Executive summary

Mongolia’s government has committed to an ambitious plan—roughly US$30 billion—to create a new capital near the historic city of Kharkhorin (New Kharkhorum) and eventually move core state institutions out of Ulaanbaatar.  The stated goals are to relieve congestion and pollution in Ulaanbaatar, promote more balanced regional development, and symbolically restore the medieval capital of the Mongol Empire. 

This white paper argues that, while New Kharkhorum may have cultural and regional-development benefits, it is unlikely to solve Ulaanbaatar’s overcrowding and environmental crises. The core reasons people move to Ulaanbaatar—and to capitals worldwide—are structural: concentration of jobs, services, education, infrastructure, and political power in a single “primate city.” Capital relocation rarely dissolves these forces; it usually duplicates administrative functions while the original city remains the main economic magnet (Lagos vs Abuja, Rio vs Brasília, Jakarta vs Nusantara, Yangon vs Naypyidaw, Almaty vs Astana). 

Unless Mongolia simultaneously tackles poverty, rural decline, urban governance failures, and Ulaanbaatar-centric economic geography, building a new capital will, at best, redistribute some state employees while Ulaanbaatar remains overcrowded and polluted.

1. Ulaanbaatar’s urban crisis in context

Ulaanbaatar (UB) is home to roughly half of Mongolia’s population and dominates the country’s economic, political, and educational life. It is a classic “primate city”: disproportionately large and influential compared to all other Mongolian cities. 

Key pressures driving the capital-move debate are:

Severe air pollution and health impacts. Ulaanbaatar is regularly ranked among the most polluted capitals in the world; winter thermal inversions, coal-based heating in ger districts, and vehicle emissions drive extremely high PM2.5 levels with major respiratory and cardiovascular impacts.  Overcrowding & informal ger districts. Massive migration of former herders and rural residents, often driven by climate stress and loss of livelihoods, has created sprawling ger settlements with poor infrastructure and heavy reliance on coal for heating.  Water stress and infrastructure constraints. Recent OECD analysis warns that water demand is likely to exceed supply by 2040 in high-demand areas like Ulaanbaatar, exacerbating vulnerability to climate change and limiting sustainable growth.  Failed attempts to “cap” the city. Ulaanbaatar introduced temporary bans on new in-migration between 2017 and 2020, but these measures mainly harmed poor migrants without solving overcrowding or pollution. 

These are structural issues rooted in economic geography, poverty, and governance—not simply in the physical location of the capital.

2. Mongolia’s New Kharkhorum capital project

2.1 What is being proposed?

The Mongolian government is pursuing the development of New Kharkhorum near the ruins of Karakorum in the Orkhon Valley (Övörkhangai province). Key elements include:

A new, modern “smart” city designed via international master-planning tenders, intended to be people-centered, green, and culturally grounded.  A dedicated New Kharkhorum City Construction Administration (now being reorganized into a Governor’s Office for New Kharkhorum) to manage feasibility studies, infrastructure planning, and investment promotion.  A legal framework: the Law on the Planning, Development and Promotion of Kharkhorum City, approved in January 2025, anchoring the project in Mongolia’s long-term development policy (“Vision-2050”).  Substantial public–private partnership financing, with a widely cited figure of about US$30 billion for the full capital relocation and city construction package. 

Recent government statements emphasize that New Kharkhorum should become an economic hub for central Mongolia, with large green areas and strong renewable-energy integration. 

2.2 Official rationale

Mongolian officials and planners highlight several motivations:

Relieving pressure on Ulaanbaatar (overcrowding, traffic congestion, air and soil pollution).  Balanced regional development: steering investment and population toward central and rural provinces.  Cultural symbolism: reconnecting the modern state with the historical Mongol Empire capital in the Orkhon Valley, a UNESCO World Heritage site.  Tourism and heritage: using the revived capital as a magnet for international tourism and national pride. 

These aims are understandable, but they do not, by themselves, change the deeper dynamics that pack people into Ulaanbaatar.

3. Why capital relocation alone will not fix overcrowding

3.1 Ulaanbaatar’s primacy and agglomeration economies

Urban-economic research shows that capital status and primate-city dominance reinforce each other: public spending, institutions, and firms cluster in the capital, creating self-reinforcing economic advantages and migration pull. 

