Politics During the Current Economic Crisis

There is no political crisis in the sense of any conflict within parliament or between parliament and the president. Nor are there major scandals at the moment. However, there does appear to be a crisis in the sense of the lack of ability of policy makers to address the current economic challenges and to move toward immediate and long-term solutions.

This is also somewhat ironic, of course, as the re-election of President Elbegdorj seemed like a triumph for the Democratic Party and its occupation of the three highest constitutional offices (president, prime minister, chairman of the Ikh Khural) at the same time as having a DP mayor in place for Ulaanbaatar.

PM Altankhuyag has been – perhaps surprisingly – successful in keeping his coalition of the DP, MPRP and Civil Will Green Party together for over a year now. Factions and disputes between factions often bubble to the surface within the DP and while a replacement of Altankhuyag as prime minister does not seem imminent, it would also not come as a major surprise. Few would place a lot of money on the likelihood that Altankhuyag will be able to serve out an entire term until the 2016 election. The current rumours seem to point to Minister of Defence D Bat-Erdene (no relation to former MPP presidential candidate, B Bat-Erdene) as a possible replacement.

For the moment, there does not appear to be a viable alternative to the current coalition of DP, MPRP, and CWGP as the MPP seems unlikely to want to enter into any coalition, especially since it is facing an on-going leadership crisis of its own. On the questions surrounding the economic crisis none of the parties offer a particularly different vision of how to tackle the current challenges, nor on the direction to pursue in the long run.

On the policy-making side, the government’s contrition over last year’s foreign investment law – once again – seems largely reactive, not the result of strategic considerations that have led the government to pursue a particular course of action. Acting primarily in a reactive fashion is obviously not unique to the Mongolian government, but it has been a pattern in the country when it comes to investment and mining regulations. The pendulum swinging from the initial welcoming of foreign investment around the turn of the millennium to the Windfall Profits Tax in 2006 and back to a more welcoming stance in the negotiations for the OT Investment Agreement charts the reactive nature that legislation on foreign investment has exhibited.

Elbegdorj has announced that he has withdrawn the much-aligned (at least by foreign and business observers) draft Mining Law, and has even recused himself from further deliberations.

This lack of strategic planning is yet another piece of evidence for my on-going argument that one of the crucial roadblocks to Mongolia’s economic, political and social development continues to lie in its lack of policy-analysis and policy-making capacity.

The greatest fear regarding the political reaction to the current crisis is thus that reactive policies represent yet another swing of the policy pendulum toward investor friendliness which might be followed again at some point in the medium-term future by a swing in the opposite direction and to opposite extremes.

In his recent statements, Elbegdorj has made it clear that he feels a profound responsibility for the fate of Mongolia for the remainder of his term. He has pointed this out in light of the fact that this will be his final term as president and that he thus is not acting out of personal ambition. Some argue, on the other, hand that he may be driven precisely by personal ambition, given his rumoured ambition for a position with an internal organizations, perhaps the UN.

This entry was posted in Business, Development, Economics, Foreign Investment, Governance, Inflation, Mining, Mining, Oyu Tolgoi, Party Politics, Policy, Politics and tagged . Bookmark the permalink.

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