Mongolia’s First Economic Forum Highlights Latest Push for Growth
February 17, 2010
With four-fifths of its export income dependent on mining exports, Mongolia was hit particularly hard by the recent international economic crisis. A recent New York Times article goes so far as to say that Mongolia is arguably Asia’s hardest hit country. For a nation experiencing a period of rapid growth averaging 9 percent per year from 2004 to 2008, such a plunge is disappointing and unsettling, to say the least.
During the crisis, Mongolia saw copper prices drop by 45 percent and exports overall fall by 28 percent, sparking a major budget deficit and banking crisis, and necessitating an emergency $224 million loan from the International Monetary Fund (IMF).
To address the aftermath of the crisis, on February 8-9, Mongolia’s top government, parliament, and civic leaders gathered in Ulaanbaatar for the nation’s very first Mongolia Economic Forum. Modeled after the World Economic Forum in Davos, the Forum covered topics crucial to Mongolia’s sustainable economic recovery and growth: the state budget, mining, sustainable development, regulatory reform, capital markets, and competitiveness. With hearty support from President Tsakhiagiin Elbegdorj, the Forum was organized by Prime Minister Sukhbaatariin Batbold (both representing a new generation of leadership at 47 years old). The Forum was clearly a major coming-out event for Prime Minister Batbold, who took office in October 2009 after former Prime Minister Bayar Sanjaa resigned due to failing health. The Forum represented a unique collaboration between the leaders of the Mongolian People’s Revolutionary Party and the Democratic Party in demonstration of the Forum’s theme, “Together We Can.”
The Peruvian economist Hernando de Soto, internationally known for his advocacy for clear property rights and the rule of law, was a guest speaker at the Forum. President Elbegdorj himself facilitated De Soto’s participation and also supported the wide distribution of the Mongolian translation of de Soto’s book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000).
Despite the dramatic downturn in Mongolia’s economy, there were also some encouraging signs of recovery starting in 2009, although against a backdrop of painful lessons learned about volatile international commodity prices. The IMF disciplines have taken hold, and the long-awaited Oyu Tolgoi copper-gold investment agreement was signed in late 2009. Investors’ confidence, led by China and Singapore, has improved, complemented by the moderation of inflation to 3.5 percent in November 2009 and an increase in capital inflows marked by over $1 billion in international reserves.
Meanwhile, the new prime minister has proposed new initiatives to further develop the local capital market, including the revitalization of the Mongolian Stock Market. As a result of such developments, the National Development and Innovation Committee of Mongolia forecasts that the economy may grow 1-1.5 percent in 2010 and surge to 7.4 percent by 2011.
Prime Minister Batbold and President Elbegdorj both stated that the Forum’s primary objective is: “to build consensus around defining sustainable economic development policies and addressing pressing challenges faced by key economic sectors of Mongolia among policy makers, business communities, academia, and the civil society.” The leaders referred to Mongolia’s history of consultation, which began in the 13th century when the first Hural (forum) adopted the first Mongolian constitution Ih Zasag (Jasa) (nine years earlier than the Magna Carta in Britain) and elected Chinggis Khaan as Emperor. The Forum strategically took place before the annual and midterm development plan and budget debate that kicks off in the spring.
The event’s organizers strongly emphasized the importance of national ownership and leadership of the country’s development. The Forum took place in Mongolian, with simultaneous translation available only in selected rear-section rows. Mongolians chaired all sessions and international presenters made up a minority on all panels and were absent in plenary sessions – Hernando de Soto’s session was the sole exception.
The Forum helped to raise strong local, national, and international expectations of continued economic recovery and sustainable growth in Mongolia. But will the Mongolian people overcome serious geographic and governance challenges to again attain the rapid growth rates experienced in the early post-transition period? Although such questions remain, the Forum certainly helped generate goodwill and increased confidence that the Mongolian government can maximize its natural and human resource strengths to set the country back on a path to growth and recovery.
V. Bruce J. Tolentino is The Asia Foundation’s Director for Economic Reform and Development Programs. Last week, he participated in a panel on budget reform at the Mongolia Economic Forum. He can be reached at [email protected]. Davaasuren Baasankhuu, who also participated in the Economic Forum, is the Foundation’s Director of the Governance Program in Mongolia and can be reached at [email protected].
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