WORLD TRADE  
ORGANIZATION  WT/TPR/M/145 
17 May 2005 
 (05-1995) 
Trade Policy Review Body 
15 and 17 March 2005  
 
 
 
TRADE POLICY REVIEW 
 
MONGOLIA 
 
Minutes of Meeting  
 
Chairpersons:  (1st day) H.E. Mr. Eirik Glenne (Norway)  
 (2nd day) H.E. Mr. Don Stephenson (Canada) 
  
 
Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 
II. OPENING STATEMENT BY THE REPRESENTATIVE OF MONGOLIA 4 
III. STATEMENT BY THE DISCUSSANT 8 
IV. STATEMENTS BY MEMBERS 11 V. REPLIES BY THE REPRESENTATIVE OF MONGOLIA AND ADDITIONAL 
COMMENTS  17 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 23 
 
     
 
    
 
    
 
  
Note:   Advance written questions by WTO Me mbers and the replies provided by Mongolia are 
reproduced in document WT/TPR/M/145/Ad d.1 and will be available online at 
http://www.wto.org/english/tr atop_e/tpr_e/tp_rep_e.htm. WT/TPR/M/145 
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The first Trade Policy Review of Mongolia  was held on 15 and 17 March 2005.  The 
Chairperson (H.E. Mr. Eirik Glenne (chairpers on of the Dispute Settlement Body was replacing 
H.E. Mr. Don Stephenson, who was unable to attend on the first day of the meeting) welcomed the 
delegation of Mongolia, led by H.E. Mr. Sukhbaat ar Batbold, and Ambass ador Bekhbat, and the 
discussant  Mr. Masato Kitera (Japan).  As usual,  the discussant would speak in his personal capacity 
and not as representative of his country.  In accord ance with the established procedures, the discussant 
had made available, in advance, outlines of th e main issues he intended to raise (document 
WT/TPR/D/121). 
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures for the meeting.  The report by Mongolia was contained in document WT/TPR/G/145 
and that of the WTO Secretariat in document WT /TPR/S/145.  Copies of advance written questions, 
submitted by Canada;  Japa n;  Hong Kong, China;  United States;  Brazil;  the European 
Communities;  and the Republic of Korea, had been transmitted to the Mongolian delegation.  
3. The Chairperson was encouraged by Mongolia 's successful progress in its transition from a 
centrally planned to a market-based economy;  its economy was growing steadily, with moderate 
inflation.  This was due in part to the Govern ment's efforts involving market-oriented reforms, 
including the establishment of an open trade regime .  WTO Members had also played an important 
role in making such transition possible by keeping their markets open to Mongolia's exports.  At the 
same time, Mongolia was going through various re forms including farm privatization and price 
deregulation, financial sector liber alization, and privatization of state entities.  He noted from the 
Government Report that Mongolia in tended to enhance further the growth and stability of its economy 
by pursuing a policy of developing freer trade.  He  believed that Members would be interested in 
learning more about how Mongolia hoped to accomplish this goal.  
 WT/TPR/M/145 
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II. OPENING STATEMENT BY THE RE PRESENTATIVE OF MONGOLIA 
4. The representative of Mongolia
, H.E. Mr. Sukhbaatar Batbold, appreciated the opportunity 
for the first review of his country's trade and related policies in the Trade Policy Review Body 
(TPRB).  As an efficient mechanism of ensuring tr ansparency and clarity of trade regimes and as a 
friendly mechanism of early-warning as to WTO inconsistencies, the TPRB had contributed to 
strengthening the rule-based system of the WTO;  the TPRB was intended to facilitate a level playing 
field for every Member.  He believed that the Review would be accompanied by the assessment and scrutiny of Mongolia's trade policy from various angles and perspectives;  such examination was 
expected to suggest reasonable leads for the bette rment of Mongolia's practices and policies.     
5. Since the 1990s, when Mongolia chose to bu ild a market economy, it had been firmly 
pursuing the policy of liberalization, deregulation, privatization, and macroeconomic stabilization.  
The misfortune of crises preceding and accompanying th e rapid transition of virtually all the transition 
economies did not spare Mongolia.  However, stamina and tolerance, entrepreneurship and persistent 
endeavours of the Mongolian people, coupled with the steady policies of successive governments and 
friendly assistance of donor countries, had helped th e country to defy the downward drive of the 
economy and to reverse it.  As a result, macroec onomic stability was restored during the second half 
of the 1990s.  The rate of inflation, which exceed ed 300% in 1993, had stayed within single-digit 
figures since 1998.  After the severe decline in GDP , economic growth had resumed since 1994.  GDP 
growth, which was around 5.5% in 2003, had surged to 10.6% in 2004, and the budget deficit for 2004 remained under 1%.  The last conference of Mongolia's donor community concluded that the transition period of Mongolia was nearing completion.   
6. The trade and agricultural sectors were currently  the largest contributors to Mongolia's GDP, 
amounting to 29% and 20% of GDP, respectively.  Transportation and communication accounted for 
15% of GDP, followed by mining (9.5%) and manuf acturing (6%).  However, Mongolia's economic 
growth had been extremely volatile due to th e confluence of several factors including price 
fluctuations of key export commodities, and extern al shocks, such as repeated winter disasters.  
Economic growth had also relied heavily on the ex ploitation of natural endowments and the use of 
land and agricultural resources.  The growth had not  yet benefited the people equitably, as evidenced 
by the absence of positive change in the poverty indicators.  Mongolia remained a poor country, 
where every third citizen lived below the poverty line;  GDP per capita stood at US$477, which was 
far below the 'excuse' level provided for in Annex VII to the Subsidies Agreement.    
7. Through its persistent pursuit of  liberal policies, Mongolia had become one of the most open 
trading regimes in the world, with low import tariffs and limited non-tariff barriers.  The Government 
Action Programme for 2004-2008 pledged to continue the trade liberalization.  All political forces in 
Mongolia and the public at large believed in the strength and virtues of the liberal policies to help boost trade and entrepreneurship in the country.  Th e fact that trade accounted for 25% to 30% of 
Mongolia's GDP showed that the country's economy was heavily dependent upon trade.  Thus, trade 
expansion was expected to buttress the growth tre nd.  However, in promoting trade, Mongolia was 
seeking to diversify its exports and encourage compe titiveness of its industries.  As a result of these 
policies over the past decade, the total trade turnover of Mongolia had doubled.  In 2004 (compared 
with the previous year) the trade deficit dropped by mo re than 15%.  This upsur ge was facilitated to a 
large extent by the increase of the world price for copper and gold, which were among Mongolia's 
major export items.  
8. The positive outcomes observed in Mongolia's ec onomy were also due to intensive legal 
reforms aimed at modernizing the trade regime.  Since 1997, a number of commerce-related laws had 
been adopted, such as the Insuran ce Law, Company Law, Land Law, and Licensing Law.  Moreover, 
in the process of economic transformation, Mongol ia regularly revised and amended many of the 
basic commercial laws and regulations affecting customs,  standards, taxes, etc.  Besides the legislative 
changes, Mongolia endeavoured to rationalize the in stitutional basis of its economic system;  this  WT/TPR/M/145 
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included the establishment of a single State Sp ecialized Inspection Agency in 2002, and the 
introduction of the "one-stop-shop" mechanisms in the customs services.   
9. With a view to furthering the trade facilitati on goals of both its Government and the WTO, 
Mongolia had significantly reduced the number of product groups requiring licensing, from nineteen to nine.  In addition, Mongolia had set up the virt ual advisory board of in ternational advisors under 
the Minister of Trade and Industry to ensure bette r expert support of the trade policy formulation 
process and make the best use of modern communica tion technologies.  In order to prevent decision-
making by the Government with little debate with th e local industries, Mongolia had recently created 
a policy board to advise the Minister of Industry and Trade.  The board included representatives of 
national businesses, so that the voices of local businesses were heard and reflected in policy 
formulation.  The Council of Professional Associ ations, which would assist in channelling the views 
of professional associations to the Government, had also been created.   
10. The results of Mongolia's trade liberaliza tion could be shown in the geographical 
diversification of its trading partners;  before  the 1990s, the former Soviet Union and Eastern 
European countries had accounted for more than 90% of its total trade.  Mongolia currently traded 
with about 90 countries, the list of which was lead by China (33% of total trade), the Russian 
Federation (19%), the EC (15.7%), the United St ates (11.7%), Japan (5.8%), and the Republic of 
Korea (3.8%).   
11. With regard to tariffs, Mongolia had maintained  a single one-digit import duty column of 5% 
on the majority of imported goods (except for flour  and vegetables) since 2002, and no export tax 
(except for agricultural products, such as raw hides a nd skins, cashmere, and wool).  This constituted 
an almost 70% tariff cut compared with the tari ff rate of 15% that had applied before 1997.  
Mongolia's applied tariffs had always been mainta ined at the levels significantly below its bound 
rates, which equalled 20% across the board, with few exceptions.   
12. The Government's involvement in business ha d decreased substantially.  Since 1997, the 
major state-owned enterprises had been privatized to account for more than 5% of GDP.  As a result, 
the private sector's share in GDP reached 80%. 
13. With regard to trade regulati ons and procedures, the necessary amendments had been made to 
the Customs and Customs Tariff Laws.  The Cust oms Authorities had worked to further ensure 
transparency of its operations.  Electronic procedures had been introduced and put into operation (GAMAS system replaced ASYCUDA) to make the customs procedures more transparent, simplified, 
and speedy.  In addition, a "one-stop service" pr inciple was introduced to speed up customs services 
and to reduce the bureaucratic ladder for businesses. 
14. Mongolia had committed itself to applying fully the provisions of the Agreement on TRIPS 
by the date of its accession to the WTO in 1997.  Parliament and the Government had taken steps to 
bring the national legislation into conformity w ith the TRIPS Agreement and other international 
conventions and agreements on inte llectual property rights.  In this context, the Law on Patent and 
Copyright of 1993 was amended in 1999 to ensure compatibility with the TRIPS Agreement.  In 
2002, Parliament ratified the WIPO Copyright Tr eaty and the Performers and Phonograms Treaty.  
The Intellectual Property Office was under the resp onsibility of the Deputy Prime Minister, which 
demonstrated the significance Mongolia was attaching to intellectual property rights. 
15. As to the investment regime, Mongolia had b een working hard to make the environment 
attractive in every respect.  Investment was consid ered to be an important engine of  economic 
growth.  Hence, the Government had attributed high significance to FDI.  Mongolia's general 
compliance with the requirements of the Agreemen t on TRIMs, as well as the continued stability of 
and improvements to the business environment, had r esulted in the substantial increase of FDI since 
1997.  FDI made between 1997 and 2004 was six -fold that registered between 1990 and 1996. WT/TPR/M/145 
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16. Mongolia was committed to furthering the creati on of more favourable conditions for FDI, to 
increase the inflow of capital.  To this end, th e Government Action Programme provided support for 
the introduction of "internati onally accepted rules, procedures and standards", which were 
understandably more recognizable and credible for foreign investors. 
17. These efforts to comply with WTO commitments we re taken at time of rapid transition, both 
economic and political.  Mongolia had persisted with its  efforts out of its convi ction and belief in the 
virtues of the multilateral trading system.  He nce, Mongolia always endeavoured to ensure 
compliance with the WTO legal system in making its foreign trade policy related decisions.  In 
addition, Mongolia had gone beyond its WTO commitmen ts in many respects, despite the intensifying 
voice of criticism against the global institutions in international and na tional arenas.  Mongolia 
believed that strengthening the multilateral tradi ng system would further contribute to global 
