Mongolia Brief August 5, 2014 Part IV

Resident’s report on Chinese embassy protest

August 5 (UB Post) On Saturday, 7:30 a.m., August 2nd, I was running and saw a group of Chinese laborers, about 30 to 40 in my estimation, walking eastw on the road next to the Best Western-Tuushin Hotel.

They were flanked by police, who were guiding them with batons.

I went home and got my camera. As I returned, I saw a police car by the Chinese embassy. The group of Chinese protesters were gathered at the street corner in front of Zoolon restaurant. There were two marked police cars and an unmarked car.

There was a woman taking video. I introduced myself and we agreed to stay together.

There were four to five police and Chinese-speaking people surrounding the laborers. There was also a plain clothed man in a black tank top, camouflage pants and army boots. He had a long knife in a holster on his leg and he was walking among the police, making calls on his phone. I later realized that he was a nationalist activist.

After a few minutes, a short man in a dark suit approached the protestors. He started to address them. He started to raise his voice and point at them.

A Chinese-speaking person watched the video of the interaction and translated it for me. He identified the man in the dark suit as a Chinese embassy official. The man in the grey sweater, representing the protesters, identified himself as a construction director working at the building next to the workers protesting.

The Chinese embassy official told the group, “Mongolian police dogs have arrived… The Mongolian police have to arrest everyone who protested. You are Chinese, you have to explain yourselves and get permission before protesting.”

The representative said that the protesters were construction workers. Their head director had shorted the workers more than one million CNY.

The Chinese official asked for documentation that they had been promised a certain amount of money. The representative showed the official the document.

The Chinese official said, “I will speak with this director face to face. If he has broken his promise he will be punished and put in prison.” He continued, “If you protest, it is against the law. Monogolian police have the legal right to arrest and deport you. Every reason has been made clear to you. Decide for yourselves.”

As the official walked away, he continued to yell and point his finger at them: “If you don’t disperse now we might send someone else to deal with this. First, go home!”

The director representing the workers told them, “If Chinese workers get in trouble here, I can’t take responsibility for their families.”

The police signaled for the Chinese to start moving north towards the Chinese embassy. The group moved quietly and in order. The police surrounded the group with squad cars.

The workers were standing in file on the sidewalk next to the Chinese embassy entrance. A tall, plainclothes officer arrived and took charge. A Chinese person came out of the embassy and spoke Mongolian to the police. They decided to put the Chinese laborers inside a construction compound behind a corrugated fence. The laborers were lined up and entered the concealed construction yard through a small opening. Police were guarding the entrance.

During this time, the nationalist with a knife asked me and the woman why we were taking video. We said we were interested and it was our right. He said, “Aw, aw, okay, take videos.” He also assisted in leading the protesters to the construction yard.

A translator was called for. A few moments later, the Mongolian police started debating about what to do with the protesters. Some wanted to keep them in the construction yard. One officer insisted there was room in the Chinese embassy. A few minutes later, the protesters were ordered to exit the construction yard and stand in file next to the embassy entrance. The embassy officers and plainclothes officer met and began ordering the protesters to enter.

The plainclothes officer began asking, “Who is this foreigner taking videos?” I began to speak with him. He asked me what I was doing there. I said that I had been running and saw the group and started taking pictures. He asked the woman why she was taking video. She said she was interested. She asked if I was with her. He looked at my camera. He asked me where I lived. I said, “I was running at Sukhbaatar Square.” He asked me my name and I said I didn’t want to tell him that. He asked me what my citizenship was, and I said I didn’t want to give him my profile. I said it was my right to take video and asked him on what grounds he was questioning me. He said he wanted to know why a foreigner was here in this foreigner matter. I said I was a journalist and I asked him why they had moved all the laborers in the construction zone, out of sight. He said that they wanted to hide them from the public to avoid problems. I asked if he was trying to avoid confrontations, and he said, “yes.”
He asked me what publication I worked for and I said I was freelancing that day. He asked me if I lived close to here, and I said I didn’t like him asking me those questions. The lady I was with asked me to leave with her. We started walking together through the grass path and toward the street, when I turned around and saw a police officer following us and videotaping us.

