What are Voters Looking For?

By Julian Dierkes

The campaign for the Mongolian presidency has not entered its hot phase yet but candidates have been confirmed. When Enkhbold M (MPP) and Battulga Kh (DP) were selected, I already reflected on them, another post focused on S Ganbaatar (if confirmed as MPRP candidate) and on the dynamics of a three-way race should follow.

The Electorate’s Mood

Generally, there has been less anxiety around the past presidential elections as the electoral procedure is very straightforward, i.e. direct election of a person, and thus seems less open to manipulation. Past victories have been readily accepted by the losing candidates. There is also generally less frustration with this election as it offers voters an opportunity to actually select a person, rather than contribute in a more diffuse fashion to a parliamentary majority.

Surveys

As has been the case around previous elections, ahead of the campaign season there are some public opinion polls that give us some indication of the mood of the electorate. In Spring 2017, there are two such surveys, Sant Maral Foundation‘s Politbarometer (supported by the Konrad-Adenauer-Foundation) and a poll conducted by the International Republican Institute with support from the Canadian government. The results of the Politbarometer can be found on the Sant Maral website (PDF), the IRI poll on their website (PDF).

I have previously discussed some of the methodological challenges that polling faces in Mongolia, leading me to the conclusion, that these poll results are best read as indications of tendencies in the electorate, particularly in over-time shifts, rather than as reflecting the electorate’s views more directly. The results for specific politicians should also not be taken as a prediction of election results. Yet, these polls continue to be the only publicly available data points regarding the electorate’s mood. And, with recent legislative changes, we might see another round of publicly-available polls before the campaign opens on June 6.

The clearest results from the most recent polls are probably indications of the electorate’s dissatisfaction with institutional politics, and the primacy of economic concerns as driving voters’ hopes for the election.

Dissatisfaction with Institutional Politics

[Below, I will refer to the two polls as SM for Politbarometer and as IRI for the IRI-initiated poll. Unless identified, I cite the nationwide number.]

In SM G-1 just over half of respondents (54.2%) approve or fully approve of the statement, “In principal, you can trust that the government is doing the right things for citizens”.

Fully 81.3% of respondents do not see political parties as representing public opinion (SM S6) and over half of them see “rather little” or no influence for voters (58.7%).

Of political institutions, political parties gather the least confidence. Only a third of respondents are confident or rather confident in parties (SM S12). On IRI’s list of 15 institutions, parties rank dead last with only 30% appreciating their performance. The presidency does not fare much better at 35% (IRI, p. 17).

Voters’ Hopes and Fears

As they did ahead of last year’s parliamentary election, Mongolians continue to identify the economy as the area of greatest concern. Thus nearly a third of respondents list unemployment as “the most important problem facing Mongolia” in an open-ended question (IRI, p. 7). The number is even higher in SM G4 where 43% rate unemployment as the top problem facing the nation.

Given some of the gently positive economic news around the rise in commodity prices and the likelihood of an IMF-brokered bailout, it is perhaps not surprising that the number of respondents who see a dire economic situation has dropped slightly. But at 82% (bad or very bad in IRI, p. 8) that is still a very high proportion and one has to imagine that voters will look for solutions to the economic troubles in the election campaign.

When asked which aspects of the government’s performance in the past 9 months Mongolians have been most pleased with, the answer is “fighting crime” where 38% see very good or good performance (IRI, p. 15). They are least impressed with the performance on air pollution which 80% (!) rate bad or very bad (IRI, p. 15). The bottom five in terms of satisfaction with performance are air pollution, reducing poverty (79%),  improving economy (73%), corruption (71%), affordable housing (64%) (IRI, p. 15).

Conceptions of Leadership

SM 3a points to the longing for a “strong hand” that is often attributed to Mongolians. 68.1% of respondents find a “a strong leader who does not have to bother with the Parliament and elections” good or rather good! That is a nearly identical number to respondents who support democratic governance (SM 3d, 70.2%).

One of the most interesting questions in the IRI survey is a comparison of the desirability of democracy vs. prosperity. I call this the Chinese question, as the Chinese government continues to argue that prosperity should come before individual rights/democracy. The responses from Mongolians are consistent in three IRI surveys: Democracy more/somewhat more important 49%, prosperity more/somewhat more important 38% (13% don’t know, IRI, p. 11).

The electorate seems somewhat disenchanted with the stability that the MPP promised in last year’s election compared to the relative chaos that the DP was perceived to have brought. Now only 26% expect a more stable political government as compared to August 2016 when this number was 41% (IRI, p. 13). While Enkhbold has disassociated himself from the current government, he will still have to grapple with the reduced confidence in the stability that the MPP might bring.

Note that the various SM questions that refer to individual politicians barely mention Battulga and Ganbaatar! Enkhbold gets more mentions, in part because he seemed much more likely to be nominated all along, but he does not receive very noticeable support other than in his (electoral) home of Tuv.

 

Posted in Corruption, Democracy, Democratic Party, Elections, Mongolian People's Party, Party Politics, Policy, Politics, Presidential 2017, Public Policy | Tagged | Leave a comment

Guest Post: Negative Income Tax I – Redistribution in Expanding Economies

By Ulrich Andree

Note: This is the first of three articles. For the extended original article see LinkedIn. The forthcoming posts will focus on (dis)advantages of a negative income tax, and on the implementation of a negative income tax in Mongolia, respectively.

Redistribution as Constitutional Obligation

According to Article 6 of the Constitution of Mongolia the existing wealth concerning land, its subsoil, forests, water, fauna and flora and other natural resources belong to the Mongolian people and every Mongolian citizen should participate in it. In order to achieve this goal, the Constitution provides for the development of a “social market economy” largely based on Western models in which the creation of a “welfare state” plays a central role.

The necessary revenues are to be obtained primarily through the development of mineral resources but also through the collection of legally established taxes general following Article 16, Paragraph 3 of the Constitution. And as in other countries too, taxes are levied on diffe­rent sources of income generation, assets and income use needed for the functioning and development of a modern state.

However, only a fraction of Mongolians participate in the growing prosperity of the country. And therefore the redistribution of tax revenues to needy domestic citizens is one of the pillars of a welfare state. Pursuing this goal a “Negative Income Tax – NIT” is a viable and promising solution to the challenge of how to achieve such redistribution.

“Expanding” vs. “Mature Economies”

In order to get access to the right and task adequately approach it is useful to distinguish between fully developed, “mature” economies and “expanding” ones which are in the set up, the development and the growth phase. To make this clear, the most important characteris­tics of mature economies are listed below:

Undoubtedly Mongolia belongs to the expanding group of economies and therefore an encompassing and integrated concept of tax and social transfer system should or maybe must have quite another architecture and design than in mature economies.

The Functioning and History of NIT

In principle, NIT represents the logical-consistent continuation of the tax rate into the area below the subsistence minimum which is defined by the state and which is usually not sub­ject to taxation. In this way, below the minimum subsistence level a tax is not deducted from zero but a negative amount which can be interpreted as a positive transferable income to the taxpayers/recipients concerned.

In order to illustrate the functioning of NIT here the following example: Assuming the Govern­ment would draw the income line at 10 million MNT per year and the NIT-rate is 50 percent. If the taxable/needy person – however one might define them – has no income at all, he/she would receive 5 million MNT – that is, 50 percent of the amount by which his/her income fell short of 10 million MNT. If the taxable/needy person earns 4 million MNT, he/she would get 3 million MNT from the government – again 50 percent of his/her income shortfall – for a total post-tax income of 7 million MNT [(10 – 4) * 0.5 = 3; 4 + 3 = 7. So as his/her earnings rise, his/her post-tax income rises too, preserving work incentives mainly basing on the drawn income limit and the tax rate.

The functional relationships between personal income, a given income limit and varying tax rate are shown in the following chart for a subsistence minimum of 10 million MNT and tax rates of 30, 50 and 70 percent. The areas forming the respective triangles ABC1, ABC2 and ABC3 represent the monetary redistribution volume of NIT. Additionally, there is represented a tax-line for a curve-shaped course f(PI) with an upper tax limit of 20 Mil. MNT and a lower refund limit of 8 Mil. MNT. In this case, the redistribution volume corresponds to the area ABC4.

This effect is very different from many social welfare programs, in which a household either receives all of a benefit or, if it ceases to qualify, nothing at all. The all-or-nothing model encourages what social scientists call “poverty traps,” tempting the poor not to improve their si­tuations.

In summary, the amount of individual NIT-entitled depends mainly on following influencing factors and correspondingly available information whereby the precisely prepared tax-rele­vant data in Mongolia are playing a very prominent role:

  • the available volume of the redistribution mass, which can be roughly determined from the amount of all government revenues minus the necessary current consumption and in­vestment expenditures (Government share),
  • the absolute level of the defined subsistence minimum,
  • the corresponding tax function/tax rate and
  • the number of eligible persons who can be determined as the resultant of the aforemen­tioned influencing main variables.

For this purpose, precisely prepared tax-relevant data are required which are still largely missing in the Mongolian tax administration.

The NIT-concept was already mentioned by the mathematician A.-A. Cournot as „impôt négatif“ 120 years ago and taken up again and elaborated in detail by Lady J. Rhys-Williams in the fifties of the last century, at the time called „social-dividend-type“. But the NIT really was known by the publication of the famous American economist and Nobel Prize winner Milton Friedman, who introduced this concept in his book “Capitalism and Freedom”, (Fried­man, Milton,, Capitalism and Freedom, University of Chicago Press 1962). In this book Fried­man acknowledged that some form of welfare was necessary in capitalist societies and that the state should play an important role in its provision.

Robert Moffitt noted another advantage of this instrument over other forms of state assistance: “No stigma attaches to the NIT.”( Moffitt, R. A., The Negative Income Tax and the Evolution of U. S. Welfare Policy, Journal of Economic Perspectives Vol. 17, 2003, 119 – 140, p. 124). It is noteworthy that just in the motherland of capitalism, the United States of America, experiments on NIT were carried out in the sixties and seventies of the last century. Although the results were fuzzy, probably because so many other factors were in play, the public reporting was tendentious and biased from the beginning. Presumably this attitude goes back to the deep-rooted self-understanding of American citizens towards their state which should intervene (even financially) in as few private matters as possible.

About Ullrich Andree

Dr. Ulrich F. H. Andree is a Visiting Professor at National University of Mongolia NUM
and public sector consultant.

