ECONOMIC RIGHTS IN MONGOLIA

D.Narmandakh
Vice President of Association
of Mongolian Trade Unions

Ladies and Gentlemen,
First, I would like to express, on behalf of Association of Mongolian Trade Unions, our appreciation to organizers of this event, including the Lawyers Centre of Legal Reform Support, for the invitation and the opportunity of speech at this first ever national forum of Mongolian human rights non-governmental organizations.
Although the subject matter of my presentation is economic rights in Mongolia, according to the UN standards any type of human rights are an inalienable and integral part of the larger “human rights” concept. Thus, economic rights will be discussed in close relationship with other human rights.
One. Three periods of human rights, their interdependence
The concept and principles of human rights became rather cohesive starting in the XVIII century being spelled out first in Declaration of the Rights of Man and of the Citizen of France and Declaration of Independence of the U.S.A. Basic principles of the human rights concept, however, can be traced back to social, economic and cultural aspects of nations centuries earlier. After the civil and political rights received legitimate debate and attention in the XVIII century, the economic, social and cultural rights started to slowly appear on different agendas. In the recent years, peace and sustainable development on earth have received worldwide recognition as universal aspirations. It is, therefore, important to touch upon the three stages of human rights development.
The first phase of human rights are so-called “negatively formulated rights”, or those civil and political rights described in Articles 2 to 21 in the Universal Declaration of Human Rights. These rights aim at protection of human rights and liberties from restrictions in any way and form.
The second phase of human rights, or so-called “positively formulated rights”, are economic, social and cultural rights designed to promote and ensure social justice, adequate living standards, opportunities for social activity and participation and listed in Articles 22 to 27 of the Declaration.
The third phase rights are “collective” rights. These rights are stated as follows in Article 28 of the Declaration “Everyone is entitled to a social and international order in which the rights and freedoms set forth in this Declaration can be fully realized”.
It is understood that developed and industrialized economies are the frontrunners in ensuring economic, social and cultural rights. Developing nations recognize that the third phase rights offer a solution to alleviate poverty and social injustices and, thus, more and more actively demand social justice and equal participation at regional and other international levels.
In this age of fast-paced globalization, we also need to note growing interdependence of the three phases of human rights. This makes it necessary for human rights non-governmental institutions to review their activities at micro and macro levels in order to develop integrated approach to the subject matter. The same should be said about Mongolian human rights non-governmental sector – it is time they all united to make their case stronger for establishment of international order favourable to enjoying civil, political, economic, social and cultural rights.
Mongolia has officially joined International Monetary Fund, World Bank, International Development Association, International Finance Corporation in 1991. If we assess results of the cooperation with these international institutions, although the macroeconomic stabilization goals have been achieved to certain extent, they have a long way to go before being able to impact every household and poverty alleviation remains the same as before. The National Poverty Alleviation Programme, which had ambitiously aimed at its launch at bringing the national poverty from 33 percent down to 10 percent, failed completely.
The national currency – Mongolian tugrug – suffered devaluation of 256 times between 1991 and 2001. The economic downfall brought about increased unemployment and poverty driving the living standard up 226 times.
As the salary growth rate is 2-2,5 times slower than that of living standard, more and more parts of the population slip into poverty.
The unemployment rate, according to the population census by the National Statistics Department in 2000, is 17,5 percent.
Efforts to limit demand in an economy as poor as Mongolia to try to tame inflation resulted in increased unemployment and poverty levels and made domestic economy prohibitively dependent on foreign aid. The incoming foreign aid also devalues national currency in relation to foreign currencies, decreases domestic savings, slows down competition among import-replacing and export-oriented manufacturers and contributes to debt burden. In other words, the aid has not in general positively impacted the economic growth and poverty alleviation.
Therefore, it is essential that non-governmental organizations, including trade unions, participate in and contribute to development of “Poverty Alleviation Strategy” being developed in concert with International Monetary Fund and World Bank.
