Mongolia's mining boom

A steppe-land struggles with new riches

Oct 21st 2010 | Ulan bator

Gouging the grasslands.

MONGOLIANS were until recently wont to describe themselves as “beggars sitting on a huge pile of gold”. But with the recent launch of several big mining projects, a transformation looms. It will present the government with a different set of problems: how to manage a promised economic boom without devastating the environment or destabilising either the economy or the nation’s fledgling democracy.

Few doubt that the boom is coming. The IMF foresees a double-digit annual-growth rate for years to come; and a quadrupling of GDP per head—currently a measly $5000—by 2018. Two mines in Mongolia’s southern Gobi region are expected to provide much of the new wealth. One, called Oyu Tolgoi, which was given the green light last year, will tap an estimated 40m tonnes of copper and also gold. The other is an existing coal mine, Tavan Tolgoi, to which new capacity has been added, including road and rail links to its main customer, China (surprise, surprise).

The government will be a big beneficiary of the boom: it owns a third of Oyu Tolgoi (a Canadian firm, Ivanhoe, owns the rest). Yet the country’s president, Tsakhiagiin Elbegdorj, considers it potentially dangerous. “If we get much more income and much more profit in a bad system with bad governance, I think Mongolia is in trouble,” he says.

Mongolian politics is already based on patronage, with politicians invariably offering cash and other goodies for votes. Swollen government coffers could exaggerate these bad habits. Corruption could also thrive—as it did in the 1990s, on the back of a hasty privatisation of state-owned businesses soon after the country emerged from the Soviet Union’s shadow and introduced democracy. Indeed, the involvement of many senior officials in mining makes this likely. And even virtuous public spending may push up inflation.

An economy hooked on a handful of commodities is also vulnerable to price shocks. A new fiscal stability law has been adopted, setting indices for commodity prices for budgeting purposes. When prices go above the index, excess revenue will be stored in a “stability fund”. If prices fall, the government can tap the fund to cover its costs.

Other precautions are being taken. New anti-corruption legislation has been passed. And Mr Elbegdorj vows to help boost investments in non-mining sectors, including tourism, finance and outsourcing. He says that mining’s contribution to output should shrink from 70%, its current level, to around 20% within two decades.

That sounds unlikely. Yet there is hope that Mongolia’s current leaders, who are better educated than their predecessors (in fact, Mongolia's President is a Harvard graduate, Prime Minister is a graduate of London School of Economics, Foreign Minister is a graduate of Cambridge University, Speaker of the Parliament is a graduate of Humboldt University in Berlin, Finance Minister is a graduate of Georgetown University, Minister for Mineral resources is a graduate of Australian National University, Defense Minister is a graduate of the University of Munich, Justice Minister is a graduate of St. Petersburg University in Russia, Education and Culture Minister is a graduate of the Australian National University,and Health Minister is a graduate of Budapest University in Hungary), do at least understand the dilemmas involved in managing the coming riches and the rising expectations they will bring. “It’s a question of whether we become Nigeria or Chile,” says a senior government adviser, in a country accelerating away from its nomadic past.

Wow, the Mongolians and Mongolian leadership are very educated and westernized! This is probably the main reason why Mongolia smoothly transitioned from communism to liberal democracy unlike other Asian communist countries including China!

There are a couple of ministers who graduated from local Mongolian Universities including the National University of Mongolia. They are as well edcuated as others who graduated from top foreign universities like Harvard or Cambridge.

I was wondering about the education of Inner Mongolian political leadership and elite: both Mongolian and ethnic Chinese. Please write if you know. What is the education of Inner Mongolia's communist party boss (the Chinese guy) and other Mongolian and Chinese officials. Are Inner Mongolian Mongol politicians and officials are very westernized like their brethrens in Mongolia, or they are very sinocized? What are the education of Oyun-chimeg, the deputy chair-woman of the National People's Congress of China -the highest rankiong Mongolian in China, what is the education of current Inner Mongolia' Governor - Baatar?

Please compare the education of the Mongolian and Inner Mongolian political and business elties!

I found information about Mrs Oyun-chimeg's education from Wikipedia: she is a grduate of Inner Mongolian Chinese communist party school. Strange! What one learns in Communist party schools except useful Lenin, Mao, and Deng's dogmas and ideologies!

Originally from Beipiao County, Liaoning, she entered the workforce in August 1964, and became a member of the Communist Party of China in July 1966. She graduated from the Inner Mongolia Party School.

Uyunqimg rose to prominence politically in the Inner Mongolia Autonomous Region. In August 2000 she became the Vice party chief of the Inner Mongolian CPC Committee, and the Vice Chairman and Acting Chairman of the Inner Mongolia Autonomous Region. From 2001 to April 2003, she served as the Chairman of the Inner Mongolia Autonomous Region. At the 2003 National People's Congress session held in March, she became a Vice-Chair of its Standing Committee, the body which acts as a day-to-day legislative body when the NPC is not in session.