Mongolia Moves up in WorldBank Ease of Doing Business Ranking

Posted on January 9, 2013 by JDierkes

Mongolia is continuing its positive run in world indices and rankings with the release of the WorldBank’s “Ease of Doing Business” ranking, moving from 88 to 76.

This comes on the heels of an Economist prediction that Mongolia’s economy will have the fastest growing GDP again in 2013.

In November, Mongolia moved up 26 spots in Transparency International’s Corruption Perception Index. Next up: Freedom House’s “Freedom in the World Index” on January 16.

Now, Mongolia in the “Ease of Doing Business” ranking.

Mongolia is ranked 76th now, compared to its 2012 ranking of 88.

The rise appears to be mainly driven by a huge jump in the ranking of the ease of starting a business in Mongolia which is now ranked at 39th in this category. Credit is also seen to be more easily available (jump of 14 ranks) while the other subindicators are roughly stable.

Business regulation in general and in the specific areas covered by the Easy of Doing Business ranking is not a topic that I follow in any specific detail beyond more macro questions of mining policy and mining regulation, so I can’t offer any specific insights on what might be driving this rise in rankings.

Mongolia’s lowest ranking comes in the “trading across borders” category. This “measures the time and cost (excluding tariffs) associated with exporting and importing a standardized cargo of goods by sea transport”. I suspect that Mongolia is hurt by its landlocked status in this regard. When looking at the ranking on this factor alone, of the bottom 25 countries 18 are landlocked (Laos, Ethiopia, Zimbabwe, Malawi, Azerbaijan, Nepal, Bhutan, Burkina Faso, Kyrgyzstan, Mongolia, Niger, Burundi, Afghanistan, Chad, Central African Republic, Kazakhstan, Tajikistan, Uzbekistan). It thus seems that there’s very little that policy in Mongolia might address to effect this ranking.

Comparisons

The “Doing Business” allows for the easy comparison of countries included in the ranking. In the “lower middle income” category, Mongolia ranks 7th, behind Georgia , Armenia, some Pacific Islands, and Ghana.

Among small population countries, Mongolia comes in 25th.

In the East Asia & Pacific category, Mongolia is ranked 9th behind Singapore, Hong Kong, Malaysia, Taiwan, Thailand, Samoa, Fiji and Tonga.

There’s no post-state socialist category, but the countries ranked ahead of Mongolia in this grouping would be Georgia (9th overall), Estonia (21), Macedonia (23), Latvia (25), Lithuania (27), Armenia (32), Slovenia (35), Slovakia (46), Kazakhstan (49), Montenegro (51), Hungary (54), Poland (55), Belarus (58), Czech republic (65), Azerbaijan (67), Kyrgyzstan (70), Romania (72).

Methods

The index is constructed out of 10 sub-rankings of 185 economies. The overall index is the simple average of percentile rankings in the 10 sub-rankings.

The sub-rankings focus on:

starting a business
dealing with construction permits
getting electricity
registering property
getting credit
protecting investors
paying taxes
trading across borders
enforcing contracts
resolving insolvency

For an explanation of the methodology see the “Doing Business” website.

Posted in Business, Policy | Tagged Julian Dierkes | 1 Comment

Mongolia Focus This Year

Posted on January 2, 2013 by JDierkes

By Julian Dierkes

It’s been a big year for us at Mongolia Focus as well.

Parliamentary Election

To our surprise we suddenly held a near-monopoly on political analysis around the time of the parliamentary election. There were very few international journalists in Mongolia for the campaign and international organizations scaled back their election observation as well. Serving as election observers, we were able to approach politicians, campaign officials, and voters to ask them about the election campaign.

Highlights of our blogging during the election season:

we provided information about election procedures and observations on campaign themes
we tried to situate the Sant Maral poll that offered the only pre-election sense of likely voting
calculations of seat distribution

Mongolia Today Authors

Writing on Mongolia Today regularly appears to be good for graduate students’ careers, or so I will claim. All three of my fellow regular authors this year handed in major research reports and moved one step further along their academic training and careers:

Byamba handed in and defended his doctoral dissertation in Sociology at the University of Hokkaido
Mendee handed in his MA thesis and is moving on to the PhD in Political Science at the University of British Columbia
Brandon handed in his MA thesis in Asia Pacific Policy Studies at the University of British Columbia and this will hopefully be a springboard for a PhD in Political Science, most likely somewhere in the U.S.

Congratulations to all three! They have been an integral part of the Mongolia Today project and continue to subscribe insights and fascinating topics of discussion on contemporary Mongolia

Other Publications/Channels on Contemporary Mongolia

For research on Mongolia at the University of British Columbia it was a big year as a volume based on a 2008 conference held at UBC was published this summer (Change in Democratic Mongolia).

Does Anyone Read our Blog?

Oh, but do they ever!

Since we started blogging in summer of 2011, nearly 18,000 unique visitors have come to our site for nearly 30,000 visits. The huge majority of these visits has come this year (16,000+).

Most readers access the site from Mongolia, followed by the U.S., Canada, Japan, the UK, Australia, China, Germany, Hong Kong, and South Korea.

On average, readers have looked at 2 pages. That means that in 2012, nearly 45,000 unique pages on our blog have been viewed. Two thirds of traffic arrives via search engines while there have also been referrals, especially from Twitter and Facebook.

I (Julian Dierkes) seem to have increasingly built an audience for my tweets, particularly focused on Mongolia, though I sprinkle Japan tweets into the stream as well. For example, a tweet about my Dec 30 wrap-up of international perceptions of Mongolia (“In 2012 #Mongolia made news with fastest-growing economy (+17.5% GDP in 2011)”) was re-tweeted nine times within six hours of the original post, potentially reaching around 30,000 followers.

Our listing of non-Mongolian mining companies active in Mongolia gets a lot of visits. Of the categories we’ve written about, coverage of the parliamentary election has been most popular. The most popular single post was a simple announcement of the date that election was set for.

Also, especially in the latter half of the year, we ‘ve been gratified that we’re receiving more and more feedback from Mongolians who are reading the blog posts regularly.

Some of this feedback is coming in response to tweets about posts, some of it by email or by word of (virtual) mouth. It’s great to learn that it is decision-makers and ordinary folk alike who are looking to our blog as a source of information for developments in contemporary Mongolia.

Posted in Reflection, Research on Mongolia, Social Media | Tagged Julian Dierkes | 2 Comments

Mongolia this Year

Posted on December 30, 2012 by JDierkes

It’s been quite a year for Mongolia in that the rest of the world paid some attention to Mongolia, at least in punctuated bursts…

Mongolia in the News

Rapid Growth

The news item that probably attracted most international attention was the fact that Mongolia’s economy was the fastest-growing economy in 2011. This halo lasted all year in attracting visits by foreign journalists who produced relatively repetitive stories on the extent to which the Mongolian economy centres on Oyu Tolgoi and the controversies that this engenders.

Enkhbayar

The other story that made it onto the international news radar was the arrest, prosecution and sentencing of N Enkhbayar, former speaker of parliament, prime minister and president. The arrest came under somewhat theatrical circumstances in April and led first to Enkhbayar being barred from running for parliament and then to his initial sentencing in August before his sentence was commuted to 2 1/2 years in December.

Most of the international attention seemed to be rooted in a PR campaign that Enkhbayar and/or his supporters ran in various countries. This led to statements of support for Enkhbayar by US Senator Diane Feinstein, for example, and to a whole series of rather vacuuous blog posts by a political strategist/blogger named Doug Schoen who seemed to have a very rudimentary understanding of Mongolia and reproduced the line that was pushed in PR materials sent out by the Enkhbayar camp. Regardless of the silly notion that Enkhbayar’s trial would be the end of Mongolian democracy, democratic governance seemed to pull through just fine and emerged significantly strengthened from the June parliamentary elections.

DP Political Dominance

This election was also the first step in what may shape up to be a period of dominance over Mongolian politics by the DP. Having won a plurality of seats in parliament in June as well as the mayoral election in Ulaanbaatar, DP candidates did well in the local elections in November as well, winning a number of provincial khural majorities and thus governor positions.

While the presidential election is still more than six months away, Elbegdorj’s chances at re-election currently would look very strong, assuming that the DP holds together with the same unity that characterize the parliamentary campaign in June. If Elbegdorj were to be re-elected this would cement DP dominance further until the next parliamentary election in 2016, again assuming that internal rivalries don’t break out.

