Mongolia’s efforts to extricate itself from the “resource curse” highlight the dangers that countries blessed with tremendous natural resources face when they find themselves at the mercy of wealth-destroying boom-bust cycles, The Financial Times reports:
Success will allow the buffer state to continue balancing between China and Russia by attracting “third neighbour” allies like Japan or the US. Failure could upend that careful balance in China’s favour, dragging Mongolia into its orbit just like Cambodia, Laos or some of the weaker Central Asian nations.
Mongolian bankers fear Chinese businesses will gain a sudden advantage as borrowers quickly refinance at Chinese rates. That would pull the rug out from under local banks, increasing the economy’s dependence on China…
This is Mongolia’s deepest collective fear. Conquerors of much of Eurasia 800 years ago, Mongolian territory has gradually diminished until the remnants were divided by the Soviets and the Chinese in the early 20th century. The country … has been democratically governed since the 1990s after decades as a Soviet satellite. Most of its people are aware that 3m Mongolians cannot compete with China’s 1.3bn citizens beyond the Gobi desert.
“They will swallow Mongolia,” one businessman concluded gloomily. “In a few decades we’ll be the autonomous region of Outer Mongolia.”
Mongolia has developed and sustained a competitive democracy in which parties have rotated in and out of power. Today it has a robust press, an independent civil society, and a spirit of freedom among its citizens. These are not small achievements, Stanford University’s Larry Diamond, Francis Fukuyama and Stephen Krasner wrote for The Wall Street Journal:
Mongolia should vigorously prosecute grave acts of corruption by leaders from all political parties, while strengthening guarantees for due process. Given the current controversy about judicial independence, now would also be a good time for constitutional reforms that would increase the independence of the courts. …In addition, civil society should launch a more comprehensive audit of the state of democracy in Mongolia. International friends of Mongolia can best help by aiding this process of critical reflection and institutional reform.