The Contested Politics of the Presidential Veto

In August,  parliament (State Ikh Khural) passed two separate amnesty bills: the first provides a one-time amnesty for all unregistered wealth from  criminal investigations and taxation. The other applies to first-time offenders, minors, women with small children and people who haven’t committed violent crimes.  This wasn’t new for the parliament.  On the occasion of major anniversary, the state is used to issue the amnesty.  The criminal amnesty bill was passed in 1991, 1996, 2000, 2006, and 2009 whereas the economic amnesty was introduced in 2008.  For this time, both bills were passed in honour of the 25th anniversary of the first democratic election of the country’s legislature.

But this time, both bills triggered interesting rounds of politicking and contestation.  The economic amnesty bill (Economic Transparency Law) was quickly began to be implemented by the government (executive branch) in spite of  political opposition and public call for transparency – to disclose the amounts of declared wealth and names of wealth holders.  The criminal amnesty bill revealed strong disagreements among political institutions, elites, parties, and factions as well as public.

On the same day of the passage, former president, prime minister, and speaker N Enkhbayar returned from South Korea, where he was undergoing medical treatment, and declared his commitment to establish a new coalition government with the DP.  Under the amnesty law, his corruption related criminal case would be exonerated.  On the following day, the current president Elbegdorj announced his intention to veto the criminal amnesty bill, which included crimes related to corruption, during his speech at the 85th anniversary of the prosecutors’ office.  At the same time, some DP members (esp., Kh Temuujin), MPP parliament members, three independent members, and Civil Will Green Party members expressed their objections to the inclusion of  corruption crimes in the amnesty bill.

On August 17, the President vetoed articles concerning  corruption and related crimes in the criminal amnesty law.  Parliament accepted the presidential veto during its special session of August 3-11.  Here are several observations:

First, the quick, non-transparent vote on and implementation of the economic amnesty law demonstrates the power and influence of oligarchs, kleptocrats, and business factions.  Given the difficulties of maintaining off-shore accounts and remaining under threat from their competitors, state institutions, and population, it appears to be a practical solution for the state to collect taxes incoming years and for property owners to be protected from further criminal investigation and potential expropriation.

Second, the law-making process is becoming too loose and vulnerable to interests and influences of various groups.  As indicated by MP Temuujin (DP) and Ts Nyamdorj (MPP), the initial (draft) bill, which was introduced by the government (Prime Minister), was completely changed at the standing committee and parliamentary deliberation.  This process was dominated by members with strong conflict of interests (esp., Justice Coalition).

Third, parliament members are appealing to the public (esp., social media and press).  The media listed pro and against votes of members in regards with the presidential veto and parliament members (esp., those were in support of the presidential veto) pressured the speaker to release minutes and recordings of the parliamentary deliberation on the amnesty bills.  Yes, on one hand, all members and parties are concerned with public ratings and upcoming elections; but, on the other hand, it pressures politicians, parties, and factions who were not willing to present their standings on important issues like fighting against the corruption.

Finally, political institutions remain vulnerable and have lost their steam because of unruly competition of the ‘winner takes all‘ variety.  The presidential veto added a bit of steam into Mongolia’s politics to strengthen democratic institutions and to uphold the principle of  transparency and accountability.  But, dangers for democracy are out there.  Political-economic factions continue to weaken the state institutions as each wants to take-over important ministries, agencies, SOEs, and provinces – for either wealth defence or accumulation.  The politicization of the security institutions (esp., intelligence, anti-corruption, police, marshal service) and judiciary (including prosecutor’s offices) become more visible than it was earlier years of the democratic transition.  Key political institutions are bureaucratically weak; therefore, influential and charismatic agents could easily use for their parochial interests.

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Cabinet Reshuffle

Roughly a month after MPP members were kicked out of cabinet, we now appear to have a Saikhanbileg II cabinet forming.

Cabinet Composition

The new cabinet members are:

  • G Bayarsaikhan (DP), Min of Labour
  • B Bolor (DP), Min of Finance
  • M Zorigt (DP), Min of Roads and Transport
  • N Battsereg (JC), Min of Environment , Green Development and Tourism
  • Z Bayanselenge (JC), Min of Construction and Urban Development
  • Ts Oyunbaatar (JC), Deputy PM

Note that these are all current MPs. The ambition to not appoint a majority of members of parliament to the cabinet (avoiding the “double-deel”) has thus apparently been abandoned even though it was one of the issues that animated political debates in 2014, and was emphasized by PM Saikhanbileg in announcing his first cabinet. The only non-MP members of cabinet are now D Dorjiglav (Justice), R Jigjid (Mining), L Purevsuren (Foreign Affairs), and G Shiilegdamba (Health and Sports).

Note also that neither S Oyun nor S Demberel from the Civil Will Green Party have joined the cabinet suggesting that this is not quite a return to the coalition under PM Altankhuyag pre-Nov 2014 as it does not appear to include the CWGP. Instead, cabinet now includes six ministers nominated by the Justice Coalition suggesting their increased clout within cabinet.

Last November we had offered mini-bios and the faction affiliation of Saikhanbileg I cabinet members, here’s a limited update (DP faction/ Justice Coalition party membership).

  • G Bayarsaikhan (DP: Falcon faction)
  • B Bolor (DP: Mongolian National Progressive Party faction)
  • M Zorigt (DP: Mongolian Democratic Union faction)
  • N Battsereg (JC: MNDP)
  • Z Bayanselenge (JC: MPRP)
  • Ts Oyunbaatar (JC: MPRP)

Cabinet Politics

Given the continuity in the Prime Minister and the fact that the super coalition has simply been reduced to a coalition, there is no reason to expect any major shifts in policy. The previous MPP members of the cabinet did not seem to differ in any specific policies from the PM and his other colleagues, so their forced departure should not lead to any redirection of efforts or review of previous decisions.

Of the major resource projects that would continue to jump start the Mongolian economy again, Tavan Tolgoi is the obvious remaining challenge. However, it strikes me as quite unlikely that this (or any future cabinet, before or after the election) will have much luck with that particular project. The first (almost insurmountable in my mind) hurdle is the fact that multiple private Mongolian investors are vying for variously large pieces of the TT project. While more private sector involvement may be a good thing in some people’s eyes, I see it as ultimately leading to a stalemate between different efforts to lobby for a particular domestic investor to gain the upper hand. As a resource, the thermal coal that might be produced at TT is increasingly unattractive on the international market as even China may be moving away from coal in the long run. In the medium term there may still be plenty of a market, but this is not exactly a future-oriented investment. Coking or metallurgical coal by contrast is likely to continue to find buyers into the future.. The decline of the use of thermal coal may make TT less of a prize possession than it seemed some year ago.

Beyond Oyu Tolgoi and the economy, I had included a number of other policy arenas that I was hoping Saikhanbileg I might address: anti-corruption, public service, higher education, long-term research to promote diversification, strengthening policy-making capacity, a role for repats, support for aimag centres, and nurturing democracy (incl. democracy as an important pillar in foreign policy). I don’t really expect movement in any of these areas (though the topics have lost none of their urgency in my mind).

It is relatively unclear how long this cabinet might last. The DP continues to be rife with vaguely suicidal factional battles which might erupt at any moment again. The tug-of-war about the MPRP-demanded amnesty law suggests that that party and the Justice Coalition might also become less attractive as a partner as the election approaches. But whatever permutation of DP-led coalitions might arrive, the looming election probably will prevent both, any significant change of policy direction, and – sadly – any real policy achievements.

Posted in Democratic Party, Governance, Ikh Khural 2016, Mongolian People's Revolutionary Party, Party Politics, Politics | Tagged | Leave a comment

Ulaanbaatar Impressions

Yes, another periodic visit to Ulaanbaatar, yes once again too short a visit, but here are some immediate impressions along the lines of observations on previous visits that I noted down: May 2015November 2014May 2014 |November 2013.

Cityscape and Traffic

– I arrived in the middle of the night and flew out before first light, so I didn’t see the airport road during the day, but it seems to change almost as quickly as the immigration and departure hall at Chinggis Khaan (of course!) airport. For the airport changes, Tsogoo suggested “nomadic reformism” as an explanation. I think we might have to expand our policy series to feature this perspective! Back to the airport road, development along this road is continuing though the large mall certainly looked quite dark. Lots of gas stations, too. And, a new row of trees along the southside to complement that poor stand of JICA-planted trees that have been more or less alive on the northside of the road for seemingly decades.

– I don’t think I had previously been in Ulaanbaatar just before/on the beginning of the academic year. There was a noticeable and seemingly overnight increase in traffic to celebrate the beginning of the school year. This also coincided with the introduction of jaywalking fines for crossing the street outside of crosswalks. According to Y Otgonbayar, an individual from the province he represents in parliament, Bulgan, had beat me to the punch in becoming the first person fined, but oh my, how the world has changed when you see Mongolians waiting for a pedestrian light to turn green even though traffic is jammed in front of them. The jaywalking fine threat is unfortunate, of course, as the return of traffic makes downtown Ulaanbaatar safer for pedestrians who can cross in between stopped cars.

– With increased traffic and the disappearance of open areas in downtown Ulaanbaatar, parking is growing scarce. I noticed for the first time that the small hotel where I like to stay now charges hourly for use of its (very central) parking lot.

– There still is an astonishing number of hotel and commercial buildings under construction in central Ulaanbaatar. Hard to imagine what hordes of conventioneers, businesspeople and tourists are meant to fill all these buildings. The Shangri-La appears to be sort of open, couldn’t say that it looks particularly attractive from the outside, but early reports are of high quality on the inside.

– The beginning of the school year is clearly treated as a holiday and it was wonderful to walk in central Ulaanbaatar between appointments. Lots of kids on the hands of their (grand)parents in brand-new school uniforms, the girls with fancy hair, chattering away excitedly, reporting on the first day of school, I imagine. Teenagers also walking along in newly uniformed groups, looking like they were deep into catching up on events that may have occurred over the summer. Wonderful atmosphere.


– In several conversations I found general astonishment and surprise about the removal of MPP ministers from cabinet earlier in the summer confirming my own sense of the current political landscape. The consensus on identifiable causes/explanations: DP in-fighting. The tug-of-war between УИХ Speaker Enkhbold Z and PM Saikhanbileg Ch. continues, now focused on the naming of new ministers in front of parliament. Apparently, the DP caucus is demanding that these are all double-deel DP MPs.

– While the electoral system for next year’s УИХ election appears to be on track for some continuity (28 proportional, 48 first-past-the-post with some multi-member districts), there is some speculation about an early (March) or late (October) election instead of the usual late-June date. The argument for early centres on the DPs inability to govern (with the common expectation that we will see more changes in government until the election). Speculation about moving the election to a later date is in part rooted in the July ASEM summit which will clearly have much of the government (and Ulaanbaatar) preoccupied from some time in the late Spring with preparations.

– Several conversations highlighted the deepening governmental engagement with China, beyond the symbolically important and visible participation of Mongolian troops in the Sept 3 military-triumphalism-event in Beijing.

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Politics in Late Summer 2015

I’m about to head to Ulaanbaatar for a very brief visit. While summer is a time of parliamentary recess and Naadam, it has been a bit more eventful than usual with the de facto dissolution of PM Saikhanbileg’s super coalition. About 10 months away from the next parliamentary election, I wonder what’s to come and what political mood I will find in Ulaanbaatar.


The end of the DP-MPP-Justice-CWGP super coalition was not entirely surprising, even if the timing this summer already did surprise me.