economic development and that all Members would be able to reap the benefi ts of a freer and more 
open trading system.  However, experience had shown that just liberalism per se might not ensure the 
intended benefits for developing co untries, unless a coordinated and concerted effort was made at the 
global level.  The Doha Development Agenda  was precisely the response to such reality. 
18. Proportionate enthusiasm for the development issues would not ruin the WTO system.  On the 
contrary, it would further strengthen the multilateral trading system and reinvigorate the involvement 
of all Members in the trade negotiations.  Within  the framework of the Doha Development Agenda, 
Mongolia was firmly committed to the goal of comp leting the round of negotiations successfully.   
19. Agriculture was one of the most important sect ors to many Members.  Positive and acceptable 
results for Members in the agricultu re negotiations would greatly contribute to the creation of fairer 
trade and the success of the DDA.   Therefore, Mongolia would continue to participate in the 
negotiations with particular emphasis on and cons ideration of improved market access for agricultural 
products.  It also stood for furthering the trade facilitation efforts undertaken by Members.  
20. One of Mongolia's major constraints in its in ternational trade was transit transport.  Its 
landlocked location had a negative impact on the free flow of goods and impeded the economic 
development of the country.  Therefore, the issue of transit transport had always been at the centre of 
Mongolia's attention throughout its membership in  the WTO.  Further clarification of GATT 1994 
Article V could represent one of the foremost contri butions of the WTO to the brighter prospects of 
small, landlocked countries like Mongolia.  In this connection, Mongolia urged the crystallization and 
progressive development of the rule embedded in th e Article.  Incorporation of national treatment 
provision or the application of special and differen tial treatment to small, landlocked and vulnerable 
economies might reduce the unnecessary costs and burde n of trans-shipment posed on such countries. 
In the meantime, Mongolia, together with othe r landlocked Members, had initiated a group of 
landlocked developing countries within the WTO to prot ect their interests collectively.  The issues of 
small, vulnerable and landlocked economies transcen ded transit transport and their problems were no 
smaller than those of LDCs, which were accorded special treatment to mitigate the problems they 
faced on the path of their development.  Indeed, many of the landlocked developing countries also had 
least-developed status.  Mongolia believed that th e issue deserved closer investigation within the 
framework of the WTO.   
21. Russia and China accounted for more than 50% of Mongolia's total trade.  Therefore, besides 
the negotiations within the multilatera l fora, Mongolia aspired to strengt hen its bilateral trade relations 
with these two neighbours.  Given the pace of the ge ographical diversification of its trading partners, 
Mongolia was also seeking active participation in the c ooperative mechanisms in Asia and the Pacific.   
22. Mongolia did not belong to any of the regional agreements, but it closely followed the 
activities of the APEC and ASEAN.  In addition to these efforts to use the ex ternal factors in favour 
of Mongolia's economic development, it had sought  to establish free trade and free economic zones 
and industrial parks so that it could empl oy its inner strengths and potentials.    WT/TPR/M/145 
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23. In summary, during the period under the review, Mongolia had pursued a policy of 
consolidating economic development through the est ablishment of a liberal economic environment, 
which promoted fair competition and led to the crea tion of a new structure of the economy resting on 
the pillars of competitive industries.  The economi c policies of the country and its WTO compliance 
efforts were complementary, and had led to great er trust in Mongolia in the WTO.  However, 
countries like Mongolia had higher expectations in th e WTO;  and Mongolia hoped that its legitimate 
interests would be treated with due attention and consideration.  WT/TPR/M/145 
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III. STATEMENT BY THE DISCUSSANT 
24. The discussant
 (Mr. Masato Kitera) stated, that Mon golia had already started the process of 
democratization and breaking with so cialism in the latter part of 1989.  Mongolia had been a socialist 
country both politically and economically, depending on the Soviet Union, since its independence in 
1921.  The political reform, "Glasnost", had taken place in Mongolia earlier than in the Soviet Union.  
However, Mongolia had had some difficulties in its  economy because the Soviet Union, which was 
facing its own difficulties at that time, could not afford to assist Mongolia.  Mongolia was at the special turning point in its long history, when th e discussant encountered it for the first time at the 
beginning of 1991, soon after he was assigned to the China and Mongolia Division of the Ministry of Foreign Affairs.  The discussant had been involve d in providing essential relief for two emergency 
situations concerning food, medicines and electric ity during that particularly cold winter.   
25. In August 1991, the Japanese Prime Minister, had officially visited Mongolia and promised a 
new bilateral relationship with the Mongolian President .  This was the first official visit to Mongolia 
by a leader of an industrialized country.  At that time international telephone lines from Mongolia 
were available only via Moscow or Viet Nam;  Japa n subsequently provided a grant aid project to 
Mongolia to establish an international satellite telecommunication circuit.   
26. In 1993, Mongolia was still facing economic di fficulties, while promoting democratization 
and transition to a market economy.  Japan's grant aids for Mongolia were over ¥5 billion in 1994 and 
it had maintained and diversified a high leve l of economic cooperation with Mongolia.   
27. The early 1990s was an extremely difficult period for Mongolia.  In 1989, the Centre for 
European Economies in Transition in the OECD was established.  When the Centre had activated the 
intellectual assistance for the former Soviet Un ion Republics and the east European countries to 
promote transition to a market economy, Japan pr oposed deleting "European" from the name of the 
Centre, to enable it to provide the same assistance for Mongolia.  Th is proposal was accepted and the 
mission from the OECD visited Mongolia, and economis ts from Mongolia participated in the seminar 
hosted by the Centre.  He hoped that this Centre facilitated Mongolia's transition to a market 
economy.   
28. In the early discussions of the Centre, the most important thing for the transition to a market 
economy was concluded to be "sequencing".  Th e purpose of the market economy was obvious;  
prices were to be formed in the market, including th e goods, labour, and financial markets.  In order to 
reach this goal, reform toward a market economy was recommended to proceed sequentially, or step 
by step, in accordance with the specific situation of the country. 
29. The discussant appreciated the impressive progress in Mongolia's transition from a centrally 
planned economy to a market economy since 1991.  Mongolia had broken with socialism, changed the 
name of the country, and made a historical shift to  establish a market economy.  Politically, the cost of 
democratization had been considerable, for example,  four cabinets had been formed in four years 
between 1996 and 2000.  There had also been na tural disasters, such as heavy snow, which had 
decreased livestock by around 10 million head. 
30. The discussant applauded Mongolia's generally stable economic growth in spite of these 
difficulties, and the recently accelerated growth rate, to a remarkable 8% in real GDP in 2004.  He 
considered that Mongolia's macr oeconomic policy measures, such as lowering inflation and foreign 
exchange control, were appropriate.  The Govern ment of Mongolia was firmly committed to the 
direction of structural reforms and liberalization.  It  was remarkable that the rate of privatization had 
reached around 80%, from 0% before 1991.  In ever y sector, from agriculture to services, Mongolia 
had made progress.  It was also impressive that a number of laws and regulations that legally supported the market had been accomplished.  As a result of these measures, Mongolia had achieved  WT/TPR/M/145 
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stable economic growth and modera te inflation, reducing the over all budget deficits and increasing 
trade.  In particular, the increase of trade was impr essive:  ten times greater than a decade ago.   
31. On the other hand, there remained some are as to be improved, such as the increased total 
external deficit and the dependence on a few export it ems, such as copper and cashmere.  In order to 
promote and diversify exports, the discussant considered it essential to upgrade the quality of the 
export goods.  However, depende nce on single export items increased vulnerability to external 
shocks, such as natural disasters or the fluctuati on of market prices.  The discussant asked which 
measures Mongolia would take to promote the di versification of trade and the economy.   
32. The discussant considered that the privatizati on of the remaining large national enterprises 
and the extension of private land ownership would lead to the accomplishment of the market economy 
in Mongolia.  He hoped that Mongolia would over come the challenges and accomplish its goal of a 
market economy through the sequencing process.  In order to achieve further growth and development 
and accomplish the full market economy in Mongolia, he  believed that further aid by the international 
community was indispensable, in the form of funds a nd technical assistance.  It would be useful for 
both Mongolia and the international community if Mongolia could identify priority areas for further 
aid and technical assistance.   
33. On trade and investment policies, the discussant highly commend Mongolia for first acceded 
to the WTO as a transitional economy in 1997, and continuing to give priority to the WTO in its trade policy, through committing firmly to the multilatera l trade system and promoting its open trade and 
investment policies.  He also commended Mongolia 's continued active participation in the Doha 
Development Agenda.  He thought it would be he lpful for other Members' understanding of Mongolia 
if it could indicate its priorities and position in the current negotiations.  Many Members would be 
interested in Mongolia's stance, pa rticularly in the agricultural nego tiations and development issues.  
He believed that Mongolia would benefit from active participation in the ongoing WTO negotiations.   
34. On regional cooperation, he noted that the pop ulation of north eastern China and far eastern 
Russia was 130 million, and that of Japan and the Korean Peninsula was about 200 million.  The total 
population of the two areas was close to the total population of EU-15 (380 million).  He suggested 
that more active movement of goods, money, an d persons in its surrounding region would contribute 
to the steady growth of Mongolia. 
35. Mongolia had bound all tariff lines and had no impor t quotas;  it also maintained relatively 
low applied tariff rates.  On the other hand, there was a gap between bound rates and applied rates.  In 
1999, the applied rate was raised after it had been re duced to 0% in 1997.  This did not conflict with 
Mongolia's GATT commitments but it influenced the predictability of the trade regime.  He asked 
whether Mongolia had any plans to reduce the gap between bound rates and applied rates.   
36. Concerning the commitment to eliminate export duty on raw cashmere within ten years of 
WTO accession, it was estimated th at half of the cashmere produced was currently smuggled into 
China to avoid export duties.  He encourage Mongo lia to eliminate these export duties at an early 
stage.   
37. The discussant recognized the importance of attract ing investment, particularly FDI, in order 
to achieve further development by establishing a more market-oriented economy.  He therefore 
appreciated that Mongolia currently did not impose any restrictions for the size and content of FDI and had endeavoured to promote FDI through such measures as the Investment Programme launched 
in 2001 and the Year of Investment Promotion a nnounced in 2002.  He recommended that Mongolia 
continue its policies to promote FDI, and enc ouraged Mongolia to do its best to ensure the 
predictability and coherence of the laws and regulat ions for an investment-friendly environment.  The 
issue of land ownership in a transition economy was strongly related to investment.  Currently, 
foreign nationals or companies were not allowed to  own land in Mongolia.  The basic policy for land, WT/TPR/M/145 
Page 10  
 
