Thursday, June 5, 2014

B.Byambasaikhan: Building Trust will save the Mongolian economy

The following is an interview with the Secretary of Economic Council B.Byambasaikhan, about the council’s “100 day plan to intensify the economy.”

Many people can’t believe that an economy built until today can be revived in just 100 days. Can the economy be revived in 100 days?

Presently, everyone is criticizing that the USD exchange rates have risen and that money isn’t flowing into Mongolia. Instability of the legal environment, uncertain rules and principles and the weak legal environment for business are all connected to the reason for shortage of money flow into Mongolia.

Mongolia’s investment environment was improved. Major projects were implemented and gave reason to trust Mongolia to foreign and domestic investors. Corresponding to this, the amount of money flow into the economy had increased. Unfortunately, Mongolians lost that trust of investors in a very short amount of time. Many investors deflected from Mongolia because of unscientific, baseless and uncalculated law adoptions. The most important thing to do within these 100 days for intensifying the economy is to regain the trust of investors and bring back money flow.

In other words, by creating a favorable environment for running businesses within these 100 days, we’ll be able to attract required funds for the current economy to Mongolian markets in a short period of time. Let’s make integrated mediums and long term economic plans. Currently, a plan to create an environment that Mongolian businesses can make strategy plans based on this integrated economy medium and long term plan is being developed.

Getting investors’ trust is a time consuming work. Some foreign investigators define Mongolia as a difficult partner to do business with. It seems that not only foreign but also domestic investors have lost faith in Mongolia. What do you think about this issue?

It’s said that it’s easy to lose someone’s trust but difficult to redeem it once it is lost. Mongolians will not be able to grow the economy without building trust. Without regaining trust, there’s no chance of attracting investments. All businesses are based on mutual trust. We have to concentrate on building and regaining trust during these 100 days. Both the government and politicians should focus on regaining the trust they lost. Investors stopped believing in Mongolia because Mongolians insist on changing established contracts, change laws and regulations whenever they please and if they don’t like it, they banish, protest and do demonstrations.

Any investor would prefer reliable and stable business environment over partners that will change their attitude every time they wake up. Mongolians first need to focus on their attitudes and communication skills. Every time investors are discussed and conspired on, they will define us as unreliable partners. When adopting laws, opinions of the private sector, specialists and economists must be heard. We’ve just seen the harmful consequences of laws initiated by politicians for political purposes have to the economy. Most importantly, politicians should stop initiating and approving laws based on their emotions.

It is widely considered by experts that an economy which is dependent on only one sector brings about huge amounts of negative consequences. Do you think that not only the mining sector but also other sectors should be developed?

It’s evident that the Mongolian economy should change its model and diversify. Determining what to concentrate on diversifying the economy is also a big issue. Since mining and agriculture are the supporting powers of Mongolian economy, other sectors should be developed based on them. Undeniably, Mongolia’s economy is receiving negative effects from global market failures for being too dependent on mining. A major change in the policy is required. If we can acquire two billion USD in the Mongolian economy, the exchange rate of USD will stabilize for a period of time. It’s certain that there’ll be negative consequences after six months or so as it is not limitless money.

The government decided to encourage exportation and limit unnecessary importation. How will this policy be reflected on the economy? 

There’ll definitely be some difference. Through importation, Mongolia is externalizing large sums of USD. Although, not everything can be produced domestically, things that can be produced by us should be produced domestically. We can grow and harvest vegetables. A country like Mongolia, with over 40 million livestock, should supply its own milk and wear Mongolian socks. Corresponding to this, workplaces will become available and taxes can be charged from them. Mongolia needs to become a producing country. A definition of an intellectual government is to be prudent and calculative in every aspects as well as making economic decisions based on research. Temporary emotional interferences in decision making in the last few years became the cause of the Mongolian economic crisis.

Now, the Economic Council is involving private sectors and aiming to make changes together with them. As people who know the difficulties, advantages and disadvantages of operating businesses more than politicians, within the framework of 100 day plan to intensify the economy, our main objective is to research and find solutions for getting out of the economic crisis, participate in making decisions based on estimates and most importantly, build trust which we lost in the last few years, together with the government.

Business entities are actively participating in the 100 day work to intensify the economy. Some people believe that you’re working with funds that you received from the government. Is it true?

Sorry to contradict you but we’re working without any salary. Most importantly, it’ll be beneficial everywhere if favorable conditions for businesses are established. We’re working because we aim to create economic changes together. Perspectives of politicians and business entities are different. This country is held up by business entities, not by politicians. If business entities have funds, the country will have both power and prosperity. Regarding this, we thought that we should participate in retrieving the country’s economy in a state of crisis and work together with politicians on building trust. Wealth producers must be the ones to change the economy.

After 100 days, will the exchange rate of USD drop?

Money flows into the economy through capital. Implementation work of projects is based on mutual trust and partnership. If Mongolia desires prosperity, everyone including ordinary residents, politicians and businessmen should work together. The second stage of investment for Oyu Tolgoi was halted. The funds that were to come flowing in through the underground development are no longer coming in. Now it’s better to concentrate on aspects to develop the economy without fracturing or politicizing. Oyu Tolgoi must be advanced and Tavan Tolgoi should be included in the economic utilization. Mongolians have so much work to do, starting from the development of infrastructure and railroads and we need to have ethical consciousness to adhere to established contracts and stop restricting, threatening and humiliating wealth creators. It’s clear that money will never flow into Mongolia if we lose the trust of not only foreign investors but also domestic investors. In order to become wealthy, attitude of the people must be changed.

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