Friday, September 24, 2010
Friday, September 17, 2010
Published September 17, 2010
Anaconda is the name for a giant snake inhabiting in jungles of Amazon in South America, which is almost twenty feet long and over 200 pounds weight.
They kill their prey by coiling their large, powerful bodies around their victims and squeezing until their prey suffocates or is crushed to death and dies from internal bleeding. Then the snake unhinges its jaw and swallows the victim whole. The Anaconda that have already accustomed in Mongolia and that coiled around almost all dignitaries in power, is the corruption. It is an emerging necessity for citizens to understand what this terrified corruption exactly is it, where and why it did come from, what consequences does it have and how to protect from it.
Corruption is defined as “misuse of power entrusted by others for a private interest or gain”. In some countries, the corruption also means the loss of “arm’s length principle”. This principle is about a private or public official in any way being free from any influence by his own and family interests in making any economic decision.
In 2009 Mongolia shared the 120th place together with Kazakhstan, Ethiopia and Vietnam, out of surveyed 180 countries in the world, according to an international organization that measures corruption level around the world. Five years ago, Mongolia was ranked at 90th when was officially measured for the first time. Means we are slipping backwards at high speed. Both current and former presidents, cabinet ministers, parliament members all talk about how the corruption has penetrated deep into every ramus of central and local administration. But any of government officials has never been charged or sentenced for corruption-related crimes so far. The subject without a person and illusion called ‘corruption’ is wandering around Mongolia.
Journalists have been writing every day about the fact that all business such as getting and extending licenses and permits of mineral exploration and exploitation, construction licenses in Ulaanbaatar City, enrolling to domestic and foreign schools, appointment to a position especially in taxation and customs, winning tender bids and any business by which can make black money, can no longer succeed without the corruption. But they do not so often write about the damages the corruption is causing to economy of the country.
The corruption weakens the competitiveness of that industry and encourages private companies compete each other not by their new product and service offers and skills but by their links with decision making politicians, in order to cut their expenses and costs. The corruption money enlarges and expands shadow economy, increases the amount of cash not transferred through banks and slows down money circulation. Higher the money earned by means of corruption, higher the irresponsible spending and higher the too luxury and one-time consumptions.
Politicians are not eager to tax the income earned from reselling mineral licenses, for a simple reason that they are involved in such business. They finance politicians, political parties and others from such incomes, in order to get political protection. Such attitude has become an emerging “fashion trend” or a new political-business model over the past. Corruptors may be happy for today that they still can protect their private interests. Indeed they are digging holes to bury themselves, from a long perspective. Because the corruptors have no idea about the real value of money and hanker after wealth excessively. In next rounds of corruption they will demand more and more money, which is affordable by only those richer and bigger than you. As time goes by, the rate of corruption will be hiking faster than our economy and as the time comes when even the biggest and richest domestic company cannot afford that, only huge foreign money will decide everything. Time will come when Mongolian companies would go bankrupt one by one beginning from small and middle ones and ending big ones and join demonstrations hosted by those civil movements, at whom they are laughing at now today.
That time next generations of even bigger corruptors would trade at higher prices and would keep under their control and rule not only a single industry but whole country. There is an unwritten law that the corrupted government gets bigger and bigger. According to Parkinson law, a weak official employs two subordinates weaker than himself, because they build their administration not according to skills but to the amount of corruption.
Such a governance attitude is repeated downwards, multiplying weak subordinates. Further, state budget money would be more spend for adding the staff of police and troops and for buying the latest and most expensive weapons and equipments, taking more care of protecting the corruptors on the name of state. The Government would take care not of its concept but of appearance and color and vehicles and consumption of top officials would be dramatically luxurious even presidents of Big Eight would feel jealous. They would not stop to increase tax rates in order to finance all these luxurious expenses, leading to bankrupt of private companies, who would remain only on paper. Though it is possible to incorporate a company, you cannot liquidate it.
Since the government would no longer be able to do anything except corruption, the economy and livelihood of citizens get even worse together, the ordinary people first would go out on streets to demonstrate and then would trespass upon the property of others, leading to mass disorder. Thousands of people would lose jobs and starve. Crimes would grow, causing instability in the country.
