Industry Trend Analysis - MPP Victory To Boost Mining Industry - AUG 2016

BMI View: The Mongolian People's Party's (MPP) victory in Mongolia's June 2016 parliamentary elections will usher in a period of relative political stability and improved policy co-ordination over the coming years, which will in turn boost the country's mining industry . The stalled Tavan Tolgoi coal mine will be a major beneficiary of the party's political will to support the mining industry.

Mongolia's mining industry growth will pick up as a result of the return to power of the relatively stable and coordinated Mongolian People's Party's (MPP) following its victory in the 2016 parliamentary elections. The exit of the Democratic Party (DP), in power since 2012 and which lacked unity amongst its leaders and had a hard resource nationalism line, will prove to be beneficial for the mining industry, the outlook of which had weakened substantially since the departure of the MPP. Almost all anti-mining and pro resource-nationalism parliamentary members have now been voted out of parliament, paving the way for a more enticing business environment. The MPP is the former communist party that ruled Mongolia for 70 years before the country's transition to democracy and a free market economy following the collapse of the former Soviet Union. Economic indicators such as rising unemployment, a huge government debt and poverty were considered major factors in the election that saw the exit of the DP. Compared to an average real GDP growth rate of 8.8% during 2009-2012 during the MPP's reign, growth fell to 5.9% during 2013-2016. While slowing Chinese demand and falling prices of mineral resources that make up the majority of Mongolia's exports had a big role in the economic decline of the country, the DP's stalling of the Tavan Tolgoi coal mine and Rio Tinto's Oyu Tolgoi copper-gold mine for years contributed as well.

Oyu Tolgoi And Tavan Tolgoi To Benefit

GDP To Pick Up With MPP
Mongolia - Real GDP Growth Rate
e/f= BMI estimate/forecast. Source: National Sources/BMI

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