Mongolian National Security Vs Prosperity

Mongolian National Security VS Prosperity

Abstract

Mongolia is a landlocked country located in central Asia, shares borders with two superpower countries, Russia and China. Mongolia is a very small country with respect to its neighbors, not only by its size of the country, but also by its population, economic development and military defence. Mongolia has historical conflicts with China and has great political influence by Russia. Mongolia entered into free market economy in 1990 when Soviet Union countries start to collapse and when Soviet Union power start to decline. In terms of economics, trade and development, Mongolia is very dependent on its two big neighbours. Almost all of the petroleum is imported from Russia and today Russia owns 50 percent of the Mongolian main train track, Ulaanbaatar Railway that connects Russia and China. On the other hand, Mongolia imports high percentage of goods from China and China is Mongolia's biggest exporting market and biggest foreign direct investors. Due to recent development and discovery in mineral resource deposits, Mongolia expects to grow much faster than before. Yet, the mining development of Mongolia is likely to raise an issue of national security from its two super power neighbours since mineral resources are so demanded in these two nations. The main concern is how to manage its natural resources with respect to balancing the interests of two neighbouring countries.

Background

Mongolia had been controlled by Manchus tribal group, today's China, for almost two centuries since 1691. With the increasing power of Soviet Union in 1900s, the Mongolia is able to declare its independency in November 26th, 1924 with the help of Soviet Union. Though Soviet Union helped Mongolia to separate from China, Mongolia went from one control to another control with the agreement of assimilation. Mongolia was an autonomous state under Russia's control since 1924. Consequently, Mongolia adopted Russian communist system, education system and also able to get Russia's military support up until 1990. Russia influenced Mongolian society enormously resulting more dependent Mongolia of today. Due to emerging democratic revolution and collapse of Soviet Union, Mongolia entered intro free market economy and become open democratic government in 1990. Formerly state-owned economy and disappearance of Soviet Union assistance resulted Mongolia to enter into deep economic recession.

As of 2010, total population of Mongolia is 2,756,001 with GDP per capita, PPP is $2207 (The World Bank, 2011). At 1,564,116 square kilometers, Mongolia is the 19th largest and the most sparsely populated country in the world (The World Factbook, 2011). Mongolia joined the World Trade Organization in 1997, seeking to expand its participation in regional economic and trade regimes. Yet, Mongolia's economic development is fairly low. Due to recent economic recession and harsh winter, Mongolia lost about 20% of total livestock (Global Edge, 2011). Moreover, Mongolia is still underdeveloped and has inefficient infrastructure, lack of technological advancement, in effective legal system and instable government regime. Furthermore, Mongolia has a high inflation rate of 10.10% and a high poverty rate of 35.2% (The World Bank, 2011), increasing the risk of foreign direct investment. However, Mongolia's vast natural resource expected to boost up its economy in the near future to increase the standard of living of people, and decrease the unemployment rate, and increase the overall economic development of the country.

In Mongolia, mining accounts about 21.8% GDP and agriculture accounts about 15% of the GDP (Global Edge, 2011). China is Mongolia's biggest exporting markets for development. Yet, China has a great influence on Mongolian economy not only by its market size, but also its high percentage of imported goods. On other hand, Mongolia purchases 95% of its petroleum products from Russia (Global Edge, 2011), in which through petroleum pricing, Russia has great influence on Mongolian economy.

Issues

The main issue that limits Mongolia's prosperity in the near future is national security that arises from its two superpower neighbours: China and Russia who are desperate for scarce mineral resources.

In October 6th, 2009, the Mongolian government entered into mining agreement with Canadian company, Ivanhoe Mines and Rio Tinto in order to exploit the copper and gold mine called Oyu-Tolgoi, which located in Southern Gobi Desert, Mongolia. This mine is expected to produce "a billion pounds of copper and 330,000 ounces of gold every year for at least 35 years." (Borowiec, 2011).

On the other hand, the coal mines at "Tavan Tolgoi, near the copper-gold "Oyu-Tolgoi" mine in the South Gobi attracts many investors all around the world. If the mine is developed, it is expected to produce 50 million tons of coal per year. The Tavan-Tolgoi coal mine is very close to China's border, though it doesn't have rail line that connects Tavan-Tolgoi with China.

Tavan Tolgoi mine is owned by the Energy Resource LLC, under MCS Corporation, in which MCS Corporation is looking for a cheapest cost to transport with highest profit results. As a result, MCS Corporation entered an agreement with Deutsche Bahn AG, Germany's state-owned railway, in order to build privately owned train track that connects Tavan-Tolgoi and China since the mine is only 80 km away from the China's border in comparison to main trail way, which is about 400 km (Kucera, 2010). Due to National Security issue, Mongolian government void the agreement because Mongolian government concerns that China will have more control over the mining and plus they concerned with its other neighbour's interests. Moreover, the trail way is country's strategic infrastructure, in which the government of Mongolia doesn't want to lose its control.

If MCS Corporation implements train track project, Russia will likely to respond back by blocking the eastern construction of train line, currently in process and main train line that connects Russia and China, in which Russia owns 50 percent of the ownership, since Russia also wants to get a bite from the natural resources. 'Russia has lots of control, Mongolia can't make decisions by itself on the railroad' says Nemekhbyar. "Strategically, geopolitically, Russia will block the narrow-gauge railway from being built in Mongolia... Politically they can do it somehow. We have only two neighbours" (Kucera, 2010).

On the other hand, national security arises when Mongolia develops relationship with U.S.A, in which Russia concerns about U.S. influence on