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“The Foolish Glutton” and “The Last Station of the Mountain Goat1”

1 For not Mongolian readers: There is a very well-known Mongolian poem about an old, mountain male goat (ibex) that stands on the edge of a very high cliff in the Altai Mountains, his final station. He is pulled down the slopes by the heavy horns of tradition and his leadership is transferred to a stronger, younger goat. The poem is called “Tekhiin Zogsool.”

December 19, 2012

We Mongolians have a saying: “The foolish glutton watches his pot, but the clever glutton tends to his fire.”
The Mongolian government is gluttonous andindeed foolish. All of our recently elected representatives have greedily opened the lid of the pot and grabbed whatever has been ready to be taken. It seems, however, that the administration prior to the democratic revolution wasa clever glutton. The fire they originally started has been used by all succeeding governments for nearly 20 winters. Alas, everything has its limits and the fire is about to go out because nobody has kindled it. Mongolia and in particular Ulaanbaatar, is starting feel the cold and darkness. Our fire is in desperate need of kindling and I don’t just mean this metaphorically.
Last Monday evening most households in Ulaanbaatar were totally cut off from electricity. Families sat in cold, dark homes unable to cook their dinner. It was reminiscent of nights from the 90s when blackouts were so common that people didn’t even bother tocomplain while their babies were crying for food. The only difference this time was that many people “heavily tweeted” from their mobile phones to express their concern and discomfort.
Today no new building in Ulaanbaatar can be connected to electricity and heat. Electricity distribution is at its limit. If we cut off electricity to more than 100 buildings that were erected without permits and transfer it, the luckiest residents in these new buildings might have a chance to get warm. It’s not at all realistic to talk about 100,000 new apartments today. A few politicians have been toying with our minds and have simply “used up the fire.” Where is the 5th power plant they have been talking about?
The electricity supply to the Western districts of the city is restricted by two hours a day. It looks like they have no other way but to limit electricity usage one district at a time. This is because the 30-year-old distribution cables are too worn out and incapable of catching up with our steadily increasing demand for power.The situation downtown doesn’t look much better either. Most restaurants, cafes, shops and other service centers have moved into apartments. It has been many years since they started stealing from the residents by disrupting their electricity, heat and water supply. To use another metaphor -our electrical power stations are running like a worn-out GAZ-53 which is an ancient Russian truck. The engine is trembling, the wires are eroded and the headlights are blinking. Although the truck is trying to move forward carrying a load that is many times heavier than itself, it has become hardto determine if the truck is actually moving or has already stopped.
The government is responsible for preventing such disruptions. This is one of the reasons why government exists. Did they know that things would eventually turn out this way? Yes, they did. They knew about this looming situation very well, but making a positive change meant no gains for them.Their interest was more focused on getting wealthy quickly before the next election rather than looking beyond and making investments for a better future.
Big projects no longer make progress unless associates of decision makers are involved in the process. Political business groups are competing with one another in order to gain more members. Meanwhile, despite owning world class coal resources, Mongolians are about to freeze to death in the 21st century.
The question of which political party has the ruling power is of secondary importance. The government must fulfill its primary duties at all times. It’s like what Deng Xiaoping once said: “It doesn’t matter if a cat is black or white as long as it catches mice.” Our government pretends to achieve great things and sometimes actually makes a right decision. However, a new government usually destroys what the previous one did.
The alarm has gone off in the electricity system of Mongolia today and we urgently and simultaneously need to undertakethe following three measures:

