“Investing in people brings the highest returns. This needs to be the policy of the Mongolian government.”
Dorjkhand Togmid was born in Ulaanbaatar in 1977. After graduating from Ulaanbaatar Secondary School number two, he went on to study public finance in the National University of Mongolia. He earned his master’s degree in public policy and economic theory from Hitotsubashi University in Japan. In 1999, he began his career at the Ministry of Finance’s Fiscal Policy Department as a specialist and worked there for 15 years. He held various positions: Specialist at Procurement Policy and Coordination Department of the Ministry of Finance, Deputy Head of the Policy Coordination Office of Financing and Aid, Head of the Project Finance and Debt Management Office, Director General of the Department of Financial Policy and Debt Management, Trainee at the National Tax Agency of the Ministry of Finance of Japan, government procurement consultant at the ADB, Programme Coordinator at the Central Asia Regional Economic Cooperation of the ADB and Coordinator of the UN’s “Greater Tumen Initiative.” Since 2013, he has been working as an Advisor to the Executive Director for Asia and the Pacific at the IMF. In addition, he also studied financial theory and project financing at the Harvard and Oxford.
Q: Several Mongolians work at the World Bank and IMF. However, I understand that you are the first Mongolian to hold an administrative position at such a global financial and economic organisation. Why did choose to work in this organisation, and what requirements did you need to meet to get this position?
A: I am not sure whether that many Mongolians have worked for the IMF. However, several Mongolians worked at the World Bank. It is an open field in which anyone can work if the desire and ambition are there.
As for me, I had dreamt of working at this organisation since I started working at the Ministry of Finance in 1999. At the time, I used to cooperate with IMF economists on many policy solutions when they came to Mongolia. Frankly, we learned much from them also.
As for this position’s requirements, they require professional criteria, such as knowledge of economic theory, experience developing policies and a possibility to represent one’s own and regional countries. Also, they see whether you have previously worked in other countries, and knowing a languages other than English is advantageous as well. Generally, you have to meet all the general criteria set by international organisations.
Q: Working on an administrative level in an international financial organisation that regulates monetary relations will naturally give invaluable experience and knowledge. What kind of experience and knowledge have you obtained from there?
A: I gained a lot of experience and knowledge by working at the headquarters of the IMF. I hope that any and all interested Mongolians work here. Many international experts and researchers work here because it is an organisation that aims to ensure global financial and economic stability. It is a firmly established organisation. The advantage of working here is that solid information about nations’ economies, research facilities and archives are rich and open to the employees. Thus, 95 percent of the organisation’s economists have a Ph.D., and all of them are people who have conducted their own research and have experience developing policies. In addition, Nobel Prize-winning economists and world-renowned university professors regularly come to give lectures and hold debates.
As for me, I mainly work on policy documents being discussed by the Board of Directors and on economic assessments of member states. I came upon some interesting results when I compared policy mistakes and successes of resource-rich countries like Mongolia. For example, the IMF has 188 member countries and provides economic assessments to these countries annually. About 45 countries of the member countries have significant natural resources, and most of them are developing countries that depend on mineral exports. There are many examples of economies of some these nations being tarnished because of political instability, weak governance, incompetence and indulgence of populist promises by ruling parties. Sounds familiar, right? The main point is that there are many countries that have bitter stories similar to Mongolia. We need to simply read, learn and study about them to develop a policy.
Q: You worked at the Ministry of Finance for more than ten years. Would you tell us more about the first time you started working there?
A: I am a Mongolian person who was born in Mongolia and raised around livestock. When everyone was avoiding government jobs during the transition period, I went on to work as a specialist at a state ministry. I am one of the guys who was overburdened by work and had to work 18 hours per day. I have always taken pride in that. On my first day of work, the Head of the Fiscal Policy Department, Dashdorj, told me, “The Ministry of Finance will not pay you that much. Don’t even think about being provided with housing, and you will not even have time to get married. All you’re going to get is work.” It was true, and I was overwhelmed with work as soon as I entered the job. When it came time to make the budget, I slept at the office for two months. I truly experienced for the first time what it is like smell awful, having not showered in a long time. I realized my dream of working at the IMF by not losing my thirst for knowledge when starting my career at such a ministry where work never stops.
Q: You worked as a director of two departments at the Ministry of Finance. What projects have you worked on, and what outcomes have you achieved by working there?
