Due to the grave financial uncertainty, wealth has quickly evaporated out of the insolvent US and European economies in search of more fertile markets. Some of the most promising opportunities lie in Mongolia because of their massive caches of natural resources, however, many Mongolian nationalists are fearful of losing their sovereignty to these foreign investors. Reuters reports on Mongolia’s recent political shift and the financial implications for outside investment:
Mongolia’s Democratic Party (DP), which failed to win enough seats in last month’s elections to govern alone, has agreed to form a coalition with populist fringe parties in a move that could worry foreign investors, local media said.
The new government, to be led as prime minister by DP chief Norov Altanhuyag, will include minority parties such as the Mongolian People’s Revolutionary Party and Mongolian National Democratic Party, which both want to limit foreign investment in the booming mining sector, said local news portal news.mn late on Thursday. The coalition deal was struck earlier in the day.
The two smaller parties, which campaign together as the “justice coalition”, also want to restrict the number of years a foreign firm can operate in Mongolia and have called for the coveted Tavan Tolgoi coal project to be kept under 100 percent Mongolian control.
“We anticipate substantial pressure for policies to be more populist and resource nationalist which in return will result in (an) elevated level of volatility for global Mongolian resource equities” Ulan Bator-based Frontier Securities said in a note to investors late on Thursday.
“Therefore investors would be well-advised to diversify their Mongolian portfolios.”