I approached the officer and asked why he had taken footage of us. He denied it and said, “I didn’t,” but would not look at me or respond. I went to the plainclothes officer, who was seemingly in charge, and demanded to know why they were videotaping us. He said they weren’t. There was a police officer standing right there videotaping me and I pointed it out. I said they were spying on me, and one officer laughed. He said, “But I want to know why you are here,” I said they did not have the right to take video of me. He said they did. I demanded to know on what legal justification they had the right and asked to record his response. He said he didn’t want to.

I and the lady left again, and as we reached the corner at Mongolian State University, the man in sunglasses and another man greeted us. “Hi. We are nationalists and we don’t like the Chinese gathering together and protesting. We don’t want anyone taking videos of them.” We asked why and said it was our right to take videos if we are interested. The man started wagging his finger at me and said, “A foreigner should not be around taking videos.” He started to get confrontational and demanded to delete the videos, and I walked to the police officers. One of the nationalists followed me, and as I neared the officers, grabbed me. I put my hands up and called to the police, then the nationalist group member let go.

I said that the nationalists had knives and were bothering us, that they were not police officers but they were making demands. I said I wanted to be left alone by them. The nationalist said that they wanted to delete our video. Another officer tried to take me aside and said, “You took videos!” and asked to see our camera. I said he did not have a right to see the videos. He did not respond. I told the officers that we were being threatened and he said, “okay, just go then.” I repeated that the nationalists were following us and I wanted a police officer to separate us and let us walk away. He asked if the police officer should take us home. I said no, we just want to walk away. He sent an officer and we walked away towards Sukhbaatar Square.

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Strict monetary policy’s long-term effects on the economy

August 5 (UB Post) On July 30, the Bank of Mongolia made a decision to increase its policy interest rate to 12 percent in order to relieve the balance of payments difficulty, maintain medium and long-term economic stability, avoid further risk facing the Mongolian macro economy, protect the public’s income, and to curb inflationary pressure.

Below are opinions from economists on the interest rate change.

D.Jargalsaikhan: Tightening monetary policy will pose challenges for businesses

The Central Bank of Mongolia did what it ought to do in the current situation. The policy interest rate of the bank was 14 percent during the 2014 economic crisis. The bank has since been reducing the policy rate. The rate was 10.5 percent as of February 2014. Increasing it by 1.5 percentage points is indeed a huge number. But the loan criteria became more challenging. As a result, the amount of loans on the market will decrease. This will pose challenges for businesses. Otherwise, everyone will face difficulties. The bank made such a decision. The amount of USD in the box called “the economy” is decreasing. Accordingly, the rate of the MNT is depreciating. Ultimately, we are paying the costs of erroneous government policy.

D.Batjargal, Ph.D: Government spending should be curtailed

Increasing the policy interest rate is a measure to curtail inflation. Since 2013, the Central Bank of Mongolia has been implementing lenient monetary policy in order to support the economy and the public, and to decrease the interest rate of investment loans for businessmen. However, on July 30, the bank decided to tighten its monetary policy, which means an increased policy interest rate. In my opinion, the interest rates for loans at commercial banks should be increased. The paramount problem in Mongolia is weak management of budget revenue and expenditure. This should be resolved first.

L.Oyun, Ph.D and Lecturer at National University of Mongolia: The Central Bank of Mongolia has no other choice than to increase the policy interest rate and implement strict monetary policy

I see the measure the Central Bank of Mongolia took as an effort to maintain macro economy stability. Although the Central Bank says it will restrict demands by increasing the policy interest rate to fight inflation, demands outside of the state budget aren’t enough to subside inflation. Therefore, state spending should also be decreased.

D.Lkhagvadorj, Ph.D and Head of the Economics Department of Mongolian State University of Agriculture: It was a decision that protected the economy from crisis

Although tightening monetary policy might curtail the operations of enterprises and the private sector, the decision was inevitable to maintain economic stability in the long term. Mongolia’s economy is hugely dependent on the mining sector, which accounts for 90 percent of overall exports and 83 percent of foreign direct investment. This magnificent reliance on one sector is making our economy vulnerable and sensitive. Also, according to the preliminary balance of payments for the first six months of 2014, the current account deficit stands at 915.1 million USD. Foreign direct investment to Mongolia decreased by 70 percent from the previous year. The Central Bank stated, “It has still been crucial to enhance foreign exchange inflows through increasing export proceeds and promoting foreign direct investments, and maintain fiscal stability in order to neutralize the balance of payments pressure and to overcome current economic challenges.”  Therefore, measures to increase foreign exchange inflow should be taken.

