Jargal's Blog

2011-06-07T11:33:00.003+08:00

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A Step Towards a Healthy State

2011-05-24T14:28:00.000+08:00

Recent events in Mongolia’s political life have given opportunities to seal democratic principles deep into the root of government and further strengthen public governance. The conflict in the management level of the political party, who have ruled the country for more than ninety years, has been brought to light and the party has started to crumble as a political force. It is the beginning of a natural act of disintegration that was always going to happen.

A political party can carry out its duties for a long period of time only when they are based on a definite doctrine, a set of unambiguous principles and an ideology which reflects both of these.

It is natural law that a political force founded on personal interests or individual property interests will crumble and breaks apart sooner or later. After around two decades the only political party in the country failed to achieve its goal to build a successful communist state and left Mongolia without a political ideology.

Out of the remnants of this old party, a group of people united to fulfill their personal interests and desire for power, and since then they have been misusing their offices to cheat the people out of their own property. As they failed to build a new, well-ordered and stalwart ideology and existed only to control, the remains of the old doctrine have conflicted with current actions and leading the party to change its name and form.

Since there is no limit for human avarice and resources are limited, the group which united through their personal interests grew weaker due to those who misappropriated, distributed and benefited from public properties for their own personal wealth in a re-distribution of properties and powers.

A battle between the groups to destroy each other has begun, thanks to which great crimes of public property misappropriation have been revealed. At the same time, others are attempting to halt the flow of information making its way into public knowledge and to prevent the good decisions which were being made, since they know all guilty players will be laid bare in the end.

By this logic, opposing parties who have become implacable enemies are forced to reconcile and rejoin. Otherwise, thousands of the young people who joined their political parties may lose their party loyalty, negatively affecting the forthcoming parliamentary elections.

Because it was the fundamental structure which collapsed they can never be reunited again. But, the time might come forcing opposing parties to pretend that they are re-united for a common purpose.

Such re-union would not last longer than one or two elections. As for the second most dominant political party, it has been building its own doctrines based on the beliefs of “democracy” in a short period of time, but they have failed to realize these values so that this party too is more based on personal interest and property demands.

The fact that there is no difference between either of the weak ideologies of the two biggest political forces in Mongolia has led to the formation of a trembling government without an opposition and to the formation of today’s coalition. Efforts by incumbent MPs and cabinet members are pushing the government to amend elections law so that they can ensure their re-election in the next bout of votes.

In reality, the only amendments should be the creation of a direct vote from the people for the head of executive governance or the Cabinet. Then it will no longer be possible to form coalition governments, thereby eliminating a faulty system allowing lawmakers to become Cabinet members.

The fundamental principle of democracy is becoming firmer in Mongolia and politicians’ actions are growing more transparent day by day. Decisive steps must be taken to ensure that political parties are a unified group sharing a strong ideology in the interests of the country.

Translation by P.Shinebayar

Ub Post

May 24, 2011

Belated Law

2011-05-17T15:16:00.002+08:00

Ub Post

May 17, 2011

A fundamental condition for the normal and efficient function of a democratic society is the high-quality control over the government and the community. Countries with well-established democracies have certain legislations and standards on good governance, which have become the basic guidelines for all people in public institutions. Out of four of the basic principles of good governance; transparency, openness, honesty and impartiality, the principle of impartiality has been disregarded and openly ignored by the authorities.

Firstly, MPs who own private universities or have seats in the top management of private universities, lately lobbied a recent decision to enable the allocation of MNT500,000 to go from the government budget to public and private universities and colleges as a tuition fee from individual students for each academic year.

Last week, the same lawmakers submitted a bill to Parliament to grant a MNT70,000 stipend to each student every month from the government budget.

They claimed that the stipend for students is the right investment to education, which would help solve many problems simultaneously. This law too has been lobbied.

Their dual roles as members of Parliament and of university institutions have caused a crucial conflict of interests.

Secondly, a draft resolution to re-set the boundary of specially protected areas, masterminded and submitted by another group of legislators, attempted to release lands on which MPs private tour camps are situated, when they are outside the boundaries of natural parks.

In this way, authorities in Bogd Khan National Park are renewing national park boundaries in their favor and interest.

Thirdly, the Government has decided to issue MNT110 billion worth of sovereign bonds to a new cooperative called “Mongol Cashmere” – which is a merging of private companies owned mostly by MPs and Cabinet members.

This means the government will finance the bond, as well as its interest. But the repayment deadline and methods have been silently forgotten.

In Mongolia, the private interests of government officials are ever present in large road and construction projects financed by the government budget.

Soon, they will pass a law allowing budget-financed projects to occur without tender bids or selections.

Finally, the authorities purposefully ensure a tender will fail to gain any share of the profits by intentionally muddying or failing to manage the tender bids.

Parliament and cabinet members with conflicts of interest should hesitate to participate in decision-making process in their respective issues. Unfortunately, they are trying shamelessly and resolutely to influence the decision making in their own interest.

The activities of seventeen members who have their own universities show the true magnitude of the vast conflict of interest in Mongolia.

If these 17 members were prohibited from making decisions related to higher education (for one can only hope the Parliament’s Office will soon check and announce their names), it might intimidate others in a Parliament whose daily attendance rate is already quite low.

There are also several members who should stand back from decision making associated to construction. Therefore a list of members with conflicting interests must be made by each industry involved.

In cases of city and provinces’ administrations and local parliaments, the conflict of interest happens in much more open ways. It won’t be an exaggeration if I say that there is no former members of the city parliament who misused their competency and authority to get a piece of land in the most favorable areas of the city or to take the slice of privatization.

The city administration office should make a statement on this matter. A mechanism to deal with such problems is the adoption and enforcement of a law on conflict of interest.

In developed countries with strong democracy, such a law is passed to define who is a person with conflict of interest and not to allow such persons to partake or influence the decision making.

In case they commit the conflict of interest, such law clearly states what kind of punishment is appropriate for the case concerned.

It should be separately clear what exactly is the conflicts of interest with minor impact emerging in the form of ethical conflict, what exactly is the conflicts of interest with middle impact emerging in the form of interest and what exactly is the one with serious impact emerging in the form of corruption, and forms of punishment must be clearly defined.

Two or three years ago, few MPs initiated and drafted a bill on conflict of interest, but the bill is yet to get adopted.

The bill envisage indicates principles, code and values of behavior by parliament and cabinet members and other high-level officials and establishes which decision makings they must not partake in.

A good news is relevant standing committees of the Parliament is expected to consider the bill in few days.

Regardless of delay, the immediate adoption of the bill is vital for “purifying” the public service and further strengthening the good governance of the community. I am just wondering if the legislators are eager to pass the bill or not.

Bond-Access to the Sea

2011-05-06T13:17:00.003+08:00

UB Post

May 06, 2011

Mongolia is a geographically landlocked country but financially it has access to the sea. In order to freely sail in the international sea of finance, one should follow principles that the other countries set.
Today, we make preparations in our little pond with our little boat to travel in big waters. The government’s launch of its bonds at international market means that the country launches its ship to the great sea. Bonds issued by national governments in foreign currencies for the term of 10-30 years are referred to as sovereign bonds.

Because the sovereign bonds are issued not by individuals or private companies but by the Government that can raise taxes, the investors buy the bond and take back the invested money with its interests at maturity.

These investors are major financial market players such as individuals, companies, funds and national governments. If the government manages to issue such bonds and penetrate into international sea of finance, then it opens door to local private companies to follow this route.

The government’s bond issuing creates information and a system that can be used to measure the economy of that country, the efficiency of its public management and its governance of discipline. So national governments and their private companies raise a good deal of capital in this way.

Prior to releasing the bond, an internationally-recognized independent firm gives assessment of the credit worthiness of that country and provides a rating as compared to other countries.

There are two or three firms specialized in this field, one of which is Standard and Poor’s (S&P). In January, 2010, this credit rating agency rated Mongolia as BB which means not investment grade and assessed Mongolia’s debt issues as junk bonds.

For this reason, Mongolian government still cannot issue its bonds at international market. Mongolia needs to establish why it is in this rating and what should be done to raise its rating.

International and local experts claim that a number of target actions should be taken in Mongolia with respect to stability of politics and macro economy, transparent environment for business, fighting of corruption and open governance.

Some noticeable steps were taken last week by authorities to issue long-term sovereign bonds for domestic market and provide guarantee to bonds to be issued by the Development Bank.

The finance minister asked the Parliament to permit the Government to issue two packs of bonds for domestic market. Of the income from first MNT127 billion bond, 55,5 billion will be spent for compensating the state budget deficit and remaining 72 billion for issuing housing soft loans for public servants and other citizens.

The income from second MNT110 billion worth of bonds will be granted to “Mongol Cashmere” Corporation – an association of twelve wool and cashmere companies – for its efforts to improve competitiveness, penetration to international market and creating jobs.

It means the total debt will be paid from subsequent state budgets. The question is if the corporation will redeem the debt.

Next significant event related to bonds was the government’s decision to issue guarantee to the bonds of the state-run Development Bank for the first time in the country’s history. The soon-to-operate Development Bank first will issue MNT300 billion worth of bonds for the period of five years, MNT250 billion worth of bonds for ten years and MNT300 billion worth of bonds for 15 years, to raise funds from domestic market.
In case if the Development Bank cannot pay off principal debt and interests of own bonds, then the Government will pay for the Bank. Taking a credit equivalent to almost 10% of GDP in order to invest in infrastructure projects for construction, energy, road and heavy industry and paying principal loan and interests for 15 years by placing it in the state budget means that the investment is made through credits in principal.

Officials say that construction of massive infrastructure facilities in a short period and creating business environment in rural areas exerts positive affect to the development of private sector and improvement of their competitiveness and creates more taxpayers. On the other hand, because the government cannot afford to finance ambitious projects from the budget, it intends to implement these projects on credit and pay back in installments.
Annual interest rate of the Development Bank’s bond is 4, 75-7, 0 percent. But annual deposit interest rate of commercial banks is two times higher that it. For this reason, this bond will not directly attract the interests of individuals, commercial banks and companies.

Initial market or bond’s first trading will not be as active as expected. But already-traded bond holders will trade with each other or commercial banks will be active in secondary market, helping to build proper ratio of capital composition.

Or if it is permitted to take the above bonds from compulsory reserve of commercial banks, then it is possible to grant housing loans with annual interest rate of 6, 0 percent to citizens, which is equivalent to the rate applied to buy bonds. It means the half of real market interest will be compensated by bonds’ interest.

It can attract foreign banks, as well financial and investment banks interested in operating in Mongolia. US$700 million is not a big deal for big foreign banks. Fund raising through issuing bonds at international market means credit taking and it can yield more profits than trading shares at capital market. Fundraising through share issuance means the selling the ownership and sharing of profits always.

But in a country like Mongolia, where there is a big conflict of interest between the public and the private, we should make perfect contract and make all the process open and transparent in order to make these ambitious construction projects by credit. Otherwise, it is highly possible that it would expand and enlarge “the corruption fund”.

On the other hand, if we fail to implement the ambitious projects in a timely and efficient manner as to plan, then the credit worthiness of our Government would be even worse, which could delay Mongolia issue its bonds in international market.

