Saturday, December 27, 2014

Mongolia Brief December 26, 2014 Part II



Speaker asked to apologize to MNB
December 26 (news.mn) The State Great Khural appointed members of the National Council of Mongolian National Broadcaster Television and Radio (MNB) during Thursday's plenary session meeting. But the Speaker of Parliament made remarks against MNB that outraged staff and workers of the broadcasting company.

Speaker Z.Enkhbold said during the appointments that MNB, the largest state-owned broadcaster with a team of 700 staff, airs copies of pirated foreign movies without official broadcasting rights, and that it is a place of binge-drinking.
Staff and workers at MNB responded by saying that the Speaker's remarks were offensive and demanded an apology to the team at MNB.
In response to the demand for an apology, Speaker Z.Enkhbold apologized for remarks offending MNB staff and workers, but commented that the remarks about binge drinking were directed at MNB directors like M.Naranbaatar, but not at the 700 staff and workers.

Bus companies to merge
December 26 (news.mn) In accordance with a decree by Governor of Ulaanbaatar, public transportation service provider companies Bus-1, Bus-3 and the city's electric bus company have been closed down.
City owned Passenger Transport Unit has begun the merging of the bus companies into a single unit in order to improve public transportation, service culture, accountability, and to reduce operating costs.
Deputy Mayor of Ulaanbaatar in charge of Finance and Economic Issues N.Bataa approved the organizational and staff structure for the new unit.
Passenger Transport Unit will operate with 1,658 employees and launch a new public services, including a digital bus pass, in spring. Everyone who uses public transportation will be expected to use the new digital bus pass in place of paper tickets.
Seniors, people with disabilities, and students will be able to use the bus passes with state compensation.

Halting inflation’s rise
By E. Zorigt
December 26 (Mongolian Economy) My wife, the finance minister of the household, has recently been a bit dissatisfied. To blame is the poor condition of the country’s economy, which has put pressure on the family budget, cut our income, and raised the price of meat and flour. Our household finance minister would not be so upset if Mongolia’s Central Bank, the main organ to fight inflation, could only keep its promise to prevent prices from rising 10 percent. Mongol Bank’s dream is to hold inflation at 8 percent until the end of 2014, lowering it to no more than 7 percent in 2015 and 2016. If the Central Bank did as promised, then today they would be collaborating with the government on inflation limitation, providing key links between monetary and budget policies as the two work side by side improving the macroeconomic situation. But the situation has only worsened, while prices have risen 12.1 percent. 
Inflation’s rise
A detailed breakdown of inflation from the National Statistics Commission shows that the main reason behind the rising rate is the weakening of the national currency. The tugrug has weakened for two reasons. First, prices for export products have continued to fall. Second, direct foreign investment has all but disappeared. As the supply of US dollars decreases, the increase for its demand only strengthens the dollar.
There are numerous long- and medium-term factors affecting inflation. One factor is the current high denomination value of Mongolian notes. Financial adviser professor at the Business Institute of Mongolian National University, L.Oyun, clarifies: “Inflation is the rise in rate. The rate rise is expressed by the national currency. Inflation has seen the tugrug’s small denominations lose their value. A survey entitled ‘Demand and supply of national currency small denominations’ has been conducted since 2005. In the frame of the survey, are several independent studies, one of which asks ‘Is there any country without small denomination currency?’ Mongolia does have a demand for small denominations.” When considering the currencies of other countries, the average note is 100, while the highest might reach 2,000. Few countries have denominations as high as 5,000 or 10,000 bills. “The higher currency denominations we have, the greater the decrease in value of small denominations,” says L.Oyun.
One cent, one von, one mao—each of these small denominations have little value in their respective countries. The ‘Demand and supply of national currency small denominations’ survey has shown that Mongolians likewise have little use for 1 to 50 tugrug bills. If we do not value the small denominations, there will be no goods available to purchase with them. In short, all products will be expressed by large denomination notes, thus resulting in even further price increases. 
Returning to small denominations
The main objectives of the monetary policy are to maintain a low and constant inflation rate, to provide the sustainability of macroeconomics and the financial sector, and to improve economic immunity. But the monetary policy is limited in its powers, and results often cannot be achieved in a short period of time. The most proven way to hold inflation in check in the short-term is monetary reform, which can generally be understood as regulating money supply. The ‘Demand and supply of national currency small denominations’ survey team states: “Due to present conditions, it would be better to reform the 20,000 tugrug note in the market. There are varieties of methods to reform the monetary note. A zero can be removed from the digits—even three or four zeroes. This is a way to fight inflation.” If Mongolia pursues such measures to increase the monetary value, it would stop inflation’s rise. Russia successfully implemented this method a few years ago. Russia, Kazakhstan, and Belarus had been trying to lower inflation for a long time, but they only achieved progress after instituting such currency reform. Russia turned the old 1,000 ruble note into the new 1 ruble, thus enabling the improvement of the small denomination value and inviting the appearance of cheaper goods.
Raising salaries
While prices have risen, salary rates have continued to drop. Salary sizes are known to be intimately tied to the inflation rate. Income sizes are a product of sales growth. Low income means less spending and fewer sales, as more people have less money to spend on production and services, thereby decreasing production. If the downward spiral continues long enough, you have an economic crisis. Therefore, indexation should be applied, to maintain the purchasing power of the general public during a period of prolonged inflation.
Economist J.Delgersaikhan, Professor of Financial Faculty at the Institute of Finance and Economics, notes that government wage indexation should not go beyond the level of inflation, as if wages exceed rising prices, it will only result in increased inflation. This means that the MNT 500 billion budgeted for government salary and pension growth next year should be increased to match inflation. The Ministry of Finance says that salaries and pensions could rise by 2.5 times. The Ministry is hesitant to increase salaries, as doing so would further increase the budget deficit. L.Oyun offers: “The influence the budget deficit has on the economy is interesting, as it provides economic growth. Therefore, there is no need to worry much about the budget deficit. A salary increase will raise the budget deficit, but production and products will grow with the salary increase. That is why the salary should be raised by indexation.”
In conclusion
There are other methods to hold the inflation rate. China, the main contributor to our economy, raises supply in order to offset inflation. If the price of a certain product rises, China increases the supply of that product; a dominant manufacturer, China can afford such a practice. Unfortunately, J.Delgersaikhan says, Mongolia “has no such possibility to increase the supply. But we still hold prices to support domestic producers in order to have a long-term decrease of inflation. Holding the prices by force will bring nothing but a negative influence to our economy.”

