Crop farming and farm animal breeding form the basis of Mongolia’s economy. Manufacturing is devoted largely to the processing of agricultural and farm animal products. During the Communist era, the government attempted to increase industrial and agricultural production through a series of five-year plans, first initiated in 1948. The state controlled all industry and trade, through either direct ownership or cooperatives. In the 1990s Mongolia began to transition from a planned socialist economy under Communism to a market system under a democratic government. Economic reforms have included the transfer of some state-owned enterprises to private ownership. In 1999 the gross domestic product (GDP) was $0.92 billion, or about $390 per capita. Corporation. All rights reserved.

Mongolia possesses mineral resources. Geologic surveys have confirmed the existence of large deposits of coal and iron, tin, copper, gold, and silver ore and a number of lesser known minerals. Mongolia's biological resources consist largely of the great herds of farm animal in the nation. Overall farm animal figures rose throughout most of the 20th century, providing a valuable agricultural resource base that even enabled some exports of meat to be made. In addition, the northern rivers of Mongolia offer great potential for hydroelectric development, whereas the wildlife of the nation offers potential for commercial exploitation.

Economic activity traditionally has been based on agriculture and breeding of farm animal. Mongolia also has considerable mineral deposits: copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990-91, at the time of the dismantlement of the USSR. Mongolia was driven into deep recession, which was prolonged by the Mongolian People's Revolutionary Party's (MPRP) reluctance to undertake serious economic reform. Major domestic privatization programs were undertaken, as well as the fostering of foreign investment through international tender of the oil distribution company, a leading cashmere company, and banks. Reform was held back by the ex-communist MPRP opposition and by the political instability brought about through four successive governments under the DC. Economic growth picked up in 1997-99 after stalling in 1996 due to a series of natural disasters and declines in world prices of copper and cashmere. In August and September 1999, the economy suffered from a temporary Russian ban on exports of oil and oil products, and Mongolia remains vulnerable in this sector. Mongolia joined the World Trade Organization (WTrO) in 1997. The international donor community pledged over $300 million per year at the last Consultative Group Meeting, held in Ulaanbaatar in June 1999. The MPRP government, elected in July 2000, is anxious to improve the investment climate; it must also deal with a heavy burden of external debt.