Posted in Demography, Development, Economics, Policy, Public Policy, Public Service, Social Change, Social Issues, Taxes, Ullrich Andree | Leave a comment

Guest Post: Negative Income Tax II – Advantages and Disadvantages

By Ulrich Andree

Note: This is the second of three articles. For the extended original article see LinkedIn. The previous post focused on redistribution and the concept of an NIT. The final article will focus on the implementation of an NIT in Mongolia.

Economic Advantages and Disadvantages of NIT

The NIT concept in its pure form is an instrument that aims at the abolition of all social trans­fers in the long-term including public pensions, health and unemployment insurance and similar. Even if a complete abolition of these payments, may be difficult, the discussion of (dis)advantages below is based on an idealtypical implementation of NIT.

Advantages of NIT

The NIT could reduce observed deficiencies within the state redistribution system and maybe eliminate them in the ideal case because it would lead to a better coordination and later on integration of direct taxes and social transfers.

Higher Target Accuracy in the Granting of State and/or General Public Support

As generally known “absurd hikes” in the marginal rates can be observed due to the uncoor­dinated tax and transfer basis and schedules in the most existing welfare systems, especially because of uncoordinated income brackets and the sudden abolishment of transfers. If additional transfers to households with a different social status are taken into consideration, one can observe notable marginal rates which in certain cases can be higher than 100 percent. But by means of the correct design of NIT these excesses and misallocations could largely be remedied. The prerequisite for this, however, is the existence of an efficient tax admini­stration which is aware of all facts relevant to taxes and social transfers of each taxable/ needy citizen affected.

More Redistributive Justice

The amount for redistributive purposes in welfare states is so large that serious disincentives via progressive taxes and high social security contributions are unavoidable. What is urgently needed in Mongolia is an inventory of all redistributive measures, especially those which favour groups who do not belong to the “working” and “non-working poor”. The abolishment of those transfers connected with the concentration of redistribution to the „real poor“ could reduce redistributive activities, thus giving room to lower taxes and contributions. A rationally planned NIT could have pride of place with respect to the abolishment of the contrast between efficiency and justice.

Delay or Closure of “Rural Depopulation”

If all Mongolians would be guaranteed the same minimum income even in the most remote regions of the country, they hardly have any existenial reasons to go to the metropolitan are­as, especially to Ulaanbaatar. This migration leads to major problems including the slump into greater poverty due to lack of sufficient paid job opportunities or due to environmental pollution caused by the massive accumulation of yurts on the outskirts of the metropolitan areas.

In addition, many Mongolians must abandon their former place as herders, workers, traders, craftsmen etc. and leave their beloved families, relatives and friends in the countryside to earn livelihood in a completely strange environment. This is a disaster from the “human point of view” because it stresses or destroys the most personal relationships and/or forces their families to participate in the “vabanque game” – whether they remain in their native land or whether they take the risky step to go in unknown regions too.

Saving Social Bureaucracy Costs and Improving Tax and Social Transfers Transparency

The costs of social bureaucracy in Mongolia are enormous, and according to “Murray’s Law of Unintended Rewards” they have a tendency to expand even further. To that Murray re­marks: “„Any social transfer increases the net value of being in the condition that prompted the transfer.” (Murray, Charles, Losing Ground: American Social Policy, 1950-1980, Basis Books, New York 1984, p. 212 – 213)

That is why the abolishment of social transfers could reduce the cost for social bureaucracy and raise tax-related transparency considerably. The Government would no longer need the sprawling multiple agencies necessary to distribute food stamps, public housing, medical aid, cash welfare, etc. and a big number of community development programs. Nor would they need to pay the salaries and future pensions of public employees who run all these social programs.

Increase of Labour Incentives and Preservation of Free Labour Marktes

If NIT would be developed progressively, incentives to work would be retained for the trans­fer recipients, which might be stronger or weaker depending on the tax rate and the level of the minimum income. Concrete tax parameters are  a political decision and depends on facts.

Yet another NIT advantage is the liberalization of the labour market. No minimum wage would be necessary, since a minimum income now would be guaranteed. This would boost employment: as economists recognize, a legal minimum wage tends to increase joblessness by discouraging employers from recruiting unskilled labour. Therefore NIT, as a by-result, could subsidize unskilled jobs in decreasing the effective wages for the employers via a decline of the wage costs.

This proposal is connected with the perception that there is no general shortage of labour, but a shortage of „payable labour“, with the consequence of a high “pedestal unemployment”. And in Mongolia the current average wages are relatively low with the corresponding conse­quences for payable work.

Disadvantages of NIT

Some opponents of NIT fear following disadvantages which mainly concern the practical im­plementation:

Difficulties in Recording the Correct Tax Base

In practice there are a lot of obstacles which hamper the introduction of NIT. In order to be able to determine the number of people in need and the amount of NIT tax refunds accurate­ly, it is imperative to provide the appropriate statistical data which must be as detailed as possible concerning the individual situation of taxable/needy persons and taking into account their very personal circumstances and their associated tax-related burdens or social transfer claims, resulting from all of this.

To prevent individual tax cuts, tax evasion or social transfer fraud, the establishment of a highly qualified tax administration is indispensable. In this regard in Mongolia is still a lot of catching up to be done so that the introduction of a NIT is very closely linked to the creation of an efficient, country covering tax administration.

Difficulties in the Definition of the Beneficiaries and the Amount of the Subsistence Minimum

This problem is primarily connected to the question of the most suitable attribution units and the determination of the available redistribution amounts. Should incomes be determined at the individual, family, household level or something else?

Another problem is the determination of the total amount of the existence minimum which can be redistributed. The volume depends on many factors that are difficult to quantify “ex ante” and which are also related to overall economic development.

High Cost of Setting Up an Efficient Tax Administration

This objection can be unmasked as “pseudo-argument” because in Mongolia there already is a social transfer bureaucracy that is not very effective and efficient and which still has deve­loped a “life of its own”. It fuels Murray’s Law of Unintended Rewards because this bureau­cracy has a great interest in expanding its own scope by influencing politicians as well as trying to exercise power over the highest possible number of citizens. And politicians volunta­rily and involuntarily play the “useful idiots” who need a political platform to distribute benefits among the citizens.

This will give political interventionists the opportunities for further influence to support newly defined group interests with the aim of maximizing their votes. It is therefore essential to compare the high costs at present with the costs of creating and developing an efficient tax administration.

At the same time, one should also take into account the fact that an efficient tax adminis­tration is the indispensable basis for the functioning of a modern state which can not be dis­pensed with. The cost of a well-developed tax administration would certainly be much lower than that of a separate social bureaucracy.

Resistance by Powerful Stakeholders

This point leads to the “public choice theory”. Politically responsible persons and influental interest groups initially have their individual benefits in mind, and only consider the common good after that. The personal utility of a politician is vote maximizing and his/her prestige from a public office. In order to achieve this he/she will subordinate all political actions to the objective of a re-election, and will prefer interest groups that can support this goal. Since only well-organized groups are helpful, their interests are satisfied first.

But apart from this “disastrous alliance”, there is another interest group that probably would oppose the introduction of a NIT: the trade unions. However, their tasks generally are far more comprehensive than the negotiation of minimum wages and include, for example, regulations on working time, accident prevention, occupational safety, holiday arrangements, etc. Therefore, the tax-related concerns about about diminishing influence are largely un­founded.

And finally, there would remain the social transfer recipients themselves who, for psychologi­cal reasons, would estimate personal financial contributions and in-kind benefits higher than deductions from tax burdens. The latter are less noticeable and the politicians know this very well. From that it can be assumed that the abolition of the social transfer bureaucracy only can be enforced against the bitter resistance of these powerful stakeholders and its “stir­rups”, the politicians.

Decrease of Labour Incentives

The results concerning taking up a job are ambigious and are highly dependent on the speci­fic structure of NIT, both regarding the tax rate and the consideration of tax- and/or social-relevant facts. In the case of high reimbursement rates, the “underground economy” also comes into play, with the consequence that “non-working poor” can earn higher incomes than “working poor” or even regular employees. But usually the productivity of unskilled workers is often less than their total wage costs – one important reason why especially unskilled workers are the dominating group within the long-term unemployed.

And therefore, as Jamie Dimon, CEO of the Morgan Chase, has said on the occasion of the World Economic Forum in Davos, Switzerland: “I think negative income tax is a big solution for the low-skilled, to give people a living wage and the dignity of a job.” (http://markets.busi­nessinsider.com/news/stocks/how-negative-income-tax-earned-income-tax-credit-works-2017-1-1001702980). And this is especially true of the Mongolian labor market.

Non-Economic Reasons

Besides the economic reasons there are weighty non-economical considerations which plead for the implementation of NIT. The Mongolians are people who love their freedom, their inde­pendence and their self-resonsibility above all. They are proud of their great culture and no­madic heritage which dates back to the time of Chinggis Khaan and earlier. Therefore, in the souls of Mongolians, it is the greatest misfortune when they have to apply for state aid as “petitioners”. Or as one says in many countries of Asia: With this attitude they would “lose their faces” and would be “stigmatized”.

With the implementation of NIT this “social humiliation” would cease because all compulsory taxpayers/needy persons are already recorded in tax or transfer lists, regardless of the amount of their current income. The prerequisite for this, however, is that there would be a well equipped and well functioning tax administration whicht is still not the case to this day.

About Ullrich Andree

Dr. Ulrich F. H. Andree is a Visiting Professor at National University of Mongolia NUM
and public sector consultant.

Posted in Demography, Development, Economics, Health, Inequality, Policy, Public Policy, Public Service, Social Change, Social Issues, Taxes, Ullrich Andree | Leave a comment

Guest Post: Negative Income Tax III – Implementation

By Ulrich Andree

Note: This is the third of three articles. For the extended original article see LinkedIn. The first post focused on the concept of a negative income tax, the second, on its (dis)advantages.

The Implementation of NIT

The implementation of NIT obviously is a “force act” which affects the entire Mongolian society – the politicians, the public administration and, of course, all citizens. If a corresponding political decision is made to introduce NIT, which absolutely should be confirmed by a peo­ple’s referendum as in other countries of the world, it is very useful to carry out the imple­mentation in three steps.

Development of a Theoretical Tax Model

This is about the most accurate recording of all individual, family and special loaded influ­ence dimensions. The individual characteristics include, for example, body handicaps, chro­nic diseases and the like. To the family-related components belongs amongst other things the martial status (single, married, divorced, etc.), the number of children and other depen­dents who are in need of one-time or ongoing financial support of the taxpayer/ recipient. And the latter group includes, for example, special burdens resulting from illnesses, disabili­ties, accidents, loss of income caused by climatic conditions and natural catastrophes and similar reasons.

