Poverty and its causes in Mongolia

Poverty as a widespread phenomenon emerged in Mongolia during its period of transition to a more market-based economy which began in 1990. Since that time the country has witnessed an increase in poverty from very low level during the centrally planned economy to a situation where it now affects every third person. A World Bank - sponsored survey in 1998 estimated that 36% of the population was poor.

The primary cause for poverty in Mongolia is the economic crisis, deterioration in state budget availability and devaluation which were brought about by the collapse of trading relations with the former USSR. Many national industries were left permanently bankrupted and almost all viable state enterprises were privatized leaving the government dependent on unpredictable tax revenue. The fundamental restructuring made by the privatized companies in order to function in a competitive market plunged more than a quarter of the working population into unemployment. All these posed a negative effect on income potential, education, health and other social services quality and access.
In order to determine the cause of poverty in Mongolia, it is important to consider other factors that can deepen poverty. The main causes and sustaining factors of poverty in Mongolia are identified as follows.

- Deterioration of social welfare. The fiscal difficulties prevent the government from expanding expenditure on the social services specially on social security system.

- Mismanagement of financial resources. Fiscal mismanagement and widespread corruption in Mongolia are the roots of the government’s budget crises.

-Tax evasion by individuals and companies. The high level of tax evasion in the country limits the government’s ability to implement fundamental policies such as providing adequate social services for the public.

- Growing foreign debt. The country’s excessive dependence on foreign capital and foreign debt has been the biggest barrier to development suffocating any chance of recovery.

- Unfair and biased global trade system. Mongolia and other weaker countries suffer from unfair trade terms and rules proposed by International Financial Organizations. For example, the WTO’s ‘free trade’ policy does not allow developing governments to protect their domestic industries from multinationals.

- Low domestic productivity. The shortage of domestically produced goods makes the country dependent on other countries’ economies.

- Inefficient policies. We need to reconsider the country’s economic policies and laws and choose policies that encourage long-run growth.

- Lack of civil society organizations to protect rights and freedoms of the poor. The weak and poor people are often not in a position to exercise basic human rights so the role of civil society is crucial in ensuring that the poor and disadvantaged enjoy their rights.