ADB–Mongolia Partnership: Building a Better Tomorrow

Publication Stock No. ARM113933

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Printed on recycled paper Contents v Messages vii Foreword 1 ADB–Mongolia Partnership: Building on Successes for a Richer Tomorrow 4 Education: Building High-Quality Human Capital 8 Health: Providing Affordable and Good Quality Health Care for All 12 Urban Development: Enhancing a Sustainable Quality of Life 16 Transport: Driving the Engines of Growth 21 Private Sector Development: Harnessing Resources for Human Development 26 Regional Cooperation: From Landlocked to Land-Linked 29 Looking Ahead: Setting Key Priorities vi Message Asian Development Bank President Haruhiko Kuroda confident that it will continue to strengthen in the years ahead. The ADB–Mongolia partnership remains rooted in our mission to reduce poverty in the region, and I am Mongolia’s benefit. in the region’s many success stories, and to apply our full range of innovative financing instruments for Pacific, ADB is committed to share with Mongolia theknowledge we have gained from our involvement draw on ADB’s Ordinary Capital Resources. As a central participant in the development of Asia and the resources of ADB’s Asian Development Fund. With its improved creditworthiness, Mongolia can now also ADB has been the largest source of development finance for Mongolia, drawing on the concessional Mongolia can rely on ADB to help meet these challenges. Through 2 decades of excellent cooperation, achieving inclusive growth are essential for successful development. in developing Asia clearly shows that developing human capital, combating income inequality, and thus of climate change have to be addressed, especially in a land that is largely permafrost. ADB’s experience of current and future generations will depend on sustainable environmental stewardship, and the risks good governance, closer integration with the world economy, and economic diversification. The welfare lead to a better quality of life for all Mongolians. Achieving this will depend on many factors, including With its mining-driven growth, Mongolia is entering a promising chapter in its development, which can livelihoods and forced many to migrate from the countryside to the cities. assistance to help the country cope with several natural catastrophes, which had robbed families of providing universal access to quality education and health services. And ADB has rendered emergency MESSAGE and expand its economy. Our partnership has also contributed to and power have helped Mongolia connect to international markets assistance. Investments in telecommunications, transport, aviation, economy and society, and ADB has been privileged to have provided Mongolia has made remarkable progress in transforming its Development Goals. has made admirable progress in achieving the Millennium Today, the prospect of economic prosperity beckons, and Mongolia T economic contraction like many other transition economies. Development Bank (ADB), its people were enduring a severe wenty years ago, when Mongolia joined the Asian MESSAGE

take this opportunity to express the profound gratitude on behalf of the Government of Mongolia to the Asian Development Bank I(ADB) for its unwavering support to our country. For the past 20 years, ADB has been an enduring friend and has assisted Mongolia as it went through its most difficult challenges— our transition in the 1990s to a market economy, the harsh winters that made life difficult for many of our people, and recently, the global economic crisis that threatened to affect our hard-won gains.

ADB’s assistance in the most critical areas of Mongolia's economy, anchored on its firm commitment to poverty reduction and inclusive growth, has helped many of our people realize their dreams for a better tomorrow. Through improved access to education, health, and other basic services, ADB has created opportunities for our people to realize their full potential.

As we march ahead and confront new challenges, we will look to ADB to stand by our side as a true partner in the development of our people and help build a happy, healthy, and harmonious Mongolia.

S. Bayartsogt Governor for Mongolia in the Asian Development Bank and Minister of Finance of Mongolia Message

vii viii Foreword from theworst ofthecrisis. respond to theglobaleconomic crisis, to helpsafeguard withADBproviding financialsupport thepoor initiatives.sector Along withotherdevelopment ADBhelpedtheGovernment ofMongolia partners, also helpedestablisheffective foster and efficient services, regional integration, andenableprivate expanding available thefinancialproducts to householdsandbusinesses. ADB’s inkeysectors support economy.market ADB’s assistance for commission, thefinancialregulatory for instance, contributed to successful establishthe basicelements ofawell-functioning inhelpingMongolia been particularly while, at thesametime, addressing socialandhumandevelopment concerns. ADB’s assistance has Through itsvariousprograms, ADBhascontributed substantially to thestrengthening oftheeconomy All these, we are proud to say, have climbseveral helpedMongolia notches upthedevelopment ladder. under theJapanFund for totaling $31.49million. Poverty Reduction financing. ADBalsoprovided amounting to $85.96millionand grantstechnical assistance support totaling $172.2 million,were approved from becameeligible 2007,whenMongolia for ADFgrant loansamountingaddition,12Asian to Developmentsector $14.5million.In Fund (ADF) grant projects, theyears,Over 45loanstotaling ADBextended $794.7milliontoincludingtwo private Mongolia, finance, health,industry, telecommunications, development. andurban transport, byMongolia providing financialand technical assistance inagriculture,for projects education, energy, through atransition process. Taking along-term view, ADBworked closelywiththeGovernment of development critical went asthe projects country financial institutionMongolia,supporting to assist from andto slippingintoimproving oftheirlives. poverty thequality ADBwas thefirstinternational ADB’s relationship hasalways withMongolia beenanchored onitscommitment to keepingMongolians its programs, butbecauseithasmadeapalpabledifference inthelives ofmanyMongolians. issomethingthatMongolia's ADBisproud success of, story thesuccess notonly becauseitreflects of f or e wor d W Development commitments. Goal isalsoontrackon itsdoors.to meetmostofitsMillennium It robust thanitwas in1991,withglobalprivate businessknocking challenges remain, Mongolia’s economy is much stronger and more difficultiesitenormous went through inthe1990s. Thoughmajor Today, that shows isadynamiccountry few Mongolia traces ofthe prospect of going without heating in the coldest place on earth. Soviet Union, its people faced a life of uncertainty, including the grim collapse. Without the financial support from the former 20 years ago, the country was on the brink of economic hen Mongolia joined the Asian Development Bank (ADB) Asian Development Bank East Asia Department Director General Klaus Gerhaeusser and itspeople. the challengesahead. And justlikeMongolia’s citizenry, we are hopefulfor thefuture ofthecountry anchored ongoodgovernance. Justlikeourpartner, theGovernment we ofMongolia, are ready to face manage itsgrowth sothat itisinclusive andsustainable, andinstitutionalreforms by promoting policy priorities, we definesthedirection willtakeintheyears to come. ADB’s goalisto helpMongolia Partnership Strategy for 2011–2015,whichiscloselyaligned withthegovernment’s development inpursuitofitsdevelopment Country agenda.Our thecountry vigor andcommitment to support by theprivate sector. itdoessowithrenewed withMongolia, As 20years ADBmarks ofpartnership Mongolia’s for connections regional andfostering andglobalmarkets growth andemployment led led to an institutional framework for economy. amarket role ADBplayed inenhancing animportant ADB’s education, finance, contributions were inthetransport, sectors andurban significant, which contributed to Mongolia’s strong inrecent economic andsocialperformance years. noted The report assistance program anindependent 2008country fact, evaluationIn showed that ADBassistance

