Mongolia – Funds from the government to improve poor infrastructure have increased by 3400% since 2013 (Hasnain, 2013). This was caused by increased mining production of coal, copper, and gold, which led to a surge in finance. Founded in April 2024, the Genghis Khan Sovereign Wealth Fund manages mineral wealth for long-term development. It was funded through the revenue from major mining operations. It has funded projects, such as renewable energy power grids, data centers, and initiatives to boost green energy exports. This enabled Mongolia to use $1.4 billion in assets from the wealth fund to support infrastructure construction and reconstruction in 2024 and 2025.
With substantial funding and investment in place to drive development, a key question remains unanswered: why has Mongolia not yet made a major transition from its densely populated, polluted capital city, particularly in Ulaanbaatar’s slums, to the envisioned model of sustainable urban living?
Geographic Constraints and Trade Isolation
The immutable city continues to struggle with this critical issue for numerous reasons. Among the most common would be its limited development due to its landlocked geography, as Mongolia lacks direct access to seaports and must rely on long overland routes through China or Russia for trade. In turn, this increases transportation time and costs. Moreover, Mongolia’s extremely low population density, given its vast land area, makes it difficult to develop and maintain large-scale infrastructure such as roads and railways, further constraining urban growth. At the same time, the persistent lack of private investment contributes to structural conditions that resemble structural violence, as long-term infrastructure development is slowed and existing inequalities are reinforced through systemic underinvestment.
Transportation Infrastructure Deficits
Mongolia’s landlocked geography creates unavoidable trade barriers. The effects of this isolation are intensified by weaknesses in the country’s transportation infrastructure. Only about 13–15% of Mongolia’s roads are paved, meaning most transportation depends on unpaved roads that are difficult to use year-round and costly to maintain, especially during extreme weather (World Bank, 2022). In addition, Mongolia ranked 108th on the Logistics Performance Index, showing major weaknesses in transport quality and connectivity compared to other countries (OECD, 2023). These conditions increase transportation costs, discourage private investment, and limit the country’s ability to modernize its infrastructure. Further promoting the Sovereignty Wealth Fund to be invested towards more solvable problems than an incredibly difficult one in the eyes of the government.
Institutional Weaknesses and Governance Failures
Beyond geographic and transportation constraints, Mongolia’s infrastructure challenges are also shaped by institutional weaknesses that limit the effectiveness of investment planning, implementation, and monitoring.
Mongolia’s public sector faces long-standing challenges, including fragmented decision-making and inconsistent policy implementation. Poor coordination across ministries limits the government’s ability to manage complex, long-term infrastructure investments. Even after reforms to public financial management and organizational systems, many infrastructure projects have continued to experience delays, causing costs to overrun and be above budget.
The Corruption Perceptions Index shows that Mongolia has a low governance score of 33 out of 100, indicating persistent corruption risks that undermine effective public investment (Lkhaajav, 2024). These risks weaken confidence in infrastructure planning and project execution. In parallel, the OECD identifies ongoing gaps in Mongolia’s institutional and regulatory frameworks. Weak regulatory enforcement and unclear standards discourage private-sector participation and limit the scalability of high-quality infrastructure projects. Together, these institutional and governance failures help explain why increased funding and strategic initiatives have not consistently translated into durable infrastructure outcomes. Implementation often lags, project quality suffers, and development fails to keep pace with economic and demographic demands.
Rapid Urbanization and the Expansion of “Slummy” Suburban Districts
Around a quarter to a third of Mongolian citizens experience poverty, with recent figures from 2022 showing a national poverty rate of 27.1%. Those in poverty often live on the outskirts of Ulaanbaatar, in the slums. Those living in the slums deal with temperatures as low as -40 degrees Celsius in winter. These conditions are not merely the result of individual circumstance or climate, but reflect deeper structural constraints in housing provision, urban planning, and service delivery. These long-term weaknesses in coordination undoubtedly are most visible in Ulaanbatar, where rapid urbanization and expansion of informal slum districts have overwhelmed infrastructure capacity. Mongolia’s ability to convert funding into visible infrastructure is limited because demand grows faster than networks can be planned, financed, and built. UN-Habitat reports that 47% of Mongolia’s population lives in Ulaanbaatar, and 54.4% of the city’s residents live in the suburban slums, where settlement expansion has outpaced formal service provision (UN-Habitat, Mongolia Country Profile). Informal districts are extremely hard and costly to reform. Large-scale networks are often technically difficult and capital-intensive. This is because households in suburban slums rely almost exclusively on open pit latrines and face severe shortages of water, sewage, and heating.
