Facebook, Twitter and other social media platforms buzz regularly (some may say permanently) with the gripes, complaints, disenchantments and other quirks of life and politics in Mongolia. Some justified and considered, some significantly less so. This is by no means unique to Mongolia and to a casual observer seems to be on the rise globally.
Having lived in Mongolia for the past 13 years it has become an ever-present part of my life, a comforting topic of discussion, a mean to forge social bonds with peers. Expats, Repats and Mongolians alike often take a certain level of glee and no small pleasure in pointing out the failings, errors and inadequacies of a growing economy.
I regularly partake and am equally as guilty of this, in truth it makes a nice change from discussing Trump and Brexit but my relationship with Mongolia is significantly more complex. I would otherwise not have stayed here for that long of a period of my life. Mongolia has provided me with great professional opportunities, extraordinary lessons in business and life, an ability to develop flexibility and quick thinking as well as regular moments of joy, laughter and love. It has very much been a journey of intense moments of hate and love intermingled into a confusing mess. As I slowly prepare to ease myself out of living full time in Mongolia, I want to reflect on three things that I think Mongolia probably does better than most places in the world (that I know of).
- The VAT e-Barimt System
Similar to most other developing countries, the Government of Mongolia (GoM) struggles to collect all due taxes. Creative tax avoidance is akin to a national sport and a source of pride for many. The prevalent thinking goes something like this: “The Government is incompetent, they are corrupt, they will waste my money so why should I hand over my hard earned cash?” This has created a feeling of us-the-people against them-the-corrupt-elite, a great divide now exists leading to a reluctance of paying taxes such as the VAT but unlike developed nations where similar sentiments exists, the GoM does not have the capacity nor the ressources to effectively track down and punish offenders. Hence the catch 22 situation common to most developing nations. Cash-starved Government borrows heavily to carry out essential investments in infrastructure, education, public service etc.. hoped for increases in tax revenues do not materialise, they end up not being able to repay bonds, the country gets its ratings downgraded, IMF intervenes… rinse and repeat.
This is where the Mongolian Tax Authorities (MTA) found a neat turnaround. In July 2015, they passed a new VAT tax law amendment in an effort to increase the number of companies that would declare their sales correctly and thus improve collection of the VAT. Unlike other taxes, the VAT is payed by the end-user of the product and service but collected by businesses on behalf of the Government.
The idea is simple, all businesses must now use Point of Sale (PoS) systems in order to register all their sales, each POS is connected to the e-barimt (e-receipt in Mongolian) network which creates a unique QR code at the end of each receipt (see pic). Taxpayers who have subscribed to the app, online or through text messages can then scan the QR code and register their purchase. They receive in exchange up to 20% of the VAT amount (10%) and each scanned ticket is automatically entered into a monthly lottery with multiple cash prices ranging from 50,000 MNT to 50 Million MNT (7 USD to 20,000 USD) and some super lotteries that go up to 300 Million MNT (120,000 USD). This incentivises end-users to demand the receipts and to only patronise businesses that provide those QR code enabled receipts.
Before 2016 (when the new VAT system was implemented) only 12,000 PoS machines were used, thus pointing towards a heavy use of cash in the economy and the associated “mis-reporting” of income generated, in the first few months after introduction of the system, this increased to 37,400 and now stands at approximately 65,000. More importantly over 620,000 taxpayers have registered on the system (out of 900k registered tax payers) and VAT income for the MTA has increased by approximately 250% in the past year. This also gives the MTA more reliable data on income generated by businesses and thus allows them to verify that the correct levels of corporate income taxes are paid. The e-barimt website is now the third most visited website in Mongolia (after Facebook and Twitter).
I scan all my receipt daily and complain loudly if I go to a restaurant or business that does not issue me a QR code receipt, so do all my employees and now so does my business. This creation of an incentive driven system for the people to force businesses to accurately declare their sales has driven a landmark change in how businesses operate and declare taxes. It is a cost effective and efficient measure (despite some grumbling from business owners) which has been well implemented and which in my opinion other countries should learn from.