ix Foreword ADB–Mongolia Partnership:

x Building a Better Tomorrow • development priorities and needs. Mongolia has changed with the country’s evolving Over the past 2 decades, ADB’s strategy in I for a Building onSuccesses battered Mongolia’s economy. and the frigid winters of the 2000s, also heavily The Asian economic crisis of the late 1990s, economic growth and intermittent slowdowns. development, assisting it through periods of rapid telecommunications, transport, and urban education, energy, finance, health, industry, and technical assistance for projects in agriculture, Government of Mongolia by providing financial transition period. ADB worked closely with the to enter the country during this difficult of the first international financial organizations Development Bank (ADB) responded by being one Recognizing Mongolia’s great need, the Asian including the painful reality of poverty. people of Mongolia faced numerous uncertainties, political scene. For the first time in their lives, the ADB–Mongolia Partnership climate, nomadic population, and dynamic country, known for its exceptionally harsh reforms. It was a tough time for the sprawling n the 1990s, Mongolia embraced free-market R icher Tomorrow which included a 1.3% contraction in 2009 due an average of 6.5% annually from 2006 to 2010, related to external shocks. The economy grew at Growth has been sustained despite fluctuations represents about 75% of gross domestic product. an open economy, with a private sector that economy. Today, Mongolia enjoys the fruits of structural reforms necessary to develop a market process. Mongolia implemented most of the Mongolia through its challenging transition In the first decade, ADB focused on assisting development priorities and needs. Mongolia has changed with the country’s evolving Over the past 2 decades, ADB’s strategy in an involved development partner. the years from being a silent donor to becoming relationship with Mongolia has progressed over to expand with the country’s growth. Its enduring multilateral partner, with a portfolio that continues Now, 20 years later, ADB remains Mongolia’s largest 1 ADB–Mongolia Partnership: Building on Successes for aR icher Tomorrow ADB–Mongolia Partnership:

2 Building a Better Tomorrow • is renewed economic activity all over the country. As Mongolia approaches middle-income level, there to the recent global financial crisis. It quickly recovered to a 6.1% positive growth in 2010 and is expected to grow to 12% in 2011 and 10% in 2012.

Following the success of Mongolia’s economic transition to a market economy, ADB’s strategy shifted to poverty reduction in the next decade. ADB provided assistance to deepen market- oriented reform, help stabilize and broaden financial markets, develop commercial agriculture, improve services in secondary towns and cities, and restructure social services. It also supported transport infrastructure development to enhance connectivity and build regional and global market links.

At present, ADB has a broad-based portfolio in Mongolia. It has been particularly active in the areas of education, health, urban development, transport, and trade facilitation. Promoting the development of the private sector and increasing regional cooperation between Mongolia and its neighbors have been recent but vigorous additions to ADB’s work in the country as it

continues to find innovative and sustainable ways Tomorrow r toward inclusive growth.  iche R Mongolia Partnership: Partnership: Mongolia – ADB a for Successes on Building

3 Promoting the development of the private sector and increasing regional cooperation between Mongolia and its neighbors have been recent but vigorous additions to ADB’s work in the country as it continues to find innovative and sustainable ways toward inclusive growth. ADB–Mongolia Partnership:

4 Building a Better Tomorrow E and effective education provision; and promoting educational services; encouraging more efficient improving access to, and the quality of, basic In the mid-2000s, ADB’s strategy evolved into retraining teachers. the curricula, developing new textbooks, and while expanding access, and by modernizing primary and secondary education facilities It did so by rationalizing the network of and the learning and teaching environment. improving the overall efficiency of the system comprehensive education reform aimed at partners, the government engaged in a With the support of ADB and other development quality of education. providing the foundation for improvements in the reestablishing basic education infrastructure and Education Building High-QualityHumanCapital ago. Support was originally devoted to partnership with Mongolia 2 decades of assistance for ADB since it began its ducation has always been a core area • facilities in and providing furniture and and learning environments by rehabilitating system for teachers. It also improved teaching improve training and establish an accreditation framework and strengthen standards, as well as government to develop a new national curriculum Under the project, ADB worked with the schools and to introduce a new curriculum. The project was designed to reform Mongolia’s achievements of two previous education projects. approved by ADB in 2006 that built on the Development Project, a $13 million project A clear example of this work is the Third Education from Mongolia’s rapid economic growth. opportunities for the poor so that they can benefit mismatch and by providing better education to mitigate growth constraints caused by skills education of the labor force with market demand further by focusing on aligning the skills and on previous efforts and refined this strategy demand-driven vocational education. ADB built and educational equipment funded by ADB. enjoy learning in rehabilitated facilities, with furniture High school students from Sainshand School No. 2 • Vocational training provided through ADB-funded • By aligning the skills of the labor force with market education programs aims to address Mongolia’s demand, more people can benefit from Mongolia’s growing human capital requirements. rapid growth.

educational equipment to about 45 primary and of learning and research facilities, equipment, secondary schools. and materials; public–private partnerships; and improvement of higher education policy These gains were threatened when the global environment. ADB leads donor coordination economic crisis affected the capacity of Mongolian in the education sector and, together with the parents to provide for their children’s schooling Government of Japan, chairs the Education needs, such as textbooks and materials. Coordination Committee.

