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http://zgm.mn/post/2620/

Mongolia’s economy needs diversification

30 years pass without the freedom of development

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http://zgm.mn/post/2620/


Mongolia’s unique feature or a particular thing that differentiates the country from others? Our special feature is a democracy and freedom of the press. Indicators of democracy are great enough. On papers and international reports, Mongolia is a beautiful country like a rose, a brilliant star of democracy. In reality, it is completely different.

Democracy is being separated from real life. It has been 30 years without a “freedom of development.”

Let us continue with the corruption-filled series of poverty alleviation of Mongolians, the emergence of populism, the issues in the independence of the judiciary, the obstacles of public institutions, and the societal stresses. Poverty did not improve significantly since 1995. Discussions on necessary improvement began in the XXI century. There are still no results. I am writing to make a conclusion about it.

Our economy needs only a few important factors. Let us look at the economy at a macro level. Only the mining sector growth is visible, but it is accounting for a big part of the economy. However, it is not a good thing in the long term as a macroeconomy. Why does the mining growth affect the economy? The IMF has implemented six programs in our country. IMF recommends that more flexible, budget-free economy and more importantly, higher employment, and profitable businesses. In the 1990s, the transition program was successful. The “Stand by” program has helped a lot in 2008-2009 during the global economic crisis. The next program started in 2016-2017. There is a light. The debt burden equaled 100 percent of GDP, which now stands at 70 percent. Mongolia has a GDP of USD 11 billion. The IMF’s sustainable development program is worth 5.5 billion. The economic growth has fallen from 17 percent to negative 2 percent when the IMF’s sustainable development program started. What has saved us improved the economy is actually the growth of China’s coal imports.

Our economy is dependent on many things. The infrastructure is not developed enough. Until now, almost 3 percent of the 1000 km of the road had pavement, the only line of the north-south railway, which is dependent on Russia’s geopolitics. When we try to build another railway, we will have to deal  with Russia’s geopolitical interest. As long as we have Ulaanbaatar Railway JV, there will be Russian interests. I do not want to blame it.

However, the multi-pillar foreign policy choice is invoking to be friendly with all countries around the world. There is no such relationship with all countries. Also, there is no noticeable economic relationship improvement with any country. Although it is the world’s least densely populated area, Mongolia is clumping in the capital. Huge social issues are created because of this.

The dissociation had already processed and different social conditions are growing rapidly. Social licensing issues are serious. Anti-mining conflicts and disputes tend to rise in mining-dependent countries, and civil movements trigger social disintegration. Even with 70 million livestock, agriculture does not strengthen social capital. Mining has also dominated other sectors, which is a negative impact. We only talk about a single line of cashmere to improve the non-mining sector. There is no ongoing activity in the development of rural areas and the overall turnover of agriculture. If our cashmere enters the world market, China will be our rival.

There is no coordination between mining and other economic sectors, so there is a war between mining and livestock. Disintegration is accompanied by populism. Populism has started to break the fundamental principles of democracy.

In addition, Mongolian politics is a restriction to economic and social development. The policy is unstable and uncertain. There are 140 development policies and programs to be followed. Most recently, the “National Program on Unemployment and Poverty Reduction” was adopted. It was supposed to promote economic growth, reduce unemployment, alleviate poverty, become an exportoriented country, and encourage other products, leading sectors, public-private partnerships, and implement the goal of reducing unemployment and poverty by human development and social protection policies. I hope these do not diverge and eventually be forgotten or changed by the next program.

There are 2000 draft documents, conventions, and recommendations. There is no mechanism to control the implementation of these documents. None at all

In fact, the economics of postcommunist countries that transcend Central and Inner Asia are even more profound. Mongolia is left behind by economic diversification. Mongolia has been marked as the country with the unspecified economy. Even worse than Tajikistan. When it comes to primary products, it does not go further than adding value to natural gas. That is why there is no diversity, just as President Battulga Khaltmaa said, it is simply an “inefficient economy.”

Those people who received loans from the SME Development Fund should diversify the economy. Government funds do not cover the SMEs, but international funding is effective. However, it does not reach the level of economic diversification. Having an export-oriented economy can save this country, and the government expects that poverty will be eradicated with an exportbased economy. They convince people to believe it. However, they do not go farther than talks.

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Amartuvshin: Mongolia’s economy is smaller

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The Boao Forum for Asia was held in Ulaanbaatar on August 19- 21, discussing several crucial issues in the region. Amartuvshin Otgondavaa, President of Mongolian National Chamber Of Commerce and Industry (MNCCI) gave a brief interview to talk about the significance of the forum and planned projects of the chamber.

