Ikh Tenger, Mongolia May 29, 2012
Financial Times reporter David Pilling speaks with Tsakhia Elbegdorj, President of Mongolia

FT: Mr. President, let me start by asking you about the origin of Mongolia as an independent nation. It has interesting beginning after the fall of the Soviet Empire, and unlike some other former soviet states, it became democratic almost immediately. You were part of that whole movement. Can you explain that event?

President Elbegdorj: Mongolia was an independent nation in the old socialist system. For a man, as well as for a nation, freedom is indispensable. It is vital for private individuals to be free, because free men, free individuals make up a free nation. Mongolians have the sense of freedom; we carry that feeling in ourselves. The sense of independence, the sense of free life has been in us through generations, at all times. I think that this sense was a great help to Mongolia acquiring its freedom and independence again in a full sense, in particular after 1990.

There is a special feature of the Mongolian change. First, it was generally understood that for Asian nations it was not possible to make political and economic reforms concurrently. Mongolians broke perception. Beginning in 1990 we did make political reform, and we did make economic reform. We doubly implemented this reform of giving our people rights and freedom. Thus, in this way Mongolians’ reforms are of one special feature. The second special feature is that we were able to make this major societal transformation in a peaceful way, through dialogue and consensus. The third special feature is that it has been 22 years since 1990, and in this period of 22 years the striving of Mongolians to continue the reforms has been resolute. We never abandoned, never retreated from out path and choice. We our proud that Mongolia has evolved as a nation with freest economy, politics and society in the region.

FT: There is a little bit of a trend to talk about Beijing consensus. As you think to that, people compare, for example, development with India. Have there been any disadvantages? Starting out on this road to development to economic reform as you put it? And as a democracy, has that road difficulties and problems along with advantages?

President Elbegdorj: It was indeed very challenging to conduct a social, economic and political transformation of such a great magnitude. In economic sense, in the time of socialism nearly 90% of the total sales, 90% of the total economic trade was made with one nation, namely the then Soviet Union. On the other hand, thanks to the transformation, we rose to similar with other countries values. In short, the very value of establishing rule of law and respecting human rights and freedom is stronger than any ideology. Thanks to new values we made many new friends. Opportunities have been opened for international banks, financial assistance institutions, and nations with similar values to work together with us. Thus on the basis of these possibilities, conditions and opportunities to decide hard problems that at the time were urgent came to us of themselves. Second, one thing that I think is that freedom has a really great, amazing side to it. Every day free people in a free society can hear good news. A new business is being created in one place, a new service is being created in another corner. People who have felt their freedom and creative capacities create this wealth. A free man is more responsible, a responsible man is more creative.

FT: Now it is not a secret that Mongolia is sitting on enormous resources, some of which have been discovered, some of which have not been found yet. Countries that have resources, have sometimes, even more curses than blessing, West African and oil, for example. Honestly, we would like Mongolia to become Chile or Qatar, maybe. What would prevent this place from becoming another country with less honorable record?

President Elbegdorj: I interpret your question as asking us, a nation with great natural wealth, whether we are going a right or wrong path, right? Let’s think of what could safeguard Mongolia if we’d go a wrong way, for example. The answer clearly comes to my mind, I am confidant in this. Nations with great natural wealth, which have taken the wrong road, are by and large closed nations. Countries richly endowed with mineral resources but which have gone the right ways are open countries. What about Norway, Australia or Canada – we see that these nations are democratic nations. It is by and large not the countries that take action under the instructions of its investors, or of the power holders of that country, but the countries that take action through the wishes and desired of its people that are most successful. Travelling on the right road makes it possible to navigate ahead while correcting our failures and mistakes. The people have the sense of right and wrong – they feel the nature is being destroyed, or else, that the profits of economic development are not coming to us, that the gap between the poor and the rich is increasing; this voice and feeling come loudly from the people than from those in power. Therefore, since the fate of the people in this country is decided by people’s wants and desires, and the leader follows people’s wishes, we are able to fix our problems. The most essential guarantee of Mongolia’s development and prosperity reflective of people’s interests and benefits is our openness, is that Mongolia is an open country. And also, we are eager to learn from others, always. We do criticize ourselves, and we do openly talk about our shadowy sides. Our media is independent, people have every opportunity to receive information, and these opportunities will be further expanded. And as I said, we have all possibilities and chances to learn from others. In fact, if we were to describe democracy in few words, it is leaning from your mistakes, learning from others. Learning means progressing, moving forward.