To address the immediate needs of students, The report of an independent country assistance ADB extended a $17 million grant to support the program evaluation on ADB’s assistance to Education for the Poor—Financial Crisis Response Mongolia, conducted in September 2008, rated Project, providing about 150,000 preschoolers ADB assistance in education as “highly successful” with free meals, about 100,000 students with free and recommended that ADB continue to focus secondary textbooks, and more than 300 block on the sector, given its strong track record. In

grants to schools so parents would not have to fill the future, ADB assistance will look to address Education: Capital Human High-Quality Building gaps in the budget. These quick disbursements the skills shortages and mismatches that affect addressed immediate needs, helping reduce nearly all sectors of the country’s economy. 5 malnutrition among children and preventing an Specifically, ADB will be helping the government increase in school dropouts. to enhance the quality of the skilled labor force by improving sector governance, management, and ADB also supported the $6.5 million Second donor coordination, as well as by strengthening Education Development Project, which finances higher technical and vocational education and basic building rehabilitation, textbook provision, training. ADB is seeking to support policy reforms, and teacher training. It also reorganized schools to capacity building, and investments in line with the be more efficient, freeing resources for financing government’s Education Sector Master Plan.  essential items, such as teachers’ salaries. ADB assisted Mongolia with the $20 million Higher ADB is seeking to support Education Reform Project, which institutes reforms to improve the quality and relevance of higher policy reforms, capacity education programs and the governance and management of higher education institutions, and building, and investments in to promote equitable access to higher education. line with the government’s It provides support for institutional capacity building; human resource development; provision Education Sector Master Plan. ADB–Mongolia Partnership:

6 Building a Better Tomorrow has large, detailed posters and hands-on models of human and animal biology. blackboard and try to explain. We were just making do with what we had.” Under the ADB project, the school now 50-year-old Russian science “Tobooks. illustrate concepts of biology and internal organs, I would draw on the Right fromRight theStart Shielding Students from theFinancial Crisis For these kids, studying is a positive experience. No. 2useeducationaltoysandaids. Elementary studentsfromSainshandSchool Project, benefitingstudents like Chuluun, who got the thattextbooks he needed. ADB responded quickly with a $17 million grant to support the Education for the Poor—Financial Crisis Response Maintaining vulnerable citizens’ access to quality education during the financial crisis was a major challenge, and declining real wages. cobbler, or collector of cans and plastic bottles—as some other teenagers had—to supplement the family’s rapidly afford even three saidtextbooks,” Chuluun’s parents.They said that their son might have to work as astore clerk, and English, but this year, with the prices for food commodities and school items increasing, we are unable to Mongolia, prompting most parents to forego buying them. “Last year we bought fortextbooks math, Mongolian, could buy fortextbooks only three of the 18 subjects taught at a middle school. Textbooks are very expensive in Even before the 2009 economic slowdown, the parents of Chuluun, a ninth grader in Mongolia’s Zavkhan Province, Third Education Development Project her life, says some of the materials she used in the past were also provided a television, audio player, educational games, and fashioned desk, not designed for their age group.” The project which has 1,621 students and 71 teachers. “Before, it was an old- now,” says Tserenlkham, the energetic administrator of the school, desks“The for the first graders are modern and comfortable at home.” here, and there are games and toys here that we don’t have first grade.“I like to come to school,” shesays. “I’m comfortable Development Project, 6-year-old Saranchimeg has just started in the Gobi Desert that benefitedfrom ADB’sThird Education At Sainshand School No. 2, a public primary and secondary school school appealing to them.” children of this age group. These additions to the classroom make she adds. “It is critical that school is a positive experience for important that they get a good impression and want to continue,” “This is the first year in school for these children, and it is modern and safe toys for the classroom. old biology teacher who has been instructing students for half In the Sainshand high school biology class, Otgonjargal, a 44-year- Education for thePoor—Financial Project Response Crisis Education for All in Mongolia Second Education Development Project

Students bundled up in long coats and fur hats trudge down the frozen streets of Zuunmod, a town of about 20,000 people, south of the Mongolian capital of Ulaanbaatar. The clanging of the School of Humanity’s bell makes them sprint the last few meters to the school’s door. Cheeks ruddy from the cold, the students welcome the warmth of the building, but heat is costly during Mongolian winters.

The School of Humanity received $120,000 from the ADB-supported Second Education Development Project to repair its badly decaying roof and provide various needs, such as chemistry and physics laboratories, computers, desks and chairs, Education enables the children of Mongolia to achieve chalkboards, and new books. The School of Humanity their dreams. also gained a newly built primary school.

Schools are now more accessible for Mongolia’s youth. Nyamdavaa Namjil, a 15-year-old student and dormitory resident at the School of Humanity, wants to be a doctor and live in a town. “I don’t want to be a herder. I want to be a professional. That’s why I’m interested in science,” he says.

Nyamdavaa’s youngest sister, Byambadulam, loves animals and wants to take over caring for 150 sheep, 50 goats, 50 horses, 17 cattle, and 2 camels from her father, Zuudi Namjil, who is undaunted by this break from tradition. “I prefer Nyamdavaa to continue his studies,” says Zuudi Namjil. “I want him to be an excellent student and become a doctor for the people of Mongolia.” Education: Education: Capital Human High-Quality Building

ADB responded quickly with a $17 million grant to support the Education for the Poor—Financial Crisis Response Project, benefiting students like Chuluun, who got the textbooks that he needed. ADB–Mongolia Partnership:

