Speaker Z.Enkhbold discusses mortgage loan issues and election
The following is an interview with Speaker of Parliament and Head of the Democratic Party (DP) Z.Enkhbold about the mortgage loan program and the Election Law.
This interview has been edited for clarity.
Commercial banks suspended mortgage loans with annual eight percent interest rates before the New Year’s holiday, following the Constitutional Court’s decision. What’s your opinion on this?
Mortgage loans shouldn’t be handled carelessly. Lawyers created a new Mongolian term, “Baritsaalbar” (document of collateral) through the mortgage loan program approved in 2009. Baritsaalar is kept at banks. The law specified that transactions can be made with the baritsaalbar only with approval from banks. Previously, it was uncertain whether an apartment belonged to someone even if they managed to pay the full amount through a loan. After the mortgage loan was approved, individuals became unable to arbitrarily collateralize or rent their apartments unless they paid back their mortgage loans or got approval from the bank or mortgage company that have their documents of collateral.
Yet, the Constitutional Court cancelled this system, meaning that people can sell their apartments to whomever they please and that a document of collateral can be collateralized at multiple places. Even if you bought an apartment with a mortgage, you can now sell it to many people at the same time. Banks stopped the eight percent interest loans to avoid risks.
Around 200 families had paid the 30 percent down payment for housing purchase and were ready to take out the eight percent interest rate loans. The combined value of these people’s down payments equal to approximately 10 billion MNT combined with the 70 percent covered by banks. The State Housing Corporation would’ve transferred this money to national construction companies so that they can give salaries to workers and proceed to the next project. Only five households moved into new apartments after mortgage loans were stopped. If these 200 households had moved into their apartments, the next 1,400 households could’ve applied for mortgage loans and gotten a home. The Constitutional Court made a big mistake.
Presently, around 76,000 families have been housed through the eight percent interest loan. A little less than a third of these people had prior housing loans and transferred to the eight percent interest housing loan. The amount they had to pay decreased by two folds or more by transferring. Let’s say they paid 500,000 MNT a month before, but through the eight percent interest loan they only pay 200,000 MNT. This was an incredible saving. Yet, this is about to end.
Construction workers who built new apartments haven’t been paid yet. We are able to meet 60 percent of the national construction material demand domestically. The Constitutional Court’s decision is deadly to the construction sector. In fact, the construction sector was able to expand thanks to the eight percent interest loan, which created demand.
Houses and apartments are expensive purchases that has to be paid for 20 to 30 years. Mortgage is the optimal system used globally. The DP worked hard to establish this system, but the Mongolian People’s Party (MPP) stopped this. Regardless of the MPP, the DP will correct this issue at the parliamentary meeting.
The DP introduced globally practiced mortgage terms to Mongolia. We employed an American lawyer as advisor for drafting the Mortgage Law. He developed the law consistent to American standards. I don’t understand how this law violates the Constitution. The Constitutional Court has power to veto laws, but Parliament has power to pass new laws. Parliament will hold a meeting as soon as possible, within this week. We will discuss a draft bill on mortgages and do a polling within this week.
Will the draft bill be approved within January?
Yes. I can say this for sure.
Is it true that loan interest rates will decrease if the draft bill is passed?
The possibility to decrease loan interest rates has opened for the first time in 25 years. Loan interest rates depend on whether it’s for a mortgage or car. Banks determine the interest rate by the expense, or savings account interest rates. Presently, this interest rate is at 16 percent. Banks issue loans with a 20 percent interest rate after taking into account the inflation rate, wages for employees, and heating and electricity costs.
The reason we couldn’t reduce loan interest rates until now is because Mongolia’s inflation was always in double digits. The inflation rate dropped to 3.5 this year for the first time. This enables Mongol Bank to lower the policy interest rate to a single digit, which will also decrease savings account interests. Mongolians need to understand that decrease of loan interest rates lead to decrease of savings account interest rates.
The inflation rate was at 14 percent when the eight percent interest rate loan started. Mongol Bank deliberately issued the mortgage loan with a low interest rate. Thanks to this, the loan was successful and housed 76,000 families. Now, we have 77,000 builders in Mongolia. The Constitutional Court has made a decision harmful to tens of thousands of people in the construction sector.
Parliament passed amendments to the Election Law before the new year. Can you comment on this?
Mongolia has always had legislations adjusted to each election. We had separate laws for provincial and soum elections, city council election, presidential election and parliamentary election. A working group for the Election Law was established three years ago and was ordered to integrate these laws into a single legislation. A prominent new law was developed. I don’t think it’ll need amendment for some time. The Election Law is a law for electors, not for political parties.
The Election Law included proposals from parties that don’t have seats in Parliament, but we didn’t accept proposals to make the state cover all costs for holding an election. Someone proposed to revert back to a system to have people count votes manually. The automated counting machine was able to count three to four million public votes without any errors during the last three elections. This machine prevents risks of corruption, illegal acts, and abuse of power. It doesn’t drink alcohol or skip work. These things used to happen when votes were counted manually. The new revised Election Law kept all the good points of the previous version and improved areas that needed to be improved.
Provincial, city council and parliamentary elections will be organized together from now on. What are the advantages of conducting these elections at once?
Costs will be saved. The DP wanted to conduct all elections simultaneously, but due to opposition from the MPP, it’s been decided that soum and district elections will be held in autumn, while provincial, capital city council and parliamentary elections will be held in summer. This reduces election budgets of candidates and political parties.
The DP will combine and submit campaign materials of all candidates from our party to the Ulaanbaatar authority. We will be able to save costs and it helps the organization of elections. The DP believes that half of the objectives that we included in the Election Law have been met. In general, it is best to conduct all elections on the same date just like in the USA.
You will participate in the 2016 election as the head of the DP. Is the DP ready for the election? The MPP organized its third party meeting and announced that the party is preparing to participate. Isn’t it time for the DP to report on its activities?
Unlike the MPP, our party is very busy. It organized four regional conferences involving all provinces. All political party heads instructed members to start party activities so I have no choice but to focus on election preparation work. Members of the MPP are able to make time for election preparation as they haven’t got any work. The head of the DP is busy with state work in 190 soums, 15 provinces and eight districts.
Our party believes that it’s unnecessary to nominate many candidates like the MPP. The DP started Mongol 2020, a program to develop Mongolia from 2011 to 2020. We will not start a new program dedicated to the 2016 election. The first four years of Mongol 2020 program will be reported to the public. We will make necessary changes and develop plans for the next four years. Simply put, our action plan is ready. We will ask the public to give us the opportunity to continue our four years’ worth of work. GDP per capita will have increased by 2020. When that time comes, we will be talking about people with jobs and regular incomes.
The DP will not get hot-headed saying that we will win the election. We will not cease the eight percent interest mortgage loans or transfer ownership of corporate properties to individuals. Interests of many people will be abused if the reputation of the DP falls. 1,620 families were supposed to move into new apartments before the new year, but they couldn’t. I promised that I would house these people before Tsagaan Sar. I’ve only visited Buyant Ukhaa-2 residential town, but there are many empty building like Buyant Ukhaa-2. The main target was actually to lessen air pollution from ger areas. We could do many things that’ll bring us advantages during the election. However, we don’t want the public to suffer like this. The DP really doesn’t have time to go around submitting applications to the Constitutional Court. People should stop obstructing works that are going smoothly. You can do politics as the election date nears. There are many fields for this. However, I’d like to remind them not to meddle with key areas such as mortgages, market economy and the private sector.
Source: Daily Newspaper
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