Climate change and a mining boom are altering the lives and livelihoods of Mongolians.
Tsedew Zagdbazar, 46, remembers the brutal winter of 2009-2010. That year, a dzud, an increasingly frequent, harsh winter weather event in the country, wreaked havoc on Mongolia.
The 2009-2010 dzud devastated livestock in the western province of Khovd and across the country. Over one-fifth of Mongolia’s total livestock died (8.5 million animals), subsequently affecting close to a third of the Mongolian population who have sustained pastoral traditions for generations. According to the Red Cross, a quarter of a million herding families were affected: 44,000 households lost their entire livestock, and some 164,000 lost more than half.
Tsedew’s family was one of them. After losing some of his animals, he was left with the choice of salvaging his depleted livestock or selling his remaining animals and look for work elsewhere. Herders without animals have one realistic economic choice: Move to Ulaanbaatar, the only city in the country with formal work opportunities.
“Pastoralism is just not lucrative anymore,” Tsedew says.
In the past decade alone, 600,000 people have migrated to the capital largely because of harsh climate conditions, looking to build an easier and more stable life for their families. The urban-rural makeup of the country is a virtual split. Ulaanbaatar’s population is just under 1.5 million, with tens of thousands of people moving to the capital each year looking for work. Thirty percent of the country’s population still lives in poverty, increasingly in an urban environment.
Now a former herder, Tsedew is contrite about his decision to move to Ulaanbaatar. “It wasn’t what I expected and it wasn’t worth it,” he tells The Diplomat. Once herders give up their rural lives, it is virtually impossible to return to it. Many become hamstrung by high interest debt accrued in trying to set up their lives in the city.
It takes years to cultivate livestock and pastures, but only one bad winter to lose everything. Like almost all rural migrants to Ulaanbaatar, Tsedew lived in the city without his family in one of the informal ger districts ringing the city’s outskirts. These districts are not connected to formal infrastructure like plumbing, electricity, or gas making life even more challenging.
Almost concurrently, in 2010, as weather disasters created an exodus to the capital, Mongolia’s mining boom took off. After securing a long term deal with the Mongolian government, money flowed in at unprecedented levels spurred by multinational mining mammoth Rio Tinto’s investment into Oyu Tolgoi. The company manages the country’s largest copper and gold reserves.
With immense reserves of copper, coal and other minerals valued at $1-3 trillion, Mongolia became one of the fastest growing economies in the world. With growth hitting 17 percent in 2011, Mongolia banked on sustained Chinese demand. Foreign direct investment and projects connected to the mining sector poured into the country. The luxury market and other sectors such as services, property, tech, and finance also started to take off. The country was deemed “Minegolia” for its mining potential and dubbed a “frontier market.” By 2013, Mongolia had reached a GDP per capita high of $4,400.
Tsedew thought the timing was right to benefit from the mining boom himself and leave the capital. Despite the financial allure of working in the booming Oyu Tolgoi copper and gold mines or Tavan Tolgoi coal mines, the harsh and desolate desert conditions of the Gobi didn’t appeal to him. He also wanted to move closer to home. After three years spent far away from his family, Tsedew moved back west to work in the Khushuut coal mine. He counted on Mongolia’s thriving commodities boom to last.
But after three years of double digit growth driven by the mining boom (2011-2013), foreign investment and commodity prices collapsed. By 2016, the boom and growth crawling at just 1.2 percent. Things quickly went south when China’s own growth tapered, demand for commodities sank, and Mongolia’s government went on a debt-fueled spending spree. A financial crisis soon emerged.
The Mongolian tugrik freefell against the U.S. dollar by almost 80 percent between March 2013 and January 2017. Within a five year span, FDI plunged from $4.5 billion to 94 million in 2015. Mining projects were halted; investment that had boomed between 2010 and 2012 was soon followed by a major collapse in the 2013 to 2015 period.
Despite the boom and bust cycles, Tsedew’s life and livelihood remains centered around the Khushuut coal mine. Tsedew sees his new life as a compromise between living in the smog-filled capital and the harsh conditions of the Gobi. Life is not easy here either, however. Tsedew now lives with his family directly in front of the mine which operates day and night. He says he earns 1.2 million tugrik per month ($450), somewhere between double and triple the average salary in the country.
Nestled between two mountain ranges in the western Mongolian province of Khovd, trucks churn up coal dust at the Khushuut coal mine. It is one of the largest deposits in Asia of its kind. Since 2007, the Khushuut mine has been controlled by the Mongolia Energy Corporation (MEC), a Hong Kong-based company which also has projects in neighboring Chinese Xinjiang province.
According to MEC’s latest annual report in 2018, the volume of coal exported to China from Khushuut reached 36.2 million tons — the highest number ever recorded — and among that, 27.7 million tons was coking coal. The mine is estimated to have reserves amounting to 460 million tons of coking coal, one of the largest coal reserves in Asia. Coking coal is mainly used in the steel industry in China, which is what continues the surge in demand for it.
Mongolia’s coal exports rose by 15 percent in the first quarter of this year to 7.8 million tons. Much of this surge stemmed from a souring in China-Australia relations. China decided to cut back imports of coal from Australia and the time for such imports to clear customs has reportedly doubled, slowing the trade further.
Mongolia’s mining fortune is heavily determined by Chinese demand for copper and coal, which account for more than 90 percent of its exports. The outlook for commodity exporters looks promising at least into 2020 as new mining projects begin to open up in Mongolia again.
However, miners must also deal with temperatures that vary from -40 C to 40 C (-40 F to 104 F). As a result, mines tend to limit drilling programs in the Gobi to between late March and November. This puts limitations on the mining sector compared to most other mining rich regions, where excavation can continue uninterrupted year round.
