Mongolia economic forum 2015 starts

General announcement of the forum has finished and plenary sessions have been started. In scope of the agenda:

11:30-13:00

Grand hall:  Institutional governance and cooperation

А Hall:  Climate change and its impact on community

Б hall:  Ethical behaviour in media

13:00 – 14:00 Grand hall: Working lunch: Minister of  Mongolia, M.Enkhsaikhan      

Plenary session on "Current macro-economic position of Mongolia", conducted by the economist D.Jargalsaikhan is being discussed at the Great Hall.

Guests of the general meeting:

• J.Erdenebat, the Minister of Finance
• N.Zoljargal, President of the BoM
• B.Batbayar, publicist
• G.Ragchaasuren, researcher
• Taehyun Lee, World Bank Senior Economist

N.Zoljargal, President of BoM: "Inflation rate is being close to achieve the goal for the first time. Last year, inflation goal was set for 8 percent and it ended up with 11 percent while this year, inflation goal was set for 7 percent ant it is currently, 9 percent. Further, inflation rate will be reached 8 percent. If that situation continues, Bank of Mongolia policy to control inflation at lower level, i.e. 7 percent will be implemented."

"The Government has been able to receive loan with worth of USD 600 million. Banks are able to make guarantee by mortgaging bonds owned by the Government. Total of USD 1,4 billion guarantee is to be granted and out of USD 500 - 700 million will be implemented, this year. People and economist have noticed the big changes in 2014. BoM received 4 tons of gold as end of 2013 while it has increased to 13 tons in 2014. Projection for 2015 is 18-20 tons and it will increase the flow of foreign currency by 700-800 million. Moreover, issueing mining license will be increased foreign direct investment. Plus, I hope for OT and TT to go forward."

James Anderson, the World Bank's Country Manager for Mongolia is making 15 minutes presentation under the "Institutional Governance and Partnership" panel. 

We are delivering you main contents of  speeches made by MP Batchimeg and MP Bayartsogt on "Institutional Governance and Partnership".

MP Batchimeg: "Governance is the most closest to this year`s Economic Forum slogan Building Credibility. In this regard, is there a trust in the state among the citizens, how much trust one has being employed for long term. Political stability, long term development policy and ensure the proper implementation are basis for the good governance and further building up of the credibility for the businesses and investors.

MP Bayartsogt: "We have to talk about the facts and reality and then promote on our building of the credibility. Political stability and political continuity is essential. It is good we are talking about it and discussing about it. But we have to learn on our mistakes and correct them. This economic downturn was more because of the policy mistakes or in other words the internal environment, rather than the external environment as it was during the economic crisis we faced in 2008.

Avarage age of the cabinet was 1.4 years, on top of the four year term for the parliamentary elections, followed by the presidential elections. In this environment it is hard to talk about the policy contributy and political stability. This creates the waiting mode among the potentioal investors, as they start to postpone their desicions in hopes for more stable environment."

We are delivering you the main contents of speech made by James Anderson, the World Bank's Country Manager for Mongolia on "Institutional Governance and Partnership". 

Transparency is the key to the governance and this is essentially the right to information. Mongolia lacks in the area of ots promotion as people have the right to know what is happening. It is important for the parties to make sure they are made avail to the information. Integrity framework is basically the assessments of laws, access to information and how the elections are run. In other words, it is about the institutions, not the outcome. Legal framework in Mongolia is put in the strong category, whereas the implementation is weak. Mongolia is on the high end of the implementation gap.

Impact of political change, in this category Mongolia has fairly decent rating. But Mongolia is prone to political changes that tends to stretch down. Hiring is based on political connections, rather than the merit based.

We are delivering you the main contents of speech made by S.Otgonbat, CEO of Ottogen LLC and J.Bolor, President of Newcom Group on "Institutional Governance and Partnership".

S.Otgonbat, CEO of Ottogen LLC: "It is good to hear that the Government recognizes the reasons of the current economic slowdown was the bad governance."

J.Bolor, President of Newcom Group: "Talks on how the political instability and lack of the policy and political continuation disrupts the businesses and therefore drives down the credibility for Mongolia and pulls back the potential investors from entering the Mongolian market."

Super Cycle: Rich and Poor

Working lunch by Minister of State M.Enkhsaikhan.

Minister M.Enkhsaikhan welcomed the participants and expressed gratitude to the organizers and sponsors of MEF 2015.

1. Super Cycle

The last super cycle occured during 2000 - 2010.

Message 1: Super cycle has ended and we need to go further and find solutions.
Message 2: Super cycle fulls financial resources into the resource rich countries.
Message 3: Lost cycle was it due to the holloand disease?
Message 4: How to measure the yield of mega projects such as OT and Erdenet. Tax is not important, investment multipier effect is crucial.
Message 5: Erdenet Mining Corp was established out of political motivation.
                    Oyutolgoi is the project established based on the market motivation.
Message 6: Populism and emotional approach inevitably leads to the bankruptcy.
Message 7: Traditional animal husbandry development will convert into modern agriculture through the mining development.
Message 8: Turning unsustainable income into sustainable development.
                    Establishment of the wealth funds, how to do risk management.
                    Nordic countries experiences or Botswana experience.
Message 9: Correct policy needed.
                    Create capacity.
                    Mining is the most cash intensive sector and we need to understand this at first. Based on the incomes from mining we can into other sectors such as agriculture. We need to establish capable national corpotations.

Discussion on Financial sector sustainable development and economic sustainable growth panel are being held at Hall B.

Z. Narantuya, Head of the Financial Regulatory Commission, presents on the current capital market situation in Mongolia and the following conclusions are being made:

• Market valuation is low
• Liquidity ratio is slowed down
• Trade amounts have dropped
• Top 20 index cannot act as the realistic indicator of the market
• Low quality of the registered public companies
• Low capacity of the market participants
• No unified monitoring system is established
• Too many types of Special licenses and high service fees
• Weak market analysis and modelling
• Infrastructure is not supporting the reliable and risk free environment

Panelist do agree that Mongolian capital market is dominated by commercial banking services comprising almost 98 percent of the total loans issued on the market. The reason for low development of capital market is high interest rates namely 18 percent annually and with this situation no one is interested in investing into securities and other financial instruments. Next big issue is the lack of corporate governance at the registered public companies.

Participants agree that state property should be privatized through the IPO s at the MSE.