Oliver Belfitt-Nash in Ulaanbaatar -

After a long night of delays, the preliminary results of the Mongolian parliamentary elections were announced on the afternoon of June 29, outlining a close run race. The long process of coalition building starts on July 2.

In a statement, President Tsakhia Elbegdorj congratulated "the seventh free and fair national parliamentary elections since our revolution," expressing his pride in what he considers the "democratic anchor of the East".

However, set back by problems with the counting and reporting of votes, it took longer than forecast to return preliminary results. When they did arrive, they suggested that the Democratic Party (DP) won the most seats, taking 32 with 42% of the vote, and closely followed by main rival and incumbent the Mongolian People's Party (MPP) with 29 seats and 38%. However, neither of the main parties won a majority.

Analysts predict the most likely result will be a DP-led coalition with a DP Prime Minister, but other agreements will be open for negotiation. The Mongolian People's Revolutionary Party (MPRP), with 11 seats and 14%, could yet play kingmaker, whilst the four seats shared equally by the Civil Will Green Party and independents could also make a difference. The last eight years featured a coalition of the two major parties, but led by the MPP. President Elbegdorj insisted on June 29: "only cooperative governance will ensure a proper standard of living for our people."

Resource focus

Over the next four years the country's vast mineral wealth will be exploited and the state coffers will begin to fill, making the next government key. "The importance of this next term cannot be overstated," says Travis Hamilton, founder of the Khan Mongolia Equities Fund, although he remains bullish overall on Mongolia's economic and investment future regardless.

The issues of natural resources, investment, and subsequent wealth distribution, have been amongst the most important campaign topics for the public, with each party promising a fairer method of sharing the proceeds. "In the last four years we have just started to use our mining resources, but the coming four years is a tipping point," says Norovyn Altankhuyag, leader of the DP. "We have huge discussions on how to use the mining wealth."

There is already a mechanism being developed that allows the government to dish out shares of major mining projects to every member of the public. The country's largest coking coal mine, Tavan Tolgoi, is due to be listed next year in Hong Kong and London, with over 2m shareholders potentially ready to trade. This ambitious scheme has caught the attention of many investors watching for the next opportunity, and will be a pillar event for the eventual government.

"There is still a question on how we will collaborate with foreign investors," says Altankhuyag. "Some sectors we can do ourselves, some we will cooperate with investors."

Devil in the details?

The detail that goes into building the next cabinet will be of immense interest to investors then. According to the figures, over half of the MPs in the new parliament will be newcomers, which could mean some significant shifts in alignments will take place.

One of the most significant of these would be the potential loss of Dashdorj Zorigt, the MPP Minister of Mineral Resources and Energy and a stout supporter of the Oyu Tolgoi (OT) investment agreement made between Ivanhoe Mines and the Mongolian government in 2009. A member of the MPRP could well replace him. Should that happen, the party's vocal stance against the country's largest mining operation may have repercussions for the wider investment climate in Mongolia, with many already wary of resource nationalist undercurrents.

However, the major parties are clearly aware of the danger. President Elbegdorj highlighted the importance of projects like OT in his statement, saying, "I urge the members of the new parliament to work together to ensure the sustainability of our nation's precious resources as we pursue meaningful economic opportunities that these assets offer all Mongolians." Altankhuyag, current leader of the President's old party, and potential new prime minister, is also firm on the importance of the agreement. "This is not the time to discuss [Oyu Tolgoi]. There are conditions in the document and the timing [of further discussion] is decided by the agreement," he said.