and 6 billion Tugriks under minor privatization. This program was accelerated and proceeded quite rapidly. The government privatized practically all small enterprises and more than 400 large scale industrial companies. Also, about 90 percent of the entities of the trade and service sectors (shops, hotels, etc.) were privatized. In the agricultural sector, the privatization process is continuing more rapidly. Almost all livestock (about 25 million) is under private ownership whether by herdsmen, family farmers, or privatized agricultural enterprises. The method of privatization is not by sales but by a transfer scheme with use of vouchers. The vouchers were distributed in summer 1991 to each citizen (of any age). There are two kinds of vouchers: "pink" vouchers for small-unit privatization and "blue" vouchers for large enterprises. Each citizen is given three pink and one blue vouchers valued at 1000 (each) Tugriks and 7000 Tugriks respectively. The former is sellable while the latter is not. The blue vouchers are to be used to bid for equity shares in large enterprises; equity shares are then to become tradable at the stock exchange which was newly established in February 1992. The private sector is playing an increasingly important role in Mongolia's economy. In 1992 the private sector produced approximately 43 percent of industry output, 99 percent of agriculture and 62 percent of overall GDP.

## 2 -5 Liberalization of Foreign Trade

## 2 -5-1 Foreign Trade Reform

Under the central planning system, Mongolia's export and import trade were handled, predominantly through barter arrangements with COMECON countries, by state-owned foreign trading corporations. A new law on customs duties went into effect in March 1991. The government eliminated export taxes and introduced a uniform import tariff of 15 percent. By the end of May 1993, all quantitative export and import controls were eliminated, the scope of import licensing reduced to cover only four categories of goods (drugs and narcotics, firearms and military equipment, explosives, and chemicals), and export registration was abolished. In addition, the private sector was permitted to import goods for internal sale or export. Virtually all areas of economic activity (except for the production of military equipment) were opened to local and overseas private sector participation.

## 2 -5-2 Foreign Exchange Reform

In the past, official exchange rates between the Tugriks and the “transferable rubles” for trade with the COMECON area existed. Trade with convertible currency countries was based on the rate between Tugriks and U.S. dollars. For each, a differentiation was made between the “commercial rate” and “noncommercial rate.” In March 1992, the commercial and noncommercial rates for the dollar have become unified (40 Tugriks to a dollar). The Tugriks was further devalued to 150 Tugriks = 1 dollar in January 1993. Both the parallel and official rates were unified under a floating rate regime in July 1993, and at present the rate is approximately 400 Tugriks = 1 dollar.

## 2 -6 Promotion of Foreign Direct Investment

Although the government has stated that foreign investment is a priority, the 1990 Foreign Investment Law has not been effective. Difficulties include the lack of investment