The Project’s Advisory Board Members Reflect on the Mongolian Economy — Comparing 2019 and 2016
By Hedwig A Waters, on 12 July 2019
This blog post was written by Professor Rebecca Empson, Principal Investigator of the Emerging Subjects Team
As we near the funded-end of our project, Bumochir and I recently held a series of meetings in Mongolia to thank our collaborators and inform people of our findings (see previous blog post). The first of these meetings was with our Advisory Board – the group of diverse specialists from very different sectors of society who have kindly given so much of their time and expertise over the past five years. We have been really lucky to have such a fantastic group of independent thinkers to call upon and discuss our ideas throughout the project and we thank them immensely for their time and commitment.
- Dashdemberel Ganbold, an environmental lawyer and activist based in Ulaanbaatar
- Jargal de Facto, an independent journalist and TV presenter
- Batsuuri Haltar, an economist, currently working on educational auditing
- Badruun Gardi, the founder of GerHub bringing innovative thinking to residents of ger districts
- Shurkhuu Dorj, a historian at the Academy of Sciences
- Delgermaa Tsend, a ministerial employee in the countryside
- Manduul Nyamandeleg, an economist at the Ministry of Finance
In the following we present summaries of some of their reflections over the past two years. I hope that they may be useful starting points to think through the changes Mongolia has gone through in the past ten years for both academics, lay people, and policy makers alike. We contrast comments made in April 2019, when we asked them to give: one example of something they think determines the economy in Mongolia and one thing they would like to change, with those made in April 2016 when we asked them to: highlight 3 features of Mongolian capitalism.
In accordance with our meetings, we have anonymised the comments as ABM (Advisory Board Member) but numbered them so that the same person corresponds over the two years (N.B. AMB 7 only commented in 2016).
What determines the Mongolian Economy and what do you think should change?
ABM 1, 2019
In very simple terms, I believe the economy is determined by personal interests rather than macro-scale policy and decision-making. Since the start of the mining boom that began with the signing of the OT Investment Agreement, the amount of money and interest flowing to Mongolia has been on a much larger and globally interconnected scale than before. This seems to have happened around the same time as Mongolian businesses and politicians became savvier in terms of dealing with various international actors. These two factors seem to come together to increase the ambition and perceived possibilities for enrichment at a never-before-seen scale, motivating people in positions of power/influence to take egregious steps for personal benefit. This results in an economy that is not necessarily market-driven but more driven by publicly unseen forces directly related to individuals in a position of power, their personal financial interests, and their associates.
The thing I’d like to change is to improve the scrutiny of the financial disclosure of officials. Although they are required by law to disclose finances, there are too many misrepresentations due to the shifting of equity and ownership to family members and other associates. Even when certain aspects are disclosed, there is not enough scrutiny by the public. There have been recent high-profile cases of investigative journalism uncovering corruption at high-levels, but there needs to be even more scrutiny and public discourse around such abuses of power.
ABM 2, 2019
The most important issue that shapes today’s Mongolia is the mistrust in law. The distrust comes from the recent talks about amending the constitution. Such discussions and critiques to the constitution generate a perception that the principle of laws in Mongolia was not correct since the constitution was approved in 1992. Many critique the constitution and talk about amending it without asking whether the articles in the constitution was implemented. The problem is probably not in the constitution but in the implementing. Consequently, not obeying the law or not accepting what law says becomes a common tendency in Mongolia. Not only different individuals in Mongolia, but various institutions including political parties, the government, the parliament and the state, all fail to conform to the law consistently. To some extents, not conforming to the law by navigating has become a norm. Different navigations establish a norm or a tendency in the society to perceive that law is something that can be navigated (argalj boldog) if necessary, rather than something that should be conformed to in all circumstances with no imbalance. Law and order tend to enforce the poor and the powerless, those who do not have the power to manipulate. While those who have power and money tend to have more power to navigate or even amend the law to meet their interests. Such navigations or amendments on the other side can inflict severe problems for some other people mostly those who are powerless. Issues of such imbalance are common in the cases of mining and environmental destruction. For example, environmental problems in the river and forest areas after the law with the long name that protected rivers and forests from mining destructions amended in 2015. One can find many other examples of failures to conform to the law can be found not only in the environment and mining but in many other cases. Considering such situations, the most important change that needs to complete is strict obedience of the law.
ABM 3, 2019
The first important driver in society in Mongolia is the quality of political institutions. The weakness comes from the weakness of political parties. There is no clear principles, divisions and ideologies in the political parties in Mongolia. The weakness in the institutional strength and capacity of political institutions is the main problem in the country. The solution is to create transparency in the finance of political institutions namely the political parties. This is the core of the secrecy of corruption in Mongolia. This is where all the secret deals are happening. There is no mechanism to disclose this secrecy. The Supreme Court is supposed to audit and control political parties. But this never happened. Not the Supreme Court and not the civil society require transparency of political parties. The auditing is a broken system in Mongolia. Even international auditing companies can be bought. The second issue in Mongolia is the stealing of public assets and stealing of public assets with the state money. This is a matter of the Erdenet 49 percent, Erdenet 51 percent, the small and medium enterprise funding grant distributions to the companies of wives of politicians, and so on. It is a critical period of democracy that is coming now. It is the time of truth. It is the beginning of a silent revolution. We expect independent media to go and reveal. But most of the media are bought.
