Promises Best Left Broken

 

Government has committed itself to fairly distributing the wealth from Mongolia’s booming mineral sector to the people, but its plans so far have not come together as it would have liked. Now government is left with the task of finding some way to continue its monthly allowance payments during this recently commenced spring session of Parliamen, while many argue that its attempts thus far have been shallow short-term resolutions rather than long-term resolves to poverty and poor standards of living.

Parliament members were falling over themselves in 2008 trying to top their competitors’ promises for election into office. While state Parliament positions are by appointment proportionate to the number of votes a party received, local elections have citizens directly elect their public officials. Meanwhile sitting members in state Parliament interested in extending their time in office must make sure they still have a seat left for them after the elections.

The 2008 elections had party members promising increasingly more money in the form of cash handouts to citizens until the Mongolian People’s Party topped off at MNT 1 million a head. Government was slow to make those payments as it had not actually developed a plan to finance that sum for the 2.8 million citizens living in Mongolia. Eventually the delay led to protests following the 2009-2010 so-called zud, an extremely harsh winter with excessive snowfall that usually results in large-scale animal deaths.

Eventually the Human Development Fund was set up with the intention of directing the wealth from the country’s mineral economy to diversifying the economy and improving the lives of people. So far, however, the fund has chiefly been a reserve for the MNT 21,000 monthly allowances set up to make good on those election promises until meeting the MNT 1 million mark.

Half way into each month long lines form in front of commercial banks so people can collect their MNT 21,000 allowance, but last month people were turned away. Bank officials said they had not yet received the payments from the government, spreading distress to the populace. 

“It is true that this month’s allowance is postponed,” O. Khuyagtsogt, budget officer at the Finance of Ministry, told local newspaper Undesnii Shuudan. “The reason is related to an inability to gather the funds in time.” He added that this month’s payments would be made in the middle of the month, just as they had before.

Most analysis shows that the cash handouts have been largely detrimental to the economy by exacerbating inflation pressures already present in Mongolia due to too-fast growth and volatility to the tugrug. In February inflation was up 12.5 percent compared to a year before, according to the National Statistical Office (NSO). And meat prices are reaching record highs, with mutton costing MNT 8,500 a kilogram after never before surpassing MNT 5,000 per kilogram, reported local financial magazine Mongolian Economy.

Since the implementation of the allowance system, politicians have continually criticized the practice of cash handouts. Rather than point to rising inflationary trends, however, they would rather talk about how handouts make people lazy, as if any one person could actually live on MNT 21,000 over the course of a month. Indeed, however, employment statistics have shown a drop since their installation with a 51.6 percent increase in the number of registered unemployed in February compared to the year before, according to the NSO.

Some reports have spread news that the HDF’s fund are running short, leaving the finance ministry scrambling to find the money. The finance minister, D. Khayankhyarvaa, had previously announced that funding was adequate to run until July, but the delay last month had some wondering if that was true. The 2012 budget allotted MNT 800 billion to the fund, of which MNT 700 billion was directed towards the MNT 21,000 allowances. Up until now, government had used funds from a pre-payment from the investors of the Oyu Tolgoi copper and gold project. Parliament had expected at least half of the residual MNT 800 billion to come from an advance payment from investors of the Tavan Tolgoi’s western tsankhi project as well, but delays in their selection has made it impossible.

The turn of events make further payments down the road, such as the MNT 1 million to elderly and disabled people, looking unlikely as well. The government has since decided to distribute an additional MNT 1 million worth of stock in Erdenes-Tavan Tolgoi as an option in place of cash handouts as well.

Although it is encouraging to see the government going to such pains to fairly distribute this wealth among the populace, the rash, half-thought-out methods they have used so far are troubling. Hopefully they can learn from their mistakes and instead use collected taxes from mining companies for infrastructure projects and propping up industries that would create new jobs, as the International Monetary Fund has recommended. On the other hand, it would be quite distressing if the government suddenly lost interest in the matter all together after elections this June.

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