Selective measure to strengthen the tugrug
June 24 (UB Post) According to the National Statistical Office of Mongolia, money supply in our economy (including cash, balances held in checking and savings accounts, and foreign currency) reached 10.2 trillion MNT by the end of May 2014.It was 30 percent higher compared to the money supply from the same period last year. Due to loans provided by commercial banks with money generated by government bonds and the eight percent mortgage program implemented by the government, total outstanding loans have increased by 46.5 percent compared to the previous year.
The tugrug rate against the U.S. dollar declined by 26 percent, while our foreign-exchange reserves fell to 2.2 billion USD, decreasing by 38 percent. The rates of inflation and unemployment have reached 13.7 percent and 10 percent respectively. The increased inflation and tugrug decline have negatively impacted both the economy and the livelihood of people.
The government says the economic crisis has solely been caused by reduced foreign investment in the mining sector and that it has started taking action to bring foreign capital back into the country by offering softer regulations regarding taxation and fees. However, the main cause of the economic crisis is not that we lacked capital, but that we suddenly had excessive capital that was used to fulfill election promises by handing out cash instead of utilizing mining income to create value. Also, huge foreign loans were acquired by wagering our future income.
In economic terms, such uncalculated, irresponsible actions by the government can be explained by the loss of budgetary discipline, implementation of loose monetary policy, printing of paper money without backing, and losing the trust of investors by failing to have transparency in public governance and establishing fair competition.
It is highly doubtful that the investors will come back when there is no guarantee that past mistakes are fixed and not to be repeated. The biggest mistake is the loss of macroeconomic discipline, because of which budget expenditure has always been greater than revenue, inflation has increased, and the national currency has suddenly declined. A selective measure to fix this mistake altogether is to establish a currency board. Currency boards were first introduced in the 19th century and used by about 70 countries by the 1980s. Today, many more countries have a currency board as well.
Taking this measure that suits Mongolia’s current conditions very well, we can peg tugrug to dollar exchange rates and establish a currency board. The establishment of such a board will allow us to have tugrug rates fixed against dollar rates, ensure free convertibility, reduce budget deficit, and control the balance of trade.
ENSURING THE CONVERTIBILITY OF MNT TO USD
If the rate of our national currency is fixed against the most commonly used foreign currency in the country, it greatly contributes to expanding foreign trade, accelerating turnover, and boosting the confidence of investors. This means that the value of the national currency would be rigidly pegged to the value of another single currency, or to a basket of other currencies, and reserves of the foreign currency would be created to ensure free convertibility. A currency board is established to ensure that national currency in circulation is equal to and sufficient for converting to foreign currency reserves.
Some former socialist countries such as Estonia, Lithuania, and Bulgaria, have successfully established such currency boards and enabled themselves to implement many important reforms and build a more capable and sustainable economy.
We should fix the tugrug against the dollar at 1,800 or 2,000, which makes it easier to calculate, stabilizes the exchange rates, and ensures convertibility between the two. In order to do so, we would need to create and maintain dollar reserves that were equal to the total money in circulation, with the eventual goal of setting the reserves as 110 percent of the base money. The base money, which includes required reserves, commercial banks, and the total cash in circulation, was 1.8 trillion MNT by the end of May 2014. This means that the foreign currency reserves should be around one billion USD.
In other words, there should be a separate law developed and passed in order to transfer the required reserves of commercial banks held by Mongolbank into an account of the currency board. Besides the account holding those reserves, the responsibility to manage monetary policy would also be transferred to the currency board. This means that Mongolbank would only retain their right to provide oversight of the operations of commercial banks. Also, Mongolbank would no longer be authorized to provide soft loans to banks, as they do now, and print and inject money freely into the market. The experiences of some countries show that a central bank can fulfill the same role as a currency board.
STRENGTHENING MACROECONOMIC DISCIPLINE
When Mongolbank is no longer authorized to be involved in the development and implementation of monetary policy, it would no longer be able to purchase domestic capital. As a result, Mongolbank would not be able to buy tugrug bonds that the government issues to make up for their deficit in operating costs. Such conditions would prompt the government to balance their revenue and expenditure. When countries had a currency board that had greater authority than budget management and ensured good budgetary discipline, great success was achieved in a short amount of time. In the absence of a currency board, the central bank prints and injects money freely into circulation and causes inflation levels to go up. When there is a currency board, whether or not the national currency in circulation is in balance with foreign currency reserves is checked before injecting more money into the economy. Therefore, printing money is not easily done, which strengthens macroeconomic discipline.
