Victory day 2018: Mongolia's role in defeating fascism www.news.mn

On Wednesday 9 May, Russia is marking the 73rd anniversary of the victory over Nazi Germany in the Great Patriotic War of 1941-1945.

Meat processing complex to be built in Tuv Province www.news.mn

For several years, Mongolia has been looking at establishing large scale slaughter and meat processing plants in order to boost exports. Currently, large volumes of meat are being exported to China, however, Beijing is concerned about inconsistencies in health standards. For this reason, it was only natural that China would become the main partner in establishing such a facility.

Walmart wins battle for India's Flipkart www.bbc.com

Walmart will pay about $16bn to take control of Flipkart, India's biggest online retailer, in a deal that puts it head to head with Amazon.

Amy Leung: We hope to see Mongolia move to upper middle-income country www.theubpost.mn

The UB Post was introduced to the Asian Development Bank (ADB)’s operations in Mongolia, including projects for air pollution reduction and ger area development, from the bank’s newly appointed Director General for East Asia Department Amy Leung. She also oversees the ADB Sustainable Development and Climate Change Department.

Leung has an extensive knowledge about East Asia affairs as she previously worked as the deputy director general for East Asia Department from 2014 to 2016. Before her appointment as deputy director general, she was the director of Urban Development and Water Division in Southeast Asia Department, covering Cambodia, Indonesia, Lao PDR, Myanmar, the Philippines, and Vietnam. Before that, she was the director of Social Sectors Division in East Asia Department.

Does ADB’s East Asia Department only cover Mongolia and China?

The East Asia Department has only two countries – Mongolia and China.

When you do economic analysis, do you not evaluate Hong Kong, South Korea, and Taipei?

The Economic Research Department when they do conduct research they cover the whole region and they also cover these areas, but for the East Asia Department, we do things related to China and Mongolia.

If North Korea applies to enter as a member of ADB. How will you respond?

I think our President Takehiko Nakao answered this question. I think ADB’s position is that we’re very encouraged with the development of North Korea, Italy, and other countries. To become a member of ADB, we need the consensus of our shareholders. Currently, ADB has 67 shareholders both from developed countries and developing countries.

As of now, we will continue to monitor the congress and the development and see how it goes. It’s still early to be talking about membership but since North Korea is indeed in East Asia, if things continue to improve, they can become a member of ADB.

What is ADB’s main focus in Mongolia?

The Country Business Operation Plan was approved last year and its main focus is to help Mongolia diversify economically. Last year was a crisis for Mongolia. During that time, funding partners were all reluctant to not only support the government but also the country program. We do have projects in energy, health, transport, and development of ger areas, which is a very big part of our plan.

We have three pillars. So, the three main areas we are supporting Mongolia are firstly, strengthening environmental sustainability. Just a month ago, Ulaanbaatar Air Improvement Program was signed. The second one is developing infrastructure for economic diversification, and the third is promoting economic and social stability. To support and achieve these targets, the projects just mentioned also cover roads, energy, cleaning the environment, and promoting development. Ger area is an area we’re very focused on. We’re also doing a number of projects in the health sector in Mongolia.

Can you tell me about ADB’s operations in Mongolia, specifically ADB’s current projects targeting promotion of sustainable development, resolving issues related to climate change and water scarcity, as well as future plans for Mongolia?

ADB’s current active portfolio in Mongolia includes 1.15 billion USD of loans and grants, covering 29 projects. Environmental sustainability is one of the three main pillars in ADB’s current CPS, 2017-2020 (the other two are Economic and Social Stability and Infrastructure to Support Economic Diversification). Between 2008 and 2016, ADB provided 26.5 million USD in grants and TAs for the environment sector and ADB plans to significantly increase this over the remainder of the CPS period.

In addition to the loan on air quality, ADB is providing a grant to reduce soil pollution in ger areas by improving sanitation and is providing technical assistance support to the government to conserve forest genetic resources.

Going forward, ADB aims to provide support to improve solid waste management and recycling (2018 –three million USD grant); managing solid waste in secondary cities (2019 – two million USD grant); improve the management of wastewater in aimags (provinces) and soums (Southeast Gobi Urban and Border Town Development Project – 2018 loan for 20 million USD); and strengthen disaster risk management (2020 – 25 million USD loan).

ADB recently loaned 130 million USD for air pollution reduction. I would like an update on this. What is the money being used for?

This stand-alone PBL (policy-based loan) was approved in March 2018. The first tranche, 100 million USD, will be disbursed in May, and the second tranche, 30 million USD, is expected to be disbursed in December 2018 upon the government’s fulfillment of the remaining policy commitments. The PBL is part of ADB’s contribution to the IMF “rescue package”.

The recommended policy actions tackle the air pollution problem from a holistic multi-sector perspective over short-term, medium-term and long-term horizons. And amid fiscal tightening and efforts to stabilize the economy imposed by IMF, the PBL expands public resources for air pollution control, also through efficiency and resulting fiscal savings and by leveraging private sector finance,

ADB’s policy dialogue has helped the government of Mongolia implement urgent measures to reduce air pollution and protect human health in Ulaanbaatar, such as the expansion of district heating and retiring highly inefficient and polluting small heat-only boilers, and the provision of cleaner heating fuel.

