Mongolia's nomadic way of life threatened by climate change, neglect, modernity www.washingtonpost.com

It was another harsh winter on the central Mongolian steppe, with temperatures dropping to nearly 50 below zero Fahrenheit and thick snow covering the rolling grasslands. More than a million cattle, sheep and goats, already weakened by a dry summer, died, while nomads' precious horses froze to death on their feet.

"It was very hard, and the snow was deep," said 38-year-old herder Nyamdorj Tumursanaa, drinking milky tea in the nomads' traditional circular tentlike home known as a ger. "Even if the animals dug through the snow, there was no grass underneath. We had to buy grass for them, but still many of our animals died."

Here on the central Asian steppe, the ancient home of Genghis Khan and his Mongol horde, the nomads are brought up tough. Yet their ancient lifestyle is under threat as never before. Global climate change combined with local environment mismanagement, government neglect and the lure of the modern world has created a toxic cocktail.

Every year, thousands more herders abandon their way of life and head for Mongolia's crowded capital, Ulaanbaatar, which already holds half the nation's population.

The nomadic culture is the essence of what it is to be a Mongolian, but this is a country in dramatic and sudden transition: from a Soviet-style one-party state and command economy to a chaotic democracy and free market economy, and from an entirely nomadic culture to a modern, urban lifestyle.

Climate change is a major culprit, and Mongolia, landlocked and far from the moderating effects of the ocean, is suffering more than most parts of the world.

At the best of times, this is a fragile climate, with little rainfall and huge variations in temperature, which is why this vast territory supports a population of only 3 million people, making it the world's most sparsely populated country.

Now, government figures show average temperatures have risen by about 2.2C since systematic records began in 1940 - well above the global average rise of about 0.85C since 1880.

Summers, when most of the rainfall occurs, have become drier, and "extreme climate events" have become more frequent, says Purevjav Gomboluudev, head of climate research at Mongolia's Information and Research Institute of Meteorology, Hydrology and Environment.

The most dangerous event of all is a dry summer followed by severe winter, a phenomenon known as "dzud." Drought leaves livestock weak and reserves of grass low, making cold weather more dangerous: extreme cases in 1999-2001 and 2009-2010 wiped out a combined 20 million animals.

On the grasslands outside the small town of Altanbulag, 47-year-old Banzragch Batbold and his wife, Altantuya, remember how streams used to run off every mountain in their youth, how horses would dive into a local pond to cool off in the summer. "Now all that water is gone," she said.

Hundreds of rivers, lakes and springs have dried up across the country, the environment ministry says. And as the water retreats, the desert advances. Roughly three-quarters of Mongolia's land is degraded or suffering desertification, with about a quarter seriously affected, said Damdin Dagvadorj, managing director of the Climate Change and Development Academy.

But Mongolia's mismanaged twin transitions are also to blame.

In the Soviet era, Mongolia, a satellite state, kept nomadism under tight control. Animals were kept under collective ownership, but their numbers were limited, while the state supplied veterinary services, winter fodder and a guaranteed market.

In 1990, as the Soviet Union disintegrated, Mongolia threw off its one-party state and became a democracy. Three years later, it began privatizing the herds.

What followed was a huge expansion in animal numbers as individual herders valued their worth by how much livestock they held.

State support simultaneously vanished almost overnight.

Today, 66 million livestock roam the Mongolian steppe, nearly three times the 23 million cap maintained in the communist era. Overgrazing is a major cause of pastureland degradation, especially by the voracious and sharp-hooved goats whose numbers have exploded to supply the valuable trade in cashmere. Rampant, uncontrolled mining also uses huge amounts of groundwater, pushing the water table ever lower.

At the same time, the government has failed to extend education, health care and veterinary care to remote herding communities, says Ulambayar Tungalag of the Saruul Khuduu Environmental Research Center. "There is no incentive to stay in rural areas," she said.

Nor is herding as financially viable as it was. Middlemen traversing the grasslands pay herders knockdown prices for wool and other products while supplying consumer goods at sharp markups. Herders often go into debt to pay for their children's schooling.

And inequality is rising: Eighty percent of the livestock is controlled by the richest 20 percent of owners, among them elite city dwellers who pay others to look after their herds. More than 220,000 Mongolian families depend on herding, but more than half have fewer than 200 animals, government figures show, well below the 250-to-300 threshold considered economically sustainable.