Other Coverage

Unfortunately, these domestic political dynamics were largely ignored by the international press, perhaps because journalists were so busy focusing on stories about various decommissioned UK ambulances who annually trek to Ulaanbaatar claiming 82% of international news coverage (my unscientific impression of coverage). At least we made it through a year of no stories (at least none that I recall) on kids living in sewers in Ulaanbaatar and Mongolian neo-Nazis. We almost made it through the year of the 850th anniversary of Chinggis Khan’s birth without any attention paid to this, but then Newsweek followed through with a story reporting on the “hunt” for Chinggis Khan’s tomb.

International Relations in 2012

Of greater significance for real rather than legendary international relations were three events this year. In May, the Mongolian parliament passed a Foreign Investment Law that is still causing ripples half a year later. In the Fall, Mongolia’s nuclear weapons-free status was finally formally recognized by the UN Security Council and in November Mongolia joined the Organization for Security and Co-operation (OSCE) as the first member from Asia (beyond the former Soviet republics of the Caucasus and Central Asia at least).

Other events that were noticed around the world were the November meeting of Japanese and North Korean negotiators in Ulaanbaatar and the massively oversubscribed sale of Chinggis Bonds (Mongolian sovereign debt).

Intensified Efforts against Corruption and Pollution

The Mongolian government has become more active during this year in two areas that hold importance consequences for the long-term future of the country: corruption and pollution.

The Enkhbayar trial is only the most prominent indicator of a seemingly intensified effort to curb corruption. A series of legislative efforts have clarified matters around an understanding of corruption and conflict of interest so that the prosecution of corrupt practices has become possible and some deterrent is being established. That does not mean by any stretch that corruption has been curbed, nor that the current DP government is free from it, but corrupt practices are being discussed in public more concretely and allegations are moving from the realm of conspiracy theories to criminal investigations.

After years of lamenting the horrific air pollution in Ulaanbaatar in the winter, there also seem to be some concrete steps to address this pollution, at least where it is coupled with traffic congestion. Less effort seems to be devoted to air pollution from coal stoves, though some pilot projects providing cleaner-burning fuels and stoves are in process.

Olympics

Finally, Mongolia’s success at the London Olympics winning five medals was drowned out somewhat by the absence of a single gold medal despite great efforts by athletes, especially in judo.

Outlook to 2013

The two political events that are most clearly on the horizon for 2013 are the presidential election and Mongolia’s continued presidency of the Community of Democracies.

On the economic front, Mongolia is likely to record strong growth for 2012 again, especially with the slight re-bounding of coal sales in the latter half of the year.

If any decisions related to Tavan Tolgoi are made this year (unlikely before the presidential election, somewhat less unlikely in the Fall) this will certainly garner attention, as would any more concrete attempts to renegotiate the Oyu Tolgoi IA.

Posted in Democracy, Elections, Foreign Investment, Foreign Policy, Ikh Khural 2012, Local Elections 2012, Media and Press, Nationalism, Oyu Tolgoi, Politics, Publications, Research on Mongolia, Social Media | Tagged Julian Dierkes | 2 Comments

Small Power

Posted on December 28, 2012 by miliate

My thesis- written under the direction of Drs. Julian Dierkes and Brian Job- has been officially accepted by UBC, marking the completion of my M.A. Asia Pacific Policy Studies. I have included the abstract and link below, and in the coming weeks, I will add a post or two summarizing the Mongolia-specific sections for your reference.

Small Power: Mongolia’s Democratization and Foreign Policy Objectives

Small states are in a unique position, where they cannot hope to meet their foreign policy and security objectives through hard power. Rather, small states must balance against large neighbors via more subtle and nuanced ways. Through a critique of soft power, the author presents a new analytical framework for understanding small power and new criteria for defining “smallness” in today’s international system. Small power attempts to explain small state foreign policy decision-making and the role that “attractiveness” plays in their relations with larger states. One potential source of small power– democratic governance- is explored through a detailed look at the Mongolian model of democratization as a foreign policy tool in its “third neighbor policy”. Successful democratic transitions in small states can attract more security related, economic, and institutional support from leading democratic countries than their smallsize might initially suggest.

Posted in Democracy, Foreign Policy, International Relations, Mongolia and ..., United States | Tagged Brandon Miliate | 1 Comment

The Citizens’ Hall and Homeland Councils

Posted on December 13, 2012 by mendee

Just adding a part of my thesis that focuses on the Citizens’ Hall and Homeland Councils. And, still wondering how political parties’ emerging interests in local politics will impact the most powerful local network, Homeland Councils.

The citizens’ halls and the homeland councils provide interesting insights. The citizens’ halls demonstrate how a new democracy localizes ideas found in other democracies, while the homeland councils are examples of how informal networks of previous regimes have been transformed into the most influential formal network between urban and rural societies. The former plays a constructive role in civil society development, but the latter plays both positive and negative roles.

The first citizens’ hall (irgenii tanhim) was established in 2009 at the Government House.[i] Its main purpose is to provide citizens and civil society organizations an opportunity to participate in the law-making process. It was initiated by current President Elbegdorj and his advisors based on examples from developed democracies. The German Embassy, TAF and OSI provided technical assistance.[ii] In the past three years, the citizens’ hall at the Government House was used to discuss draft legislation, amendments and the state budget, to debate over policies (e.g., city development, taxation, food security), to conduct hearings, and to hold an annual ‘town hall’ meeting with the president. The citizens’ hall at the Government House is administrated by the Presidential Office. The Presidential Office sets agendas, recieves public recommendations, administers the debates and hearings[1], and reports outcomes to the public. The citizens’ hall uses all types of social media (website, Facebook, twitter) and broadcasts major debates. Events are usually attended by parliament members, government officials and experts. By January 2012, 15 out of 21 provinces, 5 out of 9 districts of the capital city, and the capital city itself established the citizens’ halls.[iii] The citizens’ halls are mostly run by the secretariat of the local legislative chambers. The majority of these halls follow the handbook, Local Self-Governance based on Citizens’ Participation (2010).[iv]

The idea of the citizens’ halls is localized in the Mongolian context. It shows the existence and impacts of civil society space because politicians are reacting, and trying to establish channels with civil society actors and organizations. But, the citizens’ hall reaches a limited number of citizens (ARD, 2010, p. 7), and could be used to strengthen the legitimacy of the presidential office, or to advance specific interests by claiming wider public support. It is even a bit early to distinguish the impacts of the citizens’ halls from similar efforts occurring among Mongolia’s neighbors: Chinese deliberative mechanisms (He & Warren, 2011) or Russian Public Chambers (Evans A. B., 2008; Richter, 2009). However, it has begun to serve as a channel for civil society actors to advance public interests.

The homeland councils (nutagyn zuvlul) differ significantly as an institution from the citizens’ halls. The councils are self-initiated, self-funded, and self-governed, while the citizens’ halls are dependent on government initiatives, resources, and governance. To gain parliamentary seats, and provincial governance positions (i.e., governors and local legislative chambers of province and counties), politicians are increasingly dependent on the support of the homeland councils. The homeland councils play an important role in politicians getting elected, artists getting state awards, and even wrestlers getting the national wrestling ranks. For example, in last parliamentary elections, 56 out of 76 members of the Mongolian parliament represented ridings outside of the capital city, although over half the population resides in the capital. The revised Election Law (15 December, 2011) reduced the number of majoritarian seats from 76 to 48 by introducing 28 proportional seats. However, 34 out of 48 seats will still belong to provinces. Moreover, the homeland councils are a locally developed innovation. Their main goal is to facilitate communication between people in the rural provinces and counties with their natives who are presently residing in urban centres. The most common shared ties with rural provinces and counties include place of birth, parents’ native lands, home schools (e.g., secondary, vocational schools, and university), and work-related experiences.

The number of the homeland councils started to surge starting in the early 1990s because of the increased migration to the urban centres and the deterioration of public services in rural areas. Today each of the 21 provinces has its own homeland council.[v] Although the goals of the homeland councils have changed over time, there are several generalizable features. First, the homeland councils are registered as non-governmental organizations (Sneath, 2010, p. 258). The homeland councils of counties usually operate as part of the homeland council of the respective provinces.[vi] Second, the management committee (udirdakh zuvlul) of the homeland council includes notable individuals (e.g., statesmen, politicians, athletes, artists, scholars, high-ranking military and security service personnel, and monks) who have ties with the province. According to Sneath, the management committee has 10 to 25 members and the councils have a membership of 30-60 members help to organize events and campaigns (Sneath, 2010, p. 258). Third, homeland councils organize similar events. Two annual events are worth mentioning. The Lunar New Year’s celebration is organized in major urban centres. Interestingly, governors and members of the legislative chambers of the province and its counties attend this celebration. The other event is the anniversary of the province. All members who reside outside of the province participate in this celebration which takes place in the home province. Fourth, some councils have veterans and student associations. The student associations are in charge of mobilizing students, alumni and organizing youth events (e.g., New Year’s celebration, parties, and sporting events). Although all councils operate in the capital city (Byambajav, 2012; Sneath, 2010), some have branches in other major urban centres, such as Erdenet, Darkhan, and Choibalsan cities. Fifth, councils organize fundraising or disaster relief assistance. Finally, all councils have their own regulations, and have begun to use social media (e.g., web sites, facebook), publish local histories, and reach out natives abroad.

