The reform measures undertaken by the Government at the initial stage of the transition has led to the stabilization of the economic situation and recovery of the economy since 1993. The GDP growth rate increased to 2.3 percent in 1994 from a decline of 9.5 percent in 1992, and has remained positive since then. Importantly, the industrial sector (including the mining sector), which consistently declined at a rate of about 6 percent per annum revived, delivering 20 percent growth in 2002.

Sixteen commercial banks, more than eighty non-banking financial institutions, around 200 savings and credit cooperatives, 34 broker and security firms, 4 leasing companies and 16 insurance companies are actively participating in and composing the financial sector. Out of sixteen commercial banks two are foreign owned, one is 100 percent government owned, one is a joint venture with government, the share of which composes a little over 17 percent of total assets and the rest are in pure private ownership.

The fiscal federalism of Mongolia composes a two-tier system as its banking sector, namely, central and local government levels.

The intergovernmental transfer system, from the central to the local governments, works in a very simple fashion, which is the difference between local revenue and expenses. The central government revenue is collected through the corporate income, personal income, value added, customs, excise, and gold royalty, taxes and duties. The local government revenue consists of the motor vehicle, immovable property, stamp, land use, natural resource exploration taxes, fees, and payments.

Foreign Trade. Since the start of the transition to a market economy, Mongolia has been carrying out a policy to promote foreign trade and foreign investment. With support of donor countries and international organizations, Mongolia strives to find its place in the international arena, renewing its economic system. Compared to other countries n transition, Mongolia achieved tangible results in trade liberalization. Mongolia ’s accession to the World Trade Organization (WTO) in January 1997 highlights its relative success in pursuing economic reforms and developing a new trade regime in line with international trading principles. Accession has allowed Mongolia to become a part of the global trade regime, to access full information on WTO member countries and to benefit from human resource development in the trade field.

Mongolia has rich mineral resources and the earth exploitation has been intensively increasing in the transition period to the market economy. There are over 8,000 deposits of 440 different minerals in Mongolia , of which about 600 deposits and outcrops of resources have been determined. A total of 181 gold deposits, 5-copper molybdenum deposits, a lead deposit, tin-5, steel-10, iron-1, silver-4, magnesium-1, mica-1, gypsum-3, asbect-3, graphite-3, bitumen-2, coal and brown coal-42, phosphorus-1, fluorspar-42, salt-12, sodium sulfate-10, partial precious stone-6, crystal-9, about 30 underground water deposits and 205 construction materials, including stone, sand, gravel, limestone, marble, plaster, cement and mineral pigment’s raw materials are found. Exploration works were conducted in about 70 percent of the deposits, and the resources of the deposits were evaluated from an industrial mining point of view.

In 1234, the Mongol Empire of Chinggis Khaan set up the world’s first long-distance postal transmission system, known as “Morin urtuu” (Horse relay station). Then it could take a letter from Kharkhorum to the Caspian Sea in one week. The horse relay service remained so until 1930s. The modern communication development began in the 1930s with the first international telephone exchange. Those days are gone, but now Mongolia is enjoying another information boom.

Mongolia is a remote country with limited transport and energy infrastructure, a small domestic market, harsh climate, landlocked geography, nomadic livestock and low population density. High dependency on livestock, which is the main base of the economy, highlights the volatility and risks from nature and weather, that so influences the Mongolian economy. As of 2002, the value added from the agriculture sector was 20.1 percent of GDP. The output of livestock production comprised 78.9per cent of the total output of agriculture. The number of livestock by five types (horse, camel, cattle, sheep and goat) was 23.9 million heads at the end of 2002.

The most important Government programs are indicated in following table.