Let us privatize the licensing office
We have so far held numerous meetings, conferences, forums, talks, research etc. Now we need only three things – action, decision, implementation. That’s all. From today on the Mongolian government should move to the modus operandi I am talking about. Therefore, I am introducing law drafts.
Let us stop creating new licenses, and if a need really arises, licenses and permits should be initiated by law. Let us stop having every official enact a license. Let us do a license/special permit census, registration. And let’s announce which ones are valid. Let us know all what we have and where. And let’s invalidate those unnecessary. Let us have only the Parliament approve them according to a certain procedure.
I hope you recall my tearing apart licenses and special permits on this very podium a few years ago. If a license earns a rent, earns a profit to an official, it [the license] multiplies, it grows many like a weed. Therefore, let us fight not with the weed itself, but with the soil it grows on. Let us remove the soil, let us cover the soil with cement, with concrete. In that way only can we fix our problems.
Let us move those officials and offices which issue licences to the private sector. “Let the government sign a contract with you, and you set up an entity which issues licenses. You will have some privileges in the first year of operation, but starting from the second year, you will have to compete with other companies with similar functions” – is what the government should tell them.
There is nothing difficult here. The government will retain a few licenses and special permits associated with the country’s and public security. Let the Parliament have the list of such permits approved. This will make it difficult to any further pushes to enact more licenses. But look at what’s happening today. When we say, for instance at the border customs, that we must invalidate 20 licenses, but require only two things, they still require the same 20 licenses. The government has already started the process, yet on site, in real life, it is not implemented. So therefore, let us make it a law. A law is our rule; and because officials are arbitrary setting norms beyond laws, we do not make any progress on this front. There should be a procedure telling an official, an officer how he or she should work without surpassing the law.
Let us restrict by law government’s business activities
The second law we need is a law to restrict government’s business operations. The main tenets are:
1. Prohibit establishing new state owned entities.
2. In case a state owned enterprise or a company needs to be established, they must be formed by Law to be enacted by the Parliament.
3. The Board of directors of the state owned enterprises must be separated from public service, and the state owned enterprises must adopt the best corporate governance models.
4. Let us explore and use other means of investment and financing, call IPOs. Let us set profitability criteria. If the company makes no profits, there is no point for the government to own it.
5. Let the Parliament and Government discuss the performance reports of the state owned entities every year.
6. The structure of the State Property Committee must be reorganized to conform with international benchmarks and standards.
There are 101 state owned companies in Mongolia today. They employ 47653 people. A smart government is not a government which runs businesses. We have a famous company called “Erdenes Tavan Tolgoi”. It should not be this company’s business to transport coal. In a smart government, how should a company look like? Very simple. A company to be owned by a smart government must be a company of law. A company of paperwork. A company which concludes agreements and sees to the enforcement of the agreements. If the contract/agreement is not enforced, hold those wrong accountable. What’s the point for this company to mine coal, to transport it. There are ample possibilities to change the situation in this way, let’s just do it.
Let us enact a law on glass account.
I issued a decree on this issue. These days many organizations are adopting this system. Now let’s have a law to be enforced by all government organizations, state owned entities and companies. All fiscal expenditure decisions above 1 million MNT shall become open. The timeline will be set. Within 24 hours your expenditure decision will have to be posted on the website or your information board. Let’s prescribe in the law that if an official fails to declare the decision this way, this failure will be the ground for his or her dismissal, holding the official accountable for the failure to enforce his or her duty set by law. The accountability provision is one thing which our lawmakers often times forget when enacting a law. So now, let us not forget about.
Many individuals, many companies are annoyed and fed up with the government and politics. But there’s one thing that interests them – money. They are interested to see and know how well or poorly the taxpayers’money is spent.
Let us stop the government invest in projects which can be undertaken by the private sector; let us stop owning equity on debt.
