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Mongolia and the modern world

Mongolia is a unique country. It has a population the size of Wales and a land mass nearly three times that of France, and in terms of its history, geography, culture, natural resources and political position, there is no other country quite like Mongolia. This means that Mongolia faces distinctive challenges, which are in many ways peculiar to the country.  One of those challenges arises from Mongolia’s landlocked position between Russia and China. Another is how best to exploit its vast mineral resources. The two issues are connected and how Mongolia responds to these twin challenges will determine its future.

Mongolia was a close ally and was strongly influenced by the Soviet Union.  Following the post-Soviet decline of that influence from around 1990, Mongolia began to develop into a young, robust parliamentary democracy. At the same time, it has been keen to make sure that its national sovereignty is respected by its powerful neighbours to the north and to the south.  Such an approach is, by definition, difficult to maintain and requires both determination and sensitivity by the country’s relatively inexperienced elected politicians. The chance of success is made easier, however, by the fact that, although there are clear political differences between the two main political parties – the Mongolian People’s Party and the Democratic Party – there tends to be broad agreement on the direction of travel which the country needs to take.

Unlike a number of former Soviet client states, Mongolia has tended to see the Soviet era in quite a benign way. The positive aspects of the legacy of Soviet communism are apparent in the emphasis which is placed on opera and classical music and the desire to preserve social policies that benefit the less well off. But this does not translate into any wish to see Mongolia come under Russia’s sphere of influence. Mongolians are determined to maintain their independence and wish to be even handed in their relationship between the Russian Federation and the growing, economically assertive People’s Republic of China.

If Mongolia is determined to maintain its political equidistance between Russia and China, it is also keen to maintain a balance between the West and East in its modest military activity. This is why Mongolia is involved in peacekeeping operations alongside NATO in Iraq and Afghanistan for example, but is, at the same time, reluctant to accept NATO’s view that Russia is becoming increasingly belligerent.

A desire to work more closely with Britain in military matters is very much in evidence, both in the Mongolian Government and the Mongolian Armed Forces (MAF). The annual Khan Quest exercise is seen as very worthwhile, and Polo is seen as important, with the Mongolian military being keen for sporting co-operation to be increased. English language training has been valued greatly. The MAF also want more of their officers to attend British training courses. Looking to the future, military co-operation is an area which can and should be extended.

At the moment, Mongolia is going through a tough time economically. Last year, economic growth slowed to 1% and following a decline in exports after the world economic downturn and a weakening of the commodity market, Mongolia received a significant loan of $ 5.5 billion, contributed in part by the International Monetary Fund (IMF). The loan was conditional upon Mongolia tightening its economic belt with a reduction in its public expenditure, particularly for social programmes, and the introduction of structural reforms. Since securing the loan economic growth has improved.

In the medium to long term the country’s economic prospects are very good. Receipts from the vast Oyu Tolgoi copper mine, heavily invested in by Rio Tinto, are due to increase substantially and over 80% of the country’s vast mineral reserves remain untapped. Relations with foreign investors can be difficult, with some politicians believing that the country is not deriving sufficient benefit from foreign investment. In turn, actual and potential investors complain about the lack of clear government policy, delays in decision making and abrupt changes of policy direction.

Given the size of Mongolia’s mineral resources, it is important for a firm relationship to be established and maintained between the Government and international investors. When we visited Oyu Tolgoi copper mine, it was clear that Mongolians were playing an increasingly important role at the mine and it serves as an indication of what is possible and what can be achieved on the basis of partnership between the Mongolian state and external investors.

Mongolia is an exciting country with huge potential. The relationship with its near neighbours, Russia and China, are always likely to be precarious, but if Mongolia’s relationship with international investors can be firmly structured, then Mongolians can have a prosperous future to look forward to.

Wayne David MP