Econometric Parametrization on the Base of a Total Tax Model

In the second step the main point is to determine the parameters of each of the individual influencing factors quantitatively. This will lead to provisional tax tariff curves, tax-free subsis­tence minimums and corresponding tax burdens with rising positive income. The determina­tion of tax burden or relief rates is particularly important because the degree of politically intended redistribution as well as the total amount of tax redistribution volume is manifested in the tax function.

To determine the correct tax function it is very useful to carry out computer simulations which allow both a variation of the macroeconomic conditions as well as the determining parame­ters. Due to the enormous performance of modern computer systems, this is no longer a pro­blem and therefore should be applied intensively.

Conduct of Practical Field Experiments

Even though computer simulations are an indispensable tool for determining possible tax tariff functions, they cannot replace practical field tests. In order to obtain results as realistic as possible, even taking into account probably changes in the behavior of the beneficiaries, suitable cities or aimags should be selected the above described positive and negative effects are most likely to be expected. This could be the case, for example, concerning the capital city of Mongolia ,Ulaanbaatar, the second largest city, Erdenet (Orchon Aimag) or the third largest, Darkhan (Darkhan-Uul-Aimag).

Methodologically it would be important to form homogeneous comparison groups whose be­haviour is examined once in consideration of NIT and on the other side without the same one. This could be best done with a multi-year “cohort analysis” which is a subset of behavi­oural examinations that take the data from a given dataset and rather than looking at all users as one unit, it breaks them into related groups for analysis. These groups or cohorts usually share common characteristics or experiences within a defined time-span.

Summary and Conclusions

The implementation of NIT – in whatever form – very likely would lead to more redistribution equity and justice and would give the “working” and “non-working poor” a basic or even better chances to participate in the prosperity of Mongolia. It would pave the way from “Big State” to “Smart State”, since in the long run a proliferating and intransparent social bureau­cracy could be completely abolished and all responsibilities would be concentrated in the tax administration.

But even if the concept of NIT is methodologically and substantially totally convincing and its advantages outweigh by far, it is very likely that there will also be strong resistance from powerful stakeholders, such as those from politics, social administration, trade unions which all lose an important public forum for the attainment or exercising of power and/or personal profiling. And it is to be expected that also most citizens entitled to the grants will have a greater interest in receiving direct social monetary transfers and in-kind benefits.

Besides this, there are a large number of practical problems that must be moved out of the way, but which seem to be all solvable if necessary expertise is available. In this respect, Mongolia could learn a lot from the countries that have already dealt with NIT concepts.

The most notable advantage, however, is the fact that NIT would enable the participation of all citizens in the increasing wealth of Mongolia thereby meeting the constitutional require­ments and thus makes a decisive contribution to the society’s cohesion and welfare altoge­ther.

About Ullrich Andree

Dr. Ulrich F. H. Andree is a Visiting Professor at National University of Mongolia NUM
and public sector consultant.

Posted in Countryside, Demography, Development, Inequality, Public Policy, Public Service, Taxes, Ullrich Andree | Leave a comment

M vs Genco

By Julian Dierkes

The MPP has selected its chairman, Enkhbold M, to be nominated as candidate in the June 26 presidential election. The DP appears to have selected Battulga Kh., pending a party congress.

One question remains: Will Enkhbayar N somehow prevail in the courts to be accepted as a MPRP candidate in the election. That seems unlikely, but it is still unclear whether the MPRP will nominate someone else to run. None of the obvious candidates seem likely to trouble either “M” (Enkhbold M) or “Genco” (Battulga Kh).

The Fog over Democracy

During last year’s parliamentary election, many Mongolians expressed frustration over the lack of political choice offered to them. This led to a landslide win of the MPP, largely as a rebuke of the DP, and magnified by a hastily set-up first-past-the-post voting system.

How will Mongolians perceive a two-horse race between M and Genco? These candidates are likely to be perceived as embodying a common complaint about Mongolian politics, namely that it has become enshrouded in the two-party dominance by МАНАН (MANAN in English), the fog that has descended over Mongolian democracy.

MAH and AH are the Mongolian abbreviations forМонгол Ардын Нам (Mongolian People’s Party) and Ардчилсан Нам (Democratic Party), thus combined as MAHAN in a duopoly of power. How appropriate as Манан also means “fog”. Funny how some of these images permeate Mongolian politics, just think of Монгол Ардын Хувьсгалт Нам, the Mongolian People’s Revolutionary Party, often referred to as МАХ Нам, or “meat party”.

The metaphor of the MAHAH fog has been around for some time. Initially, it was used simply to refer to the duopoly of political power between the MPP and DP. More recently, it has been used to refer to purported collusion specifically between President Elbegdorj and Enkhbold. This latter use is, of course, entirely based on rumours, but clearly seems to resonate with parts of the public. Under this use, Genco would not be seen as part of the fog.

How might M & Genco be perceived as the embodiment of this fog? They have been politicians for a long time, have served in various party and government functions. Neither of them has ever distinguished himself by any public dedication to concrete policy issues. Both of them are tainted by swirling rumours of corruption. That is true of almost all serving Mongolian politicians, of course, but their share of rumours seems to be even greater than the average.

Enkhbold M

M could probably best be described as a party apparatchik. While this term has traditionally been reserved in English for socialist party leaders during the Cold War, it would seem to apply to him fairly well.

He was born in 1964. He has been an active party official for 25 years, having been appointed as Deputy Governor of an Ulaanbaatar district in 1992. He jumped into national political prominence when he became chairman of the then-MPRP in 2005 following Enkhbayar N’s resignation in the course of Enkhbayar’s candidacy (and victory) in the 2005 presidential election.

When the MPRP withdrew from its coalition in Jan 2006, the turmoil led to Enkhbold being installed as prime minister and he served without any particular distinction in that office until he was succeeded by Bayar S in Nov 2007. He succeeded Enkhtuvshin O as party chairman (again) in Nov 2013.

Further to the apparatchik label, M’s main skill seems to be in managing his party. This he has been quite successful in. At the same time, I cannot think of a concrete major policy that M has championed on substantive not partisan grounds. Likewise, he has not been noticeable for encouraging deeper party-wide or wider political debates about the challenges that Mongolia faces. His success in managing the MPP has come largely through dealings outside of the public eye, rather than through rousing public speeches or the championing of a substantive platform.

He is a fairly uninspiring speaker and campaigner. I followed him for a day of campaigning in the 2012 election. In his aimag of Tov he appeared very much as a party apparatchik, i.e. fairly wooden in his public appearance, lecturing at potential voters rather than engaging them in any particular fashion.

Battulga Kh

By contrast, Genco is a significantly more colourful character.

Unlike many politicians who (sometimes not entirely truthfully) boast about their educational pedigree in a context where official candidates’ statements always include their degrees, Genco appears not to have attended university.

Instead, he has built a career paralleling his political career around judo and business.

Genco has long been active in the Mongolian Judo Association, serving as its president, and likes to appear with active judoka, particularly around major events like Olympic Games, etc. The fact that he also surrounds himself with burly judoka in his campaigns gives him a slightly thuggish image which he seems to like to cultivate. He appears to like to be photographed wearing a fedora and with a very serious facial expression.

His nickname derives from the corporation that he has established, Genco. Recently, he and Genco Tours have become especially associated with the Chinggis Khaan theme park that is being built around the marvellous mounted statue near Ulaanbaatar that has become a major tourist destination.

His political career has been rooted in his home province of Bayankhongor. He served in parliament from 2004 to 2016, including a stint as Minister for Road, Transportation, Construction and Urban Development from 2008 to 2012. He is the leader of the Mongolian Democratic Union faction (Монголын Ардчилсан Холбоо – MoAKh) within the DP.

One aspect that makes his nomination very curious is that he was not re-elected in the 2016 parliamentary election. Given all the advantages given to incumbents (majoritarian voting, shortened campaign period, etc.) and Genco’s national prominence as well as perceived control of politics in his aimag, it was very surprising that he was defeated by a relatively unknown candidate for the MPP, Eldev-Ochir L. Yet, somehow, DP members have looked past this recent electoral defeat in selecting him for the nomination as presidential candidate.

There is also a case to be made that Genco does NOT represent the МАНАН collusion as that is often associated with current president Elbegdorj Ts and M. In this view and all the rumours about this collusion, Genco would be seen as a target of MAHAH scheming, rather than as a participant to it.

This case also colours the perception of corruption associated with Genco. Several of his associates were arrested very publicly on Apr 11 2016. Some take this as evidence of corruption, some as evidence of MAHAH schemes against Genco.

Like M, Genco has not distinguished himself by championing any particular policies or by demonstrating an interest in concrete policies that might improve the well-being of Mongolians. I have not seen him campaign or speak in person, so I don’t have much of an impression of him as a campaigner or debater.

Campaign Outlook

Pending confirmation of the M and Genco candidacies and any MPRP candidate, there is very little in their persona or past roles that suggest a campaign that might be fought around some of the very important issues that Mongolia faces. Even as commodity prices are recovering and thus throwing a lifeline to Mongolia’s economy along with an IMF bailout, many choices are still to be made about the development of the Mongolian mining sector, governance issues surrounding state participation in that sector, perceptions of rising inequality, etc.

It seems unlikely that either candidate will address these issues in a meaningful substantive way.

M will likely say very little of substance in the campaign, relying instead of the seemingly built-in strength of the MPP. In his wooden ways, he will look vaguely presidential.

Genco campaign is much harder to predict, as he is much harder to predict as a person. Given that most people would assume that an MPP victory is likely, Genco might approach the campaign with a nothing-to-lose attitude. In that case, he might well lash out at M over the recent Erdenet Mine shenanigans. Both candidates will mutually brand each other as corrupt. Genco has also been mentioned in the past as the type of politician that might appeal to a latent desire for a “strong hand” in the Mongolian electorate. I am not convinced that there is such a desire in a significant way, but if there is, Genco might just have the populist streak in him to appeal to that desire.

Posted in Corruption, Democracy, Democratic Party, Elections, Foreign Policy, International Relations, Mongolia and ..., Mongolian People's Party, Party Politics, Politics, Populism, Presidential 2017, Public Policy | Tagged | 4 Comments

Dialogue on “Participation to Mongolian Development”

Participation to Mongolian Development workshop was organized on the Monday, April 20, 2017 at the Liu Institute for Global Issues by the BC Mongolian Student and Alumni Club. This is the second series of the dialogue workshop organised by the BCMSA club last year Envisioning the Future for Mongolia. The event attracted 25 participants representing UBC students, people living and working in Vancouver, British Columbia.

