Two yurts in the steppe near Nalaikh, Mongolia

Mongolia A country with huge potential and challenging conditions

With only two inhabitants per square kilometre, Mongolia is the most sparsely populated nation in the world. More than four times the size of Germany, this Central Asian country has a population of just 3.4 million. Germany is one of Mongolia’s most important development partners.

Sushbaatar Square in Ulan Bator, Mongolia — Straight to

The country has successfully completed the transition from a communist people’s republic to a parliamentary democracy and from a centrally planned economy to a market economy. The mainstays of Mongolia’s economy are livestock farming and the extraction of the country’s rich mineral deposits. It is therefore heavily dependent on international commodity prices, and on China as its main consumer country. Russia’s war of aggression against Ukraine has led to trade restrictions and a steep rise in fuel and food prices. There have been positive developments and stable growth rates since 2022, however, due to the increasing demand for raw materials.

Nevertheless, Mongolia’s development remains hindered by weak infrastructure in the lowlands, a lack of skilled workers and a legal system plagued by uncertainty. There is still a lot of ground to make up in rural areas in particular. The nomadic population especially are threatened with the loss of their livelihoods as a result of increasing environmental degradation caused by mining and overgrazing. The steppes, deserts and high mountain areas of Mongolia are also very sensitive to climatic change. Temperatures have already risen sharply compared with the previous long-term average, which is causing permafrost thaw and increasing the degeneration of areas into steppe.

Mongolia is currently ranked 96th out of the 193 countries assessed in the United Nations Human Development Index (HDI).

German development cooperation with Mongolia

Development cooperation between Germany and Mongolia began in 1991/92, after the country underwent a political and economic transition. In spring 2020, as part of the BMZ 2030 reform, the decision was taken to end bilateral cooperation in the medium term. However, in light of the changed global political situation and Mongolia’s increased challenges, cooperation was resumed in autumn 2022. Alongside the USA, Japan and South Korea, Germany is one of Mongolia’s key development partners. Mongolia refers to these countries as its “third neighbours”.

The strategic partnership agreed in February 2024 on the occasion of Federal President Steinmeier’s visit underscored the importance of cooperation in the areas of policymaking and security, business and trade, education, science and culture, and environmental and climate protection.

Development cooperation focuses on the following core areas:

Conserving nature and natural resources, protecting life on Earth
Areas of intervention: biodiversity, forests
Sustainable economic development, training and employment
Areas of intervention: technical and vocational education and training, private sector and financial sector development
Climate and energy, just transition
Area of intervention: renewable energy and energy efficiency

For the period 2022 to 2023, Germany made up to 78 million euros available for Mongolia. Following the decision in autumn 2022 to continue development cooperation, the Federal Ministry for Economic Cooperation and Development (BMZ) made an initial commitment of 24 million euros for bilateral development cooperation with Mongolia. In the government negotiations in September 2023, an additional 25 million euros were provided (15 million euros for Technical Cooperation and 10 million euros for Financial Cooperation).

Debt conversion of up to 29 million euros was also agreed. Under this “debt-to-health” swap, Mongolia undertakes to support the work of the Global Fund to Fight AIDS, Tuberculosis and Malaria in the country, and in return receives debt relief from Germany for at least the equivalent amount.

Mongolia is a country with rich biodiversity. However, its valuable natural resources are under threat through excessive use and climate change. Germany is supporting Mongolia in its efforts to manage and finance its nature reserves and to improve the living conditions for people inhabiting the buffer zones around these protected areas.

Training workshop for future welders at the Hasu Megawatt training centre, Ulan Bator, Mongolia

The Mongolian economy is highly dependent on commodity exports. The government is aware of the risks of this dependence and is striving to increase the proportion of raw materials that are processed locally and to widen the basis of the Mongolian economy. Against this backdrop, the BMZ is engaging in measures to promote modern vocational training and support small and medium-sized enterprises in Mongolia.

Solar plant and coal-fired power station in Ulan Bator, Mongolia

Most of Mongolia’s energy has so far come from old, inefficient, emissions-intensive coal-fired power stations. These are unable to meet the growing demand, which leaves Mongolia dependent on power imports. Germany is therefore supporting the use of more renewable energy and measures to enhance energy efficiency.