113 projects make it to national programme list

16th of 7, 2018

The Mongolian Mining Journal /May.2018/

E.Odjargal finds out from B.Bayarsaikhan, head of the National Development Agency, how projects are selected for inclusion in the national investment programme and the strategic goals of the “Three pillar development policy”.

Is the investment programme for 2016-2021 ready?
Not yet, but the almost two-year exercise is in its last stages. Let me tell you how it works and you will know why it has taken this long. Projects requiring a minimum of MNT30 billion are included in the national investment programme. Initial selections are made by the sector ministries and local agencies and they forward their separate lists to the Ministry of Finance which makes the final choice. It takes time to sift the recommendations, often contradictory, and then to assess how projects fit in with the Extended Fund Facility programme of the IMF, the Prime Minister’s goals of Going Forward and so on. It will not be long before the final list is submitted to the Cabinet.

How many projects have been selected?
Altogether 113 projects are in the list. Of them, 43 have already begun working, totalling more than MNT10 trillion, and the remaining 70 are new projects, requiring MNT20 trillion. Projects costing less than MNT30 billion will not be included in the programme but will be eligible for financing by the Ministry of Finance.

Where will the financing come from for the projects under the programme?
Some 2-3 percent will be financed from the budget and 28 percent will be externally funded. The remaining 70 percent will be implemented in collaboration with state and private enterprises. One goal is to attract foreign direct investments.

Is the current legal and regulatory framework conducive to such investment?
The basis of the National Investment Programme is the “Three pillar development policy”. The State budget has been tightened and using external loans to finance major projects has become extremely difficult. In this tough situation, collaboration of state and private enterprises and bringing foreign direct investment through the private sector have become the best ways to finance infrastructure projects. Public-private collaboration could take up such projects under a concession regimen which allows Construction- Consume –Transfer. Our current Concession Law is not very helpful, though. We should have proper regulations for collaboration between state and private enterprises, and our goal should be promotion of wealth creation. If the government is to entrust mega projects to the private sector, it must improve the existing legal environment and management policy. This is possible under the “Three pillar development policy”.

Our investment framework needs strengthening if the private sector is to attract foreign direct investment, especially for implementing infrastructure and other mega projects. To that end, The National Development Agency signed an MoU with IFC of the World bank group in September 2016, to get an external and independent assessment of our current situation, identifying what is good and what is not working, how investors see us and so on. The results of the study were presented at the State and Private Enterprises’ Council meeting on 17 May by Dr. Christine Zhen Wei Qiang, Practice Manager for the Global Investment and Competition Unit of the World Bank Group’s Macro, Trade and Investment (MTI) Global Practice.  

Weak infrastructure is a major constraint when moving large projects. Are such issues, especially in roads and transport, addressed in the programme and how are such activities coordinated?
Our 21 provinces do not have good highway connections, for which we need foreign loans. After long argument, several highway projects have been passed on to the private sector under the Build-Transfer Concession arrangement. 

Tavan Tolgoi is the topmost priority among the mega projects. It is included in the “Three pillar development policy”. Transporting coal only through Ganshuunsukhait port is not enough for its potential. We have to add more export routes. Let’s build railroads and open new auto routes to the south, passing through Tsagan Del, Khanbogd and Khangi. And let us build its infrastructure complex with collaboration of state and private enterprises. Only then would Tavan Tolgoi be economically viable and its value rise.

Which infrastructure project is the priority – the railway, the power plant, the refining facility, or something else?
First, we have to ascertain whether the construction would be financed by the state budget or by foreign loans and aid. Prioritizing infrastructure projects becomes necessary only when there is pressure on the state budget. At the moment, they are proposed to be implemented by public-private collaboration under Concession rights, so all of them can begin at the same time.

If a new development policy is to come into force, will the Government also change the State policy on railways?
No. Railway projects will be implemented in accordance with the present policy. The railway policy is considered to be perfect, though it has not been implemented on the ground. But that will soon change.
In general, it is important to determine what is going to be put into economic circulation and how. Then we build roads and railways. There is a clear map for delivering Tavan Tolgoi coal to the world market, and following that, the Tavan Tolgoi Infrastructure Package project will take up railway and roads.

What other projects are in the Investment program apart from railway?
For Mongolia, the Three Countries’ Economic Corridors programme, the One Belt, One Road initiative and the transit transportation link that connects China with Europe and Russia are important. The Altanbulag-Zamiin-Uud road and the Eastern and Western corridors infrastructure will be part of the economic corridor programme.

As for the railway, talks are in an advanced stage on building the Erdenet-Ovoot railway in the northern direction as a state-private partnership project. This will bring the Ovoot coking coal deposit in Khuvsgul province into economic circulation. Another railway will be built from Sainshand to the oil refinery. The feasibility study for the refinery will be completed and its construction financed by a concessional loan from the Government of India.

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