PM of Mongolia S.Batbold: Let’s not criticize the past, we should focus on creation and implementation
S.Batbold, Prime Minister of Mongolia, gave an interview to the National Public TV and its transcript was published on Unuudur Newspaper. Business-Mongolia.com brings some excerpts of his interview that might me interesting for our readers.
Q: Good Spring Days, Mr. Batbold, you just arrived from the Cabinet Meeting. What key issues were discussed during the meeting?
S.Batbold: Thank you, enjoying lovely spring days. We were discussing the Housing Program. I believe that in order if a state to strive for the progress and development, it should solve the 5 issues of developing its people. First, people should be healthy; second, people should become competitive and capable for the cluster; third, people should be employed; forth: people should have houses or apartment; fifth, elders and disabled people should be protected under welfare policy.
Housing Program, one of the major programs of the new industrialization, have many questions such as how to implement, which model to follow and whether it can meet with the demand of the Mongolian people or not. We build houses, that is easy thing, but if they can’t be sold, that is the issue. Therefore, our experts studied internationally recognized and proven experiences and policies. For example Singapore has huge intervention from the Government. But in reverse, in US and other developed countries, free market regulations are prevailing. In some countries, dual version of the Government coordination and market regulations exists. At the end, we reached the conclusion to have the wider Government intervention in coordinating the policy.
But it shouldn’t be implied in each and every field. When implementing this policy, we see to sole the issues of smoke, workplace creation and supporting families with low income. Let’s leave free market regulation to the families that are capable for their housing, but the Government should support families with low income in choosing their houses and apartments. When granting long term soft loan of housing, we should ally with our bank and financial sector players. The Government shall pay the difference of the interest rate. We see the interest rate will not exceed 6% per annum. If commercial loan from banks have interest rate around 10-11%, the state will cover its half. Of course, there will certain limitation on selection of apartments such as 1-2 bedroom and pre-payment. But this is technical issue. All will be solved in profound way. A working group, led by Deputy Prime Minister, on this program is established and taking challenge. Recent Cabinet Meeting gave order to the related organizations and agencies and it will be the beginning of implementation of Housing Program for 100,000 households.
The program implementation will launch in April.
Q: The Government announced this year as Employment Year. How many people will be employed, if the program starts?
S.Batbold: – As for me and my Government, we have one clear position – not to judge or criticize the past, not to seek reason of failure from one person or from others and halt composing the wish lists, but we should look forward. In doing so, we should pay less attention of advertising or propaganda, and in reverse, shall utilize that saved time on creation and implementation. Poverty and unemployment are everywhere. In order to get through it, we should encourage employment. Therefore, every sector, not only through the Housing Program, will pay attention in creating workplaces. As the result, at least one family member shall be employed.
We had attitude to retreat from easy offers or subsidized mentality, but shall seek for creativity and it is still being pursued. Only thing is that we paid less attention on forming such environment. We are striving to fill this gap. The Government and SGK are working to provide such environment through various measures such as legal and financial ones.
Q: Spring is coming, you know that it is the wakening season of political opinions and the most obviously, they will be targeting the Government. Is the Government ready for their criticism and pressure with its achievements and performances?
S.Batbold: Once we embraced democracy, there should be other point of views. But, I think that such understanding of revival of political opinions in springs should be changed. Every spring street demonstrations, political pressures and conflicts have become routine. Majority of public doesn’t give credit much on them. If we gain much through demonstration and pressure, we would develop much further than today. We can see that many developed countries which were experiencing same problem like us. Development and progress were enabled for those who have clear policy and effective measures. We can draw example from our neighbours, Gulf, Asia (oriental) and Eastern European countries.
Therefore, I believe such spring political activation shall be expressed through different ways. We’d better go out with our shovel when spring comes. We shall walk to the fields where the most constructive actions are occurring such as road building, construction, animal husbandry and agriculture. Country with labourous citizens shall develop. The development shall not be determined through size of criticism and dispute.
The coalition Government established path of creation and constructiveness. I think this year shall be the year of launching the biggest industrialization and new culture in democracy in building society and policy.
Q: Industrialization programs shall be implemented through the Development Bank. When the bank’s operation will start?
