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Mongolian Democracy: 'Unless Your Life Improves, What's The Point Of A Market Economy?'

Mongolian children walk home from school in Zuunkharaa, a former railroad and industrial hub 160 kilometers from the capital, Ulan Bator.
Mongolian children walk home from school in Zuunkharaa, a former railroad and industrial hub 160 kilometers from the capital, Ulan Bator.
ZUUNKHARAA, Mongolia -- There are many ways to measure the success of Mongolia's 20 years of democracy. One is by visiting here.

This town once bustled as a railroad hub nestled between the city of Darkhan, near the Russian border, and the capital Ulan Bator. But trains rarely run on the line anymore, and Zuunkharaa has become a ghost town, unsettlingly quiet even on a weekday afternoon.

A handful of pedestrians shuffle aimlessly down muddy, unpaved roads. Cows low listlessly just beyond the tall, ramshackle fences that Zuunkharaa's residents erect around their tiny, wooden homes.

Even the drive to Zuunkharaa contributes to the feeling of abandonment. Despite being just 160 kilometers from the capital, there are no roads leading to Zuunkharaa. A trip to the town can take hours, as drivers slow to a crawl, fearing for their car's suspension as they wind through an endless, rocky maze of gullies and bumps. Clearly, no one is in a hurry to get here.

"We used to have a huge services sector, like a box-making factory, and a huge timber industry. We had a huge transportation center that hired mechanics," says Damdinjamts Tuya, who works with a local NGO dedicated to improving the lives of local families.

"These industries all shut down and became small, privately owned businesses. They let most of their employees go, and hired only their friends and relatives."

Tuya's NGO, Duush Mandal Khairhan, helps residents who, deprived of their old jobs, have turned to illegal mining to eke out a living.

It's not only the town's factory employees who have been left without work after post-communist privatization left the country's state-run industry in tatters. A series of bitter winters in the late 1990s also ended the livelihood of many of the region's herders, killing off tens of thousands of livestock and forcing nomads to abandon the countryside and move to urban areas.

WATCH: Mongolia is home to one of the world's few remaining nomadic cultures, with some 40 percent of the population raising animals on the steppes. But economic and social changes are forcing many Mongolians to leave their traditional ways behind:

Wealth, For Some

Mongolians in places like Zuunkharaa see the 1990s privatization rush and years of harsh weather as a kind of economic one-two punch. Twenty years after Mongolia peacefully threw off 70 years of communism, one-third of Mongolia's 2.6 million people live below the poverty level of less than $2 a day; even white-collar workers like doctors and teachers can earn as little as $300 a month.

But the hardship at ground level can't be explained at the top. The Mongolian economy recorded six years of steady growth before the global economic crisis. GDP tripled to $1,500 per capita and budget revenues swelled.

With no trickle-down, however, ordinary Mongolians are increasingly frustrated -- especially as they watch foreign companies race to extract the country's rich mineral and metal deposits.

Zuunkharaa borders on the Boroo gold mine, one of Mongolia's earliest foreign-run mines. Boroo, which is operated by the massive Canadian mining company Centerra, began commercial production in 2004 and yields an average of 180,000 ounces of gold a year. The company prides itself on an impeccable safety record and its generous payment packages for Mongolian staff -- as much as $800 a month.

Damdinjamts Tuya of the NGO Duush Mandal Khairhan
But critics say the Mongolian government routinely hands mining companies favorable tax terms that allow them to operate profitably for years while state coffers see little in return. (Production at Boroo has already peaked, and Centerra is already preparing to shut down the mine, long before a higher profit tax was scheduled to come into effect in 2013.)

Mining, however, is undoubtedly seen as Mongolia's only path out of poverty, and the country's preoccupation with the industry borders on mania. A recent mega-deal with two foreign mining firms, Rio Tinto and Ivanhoe Mines, to begin production on the country's massive Oyu Tolgoi copper and gold deposits was touted as potentially bringing in as much as $4 billion to the Mongolian economy.

But Morris Rossabi, who teaches Mongolian history at New York's Columbia University, says the deal, which took five years to negotiate, has raised more doubts than hopes.