A: I used to work a lot on the improvement of fiscal policy, accountability and discipline. We worked on many draught laws to expand tax income when budget revenues were disrupted and introduced a new budget-saving system that significantly contributed to Mongolia.
When you take an oath of a state official and work for the state for a long time, a person’s heart gradually starts to beat for the good of the public and gives you satisfaction. I think that developing the drafts of the Debt Managment Law and Wealth Fund Law before coming here was a timely work, and I am glad about that. These reforms are very important in the long run, as they foster fiscal discipline and economic counter-cyclical fiscal rules.
Q: You used to work at the Ministry of Finance of Japan. There are many interesting things to be asked. How does Japan’s main public policy ministry operate? What king of systems are in place? How do the personnel go about their work?
A: Yes, I worked at the Ministry of Finance of Japan as a trainee for over a year while studying in Japan. It was a great opportunity to gain experience and theoretical knowledge. Despite being aware of the Japanese people’s diligent and precise nature, we do not know much about the systems of work. Japanese people do not know about laziness, because the state creates the conditions and instills a mentality to work diligently, honestly and wholeheartedly. They are a people that know the country will develop by working like that, and if the country develops, their lives will be much more comfortable.
Q: When you were in Japan, you translated into Mongolian a book on economic theory written by Nobel Prize recipient Joseph E. Stiglitz. Would you please tell us more about this?
A: The book is titled “Economics of the Public Sector.” I used to study from this book when I was studying for a master’s degree in public policy and economic theory. One day, the author of the book came to Japan for a lecture and gave a presentation about his Nobel Prize-winning work. His lectures were fascinating. I translated it into my native language because I was impressed when I studied from his book, and the author talked about the book in detail. I wanted to translate it since it will be of great benefit to Mongolians, especially to the people who develop public and economic policy.
Q: Thinking in terms of economic theory, how can Mongolia’s economy be developed?
A: When talking about a country’s developing economy, we have to think about growth theory. There are many economic growth theories. Of these, the most recently accepted theory is new growth theory. In short, the previous standard growth theories considered property and assets as the main factors of growth, while new growth theory says that human knowledge is the main factor in growth. It is an idea which holds that limited resources can be increased by human knowledge. However to achieve this, the state must make investments to develop and educate the people. It is considered a work to be done by the state because individuals and companies have less incentive to invest in this area.
Now let’s apply this to Mongolia. Our country has underground reserves equal to USD 1-3 trillion. The population is three million. However, qualified human resources are lacking. So, the assets are there, but the human capital is not. The idea is that sustainable, long-term growth cannot be achieved without investing in people’s education in such unbalanced and unstable circumstances. In other words, it means it is impossible to fairly distribute the riches when education is a question of the individual and his circumstances. Therefore, it is important to focus on the development of the Mongolian people. Investing in people brings the highest returns. This needs to be the policy of the Mongolian government.
Q: The IMF relayed advice and warnings to the government during the current economic downturn of Mongolia. Experts say that our state and government ignore their advice. What pieces of advice have they given us up to today?
A: The balance of payments (BOP) is under pressure and the fiscal position is weak. These problems are partly due to declining FDI and weak commodity prices, but also due to overly loose fiscal and monetary policies. As noted in the latest IMF Article IV assessment of the Mongolian economy, published in April 2015, we made the following recommendations:
• the fiscal deficit—covering both the traditional budget and the Development Bank of Mongolia (DBM)—should be reduced, and the monetary stance too could be tightened, to bring public debt under control and moderate BOP pressure;
• all fiscal or quasifiscal activity currently undertaken by the DBM, the Bank of Mongolia (BOM), or other agencies should be conducted on-budget by the government;
• exchange rate flexibility should be preserved;
• banks’ provisions and capital buffers should be bolstered, and supervisory and crisis preparedness frameworks strengthened;
• governance reforms at the DBM and BOM would help strengthen these institutions;
• steps should be taken to move ahead with major mining projects, improve the investment climate, boost FDI, and support growth;
• social safety nets should be strengthened and better targeted to the poor.
• some monetary tightening would be desirable, to strengthen the BOP, macroeconomic policies be tightened, and the exchange rate be allowed to move flexibly.
Q: Our government is not heeding the given advice. So what needs to be done?
A: I understand that the government and the Bank of Mongolia have started working on these things. However, they started takings measures late. The price of overcoming today’s difficulties will be greater the longer we lose time without making policy adjustments.
Q: There is research conducted by international organisations that states Mongolia is one of the leading countries at risk of falling into a debt crisis and possibly defaulting. Can you provide us with specific information about such research and its indicators?
