The Harmful Effects of Being a “Generous” Father

Dorj, a Mongolian miner, is a very generous person. When he receives his salary, he hands out cash to his children so they can buy fruits and candies at the supermarkets and spends what is left on buying his wife presents. For him, it is a way of showing his love to his wife and children. But one day disaster strikes. The price of coal falls on the world market and Dorj suddenly loses his job at the local coal mining site. Left without savings, the father and his family find themselves in a dire situation or  Unfortunately, misfortunes keep hammering at them. His wife becomes pregnant with another child, but after a nine months pregnancy, the baby is stillborn. Not long after the tragedy, the other children must go to school. However, school expenses cannot be met.

Augusto, on the other hand, has a totally different attitude to life. A Chilean citizen, the miner prefers to spend his salary on his children education by investing in a violin, piano, and chess set instead of just giving them cash. Actually, Augusto is a far-sighted man. He saves portions of his monthly salary to spend on his children’s health and future education. Because of his savings, Augusto is less worried by the fluctuation of copper prices on the world market. He sent his children to study in the UK, the US and Germany. Highly educated, they come back young men eager to contribute to the development of their country. Two metaphors for two different countries with two different policies.

Mongolia has learnt from Chile’s experiences and, trotting in the right direction, it adopted the Law on Budget Sustainability. Nevertheless, the Government intends to raise expenditures from the state budget to 4 trillion togrogs for the year 2011 - a record amount which exceeds the state budget by 780 billion togrog and equals 10% of the country’s GDP. How will the money be invested? What will it achieve in the long term? Augusto’s wisdom would advise to spend it on building new hospitals and schools, on laying the foundation of a healthy and educated nation, on shaping the country’s future workforce. However, this seems not to be the case. Just a quick look at some figures shows how vital it is to carefully and thoroughly reconsider how these expenditures will be budgeted and distributed in the different sectors of the Mongolian economy.

In 2011 the Parliament adopted a plan of action for the implementation of projects and other activities requiring a total investment of 627.7 billion togrogs from the state budget.  The majority of this money - 44.1% more exactly – will be spent on the infrastructure sector, while the health and social protection sector will receive a mere 10%. It is appalling that 805.2 billion togrogs will be dedicated to the realization of the unconstructive promise of handing cash to every citizen, while only a mere 54.5 billion togrogs have been budgeted towards the health sector - approximately 16 times less – despite the fact the Mongolian healthcare system is in a deplorable state.

Just during the first quarter of this year, 9,859 people suffered from infectious diseases and 346 children died before the age of five - a data which does not include stillbirths and children born with abnormalities. Meanwhile, the rate of life threatening diseases such as cancer, heart attacks, and paralysis among Mongolians is growing. One visit to any hospital of the country is enough to show the dire working condition of doctors and the poor state of medical facilities and equipments.
Although many infants died last year from umbilical cord infections, the budget for a new 4th Maternity Hospital is just being resolved. It is stated that 19 billion togrogs would be invested in the building of the hospital. At that price, 42 such hospitals could be built with the 805.2 billion togrogs budgeted for the fulfillment of election promises to handout cash to every citizens.
What is the use of having vast reserves of gold, copper, coal and uranium if the people of Mongolia cannot live a decent life and beneficiate from the most basic services to raise healthy and educated children? What is the use of fulfilling political promises to hand 21,000 togrogs to every citizen if they cannot even receive proper health care services when needed? 

The Constitution states that the “Natural resources shall be subjected to the people’s power and State protection,” according to what the Parliament’s 76 members pretend that the distribution of cash to every citizen is just an application of the provision. Electoral promises with eye-catching names such as “Homeland Reward” or “Treasure Endowment” are carried out through the distribution of 21,000 togrogs to every citizen. But have our 76 members actually read the Article 16 of the Constitution?
Mongolian citizens have a right to life, to live in a healthy and safe environment and benefit from health and medical care. However, the National Statistical Office of Mongolia states that 5,091 crimes were registered within the first quarter of this year; crimes which led to 346 deaths and 1,874 people being injured. Is that the kind of life Mongolians deserve?

Members of Parliament who strive to come to power by promising citizens an amount of money exceeding the real capacities of the economy and thus weakening it, play with the financial precariousness of Mongolians in order to buy their votes and, in doing so, violate their most important rights. Meanwhile, the Government that drafted and submitted for adoption the Law on Budgetary Sustainability has kept silent and gave in to political pressures…
“We have initiated a proposal to implement projects amounting to 116.5 billion togrogs in 2012 by postponing the investment of projects due to be implemented in 2011. If this proposal is not accepted, then it would be impossible to invest in new projects according to the 2012 and 2013 budget,” the National Development and Innovation Committee admitted during their presentation of the Mongolian Investment Program. In clear, this means that the budget capacity adopted with a deficit equal to 10% of GDP is not even enough to implement the adopted plan of action.

“The distribution of cash handouts is not effective in the long run, and it can only succeed in increasing the inflation rate. On the other hand, investments into the health and infrastructure sectors can bring benefits in the long-term,” Mr Steven Barnett, chief of the IMF working group, stated. Our country imports 70% of its food and other consumer products and is totally reliant on the imports of energy and fuel from Russia. Such a situation clearly shows that all of the 805.2 billion togrogs handed out will evaporate into the economies of our two neighboring countries. Instead of distributing 802.5 billion togrogs directly to Mongolian citizens, the Government should concentrate on financing projects from the state budget. How many hospitals, kindergartens, sport complexes, and parks could have been built with this money? Nevertheless, it is believed that increasing the amount budget expenditures will make everything alright. But many experts warn that a lot of things need to be put into order.

Officers at the Division of Investments from the Budget at the Ministry of Finance openly speak of common cases of violations, fraud and embezzlement by acquaintances of those in power. Furthermore, many unnecessary and ineffective projects are accepted due to the local authorities’ lack of participation in the budget planning. International organizations have been criticizing the lack of a monitoring system that oversees the implementation and effectiveness of projects and assesses investments linked to the budget. It is unclear how long such misconducts, resulting from the race for political power and achieving nothing but the waste of tax payers’ money, will continue for.

Data show that in Mongolia, around 1,170 mining deposits of 80 different types of mineral resources and about 8,000 findings are registered. World Economic Forum representative Mrs Catherine MacPile reminded that “Mining cannot deliver positive results straight away, and all is dependent upon an appropriate management.” Although Nigeria is the largest exporter of petroleum in Africa, more than 95% of its population lives in extreme poverty, only 5% lives more than comfortably.  In the case of Venezuela, the country became impoverished after it distributed cash handouts to its citizens to forestall their protests and criticisms. Mongolia has the chance to benefit from the advices and warnings of experts to avoid repeating the same errors and set on the right path. However, our “generous” leaders are taking no notice and seem to have totally succumbed to the temptation of taking the biggest slice of the cake for themselves and leaving out the crusts to their electors.