Business Council of Mongolia organizes President Battulga Khaltmaa's first meeting with investors

BCM's special monthly meeting was held on Monday, 14 August 2017 at the Blue Sky Hotel, with over 300 international investors, business leaders, as well as Ambassadors, diplomats, and dignitaries. International attendees included a significant number of Chinese and Russian investors and business representatives.
Upon the invitation of the Business Council of Mongolia, the guest of honor President of Mongolia Battulga Khaltmaa attended the meeting and held a candid discussion during his first meeting with a large number of international and local investors and business leaders since his inauguration a little over a month ago.

Introduction of President Battulga Khaltmaa by CEO of Erdenes Mongol Ts.Tumentsogt

Battulga was born in 1963 in Ulaanbaatar
1978: graduated high school from State School No. 34
1982: Graduated from School of Fine Arts 
1982-86: Worked as an artist at the Union of Mongolian artists
1983-89: Participated in a variety of different international sports competitions, earning Mongolia 2 gold, 2 silver and 2 bronze medals in the discipline of sambo as well as judo.
1992-97: Director of Genco LLC
1997-98: Director of Bayangol Hotel
2000-04: CEO of Makh Impex
Prior to establishing Genco, Battulga imported electronics and equipment from Singapore to sell in Mongolia.
Was elected as an MP three times
2004-2008: Was the Chairman of the Human Rights Subcommittee
2008-2012: Was also the Ministry of Roads, Transportation, Construction and Urban Development
2012-2016: MP, as well as Minister of Agriculture and Industry from 2012-2014
2006: President of the National Judo Association and also Representative of Asia at the Policy Committee of the International Judo Federation
From 2009, Head of the Mongolian Democratic Union
Current member of the Democratic Party’s National Policy Committee
President of the Mongolian Union of Herders
President of the Mongolian Bodybuilding and Fitness Association
Battulga has been awarded various athletic honors, such as the “State Honored Athlete” medal of Mongolia and the Golden Star award by the International Judo Federation.
During his tenure as President of the Mongolian Judo Federation, Mongolia’s very first Olympic Gold Medal was earned by judoka N.Tuvshinbayar in 2008
Battulga has initiated and was involved in various economic and social development projects, such as the Genghis Khan Equestrian Statue Complex, Sunny Bridge (Нарны гүүр), Mt. Bogd Road, Coal liquification plant, Sainshand Industrial Park, Altanbulag port, connecting all provincial capitals with the capital via paved roads, etc.

Main points from the speech by the President

I would like to thank the Business Council of Mongolia for hosting this event, my first with the international community of investors and business leaders.
BCM and other non-profit organizations have a big role to play in voicing their interests to the state.
It has been 34 days since my inauguration as president and this is the first event with the business community.
I believe you all have your own ideas for improving the legal and investment environment
The recent election highlighted the wishes of the business community for greater stability and opportunities

On foreign policy

In terms of foreign policy, there are many ideas being talked about, but it is important to ensure a unified foreign policy.
I want to underline that there is a single, unified foreign policy – not contradictory policies of one ministry, the president, or other political entities.
As the President, I will maintain the same foreign policy as the government.

On business

The business environment should be expanded, and I will work in collaboration with the government on this
Since the democratic revolution, I have worked as a sole proprietor up to major industrial companies – I am of one mindset with entrepreneurs
I was an MP three times, and worked in the Cabinet in two of those terms

On transport

Minister of Road and Transportation for four years from 2008-2012, during which the blueprints for roads connecting 21 provincial centers was developed with support from the ADB.
There is currently blueprint for a 1,100 km road connecting Zamiin-Uud and Altanbulag, which can be a major transit transport corridor to connect China and Russia. This will facilitate trade. I mention this because it is important for businessmen to know that such projects are ready to be implemented.
Another major project concerns railways. As a landlocked country between two big neighbors, in order to ensure the development of the economy, in 2010 we got approval for a railway project. It reflects 460 km in the first stage, 1,800 km in the second stage, and the third and final comprises 5,000 km of railway along three longitudinal corridors connecting Russia and China. The blueprint for 1,800 km of this has been developed by the company McKinsey.
In terms of aviation development, the policies have been instituted, so we will now leave it to business.

On other infrastructure

We have started work on re-development of provincial centers
As for housing, a 100,000-apartment complex and the Maidar City project are ready for investment. The Maidar City project’s blueprints have been designed by a German company; the city is planned to be developed close to Ulaanbaatar, capable of hosting 400,000 people.

