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“Shakhaanii Business”: Shared Debt, Privatization of Profit, and (Re-)Emergent Corruption Discourses in Mongolia

By Guest Contributor , on 2 March 2017

By Marissa J. Smith

Marissa J. Smith obtained her PhD from Princeton University’s department of anthropology in 2015, after defending a dissertation about Erdenet and its position in local, national, regional, and international contexts. She currently teaches at De Anza College in Cupertino, California. 

 

With presidential elections on the horizon, as the Parliament called its fall session into recess and Mongolians began preparations for the Lunar New Year, Tsagaan Sar, major developments materialized regarding two particular issues that since the June 2016 parliamentary elections have become foci of interrelated concerns, controversies, and conspiracy formation about national debt, national development, and international mining projects, long noted and discussed on this blog.

The two issues are: 1.) the Parliament’s vote on February 10 that the state take (törönd avakh) the forty-nine percent share of the Erdenet Mining Corporation, deeming illegal the controversial sale of the shares on the  and 2.) the announcement on February 19 of a “staff-level” agreement worked out with the IMF, $440 million dollars through a three-year “Extended Fund Facility” program. This announcement included that around five and a half billion dollars of “support” from China, Japan, South Korea, the Asian Development Bank, and the World Bank were also expected. China confirmed the extension of an over two billion dollar currency swap on February 21 during the diplomatic visit of Foreign Minister Ts. Munkh-Orgil, while Erdenet was not officially addressed during Munkh-Orgil’s visit to Russia on February 13-14.

As noted and discussed on this blog, the senses prior to and just after the summer elections were of slow-down, “stalling,” “resisting closure;” the feeling may now be characterized as of urgency, sped up, as the first of a billion dollars’ worth of loan payments come due this year and presidential elections approach. With $580 million due for maturing bonds in March, the announcement of the IMF decision has been met with some relief. However, this relief has also been mixed with suspicions and speculations like those around the highly controversial “matter of the Erdenet 49%.” Some have also tied the two together:

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“The $550 [sic] million of the IMF matches the amount of money that the 49% of the Erdenet enterprise was purchased for. It seems that the Mongolian People’s Party (MAN) is “settling accounts” of/with the people.”

Both of these events are easily placed in narratives noted and discussed in this blog. With the IMF package, there are ever more loans than can be paid off, as more loans are taken to pay for loans. While much more on the IMF package and associated “projects” from the ADB, World Bank, Japan, and South Korea can be expected after Tsagaan Sar, for now the announcement of stagnant salaries and increased taxes associated with the IMF’s conditions for the loans has been at the center of concern. The major worry with the Erdenet 49% is that shares (khuv) have been, and will continue to be, wrongly distributed. As I have written about elsewhere, while international headlines described the action as “nationalization,” what is expected is a re-privatization, one that will favor a small group of politicians, working together across party lines (see Bumochir Dulam’s post on Mongolia’s deficit of institutionalized and regulated opposition politics) and foreigners (with some of the major politicians accused hailing from minority ethnicities subject to being questioned as to their degree of “Mongolness,” like many of the residents and employees of Erdenet itself).

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“The country has no money, has taken loans from the IMF and China, there will be taxes and fees on the citizens, salaries will not increase, they say. The Ulaanbaatar City Council head SANDUI LIVES IN LUXURY on budget money!!”

 

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Members of MANAN milking Erdenet, the “exhausted cow.”

 

How are these two issues connected? The IMF cites predictions of a return to eight percent growth in the national economy by 2019, but why is the premise that privatization will generate excess wealth to pay off loans unbelievable and genuinely questionable, from the perspective of Mongolian citizens as well as an anthropological perspective?

Who Owns the Shares?

Beginning a period of field research this past summer, I arrived in Mongolia just one day before the Parliamentary elections. After settling in my hostel, I glanced at twitter and saw something about Erdenet trending (before now, highly unusual), but with arrival errands I was unable to look into the matter beyond noting a connection with the discourses about “offshore” assets that had broken into Mongolian political commentary in spring 2016 with the release of the “Panama papers.” The night of elections, I attended a party with other foreign researchers and journalists, where I was told that Prime Minister Ch. Saikhanbileg had made his announcement that Erdenet was now “100% Mongolian.”

