COM 05/2016

Election 2016 in Mongolia: A Call for Economic Security

Anthony V.  Rinna,  Russia and Eurasia Analyst, Sino-NK research group, South Korea

In the event of the Mongolian People’s Party’s (MPP) landslide victory this past summer, the people of Mongolia have issued the left-leaning MPP a mandate for Mongolian economic security. Barry Buzan of the London School of Economics, in an attempt to provide a framework for understanding what exactly constitutes a security issue offers several categories for understanding security threats, including economic, political and societal issues. In analyzing both the issues leading up to the election as well as the major tasks with which the returning.

MPP has been charged, Mongolia’s economic security situation presents a two-fold challenge. On the one hand, the Mongolian government must provide for the needs of its citizens’ economic security, while at the same time continue to foster a democratic culture that will, in turn, see to the promotion of Mongolia’s economic well-being.

Policy Changes: Investor Friendliness and Economic Sovereignty

With 85% of seats in the State Great Khural, the Mongolian People’s Party is set to enjoy comparatively greater political power than during the last Khural. Source: The Great State Khural of Mongolia.

The MPP’s return to power has raised hopes that, after years of political risk to foreign businesspeople and corporations operating in Mongolia, a larger measure of stability will return to the country’s economic sector. As a result of the election, many of the resource nationalist-populists who had sat in the Great Khural had been ousted, and the MPP’s undisputed majority removed the need for any sort of political compromise or coalition formation with other parties. The MPP’s overwhelming majority in the Khural has raised hopes not only of greater political stability and efficiency in parliamentary politics, but also that the MPP will be more effective in general in implementing needed reforms across the country. External observers such as Adrienne Lui have noted the MPP’s superior track record in organization and leadership versus the inconsistencies of the DP government, which created an unfriendly business environment for external investors.

One of the major tasks at hand is to alter or re- verse policies that have made resource-rich Mongolia a risky and unfriendly place for foreign companies and investors to operate. Policies implemented under the previous government were designed to preserve Mongolia’s economic sovereignty as well as control over its coveted natural resources. While Mongolia has long felt an overwhelming economic influence from its neighbors, especially China, in re- cent years the overall amount of external investment in Mongolia has decreased. As Daisuke Harashima, an economic analyst with the Nikkei Asian Review asserts, measures that were initially designed to prevent China from taking excessive control of the Mongolian economy have instead caused investors from not only China but from the European Union and Japan to shy away from investing in the country. The decline in foreign investment in Mongolia’s natural resource production has prompted the country once again to reconsider its policies on government ownership of national natural resources, according to Charles Krusekopf.

The MPP’s task therefore is to The implement policies that protect Mongolia’s economic sovereignty while fostering a larger amount of FDI. Nevertheless, the matter is more complicated than a simple reversal of previous policy. The main issue at hand is how Mongolia can enjoy the benefits of external investment in its natural resources without ceding its economic sovereignty or control of its as- sets to foreign powers. Mongolia, therefore, would not likely be willing to grant foreign ownership of some of its major natural resource firms to foreign actors, but rather would prefer to take development loans from abroad. Diversifying Mongolia’s economic partners, however, is obviously much easier said than done. Based on Mongolia’s geographic realities, the country’s economy is inextricably linked to its policies toward China and Russia. As Alicia Campi argues, the MPP has traditionally leaned more toward Russia, and thus will likely seek more active Russian participation in the China-Mongolia-Russia trilateral relationship. Russia has already benefited Mongolia’s economic situation by canceling Mongolia’s $174 million debt to Russia, which had hindered Mongolia-Russia cooperation on the energy production market.

On this account, Mongolia can perhaps combine necessary economic reforms with its largely successful “third neighbor” policy to diversify its economic partners, and thus bring in larger amounts of investment while not falling overly beholden to any one external partner. The Mongolian government has already begun to woo international investors once again by developing trade partnerships with other countries. Japanese Prime Minister Abe Shinzo, met with both Mongolian President T. Elbegdorj as well as the new Prime Minister J. Erdenebat at the ASEM summit in Ulan Bataar. During his visit to Mongolia, Abe emphasized the continued importance of the Japan-Mongolia relationship and asserted that the foundation of those ties “remain unchanged”. Prime Minister Abe touted the shared values between the two countries, and vowed to cooperate with the new government. The statement comes just after the implementation of a free trade agreement (the first such arrangement for Mongolia) between Japan and Mongolia, whereby tariffs and duties will be either abolished or phased out over the course of a decade. Given the comparatively small volume of trade be- tween the two countries, analysts project that the impact of the FTA will be relatively modest. Mongolia is also discussing the implementation of a similar trade agreement with the Republic of Korea.

