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MONGOLIA: Systematic Country Diagnostic Public Disclosure Authorized MONGOLIA: Systematic Country Diagnostic Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Acknowledgements This Mongolia Strategic Country Diagnostic was led by Samuel Freije-Rodríguez (lead economist, GPV02) and Tuyen Nguyen (resident representative, IFC Mongolia). The following World Bank Group experts participated in different stages of the production of this diagnostics by providing data, analytical briefs, revisions to several versions of the document, as well as participating in several internal and external seminars: Rabia Ali (senior economist, GED02), Anar Aliyev (corporate governance officer, CESEA), Indra Baatarkhuu (communications associate, EAPEC), Erdene Badarch (operations officer, GSU02), Julie M. Bayking (investment officer, CASPE), Davaadalai Batsuuri (economist, GMTP1), Batmunkh Batbold (senior financial sector specialist, GFCP1), Eileen Burke (senior water resources management specialist, GWA02), Burmaa Chadraaval (investment officer, CM4P4), Yang Chen (urban transport specialist, GTD10), Tungalag Chuluun (senior social protection specialist, GSP02), Badamchimeg Dondog (public sector specialist, GGOEA), Jigjidmaa Dugeree (senior private sector specialist, GMTIP), Bolormaa Enkhbat (WBG analyst, GCCSO), Nicolaus von der Goltz (senior country officer, EACCF), Peter Johansen (senior energy specialist, GEE09), Julian Latimer (senior economist, GMTP1), Ulle Lohmus (senior financial sector specialist, GFCPN), Sitaramachandra Machiraju (senior agribusiness specialist, GFA02), John Middleton (principal environmental specialist, CESI2), Juan Jose Miranda Montero (environmental economist, GEE09), James Morley (senior investment officer, CM4C1), Dinesh Nair (senior health specialist, GHN02), Joo Nam (investment officer, CN4S4), Jean-Pascal Nguessa Nganou (senior economist, GMTP1), Neil Pereira (principal investment officer, CNGMI), Poonam Pillai (senior disaster risk management specialist, GSU08), Josefina Posadas (senior economist, GSP02), Artessa Saldivar-Sali (senior municipal engineer, GSU08), Autif Mohammed Sayyed (senior operations officer, ), Achim Schmillen (senior economist, GSP02), Carolina Luisa Vaira (senior governance specialist, GGOEA), Alexei Volkov (strategy officer, CCECE), and Yun Wu (energy specialist, GEE09). Overall supervision was provided by Bert Hoffman (country director, EACCF), James Anderson (country manager, EACMF) and Salman Zaidi (practice manager, GPV02). Guidance also provided by Sudhir Shetty (chief economist, EAPCE) and Xiaoqing Yu (director strategy and operations, EAPVP). Peer reviewers to the concept note and final SCD were: Trang Van Nguyen (Senior Economist, GPV03), Miguel Eduardo Sánchez Martín (Senior Economist, GMF02), Carter J. Brandon (Lead Economist, GENDR) & Daniel Francis Street (Senior Operations Officer, CCECE). Administrative support was provided by Mildred Gonsalvez (program assistant, GPV02), Angar Enkhtur (team assistant, EACMF), Boloroo Bayasgalan (program assistant, EACMF), and research assistance from Reno Dewina (consultant, GPV02). Contents EXECUTIVE SUMMARY .................................................................................................................................. ix Country Context ..................................................................................................................................................... ix Overarching challenges and development strategies ...................................................................................... x A list of development priorities .......................................................................................................................... xii Conclusion ............................................................................................................................................................. xv I. INTRODUCTION ........................................................................................................................................ 1 Analytical Framework ................................................................................................................................................ 2 Structure of the Document ........................................................................................................................................ 6 II. STABLE ECONOMIC GROWTH.............................................................................................................. 7 Growth performance: fast GDP and productivity growth but growing instability.................................................... 7 Challenges to stable growth: towards prudent fiscal management and diversified assets accumulation ............... 14 III. ENDURING POPULATION WELLBEING ........................................................................................ 26 Equity performance: advances in poverty reduction at risk .................................................................................... 27 Challenges to equity: better investments in health, education and housing as the foundations of enduring wellbeing. ................................................................................................................................................................ 32 IV. REDUCED ENVIRONMENTAL STRESS .......................................................................................... 47 Sustainability performance: has there been green growth in Mongolia? ............................................................... 47 Challenges to sustainability: Is Mongolia preserving its capital in natural resources? ......................................... 49 V. DEVELOPMENT PRIORITIES FOR MONGOLIA ............................................................................... 63 Summary of the diagnostic ...................................................................................................................................... 63 A ranking exercise ................................................................................................................................................... 66 A list of development priorities: .............................................................................................................................. 67 REFERENCE LIST ........................................................................................................................................... 75 TABLES ............................................................................................................................................................. 80 FIGURES ........................................................................................................................................................... 85 ANNEXES ........................................................................................................................................................ 105 Annex 1: A benchmarking exercise for Mongolia ................................................................................................. 105 Annex 2: Consultations with Stakeholders ............................................................................................................ 139 Annex 3: Data and research gaps for Mongolia ................................................................................................... 163 List of Boxes Box 1: Governance in Mongolia: The implementation gap .......................................................................... 4 Box 2: Governance in Mongolia: A “provisioning” pact? ......................................................................... 24 Box 3: Governance in Mongolia: Crisis of clientelism and perceptions of corruption .............................. 45 Box 4: Governance in Mongolia: The long-term consequences of current politics .................................. 62 Box 5: Governance in Mongolia: A critical juncture.................................................................................. 69 List of Tables Table 1: The rules of FSF and FHF ............................................................................................................ 80 Table 2: Consolidated Budget and Central Budget Aggregate Expenditure Outturn: Compared to Originally Approved Budget ....................................................................................................................... 81 v Table 3: Mongolia's trade costs are high ..................................................................................................... 81 Table 4: Inequality in livestock production ................................................................................................ 82 Table 5: Poverty profiles by household head and dwelling characteristics 2016 ....................................... 83 Table 6: Increased frequency of dzuds and droughts in Mongolia… ......................................................... 84 Table 7: Changes in per capita wealth for selected countries: 1995-2014 .................................................. 84 Table A.1. 1: Glossary of Benchmarking Indicators .................................................................................. 118 List of Figures Figure 1: Decomposition of GDP per capita growth, Mongolia 2000-2016 ............................................... 85 Figure 2: Investment and Capital Accumulation in Mongolia .................................................................... 86 Figure 3: More
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