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Election outlook: odds are in DP's favor yet resource nationalism is to rise whichever party wins

highlights

 

 ¨ Difference between the parties: To begin with, MPP is much more old and experienced political party than DP as it has been a ruling party for almost 60 years during socialist period of Mongolia.  Moreover, it can said that by definition DP is more liberal than MPP and is associated with Democratic Revolution in Mongolia.  However, both parties have substantially reformed and matured over last 20 years of Mongolia’s transition to democracy and even were partners in Coalition Government of 2008-2012. According to DP’s presentation (http://prezi.com/cres0pr3xbky/presentation/) , it is right center party characterized by low taxes and support for production and industry aiming to creating comfortable middle class in Mongolia, while it could be implied that it views MPP as left center party characterized by higher taxes and more attention to social welfare.

¨ Both DP and MPP have resource nationalism oriented items in their election agenda. We believe that resource nationalism is broadly bi-partisan and is to increase whichever party wins.

¨ According to polls, interrelated trio of unemployment, standard of living\ poverty\ income  and price increase\ Inflation continues to be major problems in Mongolia. Yet there is consistent lack of confidence by voters in ability of Government to solve these major problems for them.

¨ Despite high growth rate, Mongolians appear to be unimpressed by it and view that growth alone is not enough—the government has to action to reduce unemployment

¨ Not surprisingly, majority of Mongolians are consistently not happy with income difference between rich and poor, another crucial question for voters.

¨ Latest polls could be interpreted that voters are not happy at the status quo and that is reflected in advance of DP ratings especially in Ulaanbaatar.

 ¨ Polls could be interpreted that there is substantial advance in DP ratings, from nationwide 19.2% in 2010 to nationwide 28.6% in 2012. Number of critically  important undecided voters has substantially declined from 32.2% in 2010 to 23.3% in 2012. Similarly, no answer voters have declined substantially from 19.2% in 2010 to 9.2% in 2012. MPP remained almost same, nationwide 17% in April 2010 to nationwide 18.8% in June 2012. MPRP which was absent in April 2010 jumped to 15.9% in June 2012

¨ We believe that shift in voters opinions resulting from voter dissatisfaction with status quo translates in odds being in DP’s favor  as MPRP is capitalizing on this dissatisfaction with authorities and, according to L.Sumati, director of Sant Maral Foundation, breaking away votes from traditional MPP electorate.

¨ We believe that most likely scenario is “ slight DP plurality (30-35 seats), but not enough to form government with CWGP. Result: DP-led coalition with MPP, PM = Altankhuyag”, according to Julian Dierkes, an associate professor at the University of British Columbia’s Institute of Asian Research.

¨ New Government would be likely to be overall characterized by low taxes and support of production and industry with goal of establishing comfortable middle class and emphasis on creating jobs and income for Mongolians, universal residential programs, paying attention to their health, education, safe environment, freedom and liberties.

        Economically, according to DP’s election program, new Government’s policy would be        likely to be characterized by prioritizing policy of reducing dependency from mining sector, ensuring sustainable long term development, and economic diversification

 ¨ We believe that election platform of DP overall is broadly defined so it would be hard to specify clearly impact of the new Government.  On the other hand, we don’t expect drastic changes in Government policies as DP will value highly continuity quality of Mongolian state policy. Over 20 years of democracy, DP has become major mature political party and gained considerable state policy experience being partner of MPP in Coalition Government of 2008-2012 where both parties had similar approaches to many issues due to both being center parties.  Therefore, overall, we expect business as usual in Mongolian politics to come.

¨ At the same time, we do believe that  there is a clear trend of increasing resource nationalism in election platform of DP reflecting popular voters support for it.

¨ Overall, we expect business as usual with the likely new Government and generally pragmatic approach to resolving various issues. Broadly speaking, DP election platforms fares well in terms in various aspects such as good governance and so on. At the same, time, our recommendation  to investors is to be prepared for resource nationalism which is clearly to increase.

 

To get a full PDF version of this research report please click on https://dl.dropbox.com/u/42174832/ELECTION%20OUTLOOK%20REPORT.pdf

 

Dale Choi | Chief Investment Strategist | Frontier Securities | #705, Blue Sky Tower, Peace Avenue 17, 1st khoroo, Sukhbaatar district, Ulaanbaatar, Mongolia| Office: +976 7011999 | Mobile: +976.99103371 | Email: This email address is being protected from spambots. You need JavaScript enabled to view it.">This email address is being protected from spambots. You need JavaScript enabled to view it.