Private Sector Development

The President of Mongolia, Elbegdorj Tsakhia, sat at the table behind a Greek salad. We were at a lunch hosted by the Corporate Governance Development Center, an NGO which brings international best practices in corporate governance to Mongolia. Also present were the Minister of Education, the Director of the Financial Regulatory Commission (FRC), the Deputy Chief of Party of the USAID-funded Economic Policy Reform and Competitiveness Project (EPRC), which helped to establish the Center with the Institute of Finance and Economics, and CEOs of leading Mongolian firms. Several International Finanace Corporation (IFC) clients were among them.

The salad looked delicious, but it would have to wait. President Elbegdorj was speaking about the role of corporate governance in Mongolia. "Corporate governance is important for Mongolia's competitiveness," he said. I was delighted. I've been waiting a long time for this moment.

The investment climate is the fundamental socio-economic framework in which firms operate – the macroeconomic and trade policies they face, the labor and financial markets in which they recruit and raise money, the available infrastructure and imposed regulations, as well as all other areas of public policy impacting on private business.

In Thailand, the uncertain political situation since 2006 has negatively affected the country’s economy. The Productivity and Investment Climate Survey, which was fielded in 2007 at a time of great political instability and policy uncertainty, clearly reflected the pessimistic views of business managers. One interesting finding of the recently released Thailand Investment Climate Assessment Update is that instability and economic policy uncertainty became major issues – firms that perceived it a major or severe obstacle doubled from one-third in 2004 to two-thirds in 2007.

Another example of China’s respectable growth, despite the global economic crisis, is apparent in this month’s Fortune magazine, with its Global 500 list of the world’s largest companies. The 37 Chinese firms that made the list is all the more impressive when you consider just six companies made the list in 1998, as Worldfocus pointed out on its blog and on its television program.

In the following video clip, Fortune global editor Brian Dumaine says the increasing number of Chinese Fortune 500 companies is all about the country’s economic growth. “It’s a growth story,” he says, “and if you look at where most growth is going on, it’s not in the developed world, it’s in the developing world.”

Despite the successes of a number of Chinese companies, other developing countries in the East Asia and Pacific region are all but completely absent from the Fortune’s list. Of developing countries, only Thailand is listed with its state-owned oil and gas company, PTT Public Company Limited, which has been on the list for at least the past several years.

Children breathe thick, toxic smog from thousands of stoves in Ulaanbaatar's ger districts, which are home to 60 percent of the city's population.

There’s no capital city anywhere in the world with a housing problem like Ulaanbaatar, Mongolia. Imagine a city of one million people. Then imagine 60 percent of them living in settlements without water, sanitation or basic infrastructure, often in traditional Mongolian felt tents, known as gers. Then imagine these people relying on wood- or coal-burning stoves for cooking and heating, with fuel costs eating up 40 percent of their income. Then imagine the discomfort of having to get up in the middle of the night when it’s -35 degrees Celsius to go to the bathroom – outdoors.

Worst of all, imagine you and your children breathing the thick, toxic smog from thousands of stoves 24 hours a day, seven days a week. Unfortunately, this is not imagination, this is the real situation for over a half million people living in the ger districts of the capital. Not a pretty picture.