Friday, April 23, 2010

Role of the Government

UB Post


Over the past fifty years, there have been no significant principal changes in our central government methods and strategies to rule the country.

Instead there are increasing number of politicians who speak there were many changes. Almost every person who got positions in central government make them autocrats, treat the citizens as their bondservants and still do all things in dictatorial way. Though they passed laws and orders to moderate property relations, which is a fundamental to society, and develop economy by the law of market economy, central government still cannot get rid of its old socialist approaches in regulating other social relations.

Experts from the Harvard University have found that the understanding that the government plays the most important role in determining and developing national advantages is baseless at all. The government’s decision that it has the duty of a helper and supporter for each economic sector, hinders firms in their efforts to develop their competitiveness on a long-term basis, causing the loss of possibility of continuous economic improvement. For instance, in our country, in order to keep major consumer goods prices stable (meat, petroleum etc) certain type of goods are stored for an extended period and are released to market at cheaper prices in times of shortage in supply.

Actual cost of such “aid” (storage cost, loss, seller’s choice, transport cost) is often higher than the sold price. Indeed this is a wrong political action for income transfer attempting to support a part of the community with the money of other part of the community. Beside material losses, this kind of “aid” dampens the firms’ desire and enthusiasm for competition, sometimes brings ties of some businesses and politicians too closer and encourages corruption, which causes big damage to society. Aids only support and assist the increase of demand for aid itself. Experts claim that the most important role of the government in developing the economic competitiveness is to be a presser and challenger.

In order to define and develop its competitive advantage, the government needs not only focus on improving and strengthening the business environment but also needs to support business competitiveness in all aspects. The only unalterable principle for the government is to establish standards of human safety and environmental impact precisely and ensure their firm observation and compliance. For instance in Spain, there are is precisely established high standard for construction of building facilities and all competent agencies obey to these standards strictly. In order to comply with such high standards and make a good profit, building companies introduce the best technologies and can be creative and initiative to be competitive, thanks to which this country is very popular in Europe because it has the most quality and beautiful buildings in terms of cold and sound proof walls and window sets, as well as planning and architectural designs.

Another function of the government to improve the competitiveness of business sector is to give the right signal at the right time. For example, in 70s when Japan-made products were considered as low quality and cheap ones, the Japanese government had tightened up all quality-related national standards and initiated popular Deming Prize, which was an important signal for companies in planning their businesses. Because it was the matter of honor for companies to receive this prize, which is believed to be the guarantee of excellence in quality, after nearly ten years the name Japan meant “quality” and soon almost every company started to export their products abroad.

In our country it is an opposite. Some public organizations rates the companies according to the amount of tax the companies paid (originally the taxation is supposed to be the matter of government) and if exclude “prize certificates” the price of which is paid by the competing companies, there is no specific government policy in Mongolia in this sphere. It is even strange that such prize do not separate the vodka, tobacco and petroleum selling companies that are anyway obliged to pay excise tax depending on peculiarities of their businesses.

Principal objective of the companies is not to pay taxes but to be competitive in their respective fields, expand scope of their business, strengthen their position in market being different by their productivity and make a high profit. Main duty of the government in economy is to create a domestic demand by which every business will continuously endeavor and be constantly creative and initiative in order to increase their productivity and profitability.

The government has a duty not to support and assist business activities but to press and challenge them.

Translated by P.Shinebayar

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