Ard Hold­ings is an in­sti­tu­tional in­vestor cur­rently striv­ing to be­come listed on the Mon­go­lian Stock Ex­change (MSE) through a merger with In­vestor Na­tion, one of its mi­nor­ity sub­si­dies.

The UB Post sat down with CEO of Ard Hold­ings and for­mer Vice Fi­nance Min­is­ter Ch.Gankhuyag to dis­cuss the pro­posed merger and re­v­erse takeover of their com­pa­nies.

As a pre­lude to the in­ter­view, Ch.Gankhuyag briefly in­tro­duced his com­pany and its op­er­a­tions.

“Our com­pany, as Mon­go­lians work for the Mon­go­lian peo­ple, which is the mean­ing of our name in Mon­go­lian, the peo­ple. Pre­vi­ously, I used to work for for­eign in­sti­tu­tional in­vestors, hav­ing es­tab­lished Khas Bank for ex­am­ple. We don’t want the Mon­go­lian peo­ple just to be cus­tomers at a bank, tak­ing out loans, re­ceiv­ing a card, and pay­ing fees. The main idea of our fi­nan­cial in­sti­tu­tion is that we want the Mon­go­lian peo­ple to have own­er­ship,” he said.

The fol­low­ing in­ter­view ex­plores what CEO Ch.Gankhuyag sees in store for Ard Hold­ings while also un­cov­er­ing the opinion of the for­mer Vice Fi­nance Min­is­ter on eco­nomic top­ics of rel­e­vance.

What is the main goal you have in mind when you launch a re­v­erse takeover (RTO) for In­vestor Na­tion and even­tu­ally Ard Fi­nan­cial Hold­ings?

The main goal is to en­able the Mon­go­lian peo­ple who al­ready have own­er­ship stakes in In­vestor Na­tion and Ard Hold­ings to trade their shares on the des­ig­nated mar­ket place, MSE.

Has the fact that the Mon­go­lian Stock Ex­change is state-owned brought on any ob­sta­cles to your pro­posed RTO?

I would say MSE has been very forth­com­ing and wel­com­ing to our ap­proach to list on shares on MSE. Right now, the matter is be­ing looked at by the Fi­nan­cial Reg­u­la­tory Com­mis­sion (FRC). I just had a meet­ing yes­ter­day with the Chair­man of FRC, S.Davaa­suren, and we hope that the com­mis­sion will is­sue the ap­proval to go ahead with first In­vestor Na­tion and then with Ard Hold­ing’s RTO. This is an un­prece­dented event in Mon­go­lia. We hope that our cur­rent ex­ist­ing 3,000 share­hold­ers will be able to go and trade their shares, in­stead what is hap­pen­ing right now is that share­hold­ers trade their shares in the com­pany head­quar­ters in an un­reg­u­lated way. We want to bring our shares to the mar­ket­place.

You have been pub­li­cally crit­i­cal of the gov­ern­ment’s han­dling of the Er­denes Ta­van Tol­goi shares. Both MSE and Er­denes Ta­van Tol­goi are state-owned. Do you think that pri­va­tiz­ing MSE will pro­mote bet­ter trans­parency per­tain­ing to th­ese shares and trad­ing in gen­eral?

I think the stock ex­change should be in pri­vate hands as well as any other com­pany that op­er­ates in the fi­nan­cial ser­vices sphere. The public owns about 15 per­cent of Er­denes Ta­van Tol­goi. Con­sec­u­tive gov­ern­ments have vi­o­lated mi­nor­ity share­hold­ers or Mon­go­lian cit­i­zens’ rights for the last six or seven years. We need to cure this sit­u­a­tion re­gard­less of who owns MSE. As it comes to the pri­va­ti­za­tion of the stock ex­change, we need to look at clean­ing house in the Mon­go­lian Cen­tral Se­cu­ri­ties De­pos­i­tory. The ex­change and the de­pos­i­tory are sis­ter or­ga­ni­za­tions. We need to take th­ese two in­sti­tu­tions away from the con­trol of the Min­istry of Fi­nance. The bu­reau­crats who are sit­ting on the board of both the de­pos­i­tory and the ex­change right now are not ca­pa­ble of tak­ing th­ese in­sti­tu­tions to its next stages of de­vel­op­ment.

