Mr. Chairman, ladies and gentlemen,
thank you for this opportunity to speak in support of the initiative on cooperation between the Public Service Commission and the Civil Service Council of Mongolia.
The North America-Mongolia Business Council, NAMBC, is the oldest and largest international trade association linking Mongolia to the west. We were founded 20 years ago, within months after the fall of the politburo. We represent Canadian and American investors in Mongolia and Canadian and American organizations and companies that are active in that country. We've had the opportunity for 20 years to observe the path of Mongolian development.
As Mr. Williams has very eloquently pointed out, Mongolia, like every other country on earth, never voted to be poor. They never voted to be picturesque. Although Mongolia was in the worst shape of any of the former Soviet satellites and former Soviet states in 1990 when the Russian Soviet occupation and subsidy ended, Mongolia has responded to the challenge better than any other former Soviet satellite or state. More so than any of what used to be called its socialist brothers, Mongolia has simultaneously and relentlessly pursued democratization and liberal economic reform.
It has not been easy. The condition of Mongolia in 1990, as revealed by a study at Harvard University, which nobody really read, was more analogous to the Italian economy in 1943 or the Japanese economy in the six months before the surrender in 1945. They were devastated.
They have rebuilt their country, brick by brick, step by step, with several commitments that I think reflect the confidence of Mr. Williams and others among the distinguished and learned members around this table that Mongolia would be a suitable beneficiary of this kind of assistance from Canada.
Number one, they are self-aware. This is a government and a political system that is self-aware. They know what their problems are. They don't try to cover them up. They don't shoot the messenger. There is free speech. There is an awareness of what they need to do and a sensitivity to their responsibility to the people.
Number two, they have always, for 20 years, been interested in best practices. They don't want to just get it done. They want to get it done the right way--not the right way that's convenient, but the right way that's the best in the world.
When it comes to an honest, functioning civil service, arguably Canada is very close to if not the best in the world. I point, with some humiliation, given my passport, to the fact that Canada, in the latest Transparency International survey, rose from number eight to number six. The United States fell from number 20 to number 22. It is the first time the United States has been outside of the top 20.
Mongolia is interested in the best way the world has discovered to fix problems.
Number three, they correct their mistakes. In 1998 they imposed a gold export tax, which effectively killed mining in the country. Two years later they repealed it. It took them only one year to repeal the 68% windfall profits tax on gold and copper mining. It took them only two years to correct the impression created by the 2006 mining law that the government would confiscate a government share of mining licences.
Instead, they demonstrated by action, in the case of the Oyu Tolgoi mine, that the government would pay for it. So this is a government that I think is sincerely eager to regard Canada--as Prime Minister Sükhbaatar Batbold said during his historic visit to Ottawa in September--as a model country for Mongolia to imitate.
This proposed activity and relationship between the Public Service Commission and the Mongolian government service council offers a valuable opportunity for Canada, and not only on a commercial basis. Let me say for the record that one of the biggest impediments to the success of Canadian and other companies in Mongolia is lack of efficiency and transparency in the government service, in the bureaucracy. The better the bureaucracy functions, the more level the playing field. This is a goal that is shared, not just by the foreign investors in Mongolia, but by the Mongolian business community.
The Canadian role in Mongolia in an official way has evolved more slowly than that of other international partners of Mongolia. We've only had a resident ambassador for two years. Canada has never been a member of the international donor committee, which, for the last 20 years, has averaged about $350 million a year in aid to Mongolia. However, today Canada is the largest single western investor in Mongolia. After China, it is the largest investor in the country. As Mr. Williams has said--and as my friend, Mr. Abbott, knows very well and has been sharing with the committee--the level of Canadian investment in Mongolia is already starting to have an impact on the Canadian current account, as Centerra and other countries repatriate profits.
This PSC initiative offers Canada the opportunity to have a high-impact, high-visibility, and highly important effect on a key player in the future of the investment and business climate in Mongolia. There is a desperate need for structural change. We look at this and compare Mongolia to 150 other countries today. But if you look back and compare Mongolia 20 years ago to Mongolia today, it is a vastly different place, not only in the landscape and the prosperity of the people, but in improvements in government structure. They've done it in bits and pieces, and what they've done is remarkable and astonishing. It is a better place administratively than Kazakhstan, other “stans”, and even several other Soviet satellites in eastern Europe. But it still needs work.
There are important structural reforms on which they need advice. The character of an independent civil service commission is a key factor, as Mr. Williams emphasized. It does not now exist. So here's an opportunity for Canada to do something very visible without spending the amount of money that Japan, the U.S., China, and other donor countries invest.
Corruption is a problem in Mongolia. It ranks 116 out of 178 in the world. It's the 22nd worst in the region. But things are getting better. The Mongolian government and Parliament enacted and created an independent anti-corruption office that is just getting off the ground. They have brought indictments, and it enjoys broad public support.
In response to a question one of the members raised earlier, other efforts have been funded by donors in the past to improve the civil service and governance. There was training provided by the Government of Sweden aid program, and domestically most of the training is provided in-house by the Mongolian Academy of Management. It provides short courses to about 1,500 civil servants a year. Keep in mind, this is a country where the top civil service pay is about $2,300 U.S. a year.
Mr. Chairman, ladies and gentlemen, thank you for the opportunity to share these views with you. I'll be delighted to answer any questions if there are any.