Mongolia: Second Shock-Responsive Social Protection Project

Sovereign Project | 54214-002

With a worsening coronavirus disease (COVID-19) situation unfolding in the fourth quarter of 2020, the Government of Mongolia has requested urgent additional support for social protection measures to mitigate the socioeconomic impacts of the pandemic on poor and vulnerable groups. The proposed project will (i) apply shock-responsive social protection principles to continue support for pro-poor child grant top-ups on a temporary basis through an established national social assistance program, and (ii) strengthen social welfare programs and systems for improved household resilience and government response to future crises.

Project Details

  • Project Officer
    Schelzig, Karin Mara
    East Asia Department
    Request for information
  • Country
    Mongolia
  • Sector
    • Public sector management
Project Name Second Shock-Responsive Social Protection Project
Project Number 54214-002
Country Mongolia
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 4051-MON: Second Shock-Responsive Social Protection Project
Concessional ordinary capital resources lending US$ 26.60 million
Loan 4052-MON: Second Shock-Responsive Social Protection Project
Ordinary capital resources US$ 46.40 million
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Partnerships
Sector / Subsector

Public sector management / Social protection initiatives

Gender Equity and Mainstreaming Effective gender mainstreaming
Description With a worsening coronavirus disease (COVID-19) situation unfolding in the fourth quarter of 2020, the Government of Mongolia has requested urgent additional support for social protection measures to mitigate the socioeconomic impacts of the pandemic on poor and vulnerable groups. The proposed project will (i) apply shock-responsive social protection principles to continue support for pro-poor child grant top-ups on a temporary basis through an established national social assistance program, and (ii) strengthen social welfare programs and systems for improved household resilience and government response to future crises.
Project Rationale and Linkage to Country/Regional Strategy

Impact of the pandemic. Mongolia took early and decisive action starting in January 2020 to prevent the outbreak of COVID-19. However, while the direct health impact was initially limited, economic data and several rapid assessments confirm that the socioeconomic consequences of the virus containment efforts including border closures, trade disruptions, and school and business closures have been substantial. The economy contracted by 5.3% in 2020, exactly matching the Asian Development Bank (ADB) forecast, indicating the worst economic recession since 1992. The contraction has been driven by a significant decline in mining, transport, trade, and construction. The resulting household-level shocks can be severe and long-lasting, particularly on the poor and vulnerable. As early as May 2020, (i) nearly three-quarters of all Mongolian households and 85% of poor households reported experiencing some sort of economic shock, (ii) nearly two-thirds (64%) of all households reported an increase in food prices, (iii) nearly three-quarters (73%) of self-employed workers experienced income loss, and (iv) 70% of farmers and herder households reported a decline in income compared with the previous year. The impact of the pandemic became more acute in Mongolia with the first community transmission recorded in November 2020, causing the government to issue strict lockdown orders from 12 November 2020 to 11 January 2021 and again from 11 to 23 February 2021.

Pre-crisis poverty. The pre-crisis poverty rate was already high at 28.4% in a population of 3.24 million, but this national average conceals important differences by location, sex, and age. The poverty rate is significantly higher among urban households headed by women (32.4%), households living in the country's eastern region (37.4%), and among very young children aged 0 4 (38.0%). Childhood poverty is widespread: children under the age of 15 comprise 42% of the country's nearly 905,000 poor people, while 52% live in households with more than three children. A large share of Mongolians who are technically nonpoor live precariously close to the poverty line. Increasing the poverty line by half (from MNT166,580 to MNT249,870 per capita per month) nearly doubles the poverty rate to 55.7% (footnote 5). Mongolia's experience of both past crises and the COVID-19 pandemic confirms the risk of negative coping strategies. These include selling productive assets, reducing consumption levels, or making harmful choices regarding investment in education, health, and livelihoods, all of which can impact long-term well-being. In May 2020, 27% of households reported that their food consumption had declined, with households headed by women being much more likely to report decreased food consumption (41.0%) than those headed by men (22.5%).

Mongolia's effective social protection response. To mitigate the impact of the pandemic, the government issued a robust package of measures worth about 1.5% of gross domestic product to stimulate the economy and extend social protection. The first set of measures implemented from April to September 2020 included five key interventions: (i) exempting all business entities from social insurance contributions for 6 months, which benefitted employers as well as paid employees and self-employed people who make voluntary contributions; (ii) exempting citizens from personal income tax on salaries for 6 months (excluding civil servants); (iii) exempting smaller companies (with income lower than MNT1.5 billion) from corporate income tax for 6 months; (iv) paying entities that kept employees on the payroll despite weakening operations a monthly allowance of MNT200,000 per employee from April to June 2020; and (v) increasing monthly child grants under the universal child money program (CMP) to MNT100,000 (from the basic benefit of MNT20,000). From May 2020, added measures included doubling the monthly food stamps targeted at the poorest households and increasing social welfare pensions by MNT100,000 for highly vulnerable groups (persons with disabilities, older persons without other pensions, orphans, and single parents with many children). A subsequent set of measures covering October December 2020 continued some of these policies and measures and suspended others.

A microsimulation analysis shows that both inequality and poverty would have increased significantly without these measures, which appear to have not only counteracted the negative effects but may also have reduced poverty from the pre-pandemic baseline level. Because of the high rate of child poverty and the large number of children in poor households, the child grants alone reduced both poverty and inequality (para. 18), reaching 64% of the country's households, comprising 80% of the population. On the strength of this result, and with the crisis worsening as of November 2020 and prolonged socioeconomic impacts expected, the government approved the extension of the child grant top-ups from January to June 2021.