8 Building a Better Tomorrow • administering medical assistance. A health worker in Zuunmod Health Health Carefor All Providing Affordable andGoodQuality M One of the biggest public health challenges in poverty, and they are the hardest to access. for instance, are those most likely to be living • and peri-urban ( density over a vast territory. The rural nomadic owing to the country’s extremely low population health services is especially expensive in Mongolia user fees, and informal payments. The delivery of of out-of-pocket costs, such as co-payments, poorer sections of Mongolia’s society is the level The major barrier to accessing health care for the government to address these issues. realignment, and ADB worked closely with the health care system required a major overhaul and planning, and regulatory processes. The country’s care, financing systems, human resources and services to citizens. services prevention and treatment provide Family doctors with little focus on primary health outmoded and low-quality services health care sector providing generally ongolia inherited a large, inefficient ger or tent district) households, the citizens. provide treatment and prevention services to system, teams of family doctors and nurses toward primary health care. Under this practice as a means of reorienting the health system helped develop the family group practice system 1997, financed in part by an $11.9 million ADB loan, The initial Health Sector Development Program in health information. a lower educational level and limited access to the more disadvantaged households, which have confronting the government is reaching out to reforms initiated under the first program. infrastructure, providing equipment, and extending health services in rural areas through improving project focused on improving access to quality Supported by a $14 million ADB loan, this second Health Sector Development Project in 2003. The initial program was followed by the Second 9 Health:Strengthening Providing Peace Affordable andthrough Good Inclusive Quality DevelopmentHealth Care for All ADB–Mongolia Partnership: 10 Building a Better Tomorrow aged 15–44, above the national average of 43%. project aimag has reached 55% among women down from 10 to 8 days. Contraceptive use in the 92%. The average length of hospital stay has come in the project area, above the national target of rates to 98% among children under 5 years of age health component, which has raised vaccination population—benefited from the project’s rural More than 422,000 Mongolians—about 17% of the maternal mortality ratio, and infectious diseases. their high levels of poverty, infant mortality rate, in five The project helped improve rural health services economists of the health department, and staff doctors, district and provincial administrators, The project also trains community nurses, district aimags or provinces chosen because of been built or renovated, and equipped. hospitals, and 4 provincial center hospitals have Twenty-three district health centers, 5 interdistrict developing human resources in the health sector. family group practices, improving hospitals, and strengthening primary health care through The project supports key reforms, including Ministry of Health build institutional capacity. of the health insurance organization to help the • the introduction of more than 230 family group the major accomplishments of the programs was the initiatives of the firsttwo programs. One of with a $14 million grant. The project Sector Development Project, which ADB supported with the Ministry of Health on the Third Health In 2007, the government requested ADB to work during the financial crisis. financial the during even services access to health enjoyed poor The

enhanced practice clinics to provide primary health care in Rapid gender assessments, as reported in cities and towns throughout the country. the publication Gender Equality Results in ADB Projects–Mongolia Country Report, undertaken In 2009, ADB provided a grant assistance of by ADB found that Mongolia’s Second Health $3 million to Mongolia for the Protecting the Sector Development Project produced very Health Status of the Poor during Financial Crisis positive gender equality results. The health Project. The project aimed to provide the poor program was found to provide a major population better access to health services during improvement in the quality of health care the financial crisis through a health card program services for women and children, including that covered 50% of eligible poor households and a strengthened capacity to respond to their micronutrient distribution program that benefited health needs. Many of the 7,850 rural health 15,000 children in aimags. It also sought to propose workers trained were women, including policy reforms to lower financial barriers that community-based nurses, doctors, and medical prevent the poor from accessing health services. and administrative staff at provincial health centers. As a result, the proportion of women The independent country assistance program experiencing pregnancy-related complications evaluation of ADB’s work in Mongolia examined decreased from 50.0% to 34.5% after the the interventions in the country’s health care program’s implementation. system and noted that the health programs have helped the government to plan and implement Building on the positive reform momentum, ADB organizational and financial reforms since 1997 assistance in the future will be aimed primarily at and have successfully introduced a number of sector policy and institutional reform, and will be significant changes in the health system. designed in close cooperation with development partners who are better positioned to contribute Though the introduction of the hundreds of family to building technical competence in health service group practice clinics around the country was delivery. In line with the Health Sector Master Plan, found to be beneficial, continuing challenges were ADB will provide assistance for improved financial identified. They included inadequate funding management, hospital rationalization, facility for the system, an ambiguous legal status, and upgrading, capacity building, and improved food unsatisfactory quality of services in some clinics. and drug safety. 

Good Health for All Second Health Sector Development Project Affordable Providing Health: All for Care Health Quality Good and

About an hour’s drive south of the capital 11 Ulaanbaatar lies Zuunmod, a Mongolian aimag whose residents of about 20,000 are outnumbered by its official count of heads of livestock. In the middle of town stands a clean, modern clinic built with an ADB grant and staffed with three doctors serving a steady stream of patients. Battsetseg Baigalmaa, a 26-year-old resident, brought her 10- month-old son, Temuun Ganbold, to the clinic to check on his cough. The clinic is about a 5-minute Access to health services has improved considerably, walk from her house, and she waited less than especially in the aimags or provinces. 10 minutes for her son to see a doctor.

“It’s very convenient to have the family clinic in our community,” she said. “If we had to travel to the provincial hospital, we wouldn’t see the doctor as often. I think my son is staying healthier because this clinic is nearby.”

In addition, the doctors in the clinic often live in the area, know their patients personally, and are aware of the family’s medical history. This increases efficiency and improves overall health in the community, doctors in the clinic said. ADB–Mongolia Partnership: 12 Building a Better Tomorrow • urban landscape. Mongolia’s changing Development Urban Enhancing aSustainable Quality ofLife The dilapidated state of urban infrastructure in Ulaanbaatar and other cities around Mongolia has also created bottlenecks for sustainable development.

one of Asia’s most crowded cities. This population explosion has overwhelmed the municipal financing and management system, and resulted in traffic congestion, severe levels of ambient pollution, under-serviced settlements, and housing shortages. The dilapidated state of urban infrastructure in Ulaanbaatar and other cities around Mongolia has also created bottlenecks for sustainable development.

To address these, ADB projects have focused on providing basic services to urban dwellers. The Integrated Development of Basic Urban Services in Provincial Towns Project, completed in 2008 and supported by a $20.1 million loan, improved access to clean water and sanitation services in eight provincial centers and benefited 148,000 residents, more than 25% of the area’s population. The water supply, wastewater treatment, solid waste collection, and bathhouse components of the project contributed to the reduction of poverty in the area. ADB also installed 11,000

water meters in the area (though this was not Development: Urban Life of Quality Sustainable a Enhancing part of the original project), cutting the average nonrevenue water loss from 70% to about 37%. 13

