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Ideologies of mortgage financing in Mongolia

By Rebekah Plueckhahn, on 16 March 2018

Rebekah Plueckhahn is a Research Associate on the Emerging Subjects Team at UCL – Anthropology. This post draws from research that forms part of her book Shaping Urban Futures in Ulaanbaatar forthcoming with UCL Press.

Visiting Mongolia in November-December 2017, many people I spoke to were preoccupied with the topic of the current influence of the recently implemented oversight by the International Monetary Fund (IMF) and their influence in numerous sectors of Mongolian economic governance as they prepared to make sizable loans to the country. The influence of the IMF is currently extending into a vast number of areas, including macroeconomics, national ministries, as well as Ulaanbaatar municipal budgets. One area that had implications across these areas was the IMF’s current recommendations for the systems of financialisation that have made Mongolia’s 8% mortgage (ipotek) program possible through Mongolia’s secondary mortgage market.

As part of their recommendations, the management of Mongolia’s secondary mortgage market is being transferred away from Mongol Bank (the Central Bank of Mongolia), to the government, in particular, the Ministry of Finance (IMF 2017, 15 and 67). This has come as part of redefinitions and restructurings of the role of Mongol Bank vis a vis the Mongolian government, that has been cemented through the recently passed amendments to the töv bankny tuhai huul’ or the Law on the Central Bank of Mongolia. Part of these restructurings has been attempts to increase the central bank’s independence from government, including limiting its influence in state budgets, and putting measures in place so that it can better act as an agent of government, more involved in price stability rather than inflation and exchange rates (IMF 2017, 44). Talking with people and reading about these types of restructurings brought into view different anticipatory conceptual ideals of what an economy or financial arrangements should look like or become. The IMF recommendations followed their Safeguards Assessment of 2017, an initiative that encourages standardisation of central banks internationally. This forms part of a much longer history of central banks worldwide becoming institutions that adhere to the ‘rules and rhythms of the market’ rather than political influence (Bear 2015, 190-193). Mongolian parliament member D. Damba-Ochir, quoted in news outlet montsame.mn, stated that the amendments to the law on the central bank will encourage togtvortoi baidal or stability in times of financial crisis (ediin zasgiin hyamral). Another person I spoke to said the move to transfer the ipotek program to the Ministry of Finance was done to encourage sustainability.

Expanding monetary circulations

Hearing these updates at the end of 2017 gave me an opportunity to reflect upon other perceptions on the roles and make-up of Mongolia’s secondary mortgage market and the ethics of mortgage provision. It also gave me a chance to reconsider the links between these factors and the ways this scheme has unfolded and manifested throughout areas of Mongolia’s systems of financialisation, built environments and personal spheres. During the course of my research from 2015-2017, different manifestations of economic ideologies have proliferated throughout the entangled assemblage of actors that comprise Mongolia’s banking and construction sectors. Through following different, interlinked forms of monetary circulation (möngönii ergelt) that allow people to access apartment mortgage financing, what I was alerted to were the different and sometimes (but not always) competing perceptions of how things should be and how the housing ‘market’ should be formed.

Out of the multiple influences of a slowly emerging housing finance program during the 2000s, initiated partly through assistance from the Asian Development Bank and USAID, as well as a hugely increased housing stock brought on by Mongolia’s speculative boom in foreign direct investment from 2009-2012, Mongolia’s mortgage ipotek system was launched in 2013 as an attempt to reconcile the huge demand for housing and the lack of affordable mortgage financing then available. This mortgage system, run by the Mongolian Mortgage Corporation (Mongolyn Ipotekiin Korporatsi) (MIK), provided an interlinked secondary mortgage market through funds issued by the Central Bank of Mongolia to participating commercial banks, allowing them to issue 8% interest ipotek (mortgages).

