2017 Index of Economic Freedom

Mongolia

overall score54.8
world rank129
Rule of Law

Property Rights51.3

Government Integrity36.8

Judicial Effectiveness28.4

Government Size

Government Spending57.6

Tax Burden87.1

Fiscal Health0.0

Regulatory Efficiency

Business Freedom67.2

Labor Freedom76.6

Monetary Freedom72.3

Open Markets

Trade Freedom74.9

Investment Freedom45.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 3.0 million
  • GDP (PPP):
    • $36.1 billion
    • 2.3% growth
    • 10.3% 5-year compound annual growth
    • $12,147 per capita
  • Unemployment:
    • 7.1%
  • Inflation (CPI):
    • 5.9%
  • FDI Inflow:
    • $195.1 million
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In an effort to accelerate its transition to a competitive economy, Mongolia has adopted policies to liberalize markets and develop the financial sector. However, long-term economic development will still require further critical reforms. The evolving regulatory framework governing investment remains opaque, injecting uncertainty into investment decisions.

The weak rule of law and lingering corruption are additional drags on the economy. Institutional reforms and continued efforts to streamline public administration are critical to sustaining economic growth. Management of public finances has deteriorated notably, and growing budget deficits have pushed the level of public debt to more than 75 percent of GDP.

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Background

Since the adoption of a new constitution in 1992, Mongolia has transformed from a closed society ruled by a single-party Communist system into an open society and a dynamic multi-party democracy. This transition has been accompanied by the gradual introduction of free-market reforms and relatively well-maintained political stability. While improving overall relations with the U.S., Japan, and South Korea, Mongolia has also maintained strong ties with Russia and China. President Tsakhiagiin Elbegdorj, whose Democratic Party coalition controls parliament, is serving his second term. Agriculture and mining remain the most important sectors of the economy. Uncertainty over investment rules has caused investment in the mineral sector to ebb and flow.

Rule of LawView Methodology

Property Rights 51.3 Create a Graph using this measurement

Government Integrity 36.8 Create a Graph using this measurement

Judicial Effectiveness 28.4 Create a Graph using this measurement

Property and contractual rights are recognized, but enforcement is weak. The government lacks the capacity to enforce intellectual property rights laws. The judiciary is independent but inefficient and vulnerable to political interference. Pervasive corruption stems from a political culture that places a high value on relationships. Graft is endemic, and weak institutions do not enforce anticorruption measures effectively.

Government SizeView 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 and an excise tax. The overall tax burden equals 23.7 percent of total domestic income. Government spending has amounted to 37.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 9.4 percent of GDP. Public debt is equivalent to 76.5 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory framework continues to evolve, although the pace of reform has been sluggish. Labor regulations are relatively flexible, but the labor market lacks dynamism. The nonsalary cost of employing a worker is moderate, and dismissing an employee is not burdensome. Faced with a budget deficit, the government is contemplating the sale of some state-owned enterprises such as power plants, coal companies, and the stock exchange.

Open MarketsView Methodology

Trade is important to Mongolia’s economy; the value of exports and imports taken together equals 87 percent of GDP. The average applied tariff rate is 5.0 percent. The judicial and regulatory systems impede foreign investment, and state-owned enterprises distort the economy. The limited availability of long-term loans and costly collateral requirements make access to credit a challenge for small and medium-size firms.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong89.81.2
2Singapore88.60.8
3New Zealand83.72.1
4Australia810.7
5Taiwan76.51.8
6South Korea74.32.6
7Malaysia 73.82.3
8Macau70.70.6
9Brunei Darussalam69.82.5
10Japan69.6-3.5
11Kazakhstan695.4
12Vanuatu67.46.6
13Thailand 66.22.3
14Philippines65.62.5
15Azerbaijan63.63.4
16Fiji63.44.6
17Tonga633.4
18Indonesia61.92.5
19Kyrgyz Republic 61.11.5
20Cambodia59.51.6
21Bhutan58.4-1.1
22Samoa58.4-5.1
23Tajikistan58.26.9
24China57.45.4
25Sri Lanka57.4-2.5
26Nepal55.14.2
27Solomon Islands558.0
28Bangladesh 551.7
29Mongolia54.8-4.6
30Micronesia54.12.3
31Laos544.2
32Pakistan 52.8-3.1
33India52.6-3.6
34Burma52.53.8
35Vietnam52.4-1.6
36Uzbekistan52.36.3
37Papua New Guinea50.9-2.3
38Kiribati50.94.7
39Maldives50.3-3.6
40Afghanistan48.9N/A
41Turkmenistan47.45.5
42Timor-Leste46.30.5
43North Korea4.92.6
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