Competitive industries require good leadership not hand-outs
Earlier this week I was fortunate enough to take part in one of the most important economic events of the year in Mongolia, the Mongolia Economic Forum 2013. While I was impressed with the range and professionalism of the Mongolian companies present at the event, what caught my attention was the overwhelming number of companies requesting for government support in their respective fields of operation despite the fact that the majority of analysts, and even the President of Mongolia himself, believe that State intervention is the biggest risk in holding back economic growth.
The Mongolia Economic Forum is an annual event in which the private and public sectors get together, along with representatives of civil society, to discuss the best way forward for the Mongolian economy. The goal of this year’s forum was to discuss the possibilities for diversifying the economy and for establishing a Mongolian brand on the world market. The most prominent sectors of Mongolia’s economy were represented at the forum, including the wool, cashmere and leather industry, the textiles and clothing industry, the travel and tourism industry, and the meat and dairy industry, and all displayed what they had to offer, eager to prove that they have what it takes to be the face of Mongolia. It was a bit like one of those Reality TV shows where the winner becomes a star, except that in this case the prize that they were all clamouring for was support from the government.
Some people might not see anything wrong with this, but I think asking for government assistance is unfair as it results in a handful of business sectors receiving subsidies and grants, while other sectors are forced to succeed, or fail, on their own.
At the Mongolia Economic Forum, the delegates all wanted support and assistance from the state, whether it be tax exemption or grants. There were delegates from sectors such as textiles and electronics complaining that they had not received subsidies for twenty years while other sectors regularly receive subsidies and grants from the State.
One example of government support, is the initiative being implemented currently to support the wool, cashmere and leather industry. Under this initiative, herders receive 2,000 to 3,000 MNT (depending on the quality) for each kilogram of wool and animal skin they sell, on top of the price of the wool and skin, and they receive 200 to 300 MNT for each kilogram of meat they sell, on top of the price of the meat they sell. Other sectors don’t receive such grants.
To be fair to everyone, the government should stop handing out subsidies and privileges altogether. Unfortunately, the problem is that Mongolia’s national producers need support to prevent being out-competed by larger foreign industries. This is due to the fact that mass production is much cheaper per product than the small scale production of Mongolia’s producers. There is no doubt that if Mongolia’s producers are not aided by the government, it will be difficult for most to compete on the world market, and for some it would take a miracle to be able to establish a well-known brand.
But from a business point of view, competition is a beneficial thing. The business environment, like nature itself, is unforgiving and impartial. Only those that can produce the highest quality products and services, at the lowest cost, can survive. To survive and thrive in the world of business, one must be innovative, astute and, most of all, productive. Competition weeds out the bad from the good. Sometimes even losing in a competitive market is not necessarily a bad thing because companies merge with their competitors, and the companies that are the most proficient in their specialised field come out at the top.
So there I was at the forum, observing how eager the private sector was to get the State involved in their operations. It seemed strange because, as many people have pointed out, politics and business should not mix, because politics is a risky game.
Every business person knows that they should minimize risk. Risks are minimized by cutting threads to any potential threat. But when they are presented with the potential for government support, businesses seem to ignore their own risk reduction strategies.
If the Mongolian government is to support national production, it should do so for all national producers – not just a few sectors. Around 30 percent of Mongolians live under the poverty line, 47,000 are unemployed, and 65 percent of products produced domestically are produced in Ulaanbaatar alone. With labour available and people crying out for employment, Mongolia has the human resources necessary to build a bright and prosperous future, but what is standing in the way? My answer, like that of many delegates at this week’s forum, is mismanagement of resources and poor leadership.
Yes, Mongolia has progressed over the past two decades of a market economy, but we could have done better and still can do better. It is only because of the sheer size of the natural wealth beneath our feet and the minute size of the economy that our growth rate seems large compared to other nations.
What Mongolia needs now is strong leadership and farsighted and fair regulations that don’t get in the way of businesses. To achieve better outcomes for all Mongolians, the priority sectors should be education, health and infrastructure – as pointed out by organizations such as the World Bank, the International Monetary Fund, and the Asian Development Bank. Mongolia cannot prosper without creative minds, healthy physiques, and an appropriate setting that can accommodate development.
