Fate of Mongolia dependent on Ogoomor (Benevolent)

Scenario number 2 from 4 possible future scenarios of the life of ordinary Mongolian woman – Zaya, in 2021, depending on mining revenue management of Mongolia. 

1. Although, sun rose up high, it could not penetrate dark clouds hovering over Ulaanbaatar. One of gloomy mornings of Ulaanbaatar. Spring wind immediately taints glass buildings in downtown Ulaanbaatar with trashes and dusts it gathered from muddy slums of Ulaanbaatar where poor people live. Tattered public residential district serves as border between these two different worlds which have nothing in common except the wind. Side of this residential buildings facing downtown is nicely decorated and painted and has artificial green lawns under the windows. Other side facing the slums looks like ruins of buildings that may collapse any time and worn-out. 

Woman coming out of most northern entrance of the building kicking trash and dust is called Zaya Mongol. She is about 30 years old, but looks very old and mature. Her 4 children are looking after her through window and remained in the apartment. Mongolian government implemented many cash distribution program to support population growth during last 20 years. The results are evident. Nowadays, it is no longer surprising to have 4 children for Mongolian women. As result of this, Mongolian population boom is at its historical high.

Zaya graduated one university as lawyer about  10 years ago. However, she never worked in her field and soon after, married a Mongolian guy named Orkhon and gave birth to three children. However, her husband was not doing any work and on top of that, he was spending the monthly cash allowance to buy and drink vodka. Later he even beat her, so she divorced from her husband taking her children with herself.

A few years later, she married with one Chinese worker and gave birth to another child. Almost no Mongolian person was willing to work in jobs with salary level that does not exceed monthly government cash handout. Therefore, many Chinese workers were brought in. Following this trend, marriage of Mongolian women with Chinese is seen now as normal. Following this trend, Zaya married a Chinese man with job and income and living happily in average living standard. Her husband is Zhipeng who is an engineer in charge of Chinese construction workers in industrial park of Sainshand.

As forewarned by her father, one day, fate of Zaya turned into a feverish nightmare from a sweet dream. When next global economic crisis started in 2018, investment in the Mongolian Industrial Park was stalled and Zhipeng, who became unemployed, went home to China not leaving anything except apartment they were living. Zaya did not try to find work as she lacked skills to work, most importantly, willingness to work. Zaya was confident economic crisis will be over in one or two months and everything will be normal again and continue her livelihood by receiving the social welfare payment from the government. Now looking back 3 years later, Zaya felt her hope dashed and it became more difficult to continue her livelihood.

International investors’ confidence was regained since 2013 when Mongolia made decision not to review mining agreements signed since 2009. Big mines such as Oyu Tolgoi and Tavan Tolgoi began production and 2013 was the year many ordinary Mongolians like Zaya felt progress was very close.

Ordinary citizens mesmerized by everyday talk of politicians about  Mongolians living in luxury by doing nothing as Mongolia will become one of highly developed countries of the world, are overwhelmed with excitement to receive cash handout and doing nothing. Political party which won in 2016 parliamentary election pledged cash distribution like previous election and announced  its decision to increase cash for children to 300 thousand tugrug per month and to give 500 thousand tugrug to each citizen of Mongolia per month as it negotiated advance payment from the mining revenue. All this seemed so recent to Zaya.

Initially, the cash handout of the government was sufficient for livelihood, however, within a few years, Tugrug was devaluated and inflation rate increased sharply. Deterioration in living standard began to be felt sharply. She was little bit upset with this, however, Zaya was able to pull through this using her and her children’s cash handouts and salary of her husband and still carried the hope that the promised good life will realize one day.

However,  sudden misfortune fell and by early 2018, economic crisis started. Deposits of the Stabilization fund established in 2013 was given first to herders, then for old people and children, eventually for each citizen and when the economic crisis hit the country, the fund was already exhausted. Mongolian economy which was unprepared for the crisis, felt the blunt of the crisis. As economic crisis deepened, since 2020, some of the cash programs were cut, now strong public protest is going on. Everybody murmurs “ 15 thousand tugrug is  not sufficient to buy for 1 kg meat and 300 thousand tugrug for children equals with 100 thousand tugrug of the initial period when the cash program was started.”

