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2015: The 25th year of Mongolia’s partnership with the World Bank

Jim Anderson's picture
Also available in: Mongolian
This is the final entry in our series on the 25 years since Mongolia joined the World Bank. (To read the series from the beginning, click here for the 1991 post.) Befitting the 25th year of the partnership, the year 2015 was a year focused on knowledge.

The latest estimates of poverty in Mongolia showed both progress and reason for concern. The National Statistical Office (NSO) and the World Bank have worked together on the methodology for estimating poverty since at least 2002. The estimates showed that the poverty rate declined from 27.4 percent in 2012 to 21.6 percent in 2014, continuing the trend of 2010-2012. The estimates also showed, however, that many people are near the poverty line and remain vulnerable as the economy softens. 

A detailed study of social welfare transfer programs brought more evidence to bear on a recurring theme of many analyses in the past two decades, that poverty targeting could make the transfer programs more effective.  The study revealed that about half of all citizens are direct beneficiaries of at least one social welfare program.  And while the government maintains an updated poverty-targeted mechanism, only one program out of more than seventy is poverty targeted. Rather, “they do not directly target poor or vulnerable households, but instead provide benefits to population groups deemed vulnerable or meritorious (such as the elderly, the disabled, the orphans and their caretakers, pregnant mothers and mothers who have given birth to many children, and veterans with state honors). The Food Stamp Program is the only program that is currently poverty-targeted.” 

Another study sought to unpack the problem of unemployment by describing and analyzing “labor market outcomes for different groups of the population in Mongolia, with a particular focus on poor and vulnerable households—ranging from graduates to disabled, older workers, herders, and unskilled job seekers—and presents a set of policy interventions to strengthen the labor market participation and integration of currently unemployed or inactive adults.”

The rapid expansion of the population of Ulaanbaatar in recent decades brought opportunity to many, but also brought pressures on the city.  A study on land administration and management in Ulaanbaatar argued that “low-density urban expansion and lack of infrastructure combine to reduce residents’ quality of life and the city’s overall economic competitiveness.”  Drawing attention to the fiscal implications of policies, the report found that current weaknesses in land administration and management leads the city to forgo significant public revenues that could be derived from private investment in land. Existing land fee and tax policies provide little revenue because they do not reflect the market value of land and property.

The fiscal balance was also a concern for the national economy, as highlighted in the November 2015 Mongolia Economic Update. With falling commodity prices and slowing growth in China, 2015 was a difficult year for Mongolia: growth slowed further to 2.3 percent for the year, and budget revenues fell well below projections. This was not only a result of the slowing economy: The Public Financial Management Performance Report, released in 2015, found that the budget of Mongolia “has low credibility as evidenced by deviations of over 15 percent in each of the past three years (2011-2013) between planned expenditures in the originally approved budget by the State Great Khural (Mongolia’s parliament) and actual expenditures at the end of the budget year; and deviations of over 20 percent in two of the past three years between planned and actual revenues. This lack of credibility has required mid-year amendments to the budget by the parliament in each of the three years in order to meet the targeted fiscal aggregates.” The report gave relatively better assessments for budget transparency, comprehensiveness, accounting and reporting, although it noted the limited oversight of fiscal risks of state-owned enterprises.

Notwithstanding Mongolia’s weaknesses in the PFM system, the report concluded that “the great strength of Mongolia’s government system, and society, is openness, not just of fiscal and budget transparency, but of the broader political process, with active citizen engagement in a variety of dimensions. … Transparency and citizen engagement can help align the informal institutions with the formal PFM institutions to better achieve fiscal sustainability, strategic allocation of resources and efficient service deliver so that Mongolia’s vast mineral resources can be used to better the lives of its citizens.”

Transparency and accountability were also the foci of a new project launched in 2015 with support of the Swiss Agency for Development and Cooperation (SDC).  The Mainstreaming Social Accountability in Mongolia (MASAM) project seeks “to support government efforts to increase transparency and accountability, and give impoverished communities a greater voice on issues affecting them … by building skills and capacities of citizens and civil society groups in poor and vulnerable regions of Mongolia, and working with local governments to enable sustained outcomes throughout the project.”