Minister of Education Meets Turkish Delegation

By B. Khuder
Ulaanbaatar, December 26 (MONTSAME) The Minister of Education, Culture and Sciences L.Gantomor Thursday met a visiting delegation headed by Mr Hassan Jengis, a president of the Eurasia Local Management Society.
At the meeting, the sides exchanged views on attracting business people to the cooperation in education, culture and science sectors in frames of forwarding the bilateral friendly relations and cooperation. They also concurred to set up a joint working group with a responsibility for determining directions and opportunities for the mutually beneficial collaboration.
The Turkish delegation's visit is to continue until this Saturday.

Minister of Industry Calls Press Conference

By B. Amarsaikhan
Ulaanbaatar, December 26 (MONTSAME) The Minister of Industry D.Erdenebat called a press conference on Friday to give information on the 2015 plans of his Ministry. This ministry will be in charge of all industries of Mongolia except for extractions and concentrations.
He said that former policies on industry will be refined and the sciences-based policies will be developed to focus mainly on promoting the domestic industries through increasing import taxes and giving incentives to the import-substituting industries.
The Ministry is working to sign a contractor agreement with a private company in order to commission the roads of western region within the next year, he added.

Composition of Some Standing Committees Changed

By B. Khuder
Ulaanbaatar, December 26 (MONTSAME) A plenary meeting of the parliamentary session on Friday adopted a resolution on changing the composition of parliamentary Standing committees.
Accordingly, Yo.Otgonbayar was freed from the Standing committee on security and foreign policy; O.Sodbileg, Ts.Tsolmon and J.Erdenebat--from the committee on environment, food and agriculture; J.Batsuuri--from the committee on social policy, education, culture and science; D.Sumyabazar and B.Choijilsuren--from the committee on petitions; Ch.Khurelbaatar, R.Burmaa and D.Erdenebat--from the Standing committee on state structure; S.Bayartsogt and D.Khayankhyarvaa--from the Standing committee on budget; and N.Nomtoibayar and D.Oyunkhorol--from the committee on justice.
Accordingly, the Standing committee on security and foreign policy has now new one--O.Sodbileg; Standing committee on environment, food and agriculrure--N.Nomtoibayar, Ch.Khurelbaatar and S.Oyun; Standing committee on social policy, education, culture and science--D.Sumyabazar; on petitions--D.Arvin, J.Batsuuri and D.Khayankhyarvaa; on state structure--N.Batbayar, Kh.Temuujin and O.Sodbileg; on budget--Ya.Sanjmyatav and B.Choijilsuren; and the Standing committee on justice--S.Byambatsogt and Yo.Otgonbayar. 
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