Mongolia: Sustainable Tourism Development Project (Phase 2)

Sovereign (Public) Project | 51422-002

The project will support the development of tourism in three aimags (provinces) of western Mongolia an area of national priority for economic development focused on inclusive benefits for communities, nature-based solutions to protect wilderness and heritage values, and post-coronavirus disease (COVID-19) recovery and resilience. The project will build the capacity of residents and a small but growing private sector for community-based tourism, create jobs through the establishment of tourist streets and visitor complexes, and strengthen the management of five globally important protected areas and heritage sites through improved visitor and sanitation facilities. The designs are based on post-COVID-19 tourism recovery projections, sanitation measures aligned with health and border procedures, and building standards for green and climate-resilient infrastructure. About 16,296 residents are expected to benefit from the project through tourism-related skills and income.

Project Details

  • Project Officer
    Bezuijen, Mark R.
    East Asia Department
    Request for information
  • Country
    Mongolia
  • Sector
    • Agriculture, natural resources and rural development
Project Name Sustainable Tourism Development Project (Phase 2)
Project Number 51422-002
Country Mongolia
Project Status Proposed
Project Type / Modality of Assistance Grant
Loan
Source of Funding / Amount
Grant: Strengthening Community Livelihoods in Buffer Zones of Protected Areas Project
Japan Fund for Poverty Reduction US$ 2.00 million
Loan: Sustainable Tourism Development Project (Phase 2)
Ordinary capital resources US$ 30.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Regional integration
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Private sector development
Sector / Subsector

Agriculture, natural resources and rural development / Land-based natural resources management - Rural sanitation - Rural solid waste management - Water-based natural resources management

Industry and trade / Trade and services

Water and other urban infrastructure and services / Renovation and protection of cultural heritage

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The project will support the development of tourism in three aimags (provinces) of western Mongolia an area of national priority for economic development focused on inclusive benefits for communities, nature-based solutions to protect wilderness and heritage values, and post-coronavirus disease (COVID-19) recovery and resilience. The project will build the capacity of residents and a small but growing private sector for community-based tourism, create jobs through the establishment of tourist streets and visitor complexes, and strengthen the management of five globally important protected areas and heritage sites through improved visitor and sanitation facilities. The designs are based on post-COVID-19 tourism recovery projections, sanitation measures aligned with health and border procedures, and building standards for green and climate-resilient infrastructure. About 16,296 residents are expected to benefit from the project through tourism-related skills and income.
Project Rationale and Linkage to Country/Regional Strategy

Prior to the outbreak of COVID-19, tourism was the largest and fastest-growing sector of the global economy. Ecotourism, a major subsector, has comprised up to 20% of global tourism and is a key contributor to rural incomes and the financing of protected areas in many countries. Mongolia has a small but emerging tourism sector. In 2019, tourism accounted for 7.2% of Mongolia's gross domestic product (GDP), generating $989.2 million, 7.6% of total employment, and 88,700 jobs. International visitor arrivals in 2019 (577,300) increased by 6.4% compared with 2018, and the tourism sector's annual GDP growth (11.9%) significantly exceeded national GDP growth (5.6%). By 2030, tourism was forecast to comprise 11% ($1.5 billion) of GDP, provide 95,000 jobs, and attract 1 million international arrivals annually. The global spread of COVID-19 in 2020 resulted in national border closures in Mongolia, the decline to almost zero of international arrivals, and estimated losses in tourism revenue of more than $421 million. Long-term projections of the impact of COVID-19 on Mongolia's tourism sector are not yet available, but recovery scenarios for Asia and the Pacific suggest that a return to pre-COVID-19 international visitor numbers will only occur by about 2023 (footnote 4).