Returning to twitter to take a closer look, I found that this very notion of Erdenet having become “100% Mongolian” was a major point being refuted in the tweets I had been seeing. In conversations considering the election results, consensus quickly emerged that the timing and grandiosity of the announcement had been a key element in the Mongolian People’s Party’s taking eighty-five percent of the Parliament, the announcement backfiring badly for Saikhanbileg and his Democratic Party. As I spoke with Mongolian friends with varying degrees of relation to Erdenet and the Erdenet Mining Enterprise, the theme of “who has taken the 49%?” continued to dominate conversations. Everyone, not only Erdenetchuud, the people of Erdenet, felt dispossessed. The matter did also come into my arrival errands, as while I waited to have a notarized copy of my passport made near the Government Building the morning after the election, the notary held court with clients on the issue of who had the 49%.

 

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Answers to this question ranged widely: an eye-catching tweet showed a pie chart with the percentages of the Trade and Development Bank owned by shareholders in China, Luxembourg, United States, and Mongolia (just over two percent); those in and close to Erdenet tended to allege that the 49% had gone or would go into Chinese hands; others focused on individual politicians, doing politics in the way noted by Rebecca Empson: “speculation and circulation of rumours, of factions, motivations, alliances and actions of individuals dominates political talk.” A  friend who had worked at Erdenet while I conducted dissertation research there and was now living in Ulaanbaatar also framed things in this way a few days after the election, listing everything that had gone downhill since changes in political appointments following the 2012 elections. Her relatives had been compelled to retire, access to the sport center had been restricted with entrance fees, and there was speculation a national-level politician would take the vacation resort. She also told me how she was one of the few regular salary-earners in her extended family and was helping to pay off the mortgage on an apartment in the name of a family member while living in another apartment owned by still another family member, caught in an arrangement that reminded me of the story in the post by Bumochir Dulam.

The shared nature of debt makes privatization excessively threatening, go beyond expropriation, in ways that make scalar and even erase distinctions between consumer, corporate, and national debts. If wealth, and the relations generating wealth, are distributed into closed groups or exit from the national community, the burden of debt (made heavier with increased taxes and stagnant and evaporating wages) remains widely shared with less possibility of being alleviated. A pattern has even emerged in which it at least appears that more and more debt is taken on as shared, while ownership and possession of capital and profits is made increasingly exclusive. If the knowledge of where this ownership and possession lies and moves is unavailable, its realm of exchange cannot be entered, and thus “transparency” (shilen dans) has become a cornerstone of President Elbegdorj’s policy without stemming the flow of suspicion and speculation over conspiracies involving members of the government and business elite.

As posts on this blog from over the past year articulate, the mirroring of debt in personal life and one’s own business and household on the one hand and at the level of the national economy and international relations on the other are not merely apparent. As Lauren Bonilla put it last February, the “external debt” is also “internal debt” – for individual Mongolian citizens this debt is their own, and also for members of government who have calculated the share of the debt as held by every citizen (including pensioners and children). Most lately, at the end of January, as Mongolians were awaiting news on the IMF agreement and the Erdenet matter was being investigated in Parliament, major English news outlets reported that, “oddly enough,” Mongolian citizens were offering their own cash, jewelry, and livestock towards paying off the national debt. (This phenomenon and associated negative international attention were also mentioned by President Ts. Elbegdorj in his address to the Parliament before the vote on taking the 49%, which I assume is connected with the apparent encouragement of the practice by Prime Minister J. Erdenebat, though it has been stated that the donations, khandiv, will go into a separate fund and not be put towards debt payments. Both moves seem to demonstrate that the government members seek to take responsibility and authority for paying the debt onto themselves.) Bumochir Dulam also shows how the “8%” mortgage program tied not just individuals to the state bank, but also groups of friends and family, being at least informed by employees of commercial and state banks. The concerns of the Mongolian economists he cites as to who actually benefitted from the program and attendant negative effects on the economy broadly are apparently also borne by the IMF, who support legal reforms of the mortgage program and regulation of the state bank, passed at the end of the fall session of Parliament.

What is “shakhaanii biznes”?

On being told of the sale of the 49% on the election night in June, my reaction was of disbelief; having studied Erdenet for almost a decade I thought of the central roles I have seen the enterprise and city hold in relations not only between Russians and Mongolians (let alone other international relationships), but also among Mongolians; the great stresses that would be required to break these relations, the force with which these stresses would be resisted, and the massive scale of the potential fallout for the national economy and international relations, in which were also implicated the jobs and workplace communities of many of my friends, the infrastructure of the city of Erdenet, and the many Mongolians who accessed trade, schooling, healthcare, and employment more indirectly through association with the enterprise and its associated institutions throughout the city.

