**MONGOLIA'S INFORMAL SECTOR** -

**of** Informality

**Appendix A: Micro-studies of**

**30**

consumers; the steady stream of customers, and relatively warmer working conditions, make the operation of a counter more profitable and more comfortable than operating a kiosk.

78. With the greater profits come greater fees. Indoor markets charge an average of 35,000 togrogs per month per counter space, sometimes at varying rates depending on the location within the market. Like kiosks, counters are charged a flat income tax that does not vary with the level of activity, according to the _Informal Sector Income Tax Law._ All of the regulations outlined in the section on kiosks refer to counters as well.

79. Like kiosks, counters tend to be family-oriented businesses. Eighty to ninety percent of the counters at a typical indoor market are owned by individuals, and only ten to twenty percent by economic entities. Typical of informal distribution activities, counters are dominated by women, who occupy roughly three fourths of the 2,500 counters in Ulaanbaatar.

# **The Nucleus of Ulaanbaatar's Informal** Sector: **The** "Black" **Market**

80. The name of the "Black" Market reflects its history more than its present. Although this market undoubtedly is a convenient place for thieves to fence stolen goods, and is notorious for pickpockets, the vast majority of the economic activity taking place in this single hectare of fenced land that the Mongolian comedian Batsuh had in mind when questioned about the definition of a market economy, is legal. Although it existed as a trading place prior to the abandonment of communism, and may not have been illegal even then, it was certainly "less free" as one of the managers put it. (The management prefers the name "central market" but most Mongolians still refer to it as the "black market.")

|81.<br>Estimates of the popularity|||
|---|---|---|
|of the "black" market are staggering.<br>According to estimates provided by<br>the management, by duureg officials,<br>and by the Ulaanbaatar City|_Teacher:_<br>_Pupil:_|<br>_What is a market economy?_<br>_I know this one! It's when a lot ofpeople crowd into a_<br>_fenced area, and push each other around, buying and_<br>_selling stuff_|
|Administration, between 60,000 and<br>100,000 people (10-17% of||Batsuh, Mongolian Comedian & Social Commentator|
|<br>Ulaanbaatar's population) visit the<br>market on its busy days, Saturday and|**Box**9||
|<br>Sunday, half as many on weekdays.<sup>8 0</sup>|||

82. The "black" market was privatized in 1995, having been sold to a private trade company. It currently employees 120 people, excluding the thousands of vendors who come to the black market to sell their goods. The - form of organization of the black market is similar to that of indoor markets formal ownership, and informal occupation, of premises. (See Box 5.) As a privately operated entity, this market makes money by charging vendors, and by charging an entrance fee, although the former is more easily enforceable and provides more revenue than the latter. Importers who wish to park their containers in the area pay 9,000 togrogs per day. Trucks pay 6,000 togrogs per day. Individual vendors pay varying fees, from 300 togrogs to 3,500 togrogs per day, depending on the volume of business they do, although the management has difficulty, understandably, getting honest participation from vendors. The fees for the counter spaces at the market were originally established (recommended) by the Ulaanbaatar Price Consensus Commission. Soon after privatization, a secondary market for their counter spaces developed, demonstrating the popularity of this particular hectare of land. The counter spaces were rented for 200 togrogs per day, at the time. Some renters would stay the night and resell the spaces the next day for ten times as much.<sup>8</sup> ' 83. The volume of economic activity at the market is unknown, but information provided by the management (and corroborated by our own counts) provide some indicators. On a given day at the "black" market one can expect to find about 150 containers of imported goods serving as their own store-fronts, and about 800 other