Mongolian government needs to take immediate actions to reduce the budget deficit, stop compensating the deficit by foreign loans and aids, and cease co-exercising the authority to dispose of the budget by the Government and the Parliament, in order to issue its bonds abroad.

Issuing sovereign bonds is vital for financial infrastructure of the country.

Translated by P.Shinebayar

Common and Preferred

2011-04-22T10:52:00.000+08:00

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

2011-04-19T20:55:00.000+08:00

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

2011-04-01T15:36:00.000+08:00

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

The State and Housing

2011-03-25T20:04:00.000+07:00

Ub Post

March 25, 2011

As a next parliamentary election approaches, the Government is increasing the size of its housing project and is reducing the interest rate of housing credit.

Last week, the Government passed a decision to implement a 100,000 Family Housing Project and thus keep yearly interest rate of housing credit below 8%.

It is the right time to judge if the decision is feasible or not, who will pay for real expenses and what should be taken into account in order to implement this challenging task, and express own views and positions from the point of civil society.

Ulaanbaatar City needs some 200,000 family apartments so far. If to look back at previous housing projects before implementing this ambitious project, we need to have completely new approach of governance, urban planning and investment etc. With respect to governance or state policy, it is obvious that Mongolian government possess no integrated long-term policy regarding the housing and that its actions are limited only by populist promises made between elections with intention to win them.

Actions taken by authorities are often ephemeral as they do not think before acting but act before thinking. For instance, three years ago the authorities proudly laid a foundation stone to build Power Plant #5, a new power source crucial for the city’s housing project, in Uliastai, eastern uptown sub-district of Ulaanbaatar City.

But they have changed their mind to build it on the base of existing Power Plant #3. Such a careless and irresponsible treatment to such an ambitious and important project makes us think that they never undertake proper surveys and studies or they work under someone’s pressure.

In both cases, it is visible that the authorities are not satisfactorily negligent and responsible and lack strong governance management. Moreover, our government in every stages measure its action results according to the amount of money spent but not to achievements made and outcomes reached and what Mongolian people did benefit from that.

For instance, when I tried to find out how many families managed to get modern apartments thanks to government’s 40,000 housing program, the only information I managed to get from the official website administered by Housing Financing Corporation, the government’s agency in charge of the program, was that a total of MNT31.4 billion was spent for housing projects in Ulaanbaatar City and rural provinces between 2007 and 2009 under the government housing program and current balance amounts to MNT1.3 billion”.

Would not it be more important for citizens to know not the amount of money spent but the number of families got apartments so far under the program?

It can be concluded that there is no urban planning for Ulaanbaatar.

If there is, it must be a special plan that is against the will of citizens and that is intended to make our lives more complicated and more uncomfortable.

If they even had a plan to implement, their plan must have been to build dwelling apartments inside high school yards, on kids’ playgrounds, blocking the roads, cutting the flood-control dams or filling the spaces between buildings.

In a civilized country with good governance, infrastructure system is provided prior to building apartments. But it is different in Mongolia.

First we build apartments and afterwards build infrastructure. As result, every family in ger districts dig own water well in own yards and transport sewage separately.

Even if we hired saboteurs to make planning and undertake it for us, the situation would not be such a catastrophic like today. There are few extraordinary abnormalities existing with respect to housing investment source and selling prices.

Existing infrastructure access and capacity of water, sewage and electricity in Ulaanbaatar City is no longer able to afford the city’s increasing demand because authorities allows to build apartments in every free spaces close to infrastructure system in a disorganized way.

Housing land licensing is still tricky and hidden for ordinary people like mineral licensing. Reselling these licenses at higher price is the biggest and most profitable tax-free corruption source. It is not a secret anymore that the size and scope of this licensing business is getting bigger and bigger, making it a certain political power already.

A reason that hikes up apartment price is the corruption money to get housing land license and other relevant permits. The decision to keep housing credit interest rate below 8.0% as stated in previous program and 6.0% as in new program is beyond reality.

Current yearly rate of commercial banks or money market is 14% means that the margin of 8.0% would be paid by budget or by taxpayers.

It is a government’s attempt to regulate market price of goods and service. In all cases where goods & service prices are not regulated by market’s rule of demand and supply, final victims of it are consumers on long-term basis.

Government’s interference never reduces market price of goods and services, meaning there no balance between demand and supply. The Government decides to “issue housing credits with interest rate of 6% to middle-class families without own apartment in possession”, which means all citizens without apartments.

The priority of the housing program should be to build one or two storey cheaper dwelling apartments with access to hot and cold water system affordable by low-income families.

In order to build such apartments, it would be faster if turn lands owned by citizens into investment.

It is efficient that the government issue bonds and get long-term credit in order to make infrastructure investment. Besides, distinguishing of population by their employment with public service not by income level in order to provide with apartment with preferential conditions, makes their interest to work with public service which would make the government more cumbersome.

The time has come to take into consideration the above problems concerning the governance, urban planning and capital source before launching successive program.

Translated by P.Shinebayar

CALAMITY INSURANCE

2011-03-18T13:55:00.001+07:00

Ub Post

March 18, 2011

The most countries require by law that citizens have proper insurances of life, house, vehicle, property etc against natural calamities.

Not public but private firms are responsible for property insurance and small insurance companies purchase an insurance from another big company as a means of risk management. Reinsurance companies are mostly big and transcontinental financial corporations.

In Mongolia, in order to get a housing credit or buy movable and immovable properties on leasing, it is a requirement that the property is insured against risks such as fire, flooding, quake and other calamities.

Basically, the only mean to protect private or public properties from all risks that might happen due to natural calamity is insurance.

17% of all properties damaged and destroyed by 9.0-magnitude earthquake that spawned a deadly tsunami into northeast coast of Japan had earthquake insurance and American AIR Worldwide experts estimate that the amount of loss to be paid by insurance companies is approximately US$35 billion.

As earthquake insurance premium rate is very high in this regularly-shaking nation, not everyone affords to get insurance coverage. Though this type of service is not common for this reason, almost one sixth of its population had earthquake insurance.

The Japanese earthquake is the second costliest natural catastrophe for insurance companies after Hurricane Katrina (US$100 billion).

It means $35 billion of the total loss will be paid not by the Japanese government but by international insurance companies altogether.

Share price of insurance companies is dropping in big stock exchanges. Share price of insurance and reinsurance companies such as Munich Re, Allianz, Swiss Re, Hanover Re, Admiral, RSA and Prudential went down to 1.1- 5 percent on the quake day.

International insurance and reinsurance system has already suffered the loss of US$10 billion due to recent earthquake in New Zealand and US$8.0 billion from unrest in Mid-East and Arab.

Anyway, almost every nation has insurance system under, which any loss caused to property due to an incident or calamity is compensated if it has insurance coverage and some countries even has a law which rules the deadline to complete insurance compensation or states that in case of becoming homeless, the cost spent to reside in another place must be compensated.

Insurance is a capital that makes up the largest portion of financial market. The insurance accumulation in developed countries serves as a bearing column for capital market and a leverage to stimulate securities trading. At the end, shares of big insurance companies are placed in relatively stable and long-term investment funds. In any country, social, health, pension and risk insurance funds serve not only as a core of capital market but also a reliable source of risk management.

Then, where Mongolia’s insurance capital is accumulated and how much it has been growing? This question has been put many times by Mongolians, especially NGOs headed by Ganbaatar from Trade Unions, but the authorities seem like not willing to give certain answer.

There is no warranty that a natural calamity would hit Mongolia. Does anyone know how much real estate is in Mongolia and how much of them have insurance?

In order to have an estate insured, first it needs to be registered. Then, how much of all real estate has registrations? It is already the time to register the property of citizens, bring them into economic circulation and protect them from risks through insurance.

It was reminded two years ago by well-known economist Hernando de Soto during the 2010 Mongolia Economic Forum and a whole sub-session was dedicated to risk management during this year’s Economic Forum.

Time has come to Mongolia to develop risk management institutions, including insurance system, immediately and ensure its proper function as to market principles, before getting into mining mania. A natural calamity is never predicted.

In a democratic system, under which the government is replaced as result of elections, an extraordinary duty of the government is to establish and develop a reliable insurance system, which is a crucial tool to protect the society from risks.

PS: I extend my deepest sympathy over terrible tragedy the Japanese people suffer.

I would like to note here that the patience, mental strength and unity of Japanese people made me wonder, respect and prideful.

Translated by P.Shinebayar

Mining Mania

2011-03-15T11:48:00.000+07:00

Ub Post

March 15, 2011

A regular Mongolia Economic Forum closed few days ago. There is almost no developing and democratic country in the world, except Argentina of President Perona’s time, who satisfactorily managed to use rich mineral resources to make the country develop properly. Almost every state who managed to develop its country based on mineral resources, had totalitarian regimes. Chris Devonshire, who attended the Forum, wrote that the rest of the world closely watches how Mongolia that cannot no longer exercise democracy properly and pass non-democratic decisions, would deal with a challenge to make its natural resources a fundamental for development.

Mining mania mentioned several times during the forum by attendees, including President Elbegdorj, has already started to happen in all government and socio-economic levels of our country. Today, all affairs that the country faces, are connected to future mining income and any work or business not related to mining is no longer go further.

The government’s size and spending is getting bigger and bigger and the government’s budget expenditure accounts for 2/3 of the country’s economy. The government’s expenses boosted by rumors of mining income even exceed expected high income and its difference is about to reach to rate equivalent to 11% of the country’s economy.

As the next parliamentary elections get closer, political parties and authorities only talk about how to distribute shares of Tavan Tolgoi and whom to give it to or whom not. The authorities are spending sleepless days to look like they fulfilled their pre-election promises by distributing shares to the people. It has started to count chickens before they are hatched.

They say that shares are not available for children who would be born after the last day of this year. It appears it is the fault of these children that they are born not in right time. They also state that only those with incorporated company can buy shares cheaply and those without a company can blame themselves. According to authorities, all city problems including smoke, traffic and water, will be settled by the money to come from mining. And no one talk about how they are spending existing money.

Everyone knows that high school principals in ‘close cooperation with politicians’ have been stealing open sport-grounds inside the school yard to build residential buildings for their own wallet, but no one dares to say it loud. Everyone is expecting big money. Those who exenterated funds of social care, pension and health, are also hungry waiting for next bait to come from natural resources. I do not think that current social insurance system that cannot function properly, would suddenly begin to work well even there is more income to come.

A person in mania gets separated from reality and normal standards and sometimes does shameful things. Exactly the same acts are happening in all government levels. Press and media also suffer from this disease, writing only about mining income and issues surrounding Tavan Tolgoi shares. An expectation that Mongolia will develop and each citizen will get rich thanks to massive income soon to come from Oyu Tolgoi and Tavan Tolgoi, is spreading across the society. In order to manage this expectation properly, we need no efficiently marry and co-ordinate mining industry with the rest of economic fields.

Every company needs to find their place and supply their goods and services to accumulate capital, based on fair competition by undertaking the above co-ordination effectively. Besides, such a big expectation can lead to inflation only if there would be no increased economic productivity and final victims would be consumers, especially those with low income. If mining income cannot support and increase economic productivity at all and produce only inflation, then economic growth can become a castle in the air.

Only the economic growth that is capable of making a particular industry competitive in international market can ensure a real and long-term development only. Thus, I demand politicians and the government stop their mining mania and carry out realistic activities.

