Bloomberg News

Mongolia’s Democratic Party Leads After Vote for Parliament

June 29, 2012

Rio Invested in Mongolia's Oyu Tolgoi Mine

Oyu Tolgoi, 66 percent owned by Ivanhoe, is halfway through completion and will be one of the world’s five biggest copper mines, according to Rio Tinto, which is managing development. Photographer: Doug Kanter/Bloomberg

Mongolia’s opposition Democratic Party is leading after early counting from parliamentary elections though no party has a clear majority, President Tsakhia Elbegdorj said in an interview today.

Elbegdorj said he believed all parties have accepted the results so far and it’s likely a coalition government will be formed in August. The Democratic Party claimed 12 of 14 seats in the capital of Ulan Bator and was winning 50 percent of the rural vote, according to Chimed Saikhanbileg, the party’s leader in the 76-seat parliament.

The Democrats had worked with Prime Minister Sukhbaatar Batbold’s Mongolian People’s Party to run the country, which sits on an estimated $1.3 trillion in mineral wealth and had the world’s fastest economic growth last year. Leaders are grappling with how best to exploit deposits of gold, copper, iron and coal without fanning inflation or creating conflict with mining companies led by Rio Tinto Group (RIO) that have invested $5.3 billion.

“The MPP seems to be losing to the Democratic Party,” Elbegdorj said, adding that the results were still preliminary. “I hope that Mongolia is going to make great progress toward democracy, justice and prosperity.”

Voting went calmly and turnout was about 65 percent, said Luvsanjav, the head of the General Election Commission. There was no sign of the tension that erupted into violence after parliamentary elections in 2008. At least five people were killed in that unrest, during which the government imposed a four-day state of emergency.

Riots Unlikely

Riots aren’t likely, Elbegdorj said. The MPP will seek manual recounts in some areas because of problems with electronic voting machines, MPP spokesman Amarbayasgalan Dashezegve said.

The General Election Commission delayed announcing results because not all the votes from the rural districts are in, election commission spokesman Jamindorj Nergui said.

“We’re expecting many things from the new government, but this time I think we can’t change a lot,” Amgalan Terbish, 35, a travel company employee said after voting yesterday. “I want to see the money go into development.”

The country of about 3 million ranked 120th out of 183 in Transparency International’s latest corruption survey. Almost two thirds of those polled in a June 14 survey by the Sant Maral Foundation said government policies “always” fail to solve citizens’ issues.

Wealth Distribution

Public discontent centers around the distribution of wealth from the mineral boom, which boosted the economy 17 percent last year. Mongolia, which supplies almost half of China’s coal for steelmaking, doubled state spending in real terms to 6.3 trillion tugriks ($4.7 billion) last year, the International Monetary Fund said in December. That caused food prices to jump 31 percent in April from a year earlier.

An April announcement by state-run Aluminum Corp. (2600) of China Ltd. that it will take control of SouthGobi Resources Ltd. (SGQ), a Mongolian coal miner, sparked a public outcry. Parliament reacted by passing a law tightening rules on foreign investment in industries including metals, media and communications, Vice Finance Minister Ganhuyag Chuluun Hutagt said in May.

“Mongolia is right to worry that the deals with foreign investors should offer the best value for its citizens,” the European Bank for Reconstruction and Development said in a June 22 report. “Yet Mongolia also needs foreign expertise, not least in mining, given that most of its resource wealth is still in the ground.”

Foreign Investors

With commodities accounting for about 80 percent of all exports, the two main parties may have limited scope for maneuver with Rio Tinto and other foreign investors. Mongolia risks economic contraction, which happened in 2008, should commodity prices fall, the International Monetary Fund’s Mongolia chief Steven Barnett said in an interview.

The Democrats and the Mongolian People’s Party, or MPP, together wrote most of the current legislation for business and infrastructure development.

“Whichever party wins, they’ve already been party to drafting a lot of the legislation,” said Travis Hamilton, the founder of Khan Investment Management Ltd., which focuses on the nation’s stocks. “From the perspective of an international investor, I don’t see any policy shift post-election.”

In the 2008 election, the two biggest parties vowed to hand out at least 1 million tugriks to each citizen as spoils from the mining boom. The government also plans to distribute preferred shares of Erdenes MGL, the state’s holding company for the country’s biggest mining projects, Ganhuyag said.

Each citizen will get one preferred share of the holding company to make sure that profits are distributed equally to all citizens via Erdenes MGL dividends, he said. Not all are happy about the plan.

“These are pieces of paper that go up and down -- there is no guarantee that they will rise in value,” said Chimeddorj, a 39-year-old businessman who travels to southeast Asia often for work. “They should be spending on real things, like transport, education and health.”

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net


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