A SMART MAN IS HONEST, A SMART GOVERNMENT IS EARNEST PART I

Speech by President Tsakhiagiin Elbegdorj at the First National Consultative Meeting “From a Big Government to a Smart Government”.

November 16, 2013 Government House, Ulaanbaatar

I extend the greetings of the day.

This, in fact, is not any formal opening speech. We have reached a point of time when we need to sit down all together and discuss what the theme of our meeting today “From a Big Government to a Smart Government” means to us, what we have accomplished in the past years and months, and what the way we have to walk along looks like. Usually such meetings start in the morning. Today, we are starting in the afternoon. I wish it is always morning in our Government. Therefore, this meeting is being convened in the afternoon. Chief of my Office Mr. Tsagaan has just mentioned that this meeting has brought together a broad spectrum of people – decision makers, businessmen, local governments, media, academia and NGOs.

What I am going to talk about today is not entirely new. We have established a working group with the representation of political parties, researchers, NGOs and the general public. And our media organizations have been attentive too.

The topic of our meeting today is our key challenge, our common trouble. This is not a concern of only the Government, or of the Cabinet, or of any one particular party or an individual. This is a Mongolia’s ordeal. Therefore I think it is right for all of us to come together, discuss and find solutions. We should remember that we are all seen in one same colour, we are all seen as one whole –Mongolia, the Mongolian Government

Where are we among the 15 countries of comparison?

Now let’s begin with the first issue. It won’t hurt to start with comparing ourselves with some countries. You are aware of the Global Competitiveness Centre, and of Mongolia’s Competitiveness Report, produced annually. I shall base my talk on 2012 Report, where Mongolia is compared with 14 countries against 329 criteria. It would be best if our government and people assessed their performance by these criteria. Qatar, Singapore, Malaysia, Mexico, Thailand, South Korea, Chile, Peru, Kazakhstan, Russia, Slovenia, Bulgaria, Ukraine and Slovakia are the countries of comparison in the report. We rank the 13th by Economic Performance indicator, collecting 38 points. The closer a country to 100 points, the better it’s performing. By Government Efficiency, we rank the 13th scoring 31, and the average of the two indicators is 56.

In Business Efficiency we are the 12th scoring 37 (average 56), in Infrastructure – the 15th scoring 20 (average 55), in GDP (ppp) per Capita – 15th with 4745 $ (average 24204 $), in Economic Diversification – the 15th with 2 scores (average 5), in Gross Domestic Savings – the 15th with 3 billion $ (average 126 billion $), in Annual Household Saving – the 14th with 1191$ per capita (average 8229$), in Institutional Investor – the 15th, scoring 34 (average 66), in Foreign Exchange Reserves – the 14th with 2 billion $ (average 115 billion $), in Capital Market Value – the 15th with 1 billion $ value (average 286 billion $), in Direct Investment Stocks Inward – the 15th with 4 billion $ (average 137 billion $), in Implementation of Government Policies and Decisions –the 15th scoring 2 (average 4), in State Ownership of Enterprises– the 15th scoring 3 (average 5), in Skilled Labour (in the difficulty of employing qualified, skilled labour) – the 15th scoring 2 (average 15), in Technology Development and Application (legal environment blocking the technological development) – the 15th scoring 4 (average 6), in Energy Infrastructure – the 15th, scoring 2 (average 6),in Air Transportation – the 15th with 398 thousand people (average 15117 people), in Total Public Expenditure on Education per Capita – the 15th with 140 $ (average 655$), in Pupil-Teacher Ratio (number of students per teacher) – the 15th with 30 students per teacher (average 19 students).

The World Bank produces the Doing Business Report. I have picked up indicators of rather poor performance. On the other hand, it just can’t be so that of the 15 countries, we always rank the 15th, the worst. By the level of women’s employment, use of mobile phones we rank quite high. So, here I am showing the indicators which we have to attend and improve, not the ones where we are doing well. In Foreign Trade, we rank 181st among 189 countries. In Getting Electricity, which is not that difficult a job, we are 162nd among 189 countries. We are seen as a hugely bureaucratic country with very meagre opportunities. InResolving Insolvency, we are 133rd of 189 countries; inDealing with Construction Permits – we are 107th of 189 countries.

