Restoring foreign investment high on the Mongolian government's agenda

Mongolia is experiencing challenging times in the lead-up to the general elections in 2016. The country’s traditional balancing act between its giant neighbours has come under increasing pressure in recent months, while winning and maintaining international investor confidence continues to be a multi-faceted and essential task. However, expectations of rapid and sustainable growth among the country’s citizens now exist within the framework of a more uncertain global economic climate in which mineral exports in particular – a staple of the country’s balance of payments – have proven volatile.

In facing this challenging environment, however, Mongolia can draw on a number of significant strengths, both from its past and its present. Not only are the country’s economic fundamentals impressive, but it also has a pedigree of resilience, which, together with a more recent history of democratic governance, vibrant public debate and openness to world markets, stands it in good stead.

Mongolians are justly proud of their heritage, as the former seat of one of the world’s greatest empires, while also being proud of the resourcefulness that has long allowed them to prosper in what remains an extremely difficult environment. Drawing on these strengths, Mongolians now look towards a less troubled and more prosperous future thanks to political stability and economic growth.

From Empire to People's Republic

Long home to various nomadic tribes, it was Chinggis Khan’s great genius in the early 13th century to unite these groups into a powerful force, capable of carving out an empire that, at one time, stretched from the Pacific to Poland. Mongol armies struck into Vietnam, too, and the Arabian Peninsula, becoming a powerful and truly global force. Chinggis Khan’s grandson, Kublai Khan, further consolidated this vast territory, establishing the Yuan Dynasty in China in 1271 with Yuandadu (today’s Beijing) as the empire’s capital, over which it ruled for nearly a century until 1368.

The relationship with China, however, later reversed, with the Manchu Qing Dynasty conquering Mongolia in the latter half of the 17th century. By then, eastward expansion by the Russian empire had also begun, squeezing Mongolian territory back into much of its present form. Qing rule continued until 1911, when an uprising led by the Bogd Khan, who was also the spiritual leader of Mongolia’s Buddhist population, broke out.

Fighting with China continued through the 1919 invasion of Mongolia, until in 1921, with the help of the Soviet Red Army, the Chinese – along with the White Russian army of Baron Ungern – were finally driven out. The hero of the Mongolian revolutionary army was D. Sukhbaatar, one of the founders of the Mongolian People’s Party (MPP), later renamed the Mongolian People’s Revolutionary Party (MPRP). In 2010, the party split, with one part reverting back to the original name and the other group continuing as the MPRP. A Soviet Republic was then declared after the mysterious death of the Bogd Khan in 1924.

Cold War & Dramatic Change

Mongolia remained a staunch ally of the Soviet Union throughout the Second World War and the Cold War. Its state socialist economic system was also highly integrated with Russia’s, along with its military and political cadre. Agriculture was collectivised, radically altering the nomadic, pastoral livelihoods of many rural inhabitants. Mongolia also suffered the purges of Stalin’s time, with some estimates of the numbers killed – mostly in the 1930s – reaching as high as 100,000. Much of the Buddhist clergy, political oppositionists and even some of the early Mongolian communist leaders were among the victims.

When the Sino-Soviet split occurred in the 1960s, early cooperation with the People’s Republic of China also ceased, tying Mongolia even closer to the Soviet Union and the Council for Mutual Economic Assistance. In 1989, however, as elsewhere in the Soviet world, change began. Mass demonstrations in the capital, Ulaanbaatar, followed by hunger strikes, led to the resignation of the MPRP Politburo and negotiations for the first democratic elections. These were then held in July 1990, and won by the MPRP, much to the surprise of the divided opposition parties. The new government then began work on a new constitution, which entered into force in 1992.

The New Republic

This new set of rules established Mongolia as a unicameral republic with a semipresidential, semi-parliamentary system. The head of state in this structure is the president, an office currently held by Ts. Elbegdorj, who has served in the post since 2009, having been re-elected in the 2013 presidential election. Elbegdorj was also a key player in the 1989-90 revolution, and was prime minister in 1998 and then again from 2004 to 2006.

The president is directly elected for a four-year term, which overlaps with parliamentary terms, with a two-term limit. Presidential candidates must be nominated by parties represented in the State Great Khural (SGKh), the single-chamber parliament.

The president has the power to veto legislation from the SGKh, although this may then be subsequently overturned by a two-thirds majority vote in the assembly. The president can also initiate legislation for the SGKh’s consideration and propose candidates for the post of prime minister. The prime minister is also required to sign on to any decrees the president may issue for them to become law. The president may be removed by a two-thirds vote of the SGKh. The current incumbent was formerly a member of the Democratic Party of Mongolia (DPM).

The head of state also has important powers of appointment, including those pertaining to the chief judge of the Supreme Court (SC), while the president must give approval in appointments to other judicial posts. The president serves as the commander-in-chief of the armed forces as well.

The head of the government is the prime minister – a post won by Ch. Saikhanbileg in late November 2014, after the previous incumbent, N. Altankhuyag, lost a vote of no-confidence. Saikhanbileg had previously been a member of Altankhuyag’s Cabinet and, prior to that, he had been a leader of the DPM caucus in the SGKh.

The party that wins a majority in parliament has the right to nominate a candidate for prime minister. The nominee must then pass a vote of confidence in the SGKh and be confirmed by the president – ordinarily because he or she is the head of the largest party in the SGKh – before being able to proceed and form a government.

