{"id":44876,"date":"2026-05-04T10:00:00","date_gmt":"2026-05-04T02:00:00","guid":{"rendered":"https:\/\/jargaldefacto.com\/?p=44876"},"modified":"2026-05-04T17:06:39","modified_gmt":"2026-05-04T09:06:39","slug":"stop-the-budget-bleeding-soes-mongolias-historic-economic-reform","status":"publish","type":"post","link":"https:\/\/jargaldefacto.com\/?p=44876&lang=en","title":{"rendered":"Stop the Budget-Bleeding SOEs: Mongolia\u2019s Historic Economic Reform"},"content":{"rendered":"\n

Mongolia\u2019s paradox of poverty<\/a> amid abundant resources continues. In my writings I captured the reality exactly: \u201cState-owned enterprises (SOEs) now exceed one hundred in number, with roughly one-third operating at a loss, sucking resources from the state budget and crowding out private investment. Keeping energy prices artificially low through subsidies distorts investment signals and widens the budget deficit.\u201d<\/p>\n\n\n\n

Current State of Mongolia\u2019s SOEs<\/strong> As of 2025, Mongolia has 109 state-owned and state-participated enterprises. Nearly one-third \u2014 43 companies \u2014 are chronically loss-making, many for three consecutive years, with balance sheets deep in the red. In 2024, these SOEs generated \u20ae26 trillion in revenue, yet their combined debt nearly doubled to \u20ae11 trillion. This amount equals roughly one-third of the 2026 national budget (\u20ae32.9 trillion) and accounts for 24 percent of total public debt. The energy sector remains the biggest \u201ccash drain\u201d: subsidised tariffs force utilities to run at losses that are routinely covered by the state budget. The tariff adjustment in November 2024 was a welcome step, but it has not yet eliminated the quasi-fiscal deficit.<\/p>\n\n\n\n

Why Are They So Inefficient?<\/strong> The causes are structural and deeply political. Private companies are driven by profit and competition, whereas SOEs operate under soft budget constraints \u2014 losses are routinely covered by taxpayers or hidden through off-balance-sheet guarantees. Management and board positions are often filled through political patronage rather than competence. In critical sectors such as energy, transport, and mining, the lack of competition removes any pressure to cut costs or innovate. Energy subsidies distort investment signals, deter private capital, and turn the state into a perpetual cash cow. The result is a vicious cycle: SOEs drain the budget, stifle private-sector growth, and increase the vulnerability of an economy overly dependent on volatile mining revenues.<\/p>\n\n\n\n

\n

Big Promises, Zero Delivery: SOEs as a Political Cash Machine<\/strong> Since the 1990s every government has promised SOE reform and privatisation, yet the number of loss-making companies has only increased. Early voucher privatisation gave some assets to citizens, but strategic enterprises remained under state control. Successive administrations have repeatedly announced plans \u2014 most recently pledging to privatise 18\u201320 SOEs by 2028 through the Mongolian Stock Exchange (MSE), selling 10\u201366 percent stakes to raise \u20ae3.7 trillion. The holding company \u201cErchist Mongol\u201d, created to manage 44 energy firms, has failed to deliver any meaningful change and now lies dormant.<\/p>\n<\/blockquote>\n\n\n\n

The reason is simple: SOEs have become reliable cash-flow machines for ruling parties and bureaucrats. They provide jobs for loyalists, lucrative contracts for connected businesses, opaque procurement deals, and dividends that quietly finance political networks. This powerful interest group \u2014 politicians, senior officials, and insiders \u2014 fiercely resists real reform, turning every promise into electoral theatre.<\/p>\n\n\n\n

Proven International Success Stories<\/strong> This deadlock can be broken through bold privatisation. A standout example is British Airways under Margaret Thatcher. In the early 1980s, BA was a heavily loss-making, overstaffed state carrier. On 11 February 1987, its shares were offered to the public on the London Stock Exchange and were oversubscribed 11 times. After privatisation, staff numbers fell while passenger numbers soared, on-time performance improved dramatically (from around 70% to 85%), and customer complaints halved. BA transformed into one of the world\u2019s most profitable and respected airlines, famously known as \u201cThe World\u2019s Favourite Airline.\u201d<\/p>\n\n\n\n

Other successes include New Zealand\u2019s corporatisation and privatisation programme, which turned loss-making SOEs into profitable enterprises; Chile\u2019s power sector reforms that halved losses and attracted massive private investment; and Kenya\u2019s partial IPOs of KenGen and Safaricom, which boosted efficiency and capital-market development. Even in Mongolia, the partial listing of Mongol Post has demonstrably improved governance and market valuation.<\/p>\n\n\n\n

The Way Forward for Mongolia<\/strong> Listing SOE stakes on the Mongolian Stock Exchange can deliver multiple benefits at once: attracting private capital and professional management, imposing market discipline through shareholder oversight, giving ordinary citizens real ownership, and deepening the domestic capital market. In strategic sectors the state can retain a golden share. Essential complementary reforms include moving energy prices to full cost-recovery levels, establishing genuinely independent boards, strengthening corporate governance laws, and rigorous fiscal risk monitoring by the Ministry of Finance.<\/p>\n\n\n\n

If implemented transparently and free of corruption through the MSE, these measures would turn loss-making \u201ccash cows\u201d into engines of growth. Former SOEs would stop bleeding the budget, freeing resources for health, education, and infrastructure, while unlocking private investment in energy and logistics.<\/p>\n\n\n\n

Mongolia cannot afford another decade of half-measures. Reforming SOEs is not merely an economic necessity \u2014 it is the foundation for fiscal independence, private-sector vitality, and long-term national prosperity.<\/p>\n\n\n\n

It is time for quick decision and act faster.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Mongolia\u2019s paradox of poverty amid abundant resources continues. In my writings I captured the reality exactly: \u201cState-owned enterprises (SOEs) now exceed one hundred in number, with roughly one-third operating at a loss, sucking resources from the state budget and crowding out private investment. Keeping energy prices artificially low through subsidies distorts investment signals and widens […]<\/p>\n","protected":false},"author":4,"featured_media":44870,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[191],"tags":[],"ppma_author":[268],"class_list":{"0":"post-44876","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-article-2"},"authors":[{"term_id":268,"user_id":4,"is_guest":0,"slug":"haluinaamgmail-com","display_name":"Jargal Defacto","avatar_url":{"url":"https:\/\/jargaldefacto.com\/wp-content\/uploads\/2024\/08\/JD2-scaled.jpg","url2x":"https:\/\/jargaldefacto.com\/wp-content\/uploads\/2024\/08\/JD2-scaled.jpg"},"author_category":"","first_name":"Jargal","last_name":"Defacto","user_url":"https:\/\/jargaldefacto.com\/","job_title":"","description":""}],"_links":{"self":[{"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/posts\/44876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=44876"}],"version-history":[{"count":1,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/posts\/44876\/revisions"}],"predecessor-version":[{"id":44877,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/posts\/44876\/revisions\/44877"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=\/wp\/v2\/media\/44870"}],"wp:attachment":[{"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=44876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=44876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=44876"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/jargaldefacto.com\/index.php?rest_route=%2Fwp%2Fv2%2Fppma_author&post=44876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}