Mongolia, Hit Hard by the Commodities Slump, Wearily Faces Elections

When a country’s economy is doing poorly and voters are suffering, a government can expect to be voted out of office on election day. So Mongolia’s upcoming parliamentary elections June 29 could see a staggering defeat for the ruling Democratic Party (DP), which has led successive governments over the past four years. This is not lost on DP officials. Yet rather than offer a compelling vision for Mongolia’s future, their campaign strategy has focused on reconfiguring the entire election system, creating more problems in the process.

Two factors have combined to depress the Mongolian economy: world commodity prices and domestic political choices. No mining economy has been spared the impact of the global slump in commodity prices that is linked to a slowing down of the Chinese economy. Given Mongolia’s dependency on China’s purchases, this downturn has been particularly acute

Worse, over the past several years, it was primarily new coal deposits that were set to be exploited, just as coal declined in significance on the back of measures to deal with climate change. Mongolia, like every other resource economy, might have prepared more diligently for this downturn. Yet decisions by the Mongolian government, both under the leadership of the DP and under its predecessors, have significantly worsened the economic impact.

Before the 2012 election that brought the DP to power, a series of decisions were made by the then-governing Mongolian People’s Party (MPP) to regulate foreign investment. That gave Mongolia the reputation of being inhospitable to foreign investors, which drove away most foreign direct investment. Add to this the decision to take on significant foreign debt with the issuance of so-called Chinggis Bonds in late 2012 under the then-newly elected DP-led coalition government, and the Mongolian government has left itself very little monetary or fiscal wriggle room to deal with its current economic woes.

These two factors have combined to cause a downturn in GDP growth from 12.4 percent in 2012—the last parliamentary election—to forecasts of 7.9 percent in 2014, 2.3 percent in 2015, and just 0.8 percent this year. The relatively high rates of inflation over this period have combined with the decline of Mongolia’s currency, the tugrik, to lead to job losses, unemployment and poverty. This trend is a reversal from the years leading up to 2012, when GDP growth, driven largely by the commodities boom, was strong enough to vault Mongolia into the rank of upper middle-income countries.

Until there is a significant upturn in world commodity prices, the current economic woes are likely to continue through the presidential election in June 2017, when President Elbegdorj Tsakhia’s second and final term is up. Given that Mongolians continue to identify the bad state of the economy and their concerns about unemployment as the most pressing policy issues in polling, it is difficult to imagine an election, whether this month’s parliamentary polls or next year’s presidential race, where the economic performance of DP-led governments will not be front and center.

It is not only the economic performance of the past four years that suggests that voters might take the DP to task. The past four years have also seen some significant turmoil in the DP’s governing coalition and among members of the Cabinet. In this, the DP government has mimicked the Democratic Union governments in power from 1996 to 2000. 

The Democratic Union had been formed out of various constituent elements of the democracy movement that brought about the Mongolian Revolution of 1990. In 2000, these elements united in the Democratic Party, but they have maintained their identity as factions within that party. It has been difficult to understand these factional rivalries at times, especially because some internecine battles have been clearly to the detriment of the DP and the Mongolian government. Prime Minister Altankhuyag Norov’s government fell in 2014, for instance, largely because of factional struggles within the party. 

Until there is a significant upturn in world commodity prices, the current economic woes are likely to continue through the presidential election in June 2017.

DP stalwarts of the democratic revolution like Elbegdorj, but also Ulaanbaatar’s mayor, Erdeniin Bat-Uul, continue to dominate the party, along with other factional heads such as the speaker of parliament, Zandaakhuu Enkhbold. Much of this DP old guard is set to run again in this month’s election, fueling some frustration among Mongolian voters who feel that there are few attractive choices and alternatives.

Meanwhile, although an amended electoral law that handicaps smaller parties has grabbed headlines, debates about the election system are nothing new in Mongolia. The last three parliamentary elections—in 2004, 2008 and 2012—have all been run in different ways. This month’s election looks set to return to the 2004 system of 76 directly elected, first-past-the-post constituencies, after a high court ruled that proportional representation, which was partially introduced in 2012, was unconstitutional.

It does not take much imagination to recognize that majoritarian elections favor large parties and incumbents. Therefore, this electoral shift seems like an attempt by the DP—and perhaps to a lesser extent the MPP, which looks set to move out of the opposition and back into government—to maintain its share of power in Mongolia’s parliament, known as the State Great Khural. 

Other measures have reinforced this impression. The official campaign period ahead of election day on June 29 has ostensibly been shortened to 18 days, starting June 11, in order to reduce the amount of spending by candidates and theoretically make it easier for smaller candidates to enter the election. It is not clear that that will be the effect, however. A shorter campaign period would seem to represent a clear benefit to better-known incumbents, especially when coupled with majoritarian voting. This is especially the case since candidates are not allowed to appear publicly in their constituencies prior to the beginning of the campaign, though incumbents are much less restricted in this regard.

It is also no surprise that the DP-appointed General Election Commission is addressing administrative shortcomings in party and candidate registration by ruling such candidacies out. This seems to have removed the upstart XUN Party from the ballot already, and is likely to exclude former president—and convicted money launderer—Nambaryn Enkhbayar, as well.

Where does this leave the actual content of parties’ campaign platforms? In truth, the substance of political discourse ahead of the election seems to be outweighed by manipulations of the political process. So far, no political parties have announced any major policy initiatives that would see departures from the current government. Since candidates are legally bound to their party’s platform in campaigning, it is unlikely that the campaign will hold any major surprises.

Mongolians have grown critical of their political institutions while remaining committed to democracy in the abstract. As the country prepares for this election campaign, there is little on the horizon likely to inspire voters in their political institutions—and much to be cynical about. Some of that cynicism may express itself in lower-than-expected voter turnout; it even seems possible that some constituencies will not see the minimum 50 percent voting rates stipulated in the election law.

While the new government is likely to be led by the MPP, the lack of policy differences between the large party platforms suggests that the biggest question is not whether policies, economic or otherwise, will shift. Instead, it is whether the MPP will forego an opportunity for yet another wholesale replacement of public servants, and whether anti-corruption efforts will continue to be politicized. Those factors will likely have a significant impact on Mongolians’ confidence in democracy, shaping the country for years to come.

Julian Dierkes is associate professor and Keidanren Chair in Japanese Research at the University of British Columbia.



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