State-owned organizations working inefficiently
Minister and Chief Cabinet Secretary D.Amarbayasgalan gave a speech at the beginning of the conference “Revival of SOEs”. He said, “It is necessary to focus on increasing the efficiency of state-owned enterprises. According to the report on the assets of state-owned companies, while the GDP of our country is 52.9 trillion MNT, the total assets of state-owned companies operating in Mongolia are 59.2 trillion MNT. Basically, it exceeded the GDP by 12 percent and there was an indication that huge property was concentrated.”
“According to a study conducted by the European Bank for Reconstruction and Development in developing economies, state-owned companies account for about 47 percent of GDP in other countries. However, it was concluded that ours has reached 112 percent, which means we have huge state-owned companies and assets.”
Looking at the amount and period of capital increase, SOEs’ capital has increased by 9.4 percent in the last 10 years. It has increased by 2.8 times in the last five years.
On the other hand, it shows SOEs’ too much influence on the private sector and in the free economic market, the minister said.
He also mentioned that, state-owned companies, which were 104 in 2021 and 105 in 2022, are now listed as 98 companies according to National Statistics Office. In specific, from the 98, 45 had a profit while 53 operated with a loss.
The total profit of SOEs is 2.1 trillion MNT, 1.9 trillion MNT of it was generated by “Erdenet Mining Corporation” and “Erdenes Tavan Tolgoi”. The remaining 200 billion MNT are generated by the remaining 96 SOEs. Rather than saying that it is a low profit, it should be understood as a number that shows that SOEs are working less efficiently.
He then continued, “It is believed that it is appropriate to clarify the activities, to merge companies that operate in a similar way, to ensure that the SOEs do not compete with the private sector, and to give business projects that the government does not necessarily need to go to the private sector.”
Therefore, transparency of state-owned companies is important. Complaints about state-owned companies being corrupt, bureaucratic and inefficient, and doing all the work in front of the private sector have been reported not only by citizens, but also by international organizations.
People believe that the governance and policies of SOEs are not transparent. Issues on who works, how they were chosen, and the ability of those were discussed. It has been studied that it is advisable to take two to three stage policy measures to improve management within the reform policy of state-owned legal entities.
The number one goal is to turn Erdenes Mongolia into an investment company with real management and to be able to compete at the international level. Unfortunately, since its inception, the association has not been able to perform its duties as a union. It receives support from subsidiary companies. In the future, Erdenes Mongolia should work as a union within 32 companies. Also, the union will adhere to the government’s obligation to completely renounce the decision to establish any form of SOE or to establish a unit to implement any project or program. If it is considered to be economically profitable and it is possible to cooperate with investors, the board of directors can decide and act.
There are 108 units of local ownership under Ulaanbaatar city. The government is trying to make it 55. Nine types of services will be transferred to private units including landscaping companies, sewage companies, and road maintenance companies.
Also, the government will abandon the status of evaluating ministries and move to a state where ministries meet their own goals. In other words, the Ministry of Economic Development will create an evaluation system based on many contexts, such as what goals have been set and how much the economy has grown. Otherwise, the Ministry of Justice and the Ministry of Defense cannot be compared. This will be reflected in state-owned companies, he added.