Translated by Shinebayar

Gerege of the Mongol

2011-03-04T11:46:00.000+07:00

UB Post

March 04, 2011

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.

Translated by Shinebayar

“Ulaan Qatar”

2011-02-25T12:05:00.001+07:00

UB Post

February 25, 2011

This week Mongolia is about to make a historical decision. It will announce contract miner for Tavan Tolgoi, the world’s largest unexploited coking coal deposit with estimated reserve of 6.5 tons and banks to manage an IPO worth up to US$5 billion for the deposit.

For the first time, our government is about to implement this ambitious project to make a historical change in the country’s economy by hiring international capital market players and attracting billions of investment, without the participation of a foreign country.

More than 150 representatives from over twenty biggest world banks including “Morgan Stanley”, “Goldman Sachs”, “Macquarie Group”, “Citigroup”, “JP Morgan Chase & Co”, “Deutsche Bank”, “Credit Suisse Group and UBS” and many others gathered here in Ulaanbaatar to present their proposals battling for a piece of the country’s upcoming coal IPO.

These banks see the deposit not only as an opportunity to make astronomical profit but also as a matter of reputation and prestige as Mongolia is the first developing country in the world to raise such a big capital from mining industry.

Beside the deposit, three or banks to be shortlisted will also get a piece of financing of enormous infrastructure projects related to the deposit’s development. For this reason, The Wall Street Journal reported that giant banks fight each other in Ulaanbaatar to do extraction in Mongolia.

Western press say that it is estimated to raise up to US$5-billion by selling a 30% stake in Erdenes Tavantolgoi Co., the state-owned coal company.

You have to wonder whether, with Mongolia’s citizens entitled to share of any state-owned assets listed on the exchange, the country’s 2.8 million people may one day enjoy GDP per capita akin to Abu Dhabi or Qatar.

According to “Financial Times”, if 2010 was the year when equities on the exchange in Ulaanbaatar, the capital, skyrocketed, then 2011 looks like the year they went into orbit. They also wrote that the country’s 2.8 million people may one day enjoy GDP per capita akin to Qatar and that its capital may become not Ulaanbaatar but Ulaan Qatar.

Qatar with population of only 1.5 million, is the world No.1 gas exporter and its GDP per capita recently reached up to US$100,000 leaving behind Switzerland and the United States of America, becoming one of the richest state in the world.

Though we can be Qatar in terms of mineral resource, we are much better developed in terms of government and social structures, human rights and freedom. This country with absolute monarchy system may see political crisis like it is happening in neighboring Bahrain.

Mongolians had completed the democratic revolution which has just started in Arabian countries, some twenty years ago. The independent democratic country is supposed to use own mineral resources more efficiently than the dependent countries with monarch system.

Unfortunately, it is still likely that in Mongolia, only those in power and their accomplices become richer and richer like in Qatar, while the majority of population stays poor like in northern Yemen.

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%.

Each of Mongolian citizens started to register to get 550 shares and the State Property Committee head announced that the shares’ distribution is expected to complete before Naadam Holiday in July.

There are two methods only to make a profit in shares. The one is dividend and the other is capital appreciation. 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.

Today I see the picture of next ten years as follows. Deceitful and shrewd ones would buy and collect all shares in legal and fraudulent ways and after a decade the most of population would remain poor like today and become the slave of few people who managed to centralize all resources in their hands.

In democratic but poor Philippine, 19 families only own all resources and capitals of this country.

Mongolians have not forgotten how some twenty years ago the authorities “distributed” the asset that the Mongolian people created for sixty years, exactly in the same way today.

It is time to search for the ways to use our God-given resources in a way beneficial to each single citizen from generation to generation, in order to become “Ulaan Qatar” not in statistics but in reality. This is a new intellectual challenge that Mongolians face. The bell of history is ringing only about this.

Translated by Shinebayar

The Guulichid

2011-02-18T13:20:00.000+07:00

Ub Post
February 18, 2011

What the parliament have done to take a break, wondered a correspondent as the Parliament closed the fall session and the question was warmly supported by many citizens. Though they say with proud that they worked hard whole winter to adopt and amend 150 laws, indeed thirty of these laws have been passed at the same day or the last day of fall session.

A reason why a law becomes a “guuli” /Mongolians say a law turn into “guuli” when a law is of poor quality and is not enforced properly after the adoption/ is that the parliament passes a bulk of laws within two or three days just before the break of spring and fall sessions.

A principal duty of lawmakers is to draft and pass a law.

Because our dear members treat to their principal duty not seriously and even miss sessions if an agenda is not of their personal interests, the quality of their work is very poor. It is becoming a normal habit for parliament that it passes the law that requires constant amendment and alteration or do not live for three days or that is never realized.

Every law must be obeyed and implemented properly. If it is not, it is a basic principle of relations of democratic society that a lawbreaker is subject to legal responsibility.

The Government should lead the implementation of law and every citizen and cooperative should comply with it, but judicial institutions must control its process.

Since there is no one to comply with laws and laws turn into “guuli” because of their poor quality, we, the citizens, are wondering to find out an answer to only one question. Do parliament members pass such “guulis” by accident or by purpose?
Looking back thoroughly, it can be concluded that two political parties who ruled the country independently or jointly, have been passing the laws with bulk of defects by purpose.

Since political parties have no established economic program and doctrine in Mongolia and there is no principal difference what they say and do, it is easily seen that they do not undertake long-term farsighted policy and research regarding serious socio-economic issues before passing related law.

Simply for this reason, parliament members who managed to have seats in parliament using the name of their political party, play their own game, treat to principal duty from the point of personal interest only and pass or amend laws solely for the purpose of personal benefit and business income. Probably it can be said that there is institution called political party in Mongolia.

The brightest example is the recently-passed law on Prohibition of Mineral Prospecting Exploration in Water Basin Areas and Forest Areas. The law, widely called as “the Long-Name Law” is a clear demonstration of all-time parliament members’ lack of vision and their parochialism.

Few parliament members have recently proposed to amend this law that it is not realizable in reality though it was passed in 2009. Where were they and why were they silent when the law was debated and passed?

The reason why the laws are not implemented has deep root. Far early 1990s, the parliament comprised of the two political parties’ members passed the law which gave green light to gold exploration in any place regardless of mountain, steppe, forest and river.

The cabinets of that time also contributed to this by uncontrolled grant of prospecting and exploration licenses flourishing the license-based jobbery, for own wealth and pocket.

Companies owned by all-time parliament members, cabinets they formed and “bosses” they appointed were the pioneers to mine gold in that river basins where the exploration was the fastest and most cost-efficient for them.

They left the area not undertaking any post-mining rehabilitations, after digging up every fragment of gold. They also re-sold licenses at double or triple prices. You can find their names on any newspaper.

Hundreds of rivers dried up and disappeared and when local communities stand up to protect what is left today, they are trying to cancel that law by obscuring it with various new clarifications, explaining that the country will have to pay billion dollar compensations if the already-issued licenses are taken back by the government.

It is obvious that the “long-name law” is not implementable in this way and will remain in history as a classic example of “guuli”.

Exactly the same tactics is being used by politicians in order to legalize what they are doing on territories of all national parks. Soon they will re-set the boundary of the Bogd Khan National park in an attempt to legalize the money laundered by selling the lands of Ulaanbaatar City.

The people see and know that such a well-performed show is behind every law almost and that those in power misuse Mongolia’s natural resources and lands for own profit humiliating and making nasty fun of its people. Mongolian people sacrifices their environment and children’s future in order to pay for politicians’ robbery costs.

It is very strange that the “guulichid*” /makers of such “guuli”/ of Mongolian parliament not only do business in law, flourish their private business in the name of lawmaking, launder money and play with the money of taxpayers by passing the laws with defects and loopholes, but also are going to take a vacation at our expenses.

Should we allow a group of few narrow-minded and unprincipled people, who cannot think beyond washing brains of low-educated people by making fake promises to win elections and by passing such “guuli” based on no certain studies and researches, play with another twenty year of our life?

Translated by Shinebayar

Costs of Promise

2011-02-11T12:22:00.000+07:00

Ub Post

February 11, 2011

Two ruling parties managed to win the recent parliament elections thanks to their pledges to distribute big cash to each citizen; one pledged 1.5 million cash, while another one promised US$1000 cash.

Consequently, these two parties formed a joint coalition government. Because, from the very beginning, their promises were only to take as much as votes but not to give such big cash indeed and lacked accurate and real calculations, now they started to fight like a cat on hot bricks since they realize that their promises were lies as next elections approach’s day by day.

It is not possible to find five billion dollars, twice more than the country’s economy, within seventeen months.

This money can provide 140 thousand families with one-room apartments. It is enough to turn ger districts of Ulaanbaatar city into modern dwelling apartment blocks.

Or it can increase the country’s population of livestock by ten million. Any international institution will refuse to issue credits as everyone knows that this year Mongolia government has a budget with a major deficit.

The government cannot issue bonds too. The only mean left for them is to take mineral deposits as security. They are trying to collect that money by means of developing strategic mineral deposits quickly and “racketeering” foreign investors.

For instance, they already used their “smart idea” to take US$100 million from Oyu Tolgoi to distribute it to citizens and hope to get additionally US$150 million in this way.

Even if they manage to sign a good agreement on Tavan Tolgoi with a foreign investor, they cannot pull out US$250 million from the foreign investor.

It can be possible only if the government would make an ENORMOUS CONCESSIONS in favor of the investor and sell important deposits at quite cheaper price.

The deposits will go to someone who would pledge more money before others.

No matter the government could or could not give such a big money to keep their words, final losers would be the people of Mongolia because the people pay for real costs of promises indeed.

Maybe they find a way to give; the result would be inflation surge, price growth of all goods and devaluation of citizens’ deposits.

It means you will pay MNT5000 to buy the stuff that was MNT1000 before the inflation.

The people who ruled the country with their narrow ability to foresee elections only, have not done a single farsighted ambitious projects, infrastructures and constructions in the past.

Ulaanbaatar City would not look like as today even the city’s planning is done by enemies.

There is no free land or playground left in Ulaanbaatar City because every possible lands, grounds even schools’ sport fields were stolen by politicians and their relatives, to build dwelling apartments to make money. Plus all mountainsides were also stolen and sold.

Mongolia has lost BIG OPPORTUNITY of development.

Like this way, politicians make promises and do everything beneficial for them on the name of the state, while the people pay for the cost of their promises.

How long we, the Mongolians, must stand the swindlers who play trick on the people making badly-computed false promises and steals peoples’ properties and money on the name the state? We need a law which prohibits the participation of political party in political elections if they pledge cash money to voters.

Translated by P.Shinebayar

Ice Home

2011-02-01T10:24:00.000+07:00

Ub Post

February 1, 2011

There is an ice hotel in Japanese northern island of Hokkaido, which is said to be making a good profit. Though a single room with ice bed, ice table and ice seat costs US$500 per night, all rooms were occupied many months ago. Such a kind of demand can be a good opportunity for residents of Ulaanbaatar City.

It is enough for us to invite all Japanese people willing to stay in ice hotel and let them stay in our homes.

