PSD Blog - The World Bank Group

Weekend Links

A new look at the tragedy of the commons.

The Halo Effect, explained.

Mongolia is in the news this week.

A societal preference for boys has become an unlikely source of power for Indian women.

Consumption versus Income Inequality.

The view from Mongolia on Doing Business 2010

The room was packed. About forty people, mostly journalists, came to the launch of Doing Business 2010 by video conference with Washington and several other East Asian and Pacific countries.

Mongolia is going through a lot of economic changes. It was hard-hit by the global economic crisis, which devastated commodity prices and strained the banking system. Mining could also transform the economy if negotiations between the government and Rio Tinto, a global mining corporation, are successful. Mongolia has a chance to show that it’s a good place to do business and to invest in. It would be good, then, to see signs of interest in reform by journalists and the public.

Mongolian Cashmere: Softer than a baby’s bottom

Before I came to Mongolia, I thought the softest thing in the world was the rear end of a baby. But that was before I visited the Gobi Cashmere factory, where I saw the production process from smelly goat hair to high-quality clothes. It’s hard to believe that the scraggy goats you see in the countryside are the source of Mongolia’s fabulous cashmere products, but it’s true. Somehow, the tough conditions of Mongolia lead to incredible, wearable softness.

Mongolia is the second largest producer of raw cashmere, after China. Estimates vary, but Mongolia produces about 20 percent of global supply. China produces about 70 percent. The rest comes from Afghanistan, Iran, India, Pakistan and Central Asia. In spite of this, Mongolia hasn’t succeeded—at least not yet—in branding its top-quality cashmere.

Mongolia's construction sector: still frozen

From our office window, I can see nine cranes hovering over unfinished buildings. None of them are moving, even though it's now well above freezing. In winter, construction stops because of the sub-zero temperatures. But when it warms up, the work starts up again. A year ago, when I first arrived in Ulaanbaatar, there was a ton of construction activity. This year, there's almost nothing. Another visible sign of the crisis.

Even before the crisis, I was astonished by the sheer number of buildings going up. Within spitting distance of our office there are five new office buildings that are nearly complete, and many more throughout the city. Who is going to move into these spaces? There are even more residential buildings being thrown up, including entire sub-districts. But who's going to move into them, if they're ever finished?

Top ten signs that the global economic crisis has reached Mongolia

The worldwide press is full of bad economic news about the financial crisis. You'll find plenty of graphs and figures of collapsing commodity prices, depreciating currencies, rising unemployment, and other economic horrors. But what about the impact on the ground? Here are some observable signs of the crisis in Mongolia that I've noticed in the last six months:

Crazy driving in Ulaanbaatar

"We drive cars the same way we ride horses," a Mongolian colleague once told me. It took me a while to process that thought. I can't say I see the grace and beauty of a Mongolian horseman reflected in Ulaanbaatar's traffic. But I don't think that's what he meant. I think he was referring to the freedom of movement that both drivers and riders on horseback enjoy.

I first experienced Mongolian traffic as a pedestrian, desperately trying to cross busy streets, surrounded by cars and in constant terror. At first, I stayed alive by waiting until a critical mass of pedestrians gathered together at the side of the road. Then, as a single body, they would surge forward into the traffic, forcing cars to stop or at least slow down. I don't know what triggers the collective decision to move forward, but somehow it works.

Pollution for breakfast, lunch and dinner

Editor's Note: The following post also appears on Dave Lawrence's personal blog, Out of Mongolia.    

The winter air in Ulaanbaatar is hard to imagine. It is basically a thick blanket of smoke spewing out from the stoves of thousands of people living in gers, which are traditional Mongolian homes made from wooden frames covered in felt. Raw coal is the main fuel, since it is much cheaper than wood. Traffic and power plants play their part too, but it's the smoke from the gers that makes breathing such a challenge at this time of year.

Half a million people in the city live in the ger districts. They are mostly poor; recent migrants from the countryside in search of better lives. The poorest cannot even afford coal, and burn whatever they get their hands on.  Even garbage and old tires. Just think of what's going into the air.

Many are cold, but few are frozen

For months, I imagined that I would write a post in the dead of winter describing my sufferings in the bitter cold. It is bitter cold: right now (10:00 am) it's -29°c. But I'm not suffering, at least not anymore.

At first, the cold was a major shock. If you're not dressed properly, you will definitely suffer. I remember walking to a meeting in December. I had a warm hat and a decent coat, but I had forgotten about my legs. In minutes, the cold bit sharply through my trousers, stinging the skin on my thighs until they went numb. I had to keep my hands in my pockets; even with gloves, my fingers turned to ice.

One weekend, it got down to -37°c, almost to the point where Fahrenheit and Celsius temperatures are identical (-40°c). I would not leave the house, or go near the windows and doors. I survived on rice and boiled eggs, and interacted with the outside world through text messages and the Internet. Thank goodness for Facebook.

What’s your lucky number? For Mongolia, it’s 58.

The hall was large and chilly. But it was also full. Nearly 80 people had come to listen to a presentation on Mongolia’s ratings in the 2009 Doing Business survey. I was happy to see a healthy mix of government officials, private firms, developmental organizations, NGOs and journalists there.

The Doing Business project looks at the business environment in 181 economies using ten indicators that reflect the life cycle of businesses. Then it ranks them. Governments can use the rankings to compare themselves to other countries, or to measure their own progress in business reforms over time.

Mongolia is currently at 58, a slight drop from last year. It is 7th in the East Asia & Pacific Region, well ahead of China (83) and Vietnam (92). Mongolia also outperformed most countries of the former Soviet Union, including Russia (120) and Kazakhstan (70). Quite an achievement!

Leasing in Mongolia gets a jump start

What does it take to get the leasing sector off the ground? In IFC's experience, the first thing to take care of is legislation that makes leasing feasible. Tax treatment, customs regulations, and the ability to reclaim equipment all have a big influence on whether leasing companies will make it or not.

This is important for Mongolia. Although commodity prices are depressed right now, there is a huge amount of wealth in the ground. Getting it out will require a lot of equipment, everything from excavators to drills to vehicles, and more. And it's not only mining companies that will need equipment—the many Mongolian businesses that provide goods and services to the mining industry will need equipment too. These businesses will be an important part of mining-led economic growth in Mongolia.