2014 Index of Economic Freedom

Mongolia

overall score58.9
world rank97
Rule of Law

Property Rights30.0

Freedom From Corruption28.2

Limited Government

Government Spending39.1

Fiscal Freedom81.8

Regulatory Efficiency

Business Freedom71.8

Labor Freedom81.1

Monetary Freedom72.4

Open Markets

Trade Freedom74.7

Investment Freedom50.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.8 million
  • GDP (PPP):
    • $15.2 billion
    • 12.3% growth
    • 8.6% 5-year compound annual growth
    • $5,372 per capita
  • Unemployment:
    • 6.8%
  • Inflation (CPI):
    • 15.0%
  • FDI Inflow:
    • $4.5 billion
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Mongolia’s economic freedom score is 58.9, making its economy the 97th freest in the 2014 Index. Its overall score is 2.8 points lower than last year, with deteriorations in the control of government spending, trade freedom, and monetary freedom outweighing small improvements in business freedom and labor freedom. Mongolia is ranked 19th out of 42 countries in the Asia–Pacific region, and its overall score is above the regional average.

Over the 20-year history of the Index, Mongolia has advanced its economic freedom score by over 11 points. Despite ups and downs, its relatively broad-based overall score improvement has been facilitated by advancements in seven of the 10 economic freedoms including monetary freedom, fiscal freedom, and trade freedom. The rule of law has lagged, however. Once considered a “repressed” economy, Mongolia had risen to “moderately free” before falling back this year.

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

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Background

Mongolia’s transition from a Soviet Socialist Republic to democracy has been characterized by the gradual introduction of political and free-market reforms. Despite political tensions, the country has enjoyed relative stability in recent years. Tsakhiagiin Elbegdorj, whose Democratic Party coalition controls parliament, was re-elected to a second and final term as president in June 2013. Agriculture and mining are the most important sectors of the economy, although tourism and construction are growing in importance. With its abundant mineral resources attracting foreign investment, Mongolia has become one of the world’s fastest-growing economies. While improving overall relations with the U.S., Japan, and South Korea, it has also sought to strengthen ties with Russia and China.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 28.2 Create a Graph using this measurement

Corruption is viewed as pervasive. Graft is endemic, and weak institutions do not enforce anti-corruption measures effectively. The judiciary is independent but inefficient and vulnerable to political interference. Corruption persists among judges. Property and contractual rights are recognized, but enforcement is weak. The government lacks the capacity to enforce intellectual property rights laws.

Limited GovernmentView Methodology

The top individual income tax rate is 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 is 33.1 percent of gross domestic income. Government expenditures equal 45 percent of GDP, and public debt stood at 41 percent of gross domestic income in the most recent year. The government receives substantial revenues from the growing mining sector.

Regulatory EfficiencyView Methodology

Despite some progress in modernizing the regulatory framework, time-consuming and costly requirements continue to reduce overall regulatory efficiency. The labor market remains inefficient, and chronic unemployment and underemployment continue. At the end of 2012, the IMF noted a steady erosion of fiscal discipline as the government increased spending on subsidies such as costly universal cash transfers.

Open MarketsView Methodology

Mongolia has a 5.1 percent average tariff rate. It is costly and time-consuming to import goods. The “Strategic Entities Foreign Investment Law,” enacted in 2012, limits investment in strategic industries. The financial system has undergone rigorous modernization. Weathering the strain caused by the global financial turmoil, the banking sector has 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 Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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