Common and Preferred

Underground mineral of Mongolia is the property of Mongolian people and all citizens must equally benefit from it. Our country has become one of the world leaders in minerals with its underground resources. Certain companies are making enormous profits by extracting and importing gold, copper and coal only to the southern neighbor.

Their extraction is likely to increase in geometric progression in coming years. Besides, more and more new deposits of rare earth elements such as silver, iron and zinc are being discovered one after the other.

These fabulous natural resources must be used for improving livelihood of all citizens, not of a group of people. Otherwise, the gap between rich and poor will grow leading to social and political conflicts.

History of many countries, whose natural resource is damned, evidence that it can evoke disorder and unrest and destroy everything created and built.

Anyway, Mongolian government launched a new project to distribute shares of state-owned new companies to every citizen. Such a distribution of shares is a golden chance for two ruling parties to be seen as if fulfilling their promise of last elections to give a cash of $2,000 to each person.

Some foreign countries had implemented similar methods to dish out natural resources to their citizens. Oil rich countries like the Gulf states, Lybia, Nigeria and Alyaska implemented a method so-called “Resource Share”. Mongolia is trying to apply this method by deepening its concept.

Authorities already made a decision to turn the resource into shares and to distribute them to each person, after which to distribute dividends and to allows people to trade their shares at capital market after a certain period. Though the Government announced the number of shares to be distributed, it is yet to announce nominal price of shares.

The Government established a corporation called “Erdenes Mongol” as the owner of the strategic deposits of coal in the country. 10 per cent of “Erdenes Tavan Tolgoi” Ltd, one of fifteen subsidiaries of Erdenes Mongol Company, will be distributed in 565 shares for each citizen. This was a major political show of Mongolian politicians.

Their next show for April will be the release of preferred shares of Erdenes Mongol Company to be distributed one share per person and give the remaining shares to every new-born child. What is the difference between common and preferred shares? An owner of common share can turn his share into cash by selling it at the market price of that day or receiving dividend from shares.

If everything would go in the way we expect or dream of, the first option would mean give golden-egg-laying duck in return for three or four eggs.

The second option would mean golden eggs each year. But the time for egg-laying or dividend distribution is too far. Dividend from shares are distributed from the money left after the companies pay off all operational costs, including cost of credit taken and income tax, after many years.

Besides, it is not obligatory to allocate dividends despite the operation is in surplus. There will be no dividend to distribute if incomes are spent for expansion of business activities and injecting investments. For this simple reason, shareholders seek to have own physical representative in the Governing Board of the company.

Because the Government is aware of this, it is regularly reminding the citizens that they will make cash if they sell their shares. If citizens would sell their shares to those with money to make one-time cash, then the poor will spend this cash in a single day and remain poor forever. Preferred share usually carries no voting rights which common share carries.

Preferred share is often likened to bonds because fixed amount of dividend must be given every year from such shares. Bond holders receive certain amount of payment (coupon) every year regardless of the fact that the company is profitable or not. Another advantage is preferred shares have priority over common shares in the payment of dividends and upon liquidation.

That’s why it is called Preferred stock. Erdenes Mongol Company is believed to issue 100,000 common shares and 3,000,000 preferred shares.

Common share will make money. But in case of three million preferred shares, money will be given in dividend. In both cases, the company can liquidize the value of shares of preceding shareholders by issuing additional shares. The silence of the Government about issuing new shares or not means they don’t deny it. Another point should be noted here that company shares are issued for the purpose of raising money but not for distributing money like being done in Mongolia.

It should be considered that such a distribution can evoke multilateral conflicts within the company governance. Executive administration of the company must assume extraordinary responsibility for their actions and deeds and their activities must be kept transparent.

One thing obvious is that Mongolian people who got shares without paying a cent will compete with investors who bought shares to trade their shares, which will relatively reduce share prices.

It would be more efficient from the point of distribution if 10 per cent of Erdenes Tavan Tolgoi is distributed to all citizens instead of selling it to Mongolian domestic business entities at nominal price. It would be also efficient for increasing share price of secondary market.

