UNIDO’s 50th Anniversary

November 15, 2016




Sustainable Development in Mongolia: UNIDO’s 50th Anniversary

by LI Yong, Director General of UNIDO.

As a land-locked country adjacent to its big neighbours, China and Russia, Mongolia possesses unique features:  an abundant land area with a small population and an affluent endowment of natural resources, especially minerals. By some estimates there are over 6,000 deposits of some 80 different minerals, and the country has the largest copper mine in the world. While this wealth has certainly created a lot of opportunities, Mongolia has also experienced some downsides in the past.

Mongolia’s geographic characteristics have created barriers for foreign products to enter the domestic market, and exporting goods has been difficult because transportation costs are high. At the same time, Mongolia has over-relied on revenues from natural resource exports as a primary source of income. These accounted for 89 per cent of total export revenues in 2012. This goes along with a general lack of economic diversification with Mongolia remaining trapped in the “natural resource curse”, a common dilemma of many countries with rich natural resources.

Two important changes of the 1990s, the transition from a socialist to a market economy after the Cold War and the entrance into the World Trade Organization (WTO) in 1997, have often been hailed but, in many ways, they have not yet fulfilled their promise. After opening its economy to global markets, Mongolia has continued to rely on its obvious comparative advantage in exports of natural fibres and minerals at the expense of developing more technologically advanced sectors, such as the chemical and electrical industries.

UNIDO has had the privilege to accompany Mongolia’s development process for a long time. As the Organization turns 50 this year, this is a good moment to reflect on our partnership. The main aim of UNIDO’s support to Mongolia over the years has been to achieve inclusive and sustainable industrial development by making sure that the impact of abundant natural resources remains a blessing rather than turning into a curse. The diversification of the Mongolian economy towards manufacturing, together with the adoption of green technologies, plays an indispensable role in this context.

The first UNIDO project in Mongolia started as early as 1968. It focused on manufacturing precious and semi-precious stones. As the demand for minerals grew, UNIDO continued to provide assistance to Mongolia with research on gemstones and the production of jewelry.

Since then, Mongolia has received assistance from UNIDO in a number of areas. It would be beyond the scope of this article to venture into all the details. Special emphasis has been placed on the agro-processing sectors; a sector where Mongolia enjoys a clear comparative advantage. The livestock sector provides immense opportunities, in particular, and maximum economic benefits can be derived from this sector if it is targeted through an effective value chain development and management approach that establishes cross-sectoral linkages. For this purpose, strategic business alliances, partnerships and joint venture arrangements with international brands are indispensable.

To support such an approach, UNIDO has recently embarked on a joint project with the UN’s Food and Agriculture Organization with funding provided by the European Union. The objective of this ambitious project is to support decent employment creation and income opportunities in the meat, dairy, cashmere and wool, leather and vegetables value chains in Mongolia, simultaneously addressing the problem of often poor quality of livestock products when used as an input for industrial production. The project will most certainly help Mongolia to shift from a mining and minerals-dependent economy to a more inclusive and value added agro-based economy with high potential for employment creation and access to export markets.

Any support to diversify Mongolia’s economy and help the country achieve the Sustainable Development Goals (SDGs) which was adopted by the international community in 2015, ultimately needs to address the policy level. To re-position Mongolia as an active global player in manufacturing and the export of value-added industrial goods, UNIDO has in recent years carried out a seminal study on “Strategic directions on industrial policy in Mongolia”. Analysis of long-term structural change patterns has been combined with a fresh look into the role of industrial policy. As a result, specific industrial policy recommendations have been identified to support the country in its industrialization efforts. Most notably, a dynamic approach has been applied, which helped identify strategic priority areas where investments into the country’s capabilities would ultimately lead to a comparative advantage in higher value added activities. Both traditional manufacturing and emerging ‘green’ sectors have been targeted.

The transition to a green economy will be key for Mongolia in the years to come. A number of UN agencies have joined hands to support this objective. As part of the UN Partnership Action for Green Economy (PAGE) in Mongolia, UNIDO is working closely with its sister agencies including UNEP, UNITAR, ILO and UNDP. The joint approach considers policies, strategies and best practices in a holistic manner. Complementary work streams identified, together with the Government, thus focus on a range of issues. These include green development strategies, modelling and policy assessments, green development indicators, sustainable procurement, green buildings, waste management and sustainable financing, to mention a few. The part that has fallen on UNIDO’s shoulder is to help Mongolia develop a national strategy for waste management, a big challenge in view of the country’s immense waste problem today. An inventory of industrial wastes has been developed and will provide the necessary information and data for informed policy and strategy development as a next step.

Another cornerstone of UNIDO’s support to Mongolia in the context of fostering the transition to a green economy and green industries has been to assist the Government in meeting its obligations under important multilateral environmental agreements, particularly in the area of sustainable management of chemicals under the Stockholm Convention on Persistent Organic Pollutants (POPs) and the Minamata Convention on mercury. As part of those efforts, national capacity has been built, and policy and regulatory frameworks, norms and standards established.

At the end of the day, products can be as green as they claim to be, but if there is no national capacity to test and certify them as green and high-quality then they will not be able to enter international markets. UNIDO has, therefore, supported Mongolia in strengthening its national quality infrastructure. The main beneficiaries of these efforts have been the Mongolian Agency for Standardization and Metrology, Regulatory Agency and the Mongolian National Chamber of Commerce and Industry. Both institutions have been upgraded to cater to internationally accepted conformity assessment requirements.  Competencies have been upgraded to a level that certificates issued are now recognized internationally.

Looking forward, many opportunities lie ahead for Mongolia to advance its development process. On 23 June 2016, the Presidents of China, Russian and Mongolia signed a trilateral economic partnership agreement in Uzbekistan, which underscores such recent international initiatives as the “One Belt, One Road”, the “Trans-Eurasia Belt Development”, and the “Prairie Road” programme – all designed in a spirit of South-South cooperation. The establishment of industrial corridors under those initiatives could bring improved transport infrastructure and greater trade integration. Together, those initiatives have a potential to strengthen the ties between Mongolia and its two big neighbours and largest trading partners.

As UNIDO is celebrating its 50th birthday this year, this is a good moment to reconfirm our commitment to Mongolia. UNIDO will spare no efforts to continue to support Mongolia in moving towards a more diversified economy based on exports derived from modern, high-tech and environmentally friendly industries. Eventually, Mongolia will enjoy the blessings of its plentiful resources and achieve inclusive and sustainable industrial development.


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