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 emergency rule -- the first in Mongolia's history -- means protests are banned and security forces can use tear gas and rubber bullets to break up demonstrations.

At this moment, the situation in the capital city is relatively normal. It is very peaceful compared to yesterday, but the troops need to stay in the street, the chief of police, Amarbold, said on state television.

Justice Minister Monkh-Orgil said about 220 civilians and 108 servicemen were injured in the clashes. Around 700 protesters have been detained.

The outpouring of violence from a crowd of thousands has left an uneasy calm over the city, where armoured vehicles manned by troops took up positions.

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 and expressed hopes of a meeting with the MPRP to resolve the situation.

From the Sea of Japan to the eastern border of Europe, we are the only functioning democracy and we have a duty to save it, Democratic Party leader Tsakhiagiin Elbegdorj told Reuters.

Parliament was to convene an extraordinary session late on Wednesday to formally approve the president's state of emergency.

The uncertainty 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 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 expressed 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 and residents said they were shocked by the violence.

What happened last night was really very wrong, said Undrah, 24. All of us feel that this was an act organised by a few people who were disappointed they could not get into parliament.

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 and a curfew is in place in areas of the capital.

The U.S. Embassy in Ulan Bator said it was deeply concerned and urged both parties to work together in a country often viewed as a rare example of democracy in Central Asia.

The Foreign Ministry in neighbour Russia called on all sides to show restraint and responsibility.

Mongolia's election commission vowed to press on with counting. International observers say overall the election was free and fair. But new election rules have led to procedural problems and some confusion over counting. (Writing and additional reporting by Lindsay Beck and Ian Ransom; Editing by Benjamin Kang Lim and Alex Richardson)