Undoubtedly, homeland councils are important civil society organizations, but some of their activities and their lack of transparency tend to work against the development of democratic institutions. For example, councils actively lobby for their natives to be posted in higher government positions and university graduates for employment in various organizations, including government services. As a result, this contributes to the growth of unofficial local networks within the public services and undermines the principles of meritocracy and professionalism. To secure ones’ political and business interests, politicians (esp., parliamentarians) engage in ‘logrolling’ and compete to distribute government funds and to obtain foreign assistance for their provinces. In addition, business entrepreneurs and entities provide financial assistance to gain the support of homeland councils. However, the financial aspects of the homeland councils remain nontransparent. Apparently, larger funds are devoted to organizing expensive anniversary celebrations.[vii]

Examples of the citizens’ halls and the homeland councils demonstrate the existence of civil society space in Mongolia. Two different types of institutionalization are occurring. The citizen’s halls are initiated and promoted by the Presidential Office. It is totally dependent on the will and resources of the government and politicians. In contrast, the homeland councils are self-initiated, funded, and governed by citizens to promote local interests in national politics. Both venues are open to any politicians, citizens, and state and business actors to advance their public, collective, or even personal interests. These venues are promoting democratic values and a sense of democratic citizenship through encouragement of civic activities. However, the homeland councils, apparently, lack transparency and often promote clientelistic types of engagements with actors of the state and political and economic societies. This is harmful to healthy civil society development.

[i]“Erokhiilogchiin dergedeh irgenii tanhim uudee neelee” [The Citizens’ Hall at the President’s Office Opens], available: http://www.vip76.mn/medee/uil-yavdlyn-medee/8299-eronxiilogchiin-dergedex-irgenii-tanxim-uudee-neelee.html (accessed 20 May 2012).

[ii] Opening Ceremony Addresses of the German Ambassador, TAF Country Representative, and CEO of the Open Society Forum, 15 December 2009, available at: http://www.irgen.org/index.php/irgenii-tanhim?start=28 (accessed 27 May 2012).

[iii] “Update of the Establishment of the Local Citizens’ Halls,” the Citizen Hall Press Release, 10 January 2012, available at: irgen.org/index.php/irgenii-tanhim/135-3534546547 (accessed 27 May 2012).

[iv] The handbook was written by the Presidential Office experts who were in charge of the initial study, establishment, and management of the citizens’ halls. The handbook is available at: www.president.mn/mongolian/sites/default/files/it_nom.pdf.

[v] Administratively, Mongolia is divided into 21 provinces and the capital city, Ulaanbaatar. The 21 provinces are subdivided into 331 counties (sum).

[vi] On some occasions, some provinces also operate on a regional basis, such as the homeland council for provinces of the Western Regions, in which several provides come together for certain events.

[vii] The homeland councils often present costly awards (the most popular one – jeep – e.g., Toyota) for winners of the wrestling and horseracing competitions.

Posted in Civil Society, Research on Mongolia, Social Movements | Tagged MENDEE Jargalsaikhan | 1 Comment

More on Corruption in Mongolia According to Transparency International: Further Comparisons

Posted on December 7, 2012 by JDierkes

A couple of days ago, I offered some initial observations on Mongolia’s jump from 120 to 94th least perceived-to-be corrupt public service.

I find this business of the construction of various indices in political risk analysis and other fields, quite interesting, so here are some more thoughts.

More Comparisons

In order to get a better sense of Mongolia’s ranking in a comparative context, I’ve tried to add some information to the TI datafile to be able to make different comparisons. In my previous post I listed the comparison with Asia Pacific countries already, and tried to eyeball post-state socialist countries and mining jurisdictions.

Now I’ve taken one of the indicators that flows into the CPI and used that to categorize countries. The Bertelsmann Foundation produced a Transformation Index that evaluates countries in transition on a whole range of criteria.

I have now compared Mongolia to all transition countries and to those transition countries in the Post-Soviet Eurasia category.

Post-Soviet Eurasia

This includes: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

In this group, Mongolia ranks second jointly with Moldova following the much higher-ranked Georgia. Armenia follows at (105 on global ranking) and it’s downhill fast after that, ending with Uzbekistan and Turkmenistan at 170.

This is a very relevant comparison, I think, in that these are all countries that would have been in a roughly similar position in 1990. Note that of these countries, only Mongolia is rated “free” by the Freedom in the World report (Freedom House, 2012).

Transition Societies

The Bertelsmann Foundation includes a total of 128 countries in this listing. On the CPI this includes some countries with very low perceived corruption (Singapore, Chile, Uruguay, various Gulf states, Baltic countries, Eastern Europe, etc.).

Among these 128 transition countries, Mongolia ranks 55th with Moldova, Benin, Colombia, India. Other countries in this group at a similar rank would be Morocco, Thailand, Zambia, Senegal. That places Mongolia ahead of some countries such as Argentina, the Philippines, Indonesia, Vietnam, before the list ends with the highly corrupt Turkmenistan, Uzbekistan, Sudan, Afghanistan, North Korea and Sudan.

All in all, this leaves much room for improvement for Mongolia, but if the CPI is to be believed than Mongolia is already doing well in comparison to some obvious groupings of countries, and seems to be building momentum toward further improvements.

Potential Bribe Payers

Obviously, it takes two to be corrupt, so what about the potential bribe payers in Mongolia? Clearly, there would be a category of domestic bribes that might range from the banal (traffic tickets) to the more serious (allocation of public funds, jobs, etc.). [This is the kind of corruption in Mongolia that Astrid Zimmermann has worked and published on, for example in her chapter in Change in Democratic Mongolia.]

For the more serious (in terms of amount of financial benefit potentially gained, as well as harm done to the nation) corruption, most people think of property transactions and especially the mining sector in Mongolia. Mining is a sector that has attracted many foreign investors whether it is N American, Australian, and European junior mining companies with exploration projects, largely Chinese investors who are operating small and medium-sized industrial mining operations, or global investors buying into the Oyu Tolgoi project.

One of the components of the CPI is the Bribe Payers Index that is compiled by Transparency International as well. The 2011 edition ranked some of the most prominent foreign investor countries active in Mongolia as follows: Germany and Japan 4th, Australia and Canada 6th, U.S. 10th, South Korea 13th, Hong Kong 15th, India and Turkey 19th. While China and Russia come in at 27th and 28th, respectively, note that only 28 countries are included in the index and that mining is ranked 15th among 19 sectors according to the likelihood that companies in this sector bribe. The BPI does not correlate countries or sectors with specific destinations for bribes, so it offers no direct conclusions about (the perception of) corruption in Mongolia, the array of significant foreign investors is surely an important part of the context.

Methods

Yes, back to methods. I guess it’s the social scientist in me…

Frankly, I still can’t quite figure out whether the Corruption Perception Index is simply a mathematical formula standardizing a number of other indicators through a mathematical formula, or whether there is some expert judgement or additional scoring by TI involved. What puzzles me even further is that the sources listed on the Mongolia page, don’t correspond exactly to the sources listed in the datafile that TI makes available for download (XLS). As far as I can tell so far (I’m continuing to look into individual scores), none of the sources point to a significant change in scores for Mongolia, so I’m puzzled where the jump in score and ranking comes from in the CPI.

Posted in Business, Civil Society, Corruption, Foreign Investment, Global Indices, Mongolia and ... | Tagged Julian Dierkes | 1 Comment

FDI to Mongolia: Restrictions, China, and Comparisons with Canada

Posted on December 5, 2012 by JDierkes

Ever since the Chalco bid for South Gobi Resources prompted the swift passage of a Foreign Investment Law by the Mongolian parliament I’ve been struck by some of the parallels between this law and its counterpart in Canada. I tweeted about this some weeks ago as well.

Feeding the Hungry Dragon

Now, a very interesting policy update for the Canadian Defence & Foreign Affairs Institute has me jumping off my fence and wanting to weigh in on this topic. The policy update (November 2012 PDF) was written by Charles Krusekopf and Hugh Stephens. These are authors who are definitely worth paying attention to. Charles has been involved in Mongolia and research on Mongolia for quite some time. He is the founder and continues to serve as the Executive Director of the American Center for Mongolian Studies. [Disclosure: I serve on the Executive Committee of the Board of Directors of the ACMS.] The ACMS has established itself in the 10 years of its existence not only as the go-to organization for researchers of all stripes doing research in or on Mongolia, but has become a mainstay of relations between Mongolia and North America. It also houses an ever-growing library that offers access to scholarly materials to Mongolians.

