Mines & Minds - Leveraging Natural Wealth to Invest in People and Institutions - Mongolia Country Economic Memorandum - September 2020

Jul 19, 2026

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Mines & Minds examines how Mongolia’s heavy reliance on extractives affects macroeconomic stability, productivity growth, and the expansion of endowments. The memorandum analyzes volatility drivers, the amplification role of macroeconomic policies, and the procyclicality trap that weakens outcomes during booms and busts. It then focuses on constraints to innovation and productivity, and proposes policy priorities to escape natural-capital overreliance through more diversified and resilient institutional and human-capital investment.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages84

Reading Time3 h 32 min

AccessFree to download

Overview

Prosper now, stagnate later?

An organizing framework

Three pillars: stability, productivity, and diversity (of endowments)

Seeking Stability

Volatility is the norm not the exception

Macroeconomic policies amplify rather than dampen volatility

Policy priorities-Escaping from the procyclicality trap

Boosting Productivity Growth

An environment marked by weak productivity growth and declining innovation

Constraints to productivity growth

Policy priorities-Addressing constraints to lift productivity growth

Expanding Endowments

Mongolia over relies on mines and underutilizes its minds

Explaining Mongolia’s limited progress in expanding its endowments

Policy priorities-Escaping the natural capital overreliance trap

Annex and References

The conceptual framework

References

Public Disclosure Authorized Public Disc losure Authorized Public Disclosure Authorized MINES & MINDS LEVERAGING NATURAL WEALTH TO INVEST IN PEOPLE AND INSTITUTIONS Pub lic Disc losure Authorized MONGOLIA COUNTRY ECONOMIC MEMORANDUM SEPTEMBER 2020 MINES & MINDS LEVERAGING NATURAL WEALTH TO INVEST IN PEOPLE AND INSTITUTIONS MONGOLIA COUNTRY ECONOMIC MEMORANDUM SEPTEMBER 2020 © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; [Internet: www.worldbank.org](Internet: www.worldbank.org) This workisa product of the staff of the World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. ii COUNTRY ECONOMIC MEMORANDUM 2020 TABLE OF CONTENTS ACKNOWLEDGMENTS vi ABBREVIATIONS vii I. OVERVIEW 1 I.1 Prosper now, stagnate later? 2 I.2 An organizing framework 9 I.3 Three pillars: stability, productivity, and diversity (of endowments) 10 II. SEEKING STABILITY 15 II.1 Volatility is the norm not the exception 16 II.2 Macroeconomic policies amplify rather than dampen volatility 19 II.3 Policy priorities-Escaping from the procyclicality trap 23 III. BOOSTING PRODUCTIVITY GROWTH 33 III.1 An environment marked by weak productivity growth and declining innovation 34 III.2 Constraints to productivity growth 40 III.3 Policy priorities-Addressing constraints to lift productivity growth 44 IV. EXPANDING ENDOWMENTS 47 IV.1 Mongolia over relies on mines and underutilizes its minds 48 IV.2 Explaining Mongolia’s limited progress in expanding its endowments 51 IV.3 Policy priorities-Escaping the natural capital overreliance trap 57 Annex 1. The conceptual framework 68 References 70 BOXES Box 2.1 Cost of macroeconomic volatility 16 Box 2.2 Peru’s fiscal rules-Lessons for Mongolia 24 Box 2.3 International practices suggest independence is a key condition 27 Box 2.4 Sovereign wealth funds as effective instruments 28 Box 2.5 Model simulation of partial saving rule of mining revenue 29 Box 2.6 Independence and governance of the central bank 32 Box 3.1 Factors leading to innovation in Mongolian firms 38 Box 3.2 Innovations of large firms 46 Box 4.1 Mongolia’s comparative advantage 50 Box 4.2 OECD and World Economic Forum directives to improve learning and competencies 59 Box 4.3 Gender Responsive Budgeting and female labor participation 60 Box 4.4 Mongolia can learn from the Malaysian experience of attracting talent 61 Box 4.5 Industrial policy-Pros and cons 64 Box 4.6 Meat exports offer significant potential 66 iii FIGURES Figure 1.1 Rising importance of extractives in Mongolia’s economy 4 Figure 1.2 Mongolia’s resource rents have increased in recent years and exceed its peers 4 Figure 1.3 The positive side of Mongolia’s mining-led development 4 Figure 1.4 Mongolia has underperformed all its peers in the use of human capital… 6 Figure 1.5 …and its institutional quality has deteriorated in recent decades 6 Figure 1.6 Out of every dollar of mineral output, Mongolia has consumed 99 cents and savedone cent 6 Figure 1.7 How mineral revenues were spent (% of GDP), 1998–2019 7 Figure 1.8 Gross contributions to the Stabilization Fund and Future Heritage Funds have significantly increased in recent years (% of GDP)… 8 Figure 1.

FAQs

What is the report’s main organizing framework for Mongolia’s economic challenges?

The report organizes the analysis around three pillars: stability, productivity, and diversity of endowments, linking Mongolia’s extractives dependence to outcomes across these areas.

Why does the report emphasize macroeconomic procyclicality in Mongolia?

It argues that macroeconomic policies amplify volatility rather than dampen it, trapping policy responses in a procyclical pattern during booms and busts.

How does the report propose addressing endowment expansion in Mongolia?

It focuses on escaping the natural-capital overreliance trap by reframing how mining revenues and broader national resources are used to build more diversified endowments, including human capital and stronger institutions.

Jul 19, 2026

Upload by Quinn