Mongolia's economy has been expanding rapidly. After experiencing a GDP growth rate of 17.5 percent in 2011, the economy grew by 11.7 percent in 2013, easing from 12.4 percent in 2012. The massive development of mineral and coal mining has been largely the driving force behind the swift economic rise of the Central Asian nation. Mongolia - nearly the size of Western Europe - sits on a virtual treasure trove of natural resources estimated at around 1.3 trillion USD.

However, according to a recently released report by the Asian Development Bank (ADB) titled "Demand in the Desert: Mongolia's Water-Energy-Mining Nexus," the development of the mining industry is leading to an increase in the demand for water and energy; scarce resources especially in Mongolia's capital and largest city, Ulan Bator.

Qingfeng Zhang, Lead Water Resources Specialist at ADB who oversaw the report says in a DW interview that water shortages in the capital city are expected as early as 2015 as existing groundwater supplies become fully utilized. Ulan Bator will then be forced to draw on additional groundwater resources, but these may only last until 2021.

DW: Given the rapid development of the mining industry, does Mongolia face the possibility of water shortages in the near future?

Qingfeng Zhang: Rapid development of the mining industry is driving the urbanization and economic development of Ulan Bator with increases in demand for water and energy.

Zhang: 'Mongolia should promote energy efficiency in homes and industry, better rainwater collection, and more recycling of wastewater'

Water is already scarce in Ulan Bator, with water shortages expected as early as 2015 as existing groundwater supplies become fully utilized. The capital will then be forced to draw on additional groundwater resources, which have already been identified and approved for use. Supply is expected to be adequate until 2021 but then there may again be water shortages if demand remains high.

Basin-wide water shortages are not predicted in the major mining areas of the South Gobi desert. However, localized conflicts over water use with communities and herders are expected as the groundwater resources are extracted for mining.

How much water is the mining industry consuming?

In 2010, the mining industry accounted for approximately 13 percent of total water consumption while the energy sector accounted for around 10 percent. However, this is changing quickly due to rapid development of the mining industry and growing energy demand, which is thirsty for water.

For example, in the Galba-Uush Doloodin Gobi Basin of the South Gobi Desert, recent water use has been than less than 5 million cubic meters per year. Major new mining operations, including Tavan Tolgoi and Oyu Tolgoi, and a new coal fired power station, are expected to dramatically increase water demand, with an estimated 108.2 million cubic meters of water expected to be consumed annually by 2025.

Although, basin-wide water shortages are not predicted, it is expected that mining and energy water use will further exacerbate water use conflicts with local communities and traditional herders.

How scarce is water in Mongolia?

Mongolia suffers from regional scarcity of water resources. Abundant surface water resources are located in Northern Mongolia. However, this water is inaccessible for most parts of the country. Urban centers and mining operations are located far from these major water sources. As a result, Mongolia has a high reliance on groundwater resources. In 2010, groundwater accounted for 80 percent of all freshwater consumed.

To what extent will water shortages constrain the country's economic development?

Mongolia is grappling with the challenges of simultaneously achieving food security, water security, and energy security as the country implements its green development policy. At the same time, Mongolia's economic development based on mining and the sustainability of its urban economy will be impossible without energy and water - water as a key input to produce energy, and energy to operate water facilities.

In 2010, the mining industry accounted for approximately 13 percent of total water consumption, says the expert

What must the government do to ensure that supply meets demand for water?

In addition to integrating water resource considerations into energy and mining developments, Mongolia should promote energy efficiency in homes and industry, better rainwater collection, and more recycling of wastewater.

New energy facilities should be designed to minimize water use, while better payment systems such as water use fees and pollution fees could improve energy and water efficiency. These measures need to be supported by better water management institutions.

Qingfeng Zhang is Lead Water Resources Specialist with the Asian Development Bank's East Asia Department.