09.10.2015 strategically managing mongolia’s sovereign credit and perception ratings nigel finch
TRANSCRIPT
Business Council of Mongolia, EEIBC, Galaxy Tower, Ulaanbaatar 9th October 2015
Strategically Managing Mongolia’s Sovereign Credit and
Perception Ratings
TRANSPARENCY INDEX RANKING
Mongolia ranks 80/175 on the Corruption Perception Index
CORRUPTION PERCEPTION RANKING
Mongolia ranks 80/175 on the Corruption Perception Index
While this score is improving it places it below Bosnia and El Salvador
CORRUPTION PERCEPTION RANKING
Mongolia ranks 80/175 on the Corruption Perception Index
While this score is improving its perception places it on par with Bosnia and El Salvador
ECONOMIC FREEDOM INDEX
EASE OF DOING BUSINESS RANKING
REGULATORY QUALITY
EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE
2010 was the first year
that Mongolia was considered compliant
Decrease in
discrepancies between taxes and royalties companies disclose
they have paid and the amount government
discloses it has received
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2006 2007 2008 2009 2010
Company payments
Government reciepts
GLOBAL COMPETITIVE INDEX
SOVERIGN CREDIT RATING
Mongolia’s sovereign credit rating has fallen from BB- to B- (non-investment grade).
SOVERIGN CREDIT RATING
And the trend continues to be unfavourable….
SOVERIGN CREDIT RATING
Mongolia’s sovereign credit rating is now ranked as B- (non-investment grade).
Comparative analysis suggests that governance indications are comparatively weak.
The sovereign credit rating is influential in informing the investment decision choice and the cost of borrowings for:
- The Mongolian Government
- Domestic banks
- Domestic private sector
- Foreign investors
SOVEREIGN RATING CRITERIA
Source: Criteria For Rating Sovereigns, Standard & Poor’s
1 5 4 3 2
SOVEREIGN RATING CRITERIA
Source: Criteria For Rating Sovereigns, Standard & Poor’s
SOVEREIGN RATING CRITERIA
Source: Criteria For Rating Sovereigns, Standard & Poor’s
SOVEREIGN RATING CRITERIA
Source: Criteria For Rating Sovereigns, Standard & Poors
SOVEREIGN RATING CRITERIA
Source: Criteria For Rating Sovereigns, Standard & Poors
SOVEREIGN RATING CRITERIA
Source: Criteria For Rating Sovereigns, Standard & Poors
EMERGING MARKET BOND ISSUANCES
ASIAN PRICE ADVANTAGE
SAVINGS FROM FUTURE BORROWINGS
Mongolia’s National Development and Innovation Committee (NDIC) estimate that Mongolia will require USD$50 Billion in funding in next five years.
If borrowing at where to remain at 5.75%, the annual interest bill would be a staggering USD$2.875 Billion
SAVINGS FROM FUTURE BORROWINGS
Mongolia’s National Development and Innovation Committee (NDIC) estimate that Mongolia will require USD$50 Billion in funding in next five years.
If borrowing at where to remain at 5.75%, the annual interest bill would be a staggering USD$2.875 Billion
An improvement in sovereign credit rating which leads to a one percent (100 bps) reduction in interest equates to USD$500 million in savings every year for Mongolia.
These savings can be used to fund other valuable economic and social priorities for Mongolia.
SO WHAT CAN BE DONE?
The sovereign credit rating provides a minimum floor for pricing any transaction in the country.
SO WHAT CAN BE DONE?
The sovereign credit rating provides a minimum floor for pricing any transaction in the country.
Any erosion in the credit rating means that the cost of government financing increases and the cost of private sector financing increases.
SO WHAT CAN BE DONE?
The sovereign credit rating provides a minimum floor for pricing any transaction in the country.
Any erosion in the credit rating means that the cost of government financing increases and the cost of private sector financing increases.
A co-ordinated strategy to manage the credit rating means there is less chance of a downgrade and an evidence-based approach for achieving an upgrade.
SO WHAT CAN BE DONE?
The sovereign credit rating provides a minimum floor for pricing any transaction in the country.
Any erosion in the credit rating means that the cost of government financing increases and the cost of private sector financing increases.
A co-ordinated strategy to manage the credit rating means there is less chance of a downgrade and an evidence-based approach for achieving an upgrade.
In the first instance it can be as simple as:
- Better preparation and rehearsal of meetings
- Compilation and validation of source documents
- Taking on the actionable feedback from ratings agencies
- Improving the perception ratings by firstly understanding the methodology
- Showing how progress is being achieved and that there is a plan
- The use of strategic PR in internal forums