The keynote speaker BOLORMAA Purevjav, who is a Canadian International Resource Development Institute’s Fellow at UBC and Chair, Stakeholder Engagement and Sustainable Development. Ms. P. Bolormaa has shared her insights with regards to the growing need of participation at all levels with the focus on sub-national level. She showcased a story where people at local community gathered to formulate their vision and the importance of leading a participatory process of stakeholders to achieve its vision.

The panelists at the event were Ms. Bolormaa Purevjav, Mr. Batjav Gonchigjav, businessman in Vancouver, and Ms. Sainsanaa Khurelbaatar, graduate student at UBC. The panelists shared their personal experiences on “what it was living in the socialist regime; what exactly meant transition period to democracy and how they tried to respond to hardship that country experienced in in early 1990s”. The life wisdom, struggle, strong ties to traditions and culture, personal values guided them in their life path and career achievements.  Personal development is of high importance; being organized, developing right habits, having positive attitudes and maintaining good health is a foundation.

Panelists, looking back and reflecting what was achieved through personal life stories, made participants to share their own experiences and connect with each other. Many participants expressed their view how they feel about themselves while in Canada, how they would frame the Mongolian identity. After consoling the past, present and future, the group identified that being a Mongolian means that we are proud, resilient, adaptive, observant fighters who is embracing consistency and patience.

The graduate student Ms. Sainsanaa Khurelbaatar, representing the young generation of Mongolia, shared her insights in participating in the Mongolian future. She emphasized that mental and physical health of young Mongolians were and are in the front and center for our nation’s success and how we should tap into our ancestral wisdom and quoted the proverb on “Цагын юм цагтаа” (do things in due time – pragmatic translation).

In the end, BC-MSA club annual report was presented by club head Enkhgerel.G. According to his presentation, Mongolian students raised $1526 CAD from fundraising events and supporters, and over 20 students contributed and actively participated in these events.

From February 2016 to March 2017, BC-MSA club has organized over 15 events, including scholar lectures, volunteering fundraising event, and workshops. BC-MSA current vision is to expand their activities through students who are studying and studied in all around Canada. At this workshop, the club announced the election for the club’s executive roles. The role, Head of Club, Treasurer, Operational VP, External Relationship VP, and Marketing VP are open to Mongolian students and community.

As part of known as multicultural school UBC, the Mongolian student community delighted to be actively engaged with each other and enthusiastically contributed to the Mongolian community. On behalf of the BC-MSA club, we thank everyone for their generous support.

 

Acknowledgement

The event organizers would like to thank the Liu Institute of Global Issues, Dr. Nadja Kunz, Ms. Jani Manikkar, Starbucks and everyone who generously supported our event and our activities.

 

Posted in Canada, Development, Diaspora | Tagged | Leave a comment

Guest Post: Erdenet Update 100%, Again Contested

By Marissa Smith

At the close of the fall session of the Ikh Khural, Mongolia’s Parliament, the body voted to invalidate the sale of the 49% shares of Erdenet carried out in summer 2016, which transferred the ownership of the 49% from the Russian state enterprise Rostec to the recently created Mongolian Copper Corporation. As of March 29th, the Erdenet enterprise has now been registered as 100% government-owned. The Spring Session of the Ikh Khural opened on April 5th. Though, as reported, no direct references in session have yet been made to the matter of the Erdenet 49%’s “taking by the government” at the close of the fall session, the month of March and beginning of April have seen several relevant events.

The legality of the Parliament decision to revoke the sale 49% of Erdenet shares is being reviewed by the Tsets, Mongolia’s constitutional court, an event that has been lightly covered and may stretch out for a long period of time .The event that I see as most important to discuss at this point in time and which I will focus on in this post, however, is the removal of MCC board members and their replacement with members of government ministries, and the re-entry into discourse of the Erdenet “100%,” which has previously been associated with former Prime Minister Saikhanbileg’s much contested assertion that the sale of the 49% to MCC constituted Erdenet’s transformation into a “100% Mongolian” enterprise.

Increased Government Control, to What Ends?

The three directors of the board associated with the Mongolian Copper Corporation (MCC), the CEO of the Trade and Development Bank (O. Orkhon), long-time politician and proponent of market liberalization and reform (D. Ganbold) [See Morris Rossabi, Modern Mongolia: From Khans to Commissars to Capitalists, Berkeley: University of California Press, 2005.], and M. Munkhbaatar (http://www.news.mn/r/314463), have been replaced with members of the government from the energy ministry (Z. Mendsaikhan), mining and mid-sized industry (D. Davaadorj), and Committee on State Property (A. Dagvadorj). It appears that the central government in Ulaanbaatar may be moving to wrest at least more control of Erdenet from the largely separate group who have been involved with the enterprise since the Tsedenbal period.

The ousted board members – with the exception of former TDB CEO Orkhon — are speaking out and calling the events “highway robbery” (deerem), and Ts. Purevtuvshin, the twenty-something director of the MCC has emerged and been giving interviews and press conferences.

The new members of the board are obscure, so it is hard to say now how the central government may or may not  be seeking to further change the relationship with Erdenet, and there would be other forces of resistance to its actions than free-market logics and those espousing them, domestically and internationally. The silence of O. Orkhon about his removal suggests that these forces may be moving, however.

In terms of the other forces, the position of Russian actors in relation to these three groups of Mongolian actors continues to be important. Through intermediaries who must also be taken into account, the Erdenet enterprise requires continued access to Russian electric power and gasoline, as well as replacement parts for equipment. With Mongolia’s railway continuing to be a Mongolian-Russian joint enterprise, the feasible transport of copper and molybdenum concentrates also requires Russian cooperation. In March Erdenet’s general director, reportedly visited Russian mining equipment manufacturer Rudgormash.

Director, A Long-time Mining (but not Erdenet) Insider, Under Threat

But most lately, Badamsuren is at the center of a storm of controversy about his salary and other benefits (a story also just appearing in Russian-language news outlet asiarussia.ru). Though he was appointed director after the sale of the 49% to MCC, Badamsuren is associated more with the late socialist-era engineering technocracy that also characterizes the administration of Erdenet, rather than Western-oriented business and finance circles (though like members of the Erdenet establishment, Badamsuren studied at the Colorado School of Mines in the 1990s).  Is he (along with the MCC management) being particularly targeted for replacement, possibly for seeking contracts with new or, the wrong, new suppliers? Badamsuren was previously associated with Mongolrossvetmet (the very little discussed Mongolian-Russian mining enterprise, which produces Mongolia’s world-leading levels of fluorspar among other nonferrous metals and minerals, whose shares were also sold last summer) and appears to be an outsider to Erdenet and its networks.

In any case, public discourse is continuing in much the same form as Mongolian news outlets have released many, many stories about the salaries, consulting fees, and somewhat luxurious possessions of Erdenet’s directors (on Wednesday, April 5, a half-hour long press conference on this topic was held and webcast by the State Property Committee). Concern over taxes is also populating the Mongolian press and social media, and conversations (and protests) about offshore accounts are back with a vengeance.

Unfortunately, these stories and conversations miss and lead us away from examining the structural conditions underlying the difficult situations and justified outrage that generate and make attractive simplified narratives of corruption. Similarly, and we may expect the discourse to be increasingly structured along these lines with presidential elections drawing closer, the matter of the 49% is not one involving and to be decided only by two sets of actors facing off, as in alignments between those seeking privatization, the MCC board members, and Democratic Party on the one hand and those supporting government ownership and management and the Mongolian People’s Party on the other, or alliances between government members across party lines (“MANAN”) and other “oligarchs” versus the rest of the Mongolian people.

In particular, in this and my other writing about Erdenet I have sought to highlight the character of Erdenet as involving a largely separate group of actors or “establishment,” with their own sets of networks not only in Mongolia, but also abroad. Though much focus has been placed upon the “taking” of the 49% from the MCC, attempts to take Erdenet from the people who have been operating the enterprise and the networks that keep it running for forty years has been little discussed, and would in many ways prove much more difficult, as has been evident with similar cases involving many large post-Soviet enterprises across Eurasia over the past two and a half decades.

About Marissa Smith

Marissa Smith obtained her PhD from Princeton University’s department of anthropology in 2015, after defending a dissertation about Erdenet and its position in local, national, regional, and international contexts. She currently teaches at De Anza College in Cupertino, California. 

Posted in Corruption, Erdenet, Marissa Smith, Mining, Mining, Mining Governance, Policy, Politics | 3 Comments

Guest Post: The Long Journey – Towards a Broadcasting Law in Mongolia

By Toby Mendel

Broadcasting laws are important

Most democracies, and quite a few non-democracies, have adopted broadcasting laws. At their best, these laws can promote a number of important social and human rights objectives. They can establish independent bodies to regulate broadcasting, so that this is not done by a ministry or another body which lacks independence from government. They can put in place a fair, competitive processes for obtaining broadcasting licences, ensuring a level playing field and promoting various public interest objectives through licensing (such as controlling undue concentration of ownership of broadcasters). They can establish various mechanisms to promote diversity in the broadcasting sector. And they can put in place appropriate systems for addressing harmful content in the airwaves or, put differently, for promoting professionalism among broadcasters.

Mongolia, however, is an exception in this area, since it does not have a broadcasting law. This is not for lack of trying and both advocates and officials have spent many years promoting the idea of a broadcasting law, so far without success. As far back as 2002, I was a co-author of the publication Mongolia in Transition: Analysis on Mongolian laws Affecting Freedom of Expression, produced by Globe International and ARTICLE 19, which, among other things, recommended the adoption of a comprehensive broadcasting law. In 2009, the Asia-Pacific Institute for Broadcasting Development (AIBD) worked closely with the Mongolian National Broadcaster (MNB) to prepare a broadcasting law, but the resulting draft was never adopted. Following this, in 2013-14, the Asia-Pacific Broadcasting Union (ABU) worked closely with the Communications Regulatory Commission (CRC) to draft a broadcasting law which, again, was never adopted. In both cases, I was the international expert on the team.

Mongolia does have a Law on Radio Waves, passed in June 1999, and a Law on Communications, passed in October 2001. The former establishes a general system for licensing the airwaves for both broadcasting and telecommunications activities, while the latter creates the CRC. However, CRC is not independent of government among other things due to the fact that the Prime Minister appoints the Chair and other members of the Commission, on the basis of nominations by the Minister responsible for communications. Furthermore, neither law provides for specific rules on broadcasting. As a result, these laws fail to promote the important potential objectives of a broadcasting law, noted in the first paragraph of this blog.