the Land Law, was established in 2002 and the ne w law for private land ownership by Mongolian 
people was implemented in 2003, introducing the ri ght of land ownership.  He asked how Mongolia 
intended to proceed sequentially to release land ownership, including w ith regard to foreign nationals 
and companies.  In addition, with respect to trad e related issues, he considered that appropriate 
government procurement, the harmonization of domest ic standards to international standards, and 
promotion of the protection of intellectual property, particularly enforcement, were also important.  
He hoped that Mongolia would continue its efforts to improve these areas.  
38. On sectoral policies, the discussant was impre ssed by the increase of the share of service 
sectors in Mongolia's GDP from 37.9% in 1995 to 61.0 % in 2003.  He appreciated that Mongolia had 
made various GATS commitments upon accession and had proceeded with reform s in various service 
sectors, including energy, financial services, and telecommunications.  Tourism was also promising.  
Mongolia was very active in utilizing informati on and communication technology, as shown by the 
adoption of the Concept for the Development of  Information and Communications Technology of 
Mongolia to 2010, and the drafting of  several related laws, such as the Law on Information Security, 
General Law on Information Technology, Law on E-Signature, and Law on E-agreement.   
39. In contrast with service sectors, there was room for improvement in agriculture and 
manufacturing.  While 30% of exports were still agri culture-based, labour productivity in agriculture 
had been declining.  Restructuring of the industria l sector was still under way.  For the recovery and 
development of the industrial sector, government po licies were directed towards the implementation 
and establishment of free economic and trade z ones and industrial parks to promote small and 
medium-sized enterprises.  He asked what Mongolia's  difficulties were in realizing the recovery in 
agriculture and manufacturing. 
40. The discussant praised the work of the Mission of Mongolia in Geneva;  the mission covered 
the issues of the WTO, the United Nations, a number of special UN organizations, and disarmament, with a very limited number of staff.   In th e DDA negotiations, Mongolia's priority was on trade 
facilitation and it was constantly ex changing views with Members promo ting this issue.  In the trade 
facilitation negotiations, Mongolia beca me a co-sponsor of a proposal tabled by Japan.  He believed 
that Mongolia would take advantage and finally obta in good results through act ive participation in the 
on-going WTO negotiations.   
41. In conclusion, the discussant noted the frie ndship between Japan and Mongolia, and in 
particular their assistance to each other during sever e hardships in Mongolia in 1991 and in Japan in 
1995.  He wished Mongolia success in the WTO.  WT/TPR/M/145 
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IV. STATEMENTS BY MEMBERS 
42. Members thanked the Mongolian Government and the Secretariat for their reports.  They 
looked forward to receiving any outstanding re plies to their advance written questions.  
43. Many Members noted that their bilateral trade and investment ties with Mongolia had been 
strengthened over the recent period.  
44. Members recognized that the multilateral trading system had contributed greatly to 
Mongolia's economic transition.  They appreciated Mongolia's active role at the WTO, including its 
strong support for the Doha Development Agenda.     
45. The representative of Canada  stated that, since becoming a Member in 1997, Mongolia had 
proven to be an impressive addition to the WTO.  The country's openness and acceptance of a market 
economy had resulted in stable economic growth  and a welcoming economic environment.  
Mongolia's commitment to improving its financ ial sector and investment opportunities had 
encouraged both potential investors and trading partners to seriously consider the country as a prospective market.   
46. He welcomed Mongolia's objectives of maintain ing its economic growth while diversifying 
trade sectors and exports.  The market and policy reforms implemented since the shift to a market 
economy had had positive consequenc es, including the capacity to recover from various setbacks.  
Canada urged Mongolia to continue implementi ng structural and financial reforms to further 
invigorate domestic activity and investment.   
47. Canadian investment in Mongolia had increased s ubstantially over the past few years.  This 
could be attributed especially to the mining sector , where new laws and regulations had created an 
environment conducive to attracting foreign compan ies.  The representative commended Mongolia for 
its efforts in developing productive mines through bot h local and international participation, including 
the importation of capital equipment.  He also ac knowledged the important role of the mining sector 
in Mongolia's overall economic development. 
48. Mongolia's regulatory reforms in telecommunicati ons were encouraging;  however, he urged 
Mongolia to complement these reforms by committing to the pro-competitive regulatory principles of 
the WTO Reference Paper on basic telecommunicati ons, which was important for promoting a fair 
and competitive telecommunications market.  Legisla tive transparency was impor tant for a stable and 
healthy investment environment, and Canada enc ouraged Mongolia to improve transparency through 
consultations, as well as advance notice of laws pot entially affecting the business climate.  He 
commended Mongolia for binding all of  its tariffs and for maintaining a transparent, harmonized tariff 
schedule.  Similarly, Mongolia's customs practices were extremely transparent and streamlined, and 
provided an excellent example of what a developing  country could achieve in customs administration. 
49. The representative of Japan
 appreciated Mongolia's impressive progress of transition from a 
centrally planned economy to a market-based economy since 1991. He welcomed Mongolia's accession to the WTO in an early stage, as a transiti onal economy, in 1997;  it had liberalized its trade 
regime by reducing its tariffs, lessening impor t procedures, and making many commitments in 
services.  
50. Since 1991, Japan had remained the largest donor country to Mongolia.  Japan had 
contributed 60% of all development assistance  and had hosted seven conferences of countries 
providing aid to Mongolia.  He hoped that Mongolia w ould continue to promote the liberalization of 
its trade and economy and achie ve further development. WT/TPR/M/145 
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51. It was important for Mongolia's further developmen t to attract more foreign direct investment.  
In this regard, Mongolia had been taking some conc rete measures, such as the Investment Programme 
launched in 2001, and the Year of Investment Prom otion announced in 2002.  However, there seemed 
to be room for a more investment-friendly environm ent.  For example, concerning the implementation 
of laws and regulations, the lack of the cohe rence of interpretation and guidance within the 
Government harmed the predictability and transp arency necessary for companies to invest in 
Mongolia.   
52. Regarding Mongolia's participation in the WTO,  Japan welcomed Mongolia's attachment of 
high importance to the WTO.  Japan and Mongo lia had maintained good cooperation in trade 
facilitation negotiations.  Mongolia faced difficulti es as a landlocked developing country.  Japan 
hoped that Mongolia would continue to participat e actively in the WTO, and that Mongolia would 
soon table its initial offer in the service negotiations , reflecting the results of liberalization in many 
services areas.  In agri cultural negotiations, Japan supposed that  Mongolia would share its view that 
the coexistence of various types of agriculture s hould be sustained under the final results of the 
agriculture negotiations in the Doha Round, sin ce Mongolia was aiming to achieve greater self-
sufficiency in its agricultural policy. 
53. The representative of Hong Kong, China
 stated that Mongolia's efforts in liberalizing its trade 
regime since its accession to the WTO in 1997, and its macroeconomic and structural reforms in the 
past few years, had contributed to recent econom ic and trade growth.  He welcomed Mongolia's 
commitment to contribute to the successful implem entation of the Doha Development Agenda.  Trade 
liberalization could play a vital role in impr oving global living standards, fighting poverty, and 
contributing positively to the development of al l countries.  The greatest potential gains for 
development in the DDA negotiations would come from improvements in market access, and trade rules, including trade facilitation.  Developing Memb ers should also benefit from proper reflection of 
the development dimension in the various negot iating areas, including special and differential 
treatment and technical assistance.  In this regard , he appreciated Mongolia's continued need for 
technical assistance to fully implement its WTO commitments and to participate in the DDA 
negotiations. 
54. The representative commended Mongolia's reducti on of applied tariffs since its accession to 
the WTO.  The differences between Mongolia's bou nd rates (simple average of 18.4%, and maximum 
of 75%, in 2004) and applied rates (simple average of  5.0% in 2004) were substantial;  such a gap was 
not conducive to tariff predictability.  He encour aged Mongolia to participate actively in the NAMA 
negotiations with a view to bringing down its bound tariffs. 
55. On government procurement, he noted that M ongolia gave price preferences, 10% and 7.5% 
respectively, to domestic suppliers of goods and ser vices;  he encouraged Mongolia to move towards 
a more open government procurement regime and consider joining the WTO Agreement on 
Government Procurement in due course. 
56. The main standardization and metrology la ws in Mongolia were amended in 2003 to 
harmonize the activities of standardization and confor mity assessment with international approaches.  
However, currently, only 35% of Mongolian industria l standards were harmoni zed with international 
standards.  He encouraged Mongolia to further its alignment process;  as tariffs came down, the other 
nuisances like technical barriers would become more significant. 
57. Mongolia had taken liberalization and reform measures in services, notably the infrastructural 
sectors such as financial services and telecommunications.  Given the growing importance of services 
trade to Mongolia's economy, continued liberaliza tion of trade in services would be crucial for its 
further economic development.  He encouraged M ongolia to participate more actively in the ongoing 
services negotiations, and table its initial offer as s oon as possible.  Further improvement of services  WT/TPR/M/145 
 Page 13 
 
