President Battulga: Privatization for the upheaval of our economy has failed

ZGM DAILY

2018-05-24 14:20 GMT+8

President of Mongolia Battulga Khaltmaa addressed the General Session of the second day of Mongolia Economic Forum 2018. The President remarked:

“Greetings to the distinguished guests and participants of the Forum!

There are many things we need to dedicate serious considerations to. However difficult it is to listen and admit to, it is the high time we confronted the unpleasant truth.

Regardless of Mongolians’ imagination of and pedantry and debate over the growth of Mongolia and initiation of countless ornamented projects, geopolitics of great powers, their geo-economic tendency, power distribution and gravitations are the factors which bring actual effect to the Mongolian economy through forcing their interests on, halting and forwarding our projects.

President addresses the Mongolia Economic Forum-2018 

Lucy Hornby, reporter at the Financial Times, leading financial and business newspaper, wrote Mongolian laws on mining and investment can be deemed the most liberal in the world. Aside from concluding that Mongolian mining and investment regimen as the most liberal on the globe, she added that Mongolian cabinets are keen to modify the mineral laws in favor of investors in order for major agreements to be secured.

Nevertheless, the amount of investment is not rising. Researchers strongly advise to seek the reasons from the instability of governance and geopolitical tendencies of the great powers of the world.

Boasting so-called most favorable legal grounds for investment, yet, Mongolia could not make the Top 80 countries that are “hospitable” to foreign investment, while our neighbor in the south was ranked at the 50th place and the Northern neighbor, at the 60th. Even Vietnam, which can be said to have started from the same start-line as Mongolia, was ranked at the 59th and Kazakhstan, at the 64th. This points to the fact that no matter how soft the conditions our laws offer to the investors, it means that major investments would still run away from us unless we make policies that keep up with the geopolitical interests of the great powers. As a comparison, it’s worth mentioning that China made direct investment of USD 42.8 billion and loaned USD 50 billion to Kazakhstan last year.

What I mean to say by breaking down all of the above is that the future of major projects of Mongolia is uncertain until we unite our interests with those of the neighboring great powers by becoming integrated with the regional economic alliances. We will go further only when we deciphered the mystery of hyper-dependency of Mongolian economy on external factors and sluggishness when it comes to exploiting full internal resources for the last 28 years.

Near the end of last year, after the US President Donald Trump had announced his new foreign policy, his Security Advisor Herbert McMaster said “Geopolitics are back, and back with a vengeance…”. It seems to be coming true as the days go by.

Balance of power in the modern world offers both pleasant and unpleasant conditions for Mongolia. The only reason behind the impressive 5.1 percent increase of GDP recorded in 2017 was the favorable condition provided by the sanctions imposed on North Korean coal exports, which allowed Mongolian coal export to rise on the occasion. I would like to underline that there has been no contribution whatsoever to the growth from the Government or the miners.

In all periods of history, Mongolian economy has been affected by the external factors more intensively than the internal factors, and it is projected to remain the same in the future. Our naive imagination which brought hope in free-market economy, “the invisible hand” and privatization for the upheaval of our economy has failed to deliver in the face of reality. The invisible hand is impalpable for ensuring national security, and yet, geopolitics still remain effective. 

As the international arena reforms at an incredible pace, new alliances and divisions are likely to arise. The recent events, in which, the DPRK Leader Kim Jong Un suddenly warmed his connections with the US and South Korea, Chinese authorities met twice with the North Korean leader within just a couple of months, and the US announced its exit from the Iran Nuclear Deal, Russia strengthened partnership with Syria and Iran and Europe announced the end of dependency on the US and began negotiations with Russia on the northern pipelines, as well as the US compromised on the trade deal with China, is expected to bring inevitable and irreversible geopolitical changes, followed by geo-economic convictions.

Balance of power in the modern world offers both pleasant and unpleasant conditions for us 

When the US President Trump announced the “National Security Strategy”, he introduced a new terminology called “Indo-Pacific” region, which is also a new category. According to Washington’s claims, the Indo-Pacific occupies a vast space stretching from western coasts of India to the America’s west coast. The new categorization is an expression of opposition to China’s rise to power. The US is not making bones about its interest in balancing out China’s growth in Asia, especially in Southeast Asia, and neutralizing Russia’s influence in the region. Meanwhile, China expresses its opposition to the US Policies through its Belt and Road Initiative, firm pursuit of globalization and close partnership with Europe and Russia.

The above-mentioned were not unpredictable at all, but the embodiment of assumptions, mainly issued by the WEF, about the eventual shift from mono-pillar to multi-pillar world order, stranglehold of globalization and inception of new alliances, contributed by the fall of western liberal democracy, shift of conflict of power to Eurasia and aspiration of the US to restore its scope of influence.

In such situation, discussions revolving around only Mongolian economic relations and policies can only be described as credulousness to be put softly. We can never ignore the fact that World Economic Forum, the specimen for today’s Forum in Mongolia, has been taking geopolitics and geoeconomics as its main agenda.

Second part of the speech will be published on tomorrow's issue of ZGM Daily. 

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