Mongolia is a large landlocked middle-income country. It shares borders with the People’s Republic of China (China) in the south and the Russian Federation (Russia) in the north. Both countries are also its main trading partners (Observatory of Economic Complexity (OEC), n.d.[1])1. The country has achieved a status of high human development in UNDP’s Human Development Index, ranking 96 out of 193 in 2022 (UNDP, 2024[2]). With a 2023 GNI per capita of USD 4 950 (World Bank, 2024[3]) Mongolia is in the midst of moving from lower- to upper-middle-income status. While almost half of the population lives in the capital, Ulaanbaatar, Mongolia’s extremely low population density (3.4 million people for a land surface of 1.6 million km2, the lowest in the world (World Bank, 2024[4])) has implications for infrastructure development, including higher costs to connect citizens to and through infrastructure.
To achieve its development objectives, in particular, for economic and regional development, the country has identified the need for significant infrastructure investments (World Bank, 2021[5]). Its long-term development policy, Vision 2050, foresees a significant expansion of the road and rail network; investments in energy production and transmission to achieve self-sufficiency in terms of electricity; and the development of mining, which is expected to continue as a key sector of the economy (Mongolia, 2020[6]). These sectors feature prominently in the country’s New Recovery Policy 2021-2030 and action plan adopted in response to the COVID-19 pandemic (Mongolia, 2021[7]). In September 2024, the new government coalition adopted its Government Action Plan 2024-2028, with infrastructure investments at the very centre: almost all 14 mega-projects are linked to transport, energy and industrial infrastructure (Government of Mongolia, 2024[8]).
Transport is a policy priority due to the vast geographical expanse, location of mineral resources, and low population density. Connectivity is essential also for Mongolia’s exports. While Mongolia has already heavily invested in transport infrastructure over the past years, needs remain high (OECD, 2019[9]): many roads are unpaved, maintenance is a challenge, and transport costs are high (World Bank, 2021[10]). The country ranks 108th in the 2023 Logistics Performance Index in terms of infrastructure (World Bank, 2023[11]). The concentration of population and economic activities in a few areas means that value for money of transport infrastructure needs to be closely considered (ITF, 2019[12]). The Government Action Plan 2024-2028 focuses on railway development (3 200 km), highways and roads (4 400 km planned2), and freight and port infrastructure (Government of Mongolia, 2024[8]).
Mining remains central to the economy. Ever since the opening of the economy in the 1990s, the mining sector – mainly coal and minerals – has been the main engine of GDP growth and trade. It accounted for 93% of exports in 2022 and 56% of domestic and foreign investment in 2021, and 60% of GDP growth in 2023 (Government of Mongolia, 2023[13]; World Bank, 2024[14]). For instance, the underground expansion of the Oyu Tolgoi copper and gold mine represents an estimated investment volume of USD 7 billion (Rio Tinto, 2023[15]). Artisanal mining is an important source of employment for rural populations (Lahiri-Dutt et al., 2021[16]). The vast majority of Mongolia’s exports is directed to China, in particular, coal. Chinese companies are expected to adhere to the Chinese Due Diligence Guidelines for Mineral Supply Chains, which have been developed building on OECD standards (China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC), 2020[17]). The global energy transition creates additional demand for extractives such as copper, lithium, and uranium, and presents opportunities for Mongolia. The New Recovery Policy and 2024-2028 Action Plan foresee an expansion of mining and investments in industrial transformation of copper, gold, and coal to capture more value-added before export (Mongolia, 2021[7]; 2024[8]). Expanding the mining sector is also at the origin of substantial investments in infrastructures for transport (to access mining sites and export goods) and power for operations. Moreover, revenue from mining is expected to finance Mongolia’s Sovereign Wealth Fund, created in 2024 (Montsame, 2024[18]). The Fund’s objective is to support the country’s development investments and long-term financial stability.
Mongolia’s energy sector remains heavily reliant on fossil fuels, with renewables slowly gaining traction. A particularity of Mongolia in this regard is the importance of heating needs and the central role of coal, with outdated thermal power plants producing the vast majority of both heat and electricity (World Bank, 2021[5]). The New Recovery Policy, reaffirmed under the Action Plan 2024-2028, foresaw creating an additional capacity of 3 400 MW and a heating capacity of 1 536 MW (Mongolia, 2021[7]; 2024[8]). While Mongolia exports energy resources from mining, its domestic electricity production is insufficient to meet growing needs: around 20% of electricity consumption stems from imports (Government of Mongolia, 2023[13]). Wind and solar energy production has increased but it constitutes, together with hydropower, only 10% of energy production (Government of Mongolia, 2023[13]). Compared to the New Recovery Policy3, the 2024-2028 Action Plan recognises the vast potential of renewable energy and puts greater attention on renewable energy sources (RES), including through large and mega-scale solar wind projects and hydropower stations (Government of Mongolia, 2024[8]). This aligns with Vision 2050’s objective to bring the share of renewable energy to 30% by 2030 (Mongolia, 2020[6]). 
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Published Date:2025-06-17