“Scenarios for Mongolia: Building a Positive Future” guidebook

8/13/2019 Scenarios for Mongolia: Building a Positive Future guidebook

1/13


2/13

3

FOREWORD

What will Mongolia look like in 10 years? If a single person were to consider

this question alone, they would come up with only one version of the future.

But if ten or even a hundred people were to reect on this question, they would

no doubt develop a much more interesting and diverse product. Scenarios can

be developed under the consideration of different national and international

aspects.

The World Economic Forum organized a Country Strategy Dialogue on the

Future of Mongolia on September 15-16, 2013. The goal of this event was to

develop scenarios for Mongolia. These scenarios focus on Mongolias role in the

North-East Asian context and from a global point of view. The results will be

presented at the annual World Economic Forum in Davos 2014.

Prior to the World Economic Forums initiative, in 2012 experts from Heminge & Condell held rounds of

discussions in Ulaanbaatar with representatives from government; business and society on what Mongolias

future could look like. As a result of these discussions and separate contributions from Mongolias various

stakeholders, four different scenarios emerged on What would Mongolia look like in 2025.

It was thought that the future of Mongolia will substantially depend on the foresight of Mongolian leaders

and their ability to anticipate and manage the future. Furthermore, as Mongolia is a mining-dependent nation

at present, the demand for Mongolias mineral products on the world market will also have a considerable

impact on our future. Hence, the four different scenarios are based on the two different outcomes of these two

assumptions: will the actions of Mongolias leaders be determined by short-term opportunities or long-term

investments, and what will happen to the global demand for commodities. The resulting scenarios present four

starkly different versions of Mongolias future which we think will be most interesting to our readers.

However, these scenarios are not merely intended for reading enjoyment. They can achieve their full

value only when used as tools to dentfy the best possble pth for long-term deelopment

nd progress. When looking at the four different scenarios, it becomes much simpler to identify which

circumstances are desirable for our future, and which ones we must strive to avoid. Thus, by using these

scenarios we must assess the path we are currently taking, and consider our options on how to create a better

future. These scenarios can be utilized for many positive examples of such an application of scenario thinking

methodology to plan for the future. They are useful as a guide to produce an optimal long-term development

policy for Mongolia, and to provide a guide to ultimately enhance Mongolias competitiveness and economic

development.

Thus, with the purpose of hosting in-depth deliberations on long-term, sustainable development policies

for our nation, the Economic Policy and Competitiveness Research Center organized two workshops entitled

Scenarios for Mongolia: Building a Positive Future. Many representatives from the public and private sectors,

as well as academia and international organizations participated in these discussions, providing their invaluable

analytical input into the four scenarios. Our participants proved to be extremely vigorous, discussing thecurrent tendencies in Mongolias economy and societal framework as well as possible future challenges. They

also came up with a list of early-warning signs to indicate which scenario we are heading towards and what

signs we need to be wary of.

The future of Mongolia will depend on the actions of Mongolians. Hence, we must discuss and identify

the necessary steps we must take and implement them ourselves to create a brighter future. We would like

to express our gratitude to participants of the discussions for providing valuable contribution through their

thoughts and ideas for sustainable development for Mongolia. Herewith, we present to our readers the product

of their work that they committed long hours and serious thinking towards.

We are condent that our readers will be able to nd many different possible scenarios for Mongolia.

But let us reect on what these versions of our future look like, and what we must do to make it better and

brighter.

Generl drector B.Lkshm


3/13

Scenarios for Mongolia: Building a Positive Future

4 5

SCENaRiOS FOR MONGOLia:

BuiLDiNG a POSiTivE FuTuRE

In June and July 2013, the Economic Policy and Competitiveness Research Center (EPCRC) held

a series of workshops entitled Scenarios for Mongolia: Building a Positive Future. During these

two workshops, notable representatives from government, business, civil society, academia and

international development organizations analyzed four alternative scenarios for the future of Mongolia

in 2025. Through these workshops, the EPCRC engaged and provided these stakeholders with a

neutral platform for multi-stakeholder strategic dialogue on these scenarios. The aim was to identify

actions needed to support the sustainable development of Mongolia towards a brighter future.

