The time has come for us to find the most rational and efficient way to possess underground resource of Tavan Tolgoi deposit and benefit from its fruits from generation to generation.
The country’s future, social stability and order as well national security will depend on how we deal with such a new intellectual challenge. The Government of Mongolia decided to sell 10% of Erdenes TT to domestic professional investors and give 10% free to its people, 30% to international investors and own remained 50%. So far, it selected Deutsche Bank (Germany) and Goldman Sachs (the U.S.A) as underwriter for IPO and BNP Paribas (France) and Macquarie Bank (Australia) to involve in the sales and brokerage activities.
Shares in state-owned company Erdenes-TavanTolgoi will be sold within 2011 and each citizen is expected to receive 550 shares.
If the shares would be sold as to this government version, in a country like Mongolia where the half of its population lives only for daily foods to eat, the people will hurry to sell their free shares at first chance to do so.
All capital will concentrate in hands of few people and after some time the poor will remain poor. Mongolians will be begging money from donors sinking in debts.
The two political parties in power are doing this with final purpose of looking as if they fulfilled their pre-election promises. Since it is going to take more time for us to receive real money after Erdenes TavanTolgoi make initial profits and distribute its dividends, I suggest to make a little change to this.
1. It is necessary to ensure that 10% of existing and to-be-determined reserve of Tavan Tolgoi Deposit should be always equivalent to 10% of total shares of Erdenes Tavantolgoi Ltd. Otherwise; there is possibility that by issuing additional shares, the value of previously existed shares is diluted.
2. Let us give 500 shares to existing population of Mongolia.
3. Though it might be a good idea to sell 10% to national companies, it is a burdensome task. It would be unfair to sell shares at nominal price by comparing Erdenet Mining Corporation or Mobicom Company with those passive companies that did nothing for ten years and did not pay a single penny to tax and this is the discrimination of citizens with no company. Instead, let us distribute this 10% in shares, 500 shares per new-born citizen of the country. It means our current population of 2.7 million can double to 5.4 million. After that, we can look back again to improve our system.
4. I propose to hand over 500 shares together with the Gerege or certificate of the Mongol to each citizen and to new-born child citizen to certify that the holder is a real owner of the country’s treasure. But do not make it a political game.
5. But the Government will own 30% and let us develop secondary market of securities by means of selling another 20% at domestic stock market. Anyone with wealth can acquire and sell it freely.
6. Let us apply this model not only in Tavan Tolgoi but also in all of other strategic deposits. The Gerege should play a basic role in ensuring that that being a free and happy citizen of independent and democratic Mongolia is the guarantee of good life. If we manage to effectively coordinate this capital with hard work and commitment of every single person, then the proud to be a Mongol will arise. In order to make the Gerege a guarantee for each Mongolian person to live in wealth, a law including the following provisions needs to be adopted.
а. Open personal account for each person with the Development Bank or with the Human Development Fund and deposit dividend from 500 shares to this account on annual basis. Let us state in the law that owner of the shares is not entitled to sell his shares and can use certain amount of his dividend on specified conditions. He only can spend that amount for limited purposes such as buying or repairing apartment, paying tuition fee or treatment. The government can also spend the capital to deal with such issues. The goose that laid golden egg in Aesop’s fable would be this share.
b. Shares can be transferred to children and grandchildren under a will. By doing so, Mongolians all generation can own apartment despite they might be poor ones. c. It would be fair if the Development Bank pay an interest equivalent to the long-term apartment purchase loan to the balance of long-term personal account.
Besides, this capital can be spent to issue credits to big infrastructure projects. Generally, in some countries, pension and health funds are brought into circulation in this way. Only in this way, we can provide each family with modern apartment and deal with almost all urgent problems in Mongolian society.
This model was successfully implemented by Singapore to achieve today’s progress. We should raise initial funds of operation by selling 30% at foreign stock markets. Basically, shares are usually issued piece by piece to sell by constantly increasing the price. Anyway, up to 80% of total shares will be circulated at free market and remained 20% will not be for sale to be distributed as dividend.
It is also required that one third of company’s board of directors is civil representatives and that all information is open and transparent.
The Gerege of Mongol would be a real step towards making Mongolians prideful, self-confident and respected. Thus, let us give every single citizen an opportunity to work, create and live well in own country.