Developing Mongolia's tourism sector is a high national priority to diversify the economy and create jobs. As short-term emergency efforts to address the immediate impacts of COVID-19 are completed, there is a need for longer-term projects which contribute to economic revitalization combined with strengthening resilience to the risk of future disease outbreaks. Mongolia ranks moderately in the Travel and Tourism Competitiveness Index (in 2019, Mongolia was ranked 93rd out of 140 countries evaluated). Existing challenges include low service standards, inadequate infrastructure, and a short tourism season due to harsh winters. Government plans to develop tourism focus on nature- and heritage-based tourism in protected areas, yet most of these sites are underfunded and located in remote regions of high poverty. Tourism, if inadequately managed, may result in negative ecological and cultural impacts, and provide few local benefits. Domestic tourism, although largely undocumented, is increasing rapidly in Mongolia and will also be an important component of post-COVID-19 economic recovery. To address these issues, the government is implementing the National Program on Tourism Development, 2016 2025, which aims to establish Mongolia as a global destination for nomadic culture. The program outlines a phased approach that prioritizes investments in visitor facilities, transport and sanitation infrastructure, and community-based products and services. Following projects initiated in northern and central Mongolia, including support from the Asian Development Bank (ADB) (para. 10), western Mongolia is prioritized by the government for tourism development.

Western Mongolia comprises the three aimags of Bayan-Ulgii, Khovd, and Uvs, and borders the People's Republic of China and the Russian Federation. Much of the area is characterized by extreme remoteness and limited economic development. It also supports a unique cultural heritage the richest and most well-preserved rock art (ancient images on rock) in northern Asia, the highest number of ethnic groups in Mongolia, and a network of protected areas which includes two World Heritage sites and four Wetlands of International Importance. Each aimag supports small but operational domestic airports, new roads linking with the national capital (Ulaanbaatar), and international border crossings. Poverty rates are high and rural populations depend largely on subsistence agriculture. Visitor numbers are small, but prior to COVID-19 were increasing rapidly. Growing attractions include five locations with road access from the aimag centers and border crossings: Altai Tavan Bogd National Park (Bayan-Ulgii), Khar Us Nuur National Park (KUNNP) and Tsenkher Cave (TSC) (Khovd), and Khan Khukhii National Park (KKNP) and Uvs Nuur Basin Strictly Protected Area (UVSPA) (Uvs). These sites encompass over 2.1 million hectares (ha) of wilderness, biodiversity, and rock art. The early stage of tourism development in western Mongolia provides a timely opportunity to support sector planning, livelihoods, and conservation.

Impact Sustainable tourism development in Mongolia improved and diversified
Outcome Sustainability and inclusiveness of ecotourism in western Mongolia increased
Outputs

Inclusive planning and capacity for local tourism businesses enhanced

Enabling infrastructure for tourism constructed

Sanitation and waste management improved

Management of cultural heritage sites and protected areas strengthened

Geographical Location Nation-wide
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects Project locations have been identified based on strict selection criteria including the avoidance of strict protection zones and critical habitats of protected areas, distances to nearest waterbodies that comply with regulatory requirements, small facilities tailored to local conditions, and efficiency of water and power use and waste management. An environmental management plan has been prepared to address environmental risks.
Involuntary Resettlement No involuntary resettlement per ADB's Safeguard Policy is anticipated.
Indigenous Peoples No impacts to indigenous peoples per ADB's Safeguard Policy is anticipated.
Stakeholder Communication, Participation, and Consultation
During Project Design Over 300 households were consulted during the project design, as well as local government agencies, civil society organizations, and development agencies involved in livelihoods, tourism, and conservation in western Mongolia.
During Project Implementation A consultation and participation plan, and stakeholder communication strategy, has been prepared, and will ensure consultations are continued during project implementation.
Responsible ADB Officer Bezuijen, Mark R.
Responsible ADB Department East Asia Department
Responsible ADB Division Environment, Natural Resources & Agriculture Division, EARD
Executing Agencies
Ministry of Environment and Tourism
Government Building II, United Nation's
Street 5/2, Chingeltei District,
Ulaanbaatar 15160, Mongolia
Timetable
Concept Clearance 08 Jun 2020
Fact Finding 24 Mar 2021 to 06 Apr 2021
MRM 15 Jun 2021
Approval -
Last Review Mission -
Last PDS Update 31 Mar 2021

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Evaluation Documents See also: Independent Evaluation

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