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Managing Mongolia’s resource boom

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Author Info

  • Asel Isakova

    (EBRD)

  • Alexander Plekhanov

    ()
    (EBRD)

  • Jeromin Zettelmeyer

    (EBRD)

Abstract

With two very large mining projects expected to reach full production this decade, Mongolia is entering a commodity boom. History teaches us that commodity revenues offer unique opportunities for development but can also depress long-term economic prospects by increasing macroeconomic volatility, reducing incentives to invest in physical and human capital and undermining economic and political institutions. This paper surveys what Mongolia can do, building on reform steps it has already taken, to avoid a “resource trap”. It argues that (i) cash transfers to the general population should be linked directly to the performance of the underlying mining assets to create a domestic constituency for good governance in the mining sector; (ii) social spending should be de-linked from resource revenues, better targeted and fully incorporated into the budget; (iii) macroeconomic volatility could be reduced by operationalising the fiscal stabilisation fund, issuing GDP-indexed debt instruments, and through financial sector reforms; and (iv) major infrastructure and industrial development projects should seek private sector co-investments to ensure that public money is well spent.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 138.

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Length: 36 pages
Date of creation: Jan 2012
Date of revision:
Publication status: Published in Working papers 138, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:138

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Related research

Keywords: natural resources; economic boom; institutions; financial development;

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References

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  1. Erik Berglof & Yevgeniya Korniyenko & Alexander Plekhanov & Jeromin Zettelmeyer, 2010. "Understanding the Crisis in Emerging Europe," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(6), pages 985-1008, September.
  2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  3. Gylfason, Thorvaldur, 2000. "Natural Resources, Education, and Economic Development," CEPR Discussion Papers 2594, C.E.P.R. Discussion Papers.
  4. Cally Ardington & Anne Case & Victoria Hosegood, 2007. "Labor supply responses to large social transfers: Longitudinal evidence from South Africa," Working Papers 59, Economic Research Southern Africa.
  5. Amin, Mohammad & Djankov, Simeon, 2009. "Natural resources and reforms," Policy Research Working Paper Series 4882, The World Bank.
  6. Alexander Plekhanov & Sergei Guriev & Konstantin Sonin, 2009. "Development based on commodity revenues," Working Papers 108, European Bank for Reconstruction and Development, Office of the Chief Economist.
  7. Emmanuel Skoufias & Vincenzo Di Maro, 2008. "Conditional Cash Transfers, Adult Work Incentives, and Poverty," Journal of Development Studies, Taylor & Francis Journals, vol. 44(7), pages 935-960.
  8. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, 01.
  9. Eduardo Borensztein & Olivier Jeanne & Paolo Mauro & Jeromin Zettelmeyer & Marcos Chamon, 2005. "Sovereign Debt Structure for Crisis Prevention," IMF Occasional Papers 237, International Monetary Fund.
  10. Sergei Guriev & Konstantin Sonin & Anton Kolotilin, 2007. "Determinants of Expropriation in the Oil Sector: A Theory and Evidence from Panel Data," Working Papers w0115, Center for Economic and Financial Research (CEFIR).
  11. Martin Wittenberg, 2002. "Job Search In South Africa: A Nonparametric Analysis," South African Journal of Economics, Economic Society of South Africa, vol. 70(8), pages 1163-1196, December.
  12. María Alzúa & Guillermo Cruces & Laura Ripani, 2013. "Welfare programs and labor supply in developing countries: experimental evidence from Latin America," Journal of Population Economics, Springer, vol. 26(4), pages 1255-1284, October.
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Cited by:
  1. Theodore H. Moran, 2013. "Avoiding the "Resource Curse" in Mongolia," Policy Briefs PB13-18, Peterson Institute for International Economics.

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