The development of the Oyu Tolgoi copper mine: an assessment of the macroeconomic consequences for Mongolia

Mongolia is a vast, resource abundant country located between China and Russia. The formal economy is relatively small with GDP in 2009 of US$4.2 billion but growing quickly with an annual average real GDP growth from 2003 to 2008 of nearly 9 per cent. The country has relatively low living standards with a GDP per person of US$1,560 in 2009. Since the early 2000s, the Mongolian economy has become more dependent on the mining sector for GDP growth, exports, and fiscal revenues with copper, gold, coal, molybdenum, fluorspar and zinc being the major commodities.

The analytical framework used in this assessment is BAE’s general equilibrium model of the world economy, MINCGEM. The impacts of Oyu Tolgoi are projected by comparing economic outcomes in the reference case (a hypothetical global economy in which Oyu Tolgoi is economic impact assessment – Oyu Tolgoi not developed) to a number of alternative policy scenarios in which Oyu Tolgoi is developed. The assessment is conducted over the period 2010 to 2043, that is, covering the first 30 years of the mine’s production life.