Mongolia: 2017

MONGOLIA: PROVINCIAL COMPETITIVENESS REPORT 2017 (based on the statistics of 2016) www.aimagindex.mn Implemented by: ECONOMIC POLICY AND COMPETITIVENESS RESEARCH CENTER ÝÄÈÉÍ ÇÀÑÃÈÉÍ ÁÎÄËÎÃÎ, ªÐÑªËÄªÕ ×ÀÄÂÀÐÛÍ ÑÓÄÀËÃÀÀÍÛ ÒªÂ ДАА 339 HHA 65.012.2 P-93 THE PROVINCIAL COMPETITIVENESS REPORT ULAANBAATAR 2017 ECONOMIC POLICY AND COMPETITIVENESS RESEARCH CENTER San Business Center, 9th floor, Prime Minister Amar street 29, Sukhbaatar duureg, Ulaanbaatar, Mongolia Tel: 976-11-321927 Fax: 976-11-321926 Provincial Competitiveness Report website: www.aimagindex.mn E-mail: [email protected] Website: www.ecrc.mn Facebook page: http://www.facebook.com/ecrcmn Twitter page: http://twitter.com/ursulduhchadvar ISBN 978-99978-2-142-3 © All rights reserved. No part of this publication may be transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. Nor may any part of this publication be included as a reference in any other work without authorization. FOREWORD I am glad to present the latest Provincial Competitiveness Report for Mongolia. This report is the sixth annual edition published by the Economic Policy and Competitiveness Research Center (EPCRC). The economic development of Mongolia is inconceivable without rural development. In recent years, the topic of economic diversification has been increasingly discussed in Mongolia, and the possibility to diversify the economy are in Mongolia’s 21 provinces. In the process of discussing Mongolia’s economic diversification, many questions and topics have been raised, including: how can these provinces become cornerstones of the development? What sectors should provinces invest in and develop further? What are the strengths and weaknesses of each province? How can provinces cooperate and support each other in their diversification efforts? This report contains provincial profiles and detailed information regarding each of the 21 provinces as well as their competitiveness performances in recent years, as measured and assessed by the EPCRC. Sustainable development goals are increasingly being pursued and implemented by countries around the world. In Mongolia, provinces need to develop their own sustainable development strategies, based on their local challenges and particular economic situation. In doing so, they shall seek to enhance people’s livelihoods while creating job opportunities to ensure the wellbeing of future generations. For this purpose, we need rigorous research and forward- looking policies. This is the motivation behind this annual report which we hope will contribute to supporting economic development and prosperity in Mongolia. In order to better understand and strengthen the competitiveness of Mongolia’s provinces, we have been organizing annual regional competitiveness forums since 2014. During these forums, various public and private stakeholders meet and discuss the economic challenges in the region to extend their cooperation and develop sound policies. This year, the Khangai Region Competitiveness Forum 2017 with the slogan “Coherent policies for a sustainable Khangai” was held in Murun, Khuvsgul Province, on 12-13 October, 2017. I would like to express my sincere gratitude to the Asia Foundation and the GIZ Integrated Mineral Resources Initiative for their ongoing support of the EPCRC’s work. Mongolia has many resources and opportunities. However, using these opportunities to the full potential will require cooperation across provinces and a proper development framework. TSAGAAN, Puntsag Chairman of the Board RESEARCH TEAM Economic Policy and Competitiveness Research Center The Board Mr. Tsagaan Puntsag Mr. Boldbaatar Tserenpuntsag Ms. Lakshmi Boojoo, Director Ms. Odonchimeg Ikhbayar, Deputy Director Mr. Ganbat Chuluun, Researcher Ms. Tungalag Erdenebat, Researcher Ms. Yesunchuluu Khuderchuluu, Researcher Mr. Otgon-Erdene Khandaa, Researcher Mr. Zolbayar Enkhbaatar, Researcher FOREWORD Dear readers, A look into an economic textbook will show, that competitiveness is defined as the ability of companies - or for that matter a country - to remain profitable in an increasingly globalized economic environment characterized by international trade and production and to assert market share at home and abroad. There are recognized and according to Paul Krugman “uncontested competitiveness indicators”: unit labor costs and effective exchange rates, each as a measure of the international cost and price comparison. This could be the core of competitiveness and its measurement. However, in economic policy debates the terms competitiveness and productivity are often interchanged. Competitiveness understood as the ability to compete commercially, is based on prices and costs and is part of the nominal side of the economy. It could be simply improved, for