A: Debt sustainability analysis uses a variety of criteria. For example, it includes accumulated debt remainder, debt servicing ability, economic growth and export prospects-based debt dynamics. By the Debt Sustainability Assessment, we reached the conclusion that Mongolia’s current debt levels are too high. More specifically, debt risk is high as the global commodity market is deteriorating, and exports and foreign investment outlooks look poor. The possibility to improve our credit rating and finance the existing debt with cheaper debt instruments will be created if the government corrects policy mistakes and immediately makes adjustments. It is an essential tool for reducing the risks Mongolia is facing.
Q: What about the impact of the mining sector on our economy? How should we create long-term, sustainable economic growth in the long run?
A: Mining will continue to have a crucial role in Mongolia’s economy given the huge potential reserves of coal and copper. With the second phase of OT now back on stream and the Tavan Tolgoi coal mine under negotiations, we expect large inflows of FDI over the next several years and substantial export revenues thereafter. Putting into operation the proposed Sovereign Wealth Fund and implementation of the Fiscal Stability Law are critical in ensuring that the pickup in the commodity cycle results in an accumulation of savings and not a buildup of debt. A sound macroeconomic environment is crucial for sustainable growth, and this includes maintaining low and stable inflation, a competitive exchange rate and prudent fiscal and monetary policies.
Q: Have you worked on any issues relevant to Mongolia while working at the IMF?
A: When I first entered the job, I was responsible for Mongolia, Uzbekistan and Micronesia and visited these countries many times, making assessments on their economic situations to let the issues to be discussed by the IMF Board of Directors.
I got some issues relevant to my country resolved. The biggest one is that I initiated was the work to increase Mongolia’s credit rating and getting it approved by the board, which I am very happy about. Our country is in the list of the IMF’s least developed countries with low-income status. It means that Mongolia has the option to receive USD 150-200 million loans from the IMF in case of emergency if the economy collapses. We had the right to receive a relatively small loan. Today, Mongolia’s status has changed to middle-income country and carries with it the possibility to taken out a loan of USD 500-600 million.
The most interesting issue discussed by the council was Argentina’s debt issue, because Mongolia is right behind this country in terms of foreign debt. In beginning, Argentina raised funds through bonds on the international market and took out loans with an annual interest rate of 4-5 percent, similar to Mongolia. However, later on, the annual interest rate reached 24 percent due to mismanagement of fiscal policy expansion and financing debt with debt. Furthermore, they announced a default in 2001, and the situation is still the same today. Defaulting carries a great risk of state assets going to the hands of lenders.
Q: How is the future of the global economy?
A: Global growth declined in the first half of 2015, reflecting further slowing down in emerging markets and a weaker recovery in advanced economies. It is now projected to be 3.1 percent for 2015 as a whole, slightly lower than in 2014, and 0.2 percentage points lower than the forecasts made in the July 2015 World Economic Outlook (WEO) Update. Prospects across the main countries and regions remain uneven. Relative to last year, growth in advanced economies is expected to pick up slightly, while it is projected to decline in emerging markets and developing economies. With declining commodity prices, depreciating emerging market currencies and increasing financial market volatility, negative risks to the outlook have risen, particularly for emerging markets and developing economies. Global activity is projected to gather some pace in 2016. In advanced economies, the modest recovery that started in 2014 is projected to strengthen further. In emerging markets and developing economies, the outlook is projected to improve: in particular, growth in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East), while remaining weak or negative, is projected to be higher next year, more than offsetting the expected gradual slowdown in China.
Q: When will your term of work at the IMF end? When will you come back to Mongolia?
A: As for contract terms, it can be extended by 2 years after initial expiration. For me, my first contract will expire pretty soon. I am thinking of coming back to Mongolia without extending my contract. I am very happy to see many educated youth joining forces to serve their country. I will go back to Mongolia and join forces with those young people to contribute what I can to the country .
When I asked him about his hobbies, he said he enjoys any sport with a ball, especially basketball. He also said that he likes playing chess and checkers, going hiking, familiarising himself with multi-ethnic cultures, reading refreshing books and watching movies. After going to the US, he developed the new hobby of making food for his children and grilling meat for guests. Pushing 40 years old, T.Dorjkhand is a father of four children, and says he does his best to fulfill his fatherly duties.
*Published with consent of the interviewer
With Christine Madeleine, Managing Director of the International Monetary Fund