Friday, January 21, 2011

Why Forum?

Ub Post
January 21, 2011

Regular Mongolia Economic Forum is about to take place. What makes the forum unique compared to many other discussions and conferences regarding the development of the country?

37 years ago, first-ever economic forum was held in Swiss village of Davos, during which a number influential state heads, business leaders, scholars from all around the world gathered and shared views on global economic problems and challenges.

Such a mechanism of discussion which played extraordinary role in the solution of socio-economic problems entered in Mongolia after 36 years. A new non-governmental organization “Mongolia Economic Forum” was set up this year with the purpose of discuss development strategy and actions being taken to achieve it every spring of the year.

The forum is designed to bring together leaders from the government, business, science and non-government to hold open discussion and debate on urgent issues of the country’s socio-economic development, based on real surveys and evidences. Any democratic society must have such a discussion.

In a non-democracy country, relation and coordination between rulers and the society is like a road with a single direction, which hinders an efficient decision on development to be made.

If a number of important issues like unemployment, poverty and inflation pass many years without proper settlement and get worse and worse, then and under certain circumstances the society undergoes a big blow and the government suffers ‘cataclysm’, as result of which dictators flee from their country leaving it in unrest, and when citizens lose all the property and capital they collected for many years the country suffers both political and economic crisis simultaneously. The most recent case is Tunis.

President Ben Ali boarded a plane leaving his nation; he ruled for 23 years under his dictatorship and flied to many countries asking permission to land. The Saudi Arabia was the only country to welcome his plane to “hand over Ben Ali to his people”. Only real and business-like meetings and discussions that tells bitter truths can boost progress. Agenda of this year’s forum entitled “Together for Development” includes four major topics like human development, development policy, governance and infrastructure. As an example, let me share my imagination about what they might discuss regarding the infrastructure.
Appropriate infrastructure in harmony with macro-economic stability and long-term development strategy build fundamental conditions for stabile socio-economic development. More colossal investment is required in order to develop, mine, sell and increase the value of mineral deposits, which real reserve base has been increasing as result of geological prospecting.

Total amount of investment required for building power plants, auto and rail roads, social and other soft infrastructure facilities across Mongolia is yet to be calculated. As the government officials informed so far, US$800 million is needed for the construction of Power Plant #5, US$500 million for a new airport /it is said that these two projects will be financed by a long-term soft loan granted by Japanese government\, US$15 billion for the state-run Development Bank to implement and finance big construction projects /including 100,000 residential dwelling apartments and fighting against air pollution in Ulaanbaatar City, connect centers of provinces by auto road/ and US$5 billion for the development of Tavan Tolgoi Coal Deposit.

Unfortunately, the government of Mongolia does not have such colossal money at present. The government got 100 million dollar out of US$250 million loan agreed to take from the Oyu Tolgoi project and distributed it to each person in cash. Soon they will take the remained amount. Plus to other budget money, they need additional US$6.7 billion to keep their election promises before the 2012 parliamentary elections. In total, US$30 billion is required.

Some part of the total is said to be financed by the state-run Development Bank that will issue bonds under the government security and remained part will be financed in cooperation with private sector. Even a law was passed to enable strong partnership of the government and private sector in order to ease the government burden and provide more engagement of private sector. Under the law, private sector should build the infrastructure at own cost, after which should take back such cost from the government in certain installment.

At the Forum, the parties should hold serious discussion about what has been done and what problems and hardships exist since the law was passed. According to a KPMG survey conducted in five countries that passed similar law, there are five kinds of problems, including difficulties regarding the project financing, bureaucracy in the government, playing politics in prioritizing the projects, mistrust among private sector and the government and corruption. These urgent problems exist in Mongolia.

There is a need to talk with international experts about what actions should be taken in order to deal with these problems in an efficient way. The time has come to review if any particular research was made or not and how they are being settled. Most importantly, we need to decide in every detail what can we do further and what can be the most appropriate and efficient form of structure to function. Otherwise, infrastructure projects cannot succeed and the country cannot develop without infrastructure.

