receivers are being installed.

## 3 -2 Problems Attached to the Reform Programs

The economic collapse in Mongolia is severe. There are two primary reasons for collapse: one is the abrupt deterioration in economic relations with the COMECON countries, especially the former Soviet Union. This includes: the end of Soviet financing, a deterioration in the terms of trade between the two countries, a collapse in the volume of trade and a shortage of spare parts. The another reason is the hardships encountered as an economy moves from a centrally planned system to a market system. Price liberalization and privatization are typical examples. On the other hand, a social crisis has become clear. The main point is how long Mongolia can bear economic difficulties without losing morale.

Decline of production activities combined with a population increase has resulted in high unemployees. According to the government statistics, 60 thousands are registered as unemployment as of July 1993. The number of unofficially unemployed is much higher. The unemployment rate is estimated to be around 15 percent. Many youths are desperately drinking alcohol in the daytime, depressed over a hopeless future. Job creation is essential not only for economic recovery, but also for moral protection. The devastation of education is an important problem. Mongolian education level was considerably high, and has led to a literacy rate of over 90 percent. But now students and teachers tend to leave their schools because of high expenses and low salaries respectively.

In rural areas, problems are more serious. Owing to the privatization of livestock, one herdsman had to raise various kinds of livestock and suffered from a labor shortage. As a result, children are used as labor and cannot go to school. The private sector has developed rapidly in the past three years, with the creation of new private economic entities in addition to the privatized enterprises. As of June 1993, the number of functional private entities is estimated at around 9000. But in over 90 percent of privatized enterprises, the presidents are the former factory managers. Their management is not competitive in a market economy; mainly because equipment and technologies are outdated and productivity is very low. But the basic reason is a lack of entrepreneurship. After privatization, management efficiency has not improved. The real target of privatization has not been achieved yet.

A market economy is alien to the Mongolian people. Mongolia had no history of private business and entrepreneurship. The country was the second oldest Communist country. The adjustment period is likely to become prolonged and painful as the society and its constituents must learn the new rules of a market system. Moreover, the following development problems should be pointed out:

(1) Mongolia is a landlocked country, with high transportation costs for foreign trade. Competitive forces in export prices are weak;

(2) Population size is very small (approximately, 2.2 million) and the level of income is quite low. The domestic market and demand are extremely small. The size of the country is an economic plus in one respect and a minus in another. Mongolia has a lot of mineral resources, considering its small population. This means that its small population size has the possibility of relatively easy economic development. A very significant handicap, on the other hand, is Mongolia's vast territory. Its infrastructure is now extremely poor, and though urgently