Transport / Transport policies and institutional development

Mongolia is landlocked between the Russian Federation and the People's Republic of China, with a population of 3.3 million in 2020 and a land area of 1.6 million square kilometers (km2), its population density is only 1.9 persons per km2. Due to the large distances, sparse population, and severe weather conditions, surface transportation is difficult, and infrastructure is underdeveloped.

Mongolia's economic growth has been volatile, with both growth and poverty fluctuating wildly mainly due to Mongolia's dependence on minerals (92.8% of exports). From 2017 to 2019, the country experienced steady gross domestic product growth. However, the coronavirus disease (COVID-19) crisis induced an economic contraction of 5.3%, which led to job losses in all major sectors and increased unemployment and underemployment by 1.4 percentage points in 2020. Poverty has most likely increased further from 28.4% of people who lived in poverty as of 2018. The poor condition of roads in Mongolia aggravates persistent poverty conditions, particularly in rural areas as it restricts access to markets, education, and services. Mongolia has a road network of 112,414 kilometers (km), of which 14,918 km are international and state roads and of these only 7,445 km are paved. Improving access to health services and to domestic and external markets will be crucial to assist with recovery from the COVID-19 crisis and to lay the foundations for diversification in the longer term, particularly in isolated regions such as Western Mongolia. The region suffers from slow development because of its remoteness from the country's political and economic centers, and state roads connecting aimag capitals remain unpaved.

Impact, outcome, and outputs. The project is aligned with the following impact: inclusive economic growth promoted by enhanced local, and regional connectivity in Mongolia. The project outcome will be efficiency and safety of road transport within the project area improved. The project outputs will be: (i) road condition improved, (ii) road asset management capacity improved, and (iii) road safety design and capacity improved.