Mongolia is an East Asian country located between the two giant powers of the world: China in the South, and Russia in the north. As a classic example of a mineral-rich developing country, Mongolia has an export-driven economy in which 90% of the exports come from its minerals[1].
The country’s quick and vigorous action on preventing the spread of COVID-19 resulted in a notable success in fighting the pandemic so far. The country has relatively few cases with 310 confirmed cases and still no deaths in the middle of September 2020. But this success has come at a price.
According to the UN, in the first quarter of 2020, Mongolia’s economy contracted by 10.7 per cent, and government revenue fell by 8.6 per cent year on year, whilst expenditure went up 19.3 per cent[2]. On the other hand, the country struggles to boost its export-driven economy that is tightly tied to China. Asian Development Bank (ADB) estimates show that Mongolia will suffer significant investment and consumption shocks in addition to negative global demand spillovers in 2020. In addition to that, there is mounting international debt[3].
However, Mongolia is an interesting country that the world can learn some lessons from regarding the role of states in the ongoing health crisis of COVID-19. The country perhaps was the first developing country that introduced a resources-to-cash scheme[4], and with the COVID crisis this scheme is back on the agenda.
With the outbreak of COVID-19 during the winter of 2019-2020, Mongolian citizens were promised a cheque of up to 96,480 tugrugs (USD 34), but this promise was not a usual handout like in other countries. Mongolians who were born before April 11th 2014 are shareholders of a company called Erdenes Tavan Tolgoi (ETT) that manages a massive coal deposit on the state’s behalf; do these cash payments are dividends distributed by the company to its shareholders[5].
In 2019, the company made USD 1 billion and 30 million from its sales. For this reason, the dividend per share was calculated to be MNT 90, which results in MNT 96 thousand being given to each individual’s 1,072 shares. Minister D.Sumiyabazar said that the amount of the dividend will be raised further if the company’s revenue goes up[6].
As mentioned above, this resource-to-cash payment was not a new experience for Mongolians. In 2004, the government started to experiment with universal resource-financed payments for children. In 2010, the child-oriented payments were replaced with the new Human Development Fund (HDF) that was financed from mining dividends to provide a universal basic income that was paid monthly to every citizen. Mongolians monthly received MNT 21 thousand between 2010 and 2012 through the HDF. This experience provided a unique perspective on public ownership and revenue sharing in the mineral sector as citizens got a direct and equal share of their country’s wealth as co-owners of their country[7].
However, these payments were based on election promises and resulted in a vast deficit in the HDF as the expenditures were exceeding the actual mineral revenues[8]. In 2012, HDF was stopped and child-oriented payments were brought back.
On the other hand, in 2011, through a new scheme, every citizen received 1,072 shares in the ETT. Mongolians could use these shares for different purposes including tuition fees for students, health insurance coverage, or cash through a stock repurchase program by the government. Around 1.08 million Mongolians have kept all their shares and are entitled to a full dividend payout of MNT 96,480 (USD 34)[9].
Although these cash transfers have reduced poverty and inequality, and increased the transparency of the company’s actions and performance, the experience has taught the important lesson that it is not enough just to give cash payouts if the scheme is poorly designed and implemented[10]. As mentioned above, these cash payments have been used as tools to win elections, and this has resulted in an increased debt and an increase in inflation. In this regard, in 2019 the country passed an Election Law that prohibited the political parties from using the promise of cash transfers for elections.
Although the cash payments that were promised a few months ago are different from the previous cash transfers, as “The board (of ETT) has approved for the first time to distribute dividends to shareholders according to the Company Law. In the past, the state used its preferential rights to buy stakes from some people in cash. This time, it’s not a cash payout but a legal dividend distribution”, Minister D.Sumiyabazar said[11], we can still see something of the old tendency: a connection between elections and cash transfers.
On May 1, it was announced by the Minister of Mining and Heavy Industry that 100 thousand MNT was going to be distributed, but one month later there was still no payment. Erdenes Tavan Tolgoi company had already transferred 60 billion MNT to Mongolian Central Securities Depository but it is obvious that the government was holding it up due to the parliamentary election[12].
As we can see, the Mongolia experiment contains very important lessons in regard to the resource-to-cash payments. This experience underlines the importance of independent institutions from governments being tasked with the distribution of basic income type payments. If we understand these experiences and learn from them, it could provide a new perspective for governments in their fight with COVID-19.
Despite all kind of criticism regarding the government’s approach on resource-to-cash payments; people are losing their jobs, hopes, and voices all over the world, and this kind of resource-to-cash scheme gives a sense of certainty and security to people (without the burden of stigmatization), especially in such uncertain and volatile times.
