Mongolian Voters Seek Bigger Share of World-Beating Economy
Norovyn Altankhuyag, head of the Democratic Party, is predicted to oust Prime Minister Sukhbaatar Batbold’s ruling Mongolian People’s Party, according to a June 14 survey by Sant Maral Foundation, and may have to rule in coalition with some of the 11 parties in contention.
The new government must tackle how to use a jump in revenue from gold, copper, iron and coal projects to benefit its 3.1 million people, a third of whom live below the poverty line. Pressure to hand out more of the proceeds may put it in conflict with mining companies led by Rio Tinto Group that have invested $5.3 billion to tap the country’s mineral wealth.
“The issue isn’t the growth, it’s how it is felt by every Mongolian,” said Jargalsaikhan Dambadarjaa, an independent economist in the capital Ulan Bator. “That can be done only by developing the infrastructure that can be used by everybody.”
The election has already been marked by allegations of corruption after former President Nambaryn Enkhbayar was arrested in April on charges of enriching himself while in office and barred from standing as a candidate. Enkhbayar denied the charges and said the move was politically motivated.
“This is the most important election ever,” said Erdene- Ochir, an 84-year-old pensioner who voted in Ulan Bator. “This is a critical time for change and there needs to be a new government and a new policy to improve all of our lives.”
Failed Policies
The country ranked 120th out of 183 in Transparency International’s latest corruption survey. Almost two thirds of those polled in the Sant Maral survey said government policies “always” fail to solve citizens’ issues.
Public discontent centers around the distribution of wealth from the mineral boom, which boosted the economy 17 percent last year. Mongolia, which supplies almost half China’s coal for steelmaking, doubled state spending in real terms to 6.3 trillion tugriks ($4.7 billion) last year, the International Monetary Fund said in December. The flood of money caused food prices to jump 31 percent in April from a year earlier.
An April announcement by state-run Aluminum Corp. (2600) of China Ltd. that it will take control of SouthGobi Resources Ltd. (SGQ), a Mongolian coal miner, sparked a public outcry. Parliament reacted by passing a law tightening rules on foreign investment in industries including metals, media and communications, Vice Finance Minister Ganhuyag Chuluun Hutagt said in May.
Resource Nationalism
“Resource nationalism is broadly bipartisan and will increase no matter who wins,” Frontier Securities, an Ulan Bator-based broker, said in a report June 24. All parties will push for the development of more processing industries to create jobs around mining, the report said.
Still, with commodities accounting for about 80 percent of all exports, the two main parties, who ruled in coalition after the last election, may have limited scope for maneuver with Rio Tinto and other foreign investors. Mongolia risks economic contraction, which happened in 2008, should commodity prices fall, IMF’s Mongolia chief Steven Barnett said in an interview.
The Democrats and the MPP, the successor to the Communist Party that ran the nation for more than 60 years, together drafted most of the current legislation for business and infrastructure development. Bruce Tobin, a Melbourne-based spokesman for Rio Tinto Group (RIO), declined to comment.
Mining Guys
“They are both made up of guys who’ve been in business primarily, some form of mining probably,” said Jim Dwyer, head of the Mongolia Business Council and former global M&A chief at UBS AG. “They basically are for foreign investment and economic growth.”
At the 2008 election, the two biggest parties vowed to hand out at least 1 million tugrik to each citizen as spoils from the mining boom. The government will also distribute preferred shares of Erdenes MGL, the state’s holding company for several of the country’s biggest mining projects, according to Ganhuyag.
Each citizen will get one preferred share of the holding company to make sure that profits from the mining projects are distributed equally to all citizens via Erdenes MGL dividends, he said.
GDP Boost
The MPP has said mining wealth and investment may raise gross domestic product per capita to $60,000 per capita by 2030, from $3,000 last year. That compares with $37,491 per capita in the U.S. at the end of 2010, according to data compiled by Bloomberg.
“We’re witnessing the dawn of the next Mongolian uprising,” said Travis Hamilton, the founder of Khan Investment Management Ltd., which focuses on the nation’s stocks. “The country remains heavily dependent on foreign investment in order to achieve its growth. Once they become extremely wealthy and they can support themselves, it’ll be a different story.”
About 1.84 million registered voters will have the chance to decide the 76 members of State Great Khural, Mongolia’s parliament. Eleven parties and two coalitions are fielding 544 candidates, some of whom will be elected via proportional representation, according to the General Election Commission website. The result may come as early as midnight.
To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net
To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net
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