Zoos Bank case has exposed how laws are not observed under political pressure

Arshad Sayed, Resident Representative of the World Bank in Mongolia, clears some misconceptions and reiterates the Bank’s commitments in a conversation with MMJ. 

What do you think of all the recent news in the press about the World Bank and money coming to the Mongolian mining sector?
Some sections of the press have recently spread news which has nothing to do with the role and responsibility of the World Bank and its activities in your country. Mongolia is one of the shareholders of the World Bank. The Board of Directors of the World Bank has 24 members, one of whom is a representative of Mongolia.  Thus, first, it is not just an outsider organization. Second, since the World Bank is a jointly owned organization of many countries, our goal is to support the activities of the Government of Mongolia. This support is provided through different channels. The International Development Association is in fact among the cheapest sources of funds for Mongolia. Apart from financing, the bank is responsible for transferring good practices, since it is a global development institution. Another area of the Bank’s operations gets highlighted when some countries interested in working in Mongolia find that they lack the human resources, and then their Government places money in the World Bank fund and get an opportunity to cooperate with Mongolia through the Bank project funding.

We have to make it clear that we are a neutral organization. Our goal is not to represent or further someone’s interest but to transfer international knowledge and experience. Since we provide globally tested and tried information and suggestions, many of our recommendations have been accepted by the Government of the relevant country. There have been cases when a Government has not accepted advice from the World Bank. During our 19 years of partnership with the Government of Mongolia, we have seen both situations. 

We are neither a commercial bank aiming for profit, nor a private business entity opening its office when the going is good and closing it and leaving the country when the situation turns bad. Our relationship with Mongolia for the past almost twenty years has been stable, during times good and bad. Since 1991 the World Bank has provided over USD 450 million to Mongolia – most of it in the form of grants. In 1991 when the Bank started its cooperation with Mongolia, Ulaanbaatar power plants used to break down  often and there was frequent interruption in power supply. The very first aid project of the World Bank was designed to ensure reliable operation of the power plants. Equipment were upgraded, putting an end to regular power interruptions. There have been many such gratifying instances since 1991 when we offered help to Mongolia in times of difficulties. We have always been with Mongolia, in rain or shine.
The negative reports can be explained as being generated by mainly lack of understanding and knowledge about the Bank’s activities and principles, but do you think they are being encouraged by elements unhappy that the Bank will arrange for an international audit of our banks?

The World Bank organized an economic policy conference on October 29-30 this year and this was open to the public. There the real nature of the crisis in the banking sector was bared. The discussions made it clear that the present difficult situation has been coming for the last 10 years. This is now accepted by the Government, Parliament, as well as by individual observers. We all were of the view that the international crisis merely dealt a strong blow to the banking system which was already staggering. The external factor was there, but the origin and growth was of an internal nature.

There were many aspects to it. First, the banking sector lacked transparency, especially with regard to issues related to ownership of banks. This allowed owners and directors to lend money to companies in which they had interest. Second, banks were unable to introduce best practices in risk management. Third, Central Bank supervision was inadequate and incompetent. Fourth, the Financial Regulatory Committee failed to perform properly as far as commercial banks were concerned. The problems have been accumulating for long. After all this had become clear at that policy conference, the Government and the Central Bank came to the conclusion that an urgent audit of the capital assets of banks was essential. The Office of the President of Mongolia and the Secretariat of the State Great Hural were of the same opinion. The World Bank, the Asian Development Bank and USAID together discussed the possibility of meeting  the Government request.

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