Will Mongolia's new PM also get lost in the wilderness?

By bne IntelliNews December 12, 2014

Terrence Edwards in Beijing -


Mongolia's recently dismissed prime minister, Norov Altankhuyag, is known as an outdoor enthusiast who unknowingly set off a media frenzy by getting lost in the remote Mongolian wilderness during the winter after taking office in 2013. The ordeal became a huge and expensive embarrassment after a search-and-rescue team and chopper pilots had to be called in to extract him from Mongolia's remote pine forests.

Lost in the wilderness is a fitting image for his term of office, which was hobbled by a complex system of alliances within his cabinet. And the new prime minister, fellow traveller and ally Chimed Saikhanbileg risks repeating his predecessor's mistake of forming too many alliances as he heads down even more tortuous paths to rescue the flagging economy.

Saikhanbileg, officially installed as PM on November 21, is putting together an even more crowded and complicated coalition by inviting a fifth party to join the government, the main opposition Mongolian People's Party (MPP). With the MPP on board, the new government comprises all but three independent MPs in Mongolia's 76-member parliament. “The key thing from our perspective is that while the creation of a ‘unity’ government is being portrayed as a positive for the investment environment, the test for Mongolia will be in implementation,” says Neil Ashdown, an analyst for IHS Country Risk Analysis.

The goal is to jump start the resource-based economy's largest mining projects and resolve some looming fiscal problems. Protectionist actions taken by previous governments over the country's vast natural resources were popular among voters, but not with foreign investors. As a result, Mongolia saw a 57% decline in foreign investment in the first 11 months of tis year compared with the same period in 2013. At the same time, waning demand for commodities from China, which consumes most of Mongolia’s minerals, has also taken its toll.

“When we're in a mess like this, I think it's best to have all your political groups aligned together trying to resolve things,” says the head of newswire Cover Mongolia, Badral Munkhdul, who is positive about the new government. He reckons that having unity in the parliament takes away the opportunity for an opposition party to capitalise on what will undoubtedly be politically unpopular decisions to help more foreign companies exploit Mongolia's natural resources.

Altankhuyag's government-leading Democratic Party in 2012 allied with the Mongolian People's Revolutionary Party (MPRP), as well as two lesser partners in the Mongolian National Democratic Party and Civil Will-Green Party. Altankhuyag then parcelled out a proportionate number of ministerial posts to each party. The alliance worked for a time, but Altankhuyag had a hard time managing so many competing voices in his cabinet. In the end, when his popularity was at its lowest ebb because of economic troubles, it proved his undoing.

Band of revolutionaries

The Democratic Party's ranks are filled with the revolutionaries of 1989, who helped topple Communism and push the country towards democracy and a free market economy. However, they did not start off as a consolidated group to match the old powers, who aligned into what is today the MPP. Instead, they broke off into numerous splinter factions of free thinkers that have often bumped heads.

Eventually, they came together as a loose coalition to run a government in 1996, the first time the MPP was taken out of power by the Democratic Party. But they wouldn't form as an official party until a decade later.

The Democratic Party now have five or six main factions dominating the party, says Tsoggerel Uyanga, chief financial officer at Ulaanbaatar-based real estate firm M.A.D. Investment Solutions, “but there's a myriad of smaller and unofficial allegiances, factions and secret agreements” that further complicate the political landscape.

“Each faction has a nominal leader who gathers influence, yields power and favours, and lobbies for greater responsibility,” she says.

Former and current government heads Altankhuyag and Saikhanbileg both belong to a group known as Polar Star. President Tsakhia Elbegdorj, on the other hand, doesn't have any official faction of his own to claim, but Uyanga thinks he plays a role moving between them and sometimes pitting them against each other to further his own political agenda. “Over the past two to three years [Elbegdorj] has been active behind the scenes in forming factions, setting them against each other, promoting and demoting at will, and stirring public opinion,” she explains.

An example of that was when the rival Falcon faction, named after Mongolia's national bird, teamed up with the president to help push Altankhuyag out of office when he wouldn't leave quietly. Five members of the faction didn't show up for a confidence vote on November 5, which could have saved his job.

Outside of those groups are alliances with some of the country's wealthiest individuals. Former judo star Khaltmaa Battulga was the industry and agriculture minister for most of Altankhuyag's term, and until recently led the Mongolian Democratic Union. He is also chief executive of diversified holding company Genco and was listed as Mongolia’s third wealthiest man with a net worth of at least $1.2bn in a 2013 survey of the country's 100 richest, published on the Mongolian website 24tsag.com.

Luvsanvandan Bold, who was foreign affairs minister, is the head of the Northeast Asia Faction in addition to being the founder of the massive holding company Bodi International. He was listed in eighth on the same rich list, with an estimated net worth of $800mn.

Outside interference

Battles within the government leading-Democratic Party are not the only destabalising concerns, however. The MPRP and MPP have their own scores to settle.

The MPRP was formed in 2010 when former president Nambar Enkhbayar stormed out of the MPP after falling out with the party leadership. The two parties' names are conspicuously similar for good reason: the MPP used to be called the MPRP but changed its name in 2009 as a symbolic move to signal changes in the party. Enkhbayar, knowing the value of name recognition in such a vast country come election time, retook the name for his breakaway party.

“Most of the voter base for MPRP are those who used to support MPP,” says Munkhdul. “I guess you could say the MPRP flipped MPP voters from people who were supportive and loyal to Enkhbayar.”

The division between the two parties has been a weakness for the MPP – and the biggest gain for the Democratic Party, says Munkhdul. Many felt the splitting of the vote between the two led to the strong victory by the Democratic Party in 2012, and then Democratic presidential candidate Tsakhia Elbegdorj to win a second term in 2013.

Challenges ahead

The main goal of the new ‘unity government’ is to relaunch work at the country's two largest mines, Tavan Tolgoi and Oyu Tolgoi. Both mines, one coal the other copper-gold, are billion-dollar investments that are critical for this fledgling economy, which slowed to an annualized 7% in the first nine months from 12.8% last year.

The government must also focus on new debt restraints that, if not heeded, could cause Saikhanbileg's government to fall apart. Saikhanbileg has until next April to either raise the debt ceiling or bring the debt to below 40% of GDP; the last estimate of public debt was around 49%.

Meanwhile, the latest complex network of alliances will likely put a huge strain on the coalition. The MPP demonstrated its capriciousness by joining Saikhanbileg's government after protesting his confirmation by not appearing for the vote.

Tough decisions will undoubtedly have to be made, so it makes sense that Saikhanbileg would want to remove any opposition that could stand in his way. How long he can keep such a large and diverse group content, or if he too will find himself lost in the wilderness, is anyone's guess.

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