S.Batbold: As of today’s meeting we decided structure and organization of the bank. Legal environment has formed. National level projects such as housing, auto road, railroad, and energy, will be funded through Development Bank. As of the management, foreign experience and expertise shall be required. We can see examples of rapid development of 20-30 years around us; Republic of Korea, Singapore and UAE. One secret of it is that the state coordination and the Development Bank is one of such measures.
We made decision to run the Development Bank’s management with foreigners. According to this arrangement, the selection was made and it is presented to the Government. As far as I was informed, Development Bank of RoK has better and active position. We know very well of the Korean development and progress and their bank’s experience. I don’t see any negative or ejective cause of such cooperation.
Q: People have simple understanding that much cash will come from TT to be distributed to everyone and living standard of people will boost. Actually, benefit doesn’t come that easy like tomorrow. When TT will start its operation and stabilize its operation?
S.Batbold: I see it very soon. More precisely, it will be implemented this year. This project shall become model to its successors. Still now, state owned enterprises lacks with their transparency. Public involvement and control is almost zero and their effectiveness is low.
But TT shall become a cmodel ompany that meets with the world standard, perfectly suited to the modern market economy demands and requirements. Rio Tinto acquired majority of Oyu Tolgoi LLC. Its operation is transparent; you can see it from their website using internet. Millions of people can read stories about this company such as rejection of Australian Government on the Chinese Government’s bid on 19% of the equity or its share price and so on. In 1990s, the Chinese state owned companies were not transparent and made less profit that others. Therefore, those companies were transferred into the market into regime and listed at New York, Hong Kong, London and Shanghai stock exchanges. As result, positive changes were made on those companies assuring public involvement and transparency in their operation and those companies has become competitive to the world stage. Our TT shall repeat this story. Erdenet and other companies shall follow this path.
With such purpose, MSE made management agreement with LSE, in order to meet with the world standard. After that, it shall attract capital flow to TT from the world stock exchanges. Upon my receipt of PM’s position, I mentioned of establishment of the national symbol companies in the sectors of mineral, energy and infrastructure. “Erdenes Tavan Tolgoi” shall become its pioneer. Its operation shall become stable within this year and information on face value of share price, distribution volume to the people of Mongolia will be clear. It shall not serve for the certain group or advantageous factors. The interest right of citizens and national companies shall be the same. The state involvement and control shall decrease from 51%. The Government will pursue strict position.
Q: There are many opinions on TT share distribution, for example, what will bhappen to citizen doesn’t have company or new born child can’t get the share and so on. Can the current version be improved or changed?
S.Batbold: I agree with perfection, but perfect solution is still hard to achieve. We are living in today, but our experts, lawyers, economists and advisers who are developing the project have idea to put forward in connecting past through today to the future. We shall consider other opinions and alternatives. Endless philosophical dialogue on perfection may hinder the progress that can be made. I believe the best way to move forward is to select the best solution based on the current level and givings and correct and upgrade it in the future according to the time’s demand.
KEY TO THE DEVELOPMENT BELONGS TO THE EDUCATED HUMAN
Q: Oyu Tolgoi project started its implementation. The agreement is still under criticism. How was the agreement actually?
S.Batbold: Erdenet agreement was made under the influence of the system which we supported. At that time, public had very little knowledge because of lack of openness like today. One example is that up until 2003, Erdenet factory didn’t pay most of 16-17 taxes that are effective today. It only paid income tax and was waived from royalty, land lease, customs, labour, environment etc. since 2003, it started operating as a business entity in the territory of Mongolia. Oyu Tolgoi agreement is the biggest and national level one since Erdenet and it is several times bigger than Erdenet. Plus, it is the first ever agreement made by the Mongolians independently without any influence. It is the agreement which requires our ability and wit, considering foreign expertise and independent and neutral stance towards all stakeholders. But I won’t say it was perfect one.
Most of all, its realization is itself the biggest achievement. I think my Cabinet members made excellent job within their knowledge, information and legal environment. Moreover, when our knowledge and experience increase and market and time constraints change, its amendments remain open. Recently we made some amendments, such as decreasing loan interest and not to sell or transfer the share without consent of the Mongolian Government. I believe that we can improve the agreement through such measures.