Hugh has had a stellar career with the Canadian foreign service and then in the private sector, mostly in Asia. He knows policy-makers and policy-making processes in Asia intimately.

In their piece, Hugh and Charles (S&K hereafter) argue that Mongolia offers a cautionary tale for the Conservative government as it makes decisions about resource investments in Canada by foreign investors. They base this argument on their view that given the similarities between Mongolia and Canada in terms of the strength of the resource economy, but also the need for foreign direct investment in this sector, the reactions to decisions made in Mongolia may offer a glimpse at reactions that Canadian decisions might prompt.

In their eyes, developments in Mongolia this year are a cautionary tale because the passage of a foreign investment law there has raised the political risk for investments in Mongolia, particularly for Chinese investors, but as a quasi-collateral damage, for all foreign investors.

Their argument was endorsed by a Wall Street Journal “Canada Real Time” blog post by Paul Vieira.

Similarities and Differences between the Mongolian and Canadian Foreign Investment Law

Before I turn to developments in Mongolia, a quick note on the parallels (or lack thereof) between the Canadian and Mongolia Foreign Investment Law.

The greatest similarity obviously is the fact that such a law exists and that this law demands a government review of investments in certain industries triggered by thresholds of the financial volume of these transactions.

Discussions about the application of the Canada Investment Act to the bid by Chinese state-owned for Nexen are ongoing in Canada. The general expectation had been that a Conservative government would welcome such investment. However, this government has actually turned down a number of such bids, swayed by economic nationalism rather than a free trade/capitalist agenda. In the CNOOC bid this debate is sharpened by the fact that the bidder is a state-owned Chinese company. Both, “state-owned” and “Chinese” appears to have raised warning flags in parts of the Conservative government.

S&K are not alone in warning that these discussions in Canada are likely to hurt Canada’s reputation as an investment destination. This is an argument that another highly trustworthy voice on Asia in Canada, Joseph Caron, DFAIT Asian grand slam winner as the former ambassador to China, India and Japan, made in October in the Financial Post.

Earlier in the Fall there had apparently been some discussion in the government about specifying some guidelines that might distinguish bids by state-owned entities from those of non-state companies.

This is a distinction that the Mongolian law has created quite explicitly. The Mongolian law outlines sectors that it applies to (the resource sector is included, naturally) and thresholds at which different kinds of reviews are triggered. A large bid by a state-owned foreign investors would thus trigger a review by parliament. This was a clause in the law that was aimed at the Chalco bid for South Gobi at least in part.

And, in a Canadian context, parliamentary review sounds like a good thing, doesn’t it? In fact, there are voices demanding just this in Canada, though I suspect that they’re not necessarily inspired by the Mongolian example.

Parliamentary review in Canada would offer transparency and would force the government to take a clear stance on a proposed sale. Whatever this decision was, any opposition to it would also want to be clear in its opposition making this decision more approachable to the Canadian public.

Is this what would happen in Mongolia? Would parliamentary review offer more transparency, a more informed and more democratic process? Sadly, I doubt it. Note that I have lots of reasons to believe in Mongolian democracy and its staying power. I continue to keep a close eye on political developments in Mongolia in part to develop a more accurate sense of the political risk involved in investing there.

Parliamentary review in Mongolia would imply a) a politicization of the decision, and b) particularly sadly, an opportunity for parliamentary corruption. Obviously, the latter fear is based on conjecture, though there is so much discussion of endemic corruption in Mongolia and many MPs are so obviously wealthy that it is difficult to dismiss this nagging fear. Note, however, that Transparency International just released its 2012 Corruption Perceptions Index and boosted Mongolia’s ranking from 120th to 94th least corrupt. This may give some cause for optimism that anti-corruption measures are building momentum and that parliamentary review may become just right as a response to foreign investment in the future.

Also, decisions on FDI in Canada would come in the context of a fairly stable regulatory regime that offers predictability and the attempt to balance investors’ expectations with Canadians’ needs. Stability in the regulatory regime has not been the strong suite of Mongolian mining regulation.

So, this is where the parallels in my eyes clearly end. Yes, similar principles, but a very different application thereof.

Mongolia as a Cautionary Tale?

Back to that hungry dragon…

S&K write that “Mongolia’s handling of the China file has been less than stellar, reflecting a deep seated ambivalence about China’s intentions combined with a rise of resource nationalism”.

Resource nationalism has been written about a fair bit in the Mongolian context. This is generally equated with some evil movement aiming at nationalization of resource assets. Hugo Chavez is the example that everyone seems to have in mind. In Mongolia this claim is most commonly linked to the demand by some parliamentarians and parts of civil society that the Investment Agreement for the Oyu Tolgoi mine should be revisited (2011 discussion).

But one observer’s resource nationalism is another person’s attempt to preserve the resource wealth of a country and to reap its benefits for current and future generations. The former is a foreign investor, while the latter is a Mongolian.

I would be the first to agree that the process by which Mongolian policy-makers have arrived at some decisions has not always been ideal (in the sense of a careful decision that is based on a thorough and dispassionate analysis of available information) – in fact, this process has been awful at times – but I cannot fault Mongolians or their leaders for their desire to get this decision “right” and their fears of getting it “wrong”.

Striking the appropriate balance between material needs, social aspirations, environmental and cultural protection, and, yes, financial rewards for investors, is not an easy decision. Jurisdictions in North America that have had decades to arrive at appropriate mechanisms for this decision, are still struggling with these issues.

Yes, there is a deep-seated ambivalence about Chinese investments in Mongolia (but also in parts of Canada). This ambivalence includes fairly rational fears of economic dominance (hey, even the Conservative government in Canada is looking to diversify beyond economic dependence on the U.S.), but also elements of anti-Chinese sentiments. Fellow “Mongolia Today” blogger Mendee has written about the latter aspect in his MAAPPS Master’s thesis. Another fellow blogger, Brandon Miliate, is currently completing his MAAPPS thesis examining the options that Mongolia might have in its foreign policy.

S&K write that Mongolia “has been reluctant to allow Chinese ownership of mineral resources. Its efforts to block Chinese ownership of resources, however, have impacted all foreign investors, raised uncertainty and potentially led to an overall decline in foreign investment.” This is a topic that Mendee and I have both taken up in the past:

Mendee “Why Mongolia’s China Mining Strategy is NOT a Mistake!” Sept 26, 2012
Dierkes “Mongolia’s ‘Third Neighbour’ Policy and Its Impact on Foreign Investment” East Asia Forum, Feb 15, 2011

The part of S&K’s statement that I find easiest to agree to is raised uncertainty. There’s no doubt that this is the case. Surely, this has also scared off some investors or made investments dearer. But have enough investors been scared to have an impact on Mongolia? Is the OT mine not such a gigantic project in a resource-hungry world that scaring off some investors might not have a negative impact.

Sure, there is a line where all investors might be scared, but I don’t think that Mongolia has come close to that line. Witness the Chinggis Bond sale last week, raising $1.5b, but attracting orders for ten times that amount. Yes, Mongolia with its BB- S&P rating is paying 5 1/8% on these bonds, but that’s cheaper credit than Italy has been able to get recently, so not too many bond investors seem scared off. In the end, there are so many investors in the world who have read the news that Mongolia was the fastest growing economy in 2011 and who want to participate in this presumed bonanza, that there doesn’t seem to be a shortage of investors, even without any large-scale Chinese investment.

Back to S&K: Yes, Chalco got scared off by the foreign investment law. But that, presumably, was the point. Also, it is very clear that something went seriously wrong in this Chalco bid for South Gobi. Who in their right mind, especially if they had any experience in Mongolia, would announce such a bid without consulting the government extensively? There’s no indication that such consultation occurred. This smacks of hubris on part of South Gobi, or Chalco.

If you’re inclined toward conspiracy theories (as many Mongolians and the Mongolian press seem to be), the most logical explanation of this Chalco bid announcement is one that sees Rio Tinto behind this announcement with a deliberate attempt to drive down South Gobi shareholder Turquoise Hill Resources’ stock price as RT is purchasing Turquoise Hill.

Did South Gobi cease production because of the failed bid? Yes, in the sense that Chalco would have operated the mine, presumably, if the purchase had gone through, but note that it is South Gobi’s coal price (and ultimately its production costs coupled with shrinking demand in China) that has sunk that particular ship. The Chinese ambassador to Mongolia agreed that it is a lack of price competitiveness that has reduced coal exports to China in a recent interview.