Now let me explain the goal of today’s national consultative meeting. We have two aims: first, how to grow our economy. We have just seen comparisons of Mongolia with some countries. What opportunities for growth do we have? Are we really that bad? Second, let us look into the possibilities deeper. Now we know our standing in 2013. I will show you our potentials in some details and let’s see what we would have reached in 2020, 2040 if we maintain our average current speed.

Population growth. Now our population is 2.9 million. Assuming that a family would at least have 3 children, which gives us a population growth rate of 2.5%, by 2050, our population will have reached 7 million people. Life Expectancy. Now it is 68 years, by 2050 it will have grown to 85 years.

By 2050 we will have become a country of rule of law and of a competitive economy.

Let us see the GDP growth pattern. Here we have three scenarios – at growth rate of 5%, 10% and 12%. So if we take 10% growth rate, by 2050 our GDP will have reached 380 billion $. GDP per Capita is a critical indicator; again, in any projections we take the same 3 growth rates of 5, 10 and 12%. Let’s take the average. By 2050, if we assume that we grow at 10%, our GDP per Capita will have grown to 54 thousand $. Investment ranking. Today our ranking is double B, by 2050 we will head to triple A.

Now about the Mongolian Development Goals. Our performance will be gradually improving along 2013, 2020, 2030, 2040, and 2050. So by 2050, our population will have grown to 7 million, with average life expectancy of 85 years, with 380 billion $ GDP of per capita 55 thousand $, and with an investment environment rated triple A. A country of rule of law and competitive. Domestic saving is an important indicator; let us look at it as household savings. One of the fundamental factors of a country’s development and stability is related to this indicator, the savings. If an individual/household has savings in the bank or any balance in the pension account, in essence, this indicator shows how much money an individual household commands. If at the national level, all of our households would keep 50 billion $ savings, no storm would be fatal for us.

Now to recall the objective of the meeting today, we have set forth two goals: how to develop our economy, how to mend our government. If we fail to clarify our mission, our goal, people’s confidence in the government will not increase. Why do people’s trust and confidence in government erode? My answer, my conclusion is that the source of distrust rests in the Government itself. People say:” [The Government] does not deliver its promise. It is disordered. Its decisions are unstable”. And the cause of such a Government is the lack of sharedcommitment, lack of research, lack of systematization. And this means, the Government lacks a unified policy, lacks responsibility, lacks control.

Irresponsibility, lack of control makes the Government a Government which does not deliver results, whose policies are unstable and messy, whose actions are disorderly. And this is called a vicious circle. This is our true picture today.

For 24 years we have ridden our horse. Now let’s dismount and talk.

Indeed, for twenty four years we were on horseback. The time to dismount and speak out has come. If our horse is fatigued, let’s change the horse. Imagine we are on-board of an airplane that needs to be fixed. Let’s talk today about what needs to be fixed. Because it is an open society, in Mongolia we hear much noise and sounds here and there, yet amidst that noise we must distinguish the sound of an alarm. But we just can’t catch that sound. We must to hear it. Once we hear it, we must stop and come to senses and realize what we are doing. In fact, we should have organized this meeting much earlier than today.

Numbers don’t lie. Therefore, let me cite a few numbers. Over the past one year we inflicted to ourselves a loss of 1.5 billion $ or 2.5 trillion MNT. In 2013, the state budget is about to record a deficit of 1-1.5 trillion MNT. We owe 1 trillion MNT to our Human Development Fund.

Now, Government debt to GDP ratio.The Government debt stands at 8.4 trillion MNT or 49.5% of GDP, as the Ministry of Finance reports. It is 24% in Australia, 10% in Chile. Some say that we are heading to become a country with a Government debt several times the GDP. We do not need to compare ourselves with such countries. We must compare with better doing countries. For instance, with Chile. If we want to bring the 2013 FDI to the level of 2011, we must double the FDI. Please note, this is exclusive of Oyutolgoi investment.

Prudence on Fiscal Expenditure in GDP ratio should be observed

Mongolia’s GDP is 17 trillion MNT, or 10 billion $. With the start of 2013 it is little more into 11 billion, yet let me base in my talk on somewhat modest estimate of 10 billion $.

