“Today Shapes Tomorrow”: Some thoughts of the MNCCI on today’s problems and tomorrow’s scenario for the development of Mongolia
Delivered by Sambuu Demberel, Chairman & CEO of the Mongolian National Chamber of Commerce and Industry
Today,
In Mongolia a long list of government functions such as macro economic management, efficient distribution and re-allocation of budget revenues, promotion of added value production, stabilization of consumers market and inflation management have come to a gridlock. The economy is losing its maneuverability. The functions of the Ministry of Finance and the Bank of Mongolia have shrunk to ‘bookkeepers’ of bonds and money.
The right linkage between fiscal and monetary policies is impossible, and any effort to do right fails from the very start. The country has been subject of many failed policies.
The monetary policy of the Bank of Mongolia, approved by the Parliament, is in fact doing a real damage to the real economy pushing it to the limit of a chronic exhaustion. Its policy is based on false premise that given the current situation inflation and its expectation can be easily influenced. It has been shaping the behavior commercial banks to the wrong direction since 2007.
The economy is losing its true economic sense, and the right balance between market and state - the best and the worst mechanisms of allocating limited resources – is being lost in favor of the latter.
There are many reasons behind this grim picture, especially populist promises and unbearable load of various social welfare programs that tie down the hands of policy makers. We are left with a few choices: either to destroy the essence of the economy in an attempt to fulfill all the populist promises or to keep the economy in its classic shape. In other words, to listen either to those who urge a rational economic thinking and drastic reforms in social welfare system, or to those who deny it arguing “drastic reforms are not needed yet as we are still in transition” without a slightest hint of what they are saying.
