(dedicated to the 20th General Assembly of the MNCCI)
The Mongolian National Chamber of Commerce and Industry (MNCCI / the Chamber) turns 60 next years and will embark on their next 60 years’ journey. Throughout their history of striving to develop commerce and industry in Mongolia, the Chamber spent its first 30 years serving a society where there was no private ownership – only publicly or state-owned property, and the other 30 years serving a society where all forms of public and private property are recognized and the rights of the owner are protected by law.
In 1995, a Mongolian law on Chamber of Commerce and Industry was passed in order to respond to the needs of the market economy and to protect the interests of hundreds of private companies that were being founded at the time. In 2009, the Chamber acquired its own building with aid from China. Today, the Chamber employs 150 people in its key activities of advocacy, policy influencing, and business services.
The Chamber has all the opportunity and power to run its operations, but only 3,500 out of 180,000 businesses in Mongolia have become members so far. Why have the rest opted out of joining the Chamber? The reason lies in the Chamber’s governance – its organizational structure and leadership capabilities.
First of all, the Chamber’s governance needs to make clear distinctions between its board and executive management.
A new benchmark in board governance
The MNCCI is different from the classic chambers of commerce you might see in other countries that sit above different, specialized chambers as an umbrella organization. Mongolia’s Chamber has nearly 20 branches in aimags and towns, and employs a more horizontal structure. Local businesses and economic entities are usually registered at their local branch but can directly interact with the Chamber.
The Chamber now organizes its general assembly once every four years, which is weakening their connection and engagement with members. Given there is a limited opportunity to report what they are doing to ordinary members, which is reducing involvement and participation, it would be better to increase the frequency of the general assembly to every two years.
The Chamber’s board of directors consists of 75 members today to cater for and represent members spread throughout the country. The 75 members consists of 21 representatives from all 21 provinces (one from each province), 51 representatives from the general assembly, and another 3 representatives from the executive administration. The Chairman of the Board is selected from the board members, and the board meeting takes place annually. It would be more effective to decrease the number of board members to 51, half of which should be elected every two years with a vote. More members don’t always mean better outcomes.
Twenty-five praesidium members are elected from the board, and the Chairman of the Board becomes the President. It means that one person holds both the chairman and president roles. The praesidium members are elected on a 4-year term, which is restricting the participation and involvement of other members, thus their term needs to be reduced to two years. New praesidium members would bring refreshed energy and can adapt to new circumstances better. If the number of praesidium members is reduced to 15-17 and the term changed to two years, it will improve the speed and effectiveness of their decision-making process.
As per the international benchmark, the Chairman of the Board of Directors and President should carry out the role in volunteer terms, meaning the person shouldn’t be paid any salary in that role. However, it is a part-time role, so it is acceptable if there were incentives around costs related to work travel, chairing board meetings, and hours worked.
Since the President of the Chamber has a duty to influence government policy to improve the business environment, it should be someone who doesn’t have a political party affiliation. The President should speak up against corruption and provide counter arguments to government policies that could impact businesses negatively, including tax increases. There is currently a need to reduce costs to fund businesses and support bringing foreign banks in. The Chamber’s feedback is very critical when it comes to draft legislation on the public budget and business environment. These tasks can only be carried out by a President who is politically independent.
The Chamber is represented by its President internationally. Therefore, it is a timely need that it should be someone who is reasonably fluent in English and can strictly follow the disciplines and norms in international relations.
A new benchmark in executive governance
The recent change in the MNCCI’s membership has offered different types of membership, including gold, platinum, and diamond members, depending on the benefits and annual fee. It is a good improvement that will enhance the quality of services.
The Chamber currently has nearly 30 councils. In order to bring them to the international benchmark and improve their effectiveness, we should reduce the number of the councils, change them to committees, introduce a system to compare them by their revenue and expenditure, and set KPIs that are tied to their financial incentives.
The Chamber should also start focusing more on attracting foreign investment and enrolling international companies and partnerships. In addition, the Chamber should develop specialized education programs that incorporate learning and practice, and direct businesses to assume greater social and ecological responsibility by recycling product packaging and waste.
There is also a need to cooperate with relevant industry associations, and conduct training on using business platforms effectively and utilizing new software and applications, especially those related to artificial intelligence and robotics. There is an emerging demand for information, knowledge, and training on Mongolian companies entering international markets.
Therefore, the CEO needs to be someone who can manage and facilitate these objectives. The CEO and his or her deputy should be appointed by the Chairman of the Board of Directors with an approval from the praesidium, instead of the current practice where they are elected from the board. This change would make a stronger distinction between the board and the executive management, which will produce better outcomes. The President shouldn’t be involved in the day-to-day operations of the Chamber.
The CEO should be contracted for four years, and his or her performance needs to be measured against the business plan approved by the praesidium every year. Financial incentives should then be based on performance.
The Chamber’s new management and its members now have the accountability to carry out these two major reforms as they welcome the next 60 years of the Chamber’s history. In Western countries, their chambers of commerce have always been the strongest voice that represents the business community, because every member has something to lose.
The MNCCI must be the strongest voice that represents Mongolian businesses.
2019.02.27
Trans. by B.Amar