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Honour guards and security personnel walk down the stairs in front of the statue of Genghis Khan at the parliament building during a ceremony marking National Pride Day, also the birthday of Genghis Khan, at Genghis Square, formerly Sukhbaatar Square, in Ulan Bator, November 23, 2014. REUTERS/B. Rentsendorj/File Photo

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By Terrence Edwards

ULAANBAATAR (Reuters) - Democratic values that flourished in Mongolia in the quarter century since communism crumbled have been eroded, according to small parties that have been marginalized by changes to election rules ahead of next month's parliamentary poll.

With just three million people, this remote land, best known as the birthplace of the Mongol emperor Genghis Khan, has stood as an oasis of democracy, surrounded by single-party dominated regimes - including giant neighbours Russia and China.

Mongolia's political transformation since a peaceful revolution in 1990 has been a big plus for foreign investors eyeing up its rich mineral resources.

But an abrupt economic slowdown since 2012 has stirred controversy over the role played by international mining firms like Rio Tinto, which this month finally approved a $5.3 billion (3.65 billion pounds) Oyu Tolgoi copper mine extension plan, having settled a long dispute with the government a year ago.

The mining slump was still likely to cost ruling Democratic Party seats at the June 29 election, according to opinion polls.

Whether the opposition Mongolian People's Party (MPP) can take advantage is unclear, but following a recent fundamental change to the character of Mongolia's democracy, the election has become much more of a two-horse race.

On May 5, parliament amended the election law to remove a clause first introduced in 2012 that allocated 28 of the 76 seats in the legislature, known as the Grand Khural, according to parties' shares of the vote.

"Unfortunately, the recent decision to go back to the majoritarian system is a regress and will again force many parties into two political blocs," said Oyun Sanjaasuren, a lawmaker from the Civil Will-Green Party, a junior partner in the ruling coalition.

A panel of judges said all lawmakers should be directly elected by voters, rather than selected from party lists.

The decision will also mean some 150,000 Mongolians living abroad won't be able to vote as they are not registered with a constituency.

Advocates of democracy were dismayed by the late rule changes.

"It's considered bad practice everywhere to change the law so close to the race," Dagva Enkhtsetseg, the Open Society Forum's programme manager for elections and political financing, told Reuters.

The complete switch to a 'first past the post' system - similar to British democracy - virtually reduces the poll to a two horse race.

The Democratic Party, which emerged out of the revolution, will slug it out against the MPP which had held sway during earlier decades of Soviet hegemony, and later reinvented itself as a social-democrat party and either led or was partner in coalitions between 2002 to 2012.

Two days prior to the election law amendment, the government-appointed General Election Commission, barred two smaller parties - including the Civil Will-Green Party - from contesting due to election paper irregularities.

Another 12 small parties were given the all clear, including the Respect the People Party, the "Khan Choice" Coalition, and the Conservative Party, but they are not expected to score well under a 'first past the post' system.

HARD TIMES

The Civil Will-Green Party is seeking reinstatement in the ballot, but Surenkhuu Borgil, leader or the newly-formed National Labor party (HUN), which was also barred from contesting, intends to run as an independent.

He fears controversies arising from the law changes could spark discontent, as seen during the 2008 election when rumours of vote rigging sparked riots in the capital, Ulaanbaatar.

"Changing the election law is not improving the election process, but cheating democracy," he said. "This could trigger a messy election."

A weak economy and lack of jobs has reduced confidence in politicians and widened social divisions in a nation where nearly a third of the people still live nomadic or semi-nomadic lives.

An International Republican Institute (IRI) survey found 57 percent of Mongolians believed parliament was ineffective and 67 percent disapproved of Prime Minister Chimed Saikhanbileg.

Economic growth is projected at 0.1 percent this year, far away from the all-time high of 17.5 percent in 2011. Falling coal and copper prices, and weak demand from China, Mongolia's biggest trading partner, have made for hard times.

"Everything is bad, it's pretty bad," Delgermaa, a 56-year-old stall holder, said while selling candies in the capital's Chinggis Square. She hadn't decided who to vote for.

(Editing by David Stanway and Simon Cameron-Moore)

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