2013 Index of Economic Freedom

Mongolia

overall score61.7
world rank75
Rule of Law

Property Rights30.0

Freedom From Corruption27.0

Limited Government

Government Spending62.6

Fiscal Freedom82.5

Regulatory Efficiency

Business Freedom70.4

Labor Freedom79.2

Monetary Freedom75.6

Open Markets

Trade Freedom79.8

Investment Freedom50.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.8 million
  • GDP (PPP):
    • $13.3 billion
    • 17.3% growth
    • 8.1% 5-year compound annual growth
    • $4,744 per capita
  • Unemployment:
    • 9.9%
  • Inflation (CPI):
    • 9.5%
  • FDI Inflow:
    • $4.7 billion
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Mongolia’s economic freedom score is 61.7, making its economy the 75th freest in the 2013 Index. Its overall score is 0.2 point higher than last year, with a large improvement in regulatory efficiency outweighing a decline in the management of public finance. Mongolia is ranked 12th out of 41 countries in the Asia–Pacific region, and its overall score is above the regional average.

Mongolia has gradually moved toward a more modern and vibrant economy, with double-digit economic growth driven by the booming mining sector. The trade regime is increasingly open, and the regulatory framework has become more efficient, supporting the development of a growing private sector. The Fiscal Sustainability Law, which places ceilings on spending growth, structural budget deficits, and public debt in an effort to ensure fiscal discipline and long-term economic growth, is expected to take effect in phases beginning in 2013.

Despite notable strides made over the past decade, the momentum for swift structural reform has largely stalled. Prospects for enhancing economic freedom remain curtailed by a lack of institutional commitment to the strong protection of property rights and ineffectiveness in fighting systemic corruption. The judicial framework remains vulnerable to political interference, undermining respect for the rule of law.

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Background

Mongolia’s gradual emergence from the shadow of the former USSR has been facilitated by political and free-market reforms since 1990. The Democratic Party of President Tsakhiagiin Elbegdorj, which won the most seats in the June 2012 parliamentary election, now heads a coalition government in parliament. The mineral resource–rich economy has a strong trading relationship with neighboring China that supports high rates of economic growth. The services and industry sectors account for about 80 percent of domestic output, although a large number of workers remain employed in livestock herding. Contributing to strong economic expansion, the mining sector continues to attract the largest portion of foreign investment.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 27.0 Create a Graph using this measurement

Property and contractual rights are recognized, but enforcement is weak. The judicial system remains inefficient and vulnerable to political interference. The government lacks the capacity to enforce intellectual property rights laws. Graft is endemic, and pervasive corruption continues to undermine the foundations of economic freedom and add to the cost of conducting business. Anti-corruption measures are not enforced effectively.

Limited GovernmentView Methodology

The individual income tax rate is a flat 10 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and an excise tax. The overall tax burden equals 31.9 percent of GDP. Government spending is equal to 35.3 percent of total domestic output. The budget balance has turned to a slight deficit, and public debt is about 40 percent of GDP. Strong mining growth has helped to boost the fiscal account.

Regulatory EfficiencyView Methodology

A modern and efficient regulatory framework continues to evolve. With no minimum capital required, launching a business takes less than 10 procedures on average. Employment regulations are relatively flexible, but the labor market lacks dynamism. Inflation threatens not only to hamper economic growth, but also to cause political instability, but the government seems unable or unwilling to deal with it.

Open MarketsView Methodology

The trade-weighted average tariff rate is 5.1 percent, and costly non-tariff barriers further constrain trade freedom. Foreign investment is officially welcome, but the legislative framework regarding investment is still developing. The financial system has undergone rigorous modernization. Weathering the strain caused by the global financial turmoil, the banking sector has become stabilized.

Country's Score Over Time

Bar Graph of Mongolia Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Mongolia to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong89.3-0.6
2Singapore880.5
3Australia82.6-0.5
4New Zealand81.4-0.7
5Taiwan72.70.8
6Japan71.80.2
7Macau71.7-0.1
8South Korea70.30.4
9Malaysia 66.1-0.3
10Thailand 64.1-0.8
11Kazakhstan63-0.6
12Mongolia61.70.2
13Sri Lanka60.72.4
14Azerbaijan59.70.8
15Kyrgyz Republic 59.6-0.6
16Cambodia58.50.9
17The Philippines58.21.1
18Fiji57.2-0.1
19Samoa57.1-3.4
20Indonesia56.90.5
21Vanuatu56.60.0
22Tonga56-1.0
23India55.20.6
24Pakistan 55.10.4
25Bhutan55-1.6
26Papua New Guinea53.6-0.2
27Tajikistan53.40.0
28Bangladesh 52.6-0.6
29China51.90.7
30Vietnam51-0.3
31Nepal50.40.2
32Micronesia50.1-0.6
33Laos50.10.1
34Maldives49-0.2
35Uzbekistan460.2
36Kiribati45.9-1.0
37Solomon Islands45-1.2
38Timor-Leste43.70.4
39Turkmenistan42.6-1.2
40Burma39.20.5
41North Korea1.50.5
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