Mongolia opposition scores landslide election victory



MPP back in government after 4-5 year gap mid steep economic downturm

The Mongolian People’s party has won a landslide victory in parliamentary elections, returning to power after  four-year gap that has seen a step economic downturn.

The outgoing grand coalition led by the Democratic party improved investment terms for foreign miners but failed to implement austerity measures. Instead Mongolia’s debt has soared amid a fall in revenues and foreign direct investment.

Mongolia is one of the countries worst-hit by the global drop in prices for copper and coal — its two main exports. Falling national revenues have been compounded by rising public and private debt and fears of growing dependence on China, its neighbour to the south.

Next year about $2bn in public and private debt matures, as well as a $2.3bn currency swap with the People’s Bank of China. So far the government has refused to publicly discuss the idea of a bailout.

The faction-plagued Democrats lost many of their most prominent seats, including that of prime minister Saikhanbileg Chimed.

“The biggest economic implication is probably that a majority this big will lead to a stable government over the next four years, particularly given the much greater party discipline of the MPP compared to DP,” said Julian Dierkes, a specialist in Mongolian politics and civil society at the University of British Columbia. He said next year’s presidential election and the possibility that the MPP might purge the Democrats’ appointees could still cause ructions.

The MPP is expected to continue the Democrats’ efforts to steer the country through the crisis without a painful and politically embarrassing public reckoning of the cost of the commodities slump. “I think MPP will do everything to avoid a bailout,” said Badral Munkhdul, who runs the economic consultancy Cover Mongolia.

The Mongolian state has yet to reap most of the revenues promised from big mining projects, including the Oyu Tolgoi copper and gold mine operated by Rio Tinto in the Gobi desert.

However, politicians have coaxed public support for the mining projects by raising civil salaries and giving cash handouts, compounding the budgetary woes as the price of exports tumble. The handouts “reinforce the electorate’s sentiment of entitlement to unearned income from our mineral endowment”, said Dale Choi, of Independent Mongolian Metals and Mining Research.

Devastating overgrazing in agricultural regions has compounded the country’s woes. International aid agencies rushed to give aid this winter to prevent herds from being wiped out and fend off a new flood of rural migrants into cities that have no jobs to offer.

But the aid has contributed to an unsustainable policy of maintaining the number of grazing animals at levels that in some areas are double the grazing capacity of the grasslands.

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