Ulaanbaatar residents will surely get rich only by charging $100 per person while suffering no expense. You may ask why? The answer is the most of 130 thousand apartments in the city is as cold as that Japan’s ice hotel.

The majority of apartment residents in Ulaanbaatar suffer the cold below minus 13 degrees, living like a хөрвийн аргаар. We stay home in outerwear and go to bed not taking off dress. Young children get sick and get pneumonia. Going out, we are hit by poisonous smoke.

Residents from khoroos No.3 and 4 in Sukhbaatar District went through all administrative levels to deliver their complaints about this problem, but their effort yielded no results.

Their apartments have no heating and they reside in ice halls. Offices in charge of apartment management and maintenance and heating supply bodies always blame each other for such inconvenience, while they still dare to take whole heating fee almost forcefully.

Heating system body is in charge of main systems of the city, apartment maintenance bodies are in charge of branch systems and apartment owners association is responsible for vertical systems. Residents pay for maintenance costs of all systems, after which these bodies share the money.

It has been a long time since these bodies freeze consumers instead of heating in return for the money which consumers pay. Erecting a new building in every space available in a particular area, without any planning, causes overload for heating system.

Officials from central, metropolitan and district administrations are believed to behind all these shelters. If to investigate the reason of such ice houses, irresponsible and negligent activities of officials from bodies in charge of heat supply will be exposed.

Since their activity is not open and transparent, consumers suffer, while particular officials make profit from it.

Instead of performing their duties borne before the public, they put their personal interest before the public one, causing the conflict of interests.

For instance, Apartment Maintenance and Public Utility Office #1 responsible for 14163 persons from 465 families in 100 apartment buildings with total area of 192.3 thousand square meter and 330 business entities and organizations and three big centers located in the territory of khoroos No.1,2,3,4 and 5 in Sukhbaatar District, was privatized and re-structured as “SUN COMFORT” LLC. In principle, this company must be a shareholding one, not a private one.

Income and expenditure statements of that and other similar companies should be open to the public. Residents should know how much of total income is paid to heating system, how much is spent to repair and replace pipelines.

Everybody understands that a money owner must know where their money is stored and how it is spent. Exactly such a requirement must be in place for all apartment owners associations.

All bodies have possibilities of administering their respective websites displaying all these information and updating it on daily basis. Such an activity is cheaper than a mobile phone.

The only thing the city and district authorities did in the past, instead of administering and managing such actions, was to find empty land space in order to sell it for personal interest.

The city and district authorities had no interest to make the information open to the public from the first beginning when apartment maintenance and public utility bodies were privatized.

They never had a desire and willingness to make public governance transparent and they are happy when information is closed and not understandable to residents. The main reason is that city and local authorities are not elected by residents, but appointed by political party.

For them, it is a sole purpose to serve for their political party not for residents.

It is because they are replaceable not by residents but only by party head.

The question is which temperature degree the residents live and how many of them is at risk of freezing to death is just statistics for them. Few people are playing with lives of our Ulaanbaatar residents this way.

It has been many years since the most of us feel cold no matter we are home or outside, are poisoned by poisonous smoke and traveling in a frozen bus. How many winters we must pass further in this way?

Translated by P.Shinebayar

Why Forum?

2011-01-21T15:40:00.000+07:00

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

Risks on the Road

2011-01-14T15:25:00.000+07:00

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

Mongolia in 2020

2011-01-07T17:52:00.000+07:00

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

The Mongolian “Katrina”

2011-01-05T13:45:00.000+07:00

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

Auditus

2010-12-28T12:29:00.001+07:00

Ub Post

December 28, 2010

Аuditus is a Latin word meaning heard or accepted. In English language, it is widely used as auditing or examination and review and was developed as a definite management tool in those countries where private property relations developed highly.

It can be defined as an art of communication to provide evaluation and conclusion by a third party into the utilization of a private property when an owner of the property is different from the user of the property.

As Mongolia undergoes rapid development of private property relations, there is an emerging challenge to carry financial and operational examinations into business establishments and the role and importance of internal and third or independent auditing is growing.

The terminology ‘internal and independent auditing’ is gaining wide acceptance in the private sector and as private companies get bigger and bigger their owners tend to become more reliant on the traditional management approach and entrust the management of their firms to professional people. Undergoing such examination on annual basis is a ‘must-do’ in every country in order to sell shares in capital markets. As for the public or government sector, auditing is still just on paper and developing auditing in its real context is almost like committing suicide for our politicians. Our politicians, who are responsible for transparency and openness of all government activities, speak out about theory very glamorously.

Unfortunately, it is the total opposite in reality. A primary and most important tool to maintain transparency in the government activities is a true independent auditing. Indeed, the Government has specialized agencies institutions in order to control or audit its activities. These are internal auditing and because they are appointed by political parties to which they belong, they serve only their parties not citizens who are owners of property. Such internal auditing is more appropriate only in a country with a strong opposite political force.

State-run business entities of Mongolia really need a true independent auditing. A foreign professional institution would be the right option to assess business activities of state-run firms in a true and complete way.

It should be noted here that MP Ya.Batsuuri last week submitted a definite proposal regarding the hiring a foreign auditing organization for this purpose.

“Election-winning party appoints only its own persons to preside over important state-run firms such as the Erdenet ore-processing factory, the railway system and the national airline MIAT. In this way, the parties continue compensating the costs spent to win elections and raising funds to finance next elections from the so-called state milk-cow. In this situation, it is not possible to place trust on internal auditing. Thus, it is essential to bring an in internationally accepted prestigious auditing firms immediately in order to charge punishment to guilty officials” Batsuuri said.

If the MP’s proposal gets approved and each of above-mentioned “milk-cows” undergo auditing by a foreign professional firm to find and punish those guilty officials, “it will cause the stopping of functioning of the Mongolian state in many areas”.
A war might break out in Mongolia, where guilty ones are not punished, instead, the Cabinet would be changed if the foreign auditing firm would reveal and publicize only a small portion of big deficiencies which are hidden by domestic auditing examination. For this reason, Mongolian politicians talk about internal auditing reports only when they share state property for own wallet or when they cannot deal over how to share their gains. They become silent if they reach a deal after making some noise in the newspapers.

In our government, there is no deal possible, only the price is negotiable. Besides, there is no office tradable because they can create as many new sub-offices as they wish to. Precisely for this reason, foreign auditing must be brought to examine state-run factories and companies, prior to inviting a foreign management team.

Only in this way can we determine where exactly do deficiencies occur and who makes mistakes, after which it will be possible to punish guilty persons based on evidence. It would be cost-efficient to appoint a new management and results would be seen immediately as the tasks are clear. If we are able to make business activities of these “milk-cows” more transparent, then the people’s real interest and requirement to penetrate into politics would disappear, thereby the number of public officials would automatically decrease, opening up the path to receive many public services through Internet.

Only in this manner will a business-like attitude revive, encouraging the young people try their strength in the business sector.

Only Sweden, which managed to develop independent auditing and make government activities transparent under pressure of its people (all-level auditors are appointed and financial and operational auditing is carried into all-level government institutions and its report is published), Norway and Finland (auditing is carried mostly by certified auditors), Denmark (Auditing is responsible for controlling and examining the Government and audit reports are introduced to all-level councils. Since 1997, it passed law on operation auditing), had practically managed to eliminate corruption. These countries have proved that corruption and government have proportional relationships.

The people and taxpayers of Mongolia support, and are demanding the authorities also support, a proposal to bring foreign auditing into state-run big companies, into the State Property Committee and into the Ulaanbaatar City Administration.

Translated By P.Shinebayar

Netted Inflation

2010-12-17T12:06:00.000+07:00

UB Post

December 17, 2010

The improvement of capacity to buy a foreign currency by a national currency means the national currency had strengthened. If we bought US$1 for MNT1470 as of January 12, 2010, and after eleven months exactly we buy it for MNT1211, it means the Mongolian tugrug has strengthened by 20 percent during this period.

However, inflation jumped by 11% as of first eleven months or the quantity of goods to buy for a certain amount of money has reduced and therefore money lost value by 11%. In a country where the currency is freely convertible, price changes to buy a foreign currency and to buy goods both should move in the same direction and more goods should be bought for a certain amount of money. For instance in Japan, the stronger the currency, then deflation is higher or prices goes down.

But how is it in Mongolia that prices are growing when the tugrug is getting stronger? The reason is that the national currency is not able to stop the price growth, despite the currency getting stronger and stronger. Then why the price is getting so high?

The inflation is enormous. Basically there are four types of inflation in the world, including demand-pull inflation, cost-push inflation, administered price inflation and industrial inflation. In Mongolia these four types are simultaneously taking place at different rates, netting whole inflation.

In Mongolia, economic volume per capita is low, one third of the population is poor and almost one third of consumer goods consists of only five kinds of foods, including meat, flour, rice, sugar and potato. In addition to these goods, the price of energy and petroleum has a remarkable impact on inflation and the population is very sensitive to price changes of these few types of goods. Fundamental inflation is the one that is computed excluding price changes of these goods.

In order not to allow the price of these few goods to grow, the Mongolian government takes every possible action. For instance, in order to prevent inflation it regulates the petroleum price by changing the import excise tax rate, regulates the meat price by stocking it in winter time for spring release when it is scarce, holds down the wheat price by purchasing wheat from growers by paying a subsidy and holds down the price of electricity by paying subsidy to cover the energy cost.

These costs are covered from the government budget by taxing a particular group and paying to other groups to reduce the price. The government regulates the price based on goods’ supply in an attempt to keep the price fluctuation stable. Basically, on a long-term basis the Government cannot keep the price stable anyhow.

Unfortunately, prices started to get higher because politicians began to distribute cash to everyone knowing its negative impact, in order to fulfill their election promises. According to the budget approved by the Parliament, the Government will distribute more MNT1 trillion in cash, which surely will increase the demand for consumer goods, meaning the government hardly keeps the price stable by one hand if it pulls the price up it by the other hand.

It is obvious that the supply cannot chase the increasing demand at the same speed and the reason for price growth is that they distribute it during the Naadam Holiday to make a PR as if they give it from own pocket. That is called demand-pull inflation.

This is the most common type of inflation. Another reason causing the price growth is the Government’s decision to raise the salary of public servants by 30% last month, which forced other private business sectors to follow suit and increase their salary. When salaries surpass productivity, it causes an increase in production and service costs leading to price growth.

Besides, health and social insurance tax burden is so high upon Mongolian companies and all these high taxes and levies, instead of supporting the supply through financial market as investment, boosts luxurious consumption in open or hidden ways thus increasing the demand. Cost-push inflation means the one which is caused by substantial increases in the cost of important goods or services where no suitable alternative is available.

The third type is administered price inflation. It is when a certain business can make more profit by raising the price and usually it occurs in an oligopoly-like business or in an industry whose market is completely occupied by just a few companies.

The press informs us that this is observed in the supply of oil products and meat. Basically this type of inflation occurs when there is an economic growth, but it is still observable in our country. The fourth type is the inflation of a particular industry.

Our country is still attempting to recover from the crisis in the construction industry. Though the price of many apartments has fallen because they remain unsold, the inflation forces the price to grow. There is no significant decrease of the price of apartments and in some cases it is getting higher. It should be noted here that people began to transfer their dollar savings into fixed capital, as the dollar exchange rate goes down.