FT: Let me ask a question about corruption. The corruption is that one always worries about. This country doesn’t particularly do well if you look at the Transparency International table list. To get into the Parliament I believe, it’s calculated 2 million dollars. But the wage of a Parliamentarian is some 800 USD a month. That will suggest people see getting into the Parliament for some kind of earning opportunities. Can you assure people here that this your government and Mongolians are willing and able to do away with this?

President Elbegdorj: We do worry about this issue. It is shameful for me to see the news where Mongolia’s reputation is damaged because of corruption. Corruption makes Mongolia look awful, ugly. Corruption is the daunting enemy of a free society, it is the main brake for the further growth of a free society. Corruption is associated with the governance, state structure and its policies. Therefore, I set this both as a goal and a call: let’s make the coming 4 years the years of fixing the wrongs in the state, in the government. Mongolia’s people can’t live a decent life because the country has no money; Mongolian people live a poor life because our society misses, lacks justice. People live poor lives because Mongolian law does not treat the people equally, people lack equal access to law. And I think, our todays’ Forum at Ikh Tenger addresses specifically this issue.

It was not possible to talk about this 20 years ago; 20 years ago the problems that were pressing on us were much different problems. Even 10 years ago it was not possible to discuss it. Perhaps even 5 years ago it would not have been time for our society to accept discussing this openly. But now it is very important that we have begun discussing with our thoughtful friends, with our experts and researchers, with our people, and with non-governmental organizations how to lay the basis for inclusive growth, how to ensure that the economic growth benefits our people. For myself, Mongolia’s struggle against corruption is the aim and purpose of Mongolian state and government. We can work effectively in this direction. Before the Parliament took a break it adopted 6 laws on judiciary that I initiated. All in all we have to change and amend 18 laws to reform our judiciary. We will have to undertake many reformative actions further on. Therefore, the agenda against corruption is present both in people and in the government. The legacy I will leave behind myself is Mongolia free of injustice, free of corruption. We must strive to contribution to this cause to the best we can do and offer.

FT: What kind of resources does this country have? In per capita terms, what are you looking at? Could this place be as wealthy per capita as Qatar? Could we be talking about that kind of level, in what kind of time period?

President Elbegdorj: Last year Mongolia was ranked to the country with the highest rate of growth. Some surveys indicate that our economy grew by 17.5%. However, the public, the society doesn’t seem to be happy about this growth, people are more cautious of such a growth. Our people have become more resilient and wiser in the course of the past 20 years hard work. And the caution stems from the fear not to become a country dependent only on one source. Our growth bases only upon mineral sector development – mineral exports and investments into the mineral sector. Processing industries, infrastructure and other sectors virtually don’t grow. In 2 years, our GDP grew by 100%, but with the old infrastructure and old capacities we cannot keep up with this growth rate. Therefore, with the proceeds we make from the minerals industry, we have to invest in other sectors, very wisely, based on accurate projections and estimates. So we are discussing these issues, so actively, that one can say we are about to hold a referendum. And speaking of which, the Parliamentary election is a voting. It is a vote for the politicians and political parties which propose the smartest, the most visionary, most realistic policies, based on sound evaluations and calculations. Such candidates shall receive people’s support. So we have to look at the returns of the vote. The discussion is talking place all over Mongolia.

FT: You are sitting on all those resources. First of all, you have to decide how to divide them between Mongolia and foreigners who come here. You need them because they have experts, capital, lawyers and others. They have something that Mongolia doesn’t have yet. And then you have to divide it between yourselves. But let’s start with how you divide with foreigners. And the foreign direct investment law, which is now being discussed, which is, I guess, an attempt to begin to create the rules of how that is to be done.

President Elbegdorj: When we began the fundamental societal transformation, there was an acute need to attract foreign capital. Mongolia was like a family of a bride. We were a family with a fine, flawless girl, who hadn’t yet found a proper groom, no country was found that could be a potential son-in-law. Now, our daughter is noticed, men approach our daughter, who is very intelligent, capable, highly educated, and is potentially a good mistress of the house in our household. You see, we make our choice with our values and measurements. First, we needed to be open. Now, as Mongolia, our minerals sector enters the core attention of foreign investors, we prioritize the common, fundamental rights and benefits of the Mongolian people. In the past we desperately needed money and foreign investment. Now we need to find the most effective equilibrium between the two. Recently our Parliament discussed issues related to regulating foreign investment, foreign public or government’s investment. We have found the solution after three years intensive discussions. It is not that we began discussing them once the matter of Chalco arose, this law was put forward three years ago. These discussions have proceeded openly for three years. There is one thing to say about it here. In Mongolia before 1990, all properties and assets were owned by the state. Since 1990 we have tried to support private sector. We have always tried to impose stringent control over state ownership, we have strived to curb government ownership and support private initiatives within Mongolia, domestically. Such a regulation has been in place not only in Mongolia. Open economies, including the most powerful economies have such a regulation. We introduced the regulation looking at the experiences of those countries as well.