Fiscal expenditure in GDP. When the 2014 budget was being discussed at the Parliament, I inquired about the 2014 estimated fiscal expenditures, I was told it was 7.3 trillion MNT. The Parliament, I hope, worked hard on it. So, the fiscal expenditure is 7.3 trillion MNT or 40% of GDP. If we add to that 1.5 billion of Chinggis bonds, 600 million dollars of the Development Bank, which combined make 3.5 trillion MNT, that will make our expenditures 10.8 trillion MNT. We should not exclude these two numbers from our expenditures, our budget. To be prudent. So, if we combine all these, ourtotal expenditure to GDP ratio might end up to be63.5%. MPs tend to cite confusingly different numbers, but let us observe utmost prudence here.

Last year every single Mongolian lost 863 thousand MNT. This is the cost of populism.

We must all see what happens when investment shrinks. Production and services contract. As production and services contract, income dries up. Since there is no earning, no income, people’s lives aggravate. The very source of people’s saying “life has gotten worse; it’s hard to run a business” rests precisely here. I mentioned earlier that in a period of slightly more than a year, we lost 2.5 trillion MNT. This is a cost borne by the people of Mongolia. From a baby in the cradle to an elderly on pension – every single Mongolian paid a cost of 863 thousand MNT. Every Mongolian lost this much. This is a number reported by the Mongolbank. That cost is the cost of inflation, the cost of various programs, the cost of securing the GDP growth rate – which taken together I define with one single word. This is the cost of populism. This much Mongolia paid for populism. The crying out loud is done by the populists, but sadly, he cost is borne by the people. The time to realize this has come.

Next point. I intend to run a short voting on issues we will discuss today. You have those voting devices at hand. The question is very simple: is the Mongolian Government a big government?

Press A for Yes, B for No and C for Don’t Know. I expect you, the officials of a smart government, would know how to use a smart device. Now let’s look at your response. I have another question to ask from you. Government expenditure in GDP is an important criterion. It is considered a government with normal structures, with normal expenditures if it takes for up to 30% of GDP; and considered abnormal, wasteful, and big if the expenditures exceed 40% of GDP. And I leave it to you how you would call a government with expenditures beyond 60% of GDP. I guess you know well that the ratio of government expenditure in GDP is a common measurement of performance.

So, is the Mongolian Government a big government? Here we see the response: 37% responded “yes, it is big”; 12.6% responded “no, it is not”, and 4.5% responded “don’t know”. Forty five (45) percent, didn’t press any button, or confused the buttons. Anyhow, 37% of you say the government is big, inarguably.

Knowledge, technological progress just do not knock the government’s door.

Now let’s talk about the reasons for the government to grow big. Why is our government getting bigger? Knowledge, technological progress do not enter the Government. The Government tries to resolve the pressing issues by mere structural, mechanical expansion of the staff. Let me show something interesting. This is the first mobile phone. We used it some 15-16 years ago. Its function was to collect a phone number by pressing the buttons. Nothing more. We all know of a regular mobile phone of today. This is how it looks like. The computer of the time when this [old] phone was produced is now much more out-dated than this phone. Now this phone has multiple functions, you all know and at times you complain “there are so many functions that I don’t even understand, so I use just three” etc. When a technology develops, it doesn’t get bigger. The more functions are developed, the leaner it becomes. Then, let us use this technology. Our Government only grows bigger, adds more units and people as more issues come up, as more needs arise. This technology tells us that we must move to a smarter government.

On the reason for the Government to grow bigger, or a way to profit and rent-seek.

The second major reason for the government to grow big is the fact that it is profitable, beneficial to work for the government. By issuing licenses and permits, interfering into business and economic lives, by arbitrary setting norms. There are many honest public officers. And among them there are many politicians and political officers.

Working for the Government is beneficial for various licensing authorities, setting norms and seeking profits by abusing these powers. As of today, there are 1164 licenses and special permits at the national level. Some of them are no longer called “licenses”. Some of our officials have become masters in inventing bad practices. So the term “license” has been replaced with a different word. And when inspectors come to count the licenses, they disguise them under different names and submit only few. Actually, sheep must be called “sheep”, and not “a goat”. Asking for sheep, inspectors are pointed at goats.

