30.04.2020

Sheep diplomacy and a troubled economy: Mongolia amid COVID-19

Balancing two mighty neighbours is part of the DNA of Mongolia’s diplomacy and economic relations. The country’s economy depends heavily on trade with China and Russia. As demand is decreasing during the pandemic, the most vulnerable are expected to be hit hardest.

Mongolian yurts on a field.
© istock / bizoo_n

For Mongolia, landlocked between China and Russia, it has always been important to have good relations with its neighbours. Economically, Mongolia is more dependent on China to the south, which shares a 4,700-kilometre border and takes almost 90 per cent of its exports, mostly coal and copper. Thus, the spread of COVID-19 in China poses particular challenges. Mongolia has had to maintain good relations with the Chinese government to keep its economy afloat, while preventing the pandemic from spreading within its territory. 

At the same time, Mongolia enjoys traditionally close relations with Russia to the north, dating back to the communist era. Cross-border trade, energy cooperation and a largely favourable view of the country among Mongolians are the pillars for the bilateral relationship.

 

Sheep diplomacy

When COVID-19 cases expanded in Wuhan Province, the Mongolian government took drastic measures to contain the spread of the coronavirus that causes the disease. Well before the first imported case of COVID-19 was confirmed, the government shut the border with China, cancelled international flights, closed all educational facilities and even cancelled the Tsagaan Sar (Lunar New Year) national holiday.

When President Khaltmaagiin Battulga announced a visit to China in late February, a number of people opposed it initially for fear of coronavirus infection. However, during his five-hour visit, President Battulga was warmly welcomed by his Chinese counterpart Xi Jinping as the first foreign head of state to visit China since the outbreak of COVID-19. The Chinese public expressed particular gratitude for his donation of 30,000 sheep as a neighbourly gift from a strategic partner.

President Battulga’s so-called “sheep diplomacy” received overwhelming positive comments on Chinese social media. The topic “Mongolian President donated 30,000 sheep to China” received more than 100 million views on Sina Weibo. International affairs expert and former diplomat Dashdorj Bayarkhuu considers this visit a “diplomatic victory for a small state” and a “smart move to promote Mongolia’s positive image to the Chinese people”. Luguusharav Byambakhand, an independent researcher focusing on international affairs, sees the visit as a “soft power policy success for Mongolia in winning over the hearts and minds of the Chinese”. Dr Jamsran Bayasakh, prominent sinologist and former director of the Institute of International Affairs at the Mongolian Academy of Sciences, shares a similar view on the importance of this visit amid the current crisis, but he is somewhat critical of the Ministry of Foreign Affairs for not being sufficiently proactive and letting the president take up the reins instead.

Though the livestock will not actually make the trip until the autumn, when they are in best physical condition, the sheep diplomacy move has certainly helped to improve the Mongolian president’s image in China. Back in 2017, he won the presidential election on the back of anti-China rhetoric. Moreover, the latest moves have greatly helped to solidify the strategic partnership between the two countries, to improve political and economic relations and to deepen mutual understanding between the Chinese and Mongolian people.

 

Economic challenges on all fronts

When the Mongolian State Emergency Commission decided as early as January to close schools as well as restrict public gatherings and visits to bars and restaurants, the impact was felt quickly. According to official figures, more than 70 per cent of companies operating in Mongolia are small and medium-sized enterprises in the service industry. Due to quarantine measures and a fall in foreign trade levels, 60,000 companies have reported a decrease in business revenue. They are facing challenges in servicing bank loans, tax obligations and staff salaries, resulting in staff lay-offs or leave without pay.

The export of commodities to China, Mongolia’s main source of revenue, was also severely disrupted for some weeks but recently resumed with additional precautionary measures for ensuring the health of Mongolian truck drivers entering China. At the same time, commodity exporters like Mongolia continue to feel the pain resulting from the oil price war between Russia and Saudi Arabia and the collapse of the oil price.

The poverty level in Mongolia has decreased but remained at 28.4 per cent as of the end of 2018, according to the National Statistics Office. An additional 15 per cent of the population is considered vulnerable to falling into poverty. Those parts of the population will suffer the hardest from an economic decline that is sure to materialize.

 

Rolling out the government’s rescue package

Prime Minister Ukhnaagiin Khurelsukh announced in the beginning of April the government’s package of measures to overcome the economic difficulties and support for businesses and households. This package of measures is estimated to cost 5.1 billion tugriks (1.9 $million), subject to further debate in the parliament. These measures include the following:

  • Employers and employees of private companies as well as voluntary contributors to the Social Insurance Fund will be exempt from contribution obligations for the upcoming six months.
  • Companies with a taxable income less than last year of less than 1.5 billion tugriks (approximately $270,000) will be exempt from corporate income tax for the upcoming six months.
  • Employees of companies that lost revenue because of quarantine will receive wage support of 200,000 tugriks (approximately $75) per month for the next three months for each employee retained on the payroll.
  • Child money received for each child (20,000 tugriks per month per child aged 0–18 years) will be increased by 10,000 tugriks (approximately $4) for the next three months.
  • Low-income households who are unable to pay electricity bills will not be subjected to electricity restrictions.

 

United in resilience

It remains to be seen whether these measures will be sufficient to provide a safety net for Mongolia’s fragile economy. What is certain, though, is that Mongolians have weathered many storms and hardships throughout their proud history. To this day, more than 300,000 herders continue to cherish the traditions of a nomadic lifestyle under some of the harshest climatic conditions on the planet. Resilience is probably the biggest asset of Mongolia’s people.

 

 

Oyunsuren Damdinsuren is a senior lecturer at the School of International Relations and Public Administration, National University of Mongolia.

Enkhbayar Namjildorj is a lecturer at the National Academy of Governance, Mongolia.

The views expressed in this blog series are not necessarily those of FES.

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