Mongolia Brief August 13, 2014 Part III

MUST under scrutiny for suspect appointments

By B. Dulguun

August 13 (UB Post) Although changes have begun, the education sector is still struggling to take-off due to corruption and other concealed activities within the sector. 

The following is an interesting update on the directors of Mongolian University of Science and Technology (MUST).

The education sector is implementing an actual system of appointing family members, relatives and friends to decent positions, under the name of patching up a team, and so, official positions are being acquired through bribery and charity. The government should eliminate all unstable, impotent, and un-progressive assets and strive to improve the appearance of the few state-owned schools, and transform them into something that’s less embarrassing. Now, the teachers of state-owned schools are frequently rattling on about the government mess the Minister of Education is making by conducting back and forth structural changes, instead of developing and improving the education sector.

One of the few state-owned schools is Mongolian University of Science and Technology. It wouldn’t be an exaggeration to say the operations of this university, making huge contributions to Mongolia’s global recognition, were compressed by the minister. MUST’s dean was replaced and T.Batbayar was appointed as proxy. Shortly after being appointed, T.Batbayar selected T.Batchuluun, who worked as his manager during the election, as Vice Dean for Economic Development, and received a great deal of criticism.

According to law, a proxy does not have the right to designate people for positions, manage assets or spend them. Still, an appointment for the position of Vice Dean for Economic Development position was given to a man without an academic title, who works for the business sector, instead of the education sector.

The dean of MUST was chosen by the minister, despite organizing a selection process, and handed over to B.Ochirbat, who’s now managing the university. Although, many are pleased with the selection of a man with a lifetime of knowledge from within the establishment, can he really oppose Minister L.Gantumur and operate on his own? Every director of MUST will become the Minister’s underling, as the Vice Dean is responsible for all prospective economic and financial matters. Critics believe the new Vice Dean will act as the minister’s handyman.

Director of the International Cooperation Office P.Jargaltuya advanced to her position thanks to her husband, Governor of Khan-Uul District J.Gankhuyag. This woman has no foreign language education and could presumably understand foreign relations as “going shopping” abroad. When a representative from One Democracy Club became the Minister of Education, Governor J.Gankhuyag seized the opportunity to assign his wife, who taught at a design school, to a valuable, vacant seat in the famous state university that provides access to world-wide relations.

Big shots, including the Director of the Education Office Kh.Enkhjargal and Director of the Science Office Baasandash, are said to have had support in gaining their current positions. MUST has increased its administrative members considerably within the past year by employing leaders with chains of people behind them. It’s said that even a faction has been created. One of the new administrators is a friend of B.Nasanbayar, the head of the Strategy, Policy and Planning Department at the Ministry of Education and Science.

Under the guise of improving the university, people were pushed to government positions. As soon as they were appointed to government positions, they got their hands on the advantages of their appointments.

One person with a “conflict of interest” violation is Vice Dean D.Batchuluun. His position oversees all issues connected to the university’s “wallet” and assets. He selected his own company, Mongol Lift, to tender for the reconstruction of an elevator in the second building of MUST. Before being appointed Vice Dean, Batchuluun was the CEO of Mongol Lift LLC.

His changes, which he enforced immediately after being appointed, aren’t very much appreciated among teachers and staff. Directors, experts and professors of branch schools contacted the State Specialized Inspection Agency to do background inspections on how D.Batchuluun was able to acquire his current position.

After a month of inquiry, the State Specialized Inspection Agency was able to make a tangible assessment on the illegal activities of the school’s administrators. However, the assessment was covered up after being evaluated as inaccurate, leaving the Vice Dean to continue with his duties.

The state bestowed endowment for the Vice Dean’s achievement of juggling the university’s structure, implemented in the name of improving the university, and awarded him an Altangadas (Polaris) medal.
Anyhow, Minister of Education L.Gantumur’s parliamentary election triumph in 2012 served a special role in assisting D.Batchuluun to select his private company for tender, and the minister’s appointment of government officials, while repeatedly wrapping his hands around the position’s glories. Relevant law enforcement and inspection agencies should take notice of this man with conflicts of interest.

