1 an Analysis of the Mongolian Political and Economic Transition: A

An Analysis of the Mongolian Political and Economic Transition: A Model Democracy with a Promising Future By Enkhtaivan Oyunbazar May, 2015 A thesis submitted in partial fulfillment of the requirements for a baccalaureate degree in (Economics) in cursu honorum Reviewed and approved by: Dr. Alexander Mirescu Submitted to The Honors Program, Saint Peter’s University March 23, 2015 1 Acknowledgements I would like to thank all of the people who have been helpful, supportive, and caring to make this work possible. I am extremely thankful to have a wonderful family, friends, and teachers who have helped me throughout life and continue to support me in any endeavor. Special thanks to the Director of the Honors Program Dr. Rachel Wifall and my advisor for this work Dr. Alexander Mirescu from the Department of Political Science. Abstract Mongolia is a democratic free market-oriented Asian state and it is the second largest land locked country in the world. Located between the Russian Federation and the People’s Republic of China, Mongolia’s total area of 1.6 million square kilometers encompasses an area greater than that of Britain, France, Germany, and Italy combined; four times the size of Japan. Mongolia is the fifth largest country in Asia and it is also the least densely populated country in the world; the country’s population reached only three million in 2015. Mongolia became the second communist country in the world after the USSR when the Bolsheviks advised the young Mongolian nationalists to establish a Marxist state. Mongolia emerged as a supplier of raw materials and food for the USSR’s Siberian industries and towns leading up to the transition. The political structure and economic development of the country were largely influenced by the Soviet Union. Mikhail Gorbachev’s policies of increased openness, transparency, and restructuring of the economy in the Soviet Union eventually led to widespread reform movements in Eastern Europe, Soviet Union, and Mongolia. Mongolia held its first multiparty elections in 1990 and established a coalition government, which initiated the full-scale transformation of the entire political and economic system. A new constitution 2 allowing free elections, political parties; freedom of speech, religion, and press; the protection of private properties was necessary as the communist Mongolian People’s Revolutionary Party suppressed these rights for seventy years. The one party rule and the centrally-planned economy of Mongolia turned into a democracy and a market oriented economy that is overcoming the difficult process of a political and economic transition, and is on its way to become an upper-middle income country. Table of Contents 1. Historical Background...........................................................................................3 2. Political Transition.................................................................................................4 1.1 Democratic Revolution ......................................................................................4 1.2 New Constitution .............................................................................................10 1.3 Democratic Consolidation ...............................................................................13 3. Economic Transition ............................................................................................20 1.1 Period of Crisis and International Aid .............................................................20 1.2 Foreign Investment and Trade .........................................................................28 1.3 Privatization and Price Liberalization ..............................................................33 4. Present State .........................................................................................................40 1.1 Model Democracy ............................................................................................40 1.2 Economic Growth ............................................................................................47 1.3 Upper Middle-Income Country........................................................................58 3 5. Conclusion ............................................................................................................60 6. Bibliography .........................................................................................................61 Historical Background Mongolia is a country that has a very long and rich history. The large Eurasian landmass has been the home of numerous historical nomadic tribes and empires dating back thousands of years. The Mongol Empire was the largest empire that the people of this region built under Chinggis Khaan. A single Mongolian state was formed in the 13th century under his leadership when he established the Mongol Empire. Chinggis Khaan effectively adopted the previous empires’ political structure and military organization and used them to form the Mongol Empire. Chinggis Khaan’s heirs expanded the Mongol Empire through conquests and at its greatest extent, the empire stretched from the Korean Peninsula to Hungary, from northern Indochina to the Middle East. The Mongol Empire didn’t last long as it disintegrated into four different empires, Chinggis Khaan’s grandson Kublai Khan founded the Yuan Dynasty in China that lasted until 1368. The Mongols returned to their homeland and for the next centuries they fought among themselves for power until the rise of the Manchu Qing Dynasty. The Manchu people conquered China, deceitfully intensified the civil war in Mongolia, and turned Mongolia into a vassal state until 1911. The Qing Dynasty collapsed as a result of internal and external pressures and the Mongolians used this opportunity to declare independence on December 29, 1911 and 4 established a theocratic state under the Buddhist religious leader Bogd Khaan. The communists rose to power in Russia and wanted to spread their ideology to the rest of the world. Mongolia turned into a communist state in 1921 that lasted until the democratic revolution of 1990 when a multi-party system was introduced; Mongolia adopted a new constitution in 1992 and turned into a democratic state with a free market economy. Political Transition 1.1 Democratic Revolution The Mongolian political and economic transition started as a result of the policy changes in the Soviet Union under the leadership of Mikhail Gorbachev. Gorbachev introduced the ideas of “glasnost” and “peresktroika”. Glasnost means increased openness and transparency; a Soviet policy permitting open discussion of political and social issues and freer dissemination of news and information. Perestroika refers to the policy of economic and governmental reform instituted by Mikhail Gorbachev in the Soviet Union during the mid-1980s. Mongolians narrowly defined the term glasnost “il tod”, which allowed a more relaxed approach by the government to negotiations in international political and economic affairs. This increased openness and transparency led government officials and policy-makers more aware of Western practices. Glasnost started to affect many aspects of the Mongolian society. People started to openly talk about ending the communist Mongolian People’s Revolutionary Party’s (MPRP) monopoly on power. The Mongolian people became aware of the failure of the Soviet modeled socialist system that governed the country for 70 years and started to demand political and economic reforms. 5 Politically, they demanded the resignation of the Mongolian People’s Revolutionary Party’s central committee and asked for parliamentary reforms, free elections, freedom of speech, press, religion; and wanted a transition to a democracy. Economically, people began to discuss about private housing developments, private ownership of livestock, and the selling of basic goods such as milk and vegetables for profit. Newspaper articles criticizing the inefficiencies in the centrally planned system began to appear; complaints about breakdowns in the urban heating system, environmental pollution, and industrial mismanagement were common. The beginning phase of glasnost didn’t allow a complete transparency from the government as the true accounts of the purges and the Stalinist repression of political and military leaders as well as intellectuals were still hidden from the public. Thousands were killed during the purges as the NKVD strategies in Mongolia called for the destruction of Buddhism and enforcement of collectivization in late 1930’s which resulted in the annihilation of approximately 800 Buddhist monasteries and the deaths of over 30,000 monks. The official accounts of these events have been rewritten many times, yet the Mongolian people are still not questioning the truthfulness of these accounts. On the eve of the communist revolution, there were over 100,000 Buddhist monks in Mongolia when one-third of the males in the country became lamas. During the purges, most of them were dispersed and many of them were killed as massive graves are found in various parts of the country. Buddhism was a strong force in the Mongolian society at the time and the monks had much power, as they owned land, properties, and livestock. 6 They strongly opposed the state ownership of properties and the enforcement of collectivization, which made the Soviets fear of a “counter-revolution” in Mongolia, undermining the success of the communist takeover. The NKVD instructed the Mongolian Ministry of Internal Affairs to carry out the mass killings of the Buddhist

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