Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen. This post is the result of a recent study trip to Mongolia and China.
Mongolia is huge and landlocked between China and Russia, has almost no physical infrastructure and is still quite poor. But it is a budding, vibrant democracy with a solid base of well-educated nationals and an ample endowment of precious metals, coal and very likely also huge shale gas reserves. Whether it wants to or not, Mongolia is being sucked into the economic maelstrom of an ever resource-hungrier global economy.
As a modern state, Mongolia came into its own only 20 years ago with the demise of the USSR. But Mongolian national history goes back to the 13th century when its greatest son and object of considerable pride through to the present, Genghis Khan, ruled the known world from the east coast of China to Hungary. With the death of his direct descendants the greatest empire ever created imploded as fast as his horsemen had conquered it.
Today Mongolia is just about the only real democracy, where 'one person, one vote' rules supreme, between the Pacific and eastern Europe. In Ulan Bator no authoritarian figure or family plunders the country as is the case in other Central Asian states, and Mongolian voters can and have thrown the rascals out, the last time in June 2012 with a seamless transfer of power from the government to the opposition.
A former president is under indictment for corruption, which on the one hand shows that nobody can get away with murder in Mongolia but on the other is an indication of the greatest challenge to its democracy. The resource stakes are high and tempting. Thus the real test for Mongolian democracy will be whether the future giant proceeds from the riches of the soil will bring with it the resource curse suffered by so many other countries in the form of widespread corruption and endless waste.
Another and immediate challenge is the slowing of the Chinese production machine, with falling demand for the two main Mongolian exports, copper and coal. This has cut severely the hitherto very impressive Mongolian growth rate. In figures, it means a budget shortfall for 2012 of about 20%. That could lead the authorities on to the slippery slope of forcing contractual changes to resource deals with foreign investors. Exactly this is apparently now happening to Rio Tinto, foreign partner in the Oyu Tolgoi copper mine, where the new government is considering renegotiation of a 2009 agreement with increased royalty and tax payments to the tune of US$300 million.
However, Mongolia has in general shown a remarkable ability to deal intelligently with its international partners both from the public and the private sector. In contrast to the practice of many emerging resource rich countries, the complex process of resource exploitation is led on the Mongolian side with considerable know-how. The resources appear to benefit the country and not individuals and their families.
In the public sector and particularly in its foreign affairs Mongolia is both realistic and independent. It has no choice but to cultivate excellent relations with its two giant neighbours and especially China, which could choke off Mongolia's lifelines (roads, railroads, flights) at any moment if it chooses. In consequence, when the spiritual head of Mongolia's dominant Tibetan Buddhist creed, the Dalai Lama, visits other countries, as he does frequently, it is understood by all sides that he is not received on an official level but nevertheless revered by all in private.
Outer Mongolia, a Chinese province, counts considerably more Mongolians than the roughly three million in the old homeland next door. Here again, Ulan Bator 'plays ball' in not doing anything to alarm the Chinese. And not Russia either, where the Burjaks, closely related cousins of the Mongolians, have their homeland. Nationalist sentiment is not absent in Mongolia, as an aside from a former minister to this scribe indicated: 'Of course the Han workers on Chinese-financed big projects remain well hidden at the sites and do not show up in the Mongolian public'.
Ulan Bator also cultivates relations in its wider region and beyond. My former Mongolian colleague in Canberra, in his new role as roving Ambassador for the Asia Pacific, is now criss-crossing the continent and cultivating Mongolian membership in its many multilateral gatherings. Mongolia also has a small contingent of troops in Afghanistan; Hillary Clinton has come to town repeatedly and President Obama is scheduled to visit.
Looking at the big picture of future Asian institution building, Mongolia's role as an honest broker — impeccable Asian credentials and the potential financial means to conduct a more visible foreign policy — appears to have sizeable potential to grow. This lead us to Australia. With the official embrace, in the recent White Paper, of Australia as an integral part of Asia, Canberra could now also serve as such an honest broker from the other side of the Asia Pacific. So why not in concert, with much delicate handling of the countries of South East Asia so as not to arouse their ever present fear of losing ASEAN's centrality for the future of the region?
That will be in the future. For the time being, I can only recommend Ulan Bator and Mongolia (brown-grey steppe under endless horizons, reminiscent of parts of the Australian outback) as a travel and investment destination. Once past the miserable infrastructure, wide vistas are omnipresent.
Photo by Flickr user Juho Galle.