Why All Roads Lead to Mongolia

Recent Features

Features | Economy | Central Asia

Why All Roads Lead to Mongolia

Mongolians have long dismissed their country as a pony between two elephants. But a wealth of natural resources could change that.

In the past month, Mongolia has played host to an impressive succession of visiting world leaders, including senior officials from China, the United States, South Korea and Finland. Movers and shakers in government and business from around the world are taking unprecedented interest in Mongolia. Why?

As industrialized countries scour the globe for increasingly scarce raw materials, Mongolia is seen as a generously endowed partner that is eager to do business. The physically massive but undeveloped country is enjoying the attention as it extends its brand of resource diplomacy. All recent visitors left with plans to extend ties and get their piece of Mongolia’s mineral pie.

The recent meetings were feted by their participants and in the Mongolian press with some gushing rhetoric, with much talk of ‘historic’ agreements and ‘special relationships.’ During his meeting with Zhou Yongkang, a senior official of the Chinese Communist Party, Mongolian Prime Minister S. Batbold spoke of a coming ‘golden era’ in Mongolian-Chinese relations, which have historically been antagonistic.

Batbold also referred to South Korea Mongolia’s ‘third neighbour.’ Shortly after South Korean President Lee Myung-bak’s visit, the country’s state-run Korea Development Bank (KDB) announced the signing of a contract with the Development Bank of Mongolia (DBM) to manage DBM for four years.

Under the deal, inked on August 30 in Ulan Bator, KDB will remake the bank’s operating system and take control of its development financing side. An official from KDB stated that the contract would be extended ‘if necessary,’ though what might constitute necessity wasn’t explained.

US Vice President Joe Biden, meanwhile, praised Mongolia’s democracy by calling the country ‘an emerging leader in the worldwide democratic movement.’ The United States plans to share its expertise in high technology in return for deals related to Mongolia’s natural resources.

On the same day as Finnish President Halonen's visit, the Mongolian government announced plans to raise $300 billion by privatizing Erdenes Tavan Tolgoi, the company in control of one of the world’s biggest coal deposits. The company will be listed on the stock exchanges of London, Hong Kong and Ulan Bator. This spreading of associations perhaps sends the message that Mongolia wishes to keep a range of partnerships, rather than being seen to rely on one partner.

Mongolians have described their country as a tiny pony stuck between two huge elephants, namely Russia and China. Mongolia became a Soviet satellite after it looked to the victorious Bolsheviks for protection from China. The Chinese government at the time wanted to claim both Inner and Outer Mongolia as Chinese territory. Much of Mongolia’s history is therefore comprised of being pulled between larger powers. Now, though, the country is using its mineral wealth to carve out an independent global position.

Mongolia’s economy has been predicted by the European Bank for Reconstruction and Development to grow by 9 percent this year, and 12 percent in 2012, as a result of increased activity in the mining sector.

Yet despite such impressive numbers, the capital of Ulan Bator doesn’t look much like a prosperous city. The city centre is rife with abandoned buildings and a huge, growing slum sits on its edge. More and more Mongolians are finding it impossible to continue with their traditionally nomadic way of life, while extremely harsh winters have killed herders’ animals, leaving them with no option except to migrate to the city, where they generally fail to find work and end up living in poverty.

‘Once they get here, they’re stuck. They can’t go back to being a herder,’ says Troy Tvrdik, who with his family runs the NGO Flourishing Future in Ulan Bator’s ger (traditional Mongolian hut) district. ‘Then all of a sudden they wake up and have nothing to do. They lose all sense of purpose.’

On August 27, Mongolian Finance Minister S. Bayartsogt announced that the government plans to invest the budget surplus into welfare measures designed to improve employment and health. In July, revenues were MNT 248.8 billion ($199.8 million) more than projected, due to big increases in industrial and mining production.

The government says it will increase spending by up to MNT 92.6 billion ($74.4 million), with MNT 30 billion to be allocated for programmes to boost employment, MNT 10.3 billion ($8.3 million) to be used to improve transportation and health for vulnerable Mongolians, and MNT 1 billion ($8 million) set aside to help Mongolian athletes prepare for the 2012 Olympic Games.

Of course, despite the recent interest and pledges of investment, Mongolian officials have a long way to go in trying to create a broadly successful society while relying on industries that employ few people and are often foreign-owned. Still, the decisions and relationships now being made in Mongolia will determine whether it can become one of the big elephants of the global economy, or if it is destined to remain a tiny pony.

Steven Borowiec is a South Korea-based writer. His work has appeared in The Guardian, The Toronto Star and Asia Sentinel, among other publications.