Note also that South Gobi is now under some kind of investigation by Mongolian authorities that has stranded an Australian lawyer in Ulaanbaatar for some weeks. Most reporting on this case is focused – once again – on “resource nationalism”, but note that the entire executive team of South Gobi has been fired over the summer one by one and their mine has ceased production. Again, without giving in to temptations of seeing conspiracies, could it not be that there really is something to investigate there?

S&K: “The slowdown in foreign investment has reduced Mongolian government revenue, lowered the credit rating and stock prices of companies working in Mongolia, and slowed ambitious development plans for both mines and critical infrastructure projects.” All true. But if a country is so dependent on mining for its future, is that not a reasonable cost to pay for a more careful (if not always carefully executed, and sometimes even recklessly so) deliberation?

After all, the natural resources in question are unlikely to vanish in Mongolia or in Canada and nor is demand for them, at least in the near or medium-term future.

Of course, S&K and I can only speak in hypotheticals when it comes to considering the impact of legislative changes on investment volume. Any empirical evidence on this would have to analyze a large number of countries in a great variety of different contexts.

It is important to note, however, that foreign direct investment seems to be somewhat of an example of herd behaviour, especially in the mining industry. The perception of political risk might thus be more important in some circumstances than the actual risk. This is certainly more the case for a place like Mongolia where much of the information (including this discussion) is about perception rather than a measured empirical reality.

Conclusions

My understanding of the Canadian oil & gas sector and its regulation or of the Canada Investment Act is too limited to take my slightly different (from S&K) perception of Mongolian developments as a basis for recommendations on the Canadian situation. However, I don’t think that it is an accident that resource-rich countries, whether they are advanced industrialized countries like Canada or Australia, as well as developing and just-on-the-verge-of-booming countries like Mongolia are grappling with similar challenges and are doing so in the context of democratic discourse.

When members of the mining industry in these advanced industrialized countries complain about governance and regulatory uncertainty in places like Mongolia, they would do well to note shared challenges and some of the parallels in the solutions that policy-makers hit upon. With this, I do not have S&K in mind who have offered some thoughtful observations and have taken a well-informed position on the particular challenges facing Canada and Mongolia.

Posted in Business, Canada, Economics, Foreign Investment, Governance, International Relations, JD Mining Governance, Mining, Mongolia and ..., Oyu Tolgoi | Tagged Julian Dierkes | 7 Comments

Corruption in Mongolia according to Transparency International

Posted on December 5, 2012 by JDierkes

Corruption is one of the most prominent features cited in any overview of Mongolian politics, political risk, human development or investment potential. Yet, any hard evidence on the prevalence, extent and mechanisms of corruption are very hard to come by. One of the most internationally visible single piece of evidence in this regard is Transparency International‘s Corruption Perception Index. The 2012 iteration was released on Dec 5, 2012 and below I take a look at Mongolia’s ranking in and of itself and relative to other countries.

Methodological Note

First a few words on the Corruption Perception Index. First of all and very importantly, this is an index of the perception of corruption, not of corruption itself. Presumably this perception correlates highly with actual corruption, but perhaps perception is liable to change more quickly than actual practices, or may lag practices in some circumstances.

Secondly, as the CPI measures perception, it is survey-based and thus subject to the challenges that all surveys face in terms of the recruitment and representativeness of respondents, the translation of words and concepts across languages, etc. These challenges are more severe in a place like Mongolia where we can’t compare any survey data with some general social survey that would give us a better handle on population composition and demographic variables beyond what is offered in the census. This is a challenge that was laid bare in polling in advance of the 2012 parliamentary election, for example.

Importantly, the CPI is a composite index, i.e. it relies on scores/results of a number of other indicators. Beyond that it is actually somewhat difficult to figure out what exactly is going on in the calculation of the Index. The part that I haven’t quite figured out is how much of a judgement by individuals is involved as opposed to a purely mathematical process of aggregating and standardizing other indicators.

One the one hand, TI mentions the involvement of experts in various methodology notes, on the other hand, the Index is clearly described as an “aggregate index, which draws on relevant questions from a number of different data sources that capture business and expert views” (CPI Updated Methodology 2012).

As far as I can figure the methodology notes out, the basis steps in compiling the index are:

selecting data sources according to four criteria: quantifies perception of corruption in public service, valid methodology, credible source, sufficient variation in scores
standardise date sources to 0-100 scale with mean around 45 and SD around 20.
average scores across sources (minimum 3)
report standard error and confidence interval.

According to the Mongolia country page, the sources of information for Mongolia are:

Control of Corruption: WorldBank (2010)
Global Corruption Barometer: TI (2010)
Open Budget Index: International Budget Partnership (2010)
Global Competitiveness Index: IMD (2011-12)
Judicial Independence: World Economic Forum (2011-12)
Human Development Index: UNDP (2011)
Rule of Law: WorldBank (2010)
Press Freedom Index: Reporters Without Borders (2011-12)
Voice & Accountability: WorldBank (2010)

Sources that are not available for Mongolia:

OECD Anti-Bribery Convention [only OECD countries?]
Bribe Payers Index [only “world’s wealthiest and most economically influential countries”]
Financial Secrecy Index

I am a little puzzled by the listing of sources in that none of the more recent scores (I can’t imagine that 2010 sources are driving the 2012 leap for Mongolia) are particularly positive. Since my conclusion now is that the CPI does not seem to involve any judgements by TI independent of the scores from sources, I’m not sure how this score for Mongolia comes about when I look at the components.

Ranking Mongolia

The biggest news is clearly that Mongolia has jumped from 120th to 94th least corrupt country or, alternatively from 62nd to 80th most corrupt.

TI explicitly warns that the methodology for the 2012 version has changed making year-over-year comparison impossible, though the change was in part motivated by the desire to make such comparisons possible in the future.

Mongolia received a score of 36 out of 100 (100 representing no perception of corruption at all). This compares to an average of just under 44 for all 174 countries ranked. The number of sources used in the calculation of Mongolia compares well with OECD and many other countries.

Among the 28 countries included in the Asia Pacific group, Mongolia ranks right in the middle at 14.

Among all 174 countries, Mongolia has an identical score as Benin, Colombia, Djibouti, Greece, India, Moldova, and Senegal. I know very little about most of these countries, but an identical ranking to an EU member country (Greece) and a gigantic Asian democracy (India) is surely not something to be ashamed of.

If we look at post state-socialist countries in the listing, Mongolia sits right in the middle, below European post-Soviet and Eastern European countries (the Baltics, Poland, Hungary, Czech Republic, Slovakia, Romania, Macedonia, Bosnia and Herzegovina, Bulgaria, Montenegro, Moldova), but ahead of other Asian and some European countries (Armenia, Kosovo, Albania, Belarus, Vietnam, Kazakhstan, Russia, Azerbaijan, Ukraine, Kyrgyzstan, Cambodia, Tajikistan, Laos, Turkmenistan, Uzbekistan. Perhaps most notable is the significantly better score for Mongolia than any of the Central Asian countries even though some of the starting point for development in 1990 may have been comparable (though minus the Soviet Republic status, and plus democracy for Mongolia).

I was also trying to group the TI-ranked countries by those that are significant mining jurisdictions, but found no single listing of such jurisdictions on-line. The challenge would be to come up with a metric that would include a country like Canada with a long-established and large mineral sector, and also Mongolia where the volume is small, but the potential is huge.

In any case, eyeballing some countries with prominent mineral sectors (not oil and gas) would put established producers like Canada, Australia, US, Chile ranked highly, but also Botswana, Namibia, Brazil, South Africa. Mongolia would then be somewhat similar among mining countries to Peru, Mexico and the Philippines, but much less corrupt than Indonesia, Kazakhstan, Russia, Nigeria and Venezuela.

Explaining Mongolia

Let’s assume for the moment (and I am happy to make this assumption having looked at the documentation) that the CPI produces reliable information and that the ranking of countries relative to one another is meaningful. This assumption begs the question of what happened in Mongolia in the past 12 months that would lead to such a significant jump. Fortunately, I had a chance to discuss this with PoliSci PhD student Mendee this morning to get a better sense of likely developments.

Remembering that the CPI is a Corruption Perception Index the best explanation for Mongolia’s jump would be to focus on the momentum (Mendee’s suggestion) that has been building around anti-corruption activities in Mongolia. Corruption has been very much in the news this year with the most internationally visible instances being the arrest and trial of former president Enkhbayar and the current detention of Australian lawyer Sarah Armstrong. But there has been much more than this going on that has been much more visible domestically with investigations of several aimag governors, a tightening of income reporting requirements for public and elected officials, etc.

