Mongolia Brief May 27, 2014 Part III
Mongolian professionals enter international competition
May 27 (UB
Post) Mongolia joined WorldSkills International as the 69th member in order to
train skilled professionals based on labor market demands, to challenge the
skills and knowledge of teachers and students, improve the vocational education
system, introduce Mongolia’s skills to the world, and to learn from the
experiences of foreign countries.
As a Member of
WorldSkills, Mongolians can now participate in the WorldSkills competitions and
other activities, gain access to their network of worldwide resources and
expertise in skills training and promotion, and set themselves against the
highest global benchmarks set by countries and regions with the most advanced
skill levels.
WorldSkills
International annually organizes the WorldSkills competition, and in order to
select competitors, Mongolia is organizing Mongolian Skills-2014 for nine
professions in two phases.
Students from
vocational education training organizations selected for competition will be
trained in South Korea as part of the preparation for WorldSkills.
The Mongolian
Technical Vocational Education and Training system is focused on becoming
demand driven, with importance placed on improving learning environments
through upgrading equipment, workshops, and instructional learning materials.
Contract to develop Doloonbuudal and Bayakhoshuu ger district areas approved
May 27 (UB
Post) According to Finance Minister Ch.Ulaan, 1.3 million Mongolians were
living in Ulaanbaatar by 2012, indicating that over the last ten years,
Ulaanbaatar’s population has increased by six percent annually. In order to
resolve the issues that ger districts face, in cooperation with Asian
Development Bank, an investment program to develop and improve Ulaanbaatar’s
ger districts will take place in three phases over the next ten years.
The program
correlates with the “Street” project implemented by the Economic Development
Ministry. Within this ten-year term six sub-centers will be created in ger
districts.
Population,
mass migration, and the number of people living in ger districts are increasing
year by year, however, development policy to improve ger districts,
infrastructure and land use management has been insufficient. In accordance with
the “General plan amendment to develop Ulaanbaatar until 2020 and Ulaanbaatar’s
development outlook to 2030”, approved in 2013 through Parliament, the
population of Ulaanbaatar is expected to increase by 400 thousand citizens in
the next decade. This mass migration will cause over-crowding in the city and
will create challenges for city residents.
Construction of Buyant Ukhaa-2 town launches
May 27 (UB
Post) Buyant Ukhaa-1 government housing project construction has been recently
completed and residents are expected to move in soon. Following the project,
Buyant Ukhaa-2 town’s groundbreaking ceremony was held on Monday with the same
objective to supply reasonably priced apartments to citizens with average
income.
Buyant Ukhaa-1
covers 4.6 hectares and will become home to 1,764 households. The town has a
kindergarten for 120 children and a 380 square meter service center. According
to authorities, Buyant Ukhaa-2 town will be built on a much bigger scale, on 28
hectares of land to accommodate 7,000 households in total.
The town will
have 48 nine-story apartments for 54 households each, and 60 12-story buildings
for 72 households each. Also, four kindergartens for 960 pre-schoolers, two
general education schools for 1,880 students and a seven-story garage will be
built at Buyant Ukhaa-2.
Apartments for
3,000 households and a kindergarten for 240 kids will open by next year in the
first phase of the project.
National
Development Corporation (NDC) LLC, which executed the construction of Buyant
Ukhaa-1, has been selected as constructor for Buyant Ukhaa-2.
The corporation
comprises of Delta Construction LLC, BUTI LLC, ECC LLC, Ulaanbaatar Barilga LLC
and Erelt Impex LLC.
General
engineer of NDC B.Enkhbayar commented, “The town will be constructed with the
latest technologies which are known for lasting results. All the construction
materials will be purchased from national manufacturers to support domestic
economy.”
The following is a brief interview with
executive director of Mongolian Housing Finance Corporation (MHFC) A.Gantulga
about the town’s construction plans.
Buyant Ukhaa-2 will be a very big
development project compared to Buyant Ukhaa-1. How will MHFC manage the budget
issues?
