OBG talks to President Ts. Elbegdorj

Interview: President Ts. Elbegdorj

In which sectors would you like to see additional foreign investment and what are the priorities?

ELBEGDORJ: We need to build more roads, railroads and power stations. As soon as our natural resources cross the border they get processed and sold at greater value. Why don’t we do that domestically? We would like to see more value-added products in Mongolia. For example, Mongolia is almost 100% dependant on fuel imports, so we would like to see more processing centres for different materials. We are looking to produce, process and add significant value to our raw materials. Mongolia has an enormous potential to become a processing centre where we can export to China, Russia and East Asia.

We have almost 1m students at all different levels, from kindergartens to universities and vocational centres. A third of Mongolia is currently studying and this means we have a great young workforce that is about to enter the labour market. During my time as prime minister we introduced the “four 10s”, making corporate tax, personal income tax, value-added tax and social security tax all flat at 10%. In the Western world this would be almost impossible to implement. We are beginners and sometimes beginners have an advantage. So, if we introduce the right policies we will see positive results and be able to work towards further development.

How will the development of rail infrastructure strengthen ties with Russia and China?

ELBEGDORJ: Our parliament has already passed the main guideline for railroad development. We have one access point to Russia, through the Trans-Siberian Railway, and another with China. We would like build more exit points with both of our neighbours. This will allow us access East Asian countries and beyond. Our government, through the establishment of the Development Bank, is addressing some of the financing for these infrastructural projects. However, local companies – as well as international groups – are invited to start these projects. The latest studies by the McKenzie Group showed these projects to be highly profitable. We will build more exit points to eastern China and Russia. There are great deposits in Mongolia’s border with Russia and these deposits are needed in China, so we can build a railway network to transport Russian coal and iron ore to China, acting as the link between supply and demand. When I met with Russian and Chinese leaders we spoke about building oil and gas pipelines connecting the two countries through Mongolia, and we would like to be an important and reliable partner for our neighbours. In addition to our existing mining deposits at Oyu Tolgoi and Tavan Tolgoi, there are other similar significant deposits. Mining is a good source for wealth and we hope after 10 years mining is going to be one of the main sectors for both the country’s development and economy.

What do you see as your top priority in the coming years when it comes to the fundamentals of securing economic development?

ELBEGDORJ: To ensure sustainable economic development, we first must have a good judicial and legal system. Therefore, one of our priorities is reforming our judiciary system. If we have bad governance and a bad judicial system then we are in trouble. I would like to see big business disputes related to Mongolia resolved in Ulaanbaatar, not discussed in London courts. The business community should trust and believe in our courts and legal system.

Mongolia is actively working to reform our legal and judicial system, but we also ask foreign investors and businesses to help us to invest in the system. The most challenging and important transition for our country is to change the mindset of our people. The Mongolians lived under a communist system for three generations, so we have to change the ideology and mindset in our country. We will continue to focus on judicial and legal reforms going forward.

The other issue is the relevance of Mongolia to global matters. When world leaders meet, Mongolia occupies a small room in the minds. How do we make room for Mongolia in their mindsets? Mongolia can be a big player in the mining world. For example, we can dictate copper prices and we are the world’s second-largest producer of cashmere. We can also be a big player in terms of political and economic reforms. We are now chairing and leading the Community of Democracies. In our part of the world there are many countries still under dictatorships. We have something to share with other developing countries. In the end, we also have to remain Mongolian, preserving our culture and lifestyle. Mongolia is small, but we can set an important example for other developing countries. We would like to make Mongolia more relevant to global matters.

What changes have been most important to your administration since your election in 2009?

ELBEGDORJ: I am the first president to be elected to the office from the Democratic Party. I believe in the power of people and power of freedom. Before 1990, all major political decisions were made in Moscow. Now, thanks to our democratic transition, we have brought this authority home to Mongolia. However, we now have a second duty to fulfil, which is to give decision making power to our people. Unfortunately, this power is currently stuck in the house. If we are going to create a civil society, it is impossible to do so without civil participation. It may take years of struggle, but I see the development of our democratic society as comparable to a growing infant. We have to nourish and take care of our democracy day by day.

The second issue is related to justice. If there is no justice and no rule of law there cannot be democracy. The biggest mortal enemy to an open society is corruption and red tape. Some of the failed new democracies in post-revolution or democratic transition faltered due to bad governance and corruption. When I was prime minister, one of my primary goals was to oust corruption and clean up our system. Our judiciary system dates back to the Soviet era. We have to revise our laws, but change can be very risky because the early communists became capitalists with power and wealth.

As we enter this new era of wealth, we must ensure it does not simply end up in the pockets of the few, but instead benefits us all. If we have open governance and if we make sure we are ruled by the people’s will, this will be our blessing.

Justice and civil participation are two very important issues during my term. I also want to make Mongolia more relevant to the rest of the world, which means we must build and share common values, path and interests as we try to make Mongolia more visible to other countries.

What steps is Mongolia taking to ensure it develops the right economic model for growth?

ELBEGDORJ: Mongolia is an open society so I hope we can use our wealth in a proper way. There are many countries with abundant natural resources, but the ones that have succeeded are those with open political and economic systems such as Canada, Australia or Norway. Another issue key to our success is our neighbours. We have something to share with them and we are destined to be between them. Of course there are challenges but there are also opportunities. Mongolia can play an important role for both of the neighbouring big economies.

We will strengthen our legislation and implement good institutions to follow important examples. During my time as prime minister, we joined the Extractive Industries Transparency Initiative set up by Tony Blair. Now Mongolia is one the three best performing countries in that programme. We joined these global movements in order to receive help, support and guidance to make our future direction clear.