On March 29 this year Association of Mongolian Trade Unions has submitted the following specific proposals to the Boards of Directors of both the World Bank and International Monetary Fund through their representative offices in Mongolia:
1. Conduct assessment of impact of its aid agreed upon with the Government of Mongolia on the poverty and make necessary adjustments
2. Develop and implement, together with the Government of Mongolia, policies which will ensure an economic growth at annual 8-9 percent
3. Create fund (reserves) against risks of outside factors and natural disasters, enhance capacity for disaster management
4. Support pro-investment policies of the Government in such infrastructure fields as energy, water supply, also education, health care, food industry, pension and salary in order to encourage private sector investments
5. Reevaluate insufficient percentage of the poverty alleviation-oriented and rural development resources in the overall official development aid and make the necessary adjustments
6. Recognize Mongolia’s legitimate interests to protect domestic production and market within the framework of the World Trade Organization.
The submission of the above proposals to ensure economic growth together with ensuring adequate living standards and decreasing unemployment and poverty is a sign of our unity with foreign labour organizations and trade unions in their efforts to promote international economic justice.
Two. Economic rights in Mongolia
Mongolia has acceded to International Covenant on Economic, Social and Cultural Rights in 1974, thus, agreeing to the following commitments:
· recognize the right to work … and … take appropriate steps to safeguard this right (Art. 6)
· recognize the right of everyone to the enjoyment of just and favourable conditions of work (Art. 7)
· ensure the right of everyone to form trade unions and join the trade union of his choice … for the promotion and protection of his economic and social interests (Art. 8)
· recognize the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions…(and) take appropriate steps to ensure the realization of this right (Art. 11).
From the above, only the right to the enjoyment of favourable conditions of work is reflected and recognized directly in the Constitution of Mongolia.
The right to form and join trade unions for the protection of interests can also be found in Article 22 of the International Covenant on Civil and Political Rights. Mongolia is a signatory to this treaty since 1974 and to its Protocol – since 1991.
Although the State is under obligation to ensure this right, the right is not respected in many businesses, including private and foreign investment companies.
Some employers do not understand that trade unions have the authority not only to represent and protect economic interests, but also to implement them. This misunderstanding leads the employers to fully assume duties of implementing economic interests.
Restoration of the right to own property, to conduct private business represents the core change that has come about in the course of constitutional and economic reforms. However, a right directly connected to this right – the right to work – has not been completely guaranteed in the Constitution.
The Constitution of Mongolia contains the following specific provisions dealing with private economic rights and interests:
· The State recognises all forms of both public and private property and shall protect the rights of the owner by law
· The owner’s rights shall be limited exclusively by due process of law
· The State may give for private ownership plots of land, except pastures and areas under public utilisation and special use, only to the citizens of Mongolia. This provision shall not apply to the ownership of the subsoil thereof.
· Intellectual values produced by the citizens are the property of their authors and the national wealth of Mongolia
· No person shall be discriminated against on the basis of … property, occupation and post …
· Right to fair acquisition, possession and inheritance of moveable and immoveable property.
· Illegal confiscation and requisitioning of the private property of citizens shall be prohibited.
· If the State and its bodies appropriate private property on the basis of exclusive public need, they shall do so with due compensation and payment.
· Right to free choice of employment, favourable conditions of work, remuneration, rest.
· Right to private enterprise
· No one shall be unlawfully forced to work.
· Right to material and financial assistance … in … circumstances as provided by law
· Citizens may establish and operate private schools if these meet the requirements of the State
· Right to engage in creative work in cultural, artistic and scientific fields and to the benefit thereof
· Men and women shall have equal right in political, economic, social, cultural fields and in family affairs
· Right to be compensated for the damage illegally caused by others.
Three. The right to work in practice
According to the census by the National Statistics Department in 2000, the adult population of 15- year-old or older was 1524,4 thousand out of which 944,1 thousand (or 62 percent) were reported as “economically active” members of society. Within the economically active, 779,2 thousand had employment and remaining 164,9 thousand were registered as looking for a job. The rate of unemployment was, thus, calculated as 17,5 percent.
