Mongolians head to the polls tomorrow to elect a new president in a tight race that will help determine when and how the country will reach consensus on working with foreign investors to tap its vast mineral wealth.
A pressing issue at stake is whether parliament can quickly ratify a long-awaited draft investment agreement on the US$3 billion Oyu Tolgoi copper and gold project, set to be developed by Ivanhoe Mines and Rio Tinto.
While the office of president is largely ceremonial, the contest over that symbol of national unity has already distracted parliament from working on approving the landmark agreement. Any disputes over the election’s outcome could further push back progress.
A victory by opposition Democratic Party (DP) candidate Tsakhiagiin Elbegdorj over incumbent Nambariin Enkhbayar of the ruling Mongolian People’s Revolutionary Party (MPRP) could set back foreign investors’ long-term interests.
“If Elbegdorj wins, that would be a pretty strong signal of probably more complications in policymaking over mining, given his track record on anti-foreign and populist inclinations,” said Damien Ma, of the political risk consultancy Eurasia Group.
Mongolia, whose annual per-capita income is about US$1,200, wants to use its deposits of copper, gold, uranium, lead, zinc, and coal to pull its nearly 3 million people out of poverty.
The government’s desire to formulate the Oyu Tolgoi deal as a template for future mining projects has meant negotiations have dragged on for years, as Mongolia seeks to ensure it obtains more favorable terms than with past projects.
But sealing the deal quickly is important if Mongolia hopes to realize its ambitions of becoming a mining powerhouse and take advantage of the next upturn in commodity prices.
In the meantime nearly US$1 billion in foreign loans and grants are helping Mongolia, a vast, windswept country wedged between Russia and China, through a collapse in mineral prices, particularly for its biggest export, copper, that has seriously dented income.
Any repeat of the type of unrest and ensuing legal struggles that followed last year’s parliamentary elections, in which at least five died, could postpone the Oyu Tolgoi project and other investments further, just when the country most needs to secure future sources of revenue, Ma said.
If any post-election disruptions to progress on mining were serious, there could even be a “low, but slight uptick” in the risk that Ivanhoe or Rio Tinto could become so disenchanted that they would think twice about Oyu Tolgoi, he said.
Frustration over rampant poverty and perceptions of official corruption appear to be working in favor of challenger Elbegdorj, said Luvsandendev Sumati, director of the Sant Maral Foundation, a group that does polling and surveys.
A poll by the foundation late last month showed that 37 percent of voters favored Elbegdorj, while just more than 36 percent would vote for Enkhbayar.
Polling is not permitted during the seven days prior to the election and exit polls are also banned, but Sumati said there were signs Elbegdorj had been gaining among constituencies that have traditionally favored the ruling MPRP.
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