I wouldn’t say we have adopted the best law, the best regulation. There are some things to criticize here. But we have them anyway and let’s go with them and see. There are opportunities to improve them, we are always open to improvements. We will listen to what our partners say, what those parties interesting in investing in Mongolia say, as this is the first time we introduce such a regulation in Mongolia.

FT: Are you worried about the foreign state companies, or worried about Chinese state companies, obviously there are a lot of SOS in China?

President Elbegdorj: As for participation by companies with foreign state ownership, not just Mongolia but all countries are careful, as you know. We did not provide any article in our law against the state owned companies of any one particular country. The articles of the law are equally applicable to all economic entities and companies, all state owned companies.

FT: I was phoned by some investors since I have been here. And they say unless they can have control 51%, they are not interested because it’s too risky, they need control. Now the law, as I understand, says, that if they seek control they must go through the Parliament. Is that the bottom-line? Are you going to call foreign investors bluff?

President Elbegdorj: In fact, 51% control is not considered the highest level of all criteria. This is just one criterion. Second, if a problem has arisen in connection with this criterion, we must make clear a mechanism that solves the problem. That is discussing the issue at the Parliamentary level. So we must make regulations for situations like what sort of issues will be decided at the government level, what things will be decided within the scope of investment law at the level of an enterprise, what sorts of issues will be decided at the parliamentary level. It’s not that there are issues here that will absolutely not be discussed, negotiated, or decided. So I personally view that we have just clarified the mechanism of solving the issue.

FT: I think, some foreign investors think that there is election going on here, you are very close to parliamentary elections. And their hope is that once the elections are over, things will settle down a bit. Is that a realistic hope?

President Elbegdorj: Mongolians fully understand that the sun will rise after voting in the election. This isn’t the first time we’ve held an election. This is the sixth time we’ve held our parliamentary elections. Because of this I don’t think it’s something to worry about. In fact, Mongolians look near and far and then make our choice. Mongols are a people who think about what place we will go to, then catch a horse and saddle it. Because of this we’re not people who only look at today or look at one side and then decide the issue. I personally really trust in the people’s wise choice. I believe that this people I have spoken of can send a clear message to their power holders with that choice. This is a chance to make our decision on the basis of what policy from the government our people support and what policy they oppose.

FT: I return to the domestic issues. As this money, which we hope, is going to begin to come to Mongolia very soon – what is the best way of spreading that wealth? The crudest way might be, handouts to everyone. Or the other ways – institution building, education, sovereign wealth fund… I’d like to discuss some of these in more details. What is your vision, how this can be handled equitably?

President Elbegdorj: As a matter of fact, to this same question all the people sitting here, our people can provide solid, realistic answer. Our answer is – a Mongolian citizen, a Mongol man is a gateway to development, not mining.

Over the past years, we have adopted laws promoting education, education of the Mongolian people. Mongols hold education in high esteem. Even if Mongols don’t have spare tugrug for their daily consumables, they send their children to school; they take loans for their children’s schooling. So people to attach high significance to education. The investment made into youth education, into children, into their schools, into their tuitions and education financing is the best form of investment. Equally important is education. Mongolia’s future is a future of healthy, educated and ethical people. Therefore we must prioritize investments into a Mongolian citizen, into his or her developmental opportunities and to expanding this opportunities. Another venue of investment is investing into diversifying our economy. Agriculture is a sector of immense opportunities for Mongolia. Our livestock herd today accounts to 47 million heads. We are 2.7 million people and we are located between two huge markets, with huge populations. We could supply for a certain percentage of food needs of our neighbors with our good quality agricultural produce. On top of that, Mongolia’s population is scattered around our lands. We have the lowest population density, or put other way, the highest per capita land. This is, again, an opportunity. Using this opportunity, we shall produce products needed at other parts of the world. An area in critical investment need is obviously infrastructure. Expansion of the transit transport capacities, creation of new railroad networks is essential. We have the resources to produce energy for our domestic consumption. Mongolia homes huge coal reserves, and indeed Mongolia is an energy heaven. Yet, we are in shortage. And the reason we can’t be self-sufficient is in us, is because of ourselves. We are dependent on oil and fuel imports. Therefore, investing in domestic production of fuel is also vital. Over the past years, we have talked, discussed about all of this, now we know what needs to be done, what needs to be built, in essence, we have a roadmap to navigate ahead. Any political party, any policymakers have the overall picture with their solutions. Now we need to consolidate a more comprehensive stance supported by necessary legal and financial frameworks.

