D.Sodnom: We should concentrate on developing our national industry


The following is an interview with former prime minister D.Sodnom about recent financial and economic issues grappling the country.

-          A meeting with the National Security Council (NSC) was held last week. What issues were discussed and what conclusions did they reach during the meeting?

-          As the Head of the NSC, President Ts.Elbegdorj held a meeting and invited former members of the council. The meeting lasted for about four hours. During the meeting, Minister of Economic Development N.Batbayar; Minister of Finance Ch.Ulaan; and Director of the Bank of Mongolia N.Zoljargal reported on Mongolia’s current economic and financial situation.

The participants then put forward their recommendations on how we should tackle Mongolia’s current economic situation and which spotlight the government should turn on. I’m so glad that the President organized this meeting. Mongolia’s foreign trade deficit is growing. Exports have decreased in both quantity and price. As a result of the reduction in the purchasing power of the tugrug, the price of imported goods has increased. Finally, this has affected people’s life negatively. Everyone said that our economy was very close to having a crisis. Afterwards, they expressed their opinion regarding proper measures to take in this kind of situation. Anyhow, I hope that the Parliament and the government ministries will take immediate measures to solve this problem.

-          What recommendations did you put forward during the meeting?

-          I said that we should concentrate on developing our national industry. Tax receipts and exports won’t increase unless national industry develops. In fact, the basis of everything is the country’s national industry. Some Mongolian national companies implement programs to increase exports and manufacture products which can replace imports. But the government doesn’t support them even though they try to develop national industry. Our national industry needs more support. There are too many bureaucratic deadlocks in getting permission to construct infrastructure or approvals related to the workforce. It takes too much time for governmental authorities to decide on them. The government should act on this issue much faster. It is important to decide quickly on infrastructure financing. It is hard to develop industry and expand sales if there are no roads and infrastructure.

For instance, we haven’t constructed a new railway yet. We have been discussing its construction for about four or five years. But it hasn’t been realized due to the government’s bad policies. It was decided before to construct a broad gauge railway to China. Because of this, we can’t construct new railways both in the direction of China and Russia.

Secondly, there are many projects which are important in increasing exports and decreasing imports. For example, I’m currently working on the Mongolyn Alt group’s project of the Tsagaansuvarga copper field in Mandakh Soum, Dornogovi Aimag. This field has 300 thousand tons of copper concentrate reserve which is equivalent to 60 to 70 percent of Erdenet copper field’s reserve. The government should provide credit from the Chinggis Bond for this kind of project.

A part of the Chinggis Bond was spent on road and infrastructure construction. But we can’t pay back the bond by constructing roads. Therefore, we should spend this money on projects which can make products and gain profit. One of these projects is the copper concentration plant. Moreover, a cement factory with a capacity of one million tons is being built in Dalanjargalan Soum, Dornogovi Aimag. Mongolia uses 2.5 million tons of cement in a year. We import a greater part of this from China. Hence, the government should support the financing of this project which can produce a million tons of cement. The most important step to get out of this difficult economic situation is supporting national industry. All participants in the meeting agreed with this opinion of mine.    

After the meeting, President Ts.Elbegdorj said that the Parliament and the executive branch of the government should work together in supporting national industry. Now we should just wait for their actions. Some people actually criticize them a lot. They say, “The government should solve problems, not make trouble.”

-          What can you say about the government’s actions?

-          I prefer advising and giving recommendations rather than criticizing.

-          What should we do in the future? Did they decide to spend the remaining part of the Chinggis Bond to support our national industry?

-          President Ts.Elbegdorj said that they should spend not less than 70 percent of the bond for national industry projects. I also put forward a recommendation to select projects which can increase exports and reallocate the Chinggis Bond for specific purposes. The government needs to find good projects and finance them.

-          What about the progress of the Oyu Tolgoi project? Does the government agree with the demands of the investors of this project?  

-          We have discussed this issue for a long time. According to the contract with Oyu Tolgoi, we won’t get anything in the coming years. It is said that they tend to reduce the royalty, profit, tax, and dividends for the government. Therefore, we should find a reliable way for Oyu Tolgoi to rightfully pay back Mongolia. So we should change the contract by adding terms about payments.

-          People think that the management of Rio Tinto is blackmailing the Mongolian government and blocking the operations of Oyu Tolgoi. How should we deal with them?

-          We don’t need to be in conflict with them. First of all, we should discuss and formulate changes in the contract carefully. Everything will be ruined if we don’t make any of these changes. The Oyu Tolgoi project will last for 30 years at least; therefore, we can’t always argue with them in these 30 or 40 years. Hence, we should come up with a clear and confidential contract that the parties are mutually confident in. The Mongolian government has to do this, not the company’s Board of Directors. Mongolia’s three representatives in the Board of Directors can’t decide on this issue. They didn’t sign the Oyu Tolgoi contract. Therefore, the government should grab the initiative, take action, and work out an amenable solution.

-          What is the stance on this issue of former president N.Bagabandi who is a representative of Mongolia in the Board of Directors of the Oyu Tolgoi company? Isn’t his stance important?

-          N.Bagabandi is one of the representatives of Mongolia in the Board of Directors of Oyu Tolgoi. Therefore, he is not in charge of changing the contract. The government with the ministers has to solve this problem.

-          The rating of the Chinggis Bond in the international market is dropping. Mongolia will issue 3.5 billion USD more worth of bonds.  What should we do in order to increase the rating of our bonds?

-          The rating of the next bond will depend on the previous bond’s expenditures and result. It is right to issue bonds in the world market. But we should issue them in a new form. Before issuing a new bond, we should estimate how to spend the money and figure out what projects we should implement.

-          There are a lot of government projects under way such as constructing the new railway and supporting national industry. What is the most important sector which needs support aside from mining?

-          During the meeting of the NSC members, participants recommended that the more important thing to do is extract mineral resources as well as develop the agricultural sector. Building a tannery and manufacturing industry of livestock products is also very promising. Extensive products from livestock have the best quality in Mongolia. Developing tourism is also important.

-          The future of the coal sector has been uncertain in recent years. Is it right to find a way to export to other countries aside from China?

-          Coal is and will be an important source of energy. Therefore, it is necessary to use this resource in Mongolia. On the other hand, Mongolia has a consolidated policy of coal exporting. This current policy is very insufficient. I think that it is wrong to have state-owned coal mines.

-          China constructed a railway to Mongolia’s border. But Mongolia’s railway construction from its side has been unsuccessful.  Shouldn’t we construct a railway from Tsagaan Khad to China’s border instead?

-          It was agreed upon to construct a 30-km broad gauge railway from Tsagaan Khad to China’s border. If I had been the one who made this decision, I would’ve constructed a narrow gauge railway instead.  A broad gauge railway is not a smart decision. But constructing a new railway and not relying heavily on road transportation is good though.

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Posted by on Aug 22 2013. Filed under Топ мэдээ. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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