Will Mongolia Privatize Its Leading State Enterprises?

Mongolia’s state sector is again in motion, though the logic behind the latest reshuffle is murkier than the rhetoric surrounding it. Nyam-Osoryn Uchral, now both party leader and Parliament Speaker, promises a friendlier climate for private property and a slimmer state.

The prime minister who led the campaign against conglomerates, Luvsannamsrain Oyun-Erdene, exited in June. His successor, Gombojavyn Zandanshatar, preaches austerity and vows to rationalize state enterprises.

Prime Minister Gombojavyn Zandanshatar at the state-owned Erdenes Tavan Tolgoi coal mine.

Yet consolidation and cost-cutting collide with a system still run as a political franchise.

The grand plan to fold all SOEs into two holding companies remains half-finished, with Erchist Mongol absorbing most energy entities while the rest sit in a fog of recycled mandates.

What has not changed is the arithmetic. The SOE universe has swollen into a parallel fiscal state. Revenues have jumped from ₮14 trillion in 2022 to ₮40 trillion in 2024, rivaling the national budget.

Debt stands at ₮22.8 trillion ($6.4 billion). Four-fifths of all earnings and cashflow come from a handful of mining companies tied to China’s commodity demand. The rest—roads, rail, power—lose money or survive on subsidies.

Financials of State Owned Enterprises from 2021-2024. Source: https://time.mn/n/131547

Eleven of 28 energy firms remain in the red despite tariff hikes, their pricing power capped by ministers wary of public backlash.

Politicians rarely shrink systems that feed their patronage networks, and Mongolia’s elite is no exception. The new leadership talks of discipline and transparency, but appointments still follow political lineage.

Recent moves at Erdenes Mongol and Erdenes Tavan Tolgoi had the usual choreography: the language of reform fronting decisions shaped by factional arithmetic.

Davaadalai, the incoming head of Erdenes Mongol, is respected but untested in running large operational firms; his selection owes more to political proximity (i.e. President Khurelsukh and PM Zandanshatar) than managerial record. His main task is to centralise control of strategic deposits and feed the national wealth fund—an agenda that risks becoming another tool for political extraction if governance remains weak.

At Erdenes Tavan Tolgoi, the crown jewel of the state sector, leadership will shift to Delgernaran, a veteran administrator with a long résumé across Ulaanbaatar politics and the Election Commission. The supposedly open search collapsed into a familiar conclusion: loyalty over competence. The MIAT reshuffle followed the same pattern, wrapped in hazy explanations about ticketing and leases but offering no documentation and little credibility.

Into this mix returns privatisation—an idea that means everything and nothing depending on who is speaking. Listing minority stakes on the domestic exchange could clean up accounts, broaden ownership and raise capital without touching nationalist nerves. But minority listings rarely change behaviour if boards remain political and tariffs stay frozen.

Anything below a 20 percent free float risks cosmetic reform. Pushing loss-makers to market before addressing distorted prices, politicised procurement, and unfunded social mandates will merely invite discounts.

External conditions are tightening the screws. Higher global borrowing costs leave less room for subsidised losses. China’s uneven commodity demand makes Mongolia’s mining cashflow more volatile, putting additional pressure on the state giants asked to bankroll everything from social transfers to foreign-exchange stability. Energy companies cannot raise tariffs without approval. Road firms rely on the treasury to plug holes. Austerity complicates this balancing act rather than easing it.

The next phase hinges on whether the government can break old habits. Consolidation means little if top jobs remain political prizes. Productivity targets mean little if tariffs remain political decisions. A privatisation plan means little if the cabinet refuses to surrender control. Mongolia has reached the point where its state sector is too large to manage cleanly and too politicised to reform quickly. The rhetoric has shifted; the incentives have not. That is the fault line on which its reform effort now rests.