The PBL lays the foundation for the longer-term transition to cleaner energy systems and resilient and low-carbon urban development, in complementarity with ADB’s ongoing and planned portfolios, such as promoting a shift to cleaner transport fuel and the use of renewable energies for heating.

With the PBL, ADB leads the development coordination dialogue on air quality improvement and amplifies the impact of other donor interventions (JICA, KEXIM, WB, and others).

I noticed that ADB’s investment to the Ulaanbaatar Urban Services and Ger Areas Development Investment Program will increase through 2020. Can you tell us specifically what kinds of projects will be implemented?

Basically, this project will develop ger areas in terms of providing basic services. For example, water sanitation will be one of the key areas of our intervention. We approved the first tranche of the project in 2013 and the second in 2017. The first one was 130 million USD and the second 67 million USD.

In conjunction with the ger area improvement, we will be processing green affordable housing. Not just housing but housing that uses low carbon technology. A lot of the project is related to the ecosystem, so like recycling. The ger area project is directed to heating, roads, and water supply.

Do you have a specific target you want to meet through this project by 2020?

It is not just one project. It’s a big program with a bunch of small programs. I think that the green affordable housing had a target of 10,000 houses. The project is still in process so it’s not definite yet. We hope that it will provide a more ecological approach to making the ger area more livable.

What are the biggest challenges you face in implementing projects in Mongolia?

It’s the short working season. Only six months can be used for construction. If we look at our projects, we can only make progress a season at a time, because of that constraint, unlike in other countries where we can work all year round. The harsh weather conditions impact our timetable for implementation in Mongolia.

We missed the construction season a couple of times and had to wait for six months. Sometimes it happens when we go for a meeting with constructors because of some dispute or disagreement in negotiation and after it’s resolved, the construction season is over two months later.

Like in most projects, if the implementing agency is working with ADB for the first time, we need to build their capacity because we have a lot of procedures, which is also a part of the reason why your government is borrowing from ADB – to build capacity and knowledge of officials in planning, managing, and implementing projects. In some cases, it could cost delays.

How cooperative is the Mongolian government?

At project level, the Mongolian government is very cooperative. I remember a health project and a couple of social protection policy loans that we supported the government in ensuring. Because Mongolia is so dependent on mining, the economy sort of collapses when the price of metal resources goes down. Our support to that is very effective in my opinion.

Overall, I would say the government’s cooperation is very consistent.

As a large economic partner in Mongolia, we are working really closely with the government right now to implement. We have some policy-based loans that have been challenging but the government actually met the conditions last year. It’s challenging but we are working with the government to identify and resolve issues.

ADB is discussing its Strategy 2030. What is the plan for Mongolia?

The Strategy 2030 is guided ADB’s next 10-year focus — the area we want to focus on. We want to work with our developing member countries to identify the issues we can join hands on. We identified seven issues, including inequalities and poverty reduction, climate change, disaster resilience, and environmental management. I think Mongolia will still require partnership in these areas. Then there’s gender equality. Mongolia actually has good gender equality. There’s also regional cooperation, rural development and agriculture, livable cities, and governance.

These are the areas we want to focus but it’s more to do with getting results. For example, we will not be just building schools; we will see the impacts on students.

How does ADB vision Mongolia in let’s say five years

We hope that Mongolia will be clean, green, very livable, and have a diverse economy. We have been working in Mongolia for more than 30 years. We are committed to support and hopefully, together we can support Mongolia to continue its economic development. I think that other than the environmental aspect, we will diversify the economy. For Mongolia, this is crucial for stabilizing the economy. We will work at the macro level in these two areas and then the air pollution and infrastructure.

I see us continuing our work in Mongolia for many years and hopefully, we’ll see it move to the upper middle-income country.

Mongolian mining Minister grills Chinese oil company www.news.mn

A delegation, led by Mining and Heavy Industries Minister D.Sumiyabazar, is currently working in the eastern provinces of Mongolia to see how efficiently the oil companies are operating. On 5 May, as part of the inspection, D.Sumiyabazar visited PetroChina Daqing Tamsag LLC, which is extracting oil in the Tamsag area of Dornod Province's Matad Soum.

Russia-China trade gets another significant boost www.rt.com

Trade turnover between Russia and China grew by 31 percent in the first three months of the year compared to the same period in 2017, according to the Russian customs data.
Exports from Russia to China amounted to $12.27 billion (an increase of 37.1 percent), imports to Russia from China surged to $11.8 billion dollars (an increase of 24.9 percent) in the period. The total trade turnover amounted to $24.1 billion.