Public perception of anti-corruption activities given a high level of underlying corruption (this is assumed to be the case for Mongolia where people (Mongolian and non-Mongolian) speak of corruption as “endemic”) could be either, “OMG, what a cesspool, corruption is everywhere” (perception as more corrupt than expected), or “Yes, corruption is everywhere, but things are getting better”. Clearly, the second view must have predominated in the sources used by TI.

What makes this explanation of building momentum plausible is that corruption and related topics like conflict-of-interest have become better defined over the past several years in Mongolia. There has been a fair bit of legislative activity that makes some of the principles behind corruption as well as specific definition clearer to all involved so that discussions now are less about the principle than about specifics.

These legal definitions and some initiatives at enforcement may then be acting in two ways, a) by building awareness, and b) by providing a deterrent to potentially corrupt officials.

News Events that may have contributed to perception of more stringent anti-corruption efforts

Obviously, news events relating to corruption have a great potential to change perceptions. When I exchanged tweets with Enkhbold Z, chairman of the Mongolian parliament, he agreed that “yes, I was expecting some improvement. I think creation of ACA [Anti-Corruption Agency], Elbegdorj election [for president 2009], of course Enkhbayar case contributed to this”. While their impact would be most likely on 2013 or even 2014 surveys, some of the 2012 events might have been:

Arrest and trial of former president Enkhbayar. Contrary to the expectations of Doug Schoen and other participants in an international media campaign apparently orchestrated by Enkhbayar, this did not spell the end of Mongolian democracy, but instead signaled the seriousness of anti-corruption efforts. The Anti-Corruption Agency was very visible in this process, though also accused of being political motivated.
Tightening and tighter enforcement of election regulations around the June parliamentary election. This included the prosecution of some winning candidates for electoral fraud.
New Minister of Justice Temujin has obviously gained some prominence in terms of judicial reforms which is in part an anti-corruption effort as well.
While investigations of mining companies, including South Gobi are primarily viewed as being motivated by political/corruption revenge or “resource nationalism” by foreign investors, these may be signalling powerfully to a domestic audience that anti-corruption efforts are being bolstered.

Caveat: A Secular Trend in Rankings of Mongolia

One alternative explanation to this positive sense of building momentum would be that the information used by TI has simply gotten better. This is not implausible in that more attention is being paid to Mongolia from many directions so that more information is becoming available. There may thus be a secular trend in part associated with the status of having the highest GDP growth in 2011 that would lead to a rise in these kind of index scores for Mongolia.

Conclusions

It has been over a year since the Luis Vuitton boutique was established in Ulaanbaatar. It appears to be economically viable. This alone suggests rampant corruption in a country with very few domestic industrial activities (as of yet) and a significant proportion of the country living in poverty. Perhaps this should be an indicator used by TI for their Corruption Perception Index, but maybe not as it would paint as negative a picture of the country as the ownership of the only Rolls Royce by a minister would. The picture suggested by the CPI is more positive.

The bottom line thus could be, corruption is rampant in Mongolia, but anti-corruption efforts have been stepped up significantly, so a decline of corruption can be reasonably expected in coming years.

Posted in Business, Civil Society, Corruption, Foreign Investment, JD Mining Governance, Mongolia and ... | Tagged Julian Dierkes | 8 Comments

New Book: A History of Land Use in Mongolia: The Thirteenth Century to the Present

Posted on December 3, 2012 by JDierkes

Elizabeth Endicott

A History of Land Use in Mongolia: the Thirteenth Century to the Present

Palgrave/Macmillan, November 2012.

While modern Mongolia has attracted much attention from political scientists and economists seeking to explain the rapid changes that have occurred since the end of state socialism (1921-1990) and the advent of the free market democratic era (1990 – present), far less attention has been directed to core issues of land use in a country that supports a pastoral nomadic population. A History of Land Use in Mongolia: the Thirteenth Century to the Present examines conceptual and practical issues of land use in historical terms. For instance, to what degree over the centuries have external forms of authority – secular and religious – shaped herders’ relationships to the pasturelands that are crucial to their livelihoods? What sorts of strategies in dealing with authority – confrontation, avoidance, flexibility – have Mongolia’s pastoral nomadic herders relied upon? From a historian’s perspective, the current ways in which Mongolia’s herders have adapted to a new economic/political system are best fathomed by understanding how herders have adapted in previous historical regimes dating back to the thirteenth century.

The text of the book is accompanied by several of the author’s photographs. Among these, for instance, are photos of winter/spring livestock shelters. These shelters and their surrounding pasturelands represent a key area in which evolving land legislation and local practices intersect in today’s Mongolia. Since summer and fall pastureland is by law open to common use and unrestricted by any form of land deed, the winter and spring livestock shelters point to new concepts of land leasing and ownership in a countryside largely devoid of fencing.

In the course of the book, Mongolian government policies vis-à-vis pastoral nomadic production are compared with Chinese government policies in ethnically Tibetan and Mongolian regions within the PRC. Challenges faced by Mongolia’s herding population are also compared and contrasted with those faced by herders in neighboring Kazakhstan.

About the Author

Elizabeth Endicott is a professor emerita of History at Middlebury College in Vermont. She is the author of Mongolian Rule in China: Local Administration in the Yuan Dynasty and Pages from the Past: the 1910 Moscow Trade Expedition to Mongolia.

Posted in Grassland, Nomadism, Publications, Research on Mongolia | Tagged MENDEE Jargalsaikhan | Leave a comment

2012 Local Election Final Results

Posted on December 3, 2012 by D.Byambajav

The General Election Commission announced today the official results of local elections. In the run-off elections in six capital city districts, the Democratic Party (DP) won in 4 districts and the Mongolian People’s Party (MPP) won in 2 districts. Overall, the DP won in 12 provinces and 5 districts and the MPP won in 9 provinces and 4 districts. Below, the 2012 election results are compared with the corresponding elections in 2008.

Posted in Elections, Politics | Tagged BYAMBAJAV Dalaibuyan | 1 Comment

2012 Local Elections and Parliamentary Runoffs

Posted on November 29, 2012 by mendee

Although the General Election Commission hasn’t announced the official results of local elections, the two major political parties have already accepted the election results and have begun preparing for the run-off elections in five capital city districts where the voter turnout was under the 50 percent threshold. [The runoff election is scheduled on November 30, 2012.]

The Democratic Party (DP) won in 12 provinces and 7 districts of the capital city and the Mongolian People’s Party (MPP) in 9 provinces and 2 districts. According to the General Election Commission, the DP won 379 seats, the MPP 334, the other parties 23, and independent runners 6 of the total seats of provincial Citizens’ Representative Khurals (link). This means that two major parties will establish the Citizens’ Representative Khurals at the provincial and county level in coming weeks and nominate their party officials for the posts of provincial and county governors – the most important positions in local politics. In fact, some analysts argue that a party’s influence at the local levels and especially the strength of their on-the-ground organization, has been an influential factor in parliamentary and presidential elections. In the past, the MPP has been dominated in the local politics partly with its strong network that it inherited from the one-party era. In addition to the capital city’s Citizen’s Representative Khural and Mayor, victories in 12 provinces demonstrate the DP’s strength and influence.

At the same time, the local elections highlight the weaknesses of smaller parties that lack local network and resources. For small parties, the likelihood of gaining some role in the local elections is low in the absence of further disintegration of the two major political parties as happened prior to the parliamentary election in 2012.

Along with local elections, the runoff for the parliamentary election in Ulaanbaatar’s Bayanzurkh district ended with the victory of former MP Arvin (MPP). According to the speaker, five new MPs are planning to sworn-in. Ms. Sarangel (MPP) will fill in the seat vacated by MP Khurelsukh (both nominated by the party list). Mr. Oyunbaatar (MPRP), whose sworn-in ceremony had been postponed in connection with former President Enkhbayar’s trial, will fill the seat of the MPRP party list. Two DP members, Batkhuu and Zorigt, are cleared to become members after the disputed election in Uvurkhangai Province in according the General Election Commission, but the MPP still objects their sworn-in ceremony. Their earlier sworn-in ceremony was delayed by the MPP’s “sofa boycott” which blocked the entrance of the parliament because the MPP nominees in Uvurkhangai Province appealed the initial court decision. Since the Supreme Court hasn’t decided on the appeal of the MPP nominees, the MPP continue to object the General Election Commission decisions in regards with two DP members.

At the same time, the investigation of two current MPs of Uvs province (both MPP members) on violations of the election law (i.e., cash transfer) is ongoing and the DP majority parliament has still delayed the recognition of the MPP’s parliamentary group. Without parliamentary group status, the MPP will not have much say on upcoming bills, one of which will be the changes to the Presidential Election.

