Foreign Policy Implications of Mongolian Crony Democracy

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Foreign Policy Implications of Mongolian Crony Democracy
Publication: Eurasia Daily Monitor Volume: 11 Issue: 47
March 12, 2014 05:06 PM Age: 7 hrs
By: Mendee Jargalsaikhany

Though considered a healthy—albeit developing—democracy (http://www.osce.org/odihr/elections/105158; www.santmaral.mn/en/publications), Mongolia has in recent years become dominated by the competing interests of its political and business factions, whose collective actions undermine the country’s democratization trends as well as complicate Ulaanbaatar’s foreign policy. For now, Mongolia resides in a stable and largely friendly neighborhood, its democratic system is peaceful, and it boasts valuable natural resources. But the intense competition among its domestic political and business factions welcomes assertive Russian interests, increases Chinese dominance, and discourages Western investors.

Recently, powerful businesses and wealthy entrepreneurs have come to dominate Mongolia’s major political parties—the ruling Democratic Party (DP) and the opposition Mongolian People’s Party (MPP)—as well as the parliament and the executive branch. This business sector dominance encourages profit-maximizing competition among party-affiliated businesses and discourages any legislative or judicial efforts to constrain their influence in politics. Such competition appears to slow down under coalition governments (e.g., 2004–2008 and 2008–2012), but expands unchecked when one party establishes a majority government (e.g., 1996–2000, 2000–2004, 2012–2016). Under a majority government in Mongolia, the ruling party routinely cancels the previous government’s projects, names party-affiliated politicians or businessmen to key posts in the government bureaucracy and state-owned enterprises, and influences judiciary and law enforcement organizations. For instance, today, 74 members of parliament (out of 76) hold wealth equal to 7.6 percent of GDP, and only 4 members of parliament account for 64 percent of this net wealth (http://www.themongolist.com/blog/parliament/79-the-wealth-of-parliament-redux.html).

Given the inherent economic uncertainties in Mongolia’s commodities markets and rates of foreign investment, profit-maximization strategies appear overtake all other political issues that divide the country’s political and business factions. Consequently, the ideological lines between Mongolian political parties have become blurred, and these parties remain vulnerable to ever-changing short-term coalitions or dissolutions based on convenient business deals. Since 2005, the natural resource boom has intensified this competition by creating expectations of business opportunities (e.g., the growing market need for supply and support businesses) and the influx of funds (e.g., investment, fees, royalties). And this domestic phenomenon, in turn, affects Mongolia’s foreign relations with Russia, China and the Western democracies.

Mongolia’s historical sensitivity to China provides a favorable climate for Russian business groups. Although Russia’s geo-strategic interests in Mongolia have declined somewhat since the fall of Communism, Russian business groups have been influential in reviving interest in Mongolia. A recent interview by Russian goldmine owner Sergei Paushok, who contested Mongolia’s imposition of a windfall profit tax, triggered quick debates among the country’s politicians regarding policies to attract Russian business (Zuunii Medee October 26, 2013; Medee.mn, October 28, 2013).