Presented by the MOEF, Republic of Korea 2018/19 KSP Policy Consultation Report Mongolia Strengthening Economic Development Planning and Infrastructure Funding for Mongolia Government Publications Registration Number 11-1051000-000943-04 2018/19 KSP Policy Consultation Report Strengthening Economic Development Planning Mongolia and Project Performance Assessments in Mongolia 2018/19 KSP Policy Consultation Report Project Title Strengthening Economic Development Planning and Infrastructure Funding for Mongolia Prepared for The Government of Mongolia In Cooperation with ‌Ministry of Finance (MoF), National Development Agency (NDA), Development Bank of Mongolia (DBM) Supported by Ministry of Economy and Finance (MOEF), Republic of Korea Prepared by Korea Development Institute (KDI) Project Director Sanghoon Ahn, Executive Director, Center for International Development (CID), KDI Youngsun Koh, ‌Executive Director, Global Knowledge Exchange & Development Center, Former Executive Director, CID, KDI Project Manager Changjae Lee, Visiting Senior Fellow, CID, KDI Project Officer Jinha Yoo, Senior Research Associate, Division of Policy Consultation, CID, KDI Jun Hee Kim, Senior Research Associate, Division of Policy Consultation, CID, KDI Senior Advisor Seok Dong Kim, Former Chairman of Financial Services Commission Principal Investigator Myung Ho Park, Professor, Hankuk University of Foreign Studies Authors Chapter 1. Myung Ho Park, Professor, Hankuk University of Foreign Studies Belguun Enkhmandal, Specialist, MoF Ichinnorov Luvsanvandan, Officer, MoF Chapter 2. Sung Ho Choi, Professor, Kyonggi University Erdenebayar Davaasambuu, Director, NDA Sarantuya Munkhtur, Officer, NDA Chapter 3. Changyong Choi, Professor, KDI School of Public Policy and Management Sukhdelger Sosorbaram, Specialist, MoF Chapter 4. Jongyearn Lee, Professor, KDI School of Public Policy and Management Ochir Lkhagvasuren, Chief Executive Officer, DBM Chapter 5. Younghan Lee, Professor, University of Seoul Takkyung Kim, ‌Deputy Director, Division of Public-Private-Partnerships, Public and Private Infrastructure Investment Management Center, KDI Dulguun Ganzorig, Asset Manager, DBM English Editor Institute of Culture and Arts Translation Government Publications Registration Number 11-1051000-000943-01 ISBN 979-11-5932-455-0 979-11-5932-438-3 (set) Copyright ⓒ 2019 by Ministry of Economy and Finance, Republic of Korea 2018/19 KSP Policy Consultation Report Strengthening Economic Development Planning and Infrastructure Funding for Mongolia Preface Knowledge is an essential ingredient in a country’s economic growth and social development. Of particular importance is government capacity to formulate and implement policies. The global society is making various efforts to promote knowledge sharing between countries and improve their policy capacity to tackle development issues and enhance global prosperity. Indeed, knowledge laid the foundation for Korea’s unprecedented transformation from a poor agro-based economy into a modern industrialized nation with an open and democratic society. Technology transfer from abroad and educational investment helped expand the domestic knowledge stock and made this transformation possible. The Korean government could also accumulate invaluable practical lessons not found in a conventional textbook through the course of development. The Ministry of Economy and Finance (MOEF) of Korea introduced the Knowledge Sharing Program (KSP) in 2004 to share Korea’s development experience with the international community through joint research, policy consultations, and capacity-building activities. Since its inception, the program has played a vital role in supporting socio-economic development of partner countries around the world. Korea Development Institute (KDI) has participated in the KSP since the program’s launch and has been working with more than seventy foreign countries and organizations. KDI, Korea’s leading think-tank with an extensive experience in policy research, has provided solutions to the challenges that partner countries face in a variety of fields, ranging from industrial development to public-sector reform. In the 2018/19 KSP, KDI carried out policy consultation and capacity-building projects with twenty-two partners including three new participants— Belarus, Serbia, and the ASEAN Secretariat. Among these meaningful projects for mutual learning, this one was initiated by the Ministry of Finance (MoF) with the aim of “Strengthening Economic Development Planning and Infrastructure Funding for Mongolia.” Upon the request of the MoF, the MOEF and KDI organized a research team consisting of Mongolian and Korean experts. The team conducted in-depth analysis of internal and external policy environments, identified Mongolia’s key development challenges, and offered policy recommendations and action plans. On behalf of KDI, I would like to express my deepest appreciation to the Government of Mongolia and the MoF for their collaboration in the project. In particular, I would like to extend my profound gratitude to the government of Mongolia for their unwavering support. The completion of this project would not have been possible without their devotion. I also wish to thank the KSP consultation team—Senior Advisor Dr. Seok Dong Kim, Principal Investigator Professor Myung Ho Park, researchers Professor Sung Ho Choi, Professor Changyong Choi, Professor Jongyearn Lee, Professor Younghan Lee and Dr. Takkyung Kim, and local consultants Belguun Enkhmandal, Ichinnorov Luvsanvandan, Erdenebayar Davaasambuu, Sarantuya Munkhtur, Sukhdelger Sosorbaram, Munguntsatsral Boldbayar, Ochir Lkhagvasuren, Dulguun Ganzorig—for producing this report. This project benefited greatly from many others both inside and outside the Mongolian government. I would like to extend my sincere thanks to all who have made valuable contributions to a successful completion of the project. I am also grateful to the Center for International Development of KDI, in particular Executive Director Dr. Sanghoon Ahn, former Executive Director Dr. Youngsun Koh, Project Manager Dr. Changjae Lee, Project Officer Ms. Jinha Yo and Mr. Jun Hee Kim, for their hard work and dedication to the project. I firmly believe that the KSP will serve as a stepping stone to further elevate mutual learning and economic cooperation between Mongolia and Korea, and hope it will contribute to their sustainable development. Jeong Pyo Choi President Korea Development Institute (KDI) Contents 2018/19 KSP with Mongolia ······································································································019 Executive Summary ····················································································································023 Chapter 1 Institutional Set-up and Governance for Integrated Development Planning Summary ····································································································································027 1. Introduction ····························································································································028 1.1. ‌Current Situation and Challenges of Development Policy Planning of Mongolia ······029 1.2. What to Share? ················································································································033 1.3. Mongolia and Korea ········································································································035 2. Economic Development Plan: An Integrated Approach ·······················································039 2.1. History and Concept ·······································································································039 2.2. New Approach ················································································································040 3. Economic Development Plans in Mongolia ··········································································043 3.1. The History of Mongolian Economic Development Policy ···········································043 3.2. New Tool Kit: An Integrated Approach on Mongolian Development Policy Planning ······055 4. Economic Development Plans in Korea ················································································066 4.1. Economic History of Korea ······························································································066 4.2. EDPs in Korea ···················································································································071 5. Policy Recommendations ······································································································075 5.1. The Establishment of an Integrated Framework for EDPs ···········································075 5.2. Political Leadership and Institutional Set-Up ································································076 5.3. Evidence-Based, Empirically Backed Policy Options ·····················································077 5.4. Development of Budgeting and Financial Systems ·······················································078 5.5. Support for Monitoring and Evaluation (M&E) ······························································078 5.6. Capacity Development ····································································································079 5.7. Conclusion ······················································································································080 References ··································································································································082