2017 Economic and Political Outlook


2017-01-05 10:33 GMT+8

Everyone agrees that Mongolian economy will get worse in 2017. The country is now facing many challenges including soaring budget deficit and stopped foreign investment. However the situation can be changed, if authorities make the right decisions on following projects. 


Unofficial talks about opening local branches of foreign banks have spread since July, 2016 as new Government has begun to form. Sooner some MPs said that the Government should create a new legal environment for foreign banks allowing investment activities only. 

Cabinet discussed the issue on Dec 21st, 2016 and obliged Minister of Justice and Minister of Finance to develop a draft law on amendments to the Banking Law. 

Foreign bank branches in Mongolia are required only to grant loans, invest, make domestic and foreign payments, provide loan guarantees, sell and purchase bonds, while not being allowed to provide saving accounts. This will lower interest rate and create real competition in the banking sector. 


Gatsuurt gold deposit is one of the halted projects of the country. Gatsuurt deposit proven reserves are at 50 tons of gold and profitable effect reserves are calculated to be 25 tons, which fully complies to requirements for Strategic Deposit.

Mining license holder Centerra Gold LLC have got Gatsuurt Deposit Reserve Report approved in 2013 and Feasibility Study in 2014 by the Mineral Resources Council and the site is ready for the mining.

However previous Government has tried to start the mining operations of the deposit, but faced with civil protests as Gatsuurt deposit locates in Noyon Mountain that stores in itself the tombs of Mongol nobles and other cultural findings dating back to the Hun Empire period. While the graves and findings of ancient Huns are located just at 5.8 km South West of the exploration site.

Protesters took Centerra Gold LLC to the court and the Capital City Court made a decision on protester`s side. ​

Newly formed Government led by Prime Minister J.Erdenebat claimed to start Gatsuurt project, but the dates are still uncertain. Current authorities are implementing a "Gold" program in order to maintain foreign exchange reserves and started following policy to raise gold delivery. 


The New Ulaanbaatar International Airport, locates 52 km south from the city center, will be commissioned this year. In May 2008, a ¥49 billion (US$385 million) 40-year soft loan agreement at 0.2% interest was signed between the Government of Mongolia and the Japan Bank for International Cooperation to build a new international airport. 

During the construction process, additional cost of ¥5.9 billion were required. The Government of Mongolia requested additional loan from Japan International Cooperation Agency.

33.5 km roads from Ulaanbaatar city to new airport has started to be constructed with Chinese soft loan, planning to finish within the second quarter of 2016. However the road project has been falling behind the schedule. 

The New Ulaanbaatar International Airport, a construction with the biggest foundation in Mongolia is designed with the capacity of up to 3 million passengers per year and have capacity to receive 1500 passengers per hour.  

The airport is able to launch 6 planes from its passenger boarding bridges and 13 planes from its field. 5 planes with up to 300 passengers are able to take off at once. 


The Development Bank of Mongolia faces a $580 million repayment on Mar, 2017. However, the country is not able to meet the debt obligation. The state-owned Development Bank of Mongolia, which finances social development and commercial projects, and grants subsidised mortgage credits, has raised a $580 million bond from Singapore Stock Exchange on Mar 4, 2012 with an annual 5.75 percent interest rate that is due in Mar 21, 2017. 

Government is seeking ways to delay the payment or more cost-effective and long-term loans. 

Although the country has started negotiations with Internationl Monetary Fund, projects and the amount of loan are still unclear.

$580 million bond financed Khutul cement plant, Amgalan power plant, Tavantolgoi-Gashuun Sukhait railway, Geology Central Laboratory, 33.4 km railway from Tumurtei deposit to Khandgai,  extension of III and IV power stations, expansion of mining capacity of Baganuur coal deposit, development of Erdenes Tavan Tolgoi, apartments for 1152  households near Yarmag bridge, Sainshand industrial complex and project​s for small and medium enterprises. 


Tavan Tolgoi, which contains 7.4 billion ton of coking and thermal coal deposits deal to be continued.

Mining and Heavy Industry Ministry officials received delegations from China Shenhua Energy Company Limited on Dec, 2016. During the meeting, China Shenhua proposed to commence Tavantolgoi`s power station, railway construction and mining projects at the same time. 

Previously, China Shenhua has expressed incentives to invest in Tavantolgoi coal deposit. The company has won the bid, announced by the previous government, establishing a consortium agreement jointly with the Energy Resource LLC and Japanese Sumitomo Corporation.

Prime Minister J.Erdenebat obliged working group to move the project as soon as possible. However, consortium agreement, winner of the bid might have new competitor due to domestic entities having expressed interest in investing Tavan Tolgoi jointly. 

Government refers to the following conditions on Tavan Tolgoi deposit:

  • Mongolia will own 51% while China Shenhua will own 49% of a company to build a railway from Tavan Tolgoi mine site to Gashuunsukhait
  • Investment and cooperation agreement period shall be 22 years, consistent with the operating license period
  • The operations to be 51% owned by Mongolian company
  • Target market of the project shall be China and the third country 
  • Subcontractors shall be Mongolian entities and the contract term shall be not less than 5 years.


The Presidents of China, Russia and Mongolia have signed off on a Trilateral Program for the development of an Economic Corridor between the three countries. This program includes the establishment of a new Northern Rail Corridor connecting China with Russia through Mongolia. The Northern Rail Corridor is a continuous railway stretching from Tianjin Port on China’s east coast through Beijing, ErlianUlaanbaatarErdenet to Ovoot, Arts Suuri to Kyzyl, connecting to the Trans Siberian Railway at Kuragino

Aspire Mining LTD developed the first stage of feasibility study of the project. Also, environmental study of the project has been completed. 

Northern Railways LLC, 90% owned by Aspire and 10% by the Noble Group will build a 547 kilometre section of the Northern Rail Corridor from Erdenet to Aspire’ s Ovoot Coking Coal Project.

The establishment of this Northern Rail Corridor confirms that the Erdenet to Ovoot Railway has developed from being a rail connection to a large coking coal project, to now being part of an important new trade infrastructure route. It is also the Company’s understanding that Aspire is the only listed public company with a significant interest in this new rail corridor.

The Ovoot project development is dependent on the construction of the Erdenet to Ovoot railway. Ovoot Coking Coal Project (Ovoot) is the second largest coking coal project by its reserves in Mongolia. 

The railway construction is planned to finish by 2019. 


The president is elected for a four-year term by the people, using the two-round system. 8th Presidential elections to be held in Mongolia in June 2017. 

As Presidential Election is to be organized this year, the bill on Presidential Elections was submitted just a few days ago. 

The previous parliament approved Law on Elections, which regulated all elections including Parliamentary, Presidential and Citizen’s Representative Meetings of provinces, soums and districts. However General Elections Commission put a request to organize elections under separate independent laws, as it was difficult to organize the previous parliamentary elections, adhering one combined law.

The Commission proposed to follow main contents, criteria and regulations of the 2013 Presidential Election law and to change organizational matters. 

Currently, former Prime Minister N.Altankhuyag announced to stand for presidential election and former MP R.Amarjargal is on the list from the Democratic Party. Meanwhile, Mongolian People`s Party has not announced yet their presidential candidate. 

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