There are many ways to benefit from the government. Just to take an example, our ministers employ advisors. Some do not have one, while some have 3-4 advisors. There are 24 advisors working for the ministers. Some appoint their close friends or relatives as advisors. And those advisors are turning the government into a real mess. The advisors take charge of everything and are omnipresent – they run the public, business and financial affairs. Some ministry officers fear of them as of the most dangerous persons. And when an issue comes up and the minister will have to be hold accountable, the advisor is fired. Such lawlessness is taking wider rooms in the government bodies.

Also, the aimag Governors have 15 advisors. Well, there are governors who do not have advisors at all. It is OK of the advisors are free of conflict of interest. But no. It is absurd to employ advisors to have them run all the dirty businesses and devastate the government. These unruly advisors are turning the government into a non-government.

Government may not be run as a company is run

A Noble prize winner once warned that running a government can never be identified with running a company. Sometimes we hear that well before the director of a state-owned company is even appointed, the company is forced to purchase goods from companies that either belong to officials or where the ultimate beneficiaries are high ranking officials. When appointing the executive management of a state owned enterprise, the skills and qualifications are ignored. And very often, the appointment decisions are made based on the appointee’s willingness to feed the minister’s private interests and businesses. And everybody knows about this. In that way, the government is ravaged.

In a country with assailant into wealth a government, the people are impoverished. We may not let it happen when the government collects the cream, and the people fight on the left-overs. And this is the secret of why people remain poor while the economy is growing. The government is dashing into wealth snatching it away from people.

Too many a man do a job doable by a single man in a single span.

The third reason of why the government is swelling – lack of unity and cohesion in the government work. Because there is no unity, most part of the government is doing the same kind of job. We see too many people do a work that is doable by just one man in one span of time, single span of effort. Therefore, the government turns into a fire extinguisher, a brainless monotonous machine. And the officials live like feudal lords.

I was telling this earlier to lawyers and law enforcers, now I will repeat this for you. Being a minister, an official in the government is not an insignia of a privilege. Being a minister means that you have to serve one certain concrete task. For instance, minister of defence is in charge of providing for defence. Energy minister is in charge of energy policy. It is not an entitlement to power. Unfortunately, very often the officials take themselves for the holders of ultimate powers.

Drawing an analogue with an orchestra, ministers and officials are simply musicians playing different instruments. We can’t ask a flute player to plan a violin. So if you are violinist, play your violin, if you’re a flute player, play the flute. So in the government you are appointed to do your job, and if you can’t, you have to leave. A fair demand, isn’t it.

Businessmen in Mongolia wish to have a government that does not meddle into business, does not compete with businesses.

A survey conducted to establish the ways our people interact with the government revealed interesting findings. Sixty per cent of respondents said they did not interact with the government at all, thirty percent interacts sometimes, and eight percent responded they communicate with the government at all times. So the government must be structured to respond to this pattern.

Another survey to find out what the businessmen want from the government indicated that 42% wants the government not to hamper businesses, some asked for stability, 20% wanted support. Businessmen want just three things – stable, equal and transparent legal environment. They want a predictable taxation environment. They want the government not to interfere, a government that helps at the times of need, a government that doesn’t have any conflict of interests, and that doesn’t compete with the business. Indeed, it is not right for the government to establish companies and compete with private businesses.

These are the businessmen who are the oppressed class in the society. There is a whole system to oppress the businesses. Pressure of inspectors, then pressure of officials to purchase their companies’ goods and services. What the officials like about businessmen is money. Then the pressure of law enforcers. And when they speak to businesses, they cite big names, names of officials. We must stop this, we must tear this mechanism apart. From now on, let us start breaking this machinery at each of our government offices.

There are 7 ills in the Government, you can name more.

I observed a number of ills of the government, and have listed them, you can add more.
1. The Government is everywhere, the government decides everything. 2. Accountability – not a big deal, this is something we can fool around with. 3. The one who becomes an official acts as he/she pleases. 4. Research, theory don’t count if you have experience. 5. An election program must only be liked by the voters. 6. If the government doesn’t own assets, others will benefit. 7. Adecision maker cares only for today free of problems, tomorrow doesn’t matter.

