Mongolia seeks answers to killing of independence hero

Many believe Sanjaasuren Zorig’s 1998 murder was ordered by someone at the top  

© Richard Ellis/Getty Images

By Lucy Hornby in Beijing

It is a grisly murder mystery that has cast a shadow over Mongolian politics for almost 20 years.

The east Asian nation has finally launched an investigation to identify who ordered the assassination of Sanjaasuren Zorig, a hero of Mongolia’s independence from the Soviet Union who was stabbed to death in 1998, hours after being nominated as prime minister.

Two men and a woman were last month convicted of the murder in a closed court but the secret four-day trial failed to reveal who hired them — stoking conspiracy theories that the killing was a politically motivated hit carried out at the behest of someone at the top.

Mongolian media outlets have alleged that the mastermind’s bodyguard was part of the gang who carried out the killing, before being murdered by one of the men sentenced last week. Amid mounting criticism over why the state has not revealed the names involved, Ulan Bator’s state general prosecutor on Wednesday announced an investigation into who ordered the assassination.

Mogi Badral Bontoi of the Cover Mongolia consultancy said: “People are not convinced by this trial. It seems weird to sentence someone and then look for the guy who ordered the killing.”

The bloody murder of Zorig, who was stabbed multiple times after he returned to his Ulan Bator home, is seen by many Mongolians as ending the idealism that accompanied the early years of their democracy. The secret trial, imprisonment of people suspected of involvement in the case, and even a state-sponsored kidnapping, have all fuelled the idea that a senior figure was behind the killing.

Oyun Sanjaasuren, Zorig’s sister and founder of the Civil Will party, said in an email: “Our family has asked for a declassifying of the case and we have been calling for [an] open hearing. The requests have not been met. We do not think the case has been fully solved or closed.”

Many in the landlocked country believe Zorig’s murderer hailed from among his fellow Democrats, an uneasy coalition of idealists, businessmen and pro-market politicians that came to power in the mid-1990s. Others suspect the Communists, now back in power as the Mongolian People’s Party after they defeated the Democrats in last year’s election. Officials from the country’s largest copper mine, Russian gangsters and common criminals have also been implicated.

Zorig’s widow, Bulgan, was imprisoned for several months last year, accused of giving false testimony during an earlier investigation into her husband’s murder. The assassins had tied her up in the bathroom while they waited for Zorig to come home.

Another unanswered question concerns a Mongolian man who was kidnapped in 2003 from a McDonald’s restaurant in France before being drugged, transported across Europe and flown home to stand trial for Zorig’s murder.

After those charges were dismissed, he and his lawyer were jailed for three years for leaking state secrets and the man died days after his release. A Mongolian intelligence agent was detained for several months in Germany on suspicion of ordering the kidnapping before Berlin dropped the allegations in 2011. He is now Mongolia’s top security official.

Analysts believe Tsakhiagiin Elbegdorj, Mongolian president and a veteran of the independence movement who was ousted as prime minister shortly before Zorig’s death, is keen to close the book on the long-running case before he leaves office this summer.

Twitter: @HornbyLucy

Source:Financial Times

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Nomads no more: why Mongolian herders are moving to the city

Climate change and the end of Soviet state support have forced 600,000 to migrate to the capital, leaving it struggling to cope.



In Altansukh Purev’s yurt, the trappings  of a herder’s life lie in the plain sight. In the corner are his sadle and bridle. By the door, he has left a milk pail.

For more go to:

https://www.theguardian.com/world/2017/jan/05/mongolian-herders-moving-to-city-climate-change

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National Public Radio:How Your Cashmere Sweater Is Decimating Mongolia's Grasslands

There's a lot of time for contemplation when you're milking cows in Mongolia. 90-year-old Lkhagvajav Bish has milked them for decades. She's a nomadic herder, and she follows them in their endless search for grass.

