D.Erdenebat: We’re aiming to set foundations for industrialization

Trans. by B.DULGUUN

 Member of Parliament and Minister of Industry D.Erdenebat gave an interview about various industrial development issues.

The government submitted a draft policy for the industrial sector. What’s been included in the draft policy?

 The past 25 years have proved that Mongolia will not industrialize without initiations from the government and state. Mongolia has accomplished many things while forming a democratic society for 25 years. Nevertheless, many things were lost. One of them is the industrialization policy. Mongolia’s economy has become unstable, dependent on price spikes of mining raw materials, because Mongolia’s industrialization is underdeveloped. Well-organized planning and policy is urgently required for industrializing.

Mongolians misunderstand that mining is industrialization. There are people who think that they can continue their livelihood by selling Mongolia’s resources. It’s become clear that mining resources can’t establish a sustainable economic growth. Also, we’ll be in trouble when resources exhaust. Probably, everyone has realized that industrialization is crucial for maintaining economic stability. For that reason, the Ministry of Industrialization was established. The newly formed ministry has to develop the desiderated industrialization policy.

The draft policy for industrial sector has determined well-developed and organized rational concepts for developing the sector. Fundamentally, the key to economic growth has been determined as industrialization in the draft. Light, heavy, processing plants, as well as agricultural and energy projects have been included in the draft as essential to industrialization.

 The Ministry of Industry is mainly focusing on improving the heavy industry sector. How will heavy industries be supported?

The industrialization draft policy has included three fundamental objectives for industrial development. The first is to expand heavy industrialization. Basically, to establish plants that’ll produce main raw materials. Mongolia can process mining raw materials and produce main raw materials such as copper, steel and coking coal. The next objective is to establish plants to produce products with these main raw materials. Afterwards, Mongolia could strive towards precision manufacturing, producing cars and machinery.

Another objective is to develop processing plants. Mongolia has determined to fully process fur, leather, wool and cashmere. The major part of developing heavy industry includes building an oil processing plant. Mongolia has been discussing to establish an oil plant for many years, but never reached a conclusion. The Ministry of Mining has been given the task to make the initial solution for setting up an oil production plant. Our 15 companies already developed a project for building this plant and the government has approved nearly half of the draft policy. Yet, not a single plant has begun construction. This shows that the heavy industry cannot be developed without government policy and regulation.

 Approving the policy is a sign that the industrial sector will be supported. However, not every plant will be supported, right?

Indeed. I reviewed industrializations done in the past. Projects were financed without integrated policy or order, and didn’t yield results. Providing concessional financing for industrial projects was a good move, but executing them without order was wrong.

Projects that received investment from Chinggis Bond last year and the year before will show results this spring. Few projects enforced by capable and experienced companies with professional personnel management are likely to give adequate results. It’s unfortunate that the majority of investments supporting industrialization was turned into a tool for inflating interest rates of investments. Issuing investment for some under-developed and useless projects not only distorted the government policy but also increased import demand and inflated the economy. This mistake should be acknowledged and corrected. We don’t have the right to mess up again.

 Are you implying that the investment for 888 projects for promoting import-substituting and encouraging exports was implemented with flaws?

Last year, over 200 of the 888 project received investments. There are many projects planned to be implemented this year. Our ministry is developing regulations for selecting projects to receive investment. Whether companies have adequate base, professional personnel, and management for implementing a project will definitely be evaluated. Over 3,000 projects requested investment. Projects will be examined in accordance with regulations. At least 70 percent of the projects receiving investment have to be effective and beneficial. Setting requirements is the foundation for executing good projects with high competitiveness rate and implemented by professionals with new advanced technologies. These regulations and requirements have been issued in the draft policy paper. The idea that anyone can write up a fairytale-like project and attempt to get investment should be completely eradicated.

 Strategy planning for industrialization is said to be developed. How many years will the planning cover?

I’m confident that MPs will support the draft industrialization policy at the parliamentary spring session as the concept and foundation are all correct. Strategy planning will be developed consistent with the draft policy and then, the government will approve it. Targets will be set every five years and results will be accounted along the process. After five years, the general picture for Mongolia’s industry sector in 10 to 15 years will be drawn out. The location and type of industry to be set up will also be determined depending on the animal husbandry sector, population density, environmental features, and raw materials before receiving approval from the government. Like so, policy, planning, and blueprints for industrial development will become ready. These tasks will be accomplished within spring. Investors will develop projects according to the plans and blueprints, and make their demand. If policy planning is consistent with blueprints, the government will pass it. If necessary, financial aid will be provided.

 Some countries practice tax exemption to boost industrialization.  Will the Ministry of Industry initiate tax exemption?

Tons of businesses came to us requesting for credit and tax exemption. Credit and tax exemption is completely possible. Companies will have to introduce new technology, increase workplaces, purchase raw materials from domestic sources, manufacture import substitution products, and maintain suitable prices to receive credit and tax exemption. When these conditions are met, we can proudly negotiate tax exemption with the government. Our ministry established a one-year contract for Erdenet and Darkhan industrial parks. We can negotiate tax exemption by next year if trades and exchange of goods proceed well and industries of these parks are able to cluster, promoting national productions.

 Five years targets have been planned in three stages, meaning that results will be seen by 2030. Wouldn’t it be motivating to announce the things that’ll have been accomplished by 2030? For instance, Kazakhstan has set an ambitious goal to develop production and become one of the five big powers of the world by 2050.

Yes, I think it’s a good idea too. But it is wrong to move ahead of time in a hurry. Before announcing our ambitions, our draft policy should first get approved by the government. Within the scope of strategic planning, everything will be shown in graphs and we’ll make estimations and announcement about where Mongolia will have reached by 2030 for heavy, light, small, medium industry sectors as well as for management and technology.

Presently, processing plant takes up merely eight percent of Mongolia’s GDP. The rest is provided from mining. Mongolians believe that Mongolia has developed, when in reality, we were only getting ahead of ourselves as prices of mining products increased and brought in a few more profit to Mongolia. Still, Mongolia stumbled when the prices of raw materials fell. Now, everyone’s looking for someone to blame. This is wrong. During this time, we should be looking towards the future and striving towards it. Everything will become politicized once elections draw nearer. Everyone will start seeking someone to put the blame on. If there’s someone to blame, it’s all of us. We’re all at fault since we all became swell-headed and scattered money together. Like the proverb, “Don’t cry over spilt milk”, we shouldn’t be crying over our mistake. I will look ahead and work hard. The main objective is to transform this country into an industrialized country with well-managed industries. Lives of many will see dramatic changes once industrialization develops in Mongolia.


Source: mongolnews.mn /1h7t


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Posted by on Feb 26 2015. Filed under Prime Interview. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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