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MongoliaForeign Assistance, Investment, and Joint Ventures
Foreign assistance and investment in Mongolia were in the
form of credits, gratis assistance, turnkey projects, and joint
ventures. Most foreign investment and assistance came from the
Soviet Union, but precise information was lacking or was hard to
quantify. Foreign observers have estimated Soviet assistance (in
constant 1967 United States dollars) to Mongolia from 1955 to
1983 to total US$7 billion in aid agreements, of which US$5.5
billion was disbursed, US$1.9 billion was repaid, nearly US$400
million represented interest payments, and US$1.5 billion of
loans still were outstanding. Estimates included a credit
agreement of US$225 million for the period 1947-56, and
irregular, minor assistance agreements of US$61 million in 1957,
US$25 million in 1964, US$17 million in 1969, and US$19 million
in 1974. Major assistance agreements coincided with Mongolia's
five-year plans: US$500 million in 1961 for the Third Plan,
US$550 million in 1965 for the Fourth Plan, US$633 million in
1970 for the Fifth Plan, US$1.6 billion in 1976 for the Sixth
Five-Year Plan (1976-80), and US$3.4 billion in 1980 for the
Seventh Plan. Another Western source estimated that 11 percent of
the Mongolian GNP during the 1976-79 period came from the Soviet
Union. Assistance from capitalist countries was negligible; Japan
granted Mongolia a 5-billion yen loan to finance the building of
a cashmere plant which began operating in 1981.
A Soviet source detailing Soviet credit and gratis assistance
to Mongolia noted that 17 percent of the Mongolian budget from
1924 to 1940 came from Soviet loans, which accounted for 90
percent of Mongolia's foreign credit. Soviet credits to Mongolia
totaled 450 million rubles from 1961 to 1965, 470 million rubles
from 1966 to 1970, 550 million rubles from 1971 to 1975, and
about 1.1 billion rubles from 1976 to 1980. Most of these loans
were granted at a concessionary rate of 2 percent annually;
deferments of repayments, during which time interest was not
charged, were obtainable if necessary. Soviet credits represented
a large proportion of Mongolian capital investments: 32.2 percent
from 1958 to 1960, 47 percent from 1961 to 1965, and 59 percent
from 1976 to 1979. Credit assistance went to reimburse Soviet and
Mongolian organizations involved in construction, installation,
and technical assistance in agriculture, industry, construction,
transportation, communications, housing, and cultural projects as
well as to finance Mongolia's trade with the Soviet Union. Soviet
gratis assistance to Mongolia was listed as 77.5 million rubles
from 1921 to 1940, as 50 million rubles from 1966 to 1975, and as
40 million rubles from 1976 to 1980.
Turnkey projects, financed by loans from the Soviet Union and
other Comecon nations, were a major form of assistance in the
1980s. The Soviet Union was the leader in providing Mongolia with
turnkey projects; it constructed or modernized 90 economic
facilities from 1961 to 1965, 52 from 1966 to 1970, 150 from 1971
to 1975, and 240 from 1976 to 1980. From 1971 to 1975, turnkey
projects represented 44.9 percent of Soviet credits to Mongolia.
By 1981 facilities built by the Soviet Union contributed more
than half of Mongolia's total industrial output: 90 percent of
thermal and electric power generation; 80 percent of coal
production; 70 percent of confectionery and bakery products; and
100 percent of woolen cloth, felt, formula food, copper and
molybdenum concentrate, and fluorite output.
Examples of turnkey projects constructed after the 1960s
included a woodworking combine, a glue factory, and two
distilleries built by Poland; a clothing mill and flour mill
built by Hungary; a tannery and a cement works built by
Czechoslovakia; a furniture and a cardboard combine built by
Romania; a meat combine built by the German Democratic Republic
(East Germany); a sheepskin coat factory and the Sharin Gol state
farm's fruit and vegetable processing factories built by
Bulgaria; and a house-building combine and spinning mill built by
the Soviet Union. Turnkey projects often were part of larger
joint Soviet-Mongolian development projects, such as those at
Baga Nuur, Choybalsan, Darhan, and Erdenet (see
table 8,
Appendix).
Since 1924 joint-stock companies and joint ventures between
Mongolia and the Soviet Union as well as other socialist
countries have been a major means of securing foreign investment,
of training Mongolian personnel, and of developing the Mongolian
economy. Although many joint-stock companies eventually were
handed over to sole Mongolian ownership by the Soviets, joint
ventures in operation in the late 1980s also enabled the Soviet
Union to penetrate, and to exercise control over, important
sectors of the Mongolian economy, especially in the early days of
the republic. Mongolbank, Mongoltrans (Mongolian Transportation),
Stormong, the Ulaanbaatar Railroad, and the Erdenet Mining and
Concetrating Combine are examples of joint ventures of strategic
economic value to the Soviet Union. All partners in a joint
venture typically have equal or nearly equal shares; part of the
profits are allocated to development, reserve, and special funds;
the balance is shared equally by the partners. Directors of joint
enterprises with the Soviet Union typically are Soviets, and
their first deputy directors are Mongolians. Beginning in the
1970s, many East European countries formed joint ventures with
Mongolia.
Mongolia provided a very modest amount of foreign aid. During
World War II, Mongolia gave the Soviet Union 35,000 horses, 2.5
million tugriks, and 300 kilograms in gold, and it financed an
armored column of 53 tanks and the Mongolian Herdsman aircraft
squadron. According to a Soviet source, Ulaanbaatar also supplied
the Democratic People's Republic of Korea (North Korea) and
Vietnam Democratic Republic of (North Vietnam) with financial
assistance during their "wars of liberation." In the 1980s,
recipients of Mongolian aid included Afghanistan, which received
two fully equipped ger; Cambodia, which received 77 tons
of unspecified aid; Laos, which received a sheep-breeding station
and a 200-bed hospital; and Vietnam, which received canned
foodstuffs, school equipment, and 100 million meters of cloth. In
1988 the Soviet Union accepted 1.9 million tugriks and 300,000
tons of canned meat from Mongolia for the Armenian earthquake
relief fund.
Data as of June 1989
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