The perils of not having a broadcasting law

In many respects, Mongolia represents an almost classical study of what happens in a country which, while a reasonably progressive transitional democracy, lacks a proper legal/regulatory framework for broadcasting. Because the regulator, the CRC, is not independent, it is not regarded as a legitimate decision-maker. This, in turn, seriously undermines its ability to make hard decisions. For example, a competition to determine which television stations would get access to the national, digital transmission network, held over one and one-half years ago, has still not been decided. The result is that the six legacy (historical) channels remain on the national network rather than this having been decided in a fair, competitive manner.

More generally, instead of holding competitions for a limited number of broadcasting licences, based on what the country can reasonably support, licences were, at least in the past, issued to every bidder who met minimum technical standards (the so-called “fit and proper” test). Although some brakes have been put on this recently, the result has been a massive oversupply in the number of channels, many of which operate at a loss and with tiny audience shares. This, in turn, fractures advertising revenues and otherwise creates serious market distortions, making it very difficult for even the most popular channels to invest the resources that are needed to produce quality content.

The lack of independence of CRC, combined with an inadequate legal framework, also makes it almost impossible to regulate content, whether in the form of enforcing positive obligations (such as a requirement for all channels to carry 50 percent Mongolian content) or professional standards (such as not to broadcast hate speech or content which is inappropriate for children during the daytime). This has significantly exacerbated the problem of low standards in broadcasting.

Another problem is the absence of effective rules to promote diversity in the broadcasting sector. One measure which has been put in place is to require so-called “cable channels” (i.e. those which, in accordance with their licences, are distributed exclusively over cable networks) to concentrate 80 percent of their programming in the specialized area indicated in their licence, such as history, culture, education, news or sports. Even this rule, however, is widely ignored and rarely enforced. Otherwise, there are no rules limiting concentration of media ownership, promoting diversity through the licensing process or supporting the establishment of community broadcasters, all key diversity mechanisms in more developed broadcasting systems.

Moving forward, albeit with some headwinds

In an important breakthrough, at the end of December 2016, the CRC did place a draft Broadcasting Law before parliament. This is significant because it represents a real opportunity to move forward on this issue. At the same time, as a recent Analysis of the draft Law by the Centre for Law and Democracy shows, there are significant problems with the draft.

The first and perhaps most significant problem is that the draft Law does nothing to enhance the independence of the CRC. Indeed, it says nothing at all on this subject. Despite this, the draft Law grants very significant powers to the CRC, including to license broadcasters and to undertake the very sensitive task of applying content rules. The problems with independence do not stop there. The draft Law creates a Development Fund for National Broadcasting, with the worthy goals of improving the quality of Mongolian content, and funding priority and more costly content production. However, the draft Law also calls on the government to collect and set the rules for disbursing the Fund, both very politically sensitive tasks.

The failure to promote the independence of the regulator is exacerbated by the fact that the term for broadcasting licences is set at the unrealistically short period of three years, whereas in almost every other jurisdiction this is at least seven years. The result is that every broadcaster will have to apply every three years to the politically controlled CRC for licence renewal. The draft Law also fails to establish even a framework of rules to ensure that licensing processes are fair, transparent and assessed on the basis of pre-established and legitimate criteria. The draft Law is also silent as to the question of how television stations get access to the highly coveted national distribution system, for how long and so on, leaving this to the sole discretion of CRC.

In terms of diversity, the draft Law does include basic rules on concentration of ownership of broadcasters, although it fails to establish analogous rules regarding cross-ownership between the broadcasting and print media sectors. It also includes a very general call for quotas for Mongolian, local and licensee produced content, but the specifics are to be set by the CRC. While positive, it would have been preferable for the Law to include more detail on these important matters. Significantly, the draft Law entirely fails to recognize community broadcasting, which is never even mentioned. For example, the definitions recognize public and commercial broadcasting, but not community broadcasting.

Finally, the draft Law establishes a number of direct content restrictions and then appears to leave enforcement of these rules to the CRC, mainly through the licensing process (i.e. by suspending or revoking licences for breach of the rules). Better practice in this area is to grant the regulator the power to adopt and then apply a detailed code of conduct for broadcasters, and to provide for a graduated system of sanctions, including warnings, a requirement to broadcast a statement acknowledging the breach and fines before the more serious measures of license suspension or revocation are invoked.

To be fair, it is very positive that Mongolia appears to be moving forward with the adoption of a broadcasting law and, despite its shortcomings, the draft Law does contain a number of positive features. At the same time, given how long Mongolians have waited for this, it would be a lost opportunity if greater effort were not spent trying to improve the existing draft. The Analysis by the Centre for Law and Democracy provides a good starting point for such improvements.

About Toby Mendel

Toby Mendel is the Executive Director of the Centre for Law and Democracy (CLD), a Halifax, Canada based international human rights organization that focuses on foundational rights for democracy (freedom of expression, the right to information, freedom of association and assembly and the right to participate). He has worked on these issues globally and in countries around the world at CLD and, previously, with ARTICLE 19, for some 20 years. He also works with a range of inter-governmental organizations – including UNESCO, the World Bank, the OSCE and the Council of Europe – on these issues.

 

Posted in Law, Media and Press, Public Policy, Social Media, Society and Culture, Toby Mendel | 3 Comments

Funny Thing Happened Last Week: John Oliver, Dalai Lama, Mongolia

By Julian Dierkes

One of the reasons I encourage graduate students to be strategic about communicating their research results is that you never know when and on what topic the public comes knocking on your door.

Sometimes the public comes in the form of a John Oliver interview with His Holiness the Dalai Lama, viewed more than 4.5 million in the first five days since it was posted.

Obviously, the Dalai Lama is well-known for his sense of humour, so perhaps not surprising that he would be interviewed for a comedy news show.

In this vein, perhaps it is also not so surprising that he ended up talking about fermented mare’s milk in Mongolia. Hey, why not?

And as Tsogtbaatar B says (more about that below),

Well, who am I to judge Dalai Lama?

Sudden Interest in Alcoholism in Mongolia

Obviously, when the Dalai Lama mentions something, and even more when he does so in response to a John Oliver question, the world appears to get interested.

In the case of our Mongolia Focus blog, that means the world suddenly got interested in a post that Mendee wrote in 2012: “Mongolia – Without Vodka, Cheers with Milk“.

Now, as blogs are organized chronologically, a 2012 post is buried pretty deeply on our blog. We have written over 450 posts in the 5 1/2 years of operation of our blog until today (March 2017), so it is highly unlikely that anyone would find this blog post by clicking on <next post>.

But, somehow, someone found the post and posted a link on a scientific skepticism site. I can’t quite figure out whether it is this post that has driven traffic, but more than 500 people read that post in the days after the John Oliver segment aired.

Just to put this in perspective, apart from election coverage when we see huge spikes in readership, a regular blog post does well when it gets over 100 readers in the first couple of days after posting. There are exceptions, like Marissa Smith’s recent guest post on the Erdenet NoSale which has been read more than 500 times since it came out already, but 500 readers for a 2012 post is a very big number, even in the grand scheme of things, i.e. the over of a quarter million page views that our blog has had since we started writing.

In the world of blogging about Mongolia, that’s about as viral as you’re going to get, even if it is only 0.01% of the viewership of the John Oliver video.

And then, the Media

Not surprisingly, as John Oliver’s brand of news comedy seems to be popular with journalists and the public, this mention of Mongolian alcohol abuse also caught the attention of journalists.

And sure enough, some days after the interview, a post showed up on U.S. National Public Radio’s Goats and Soda blog: “Looking into the Horse Milk Story that the Dalai Lama Told John Oliver“. An aside: the name for this health blog “Goats and Soda” apparently derived from some travel in Africa where goats and carbonated sugar water seemed ubiquitous, but obviously, any blog that has “goats” in the name seems an appropriate place for writing about Mongolia.

Since Pres. Elbegdorj’ office didn’t respond to a request for an interview (perhaps, the Dalai Lama remains too controversial a topic for officials following the recent spat with China over HHDL’s visit in November 2016), NPR’s Angus Chen turned to blogging experts on Mongolia. The story thus cites Mendee J, co-founded and frequent contributor to this blog, but also Tsogtbaatar B. Not only was I a member of Tsogoo’s dissertation committee, but he has also written for this blog in the past while now serving as the director of the Public Health Institute of Mongolia. Since his work is directly related to this story, I hope that the sudden media attention raises awareness of public health issues Mongolia is facing in Mongolia itself and abroad.

Who Cares?

Allyson Seaborn along with many other people most likely, was somewhat annoyed by the John Oliver-HHDL hoopla after a few days.

I will note here that the substance of the Oliver-HHDL interview is not really quite worth commenting on.

Of course, the Dalai Lama did not cure alcoholism. Of course, horse milk is typically consumed as airag, i.e. fermented, and thus alcoholic. Of course, Mongolians and many other people have been consuming fermented mare’s milk for many centuries. And of course, Oliver and HHDL both capitalize on the exoticization of Mongolia as “Outer Mongolia” and of fermented mare’s milk.

But the fact that Mendee’s very old blog post has found hundreds of readers is of interest to me. Some of those readers were hopefully interested in other blog posts. Maybe some of them even got more interested in Mongolia than an initial “oh, how exotic way”. That is often not easy to achieve when you’re offering analysis of contemporary Mongolia.

Conclusion

As researchers, we should be ready to leverage the attention that sometimes random connections might bring, to raise awareness of our analyses and the issues we care about.

Posted in Curios, Dalai Lama, Health, Media and Press, Pop Culture, Social Issues, Social Media, United States | Tagged | Leave a comment

Anti-Chinese Attitudes in Mongolia through Generational Imprinting

By Mendee Jargalsaikhan

A few years back, Julian introduced me the concept of generational imprints and pointed out the work of Karl Mannheim.  Mannheim (Essays on the Sociology of Knowledge. Routledge: 1952) defined a generation as a social creation and argued that each generation receives imprints from the social and political events during their formative age.  Fascinated with this work, I did a little brainstorming for my MA thesis.  I am still hoping that the study of generational aspects could lead to more insightful examination of anti-Chinese attitudes in Mongolia instead of over-emphasizing its persistence among general public. Here is a bit long excerpt:

Logically, all generations talk differently about China, Chinese people, and their culture, because they have collective memories of significant events based on their first-hand or second-hand learning experience. Without rigorous interviews and analysis, it is impossible to prove generational aspects. Nevertheless, I will advance the following speculations to dis-entangle overall claim of persistent anti-Chinese attitudes in Mongolia a little further. Table 9 correlates seven generations, their sources of foreign education and orientation, experience (either first or second hand) of events, and political status to speculate potential attitudinal outcome in regards with China, Chinese people, and culture. If a generation received all sources of schemas, their attitude toward China may be neutral. In opposite, if a generation is only exposed to negative schemas during their formative age and has limited interactions with China, their attitude towards China could be mistrusted. And, even if they are exposed to positive and neutral schemas after their formative ages, their attitude to China may be cautious. At the same time, attitudes of generational cohorts also may alter significantly overtime due to dramatic changes such as start and end of Cold War and democratization.

