April 16, 2010
Time has come to look back to past two decades when we pulled our economy by free market system and stood up with the help of international donors though there were times of failure and conclude ups and downs in reality. We need to summarize what we have been focused our national policy and energy on and what results we have achieved and seriously discuss what we have to do and what should be our priority to outline strategy for next two decades.
On the other hand, as Mongolia is more shining on the world mineral map and as it neighbors with the world’s biggest consumers, the sharks of mining industry are keeping close eye on Mongolia, some of them have already set up here. As we intend to extract and use our natural resources which is not recoverable, we, the Mongolians, have to not only address current problems but also we are obliged to create a resource that our next generations can make use of. We need a new strategy of state policy directed towards ensuring efficient and fruitful development our economy and society based on mineral resources we are in possession of.
We have to recognize that new circumstances require a new way of thinking. In the past, Mongolian government had focused on issues of macroeconomics in order to maintain economic stability. The policy of macroeconomics or of a “bigger picture” includes four major objectives: increase total output of production; increase employment; keep the goods and service prices stable; and balance foreign trades. The goverments of Mongolia, one after another have been doing it with mixed results, mainly under the pressure of its main lender the International Monetary Fund, but it gained some experience.
Mongolian government like other developing economies did not consider that a good marcoeconomic policy without an efficient microeconomic policy can not result in a success. Macroeconomic stability is a necessary condition for economic development, main purpose of which is improving living standards of its citizens, but is not a sufficient condition. Because the government failed to carry out its economic policy in integrated and systematic ways, only living standards of macro-decision makers and their allies have improved significantly. It is evident by the recent public announcement about the huge personal income increases of our parliament members and top political officials. As a result of wrong economic policy, social crisis has worsened and most of population got poor.
The President once stated during 2009 election that we have government officials much richer than citizens. The above-mentioned sufficient condition for economic policy is created through microeconomic policy or a policy that is to do with particulare industrial sector.
Though the government adopted certain industrial development policies in the past, there is no principal results yet. No sustainable development is reached in any of the sectors. Instead, the competition was replaced by conspiracy in every field, the government is involved in, the „close ties” between business and government was developed till the next election, because of which corruption has flourished and government officials are becoming richer and richer.
In the past two decades, Mongolian economy is politicized into real fever, and every one wants to be a member of a political party, like at the old time of socialism. Originally, supporting the macroconomic stability by means of efficient microeconomic policy means creating a free competition in all business sectors. Under the circumstance of free competition, people have to race their minds and skills and supply demanded goods and service at reasonably cheaper prices, in order to improve their livelihood. The competition is created through the policy of productivity. Business clusters in a certain region, counry and locations increase productivity of that industry, where firms to supply for domestic demand first, then expand their business to foreign markets.
The July 1, 2008 event has shown that how fast the poor citizens can stand up and create instability in society, if we do not understand and implenment the needed microeconomic policy in order to address the poverty. The latest reminder for that are hunger strike protesters at the Sukhbaatar Square and events happening in Kyrgyzstan. Another urgent need to discuss the policy of productivity seriously is a business cluster emerging in the southern region of Mongolia already. If this cluster is supported by an efficient microeconomic policy, our underground resource can turn into aboveground resource and if not, only an empty hole will be left behind. Thus, the time has come to renew our economic strategy and policy.
Translated by T.Shinebayar
Translated by T.Shinebayar