"Taxes have been reduced on the mining company that just got the agreement," he says. "It's unclear how many Mongolians they will really employ in these mining endeavors, it's unclear how much damage they'll do to the environment. So there are a lot of issues that were not made public."

'The Land Belongs To Everyone'

That lack of transparency has become routine for average Mongolians, who are skeptical the state has their best interests at heart.

A recent poll by Mongolia's Sant Maral independent polling agency shows a majority of respondents believe government policy is characterized most by "lack of concern for society at large" and "support for the rich" over the middle class and poor. (Sukhbaatar Batbold, the country's new prime minister, is a mining tycoon and one of Mongolia's richest men.)

Luvsandendev Sumati, who runs Sant Maral with funding from Germany's Konrad Adenauer Foundation, says many Mongolians doubt the state has either the inclination or the know-how to use mining profits to stimulate the economy.

The Boroo gold mine outside of Zuunkharaa
"The government, from the very beginning, showed neither transparency nor effectiveness nor professionalism in solving this issue," Sumati says. "If the agreement had been done in a professional way, we could have settled the issue before the global financial crisis started. We could have gotten much better terms than we have now."

The Mongolian Constitution states that the country's vast grazing lands are common property. It's a nod to the country's communal herding traditions. But many Mongolians, angered by the massive influx of foreign mining firms, also see it as an opportunity to mine the land themselves.

Thousands of Mongolians now engage in illicit mining, often using dangerous chemicals like cyanide to harvest a living from small deposits of gold and other metals.

Some "ninja miners," as they're known, work alone, carrying their equipment on their back; others as part of a complex team involving heavy equipment and sites so sophisticated and heavily guarded they resemble legal mining operations.

Damdinjamts Tuya of the Zuunkharaa NGO works to persuade ninja miners to abandon the dangerous chemicals and adopt mining practices that are safer for themselves and the land. But she says the ninjas will never give up mining altogether.

"The law says the land belongs to everyone. The ninjas are taking that too literally. They think that because they're Mongolian, they can go wherever they want to and dig for gold," Tuya says.

"They do it because the foreign companies in Mongolia are digging up gold and exporting it without paying any tax, so they feel it's unfair. Boroo Gold and Centerra Gold are near our village, and we talk about the fact that they're taking the gold."

Hope For Change

If the silent streets of Zuunkharaa are one extreme in Mongolia, the swank interiors of Ulan Bator's five-star hotels are another. Here, young Mongolians in elegant black suits and precision eyewear sweep in from the dusty streets of the capital for meetings or drinks, looking very much like the up-and-coming generation of a prosperous, stable nation where no one needs to dig for gold.

But even habitues of gleaming hotel restaurants know life remains grim for many Mongolians.

Luvsandendev Sumati (left) of Sant Maral polling agency, with Green Party lawmaker Dangaasuren Enkhbat
Lawmaker Sanjaasuren Oyun -- whose late brother, Zorig, was one of the leaders of Mongolia's 1990 democratic revolution -- today wears a polished pinstripe suit and, like many Mongolian politicians, is an expert in mining issues. She was the first Mongolian to earn a doctorate in mining metallurgy at Cambridge University, and once worked for Rio Tinto in London.

Oyun concedes that the early promise of democratic change in Mongolia has not delivered for the country's poor, and that the government must act to improve living standards across the board. "If your life isn't better than it was 20 years ago," she imagines people musing, "what was the point of moving to a market economy?"

"Despite the problems, I think we've achieved a lot," Oyun says. "We are a vibrant, multiparty parliamentary democracy. The main challenge now, I feel, is delivering better living standards to people, delivering better economic growth. I understand that it's not only democracy that leads to development, but other factors -- geography, the market, infrastructure. It's not very simple."

Pollster Sumati can only concur. "Mongolia's transition may be over," he says, "but its social transformation is not."

It's an evolution he says will take another decade or more. Fortunately, he says, his subjects, the Mongolian public, are accustomed to taking the long view. Frustration with chronic poverty may be mounting, but statistically, most Mongolians still believe the country took the right step back in 1990.

"We asked, was the transition to democracy and market economy a right step or a wrong step? So we've traced this question since 1995, and over 80 percent of our population still considers that it was a right step," Sumati says. "Nobody in Mongolia is looking backward."