Policy paper

UK–Mongolia development partnership summary, March 2024

Published 27 March 2024

Introduction 

The International Development White Paper sets out a re-energised agenda for the UK working with partners to accelerate progress on eliminating extreme poverty, tackling climate change and biodiversity loss, and accelerating progress on the United Nations Sustainable Development Goals (SDGs) by 2030. In a contested world, where ODA alone will not be enough, achieving the vision as set out in the SDGs requires a radical rethink in our approach to international development. The White Paper sets out how our partnerships are central to this approach. These are founded on mutual respect, with an emphasis on country ownership, accountability, transparency and common values. This Country Development Partnership Summary details how the approach detailed in the White Paper will be put into practice with Mongolia.

Country context 

Mongolia is a lower-middle income developing country with a nominal GDP of US$ 17.15 billion and GDP per capita of US$ 5,045.5, in 2022 (World Bank data). The economy is largely driven by mining-led growth. Mineral exports account for about 80% of total exports and 90% of exports go to China. However, mineral exports were hit harshly by the Covid-19 pandemic, due to a sharp decline in the demand for mineral products and prolonged closures of borders with China. Mongolia’s GDP growth fell from 5.6% in 2019 to minus 4.6% in 2020 and gradually increased to 5.0% in 2022 and 7.0% in 2023. The impact of the Covid-19 pandemic highlighted the importance of economic diversification to reduce the country’s reliance on the extractive sector for economic growth.  

Mongolia is sandwiched between Russia and China and has significant dependencies on these neighbouring countries. Russia is the single biggest supplier of Mongolia’s fuel and energy and China is the biggest export destination. These dependencies have a significant impact on Mongolia’s political, economic, and foreign policies. Once called an ‘oasis of democracy’, Mongolia is generally supportive of democratic values and the international rules-based system. However, the country’s democratic path is under growing geo-political stress, particularly following Russia’s brutal invasion of Ukraine.  

Mongolia has huge potential for development. However, corruption has become a major hindrance to prosperity. In 2023, Mongolia scored 33/100 and ranked 121st out of 180 countries in Transparency International’s Corruption Perceptions Index. In 2022 Mongolia ranked 116th with the same score 33/100, having dropped 6 places from 110th (out of 180) with a score of 35/100 in 2021. Prime Minister L.Oyun-Erdene declared 2023 as the ‘Year to Combat Corruption’ and introduced ‘Five Ws’:

• whistleblowing (enabling laws and regulations to encourage whistleblowing and protect whistle-blowers)
• wiping-out (eliminating the practice of appointing civil servants through political acquaintances)
• wasp (bringing back overseas fugitives in line with international agreements and Mongolian laws)
• wealth-transfer (detecting and bringing back illegal and hidden wealth in foreign countries and/or offshore areas)
• wide-open (intensify digitalisation and enhance transparency)

Mongolia is vulnerable to climate change. Mongolia is committed to reducing total national greenhouse gas emissions by 22.7% by 2030 and further to 27.2% with conditional mitigation measures. However, transitioning away from coal is challenging given vast coal reserves and investment needed for renewables. Due to its continental and harsh climate, Mongolia is impacted disproportionately by climate change and has already experienced temperature rises in excess of 2 degrees whilst already affected by some of the world’s worst urban pollution. Animal husbandry is a vital source of income for its nomadic community with over 70 million livestock registered in 2022 but more than 70% of pasture has become degraded. Loss of biodiversity is also inevitable.  

Why and how: the UK’s development offer with Mongolia  

The UK was the first western country to recognise Mongolia’s independence in 1963. As Mongolia’s ‘third neighbour’, the UK aims to expand bilateral and multilateral collaboration in a wide range of areas to support Mongolia’s emergence as a stable, secure, and economically resilient democracy, aligned with UK interests in the Indo-Pacific and globally. UK trade and investment interests are significant, in particular Rio Tinto’s strategically-important $15 billion investment in Oyu Tolgoi (the 4th largest copper mine in the world by 2030). Mongolia has huge mineral potential, including critical minerals.  

Capitalising the UK’s strength and Mongolia’s commitment on climate change and biodiversity, we continue to support increasing Mongolia’s ambition on its Nationally Determined Contributions (NDCs), renewables and net-zero targets. On energy, UK advocacy and footprint in renewable energy in Mongolia supports a diversified energy portfolio and reducing reliance on Russia. We continue providing material support where possible (e.g. UK Export Finance financing of renewable projects) and DEFRA-funded conservation work.  

The broader UK development offer is focused on 3 areas, namely, (A.) Trade and investment, particularly the $15 billion Rio Tinto and other UK investments and linked trade opportunities. The UKEF offer for Mongolia provides a key opportunity to support infrastructure development. Mongolia also benefits from the UK’s Developing Countries Trading Scheme; (B.) Support for democratic and international rules-based values; and (C.) Economic development: our partnership in areas such as education (Chevening scholarships and the Cambridge Partnership for Education programme) and climate/nature (through bilateral and global funds) are delivering transformational impacts.  

Key programmes  

• DEFRA Illegal Wildlife Trade Challenge Fund (IWTCF)] (Round 9) project “Empowering communities and rangers for protection of Asia’s mountain wildlife” implemented by the International Snow Leopard Trust in Kyrgystan, Pakistan, and Mongolia from 2023
• DEFRA IWTCF Challenge Fund (Round 7) project “Mongolia’s New Ecological police: Global Standards and Community Engagement” implemented by the Zoological Society of London (ZSL) from April 2021 to March 2024 
• DEFRA Darwin initiative project “Protecting Mongolia’s Gobi Desert for wild camels and herder communities” implemented by the Zoological Society of London (ZSL) from July 2021 to June 2024

Who we work with 

The significant part of UK ODA projects in Mongolia are being implemented through multilateral organisations, where the UK contributes. These include the World Bank, European Bank for Reconstruction and Development, Asian Development Bank, and the Green Climate Fund (GCF). For instance, GCF has approved 11 projects for Mongolia and/or including Mongolia with US$ 460.6 million funding to date to support Mongolia’s climate change mitigation, adaptation, and cross-cutting efforts. The NAMA Facility, to which the UK is a major contributor, has approved the “Mongolia-Energy Performance Contracting for Residential Retrofitting in Ulaanbaatar City” project to improve insulation and energy efficiency in old apartment blocks.  

With UK government direct funding, currently 3 projects are active with DEFRA IWTCF and Darwin Initiative funds. Details are listed above.  

Links 

British Embassy Ulaanbaatar  

Mongolia DevTracker Page