 
commitments, greater transparency, and enhanced predictability of its regime would contribute to 
Mongolia's capacity to attract FDI.  
58. The representative of the United States  stated that Mongolia had taken notable steps since 
1991, when it began its transition to a market-bas ed economy, and since 1997, when it modified its 
laws and practices to comply with its accessi on commitments.  Major economic reforms were 
implemented quickly, including a revision of laws to create a legal framework to support a market 
economy.  Prices had been deregulated and key sector s, such as agriculture and financial services, had 
been liberalized.  Many state-owned enterprises al so had been privatized so that today 80% of 
Mongolia's GDP was derived from the private sector.  He applauded Mongolia's intention to sustain 
privatization and its policy of requiring remaining st ate enterprises to employ international accounting 
standards.  He hoped that Mongolia would conti nue with reforms to secure an open trade and 
investment regime that could attract increasing FDI flows.  
59. Mongolia's exports to the United States we re given preferential access through the 
Generalized System of Preferences.  In 2004, th e United States and Mongolia had signed a Trade and 
Investment Framework Agreement.  The United St ates offered trade capacity building programmes 
and trade-related technical assistance through the U.S. Agency for International Development, and 
Mongolia was eligible to apply for assistan ce from the Millennium Challenge Account.  
60. At the WTO, the United States and Mongolia sh ared many common interests and concerns, 
including in the Doha negotiations and there was a positive working relationship between them on a 
variety of issues, including trade facilitation.  In  the context of this Review, he welcomed the 
opportunity to hear Mongolia's views on how specific outcomes in the Doha negotiations might 
benefit landlocked countries. 
61. The representative asked when Mongolia planned to extend national treatment to imports of 
spirits, beer, and other alcoholic beverages, whic h were treated differently for excise tax purposes 
than like domestic products.  Around 40% of Mongo lia's standards were re ported to be mandatory 
technical regulations.  He was surprised that Mongolia  did not appear to have made any notifications 
to the WTO under the Agreement on Technical Ba rriers to Trade about these regulations, and 
requested more information about Mongolia's curre nt and proposed standards, technical regulations, 
and conformity assessment procedures, in particul ar where such notices were published, and the 
process for submitting comments.  With respect to s ubsidies, he wondered wh en Mongolia planned to 
eliminate programmes that provided income tax holidays and tax relief for business entities with foreign investment that exported more than 50%  of production.  In its accession, Mongolia had 
committed itself to eliminating such programmes.   
62. Investors sought locations that offered the strongest possible protection of intellectual 
property.  In this context, Mongolia was to be commended for revising its patent and copyright laws 
with a view to complying with the WTO Agreement on TRIPS and for adopting the Law on Joining the World Intellectual Property Organization (WIP O) Copyright Treaty, and the WIPO Performers 
and Phonograms Treaty.  He requested further de tails on IPR enforcement-related provisions in 
Mongolia's laws and on the Government's efforts to enforce its IPR-related laws, in order to better 
evaluate Mongolia's technical assistance needs. 
63. The representative of Brazil
 commended Mongolia for its impressive efforts, since 1991, to 
move to a market-based economy.  Despite difficulti es, reforms were implemented speedily, including 
privatization of farms and state entities, price deregula tion, and financial sector liberalization, with the 
development of a framework to support market economy.   In this context, he congratulated Mongolia 
for the steady and increasing GDP growth registered in  the last years, particularly in 2004, when it 
reached 10.6%. WT/TPR/M/145 
Page 14  
 
