Mongolia Seeks Balanced Growth to Avoid ‘Dutch Disease’ From Mining Boom

Mar 8 • Mining • 839 Views • No Comments on Mongolia Seeks Balanced Growth to Avoid ‘Dutch Disease’ From Mining Boom

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Mongolia needs to look beyond the coal and copper mines that are driving its economic boom to find a more balanced model of growth, Prime Minister Sukhbaatar Batbold said.

Investment in mining projects and speculation on the wealth they will create in the world’s most sparsely populated nation have made Mongolia’s tugrik the best-performing currency since the beginning of last year. That’s putting exports such as cashmere at a disadvantage, and adding costs to newer industries such as tourism, food production and metal processing.

“It is important to have a good mining industry,” Batbold said in an interview at a forum in Mongolia’s capital Ulan Bator. “But it is a tool of moving many other things forward. What we want to focus on is creating jobs in many other industries.”

Mongolia needs to avoid developing “Dutch disease,” where the financial benefits of a resource boom lead to a hollowing out of other sectors, according to the World Bank. Sandwiched by Russia’s far east to the north and 1.3 billion-strong, resource- hungry China to the south, the government is looking for ways to lessen its vulnerability to competition from its giant neighbor and reduce its reliance as a customer.

“Mongolia can’t compete with China on wages, but it can certainly find areas in the Chinese economy where it could have an edge,” such as in cashmere, meat, and services, said Rogier van den Brink, lead economist for Mongolia at the World Bank. “Diversifying from resources would be a solution similar to what the Dutch found to combat the resource disease.”

Source: Bloomberg

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