In the last two months, as I have followed news, opinion writing, and social media during the course of investigations by the Standing Committee on Law of the Ikh Khural, I have noticed a category for a particular kind of corruption that I had not picked up on before. The term shakhaanii biznes, or simply shakhaa, appeared particularly in connection with discussions of apparent conflicts of interest involving politicians most centrally involved with the movement to take the 49%. The term struck me not only as a category of corruption accusation I had been unfamiliar with, but also due to the force of its possible valences; a possible translation is “pressured” or “forced business,” but a related or homonymic verb with the meaning “to shoot” is commonly used in Mongolian as a strong swear word, analogous to English’s “f-word.”

While this concept and its contexts bear more investigation, the situation being described here is apparently that of trade being kept within a closed circle of participants to the detriment of those outside – as well as inside? The term might also refer to the “pressure” upon those inside to participate in the activity. In December and January the Buryatia, Kalmykia, and Mongolia-focused Russian-language news outlet asiarussia.ru ran two pieces (here and here) related to the issue of Erdenet’s 49% with shakaanii biznes in the headlines and with suggested translations, including tenevoi biznes (“business in the shadows”). Sociologist Alena V. Ledeneva, a major contributor to academic discussions about “barter economies” and “corruption” in postsocialist economies, devotes a chapter of her How Russia Really Works to tenevoi biznes, describing the way that networks of barter, in which the many participants she interviewed expressed being compelled to participate, kept the Russian economy itself, as well as individual Soviet enterprises (similar to Erdenet) going through the 1990s and beyond.

As I re-read Rebecca Empson and Lars Højer’s separate work about Mongolian pawnshops (lombard), it strikes me how it is not sharing or transferring property or personal substance itself that is objectionable, but being compelled to do so in conditions of anonymity or uncertainty, as the effects of these movements are so wide-ranging, potentially infinitely so. Such transactions involve and constitute ongoing relations, in which consequences and risk, as well as benefits and potential benefits, are shared. As Rebecca Empson shows, these “chains of debt” extend well beyond the lombard and the person handing over property in exchange for a loan, as she observed, remarkably, that a debtor had to also provide a list of telephone numbers belonging to other people also “accountable for payment.” The lombards themselves, Empson notes, are also “just ticking over;” rather than being profit-making ventures as her interlocutors alleged, they were as bound in chains of debt as their “clients.” Debt relations are not between a debtor and a creditor, but form “networks” and “webs” in which these distinctions become perspectival.

It seems that large enterprises and national economies and their politics are not so different, and thus are really involved and implicated in much more small-scale seeming interactions after all. To analyze Mongolian economy and politics, we must not lose sight of these points as we encounter one particular corruption accusation or conspiracy theory after another.

 

Recap of ‘Mongolian-Made’ Capitalism Workshop

By Lauren Bonilla, on 9 December 2016

What forms of capitalism are emerging in Mongolia?  How capitalist is Mongolian capitalism?  These are questions that an interdisciplinary group of scholars associated with the Emerging Subjects project at University College London and the National University of Mongolia (NUM) explored at the workshop, ‘Mongolian-Made’ Capitalism, held at the Mongolia-Japan Center in Ulaanbaatar on November 16th.  The goal of the workshop was not to produce a definitive answer about what capitalism ‘is’ in Mongolia.  Rather, the workshop explored the ways in which capitalist economic activities have become part of many Mongolian peoples’ everyday lives, and how this in turn shapes capitalism more broadly.

While we called the event a ‘workshop’ during planning, in actuality it felt more like a conference given the large number of people in attendance and the quality of research material presented.  Expertly organized by Rebekah Plueckhahn and Bumochir Dulam, the workshop brought together junior and senior researchers from disciplinary backgrounds including anthropology, economics, geography, and sociology.  As Rebecca Empson explained in the introduction, the workshop served to feature aspects of research conducted within the larger Emerging Subjects project, especially collaborations between researchers at UCL and the NUM.  Because the workshop occurred a little past the halfway point of the Emerging Subjects project (2014-2018), and followed many months of fieldwork in Mongolia, it provided a chance for us to present initial findings and get feedback from others before the next phase of analysis, writing, and publication.

Audience 3

Over 100 people attended the workshop, including a large number of undergraduate and graduate students from the Department of Archaeology and Anthropology at NUM, as well as faculty from other university departments, researchers, journalists, and politicians.  Workshop panels were chaired by a wonderful group of university professors and public leaders: S. Munkhbat (NUM, Political Studies Department), B.Tuvshintugs (NUM, Economics Department), and Ts. Delgermaa (Ministry of Environment and Green Development, Director of Onon River Authority).

