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At the Marshal House, a pastel peach building in the centre of the Mongolian capital Ulaanbaatar, it feels like time has stopped. A tall soldier waves me through ornate iron gates while another lights a fire against the cold spring air in the grand reception room. The thick carpets, full-length drapes and square marble columns exude the lavish but cold formality of Soviet architecture: in the first half of the 20th century this was the residence of Marshal Choibalsan, who ruled with a bloody fist during Mongolia’s early decades as a satellite of the USSR.
Today the country is independent. The huge copper and coal deposits in the Gobi desert that powered its GDP to $11.7bn from just $1.1bn 10 years ago have given rise to the nickname “Minegolia”. The stately routines of the Marshal House are a sharp contrast with the rest of the city: once low-rise and drab, it now boasts glass-and-steel skyscrapers and glitzy billboards, and the roads are crowded with SUVs. Almost half of Mongolia’s 3m people live in Ulaanbaatar; each year, a further 10,000 families migrate here from the vast steppes and desert that make up the world’s second-largest landlocked country. They are lured by the same promise of wealth that has attracted foreign miners and bankers.
But all is not well. Mongolia’s economy has been hit by the crash in commodities prices and a steep drop in foreign investment. The currency is weakening and companies are starting to default on bank loans. I am here to meet Saikhanbileg Chimed, Mongolia’s youngest-ever prime minister, and the man charged with averting a looming economic crisis.
Last November, Saikhanbileg cobbled together a “grand coalition” of parties with a mandate to get Mongolia’s economic house in order. He is currently in a race to push through his agenda before the summer, when the beginning of the next election campaign season will test his coalition’s unity. The prime minister appears tense but defiant: he believes the foreign investment community isn’t giving Mongolia credit for what has been done so far. “In the last two or three years, the Mongolian government has been seen as 100 per cent the guilty party [in any investment dispute],” he complains. “In real life, it is never like that. Even between husband and wife, it is 60-40, 70-30, never 100-zero.”
If it were truly the government’s intention not to let foreigners into Mongolia, he says, there would be no reason for him to have lunch with me. “When we had this big boom, big investment, some people thought, ‘This is such an easy thing — why do we need investment?’ ‘We can just do it by ourselves, why do we need the westerners’ money?’ But it’s not the case, you know.”
At 46, Saikhanbileg is the standard-bearer for the post-Soviet generation of tech-savvy, western-oriented Mongolians. He was a popular television reporter before he first ran for parliament. After decades of staid, communist broadcasting, Mongolians were fascinated by the tall, handsome and politically passionate young correspondent. Many can still mimic his signature sign-off, “Don’t change the channel!”
Today, Saikhanbileg still has some of the television reporter about him. Describing the country’s transformation since its first democratic elections in 1990, he moves his hands along the white tablecloth, as if editing an imaginary piece of film. “We are cutting, putting what the west has experienced in 200-300 years into 25 years,” he says. “It is a quite difficult job. There have been a lot of cuts, a lot of edits, a lot of short-cuts in terms of timing.”
Saikhanbileg’s own life has mirrored those changes. Fluent in Russian, he studied history in Moscow in the late 1980s, and law in newly democratic Mongolia in the 1990s before earning a law degree from George Washington university, Washington DC, in 2002. His generation was, he says, “very lucky”. “Our childhood and young years were spent under a totalitarian regime, so we somehow understand North Koreans right now, Cubans right now, because we were the same. Now, for 25 years, we have been in a western free democracy, free market economy, so we can also understand what the western world looks like. In these 25 years, a very small period of time, we have experienced a rollercoaster, seeing what sunny days and rainy days look like.”
In the sunny days of the mining boom, politicians “divided the pelt before killing the bear”, to use a Mongolian expression. They pledged mining revenues that had yet to materialise and demanded greater shares for the state, fearful that Mongolia was giving away its wealth too cheaply. Now, the boom has gone and the rain arrived. Foreign investment — which at its height in 2011 accounted for half Mongolia’s GDP — has plummeted in the past few years, along with metal prices. The downturn is a severe blow to one of the world’s most resource-dependent economies. Unemployment is at 7.7 per cent and is a particular problem in the “ger” districts — informal settlements of circular yurts — that house the capital’s rising population of migrants, where average incomes are only a few hundred dollars a month. Worse, $1.08bn in international bonds become due in two years, an amount equal to about one-tenth of current GDP.
Attracting more foreign investment would make it easier to refinance the debt. The biggest chunk of that investment would come from a proposed expansion of the giant Oyu Tolgoi copper mine in the Gobi desert. Negotiating with developer Rio Tinto, one of the world’s largest mining companies with a market capitalisation five times the size of the Mongolian economy, has not been easy. Nonetheless, shortly after we meet Saikhanbileg announces on national television that he has a deal “in principle” to move ahead on expanding Oyu Tolgoi as well as a huge coal mine.
Foreigners have complained of Mongolia’s rapidly gyrating policies but, says Saikhanbileg, they must learn to live with the country’s still young democratic process. “Do you want Mongolia to be a totalitarian society under one khan’s rule, making one decision that everyone will follow? That’s not the case. We made this decision 25 years ago and that’s why there will be a majority, there will be a minority, there will be critics and there will be supporters,” he says.