ABM 4, 2019
By the suggestion of IMF Mongolian banks went through auditing. The auditing revealed USD 815 million shortage of capital in 14 commercial banks. The ones have the most shortage of capital was the Trade and Development Bank (TDP), Golomt, Khan and Khas Banks. 80 percent of this shortage falls into these four banks. There is no detailed information on which banks have how much shortage of capital. But some sources suggest that TDB is short of USD 400. The problem of shortage of capital in TDB adds to another issue of the TDB main shareholders. At the same time when TDB was in shortage of capital, the principal shareholders of TDB purchased the 49 percent of the Erdenet mine from the Russian government. Not long of the auditing the Bank of Mongolia announced the auditing and gave some recommendations. There is no more information from the Bank of Mongolia. There was a program called the troubled asset relief program which was supposed to be implemented by 2018 to fix the problem of the shortage of the bank capitals to bring back the shortage of the capital. The troubled asset relief program suggests the state to step in and purchase the equity of banks and establish state ownership of those banks. Then when the banks reach a secure state after a certain period of time, then the state can sell the equity and leave the bank ownership. There is no information about how those banks will bring back those missing assets. There is no information about the auditing in Mongolian media, only one in the international media. It is interesting why everyone including the IMF is silent on this issue. The central bank is hiding the failure, instead of revealing it and protecting the commercial banks. There is lots of political influence in the central bank. The names of those bank owners are not clear. The secrecy in the name of bank owners is something that is the main problem in the shortage of bank capital. The shortage of capital is a severe issue in the banking and financial system of the country. The problem is TDB controls the Central Banks, not the other way around.
ABM 5, 2019
Since the transition to the democratic system, one issue started to shape the society in Mongolia. That one issue is to create different ways to make money (mongo oloh arga). The ways how to make money powerfully shapes the image (dür törh) of contemporary Mongolia. One last example is, teachers demonstrated in the street and forced the government to increase their income, and demonstration was the last and only way. Recently Mongolians have discovered how politicians in Mongolia have been laundering dirty money. Parliament member used to have a budget of MNT 10 million to spend for their electoral districts, now the budget is MNT 1 billion. Also, another example is JDU funding (Jijig dund üildveriin san), which again shows how politicians made such funds an easy way to make money. It is a way to make a large amount of money with no or minimal expenditure. The amount of money to make is growing like a snowball. The most unfortunate thing is the mega project (tom toslüüd) such as Erdenet, Oyu Tolgoi and railway etc. are all turning to a target to make money. Therefore, Mongolians need a is a just and definite system of money making (shudraga todorhoi möngö oldog togtoltsoo). To create such a system is not an easy task. To have a good king or a president is not a solution. But the answer is education which is a topic everyone mentions. By respecting knowledge, education and science, Mongolians can make rapid strides. This is because many people in Mongolia have poor education, and they are accepting any money given to them by anyone. Unfortunately, education became business (biznes bolson) in Mongolia or another way to make money. Such a business instead is providing education, creating class, gap and conflict in the society.
ABM 6, 2019
There is a need for reform in the education sector. Because education has the most critical defining role in society in Mongolia. There are the following problems that need urgent solutions regarding the current issues of education. Secondary school, university and other educational institution director positions, and expert positions of those working in the Ministry of Education should be independent of politics and should not change after elections every four years. Those with specialist experience and knowledge should be selected within a fair, and the current leadership and managerial skill and capacity need reform. Further reform is also necessary for the ways of secondary school teaching and curriculum.
List three features that you think define Mongolian capitalism
On November 14th, 2016 we met originally with our Advisory Board and asked them to reflect on three features of Mongolian capitalism.
ABM 1 2016
- Power of networks
- Defying market principles
- Wealth above all else
ABM 2, 2016
- Two parties played with the national resource wealth
- Parties and the rich became the head of the state
- Rulers and ruling institutions are buying the state and state assets through the management of parties
ABM 3, 2016
- State is captured by non-transparent business – Erdenbilegism: a new phenomenon in Mongolia’s democracy
- Semi-capitalist society – Marching back to socialism
- Too large government – Fakestan
ABM 4, 2016
- Extractive industry dependent economy
- Oligarchical governance
- Neocolonialism, or the country is a neo-colony to multinational companies and economic powers such as USA, China, Canada, Netherlands and Australia.
ABM 5, 2016
- Relationship of Mongolia, China and Russia (transport corridor etc.)
- Mongolia’s third neighbours relationship
- Symbolic representation of Mongolia, China and Russia (Mazalai, Panda and Bear)
ABM 6, 2016
- Lack of information, knowledge and education of the rural population
- Violence toward rural women
- Influence of election in the rural regions
ABM 7, 2016
- Law implementation: common problem that occurs frequently is we have many world-standard legal frameworks, but lack their implementation. Here, people who are supposed to enforce the law could be well-informed or ill-suited, or some legal aspects are not just compatible with our level of development (think of anti-smoking law).
- Organizational check-and-balance: frequently, the balance between key organizations in the public sector is biased or leaned toward one side, that at the end of day, human factor becomes defining performance results. Thus, at some point, one organization becomes very active or powerful, it may seem our policy is focused on that part. Then, sometimes within the organization, an individual’s decision could be implemented unchecked.
- The extent of public sector involvement in the market: we’ve seen some back-and-forth thinking in terms of where the line should be drawn for the government to be involved in the markets. In the 90’s, popular thinking was laissez-faire economy, which now is transformed into more public involvement to regulate parts of the economy. It’s always in flux, a fight between where the balance should be (think of banking sector, which was freely regulated, now might become our Achilles hill).