New Leaders Spearhead Move Away From State Ownership

TRANSITION TO CAPITALISM

Corporate heads may be rolling at Mongolia's top state enterprises since reform-minded democrats swept to power this summer.

But T.S. Baldorj, a long-time apparatchik and editor of the country's largest newspaper, is digging in for a tough fight.

Just before the June election when a democratic coalition ousted the ex-Communist Mongolian People's Revolutionary Party (MPRP), Mr. Baldorj privatized Ardyn Erkh, the newspaper he founded six years ago. In 1990, democratic protests ended 70 years of Communist rule although the reconstituted MPRP continued to govern.

Among the 176 newspaper employees, the editor came out the largest shareholder with a 9 percent stake. The new government cried foul and charged that the media company was sold off unfairly. It wants to put the paper up for competitive bids. Baldorj says he will have none of it.

"The new government is changing all the posts in the state-owned companies. These people have a lot of expertise and should be retained," says the editor, at one time a senior leader of the MPRP but who now maintains that his newspaper is independent. "I feel sorry for the people they are playing with," he says. "But they can't play with me."

A newly elected corps of young, free-market upstarts wants to escalate Mongolia's transition to capitalism. A democratic coalition scored a landslide victory over the former Communists by pledging to revitalize the economy.

Since the June vote, reform has taken on a new urgency, government officials say. The copper market, accounting for half of Mongolia's exports, has been hit by the scandal at Sumitomo Corp. Prices plummeted by one-third, throwing Mongolia into a foreign-exchange crunch.

Trade in cashmere, the fine goat's wool that is Mongolia's other major export, is also weakening. China, the world's largest producer, has boosted production, undermining prices by one-third. Tourism, a key earner of foreign exchange, is down drastically in the wake of a cholera outbreak last month.

The bad news hits just as Mongolia seemed to be rebounding from economic disaster caused by the end of Soviet aid. After shrinking 20 percent between 1991 and 1994, the economy, propped up only by $200 million in foreign aid, grew 6.8 percent last year. Inflation was down from triple-digit levels three years ago, and foreign-currency reserves had stabilized.

Now, Mongolia could find itself in equally dire straits, officials say. The government has no choice but to raise gasoline and electricity prices because it lacks funds to continue subsidies. It also must sell or close many decrepit state industries, threatening thousands of jobs and risking unrest.

Recently, elderly patrons of a collapsed bank demonstrated outside the parliament building in central Ulan Bator, the capital, demanding the government make good their lost savings. The small bankruptcy is the tip of the iceberg in an industry tottering under bad loans to state companies.

"Many of the largest banks are on the brink of bankruptcy," says Rinchinnyam Amarjargal, a Western-trained economist and new parliamentarian. "The situation is as bad as 1990. History is repeating itself. The new government has very little room to maneuver."

In their hurry to push through reforms, the new rulers, many in their 30s and 40s with little government experience, confront a rigid ex-Communist bureaucracy. Since they took office, ministries have been restructured, apparatchiks pushed aside, and state company executives retired.

At the restructured State Property Committee, Zandaakhuu Enhbold supervises many bureaucrats who are twice his age. A recent law-school graduate, Mr. Enhbold was the campaign finance manager for the winning four-party democratic coalition.

He is now charged with privatizing the 450 state-owned companies and speeding up a process that began in 1991 but has inched forward amid controversy. Currently, only one-fifth of the economy is in private hands. To many Mongolians, privatization has been tarnished by insider sales of state companies to ex-Communists.

"I think these street children will fall from power within four years," an ex-Communist official says about the new government. "The smart people are in the MPRP."

Enhbold, the property committee chairman, says he's going to turn things around by holding fair and open bidding. He's also trying to inject new life into the largest Mongolian state companies by changing management and luring foreign investors.

"For six years, we have called for [privatization]. Now, we have a chance to accomplish this.... In the past, many mistakes were made. The government wants to create more jobs, but in reality, we don't know what will happen," Enhbold says.