A certain group of people benefit from underground resources of Mongolia, while ordinary citizens are panicking in an attempt to find their space. If there is no new jobs created, no significant improvement in livelihood of citizens and no immediate change in the country’s infrastructure quality in the process of exploring and processing underground resources, our resource for sure will not be a blessing, but yield serious consequences instead.

Translated by P.Shinebayar

UB Post

April 22, 2011

Intelligent City

Ub Post

April 19, 2011

Great cities of the world have already taken their first steps towards a new era of development. Since 1990s when information and communication technology underwent a revolutionary boom, ordinary cities were turning into smart ones, but from 2010 onwards the smart cities are becoming intelligent ones.

Residents of any city must live in an apartment with access to water, sewage and electricity, public transport service of the city must be adequate and prompt, its green areas must be able to clean the city’s air and the city must have adequate infrastructure to support all these conditions for the secure and comfortable living and working of its population and this is called a solid infrastructure.

The people from rural provinces can move to the city and become a resident of the city easily. It is getting more problematic and troublesome to provide downtown ger districts of Ulaanbaatar City with proper facilities.

If you look at UB city with a focus on its infrastructure, Ulaanbaatar is not yet an ordinary city. The quality of living and productivity of the city’s residents depends not only on solid (tangible property) infrastructure but also on infrastructure of information and communications technology.

A city that managed to computerize all data related to the city, its business and services are called a smart city.
In a smart city, the people receive most of the services and make all payments by means of gadgets such as a phone or a computer). Residents of Seoul City pay all their fees and charges and purchase payments just using their mobile phones.

In such cities, payments such as road fees and public transport charges are made using electronic gadgets, which saves much time and paperwork. It is enough to sit in a taxi with a GPS device to know how all the information is computerized in a smart city.

After entering your destination, the device will tell you how to reach the destination, your time of arrival at the destination and services available nearby.

Over recent period, smart cities are developing into intelligent cities, which mean that they develop into a specific area relying on their most competitive knowledge and advantages.

For instance, since Singapore City draws its drinking water from neighbors through piping, it is creating and building a unique infrastructure to catch, store and treat rain water for domestic use, which attracts great interest from many big cities around the world.

In order to become an intelligent city, Singapore seeks to become an specialized city to be an important node point in the global monetary and media systems.

As this country is nicknamed as ‘Asian Switzerland’ since they keep personal bank accounts in strict confidentiality and its banking and financial institutions strictly comply with all international principles and rules related, it has started to draw global offshore capitals like a magnet.

In February, Singapore opened a Mega polis Center and numerous firms are racing with each other to rent rooms equipped with the state of the art equipments and devices to create and transfer electronic products. It is emerging as world’s specialized cluster of animation industry.

Nearby this, two separate clusters of engineering and bio-treatment, Fusionpolis and Biopolis, are established and “Procter & Gamble” Corporation is injecting US$250 million to create its own World Center for New Initiative.

Ulaanbaatar City can start creating its infrastructure as an ordinary city in compliance with up to date requirements of modern city considering the above trends of urban development. For example, we could save considerable expenses and costs of we plan all new roads not with a drainage system only but with a system to collect and treat rainwater.

We should plan a totally new Ulaanbaatar, not for the interest of someone or some people, but for the welfare of all the city population and their coming generations, to join the world family of smart and intelligent cities.

Obviously, a lot of efforts and resources will be required in order to make Ulaanbaatar an intelligent city. We can use mineral income for this purpose, which would mean that we are managing to shift irrecoverable natural resources into the form of recoverable human resources.

This task should be carried out in coordination with the city’s taxation policy. All costs of cleaning the waste and treating sewage must be paid not by the government but by city residents. Only intelligent management can create and build an intelligent city. We, residents of Ulaanbaatar, want the city authorities to be smart if not intelligent.