The 8% interest ipotek is the only kind of more affordable form of housing finance available on the market in Mongolia. It is also quite new. The alternative, for apartments bigger than 80sqm, is to take out a oron suutsnii bankny zeel (apartment bank loan), a loan drawn from savings within commercial banks themselves (savings-based loan), which is often offered at 17-20% interest and a shorter time frame in which to pay it back. For the 8% interest ipotek mortgage, the 30% deposit and the considerable employment history required in order to qualify for it means that this option often does not meet the intended market of low-middle income buyers, nor has it allowed a great deal of people from the peri-urban ger areas of Ulaanbaatar to access apartments. However, among people who can afford it, the demand has been, and remains, extremely high. However, due to a depreciation of the Mongolian tögrög and a lack of funds to inject in the system, the issuance of the 8% ipotek loan from the central system has been varying, including it being paused at the end of 2015, and resumed in varying ways at different points since.

Discussing 8% ipotek mortgage issuance with loan officers at different banks in November 2017, I was informed about the high demand for these mortgages and the fact that some customers are still waiting for money to appear even though their mortgages had been approved a year ago. Attempts to meet this high demand have given rise to different kinds of monetary circulation in order to make this possible. Expanding beyond the secondary mortgage market, within Mongolia the systems of financialisation and monetary links comprise of an ever-expanding set of circulations, arrangements, exchanges and connections. While the economy has stalled, the 8% interest mortgage has remained a kind of idealised form of housing finance regardless of the changing nature of the systems that support it or the fluctuating levels of funding different economic institutions receive.

One such way to meet this demand has been the cooperation between banks and construction companies in an attempt to maintain the 8% ipotek mortgage as an option. Speaking with a loan officer in a bank in Ulaanbaatar, they told me how customers can qualify for 8% interest house loan through their bank if they buy an apartment in buildings built by particular construction companies. This circulation of money between a bank, an individual and a construction company allows construction companies a better chance of attracting customers in order to recoup construction costs through attempting to meet the high demand that the system will no longer support. These ‘circulations’ sometimes consist of the conversion of other forms of capital into an expanded type of circulatory network. As seen in the following advertisement posted in January 2017, this construction company at that time received land (including compensating for self-built buildings or baishin) and cars in lieu of a 30% down payment (urd’chilgaa tölbör):

Figure 1: In January 2017, a construction company advertises a variety of different and flexible conditions on acquiring an 8% interest mortgage through their partner bank, including items that can be accepted in lieu of a deposit. They promise a ‘quick decision’ on apartment loan applications.

Considering the construction company’s role in promoting arrangements like this expands our understandings of how Mongolia’s secondary mortgage market can be conceptualised and redefined. During fieldwork in 2015 and 2016, construction companies were often engaging in forms of bartering of cars and building materials in order to complete projects and sell apartments. Collaborating with banks forms another aspect of doing business.

Expanding ideologies

Such a collaboration between a bank and construction company that provides a different way of financing of a singular (relatively) affordable option allows banks to continue to participate in a form of mortgage financing in the hope that the secondary mortgage market will become increasingly reliable. The idealisation of 8% interest ipotek mortgage extends not only for its ability for a wider group of non-elite people to buy apartments, but also an idealisation of the system itself and what it can bring to the Mongolian economy. Echoing in a different way the IMF stance outlined above, one loan officer told me the secondary mortgage market could ‘ediin zasagiin zöv goldrild oruulah,’ or ‘turn the economy onto the proper course.’ While people are also skeptical of the different arrangements making mortgage financing possible, in the minds of many people the system initiated by the Central Bank exists in its potentiality as much as its practice. Mongolia’s secondary mortgage system is quite new, and like other arrangements and entanglements that make up the mortgage market, it is still in the making. In the meantime, people rely on other connections (Narantuya and Empson, forthcoming), that support this system from within (Maurer 2012, 414). Its proposed transfer to the Ministry of Finance in September 2018 (IMF 2017, 47), will form another substantiation of this network’s financialisation that will undoubtedly give rise to new political and economic relationships, connections and circulations. These, like other forms of financialisation, will further shape this nascent but important network and continue to expand and give rise to different economic ideologies within Mongolia.