Q: It is obvious, that Mongolia will become mineral rich country, almost like diging the earth we are sitting on and making money. How do you see the future of mining sector? Are we gonna dig it when it is available or as said by some others “to keep other mineral reserves untapped and use only two “Tolgois”, uranium deposits, and other projects such as Asgat and Tsagaan Suvarga”?
S.Batbold: The Government shall make policy and coordination in relation to the strategically important deposits. On the other hand, private sector engaged into the mining business a lot. In the last 10 years, license issuance and mining operation were made quite open with less control. We learned a lots of lessons and gained experience from our mistakes and errors. A new law to regulate such openness so called “Law with Long name” (Law on prohibiting exploration and mining minerals from river source protected water and forest reservoir areas) showed us that it is not that easy to regulate activities of private sector.
It is not easy to limit others and set free the projects of the Government. Therefore, the state shall issue its policy, especially, the Government shall take challenge of realizing the strategic deposits into the economy and forming to and facilitating them with infrastructure and legal environment. Much attention shall be paid on the equal and fair distribution of the benefits from such realized deposits to the citizens of Mongolia. As for the first phase, it is better to start with wise realization of decisive deposits to the economy and based on the experience gained, we shall move forward with other projects. It can be said that “realize not all at once”, but gradually, step by step with policy.
We have regional development concept. According to this concept, development fundamentals shall be established not only in Umnugobi, but in other regions and zones or economy centers. The state shall form such groundings. In overall, we should plan the development policy, especially mining realization in accordance with the centers of economy. With this purpose, the Government instructed the National Development and Innovation Committee to develop policy. It will be discussed in coming days. Recently, during the Mongolian Economic Forum, vast discussion was made on development architecture and model and planning and many voices from public were heard at the forum. Good comments and findings from this forum will surely be reflected in the policy background.
Q: Our newspaper (Unuudur) has editorial policy against realizing Burenkhaan deposit. Khuvsgul region can be developed without phosporite. Khuvsgul is not only the cradle of Mongolian eco system, but it is for the world community. How do you think about it?
S.Batbold: It shall be discussed within the issue of development planning, which we have just discussed. It is the important issue to attract public discourse. Due to uncertainty in the state regulation and planning, social, prfesisonal, local community and group and media concerns are raised. We shall start tidying up the unregulated policy first. Once we achieve it, others will remain clear. We shall resolve which to realize and which one not to. Otherwise, it can’t be decided through Prime Minister or someone else’s wish.
Q: Khushuut Coal deposit is big. MonEnCo is raising notable fund from HKSE. As far as we understand, it is strategic deposit. Is there any development made on registering Khushuut into the strategic deposit list?
S.Batbold: As for now, the Government didn’t discuss adding new deposits into the old one. But, it is quite obvious to consider and solve the mining sector in complex way. This solution has to be made during the term of this Government.
Q: Public widely appreciated localizing Cambridge Education Standard and EU standard in the Mongolian soil. What is the progress now?
S.Batbold: Everyone is keen to know what is the true key of the development in other countries. I see that KEY TO THE DEVELOPMENT BELONGS TO THE EDUCATED HUMAN. That is why, it was announced. Fresh graduates should learn to find balance and even swim further when they enter into the “vast ocean of life” and workplace. I observed that the education system wasn’t reformed during the transition period, and it still lacks of complete solution, miring in the “mud” of reform. Hence, I believed that it should be ended and the Cambridge standard is the correct one to embrace. Let’s take example from Singapore. Through acceptance of this standard and improvement with its own peculiarity, every Singaporean citizen has become competitive at any level and any work. But it didn’t achieve it like “straightening a nail”. It spent lengthy time and effort to reach such quality progress.
We will follow this path. Huge amount of capital and energy is required to succeed in this reform. Anyhow, the first step was made. The agreement was made with the Cambridge University and working group was established to align the current general education program/curriculum with the Cambridge one. Soon, secondary schools will have Cambridge standard program and teachers will be trained to implement the program. As for the introduction of the program, lab schools will be established. These schools will be the strongholds and pioneers to introduce the standard. Such centers will be established one in Ulaanbaatar, then one in each aimags and then to soums. Investment in education sector will surge in parallel with the increase of economy capacity. I have no doubt that the key to the development lies here.
