THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Mongolia

Ranked 76th of 149

At a glance

Ranks

76 th on the Legatum
Prosperity Index™

64th
82nd
81st
48th
93rd
105th
83rd
30th
108th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Mongolia performs best on Social Capital and Education and scores lowest on the Natural Environment sub-index.

Visit our Rankings table to see how Mongolia compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

While Mongolia’s prosperity deficit is small, it has worsened over the last decade. Moving into surplus requires closing a 2.8-point gap, and would be a considerable achievement considering that Peru, the country with the most similar wealth level to Mongolia, has been a democracy and market oriented economy for a lot longer.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Mongolia’s economy has boomed since 2010. The country’s natural resource wealth has not been concentrated, with relative poverty falling rapidly from 38.8 percent to 21.6 percent, and Mongolians’ satisfaction with their living standards improving by 16 percent. This progress on both growth, and its quality, has helped Mongolia rise from 90th in the Economic Quality sub-index in 2007 to 64th today. With the World Bank estimating that the income generated by mining will triple the economy by 2020, the prospects for Mongolian prosperity are strong indeed.

Opportunities in the region abound. Since 2015, the Central Asian Regional Economic Cooperation (CAREC) has invested $560 million in Mongolia. This investment has improved Mongolia’s transport and trade infrastructure, allowing the country to take advantage of its proximity to the huge markets of China and Russia. There are signs that increased market openness is driving a degree of diversification and development in Mongolia’s export market. Export quality has risen by 2.5 percent since 2007.

However, Mongolia faces challenges in converting burgeoning wealth into prosperity. While there have been notable reductions in poverty rates, there are growing concerns that potential mining revenues will prompt a degree of Dutch disease, benefitting a small sector of society and stifling any other export industries. The country is acting to try an ensure that its mineral wealth can reach all. In 2008 the National Development Strategy was passed and a Human Development Fund created with the aim of bringing Mongolia’s human development status to the same level as developed countries by 2020. The fund is expected to distribute the wealth obtained by minerals by providing pensions, cash payouts and health and education benefits to all citizens.

There are signs that the 2020 ambition is bearing fruit. Mongolia has made significant improvements in the Education sub-index, ranking now in the global top 50 having risen 6 ranks to 48th over the past decade. Literacy rates have been brought up to comparable developed country levels, with youth literacy reflecting rates in Qatar, and adult literacy reflecting rates in Portugal. Years of secondary schooling in the workforce is on a par with Sweden and, although still low, tertiary education per worker has risen by 26 percent. These improvements have come alongside a decline in education inequality and an improving girls to boys enrolment ratio. Yet a greater focus on education quality is needed, now that coverage is high, for education to have a greater impact on Mongolia’s prosperity growth.

Nevertheless, progress has not been universal. Very little improvement has been achieved in the Health sub-index over the last decade, where it ranks 93rd. Mongolia may have added nearly 4 years to life expectancy and improved sanitation by ten percent over the last decade, but progress in the sub-index has been limited. This is predominantly the result of rising health problems and falling satisfaction with healthcare. Though overall, performance has improved, it has not kept pace with development elsewhere in the world. As a result, Mongolia has slipped six ranks in this sub-index over the last decade. There are steps that the country can take to try and improve the health of the population, like tackling the rising levels of air pollution in urban areas, particularly in the slums surrounding the capital Ulaanbaatar.

While mining may be accelerating growth, 40% of the population is nomadic and depends upon traditional pastoralism for survival. Environmental pressures in Mongolia are of particular threat to this way of life and to the livelihoods of a significant part of the population. The country ranks just 108th in the Natural Environment sub-index, its worst performance within the Prosperity Index. Extreme climate conditions, pasture degradation, water and forest depletion, and a highly vulnerable ecosystem are imminent problems threatening the basic living standards of almost half the population. There are also growing concerns on the environmental impact of mining on such a large scale, especially on water resources and pollution. Consequently, Mongolia needs to improve its preservation efforts if prosperity is to continue to grow alongside the economy. Environmental protection needs to be combined with progress in health and education if Mongolia is to achieve its human development goal by 2020.

Mongolia has made huge improvements in Social Capital, from overtaking the world average in 2008 to reaching the global top 30 in 2015.
Mongolia has made huge improvements in Social Capital, from overtaking the world average in 2008 to reaching the global top 30 in 2015.

The greatest sign of Mongolia’s promise comes in the Social Capital sub-index. Mongolian society has been growing stronger, with the country rising from 84th to 30th since 2007. This has predominantly been the result of rising social trust, and greater altruistic activity by Mongolians towards one another. Volunteering rates have nearly doubled in the last ten years.

We see consistently throughout the Index that strong social capital can have a significant prosperity payoff at every level of development. Higher trust levels are linked to stronger growth rates, higher levels of investment, and of entrepreneurship. Strong societies seem better able to deliver more prosperity with less wealth. With its strong society and the potential of its mining wealth, the right policy decisions now to secure prosperity growth could see Mongolia’s future shine bright indeed.


Ways to make a change

Click on the Tweets to help make a change in your nation.


Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.