During the meeting,  Russian President Vladimir Putin said Moscow supports Mongolia’s plan to build oil and gas pipelines from Russia to China via Mongolia. According to the Kremlin press release, Putin said: “Our states are building cooperation in developing a modern transport infrastructure. As I said at the bilateral meeting before, last year, the volume of container traffic on the China−Mongolia−Russia route to Europe increased 2.7 times, and by almost four times in the first quarter of this year.

“We plan to upgrade the Ulaanbaatar Russian−Mongolian railway and adjacent sections. We are developing an upgrade project for this railway through 2030. The first stage spanning 2018–2020 will receive $260 million in investment.

“In 2016, we signed a trilateral intergovernmental agreement on cooperation in motor transportation. Russia ratified the agreement last year. We hope that our friends will do their part soon.

“We are starting to work together to remove excessive administrative barriers to provide an uninterrupted flow of transit trade. To this end we have to ensure full implementation of the 2016 agreement on mutual recognition of the results of customs control inspections.

“As Mr Chairman just said, the introduction of the electronic information exchange system envisaged by the agreement has already substantially expedited the process of customs clearance at the border.

“We have good opportunities for interaction in energy. Our Mongolian partners have proposed oil and gas pipelines from Russia to China across their territory. Generally, we are supportive, this is a good idea. But of course, as always, thorough feasibility studies need to be carried out.

“Close interregional links play a special role in the cooperation between our states. For several years now border cooperation forums have been held involving Russia’s Trans-Baikal Territory, the Inner Mongolia autonomous region in China and the border areas of Mongolia.

“We believe it is important to step up the efforts to promote three-way cooperation in tourism. In this context I would like to mention the proposal to form a cross-border “Tea Road” that would link these regions in Russia, China and Mongolia.”

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“When given the proper platform and support, people with disabilities can help Mongolia improve productivity and boost economic growth,” said Raushanbek Mamatkulov, Senior Health Specialist at ADB’s East Asia Department. “The project will significantly change the way ADB approaches its assistance to and engagement with people with disabilities, by implementing initiatives focused on what they can do and contribute, instead of what they cannot do.”

People with disabilities in Mongolia, comprising about 4% of the country’s population as of 2010, and their households are often more likely to be in poverty and living in isolation than the rest of the country. They also typically lack access to education, healthcare, social protection, and employment, while remaining marginalized—hindering their potential as productive members of Mongolian society.

The project, focused on Ulaanbaatar and six provinces, aims to achieve equal participation for people with disabilities in economic and social activities by making it easier for them to access basic services and job opportunities. Specifically, the project will focus on early identification of children with disabilities through early medical and social intervention. It will also improve the service delivery for people with disabilities by engaging social workers, conducting family sessions, and establishing a dedicated hotline on information, counselling, and referrals.

The project will fund the construction and rehabilitation of people with disabilities-friendly infrastructures and public spaces. It will also enhance people with disabilities’ job opportunities through policy support and industry partnerships, while enhancing public knowledge and awareness of issues surrounding people with disabilities and programs through policy review and campaigns.

In addition, ADB will administer a grant equivalent of up to $2 million for the project provided by the Japan Fund for Poverty Reduction (JFPR). Established by the Government of Japan in 2000, JFPR provides grants for projects supporting poverty reduction and related social development activities that can add value to ADB-financed projects.

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Developing countries carried out 206 reforms, accounting for 78 percent of the total reforms, with Sub-Saharan Africa implementing 83 reforms and South Asia implementing a record 20 reforms. A large number of reforms centered on improving access to credit and registering a new business, with 38 reforms each, as well as facilitating cross border trade, with 33 reforms. 

Business reforms continued at speed in East Asia and Pacific, with regional economies adopting 45 reforms during the past year. The region is home to two of the world’s top 10 ranked economies, Singapore and Hong Kong SAR, China, and two of this year’s top 10 improvers, Brunei Darussalam (for a second consecutive year) and Thailand.  

Mongolia implemented substantive reforms to boost SME financing through Secured Transactions Reform project. Access to finance is a challenge faced by many Mongolian SMEs, which struggle to obtain bank loans as they do not own land or buildings that banks generally seek as collateral. 

To address this issue, the International Finance Corporation (IFC), a member of the World Bank Group, and the Ministry of Justice have partnered with the Bank of Mongolia, Mongolia Bankers’ Association, and other stakeholders since 2013 to help reform the country’s secured transactions system to unlock affordable financing for SMEs. As part of the reform, a web-based pledge-notice registry was launched in February 2017, enabling creditors to search for existing interests on movable assets that they intend to use as collateral and to file security interest on their approved collaterals. In addition, the IFC-supported Law on Tangible and Intangible Movable Property Pledge went into effect on March 1, 2017. The new law, along with the registry, allows SMEs to offer moveable assets such as accounts receivable, inventory, livestock, equipment, and future income as collateral to banks – a major move to improve access to finance for SMEs. The system also reduces the need for paper documents and notifies creation of pledge-rights to existing and prospective lenders. 

To date, around 90,000 pledge-notices have been registered, 38 percent of which is equipment, 24 percent is livestock, 5.4 percent is account receivables, and 2.0 percent is vehicles. Women account for 24 percent of the total borrowers. 

“We are very encouraged to see the strong early results from this project” said Tuyen D. Nguyen, IFC Resident Representative in Mongolia. “Mobilizing movable collateral to boost access to finance, especially for MSMEs, can play a significant role in Mongolia’s sustainable economic recovery and job creation.” 

In its annual ease of doing business rankings, New Zealand, Singapore and Denmark retained their first, second and third spots, respectively, followed by Republic of Korea; Hong Kong SAR, China; United States; United Kingdom; Norway; Georgia; and Sweden. 