Sta­tis­tics show that only three per­cent of Mon­go­lians own 80 per­cent of the sav­ings in the coun­try. Do you think im­prov­ing aware­ness about trad­ing stocks or shift­ing as­sets into

Re­gard­ing the pri­va­ti­za­tions of state-owned en­ter­prises, I be­lieve the process should be done through a pro­posal I made sev­eral months ago. That is com­bin­ing pri­va­ti­za­tion with the pen­sion over­haul. Ini­tially, state owned com­pa­nies can be in­cor­po­rated into the pen­sion fund. Hav­ing a large pen­sion fund will boost the econ­omy and the de­vel­op­ment of the fi­nan­cial sec­tor while also giv­ing con­fi­dence to the peo­ple in their pen­sion fund. The rev­enues of the state-owned en­ter­prises will back cur­rent monthly con­tri­bu­tions. It is not pri­va­ti­za­tion; it should be called a state pen­sion fund. The gov­ern­ment and Par­lia­ment should still re­tain over­sight and con­trol over this en­tity but we will have to have a clear pol­icy on how to go about pri­va­ti­za­tion of en­ter­prises that are owned by the gov­ern­ment.

In ad­di­tion, the state bud­get and the pen­sion fund will fi­nally be sep­a­rate. Cur­rently, the state bud­get or tax­pay­ers con­trib­ute 700 bil­lion MNT to 800 bil­lion MNT an­nu­ally as sub­si­dies to the pen­sion fund. That is­sue will be ad­dressed with the pro­gram I am propos­ing.

In terms of long-term sav­ings, our com­pany Ard In­sur­ance has pi­loted pri­vate pen­sion funds start­ing in 2007. Peo­ple make monthly con­tri­bu­tions to the fund which is a long-term sav­ings pro­gram and also serves as life in­sur­ance. It is a mix­ture of life in­sur­ance, long-term sav­ings, and the pen­sion pro­gram. We have 800 ac­tive sub­scribers to this pro­gram.

I be­lieve that Mon­go­lians do un­der­stand the im­por­tance of sav­ings but do not earn enough to save and that is­sue needs to be ad­dressed. The public needs to be ed­u­cated about fi­nan­cial ser­vices and prod­ucts, and need to un­der­stand the prod­ucts in the mar­ket be­fore they make so­phis­ti­cated fi­nan­cial de­ci­sions.

As you know, Mon­go­lia has up­com­ing bond debt obli­ga­tions of 660 mil­lion USD in 2018. The coun­try has fallen into a debt cy­cle, re­fi­nanc­ing bonds when it ma­tures through new sov­er­eign bonds. As an ex­ec­u­tive ac­tive in the fi­nan­cial sec­tor, do you see Mon­go­lia es­cap­ing this debt cy­cle?

The gov­ern­ment should ap­proach the debt very re­spon­si­bly. The is­sue of ac­count­abil­ity and re­spon­si­bil­ity should be brought up. 1.5 bil­lion USD raised through the bond, where did it go? Who took loans? Which projects did we fi­nance? Are th­ese projects pay­ing back?

We need to make sure the sources of re­pay­ment are very clear be­fore is­su­ing any bonds. It is not fair if the gov­ern­ment bor­rows 1.5 bil­lion USD and asks all tax­pay­ers to carry the bur­den.

Dig­ging into who in­curred how much debt to fi­nance what is a more philo­soph­i­cal ap­proach. The prac­ti­cal ap­proach would be to cut ex­pen­di­ture in the bud­get, stop distribut­ing money and hand­outs. We should not even start dis­cussing salaries of civil ser­vants. All that money that is saved needs to be con­trib­uted to the bond re­pay­ment. Any­thing that is left needs to be re­fi­nanced or re­struc­tured.

In this ca­pac­ity, do you think the ex­tended fund fa­cil­ity pro­gram with the In­ter­na­tional Mone­tary Fund (IMF) is a pos­i­tive for the econ­omy?