The next law is a law on government investment. For years we have been talking about government or public investment. Let us finally cross all Ts and dot all Is in that issue. Let us stop the government invest in projects which the private sector can implement, and let us stop owning an equity by debt. Let the government approve the list of investments that the government must finance. For instance, it is the duty of the government to build electricity and heat transmission lines. But the government just doesn’t build them. Because it does not, the city is not expanding, no new projects are implemented. Other investments, estimated by established formula, should be given at the discretion of the local governments and citizens, to be decided and disbursed through the community development funds. Keep just 3-4 investment projects in the list, invest in those; and don’t care about other investments. The government does not need to build kindergartens, instead, if a company builds a kindergarten for the children of its employees, let the government pay for the variable cost per child. If, say, some parents, a mother of a child, want to be build a kindergarten, give her a loan at 8% interest rate, just like the one provided for purchasing housing. This will have all our kindergarten shortages resolved within one year.
Another principle. Mongolians like government investment very much. Government investment extends over years – a building is built, but there is a total mess with its maintenance, repair etc. Let us abide by one principle here. If law or contract do not provide otherwise, let the investor pay for the current expenditures of the built facility. That’s all. If a local government builds a facility, it should pay for its current expenditures. If the government built it, the government should pay for current expenditures. A clear demand. That will prevent a fever to build three kindergartens at one soum; for the builder now pays for the current expenditures. Only in matters of special needs, the government invests. The Oyu Tolgoi’s 34% has proven to the fullest that the government does not need to own equity. Is that right? The government can only own shares. Shares which are traded, valued.
Government budget is to be spent only for purchase of domestically produced goods and services.
Let us adopt a law on government procurement. What could be the core ideas here? Government budget is to be spent for the purchase of only domestically produced goods and services. From the start till the end this process has to be open and transparent to the public. Let the public, local communities openly discuss government’s purchase of goods and services and let them decide. Let us set profitability and other criteria for the government, and let’s announce them.
Here, we must be aware of the wholesale principle. Say, a school needs to be rehabilitated in a soum. For such a case, needed materials will have to be purchased from outside. However, if we are to fix all schools of one entire aimag, why not establish a plant locally? We just need to support domestic industries in that way. The costs are extremely high, execution is punishingly slow because we do one job at a time. If we support domestic industries, we shall have our own industrial, production base and people will have jobs, thus will earn income.
Let me tell you just one revealing example. It has become so easy to build a facility, an apartment building for instance, construction companies say. Land is secured, the foundation is dug, the frames are set and as soon as the erection starts, private businesses and shops just rush to them offering everything a constructor company might need – some want to supply cement, some – windows and doors, some can do insulation, electricity, some want to provide furniture.
This is how a government service should be provided. People will come to the government with offers. And the only thing the government will have to care for is to have these people compete in merits and skills. You will see, within a very short time, the government’s performance will have dramatically improved. Let’s work and do this way from now on. If the government really starts operating this way, it will no longer be called bad names – corrupt, shady, gluttonous etc.
Let me highlight one point here. People are asking for the rights they are deprived of. They are just saying “give me my bid back”. Good tenders, good bids are seized by the government. They say: “I am a carpenter, let me make the furniture for the soum governor office by all quality standards, please stop the minister supply tables to the soum government!” After having heard what I have just said, many people now will approach the government, in cities and soums. Expect them to tell you: “Let me paint your government building next spring. I import good paints, or I can establish a paint plant here at my soum”. Such an attitude shall make a drastic change, shall develop domestic, national industries. So shall we resolve the tender problems this way?!
Our goals must be, first, measurable, second, attainable, third, simple and understandable.
The next law. We lack a consolidated development goal. Let us have a law on this issue, an issue of having a solid integrated objective. There is one holistic goal most widely known in the world. The Millennium Development Goals. We do make decisions on our national development goals, but they are not implemented. There is one thick book, uncomprehendible, with numerous provisions. The UN MDGs fit just on two pages, on two sheets, with some 20 only provisions. The same should be a case in Mongolia. A document containing some 10 plus provisions. Our goals must be: 1) measurable, 2) achievable, 3) easy to understand. Let us develop them, and set by law. And let us discuss these goals.
Let us set in the law how we increase our GDP and household savings. Also, let us have all government organizations and officials fill in statements before they make a decision. What do we do now? We collect comments from ministries, from here and there, and this lacks any order. That statement I am talking about should show whether the decision is consistent with laws of Mongolia, whether they are consistent with the Mongolian development goals, whether they are financially sound, economically efficient and socially beneficial, that’s all. Another provision that the law must contain is about the ways and means the election candidates, both parties and individuals, envisage in their platforms to ensure the implementation of the Mongolian development goals. And that’s it. The auditing and election bodies must check for compliance. Let the Parliament and Government discuss at least once a year the implementation of the MDGs, Mongolian Development Goals. It must also be added in the law that once in 5 years the MDGs be amended.