Two big reasons make this not terribly surprising:

  1. the single most important purpose of the coalition was to get resource projects and thus ultimately foreign investment and the economy back on track. This was the first item on my personal Saikhanbileg wishlist, and the announcement reasserting Rio Tinto’s and the Government’s commitment to Phase II of Oyu Tolgoi construction seems to have granted that wish and fulfilled that purpose. Note the parallel here with the grand coalition of 2009 under PM Bayar and the initial signing of the OT investment agreement.
  2. Grand and super coalitions are a political strategic headache going into elections as they muddy opportunities for parties to make a case for their contribution to government and negate the role of an opposition. Note the parallel to the break-up of the grand coalition under PM Batbold in January 2012.

But why already in the summer of 2015, rather than late this year or early next year?

Current Coalition Possibilities

Since the removal of MPP ministers from cabinet, there has not been an announcement of a re-formed government and new ministers. That would suggest that negotiations with coalition partners are on-going. The two most viable alternative constellations would seem to be either a) a return to a coalition like the one that supported PM Altankhuyag (DP + Justice + CWGP) or b) an MPP-led coalition. Given their crucial seats, this might give Enkhbayar and his Justice Coalition a fair bit of leverage in negotiations with the DP, particularly since the super coalition reduced the MPRP’s role somewhat.

Electoral Strategy

I tend to dismiss the analyses of Mongolian politics that always point to upcoming elections as a deciding factor. Why am I not so happy with these explanations? To paraphrase German football coaching legend Sepp Herberger (“Nach dem Spiel ist vor dem Spiel”), after an election is before an election, meaning that there is always another election coming, so that the fact that there is an election coming explains very little. Sure, MPs might be thinking more about the coming election 10 months out (i.e. now) than 40 months out, but many politicians (in Mongolia as in other democracies) seem to think in terms of coming elections all the time.

However, electoral calculations in Mongolia may have shifted in the past six months.


When Ch Saikhanbileg took over as PM from N Altankhuyag, this seemed like a suicide mission. The DP seemed to be committing very public suicide through factional fighting after they’d made a mess of the economy through decisions on foreign investment and also failed with a number of other reforms projects (judicial reform, anti-corruption). Saikhanbileg was taking a bullet for the party knowing that chances in the 2016 election looked dire and perhaps hoping that this would give him political credibility in a future election as the DP leader that righted the ship and set it on a new course knowing that electoral defeat was coming.

Now, that electoral defeat doesn’t look as certain any more, though still likely. What’s changed? Well, that Oyu Tolgoi announcement primarily. The measurable economic impact until the June 2016 parliamentary election will be negligible, but it has changed perception. The tugrik might well continue to slide, the government still has no money and will struggle to begin repaying bonds (though cleverly playing Indian and Chinese desires for influence off against each other will likely allow them to stall on payments), many people will struggle with inflation in daily lives given lack of employment, but at least there seems to be a light at the end of the tunnel.

Construction at OT will be under way and that means that production will ramp up in five-seven years’ time suggesting at least a future cash flow even if there are struggles at the moment. That decision can also be one element in reviving domestic supply chains and employment as well as in regaining the interest of foreign investors, maybe. [The on-going situation surrounding the Khan Resources arbitration award and Centerra’s Gatsuurt project cast a shadow over any likely revival of FDI from a Canadian perspective, of course.]

This will obviously be the case that Saikhanbileg (or any DP prime minister or Z Enkhbold as party chairman) will make in next year’s campaign.


For the MPP this continues to be a situation of damned if you do, damned if you don’t. If the MPP stays out of government, this makes it easier for the DP to argue that they’ve corrected their past errors and are on the right track, claiming the shift in sentiment due to the OT announcement as their achievement. If they stay in some kind of government, it makes it more difficult to emphasize their own contributions.

This quandary presents itself at a time where there also seems to be some turmoil within the MPP. While the party always represents itself as unified at election time, the split of the reformed MPRP under N Enkhbayar is only the most obvious indication that the MPP is not free from factions either.


Much has been made of the apparent popularity of independent MP S Ganbaatar, but more in terms of a potential presidential bid and someone that might shift debates ahead of the parliamentary election toward populist demands. To have a chance in any presidential contest, Ganbaatar would have to be nominated by a party sitting in the Ikh Khural, of course.

This need has led to speculation about any new parties, perhaps especially the HUN Party that seems to be in formation. We provided a quick sense of this National Labour Party in a post in early June, but I’m eager to learn more about their agenda and potential role in politics on this upcoming visit (not to support their effort, of course, as my interest as a foreigner is in analysis not in influencing politics).

Electoral System

There have been some discussions of a new party law and of changes to the electoral system in recent months. It appears that the latter have become muted somewhat. Proposals had included a shift to 76 newly-created electoral ridings with first-past-the-post voting or a number of other alternatives. For now, it seems that the most likely outcome would be continuity from the 2012 election (for once), i.e. a mixed system of proportional representation and first-past-the-post electoral ridings with the twist of multiple candidates in some ridings. The women’s quota for political candidates also seems to be likely to remain.

Posted in Democratic Party, Elections, Foreign Investment, Ikh Khural 2016, Mongolian People's Party, Party Politics, Politics, Public opinion | Tagged | Leave a comment

Graduates of Archery 100 in Mongolia

Presenting graduates of the Archery 100 course in Mongolia

Dmitry Medvedev

Russian President Dmitry Medvedev in 2009 (source link)

Xi Jinping

Chinese President Xi Jinping in 2014 (source link)

Finnish President

Finnish President Tarja Halonen in 2011 (source link)

Joe Biden

The US Vice President Joe Biden in 2011 (source link)

Narendi Modi

Indian Prime Minister Narendra Modi (source link)

14754107833_dddc9da477_z copy

Canadian Foreign Affairs Minister John Baird in 2014 (source link)


German Foreign Minister Frank-Walter Steinmeier in 2014 (source link)

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Concrete Information on Corruption Paints Depressing Picture

I have written about corruption in various contexts in the past, most recently comparing the context of anti-corruption movements in India and Mongolia. In that post, I wrote that, “Petty corruption, systemic corruption, as well as grand corruption appear to be wide-spread if not endemic in Mongolia.” “Wide-spread if not endemic” is the phrase I have used generally to refer to corruption. Yet, concrete information is obviously preferable to such a vague generalization.

This is where I was delighted to see the publication of the Asia Foundation’s most recent (2015) “Annual Survey on Perceptions and Knowledge of Corruption (SPEAK)”.

Why I Have Some Faith in the SPEAK Results

The Asia Foundation has been engaged in Mongolia since the early days of democracy and has built up multiple programs and strong expertise.

The SPEAK survey itself builds on the Mongolia Corruption Benchmarking Survey that was conducted annually from 2006 to 2011. Since 2012 it has been known as SPEAK. If you look at the report, you will find a detailed methodology section that focuses on a “multi-stage, random sampling procedure … with probability sampling in an area cluster. ” (p. 9). Essentially what this means is that more and more specific geographic areas are selected at random to ultimately give interviewers a starting point for face-to-face surveys from where they proceed by a further random rule. Ultimately this yielded over 1,360 sampled households, 560 in Ulaanbaatar and 800 in the countryside.

The fact that this is an annual survey gives me even more confidence in it as it allows to compare longer trends that are impacted less by daily news and other swings in political mood.

Of course, there are lots of sources of error in this kind of methodology, though hopefully not of systematic error.

It is worth noting that this is a survey of perception of corruption, not of corruption itself, as is true of most instruments that deal with corruption though there have been promising attempts at measuring actual experience of corruption with experimental methods.

Answers I am Looking For

To me, the most pressing questions about the perception of corruption are: 1. how widespread is it?, 2. is corruption improving or deteriorating?

Ultimately the answers to these questions can inform and lead to a discussion of how corruption can be addressed best.

How Widespread is Corruption?

Since the beginning of these surveys in 2006, over 80% of the respondents have agree (agree or somewhat agree) with the view that “corruption is a common practice in Mongolia” (Figure 1.4, p. 12). Somewhat oddly, the number of respondents who reply “don’t know” or decline to answer has gone up over the years from a low of 1,4% in 2006 to 6.4% in 2014 (4.7% this year).

For 2015, 64.6% agree with “common practice” and 20.7% somewhat agree for a total of 85.3%. To me, that settles the question of whether corruption is endemic of not with an emphatic, “Yes!”. Yet, the number of respondents who identify corruption as a major problem has held steady around 8%. Whereas corruption has been identified by the third-most number of respondents in the past, it has now been surpassed in mentions by “national economy”. Unemployment, inflation and national economy are mentioned as the single major problem by 49.5% of respondents. “It’s the economy, stupid!”

Does the fact that most see corruption as a common practice, but that few people identify it as a major problem, an indication of resignation regarding anti-corruption efforts, or a lack of recognition of the losses related to corruption? Or does it follow from the SPEAK finding (p. 16) that respondents see corruption having an impact on their personal life only to “a small extent” and that this impact appears to be receding over time.

Along the lines with the perception that the impact of corruption is greatest in politics, respondents have identified the following institutions/facets of political life as the most corrupt: 1. land utilization, 2. political parties, 3. mining, 4. national government, 5. parliament. This is a marked and worrisome change from previous surveys that had never led to a listing of the national government, nor of parliament among the top 5 of corruption. The fact that political parties were ranked the second-most corrupt also suggests that this is not a matter of the actions or perceptions of a single party (though the DP obviously has a majority in parliament and in cabinet), but of political parties more broadly. In the eyes of Mongolians, their main political actors are corrupt!

Is Corruption Waning?

For the country’s sake, anyone ultimately is inspiring to be Scandinavian in the absence of corruption, but is Mongolia moving towards that goal? The longitudinal nature of the SPEAK data allows is to assess this to some extent.

I already discussed the shift toward political parties, the government, and parliament in perception of worst institutions above. This shift seems to be paralleled by the general sense that things are getting worse in Mongolia over the past several years. The graph on p. 20 of the report (Figure 4.1) illustrates this nicely by charting responses to the question of how corruption has changed in the previous three years. The number of people who responded that corruption had increased a little or a lot was declining from 2010 until 2014 to a low of just under 40% and increased sharply in 2014-15 to just under 60%. Not a good trend line, particularly since respondents are also less optimistic about the fight against corruption in coming years.

When it comes to families payment of bribes, however, the development is more positive. In fact, Figure 9.3 (p. 37) shows a decline in the number of respondents who acknowledge having paid a bribe in the past three months from 28% in 2006 to 7% in the most recent round of surveying. This is one question where SPEAK is not just about perceptions but aims to ask about behaviour. There are obvious challenges in interpreting this figure given some (presumed) tendency by respondents to underreport bribes, however, the overtime trend does suggests a decline, unless the awareness of bribing as unnecessary or immoral has risen massively and no other responses in the survey suggest that.


As a four-time election observer and given the looming 2016 and 2017 elections, I’m obviously interest in perceptions of corruption in the context of voting (pp. 13-16). The survey asked respondents to identify their expectations of fairness and transparency of the election in five stages: preparation and registration, campaign finance, campaigns, vote counting, and reporting of results. Of these respondents have the greatest confidence in the fairness of the campaign with 45% expecting fairness to a moderate or large extent. By contrast, they have least confidence by far in campaign finance with a whopping 40.5% reporting no expectation of fairness at all, and an additional 17.3% expecting a small extent of fairness.

Other Observations

Because SPEAK covers a variety of topics in addition to corruption, there are some interesting findings sprinkled throughout the report.

