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Mongolia Compact

The Millennium Challenge Corporation (MCC) and the Government of Mongolia signed a five-year, $284.9 million compact in October 2007, designed to increase the country’s economic growth and reduce poverty, by investing in five project areas:

  • property rights;
  • health;
  • vocational education;
  • energy and environment; and
  • transportation.
Mongolia is a landlocked country in Asia covering 1.56 million square kilometers, roughly the size of Western Europe. Mongolia’s limited, aging transportation infrastructure and young governing institutions have been shown to be significant constraints to economic growth and development. These constraints are acute given the pressures of the country’s abrupt transition to a market economy, the loss of financial support from the Soviet Union, and the rapid urbanization of a population that was highly dispersed and pastoral. Nearly half of Mongolia’s 2.6 million people live in the capital city of Ulaanbaatar, and approximately 60 percent are located along the north-south rail corridor between Russia and China.

In developing their proposal, Mongolia’s National Council, the team formed by the government to develop their compact proposal, relied on the national development plan and poverty reduction strategy papers and on targeted consultations with sector experts and stakeholders. All five projects were designed to increase the productive capacity of Mongolians—both individuals and enterprises—and unlock opportunities for growth in domestic and regional economies. By the end of the compact in September 2013, the Government of Mongolia and MCC had spent 94 percent of the anticipated compact funds to increase land security, reduce impacts of non-communicable diseases and injuries, provide enhanced vocational training, expand distribution of energy-efficient household products, and construct roads for commercial traffic. The Government of Mongolia and MCC expect more than 2 million people to benefit over the 20-year lifetime of the investment. Further details of the compact results and impacts will be shared in forthcoming impact and performance evaluations.

  • Original Amount at Compact Signing:
    $284911363
  • Amount spent:
    $268993805
  • Signed:
    October 22, 2007
  • Entry Into Force:
    September 17, 2008
  • Closed:
    September 17, 2013

Project Results

Energy and Environment Project (EEP)

  • $47,200,000
    Amount at Project Inception
  • $40,420,819.04
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Energy and Environment Project (EEP)
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At compact closure 338,425 $38,200,000

Project Description

Mongolia has an extremely harsh winter climate, and mid-winter temperatures in Ulaanbaatar, the capital, can drop to as low as minus-40 degrees. Nearly half of all Mongolians live there, the coldest capital city in the world and the world’s second-most air polluted city. At levels of up to 10 times the international standards for particulate matter, air pollution is a major cause of serious respiratory problems among urban residents, contributing to increased health disability of the working population and decreased life expectancy. The primary source of the pollution comes from inefficient coal-burning stoves used to heat poorly insulated homes in the city’s vast ger districts. These homes, typically constructed of traditional felt, are not connected to the city’s heating grid. The Energy and Environment Project was designed to increase economic growth by reducing urban air pollution in the capital, decreasing related health costs, and lowering energy costs through more efficient fuel consumption. The project provided financial incentives for ger district residents to adopt energy-efficient and lower-emission technologies, and funded the upgrade of the electrical network. The project’s Wind Activity supported the development and production of the first commercial wind-powered electricity generation facility in Mongolia, funding an upgrade to the Nalaikh substation and the installation of a training simulator for dispatchers in Ulaanbaatar’s National Dispatching Center.

Additional funds were made available after the Rail Project was withdrawn from the compact.

Health Project

  • $17,027,119
    Original Compact Project Amount
  • $41,873,775.55
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Health Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At compact closure 1,727,000 $12,800,000

Project Description

In Mongolia, rates of non-communicable diseases and injuries (NCDI) such as cardiovascular diseases, cancer and traffic-accident induced injuries were a major cause of death and disability, particularly in younger age groups. This created a negative impact on the productivity of the country’s labor force. The Health Project aimed to strengthen the national program for prevention, early diagnosis and management of NCDIs and address major causes and risks of NCDIs.

By the end of the Compact, more than 1.4 million health education materials had been disseminated, 49.7 percent of the target population had been screened for diabetes, and 6.5% of the target population of girls age 11-15 had received human papillomavirus vaccinations.

Additional funds were made available to this project after the Rail Project was withdrawn from the compact.

