 I'm at the resource management in Asia Pacific program in this university. And I was lucky enough to be in Mongolia for about three weeks and do some desktop literature review on Mongolian resource, the situation, in particular the informal mining of gold by the ex-nomadic herder. So that is my claim to fame with regard to Mongolia. I have great pleasure in introducing Dr. Jargal Saitan Dambardagya. India is famous for journalists who are very well educated and who write books and do commentaries and all that. I'm really pleased that if you allow me to call you as Jargal Saitan, he has degrees from Moscow State University and also USA. And here we have an economist who is also a journalist, so he wears many hats. And for example, he has been associated with Fair Tax and Wise Spending Group in Mongolia, also the Taxpayers Association, and he has worked for various resource companies. So I have great pleasure in inviting you, Dr. Saitan, to come and give your presentation. What a wonderful place, a country, a city, in the legs in particular. I think this is not by chance you have Mongolian Institute at this university, in this part of the world, in here, because we have Igor Preshevitz, a doctor. I mean, we honored, I think, him with us. And it's a very critical time of our development. So we are here with a group that could back impact a lot on the way, what kind of decisions we make down the road. Today I am here to brief you with economics, economic development of the country, some challenges in the way we are trying to solve these issues. I have had some, I know it's on computer, and I think it can be available if we need it. So first of all, let me give you some snapshots of our economic development today. You know, as I was introduced, I'm trying to be the mirror of the society. The mirror is something, you know, it never cheats. You have a very bad, ugly face, somebody is trying to break down this mirror. And I want to make sure that this mirror is not broken, and the mirror is vice versa, helps the people to look better. That's, I think, a social mission, the way of my mission, I find myself in. In a way, my passion as well. I do weekly economics column on politics, mostly sometimes, and then also interview, call de facto, and try to interview interesting prominent visitors and newsmakers in the country so that our next generation, as Baba just now suggested, he's always more keen on the next generation, and he's always reflecting the current generation. And I think it's our life. It's in everything in our hand to change today. So, economy, I was comparing before arriving here, two countries, Mongolia and Australia. Interesting fact, your land is 10 times more, population is also 10 times more, GDP 10 times more, GDP per capita also 10 times more than Mongolia. But however, per person, does it work? Maybe you will increase the volume. One, two, better? Okay. So, I found out all this 10 times. And then I found out also, per capita, we have, Mongolia has a half thousand school admit per person. You have a 350. So, a lot of problems could be seen. The problem of big land, the difficulty of creating proper infrastructure, etc. And there are similarities in the way we have been solving the economic problems. And we also, we have 90% of our export depending on mining. You have 55% as of today, depending on mining. And we both depend on one commodity, coal. And first time we have oversold Australia last year to China, with coke and coal. So, down the road a lot of comments that we will address everybody here in this audience, will hear and touch these issues. Our economic overview could be said with two words, described. Growing, but volatile. Every growth rate between 1997, 2011 was 6.3%. But nominal GDP per capita has increased sixfold between 1977 and 2011. Our HDI Human Development Index is 0653, which places us 110th in the world. Economy almost quadrupled by 2020, with average growth of 15%. Last year we were the largest, fastest growing economy in the world. The same history was only with Qatar. And Mongolia will be the fastest growing economy in the world in between 2010 and 2013. Overall it will be on the average about 10%, according to Citigroup global market. But our economy is highly reliant on the mining sector, as I told you. We see a lot of our future connect with copper price, gold price and cocaine coal price, which are not going to be very high like a couple of years ago. But our policies remain the same. Today the economy is driven by two major projects. One is OU Tosve as you know, and it will reach 800,000 tons of copper, concentrated by 2020, and 28 tons of gold. Steamets suggest that 25% of GDP in 2020 will be that project alone. The second project is Tauban Tosve, a cocaine coal mine. We have a lot ups and downs around this project, private sector on part of it. And now the government is very heavily working on getting somebody coming like Peabody on that project. And it will be 40,000 tons a year. Surprisingly, two of the largest projects important for Mongolia are headed by Australian executives, both way 10 days ago in Hong Kong. We had Investment Summit, the largest investment forum outside of the country, hold every year. We are concerned about two things. One is the quality and the infrastructure. Major hurdles to conducting business in Mongolia is inefficient government bureaucracy. Taxes, supervision, regulations. Second, access to financing. Third, government policy instability. Fourth, law and contract enforcement. The fifth and the worst is corruption. Infrastructure is another major hurdle for businesses. The major one is bottlenecks at the border and quality of roads and air transport infrastructure. I keep writing about each of the topics once a week. And when you address these issues, I'm always wondering, the country has everything like Australia. And the only problem with us is we are our governance the way we are governed. I'll give you some macroeconomics snapshots. Main