Mongolians cast their vote in the 2016 parliamentary elections. Yet with popular discontent toward politicans rising, the future of Mongolian democracy faces fresh challenges. Source: The Diplomat.

Mongolian Democracy and The Nation’s Economic Health

While issues directly related to the economy such as resource ownership and investment policy have been front-and-center in this year’s election, an issue separate from but related to the economy is the viability of Mongolian democracy. Mongolian democratic institutions’ ability to function properly has implications for the nation’s economic security in addition to aforementioned government policy is- sues. Many members of the Mongolian electorate have grown weary of a system widely seen as corrupt. Many residents cite a “lack of responsibility” in Mongolian society as fueling the rampant corruption in the country. Comments from citizens on the problem of corruption frequently point to the fact that, in a country with a relatively small population, nepotism and the use of connections are widespread. If someone commits a crime, and even if a punishment is to be enacted, the guilty party is often able to find a connection that can prevent the penalty from being implemented.

Julian Dierkes at the University of British Columbia has warned both of “democracy fatigue” taking root in Mongolia. Furthermore, with the rise of the MPP, Dierkes warns of the possibility that, after the DP’s supposed politicization of tools of government, the MPP may seek revenge against political opponents. A combination of public discontent with democracy as well as institutional malfunctions will not bode well for the future of democracy in the country. In his analysis of the connection between democracy and human security, Todd Landman asserts that the dependence of politicians on their constituents leads to greater accountability and thus necessitates actions designated to protect human security. Furthermore, Landman highlights research indicating that while democracies are not especially proficient at generating economic growth, they are better than other forms of governance for fostering human development. As human development is one of the keys to the sustenance of a well-heeled economy, the preservation and efficient functioning of Mongolian democracy is a key ingredient in Mongolia’s economic and financial viability.

Aside from the general viability of Mongolia’s democratic institutions and their relation to the country’s economic health, one specific aspect of Mongolia’s political economy that has suffered in this past election is the rights and role of Mongolian women in their country’s political participation. The Asian Forum for Human Rights and Development issued a statement one month prior to the elections calling for all political parties involved to include human rights platforms in their agendas. The statement specifically included a provision calling for the amendment of Mongolian electoral laws to ensure that women occupied at least 30% of all seats in Parliament. This had actually been on the books in Mongolian electoral law, yet ahead of the 2016 vote, among a number of controversial changes was a decrease in the quota for nominating female MP candidates, from 30% to 20%.

Women’s  rights  and  economic  empowerment have, in fact, been a key factor in Mongolia’s success as a democracy, according to Mongolian MP Oyungerel Tsedevdamba. The large-scale participation of women in Mongolia’s economy immediately following the fall of communism- more out of necessity than direct policy shifts aimed specifically to empower women, played a major role in Mongolia’s successful implementation of democracy. The active participation of women in the nation’s economic life helped the country survive lean economic times, rather than fostering nostalgia for a return to communism.

Moving Forward

For Mongolia, the mandate to provide economic security comprises the maintenance of national economic sovereignty and control of natural resource wealth, the execution of relatively low-risk and investor friendly commercial policies, the satisfaction of the economic needs of Mongolian citizens, and the solidification of Mongolia’s democratic institutions. The ability to create an investor-friendly cli- mate that does not sacrifice Mongolia’s economic independence will require a balancing act not un- like the country’s “third neighbor” foreign policy, whereby relations between China, Russia and third states are maintained in relative equilibrium. Investor-conducive policies will, hopefully, reverse the decline in Mongolia’s economic growth and allow citizens to enjoy higher levels of prosperity. At the same time, the Mongolian government must maintain the viability of its democratic apparatus, and must work to combat corruption. In direct relation to the realization of Mongolian good governance, and in a more oblique yet still important relation to economic security, the Mongolian people must not fall subject to the aforementioned risk of “democracy fatigue”. The electorate in Mongolia has spoken, and the Mongolian People’s Party has its work cut out. Yet while the people of Mongolia have given their new government a formidable task, it is also up to the people of Mongolia to practice patience and understanding as they work to continue building a prosperous Mongolia.