Today, the ger, or tent, she and her son live in is pitched in a valley surrounded by brown hills whose tops are white with frost, and as her hands squeeze the last milk from one of her herd, Bish reminisces about a time when this valley looked completely different.

http://www.npr.org/sections/parallels/2016/12/09/504118819/how-your-cashmere-sweater-is-decimating-mongolias-grasslands

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Amnesty International:Thousands at risk of homelessness due to authorities’ urban redevelopment failings in Mongolia

The Mongolian authorities’ are failing residents of Ulaanbaatar with an urban redevelopment process that is putting thousands of people at risk of forced eviction and homelessness, Amnesty International said in a report published today.

 

The 55-page policy briefing, Falling Short: The Right to Adequate Housing in Ulaanbaatar, Mongoliahighlights the plight ofresidents in Mongolia’s capitaland reviews an urban redevelopment agenda that is marred by a lack of information on eviction, compensation and resettlement.

 

“Families are living in fear that they will be left homeless as a result of urban redevelopment. The authorities are falling short in their responsibilities to protect residents’ rights,” said Nicholas Bequelin, East Asia Director at Amnesty International.

 

“The ambitious redevelopment agenda has not been matched with the establishment of sufficient safeguards to protect against the risk of forced eviction. There is an urgent need for theauthorities to put in placeclear and effectiveguarantees to protect residents’ rights.”

 

Ulaanbaatar’s redevelopment agenda

 

The current redevelopment plan for Ulaanbaatar is focused on 24 ger areas where approximately 9% of the city’s 1.3 million residents live and public housing which is deemed unsafe or structurally unsound.

 

Ger areas combine both houses and gers (traditional round felt dwellings) and often lack basic infrastructure such as roads, access to water, sanitation and heating. They have multiplied over the past decade, as hundreds of thousands of herder families have left the steppes to settle in the outskirts of the city. These families typically find a piece of unoccupied land, put up a fence and erect their ger as they look for new ways to support their livelihood.

 

The redevelopment agenda has the potential to transform the living conditions for many Ulaanbaatar residents, with better housing and access to services for new and old inhabitants. It could also help combat high levels of air pollution through measures such as improved land use and upgrades to heating systems and water supplies.

 

However, the absence of clear and adequate government regulation, effective consultation and monitoring makes individuals affected by redevelopment vulnerable to a range of human rights violations, in particular the right to adequate housing.

 

Shortcomings in legal protections

 

A critical deficiency of relocation policies identified by Amnesty International is that residents lacking formal land titles or whose names do not appear on land deeds—a common occurrence in Ulaanbaatar where khashaa (fenced plot of land) are often shared by different families—are excluded from the procedures governing evictions and relocations.

 

The possibility of removing people from their land and housing for redevelopment without adequate consultation and compensation presents a serious risk of forced eviction and other human rights violations and runs counter to the stated objectives of the urban redevelopment agenda to “ensure a healthy, safe and comfortable living environment”. Under international human rights law, adequate consultation with and compensation for all residents are necessary to make evictions lawful.

 

Another key failing of current legislation is the absence ofspecific measures to ensure equal participation of all and consultation with those affected by the redevelopment in specific and different ways including women, the elderly, youth and people with disabilities.

 

For example, while the Development Law includes a clause to ensure that new infrastructure must include conditions for easy access for people with disabilities, there is no provision requiring consultation on the planning and design of the new infrastructure with people with disabilities who may not be title holders.

 

Increased risk of homelessness

 

Amnesty International’s research also found that residents often lacked adequate informationwhich was a key factor in placingthem at a distinct disadvantage with property development companies. Private developers play a major role under Ulaanbataar’s current urban redevelopment programme.

 

While in recent yearsa number of key laws and policies on redevelopment have been amended—at times in the right direction—residents have been left in the dark about what these changes mean in practice when faced with the risk of being evicted or relocated.

 

One resident told Amnesty International that her family saw no choice but to signan agreement with aconstruction company thatthey considered potentially disadvantageous. They were toldby the construction company that if they refused the terms of the agreement, the developer would utilize the provisions in the law to have them evicted – provisions that are contradicted in other redevelopment laws and regulations.

 

At the outset of the redevelopment project, residents were often offeredrent money for fixed terms to pay for temporary accommodation until the new housing is built. However, with many projects now stalled as developers failed to make provisions for thecurrent economic downturnand cannot cover the longer term payments, many families cannotafford the rent on their own.