These are the 7 ills defining the Mongolian government. Speaking of which, it is unacceptable of politicians’ thinking of the voters only during the election race, and after the election, thinking only of themselves.

And second, the government which tries to do everything for you, in fact, deprives you of everything.

Smart Mongolia, smart government is not about a choice, it is the only way the government has to live.

Now let’s go back to our talk about a smart government. The path for Mongolia to go is clear – it is the path of rule of law, smart government and open, inclusive, safe society. In the old socialist times we were forced to learn by heart socialist slogans, now I want you to memorize these few words – a government is called open and democratic if it provides for security, serves the citizens and upholds the law. I must carry on my mission in a system which maintains these three principles. In such a system my mission is achievable.

Today we have every need to move to a smart government. This is consistent with our goal to build a humane, democratic society. Circumstances, environment, attitudes are changing. The public demands the government to be smart. People often say in their ordinary, daily conversations “be smarter”. In the new century, elements, features of the past century, even of the past year are outmoded. Some 8 years ago, we launched an “e-Mongolia” (digital Mongolia) program. Today we are just being forced to talk about smart Mongolia, smart government.

This attitude is becoming a prevalent common tendency. The UN has started producing the Smart Government Index. Republic of Korea ranks the first by this index. We are not talking about something void, or unknown to others, or not done yet somewhere else. This is a common, prevailing trend.

Most importantly, a new generation has arrived. Those small children of the 90s are adults who make up new Mongolian families. Mongolians have a tradition to assemble a new ger, build a new home for their children who form their own families. Following this tradition, we must renew our government for our new generation.

A smart government mustwork like a modern hospital.

How do we distinguish a smart government? A smart government.

• Offers services regardless of spatial and time constraints;
• Laws and regulations in a smart government are precise, operations uphold standards, an integrated database is a must;
• It supports its citizens to develop skills, be ethical, creative and pro-active;
• It does not only serve the citizens, but also helps its citizens to obtain education and be ethical;
• It provides the most optimal solutions to emerging issues, emerging demand;
• It must be capable of doing its work in the most efficient manner.

We can identify a smart government by a picture, for instance. Today, public officials sit in offices with big doors and behind walls. In a smart government, officers see each other, they are like dispatchers. A smart government needs only dispatchers, who can see and check the managers. This is how our ministries and agencies should look like. If we organize ourselves this way, we would be able to accomplish a lot. And we have already started the process. Recall how we used to organize our elections in the past – citizens turned into losers, houses torn or burnt down. And did all thesehappen again after we started using electronic voting machines?

The Kyrgyz Foreign Minister told me: “I attended the ceremony of your Presidential oath of office. You won the election at a slight margin. But nothing happened the next day after the election. I feared a strike might break out as happened in Kyrgyz. The people who attended the ceremony were rejoicing as if participating in a festival”.

There was nothing to dispute about in the election, we just counted the votes by machines.

We shall continue using technologies and machines. Imagine how many services people will start receiving after government service kiosks start operating, when people will no longer have to communicate with officials? We must now alter our structure to fit those kiosks. Officials just cannot be imposing themselves sitting in the kiosks. A smart government must operate just like a modern clinic.

The capital city is moving with Bat-Uul to a city of Pan-Uul
[Uul in Mongolian language means Cloud. Transl.]

I heard that the city municipality is having its job scheme developed by Mobicom. This is a commendable decision. The capital city is developing its integrated database. Behind “integrated” we see efficiency. A lot of earlier duplicated functions will be performed through one single integrated system, integrated network. Government will achieve enormous efficiency through this system. Many countries, especially cities are moving to “smart” systems. For instance, there is a system “Cloud”, “Uul” in Mongolian. So our city run by Bat-Uul will move to a city of Pan-Uul, Pan-Cloud. We will have a Pan system, and let us become a Pan-Mongolia. “Pan” means united, integrated. So, let us develop an integrated network of services.

You all know, how much change, speed and efficiency was brought about by inventing “conveyers” in early 20th century. That system I am talking about is that conveyer, the government’s conveyer.

