By Tirthankar Mukherjee
Mongolia is doing well, judging by macroeconomic figures and coverage in the global media. The ungainly name Minegolia has stuck, and investment analysts are predicting all sorts of possible achievements. The euphoria is palpable in Ulaanbaatar, too, but my concern is that little notice is taken of the riders that follow the prescription. These constantly remind us that large, untapped deposits in frontier markets such as Mongolia do offer greater promise but at the same time venturing into uncharted territory, characterised by the absence of strong political institutions and a paucity of earlier major natural resources investment, carries its own risks.
Policymakers in Mongolia, however, see, hear, and speak no evil. They take possibilities as achievements, and prospects as certainties. Former Prime Minister Bayar once chided MPs for dividing the skin even before the wolf had been killed, but the mindset has not changed. If anything, the special demands of the present times have encouraged anybody who is anybody in both the MPP and the DP to make generous promises to the electorate and to press for decisions which are rather premature.
All is fair, we are told, in love and war. That being so, and all political parties and leaders claiming to be in love with the people whom they profess to serve, as also elections being a legitimate form of unarmed warfare between groups vying for power, there can be no surprise that as election time draws near, efforts to win votes will not all be sensible, irreproachable or meet universal standards of propriety. Every political party has an absolute right to aim at being in power, and so both groups with any realistic chance of earning the mandate to form a government on their own are busy devising ways of persuading voters that their credentials are superior and their promises are more attractive. The smaller parties, relishing the impending possibility of playing spoiler or kingmaker, are also watching and strategising. The coalition has been dissolved, and what was presented as consensus politics – despite popular bewilderment that people so critical and intolerant of each other could claim to be partners in effective governing – will now be replaced by open mutual recrimination, until, depending on the election results, the two parties find it expedient to join forces again, on principle or, more likely, because that would be the most convenient, or the only way to be among the spoils.
Let me assert that I am not in any denial mode. The basic and simplistic arithmetic, however, becomes a little inconvenient when the GDP growth is placed against the rate of inflation, burgeoning foreign exchange reserves against the balance of payment, and such. This should not surprise anybody, as professionals inside the country and international financial institutions have been ringing alarm bells for long. The general populace lap up all that they hear of the phenomenal gains from the planned Tavan Tolgoi IPO, though, as an article elsewhere in this issue shows, technocrats know there is no certainty in these things, with investors’ confidence liable to be dented by imponderables which the election-obsessed politician ignores, at the nation’s peril.
Speakers of truth to the deliberately deluded are rarely popular, and providers of largesse intent on reelection tend to ignore prudent advice. How one misses an informed and responsible public debate on the right ways to define the relationship between economic and social challenges, to ensure that benefits and opportunities are available to more people. Most politicians are happy offering handouts, not realising that giving the underprivileged a hand up is a better option, when looking beyond the next election. National wealth, most of it from mining in the case of Mongolia, can sustainably and effectively advance the public good only when governments, businesses and nongovernmental organisations work together to share expertise and implement lasting solutions. The bottom line should be more about strengthening the future than just making life a little brighter until polling day.
As of now, China is the sole market for Mongolia’s coal, and economic growth in China eased over the course of 2011. China entered 2011 with a growth rate of 9.7 per cent in the first quarter but ended it with a full-year GDP increase of 9.2 per cent – the lowest level since 2002. By the standards of almost any economy, the 8.9 per cent annual growth rate China notched up in the fourth quarter last year would be a success, but China is now seen as the global saviour, and the mood in Beijing was sombre as the government announced its lowest increase in gross domestic product in 10 quarters. “In terms of the domestic and international situation 2012 will be a year of complexity and challenges so we should be fully prepared,” said National Bureau of Statistics spokesman Ma Jiantang in a speech laced with words such as “gloomy”, “complicated” and “severe”.
Most analysts, whether bullish or bearish on China’s longer-term prospects, expect growth to drop back in the coming months, to well below an annualised rate of 8 per cent in the first quarter. Some are even predicting full-year growth as low as 7.5 per cent in 2012. An academic economist and adviser to the government says GDP growth of 7-8 per cent would be acceptable, but below 7 per cent would signal an economic crisis, or even a political crisis.
The outlook for China could be further weakened should the arguably over inflated real estate market there deflate. Real estate investment directly accounts for about 13 per cent of GDP so a collapse in the sector would have repercussions in commodity-exporting countries that rely on Chinese construction for their own growth. The recent Wukan incident also reveals the shaky foundation of China’s rise to economic super power. Anything that negatively alters the quality of life of China’s rural majority has the potential to impact the already fragile global economy. Prime Minister Wen Jiabao has asserted that “China can no longer sacrifice farmers’ land rights for the sake of reducing the cost of urbanization and industrialization.”
Our threatened new world has no familiar paradigm. It is one that is marked by a dissolving of certainties, one that is more dependent on culture and context. This appears truer of politics than economics but the distinctions are getting blurred. One of the flip sides of globalization is that a local event can become a global event much more quickly. The ability to read a crystal ball may be more helpful than complex calculations in determining risks stemming from human events.
I am no arrogant prophet but I do confess my feelings of foreboding are deepened by the latest economic forecasts issued by the World Bank. They urge developing countries to plan for a global economic meltdown on a par with 2008-09. Andrew Burns, head of macroeconomics at the Bank, says, “Developing countries should hope for the best and prepare for the worst.” Stressing the importance of contingency planning, he adds, “An escalation of the crisis would spare no one.”
All I would like to see in Mongolian public discourse until the election is an acknowledgement that things can go wrong. The dawn always appears brighter after a grim and grimy night, and rousing expectations without the guaranteed wherewithal to meet them may rebound uncharitably. When it becomes clear that promises cannot be met, we could have social unrest increasing widely. People are not happy when they think they have something and then are told that it will not be there.