Centre on Regulation and Competition WORKING PAPER SERIES

Mongolia, unlike several other Asian Transitional economies, has since 1990 pursued a “Russian-style” transition to a market economy. This has entailed rapid and extensive privatisation accompanied by, inter alia, stabilisation, liberalisation and de-regulation. The transition process has been characterised by relatively poor macroeconomic performance and increased levels of poverty and inequality in income distribution. Privatisation had the central objective of cementing the new political and economic framework, and little consideration was given to issues of competition and regulation. Proposed privatisations in the social sector, infrastructure and land increase the urgency with which these issues must be addressed. In this paper, we briefly describe the chief features of Mongolia’s transition and of the privatisations that accompanied and, to a degree, defined it. We identify a range of issues relating to regulation and discuss the degree to which they are being addressed by the post-1990 political class. We conclude that although there exist, or that there are plans to establish, a number of regulatory agencies, nevertheless there is a lack of political commitment to implementation and enforcement. There is also little official recognition and appreciation of the extent, depth and implications of market failure. The scarcity of experienced and technically competent staff capable of establishing and operating effective regulatory agencies and ensuring compliance is a major problem. It is possible that regulatory capture is already a significant problem in key sectors of the economy.