Everybody says majority of the population is experiencing hardship as the cash programs are cut  and few became so rich, they did not feel slightest of the economic crisis. Statements like “ only 2% of the Mongolian population is exorbitantly rich and 10% is rich and the  middle class that works in sectors that provide services and logistics for mining and construction sector make up 30% of the population. This means one of every two people is poor and relies on government welfare program “echoes from podiums of the often held protest demonstrations. Zaya listen to all this and ponder about last 20 years history of her country. Actually Mongolia is known worldwide  during last ten years for its mineral resources and earning large revenue because of it. However, it was unable to use it for its economic development, despite its continuous talk of revenue management and did not use this huge revenue for long term sustainable development.

Zaya heard people discussing about recent newspaper interview of one economist. The economist said, although, Mongolian government is earning 6 billion dollars from mining sector each year, most of this revenue is spent to meet current needs and financing of inefficient infrastructure projects using facts and figures. This interview which bluntly said that the large projects financed by  the  natural resources funds are managed by cronies of politicians and are very inefficient, created double impression on Zaya. When thinking about various development works ranging from soum, district level construction work to model motor road network passing through native village of the Transportation Minister and narrow gauge railroad connecting Mongolia from North to South, it is hard to be critical and say government is doing nothing. When thinking about unfinished construction of large recreational park with 500 car underground parking lot initiated by lawmaker from her district and financed by the Development Bank in order to fulfill his election promise, Zaya felt sad. Global economic crisis and, commodity price plunge stopped completion of this park and dashed hopes of Zaya to buy larger apartment and get a new car.

2. Number of participants joining the protest demonstration in Central Square increased and by noon, the square was full. The protestors echoed what orators were saying from stage in centre of the square. They held banners which held grandiose slogans such as “ Mongolian person should not eat meat in Mongolia more expensive than in Europe”, “ natural resources belong to people”, “ Let’s stop corruption- Fulfill your pledges and increase the cash distribution”. Main objective for Zaya was to get the cash handout increased, however, she was seen to echo and shout these political slogans at the top of her voice. Some group of the protestors are seen drinking vodka on edges of the square and luxury brand shops around the square are closed down and protected by armed security guards. Protestors attacked and robbed these shops during one of the protest demonstrations held one week ago and police force was used to disperse the crowd.. On western side of the square, several dozen people held bankers that said “ Cash programs will not improve our lives”, “ Direct mining revenues to future development”, “Stabilization fund and Development Bank should be reporting and held accountable” and stood quietly. Later they disbanded.

. Later, word spread that government is going to make a statement. Soon, young minister Ogoomor surrounded by numerous bodyguards walked up to the stage. This young man who was elected to the parliament under slogan “ Electricity to each bagh and Megjid Janraisig to each soum” (Megjid Janraisig is 25 meter tall golden statue of Buddhist deity of compassion) from Arkhangai province,  is a son of influential member of ruling party. By virtue of his father, he studied abroad in a developed country and seen as very promising politician.

– Citizens!  Since 2018, international market price of minerals plunged by 60% and our government revenue dropped by 54 percent. This means our budget deficit is 35 trillion tugrig which equals 28% of our GDP[1].Therefore, we had to reduce cash program for citizens and large development projects are stalled.. 

Oh, no.

– However, As result of our government’s hard work using all our available resources, each citizen will get cash equivalent of 4 million tugrig or 1 thousand dollars[2]  within June, 2020.

Huray, huray

Young minister turned  into a national hero within a few minutes and proudly left the stage. Ogoomor realizes the approach to distribute this cash handout is very harmful. However, this is politics, what can he do!

The Stabilization Fund was set up in 2011-13 when budget revenue was very high. The young minister knows well that deposits of the Stabilization Fund was used for establishment of “Herders fund” at the demand of the herders to disburse loan without any interest for herders which lost their animals during Zud disaster of harsh winter. Soon after the Herders fund changed its objective and began to disburse loan to increase number of animals for all herder households. This led to deterioration of pastureland and this and mining made herders without pastureland. Ogoomor knows all this. Before the 2016 election, the Herders’ fund was renamed as Chinggiss Khan Fund and he initiated the proposal to give 500 thousand tugrug for each citizen and 300 thousand tugrug to each child per month.