The “economically inactive” population was counted as 580,3 thousand out of which 90,4 reported as unable to find a suitable employment. If these individuals who are not employed, neither, were included in the above total of the unemployed (164,0 thousand), the overall unemployment rate would reach 25 percent.
Only 15 percent of all the unemployed (only 38,6 thousand) were registered with the Employment Office in 2000. If this (i.e., officially registered figure) had been the official indicator of the unemployment rate, the rate would have fallen to 5 percent.
Employment has different forms now. Among the employed population (779,2 thousand) 321,4 thousand were contractors, 10 thousand – employers, 243,2 thousand – individual (sole proprietorship) entrepreneurs, 197,5 thousand – non-salaried family business participants, 3,7 thousand – cooperative members and 3,4 thousand – miscellaneous.
Herding, informal sector in urban areas, small trading, labouring abroad have stayed as significant sources of living.
The 2001 Human Rights Baseline Study studied the hurdles to exercising free choice of the employment in Mongolia. The respondents in Ulaanbaatar indicated the nepotism (18,9 percent), low salary rate (14,4 percent) and lack of profession (11,2 percent) as the three largest factors. Also, bribing an employer to be recruited (10,0 percent) and age or sex-based discrimination (5,6 percent) have also been mentioned.
Another serious obstacle to free choice of employment is violation of the right to choose permanent or temporary residence.
The right to the enjoyment of just and favourable conditions of work comprises fair salary rate, payment of salary sufficient for decent living by the employee and his/her family members, work conditions which meet security and sanitary requirements, equal opportunities for merits-based promotion, vacation, limits to the working hours, overtime payments etc. Violations of any of the above, whether individually or collectively, are frequent. In addition to insufficient salaries, low standards of security and health and sanitation in the work environment, daily 9-12 hours of work without overtime compensation are few examples of the existing violations.
The right to creation of a trade union, to negotiate and conclude collective and bargaining agreements with an employer in order to promote and protect economic and social interests is not adhered to in some companies. Recently, a clear trend of replacing the labour (employment) agreement with a Civil Code contract can be observed. This prevents employees from actively participating in labour relations such as organizing trade unions, concluding collective and bargaining agreements with employers, going on strike etc.
Breaches of the law by employers to avoid conclusion of individual labour agreements, collective and bargaining agreements seem to be becoming a trend.
Age, sex, political affiliation, wealth-based discrimination or favoritism takes place on an occasional basis.
Finally, a mechanism for monitoring and implementation of the thirteen International Labour Organization conventions to which Mongolia is a signatory as well as for applying norms contained in the conventions is yet to be put in place.
The following actions need to be pursued in order to ensure the right to work:
· Pursue active employment and labour market policies
· Make adjustments to the long term poverty alleviation programme
· Develop and implement short term employment promotion programme
· Take measures to create new jobs, offer vocational training and retraining in line with management and structural reforms of privatization-bound enterprises, other valuable business as well as public (State) institutions
· Expand effective employment in agricultural sector
· Resort where possible to labour-intensive projects such as construction or similar public projects
· Ratify “Forced Labour Convention”(No. 29, 1930) and “Abolition of Forced Labour Convention” (No. 105, 1957) of International Labour Organization
· Fight any forms of discrimination or favoritism and corruption in employment matters
· Review and recall if necessary decisions and actions by local Khurals (Citizen Meetings) and administration which restrict freedom of choice of permanent or temporary residence.
