Mongolia at Investment ‘Turning Point,’ Cabinet Secretary Says
Mongolia aims to show its relationship with foreign investors has reached a “turning point” by progressing on development of two of the country’s largest mines, Cabinet Secretary Saikhanbileg Chimed said.
The nation needs to follow last week’s passage of a law ending different treatment of foreign and local companies with “a good chain of events,” Saikhanbileg said in an Oct. 3 interview in Ulaanbaatar. Progress on funding the second phase of the Oyu Tolgoi mine being developed with Rio Tinto Group Plc (RIO) and preparations to list the state-owned Erdenes Tavan Tolgoi mine are among steps that would bolster confidence, he said.
“When we make a final decision, there should not be any political interference,” said Saikhanbileg, 44, a graduate of George Washington University’s School of Law. “When we make the initial talks of course maybe the politics comes up but the final approach in terms of policy should be a normal business practice. A practical decision should be followed.”
Following record economic growth of 17.5 percent in 2011, Mongolia’s mineral resource boom has slowed during a year-long election cycle that raised the level of resource nationalism, taking a toll on investor confidence. Worries over the economy peaked in August when failure to agree on terms of a $5.1 billion expansion of Oyu Tolgoi led to 1,700 worker layoffs.
By September, Mongolia’s currency, the tugrik, lost one-fifth of its value and foreign investment plunged 47 percent year-on-year.
Number One Priority
Saikhanbileg, who by the age of 29 was already Mongolia’s Science and Education Minister, said resolving the Oyu Tolgoi financing package is his government’s “number one priority,” adding that he’s hopeful a solution will be made by the company’s directors, rather than politicians.
The Oyu Tolgoi dispute centers on approval of a $4 billion financing package that will allow the company to develop the underground portion, where 80 percent of the mine’s wealth lies. The Mongolian government and Rio are still negotiating over 15 points of dispute that include an audit on cost overruns during the first phase.
“Oyu Tolgoi needs to be resolved purely on business decisions, not political ones,” said Saikhanbileg, speaking in his office where photographs of him and other world leaders and business people cover one wall. Germany’s Chancellor Angela Merkel, whom he called an ’Iron Lady’, was one of the world leaders he was most honored to meet.
Saikhanbileg said it was “high time” to resolve other delayed mining projects, including the expansion of the Erdenes Tavan Tolgoi coal mine.
Part of his ’good chain of events’ is preparation for an initial public offering of state-owned Erdenes TT, which requires substantial infrastructure, including a power plant, coal-washing facilities and a railway to China.
“We need to increase the value of the company,” said Saikhanbileg, whose life outside politics includes watching Denver Broncos football and heading Mongolia’s power-lifting federation. Once the company is better placed to turn a profit, an IPO could ensue “within two or three years,” he said.
Another goal of his cabinet is to improve the clarity of the government’s message, Saikhanbileg said, indicating an awareness of the bad press Mongolia has been subjected to over the past year and a half.
“We have a missing link in expressing the government position to the rest of the world,” said Saikhanbileg, adding that the government plans a promotional team that can travel outside the country to explain its actions.
“We are going to set up this kind of channel, so everyone can get info about Mongolia,” he said. “The new agency called Invest Mongolia will do this.”
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