Economy Woes Lift Mongolian Opposition to Power in LandslideMichael Kohn
MPP wins 65 seats in Great Hural; ruling Democrats win nine
Commodity slump, rising debt made vote referendum on economy
The Mongolian People’s Party was expected to trim spending after returning to power after a landslide election that focused voters’ attention on slowing economic growth and a doubling of external debt under the ruling party.
The MPP, which ruled uncontested for decades during Mongolia’s communist era, won 65 of the 76 seats in the Great Hural, General Election Commission chief Choinzon Sodnomtseren said Thursday, citing preliminary results. The ruling Democratic Party conceded defeat after winning just nine seats, down from 38 previously. Turnout was just more than 72 percent.
The election was largely billed as referendum on the $12 billion economy, after growth tumbled from more than 17 percent in 2011 to just 2.3 percent last year. While much of that decline can be attributed to a slowdown in China and weak prices for Mongolia’s major exports of coal and copper, voters also blame the government for missteps and rising debt. The MPP had also called on voters to reject the DP’s spending plan, which doubled external debt in four years.
Democratic Party chief Enkhbold Zandaakhuu and Prime Minister Saikhanbileg Chimed were among several DP leaders who failed to win their own constituencies. The Mongolian togrog weakened as much as 1.7 percent, the most since August 2014, to 1,985 per U.S. dollar.
"While Prime Minister Saikhanbileg did a good job correcting some of the mistakes of his party since 2012, the overall economic results have been dismal and the voters wanted a change," said Pete Morrow, a partner at Ulaanbaatar-based advisory firm NovaTerra. "The new MPP government has every chance to put in place a coherent, positive program to fix Mongolia’s problems and embrace the role of foreign investment as part of that. Certainly, they bring to the task a number of familiar faces that we know and trust."
Morrow emphasized the need to maintain consistency at Erdenes Mongol LLC, which holds state stakes in resource assets such as the Tavan Tolgoi and Oyu Tolgoi mines.
Erdenes Mongol Chief Executive Officer Byambasaikhan Bayanjargal, who also heads the Business Council of Mongolia, said he didn’t know whether the new government would seek to replace him. He said he expected the MPP to continue policies toward foreign investment and that the country needed to continue developing its infrastructure.
"I haven’t heard anything drastic that we are going to shift 180 degrees in the other direction," Byambasaikhan said.
With elections now behind him, MPP Chairman Enkhbold Miyegombo is expected to seek spending curbs as the country tries to tackle around $1 billion in debt due next year and early 2018. While a delay in the development of the Oyu Tolgoi copper-and-gold mine has been a factor in the slowing growth, Mongolia has still managed to access credit markets.
"There was a great deal of investor comfort with Democratic Party Prime Minister Saikhanbileg, so the challenge for the MPP is to pick a prime minister that inspires a similar level of confidence," said Nick Cousyn, chief operating officer of BDSec JSC, Mongolia’s largest brokerage. "The election result was a clear message from voters that they want change and economic growth."
Cousyn cited the defeat of incumbent lawmakers who were critical of overseas mining companies such as Rio Tinto Group as a positive sign.
Two seats were won by singer Samand Javkhlan, who ran as an independent, and a candidate from the Mongolian People’s Revolutionary Party. Overall turnout was just over 72 percent.
The MPP ran Mongolia for 69 years until 1990, when it was also known as the Mongolian People’s Revolutionary Party. Wednesday’s election was the largest win by a party since the MPP won 72 seats in the 2000 election.
“The Mongolian people have made their choice. We respect this decision,” Enkhbold said early Thursday. “The last four years have been difficult. I congratulate the MPP and the ten or so DP winners. I’ll take responsibility for this loss.”
Ashleigh Whelan, country director for the International Republican Institute, said economic concerns led voters to seek a new direction.
"It’s clearly about economics," Whelan said. "They are looking for prosperity, they are looking for higher employment and they are looking for change."