By Bolortuya Chuluunbaatar

Photo by Byamba-Ochir Byamba-Suren

Series – Part 2

Ulaanbaatar, January 8, 2026 /MONTSAME/ Human intervention in Mongolia often carries a stigma of tampering with nature, yet in the past Mongolians actively maintained forest health by removing dead trees. That practice has gradually faded, and the lack of proper forest maintenance has allowed deadwood to accumulate, contributing to growing problems in forest ecosystems.

“When forests become overmature and overloaded with deadwood, they create favorable conditions for pest infestation and increase the risk of wildfires. Therefore, the most important measure for preserving and sustaining forests is thinning and cleaning. In other words, reforestation without first maintaining and cleaning the forest is ineffective.”

Narantsetseg S., head of the “Sumber Ekh Nutag” Forest User Group in Tuv Aimag: “Climate change and irresponsible human activity have led to extensive accumulation of deadwood and dense undergrowth in Mongolia’s forests.” As she noted, “When forests become overmature and overloaded with deadwood, they create favorable conditions for pest infestation and increase the risk of wildfires. Therefore, the most important measure for preserving and sustaining forests is thinning and cleaning. In other words, reforestation without first maintaining and cleaning the forest is ineffective.”

Her remarks are strongly supported by national data showing that 76 percent of Mongolia’s forests are now mature or overmature.

Under Mongolia’s current Forest Law, the stated objective is to regulate the protection, restoration, cultivation, possession, and use of forests, as well as the prevention of forest and steppe fires. Yet the statistics mentioned above illustrate just how much effort is required for this objective to be meaningfully achieved.

In the previous article, we examined the misconceptions and ineffective practices surrounding forest protection and restoration. In this second article, we turn our attention to governance and institutions within the forestry sector.

Governance in the forestry sector refers, in essence, to the institutional arrangements, rules, coordination mechanisms, and accountability systems through which policies and decisions are made, implemented, and monitored. “Good governance” means that these functions operate effectively, stakeholders’ interests are meaningfully reflected in decision-making, and the system as a whole performs efficiently and transparently.

Forests cover 8.45 percent of Mongolia’s total land area. Although this represents less than 10 percent of the country’s territory, Mongolia has 4.1 times more forest than Austria and 2.8 times more than South Korea. Yet Mongolia’s annual timber harvest is, for example, roughly twenty-two times lower than Austria’s.

This contrast illustrates a deeper issue: weak governance and the absence of sustainable forest management have resulted in inadequate thinning, cleaning, and maintenance. Consequently, Mongolia is losing both ecological and economic potential. Today, 76 percent of the country’s forests are mature or overmature; 13.9 percent—equivalent to 172.5 million cubic meters—consists of standing deadwood, while 20 percent—248.3 million cubic meters—has accumulated as fallen deadwood.

This raises an important question: which institutions are responsible for decision-making, implementation, and oversight within this sector?

I. THE NATIONAL FOREST AGENCY FLOATING IN THE CLOUDS

Today, Mongolia’s forestry sector falls under the mandate of the Ministry of Environment and Climate Change, which is responsible for setting the sectorial policy. Implementation, in turn, is carried out by the National Forest Agency (NFA), a government implementing body.

As a result of amendments to the Forest Law approved on June 3, 2022, the NFA was re-established and granted 25 new authorities related to forest protection, restoration, and utilization. The agency now operates with the status of a government implementing body. However, the responsibilities, decision-making and enforcement powers concerning forest issues that rest with local governors and Citizens’ Representative Khurals remain unchanged. This fragmented structure continues to hinder sector development and prevents meaningful progress.

According to  Burenbat J., a representative of forest professional enterprises in Selenge and Darkhan-Uul provinces:

“For the forestry sector to develop and for the Forest Law to be effectively implemented, the National Forest Agency, the forest divisions under provincial Environment Departments, and soum-level forest units must operate under centralized management and administration. Because these organizations currently function under different structures and statuses, inconsistencies and ambiguities frequently arise. Soum Citizens’ Representative Khurals allocate annual timber harvest quotas, but since these decisions are often made by individuals with limited technical knowledge and influenced by political interests, the process faces many obstacles. If these governance issues are clarified and streamlined, the forestry sector would gain significant momentum. Mongolians plant trees, work to conserve forests, and participate in many environmental initiatives, yet the impact remains limited. Only once these governance challenges are addressed can we expect real, measurable results.”