This is the reason why the inflation continues to grow though the tugrug is getting stronger because of pressure of all types of inflation. If the tugrug did not get stronger, this growth could be almost two times higher. Anyway we have a low inflation thanks to an inflow of foreign currency.

Thus, with such politicians and government above us, Mongolia can maintain its speed of growth speed only if there is more foreign investment coming to Mongolia.

Translated by P.Shinebayar

The Armey’s Curve

2010-12-10T10:46:00.002+07:00

UB Post

December 10, 2010

The 2011 Budget of Mongolia has been approved, setting three records in its modern or capital development history. First record is that it became the biggest budget in the history of Mongolia (MNT4.0 trillion). The second one is that the 2011 budget is the most cumbersome budget or more than the half GDP.

Third record is that the deficit in this budget will be equivalent to 1/10 of the economy for the first time. Let us analyze each of them in more understandable way. The biggest budget never seen in the history of Mongolia on one hand shows the beginning of rapid economic development of the country. On the other hand, it will be a huge challenge for the governance to pass MNT4.0 billion through the Government. The corruption will get even bigger, leading to expansion of black economy.

The queue of applicants wishing to get a job in government system will get longer and longer and the bureaucracy of government officials will get stronger and stronger. The consumption of government will get more luxurious. Budget of any country is compared to its economy or GDP to measure government’s portion in the economy. This proportion cannot be zero or if there is no government, then chaos will spread and economic creative actions will not create any accumulation or there will be no wealth.

This proportion cannot be 100 percent too. We had experienced it in our recent history. There has been continuing debate about what can be a proper proportion rate in order to make the economy more fruitful and U.S Congressman Richard Keith “Dick” Armey first applied graphics of such proportion and it is called the Armey’s Curve. It is believed that the highest possible proportion of government is that it should not exceed the half of economy. If it does, then it will negatively impact economic growth.

In other words, the government is just like meal. If you undereat or overeat a meal, both diets are bad for your health. Our budget of next year “overeat” by 2 percent reaching 52 percent. Economists claim that 15-17 percent is the most appropriate and proper rate. Does anyone remember that two years ago IMF had rescued our country from real bankrupt by granting a US$290 million credit and that Mongolian Government had pledged to keep budget deficit below 5 percent in order to receive this credit?

Though the European Union demands its member states to keep the budget deficit at 3 percent, Greece and Ireland was about to get bankrupt because their deficit reached to 13 percent and 16 percent respectively. They had to ask credit from abroad to rescue their countries. Mongolia plans to spend MNT4.0 trillion next year, which is more than total budget income by some MNT700 billion, which means budget deficit is about to reach 10 percent of the economy in 2011.

Since the country is going to spend more than it earns, somehow this gap must be financed from a source. There are only two options for the country in budget deficit: Print paper money or take credit from abroad or home sources. The former will directly create inflation.

The latter is to get loan and next generations will pay this loan. It will depend on expenditure purposes of the budget if the second option will create inflation or not. If the budget is spent to create value, there will be more job places and bring other resources into circulation and there will be no risk of inflation.

The inflation will get high if the final consumption grows. Mongolia is now at the risk of inflation because one third of that big budget spending is the cash of political promise to be distributed in the form of social allowance. If such a big money is spent for energy and infrastructure development, it would create more job places, improve economic productivity and exert positive impact to inflation.

This year’s government investment for energy and infrastructure hardly approximates with half of cash handout or with last year’s amount. As World Bank Country Economist for Mongolia Roger van den Brink said, there is a high probability that inflation rate reach up to 25 percent after one year. In that case, it means one fourth of social care will just disappear. It is also said that the inflation is a theft committed by the government.

In Mongolia, budget spending must be low and stable. We should not forget that the budget growth is caused by the growth of price of some minerals at international market, which means we did not create this growth ourselves.

Translated by P.Shinebayar

“Travelers”

2010-12-03T11:32:00.000+07:00

UB Post

December 03, 2010

The most precious quality of an administration is its just deed and people’s confidence in its match of words said and actions done.

Unfortunately, such kind of confidence is an endangered thing in Mongolia. In a country like ours where the law pertains not to those who has power and money but only to ordinary citizens, who will believe in government?

Will you be surprised if a list of the biggest lawbreakers of Mongolian laws includes law-making parliament members, law-implementing Cabinet members and its agency heads, law-enforcing court and police officials of all generation? Just go to and look at Zaisan, Nukht and other valleys in the National Park of Bogd Khan Mountain. You will see disorderly and unplanned built luxurious houses, cottages and apartments, in which our lawmakers, law implementers and law enforcers mostly live.

We see how the press makes it public who and where lives taking their definite names and positions and we see how the number is increasing. The highest place to appeal lawmakers and the principal fundament for Mongolian legislation must be the Constitutional Court of Mongolia.

Unfortunately, our Constitutional Court itself settled in a new palace built right on the Zaisan Valley, a part of the Bogd Khan National Park, thereby calling the others for breaking the law. How should we understand that? Does it mean that we, the citizens, have got nothing left to address not to the Constitutional Court but to blue sky which is the only available option above the Constitutional Court, to ask how in all government administration levels the Article 12, Law of Mongolia on Specially Protected Area is insistently infringed by lawmakers, law implementers and law enforcers themselves. It is good that the number of shamans is on increase. Or are our authorities “the travelers”, who have permits to camp on the National Park stated in the above-mentioned law? If they are, then it appears that our “home” is ruled by some passers-by?!

Like Mongolians say “Don’t let someone, who will stay, load the cargo. Most of people who are in power in Mongolia, their puppets altogether machinate lands of Ulaanbaatar City for personal interest only in an open and hidden way, being a part of dirty land business directly and indirectly. These bad guys, who became masters in acquiring a land in the territory of the Bogd Khan National Park behind the name of license to run a tourism business, in order to build their luxurious houses and cottages jointly with their accomplices, have bought and subjugated leaders of political parties.

A pyramid of lobbies who buys the choice of citizens at high price and finance election expenses of particular politicians to make the decision making profitable for them only or of politicians who are pledged as debt security, has erected in Mongolia. Valleys in Bogd Khan National Park is the clear examples of how officials who was elected only serve its people, put their personal interests before the peoples’ interests and how such trend has “developed” into a day-to-day function standard of all recent administrations

The only method and chance to change such system is next elections. It is obvious that in next elections the people have no reason to believe in those “valley residents”, who took the law into their own hands and makes a mock of their people. We can do nothing with those who already settled in the Bogd Khan valleys. We just need to make this area a special zone of Ulaanbaatar City to charge relevant tax or fee and use this money to finance projects to turn ger districts into apartment blocks.

Even a goat understands that Ulaanbaatar City can be free from air pollution only after the ger districts turn into apartment blocks. Generally, it is already time to make political parties publicize their separate reports on origin and amount of election donations and their expenditure, on each of candidates. We can live a healthy and energetic life only if we will be reminding the politicians continuously and constantly that they are servants of the people. Today’s politicians are not able to do all these changes and reforms.

As they hostage each other, they can talk rhetorically, but are not able to do anything. Let them live in harmony. Otherwise, they might beat each other and tear down our home.

Anyway, next election is approaching. Very soon, a new young generation, who has sagacity, who loves their homeland, who are free from machinations and various dirty things and who are intelligent, will come to power as a new political force. But for today, Mongolia is ruled not by the governance of justice but by the law of governance.

Translated by P.Shinebayar

Samurai

2010-11-30T11:42:00.000+07:00

UB Post

November 30, 2010

President Elbegdorj has paid a visit to Japan. Japan and Mongolia has been expanding their ties in government level and Japan has been rendering development assistances to Mongolia for many years.

They repaired our power plant when it was almost about to stop, provided circulating capital when we had no money to extract coal, presented fifty buses when city’s public transport was on the verge of stopping that winter, and built dozen of secondary schools nationwide. Soon they are going to build an airport on long-term credit.

All these are bringing a new consumption culture to Mongolia. However, Japanese business is not in hurry to enter Mongolia. Main reason is that we, Mongolians, are not predictable or it is still hard to trust us. Business representatives I met say that there is still high risk in business trust in Mongolia. Exactly the same talk developed a decade ago. There is a huge gap between Mongolian and Japanese person regarding the understanding of social relationships.

The fundamental ideology of Japanese people is Samurai rules. The Japanese worship to the rules, which include many characters such as mastering own deed perfectly, courage, patience, modesty, finish what started or what promised and bear responsibility for all words said, and teach them to their children. The quality of goods and products created by the Japanese is a clear demonstration of this. Though not all 130 million Japanese obey to these rules, the dominant culture in Japan is the culture of Samurai.

Everytime I go to Japan, I feel this culture more and more and I get more eager to find and restore own rules and culture we had once. Even Japanese say that they are connected with Mongolians and that there are many similar qualities between Mongolian warriors and Japanese samurai. In 1192, Yoritomo Minamoto left Kyoto to build an administration of his own, centered on his military headquarters in Kamakura and soon he managed to unite other cities and clans under his rule. He established the supremacy of the warrior samurai caste and the first bakufu (shogunate) at Kamakura, which lasted until the mid-19th century.

He established a harsh military (samurai) regime under which he stopped luxuriated use of lords (then-lords usually used to wear twelve-layered kimono until the Yoritomo rules) criticizing the fact that ordinary people got poor due to high tax rate. The new regime ruled to use the foods and goods enough only for staying alive, not to collect properties for private use and to commit to physical development.

His younger brother Yositsune Minomoto was the most popular and courageous samurai of his era and two brothers clashed with each other with respect to their ideology of how to rule the state. The younger brother disappeared without a trace and even there is a gossip that he joined with Mongolians. Khubilai Khaan of Mongolia attacked Japan twice in 1274 and 1281, but major typhoons dispersed Mongolian fleets. The Japanese named this typhoon “kamikaze” /divine wind/ and later the name was used to glorify Japanese suicide pilots during World War II.

Japan’s samurai culture has become ideological principle in their everyday life, making them responsible, disciplined and competitive. Where is a historical fundament of courage, patience and intelligence of our Mongolians?

If we manage to find the answer to this question, then it might be a big step towards bringing closer the difference between Mongolian and Japanese people regarding the understanding of social relationships. Only when this difference gets lesser, the business cooperation between the two nations would develop in real sense.

Translated by P.Shinebayar

Democratized Corruption

2010-11-23T15:32:00.001+07:00

UB Post

November 23, 2010

The capital accumulation, an economic basis for capitalist system, is taking place in Mongolia. Only when a huge capital is centralized in hands of particular companies, it is possible to make remarkable investment to develop projects.

The government duty is to build a favorable fair-competition environment for private companies and on the other hand to make infrastructure investment through taxes and other levies.

Unfortunately, in today’s Mongolia, the government serves as a tool to make some group of people get richer and richer instead of fulfilling the above duties, further deviating the business principles and its normal operation instead of building favorable conditions for businesses, which led to disappearance of fair and free competition. Finally, ordinary businessmen “buy” their favorable business conditions by corruption. Though the corruption has been spreading in Mongolia and in our northern neighbor, it is different in terms of their concept.