The government plans to improve infrastructure in suburban slums, but the scale of those communities is overwhelming. World Bank projections estimate that nearly 400,000 residents will still be unconnected to sewer systems by 2030 under existing development strategies, leaving much of the city’s expanding outskirts structurally excluded from formal infrastructure coverage. Rapid urbanization intensifies the pollution crisis, with studies showing that around 95% of households located in the slums rely on coal and firewood for heating and cooking. As a result, Mongolia experiences significant air pollution in winter. These conditions increase the cost of public healthcare and divert resources away from long-term infrastructure investments.
Low Population Density and National Infrastructure Inefficiency
Migration from surrounding regions and rural areas into Ulaanbaatar has caused overcrowding in the capital. At the same time, high population density in Ulaanbaatar and extremely low density across the rest of the country make infrastructure investment far less efficient and limit nationwide improvement. With a population of roughly 3.54 million people spread across 1.56 million square kilometers, Mongolia has one of the lowest population densities in the world.
While half of the population lives in Ulaanbaatar, the rest is dispersed across small towns and remote pastoral areas. This distribution forces infrastructure networks to span long distances to serve a small portion of the population. According to the OECD, this population distribution raises the costs of building and maintaining roads, railways, power grids, and water systems, making large infrastructure projects far less efficient compared to denser countries.
High costs and sparse populations discourage private investment in rural and regional infrastructure, pushing public funding toward a narrow set of strategic corridors, such as mining routes and border connections, rather than integrated national networks (World Bank, 2020).
Similar challenges exist in digital infrastructure. Fixed broadband is largely confined to urban areas, while rural regions rely on more expensive wireless or satellite connections with lower service quality. As a result, even substantial investment struggles to produce visible, nationwide improvements, as resources are spread across a vast territory where infrastructure deployment is far less efficient.
Policy Implications and Strategic Pathways Forward
[https://www.freepik.com/premium-photo/multilane-dirt-road-mongolia_28406738.htm]Improving Mongolia’s infrastructure requires addressing these barriers through targeted reforms rather than increased funding alone. To reduce the constraints of landlocked geography and weak transportation networks, investment should prioritize high-impact trade corridors, border logistics hubs, and all-season paved roads connecting Ulaanbaatar with mining regions and countryside cities. Focusing resources on these corridors would lower transportation costs, improve trade efficiency, and attract private investment. Institutional reform is also essential. Strengthening inter-ministerial coordination, improving project oversight, and increasing transparency in procurement would help ensure funds are used effectively and that projects are started with a clear purpose and a defined finish date.
Urban growth and population dispersion also need more strategic management. In Ulaanbaatar, infrastructure policy should prioritize gradual upgrades in suburban slum districts, such as eco-friendly heating systems, sewage systems, improved road access, walls that can’t be pushed over, and more. Outside the capital, low population density can be addressed through hub-and-corridor development, which concentrates infrastructure around regional centers rather than spreading resources thin across large areas. Expanding digital infrastructure through wireless and satellite technologies would further reduce isolation and support economic activity in remote regions. Together, these steps emphasize practical planning and focused investment, allowing Mongolia to achieve more durable infrastructure improvements despite its structural challenges.
In conclusion, Mongolia’s infrastructure challenges stem less from a lack of funding than from structural and institutional constraints that limit the effective use of investment. Despite major increases in spending driven by mining revenues and the Genghis Khan Sovereign Wealth Fund, progress has been slow. Plans and ideas reach a standstill due to constraints of geographical landlocked, weak transportation networks, governance failures, rapid urbanization, and low population density, all of which raise costs and hinder development. Addressing these issues requires targeted investment in trade corridors, stronger institutional coordination, gradual upgrades in slum districts, and hub-based developments suited to dispersed populations. While these constraints cannot be removed, aligning infrastructure policy with them would allow Mongolia to achieve more durable and inclusive development.
Bennet Bat-Ulziit
Amar Tuvshintugs
Amar Tuvshintugs is a writer based in Arlington, VA, specializing in culture, international affairs, and community engagement. With a focus on diverse perspectives, diplomacy, and policy, Amar explores the intersections of cultural exchange and global relations.
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Amar Tuvshintugs#molongui-disabled-link
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Amar Tuvshintugs#molongui-disabled-link
