USSR FOSTERS ECONOMIC DEVELOPMENT IN MONGOLIAN PEOPLE'S REPUBLIC

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700030434-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: October 14, 2011
• Sequence Number: 434
• Publication Date: December 15, 1951
• Content Type: REPORT

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CLASSIFICATION CONFIDENTIAL CONFiDENTlAL
CENTRAL IN'~COL~~CEI~~ON REPORT
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADCASTS CD N0.
COUPITRY Mongolian People's Republic
SUBJECT Economic - Development
HOW
PUBLISHED
WHERE
PUBLISHED
Daily newspapers; monthly, semimonthly
periodicals; books
DATE
PUBLISHED
'.ANGUAGE
DATE OF
INFORMATION 1949 - 1951
DATE DIST. /,f~Dec 1951
N0. OF PAGES 6
SUPPLEMENT TO
REPORT N0.
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or rxr uwnw {nm rrtxn rx[ nuur or unow.ra ?cr a
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or m cownwn a awr rawwq TO Ix uw{urxouxan ru[ow a rao
wiamo n ur. av{oaucnaw or rxu rover a r[oxume.
USSR FOSTERS ECONOMIC DEVELOPMENT
IN MOPCOLTAN PEOPLE'S REPUBLIC
~fitmbers in parentheses refer to appended eources~
The gradual devel.opmeat and stabilization of the economic position of the
Mongolian People's Republic ie being effected by the strengthening of economic
ties vlth the USS&, in the form of Soviet materiel aid and technical advice.
Iaports of machinery sad precision equipment from the USSR have been steadily
increasing. Soviet advisers have assisted in the construction of industrial
plants, factorise, railroads, and highways. Soviet-made tractors and other farm
equipment have contributed to the further mechanization of Mongolian ngricul=
ture.(1) Soviet aid has been the dominant factor in the creation sad stabiliza-
tion of industrial enterprise in the Mongolian People's Republic.(2)
The development oP Mongolian industry began in 1930, when the government
concluded as agreement with USSR economic organizations nod received technical
assistance is the construction of en industrial combine and other enterprises.
The trend of industrial development vas toward the creation and expansion of
manufacturing concerns to process such domestic raw materials as wool, leather,
sheepskins, nonferrous metals, coal, timber and othere.(3) Soviet loans sad
~'investmeats have stimulated a steady increase in total capital construction. Ia
1939, capital construction aaounted to 10.6 million tugrika (one tugrik equals
1.3 rubles).(4) In 1946, it vas 70.6 million tugriks.(3) Ia the current Five-
Year Plan, which x111 end in 1952, a total of 253.3 million tugriks will have
been invested in capital conetruction.(1)
Soviet specialists have also been Instrumental in setting up industrial sad
trading cooperatives which are assuming increasing significance is the national
economy. Ia 1921, Montsenkop.(Central Consumers' Cooperative) vas formed. This
organization vas operated Jointly by the USSR and the Mongolian People's Republic
until 1'934. At that time, the USSR relinquished its supervisory and administra-
tive authority over Mongolian trade, thus leaving s state monopoly over trading
transactions in the hands of Monteenkop and the National Trading Corporation.
The latter organization vas net up in January 1935, immediately after the vith-
drawal oP Soviet trading interests, in an effort to restore the private trade
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sector to its former position in the national econo~. The chief function of the
National Trading Corporation ie to procure livestock, furs, and raw materials from
private traders for export to the USSR and to the people's demociacies.(4~ On the
other hand, Montsenkop is the principal channel for local trnde~ since it hse con-
trol over several affiliated cooperatives scattered throughout the republic. In
1926, there xere 134 cooperativea and 6,627 shareholders, with a total capital of
225,000 tugrike.(3) In 1950, there were about 4,200 cooperativea and more than
248,000 shareholders, with a total capital of almost 4 million tugriks.(7)
The current Five-Year Plan (1948 - 1952) envisages the following attainments:
1. Expansion of Mining and processing industries by developing new mines and
constructing more plants and factories.
2. Establishment of new industries including glassrorke, furniture end cloth-
ing factories, workshops for repair of sewing machines, adding machines, bicycles,
etc.
3. Expansion of postal, telegraph, telephone, and radio communications.
4. Inereaee in food output of 117 percent.
5. Increase in generation o~ electric power.
6. Increase in volume of groan production in all state and cooperative indus-
tries cf ~.u percent, to achieve a total of 370 million tugriks.(1)
Industrialization
Mongolian industry is now celebrating its 30th year of development. In the
past 30 years, Soviet aid hen been instrumental in the construction, establishment,
and management of an industrial combine, a meat combine, n food combine, a power
combine, several coal, rare and nonferrous metal mines, s wool-washing plant,
several tanneries, felt, clothing and shoe factories, construction material plants,
machine repair shops, and factories to process hides and skins.(5)
Although progress has been achieved in many branches of industry, the moat
significant advancement has been attained by the coal-mining industry. Mongolian
coal reserves hove been estimated `,o total over 500 million tone, most of which is
located in the Nalaikha area. Almost all cP the coal mined in the Nslaikha coal
basin is a friable brown coal which has approximatel?, the same calorific value as
coal mined in the Moscow basin. Although coal deposits have also been discovered
in the Choybalnan, Dzun-Bulak, and Daisy Sayn Shanda areas almost 90 percent of
the coal. mince in the republic is in the Nalaikha beain.(3~ In 1939, Soviet coal-
mining engineers assisted in the reconstruction and mechanization of the Nalaikhs
coal mines. Many pieces of modern mining machinery were imported from the USSR aa%.