INCREASING THE PRICE OF HEAT AND ELECTRICITY

Our electric power system has a deficit of MNT 50 billion this year. Its main equipment is too old and the distribution lines are eroded. Coal is also getting more expensive and one railroad has a monopoly on transportation.The government sets the electricity tariff in Mongolia, therefore the price of electricity inevitably reflectsits cost. If the government is too involved in the pricing policy, there will be a shortage of goods and commodities, and ultimately, they will completely disappear from the market. In order to ensure a continuous supply of electricity and heat, the government first has to set minimum and maximum price levels onlyand then eventually step out of the price-setting processto create competition.
The 72nd resolution issued by Parliament two years ago resolved that electricity and heat prices would be freed in the succeeding four years. Today the government of Mongolia is ignoring the laws because the legislative branch has become the executive branch themselves by nominating its members to the cabinet. A calculation suggested that low-income families would not be required to pay more for their basic electricity needs (up to 150 kilowatt per hour) while those who use more than 150 kilowatt per hour would be required to pay 15-20 percent more each year. However, the government hasn’t done this and they did not even look at consumer prices of factories and companies.The government is still supplying highly lucrative companies with cheaper electricity and heat. Nevertheless, most consumers and companies in Mongolia today are in a financially strong enough position to accept an increase in the price of electricity. The business world knows that without electricitythere is no tomorrow.
In order to look like a generous candidate to every voter, politicians keep promising that they will not increase electricity and heat tariffs. We are caught in their trap and our country faces the risk of slipping back into a primitive society rather than a market economy.The train has already left the station and all we can do is to shout after it.

REDUCING THE COST OF HEAT AND ELECTRICITY

Flattered by their so-called “legitimate monopolies,” those companies granted with the exclusive right to generate, transmit and distribute electricity must keep their operations and expenditure open to the public. It should be disclosed because public investment was made to these companies and their deficit is made up with taxpayers’ money. Mongolian politicians always forget the basic principle of democracy – everything that public money was spent on must be transparent to everyone at all times. After all, they are spending our money, not theirs.
Although 18 big electric power companies in Mongolia are called “shareholding companies,” they are actually all state-owned. Their shares belong to only three parties: the energy ministry (41 percent), the Ministry of Finance (20 percent) and the State Property Committee (39 percent). Those who sit on the board of directors of these companies never report to the public nor allow supervision and oversight. Instead, they use the backdoor to appoint their associates to good positions or let their senior people or ministers take over the company under the name of “privatization.” Therefore, 49 percent of the shares must be urgently sold on the stock exchange on the condition that one shareholder can’t own more than 5 percent of the shares and the buyer cannot be a foreign state-owned company.This way, shareholders can exercise real supervision over the company and its activities.
These companies claim that they used to spend one fourth of the revenue they produced in the past, but managed to cut it down to 15 percent. However, this percentage is too high compared to their counterparts in other countries and their efficiency is too low. The only way to check the real total expenditure, to improve labor productivity and to increase efficiency is to introduce legitimate supervision of shareholders. If there is neither privatization nor supervision, no principal difference will occur regardless of how much the price is increased.

MAKING INVESTMENTS AND BUILDING NEW SOURCES OF POWER

They have been talking about making more fire and building a new power plant for 10 years. They laid foundation stones three times and construction companies (who were to build the plant with their own funding) were even chosen. However, there hasn’t been any actual work done except paperwork. The foolishly greedy have led us to a dead end.
If we do not start building the 5th power plant somewhere- maybe in Khonkhor, construction work will take at least three to four years. As it is a new location, transmission and distribution infrastructure will have to be built with public budget on time. If we fail to do that, it will take a much longer time. Another reason why it has to be done quickly relates to the current catchy trend whereby associates of authorities gather information from them before anything happens, buy the designated land and then sell it back at an expensive rate. The issue of land regarding the 3rd power plant has not been resolved due to thisexact reason.
If we involve the private sector in the electric power sector under the BOT (build-operate-transfer) principle, it will create competition and give customers more choices. Also, this has to be done with the long-term objective of exportingpower surpluses.
The electric power sector in Mongolia can only get out of this hole by urgently and simultaneously taking these three measures.
The reason it takes so long to make political decisions is that there is no real opposition. Due to the absence of a strong opposition, the Mongolian government lacks a system of accountability. Therefore, political parties have been using their opponents’ secrets to keep their own secrets safe.
We need to improve governance in the power sector. In order to do so we should reflect upon the experiences of Australia and New Zealand, create a transparent, accountable system by encouraging cooperation between politicians, civic society and regulators and develop the industry in a sustainable, environmentally friendly way.
The government can be greedy, but let it be clever as well. Without electricity, every other economic sector will come to a complete halt because electricity is one of the most basic infrastructures.

Short URL: http://ubpost.mongolnews.mn/?p=2306

Posted by on Dec 27 2012. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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