Institutional Weaknesses in Mongolia - Essay Example

al Weaknesses in Mongolia al Weaknesses in Mongolia Introduction Infrastructure refers to the rudimentary organizational and physical assemblies required for a society or even an enterprise to operate. Infrastructure also ensures the availability of facilities and services that are necessary for economies to work perfectly. Logistic infrastructures are important for any country and may lead to slower or faster rates of growth in the country. Transportation infrastructures are important in measuring the internal development of the country. Roads - railway system and airport transport - may be broadly classified as logistical amenities. This paper will seek to underscore the institutional weaknesses inherent in Mongolia that lead to weak logistics in infrastructure. Logistics Infrastructure in Mongolia Mongolia is a landlocked country that borders China and Russia and depends solely on air and land transport. Land and air means of transport are the only possible means that the country can use to ferry goods in or out of the country and to transport people to their various destinations. Travelling to Ulaanbaatar, the capital city of the country depicts the real picture of the poor logistical infrastructure in the country. The road network to the capital city is anything, but standard, which are extremely cracked owing to the freeze-thaw temperatures (Isakova, Plekhanov, & Zettelmeye, 2012, p. 2). Heavy trucks exacerbate the situation and the cities are usually in traffic jam mayhem. In addition to that, the airport of the country is also in a poor state. It can be best described as a Soviet-era infrastructure. The transport facilities in Mongolia are poor. Most of the areas in the 1.56-sq-km land do not have metal-based roads. The terrain towards the northern parts of the country is majorly mountainous while the south is mainly a desert, Gobi Desert. Although the country has some water bodies, waterways are highly underdeveloped. The country is dependent on one railway system that connects China to Russia through Ulaanbaatar. Mongolia’s railway system is highly different from that of China. Its railway system is built using broad gauge tracks measuring 1520mm while China system is of standard tracks measuring 1435mm. This means that trains get fitted with new gauges to aid in crossing the borders, delaying crossings (Isakova, Plekhanov, & Zettelmeye, 2012, p. 10). Institutional Development Mining Sector Mongolia attained its independence in the year 1990 (Wachman, 2009, p. 8). Balancing of relations with her neighbors, the Russia together with China has been an uphill task. Scramble for minerals and energy resources by super powers in Mongolia forms one of the chief causes of Mongolia’s economic and political vulnerability. This scramble has led to a much-heated debate on whether the countries that are producing and supplying the resources should put protection on the scarce commodities. Mongolia, in the middle of this scramble, stands as a rich source of lanthanum, neodymium, cerium, dysprosium, and yttrium. These resources attract the neighboring nations and countries such as Beijing, Russia, and China stands in the middle of this scramble. The country’s development remains low and ranks 108 out of an HDI score of 187(Wachman, 2009, p. 23). currently, the country depends so much on extraction and exportation mineral resources as its major source of revenue. Although the natural resources present in Mongolia have the potential to make the nations rich, they also serve as a curse. The mineral resources have led to the development of transport infrastructure in the country. However, the transport system remains highly inadequate due to overdependence and poor management. Indeed, sufficient literature supports this as they state that natural resources lead to corruption, reduced levels of accountability, and state weakness. Ironically, natural resources’ wealth can lead to increased levels of poverty and dependence on foreign states and actors in economic matters. This situation is exhibited by Transparency International’s report that shows international companies have been receiving tenders to mine in Mongolia at the expense of local development, which includes logistical development. These concerns have been the reason behind increased strikes and protests from the country’s citizen (Chene, 2012, p. 10). One of the challenges facing Mongolia is the management of large-scale commodity booms. The GDP per capita of Mongolia was approximately $1500 in 2009 (Isakova, Plekhanov, & Zettelmeye, 2012, p. 2). This was mainly attributable to its mining projects. These mining projects contribute massively to the development of the economy. However, these mining projects are not without policy challenges. Key to the challenges is how to manage a steadfast growth efficiently in the sector in the long run time. Scholars have at times argued that poor countries with same revenues out-perform similar countries with abundant resources (Isakova, Plekhanov, & Zettelmeye, 2012, p. 2).This tendency referred to as resource-curse has the implication that numerous resources may at times derail economic development rather than economic growth (Ross, 2003, p. 17). Lack of proper infrastructure has also crippled the mining sector. Unequal and Poor Policies Structural shifts and volatility of macro economies is another area of concern. This is the result of overdependence of one sector as a source of revenue. Macroeconomic volatility is a consequence of high commodity prices in the peak period followed by low prices in the off-peak season. This renders the investment in physical capital and human capital to be uncertain. Development of sound financial systems is inhibited by such macroeconomic volatilities (Isakova, Plekhanov, & Zettelmeye, 2012, p. 4). Unequal distribution of resources and wealth is a challenge in Mongolia. Revenues obtained from mining activities usually accrue to a small group of the population in the