Magazine article Foreign Policy

Welcome to Minegolia: How the Land of Genghis Khan Became a New Gold Rush San Francisco on the Steppe

Magazine article Foreign Policy

Welcome to Minegolia: How the Land of Genghis Khan Became a New Gold Rush San Francisco on the Steppe

Article excerpt

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FOR THE FIRST TIME in as long as anyone can seem to remember, there have been traffic jams in Ulan Bator--a place previously known mainly either as the answer to a trivia question (Which capital city has the coldest average temperature?) or as a historical curiosity: Asia's Timbuktu, the fabled homeland of Genghis Khan. Until recently, the Mongolian capital had more horses than cars.

No longer. Mongolia is in the middle of an epic gold rush--think San Francisco in 1849--but it's copper and coal that have enticed businessmen, investment bankers, and miners from London, Dallas, and Toronto by the planeload. Today, Ulan Bator is abuzz with talk of options and percentages, yields and initial public offerings. Not since the 13th century, when Genghis Khan consolidated the nomadic tribes of these remote steppes and established an empire that eventually spanned from Eastern Europe to Vietnam, has Mongolia seen so much action. The country's stock exchange (though still the world's smallest) rose 125 percent last year, and the IMF forecasts double-digit GDP growth rates for years to come. Others aren't nearly so pessimistic: Renaissance Capital--an investment bank that specializes in emerging markets, one of many that have recently set up shop in Mongolia--notes that overall economic output could quadruple by 2013.

"Mongolia is about to boom. Of that, there is no longer any doubt," says John P. Finigan, the Irish CEO of one of Mongolia's largest banks. A veteran of developing markets in scores of countries, he says the only comparable growth potential he has seen has been in the Persian Gulf oil states.

The reason for the boom can be summed up in a word: China. Mongolia has some of the world's largest undeveloped fields of coal, vital for its southern neighbor's hungry steel mills and power plants. Mongolia is also rich in copper, needed for the power-transmission lines being strung at record rates in fast-growing Chinese cities and for the production of batteries, especially those for the booming market in electric cars. China currently consumes nearly 7 million tons of copper each year (about 40 percent of global demand), but it's on track to triple its copper needs within 25 years, according to CRU Strategies, a London-based mining and metals consultancy.

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Twenty years ago, when I first visited Mongolia, it had just emerged from seven decades under the Soviet umbrella. Ulan Bator had a shellshocked otherworldliness about it. There were a few grimy hotels fronting Sukhbaatar Square, named for the leader of the 1921 revolution that transformed Mongolia into the world's second socialist state. After decades of decline, the city looked like a set for an apocalyptic movie, especially in the crush of winter, when the sky was a perpetual charcoal gray.

Nowadays, Ulan Bator looks increasingly like a Chinese boomtown, with all the same trappings--exploding property prices, huge capital inflows, rising concerns about corruption, widening gaps in income disparity, and a flood of flashy automobiles on the roads. A year ago, a Louis Vuitton boutique opened for business in the posh Central Tower building near Sukhbaatar Square. A glass cabinet holds a horse saddle encrusted in gems. …

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