Genghis Khan Keeps an Eye on His Riches
November 30, 2011
About an hour’s drive from Ulan Bator, Mongolia’s capital, a massive statue of Genghis Khan in shining armour emerges out of the steppe. Sitting straight on his horse at 141 feet, he looks defiantly at the horizon, wrapped in his brand-new 250-ton stainless-steel coat. Banned from the country, as any other nationalistic symbol was during the communist era that ended with the collapse of the Soviet Union, the cruel conqueror of the 13th century, who claims the fatherhood of the largest empire ever built on Earth, is now back in the Asian steppes – with a vengeance.
“It’s him who united all the Mongolians and built our country,” a Mongolian woman in her 50s wearing a blue silk del – the traditional costume – said from the observatory, standing atop the head of Khan’s mounting. “But we need, today, a new Genghis Khan to make Mongolia stronger, and to give us back our riches!”
As Mongolia experiences one of the fastest rates of economic growth in the world, driven by a massive mining boom and intake of foreign investments, the country, sandwiched between Russia and China, also experiences a wave of fierce nationalism that increasingly sees the exploitation of natural resources by foreign companies as a looting of its almost sacred riches. But the “looters” are now not only Chinese or Russian, as they have been for decades – they’re Canadian, too. Canada now ranks second after China in Mongolia for foreign investments but ranks first in the booming sector of natural resources (e.g. mining). It’s no wonder Canadian companies have felt the heat and will probably still do so in years to come.
The Roaring Mongolian Economy
It’s not rare anymore to hear that Mongolia, already one of the fastest growing economies in the world, could become the fastest soon. 2011 started with 6.1 percent growth, followed by 17.3 during the second quarter and 20.8 percent during the next. The International Monetary Fund forecasts a 11.5 percent growth rate for the whole year, close to 12 percent next year… and close to 16 percent in 2016 .
In his brand new monster house, harboured in one of the few gated communities – which have developed only recently in Ulan Bator as a feature of its unbridled development – a 53-year-old businessman recognizes that he owes his success and his three-storey house to the mining boom. “But we don’t need all these foreign investments,” says the father of two, who built his fortune selling Lexus and furs. “Genghis Khan gave us all these incredible riches. And there might be even more to discover. We have always been rich […]. But it’s the foreign companies that are benefiting from it. Not us.”
The man went on to speak in Mongolian about Oyu Tolgoi, saying that it was a test of sovereignty for his country (as his 18-year-old son translated into perfect English). Oyu Tolgoi, or “Turquoise Hill” – is the talk of the town. It is Mongolia’s biggest mining project and economic and political issue No. 1. It is also the flagship project of Vancouver’s Ivanhoe Mines, which owns 66 per cent (in partnership with Rio Tinto) of what will be one of the largest copper-gold mines in the world when the site goes online in late 2012. The Mongolian government owns the remaining shares. The $6-billion project – roughly the size of Mongolia’s GDP – should produce a third of the country’s GDP when it reaches its full capacity by the end of the decade.
But why is it a test of sovereignty? Because, when the businessman was speaking in the early days of October, the Minister of Mines had just declared that he wanted to reopen the deal that was closed in 2009 after six years of intense negotiations with Ivanhoe, and raise the government’s shares to 50 per cent. The minister’s declaration sent a shockwave across the world markets, and caused dismay among foreign investors, who fear the rise of resources and economic nationalism.
Even though the government finally backed down two weeks later, the roots of that nationalism have not disappeared. Far from it, since they seem to be deeply rooted in a national pride that longs to be uttered after four long centuries of direct and indirect rule by either the Chinese or the Russians. The ubiquity of Genghis Khan – whose name and face now appear on the national airport’s main terminal, on a big hotel façade, on top of Parliament’s front steps, on vodka and beer bottles, and on a hill bordering Ulan Bator, to name a few – is only the most visible expression of that reclaimed pride.
This sentiment is deeply rooted in the steppes, the mountains, and even the dryness of the Gobi desert that shape the beloved land roamed in every corner by the nomads. Nature is revered in the least-densely populated country of the world, and it has to be taken care of – a popular and strong injunction that basically clashes with mining. Rare are the citizens of Ulan Bator, where half of the 2.8 million Mongolians now live, who don’t dream from time to time of going (or actually go) back to the countryside.
Forty-two-year-old Batsetseg comes from the steppe every now and then to lend a hand in a modest restaurant in Ulan Bator. Her sister opened the restaurant a year ago, and named it “Meej Mountain,” after a hill near their homeland that they hold dear. “When I’m in town, it’s for making money and helping my sister. I really miss the steppe, though …” she says in a very affectionate way. “But back near Erdenet [a mining city 325 km North of Ulan Bator], I worry because of the mine,” she goes on to say even before being asked about the mining activity. “We are a people who respect the environment. Our parents taught us not to cut the flowers and the trees. To dig the earth makes me uncomfortable. If we are to do mining, we have to do it gently and restore the land exactly as it was before, or [make it] even better. Otherwise, nature will take its revenge.”
For Batsetseg, it is no coincidence that the mining boom started about a decade ago and since then, the harsh winters – called dzud – have killed millions of livestock.
There seem to be few Mongolians who are strictly against mining. But they all want to think that the exploitation of their natural resources will benefit them in the long run. To enforce that hope, this fall, the government started sending a cheque of 21,000 tugriks (CAD$17) to every citizen in the country each month, and will soon be distributing 10 per cent of the shares of the Tavan Tolgoi project, which will be the largest coking coal mine in the world, evenly among Mongolians.
Despite these cash handouts, many people from the poor and middle classes feel that they have yet to see the benefits of the mining boom. In the meantime, they have to cope with galloping inflation that rides alongside unbridled economic growth. Last year, Mongolians were hit by a 10.1-per-cent rate for consumer goods, one of the three highest in Asia. This year, the International Monetary Fund expects it to double to 20 per cent.
All this fuels a nationalistic sentiment among the population that fuels, in turn, the equally strong stream of populism among elected officials. This is all too salient as the country is heading towards legislative elections in 2012.
The government seems to suffer from a split-personality disorder, trying to woo foreign investors and please a growingly nationalistic population at the same time. That Mongolia wants to attract capital from abroad is a no brainer. For one, Prime Minister Sukhbaatar Batbold is a forceful voice in favour of attracting foreign investors – including Canadian ones. The country also has a “third neighbour policy” – somewhat similar to Pierre Trudeau’s “third option” – which aims to diversify Mongolia’s diplomatic and economic ties away from its two obtrusive neighbours and towards other countries, including Canada.
Nevertheless, in October, nationalism mixed with populism pushed politicians in power to try to revise, to its advantage, the biggest commercial deal signed in Mongolia since the country switched to a free-market economy.
As the nationalistic sentiment grows among the population, and with election season well underway, ignoring politics and the interests of Mongolians could come at a heavy price for Canadian and other foreign companies.
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