The nation would be desperate to the end and suffocates to death. This is the Anaconda or the Anatomy of Mongolian corruption. The rest is a history. If you want to see exactly such history, you study Uganda, Ethiopia, Congo, Mozambique, Nigeria, Argentina, Paraguay and many other countries, who are suffocated by Anaconda despite their rich natural minerals.
Some of leaders who ruled these countrieslive in luxurious comfortable houses bought by the money transferred to western countries which are peaceful and respect law and order, while some of them were killed by next dictators.
Should we become a prey of Anaconda not doing anything? Isn’t it unacceptable that we let few greedy and vulpine people play with our beautiful country? It is time to install the art of hating the corruption into consciousness of Mongolian society.
Translated by P.Shinee
Monday, September 13, 2010
September 10, 2010
Mr. JEFFRY Sachs, the famous economist divides the economic development of countries into four stages such as prior to commercialization, commercialization, industrialization and knowledge based economy. During the first stage which is the prior to commercialization stage, rural and urban people are barter goods, further developing labor division. If all rural people participate in the process of bartering of goods then the economy would be considered as a fully commercialized. Due to lack of infrastructure development, or the presence of civil war in some countries, they cannot get commercialized their economy fully.
Most of the developing countries are in the stage of industrialization. Industrialization is coherent to the social and economic development, renovation of technology, furthermore, the process of industry shall be intensified, and most of the citizens are able to live by their income from the salary.
Therefore, industrialization has drastic influence to relations of social groups by making big changes in structure of social life. Industrialization is certain, long term and historical process of development. Many of developing countries are in the middle stage of industrialization. A few countries in the transition of final stage of industrialization or knowledge based economy when developed countries are already in the stage of knowledge based economy. Generally, the level of gross domestic product per capita of a country indicates the stage of economic development of that country. If the level reaches to 5000 dollars then the economy is considered as in the early stage of industrialization, if the level reaches to 15000 dollars then the economy is considered as in the middle stage of industrializing, if the level reaches to 30000 dollars then the economy is considered as in the stage of transition but if the level is above those then the economy considered as in the stage of knowledge based economy.
For example, Mongolia /3000 dollars/ is in the beginning stage of the industrialization, Kazakhstan /10000 dollars/ is in the middle, and Chili /15000/ is near the transition of final stage of industrialization to knowledge based economy. The UN economists divide the industrialization into three sectors such as primary sector or extracting natural recourses, fishing, agriculture, and secondary sector or produce products by exploiting natural resources, and the third sector or services. All countries develop via these three sectors of industrialization, beginning from the primary sector to the next sector, by increasing their resources per capita. Countries develop their own policy and strategy on combining related sectors, accordant to their development conditions and implement it. Countries which identified and implemented policy on industrialization, accordant to their type and size of natural resources, market locations, infrastructure development, and the level of labor capacity shall have development success in a short time. The Chili, Mongolia, and Kazakhstan started to industrialize by using their mineral resources, respectively.
Mongolia is just starting the industrialization process when the Kazakhstan has started the process 10 years ago and the Chili has started the process 20 years ago. The policy on exploitation of mineral resources, its elaboration and development of combined services, furthermore the selection of priority sector of the economic development is different in countries in relation to their respective character of natural resources, locations, and other factual situations. The main basis of industrialization process is the development of infrastructure and first of all establishment of reliable network of electricity and energy, water, transportation and roads, and communication. Also, there is a need to prepare and provide specialized human resources for the market economy.
The Chili and Kazakhstan is reaching the success in the economic development due to rational investment in this direction. They invested the income extracted from the natural resources, first to the National Fund in Kazakhstan and to the Sustainable Fund in Chili and disbursed the fund under the rigid control and rules. In Mongolia, currently the Human Development fund is established but it is increasingly becoming unclear in what direction is to disburse the fund. Firstly, it is required to build all infrastructures, then to find out achievements of human being in this sector in order to work initiatively on utilizing industrialization process effectively and efficiently. The capacity of competiveness of that sector is measured by the number of produced goods and products which are sold in a foreign market and the impetus of this is the free competition of companies in the sector and market coordination. Chili has mostly used this method and the Kazakhstan is missing the possibility. The economy of the Chili is reducing the dependent of their economy from the natural resources and could assort the industrialization.