This year’s top 10 improvers, based on reforms undertaken, are Brunei Darussalam; Thailand; Malawi; Kosovo; India; Uzbekistan; Zambia; Nigeria; Djibouti; and El Salvador. For the first time, the group of top 10 improvers includes economies of all income levels and sizes, with half being top improvers for the first time – El Salvador, India, Malawi, Nigeria, and Thailand. 

The report also monitors hurdles faced specifically by women in the areas of Starting a Business, Registering Property and Enforcing Contracts. This year’s report records a welcome reform by the Democratic Republic of Congo, which eliminated the requirement for women to obtain their husband’s permission to register a business. However, 36 economies continue to place obstacles for women entrepreneurs, with 22 economies imposing additional steps for married women to start a business and 14 limiting women’s ability to own, use and transfer property. 

This year’s report includes two case studies on transparency, which analyze data from business registries and land administrations and find that economies with more transparent and accessible information have lower levels of corruption and bribery. A third case study on private sector participation in formulating construction regulation finds that such rules exhibited higher costs and a propensity for conflicts of interest. A fourth case study highlights three successful insolvency reforms in France, Slovenia and Thailand, and lessons that are transferable to other economies. 

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After extending her congratulations to the Minister of Finance on his appointment, Ms. Fernandez Lommen introduced ADB’s new Country Partnership Strategy (CPS), 2017-2020, for Mongolia that will guide ADB’s future investments, policy reform support, capacity building, and knowledge sharing in the country.

Support amounting to $1.2 billion over the next four years will focus on three core pillars. The first pillar is economic and social stability, a major part of which is to support macroeconomic stability while maintaining progress on social development. The second pillar is infrastructure for economic diversification, and the third is strengthening environmental sustainability.

“The CPS builds on ADB’s role as Mongolia’s lead development partner and the bank’s improved operational performance in recent years. It is closely aligned with the government’s high-priority areas, and will focus on complex projects requiring significant technical expertise,” said Ms. Fernandez Lommen. “ADB has also closely coordinated with the International Monetary Fund and World Bank in formulating this strategy.”

Recalling his close cooperation with ADB as a former State Secretary of the Ministry of Finance and an Economic Advisor to the former Prime Minister, Minister Khurelbaatar affirmed his positive expectation from the country’s partnership with ADB in sustaining inclusive growth in a period of economic difficulty.

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Publication of essential macroeconomic data through the new NSDP will provide national policy makers and domestic and international stakeholders, including investors and rating agencies, with easy access to information that the IMF’s Executive Board has identified as critical for monitoring economic conditions and policies. Making this information easily accessible in both human and machine-readable formats, and in accordance with an Advance Release Calendar, allows all users to have simultaneous access to timely data, bringing greater data transparency.

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12th December 2013

Mongolia is one of the fastest growing countries in the world, with economic gains over the last 20 years lifting per capita income levels up to around $4,000. Strong international interest in the future of the Mongolian economy helped the country access the international bond market in 2012.

Yet sharp falls in foreign direct investment (FDI) and the depreciation of the tugrik have raised concerns around how Mongolia might be affected by an uncertain global economic climate. With an expectation of a sustained economic recovery in the US and Japan, and planned phasing out of aggressive monetary easing in the US, investors have been moving funds from Asia’s emerging markets, resulting in steep declines in the value of many Asian currencies.

While Mongolia was once largely insulated from such global economic developments, this is no longer the case. Its economy and markets increasingly depend on foreign businesses and investors, who have provided the fuel for the bullish growth of the past few years.

Still, the prospects for Mongolia’s economy are favorable and we project economic growth of 12% in 2013. Although coal exports have recently plunged, the commencement of copper production at Oyu Tolgoi is keeping growth levels high. This said, economic policy makers need to manage the current situation by safeguarding fiscal and financial stability and improving the legal and regulatory framework for FDI.

A flexible exchange rate system that allows the currency to adjust to economic and financial shocks is beneficial, especially for a small open economy like Mongolia. Orderly currency depreciations, particularly following extended periods of high inflation, should increase the competitiveness of local companies exporting to other countries or competing with foreign companies in the domestic market. This, in turn, will support the creation of jobs.

While Mongolia’s economy has grown rapidly, it is still very narrowly-focused, especially on the mining sector. Diversifying the economy and deepening value chains is critical to improve the quality of growth and create a substantial number of sustainable jobs. Broadening the economic base would also lessen the dependency on a few international commodities whose prices fluctuate widely with global trends.

ADB is already working with many companies in Mongolia including those producing milk, carpets and cashmere, and we believe there is ample room for growth, both in domestic and international markets for these companies as well as for companies in other industries.

Financial stability is a key for inclusive and sustainable growth. A country with most of its income derived from minerals can save during periods of high commodity prices, and use such savings as buffers during downswings to minimize the adverse impact of fluctuating commodity prices on its economy.

In the past, the Mongolian government tended to spend more when high commodity prices were earning the country a larger income, but without creating sufficient reserves to support public spending when the country experienced economic slowdown. Other resource-rich countries have proven that finding the right balance between spending and saving is necessary for long-term sustainable and inclusive growth. ADB therefore fully supports the government’s efforts to create a sovereign wealth fund that will save mineral-derived revenues for future generations, providing a cushion of support for Mongolia during periods of economic turbulence.

As delegates gather for the World Economic Forum on 15 September, I hope potential investors will recognize the opportunities Mongolia offers.

The Mongolian government is making concerted efforts to improve the country’s investment friendliness and safeguards for financial stability. Greater private sector investment – not only in mining but particularly in other sectors– will support a virtuous cycle that reduces volatility, stabilizes the economic environment, and provides greater comfort to private investors, all of which will help Mongolia achieve sustainable and inclusive development.

Source: Asian Development Bank

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