Mongolia country brief

Australia-Mongolia Relations

Resource-rich, strategically located and outward-looking, Mongolia is the world's most sparsely populated country, with 2.8 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 assistance 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 in 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, but there are also strong people-to-people links and deepening political engagement. Mongolia opened an embassy in Canberra in 2008. Mongolia's current resident Ambassador, His Excellency Mr Ravdan Bold, presented credentials to the Governor-General on 27 June 2012.

Australia appointed an Honorary Consul in Ulaanbaatar in 2007. In 2008, Australia moved its diplomatic accreditation to Mongolia from Beijing to Seoul. Australia's current Ambassador to Mongolia (resident in Seoul), Mr Bill Paterson, presented credentials to the President of Mongolia on 10 September 2013. In February 2011, then Prime Minister Gillard announced that the Australian Trade Commission (Austrade) would open a trade office in Ulaanbaatar to serve the needs of Australian business. That office was upgraded to an Australian Consulate-General which opened in Ulaanbaatar on 30 March 2012 and which, since April 2013, includes an office to administer Australia's development assistance program in Mongolia.

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. 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.

Media Release on Australia – Mongolia Mining Industry Cooperation

Other high-level visits between Mongolia and Australia have reinforced ongoing cooperation between the countries. In May 2013, Mongolian Minister for Mining Mr Davaajav Gankhuyag visited Australia for the Extractive Industries Transparency Initiative 2013 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.

Four officials smiling, with the two in the centre shaking hands. Foreign Minister Julie Bishop is on the right
From left: Mongolian Foreign Minister HE Mr Luvsanvandan Bold, Mongolian Ambassador HE Mr Ravdan Bold, Mr Justin Brown (First Assistant Secretary, Consular & Crisis Management Division, DFAT) and Foreign Minister the Hon Julie Bishop MP, following the signing of a Memorandum of Understanding on Consular Cooperation, 18 March 2014.

There have been numerous visits by parliamentarians and departmental heads in recent years. 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 350 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 March 2014 the number of postgraduate scholarships awarded under the Australia Awards in Mongolia Program increased from 38 to 43 per year.

Australia has long had a volunteer presence in Mongolia. Since 2002, over 220 Australian volunteers have contributed to Mongolia’s development. 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. 50 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), Leighton Holdings (undertaking contract mining and road construction and installing Mongolia's first large-scale wind farm), 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 Khan 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. Two new parties successfully contested the June 2012 parliamentary elections: a breakaway group from the MPP led by former president Enkhbayar, which took on the party's old name of Mongolian People's Revolutionary Party (MPRP), and the Civil Will/Green Party. The 28 June parliamentary elections led to the formation of a coalition government headed by Prime Minister Norovyn Altankhuyag, and comprising the DP, the Justice Coalition of the new MPRP and the Mongolian National Democratic Party, and the Civil Will/Green Party.

In the most recent presidential election, held on 26 June 2013, President Tsakhia Elbegdorj of the Democratic Party was elected for a second term of office. He was sworn in on 10 July 2013.

Economic overview

Mongolia's economy is small but growing rapidly, with GDP (current prices) for 2013 estimated at US$11.14 billion. The IMF estimates that Mongolia's GDP grew by 11.8 per cent in 2013. Economic growth is projected to remain in double digits throughout 2014, though the growth rate is steadily easing off from the 17.5 per cent peak seen in 2011.

Agriculture (primarily herding), once the mainstay of the Mongolian economy, continues to decline in terms of share of national employment and contribution to GDP. Today, 33 per cent of the workforce is employed in agriculture, down from 42 per cent in 2007. Agriculture comprises about 18 per cent of GDP, while services alone account for over 50 per cent of GDP and 56 per cent of national employment. Industry is estimated to account for more than 32 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 $24 million in 2013, down from $45 million in 2011. This is comprised 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 are telecom equipment and parts, and medical electro-diagnostic apparatus.

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 76 out of 189 countries on the World Bank's Ease of Doing Business index. Inflation remains a concern for the Mongolian Government, with the average inflation rate for 2013 just under 10 per cent. The exchange rate's recent sharp decline has pushed up the cost of imported goods, especially food.

Previously, Mongolia's development has been hampered by its landlocked position, geographical isolation, extreme climate, lack of infrastructure and uncertain regulatory environment. But its location, adjacent to a rapidly growing China, has become a major advantage. 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 rapidly growing economy, large-scale foreign investment and the rising expectations of Mongolian citizens. Mongolia's economic growth is expected to be one of the highest in the Asia-Pacific region. However, increasing reliance upon mining for economic growth has made other sectors, particularly agriculture, less competitive and the overall economy more susceptible to external shocks. A further dampening of the global minerals market and moderating economic growth in China could create 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. Nonetheless, the country has seen steady decreases in poverty of five to six percentage points annually, with the incidence of poverty decreasing from 38.7 per cent in 2010 to 27.4 per cent in 2012.

Development Cooperation overview

More information on development assistance to Mongolia.

Last Updated: 31 March 2014