Ard Holdings is a financial holding company poised to get listed on the Mongolian Stock Exchange through a merger with Investor Nation JSC, one of its invested companies. The UB Post sat down with CEO of Ard Holdings and former Vice Minister of Finance Ch.Ganhuyag to discuss the proposed merger and reverse takeover of their companies. As a prelude to the interview, Ch.Ganhuyag briefly introduced his company and its operations. “Our company’s vision is to have Mongolians work for the benefit of Mongolian people, hence meaning of our name in Mongolian - the people. Previously I used to work for foreign institutional investors, having founded XacBank and TenGer Financial Group for example. We don’t want the Mongolian people just to be customers at a bank, taking out loans, receiving a card, and paying fees and interest. The main idea behind our financial institution is to let the ordinary Mongolian people have ownership and share in the profits of the bank” he said. The following interview includes what CEO Ch.Ganhuyag sees in store for Ard Holdings, while uncovering the opinion of the former Vice Minister of Finance on current economic topics. What is the main goal you have in mind when you complete a reverse takeover (RTO) for Investor Nation and eventually Ard Financial Group? The main goal is to enable Mongolian people who already have ownership stakes in Investor Nation and Ard Holdings to trade their shares on the designated market place, the Mongolian Stock Exchange. Since 2005 Ard shares worth billions of MNT were traded annually on the OTC market – we want to bring this volume to the MSE. Has the fact that the Mongolian Stock Exchange is state-owned brought on any obstacles to your proposed RTO? I would say the Mongolian Stock Exchange (MSE) has been very forthcoming and welcoming to our approach to list our shares on the MSE. Right now, the matter is being looked at by the Financial Regulatory Commission (FRC). I just had a meeting yesterday with the Chairman of the FRC, S.Davaasuren and we hope that the commission will issue the approval to go ahead first with Investor Nation and then with Ard Holdings’ RTO. This is an unprecedented event in Mongolia. We hope that our current 3,000+ shareholders will be able to go and trade their shares; instead, what is happening right now is that shareholders trade their shares at the company offices in an unregulated way. We simply want to bring our shares to the marketplace and let our shares float in the market. We want the market to set a price for our stock. You have been publically critical of the government’s handling of the Erdenes Tavan Tolgoi shares. Both the stock exchange and Erdenes TT are state-owned. Do you think that privatizing the MSE will promote better transparency pertaining to these shares and trading in general? I think the stock exchange should be in private hands, as well as any other company that operates in the financial services sector. About 15 percent of Erdenes Tavan Tolgoi is owned by the people. Consecutive governments have violated minority shareholders, or Mongolian citizen’s rights for the last six or seven years. We need to cure this situation regardless of who owns the MSE. As it comes to the privatization of the stock exchange, we need to look at the clearing house, the Mongolian Central Securities Depository. The exchange and the depository are sister organizations. We need to take these three institutions away from the control of the Ministry of Finance. The bureaucrats who are sitting on the board of both the depository and the exchange right now are not capable of taking these institutions to their next stages of development. Statistics show that only three percent of Mongolians own 80 percent of the savings in the country. Do you think improving awareness about trading stocks or shifting assets into more long-term prospects will help improve this situation? Regarding the privatizations of state-owned enterprises, I believe the process should be done through a proposal I made several months ago. That is combining privatization with the pension overhaul. Initially, the state owned companies can be incorporated into the pension fund. Having a large pension fund will boost the economy and the development of the financial sector while also giving confidence to people in their pension fund. Current monthly contributions will be backed by the revenues of the state-owned enterprises. It is not a privatization; it should be called a state pension fund. The government and Parliament should still retain oversight and control over this entity but we will have to have a clear policy on how to go about privatization of enterprises that are owned by the government. In addition, the state budget and the pension fund will finally be separate. Currently, the state budget or taxpayers contribute 700-800 billion MNT annually as subsidies to the pension fund. That issue will be addressed with the program I am proposing. In terms of long-term savings, our company Ard Insurance has piloted private