Source: Daily Post

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Ch.Khashchuluun: The economy will worsen this winter

By B. Dulguun

August 13 (UB Post) The following is an interview with economist Ch.Khashchuluun, highlighting many crucial issues regarding Mongolia’s current economic conditions.

Only ten days are left until the 100 day plan to intensify the economy ends but macro economic statistics continue to decline. The program was supposed to bring positive effects and yet, just recently, international credit rating agencies downgraded Mongolia’s government bond ratings. Can you comment on this?

Mongolian credit rating rose in the last few years but declined last year. The decline is connected to the inadequate bond sales in foreign markets as well as ineffective monetary policy. Bond repayment will be paid from budget revenue. My assessment for Mongolian credit rating downgrade is that due to increasing deficit of state budget revenue and inconsistency, all investors were informed that Mongolia couldn’t make repayments for the sovereign bonds released on foreign markets. This can be understood as an assessment for state budget revenue, deficit and payment balance.

MNT exchange rate continues to fall because of the balance of payment deficit. Will MNT exchange rate continue to drop further?

Exchange rate depreciation is explained correspondent to foreign investment decrease. This is true but foreign investment decrease is only one side of the reality. The other side isn’t mentioned at all. MNT is supplied in high quantity in markets. The Central Bank issued a lot of loans in MNT, which gave off extreme supply of MNT and is causing long term negative impact in macro economy. If the Central Bank had implemented a policy to de-escalate MNT supply, despite less USD inflow, circumstances wouldn’t have been so dire. This method was used in 2009 to moderate the escalation [of USD exchange rate]. The opposite was implemented this time by increasing MNT supply and issuing tons of loans to entities. Even at this moment, they’re not considering a policy to de-escalate MNT supply.

Recently, Mongol Bank increased the policy rate interest by 1.5 percent. Will this not affect the weakening MNT exchange rate?

Interest rate the policy loan isn’t affected directly from monetary supply. In other words, it will not affect the essential money supply. Increasing policy interest rate will only cause difficulties to people taking out loans. Although it is a classic method, it’s hard to measure how much research the Central bank did on its effectiveness at our current economic conditions.

Obviously, bank loan interests will increase along with policy interest rate and induce negative effects on entrepreneurs. However, experts see that it’ll be beneficial for stabilizing the macro economy. While non-performing loans (NPL) continues to upsurge, is increasing policy interest rate truly the best method?

NPLs have been constantly increasing and reached to a high level which Mongolia hasn’t seen in some 20 years. It’s been increasing intensively since last autumn. If policy interest rate is raised at this point, NPLs will increase further. This can’t be minimized back with policy interest rate. Loan takers previously faced difficulty repaying the original interest amount, now, they’ll be forced into a situation where they’re incapable of repaying. Basically, interest rate will increase, people will not be able to pay on time, and full repayment period will be prolonged. The good side is that monetary supply will weaken and new loans will not be issued so much. However, this will not revive the current economy.

Overall, this monetary policy decision was made behind the time. Exchange rates began to upsurge around this time last year. This measure should’ve been taken at that time. If loans in MNT had been wrapped up to a certain limit, would Mongolia have reached current conditions? Even if the Central Bank begins a policy change, it’ll require a minimum of two years to eliminate today’s economic crisis and get positive feedback.

The global practice is showing us that issuing large amounts of loans to construction and real estate markets is wrong. Vivid examples are Japan, Thailand, and Kazakhstan. These countries loaned to constructions and real estates in considerable quantity, which turned to long-term NPLs. Banks that issued loans, people and entities that got loans, and companies which implemented construction work all faced losses.

Are you indicating that to overcome the economic crisis, loans for construction and real estate should be reduced?

Exactly. Construction and real estate markets should hit off strongly to give off results to the economy.

Mongolia is attempting to overcome the economic crisis by generating capital from foreign markets, instead of changing the policy. Is there any opportunity to revive the economy through policy change?

If capital is generated when credit rating is down, interests will become high, meaning the most expensive loans will given. Most importantly, we don’t know what to do after getting loans. People say they’re building debts to develop the nation’s economy but the development project or what sorts of aftermath the project will give is indefinite. The loans are spent on whatever comes to their minds. For instance, pedestrian roads were fixed with bond funds.

