June 7, 2017

MONGOLIAN PRESIDENTS AND CRISES

The 2017 presidential election in Mongolia has recently entered the spotlight of Mongolians and international commentators. Foreign investors are postponing their business decisions until after the election results come in. It partly raises the questions whether presidency – as an institution – would impact economy.
If our government is likened to a tall tree, the people would be the root and the government would be the body. The tree would have three branches: legislative, executive, and judicial. The president, who is the leader of the state and the symbol of unity, would be the peak of the tree. The law determines the relationship between the president and the three branches.

The president’s relationship with the parliament focuses on initiation of laws and placement of veto. When it comes to the government, the president proposes the candidate for Prime Minister to the parliament, after which the Prime Minister – in consultation with the president – sends the proposed structure of the government to parliament. The president has special privileges in his or her relationship with the judiciary branches – appointing the Justice and other judges of the Supreme Court. Also, the heads of the Independent Authority against Corruption and the General Intelligence Agency are appointed in consultation with the president.

If the presidential institution succeeds in evaluating how these important institutions are managed, the president will be able to impose a direct influence on the effectiveness of government operations. This influence would have an indirect manifestation on economy. It is a completely different question if we ask whether our presidents have been able to do that.

Let’s look at some examples of how and what macroeconomic issues were resolved or left unresolved during different presidencies. Since 1992, Mongolia has had six elections and four presidents. P.Ochirbat was elected as President in 1993, N.Bagabandi in 1997 and 2001, N.Enkhbayar in 2005, and Ts.Elbegdorj in 2000 and 2013.

President and economy

Every president has been active on the foreign relations front, paying official visits to many countries and being involved in obtaining foreign aid and attracting investment. If you look at the domestic scene, Ochirbat initiated a program named ‘Gold’. Mongolia mined 218 tonnes of gold in 1992-2002. The privatization law was passed in 1995, which led to the privatization of half of industries, and 90 percent of livestock.

N.Bagabandi prioritized maintaining the symbolism of the presidential institution more than having an impact on economy. During his presidency, nearly 80 economic entities went from public to private ownership.

N.Enkhbayar commenced the Tavan Tolgoi project because he had control over all branches of the government. During his presidency, the privatization was boosted, with more than 70 state-owned entities privatized in 2004-2008.

During the time of President Elbegdorj, the privatization almost stopped, and more public entities were established. Except for the transfer of 49 percent stake in Erdenet (which was bought from Russia with his own involvement) to the government ownership, President Elbegdorj has neither initiated laws against increasing public ownership nor vetoed such actions. Although President Elbegdorj initiated public governance improvement works such as ‘From big government to smart government’ and ‘Glass account’, the government has kept growing big, and corruption has flourished.

President and government debt
N.Enkhbayar had 10 billion USD that was owed to Russia written off. When N.Enkhbayar started his presidency in 2009, Mongolia took part in an International Monetary Fund (IMF) program and received a loan of 229 million USD. Exactly eight years later, we can see that Mongolia is once again part of another IMF program. These two IMF programs have the same objective, but different sums – one is 20 times larger than the other. The purpose of the programs is to improve the budgetary discipline, support the independency of the central bank, strengthen the financial sector, and protect the vulnerable groups in society.
President Ts.Elbegdorj has said countless times that the cause of the current economic decline in Mongolia is the corruption in the government, not a problem in economy. However, he has not managed to take any real, brave actions. The corruption crimes went on, and many of the cases ended up being forgotten with the culprits pardoned.

Before casting the vote, the people of Mongolia need to know what our next president intends to stop this downward spiral when the country is on the brink of insolvency – settling one debt by obtaining another loan.

President and foreign investment

Although it has been widely said that foreign investment is essential to the development of Mongolia – a country with a small population and a small economy, our presidents have not been able to take any substantial measures. In most cases, they have mixed it up with domestic investment and viewed as such.

Foreign investment is about not only the additional monetary value coming into domestic economy, but also the new technology, know-how, and management that come with the money. Due to the failure of passing laws that acknowledge and support these differences between foreign and domestic investment, Mongolians today are seeing foreigners making small investments, getting the benefits of being an investor, and doing the work that could have been done by nationals.

Domestic investment is a normal expansion of businesses. The key is that – regardless of whether the company is national or foreign – its operating environment has to be stable and clear to understand. But Mongolians today are going abroad in large numbers, escaping the unfavorable business environment on our home soil, let alone the foreign investors. The Korean ambassador has recently mentioned that there are currently 36,000 Mongolian workers and students in South Korea, and nearly 10,000 applications have been received every month since the start of the year.

Before casting the vote, the people of Mongolia want to know how our new president views this situation and what he is going to do about it.

President and the rule of law 

The rule of law means all social relations are conducted under well-established laws and rules, with less arbitrary exercise of power by individuals. In order to achieve it, political and economic institutions have to be well developed. In a country with the rule of law, the judicial branch ensures that the law is applied equally to everyone, private property is protected, and agreements are upheld. It can be seen from the rule of law indexes developed by the World Bank that Mongolia has a huge gap to make up for.

The 2015 indexes such that Mongolia scored 0.39 and ranked 112th out of 192 countries. Our presidents have always thought that replacing the head of the judicial branch was a reform in the rule of law.

On the other hand, our presidents have been widely exercising their power to veto and to initiate laws. The four presidents have placed a total of 53 vetoes, 75 percent of which were accepted by the government. These vetoes were related to the government, parliament, amendments to the constitution, government structure, political parties, taxes, and judicial powers. President Ts.Elbegdorj has initiated 63 laws, 29 of which were enacted.

The people of Mongolia want our next president to exercise his power fully to privatize public properties, reduce external debt, attract foreign investment, establish the rule of law, stop corruption, and bring competitiveness to our economy. Most importantly, our next president has to be the truest example of justice and fairness.