Terrence Edwards in Ulaanbaatar -

Known to many as the land of the Blue Sky and the birthplace of Genghis Khan, Mongolia,  the world's least densely populated country, has been named a must-visit location by publications such as The New York Times, The Guardian, and National Geographic. But despite the exotic appeal of the Gobi desert and vast steppe, tourism still remains a blip on Mongolia’s economic charts.

By most accounts tourist numbers have fallen so far this year. Government figures show that the number of people entering on tourist visas was 210,587 in the first seven months of 2014, some 8.5% less than the same period last year. However, because many people enter the country to look for work or other reasons unrelated to tourism, that figure alone is unreliable. But financial reports from the publically traded Genco Tour Bureau show earnings were down 22% for the first half of the year, though that also misses the peak tourist season between June and October.

Tsedevdamba Oyungerel, Mongolia's minister of tourism, sport and culture, also believes that tourism is down from past years: “So, according to this year's observation, July was quite a successful month. But only July. June wasn't successful and August was not good either.”

The lack of attention tourism receives from the government is unfortunate given that the industry can have such wide economic impact compared with mining – the main driver of Mongolia's economic growth – which tends to benefit only a small portion of the population. Too much reliance on resources typically results in appreciations of the local currency and deteriorating competitiveness in  other sectors – a phenomenon known as “Dutch” disease. Sustainable tourism, on the other hand, provides jobs in local communities and encourages more spending there. It also provides an economic incentive to help preserve cherished vanishing cultures, such as Mongolia's nomadic traditions.

Own worst enemy

Waning enthusiasm for Mongolia's mine assets has forced lawmakers to look to other industries such as tourism to keep the economy afloat. The change of heart helped Oyungerel snatch the ministry's largest-ever budget yet this year. The parliament for 2014 approved a budget of 5 billion tugrug ($2.7m) this year, five times greater than the Tourism Ministry had had the year before.

Unfortunately,  Mongolian tourist services leave many travellers frustrated. A lack of roads makes travel laborious and sometimes perilous at night when there is little-to-no visibility. Although the government plans to build  paved roads between the capital and every province next year, there still will not always be good routes between provinces. “The quality of roads is really bad – its bumpy with many potholes. Really government should do something about the roads,” says Unbrakh Tsetsenbileg, a sales manager who has also worked as a tour guide  at Juulchin World Tours.

Oyungerel and Tsetsenbileg both think tourist companies must find ways to boost marketing and promotion. That is why the Tourism Ministry has spent most of this year's budget on its partnership with the ITB Berlin trade show to help build up a network with travel companies around the world.

But controversies such as  last year's attempt by the Ulaanbaatar Citizens' Council to ban the use of foreign languages on signs outside buildings demonstrate the obstacles facing the tourist  industry. Locals felt the signs made their capital look too much like a foreign country. Oyungerel said she took a strong stand that the signs are helpful to foreign guests and eventually prevailed.

Most damagingly, domestic criticism of  one of the country's largest tourism draws, the Mongol Rally, has led to it being diverted away from Mongolia. Strained relations with the Mongolian government made organising the driving marathon more trouble than it was worth, says event manager Katy Willings, so participants will not  even have to drive through Mongolia anymore to finish. For the first time since The Adventurist first launched the driving marathon 10 years ago, 2015's brave motorists setting off from Britain to travel 10,000 miles across Europe and Eurasia will finish at the capital of another Mongol nation, Ulan Ude in Russia's Buryatia Republic. For Mongolia, that means the loss of of tens of thousands of dollars from tourist spending, customs duty, VAT, excise tax and sales tax. 

In addition,  this year will also be the first time cars will be shipped out of Mongolia back to Europe, rather than donated or sold. Proceeds from sales that exceeded The Adventurist's own expenses had  previously  been donated to charity. “New policy: no car left behind. We're never going to import another car to Mongolia,” says Willings. Local newspapers had decried the Mongol Rally as a public nuisance and an excuse for super-charged young foreign travellers to leave junked cars in the developing country. To the contrary, Willings says, the cars are all refurbished and had to pass inspection before being sold or donated. 

Nevertheless the Adventurist, which encourages its clients to get “lost and in trouble”, has not abandoned Mongolia completely. It will continue to host the Mongol Derby in Mongolia – a 1,000 kilometre horse race that replicates the journey of the postal riders that delivered messages for the 13th century Mongol Empire.

Rolling the dice on casinos

Minister Oyungerel is now hoping to legalise gambling to create new attractions for tourists. She  expects  parliament to vote on a law that would allow for a horse racing track. She is also preparing a second bill that would allow for a casino. 

“The legalisation of gambling, if done in a responsible way, would be a major positive for Mongolia's economic growth and create an industry that is larger than the current mining based economy,” says Harris Kupperman, chairman of the real estate development company Mongolian Growth Group. “With over one billion potential customers in China alone, the legalisation of gambling would allow Mongolia's tourist sector to mirror Macao's growth over the past decade.”

But the real challenge Oyungerel and tour groups will have to face will be improving the industry without wiping away the rugged veneer that makes Mongolia such a special place to visit in the first place. “There is a beauty about that,” says Oyungerel about the challenges of being a tourist in Mongolia. “Those who travel to Mongolia should expect some spontaneity. If they live by a set schedule they should come to Mongolia and leave behind their schedule for some days.”