It’s more than 800 years since Genghis Khan and his Mongol horde galloped out of central Asia, but today Khan looms large in the Mongolian capital Ulaanbaatar. He is the face of commerce emblazoned on bank notes and multiple brands of vodka. There is even a Grand Khan Irish Pub.
From the steps of parliament, a statue of Khan glares down from a bronze throne. On the banks of the Tuul River, 54 kilometres east of the city, he sits mounted on the world’s largest steel horse, one hand grasping a golden whip.
Under Khan’s advance, all those centuries ago, cities fell, east and west, their civilian populations put to the sword. At his peak, Khan ruled a quarter of the world’s population. Only the Black Death halted his men and heralded his empire’s gradual decline, which culminated in the humiliation of Mongolia’s annexation by Russia in 1783.
Mongolia emerged from the 1991 collapse of the Soviet Union a dusty backwater, but with its culture mostly intact, isolated by a national language spoken only by its own people and a population of around 2.5 million. The once mighty empire was now sandwiched between two dominant neighbours, Russia and China, with combined populations almost 500 times their own.
Still, the last 20 years have seen a meteoric rise in the fortunes of Mongolia. The country is experiencing its most profound social and economic changes since Khan’s reign. Although 40 per cent of Mongolians still live as nomadic herders, democracy, market capitalism and a resources boom catapulted the nation’s economy to achieve the world’s fastest growth in 2011 with GDP growth of 17.3 per cent. Trillions of dollars of natural resources – coal, copper, gold, uranium, silver, fluorite and other minerals – lie beneath its steppes.
But as in Russia, post-Soviet resource wealth has been spread oligarch style. A handful with government connections became rich overnight. Today, Mongolia’s richest ten citizens include two members of parliament and a former prime minister. Predictably, the Mongolian elite have a taste for luxury brands and prestige cars.
“It changes each year,” explains Belgian Chris De Gruben, managing partner of M.A.D. Investment Solutions, a real estate and consultancy firm established in Ulaanbaatar in 2008. “The first must-have car was the Hummer, then it was the Range Rover and this year it’s the black G-Class AMG [Mercedes 4WD].” One parliamentarian, he says, has four Rolls-Royces. “They drive through the city in convoy: one for him, one for his wife, one for his daughter, one for his son.”
Yet within the last two years, Mongolia’s boom has turned to bust. Dependent on the mining industry for 90 per cent of its GDP (with more than 90 per cent of exports destined for China), Mongolia has been hurt by a downturn in minerals prices, in particular coal, and a decline in China’s economic growth.
More contentiously, a government elected on a nationalist platform has introduced a raft of economic policies intended to protect the country’s sovereignty. One new law has greatly complicated foreign firms’ acquisition of mining or other strategic assets.
Additionally, a freeze on 106 mining licences due to a corruption scandal and an ongoing dispute between the Mongolian government and British-Australian mining giant Rio Tinto over profits and expenses from the gargantuan Oyu Tolgoi (Turquoise Hill) copper-gold mine reduced direct foreign investment by almost 90 per cent in two years. Ulaanbaatar’s Western expatriate population dropped from around 7000 to 2500 in 18 months.
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