I’d like to sincerely thank Batbayaryn Erdenezayaa for her assistance with this research.

References:

Bear, Laura. 2015. Navigating Austerity: Currents of Debt Along a South Asian River. Stanford, California: Stanford University Press.

Bumochir Dulam. 2016. “The Politics of the Mortgage Market in Mongolia.” Emerging Subjects Blog, 29th January 2016. https://blogs.ucl.ac.uk/mongolian-economy/2016/01/29/the-politics-of-the-mortgage-market-in-mongolia/. Accessed 5th February 2018.

International Monetary Fund. 2017. “Mongolia – First and Second Reviews under the Extended Fund Facility – Press Release; Staff Report; and Statement by the Executive Director for Mongolia.” Washington DC. December 2017. https://www.imf.org/en/Publications/CR/Issues/2017/12/21/Mongolia-First-and-Second-Reviews-Under-the-Extended-Fund-Facility-Press-Release-Staff-45505

Maurer, Bill. 2012. “The Disunity of Finance: Alternative Practices to Western Finance.” In The Oxford Handbook of the Sociology of Finance, 413–30. Oxford: Oxford University Press.

Narantuya, C. and Empson, R. (Forthcoming) ‘Networks and the Negotiation of Risk: Making Business Deals and People among Mongolian Small and Medium Businesses’ Central Asian Survey.

The Black Box of Presidential Politics

By Bumochir Dulam, on 17 June 2017

This blog was co-authored by Bumochir Dulam and Rebecca Empson.

 

As Mongolians are getting closer to vote for their new President, campaigning among the three candidates, M. Enkhbold from the Peoples Party, Kh. Battulga from the Democratic Party, and S. Ganbaatar from the Revolutionary Party, is in full swing.

Like last year’s parliamentary elections, rumours circulate as to the motivations, characters, and aims of the three candidates, and speculations abound about whom is ‘behind’ (or supporting) whom (see our blog post). ‘People [are] constantly searching for meaning – connections and explanations – in actions they [find] difficult to read and understand. In fact this searching for meaning and speculation is [very much] what politics is in Mongolia. It is the speculation of connections and motivations beyond the visible and tangible. To understand politics – or to think politics – is to understand the underside of things, beyond the way things appear to the ordinary eye, to uncover the workings of a kind of magic or religion.’ (Rebecca Empson, 2016).

In this post we discuss rumours circulating around the use of Electronic Voting Machines (Mng. Songuuliin Khar Mashin, coll. Khar Khairtsag, ‘Black Box’) in Mongolian elections, and the President’s involvement in securing his successor. In doing so we extend the use of the phrase ‘Black Box’ to explore aspects of Mongolian politics that are unclear or opaque to the general public.[1]

***

Against the background of the 2008 July riots, which were sparked by allegations of fraud surrounding the legislative election and which lead to a state of emergency which lasted for four days and included five civilian deaths (cf. Kaplonski, Delaplace, and Sneath 2008), and in order to go some way in countering speculations of tampering with votes, in June 2012 Electronic Voting Machines were introduced to count votes in the parliamentary elections.

The infamous ‘black boxes’ (Mng. Khar Khairtsag) (called ‘New Image Cast’) were brought from America, from a company called ‘Dominion Voting’, by a Mongolian company called Interactive.

Black Box

Over 2,500 ‘black boxes’ were used throughout the country in the 2012 Parliamentary elections.  Source: www.baatar.mn

 

While some doubted their impartiality, many were impressed and relieved at their implementation, believing that the black boxes were secure and would eliminate human error and bias in counting votes. Results, it was reported, would be sent immediately to the General Election Committee, avoiding manual tabulation by local election officials.

However, on June 30th, 2012, the Mongolian People’s Party and 8 smaller parties questioned the use of the machines and called for a recount of the votes by hand. In contrast, the Democratic Party, headed by Ts. Elbegdorj, backed the automated system and became the majority in the new coalition government.