For example, the listing of “Major Problems” (pp. 11-12). Surprisingly (to me), inflation got fewer mentions this year than in 2014, and much fewer than in 2013 (down to 10.9% from 21.5%). I find this surprising since inflation is often mentioned in conversations with Mongolians as the factor that makes the current economic turmoil most tangible in daily life next to employment concerns. But even concern about unemployment (the most frequently mentioned major problem) is roughly steady across the past three years.

What is to be Done?

Given the ultimate aim of reducing corruption, the question arises of how achieving this aim might be expedited in some fashion.

In my conversation with MAAPPS student Asim, I concluded that a popular movement has to proceed political action. All the questions in the SPEAK data about the IAAC (Independent Authority against Corruption – АВЛИГАТАЙ ТЭМЦЭХ ГАЗАР) suggest that expectations of this regulatory approach and of enforcement of already-existing laws and regulations are high. But, while such enforcement will punish offenders and thus offer some deterrence, it seems to me that it’s a change in politicians’ (and others’ mindset) that’s most needed. As the German proverb has it, “Der Fisch stinkt vom Kopf her” (i.e. a fish rots from the head), so its society’s head that needs to be addressed.

But, more avenues to bring concrete evidence of corruption to the public’s view is needed. The media in Mongolia seems to be largely involved in finger-pointing and outlandish accusations, rather than concrete instances of corruption. This is certainly the case with electoral fraud and manipulation, but also extends to other areas. Transparency is only as good as the use that civil society and the media put information to. This is very clear in the case of the important Extractive Industry Transparency Initiative, for example, which has been making information about revenue streams transparent for some years. Legislation extending the EITI seems to be in parliamentary limbo at the moment, but the information that has been made available through the EITI has not been used enough by civil society and the media to have the desired effects. This is why some level of social mobilization appears to be required.

I personally believe that such mobilization would also have to occur in the political realm, whether through established forces like the Civil Will Green Party or a generational change in either of the long-standing larger parties, or through new political movements (it’s not at all clear whether this might be one of the aims of the new National Labour Party).

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Corruption in India: Lessons for Mongolia?

A Conversation With Asim Arun

One of the things I really like about the broad variety of disciplinary academic perspectives on Mongolia that I come in contact with (for example, a lot of the discussions at the recent Oxford Deserts Conference), is that I get to learn a lot in the process of this contact. The same can be said about different discussions that centre around a specific issue.

Here, I’m writing together with Asim Arun who is an MA Candidate in our Asia Pacific Policy Studies program. Asim is a government officer from India on a mid-career study break.

We were having a discussion about Indian PM Modi’s recent visit to Mongolia and the extent to which PM Modi has emerged as a foreign policy actor. This followed on his election more or less on a domestic agenda focused on anti-corruption. This in turn gave me occasion to learn about anti-corruption activities in India from Asim and to think about how these might apply to Mongolia if at all.

Corruption in Mongolia

First, let’s set the stage for a discussion of corruption in Mongolia. This is clearly a serious issue. Petty corruption, systemic corruption, as well as grand corruption appear to be wide-spread if not endemic in Mongolia. It is important to note that grand corruption in particular essentially amounts to theft from the Mongolia people.

I have always been amazed by the extent to which corruption seems wide-spread in Mongolia and leads to some of the vast inequalities that can be observed, for example, in the kind of cars that can be seen on Ulaanbaatar streets today. Clearly, evidence is scarce, but there’s so much smoke around the topic of corruption that it is unimaginable to me that there isn’t a corrupt fire. Note that I’m concerned with corruption somewhat in the abstract here, not with particular cases or individual actors.

Anti-Corruption Efforts in Mongolia

The Civil Will Green Party has probably talked about the scourge of corruption for the longest time among the parties that continue to be active in Mongolian politics. Yet, despite the credibility on this issue by some of its leaders, most notably perhaps MP S Oyun, even CWGP has not – in my observations – made corruption the centre of its agenda or campaigning and appealed directly to the citizenry on the need to address corruption.

The Democratic Party has also talked about corruption for some time and President Ts Elbegdorj has been particularly vocal in this area. Yet, the last several years of a DP-led government have been disappointing in this regard. For the most part, anti-corruption activities seem to have focused on political opponents of the DP, or sometimes opponents of individual DP leaders. The Anti-Corruption Agency has lost some of its independence in this regard and many Mongolians now appear to see it primarily as an agent of the presidency.

If we think of the past several years as essentially a failure and lost time when it comes to the bigger fight against corruption (not that there haven’t been successes like the Extractive Industries Transparency Initiative or the enforcement of financial reporting by MPs), what strategies can we imagine that might be more successful?

Why India?

Here’s where my discussion with Asim was interesting to me as offering some possible lenses on Mongolia: Not only have India-Mongolia relations seen a recent highlight with #ModiInMongolia, but these are two of a rare breed, democracies in Asia. They serve an important signalling function for the rest of Asia, India obviously more so given its size and longer history of democratic governance, but Mongolia as well (as I discussed in a recent East Asia Forum Article, “Can Freedom Go Online in Asia?” with other MAAPPS students Trevor Kennedy, Christina Toepell and Melanie Schweiger).

Not only are Mongolia and India democratic, but they are generally seen as somewhat chaotic democracies. They might also be somewhat similar in the nature of their media: lots of it, but low journalistic standards across a wide spectrum of media outlets. On the issue of corruption, some of these low standards have meant that discussions are focused on scandals and that that the “discovery” of such scandals happens in a tabloid style and is rarely backed up by evidence.

Part of the chaos associated with these democracies is corruption:
In international comparisons, India and Mongolia look quite similar when it comes to corruption. In Transparency International’s 2014 Corruption Perception Index, the prevalence of corruption is perceived to be at similar levels in the two countries, as they receive a score of 38 (India) and 39 (Mongolia), ranking right in the middle of the 175 countries included at 85th and 80th, respectively. The Heritage Foundation’s Index of Freedom allows a side-by-side comparison of its “Freedom from Corruption” category (which is “derived primarily from Transparency International’s Corruption Perceptions Index (CPI) for 2010, which measures the level of corruption in 178 countries.“).

In many areas, the differences between India and Mongolia are so vast that they almost seem like incomparable cases. Population size and density, religious and ethnic diversity, the existence/remnants of caste society, geopolitical situation, etc.

Yet, there is another big difference between India and Mongolia: in India, corruption has become a prominent political issue that is not just paid lip service to, but that has swayed elections. That does not mean that corruption has been rooted out in India, nor that it is set to disappear any time soon, but there has been significant mobilization around the issue, a context that would seem to be one of the preconditions for any real attempts to address this issue.

A Chronology of Recent Indian Mobilization

With the Right To Information Act (RTI) coming into being in 2003, various levels of the government were forced into transparency and numerous instances of corruption- grand and petty, started coming to light. The Comptroller and Auditor General (CAG) pointed out large-scale state capture corruption in mining where instead of a transparent auction of coal blocks ‘allotments’ were made to companies in which members of the ruling coalition led by the Indian National Congress had interests. Similarly, the process of allocation of radio spectrum frequencies, another natural resource, was opaque and arbitrary. The CAG estimated the loss to the government in Coal-gate at USD 34 billion and the spectrum scam at USD 30 billion!

While news of such grand corruption occupied prime time, citizens struggled with petty corruption in their day-to-day lives. RTI activism gained support to evolve into a strong civil society movement which reached a crescendo in 2011 with India witnessing a massive campaign under Gandhian septuagenarian leader, Anna Hazare. Anna’s prime demand was the creation of a strong anti-corruption agency called Lokpal that, as in Hong Kong and Singapore, would become the main cleansing agent. To silence the growing movement, the Congress-led government reluctantly passed the Lokpal bill in Parliament but did nothing to implement it. Anna’s movement lost steam as its prime players could not work together for long and went their ways. A large chunk founded a political party – Aam Aadmi Party (Common Man’s Party) and in 2013 could manage 27 out of 70 seats in Delhi’s provincial elections. They even formed the government, ironically with Congress’ support, but resigned on its 49th day having realized the futility of running a minority government.

Sensing the mood of the electorate, Narendra Modi and his Bhartiya Janata Party (BJP) made anti-corruption the main plank of their 2014 federal election campaign and succeeded in sweeping it. In February 2015, fresh elections were held in Delhi and the AAP, this time, won all but 3 seats to the 70 member state assembly! Clearly, anti-corruption is the flavour of the season. In India today, no party can step into an election campaign staying silent on this issue. This bottom-up or demand-driven anti-corruption movement has mounted pressure on the government to reform procedures and cure corruption because the voters are not likely to forgive non-performance on this count.

In contrast, President Xi Jinping’s campaign in China is being criticised for employing a top-down approach. Without freedom of expression, democracy and, a vibrant and vocal civil society even if a demand for curing corruption exists, it does not aggregate into a movement. Mongolia has the advantage of the existence of these dimensions of a free society and it should not be difficult for people from all walks of life to come together against corruption in such a way that no political party can afford to ignore the malaise any longer.

Implications for Mongolia

India’s example of cosmopolitan, if somewhat urban, anti-graft movement holds lessons and inspirations for Mongolians. State capture or grand corruption can be controlled only by creating a strong and smart agency to track, try and, punish the corrupt actors. Petty or street corruption can be best addressed by creating complaint helplines and then helping the complainant organize a trap by using surveillance cameras in such a way that it becomes legally admissible evidence. This could be done by a government serious about the cure or even an apolitical activist organization. The idea is to bring corruption centre stage. In India, the media played, and continues to do so, the role of a catalyst as prime time TV and front pages of newspapers are occupied by news of corruption and anti-corruption.

An important dimension, where India has not made much of a breakthrough, is eliminating the imperative need for black money for financing political parties. A transparent process of political funding has to be worked out to get rid of systemic corruption which, in turn, needs out of the box thinking by a fresh bunch of people who believe that change is possible.

At the same time, it should be noted on the Indian example, that anti-corruption does appear to hold the transformative potential to mobilize the electorate around a single issue. Whether that leads to a new party like the AAP in Delhi, or forces existing political parties to adopt anti-corruption in its platform as now-PM Modi did in the 2014 general election, on top of civil society mobilization anti-corruption efforts can clearly galvanize the electorate. In the Mongolian context, it’s difficult to imagine any of the three biggest political forces, DP, MPP or Justice Coalition, to adopt a credible anti-corruption stance, but the Indian example seems to suggest that existing political forces, especially the CWGP or independents, as well as emerging political parties, may well turn to anti-corruption as a campaign theme. Such a theme would presume that civil society mobilization is not a necessary condition in bringing anti-corruption efforts to the political fore, as we’ve seen only a limited amount of mobilization around this theme.

In terms of institutional design, Mongolia might consider creating the role of a Comptroller and Auditor General (or expanding that role if it exists to some degree). Rather than making that an anti-corruption role only – and thus locating it within the Anti-Corruption Agency – a broader independent role to assess government accounting and procurement as the Canadian Auditor General has, might offer a number of additional benefits.

While some anti-corruption efforts like the Extractive Industries Transparency Initiative are focused on the payments that industry makes to government, there’s significant less attention paid to what government does with money that it receives. Scrutiny of some government programs without turning that into a potential instrument for a witch-hunt or partisan persecution, could give greater impetus to transparency efforts in other areas.

