Mongolia country brief

Australia-Mongolia Relations

Australia established diplomatic relations with Mongolia in 1972. Bilateral engagement accelerated following the introduction of democratic and free-market reforms in Mongolia in the early 1990s. The focus of the relationship to date has been on development assistance and commercial activities in Mongolia’s resources sector.

Mongolia opened an Embassy in Canberra in 2008. Mongolia’s first resident Ambassador, His Excellency Mr Tserendorj Jambaldorj, presented credentials to the Governor-General on 30 October 2008. In 2007, Australia appointed an Honorary Consul in Ulaanbaatar, and, in 2008, Australia moved its diplomatic accreditation to Mongolia from Beijing to Seoul. Australia's current Ambassador to Mongolia (resident in Seoul), Mr Sam Gerovich, presented credentials to Mongolia’s President on 17 August 2009.

In recent years, Governments of both countries have taken opportunities to strengthen bilateral relations. In September 2008, Prime Minister Kevin Rudd met then-Prime Minister Sanjaa Bayar in the margins of the United Nations General Assembly. In July 2008 and July 2009, Foreign Affairs Minister Stephen Smith met Mongolian State-Secretary for Foreign Affairs and Trade Damdin Tsogtbaatar in the margins of the ASEAN Regional Forum. There have also been a number of high-level visits in both directions. At Head-of-State level, then-Governor-General Bill Hayden visited Mongolia in 1994, and Mongolia’s first democratically elected President, Punsalmaagiin Ochirbat, visited Australia in 1997. Australia’s Foreign Minister visited Mongolia in 1994 and 2007, and Mongolia’s Foreign Minister visited Australia in 1993. Australia’s Minister for Industry, Tourism and Resources, visited Mongolia in October 2005. There have also been a number of parliamentary visits in both directions. In 2009, two delegations from Mongolia led by Members of Parliament have visited Australia, and in July a group of four Australian Members of Parliament from the Australia-Mongolia Parliamentary Friendship Group, led by the Chair of the Group, Ms Kirsten Livermoore MP, visited Mongolia at the invitation of the Vice-Chair of the State Great Hural (Mongolia’s Parliament).

Bilateral trade with Mongolia is modest, totalling $15.5 million in 2008-09. This is comprised mostly of Australia’s exports of civil engineering equipment, instruments and tools used in Mongolia’s mining industry. While trade volumes are small, there is significant commercial interest by Australian companies and much potential in Mongolia’s minerals and energy sector. A number of Australian mining companies have been active in Mongolia for many years, including Rio Tinto, BHP Billiton and Leighton, with significant mineral leases in Mongolia held by Australian companies. Australian geological, drilling, mining software and environmental management companies are also winning business. In 2009, Austrade placed a business manager in Ulaanbaatar for three months to explore and enhance opportunities for Australian businesses in Mongolia’s resources sector, as well as sectors such as agribusiness and education. As a result of this placement, Austrade has published The Mongolian Mining Projects Report 2009. The report was launched on 7 September 2009 by Parliamentary Secretary for Trade the Hon. Anthony Byrne MP.

Since 1995, Australia has provided more than $50 million in aid to Mongolia, and expects to provide another $6.4 million in 2009-10. The current focus of Australia’s development cooperation program is on human resource development through the provision of scholarships. The Mongolia-Australian Scholarships Program is highly regarded by Mongolia as an effective capacity building instrument for government agencies. The program has also been highly effective in forging strong links with Mongolia’s leadership. A number of alumni of the program are currently serving as government officials, members of parliament and ministers. An expansion of the program announced in 2007 will see the number of scholarships doubled to 28 per year by 2010. (See AusAID’s website for more detail.)

Mongolia also receives around 20 Australian volunteers each year, through the Australian Youth Ambassadors for Development program, focusing on a range of assignments including public health, environmental engineering and business development. For more information on the AYAD program, visit http://www.ayad.com.au/.

Political overview

Mongolia held its first democratic elections in 1990 after 70 years of Soviet-style single-party rule. Members of the State Great Hural (Parliament) and President are both elected for fixed four-year terms (but on different electoral cycles). Executive power is shared by the Parliament and the President. The Cabinet is appointed by the Prime Minister. The President is the Commander-in-Chief and holds the power to veto legislation, although this can be overridden by a two-thirds majority in Parliament. Presidential candidates must be nominated by a party represented in the Parliament, but the President is technically non-partisan, and must renounce party membership before taking office.

