Mongolia Privatization Push: Selling State Owned Enterprises to Close a Growing Fiscal Gap

Mongolia is dusting off a familiar but fraught playbook: selling pieces of its state-owned giants. Past attempts have collapsed under nationalist pushback, shifting laws, and a political culture that treats state firms as both economic engines and patronage machines. This time, Ulaanbaatar insists urgency will force its hand.

The government plans to shrink its roster of state-owned enterprises (SOEs) from 109 to 87, starting with 20 slated for public offerings over the next three years. Shares of between 10% and 66% would be floated on domestic and foreign exchanges. The preliminary list includes copper giant Erdenet, coal powerhouse Erdenes Tavan Tolgoi, national airline MIAT and several energy companies.

Officials hope the sales will raise MNT 3.74 trillion ($1.04 billion) while capping SOE executive pay from as much as MNT 30 million ($8,380) a month to MNT 5 million ($1,395).

The financial case is clear: SOEs posted MNT 26 trillion ($7.27 billion) in revenue in 2024, up 10.1%, with net profit rising 14.9% to MNT 5.7 trillion ($1.59 billion). Yet profits are concentrated—Erdenes Tavan Tolgoi alone generated MNT 4.5 trillion($1.26 billion)—and losses like Tavan Tolgoi Fuel’s MNT 227.7 billion ($63.6 million) still drain the system.

The pitch goes beyond budget relief. International lenders such as the World Bank have long flagged Mongolia’s SOEs for “quasi-fiscal operations” that bleed public funds and crowd out private enterprise. IPOs could, in theory, force cleaner accounts, corporate governance, and less political meddling.

But politics will be brutal. Mongolian law requires the state to hold at least 51% of mineral deposits explored with public money, making it improbable that “strategic” assets like Erdenes Tavan Tolgoi will see controlling stakes sold. Past sagas—like the protracted legal fight over Erdenet’s 49% stake, now settled in the state’s favor—still weigh on investor trust.

Public sentiment is cool: a 2024 poll found only 6.4% of Mongolians support fully private ownership of strategic mines, while nearly two-thirds favor state-private mixed ownership models.

The government is treading carefully. A deputy cabinet chief now serves as special envoy overseeing Erdenes Tavan Tolgoi, underscoring continued political grip. Ministers have until August 15 to submit final privatization plans to cabinet, with changes to state-ownership and corporate laws to follow.

Still, circumstances have shifted. Falling coal export earnings are eroding budget revenue, forcing austerity measures just as rising global interest rates make foreign borrowing costlier. Mongolia’s dependence on commodities magnifies the pain, leaving its finances exposed to further shocks. A digitally engaged public is increasingly demanding transparency. And investors are more vocal about governance standards before committing funds.

The current challenge is to scale the privatization without reverting to old habits. Partial sales will only succeed if the state resists interfering once shares are sold and allows genuine market discipline to take root.

If Ulaanbaatar follows through, it could draw fresh capital, diversify beyond mining, and strengthen institutions that have long been subordinated to political expediency. If it retreats, privatization will again be remembered as a political performance—an illusion of reform masking business as usual.