Posted in Asim Arun, Corruption, Governance, India, Party Politics, Politics, Social Movements | Tagged | Leave a comment

Guest Post: National Labour Party – Хөдөлмөрийн Үндэсний Нам

Bulgan Batdorj

Since their first forum “National Development – Mongol Person” in February this year, the Development Hun (ХҮН/Hun = person, individual) club expressed its intent of becoming a political force, but had not settled on both type (political movement, pressure group or party) or name. So, on May 4, the Development Hun club announced that they were becoming the new “National Labour Party” (in Mongolian) “Хөдөлмөрийн Үндэсний Нам”, abbreviated as ХҮН. The National Labour Party was registered with the Supreme Court of Mongolia on November 2011 as a political party and there was no information on whether it was a name transfer or merger. Before settling on the name, the club had suggested a few names which contained the word ХҮН. This is because their framework is to centre on ХҮН.

HUN’s Goals

According to Sant Maral’s April 2015 Politbarometer, 43.5% of respondents say that none of the political parties can best solve the socio-political or economic problems that Mongolia is facing today. This seems to suggest an opening for a possible new political force next to the two large parties and well-established parties like MAXH and Civil Will Green Party.

Those problems are in priority order Unemployment; Standard of living; Price increase (totals 65%) Economy, Law enforcement, Corruption, Education, Social Justice, State Administration and lastly Environment rated on the 10th place with 1.4%. Many of these problems are addressed in the HUN party’s “Mongolia Goal” agenda. There are 10 pillars for the Mongolia Goal [see the graphic entitled “МОНГОЛ ЗОРИЛГО” on Facebook]. Those are: (right to left)

  1. National Existence
  2. Environment to create wealth
  3. Legal Environment
  4. Environment/Ecology
  5. Wealth Distribution Environment
  6. Education
  7. Health
  8. Food
  9. Employment/Income
  10. Shelter/Housing

The “Mongol Goal” is illustrated in three timelines, short term, medium and long term, with set up qualitative and quantities objectives for the Mongolian economy and society up till 2050. The proposed framework suggests a liberal ideology, accepting the government’s role in education, health and poverty and endorsing a free(er) market economy.

HUN’s Leadership

The party seems to be building an image of educated and experienced men who are mature and energetic, based on the people who are representing the party in the public domain.

For example, the party leader is Mr. S. Borgil, who received a masters and PhD in the U.S., and has previous work experience at the Mongolian Ministry of Finance and a bank in Colorado.

Mr. B. Naidalaa is the CEO and the secretary of the Mongolian Banker’s Association, with previous experience in banking and MCS company. He has a graduate degree from the University of Kobe, Japan.

Another figure representing the party is Mr. T. Bat-Orgil, his mother and grandmother are highly respected and state-recognized actresses in Mongolia, so he is perceived by the public as being the son of a wealthy family and out of touch with the realities of a difficult life.

All three man are successful, educated and experienced. According to their interviews, many of the party’s members are foreign graduates and harvested work experience, recognized in specific sectors (technocrats). They uphold strong values of ethics, principles, accountability and humility at the individual level.

At the institutional level, they are promoting strong institutions (often pointing fingers at the other parties for having weak institutional capacity) guided by knowledge, justice and unity. As per the same Politbarometer, 65% of the respondents say that government policy is characterized most by self-interested politicians and in support for the rich. So, the image and message of “technocrat – capable institution” is appealing to many. This could also be a good strategy as the need of having technocratic perspectives involved in political decision-making was the main motive (at least publicly) to dissolve  Prime Minister N. Altankhuyag’s government and was the main condition for the next government (although this did not happen).

Challenges in Organizing a New Political Force

There are two main criticisms so far. The party is firmly pointing its fingers at the MPP & DP for their failures, but a further round of the “blame game” is not the best strategy to win the hearts of some. The second issue is that people are starting to develop conspiracy theories about the party’s finances as the events they organize are taking place at fancy venues and without transparent information on backers.

Anyone who has observed past election years in Mongolia would know that they will hear about many new political parties that they have never heard before during election campaign and will never hear again till the next election. The public is weary of yet another “New Political Party” especially on the doorstep of another election. But the National Labour Party might be the new thing that Mongolia might give a go for the next election in 2016 as they seem to be hitting the nail on the head (at least according to the Politbarometer 2015).

About Bulgan Batdorj

Bulgan Batdorj is a Master’s student at the Norman B. Keevil Institute of Mining Engineering of the University of British Columbia. Her research interests are Extractive Dependency, Resource Curse and Sustainability.

Posted in Bulgan Batdorj, Ikh Khural 2016, Party Politics, Politics, Social Movements | Leave a comment

Planning for 2016 УИХ Election

In June 2016, Mongolians will be voting for a new parliament, the Улсын Их Хурал. Having served as an election observer in the last four national elections, I’m thinking about what activities could be undertaken now to prepare for next year’s election, specifically whether there are any projects that would need to be initiated long ahead of the election.

Overall, I would say that the 2008 (despite the riots that followed), 2009, 2012, and 2013 elections were reasonably fair and free. While many rumours of electoral fraud swirled around these elections, no concrete evidence has ever emerged. The fact that electoral fraud only makes sense on a large scale suggests to me that evidence of any such national-scale fraud would have emerged over time. Of course, election monitoring is primarily focused on what happens in polling stations, any behind-the-scenes manipulation would be difficult to capture.

Despite the overall quality of the elections, there is certainly room for improvement.

The main challenges I have observed in the past include

  • lack of confidence in results and unproven allegations of fraud
  • variability in the electoral system
  • an increasingly active role of the media, but limited regulation, particularly regarding ownership of media outlets
  • organization of collection of the results at the district level.

Here, I want to think out loud about projects that might address these challenges, especially the first, as well as the ever-present need for voter education.

My ideas would variously apply under some of the changes to electoral laws that are currently under discussion, whether that is the MPP’s apparent proposal to turn to an all first-past-the-post system with 76 single-member electoral ridings, or any other specific set-up.

Guiding Principles

If I were to propose or carry out any efforts focused on the 2016 election, I would be guided by three principles:

  1. Do no harm.
  2. Remain independent and agnostic on outcomes.
  3. Lay open all decisions and funding.

I am not Mongolian, I do not vote in the election, and I do not have a direct stake in its outcome. While I have personal contacts with politicians of various stripes, I don’t have any particular sympathy nor loyalty for any of the Mongolian parties. I have no financial or other stake in Mongolia and election outcomes thus have no direct impact on me.

If I were to fear that any project I would undertake might have an undue impact (i.e. through manipulation or bias, rather than through information and education) on the results or on confidence in the results I would certainly not want to undertake such a project.

Goal: Confidence in Results

Mongolians’ confidence in the results of elections is shaken by all the unsubstantiated rumours that swirl around the press and politicians following the election. Clearly, rumour-mongering is a general pattern in the press, but it is the absence of evidence/further information that also plays a role in the tendency to jump to conspiracies as explanations, rather than offer actual evidence.

What can be done? Sant Maral’s Sumati is the only pollster in Mongolia, really. Yet, as he would likely readily concede, his polls are severely hampered by methodology (how do you poll a nomadic population?), the absence of a general social survey that would allow him to compare his results to such data to check representativeness, and – obviously – resources. The fact that credible, nation-wide pre-election polls are not possible, and that the number of exit polls is limited, means that election results stand on their own. In elections in many countries elsewhere,  results are anticipated by polls and voters thus gain a sense that the election “came out right”. When there are surprises (most countries can point to elections that had surprise results, I think), they are examined, re-polled and re-examined at great length to figure out why polls were wrong. Note that the default explanation is that the polls were wrong, not that there was electoral fraud.

Short of orchestrating a Kickstarter campaign to heap money on Sant Maral’s head (if you orchestrate it, I will donate!), what are other options?

I have long thought that an election stock market would be a great option for Mongolia. You can find the concepts of an election stock market explained on WikiPedia and in numerous academic publications. Some colleagues at UBC have been involved quite actively in this as the UBC Election Stock Market.

The main benefit of an election stock market in Mongolia could be that its predictive power of results might bolster confidence in reported results. I.e. if there are enough reasons and indications to believe that the prediction generated by an election stock market has some validity (that’s a big IF with many different elements), then reported actual results could be compared to this prediction. Overlaps would reinforce confidence in results, differences would need to be analyzed further.

However, there are massive obstacles and hurdles to establishing an election stock market that have me leaning away from proposing this as an avenue for Mongolia.

There are some quasi-legal hurdles. Election stock markets are meant to be driven by the predictive power of a large number of financially-motivated speculators. I.e. if you think you’re prediction of the election outcome is a) solid, and b) different from the conventional wisdom, you could make a moderate amount of money by participating in the election stock market. No investment, no risk in making predictions, and thus little predictive value. However, participants are essentially betting on the outcome of the election, and thus might run afoul of gambling laws. There are legitimate fears about the manipulation of election stock markets, especially in a situation like Mongolia where few other predictions might exist and the stock market might thus end up influencing rather than predicting the result.

Goal: Voter Education

This goal builds on the assumption that better educated voters make better choices and hold politicians to account.

There are many different elements in voter education from promoting an understanding of the electoral system to registration processes, party platforms, party advertising, candidates’ bios, polling station locations, etc.

Previous Efforts

The Mongolian General Election Commission (СОНГУУЛИЙН ЕРӨНХИЙ ХОРОО) has been challenged in recent elections by some fairly late changes in election system, such as the abandonment of the female candidates’ quota in 2008, its institutionalization in the 2012 election, but also the introduction of a proportional representation national party list in the 2012 election. From my perspective, the GEC has done a good job under challenging circumstances, particularly when it comes to public information about voter registration and voting procedures.

The Mongolian parliament has also taken some quite progressive steps that facilitate voter education, such as the power of the GEC to check party platforms against their (fiscal) feasibility, i.e. “no unfunded promises”. Candidates’ campaign literature is also checked against approved and published party platforms. This is meant to give voters a chance to familiarize themselves with readily-available party platforms to inform their decision on candidates and parties. It presumably also provides an incentive to parties to pass campaign platforms that are clear and accessible to voters, as well as presenting policy choices.

Possible Efforts for 2016

I could think of two strategies that seem promising in the Mongolian context: 1. further facilitation of access to information about candidates and parties, 2. application of tools to facilitate voters’ choices, particularly as they have been developed in German-speaking countries.

Facilitating Access to Information

While parties make information about platforms and candidates available, surely making access to this information easier could make a positive contribution. I am particularly thinking of the wide-spread adoption of smart phones in Mongolia that makes it possible to consider a voter education app to be deployed in 2016. Perhaps the GEC is already considering this, but it could also be an effort that would be organized privately.

An app as I imagine it could be based on different organizing principles, location, party, candidates. A map would allow a voter to select her riding and to then receive information about the parties and candidates competing in that specific riding, as well as locations of polling stations, etc. The information made available here would come entirely from public sources, possibly via the GEC or directly from parties.

Likewise, voters could be given the opportunity to search for candidates by name leading to standardized information about candidates’ biographies, including past offices held, etc. Party information would reproduce campaign platforms, etc.