Short URL: http://ubpost.mongolnews.mn/?p=3268
The Mongolia Economic Forum is an annual event in which the private and public sectors get together, along with representatives of civil society, to discuss the best way forward for the Mongolian economy. The goal of this year’s forum was to discuss the possibilities for diversifying the economy and for establishing a Mongolian brand on the world market. The most prominent sectors of Mongolia’s economy were represented at the forum, including the wool, cashmere and leather industry, the textiles and clothing industry, the travel and tourism industry, and the meat and dairy industry, and all displayed what they had to offer, eager to prove that they have what it takes to be the face of Mongolia. It was a bit like one of those Reality TV shows where the winner becomes a star, except that in this case the prize that they were all clamouring for was support from the government.
Some people might not see anything wrong with this, but I think asking for government assistance is unfair as it results in a handful of business sectors receiving subsidies and grants, while other sectors are forced to succeed, or fail, on their own.
At the Mongolia Economic Forum, the delegates all wanted support and assistance from the state, whether it be tax exemption or grants. There were delegates from sectors such as textiles and electronics complaining that they had not received subsidies for twenty years while other sectors regularly receive subsidies and grants from the State.
One example of government support, is the initiative being implemented currently to support the wool, cashmere and leather industry. Under this initiative, herders receive 2,000 to 3,000 MNT (depending on the quality) for each kilogram of wool and animal skin they sell, on top of the price of the wool and skin, and they receive 200 to 300 MNT for each kilogram of meat they sell, on top of the price of the meat they sell. Other sectors don’t receive such grants.
To be fair to everyone, the government should stop handing out subsidies and privileges altogether. Unfortunately, the problem is that Mongolia’s national producers need support to prevent being out-competed by larger foreign industries. This is due to the fact that mass production is much cheaper per product than the small scale production of Mongolia’s producers. There is no doubt that if Mongolia’s producers are not aided by the government, it will be difficult for most to compete on the world market, and for some it would take a miracle to be able to establish a well-known brand.
But from a business point of view, competition is a beneficial thing. The business environment, like nature itself, is unforgiving and impartial. Only those that can produce the highest quality products and services, at the lowest cost, can survive. To survive and thrive in the world of business, one must be innovative, astute and, most of all, productive. Competition weeds out the bad from the good. Sometimes even losing in a competitive market is not necessarily a bad thing because companies merge with their competitors, and the companies that are the most proficient in their specialised field come out at the top.
So there I was at the forum, observing how eager the private sector was to get the State involved in their operations. It seemed strange because, as many people have pointed out, politics and business should not mix, because politics is a risky game.
Every business person knows that they should minimize risk. Risks are minimized by cutting threads to any potential threat. But when they are presented with the potential for government support, businesses seem to ignore their own risk reduction strategies.
If the Mongolian government is to support national production, it should do so for all national producers – not just a few sectors. Around 30 percent of Mongolians live under the poverty line, 47,000 are unemployed, and 65 percent of products produced domestically are produced in Ulaanbaatar alone. With labour available and people crying out for employment, Mongolia has the human resources necessary to build a bright and prosperous future, but what is standing in the way? My answer, like that of many delegates at this week’s forum, is mismanagement of resources and poor leadership.
Yes, Mongolia has progressed over the past two decades of a market economy, but we could have done better and still can do better. It is only because of the sheer size of the natural wealth beneath our feet and the minute size of the economy that our growth rate seems large compared to other nations.
What Mongolia needs now is strong leadership and farsighted and fair regulations that don’t get in the way of businesses. To achieve better outcomes for all Mongolians, the priority sectors should be education, health and infrastructure – as pointed out by organizations such as the World Bank, the International Monetary Fund, and the Asian Development Bank. Mongolia cannot prosper without creative minds, healthy physiques, and an appropriate setting that can accommodate development.
Short URL: http://ubpost.mongolnews.mn/?p=3268
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