At a crossroads: The twin task of advancing political and market reforms

Some 22 years after holding its first multi-party elections, contemporary Mongolia has achieved much in the political arena, with a democratic culture established seeking peaceful means in the resolution of disputes and conflicts. In recent years, this has gone hand in hand with greater market openness, as foreign investment and participation in the country’s economic development has been encouraged. Mongolia has also looked beyond its immediate surroundings to bring in investors from the wider world, creating what has in many ways been a gold rush of foreign interest.

OBSTACLES AHEAD: Today too, though, the country faces some major challenges in taking this democratic and free-market approach forward. The 2012 elections resulted in a coalition that has proven unstable, with issues such as the relationship between government and the judiciary, the fight against corruption, and resource nationalism all major points of contention. Meanwhile, Mongolia’s strategic position, between the two giant neighbours of Russia (to the north) and China (to the south) continues to shape the country’s outlook. Interactions with these major powers can strongly influence the general business and investment climate domestically, with the “third neighbour” strategy a response to this reality (see analysis). Yet for all these challenges, the underlying strength of the resource-rich economy, coupled with the determination of Mongolians to create a robust and open society, will likely help guide the country forward in the immediate and long-term future.

PROUD HISTORY, ANCIENT CULTURE: What is now Mongolia has been inhabited for at least the last 40,000 years – the age of the first early humanoid finds there. The Stone and Bronze ages also left their mark in a scattering of places across the country, while the early Iron age saw the establishment of large, nomadic tribes in the region, their economy based on herding. Indeed, the geography of vast steppes and mountains, subjected to the extremes of harsh winters and hot summers, established a way of life here in ancient times, which has for all intents and purposes survived until today. Herding imposed its cyclical, seasonal rhythms on the people, who traded with more settled agricultural neighbours while moving vast numbers of yak and horses across the often unforgiving land.

These nomadic tribes often formed confederations, with these eventually coalescing into more established kingdoms, or khanate. The first of these was the Xiongu Empire, of the third century BCE, followed by the Turkic Göktürk and Uyghur Khaganates, and the Kyrghiz and Khitan Lioa Dynasty, respectively.

MONGOL EMPIRE: The Mongols, as a distinct entity, first arrive in the history books in the ninth century, with these early tribes then evolving into a distinctly Mongol kingdom – the Khamag Mongol Confederacy – by the 12th century. That period also saw the arrival of Temujin, later known as Chinggis Khan. Born in 1162 and living until 1227, he and his immediate successors were not only able to unite the differing confederacies of the region into a large Mongolian state, but also conquer a sizeable proportion of the known world.

Indeed, the armies of the Mongol Empire covered the Danube to South-east Asia, while conquering much of China. Chinggis’s successor, Ogedei Khan, made Karakorum the Mongol capital, while his armies neared the Adriatic coast. Kublai Khan then later re-established Buddhism in Mongolia and moved the capital to modern-day Beijing, where he was head of the Yuan Dynasty and ruler of all China. The empire then fractured, however, into Yuan Chinese, Golden Horde, Chagatai and Ilkhanate territories. The rising Ming Dynasty then pushed the Yuan out, while the other territories of the empire fell away – mainly to the rising power in the west, Russia. Eventually, in the 17th century, Chinese Qing Dynasty troops occupied what is now Mongolia, beginning a period characterised by rebellion and repression.

PERIOD OF TURMOIL: In the 20th century, however, and with the weakening of the Qing Dynasty, a large rebellion in 1911 successfully created an independent Mongolian khanate, with the Bogd Gegeen enthroned as the Bogd Khan. A period of great turmoil then ensued, though. Chinese troops re-occupied the khanate in 1917, following the outbreak of revolution in Russia. Then, in 1920, the White Russian army of Baron Ungern von Sternberg invaded, driving the Chinese out by 1921 and restoring the Bogd Khan.

SOVIET ALLIANCE: The year 1921 also saw the establishment of the Mongolian People’s Party (MPP) though, later renamed the Mongolian People’s Revolutionary Party (MPRP), which sought to ally Mongolia to the Soviet cause. The Mongolian Revolution thus began in March that year, led by Sukhbaatar, fighting in cooperation with the Soviets. The MPP took power, establishing a Soviet-style state by 1924, and in 1928 forced collectivisation began. As a close Soviet ally, Mongolia also suffered the purges of Stalin’s era, with 1937 seeing the killing of large numbers of the Buddhist clergy in particular. Mongolian troops took part in the 1939 Soviet victory over Japan at Khalkyn Gol, and in the 1945 Soviet invasion of Japanese-occupied China.

In August 1945, China also agreed to recognise Mongolian independence, following a plebiscite to be held a few months later. During the Cold War, Mongolia gained a reputation as a loyal Soviet ally, siding with Moscow in the Sino-Soviet split. Likewise, Mongolia followed the Soviet Union into the turmoil of the perestroika and glasnost years, with 1989 seeing the first democratic organisations established. A mass meeting that turned into a demonstration in 1990 led to the resignation of the MPRP government, with the first democratic elections then held in July 1990.

NEW CONSTITUTION: The current constitution of Mongolia came into force in 1992, with major amendments made in 1999 and 2001. The constitution creates a mix of presidential and parliamentary models.