· Support employment of the handicapped by businesses
· Negotiate and conclude agreements or any necessary documents with foreign countries aimed at protecting rights and interests of Mongolians labouring abroad
· Expand number and scope of vocational trainings by specialized training centres, facilitate communications and cooperation between the employers and these centres
· Increase effective investment and create new jobs:
- by thoroughly reflecting economic growth and employment promotion priorities in the poverty alleviation policy documents and by securing international donor support
- by reviewing expenditures on non-profitable or low profitable investments and by devising domestic savings accumulation
- by supporting re-investment of certain part of foreign investment proceeds
To the end of promoting the right to just and favourable conditions of work, the employers, the employees and the trade unions need to take the following actions:
§ Set the minimum labour wage (determined by the Cabinet taking into account proposals by the central organizations of the employers and the employees) annually by the end of July so as to be considered in developing and approving the annual budget
§ Implement a series of steps aimed at raising the minimum labour wage up to 50 percent of the average national salary level
§ Recognize the right to salary ensuring an adequate standard of living for an employee and his family, introduce a practice of covering the wage issues in a collective agreement on a regular basis
§ Establish labour standards and specialization levels (degrees) for employees based on criteria (such as responsibility level, significance of the job position etc.) in order to pay equal amounts of salary to equal positions
§ Provide merits-based promotion and professional growth opportunities to any employee
§ Establish Workplace Security and Sanitation Councils at each organization with representation of both employer and employees on it, introduce the work security guidelines to employees, maintain monitoring mechanism
§ Ensure compliance with workplace sanitation standards
§ Limit overtime performances in a collective agreement, observe more adequate work and rest periods, ensure overtime payments
§ Regularize labour arbitration courts.
Employees, trade unions and other NGOs need to focus their joint efforts on the following in order to jointly promote and protect their economic and social interests:
§ Increase responsibilities of both trade unions and employers in promoting the right to work of everyone, ensure their equal rights, assign collective agreements and bargaining as primary methods of economic decision making in employment relations, involve participation of both sides on drafting the documents and related estimates, introduce and/or strengthen information exchange and sharing and other social partnership mechanisms at all levels, especially in businesses.
§ Ensure the right to establish or join trade unions, to negotiate, to go on strike by:
- prohibiting replacement of labour agreements with Civil Code contracts
- ensuring compliance of a labour agreement with not only with Labour Code or international law, but also with collective agreement and bargaining
- canceling prohibitions to join trade unions, negotiate or participate in strike in the Law on Courts, the Law on Government Service and others in connection with upcoming private sector model–based reform of management and funding system of government (i.e., State budget) institutions
- abolish registration requirement of trade unions
- elaborate in the Law on Trade Unions on penalties on employers for prohibition or all forms discrimination of trade unions or its activists (e.g., illegal dismissal), interference with internal matters of trade unions
- strengthen supervision and monitoring of labour standards and legislation by state inspectors, employers and trade unions and other relevant authorized bodies
- introduce new conventions and recommendations of International Labour Organization each time they are passed, create mechanism for ensuring implementation of conventions to which Mongolia is a party.
Four. The rights to own property and the right to private enterprise
The 1992 Constitution of Mongolia, the 1994 Civil Code of Mongolia and related sectoral laws have explicitly recognized public and private ownership and provided for rights of the owners.
Although the Constitution reads “The State shall regulate the economy of the country with a view to
ensure the nation’s economic security, the development of all modes of production and the social development of the population”, little attention is being given to development and support for cooperatives and non-profits and their economic interests.
Although the rights of an owner may be restricted subject only to the grounds and procedures prescribed by the valid law, abuses of ownership rights by local administration and administrative agencies are more and more common.
Today, hundreds of thousands of shareholders hold shares in over 400 stock companies through the Stock Exchange. Most of them, however, do not enjoy the rights and benefits of a true investor. Namely, regular and prompt access to corporate records, active participation in shareholders’ meeting (e.g., right to the vote), holding Board of Directors accountable and responsible, payment of dividends do not realize in many companies.
The Company Law and the corporate governance structure that the Law spells out do not provide for equal protection of shareholders’ rights, including minority and foreign-based shareholders.
Depriving employees of ownership opportunities of shares in a company they are employed adversely affects cooperation of employers and employees and, thus, sustainability of the business organizations.
