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MongoliaEconomic Reforms
In the late 1980s, dissatisfaction with the economic
stagnation of the last years of the former regime of Yumjaagiyn
Tsedenbal and the influence of the Soviet perestroika led
Mongolia to launch its own program of economic reforms. This
program had five goals: acceleration of development; application
of science and technology to production; reform of management and
planning; greater independence of enterprises; and a balance of
individual, collective, and societal interests. Acceleration of
development in general was to result from the attainment of the
other four goals. Scientific research was being redirected to
better serve economic development, with electronics, automation,
biotechnology, and the creation of materials becoming the
priority areas of research and cooperation with Comecon
countries.
Reform of management and planning began in 1986 with the
first of several rounds of reorganization of governmental bodies
dealing with the economy. These changes rationalized and
streamlined state economic organizations; reduced the number of
administrative positions by 3,000; and saved 20 million tugriks
between 1986 and 1988. The role of the central planning bodies
was to be reduced by limiting the duties of the State Planning
and Economic Committee to overseeing general capital-investment
policy. The indicators specified in the five-year and the annual
national economic plans also were to be decreased. State
committees and ministries, rather than the State Planning and
Economic Committee, were to decide upon machinery and equipment
purchases. Decentralization of economic management also was to
extend to aymag and city administrations and enterprises.
These bodies were given greater autonomy in construction and
production, and they also were held financially responsible for
profits and losses.
Efforts to devolve economic decision making to the enterprise
level began in 1986, when more than 100 enterprises began
experimenting with financial autonomy (before then, enterprises
operating with a deficit had been subsidized by the state).
Enterprises were accountable for their own losses, and they were
responsible for fulfilling sales contracts and export orders. The
draft law on state enterprises, presented to the People's Great
Hural in December 1988, was to extend greater independence in
economic matters to all state enterprises and to lead to an
economy that combined planning and market mechanisms.
Under provisions of the draft law, state enterprises were to
be authorized to make their own annual and five-year plans and to
negotiate with state and local authorities to pay taxes based on
long-term quotas. State enterprises also were to sell output
exceeding state orders and unused assets; to establish their own,
or to cooperate with existing, scientific organizations to solve
scientific and technical problems; to be financially responsible
for losses, and to pay back bank loans; to set prices
independently; to establish wage rates based on enterprise
profitability; to purchase materials and goods from individuals,
collectives, state distribution organizations, and wholesale
trade enterprises; to establish direct ties with foreign economic
organizations; to manage their own foreign currency; and to
conduct foreign trade.
The draft law stipulated that enterprises were to be divided
into two categories. National enterprises were to be the
responsibility of ministries, state committees, and departments;
local enterprises were to be supervised by executive committees
of aymag and city administrations or members of local
hurals. State and local bodies were not to interfere in
the day-to-day decision making of enterprises, but they were
responsible for ensuring that enterprises obeyed the law and that
they did not suppress the interests of society. Enterprises were
allowed to form three kinds of associations: production
associations, scientific production associations, and enterprise
associations to coordinate economic affairs. Finally, the draft
law said that the state was the owner of state enterprises and
that the labor collective was the lawful manager of a state
enterprise. The labor collective was to elect a labor collective
council, which was to ensure that the enterprise director (who
acted on behalf of the collective and the state) met the
interests of the collective in managing the enterprise. It was
unclear how the relationship between the enterprise director and
the labor collective would work out in practice.
Balancing the interests of society, the collective, and the
individual entailed providing scope for individual and collective
initiative to increase production and efficiency. Enlarging the
scope for individual initiative had three aspects: linking wages
to enterprise profitability, permitting output exceeding state
plans to be sold for profit, and providing employment
opportunities outside the state and the cooperative sectors. In
1988 wage scales dependent on enterprise revenues were introduced
to the light and food industries and to the domestic trade
sector, resulting in a reduction in materials utilized by those
sectors. Beginning in late 1986, state farms and
negdels
(agricultural stations--see Glossary) were eligible for state
payments for output exceeding the annual average growth rate for
the previous five-year plan. Individual agricultural cooperative
members and workers were allowed increasing numbers of privately
held livestock. The draft law also stipulated that enterprises
could sell production exceeding plan targets for their own
profit. In 1987 the government began encouraging the formation of
voluntary labor associations, auxiliary farms, and sideline
production attached to enterprises, schools, and so forth to
increase production of foodstuffs and consumer goods, to engage
in primary processing of agricultural goods, and to provide
services. The authorities permitted the formation of individual
and family-based cooperatives; by 1988 there were 480 such
cooperatives. Contracting among state farms and both agricultural
cooperatives and families was permitted and was increasing in the
late 1980s
(see Agriculture; and
Industry
, this ch.).
Data as of June 1989
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