Box 1. Scenario Planning

Scenario planning is based on the observation that, given the impossibility ofknowing precisely how the future will play out, a good decision or strategy to adoptis one that plays out well across several possible futures. To nd such a robuststrategy that works across all futures, scenarios are created in plural, such that eachscenario diverges markedly from the others. These sets of scenarios are, speciallyconstructed stories about the future, each one modeling a distinct, plausible world inwhich we might someday have to live and work.

The purpose of scenario planning is not to pinpoint future events but to highlightlarge-scale forces that push the future in different directions. Its about making theseforces visible, so that if they do happen, the planner will at least recognize them. Itsabout helping make better decisions today.

Scenros re:

-Storesbuilt around a methodically constructed plot;

-a toolfor identifying strategic options in the face of long-range uncertainty;

-a frmework nd ocblry for an on-going strategic conversation.

a good set of scenros re:

-Plsblestories;

-Relentto the question at hand;

-Dergentfrom one another;

-Chllengngto our assumptions about how the future will play out.

Source: Global Business Network

Moderate/Stable

Short termopportunities

Long terminvestments

For alternte Scenros

In early 2012, scenario planning experts from consulting group Heminge & Condell came to

Ulaanbaatar and organized workshops amongst Mongolian business, social and political leaders to

discuss the future of the country. The group discussed the range of uncertainties affecting Mongolia,

including economic uncertainties, technological developments, social concerns, environmental issues

and political programs and policies. As a result, they identied the most important external inuences

and the most important decisions that will affect the future of Mongolia. These are as follows:

Wht wll hppen to the globl demnd for commodtes?

-Economic slowdownin China

-World economiccrisis

-New technologiesthat could decrease

commodity demand

Commodity Demand

-Chinese economicboom

-World economicrecovery

-New technologieswill be expensive

Wht wll gde the ctons of Mongoln leders?

-Political, economicand social instability

-Bad scal andmonetary policy

-Corruption, red-tape

Focus of MongolianLeaders

-Political, economicand social stability

-Good scal andmonetary policy

-The Rule of Law

From this work, they developed four alternative futures for Mongolia based on the most important

external inuences and the most important decisions.These scenarios are presented in the following

diagram

Nine White Banners

High commodity demand / Long-term investments

Business, social and political leaders work

together to build a positive future that can be

shared by all Mongolians.

Storm of GobiHigh commodity demand / Short-term

opportunities

The gap between rich and poor widens, and

competitiveness falters as oligarchs and

foreign inuences use political and economic

power for personal gain.

Disappointed DreamsModerate commodity demand / Short-term

opportunities

An ultranationalist party comes to power as

international support falters and antipathy

increases toward government and private

enterprise.

Future PromiseModerate commodity demand / Long-term

investments

Mongolian leaders join together to create a

shared vision and plan to build an economy that

is more open, educated and competitive.

Commodity demandModerate High

Long- term investment

Short-term opportunities

High/Volatile

Focusof

Mongolianlea

ders


4/13


6 7

Erly wrnng system

The scenarios represent four very diff erent, very challenging and yet plausible worlds that stakeholders

in Mongolia may face in the future. Thus, with the help of the participants, we have come up with a

list of Early Warning Signs that provide an indication to identify the path Mongolia is on.

Annex. List of early warning system

FuTuRE PROMiSEPoltcs

Governance is transparent with increased civic participationRule of law is consolidated

Public service is prompt and transparentEconomy

State involvement is minimal with more opportunites for private sec-

tor participationSectors other than mining, especially agricultural sector experiences

rapid growth. Exports of wool, cashmere and leather products in-crease

Stable MNT exchange rate with low inationTransparent and accountable budget management. The Governmentdebth will increase (by issuing bonds etc.), but the proceeds shall

only be invested in highly protable projects.The environment for investment improves, with nancial and capital

markets expands.Enronment

Social movements against environmental degradation will heighten

due to insufcient environmental rehabilitation from mining activi-ties.

Water prices surge and water saving movements begin due to declinein water reserves.

