Mongolia’s Invidious Anti-Invasion Force
Mongolian bonds followed sputtering stocks on late-year Samurai issuance guaranteed by Japan’s International Cooperation Agency which technically breaches the 40 percent of GDP public debt ceiling contained in fiscal responsibility legislation also routinely missed with deficit outcomes. GDP growth was again 12 percent in the first half on 50 percent breakneck credit expansion, one-quarter sourced from the central bank, prompting a Fitch Ratings outlook downgrade as it called for “stringent controls.” Both FDI and the currency are off double digits this year amid stalemate over the $5 billion second phase of the strategic OT copper mine 51 percent owned by London-based Rio Tinto, whose fate was a central campaign issue in recent elections won by pragmatists vowing to “turn the corner” at an October investment conference. Over $6.5 billion has gone into the open pit project which began production at mid-year as the government seeks new terms on funding and royalties as well as export and environmental policies. In other commodities a 15 percent coal price drop has eroded China shipments and delayed exchange listing of another mine, and the bilateral currency swap line was doubled in response. Fiscal and monetary stimulus and tugrik depreciation, currently the world’s fastest outside war zones, have revived 10 percent inflation hurting living standards, according to the Asian Development Bank’s annual review. Stubborn poverty and foreign investor backlash have combined to foster extremist political groups including Nazi sympathizers and “eco-terrorists” who have attacked international operators. Local anger has also erupted in fresh frontier market Myanmar, where office space in the capital is Asia’s most expensive at $100 a square meter, and family plots have been bulldozed to make way for offices and factories. The Thilawa zone on Yangon’s fringe has attracted Japanese interest but residents refuse to budge without major compensation and the military thus far has refrained from previous seizure practice. Dozens of multinational oil groups entered the auction for offshore blocks to be developed as joint ventures as existing relationships have frayed as illustrated by the headline clash between Singapore’s Fraser and Neave and its army counterpart over the biggest brewery. Agreements now allow international arbitration but in the past legal recourse was not an option with the junta responsible for enforcing provisions.
Communal and religious violence is another deterrent and invited widespread external condemnation following Buddhist moves against Muslims and discrimination against citizens from smaller states that led periodic insurgencies. The Rohingya minority in Rakhine province originated mostly from Bangladesh, which has been mired in its own civil strife with the two main political parties at loggerheads and trading strike action going into elections. Stocks are flat on the MSCI Index with limited economic shifts expected as textile exports remain under pressure from new labor and minimum wage standards. An Islamic party figure was hanged in December for his historic role in fomenting clashes which repeat throughout the sub-region.