Bond expenditure is influencing credit rating decrease. There’s nothing to be surprised about. Mongolia has high risks for generating capital as long as Mongolia doesn’t have development policy and investment plans. Even if it’s generated, it’ll convert to debt if spent without plans. Including interest, some 2.5 billion USD is required to repay bond debt. This is equivalent to Mongolia’s one year budget if estimated at the current exchange rate. Repayment will begin from 2017, meaning Mongolia will not fix any streets, do investments, construct schools, and only repay debts from 2017 to 2024.

Investment environment isn’t reviving even when several laws for attracting investment have been approved. From your perspective, is there a tendency for investments to revive in the near-future?

It’s correct to improve legal environment. Laws passed within the framework of the 100 day plan to intensify the economy do have significances. It’s one of the works that must be done. But the investment environment didn’t improve with the new laws. Investment environment is referred to the mechanism of making decisions. People will invest if the mechanism is easy to understand and substantive.

Even with investments, Mongolia doesn’t have an environment for making decisions. For instance, the Tax Office suddenly issued a penalty of 130 million USD, although they didn’t mention anything before. What was the Tax Office doing in the last five years, instead of resolving this issue?

Investors are given permission to invest and yet, in a year’s time, projects are being terminated. For example, railway construction began in May 2012 and aborted in October. This game-like decision doesn’t have any rules. Investors regard this as a high risk. Not only foreign but also domestic investors are scared by this situation. Investing demands a lot of courage and trust from the investors and there aren’t many with that much courage.

Coal exportation, which composes a majority of Mongolian export revenue, hasn’t reached adequate levels in the last two years. Can this sector revive?

Research body of the Australian Government estimated coal price to recover after 2017. Rio Tinto declined from Mongolian coal and exited the market as well as Coal Mozambique. Simply, I also agree with the sentiment that the coal market will not reviving in the next few years. Mongolia should also be prepared for selling coal at lower prices. To get profit from selling low-priced coals, Mongolian transportation and mining expenses should be low. Railway holds a vital part in this. The government approved to construct the railway with a narrow gauge track to support export products but nothing is being implemented. On top of this, the government agreed to supply coal at a considerably low price of 30 to 40 USD in the last agreement with Chalco (State-owned Chinese company that buys from Mongolia’s state-owned Tavan Tolgoi coal mine). Due to this, Mongolian private coal  companies had to reduce their prices. Whether the government is working with a loss may be irrelevant. However, this agreement is affecting private companies negatively. Some big companies working in the sector will face significant losses if this issue isn’t resolved soon.

How do you judge Mongolia’s economic outlook? Is there any chance of getting out of the economic crisis?

I don’t think Mongolia’s reached the lowest level of economic crisis. The main crisis will begin this winter. We thought last year’s winter situations were the worst we’ve ever experienced but this year’s will be even worse. Major development projects were scheduled to start this summer but they didn’t. This year’s budget prolapsed several times. The 2015 state budget will be approved this winter. If next year’s budget is approved without any rationale again, the budget will experience more hiccoughs. Similar to how expenditure of the 2014 budget was trimmed considerably, 2015’s budget will be cut even more. This’ll reduce expense of services and projects implemented with the state budget revenue.

Parliamentary election is also scheduled next year. They’ll be hyped up in keeping promises they made to constituencies. Portion of the state budget investment will become necessary for giving to constituencies and projects financed by the state budget will become jammed. People fear that projects will be seized across the country. At current situations, there isn’t a tendency for improving Mongolian budget and monetary policy. The 2015 state budget will be approved in a controversial situation with high consumption and impossible promises.

In 2017, Mongolia will begin repaying bond debts. Plans on how it will be repaid haven’t been developed. If annual repayment amounts for the bonds are not clarified, majority of investments in 2017 and 2018 will function as repayment. After elections in 2016, development projects will be forced to decrease.