The road from the village to the Chinese company is sealed and pristine. Truck drivers ply the road six to eight times per month and earn an average of 100,000 to 200,000 tugrik or $40 per trip, or $300 per month.
The new road from the mine snakes south and west. It was built by MEC and the Chinese government to link the Khushuut mine with Takeshenken on the Mongolia-China border. The road is used to transport coking coal across the border into Xinjiang province.
Although mining is relatively less developed in this region than other parts of the country (393 exploration and exploitation licenses covering almost 2.6 million hectare in November 2014), it is predicted to develop rapidly in the future. Mineral products and precious metals currently account for 23 percent of Mongolia’s overall GDP. It’s anticipated that the industry itself won’t die any time soon, even if the boom and bust cycles of the overall economy makes life uncertain for the miners.
Continuing Climate Induced Migration
According to the Green Climate Fund and Mongolia’s Institute for Meteorology, Hydrology and the Environment, the country has seen an average temperature increase of 2.2 C, more than double the global average since 1940.
According to UNDP, over 7.8 percent of Mongolia’s territory has been affected by desertification and land degradation. Khovd province in Western Mongolia has been identified as one of the most critical areas; the province has been highly affected by desertification.
Huandh, 43, and her husband Kantovat, 50, live in a small valley on the edge of Tavan Bogd National Park where China, Russia and Mongolia meet in the Altai Mountains. With their son, Tairverdi, who is now 15, they depend on stable conditions in the spring and summer months to ready their animals to make it through the winter. However, herders and communities must prepare for the worst and have little margin of error if something goes wrong.
For Huandh and her family, they don’t have the luxury of moving. They begin to prepare in September for winter. Everything that they eat and use to heat their home comes from their two camels, 30 cows, and 160 goats and sheep. If they have not properly stored enough fat for winter, they risk not surviving if the temperature plummets more than usual.
This part of the country is particularly prone to harsh weather conditions and to the dreaded dzud, which devastated Mongolia’s animal stocks in 2000, 2010, and most recently in 2017. To the relief of the remaining herders in the region, last winter was not a dzud. The adjacent province of Hovd has also been identified by UNDP as one of the most at risk regions of worsening dzuds, assessed in October or November each year.
The western cities of Olgiy and Khovd have benefited with growing populations from the uptick in mining in this part of the country. This has, however, put a strain on water and other resources in an area of Mongolia which is already at high risk of acute water shortages.
Western Mongolia has an estimated 38,000 nomadic and semi-nomadic herding families like Huand’s who rely directly on a stable and unpopulated grassland environment for their herds.
In 2017, Mongolia had to temporarily ban grain exports after nearly a third of the country suffered a severe drought and the highest temperatures in over half a century. Officials are concerned that droughts will lead to crop failures that will leave the country’s semi-nomadic herders without enough means to sustain their animals through winter. The country has prioritized the expansion of its agriculture sector as protection mechanisms from drastic changes in commodity prices.
A Changing Economy
In the last decade Mongolia has seen a substantial labor shift propelled by the mining boom from the agricultural sector to the mining, manufacturing and construction sectors. Many of those who moved to the capital have shifted from pastoral occupations to service sector or construction jobs. Others have worked seasonally in mines around the capital or in the booming southern Gobi.
More recently, since 2017, after a brief contraction linked to a harsh winter and border complications with China that stalled the movement of goods, Mongolia’s economy has partially recovered. Global commodity prices surged again, particularly in coal and copper in 2018. Although not at the double-digit growth of early 2010, the economy grew at a strong 6.9 percent in 2018 and the mining sector has continued to expand at numerous sites across the country. Resurgent Chinese demand for coal has powered growth and government revenues, pulling the landlocked economy back from the brink of a classic emerging market crisis.
According to UN Comtrade, in 2018 Mongolia’s top exports were centered around two commodities: coal briquettes worth $2.8 billion and copper ore worth $2 billion. According to the Asian Development Bank, Mongolia’s GDP is expected to grow at 6.1 percent in 2020, the highest in Asia, 0.1 percent higher than China. Mongolia’s inflation rates are forecasted at 7.5 percent in 2020, nearly three times more than Hong Kong at 2.3 and China at 2.2 percent. China’s coal imports reached 2.75 billion in 2018, according to UN Comtrade data. Coal exports generate about 35 percent of Mongolia’s total export revenues currently.
In the first quarter of 2019, year-on-year GDP growth was 8.6 percent and the inflation rate has been stable at around the target of 8 percent. According to the World Bank, Mongolia’s economy has recovered strongly since the 2016 crisis, when growth slumped to 1.2 percent, but underlying vulnerabilities remain. Economists warn that lurking vulnerabilities remain, particularly mineral price fluctuations or lower growth in China. Despite progress in the banking sector, continuing bank fragility poses a risk to economic health.
China accounts for the lion’s share of Mongolia’s exports. About 90 percent of Mongolia’s trade currently passes through China. According to the country’s statistics office, Mongolia’s export earnings from coal over the first three months of the year reached $644 million, up 25 percent compared to a year earlier.
Although China has weaned itself off of domestic coal production and mining, and has been building or financing hundreds of coal-fired power plants in other countries, mainly in Asia. It is still the world’s largest coal consumer, drawing more than 70 percent of its electricity from coal.
In 2018, China accounted for more than 60 percent of the world’s industrial coal consumption, but its share falls to a little more than 40 percent in 2050 because of consumption growth in other countries and China’s policies to reduce coal use in the industrial sector.
In respect to coal, according to the National Statistics Office of Mongolia, Mongolia produced a record high of 50 million tons of coal in 2018, surging 6.2 percent compared to the previous year.
Source: thediplomat.com
