ULAN BATOR, Mongolia – Mongolians vote for a new legislature this week facing a fortunate choice: How best can the landlocked, still poor country spend an expected windfall from its mining boom?
The main political parties in Thursday's elections are offering variations on using royalties and revenues from mammoth coal, copper and gold mines to build out pension systems, fund development projects and give Mongolians shares in state companies and even cash outright.
If wisely spent, the funds could propel Mongolia — a third of whose 2.8 million people live below the poverty line, with many roaming the steppes herding yak and goats — up the development scale into the ranks of solidly middle-income countries. The economy grew 17 percent last year, and the boom has transformed the capital, Ulan Bator, bringing a real estate rush, luxury-goods shops and nonstop traffic jams to the city of pot-holed streets and decrepit, boxy Soviet-era apartments.
Alongside the flood of money have come high inflation, persistent unemployment and a widening rich-poor gap that has fueled social tensions. There also is a fear of dependency on China, one of two giant neighbors along with Russia. China buys about 90 percent of Mongolia's exports, mainly coal, copper, cashmere and other raw materials.
For the future that means "Mongolia has to diversify its economy, beyond minerals and China dependence," said Hyun-Chan Cho, senior manager for China and Mongolia at the International Finance Corporation, part of the World Bank.
Titans of global mining — including Anglo-Australian giant Rio Tinto, Peabody Energy of the U.S. and China's Shenhua Group, among others — have rushed in for a share of mineral reserves the government estimates to be worth $1.2 trillion. One project, the copper and gold deposits known as Oyu Tolgoi, has attracted $5 billion in investment so far; the site will produce about 3 percent of the copper mined globally each year. Post-election, the government plans to inaugurate a sovereign wealth fund to invest some of the gains, starting with an initial $600 million.
The predicament marks a change of fortunes for Mongolia, a remote former Soviet client state that has developed into a robust democracy. After the last parliamentary elections four years ago, claims of vote fraud led to riots in Ulan Bator that left four dead. This time around, the fight over the mining boom's spoils has unnerved foreign mining companies, who worry about changing rules as politicians appeal to economic nationalism.
Mongolia's two main parties, the ruling Mongolia People's Party and the opposition Democratic Party, are promising similar platforms to share the wealth better. Both parties want to issue more shares in strategic mining ventures to the public and want to use mining profits to build processing plants and fund railways and other infrastructure to create more jobs and keep more revenue at home.
Reforms in the way seats are awarded in the 76-seat parliament mean that Prime Minister Sukhbaatar Batbold of the MPP and other leading politicians are all but certain to win. About two-thirds of the seats will go to the majority vote-getters in their districts, as in the past. The rest will be awarded to parties in proportion to the overall votes received, giving the proliferating numbers of smaller parties a greater say in parliament.
A poll in the first half of June by the private, nonprofit Sant Maral Foundation showed the Democratic Party with a slight edge, with more than 25 percent support compared to less than 20 percent for the MPP. The poll of 100 people, for which no margin of error was given, found voters chiefly concerned with pocketbook and social fairness issues such as unemployment, living standards and inflation.
Emerging strongly from the political jostling is a former president, Enkhbayar Nambar, who has championed a populist message. Along with the Democrats, he has painted the ruling MPP as succumbing to corruption and becoming the party of the rich, cozying up to the oligarchs and foreign mining companies.
The government's election commission disqualified Enkhbayar from running because he faces corruption charges for misuse of state funds and other abuses of power while in office in a case his supporters say was fabricated. Still, the Sant Maral poll showed his Mongolian People's Revolutionary Party running a strong third and named Enkhbayar as the country's most respected politician, ahead of the current president, Elbegdorj Tsakhia, a Democrat.
In a move seen as an attempt to boost popularity, the MPP-dominated parliament last month passed a long-discussed foreign-investment law to limit foreign control of mines and other strategic industries. The law requires government review of large deals if the foreign investment would exceed 49 percent of the venture or if the companies are state-owned, as most Chinese mining companies are.
Associated Press writer Charles Hutzler in Beijing contributed to this report.