Ulaanbaatar is not just the seat of government—it is the center for:

Higher education and specialized medical facilities Banking, national media, and major private firms International organizations, NGOs, and diplomatic missions

These agglomeration economies make jobs and services more plentiful and diverse in Ulaanbaatar than anywhere else in Mongolia. Unless an equivalent or superior set of opportunities emerges in New Kharkhorum, people will still aim for Ulaanbaatar—even if Parliament and some ministries move.

3.2 Migration drivers are economic and social, not symbolic

The past two decades of rural-to-urban migration to Ulaanbaatar have been driven largely by:

Loss of herding livelihoods due to dzuds, desertification, and land pressures Poverty and lack of services in soums and small towns Demand for education, health care, and wage income not available in the countryside

Studies of Mongolia’s environmental and social crises emphasize that people move to Ulaanbaatar because it concentrates opportunities, not because of its official status as “capital.” 

Moving ministries 300+ km away to New Kharkhorum will not, by itself, create high-quality jobs for poor migrants or replace the social-service density in Ulaanbaatar. The incentive to move into UB’s ger districts will remain as long as there is a stark rural–urban gap in livelihoods and services.

3.3 Comparative evidence: The old capital usually stays crowded

International experience is consistent: relocating the political capital rarely decongests the original metropolis.

Brazil: The capital moved from Rio de Janeiro to Brasília in 1960 to promote interior development, yet Rio and São Paulo remain the main economic and demographic giants.  Nigeria: Abuja replaced Lagos as capital in 1991, but Lagos remains the country’s foremost and most populous city, and an economic and socio-political hub with ~20 million people.  Myanmar: Naypyidaw was built on empty grassland 450 miles north of Yangon; despite massive investment, the new capital has long been criticized as a “phantom” city, while Yangon remains Myanmar’s commercial heart.  Kazakhstan: Astana/Nur-Sultan became the capital in 1997, but Almaty remains the largest city and financial center.  Indonesia: The Nusantara project aims to relieve overcrowded, sinking Jakarta, yet critics warn Jakarta will remain the economic center; Nusantara risks becoming a “white elephant” or sparsely populated political enclave. 

Across these cases, the old capital:

Keeps most corporate headquarters and high-value services Continues to attract internal migrants Often receives continued infrastructure investment because it is simply too large and important to neglect

There is no clear reason to expect Ulaanbaatar to behave differently without a deliberate, decades-long rebalancing of Mongolia’s entire urban system and economy.

3.4 Who will actually move to New Kharkhorum?

Even if the new capital is fully built, migration patterns into it will likely be selective:

Civil servants and political staff required to relocate Construction workers during the build-out phase A limited number of service workers and businesses that directly serve those state functions

By contrast, Ulaanbaatar will still host:

Existing universities, hospitals, and cultural institutions Established private-sector clusters and supply chains Dense social networks and family ties for millions of residents

For poor migrants in ger districts, moving to New Kharkhorum will likely be financially and socially harder than staying near informal support networks in Ulaanbaatar and seeking casual or low-wage work. Housing in a master-planned capital tends to be more regulated and often more expensive than self-built ger plots.

3.5 Environmental and resource constraints

New Kharkhorum aims to be more sustainable than Ulaanbaatar, but it faces its own constraints:

The Orkhon Valley is an ecologically sensitive World Heritage landscape; large-scale urbanization risks damaging cultural and natural assets if not carefully managed.  Mongolia as a whole faces tightening water scarcity, especially in high-demand zones and areas targeted for new industrial and energy projects; shifting a capital there will add to local demand, even if it relieves some pressure on UB.  Long-distance energy, road, and transport infrastructure to connect New Kharkhorum to the rest of the country and to international corridors will be expensive and slow to build. 

This makes it unlikely that New Kharkhorum will quickly scale into a mass-population alternative that absorbs a meaningful share of Mongolia’s urban growth.

3.6 Governance and implementation risk

Mongolian commentators have already questioned whether the New Kharkhorum project risks becoming an expensive administrative exercise with unclear benefits: critiques focus on proliferating agencies, opaque spending, and lack of measurable progress. 

Internationally, capital-relocation megaprojects often suffer from:

Cost overruns and financing shortfalls Political changes that shift priorities (Indonesia’s recent downgrading of Nusantara to a “political capital” and sharp budget cuts are a current example).  Under-utilized infrastructure if population targets are not met

If New Kharkhorum progresses slowly or partially, it may divert money and attention away from urgently needed investments in Ulaanbaatar—in effect worsening the capital’s problems while providing only limited relief.

