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http://zgm.mn/post/2716/

World Bank report underscores importance of strong fiscal foundation

Mongolia’s capital expenditure has been among the highest in the world in 2010-2016

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http://zgm.mn/post/2716/


According to the World Bank’s report on public expenditure, Mongolia’s over-expanded budget policy altered fiscal discipline. Therefore, the World Bank highlights the need for adequate fiscal resources by accumulating savings during economic growth.

“With high public debt, low tax rates and high exemptions, the Mongolian economy remains extremely vulnerable to external factors, including shifts in global demand, commodity prices, and exchange rate and interest rate shocks. There is a clear need to strengthen fiscal buffers through increased savings during years of prosperity,” said Andrei Mikhnev, World Bank Country Manager for Mongolia.

At an average of about 11 percent of GDP in 2010-2016, Mongolia’s capital expenditure has been among the highest in the world. However, the returns of this spending have been low due to poor project selection, long delays in implementation, high-cost overruns, and low maintenance budgets.

“The report lays out key actions the country can take to enhance the efficiency of public investment. Development and implementation of a national road map to improve the efficiency of these investments is the top priority,” said Jean-Pascal Nganou, Senior Country Economist and a lead author of the report.

Given Mongolia’s highly volatile revenue performance, the report also recommends reducing the dependence of government revenue on the mineral sector by embarking on a gradual reform of the tax system. This includes measures to increase low statutory tax rates, revise the number and size of tax exemptions, and broaden the tax base. The report illustrates that VAT and excise taxes in Mongolia are regressive in nature as their burden is larger among the poor than among the non-poor.

It also highlights special spending needs in health and education – key sectors that play an essential  role in the country’s long-term development and the fight against poverty.

The report highlights the urgent need to strengthen the pension system to meet the needs of Mongolia’s aging population. The government set the target for a maximum state subsidy for pensions of 2 percent of GDP by 2030. However, due to measures allowing many workers to purchase a pension for life at retirement age at a fraction of the cost that other workers have paid during their work lives, reducing herders’ retirement ages, and others, the current subsidy of 2 percent of GDP is projected to rise to 6 percent in 2030 and 11 percent in 2050 unless reforms are undertaken.

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Women role in Mongolia’s business sector exceeds world average

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  • Forbes Women’s Summit gathers up inspiring women leaders from all rectors to discuss growth management
  • According to a World Bank study in 2019, the share of women in the Mongolian business sector is higher than the global average. Specifically, 32.7 percent of businesses in Mongolia are owned by women. In the world, this number sands around 14.3 percent
  • Women in mongolia account for nearly half of all educated personnel, but they do not hold such a position in the economy. Mongolians focus on girls' education but require them to have families and children to care when they should be contributing to society and themselves.

At the Forbes Women’s Summit 2019 in Mongolia on December 5, participants from the community of inspiring women leaders from all industries came together to support women’s participation in decision making and growth management. Panel discussions focused on a more diverse future, through keynotes from internationalspeakers, breakout sessions and networking. Innovative visionaries’ ambitious actions are changing the world at an unprecedented scale. The summit held a panel discussion under topics, namely Growth Management and Women, Investment Environment and Women, Employment and Women, and Women’s Participation and Leadership.“Mongolia’s social, economic and political situation is not completely stable. Women in Mongolia account for nearly half of all educated personnel, but they do not hold such a position in the economy. Mongolians focus on girls’ education but require them to have families and children to care when they should be contributing to society and themselves. Women also need to support one another than men do,” said Dolgion Erdenebayar, publisher of Forbes Mongolia and CEO of Bloomberg TV Mongolia, at his opening speech. He also emphasized that Mongolia loses USD three billion annually by letting women stay home, being unpaid. “According to the World Economic Forum, GDP growth can be up 35 percent by encouraging women participation. If we assume Mongolia’s GDP at USD 10 billion, we lose USD three billion. In the absence of unemployed women, Mongolia loses USD three billion a year.” The Boston Consulting Group also released a study on the possibility of increasing global GDP by as much as USD 2.5-5 trillion by reducing gender inequality in the business sector.






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President partially bans 2020 Budget Law

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The Budget Law increased 2020 budget deficit to MNT 2.07 trillion


On December 3, President of Mon golia Battulga Khaltmaa sent an official letter to Parliament Speaker Zandanshatar Gombojav to veto 2020 Budget Law, specifically ban Law on Advocacy and several other laws submitted with it. The official letter said, “The Budget Law increased 2020 budget deficit to MNT 2.07 trillion, and has many other disadvantages and risks to the country’s economic and social life.”“Social insurance fees will have increased by 2 percent in 2020, posing a risk to increase pressure on the lives of people,” it included The President has banned investment of the budget partially, the funding of 174.2 billion MNT from increased social insurance, and the regulations of amendments to the Law on Future Funds wholly. 



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Mongolia’s economic activity slumps in November

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Sales managers index hit the lowest in last 32 months

According to World Economics, the global authority on economic data, Mongolia’s economic activity has fallen sharply in November. The sales managers index, which indicates business activity, hit the lowest in last 32 months
.The business confidence index, which provides information on future developments, based upon opinion surveys on developments in production, orders, and stocks of finished goods in the industry sector, fell to the lowest level of 11 months. The sales growth index has reached the 12-month low and the market growth index has slipped to a nine-month low, according to World Economics data. World Economics is the global authority which is dedicated to reducing the risks involved in Business, Financial and Government decisions that use what is arguably the most important information in the world.As reported earlier, Mongolia was included in the Financial Action Task Force (FATF)’s Grey List in mid-October. To get out of Grey list next year, private entities should pay attention to what they need to do next year, said Adiya Oyungerel, Executive Director of AmCham Mongolia. Thus, the international rating agency S&P announced last week that it left Mongolia’s credit rating at B.Despite stable economic growth and fiscal outlook, Mongolia’s debt crisis is high and the bond repayments are pending; the 2020 election and dependency on commodity prices were named as the major risks to the country. 

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Mobile usage of Mongolia nears developed countries

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  • Telecommunication is the third-largest sector in Mongolia after finance and mining

In the first nine months of 2019, the number of mobile users increased to 4.5 million, up 10.1 percent compared to the same period of the previous year. Industry companies highlight that the digital use of Mongolia is comparable to developed countries.The number of data users exceeded three million in the first half of the year, according to the Communications Regulatory Commission. In terms of other economic data, the total revenue from the postal and telecommunications sector reached MNT 878.2 billion in the first nine months of the year, up 18.5 percent, according to the National Statistical Office (NSO)’s report. Mobile communication companies made up 55.4 percent of the total revenue. In addition to the mining and financial sectors, the third-largest sector in the Mongolia’s economy is the telecommunication sector, said Tatsuyama Hamada, the Chief Executive Officer of Mobicom Corporation.The Bank of Mongolia (BoM) also signed to deal with Mastercard International to transform the “₮” card into EMC chip technology, as we reported recently. Allowing the EMV chip enables customers to transact remotely and faster. The BoM plans to implement the project in 2020.In spite of improvements in the e-transition process, the security of information is becoming serious, sector representatives emphasized.