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Lawyers of embezzlement suspects issue complaint to National Human Rights Commission

August 5 (UB Post) The General Authority for Implementing Court Decisions (GAICD) banned all visit, including lawyers, to embezzlement case suspects L.Gansukh, advisor of Prime Minister, L.Gansukh’s former assistants M.Tulga, E.Tumurbaatar and G.Batkhuyag who are currently detained in Tuv Province, on the request of the Independent Authority Against Corruption (IAAC).

M.Tulga’s lawyer Ts.Baasandorj went to Tuv Province to meet his client, but was not allowed as IAAC didn’t issue permission.

Following the incident, Ts.Baasandorj submitted a complaint to the National Human Rights Commission and the GAICD about the ban on visits.

The banning of visits to detainees not convicted of a crime contradicts both the Constitutions of Mongolia, which states that all citizens have the right to defend themselves and be defended, and the Criminal Procedure Code of Mongolia, which states, “A suspect and/or convict has the right to hire a lawyer and meet one’s lawyer in private.”

The IAAC is yet to formally report specific reasons for banning visits to the suspects.

The IAAC’s statement requesting a ban on visits sent to the GAICD notes, “Families of the suspects have not signed any contracts with lawyers to defend them. We request to refuse to let the suspects meet anyone until we send the names of the suspects’ lawyers to the GAICD.”

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Ch.Ulaan: Long and mid-term plans are needed

August 5 (UB Post) A conversation with the Minister of Finance on current issues.

How will the exchange rate be calculated in budget re-planning?

According to the supplementary budget made last spring session, diplomatic organizations working abroad were challenged by the rate changes, so we found some solutions. We are working on a supplementary budget project. In regards to current economic conditions, we will accurately estimate exchange rates. On the other side, according to directions from Parliament, we will take savings measurements with budget expenditures. But the most important thing we are working on now is to include the Development Bank’s Chinggis Bond in the budget.

What is your opinion on the policy interest increase at Mongol Bank?

Increasing policy interest creates limits for people at a certain income level. This won’t activate the economy directly. However, it will help keep economic indicators at an appropriate level. So, I think it can bring positive changes to the economy in the short-term. Therefore, there will be a need to strengthen the economy in the long and mid-term.

How will the implementation of EZEN-100 be concluded?

This is the 100-day program for strengthening the economy. In other words, creating something new. The goal is to increase effectiveness and results. The government, especially the Ministry of Finance, has worked hard on this project. At the end of the spring session, in order to intensify the economy and create pleasant conditions, we solved many issues.

For example?

Tax cuts supporting small and medium-sized businesses. Thanks to this, we have an opportunity to import foreign equipment without taxes and create new jobs. For businesses implementing major projects, we created conditions to defer equipment taxes for two years. Also, thanks to this plan, industries and entities will have a chance to pay attention to their investments. I think investment will grow in relation to this. In the banking sector, we decided to support the activities of banks that are offering low-interest loans and offer tax cuts. This will create pleasant conditions for more people to enter the market and increase the influx of capital. It will also improve the currency exchange supply and is important for balancing the exchange rate of the tugrug.

Likewise, the Ministry of Finance approved 11 laws in the spring session. We made big changes in policy, all aimed at intensifying the economy and resolving difficulties for entrepreneurs. During this period, we have been consulting with businessmen. At least we changed methods to increase coal exports. It pretty much supported the activities of this sector’s factories and businesses. Also, the Stock Exchange has been transferred to operate under the Ministry of Finance. We hope that the second market of stocks will become more active. Generally, the three pillars on which markets and economic policy stand are: budget, monetary policy and the financial market. Before, we were paying attention to the budget and monetary policy, but not the financial market. Focusing on the three pillars of the market by creating working conditions with classic market principles will provide results for the 100-day economic intensification program.

It’s been said that governmental organizations were unable to pay salaries, but somehow, they paid salaries from the Chinggis Bond. Can you explain this?

It’s not true. We haven’t been unable to pay salaries yet. The current financing to be paid is being provided on time. There is a law that says budget holes shouldn’t be filled-in with Chinggis Bond money.  Also, it shouldn’t be distributed as social welfare. Perhaps some organizations were unable to pay salaries on time. It could be self-governed organizations. In the case of the state and unified budget, there were no such cases and won’t be in the future.

Link to interview