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Privatizing Mongolia

Interview - March 14, 2014
With Mongolia's transition from a communist society to a democratic one, since it was founded in 1996, the State Property Committee (SPC) has been in charge of protecting, maintaining, utilizing and finally privatizing the state's many assets. Having privatized over 1000 properties in total since its establishment, Chairman of the SPC Damshnamjil Tsogtbaatar talks to United World about plans for the future of the committee, including the President’s goal to eventually privatize one third of state owned properties
The first thing we would like you to speak about is of the tremendous transformation of Mongolia since its transition towards democracy and how all this economic growth has been transformed into social welfare policies. 
We all know that our previous society or communist society was a closed one (Kazarm Culture).

At that time everyone had a matching hat, identical coat and clothes furthermore numerous acts were prohibited including one of the most important one - freedom of speech. Anyone who expressed their opinion and mind for the sake of the country were repressed. And one of the critical elements of freedom is private property and by not supporting privatization the country lost valuable time to grow and flourish - a country’s growth is calculated by its citizen’s growth.

Previously it was calculated by the economic growth but nowadays it’s measured by the people’s growth.  Many forward thinking scientists, professors and various specialists of different sectors, individuals who expressed their thought was punished for their deed. Thus we are 80 or even 100 years behind compared to developed countries. The transitional era of changing into Democracy from Communism brought breeze of change of people’s mentality.

This change was the stepping-stone towards a more sophisticated society and the political transformation evolved harmoniously. As a result of Democracy, Mongolians have once again obtained their freedom, private property; its road to prosperity and most importantly got back their country.  This is the main achievement of adopting Democracy. 
As a public officer and servant of this nation, can you please enlighten us on the fight against corruption and how SPC is carrying out this battle into its different institutions for the effective management of Mongolia’s SOEs? 
The most important factor for a governmental institution is management and its legal environment. Democracy is nothing close to anarchy; it is a carefully structured for an efficient management. It follows its standard, which have been agreed however with minimal bureaucracy, quick and efficient service which are aimed in helping the public.

In other words, when a citizen requires information from the government, the serving public officer should contact any relevant department, which will aid the citizen in achieving what he needs.

This can be the tax authority, legal authority or any other department but at the end all department should work together to satisfy the public demand. This is an expression of how the government is respecting its citizen and individuals have to feel the equality and their rights. It is possible to say there is democracy and freedom running through my veins and this is what I respect and hold dear. 
Government institutions have to have clear vision and policies, in other words all ministries have to have a clear policy. If these milestone and policies are not in position, government institutions start getting involved excessively in commercial daily activities and minister’s start thinking in business terms and they end-conducting business on behalf of the government.

Policy makers should strictly stick with policy making and the private sectors should carry out their business. Intersection of these two different activities gives rise to corruption and bureaucracy.

Thus public servants role and responsibility should be accordance to a standard, it has to be precise and give importance to the skills of their human resource and how to improve them and finally manage their internal resources efficiently to achieve maximum efficiency. Since democracy politicians looked at public property as a business opportunity, they have took advantage of using it for themselves and thus resulted in many public companies to be running at loss. So since I got into this position for the first 1-month conducing checks on all public property the way it felt about the public sector is almost same as it was hit by a Tsunami.

Many of the state companies were supplied with services and products for staggering prices and as a result most of them were struggling to survive and most of them were making loss. Also many of the assets were purchased for high prices thus it will make loss even when sold and cannot be used which means they have turned into dead assets. 
What is the vision and mission of State Property Committee and as its chairman how are you transforming this institution to make it efficient and profitable? 
When the State Property Committee was founded in 1996 it had to follow all the legislation in a Democratic structure for urban and suburban areas.

In other words, the SPC had the responsibility of protecting, maintaining and utilizing the state assets and had to report all the belongings on a state scale and finally grow it. Reports and checkups were conducted every four years and the last report was conducted in 2012, and from the final report state property was estimated at a value of 14 trillion tugriks worth of assets. The previous Communist society and the current Democratic society differ in many ways.

One of the main differences of Communist society is that the state property is immobile and does not grow and the role of the SPC is only to protect it. Current SPC however privatize state properties to public and as a result the private sector uses these assets to make profit improve and evolve them. In 1996, there was a period of mass state property privatization. And every 3-4 years the SPC offer the parliament what they consider to be privatized.

During these periods, average of 40-50 billion tugriks worth of state property was being privatized to private sector and the total worth of state sale reached 173 billion tugriks. Only from 1996 to 1999 total of 926 entities were privatized and this was the peak era of mass privatization and until now total of around 1000 entities have successfully sold to private sectors. The question remains how the income from selling private property will be spent.

