Mongolia $1.25/Day Labor Amid $4K Purses Stirs Discontent
By Yuriy Humber - Feb 5, 2013 1:55 AM ET
Sapaar is 23 and he’s a “ninja” miner, hauling low-quality coal from a pit in the Mongolian steppes for 12 hours a day.
Sapaar’s coal is not the steel-making variety the bigger mines export to China, a trade that helped the economy expand a world-beating 17.3 percent in 2011. The boom brought luxury retailers such as LVMH Moet Hennessy Louis Vuitton SA (MC) to Ulan Bator, Mongolia’s capital, to sell $4,500 handbags. Sapaar doesn’t shop there.
As companies such as Rio Tinto Group (RIO), Mongolia’s biggest investor; Peabody Energy Corp. (BTU); and Mitsui & Co. (8031) plan to keep the momentum going by exporting more of the country’s $1.3 trillion trove of resources,
about a fifth of the population of 3 million are getting by on $1.25 a day.
The explosive growth of Mongolia in just 10 years makes for a sharp disconnect between French handbag boutiques and hand- digging coal out of frozen rock. That’s raising warnings of public unrest and driving controversial renegotiation of mining deals by the government to keep a larger share of profit at home.
Rio Tinto’s $6.2 billion investment in the first phase of the Oyu Tolgoi copper and gold mine in Mongolia is the biggest test case and tensions are rising.
Most of Mongolia’s population are unhappy with the big mining projects, said Dale Choi, an Ulan Bator-based associate with Origo Partners MGL, a private equity investment firm.
“Locals don’t benefit from them directly,” Choi said. “The country as a whole benefits, the tax revenue benefits, but the people don’t feel it” and are getting more irate, he said.
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