installed by Soviet technicians. This equipment included electric and pneumatic
drills, automatic lifts, conveyors, electric pampa, mechanical coal cutters, etc.
In 1937, construction of a narrm.+ gauge railroad betxeen Nalaikha end Ulan Bator
was begun; it was completed the following yesr. Ae n result, i^ 1939, m,?re than
200,000 tone of coal were shipped to Ulan Bator by railroad, as compared with 7,900
tone in 1927 by pack animale.(4)
Since most of the industrial establishments in the republic are directly de-
pendent on coal mined in this urea, a steady increase in the output of coal has
been an eeaentiel prerequisite for expanded industrial output. The annual output
oY coal at the time of the founding of the republic in 1921 was about 1,000 tone.
(6) In 1947, it had risen to almost 300,000 tone a year. By the end of the cur-
rent Five-Year Plan, coal production is expected to be twice that of 1947 and 600
times ae much as in 1922.(3)
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CONFIDENPI4L
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Several other branches of industry are currently fulfilling their pro-
duction goals: The Chcybalean Industrial Combine, Stalin Ment Combine, n tim-
ber combine in the Anlaikha coal basin, an automobile repair p,..,nt, a leather
factory, the biological combine, end many other industrial establishments ful-
filled the goals set for tae third year of the current Five-Year Plan.(5) Dur-
ing the first year of t'pe plan, the over-sll industrial plea vas fulfilled by
101.1 percent, and the plan for capital construction by 100.8 percent. During
the second year, output of smelted pig iron increased by 1.5 percent over the
previous year; output of butter by 10.2 percent; output of all types of eklns
by 31.5 percent; output of pieces of felt by 23.6 percent.(1) The volume of
capltal investments betxeen 1945 and 1950 increased by 38.4 percent, thus ns-
euring a steady expansion is the over-all industrialization of the republic.
(7)
Soviet industrial experts are effecting n tremendous trnneformation in
Mongolian industrial production. Yn 1927, the value of total induetrinl out-
put vas 1.8 million tugrika.(6) In 1937, it was 23 million tugrika.(4) Ia
1947, it had risen to 188.3 million; and in 1952, it ie expected to teeth 370
million tugrlks, ore than 100 million US dollarJ.(6) The following table
shows the relative rate of increase in value of total industrial output. ,
Table i. 4aiue of Increase in Indusiriai Fr'oduction
(millions of tugrika) (3, 4, 6)
~Z ~ 1 6 ~s ?2
1.8 8.7 2o.A 41.5 52 112.1 173 188.? 196.3 370
The expanded indu:atriel output hoe required n proportionate expansion in
the country's labor force. In 1927, there were only 225 people engaged in ia-
dust +.al work; in 1934, there xere 3,291.(4) In 1947, more than 61.,000 workers
were employed in industry; .? 3 by the end of 1952, thin total is expected to be
almost 74,000.(1) The following table shown the relative rate of increase in
the number of industrial workers.
Table 2. Increase in Number of Industrial Workers (1, 3, 4)
131 ~~ ~~ 19!+0 ~ ~?
225 2,335 3,291 12,785 13,300 6o,5G0 73,585
Soviet apeelnliete have assisted in the formation of not only state indue-
trinl enterprises, but also of many handicraft induetrinl cooperatives, which
are es2ecinlly important for the induetrinl development of the coun~ry. Crafts-
men ere united on the basis of cooperative oxnership of the fundamental menus
of production.(7, 8) In 1931, tae Mongolian Handicraft Irx:ustrinl Union wee
established on the basis of organized artels, the members of x`.:oh directly
participate is production and have a share in the arofite.(4) During the first
year of its existence, there were 14 ertels and 73k members; in 1946, there were
198 nrtcls and more than 12,000 workers.(3) Cooperative industry contributed
over 47 million tugrik's worth of production in 1947. This amount is expected
to be increased to over 90 million tugriks by the end of 1952, end represents
almost 25 percent of the republic's total industrial output.(1)
Government Finnace
Industrial expansion has necessitated a consl3erable increase in the ~~otal
expenditures of the annual state budget. From 1921 to 1948, the budget in-
creased almost 200 times, from 1.7 million to 329.2 million tugriks.(1, 4)
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CONFIDEbTIAL
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There has been s steady increase in state revenue accruing from state-controlled
industrial, bnnlcing, trading, transportation, communications, and cooperative
enterprises.(4, 9) The fallowing table shows the relative rate of increase of
state revenue attd expenditures.
