Tuesday, December 30, 2014

Mongolia Brief December 30, 2014 Part II

Government decides to dissolve 26 foundations

December 30 (news.mn) The government has decided to dissolve 26 foundations including the Clean Air Foundation, the Fund to Support Mongolian Studies, the State Education Training Fund, the Human Development Fund, Mongolian Health Promotion Fund, and Road Fund of Mongolia following research on funding.

The new government announced that it would put policy in place for nationwide cost cutting to endure economic distress. In its belt-tightening policy, the government will cut 1,500 civil servant jobs, monthly state welfare allowances for children and students, and to dissolve useless state agencies and funds.
The Clean Air Fund has been a target of criticism since its founding. The fund distributed low-smoke stoves to households, but conducted no efficient measures to reduce air pollution.
The fund spent a large amount of money from the government budget, and former officials in charge of the fund were charged with embezzling 1.9 billion MNT. There are currently dozens of projects and programs designed to reduce air pollution now working in the city, but there is no apparent reduction of air pollution.
The government has decided to dissolve the Clean Air Fund and merge it with the National Committee for Reducing Air Pollution.
The State Education Training Fund is also being considered for dissolution, as it is seen as having no significant role beyond distributing and monitoring monthly allowances for students in higher education programs.
The Human Development Fund's function is left uncertain, since it has distributed 20,000 MNT in allowance to all citizens.

Revising VAT

By B. Bayartogtokh
December 30 (Mongolian Economy) It has been while since the government handed a draft bill for VAT (Value-added tax) reform to Parliament. “The bill aims to create a stable business environment by fulfilling fair and clear regulations for taxation as well as supporting economic growth,” says Former Minister of Finance Ch.Ulaan. Scheduled for debate in the spring session, the bill was shifted to the fall session for further discussion. If the delays continue, the bill might not see progress until next year.
Mongolia’s VAT law, introduced in 1998, has been revised around 30 times in the past 16 years. Changes made so frequently have caused tax loopholes and discounts to expand beyond a reasonable limit, say experts. This has crippled today’s taxation system, states the National Committee for Supporting the Private Sector. The Ministry of Finance opposes such an argument, however, saying it is the nature of taxation to allow discounts and loopholes. As a result, disputes related to taxation have increased.
Reformed VAT draft bills were handed to Parliament twice in the past three years. Neither were approved. The newest try is the third for VAT. This time it’s the current government and not the opposition group that is proposing the law—thus, there’s an expectation that it will be approved.
Why VAT?
VAT is considered to be the most effective form of taxation for small countries. However, some criticize VAT for encouraging small-scale, cash-based services that avoid paying taxes. According to unofficial data, there are over 2,000 enterprises operating illegally in Mongolia—doing business while paying no VAT.
Additional changes have been considered for the current VAT law, such as incorporating trade taxes. According to parliament member S.Bayartsogt, VAT is more efficient for Mongolia than trade taxes. Mongolia has some experience in trade taxes, which have been imposed on manufacturing, import and wholesale trades. Trade taxes are deducted apart from other forms of taxation, which can lead to tax duplication and sometimes tax evasion—reason enough to reject this form of taxation.
Since 2000, taxation income has increased by 23 times, while the state budget increased by 10 times and the economy expanded by 14 times. For this reason, taxation regulations need additional changes and updates. The VAT reform bill aims to improve the current law, enable a more streamlined tax code, and expose the underground economy.
“VAT is regarded as a mechanism to bring order to the financial reports of an organization, enterprise or person. It also decreases the shadow economy and brings the monetary flow under government monitoring”, said D.Onchinsuren, Director of Deloitte Onch Audit in Ulaanbaatar. The threshold bracket of MNT 50 million in the bill has caught much attention. According to private sector associates, the threshold of MNT 50 million—under USD 27,000 per year—to be imposed by the Minister of Finance might cause tax evasion by many smaller enterprises. That VAT bill also looks to enable 50 percent of enterprises throughout the country to shift from a paper-based report and invoice system to an online taxation service.
Senior lecturer at the Institute of Finance and Economics Ch.Unurjargal says, “VAT has become a tool to increase the budget. This has caused the true nature and ideology of the law to disappear. One disadvantage of the law is there are too many discounts and loopholes. If the government wants to support manufacturers, it should go for income taxation and not indirect consumer taxation.” Parliament member Ts.Oyunbaatar, supporting Unurjargal’s ideas, says “Everyone must pay VAT. To make people pay taxes, unnecessary discounts and loopholes must be eliminated. Only a few policy related discounts must stay. The others must be eliminated to as few as possible.”
Entities that pay VAT account for 34 percent in total taxed income, and 85 percent in state budget income. But they make up only 1.25 percent of total enterprises. According to Ch.Nergui, Head of the Policy Planning and Coordination Department at the Mongolian National Chamber of Commerce and Industry, the draft bill, if approved, will increase taxation pressure on tax payers. Many experts criticise the fact that VAT has already been a burden to those who pay it. Businesses insist decreasing VAT to 5 percent will be significant for Mongolia, as it is a developing country and needs government assistance to spur growth.
Currently, VAT exists to make money for the state budget. Total taxation income consisted of 19 percent from VAT in 2000. Now the number has reached 32 percent. As VAT’s importance in the budget grows, reform must follow.