REGULATORY MECHANISM FOR BALANCE OF PAYMENTS
If there is a balance of payments deficit, the money supply gradually decreases and interest rates go up after some time, which increases incoming capital flow. Higher interest rates increase the value of national currency and causes deflation. Ultimately, it weakens absorptive capacity and reduces the balance of payments deficit.
In 1998, the government led by M.Enkhsaikhan attempted to establish a currency board and fix tugrug rates against the dollar at 1,000 MNT for one USD. However, the idea was not supported by the parliament. While there is an expansionary policy in place without being able to control inflation rates and currency decline, it would be a wise step from the government led by N.Altankhuyag to make a bold move and change policy to establish a currency board. If they recognize and fix their past mistakes, the government has time to revive the economy before the next election. It would be better to make a decisive step rather than implementing the same measures from the past, while labeling them differently as “100 days to invigorate the economy”.
If we manage to establish a currency board, the interest rates of commercial banks would be one-digit numbers, and investors would have more faith in the tugrug. Also, the value of the tugrug would be fixed, thus, people would no longer be worried about losing the value of half of their savings.
The Baltic States that established currency boards 20 years ago achieved rapid development. It proves that currency boards are very suitable to small countries that practice free trade. Mongolia needs to discover this opportunity to revive trade and investment, restore economic growth, and achieve sustainable development.
Translated by B.AMAR
Runway show weaves relationship between Mongolia and Turkey
June 24 (UB Post) Eighteen models from the Mongolian National Designers Association boasted colorful hand-woven Turkish kutnu and silk chiffon, aptly fusing the traditional and the modern, and the national and the international.
On Friday, June 20, Serap Pollard, the first Turkish designer in London, displayed her AW14 collection at the Embassy of Turkey in Ulaanbaatar in a runway show as part of a week of cultural events to celebrate the 45th anniversary of the establishment of diplomatic relations between Mongolia and Turkey.
Pollard’s collection, displayed in front of the crowd of roughly 100, comprised of the international business and fashion community, also embraced a polycentric philosophy.
Pollard used a vibrant, hand-woven fabric called kutnu, traditionally used to make gifts in Turkey. Pollard is an ecological designer as she creates zero-waste fashion, which means little or no textile waste was generated during production. This pays homage to traditional Turkish fashion, which reflects the wearer’s social and ethical values.
Turkish Ambassador in Mongolia, Murat Karkagoz, who co-hosted the event, commented on fashion as a means of bridging cultures.
“Fashion is an important instrument to build a bridge between two countries… I am presenting you the fashion diplomacy. Strong ties between countries, people and organizations tonight… She gets inspired from not only culture, but also the colors and scope of the city,” said Karkagoz. “She is ready for anything to promote and introduce Turkish culture.”
This collection, blending modern fashion trends with traditional styles, was a unique display of sustainable and organic fashion, usually bland.
On bringing sustainable fashion abroad, Pollard, whose company is based in London, noted, “I live in London and the fashion there is very fast paced and people use one garment, throws it away and then use another. The clothes they use are mostly not eco-friendly materials and fibers. But Mongolia is not aware of it and does not actually need because the clothes here are organic. Food is organic, clothes are organic, and everything is organic. It’s heaven here! British people need Mongolia. Mongolian clothes are heaven, there is cashmere, leather, wool and food is delicious because it is organic and natural,” said Pollard, going on to comment on the importance of displaying her work in Mongolia during this week.
Despite geographic distance, Mongolia and Turkey share a longstanding economic and trade relationship. In Mongolia’s “Third Neighbour Policy” (TNP), a feature of Mongolia’s foreign policy that intends to balance relations with its direct neighbors, China and Russia, Mongolia refers to Turkey as one of its third neighbors. According to the Turkish Ministry of Foreign Affairs, Turkey views this mention as indicative of the “importance of friendship” with Mongolia and considers it as “a strategically important country with its huge landmass and vast resources,” citing 40 million USD in trade volume between the two countries.
