Kari Reports

Mining experts estimate that the country possesses as much as $1 trillion worth of untapped precious metals and minerals in at least 6000 sites. That works out to potentially over $333,333 per every man, woman and child in the country.

Mongolia, as a destination and as a mineral producer, is fascinating. Those who visit (I am still waiting patiently to make the journey) come back more curious than when they set off for Ulaanbaatar and the steppe beyond. Stark images of Ger-living along a dramatic landscape evoke a feeling of endless possibilities — the American wild west with more than a dash of Eastern romanticism. As a mineral producer, they’re equally as hypnotic – a tiny herdsman population, sparsely dotted throughout large swathes of land, sits atop an estimated $1 trillion in mineral reserves. The promise of vast wealth looms large, as does the unique obstacles that come with it.

Exploitation of coal, gold and copper at mega sites such as Oyu Tolgoi (Turquoise Hill) brings great promise for economic growth for the country in the face of some well-documented (yet not insurmountable) challenges, such as the lack of infrastructure or skilled labor. Some of the world’s finest luxury cars bump along unfinished roads in the nation’s capital.

The government is working hard to secure the best deal possible in terms of extracting the most money from exploitation, but the real question will be how they spend the money once they get it. Obvious areas in need for a country like Mongolia will be health and education. The country’s World Governance Indicators (below, as compared to Afghanistan) are promising…

and their showing on the Human Development Index isn’t so terrible either (below).

Some of this money also needs to feed back into the economy at large, building up other sectors to ensure that growth is sustainable in the face of uncertain commodity prices. The opportunity to develop a thriving tourism industry seems obvious, and creating revenue management policies that reflect this agenda would be wise. The Mongolian tourism board is already seemingly smartening up to this fact, though coherent coordination between ministries is still very much a work in progress.

With a small, ethnically homogeneous population, the likelihood for large-scale violent conflict as a result of resource exploitation is small (barring potential clashes between migrants brought in to work in the mines and local herdsman). So, I am put in a strange position as an extractive industries-conflict watcher. Despite the tomes of literature decrying the demise of developing, resource wealthy, nations Mongolia stands a good chance to develop its sector on solid ground.

In 20 years we could be talking about the country as people do Azerbaijan today, a happy ending indeed. But one challenge stands to throw it all off course: water. I won’t rehash the many well-reported pieces on this issue (here and here give some good insight), other than to say that the time and attention that has been given to securing investments with good fiscal terms will come to naught if Mongolia can no longer feed and water the herdsman and their animals that have roamed the landscape since well before the time of Genghis Khan. Given current projections for the rate of fresh water depletion, this isn’t an outlandish concern. As the country’s leaders amble toward a development path that could be seen as a model for nations in similar positions in the future, now is the time to call a time-out and plan responsibly. Ferrari and Fendi might be nice, but they can do little to satisfy parched lips.

Innovation is the product of necessity and for Mongolia’s brightest minds, now is the time to start innovating.