140,000 jobs or MNT21,000?

Ms. Doljin was standing in a long line with her nephew in her arms when she breathed loudly and said “Ah, I hope her mother (talking about the child) will soon graduate and find a job.” Ms. Doljin is a skillful tailor and hopes to open a tailor shop where she will sew clothes and sell them. But to buy an electric sewing machines and some quantity of materials, she needs almost MNT2 million, and because she is jobless, no loan is available. In the eventuality of a bank granting her a loan, the conditions are too heavy and include a high interest rate and possessory security. “Well, now I will buy meat and flour of several kilos with the money given to me from the Human Development Fund, then I will go home.  By the way, have the meat price gone up again?”

In fact, Ms. Doljin used to work as a tailor in a sewing factory. As her daughter gave birth, there was no other way for her but to resigned from her job and take care of the baby. Saraa, her daughter, left university to enroll a vocational training center where she is paid a “salary” of a certain number of tugrug which allows them three not to live amongst the poorest. In addition, they are given MNT63,000 from the Human Development Fund which contributes a little to their livelihood. But for Ms. Doljin, it is clear that a job paid MNT210,000 a month is better than being unemplyoed and receive MNT21,000.

The government intention to declare the year 2011 the Year for Employment Support years seems to have had little encouragement. The Ministry of Labor announced that throughout the country the number of unemployed has reached 103.1 thousand people and the unemployment rate represents 8.6 percent of the country’s labor force. Out of them, about only 38 to 40 thousand are actively seeking jobs. At present it is difficult for those like Ms. Doljin, aged almost 45, to find a job. Last autumn, having given her nephew to a kindergarten, she spent time seeking a job until she became fed up. Employers for most organization now prefer to employ a tall, thin, and younger woman with English proficiency, even if only for a position as a receptionist. The Ministry of Social Welfare and Labor has worked out a policy to generate no less than 60,000 workplaces starting from this year. Good news for all those in search of a job. All that is left now is to implement the policy.

When the country switched to a market economy in 1990, over 30 percent of its population could have been classified as poor. During the last 20 years, the country’s economy grew, collapsed, and grew again. Large mining projects started to be implemented and the amount of direct foreign investment increased. Despite this economic growth, there is still no difference and 1 in 3 Mongolians continue to live in poverty. Last year, the government announced year for production support and business innovations. Unfortunately, there is nothing noticeable to say about this last years. No improvement has occurred in the life of Ms. Doljin. But the year of 2011 is the year employment. Ms. Doljin hopes that if not her, at least her daughter Saraa will find a job, as a result of which their life will eventually improve.    How is the government going to support employment? It would be logical to invest in the sector small business do it is most likely to create jobs on a large scale, and the following figures will explain why.

In 2009, for the first time, a soft loan of MNT30 billion was issued from the state budget. The interest rate of the soft loan was 1 percent a month and the loan had to be reimbursed within three years. It is estimated that the soft loan which was distributed to 1528 companies and citizens resulted in 469 new businesses starting up, 950 companies expanding their operations, and in the creation of about 6000 jobs. At present, repayment of the loan has reached 98.9 percent. According to this, it is quite clear what positive return the loan had.     But this year, expense from the Human Development Fund will amount to MNT805.2 billion, out of which MNT702.5 billion will be spent on the distribution of MNT21,000 to every Mongolian citizen. By spending MNT30 billion, 6000 workplaces were created. If so, how many people will be employed with the amount of MNT702.5 billion? 140,000? These figures show that supporting small businesses is better than to distribute MNT21,000 with which nothing can be done. Nevertheless, one thing must be paid attention to. In 2010, soft loans of an amount of MNT30 billion was again granted to 1233 companies, thanks to which 2830 new workplaces were created. One could wonder why so few jobs were created in 2010 in comparison with the previous year. Over 85 percent of the whole 40.9 thousands companies in Mongolia are small companies whose number of employees varies from 1 to 9. In other words, it means only small companies create more workplaces. Large and firmly established companies import high-price modern technologies and have skilled personnel suitable to their need. But by looking at the table, it is possible to see that the amount of the loan that was granted in 2010 was limited to MNT10 million, 2.5 times less than in 2009. It can be assumed that due to the fact that the loans granted to small businesses in 2010 were inferior to those granted in 2009, so was the number of workplaces created.

Therefore, in order to support employment, the government needs to support the nation’s micro-businesses more, which would contribute to the generation of jobs and the reduction of poverty. Here is an interesting example of successful micro businesses support.
Mohammad Yunus, a Bangladesh doctor, founded the Grameen Bank to carry out micro-lending operation only. When he started to grant loans without requiring collaterals to the people belonging to the society’s most vulnerable groups, bankers thought he was mad. His bank gave out loans of more than USD5 billion over 4 million people. The loan has been repaid to 98.9 percent, a real sensation! For this achievement, Mohammad Yunus won the Noble Prize in 2006. This man managed to prove that the most vulnerable groups of society are able to repay the loans they are granted, and also that the only and best way to alleviate poverty is not to distribute money in cash, but to give out soft loans.  The Grameen Bank has now opened branches in more than 30 countries. If there was an opportunity to obtain such a loan for Ms. Doljin, she would able to found a tailor shop and improve her livelihood. If her business was successful, she would have to employ 2-3 more people and could be successful as a small-sized enterprise. Why should Mongolians buy their underpants from China? Why should a Mongolian citizen, even poor, not be able to run a business and improve his or her life?               

Who will benefit from the MNT21,000 that are handed out monthly? Are we so blind as not to see that poverty has been increasing although money in cash is being distributed? In 2007, gold and copper prices skyrocketed and as the budget benefitted from it, the authorities started to distribute money in cash. As a result, inflation reached 34 percent that year and citizens’ buying power was significantly weakened. Right after this, when the copper price went down, state budget was in deficit again, the country’s economy declined, its foreign currency reserves sharply decreased and the tugrug exchange  as a result rate was resolutely weakened. As a result Mongolia has been classified among the countries most affected by the crisis. The last crisis showed that the distribution of money did not cause results bring any. However, government officials seem not to have learnt from it. For the 76 members of Parliament, it is important to put money in the citizens’ pocket to gain seats in the Parliament for the next election. This is a bewildering.

Like in 2009 and 2010, the Small and Medium Sized Enterprises Authority started to give out soft loans this year too. 11,950 entities and citizens requested loans of a total of MNT913.8 billion. The loans granted so far account for only 5 to 6 percent of the demand. But in 2011, only MNT24 billion were budgeted for loans for small and medium enterprises. Specialists from the Small and Medium-sized Enterprises Authority say an additional MNT28 billion from the repayment of the previous loan is being considered. Nevertheless, it seems the amount of the soft loan will not be enough. The authorities have budgeted MNT805.2 billion in order to implement their promise made during election. It is unfortunate that they cannot spend this money on the alleviation of poverty and the reduction of unemployment. Furthermore, it is more likely that the MNT21,000 handed out will indirectly benefit the border city of Erelian in China. If Mongolians were granted the soft loans they wish to obtain, the amount and its interests would remain in the country. As a result, the people’s livelihood would improve. With companies’ expansion operations, income tax feeding the budget would also increase.

“The real wealth of the people is their ability to work” used to say Ezop, the great Greek philosopher. Meanwhile saying that “Nothing ventured, nothing gained” is confirmed by Mongolians. But Mongolians are not lazy and stupid, every Mongolian is eager to work and improve his/her life. And what they need to improve their lives is MNT21,000, but a loan with low interest rate and jobs.

By D. Munkhchimeg