The prime minister also appoints a Cabinet, which has to receive SGKh approval. Up until October 2014 there were 16 ministries represented in the Cabinet, headed by ministers. These ministers, along with the prime minister and deputy prime ministers, constitute the government. However, on October 7, 2014 the SGKh approved a bill to reduce the number of ministries in the Cabinet to 13, along with 11 regulatory agencies and 19 implementing agencies.

As it is made up of deputies elected to the SGKh, the government effectively serves a four-year term, but this may be cut short by the resignation of at least half the Cabinet, or the resignation of the prime minister, or by a vote in the SGKh to dissolve.

The government may initiate legislation, passing draft bills to the SGKh for deliberation and voting, before they can be forwarded on to the president for final approval. A number of permanent, specialist committees at the SGKh may also deliberate new legislation, with these committees including those on areas such as industry, health, budgets and planning, education and transport.

The Grand Khural

 The SGKh is thus the supreme legislative body in the Mongolian political system. It is currently composed of 76 members, who are elected for four-year terms. All citizens aged 18 years or older are entitled to vote.

The 76 deputies are, however, in two groups. The first, of 48 seats, are popularly elected by district, while the second group of 28 are appointed by the political parties from party lists, according to a system of proportional representation.

The last general election was held in June 2012, with the next one due in June 2016. In 2012 the DPM emerged as the largest party, with 34 seats. The second largest was the MPP, with 26 seats. The MPRP had reverted to its original name as the MPP in 2010, a move that also triggered a split, with a second grouping taking and continuing with the MPRP name. This second group joined with the Mongolian National Democratic Party and DPM to campaign as the Justice Coalition in the 2012 election, securing 11 seats. The Civil Will-Green Party picked up two seats, while three seats went to independents.

The voting represented a significant advance for the DPM, which had won just 28 seats in the 2008 election. This advance was further confirmed when the DPM’s presidential candidate, Elbegdorj, won in 2013, defeating D. Bat-Erdene of the MPP and the MPRP’s N. Udval. The MPP-MPRP split, however, left both without enough votes to form a majority; in 2008, as a single party, they had secured 45 seats. In 2008 Civil Will and the Green Party had campaigned separately, each winning a single seat, and although in 2012, campaigning together, they increased their total number of votes slightly, they failed to secure a major electoral breakthrough.

The MPP went into the 2012 election led by S. Batbold, who had been prime minister from 2009 to 2012. Batbold then resigned after the election and the MPP is now led by M. Enkhbold. The MPRP was led by N. Enkhbayar, formerly the prime minister between 2000 and 2004, and president from 2005 to 2009. Enkhbayar was, however, prevented from standing in the elections by a prison sentence for corruption, for which he was pardoned by the president in 2013. In terms of official policies, the MPP and MPRP come from a more socialist tradition, although the MPP has committed to the “third way” – a more centrist, social-democratic approach, with economic policies that welcome the private sector.

The DPM, meanwhile, comes from a merger of opposition forces, and has similar economic policies to the MPP, although campaigned with a more economic-nationalist position in 2012. There is an overall consensus in favour of opening up Mongolia to the world, although the exact emphasis may differ between the two parties.

Judicial Issues

 The highest court in the country is the SC, which is also the final court of appeal for all matters, criminal and civil, except those pertaining to the constitution. The Constitutional Court has final jurisdiction on those matters.

The General Council of the Courts nominates chief judges for the SC, who are then presented to the president for final approval. Some 24 subordinate justices and one chief justice sit on the SC, with the latter post currently occupied by Ts. Zorig. The chief justice holds office for one, six-year-long term.

The SC is divided into three chambers – criminal, administrative and civil – which form the pinnacles of the three respective systems of courts that operate in the country. The lower courts consist of city, district, aimag (province), soum (district) and intersoum courts. Since 2011 there has also been an administrative court of appeals to hear intermediate cases in this jurisdiction.

Also important in the legal sphere is the Independent Agency Against Corruption, which was established in 2007. The agency has the power to conduct investigations and has recently had some notable and high-profile successes.

Local Authorities

With Mongolia covering a land area similar to that of Spain, France and Germany combined, yet with a much smaller and more dispersed population and very undeveloped transport and communications infrastructure, different regions have long had an important role to play in local governance. The country is divided into 21 aimags, and each has its own khural, or council. Additionally, although Ulaanbaatar falls within Töv aimag geographically, it operates as its own administrative body. Each aimag elects its own governor, while members of the local council are elected every four years. In the case of Ulaanbaatar, the mayor also acts as the capital city governor.

The khurals do have some power, with their own administrative organisation and budget. The aimags further break down into soums and bags (sub-districts), while the capital breaks down into khoroos (regions) and hulens (neighbourhoods).

A programme of decentralisation was initiated by the government in the early years of the 21st century. This programme has been supported by many national and international capacity-building initiatives, while debate on the balance between local and central authority continues.

Outlook

Recent times have seen a surge in interest by foreign investors in Mongolia, along with a jump in economic growth and per capita GDP. Yet, the political consensus around foreign investment turned out to be more fragile than anticipated, with political challenges becoming an important factor putting the breaks on development.

Meanwhile, Mongolia’s perennial challenge of negotiating an independent line between its two giant neighbours, which are both major world powers, has been increasingly difficult, with both Chinese and Russian influence gaining momentum.

Going forward, however, there are signs that Mongolia is emerging politically from a period of debate and heading towards a new consensus, with its government and opposition both aware of the need for a new approach. Restarting stalled negotiations on major projects such as the Oyu Tolgoi mine and restoring foreign investment and economic growth are, therefore, likely to be the main issues dominating the new prime minister’s term. The year ahead, then, could be a crucial one for the country, particularly in the lead-up to the 2016 SGKh election.