 

A cohort born in 1930 would have seen high-level exchanges of Sino-Mongolian leaders, a visible presence of Chinese workers and their families in Ulaanbaatar, unique Chinese goods (e.g., silk, fruits, and tea), and culture (e.g., song and table tennis), and heard about Mongolian participation in the Liberation War in northern China during their formative years (17-25 years). Many of those who were educated in the Soviet Union would have interacted with Chinese students in Moscow and a few might have had opportunities to study in Beijing. The generation would have also lived through a period of three decades, when all these interactions would have ceased. They would have seen a good China (providing assistance to Mongolia) and a bad China (cultural revolutions, political struggles, and the Tiananmen incident). This group of people might have played a crucial role in resuming normal relations with China at the end of the 1980s, since most members of the Political Bureau of the Mongolian Communist Party had been born in the 1930s.

The second cohort, born in the 1940s, witnessed some friendly Sino-Mongolia relations. But the students abroad in the Soviet Union would have had few interactions with Chinese people in Mongolia, because the Chinese workers in Mongolia were strictly guarded and influenced by the extensive propaganda and anti-Chinese attitudes. They would have been mostly aware of the images of bad China, and would have interacted closely with Russians in Mongolia and abroad, from their formative years, starting from the 1960s. As Mongolia transitioned into a democracy in 1990, the political elites from this cohort would have dominated most of the leadership posts.

The third cohort, born in the 1950s, would have had first-hand experience with anti-Chinese attitudes, but would not have interacted with Chinese until the 1990s. They were brought up under the “China threat” atmosphere and would have fulfilled their extensive military and civil defense obligations. Although they would have had first-hand experience of the Soviet-Mongolian brotherly relations, and been knowledgeable about the Soviets and the communist world, their views on China would be one-sided, since they would have lacked any exposure to neutral or positive views about China. This group has been a driving force for the democratic movements, and abhorred the Chinese and Romanian repressions of democratic movements.

The 1960s generation had experiences that were similar to those of their previous generations, though Sino-Soviet tensions had been reduced and the cohort began questioning the need to have military and civil defense obligations. During their study in the Soviet Union and Eastern Europe, the members of this generation would have had first-hand experience with the negative images of the Soviets in Eastern and Central Europe, and been exposed to liberal ideas and anti-communist discourses. They would be attracted to the ideas of democracy, market economy, and developments in the capitalist world. Their knowledge about China would have been influenced by the negative views; they would have disliked the Chinese repressions of 1989. On the other hand, this generation enjoyed free access to Chinese markets and infrastructure. This cohort is becoming the most influential group in Mongolian politics today.

The 1970s generation has mixed views about both China and Russia. They would have first-hand experience of the anti-Chinese propaganda, strained relations with Russia (withdrawal of Russian military and the anti-Soviet attitudes), and increasing interactions with China. They would likely have similar feelings about the Tiananmen incident and the growing Chinese economy, as would earlier cohorts. Nevertheless, Russia would no longer be the window through which to see the world, as it was for earlier generations. Cohorts from the 1940s and the 1960s were more familiar with Russia, its people, and culture, since 32,000 Soviet civilian workers with their large numbers of dependents, and 80,000 Soviet troops were in Mongolia in the 1970s and 1980s. The Russian language was a mandatory second language for thousands of Mongolians who were studying in the Soviet Union, from the time of their elementary school. This was not the case for generations, from the mid-1970s and afterwards.

Logically, generations of people, who were born in the 1980s and 1990s, will likely have the most neutral view of China and be rather cautious and mistrusting of Russia. They have not experienced the anti-Chinese (pro-Soviet) propaganda, and are able to have multiple views on most issues, links with the West, and access to vast amounts of information (from the Internet, cable TV, and newspapers). The most significant events they are likely to recall are the winning of two gold medals by Mongolians at the Beijing Olympic game, rather than second-hand knowledge about the Tiananmen incident and bad images of China from the 1960s. The increasing number of Mongolian students in China and China’s sustained projection of its soft power policy (e.g., visa waiver, granting access to Chinese infrastructure and medical facilities, developmental aid, and assistance) for Mongolia will certainly affect the attitudes of future generations in Mongolia. However, the results from AsiaBarometer (2005) and Asian Barometer (2006) yield interesting outcomes. First, all generations tend to hold neutral and negative views of China in both polls. Although there was no significant deviation between generations of 1930-40s and 1950-70s, younger generations (1980-90s) have slight positive impression of China in the Asian Barometer study. But younger generations in both polls were overly polarized while other generations have more neutral views (about 28-36%). Second, there are noticeable correlations between view of China and gender along with educational level of younger generations. Male participants and people with low educational levels hold more unfavorable view of China. The question will remain why views of younger generations are polarized and holding similar negative views as older generations.

These barometer studies are not likely reveal attitudinal shifts of generations. First, number of the sample, questions, conducting organizations, and timeframe of two barometers were different. For instance, when AsiaBarometer (2005) asks about Chinese influence, Mongolians responded in more negative while more positive as Asian Barometer (2006) asks about impressions about China. Second, each poll had a single question on China and one possible response. More insightful examination of anti-Chinese attitudes would need a specific set of questions. For instance, questions whether a person allow his children marry to Chinese, live next to a Chinese neighbor, or work in Chinese-Mongolian run business may help us to understand emotional components of anti-Chinese attitudes. Moreover, degree of awareness of Chinese culture (e.g., language, literature, religion, customs, and traditions), history, contemporary Chinese politics and socio-economic situation as well as Sino-Mongolian relations need to be examined by a carefully-designed questionnaire will contribute to our understanding of anti-Chinese attitudes. In addition to variables like age, gender, geographic location, it might be possible that other variables such as personal income, social status, and degree of interactions with Chinese people could correlate person’s attitude to China.

Without further study, it would be difficult to make firm conclusions about the anti-Chinese attitudes of different generations and their key generational imprints. Nevertheless, it is fair to speculate about the existence of lingering impacts from the artificially-consolidated past schemas on the younger generations, since the past schemas have not been de-constructed in historical textbooks, the literature, entertainment, or the political leaders’ discourses in post-communist Mongolia. A handful of empirical studies suggest that Mongolians generally hold unfavorable views about China, and the intensity of the anti-Chinese discourses in the media, blogosphere, and public domain is apparent.

Note:  this excerpt is directly taken from my graduate thesis, Anti-Chinese Attitudes in Post-Communist Mongolia (2011), pp. 34-38.  Here is the link to the full thesis.

Posted in China, Nationalism, Politics, Social Issues | Tagged | 1 Comment

PS: Constitutional Reform & Double Deel

By Julian Dierkes

Constitutional revision remains under consideration in Mongolia. If the MPP wins the presidential election in June 2017, there may be less pressure toward a revision of the relative power of president and parliament (most recent discussions in Mongolia would assign more power to parliament, but somehow I don’t think that M Enkhbold would be so excited about that should he win the presidential election).

One of the issues that keeps coming up over and over is the “double deel” (давхар дээл), i.e. concern about members of parliament also serving as members of cabinet.

Previously, I have used examples from Canadian and German state/provincial parliaments to argue that other parliaments of comparable size have not been concerned about this challenge.

As it turns out and as I have learned in the context of debates of constitutional reform in Berlin, I was at least partly wrong about that.

The Green Party of Germany, for example, has long argued for a separation between a seat in parliament and an office (Trennung von Amt und Mandat), though this has been focused primarily on party offices.

In Spring 2017, the Berlin parliament (Abgeordnetenhaus) is debating a proposed constitutional amendment to prevent the double deel. I hesitate to offer this link, in part because it leads to the proposal by the Alternative für Deutschland, a rightist-populist party. However, as the example of rules against the party double deel in the Green Party show, this is a debate that other parties are open to.

The case in the Berlin discussions includes the following elements:

  • separation of power: the German constitution does not adopt this as a principle, instead preferring interlocking powers (Gewaltenverschränkung)
  • weakening of parliament: this is in part a numbers argument (i.e. every member that joins the cabinet no longer operates as a member of parliament, but also an argument about the role of parliament as endorsing and controlling the government
  • salary: the Berlin parliament is defined as a half-time job (surely not realistically so), members of cabinet (Senatoren in the case of Berlin) thus draw salaries as such AND as members of parliament
  • examples: the two other German city states, Hamburg and Bremen, both have separated membership from parliament from membership in cabinet

While the Greens have practiced this separation for some time, it has also been advocated for by parts of the Social Democrats.

Given similarities in the issues and challenges identified, perhaps there are opportunities for an exchange between Berlin and Mongolia around this topic.

Posted in Constitution, Democracy, Germany, Governance | Tagged | 4 Comments

Addendum: Paying Bribes

By Julian Dierkes

I recently wrote that year-over-year changes in the Corruption Perception Index for Mongolia didn’t mean much, and also tried to benchmark corruption in Mongolia against post-state socialist countries, resource economies and democracies.

Now, Transparency International offers some more information in their “Asia Pacific – Global Corruption Barometer“.

Methods

First – as I do often – a quick note on methods.

Figures reported in the GCB are based on face-to-face surveys conducted in Mongolia in December 2015 (Nov 25 2015 – Jan 2 2016). 1,500 respondents were interviewed.

A number of reported measures come with caveats, often involving Mongolia. For example, questions regarding whether corruption had become better or worse were not asked in Mongolia and no explanation was given why that might have been the case.

“TNS” is listed as having conducted the survey in Mongolia.

Results

Reports of Bribes Actually Low for Mongolia

At the broadest level, the survey reports that 20% of Mongolians report having paid a bribe. That is remarkable and worth noting.

World Bank country manager Jim Anderson notes this right away:

It is worth looking at this regional comparison a bit more closely. Transparency International colours its map by deciles, i.e. 0-10% reporting paying bribe, 11-20%, etc.