Despite their alleged ‘impartiality’, speculation has continued to circulate about the possibility that the khar mashin’s are rigged or can be ‘hacked’ (songoliin haker) (cf. Oldoh 2017). The General Election Committee (Songuuliin yeronhii horoo) maintains and runs the black boxes and its IT officers are in charge of installing and updating programs on the machines (Bat-Ireedui 2015). According to some, this means that powerful politicians could very well influence and manipulate the General Election Committee, making sure the machines were used for their own means.

On the 10th December 2015 a protest was arranged in Mongolia against the use of electronic voting machines in elections. On the same day, Delkhiin Mongolchuud Radio posted a Mongolian dubbed version of the American film ‘Hacking Democracy’, directed by Simon Ardzzone. This film showed how elections could be tampered with using various kinds of technology, including the Electronic Voting Machines, and emphasised how they could ‘steal’ (luivar) votes. On the same day as the film circulated a protest was arrangedfor a fair election without the use of the corrupt black machine’ and an effigy of the ‘khar mashin’ was burnt in Ulaanbaatar.

Burning of a Black Box Effigy. Text on box reads: ‘Black machine for vote counting’ . Source: UBS.MN

Burning of a Black Box Effigy. Text on box reads: ‘Black machine for vote counting’. Source: UBS.MN

 

In 2017, further protests were arranged by the ‘Free Association of Elders’ (Ahmadyn choloot holboo) (Olziibayar 2017), ‘United Association of non-party citizens’ (Nam bus irgediin negdsen holboo) (Urantsetseg 2017), and the ‘Fair centre’ for the protection of victims’ rights and interests (Hohirogchidyn erh ashgiig hamgaalah ‘shudraga tov’) (Uchral 2017) calling for an end of the use of Electronic Voting Machines to count election votes.

Regardless of such protests, the electronic voting boxes will be used in 50 % of votes in the up-coming presidential election, despite rumours circulating that Ts. Elbegdorj controls the very black boxes that he used to bring himself and his own party into power. Indeed, people speculate that he can determine their outcome.

This idea is so prevalent that Kh. Battulga, the candidate of the Democratic Party, is now suspected to be involved in an attempt to buy the very same machines from America for use in the up-coming elections to count his own votes. M. Udaanjargal, his Political Advisor (zovloh), is now under police investigation for attempting to purchase the boxes from the American company ‘Dominion Voting Systems’ (Od 2017). If this rumour is correct, then it is held by many to confirm speculation that the electronic voting boxes can be used to hack votes.

***

Rumours over Elbegdorj’s ‘ownership’ and control over the black boxes extend to speculation about his control over the whole elections. The black boxes and uncertainty over the ‘true’ power behind them becomes a metaphor for the different candidates and questions over who actually ‘controls’ them. In this murky world of political wrangling people speculate that Elbegdorj is in fact behind the appointment of all three candidates, having deliberately supported them at various times, and put them in place to rig the election in order to determine his own succession.

A major reason for this, it is speculated, is to secure himself against future corruption charges (particularly the Erdenet 49% share, etc) once he has seeded his position. Attempting to align himself with all three candidates, he hopes to avoid any opposition that will come to question his reign as President.

Such speculation circulates along the following lines: once a major donor and founding supporter of HUN Nam (Hodolmoriin Undesnii Nam – the National Labour Party), he is behind the appointment of the candidate S. Ganbaatar. He is also a supporter Kh. Battulga, who supported Elbegdorj’s presidential campaign eight years ago, and who at this election seems to be garnering the most public support. However, these two might be considered mere puppets for his steadfast support of M. Enkhbold for President, whom many in fact consider to be the only ‘real’ political candidate.

Despite his political credentials, many worry that M. Enkhbold’s appointment could provoke riots among the public who largely support Kh. Battulga (as shown by the wide range of people who supported him when his offices were raided last year), and at worst burn down the People’s Party building, as in the 2008 riots.