This implies that landlocked Mongolia seeks to strengthen its relations with third parties such as Turkey, as the country is heavily dependent on China and Russia as trading partners, with 54.9 percent and 17.7 percent of its total trade occurring between these countries, respectively, according to the European Union.
Cultural events celebrating the anniversary were held from June 17- 22.
Coal classification standards approved
June 24 (UB Post) “Coal Classification MNS 6456:2014” and “Coal, Coal Product Classification MNS 6457:2014” standards were added to the national registry on June 12, 2014, and will now be adhered to.
The new standards were developed in conformity with international standards, and valuation standards adhered to in the United States, Australia, China and Russia, and incorporate the suggestions of specialists and scholars in the coal sector, geologists, engineers, associations in the field and professional coal quality researchers.
Full texts of “Coal Classification MNS 6456:2014” and “Coal, Coal Product Classification MNS 6457:2014” are available at estandard.mn.
Water levels rising in area rivers
June 24 (UB Post) The water levels of the Terelj, Uliastai, Sugnugur, Barkh, Eg and Onon rivers rose 10 to 40 cm than levels recorded on June 20. Flood stage development along Sugnugur- Sugnugur, Taats-Nariinteel and Buyant-Khovd rose by five to 15cm.
The water level of the Tuul River and rivers running through Ulaanbaatar increased by 40 cm on June 21. Households and herders living in river areas are instructed to be aware of flood conditions.
N.Altankhuyag: Spreading rumors prevents work, we are canceling the land law project
June 24 (UB Post) The “30 Minutes with the Prime Minister” meeting took place yesterday, and the leader of the government spoke about the latest topics with journalists. Earlier, he participated remotely in the celebration of the “Renewing National Communications Network Expansion” project connecting 150 soums to high speed fiber-optic networks.
The Information Technology, Post and Telecommunications Agency oversaw the project and ZTE executed it. Delegates from the 150 soums connected with the Prime Minister online and cut a ribbon to celebrate the “opening” of the network. “Ninety percent of 332 soums are now connected to the internet. Only 30 soums are left. They will be connected to the internet by the end of this government’s term,” said N.Altankhuyag in his opening speech. Within the terms of the project, 9,000 km of high speed network cables and transfer areas were laid for remote soums.
Currently, 129 of the 150 soums are connected to the integrated control network, the other 21 soums will be connected by August 15. Only 37 soums are left without internet because of their location and technical challenges.
The following are responses by the Prime Minister to journalists’ questions.
People signed up for apartments in the Buyant Ukhaa-1 district couldn’t get loans with eight percent annual interest. Did the government change the loan system?
Citizens participating in the Buyant Ukhaa-1 housing program can’t sell their apartments for 15 years. But under offers from commercial banks, we approved their requests and made apartments available for mortgage. People should understand that apartment loans with eight percent annual interest are available.
The public is against the government’s decision allowing rich people to purchase land for investment purposes. And some say that the duration of possession is too long?
A negative outlook has appeared on social networks to distribute a lie. The content being talked about on Twitter and Facebook is not present in this law. If you tell them that, it will become an argument.
Today I asked Minister Ts.Bayarsaikhan, and he said there is no such content. Yesterday, Member of Parliament B.Garamgaibaatar gave answers to these questions while he was working at the 11-11 center. After that, I received an SMS. People spread rumors and it prevents work. It’s sensation that is caused by just a few people who divided the land. Actually, within the limits of this law, we would open up considerable opportunities for citizens to own land. We aren’t about to do anything wrong, but we decided to cancel this project. It’s so complicated to argue through social media. So, this fall, when people understand us properly, we are going to submit our project once again. People should trust that government won’t sell land to foreigners.
The government has confirmed policy in the field of aviation. This policy says that MIAT won’t be privatized in coming years. Why has this now changed?
I’m not the one who knows everything. We decided to privatize 49 percent and hold 51 percent for the state. But the company works with losses. I think that it is necessary to privatize most of the company and keep less for the state.
A resolution about new railway line construction was presented to the parliament. How did you decide on the problem of railway gauges?