Facilitating Voters’ Choices

A more ambitious version of such an app might facilitate a match of voters’ policy preferences with party platforms. This is a model that is well-established in German speaking countries by now as the Wahl-O-Mat in Germany, or Wahlkabine in Austria. In English such apps are know as “voting advice applications”, “voting aid applications” or “votematch tools” (Wikipedia). These applications, mostly web-based until recently, allow voters (anonymously) to fill out a questionnaire on important policy choices and then point to a match or mismatch between these preferences and party/candidates’ platforms. The apps don’t offer a recommendation per se, but instead typically point to the extent of overlap between voters’ preferences and parties’ stated intentions. After filling out such a questionnaire, a voter might thus see the result that his preferences match the intentions of Party A to 65%, those of Party B to 63%, and those of Party C to 40%. This leaves a lot of leeway for voters to decide what level of overlap between preferences and intentions serves as their personal “cut-off”, i.e. is an overlap of 45% large enough that this voter wants to consider Party C or will he restrict himself to a choice between Party A and B? Since voters initiate the advice themselves, these are really tools to facilitate decision-making, not to influence voting behaviour.

Obviously parties have to be given an equal opportunity to clarify their positions on policy choices that are included in the list of the votematch tool, calculations have to be transparent and reproducible, and impartiality is essential.

Some votematch tools are compiled and hosted by public or quasi-public institutions such as Germany’s Bundeszentrale für Politische Bildung (Federal Agency for Civic Education), Other examples such as Canada’s Vote Compass are hosted by media organizations. Applications have been generally prevalent across OECD countries, but have not spread much beyond these countries. It would appear that the widespread adoption of smartphones in Mongolia, coupled with the pre-existing efforts of the GEC would make an application in Mongolia quite feasible and desirable.

Clearly, the success of votematch tools depends on the neutrality and credibility of the organization(s) that “host” the tool online. Maximal transparency in all processes would be essential and either all parties should be invited to sign on, or no party involvement should be allowed. Foreign involvement would also have to be treated very carefully and in a transparent fashion.

Despite some of the risks inherent in votematch tools, I could certainly imagine an effort focused on the 2016 parliamentary election that would take the first step, i.e. the compilation of information on party platforms and candidates into an app, to test technology and the interest in it. The 2017 presidential election might then be an ideal occasion to develop and deploy a votematch tool as the direct competition between a small number of nation-wide candidates would lend itself particularly well to some kind of questionnaire.

The Media and Elections

One of the joys and strengths of Mongolian democracy is the vibrancy of the media, traditional as well as online. However, the Achilles heel of this vibrancy is the lack of credible information about the ownership of media outlets, whether they are broadcast, print, or online media. In the context of many media outlets that are owned and operated privately, there are numerous such outlets that are directly tied to prominent politicians or parties, or associated closely with political actors.

Perhaps the 2016 election presents an opportunity at self-regulation by media owners, or otherwise legislation that would force media companies to disclose ownership structures.

Posted in Democracy, Elections, Ikh Khural 2016, Media and Press, Party Politics | Tagged | 5 Comments

Policy Series: Mining Policy Failures (I)

Mining policy is a good entry point to understand the overall policy-making processes of Mongolia. For one, mining has been one of the dominant economic sectors of Mongolia since the early 1900s.[1] Second, with extensive mining activities, mining has caused numerous political and socio-economic challenges for policy-makers. Today any policy decisions related to mining trigger diverse reactions from political parties, political-business factions, businesses, civil society activists, and citizens. Third, mining policies also have implications for global stakeholders such as IFIs, multinational corporations (MNCs), state-owned enterprises (SOEs), foreign governments, and transnational advocacy networks (TANs). Finally, mining requires policies with long-term consequences not only to ensure foreign and domestic investors business rights and property rights are protected, but also to assure citizens limit negative mining impacts on politics, economy, society and environment are prevented. For these reasons, the study of mining policy and its failures is useful to illuminate ways to manage the central challenge of democratic governance – how to promote long-term policy solutions in the face of short-termism (fractionalized, parochial interests) dominated politics. In other words, mining policy failures in Mongolia will highlight a key feature of democratic politics: politicians, who are on an electoral schedule are inclined to neglect the long-term consequences of their policies and only be interested in remaining in office at any cost.

The following examples illustrate the less successful policy-making processes in Mongolia. They are policy failures for a few reasons: (1) their negative consequences are still present; (2) both politicians and the public acknowledge them as failed policies; (3) succeeding parliaments and cabinets have not taken any long-term policies to mitigate their negative impacts; and (4) politicians and bureaucracies still introduce similar policies that would certainly repeat these failures.

The Gold Program [Алт хөтөлбөр] was introduced in 1992 to attract foreign and domestic investors and to alleviate the immense socio-economic challenges resulting from the economic transition of the early 1990s. Even though the program provided opportunities for domestic mining companies and the government to generate some revenues, the program brought many challenges. First, mining companies exploited the weak regulatory and institutional settings and the majority of miners did not properly close and/or reclaim their mining sites. Second, related to the first, it provided opportunities for the emergence of a Mongolian-type of ‘gold rush’ – the ninja miners – people who engage in artisanal mining activities at abandoned mining sites.   Although the studies present different numbers, over 60 thousand people engage in artisanal mining activities and live within the informal (illegal) socio-economic structures of the artisanal mining. (Swiss Agency for Development and Cooperation, 2011, pp. 23-27; Grayson, 2004) Third, the negative environmental and socio-economic impacts of these small and medium-sized mining companies and artisanal miners are the most devastating to local community, environment, and herding livelihood (Swiss Agency for Development and Cooperation, 2011; World Bank, 2006). Although a few attempts were initiated, they did not succeed because of sudden policy changes.

Nalaikh Coal Mine [Налайхын уурхай] is a thermal coal mine partially closed following a deadly explosion in 1990. From 1954-1980, a Soviet-style mining town was built in Nalaikh to provide high-quality coal for the Soviet military facility (i.e., the largest joint military airbase, engineering and air defense units), power plants of the capital city as well as ger districts in the greater capital city area. At that time, the mine had state-of-art facilities and followed the Soviet mining standards for environmental and labor safety.[2] The withdrawal of Soviet military forces and suspension of Soviet assistance contributed to the overall deterioration of the operation and maintenance of the Nalaikh mine. Because of economic devastation in 1990, the government partially closed the mine, but it could not fully restrict artisanal mining activities in underground shafts of mostly unemployed miners and their families. Today over 1500 people mine with the lowest safety requirements. Since its partial closure, on average 10-17 people die annually in Nalaikh mines.[3] Despite periodic talk about the negative impacts of artisanal mining in Nalaikh, no government attempted to enforce the mining law, standards, and regulations or to provide a long-term policy solution even though it is the closest mine to the capital city.

Oyu Tolgoi [Оюу толгой] – was the first-ever and largest mining deal with multinational mining corporations (Jackson, 2014). After eight years of its discovery by the Canadian Ivanhoe Mines, the Mongolian government concluded the investment and shareholders’ agreement with the Ivanhoe Mines and Rio Tinto in October 2009. Under the agreement, the Mongolian government obtained 34 percent ownership and the Turquoise Hill Resources (a name of joint mine of Rio Tinto and Ivanhoe Mines) 66 percent, with foreign investors agreeing to provide local employment, procurement, and to contribute to infrastructure development for the value-added production (e.g., copper smelter, power plant, rails, and roads). Even though this phase I (i.e., open pit mine) of the mine was completed in June 2013, the Mongolian government and Rio Tinto failed to reach agreement on the project costs, including its phase II (i.e., the underground block-cave mine). This disagreement caused both sides to take retaliatory measures against each other (e.g., unpaid tax claims by the Mongolian government and trimming Mongolian employees and some local procurement by the investors) while slowing the overall project development, sending negative signals for foreign, especially Western investors, and heating up domestic politics. Now many policy questions – how to deal with powerful, global investors over the ownership, management, and development of the large-scale projects and how to assure the public about long-term environmental and socio-economic challenges – remain unanswered. The most interesting fact is why politicians, most of whom were members of the 2004 and 2008 parliaments which approved the investment agreement, now have been attempting to change their policy choices.

Tavan Tolgoi [Таван толгой] is the largest coal deposit in southern Mongolia. Since 2008, Mongolian politicians, bureaucrats, and private businesses as well as foreign investors have hoped to generate quick, substantial revenue from the Tavan Tolgoi deposit for two reasons. First, it will be closer to Chinese and East Asian markets if the railroad to the Chinese border is built (247 km). Second, unlike the Oyu Tolgoi mine, the deposits are extractable with open-pit mining technology. Therefore, all stakeholders have been extensively competing over licenses for mining operations and development of infrastructure, especially the railroad. In 2010, following the recommendation of the National Security Council (NSC), the parliament directed the government of Prime Minister S Batbold to negotiate with potential foreign investors to operate the western section of the mine. A year later, the government announced its decision to divide the operating licenses for Chinese Shenghua Group (40%), Russian-Mongolian consortium (36%), and American Peabody Energy Corporation (24%). However this decision was recalled immediately due to concerns from Japanese and Korean bidders. At the same time, the government permitted the state-owned Erdenes Tavan Tolgoi to operate the eastern section of the mine with domestic and foreign mining companies. Then contracts of the Erdenes TT were revoked and re-negotiated by the governments of ex-Prime Minister Altankhuyag and incumbent Saikhanbileg. In August 2014, the government issued another resolution to finalize the bidding over the operation of the Tavan Tolgoi mine.

The Strategic Entities Foreign Investment Law was passed by the parliament in May 2012 and invalidated in October 2013 with the passage of the new Investment Law. In April 2012,the Chinese state-owned Aluminum Corp of China Ltd (Chalco) launched a bid to buy the stakes of Ovoot Tolgoi, a Mongolian coalmine, from the South Gobi Resources Ltd (SGQ). Since the deal was done without informing the Mongolian government, politicians and the public began to voice concerns about the country’s sovereignty. A month later, the parliament passed the ‘Strategic Entities Foreign Investment Law,’ which requires foreign state-owned and private investors to obtain the parliamentary and governmental (cabinet) approval to operate in sectors of strategic importance (i.e., terrestrial resources, banking and finance, and media and communications).[4] Just like the quick passage of the law within a month, it was amended in April 2013, and repealed in October 2013 with little study and justifications.

The Windfall Profit Tax Law was passed in 2006 and repealed in 2011. The law imposed a 68 percent tax on copper and gold concentrates. In accordance with this law, mining companies operating in Mongolia would pay 68 percent tariffs on copper and gold concentrates if the price of copper and gold exceed $2,600 per metric ton and $500 per troy ounce respectively on the London Metal Exchange.[5] The threshold for gold was raised to $850 in 2008. Although the initial draft included only copper, gold was added later because of pressures from civil society movements. Interestingly, this law was secretly passed through a quick legislative process without proper consultation with major stakeholders – the copper and gold mining companies. By imposing the windfall profit tax, politicians intended to generate revenues to implement their election campaign promises (e.g., cash transfers), to assuage concerns of environmental and civil society movements concerning irresponsible mining, and to pressure the Oyu Tolgoi mine to build smelter facilities in Mongolia.  The Windfall Profit Tax Law produced several unintended consequences. First, it faced strong opposition from the mining communities; many sought ways to evade taxation (mostly due to poorly institutionalized enforcement) and the scale of the artisanal mining increased. Second, the only implementer of the law became the Mongolian-Russian joint copper venture, Erdenet, which then needed to generate additional revenue for the state beyond its operational capacity. Third, it projected the image of an unstable regulatory environment for major foreign investors.