In Russia, the corruption is feudalizing. There, a few number oligarchs has built close links with authorities and became an extraordinary social class, who machinates with authorities to sell Russia’s rich natural resources and who outbids to buy the world’s most expensive real estates. Meanwhile, ordinary citizens of Russia remain poor. However, because Russians can see and sort out who creates and spreads corruption, they have possibilities to clear out and get rid of them under a certain historical conditions.

In case of Mongolia, the corruption is democratizing. The corruption has penetrated deep into every branch of our social life, becoming a basic survival condition for ordinary citizens. All businesses, no matter big or small, are being fed by corruption.

In order to win a tender bid, which is machinated by decision makers, citizens and individuals race with each other to give bribe in each decision making levels. Ordinary citizens fight each other to have even little connection to any part of mineral resources development. A main reason why the corruption is democratizing in Mongolia faster than its society is that every person began to see the corruption as an only opportunity or only approach available to get or acquire what he wants. As the corruption serves as basic conditions for the existence of society in Mongolia, chances to clear out and get rid of corruption system have been disappearing.

If it continues at current speed, we will soon be among the countries, where the corruption is more democratized than society, where authorities in power get richer and richer while ordinary citizens get poorer and poorer. Economic branches are politically and economically controlled by leaders of machinated political parties in power, under such fancy names as coalition or consensus. Meantime, most of population is gradually getting poorer, increasing the number of people isolated from the society.

So far, one generation that only the minority benefit from quality or international standard education is behind us and the power of government is now passing to inherits of those who ruled the country for the past two decades. In a normally developing country, the income of population grows at relatively same speeds and order to ensure it there must be a real political opposition party in the government. In Mongolia, only few people rule and control the whole country and do whatever they want, under the name of coalition or consensus.

On the name of the state, they threat, rob and shoot to death its citizens. It is getting more likely that soon there will be no one left to say against the words ordered by them. Those who are believed to be smart, intelligent, just and wealthy, go abroad in exodus for various reasons and started to purchase real estates in the country, to which they go. In order to stop this sorrowful trend, first we need a strong political opposition party.

Secondly, we need the involvement of well-informed and intellectual citizens capable to affect decision making. In other words, we lack a strong civil society. These two factors are major guarantees for democratizing the society faster than the corruption.

Translated by P.Shinebayar

Healthy Building

2010-11-12T14:48:00.000+07:00

Ub Post

November 12, 2010

It has been many years since special inspection is carried to determine if building materials used in buildings are friendly to health of people or not and decisive actions are taken if hazardous materials were used, including demolition and building a new one.

Law provisions are in place to forbid the use of certain type of materials for building and any infringement of them is fined at the rate that would be never forgotten. Unfortunately this is the practice happening not in Mongolia but beyond our country. In Mongolia, the issue concerning the health impact of building is discussed now and again.

The authorities pass one or two regulations, but these regulations last effective for “three days” only like other regulations do.

There should be a mechanism to keep this problem under regular control to ensure that health and interest of citizens are protected continuously. It can be considered for the following example.

Many countries require that all materials should be filled with casting in order to apply polystyrol. In some countries, polystyrol is forbidden for use in building.

Few years ago in Russia, a fire in a night club left many young people died. Main reason was the roofing of this night club was made of polystyrol. Though the roofing was covered with inflammable material, the polystyrol that easily ignites to fire has melted and leaked through roofing.

This type of material is extremely hazardous and burns generating black thick smoke, which leads to instant death. Even in its normal condition, this material generates poisonous gas, affecting the kidney and even a fresh embryo in abdomen. Currently, all building insulations made of this material have been removed from buildings in Moscow.

On the contrary, this material is widely used for insulation in new buildings in Ulaanbaatar City and no one talks about if it meets health requirements. If there would be a fire, it is almost not possible to extinguish and it melts instantly and generates asphyxiants. The application of asbestos for construction caused the death of many people after suffering from lung and laws forbidding the use of all materials containing this material have been passed in many countries.

But we still use this and in recent years boards containing asbestos is beiong sold in local markets. In addition, slate or roofing material is made of asbestos and is being imported from Russia and China.

Generally as building requirements got stronger in our two neighbors, it tends that ready-to-use materials pushed out of markets of China and Russia are being brought to Mongolia at cheap price. Though the flooring of new buildings is made of parquet wood, the polish used to protect the parquet wood is in the list of hazardous materials.

The composition of polish includes toloul and ksylol and these substances causes skin irritation and affects central nervous system of humanbeing. It also needs to check what type of polish and paint is used for internal covering of building wall.

Moreover, all building materials made of ashes from power plant contains radioactive substances and may cause cancer if penetrates into lung. Thus, certain criterion is put against the production of building plates using ashes from power plant.

Originally, all building materials must have three licenses including of building, of fire and of hygiene. Both purchaser and contractor must be firstly responsible for making sure that all materials meet minimum health requirements and standards of the country. In Mongolia, every building company is responsible for whole process of ordering, selling and controlling the building, on its own. The government or professional inspection body is responsible for protecting the interest of consumers, but they don’t have technical capability to provide regular control over all building projects.

As result, buyers or owners of the building have not choice but dealing with the building company in the process of utilization if there is any problem with the quality as there is no institution solely responsible for any defects and quality-related problems. After all, buyers will have no individual or no organization to deal with their problem because the building company would also disappear as if never existed.

Some apartment owners cannot even get a certificate to verify that they are real owners indeed. Originally, purchaser and executor of the building must be separate organizations, which should enable complete and efficient control over the quality of building during whole process of construction work and which will force the purchaser to take care of the quality seriously.

According to a survey, more than 80 percent of all building materials use home is imported only from China, which demonstrates that it is time to focus on hygienic safety of buildings. In Japan, each room of a building is thoroughly inspected against air composition after the completion of building work and dwelling is only allowed after ensuring that there is no hazard or threat to human health.

Japanese people must dwell only in those buildings certified as “healthy building”. In Mongolia, it seems like is does not make any difference for the government if Mongolian man lives in healthy building or not. What if we begin to issue a certificate “healthy building” in Ulaanbaatar City?

Translated by P.Shinebayar

Fever-Affected Economy

2010-11-05T11:24:00.001+07:00

UB Post

November , 2010

Because banks’ loan interest rates had decreased almost two percents a year by year while savings interest rates keep standing at same rate to loan’s rate for the past decade, the difference between these rates gets closer leading to increasing imbalance of monetary circulation in the economy and the economy fever-affected.

In a normal and healthy economy, changes to these two rates should be made simultaneously and proportionally. The banking sector standing on the floor of a firm savings rate, while being pushed down by the roof of a falling loan interest rate and which living space is getting tighter and tighter, suffers the most fever heat and shaking. Though official number says that there are 65 thousand registered companies in Mongolia, only half of them are active and 80% of this half employs the staff up to twenty persons, according to the National Chamber of Commerce and Industry.

According to a sample survey conducted by the National University of Mongolia, only 40% of active business entities got loan from banks. They don’t want to take loans as interest rate offered by banks is too high. It is indeed not easy to repay the loan with monthly interest rate of 2% and with maturity of one year only. Because the money is very expensive in Mongolia, all big companies capable to bear risk now take loans from abroad. Because of high interest rate business gets into money shortage and grey economy is growing, which are demonstrated by the fact that non-banking financial service has expanded and their monthly loan interest rates have even reached 5-8 percents in recent times. There is no chance for small and medium enterprises, a major composition in Mongolia’s economy, to expand and grow. A number economic reasons support the interest rate to stand high.

The most important three factors are: first fundamental reason is the pressure by ongoing savings interest rate; the second is inflation; and the third is the Bank of Mongolia itself. A main reason for high savings interest rate is that depositors place their money in those commercial banks that offer higher rates.

In other words, the market supply cost is high. These commercial banks, who collected main funds thank to high savings rate, issue loans with high interest to the entities in need of capital, by adding operation costs, risk costs and profit. The other party in excess cash or the depositors place their money for a high but risky profit. As there is almost no capital market in Mongolia, savings interest rate is not expected to go down for a long period.

A key reason why the capital market cannot develop in Mongolia is the lack of credit in Mongolian companies that issued shares and the lack of a mechanism to guarantee the trustworthiness of all information the companies provide. This is beyond the business scope of Bank of Mongolia. Savings’ interest rate must be higher than the inflation rate for the reason that purchasing power can be kept stable provided only that the money saved in bank would be growing higher than real inflation rate at least.

Another key reason for savings’ interest rate remains high is going-up inflation rate. Bank of Mongolia reported that average increase of inflation rate was 6.5% between 2000 and 2004 and 11.5% in following five years. A major factor which makes the inflation rate go high is the Government which is getting more cumbersome.

They recover cumbersome budget expenditures by means of hiking tax on private sector in various ways or forcing mining companies to pay down-payment. Our authorities have converted state budget, which is supposed to be used to manage macro economic policy of the country, into their means of implementing their pre-elections promises and raising their political image. The budget expenditure has been increasing at astronomic speed, while the accountability related to budget spending has been vanishing at higher speed.

This year budget expense got higher than loans to be issued to businesses and the Government is becoming bigger than all businesses combined. The events like elites of two ruling parties amended the Constitution in the way only beneficial to them and parliamentarians obliged to pass law became members of executive governance or the Cabinet, have created favorable conditions for making the Government more cumbersome and for constant increase of inflation rate. Because legislative, executive and all controlling systems are mixed together, the subject to bear responsibility has lost somewhere and few irresponsible bastards have been doing what they want. As result, the price is now fixed not through market ratio of demand and supply but by political decision, leading to failure to control the inflation anyhow. Inflation is the robbery that authorities do from its citizens.

Third reason responsible for high savings interest rate is opportunistic or timeserving policy of Bank of Mongolia. In a country like Mongolia, which has two banking systems or where the central bank is not engaged in business but controls monetary policy, while commercial banks issue loans to businesses, the management of the central bank must pursue an independent policy free from the Government. However, the management of Bank of Mongolia has become representation of an attempt to balance political power of two ruling parties and therefore cannot take independent and proper actions as soon as it gets alert from market.

Authorities of the Bank of Mongolia are the ones who surely know about who is the biggest borrower of all commercial banks and about how the loan repayment is being made. They are the ones who must inspect operation of commercial banks at any time to reveal deficiencies and violations and who must take necessary steps promptly. Because commercial banks are owned by top officials of political parties, who became principal decision maker of the Parliament and the Cabinet, the Bank of Mongolia do not dear to speak out though they are the only one who is well aware of about why the banking sector which is the most affected by politics, still cannot change interest rates. They also have been silent for many years though they first felt the consequences of a cheap political play to distribute cash. But it is good that they started to speak out past few months.
The policy rate of Bank of Mongolia yet cannot affect savings interest rate of a country like us, whose economy is fever-affected. Monetary policy of central bank only influence minor any impact to money supply into real economy. The above three challenges must be addressed in order to reduce loan interest rate and each of three reasons urge Bank of Mongolia and competent government agencies function intelligently and fairly. Above all they remind ruling parties to be responsible.

Do you remember A.Einstein said once that “We can’t solve problems by using the same kind of thinking we used when we created them”?

Translated by P.Shinebayar

Right to Sleep

2010-10-29T16:51:00.001+08:00

UB Post

October 29, 2010

This is one of many things that were lost for residents of Ulaanbaatar City. Conspired government officials have stolen from us not only our lands of kindergarten, playground and other properties of public ownership, pure air and sidewalks but also our right to sleep.