 

Ahead of this year’s winter, several families told Amnesty International they feared that they would be made homeless as a result. Temperatures typically reach minus 30 degrees Celsius during Ulaanbaatar’s winter.

 

“No one should be left homeless because of redevelopment, yet families in Ulaanbaatar find themselves in limbo with no protection from the authorities as developers halt construction,” said Nicholas Bequelin.

 

“Mongolian authorities must put the rights of residents first and ensure everyone affected by urban redevelopment is involved in the consultations. The government has the responsibility to make sure everyone involved is aware of their rights.”

Source:Amnesty International Mongolia

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Mongolia Expresses Interest to Join Eurasian Economic Union - Ambassador

Mongolia expresses high interest in collaboration with the EEU, develop trade and economic ties with Russia, the country's Ambassador to Russia Banzragch Delgermaa said Saturday.

MOSCOW (Sputnik) — The Eurasian Economic Union (EEU) is of great interest for Mongolia, the country's Ambassador to Russia Banzragch Delgermaa said Saturday.

"As you know, the process of integration and establishment of regional blocs is underway in the world, and that is why Mongolia, located between such powerful states as Russia and China, and without access to the sea, is glad to join some economic blocs and work effectively, In this regard, the Eurasian Economic Union is of great interest for us," Delgermaa said in the interview to Rossiya 24 channel.

Delgermaa noted that joining the EEU was earlier discussed with former Armenian Prime Minister Tigran Sargsyan, who is currently the chairman of the Eurasian Economic Commission, the executive body of the EEU. The Eurasian Economic Union is a Russia-initiated regional political and economic bloc which aims to streamline the flow of goods and services between its members, namely Russia, Kyrgyzstan, Armenia, Belarus, and Kazakhstan.

"As you know, the process of integration and establishment of regional blocs is underway in the world, and that is why Mongolia, located between such powerful states as Russia and China, and without access to the sea, is glad to join some economic blocs and work effectively, In this regard, the Eurasian Economic Union is of great interest for us," Delgermaa said in the interview to Rossiya 24 channel.

Delgermaa noted that joining the EEU was earlier discussed with former Armenian Prime Minister Tigran Sargsyan, who is currently the chairman of the Eurasian Economic Commission, the executive body of the EEU. The Eurasian Economic Union is a Russia-initiated regional political and economic bloc which aims to streamline the flow of goods and services between its members, namely Russia, Kyrgyzstan, Armenia, Belarus, and Kazakhstan.

"The potential of trade relations between the two countries is very big, earlier we had joint ventures, unfortunately we do not see any investment projects yet. But at the SCO summit in Tashkent this year a program of economic corridor was signed, on which we hope. We also hope that the investment environment would improve," Delgermaa told the Rossiya 24 TV-channel in an interview.

She said that the countries had positive political relations but noted that there were misbalances in bilateral trade with the turnover amounting to $1.2 billion and Russian export to Mongolia – over $1 billion. Delgermaa pointed out that Russia had always been a good neighbor of Mongolia – especially during last 95 years. Earlier on Saturday, Russian Foreign Minister Sergey Lavrov and his Mongolian counterpart Tsendiyn Munkh-Orgil had exchanged congratulatory messages marking the 95th anniversary of establishing diplomatic ties between the countries. Russia and Mongolia have almost a century-long history of friendly relations. Mongolia declared its independence from China in 1911 following the Xinhai revolution in China. In 1921, Russian White warlord Roman von Ungern-Sternberg helped to free the Mongolian capital of Urga from Chinese troops thus protecting the country’s independence. The same year, Mongolia witnessed a revolution that resulted in improving relations with Soviet Russia. In late 1930s – early 1940s, the countries joined their efforts resisting expansion of the Japanese Empire.