64. Since its accession to the WTO in 1997, Mongol ia had substantially liberalized its trade 
regime, reducing tariff rates and eliminating impor t licensing requirements.  The relatively uniform 
tariff structure of Mongolia contributed to the si mplification of procedures, reduction of market 
distortions, and enhancement of transparency.   
65. Mongolia's current economic base was concentrat ed in mining and agriculture, which made it 
vulnerable to fluctuations in world commodity pr ices and weather conditions.  In this regard, he 
encouraged Mongolia to pursue its goals of in creasing and diversifying exports, improving the 
capacity to attract FDI, as well as promoting the industrial and service sectors.   
66. The representative of the European Communities
 congratulated Mongolia on its progress in 
the transition towards democracy and the creation of a market-economy.  Mongolia had tried to set up 
a transparent and open trade regime so as to increase growth and promote development.  It had kept a 
very low tariff and had not tried to hinder the m ovement of goods through trade barriers, and had 
introduced the "one-stop" service system intended to speed up customs procedures and thus reduce 
bureaucratic burden against companies;  it had also  launched an investment programme in 2001 to 
improve the environment in the private sector.  Mongolia had undertaken c onsiderable legislative 
reform to sustain its trade liberalization programme .  Mongolia had also taken measures to diversify 
exports to minimize the negative effects of fluctu ating world markets prices, particularly on countries 
that depended on very few products. 
67. Mongolia had profited from a clearly defined trade policy.  She encouraged Mongolia to get 
back fast to an operational level of work, partic ularly after the prolonged internal struggles in the 
formation of the new Government.  Political instability might make it difficult to benefit from trade 
and investment policies.   
68. Mongolia's efforts had been considerable in terms of strengthening policies in competition, 
government procurement, trade facilitation, an d opening up of markets.  The opening up of 
competition would promote development.  Mongolia c ould also refine its strategy for diversification 
of production;  this would help its textile industries to face the end of the quota system from 
1 January 2005.    
69. Technical assistance was indispensable for Mong olia to help it set up the basis for an open 
and transparent trade policy.  However, technical assistance could not replace trade, which had to be 
the main engine for development.  Mongolia, a landlocked developing country, was an example 
showing that an open trade regime, with a deregulated and reinforced internal market, would increase 
trade in goods and services and stimulate investme nt.  Mongolia had already started opening up its 
markets and strengthening rules;  this enabled th e country to promote economic development.  As a 
result of the reform of its customs regime, Mongolia 's measures were very close to what had been 
examined in the trade facilitation framework.   
70. She encouraged Mongolia to continue work  towards sustainable development.  All 
Mongolia's measures to prepare and strengthen its de velopment would surely produce an outcome if it 
continued to support the WTO system to promote the development of medium and smaller countries.   
71. The representative of the Republic of Korea  commended Mongolia for the progress in its 
transition to a market-based economy.  Efforts to  create a market-oriented legal and institutional 
framework had made such impressive progress possible.   He highly valued Mongolia's commitment to 
the multilateral trading system and its trade libera lization process since its accession to the WTO in 
January 1997.  He also welcomed Mongolia's cont ributions to the DDA negotiations.  He hoped that 
Mongolia would achieve sustainable economic growth  by keeping up its reform and liberalization 
policy.    WT/TPR/M/145 
 Page 15 
 
 
72. Different rates of excise taxes applied betw een certain goods produced in Mongolia and 
imports.  In particular, domestically produced b eer and home-made liquor distilled from milk were 
exempt from excise taxes while imports of these prod ucts were not tax-exempt, making the excise tax 
a barrier to imports of these products.  The re vision of the Excise Tax Law in December 2004 
broadened the gap in discrimination between domes tically produced beer and imported beer.  He 
urged Mongolia to correct this discrimination, wh ich was not consistent with the national treatment 
provision of the GATT.   
73. Concerning Mongolia's plan to further liberalized the telecommunications sector, he was 
interested in learning more about the privatization plan of Mongolia Telecom.   
74. The representative of Paraguay  was pleased that Mongolia had highlighted the significance of 
being a landlocked country and the effect this ha d on trade and development.  Despite Mongolia's 
considerable efforts, its trade figures were very  low.  This Review was important not only for 
Mongolia, so that it could draw conclusions and undertake the proper strategies to move towards 
development, but also for developed countries, so th at they could cooperate w ith Mongolia in terms of 
opening up of markets and trade facilitation. 
75. The representative of Turkey  stated that, as a landlocked, sparsely populated and small 
economy, Mongolia had made very comprehensive ec onomic and trade reforms both before and after 
joining the WTO.  Although it had faced economic shoc ks after the collapse of the Soviet Union, with 
which it maintained important econom ic relations, and despite its efforts to transform its economic 
system from a planned economy to a price-signal-based market mechanism, Mongolia had liberalized almost all of its former price, trade, and investme nt system during the last 15 years. Mongolia had 
also radically reduced its tariff average, to 5%, which was considered quite low.  Mongolia could 
further liberalize its tariff structure by closi ng the gap between its applied and bound tariffs. 
76. Turkey had concluded several agreements with Mongolia on double taxation, mutual 
protection and promotion of investment, and trans portation rights since its independence.  During the 
last decade, Turkey and Mongolia had also exchange d high level visits on the presidential, ministerial 
and deputy-ministerial levels to boost bilateral relations;  they we re cooperating in several areas, 
including customs, eximbank credits, special industr ial zones, transportation, and small and medium-
sized enterprises (SMEs).  
77. He commended Mongolia's commitment to  the multilateral trade system, continuous 
economic reforms, and trade libera lization.  The only serious policy question facing Mongolia was the 
issue of economic diversification.  
78. The representative of India
 stated that the trade and economic cooperation agreement signed 
between Mongolia and India in 1996 provided a general framework to further the bilateral 
commercial engagement.  Although bilateral trade ha d not been very significant there was a mutual 
realization of the potentials to be expanded.  In particular, in IT and pharmaceutical sectors, there 
were enormous possibilities for enhancing of bilatera l trade and cooperation.  India had been working 
closely with Mongolia in the field of human resour ces development through India's numerous training 
and scholarship programmes in the specific sector of IT.   
79. The representative of China  recognized and welcomed Mongolia's efforts to modernize and 
liberalize its trade regime and appreciated measur es it had taken to conquer its unfavourable natural 
environment and other difficulties as a landlocked country.       
80. The representative of Malaysia  was impressed with the speed of Mongolia's transition to a 
market driven economy within less than 15 years.  She welcomed Mongolia's strong economic growth 
reflecting a turnaround in agriculture and in the growing services sector.  She also commended 
Mongolia for the open nature of its economy, with its applied tariff of only 5% and relatively low WT/TPR/M/145 
Page 16  
 