FT: I am a little bit suspicious of cultural explanations, but I still want to ask you a cultural question. There are some Asian nations that has a sense of national mission, such as countries that had gone through the vast development stage like Japan, South Korea, Singapore. And there are other nations that haven’t has the sense of national mission. I would think, it’s Philippine, for example. I want to ask you where Mongolia fits in this picture? A nomadic civilization in the vast lands, Mongolians seems to me to be more self-reliant, and they think of their own wellbeing, separately. Now as I say it, I am little bit suspicious about this explanation, but this question is worth asking.

President Elbegdorj: Last year Mongolia celebrated the 2,220th anniversary of the establishment of our State. Today we are talking about some 20 years of our history. Back centuries ago, Mongols had conquered the half of the known dry land; it is a nation which formulated the global policies for 200-300 years. The best traditions and legacies of the Mongol Empire have lived on in Mongols. I find my fellow Mongols to be wise, realistic, objective, resilient, and adaptable to new conditions, able to collectively solve issues, which I think are the merits developed in the course of centuries and millennia of statehood. Also, we home today the best part, the hearth of the massive terrains that were dwelt by Mongols. On the other hand, nomadic way of living is a high standard living. If an eco-friendly lifestyle is considered to be the high standard, I would say Mongolian nomads live such a life – a life in full harmony with the nature. Nomads never pollute, they never dry rivers up, and damage the nature. The fascinating tradition and wisdom of living as one with nature is Mongolians’. Therefore, the Mongolian people set environmental criteria and requirements. The sense of fairness and justice is in Mongol genes, it’s our common value. Therefore, what the people demand constitutes the core of our policies. So if we do have issues and problems in Mongolia, they are because of the policy makers, and not because of the people.

FT: Now, you spoke about the need to develop industries other than mining, that the country is not healthy if it lives on resources only. The economists obviously speak about the Dutch Disease, which us when economic resources are distorted. Even economies like Australia, which is very wealthy and advanced, suffer from the Dutch Disease. If you go to Perth in Western Australia, it’s very hard to find a waiter who will work decently, If they were fired they can go to work in another city for hundreds and thousands of dollars. The currency in Australia is very strong, too strong for manufacturing industry. How to prevent the same thing happening in Mongolia?

President Elbegdorj: That caution has always been there. There are many issues involved – monetary policy, currency exchange rate, its appreciation and depreciation, fiscal expansion etc. One of the best achievements of the outgoing Parliament was the fact that it did approve the Fiscal Stability Law. The Law shall come into effect from January 1, 2013. Until then we have to ensure smooth transition. Another important issue: looking at Australia’s case or some others’, the world today is so different from what it was 10, or 5 years ago. Although Mongolia’s economy in incomparable by size with major economies, our people enjoy the same benefits, have the same living as people in other countries. A herdsman on horseback is holding a mobile phone. After he comes homes in the evening, the same herder watches TV on at least 60 channels. At soum center, there are plenty of internet cafes. In the morning, upon awaking he reaches out to the information on prices of his cashmere in Ulaanbaatar exchange, over 1000 km. With the help of their children, studying foreign languages, they learn of the Mongolian stock performance on global exchanges. Mongolians receive the same level, the same kind of information as people in any other part of the world. This enables people to make right decisions. I am earnestly happy that this empowerment has become possible thanks to technological development. Mongols are finding the best use of technological progress.

FT: There has been a lot of press release, especially in foreign press, about your former President and his arrest. A lot of news were published about his arrest and the surroundings of the arrest. I wonder whether you think the story has been properly told abroad? I want to know your interpretations what precisely happened?

President Elbegdorj: As for the press, there is a principle I have kept in my political life, in my public life – I never blame the press. If the press has got something wrong or printed anything wrong, I only blame myself. We blame ourselves. The reason is that we have given the media a reason or an excuse, or we let them misunderstand. Therefore, we are always open to fix our mistakes.

Mongolia is open to any organization, any individual, international organization, and media willing to constructively cooperate with us in combatting corruption and securing human rights, freedom and rule of law. Corruption, money are a big power. Corruption is not a phenomenon that resides in one particular country. The power of the corruption money, of the corruption network can reach anywhere on earth. Our people all see how hard it is to combat corruption. Corruption is not a mere chitchat, it is not something easily declared and then abandoned. It requires concrete results, it requires law to be enforced and equally. So we are learning in the process, our society is learning. We must derive right lessons and move forward.

