(Corrects name of political party in paragraph 2 to s Democratic Party)
By Lindsay Beck
ULAN BATOR (Reuters) - On horseback, foot and motorcycle,Mongolians cast their ballots on Sunday in a tight race thatwill see the election of a government tasked with fightinginflation and tapping into huge mineral wealth.
A poll showed the ruling Mongolian People's RevolutionaryParty (MPRP) with a slight edge over the Democratic Party, butif neither wins a majority in the 76-seat parliament, or GreatHural, the smaller parties on the ballot could be the realpower-brokers.
"Are you going to ask me who I voted for?" Prime MinisterSanjaagiin Bayar joked as he cast his ballot in the capital.
The last election four years ago resulted in a hungparliament, leaving the parties to scramble to form agovernment to rule the landlocked country of less than 3million, whose empire under Genghis Khan once extended west asfar as Hungary.
The unstable coalition meant the country has been throughthree prime ministers since then. Bayar's MPRP ruled Mongoliafor much of the past century as a Soviet satellite.
The challenge now will be to elect a government with enoughmandate to take decisive action to fight inflation that rose to15.1 percent last year, its highest level in over a decade, andto ratify a key mining investment agreement.
Amendments to the Minerals Law and the passage of the draftinvestment deal would allow the Gobi desert Oyu Tolgoi copperand gold project to go head.
The agreement, which developers Ivanhoe Mines and Rio Tintopredict would increase Mongolia's GDP by 34 percent, couldclear the way for future deals to extract its resources, whichinclude coal and uranium.
Both parties say they support the investment agreements.
But smaller, populist parties are tapping into publicsuspicion that mining deals will give away Mongolia's wealth toforeigners and create environmental disasters, and those groupscould be in a key negotiating position in a tight race.
"These elections will be very important for the developmentof Mongolia, and Mongolians will have to chose what kind ofdevelopment they want in the next four years," said TsakhiagiinElbegdorj, the leader of the Democratic Party.
HIGH TURNOUT
Many voters expressed a desire to see a more stablegovernment, and Mongolia's Election Commission said judgingfrom early returns, voter turnout was expected to surpass the82 percent who voted in 2004.
"It's important that somebody who is capable of doingsomething, not just talking, is elected," said EnkhtaivanSaaral, 38, who like many Mongolians, is a nomadic herder onthe country's rolling grasslands and lives in a round felttent.
He was to travel on horseback to the nearest districtcentre to cast his ballot in the polls, which close at 3 p.m.British time.
In the poor suburbs of Ulan Bator, where many are withoutsewage treatment and disconnected from the city's power grid,residents were anxious to reap the benefits of Mongolia's 9.9percent economic growth, and feeling the pinch of inflation.
"The living standards here need to be improved. We needmore income," said Bayartai, 67, wearing a traditional longsilk cloak, known as a deel.
New electoral rules that change the previousfirst-past-the-post system mean there could be confusion at theballot box and several days before an official result.
"The system of calculation is very complicated," saidLuvsandendev Sumati, director of the Sant Maral Foundation, anon-governmental organisation that does polling and surveys.
"I'm afraid that if they calculate the ballots 10 timesthey will get 10 different results," he said.
(Editing by David Fogarty)
