21.02.2013 economic reform objectives, mr.o.chuluunbat

ECONOMIC REFORM OBJECTIVES

VICE MINISTER FOR ECONOMIC DEVELOPMENT

H.E. Mr.O.CHULUUNBAT

Ulaanbaatar

2013-02-21

MINISTRY OF ECONOMIC DEVELOPMENT

INDEX

Investment in Coal sector

Foreign investment policy

Reform objectives of Macro economy

First steps for the Reforms

Economic development objectives stated in the Action Plan of the Reform

Government:

Lower interest rates to single digits;

Cease to be led by inflation and start controlling inflation;

Introduce single window policies in export;

Start manufacturing construction materials domestically;

Reform housing finance system;

Implement job creation programs;

Implement 2nd phase of tax reforms for supporting businesses;

Implement reforms at border crossing point ;

Upgrade MSE;

Start work on establishment of Special zone for banking and finance,

stock exchange, information technology, leisure and airway junction

The reform objectives of Macro economy

First steps for Reforms

1. New Government has established the Ministry of Economic

Development - responsible for integrated macroeconomic planning

1) regulation of implementation of comprehensive socio-economic

development policies; development planning; coordination of inter-

sector policy

2) determining the top priority and the sectors; stabilization of sector and

infrastructure development relationship

3) integrated investment policies

4) foreign investment policies, regulation and registration matters

5) integrated loan and aid policy

6) Integrated economic cooperation policies and regulation

7) trade policies and regulation

8) establishment and strengthening of high technology and innovation

promotion mechanisms

9) development of free trade zones

10) concessions and PPP policies


2. Issued successfully ‘Chinggis bond’ in the international markets with

following significance:

2 fold increase in foreign reserves that supports macroeconomic stability

Provides basis for stabilization of national currency, allowing inflation expectations to

stabilize for the first time in 5 years

This gives turn policy to the Bank of Mongolia to decrease policy rates and increase

money supply, which will support overall economy

Increased potential credit sources in the economy

Allows financing the Social Insurance Fund and effective implementation of notional

personal accounts system

Allows introduction of classical mortgage finance system


3. Made decision is to shift to 4-year mid-term public investment planning

Establish investment fund mechanism, e.g. Social Insurance Fund capable of

investing

Started mid-term public investment planning initiative at 330 soums

“Soum” project in rural Mongolia and “Street” project in Ulaanbaatar have been

formulated


4. Initial steps for manufacturing of construction materials and petroleum

products, which is the main cause for the foreign trade and domestic

economic volatilities.

Decisions taken by the authorities to establish the Oil refinery at Darkhan.

Negotiations are in progress with Government of Japan.

Intentions are set to supply the key construction materials for domestic demand

completely. Within the framework, planning to establish the cement, rebar plants and

metallurgy by region.


5. Investments into infrastructure projects

Аuto roads

Rail roads

Power stations

Power networks

Foreign investment policies

•Foreign direct investments are one of the main pillars of the economic

development of Mongolia.

•In order to attract more foreign direct investment, the measures will be taken

for the improvement of business environment.

•“Regulations” will be made to ensure that investments are for the mutual

benefit of parties, in line with economic development policies, and are

beneficial for Mongolia and its people.

•Within the framework of such objectives, target sectors and activities for

foreign direct investment will be defined.

An example is the passing of the Law on Regulation of Foreign

Investment in Business Entities Operating in Sectors of Strategic

Importance


For following reasons, the Ministry does not support assertions that investors are

departing due to the above mentioned law:

1. During “Chinggis bond” release received offers amounted to 15bln, or 10times

the amount sought.

2. “Doing Business” of World Bank and ОЕСD studies have shown that Mongolia

made progress as investment and business destination.


3. In regional terms, Mongolia is a relatively open country with liberalized

economy.

0 0,1 0,2 0,3 0,4 0,5

Sweden

USA

Norway

Mongolia

Austria

Ukraine

Australia

Kazakhstan

Korea

Russia

China

0.128

0.116

0.106

0.096

0.089

0.089

0.059

0.408

0.178

0.143

0.137

FDI Restriction Index, ОЕСD, 2012


Countries compete in the following areas in relation to FDI:

