By Julian Dierkes
A small, well-educated, and open-to-the-world population living in a democracy with mineral wealth? Mongolia’s potential for development remains terrific.
It’s this potential that keeps investors (foreign and domestic) interested in Mongolia. It’s also this potential that makes Mongolia’s dynamic development fascinating to a social scientist like me.
I am quite confident that Mongolia will reach its potential to benefit Mongolians in the long run. However, the actions – or rather inaction – of the current government seems to be putting that ultimate achievement of social development off by many years. On two visits to Ulaanbaatar in May, I heard a lot of fatalism and frustration about politics from Mongolians.
Once Mongolians decided to embark on a path of democratization and some form of capitalist development, mineral wealth has emerged as the strongest, if not the only basis on which to build such development. The discovery of Oyu Tolgoi made that potential all the more possible.
Yet, after some short years of growth built on Oyu Tolgoi investment, the Mongolian economy has ground to a sputtering halt. Or, more accurately, the current government has essentially stopped further development by scaring off foreign investment and delaying progress at Oyu Tolgoi while borrowing funds to paper over the resulting decline in economic activity.
When President Elbegdorj initiated the current protracted dispute with Rio Tinto in his speech to Parliament last year. He raised many important questions regarding the costs of construction and the Oyu Tolgoi governance structure. Initially it looked like there was follow-up to those questions by the shuffling of the government-appointed Oyu Tolgoi directors. The replacement of political figures with individuals who offer some substantive expertise seemed like a good sign. However, I see very little progress on any of the questions raised by Elbegdorj since then. Surely, there are private discussions with and about Rio Tinto that I have no access to, but there are no public signs of progress. I am not even sure that the government is better informed about Oyu Tolgoi activities now than a year ago.
Prime Minister Altankhuyag has been surprisingly successful at keeping together a rag-tag coalition with the MPRP and Civil Will, a coalition that seemed like an odd choice in 2012 in part because the likelihood of this coalition enduring seemed low. But despite the recurring rumors of an imminent demise of the Altankhuyag government (intensifying once again in the last several weeks), the prime minister has kept the cabinet together for the moment. But to what purpose? After a flurry of action last fall to undo some of the damage caused by the Foreign Investment Law, and a relatively quiet winter, energies during the always-turbulent-in-Mongolia spring have focused on political infighting.
As a scholar, I am very interested in questions surrounding institutional design and whether a parliament is impeded in its function when nearly 1/3 of its members are wearing the “double deel” of also serving in cabinet. But as an observer of current developments in Mongolia, I do not see this question as one that has much impact on developments. Will the Oyu Tolgoi impasse really be resolved more effectively by a cabinet of single-deel wearers?
The circumstances of attempts to remove Minister of Justice Temuujin from office also suggest that these efforts are more rooted in personalities than by disagreements over policy choices.
Will the DP’s efforts to replace all officials across Mongolia down to school principals with DP-friendly individuals really lead to a better future for Mongolia?
To my mind, the top priority for any current government is to structure the environment around Oyu Tolgoi in a way that allows that project to go ahead without inflicting environmental and social damage while yielding tangible and significant benefits for Mongolians now and in the future. A well-managed Oyu Tolgoi in any form will be the cornerstone of Mongolian development, so that management must come first. A lack of progress will devastate the economy and risk social development further, while progress on Oyu Tolgoi will produce the additional resources and experience to deepen the regulatory and policy analysis capacity of the government.
I would note that there is no perfect solution to how to manage such a project. There is no sense in searching for an optimal solution when this search delays progress and leads to a decline in confidence in Mongolia and hardship to Mongolians through inflation and the decline of the Tugrik, for example. Once good practices – not necessarily best practice – have been established around Oyu Tolgoi that will produce the resources and the time to address other issues. But to reach a decision for good practice must be the most important task for the government.
I hope that the current government is devoting much more time to seeking a solution to the Oyu Tolgoi impasse than is publicly visible. I also hope that they are investing heavily in their internal resources to help build capacity to analyze options regarding Oyu Tolgoi at future decision moments. If they are not focused in such a way, they are gambling with Mongolia’s future.
Julian Dierkes is an associate professor at the University of British Columbia in Vancouver, Canada. Read more of his views at http://blogs.ubc.ca/mongolia or follow @jdierkes.
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