Mongolian Government, Partners Agree to Increase Focus on Development Results

March 2, 2006

ULAANBAATAR, March 2, 2006 – The Government of Mongolia and external partners concluded a two-day meeting today to discuss the country’s economic and development progress. The meeting focused on strengthening management for results and harmonization, debt management, private sector development, and education. Subsequent meetings will review other priority issues.

Mongolia receives a significant and stable annual aid flow each year. The technical meeting, jointly organized by the Government of Mongolia and the World Bank, marks an intensification in the Government-external partner cooperation to establish clearer development priorities and better align this external support with the government’s own planning and budget cycle through regular six-monthly meetings focused on achieving results and a higher accountability for aid.

In pursuing priorities, the Government and external partners will work to improve coordination among the government and external partners, based on the Government’s existing planning and budget mechanisms and on a new MDG-based national development strategy under preparation. We mutually agreed on the new mechanism of cooperation based on the principles of accountability, transparency, support of real economic development, results on the ground and elimination of any overlaps.  Particular attention will be needed addressing cross-sectoral issues, ensuring adequate focus on poverty reduction, and using an open and collaborative process involving line ministries, parliament, and civil society and the private sector.  In order to generate a needs-based program of activities costed and aligned within sustainable resource envelopes, the government and partners also agreed on the need to strengthen capacity and institutions to make sure the national strategy, medium term planning, and the budget process are strongly linked.

Minister of Finance N. Bayartsaikhan noted the need to increase the efficiency of foreign loans and aid, bearing in mind the currently high level of external debt, numerous competing needs, and vulnerability to external conditions. “In working to achieve the MDGs and other development goals, one key challenge will be to develop a sharper, more coherent strategy for public debt management and to maintain the right balance between private direct investment, grants and loans. Our aim must be to strengthen our economy to withstand future shocks and dips in commodity prices that will inevitably happen.”

The Government and partners agreed that the country has made significant progress in its transition to a market economy since the early 1990s. With recent economic growth, supported by rapidly rising minerals prices and production, Mongolia recorded a budget surplus in 2005, compared to deficits of more than 9 percent in the late 1990s. Mongolia is now on track to achieve some of the Millennium Development Goals including achieving universal primary education, and has made significant progress on others, including reducing infant and child mortality.  Participants agreed that the good progress needs to be sustained and further attention is needed where progress is lagging, such as poverty reduction, water and sanitation, and other environmental sustainability goals.

However, Mongolia is facing some substantial risks, which is why the meeting agreed it is important for the government to use the current good times, while the economy is growing fast, to prudently manage the budget windfalls.  Both the Government and external partners expressed willingness to work further to convert the recommendations discussed into actions, and to review progress in implementing these actions at the next technical meeting, to be held in six months.

The meeting included sessions on the private sector and education, with a focus on desired results in those two key areas for achieving Mongolia’s development goals.  There was broad agreement that further progress on reducing private sector barriers will be critical for achieving sustained growth.  In particular, participants discussed the findings of recent studies on tax, customs, and licensing, and concrete steps needed to address corruption and red tape, both of which have been highlighted as key barriers to the private sector.

The meeting also reviewed efforts in education, where the donors and the Government have worked together to develop a sector development plan.  The development of a health master plan and its implementation was also recognized. Participants agreed to work together to further clarify priorities and to speedily endorse the new Education Master Plan, and the assessment of the plan that has been done as part of a process to help Mongolia become part of the Education for All – Fast Track Initiative, a possible source of additional grant resources.  At the same time, participants noted remaining challenges in serving the vulnerable through non-formal education as well as ensuring full access to formal education.

In closing, David Dollar, World Bank Country Director for Mongolia, emphasized that prioritization will be needed at both the macro and micro levels. “I am pleased to see that Mongoliais moving to set clear priorities in key areas such as education and private sector development. An increased focus on prioritizing results in these and other key areas will ensure that external aid supports Mongolia’s main development goals,” he said.  “At the macro level, to ensure that Mongoliaguards against future macroeconomic instability, very concrete measures will be needed to limit debt and non-concessional borrowing, and ensure fiscal sustainability.”

The meeting, held at the Chinggis Khaan Hotel from 28 February to March 1, was the start of a regular six-month cycle of meetings to exchange views on key issues for Mongolia’s development among donors and the Government of Mongolia, as well as the private sector and NGOs.   This meeting initiated a shift to a new format for Government-external partner cooperation, with regular six-monthly meetings, aligned with Mongolia’s own planning and budget cycle, and focused on improving the management of development results.



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