In addition, interlocutors involved in the research of Emerging Subjects’ project members – such as herders, mining investors, entrepreneurs, and environmental activists – came from Ulaanbaatar and the countryside to attend the workshop.  The diversity of backgrounds and the availability of simultaneous English and Mongolian translation during presentations contributed to lively engagement among those in attendance, especially during tea and meal breaks.

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Making Capitalism

Rebekah and Bumochir kicked-off the workshop by calling attention to the varied meanings of capitalism, both as a theoretical concept and as an empirical experience.  Rebekah drew theoretical insight from scholarship on the heterogeneity of capitalist practices, highlighting how capitalism is never a complete project, but always something that is being constructed through the interaction of local and global processes.  She explained that the workshop presentations demonstrate the concrete, grounded ways in which capitalism is constantly made and remade through social practice and engagement with the material world.  Attending to the specifics of capitalism in this manner is quite different from approaches that tend to treat capitalism as an abstract background context from which economic activities and interventions take place.

Bumochir’s presentation extended these points by critiquing the notion that capitalism is a singular as well as recent economic form.  By tracing the long durée of capitalism in Mongolia, he explored how practices associated with capitalism, such as private property ownership, wealth accumulation through debt and usury, and market integration have deep historical roots in the country, particularly during the period of independence in the early 20th century.

Bek and Bumochir

From this overview we also learned that Mongolians have long been co-creators, not just recipients, of capitalism.  I built on this idea in my discussion of the active role played by Mongolian individuals in developing the extractive industry as a pillar of the market economy following Mongolia’s democratic transition.  I. Byambabaatar further elaborated this theme by illuminating the diverse non-capitalist economies that proliferated in Mongolia following the mainstreaming of national neoliberal economic politics in the 1990s.  He detailed how activities he termed ‘survival assemblages’, such as trading animals skins and scrap metal, or mining for gold, continually flourish in the midst of capitalism, perhaps enabling its very existence.

Byambabaatar

 

A Capitalist Continuum?

For some Mongolians, the fact that the economy is a mix of economic forms with varying degrees of market, state, and individual influence seems to present some ideological and practical challenges.  G. Munkherdene introduced us to the rise of pro-capitalist intellectuals in Mongolia who seek to both conceptualize and create ‘genuine’ capitalism as opposed to the ‘wild’ or ‘primitive’ (zerleg) capitalism that is often said to characterize the country’s volatile economy.  Through the publication of western books about liberal economic theory, and the high level of interest among groups of young people to read and discuss these books, he argued that there is the sense that Mongolians could, and should, model a ‘genuine’ capitalism that exists elsewhere (though namely in America).

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This view of the Mongolian economy as being on a linear path stretching upwards towards an economic ideal seems to be prevalent not only among these intellectuals, but also among Mongolians more generally.  For instance, following the talk I gave based on research with S. Tuya about pre-election gifting strategies among political candidates, a number of attendees variously asked whether the giving of gifts like noodles or cash before an election is a corrupt symptom of a kind of ‘embryonic’ experience of democracy and capitalism.  One person questioned whether these practices will persist as Mongolia becomes “more developed” and “less like America 50 years ago”.

The Generative Nature of Capitalism

While tracing economic trajectories and comparing economic forms in Mongolia to elsewhere has value analytically and in terms of policy-making, many of the presenters at the workshop challenged an evolutionary approach to the economy that presumes the existence of ‘higher’ and ‘lower’ stages of development.  Instead, there was an interest in capturing and understanding the generative quality of capitalism to bring about new social, economic, biophysical, and political worlds (an orientation common in current scholarship in economic anthropology).

Bayartsetseg and Rebekah Plueckhahn’s collaborative presentation illuminated the capitalist landscapes that are coming into being in the ever-changing ger districts of Ulaanbaatar. They showed how the strategies people employ to obtain land possession rights and access to infrastructure– such as constructing wood fences or occupying land through the tactical placement of one’s home or business – is transforming the material, legal, and commercial dimensions of land around the city. According to them, everyday strategies are not simply responses to capitalism, but means of creating landscapes that are productive of new forms of economic activity and ways of living.

