Resources and power

Mongolia possesses large deposits of coal and fluorite (fluorspar) and of copper, gold, silver, and other metallic ores. The chief mineral produced is coal, which is primarily for domestic use, although the newer coalfields of Khöshööt near Khovd in the west and Tavantolgoi in the southern Gobi have begun exporting their coal to China. For years the two main coal-mining districts were Nalajkh, just south of Ulaanbaatar, and Sharyn Gol, southwest of Darkhan. However, since the beginning of the 21st century the most productive coal mine has been at Baganuur, just east of Ulaanbaatar, which supplies the power plants of the capital region.

Fluorite, gold, and copper and molybdenum ores are exported. Iron, zinc, and tin deposits are also worked. The large Erdenet copper-and-molybdenum mining enterprise began operation in the late 1970s as a joint venture between Mongolia and the Soviet Union; Russia later succeeded to the partnership. The output from this complex has provided a major component of Mongolia’s export revenues. Of growing interest has been the giant Oyuutolgoi gold and copper deposits in the southern Gobi, and the government has entered into operating agreements with foreign mining companies to exploit the reserves there. However, unregulated gold mining by small-scale operators has caused environmental damage to older goldfields in central Mongolia.

Mongolia and the Soviet Union developed small petroleum-extraction operations in the 1950s around Züünbayan in the Gobi and Tamsagbulag in eastern Mongolia, but the Soviet technology available then could not sustain it, and exploitation stopped. Since 1990, oil companies from the United States, China, and other countries have introduced new technology, which has been used to drill for oil from deeper wells in the original deposit around Züünbayan and at new sites in the Tamsagbulag area. The crude petroleum extracted is trucked to China for refining,

Mongolia’s electrical power is generated almost entirely by coal-fired thermal stations, which, in addition to providing power, also supply hot water for residential and commercial heating. The main towns of northern Mongolia are linked by a national power grid, but settlements in remoter areas still depend on local diesel-fueled generators. In the countryside many herding families have begun producing electricity with solar panels or wind turbines for domestic use. Mongolia has considerable reserves of uranium, and the government has entered into joint ventures with companies from several countries to exploit the deposits. In addition, several of the rivers of Mongolia offer potential for hydroelectric development, although exploitation has proved to be problematic.

Manufacturing

Much of Mongolia’s manufacturing still centres around processing domestic raw materials. Products include foods (meat, beverages, dairy products, and flour); clothing made from cashmere, wool, hides, skins, and furs; and wood products such as ger frames and furniture. Brewing, distilling, and bottling of soft drinks have grown, as has the manufacture of construction materials (including cement). Early in the post-1990 conversion to a market economy, several of the clothing manufacturers were converted to making textiles and garments from imported materials for reexport. Among the manufactured products that have started to be produced since 2000 are rolled copper sheeting, copper wire, and zinc concentrates.

Ulaanbaatar is the centre of Mongolia’s manufacturing, especially of the lighter industries. The country’s main heavy industrial enterprises include those at Erdenet that concentrate copper and molybdenum ores for shipment, iron works at Darkhan, and a growing complex producing coke and chemicals in the Gobi.

Finance

After 1990 there was a fundamental renewal of the financial sector, which under the socialist system had been based on the monopoly of the State Bank of the Mongolian People’s Republic—subsequently renamed Mongolbank (the Bank of Mongolia)—and its international branch, the Trade and Development Bank. The Bank of Mongolia remains the country’s central bank and is responsible for regulating the national currency, the tugrik (tögrög). The establishment of several private-venture and international banks in Ulaanbaatar was followed by periods of consolidation and relative stability, which opened up opportunities to set up services for commercial and private loans and personal banking and to introduce electronic banking, credit cards, and automatic teller machines. Companies were formed to handle insurance and mortgages. A stock exchange was established in Ulaanbaatar in 1991; though attracting little foreign interest, it has done business in shares of major domestic companies operating utilities or manufacturing cashmere goods, wool carpets, and beverages.

Trade

Since the 1980s minerals and ore concentrates have been Mongolia’s principal export, with copper concentrates and gold accounting for the largest share of export value. The traditional exports of livestock and their by-products have come to account for only a small proportion of the overall value. The main imports are fuels, machinery, food and agricultural products, and motor vehicles.

China and Russia are Mongolia’s largest trading partners, together accounting for some two-thirds of the value of imports. China also receives more than four-fifths of Mongolia’s exports. Mongolia has sought to increase trade with other countries, but this has been hampered by a lack of direct access to the sea, the need to use Russian and Chinese transport systems and ports, long distances and high transport costs, and the difficulties of competing in international markets. Mongolia has run a relatively modest trade deficit in most years, though the value of exports occasionally has exceeded that of imports.