A group of men were enjoying the midday sunshine and each other's company. They were rivals and friends – who drank and played together. This day they were enjoying their vodka and telling stories, and planning the future for themselves and their families. A sheep was tethered to the pole 20 meters away, it looked forlorn and aggravated as it knew it was soon to be their dinner. The hours passed, the noise grew, the plans grew grander and eventually the men fell into a drunken sleep.

Several hours later, the men started waking up. They were hung-over, but still cheerful as they remembered all the plans they had made for themselves. Somebody said, "let’s eat". And they all looked to the table, where there was no food. One looked back in the direction of the sheep, and laughed.

Another sleepily said "the sheep is still a sheep".

Last October, business leaders met at a business association summitin Ulaan Baatar where there was discussion about why Mongolia was languishing at that point in time – and what should be done. The business leaders knew that the poor economic conditions in Mongolia were partially a result of a global downturn but also acknowledged that Mongolia's situation was also of its own making.They all wanted Mongolia to find a “winning formula”.

Since October 2013, the economic conditions of the country have further deteriorated. Capital investment and foreign direct investment have fallen sharply, domestic inflation is on the rise and reports of dwindling FX reserves are supported by a steadily devaluing Tugrug.

It is important to create the conditions to get the business associations, Mongolian intellectuals, the parliament and the arms of government to generate outcomes for Mongolia that speed up the rate of development and deliver great outcomes for Mongolian’s and the institutions that work and invest in Mongolia’s future.

Mongolia has critical challenges and fixing these requires honest evaluation of the reality that we find ourselves in. This evaluation demands penetrating questions and frank exchanges of view. These can focus the mind and place attention to where it is needed.

Today there is significant disillusionment with many media opinions being expressed in a negative manner. There are many different opinions as to the causes of our collective problems and it is the aim of INS to add to the debate but hopefully in a way that brings people together to discuss the issues and ultimately to put meaningful solutions into place.

The following situations focus us on just 5 issues that will be addressed in the early articles of the INS article series.

Situation 1:         A good measure of a country’s wealth is its physical and social infrastructure. The condition of Mongolia’s roads, railways, airports, power stations, hospitals, clinics, schools, sporting, cultural and other facilities are a poor reflectionon Mongolia’s natural beauty.               

Situation 2:         The government sets the conditionsfor Mongolia to generate the funding needed to tackle these physical and social infrastructure challenges. Importantly these challenges present business opportunities and an economic benefit. Jobs and taxes will be generated as these projects turn from pipedreams into construction projects and into operating realities.

Situation 3:         Mongolia has experienced high and semi-high rates of economic growth since 2010 however we now have significant devaluation of the national currency and steadily growing inflation rates.We still see real estate developments progressing in UB and several other cities – but on the other hand it is harder to understand the economic costs of government quantitative easing programs and the impact on government long term debt levels.

Situation 4:         Countries with high GDP and globally successful companies “benchmark” their performance and strategies against the best in their field. They know that getting into the “top league” is hard work. The Economic Policy and Competitiveness Research Center (EPCRC) was established to work with the Institute for Management Development (IMD) to benchmark Mongolia against a basket of competitive countries.

The 2013 EPCRC report highlights the four key competitiveness factors (see above) and gives a breakdown of those critical subelements. Mongolia continues to rate poorly for its fourth year but the report does give an understanding of what needs to change. The EPCRC view is reinforced by the World Economic Forum’s recent Global Competitiveness report whereby Mongolia’s facts in the bottom 20% of many critical measures.

Situation 5:         In Mongolia democracy is strong, evidenced by the number of newspapers, TV channels and internet platforms available to Mongolians. Indeed the channels per head of population is unusually high. Mongolia is technically well positioned to support broad and insightful discussions on how to deal with its problems and turn adversity into opportunity.

This debate will no doubt be controversial at times. A recent article, written by a Mongolia, was posted on the website “Mongolia Focus” where it raised the issues of foreign investors and their appetite for Mongolia. But what the article really addressed was how the writer saw business and government working in practice. This is obviously not a flattering view and we are sure some will object to the assessment and some will say it is not helpful for this type of discussion to occur.

http://blogs.ubc.ca/mongolia/2014/why-are-american-investors-struggling-in-mongolia/.

Summary: In this first article INS have highlighted 5 situations which raise 5 issuesfor our leaders in government, business and society to debate.

• The pace of critical infrastructure development
• The slow pace in getting projects off the drawing boards and into execution
• Mongolia’s international competitiveness
• The quality of critical analysis of economic performance
• Using public policy debate to tackle the really critical issues

About INS

INS was formed because the leadership of Mongolia’s business associations know there is a huge gap in public policy debate. They feel this debate should be vibrant and focused on Mongolia’s strategic development choices and economic management. Importantlythese debates should be based on unbiased research and through working with leading edge Mongolian and international thinkers.

A key focus of INS is to see the private sector radically stimulated and for Mongolia to reap the benefits of a market driven economy. We believe that a great development strategy should be focused on Mongolia’s natural and locational competitive advantages and seek to bridge the gaps where weaknesses stand in the way of essential objectives.

Specifically INS aims to provide regular commentary via an article series on critical issues facing Mongolia AND to provide input into long term strategic development planning.

INS will commission senior leaders and experts from within Mongolia and abroad to write these articles. They will be the opinions of the writers and INS will write a short piece at the end of each article to highlight how the issues may play out in the political arena. The purpose here is not to take sides politically but rather to highlight the policy positions that may exist within the political parties, the government or broader society.

INS acknowledge the good work of many organizations who seek to provide meaningful input into Mongolia’s public policy thinking. We will be seeking to formalize relationships and to provide pointers to where that good work can be found and further leveraged.

Next article in the INS Series – “Regaining credibility”

Website linkages – a website is being created that will provide useful links to reputable organizations doing similar work to INS, and as a repository for INS articles and key reports on Mongolia.

Cameron McRae, President of Institute of National Strategy

Munkhsoyol B., CEO of Institute of National Strategy