D.Davaasambuu: We need a pension fund more than anything else

Both the MPRP and the DP pledged during the parliamentary election of 2008 that every Mongolian citizen would get a share of the revenue from the country’s mineral resources. Now that advance payments have finally begun coming and the beginning of mining is not also far away, both are busy working out how this distribution will be done, whether it will be a one-time payment or through access to services that will cover the whole life of a citizen. D.Davaasambuu, Advisor to the Parliament Speaker, explains his views on the complex issue to L.Bolormaa, and tells her why he thinks a pension fund is the best option.

There is much talk about setting up a fund. What exactly is a fund and how would it work?
A fund is where monetary asset is collected. A certain part of the monetary asset can be controlled by the State. It can also be controlled by an enterprise or an individual. I take it you are asking specifically about the fund proposed to be used to distribute revenues from natural resources. As commodity prices fluctuate according to economic growth cycles, countries with natural resources usually establish Stability Funds. Money from the good times is put there to be used in the bad days. Different countries, both emerging and highly developed, establish different types of funds. However, it is safe to say that funds run on democratic principles have proved to be the most effective.

Does this mean that the State will be responsible for the management of the fund?
The money that is saved in the fund is for the people of the country. If it is a State-run sovereign wealth fund, there will always be risks associated with its use by politicians, political parties, or by any powerful ruler. If there are enough financial capacities in the country, it is better to have both a State-run sovereign fund and a citizens’ fund. That way security is doubly assured.
Usually the people’s savings are put in pension funds, which serve worldwide as an optimum source of capital. Countries with natural resources have used such funds very effectively, with the Norwegian Pension Fund and the Australian Pension Fund proving to be examples of an economic powerhouse. Britain plans to move much of its retirement benefit responsibilities to a pension fund from 2014 or 2015. Norway has a policy of cash distribution while it is extracting oil from the North Sea. A pension fund basically means that if you are not already retired, your share of the revenues from the development of natural resources are kept for you and will become your fund for the future when you finally do retire.
MPs and other politicians are discussing what kind of fund to set up for the distribution of cash pledged to the people and how to distribute it. As an Advisor to the Parliament Speaker I have a word to say in this regard. However, what I’m proposing is very different.

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