Even so, the Mongolian government was recently shaken by an international arbitration panel’s award of $100m to Canadian-listed Khan Resources, whose uranium prospect near Saikhanbileg’s birthplace in the far eastern province of Dornod was nationalised in 2010. (Payment talks broke down completely after the chief executive of Khan died from diabetes complications in a Mongolian hotel in April and Mongolia said it would seek to annul the award.) When I raise the subject, Saikhanbileg is immediately agitated. “I don’t get why just one arbitration case and just $100m is talked about as if it is an earthquake!” Other countries have faced arbitration claims too, he exclaims, so there is no reason to put Mongolia “under a microscope”.
A broth with tiny round dumplings arrives. Saikhanbileg breaks the tension by telling me it is a favourite Mongolian dish. I ask him about the previous serving — a sweet and oily warm cheese offering with chewy curds that comes in a metal cup. “It was cheese in a special Mongolian way. I didn’t notice what I had but it was cheese,” he says. Was he too upset over my question about Khan Resources to notice? I ask. He laughs and relaxes. “I was not upset!”
We consult a waiter, who explains that it was cheese julienne. A French dish, or Mongolian? I wonder, betraying my ignorance of haute cuisine. Saikhanbileg looks baffled. “It’s hard to say, but the cheese is Mongolian, that’s for sure.” This is followed by a dish consisting of mutton minced with carrots and greens but mysteriously reattached to the rib, as if it were the original cut. Another Mongolian speciality?
“It is sheep.” Saikhanbileg emits a surprisingly realistic bleat for clarification. Like most other Mongolians I have met this week, the PM leaves the side serving of vegetables untouched.
Vegetables remain rare and expensive here, so their presence at mealtimes is one more sign of changing times in Mongolia, where the traditional staple food is lamb. The jarring slide from dependence on the Soviet Union to dependence on mining has left many anxious. One woman I met in Ulaanbaatar phrased it this way: “In the city we worry about pollution, for the countryside it is the environmental damage, and we don’t know if there will be anything left for our children.”
The destruction of the nomadic lifestyle and the grasslands in Inner Mongolia was the subject of a recent hit Chinese movie, Wolf Totem, that transfixed Ulaanbaatar, though Saikhanbileg says he has yet to see it. Only 300,000 of Mongolia’s nearly 3m people are still nomads but this past remains a large part of Mongolians’ identity. According to Saikhanbileg it also plays a part in the national discord over foreign mining investment. “The nomadic style of life makes people adapt very quickly to any circumstances,” he says. “Every person is a decision maker. You talk about why Mongolians are not so unified in a specific area — this is the mentality.”
Earlier this year, in an attempt to get a popular mandate to negotiate the Oyu Tolgoi mine, Saikhanbileg launched a referendum by text message. Mobile phone owners were asked to choose between two evils: big mining projects or austerity. Ten per cent of the population responded, with 56 per cent choosing mining, but the exercise in direct democracy left many Mongolians fuming that it was not a fair question. “It’s like being asked to choose between your mother and your mother-in-law, when what you really want is your wife,” groused one blogger.
For his part, Saikhanbileg says he was pleased by the level of response to the poll. “I did not expect that 365,000 people would participate. That is a big number in Mongolia.” Yet there is one glaring gap in the prime minister’s efforts to build a national consensus: he is not on Twitter. It’s a striking absence in a society where both politicians and the populace tweet constantly. Accusations of corruption or selling out to foreigners fly thick and fast on social media.
“That’s not the approach for me,” confesses Saikhanbileg, who throughout his political career has avoided personal scandal. “I have official channels to introduce myself to society and people. So that’s why it is better not to engage with someone criticising you on Twitter.”
He has, however, gone on TV to complain about online personal attacks. His wife, a former model, runs a beauty spa in Ulaanbaatar and he keeps his young children out of the limelight. “When this offence is on your private life, on your wife and children, it is really hard to accept,” he says. “I lost my very happy youth under the public eye, when I was a TV anchor and entered politics. I didn’t have the chance like a normal young guy to go to nightclubs, dance or whatever. It was always under somebody’s surveillance.” Anyway, he points out, as prime minister, “there is no physical time” for Twitter and it would feel fake to have a staffer do it for him.
The arrival of green tea to end the meal seems like a good time to ask about Mongolia’s powerful neighbours. Attracting western investment is one way to keep Russia and China at bay — what Mongolia calls its “third neighbour” policy. But Mongolians also fear foreigners will flip attractive projects to Chinese buyers. Already the country’s main oilfield is operated by China National Petroleum Corp, after being sold by an American company.
Just on the other side of the Gobi desert, China boasts a population 500 times the size of Mongolia’s. In Ulaanbaatar rising nationalism is coupled with anxiety that the country is slipping into a satellite state of China, so quickly after shrugging off Russia’s embrace. Nearly everyone I met mentioned turning to China for loans as a last resort if the next few years got really tough. But no one liked the idea. “It’s hard to explain,” Saikhanbileg says, slowing down for the first time. The threat of Chinese incursion from the south “was the issue during the past 800 years, maybe more than 1,000 years.” He pauses. “The good thing is that people are concerned about this. As long as the concern is there, we will be in good shape.”
In a sign of the times, the PM is trying to learn some Chinese. He finds the pronunciation hard. If you don’t have time for Twitter, surely you don’t have time to learn Chinese, I suggest.
“For any prime minister the hardest thing is that economic problems, other issues, they never end,” he admits. “Spending time with family, with the children, this type of thing needs to be sacrificed.” But, he finishes: “It’s also a good opportunity to perform something, to achieve something.”
Lucy Hornby is the FT’s China correspondent
Illustration by James Ferguson