Mongolia, the land of Genghis Khan
and nomadic herders, is in the midst of a remarkable transition. Rich in coal,
gold and copper, this country of fewer than 3 million people in Central Asia is
riding a mineral boom that is expected to more than double its GDP within a
decade. The rapid changes simultaneously excite and unnerve many Mongolians,
who hope mining can help pull many out of poverty, but worry it will ravage the
environment and further erode the nation”s distinctive, nomadic identity.

What country had the world”s
fastest-growing economy last year?

If you guessed China or India, you”d
be wrong.

In fact, it”s Mongolia: Its economy
grew at more than 17 percent in 2011, according to estimates. That”s nearly
twice as fast as China”s.

The reason — in a word — is mining.

Mongolia is rich in copper, coal and
gold, and it”s in the midst of a mineral boom. This marks a profound change for
a country where two out of every five people make their living herding
livestock. Extractive industry has become so pervasive, some Mongolians now
refer to their homeland as “Minegolia.”

For the poor, landlocked nation of
fewer than 3 million people, mining represents a remarkable opportunity, but
one that”s also loaded with risks.

Doubling GDP In A Decade

Much of the focus these days is on
Oyu Tolgoi, a mega-mine in Mongolia”s South Gobi province, about 50 miles north
of the Chinese border.

The mine — owned by international
mining giant Rio Tinto, Canada”s Ivanhoe Mines and the Mongolian government —
is scheduled to produce its first copper ore in June and grow dramatically over
the next five years.

Cameron McCrae, Oyu Tolgoi”s
Australian chief executive, estimates that the mine will be the world”s
third-largest copper and gold mine.

The mine is playing a substantial
economic role even before it”s operational, McCrae notes.

“At the moment, during
construction, we probably make up 30 percent of the GDP of the country,”
he says.

Tuvshintugs Batdelger, who runs an
economic think tank at the National University of Mongolia, says mining is
helping to drive the economy of this Central Asian nation at an incredible
pace.

“In the coming 10 years,
average GDP growth will be 12 percent,” he says. Even when you factor in
inflation, “GDP in real terms more than doubles in 10 years” time.”

Opportunity In The Gobi

Mining”s impacts are visible
throughout much of Mongolia, which is wedged between China and Russia and is
nearly the size of Alaska. Hummers roll past the Louis Vuitton store and
columned Soviet facades in Ulan Bator, the capital. Thousands of young
Mongolians have moved to the middle of the Gobi to work at Oyu Tolgoi, which
means “Turquoise Hill” in Mongolian, a name that”s derived from the
color copper turns when exposed to oxygen.

The mine at Oyu Tolgoi, Turquoise
Hill in Mongolian, will be one of the world”s largest copper mines in about
five years. An employee holds up a small sample of the oxidized copper that
gave the mine its name.

The mining camp, a mix of prefab
housing and gers, or yurts, feels like a cross between a boomtown and a
college fraternity.

The Mongolian workers are mostly in
their 20s. At a recent birthday celebration, they sing Mongolian pop songs at
the camp bar.

Solongo Namjil is a self-described
country girl from the Mongolian steppe. The 22-year-old came to Oyu Tolgoi six
months ago to work as a clerk and sees the mine as a crucial opportunity for
her country.

“Every Mongolian here is doing
their best for this project, which is enormous to Mongolia”s future,” she
says between sips of beer. “We all understand the significance of the
project. We do hope that every Mongolian can benefit.”

But Solongo — Mongolians go by their
first names — worries about mining”s broader impact, particularly in South Gobi
province, and on the thousands of herders who live there. Many are struggling
with water-supply issues, and the mines need huge amounts to operate.

“I”m really concerned about
that,” she says, “that there won”t be enough water for our children
and children”s children.”

Avoiding “Dutch Disease”

Building an economy on minerals
presents other problems as well. For one thing, the economy becomes dependent
on commodity prices that fluctuate. When the price of copper crashed in late
2008 during the global financial crisis, Mongolia”s government had to call in
the International Monetary Fund for help.

Horses were first domesticated in
the area that is Mongolia today. The original cowboys, Mongolians ride on
wooden saddles and are some of the best horsemen in the world. They”re a part
of Mongolia”s traditional culture, which is under pressure from the mining
boom.

When prices for natural resources
are high, they can cause other problems and strangle important domestic
industries. Heavy demand drives up the value of a country”s currency, which
makes its exports more expensive and harder to sell.

Rogier van den Brink of the World
Bank says that”s what happened after the Netherlands discovered huge natural
gas reserves in late 1959. The syndrome became known as “Dutch
Disease.” Van den Brink, who is Dutch himself, remembers the damage.

“As a boy growing up in
Holland, the impact of this was very stark to me,” he says. “Sectors
of the economy that we long had pride in, like the shipbuilding industry, we
had to close them down.”

Today, van den Brink is the World
Bank”s lead economist in the East Asia and Pacific region. He has worked
closely with the Mongolian government to enact a law to enforce government
savings and control spending and borrowing so it might avoid what happened in
the Netherlands.

Threat To Traditional Industry

Landlocked Mongolia doesn”t build
ships, but it has other businesses that the mining boom could hurt. The Gobi
cashmere company in Ulan Bator is already feeling the side effects. The firm
turns raw cashmere from Mongolian goats into sweaters, jackets and shawls, and
exports them to more than 40 countries.

Clothing designer Ariunaa Suri works
in her office at the Gobi cashmere company in Ulan Bator. Before mining,
cashmere was Mongolia”s main export.

Mongolia”s new mineral wealth drove
inflation to more than 12 percent last year, forcing Gobi to raise workers”
wages by one-third. Naranbaatar Davva, the company”s 30-year-old chief
operating officer, says raw material prices are up, too.

“Three years ago, we used to
buy 3 kilograms of raw cashmere for $20,” he says. “Today, this
figure is $60.”

Higher prices are good for Mongolian
herders, but they cut into Gobi”s profits. Naranbaatar says a special
government policy is also undermining herders” incentive to work. This year —
an election year — the government is giving citizens up to $770 each in
one-time cash payments. It”s essentially a mining dividend and, for many Mongolians,
a lot of money.

“Livestock herding is almost a
16-hour-a-day job. It”s a hard job, so you don”t see many young herders
anymore,” he says. “Plus, the government gives out free cash.”

Naranbaatar says mining brings many
benefits to Mongolia. He just hopes people don”t lose sight of an old, reliable
industry like his.

“Mining resources are not
renewable. Depending on the reserves, it may last 20, 50 or 100 years,” he
says. “If we use the right policies and preserve our nomadic herding
traditions, many people will be employed in the Mongolian cashmere industry for
hundreds and thousands of years.”

Question Of Distributing The Wealth

Back at the bar at Oyu Tolgoi, it”s
closing time. Workers pour outside and continue to drink beneath street lights.

Many Mongolians worry that mineral
companies and politicians will be the greatest beneficiaries of the mining
boom. Solongo, the clerk, hopes some of her nation”s new riches are used to
improve the hard lives many Mongolians face.

“There is lots of poverty in
Mongolia, almost 40 percent, which is unbelievable with this natural
resource,” she says. “We should find the right way to distribute the
benefit of this resource to everyone. They deserve it.”

By Frank Langfitt

Source:  http://www.npr.org