Regions and Countries

	Table of Contents
p. 11 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Operations IV. Subregional Economic Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Mongolia : III. Sector Strategies

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C. Social Infrastructure and Environment

1. Health

60. Issues in the health sector include the need to strengthen primary health care, encourage private sector participation in health service delivery, upgrade the health referral network, train health personnel, develop family group practices, and change the method of payment to health service providers to introduce market signals and incentives for improving cost efficiency.

61. The Government places a high priority on health sector reform. Attention will be paid to the reduction of maternal and child mortality and checking the spread of infectious diseases, while reducing the excessively high number of hospitalizations through the implementation of demand management policies, including greater cost recovery from those who can afford to pay. To improve equity and access to health services needs to be re-orientated from curative to primary health care and preventive programs. The public health systems will be based on expansion of Family Care Practice and provision of an essential health minimum clinical package. At the same time, rehabilitation of equipment and hospital facilities is also needed. Programs on the acceleration of reforms in the medical sector, development of a family doctor system, establishment of regional diagnosis-treatment centers, and maintaining a proper ratio of doctors and nurses will be initiated. Government policy also will continue to support privately owned medical institutions through the promotion of their service areas and human resource development.

62. In the health sector, ADB’s comparative advantage is mostly in the areas of management reforms, decentralization, and training. The new strategy will focus on ADB’s involvement in these areas, as opposed to investments in health infrastructure and heavy equipment. In the new strategy, some aspects of reforms in the health sector, such as general public’s education on preventive health care and vocational training, will be combined with envisaged reforms in the education sector. Health finance management will be addressed in accord with the public sector governance reforms.

63. The strategy will focus on:

1. general health education;
2. training of health-care staff in primary health;
3. vocational training related to the health-care industry;
4. capacity building; and
5. health finance management on a wide basis.

Additionally, the experience from pilot projects in the health sector in the past (such as emphasizing family doctors) will be consolidated and used to expand the successful aspects of past efforts.

64. The ADB-financed Health Sector Development Program (HSDP) is helping the Government reform the health sector to ensure its sustainability in a market economy. With cost-efficiency and universal access to quality essential services as priorities, the HSDP seeks to re-orient the health sector by:

1. focusing on primary health care rather than hospital services;
2. developing an effective referral system to provide quality services as needed rather than provide universal access to poor standard services;
3. introducing mechanisms and regulations to maximize private-sector entrepreneurship in health service delivery through payment of providers, licensing and accreditation; and
4. creating hospital boards.

Family group practices in urban areas, and structural reorganization of the health facilities in rural and urban areas are major components of the reforms. These reforms require intensive training of health personnel. ADB has provided support for improving the Health Insurance Law and in developing the National Health Policy. In particular, ADB is trying to create a dynamic and efficient partnership between the public and the private sectors, to harness the strengths and qualities of both sectors, and to ensure that each is participating in the most cost-effective way to improve access and quality of the services. The HSDP is progressing well and is on schedule. Additional support to extend and strengthen the reforms, and to improve service quality, is envisaged through the Second Health Sector Development Program (2002). Particular attention will be given to mitigating the social costs of the reforms that disproportionately affect women, because they constitute the majority of the staff in the education and health sectors. Impact analysis will pay specific attention to women, ensuring collection of data and indicators disaggregated by gender.

2. Education

65. Expenditure on education has remained relatively constant at around 5.5 percent of gross domestic product for the past four years. The education sector is unlikely to experience significant growth in state funding. In addition to the issue of funding, key requirements are building institutional capacity at both central and aimag levels; improving physical facilities and teacher effectiveness at basic and secondary education; establishing a market-driven and private sector led technical education and vocational training (TEVT) system; continued efforts to improve higher education quality, effectiveness and management; capacity building for science and technology (S&T) to augment a pool of scientific personnel in the context of globalized environment; and strengthening central and local non-formal education networks.

66. Development of a new education system that can successfully meet the needs of the population in education programs and services is one of the Government’s priority tasks. The Government intends to accelerate ongoing reforms in the educational system, and improve the content of training programs and materials. Greater attention will be devoted to the development of non-formal education, distance learning programs and to the completion of ongoing rationalization and productivity improvement measures including diversification of services delivery and decentralization of education management. The Government also intends to improve education quality by gradually upgrading priority facilities and equipment. In addition, increasing number of students and professionals will be sent to the developed countries to pursue advanced studies in business, economics and other fields in which there is a shortage of professionals. The Government’s policy reform package supported by an ADB Education Sector Development Program includes measures to:

1. rationalize education structures and staffing;
2. promote cost recovery;
3. support privatization and private provision of education; and
4. develop a comprehensive policy framework for TEVT.

67. ADB’s poverty reduction strategy requires that assistance to the education sector focuses on two main areas:

1. developing an education system that can successfully meet the needs of the population in a new labor market (to fight the existing unemployment-poverty problem), and
2. addressing the issues relating to equity of access to education (to prevent the development of new forms of poverty based on social service deprivation).