-What was the chamber’s main role in the forum? What are the chances to enhance trade and economic cooperation in the region?

-In terms of population and increasing consumption, Asia is one of the important regions in the world. We should focus more on Mongolia’s participation in the region’s integration. Mongolia’s economy is smaller than the other countries in Asia. It’s important to invest in the mining industry effectively. Also, Mongolia can benefit from economical integration through developing the other sectors, including, education, health, IT, and agriculture.

-Recently, some mining companies’ licenses were revoked. What is your opinion on this?

-It’s about lacking connectivity between the government and local entities. And investment needs time. Instead of interfering with mining companies, the government should improve its connectivity with middle-level administrations of the provinces. Private entities are not responsible for the order that has been made already. On the other hand, it’s not right to blame the entire business sector for the illegal activities of a few companies.


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Market value up 4.83 percent in H1

Government securities trading 8.76 percent of the total trade

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Market value increased by 4.83 percent, to MNT 2.6 trillion in the first half of 2019. Total of 376.9 million shares worth MNT 82.3 billion was traded at the primary and secondary market in the reporting period. 79,800 government securities worth MNT 7.9 billion were traded Trade at the Mongolian Stock Exchange (MSE) totaled MNT 90.2 billion, increasing by MNT 12.1 billion or 16.1 percent compared to the same period of last year. Stock trading accounts for 91.24 percent or MNT 82.3 billion, government securities trading 8.76 percent or MNT 7.9 billion of the total trade.

The MSE has registered 4 new securities companies in the reporting period, and trading in the primary market totaled MNT 42.5 billion, three times higher than the same period of last year. In order to ensure compliance with the obligations of registered companies, MSE excluded 22 companies from registration due to non-performance of their obligations under the law.

Even though the primary market trade for Government securities was not active, MNT 994.4 million of income was generated and cost reached MNT 716.9 million, totaling the net income at MNT 277.4. In its financial statements, the deficit of MNT 204.6 million has been confirmed as a pre-tax loss. Compared to the same period of the previous year, total revenue increased by 25.3 percent, trading fee income sore by 34.6 percent and fee service fee grew by 24.6 percent respectively. A total of MNT 274.9 million were spent on the state budget which is 25.1 percent higher than the previous year.

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Petro Matad caps permitting progress for Mongolia wells

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Mongolian oil explorer Petro Matad Ltd has completed all processes for obtaining the land permits for the Heron and Gazelle well sites. The company is now waiting for the final signature from the local governor to allow the permits to be issued.

In the meantime, operations are continuing as normal at the Heron well site and based on current performance the drilling and logging of Heron-1 are forecast to be completed around 9 September, Petro Matad said.

The company’s operations at Red Deer are proceeding as planned, with the well reaching its intermediate casing point and preparations underway to drill the next section.

The Heron, Gazelle and Red Deer wells are all situated in block XX in eastern Mongolia. Shares in Petro Matad were up 4.5 percent at 7.52 pence on Tuesday in London.

Petro Matad is the parent company of a group focussed on oil exploration, as well as future development and production in Mongolia. At the current time, Petro Matad holds 100 percent working interests and the operatorship of three Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 10,367 square kilometers in the far eastern part of the country, and Blocks IV and V have an area of 29,062 square kilometers and 21,143 square kilometers, respectively, in the central-western part of the country.

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Service sector spurs economic growth

Competition in the trade and services sector has been rising rapidly

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Mongolia’s GDP growth is showing good performance in 2019, as the service sector improves. Competition in the trade and services sector has been rising rapidly, and demand for human resources in the field is increasing. As the players grow, new management, quality of service and standard is approaching the world standard step by step. Public service, hotel, and domestic trade that are included in the service sector have increased, according to the National Statistics Office (NSO).

Trade revenue totaled MNT 10.8 trillion in the first half of 2019

In particular, trade revenue totaled MNT 10.8 trillion in the first half of this year, up 23.1 percent over the same period of last year. The retail sector, particularly, online retailing is expanding its scale in the market.

Following the downturn in mining commodity prices, the hospitality industry, especially the foodservice revenue drops. However, it increases as coal prices improve. For example, in the first half of this year, the catering industry’s income reached MNT 217.3 billion, up by 15.6 percent compared to the same period of the previous year. Also, the restaurant revenue grew by MNT 22.6 billion in the reporting period, triggering the GDP to increase.

The industry revenue for hotels rose 40.7 percent, to MNT 66.4 billion in the second quarter of 2019. The number of visitors reached 372,000, up by 70,000 over the previous year. There has been a growth in the hospitality industry in 2018, and this has also shown an increase, supporting the economy.