Mongolia’s cabinet reshuffle ends “super coalition” government

By bne IntelliNews August 10, 2015

Jacopo Dettoni in Almaty -


Mongolian Prime Minister Chimed Saikhanbileg ejected six cabinet ministers belonging to the Mongolian People Party (MPP), putting an end to the “super coalition” government 10 months ahead of the June 2016 parliamentary elections.

Saikhanbileg, who heads the ruling Democratic Party (DP), sent Zandaakhuugiin Enkhbold, the speaker of unicameral parliament State Great Hural (SGH), a resolution requesting the dismissal of the six MPP ministers for their “inadequate” contribution to the government on August 5. The DP-controlled parliament backed the motion straight away, forcing the six ministers to step down. The list of ousted ministers include, among others, Ukhnaagiin Khurelsukh, deputy prime minister, and Finance Minister Jargaltulgiin Erdenebat.

The vacant cabinet seats have been temporarily assigned to acting DP ministers, waiting for a definitive appointment ratified by the SGH to come through in the coming days.

Prime minister since November following the resignation of Norov Altankhuyag, Saikhanbileg orchestrated the appointment of a “super coalition” government representing Mongolia’s four major political parties to get over the political quarrels that had contributed to the stalling of many of the country’s most ambitious projects, like a multi-billion underground development of flagship copper and gold mine Oyu Tolgoi. Saikhanbileg thus appointed 10 DP ministers and another six from the MPP, a party grown on the ashes of the old Communist Party that ruled the country under the influence of the Soviet Union until 1991. The remaining three ministers were divided between two smaller parties.

The new government managed to close the long-awaited Oyu Tolgoi deal with mining powerhouse Rio Tinto, which operates the mine through the subsidiary Turquoise Hill. It also signed a $1.3bn concession contract with a consortium led by French utility group Engie (former GDF Suez) for the development and opearation of a new, much needed combined heat and power plant in Ulaanbaatar. Saikhanbileg has also repeatedly claimed that an agreement with a consortium of China's Shenhua Energy, Japan's Sumitomo and Mongolia's Energy Resource for the development of Tavan Tolgoi, the country’s largest deposit of coking coal, was imminent – although the DP seems divided over the terms of the concession agreement.

Despite the government’s early achievements, Saikhanbileg decided to oust the MPP from the government, giving in to pressure mounting from within how own party. Opposition to the move from President Tsakhiagiin Elbegdorj, one of the country’s most charismatic politicians and leaders of the DP, did little to change the course of the events.

“I hereby refuse to accept the proposal on dismissing some members of the Cabinet as it can cause negative impact on society, economy, country’s reputation in the international arena, and the people’s living, and it also might lead to political instability in the country,” Elbegdorj wrote in a note following Saikhanbileg’s official request to dismiss the six ministers.

Local observers described the cabinet reshuffle as yet another political game completely indifferent to the country’s real needs.

“It is quite evident that in this ugly game of politics, the fate of the nation and its future are not elements up for consideration,” B Khash-Erdene, a columnist with Ulaanbaatar’s English newspaperUB Post, wrote on Aug 7. “Power, position, and money are. What made all these political games and corruption possible are closed doors and unchallenged authority.”

Fallen star

Once a darling of frontier market investors, mineral-rich Mongolia has quickly fallen from grace as political uncertainties, combined with a weak commodity cycle, cast a shadow on its economic potential.

Mongolia’s annual GDP growth slowed to 4.4% in the first quarter of 2015, down from 7.4% in the same period of 2014, according to the latest figures published by the National Statistical Office.

Growth in Mongolia “is likely to decelerate significantly this year and next on account of lower foreign direct investment (FDI), continued delays with the second phase of Oyu Tolgoi, a large mining project, China’s weaker demand for commodities, as well as policy tightening,” the European Bank for Reconstruction and Development (EBRD) said in its latest Regional Economics Prospects report. 

GDP growth is expected at 3.8% in both 2016 and 2017, down from 6.7% in 2015, the EBRD forecasts. 

FDI in Mongolia peaked in 2011 and 2012 when it reached, respectively, $4.71bn and $4.45bn and decreased to $2.05bn in 2013 and $381.9mn in 2014. As FDI has dried up, international reserves fell to $.68bn from over $4bn two years ago, and the Mongolian tugrik remains close to historic lows trading at MNT1,987.92 to the dollar.

Nonetheless, with elections approaching, foreign observers saw the coalition's break-up as a natural step towards two independent political campaigns by the DP and MPP.

“There was a clear intention to dissolve the coalition at some point prior to the election campaign,” the Financial Times quoted Julian Dierkes, a specialist in Mongolian politics and civil society at the University of British Columbia, as saying on August 7.

“Clearly, the Oyu Tolgoi announcement in May has meant that in some people’s eyes, this super coalition has done what it was formed to do, ie, get Oyu Tolgoi back on track. That removes the need for such a coalition which makes an election campaign difficult when there are already limited policy differences between the dominant parties,” he told the Financial Times.

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