Global social protection response and lessons. Mongolia's emphasis on social assistance in its COVID-19 response is in keeping with global practice. As of September 2020, virtually all countries and territories (212) had planned, introduced, or adapted 1,179 social protection programs in response to COVID-19; the majority were social assistance transfers (724 measures, or 61.4% of the total). About 51% of these safety net measures (and 31% of global measures) were cash-based transfers in 158 countries, as in Mongolia. During a crisis, expanding support using existing programs and their infrastructure, such as targeting and delivery systems, is more efficient than creating new programs. Mongolia's Ministry of Labor and Social Protection (MLSP) used its food stamp program in this way during the financial crisis in 2017, as well as both food stamps and child grants in the initial response to the pandemic in 2020, supported by ADB under the first Shock-Responsive Social Protection Project (para. 13). International lessons include the importance of strengthening poverty targeting and social welfare delivery systems to be ready to respond when crises hit. Poverty is dynamic, but Mongolia's poverty targeting database is several years out of date. Timely data updating, operational capacity, and limited use across programs are challenges for the system's sustainability and effectiveness. COVID-19 has also underscored the need to develop shock-responsive systems and programs that help address multidimensional poverty, support the longer-term recovery process, and increase resilience to future shocks. Global impact evaluation evidence confirms that an innovative approach to social protection that combines cash support with a more holistic set of livelihood and coaching interventions can address multiple facets of deprivation and help poor people diversify their income sources sustainably, and ultimately become more resilient in the context of shocks (para. 21).

Strategic alignment. The project is aligned with the April 2020 ADB policy paper, which emphasizes that the scope and scale of the ongoing crisis make it imperative for ADB to step up support to developing member countries to combat the effects of the pandemic. Strengthening social protection systems and service delivery is a fundamental element of both ADB's COVID-19 response and ADB's Strategy 2030 operational priority 1 (addressing remaining poverty and reducing inequalities). The project also addresses operational priority 2 (accelerating progress in gender equality) and is aligned with several Sustainable Development Goals that include social protection targets.

Impact Adverse socioeconomic impacts of the COVID-19 pandemic reduced
Project Outcome
Description of Outcome Social welfare support for the poor and vulnerable, especially women and children, enhanced
Progress Toward Outcome Loan implementation is ongoing. An inception mission is scheduled on 30 Sep-11 Oct 2021 to discuss proposed utilization of loan savings, consultant recruitment, and overall implementation progress.
Implementation Progress
Description of Project Outputs

Pro-poor child grant top-ups delivered

Social welfare programs and systems strengthened

Status of Implementation Progress (Outputs, Activities, and Issues) CMP up to June 2021 completed. PIU to submit WA for retroactive financing and CMP expenses up to June 2021. Consultant recruitment is being finalized to engage an NGO consultant/implementation partner using limited competitive bidding, including a market assessment firm.
Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The project has no or very minimal impact on the environment. No environmental assessment is required after reviewing the environmental implications. No further actions including preparation of environment management plans will be required.
Involuntary Resettlement The project activities do not involve civil works and will not trigger land acquisition or involuntary resettlement impacts. No further action including preparation of resettlement plans will be required.
Indigenous Peoples The project is socially inclusive without any partiality to any ethnic groups. Ethnic groups will benefit from the project if they meet the eligibility criteria of having children aged 0 17 and registering in the IHD. The project's benefits are national in scope.
Stakeholder Communication, Participation, and Consultation
During Project Design The project is designed to respond specifically to the sudden and direct economic impacts on poor and vulnerable households of the COVID-19 pandemic and strengthen the social welfare system's shock-responsiveness to better respond to future crises. It will also strengthen household resilience by diversifying livelihoods and income sources through the graduation pilot program.
During Project Implementation The MLSP will undertake extensive outreach on the implementation of the proxy means test survey update in 2021. The project will include broad stakeholder consultation on the graduation pilot program, including working with and through local civil society organizations to identify beneficiary households.
Responsible ADB Officer Schelzig, Karin Mara
Responsible ADB Department East Asia Department
Responsible ADB Division Urban and Social Sectors Division, EARD
Executing Agencies
Ministry of Labor and Social Protection
[email protected]
Government Building-2
United Nations Street-5
Ulaanbaatar-15160,
Ulaanbaatar, Mongolia
Timetable
Concept Clearance 14 Apr 2022
Fact Finding 24 Nov 2020 to 27 Nov 2020
MRM 22 Jan 2021
Approval 22 Mar 2021
Last Review Mission -
Last PDS Update 27 Sep 2021

Loan 4051-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
22 Mar 2021 28 May 2021 07 Jun 2021 31 Dec 2023 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 213.24 Cumulative Contract Awards
ADB 26.60 18 Oct 2021 26.34 0.00 99%
Counterpart 186.64 Cumulative Disbursements
Cofinancing 0.00 18 Oct 2021 0.00 0.00 0%

Loan 4052-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
22 Mar 2021 28 May 2021 07 Jun 2021 31 Dec 2023 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 46.40 Cumulative Contract Awards
ADB 46.40 18 Oct 2021 22.20 0.00 48%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 18 Oct 2021 0.00 0.00 0%

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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