10.11.2022

Mongolia in the New Geopolitics of Asia

Mongolian experts and thought-leaders analyze the geopolitical and geo-economic dynamics that may shape the country’s future and discuss the strategies on how it can manage these challenges.

Mongolia finds itself in a challenging situation in the face of today’s uncertain geopolitical and geo-economic environment. Landlocked and sandwiched between China and Russia, Mongolia must skillfully navigate through the latest regional and global developments between the great powers. In an increasingly polarized world with threats to multilateralism, maintaining the rule-based order is important for Mongolia. In the past, the Northeast Asian country has been able to manage and navigate skillfully. Although ithas benefited from good cultural and diplomatic ties with its natural neighbours, it is crucial that Mongolia also continues to actively forge and maintain relations with other ‘third countries’ to explore multiple markets as a way of diversifying its economic partnerships.

Through the two-day Mongolian National Foresight and Strategy Lab, FES Asia offered a platform for key Mongolian stakeholders from various backgrounds to analyze major internal and external geopolitical and geo-economic dynamics that might affect the country and develop scenarios and strategic options for the future. Facilitated by the Lee Kuan Yew School of Public Policy Executive Education team, the Lab looked into a broad set of trends and driving forces in the political, economic, security, societal and environmental domains. Using futures thinking tools and methods, the participants analysed the complexity and tensions between the different stakeholders in the current state of play, created a positive future for Mongolia and recommended some concrete policy options.

Current state of play

As Mongolia is landlocked between and economically dependent on Russia and China for their imports and exports respectively, many participants expressed concerns about Mongolia having to choose sides between the complex relationship and intensifying rivalry between US, China and Russia. Mongolia’s large economic dependency on their immediate neighbours may also create negative consequences for the country in the context of geo-economic trends brought about by the COVID-19 pandemic and the situation in Ukraine.

Despite the great power rivalry and increasing polarisation, Mongolia has maintained a neutral stance in their foreign policy through their Third Neighbour Policy and by proactively seeking a nuclear-free zone. Apart from its stable external security, Mongolia has also been successful in maintaining its internal stability. The impact of climate change and environmental degradation and the need to harness Mongolia’s energy and agricultural sector remain key concerns.

Emerging trends

Improved developments in renewable technologies and agricultural technologies characterize the emerging technological trends in Mongolia. This will positively affect the country’s energy security and agricultural production, in the long run reducing Mongolia’s energy dependency on Russia and increasing agricultural yields respectively. However, the effect of climate change is adding a negative mix to the future of Mongolia’s agricultural production. Participants also noted that better infrastructure, connectivity, and technological adoptability can strengthen and diversify the country’s economy, transforming Mongolia into a leader in green technology with a self-reliant economy based on high-value mineral exports and agricultural products. Geopolitically, the rise of China may impact both the world order and the current neutral foreign policy of Mongolia. Nevertheless, it presents an opportunity for Mongolia to be an intermediary and a regional peacekeeper among neighbouring global powers.

Strategic options and policy recommendations

Reflecting on the discussions above, the participants explored policy options and recommendations for Mongolia. They developed broad internal and external policy recommendations and strategies to help the country navigate the transition between the present and their future vision of Mongolia. They suggested a range of internal and external priorities. Some of these include:

  1. Stabilizing internal politics and enhance governance: This is already high on the government’s agenda and one of the key priorities is to resolve issues within the government which causes delay in decision and policy making. Participants also opined that it is very important for the country to have internal political stability to be attractive for foreign MNCs to invest in the country and improve its economy. To that end, government should implement clear and stable policies which will improve the country’s stability and enhance public trust.
  2. Improving infrastructure and human capital to foster economic prosperity: The improvement of infrastructure and connectivity, particularly in rural areas, will increase the living standards of people and reduce the rate of rural-urban migration. The country needs to focus on fast growing sectors to stimulate the growth of its economy. This would include exploring technological advancements and digitalisation in a few of these fast-growing sectors, including energy, mining and agriculture.  Investment in human capital development is a key part towards realization of this goal.
  3. Proactive foreign policy and focus on regional integration: Mongolia should have an increased foreign service presence overseas and for the foreign service to be more active in discussing Mongolia’s neutral stance and promoting a rules-based world order. These efforts would in turn help develop a brand name of Mongolia as a regional hub for diplomacy and engagement for the Northeast Asian countries. In addition, participants suggested that Mongolia can play host to more regional and global dialogues to allow for the promotion of diplomacy in the country and region.
  4. Increasing foreign direct investments and outreach to diversify economic partnerships: Increasing the outreach to multinational corporations to generate and attract foreign direct investment is required to improve the economy and provide the foreign capital required to develop necessary infrastructures. Expanding economic partnerships also reduces dependencies on a few partners and provides for better quality of investments. To increase the attractiveness of Mongolia for foreign MNCs, it is important for Mongolia to develop an external economic development department to improve branding for the country and to provide country reports highlighting the potential for investments in the country.

Event summary compiled by Dinkim Sailo, Senior Programme Manager, FES Office for Regional Cooperation in Asia.

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