“Our leaders are getting richer and richer. But for us,
everything is getting more expensive,” 
says Altangerel, who works in a beauty salon in Ulaanbaatar. “A few
years ago a liter of milk was still MNT700 (USD0.53), but now I have to pay
twice that much.” Altangerel, who like many Mongolians goes by only one name, cannot
share the enthusiasm of her country”s politicians and foreign corporations for
the expected mining boom. “The cost of rent, heating and electricity are also
rising. My income hasn”t been able to keep up for a long time,“ she says.

Many Mongolians are skeptical if the country”s newfound
geological wealth is being shared with its citizens. The benefits of recent
payout schemes have been questioned, as politicians argue over what to do with
the new money, and economists warn of the negative effects of cash handouts.

Significant deposits of coal, gold, silver, uranium, zinc
and fluoride have been identified under the arid steppes of Mongolia, putting
the country in 14th place globally for natural resources. Many more uncharted
mineral resources are thought to be awaiting discovery, potentially enough to
put Mongolia in third place. Such prospects are enticing for China or South
Korea, where raw materials are in high demand from the manufacturing
industries. But the question of how to share the benefits of the country”s
mineral rights has stirred up controversy.

With multinationals” money pouring into state coffers,
each of the estimated 2.7 million Mongolians was promised a payment as
“erdeniin khuv”, or share of the treasure, of between MNT1 and 1.5 million.
Earlier this year, each citizen received MNT70,000, with another MNT50,000
payout planned for the end of the year, and the rest was scheduled for
disbursement by the end of 2012. Many dreamt of following in the footsteps of
Kuwait, where immigrant wage-earners do the heavy lifting while the citizens
cash in on the income from the extraction industries, and the knock-on benefits
to the rest of the economy.

But the reality in Mongolia has fallen short of such high
hopes. With its 2009 decision to implement the handouts, the government also
axed child benefit payments and subsidies for young couples. For many
Mongolians, around 20 per cent of whom live on less than USD1.25 per day
according to the UNDP, child benefit had been their only source of income.

The cash injection also caused a spike in inflation, in
line with economists” unheeded warnings, hitting Mongolia”s poorest even
harder. Opposition leaders have argued against the handouts, citing their
negative impact on the economy, calling instead for the money to be invested in
education, health and other social services.

And the burgeoning mining industry has hardly created any
jobs for Mongolians. Many school leavers have little other option than the
illegal gold mines, often hotbeds of prostitution and other criminal
activities. Local livestock farmers are involved in frequent violent clashes
with both legal and illegal mining companies, as they defend their lands
against degradation from the heavy machinery and contamination of the
waterways.

International financial institutions may have praised
Mongolia for stabilizing its financial markets and reining in public sending,
but ground-level research has shown that improvement for the country”s poor is
slow. A report compiled by the national authorities and local UNDP
representatives said that the UN Millennium Development Goal of halving poverty
by 2015 is now out of reach, with 47 per cent of the rural population
officially under the poverty line, and 27 per cent in the capital.

Unless more effective solutions are found to share the
country”s abundant natural riches, Mongolia”s wealth alone is unlikely to earn
it a place among developed nations, but the rising value of copper and gold and
recent oil discoveries mean a change in policy is unlikely in the near future.

(This article was written by Renate Bormann, who lived in
Mongolia for many years and was recently back for a visit.)