The nomadic ‘oasis of democracy’ with a mission to become the next South Korea

Ulaanbaatar: Mongolians will tell you they are agile. Which means they are not good at planning ahead.

Thousands of years of nomadic living have made the people of this arid landlocked country able to adapt fast when disaster strikes.

But it has left Mongolians struggling to keep up with longer-term global economic shifts that have centralised populations, money and power.

Children wear superhero costumes in front of the Government Palace in Ulanbaatar.Credit: Sanghee Liu

Oyun-Erdene Luvsannamsrai, Mongolia’s 43-year-old prime minister, is trying to change that. He is in the midst of instituting the broadest political reforms seen since the country split from the Soviet Union and became a democracy in 1990.

The government is overhauling its majoritarian system to mirror New Zealand’s parliament of proportional representation – even if it might cost Oyun-Erdene’s Mongolian People’s Party power at the next election.

It is also launching a corruption drive that will hit some of the country’s most prominent families, and weaning itself off its giant neighbours Russia and China.

“Mongolia does not have anything to hide,” Oyun-Erdene says in an interview in his office at the Government Palace in Ulaanbaatar.

“We have to make reforms.”

Prime Minister of Mongolia, Oyun-Erdene Luvsannamsrai in his office in Ulaanbaatar.Credit: Sanghee Liu

The Harvard graduate has the build of a wrestler. He is the first Mongolian leader not to have been educated in the Soviet Union and leads a country where 70 per cent of people are under 35.

Outside his office on Sunday, students surrounded a yurt while children rode around Ulaanbaatar’s main square on electric ponies to pumping drum and bass.

But for years Mongolia’s youth have been left behind by chronic dysfunction, 14 changes of government in the past two decades (lasting an average of nine months) and an over-reliance on the mining sector.

Then COVID-19 hit, China sealed its borders and Russia launched its war on Ukraine.

Oyun-Erdene decided it was time to move.

“I do believe that my tenure as the prime minister has been unique because of these two main issues,” he says.

“We had to find some advantages from this situation. For us, the most important thing for Mongolia is to make our economy independent.”

Young Mongolians enjoy riding a bicycle on the Sukhbataar Square.Credit: Sanghee Liu

To do that, Oyun-Erdene has to convince foreign investors that this resource-rich but volatile young democracy is worth the risk. The system of government that saw two-party rule dominate decades of Mongolian politics is out.

Coalitions are in. So too are women, who for the first time in 2024 will have one seat for every male elected in the proportional representation section of parliament.

The prime minister will have power over the cabinet, with the president acting as the check and balance rather than the old-Soviet style horizontal model which saw factional rivals chuck out prime ministers as if it was Australia.

The theory is that the new model will force governments to build consensus and encourage long-term policies while limiting the instability that has dogged each administration since the fall of the Berlin Wall.

“We lived instability. It created unclear, un-understandable environments,” says the house speaker and Mongolian political veteran Gombojav Zandanshatar.

“We are not just talking about creating a favourable environment. We are doing it. We are updating the legislation,” he says.

People take selfies in front of a museum in Mongolia’s capital.Credit: Sanghee Liu

Zandanshatar believes Mongolia can be a model for other small nations struggling to emerge from their authoritarian past.

“Sandwiched between our two giant neighbours, we call it an oasis of democracy.”

Those neighbours have caused plenty of discomfort for Mongolia’s leaders. The country remains dependent on Russia for all of its energy and 90 per cent of its exports go to China on a single railway track.

Aware the situation is not sustainable, Oyun-Erdene is diversifying the economy into artificial intelligence, renewable energy and digital finance, targeting deals with “third neighbours” like Australia in the process.

English is now the nation’s second official language.

A fibre optic cable that supplies Mongolia’s internet has to run through both Russia and China, so the government is now in talks with Elon Musk’s Starlink to provide satellite internet access to one of the world’s least densely populated nations.

“War or COVID, or any challenge, will end one day,” says Zandanshatar.

“We can’t move to Australia, with our ships and camels. Russia and China will never move. So we are neighbours. Neighbours don’t choose each other.”

It is a geographic reality that has made for a delicate diplomatic dance for Oyun-Erdene.