Socety

Strong middle class. Strong enforcement of quality standarts for com-modities and servies.

Advancement in education system and quality.Increase in employment. Cash hadnouts cease to exist, with only

targeted welfare programs for those in-need.infrstrctre

Major energy projects implemented jointly with foreign investors,

with national energy demand fullled domestically.Investments in road and rail networks expand, and budget income is

supplemented through transportation and transit services.Science and technology are prioritized by the state, with knowledge-intensive industries and their exports being under special state con-

sideration.

9 WHiTE BaNNERSPoltcs

Political stability and good governance are prevailing.

Clear and stable legal framework is materilizing.High quality public service.

Economcs

Public and private partnership will be introduced and employed broadly.Large income inux due to the mining boom. More value added products are

being producedSigns of Dutch Desease will be observed. MNT gains, surging ination.

Large sums from the National Wealth Fund would be invested in other sectorsas well as to markets abroad. The Government will turn out to be extravagant,investing even in not so protable projects.

As foreign investment pour in, nancial sector will grow to be healthy withample supply of funds.

EnronmentCompanies will have higher social responsibility, implementing various greenprojects. Environmental rehabilitation from mining activities is executed in high

quality.Water purication and recycling are broadly used. Clean water reserves will

increase.Socety

Even though Mongolia would be a high cost country, Mongolians will have a suf-

cient income that can support a high standard of living. Consumption of luxurygoods and services will increase.

High number of Mongolian students would be studying in top universities ofthe world.

Supply of professional workforce with higher level of education will increase. Av-erage wage and welfare amount would be similar to those developed countries.People will start to show signs of laziness and inactivity.

infrstrctreCoal liquefaction and renewable energy technologies will be introduced. Mongo-

lia will become an energy exporting nation.Road and transport sector will be developed into a world class system.Large amount of investment is made in developing scientic infrastructure. The

nation strives to be a knowledge-based economy.

DiSaPPOiNTED DREaMS

PoltcsPolitical instability.

Uncertain legal environment.An ultra-nationalist, Populist Political Party would claim resources under

state authority.Economy

State intervention overwhelms the private sector.

Mining sector in a state of decline, the whole economy is supported bylivestock and agricultural i ndustry.

Deation rises and industrial output drops..Economic and nancial crises is caused by dual decits in budgetand foreign trade.

By pressuring and turning foreign investors out, Mongolia faces stag-gering amount of penalties due to breaches of contracts.

EnronmentEnvironmental pollution peaks due to a vast number of closed andpoorly rehabilitated mines..

Contagious diseases are frequent due to drinking water scarcity andpollution.

SocetyMongolia faces poverty and famine, internal struggles and clashes. Com-modities including food, water, energy and other imported goods are scarce.

Education and health sectors are in ruins.

Mass unemployment leads to increased alcoholism and crime rate whileleaders will continue with their populist promises. Freedom of speech is

halted in order to suppress social outrage.infrstrctre

Declines in imports will lead to energy scarcity.

Insufcient funds for infrastructure investment. Outdated and wreckedroads and railroads are no longer suitable for use.

Technological and scientic research are long forgotten..

STORM OF GOBi

PoltcsMongolian politics is dominated by the interests of oligarchic businesses and

political power. Fight for control results in unstable and corrupt politics.Distorted and unstable legal environment.

State intervention reaches its worst, with overabundance of bureaucracy andpressure, resulting in widespread corruption.

Economcs

Economy now rests in the hands of a few political gures, oligarchs and mo-nopolies.

Economy is dependent solely on mining and resource exports.Rapid growth of ination.Overwhelming increases in the budget decit and foreign debt.

Even though a large amount of income keeps owing, it is pocketed by a limitednumber of politicians and foreign investors. Shadow economy expands.

EnronmentDue to unregulated mining activities, environmental degradation and deserti-cation become increasingly common.

Widespread water scarcity.Socety

Due to unregulated mining activities, environmental degradation and deserti-cation become increasingly common.Quality of public schools declines leading to be frequent strikes by teachers.