Table 3. Increase in Annual State Budget
(millions of tugrike) (3, 4,
10)
1921
1~
19
1~3
1937
1940
194
1945
1948 1951
Revenue
--
--
--
--
69.3
123.9
208.6
315.2
-- 351.4
(eat)
Expenditures
1.7
10.4
45.0
'3.5
65.4
122.1
185.4
304.4
329.2 346.4
(set )
Since the establishment of the republic, the bulk of annual state expendi-
tures has been devoted to national defense. In 1823, over 60 percent of the
expenditures were channeled into national defense projects. In 1940, national
defense coats still accounted for almost 45 percent of the budget, sad were
approached only by economic development cons which claimed almost 25 percent
of the budget.f41 22+e following table ~hcv., the br2okdown of the annual elate
budget from :^?3 to 1940.
Table 4.
Breakdown of Annual State Budget ('~) (4)
1923
19~
1936
1~~8
1940
Rational defense
60.4
34.7
49.3
52.5
44.6
Economic development
15.8
27.1
15.2
22.3
24.3
Social-cultural
7.3
i.:.8
14.4
16.0
21.9
Government Adminietra-
tion
11.1
9.2
8.0
5.0
3.8
Others
5.4
16.2
13.1
4.2
5.4
In 1924, Soviet banking and financial experts assisted in the establishment
of the Mongolian Industrial and Commercial Ban1c. This institution wen originally
operated ae a ,joint Mongol-Soviet enterprise, since the USSR contributed 50 Per-
cent of the bank's initial capital. In l^38, the USSR relinquished its rights
and privileges in the supervision sad management of the beak, thus crentiag e
completely naticnalized banking system in the republic. Thus far, the bank's
most significant achie?iement, in addi~ion to bolstering the national econ~:.~ by
i*?s credit operations, has been revision of the national currency. This course
oY ac~bion was initiated in 1825 and was fully implemented by 1828. The country
was placed on the silver standard and the tugrik was established as the basic mon-
etary unit. The bank later revised its currency policy and adopted the gold
standard.. As long ae it has been the basic monetary unit, the tugrik Lea been
readily convertible into rubles. At present (1950), the conversion ratio ie one
tugrlk for 1.3 :ubles.(4)
Foreign Trade
Since the Pounding of the republic, the USSR hen played an important role
in the conduct sad disposition of Mongolian trade. Between 1921 and 1935, all
financial, trading, and tra::eport organizations in the country were jointly op-
erated by the USSR anal the Mongolian People's Republic. After 1935, these
roRFI
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85.5
14.5
During World War II, Mongolian trade xith the USSR increased greatly both
in volume and in value. Mongolian exports of shoes, clothing, and food Hided
many thousand inhabitants of German-occupied regions of the USSR. Ln addition,
Soviet cavalrymen received tens of thousands of horses, winter uniforms, and
wary items of miiit3r,~ equipment. When the Mongolian People's Republic de-
clared war on Japan, Soviet military advisers as4lated .n the trairfaB of the
Mongol army, which later received high praise and recognition from the USSR
for its decisive victory over Japanese forces in Manchuria in 1945. This al-
liance has resulted in a considerable increase in tIre value of Mongolia's
over-ell foreign trade.(6) In 1935, the value of Mongolia's foreign trade
was 57.8 million tugriks; in 1939, it wsa 90.6 million; end by 1 1, it had
increased 2~ times over the 1935 level ~ver 140 million tugrik~(4)
The composition of Mongolian imports and exports has been changing gradually
is accordance with the country's induetriel development and expaneion.(1) In
1942, the newly established food combine was satisfying the country's needs for
foodstuffs. It was in that year that a Ministry of Food was created. As a re-
sult, imports of foodstuffs have been declining. On the other hand, induetriel
expP^.eion has aeceseitated an increase in the import of induetriel raw materials,
machinery, poxer equipment, petroleum and chemical products and others. Mongo-
11an imports and exports are listed as follows:
Textile fibers and manuYactured articles; leather goods; foodstuffs
(basic consumer goods not yet manufactured on a large scale, tea, sugar, flour,
fish, vegetables, etc.); chemical and petroleum products; construction mate-
rials; induetriel and agricultural machinery; transportation and communications
equipment; and othera.(4, 9)
Live cattle, horses, and sheep; wool, hides, and skins; furQ meat sad
dairy products; and othere.(4)
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institutions became stets monopolies. However, the USSR has continued to ec..-
tribute both administrative and financial aceietance whenever needed. In addi-
tion, since 15128, the USSR has continued to be the mayor consumer of Mongolian
exports, and the mayor source of Mongolian imports. During 1923 - 1924, the
USSR received 13.8 percent of ell -tngoliea exports. in 1928 - 15p9~the USSR
obtained 85.5 percent, and d?rring 1930 - 1931, almost 95 percent of the repub-
lic a exports. During the 1