The United Nations says Mongolia is slowly emerging from its long-term poverty, but a lot of economic challenges lie ahead, including a mass exodus of nomadic herders to the cities.

The U.N. Development Program's top representative in Mongolia, Pratibha Mehta, says overall, the economy of this former communist nation shows a lot of promise.

"If we compare Mongolia with other new democracies, Mongolia definitely is doing far better," she said.

Mongolia has raised its growth rate to around six percent, and recent U.N. findings show relatively good access to health care and other public services. Education, too, has been a strong point, even to the extent that some want ads for shop clerks in the capital now ask applicants to have university schooling.

But the picture is certainly far from perfect.

One of Mongolia's biggest problems is rural migration to the cities, particularly the capital, Ulaanbaatar.

Since 2000, Mongolia suffered a series of unusually harsh winters that killed large numbers of the cattle, goats, sheep and horses which rural herders depend on for their livelihood.

A joint U.N.-Mongolian survey released Wednesday shows that although the weather problem has since eased; urban migration continues to snowball, as people from the countryside seek jobs and a better life.

While some come to live with their apartment-dwelling relatives, others join the growing mass of traditional Mongolian ger tents pitched on the outskirts of the capital.

At current rates, the United Nations says more than half of all Mongolians will be living in Ulaanbaatar by 2015.

Ms. Mehta says that while part of the solution lies in improving life for the herders, the government also needs to be ready to deal with the reality that its cities will continue to grow.

"The most challenging would be proper city planning which allows for integration of rural migrants right from the outset," she explained.

Income distribution is also a worry. Surveys repeatedly show some one-third of Mongolians live below the official poverty rate of $22 per month.

Member of parliament and social activist, Sanjaarsuren Oyum, says the country's recent economic growth is only reaching about 10 percent of the population.

"Unfortunately, like in many poor countries, this extra wealth that is being created is not being distributed well, and you see the gap between rich and poor increasing," said Ms. Oyum.

She says part of the problem is haphazard government policy since the fall of communism, making it difficult for average citizens to start and run businesses. She says revising laws and tax codes to favor the small but active private sector is the key to success.