ULAN BATOR (Reuters) - A riot in Mongolia's capital over alleged election fraud has killed five people, dampening hopes for a period of stable government to develop the mining sector and tackle inflation.
President Nambariin Enkhbayar declared a four-day state of emergency late on Tuesday after protesters upset over last weekend's election clashed with police and set fire to the ruling Mongolian People's Revolutionary Party (MPRP) headquarters.
The state of emergency means protests are banned and security forces can use tear gas and rubber bullets to break up demonstrations.
"We urge parties to resolve outstanding issues related to election results in a legal way and seek a consensus-based solution to the present crisis," Justice Minister Monkh-Orgil told a news conference.
He said about 220 civilians and 108 servicemen were injured in the clashes. Around 700 protesters have been detained.
Mongolia's election committee has yet to announce the final result of Sunday's vote, but preliminary results give the MPRP, which ruled the country as a Soviet satellite for much of the last century, a clear majority in the 76-seat parliament.
The opposition Democratic Party said it did not accept the projected outcome, but members also disavowed the violence.
"Our party had nothing to do with such activities. We are very unhappy with the government for letting this violence go on so long," said Democratic Party member Amarjargal.
The chaos threatens to further delay deals that could unlock vast reserves of copper, coal, uranium and other resources beneath the country's vast steppes and deserts, seen as key steps to lifting the landlocked Central Asian state out of poverty.
Analysts and foreign business executives in Mongolia played down the violence, saying it was not supported by most Mongolians and describing it as teething troubles for a young democracy.
"The outskirts of Ulan Bator have a lot of poor and frustrated youngsters who would use any pretext to get to streets and participate in any turmoil," said Luvsandendev Sumati, from the independent Sant Maral Foundation.
Inflation, which reached 15.1 percent last year, is at its highest level in decades and many residents express frustration with unemployment and the rising cost of living.
Investors have pinned hopes on a majority government being able to push through a long-awaited draft investment deal that would allow the Oyu Tolgoi copper and gold project to go ahead.
The agreement, which developers Ivanhoe Mines and Rio Tinto say could increase Mongolia's GDP by 34 percent, could clear the way for future mining deals.
Foreign direct investment in Mongolia rose to $500 million last year, some two-thirds of it directed at mining, according to the Asian Development Bank.
Foreign residents in the capital expressed hopes the riot was an isolated case of post-election frustration.
"There is absolutely no hint there's going to be long-term instability. It's just a growing democracy and people learning to live with the reality of not getting elected," said one Mongolia-based foreign business executive.
But the outpouring of violence from a crowd Munkh-Orgil said numbered up to 8,000 has left an uneasy calm over the city, where armoured vehicles manned with troops took up positions.
At least one foreigner, a Japanese, was among those injured in the riot, in which protesters threw stones, smashed windows and torched the MPRP headquarters, the justice minister said.
Networks other than state television have been taken off the air, a curfew is in place in areas of the capital and alcohol sales are banned over the period.
The U.S. Embassy in Ulan Bator, saying it was "deeply concerned", urged both parties to work together in a country often viewed as a rare example of democracy in Central Asia.
Mongolia's election commission vowed to press on with counting.
"We are hoping to get results out today," its deputy chief Bayarsaikhan told Reuters.
International observers say overall the election was free and fair. But new election rules have led to procedural problems and some confusion over counting.