By Nathan Hsieh
The Problem
The air quality of Ulaanbaatar has been a highly politicized topic that millions of aid dollars and institutions have deliberated on. Yet, if one were to approach any random Ulaanbaatarite and state that the air would be clean in five years, the response would likely be of shock. Simply put, there does not exist a quick, economic solution that can equitably provide clean air for all. Pollution will abate as Ger-district growth is curtailed, and consumers begin to earn wages that allow migration to apartments, where energy production for heating and cooking can be centralized and removed from the city.
For Mongolians, that roadmap unfortunately lays out a great sacrifice (and a terrible social bargain) for the short-term: a continual decline in life expectancy and an increased risk of respiratory and heart disease, to name a few. And so, upon careful consideration of this intractable problem, many are left with the question – is there anything that can be done in the short-term? containment? mitigation? The answer: yes.
Indoor air pollution represents the most significant share of exposure to harmful particulate matter, and air purifiers filter out that particulate matter – but the cost per unit ranges from US$500–1500, with recurring annual costs anywhere from US$80–250. For a country where the GDP per capita is roughly US$3,700, and the average income has hovered around US$200 per month since 2000 – the price of clean air is simply not feasible.
The Solution
Thankfully, there are those that believe it is possible to leverage their resources to create clean air pathways for the less fortunate. Back in 2013, Thomas Talhelm (at the time a Fulbright scholar) was living in Beijing. The air pollution was making him sick, and he wanted to know if he could protect himself. He soon found that air purifiers were exorbitantly priced, so he started researching how they work.
Tom found that purifier technology was shockingly simple. Air purifiers capture particulate pollution using cheap, unpatented technology – the HEPA (High Efficiency Particulate Arrestance) filter. The primary function of every air purifier was simple: a fan pushes air through a HEPA filter, where particulate matter (PM) would stick to the fibers.
After buying a laser particle counter to test for microscopic particles in the air, Tom found that the ability of air purifiers to reduce PM could be mimicked by strapping a HEPA filter to the front of a fan (~US$30). He wanted to share this discovery as widely as possible, and the sincerity and resourcefulness of his solution inevitably snow-balled into what is now Smart Air.
I heard about Smart Air at a workshop in Ulaanbaatar and immediately understood the value it could provide to public health. Following a conversation with the leadership team, Tom agreed to provide a loan to begin operations in Mongolia. The first year was undoubtedly clunky and dependent entirely on the fire of a few people, but the ultimate question was how to ensure the initiative would continue after my time in Mongolia ran its course. It was decided that the best way to accomplish this indefinite end was incorporation as a Limited Liability Company.
The Roadblocks
Thus, began my forays into the legalese of corporate governance. I quickly found that the Mongolian government was highly protective of business opportunities. First of all, foreign nationals cannot own a for-profit enterprise in Mongolia unless they provide an up-front US$100,000 contribution towards share capital. The only way to waive this requirement is to fork over at least 75.6% of the business to one, or more, Mongolian nationals.
I understand the legitimacy of protecting key industries and their revenue streams. This makes particular sense in strategic industries, and it is a practice that has been enacted around the world for millennia: from the Chinese silk trade to American telecoms. But the prohibition of foreign ownership can stymie valuable intellectual capital, ideas that could be a boon for society.
As industry has developed across the US and Europe, more nuanced corporate structures have entered the fore to engender a more diverse array of business opportunities – different tax structures can, and should, be applied to different missions. Take, for example, the L3C (low-profit limited liability company) structure in the US, which was developed to facilitate investments in ventures that aim to be profitable but also socially beneficial. This relies on a consensus that profits and social good are not diametrically opposed – and I believe that is true: profits unite workforces regardless of their language or creed. But profits can also be limited by well-intended leaders. Smart Air’s stated objective is to minimize returns in order to maximize the availability of clean air. I would argue that, as a result, it should not be classified and taxed in the same way as a company that sells white t-shirts as surgical equipment.
Perhaps, nuanced systems of governance are a privilege. I don’t expect the Mongolian government to mimic the L3C as it stands; there are dangers of changing a system without knowing how entrepreneurs will navigate new loopholes. But the simple fact is that it significantly hindered Smart Air’s ability to operate and expand its reach, which directly translated to fewer clean breathes. Ultimately, the answer to how these issues can be resolved is for the shareholders – not those with fiduciary responsibilities, but the ones that breathe some of the worst air in the world and have the right, and chance, to be civically engaged.
About Me
Nathan Thomas Hsieh graduated from Duke University (’14) with a degree in Mathematics. He was a Princeton in Asia Fellow (’15-’17) and was placed in Ulaanbaatar, Mongolia, with the financial services firm, IARUDI. During his free time in Mongolia, he started a social enterprise called Smart Air Mongolia that has continued its operations to-date. Since departing Mongolia last September, he now works for The Mobility House as a Product Rollout Analyst, studying how to integrate the transportation and power sectors through the electric vehicle supply chain.
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