Mongolian speaker Zandanshatar GombojavCredit: Sanghee Liu

He has been reluctant to officially criticise Russia’s government but in his strongest public comments on the war in Ukraine to date, he made clear the distinction between the Kremlin and the Russian people.

“We always stand for peace and against war,” he says.

“Most importantly, I do believe that we don’t have to hate the regular citizens and people of the Russian Federation.”

He points to figure skater Kamila Valieva, the Russian star who tested positive for doping at the Beijing Winter Olympics. The 17-year-old performed in Mongolia in January.

“We don’t have to hate Valieva for the actions of her government. The people and businessmen are not to be blamed for the situation,” he says.

Ulaanbaatar, the capital of Mongolia.Credit: Sanghee Liu

Mongolia’s economy has been hit by the sanctions imposed on Russian banks and planes. Flights to Ulaanbaatar from Europe now have to go as far as Seoul to find a connection to the Mongolian capital.

“This is a major problem,” he says.

For now, Oyun-Erdene appears willing to take the hit. But he wants the international community to do more to take the pressure off smaller countries that have found themselves caught in the middle.

“I do believe that the United Nations has to increase its role in solving this issue,” he says.

“As a kid, I watched the situation in movies, but now it’s a reality happening next door.”

A group of Mongolians take a family photo in front of the Government Palace.Credit: Sanghee Liu

Still, there are those who believe Oyun-Erdene’s reforms don’t go far enough to address the woes in an economy where two-thirds of it remains government-backed.

“For the very first time we have set a more stable system,” opposition leader Gantumur Luvsannyam told the Mongolian Economic Forum on Sunday.

“But we should shrink the government. Out of $1 in mining we get 1 cent –the rest is expenditures of the state. I want the private sector to be bold, to be courageous, not bowing to the state.”

Mining worker Bayartnar Bayaraa says transformation will take time.

“Maybe 15 years, maybe 30 years,” he says, dressed in Prada sunglasses and a traditional Mongolian deel in front of a giant statue of Genghis Khan, the Mongol leader who once ruled over the world’s largest land empire.

“It’s a long journey.”

Mongolian miner Bayartnar BayaraaCredit: Sanghee Liu

Bayartnar and his mining colleagues have done well in a country that defines too many of its people as either miners or herders.

“The only thing we don’t have is diamonds,” he says.

But in Ulaanbaatar’s main square, student Temulen Myagmar says there is also a lack of investment in education that is crippling the prospects of young people at home.

The 18-year-old has been forced overseas because of a lack of education opportunities, fuelled by the economic division between urban elites in the city and the nomads in the country.

“The country is very beautiful but it has got a lot of problems,” she says.

“There’s one Mongolia in Ulaanbaatar and one Mongolia in the countryside. It’s kind of pathetic.”

Asia House analyst Mao Zhouchen is more optimistic.

“Mongolia is likely to outpace China’s economic growth next year,” he told the Mongolian Economic Forum.

Ngaire Woods, a professor of global economic governance at Oxford University, said every fast-growing small economy in the world faces huge challenges at the moment.

“These forces mean that a country like Mongolia has to navigate with speed and deftness.”

Dominic Barton, Chairman of Rio Tinto at the Mongolian Economic Forum.Credit: Sanghee Liu

Australian miner Rio Tinto is looking to take advantage after a tumultuous few years.

The mining giant forgave the Mongolian government’s $3.4 billion share of debt for the construction of the Oyu Tolgoi copper mine last year and began digging in one of the world’s largest copper reserves in March.

“Think about an ore body the size of Manhattan, that’s 1300 metres below the Earth’s surface, in a fairly remote part of the world that sort of gives you a sense of the challenge,” said chairman Dominic Barton.

“We could have spent that capital elsewhere, but we chose to spend it here.”

Barton likens the opportunity to steel giant POSCO building a mill in South Korea after the end of the Korean War.

“In 1970, South Korea had no energy whatsoever. They had no iron ore, they had no coking coal, they had no industry. They had a GDP per capita of $100,” he said.

“And most organisations, including the World Bank, said: ‘This is the craziest thing you could possibly do. Do not build this’.”

South Korea now has a GDP per capita of $52,000.

“And this is something that I also see in Mongolia. Ambition,” he says. “People have a vision.”

In 2023, women will have one seat for every man elected in the proportional representation section of Mongolian parliament.Credit: Sanghee Liu

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