Looking back at history, Mongolia’s forestry sector, which began to take shape in the 1920s, reached its peak strength in the 1970s and 1980s. During this period, the country had an independent Ministry of Forestry and Wood Industry, seven timber-harvesting operation sites, and sixteen state-owned enterprises, collectively employing around 20,000 people and contributing nearly 15 percent of the national GDP.

However, following the economic and social transition of 1991, the sector underwent extensive privatization. In addition, the new Forest Law adopted in 1995 reassigned significant management functions to local governments. As a result, the central institution responsible for oversight lost much of its authority. This shift marked the beginning of a decline in forestry governance, leading to fragmented responsibilities and weakened accountability—conditions that underpin the current lack of coherence in policy, implementation, and sector-wide coordination.

Chart 1, Structure of the National Forest Agency, 2025:

In other words, the National Forest Agency (NFA) does not have a direct operational structure at the local level through which to implement forest policies. Instead, implementation responsibilities fall under the mandate of provincial Environment Departments. At the soum level, inter-soum forest units also operate under the supervision of these provincial Environment Departments. As a result, the NFA exists almost like an institution “floating above the system,” without direct authority over the structures responsible for carrying out its mandate, as the organizational chart clearly illustrates.

The root of this situation lies in the Law on Environmental Protection. Under Article 16.2.2, the Citizens’ Representative Khurals (local parliaments) of aimags and the capital city are empowered to “determine the maximum allowable use of natural resources within their territory for the given year in accordance with the procedures and principles defined by this law.” Furthermore, Article 16.2.6 grants these same local bodies the authority to appoint and dismiss the heads of provincial Environment Departments, in consultation with the central administrative authority for environmental protection.

In practical terms, this means the NFA does not control the budget for local-level forest operations, nor does it have authority over the appointment of local officials responsible for forestry functions.

This lack of coordination and absence of integrated management reflects a broader governance problem commonly observed not only in the forestry sector but across multiple sectors in Mongolia. The fragmentation of authority and misalignment between policy-setting and implementation structures stand as a textbook example of systemic governance failure.

Chart 2, South Korea’s experience:

According to South Korea’s experience, the country’s forestry sector is led by the Korea Forest Service, whose commissioner holds ministerial rank. Among its core structures, the Planning and Coordination Bureau are responsible for big data management and analytical functions. The International Affairs Bureau primarily oversees matters related to timber exports and imports. Regional forestry offices operate under a centralized, region-based administrative structure and report directly to the Korea Forest Service. In addition, the agency oversees six affiliated organizations dedicated to research, scientific studies, aerial forest services, and disaster response—making it a comprehensive institution that covers the full range of forestry functions.

In Norway, by contrast, there is no separate government agency solely dedicated to forestry. Policy-related functions fall under the Forestry Department within the Ministry of Agriculture and Food. What stands out, however, is Statskog SF (“State Forests”), a fully state-owned enterprise under the ministry, which manages ownership rights over 5.9 million hectares of state land. The ministry also oversees the Norwegian Institute of Bioeconomy Research, an institution that integrates scientific research with forest policy development.

The United States follows yet another model. The U.S. Forest Service is a federal agency responsible for managing, protecting, restoring, and utilizing publicly owned forests. However, the U.S. forestry sector as a whole is dominated by private-sector, market-driven management. A clear example is Weyerhaeuser, a publicly traded company listed on the New York Stock Exchange, which owns and manages millions of hectares of private forests.

The company manages forest operations in both the United States and Canada, balancing two core objectives within the framework of sustainable forestry: generating long-term economic value from timber resources and maximizing market efficiency. In practice, this means that the volume of timber harvested is determined according to the company’s own sustainable management model, ensuring that extraction levels remain within ecologically and economically viable limits.

Thus, in developed countries, long-term forest policy is implemented not only through various government structures but also through a hybrid governance system in which state-owned and private-sector entities play complementary roles. This combination enables more stable, accountable, and sustainable forest management over time.

II. WHO OWNS THE FORESTS?

When governance is discussed, the question of ownership inevitably follows.

