By the way, how are the livestock?

The 2013 Mongolian presidential election has finally come to a close. Citizens took a whole day off to cast their votes. Sometimes, it feels like the average Mongolian is meant to live a life that is supported by the government, and take part in the political process at every level. First comes the election, then the victory celebration followed by the inauguration ceremony. Today, there have been discussions about whether the presidential inauguration should take place indoors or outdoors. This is a total waste of time because it doesn’t really matter where the ceremony takes place. The Naadam national holiday is also coming up, which means government officials are going to take an entire month off from work to attend naadams in the aimag and soums, go to resorts and maybe visit a beach or two.

There is a Mongolian saying, “By the way, how are the livestock?” There is wisdom in the simplicity of this question, so in the spirit of the old saying, let us ask how our economy is these days. What is happening in our economy? What is going on with the Chinggis bond money and its coupon payments?

The Ministry of Finance has spent a total of 35 million USD for the coupon payment of the Chinggis bonds (worth 1.5 billion USD) in the first six months. The same amount of money will be paid semiannually until 2017, when we will have to settle the main debt of 500 million USD.

N.Batbayar, the Minister of Economic Development, previously assured the public that arrangements had been made with the Mongol Bank to put no financial pressure whatsoever on the government to make the Chinggis bond payments. It is unclear how much he had to pay this time, but no one knows what will happen in the next four years. What is known now is that the responsibility of paying off the bulk of the debt shall fall upon the next government, not this one.

Instead of creating the burden of large debt, sovereign bonds should result in greater economic efficiency and higher living standards through increased productivity. Although the authorities have talked about spending this money on construction and development, all we can see is construction road blocks and new dirt roads.

If you carefully follow how the road projects are progressing, you will rarely see workers or machines working on weekends. Also, when you travel on the Nalaikh-Terelj or Songino roads, you will notice that the Terelj valley has turned into a large valley full of cars racing each other along the ten lanes. The Chinese construction workers, on the other hand, are erecting one 16 story building a month by working day and night. Take, for example, the building blocks across the Bayan Mongol district.

Our government borrowed a huge amount of money without an expenditure plan. And, the fact that they still have not decided what to spend the money on indicates how low the current capacity of our public governance is.

The law requires that, when purchasing goods and services with money from the public budget, there must always be a tender. However, this law is not being followed when it comes to the Development Bank processes. The Development Bank is supposed to be run in an independent, efficient way. It is said that a specialized loan committee that include representatives from each ministry will be established in order save time and make fair decisions.

While under a great amount of pressure, the Democratic Party is going to present its draft amendment to the concession and public procurement laws for urgent parliamentary discussion. The Chairman of the Standing Committee has acknowledged that the parliament lacked skills to manage the budget and proposed establishing a specialized agency for budget research. However, there is already a similar institution in place: the Center for Survey, Research and Public Relations. Nevertheless, it looks like every standing committee is going to have its own agency.

The government keeps expanding while the budget revenue continues to drop. Furthermore, our government now has another wallet called “government bonds” as well as another – “public budget”. A “wise solution” is in effect, that only a few members and supporters of political parties are making the final decisions about where the money goes. Infrastructure projects funded by bond money must be implemented in a timely and thorough manner, which will improve the business environment and resolve infrastructure issues. It would lead to reduced traffic jams, faster transportation services and, eventually, lower operational costs for businesses. Lower cost means enhanced labor productivity, increased income and, thus, greater collected taxes. This is the way the bond debt and its coupon payments should be cleared.

Who will be responsible for projects that fail to be implemented on time? Who will answer for corrupted tenders: the decision makers rewarded for their participation in the project, or the contractors who tried to accomplish more than their limited budget could allow?

Apparently, our government has no prioritization of tasks. It has been two summers since they started trying to build a road from downtown to the airport. Construction work for a 15 km road takes only two months in a developed country.

The public needs to know the full list of projects that are going to be carried out with the bond money and which companies are chosen to implement them – especially the road projects – and in what time frame.

The only available information at this point is that the Ministry of Road and Transportation is working with professional associations to select companies for the projects. Many complaints are being lodged that the road projects are being given to well-connected companies rather than the most experienced. Furthermore, its been reported that companies are passing on the projects to others for better pricing. Anyhow, every company has finished unsealing the roads allocated to them.

Mr. President, Ts.Elbegdorj, reminded us at the 2013 Mongolia Economic Forum, that every single dollar that we acquired by selling bonds must produce two dollars. What has happened to that directive today?

The President also said that no more than one third of cabinet members should be members of parliament at the same time. However, that policy has not been realized. What happened to the Chinggis bonds Monitoring Council that they said they were going to establish? Why bother in the first place if nothing they say comes true? The President was only elected for his second term because people trusted him to reduce the gap between words and actions for the next four years.

The 2012 budget deficit was equal to 8.2 percent of the GDP, which greatly exceeded the legal requirement of five percent. If we take into account the fall in coal exports and the 70 million USD owed for coupon payment, the budget deficit this year is likely to be more than what it was in 2012.

The current circumstances, where our debt mounting up, require us to rest less and work harder. Every single Mongolian must not forget about this huge debt and its 280 million USD in interest payments that we are paying each day. We should acknowledge that the burden of this debt shall fall upon our children. The government does not work well without the close supervision of the public. If we want to make greater contributions, rather than leaving a huge debt to our younger generations, we must oversee the politicians and their actions.


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Posted by on Jul 8 2013. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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