Attention will be devoted to the development of market-related training (including vocational training) and skills development programs to address the need for a more skilled labor force; to nonformal education in rural areas to address the problem of school dropouts; and to distance learning programs, to bring education within the reach of more people. Policy reforms will continue, with emphasis on rationalization and productivity improvement measures, diversification of service delivery, and decentralization. Increased private sector involvement in the education sector will be emphasized, but stress continued access for all.

68. Vocational training facilities will be established with the aim of engaging the private sector in their operation and takeover as early as possible. The strategy will also seek to move the government toward an effective role in the skills development sector, e.g., accreditation, setting of skills standards, policy formulation and monitoring, and skills testing.

69. In the new strategy, the education sector will therefore be charged with providing back-up support to intended reforms in other sectors within a coherent and overarching plan. For example, it will combine forces with the financial sector reforms by providing labor market-related vocational training for the intended recipients of microfinance to improve the chances for a successful microfinance scheme that creates viable employment opportunities. This will allow the development of viable small businesses and promotes employment. The education sector will also complement the health sector by including relevant health-care education in the general curriculum.

70. The ongoing Education Sector Development Program is assisting to make the education sector more effective, responsive, and sustainable. Major policy issues that ADB is helping address include rationalizing structures and facilities, reducing overstaffing, promoting cost recovery and private sector provision of education services, financing the needed investments in secondary and higher education, and strengthening management capabilities in the sector as whole. The Program was designed to mitigate social costs associated with a staff rationalization plan by developing and financing a comprehensive severance package. The Government has prepared an updated Education Sector Strategy 2001-2005 with ADB TA support. Follow-up support is planned to strengthen ongoing sector reforms with emphasis on basic and nonformal/distance education, market driven vocational education and strengthening science and technology at tertiary level. Particular attention will be given to mitigating the social costs of the reforms that disproportionately affect women, because they constitute the majority of the staff in the education sectors. Impact analysis will pay specific attention to women, ensuring collection of data and indicators disaggregated by gender.

71. The ongoing education and health sector development programs demonstrate that the Sector Development Program (SDP) is an efficient mechanism for straightening sector reforms in full partnership with the Government, as well as for addressing investment needs. Accordingly, it is planned that follow-up interventions in these sectors will employ the SDP modality to reinforce appropriate sector policies.

3. Social Protection

72. Mongolia’s formal social safety net was designed for a command economy characterized by the collectivization of resources and was highly subsidized by the FSU. The formal safety net now includes targeted consumer subsidies, targeted allowances, and social insurance. Under the National Poverty Alleviation Program (NPAP) introduced in 1994, additional projects such as public works programs, emergency assistance, unemployment retraining, and enterprise promotion have been introduced.

73. Government social policy remains fragmented. It has not always succeeded in assessing the social impacts of economic reforms (e.g., privatization) prior to legislation, in implementing amelioration programs to protect retrenched workers or vulnerable groups whose access to schooling and healthcare have deteriorated under the transition. Lack of a comprehensive Government social policy framework has also resulted in poor targeting of too many programs for too few beneficiaries. Partial evolution of family and individual allowances from socialist times and lack of program financing have meant that some families receive multiple benefits, while others receive none. Overlapping mandates for the multiple agencies involved have resulted in duplicate administrative structures and squandering of scarce human, technical, and financial resources or an absence of academic and professional training in, and cultural understanding of, social welfare and poverty issues has resulted in inadequate responses.

74. In 1995, the Government introduced a system of social insurance for health, old age, and unemployment. Although coverage is high (but limited to the formal sector), the services are of poor quality. Due to the low enterprise contributions since 1997, the pension fund is largely cross-financed through the budget. However, pension arrears are seldom and short-lived. A system of social assistance for poor families and disadvantaged groups (such as female-headed households, large families, or the handicapped) was set up in 1996. Since then, social assistance expenditures have been increasing due to deepening poverty trends.

75. Of particular concern to the Government is the increasing number of street children, and the poor coordination of the various social assistance programs. In 1994 the Government introduced the NPAP, cofinanced by the World Bank, UNDP, and some bilateral sources. The program with its three major components (microfinance, public employment programs for rehabilitation of rural infrastructure, and capacity building) has been evaluated and proposals have been made to extend it.

76. The ADB’s proposed Social Safety Net Sector Development Project (2000) represents an important and critical contribution towards implementing and supporting the Government’s social sector strategy to reduce poverty and create sustainable livelihoods for the poor and vulnerable in Mongolia. The Program loan will assist the Government to:

1. improve its targeting, coverage, and delivery of social services to those in need;
2. appropriately manage the funds responsible for social insurance and assistance; and
3. better formulate and implement sustainable social policy in the long term.

The nationwide public works program will create short term employment and generate long term sustainable economic and social benefits to the communities involved and will have a direct impact on reducing poverty, as they will be implemented at the local level to address the needs and priorities of the communities concerned. Finally, the nationwide public advocacy and information campaign funded by the Program will do much to decrease the dependency mentality in Mongolia with which poverty is associated by increasing public awareness of the means available to them to lift themselves out of poverty. The Project loan will support capacity building activities and activities in sustainable livelihood creation that protect access to social services for the poor and vulnerable and promote employment generation. Through a subcomponent, the Project will also support activities protecting children in especially difficult circumstances and their families.