The Law on Prohibition of Minerals Exploration and Mining Activities in Areas in the Headwaters Rivers, Protected Water Reservoir Zones and Forested Areas (known as The Law with the Long Name [Урт нэртэй хууль]) – was passed by the parliament in July 2009 under pressure from civil society organizations and the environmental movement.[6] Since the implementation of the aforementioned Gold Program, environmental damage, especially to rivers and forests, had grown noticeably and disrupted the livelihood of herding families and agrarian communities. The law caused strong opposition from the mining companies while bringing staunch support from civil society and the public. However the implementation process became difficult for two reasons. First, the law stopped all types of exploratory and extraction activities of mining companies near water sources, river basins, and forests. As a result, the government has been mandated to reimburse costs of all these mining companies. Second, the law still lacks effective enforcement mechanisms for artisanal miners, whose operations are not regulated under any mining and environmental legislation. Although civil society and environmental movements succeeded in pressuring politicians to regulate irresponsible mining activities, politicians failed to produce a well-thought, phased, and effective policy that considered the demands of all stakeholders, namely civil society organizations, mining companies, and local community.

These are a few examples of failed mining policies in Mongolia. Although politicians, parties, and bureaucracies have been attempting to improve the regulatory framework for mining activities, these laws, regulations, and standards are destined to be “momentary policies” due to the bargaining dynamics of major stakeholders – domestic and foreign investors, mining lobbies, mining companies, and IFIs on one side and civil society actors made up of domestic and international networks, environmental movements, and local community on the other side. Between these two forces, politicians, parties, and bureaucracies could not envision and enforce long-term mining policies.

[1] The mining sector of Mongolia has evolved through different historical stages: mostly Chinese dominated artisanal mining period (up to 1925), when Western companies were conducting small-scale exploration and extraction activities; the socialist period (1925-1989), when the Soviet Union and other communist bloc states (esp., Czechoslovakia, Bulgaria, Germany) had assisted establishing a large and medium scale mines and conducting geological surveys; the post-communist period (from 1990 onwards), when Mongolia has been using its mineral resources to attract foreign and domestic investors.

[2] Mining administration, mining rescue unit, recreational facilities, railroad, and mining vocational training college.

[3]For more information on Nalaikh mine, see;;;

[4] The Strategic Entities Foreign Investment Law (2012) available at:

[5] The 68 percentages was taken not because of the careful calculation, but of the commemoration of the Mongolian sumo records.

[6] The law was published in the State News (Төрийн мэдээлэл) 2009, No. 28. In 2011, the Head of the Mineral Resources Authority acknowledged the law was an important step towards responsible mining, but its implementation process was not clearly articulated. “The Law with the Long Name is a Good Legislation,” [“Урт нэртэй” хууль бол сайн хууль] 27 April 2011,; the civil-society compiled information on the Law with the Long Name is available at

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Policy Series: Typical Explanations for Policy Failures (II)

The following explanations are commonly offered to explain these faulty mining policies.

External Factors – In the absence of major international or regional armed conflicts and threats (conventional and non-conventional), politicians often highlight two external factors – the dynamics of the global market and the geopolitical interests of major powers. Understandably, these external factors constrain Mongolian policy-makers – who have limited capacity to deal with them.

 Dynamics of Global Market. In 1990s, Mongolia was, like its two neighbours, desperate for western investors, but few responded because of the unattractive market environment (especially, infrastructure), uncertain political and socio-economic development, and underdeveloped regulatory framework for foreign investors. From a broader perspective, China was not seen as a promising market for natural resources. There also were the economic sanctions following the Tiananmen Square incident. Being overwhelmingly aid-dependent and isolated from the global and regional markets, Mongolian politicians had very little choice except to create the most welcoming regulatory framework for Western investors. They were unable to constrain investments from Chinese small and medium enterprises that were mostly in joint nature. When the potential benefits from the mining activities increased from 2000, Mongolian politicians were overwhelmed with increased interests from foreign investors; resulting in high expectation for resource-based development among politicians. Because of this politicians began to lose their earlier visions of non-mining development strategies (e.g., agriculture, tourism) and the economy became highly dependent on the international commodity prices as well as Chinese buyers. Instead of calculating the commodity market dynamics, politicians are now cover their mining policy failures under the commodity boom and bust cycles. Therefore, the dynamics of the global market is not alone responsible for the mining policy failures. It does offer both a blessing and curse for mining policy making because the reliance on the mining sector and a few mega projects – along with inefficient distributive policies –increases the vulnerability of Mongolia’s economy.

 The Geopolitical Interests of Major Powers. Geopolitical interests also appeared to provide another reasonable external justification for politicians to evade public scrutiny for faulty mining policies. Since Mongolia is a small, weak, and peripheral state, all external actors – two powerful neighbours, distant major powers, their MNCs and SOEs, and IFIs – exercise strong, effective leverage over Mongolia. For the time being these external actors, except Russia on some issues, seem to be tolerant and respective for Mongolia’s domestic policymaking process.

In retrospect, Russia has been quite assertive in certain areas and has explicitly pressured Mongolian politicians to change their policies (Wachman, 2010; Radchenko, 2013).[1] The first is the railroad. For Mongolia, the railroad is the most critical infrastructure for mining. With its partial ownership of the Mongolian railroad, the Russian government is heavily involved in the railroad politics. This is seen by its (1) rejecting the Mongolian government’s attempt to accept the US Millennium Challenge Account funds ($188 million) for the railroad project; (2) advocating the linkage of major mining sites to the trans-Mongolian and trans-Siberian lines; and (3) delaying the linkage of major mining sites in southern Mongolia to the Chinese railroads. Uranium mining is another area. From 2009, Russia re-established its influence in developing uranium deposits in Mongolia by (1) establishing the joint liability company, Dornod Uran; (2) marginalizing the Canada-based Khan Resources Inc; and (3) agreeing to resume full-scale of cooperation with Mongolia in areas of uranium (e.g., education, training, and infrastructure). [2] The last are on and off attempts of Russian state-affiliated oligarchs to be involved in major mining activities (e.g., Tavan Tolgoi and Asgat) and infrastructure projects (e.g., a power plant, railroad). The first two, the railroad development and uranium mining, were explicitly advocated by the Russian state whereas the other issues have been advocated by Russian oligarchs.

In contrast, China has been more tolerant and less assertive in dealing with Mongolia – although it possesses strong leverage over Mongolian policymakers.[3] First, China did not openly retaliate against Mongolia’s inclinations to provide more opportunities for Western companies. This might be understood in the context of Chinese closer economic collaboration with the West. Second, China tolerated Mongolia’s protective measures against Chinese SOEs’ investment into mining, telecommunication, and banking sectors. For instance, Mongolian politicians cancelled the bidding of the Chalco, a state-own aluminum company, to buy the SouthGobi Sands coal mine and approved the Strategic Entities Foreign Investment Law. Third, Chinese companies appear to be accepting the mining policies, despite the unpredictable and unstable nature of these policies, and offering more flexible policies towards Mongolia, especially in the areas of joint development of infrastructure and access into Chinese transit networks and ports. This type of Chinese constructive behavior would certainly create a favorable market and investment environment for mining in Mongolia.[4]

Given these contrasting behaviors of Mongolia’s two neighbours Mongolia has attempted to attract political security and economic interests of the so-called ‘third neighbors’ – distant major and secondary powers, that are expected to support Mongolia’s efforts to maintain its sovereign statehood in a complicated neighborhood.   Mongolia has restructured its macroeconomy with assistance from these states and IFIs, entered into a series of agreements with them to increase trade and investment, and even offered various types of exemptions, ranging from visa to taxation, for these states. With the commodity boom, long-term stability of the Chinese market and Mongolian desires for engaging non-Chinese firms, private companies of third neighbor states appear to have some advantages over Chinese and Russian SOEs. Moreover, the democratic system also provides these multinationals with formal mechanisms to influence domestic policy-making process. As a result, we have witnessed these multinationals exert influence through various channels. This includes advocating government policies (e.g., the United States), IFIs – especially, the WB, IMF, EBRD, influential politicians (e.g., James Baker, Tony Blair), and local partners.

Although all these external actors – all simply pursuing their pure business interests (maximize the gain, minimize the cost) – contribute to competitive political and business environment for Mongolian politicians, none of these actors, except Russia in some areas, have demonstrated explicit manipulation of Mongolian policymakers in developing and implementing the mining policy. Therefore, it is not sufficient to point out external factors – the dynamics of global market and geopolitical interests of major powers – as key explanations for the mining policy failures of Mongolia.

Domestic Factors – Politicians also point to two specific domestic factors for causing the policy failures. One is private business interests, which are expressed by political and business factions and business interest groups. The other is civil society activists, which have been labeled by politicians as “populists” a problematic term in Mongolia.

Private Business Interests. Like any other democracies, including the developed ones, businesses have all possible channels to influence the policy-making process in Mongolia. In order to advance their business interests (i.e., to increase and protect their wealth), businesses always complicate the policy-making process – unless politicians, parties, and bureaucracies create and maintain the predictable and just business environment. This is the most complicated, especially during the transition period and also in a developing state like Mongolia. Starting from the gold rush period (1992) and privatization of state properties, natural resources contributed to the emergence of a new capitalist class. Many mining companies and individuals obtained mining licenses and privatized the state-owned mining enterprises, some jointly with foreign investors. This process was pushed forward by the coal-mining boom and increased foreign mining interests in Mongolia. All businesses wanted to capitalize on these ad-hoc opportunities. Some of them established the mining consortium to operate in the largest coal mine deposit (i.e., Tavan Tolgoi), some entered into a competition to disadvantage each other (e.g., MSC vs. Jenco), others quietly bargained over major mining projects (e.g., MAK) and still others competed for the supply side businesses (e.g., equipment, fuel, food, services and so forth). Today these competitions have became more intensified and are formally and informally institutionalized in Mongolia’s political processes. Just a quick glimpse of the composition of the parliament, cabinet, and political parties demonstrates how much these private business interests are entrenched into the policy-making process. Therefore, this is clearly one of the influential factors for the policy failures, although all other democracies face this influence of business interests.

Civil Society Activists and Movements. Politicians also blame civil society activists and environmental movements for mining policy failures. Like private business interests, politicians, parties, and bureaucracies cannot escape from the pressure of civil society movements. Until the main causes of the public discontent are sufficiently addressed and/or assured with reasonable medium and long term solutions, civil society activists and movements will not decline. In any democracy, the government would expect the public discontent and social mobilization when the government cannot provide important public goods, especially justice. This also applies to the Mongolian case. Since 1990 the civil society space has remained open for civil society activists, organizations, and movements. A few main themes – corruption, injustice, and environmental degradation – have been advocated by these actors. The growth of the mining industry simply intensified the public discontent for three main reasons. First, corruption, revolving around the natural resources, provides much stronger justification for the public discontent than the corruption involving foreign aid. The public is more concerned with the mining issues. This is because (1) the land and natural resources are considered the public, national property; (2) mining activities have the most visual impacts on the environment, society, economy, and politics; (3), especially in the Mongolian case, the public is concerned about non-transparent governmental debts (e.g., borrowing loans and bonds in anticipation of operating large scale mines with foreign investors). Second, the environmental damage, especially from artisanal mining, arouses a stronger sympathy from the public in comparison to other major social issues (World Bank, 2006; Swiss Agency for Development and Cooperation, 2011). Third, major mining investment projects provide an effective leverage for the public to pressure politicians, parties, and bureaucracies since political instability increases the risk for large-mining investment deals. Unlike authoritarian regimes, we would expect similar types of public discontent in other democracies, especially in developed ones, if the mining industry contributes to corruption, injustice, and environmental degradation. Any politicians, parties, and activists would pursue the populist politics for multiple purposes (e.g., morale, political, and rent-seeking). Therefore, like private business interests, civil society activism (plus populist politics) also is considered one of the influential factors for mining policy failures, although it is not the cause.