We all no longer talk about how the city is noisy in day times and almost got used to it.

Noises of construction and repair works in every street and every building, of car signals and of hammers smashing down the concrete walls has been increasing day by day, raising the question about how many people cannot sleep because of such noises. Construction of a building almost inches close to your building will continue all night long. Thousands of residents who went to beds after long working day, particularly elders and infants cannot sleep well till the morning. Many of them just call to police because there is nothing they can do. The police line 102 will answer we cannot do anything if there is no direct threat to human safety, please call to 310005. The person on duty, who is on this number, would say: “What can I do on my own, but I will forward to management”. Such scene repeats every night and the days are going by. Unfortunately, there is no mechanism to stop activities responsible for all noises in Ulaanbaatar City, which don’t allow residents sleep well. Don’t hope that the group of people called ‘city parliamentarians’ would care if you sleep or not. They are too busy with their “job” to get an estate or catch up a profitable business while in office. In civilized and democratic countries, there is a special law or regulations regulating the noise in the city.

Noise is classified into the classification of pollution like air and some special requirements are put against it. In most of megacities of the world, car horn is prohibited at night and the trespasser is subject to penalty. It is also restricted to use loud speaker at railway station. Any construction work between 06.00pm and 07.00am hours is totally forbidden. Any and all men who infringes it, is levied high fines so that it never repeats again. The United States Law of Noise Pollution says that any infringement of standard herein is fined US$25,000 per day or is imprisoned up to one year. In civilized countries, early it is legalized to fine for example if loudspeaker’s volume is high audible to neighboring house or street, or audible beyond hundreds of steps.

But today noise standards are expressed in decibel (dB). For instance, human whisper generates 20 dB, normal dialogue between two people in 1 or 2 meters - 60dB, sound of truck - 90dB, gas hammer – 100dB, rock music - 110, take-off by B747 aircraft – 120dB respectively. If it is higher than 130 dB, the ear will pain, further drumhead will be damaged seriously. A WHO research indicated that 3.0% of people dying because of heart diseases due to noise-related stress. A man feels uncomfortable in the sound higher than 45 dB and cannot sleep in the noise higher than 40dB.

Kid’s learning capacity is completely lost in noises above 55 dB, and they even get into stress. Metropolitan residents must take care of such impact of noise and demand city authorities and central government take efficient actions. They are obliged to serve the people. Instead of serving the people, they indirectly support seizure of all of citizens’ rights and properties and are even involved in. Look at these numerous buildings built and being built between two buildings in Ulaanbaatar City.

They build buildings blocking windows of families and sidewalks. Residents first will react with strong protest. They go to all competent organizations, including the government, courts, khoroos and apartment owners associations, and make sensations, in the hope that they will serve for the people’s sake. All organizations will pledge to take necessary actions. Very soon, all parties will get silent because all got what they wanted – the money. Since the money is paid to make residents silent, the owner of building will do whatever he or she wants, but the residents, who sold their comfort for small money, will stay awake whole night saying no complaints no matter how the noise is.

Exactly like this way, your right to sleep is sold and conspired at the end. City authorities, government officials and building owners cannot choke back laughter looking at that residents cannot get asleep at all. Because, they all live comfortably in big houses in mountainsides which they acquired by means of conspiracy by lying the people that mountainsides are part of national park, far from big city’s noise and polluted air. My metropolitans, have a good sleep … if you can!

Translated by P.Shinebayar

Counterfiet Medications

2010-10-22T14:26:00.002+08:00

UB Post

October 22, 2010

“Mongolians used to be poisoned with foods, but now we are poisoned with drugs” said the Health Minister S.Lambaa (Unuudur Newspaper. 2010.09.27. Page C3)

You are right, Mr. Minister. We, the citizens, already know that we use counterfeit drugs poisonous for our health. Those who lost their loved ones because of using poisonous counterfeit drugs, knows even better.

Citizens of Mongolia want to know only about why your drugstores are not stopping to sell counterfeit drugs and what you, Mr. Minister, are doing to stop this kind of crime as the highest competent one in charge of population health. You said “Drug control is carried by the State Professional Inspection Agency, but originally the Health Ministry must take control of drugs”. Can Mongolian Government and state-run agencies control themselves? State controlling agencies are all already in entrenchment.

In principal, we, the citizens, don’t care about where is your Government’s controlling and inspection body. The only thing we want and demand is You, as a cabinet member, put a control, no matter professional or devil’s, as soon as possible and stop exploiting your people by counterfeit drugs. If you cannot find out who is the importer of counterfeit drugs, punish such importers and stop this crime immediately, then it would not be useful even if you take control of drugs and set up that new agency as you said.

New seedlings can be planted only after weeds are pulled up by the roots. Even innocent young kids die on hospital beds because hospitals inject counterfeit injections. Wondering if You are in power to stop your subordinate who force patients to buy counterfeit drugs or not?

As Minister for Health, can you publicly announce how many companies are licensed to import medications in Mongolia, when did they get such licenses, on what grounds the licenses are suspended and how many of these licensed companies are linked to current and previous ministers, deputies and to those authorized to issue licenses? The citizens doubt that You can announce all these publicly.

Generally, such kind of information is always open for public in any democratic state. Besides, You are the Minister from the Democratic. If you can, publicize it and the citizens will judge your right and wrong very soon. Carry sudden inspection in drugstores to find out how much of all drugs are counterfeit products and publicly announce by each drugstore. Then expose how these counterfeit drugs came here. There won’t be any trouble to find out it because there is no doubt that the money from counterfeit business always goes to its counterfeit dealers. After that, find out who gave licenses. If it is difficult to know where they came from, talk with customs.

Ask why individuals bring foreign drugs in their hand luggage. Then reveal if they pay taxes or not. Also ask why drugstores do not use price tags on drugs they sell. Ask why drug price is fixed by a drug selling lady, who is able to easily define your purchasing power instantly due to your appearance and look, better than Statistics Office of Mongolia. Deal with all foreign and domestic hospitals and all drugstores, who make superb income from selling the drugs in retail like tobacco.

You, Mr. Minister, and your “colleagues” must have noticed the following while undergoing expensive medical treatment abroad. In a civilized country, it is recommended to refuse from the drug if its package is opened or damaged and, in case of using such drug, the people are warned that the manufacturer will not be responsible for the quality of its drug. Do the authorities care that everything is vice versa in Mоngolia?

If not, please tell us who must care of it. This is not all about medications. The same situation exists for all products, tools, apparatus related to health and everything associated with hospital is counterfeit. Are all these food supplements and herbals are real?

The most of natural supplements and herbals come from Russia. All television channels in this country are discussing that Russia leads in the world by its imports of such counterfeit products. Do we only bring original ones? The only official, who has the competence and authority to expose, publicize and deal with all these, is You.

It is your basic duty to do so. Your previous ministers have not done this and they have not been punished for not doing this. Because political parties in power never charge each other with responsibility. It is always like that “one feudal is replaced by another feudal”. Though you, the politicians, were excited to pass a national program so-called “Healthy Mongolian”, finally it appears that there is no healthy Mongolian. Don’t You and your ministry staff really know that there are a number of successful practices about how to stop counterfeit drugs and medical equipment? Ask the citizens if you cannot find out such best practices.

Minister Lambaa, you are the first person to become a health minister despite the fact you’re you are not a doctor. Minister is not required to be a doctor, it is enough to be a good manager.

Therefore, deal with the half of things written here if you have a desire and willingness to be a good manager. At least start it. Just set a standard.

Maybe the counterfeit drug businessmen altogether would unite their wealth and influence to change you somehow in order to defend their dirty business. But if you manage to do half of this at least, You will easily win next elections again.

Translated by P.Shinebayar

The Lost in Storm

2010-10-15T17:33:00.000+08:00

UB Post

October 15, 2010

Our government is always with events and acts just only to ‘extinguish the fire’. It is obvious that the man, who always goes downwind and is lost in storm, is not able to think and plan something. Probably the government had suddenly noticed last week that almost 40% or 1.1 million people of total population is able-bodied, 140 thousand of them had gone abroad and 200 thousand is unemployed, only 1/5 of all able-bodied population are active job seekers and the rest just rely on their monthly incomes. As their reaction, they said they are going to do two things: first is to pass a law on export of own citizens abroad and import of foreign workers to Mongolia and the second is to create a national integrated information network of labor market registration and information.

The government lost in storm seems like just following its nose. The problem of labor force in Mongolia is that job seekers do not have satisfactory skills to meet requirements of vacancies and that their professional diplomas and certificates do not guarantee its concepts.

By creating a giant registration and information system, you cannot just make the labor force skilled and qualified. Our government acts in a way of “racketeering” of foreign investors and is overdosing that some 3,300 specialists are to be prepared in three years with the investment of Oyu Tolgoi as if they have managed it. The health minister and his deputy made a mountain out of a molehill by laying a foundation stone for the building extension of Maternity Hospital No.1. Indeed the money for the extension was “donated” by Boroo Gold Company.

Foreign companies have not entered Mongolia to build a school or a hospital. They are forced to finance all these. It is obvious that they will deduct such costs from the tax they will pay later. It is legitimacy that foreign companies must run operations and pay taxes as the others do and the Government must collect the tax to make necessary investments according to a certain plan.

Don’t you think it is a good idea to order each foreign investor entering Mongolia to build a particular facility, without the need of ministries in charge or parliamentarians? If the government could act in far-sighted and planned way, then the development benefits would be sufficient for all citizens and would provide equal opportunity for education and employment. An industrialized country means the one, whose citizens have job and are paid enough to have sufficient livelihood. There are two basic reasons why the minimum wage rate is so low in Mongolia. Firstly, social and health premiums and income taxes imposed on wage are high. Secondly, the labor productivity is low.

Labor productivity of Mongolians is low in Mongolia while it is high abroad, which means there is no fair competition in any business field. Let us have a look at labor force problem in case of mining industry. The mining industry creates fewer jobs compared to the investment made to the industry. However, we must use existing opportunities in a proper and beneficial way since this industry is only sector that makes big money for Mongolia. Though Chile and Peru both allowed huge investment to their mining industries like we are doing now, the results were relatively different. The poverty rate has significantly reduced in Chile, but it did not change in Peru. If 44% of Chilean population was below the poverty line (US$1 income per day, or less) in 1987, after two decades it has reduced to 18%.

Today, the average salary rate is US$800 in Chile. Chile has taken a number of significant actions to diversify its economy and improve the population livelihood; the most attractive one is how it solved its labor force. Three keystones of Chilean reform strategy were to make its human resource high quality, carry out business reform capable to create value and to develop basic science on strategy.

Out of several steps towards building the quality human resource, the most noticeable step was rational and efficient solution of issues concerning jobs and employment. First of all, they had a thorough investigation into functions and requirements of jobs in each mining company and summarized results according to each sector. Afterwards, they had defined which training framework, practice and skills are in demand and had prepared teachers and instructors at first.

They involved all concerned parties to this mission to establish standards of skills for every worker and work out training schedule meeting this standard. Workers are trained and evaluated under this standard and training schedule, to get their professional certificates. Because the latest standards of training, examinations and evaluation from the beginning were prepared not under own standard but under the standard approved by the Organization for Economic Cooperation and Development (OECD), the worker is capable to work in any mine in any country once he got that professional certificate.