Children of the afuent will attend exclusive private schools or schools abroad.Even though there are vast numbers of unemployed Mongolians, mining and

construction sectors would employ equally large number of Chinese migrantworkers.

infrstrctreEnergy imports increase, domestic energy market is now fully dependent onimport

Construction of roads and rails intended only for transportation of minerals.Due to low quality and poor maintenance of other infrastructure, costs related

to damage and to the environment increase..Technological and scientic infrastructure are gravely outdated; Mongolia fallsfar behind when compared to world advancements.

Box 2. Mining as Mongolias main economic driver

Due to the huge mining developments underway, Mongolias economy has beenexperiencing rapid growth in recent years. Mining currently accounts for about 20%of GDP, 60% of industry, and 90% of exports. Hence, it is appropriate to considermining as Mongolias economic driver.

Mongolian GDP growth

Share of the mining industry for Mongolias GDP, Industry and Exports

Unfortunately, over-dependence on mining is already taking its toll on the Mongolianeconomy through uctuations of world commodity prices. For instance, economicgrowth fell from 17.3% in 2011 to 12.3% in 2012 due to volatility in the miningindustry. Moreover, Mongolias export and budget income shrank in the rst half of2013 due to the decrease in coal demands and prices caused by Chinese economicslowdown. In the rst quarter of 2013, GDP growth was a mere 7.2% from theyear before. In addition, due to a dual decit in the government budget and tradebalance MNT rate fell drastically against USD and other major currencies.

In order to maintain a reasonable economic growth pace and to achieve sustainablegrowth, Mongolia still needs to shed its over-dependence on mining by providing thenecessary support to other sectors.

There were many great ideas proposed by workshops participants during discussions.This included establishing a sovereign wealth fund, developing Mongolias agricultureand tourism sectors, and supporting a knowledge-based economic structure. Theseideas are considered in the Solving the Problems sections for each of the scenariosbelow.

-5

0

5

10

15

20

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

in percentage

0

10

20

30

40

50

60

70

80

90

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP

Industry

Export


5/13


8

The list of Early Warning Signs identied in the workshops and included here provides us with

an indication that Mongolia is heading in a particular direction towards one of the scenarios.

However, it is not complete; indeed, no list of early warning signs ever can be fully complete.

The purpose of the Early Warning System process is to broaden and to enrich the list of early

indicators by monitoring the changing environment over time.

During the second workshop on July 5, by accessing the list of Early Warning Signs participants

identied Mongolias current development tendency. By giving scores from 1 to 5 to each of the

16 signs for all 4 scenarios, participants agreed that most of the indications are pointing towards

the direction of the Storm of Gobi more than the other scenarios. On the other hand, there were

some strong and some early signs for the other three scenarios: Nine White Banners, The Future

Promise and the Disappointed Dreams. The results of the questionnaries are presented in the

Early Warning Signs part of the analysis for each scenario below.

Solng the Problems

Anything can happen in the future. Thus, to test and understand strategies under different

circumstances, the workshop participants identied issues and opportunities in each of the four

scenarios that Mongolia may face. Participants were then asked to come up with policies and

measures to overcome the issues, and strategies to employ the opportunities identied to foster a

better future for each of the scenarios.

MONGOLia iN 2025

annex (Erly wrnng sgn)


6/13


10

SCENaRiO 1: FuTuRE PROMiSE

Moderate commodity demand / Long-term investments

Ths s world n whch

The promise of Mongolias mineral wealth is deferred, as commodity demand declines gradually to

more moderate levels.

Economic, political and social pressures increase, leading to widespread recognition of the need for

reform.

Mongolian leaders join together to create a shared vision and plan to build an economy that is more

open, educated and competitive.

Tmelne

Erly Wrnng Sgns

Results of survey question Are these signs observed in Mongolia today

1 - Not observed

2 - Seldom observed

3 - Sometimes observed

4 - Often observed

5 - Always observed

Chinas economic growth slows;copper and coal prices declinegradually from their peak.

A new Parliament of technocrats is elected with amandate for targeted reforms this would begin with

judicial reform, measures to establish a sovereign wealthfund and plans for constructing infrastructure projects.

