Mongolia country brief

Australia-Mongolia Relations

Resource-rich, strategically located and outward-looking, Mongolia is the world's most sparsely populated country, with 3 million people spread over an area almost as big as Queensland. In the 20th century, as a satellite state of the former Soviet Union, Mongolia had a primarily agrarian and centrally-planned economy. Following structural reforms and privatisation since the 1990s, it has emerged as a developing democracy with one of the fastest-growing economies in the world. From the mid-1990s, Mongolia has pursued a "third neighbour" policy which seeks to engage countries with similar views on human rights, democracy and free markets. Engagement with countries such as Australia has helped Mongolia expand its trade, investment, development cooperation and foreign policy contacts beyond its immediate neighbours, Russia and China. Australia and Mongolia are well-positioned to advance their shared interests over the next decade, as Mongolia becomes more active in the region and develops stronger ties with its 'third neighbours'.

Diplomatic Relations

Australia established diplomatic relations with Mongolia on 15 September 1972. Bilateral engagement accelerated following democratic and free-market reforms in Mongolia in the early 1990s. The focus of the relationship to date has been on development assistance and commercial activities in Mongolia's resources sector.  There are also strong people-to-people links and deepening political engagement. Mongolia opened an embassy in Canberra in 2008. 

Australia opened an Embassy in Ulaanbaatar in December 2015.   

The opening of the Embassy in Ulaanbaatar is an important milestone in the bilateral relationship, recognising that Australia is an important investor and a source of expertise in the extractives sector, and that Australia and Mongolia share commitment to democracy and interests in an open, rules-based regional order.   The Australian Trade Commission (Austrade) opened a trade office in Ulaanbaatar to serve the needs of Australian business in 2011.  

High-level visits

In February 2011, then Prime Minister of Mongolia, His Excellency Mr Sukhbaatar Batbold, visited Australia as a guest-of-government. His delegation included several Mongolian ministers, parliamentarians and businesspeople. Then Prime Minister Gillard welcomed Prime Minister Batbold as the first Mongolian Head of Government to visit Australia. Joint Statement by Prime Ministers Gillard and Batbold.

In March 2014, Mongolian Foreign Minister, HE Mr Luvsanvandan Bold visited Australia, the first Mongolian Foreign Minister to visit Australia since 1993. His delegation included several Mongolian parliamentarians, including HE Mr Nyamaar Enkhbold MP, President of the Mongolia Australia Society. Minister Bold met with Foreign Minister Julie Bishop and witnessed the signing of a Memorandum of Understanding on Consular Cooperation between the two countries. During Minister Bold's visit, Ms Bishop announced a new Australia-Mongolia Extractives Program to assist in the development of Mongolia's mining sector.

Other high-level visits between Mongolia and Australia have reinforced ongoing cooperation between the countries. In March 2016, Mr Damba Gankhuyag, State Secretary, Ministry of Foreign Affairs of Mongolia, led a delegation to Australia for High Level Consultations with the Department of Foreign Affairs and Trade.  In May 2013, Mongolian Minister for Mining Mr Davaajav Gankhuyag visited Australia for the Extractive Industries Transparency Initiative Global Conference. In October 2012, then Foreign Minister Bob Carr visited Mongolia to open the Australian Consulate-General in Ulaanbaatar and discuss the bilateral relationship and growing commercial and aid ties. In 2011, Mongolian Deputy Prime Minister Mr Miyegombo Enkhbold visited Australia to study our social welfare systems. At head-of-state level, the then Governor-General Bill Hayden visited Mongolia in 1994 and Mongolia's first democratically elected President, Punsalmaagiin Ochirbat, visited Australia in 1997. Mongolian leaders have emphasized the value they place on growing contact with Australia.

There have been numerous visits by parliamentarians and departmental heads in recent years. Most recently in April 2016, the Deputy President of the Senate, Senator Gavin Marshall, attended the Asia Europe Parliamentary Meeting in Mongolia.  In May 2013, Mongolian State Secretary of the Ministry of Foreign Affairs, Mr Gombo Tsogtsaikhan, visited Australia and met with senior Australian Government officials. In September 2012, a delegation of the House of Representatives Regional Australia Committee led by Mr Tony Windsor visited Mongolia. In January 2011, Mr Harry Jenkins, the then Speaker of the House of Representatives, led a delegation to the Asia Pacific Parliamentary Forum hosted by Mongolia. In 2010, a delegation of Australian Members of Parliament led by Ms Annette Hurley visited Mongolia and ten Mongolian State Secretaries visited Australia. In 2009, two delegations from Mongolia led by Members of Parliament visited Australia, and a group of four Australian Members of Parliament from the Australia-Mongolia Parliamentary Group visited Mongolia.

People-to-People links

People-to-people links between Australia and Mongolia continue to grow strongly. The Australia Awards in Mongolia Program has enabled more than 400 Mongolians (and their families) to study in Australia and has created a vibrant alumni network, affectionately known as 'the Mozzies', many of whom have become influential Mongolian parliamentarians, officials and businesspeople. In October 2016 there are 55 Mongolian current postgraduate scholarships studying under  Australia Awards.

A traditional Mongolian Ger, gifted by HE Mongolyn Tsakhiagiin Elbegdorj, President of Mongolia to the ANU College of Asia and the Pacific, was constructed by staff from the Mongolian Embassy on the lawns outside the Coombs Building in March 2016, and handed over by Mongolia's Ambassador to Australia, His Excellency Mr Chuluunhuu Batlai, to ANU Vice Chancellor Brian Schmidt, in recognition of the University's commitment to Mongolian studies.