A smart government is a government of paper workto develop rules, of research and analysis, of technology and of skilled people.

Republic of Korea set forth a goal to be the smartest country in the world. Mongolia will also put forward the same goal. Mongolia must be a country of the smartest governance, of the safest society, of the most effective services. People talk a lot about the recipes for government’s success. I will tell you of just one single recipe. The government serves one and only goal – a human desire to live a decent life. Period. That’s all. Just give a man or a woman an opportunity to live a life he or she wishes to live. A smart government is a government which does all the paperwork, a government of rules, of research, of technology, of people with skills and capability.

This is what the people of Mongolia, our time demands from us. In Chinggis Khaan times, the Mongolian government was the smartest, was the most capable government. In those times, Mongols did establish the horse stations, so admired in the world. The source of today’s information network. Let us bring back to the government all those best practices which we once had. Let’s bring every progressive, every best practice of the modern world to Mongolian government. We are not talking here today of something alien, uncomprehendible. I am not telling you to be smarter in a smarter government. I am just asking to use the technological progress. Is this such an unmanageable demand?

The phases of the decision-making process in a smart government are truly crucial. As you recall, one of the 7 ills of the government, as I mentioned earlier, was ignorance of research. The primary phase -the monitoring -is a must in the process. We have at hand information, statictics, people’s ideas. The second phase is the phase of analysis. Reports, research, planning. The third phase is the synthesis phase. Solution alternatives, projections, decisions. A smart man is always ethical, a smart government is a responsible government. Ethical and responsible government is respected by its people.

Founding principles of the policies and actions of a smart government

• Rule of law, openness, citizen participation
• Cooperation of public organizations, citizens, local governments
• A policy to measure the inclusive and stable growth
• Inclusive economic growth

These are the core, basic principles of the policies and actions of a smart government.
These days we often hear a phrase “Inclusive Economic Growth”. What this means is that if ever an economy grew, people will have benefitted from this growth. This is how we measure, how we define “inclusiveness”. Growth is not about having the economy grown by 17 per cent with the people further impoverishing. And a smart government should base upon an integrated database, research and analysis. A smart government rests on the juncture of three times – it carries the best from the past, meets the needs of the present and is visionary about the future. A smart government, therefore, cannot be devised by hand-drawn sketches, it is built with the help of technological progress.

Let the municipality privatize its black tower upon just one condition

How does the structure of our government look like today. What structure do we have to move to? A smart government is a government of efficiency. A unit to provide for enforcement and implementation of law and regulations, second unit is in charge of research and development, third – a unit of service provision, fourth – a unit of operational support. Under the fourth unit, the support for operations, I included contracts and leasing. What services and products can the government purchase by contracts and leasing? Does the government need to own any furniture, office building, any such properties at all? All of this can be rented from other parties. An office building can be rented. I heard the municipality was going to move to a new building. Let it sell its black tower, upon just one condition that the government would rent some space in it. You’ll see, our businesses will just rush to buy it. Why? Because a tenant [government] is there, so the lessor will have a permanent income. Just privatize, sell that black tower and let all government agencies rent space there. All of our agencies can fit in one single building. Or, tear down those ruins of a printing house next to the government house, build on the area a new building and let all the ministries rent space there, connect it with this house with an underground corridor, that’s it.

Once the government becomes a lessee it will feel in flesh the pains of leasing

In Mongolia, only the Ministry of Defence, and the Ministry of Foreign Affairs can operate separate buildings, but all others can reside in the same building. Once the government starts renting they will learn of the problems and miseries of others who rent. Well, the government makes wrong decisions, adopts bad policies, nurtures inflation etc. But once it becomes equal to other lessees, they will live their lives. Let us have common, same problems with our people. This is how the government has to house itself. These cars, offices, services – all can be rented. A driver’s salary, social insurance payments – these will no longer be on the government once the service is leased. The lesser company shall be in charge of all this. And once the government starts living the same life, the economy will come to motion. Only those who profit from the old system and structures would oppose this new arrangement. Mongolia will have a smart government. We will make sure this happens. We have talked about this a lot, enough is enough, now is the time to decide, to act.