example, by a devaluation or by price reductions due to cost savings. It is relative and measures itself in comparison to trading partners. It is a zero-sum concept: improving the competitiveness in one country inevitably means reducing the competitiveness of its partner countries and vice versa. Continuously improving that kind of competitiveness would be for any country a difficult task at the best of times. Wage policies or changes to the prices of public goods and services are usually socio-politically hard to sell and rather sensitive, and structural reforms too often intervene with the position of interest groups. What EPCRC´s Provincial Competitiveness Report 2017 analyzes once again in a highly professional and differentiated way goes far beyond that somewhat limited understanding of competitiveness. Rather, it operationalizes competitiveness as a function of productivity. Productivity, the economic output per employee, is part of the real side of the economy and has nothing to do with prices or costs, but with output. Productivity can be measured absolutely and is not a zero-sum concept: every country can work on its own, and countries can increase their productivity together. “Improving competitiveness” thus means improving the price and cost structure in an economy; “Increase productivity” means to increase your performance. Competitiveness improves when, with a given productivity, costs go down - or productivity increases at the same cost. Competitiveness is, as the four main factors– economic performance, governance efficiency, business efficiency, infrastructure – and the 16 sub-factors with round about 180 criteria used by EPCRC indicate, a rather complex concept. But for the very same reason, it provides also many more opportunities and levers a country like Mongolia with its 21 aimags can utilize in order to improve the current situation. There is a clear need for action. Without competitiveness, there will be no sustainable economic growth and employment on sufficiently high levels. With other words, competitiveness should remain a leitmotif – an overall guideline beyond political cycles and legislative terms of governments - Dr. Stefan Hanselmann Head of Program GIZ Integrated Mineral Resouces Initiative ECONOMIC POLICY AND COMPETITIVENESS RESEARCH CENTER ÝÄÈÉÍ ÇÀÑÃÈÉÍ ÁÎÄËÎÃÎ, ªÐÑªËÄªÕ ×ÀÄÂÀÐÛÍ ÑÓÄÀËÃÀÀÍÛ ÒªÂ PARTNER ORGANISATIONS The Asia Foundation Implemented by: German Society for International Cooperation Integrated Mineral Resources Initiative Mongolian National Chamber of Commerce and Industry, Regional Branches STATISTICAL DATA SOURCES National Statistical Office Bank of Mongolia PROVINCIAL COMPETITIVENESS REPORT 2017 CONTENTS Abbreviations ........................................................................................................................9 DEVELOPMENT CHALLENGES ..................................................................................... 10 PRINCIPLES OF ANALYSIS AND METHODOLOGY ............................................... 13 PROVINCIAL COMPETITIVENESS SCOREBOARD ................................................... 19 Competitiveness factors ............................................................................................. 20 Overall competitiveness scoreboard 2017 ........................................................... 21 Competitiveness structures ........................................................................................ 27 PROVINCIAL COMPETITIVENESS PROFILES ............................................................ 31 STATISTICAL TABLES .....................................................................................................117 1. Economic Performance .......................................................................................119 2. Government Efficiency .........................................................................................131 3. Business Efficiency ................................................................................................143 4. Infrastructure .........................................................................................................155 MULTI-DIMENSIONAL ENVIRONMENTAL VULNERABILITY INDICATOR .........177 ANNEXES .........................................................................................................................187 The fundamentals of competitiveness ...................................................................188 Data sources and notes .........................................................................................190 7 PROVINCIAL COMPETITIVENESS REPORT 2017 Provincial Competitiveness Profiles ARKHANGAI ..........................................................32

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