Alternatively, let’s group countries with very low corruption, i.e. under 7%: Japan (0,3%), Hong Kong 2%, South Korea (3%), Australia (4%), Taiwan (6%). I imagine that Singapore and New Zealand would also be in this group had they been included.

Then there is a jump to Sri Lanka (15%), Mongolia (20%), Malaysia (23%) and China (26%).

After that, reported figures jump to nearly a third of respondents (Indonesia 32%), and rise all the way to over two thirds of Indians reporting having paid a bribe.

Note that all the low-corruption countries are the Asian OECD countries plus Taiwan and Hong Kong. The very high figure for India, on the other hand, suggests that levels of bribe-paying are not necessarily strictly related to per capita GDP.

What could we best call Mongolia’s group of 15-26% reported bribe paying? Moderately corrupt? Not bad company for Mongolia to be in, but clearly this points to a lot of room for improvement.

Perception of Government Efforts

One of the areas where the Mongolian results are much less encouraging is the perception that the government doing badly in combatting corruption. At 61% of Mongolians responding with this assessment, the sense in the population is obviously that the government is part of the problem, not the solution. This is especially discouraging as the survey was conducted at a time of a DP government. The DP and especially President Elbegdorj has always laid claim to anti-corruption as a central differences with the MPP. The electorate is obviously not impressed by these claims.

It should be noted that the same countries where citizens report low levels of bribe-paying also report high levels of dissatisfaction with government measures against corruption. Along with Mongolia that is South Korea (76% “government doing badly”), Malaysia (62%), Japan (60%). This assessment is also high in some countries where corruption is rampant, for example Cambodia with 56% saying the government is doing badly with 40% reporting having paid a bribe.

Clearly, the relationship between paying bribes, perception of corruption, and government action is in no ways a direct/linear one, as I have long suspected for the CPI and other measures.

Adding to this negative perception of government efforts is Mongolians’ sense that “ordinary people” have limited impact in the fight against corruption. 51% of Mongolians disagree with the statement “Ordinary people can make a difference in the fight against corruption”. That is the highest figure across the region except for Pakistan (67%). Note that on this question as well, Mongolia is similar to Japan (51%) and Malaysia (55%).

I still believe that corruption has a lot of potential for mobilizing Mongolians and also for causing some major shift in party politics, along with air pollution as an issue. My belief in this regard does not seem to be confirmed by these figures, however.

Where do Mongolians Pay Bribes?

Mongolian respondents clearly identified the police and public hospitals as places where they paid more bribes than in schools or for registration and other administrative tasks. Note that Mongolians were not asked about utilities or the courts.

The identification of the police as a weak link in anti-corruption efforts seems fairly common across the Asia Pacific region.

Conclusions

Corruption is a complex challenge. Talking about it more is not a cure-all and, ironically, the case of Mongolia perhaps demonstrates that greater awareness of corruption may go hand-in-hand with lower prevalence (or vice-versa).

The complex causal relationships around perception and actual prevalence of corruption, as well as the efficacy of anti-corruption efforts, to me suggests that even more than with other global indices, the various measures used by Transparency International are of very limited meaning. At best, they may be pointing to trends over time, at worst, they seem to be subject to popular mood swings and really suffer from a lack of country-to-country comparability.

But, at the same time, corruption is a scourge on Mongolia and there are no significantly better ways of measuring it available in a consistent manner.

Posted in Corruption, Global Indices | Tagged | 2 Comments

Benchmarking Corruption

By Julian Dierkes

In January, Transparency International released the most recent instalment of its corruption perception index. I’ve already commented that Mongolia’s drop in the CPI rankings was not very meaningful. The more I’ve looked at the CPI over the years, the more I have questioned its validity and meaningfulness given that it is/has become largely a meta-index of expert judgments. This does not strike me as a great way to assess corruption and the fact that the fluctuations in Mongolia’s ranking do not really seem to be related to government policy, nor to prominent corruption cases, reinforces my sense of the overall utility of the CPI on an annual basis.

What global indices are good at, however, is to provide some kind of trend line relative to other countries that are similar in some way, be it there starting position, their policy responses to corruption or some other factor.

Given that it’s been five years since I last placed Mongolia’s ranking on the CPI in a context, let me return to that exercise here.

Mongolia’s Performance over the Past Five Years

Before I look at the index here, I would recall that corruption has been talked about a lot during this period in Mongolia. The DP has always embraced this as an important topic in its campaign, but the other parties are equally dedicated to corruption, as least rhetorically. On the policy side, some measures have been introduced and strengthened, like parliamentarians’ obligation to disclose assets, and the EITI, for example. The fate of the Anti-Corruption Agency has been more mixed during this point. While it has gained in prominence, it has also seemingly been instrumentalized by various political actors during this time period. The “Offshoreleaks” and “Panama Papers” cases have renewed public attention to corruption, as have the recent discussions around the purchase of 49% of Erdenet Mine from Russian investors.

With all this activity in the policy space and the public eye, few people seem to express a sense that much has changed about corruption, it is generally seen as still endemic.

The Asia Foundation’s  2016 Survey on Perceptions and Knowledge and of Corruption, does show that corruption is no longer seen as urgent a “major problem” as other issues, like unemployment for example. The proportion of respondents speaking of corruption has thus declined from nearly 30% in 2006 to under 10% in the last several years. At the same time, the assessment that “corruption is a common practice in our country” has not budged, in fact it has been rising since 2014, with roughly 2/3 of Mongolians agreeing with that statement. The regularity of the SPEAK survey allows us to compare its results to CPI rankings.

2012 2013 2014 2015 2016
CPI Score 36 38 39 39 38
Proportion: Agree with “common practice” 64.4% 62.7% 64.6% 65.7%

Mongolia Compared to Other Groups of Countries

TI itself offers a regional comparison, including Mongolia in the Asia Pacific grouping. The logic behind the regional approach is that perhaps there is some kind of a contagion effect that has an impact on corruption. When the CPI is constructed in Berlin, that may make a lot of sense, especially given the extent to which the EU radiates some of its policies and practices Eastward. But for Mongolia the regional grouping that includes as disparate and unconnected cases as Japan and Mynamar, with no meaningful regional interactions, this grouping makes less sense to me.

Substantively, I would be most interest in comparing Mongolia to a) post-state socialist countries, b) democracies, c) resource economies.

Mongolia and Post-State Socialist Countries

Let’s look at post-Soviet countries in Eurasia first.

In this group, I would include Armenia (AM), Azerbaijan (AZ), Belarus (BY), Georgia (GA), Kazakhstan (KAZ), Kyrgyzstan (KG), Mongolia (MN), Moldova (MD), Russia (RU), Tajikistan (TJ), Turkmenistan (TM), Ukraine (UA), and Uzbekistan (UZ).

Just like was the case in 2012, Georgia stands out in this group with a 2016 score of 57 that is far better than Belarus (40), Mongolia (38), Armenia (33), Azerbaijan and Moldova (30), Ukraine, Russia and Kazakhstan (29), Kyrgyzstan (28), Tajikistan (25), Turkmenistan (22) and Uzbekistan(21).

In this group comparing 2012 scores with 2016 shows some improvement (BY + 9, GA + 5, TK +5, KY +4, UZ +4, AZ +3, TJ +3, UA +3, MN +2, AM +1, RU +1, KAZ +1). Only one country shows a decline in its 2012 vs 2016 score: MD -6. In this grouping then Mongolia’s long-term trend is not very impressive.

Emerging Resource Economies

What countries could we group with Mongolia as an emerging resource economy for 2012-2016?

A place to start might be data on % GDP derived from mineral rents. Then let’s select countries where this percentage has been above 8% for the period 2011-15 (no data for 2016 from the World Bank yet.

Burkina Faso (BF), Chile (CL), Dem Rep of Congo (CD), Guyana (GY), Liberia (LR), Mali (ML), Mongolia, Suriname (SR), Togo (TG), Zambia (ZM).

That seems like a reasonable comparison group, though Chile is hardly “emerging” at this point and the % of GDP from mineral rents has not increasing in any of these countries.

CPI scores increased in: SR +8, BF +4, GY +6, MN +2, TG +2, ZM +1. The score stayed the same in the CD and declined in: CL -6, LR -4, ML -2.

Again, Mongolia’s performance here is middling at best. Take Suriname as an example. Mongolia and Suriname were very close in scores in 2012 (36/37, respectively), but the difference had widened to 7 (38/45). Why I don’t know anything about this improvement in Suriname, even with doubts about the CPI generally, this seems like an important comparison for Mongolia.

Guyana has also made rapid progress to almost reach the score of Mongolia. Generally, African countries with large resource sectors have fared worse than Mongolia.

Democracies

To find some comparable democracies for Mongolia, let’s start with the Freedom House ranking of 1.5. Countries at that level are: Israel, Ghana, Mongolia, Belize, Croatia, Latvia, Grenada, Mauritius, Poland, France, Lichtenstein. Of these Croatia, Grenada, Latvia, Poland became democratic around the same time as Mongolia.  They all have much higher corruption scores than Mongolia. This is a pretty amorphous group, however, and it would be more useful to somehow find a grouping of countries to compare to that is defined similarly, perhaps around constitutional forms, i.e. semi-presidential democracies? I’m not sure where I might find such a listing.

Some Conclusions

Rather than focusing on year-on-year changes in the CPI score, I’ve tried to compare Mongolia in the medium-term trend in the CPI to countries that are characterized by similarities with Mongolia in terms of history and economy. This comparison suggests that Mongolia’s performance on the CPI criteria has been moderately positive. There are examples of similar countries who have performed much better, and examples of countries where corruption is perceived to have become much worse.

Posted in Business, Civil Society, Corruption, Mongolia and ... | Tagged | Leave a comment

Guest Post: Label of Erdenet ‘Nationalization’ Misleading

By Marissa Smith

Many Fear Mongolian Government Decision Heralds Another Privatization, Securing of the Status Quo Possible

Last week during an extra session after the final day of its fall session, Mongolia’s Parliament voted that the state acquire the share of the Erdenet Mining Corporation held by the Mongolian Copper Corporation.  The share, 49% of the Erdenet Mining Corporation, had been sold by Russian State Corporation Rostec at the end of June. Investigations by the Parliament’s Standing Committee on Law as well as international journalists and scholars (The Diplomat, Mongolia Focus, Jargal DeFacto) allege that the Mongolian Copper Corporation is a shell company, its purchase of the 49% financed almost exclusively through the Trade and Development Bank, Mongolia’s oldest and one of its largest, most internationally-held private banks, as well as the state Bank of Mongolia, partly with Chinggis Bond revenues earmarked for development projects.