4. Why people move to capitals almost regardless of where they are

4.1 The pull of political and administrative power

Historically, most large cities were “political cities”—their size and wealth stemmed from being centers of rule and taxation rather than purely from trade or industry.  Capital cities still benefit from:

State payrolls: civil service, security forces, and contracted firms Infrastructure concentration: airports, highways, telecom hubs financed by national budgets Diplomatic and international presence, which brings high-value jobs and visibility

Even if a capital is moved to a geographically remote or climatically harsh site (Naypyidaw, Astana, Brasília), these flows of state resources can still attract people over time—especially middle-class professionals and firms that rely on government contracts. 

4.2 Economic clustering and “primate city” dynamics

The “law of the primate city” describes how one city in a country becomes vastly larger and more significant than all others—capturing a huge share of population and economic activity. 

Reasons people keep moving to such capitals include:

Job diversity: more sectors, more firms, more informal-work options Higher wages on average, even if living costs are higher Thicker markets for housing, services, marriage, and social networks Access to specialized services: hospitals, universities, cultural institutions that smaller cities lack

As long as the capital (old or new) is the country’s best bet for upward mobility, people will keep moving there—even if it is polluted, congested, or poorly planned. Jakarta, Lagos, and Ulaanbaatar all illustrate this pattern: residents knowingly endure harsh conditions because alternatives are worse. 

4.3 Symbolic and cultural magnetism

Capitals also serve as symbolic centers:

They embody national identity, host major cultural events, and house iconic monuments. Young people in particular are drawn to the cultural and lifestyle opportunities perceived to exist in the capital.

Even when governments try to create a new capital, the older city’s symbolic and cultural weight often persists for decades (Rio, Lagos, Yangon, Almaty). People do not automatically shift their aspirations because a new political center is proclaimed.

5. Policy implications for Mongolia

If relieving Ulaanbaatar’s overcrowding is a genuine priority, Mongolia will need a broader strategy than simply moving the seat of government. Elements of a more realistic approach include:

5.1 Treat New Kharkhorum as a complement, not a cure

Develop New Kharkhorum as a specialized administrative and cultural center with a realistic population target, rather than promising it as a mass-migration outlet. Avoid over-investing in “showpiece” infrastructure at the expense of core services in both cities.

5.2 Invest heavily in Ulaanbaatar’s livability

Relocation does not remove responsibility for the existing metropolis. Mongolia will still need to:

Upgrade heating, housing, and infrastructure in ger districts to reduce coal use and improve health.  Strengthen public transit and land-use planning to curb congestion. Address water-supply and wastewater constraints with demand management, recycling, and new infrastructure. 

5.3 Build a network of viable secondary cities

To truly reduce pressure on Ulaanbaatar, Mongolia needs alternatives that are economically credible:

Focus industrial, logistics, and services investment in a small number of secondary cities linked to mining regions, cross-border trade, and tourism.  Ensure these cities have good schools, hospitals, and housing, so that families see them as genuine options instead of way-stations on the road to Ulaanbaatar.

5.4 Tackle rural poverty and environmental degradation

Because much of UB’s overcrowding originates in rural hardship:

Policies to stabilize herding livelihoods, manage pasture sustainably, and support climate adaptation will help reduce “distress migration.”  Social protection and targeted rural investment can slow the push factors that drive people off the land and into urban slums.

5.5 Design realistic, not utopian, capital-relocation timelines

Large capital moves typically take decades, span multiple administrations, and are highly vulnerable to political shifts (as Indonesia’s Nusantara illustrates). 

Mongolia should:

Be transparent about phasing, financing, and population expectations for New Kharkhorum. Protect public finances by setting hard thresholds for each phase (e.g., only proceed to certain expansions once core infrastructure and population targets are credibly met). Continuously evaluate whether each tranche of spending is doing more to improve Mongolian livelihoods in aggregate than the same money would if invested in Ulaanbaatar or secondary cities.

Conclusion

Mongolia’s plan to relocate its capital to New Kharkhorum is historically resonant and may offer genuine benefits in terms of heritage, symbolism, and regional development. But as a tool for solving Ulaanbaatar’s overcrowding and environmental crises, it is almost certainly insufficient.

People move to capitals because they are where power, opportunity, and services are concentrated, not simply because of geographical location. Unless Mongolia addresses Ulaanbaatar’s governance, infrastructure, and social inequalities—and simultaneously builds a truly multi-centered urban system—Ulaanbaatar will remain the country’s overcrowded, polluted primate city, even after the president and parliament sit in a new complex on the Orkhon plain.