Rumours also circulate that Elbegdorj is protecting himself against future corruption charges by confirming his connections within the MANAN group or faction (frakts). MANAN is a term derived from two acronyms: ‘MAN’, the acronym for the Mongolian People’s Party, Mongol Ardyn Nam, and ‘AN’, the acronym for the Democratic Party, Ardchilsan Nam. Pairing ‘MAN’ with ‘AN’ makes the Mongolian term for ‘fog’ (Manan), hinting at the blurred and opaque character of Mongolian political alliances and factions.

It is speculated that the key people heading the MANAN faction is M. Enkhbold, chair of the People’s Party, current speaker and presidential candidate, and Ts. Elbegdorj, the current President of Mongolia. These high-ranking politicians within MANAN are seen as the most powerful politicians in the country, wielding the most power. Elbegdorj’s close association with MANAN, his control over the black boxes, over the supreme court, over the constitution, over the media, and, indeed, over the outcome of the current election leads some to refer to him as the ‘Khaan of Mongolia’.

Ts. Elbegdorj honouring the Black State Standards at Burkhan Khaldun. Source: http://old.eagle.mn/content/read/32090.html

Ts. Elbegdorj honouring the Black State Standards at Burkhan Khaldun. Source: http://old.eagle.mn/content/read/32090.html

 

No wonder, then, that the appointment of some candidates over others, and the control of certain voting systems is thought to be highly divisive.

Attending to the circulation of such speculation and rumour in this blog piece is not meant to ‘expose’ some sacred truth behind the current ‘fog’ of democracy. Rather it alerts us to the form that politics is currently taking in Mongolia. Through this we see that trying to uncover motivations and speculating about new ones is a major feature of political conversations among the general public. Once this fog has cleared, it is hoped by many that the ‘true’ nature of what politics should be about will be allowed to flourish. Perhaps then the black boxes will come to symbolise something entirely different.

 

References:

http://politik.mn/post/3796

http://www.bataar.mn/10040364

http://blogs.ucl.ac.uk/mongolian-economy/2016/08/17/political-atmospheres-in-the-lead-up-to-the-parliamentary-elections-2016/

2008 ‘The end of post-socialism? An account of the 1st of July riots in Ulaanbaatar,  Mongolia,’ Kaplonski, Chris,  Gregory Delaplace and David Sneath; Inner Asia 10(2): 353-365.

Bat-Ireedui, J. 2015. Who and how maintains the black machines. MGLRADIO102.1.  http://mglradio.com/home/?mid=fastnews&page=8&document_srl=21737

Od, E. 2017. “Jenko” songuuliin “har mashin” hudaldan avchee (“Jenko” bought election “black machines” ). http://www.shuurhai.mn/?p=150846

Oldoh, Ch. 2017. A. Erdenebayar: Manaid ashiglaj baigaa snala tooloh mashiny zoriulalt n oor (A. Erdenebayar: Vote counting machines we use in Mongolia is designed for different purpose). http://sonin.mn/news/politics-economy/79123

Olziibayar, T. 2017. G. Baasan: Yeronhiilogchiin songuuliin dung garaar toolohyg shaardaj baina (G. Baasan: Demanding to count presidential election votes by hand). http://www.ikon.mn/n/10wt

Urantsetseg, U. 2017. Iregdiin sanalyg garaar toolohyg urialj medegdel hiiv (Made a statement appealing to count peoples’ votes by hand). http://medee.mn/mobile.php?eid=93422

Uchral, B. 2017. Bid garaar toolj nudeer harj yeronhiilogchoo songomoor baina (We want to elect our presdeint by looking with our eyes and counting with our hands). http://www.ikon.mn/n/10yt

 

[1] In English and Mongolian the term ‘black box’ or ‘khar khairtsag’ is a metaphor for a system where you can see what is entering and exiting but you do not know what is going on inside the system.