Mongolia Builds a New Identity

The resource-rich land remembered for the khans and sandwiched between two giants seeks a path to becoming a modern country.

Think of a lively, but tiny, little kid living in a tough neighborhood who is about to inherit a lot of money and you have a pretty good sense of Mongolia’s situation.

When outsiders think of Mongolia, and they don’t very often, the image is usually picturesque images of fast horses, endless grasslands and nomadic people living in gers or yurts. The last time Mongolia mattered much to the world was during the time of the Khans – Genghis and Kublai— and their sprawling, short-lived empire. Mongolia was a hermit kingdom that ranked up with Albania and North Korea until its democratic revolution 23 years ago.

That picture is rapidly outdated. In an age of hunger for natural resources, Mongolia now matters. It has the largest coal reserves in the world, and some of the largest reserves of copper and many other resources, from gold to a variety of rare earths.

Mongolia’s population of 2.7 million people would fit into Shenzhen several times over. Yet Mongolians inhabit a country with a land size that 60 percent larger than Germany and France combined.

Mongolia last year posted 17 percent GDP growth, its third straight year of double-digit economic growth. Exports have nearly doubled in the past two years. Per capita GDP is expected to roughly triple in the next four years, from around US$ 2,500 now to US$ 7,500 as new coal mines open.

The economic growth is impressive, even if short-term problems like a large budget deficit and 21 percent inflation take some of the shine off the story. There is talk that Mongolia could be the Qatar of East Asia, a resource-rich country with a tiny population. Other boosters compare it to the China of 20 years ago. Some US$ 40 billion in infrastructure spending is planned for the next five or so years. A new airport is being built with a US$ 30 million loan from the Japanese government.

The reality is that Mongolia is struggling to build a national identity in a country that peaked as a civilization more than 600 years ago. From the 1920s until 1989, Mongolia was almost effectively run as a province of the Soviet Union. The country was stripped of its resources, bartering them for shoddy Soviet goods. “How could we have had this system that made such a rich country so poor?” Mongolians still wonder.

Mongolia’s only borders are with Russia and China. No country anywhere in the world is sandwiched between two giants in quite the same way. Yet the Mongolians are pragmatic and know that they have no choice but to live with their neighbors.

On a recent trip, of the 66 channels on the TV in my room at the newly branded Kempinski Hotel, 15 are in Russian. China, even more than Russia, is likely to determine Mongolia’s future. Yet the country is uneasy about this, clearly trying to avoid being embraced too closely by China. A controversial foreign investment law is implicitly aimed at discouraging Chinese investments. Mongolia has cultivated close relations with the United States. South Korea and Japan are also increasingly important partners. The 25,000 Mongolians who live in South Korea are the largest expatriate Mongolian population outside of Mongolia, leaving aside China’s Inner Mongolia region, which has more ethnic Mongolians than the country of Mongolia.

Mongolia has had two decades to build its government institutions, but it still has a long way to go. It scores poorly in corruption and ease of doing business surveys. But the perception may lag behind the reality. A former president has been jailed for corruption. Is that a sign of political revenge or a sign that corruption is being tackled? Norway’s sovereign wealth fund, with its emphasis on long-term sustainable investment in assets that will benefit the country for decades, is the model. Mongolians say that they are determined not to repeat the African experience of having resources looted by a ruling kleptocracy.

A short visit to the country couldn’t provide definitive answers. But it is clear that many business leaders are looking to build strong, clean institutions. And it is also clear that Mongolians are worrying about the right sorts of issues. Business leaders fret about the so-called Dutch disease, where a flood of foreign cash from resource sales overwhelms the domestic economy, driving up prices and making non-resource businesses uncompetitive.

When trying to build national institutions and a national identity, it helps to have a national hero. In Mongolia’s case it is, naturally, Genghis Khan. Nowhere can be this be seen more obviously than 50 kilometers east of the capital. Perched on a hill in the middle of rolling grassland is an extraordinary 35-meter-high statue of Genghis Khan on a horse. The surreal stainless-steel monument, dominating he plains around it tells a serious story: from the viewer’s perch atop the horse’s head, the view is of the steppe. In the basement is an impressive museum with artifacts telling the story of 2,000 years of Mongolian history.

Just 25 years ago mention of Genghis Khan, or, as they Mongolians call him, Chinggis Khaan, was to all intents and purposes forbidden. Now travelers fly in and out of Chinggis Khaan International Airport. Mongolia has a lot to be proud of. The challenge is building 21st-century country that will rival the greatness of its past.

Originally published in Caixin. Can be accessed at english.caixin.com/2012-11-16/100461576.html