Mongolia is around four-and-a-half times the size of Germany. With some 2.7 million people and a population density of 1.5 inhabitants per square kilometre, it is one of the most sparsely inhabited countries in the world. A landlocked territory with an extreme climate, Mongolia is characterised by adverse natural conditions. Just under half of the population lives in rural areas, partly settled, partly as nomadic livestock farmers. 

The Mongolian Government is pursuing an economic and political change process from a centrally planned economy to a social market economy with democratic structures. Mongolia's peaceful and democratic transition is decisive in making it an attractive business location. However, with an annual per capita GDP of USD 1,610 (2009), it remains among the world’s low-income countries. Some 36% of the population live on less than two dollars a day. Mongolia's isolated geographic location and dependency on the markets of two major economic powers, namely the Russian Federation and the People’s Republic of China, mean that its economy, which focuses on just a small number of export products from the raw materials sector, is highly vulnerable. Moreover, the country's poorly developed energy and transport infrastructure is also holding back economic development.

Against this backdrop, the Mongolian and German Governments have agreed to pursue programmes in two priority areas: sustainable economic development, and environmental policy, including energy efficiency and renewable energies. In both these areas the objective is to help improve economic conditions and thereby contribute indirectly to poverty reduction. During the latest government negotiations, both parties underscored the basic principles of a social and ecological market economy as the basis for their continued cooperation.

The multifaceted in-country cooperation with other donors is also of major significance. Project concepts and other forms of cooperation are coordinated with a number of multilateral institutions such as the World Bank, the Asian Development Bank, the International Monetary Fund, the EU and the United Nations Development Programme (UNDP), as well as with the United States Agency for International Development (USAID) and the Japan International Cooperation Agency (JICA).

Furthermore, GTZ works closely with other German development cooperation institutions, such as the German Development Service (DED), Kreditanstalt für Wiederaufbau (KfW development bank), Konrad Adenauer Foundation (KAS), Hans Seidel Foundation (HSS), InWEnt GmbH - Capacity Building International, Germany, Centrum für Internationale Migration und Entwicklung (CIM), the Senior Expert Service (SES) and the Federal Institute for Geosciences and Natural Resources (BGR).

GTZ first set up an office in Ulaanbaatar in 1998. This was followed in 2006 by a "Deutsches Haus“, a joint development cooperation office, housing the local representations of GTZ, DED and KfW development bank.