New Mongolian Central Bank Governor Appointed

1. (SBU) SUMMARY AND COMMENT: After what appears to have been a
bruising internal struggle within the ruling Mongolian People's
Revolutionary Party (MPRP), A. Batsukh has been appointed the Bank
of Mongolia's new governor for a six-year term, replacing the
controversial O. Chuluunbat. Batsukh was previously the Deputy
Governor of the bank, but appeared to have little substantive role
in the bank. Only time will tell whether Batsukh will pursue a more
rigorous approach to banking supervision than his problematic
predecessor. A long-time civil servant with a Ph.D in Economics and
a Master's degree from the University of Illinois, Batsukh appears
free of the business entanglements that compromised his
predecessor's tenure as bank head. However, he is an MPRP stalwart
whose low-key style deference to his party may make him easily
susceptible to political pressures. END SUMMARY AND COMMENT.



2. (U) Mongolia's parliament voted on November 2 to confirm Alagiin
Batsukh as the new governor of Mongolia's central bank, or Bank of
Mongolia (BOM). Batsukh had previously served as the bank's deputy
governor since 2000 under O. Chuluunbat, whom he now replaces.
Chuluunbat's six-year term as bank governor expired at the end of
September.



3. (SBU) The 30 to 14 vote confirming Batsukh fell mostly along
party lines of MPs present for the vote, with one MPRP member
joining Democrats in voting against the appointment. The vote
followed weeks of contentious debate as opposition Democrats
demanded a thorough accounting of the Bank's management under
Chuluunbat before agreeing to a vote. While the MPRP put up a united
front in public to thwart any meaningful investigation of
Chuluunbat's management, intra-party strife erupted behind closed
doors between those MPRP members who wanted the former governor
re-appointed to a second term, and those who wanted him out. The
"outers" finally carried the day when Parliament Speaker N. Nyamdorj
nominated Batsukh. A senior MPRP official told emboff that Nyamdorj
had strongly pushed for Batsukh within the party.



4. (SBU) Chuluunbat reputedly earned the gratitude and loyalty of
then MPRP head Enkhbayar for providing key financing for the party's
2000 election campaign, which returned the MPRP to power and led to
Enkhbayar becoming Prime Minister (Enkhbayar was elected President
in 2005). Appointing Chuluunbat as Mongolbank head was an early act
of the new MPRP government. Chuluunbat's controversial tenure as
governor was marked by allegations of corruption, conflicts of
interest, negligent oversight of Mongolia's banking sector and
preferential treatment given to favored banks and businesses.
Chuluunbat, it is widely believed, owns stock in several private
banks. Critics (including a past IMF representative) complained
that he acted more like a venture capitalist, running the Central
Bank as if it were a commercial bank. His failure at enforcement of
banking regulations is blamed for weakening the Mongolia banking
system as a whole and, consequently, keeping interest rates high.

Batsukh's CV


--------------------------





5. (U) Batsukh was born in Ulaanbaatar in 1962. In 1984, he
graduated from the State People's Economic Institute in Irkutsk,
Russia with a degree in Construction Engineering. Between 1984 and
2000, he worked in the State Planning Commission and the Central
Economic Institution as a specialist, board deputy director and then
director. He went on to obtain a Master's Degree in Economics from
the University of Illinois in 1998 (where he submitted his thesis on
monetary policy), and then a Ph.D in Economics from the National
State University of Mongolia in 2002. In 1993, graduated from a
"Tsog" private foreign language school in Monoglia as Interpreter of
English. He has been serving as Mongolbank Deputy Governor since


2000.

Batsukh: Light and Dark


--------------------------





6. (SBU) The banking sector views Batsukh as bit of an enigma.
Although deputy governor for six years, he remained quiet and out of

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the way. Most observers believe that he had little influence at
the bank. He is by reputation a very partisan MPRP man,
historically an ally of Former Minister of Finance and current MP
Ulaan, but it is hard to say to whom or to what group in the MPRP he
is aligned now. The senior MPRP official confirmed to emboff that
Batsukh has strong ties to Nyamdorj, but refused to be drawn on what
these are; rumors suggest a financial tie between the two men. He
appears less tainted by the corruption's brush, but the local press
has reported rumors that he was involved in the misappropriation of
Asian Development Bank funds. One bank confided to us that he tried
to strong-arm them into hiring an unqualified relative several years
back.



7. (SBU) On the brighter side, some younger, fairly well-respected
MPRP cadres think he is an honest broker who has changed his "old
commie" stripes. He recently headed up the working group drafting
anti-money laundering legislation which was passed by the Parliament
this summer. One big plus: He is not Chuluunbat. Batsukh holds a
Ph.D in economics and comes from a strong civil service background.
Chuluunbat, on the other hand, is a businessman with a grab bag of
investments, including banking ones. Batsukh seems to be free of
most of the commercial complication that caused his predecessor to
protect cronies. On the other hand, he may not be able to withstand
the political pressures which could be deflected by the Chuluunbat,
who was strong-willed and had the benefit of his personal links to
Enkhbayar.

Minton