Mongolia needs stable institutional system and higher standards of accountability

The Mongol Messenger
2018-05-29 12:49:52
On May 22, we had an interview with the World Bank’s Country Manager for Mongolia James Anderson on Mongolia’s economic and governance issues.

-How long have you been working in Mongolia?
-I came as the country manager in 2014 and I have been here ever since. I was here before from 1993 to 1997, working on organizing training and workshops for high-level policymakers on the institutions of a market economy as well as research on informal sector and effects of the large privatization programs.

-You have been working in the countries of former the Soviet Union and according to your experience working in Mongolia in the mid90’s, how did our country change?
-After I left Mongolia in 1997 I worked for 11 years in about 15 different countries of former the Soviet Union in Eastern and Central Europe and six years in Vietnam. Vietnam has been going through a gradual change during these years. The former Soviet Union countries were very similar to Mongolia as they had a big shock in early 1990’s from the collapse of the trading arrangements and movement to a new market-based system. A lot of countries were trying to make that shift from planned economy to market economy, suffering from the loss of Comecon system. The countries of Central and Eastern Europe were luckier because they had access to Europe and some of them became able to join the EU over the years. It was important for them as it set for the target and standard that they had to meet and opened even greater access to trade. That’s a key difference. But I have to admit that after being away for years the change in the country was remarkable. I was shocked by the crowd on the streets having fun last Saturday, car-free day. The last time I saw such a big crowd in Mongolia was when I was studying the informal sector at the black market in the mid90’s when times were difficult.

-How would you evaluate Mongolia’s current economic situation?
-Mongolia faced real challenge between 2014 and 2015. The economy had difficult times when commodity prices came down through a combination of policy mistakes and bad luck. In 2016 the budget deficit was extremely high. Happily, in 2017 the economy has recovered, partially because of tough measures that were taken to stabilize the economic situation. One of the challenges of Mongolia is it’s like a small boat in the ocean and it gets moved up and down fairly easily. Mongolia really needs to keep this in mind, be cautious and build up some buffers rather than going wild on spending when the times are good. It makes it easier to deal with negative shocks if they happen.

-Besides diversification and stable legal environment as experts say, what are the other focal points?
-Diversification is very important, but when we talk about diversification we should really focus on diversifying assets. Which means ensuring that the population is well educated, developing appropriate skills of people so that they can thrive in any sector. So rather than picking a particular sector, it has to make sure that the institutional system is stable, predictable and healthy. From long time studies, the economic historians have identified that the quality of country’s institutions is essential for its long-term success. So when we talk about diversification, it means creating that institutional environment and supporting healthy, well-educated and prepared workforce. Personally, I think Mongolia has potential in IT as it has a strong tradition of mathematics education. IT is a sector for which Mongolia would not be at a disadvantage because of geography, and of course agriculture and livestock. These sectors are huge employers. Agriculture and livestock farming has been growing, but a lot more could be done to take it to the next level, commercialize and strengthen value changes so that they could even move towards exporting.

-You worked as a government specialist in Europe; have you done any observation on Mongolia’s governance?
-While working in the countries of former the Soviet Union and Vietnam I focused on public administration, transparency, systems of accountability, measuring and monitoring corruption. Some of my observations from those times show that when the countries went through a radical redesign of their system it opened up spaces for corruption. Also when there’s a big amount of money lying, it causes corruption. We found that natural resource focused countries often have a bigger challenge than other countries to fight the corruption. The World Bank in general works on prevention, helping our partner countries to strengthen the institutions that reduce opportunities for corruption and institutions to deal with problems as they arise. One of the things that we’re working on here is strengthening social accountability, which means building a better bridge between public service providers and citizens to deliver better quality service as needed by citizens. Strengthening accountability helps reduce the opportunities for corruption. Some of my other research focused on different aspects of public administration. In several countries as Romania, Slovakia and Kyrgyz Republic I looked at many different aspects of the information system, civil service, and budget monitoring. One striking feature was how important it is to get the oriented civil service. It’s an extremely important and very difficult area of Mongolia to reform.