In other analytical work, a national low emission stove strategy was released, with support from the World Bank and AusAID, and the World Bank, with support from Japan, supported the development of the Ulaanbaatar City Flood Risk Management Strategy and Investment Plan.  (Animation here in English and Mongolian).   A study on decentralization and service delivery, also supported by SDC, attempted “to develop a better understanding of how education and health service delivery in Mongolia has been (and could be) affected by decentralization and identifies measures to strengthen service delivery going forward.” And a new activity called Code for Green UB brought together a community of atypical partners and innovators to develop ICT solutions for Mongolia’s energy, transport, urban, and water sectors.
As the end of 2015 came closer, the financing agreement for the underground phase of the Oyu Tolgoi (OT) mine was signed. The IFC and MIGA, two parts of the World Bank Group, arranged $2.2 billion in debt and guarantees, as well as the monitoring of environmental, social, health and safety aspects of the mine, in line with IFC’s Performance Standards.  And in early 2016, just before the 25th anniversary of Mongolia’s membership in the World Bank and IFC, the Voluntary Code of Practice on Water Use was signed by eight mining companies.  The Code of Practice, which was supported by the IFC and others, requires mining companies to publicly report water risks and management practices, support training and awareness-raising on groundwater protection, and involve impacted communities in monitoring a mining company’s water performance.

* * *

At the outset of this bog series we wrote that in order to know the way forward, it helps to review the past. This blog series sought to highlight some of the World Bank’s projects, studies, and events over those 25 years—we surely missed many things, but we hope the big picture captures the essence of the partnership. What is that big picture? After reviewing the 25 year partnership, what have we learned?

I was struck by the consistency of some themes, like support for public financial management, poverty analysis and measurement, and support for education. The progress Mongolia has made has been substantial and it is gratifying to know that the World Bank has steadily supported these efforts for two decades.

At the same time, tracing the evolution of the World Bank’s support showed how the program was periodically adjusted to meet Mongolia’s changing circumstances. The onset of back-to-back dzuds sparked a re-orientation of the program towards rural livelihoods, and it evolved further over the years: from the initial response of restocking the herds, to a longer-term program to focus on livelihoods, resilience, and pasture-land management, to the world’s first index-based livestock insurance system. Similarly, when substantial mineral deposits were discovered, the World Bank’s program shifted to supporting the management of the mining economy.  From the institutional framework to the system of managing the revenues, from planning the infrastructure to managing groundwater resources, the World Bank has sought to help Mongolia meet the challenges of the new economic structure.

Not everything went as smoothly as planned. Projects often had to be restructured and although evaluations of most projects found that they met their objectives, there were cases where they were only partially met. Sometimes projects had over-ambitious designs, underestimating either political or capacity constraints, making smooth implementation difficult. Even these experiences, however, are valuable in that they provide lessons that we can then incorporate into design of future projects.

Most of all, however, I was struck by how much Mongolia has changed over those 25 years. Our earliest projects provided spare parts for power plants, railways, and mines, while later projects supported the ICT framework for mobile phones and high speed Internet in the countryside. Early reports focused on fundamental questions like “what is the private sector?”, and “what has happened to education spending?” Later reports look at land markets, city finances, and the impact of educational programs. In so many ways, the nature of the advice and projects reflects an increasingly sophisticated Mongolia, one which will surely continue to encounter challenges and then, just as surely, surmount them.

As I read the documents tracing the 25 year partnership between Mongolia and the World Bank, I felt I was reading Mongolia’s history, with the partnership adjusting to Mongolia’s challenges as they arose. The World Bank has been privileged to be a part of this story and will continue to build on the strengths of the partnership, while adapting, as needed, to support Mongolia’s aspirations. I look forward to seeing what the future holds.
 
Thanks for following this blog series, all of which can be found here. This series was prepared with the support of the World Bank Mongolia staff.