The required
budget for Buyant Ukhaa-2 construction will be drawn from the Chinggis Bond
fund. A large sum of financing will be required for sure, as it is a very big
project which will house 7,000 households. Buyant Ukhaa-1 financers will
provide the budget for the first phase of the town that will house 3,000
households. We are planning to draw investment from both foreign and national
investors for the second phase.
How much financing is required for the
construction in total?
Approximately
500 million USD.
Will price per square meter be the same as
Buyant Ukhaa-1 for Buyant Ukhaa-2?
It is too early
to talk about the price as of now. It will be set shortly before the opening.
But I can assure you that the price will be lower than the average market price
as the core purpose of this development project is to supply reasonably priced
apartments for citizens.
There are many criteria that citizens will
have to pass to purchase apartments in Buyant Ukhaa-1. Will there be similar
criteria for Buyant Ukhaa-2?
We will try to
apply as little condition as possible for purchase, but we can’t tell for sure
until the construction is completed.
We don’t want to give our money to scammers
May 27 (UB
Post) Mongolians wishing to earn easy money can often end up with financial and
emotional losses. Due to specious laws and ordinances passed by the State,
regular citizens are losing their money on useless things. For instance,
herders and consumers are seeing the darker side of the law on compensating
loss with repayment conditions. For 8,000 people who lost money on their
investments, the State passed the law and then the Ministry of Justice drafted
a bill on amendments to the law. Taxpayers, how long do we have to be defrauded
by herders who rely on hand-outs and people who receive grants regularly?
During harsh times in winter “zud” disasters, we help herders a lot, but why
can’t they decrease the price of meat?
For more
examples of the state spending taxpayer funds on useless things, they passed a
law for the 8,000 victims of a savings and credit cooperative and are now
making amendments to it. Is this fair? Every spring, the victims of the savings
and credit cooperative demonstrate. This year they threatened to declare a
hunger strike. Prime Minister N.Altankhuyag met with their representatives and
created a working group led by Kh.Temuujin, Minister of Justice. As a result,
the Democratic Party made amendments to this useless law without any
difficulty.
If we estimate
that the Mongolian population is three million, at least one percent of the
population was ripped off by the savings and credit cooperative’s scam eight
years ago. Taxpayer money is not meant to be spent on charity. Instead of the
government passing useless laws, they should invest in the frozen tenders for
building schools and kindergartens. The state should not cover the losses of
the savings and credit cooperation. I will say again and again that these funds
are not state property! It is taxpayer money. When the Mongolian economy has
fallen and people’s lives are becoming more difficult, taxpayers do not want to
pay for losses on behalf of others. The government can’t spend the money from
billions of dollars in loans efficiently. If they really have such a huge
amount of money, why can’t they build schools, kindergartens and hospitals?
Victims of the savings and credit cooperation may get their money from the
State. How are we supposed to understand how they are spending our money?
In 2006, when a
lot of savings and credit cooperatives went bankrupt, over 30 cooperatives were
destroyed and the owners went to prison. In 2007, 33 billion MNT was paid to
victims by order of the Minister of Finance. The following year it was, 2.1
billion MNT, for a total of 35.1 billion MNT paid to 7,290 victims.
Honestly, those
victims are not the very poor, or vulnerable people in our communities. One
survey said that most of them live quite well, their children study abroad,
they own multiple flats and summer cottages, and run their own businesses.
However, when they were talking about declaring a hunger strike, they pretended
like they were really poor and shed crocodile tears. I saw someone who knew
them looking and laughing. They are being guided by their greed. How do they
dare to have their fingers in our pockets with the help of politicians? I
question paying taxes to help these “victims”. Perhaps it’s time to demonstrate
for terminating the law that lines their pockets.
Growing Pains: An external analysis of the Mongolian economy
May 27 (UB
Post) It is immediately clear to all external observers that Mongolia’s is a
unique and fascinating economy. With the fifth highest growth rate in the world
in 2013 according to the CIA World Factbook, Mongolia’s ongoing rapid
transition from nomadic agriculture to booming industry, and from a planned
economy to competitive markets, ever since the democratic revolution in 1990,
makes the country a hugely interesting case study for an economist.