On agriculture

The agricultural sector has become a forgotten industry
We boast 60 million heads of livestock, but we cannot effectively sell and export meat, hides, wool, cashmere, etc.
I intend to, together with the government, to elevate and pay greater attention to this sector.
Every year, we export up to 10 million pieces of skin and hide as unprocessed goods, with no value added.
The same applies to cashmere; even though the country is a major cashmere industry (30% of global raw cashmere production), there has been little policy support. As such, we have another project ready to go. Feasibilities studies for a factory which processes hides and skins and exports to Europe have been conducted by a Spanish company. This project is worth USD 300-400 million and can export up to 10 million hides to Europe per year.
I want to reiterate my commitment to working with the government to creating a stabile business environment. The business community today is restricted by oligarchs.

Question and Answer segment

Byambasaikhan, Chairman of BCM: Today we invited not only BCM members, but also major Chinese and Russian companies and officials. Taxes are a sticking point for any business. Mongolia’s tax system does not follow international standards. This inconsistency hinders investment, so what is your stance on this issue?

Poverty and unemployment has reached disastrous levels in Mongolia. This contributes to the weakness in FDI. There is also insufficient support for domestic investors as well. In order to support foreign and domestic investment, the tax regime must be stable and clear. We have spoken about improving investment for many years, and this is due to the inconsistencies. Hence, we must work together with the business community to fix these inconsistencies.
There are many MPs and officials who are former business people. They would understand the issues, and can raise the issues.
The Mongolian National Chamber of Commerce should play this role, and the Chamber must be non-partisan.
Anton Prosekin, Head of the Investment and Development Agency of Irkutsk Oblast (Russia): Mr. President you stated last week in an interview on Mongolian National Broadcaster that one of the key issues of trade relations with neighboring countries is customs tariffs. We agree with you on this. There are two ways of addressing this issue: by taking slow steps or by solving the very core of the problem. In relation to this, there are free trade initiatives underway in the Eurasian region. Mongolia itself has the “Steppe Road” initiative, which can be harmonized with China’s One Belt, One Road project. What are your thoughts on this?

President: We neighbor two major economic powers. As a businessman, I see that we are unable to export value-added products to our neighbors. One reason has to do with customs tariffs.
In my interview I referred to issues in reducing barriers to trade, perhaps not by removing tariffs completely, but by having a favorable (low) tariff system.
In terms of Mongolia joining a Eurasian customs union, Mongolia’s stance is being studied at various levels. An update will be issues on this matter after consultation with the Ministry of Foreign Affairs and other related agencies. 
Yan Xiao Chi, Head of the Zhun-hua Association, an association for Chinese investors in Mongolia: What are your thoughts on Mongolia’s macro-economic situation? Has a recovery started? If not, when do you expect it to start?

I have to say that at the moment, we lack a major economic theme or agenda. The business environment is still restricted. Our economy has not worsened and it has not recovered. The business environment, in my opinion, has been in stagnation for the past 20 years. They say Mongolia’s economy is improving when the price of coal rises, and they say the economy is declining when the price of coal falls.
So my answer to you is that there is a lack of a macroeconomic theme. Hence, the economy hasn’t improved or degraded; it just linked to the price of coal.
I think the message of the election was to restore the economy, and for this reason I am here with you.

Representative from Mongol Group: I would like to inquire about your itinerary for your first foreign trip?

The itinerary is still in discussion, but will begin with our two neighbors.
September 4-8, the heads of state from Asia-Pacific countries will attend a forum in Vladivostok, accompanied by members of the business community. Registration is still open with the President’s Office.
Mergen, Executive Director of BCM: What are your thoughts on China’s One Belt, One Road initiative?

I have only very general information on this major initiative that will link Asia and Europe.
I don’t recall the exact figures, but we have a small stake in the Asian Infrastructure Investment Bank, through which financing for the OBOR is being provided.
Implementation of infrastructure development determines many things for a country. Infrastructure projects create jobs. 
As for Mongolia’s involvement in the initiative, we must study the opportunities.
However, I believe it would be more immediately beneficial to businesses if we were to improve connection to the East Asian markets of South Korea, China, and Japan. These account for 30% of the local economy.
I have many thoughts on this particular issue, but perhaps it is not the time for such detailed discussion. Perhaps if we had a map.

Question from Masa Igata, Director of Frontier Securities: You mentioned that Mongolia will have a unified foreign policy. Recently, you appointed Asashoryu to improve relations with Japan? Does that overlap with the duties of the Ambassador?
Second question: Regarding the topic of constitutional amendments, in which areas do you think constitution could be amended? What are your thoughts on the powers of the President?