Unless allocated for private ownership to citizens of Mongolia, land and its subsoil, their resources, forests, water resources, and wildlife are the public property of the State.

Can forests be privately owned? According to Article 6.1 of the Constitution of Mongolia, “Land, subsoil, forests, water, wildlife, flora, and other natural resources shall be the property of the people and under the protection of the State.” Article 6.2 further states, “Unless allocated for private ownership to citizens of Mongolia, land and its subsoil, their resources, forests, water resources, and wildlife are the public property of the State.”

However, Article 4.2 of the Forest Law provides a specific exception: “Citizens may own forests intentionally planted and grown at their own expense on privately owned or possessed land; forest user groups, enterprises, and organizations may own forests planted on their possession lands in accordance with procedures established by law.”

In Norway, the forest area—defined according to FAO standards—covers approximately 12 million hectares, about 80 percent of which is privately owned by 49,445 legal entities. The forestry sector accounts for about 1.1 percent of Norway’s GDP and represents roughly 8.6 percent of the country’s non-oil exports.

In Austria, 81 percent of forests are privately owned, and according to 2023 statistics, the country harvested 22.4 million cubic meters of timber that year. In South Korea, 66.1 percent of forests are privately owned, while in Japan the share is 57 percent.

In Mongolia, by contrast, the Constitution stipulates that 100 percent of forest resources are public property, owned by the State on behalf of the people. Furthermore, 83.1 percent of Mongolia’s forests fall within protection zones, while only 16.9 percent are classified as utilization zones.

As noted in the previous article, the ecological and economic valuation estimated by the methodology approved by the Minister of Environment and Tourism in 2020 and further refined under the Mongolia–European Union “Forest Partnership,” estimates the total value of Mongolia’s forest resources at USD 253 billion (MNT 909 trillion, converted at the Bank of Mongolia’s MNT–USD rate on 21 October 2025).

The overarching framework for administering and managing these resources is the Forest Management Plan. According to Article 3.1.6 of the Forest Law, this refers to “a comprehensive and phased planning document that outlines forest management activities aimed at protecting, sustainably using, and restoring forests within a given administrative or territorial unit, or within a possession area.”

Chart 3, The process of approving the annual allowable timber harvest,

In addition to the Forest Management Plan, the Minister of Environment and Climate Change approves the national annual maximum allowable harvesting quota. Provinces and soums then determine their own harvest quotas within this ceiling. However, as illustrated in Chart 4, the actual decision-making process is far more complex. Each year, soums—specifically the forest units—submit their proposed harvest volumes to the National Forest Agency. Based on these submissions, the Minister approves the national harvest limit. Yet this approved figure must again be discussed and endorsed by the Citizens’ Representative Khurals at the aimag and soum levels.

This repeated cycle of approvals creates delays, opportunities for political influence, and a high likelihood that the forest units’ initial scientifically based proposals will be altered. Ultimately, this introduces systemic instability and undermines effective forest management.

As shown in Chart 1, the institutions directly responsible for forest use, timber harvesting, sustainable resource management, restoration, and protection at the soum level are the forest units.

Currently, Mongolia has 41 inter-soum forest units and five soum-level units, a total of 46 operating nationwide. Although forest units are, in principle, expected to operate under the authority of a national government implementing agency, the law grants the final decisions on their financing and the appointment or dismissal of their directors to local Citizens’ Representative Khurals at the aimag and soum levels. As noted earlier, this legal inconsistency has resulted in forest units with differing statuses, varying salary structures, and a general lack of unified policy or organizational standards.

Nyamkhishig B., head of the inter-soum forest unit in Bayankhishig soum of Khuvsgul Aimag, explained:

“Our forest unit is responsible for implementing forestry operations across 1.076 million hectares of forest in the soums of Arbulag, Bayanzurkh, Tsagaannuur, and Renchinlkhumbe. However, our organizational structure, staffing, and financial resources are insufficient to fully carry out our mandate and implement the Forest Law. Forest units need to be standardized under a single legal status, and the term ‘forest unit’ must be formally incorporated into the national salary framework. If forest units were placed under centralized administration, given one standardized status, and staffed with 8–10 professionals, we could work effectively in collaboration with forest user groups and professional organizations. What the forestry sector urgently lacks are long-term government policy.”

