Source: BMI challenges and threats to stability Rising wealth disparities: Managing the massive inflows of capital likely to arrive in Mongolia over the next decade, and the wealth disparities that this will bring, will perhaps be the government s single biggest challenge. Already, the capital Ulaan Bataar is home to both extremely rich citizens living in expensive apartments and shopping in luxury stores, and large numbers of homeless people, not to mention those living in tents around the city s periphery. ...Below, we highlight the scenarios for political change over the next decade. -- Business Monitor International Ltd www Mongolia Q- ---- room For improvement... long-Term Political Ratings For Selected Countries Source: BMI Best case scenario: stability ensures strong Growth The best case scenario is that the government continues to hold free and fair elections, maintains an independent press, and continues to reform the business environment in a way that encourages and protects the rights of domestic and foreign inves- tors. Under this scenario, investors would have the confidence to continue participating in the development of Mongolia s mineral wealth, providing jobs and contributing to an ongoing surge in exports and growth. ...This could lead to a reinstating of the windfall tax on mining company profits, presaging an exit for foreign capital and expertise from Mongolia.
...Domestic - unrest increases risks to Government s policy-Making ability < ALACRA META ABSTRACT>We have downgraded Mongolia s short-term political risk rating to --.- from --.- on the back of growing downside risks to the government s ability to enact policy, as growing public unrest could sway the resolve of its minority coalition partners. We further caution that the growing distrust of the government s policies could be a boon for the opposition Mongolian People s Party in the next elections. Should the government fail to arrest the growth slowdown, policy continuity beyond the ruling Democratic Party s term (which will run up to ----) will most likely be at risk. taBle: Political oVerVieW - Long-term political outlook - transforming Minerals into Wealth The Mongolian government will face major domestic challenges over the coming decade as the country s mining boom takes off, and it seeks to strike a balance between distributing the revenues in a way that is acceptable to the population, while avoiding stoking inflation. Moreover, we believe it will face a tough task in managing the social change that the mining boom will create, including immigration and the growing gap between rich and poor. ...However, given that we expect the government to resolve its disputes with various foreign miners, which we believe will lift the overall outlook for the economy, we maintain our expectations for the central bank to hike rates by --- basis points to --.-- by end-----.
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