Speaking of the statement, let me share with a very important idea. That is, behind every decision, after every decision there should be a paper left. Your decision and your statement should be a guide for the next generations of public servants. “How visionary the official was then. Although the project did not earn financial gains, it was implemented for its social benefits, and the fruits are being enjoyed today” – is what the future public servants would be speaking of you. Another reasoning. When an inspection arrives at an organization, there is nothing, no records against which to compare the current state. These statements that I am talking about will be a basis of comparison and assessment. So completing a statement must be made mandatory by law. This model is already now being put in place. Judges at primary instance have already started filling out such statements before they start a case. And the quality of the judges’ decisions is assessed against those statements. Lately, the Supreme Court has become a source of disappointing, ears-burning news. Looks like the Supreme Court is growing fond of invalidating cases involving big sums of money, or people commanding huge stocks of money. A few such decisions have been made recently. I must state it here that although the Supreme Court is an independent entity, its decisions are sources of guidance for the people of Mongolia on the way we go now and in the future.
Mongolia is working hard to reform our legal and judicial systems and establish justice. The reforms are actively underway at the moment. We shall complete the reform to the fullest. We need to enact another 30 plus laws. We will have them in place. And in line with these reforms, we have to reform the government. There is a saying, like father, like son. The son looks like his father, a foal takes after the mare. To have a good son, let the mother be good. Therefore, we need to work with the “mother”, with the source, with the origin. Let us make our government smart, immune to corruption and red-tape. If we manage to make our government smart, the processes and decisions at courts shall become different.
A smart government is a research and development organization
The next law. I said earlier, we need research, analysis. A smart government is a research and development organization. Only research and development organizations must serve the ministers of a smart government, because that minister is going to make decisions. Research and analysis should reach the minister before he or she makes a decision, by research and analysis the minister must bereminded of and assisted to reflect the rights points. There must be research bodies which use the latest advancements in technology. Let us establish a Mongolian Development Institute. Let us provide by law for the independence of the Institute and set the criteria for its researchers and scholars. Without adding vacancies and without increasing the budget, let us establish it on the basis of the Centreof Strategic Studies and the National Development Institute. The mission of the Institute is to doresearch, make assessments and provide policy counselling to the policy makers on Mongolia’s long term development.
The main fault of our decision makersis making arbitrary decision, led by emotions, mood, whatever spontaneously comes to their mind first. Therefore, we need research, analysis. Let us resolve this issue once and for all. Every country has a government. Let us build the best. There is no choice on that matter.
Let us all abide by a principle – let only the best, only the most honest, only the skilled work for the government.
Law on Public Service. A smart government needs smart officers. Let us appoint the public servants based on their merits and skills. Merit-based principle. Where and if possible, we should choose the merited of the people residing in the administrative purview of the local government. Let us restrict new appointments in the public service. Restrain the officials in your organizations. If the public servants to not meet merit criteria, ask them to leave the office. A public servant does not need to be in the service until his or her retirement. The government is not a nursery of bureaucracy and sanatorium forbureaucrats. If you meet the requirement, you stay, if not, please leave the government. Nothing more, and the government must adhere strictly to this principle. Pays and remunerations shall be based on performance and citizens’ satisfaction. Only the best, the honest, the skilled should work for the government. This must be our only principle.
All in all, there are 161612 public servants, and there are some 47653 people working for the state owned entities. We are talking today about these structures, of these many people, of this scale and magnitude.
We must have a law on the government decisions, registration and monitoring thereof, thus creating the government’s institutional memory.
The next law. A law on the decisions of government organizations and officials, registration and control thereof. This is another area of big failure, but not really much talked of. Mongolian ministers and other government officials today are making decisions beyond the powers of the Members of Parliament! Ministers, heads of agencies under them, officials here and there are now exercising this power of making all sorts of decisions.