Source:https://sputniknews.com

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Statement at the Conclusion of the IMF Mission to Mongolia

November 4, 2016

An International Monetary Fund (IMF) mission led by Mr. Koshy Mathai visited Ulaanbaatar during October 24–November 4, 2016. Mr. Neil Saker, the IMF’s Resident Representative in Mongolia, issued the following statement at the conclusion of the visit:

“The mission held very productive discussions with the Mongolian authorities on the 2016 Article IV Consultation as well as on policies that could become part of an IMF-supported economic and financial program. Common policy views were developed in many key areas. The team will now return to IMF headquarters to give time for further consultations on both sides. We would like to thank the authorities for their warm welcome and close cooperation and look forward to continuing our joint work to help address the challenges facing the Mongolian economy.”

IMF Communications Department

MEDIA RELATIONS

PRESS OFFICER: KEIKO UTSUNOMIYA

PHONE: +1 202 623-7100EMAIL: MEDIA@IMF.ORG

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Turkey Wants Mongolia To Shut Down Turkish Schools

POSTED BY: STAFF OCTOBER 28, 2016

Just ten years ago, Turkish Parliament Speaker Bulent Arinc recalled a dramatic scene. One diplomat dropped his teacup upon hearing that he was posted to Mongolia with 5,000 USD, special residence, and a car — a lavish job at that time. “How can I live there?” the diplomat reportedly asked, according to Arinc. He noted that there are, however, some highly qualified Turkish teachers who defied the odds and went to teach Mongolian children with only $300 salary.

This speech by second-highest Turkish official just a decade ago is ironic, given that the incumbent Turkish ambassador in Mongolia is prodding Mongolian officials to shut down Turkish schools and companies.

Mongolia, a landlocked and impoverished country of 3 million people, is allegedly bracing to shut down schools that taught Science and English to their kids for two decades, at the request of Turkey.

The schools are part of a vast global network of a U.S.-based cleric, arch nemesis of the Turkish president, and have ranked as Mongolia’s leading private educational facilities for many years. Most of the teachers were imported from Turkey’s leading prestigious universities, and many graduates of these schools had a chance to study in Turkey, Europe, and the U.S., a privilege that was unthinkable during the Cold War.

Since the failed military coup attempt, Turkey has escalated its full-fledged campaign to put pressure on dozens of countries to curb activities of a movement led by Fethullah Gulen, who is living in a self-imposed exile in rural Pennsylvania. In democracies, President Recep Tayyip Erdogan had a hard time. In many poor and undemocratic countries, however, the Turkish government could successfully convince host nations to shut down schools and companies of the movement. These countries include poor ones such as Somalia and Equatorial Guinea, or Turkey’s close allies like Jordan and Azerbaijan.

Since July, Turkey has accelerated its efforts to force Mongolia to shut down Turkish schools, or better, transfer them to Maarif, a Turkish government-run company that seeks to emulate the Gulen movement’s international school network.

This week, Turkish lawmakers Nureddin Nebat, Abdulkadir Akgul, Resit Polat, Fehmi Kupcu, Ziya Aktunyaldız, Erkan Haberal and Bulent Yener Bektasoglu were to visit Ulan Bator that includes meetings with Mongolia’s foreign and defense ministers as well as the Parliament speaker. The first and the most important item on the agenda is closing Gulen’s school. Cem Sultan Aktas from the Foreign Ministry is also among the visiting Turkish delegation.

Prior to the visit of the lawmakers, Mongolia’s local press started speculations that Ulan Bator would shut down the schools, seize Turkish companies and deport Turks at the request of Ankara.

On Oct. 13, Education Ministry Undersecretary Yusuf Tekin, who is known to be the architect of decrees that shut down Gulen’s 3,000 prep schools and nearly 950 private schools across Turkey, visited Mongolia to push the host nation to shut down the schools. General Director Bulent Ciftci was accompanying Tekin during the visit. Last week, Serdar Cam, head of Turkey’s state-run development agency, TIKA, was also in Mongolia.

Early in August, Foreign Minister Mevlut Cavusoglu phoned his Mongolian counterpart to update him about the activities of the Gulen movement.

Last month, Turkey’s Ambassador to Mongolia, Murat Karagoz, acknowledged that he officially notified the Mongolian authorities about the “upcoming danger” Gulenists posed to Mongolia and that he continues to warn the Mongolian people through the media. His two interviews were published by the Mongolian local media while he penned another op-ed as part of the government-led anti-Gulen campaign.