Source: Undesnii Shuudan

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Vice Speaker meets officials from Orkhon aimag

By B. Khuder

Ulaanbaatar, August 13 (MONTSAME) A Vice Speaker of parliament L.Tsog Wednesday received D.Monkh-Erdene, a head of the Finance and State Fund Section of Orkhon aimag’s administration; O.Ariungerelt, a chair of the Education and Culture Department; and D.Enkhzorig, a head of the Transportation Department.

D.Monkh-Erdene said the performance of their locality's budgetary revenue showed 120% and briefed on urgent problems of his aimag. "With a 96 thousand population, our province urgently needs to upgrade the public transport and health services, and also several works must be done in the education sector," he said. After this, officials spike about present situation of the aimag's health, education, roads and transportation.

The Vice Speaker decided to run this meeting with related Ministers.

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Angel experts train how to save lives

Ulaanbaatar, August 13 (MONTSAME) "The sound of groaning and moaning lazily perforate beyond the wooded back lot of the Central Armed Forces Hospital in Ulaanbaatar, as an interpreter encourages temporary accident victims to ham-up their performances during mass-casualty response training, as part of Pacific Angel 14-4".

An article about this training for saving lives was published on the website of the US Embassy in Mongolia by Sgt. William Banton, a public affairs photojournalist at U.S Air Force.

"The Mongolian Armed Forces soldiers turned actors are about to test the readiness of Mongolia civil-military physicians and nurses, rounding the corner in a scenario, which represents the culmination of a training event with U.S. Air Force medical subject matter experts.

"We try to make these scenarios as real as possible for the students,” said Master Sgt. Victoria Grey, enlisted medical subject matter expert for mass-casualty response training during Pacific Angel 14-4. "When they do go out to treat these patients we have moulaged they know that they need to be treating the most injured first.”

"The training is part of Operation Pacific Angel, which helps cultivate common bonds and fosters goodwill between the U.S., Mongolia and regional nations by conducting multilateral humanitarian assistance and civil military operations at locations like the CAFH.

"The CAFH, which was founded in 1921, provides medical and health care services to all Mongolian Armed Forces, activity duty, retired personnel, veterans and their families.

“Despite the cultural hurtles that we knew we’d expect, it’s funny how medicine is an international language,” said Major T.J. Bonjour, an emergency medicine physician assistant and medical subject matter expert instructor.

"With patience, persistence and the help of Mongolian translators’ assistance, Air Force members worked seamlessly with surgeons, cardiologists and a wide variety of nurses and technicians to help teach organizational an communication skills.

“This course mainly centered on mass-casualty management and emergency center preparedness,” Bonjour said. “Their system already has a robust [structure] in place and I think we facilitated furthering the progression of their system.”

"The training will allow the CAFH to provide better medical services to those who need it, said Mongolian Armed Forces Major Battumur Batmunkh. The training will also allow the hospital to prepare other first responders for mass causality situations.

“Pretty much for us communication was the key,” Grey said. “They are not all from the same unit so they had to come together as a team, communicate well and help each other out.”

As the students eagerly run towards the mock tragedy the groaning and moaning begins to increase exponentially. The atmosphere is finally set to test the skills learned, which could one day save lives.

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Stock exchange news for August 13

Ulaanbaatar, August 13 (MONTSAME) At the Stock Exchange trades held Wednesday, a total of 7,213 shares of 12 JSCs were traded costing MNT 20 million 455 thousand and 090.00.

"Hermes center” /4,000 units/, "Gobi” /1,580 units/, "Mongolia Development” /500 units/, "Mon-it buligaar” /465 units/ and "Baganuur” /194 units/ were the most actively traded in terms of trading volume, in terms of trading value--"Gobi” (MNT 12 million 448 thousand and 050), "Mon-it buligaar” (MNT three million and 255 thousand), "Material impex” (MNT two million and 128 thousand), "Baganuur” (MNT 737 thousand and 200) and "Hermes center” (MNT 680 thousand).

The total market capitalization was set at MNT one trillion 606 billion 301 million 311 thousand and 145. The Index of Top-20 JSCs was 16,022.69, increasing by MNT 92.60 or 0.58% against the previous day.

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