Mongolia heads to polls with slowing economy on voters' minds

Mongolia will elect a new parliament this week hoping it can reverse four straight years of slowing growth, against a backdrop of concerns about an erosion of democratic values in a country sandwiched between autocratic China and Russia.

With just three million people, this remote land, best known as the birthplace of the Mongol emperor Genghis Khan, has stood as an oasis of democracy, surrounded by single-party dominated regimes.

Mongolia's political transformation since a peaceful revolution in 1990 has been a big plus for foreign investors eyeing up its rich mineral resources.

But an abrupt economic slowdown since 2012 has stirred controversy over the role played by international mining firms like Rio Tinto , which last month finally approved a $5.3 billion Oyu Tolgoi copper mine extension plan, having settled a long dispute with the government a year ago.

The mining slump was still likely to cost the ruling Democratic Party seats in Wednesday's election, according to opinion polls.

"The Democratic Party is 100 percent guilty for the economy's collapse. The lives of citizens have deteriorated so much," said Darjaa Sovood, leading a small demonstration against the Democratic Party in front of Mongolia's parliament house on Sunday.

The resource-rich country, nicknamed "Mine-golia" during the boom years, has struggled to adapt to a changing environment where China has tempered its appetite for coal and copper and commodities are no longer valued as highly.

Economic growth has fallen from 17.5 percent in 2011, the year before the Democratic Party took power, to the IMF's projected 0.4 percent for this year.

SMALLER PARTIES MARGINALISED

While the presidency is not at stake in Wednesday's election, protester Sovood blamed President Tsakhia Elbegdorj, of the Democratic Party, for misleading voters.

The Democratic Party had promised to spread wealth from the country's resource boom to improve lives, but investors pulled out and the economy tanked.

"After Elbegdorj was elected, he didn't keep him promises. What he did was exactly the opposite of what he promised," Sovood said.

Elbegdorj, who was also prime minister in 1998 and from 2004-06, is expected to retire from politics when his final term ends next year. There has been no mention of current Prime Minister Chimed Saikhanbileg seeking the presidency.

Whether the opposition Mongolian People's Party (MPP) can take advantage is unclear, but following a recent fundamental change to the character of Mongolia's democracy, the election has become much more of a two-horse race.

On May 5, parliament amended the election law to remove a clause first introduced in 2012 that allocated 28 of the 76 seats in the legislature, known as the Grand Khural, according to parties' shares of the vote.

Dambadarjaa Jargal, an economist and television presenter, said candidates from smaller parties were being marginalised, especially as campaigning was only allowed to begin by law 18 days ahead of the election.

"It's hard for them to be known. Television is very regulated and you can't speak with a candidate for more than 15 minutes," he told Reuters. ($1 = 1,931.0000 togrog)