[1] Mongolia is overly dependent on fuel imports from Russia and transit routes to Europe while Russia maintains a significant percentage (49-51) ownership of Mongolia’s key infrastructure (i.e., railroad), industry (i.e., Erdenet copper plant), and other joint ventures – such as Mongolrostsvetment LLC (the 4th largest fluorspar mining; potential silver mine).

[2] “Uranium in Mongolia,” October 2014, World Nuclear Association, available at

[3] Mongolia is also dependent on Chinese investment, market, and infrastructure (esp., railways and seaports).

[4] However, these Chinese behaviors have been regarded suspiciously in Mongolia.

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Policy Series: A Typical Quick Solution – ‘Let’s Change It’ Syndrome (III)

In retrospect, the most common methods for dealing with policy failures have been first to blame each other – politicians, parties, factions, and civil society activists in addition to geopolitics and global economy and second to change policies without asking the hard questions. These questions would be why is there a need to change; what part of the policy is working or not working; why did it fail; what would be the short, medium, and long term impacts of a policy change; what are the optimal, win-win options; and what would be the most agreeable implementation for all stakeholders. I call this blaming and uncritical policy change a ‘let’s change it’ syndrome that increases mistrust among all actors, including the policy makers, and promotes into ‘vicious cycle’ of cheating and competition to change the bargaining dynamics.

So, why do policymakers in Mongolia prefer the ‘let’s change it’ attitude? It seems to be structural. The current political settings are so much dependent on the four-year electoral cycle – since all key policymakers and enforcers – president, parliament members, prime minister, cabinet members, governors, and local assembly members – are changed every four years. Their time horizons are short and competition for being re-elected are costly. That means they need to blame their opponents as soon as possible in order to gain the power and authority to maintain their own patron-client networks. Instead of calculating the long-term benefits of stable policies, they prefer to change the rules of the game (i.e., the laws and regulations) to create a favorable operating environment while blaming their opponents for any policy failures. As a result, we witness sudden policy changes immediately after changes in the political landscape. Like other parliamentary democracies, the political landscape of Mongolia is changed not only after presidential, parliamentary and local elections, but also by the cabinet changes (e.g., non-confidence voting results). Because the policymaking institutions and process are heavily dominated by these political actors with short-time horizons, the policymaking in Mongolia becomes unstable, unpredictable, non-inclusive (divisive) and non-transparent.   In an ideal country, where policies are stable, predictable, inclusive, and transparent, policy changes are incremental, continual build on the achievements of previous policies, and increase the certainty for all stakeholders. But, in Mongolia, it is the opposite – politicians want to change it without substantial studies and discussions while their blame game usually ends up in conspiracy theories.

Mining policy faces the exact same challenges. Also, important to note, natural resources aggregate competitions among politicians, parties, and factions for a few reasons. First, natural resources, especially gold and coal, offer opportunities for a quick accumulation of wealth without much investment and technology; therefore, the majority want to exploit this ‘window of opportunity’ that combines a weak regulatory framework and demands of the Chinese market. Second, competition among foreign and domestic investors generate ‘rents’ for politicians, parties, and factions in return for political support (e.g., bidding, investment agreement, licenses, and tax loopholes). Third, major long-term investment deals will provide multiple benefits for politicians, parties, and factions (ranging from personal, factional, and to political prestige). Therefore, the mining sector not only becomes the target of political competition, but also suffers from effects of the ‘let’s change it’ syndrome when policymakers change laws and re-structure the policy-implementing and enforcing units

The first way the mining sector suffers is that politicians are strong inclinations to change laws and rules. The principal mining policy (i.e., the Minerals Law) has had two major revisions since 1997 and is waiting for the next major one.   At the same time, this law has been amended and revised multiple times, especially from 2009 annually. Some changes are understandable because of the passages of new laws like the Uranium Law and Law with the Long Name in 2009. But policymakers are still unable to produce substantial studies and reports on implementations of their previous legislation and potential implications of the proposed changes for the public. A few examples of failed mining policies also illustrate that policymakers are not so concerned with the quality of policies or the policymaking process; therefore, laws and rules are vulnerable to changes of the political landscape and power differentials of politicians, parties, and factions.

The other suffering of the mining policy results from the reshuffling and restructuring of the governmental units – ministries and agencies in charge of the coordination, implementation, and enforcement of mining policies. Despite the simple existence of ideal laws to insulate the government bureaucracy and bureaucrats from political, economic, and societal pressures, politicians, parties, and factions compete for having control over ministries and agencies. In other words, they neglect the existing laws and regulations pertaining to the government and public service. Politicians, parties, and factions first restructure and reshuffle ministries and agencies to accommodate their private, fractionalized interests and second appoint party-affiliated individuals to senior, mid-level and junior positions of the ministry, agency, and provincial (аймаг, сум) bureaucracy. As a result, party-affiliated officials aim to benefit within the four-year, or even shorter, election cycle. Consequently, these frequent structural and personnel changes complicate the policy coordination, implementation, and enforcement functions of those ministries and agencies. Thus contributes to mining policy failures – without giving a chance for any policy to be implemented. The key mining ministry and agency (i.e., the Mineral Resource Authority) and other relevant ministries and agencies in charge of the environmental protection, finance, taxation, inspection, and law-enforcement are all affected by the changes of the political landscape.

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Policy Series: Are There Better Solutions? (IV)

There are many possible ways to improve the quality of the policy-making institutions and process to improve mining policies and reduce failed policies. In fact, all politicians are well aware of these possible solutions, but they lack political will and courage to implement them for long-term benefits. Moreover, because this clientalistic political structure is increasingly entrenched, a good principled person talks about moral principles and patriotic deeds, but acts in favor of parochial interests.   Therefore, for a ‘win-win’ result, policymakers need to look beyond the short-term horizon; investors should avoid supporting ‘corrupt’ opportunities; and the public (esp., media) must maintain the pressure both on politicians and investors. Thus requires politicians to improve the quality of policy-making processes in order to increase trust among all stakeholders. Here are four possible measures to accomplish that.

The Rule of Law [1]

Politicians, parties, factions, businesses, and the public need to adhere to the rule of law principle. In particular, policymakers, especially, high-ranking politicians, must follow the law, regulations, and standards that are the rules of the game approved by them and their predecessors. Although the rule of law principle does exist and is reflected in the contemporary politics of Mongolia, there are numerous deficiencies. In regards to constitutionalism, rulings of the Constitutional Court were obeyed up to 2000. Since then politicians, especially parliament members and cabinet members began disregarding Constitutional Court decisions. The parliament and its appointed cabinets have override the Constitutional Court decisions on power-sharing between the legislature and executive bodies, electoral procedures, and appointments of politically-affiliated officials to non-political bureaucratic and judiciary posts. Judicial independence is still questionable. There is sufficient evidence to illustrate political and business influences over the judiciary and law enforcement organizations. For example, political parties and factions assert their influence over the judiciary, especially the procurator’s office, and over the anti-corruption agency through the presidential office. They also exert influence over the police, marshal service, intelligence, and taxation via the prime minister and cabinet. Finally, because politicians for various reasons do not show respect for the law and rules, the legal culture is still not respected by politicians and political parties. Attitudes like ‘the Mongolian law is for three days’ or ‘түгжилдэх’ (to renege/to cheat) are popular in society. Therefore, all policy-makers, shapers, and takers should adhere to the rule of law principle. This would certainly have strong implications for improving the mining policymaking process.

The Institutionalization of the Legislature

Parliament must improve its policy-making and revising process. It needs to build up and empower its own non-partisan bureaucracy, especially the standing committees, in order to advance institutional interests (i.e., public interests) rather than parochial, factional, and private interests. It needs to increase incentives to conduct a thorough examination of existing policies rather than encouraging proposing new legislation. It needs to strengthen the accountability of parliament members. What’s the current legislative picture? First, it is overwhelmingly represented by business interests in comparison to the parliaments of 1992 and 1996.[2] Second, all parliament members are entitled to introduce a draft bill or changes to the existing legislation. This provides immense opportunities to change any policies and increases the workload for the parliament and staffers. Third, the law-passing process is the easiest because there are very few veto players. With the presence of 39 (out of 76) members, any legislative initiative can be discussed in the general session and passed by only 20 votes. Incomprehensively, members can vote (push voting buttons) on behalf of other absent members. Finally, there are strong monetary incentives for the law initiation. A member can get up to 20 million tugrugs for initiating the bill (i.e., funding for experts and staff).[3] Therefore, the parliament should constrain today’s fractionalized, decentralized policy-changing behavior, but should create incentives for proper institutionalization of the legislature.[4]

The institutionalization of political parties. This is another important step to improve policies, including for mining. Today the most powerful political institutions in Mongolian politics are the political parties, especially the two dominant ones. Because they are dominating the political landscape, both parties provide opportunities and protection for politicians, bureaucrats, businesses, and civil society activists. At the same time, these parties are the training ground for future political leaders and bureaucrats. However Mongolian political parties have increasingly become clientalistic and based on patron-client networks, rather than issue-oriented platforms and/or ideologies. In other words, they are weakly institutionalized, although there are some difference between the MPP and DP.  “Party’s weak institutionalization is not the only cause of political corruption, but it is certainly one of the causes of party corruption” (Pelizzo, 2006, p. 180). If the political parties are clientalistic and corrupted, then the parliament and government bureaucracies are gradually becoming clientalistic. Although well intentioned laws on political parties were passed by the parliament, it is not adequate until senior leaders of political parties dedicate the will and courage to enforce the official laws as well as parties’ own internal regulations and discipline.

Insulation and Professionalization of the Bureaucracy

Politicians need to not only agree on, but also commit to the insulation and professionalization of the bureaucracy. Unless public servants are insulated from political and business interests, policies are unlikely to be implemented and enforced thoroughly and properly. In theory, public servants are supposed to serve as gatekeepers against parochial, short-term interests by adhering to long-term developmental policies. In reality, this would not be the case if political parties, factions, and interests groups competed for the public offices to protect their own interests, to increase their benefits, and to marginalize their opponents. “Adopting any ideal public service laws and practices in the world” is not helpful, as Spiller (et al) argues, “if patronage involving positions in the bureaucracy remains an important currency used by politicians to reward their partisan base”(Spiller, Stein, & Tommasi, 2008, p. 28). The current regulatory framework for public service and conflict of interests are ideal if politicians, parties, and factions just uphold it. Because party officials and senior bureaucrats are not following these public service laws, regulations, and standards, the current political structure encourages unaccountable, opportunistic, and cozying behaviour by politicians, bureaucrats, and businesses. This also encourages individuals and public servants to seek political party affiliation, and in turn, discredits the merit-based professional public service. Since this is an overall challenge for the public service, the mining sector is also affected. Without insulating public servants from political and business interests and influences, it would be difficult to expect proper implementation and enforcement of mining policies at the national and provincial levels.

[1] The rule of law includes the constitutionalism, independent judiciary, and pertaining legal culture. The most important feature of the rule of law is that politicians must be binded by the laws, rules, and regulations (Fukuyama, 2010).

[2] For total net assets and wealth of the Mongolian parliament members, see “The Wealth of Parliament Redux: What’s It Worth?” November 11, 2013, available at:

[3] Interview with parliamentary staffers, December 20, 2014.

