S.Batbold: Mongolian economy can grow rapidly for the next 20 years


The Mongolia Economic Forum was held from March 24 to 25. The following is an interview with former Prime Minister and member of the Mongolian People’s Party S.Batbold about the forum and Mongolia’s economic development.

-Why was the Mongolia Economic Forum established?

-There’s no place where development policies are discussed and agreed on with the public. Discussing development policies with a small number of people including MPs, governors and heads is deficient. It’s also wrong to do populism and make policies out of most discussed or voiced subjects. We need to approach the matter in a more reasonable, researched and scientific manner with participation from scientists, researchers, entrepreneurs and economists. We need to set a standard that will include ideas from international institutions that work with Mongolia, including international banks, financial institutions, representatives of investors and the public in governmental policies. To determine development plans for next year or the medium-term, and further for the long-term, we established the Mongolia Economic Forum. It was decided that we would emulate the Davos World Economic Forum.

-Were you able to set the standards to listen to the necessary people when determining governmental policies?

-I believe that the first meetings were beneficial to the society.  It became an orientation for us. We opened our ears and received pluralistic opinions. There were more improvement and new aspects in the last two year’s forums. For instance, a discussion about Mongolia was held in Davos and that scenario is to be introduced in the upcoming forum.

The drawbacks are that from the observations from the last two year’s economic forum, it was directed towards one side – the authority. There’s a deficiency in promoting it to the public, to make it more open and give access to counter forces and innovators.

-Do you think that the state really listens to the people before?

-It’s insufficient to listen to opinions of the people once in a meeting and cast them away. During our time, we submitted ideas to include participation from civil society when determining policies and developing legal frameworks for them. According to this, the government issued a document for civil society to adhere to the policy. Meetings and discussions were organized for this.

Economic development and other big issues should be decided based on substantial research, analysis and calculations, not just on populism. As a result of the prolonged attempts to introduce this principle, if the economy had a minus indication in 2009, starting from 2010, it was slowly rising and in 2011, it reached up to 17 to 18 percent increase. It intensified in 2012. However, it indicated only 13 percent last year. Measures and decisions made during the previous government were seen as the foundation of stable long-term growth of economics.  The World Bank, International Monetary Fund, World Economic Forum and institutions that conduct research for competitiveness made evaluations that Mongolian economy is stable for long-terms and will increase by 15 percent on average. Evaluations show that the economy can grow rapidly for the next 20 years.

-What is the current economic growth rate?

-The growth rate is currently slowing down. The economic growth of 17 to 18 percent became 11 percent now. This indicated that growth rate has fallen.  There is growth to a certain degree. The speed slowed down, not growth. Substantial risks and challenges for further prolonging of growth can be observed.

-To increase sustainable growth rate, what kind of solutions do you hope to accomplish from this year’s economic forum?

-I hope it starts from ordinary things. Decisions of the government should be more close to the reality and more focused on giving feedbacks and results. The government should utilize its lever mechanisms including taxes, loans, quota and permit system to give correct, fair and open support to sectors that are trying to create employment. If not, business entities are decreasing their employment. Companies no longer employ new staff and are decreasing the amount of staff and salary. The previous government intensified vocational training centers and employed a lot of workforces from the centers to business entities. Now, there is no other choice but to decrease expenses through dismissing employees and reducing the number of local governments. This is a very realistic example of financing of business entities of today. The current conditions seems to be rather difficult. I do understand. During this difficult time, with dropped MNT exchange rate, in order to help and show a little bit of support to the people, we must increase salaries and pensions.

It’s nice to say big numbers of economic growth rate at macro levels. What’s most important is to calculate how that big sum is going to affect families and how it impacts their lives. It should stick to the people. Governmental support should be practical and economic growth should be allocated fairly to the society. With this principle, we increased salaries and pensions by 2.5 times for the last four years. However, pensions haven’t increased to levels we’ve discussed, neither has anything been implemented for salaries.

-Do you agree that there are substantial external reasons for the tough economy?

-I do, there are external substantial forces at large. In the world market, the price of mining products has relatively decreased. There are corresponding growths and declines. Now it’s reviving and the right approaches are being observed. American and European economics have started to revive. This isn’t difficulty only seen during this government. There were economic crisis in 2008 and 2009. It wasn’t easy at the time. Now, there aren’t external difficulties or challenges worse than those times.

-During the “united government,” apart from Oyu Tolgoi, Mongolia was supposed to repay 350 million USD worth of loans in the form of coal to China’s steel giant CHALCO by the end of 2013. It seems that it still hasn’t been completely repaid?

-It was a contract that was to finish within 2013. It was possible. This contract wasn’t made by the government. It was made within legal frameworks and world market price and formula boundaries by state industrial enterprises. As for the government, they only provided for human development funding sources with the revenue from mines in accordance to decisions made by the parliament. We didn’t say that it was an excellent contract. We can’t deny that there were areas that could’ve been improved. However, after election, talks about politics and economics were circulating. The deadlines were prolonged and a lot of time was taken.

-This government is actually said to have significantly more funds than the previous cabinets. When it has funds, why is the economy troublesome and workplaces decreasing, and why can’t they find financial sources for supplementary pension and salary?

-They say that the previous government left debts. In spring 2012, we launched bonds and handed over 580 million USD to the current government. The current government created Chinggis and Samurai bonds and the Central Bank of Mongolia gave three trillion MNT to the Price Stabilization Project. The government gave securities of one trillion MNT to domestic market. Apart from that, they made swap contracts with neighboring countries. From this, there are plenty of funds and financial sources. Spending money from bonds outside of the State Budget isn’t correct legally. Three trillion MNT given by the Central Bank to stabilize prices should also be recorded within the State Budget.  The World Bank and International Monetary Fund have noted this and are warning to make adjustments. This must be rectified.

Instead of criticism for spending of these financial sources more transparently, many are criticizing the fact that it is used on projects to support their policies and companies. Direct investment to the country has declined. From this, you can see the lack of policies for investments. Mongolia only thinks of external sources when they hear of investments. There are domestic investors too. Construction, agriculture, small and medium enterprises and all sectors needs support from investors. We need to hasten road construction, railway, energy and industrial projects and increase involvement of the private sector. We need to show investors that governmental policies are more comprehendible, stable, competitively, reliable, long-term and that they can trust the government. We can give this trust through fair activities and just policies. Wrong decisions and mistakes of the government will lose their trust. We need to always concentrate on this.

-The main role of opposing parties is to correct and fix mistakes of authorities through criticism. Why isn’t your party fulfilling its obligation?

-I do admit that our party isn’t adequately fulfilling its obligations as an opposition. There are factors in the legal framework that don’t allow us to fully conduct opposing works. MPs from our party haven’t had a union for around a year. Additionally, even now, we’re unable to fairly and righteously enter the Standing Committee. A third of the MPs are members of our party. Yet, when we go to the Standing Committee, we only take up to a fifth or a tenth. Only two members are seated in the Standing Committee with 20 members. The rest aren’t in the Standing Committee, and instead they established a Complaint Standing Committee. They tell us that we can voice ourselves in any Standing Committee but we want to exercise our rights to oppose decisions. We are in a situation where we are limited by the legal environment.

Still we are expressing our position as the opposition. There are criticisms that it’s insufficient and weak. We do have places where we lack knowledge and can’t do populism effectively.

We are limited even in media environments. We think that it’s more beneficial if we voice ourselves based on substantial and researched facts in order to keep policies fair and correct.


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