Таx regime

/Income tax-10%, CIT-10% and 25%, VAТ-10%/

Таriff levels

/Import tax 5%, export tax 0%/

Free trade zones

/Leisure centers/

Government guarantees and assurances

/Concession and investment agreements/

Land possession rights

/Dedicated laws/

Profit transfer rights

/Legal protection/

Property rights /Legal protection/

Level of infrastructure development /attention is given to these issues and

important decisions are made/

AUTOROAD PROJECT

Tamsagbulag

Jargalant

Khandgait

DARKHAN

DALANZADGAD

Khanbogd

Tsogt Ovoo

Gashuun Suhait

DORNOGOVY

TUV

DUNDGOVY

MANDALGOVY

SUKHBAATAR

Matad

Bichigt

Havirga

DORNOD

Ereentsav

Yarantai

ULGII

Ulgii

Uench

UMNUGOVY

ZAVKHAN

GOVY-ALTAI

Burgastai

Naranbulag

CHOIR

MURUN

Khatgal

BAYANHONGOR

UVURHANGAIBAYANHONGOR

Khankh

ERDENET

TsahirBattsengel

TSETSERLEG

ARVAIHEER

ARHANGAI

HUVSGUL

BAYAN-ULGII

ULAANGOM

ULIASTAI

KHOVD

UVS

BULGAN

SAINSHAND

CHOIBALSAN

BARUUN- URT

UNDURKHAAN

ZUUN MOD

KHENTII

SELENGE

BULGAN

Baga-Ilbenh

Oyutolgoi

Tavantolgoi

Tsagaan

suvarga

Shivee huren

Ulaanbaishint

Nariin suhait

ТT-Tsagaan Suvarge-

Sainshand route

ТT- Gashuun Sukhait

Nariin Sukhait-Shivee Kuren

Sainshand-Baruun Urt-

Khuut-Choibalsan route

Khuur-Numrug

route

Khuut-

Bichigt route

RAILWAY PROJECT – 1800km

POWER NETWORK


Near term objectives in line with Foreign Investment Policies:

Organize national workshop on the draft report and recommendations pertaining to

current Foreign Investment Policies of Mongolia / in conjunction with UNCTAD in

March, 2013/

Formulate a strategic document on attraction of foreign investments

Increase the volume of economically viable, programmatic FDI /aligned with

economic development policies, creating jobs, transferring technology, etc./

Enhance the relevant legal environment

Increase share of public funding toward capacity improvements in auto road, rail

road, BCP and strengthening of financial sector

Amount of FDI

/2012 estimates/

2010 2011 2012

Total investments USD1,026bln USD4,9bln USD4,0bln*

Number of

countries

59 66 59*

Number of newly

established

entiities

769 933 774

Number of

dissolved or

deregistered as

foreign invested

companies

214 233 156


(*) урьдчилсан дүн

№Тоp investing countries

1990-2012.06.30% Total /USD/

1 PRChina 31.71 3.65 bln

2 Netherlands 23.16 2.67 bln

3 Luxemburg 9.01 1,04 bln

4 BritishVirgin Islands 7.48 0.86 bln

5 Singapore 5.45 0.63 bln

6 Canada 4.23 0.49 bln

7 South Korea 2.93 0.34 bln

8 USA 2.54 0.29 bln

9 Hong Kong 1.80 0.21 bln

10 Japan 1.60 0.18 bln


73.9%

16.3%

1.5%0.9%

0.9%

Геологи, уул уурхайн эрэл хайгуул, олборлолт, газрын тосны салбар

Худалдаа, нийтийн хоол

Банк, санхүүгийн үйл ажиллагаа

Хөнгөн үйлдвэр

Инженерийн барилга байгууламж, барилгын материалын үйлдвэрлэл


Foreign investment by sectors /2012.06.30/

This picture needs to change—more

diversification is needed

Foreign invested companies operating in coal sector of Mongolia

№ CountryNumber of

companies

1 PR China 18

2 Mongolia-PRChina JV 9

3 British Virgin Islands 8

4 Singapore 3

5 Аustralia 2

6 Canada 2

7 Luxemburg 2

8 Моngolia-Russia JV 2

9 Luxemburg- VI JV 1

10 Luxemburg-Seychelles JV 1

11 Mongolia-US JV 1

12 Mongolia-South Korea JV 1

13 Mongolia-Hong Kong JV 1

14 Mongolia-VI JV 1

15 Mongolia-Luxemburg JV 1

16 Netherlands 1

Total 54

Foreign investment in the coal sector

Policy direction:

Single window policies in exports

Marketing products at international market prices

Development of transport infrastructure

Domestic power production

Support eco friendly investments

Improvement of operational efficiency of Erdenes TT

Foreign investment in the coal sector