Formal Employment Is Promoted for Inclusive and Diversified Economic Growth in Mongolia

The project, funded from the ILO Regular Budget Supplementary Account, focuses on facilitating progressive transitions from the informal to the formal economy in in Mongolia. The actions under the project will give effect to the ILO’s roadmap for “Effective ILO development cooperation in support of the Sustainable Development Goals” and the ILO Transitions from the Informal Economy to the Formal Economy Recommendation, 2015 (No 204). Further it provides support to the government in addressing the Direct Request of the ILO Committee of Experts on the Application of Conventions and Recommendations on Mongolia’s application of the Employment Policy Convention No 122.

Background

The Mongolian economy has undergone a boom-bust cycle. The spectacular economic growth in the first decade of the 21st century has declined in the second decade. The period following 2012 has seen a dramatic contraction of the annual growth rate of labour productivity and the share of informal employment in non-agricultural sector doubling between 2006/7 and 2016, from 12.7% to 26.3%. More women than men have non-agricultural informal wage jobs especially in the retail trade and service sectors, according to a joint publication of ILO and NSO (National Statistics Office) “Accelerating the 2030 Sustainable Development Goals through Decent Work: SDG monitoring and country profile for Mongolia” (ILO and NSO, 2019).

In 2013, the informal economy was estimated to provide livelihoods to nearly one-third of the population and to contribute to about 35% of the GDP. The Asia Foundation reported that in 2015 in the capital city of Ulaanbaatar, 87% of companies with less than 9 workers and a 107,000 individual traders were estimated to be operating informally. Business operators in Mongolia’s informal economy face significant challenges to expand. Their operational challenges range from finding skilled workers, training workers, accessing financial services, understanding labour laws, and seizing market opportunities (MONEF and EPCR, “Formalizing Enterprise”, 2015). Additionally, more than 25% of employment in formal business is temporary (ILO, 2016). The NHRCM labour rights survey in 2017 revealed a high prevalence of informality practices in SMEs: young and women workers are often not paid for their work, face arbitrary hiring and firing decisions, often work long hours, and are not declared to public authorities. Combined with lower productivity, poor working conditions and decent work deficits, the growth of the informal economy is likely to inhibit Mongolia’s ability to achieve the Mongolia’s Sustainable Development Vision 2030, the key development plan of the government.

Objective

To improve the working and living conditions of workers and economic units in the informal economy and give them a voice in the processes that affect them by facilitating the transitions from of the informal economy to the formal economy knowledge.

Expected impact

  • By 2030, Mongolia achieves its Sustainable Development Vision, creating sustainable jobs for all Mongolians and becomes a high middle income country;
  • By 2022, more economic units, waged and self-employed workers operating in the informal economy are able to transit to the formal economy.

Expected outcome

  • By 2022, workers and economic units that operate in the informal economy have progressively gone through a process of formalization.
  • By 2021, Mongolian Employers' Federation (MONEF) and Confederation of Mongolian Trade Unions (CMTU) each has provided adequate services to and strengthened its representativeness among the economic units operating in the informal economy.
  • By 2021 the ILO constituents have enhanced capacities and visible roles in national debates on SDGs, employment and informality.
  • By 2020 the CEACR notes Mongolia’s progress in closing the gaps in the implementation of C122 and the fundamental conventions.
  • By 2020 the government has continued the process to complete the ratification of all governance conventions.

Project outputs

  • A knowledge-based strategy to promote sustainable transitions from the informal to the formal economy in the contexts of UNDS reform is developed and implemented by the tripartite constituents in partnership with key development actors;
  • More and better outreach services to promote the formalization of economic units operating in the informal economy advocated by MONEF including through alliances with organizations of informal enterprises;
  • More and better outreach services advocated by CMTU and its affiliates to improve working conditions, skills and labour protection for workers in the informal economy with a particular focus on young and women workers;
  • Technical assistance provided to the government to increase the efficiency of labour and workplace inspections with a view to facilitate the transition to formality, with a special attention to young and women workers;
  • Enhanced visibility and increased participation of ILO constituents in the development and implementation of the UNDAF.

Project partners

Ministry of Labour and Social Protection (MLSP), General Agency for Specialized Inspection (GASI), National Development Agency, MONEF, CMTU, Authority for Family, Child and Youth Development, National Commission on Gender Equality, and selected UN agencies, development partners including the EU and relevant NGOs.