Due to the failed attempts at regional development, half of Mongolia’s population is now living in the capital city. As ger districts continue expanding, residents are experiencing serious health consequences because of increasing air pollution from burning coal as well as soil pollution from pit toilets. Ulaanbaatar’s air and soil pollution is still at disastrous levels.
It was estimated by UNICEF that Ulaanbaatar would have to spend additional 24.8 billion MNT on diseases caused by air pollution in 2017-2025. The population of the capital city is project to reach 2.3 million in 2035. This growth will come with many challenges, which includes mitigating environmental pollution, optimizing land use, and creating jobs to help employment.
The most effective way to reduce our air and soil pollution is to have the ger district residents live in apartment units. But how do we make it happen?
The only way to reduce over-centralization
Without improving the living conditions in rural areas, it is impossible to stop the migration from the countryside to the capital city and aimag centers. In order to improve the living conditions in the countryside, we need to build infrastructure in soums and aimag centers, and create a better business environment.
Such development will require capital, which should be raised by allocating at least one third of the taxes collected from people and businesses as well as other budget revenue and by investing more than 50 per cent of certain taxes back into people and businesses. Ulaanbaatar has 46 per cent of our total population and accounts for 70 per cent of GDP growth, thus half of tax revenue should be allocated to the city.
Regardless of where it is taking place, projects will achieve success only when the government listens to people, discusses issues together, and reaches mutually agreed solutions. However, all taxes have been centralized in the capital city, and only a small fraction went back to local communities. In some cases, local communities are not receiving anything back. This is why our countryside is not developing and its people are on an exodus to the city.
Local governments don’t have their own capital; thus they have no choice but to wait for their allocated sum from the public budget. But, if local governments start having its own tax revenue, they will be able to fund their social investments by issuing municipal bonds. This method is often used in developed countries. The bonds are also referred to us ‘Muni’ or ‘CD (Certificates of Deposit)’ in the capital market. The revenue local governments receive from their interest income is usually exempt from taxes.
Capital for apartment units and quality assurance
Even though many apartment blocks are being built in Ulaanbaatar today, most of them are proving to be too expensive for ger district residents. There is a huge gap between the prices and the purchasing power. This gap is caused by the fact that the right to develop the land is obtained secretly and usually with bribery. Technically apartments aren’t supposed to be built on the land along the Tuul River and at Bogd Mountain and its passes. The only buildings that can be built in those areas are supposed to be tourist facilities. It is a hugely difficult task to provide real estate certificates to the hundreds of houses built in those areas and put them up for sale using the certificates.
The relevant laws that regulate the above mentioned land relations must be reviewed. We need to redo the urban planning for new settlement areas from the beginning, carefully plan for public areas and facilities (including schools, kindergartens, and gardens), spend local budgets on infrastructure for running water and electricity, and ensure a strong process in selecting construction companies. Municipal bonds are usually used to funding specific infrastructure projects with clear locations, names, and addresses. The quality of project implementation is overseen by insurance organizations.
Implementing this scheme requires the financier, the builder, the seller, and the owner to be separate players. Currently Mongolian construction companies do everything themselves – finding land, building, selling, and operating. This affects the overall quality of the building. Given the value of real estate grows over time, half of the taxes collected from real estate should be spent on improving the exterior environment.
The Ulaanbaatar authorities have talked about issuing municipal bonds several times. However, the central government doesn’t allow local governments to retain a part of their tax revenue and use it as collateral to issue bonds. They don’t allow it because the budget authority is too centralized and the public budget is always on deficit. In September 2016, the law on debt management removed the capital city’s right to issue bonds.
Japan has a similar overall structure like ours, but they have a special law that compares the revenue and expenditure ratios of public and local budgets. The mayor or the municipal leader, who has the right to manage and spend the local budget, is elected directly by residents. In 2016, Tokyo elected its first female mayor. She initiated ‘Green bonds’ with a maturity of 5 and 30 years to support Tokyo’s green development. Subsequently, large companies, banks, and insurance businesses invested in those bonds. As such, international examples prove that it is far more effective for the local government to be accountable for projects that directly affect people’s lives, e.g. social care, general education, fire safety, bridges, and roads.
2019.03.06
Trans. by B.Amar