As for EU standard, I am about to build PCI (Partnership Cooperation Agreement) with EU. Working group was established on the issue, led by the First Deputy Prime Minister. Bulgaria, Romania, Poland, Czech Republic and Hungary, which was exactly like us in the past, received EU standard. In doing so, our expenditure in the production and service industry will be little higher than before, but at the end, its competitiveness and quality and warranty will improve. It will be little costly, but the result will become effective. I will pay visit to EU and sign this document. Upon signature, Mongolia will receive technical and economic assistance.
We are boasting that our 7200 products can be exported to EU. It is ture that EU opened its market door with higher consumption rate of 600 million populations of 28 countries to us, promoting our true democracy and open market economy choice. But, exploring this opportunity can’t go further than export of few cashmere pullovers. Because, we don’t have standard, without standard we have no competitiveness. We should have standard in order to evade from single sided revenue model such as dependant from the copper coal commodity price slump.
As for the education system, it ha many standards such as state school, private school and then Korean, Chinese, Turkish and so on. There is no certainty in the standard of our graduates. Even for the construction standard, it can be created a man, later that building fall down or under fire risk. Therefore, introducing standard is vital issue for us. This is one of the knots to be untied in order to build healthy state and society relationship free from corruption and bureaucracy.
I NEVER MIXED STATE SERVICE WITH PRIVATE BUSINESSES
Q: Can you give answer to the questions such as Tavan Tolgoi will go wrong because three ministers decide everything and S.Batbold has private interest in the project?
S.Batbold: This deposit was acquired by BHP, a world class mining company, in 1997. It was explored quite some years ago and certain exploration works already made on it. The Mongolian Government made offer to Romanian Government and North Korean Government to establish JVC. But Tavan Tolgoi deposit didn’t go into realization because of low price of coal, lack of infrastructure and poor market demand in the neighbouring countries. That is why BHP entered into Mongolia acquiring the license. Unfortunatelty, again it surrendered the license in 1998. The license was acquired by MineInfo LLC, but it also lacks capacity to realize it. Actually, if BHP surrendered, then a Mongolian company couldn’t do much on it. Therefore, this company made cooperation offer for “Altai Holding”. At that time we didn’t have big ambition to exploit it and own it. We agreed upon paying the license fee with expectation to do something bigger in the future. I have big respect for those guys. They had chance to sell it to foreigners with higher price, but they didn’t go to foreigners for making money, instead they approached to the fellow Mongolian company.
So then, since 1999, we cooperated on the project. We felt its importance and value, but we still didn’t know how to start the project in the time of non-feasible. Since 2000, coal price went into the favour of our side and several national companies joined in the project.
It is true fact that with my involvement, this project didn’t go to the hands of aliens. During the Russian Prime Minister M.Fradkov’s visit, big business people led by O.Deripaska, offered me share of Severstal (Nothern Steel) JSC to buy this project. They even offered to buy 25% of the project, giving 51% to the state and 24% for our companies. They were ready to pay pre-payment according to their equity in the project. There wasn’t any legal breach if I sell it to them and own my share in the project. It said that 51% of the project shall be owned by the Government in the law.
But, Altai Holding Company didn’t make such decision. We thought that it is big national project and its faith should be decided by the state and people of Mongolia. We didn’t dig a shovel of coal, but transferred it to the state.
Stakeholders should be re-compensated. The Government accepted previous owner’s request not to be compensated in cash, but some areas next to Tavan Tolgoi deposit. Ukhaa Khudag is considered as 4% of the total area of Tavan Tolgoi. When Ukhaa Khudag is under the exploitation, Altai Holding had no interest of making money or politics using the project, therefore, it expressed its willingness of exiting from Energy Resource and sold its share to the national companies. It is quite ridiculous to label this project still to me even when Altai Holding completely surrendered its interest to others. It is also quite unlogical act to give up its legal right and return illegally to ensure the interest.
As I said, Tavan Tolgoi shall be transparent, open public company. Its share will be distributed fairly to people and this action will be under the control of public also. 2.8 million Mongolians will control management of Tavan Tolgoi and its share dividend. Owner shall know its property. Some people who like lure public respect, say TT shall be 100% owned by the people. If so, its value will be minimized and no other change will be made. As for the Prime Minister, I will handle this project as valuable to be evaluated by the stock market with state ownership of 51% and plus, public ownership.
