Mongolia suffers from China’s zero Covid policy
Food shortages, inflation, hundreds of thousands of people with no income and thousands of shipping containers stuck at the border, not to mention the increase in Covid-19 cases, job losses, businesses closed, a paralyzed export sector and a decimated tourism industry: such has been the situation in Mongolia for two years. In an interview with the author, Deputy Prime Minister Amarsaikhan Sainbuyan described the pandemic as “the biggest crisis of my career” and went on to explain the difficulties a small developing democracy faces when trying to balancing the economy while safeguarding public health.
Mongolia is a Lower midfielder low-income country with a population of only three million and an annual per capita family income of $1,787. For nearly 70 years, Mongolia was a Soviet satellite. In 1992, the Soviets left and the country abandoned communism, moving to capitalism and democracy. While the living standards of most Mongolians have improved considerably over the past decade, Mongolia’s economic development has been uneven, with negative GDP growth of 9.3% in 1992 and positive growth 17.3% growth in 2011. In 2018, the Mongolian economy was improving, with 7.5% growth, but in 2020, following the pandemic shutdowns, growth fell to minus 4.6%.
Mongolia’s mining sector accounts for 90% of exports and around 26.1% of GDP.
One of the reasons for Mongolia’s boom and bust trajectory is that the mining sector represents 90% of exports and roughly 26.1% of GDP. But these figures represent only direct income from the sale of goods. Mined silver ripples through the economy, supporting business, education, banking, finance, construction, and many other sectors. Indeed, Investment Monitor considers that the country’s economy is 100% dependent on mining and considers Mongolia to be the country most vulnerable to fluctuations in commodity prices.
In January 2020, when the first cases of coronavirus were reported in China, Mongolia closed the international airport, as well as its only two borders, with China and Russia. This led to a sharp decline in Mongolia’s export earnings. China represents more than 60 percent of Mongolia’s total trade, providing 33 percent of its imports, while buying 89.1% of its exports. Finished goods began to thin out on retail store shelves and prices began to rise. The government has implemented strict confinement, closing schools and non-essential businesses. Without unemployment benefits to rely on, people began to suffer.
A World Bank survey found that people living in poverty and households whose incomes were reduced by the pandemic were more likely to experience food insecurity. Many children, dependent on school meals, suffered from vitamin and nutritional deficiencies. UNICEF found that 62.1% of children lost weight, while 20% experienced a decrease in meal frequency.
The World Bank has also estimated that up to 260,000 more Mongolians fell into poverty in 2020, bringing the poverty rate to 33.6%, while 35.2% of households reported a drop in income.
To make matters worse, inflation has skyrocketed at 9.6%, with food, solid fuel and gasoline prices rising the most. Ten months into the pandemic, meat prices in Ulaanbaatar had risen by 16% and fuel prices 38.8%.
Deputy Prime Minister Amarsaikhan explained that the government was doing its best to follow the guidelines of the Centers for Disease Control and Prevention (CDC) and the World Health Organization, but “the Covid measures have exhausted our budget”. With very little income, he said, “we had to depend on international donors, our neighbours, embassies and diplomatic missions.” Donations of medicine and equipment have come from around the world, but it costs money to equip ambulances with oxygen machines and to get supplies to doctors in remote parts of the country. Cost of Covid relief measures increased 2020 budget 9.5% deficit of GDP.
While Mongolia is ready to get back to work, China maintains a zero Covid policy, which keeps borders closed, Mongolian exports low and domestic consumer prices high.
About half of the population lives in the capital, Ulaanbaatar, while between 30 and 40% are nomadic herders. Throughout the country, the population density is only two people per square kilometer. “We had to bring in these new ventilators, beds, pumps, new drugs…and we had to deliver them,” Amarsaikhan said. “In rural areas, in the countryside, in 21 provinces, there were almost no oxygen facilities, so in the past two or three months, we had to import, transport and install oxygen facilities. oxygen in 16 provinces.”
Since April 2021, things have improved a lot. Private sector companies have has reopened and people have found jobs in many sectors. Production and sales volumes remained below pre-pandemic levels, as are revenues, but the deputy prime minister swears the government has no plans to lock down the country again.
So while Mongolia is ready to get back to work, China is maintaining a zero Covid policy, which keeps borders closed, Mongolia’s exports low, and domestic consumer prices high. National Statistics Office Division Chief Tseveenjav Lkhanaa sums up Mongolia’s precarious economic situation as “disproportionately dependent on our biggest external trading partner, China”. Ultimately, Mongolia is hostage to China’s zero Covid mandate and the country’s recovery is almost exclusively in the hands of Beijing and its border control policies.