I realise that this feeds well into the Orwellian scenario of the all snooping and knowing Government, as with many of those technologies no one forces the end-user to participate but the allure of cash-back and a potential big lottery win drives us towards compliance. The big data generated through the system could be used for the greater good (through better understanding of the basket that makes up the CPI for instance) and from a user perspective could allow for budgeting app add-ons (since the system knows what I spend my money on). One of my more paranoid-inclined colleague would strongly debate that this is “Big Government” going too far and that it incentives the “people” to denounce businesses to the Government yet he has now also joined the ranks of QR code demanding masses and waxes lyrically about his family’s recent lottery win.
This system is of course poorly adapted to the small open-air markets popular in Mongolia, to SME’s in the countryside or to small sole-traders but the Government is working on ways to ease their eventual integration into the system, in any case their customers increasingly demand it and they face a loss of business or regular denunciation to tax authorities if they do not comply.
- The One-Stop Shops
Red-tape, heavy administration, bureaucracy and complex administrative procedures that change constantly are amongst the most common whining topics globally. Mongolia is (was?) no stranger to the phenomenon but this is exasperated by the geographic dispersion (and regular movements) of all those administrative centres, their lack of connection with each other and general confusion by the public on the processes to be followed. This in turn lead to sizeable traffic jams, loss of efficiency for businesses and individuals, considerable avoidance of processes (since too complicated and thus easier to avoid altogether) and general mismanagement and waste of very scarce public ressources.
New stroke of genius, enter the “one-stop-shops” (OSS) (in all fairness, I know that Mongolia didn’t invented the concept but rather took it to a new level). The idea is basic; let’s acquire a huge hall in a couple of locations around the city and put a single booth for every Government or Municipal agency that either stamps something, issues a bit of paper or collects something. Then let’s make space for ancillary services like notaries, banks, clerks, photocopiers etc… Finally, let’s make it open to both businesses and individuals during both early and late hours as well as weekends. GENIUS.
The kind people at the Swiss Government provided financial and capacity building support from 2007 to 2015 to aid the GoM in setting up localised and centralised centres within respective Government Agencies (for instance the driver registration agency would have insurance companies, banks, notaries, municipal police and the Ministry of Transport booths in one place) but it is in 2015 that the revolutionary concept of centralising ALL Government and Municipal agencies under one single roof, in support to smaller OSS specialised clusters around the city, took hold. This means that you can do a property transaction, renew your driver’s license, pay your taxes and obtain your social insurance payments all in one place over a single day just by walking from booth to booth to booth.
From a professional perspective, it has reduced the time that our corporate administrative staff spends driving between agencies and filling in various forms significantly, has made processes more logical (easier to spot redundancies) and has limited corruption. From a personal perspective I know where to go to get nearly everything I need done with regards to the administration much faster and cheaper than previously. Life has become immeasurably more convenient, freeing up time for more frivolous activities.
Over 200 OSS’s now operate throughout Mongolia with 2 “super-sized” OSS’s in Ulaanbaatar, this has led to considerable efficiencies generated for both the public and private sectors, improved co-ordination amongst public agencies and facilitated ease of doing business and reduced the administrative burden on the population at large. Its a win-win for all parties involved and a significant milestone in the development of Mongolia.
As a European having had some experience of the weight of bureaucratic administration in the UK, Italy and France, the ease and convenience of the OSS’s in Mongolia is something I shall sorely miss. I am at a loss to understand why this is not more widespread globally but remain hopeful since Singapore (the height of efficiency), Vietnam, Myanmar and a number of other countries have travelled to Mongolia to learn from the lessons of the OSS. Similar concepts are being trialled and driven in a number of other emerging countries with very encouraging results. I hope the EU pays attention.
The public in Mongolia has been supportive of the efforts with over 75% approval rating in 2015, the only agency that is missing from what I could personally make out is the immigration department, which is still stuck by the airport and remains extraordinarily inconvenient, maybe it serves as a useful reminder of life prior to the super-sized OSS’s.