Q: Once we start this topic, may I have your answer on Chinggis Hotel and Boroo Gold Deposit also?
S.Batbold: Before answering the question, I would like to mention some words. I am grateful for my destiny for giving me opportunity in gaining education, experience in profession, doing business and serving to the state.
Shortly after my graduation in Moscow, I joined to the Ministry of Economic Foreign Relations and Procurement. During my 6 years of service, I gained much experience in state service and received master degree in UK. In spring 1992, I started my own business for 8 years and returned to the state service in 2000.
When I was doing business, I concentrate on my business and when I started my career in politics, I did state service. I never mixed both the state service with private business. I follow this ethics long ago.
As for Chinggis Hotel, it was built with socialist mentality with many big and costy ballrooms and conference halls in order to host conferences of the Council for Mutual Aid through Economy Countries (Soviet System Economic Cooperation Ogranisation), and earned equal income if compare with the other existing hotels. The Government looked for the investor from abroad, but it failed to find one. Actually, it was deserted in 1991-1993. It is true that Altai Trading Company win tender bid announced by the Government and received the “ruinlike” building with 65% of completion, looted by others. It is also true that upon receipt we completed the building and provided many workplaces to the economy when Mongolia underwent transition period. If one sees its positiveness, he or she surely think that it was good and fair work. There are many other buildings still deserted in Ulaanbaatar, such as sport complex. Basically, we saved Chinggis Hotel. Usually, there is always something to say for the initiative and creation, but silence to idleness.
As for Boroo Gold, it was explored in 1960s by German geologists. But it still lacks of feasibility. In early 1990s, it was given to an American company, Morrison Knudsen. This company, rich in experience, completed the extension of Power Plant IV. Some years later, it surrendered the project to the Government, because of gold price ($250-300 per ounce). But gold price surged in since 2003. Also its gold grade was quite low like 3 gram ton. Its feasibility was made and recommendation was made that it was not feasible if gold price is lower than 320 US$.
The open tender was announced in 1996 and 5 companies (4 local and 1 foreign) made bid. Altai Trading won the tender and attracted foreign investment for the project. Actually, no companies had fund to realize such project in those days. Therefore, Canadian and Austrailian companies made investment of US$80 million. We provided our project and our share diluted down to 5% at the end. 15 years ago, business and legal environment was completely different than today. With 5% of interest in the project, Altai Trading neither involved in the mining process and nor received the dividend. We sold our interest to them and paid its related tax.
But Canadian company received tax waive according to “Law on Foreign Investment’. According to this law or the Stability Agreement, company which invested US$2 million, should be waived from tax 100% in the first 5 years and 50% in the succeeding 5 years. Altai Trading exit from the project is different issue, I don’t really get why these two different things are needed to be connected?
THERE IS NEITHER CONFLICT NOR DIFFERENT OPINIONS WITHIN THE PARTY LEADERSHIP
Q: Change name of MPRP (Mongolian People’s Revolutionary Party) was discussed for long ago and it was made under your leadership. The reason of taking long was because of certain political risk. Do you and your party fellow members calculate the risk?
S.Batbod: No life is without risk. If you want to live risk free, then you should sit idly. But through taking risk, you shouldn’t ruin the existing goodness. It is necessary to feel the good direction and develop good reasoning for your acts. Risk is not that monstrous thing if you discuss with others and follow the majority. Following majority is the value of the democracy. There can be difference in thinking. But we should abide and follow the majority’s will. If someone has completely different opinion, he or she can live differently.
Our party is the polticial force that connecting history and tradition with the current values to the future perspective, while reforming itself with the pace of the modernity and social democracy. The reform shows our internal democracy. It is still open to join or leave arty with internal democracy and even to establish a new party. One thing I would like to mention here is that our party members accepted this reform and change. It is obvious when our Party Governing Board Members worked in the countryside and at our party units.
I said to my Party Members that as the Leader of Party, I will take responsibility of risk derived from the change of party name and loss in the upcoming election of 2012.
Recently, party changed its mandate. During this change, there are many new members joining to the party, showing the support from public on our reform. Media is focusing on few leavers than more joiners to the Mongolian People’s Party.
Q: Over 10,000 new members joined to MPP, right?
