Sitting in his traditional tent, Khaidav, a retired teacher, dreams of the wooden house he will build after one million tughrik ($760 U.S.) lands in his bank account this summer.
More than a million Mongolians like Khaidav, who goes by one name, will become tughrik millionaires as they sell shares in Tavan Tolgoi - the world’s third-biggest coking coal deposit which is helping fuel the country’s resources boom - to the government.
Mongolia, a resource-rich country of 3 million people with a per capita gross domestic product of less than $5,000, has introduced policies to share its growing mineral wealth with its citizens.
One measure involved spreading 20 per cent of the shares in Tavan Tolgoi among the entire population. Until recently, people were unable to cash in because the planned public listing of the mine has been delayed.
But in May, ahead of parliamentary elections slated for next week, the government offered citizens a choice: sell their stake back to the state for one million tugrik or keep the shares and wait for the public listing.
More than half of the country opted for the cash, handing the government a bill of roughly $1-billion, or a tenth of the country’s GDP. However, many Mongolian elites criticise the handouts as premature because the mine, which is barely developed, has yet to produce the revenues that are expected.
Politicians have defended the buyback programme, saying they are just giving Mongolians a chance to participate in the mineral wealth.
“That was our biggest election campaign [promise] in 2008, and we fulfilled it,” said Chimed Saikhanbileg, a candidate for the Democratic party. “Every citizen in Mongolia now owns 1,072 shares of Tavan Tolgoi, the equivalent of one million tugrik.”
The Democratic party will next week face off against the Mongolian People’s party in parliamentary elections that will determine who governs the country for the next four years. The two centre-left parties who are campaigning on similar platforms, including using mining revenues to benefit ordinary citizens, have ruled together in a coalition for most of the past four years.
Tavan Tolgoi was supposed to set the standard for how the country would handle its mineral resources. Instead, it has become a cautionary tale, as the project has been delayed by politics in Ulan Bator and by geopolitical wrangling between China, Russia and other countries that want to play a part in its development.
The listing has also been delayed by uncertain global markets and the slow progress producing a new Mongolian securities law that will create the legal framework necessary for the three-city listing.
Mongolia is trying to wean itself off of the handout culture that flourished in previous elections, in which campaigns competed for who could promise the most cash to voters. After passage of a new election law, candidates are now barred from making election promises about money or employment.
Tavan Tolgoi is a good example of how election promises can lead to mismanagement. As the government buys the Tavan Tolgoi shares back, it will resell some to Mongolian companies for the same price to reduce its bill.
“The 2008 campaigns were about who will give more cash. It cost us quite dear in the last four years because there was no money to implement this,” says Oyun Sanjaasuren, head of the Civil Will Green party, which opposes cash handouts. “Tavan Tolgoi is quite a big, complicated equation, with a lot of unknowns still, like how do we deal with geopolitics, neighbours, and strategic investors.”
Other critics say the buyback scheme is taking badly needed cash away from the mine, which is very short of cash, mainly because it still produces only a small fraction - 4m tonnes a year - of its potential output.
B. Enebish, chief executive of Erdenes Tavan Tolgoi, the state-run company that manages the mine, defended the “unusual” buyback programme, but said the company planned on tapping international debt markets for “several hundred million” dollars to tide it over until the IPO. He said the offering was expected to take place next March or April in Ulan Bator, London and Hong Kong.
Jargalsaikhan Dambadarjaa, a popular Mongolian chat show host and political commentator, says the government is neglecting the development of the mine and instead focusing on meeting election promises in the short term.
“Our government counted its chickens before they hatched,” he wrote in a recent column. “Tavan Tolgoi has become a mess rather than a coal deposit.”