Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
By Daniel Worrall, Senior Advisor, with contributions from Charlie Humphreys, Director of Corporate Affairs
Key takeaways
Introduction
On 28 June Mongolians will vote for a new government under a significantly amended election framework. This is an election that could have significant policy and counterparty implications for foreign investment into this thriving Inner Asian democracy.
At the 2020 election of representatives to the State Great Khural (parliament), the Mongolian People’s Party (MPP) won 62 of the 76 available seats giving them a “super majority” ability to pass legislation. Since then, there have been a number of domestic, international, and constitutional changes which have set the backdrop for the 2024 election.
The formal election campaign period will commence on 14 June. Ahead of Party manifestos being published[1], anticipation is building around the policy positions of the two main parties. At a macro level, it is expected that the MPP will continue to focus on delivering the tenets of Vision 2050 including economic diversification to encourage foreign investment, while the main opposition Party, the centre-right Democratic Party (DP), will focus on the environment, allegations of corruption, and attacking alleged errors in the handling of the economy and COVID-19 pandemic, made by the current MPP government. Having not held power since 2016, it is worth noting that the DP is emerging from a period of internal rejuvenation, and in 2023 elected former Education Minister Luvsannyamyn Gantumur to lead the Party into the 2024 election on a moderate and centrist mandate[2].
Key policy issues for the electorate include: economic growth paired with economic inclusiveness and social protection, including implementing a new Sovereign Wealth Fund and the shift to electronic government service provision; corruption prevention especially in the coal sector following recent public protests; provision of education, especially in rural areas; and the environment, including support for herders and continuing to tackle the air quality in Ulaanbaatar.
A changing domestic and international context
Following the transfer of the office of the Prime Minister from Khürelsükh to the energetic Oyun-Erdene in January 2021, with Khürelsükh moving into the Presidential role, progress has been made on Mongolia’s national objective of “By 2050 Mongolia shall become a leading Asian country in terms of its social development, economic growth and its citizens’ quality of life.” through Stage One implementation of the Vision 2050 plan.
Despite the challenges of an early and significant COVID border closure, the economy has remained resilient and export focused, supported by the government’s New Recovery Policy. However, Mongolia’s exports are heavily reliant on the strength of the Chinese economy, and the upcoming (2026) conclusion of a currency swap agreement with China could test Mongolia’s reserves. Both private sector and international government backed investment projects have progressed, which include the commencement of block caving at the multibillion-dollar Oyu Tolgoi underground mine, construction of a new oil refinery with India state backing, expansion of international transport links, and building partnerships around critical minerals.
Mongolia has continued to skilfully navigate international relations, balancing relationships with Beijing and Moscow while simultaneously progressing the “third neighbour” strategy of expanding partnerships with the US and other members of the QUAD partnership[3]. Mongolia’s approach to the war in Ukraine has been to call for dialogue between Russia and Ukraine while abstaining in multiple UN votes on the topic, but also acknowledging that international sanctions have impacted the ability of some investors to utilise Russian materials and supply routes. As Chimed Khurelbaatar, Deputy Prime Minister and Minister of Economy and Development, told Asia House:
“Mongolia’s recovery from the pandemic has been one of Asia’s most remarkable economic success stories. Our ‘Vision 2050’ and ‘New Recovery Policy’ established a clear ambition for our economy, leveraging the strength of our mining sector and global demand for critical minerals to support major infrastructure programmes, unlock international investment, and accelerate economic diversification.
We continue to broaden our horizons, establishing new partnerships with ‘Third Neighbour’ nations across the world, expanding transit routes, land ports and investment incentives. Renewable energy, culture and tourism, film production, technology, and the space sector have all emerged as new and exciting strategic industries, driving growth and innovation while delivering better jobs and living standards for Mongolians.
Combined with responsible financial management, this ambitious economic strategy has delivered results for the Mongolian people. Real GDP grew 7 per cent in 2023, and this trajectory is expected to continue into the future.
Looking ahead, we’re focusing on the next steps we can take to ensure that the benefits of this growth are fairly shared across our country. A key part of this will be identifying new areas for co-operation with our private sector and international partners to continue diversifying our economy and achieve our long-term development goals.”
A revised election system
While there have been multiple changes to the Mongolian electoral system since the rejuvenation of democracy in 1990, the changes implemented for this election are the most significant in recent years and are done with the objectives of refocusing the electoral system more at the regional and national level, increasing transparency, strengthening multi-party governance, and encouraging more women and young people to engage in the electoral process. As Dashzeveg Amarbayasgalan, Chief Cabinet Secretary, shared with Asia House:
“Mongolia is proud of its position as an oasis of democracy, so strengthening our country’s democratic institutions has been one of the Government’s top priorities. Our reforms to the Mongolian Constitution will strengthen the legislature, improve transparency and accountability, and bring elected representatives closer to the people they serve.
It is vital to ensure women and young people are empowered to shape the future of our country, so the Khural will now represent a broader range of voices and perspectives from across our society. As a country, we have come very far on our democratic journey, but we know there is still more work to do. These reforms reiterate our commitment to this effort.”
The way these objectives have been implemented is through 2023 Constitutional Amendments that expanded the size of the Khural from 76 to 126 seats and enabled the shift to mixed-member majoritarian representation using both Proportional Representation for 48 seats from Party lists and a First Past the Post electoral system for geographic constituencies making up the remaining 78 seats. The number of electoral districts has also been reduced from 29 to 13 which shifts the balance between rural seats and those in, and in the environs of, Ulaanbaatar.
While not a specific legislative change, increased Party attention is being paid to the low level of female representation in parliament. Despite Mongolian legislation requiring 30 per cent of candidates for a Party to be female, only 13 seats in the Khural are currently held by women.
While the complexity of the new voting system, timeline for campaigning, and likely number of candidates, mean there is not yet specific and reliable opinion polling, a likely outcome from the election is a shift to a more multi-party democracy with the loss of MPP’s “super majority” and the need for compromises and alliances for new legislation to be passed.
The electoral changes and their implications will likely increase the focus on national, rather than specific/parochial constituency issues while also increasing spirited debate within parliament. It is unlikely that there will be an impact on current desire for international investment, especially those in the renewables, tourism, agriculture, digital/technology, and other non-extractives sectors as the country looks to diversify. However, enabling legislation may well require more time to formulate and debate due to the increased number of parliamentarians and the need for intra-Party alignments.
Advice for businesses:
[1] Party manifestos are reviewed for feasibility of implementation by the National Audit Office before publishing is allowed.
[2] https://www.mongoliaweekly.org/post/mongolia-s-democratic-party-choses-gantumur-as-new-leader-with-focus-on-2024-elections
[3] Member of the Quadrilateral Security Dialogue are Australia, India, Japan, and US
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