Are natural resources a curse or a blessing for Mongolia?

Abstract

Mongolia, a young north-east Asian democracy, has become a hotspot for mining in the region, and the Mongolian mining industry has been playing an increasingly important role in the economy. This brief paper discusses the effects of the mining boom on the socioeconomic development and political institutions of Mongolia. The rapid development of the mining sector of Mongolia has impacted considerably on the overall macroeconomic and social development as well as governance and institutions. Analyzing the linkages of the mining sector to the four (real, fiscal, monetary, and external) economic sectors, we found that the rapid development of the mining sector created significant fiscal and monetary imbalances in the macroeconomy. Moreover, based on the Transparency International’s Corruption Perception Index and the Global Governance Indicators developed by the World Bank, it seems as if the institutional quality and governance in Mongolia have deteriorated noticeably at the same time when Mongolia started experiencing favorable global commodity markets.