Mongolia Booming but with Consequences

Any given day during the summer, the skies of Ulan Bator are caked in a thick smog that leaves many residents covering their faces or avoiding the outdoors altogether. According to the World Health Organization, air pollution contributes to the death of nearly 1,600 Mongolians each year. The WHO report, released last year, indicates that the concentration of dust particles in the air is 35 times more than the recommended level.

This is of course partly explained by Mongolia’s geographic reality and the sand storms from the Gobi Desert in the south of the country. However, a predominant element of the pollution is man-made and results from ubiquitous coal-fired stoves and the incineration of garbage during Mongolia’s harsh winters.

The silver lining of this looming crisis is the historical renaissance of Mongolia from forced suzerainty under the Soviet Union and Imperial China to a flourishing democratic state in a region of corrupt neighbours. In 2011, Mongolia became the fastest growing economy in the world with 17.3 percent GDP growth as pegged by the World Bank.

Mongolia’s mining and resource sectors are the main driver of the boom which has driven foreign investors to Ulan Bator with hopes of securing lucrative development contracts.

However, this growth remains uncertain due to Mongolia’s over-dependence on the global commodity market. The country has not yet managed to mature its financial investments to diversify and spread its risk across markets.

But to Ulan Bator’s credit, it has leveraged the current energy climate to its advantage and is starting to acknowledge that now is the time to accrue benefits from international partners. Mongolia has been channelling its assets to pressure Russia and China to cooperate more on important issues such as energy security, mining and defence. Earlier this month, Mongolian President Tsakhia Elbegdorj remarked in an interview that he believed China and Russia should account for Mongolia in their regional cooperation plans.

Specifically, Elbegdorj pointed to energy security and the need to redirect a planned natural gas pipeline from Russia to China so that it would include Mongolia. Elbegdorj stressed that transiting through Mongolia is “economically beneficial” and noted that his government is “trying to persuade our two neighbors not to exclude us from that project. The Chinese side has already agreed to discuss this and also the Russian side.”

Whether the pressure is altering the calculus of Moscow and Beijing is dubious. Russia, which provides the bulk of Mongolia’s energy imports, has consistently indicated that its decision-making on the pipeline would be centered on economics and not political pressure.

The current pipeline would send gas from Siberia directly to western China through a narrow border channel between Kazakhstan and Mongolia – effectively shutting out both countries from the project. Gazprom, which is spearheading the deal from the Russian side, has denied that the snub was politically motivated and has indicated that the decision comes down to pricing and avoiding costly transit fees.

Mongolia is desperate to be included in the deal as it would not only provide an economic boost via transit fees, but allow the government to address the escalating problem of air pollution in Ulan Bator by switching to the more efficient and cleaner heating option of natural gas.

The burgeoning surrounding environs of Ulan Bator are littered with traditional nomadic houses – called gers. Mongolians from all across the country are rapidly migrating to the capital in hopes that the expanding wealth of the nation will provide increased opportunities. Unfortunately, the dividend of these personal investments does not always pay out. Many new city dwellers find themselves working several jobs just to keep up with rising income levels and booming real estate prices.

And then there is the pollution. With land around the capital rising in value rapidly, the ger communities are forced into very tight quarters, creating an economic ghetto in a city that is growing faster than any other in the world. The World Bank and a host of international development agencies have recognized this threat and mobilized nearly US$45 million for the Ulan Bator Clean Air Project.

The initiative aims to help reduce the city’s reliance on coal-powered stoves and replace them with more efficient gas models. The Project also has been offering subsidies to lower the cost of the transition for this marginalized population in Ulan Bator.

Despite these positive signs, air pollution in Mongolia is likely to continue to be a problem for several years. Gailius Draugelis, an energy specialist at the World Bank on the Project, stressed that “there is no magic bullet for reducing air pollution. Significant domestic and foreign funds have been raised to support a wide range of solutions. Enlisting the support of the citizens and the local private sector is also very important.”

Draugelis also indicated that a solution to the issue must be Mongolian and that foreign assistance could only have a temporary effect. "Many solutions will require Ulaanbaatar citizens to change technologies and learn how to use them. The local private sector will need to supply and service these technologies.” As foreign investors continue to flock to Mongolia, there will be increased pressure for the government to be accountable and transparent on this issue. For Mongolia, great wealth has ushered in great obligation.

(Jonathan Berkshire Miller is a fellow for the Centre for Strategic and International Studies Pacific Forum.)