Collaborative Infrastructure Design

Ulysse Comtois, Jardin de rve, XIX, 1975. Oil on canvas, 16 X 20

for Mongolian Sustainable Development Mongolia Economic Forum, Ulaanbaatar Monday, March 5, 2012

February 2012/World Bank Mongolia Quarterly Economic Update

GDP growth accelerated to an unprecedented 17.3 percent in 2011 from 6.4 percent in 2010. Unemployment rate fell from 13 percent to 9 percent.

February 2012/World Bank Mongolia Quarterly Economic Update



Recent Policy Achievements:



Policy Integrated Budget Law (passed in December 2011):  Strengthens public investment framework by requiring feasibility studies and alignment with national priorities. Enhances authority of local governments, providing for basic public services; functions financed through local taxes and fiscal transfers. Social Welfare Law (passed in January 2012):  Replaces existing system of universal cash transfers with targeted poverty benefits. Major step forward towards setting up a fiscally sustainable social protection system. Law on Gender Equality (passed in February 2012).  Prohibits any act of exclusion or discrimination against equal rights, gender-based violence and sexual harassment.

February 2012/World Bank Mongolia Quarterly Economic Update

This is a vulnerable time for Mongolia

February 2012/World Bank Mongolia Quarterly Economic Update

 

Real wages for unskilled workers in urban informal sector falling with rising inflation rate. Government spending  Rose by 56% in 2011 (almost double that in 2009 in real terms).  Budgeted to rise by a further 32% this year.  This pro-cyclical fiscal policy could result in another boom and bust cycle Mongolia experienced before. There are once again growing concerns that the banking sector is overheating. Credit is expanding extremely fast and credit risk remains poorly monitored. Until a substantial amount of savings has accumulated in the stabilization fund, Mongolia remains strongly exposed to volatility in commodity prices.

February 2012/World Bank Mongolia Quarterly Economic Update

Air pollution in UB (Joint Report by World Bank and GOM Ministry of Nature, Environment and Tourism):
 Daily

exposures to carbon, smoke causes approximately 1500 additional deaths and 5,000 hospital admissions each year.  Annual costs for health damages estimated to be approximately $500 million year current (equivalent to equals 1/5 of Mongolias 2008 GDP.

February 2012/World Bank Mongolia Quarterly Economic Update

Conclusion: Be prepared sums up the appropriate policy advice at this point in time.

Collaborative Infrastructure Design

for Mongolian Sustainable Development

What is collaborative infrastructure design? What is sustainable development?

collaborative
Stakeholder consultation and engagement Regulatory drafting: public review & comment Improved governance coordination & accountability
Between parliament and executive agencies Between governmental agencies Between UB and local institutions

Investor-state partnerships
Open, fair, predictable, environment for FDI Investor contributions to urgent social development needs Negotiation: licenses & social licenses

Social entrepreneurship/impact investing

infrastructure project, communities, UB, national



Physical: urban, energy, environmental Legal: constitutional framework for development Regulatory: implementation and enforcement of law Governance: enhancing democratic participation Dispute resolution: legitimate, fair, accessible Financial: prudent investments in wealth creation Economic: foundation for diversification Socio-economic: education, health, safety net

design


Proactive, ex ante strategies Institutional blueprints Systems architecture policy, legislation, regulation  Mineral development, exploration, extraction  Networks: Information, technology, energy  Dispute resolution mechanisms Methodology: collaborative, interdisciplinary teams
 Public

interdisciplinary

innovation

design thinking

sustainability


Economic & fiscal

Long

term wealth creation Diversification Re-investment Stable employment

In mining projects In nearby communities Rural and urban

sustainability
Economic & fiscal: long-term wealth creation

For Mongolian nation:

 Successfully

navigate boom/bust cycles  Avoid Dutch disease & related economic distortions  Increase diversification of national economy  Incentivize reliable, robust FDI and capital investments

sustainability
Economic & fiscal: long-term wealth creation

For Investors
 Commercial

viability of investments over long term  Security of title, property rights  Firm protections against discrimination & expropriation  Contract enforcement pursuant to rule of law system

sustainability
Economic & fiscal: long-term wealth creation


Government of Mongolia and Foreign Investors  Stabilize/enhance profitable investment opportunities  Maintain successful, mutually-beneficial relationships  Between investors and state agencies  Between investors, government & impacted communities  Legal and regulatory implementation, compliance & enforcement  Eliminate corruption and patronage from all decisions  Ensure that differences are resolved through good faith negotiations and non-adversarial processes  Successful strategic reinvestment  Securing well-trained, skilled professional work force  Enabling transition: informal labor sector formal sector (especially in the artisanal mining sector)  Corporate social responsibility; adherence to MEF oath

sustainability


Environmental: protecting and restoring ecosystems Medical: protecting and restoring public health Socio-economic: alleviation: providing a viable safety net and opportunities for productive employment  Providing a foundation for economic growth
 Poverty
Improved

primary and secondary education Improved vocation and technical training opportunities


Political: securing and enhancing legitimacy and stability through democratic participation

Mongolian Development Matrix

High Economic Performance

Poor Social Well-Being & Governance

High Social Well-Being & Good Governance

Low Economic Performance

Sustainable economic growth depends on

access to public goods

Clean air, water, energy, environment Education and training Medical services, sanitation, worker health/safety Public transportation Democratic governance Peaceful dispute resolution mechanisms Cultural heritage

Sustainable economic growth depends on

building a diversified economy



Betting everything on the mining sector viable Chinese economic model viable Creating a uniquely Mongolian economic model
 Capitalizing

on entrepreneurial spirit  Enhancing access to micro-loans for small business  Revitalizing rural employment  Modernize animal husbandry practices  Expanded vocational education  Developing niche export markets (Mongolian brand)  Expand eco-tourism industry  Build on IT networking opportunities

Sustainable economic growth depends on building effective implementation mechanisms

 

Law on the books Law in action Law in action requires:  Alignment with social norms  Significantly enhanced regulatory enforcement capacity  Incentives to build and secure compliance:  Adequate salaries for civil servants  Increased regulatory enforcement  Rewards for regulatory compliance  Commercial incentives for private industry to support social and economic development  Accountability for legal violations  Public disclosure/shaming  Punishment: civil fines; criminal prosecution

Sustainable economic growth depends on designing effective dispute resolution systems

Chances of major, complex disputes = 100% Risk of future litigation/arbitration = very high Cost of ex post strategies = extremely high
In-house

legal capacity International law firms Years of discovery, motions, hearings before judgment High uncertainty of final judgment Stalled projects/breakdown of production goals Failures to meet economic targets

Alternative Dispute Resolution (ADR)



Design and commit to ex ante approaches

clauses in contracts and licensing agreements Obligation to consult and negotiate Dispute boards
ADR

Once disputes have arisen

Engage

in good faith negotiations Vigorously pursue settlement agreements Include all necessary stakeholders Convene facilitated consensus building processes

Sustainable economic growth depends on always remembering what is most important

Sustainable economic growth depends on always remembering what is most important

Zuun altan zoistoi baisnaas, zuun naiztai baisan n deer. (A hundred friends are more precious than a hundred pieces of gold.)

Ulysse Comtois, Jardin de rve, XIX, 1975. Oil on canvas, 16 X 20

Thank you