Will the government spend this money or should it make transformation in all their institutions. As I mentioned before, the public also should adapt to this democratic, free market mentality and the people should participate as much as they in the process of privatization. One of the method of privatization is the state owned companies should release stock on the Mongolian Stock exchange and the public can purchase these shares.

Once the public owns the shares, authorities’ control of the power should shift to the shareholders or the citizens who will then tend and monitor the company’s activities. 

During the last International summit in Hong Kong, President Elbegdorj said that he wants to privatize one third of the current state owned companies. So we would like to know what is the current situation of these state owned companies and how are they being privatized?  
This is definitely a major goal and a critical problem, which the government should address, and as the founder of the modern Democracy of Mongolia President Elbegdorj has pin pointed and summarized the issue in a single vision. Moving from big government to a smart government should be the aim and during the President’s visit to Hong Kong and Singapore Elbegdorj specifically brought me, the head of SPC.

Probably to show how other nations are carrying out successful management of state property and how Mongolian SPC should change their structure. Singapore’s Temasec structure can be a role model for Mongolia.
Mr. Tsogtbaatar, you mentioned freedom of the market and the President has been looking for examples in Hong Kong and Singapore. In your opinion how does he evaluate foreign investors’ participation in this process of privatizing the companies, particularly the United States? 
Mongolian government should support its companies and make them economically strong and competitive.

Consequently the improvement in private sectors will translate to the economical growth of the country. State owned companies especially mining and energy companies have outdated technology even with the current improvements, which cost the state massive amounts of resources. So the main role of foreign investor are helping these sectors to improve their technology and making them more productive and get involved in the privatization process by purchasing additional shares which will be released from the state companies.

During the open economy numerous transformations has occurred and we will improve the management further and foreign investors should help in these matters as well. Our country is open to any country that would like to collaborate, especially the United States and China. 
Do you have any partnership or collaboration with the United States? 
As I know now, not a lot of the state companies are working on any major project with the United States however we do have cooperation with the Japanese, Canadians, Australians, Koreans, Germans and Chinese in regards to improve our technology.

Our market is relatively small but as for other sectors excluding the state companies much cooperation is carried out with the United States including health, tourism. America has influences in many different industries in the world, as well as in Mongolia, but when it comes to SBC it hasn’t been cooperating a lot. Also possible I may not know all of the involvements. As you know in mining there has been significantly more presence of Americans, e.g., OT, TT. 
So everyone have his or her little babies. The companies, which are most significant and representative of the economy now, under your administration era, which are the most representative state owned companies?

There are companies that are operating at a loss. The reasons for this are that they have internal and external influences hence making a loss. For example, energy companies, mining companies. Energy companies produce and supply. There are about 20 of them. The bigger companies are TETS-4, TETS-3. From mining companies, there is Baganuur, and joint ventures of Erdenet Mining Corporation. 
I would like to thank you very much for receiving us today and for letting us discover another hero of the Mongolian history.

Yes, we are a trace or real Mongolian history. When I was a boy, I have seen life. In other countries, through cinema and literature they educate people of their past. One of the important things in Mongolia is to document what really has happened and to establish that it was in fact genocide. 600 skeletons buried under ground were discovered from a single spot. 17,000 Buddhist monks were politically accused, of which 14,000 has instantly been executed, and this has later been discovered in 2003. Therefore, we have to prove and establish this in the history for what had really happened.

The socialist party has been in power for so many years that because this happened during their reign they’ve been not admitting this. One of my biggest aspirations for me is to have this admitted into history for its facts, so the people of Mongolia, those who have and have not experienced this unfortunate event, will learn from the past and prevent such actions in the future.
The worlds known cases were the Jewish and Armenians. They both acknowledged and established that what happened was indeed genocide.  
So we would like to thank you and hope to be the platform for you to promote your cause.

We have a saying in Mongolia that our state owned and state joint ventured companies are like “horns in a sack”, they do not collaborate. So we have been taking initiative in order to smoothen the operations of these companies and fix their issues. For example, in Darkhan, we have enabled and encouraged their local steel factory to cooperate with Erdenet factory. They have to produce 20,000 ton steel balls annually. Normally during the winter the production stops, but if they cooperate they don’t have to stop. This cooperation saves Erdenet factory four million dollars a year.

If this happened earlier, like if you calculate this for 20 years, it’s over a hundred million dollars that has been spent overseas, but now thanks to our initiative this will not happen in the future.