On December 16, 2025, the Government of Mongolia decided to submit the draft Law on Economic Freedom to Parliament. Given the fundamental nature of economic freedom, this initiative has understandably drawn public attention. In a democratic society, such a foundational law should not be adopted without broad public understanding and debate. What, then, does “economic freedom” actually mean—and does the current draft truly reflect it?
Put simply, economic freedom means that citizens and businesses have the right to decide for themselves what to produce, how to produce it, and at what price to sell it—using their own property, labor, and capital—without having to seek permission from the state. If they make a profit, they enjoy it; if they incur losses, they bear them. In other words, economic decisions are made by individuals and markets, not by government officials.
Economic freedom, however, is often misunderstood. It is not about the state “regulating business well,” fixing prices, providing subsidies, or intervening in markets to “stabilize” outcomes. These are all forms of state intervention. Economic freedom is based on the opposite principle: the deliberate limitation of state involvement in market activity. In a free-market system, the state is not a market participant but a rule-keeper.
From this perspective, the current draft law raises serious questions. Although it is titled a law on economic freedom, its underlying logic still reflects a soft interventionist mindset—the belief that “if the state regulates well, business will thrive.” For example, the draft explicitly allows the state to participate in and finance sectors such as education, healthcare, infrastructure, public services, and technological solutions. This keeps the government firmly positioned as an economic actor rather than a neutral arbiter. As a result, the boundary between the state and the private sector remains blurred, increasing the risk of corruption and conflicts of interest.
If Mongolia genuinely aims to build a fully free economy, the law must clearly prohibit the state from engaging in activities that the private sector can perform under market conditions. General statements about “reducing state involvement” are insufficient. What is needed is a clear rule, such as: the state shall not engage in any economic activity that can be carried out by private enterprise in a competitive market. Only such clarity can impose a real limit on state power.
Another major omission in the draft law is the absence of any principle regarding price freedom. There is no reference to prices, wages, tariffs, or exchange rates. Yet prices are the core signals of a market economy, and exchange rates reflect risk and responsibility. When governments interfere in price-setting, markets receive false signals, leading to shortages, shadow markets, and rent-seeking. A genuine law on economic freedom must explicitly state that prices, wages, tariffs, and exchange rates are determined by free market interactions, and that direct or indirect state interference is prohibited.
Equally troubling is the lack of a clear upper limit on regulatory power. Broad and vague concepts such as “national security” or “public interest” are left undefined, allowing almost any restriction to be justified. This undermines predictability and investor confidence. Any limitation on economic freedom should meet strict criteria: it must be necessary, minimal, time-bound, and subject to judicial review. Without these safeguards, economic freedom exists only on paper.
True economic freedom also requires a clear prohibition on state-run commercial activity. The state should not operate businesses for profit. Instead, state-owned enterprises, projects, and programs should be reduced, privatized, or transferred to competitive markets. Otherwise, the government remains a dominant competitor—one that enjoys regulatory power over its own rivals.
A genuine law on economic freedom should therefore include a specific article defining the state’s core economic role. That role should be limited to protecting life and property, ensuring environmental safety, enforcing contracts and property rights through the courts, and safeguarding fair competition. Beyond these functions, the state should not engage in economic activity. This concept is widely known as the “night-watchman state”—a government that protects the rules of the game without playing it.
Mongolia’s recent economic challenges provide strong justification for such reform. Slowing growth, declining investment, and an increasingly unpredictable business environment are closely linked to excessive state intervention, overlapping regulations, and the expanding burden of licenses and permits. Partial adjustments are no longer sufficient. What is needed is a structural shift—a legal foundation that firmly anchors the economy in free-market principles.
In conclusion, economic freedom is not about better state control. It is about abandoning the logic of “the state decides” and embracing the principle that the state protects, while the market decides. If the Law on Economic Freedom is to live up to its name, it must serve as a constitutional-level guarantee of free markets—one that clearly limits government power and fully liberates private enterprise.
Finally, taking the country’s realities into account, Mongolia cannot abruptly and completely withdraw state involvement from the education and healthcare sectors. Therefore, these sectors should be managed not by the state alone, but through a productive partnership with the private sector, gradually expanding competition and choice in a phased and responsible manner.