There wasn’t much debate nor allegations about new voting machines or citizens’ biometric IDs during this local elections. This will enable to organize the parliamentary and local elections simultaneously starting from 2016 – as decided in the revised Election Law.

Posted in Democracy, Democratic Party, Elections, Local Elections 2012, Mongolian People's Party, Party Politics, Politics | Tagged MENDEE Jargalsaikhan | Leave a comment

Working Paper on Human Security of Mongolia

Posted on November 21, 2012 by mendee

I am posting the abstract and link of my recent paper, “Unkept Human Security Promises in Developing Countries: A Case of Mongolia,” which is published as a working paper series of the Central Asian Program. There are many weaknesses in the paper, and, I am really looking forward to any comments and criticisms.

Here is the link and following is the abstract.

Human security challenges in developing nations attract little attention when the latter are not experiencing armed conflicts. In spite of declarations and good intentions to improve human security, populations in developing countries remain vulnerable to both non-systematic violence and non-violent human security threats such as poverty, disease, and disasters. Non-conflict related human security is often worsened by three main factors: 1) the unprecedented difficulties of political and economic transitions in post-Communist Eurasia; 2) nation-specific geographic and ecological features; and 3) the ineffectiveness of the state to deliver security, social justice, and sustainable development. Mongolia is an excellent case study to understand the unkept human security promises of the developing world as it represents a new democracy, a landlocked state with specific geographic and ecological constraints, and ineffective state bodies unable to manage their limited resources.

Posted in International Relations, Politics, Publications, Research on Mongolia | Tagged MENDEE Jargalsaikhan | Leave a comment

2012 local elections: pre-election observation and analysis

Posted on November 19, 2012 by D.Byambajav

A record high over 19,000 candidates will run for the upcoming local elections slated for November 21 (A festival of democracy!). Seven political parties, two coalitions, and 893 independents will compete for the 8108 seats of Citizens’ Representative Khurals of aimags (provinces, 745 seats) and soums (counties, 7068 seats) and districts of Ulaanbaatar (295 seats). Two weeks of election campaigning have ended and Mongolians will vote for their local representatives tomorrow.

Voter turnout for the parliamentary election in June 2012 hit a record low of 65%, declining nearly 10% from the previous election. Voter turnout for local elections has been lower than parliamentary elections and it was 66% in 2008. Considering the low turnout in June we may see a number of run-off elections in Ulaanbaatar where voter turnout has been significantly lower than provinces. The festival needs more visitors and judges.

This year’s election differs from previous elections in several ways.

First, one reason of why the local elections attract much attention from political parties and independent candidates might be the new budget law. The law provides more opportunities for local governments to accumulate and spend local revenues as an effort to diffuse over-centralization. From next year, local governors, for example, will have more authority on local budget planning and spending.

Second, the new local election law was adopted by parliament. It introduced a number of important changes and innovations. Like the new parliamentary election system, the local elections will be organized under a mixed electoral system. One third of the members of the Citizens’ Representatives Khurals will be nominated from the political party list while the remaining two third will be elected through the majoritarian system. A similar mixed electoral system was used in the 1996 local elections, but a majoritarian system had been applied since 2000. This new system will likely to allow smaller political parties to have more representation than a majoritarian electoral system. Moreover, the local elections will use electronic counting, new personal identification cards, and biometrics to identify and check registered voters. In addition, political parties were required to follow a 30% gender quota when they nominated their candidates. More women are expected to enter local Khurals and acquire local government posts.

The result of the 2012 parliamentary election left the ruling Democratic Party and the opposition Mongolian People’s Party in a political situation in which either needs big win in local elections. The DP needs to have local institutional channels that would allow smooth and effective policy implementation. One obstacle of the DP’s policy effectiveness during 1996-2000 when the party led the government could be that the MPP controlled much of the local government. For individual members of parliaments it is also necessary to have local institutional bases via inserting own representations in local government institutions.

The opposition Mongolian People’s Party (MPP) faces much tougher test at the local elections. Since the inception of local elections in 1992, the MPP has been the majority party in most provinces and districts of Ulaanbaatar. In particular, since 2000 when the MPP became the absolute majority in parliament it could significantly cement its local dominance. Of 693 seats of Citizens’ Representatives Khurals of provinces and Ulaanbaatar the MPP won 569 seats or 82% of all seats in 2000. Since then the MPP has maintained its dominance (Table 1). Although the MPP’s number of seats in the Citizens’ Representatives Khurals decreased in 2004 (64%) and 2008 (62%), it still controlled the majority of provinces and Ulaanbaatar. Of 21 provinces, the MPP was the majority party in 17 provinces (See, Table 2). Moreover, the MPP controlled all districts (duureg) and satellite cities of Ulaanbaatar except the Khan-Uul district where the DP constituted the majority.

However, the MPP’s strength and confidence in local elections has ebbed since the election of the City Council or the Ulaanbaatar city’s Citizens’ Representatives Khural in June 2012, which was held simultaneously with the parliamentary election. The MPP had continuously dominated the City Council. Most recently, the MPP held 36 seats of the City Council’s 45 seats in the period between 2008 and 2012. So, it was a devastating result for the MPP to lose the control over the City Council this year. The DP won big in Ulaanbaatar in June in both the parliamentary and City Council’s elections. The DP’s successful campaign led by its preeminent leader Erdeniin Bat-Uul earned them 26 seats, enabling the DP to govern the Ulaanbaatar city the first time. Except two run-off elections in which at least one MPP candidate will be elected to parliament, the MPP has not won a seat in parliament from Ulaanbaatar.

The new local election law requires that the elections should be held on Wednesday of the fourth week of November. Unlike previous local elections that held in the early-October, the new law has provided a longer period or broader opportunity for the ruling party and coalition to formulate their policy and implement concrete programs that would gain them public support. During the last three months the new governor of Ulaanbaatar city E.Bat-Uul and his administration gained much support for their quick action to tackle with traffic jams, to improve public transportation, and to suspend illegal construction works and land ownership. Moreover, Prime Minister Norovyn Altankhuyag’s new initiative to reduce the price of coal for Ulaanbaatar’s ger district residents has seemed to be widely appreciated, adding strength to the DP’s campaign in the city. Thus, the MPP will have tough test in Ulaanbaatar and might lose their dominance in most districts.

It seems that the MPP has expended much effort in provinces and soums (districts). In the system of the MPP, the work of local party leaders or the governors of aimags have often been a step towards preparing to run in parliamentary elections. In provinces and soums, the party has had a well-functioning network of election mobilization comprising a large number of local government officials, local business connections, and party members. The vertical relations between the central and local units of the MPP are well institutionalized and there have been little local resistance to the elites at the top. A number of leading MPP members moved from Ulaanbaatar to provinces like Umnugovi to run for the local elections.

However, the MPP has some challenges there, as well. First, like the last parliamentary election in June, the Mongolian-People’s Revolutionary Party (MPRP) will be an annoying contender and will likely to attract some voters from the MPP. Even though the MPRP is in the coalition government, the party runs for the local elections independently. But in some electoral districts the MPRP is in coalition with the Mongolian National Democratic Party (MNDP) or with the Civil-Will and Green Party (CWGP). Second, over ten aimag governors who are all MPP members have been investigated by the Independent Agency against Corruption during the last couple of years, apparently humiliating the public image of their party. Third, the MPP did not propose an alternative, catching manifesto or policy priorities. The party’s electoral campaign largely focused on the critique of the ruling coalition, sending a message that the MPP will constrain and resist the unlimited power of the rulers. This might not be a good strategy and would not bring more seats for the party. According social media sources, there have already been open discussions within the party about a looming crisis of leadership and policy innovations in the party. If the MPP loses in the local elections it may prompt to a major intra-party reform or reshuffle in the party.

Meanwhile, the DP insists on the effective implementation of the coalition government’s program and asks the electorate to help them to increase their representation in local governments. While the DP may win big in Ulaanbaatar, it will likely to be difficult for them to have a massive victory in provinces. The defeat in the local elections would give the DP much-needed institutional infrastructure that could help the government policy to be implemented smoothly. It is also an opportunity to strengthen local party organizations, which is same for other smaller parties, as well.

See posts earlier this year for analysis of the June parliamentary election.

Posted in Democracy, Elections, Politics | Tagged BYAMBAJAV Dalaibuyan | 11 Comments

Book Chapter: Introduction to Change in Democratic Mongolia

Posted on November 13, 2012 by JDierkes

Research on Contemporary Mongolia

Julian Dierkes in J. Dierkes, ed. Change in Democratic Mongolia – Social Relations, Health, Mobile Pastoralism, and Mining Leiden: Brill, 1-13.