Source:http://www.turkeytms.com/

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Teenage Eagle Hunter Is Mongolia’s New Movie Star

By Andrew Lapin

PUBLISHED AUGUST 4, 2016

A 13-year-old girl stands proud in the mountains of western Mongolia, cradling the eagle she has trained to hunt. She’s carrying on a legacy that has defined this region for centuries.

But the girl, Aisholpan Nurgaiv, is also challenging a tradition. Though she is not the first female eagle hunter—there’s evidence of female eagle hunters from as early as tenth-century Persia according to a report by Stanford University researcher Adrienne Mayor, and National Geographic photographed Princess Nirgidma of Mongolia with her hunting eagle in 1932—Nurgaiv is the first Mongolian woman to compete in the country’s Golden Eagle Festival.

These images of Nurgaiv, by photographer Asher Svidensky, went viral in 2014. Now Nurgaiv is the star of a new documentary, The Eagle Huntress, which charts her efforts to train her eagle and compete against men on a national level. The film, which is executive-produced and narrated by Star Wars star Daisy Ridley, premiered at this year’s Sundance Film Festival and is scheduled for U.S. release October 28 by Sony Pictures Classics.

Director Otto Bell chatted with National Geographic via email about following Nurgaiv and her father, Agalai, through the changing Mongolian seasons for nearly a year, his subject’s unshakeable confidence, and the challenges of strapping a GoPro to an eagle.

The film was inspired by the viral photographs. Tell me more about that.

I happened to see Asher Svidensky’s photos of Aisholpan the day they hit the Internet back in April 2014. I remember being struck by the sight of this young girl perched on a mountain casting an enormous eagle into the air. Her face, the landscape, the magnificent bird. It was like a painting.

I contacted Asher through Facebook and, as we began talking, his photos started to gain real momentum online. I saw that as a kind of proof: If we could add sound and motion, surely we would have the beginnings of a great documentary on our hands? So he and I jumped on a plane and set out to find Aisholpan and her family.

The eagle-hunting tradition in Mongolia seems to be part sport, part utility. Tell me a bit more about the role it plays in their culture.

I’d go further than that and say that this tradition is intrinsically tied to their sense of identity. It’s more than a mere pastime to these people. For the nomadic Kazakh minority of northwestern Mongolia, eagle hunting can be a big part of how they define themselves and their ancestry. There is a healthy dose of machismo mixed in there, too. We saw a correlation between how successful men are at hunting and how highly they are esteemed by their community.

Was Aisholpan already a well-known figure in the eagle hunting world when you arrived to make the film?

There are generally accepted to be only around 250 practicing eagle hunters left in the world and most of those are concentrated in Aisholpan’s corner of the Altai Mountains. So yes, word of Asher’s photos had spread by the time I arrived. That said, you could tell the community was still wrestling with how they felt about it all when we showed up with a camera. We were truly lucky to start filming while her story was still just starting to unfold.

Aisholpan is an incredibly self-assured character—she never experiences any doubt or setback over the course of the film. Where does that confidence come from, and did you have to work with her at all on how to best frame her own story?

Yes, there is a quiet steel that underpins her determination. Me and my little crew of three would be freezing in minus-50 conditions and she would just plow through knee-high drifts, carrying her 15-pound eagle like it was a walk in the park.

But it’s hard to know how much of her confidence stems from her upbringing and how much of it is just who she is. I will say the nomads of the Altai region live a fairly unforgiving outdoor lifestyle.

For all that, she’s still a 13-year-old girl in many ways. She’s self-assured, but she’s also very shy at times. Initially, she was very nervous and wouldn't talk much while we were filming—it understandably took some time for her to really relax and forget about the cameras.

Aisholpan's parents are extremely supportive of her, especially her father. Do you have any insight as to why they were so willing to break with centuries of tradition and encourage her to compete on such a big stage?