The structure to discuss each of major issues included in the Forum’s agenda is at the final stage of formulation. The success of the forum, further the speed of country’s development will depend on preparedness of business-like manner of attendees.

Translated by P.Shinebayar

Friday, January 14, 2011

Risks on the Road

Ub Post
January 15, 2011

The only method the humankind created for today to prevent them from any potential risks and damages or to alleviate and re-cover already-happened damages is the insurance.

We protect and get insured our lives, properties and all of other valuable stuff against all kinds of potential risk, including fire, flooding and other natural disasters, and also against all risks that might arise because of forethought and accidental actions of own and a third party, by paying certain amount of premium every year to get the insurance.

For instance, the government requires that you pay health insurance premium and automatically deducts such premium from your monthly salary no matter you wish to or not. But many people particularly who never get sick, leave this world without knowing and feeling a benefit of the premium they paid for their entire life. The government must spend certain part of the fee for preventive actions to keep the population disease-free. All risks except of health are managed and administered by private insurance firms. Usually such insurance firms implement the management of all remained risks that cannot be regulated by the government and that are not needed in government regulation. Though there are various types of insurance products, this time we will discuss about auto or vehicle-related insurance. No one will disagree that the rate of damage and loss caused by car accident and breaches almost reached to the level of damage caused by air pollution in Ulaanbaatar City.

In many countries, everyone is required by the law to have a third party damage insurance before sitting behind the wheel. If you drive without such insurance, you can be sure to appear before the court in these countries. That is how the government obeys to its main duty to protect its people, their life, safety and properties. In Mongolia, the government does insurance by halves like it does with other duties. The government cannot perform main duties, but it is taking away by force everything that can be efficiently done by private sector at lesser costs. In Mongolia, only those who recognize the importance of auto insurance get insured and the majority of population never cares about car accidents or do not trust in insurance.

The traffic police enter into machination with some insurance firms and presses car owners get insured by such firms. One side thinks that it provided auto insurance and the other side pretends that it is insured. Because of such wrong trend, citizens do not give importance to insurance because the amount of payment paid by the insurer for compensation of damage caused by a car accident cannot even cover the cost of painting the damaged car.

Few days ago, a car hit my car and damaged the right front side of it. I called the traffic police and the firm that insured my car. They did measurements and took photos after which we altogether went to a district’s traffic police to make a damage report. The report says that the driver who hit my car that drove straightforward on main road is guilty for the accident. But the guilty driver claimed that he was driving his friend’s car, that his car is not insured and that has no income because he is an unemployed. The insurance firm will have my car repaired, after which they will take a long road through court and prosecutors in order to get their repair costs from a real owner of the car.

The car owner will get the money paid to insurance company from his friend who drove his car. All the process to deal with this small accident lasted for whole four hours. And this is a normal incident that happens on Ulaanbaatar roads many times during a day. How many problems would be solved if all cars in Ulaanbaatar had related insurances? The insurance is first of all the system of accountability and responsibility. The car is the most dangerous weapon that can damage and destroy human life and property instantly if its driver is not responsible. Just for this reason, all civilized states require that this weapon and its operator are both insured compulsorily. In Australia, each car owner is insured against the damage of third party. Car owners must choose one of three certified insurance firms and must stick “green” card on the right top corner of the car’s front window.

Some states require this insurance in order to register and give a plate number. The rate of insurance premium is strictly controlled by the government. In Canada, car owners are required to have a particular type of insurance and choose some other types. The compulsory insurance types include auto insurance too. Germany passed a law on insurance of third party already in 1939 and insurance premium rate depends on the type of car, experience of driver and regional peculiarities. Before Germany, Britain passed the same law in 1930. Today, the law states that maximum amount of compensation payable for the health damage to a third party is one million pounds. In some states of the United States, car owners must get insured before applying for plate number. In most states, the date is put on the plate and every twelve months insurance term must be extended and the car must pass vehicle inspection to get number. For instance in Colorado State, vehicle inspections are carried at certified places on a daily basis.