bound rates of 18.4%.  She was of the view that th is gap was consistent w ith Mongolia's level of 
development and could provide flexibility for future policy adjustments.  Of particular significance in 
this open tariff structure was the zero duty on importe d equipment for priority sectors.  Mongolia had 
also resisted protection in agriculture, despite its difficulties.  Mongolia's achievements had been 
made in spite of the challenges of a small populatio n, a landlocked status, and a harsh climate;  in 
addition, GDP per capita remained below pre-tran sition levels despite the recent improvements.  
There was overdependence on agriculture and mining, while the manufacturing sector was under-represented.  Nevertheless, foreign direct in vestment since transition totalled more than 
US$1 billion.  In addition, export growth had impr oved, and further diversification in exports was 
being pursued.  There was also much scope for expansion in the services sector, particularly in 
tourism;  tourist arrivals had almost doubled in th e last few years and income from this sector had 
increased five-fold, to more than US$400 million.  She welcomed Mongolia's active participation in 
the WTO negotiations, noting particular interest in the agriculture and trade facilitation negotiations.    WT/TPR/M/145 
 Page 17 
 
 
V. REPLIES BY THE REPRESENTATIVE  OF MONGOLIA AND ADDITIONAL 
COMMENTS 
81. The representative of Mongolia  appreciated the contributi ons and comments made by 
Members.  Mongolia was working on the issue of di versification of its exports;  it had a small and 
vulnerable economy dependent on just two or three expor t items.  It was in Mongolia's best interest to 
promote direct investment and encourage va lue-added production in different areas.   
82. Mongolia remained, by and large, a supplier of the semi-processed or raw materials.  
Mongolia would also promote technology transfer and knowledge-based industries and services, but 
these issues were related to obtaining duty-free acce ss or more market access.  Mongolia was seeking 
opportunities to improve market access by concl uding free-trade agreements or through more 
favourable treatment for its goods and services in specially targeted mark ets where there were 
opportunities.   
83. The Government was committed to continuing to  work for transparency and was introducing 
programmes, especially in Action Programme for 2004.   The Government had created "programme to 
fight with bureaucracy, red tape and barriers" and wa s working for "one-stop" services.  It encouraged 
exchanges of views with the civil society, bus iness community, and NGOs.  For example, the 
Ministry of Trade and Industry had created a Po licy Council, which included representatives of the 
business community and other industries, and was seek ing the active involvement of the international 
investors. 
84. Mongolia acknowledged that there were issues to be resolved on national treatment and 
subsidies, for instance, those related to alcohol ( especially beer).  Only one company was benefiting 
from the protection, and the issue was being rai sed with relevant government agencies.   
85. Subsidies, especially in the context of forei gn investment incentives, were important tools, 
although Mongolia was now modifying the foreign investme nt law.  As it was considered to be one of 
the mechanisms to promote foreign investment, M ongolia had submitted a request  for extension to the 
Subsidies Committee, and looked forward to the resp onse.  Mongolia's GDP per capita was below the 
level of the Annex VII threshold;  the country was se eking an extension of the application of this kind 
of measure.   
86. With regard to trade liberalization, Mongolia had demonstrated its commitment and there was 
no risk of its liberalization measures being lifte d in Mongolia.  Mongolia highly appreciated the 
cooperation and support that had been extended by its partners and friends 
87. He appreciated the many written questions fro m Members, and reiterated that the TPR had 
been an essential mechanism wher eby any Member could test its policies and practices.  He believed 
that its analytical capacity and independence of  judgement should be further strengthened and 
developed so that Members could obtain an unbiased  picture of their policies and practices, on the 
basis of which they could make optimal choices of measures to make their policies more efficient. 
88. Mongolia had a long-standing tradition of protectin g the environment.  The first national park 
taken under the protection of the State was recognized to be in Mongolia.  Therefore, in leading their 
nomadic way of life the Mongolians endeavoured to  avoid causing adverse impacts on nature.  
Mongolia had passed a number of policy documents:  the Development Concept of Mongolia (1996), Mongolia's Sustainable Development Programme  for XXI century (1998), Good Governance for 
Human Security Programme (2000), Regional Deve lopment Concept (2002), and Economic Growth 
Support and Poverty Reduction Strate gy Paper (2003).  All these contained the concept of ensuring 
sustainable development.  Therefore, sustainable de velopment was a part and parcel of policy actions 
of Mongolia.   WT/TPR/M/145 
Page 18  
 
89. Mongolia had had a continuous deficit since 1997;  this deficit decreased for the first time in 
2004.  This trend of decreasing th e deficit would be maintained by a fair competition environment, 
encouraging competitiveness and efficiency in the domestic industries, improving the macroeconomic environment, expanding market access for Mongol ian products and services, ensuring better trade 
facilitation, attracting foreign and domestic investment, and diversifying exports.   
90. Mongolia's trade doubled in the last decade.  The Action Plan for 2004-2008 continued the 
liberal policy;  its objective was to sustain higher rates of stable, private-sector-led economic growth by providing support for access to new markets and by implementing a regional development concept.  
Mongolia intended to maintain the export-oriented nature of the policy.   
91. Mongolia's applied tariff was 5% and the bound tariff was 20% across the board.  The applied 
tariff rate had changed slightly over the years.  Regarding Members' claims of unpredictability and 
their request for the reduction of the gap between  the bound and applied tariffs, Mongolia needed to 
be predictable not only for Members but also for its own businesses.  It had bound tariff rates at 20% 
and observed this for eight years.  Businesses expected the bound rates to remain stable and had been 
tuned to such rates;  they needed time for consolid ation in the environment.  On national treatment of 
excise tax, as explained on the first day, these m easures had been put in place temporarily in support 
of an infant industry.  On customs procedures,  Mongolia recognized the problems of implementation 
and needed to further reduce excessive bureaucracy.   
92. Mongolia's government procurement was well-re gulated and transparent.  There was no 
discrimination between national and foreign bidders:  tenders were mo re frequently won by foreign 
bidders.  Standards, technical regulations, and SPS measures needed increased harmonization with 
international standards, fewer mandatory standards, and increased conformity assessments of 
voluntary requirements.  The concerns voiced  during the Review would be addressed.   
93. There were no export duties except on raw cashmere, iron, and copper wastes.  There were no 
export prohibitions except for drugs, narcotics, raw hides, and skins.  The Government planned to 
change the flawed export structure;  this would in clude export diversification, new product promotion, 
improve competitiveness, and improved market acc ess in export destinations.  The export tax on 
cashmere would be maintained within the time frame provided under the WTO Agreement;  it did not violate WTO rules.  Mongolia's priority sectors were mining, agri-industry, tourism, and IT;  these were subject to review.  Mongolia intended to est ablish free-trade zones, free economic zones, and 
industrial and technological parks.  
94. On investment, stability agreements had recently be en introduced into the laws with a view to 
increasing, inter alia , predictability.  Mongolia's FDI regime had been viewed as transparent in 
general.  Mongolia had acceded to all major interna tional instruments related to dispute settlement in 
the area of foreign investment and its insurance.   A full review of investment policy was being 
planned.  Land ownership had been introduced for the first time in more than 3,000 years of history;  
the process would start with Mongolian citizens.  Going further was complicated politically since the 
issue was related to Mongolia's Constitution.  Fo reigners could lease land on a long-term basis. 
95. The development of the agriculture was largel y defined by the Food and Agriculture policy 
document, which aimed to create favourable ec onomic and business conditions, to increase capacity 
and productivity, to ensure sustainable developmen t of livestock and crop production, and to produce 
safe and ecologically clean food products.  Self-suf ficiency of the sector was to be based on the 
rational use of natural, economic, financial, and human resources, intensifi cation of production, and 
improving efficiency, product quality, and comp etitiveness, as well as ensuring sustainable 
development of the food, livestoc k, and crop production sectors.   
96. Mining, a leading sector receiving FDI, accounted for about 10% of Mongolia's GDP;  mining 
exports included copper, gold, and fluorspar con centrates.  A policy document until 2010 had been  WT/TPR/M/145 
 Page 19 
 