In my introduction, I document the origins of the volume in a conference I organized through the University of British Columbia Program on Inner Asia to commemorate the 35th anniversary of diplomatic relations between Canada and Mongolia.

One of the aspects of the conference that was a grand success and laid the foundation for the present volume was its inclusiveness in terms of topics addressed across the social sciences and origins of the authors from Asia, Europe and North America.

In the preparation I had selected eight focus areas that seemed to host particularly vibrant communities of researchers focused on contemporary Mongolia: 1. pastoralism, 2. ecosystems, 3. mining, 4. religion, 5. education, 6. politics and international relations, 7. health, and 8. transition studies. The papers collected in this volume represent a cross-section of works across these areas.

The introductory chapter situates these chapters within their larger academic context, provides an overview over the volume, and a brief synopsis of the historical background of Mongolian development that provides the backdrop for all the contributions to the book.

Posted in Book: Change in Democratic Mongolia, Research on Mongolia | Tagged Guest Post | 1 Comment

Guest Post: Southern Gobi Water Shortage

Posted on November 4, 2012 by JDierkes

Guest Post by Michelle Tolson

Looking Past Oyu Tolgoi to the Southern Gobi’s Water Shortage

Of late, Mongolian media has been obsessively focusing on the investment agreement between Oyu Tolgoi and the Mongolian government. Little attention is paid to the effect that the mine is having on locals in Omnogovi region, for good or ill. Foreign media also seems to largely focus on the investment aspect of Oyu Tolgoi, monitoring how this affects other foreign investment opportunities. Few foreign media publications delve into the environmental impact and the effect on herders in the region, but when they do, like Mongolian media, they scrutinize Oyu Tolgoi rather than Tavan Tolgoi and the mining situation overall. Though negative articles about Oyu Tolgoi seem to dominate local media, Tavan Tolgoi has escaped this scrutiny relatively unscathed.

The World Bank published a water assessment in 2010 which provided a breakdown of the mining industry’s impact on water resources in the Southern Gobi Region, using data from the Dundgovi, Dornogivi, and Omnogovi. The report listed the livestock population and their water use contrasted with mining operations’ water use in relation to known water sources. The situation is potentially dire—mentioned discretely in one paragraph on p. 35—that the current water resources in the Southern Gobi region have an expected life span of 10-12 years, taking into consideration the abundant mining licenses, growing population and limited current knowledge of water resources in the area. For example in 2005, water use was estimated at 85,000 meters cubed (m3)/day but in 2020 it could rise to 425,000. The water usage for people (rural and urban) is estimated at 10,000 cubic meters per day (m3/day)—a relatively small amount. Taking into consideration the livestock of the region, the usage increases. The study estimated that the entire region has approximately 3.8 million head of livestock comprised of 120,000 camels, 260,000 horses, 100,000 cows, and 3.4 million sheep and goats. Camels consume an estimated average of 45 liters of water a day, while horses consume 35 L/day, cows 35 L/day and sheep-goats consume 4 L/day. This comes to a total of 31,600 cubed meters a day for the combined total of livestock in the Southern Gobo region. However, the two main mining sites’ water use (and this would represent the construction phase) is each double the amount of all the livestock on the three Gobi aimags. The World Bank report found Tavan Tolgoi topped the charts at 76,000 meters cubed (m3) of daily water usage for 2010 taken from groundwater resources, while Oyu Tolgoi used 67,000 cubed meters taken from ground water resources. There are also several smaller mines gearing up which will further impact the situation.

Similar to Ulaanbaatar, the soums and aimags in the Southern Gobi region have experienced a population boom, stressing limited infrastructure. The World Bank report notes population growth in the Dornogovi and Omnogovi provinces “has followed the national trend. Between 1985 and 2004, the human population in 13 soums of these two aimags increased 53 percent, from 41,072 to 62,735 persons.” Most soums in the Southern Gobi region utilize water kiosks, much as ger districts dwellers do in Ulaanbaatar.

This migration has been influenced by the climatic changes which have been making the herding livelihood more difficult. The UNDP action plan report for 2012-2016 noted the extreme environmental degradation on the steppes caused from overgrazing and higher rates of carbon in the air from the massive livestock population which grew beyond the capacity of the land when limits on herd sizes were abolished in post Soviet years. Overgrazing has contributed to climate changes which have resulted in lower levels of rainfall and the reduction of the grasslands. About 70 percent of the country is experiencing desertification. Mining meanwhile has been booming and filling in the employment gap, further drawing people to the urban areas.

The World Bank report’s intended audience was stakeholders of the government of Mongolia. In order to learn what plans are in the works, I interviewed the Ministry of Environment and Green Development regarding a feasibility study on diverting the River Orkhon by pipeline conveyance to the Southern Gobi region. This has largely been ignored by the media—both foreign and local—but has been picked up by environmental NGOs and those advocating for herders’ rights such as OT Watch. OT Watch has ironically linked the river diversion initiative to the Oyu Tolgoi mine, though the company does not wish to participate in this method, preferring to utilize a saline aquifer treated with a water purifier to supply the water needs for both mining and their staff. Though the feasibility study is still being conducted on the river diversion project, the Ministry said the project “urgently” needed to be implemented for those living in the growing soums and aimags, including the herders. They see this as a renewable resource. The Herlen River, which was also part of the feasibility study, will not be utilized, but the Orkhon River is slated to be, according the Ministry. Mark Newby, the Water Resources Principal Advisor to Oyu Tolgoi, said the company is using their technology to find additional underground water resources to addressing the growing needs of the nearby soums and aimags, which are expected to expand in population when the mine becomes operational. However, Oyu Tolgoi’s water explorations have been viewed with mistrust according to Sara Jackson, who has conducted focus groups with the herders in the South Gobi for the past few summers as part of her PhD dissertation research on how herders are impacted by the mining boom. She previously wrote a brief guest post on this blog about the neglected needs of the herders. By Skype interview she told me that herders view Oyu Tolgoi’s further water explorations as proof that the company does “not even know where their water is coming from.”

The Tavan Tolgoi operation does not have a saline aquifer with a water purifier at its disposal and has limited water resource options. There is only a nearby fresh water lake, known as Balgas or the river diversion project to cover the mining needs and those of its workers. A previous story published by the UB Post— “Balgas Lake’s Limited Lifespan,” printed edition June 1, 2012—noted the lake, if used as a water source, would only last until 2020. According to the Ministry of Environment, the Lake Balgas issue is still being discussed and unfortunately is still a possibility—initially at least—until other sources for water are located but is not intended to be a long term solution. However, the river diversion project is still being researched and could take some time.

The recent conference in mid-October titled “Mining and Human Rights” illustrated the conflict in needs between locals in the Gobi and the needs of the rest of the nation. A panel spoke on the problems in mining, which consisted of S. Oyun, the Minister of Environment and Green Development, Chandmani Dagva, Governor of the Dundgovi, a representative of the Special Inspection Agency and Mr. Ganbold Duvchigdamba, former herder and famous environmental activist. The audience took part and asked questions. Many herders came up. One herder said he represented 4,000 people in his soum and he asked how they were supposed to live with five mines. There were four already and another was set to go operational. In contrast, the governor of the Dundgovi spoke of his inability to regulate the number of mining licenses issued and how his aimag had been covered up to 50 percent by mining licenses at one time which had been reducing over time through hard work. He said what he saw that the local governments’ main problem was a lack of power, as the central government made the decision to issue mining licenses.

The true heart of the debate on mining seems to rest on the development needs the country versus the needs of the herders and locals in the Gobi. The overall population of the Southern Gobi region is listed is at just 150,000 by the World Bank report, compared to the rest of the nation. With the central government’s focus on the returns from mining, this conflict looks likely to continue but by looking past a foreign company as the source of the problem and looking at the bigger picture—which is the limited water resources , hopefully this critical issue can be addressed with the help of foreign companies’ technology. The World Bank report noted that most present day water surveys are being carried out by foreign companies and researchers given the limited technology of the government.

About Michelle Tolson

Michelle Tolson, MSc, studied community development at the London School of Economics and Political Science and brings a background in gender with a human rights frame work to her writing. She has worked on research projects in New York City and Cambodia. As a journalist, she has contributed to the Phnom Penh Post (Cambodia), Women’s International Perspective (U.S.), the Global Post (U.S.), Women’s News Network (U.S.), Women’s Media Center (U.S.) and the UB Post of Mongol News Group (Mongolia).

Posted in Environment, Environment, Michelle Tolson, Mining, Oyu Tolgoi, Water | Tagged Guest Post | 3 Comments

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