2016 Index of Economic Freedom

Mongolia

overall score59.4
world rank100
Rule of Law

Property Rights30.0

Freedom From Corruption39.0

Limited Government

Government Spending51.5

Fiscal Freedom84.4

Regulatory Efficiency

Business Freedom67.7

Labor Freedom77.9

Monetary Freedom68.0

Open Markets

Trade Freedom70.0

Investment Freedom45.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.9 million
  • GDP (PPP):
    • $34.8 billion
    • 7.8% growth
    • 14.0% 5-year compound annual growth
    • $11,882 per capita
  • Unemployment:
    • 4.8%
  • Inflation (CPI):
    • 12.9%
  • FDI Inflow:
    • $507.6 million
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Mongolia is gradually becoming a more modern and vibrant economy, with notable economic growth driven by the mining sector. The trade regime is increasingly open, and the regulatory framework has become more efficient, generally facilitating the development of a growing private sector.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 59.4 (up 0.2 point)
  • Economic Freedom Status: Mostly Unfree
  • Global Ranking: 100th
  • Regional Ranking: 22nd in the Asia–Pacific Region
  • Notable Successes: Trade Freedom
  • Concerns: Property Rights, Corruption, and Regulatory Efficiency
  • Overall Score Change Since 2012: –2.1

Despite notable strides made over the past decade, the momentum for swift structural reform has largely stalled. Prospects for enhancing economic dynamism remain curtailed by a lack of institutional commitment to the strong protection of property rights and ineffectiveness in fighting corruption. The narrow economic base keeps Mongolia vulnerable to external shocks.

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Background

Since the adoption of a new constitution in 1992, Mongolia has transformed from a closed society ruled by a repressive single-party Communist system into an open society and a dynamic multi-party democracy. The transition to democracy 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. In recent years, lingering uncertainty over investment rules has caused investment in the mineral sector to ebb and flow.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 39.0 Create a Graph using this measurement

Corruption remains a serious problem in Mongolia and 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 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 28.8 percent of GDP. Government spending amounts to 40.2 percent of total domestic output. The budget balance has been in deficit, and public debt has reached a level equivalent to over 65 percent of GDP.

Regulatory EfficiencyView Methodology

A modern and efficient regulatory framework is emerging, albeit slowly. 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. The significant depreciation of the togrog in 2015 forced the central bank to raise interest rates and attempt to sustain currency reserves.

Open MarketsView Methodology

Mongolia’s average tariff rate is 5 percent. Importation of goods is expensive and time-consuming. The government has imposed travel bans on foreign executives to prevent them from leaving the country in order to coerce concessions from their employers. The financial system has undergone modernization. Gradually weathering the strain caused by the global financial turmoil, the banking sector has become largely stable.

Country's Score Over Time

Bar Graph of Mongolia Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Hong Kong88.6-1.0
2Singapore87.8-1.6
3New Zealand81.6-0.5
4Australia80.3-1.1
5Taiwan74.7-0.4
6Japan73.1-0.2
7South Korea71.70.2
8Malaysia 71.50.7
9Macau70.1-0.2
10Brunei Darussalam67.3-1.6
11Thailand 63.91.5
12Kazakhstan63.60.3
13Samoa63.51.6
14Philippines63.10.9
15Vanuatu60.8-0.3
16Azerbaijan60.2-0.8
17Sri Lanka59.91.3
18Tonga59.60.3
19Kyrgyz Republic 59.6-1.7
20Bhutan59.52.1
21Indonesia59.41.3
22Mongolia59.40.2
23Fiji58.8-0.2
24Cambodia57.90.4
25India56.21.6
26Pakistan 55.90.3
27Vietnam542.3
28Maldives53.90.5
29Bangladesh 53.3-0.6
30Papua New Guinea53.20.1
31China52-0.7
32Micronesia51.82.2
33Tajikistan51.3-1.4
34Nepal50.9-0.4
35Laos49.8-1.6
36Burma48.71.8
37Solomon Islands470.0
38Kiribati46.2-0.2
39Uzbekistan46-1.0
40Timor-Leste45.80.3
41Turkmenistan41.90.5
42North Korea2.31.0
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