77. Particularly in rural areas, poverty is a major cause of children’s absence and dropping out from school. More emphasis will therefore be given in ADB’s educational assistance to maintaining boarding schools and restructuring the heating system in schools.

4. Urban Development and Housing

78. The lack of capital investment in infrastructure and service facilities in recent years has resulted in a progressive deterioration in the quality of services. In the case of networked infrastructure such as water supply, district heating, and sewerage, this lack of investment is manifest in more frequent system failures and increased maintenance requirements. In the case of services relying on vehicular transport such as solid waste management and bus services, it has resulted in a significant deterioration in service schedules. During the decade of transition, capital assets, including the national housing stock, have deteriorated as a consequence of the low priority for and unaffordability of proper repair and maintenance.

79. The transition to a market economy has had a profound impact on the country’s housing delivery system in urban areas. Public sector construction of pre-fabricated apartment buildings, which previously provided the majority of acceptable housing in urban areas, is no longer taking place. The incremental improvement of housing in ger (traditional dwelling) areas, beginning with the traditional ger and ending with a substantial all-weather house, is likely to become the predominant path to affordable, acceptable housing in the future. Mobilizing and guiding this incremental improvement process will be one of the main objectives of the new housing finance system now under consideration.

80. Under the Government’s new housing policy, city housing programs are to be based on a “bottom up” approach and organized on a one, three and six year basis. The basis for the six-year program is to alert authorities to the need for planning major additions to infrastructure networks that can accommodate new housing and urban growth. Housing Action Area Plans (HAAPs) are to be prepared, based on the initiatives of communities and local authorities, and reflecting local environmental and socio-economic conditions.

81. The Government’s housing policy recognizes the private sector as being the main provider of new and affordable housing. New policies essentially cover land planning guidelines, minimum standards for infrastructure, a land registration system, a new land valuation system, and the establishment of a Housing Development Fund (HDF). Housing-related actions are now to be based on market-oriented principles. For example, market finance and cost recovery schemes will be formulated for the installation of basic infrastructure services at sites designated for the development of new housing. The possible privatization of utility services is under Government consideration.

82. ADB’s strategy in urban development will include:

1. access to basic social services to improve the health and quality of life for urban settlers;
2. improving the quality and supply of housing, particularly in the poor ger areas; and
3. strengthening institutional, financial, and management capacities in public utilities and housing, together with improving related policies, regulatory activities, and operations.

83. The strategy acknowledges the ongoing trend toward regionalization in Mongolia, which aims at creating six main regional centers with more concentrated population, in place of the existing 24 provincial centers. Therefore, the main focus of ADB’s assistance will be to provide support for these emerging urban centers after a careful municipal study of these needs.

84. The strategy will also be designed to accommodate specific conditions in Mongolian urban centers. A flexible urban infrastructure will be considered to respond appropriately to a state of housing development that is still in flux.

85. ADB’s assistance for urban development will be coordinated with interventions in other sectors so as to maximize effectiveness in each area. Municipal services will be combined with and provide backup support to the energy sector’s efforts at providing decentralized and affordable sources of household energy. Support from the roads sector will come in the form of urban transport access roads. Urban development, in turn, can provide support for strengthening the health sector efforts at preventive and primary health care by providing healthy living conditions, reliable water supply, and sanitation services.

86. In the urban development sector, ongoing the Provincial Towns Basic Urban Services Project is providing for rehabilitating basic urban infrastructure, which includes water supply, sanitation, solid waste, and bathhouses in the five provincial towns in western Mongolia. Improving town planning and cost recovery and commercializing service delivery are important elements in ADB’s policy dialogue for the sector. Further support for the development of urban services is planned with a follow-on project.

87. ADB has been actively supporting the Government’s housing sector policy development and reform program. A new housing policy has been elaborated and important reforms have been made to the condominium law. The proposed Housing Sector Finance Project looks to promote a sustainable, market-based system for delivery of housing finance to meet the borrowing needs of low- and middle-income households.

5. Environment

88. ADB has provided technical assistance to help the Government deal with environmental issues and to incorporate environmentally sound technologies and subcomponents within ADB-financed projects. ADB has been helping the Government to strengthen the environmental management capability including reviewing the comprehensive environmental law, developing national environmental standards, institutionalizing the environmental impact assessment process, strengthening environmental monitoring capabilities, preparing a permit system, and developing a public awareness and information program. The environmental impact of livestock production on the ecological systems is an important issue and ADB has assisted Mongolia to formulate policies, strategies, and an action plan for sustainable management of the extensive livestock production systems. The Government’s priority is to use grant rather than loan funds to address environmental issues

89. Support for environmental improvement will continue to be provided through ADB’s sectoral operations, especially in agriculture. Wherever possible, proactive environmental components will be included in ADB financed projects. A range of interventions is planned under the Agriculture Sector Development Program to assist Mongolian agriculture to become more sustainable and robust. The severe winter conditions and subsequent large scale livestock losses experienced in 2000 underlined a range of issues, including overgrazing and deterioration in herd quality, which have emerged during the transition.

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