However, it is
clear that the economic outlook is not all rosy. High inflation creates
economic uncertainty, erodes wealth, and imposes unnecessary economic
inefficiencies, all of which deter valuable investment, as well as diminishing
the proceeds of growth that improve individuals’ living standards. Inflation
threatens to derail the economy, as Mongolia increasingly becomes a less
attractive recipient of foreign investment.
What problems face Mongolia?
The economy
faces dual issues that create the need for both short-term and long-term
strategies. The deeper issue is one of economic dependence on export revenues
from primary industry (mining) and therefore the country relies on importing
most of its manufactured goods, resulting in an unbalanced economy that is
vulnerable to external shocks. This is exactly what has happened over the last
few years in Mongolia – the business cycle has been almost wholly determined by
the mineral demand of its main trading partners, Russia and China, which dipped
substantially in 2007-2009, causing an economic crisis in Mongolia. This
vulnerability and lack of balance must be tackled by long-term structural plans
and fiscal policies pioneered by the government to change the emphasis of economic
activity in the country.
The secondary
problem is a consequence of the former: high inflation and a rapidly
depreciating exchange rate, which are both threatening to run out of control.
This must be tackled with short-term monetary policy changes led by Mongol Bank
to stabilize the economy, but should not be considered impetus to change the
necessary long-term economic strategy.
What needs to change?
Mongolians
often despair that the government is pursuing policies for decades in the
future while they see prices rising in the shops week by week, with annual CPI
(Consumer Prices Index) inflation rate running at over 12 percent for several
months, according to Mongol Bank, Mongolia’s central bank. There is a very real
dilemma here, as structural economic reform is necessary. Consumers’ current
woes are clearly a product of structural issues, as inflation is being caused
by a weakening MNT as a result of the balance of payments deficit (imports are
greater than exports), so the resulting low demand for the MNT makes the
currency fall in value). This requires a long-term readjustment to improve the
balance of payments by basing more production locally to boost exports and
decrease reliance on imports. This would both strengthen the MNT directly, and
also ensure that future international shocks, either from rising import costs
or falling foreign demand, will have less of an inflationary impact in
Mongolia.
However, it is
clear that short-term instability in the form of inflation could weaken the
strong growth of the last few years, so in addition to this long-term plan,
more immediate action must also be taken now to tame inflation.
What policies can achieve both of these
goals?
The trade-off
between structural reform and short-term prosperity is not as stark as it
currently seems. Firstly, accepted economic wisdom since the 1980s holds that
the most important tool to tackle short-term inflationary issues is monetary
policy. There is a proven link between money supply and prices, and monetary
policy has faster effects than other policy options. Therefore, Mongol Bank
should take bolder steps to reign in inflation and to control the exchange
rate, as the IMF has proposed. In 2013, the IMF called for Mongol Bank to
tighten monetary policy by halting its mortgage program and price stabilization
program which have pumped excess liquidity into the economy, encouraging
currency depreciation and inflation. Both programs are still in place.
Reversing these policies, as well as more aggressive raising of interest rates to
combat inflation, are steps that can quickly and effectively control the
immediate inflationary crisis facing Mongolia.
Secondly, the
long-term economic strategy that the government is currently pursuing should be
promoted using different mechanisms. Currently, approaches such as the “Let’s
Construct and Create in Mongolia” program involve high government spending,
investment and effective subsidies, all of which create large government budget
deficits, only worsening short-term inflation.
According to
the IMF, government expenditure increased by 70 percent from 2010 to 2012 – an
unsustainable strategy. Instead, incentives to promote domestic production
could be created through a discretionary tax system, giving tax breaks to
companies in desirable industries (those that manufacture goods locally, to
replace imports), and increasing tax revenues in other areas. Industry
incentive tax credits have been implemented in many successful economies,
principally the United States. This policy shift would achieve the same
end-goal that the government is already targeting, while lessening the negative
short-term consequences that high government spending currently has.
