RE: Things could soon change for the better
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Financed by the mining boom, government spending on new infrastructure in Mongolia has increased 35-fold in the past 10 years. But you would not know this from driving the pot holed streets of Ulaanbaatar or inhaling the smog filled air of the city, particularly in the ger areas.
A new World Bank report I co-authored examines why this increased spending is not resulting in equivalent benefits for the citizens of Mongolia in terms of better roads, efficient and clean heating, and improved water and sanitation services.
The reasons are that much of this spending has been misdirected to low priority areas and activities, and has been wasted due to poor project planning and implementation. Correcting these weaknesses is urgently required to ensure that the government's ambitious spending plans — from the rapidly increasing budget and from new international borrowing, like the recent $1.5 billion Chinggis sovereign bond — result in good quality infrastructure.
Ulaanbaatar accounts for over 40 percent of Mongolia’s population and a bulk of its economic activity. Considerable economic research tells us that with proper infrastructure and favorable regulations, cities can be engines of economic growth, fostering innovation and raising living standards for the entire country. The citizens of Mongolia know this and that’s why they have been migrating to Ulaanbaatar in search of better paying jobs – the city’s population has increased by 60 percent over the past decade.
Yet Ulaanbaatar has been relatively neglected in government infrastructure spending. On average, it received less than 20 percent of the national roads budget over the past 5 years, and was similarly under-prioritized in expenditures on heating. Moreover, future government plans continue to neglect Ulaanbaatar; over the next four years the government plans to spend almost twice as much on rural roads as on Ulaanbaatar’s roads even though rural roads will not have anywhere near the traffic volumes needed to generate positive economic returns.
Spending can only result in good roads, schools, and hospitals if these are regularly and adequately maintained. Yet maintenance has been grossly neglected with the result that new infrastructure quickly deteriorates and then requires costly reconstruction. The government only spends a fifth of what is needed on routine road maintenance; it is therefore no surprise that 60 percent of the national road network is in poor condition requiring reconstruction. The ratio of maintenance spending to spending on new investments has been steadily declining over the past three years, pointing to more problems in the future.
Making sure that spending results in a good road or power plant being built also requires proper planning and sound construction. An infrastructure project needs a realistic cost estimate; the contract to the company to build the project needs to be given in a transparent and competitive manner
Mongolia - Improving public investments to meet the challenge of scaling up infrastructure (English)
ABSTRACT
The objective of this report is to analyze in depth the current public investment management system and to assess whether or not it is able to meet this challenge of delivering good quality projects in the priority areas in a macro-economically sustainable manner; and to recommend what needs to be done to improve the system so that it is able to effectively transform natural resource revenues into sustainable capital assets. In making its recommendations, this report focuses on some of the details that need to be laid out in implementing regulations in order to make the Fiscal Stability Law (FSL), Budget Law of Mongolia (IBL), and Public Procurement Law of Mongolia (PPLM) work. The report also suggests amendments to some of the existing laws that pose a risk to meeting the four objectives. In proposing policy options, the report is conscious of the political economy of reform and, wherever possible, analyzes the compatibility of the technical solutions with the political interests of policy-makers.
https://documents.worldbank.org/curated/en/2013/01/17282494/mongolia-improving-public-investments-meet-challenge-scaling-up-infrastructure