Hello, 2010!

Readers may have noticed that Parliament has been setting up a number of working groups, to study and review a number of draft laws to be discussed in its spring and autumn sessions. These laws are meant to bring in major changes in our country. This is an appropriate time to usher in such radical reforms as the nation celebrates the 20th anniversary of the democratic revolution. It will be a busy year for MPs as they grapple with amending the Constitution, the Law on Election and other laws regulating economic matters and with passing new laws as well. It is good that 2010 is not an election year as MPs can approach their task without succumbing to any political compulsion. 

Major reforms will be made in budget management. The President’s speech on budget reforms delivered at the last autumn session of Parliament set the stage for this. Specialists at the Ministry of Finance had already drafted the budget stability law that restricts Parliament’s involvement in budgetary matters. As MPs’ say in financial issues is curtailed, it will be the job of mainly the Government to formulate the budget, and plan expenses. Parliament is responsible for making legislation and should not interfere in monetary or  fiscal issues.

What this means is that the Government will have to provide for the funds to implement projects and programs approved by Parliament. In this it is said to resemble the Chilean budget stability law and is also believed to follow the recommendations and suggestions  of the World Bank. Any anomalies or angularities can be removed when Parliament discusses the law, and it is hoped that it will finally become a good law. The draft was discussed at a Cabinet meeting at the end of December 2009. MPs may not be enamoured of several provisions of the draft law, but the country demands a sustainable economic programme, a clear and unequivocal agenda and coherent planning. The near collapse of the law on the budget of 2010 at the end of last year showed how precarious our planning and management process is at the moment.

Besides this draft law, an amendment is proposed to be made to the law on consolidated budget. There will also be a new law on budgetary responsibility. There will also be drastic amendments made to the law on management and expenses of organizations funded by the state budget and it is logical for this to be merged with the consolidated budget law. This law was initiated by MP Ch.Ulaan back in 2002 and its adoption will be a historic achievement. Provincial administrations do not show much financial initiative and usually wait for funds to come from the centrally budgeted units leading to a scenario where anybody with money can be elected at the Citizens’ Representative Conventions where, in the circumstances, businessmen now dominate. Now a working group will study the amendment to the law on management and financing of organizations by the state budget and Parliament is likely to discuss the draft amendment in January.  Parliament has already decided to discuss the law before it takes up the 2011 budget. At a cursory glance, it may appear that several of these laws have unimpressive names but once all of them are passed Mongolians will find that there has been a  dramatic change in what they have been used to for the last 20 years.

Another set of laws will be essential to carry forward the reformist agenda. These include the law on banks, a new law on the central bank, a law on guaranteeing bank savings and another establishing a savings insurance corporation. Commercial banks will have to reveal who their owners and major investors are. They will certainly respect the customer’s confidentiality but there will be no screen behind which shareholders can carry on their private activities, as they are wont to do now. There will be another draft law absolving the state from taking responsibility for bankrupt banks. The savings insurance corporation will be an institution funded from the proceeds of the income from savings accounts with commercial banks. In case a bank goes bankrupt, this fund will mitigate the risk of savings account holders. 

Apart from these reforms in commercial banks and  budgetary management, Parliament will also discuss a number of draft laws that would support a long-term plan for sustainable development. Most important of these is the law on a stability fund. The Government is now busy working on the draft. The budget is made on the basis of an estimated copper price fixed as the average of many years. When the actual price is higher than the estimated rate, the extra income will go to the stability fund. When the price is less, the savings in the fund will meet the shortfall. In general, the idea of this law, too, resembles the practice in Chile. It will be a very important law for Mongolia as copper is its main revenue earner. MPs S.Oyun, O.Chuluunbat and N.Batbayar vehemently urged the necessity to establish the fund when the 2010 budget was being discussed. Logically, the fund has to precede the human development fund but our Parliament has been shown to lack foresight, preferring, instead, to take up issues as they  come. May 2010 make our MPs less myopic!

Probably after the experience of the recent crisis, the need has been understood to establish a financial stability council. This is likely to be a mechanism to coordinate the work of the Finance Minister, the Governor of the Central Bank and the Financial Regulatory Agency. The crisis revealed various chronic ills ingrained in the financial and monetary policies of Mongolia. This needs urgent change. Another draft law likely to be discussed at the spring session is the law on development planning. It will discourage the mindset that favors projects whenever they are proposed. Instead, the plan is to list development projects in order of importance and only then looking for methods of funding them.   

We have mentioned only a part of the tasks that face our legislators. The list has  mainly to do with the economy but change is in the offing for the election process too. The number of people acknowledging that Mongolia is facing a structural crisis is increasing. The time has come to go for reforms in a really way. Since Mongolia is poised to join  the international economy and trade it must observe the world norms in both. As we train our sights on a healthy and sound future, 2010 has dawned as a most favorable time to introduce systematic reforms in our political and economic life.