Government budget crisis, high-prolecorruption cases and continued povertyand/unemployment lead to widespreadcalls for reform.

2013 2025

Mongolia attracts global investment onthe basis of its stability and strategicplans for development.

Where there s wll, there s wy

10 11

Scenario 1: Future Promise

2,7

2,5

2,6

2,2

2,2

2,1

2,1

2,6

2,9

2,1

2,1

2,1

2,2

2,2

2,2

1,9

1 2 3 4 5

Governance is transparent with increased civic participation

Rule of law is consolidated

Public service is prompt and transparent

State involvement is minimal with more opportunites for private sector

participation

Sectors other than mining, especially agricultural sector experiences rapidgrowth. Exports of wool, cashmere and leather products increase

Stable MNT exchange rate with low inflation

Transparent and accountable budget management. The Government debtwill increase (by issuing bonds etc.), but the proceeds shall only be

The environment for investment improves, while the financial and capitalmarkets expands.

Social movements against environmental degradation will heighten due toinsufficient environmental rehabilitation from mining activities.

Water prices surge and water saving movements begin due to decline inwater reserves.

Strong middle class. Strong enforcement of quality standarts for

commodities and servies.

Advancement in education system and quality.

Increase in employment. Cash handouts cease to exist, with only targetedwelfare programs for those in-need.

Major energy projects implemented jointly with foreign investors, withnational energy demand fulfilled domestically.

Investments in road and rail networks expand, and budget income is

supplemented through transportation and transit services.

Science and technology are prioritized by the state, with knowledge-intensive industries and exports under special state consideration.

Future promise


7/13


12 13

isses nd Opportntes

Key sses: Key opportntes:

Drop in budget revenue Economic diversication

Increase in foreign debt Increasing private sector participation and initiatives

Social discontentGood governance

Rapid investment decline for a short period of time Capital market developmentGood practices on budget policy and planning areintroduced extensivelyForeign relations ourish

Solng the Problems

In this scenario, Mongolias leaders will have the necessary foresight and willingness to

promote sustainable development despite nancial limitations. Hence, it is necessary to

diversify the nancial sector, creating more income sources, and to increase private sector

participation. The following policies and steps were recommended:

1. Fosterng knowledge-bsed economy. Science and technological sectors are

priorities, and innovation is encouraged and supported. Only through such efforts will the

livestock and agriculture sector, and information technology sector be able to produce value

added products for export diversication. The following steps are recommended within this

policy:

Training of highly professional workforce, through improvements in education;

Developing innovation infrastructure, establishing science parks, research and

development centers, and technology transfer centers;

Provide incentives for the private sector to strive for innovation, pushing them to launch

new, competitive products for international markets.

2. Promotng prte sector prtcpton.The State should endeavor to share its load,

creating more opportunities for the private sector. Enforcement of laws on concessions, and

engaging private sector through public and private partnership are equally important.

3. Promotng trnsprency nd ncresng cc prtcpton:

-Consolidating rule of law. Private sector and civil society to monitor and engage in the

process of law drafting, debating, and adoption;

-Facilitating budget transparency. Create mechanisms where citizens, private sector, and

civil society are involved in the budget discussion, and are able to monitor its implementation.

This could be done by hosting regular open deliberations during budget planning;

-To instill the mindset I am a taxpayer. Thus, I must participate in budget decisions, and

support civic participation and initiatives. Initiate taxes for herders as to turn every working

person into a taxpayer.

4. Dersfyng the nncl mrket:

Since budget income is low and foreign investment has declined under this scenario,

the Government should lead the way in employing its own nancial tools (issuing bond

on international markets etc.), providing necessary opportunities and assistance to the

private sector;

-

-

-

-

Strengthening capital markets;

Improving the insurance systems;

Facilitate the establishment of venture investment funds, and support innovation;

Attract international investment banks through favorable conditions.

5. Dscoerng new mrkets. Closely observe foreign relations and regional cooperation.

Initiate free trade agreements, and discover new markets for Mongolian exports.