[4] I borrow the notion of institutionalization as elaborated by Samuel Huntington. The institutionalization is defined as the process by which organizations and procedures acquire value and stability. The level of institutionalization of a political system can be defined by the adaptability, complexity, autonomy, and coherence of its organizations and procedures. The level of institutionalization therefore can be measured by its adaptability, complexity, autonomy, and coherence. For more on institutionalization, see (Huntington, 1968).

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Oyu Tolgoi on Track Again

Last week, this is what I tweeted

It looks like the day after is upon us, according to press reports and a series of Turquoise Hill press releases. Below are my initial comments, but note that these are based on the publicly-available information only, and are preliminary in nature.

What’s in the Agreement

  • On the question of outstanding taxes that had been assessed and in dispute, Oyu Tolgoi and the government seem to have agreed on a tax bill of $30m, without prejudice, i.e. without any admission of guilt on either side.
  • Oyu Tolgoi forgoes a 2% smelter royalty it had inherited from BHP Billiton.
  • There is a change to how the royalty on sales is calculated.
  • The management fees that Rio Tinto charges for operating Oyu Tolgoi are reduced from 6% to 3%.

What’s Not in the Agreement

Pending further announcements of details,

  • Any reduction in the 34% share in Oyu Tolgoi held by the government.
  • Any debt forgiveness or assumption of government debt.
  • Any significant changes to the royalty structure (in part because the 34% stake remained.

On balance then, I’m a little surprised that there are no momentous changes in the Oyu Tolgoi structure. It had seemed that both, Rio Tinto and the government, had lost faith in their partnership. While it was always clear that progress would ultimately benefit both sides tremendously, simply because of the overall size of the project, it seems that the results of negotiations have not reconfigured the relationship. Perhaps it was the process of negotiations itself that will allow this agreement to have some longer-term durability?

What’s Next

Various financing deals for the underground construction had expired, so negotiations for $4b in project financing will have to start anew. Given the fundamental economic soundness of the Oyu Tolgoi project, this should not be a huge hurdle.

Once financing has been established, Oyu Tolgoi should be able to ramp up underground construction in the course of the summer. A construction workforce will have to be recruited and machinery and materiel procured.

As construction gets under way, a Mongolian workforce will have to be hired toward operations at the mine.

For the Mongolian government, a number of issues that have come up over the last two years remain unresolved as the Oyu Tolgoi governance structure does not seem to be changing with this agreement.

When Erdenes Mongol looks at business operations at Oyu Tolgoi, how active will this holding company be? Presumably, there will not be any involvement in day-to-day operations, but in bigger decisions, is the state holding tasked with the maximization of financial benefits to the state, i.e. maximal revenue flows to the general budget, or does it take a more comprehensive and holistic view of operations? Is the holding run (at arm’s length, one would hope) by the Ministry of Finance or do ministries like environment, labour, etc. also get a say? For the long-term operations of this mine, answers to such questions will definitely be needed!

Economic Implications

The 2011 boom in Mongolia was built on construction activities at Oyu Tolgoi. I don’t see any particular reason why a boom should not result from the underground construction that will commence with the agreement that was reached.

While much of the construction-related employment may be foreign labourers and expats, construction will draw on local suppliers to house, feed and maintain a large workforce. Presumably, domestic air travel to Dalanzadgad will resume and a number of infrastructure projects will be accelerated further adding to a construction boom.

Also, presumably, the turgrik will either appreciate or at least hold its value (depending on the fiscal situation). Would there be any reason for inflation to decline other than a halt to the depreciation of the turgrik?

Other than the $30m tax bill, a construction boom doesn’t produce immediate revenue flows for the Mongolian government, if anything the agreement will strain government budgets more as the required investment will amount to up to $2b that the government currently doesn’t have. Open pit operations will continue and continue to generate revenues but not on a scale to finance the underground construction.

While Rio Tinto has obviously been persuaded by the negotiations that this agreement provides stability in the medium term, it seems unlikely that this would immediately reverse the decline of FDI into Mongolian. Mining projects already underway and undertaken by purely Mongolian-focused companies may be able to find financing somewhat more easily again and the associated activities might see a modest rebound of FDI.

But how has the mutual distrust between Rio Tinto and the government been overcome? While the agreement is a once-a-decade step for Mongolia, will it outlast the current decade? The 2009 Investment Agreements ran into trouble 4 years into its existence. Looking at that experience, it seems unlikely that FDI would rebound on a large scale.

Political Implications

For PM Saikhanbileg, the agreement is a huge victory, particularly since it comes just over a year before the election and there is some chance that voters will see positive economic results from this agreement by the time of the election.

This may not be enough to persuade voters to return the DP to power (in fact this still seems very unlikely at this moment), but it may soften the blow and allow Saikhanbileg to claim underground operations at Oyu Tolgoi as his legacy, more than the DP’s legacy, perhaps in the 2020 parliamentary election.

Since Saikhanbileg’s super-coalition was constructed with the goal of moving on large projects (Tavan Tolgoi appears to continue to be mired in a complex web of domestic business interests, contracts, and foreign relations), the signing of this agreement surely dooms the coalition sooner rather than later. It was never expected to outlast next winter, simply because parties wouldn’t want to go into the 2016 election with coalition partners lest they cannot establish the distinctiveness of political choices, but with this agreement out of the way (and everyone, including the MPP) being able to claim some credit for this, why should the MPP stay in this coalition?

The fiscal situation doesn’t improve significantly and that’s the DP’s mess to deal with. The construction and affiliated service industry boom that will be spurred by this agreement will happen relatively independently of government actions. Unless there is an unfortunate argument that the MPP and some of its prominent politicians want “in on the boom”, it would seem that this agreement would spell an end to the coalition though perhaps not before the parliamentary summer recess.

All in all, May 19 2015 will have been very significant to Mongolia’s development. While I had been feeling quite gloomy after my recent visit to Ulaanbaatar, this agreement changes everything. As I had previously argued, the Mongolian government has to “just” get Oyu Tolgoi right as the scale of this project will sustain capacity-building for other economic activities. None of this is guaranteed by this agreement, but it seems to be a positive step at least.

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Modigolia? Indian-Mongolian Relations post-PM Modi’s Trip to Ulaanbaatar

In the wake of Indian PM Narendra Modi’s visit to Ulaanbaatar should we expect a radical revamping of Indian-Mongolian relations? Certainly, you don’t send in the big dogs unless you mean business, right?

The Visit

Modi visited Mongolia on the invitation of the Mongolian PM Ch. Saikhanbileg from May 16-18th. This is the first visit from an Indian Prime Minister to the country, and was scheduled to coincide with the 60th anniversary of formal diplomatic relations between the two states. Conveniently, this also coincided with Modi’s Asia tour, and he came to Mongolia after a very successful visit to Shanghai.

In addition to formal meetings with Mongolian officials, Modi visited an IT school that India had funded in Ulaanbaatar, as well as a medical center. He was also treated to a cultural display modeled after Mongolian Naadam and presented with his very own Mongolian horse (something often organized for visiting heads of state).

In good diplomatic fashion, a slew of contracts, agreements, and MoUs were signed during his visit. Here is a short list of the various agreements that I was able to find:

  1. PM Modi and PM Saikhanbileg signed a new strategic partnership agreement
  2. India and Mongolia will jointly establish an “Indian-Mongolian Friendship School” in Mongolia
  3. They will establish a cultural program starting in 2015 and continuing through 2018
  4. Both sides agreed to foster connections between Mongolia’s Diplomatic Academy and India’s Foreign Relations Institute.
  5. The two states committed to advising meetings to discuss and exchange ideas on national security and defense
  6. India has extended Mongolia a $1 billion credit line.
  7. India and Mongolia have decided to intensified civil nuclear cooperation, especially with regards to cancer treatment applications.
  8. PM Modi and Mongolian President Tsakhiagiin Elbegdorj discussed ways of strengthening trade through agreements on shipping and logistics, energy, and taxation.
  9. There is also discussion of using the Gujarat Co-operative Milk Marketing Federation model to boost Mongolia’s dairy industry. (Modi was the chief minister of Gujarat before becoming PM in 2014, so the connection is not as random as it might otherwise seem).

Contextualized within the larger history of Indian-Mongolian relations, this is certainly not insignificant. This is another piece of in the puzzle of India and Mongolia’s neighbourly relations.

Three Kinds of Third Neighbours

India and Mongolia are neighbours? Surely, Brandon is failing at his efforts to learn geospatial analysis. But in all seriousness, Mongolia refers to India as its spiritual neighbour, one of many third neighbours, and increasingly as an ideological (democratic) neighbour. All three components of neighbourly relations were emphasized during this official visit.

Spiritual Neighbours

If one were to imagine an arc of Buddhism, extending from India, through Southeast, Japan, and China, Mongolia would be the northernmost section, and India and the southern most. Indeed, the first Indian ambassador to post-communist Mongolia was a devote Buddhist, and funded a number of monastery projects. It is no surprise then, that Modi’s first stop was to Gandan Monastery– one of the oldest surviving monasteries in Mongolia.

Let us not over state this religio-cultural relationship, however. Buddhism is not a broadly practiced religion in India, with Tibetan refugees and Tibetan peoples in Ladakh and elsewhere making up the vast majority of practitioners. India might be held in special esteem as a result of its connections to Buddhism, but Tibet is Mongolia’s real spiritual neighbour, with India a convenient second. Still, the rhetorical of “spiritual neighbours” is useful for providing additional justification to efforts at strengthening Indian-Mongolian relations, even in geopolitical calculations might actually carry the day.

“Third Neighbours”

“You always want to be the friend of the neighbors of your own most powerful neighbour,” I was once told by an official at the Indian Embassy in Ulaanbaatar. As is well known to readers of this blog, Mongolia’s execution of its so-called “third neighbour policy,” by which the country seeks to develop close relations with regional and global powers besides its two physical neighbours, has been shaky at best. Despite efforts to diversify trade, China dominates Mongolian exports, and Russia continues to dominate the list of imported goods. Indeed, Modi may have encouraged Indian companies to explore options in Mongolia, but that won’t make these companies more competitive against Chinese, North American, or Australian firms.

That said, there is reason to be hopeful that the third neighbour policy has succeeded in fostering diplomatic ties with a far wider range of actors than some may expect. India represents a particularly attractive partner for Mongolia, because both countries share a common concern about Chinese hegemony in the region. Mongolia as a small state needs to ensure that it has an array of international partners that would dissuade Chinese action against its sovereignty (including economic action). On the other hand, a rising India has a vested interest in ensuring that China is not the only regional power courting smaller Asian states.

Ideological Neighbours

India is the world’s largest democracy; Mongolia is the only democracy in its neighbourhood. This connection appears to have been highlighted during the visit, and is certainly a central component in the Indian-Mongolian strategic partnership. During his visit, PM Modi noted that his visit not only coincided with the 60th anniversary of Indian-Mongolian diplomatic relations, but also with Mongolia’s 25th anniversary as a democracy. Both India and Mongolia make a lot of noise about their democratic status. Mongolia has effectively leveraged its democratic credentials to further its relations with the U.S. and E.U. member state; India notes its established democratic system in sharp contrast to regional rivals (Pakistan and China).


Returning to the question of whether we should expect any radical change in Indian-Mongolian relations, the answer is most likely a resounding “No, but…”

There are clear indications that India and Mongolia are moving to capitalize on the potentially strong relationship that they could enjoy as a result of their spiritual connections, shared geopolitical concerns, and ideological compatibility. There is no reason to expect that India and Mongolia will not be able to forge more significant economic and political ties, if there is the political determination to do so. At the same time, these ties remain limited by geography (distance) and the capabilities of both countries.

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