Mongolia:Land of lost opportunity

UlAANBAATAR, Mongolia—Six years ago, nomadic farmer Ankhbayar Garamdagva followed the herd to this city on the fringe of the Gobi desert, hoping to share the riches promised to Mongolia by the global commodities boom.

The 29-year-old father of two sold off all his livestock and borrowed money from a local bank to set up a stall selling jeans at a market in the city’s south, sheltered only by sheets of plastic from temperatures that sometimes break below minus 30 degrees Fahrenheit.

Mr. Garamdagva travels with his wife once a month to a wholesale market in a town just over Mongolia’s southern border with China to stock up on jeans, which he then sells for $10 each back in Ulaanbaatar.
But customers are scarce these days. The boom times in Ulaanbaatar have come and gone along with the rise and fall in commodities prices.
Now in his mid-30s, Mr. Garamdagva—along with many of his fellow countrymen—regrets what he left behind, and faces an uncertain future laden with debt.
“My sheep, goats, cows, horses…I sold everything, I can’t go back,” he says. “I moved here for a good life but, this year, we see no future.”
Few developing countries have seen their hopes dashed more by the slump in global commodities prices than Mongolia, this country of three million people that is almost four times the size of California.
With its vast unexploited reserves of copper, coal and other minerals once estimated to be worth more than $1 trillion, and a neighbor—China—going through a belated industrial revolution, Mongolia looked to have won a ticket into the modern world.
The country became known as ‘Minegolia’ as thousands of promising mining sites were identified. Mongolia’s leaders envisaged riches from part-owning mines such as Oyu Tolgoi, the world’s largest underdeveloped reserve of copper. Global companies including Rio Tinto PLC and banks such as Goldman Sachs Group Inc. pursued mining rights and stakes in local lenders.
In 2011, Mongolia was the world’s fastest-growing economy, expanding by more than 17%. Its former leader, Sukhbaatar Batbold, in 2012 forecast the country could keep growing at that rate for a decade.
It was hoped the mining boom would enrich this nation of nomadic herders enough to be able to invest in vital infrastructure, along with reliable water and electricity supplies.
Yet Mongolia failed to make progress on key projects before the commodities boom subsided. Oyu Tolgoi, now controlled by Rio Tinto, still awaits full development. At $5,000 a metric ton, copper prices are roughly back at 2005 levels, having surged to more than $10,000 between then and now.
For sure, Mongolia’s economy is still eking out some growth, unlike countries such as Canada and Brazil, which tipped into recession as the mining boom faded.
But between 2013 and 2015, the only minerals-rich developing countries that recorded a sharper economic slowdown were those ravaged by conflict or epidemics: South Sudan, Sierra Leone and Ukraine. In January, the World Bank cut its Mongolia’s growth forecast this year to just 0.8%: Two years ago, it forecast growth of 7.7% for 2016.
Mongolians like Mr. Garamdagva have arguably been left in a worse position than when the mining go-go years began.
“We missed the big time; the free ride that we were given,” said Ganhuyag Chuluun Hutagt, Mongolia’s vice minister of finance from 2010-2012. “No matter what happens to China, I thought, we will still find something to sell to them…which was not true, obviously.”
On the steppes outside Ulaanbaatar stands an enormous 131-foot-high statue of the warrior Genghis Khan on horseback, built by one of the country’s richest men during the boom years to symbolize the return to greatness of a people that ruled an empire stretching from the Pacific to Turkey 800 years ago.
The statue stands in contrast to the situation now in the city, known locally as UB, where essential infrastructure was either never built or was poorly developed.
In packed district hospitals, for example, families sleep in the hallways and lobbies. On a recent afternoon, Purevsuren Sergelen paced a corridor in Bayanzurkh District Hospital, nursing her 6-month-old son, Tumenbayar, who was admitted three days earlier suffering from flu.
“There are nine beds in my room and 18 kids are sharing beds with 18 mothers—a total of 36 people are staying in one room,” said the 21-year-old. “The air quality is not good in a room, so I take my baby in to the hallway most of the time.”
She says she wishes new medical facilities had been built, or more beds added to existing hospitals like this one. Long-held plans for a new hospital in downtown Ulaanbaatar sit on the shelf.
Purevsuren Sergelen’s son, Tumenbayar, was being treated for flu at Bayanzurkh District Hospital in Ulaanbaatar.
Purevsuren Sergelen’s son, Tumenbayar, was being treated for flu at Bayanzurkh District Hospital in Ulaanbaatar. PHOTO: AMARSAIKHAN OTGONBAYAR FOR THE WALL STREET JOURNAL
Mrs. Purevsuren lives about 3 miles away in a sprawling settlement of white, round traditional Mongolian structures and small brick homes that mushroomed on UB’s outskirts as nomads were drawn to the city. The so-called ger district is now home to nearly 800,000 people, according to government estimates, more than half of UB’s total population. There remains little access to basic amenities such as running water.
Many Mongolians risk being dragged back below the poverty line again as the economy sinks, according to the World Bank. Mongolia’s unemployment rate jumped to 8.3% in the final quarter of 2015, from 6.3% a quarter earlier.
In November, a mining-union leader held a news conference to protest the worsening plight of miners.
“Families of the workers are starving,” said Erdene Sambuunyam, the head of the Solidarity trade union of state-run mining company Erdenes Tavan Tolgoi.
The news conference took a startling turn when Mr. Sambuunyam said he would burn himself “for our children and for the people of Mongolia.”
He then set himself on fire.
Mr. Sambuunyam is now being treated in a hospital in Seoul. Erdenes Tavan Tolgoi paid his medical expenses, a company spokesman said.
Mongolia’s economy has been floored by China’s slowdown, which has unleashed a flood of supply of commodities onto global markets, sparking a 20% drop in the S&P GSCI commodities index over the past year.
There is little industry outside of Mongolia’s resources sector and no other country is as reliant on China, to which Mongolia sends nearly 90% of its exports, mostly commodities.
With no access to the sea, and lacking sufficient transport infrastructure, Mongolian miners aren’t able to chase potential buyers in new markets such as India and members of the Association of Southeast Asian Nations, like other resource-based countries can.
Residential property prices in Ulaanbaatar have plunged over past four years, with towering apartment blocks standing empty around the city.
Residential property prices in Ulaanbaatar have plunged over past four years, with towering apartment blocks standing empty around the city. PHOTO: NO CREDIT AVAILABLE
Foreign direct investment into Mongolia has all but vanished.
Net flows were flat in 2015, the latest central-bank data show. Mongolia’s external debts have risen 10-fold within six years, while government debt has swelled to $3.65 billion, more than double 2009 levels.
During the boom years, hotels such as the Shangri-La sought to establish a foothold in UB, while luxury-goods shops including Louis Vuitton and Swiss watchmaker Ulysse Nardin SA set up shop fronts. The latter has since closed.
Residential property prices have dropped by 35% in the past four years, while an estimated 37,000 apartments stand empty across the city, according to estimates from M.A.D. Investment Solutions, a local property group.
A few years ago, Mongolia boasted one of the world’s fastest-growing economies. Now, the World Bank is expecting growth of just 0.8% this year.
A few years ago, Mongolia boasted one of the world’s fastest-growing economies. Now, the World Bank is expecting growth of just 0.8% this year. PHOTO: NO CREDIT AVAILABLE
Some in Mongolia blame political indecision and missteps for the country’s problems.
After issuing free shares in the Tavan Tolgoi coal project to citizens in 2011, the government was forced to introduce a program to buy them back a year later for 1 million tugrik ($500) per person, after plans for an initial public offering of the company collapsed.
Ahead of elections in 2008, politicians had also promised to dole out cash, spending on the promise of riches to come. For more than a year, the government handed out about $17 a month to all Mongolians.
“The budget is still paying back the debt,” said Oyun Sanjaasuren, a member of the current governing coalition. 
Rio Tinto’s plans to expand the Oyu Tolgoi mine in the Gobi desert are now running years behind, a victim of fraught talks with Mongolia’s government that wanted a bigger slice of the revenue pie.
The expansion could yet go ahead: In December, Rio Tinto and its partners lined up a combined $4.4 billion from 20 lenders to fund the construction of an underground mine three times as deep as the Empire State Building is tall. Still, output from the expanded mine will only start in 2021 at the earliest.
Meantime, Mr. Garamdagva, the former farmer, fears the long, harsh winter isn’t over for Mongolia and his family. He has had to borrow from fellow stall owners to help cover monthly debt repayments.
“We can’t pay it back,” Mr. Garamdagva said, taking a swig of local tea, laden with milk and thick with salt. “We will for sure have to take more loans on…but individuals don’t have any money any more so I don’t know who we will get a loan from next time.”
Write to Rhiannon Hoyle at
Source:Wall Street Journal