In search of climate-friendly solutions to help ease urban concerns, ADB also undertook the Energy apid economic growth over the past Conservation and Emissions Reduction from Poor 2 decades, combined with a series of harsh Households Project, which aimed to provide winters, spurred a wave of urban migration highly insulated blankets in Ulaanbaatar, allowing in Mongolia, putting a heavy strain on the ger residents to save on heating expenses while Rprovision of public services as well as on urban reducing carbon emissions from the gers by infrastructure. The congestion is particularly reducing coal and firewood consumption. evident in Ulaanbaatar, Mongolia’s capital, where rural dwellers have settled in search of heating The 2008 country assistance program evaluation services and other scarce resources. Majority of on ADB’s work in Mongolia noted that ADB’s rural migrants live in traditional gers (tents) in the urban sector assistance was able to achieve the city’s peripheral or suburban settlement areas, intended sector output of improving service which have become home to half of the capital’s provision to urban residents, particularly for population and one-quarter of the country’s water connections, sanitary services, and heating poor. As of 2010, close to half of Mongolia’s 2.8 connections in aimag (province) centers and for million people, reside in Ulaanbaatar, making it district heating in Ulaanbaatar. ADB–Mongolia Partnership: 14 Building a Better Tomorrow infrastructure and services. grant, aims to help the government provide urban Project, which ADB is supporting with a $15 million Gobi Urban and Border Town Development towns within the next 10 years. The Southeast This is seen to double urban populations in many expected in many urban areas around Mongolia. growth in mining and cross-border trade is A boom in economic activity following rapid growth urban areas will also receive ADB support. pollution, especially in Ulaanbaatar. Other high- improve air quality, and reduce soil and water achieve Millennium Development Goal targets, sustainable urbanization process that will help ADB aims to contribute to an efficient, financially As Mongolia’s urban centers continue to grow, families O to wait (left). his Sainshand, saysan ADB-supported waterkiosknear in Gers Water Improving Kiosks: Life everything in our home. It’s much easier for me to take care of my family when I can easily get clean water.” it herself, even with her 2-year-old daughter in tow. “We use the water for washing, cleaning, cooking—for an arduous, time-consuming task. Now, with a modern water distribution kiosk and no queues, she does Burmaa Nergui, a 22-year-old woman, said that previously, her husband would get the water because it was to spend half my day waiting in line.” low,” he said. “Now, it just takes a few minutes to get enough water to last my family for the week. I don’t have rgoo Luvsansharav, a50-year-oldwelderin ger ortenthelpedhimsavetimeforhisfamily W

in longlinestogetcleanwaterfortheir

omen andgirlsinthevillagenolongerhave (right). Towns Project The Integrated inProvincial Development Services ofBasicUrban long lines at the kiosk because the water pressure was much time as possible with them. “Before, there were of the time, so when he is home he wants to spend as neighboring town and is away from his family most the residents’ quality of life. Luvsansharav works in the Beyond mere convenience, the kiosks have improved water needs of a traditionally nomadic community. Mongolian communities. Kiosks offer a solution to the water is not always the best option in low-income can be moved from one place to another, piped low cost. Because many families live in gers, which home, which provides clean drinking water at very ADB-supported kiosk, a few minutes’ walk from their daily use. Their toil ended with the installation of an His family struggles to collect clean water for their of Dornogovi Province, deep in the Gobi Desert. in a traditional Orgoo Luvsansharav, a 50-year-old welder, lives mainstreaming clean energy. provide technical and policy-making assistance in to increase efficiency and quality. It also aims to commercialization of selected urban services management services, and encouraging pollution, enhancing water supply and wastewater on improving public transport and reducing air of urban services. Specifically, ADB is focused on the institutional and financial sustainability financing. This will involve an increasing focus of public–private partnerships and innovative as well as catalyzing investment through the use management of the urban development process, on improving the enabling environment and ADB assistance in the years ahead will focus ger (tent) in Sainshand, the capital  • Ulaanbaatar addresses infrastructural bottlenecks with ADB’s support.

• Migration has led to the establishment of more gers or tent villages in the city. Urban Development: Development: Urban Life of Quality Sustainable a Enhancing

15 ADB–Mongolia Partnership: 16 Building a Better Tomorrow • Rail links most of the country. Transport Driving theEngines of Growth F of 49,250 kilometers ispaved. Yet only3.5%ofMongolia’s total road network regional cooperation and integration, ADB has links with its giant neighbors and promoting unlocked by enhancing Mongolia’s transport Recognizing the opportunities that can be road network of 49,250 kilometers is paved. opportunities. Yet only 3.5% of Mongolia’s total economic progress and for international trade system represents a vital ingredient for domestic and the Russian Federation, a good road of the People’s Republic of China (PRC) either side by the vibrant economies or landlocked Mongolia, bounded on travel conditions, giving residents easier, along its route. It also links markets and improves offer direct benefits to the isolated communities broad economic growth in the country and to European roadways. It is designed to promote system traversing 32 Asian countries with links Highway Network, a 141,000-kilometer road road of Mongolia. This corridor is part of the Asian Russian Federation along the main vertical arterial about 950 kilometers and linking the PRC and the project will complete the regional road, totaling at an estimated cost of about $82 million. The 432 kilometers of road from Choir to Zamyn-Uud aims to complete the road corridor by building Regional Road Development Project, which Key to this is the implementation of the human capacity in the sector. road safety, and strengthening institutional and government budget to the road sector, improving ensuring adequate fund allocations through the a sound sector policy and regulatory framework, focused its efforts on promoting and developing 17 Transport: Driving the Engines of Growth ADB–Mongolia Partnership: 18 Building a Better Tomorrow in Mongolia. affordable, faster, and safer transport services to-rail transshipment. All these will lead to more will facilitate road-to-road, road-to-rail, and rail- and improved reliability. The multimodal terminal for enhanced efficiency, increased throughput, private sector through a management contract with modern technology and managed by the Uud, a key town at the PRC border, equipped $5 million grant to build a terminal at Zamyn- Regional Logistics Development Project and a ADB has approved a $40 million loan for the and other services. less expensive, and faster access to social, health, examined a technical assistance component of Similarly, the Gender Equality Results study, which in 2002 to 200 million in 2007. doubling road traffic from100 million passengers improvements are also largely credited with domestic and international trade. The road operating costs, and contributed to improved times, improved travel comfort, reduced vehicle in many aspects. The projects reduced travel main north–south road corridor, were effective and constructed the firsttwo sections of the that the initial projects, which rehabilitated evaluation of ADB’s work in Mongolia noted The independent country assistance program the Regional Road Development Project on the vulnerable and high-risk groups, who took steps awareness and prevention of HIV/AIDS and human to reduce their risks. trafficking, showed that the program yielded impressive results. As part of the program, mobile In the years to come, massive investments will clinics offering voluntary counseling and testing be needed to continue improving Mongolia’s services for sexually transmitted infections were roads and transport systems to support the taken to construction and mining sites, while competitiveness of mining and other sectors. ADB’s condoms were provided in communities affected strategy for the transport sector seeks to reduce by the road corridor. transport and logistics costs for trade, thereby fostering regional integration; enhance transport This was found to have successfully increased efficiency and safety through public–private awareness of the health and security risks partnerships; enhance efficiency through improved associated with the development of the regional urban transport infrastructure and services; road. It supported the provision of information, increase rural accessibility; and improve institutional education, and communication materials to and financial management and human capacity.