pension funds starting in 2007. People make monthly contributions to the fund which is a long-term savings program and also serves as life insurance. It is a mixture of life insurance, long-term savings, and the pension program. We have 800 active subscribers to this program. I believe that Mongolians do understand the importance of savings but do not earn enough to save and that issue needs to be addressed. The public needs to be educated about financial services and products and need to understand the products in the market before they make sophisticated financial decisions. As you know, Mongolia has upcoming bond debt obligations of 660 million USD in 2018. The country has fallen into a debt cycle, refinancing bonds when it matures through new sovereign bonds. As an executive active in the financial sector, how do you see Mongolia escaping this debt cycle? The government should approach the debt very responsibly. The issue of accountability and responsibility should be brought up. USD1.5 billion in bond money, where did it go? Who took the loans? Which projects did we finance? Are these projects paying back? We need to make sure the sources of repayment are very clear before issuing any bonds. It is not fair if the government borrows USD1.5 billion and asks all taxpayers to carry the burden. Digging into who incurred what debt to finance which projects is a more philosophical approach. The practical approach would be to cut expenditure in the budget, stop distributing money and handouts. We should not even start discussing salaries of civil servants. All that money, which is saved, needs to be contributed to the bond repayment. Anything that is left needs to be refinanced or restructured. In this capacity, do you think the extended fund facility program with the International Monetary Fund is a positive for the economy? It is a must. I am happy that PM U.Khurelsukh’s first international meeting was to invite the IMF and confound his commitment to the program. As a country we should stay financially smart and disciplined. We shouldn’t stop spending because the IMF told us to. We should spend wisely. Eventually, we should spend money to increase salaries of civil servants in order to create a better, more efficient government. We might need fewer people in the government if we pay adequate salaries. We cannot talk about a strong and efficient government while paying civil servants pennies. Looking at the case of Singapore, the best and the brightest go to work in the government. Not because they want to become corrupt officials but they can earn a good living. In this economic climate, I’m not saying to increase salaries right now. One matter and in fact the only matter that I agreed with President Kh.Battulga on is the fact that we need to negotiate with the IMF. We should protect our sovereign interests. I don’t agree with his stance that Mongolia should start kicking out investors and stop importing and start producing everything here in Mongolia. Particularly, I don’t want Mongolians to become involved in cheap labor-intensive industries. You said you oppose the protectionist and nationalist rhetoric. Recently, the prospect of allowing foreign banks such as the Bank of China and ING to operate in Mongolia through a proposed new draft bill on Investment Banking has been discussed. What are your thoughts on this issue? I think foreign banks can operate here and there should be an even playing field for all business entities in Mongolia. We cannot let foreign government owned banks operate in Mongolia. Sovereign policy of Mongolia should be dictated by Mongolians and not Beijing or Moscow. Private banks should be welcome to operate in Mongolia and this is a compromise that I believe we can make. We have banks that are owned by foreigners but we don’t have a foreign state owned bank operating here. That should stay this way. You mentioned blockchain technology, which basically employs a public ledger that makes all transactions accessible to everyone. Do you think that the blockchain technology could be incorporated into the activities of your company or in Mongolia in general? I think the government should seriously look at this matter. While Mongolians are busy fighting their political games and getting engaged in populist agendas, the world is moving ahead. In terms of crypto currencies, just recently, we enabled the first transactions using bitcoins in Mongolia. We want to focus on this area and I invite all universities, academia, and businesses to come together and make Mongolia one of the pioneering environments, which is supportive of this development. This is one area where we can compete globally. Our company has made efforts to keep up with modern technological advancements in the financial sector. Mongolians are falling behind in modern advancements of crypto currencies, blockchain technology, artificial intelligence, and the internet of things. Ard Financial Group has been advocating more devoted research into these types of new technologies.