Governing Mongolia

Julian Dierkes on what the Mongolian election means for that country's governance structure and its mining industry.
By: /
July 2, 2013
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On June 26, 2013, Mongolians headed to the polls to vote in their sixth presidential election. The result was the re-election of incumbent Ts Elbegdorj, but barely. His 50.23 percent share of the nationwide popular vote means that he was a mere 3,000 votes away from at least having to face a run-off election against his main challenger. The election was deemed “competitive and effectively administered” by an OSCE election monitoring mission to the country. In the course of the campaign governance questions from many different perspectives featured prominently.

More than an abstract buzzword, governance has become one of the main topics of concern in Mongolian political debates. Several different versions have gained such currency, from democratic participation to corporate governance in the context of state investments. The issues raised in these debates are also at the core of the Conservatives’ push toward greater reliance on Canadian expertise in crafting a development policy with an explicit focus on development rooted in natural resources.

Given this overlap between domestic debates about governance in Mongolia, and Ottawa's focus on such issues in revising Canadian development strategies, the Canada-Mongolian diplomatic relationship looks set to grow in its 40th year. The Harper government should recognize this as an opportunity to intensify relations, both through high-level visits and the long-awaited announcement of a bilateral aid program.

In his election campaign, Elbegdorj placed a lot of emphasis on his creation over the past several years of “citizen halls”,  and of their newly devolved budget authority. These citizen halls are set to promote democratic engagement and more transparent governance structures in the countryside. Initiated at the provincial (aimag) level, they are intended to be further institutionalized at the country (sum) and local (bag) level.

For Elbegdorj’s Democratic Party (DP), the citizen halls have intrinsic value as mechanisms for deepening democratic engagement, but they are also seen as a useful means of contesting the dominance of the Mongolian People’s Party (MPP), which continues to leverage the historic organizational structures leftover from 70 years of state socialism to retain power in many rural areas.

The citizen halls are empowered to prioritize budgets according to their needs and aspirations as they perceive them as opposed to what the capital might view them to be, at least in theory. This is a remarkable aim, as Ulaanbaatar, which is home to nearly half of the nation’s population, has become an almost exclusive seat of power and policy-making. As of January 2013, the national government was busily assigning specific funding envelopes for rural development projects.

But the citizen halls would see local-level Mongolians at the center of debates over  local priorities for projects. A specific community might prioritize the purchase of a new ambulance over an extension of roadways in a discussion in the citizen hall, for example. This decision would be communicated to the aimag (or, later sum) assembly, which would adopt the prioritization in budget decisions and direct the aimag governor to implement the selected projects. Beyond involving them in decision-making, this would also empower citizens to demand concrete accountability from assemblies and governors. Sounds good, doesn’t it? But, this is also a set-up that might be rife with opportunities for manipulation of the processes involved, for corruption at the local level, and for conflicts over jurisdiction. As these decisions become more common, however, they will also affect local policies about future resource projects, an area of governance that may be central to Conservative plans for Canadian development aid.

Despite this push on local governance, Elbegdorj failed to make inroads in the rural vote. While he won 55 percent of 556,000 votes in Ulaanbaatar, he only managed a plurality of 47.4 percent of the 664,000 votes cast in the countryside.

Governance questions regarding the massive Oyu Tolgoi gold and copper project in which the government is a junior partner to Rio Tinto have also featured prominently in political debates this year, following a speech by the president to the Great State Khural in February. With this speech the president started a discussion about the role of the government-appointed directors of Oyu Tolgoi. Are they to represent the financial interests of minority stakeholders, or the interests of all Mongolians, and should they therefore look to maximize benefits beyond short- or long-term financial gain? This is a crucial question to be resolved for a project that will contribute on the order of 1/3 of GDP once fully operational.

In the election, these high-level governance questions only came up to a limited extent since neither of the challengers to Elbegdorj offered a significantly different vision of governance. But governance will be an issue that Elbegdorj will surely return to following his re-election. From 2011 until recently Mongolia was growing rapidly. In the past 12 months or so, various laws relating to investment and mining were passed (or drafts were floated) that made foreign investors very nervous regarding the short-to-medium term future of resource projects, and many projects thus seem to have stalled. This, coupled with a downturn of Chinese demand especially for coal, has led to concerns about an economic slowdown in Mongolia with attendant concerns about the fiscal stability of government finances that have mortgaged revenues for infrastructure and other investments, and increasing unemployment.

Among the aspects of governance that demand Elbegdorj’s urgent attention is the distribution of revenues generated by mining related activities. Already the population’s expectations are high in this regard. Future income is being spent at a rapid rate. Surely Alberta’s fiscal woes are not the only indicator that Canada does not have a magic formula to turn resource windfalls into a financially sustainable source of revenue. The questions that Elbegdorj will continue to face in this regard are the same questions that are being asked by communities and provinces in Canada.

In facing these governance questions, Mongolia and Canada present themselves as ideal partners. Canada’s experience with resource-based economic development may hold lessons for Mongolia, and the re-confirmation of the latter's democracy in this presidential election should make partnership attractive to the Conservative government.