Salaries for engineers and technicians working in forest units vary widely across provinces. The legal and organizational status of Mongolia’s 46 forest units also differs significantly:

• 21 are locally owned, self-financed public enterprises
• 20 are budgetary organizations
• 4 are state budget enterprises
• 1 is a state-owned enterprise

Another clear indicator of governance dysfunction within soum-level forest units is their financial inconsistency. For example, the annual revenue of the inter-soum forest unit in Khutag-Undur, Bulgan Aimag is approximately USD 15,090 (54 million MNT), with expenditures amounting to about USD 14,814 (53 million MNT). In stark contrast, the inter-soum forest unit in Umnugobi soum, Umnugobi Aimag reports annual revenue of roughly USD 866,000 (3.1 billion MNT) and expenditures of around USD 670,000 (2.4 billion MNT). (Converted using the Bank of Mongolia’s exchange rate as of 9 November 2025.) These disparities show that the financial performance of forest units is not based on forest resource potential or market principles, but rather on local capacity, discretionary decisions, and ad hoc arrangements.

As noted at the beginning of this article, strengthening governance—particularly good governance—requires ensuring the participation of citizens, professional associations, and forest user groups, while also establishing systems that operate efficiently and effectively.

Forest units receive funding from local budgets but also generate income by providing services to timber-harvesting companies and other professional organizations. For example, the Orkhon inter-soum forest unit in Selenge Aimag generated 33 percent of its 2024 budget revenue on its own. In this sense, forest units should no longer be viewed solely as budgetary institutions, but also as revenue-generating entities within the sector.

One of the most important actors in forest protection—and a vital component of the sector’s governance—are the community-based forest user groups (FUGs). These groups voluntarily undertake essential responsibilities such as forest protection, fire prevention, pest control, and the prevention of illegal logging.

According to the Forest Unit Capacity Assessment Report, Mongolia has approximately 1,267 forest user groups nationwide. Each group has an average of 20 members and manages, through contracts, a total of 4,143 hectares of forest.

Uuganbayar Z., a leading member of the Community-Based Natural Resource Management Groups in Selenge Aimag, stated:

“When it comes to carrying out first- and second-stage thinning operations or conducting fire-prevention patrols, there is no support from either local authorities or the state. Forest user groups need incentives for conducting forest cleaning, thinning, and fire-prevention work. To ensure their activities remain sustainable and to increase income derived from forest use, the Forest Law must introduce incentive mechanisms for these groups.”

In other words, although the laws, policies, and plans of the forestry sector identify forest protection as their top priority, there is still no operational or financial incentive system for the very actors—community forest user groups—who carry out this protection most effectively and voluntarily on the ground. Sector stakeholders increasingly argue that it is time to address the financial sustainability of these groups and that incentives could readily be provided from forest resource utilization fees.

In summary, the current state of governance in the forestry sector is characterized by weak coordination among key institutions, which hinders integrated planning and effective management.

Economically, the sector is also constrained. With annual allowable harvests capped at under one million cubic meters—a level far below the country’s scientific and ecological capacity—the sector remains “neither here nor there,” unable to develop into a robust economic industry. If harvest levels were increased based on scientific principles, governance distortions corrected, political interference reduced, and sustainable management practices consistently applied, Mongolia could unlock a substantial new economic sector rooted in its vast forest resources.

At the same time, there is an urgent need to better understand, engage, and support professional timber-harvesting companies—who today are often publicly labeled as “illegal loggers”—as well as wood-processing enterprises and nursery operations. Their interests and participation must be recognized at the policy level and integrated more effectively into sector development, as they are essential actors in sustainable forest management and in creating economic value.

It is time to recognize that reforming forestry policy and governance is not solely an environmental issue, but also a significant pathway for economic growth and local development.

As seen in developed countries, forests are environmentally sensitive resources that require strict protection and oversight by the state. At the same time, unlocking their economic potential through sustainable management and sound governance—implemented via public-private partnership operational models—can be an appropriate and effective approach. Strategic state stewardship and professionally managed economic activity are not mutually exclusive; rather, they can complement one another to ensure both ecological stability and long-term economic return.

In our next article, we will explore the real investment opportunities within Mongolia’s forestry sector and examine the economic benefits that could be generated.