It is a must. I am happy that Prime Min­is­ter U.Khurel­sukh’s first meet­ings was to in­vite the IMF and [af­firm] his com­mit­ment to the pro­gram. As a coun­try we should stay fi­nan­cially smart and dis­ci­plined. We should not stop spend­ing be­cause IMF told us to. We should spend wisely. Even­tu­ally, we should spend money to in­crease salaries of civil ser­vants in or­der to cre­ate a bet­ter, more ef­fi­cient gov­ern­ment. We might need fewer peo­ple in the gov­ern­ment if we pay ad­e­quate salaries. We can­not talk about strong and ef­fi­cient gov­ern­ment while pay­ing civil ser­vants pen­nies. Look­ing at the case of Sin­ga­pore, the best and the bright­est go to work in the gov­ern­ment. Not be­cause they want to be­come cor­rupt of­fi­cials but they can earn a good liv­ing. In this eco­nomic cli­mate, I’m not say­ing to in­crease salaries right now.

One matter and in fact the only matter that I agreed with Pres­i­dent Kh.Bat­tulga on is the fact that we need to ne­go­ti­ate with IMF. We should pro­tect our sov­er­eign in­ter­ests. I don’t agree with his stance that Mon­go­lia should start kick­ing out in­vestors, stop im­port­ing and start pro­duc­ing ev­ery­thing here in Mon­go­lia. Par­tic­u­larly, I don’t want Mon­go­lians to be­come in­volved in cheap labor-in­ten­sive in­dus­tries.

You said you op­pose the pro­tec­tion­ist and na­tion­al­ist rhetoric, es­pe­cially those used by Pres­i­dent Kh.Bat­tulga. Re­cently, the prospect of al­low­ing for­eign banks such as Bank of China and ING to op­er­ate in Mon­go­lia through a pro­posed bill on in­vest­ment bank­ing has been dis­cussed. What are your thoughts on this is­sue?

I think for­eign banks can op­er­ate here and there should be an even play­ing field for all busi­ness en­ti­ties in Mon­go­lia. How­ever, we can­not let for­eign gov­ern­ment-owned banks op­er­ate in Mon­go­lia. The sov­er­eign pol­icy of Mon­go­lia should be dic­tated by Mon­go­lians and not Bei­jing or Moscow. Pri­vate banks should be wel­come to op­er­ate in Mon­go­lia and this is a com­pro­mise that I be­lieve we can make. We have banks that are owned by for­eign­ers but we don’t have a for­eign state-owned bank op­er­at­ing here. That should stay this way.

You men­tioned block chain tech­nol­ogy, which ba­si­cally em­ploys a public ledger that makes all trans­ac­tions ac­ces­si­ble to ev­ery­one. Do you think that block chain tech­nol­ogy could be in­cor­po­rated into the ac­tiv­i­ties of your com­pany or in Mon­go­lia in gen­eral?

I think the gov­ern­ment should se­ri­ously look at this is­sue. While Mon­go­lians are busy fight­ing their po­lit­i­cal games and get­ting en­gaged in pop­ulist agen­das, the world is mov­ing ahead.

In terms of crypto cur­ren­cies, just re­cently, we en­abled the first trans­ac­tions us­ing bit­coins in Mon­go­lia. We want to fo­cus on this area and I in­vite all uni­ver­si­ties, academia, and busi­nesses to come to­gether and make Mon­go­lia one of the pioneering en­vi­ron­ments sup­port­ive of this de­vel­op­ment. This is one area where we can com­pete.

Our com­pany has made ef­forts to keep up with mod­ern tech­no­log­i­cal ad­vance­ments in the fi­nan­cial sec­tor. Mon­go­lians are fall­ing be­hind in mod­ern ad­vance­ments of crypto cur­ren­cies, block chain tech­nol­ogy, ar­ti­fi­cial in­tel­li­gence, and the in­ter­net of things. Ard Fi­nan­cial Group has been ad­vo­cat­ing more de­voted re­search into th­ese types of new tech­nolo­gies.

...The bu­reau­crats who are sit­ting on the board of both the de­pos­i­tory and the ex­change right now are not ca­pa­ble of tak­ing th­ese in­sti­tu­tions to its next stages of de­vel­op­ment...

more long-term prospects will help im­prove this sit­u­a­tion?

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