Today's post will be technical in nature because I spent the day discussing economic policy with folks in the Ministry of Economic Development. So bear with me. I really love this topic and will try to explain some very complex ideas as simply as possible so you won't be bored.
Ms. Tsegmed Davaadulam, United Nations Development Programme
Ms. Davaadulam is the Governance Team Leader for the United Nations Development Programme in Mongolia. She researches and prepares reports for the United Nations International Committee on Local Governance. UNDP has commissioned a study on the impact of the growth of the mining sector on human rights, the environment, and the displacement of nomadic tribes. The distribution of wealth created from the mining sector has generated a lot of political rhetoric, but very little action. The economic divide betweent the rich and poor is growing rapidly. The various ministries and agencies responsible for creating national policies to address these issues lack a coherent comprehensive strategy, according to Ms. Davaadulam.
The country needs a clear policy structure to address these challenges. Instead, the talk is shallow and the implementation almost non-existent. Political expediency is evidenced by the booming increase in national treasury "cash transfers" in a strategic manner that essentially "buys the votes" of the bureacracy. These transfers insure that there will be a lot of talking and public posturing but very little action to address the social problems.
Another area of concern is political corruption in dealing with civil servants. Many public servants across all ministries and agencies within the national and local government are losing their jobs due to the change in power following the most recent elections. Institutional knowledge is threatened and corruption is increasing. The country has no international partners to insure compliance with the United Nations Convention's policy mandates. Funding for local development remains centralized. The distribution of public tax revenues as a percentage of the GDP is decreasing though a new budget law is set to take effect in 2013 which transfers spending authority to local leaders in the aimags, districts and soums (counties, districts and cities).
The Main Point
The transition from socialism to democracy left a vacuum in national policy. Many professionals including teachers fled the country in the 1990's because of the fallout and fear of retribution. Now, there is no institutional structure to bring order to the public sector. The general public hears a lot of talking, but very little doing. Though Ms. Davaadulam presented a rather bleak picture, she does make a lot of valid points particularly when it comes to the vacuum in the structure of governance. This was another of those AHA moments when I realized that the entire governance structure was thrown into chaos when one system of governance was thrown out wholesale and another installed without any real plan in place.
Meeting with Jamba Jargalsaikhan
Mr. Jargalsaikhan is was recently promoted to Senior Officer of the Ministry of Economic Development. He is overseeing the transformation and transition of the ministry following the national elections in August.
Economic growth of the country will not reach its goal of 17.3% in 2012. He estimates that the actual figure will be around 15.2% of GDP. Coal and small-scale indurstries (meat, cashmere and wool) increased production and exports. However, the 2011 snow drought had a negative impact on the broader agriculture sector. In addition, the transition of the manufacturing infrastructure through privatization has been very difficult and production has declined. He does believe, however, that the country has turned the corner following the global economic crisis of 2008-10 and that GDP growth in 2013 will be around 19% - largest percentage of economic growth of any nation in the world.
Interestingly, Mongolia has turned to the Australian mining model of using coal fracking (the utilization of high pressure water being pumped into coal seams to extact clean burning natural gas) has increased. This model has been very controversial in both Australia and the United States. In fact, Victoria, Australia recently enacted legislation that banned the fracking process altogether. In the US, environmentalists have vigorously opposed the process citing the unknown long-term effects of the practice on the environment and even suggest that it leads to an increasing number of earthquakes though no dependable data exists to back those claims. It will be interesting to see if Mongolia has a successful outcome where others have struggled.
The 20-30 year forecast recommends a growth sustainability model for Mongolia. Over the past several years, Mongolia has exported its raw materials including coal, copper and iron primarily to China. The country is now turning its attention to expanding its own manufacturing capacity to utilize its own natural resources and create final manufactured products like steel for export. The approach is two-fold. (1) Grow the manufacturing sector to create end-products and value-added products and (2) create industrial zones for vast manufacturing parks in the south and the northeast sectors of the country.
There is both optimism and concern that these policies will have the desired impact on the Mongolian economy. The challenges include a lack of infracture to create products (facilities and professional/skilled labor) and lack of railroads. Railroad expansion is not aimed at the Chinese markets which currently buy a lot of the raw materials that Mongolia produces. Rather, the country is focused on delivery systems for finished product markets in Korea, Japan and Southeast Asia.
The goal is to increase Mongolian energy production and become completely energy independent. Currently, Mongolia is dependent on Gazprom (Russia) for most of its energy needs, but that dependence is decreasing. In the long-term, the economic goal is to eliminate that dependence altogether. The one BIG challenge? A lack of locally-grown professionals (engineers, metallurgists and skilled labor) to support the goal. So, the national education system must provide increased programs and graduates for Mongolian citizens to be trained and certified.
Mr. Jamba Jargalsaikhan, Ministry of Economic Development
Ministry of Economic Development - Department of Innovation Policy
I know that I say I really enjoyed this conversation or that one. Truly, I've enjoyed them all. My meeting with the Department of Innovation Policy, however, really turned my crank! Mr. Bulgaa Ganbat, is the director of the Department of Innovation Policy and Ms. Monkhtegsh heads the Division of Public-Private Partnerships of Innovative Policy in the Ministry of the Economic Development.
The Department of Innovation Policy creates public policy related to public-private partnerships and public sector development strategy. In 2010, the department focused on business reform and in 2012 focused on public sector development. Strategic master plans were created for the periods 2007-2015 and 2008-2020, respectively.
Over the next four years, the Law on Innovation will take effect with the goal of "less talk and more action" related to the implementation of both master plans. Mongolia is currently establishing international partners in the technology sector with universities around the world. Recently, a strategic partnership with Finland opened avenues of joint research in applied medical science, plant science and biotechnology. The department will turn its attention to innovation and implementation of green technology policies in order to meet the country's goal of energy indepence by 2020.
Mongolia's primary partners in innovation include South Korea, Taiwan, Finland and Israel.
Because of all of the changes taking effect in the political arena, our discussion time was very tight. I believe that played to my advantage because we were very focused on the quick exchange of information and partnership opportunities for the state of Kentucky. There are opportunities in this regard in Mongolia. The question is whether Kentucky is positioned or will be positioned to explore establishing innovative partnerships with Mongolia.
Mr. Bulgaa Ganbat and Ms. Monkhtegsh, Ministry of Economic Development
Tuesday was a whirlwind day of productive meetings. Immediately following these discussions, Hatnaa, Einktaivan (our driver) and I went to lunch. It was at this point we received the summons to the Mongolian Government House for a meeting with MP Batbold (see separate post regarding this meeting). At the end, I retreated to my hotel room and comtemplated all that I had heard and experienced in this one day. I went to sleep happy with our work!
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