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In 1924 Mongolian industry was limited to the Nalayh coal mine, an electric power plant in Ulaanbaatar, and various handicrafts. Gross industrial output (measured in constant 1967 prices), was 300,000 tugriks. Industry developed very slowly in the first two decades of the Mongolian People's Republic, primarily because Mongolia's benefactor, the Soviet Union, provided few resources to invest in industrialization. With Soviet advice, however, Mongolia adopted an industrial strategy that was based on the exploitation of natural resources and agriculture and it has followed this strategy since. The first steps to develop industry began in the 1930s. In 1933 the Union of Artisans was organized. In 1934 the Choybalsan industrial combine, the flagship of Mongolian industry, began operating in Ulaanbaatar.
The combine, a joint Mongolian-Soviet company transferred to Mongolian control in 1935, had its own power plant, cloth factories, tanneries, and wool-scouring mill that produced blankets, felt, footwear, leather coats, and soap. Coal production at Nalayh rose in the 1930s, and in 1938 the narrow-gauge railroad connecting the mine with the capital's power-generating station was completed. In 1940 industry accounted for 8.5 percent, and construction for 0.8 percent, of national income. Gross industrial output rose to 124.7 million tugriks.

Industry began to develop substantially after World War II, when Soviet aid increased and Soviet-style central planning was introduced, and, in the 1950s, when Chinese assistance started. Most industrialization occurred in Ulaanbaatar; smaller food combines and livestock-product processing plants were scattered throughout the country. In the 1950s, major projects completed with Soviet assistance included the modernization of the Choybalsan industrial combine; the expansion of production at the Nalayh coal mine; the opening of oil wells in Buyant-Uhaa (Sayn Shand); and the construction of four felt-rolling mills, a water supply plant, and leather-processing factories. Chinese aid was given primarily in the form of construction projects; Chinese laborers built roads, bridges, housing, and a hydroelectric power plant. By 1960 industry and construction accounted for 14.6 percent and 6.7 percent, respectively, of national income. Gross industrial output (in constant 1967 prices) was 676.8 million tugriks.

Industrialization took a big step forward after 1960. Large-scale investment by the Soviet Union and other East European countries took place with Mongolia's entry into Comecon in 1962. This assistance enabled Mongolia to diversify industry geographically and sectorally. Major industrial centers were built at Darhan and Choybalsan in the 1960s and at Erdenet and Baga Nuur in the 1970s and the 1980s. After 1970 the scope of industry expanded beyond processing of agricultural products; exploitation of minerals developed on a large scale, and the energy and the construction industries, which supported such development, also grew. In 1970 industry and construction accounted for 22.6 percent and 5.8 percent of national income, respectively; in 1985 they accounted for 32.4 and 4.9 percent of national income, respectively. Gross industrial output (in constant 1967 prices) was 1,733.2 million tugriks in 1970 and 6,244.4 million tugriks in 1985.

In the late 1980s, industry was concentrated in several urban centers. Baga Nuur was a coal-mining and energy production center. Bor Ondor produced fluorite. Choybalsan had a coal mine, a meat-packing plant, a foodstuffs combine, and a wool-scouring mill. Darhan was close to the Sharin Gol coal mine and produced construction materials, foodstuffs, and light industrial products. Erdenet, home of the copper and molybdenum processing combine, also manufactured carpets and processed timber. Hotol was the location of major limestone deposits and a cement production center. Ulaanbaatar, the oldest industrial center, specialized in coal and energy production, food processing, livestock-product processing, and textiles.

Industry, 1985
Source: Based on information from USSR, Council of Ministers, Main Administration of Geodesy and Cartography, Mongolskaia Narodnaia Respublika, ekonomicheskaia karta dlia srednei shkoly (Mongolian People's Republic Economic Map for the Middle School), Moscow, 1985.

Changes in government organizations responsible for industry reflected the regime's efforts to spur industrial development. In 1968 the Ministry of Industry, originally established in 1938, was abolished; the Ministry of Food Industry was transformed into the Ministry of Food and Light Industries. That same year, the Ministry of Geology became the Ministry of Fuel, Power, and Geology. In 1972 the Ministry of Food and Light Industries established industrial producers' associations modeled on Soviet producers' associations. The industrial producers's asociations grouped ministry enterprises according to their specialization in clothing, flour and fodder, footwear, hides and skins, and wool. In 1976 the Ministry of Fuel, Power, and Geology was divided into the Ministry of Fuel and Power Industry and the Ministry of Geology and Mining. In 1986 the Ministry of Construction and Construction Materials Industry and the State Committee for Construction, Architecture, and Technical Control were dissolved, and the State Construction Committee was established. In December 1987, the Ministry of Forestry and Woodworking, the Ministry of Geology and Mining, the Ministry of Fuel and Power Industry, and the Ministry of Food and Light Industries were replaced by the Ministry of Agriculture and Food Industry, the Ministry of Light Industry, and the Ministry of Power, Mining Industry, and Geology. Government organizations also concerned with industry in the late 1980s were the State Construction Committee and the Ministry of Social Economy and Services, formed in 1972 to supervise handicraft production and the artels, or handicraft producers' associations.

The Ministry of Environmental Protection also was formed in 1987 out of the Forestry and Hunting Economy Section of the Ministry of Forestry and Woodworking, the State Land and Water Utilization and Protection Service of the Ministry of Agriculture, and the Main Hydrometeorological Administration of the Council of Ministers; it dealt with industrial pollution. Environmental degradation of the Hovsgol Nuur-Selenge Moron-Lake Baykal ecosystem was a concern of both Mongolian and Soviet authorities. To limit ecological damage, the Ministry of Environmental Protection took steps to close the Hatgal wool-scouring mill on Hovsgol Nuur, to end shipping of gas and oil in the summer, and to cease carbon-monoxide-producing motor transportation across the ice during the winter. Plans to open the Urandosh strip mine on the banks of Hovsgol Nuur also were postponed. Other measures to alleviate environmental pollution included closing thermal power stations in Ulaanbaatar and moving industrial facilities outside the city in order to reduce air pollution. Strip mining in Mongolia - particularly at the Baga Nuur, Erdenet, and Sharin Gol mines - had created large slag heaps of concern to environmentalists. Other sources of ecological degradation were the dumping of industrial, agricultural, and household waste into small rivers and lakes.

Last Update: 2010-12-07