• Development is taking place along the road corridor. Transport: Driving the Engines of Growth Growth of Engines the Driving Transport:

19 ADB–Mongolia Partnership: 20 Building a Better Tomorrow logistics infrastructure and systems, initially and systems, in infrastructure logistics Ulaanbaatar; for and developing modern system developing transport apublic corridor; road include completing the regional ADB support Investment development. system for priorities and to multimodal on focus more transport focustoits cover subsectors other transport subsector, ADB plans to progressively broaden the road for While maintaining support its impacts andextreme weatherimpacts events, suchasduststorms. resilience developments ofinfrastructure to climate change ADB willsimultaneously beinvolved instrengthening the sheepskin trading. impact onhisincome.Heisnowabletoengagein Buyan Zayasaysthenewroadhashadsignificant Thriving Enterprises Roadside more customers,” she noted. “We might be expanding and hiring more people.” about 30 customers a week and employs nine people. “Traffic is increasing on the road, and we are getting road, we are only about 45 minutes away, which makes our resort much more attractive.” The spa averages “It’s relaxing for people from Ulaanbaatar to come here,” said Altantsetseg, a manager at the spa. “With this to families, businesspeople, and the elderly. overlooking the new highway and offers massages, jacuzzi andsauna services, and minor medical procedures thrive as a result of the road’s construction. The Arga Beleg Suvilal Spa, in the town of Hoolt, sits on a hillside About an hour’s drive from Ulaanbaatar, along a stretch of the ADB-supported highway, other businesses sheepskins. “I started this side business after they opened the road,” he said. He noted that if the road had not been built, there would be no traffic from which he finds sellers of the 3-year-old daughter, and we need the extra income.” “This is just a small side business for me, but it has helped our family a lot,” he said. “My wife and I are raising a Regional Road DevelopmentRegional Road Project factories make them into clothing and shoes. and into clothing make them factories Ulaanbaatar,in where aprofit for them resells and road the along passing people from sheepskins the purchases He trading. sheepskin in to engage able been has Zaya livestock, their tend herders where areas remote the through highway wends modern the As his income. enhancing for road new the credits Zaya Buyan highway project, regional Choir–to–Zamyn-Uud ADB-supported the of stretch acompleted along his motorcycle beside Standing its projects. ADB is also promoting carbon sequestration in extreme weather events, such as dust storms. developments to climate change impacts and strengthening the resilience of infrastructure ADB will simultaneously be involved in in Ulaanbaatar. at the PRC border, Zamyn-Uud and thereafter n • Private capital now owns more than 90% of all enterprises in Mongolia. rces for Human Development Human for rces esou R Private Sector Development: Development: Sector Private Harnessing

21 Private Sector Development Harnessing Resources for Human Development ADB–Mongolia Partnership: 22 Building a Better Tomorrow • domestic output. Private sector produces about 75% of the country's n just 2 decades, Mongolia managed to transition from a centrally planned economy to a free-market economy. From virtually nil, the private sector currently produces about 75% of Ithe country’s domestic output. Private capital now owns more than 90% of all enterprises.

All these resulted from government policies that promote a wide-ranging privatization program and the creation of an enabling environment generally supportive of new private enterprises.

Innovation and value creation are the hallmarks of ADB’s private sector development initiatives. A sterling example of ADB’s innovative approach is an agreement inked by four Mongolian banks to work with ADB to help companies in Mongolia to conduct more international trade. Firms in Mongolia, as in many developing economies, have difficulty obtaining financing to support the import or export of key components or final products they need to conduct business. ADB’s Trade Finance Facilitation Program offers loans and guarantees to support international trade transactions. The agreements, which are the first of their kind in Mongolia, involve Golomt Bank, Khan Bank, the Trade and Development Bank of Mongolia, and XacBank. This allows local companies to use international trade to expand their business, contributing to increased rces for Human Development Human for rces employment and growth of the overall economy. esou R The project, expected to benefit an estimated 2,500 families and create 800 new jobs, is administered by the Ministry of Finance and the

Ministry of Food, Agriculture and Light Industry. Development: Sector Private Harnessing It is expected to run until June 2012. On top of the ADB grant, the Japan Special Fund extended 23 an additional $2 million in technical assistance, the Government of Mongolia contributed an equivalent $1.41 million, participating banks provided $11 million, and agribusinesses put in almost $20.4 million.