And eventually, when inspection and auditing come after decisions, these officials rank these decisions as “confidential”. They hire a sibling of their wife by issuing a “confidential” order. Is there any sense of rectitude? And they do not show, submit these decisions for auditing or inspection, they conceal them, even tear them to shreds. There is one single only institution in Mongolia which makes the law, sets the norms – the Parliament, not you, a government official. There should be no single decision made elsewhere. Especially a political official, this is not your job to be hiring or firing people. This is your general manager’s job. This is what makes the government an awful place.
You please go and visit any government organization, ask for and check their decisions and resolutions. So only by enacting a law on the decisions, registration and control of these decisions shall we be able to establish the government’s institutional memory. Another point, the decisions are not formalized. A Parliament decision, resolution comes into effect on the day it is adopted or after ten days of publishing in media. But what happens with the decisions adopted at the cabinet or ministerial level. There have been many cases when these decisions are forgotten, not formalized for whole three months! Or they are deliberately not formalizing the decision, waiting. You probably guess, waiting for what. Such ugly practices must be eliminated. Therefore, we need a single, integrated registry.
The government has turned into a collection of party cronies, friends, and all sorts of people with conflicts of interest
The next law. Law on the structure of the government and state administrative organizations. After every election there is a havoc in the government. Let us stop this 24-year-long mess. Therefore, let us prescribe by law the structure of the government to be capable and lean consistent with the principles of a smart government. And let us pen it down in the law that the system will be stable, that it will be maintained for 10 years; and that the law can be changed by 3/2 of the Parliament members. Otherwise, this chaos, lawlessness in changes, replacement and appointments after every election will never end. Do you think, smart people come to serve in the government today? The government has turned into a collection of party cronies, family friends and people with utmost conflict of interests. The government is not an incubator for such a crowd.
But think of it, in 1911 we have 5 ministries; in 1998, when I was the Prime Minister, my cabinet had 9 ministries. Now in 2013, do you know how many ministries we have? 16 ministries. Now, let us think over it, the time to think has long come. Plus, let us eliminate the duplication of official positions. This is what I wanted to share with you. Why am I saying “for ten years”, “by two third of Parliament members”? Some adjustments in the government must be automatic, have time limits, have boundaries and limitations. This invites room for discipline. Let us have these fixtures and adjustments tuned automatically.
In many aspects, the government can be identified with an airplane. Let us just take one example. This vehicle called “an airplane” was invented pursuant to the laws of nature. Imagine someone comes in and starts changing it as he pleases – cut the wings, change the shape, make it a box, and you try to fly in it. So the government is like an airplane, with same functions for same purposes – it provides utmost care for security; does it adhere to rules and orders – yes, it does strictly uphold laws and rules. Does it serve the people, yes, it does serve the people. For 30 passengers it has one flight assistant, for a plane with 300 passengers, 10 people serve on board. Look then what’s the situation in the government – too many cooks spoil the broth. You see. The government must function like an airplane. The duties of the crew members are clear, set, ordered, landing and taking off have strictly set timelines. An airplane has a dashboard, a control board, and it does work well. The dashboard of our government is not working, it lost control. Imagine yourselves in a plane with dysfunctional control board, how’d you feel?
Do you think the dashboard of the Mongolian government is working? Think of it, can we hold the officials accountable for their misdeeds and errors? Not at all.
I have introduced you 10 laws to be initiated. This is our prime, first and foremost work to fix the state of today and move from a big government to a smart one. Let us all together accomplish this work.
Start cutting costs and redundancies with yourself.
Another point. Tasks needing immediate action. We need to hold a poll. Let us ask just three questions at administrative units, ministries, agencies.
First, do we need all this? These ministries, agencies, departments, officers, divisions, units?
Second, ask yourself do we need these officials, chairmen, advisors, referents, specialists, experts? And see the answers. Let us hold those who fail to do so accountable. Besides, ask yourselves, does the government need to pay for these houses, offices, cars, furniture, services? Does the government need to engage in all of these? Do all these need to be kept and paid for with taxpayers’ money? Why can all this be delegated to others – to non-governmental organizations, professional and trade associations, companies, local governments, citizens? If I ask these questions now, the shortest and easiest answer you would give to me would be “But there is a law providing for all this, Mr. President”. Ok, that law will be changed. That law will be invalidated. Let us do the way we do when doing away with licenses and permits. Most importantly, the government must start the work with itself. Here I must note one point. The reluctance of the government to cut expenditures of and reduce itself. Government cuts everything except itself. An official cuts everything but not his own expenditures. This is what is redundant. To a minister, all other ministries look bulky, except his own. But your own ministry does indeed have in excess, therefore start with your own self, your own ministry or department or agency.
