Bert Hofman: Mongolia has very bright future given wealth of natural and human resources

Ulaanbaatar /MONTSAME/ The Government of Mongolia organized a consultative meeting with the development partners on December 2 under a theme “Partnership for Sustainable Development”. The World Bank Country Director for China, Mongolia and Korea, Mr Bert Hofman addressed the meeting. “First of all, we are very pleased that the government has organized this development partners’ meeting. This is very good time to look at the government plan and understand fully and for us to see how we can support. That is what this meeting is about”, he said. “As Vice Minister Bulgantuya said we all agreed that in medium to long term Mongolia’s future is bright because of its natural resources, because of its human resources and because it is located in a very dynamic part of the world”, he went on. “The government is been very frank that in the short run there is considerable challenge. We believe that the government made very concrete plan and we are pleased to see that the Parliament has indeed endorsed it. So as one of the participants said that Mongolia is speaking as one nation. The government’s program is very broad and touches upon many things. The IMF support for the government’s program is bit more narrow under discussion which is currently ongoing. It is about what is exactly IMF supported program going to look like as a part of government’s program. The IMF usually focus on macroeconomic side, fiscal targets and on financial sector policies and financial policies, but all of development partners such as World Bank, ADB should speak later for itself. We intend to join the IMF in a broad correlation that we believe is necessary to support the government of Mongolia now”, added Mr Hofman. “Given this size of the challenges, we definitely see bilateral organizations such as China, Japan and others to be part of that broad correlation that help Mongolia through difficult times. I cannot speak for China, but I do want to note that China has been tremendously helpful in the past couple of years for Mongolia by extending the currency swap which was really quite important for maintaining stability in currency and financing the balance of payment”, he concluded. Mr Bert Hofman, later, gave an interview regarding the current economic situations in Mongolia: How do you see Mongolia’s long term good prosperity as IMF Neil Saker said during his presentation? What kind of positive are you expecting for Mongolia? Mongolia has very good future given its natural resource wealth and wealth in human capital. And given the environment that the country lives in. Asia is very dynamic part of the world so there is a lots of promises. In a short term as pointed by PM and Minister of Finance and Neil Saker of the IMF this considerable challenges. So we are here together to discuss this longer term future and what we can do to build that for Mongolia and but also how to help Mongolia getting through this shorter term phase. What kind of economic related recommendations to Mongolia to address coming 2 years? First is important to reestablish fiscal sustainability and second its is very important to rebuild resilience for the future so that there is less fluctuation coming from commodity prices. Third, diversification of the economy so that it helps creating jobs outside of the mining sector and more diversified economy such as agriculture and tourism are very promising and focusing on that so that it would work is important now. But highest priorities are probably stability and resilience. As you know the Government of Mongolia is negotiating program with IMF and Government is planning to borrow 4.2 billion USD from China. How do you see this? Well, I think Mongolia needs in the short term a lot of help that why we believe a whole team of development assistance partners of Mongolia would come together to support the Government’s program. That includes China, included World Bank, ADB and others and we are all talking and we hope that the Government concludes its program discussions very soon so that we start helping. Obviously Mongolia is not closest and China has indeed in super cycle of commodity prices and China is limiting its import of commodities into the country as Mongolia is one of the biggest suppliers of that we might suffer from that. So how China’s policy hinder Mongolian economic growth (Bloomberg)? I am not aware of that policy and I can’t react to that. Does China’s slowdown would hinder Mongolia? There is a threat as well as opportunity. China is slowing and rebalancing that is more consumption, less investment, more domestically oriented, less export oriented will change China’s demand for Mongolia. So one can expect in the longer term is less growth, I am not saying less level but less growth in commodity demand and more growth in consumer demand and Mongolia has lots of things to offer China, especially in agriculture sector but don’t forget tourism, it’s a fantastic country to visit. So from the consumption side of China there will be probably more demand or will be more growth than the past and on commodity side will be less growth than the past but in term of level the demand will remain very high. So you still see there will be growth rather than retraction? China has still lost of things to build. In terms of housing to some extent infrastructure but also lost of consumer and commodity content and in longer term. Other emerging economies also see this phase and Mongolia can play along. It is not just China. Many of the international financial institutions keep saying about improving fiscal discipline. So what kind of specific fiscal administration or fiscal policy needs to be done? In a way Mongolia already has fiscal tools for fiscal discipline. And Fiscal Stability Law is fantastic legal framework. But Mongolia has to abide by it and don’t find back doors to avoid stringency of the law. So very comprehensive budget that includes all government spending, no matter how financed whether it is Development Bank of Mongolia or Bank of Mongolia should all be in budget and part of that fiscal constraint. But second Mongolia up until now has raised not that much taxes and Mongolia is very different when I started 22 years ago. Everybody was poor 22 years ago. Now a lots of rich people and there is a lots of opportunity to mobilize more domestic resources not just think about financing but also domestic resources taxes that will help to achieve that fiscal sustainability and that fiscal discipline. Thank you.