Post a Comment

Facebook page

Powered by Blogger.


Advertising in Mongolia An Culture Editorial of the Mongolianviews education Environmental protection Famous Mongolians Foreigners in Mongolia Inner Mongolia Ivanhoe Mines Mongolia agriculture Mongolia analysis Mongolia and Australia Mongolia and Belorussia Mongolia and Cambodia Mongolia and Canada Mongolia and central Asia Mongolia and China Mongolia and Cuba Mongolia and EU Mongolia and Germany Mongolia and Hongkong Mongolia and Hungary Mongolia and India Mongolia and Inner Mongolia Mongolia and Iran Mongolia and Israel Mongolia and Italy Mongolia and Japan Mongolia and Kazakhstan Mongolia and Korea Mongolia and Kuwait Mongolia and Kyrgyzstan Mongolia and Malaysia Mongolia and Nato Mongolia and North Korean Mongolia and Poland Mongolia and Russia Mongolia and Singapore Mongolia and South Korea Mongolia and Taiwan Mongolia and the world Mongolia and Tibet Mongolia and Turkey Mongolia and UK Mongolia and Ukraine Mongolia and UN Mongolia and US Mongolia and USA Mongolia and Vietnam Mongolia Banking Mongolia civic society Mongolia crime Mongolia diplomacy Mongolia Economy Mongolia Education Mongolia Energy Mongolia Finance Mongolia Health Mongolia History Mongolia holiday Mongolia in international media Mongolia Industries Mongolia Joke Mongolia law Mongolia LGBT Mongolia medical Mongolia military Mongolia Mining Mongolia Mining Developments Mongolia Mortgage Mongolia natural disaster Mongolia Petroleum Mongolia public announcements Mongolia railways Mongolia Religion Mongolia society Mongolia Sports Mongolia Stamp Mongolia telecommunication Mongolia tourism Mongolia Urbanization Mongolia Wild Life Mongolian Agriculture Mongolian Archeology Mongolian Food Mongolian Gay Mongolian Government news Mongolian History Mongolian Military Mongolian Mining Development Mongolian Movie Mongolian News Mongolian Parliament Mongolian Political news Mongolian Press Mongolian Songs Mongolian Women Mongolian Youth Mongolians abroad Moninfo Opinion Oyu Tolgoi Investment Agreement Photo news Press Release Rio Tinto Tavan Tolgoi coal mine Ulaanbaatar development Weird expatriates in Mongolia

Blog Archive