MONTSAME Highlights Most Significant Events of Mongolia This Year

By B. Khuder
Ulaanbaatar, December 30 (MONTSAME) The MONTSAME news agency names the ten important events that happened in Mongolia in 2014
1. Presidents of neighbour countries visited Mongolia
The President of the People’s Republic of China (PRC) Mr Xi Jinping paid a state visit to Mongolia on August 21-22, whereas the President of the Russian Federation Mr Vladimir Putin paid a working visit on September 3. These visits were the continuation of traditional high-level mutual visits between Mongolia and its neighbours.
Within the visit of Mr Xi, the two counties signed the joint Declaration on developing the bilateral comprehensive strategic partnership relations and some 30 documents between the governments and entities on forwarding the cooperation. A total of 15 memorandums and contracts were established with the Russian Federation on the bilateral ties and cooperation in trade, industry and education spheres. As results of Putin’s visit, the two countries’ people began to visit each other without visas from November 14.
2. Mongolia selected as host country of 11th ASEM Summit
Mongolia was selected as the country to organize the 11th Summit of the ASEM in July of 2016. It was announced by Mr Herman Van Rompuy during a closing ceremony of the 10th ASEM Summit ran in October this year in Milan, Italy. The President Mr Elbegdorj said he would preside over "a special anniversary summit," since it will mark 20 years since ASEM was launched. "During that time, in my country we will have very nice weather," he added.
On December 30, the President Mr Elbegdorj issued a decree on setting up a national council for organizing the ASEM Summit.
3. State Heads of Mongolia, Russia and China meet in Dushanbe
At initiative of the Mongolian President, the first meeting of the State leaders of Mongolia, Russia and China was held within the 13th Annual Summit of the Shanghai Cooperation Organization (SCO) which ran September 11-12 in Dushanbe of Tajikistan. Main objective of this meeting was to implement the Ulaanbaatar Meeting of the Presidents of Mongolia, Russia and China. In Dushanbe, the State Heads of China and Russia backed in principle Mr Elbegdorj’s initiative and emphasized that such a meeting can be hosted not only in Ulaanbaatar, but also in any city as soon as possible.
4. Cabinet for reforms resigned and new cabinet formed
The cabinet for reforms headed by N.Altankhuyag resigned early November. This cabinet was co-formed by the ruling Democratic Party, the “Justice” coalition and the Civil Will-Green Party as a result of the 2012 parliamentary election, and it lasted for two years and two months.
The new cabinet for solutions was formed this month by the Democratic Party, the Mongolian People’s Party (MPP), the “Justice” coalition and the Civil Will-Green Party. Then a former head of the Cabinet Secretariat Ch.Saikhanbileg was elected the 28th Prime Minister of Mongolia. With 15 Ministries and 19 Ministers, the new cabinet announced it will focus on national economy.
5. 75th anniversary of the victory on Khalkh River Battle celebrated
Mongolia and the Russian Federation celebrated the 75th anniversary of the joint victory on the Khalkh River Battle. On occasion of the event, the Russian President Vladimir Putin visited Mongolia and promised to render support to Mongolia for improving the bilateral military and military-technical cooperation, arms and techniques of the Mongolian Armed Forces. Moreover, the “Selenge-2014” joint military exercise took place in Dornod with participation of some 1,000 servicemen within the anniversary.
6. Great Construction works done in energy, road and construction sectors
The flow of investments to the energy, road and construction sectors was high this year although a size of foreign investment was low. For example, the “Amgalan” thermal power station was put into use in the city’s Bayanzurkh district, the #3 thermal power station received a new annex. Works have launched to distribute energy to eight provinces as well.
In the road area, the capital city was connected by paved roads to Khovsgol, Sukhbaatar and Omnogobi aimags.
7. Mongolian athletes achieve brilliant success at international competitions
Mongolian athletes grabbed medals at World championships, Grand Slam, Grand Prix and other biggest competitions for many sports. A State Honored Sportswoman and youth world champion S.Tserenchimed captured a gold medal in the FILA Wrestling World Championship which took place in Tashkent of Uzbekistan. A State Honored Sportsman G.Boldbaatar won a gold medal in the 2014 Judo World Championships in Chelyabinsk of Russia. J.Nurlan became the very first Mongolian to grab a gold medal in the Bodybuilding World Championship held in Mumbai of India. Our national team collected five gold, four silver and 12 bronze medals at the Incheon Asian Games, becoming the 16th among 16 countries.
8. “Hakuho” M.Davaajargal’s success equals highest record of sumo
A State Honored Sportsman and Grand champion of Japanese professional sumo “Hakuho” M.Davaajargal won the sumo tournament of November, receiving the Emperor’s Trophy for the 32nd time. Thus, his record equaled to the record of Taikho, which is the top one in the professional sumo world. One win left for him to break the professional sumo’s all-time record.
9. Mongolia fully provides itself with flour
Mongolia harvested 465 thousand tons of wheat, thus becoming able to provide its people with flour and other products made of flour. It has been estimated that the flour consumption is about 240 thousand tons, and it needs 360 thousand tons of wheat.
This is first time for Mongolia to harvest such big amount of wheat since Mongolia received 1.6 tons of wheat from one hectare thanks to the 1st Campaign for reclaiming virgin lands in 1958. The size of the wheat harvested increased this year by 15% against 2013.
10. Mongolian actor enters Hollywood
A Foremost Figure of Culture B.Amarsaikhan became the first Mongolian to show up in  the Hollywood world. He played a historical role of Arigbokh in the “Marco Polo” TV series produced by the Netflix company. He participated in the red carpet official ceremony of the movie’s opening at the Broadway theatre in New York, wearing the national costume.