Foreign policy is directly related to foreign investment. Asashoryu is the first Mongolian grand champion of sumo and has a very special standing. My appointment of him to Japan will not overlap with the Ambassador. Presidents have personal advisors and counselors. I myself was a counselor.
As for the constitution, 25 years has passed since the current constitution was ratified. Today we met with the official heading the work on constitutional amendment. The answer to your question can actually be found on president.mn. This is a matter of principle, will the majority party push amendments for powers and positions, or will it be for real empowerment of the citizens.
Batlkham, representing MonOros company: How much information do you have on the Asian Super Grid project? Talks are underway for exporting renewable energy to Japan, how aware of you about these topics?

Energy is a crucial topic. Mongolia is a sunny country, which has a high number of sunny days per year. Wind energy is also being talked about it. We had a very interesting discussion with a US-Spanish joint venture. Renewable energy is a topic we must support.
Export aspirations depend on where we are talking about. China and Russia want to export energy. Japan of course is dependent on nuclear and thermal energy. Thermal accounts for about 30 percent of energy generation there.
Exports are a more intricate issue, which we can have a more detailed discussion later on.
There are regions of Mongolia where it is sunny for 280 or 290 days per year.
Burmaa, from a real estate company: There is a great inconsistency and overlap in the tax environment. We are willing to pay taxes, but in a fair way. Furthermore, there are unclear tax penalties that are slapped on companies by tax inspectors, who seem to pull numbers out of thin air. What should be done about this?
Second question: What is your vision regarding the knowledge economy? For example, the skins and hides having a low value right now. It seems entirely possible to create value-added products.

The real estate market is still in stagnation and I suspect that you face many challenges. You refer to tax inspectors subjectively imposing penalties; however, they have a duty to perform. If fiscal issues are resolved, I hope such problems can be corrected by that. But I agree with you that taxes must be fair for companies. We must expand our tax base so that not only a few companies take on a greater tax burden.
As for agriculture, the cost of a piece of raw hide is only MNT 600. A bowl of instant noodles cost MNT 1,500 – almost three times more than that valuable raw material.
Regarding one of the projects in preparation I mentioned earlier with the Spanish tannery, we have completed a feasibility study where one piece of raw hide can be processed to have USD 300 of added value. You can imagine the economic benefit and value that can be retained if 10 million hides can be processed and USD 300 of added value.
Steve from the Canadian Embassy: As an athlete, how does the sports sector fit into your plans? How about infrastructure for sports?

Mongolia is a country with a long history of nomadic culture. The nomadic heritage helps Mongolians to be adaptive in any environment.
Of course, sports is very close to my heart. Sports and culture can bring people closer than perhaps diplomacy can. 
I met with representatives from the Canadian Embassy, and a discussion took place. Perhaps Mongolia can support Canada in wrestling, and Canada can support Mongolia in hockey. Considering Mongolia’s climate, I think we can make strides in ice hockey. We are familiar with harsh winters, but our winter sports sector has much room for development. 
We must also support sports development in the provinces and rural areas. The support of the diplomatic corps is certainly welcome in this area. 
That leads me to Asashoryu, who was the very first non-Japanese yokozuna (grand champion). This shows that sports can be a great bridge between cultures.
As for sports infrastructure, I am committed to this issue and I would like your support.

Erdenebaatar, International Mining Consulting: You did not talk so much about one key sector, which is mining. You made good on other sectors, but we cannot forgot the mining sector. What is your policy stance on attracting foreign investment into mining, especially since we scared away investors and made them afraid of investing in Mongolia?

I will support mining and investment into mining. One thing I must emphasize is that the investment needs to be based on global standard technology and global standard contracts. The mining sector is the subject of great concerns and reservations, given the amount of money involved. Due to the power of the mining industry, the luring of politicians or bribing of politicians is something we have to be very careful of.
Again, it is important that the best international standards are utilized in this sector.
Investment will be supported, and the reflection of this is the investment forums supported by the government.

Closing words by Ts.Tumentsogt, CEO of Erdenes Mongol

Let me give a brief introduction on the Business Council of Mongolia, which was established in 2007 to support a transparent, vibrant business community.
We feature eight Working Groups ranging from tax, to customs, to law, to education, etc. These Working Groups comprise over 400 experts and business leaders, working to form policy recommendations and deliver other vital business interests to the government and regulatory bodies.
Our members receive a weekly News Wire on business and economic developments.
We maintain a close engagement with various state organizations, such as the President's Office, Prime Minister's Office, Parliament, the Government, acting as a voice for the various sectors and our members who number up to 250.
Thank you Mr. President for holding this candid discussion today.

Published Date:2017-08-15