Columbus Fund
Metaphorically speaking, people who have not fully understood where they were in the past, where they are heading and where they are now are sometimes compared to Christopher Columbus; who set sail for India and discovered America without knowing it and declared it was East India.
Here we talk not necessarily about “Columbuses”that are increasing in number in Mongolian politics today, but mostly on their “artistic creations” while in power. They are not only unable to catch up to the current speed of social and economic development but are also interrupting our daily activities.One of the clearest, most irritating interruptions is caused by the condition of roads in Mongolia today. It is time we talked about this issue and its future and change the situation for better.
It does not take even a year before the new roads Mongolians have built need the potholes filled. These roads have become an inevitable hell. We come across bumps too often that the ride in our cars is miserable.
However, the Japanese have built the Sun Road and the Sun Bridge in Ulaanbaatar City, all of which were properly built and supervised. This clearly shows the fact that better management and efficient spending of investment funds can determine the good quality of road sand bridges under construction.
Roads are the mirror of development
In the decade of 2010-2020, the period when our economy is going to triple, Mongolia’s road network is proposed to expand four times as much. Currently, Mongolia has 4000 kilometers of constructed roads, two thirds of which are hardsurfaced and the rest are gravel surfaced. If we count the more than one thousand kilometers long improved bitumen surfaced roads and the 42700-kilometers dirt or earth roads, Mongolia has a road network of 50,000 kilometers. This is one of the few countries where drivers take international gravel or dirt roads to their neighbors.
Mongolia’s hard-surfaced roads, which are considered one of the most basic necessities of a civilization, needto be lengthened five times in length during this decade. In other words, Mongolians will need to make an investment for1000kilometers of roads every year and manage and maintain it efficiently.
According to a report released by the Asian Development Bank, Mongolia spends 1.5 to 2 percent of its GDP on the roads sector, which is similar to that of many other developing countries. However, the outcome has not been so beneficial that Mongolia has been building only 100 kilometers of roads on average every year, which is a relatively less than compared to international levels.
Today, the government of Mongolia is measuring its investment by the inputs or the amount of money they spend, while people are demanding to measure it by the outcomes, results and benefits of the investment. Let us look at some issues concerning the Road Fund, which is the most pressing problem in the road sector which includes such as benefits of investment, development of the roads sector and the quality of governance.
The lost hub
The Road Fund was established twenty years ago with the purpose of financing investments in the roads sector and its rights and responsibilities were ratified by the Law on Roads in 1998. However, like many other laws in Mongolia, this law has not been implemented well.
The Road Fund’s revenue was constituted by tax on petrol and diesel fuel imports at first. Then, there have been decisions made to add to it’s revenue from other sources such as vehicle taxes, public budget and foreign loans. Yet the implementation of these decisions has not always been consistent.
The customs duty on petrol was set in 1995 that the tax imposed on flammable or combustible substances was MNT 20,350 a tonne if the octane rating of petrol was lower than 90, while it was MNT 25,700 if the octane rating was higher than 90 and MNT 2,140 for a tonne of diesel fuel.However, the tax collected did not fully go to the Road Fund. In addition, even though a special tax was imposed on fuel, it was not always spent on road financing. Although the tax collected was supposed to be invested in establishing local road funds in the cities and provinces with the purpose of collecting fees on vehicles, local administrations ended up keeping the money and spending it for other purposes.
Small-size cars have been imposed MNT 500 while MNT 800-1500 has been collected from all other size vehicles since toll roads were introduced by the Department of Road in 2002.Although MNT 830 million was collected from toll roads in 2008, 80 percent of it was spent on the procedures of collecting the charges. The average cost of collecting road tolls equals about 10 percent of the total revenue. Then, do we really need to keep the toll roads and interrupt the traffic when the expenditure cannot be covered?
The Road Fund had lost slowly its main function to build roads to the related ministry, which did not even allow them, thefunction as a “road agency”,and to fully own the financial resources needed for repairing and maintaining the roads under their authority.
The Road Fund has been not been fulfilling their duties, and the government has not overseen their operations effectively. This is what has caused today’s road conditions to become so pathetic. By international standards, generally there are two types of road maintenance: routine (short-term) and periodic (mid-term). We have only been doing the routine maintenance and forgetting the periodic maintenance, which is why Mongolia now has a very costly standard where it is choice between either all roads in Mongolia are repaired every year or roads are rebuilt after ten years. It is considered that, if routine maintenances are done timely and periodic maintenance done every 5 to 6 years following the proper standards, hard-surfaced roads do not need any larger maintenance works or reconstruction for 20-30 years at least.
Leverage and Road Board
Roads should originally be a leverage for development that brings development to the countryside creating jobs nationwide. However, it has been many years since people have been talking about how it has become the influence for taking bribes, stealing public property, forcing one’s way into politics with money, breeding billionaires from the government and getting into higher positions.
Nevertheless, we desperately need our roads to be the real leverage for development and start using them in an environmentally friendly way. This sector has to be developed in a way that brings positive economic and ecological impacts by promoting responsible mining, dust control, reducing environmental, land and pasture degradation.
Unfortunately, at this crucial stage, money supposed to be spent on roads is disappearing without serving its purpose and the governance has long become non-transparent. Therefore, it is time we looked at the experiences of other countries and established a Road Board.
A national Road Board is an institution that represents government, producers of road services’ suppliers and customers. The main purpose is to organize tenders of road construction and maintenance, release reports, implement projects and ensure that the capital accumulated in the Road Fund is spent legally and appropriately for road sector management.
The Road Board should also take part in resolving many of the issues arisen from the capital city’s need to develop. In order to reduce traffic jam, tasks such as building a highway that circles the mountain in the south and linking parts of the city with circuit roads to ease flow of traffic should be undertaken.Also, traffic lights and signs have to be installed on roads in the countryside. In order to do that, conditions for market competition have to be created.
The time has come for the Road Fund to have a definite financial source, transparent management and efficient operations that build high standard roads.
Translated by B.AMAR
2012.10.24