Bayartsetseg Bek

Also highlighting the strategies employed to generate economic activity was C. Narantuya and Rebecca Empson’s interdisciplinary examination of the popularity of business groups in Mongolia.  Given the current climate of economic crisis, where the private sector is struggling to access cash and repay mounting debts with little support from the government, they discussed how informal groups formed between small and medium enterprises across diverse sectors like mining, catering, and construction create potentials for sustaining business through the trading of resources like tenders, contracts, contacts, and materials.  This, in turn, shapes the structure of business in Mongolia, whereby group alliances can be more a matter of ensuring survival than profit accumulation per se.

Groups

 

Capitalisms’ Risks and Crises

While capitalism can present new possibilities, the workshop also highlighted the risks and crises that are inherent in capitalism as a restless and often ruthless form of economy.  For Mongolia, the nature of risk and crisis seems to be growing as a result of Mongolia’s recent embrace of foreign debt.  This was the topic of H. Batsuuri’s talk, which analyzed Mongolia’s high levels of public and private debt.  He argued that debt accumulation in Mongolia, particularly by private enterprises, has become dangerous because debts are dominated in foreign currencies rather than the depreciating tugrik.  He suggested that a looming debt repayment crisis may be far worse than what is portrayed by the government and the media, with few long-term solutions in sight.

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Increasing financialization has thrust Mongolia into global circuits of debt and accumulation.  It has also changed the scalar orientation of people’s lives.  D. Byambajav demonstrated this in his talk about herders living in the vicinity of the Oyu Tolgoi mega-mine in the Gobi.  He discussed how herders have lodged complaints about mining-induced environmental impacts with the IFC, which has financed the project operated by Rio Tinto.  While large-scale mine developments have contributed to experiences of livelihood and resource dispossession in the Gobi, he shows that it has also ushered in new opportunities and challenges to address these experiences at transnational scales.

Byamba Mining 3

Hedwig Waters’ talk revealed in ethnographic depth what it feels like to live the contradictions of capitalism on Mongolia’s geographic and economic edge.  Documenting her recent fieldwork in Khalkh Gol along eastern Mongolia’s Chinese border, she shed light on the growing discontent among rural people as they negotiate the surge of ‘outsiders’ from Ulaanbaatar, China, and elsewhere seeking to turn a profit from their land through export agriculture, oil development, and illegal border trade.  Hedwig illuminated how residents of Khalkh Gol are questioning the current political and economic status quo using language that bears striking resemblance to the grassroots populist protesters who supported Donald Trump in the US election because of his purported commitment to protectionism and promise to bring about something new.

Panel

 

Other Possibilities

The topic of what economic possibilities exist for Mongolia (and elsewhere) featured at the end of the conference.  We were honored to have former parliament member and Minister of Environment and Green Development, S. Oyun, wrap up the workshop with a discussion of the need to move beyond economic activities that privilege growth and profit at the expense of human and environmental well-being.  Drawing on the new climate economy concept, Oyun made the argument that Mongolia has the potential to move away from a market- and export-oriented economic structure and lead the development of other industries, like those that harness intangible and intellectual assets.

Yet, as many speakers and participants noted, one of the challenges that seems to persist for Mongolia is the failure of legal and political systems to uphold and put into practice progressive measures that would foster diverse and more viable livelihoods, environments, and economies.

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What’s Next?

Following the workshop, a few media outlets in Mongolia covered the workshop.  The UB Post wrote a story in their print version, Büro 24/7 interviewed Bumochir, and TV9 featured an interview with H. Batsuuri for their Daily News Program.  In the coming months, presenters will transform their talks into articles that we plan to publish in a special issue of an academic journalWe also anticipate that the collaborations that have begun between scholars at UCL and NUM through the Emerging Subjects project will be just the beginning of long-term research partnerships.

For more information about the workshop, feel free to contact the organizers, Bumochir Dulam (b.dulam@ucl.ac.uk) and Rebekah Plueckhahn  (r.plueckhahn@ucl.ac.uk), or download the Workshop Program.

Helpers

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Afterparty1

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Many people contributed their time and effort to make the workshop a success.  Special thanks goes to the National University of Mongolia’s Department of Anthropology and Archaeology.  In particular, we extend sincere appreciation to: Ts. Tsetsegjargal, the chair of the department; members of departmental staff, D. Dolgorsuren, M. Oyundelger, M. Erdene, and Sh. Uranchimeg; and students, B. Erdenezaya and B. Doljinsuren.  G. Munkherdene also provided invaluable last minute assistance.  Finally, we are grateful to the National University of Mongolia, the Japan and Mongolia Culture Center, and the Puma Restaurant.    

All photos © B. Doljinsuren.