This question was decided when Member of Parliament Kh.Battulga was a minister. Yesterday we presented this project again. It’s not about building the whole railway with narrow gauge rails. The general system is based on wide gauge rails. In due course, the government should decide what type of railway we should use for export rails. After many conversations, the government has decided to build a narrow gauge railway from Tavantolgoi to the east. If we build a wide gauge railway from Tavantolgoi the expenditure of transporting coal will be expensive. And the price of coal will increase.
Chinese Foreign Minister to visit Mongolia
June 24 (UB Post) The Minister of Foreign Affairs of the People’s Republic of China, Wang Yi, will pay an official visit to Mongolia by the invitation of the Minister for Foreign Affairs of Mongolia L.Bold on June 24 to 26.
Officials say that this visit will help to expand strategic cooperation between Mongolia and China in all sectors, strengthen mutual understanding, and develop international and regional cooperation.
During the visit, the Ministers of Foreign Affairs of the two countries will negotiate and Foreign Minister Yi will meet with Mongolian President Ts.Elbegdorj, Prime Minister N.Altankhuyag, Deputy Prime Minister and Director of the Mongolia-China Intergovernmental Joint Commission D.Terbishdagva.
Dismissal of N.Batbayar will be discussed next week
June 24 (UB Post) At the beginning of the Parliament session on June 20, there was a discussion about Minister of Economic Development N.Batbayar’s dismissal.
The opposition party had a meeting before the start of the session and prepared their questions and speeches for the dismissal discussion. But their preparations failed and the discussion will continue to be delayed for now, reported the Chairman of the Parliament. He did not mention any reason for the delay of the discussion, and highlighted that, “It is not illegal.”
The Standing Committee on Economics discussed the issue of N.Batbayar earlier, but said they did not see a need for his dismissal.
Russian Federal Council Chairwoman visits Mongolia
June 24 (UB Post) Chairwoman of the Federation Council of Federal Assembly of the Russian Federation Valentina Ivanovna Matviyenko is on an official visit to Mongolia from June 22 and 23, at the invitation of Chairman of the Parliament Z.Enkhbold.
During the visit, Matviyenko will hold meetings with Chairman Z.Enkhbold and sign a memorandum of understanding. Matviyenko will also meet with Mongolian President Ts.Elbegdorj. Prime Minister of Mongolia N.Altankhuyag and Vice Chairman of the Parliament M.Enkhbold will meet with the Chairwoman as well. Parliament member and Vice Chairman of the Mongolia-Russia Inter-Parliamentary Group, G.Batkhuu and others will meet the group’s members accompanying Chairwoman Matviyenko on her visit.
The Russian delegates include ten officials, Deputy Chairman of the Federation Council of Federation, Russian Head of the Inter-Parliamentary Group in the Mongolian Parliament Ilya Magomed-Salamovich, First Deputy Head of the Committee on Foreign Affairs of the Federation Council Vladimir Mikhailovich Dzhabarov, and others.
Chairman of the Parliament Z.Enkhbold is welcoming the guests on Monday at 9:05 a.m. at Chingis Khaan Square, reported the Media and Public relations Department of the Parliament.
Altanbulag FTZ opens with bright expectations
June 24 (UB Post) Altanbulag free trade zone (FTZ), bordering Russia in Selenge Province, officially launched a two-month trial on Sunday. State officials expect the FTZ to serve a notable role in improving the local economy, as Altanbulag has the potential to become a link between European and Asian economies with its suitable location.
The zone, covering approximately 500 hectares, has so far signed operation contracts with 28 businesses which meet operational criteria. A total of 87 businesses can run operations in the zone according to a land contract made before construction started.
A total of 24 billion MNT has been spent on establishment of the FTZ, with the goal to attract Russian consumers to the Mongolian market and support the local economy. Russian citizens can enter Altanbulag FTZ without a visa. Domestic entrepreneurs in Altanbulag FTZ will be exempt from customs tax, VAT, and import tax.
The 2014 budget for Altanbulag FTZ is one billion MNT, which will be spent on construction, transportation, power, water, and repairs for infrastructure being developed to eventually accommodate 15,000 to 20,000 residents.
Member of Parliament S.Bayartsogt, Director of Altanbulag FTZ Ch.Chimedsuren and other officials attended the launch.
Altanbulag is located on the northern border of Mongolia and lies 335 km from Ulaanbaatar.
