Resource-rich Mongolia is in the middle of a mining boom that is set to transform its tiny economy, but political uncertainties have threatened to overshadow its efforts to attract the foreign investment needed to develop mines and build vital infrastructure.
The young nation held its parliamentary elections in July and the ruling Democratic Party, which won just 31 out of 76 seats, was forced to form a coalition with Justice Coalition, which is led by Enkhbayar's Mongolian People's Revolutionary Party (MPRP).
Although Enkhbayar was barred from taking part in the elections, he remains as the chairman of the MPRP, which won the third-largest block of seats in parliament.
"The Democratic party needs the Justice Coalition without them, it doesn't work and the partnership may now fall apart," said Luvsandendev Sumati, director of the Sant Maral Foundation, a polling agency.
Election results last month left more than a quarter of the parliament in the hands of politicians who advocate local control of mines. Investors said the latest episode could worsen the political gridlock and increase uncertainty for foreign investors.
Key decisions pending for major mining projects, such as the development of the massive Tavan Tolgoi coal mine, may also be delayed.
Enkhbayar, who served as president of the landlocked central Asian country from 2005 to 2009, has called for the $13 billion Oyu Tolgoi copper and gold mine project with Ivanhoe Mines
to be renegotiated to grant better terms to the government, and also wants to keep the coveted Tavan Tolgoi coal mine, potentially one of the world's biggest coal suppliers, in local hands.
Rio Tinto has a majority stake in Ivanhoe and has full operational control over the Oyu Tolgoi mine, which is due to start production this year.
Sources: AFP and Reuters