An external perspective of Mongolia in the
world economy
Economists
often refer to the “resource curse,” a paradigm whereby most countries rich in
natural resources suffer from worse development outcomes than countries who
have to import minerals and fuel. This is because the resource-rich economies
are excessively biased towards primary industries, leaving the nation open to
turbulent and destructive boom-and-bust cycles, as well as the fact that prices
rise faster in secondary products than primary goods. Whereas economies across
Africa demonstrate the negative consequences of this, other nations such as
Norway and the UAE show that an alternative sustainable and prosperous future
is possible for resource-rich nations, so long as there is effective
macroeconomic management. As these nations have shown, this involves
government-sponsored investment in more diversified industries such as
manufacturing and services, funded by efficient taxation policies.
All of this can
be summarized as targeting sustainable growth. Mongolia’s extraordinarily high
growth rates of recent years are to be admired, but they are difficult to
achieve continuously without experiencing the negative externalities associated
with growth—inflation, environmental degradation, underinvestment in both
physical and human capital, and of course the bust that inevitably follows the
boom.
Mongolia is
well situated for the transition towards diversification and sustainability.
Compared to other economies of the same size, Mongolia has a very successful
education system (with high levels of numeracy and literacy) and a sound
financial system, both of which act as a strong basis to allow a more
diversified economy to flourish. The increasing prosperity of all Mongolians
will surely be a consequence of this more balanced economic strategy.
Unlocking Mongolia’s Potential
May 27 (UB
Post) A small, well-educated, and open-to-the-world population living in a
democracy with mineral wealth? Mongolia’s potential for development remains
terrific.
It’s this
potential that keeps investors (foreign and domestic) interested in Mongolia.
It’s also this potential that makes Mongolia’s dynamic development fascinating
to a social scientist like me.
I am quite confident that Mongolia will reach its potential to benefit Mongolians in the long run.
I am quite confident that Mongolia will reach its potential to benefit Mongolians in the long run.
However, the
actions – or rather inaction – of the current government seems to be putting
that ultimate achievement of social development off by many years. On two
visits to Ulaanbaatar in May, I heard a lot of fatalism and frustration about
politics from Mongolians.
Once Mongolians
decided to embark on a path of democratization and some form of capitalist
development, mineral wealth has emerged as the strongest, if not the only basis
on which to build such development. The discovery of Oyu Tolgoi made that
potential all the more possible.
Yet, after some
short years of growth built on Oyu Tolgoi investment, the Mongolian economy has
ground to a sputtering halt. Or, more accurately, the current government has
essentially stopped further development by scaring off foreign investment and
delaying progress at Oyu Tolgoi while borrowing funds to paper over the
resulting decline in economic activity.
When President
Elbegdorj initiated the current protracted dispute with Rio Tinto in his speech
to Parliament last year. He raised many important questions regarding the costs
of construction and the Oyu Tolgoi governance structure. Initially it looked
like there was follow-up to those questions by the shuffling of the
government-appointed Oyu Tolgoi directors. The replacement of political figures
with individuals who offer some substantive expertise seemed like a good sign.
However, I see very little progress on any of the questions raised by Elbegdorj
since then. Surely, there are private discussions with and about Rio Tinto that
I have no access to, but there are no public signs of progress. I am not even
sure that the government is better informed about Oyu Tolgoi activities now
than a year ago.
Prime Minister
Altankhuyag has been surprisingly successful at keeping together a rag-tag
coalition with the MPRP and Civil Will, a coalition that seemed like an odd
choice in 2012 in part because the likelihood of this coalition enduring seemed
low. But despite the recurring rumors of an imminent demise of the Altankhuyag
government (intensifying once again in the last several weeks), the prime
minister has kept the cabinet together for the moment. But to what purpose?
After a flurry of action last fall to undo some of the damage caused by the
Foreign Investment Law, and a relatively quiet winter, energies during the
always-turbulent-in-Mongolia spring have focused on political infighting.