 
adopted;  it encouraged value-added producti on and adopted stronger environment-related 
requirements.  Restructuring had started in the ener gy sector:  privatization of electricity and thermal 
transmission network (thermal power plants) was envisaged in the privatization programme.   
97. On manufacturing, the Government's developm ent goal was the promotion of SMEs.  A mid-
term SME development programme was being discussed  by the Government jointly with the private 
sector, with a view to creating better a lega l and economic environment for SMEs, ensuring 
technology transfer, promoting knowledge base d industries, and establishing industrial and 
technological parks.  
98. The service sector was becoming one of Mongolia 's important economic sectors.  In 2003, 
services (wholesale and retail trade, transportation,  communications, finance, energy, and water) 
accounted for 61% of the GDP.  Services accounted fo r about half of total employment.  Mongolia's 
GATS commitments included market access and nationa l treatment under Modes 1, 2 and 3;  it had 
made no commitments under Mode 4.  The market  for trade in services was fully open with no 
restrictions.  Mongolia had made no commitments af ter its accession to the WTO.  It intended to 
follow the negotiations carefully and identify its po sition in the negotiations with a view to making 
offers.  Mongolia's general position was that ne gotiations should take in to consideration the 
development dimensions for  developing countries and LDCs, and should be directed towards further 
opening the markets of developed countries to allow freer flow of persons.  The legal environment of 
Mongolia's services sector was being refined a nd measures were being taken to bring it into 
conformity with the WTO rules and regulations .  However, enforcement and implementation 
remained problematic;  problems included quality, sta ndards, inadequate technical regulation, lack of 
qualified personnel, and underdeveloped infrastructure. 
99. The telecommunications sector was under intensive liberalization:  some elements of natural 
monopoly remained, although these were not sacred a nd there would be further liberalization.  
Competition was relatively strong, but because the market was not big, there were not many players.  Binding the already liberalized measures had not been an issue so far.  The optimal balance between 
the regulatory approach and liberalization in the sector was yet to be found.  Once the level was 
determined the issue of binding might be considered.  
100. On trade facilitation, transit transportation was stipulated in Article V of the GATT;  
Mongolia was seeking the inclusion of national tr eatment provisions and the crystallization and 
development of the rule contained in the Article in to a full-fledged legal instrument.  Cooperation and 
assistance from more experienced count ries was welcomed by Mongolia. 
101. The representative of the United States
 appreciate the written responses to U.S. questions and 
looked forward to further answers in due course.  He was interested in receiving detailed information 
on some of the initiatives under way to improve transparency, including the creation of an action plan and the advisory council.  On servi ces, he noted with great interest th e update on Mongolia's efforts to 
formulate an initial services offer.  On subsidies,  he noted that the Mongolian Government was 
thinking of requesting an extension of certain pr ogrammes to the Subsidies Committee, even though 
the transition periods had lapsed and Mongolia was not  a named beneficiary in Annex VII.  It was his 
understanding that the elimination of these progr ammes was agreed during the accession process.   
102. The discussant
 stated that on the economic environment, high marks had been given for 
Mongolia's sincere effort in its transition to th e market economy;  the importance of trade for 
Mongolia had also been pointed out, as well as the country's dependence on a small number of export 
products, highlighting the need to diversify its expor t range.  One Member had called for some staged 
elimination of the external imbalance, while rais ing awareness of the cost for democratization.  
Members had also pointed out that there was still a monopoly over the sale of alcoholic beverages, as 
well as the importance of promoting competition policy in the future.   WT/TPR/M/145 
Page 20  
 
103. He believed that Members generally agreed that the Mongolian Gove rnment was steadily 
making progress in its transition towards a ma rket economy while taking due account of the 
circumstances in which the count ry was placed.  Now 15 years had passed since it started the 
transition, there remained the tasks of privatizi ng big state enterprises and introducing private land 
ownership.  He hoped that Mongo lia would take appropriate meas ures to further strengthen its 
economic potential.  In order for a country to funda mentally alter its economic system while forging 
its economic bedrock, 15 years might seem very short.   Japan had launched its reconstruction effort in 
1945, thereafter building its economic foundation;  it took 15 years for Japan to start its high 
economic growth in the 1960s. 
104. One of the major challenges facing Mongolia in  terms of macroeconomic policy was reducing 
the external debt, budget deficit, and trade deficit.   In practical terms, Mongolia was now balancing 
the deficits in these macroeconomic areas through bilateral and multilateral economic assistance.  
Thus the bilateral and multilateral assistance played  a significant role for Mongolia's economy.  While 
the IMF and others had voiced concern over Mongolia 's public external debt amounting to 94% of the 
GDP, the debt service ratio was only 6.7%, a relatively low figure among developing countries.  
Mongolia seemed to manage its external debt well.  This would be an important factor when securing 
funding in the future, as Mongolia would be faced w ith the need to rely on bilateral and multilateral 
borrowing in order to finance its construction of infrastructure.   
105. Mongolia was a landlocked country with a frag ile economy, and thus had become a member 
of the Informal Group of Landlocked Developing C ountries in the WTO.  The discussant believed it 
would contribute significantly to the development of Mongolia if there were some readily-applicable 
system through which Mongolia could overcome these handicaps.  However, this was more easily 
said than done, especially concerning a feasible concrete system to achieve that goal. 
106. Mongolia enjoyed a very high reputation at the World Bank and the IMF.  They held the 
Consultative Group on Mongolia regularly, and pl edges totalling over US$300 million had been 
flowing to Mongolia.  The Asian Development Ba nk, the World Bank and the IMF all maintained 
positive focus on Mongolia. 
107. In 1991, it had not been too difficult to co nvince the relevant offices in the Japanese 
Government to extend assistance to Mongolia, but th ere was still a need to broaden the circle of 
players in the international community offering a ssistance.  This led to the establishment of a 
Consultative Group on Mongolia, which was judged indi spensable.  Japan had played the role of a 
co-chair with the World Bank, until the Consultativ e Group reached cruising speed.  This initiative led 
to the World Bank committing itself seriously to the development of Mongolia;  at the same time 
countries in South-east Asia such as Malaysia, Si ngapore, and Thailand started to extend technical 
assistance to Mongolia, at the dawn of their econom ic assistance activities.  The involvement of the 
World Bank and the IMF was of extreme importa nce when building the framework for assisting 
developing countries. 
108. The discussant proposed that the information coming out of this TPR exercise be shared 
among the international organizations, playing an important role in the development of Mongolia, 
such as the World Bank, so that the information would facilitate assistance to Mongolia.  He hoped 
that, as trade was an important instrument for deve lopment, the World Bank would contribute to the 
process. 
109. On trade related policies, one Member had calle d for the abolition of the subsidies detrimental 
to trade;  others had called for further enga gement by Mongolia in the area of government 
procurement.  Some Members had called for ali gnment of Mongolia's standards to international 
standards.  The discussant highly appreciated the representative of Mongolia's statement that his 
country intended to improve on these aspects.  There were many positive opinions regarding 
Mongolia's effort in introducing legislation.  In pa rticular, regarding the TRIPS-related law in order to  WT/TPR/M/145 
 Page 21 
 
