Mongolia, of which this ramshackle city is the capital,
is on the cusp of cashing in on the planet”s richest untapped store of copper,
gold, other precious minerals, and coal. There could be enough underground wealth
in the steppe to make every nomadic herder a millionaire.

Lucky Mongolians? Maybe. The kind of money that is going
to start flowing here soon could buy an awful lot of consumer goods, not to
mention more durable benefits such as schools, hospitals, roads, and wind
farms.

But sudden floods of easy cash are not always a
blessing. Ask the citizens of Nigeria or Papua New Guinea, most of whom seem to
have experienced a tragic spiral of corruption, violence, and poverty in the
wake of their resource booms.

Mongolia”s Deputy Finance Minister Ganhuyag, who like
most Mongolians uses only one name, likes to boast of his country”s future as
Asia”s “alpha wolf economy,” pointing out that the country”s gross
domestic product is currently growing by 16.7 percent a year, the fastest pace
in the world.

But that is not the whole picture, acknowledges
President Elbegdorj. “The government and the people are very aware of the
risk of the “natural resource curse,” ” he says. “And we are also
very aware that with bad government and corruption my country will be in
trouble.”

“Whether we want it or not”

Mongolia is in “a race” to build its
institutional, political, and moral defenses “before large-scale revenues
materialize,” according to a recent report by the European Bank for
Reconstruction and Development. There are “grounds for optimism,” it
found, but “remaining challenges are enormous.”

As far as Munkhbayar is concerned, sitting in the yurt
he has pitched in a meadow by the banks of the fast-flowing Tuul River, the
damage has already been done.

A prominent environmentalist who has campaigned against
the gold mines that have polluted Mongolia”s rivers and lakes, Mr. Munkhbayar
deplores how the mining boom means “people now are interested only in
earning money, not in taking care of our motherland.”

If he had his way, Mongolia would not dig holes in the
ground at all – “our resources should be left where they are,” he
says – but rely instead on tourism and herding.

Though his position is extreme, his sensibilities are
widely shared. “Most people in the countryside do not want mining
here,” says Oyun, a geologist and member of parliament for the centrist
Civil Will-Green Party.

“But whether we want it or not,” she adds,
“we don”t see many venues Mongolia can use except mining to expand our
economy and integrate ourselves into the world economy. Like it or not, we have
to use mining as the main engine for growth at this stage, and hopefully the
revenues will be wisely spent.”

Ms. Oyun, who heads a foundation commemorating her murdered
brother, Zorig, a hero of Mongolia”s democratic movement, is relatively
sanguine.

Though it is too early to predict how the country will
turn out, she says, she points to new laws on corruption, conflicts of
interest, freedom of information, campaign finance, judicial reform, and
environmental standards as hopeful signs.

“Most decisionmakers here realize that the main
factors determining whether the resources are a blessing or a curse are strong
institutions, good governance, and the rule of law,” Oyun says. But laws
are not always implemented. Munkhbayar staged a couple of publicity stunts in
2010 and 2011, opening fire on mining equipment at mines he thought should be
shut in assaults he had announced at press conferences. No person was targeted or
hurt. He has not been punished.

“Corruption is Everywhere”

Nor is the law necessarily applied equally. A popular
former president, Enkhbayar, was charged with corruption earlier this year and
arrested just in time to stop him running for parliament against the ruling
party.

Though Mr. Enkhbayar has a reputation for corruption,
the timing of his arrest “appears to be arbitrary,” according to a
statement by Amnesty International at the time. “Our legal system works in
some cases but not in others,” says Sumati, who heads the Sant Maral
polling organization. “It needs tuning.”

Corruption is worsening, foreign businessmen and
ordinary Mongolians report. The country”s ranking in Transparency
International”s table stands at 120th of 183 nations. But the official anticorruption
agency has picked up steam in recent months, taking on some high-profile cases;
and citizens are speaking out more, local observers say.

“People are less accepting of the sort of easy
corruption that happened 10 years ago,” says Jonathan Addleton, the
outgoing US ambassador. “They freely express their concern.”

Uyanga, who lives with her husband, a manual laborer, and
five children in a yurt in a shantytown outside the capital, has no doubt that
“the people in government are taking the money for themselves. Corruption
is everywhere.”

Creating a Rainbow Economy

Ms. Uyanga has benefited from monthly government
handouts of $16 per family member, paid for from the government”s mining
income, but is not sorry they have just been stopped on the advice of
economists, who warned they were inflationary and not really helping the poor.

Like 45 percent of the population of just under 3
million, according to a Sant Maral poll in April, Uyanga says she believes the
government should be making the growing wealth gap a high priority and
addressing social needs. “Instead of giving us cash, I”d rather the
government did something useful like build more apartments,” she says.

President Elbegdorj, too, says he wants to invest mining
money in other sectors “to make our one-color economy into a rainbow
economy.”

One economic aspect of the “resource curse” is
the way extractive industries crowd out other sectors and stunt their growth –
a phenomenon already evident here, where tourist agencies have lost many of
their English speakers to high-paying mining companies.

Elbegdorj has tried to take some of the heat out of the
mining industry, whose poor environmental record has earned it few friends, by
imposing a moratorium on exploration licenses. Three years ago miners were free
to drill on 46 percent of Mongolia”s territory. Today that proportion has
dropped to 16 percent, the president says.

“Civil society” On the Rise

“If growth and exploration happen too fast and too
greedily, they will be a curse,” warns Oyungerel, a human rights activist
and newly elected parliamentarian for Elbegdorj”s Democratic Party. “The
new parliament”s historic mission will be to regulate the pace and the
environmental impact of mining.”

Mongolia”s democracy is vibrant; last month”s parliamentary
elections were the seventh since the country”s Soviet-dominated puppet regime
fell in 1990. And “civil society is on the rise,” Mr. Sumati says.
“Our population at large is more sophisticated and has a sounder approach
than some politicians.”

Those strengths, predicts Mr. Addleton, will serve
Mongolia well. Dealing with the wealth that will start flowing when the $7
billion Oyu Tolgoi copper and gold mine comes on line in September “will
mean huge challenges, and it will always be a challenge,” he warns.

“But for all the detours and obstacles,”
Addleton adds, “I think Mongolia will make its way to a better
place.”

By Peter Ford

Christian Science Monitor