In January 1992, a new constitution was adopted, enshrining the principles of a democratic and pluralistic system based on market economy and private property. The Mongolian People's Republic changed its name to Mongolia. The new constitution also provided for the independence of the judiciary, freedom of religion and the reduction of the parliament to a single chamber, the Great State Hural, with 76 members elected for four years. All citizens aged 18 and over are eligible to vote. The constitution also states that the president is directly elected for a four-year term. Every citizen aged 45 and over who has lived in the country for the previous five years is eligible. A complex variant of the district system is used. Executive power is divided between the president and a prime minister.
Mongolia has undergone a remarkable transformation in recent years. From a satellite state of the Soviet Union, the country has developed within a few years into a democratic constitutional state, with a dynamic private sector, free press and civil society. The first free parliamentary elections in 1990 and 1992 were won by the former communist party MPRP. However, the 1996 elections resulted in Mongolia's first elected non-communist government, the "Democratic Union Coalition". These elections testify to the process of political awareness. These positive developments have contributed significantly to the international donor community's continued support for the country. However, the transition from a communist system to a new, democratic one is still difficult. Three prime ministers have resigned since 1996, and the Democratic Coalition fell apart in early 2000.
The current political situation is described in the history section.
Until the early 1990s, Mongolia had a centrally planned economy according to the Soviet model. The collapse of the Soviet Union (at the time its most important trading partner) resulted in an immediate fall in GNP of 30% and brought Mongolia into a prolonged economic recession. Mongolia is in a transitional phase from a state-controlled economy to a more western economic model. In 1997, a large-scale privatisation programme was launched in the hope of attracting foreign investment. However, many privatised companies went bankrupt due to mismanagement, causing unemployment to rise. The harsh winters of recent years have had a severe impact on Mongolia's nomadic population, resulting in poor harvests and livestock mortality. Animal husbandry (cattle, horses, goats, sheep, camels) and mining have traditionally been the main economic activities. The (modest) industrial activities focus mainly on the exploitation of copper, coal, tin, gold and uranium.
With the introduction of a series of economic reforms, including the promotion of a free market economy, wage and price liberalisation and reforms of the banking and energy sectors, the economy recovered to some extent. However, the possibilities for recovery remained limited, as economic development was strongly affected by the Asian financial crisis in 1997 and the Russian economic crisis in 1999. The limited growth (3.5%) achieved during this period was mainly due to the good developments in the agricultural (livestock) sector. In general, the economic and social situation is not rosy. Due to the economic downturn, the infrastructure in the areas of education, health care, drinking water and telecommunications is in danger of falling. The costs of maintaining these facilities are high and, due to a lack of government funding, they are being neglected.
In 2012, Mongolia's GDP grew by 12.3% compared to the previous year and by 11.8% in 2013. In the first years of the 21st century, this growth rate was only around 1%.
Mongolia, with a per capita GDP of $13,900 per year (in 2017), is among the relatively low-income countries. The country has a narrow economic base and has an unemployment rate of around 8% (2017). Mongolia's relatively open economy is mainly based on agriculture and mining, with the often extreme weather conditions making it even more difficult to create constant economic growth. The domestic market is very limited, while inadequate infrastructure and limited transport options often pose major obstacles to production for foreign markets. The main policy objective of the Mongolian government is to promote economic growth in order to reduce poverty. Today, almost 30% of the population still lives below the poverty line.
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