If  2013  revenue level was retained, government could have shouldered all this cash programs easily. However, some of the mining revenue was taken in the form of advance payment and spent to fulfill populist pledges of the politicians and on top of that, projects of the Development Bank were bankrupted and Mongolian credit rating was downgraded. Therefore, Mongolia was forced to borrow 12 billion RMB  from China and financed the railroad project. On top of that,  in 2020, Mongolia borrowed 1.2 billion tugrug from China in order to continue the cash programs. Did not make any investment in the mining sector therefore, foreigners dominate this sector. Import of large number of Chinese workers were condition of  the Chinese loans, therefore, what can Mongolia do?  These are not all the problems and  since 2020,  Mongolia is paying  900 million dollars  annually for its foreign debt and soon will be unable to pay the foreign debt? Minister Ogoomor is worried about this and pondering about how to tell to the Prime Minister about this?

Minister, can I ask you a few questions? I’m from media

-…

Why the stabilization fund did not act it supposed to be when the  budget is in deficit?

Last 10 years was prosperity period for Mongolian economy to grow and develop.During this period, 70% of the mining revenue is used for cash distribution program in order to improve living standard of people and 30% is spent through development bank in order to finance long term giant infrastructure projects. Therefore, tiny percentage of the revenue was accrued in the stabilization fund which is not enough to overcome today’s crisis.

International media reports Mongolian development bank is actually bankrupt? Is this true?

– That’s slander and false report

What do you think about real estate assets purchased abroad with funding of the Development Bank ended up in the names of certain  ministers?

– This issue is being investigated by relevant law agencies.

Mongolian government took large loan using its future revenue as collateral. Lately, Mongolia came under debt pressure and its loan rating drastically downgraded. Therefore, it is not possible to borrow from abroad. So what will be the source of 4 million tugrig you promised?  

– We are using our internal resources. Our reliable partners of many years said they are ready to provide us assistance.

By internal resources, do you mean printing more paper currency?  If this happens, you cannot curb the inflation which is already out of control and investments will be stalled and whole economy will be pushed for brink of total collapse?

– It is important for us at this difficult time to work for our country in unity rather than criticizing those who are working hard. I’m sorry; I have to go now as I’m busy. Let’s finish this interview…

Since Ogoomor don’t have any other answer for the questions, he wanted  to finish the interview quickly. There are only two ways to raise budget revenue which are to raise the tax or print more money when international and domestic sources for raising fund is exhausted.Despite increased tax, businesses do not have enough revenue to pay the tax, it is likely that the budget revenue will not be increased, he explained at the party meeting. However, his party comrades elected the option of publishing more money since raising tax is like stealing from themselves. This way, it became common for personal interests elevated above public interest, governance capacity of Mongolia which was once considered champion of democracy among the post-communist countries, was drastically weakened. Unfortunately, there is no opposition force to fight against this and trans-party oligarch groups controls the politics and civil society acts as puppets of politicians and the common public became so passive and lethargic that it prefers only to receive the cash handout from the government. All this reminds time period when Mongolia was under the oppression of the Ching Dynasty of Manchus 300 years ago. 

3. It is 6 am. Gray morning of Ulaanbaatar with dust storm.Ireedui rubbed his eyes and  rose from behind of his computer and prepared to go to his work. His all-night work has nothing to do with his full time work to monitor CCTVs and surveillance monitors in a  5-star luxurious hotel. He was working on   www.ireedui.com  website. This 40 -year old man is a very talented software programming engineer and dreams about developing economy based on knowledge and designing world class software programs in Mongolia. However, to survive and earn income, he works today in a hotel and supports his family. He gets about salary of 3 thousand dollars a month from this job which is sufficient to live with his family in average living standard.

As for Ireedui, he was faced with dilemma of migrating abroad and work in his specialized field as recommended by some of his friends or work like this in Mongolia. However, he chose the difficult one. He explained his choice in  his site by saying we, mongolian intelligentsia, can’t act like foreign businesses invested heavily in Mongolia to launder money or in anticipation of huge profit within short period of time, which will withdrew when economic crisis hits and like them, we can’t abandon our country when country needs us most.

However, the website he is running during night-time is platform for his concern about future of country and its current path. Ireedui and other intelligentsia posts articles and engage in debates through the website. This website became very popular and turned into a political debate club among the middle class of society. However, like other intelligentsia in any society, their activities does not exceed beyond mere discussion and writing. They have been debating about is it right or wrong to join the protest demonstration going on in central square and take to the street to strengthen democracy and for reform policy. Headlines of most popular posts and information in the website are:

Shall we continue giving away strategically important deposits among Russia and China in order to balance our external relation?

Mongolia became a country that imports drinking water!

Project to divert Kherlen and Orkhon rivers funded by rehabilitation money, stalled. No Kherlen and Orkhon rivers and no rehabilitation.