Generally, it is quite better and more effective to directly copy best standards in the world for local application and use knowledge and experience of specialists efficiently, than preparing or correcting them on your own. It has been many years since Chile has used a translated version of French civil and criminal laws, without making any corrections or alterations. In Chile, the Cabinet selects ministers from technocrats, not according to political membership but to their skills and knowledge.

There was a time when thirteen ministers out of 15-cabinet member of Mongolia had been doctors of sciences. Anyway, the time has come to adopt a strategic policy intended to replace nonrenewable mining resources with renewable knowledge resource and implement it in all fields step by step.

Translated by P.Shinebayar

Inclusive Growth

2010-10-08T12:26:00.000+08:00

UB Post

October 8,2010

In recent times, economists are saying that the measurement of a country’s economic growth and success by Gross Domestic Production is no longer satisfactory and the Japanese first suggested the application of a new measure called “Inclusive growth” instead.

Last week, Chinese leader announced at the 5th APEC Human Resources Development Ministerial Meeting in Beijing that China will accept the inclusive growth as its major development indicator.

The inclusive growth means the delivery of economic growth fruits to all people from every social classes and further measuring the economic growth in relation to social progress.

There has been no occasional policy in China.

The Chinese leader’s announcement is the sign of China’s reform in its basic economic and social policies. Up to now, this nation has pursued Deng Xiaoping’s ideology “Let some people and some regions get rich first.” to make its economy open. Behind the country’s GDP which grew in two digits over the past three decades, there has been significant distinction in the outlook of regions and livelihood of population. Compared top ten percent of China’s population income against the bottom ten percent, the gap rate was 7.3 times in 1988 and in 2007 it reached 23 times, a Beijing University Professor Li Xi says.

There is a high probability that this gap rate is quite higher than in China. Our professors, scholars, researchers and statisticians may have own calculation and have their say. China has created infrastructure nationwide, providing all cities with modern system of road, lighting water and electricity and many big cities like Beijing, Shanghai and Tianjin have become beautiful modern cities not worse than of any country of the world.

How it came that our population income gap is higher than in China when there has been almost no noticeable work done in terms of infrastructure of public utility in Mongolia? In other words, in China its wealthy people got rich by doing grandiose works and productions and conquering the world with their products, but why Mongolian rich people are getting wealthy when they created and produced almost nothing?

Ulaanbaatar City dives in smokes and dust, chokes over road traffic and its population on the verge of fleeing.

The main problem of our development is that only few people misuses the government power, seizes public properties and lands and that most of them get rich by depleting the mineral-rich land or reselling licenses at higher price, not producing any added value in the society.

Because only few people benefit from natural resources though the natural resource is the property of all people and economic growth do not affect all social classes, Mongolian government needs to pay special attention towards this change and trend emerging in global economic strategic policy. In order to development growth involves everything, every one must benefit from development fruits.

The government must make sure and guarantee that everyone has equal opportunity and rights to employment and education. If the gap between rich and poor would expand at current speed in Mongolia, then those people, who could not benefit from development, might seek for justice in their own ways and approaches, which could lead to social disorder.

It is time for the government to foresee all this and pay attention to granting the opportunity of getting involved in and benefiting from economic growth to every single person. Mongolia needs inclusive growth too.

Translated by P.Shinebayar

Crying Over Spilt Milk

2010-10-01T13:30:00.002+08:00

UB Post

October 1st, 2010

Recently the head of the state professional inspection agency has announced on media that it has suddenly “learnt” that the pollution of Orkhon River is critical and that has “revealed” those guilty. Several companies like “Altan Dornod Mongolia”, “Mongol Gazar”, who mined gold in basins of Ul, Shiirt, Ulaan-chuluut and Ulziit rivers that flows into Orkhon River, has kicked away the ladder and had not taken any actions to rehabilitate the environment or at least repair garbage dam to stop water pollution. Thus, business operation licenses held by these companies will be annulled, said the Agency.

Further, the rehabilitation on the above mine sites will be carried by specialized companies at the government costs, after which the government costs will be compensated by the above guilty companies. The Government is about to approve such costs this week. It is like crying over spilt milk. This is just an example of how the Government fails to do its work. The Government of Mongolia has ceased listening to citizens and now serves not for people but for themselves. Either the officials in central and local governments have no knowledge and skills or they just pretend that they have them.

They inspect, suspend, extort and give to own people the activities associated with the business operation licenses only when they need or at any time they want, which disturbs the stability of Mongolian State. Firstly, Mongolian government does not listen to it citizens and serve only for those with money and wealth, regardless of nationality.

Mongolian people had been demanding the authorities take decisive actions by reminding and warning from very beginning that hundreds of rivers and lakes have polluted and perished, thousand hectares of forest and pastures have been destroyed and hundreds of families has left their native lands that lived for thousands of years in the process of exploitation of gold and other minerals. They shouted until they lost voices, but it was fruitless. The above case that has just been exposed by the professional inspection agency, had been reminded and warned by the people for fifteen years.

The Ongi River Movement was recognized and appreciated not by Mongolian government but by a prestigious international organization in overseas, which awarded the movement with the largest accolade in the world for grassroots environmentalists. Though inhabitants of Tsenkher Soum, Arkhangai Province had fought from the very beginning, the unaccountable government officials, who are obliged to obey to law ‘gave up’ to corruption and let inhabitants left only with ashy grass instead of beautiful river. It is sad that many places in our homeland are becoming just like moon surface. The Government decided that we, taxpayers, must pay for the rehabilitation costs of places, from which foreign and domestic barbarians left these places destroyed to dig gold.

Secondly, before issuing a mineral exploitation license, it should make sure that a fund for environmental rehabilitation is created from very beginning of exploitation.

Such funds are accumulated over many years and spent according to a definite plan. In case if the company is bankrupt or transfers its license to a third party, the purchased company will continue adding money to the fund and when the exploitation completes, the fund’s money is spent for rehabilitation. Industrialized countries require minimum difference when photos before and after exploitation are compared.

In our country, though the public institutions and agencies pass various regulations and normatives related to rehabilitation, they never implement them at any administrative level and now even say that “it is because of a deficiency in legal system” as if they don’t know about that. Only those who took minerals, must rehabilitate the nature they destroyed. Thirdly, when the government activities start to serve for a certain group of people, state controls and inspections are used only for trespassing others’ properties and for removing someone from a post, further deteriorating the principle that the state policy and its implementation must be stable and continued.

Once, the professional inspection agency dug up serious violations in activities of that times’ City administration and the Cabinet was about to discuss about defraud by city officials. This story ended up with the retirement of the Cabinet and the promotion of the city mayor to Prime Minister. Ongoing issue related to the chief of Anti-Corruption Authority might be same as this story.

All issues in Mongolia will depend on how the politicians would deal on with each other. Like this way, the government has become a tool to support political parties and misappropriate mineral resources of Mongolia in a way profitable only for few people. The government actions will never succeed without improving the accountability in government and correcting the above-mentioned three deficiencies and further affecting the country’s security. It is time for present and future politicians to re-think over these problems seriously.

Translated by Shinee

Take on Your Gas Mask

2010-09-24T11:00:00.001+08:00

UB Post

Published September 24, 2010

Dear citizen, it is time to put on gas masks. It is highly recommended that all citizens in the capital city buy and wear gas masks for this winter, regardless of your age, sex, social standing, religion, property, position or other status. This year every metropolitan resident is about to inhale 183 kilograms of toxins, through the air. Central and urban authorities, who always lie, had better buy their gas masks from world-brand shops located on the side of the central square, in order to be different from others. But 700,000 metropolitan residents, who live in ger districts (epicenter of pollution), are recommended to use two gas masks for a simple reason that they burn not only coal but also vehicle tires to keep warm all night.

It has been many years since the authorities told fairy tales about fighting the air pollution and about the flourishing city, discussed big but empty things, as if the winter won’t come again. The only thing they can do is just to invent a story about a smokeless fuel and about a “magic” stove, and using their fairy tale they force the poor in ger districts, who cannot even afford coal, to buy their “magic” stove at high prices and make millions of tugrugs through tenders, the game played by their rule to suck taxpayers’ money. The situation has been worsening year by year and our capital city believed to be the coldest in the world, has become the most-polluted one in the world.

As a citizen of Ulaanbaatar City, I believe that our authorities are doing all these things purposefully because they all know well that the only way to eliminate the air pollution in the city is to turn ger districts into apartment buildings immediately.

They know even better that first they must register and certify all lands of ger district families as real estate. They are also aware that it is feasible to give all existing courtyards for private ownership to current occupiers provided that residents would build apartment blocks on their own courtyards, in turn authorities should use city bonds to finance the construction projects along with the required infrastructure system.

Simply, they just don’t want to do that. They say it is because of legislation. They are afraid because there will be no money or property left for them to embezzle after all lands in the city would have owners, if this challenge is accomplished. Two ministries and the city administration jointly established a state-owned company with a sonorous name sounding like “Dwelling Apartment Corporation”. Just wondering what this sonorous organization exactly does to provide ger district families with modern apartments? It is sure this company makes profits as it is a business entity making a business. I think they don’t need to tell double lies saying that the country has transmitted to a market economy, if the state itself runs a business. Residents of ger districts have been showing some initiatives with real proposals, like six steps to exchange their courtyards for apartments in order to improve their living conditions, with access to water and sewage systems.

Misusing the problems of ger district residents, a previous city mayor was elected to parliament thanks to his campaign promises to give three-room apartments in exchange for their courtyards. What would be their answer when electors ask him about how many courtyards are replaced by apartment buildings.

A bunch of problems such as air pollution and others will be dealt with, if we manage to organize, so that ger district residents make their own cooperatives or groups to build apartment blocks and own them. Unfortunately, the current city mayor will not pass a decision to make it possible because he was not elected by us, the Ulaanbaatar residents. He does not respond to city residents because he is appointed by the chairman of his political party.

Generally, he is obliged to render political support and make donations to his political party. He does not care about roads and lighting in the city. He cares only about the MNT500 charged at the Bayanzurkh checkpoint from vehicles entering the city territory, not about traffic jams even if it would reach to Khonkhor, a small village about 20 kilometers from the city center. Do not waste time to expect the city authorities report on where all these big cash incomes go. He also does not care about the quality of roads repaired or built, as well as about how many days it must be finished. The only thing he cares about is to look like did it.

Seems like they get satisfaction to see how the people are stressed by traffic jams, they create by intentionally stopping the traffic at peak times or seasons, to make repairs. Off-road races on subsidiary roads of the city can be organized, like in the Paris-Dakar race. As some 100,000 vehicles compete in this race, gas masks are required also in the summer time.

No one knows yet when all things will end and when we will pass the winter without the need of gas masks. The only thing we, ordinary citizens, know for sure is that our Redhero City will turn into a Smokyhero City and that we all will have to search for gas masks.

Translated by P.Shinee

Anaconda

2010-09-17T12:31:00.003+08:00

UB Post

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

On the road to industrialization

2010-09-13T12:38:00.000+08:00

UB Post

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.

Bear Service

2010-09-03T11:58:00.001+08:00

UB Post
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.

Translated by P.Shinebayar