ADB’s focus on value creation is also evident in its efforts to develop products that provide social protection for the poor. Recognizing the role of microinsurance in protecting poor households in Mongolia, in April 2010, ADB provided regional technical assistance to help lower barriers against the development of microinsurance in the country. The technical assistance enables insurance firms to provide microinsurance products to poor households to better manage risks and protect them against sudden death, illness, or injury of household members, or loss of income or property. It is expected that, ADB–Mongolia Partnership: 24 Building a Better Tomorrow • social protection for the poor. ADB develops innovative products that provide for International Cooperation teams will work with supervision. ADB, A2II, and the German Society setting body for insurance regulation and Supervisors—the international standard- the International Association of Insurance (A2II), a global program launched in 2009 with will work with the Access to Insurance Initiative ADB, through the technical assistance project, for microinsurance in both countries. improve the policy and regulatory environment technical assistance project is expected to help microinsurance products in both countries. The Mongolia, and at least four private firms will offer available in at least 10 regions in the PRC and by the end of 2013, microinsurance will be made operationally effective. is adequate, affordable, self-sustaining, and to establish a restructured pension system that government, ADB provided technical assistance of its pension system. At the request of the of Mongolia to support the strengthening ADB is also working with the Government the technical assistance. staff and data access during implementation of Regulatory Commission will provide counterpart Commission and the Mongolia Financial people. Both the China Insurance Regulatory to promote expanded insurance services to poor the Mongolia Financial Regulatory Commission the China Insurance Regulatory Commission and ADB aims to encourage private participation in ADB’s Private Sector Operations Department the financing and management of infrastructure will respond to market demand and will focus and social services. In line with the government’s particularly on infrastructure, energy, and priorities, ADB will provide capacity development finance. Priority will be given to pioneering assistance to strengthen the enabling projects with innovative contractual and environment for the private sector to engage financial structuring to encourage private sector in public–private partnerships, including the participation, enhance management expertise, development of model transactions in the power, and improve corporate governance. ADB transport, and urban sectors. ADB is also working also plans to work in coordination with other with the government to establish a reliable credit development partners, including the European information system and an effective deposit Bank for Reconstruction and Development and insurance scheme. the International Finance Corporation. 

ADB’s Private Sector Operations Department will respond to market demand and will focus particularly on infrastructure, energy, and finance. rces for Human Development Human for rces From Local to Global: Mongolia’s Enterprises Agricultural Rural Development Project esou

Command Premium Value for Goods R

In September 2010, Khan Bank, a local private commercial bank, agreed to lend MNT2 billion ($1.5 million)

to Darkhan Nekhii, a hide-processing firm. Another private commercial financial institution, XacBank, Development: Sector Private Harnessing agreed to extend a loan of $1.32 million to Mongol Shevro, a leather goods company. 25 Due to the lack of know-how and scarce financing, local farmers and businessmen sell organically produced agricultural goods, such as cashmere wool, animal hide, herbs, and wild berries, with little value added. “The ‘organically grown’ label brings substantial premium value potential to these products, but unfortunately, they are being sold outside the country without the premium value being fully recognized, nor sufficient value being added in processing,” said Tuvshinsanaa Jadamba, director of the ADB-assisted Mongolia Agriculture and Rural Development Project.

“Agribusiness development will result in broad-based employment generation, which is badly needed to diversify an economy currently dominated by the capital-intensive mining sector that does not generate sufficient employment and is susceptible to volatile price movements,” said Takeshi Ueda, natural resources economist at ADB’s East Asia Department.

ADB guarantees up to 50% of the two bank loans mentioned above. It will do likewise for $22 million in commercial bank loans to be extended to 15–20 agribusinesses identified as having the potential to produce premium value products and generate jobs. “The agribusiness industry has great potential to grow as a competitive player in the world market, and nurturing the industry can help address the growing issue of unemployment and underemployment in Mongolia,” said Ueda. ADB–Mongolia Partnership: 26 Building a Better Tomorrow R Cooperation • From Landlocked toLand-Linked road infrastructure. opportunities that ADB has nurtured by creating China and the Russian Federation provides economic Mongolia’s location between the People’s Republic of egional m Landlocked to Land-Linked to Landlocked m egional Cooperation: Cooperation: egional R Fro

ongolia’s strategic location between helps Central Asian and neighboring countries two powerful economies—the realize their immense potential in an increasingly People’s Republic of China (PRC) and integrated Eurasia. The PRC—in particular, the the Russian Federation—has provided Inner Mongolia and Xinjiang Uygur autonomous Mtremendous economic opportunities that ADB has regions—and Mongolia are active participants. helped nurture in recent years, mainly through the Central Asia Regional Economic Cooperation Much attention has been paid to improving (CAREC) Program. Mongolia’s ability to serve as a cost-effective regional transit corridor between Asia and Supported by ADB and five of its development Europe. To achieve this, ADB has invested in road partners, CAREC promotes and facilitates regional infrastructure in the PRC and Mongolia, including cooperation in the priority areas of transport, CAREC Corridor 4, which extends from Mongolia trade facilitation, trade policy, and energy. CAREC into the PRC and is a major regional transit artery ADB–Mongolia Partnership: 28 Building a Better Tomorrow PRC and Mongolia. and infrastructure development planning in the toward greater harmonization of trade logistics goods, ADB technical assistance supports efforts reduce poverty, and efficiently move people and connectivity that will accelerate economic growth, transform this into a corridor of seamless regional linking the PRC and the Russian Federation. To Associations, recently established to bring the CAREC Federation of Carrier and Forwarder Several of these associations are part of a broader collecting and contributing data to this effort. associations in both the PRC and Mongolia are by commercial traffic. Forwarder and carrier the principal causes of delays encountered and Monitoring Program, which identifies fund a CAREC Corridor Performance Measurement An ADB technical assistance project continues to conducted at the Shanghai Customs College. customs officers in various areas have been In addition, training programs for Mongolian progress has been made in joint customs control. PRC customs cooperation program. Significant CAREC framework also augment the Mongolia– Customs cooperation initiatives under the broad Mongolia and neighboring districts of the PRC. improve the efficiency of border trade between support to communities in the Southeast Gobi to in this initiative. At the local level, ADB is providing crossing formalities. The PRC is similarly involved to facilitate data exchange and expedite border- link to a regional CAREC single-window platform minimize the demand for information and, ideally, a single electronic window system that will context of a broader CAREC initiative to develop Government of Mongolia are working within the Customs Modernization Project, ADB and the forms. Building upon the achievements of a identical international trade data via multiple government agencies on shippers to submit reduce the administrative burden imposed by Equally important are related measures to barriers to trade and commerce. CAREC-wide effort aimed at eliminating physical on the Mongolia–PRC border as part of a broader to the physical capacity of border-crossing points Mongolia, together with ADB, are devising solutions In the area of trade facilitation, the PRC and reduction in poverty in poor border areas. help pave the way for an increase in trade and a Integration Financing Partnership Facility, could grant sourced from the Regional Cooperation and financed by a $1.5 million technical assistance medium-sized enterprises in Mongolia. The study, barriers to boost cross-border trade by small and in January 2010 a study on market and finance are able to benefit fromCAREC, ADB conducted To ensure that ordinary people in border areas facilitation process. private sector’s voice into the CAREC trade logistics in Mongolia. private capital to finance the development of seeks to catalyze the flow of more foreign and regional, and local trade. ADB intervention here of this poor area and stimulate international, This project aims to help facilitate the integration the relatively underdeveloped area of Zamyn-Uud. transport system managed by the private sector in an efficient, competitive, and reliable multimodal Regional Logistics Development Project to build which came with a $5 million grant, for the approved a $40 million loan in December 2010, Building further momentum on this endeavor, ADB private partnerships. will explore opportunities for advancing public– primarily through the CAREC program, which Mongolia realize its potential for energy exports, foster the associated trade. ADB also plans to help expansion of strategic transport corridors and program. ADB will support the completion and road and rail link networks under the CAREC the public and private support of international integration and economic cooperation through ADB encourages the deepening of regional negotiating with its neighbors. established forum for benchmarking practices and have been built, and Mongolia now has a well- products. More important, trust and confidence in power generation and livestock-based has significant cross-border export opportunities the Asian Highway Network. Moreover, Mongolia developing the transport corridor that is part of of attracting investment in trade facilitation and ADB assistance under CAREC has paid off in terms evaluation of ADB’s work in Mongolia found that The independent country assistance program  Looking Ahead Setting Key Priorities • inclusive social development. sustainable and regionally integrated growth, and benefited from ADB’s efforts to foster competitive, Ulaanbaatar is home to many Mongolians who have 29 Looking Ahead: Setting Key Priorities ADB–Mongolia Partnership: 30 Building a Better Tomorrow change in the lives of the people of Mongolia:change in the lives of the people ADB’s work in critical areas to has lasting led nationsThrough inand the Pacific. Asia the years, present the fastest-growing status among its difficulttransition its from phase up to starting ADB’s commitment to remains Mongolia strong, to development. and ADB is proud to have been part of this journey prosperity that the country has not seen before, people have led to an economic dynamism and a T status. The hard work and effort of its been moving towards to mid-income operations in Mongolia, the country has wenty years since ADB first started and capacity constraints. participation; and by addressing policy, regulatory, an enabling environment for private sector role by bringing in new financing; creating Toward this goal, ADB expects to play a catalytic strong foundation for growth for the country. ADB will build on its successes to establish a As Mongolia approaches mid-income level, the common good. development towardharnessing private sector moving toward and cooperation, regional sustainable development urban initiatives, enhancingproviding health carethe people, for laying education, the groundwork quality for Looking Ahead: Setting Key Priorities Key Setting Ahead: Looking

