Ch.Ulaan, the Minister of Finance, gave an overview of the 2013 public budget and economic performance last week. Mongolia’s GDP last year reached 17 trillion MNT, which is 12 percent higher than the year before. Minister Ulaan also reported that the budget expenditure equaled 35 percent of GDP while the budget deficit was kept below two percent of GDP.
The 2013 total budget revenue was 5.9 trillion MNT, of which one third was collected through taxes and 27 percent from customs tax. In other words, 60 percent of the total revenue was made up by taxpayers. Also, approximately 70,000 economic entities paid 1.8 trillion MNT in taxes, half of which was paid by only ten companies. These ten companies were led by Erdenet (362 billion MNT) followed by APU (154 billion MNT), Oyu Tolgoi (87 billion MNT), MAK (83 billion MNT), Tavan Tolgoi (57 billion MNT), Energy Resources (54 billion MNT), Mongolian Tobacco (45 billion MNT), Erdenes Tavan Tolgoi (40 billion MNT), Boroo Gold (36 billion MNT), and Mobicom (34 billion MNT). As credit should be given to these companies for making such contributions to the economy, something peculiar can be observed if you zoom into how the tax revenues were made up.
We attribute the name “ninja” miners (derived from the animated series “The Teenage Mutant Ninja Turtles”) to persons whose main occupation is to dig in the ground while drinking alcohol, smoking, and talking on the phone while not actually turning a profit. Given that our economy is dependent on how much land we dig in and how much alcohol and tobacco people use, we should call it a “ninja economy” as well, especially when almost 10 percent of the total workforce have become ninja miners. It is the bitter truth of today.
DIGGING IN THE GROUND IS THE ONLY JOB THEY CAN DO
A specialist from an international project on micro-mining says that the only job ninja miners can do is digging holes. They treat nature with such cruelty that they do not even bother filling the holes back up. Our economy is dependent on how much coal we dig up and sell to China by sending trucks full of coal to the southern border. In 2013, Mongolia exported eight tons of gold, 18 million tons of coal, 645 thousand tons of copper concentrate, and 6.7 million tons of iron ore. However, except for iron ore, we did not manage to export as much mineral resources as initially planned.
The most influential people in ninja villages are the “bosses” who buy gold from ninja miners with their readily available cash, sitting in their dark window-tinted jeeps. Those bosses have a secret network for collecting and trading gold. Mongolia is a country that loses most of the gold mined through illegal trafficking across the border. There are around 200 bosses who become elected officials, representing political parties and acquiring ruling power in turn. Having obtained authority, they make changes to mining laws in a manner that is only favorable for them, and reallocate their wealth. Their true intention is not rehabilitation or developing other economic sectors – they are only interested in more digging.
These bosses in Mongolia have spent many years doing nothing but making false promises to carry out economic diversification and attaching fancy names to each passing year. For ten years, 80 percent of our export revenue has depended on digging up the ground. It is said that the construction industry has been the industry that experienced the most growth last year, expanding to 2.5 times its size and producing great profits. But has any construction company paid significant taxes? Homes are being built only for the rich, while not a single apartment has been erected for those with low income. What do we make of that? Is our construction industry still walking hand in hand with the land mafia?
Mongolian citizens are looking at an entire generation pass them by, while the bosses within the government are getting richer and the ordinary ninjas can barely afford their daily needs. Income inequality is expanding as our society is losing its grip on justice. Furthermore, political propaganda is growing more complex, saying, “Smog in Ulaanbaatar has now improved its quality with a whiter color,” after conspiring to steal hundreds of billions of tugrugs from public money devoted to fighting pollution. Due to air pollution, children here are suffering from lung illnesses, people are more prone to cancer, and hundreds of lives are being taken every year.
FOCUS ON THE PRESENT, FORGET ABOUT TOMORROW
Ninja miners were written about in Mongolian Economy Magazine. The story said that psychologically depressed, unable to catch up with development and with deteriorating health, ninja miners only survive to see what the next day brings. They leave their homes in the fall and return in spring while some of them never get to see their home again.
Ninjas live for today, thus, they do not create any kind of accumulation. Likewise, our bosses in the government have only one desire – to acquire huge loans as fast as possible. They consider that the responsibility of repaying the debt belongs to the next government. Today no one, including any of those bosses, can tell you who is creating an accumulation to repay 500 million USD in 2017 and one billion USD in 2022 for the Chinggis Bond. Regardless of its intended use, they are issuing another government bond called “Samurai” and obtained 300 million USD this week.
Those bosses do not have any long-term policies. Therefore, our education and health sector have fully turned into a disaster as the results of the policies in these two sectors are only seen after a longer period of time. Despite this, there are currently 37,000 officially unemployed people. We have 18,000 expatriates working here, and one third of the unemployed have degrees in higher education.
The structure of our social insurance system and organization of labor in health organizations and state hospitals became obsolete many years ago. Patients here spend many days visiting several hospitals and getting in queues in order to be examined. However, it is extremely hard to find a doctor who can produce an accurate diagnosis. Having been misdiagnosed and receiving incorrect treatment, poorer patients are only left with a choice to die, while richer patients travel to other countries. Hospitals in Hohhot, Beijing, Bangkok and Singapore are full of Mongolians who are spending hundreds of millions of dollars abroad.
Mongolia imports most of its common commodities. Even though we have 45 million livestock, 70 percent of our milk is supplied from abroad. We lack certain skills, yet we pushed the foreign investors who have those skills out of the country. It benefits no one but the bosses.
HOW CAN WE CHANGE OUR ECONOMY?
First and foremost, let us stop acting stupid, like ostriches who think others cannot see them when they put their heads in the sand. It is time for us to assess the situation realistically, stop avoiding problems and start acting on solutions. Let us treat any matter with the eyes of an individual rather than the eyes of a politician, and think of the lives of our future generations instead of just election terms.
Let us have a closer look at the work we do daily and the issues we disagree on. Then, for the purpose of comparison, we should see how fast other countries are developing. Let us use the capital produced from mineral extraction to gain economic competitiveness. As life has already shown us, it cannot be achieved through providing soft loans. Let us implement the experiences of Chilean funds, where specific products and services are developed with enormous focus in order to make them internationally competitive before selling their shares to public (more details can be found on the following link: https://jargaldefacto.com/article/sanhattan In order to gain competitiveness, the interest rates of bank loans must be reduced. The inflation rate cannot be a one-digit number when the policy rate is a two-digit number.
Less government involvement in the economy results in more efficiency. In every industry where government has taken part, free competition disappears while corruption takes over. It can be seen from the latest court cases that are attracting a lot of attention. Our fate depends on whether or not Mongolia’s public governance can improve fast enough, and whether the citizens will be empowered to oversee the activities of politicians who do nothing but give false promises. If we can take these steps rapidly, Mongolia can change its ninja economy.
2014.01.08