Government secretly revoked law to ban mining north of 47th latitude and issued licenses to foreign mining companies in order to pay back its debt.   

Intended funding for “Mongolian Lung” and “ Mongolia-Free of AIDS” program of international organizations ended up in pockets of corrupt officials.

Ireedui drops his son who studies in senior class of one private school on way to his work. Ireedui drives medium size Chinese jeep, which is commonly used vehicle by middle class.

       How is your study and exams, my son

       Good good. I got “A” grade in all my classes this season.

How was picnic of your classmates?

It was wonderful. We came across a small, flowing river. However, its water was polluted, therefore, they said we can not drink  or use its water for hand washing. We also saw rural herder family.

Good. Did you send your application to that law school yet?  

– No. Even if I became good lawyer, I can never become judge; therefore, I decided to become mining engineer.

1 pm. Working day of Ireedui continues at normal speed. His colleagues were out for lunch. Minister Ogoomor, regular customer of the hotel is meeting with a parliament member from opposition party in a special room of the hotel. This is seen on special CCTV camera. Their view of eating Australian mutton dish prepared by French cook and drinking 100 year old wine in a gold decorated luxurious room closely resembles rich Arabian Sheikhs.

Ireedui which was checking the equipments he is responsible, accidently open  the hidden microphone inside the special room.

It turned out the conversation between the Minister Ogoomor and his guest was not an official discussion, but was secret deal about how win large bids announced by the ministry of finance and share the profit. The conversation mentioned about how to embezzle the remaining money in the Stabilization fund and getting loan collateral from the Development Bank and put all the loan risks to state. This conversation was common example how the powerful officials are sacrificing the future of the country for their personal interest.

Ireedui realized that the minster who directly manages the state budget, finance and the revenue management issues is acting like this for his personal interest, not because of his ignorance or lack of knowledge and because of this, Mongolia is not developing as much as it is earning much revenue by selling much of its wealth. In order to share his realization to others, he posted the recording in the website without any comments.

6 pm. Ireedui who was going home after work, was greeted by 2 young men in glasses and black suits.

Citizen Ireedui, will you come with us.

4. Warm spring has come to rural Mongolia as it became too hot to wear cotton insulated deel (deel is a traditional Mongolian clothes resembling long gown). However, no sign of vegetation and mountains and hills looks grey like streets of Ulaanbaatar. About 70 year old man slowly galloping on top of dark horse through valley where tumbleweed blowing through is Mr. Mongol, a person now considered to be” rare species” nowadays which remained loyal to disappearing nomadic culture and living. This old man famous for stubborn character in his local area is going to soum center (county center) to get his cash handout given by government and buy supplies and food. He left his wife and livestock animals in Remote Mountain place.

Mr.Mongol is native of South Gobi province; however, he came here in search of pastureland as it became not possible to live on livestock animal herding in South Gobi province. It is been 3 years since then. His migration out of South Gobi province where everybody is trying to live and get more benefit and cash handout and attempting to get visa, demonstrates his stubbornness. People laugh at him and surprises at his stupidity when they hear only reason for his migration out of the province was search for pastureland for his livestock animals. Nowadays, herding and living off livestock animals is equaled with monks in deep meditation in Tibetan high plateau and isolated from rest of the world. Nowadays, herders[3]  are understood as people working as assistant workers farms close to big cities or living in gers along tourist routes.  As for few other herder families like Mr.Mongol, they are herding not their animals,but livestock animals of rich urban residents and politicians who like fast horses for salary and

Generally, overview of Mongolian livestock animal husbandry sector is like this. No other sectors except mining and mine related services, entertainment and construction sectors did not develop in Mongolia. One example of how politicians are benefitting from economic diversification policy is agricultural crop farming. A few years ago,  much state subsidy was given under the pretext of supporting agricultural crop farming, however, companies under the control of authorities and their close-knit groups benefitted much from funding made by tax-payers’ money and earned much profit. This did not boost the competitiveness and productivity of the sector as this can be clearly seen from that fact that today herders such as Mr.Mongol is eating Chinese produced flour. Because of the budget crisis of last few years, the agricultural crop farmers did not get any subsidy. On top of the “Virgin land campaign-4, 5,6”, the authorities allocated much funding to their own companies and local home-boys councils under the pretext of developing public-private sector-civil society-partnership. State shouldered risks of all these inefficient programs and projects, so far nobody has been held accountable for this colossal waste of state fund.

