Mongolia: Do Oligarchs See Politics as a Growth Opportunity?

Originally published by EurasiaNet.org
Mongolia: Do Oligarchs See Politics as a Growth Opportunity?
by Regis Gente
EurasiaNet.org

Reflecting Mongolia’s booming economy, Ulaanbaatar’s skyline has been transformed in recent years, with socialist-style low-rise buildings displaced by lots of steel and concrete structures. And as the towers go up, their owners seem to go into politics.

Mongolia’s economy grew by 17.3 percent in 2011, up from 6.4 percent in 2010. Foreign direct investment, mostly in the mining sector, totaled some $5 billion last year. The country sits on vast coal reserves, mostly untouched, lying within sniffing distance from energy-hungry China. It’s not surprising, then, that what some call the world’s fastest-growing economy is producing nouveau-riche oligarchs.

On the southeast corner of the capital’s Sukhbaatar Square -- where Mongolia’s parliament building is dwarfed by vast new construction projects -- stands the 17-floor Central Tower, owned by MCS, a company with interests as diverse as energy, infrastructure, alcohol, cashmere and telecommunications.

The glass-and-steel Central Tower might be unbending, but it is a reminder of which way the wind blows. Well-connected businessmen say that MCS is a longtime supporter of the Mongolian People's Revolutionary Party (which a few months ago dropped the “Revolutionary” after an internal split and became the MPP), heir to the socialist-era Communist Party. Underscoring the concerns that politics are being taken over by wealthy entrepreneurs, an MCS vice president, Enkh-Amgalan Luvsantseren, was elected to parliament with the MPP party during the last elections in June. (Luvsantseren subsequently resigned his corporate post).

The party is “a band of apparatchiks who became oligarchs," contends political scientist Sumati Luvsandendev, director of the Sant Maral Foundation.

A Western entrepreneur who has lived for over a decade in Ulaanbaatar repeats a joke that widely circulates about town: "Do you know what MCS means? Answer: Mongolian Corruption System." Though the jest might be unfair, it does highlight how big business is perceived locally.

On the opposite side of Sukhbaatar Square stands the 14-floor Bodi Tower, a building that represents the MPP’s biggest rival – the Democratic Party. President Tsakhiagiin Elbegdorj, who has been in office since 2009, is from the Democratic Party. Entrepreneurs close to Bodi Group, a holding company with a wide range of interests including banking, real estate, IT and media, say the company is packed with DP supporters. Bodi Group President Zorigt Munkhchuluun was recently reelected as a DP deputy. (Munkhchuluun has since given up the leadership of Bodi Group).

"These groups, and many others, sometimes smaller, now want to be represented in parliament, both to protect their business and get new ones,” alleges Gantumur Uyanga, a newly elected MP from a small party.

Uyanga is a former journalist who gained notoriety in 2010 after she went on hunger strike to protest against MPs who, she said, do not fulfill their promises. She names a number of new MPs and cabinet members with opaque business backgrounds. "Many owners of gold mines or coal [mines], or members of their families […] were elected to the last parliament,” says Uyanga.

Civil society activists are suspicious that entrepreneurs are getting into politics in order to take advantage of insider information concerning the privatization of lucrative state assets, as well as the granting of mining licenses.

"They had access at some point to information on mines and promising privatization processes," says a former senior government official now working for an international NGO, who spoke on condition of anonymity.

Mongolia ranks 120 of 183 countries in the global watchdog Transparency International’s Corruption Perceptions Index, up from 102 in 2008 and 85 in 2005. In August, a Mongolian court jailed former president Nambar Enkhbayar for four years on corruption charges. Enkhbayar served for 10 years as prime minister and president until 2009. He calls the charges politically motivated.

How political parties are funded is at the heart of the problem, says Luvsandendev, the political scientist. “It is not only the oligarchs that are taking the political parties under their control, but the parties themselves are growing their own oligarchs. This will not give us anything good for the strengthening of our young democracy,” he says.

Some observers are less pessimistic, believing the proliferation of foreign companies in Mongolia is encouraging a more transparent business culture. “I see this country moving forward. Many businesses, especially in the mining sector, are connected with foreign money. That does oblige the Mongolian firms to be more transparent,” says Peter Morrow, an American businessman with 12 years of experience in the country.

Editor's note: Regis Gente is a freelance reporter based in Tbilisi.