• As Mongolia achieves prosperity, ADB aims to lay the groundwork for sustainable and inclusive economic growth. ADB is proud to note that the National management, improve aid effectiveness, expand Development Strategy (NDS) of the Government the role of public–private partnerships, combat of Mongolia echoes the core themes of Strategy corruption, strengthen financial markets, and 2020, which defines ADB’s three complementary enhance ADB’s portfolio performance. agendas as it works for an Asia and Pacific free of poverty: inclusive growth, environmental As these are pursued, ADB will ensure that sustainability, and regional integration. regional cooperation, environmental sustainability, and gender equality are mainstreamed into To achieve this vision, ADB has defined its priority its operations. work areas to include infrastructure, regional cooperation, and education, which closely As the ADB–Mongolia partnership moves to new intersect with the NDS priorities and strategies. heights, ADB’s overarching goal for the country will remain the same—poverty reduction and More specifically, ADB’s strategy is built on the achievement of the Millennium Development two pillars: competitive, sustainable, and Goals. ADB remains committed to working hand in regionally integrated growth; and inclusive social hand with the Government of Mongolia to make development. The first pillar will be supported a lasting difference in the lives of the people.  by improving the enabling environment for the private sector. The second pillar will build on access to and relevance of education and policy reforms in the health sector. ADB remains committed to working hand in hand with Private sector development and good governance will be thematic drivers of change, supporting the the Government of Mongolia government’s effective use of abundant resources to make a lasting difference that mining is expected to generate. ADB will endeavor to improve the government’s financial in the lives of the people.

Hope Abounds

Sitting in a traditional Mongolian ger (tent) in a small town a few hours outside of Ulaanbaatar, the complexities of Mongolia’s development

ADB – Mongolia Partnership: Tomorrow Building a Better challenges are simplified by Munkhbat Tumennast, who is about to move to the capital 32 city with his wife and 1-year-old son.

“We are seeing more job advertisements, more economic activity in the country,” he said. “Many people move to Ulaanbaatar looking for a job, but I already have a job waiting for me there. Life is still difficult but we can see improvement in the country. We are hopeful for the future. Life will be better for our son.”

Hope abounds for Mongolia: Munkhbat Tumennast, a 24-year-old electrician, celebrates a traditional ceremony with his family. “We are hopeful for the future,” he says. Looking Ahead: Setting Key Priorities Key Setting Ahead: Looking

• The people’s development has been, and always will be, at the core of ADB’s initiatives in Mongolia. ADB–Mongolia Partnership: Building a Better Tomorrow

The partnership of the Asian Development Bank (ADB) with Mongolia began in 1991, when the country was making the transition from a centrally planned to a market economy. ADB was among the first international financial organizations to start operations in Mongolia. Through the years, ADB’s work in critical areas has led to lasting change in the lives of the people of Mongolia. As of 2011, ADB was Mongolia’s largest multilateral partner, with a broad-based portfolio that continues to expand with the country’s needs. As Mongolia approaches mid-income level, ADB commits to build on its successes to establish a strong foundation for growth for the country. ADB expects to play a catalytic role by bringing in new financing; creating an enabling environment for private sector participation; and addressing policy, regulatory, and capacity constraints. To achieve this vision, ADB has defined its priority work areas to include infrastructure, regional cooperation, and education, which closely intersect with the Government of Mongolia’s priorities and strategies. As these are pursued, ADB will ensure that regional cooperation, environmental sustainability, and gender equality are mainstreamed into its operations.

About the Asian Development Bank

ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to two-thirds of the world’s poor: 1.8 billion people who live on less than $2 a day, with 903 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org Publication Stock No. ARM113933

September 2011

Printed on recycled paper Printed in Mongolia