Best Children Named

By B. Khuder
Ulaanbaatar, December 30 (MONTSAME) The Prime Minister and head of the National Council for Children Ch.Saikhanbileg granted prizes to nine children who have been selected as the best of Mongolia of this year at a ceremony on Monday.
The Premier emphasized that all these kids have become a proud of their parents and an example for their peers. These children will continue the great deeds of developing Mongolia, he added.
This year’s best children were selected in nominations such as top chess player, humanitarian child, eco child, intellectual child, dauntless child, wise child and right child. The best creative work of a child has been selected as well.

MONTSAME Names Most Important World Events of 2014

By B. Amarsaikhan
Ulaanbaatar, December 30 (MONTSAME) First of all, this is the Ebola outbreak. Since this deadly virus started spreading in March in West Africa, 8,939 incidents were recorded in Sierra Leone, which was the highest outbreak in the world this year.
Out of over 19,300 incidents recorded globally, 7,500 died in Sierra Leon, Liberia and Guinea of West Africa. Neither medicine nor vaccine has been invented to cure the deadly virus.
2.Crimea crisis
Crisis unfolded in the aftermath of the Ukrainian Revolution which began with a demonstration of the political opposition at the center of Kiev and expanded into a coup d’etat.  Crimea got a status of federal subject of the Russian Federation, which is recognized by five UN member states so far. Armed conflicts occurred in the eastern territories of Ukraine. After these conflicts, the USA and the European Union issued sanctions against Russia, to which Russia also took responding actions.  Currently, the crisis is less intensive as a result of the deal between the Russian president V.Putin and newly elected Ukrainian president P.Poroshenko which took place October 31 brokered by the EU.
3. Mysterious accidents
Malaysian Airlines flight MH370 which was headed from Kuala Lumpur to Beijing disappeared from air-traffic controller radar on March 8 while flying over the South China Sea. After months of unsuccessful air, land and underwater searches, the officials declared deaths of 227 passengers and 12 crew members. In July, another airliner of Malaysia, the flight MH17, crashed en route from Amsterdam to Kuala Lumpur, while flying over the conflict-hit region of Ukraine, and resulted in deaths of 298 passengers and 15 crew members. It is assumed that the airplane was hit by Buk Surface-to-Air Missile System. However, the cause of the crash is still indefinite. On December 28, AirAsia QZ8501 flight carrying 162 people from Surabaya of Indonesia to Singapore went missing. Countries around the region as well as the US, France and Australia have joined the search over the Java sea. No trace has yet been found.
4. “Enduring freedom”
The Military phase of the Operation Enduring Freedom conducted Afghanistan by the USA and NATO members after the September 11 attack was concluded this year, by the military forces withdrawal by the UK and the USA from the territories of Afghanistan. Other alliance forces will be removed from the country within this passing year. Sentinel of the operation will continue assisting Afghan’s security in 2015.
5. “Islamic State”
Extremists of the Islamic State of Iraq and Syria (ISIS) declared an “Islamic Caliphate” over the regions in Iraq and Syria of which they took in control, and conducting intensively disturbing actions. The USA, with supports of the allies, is putting airstrikes to the bases of the “Islamic State” group. The airstrike alliance has been joined as well by Australia, Belgium, Canada, Denmark, France, Netherlands and the UK, and the airstrikes on the Syrian bases of the ISIS are backed by Bahrain, Saudi Arabia, and the United Arab Emirates.
6. “Winter Olympics”
The 22nd winter Olympic Games were organized in Sochi of the Russian Federation, attended by 2,871 athletes of 88 countries. They competed in 15 sports categories and for 98 packages of medals. The competitions were led by the Russian team, which satisfied 13 gold, 11 silver and nine bronze medals.
7. Football World Cup
The 20th World Championship of Football was held in Brazil. The national team of Germany won the World Cup for the fourth time.
8. Revival in US-Cuba relations
The USA reopened the Embassy in Havana, which was closed after Cuba became closely allied with the former USSR. The tensions that even resulted in 1962 Caribbean crisis died down on December 17 when the U.S. President Barack Obama and the Cuban President Raul Castro announced the beginning of a process of normalizing relations between Cuba and the United States, mainly focused on softening the economic sanctions taken by the USA towards Cuba. However, the Cuban President stated that the political orders in Cuba will remain the same.
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