Spoiled Country

A household that spends more than it earns will either borrow from someone or ask for someone’s help.

If neither works, it will start selling its own property to survive and at the end will be ruined. Some young husbands that were spoiled in childhood usually go to their parents when they cannot feed their own family. Some get used to it and even start to expect their parents’ help. They forget to decrease their expenses and increase their earnings because they believe that in times of need, they can demand support from their parents.

There are nations similar to such families. We are one of them. Every year since 1991 when our nation completed a realistic state budget for the first time, we have always had budget deficit except for in the year 2008, when copper price was at its peak. Our government spends more than its tax revenue and asks for help from abroad. Long time ago all the big countries, like rich dads, have agreed to help the poorer countries with certain amount of their GDP. The countries that have received assistance in truly needed causes and have spent them wisely have become self-sufficient and economically strong. They have come to the level of “comprehensive partnership” with their former donor countries and today cooperate with them. These are good cases.

But there are nations that have never stood up firmly because they gain assistance just to cover the unwise expenses of their governments. Foreign assistance is not required to be paid back but foreign debts are. When the time comes to repay back, these nations ask to annul or forgive their debts. In the year 2000, all donors and recipients have met and signed “Paris declaration” agreeing to increase the results of official development assistance. Our minister of finance participated as well. Since then, every year Mongolian government representatives, the Ministry of finance included, go to any one country every year to confirm the government commitment under this declaration. But there are no results. Every year, the state budget makes deficit.

Today, the government of Mongolia is already used to receiving official development assistance from foreign countries to cover its wasteful expenses so much that the parliament has created a law to support state budget deficit with foreign money. Of course, it is very easy to spend other people’s money or tax payers’ money, then foreign assistance money (these are also their countries’ tax payers’ money) when it is possible to go without any clear report on what you spend it for.

As far as foreign loan is concerned, it is usually paid in twenty to thirty years. For such a long period rich countries get richer and the careless spenders get even poorer. The latter usually has to ask for a pardon. This request is expected to start from next year in Mongolia. Then our foreign relations will be transformed into bad-loan relations.

As far as foreign aid is concerned, one is not supposed to take whatever is available. Smarter countries take foreign aid based on particular policies that support their economic competitiveness, to equip a university laboratory with state of the art technology, to train particular professionals in the world’s best universities (making sure they come back) or to invest in other foresighted projects. However it is a pity that our government implements back-looking policies to cover their past expenses and receives assistance on the things that are and can be made by Mongolian private sector. It should be very easy for aid-implementation agencies of donor countries to work with Mongolian government with our very simple approach.

We grab everything that is offered. First, the donor countries select one of their companies for a particular project. The selected companies supply the goods agreed by two governments. Then, from our side, the government selects a Mongolian company who will receive those goods and sell them on the domestic market. The government takes these proceeds and contributes to its wasteful expenses, trying to mend the hole in our budget.

As a result of such a nearsighted policy, major distortions happen in the industries, where domestic companies produce the same goods as the official development assistance’s product (wheat, flour) or Mongolian companies import the same goods (gasoline). Industries are shocked and companies without any top connections go bankrupt.

When problems and complaints start to come from businesses and the people, our government officials preach by referring to a Mongolian old saying: “never look at the teeth of a gift-horse,” attempting to throw the stone of blame to the donor country. We, Mongolian citizens see where the problem is. The problem is not in the donor countries, it is in the Mongolian government.

For the government of this spoiled nation to direct ODA policy toward decreasing wasteful spending of the budget and increasing the economic competitiveness of Mongolia.