The parliament approved the Free Trade Zone Law in 2002.
69 new bus stops for city commuters by August
June 24 (UB Post) Ulaanbaatar authorities have started building new bus stops made of rustproof steel.
They will be clearly identified and feature posted route information and power-saving LED lights.
The bus stops will have audio devices for information announcements, with information also made available for the hearing impaired. The devices will run on solar power and are capable of heard within a five meter radius. Passengers waiting for buses will also have 20-minute access to a free wi-fi connection.
A total of 69 bus stops will be built this year and 31 will open before Naadam Festival. The rest will be in operation by August, according to the Office of the Ulaanbaatar City Governor (OUCG).
The administrations cooperating on the bus stop construction and 200 other public transportation projects are the OUCG, Ulaanbaatar City Public Transportation Authority, Ulaanbaatar City Road Authority, and the Trade and Development Bank of Mongolia. They have all signed a cooperation contract, and the executor companies are reciving technical consultation from the JCDecaux Group in France.
Two Speakers Hold Official Talks
Ulaanbaatar, June 24 (MONTSAME) The Chairman of the State Great Khural (parliament) Z.Enkhbold and the Speaker of the National Assembly of Turkey Mr Cemil Cicek ran official talks in Ulaanbaatar on Tuesday.
Mr Enkhbold congratulated Mr Cicek on visiting Mongolia and wished him an enjoyable time here. Mentioning about the 45th anniversary of the Mongolia-Turkey diplomatic relations marked this year, Mr Enkhbold emphasized that the current visit will significantly contribute to forwarding of the bilateral relations and cooperation, and expressed a satisfaction with an intensive development of the friendly ties between the two countries’ people.
"Within my visit to Turkey, our countries established the visa-free agreement which allows now people to travel each other country for 30 days, and good condition has been formed to boost business, cultural and inter-citizen ties," he said. Mongolia wants to study Turkey's experience in processing leather and skins and to attract investments from Turkish companies, he added.
The ties between the friendly groups at two parliaments must be activated to become a powerful lobby to enhance the cooperation, he said, adding that cooperation between the parliamentary Offices have been developing.
In response, Mr Cicek said the Mongolia-Turkey long-year cooperation has been expanding and congratulated Mongolia on becoming the member of the Organization for Security and Co-operation in Europe (OSCE). He also said that he will focus on matters discussed with the Mongolian Speaker.
The visa-free agreement greatly forwarded the business and inter-citizen ties, collaboration in energy sector is vital in developing the industrial sector’s cooperation, he went on. A working group has been set up on this matter between the two countries but official talks and meetings have not launched yet, he noted. Turkey will pay great attention to augmenting of a quota of Mongolian students to study in Turkey, he added.
Mr Cicek agreed with a necessity to expand the cooperation in law enforcement and defense fields, and proposed mounting a joint exhibition of leather products.
He said Turkey has a plan to join the Association of Southeast Asian Nations (ASEAN) and hoped that Mongolia will back this ambition.
Present at the talks were L.Bold, the Minister of Foreign Affairs; A.Bakei MP, a head of the Mongolia-Turkey inter-parliamentary group; O.Baasankhuu and A.Tleikhan MPs, also B.Boldbaatar, the secretary-general of the Parliamentary Office; Murat Karagoz, the Ambassador of Turkey to Mongolia; Fehmi Kupcu, a member of the National Assembly of Turkey and head of the Turkey-Mongolia parliamentary group; and other officials.
Cooperation Protocol Signed
Ulaanbaatar, June 24 (MONTSAME) A cooperation protocol between the legislative bodies of Mongolia and Turkey was signed Tuesday after the Speakers of the two countries had held official talks in Ulaanbaatar.
Present at the signing ceremony were L.Bold, the Minister of Foreign Affairs of Mongolia; B.Batkhishig, the Ambassador of Mongolia to Turkey; Murat Karagoz, the Ambassador of Turkey to Mongolia; A.Bakei MP, head of the Mongolia-Turkey inter-parliamentary group; Fehmi Kupcu, a member of the National Assembly of Turkey and head of the Turkey-Mongolia parliamentary group; and others.