Judging from all these examples, the insurance related to car accident serves to every person not depending on income level or social status. It is indeed true that car accident has nothing to do with driver’s income and position. Because the above countries managed to provide third party insurance for each driver ad car to protect lives and properties of their citizens, thanks to which they managed to reduce on-road risks and the number of accident per 1000 car has significantly decreased. It should be noted here that insurance firms together with city administration implements particular projects to improve traffic system and create more accident-free conditions, with the income from insurance. It is time to introduce and implement best practices tested and proved in other countries, in Mongolia with the purpose of reducing on-road risks.

Translated by P.Shinebayar

Friday, January 7, 2011

Mongolia in 2020

UB Post
January 7, 2011
How do you in these early days of 2011 imagine your homeland of Mongolia, your organization and your private life will be at the end of coming decade? Everyone has own imagination.

If you don’t have a certain imagination and if you cannot properly express your imagination if there is, then it means you have bad vision or you don’t have none. It also indicates that you do not have a definite goal. A person saddles up only with a definite goal on hand. Future imagination or vision is the starting point.

It is not clear how much difficulties and troubles we have to get through and how much risks we have to take in order to adapt to real changes, if we fail to analyze already existing tendencies and trends in today’s society and economy and to take actions to stop some particular trends and tendencies. Some people say let it be. These people prefer living like a whittling on water, or it means these people are ready to run away if the things go wrong.

For instance, if general education system of Mongolia, particularly vocational and higher education system cannot meet modern business requirements and further cannot comply with increasing short-term demand of labor force, how we are going to substitute or compensate it? If we import the most labor force from China after a decade, what problems will be arising step by step in terms of demography, society, economy, politics and foreign relationships?

It is sad that today we have only two visions including a big wallet with big money and a desire to spend it to the last cent. Political parties in power are solely responsible for this. They have built such a situation since the 2000 parliamentary elections. Instead of building a vision and leading the country to progress, the political parties have built a political system under which they excuse each other and “dandle” one by one under the name of consensus. It is likely that the two political parties in power will win elections one by one and form their coalition governments in the coming decade.

Since there is no leading political force, Mongolian people remains without an opposition force in politics. The only way the two parties can function is the status-quo principle mutually trading with offices and power. Their governing council even discuss and decide together any principal requirements deriving out of any of two parties. Mongolia regains single-party domination. A new party called “Mongolian Democratic People’s Party” is formed.

However, under increasing pressure from citizens, who already felt human rights and freedom, to make the governance more transparent, it is certain that function of Mongolian government will be improving gradually. But the power will shift from the government to private companies the government takes care of. Political and economic domination of such government-caring private companies will get stronger and stronger, further their proxies in politics will increase and finally a machine to make a decision favoring only such companies will start. There will be practically no competition.

Moreover, local governments are taking financial control beginning from this year and a “representation” so called informal “council of province or soum” not existing in law will gradually get stronger than provincial and soum parliaments and their donor private companies will take control over local natural resources little by little. We can see that such informal councils which exist for all provinces have become the most powerful, most wealthy and most influential institution. In order to be a member of such council, you don’t have to be party member, you just need to be a native resident of that locality or a kid of such natives. In Afghanistan, exactly the same local leader is the one stronger than the government.

Ordinary people want that their homeland - Mongolia – developed, worshipped human rights and freedom, had real opportunities for employment and good life, had good infrastructure system and that Ulaanbaatar City was clean from air pollution and that all residents lived in comfortable dwelling apartments. They want that the country became economically capable of building such a life. It should be done by a transparent, smart and compact state mechanism in efficient combination with market mechanism. The only thing we want from the government is to create conditions supporting this creative activity. We also want the government not interfere at least if cannot support. This is the only way to succeed development.