Through his hard work, Mr. Mongol raised about 500 animals including goat, sheep, horse, and cows. This is considered quiet wealthy according to the standard of herders, however, all meat, dairy, wool, skin and hides businesses are concentrated in the commercial farms, Mr.Mongol does not earn sufficient income from his livestock animals. Therefore, living standard of herders still pretty much depends from the government cash handout. Despite profitability of raising more goats, Mr.Mongol stubbornly refused to keep number of goats under 10% of his total herd.

It seemed soum center have fewer people than a month ago.Several people were hanging around the soum administration building waiting to get their cash handout money. Bank branch which used to give the handout money and now gone bankrupt became a place for drunkards to hang around. Several children plays on rooftops of incomplete building of water pool with thousands of seat, abandoned due to water shortage. One time, this soum used to have 5000 population and 500 households in its center and now its population is limited with the above people.

Besides the incomplete water pool building, there are traces of efficient investments made when the state budget was fat and exorbitant. It looks that at least the huge investments directed at hospitals, schools proven to be useful at it was directed at people. For instance, 10-grade secondary school of the soum with about 1000 population is fully equipped with up-to-date equipments such as high-speed internet connection and computer lab, English language classroom etc.

Old man Mongol, who was very tired, barely was able to enter grocery store run by wife of soum governor after galloping all day under scorching sun.

       – Son, please give me cup of tea

       We don’t have tea.

       Then at least give me water?

       1 cup of water is 1 yuan.

– How much that is in Mongolian money?

No mongolian money, grandpa. Now Mongolian money became like a paper.

What a shame. You are a Mongolian person. Then trying to sell a  cup of water for ……. Chinese money?

. Mr. Mongol was not able to finish his sentence and collapses.

Mr.Mongol regained his consciousness in soum hospital with large address that said “ the hospital was founded by initiative of Government member and lawmaker of the State Great Khural, Mr.Ogoomor”. He collapsed because his blood pressure shot up. Well, this happens often. It is not first time. Hospital doctor woman told him a bad news-he now has stomach cancer. There is no hope for treatment for this. Main reason is pollution of drinking water and now one out of every two people gets the cancer.

Old man Mongol felt that not all state investments were went futile as he received very sophisticated medical diagnosis at his soum hospital without even realizing about it. However, he realized once more that money is not solution for all as he heard his disease will likely get worse as treatment can’t stop its progression. 

5. Zaya is going out of her with happiness and satisfaction. Today is the day to get the handout money from government. It is exciting to think that she was part of the public protest movement demanding increase of the government cash handout a year ago. Since then, price of goods increased several folds and living standard deteriorated. However, Zaya is happy thinking if the cash handout was not increased by protest movement, things could have been worse. Within a few minutes, she arrived in downtown through a new Subway that has been under construction for 10 years that has been halted several times due to poor urban planning of Ulaanbaatar.

Although Zaya came early today, there was already long line of people waiting to get the cash outside the ATM.Zaya purchased a tabloid newspaper and made herself comfortable among queued people sitting on road fences. Headlines such as “Mongolian horse won in Kentucky derby and PM handed award of 21 million dollars”, “ Criminal situation is worsening”, “ Mongolia raised  falcon statue, largest in the world”, “ Stock market in shock over news deposit reserves proven fake” blurred her eyes from the newspaper pages.

Then, an acquaintance brought her a letter from her father. She was barely able to understand the address which said “to daughter Zaya Mongol” written in old Mongolian vertical script and opened the envelop. Then strong dust storm emerged and  blew away the letter from her hand.

     Zaya stood still thinking whether to run after the letter or risk losing her place in the long line.

She no longer became master of her fate which became like unpredictable spring weather. Will Zaya who used to everything ready including ready food and money, ever know her father has written to her “ you need to make drastic change like wind in your life”?


[1]  By mid of 2020, GDP of Mongolia increased 3 times in terms of monetary value compared 10 years ago and reached 125 trillion tugrig. However, real growth is very little, especially; poverty level did not drop at all.

[2] Due to high inflation rate, Mongolian tugrig was devaluated and 1 USD equals 4000 tugrig.

[3] After 2014-2015 harsh winter zud disaster, “Mongol Herder Fund” was set up the pressure of herders and began to give soft loan designed to help herders to buy livestock animals. However, most of the loan of the fund was graded as bad loans and the loans were eradicated before 2016 election. Living standard of the herders did not improve much. 

 

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