In this study we are addressing an important question of whether Mongolia's natural abundance in natural resources is likely to promote economic growth in the country or lead it to stagnation. We argue that the natural resource curse is not cast in...
In this study we are addressing an important question of whether Mongolia's natural abundance in natural resources is likely to promote economic growth in the country or lead it to stagnation. We argue that the natural resource curse is not cast in stone, but that at the same time little can be expected in terms of the economic prosperity if drastic institutional reforms are not undertaken in the near future. Those reforms would have to concern the transparency of Mongolia's financial sector so as to decrease the cost of capital, and government intervention in order to channel the windfall profits from the mining sector into the infrastructural improvements. Such improvements are especially needed in order to reduce Mongolia's comparative disadvantage in terms of its transportation costs. Encouraging innovative processes in the manufacturing sector especially for the export-oriented firms would be another policy priority.