As a scholar, I
am very interested in questions surrounding institutional design and whether a
parliament is impeded in its function when nearly 1/3 of its members are
wearing the “double deel” of also serving in cabinet. But as an observer of
current developments in Mongolia, I do not see this question as one that has
much impact on developments. Will the Oyu Tolgoi impasse really be resolved
more effectively by a cabinet of single-deel wearers?
The
circumstances of attempts to remove Minister of Justice Temuujin from office
also suggest that these efforts are more rooted in personalities than by
disagreements over policy choices.
Will the DP’s
efforts to replace all officials across Mongolia down to school principals with
DP-friendly individuals really lead to a better future for Mongolia?
To my mind, the
top priority for any current government is to structure the environment around
Oyu Tolgoi in a way that allows that project to go ahead without inflicting
environmental and social damage while yielding tangible and significant
benefits for Mongolians now and in the future. A well-managed Oyu Tolgoi in any
form will be the cornerstone of Mongolian development, so that management must
come first. A lack of progress will devastate the economy and risk social
development further, while progress on Oyu Tolgoi will produce the additional
resources and experience to deepen the regulatory and policy analysis capacity
of the government.
I would note
that there is no perfect solution to how to manage such a project. There is no
sense in searching for an optimal solution when this search delays progress and
leads to a decline in confidence in Mongolia and hardship to Mongolians through
inflation and the decline of the Tugrik, for example. Once good practices – not
necessarily best practice – have been established around Oyu Tolgoi that will
produce the resources and the time to address other issues. But to reach a
decision for good practice must be the most important task for the government.
I hope that the
current government is devoting much more time to seeking a solution to the Oyu
Tolgoi impasse than is publicly visible. I also hope that they are investing
heavily in their internal resources to help build capacity to analyze options
regarding Oyu Tolgoi at future decision moments. If they are not focused in
such a way, they are gambling with Mongolia’s future.
Julian Dierkes
is an associate professor at the University of British Columbia in Vancouver,
Canada. Read more of his views at http://blogs.ubc.ca/mongolia or follow
@jdierkes.
Art in a Bottle
May 27 (UB
Post) A bottle can be a work of art, but most people focus on what’s in the
bottle. While some people don’t care and throw away empty bottles and jars,
others save them like treasure or reuse them. An exhibition showing that art
can also be captured in a bottle opened at Blue Moon Art Gallery.
B.Tsevegsuren’s
exhibition, “Art in a Bottle”, is the first exhibition of its kind in Mongolia.
Bottle art has become advanced overseas, but it has not been developed in
Mongolia. Every piece in the exhibition was really interesting and brand new.
The artist
included miniature depictions of the five kinds of Mongolian livestock, the
three manly sports, the Mongolian ger, the state hymn and flag, soyombo, daily
life, traditions, culture, values, and buildings. He captured these themes in
recycled light bulbs and vodka bottles. B.Tsevegsuren’s pieces are made with
wood, paper, cotton, beads, copper wire, iron, and plastic. He recreated the
State House in a bottle too. He may be criticized for it, but he said it is
artwork.
The exhibition
will continue through May 28.
The following is an interview with the
artist.
How did you decide on the idea to create
art in a bottle?
I found my idea
from seeing souvenirs ship in a bottle. Throughout my work, I wanted to speak
about the consequences of vodka and show that human intellect can be inside a
bottle instead. I am not a professional artist and I just do them as a hobby.
When did you start creating these pieces?
I started three
months ago. In total, I have made 200 pieces, out of which 80 pieces were presented.
It is really interesting to think about how
you created them in a bottle.
It wasn’t so
easy. First of all, I draw a picture of my work, estimate the size accurately,
and connect and glue them together with a very thin device. I did not cut the bottles.
I spent a week making the State House because it was made up of over 150 small
pieces.
Have you patented your work?
I have sent a
request to the Intellectual Property Agency. I will get the patent soon.
How many people want to buy your work and
how much does it cost?
If you want to
give people gifts of artwork instead of alcohol, you can buy it. They cost
10,000 to 150,000 MNT.
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