Right aim, wrong decision

Editor’s Note


The meeting between leaders of our northern neighbor and North Korea are turning the heads around the entire world. It is too early to say whether the purpose of their meeting was to give a warning to large nations headed by America. However, it definitely gives a hit to the twice failed meeting that was to take place between Kim Jong Un and Donald Trump. For certain, the steps that the two countries are taking towards friendly relations is a sensation for international economics and politics keeping in mind the western sanction on Russia and the pressure North Korea is receiving from the United States. With this, little Kim is showing that he is not a small player in the globe while Putin reminds us that Russia is not at a shortage of partners regardless of their sanction. International experts see that with the announcement America made about no longer importing oil from Russia, the one who will benefit the most from this situation is the Russian President Vladimir Putin. Regarding the issue of Russia importing natural gas from Ukraine, Putin is being very careful and announced that he will delay his signing of the contract until the parliamentary election of Ukraine. Who is to say whether this was an impulsive or a move with political aim? With the simmering of events taking place in international economics and politics, there are jaw tiring domestic issues being discussed in Mongolia as well, one of which is the capping of interest rates. There are many who are gradually picking up on the subject and expressing their opinions. It is necessity to lower non-performing loans. Yet, this will not be only solved by setting a limit on interests. The relevant organizations should have taken steps as soon as the non-performing loans started causing a strain on the economy without losing times. Therefore, the problem of the non-performing loans cannot only be linked to high interest rates.

If the method is wrong, then the aim would be wrong as well. The bank and financial and private sectors emphasize that it is evident what will happen to the society and economy in the next two years and that it is not appropriate to force the market oriented competitive process. There are too many talks, debates and arguments for both sides, but there are not enough valid numbers and statistics for the people to grab onto. There is no hard evidence about how legally forcing the maximum interest rate to 18 percent would affect people’s lives. Though the relevant parties say they studied this, but they are Vanga (blind Bulgarian mystic) -ing it. Many believe that the reason they are rushing to get this passed before June is because this is a pre-election play. The economists themselves aren’t giving adequate and realistic answers to where the negative consequences would start, how it will affect the relevant sectors in the short, medium, and long run. Kenya is often brought as an example module where this kind of law enforcement has failed. There are also numerous evidences suggesting that this kind of law implementation does not work, but this does not have to be this way. The initiator of the project brought up how Japan set a ceiling on their interest rates in the 1950s and how it lead to its current development. However, the 1954 Japan and the 2019 Mongolia are two cases that cannot be compared.

In Order for Mongolia to not end up like Kenya, they do not have to decide the rules first and if they really want interest rates to go down, it is a good idea to increase competition. There are sides that suggest that a more “healthy” way to do this is to bring foreign banks into Mongolia. As such, everyone has something to say. It is worth complimenting that they are discussing whether to legally limit the increasing interest rates or count on development and be under pressure. Notwithstanding, the main issue to pay attention to is not who is talking about what for which agenda, but the decision that has to be based on solid evidence and the discussion on what to reach. In particular, we must focus on not making policy errors.

In a time where this topic is getting extremely heated, the Mongolian Economy magazine has decided to not take sides, but to present our audience with both sides of the argument and make analysis based on that.

Alongside the domestic sensation, our president is making a sensation in the cyberspace. This year is the 70th anniversary of diplomatic relations between our southern neighbor and Mongolia. In honor of this, the state heads of the two countries are to make official diplomatic visits to each other respectively. Our president has made the first move. During Xi Jinping’s last visit to Mongolia, the traffic of his route was cut and not a soul was on the streets of his path except for one, Kh.Battulga. Back then, he was not the president, but an athlete who was going on his morning run on the Peace Bridge, against the direction the fleet of cars were going at.Mongolians that are active on social media were quick to point out that now, he is getting the taste of his own medicine as surely the first instance the two crossed paths made their meeting a little awkward. Although a few million yuans were spent on the high level discussion and exhibitions, there are many pointing out that he was not received as well as the president of Azerbaijan. Within the framework of the Belt and Road Initiative, the relevant leaders were gathered and brought up the idea of establishing the Asian Super Network proposed by the Mongolian president to the public again. This initiative will definitely bringe large changes to our country and the energy sector in particular.

With summer approaching, autumn and winter are also soon to come and it is impossible to guess what Mongolians will be discussing at the end of 2019. What will the results be?