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  • Amar Adiya

Mongolia Witnesses Mass Demonstrations in Face of Corruption and Living Cost Crisis

Thousands of Mongolians have been demonstrating in freezing temperatures for the past week in Ulaanbaatar's main square.



Mongolian Protestors in Ulaanbatar on December 5, 2022.
Protestors in Ulaanbatar on December 5, 2022. Credits: Wikimedia Commons


Protesters have been demanding the names of senior government officials and lawmakers implicated in widespread corruption related to coal exports to China by the state-owned Erdenes Tavan Tolgoi Joint Stock Company.

Since Mongolia's post-election unrest in 2008, the current demonstrations may be the country's third-largest protest to date.


Significant price discrepancies between coking coal sold in Mongolia (~$70 per ton), China (~$140 a ton) and the international market (~$300 per ton) is the main source of the alleged wrongdoing.

Due to the country's previous lack of a direct and shorter railroad connection to China, the cost of moving coal across the border was considerable, which raised concerns that Chinese and Mongolian middlemen and truck owners were unfairly profiting.


Two new heavy-duty rail connections have become online in late 2022 with the potential to double or more Mongolia's commodity exports to China.


Politicians claim that MNT 40 billion ($15.2 billion), equivalent to the country's current GDP, has been lost, a charge which appears to have ignited these huge protests.

Demonstrators are not only calling for the exposure of those involved in the coal corruption, but are also airing their dissatisfaction with skyrocketing inflation, widening inequality, narrowing opportunities for future generations and the sharp devaluation of the national currency.


The anger of the demonstrators peaked on December 5, 2022, when they attempted to storm the government palace. State security personnel quickly intervened and pushed the protesters back to the square.


A larger corruption investigation might disrupt businesses operating in Mongolia’s difficult economic situation since all domestic businesses are tied to the coal export industry in one way or another. Protesters and populist lawmakers attacked large corporations and banks for their involvement in the coal industry.

Because of its business' connection to Erdenes Tavan Tolgoi, a successful mining operator's owner was imprisoned recently on suspicion of bribery.


There is a widespread belief that billions of dollars worth of coal from the state-owned Tavan Tolgoi mine, a significant source of public revenue, may have been stolen or siphoned off for personal gain by politically connected people, dubbed "the coal mafia."


Demonstrators called for a probe into TavanTolgoi's corruption to proceed rapidly and to name all lawmakers involved. Many Mongolians seem to distrust the legal system out of concern that judges could give convicted officials a pass.


Coal generates about half of Mongolia’s export revenue. Mongolian officials are reporting a lower amount of coal exported compared to the import data supplied by Chinese customs. Authorities are investigating the missing amount of coal which reportedly reached nearly 400,000 tons between 2013 and 2019.


The corruption investigation started back in 2018, and Prime Minister Luvsannamsrain Oyun-Erdene has been very outspoken about the issue.


No one has been convicted yet since the investigation appears to require more time. However, a number of customs and transportation officials and senior executives of state-owned mining companies have reportedly been charged or detained.


Rather than addressing concerns about corruption and the government's inability to manage public funds, many of the demands by protestors focus on political conspiracies.

Some question whether the protests are genuine or staged by the president or the prime minister. There are also rumors that the protests were instigated by former President Khaltmaagiin Battulga, who hopes to run for office again, and former senior Erdenes Tavan Tolgoi officials who are currently being detained.


Parliament convened an emergency session behind closed doors on December 5. The prime minister and justice minister, who both wished to put an immediate stop to the protests, suggested that they declare a state of emergency. President Ukhnaagiin Khurelsukh reportedly declined to make this move to stop the situation from worsening and turn it into a riot as the 2008 protests had.


On December 6, Prime Minister Oyun-Erdene appeared in public, supporting the protesters' cause and committing to parliamentary democracy. He pointed out the need for national reconciliation and suggested a possible coalition government with the opposition parties, including the Democratic Party and the National Labor Party.


Oyun-Erdene’s party controls a supermajority in the Parliament, and he doesn’t need a coalition with the opposition. However, he apparently believes that by involving the opposition in the cabinet, he will be able to keep civil unrest at bay.

Parliament Speaker Gombojavyn Zandanshatar created a working group under the Economic Standing Committee to investigate coal corruption.


The committee will hold a public hearing on the“coal thieves” on December 21.

Since the root of the coal export corruption lies in state ownership of the company and bad governance, Parliament also discussed a potential partial privatization of Erdenes Tavan Tolgoi through an initial public offering on the domestic stock exchange. It is not clear when or how much equity the government plans to privatize.


There was significant speculation about escalating tensions between President Khurelsukh and Prime Minister Oyun-Erdene while the protests took place, which the prime minister categorically rejected. On December 7, when Khurelsukh reprimanded cabinet ministers, the chief prosecutor and other top officials, the prime minister was not there, fueling fresh rumors that their relationship was deteriorating.


Khurelsukh handpicked Oyun-Erdene, a protégé, to succeed him in early 2021 so that he could compete for the presidency. Oyun-Erdene served as Khurelsukh's cabinet secretary and faithful younger brother before becoming prime minister.


Oyun-Erdene, a backbencher in the legislature, owes Khurelsukh credit for his quick advancement. But as the 2024 election approaches and with economic troubles growing, the president may have decided that the prime minister has increasingly become a political liability.


Members of Parliament may now be divided into pro-president and pro-prime minister factions, each vying for dominance in the government.


 


About Amar Adiya


Amar Adiya is Editor-in-Chief of Mongolia Weekly, an English newsletter on political analysis and business intelligence every week. He is also a regional director at Washington-based strategic advisory firm BowerGroupAsia.

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