-

-

-

-

Scenario 1: Future Promise


8/13


14 15

Scenro 2: Nne Whte Bnners

High commodity demand / Long-term investments

Ths s world n whch

The promise of Mongolians mineral wealth is fullled, with high levels of demand for commodities,

particularly from China.

Pressures of growth create widespread challenges ination, currency appreciation, social turmoil

and resource constraints.

In the midst of these pressures, business, social and political leaders work together to build a

positive future that can be shared by all Mongolians.

Tmelne

Erly Wrnng Sgns


1 - Not observed

2 - Seldom observed


4 - Often observed

5 - Always observed

China achieves strong growth andpolitical stability smooth transferof power, as controlled expansionextends across Chinese provinces(including inner Mongolia).

Leaders ght special interests and join withtechnical experts to build competitiveness

sovereign wealth fund, free tradeagreements, and productive investments ineducation, healthcare and infrastructure.

Mongolian mining surges severe case of Dutchdisease takes hold, with growing wealth, needfor skilled workforce and clear evidence of failednational leadership.

2013 2025

Growth brings both opportunities andchallenges economic development,political power, social change,environmental vulnerability andpressures to control resources.

Mongolians manage growth to become globalleaders in mining and a model for resource-driven development.

Scenario 2:Nine White Banners

a rsng tde lfts ll bots

2,3

1,9

1,9

2,1

2,2

2,4

2,3

2,2

2,0

1,9

2,1

2,7

2,2

2,1

2,2

2,2

1 2 3 4 5

Politicalstability and good governance areprevailing.

Clear and stablelegal framework is materilizing.

High qualityp ublicservices.

Publicand privatepa rtnership willb eintroduced and employed broadly.

Largeincomeinfluxdue totheminingboom. More valueadded products arebeingproduced

Signs ofDutch Deseasewillbe observed. MNT gains, surginginflation.

Largesums from the Soveriegn Wealth Fund would beinvested in other sectors as well

as to markets abroad. TheGovernment will turn out to beextravagant, investingevenin not sop rofitableprojects.

As foreign investment pour in, financialsector willgrow tobe healthy with amplesupplyoffunds.

Companies willhavehigher socialresponsibility, implementingvarious greenprojects. Environmentalrehabilitation from mining activities is executed in high

quality.

Water purification and recyclingare broadlyu sed. Clean water reserves will increase.

Even though Mongolia would bea high cost country, Mongolians will havea sufficientincomethat can support a high standard ofliving. Consumption ofluxury goods and

services will increase.

High number of Mongolian students would bestudying in top universities ofthe world.

Supplyof professionalworkforce with higher levelof education willincrease. Averagewagean d welfarea mount would besimilar tothos edeveloped countries. Peoplewill

start toshow signs of laziness and inactivity.

Coalliquefaction and renewableenergy technologies willbe introduced. Mongolia willbecomea n energyexporting nation.

Road and transport sector willbe developed intoa world class system.

Nine White banners

Large amount ofinvestment ismade in developingscientic infrastructure.The

nationstrivesto be a knowledge-basedeconomy.


9/13


16 17

isses nd Opportntes


Low economic diversication Good nancial capabilities

Environmental degradation Green development

Increase in laziness due to rel iance on mining sector Proper income distribution mechanism

Growing pains or insufcient resources to catch up with rapideconomic growth (workforce etc.)

High quality standards

Signs of Dutch disease Well-developed infrastructure

Risk of unprotable investments Good governance

Human development, humane society

Solng the problems

Mongolians can learn from the United Arab Emirates, a prime example of how this scenariocan eventuate. Afuent and well-off Mongolians are likely to face the risk of employingimmigrant workers for blue collar jobs, with local Mongolians soon becoming lazy andself-indulgence due. The following policies and programs are recommended:

1. Mntnng nd fosterng trdtonl modes of thnkng nd lng.Since therewould be great nancial capabilities to back various projects, Educated Mongolian programshould be launched to promote higher level education, productivity, and creativity amongMongolians. Within this framework, the following measures are recommended:

Implementing programs intended at motivating Mongolians to learn, to strive for higher

education, and to work productively;

Support Mongolian families;

Proper control over immigrants and migrant workers;

Maintaining and further promoting national traditions, culture, and heritage.