Accumulation of shares in the hands of few large shareholders and transformation of joint-stock companies into limited liability companies have been gaining quick pace. This brings about a necessity for heightened protection of shareholders’ rights during the transition.
Process of depositing and investing savings by the population is not regulated to offer security and profits, neither.
Although the Mongolian Constitution provides “The State may give for private ownership plots of land, except pastures and areas under public utilisation and special use, … to the citizens of Mongolia”, the privatization of the land has been tabled indefinitely.
Even though citizens have the right to procure limited lease rights to the land as regulated in the Law on Land, lease applicants have to go through 8 different licensing instances which all in all take at least half a year.
The right of Mongolians to pursue profit activities on their own was first enacted in the Law on Business Entities back in 1991. The right was further elaborated in 1995 with the passage of the Law on Cooperatives and the Law on Partnerships and Companies. In 1999 a new comprehensive law on companies was enacted.
However, the right of a citizen to pursue profits without forming a legal person (i.e., company, partnership or cooperative) has not yet been legislated and, thus, guaranteed.
Intellectual property law is a new, but fast developing area of law in Mongolia and has the Law on Copyright (1993), the Law on Patents (1993), the Law on Trade Marks and Business Names (1996), the Law on Technology Passage (1998), the Law on Prohibition of Unfair Competition (2000), the Civil Code and nearly a dozen of administrative regulations. In addition, Mongolia became a member of World Intellectual Property Organization in 1979 and officially ratified over ten important intellectual law related conventions and treaties, including Paris Convention on Protection of Industrial Property (1985) and Patent Cooperation Treaty (1991). There are over 30 non-profits working in the field of intellectual property (according to the registration database at the Justice and Home Affairs Ministry). Finally, freedom of expression and artistic creation has been enjoyed to most degree. Despite this, respect and protection of the intellectual property are still weak.
With regard to the right to own property and to pursue profit business, non-governmental organizations should focus on the following:
· Guarantee rights of a purchaser of privatized State property
· Activate duties and functions of condominium owners’ associations, enhance their management and structure, review contractual content of condominium use to as to protect and promote rights of condominium owners
· Lower interest rate of construction projects
· Privatize the land
· Publicize the new Civil Code
· Auction off State-owned shares in commercial banks
· Enhance and strengthen oversight by the Central Bank of bank operations
· Sell government bonds to the population
· Review and if necessary cancel actions and decisions of local officials and administrative agencies which restrict the right to own
· Promote non-governmental public property relations such as cooperatives and non-profits
· Introduce protection mechanisms of shareholders, including minority and foreign shareholders’ rights
· Extend cooperation among corporations, State and shareholders in order to ensure such rights as access by shareholders to corporate records, active participation in shareholders’ meeting (e.g., right to the vote), monitoring Board of Directors, payment of dividends etc.
· Include representation of small shareholders on the Securities Committee
· Develop employee stock ownership programmes
· Develop and enact the law on pursuance of individual business without creation of a legal entity
· Develop and maintain corporate governance programmes in each company
· Increase minimum capital requirements of companies, strengthen oversight of transformation processes (restructure, merger etc.)
· Review business accounting standards, bring them in line with international practices, regularize independent audits
· Review discriminatory restrictions of the right to pursue business activities so as to make them consistent and reasonable
· Cut tax rates, create fewer categories, expand the tax base so as to ease the tax burden
· Explore needs for regionally differentiated tax rates
· Review and bring laws and administrative regulations on licenses and fees in conformity with Law on Business Licensing
· Develop and implement national cooperatives development programme
· Lay the legal framework in compliance with international law for acquisition of foreign intellectual property, including know-how, and the transfer of Mongolian intellectual property abroad
· Strengthen registration, protection and publicity mechanisms of new domestic products, designs and trademarks
· Introduce prompt copyright procedure for arts and culture creations
· Introduce and promote franchising
· Support and facilitate cooperation of intellectual property related non-governmental organizations
· Develop a list of well-known trademarks in Mongolia.
Thank you.