Domestic Trade and Other Services

In pre-1921 Mongolia, domestic trade and services were primitive. Few commodities were exchanged; those that were primarily were by barter. Traders were almost entirely foreigners - Chinese and Russian - except for Mongolians who conducted trade and provided services at Mongolia's monasteries. After the 1921 revolution, the government began seizing control of the internal trade system and transforming it into a socialist distribution network with Soviet assistance. In 1921 the Mongolian Central Cooperative was established; in the late 1920s, such Soviet trade organizations as the Stormong Company and the Sherst Company began to displace all other foreign traders in the Mongolian economy. In 1929 the Mongolian Central Cooperative was expanded, and Chinese traders were expelled from the country. In 1932 the Mongolian Central Cooperative was reorganized as the Union of Consumer Cooperatives. The Mongolian and the Soviet governments also founded a joint-stock wholesale trading company, Mongsovbuner, which took over the Mongolian Central Cooperative's wholesale operations. In 1934 the Soviet Union handed over its share of Mongsovbuner to the Mongolian government, which transformed Mongsovbuner into the Mongolian State Trading Office. The expropriation of monastic property in the late 1920s and the early 1930s effectively ended the monasteries' participation in trade. Forced collectivization of arads, however, failed miserably and set back government attempts to socialize the internal trade system. Nevertheless, about 90 percent of retail trade was carried out by state and cooperative trade organizations by 1940.

During World War II, state procurement from individual households was instituted by means of taxes in kind and obligatory delivery of goods. The wartime taxation measures provided the foundation of Mongolia's procurement and distribution system as the economy was collectivized in the 1950s. During the Three-Year Plan (1958-60), the Union of Consumer Cooperatives was abolished, and its components were consolidated with state trading organizations under the newly formed Ministry of Trade and Procurement. By 1983 the state trade network accounted for 95 percent of retail trade turnover; cooperative agricultural trade represented the remainder. In the late 1980s, this ministry still ran Mongolia's internal trade and state procurement systems.