By Irja Halasz
ULAN BATOR (Reuters) - A riot in Mongolia's capital overalleged election fraud has killed five people, dampening hopesfor a period of stable government to develop the mining sectorand tackle inflation.
President Nambariin Enkhbayar declared a four-day state ofemergency late on Tuesday after protesters upset over lastweekend's election clashed with police and set fire to theruling Mongolian People's Revolutionary Party (MPRP)headquarters.
The emergency rule -- the first in Mongolia's history --means protests are banned and security forces can use tear gasand rubber bullets to break up demonstrations.
"We urge parties to resolve outstanding issues related toelection results in a legal way and seek a consensus-basedsolution to the present crisis," Justice Minister Monkh-Orgiltold a news conference.
He said about 220 civilians and 108 servicemen were injuredin the clashes. Around 700 protesters have been detained.
Mongolia's election committee has yet to announce the finalresult of Sunday's vote, but preliminary results give the MPRP,which ruled the country as a Soviet satellite for much of thelast century, a clear majority in the 76-seat parliament.
The opposition Democratic Party said it did not accept theprojected outcome, but members also disavowed the violence.
Its members were set to meet with the MPRP on Wednesday.
"From the Sea of Japan to the eastern border of Europe, weare the only functioning democracy and we have a duty to saveit," Democratic Party leader Tsakhiagiin Elbegdorj toldReuters.
He condemned the government for allowing the riot tocontinue so long but also said it may not have been necessaryto immediately declare the state of emergency.
The chaos threatens to further delay deals that couldunlock vast reserves of copper, coal, uranium and otherresources beneath the country's vast steppes and deserts, seenas key to lifting the landlocked Central Asian state out ofpoverty.
VIOLENCE PLAYED DOWN
Analysts and foreign business executives in Mongolia playeddown the violence, saying it was not supported by mostMongolians and describing it as teething troubles for a youngdemocracy.
"The outskirts of Ulan Bator have a lot of poor andfrustrated youngsters who would use any pretext to get tostreets and participate in any turmoil," said LuvsandendevSumati, from the independent Sant Maral Foundation.
Inflation, which reached 15.1 percent last year, is at itshighest level in decades and many residents expressedfrustration with unemployment and the rising cost of living.
Investors have pinned hopes on a majority government beingable to push through a long-awaited draft investment deal thatwould allow the Oyu Tolgoi copper and gold project to go ahead.
The agreement, which developers Ivanhoe Mines and Rio Tintosay could increase Mongolia's GDP by 34 percent, could clearthe way for future mining deals.
Foreign direct investment in Mongolia rose to $500 millionlast year, some two-thirds of it directed at mining, accordingto the Asian Development Bank.
Foreign residents in the capital expressed hopes the riotwas an isolated case of post-election frustration.
"It's just a growing democracy and people learning to livewith the reality of not getting elected," said oneMongolia-based foreign business executive.
But the outpouring of violence from a crowd thatMunkh-Orgil said numbered up to 8,000 has left an uneasy calmover the city, where armoured vehicles manned by troops took uppositions.
At least one foreigner, a Japanese, was among those injuredin the riot, in which protesters threw stones, smashed windowsand torched the MPRP headquarters, the justice minister said.
Networks other than state television have been taken offthe air, a curfew is in place in areas of the capital andalcohol sales are banned over the period.
The U.S. Embassy in Ulan Bator, saying it was "deeplyconcerned", urged both parties to work together in a countryoften viewed as a rare example of democracy in Central Asia.
Mongolia's election commission vowed to press on withcounting. International observers say overall the election wasfree and fair. But new election rules have led to proceduralproblems and some confusion over counting.
(Writing and additional reporting by Lindsay Beck and IanRansom; Editing by Benjamin Kang Lim and Alex Richardson)
