Mongolia’s transition has many positive features―notably the rapid creation of afunctioning parliamentary democracy, establishment of a legal and regulatory framework forprivate sector development, privatization of one of the strictest state-run economies of theSoviet era, and the good performance of successive governments in maintaining macrostability.
Supported by pro-market policies and strong progress in civil liberties, Mongolia’seconomy has undergone fundamental changes. However, cumulative growth has beeninsufficient to impact on the high level of poverty that emerged as a result of the transitionshock. Overall growth has been low and unstable and uneven across sectors. Moreover, recentsources of growth are inequitable and inaccessible for many of the poor. Over a third of thepopulation remains poor, and the country remains aid-dependent, with a narrow and vulnerableeconomic base. Harsh natural conditions, geographical isolation, difficult access to financialresources, and unemployment are the major causes of poverty. Low incomes are compoundedby inadequate social services, particularly poor medical facilities, urban services, and education.
Three groups stand out among the poor: subsistence, seminomadic herder households,urban migrants, and the aged and disabled. Many herder households have remained poorbecause agricultural incomes are low and vulnerable to shocks and rural growth has beensluggish. In addition, geographical isolation of these households limits their access to educationand health services, putting many Millennium Development Goal (MDG) targets at risk amongthis group. Uneven growth and inadequate education have resulted in unemployment becominga major source of poverty, particularly among poor migrant households. These households alsolack basic urban services and cannot easily access health facilities and education—anotherimpediment to achieving MDG targets. Along with the uneducated, the aged generally havebeen unable to access opportunities in the market economy and were not able to accumulatesavings during communism. The social security system is unable to provide the aged and
disabled with a reasonable standard of living.