purpose of macroeconomics policy is to be stable and sustainable growth, which is not the case because we too much depend on the couple commodities. And our life, our joy, everything depends on these two crazy commodities and how much we do selfless products. And our fiscal and monetary policies have been always pro cyclical. That exacerbates economic volatility and uncertainty. Because things don't depend on us. It depends on our southern neighbor, where we sell almost everything. We brought that disease, how we call it. I think you are familiar with that at a certain time period of your development. And increasing vulnerability from wall until commodity prices, I told you earlier. It was very much seen and reflected in the crisis of 2009. And we're almost in front of another one. Same problem, same way of addressing, but unfortunately not the same conclusions. Very pro cyclical fiscal policy. Our budget is growing as much as the GDP. GDP depends on the call and copper price. It's all to China. Though we met a wonderful law, fiscal stability law. And it is to start only from January and two months in a month, where they should describe it a lot, discipline, decentralization of budget. Both never happened in this country before. And they said the deficit of our budget to be under 2% of our GDP. Which I don't believe it's going to happen. We have made a development bank. And they made a loan. They made an issued bond under the government guarantee. And we got $580 million immediately. And subscription was 10 times more, they say. What did it happen with this money? We were paying every night $19,000. And we were not using for four or five months. And finally they are now using it in the way they were not planning. More than that, now our government is going to issue, they got the permission for $5 billion from the government. And they are working day and night to issue 1.5 of them before the end of this year. And $1.5 billion is quite big money. $5 billion is all our total budget. And this government is going to have such a big pie, one that's budget, the same pie as a fund. So with the current quality of the government, planning, capacity to implement, that's another worry that the people watch. So that's why we are very worried about the more going deeper into this such disease. And also this, our source to be a cars, not the luck. Because we have a very low quality of institutions like previous speaker was talking about the quality of schools and universities. Even we have I think our situation of quality of the government is even worse. So we have, these are the challenges we have to face. So briefly you see not well established economy, only 20 years history of market economy. Before it was 100%, there was no private sector 20 years ago in that country. So we are particularly as, during 20 years we made a lot of money. Could we do better? Yes. Nowadays when the international commodity price for those products went down, our government still is going with very high budget, very big budget. And last week we have adopted or we have approved government, the parliament had approved our budget finally. But that budget is not much reflecting the current reality. And somehow our politicians were very busy saying that only that we are under the 2% of GDP deficit. They were not talking about the possible lack of revenue of the budget. That's why they want to increase tax. First time, very seriously. For just description for those who know not much about our tax system, really state tax is supposed to be 2%. I think not many people pay that. Second, profit income tax 10% and 15% after 3 billion 2 weeks taxable income, which is about $10 million. So usually we'll pay 10%. And we are one of the 27 countries in the world, the flag, which makes quite competitive and which was also a good base for foreign direct investment to the country. But however our government now is more to control our prices. And nowadays they are promising to keep the level of fuel, which is basis of our economy, which is important from Russia, at the same level. What happens? We have a shortage for a couple of days and it will go on. Now any government who want to regulate price never succeeded. Our government even worse, they failed. And now again I want to touch the issue of bond, which is going to impact very substantially the economy in coming two months. The feasibility study for the major projects is called Science and Industrial Complex. It's on the way to China, our current on the Trans-Mongolian Railroad. And they want to make a huge six-plans complex, cement, caulking, caulking, iron, and other three factories. But I have one confusion. Government is saying that we will make this complex if we need money, we will put it to that project. The bad news is feasibility study is not clear, not completed. We want them to use the money only for infrastructure to the door of every plant there, but not the particular plant itself, which is to be made by private sector at their own risk with the foreign direct investment for with the foreign investors. But I'm worried the government doesn't see that in that way. And they want to make that project themselves. May they own a corporation now. And that's the, I think, the duty or anyway of our work of the civic society to make sure that the government, government never made good management in Mongolia even so. We had a state on enterprises which all run with loss. What happens? Nothing. The political parties come to the power, change the CEO with their own people. And the guy is living and I haven't seen anybody from Mongolia, from Mongolia instead on enterprises becoming very poor. That's why everybody wants to be a public officer nowadays. And this entrepreneurship spirit is dying, which was very strong during that time when early 90s. However, we made, I wrote about that, an article called when the, when, when our ship makes maiden voyage to the financial ocean. So we sort of, we're going to issue that