The Sasakawa Peace Foundation invited Dr. Oyun Sanjaasuren, former Minister of Environment and Green Development, former Minister of Foreign Affairs and Member of the Parliament of Mongolia to speak on "Mongolia after 25 Years since the Democratic Transition: Lessons Learnt and the Way Forward," as part of The Lecture Series by Asian Opinion Leaders. The event took place on February 17 in Tokyo. The moderator was Prof. Yuki Konagaya, Executive Director, National Institutes for the Humanities. In her speech, Dr. Oyun touched upon the development of the Mongolian economy, foreign policy and in particular the 'Third Neighbor Policy' as well as its environmental policy.
A landlocked country between the two major powers of China and Russia, and with a population of only three million, Mongolia is rich in natural resources. In addition to being open to foreign direct investment, from a commercial perspective, with recent economic growth rates that are among the highest in the world, the country provides strong opportunities for business. However, since the introduction of multi-party system and a market economy 25 years ago in April 1990, the path of progress has not always been smooth. After democratization, Mongolia was isolated. It has experienced double-digit economic contraction, and the inflation at one point touched 350%. Being a small country, its economic growth is dependent on export-oriented sectors. However, during the 1990s, Mongolia found it difficult to compete with an expanding Chinese economy, except in the areas of cashmere and livestock. By the late 1990s, the economy had begun to grow and got on to a steady path of expansion. In recent years, it has continued to experience rapid growth.
This rapid economic expansion has been largely driven by the gold and copper mining sectors. For example, Oyu Tolgoi - one of the biggest mine in Mongolia - was discovered 40 years ago, but a lack of infrastructure and investment channels has meant that it has only begun to contribute to the national economy recently. However, with the rise of the price of gold and copper on global markets, along with the development of infrastructure and improvements in the investment climate, the Mongolian economy has been registering significant growth.
This growth can be understood by the rise in public spending in Mongolia, which has grown twentyfold from $300 million after democratization in the 1990s to $6 billion in 2012. However, Mongolia is not satisfied with that high growth rate. Although the rate has been high, it was coming from a low base, and Mongolia must now invest in road and electricity infrastructure, as well as schools, hospitals and other facilities. In particular, half of the 200,000 households, in the 'ger' districts of the capital Ulan Baator, are living without running water and centralized heating. Many get their heat by burning low quality coal, which leads to environmental pollution. In addition, although the poverty rate has declined in recent years, a quarter of the population still lives in absolute poverty. The wealth gap is also a problem.
I would like to talk about an example of lessons learned from the past practice. In the 1990s, Mongolia shifted from a state-controlled economy to a free market. An investment-friendly environment was created and a policy of non-interference in markets by the government was adopted. The same applied in the mining sector, where licenses were sold to both Mongolians and foreigners alike. However, as a result of this, wealth flowed out of Mongolia. Leaving everything up to the market where there should have been regulations, led to problems such as environmental degradation.
As a reaction to this, the government then started to impose stronger regulations, for example a windfall tax on mining profits. When the price of gold reached $500 an ounce and copper $2,600 a ton, a tax of 68 percent was levied on the portion of sales that exceeded those levels. On top of this, at the time of the 2008 elections, the two major parties made pledges of cash handouts to the electorate that couldn't be fulfilled. One party promised $1,000 for every citizen. However, unable to deliver on its promises, the government caused discontent among the people while building up public debt.
In a major about-turn from the laissez-faire policies that immediately followed the democratic transition, the country adopted an approach of strict regulation, which led to a drop in foreign investment and slowdown in the Mongolian economy. After a few years, a new investment law was passed, replacing the unpopular windfall profits tax with a less punitive sliding royalties system. In addition, in the lead up to the 2012 elections, pledges of cash handouts were forbidden, and political parties which made promises that would exceed the national budget were not permitted to register for the election. In this way, Mongolia learned from its mistakes.
Moving on, I would like to talk about Mongolia's foreign policy, in particular the Third Neighbor Policy. For most of the 20th century, Mongolia relied upon the Soviet Union for its foreign policy. And prior to that, Mongolia was under the control of Manchuria for approximately 200 years. Based on those experiences, the lesson was not to be overly reliant on one country. Of course, the relationship with the bordering countries of China and Russia are tremendously important. However, apart from those countries, building solid relationships with 'Third Neighbors' to the east and the west is also vital. In 1994, the 'Third Neighbors' policy was initiated with Japan, the United States and the European Union. Currently, the policy is being expanded to include deepening relations with Canada and Australia. However, the countries that Mongolia has strategic partnerships are limited, and Japan is one of them. Diplomatic relations with Japan were established in 1972, and its 40th anniversary was celebrated just recently. The people of Mongolia are deeply grateful for the active support received from Japan.
In addition, Mongolia is a small country, but it actively participates in United Nations Peacekeeping Operations in Sudan, Sierra Leone, and Afghanistan, for example.
Mongolia can also play the role of an intermediary between countries in the Northeast Asia region. Even though Mongolia is not a member country of the Six-Party Talks, it can contribute to promoting dialogue with North Korea. It is also active in the field of non-traditional security. In addition, it declared the Mongolian Nuclear-Weapons-Free Zone in 1992. Due to this declaration, 1.5 million square kilometers of land became nuclear-weapon-free.
Having specialized in geology and having served as former Minister of Environment and Green Development, I would like to talk about Mongolian environmental policy. As I mentioned earlier, one in four Mongolians still lives the life of a semi-nomadic herder. While the human population is three million, the population of livestock is more than 50 million and is rising. Rainfall levels are low and only eight percent of the country is covered by forests. Our pasture land is also very fragile. Even though our own carbon emissions are low, Mongolia has been disproportionately affected by climate change. While average global temperatures have risen by 0.7 to 0.8C, over the same period, the rise in Mongolia has been 2.14℃. As Mongolia is very cold, there are people who think this is a positive change, but this has major negative consequences for the ecosystem. Mongolia has permafrost land and glaciers, but these are melting due to the rise in temperatures, which is also leading to landslides and the degradation of pasture lands.
The Minister of Environment and Green Development managed to persuade the government last year to adopt a "Green Development Strategy" for economic growth. By 2030, energy demand is expected to quadruple, while the need for new houses is predicted to continue growing. These new households will likely use more low quality coal, leading to further air pollution, the government is planning to increase the use of renewable energy, which now accounts for only eight percent. Of course, coal is cheap to use, but it is important to increase the utilization of wind power, hydroelectric power and solar power. Recently, a 50MW wind power generation facility has been connected to the grid in Ulan Bator.
25 years since the transition to democracy, Mongolia is moving toward establishing a sustainable society. While it is easy to change laws, changing people's mentality is difficult. As Genghis Khan said, "Conquering the world on horseback is easy, but getting down from the horse and ruling is hard." One thing we can learn from Japanese people is diligence and paying attention to details. It is said that the devil is in the details, and I think we have begun to work more on the day-to-day details. The most important thing is to improve the living standards of the people. This is the number one priority for Mongolia.