Mongolians to choose who to trust with mining bounty

By bne IntelliNews June 28, 2012

Oliver Belfitt-Nash in Ulaanbaatar -

Mongolians head to the ballot boxes on June 28 to vote in parliamentary elections. Over the next four years Mongolia will begin harvesting the cash from its major mining projects, and competition to control those flows is fiercer than ever.

Campaign posters have mushroomed across the city, flyers litter housing block floors, and some car-top loud speakers blare slogans to the soundtrack from Lord of the Rings, as the two main contenders - the only ones to emerge since the beginnings of their democracy a couple of decades ago - jostle for votes.

The Mongolian People's Party (MPP) is the old socialist party that has held the majority of power since the revolution, traditionally focusing on strength, solidarity, and state authority. The Democratic Party (DP) is often still thought of as the newcomer, with change and privatization more in line with their foundations.

Yet in reality, any ideological differences are blurred. Individuals lead the show much more than their party's principals.

Hearts, minds, and wallets

Ganhuyag Chuluun Hutagt, Vice Minister of Finance and MPP Candidate for Sukhbaatar District, meets his youth followers every morning for a jog round the city, his pensive floating face imprinted on everyone's T-shirt. "We have many more young, new candidates than the other parties," says Ganhuyag. "This time we are the new guys. We are connected to the youth in Mongolia and will bring the changes needed."

Ganhuyag is a sharp-witted, western educated Mongolian with a passion for business, having risen through the ranks of the country's fourth largest bank - XacBank - before beginning a political career. He claims that his party has proved its credentials in developing Mongolia's potential minerals wealth, and that it is only the MPP that can be trusted with the task.

"We [the MPP] initiated the OT agreement [the concession on the huge copper-gold project Oyu Tolgoi given to Ivanhoe Mines in 2010], and pushed for the signing," he says. He adds that the party is also "pushing for an agreement" on the Tavan Tolgoi coal mine development and the project to build a railroad to increase exports to China. "Our economic growth all depends on China," he points out, before suggesting that only MPP is capable of pushing such development through. "Growth will only accelerate if we win," he claims.

News of Mongolia's unprecedented 17.3% GDP growth in 2011 is now on the minds of voters. However, rather than seeing their wallets filled, many are feeling more and more ostracised from the multi-million dollar mining and construction projects now dotting the country. Tsedevdamba Oyungerel, running for the opposition DP seat in Khan Uul district in Ulaanbaatar, is honing in on this issue.

"This is the fastest expanding district" she says, with cranes and concrete skyscraper shells clearly visible behind her. "Every citizen had the right to his or her piece of land, but the privatization process was so slow and so bureaucratic that only 7% of the population got it. The big developers are becoming harsher and harsher - people are being pushed out of their homes to make way for the expansions and the few are earning all the money. We want to eliminate costly physical barriers to land privatization. Future developments should go to Mongolian citizens in order to use their land, not to corrupt land dealers like they do now."

The fight against corruption is a key element of the opposition's campaign. The DP are the underdogs to a party that has ruled for the vast majority of Mongolia's 22-year democratic history, and they are playing the "change" card at every opportunity. "The ruling party became bold and corrupt," claims Oyungerel. "We never had strong enough control, but the people now want change."

Underground revolution

For the last eight years Mongolia has been run by a coalition between the two parties, although the DP recently dropped out of to distinguish itself as the "opposition". The plan may be working, as the latest polls show it leading the MPP with 42% of the vote versus 27.9%. "We only have 1 option," says Norovyn Altankhuyag, leader of the DP and former- First Deputy Prime Minister, "and that's to form our own government."

An ex-physics professor turned revolutionary in 1989, he started his political career as general secretary of the newly-formed DP in 1990, and has presented an image of fighting persistently as the underdog ever since. He speaks calmly and confidently, his words well-rehearsed.

"The MPP's main support is the minority who think their life is going OK, whose life has been improved in the last 22 years," he says. "But if you look at the poll results, the situation is clearly getting worse. Bad things are booming, and this is an advantage for us."

These "bad things" are often seen to populate the mining sector, with many seeing the rich getting richer and the poor continuing to suffer. Inflation breached 15% and unemployment hit 10.3% in June. "All Mongolian people need to benefit from the mining sector," says Altanhuyag. "There is still a question on how we will collaborate with foreign investors. Some we can do ourselves, and on some we can cooperate."

Business as usual

In the run-up to the election, this rising protest against the way the mining industry is developing has only extended the rocky ride Mongolian politicians have given foreign investors over the last few years. Resource nationalism has struggled against the sudden inflow of capital into large mining projects, and only last month new legislation threatened to severely restrict existing contracts before being watered down in its final version. With global markets teetering on disaster, it's a difficult time to play hard ball.

"I'm not concerned [about the outcome of the election]," says Travis Hamilton, director of the Khan Mongolia Equities Fund, which focuses exclusively on Mongolian publicly-listed equities. "The policies and strategies over the last four years were put together by a strong coalition. Both parties were contributors to legislation. Ultimately both parties have the same goals."

However, he also stresses that the Mongolian growth story has only just begun, and that the next four years will lead the way for decades to come. "Mongolia is coming out of the shadows of 700 years of occupation and oppression," he says. "There has been no growth like this since the great khans, and the country will soon have the capacity to influence coal prices. This is the dawn of the next uprising, and Mongolia is rapidly approaching the precipice of financial independence."

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