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Mongolia strikes it rich, but at what cost?

Vast mineral deposits are bringing wealth to this country of 3 million. Now Mongolia is in a race to stem the threat of corruption.

By Staff writer / July 25, 2012

A Mongolian honor guard awaited the arrival of US Secretary of State Hillary Rodham Clinton outside the parliament in Ulan Bator, Mongolia, July 9.

Andy Wong/AP

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Ulan bator, Mongolia

If you've never heard of Ulan Bator, that's about to change.

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  • Mongolia

    Graphic Mongolia
    (Rich Clabaugh/Staff)

Mongolia, of which this ramshackle city is the capital, is on the cusp of cashing in on the planet's richest untapped store of copper, gold, other precious minerals, and coal. There could be enough underground wealth in the steppe to make every nomadic herder a millionaire.

Lucky Mongolians? Maybe. The kind of money that is going to start flowing here soon could buy an awful lot of consumer goods, not to mention more durable benefits such as schools, hospitals, roads, and wind farms.

But sudden floods of easy cash are not always a blessing. Ask the citizens of Nigeria or Papua New Guinea, most of whom seem to have experienced a tragic spiral of corruption, violence, and poverty in the wake of their resource booms.

Mongolia's Deputy Finance Minister Ganhuyag, who like most Mongolians uses only one name, likes to boast of his country's future as Asia's "alpha wolf economy," pointing out that the country's gross domestic product is currently growing by 16.7 percent a year, the fastest pace in the world.

But that is not the whole picture, acknowledges President Elbegdorj. "The government and the people are very aware of the risk of the 'natural resource curse,' " he says. "And we are also very aware that with bad government and corruption my country will be in trouble."

'Whether we want it or not'

Mongolia is in "a race" to build its institutional, political, and moral defenses "before large-scale revenues materialize," according to a recent report by the European Bank for Reconstruction and Development. There are "grounds for optimism," it found, but "remaining challenges are enormous."

As far as Munkhbayar is concerned, sitting in the yurt he has pitched in a meadow by the banks of the fast-flowing Tuul River, the damage has already been done.

A prominent environmentalist who has campaigned against the gold mines that have polluted Mongolia's rivers and lakes, Mr. Munkhbayar deplores how the mining boom means "people now are interested only in earning money, not in taking care of our motherland."

If he had his way, Mongolia would not dig holes in the ground at all – "our resources should be left where they are," he says – but rely instead on tourism and herding.

Though his position is extreme, his sensibilities are widely shared. "Most people in the countryside do not want mining here," says Oyun, a geologist and member of parliament for the centrist Civil Will-Green Party.

"But whether we want it or not," she adds, "we don't see many venues Mongolia can use except mining to expand our economy and integrate ourselves into the world economy. Like it or not, we have to use mining as the main engine for growth at this stage, and hopefully the revenues will be wisely spent."

Ms. Oyun, who heads a foundation commemorating her murdered brother, Zorig, a hero of Mongolia's democratic movement, is relatively sanguine.

Though it is too early to predict how the country will turn out, she says, she points to new laws on corruption, conflicts of interest, freedom of information, campaign finance, judicial reform, and environmental standards as hopeful signs.

"Most decisionmakers here realize that the main factors determining whether the resources are a blessing or a curse are strong institutions, good governance, and the rule of law," Oyun says. But laws are not always implemented. Munkhbayar staged a couple of publicity stunts in 2010 and 2011, opening fire on mining equipment at mines he thought should be shut in assaults he had announced at press conferences. No person was targeted or hurt. He has not been punished.

'Corruption is everywhere'

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