Mongolia president vote heads for run-off

Bloomberg

The party overseeing Mongolia’s economic recovery plan was dealt a setback after its presidential candidate finished second behind a populist businessman promising stricter controls over mineral resources.
Democratic Party candidate Battulga Khaltmaa, a former cabinet minister, received 38.1 percent of the vote, securing an unprecedented run-off election against Parliament Speaker Enkhbold Miyegombo, according to the General Election Commission. Enkhbold, the head of the Mongolian People’s Party, squeaked into the second round with 30.3 percent, or 0.1 percentage point more than ex-lawmaker Ganbaatar Sainkhuu, of the Mongolian People’s Revolutionary Party. Because no candidate secured more than half the vote, the top two will meet July 9 in a head-to-head contest, Mongolia’s only run-off since beginning presidential elections in 1993. Incumbent President Elbegdorj Tsakhia, a Democratic Party member, is barred from seeking a third term.
The result, which follows a brief but bruising campaign marred by corruption allegations, complicates the MPP’s plans to recover from a commodity downturn that battered government finances and the economy. The presidency could provide a platform to challenge efforts to open more mines and support a $5.5 billion International Monetary Fund-led bailout package announced in February.
“The IMF is a done deal. No one can put a stop to it by just talking,” said Mogi Badral Bontoi, head of Ulaanbaatar-based market intelligence firm Cover Mongolia.
“Even if Battulga wins, he won’t be able to stop the IMF program.”

Stability, Check

While Parliament controls Mongolia’s government, the president serves as commander-in-chief, can veto legislation and is also responsible for appointing key officials.

Enkhbold, a career politician who dabbles in horse breeding, had promised stability, arguing that government policies stand a better chance under an MPP presidency. Battulga, a former agriculture-and-industry minister and one-time judo star, said he would provide a check on the ruling party’s power.
The Democratic Party candidate told Bloomberg earlier this month he wanted to reinstate a banking measure that almost derailed the IMF’s $434 million portion of the bailout package. Mongolia’s parliament last month repealed the provision, which directed revenue from the Oyu Tolgoi copper mine and other large foreign-backed projects through local banks, after the IMF balked at approving the funding.

Ganbaatar, the third candidate, had gone even further, pledging to “take back the natural resources for each citizen.”

“It largely is down to domestic politics and a lot of voter frustration,” Julian Dierkes, an associate professor with the University of British Columbia’s Institute of Asian Research, told Bloomberg TV Mongolia. “That’s mostly a protest against the two big parties.”

S&P Global Ratings projects that Mongolia’s economy, which grew by an average of more than 10 percent annually before last year’s slowdown, will contract by 0.2 percent this year before stabilizing. The government is counting on mining projects, including the $5.4 billion Oyu Tolgoi site operated by Rio Tinto Group, to bring in new revenue.

Mongolian bonds due in 2024 were trading 1.03 cents lower on the dollar to 109.7 cents as of 5 p.m. in Hong Kong, according to data compiled by Bloomberg. It was the biggest drop since the notes were sold in March.

Corruption Allegations

None of the candidates have been spared from scandal during the three-week campaign.

Surprises during the campaign included the release of a three-year-old audio recording that reports say show Enkhbold and two MPP colleagues discussing payments for senior government positions. The MPP denied the allegations and said the tapes were edited to take the remarks out of context.

MPP lawmakers also accused Battulga of misappropriating mining contracts and called on him to answer questions about online allegations that he had large overseas holdings. The Battulga campaign said both claims were untrue.

Nick Cousyn, chief operating officer of BDSec, the country’s largest brokerage, said that the result was unlikely to derail the big projects.

“Most investors, at least those that are paying attention, understand that Mongolia is in the midst of an economy recovery,” Cousyn told Bloomberg TV Mongolia. “So, I don’t sense a great deal of investor concern about this election.”