3. The Role of Women in Society
Despite my many years in Mongolia, I continue to be pleasantly comforted by the role of women in Mongolia’s modern society. This is also a regular observation I hear from anyone who has visited Mongolia, however briefly. Universities in Mongolia are dominated by female graduates (between 60% and 80% depending on the university and degree), white collar workers in offices throughout Ulaanbaatar are female, there is a new batch of senior managers, politicians, academics who are female (25% of seats in the parliament are held by women). While there remains some gender-determined roles in today’s society, there is much more obvious equality than in other countries and women are regarded as highly valued members of society to the same level (some may argue more so) than men.
This is clearly evident in any successful business in Mongolia where the vast majority of professional positions are held by women, the same is true in hospitals, government agencies and retail locations. Walk into any high-end bar or restaurants in the evening and the majority of tables will be occupied by professional women with disposable income to spend. Mongolian women are rightly proud and driven to achieve their role in shaping the future society of Mongolia and it goes to show what a country who embraces the potential of all their citizens can achieve.
Interestingly, I believe that this unusual disparity in roles has created a fairly unique situation where men as a whole are not the primary bread winners and feel threatened (emasculated maybe) by the economic and social power of women, leading sadly to high levels of domestic violence, alcoholism amongst men and high rates of divorce (or of single mothers in any case). On a positive note, it seems to an uneducated observer such as myself that many of the social stigma present in global society about age of marriage, single motherhood, being a primary bread-winner are in a large part absent from Mongolia. There seems to be less societal and familial pressure to abide by those arbitrary and often backwards standards so common in Asian societies.
While there remains much that should be done to further empower the role of women in Mongolia’s society and to ensure equal footing for all, it is my firm belief (based on personal observations solely) that many countries near-and-far could learn from Mongolia’s exemple. There is a plethora of academic papers who discuss this topic at some length, including the origins of this phenomenon (nomadism apparently), some worry (and rightly so) about what this disparity in gender balance will mean for the future of Mongolia but it is for me an aspect of Mongolian society that has always comforted me and given me hope that the future of Mongolia will be considerably brighter than its present.
No one can (and should) deny that Mongolia suffers from considerable challenges ranging from wide-spread corruption, nepotism, lack of skilled human ressources, mismanagement in the public sector, unstable regulatory system, an over-influence of short-term political domestic agenda, a worrying rise in populism and a significant brain drain but… there is always a silver lining or rather more to the story than is apparent.
No country is perfect (far from it) and despite what some (Americans) may think, no country is the “greatest in the world”. Praise is due where it must, Mongolia is in a tough geo-political spot between China and Russia, the situation is made somewhat worst by being landlocked and is burdened (in my humble opinion) with too rich a bounty in mineral ressources and yet has managed to remain a true democracy (with all its failings), has embraced freedoms of gender, religion and the press, not fallen in the trap of all of their Central Asian neighbours of semi-authoritative dictatorial regimes, has a relatively stable economy and has no ethnic or racial tensions to speak off. Mongolia is in the many ways that count a unique and very successful proposition in a region that is complex and often toxic.
There is a sense of resilience engrained in each and every Mongolian that is remarkable, there is a can-do attitude that is hard to find in more developed economies and an enthusiasm for the future (yes now its not great but just you wait till….) that is contagious. I have personally found Mongolians to be pragmatic, realists, optimists and open to ideas from the rest of the world, embracing the best of our concepts and adapting them efficiently to Mongolia. They are neither Asians nor Europeans but rather embrace some of the best (and occasionally the worst) characteristics from all cultures.
Mongolia’s continued growth will inevitably come with avoidable steps backwards, painful mistakes and significant growing economic pains but there is something unique and wonderful about Mongolia which should not be dismissed or forgotten, however convient that may be.Tags: Democracy, Good, Mongolia, OSS, Society, VAT, Women