It’s important to note that Aisholpan is not the first modern Kazakh eagle huntress—that’s a fairly common mistake. An older lady from Kazakhstan named Makpal Abdrazakova preceded her in training an eagle. However, it is extremely rare, and she is the first Mongolian female to compete at the Golden Eagle Festival in Ölgii. And she’s the first woman in 12 generations of her own family line to commit to the process of becoming a master eagle hunter.

But to answer your question, I think her parents’ support is born from a combination of factors. Firstly, they saw this coming. Aisholpan’s mother, Alma, told me that her daughter was always transfixed by her father’s eagles—since she was a baby she’d exhibited an almost preternatural fascination with the birds. Secondly, there’s circumstance. When her older brother left to join the Mongolian Army, Aisholpan took on the bulk of his chores. These were often physical farm tasks, typically undertaken by the men of the tribe. From what I understand, Aisholpan parlayed these new responsibilities into time on the mountain with her dad’s eagle. He’s a fair man and a champion eagle hunter. She was doing what’s seen to be men’s work, so I think he reasoned that it was only right for her to follow her dream and take on the traditionally masculine pursuit of hunting with a golden eagle.

There's a lot of remarkable footage here, including literal eagle-eye views, and the hunting and capturing sequences in the tundra. What was your biggest challenge while filming all this wildlife in rural Mongolia?

We were a small crew—never more than four people total—but we wanted to give the documentary an expansive, cinematic feel nonetheless. We bootstrapped a lot of it: the bird's-eye view shots you mention were captured using a dog harness we refashioned to comfortably fit the eagle and carry a GoPro.

But sometimes we just had to surrender to elements beyond our control. The third act of the film takes place on a frozen tundra, deep in the mountains, close to the Mongolian border with China. We initially set aside five days to film this finale and it ended up taking 22 days. That was partly because of the incredibly harsh weather conditions, but it was largely due to the realities of working with wild animals. We really ran the gamut; the hardy ponies could be relied on to go where they were told, whereas the eagles are never truly tame and some days just didn’t want to hunt, and then lastly you have to try and triangulate these variables with the appearance of a wild fox.

This documentary seems intended for a younger audience. How does that affect your approach to filmmaking?

I agree that the film is family-friendly and carries a positive message, but I would hesitate to say it’s entirely intended for a younger audience. I think it’s rich in a lot of universal themes we can all appreciate, like female empowerment, the relationship between a father and his daughter, coming of age, and the natural world.

So I think my approach to making the film was actually determined by the chronological chain of events I witnessed rather than my having a distinct target audience in mind. I won’t spoil the film, but the path to achieving full eagle hunter status follows a fairly time-honored set of predetermined steps. So the pace and the sequences were somewhat self-selecting. We simply tried to be in place to capture the major milestones on her amazing journey to becoming a master eagle huntress.

At one point, one of the hunting elders makes a dismissive quip that Aisholpan's successes are only "for tourists." Was that a concern making this film—that it could frame her victories too much through an outsider's "tourist" perspective?

As with any community, we encountered a spectrum of opinions while we were filming. At one end, you have Agalai, Alma, and even Aisholpan’s grandfather, who see no good reason why a woman should not try her hand at this ancient tradition. Then at the other end, we met many conservative elders who balked at the very notion of a woman stepping into what has typically been a male preserve.

But you’re right, the naysayers we met were very quick to explain away Aisholpan’s success. They said it was because she was a tourist favorite, they said it was because her bird was exceptional, they said it was because her dad was a great coach, anything but her own ability. But as you see in the film, Aisholpan’s victories are unarguably based on merit alone. She is a record-breaker and she never gives up. That’s the true story we were lucky enough to witness.

This interview has been condensed and edited.

Andrew Lapin is a film critic and journalist who has written for NPR, Vulture, the Washington Post, the Atlantic, and many other publications. Follow him on Twitter.

Source:http://news.nationalgeographic.com/

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Mongolia Faces a Debt Crisis

The mineral-rich country’s prospects were so bright only a few years ago, until the government went on an ill-advised spending spree.

By 

WILLIAM BIKALES

That Mongolia could face an external debt crisis seemed inconceivable just a few years ago. The country of three million people is so rich in copper, gold, coal, iron and other mineral resources that some dubbed it the Kuwait of Asia. Yet today Mongolia faces a real risk of becoming the first mineral-rich country to fall prey to the “resource curse” before it even develops its resources.