Another principle that I strictly adhere to – until the court issues its verdict, no one can be blamed for wrongdoings. We in Mongolia do abide by this principle. On the other hand, the organs of law and justice have all rights to call, inspect, interrogate, clarify issues from any person alleged in violation of law; and undertake measures that are provided by law.

The President has no chances to exert any influence. We strictly abide by the principle that the organs of law must act independently and by law. This principle must be observed by every single citizen in this country be that the President, a businessman, or a politician, or any other citizen.

Another golden principle is equality in front of law. No one has a preferential treatment by law over any other citizen. Equal application of law is trying hard to survive in Mongolia. And we all must strive to ensure that this golden rule lives in, endures and survives.

The question you asked has been in the center of public attention. There is another issue that people are attentive about – that tyrannosaurus Bataar, which might have been found in Mongolia. There was a sensation around the auction of almost full skeleton of the dinosaur in America. We most likely will save the 80 million year old skeleton of Bataar. It was taken out of Mongolia, so we will manage to get it back. But there is another dinosaur that Mongolians are now faced with. This is corruption. Can we manage to keep our country, our people, their rights and liberties, our new choice safe from the dinosaur of corruption? Or whether Mongolia shall become a corrupt country in the claws of the corruption dinosaur? Shall we be able to the tame the animal by law? This is a choice of fate that the Mongols are facing today.

FT: I have my last and a little weird question. This place is going to transform economically, socially, politically over the next decades. And it has been suggested to me that Mongolian women may be more adaptable, maybe better prepared for the changes that are about to happen than the Mongolian men, And it could lead to social problems, social frictions. I wonder what do you think about this?

President Elbegdorj: The contributions Mongolian women make to the society are indeed unique. At the same time, the way Mongols have regarded their women, our mothers, grandmothers, daughter and sisters is very special, truly fascinating. We hold our women in deepest esteem, respect and honor. We admire the love and care that emanate from our women and mothers. On the other hand, our women have been serving this definition: they are the ones to stretch their arms of help to those in need, they see the society in the full spectrum of colors. Just stepping inside home they can sense their elders, their children need help, need tea, need food. Women rise to their children’s first cry for care, for milk. Our women on one hand, take care of those in need, and on the other hand, they encourage, stimulate the deeds of the capable, energetic ones, the ones who move the society forward.

That’s why we must support our women to work in the state and government, in public organizations. At the moment, there are very few women in the Parliament. The situation is a bit better at the local governments level – 30-40%. Education and health sectors predominantly employ women. Yet, their participation is very limited at the political decision making level. So have amended our Election Law to have no less than 20% of women candidates. Of the 76 candidates in the election, 15 are women. And from this level on, we have to further increase this rate. I have never heard of a corrupt woman, a woman who builds a corruption network; I have never heard of a woman dictator. By policy we must support women in politics, whatever parties they belong to. I believe this will be a right choice. And this is my conviction. I wish one day a woman becomes the President of Mongolia.

Now let me say a few words about the judicial reforms we are now conducting. Sometimes it seems to me that we are seriously mistaken by alienating economic growth from people. Many people say the economic growth is not felt in ordinary peoples lives. And we see at economic growth somewhat separately from people’s lives, their freedom and their rights. At the same time, judicial reform seems to be perceived separately from people’ lives. This issue must be addressed by lawyers and economists. Because, at the end of the day, economy is our people’s life. Judiciary is also our people’s life. We will find the right solutions is we take economic and legal matters as inherent parts of people’s lives.

Today, one color predominates in Mongolia’s economy, say a mining color-dominant economy 0 brown, or given the size of the coal industry, it’s dark brown. What we want is an economy with rainbow colors, a colorful, vibrant economy. We want to build an economy where mining is one of its many sectors, and which provides for inclusive and effective for the people growth.

I thank you all for coming to meet and speak with us. I know many of you came from afar, including the guests of Kyrgyz. For whole two days you will discuss and deliberate on the matters of pivotal importance. In a certain period of Mongolia, Mongolia will have evolved as a country with tangible contributions to the global affairs, with a powerful economy, with free people, with educated and healthy citizens looking confidently ahead into their brilliant future. I have no doubt we will be able to transform Mongolia into a fascinating country of justice, rule of law and economic prosperity. And today’s Forum is an investment into such a future. Being held in an auspicious place with beautiful natural scenes, I am sure this Forum will be a success. Thank you.