In the Mongolian government, an average official incurs 3 million MNT cost a month. Cars, fuel, his office, electricity, heating, just name it. It even exceeds 3 million. Add to that phones, post. If we get rid of just one official, we will be able to pay the child money to 150 children, here I am talking about the 20 thousand MNT allowance for a child. We tend to cut on our investments in our people. Instead, we must seek to correct the wrongs, to fix the problems with this structure, an agency, a ministry, and then we will see how much we can really save from this exercise. This is not difficult. Just look at it as an opportunity, as something we must do, as something doable. Let us look at it as a way to develop our economy, as a business, if you wish.
Now all our researchers have a job, have a project to work on – a research on how to make the Mongolian government smart. Here we have ICT companies, please bring in your ideas, proposals. Now you will have work to do, your business will start moving ahead. With the delegation and transfer of government functions to other institutions there will be more space for businesses to emerge, more plants and factories will be established. Let us work this way. We must do away with our old mentality, old perception of the government. The essence of any reform lies in fact not in implementing new ideas, but in getting rid of the old.
What tasks will the Parliament undertake?
Now about what the Parliament has to accomplish. I have listed 10 tasks.
1. An integrated comprehensive system of open Parliamentary hearing, auditing and control, and accountability must be established.
2. The accountability system encompassing the suspension of full powers, release and dismissal from official position of officials appointed by Parliament, President and the Government needs to be practiced.
Paratoxical things happen at times: impunity, with subsequent appointments to high positions, or sentencing and jailing. But a human life has many spectra in between! The Parliament is sitting idle on this front. We must adopt a system by which an official appointed by the President can be removed from the post or suspended by the decision of the Parliament. The same can be practiced by the Government. Just think of it. If the Parliament calls to its session an official publicly reported to have violated laws, questions him or her, and upon voting at a Standing Committee session dismisses from the position, Mongolia will be the most responsible country. And then this practice shall be adopted at the aimag, soum level. Mongolian government shall become a responsible government. It will be a government proud in front of its people. You fail to act so. We just have to change ourselves this way.
The Parliament may not ratify a deficit budget. The fiscal stability law must be strictly enforced. Fiscal discipline must be tightened. If you look at the budget as a target, the Parliament must have hit 10 marks. Just check how many marks you hit in the 2013 target, did you check? Did you hit at least 7? Now, for 2014 budget, may your shoots be sharp. Hope at least 10 you hit. The right to initiate laws on budget and fiscals must exclusively be given to the Government. The Members of Parliament must stop initiating such laws. Government procurement and administrative costs must be frozen for some time. We must have laws regulating government bonds, credits, their disposal, spending, servicing.
We now have Chinggis bonds, a topic we like to talk about a lot. Development bank, and a whole stock of other issues deserving attention. Before you spend money, have the law in place, on which the National Security Council has already issued recommendations. It is the time to adopt this law. Why would the government itself be disbursing the loans. Isn’t it so? And without any control. That’s why we need the law in the first place, and then only talk about disbursing loan funds.
Chinggis bonds will have to be repaid in 4 years. I worry for the Development bank not turn into a nest of bad assets. I wish to never hear such awful news.
Control on the Central bank must be tight, gold and currency reserves optimal ratios must be kept and increased. Then, the Parliament must establish in its structure a sub-committee to support government reform and economic growth. Also, issues surrounding international and investment agreements should be raised only at the proposal or initiative of the Government. By law we must prohibit a public and political official negotiate an investment agreement. A professional team of experts must deal with such tasks.
The government must immediately undertake 12 tasks
I am talking about the government, about the economy. Let’s use our own home-made energy. Let’s create in our energy system opportunities for increased production, reliable supply, and opportunities to export the excess. Let’s promptly develop the railway projects. Build the new railroad, resolve the transit transport issues. Decide on the railways reform. Implement the policy to produce fuel domestically. First let’s conclude long term agreements to provide for multiple sources of supply, then, based on domestic resources, let’s start building our national industry, and from today.