Australia has long had a volunteer presence in Mongolia. Since 2002, over 250 Australian volunteers have contributed to Mongolia’s development, with around 20 new volunteer placements in 2016-17. Business is further deepening the links between Australia and Mongolia. More than 650 Australians live in Mongolia with a further 1000 Australians visiting Mongolia on short-term assignments at any time. Fifty Australian companies have a presence in Mongolia, including several large Australian companies operating in the mining sector, such as Rio Tinto (a leading investor and the mine developer in the $7 billion Oyu Tolgoi project),  CIMIC (undertaking contract mining and road construction), McMahon Holdings (contract mining) and a number of service providers including legal firms (Minter Ellison, Allens Linklaters), financial sector firms (Macquarie Bank, CPS Securities, Garrison Capital) and engineering firms (WorleyParsons, SMEC, Calibre Global).

Australia and Mongolia cooperate on global and regional issues, including in defence and security. Contributing to international peacekeeping and security has been a particular focus of our cooperation. Australians and Mongolians have served together in UN peacekeeping operations such as in South Sudan, where Mongolia has over 800 personnel deployed. The two countries have also deployed on coalition operations in Iraq and Afghanistan and peacekeeping operations in Kosovo and Sierra Leone. Australia participates in the annual Khaan Quest peacekeeping exercises hosted by Mongolia.

Political overview

Mongolia held its first democratic elections in 1990 after 70 years of Soviet-style single-party rule. Members of the State Great Hural (Parliament) and the President are both elected for fixed four-year terms (on different electoral cycles). Executive power is shared by the Parliament and the President. The Cabinet is appointed by the Prime Minister. The President is the Commander-in-Chief and holds the power to veto legislation, although this can be overridden by a two-thirds majority in Parliament. There are two major political parties: the Mongolian People's Party (MPP), formerly the Mongolian People's Revolutionary Party, which evolved from the communist single-party government, and the Democratic Party (DP) which grew out of Mongolia's 1990 democracy movement. In the five parliamentary elections held since the 1992 Constitution came into effect, power has alternated between the two major parties, with the DP forming grand coalition governments in 1996 and 2004.  The MPP achieved a decisive victory in the June 2016 parliamentary election, winning 65 of 74 seats.  The new government has announced a range of economic policies aimed at reducing the deficit and affirmed its support for foreign investment. Prime Minister Mr Erdenebat signalled his intention to support inward investment to revive the slowing economy.

In the presidential election in 2013, President Tsakhia Elbegdorj of the Democratic Party was re-elected for a second and final term of office. The next Presidential elections will be held in Jnue 2017.

Economic overview

Mongolia's economy is  heavily linked to global mineral commodity prices.. Mongolia's GDP grew in double digits until 2013. It fell to 3.5 per cent in 2015 and is projected to have zero growth in 2016, impacting on the government’s revenues and requiring reduced expenditure.

Agriculture (primarily herding), once the mainstay of the Mongolian economy, continues to decline in terms of share of national employment and contribution to GDP. In 2014, less than 30 per cent of the workforce was employed in agriculture, down from 42 per cent in 2007. Agriculture comprises about 16 per cent of GDP, while services alone account for nearly 50 per cent of GDP and 56 per cent of national employment. Industry is estimated to account for 37 per cent of GDP (including mining with 19 per cent).

Mongolia's mining sector continues to grow strongly, and approximately 90 per cent of Mongolian exports are resources, notably copper, gold and coal. Australian companies are well-placed to assist in developing Mongolia's resources, and there is strong commercial interest and investment potential in Mongolia's minerals and energy sector. The Oyu Tolgoi copper and gold mine alone is expected to account for as much as 30 per cent of Mongolia's GDP once full commercial ore production starts.

Bilateral trade between Australia and Mongolia is modest, with two-way merchandise trade totalling $18 million in 2015, down from $45 million in 2011. This is composed mostly of Australian exports of civil engineering equipment, specialised machinery and parts, pumps for liquids, and other equipment and tools used in Mongolia's mining industry. Australia's principal imports from Mongolia in 2015 were civil engineering equipment ($7m) and minerals ($2.5m).

The Mongolian economy is heavily reliant on foreign capital inflows. In the next five years, mining-related foreign investment in coal, copper and gold is forecast to exceed US$10 billion, roughly equivalent to Mongolia's 2012 GDP (current prices). Mongolia is ranked 56 out of 189 countries on the World Bank's 2016 Ease of Doing Business index, up 30 places since 2012. Inflation remains a concern for the Mongolian Government, with the average inflation rate for 2016 just under 8 per cent. The exchange rate's recent sharp decline has pushed up the cost of imported goods, especially food.

Mongolia's development has been hampered by its landlocked position, geographical isolation, extreme climate, lack of infrastructure and uncertain regulatory environment. Its location, adjacent to a rapidly growing China means China is Mongolia's largest trading partner, accounting for around 89 per cent of Mongolia's merchandise export revenues (predominantly through the export of copper and coal), and 37 per cent of merchandise import expenditure. Strong demand from China along with high commodity prices helped Mongolia to recover strongly from the Global Financial Crisis. Increasing numbers of Chinese workers are providing labour in Mongolia.

The Mongolian Government confronts major challenges in managing a growing economy, large-scale foreign investment and the rising expectations of Mongolian citizens. Mongolia's recent economic growth was among the highest in the Asia-Pacific region. Dampening of the global minerals market and moderating economic growth in China has created  uncertainty for Mongolia's mineral export-oriented economy and could affect future growth prospects.

While economic growth has helped the country reach lower-middle income status, Mongolia's poverty rate remains relatively high, with about one in three people still living in poverty.

Last Updated: 7 October 2016