quently, economic development in Mongolia was implemented by the assistance of COMECON countries. Mongolia's role in the COMECON system was virtually that of supplier of mineral resources and stock farm products. Soviet technical and financial assistance facilitated Mongolia's large-scale industrial development, such as the Erdenet copper mine. Sectoral share of industry in GDP increased from 26.3 percent in 1970 to 33.0 percent in 1993 (see Appendix 2). Although a sustained industrialization was certainly developed, its industrial structure turned in an undesirable direction. Mongolia's commodity pattern of trade is similar to that of other low-income economies: exporting land-intensive primary products (wool, cashmere, meat, skins, and copper, molybdenum) and importing manufactured (petroleum, foodstuffs) products. Mongolia imported almost all products, from gasoline, machinery, spare parts, to foodstuffs and daily consumer products, from COMECON countries, especially from the former Soviet Union. On the other hand, Mongolia exported primary industry products, such as wool, cashmere, meat, hides, and copper, molybdenum.

## 1-2 Reasons for Transition to a Market Economy 1-2-1 Mongolia under the COMECON System

The transition of Mongolia’s international trade is shown in Tables 2-IV-2 and 2-IV-3. Mongolia’s trade was overwhelmingly with the COMECON countries (96.1 percent of exports, 99.0 percent of imports in 1985), particularly with the former USSR (around 80 percent of exports, 85 percent of imports throughout 1980s). Mongolia became a member of COMECON in 1962 and had trade relationships with the Eastern European countries. Former Czechoslovakia was the second largest trade partner, with a share of only 4 percent of exports and 3 percent of imports. The degree of dependency on the former Soviet Union was absurdly high: the corresponding figures are 40-80 percent of exports and 50-75 percent for the Eastern European countries. Mongolia was dependent heavily on the former Soviet Union in comparison with the Eastern European countries. This pattern of excessive dependence on the former Soviet Union explains the collapse of international trade activities beginning January 1991 when COMECON switched to new trading arrangements based on world prices and hard currency settlements. Eastern European countries were heavily dependent on the former Soviet Union as a supplier of natural resources, especially oil. On the other hand, the former Soviet Union was the largest market for machinery, equipment and light industrial products exported from EEc. That is, the former Soviet Union supported EEc’s state-owned companies, which did not have competitive positions in the world market. Mongolia’s commodity-pattern of trade is similar to that of other low-income economies: exporting land-intensive primary products --- minerals (mainly copper and molybdenum) animal-based raw materials (mainly wool, meat and hides) --- and importing manufactured products --- fuel, machinery, equipment, spareparts and manufactured consumer goods --- with COMECON countries, especially former Soviet Union. Mongolia’s economic system had relied entirely on the former Soviet Union. This is why Mongolia is the 16th republic in the former Soviet Union. This foreign trade structure, however, came under great strain in 1990 and finally collapsed in 1991.