country. Few people have the opportunity to get quality education and training thus many talented people have no access to education. Social cohesion is also undermined, and the net result is the rise of civil unrest (Isakova, Plekhanov, & Zettelmeye, 2012, p. 6). A paradigm shift on government policies in Mongolia is needed so that redistribution policies have priority and not mere economic growth. The adoption of Extractive Industries Transparency Initiative was to curb the rising inequalities. This will result not only in higher standards of living of its citizens but will also accelerate economic and political growth of institutions (Isakova, Plekhanov, & Zettelmeye, 2012, p. 10). Land policy and agricultural systems are unique in Mongolia. Livestock rearing has always been the main agricultural use of land in Mongolia. A portion of land held for this purpose is approximately 98% of the whole land. Ownership of land was not privatized some years back. Nomadic pastoralism still is a dominant feature of the culture and economy of the country. This is because only 1% of its land is suitable for crop farming (Sheehy, Johnson, & Miller, 2006, p. 134).The pastoralists are faced with myriad challenges ranging from drought, grasshopper infestations, wolf predation, and livestock prices and natural calamities just to name a few. The result of such is huge losses to the herders, and the result is low standards of living among the people. The inception of the free market in 1992 saw the private of ownership of cattle. The centrally managed to graze systems collapsed and, therefore, farmers were accountable for their own actions. The herders now assumed all risks previously borne by the state. Challenges have increased drastically in livestock farming. This is due to the loss of wells, series of droughts and the mismanagement and consequential collapse of grazing management systems. This has an overall effect of impoverished lifestyles among Mongolian citizens (Sheehy, Johnson, & Miller, 2006, p. 136). Overdependence on Foreign Institutions The location and history of Mongolia predisposed it to overdependence in the international institution thereby forestalling logistical developments. Each country is limited by conditions and the attainment of national interests will depend on how such events are overcome. Core in the security of Mongolia is its geographical location. Developments of policies and systems in the country are thus to a great extent influenced by the long history of its relations with her neighbors. A landlocked country between Russia and Moscow the situation is inescapable (Wachman, 2009. p. 8). When Mongolia was ruled by Moscow, set developments trickled to the land that would otherwise be impossible. Part of existing infrastructure and urbanization in Mongolia is traceable to Moscow. However, the price for such developments was personal property (Wachman, 2009, p. 7). Careful thought should be taken by Mongolia in its design of systems to loosen the strings attached, with her neighbors. This ensures that they are not neo-colonized (Carothers, 2002, pg. 45). To date, the ruling elite in Mongolia have had to depend on international donations and democratization pressures. This has hampered the capability of the economic liberalization and constitutional reform in the country to produce stability in developments, in logistical aspects. Further, it has led to the widened gap between the poor and the rich in the post-communist country. Furthermore, the institutional changes that have taken place in the country have done little in addressing the encroaching of human rights and corruption in the country. This implies that development of the transport system remains low because of the weakness of the organizations and their overdependence in foreign funding (Carothers, 2002, p. 45). Infrastructure policies are central to the success of any government. Proper railway and road networks are vital in ensuring development of industries in the country. In the past Mongolia’s policy was to undertake all financing in the construction of the infrastructure. This had its disadvantages. First, the state was overburdened with the huge cost of construction. Secondly, the unpredictability of the demand and infrastructure required by private investors was another setback (Isakova, Plekhanov, & Zettelmeye, 2012, p. 10).This was the case until recently changes were made, and thus the government has allowed the private stakeholders to undertake construction of infrastructure. This was the aftermath of the adoption of public-private partnership policy in 2009. Conclusion Infrastructure is important in the economic stability of any country and the comfort of its people. Mongolia is grappling with its economy because of poor development of logistical infrastructure. The reasons for this poor growth trace back to the history of the country, and its overreliance on the mining sector. The post-communist country depends too much on mining, which is clouded by corruption, thereby forestalling development of the transport system. The government and organizations in the country are also reliant on international support. Moreover, the recent privatization of institutions is not enough to address the development challenges in the country. References Carothers, T. (2002). The End of the Transition Paradigm. Journal of Democracy, (5),. John Hopkins University press, volume 13. ( pp 21-45) Chene, M. (2012). Corruption in Natural Resource Management in Mongolia. Berlin. Isakova, A., Plekhanov, A., & Zettelmeye, (2012). Managing Mongolia’s Resource Boom (No. 138) (pp. 1–36). Ross, M. (2003). The Natural Resource Curse: How Wealth Can Make you Poor. Natural Resources and Violent Conflict: Options and Action. Ian Bannon, Paul Collier Editors Washington DC. ( pp 2) Sheehy, Johnson, & Miller (2006).Mongolian Rangelands In Transition, Volume17 (pp. 134-138) Wachman A. (2009).Preserving a precarious independence while resisting “soft colonialism.” The East Asia Institute (pp. 2-30) Read More