COVID-19 doesn’t distinguish between rich or poor, and neither can we. More than ever we need schemes that don’t differentiate between people, because in these unprecedented times no-one knows if they will be the next one who is going to be affected by this crisis one way or another.
In the current turbulent times, there is a fierce debate emerging how cities should adjust to rapidly changing economic and technological trends. Smart City Education Inside invited two experts to discuss the prospect of cash transfers to enhance sustainability and provide equitable educational opportunities for students.
Smart City Online Education Inside is a joint project between the Digital Education Institute, III, and the Talent Circulation Alliance. Under the supervision of the Bureau of Industrial Development Taiwan, the project launched a series of panel and keynote speaking events for those interested in education technology, sustainable learning, and sustainable society.
On Tuesday (8/11), Mr. Ameya Pawar, who had served two terms on the Chicago City Council and was the first Asian and Indian American elected to major office in Illinois, shared his presentation “Dignity, Decency, and Agency: The Case for Universal Basic Income.” Income inequality, wealth inequality, and decades of policies favoring wealthy corporations and big banks over working people, drew him to the idea of Universal Basic Income (UBI).
Pawar believes that every aspect of society is impacted by inattention to poverty, it is necessary to invest in mitigating it at both the national and local level.
“What leads us to believe that people will do something wrong or bad or do less if we help them a little bit?” Pawar asked. “To achieve sustainability, people need to have built-in resilience,” he said.
In response to the idea that giving cash may make people less willing to work, Pawar said that research has shown that is not the case. “Giving people money does not change the fact that people, as human beings, want to be productive; instead, it gives people more choices and breathing room in their lives,” he said.
On Thursday (8/13), we invited Mr. Sean Kline, who is the Systems Entrepreneur in Residence with RSA Future of Work Center, to share his presentation “Child Focused Development in the Digital Era.”
Kline believes, as services and technology become the dominant drivers of the economy, some segments of the population have been left behind. That’s why, a more modern and robust social safety net is needed to help transition and adapt to this rapid technological change is needed. While the government is putting tremendous conditions on how low-income families use public benefits, it is capable of giving people money in the form of large tax deductions. These unequal requirements demonstrate trust for one group and mistrust for the other. In fact, unconditional cash is administratively easier to deliver especially if it is provided universally.
With children being an important focus of Kline’s work, he suggests that lacking investment in children not only shapes their life’s trajectory, but shapes the trajectory of potential economic growth for society as a whole. Sharing examples of universal children’s saving accounts, baby bonds, and basic income and how they have benefited children, he believes that these are the primary methods to support children universally in the digital age.
The World Bank has published a substantial report titled Exploring Universal Basic Income: A guide to navigating concepts, evidence, and practices
Universal basic income (UBI) is emerging as one of the most hotly debated issues in development and social protection policy. But what are the features of UBI? What is it meant to achieve? How do we know, and what don’t we know, about its performance? What does it take to implement it in practice? Drawing from global evidence, literature, and survey data, this volume provides a framework to elucidate issues and trade-offs in UBI with a view to help inform choices around its appropriateness and feasibility in different contexts. Specifically, the book examines how UBI differs from or complements other social assistance programs in terms of objectives, coverage, incidence, adequacy, incentives, effects on poverty and inequality, financing, political economy, and implementation. It also reviews past and current country experiences, surveys the full range of existing policy proposals, provides original results from micro–tax benefit simulations, and sets out a range of considerations around the analytics and practice of UBI.
The report employs throughout a definition of Universal Basic Income that matches BIEN’s definition of Basic Income. Consistency of definition is a commendable characteristic of the report as a whole.
The only caveat is that chapter 4 assumes that a UBI would replace existing social assistance provision. Under these circumstances it is not surprising that in some countries poverty and inequality would increase if the UBI were to be implemented. The authors do not simulate the option of leaving existing social assistance provision in place and reducing it by the extent of the UBI. In the context of a progressive tax system, such schemes would not increase poverty or inequality.
The EU Commission has said from the 25th September 2020 signatures can be collected from EU residents in connection with a new European Citizens Initiative. If the European UBI family succeeds in gathering 1 000 000 signatures, divided among a minimum of seven countries, then ECI delegates will be able to present a proposal to the European Commission which, if approved, would hopefully convince EU governments to start paying Basic Incomes to all of their citizens.