There are two major political parties: the Mongolian People’s Revolutionary Party (MPRP) that evolved from the Communist single-party government, and the Democratic Party (DP) that grew out of Mongolia’s 1990 democracy movement. In the five parliamentary elections held since the 1992 Constitution came into effect, power has alternated between the two major parties, or the two parties have together formed grand coalition governments.

The most recent Parliamentary elections were held in June 2008. International observers were generally satisfied that the election was free and fair. However, allegations of fraud by the DP and minor parties escalated in the days following the election resulting in a riot which left five people dead and a state of emergency imposed. A subsequent DP boycott prevented the Parliament from convening for two months, with a quorum of two-thirds required to swear in new members of Parliament. Eventually, the MPRP offered to share power with the DP in a grand coalition with ministerial appointments divided between the MPRP and DP 60:40. Disputes and appeals delayed the announcement of a number of seats from the June 2008 election, with the result for the last remaining seat delivered to the President on 24 September 2009.

Presidential elections were held on 24 May 2009 in which incumbent MPRP President Nambaryn Enkhbayar was defeated by the DP’s Tsakhia Elbegdorj. President Elbegdorj was sworn into office on 18 June 2009. On 18 October, MPRP Minister for Mineral Resources and Energy, Dashdorj Zorigt, won the by-election for the parliamentary seat vacated by President Elbegdorj. In the 76 seat parliament, the MPRP currently holds 46 seats, the DP holds 27 seats, and minor parties and independents hold three seats.

On 29 October 2009, Sukhbaatar Batbold was appointed Mongolia’s 26th Prime Minister following the resignation of former Prime Minister Sanjaa Bayar, reportedly due to ill health. Prime Minister Batbold, formerly the Minister for Foreign Affairs and Trade, has publicly pledged to continue his predecessor’s pro-business agenda.

Economic overview

Agriculture, primarily herding, was the traditional basis of the Mongolian economy, and is still important, particularly in terms of employment and income for rural residents, providing around 40 per cent of national employment. But mining has overtaken agriculture as the dominant industry in terms of value. Mining now accounts for 27.4 per cent of GDP, trade and services 24.8 per cent, agriculture 20.6 per cent and transportation, storage and communications 12.2 per cent. Exports are the major driver of the economy. The value of Mongolia’s goods exports is equal to about half of its nominal GDP. Copper is the biggest export (24.9 per cent of value) followed by gold (18.3 percent), coal (16.5 per cent) and greasy cashmere (7.9 per cent). China takes 73.1 per cent of Mongolia’s exports. Mongolia’s economy is still small in overall size with total GDP about US$5 billion (US$10 billion by purchasing power parity). A third of the population lives below the poverty line.

From late 2008, the effects of the global financial crisis began to impact negatively on Mongolia’s economy, most notably through a sharp drop in commodity prices, especially copper. As a result, Government revenues for the first half of 2009 fell by nearly a third in real terms compared with the first half of 2008. GDP is expected to grow by only 2.7 per cent in 2009 after 8.9 per cent growth in 2008 and 10.2 per cent growth in 2007. In response to the crisis, Mongolia negotiated a stand-by loan with the International Monetary Fund, on the condition that Mongolia meet a budget financing gap of US$204 million before the loan was released, for which Mongolia sought international donor assistance.

Mongolia holds extensive mineral deposits, the successful, prudent development of which offers the country a potential path to economic sustainability. But development has been hampered by Mongolia’s landlocked position, a lack of infrastructure and an uncertain regulatory environment as the country has struggled to transform itself from a Soviet satellite to a free-market democracy. Australian companies are well placed to assist in the development of Mongolia’s resources sector, and a number are already active in the country. On 25 August 2009, the Mongolian Parliament approved legislation – including a repeal of the Windfall Profits Tax, effective 1 January 2011 – that should help to create a more certain environment for prospective investors. On 6 October 2009, the Mongolian Government signed an investment agreement for the massive Oyu Tolgoi copper and gold mine, in which Rio Tinto and Ivanhoe Mines are strategic partners. Prospective revenues from Oyu Tolgoi, on current prices, are estimated at US$3 billion, about half of Mongolia’s present GDP. The Oyu Tolgoi agreement is seen as a template that could facilitate progress on a number of other mining projects, including Tavan Tolgoi, also in the southern Gobi region, said to be the world’s largest undeveloped coking coal deposit.

Updated 19 November 2009