They established new sectors, widening their economy and increasing labor productivity. They build the ground of knowledge based economy by creating of industry of fish, wine, fruit, trees, and paper. Kazakhstan also has certain goals of developing other sectors then the mineral resources.
Mongolia shall have a good possibility of saving time and spending on reaching the preceding success if study from the experience of mistakes and achievements of the Chili and the Kazakhstan which made the income generated from the mineral resources as a basis of their rapid development.
Friday, September 3, 2010
September 3, 2010
A poem by Jean de La Fontaine called “The Bear and the Amateur Gardener” tells about how a bear whose duty is to keep the flies off his gardener friend, seizes a paving stone to crush the flies and kills the sleeping friend as well. “Bear service” means to do a disservice. The people who are the fond of such service are mostly politicians. This type of globalized service has also affected us.
Price restrictions on consumer goods, particularly on flour, meat and petroleum, by the government at the end turns into the bear service.
No one can deny the government’s support of cultivators through campaign called ‘Atar III’ has resulted in the increase of domestic crop supply. However, no one is thinking about how this support are so costly and where is it coming from indeed. The Ministry for Food, Agriculture and Light Industry for national reserve purchased from cultivators one tons of wheat harvested last year at MNT350 thousand, the price enough to make a profit after the expenditure.
The Government sold the reserved wheat to flour manufacturers at reduced price of MNT250 thousand and in return demands them not to increase their flour price, which means the Government paid the difference of MNT100 thousand from the pocket of taxpayers. For this purpose, MNT11.5 billion was allocated from the budget this year alone that means taxpayers have paid for the half price of flour consumed by non-taxpayers.
There is no free meal and only politicians think that there is.
Demand and supply of any product at the market is self-regulating, which is expressed by its price. It is a voluntary choice whether to sell or buy it at such a price. Any failure to trade at this price means the increase of demand for similar or substitute products, for which reason there is a restriction in price growth. But any attempt by the government to regulate this restriction creates abnormality in demand and supply of a particular product and fruther inflates the price. Once the support runs out, the price will go high and low-income people suffers the most and that is why it is a bear service.
The market price itself reflects all information related to supply, production and transportation of materials for a particular product. The price restriction is impossible as is the restriction of these information. It is just an short-sighted attempt to keep the price stable for a short period of time at higher costs.
Look at growing price of flour for the last days. This jump is directly because of Russia’s ban on its crop export caused by disastrous wildfire that destroyed thousands hectare of cultivated land. Politicians claim that our country has a sufficient reserve of wheat. But Oyungerel, an inspector from the General Customs of Mongolia, has an opposite information. Oyungerel said Mongolia has imported 64 thousand tons of wheat and 70 thousand tons of flour this year alone, from Russia. No one talks about Russian flour is always on-demand in Mongolia because its quality is much better than the flour produced in Mongolia. Consumers can have a choice if both of them are available at market.
L.Chinbat, president of Gatsuurt Company, which owns the biggest and the most advanced technology in the country, criticized recently that the Ministry of Food, Agriculture and Light industry must stop its repeated actions to undercut the price. According to Chinbat, Gatsuurt was about to sell its wheat to Altan Taria, the largest flour producer in the country, at MNT350 thousand but the Ministry undercut the price.
Price growth is a normal phenomenon, which encourages manufacturers increase and expand their production. In other words, a price growth supports the supply. The market should fix the price itself and there is no other best way to reduce the price significantly than increasing the supply. The attempt by the government to regulate or restrict the price will not yield any results on a long-term basis.
Recent efforts made by our government to regulate the flour price with the lapse of time will loosen the competition among agricultural industry of the country and will limit potential merge of small enterprises into a big company to an economically profitable scope and further cuts a reliable source of supply. Current policy to restrict the flour price is exactly same as to add insult to injury.
The price can be stable only when price of consumer goods is regulated not by the government but the market itself.