Hello Roy, interesting points. I work with David in maintaining his blog and I’m pretty sure if you posted them on David’s blog, he’d reply. Here’s a direct link to his original post:

https://eapblog.worldbank.org/content/financial-crisis-could-provide-mongolia-opportunity-for-reform

Cheers,

– Claudia

I partly agree with Roy. But what I criticize from the government is its inaction. Yes Mongolian government is struggling to tackle with its millions of needs stemmed from its poor population and all those messes. Who does not have a mess these times? 18 years earlier, when Mongolia was entering democracy, it had very well educated population but now I really don’t think that is still the case. Of course I am not comparing Mongolia with some underdeveloped African countries. I fear Mongolia is following a well known example of these. What I understood from the business is the top executive is to be blamed in any situation. That has its fundamental and very precise justifications too. So government is in our case. Governments inability to take protective action in the case of falling commodity prices and rising oil prices era is making lives harder and harder here. What Worldbank and IMF suggests Mongolia is to keep its expenditure at its lowest point and refrain from issuing eurobonds. But right now we need a huge infrastructure investment to bolster the economy otherwise the collapse is inevitable, in my opinion. I just had got information from my info points that retail sales dropped almost 70% during the past 1-2 months, the thing I feared from the start of this year. Now I am carefully looking at the NPL figures on the bank balance sheets. I am ready to get surprised.

I am an independent economist, who does not have any educational background in economy.

The following is just an idea. I ask nothing personally from the idea accept to see it acknowledged and perhaps someone in position to do so may act upon the idea.

Mongolia could become the center of new development for all of North Asia. I have created a plan that creates 6 development holding companies. In the proposal the company controlling all of North Asia is to be headquartered in Darhan/Darkan. Each of the 6 companies is to be headquartered in a developing country, (China, India, Ecuador, Ukraine and Egypt). Each of the 6 companies is to use the initial cash flows for direct foreign investment in developing countries. ALL developing countries. The stimulus to the developing world would then translate into jobs in the developed world as knowledge/equipment and such would be quickly needed.

The companies are all publically traded, have interconnecting stakeholdings, and are composed of land holdings and commerical properties (inluding mineral rights etc), government bonds and cash. ALL acquisitions are to be made by trading stock in the company for these assets. All assets acquired are done so with the intention of not trading until maturity or for decades at a time. There is to be no internal debt of any kind for any of the six companies.

The income from these companies would be used in the early stages for building and repairing new and existing properties.

As each of the 6 companies owns approximately 6% of the other 5 companies, in the end each company is owned approximately 33% by the other 6.

Each of the 6 companies also own approximately 6% of each individual property, bond holdings and cash of the other 5 companies as well.

In theory this would mean Green River North Asia, headquartered in Darkan, could have assets and market value of well over a trillion US dollars with no debt. But some $US 660 billion of those assets are actually in the other 5 area companies. Ownership however would be approximately 66% within North Asia.

Initial funding of all six companies can be done by any world government wishing to trade any portion of any type of government bond held by that government for shares in the new companies. It would also be initially funded by banks also trading not only bonds but portions of bank owned real estate for the same. Industrial/financial/service companies could trade buildings in a share trade- lease back agreement. By spreading the risk on a large scale, but with no debt or leverage, this would provide a financial foundation for attempted recovery.

You would find a multiplier effect of any initial IPO moneys to act as such. Each company raises lets say $US 500 billion and uses the interlocking formula described, and the combined net assets of the 6 companies would be $US 4.5 trillion instead of $US 3 trillion.

This method combines cash flows from numerous sources worldwide and focuses the income towards development. It is like thousands of raindrops coming together to form a river. A directed river.

It is my hope that each of the six companies upper management would all be women but that is not essential, just thinking that coordination between companies might be less confrontational.

I have sent this proposal to many people with no reply. Hopefully someday someone will hear.

gltoffic@aim.com

It is interesting to read observations and comments by David Dollar and those who have extensive experiences in Mongolia.

I would like to highlight it is the first financial crisis experienced by Mongolian Government since adoption of free-market economy. What Mongolia faces is the realities of systematic disorder (I mean here global financial system) and negligence of negative consequences of undisciplined economic policies (sorry, but I don’t agree with some policies taken last few years). The symptoms of vulnerability in Mongolia were observed since mid 2008 when oil prices heat up (petrol is about 25% of Mongolian import, 2007 NSO Statistics) leading to one of highest inflation in Asia, too populist social welfare programs that heavily burdened the budget (I would not critique the policies at all, but the way of distribution to all, rather than targeting the vulnerable groups only) and construction industry bubble (40,000 household programme, which provide tax facilitation to construction companies (tax difference went to construction companies rather than to buyers) contributed more to the bubble, as the realized market price on supply/demand rather than discounted price thought by Government. Today real estate price is down 20-30%, which I believe is the actual perceived value).

And many people were optimistic on protection from spillover effect of US financial crisis to Mongolia, as Mongolia does not have assets abroad, did not have any investment banks and was quite isolated from global financial system. However it was not true, as Mongolian domestic market is small and its export is not diversified, and unfortunately niched to minerals only. As global demand decreases, Chinese production slows, copper and gold prices go down. Nobody is sure how long the crisis continue, everybody is closely observing what US and EU will do next. Asia, especially China is focusing on domestic consumption, rather than putting all bets on US and EU. This may be good sign that may help Mongolia.

However seriousness is that Mongolia faced reality of triple crisis: financial, economic and currency, against most of countries which experience financial and economic crises. So, Government action to stimulate consumption might have a risk to lead to more tugrug depreciation and further consumer price inflation.

However, I believe the crisis should give much bigger lesson to Mongolians, which is financial discipline to all level. Last few years showed that Mongolia is not in rank among their Asian counterparts who tends to save. Mongolians were like Americans, want to spend if there is an opportunity (I am happy that Mongolian banks don’t have loose policy on credit cards, otherwise all might be bankrupt today). We missed good opportunities to build up reserves to be prepared for future.

I don’t believe faith of Mongolia is only in minerals. Mining sector will act only as a way to mobilize resources. The more important goal is how Mongolia distributes those resources (into infrastructure, social capital and income generating businesses) and build-up more competitive, productive and value-added sectors. If the Government can not achieve it by putting individual ambitions and short-term visions aside, there is a little hope for rapid growth and Mongolia will remain China’s sub-contractor.

bullshit gay fucker. go to hell.