Mongolia’s Global Resurgence And Oyu Tolgoi’s Promise – Analysis


By Julian Dierkes

In Mongolia, the economy continues to recover from COVID-19, partly due to the completion of underground construction at the giant Oyu Tolgoi copper mine and record-high coal exports. In domestic politics, constitutional amendments were passed that will see Mongolians vote for an expanded parliament in June 2024.

During the summer of 2023, the Mongolian government received a flurry of international visitors and Mongolian officials went on multiple overseas visits, reinforcing the sense of renewed engagement with the world under Mongolian President Ukhnaa Khurelsukh. This shift was not only due to Khurelsukh’s initiative but also due to renewed interest from OECD countries, recognising the geopolitical challenges posed by Russian aggression and US-China and EU-China confrontations for Mongolia.

For over 15 years, the Mongolian government has banked on the riches that will ultimately arrive from the Oyu Tolgoi operation in the form of the government’s 33 per cent equity stake, but also as large tax payments. With the commencement of underground production in March 2023, the days of sustained financial flows seem to be approaching.

Operational and technical issues had delayed underground production, further delaying an opportunity for the Mongolian government to make payments on profligate borrowing from the early 2010s, when riches seemed just around the corner. Assuming this news will not bring on another round of profligacy — linked to election campaign promises for the June 2024 parliamentary election — several years of disciplined spending will ultimately restore Mongolia’s fiscal situation by the 2030s.

Fluctuations in global copper prices will impact mine-generated income, especially given the state budget’s heavy reliance on income from the long-standing operations at the Erdenet copper mine. Hopefully the lessons learnt over the past 15 years will be applied by the government to ride out such fluctuations, especially as they are somewhat evened out by tax income. Coal exports have been very strong, providing immediate growth impetus, leading to nearly 6 per cent GDP growth.

The blossoming of the Oyu Tolgoi project will likely have an impact on political debates. The promise of this project has fuelled voter expectations for a long time — expectations that have gone somewhat unfulfilled, even when GDP has been growing. The disappointment has often translated into political discontent and politicians have responded with more populist promises.

Large demonstrations in April and December 2022 did not reoccur in 2023, marking a relatively quiet year on the domestic political front. In response to the December 2022 demonstrations triggered by disclosures of corruption in state-owned coal enterprises, the government has announced a somewhat steady stream of anti-corruption measures. The effectiveness of these measures in fighting corruption and quelling popular distrust of politicians and their motives remains to be seen.

The big domestic political news of 2023, with implications for the June 2024 election, was the expansion of parliament from 76 to 126 seats, and the decision to have 48 of those elected through proportional representation. The Mongolian People’s Party will still probably win the election but the opposition — including the Democratic Party and KhUN Party — is likely to grow its representation in parliament.

The Mongolian People’s Party’s embrace of these changes will undermine its own electoral position. But its super majority had made it difficult to maintain party discipline in parliament and prevent public spaces from becoming venues for political opposition through demonstrations. Despite these challenges, Prime Minister Luvsannamsrain Oyun-Erdene remains in office and looks to have a good chance of completing a full term.

In international relations, 2023 was a year of increased diplomatic visits signalling a re-embrace of Mongolia by European partners engaged in values diplomacy, recognising Mongolia’s status as a democratic outpost. The presidents of France and Poland visited Ulaanbaatar, with French President Emmanuel Macron signing uranium contracts. The reasons for the Pope’s visit to check the steppe off his bucket list are less clear. Visits have continued into 2024 with German President Frank-Walter Steinmeier visiting on 7–8 February 2024 and signing a strategic partnership declaration.

In addition to more common visits to Asian partners, Oyun-Erdene also paid a visit to Berlin and Washington and Foreign Minister Battsetseg Batmunkh hosted a meeting of female foreign ministers in Ulaanbaatar. The Washington visit was particularly noteworthy, as the Mongolian delegation met with several US officials, signalling continued US engagement with Mongolia that has been gentle enough not to spook Beijing. Public unease with the government’s silence on Russian aggression against Ukraine continued, but has not been a focus of parliamentary debates. Unease was heightened by delays in fuel deliveries from Russia.

  • About the author: Julian Dierkes is Associate Professor at the University of British Columbia’s School of Public Policy and Global Affairs. He was recently awarded the Mongolian government’s Friendship Medal and is one of the principal authors of the Mongolia Focus blog.
  • Source: This article is part of an EAF special feature series on 2023 in review and the year ahead.

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