APU and LendMN compose 40.3 percent of MSE ’s stock trade in April www.ubinfo.mn

Stock trading of APU JSC and LendMN, non-banking financial institution composed 40.3 percent of total trades conducted at the Mongolian Stock Exchange (MSE) in April. 26 percent of the trade was solely traded by the youngest firm LendMN. Last month, the MSE conducted a total of MNT 2.98 billion worth stock trades, MNT 592.7 million Government securities trades and MNT 2.98 billion package trades. In addition, the major indexes have fell. For example, the TOP 20 Index decreased by 4.2 percent, to 19800 points, whereas MSE A Index fell the most by 6.5 percent. As a result, the market cap reached MNT 2.47 trillion and dropped by 4.5 percent compared to the previous month.

Mongolia’s debt piles as Rio’s revenue doubles www.ubinfo.mn

The amount of loan Mongolia borrowed from Rio Tinto by pledging its future dividend has reached USD 1.1 billion, including its interest payment.

In 2009, as the 34 percent stakeholder in the Oyu Tolgoi project, Mongolia borrowed USD 770 million from its partner, Rio Tinto which holds the remaining 66 percent of the OT through its ownership of Turquoise Hill Resources. Mongolia pays 6.5 percent interest, plus Libor interest rate (London Inter-bank Offered Rate), which totals around 8.4 percent, for the loan. According to an official source, this equals to USD 100-110 at present. Although the people who were involved in the Oyu Tolgoi Agreement say that this is hardly a loan, Mongolia will have to pay the interest, which is further piling up.

As written in the Oyu Tolgoi Investment Agreement, the investment was financed from two sources: 75 percent from loans and 25 percent from shareholder. Erdenes Oyu Tolgoi LLC (backed by the Government of Mongolia) and Rio Tinto, the investors of Oyu Tolgoi, made primary investment of USD 2.2 billion. Out of this amount, Mongolia will be responsible for approximately USD 770 million. This has been paid by Rio Tinto under a condition that Mongolia will pay from its future dividend.

USD 770 million loan borrowed from Rio adds up to USD 1.1 billion

However, in 2009, when the Loan Agreement was signed, the interest almost reached 10 percent. At the time of signing the agreement, the loan was estimated to be 9.9 percent plus US CPI (consumer price index). In 2011, the Investment Agreement was amended and set the interest at 6.5 percent plus one month Libor.

At present, Mongolia’s credit rating, which was falling in recent years, stands stable and is estimated to improve. Therefore, it is possible to reduce loan expenses by a certain amount, the Minister of Mining and Heavy Industry Sumiyabazar Dolgorsuren noted.

In addition, an official source informed that the Government of Mongolia started talks with Rio. Officials explain that the loan cause no pressure on the State Budget. However, it will block future revenue income. Also, the exact date of dividend distribution is unclear. No one at Oyu Tolgoi and Rio Tinto could confidently say the exact date of Oyu Tolgoi’s dividend payment.

Early this year, Oyu Tolgoi’s CEO Armando Torres told the media that Oyu Tolgoi must accomplish positive cash flow and pay dividends to its shareholders as early as possible. On the other side, he argued that the Government of Mongolia made a choice to loan its initial investment for 34 percent share from Rio and repay from its future dividends. In addition, he added that the underground development fund was raised in cooperation with international financial institutions. “Today, it is impossible to say the exact date of dividend distribution,” said Mr. Armando Torres. He added that it will depend on how profitable Oyu Tolgoi will be.

OT obtained USD 4.4 billion from Export Credit Agencies of the governments of US, Canada and Australia, as well as 15 IFIs. The amount, interest rate and the maturity of the loans variable. But Erdenes Oyu Tolgoi LLC and Turquoise Hill Resources informed that weighted average interest rate was set to be Libor plus 6 percent. Calculating since December 2015, when the agreement was signed, the total sum of loans obtained for financing the underground development has reached USD 5 billion including the interest.

In addition, the company’s expenses are also building up. For a long time, Oyu Tolgoi has been criticized for excessive spending.

Deputy Minister of Mining and Heavy Industry Zagdjav Deleg notified that Rio raised USD 5- 6 billion fund with high interest from global financial market by pledging Mongolia’s deposit. Out of this, USD 1 billion was invested in Mongolia. He added that Oyu Tolgoi’s income does not flow through Mongolia's banking system and only 6-8 percent of its sales revenue is paid to Mongolia.

In the last few years, Rio’s profit doubled. On the contrary, Mongolia’s debt has increased drastically. Rio was in a difficult situation in 2008, before the Oyu Tolgoi Investment Agreement. Rio’s stock price had fallen 7 times from AUD 138 to AUD 20 by May 2008. Whereas last year, the company “treated” its shareholders with USD 5.2 billion – historical dividend disbursement. But Mongolia's economy and society still remain vulnerable.

Ilch.G, Oyunbayar.N

Steppe Gold hopes to raise 21.1 million CAD with an IPO www.gogo.mn

Steppe Gold Ltd. has announced an initial public offering and plans to raise 21.1 million CAD from Canada’s primary market.

EBRD finances the largest solar power plant in Mongolia www.ebrd.com

EBRD’s first solar project in the country follows three pioneering wind farms