Translated by
P.Shinebayar

The Government and Actions

Ub Post

April 1, 2011

Mongolian government proclaimed 2011 the Employment Support Year. The question is which country’s employment they are supporting indeed.

Today, approximately 150,000 Mongolian citizens work and study abroad. 30 thousand Mongolians work in Europe, 25 thousand in South Korea, 15 thousand in the United States and 4 thousand in Japan, while 35 thousand studies in above and other countries around the world.

Since 2004, thousands of Mongolians were exported to South Korea to do jobs the Koreans refuse to do because of work conditions and low pay, under a contract between Mongolian Government and a Korean NGO.

Last week, during the visit by Mongolian premier to South Korea, they renewed the contract to send more Mongolians to Korea, to which our Labor minister looked very happy on a TV broadcast. There is no doubt that Mongolians working abroad are making considerable contribution to the country’s economy.

The annual income from labor export or the amount of money Mongolians abroad transfer to their families is approximately US$200 million.

However, there is no calculation yet about how much damage with this money cause to their health and how many families break apart because of this money. Meanwhile, the number of foreigners coming to Mongolia for employment has been increasing rapidly. In 2009, there were over 31 thousand foreign workers in Mongolia, 85% of which were the Chinese, and 4.0% the Russians.

This figure increased 2.2 times in 2010, reaching 68,500. 74% of them were from China, 5.3% from Russia and 4.0% from South Korea.

These foreign workers transfer money to their families, growing our import size. Half of foreign nationalities are employed here in mining industry.

If 30% of foreign workers in Mongolia engaged in construction, it reduced down to 13% in 2010. According to this trend, the number of inbound foreign workers is likely to surpass the number of Mongolian workers to go abroad, at the end of 2011, the Year to support employment.

There is a paradox in Mongolia that the country hires so many foreigners when 15% of the country’s one-million labor reserve has gone abroad and another 15% is unemployed home.

Why such paradox exists in Mongolia? To this question, we, the citizens, should demand answer only from the Government of Mongolia, not anyone else.

Competent authorities are supposed to mobilize their minds and skills towards developing a policy intended to employ Mongolians at home, increase productivity and value of Mongolian man and raise their salary based on thorough studies, and dealing with everything hindering to achieve these tasks.

The biggest obstacle that hinders a Mongolian man to work home is that recruiting a person has become a profitable business in Mongolia.

Monthly spending of an employer recruiting a man is equivalent to 110% of salary payable to a worker. Meanwhile, a worker brings only 2/3 of his salary to home because the rest is forcefully deducted by the State as tax. But yet there no service equivalent to the money the citizens pay as pension and health insurances. On the contrary, there is also a problem with individuals.

A big part of population lives on regardless they have no job. It is because another party of population supports or ‘feeds’ the other party.

Politicians encourage parasite lifestyle among the population by distributing various cash allowances, which make the population believe that they can live on without working at all.

The most people do not recognize that their relatives work beyond normal loads and conditions to transfer few dollars for families. Such people misbelieve that working abroad is so easy and have no idea about how it is hard to work in abroad.

For this reason, the line of visa applicants spending days outside the foreign embassies in the city remains for many years. There is emerging deformation in labor relations of Mongolians and we now judge the labor not from the view of demand but punishment.

Our growing economy brings workers from abroad because current human resource preparation and vocational training cannot meet increasing market demand.

We are about to pass this life only talking about reforming training and education system rapidly.

We have an opportunity in hand to increase the participation of Mongolian people in rapidly-growing mining industry, particularly the contribution of Mongolian specialists in every mining-related field, at first instance.

If we grant tax incentives to those investors training and employing Mongolians, then it would be a real support that enable Mongolians get employed in own homeland.

In developing the mining industry and preparing required personnel, we need to look beyond the task to meet current labor demand and prepare Mongolian specialists capable of working on the latest technology in line with environment friendly and safe standard.

Only then, Mongolian specialists will be invited abroad for employment and our Government will not need to ask foreigners employ Mongolians for jobs which they refuse to do at all.

Translated by Shinebayar