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Mongolia is not yet the next Qatar: FT [Copy link] 中文

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Post time 2012-6-13 15:55:36 |Display all floors

Kuwait 1950. Abu Dhabi 1970. Qatar 1995. Mongolia 2012?


Mongolia, endowed with vast resources and growing at 17 per cent, has a gold-rush atmosphere. The miners, bankers and lawyers who have descended on Ulan Bator like to believe it is the next El Dorado. Those who wish the country well hope it can be more than that: a well-run democracy in which opportunity is equitably spread.

John Finigan, an über-optimist who runs Mongolia’s Golomt Bank, thinks of Qatar, which had a $7bn economy in 1995. Today, it has a gross domestic product of $174bn and the world’s second-highest per capita income of $98,000. Why, asks Mr Finigan, shouldn’t Mongolia do the same? Its top 10 mines alone contain minerals worth $2.75tn, which would make every Mongolian – all 2.7m of them – a millionaire.

Mongolia, which sits on China’s doorstep, has decades worth of coal, copper, gold, rare earths and uranium. Its president calls it a global epicentre. The best response to such euphoria is, to put it in technical terms: “Whoah there.”
The aspiration to turn Mongolia into a Qatar is admirable, the likelihood of it becoming Nigeria not negligible. Certainly, Mongolia’s tiny population – in an area three times that of France – should help. But think about it. A country with fragile institutions and a GDP per capita of $3,000 is about to be hosed with billions of dollars. What could possibly go wrong?

There are at least four things Mongolia must get right: governance, equity, economic management and geopolitical strategy. Governance is key. Here Mongolia has strengths along with obvious weaknesses. Since Mongolia broke loose of Russia in 1992, it has been, against all odds, a fairly functioning democracy. It has had regular presidential and parliamentary elections, only one mired by violence. Mongolians are 95 per cent literate. What about the leaders themselves? Mongolia has a surprisingly large cohort of technocrats trained abroad, either in Russia or eastern Europe, or in the US, UK and Japan. Present leaders have gone on missions abroad reminiscent of Japan’s post-Meiji forays to learn from the west. Warding off the “resource curse” is a priority: regular study trips include the Gulf, Chile, Norway and Canada.

There are plenty of negatives, too. It costs an estimated $2m to get a seat in the 76-member parliament. With MPs wages at $800 a month, that suggests they see rich rent-seeking opportunities once they get there. As the money starts to trickle in – $5bn in foreign investment last year – corruption has risen. Mongolia has slipped in Transparency International’s rankings to 120. The previous president has been arrested on suspicion of corruption, though he insists the charges are fabricated.
Assuming politicians don’t steal the spoils, how should they be divided?

First, Mongolia must decide how to split the booty between itself and foreigners, who have capital and knowhow. Rules for foreign investment are in flux. Tsakhia Elbegdorj, the president, says Mongolia used to be an ugly bride. Now that she is “highly educated and beautiful” foreigners are flocking to woo her. The challenge is to raise the dowry without being greedy. If the riches in the ground are as claimed, foreigners will probably come anyway.

Trickier is how to divide the cash among Mongolians. Direct transfers have been tried, a dispersal of a few hundred dollars to every Mongolian – usually before elections. That is not the way to go.

Politicians talk sensibly about investing in education, infrastructure and training. They intend to put money away in a stabilisation fund and a sovereign wealth fund. They will have to do all this and more. In the past few years, Ulan Bator’s population has boomed to 1.2m. Herders have been driven by killer winters and lured by money. Only a few have found it. About 500,000 live in gers, nomad tents, most without sanitation or proper heating.

Macroeconomic management is tricky. Educated Mongolians know all about “Dutch disease”, the strangling of third industries in resource-rich countries. Even before the cash is truly gushing, inflation is at 20 per cent. In 2010, Mongolia’s togrog was the world’s best-performing currency, not good for exporters. Other industries, such as farming, will need support. Finally comes geopolitics. It usually does. Mongolia is wedged between Russia and China, the latter a ravenous market. Yet Mongolians dislike China and suspect it of having inappropriate territorial intentions. These fears have already impeded the construction of a railway needed to export coal and triggered an ill-thought out foreign investment law.

Undoubtedly, Mongolia has a golden opportunity. But it also has a heady brew of mammoth problems. One must wish it the best – and fear for the worst.

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Post time 2012-6-13 16:01:29 |Display all floors
This post was edited by SMITHI at 2012-6-13 16:16

Finally comes geopolitics. It usually does. Mongolia is wedged between Russia and China, the latter a ravenous market. Yet Mongolians dislike China and suspect it of having inappropriate territorial intentions. These fears have already impeded the construction of a railway needed to export coal and triggered an ill-thought out foreign investment law.

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I wouldn't worry about Mongolia , it is between allied countries of Russia and China and no matter what it will stay there.

Mr Putin and mr Hu can deal with it as they did till now, we don't have to know much about how they deal with it.

Mongolia is best left alone as it is now, they will find way how to spend money I wouldn't worry much about their money and their minerals

bottom line is , it is internal affair of Mongolia.

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Post time 2012-6-13 17:05:38 |Display all floors
It's easier for those small countries to switch their direction. Maybe Mongolia would be total different decade later.

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Post time 2012-6-13 17:19:36 |Display all floors
Personally I think Mongolia is best left alone it could spoil Russia China relations poking too much and patronising them.
But that is my view which is not necessary best one of course.

Mongolians are not friend of Russia or China but they have no choice, geography  is hard reality that make this country least troublesome for Russia and China.

Let's face it if Russia and China close border they will choke.

So why worry about small country that can't escape from a trap?

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Post time 2012-6-13 20:23:14 |Display all floors
Somehow I don't believe this article one bit. Especially since mongolians are regularly crossing the border to China to access better services.
Serve the Emperor!

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Post time 2012-6-13 22:05:00 |Display all floors
SPACEMARINE Post time: 2012-6-13 20:23
Somehow I don't believe this article one bit. Especially since mongolians are regularly crossing the ...

Yes ............

You noticed ...........

An uncited article and it is my understanding that there is a growing lobby within Mongolia to rejoin China  ...........

The Ruskies stripped it before they left and whilst this barren place may well have some minerals ..........

It doesn't have the means to make them work ..........

This is just a personal point of view .............

What the world needs is more geniuses with humility, there are so few of us left  -   Oscar Levant

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Post time 2012-6-13 22:28:42 |Display all floors
" place may well have some minerals ..........

It doesn't have the means to make them work .........."

Oh dammit they will hire some multinational mining corporation, and than taxing them, mineral right tax, corporate tax, land usage tax etc.{:soso_e100:}

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