Bulgaria suffers from a number of problems, and in particular population loss and economically active citizens leave the country for better opportunities elsewhere. Angel Petrov writes:
The population decline carries long-term economic costs. Over time, a shrinking workforce becomes unattractive to investors and unable to subsidise the pension and healthcare needs of an ageing population.
All government ‘aid’ described below is highly bureaucratised and full of conditions, and in addition the funds are often paid late due to the complicated and sluggish administrative processes citizens are subjected to. The aid consists of:
Cash payments of €192 only for families with 14 year old children for the duration of the state of emergency (2 or 3 months)
over 2 months the unemployment fund will pay 60% of the income of the employees from sectors most heavily influenced by the COVID-19 crisis for up to three months. In addition to employers in sectors where operations have been suspended as a result of the social distancing measures (tourism, sports, culture, etc.), any other employer that can prove a 20% y/y drop in revenue in March is also eligible for the 60% salary subsidy.
The measure has been extended until 30th of September 2020.
This is the main stimulus. However, the working population has doubts that the administrative process will be efficient enough (it is expected that most companies will receive the aid in October and November 2020). Furthermore, many small and medium businesses don’t have the means to pay 40% of the salaries. Some critics see this policy as supporting big companies which will absorb the unemployment caused by the lack of help for small and medium companies.
To date (1st August 2020) 129 million leva (64,5 million EUR) have been distributed to 8400 employers, that is 13% of the 1 billion leva (511 million EUR) allocated by the government. Close to 35% from these people have taken aid only for one month.
On the 10th of April the Bulgarian Central Bank enacted a moratorium on debt repayments. Overall the number of people who have debts in Bulgaria is almost 3 million. By the 10th of May, 102 000 have applied for temporary cancellation on payments (usually 6 months) towards their loans, and 80 300 have been approved. Changes in these numbers are expected.
The processes are not transparent, efficient and timely
The measures are conditional and selective and not universal
Most of the governments support is expressed in loans rather than direct payments
In conclusion the measures so far have the potential to create another wave of workforce immigration towards Western countries, weakening further the economic future of Bulgaria because:
The case for a UBI emergency pilot in Bulgaria
The unnecessary agony of the Bulgarian nature and people can be prevented, and UBI is a key step that can be collectively taken to compensate over three generations who have given their talents, energy and time towards creating shared wealth spreading beyond the country borders. It’s time for common dividends to be distributed to their rightful owners.
Bulgarian UBI advocates are working hard to unite the people around the idea that once social and economic stability is achieved through unconditional payments of around 1000lv (500 EUR) Bulgarians will have the time and capacity to build a new system that meets their needs and corresponds to a consensus based on democratic values. Due to the inflexibility of the national currency (it is tied to the euro), the dominant proposal on how to implement Basic Income in Bulgaria at the moment is by restructuring the tax system and national budget in a way that will pay the UBI bill with the collection of Value Added Taxes and Excise Taxes paid by the sellers. The idea is for every Bulgarian citizen with an active address registration to own a bank card issued by the Bulgarian Central Bank which will serve people as a payment method to be used to receive a Basic Income that would meet basic needs like rent, utility bills, food, clothes etc.
A UBI emergency pilot hosted in Bulgaria would not a utopia, and the EU could rescue its reputation by supporting it. It is an opportunity to trial universal basic income on a national level using the Bulgarian state financial infrastructure to distribute funds to the people.
The EU Commission would also have a vested interest in embracing the project, as the positive results would increase cohesion and trust, and would give hope to other states that the European experiment is not another way to practice concentration of power.
It’s time for evolution not only for Bulgaria but also for the EU. UBI is a win-win solution and will literally bring Bulgaria back to life. People outside long to return to their roots and work for the wellbeing of their parents and the next generations. The EU owes this to the people of Bulgaria and Bulgarians owe it to themselves, their ancestors, the children, and the European natural environment that happens to be surrounded by Bulgarian borders. We have too much to gain and nothing to lose.
The Canadian Sayout newsletter has printed an article about Basic Income:
… At present government is paying out vast sums of money. In effect, we have a new and large-scale experiment by government in directly providing people with incomes. This gives us some indication of how a guaranteed income plan could work. Such a plan would be universal. And, as is now being demonstrated, it actually can be done.
A guaranteed, universal, and livable income programme would be transformative for our society. It would directly address income inequality. It would diminish and possibly eliminate poverty once and for all. …
The author, Robyn Peterson, has clarified his use of terms in the article:
a proper BI should be unconditional with the same amount being paid to every citizen or legal resident. This would avoid the somewhat cumbersome issue of establishing who should benefit and by how much, with a progressive income tax system evening things out.
