Mongolia’s New Prime Minister Gets ‘Honeymoon’ to Fix Economy

November 26 03:08 2014 Print This Article

Mongolia’s new Prime Minister Saikhanbileg Chimed has a period of goodwill probably until spring to get the economy back on track and resolve a dispute with Rio Tinto Group, the country’s biggest foreign investor.

The “honeymoon” for Saikhanbileg, 45, who was cabinet secretary in the previous government, could end by summer when a new election cycle will heat up, said Peter Morrow, a partner at NovaTerra LLC., an Ulaanbaatar-based advisory firm.

Saikhanbileg — a weight lifter who bench-presses 175 kilograms — takes over from former boss Altankhuyag Norov, ousted in a no-confidence vote on Nov. 5. The top three priorities are the economy, the economy and the economy, Saikhanbileg said in his address to Parliament on Nov. 21.

The job comes with a raft of problems. The economy is growing in single digits just three years after it posted a world-beating 17.5 percent expansion on the back of coal and copper mining deals. Foreign investment dropped 82 percent in the first nine months of 2014 compared to 2012, after new laws were labeled unfriendly by investors.

The $6.6 billion Oyu Tolgoi copper mine, Mongolia’s biggest mining project, stalled last year as Rio and the government tangled over issues ranging from taxes to cost overruns. On hold is a $4.2 billion financing package to develop the second phase of the mine.

‘Political Season’

“By next summer you are back in the political season again, so there is a window,” said Morrow. “I think they are going to make every effort to get it (Oyu Tolgoi) done.”

The long-delayed plan to find a partner to work with state-owned coal miner Erdenes Tavan Tolgoi JSC may also get sorted out in the same six months, said Morrow.

The government announced three years ago that a consortium of bidders, including St. Louis-based Peabody Energy Corp. and Shenhua Energy Co. (1088), would jointly operate the mine held by Erdenes TT. The deal was later rescinded by the National Security Council.

“You won’t see any radical changes but he will try to look at the current issues with a fresh approach,” said Munkhdul Badral, head of market intelligence firm Cover Mongolia.

Saikhanbileg needs to assemble a cabinet of professionals and avoid the route taken by his predecessor, said Morrow.

“Altankhuyag kept the government together by giving something to the factions, but when you hold the government together like this you give up something in the way of performance,” said Morrow.

Power Lifter

“That is what you have to watch, will they give the ministries to people for political reasons or to someone who knows what they are doing.”

Saikhanbileg won 42 of 44 votes cast in the Nov. 21 Parliament vote. The opposition Mongolian People’s Party abstained from the vote in protest of a candidate who served as cabinet secretary in the previous failed government.

Saikhanbileg yesterday invited the opposition and all other parties with seats in parliament to enter a “Grand Coalition” government. The Mongolian People’s Party is still discussing whether or not to join such a coalition, Party Secretary Bulgantuya Khurelbaatar said by phone today.

Fluent in Russian and English, Saikhanbileg became Minister for Science and Education at age 29 and later attended George Washington’s School of Law. He is the head of Mongolia’s Power-Lifting Association and a fan of the Denver Broncos.

“He is friendly to foreign investment, educated in Colorado, has good contacts in the U.S.,” said Morrow. “Does he have the political skills of Altankhuyag? Who knows. But Altankhuyag held a government together that didn’t produce anything.”

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at mkohn5@bloomberg.net

To contact the editors responsible for this story: Peter Langan at plangan@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net Iain Wilson

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