big money and we're going to have a big financial income. But it should be profitable. So what is economic outlook now? We still have these two problems. And less institutional and economic policy challenges are addressed. We will have still high economic growth. We will have a rising inequality and dominant non-tradeable and mining sectors. And the volatile economy with many uncertainties. Governance quality, just I will let me address just two of them very briefly. Review of various surveys point very into some picture. There is a, as you know, corruption index. We are ranking at 120th out of 183 countries. It's transparency international 2011 statistics. Second, index of economic freedom. We are ranked at 81 out of 179 by Heritage Foundation 2012. Or there is a World Bank, a book called Doing Business by 483 countries. We are ranked 86th country. Or the last one. World Competitiveness Index. We are ranked 93 out of 144 by World Economic Forum. So that's the reality, this snapshot. That's the mirror reflection of what we are today. First of all to recognize some of the angry challenges. Second part of my presentation. There are a lot of challenges. And I have just tried to group it into small categories. Well, first of all, the most, I think, the corruption. You know, I was running this morning at the Lake Berligur-Fim Lake. And there was a sign. It says, Government Act for the Queen, Law, and for the people. And there were descriptions of this public park, the lake, and the law related. And I shared with my colleagues this morning, hey, they are written there like this. And one of my colleagues, Mr. Campbell, said, well, in Mongolia it should be for me and for the rest. I think it's very correct remark. That's the way how public governments work. And that's the most challenge. And this challenge should address one issue, transparency. Second issue after that. Accountability. Whoever comes to that position. I was giving interview before election to Al Jazeera. He said, for more persons in prison, what do you think? I said, well, it doesn't matter. Whoever, whatever position you have, as soon as you are, you have done something wrong, you should be held accountable. Otherwise, it has no sense. That's what we do. And today, what is good about the new government is they are fighting with corrupt people. But my worry is if they go too deep, they may find their own people as well. So that's another dilemma. We have to face it. We have to address. We cannot make the economic progress we want for everybody. But we have a wonderful weapon for that, called democracy, in which Mongolians believe that democracy makes us, okay, 120, 180 universities, whether or not many of them, by the way, our politicians met these schools. And many conflict of interests that we use, are enjoyed in the country. Of course, what do you expect? The people have no right. They have a right to speak to their heart for the last 20 years. And this democracy is something that is not our neighbors possess. It's being possessive. That's true. And these days, in our southern neighbor, there is a selection happening. We have selected a few people prepared for 10 years. In our northern neighbor, they have selected only two persons. So compared with that, there is democracy. If we use properly, in the right way, in the better way, that you have been trying, we will do wonder. I believe in Mongolians. I believe we can do it. We have educated people. After 20 years, we have now a new generation, which doesn't know about communism, about Lenin, about everything that is related with the old time. So that is the base of our future change. And that's the audience I try to address. Yes, we are dependent on our neighbors. I say that, and I was quoted in a not very pleasant way there in Russia, but however, we have that feeling towards China. But China is our largest customer. You cannot keep all the time your customer known. So you have to respect your customers. In particular, ordinary customers of China. We have some different feeling about state-owned enterprises there. And I wrote an article about that. Unfortunately, that triggered a different effect that I was completely different than I was expecting. I was suggesting to stop state-owned foreign countries, state-owned companies to come to Mongolia and to own our shares. Because we have privatized finally our own state-owned ones and why the other state, foreign state-owned companies should come. Stop it. But our politicians overdid, overarched it. They took back draft law and just before the election they made a very stupid law. They have forbidden to come. They called the strategic sector other than mining telecommunication, banking, what else? Media. They have included these three sectors as strategically important sectors and nobody came on there more than 51%. I mean less than 50%. I mean forbidden to own that much into these three sectors after which we have stopped basically foreign direct investment to the country. Which was almost as much as our GDP every year. So that's the reason why the government immediately want to borrow money from a stock exchange. And I think that's why I am very afraid that this bond proceeds may go to cover the budget. Basically we are coming from the belief the civic society or informer Mongolians come to believe that government should do only the things that private sector cannot do. And government the first and for most duty of the government is to protect only three things. Our rights, liberty and our property. And they always do more than that and which is in the Russia in the Russian it's called bear service. You know bear is trying to do the most to give a birthday present to a I think to a haig and overall with that barrel of barrel of honey fall down and destroy the whole house of the poor haig. We have a lot important issues to solve one of them is a property issue. Our lands are not privatized. It's called it belongs to everybody and the state is managing on