2. accmlte sngs. Creating sufcient savings is essential in ensuring not only thepresent happiness but also the future wellbeing of Mongolia. Along with smart and savvywealth management and risk management, the following steps should be implemented:

Certain percentage of income to be accumulated in a sovereign wealth fund for possible

future predicaments;

Turn cash from wealth funds into tangible wealth in order to ensure future wealth.

Invest in top companies of the world at that time;

3. Economc derscton.Devote mining incomes to strengthen other vital sectors:

Creating and fortifying knowledge-based economy;

Supporting industries with value-added output;

Developing animal, agriculture, light industry, and tourism sectors.

4. Perfectng the ccontblty mechnsm. Effective accountability mechanismsshould be introduced, and political, economic, and social transparency should be upheld.Civil society as well as NGOs should join forces in monitoring the activities of the state, and

building of the capacity of citizens as well as themselves.

-

-

-

-

-

-

-

-

-

SCENaRiO 3: STORM OF GOBi

High commodity demand / Short-term opportunities

Ths s world n whch

The promise of Mongolias mineral wealth is supported by high yet volatile demand forcommodities.

A global battle for control of resources leads to expanded corruption and exploitation by forces bothinside and outside Mongolia.

The gap between rich and poor widens, and competitiveness falters as oligarchs and foreign inuences

use political and economic power for personal gain.

a mss s s good s mle

Scenario 3:Storm of Gobi


10/13


18 19

Tmelne

Erly Wrnng Sgns


1 - Not observed

2 - Seldom observed


4 - Often observed

5 - Always observed

Global economic recovery andcontinued growth of Chinaincrease demand for copper.

Growing income disparity asthe resource curse takes hold

politicians continue spending.

Mongolian politics is dominated bya ght for control, with widespreadcorruption and a blurring of businessand political power.

2013 2025

Exploitation by foreigninterests is clear, with ghtfor control of resources.

Economy is controlled by oligarchs anddominated by mining and government.

isses nd Opportntes


Resource curse Increased FDI in mining

Social inequality, increasing gap between rich and poor Investment in infrastructure

Populism, oligarchs in business and politics Pre-conditions for reform

Corruption and bribery

Outow on wealth and money

Ecological degradation

Falling into the mercy of major investors

Solng the problems

As the gravest challenge in this scenario is the resource curse, it would be most important

to overcome this condition. The operations of major mines as well as the distribution of

income must become more transparent and open to the public, so that a broader range of

stakeholders can be engaged in monitoring and control. Tax mechanisms and policies must

be upgraded to expose the shadow economy.

1. Fosterng trnsprent nd responsble mnng sector:

Laws should be strictly enforced. Serious retributions should be forced for crimes such as

illegal exploration and extraction of minerals, and illegal spending of mining-generated

income.

Proper use of resources and manufacturing of value-added products should receive

state support;

Strengthening corporate social responsibility. There should be assistance with facilitation

and capacity building for citizens in overseeing operations of mining companies.

2. Proper spendng of ncome:

Establishment and effective management of sovereign wealth funds;

Only invest in protable projects which would benet the whole society;

Civic monitoring and control over the budget planning and sovereign wealth fund

spending.

3. Spport ndstrlzton nd mport sbsttton

Trade tax subsidies;

Promote a highly professional workforce. Provide student loans to send students to

universities abroad. Establish high quality vocational institutes such as the Mongol-

German Technological University, offering positions for international professors and

academics, and providing jobs for graduates.

-

-

-

-

-

-

-

-

Scenario 3:Storm of Gobi

2,3

2,5

2,4

2,9

3,6

2,8

2,7

2,4

2,6

2,4

2,1

2,6

2,5

2,2

2,3

2,1

1 2 3 4 5

Mongolian politics is dominated by the interests of oligarchic businesses and politicalpower. Fight for control results in unstable and corrupt politics.

Distorted and unstable legal environment.

State intervention reaches its worst, with overabundance of bureaucracy and pressure,

resulting in widespread corruption.