The crisis traces back to 2012, when a new Mongolian coalition government took office facing extremely favorable economic conditions, including high mineral prices and strong demand from China. Gross domestic product had grown by 17.3% in 2011 and by another 12.3% in 2012, making the country a global leader.

Investment flowed into Mongolia as a result of an agreement with Rio Tinto to develop the massive Oyu Tolgoi copper-and-gold resource in the Gobi Desert. There was also strong interest in the equally massive Tavan Tolgoi coal deposit in that region, along with other coal, iron and copper deposits.But the new government had won election by making highly populist promises, and this led to a contradictory agenda. On the one hand, the government attempted to renegotiate the already signed Oyu Tolgoi agreement, and in general started seeking better terms from foreign mining firms. This led to a quick drop in investment, growth and revenues. At the same time, the government rapidly expanded spending on housing, government salaries, social welfare and pensions.

The only way the government could finance the resulting large budget deficit was by borrowing. For the first time, Mongolia became a significant global issuer of commercial paper. Between 2012 and June 2016, the government raised $3.6 billion, roughly one-third of GDP, on global bond markets, paying high interest rates. Adding in the swap arrangements with the Chinese central bank and other loan guarantees, Mongolia’s external debt position by 2015 became highly precarious, with total debt of more than 70% of GDP.

There was also a massive buildup of domestic debt. In a throwback to the planned-economy era, the banking sector once again became a major financier of government programs. Total loans in the economy doubled in the first two years of the 2012 government’s term, and the money supply expanded at an extraordinarily rapid pace. Nonperforming loans began to build up.

The state-owned Development Bank of Mongolia, established in 2011, tapped international bond markets to finance infrastructure projects and other programs whose capacity to generate an adequate financial return was far from clear. At the same time, the central bank launched two large direct-lending initiatives through the commercial banks. A “price support program” offered low-interest loans to businesses, while a subsidized mortgage-lending program propped up Mongolia’s real-estate and construction sectors.

As a result, direct central bank claims on commercial banks, which had long been near zero, soared to more than four trillion Mongolian togrog, or more almost $2 billion, by the end of 2013. These programs have been kept off the government’s budget, another throwback to the planned-economy days.

By 2014, international financial institutions expressed measured but clear concern about the deteriorating economic situation. The central bank slowed monetary expansion and budgets were tightened somewhat. This coincided with a continued collapse in foreign investment and a steady decline in global mineral prices due to China’s slowdown. As a result, Mongolia’s growth slowed sharply to 2.3% in 2015 and is likely to be zero or negative in 2016.

But the current economic downturn isn’t primarily due to a decline in global commodity prices. It is the result of the government borrowing heavily against future export earnings while taking actions that deferred the day when those exports would materialize. Instead of preparing for an inevitable cyclical downturn in commodity prices, the government took steps that magnified that downturn’s impact.

One alarm bell sounded in May when the Mongolian Mining Corporation, a 100% private company with a large stake in the Tavan Tolgoi coal mine, defaulted on the $500 million bond it issued in 2012. Although not unexpected, this default is a harbinger of more trouble to come. In the next two years, Mongolia’s cash-strapped government must repay $1.2 billion in commercial debt.

Just two years ago there was still active discussion in Mongolia about creating a sovereign-wealth fund to manage the big foreign-currency surpluses mining would generate. Now the country faces the real possibility of an external debt crisis and sovereign default.

Having borrowed irresponsibly and enjoyed an unsustainable increase in its standard of living, Mongolia has no choice now but to tighten its fiscal belt for the next few years, while encouraging a rebound in sustainable sources of growth. The country must rebuild trust with foreign investors by creating fair and transparent bidding procedures and honoring past contracts, while avoiding the well-known environmental and economic traps that commodity exporters face.

Mongolians elected a new government in June, with a clear mandate to turn the economic situation around. The opportunity is still there, but time is running out. Everyone in the country should be clear that tough steps are needed and the cost of failure could be years of lost growth.

Source: The Wall Street Journal

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