our behalf. As a result we don't have development in a countryside. We have a big migration of our herdsmen to the city. That's all down by three cities. The city where 48% of the country is in one crazy city. Very badly managed. Completely corrupt. And only from last election we expect we have changed the power and we expect some positive changes which we started to see. But I want to go way deeper. And that's why I was just talking about the you have a case called indigenous people land right? Unless we do the similar things. But it's a little bit different. Two quality wise different things. But that issue is not addressed in Mongolia. We will at the end end up having nobody in a countryside of Mongolia. Every Mongolian will be inside and I think our herds will be a wild animals. In particular with this new complex where we expect about several thousand Mongolians coming and working that's going to be another big challenge of our lever. We have already that with only one project that we will talk about. There are fourteen thousand people working. Actually nine thousand, fourteen all including everybody subcontractors. But out of nine thousand a majority Chinese workers are not. Why? Because we can also supply immediately those needed. Liberally. The same issue of property in Ulaanbaatar city where a half of population lives in our own gear in fences surrounding the city center. If each land property is not registered and put into the economic cycle this issue will not be solved. And there are somehow very law with that movement. These are the challenge very short and I found also another very interesting parallel. Forty years ago on this day one of your leaders Gough Wittler said today Forty years. It's a time to choose between the past and the future. Between the habits and fears of the past and demand and opportunities of the future. It is like exactly it is to be said today. If you paraphrase this one I would say it's a time to create new opportunities for Mongolians. Time for a new vision of what we can achieve in this generation. Not in the next generation. For our nation and the region in which we live. Well that's the description of the vision you had here forty years ago. That's what we want to see in Mongolia. A lot of similar we will face what you did. The thing is it should be here this time cheaper, faster and smart. Because we will go through the path that you made. And finally let me share with you some points on the diversification of our economy. There was a group from Harvard a Michael Portman group in Mongolia you know they did about sixty, seventy countries all around the world and they put the theory of competitiveness. So what are those competitive sectors in Mongolia? The analysis that you can google and find that says competitive in certain sectors Mongolia can be tourism. I think it's sustainable tourism in the current terms of our understanding. I interviewed the other day sustainable tourism work chair we have talked extensively on that you can see on my website. Meet our meet is very well, in particular that and people who come to Mongolia change their mind about them. Nothing to say about the Japanese who saw our summer races beating all of them for last ten years. And they are now completely like them and their consumption had increased substantially. Third Kashmir, you know that Kashmir. And I turned out I went to Italy to a factory which prepares Kashmir cloth for big names, Chanel This Kashmir is from Mongolia. Why you don't drive near Mongolia? Why you said you made it in Italy? You don't have a gold here. It turned out Kashmir fiber is getting thinner when the gold location is coming higher. And that's the place in Mongolia. We had an IMAG called Baring Honkor higher in color, yes. That fiber has become very well unfortunately we were not marketing and the whole world knows about the quality of Kashmir but they don't know that this is coming from Mongolia. And all this IT surprising the particular IT services. Somehow what happened that the Mongolians crazy of us speaking many languages you will be everybody here sitting in Mongolia probably two or three foreign languages they speak but somehow it happened they are quick with that and I think this whole IT service could be used there. The last one is mining logistics. Here we will have more there down the road 10 years from now or 20 years Australia will. Mongolia is now already working in Kazakhstan and Africa. Mongolia mining logistics company, drilling companies in Hong Kong the guy was saying that he has a five times more job in Kazakhstan than in Mongolia now a Mongolian company. Why? It's much easier to work there. Okay, Kazakhstan is Kazakhstan but stable you see I'm doing more money than in Mongolia. So to wrap up I explained about the current situation of economy from my perspective and challenges we face that we should solve and I told you most importantly that I think we can overcome it because we have everything there. We have a youth young generation half of Mongolians are under 35 years old if they are properly powered with knowledge and powered by IT probably we are now one of the most traveling nation as well you know on my website they are always accessible you can see all around the world Brasilia, Costa Rica, Puerto Rico Mongolians are approaching I mean obviously they are reading in Mongolian so it means they are Mongolians so they are all around the world we are in a way when they will come back when they want to come back and they have a conditions that they can work, challenge and get accordingly then that's Mongolian what we want to see that's what proof that I want to share with you and you can what I told today on my website called www.jargaldefacto.com I updated that every week in Mongolian and in English and all my interview is in when it comes in English it comes with Mongolian subtitles so that you can see what's going on in the country from perspective of non-political observer thank you very much