Economy now rests in the hand s of a few political figures, oligarchs and monopolies.

Economy is dependent solely on mining and resource exports.

Rapid growth of inflation.

Overwhelming increases in the budget deficit and foreign debt.

Even though a large amount of income keeps flowing, it is pocketed by a limited

number of politicians and foreign investors. Shadow economy expands.

Due to unregulated mining activities, environmental d egradation and desertification

become increasingly common.

Widespread water scarcity

Due to unregulated mining activities, environmental d egradation and desertificationbecome increasingly common.

Quality of public schools declines leading to frequent strikes by teachers. Children ofthe affluent will attend exclusive private schools or schools abroad.

Even though there are vast numbers of unemployed Mongolians, mining andconstruction sectors would employ equally large number of Chinese migrant workers.

Energy imports increase, domestic energy market is now fully dependent on imports

Construction of roads and rails intended only for transportation of minerals. Due to

low quality and poor maintenance of other infrastructur e, costs related to damage

Technological and scientific infrastructure are gravely outdated; Mongolia falls farbehind when compared to world advancements.

Storm of Gobi


11/13


12/13


13/13


24

NEXT STEPS

We would never want to live in world similar to The Storm of Gobi, where politicians and

oligarchs employ economic power for their own interest, and where there is excessive

income disparity. However, some signs indicating the emergence of such a future are

already beginning to become visible. Workshop participants unanimously stressed that

the economy is becoming more and more dependent on mining and resource exports,while ination increases, and budget and foreign trade decits soar. Development

policies deviate and change depending on which political party is in power, with an

unstable and unclear legal framework. As previously mentioned, results of our survey

of participants show that all these signs suggest Mongolia is heading towards the Storm

of Gobi scenario. In other words, the Early Warning System warns us that we are on a

wrong path.

Then, what should we do to get on the path to the most favorable scenario, Nine White

Banners? We have begun a discussion about the establishment of sovereign wealth

funds. Talks have been held on reinforcing sectors other than mining, and economic

diversication. Students studying at top universities of the world are to receive fullnancial support from the state. We also aim to create a knowledge-based economy. Such

policies directed at future well-being could lay the grounds for Mongolias development.

Yet, even the scenario Nine White Banners has its issues and disadvantages. Then

what should we do in order to maintain a prosperous future?

It should be noted that some of the participants observed that the scenario Nine White

Banners greatly reminded them of objectives put forward on the Mongolias Millennium

Development Goals based Comprehensive National Development Strategy. Moreover,

initiatives of the New Government for Changes (i.e. the Democratic Party Government

formed in 2012) for economic diversication was deemed to lead towards to scenario

Future Promise. In other words, we do have good medium to long term policies in

place. But the question remains on how effectively they are being implemented, and

how to make them even better. And to answer these questions, we can employ our

scenarios.

As scenarios are not predictions, it is highly unlikely that any of these scenarios will

emerge exactly as they have been foretold. Rather the future will most likely consist of

some combination of all of these scenarios to different degrees. However, as scenarios

can answer the question What if?, we can use them to explore a wide range of

uncertainties at the global and local levels and to cast forecasts on what might happen

in the future. Hence, we can be prepared for uncertainties in the future, and to take

appropriate action if need be.

Where do the current signs in political, social, and economic sphere lead us? How do

we correct it, if we are on the wrong path? How to correct it, if we are on the wrong

path? What should we do to create a brighter, more prosperous future? This booklet

is a product of intense discussions our participants had on these important subjects.

Using these four scenarios on the future Mongolia, you could also try to answer these

questions yourself. Are you full of ideas on how to make our future even better? Then

we are happy to inform that you are welcome to participate in our next round of

discussions.

Using scenro plnnng, many more rounds of talks will be held on ways and

means to foster the sustainable and long-term development for our country. Because

circumstances and situations surrounding us evolve and change constantly, we will

revisit these scenarios annually, and renew our list of prevention signs to once again

assess if we are still on the right path.

“Scenarios for Mongolia: Building a Positive Future” guidebook

Documents

Transcript of “Scenarios for Mongolia: Building a Positive Future” guidebook