Bring the level of non-mining exports to 30%, which today stands at 97- 3. Let’s change this ratio to 70-30. Let’s develop air transport. Mongolia, with her vast lands, does indeed have the potential to become a regional hub for international goods and passenger transport and ground service; besides, if we introduce small jet services, this could emerge as a service even cheaper than these officials riding cars. Therefore, we must make sure that this all does take place in Mongolia. Let’s act promptly. Let’s support our exports and support import substituting industries. Let’s base our growth on mining, livestock breeding, farming, new technologies. The government must pay more concerted attention to investments. Do not be allured to the job of the lazy people. When the government gets a loan, it spends without control. Beware, later on, it is paid by the people.
There are two major faults in our government. A member of the cabinet remains a member of Parliament; wearing double cloth, double deel – this is wrong. Second, it is wrong for the government to be fond of loans. If indeed the country has major issues pending immediate solutions, table them at the Parliament and make necessary laws. Oyu Tolgoi and Tavan Tolgoi issues must be expeditiously resolved. A national expert consulting team, a national project fund need to be established. The government should not be writing projects itself. Let all these businesses bring their projects. Let’s support the projects and productions with feasibility studies conducted, with secured bank loans. That’s all. This will bring the Mongolian business up. There is absolutely no sense for the government to be trying to do all this by itself, to try to own a part of the business. Let us eradicate pressures on businesses, do away with the shadow economy; let us conduct a tax reform to support growth.
What I have kept telling you is that the government must enforce laws and standards. Professional inspectorate is a standard enforcer. You know one truth very well - the quality standards of vodka “Eruul” are best secured by vodka “Kharaa”. So then do we really need professional inspectorate here? If the vodka producer fails to meet the standards, just hold it accountable. Sometimes the government likes fishing in troubled waters, doesn’t it? The government’s inspecting, placing professional inspectorate, while sneaking a bottle or so of vodka – how disgraceful is all this. Such practices must be cut down at root.
We must improve the country’s investment rating, invigorate the capital market, establish the sovereign wealth and trust fund system. When we say “country” we must mean the people, when we say “the government, the state”, we must mean law. We must strictly pursue common international standards, high technological standards. One thing that I would like to specifically highlight here: European standards, Japanese and German technologies, period. Nothing else. We do not need to set our own standards, best standards do already exist. Such standards must be observed for investments. We need technological services of such standards. This is the way we have to go. These are the three closest, three most feasible standards that we have to adopt. This by itself will resolve many of our problems.
We must seek to actively participate in regional integration, pay concerted attention to our relations with our neighbours. Associating with the government, I have highlighted mostly economic issues. Economy, money, with good or bad policies and intentions, do leave consequences, do leave footprints. We must constantly remind ourselves of this.
Another few issues. Human development should be our core aim. Everyone wants his/her child to be healthy, educated, ethical and positive. Therefore, we must immediately undertake radical reforms in education, health, insurance systems. We must support the development plans of the capital city and aimags. Another set of pending issues is land and its surrounding relations – ownership, use etc. We must resolve this.
Let’s move away from government, from family ownership to public owhership.
A message for the businesses. Businesses include state owned enterprises and private companies. Let’s move away from the government and family ownership to public ownership. Companies with sales over 100 billion MNT must go public; trade at least 30% of your stocks at the Mongolian stock exchange. This will obligate the government to run the stock exchange efficiently. If 10 thousand people hold stocks of your company, your company will be protected by 10 thousand people. Ten thousand people will stand against wrong decisions of the government. Ten thousand people shall start creating value with you. What good an ownership by a handful of people would do? We must solve this issue once and for all. Gorporate governance, corporate social responsibility will be enhanced. At this meeting today we have a whole group of media workers and journalists present. I want you all conduct public debates and discussions on the issues we discussed here today.
We have representatives of local governments. Let us conduct similar to today’s discussions about our future. Please discuss the issues raised in your aimag, in your soum. Define your development goals and priorities. Companies, public organizations can also discuss these ideas to move to smarter models of operation and system. If the proposed laws, projects are not undertaken, I shall push, remind and cooperate. I shall work to providefor the integrity of policy and actions. Rule of law, government reforms, national security remain my key priorities. Plus the 7 amendments to the Constitution have to be attended. You will be shortly given my presentation slides with notes. I wish we hold successful discussions this afternoon. Thank you.