By Jeff Genota —
Popular dissatisfaction persists over politics and the economy. One candidate has been in politics for too long, and the other boasts business acumen. Both are accused of corruption. Deja vu? You find yourself in Mongolia in June 2017.
A Rock and a Hard Place
Though not particularly eye-catching in today’s media frenzy, the Mongolian presidential election on June 26 was a pivotal one to chart the direction of the young democracy and nascent economy sandwiched in between authoritarian quasi-market juggernauts. Half of Mongolia’s population of three million people resides in up-and-coming Ulaanbaatar, where over lunch recently, one local described in a conversation that voters find themselves, “between a rock and a hard place.” As of this writing, no candidate holds a clear lead. Regardless of who wins, populist rhetoric will be tempered by economic realities.
The lead options on the ballot box consist of the candidate from the Mongolian People’s Party (MPP), Miyegombo Enkhbold, current chairman of Parliament and key player in negotiating Mongolia’s bailout financing terms. Mr. Enkhbold was also former mayor of Ulaanbaatar — many suspect his term was tainted with corruption. The other contestant from the ruling Democratic Party (DP) is Khaltmaa Battulga, a former judoka with experience in business and politics. Battulga has tinkered with resource nationalism, supporting a policy requiring foreign investment money to flow through local Mongolian banks, which Mongolia was required to legally disavow in its recent deal with the IMF. A third candidate, Sainkhuu Ganbaatar of the People’s Revolutionary Party (MPRP) placed himself in the squarely anti-investor camp, calling for a renegotiation of the 2013 Rio Tinto deal for the Oyu Tolgoi mine near the Gobi Desert.
How Low Khan You Go?
Mongolia has been adversely affected by China’s economic slowdown the past few years and the commodity price crash. These larger economic trends further exacerbated mismanagement of the economy. The resource-rich Asian nation cashed in on a mining bonanza since the mid-2000s, thanks to Chinese demand, and saw its gross domestic product (GDP) growth reach double digits before tumbling down to 2016 growth of less than one percent. Resource nationalism, economic mismanagement, and the commodity crash scared off investors and brought the country into its sixth IMF bailout since 1990. The recent economic tumbling has forced the government into austerity through budget cuts and higher taxes, stoking public discontent.
While the short presidential campaign has become more a contest of who is more “Mongolian” rather than discuss pressing issues, the new president will find that honoring the terms of the international bailout to keep Mongolia’s finances afloat (and stave off further economic downturn) are far more important than identity politics.
Moreover, Mongolia’s next president will find that accelerating economic modernization priorities, such as privatization of state-dominated sectors such as airlines, developing much-needed infrastructure, rooting out corruption, and pushing badly-needed economic diversification away from the extractive sector are essential. One key project in the Chinese One Belt One Road mega-infrastructure network unveiled earlier this year to connect London and Yiwu, China by rail bypassed Mongolia since it lacked the infrastructure and capacity.
Looking at the Future
If forecasts prove correct on the rebound of commodity prices, Mongolia should see growth rates of at least six percent by 2020. But the burden on the next president is to avoid making the mistakes of his predecessors and to pull through on future-oriented economic solutions.
One foreign diplomat remarked to me that Mongolia’s younger generations are looking to break out of the last vestiges of the communist area in the public and private sectors and further modernize the nomadic nation. Entrepreneurs and foreign-educated professionals are taking risks to provide innovative goods and services to address social and health issues of less-advantaged Mongolians and unleash the promise areas such as solar energy and power generation, among others.
Mongolia continues to captivate “investors” of time and money from all over the world to tap its vast potential and promise. Populist tendencies would stunt Mongolia’s progresses in democratization and economic liberalization and worse, deny it a chance to participate in the rise of Asia in the 21st century.
Mr. Jeff Genota is a rising second year M.A. in Asian Studies candidate at Georgetown University’s Walsh School of Foreign Service and interning with an investment firm in Ulaanbaatar, Mongolia this summer. The views expressed herein are his own.