 
comply with Mongolia's obligations.  There had al so been calls for improved transparency in the 
administration of government organs responding to  these laws.  The representative of Mongolia had 
mentioned that the Government was making efforts in  the area of institutional transparency and that 
its action plan for the year 2004 called for "fight against bureaucratic system".  Mongolia had introduced "one-stop shops", and it had establishe d a policy consultative group with participation 
from the private sector.  This consultative group was apparently open not only to the domestic 
companies but also to companies investing in Mon golia.  These points were important in promoting 
foreign direct investment. 
110. Many Members had voiced their endorsement of  the binding of all tariff lines, and the 5% 
across-the-board applied tariff rate.  However, th ere had been calls for the reduction of the gap 
between the bound and the applied tariff rates, and views that the excise tax on imports acted as an 
impediment to importation and a price gap between imports and dom estically produced goods.  There 
had also been support for Mongolia's initiatives in the area of trade facilitation, such as the realization 
of a "one-stop service" at the Customs.  As Mon golia was fully aware that improvements in these 
areas would be of benefit to its trade, the discu ssant anticipated that good solutions would be found, 
although this might take some time.  
111. Along with trade, expansion of FDI was of pr ime importance for Mongolia.  In terms of the 
ratio to GDP, Mongolia already received far more FDI than Japan.  A Member had stated that 
Mongolia was already undertaking a number of initiativ es to attract investment, while others referred 
to the need to increase tran sparency in relation to legal restricti ons.  Mongolia had been successful in 
setting up special zones, such as free-trade zones, and free economic  zones, as well as obtaining 
investment from Canada in the mining sector.   
112. Mongolia's replies had clearly shown the Gove rnment's keenness to deepen its sectoral 
policies.  There was a comment that improvement was needed in terms of agriculture and mining 
industries.  There had been a decrease in productiv ity due to the inflow of the unemployed into the 
agriculture sector from other sectors.  As one of Mo ngolia's primary industries, there was a huge task 
ahead for agriculture.  Among these tasks were the n eed to add more value to its export items, and 
improvement in export conditions through trade negotiations.  While self-sufficiency in food was a 
national policy, neighbouring countries were becomi ng net importers of food.  Thus it remained 
important to export agricultural products.   
113. Some Members had called for improvements in the area of mining.  The challenge for 
Mongolia in this area was to add more value to the products in the domestic economy, as well as to 
export the ores after further processing work.  To conquer these challenges, M ongolia needed to solve 
the energy and transport issues;  much could be expected from the technological revolutions.  It was 
heartening that Canada's investment in this sect or had been successful.  The discussant hoped that 
Mongolia would successfully achieve its goals in deve lopment by way of the combination of its rich 
deposits of rare metals and new technologies.   
114. In telecommunications, while the reforms undertak en so far were valued, Members noted that 
there remained room for improvement, such as in  the area of monopoly supply of telecommunication 
services.  In textiles, while developing countries in general were experiencing difficult times after the expiration of the MFA, a large number of Russian buyers had apparently gone to China to purchase 
huge quantities of textile products.  Consequently, if Mongolia coul d position itself to provide a good 
supply of quality textile products, it would create some commercial opportuniti es as Russian buyers 
would not have to travel as far as China. 
115.
 The presence of H.E. Mr. Batbold at this TPR  exercise demonstrated that Mongolia placed 
high priority on the WTO.  The discussant was very  much aware of the importance Mongolia attached 
to trade facilitation as well as the important role tr ansit played in further developing their trade, a 
lifeline for Mongolia.   WT/TPR/M/145 
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116. The fact that Mongolia did not have any free-trade agreements was not decisive.  The 
negotiation for FTAs consumed a great deal of human resources.  Of prime importance in trade were the rules of the WTO based on th e MFN principle at its foundation.  If FTAs were the leaves or 
branches, then WTO rules would be the trunk and roots of a tree.  If the number of FTAs increased pointlessly, only the leaves and branches would grow, while the trunk and roots would die. 
117. The representative of Mongolia
 stated that its first TPR had been both pragmatic and 
constructive.  Since the beginning of its transition, Mongolia had been building the system of government with the learned assistance of the wo rld community.  What Mongolia had today was a 
product of team efforts with the donor community a nd other nations from around the globe.  All the 
congratulations expressed for Mongolia during the Re view should go back to those who congratulated 
it.  The active involvement of many Members in the Review and their questions and comments would 
all benefit Mongolia's trade policy.  He thanke d all Members, large and small, developed and 
developing whose geographically diverse and repr esentative participation in Mongolia's TPR had 
shown that though it was a small economy, it matt ered in the multilateral trading system.  The 
discussions during the Review would serve as guidan ce and a good source of reference for improving 
Mongolia's trading regime, which, in turn, would contribute to its development.  He thanked the 
Secretariat for the excellent report and skilful arrangement of the TPR.  He also thanked the 
discussant for an outstanding presentation, and two Chairpersons.  
118. The discussant
 expressed his personal pleasure in "meeti ng Mongolia for the third time".  He 
had first encountered Mongolia during 1991 to 1993 wh en Mongolia underwent an historic change;  
his second experience was from 1993 through 1995, as director of Grant-Aid Division assisting 
Mongolia with all his energy.  He was pleased to cel ebrate the great success of the TPR for Mongolia.   
119. The chairperson  stated that, on the subject of the appraisal of the operation of the Trade 
Policy Review Mechanism by the TPRB, he intended  to have the Ministerial Meeting in Hong Kong, 
China take note of this appraisal.  It was his inte ntion to distribute shortly a non-paper, which would 
be a list of a non-restrictive and non-exhaustive issu es that Members might wish to consider.  Then, 
he would convene a series of informal consultations  so that Members could discuss how to improve 
the operation of the mechanism.  WT/TPR/M/145 
 Page 23 
 
 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
120. This first Trade Policy Review of Mongolia has given us a better unders tanding of its trade 
and related policies, and of the challenges it faces.  The preparation of an excellent Report by Mongolia provided a context for domestic exchange  and reflection, and the comprehensive Report by 
the Secretariat provided a valuable tool both for further domestic reflection and for transparency 
within the WTO.  Our dialogue has been stimulated  by the full and open enga gement of the high-level 
Mongolia delegation led by H.E. Mr. Sukhbaatar Bat bold, Minister for Industry and Trade, as well as 
by our discussant's insightful comments and ma ny thoughtful interventions by Members. 
121. Members commended Mongolia for the very significant progress it has made in its transition 
from a centrally planned to a market-based economy;  this has led to significant growth, especially 
since 2002, with a real turnaround in agriculture a nd a buoyant services sector.  Members also noted 
that Mongolia's still narrow production base makes it vulnerable to external shocks;  they urged 
Mongolia to continue its market-oriented reform pro cess, such as continued liberalization of trade in 
services, with a view to enhancing competition.   
122. Members welcomed Mongolia's active particip ation in the multilateral trading system, 
including its support for the Doha Development Age nda, particularly in respect of agriculture and 
trade facilitation;  the latter might address difficulti es associated with Mongolia's landlocked status.  
Members expressed their appreciation of the steps taken by Mongolia to liberalize its trade and 
investment regime;  currently most imports enter Mongolia either duty-free or subject to a uniform 
tariff of 5%.  Many Members urged Mongolia to  narrow the gap between applied and bound MFN 
tariff rates, to increase predictability, while others be lieve this gap to be c onsistent with Mongolia's 
current level of development.  Members encourag ed Mongolia to eliminate its export duties, which 
might be inducing smuggling.  Members urged Mongo lia to extend national treatment to imports of 
some items subject to excise tax, and to elim inate tax incentives based on export performance for 
business entities with foreign investment.   
123. Members also expressed their appreciation of Mongolia's measures to privatize its state-
owned enterprises. Some Members encouraged Mongolia to employ a more open government 
procurement regime.  They encouraged Mongolia  to further align its standards and technical 
regulations with international norms;  some Memb ers queried the transparency of its technical 
regulations.  Steps to strengthen intellectual prope rty rules and their enforcement were welcomed.  
Members enquired about factors discouraging foreign di rect investment (FDI) into Mongolia;  in their 
view, further action to assure the predictability and transparency of the trade and investment regimes 
would create a more investment-friendly environment. 
124. On sectoral issues, Members welcomed reform s in agriculture, mining, and services, in 
particular in financial services and telecommunicati ons.  They believed that reform in these sectors 
should continue with a view to attracting more FDI. 
125. Members appreciated the oral and written r esponses to their questions provided by the 
Mongolian delegation, and look forward to receiving fu rther written responses at the earliest possible 
date. 
126. This successfully concludes our first Review of Mongolia.  Members have shown a keen 
interest in Mongolia's trade and related policies and its participation in the WTO.  In this context, 
I would encourage Mongolia to continue its suppor t for the multilateral trading system.  I also hope 
that Mongolia will take to heart Members' concerns, a nd that it will continue with its reform process.  
At the same time, I invite Members to assist Mongo lia by providing adequate technical assistance, 
including in trade capacity building, and by furthe r opening their markets to Mongolia's exports.  
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