Bloomberg and the Associated Press have run headlines over stories about the action prominently featuring the label “nationalization”. However, while the Mongolian People’s Party, which took power after the sale and whose members are leading the charge to revoke it, may be often taken by foreign observers to be devotedly following the example of the Mongolian People’s Revolutionary Party that governed Mongolia during over six decades of state socialism, their members have long demonstrated their willingness to participate in privatization. A major reaction by the Mongolian public to the latest moves has been that the 49% has been taken away from the Mongolian Copper Corporation by the government in order that it be given to other businessmen and corporate actors, ones with ties to politicians (of both major parties) currently in power. That is, the government’s taking of the 49% from the Mongolian Copper Corporation is widely viewed as the opening move in another example of the kind of corruption they accused the June sale of (see Mendee J.’s comments), made while the sale was being contested in Parliament earlier on, and summary of Lhkagva E.’s interpretation and comments by Julian Dierkes about Mongolians’ suspicion of collusion across party lines. On Tuesday the Mongolian People’s Party said at a press conference that it is discussing forming an openly traded company though it is unclear as to whether this would include the 51% owned by the Mongolian state as well as the 49% ordered to be taken from the Mongolian Copper Corporation.

(“Who is going to take the milk of the spent old cow?”)

As President Elbegdorj noted in his address to Parliament (in which he urged the assembly to not approve the measure to take the 49% from Mongolian Copper Corporation, warning that such a move would deter foreign investment), the Erdenet Mining Corporation involves and directly benefits tens of thousands of Mongolians. As President Elbegdorj suggested, the loss of Mongolia’s “Milk Cow,” arguably the nation’s commodity most easily converted to cash, if the 49% were mismanaged would likely result in a political backlash. Erdenet has been the nation’s largest taxpayer and produces at least around half its copper concentrates. Elbegdorj noted plans for further development of Erdenet, including a long-proposed copper refining plant. The last serious such proposals at a national level have been to build the refinery at Sainshand, on the Trans-Mongolian Railroad, located between Erdenet and Oyu Tolgoi, a project now dormant.

The grades of copper sulphide ores in Erdenet’s forty-year-old open pit have sharply decreased as the mine has aged, though its oxide ores could be exploited with new processing plants.

Mongolia and Russia

The political situation is precarious. Mongolians are watching on-going Romanian anti-corruption protests much as they did in 1989 (media outlet Mongolia Live posted posted a statement of solidarity with Romanian protestors on February 1, saying that “corruption is extremely high in both countries”).

The matter of the Erdenet 49% remains mired in an ongoing crisis, in which the failure of public benefits to be realized by other operations, here the Oyu Tolgoi and Tavan Tolgoi mines in particular, has forced Erdenet, as the lone major functioning enterprise, into the spotlight, as also happened in the late 1980s and early 1990s.

Currently, Mongolians are waiting for response from Rostec and the Russian government. As Foreign Minister Munkh-Orgil visited Russia on a working visit February 13-14, Mongolian journalists and social media users were quick to note that the Erdenet matter was not discussed in press conferences, and the Mongolian Ministry of Foreign Affairs responded to inquiries that a meeting between Munkh-Orgil and Rostec CEO Sergei Chemezov had not been requested.  The text of a letter reportedly sent to Prime Minister J. Erdenebat from Chemezov and circulated among members of Parliament was printed by major news outlets news.mn and medee.mn, stating that reversing the sale would damage Mongolia and Russia’s reputations in the eyes of investors, and suggested that the matter be taken to an arbitration court in Singapore. If true, this text could be understood as a move to keep Russian-Mongolian relations in a holding pattern, as public discussions between Lavrov and Munkh-Orgil did, continuing to gesture towards the Shanghai Cooperation Organization, Eurasian Economic Union, and One Belt One Road’s China-Russia-Mongolia Economic Corridor as wellsprings of cooperative economic development. These have so far been unsuccessfully tapped, however, and Lavrov restated firm Russian opposition to a Chinese-backed dam project that has gotten the furthest of any of the OBOR projects in Mongolia. Munkh-Orgil will visit China February 19 to 20.

What can be expected to happen now with the 49%? And with Mongolia’s international and regional relationships? As emphasized on this blog and elsewhere Rostec demonstrated substantial desire to “cash in” the 49%. A possible scenario is that the Erdenet 49% be reprivatized to entities that will maintain the status quo (as also before Rostec acquired the 49% in 2007) in which Erdenet maintains Mongolian ties to Russian enterprises and involves social groups beyond the Ulaanbaatar-based elite (members of which have included many of the most adamant proponents of Erdenet’s privatization over the course of the last three decades), groups that are in comparison marginalized in Mongolian politics and business. The activity of these networks has long been demonstrated to have benefits for the nation as a whole.

There is some speculation that the sale and its illegalization are moves to force Russia’s hand to lend more aid to a Mongolia in deep crisis. (As a piece from Bloomberg’s editorial board stated three days ago, “the [Mongolian] government, along with a state-backed development bank, is on the hook for more than $1 billion in maturing bonds over the next year, starting with a $580 million payment due in March.” Currently, Erdenet constitutes a, if not the, major nexus of Russian-Mongolian relations in the form of important trading relationships between firms; for instance on February 2nd director of Russian manufacturer Uralmashzavod’s mining division named Erdenet as a major purchaser in an interview with leading Russian business journal Kommersant. In 2007, Erdenet joined other privatized Soviet enterprises when the 49% was taken into Russian state corporation Rostec, and thus was rearticulated with other such enterprises as well as the Russian state. It can easily be imagined that Russians as well as Mongolians are worried about the loss of tax revenue, business activity, and employment (not to mention the risks to the city built around the Erdenet mine, one of Mongolia’s only two second cities and a major infrastructure hub) were the Erdenet Mining Corporation to collapse. Furthermore, Cold War-era Mongolia expert Robert Rupen (in How Mongolia is Really Ruled: A Political History of the Mongolian People’s Republic, 1900-1978, Stanford:Hoover Institution Press: 1979, pg. 92) remarked as Erdenet was under construction that the gigantic mining operation (at the time, Asia’s largest open pit mine), city, and the road and railways connecting it to Ulaanbaatar and Irkutsk constitute a “defensive shield” for the section of the Trans-Siberian Railway that had to be built close to the Mongolian border in order to pass south of Lake Baikal.

About Marissa Smith

Marissa Smith obtained her PhD from Princeton University’s department of anthropology in 2015, after defending a dissertation about Erdenet and its position in local, national, regional, and international contexts. She currently teaches at De Anza College in Cupertino, California. 

Posted in Business, Corruption, Erdenet, Marissa Smith, Mining, Mining Governance, Policy | 21 Comments

Drop in 2016 Corruption Perception Index Score Not Very Meaningful

By Julian Dierkes

As readers of the blog know, I have developed an interest on Mongolia’s position on various global rankings over the years. I have written about indices in methodological terms as well as to try to understand Mongolia’s results. I have also become involved in formulating Mongolia’s scores for a number of indices myself.

Transparency International’s “Corruption Perception Index” (CPI) is one of the more important global indices. Not only does it have a long track record with a respected international non-governmental organization, but it is also an index that is used as a building block for many other indices, in part because corruption is difficult to measure, and there are not many alternatives to the CPI.

However, I’ve also been somewhat skeptical of the Mongolia scoring in the past and have written some notes about previous CPI rankings in 2012:

Mongolia in the 2016 CPI

Let’s look at what actually happened in Mongolia in the newest CPI that was released in January 2017:

2016 2015 2014 2013 2012
Rank 87 (of 176 countries included) 72 (176) 80 (175) 83 (177) 94 (174)
Score 38 (out of 100, higher = perceived to be less corrupt) 39 39 38 36

Before I get into methodology and an attempt to explain the change in score, it’s worth noting that the movement in rank (-15) is fairly substantial, while the score hasn’t changed much. The obvious interpretation of this year’s CPI is thus that not much has changed in Mongolia, but a number of other countries are perceived to be less corrupt.

Methodology and Meaning

Note that the CPI is fundamentally an aggregate score, i.e. it takes data from other rankings (that is interpreted to be related to corruption), standardizes that data on a 0-100 scale, adds it all together, and, presto!, a CPI score is born.

Transparency International does provide the xls sheets of data used in the calculation so that we have a look at the data included for Mongolia. Since the score changed from 2015 to 2016, let’s look at what was included with what score in those two years.

  WB CPIA WEF EOS Global Insight Country Risk BTI IMD World Competitiveness
2015 47 42 42 36 37
2016 47 38 47 35 35
WJP Rule of Law PRS Intl Country Risk EIU Country Rating Freedom House Nations in Transit
2015 35 31 38
2016 38 32 34 37

WB CPIA = World Bank Country Policy and Institutional Assessment
WEF EOS = World Economic Forum Executive Opinion Survey
Global Insight Country Risk = IHS Global Insight Country Risk
BTI = Bertelsmann Foundation Transformation Index
IMD World Competitiveness = IMD World Competitiveness Yearbook
Rule of Law = World Justice Project Rule of Law Index
PRS Intl Country Risk = PRS International Country Risk Guide
EIU Country Rating = Economist Intelligence Unit Country
Freedom House Nations in Transit

In comparing the two years, let’s first note the additional data point for 2016, i.e. the Freedom House Nations in Transit score. Then let’s also note that there are several, relatively small changes in a number of the other scores. Scores that went down: WEF EOS (-4), BTI (-1), IMD (-2), EIU (-4). Scores that went up: Global Insight (+5), Rule of Law (+3), PRS (+1). If these are added together we get a -2 overall movement. This is then reflected in a shift in the aggregate average of these scores of 38 for 2016 and of 38.5 for 2015 (rounded to 39). This makes it very clear that the score shift from 39 to 38 is NOT particularly meaningful. If any of the component scores had been just one lower in 2015, the score would have been 38 already.

Face Validity: What Happened in Mongolia in 2016?

With the conclusion that the change in the score is very slight only, there really isn’t that much of a point to a closer investigation of face validity in light of events in 2016.

Conclusion

What global indices can do is provide a benchmarking against other countries and a rough tracing of longer-term trends.

The 2016 CPI is another example of a year-on-year change in score that will likely be reported (I tweeted about it myself), but that should probably be ignored as it does not seem to be substantively meaningful.

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