M.Enkhbold Meets Aabar Investments PJSC Delegation
Ulaanbaatar, June 24 (MONTSAME) Parliament Deputy chairman M.Enkhbold met Tuesday with representatives of Aabar Investments PJSC, a private joint stock company registered and incorporated in Abu Dhabi, UAE.
Mr Enkhbold thanked the delegation for visiting Mongolia and shared opinions with them on investments cooperation with Mongolia. During the meeting, the delegation emphasized a need of ‘certain’ support in enhancing cooperation here.
Aabar Investments PJSC has been investing into mining and finance sectors of Mongolia, and is interested in increasing the amount of its investments. The company is engaged in investing activities in various industries including infrastructure, aviation, real estate, automotive, commodities, energy and financial services. The company’s parent is the International Petroleum Investment Company (IPIC), which is wholly owned by the Government of Abu Dhabi. As per IPIC’s semi-annual financial statements, IPIC's ownership in Aabar stood at 95.52% as of 30 June 2012.
Mongolian Minister Chairs UN Environment Assembly
Ulaanbaatar, June 24 (MONTSAME) Delegations at the United Nations Environment Assembly in Nairobi, Kenya unanimously agreed Monday to appoint S.Oyun, Environment Minister of Mongolia, as the Assembly chair.
Ms Oyun has been invited to the First United Nations Environment Assembly, taking place in Nairobi on June 23-27, with over 1,200 participants, 170 national delegations and 40 events.
A Mongolian delegation attending the event will present the Government's environment and green development measures and will share experiences in realization of the "Partnership for Green Economic Activities" initiated by the United Nations.
The first session of the United Nations Environment Assembly (UNEA) of the UN Environment Program convenes at the United Nations Environment Program (UNEP) headquarters in Nairobi with more than 1,200 participants, including Environment Ministers, Government delegates and representatives of major groups and stakeholders.
The overarching theme of the first session is “Sustainable Development Goals and the Post-2015 Development Agenda, including sustainable consumption and production", which is designed to inform ongoing discussions on the formulation of a set of targets and indicators that would succeed the Millennium Development Goals.
Ministers are discussing the illegal trade in wildlife, an issue that is generating increasing global attention due to its adverse impact on biodiversity. Other issues range from environmental rule of law to UNEP program of work and budget.
UNEA is a result of the call made by world leaders at the United Nations Conference on Sustainable Development (Rio+20), held in Brazil in June of 2012, to strengthen and upgrade UNEP as the leading global environmental authority that sets the global environmental agenda and by establishing universal membership in its Governing Council.
Speakers of Mongolia and Turkey about Visit
Ulaanbaatar, June 24 (MONTSAME) The Chairman of the State Great Khural Mr Z.Enkhbold and his Turkish counterpart Mr Cemil Cicek Tuesday called a press conference.
Mr Enkhbold noted that the official visit of Turkey’s Top Legislator to Mongolia is running successfully, and underlined that this visit has been paid in frames of the 45th anniversary of the Mongolia-Turkey diplomatic relations.
He said the countries’ parliaments signed a cooperation protocol and shared views on the bilateral relations and cooperation including the inter-parliamentary ties. Mongolia and Turkey have the ancient ties and have many similarities in terms of cultural and traditional areas, Mr Enkhbold added.
This visit has an importance in enhancing the Mongolia-Turkey friendly relations and cooperation in accordance with the Mongolia’s "Third Neighbor" policy, reflected in Mongolia’s foreign policy concept, he went on. He said the goals of this visit are to deepen the bilateral traditional friendly relations and cooperation, to keep a frequency of high-level mutual visits and talks, to expand the inter-parliamentary ties, and to increase their outcomes.
Mongolia wants to exploit investments from Turkey for construction of apartments, developing infrastructure, energy and tourism sectors, he added.
In turn, Mr Cicek noted his visit is coincided with the 45th anniversary of the diplomatic relations and underlined that Mongolian and Turkish people have ancient ties.
There are no political conflicts between Mongolia and Turkey, which makes much easier to lay a basis for expanding the relations and cooperation in all spheres, Mr Cicek said. His country is ready to share its experiences with Mongolia. The two countries have a great opportunity to cooperate in education, redeveloping ger (national dwelling) areas and great constructions, he said.Link to article