S.Batbold: No, it even reaches 20,000 now. During few days of celebrating 90th years of the party, 3000 new members joined the party and it was 14,000 before that.
Q: 269 leavers, right?
S.Batbold: Officially, 269. Some say there are many more than that, but we should consider statistics.
New members are increasing. Also many old members are returning, who left the party because of different opinion and personal issue, such as Mr. J.Gombojav, former Speaker to the People’s Great Khural. Also, Mr Lkhagvasuren Bavuu, the People’s Artist, said that he is returning to the party. Many people, especially senior activists in politics and statesmen, are returning to the party.
“SAID YOU CAN DO IT”, I REPLIED THAT WELL, I WILL WORK HARD
Q: You received Prime Minister’s position out of sudden. It was decided by the previous Prime Minister’s request. What did you think when you heard of it? On the other hand, some say that you are under influence of S.Bayar and S.Bayar rules the Party and the Government.
S.Batbold: It is again media anticipation. Previous Prime Minister’s selection was not random one. I served to the state from an ordinary official, head of department, to Vice Minister, and Minister’s post, and gained experience in business. I think of myself that I went through all levels of state service and prepared for the position. It is not blowing my own horn. The experience gained in the past is truly helpful for me to work as the Prime Minister.
I determined my main goal during my first speech as Prime Minister. It include plan to implement in every sentence, briefly it was my action plan. In order to reach my goal, I am working like from sentence to sentence of that speech. I prefer precise constructive words than general and fancy sentences. In brief, I prefer to say in order to implement not to be rehearsed.
As for Chairman S.Bayar, I would like to quote from his word “If you can take it, then you can welcome it. Be there not to be, but be there to be able to. Don’t play around, feel the time demand”. He showed himself in many cases that he reaches his word. He never recalled his postion or returned to keep his influence, asking favour or trying to impose attachment. When he was handing his position to me, he said about his will and plans. Since that time, we never had discourse on Prime Minister and Party Leader’s position or works. He called me one day and said “I want to become Prime Minister and you can do it” and I replied “Well, I will work hard”. Then he left his position.
Q: Can Coalition Government see the end of its term as it allied? There were many attempts and pressures to split the Government since its establishment. What is the gain and loss of being allied?
S.Batbold: The main goal of any party is to develop the nation and ensure well being of its people. When parties think or plan of reaching this goal, they have conflict of approach and methodology. It is obvious to compete with own concept during the election and this competition shall be fair. The legal environment shall be formed for this fair competition. Within this framework, maturing parliament and improving election law are not the concern of ruling parties, but to all political parties. We think it is necessary to hold wider discussion and dialogue on it.
It is correct to criticize or demand of step down from the governance if coalition government make mistake. If it goes on the right path, it should be encouraged and supported. The competition is not only to conflict or pressure is not only to remove. In reverse, nothing will become perfect through just embracing each other. There are many cases and models of coalition government in the democtratic nations in the world. Everybody knows, through coalition Government, many important issues and opportunities were unlocked. The Government shall work together in order to make progress in industrialization plans and programs and to see the result. As of individual S.Batbold, Prime Minister and Party Leader, I strongly believe that coalition Government shall run until the election 2012. Many difficult issues needed to solve still exists inside the party and between the parties. But we can be united for the bigger interest of nationa and it can be kept in the future.
Q: Do you have something to say to our readers?
S.Batbold: We are at the important period of our nation’s development. The most obviously, the nation will develop further. This development has many human and non-human factors. In the part of human factor, it is important to make urgence, support and work harder. The urgency shows that there is a social demand for it. It is good that decision making level understands it and striving for it. But, we should improve our living and create middle class. The words of poverty, unemployment and corruption have become spells to express oneself how he or she loves home country. We should decide it, when deciding it, we shouldn’t talk much, but work much.
Coaltion Government enjoys better opportunity to work and make achievement. On the other hand, we are facing to the challenge to be more responsible. We should develop open Governance. It is time to step forward from transition period into the progress. Let’s upgrade our economy into the next quality level – competitiveness. Let’s determine the development of hard and soft infrastructure development.
In doing so, human shall be at the center of attention. If we can devlop our human, the target and action shall become clear. Therefore, let’s try harder together.
Wish happiness to my fellow Mongolians