Translated by P.Shinebayar

Wednesday, January 5, 2011

The Mongolian “Katrina”

UB Post
January 5, 2011

In late August of 2005, Florida and Louisiana states of America were hit by the Katrina hurricane, killing thousands of people, forcing the evacuation of hundreds of thousands of people and US$100 billion was spent to overcome the total cost of damage to the economy.

A state of emergency was announced in these states and appropriate actions were taken in order to fight this natural disaster called “Katrina” that devastated normal life and activities of thousands of people and settlements.

A disaster almost similar to “Katrina” in damage to citizens and economic loss exists in the capital city of Mongolia. Every winter 1.5 million residents of Ulaanbaatar City are poisoned by extremely poisonous smoke and thousands of residents in ger districts or in the vicinity, particularly elders and infants are losing consciousness suffering from carbon monoxide.
The situation is worsening for people in the ger districts cannot find their own yard in the smoky dark streets of winter and even if they do find it they cannot see their home. More than 200 thousand chimneys emit half-combusted coal smoke, polluting the air in such a catastrophic quantity.

Because poor residents of ger district cannot afford to buy coal to heat their gers in winter, they burn used tires of automobile and bricks soaked in used engine oil to heat their gers in cold nights. If you look at the city from the southern mountain in wintertime, you cannot distinguish gers from apartments in a thick dark smoke and dust and people are suffering from asthma and allergy. That is how the world’s most polluted city of Ulaanbaatar looks. The smoke in Ulaanbaatar became not a matter of urgent problem but a matter of disaster.

If a problem exists, it can be discussed and settled. In a disaster, it is settled through continuous efforts and hard work by mobilizing all strengths and resources available. Unfortunately, our city authorities are trying to deal with this by just meeting, discussing and passing a law. It is almost a well-established tendency or practice that Mongolian politicians and city authorities develops hot debate about the city smoke in winter times but forgets about it when it gets warm.

For instance, last spring a parliament resolution was passed to allocate MNT18.2 trillion for the purpose of implementing so-called “New Reform” in the second half of this year, but nothing was done and nothing was started and politicians are afraid of talking about this.

They continue to spout off about smoke-free coal and “magical” stove and cannot do anything but machinating many billions of tugrugs by supplying heatless but more expensive compressed fuel than ordinary coal, at higher costs. Though both the city mayor and the city parliament continue saying that combating smoke is the first priority and that ger districts must turn into dwelling apartment blocks, in reality they did nothing. Talks about adopting a special law and tax system for the city are not finished after many years and they did nothing but complain. How long should we tolerate these irresponsible politicians who are playing with our lives and health.

A disaster is not settled by market approaches. It can be solved only through efficient use of smart approaches and rapid efforts at any cost. That is the only way for us to fight the Mongolian “Katrina” affecting Ulaanbaatar City.

It is urgent to zero the price of night-time electricity in the ger districts to allow ger residents to use the heating system instead of firing coal to heat their gers; and forbid the consumption of raw coal. Obviously expenses might be high. But apartment dwellers don’t pay for water they used at the real market price, whereas ger district dwellers pay exactly as much as they use. Why cannot ger district dwellers be given some discounts or concessions in terms of electricity payment.

It is not right that it is not the poor residents of ger districts but only the rich and officials benefit from state discounts and concessions. Current and further damages to the population’s health, the reduction of their labor productivity, the loss of time spent for treatment, the psychological damage, the outbound investment made by rich people who becomes like amphibians escaping from polluted city and the migration cost of “waterbirds” altogether make the damage caused by the Mongolian “Katrina” as many billion dollars.

If the damage caused by poisonous smoke were to be measured and compared to the cost required for its solution, then the damage will exceed the cost. Thus, we need to strike a wake-up gong about the Mongolian “Katrina” to fight the air pollution more vigorously.

Translated by P.Shinebayar