Herders may have solar panels, smartphones and televisions, but life isn't getting any easier. Families are separated for much of the year as children head for boarding schools in the nearest towns, sometimes with mothers tagging along.

In the winter, Altantuya stays, getting up at first light to dig frozen cowpats out of the snow to build a fire, with Batbold heading out to protect the animals from wolves, wind and snow.

"In the winter, people get lonely," he admitted. "You can't go anywhere. You have TV now, but your children are in school. The women go crazy, and the men drink vodka."

The couple's children are being educated in Ulaanbaatar. Neither child has expressed any desire to follow in their parents' footsteps. "No one wants to be a nomad," Batbold said. "When I'm old, and If I am not able to ride, there will be no one left to look after the steppe."

Quentin Moreau, country director for AVSF (Agronomists and Veterinarians Without Borders), a French nonprofit supporting smallholder farming, says no investment is being made to make herders' lives easier. Projects to promote quality over quantity - for example, by rewarding herders with higher prices for better-quality cashmere - are still too small-scale to make a difference, and government plans to promote intensive farming make no sense on the water-starved grasslands, he says.

Moreau fears an acceleration of the rural exodus - to the point where the system of villages and towns serving herders is no longer sustainable. What few social services that are available could disappear entirely.

Yet the lure of the capital often proves to be a mirage.

A century ago, the town that is now Ulaanbaatar was little more than a trading post and a monastery. Today, it is a sprawling mess of 1.4 million people, half living in Soviet-style apartments, half in the sprawling, unplanned "ger districts" where people have pitched their homes on the hills surrounding the city.

Mongolians are a people deeply connected to nature, who call their country the Land of the Eternal Blue Sky. But their capital has become the land of choking smog, as ger dwellers burn coal to ward off the cold.

In winter, the capital has some of the worst air pollution in the world. Cases of respiratory infections have nearly tripled in a decade, pneumonia is a leading cause of death for infants, and children living in the center of the city have 40 percent lower lung function than those in rural areas, UNICEF says.

Residents of ger districts lack access to running water, while jobs for rural migrants are few and poorly paid - a watchman, a cook, a driver perhaps. Many people lack the skills to succeed here.

During festivals and important events, politicians like to don national costume - the herders' calf-length tunic, or deel - but are doing nothing to protect the source of that culture, Tungalag said. Meanwhile, in urban society, herders are often stigmatized, their lifestyles looked down upon.

"Nobody understands that actually Mongolian identity - being a nomadic person, being close to nature - is being lost," Tungalag said.

Mongolia, China, Russia discuss ways to develop cross-border tourism www.xinhuanet.com

ULAN BATOR - The third tourism ministerial meeting of Mongolia, China, and Russia was held here on Monday, with the aim to deepen trilateral exchanges in the tourism sector.

Fitch Upgrades Mongolia to 'B'; Outlook Stable www.fitchratings.com

Fitch Ratings-Hong Kong-09 July 2018: Fitch Ratings has upgraded Mongolia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B' from 'B-'. The Outlook is Stable.

A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS

The upgrade of Mongolia's IDR reflects ongoing improvements to fiscal and external metrics and progress in meeting key IMF programme targets.

Fiscal metrics have continued to improve since November 2017 when we revised the Outlook to Positive from Stable. General government revenue through May 2018 rose by 26% yoy, due to stronger than budgeted tax receipts associated with robust customs activity and the broader economic recovery. At the same time, expenditure rose by a modest 6%, broadly in line with the 2018 budget target. As a result, Fitch now forecasts a 2018 general government deficit of 3.9% of GDP, below the authorities' approved budget target of 5.9%, and consistent with the gross general government debt (GGGD)/GDP ratio remaining on a downward trajectory.

Fitch forecasts GGGD will decline to 75.3% of GDP by end-2018, down from 81.2% in 2017, and well below its 2016 peak of 91.4% following a commodity-price shock, sharp rise in expenditure, and large currency depreciation. The agency's baseline forecasts suggest GGGD will fall to about 70% of GDP by end-2020, assuming average nominal GDP growth of 12.7%, a budget deficit of 4.0%, and broad stability of the exchange rate. Nevertheless, this scenario will still leave Mongolia's GGGD/GDP ratio well above the current 'B' median of 62%.