The president is head of state and commander-in-chief of the armed forces and, since 1992 has been directly elected for a four-year term, with a two-term maximum. In addition, the president has the power to nominate the prime minister and veto legislation coming from the parliament, the unicameral Ikh Hural – “Great Congress” – otherwise known as the State Grand Khural (SGKh) or State Grand Assembly. The SG kh is able, however, to overturn a presidential veto if it can gain a two-thirds majority for doing so. The president also appoints the chief judge of the supreme court and has to give approval for many other judicial appointments. The president can be removed by a vote of the SGKh if the constitutional court, the supreme judicial arm on constitutional matters, finds the president to have violated the constitution or committed an abuse of power. The prime minister, meanwhile, also has a four-year term and must be confirmed by the SGKh after nomination by the president. In effect, the president designates the person who will command a majority in the SGKh. The prime minister then appoints the cabinet, which then must also be approved by the Assembly. The cabinet forms the government, which also has the power to propose legislation to the SGKh.

Since the start of democratic rule, four people have held the office of president and 10 have held the post of prime minister. The first president was P. Ochirbat, in office during the transitional phase from 1990 to 93 as a member of the MPRP, then also again from 1993 to 97 as a member of the Mongolian Social Democratic Party (MSDP). Ochirbat was succeeded by the two-term N. Bagabandi of the MPRP, who held office from 1997 to 2005. Bagabandi was followed by N. Enkhbayar, also a member of the MPRP, during the 2005-09 period, when Ts. Elbegdorj of the Mongolian Democratic Party (MDP) took over. His term is scheduled to terminate in June 2013.

POLITICAL ALLIANCES: Two main party political strands have thus dominated elections since 1990. Arising out of the pro-democracy movement that challenged one-party communist MPRP rule, the Mongolian Democratic Union (MDU) first took office between 1996 and 2000. This force also scored highly in the 2004 elections as the Motherland Democratic Coalition (MDC), with a hung parliament under an MDC prime minister resulting. This lasted until 2006, when the MPRP won the following election. The most recent June 2012 elections then saw the latest manifestation of the MDU strand, the MDP, return to office.

Meanwhile, the other main strand, the MPP-MPRP, is unusual in former Soviet countries, surviving and even prospering through the transition to democracy. The party has had two long-standing factions, however. When the party changed its name in 2010 back to its original one, MPP, one of these factions, under Enkhbayar, continued under the MPRP name, while the other continued as the MPP.

The SGKh itself, meanwhile, is a unicameral institution consisting of 76 members elected for four-year terms from 26 multi-member constituencies. In 2012 these elections were held for the first time under a block vote system, meaning that 48 members were elected from the local constituencies and 28 others were chosen from party lists on a proportional basis.

The assembly has the right to nominate candidates for the direct elections to president and confirms the result of the presidential election. It is also the supreme legislature, debating, introducing and passing the country’s laws. Elections to the SGKh have often resulted in a hung parliament, with voters often very evenly divided between the two main strands.

COALITION: The elections of June 2012 were no exception to this. The MDP became the largest party in the SG kh, with 31 seats and 35.32% of the vote, while the MPP won 25 seats and 31.31%. The MPRP ran along with the Mongolian National Democratic Party (MNDP) as the Justice Coalition, and won 11 seats with 22.31% of the votes. Other seats went to the Civil Will-Green Party and to independents, the former winning two, the latter three. Five seats were contested, with the results still suspended awaiting investigation by the General Election Commission (GEC) at time of writing.

Given this balance of forces, the result was a coalition government consisting of the MDP and MPRP. The coalition was functioning smoothly until December 2012, when the MPRP threatened to pull out in protest at the imprisonment of Enkhbayar, the former president who had also been prime minister between 2000-04. Jailed on corruption charges, the MPRP supported Enkhbayar in his claims that these charges were politically motivated. However, this has since been resolved; the MPRP has announced that it will remain in the coalition. There was also widespread speculation that another election might soon be on the cards. November 2012 also saw local elections in Mongolia.

The country is divided into 21 provinces, known as aimags, and one city, Ulaanbaatar. Each of these elects a local assembly, or khural. Each aimag and Ulaanbaatar is then further subdivided into districts, or soum, with the capital divided into nine of these. The MDP won majorities in 12 provinces and seven districts of Ulaanbaatar, the MPP won nine provinces and two districts.

In terms of seats, the MDP won 379, nationwide, the MPP 334 and 23 went to the other parties. Turn-out in the capital was particularly low, however, with seven districts seeing less than 50% of registered voters casting a ballot – triggering re-runs in those districts.

JUDICIAL POWERS: The Romano-Germanic-based Mongolian judicial system follows the hierarchy of soum-aimag-nation in terms of courts of ordinary jurisdiction. The courts of first instance are at the soum level, the appellate courts at the aimag, and the supreme court is the highest judicial organ in the land. The supreme court is headed by the chief judge, appointed by the president, and has 12 other judges to its name. The chief judge also heads the General Council of Courts, which selects lower judges and is charged with preserving judicial independence. An administrative court was also established in 2004.

The supreme court can examine criminal cases and human rights cases referred to it by the constitutional court, which has exclusive purview in interpreting constitutional law. The nine judges of the constitutional court are appointed by the SGKh for six-year terms.

OUTLOOK: With presidential elections due in mid-2013 and uncertainty surrounding the government in late 2012, these are challenging times for Mongolia. There is thus a strong possibility that 2013 will see a considerable amount of political manoeuvring, with this of concern to investors, as well as to citizens.

The country has certainly come a long way since 1990 though, both politically and economically. The momentum of reform has proven highly attractive to businesses, foreign and domestic, with the vast resources of this country only now beginning to be tapped. The impact of urbanisation and opening out to the wider international community, and the management of the expectations these changes produce, are also major tasks facing the country’s government, from the soum centre to the SGKh.

Yet for all the key challenges, Mongolia is also a country of considerable resources, not only in minerals, but in terms of the talent and strength of its people. Indeed, Mongolia’s long, great history is still a tangible, unifying force for the country, of which Mongolians are justifiably proud. Celebrating this history while embracing the wider world may likely be the route going forward.