By Graham Earnshaw, Reuters
ULAN BATOR, May 22, Reuter – Mongolia’s efforts to develop a modern economy are being severely hampered by its isolation and low productivity levels, but progress is being made thanks to massive infusions of Soviet aid every year.
The economy of this huge, sparsely-populated country in central Asia has traditionally consisted almost solely of animal husbandry, and huge herds of cattle, sheep and camels still roam the grasslands which cover most of its territory.
But Soviet aid amounts to well over one billion U.S. dollars a year, and most of that money is being pumped into the development of industries and mining, particularly producing goods for export to the Soviet bloc.
A rather cruel joke doing the rounds in the East European community here highlights the contribution Soviet bloc countries believe they have made to Mongolia:
A Soviet leader visiting Mongolia goes to see all the major factories. At each one he asks his guide “Who built this?” and is told: “This one was built by the Soviet Union, that one by the Hungarians, that one by East Germany”, etc.
Puzzled, the Soviet leader asks the guide: “And what have the Mongolians built?”.
“Why,” the guide replies, “socialism of course.”
Soviet aid alone accounts for 70 per cent of total capital investment in Mongolia every year and local officials are quick to express their gratitude for Moscow’s money and help.
Thanks to the aid and the army of perhaps 20,000 Soviet specialists which help run every single branch of the Mongolian economy, the standard of living has risen sharply over the past few decades and is now calculated to be higher than in the Chinese region of Inner Mongolia to the south.
Mongolian officials emphasise that their country was one of the poorest, most backward places on earth when it gained its independence in 1921 with Soviet military help, thus becoming the world’s second communist country.
Industry and mining have become the major components in the economy, replacing animal husbandry, but economic inefficiency appears to be a major problem.
Officials admit that industrial productivity is only half the average for other Soviet bloc countries. Foreign experts said Mongolia’s wheat yield is also half the Asian average.
“There are many enterprises here built with the help of the Soviet Union,” said a Soviet Embassy spokesman. “The most important task for ourselves and the Mongolian people now is to raise the efficiency of these enterprises and the quality of production.”
Even animal husbandry, the foundation of the Mongolian economy, appears to have suffered from long-term neglect. Some diplomats and East European resident officials said meat shortages were common.
A diplomat said he understood the government originally intended to cut the monthly meat ration from March 1 but had been forced to scrap the plan due to widespread opposition.
“You can always get camel meat in the shops but good meat like lamb tends to be only available on national holidays,” he added.
Mongolia’s population has more than doubled since 1961 from 950,000 to just under two million, while the total number of livestock has remained almost static at about 20 million head.
But Mongolian officials denied that there were shortages of meat, the most important part of the Mongolian diet.
“We have no meat shortage problem,” said a senior official from the ruling party’s official newspaper Unen (Truth). “Maybe we eat a little less meat now that we are beginning to eat some vegetables. We eat too much meat.”
Mongolia’s leader, Zhambyn Batmunkh, referred to problems in food supplies in a major speech on the economy in May last year.
He said large livestock losses had been permitted during the 1981-85 five-year economic plan period and that production of “some important kinds of foodstuffs and consumer goods” had fallen behind demand. He did not elaborate.
Figures are hard to obtain but officials said the grain harvest in 1986 amounted to 870,000 tonnes, the fifth year running that it topped 800,000 tonnes. Grain has been exported to the Soviet Union for the past three years.
The country is rich in mineral resources, with large deposits of coal, iron ore, copper and other metals, including gold.
Statistics for reserves, production and exports are not available, but it is clear that Mongolia has the long-term potential to become a major minerals producer.
In the last few years, Mongolia has become a copper exporter thanks to the development of the Erdenet copper mine, near Soviet border north of Ulan Bator, since the late 1970s.
State publications pointedly omit copper production figures, but the official Mongol press said recently that “by the end of 1983, Erdenet had mastered its rated capacity of 16 million tonnes of ore a year, thus becoming one of the world’s 10 leading enterprises of its kind.”
Both China and the Soviet Union are now experimenting with various economic reforms but in Mongolia, there are no private shops, restaurants or workshops. Tinkering with the highly-centralised economy is viewed with great scepticism.
But unlike last year when they flatly ruled out any possibility of private enterprise being allowed a new chance, officials this year are at least willing to consider the possibility.
“We don’t have such a question at present,” a senior official from the State Planning Commission told Reuters. “We are studying information and it is difficult to say if we will introduce it or not.”
Diplomats ruled out any drastic reforms to the economy in the near future despite its inefficiencies.
“The current Soviet reforms will eventually result in some echo here but it will take a long time,” said one.
“The big difference is that this is still a developing country,” he said. “A relatively developed country like the Soviet Union can afford to indulge in a small private section. Here, the first priority is to get things together on the state side.”
If the difference between the official and black market exchange rate of a currency can be used as an indication of the health of an economy then Mongolia is in in big trouble.
The official rate is 2.8 tugriks to the dollar but out on the streets, the rate is as high as 20 to 25 to the dollar.
Asked about the yawning gap between the two rates, the deputy chairman of the Mongolian State Bank N. Yanzan said: “I don’t have any information on this. We have an organisation (in the government) to deal with such things.” REUTER NNNN