The IMF Executive Board completed its fourth review of Mongolia's three-year Extended Fund Facility in June 2018, citing strong performance under the programme and that all quantitative targets had been met as of end-March 2018. This will enable an additional disbursement of IMF funds and provide a supportive backdrop for other external donors to approve further disbursements under their respective arrangements that together form Mongolia's IMF-led USD5.5 billion external financing package, initiated in mid-2017.

External buffers have strengthened. Foreign reserves rose to USD3.3 billion by end-May 2018, up from about USD1.0 billion in early 2017, supported by donor inflows tied to the IMF programme. Fitch forecasts foreign reserve coverage will rise to 4.5x current-external payments by end-2018, up from 2.3x at end-2016, to exceed the 'B' median of 3.9x. The agency expects the current account deficit to widen further this year, but more than half of the increase will reflect a rise in capital goods imports tied to the Oyu Tolgoi copper mining project, which is funded via FDI.

The growth outlook remains favourable. Real GDP growth accelerated to 6.1% in 1Q18, up from 5.2% in 2017, due to rising consumption and a surge in mining-related investment. Export volumes of coal and copper rebounded following an official visit of Mongolian Prime Minister Khurelsukh to China in April 2018, which appears to have resolved a customs dispute at the Chinese border that crippled the passage of cargo vehicles last winter. Fitch forecasts real GDP growth of 5.2% in 2018 and 6.3% in 2019, which balances our expectation of continued strength in private consumption and investment, with a large drag from net exports owing to a sharp rise in consumer and capital goods imports since early 2018.

The 'B' IDR also reflects the following key rating drivers:

The rapid improvement in fiscal metrics has benefitted from a strong external environment and rising commodity prices, which have lifted government revenue in excess of budget expectations. Against this backdrop, however, the authorities have delayed a variety of structural budgetary reforms, including the introduction of a progressive income tax, an extension of the retirement age, and the establishment of a politically independent fiscal stability council. This raises the risk that a waning commitment to further structural reforms could leave fiscal revenue vulnerable to swings in the external environment, or undermine the credibility of recent enhancements to Mongolia's fiscal policy framework.

Near-term refinancing risk has receded, with the sovereign facing no external bond maturities until after 2020. Nevertheless, Mongolia's heavy reliance on funding from external debt capital markets exposes the country to shifts in investor sentiment toward emerging market assets. Yields on Mongolia's 2023 US dollar bonds, for example, have risen by around 150bp since the beginning of the year, a trend shared by many emerging and frontier market issuers as a result of global risk aversion. High commodity export dependence, at 77% of current-account receipts, and export concentration to China, at 86% of exports, also leave Mongolia vulnerable to external shocks and constrains its ratings.

A history of abrupt leadership changes, with Mongolia experiencing four different prime ministers over the previous five years, increases the potential for political shocks or policy reversals. In addition, commercial disputes persist between Rio Tinto, the country's largest FDI investor, and the government with regards to various aspects of the Oyu Tolgoi project. Fitch expects the disagreements will ultimately be resolved given the mine's long-term strategic importance for both parties, but this conviction may be tested in the run-up to Mongolia's parliamentary elections in mid-2020, given the prominence resource nationalism has played in previous electoral cycles.

The completion of the asset-quality review has eased uncertainty over capital adequacy in the Mongolian banking system. The review revealed a system-wide capital shortfall equivalent to 1.9% of GDP, well below prior IMF estimates of up to 7.0%. Banks are expected to raise additional capital by end-2018, though the authorities have yet to specify the impacted institutions. A banking-sector recapitalisation law passed by parliament in June 2018 sets guidelines under which systemic banks can receive public capital injections. If public funds are indeed required, Fitch does not believe the expected amounts would pose a material funding challenge to the sovereign. Newly passed reform measures that give The Bank of Mongolia greater scope to implement macro-prudential policies may soon be tested in the face of rising household debt, which increased by 25% yoy to end-May 2018.

Structural factors, such as GDP per capita, governance indicators and doing business rankings score above 'B' category peers and provide considerable support to Mongolia's rating. Per capita income has the potential to rise substantially over the longer term if the country can successfully harness its substantial natural resources endowments via strategic mining projects, and deliver them more reliably to third markets via planned infrastructure investments.

SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Mongolia a score equivalent to a rating of 'B+' on the Long-Term Foreign-Currency IDR scale.

Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final Long-Term Foreign-Currency IDR by applying its QO, relative to rated peers, as follows:
- External Finances: -1 notch to reflect repeated bouts of external financing stress.

Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a Long-Term Foreign-Currency IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.

RATING SENSITIVITIES
The main factors that could lead to positive rating action, individually or collectively, are:
- A track record of fiscal discipline supported by reforms to broaden the revenue base that leads to further declines in GGGD/GDP, and brings it more closely in line with 'B' rated peers.
- Continued implementation of credible and coherent macroeconomic policy-making that makes the economy less vulnerable to swings in commodity prices and the external environment.

The main factors that could lead to negative rating action, individually or collectively, are:
- Failure to meet IMF conditionality, resulting in the programme falling off track.
- Fiscal policy settings that put GGGD/GDP back on an ascending trajectory.
- Political instability sufficient to significantly disrupt FDI inflows or strategic mining projects.

KEY ASSUMPTIONS
- The global economy performs broadly in line with Fitch's Global Economic Outlook

The full list of rating actions is as follows:

Long-Term Foreign-Currency IDR upgraded to 'B' from 'B-'; Outlook Stable
Long-Term Local-Currency IDR upgraded to 'B' from 'B-'; Outlook Stable
Short-Term Foreign-Currency IDR affirmed at 'B'
Short-Term Local-Currency IDR affirmed at 'B'
Country Ceiling upgraded to 'B+' from 'B-'
Issue ratings on long-term senior unsecured foreign-currency bonds upgraded to 'B' from 'B-'

Contact:

Primary Analyst
Andrew Fennell
Director
+852 2263 9925
Fitch (Hong Kong) Limited
19/F Man Yee Building
68 Des Voeux Road Central
Hong Kong

South Korea eases visa rules for Mongolia www.news.mn

The South Korean Government has approved multiple entry visas for doctors, lawyers and other skilled workers from Mongolia and three other nations. South Korea has so far restricted multiple entry visas to stop illegal immigration. The visa will be valid for one to five years. Its holder can stay in Korea from 30 to 90 days each time they enter the country. Journalists, entrepreneurs and those who hold masters' or higher degrees from the four countries can also apply for multiple entry visas, if they have met certain conditions.

Bank of Mongolia gold purchase increases by 6.0 percent www.news.mn

The Bank of Mongolia purchased 7.1 tons of gold from legal entities and individuals in the first half of 2018 - up 6.0 percent year-on-year.

Iran requests relocation of Mongolian camel and frozen camel semen www.montsame.mn

Ulaanbaatar /MONTSAME/ Deputy Minister of Food, Agriculture and Light Industry J.Saule met with delegates led by Mahmoud Farazandeh, Vice Minister and Director General for East Asia and Oceania Affairs of the Iranian Foreign Affairs Ministry.

Iran intends to increase meat imports from Mongolia www.news.mn

With around 61 million livestock, Mongolia has the potential to become a major world provider of meat. Economists have estimated that Mongolia has the capacity to export five million head of livestock or around 100,000 tons of meat every year. In this connection, Mongolia signed an agreement with Iran to ship 4,000 tons of mutton last year.

Meat export to Vietnam under discussion www.montsame.mn

Ulaanbaatar /MONTSAME/ On July 5, State Secretary of the Ministry of Food, Agriculture and Light Industry D.Enkhbat held official meeting with representatives led by Hoang Van Thang, Deputy Minister of Agriculture and Rural Development of the Socialist Republic of Vietnam and Doan Thi Huong, the Ambassador Extraordinary and Plenipotentiary of the Socialist Republic of Vietnam to Mongolia.

Fuel prices rise by 2-15 percent in Mongolia www.news.mn

Fuel prices have increased for three times since January, reported the Committee on Road and Transportation at a press conference on Friday. The most recent price increase took place on 4 July. Fuel prices vary across Mongolia: in the western provinces of Bayan-Ulgii and Uvs, for example, Specially, fuel is 20 percent more expensive than in Ulaanbaatar.

Mongolia to hold festival of overseas Mongolians www.xinhuanet.com

ULAN BATOR, July 5 (Xinhua) -- Mongolia will organize a Naadam Festival for overseas Mongolians here on July 6-8, a Mongolian Foreign Ministry spokesperson said Thursday.