(EnergyAsia, April 23 2012, Monday) — The Asian Development Bank (ADB) has agreed to provide the Mongolian government US$434 million of loans and technical assistance as part of a new five-year development assistance strategy to help the country diversify its economic activities and narrow its inequality gap.

ADB said its board of directors has endorsed the Country Partnership Strategy (CPS) that outlines its support for Mongolia’s efforts to address priority infrastructure gaps, regional economic integration, and access to basic urban services, including water supply, education and health.

“As Mongolia approaches the middle-income level, ADB’s support is expected to grow and play an increasingly catalytic role by improving the environment for private sector participation in infrastructure and service delivery, and by addressing policy, regulatory and capacity constraints,” said Robert Wihtol, director-general of ADB’s East Asia Department.

The bank said the new strategy aims to achieve the twin goals of competitive, sustainable and regionally integrated growth, and inclusive social development.

Selective investments are planned in transport, energy and municipal development, with emphasis placed on public-private partnerships and regional cooperation.

ADB said it will also support skills development through higher education reform and vocational training, as well as help sustaining health reforms so that private sector can invest to improve health services.

The Mongolian economy rebounded strongly after being one of the hardest hit by the global economic downturn of 2008 to 2009.

With a growing mining sector, the ADB predicts Mongolia will become one of the fastest growing countries in the region.

But poverty remains a challenge. In 2011, an estimated 39% of the population was living below the poverty line, with nomadic families, households headed by women, and recent urban migrants registering a high poverty incidence.

The bank said inequality is severe between the urban and rural areas, especially in the western part of the country. This is reflected in poor and unequal access to basic social services in underserved suburban and rural areas.

The CPS plans to raise the percentage of college graduates employed in the fields in which they received training to 50% by 2016, up from 40% in 2007. It also plans to achieve universal coverage of health insurance by 2015.

Stating a common complaint among investors, the ADB said Mongolia’s infrastructure is still inadequate to realise the full potential of mining sector development. Despite a strong government commitment to health and education, fundamental skills mismatch and inefficient health services still prevent many Mongolians from participating in the new mining- and services-based economy.

ADB said it has been the government’s single largest source of official development assistance, providing a total of US$839 million in loans for 46 projects between 1991 and 2011. Since 2007, the bank said it provided another US$172 million through 12 Asian Development Fund grant projects.