North-South Road Project

  • $79,750,000
    Amount at Project Inception
  • $74,775,867.37
    Total Disbursed

Estimated Benefits

Estimated Benefits for the North-South Road Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At compact closure 161,000 $273,000,000

Project Description

The North-South Road Project sought to mitigate Mongolia’s inadequate transport infrastructure in a key segment of a critical economic corridor by constructing an all-weather road and connecting Mongolian markets to key trading partners.

Infrastructure is critical for the future development of Mongolia due to the country’s small population and large geographic land area. Mongolia has vast mineral resources but lacked adequate and reliable road transport infrastructure. Nearly half of Mongolia’s population is concentrated in Ulaanbaatar, and approximately 60 percent are located along the crucial economic road and rail corridor between Russia and China. A portion of this link, the Choir-Sainshand Road, was unpaved, forcing drivers to make frequent detours to avoid its potholes and deep trenches. The quality of the road, and the driving style required to navigate it, negatively impacted neighboring pastureland.

MCC funded the design of 19 additional kilometers to allow for construction on the entirety of the 176-kilometer road. Following approval of the project in 2009, significant increases in the cost of works for the North-South road led to a decision to re-allocate compact funds from the Bayanzurkh Bridge and the Ulaanbaatar-Nalaikh road to finance work on the Choir-Sainshand segment.  These two investments of the project were dropped entirely.

Additional funds were made available after the Rail Project was withdrawn from the compact.

Property Rights Project

  • $23,062,286
    Original Compact Project Amount
  • $28,543,830.15
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Property Rights Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At compact closure 102,168 $28,200,000

Project Description

Many low-income rural Mongolians abandoned traditional nomadic herding practices and migrated to cities in search of better jobs and educational opportunities for their children. The bulk of these migrants moved to Mongolia’s three biggest cities—Ulaanbaatar, Erdenet and Darkhan—where they either settled in suburban (ger) districts, rural or peri-urban areas in between urban and rural districts.

Mongolian law allows ger district residents the right to obtain ownership of the land upon which they live. The complexity and expense of the registration process made it difficult for these people to become property owners and fully realize the benefits of property ownership. The Property Rights Project sought to improve the national property registration system and help poor households obtain titles to land in ger districts. The project also facilitated the leasing of pastureland to herder groups in peri-urban areas and invested in infrastructure and training to improve livestock productivity and herder incomes in peri-urban areas.

By the end of the compact, 15 land registry office buildings had been renovated and received modern equipment, new processes for registering land rights had been introduced, and registry office personnel had been trained.  19357 poor households received land titles directly from the project.  MCC also put in place  a new land-leasing system for pasture areas around cities. This system provided 15-year pastureland leases to approximately 1,300 herder households, installed 346 wells on leased lands and provided water to most of these households, and trained herder groups on sustainable pasture use and livestock productivity.

Vocational Education Project (TVET)

  • $25,512,856
    Original Compact Project Amount
  • $49,322,727.09
    Total Disbursed

Estimated Benefits

Estimated Benefits for the Vocational Education Project (TVET)
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At compact closure 170,000 $27,500,000

Project Description

As the Mongolian economy transitioned to a market economy after the fall of the Soviet Union, its technical vocational education and training (TVET) system remained outdated and dysfunctional. The technical content of the trade and occupational courses no longer applied to increasingly sophisticated economy sectors. TVET Learning programs focused heavily on theory, and graduates had a reputation of being ill-equipped for the modern workplace.

In response to a growing economy‘s strong demand for skilled workers, the Vocational Education Project was designed to upgrade technical education and training. This would increase employment and income among the unemployed and marginally employed by improving technical skills and productivity, and by developing the TVET sector to become more responsive to labor market demands.

The project had five main components:

  • policy and operational framework reform,
  • implementing professional development programs for TVET instructors,
  • updating curricula based on competency-based training standards,
  • establishing a labor market information system, and
  • providing state-of-the-art equipment.
By the end of the compact, nearly 12,000 students had graduated from MCC-supported educational facilities, 54 technology labs had been installed and upgraded, and 106 practical training sites had been modernized.

Additional funds were made available after the Rail Project was withdrawn from the compact.