SPECIAL EDITION FOR THE MONGOLIA-JAPAN BUSINESS FORUM MAY 2021 ISSUE #04 INVEST IN MONGOLIA MONTHLY NEWSLETTER OF THE NATIONAL DEVELOPMENT AGENCY
WHAT’S INSIDE THIS ISSUE JAPANESE FOREIGN DIRECT INVESTMENT IN MONGOLIA
MONGOLIA-JAPAN RELATIONS
PROJECT CAPACITY LIVESTOCK SECTOR BUILDING PROGRAM
SUCCESS STORY BRIEF INTRODUCTIONS OF PROJECTS “VISION 2050” MONGOLIA’S LONG- TERM DEVELOPMENT POLICY AND WEBINARS AND EVENTS COOPERATION WITH JAPAN
THE FUTURE OF RENEWABLE ENERGY IN MONGOLIA
www.investmongolia.gov.mn INVEST IN MONGOLIA May, 2021
A MESSAGE FROM OUR INVESTMENT DIVISION INTRODUCING PROJECTS TO e are pleased to publish the special Japan edition May issue of our monthly newsletter, WInvest in Mongolia. JAPANESE INVESTORS “INVEST IN MONGOLIA – TOKYO 2021”
Diplomatic relations between Mongolia and Japan were MONGOLIA JAPAN BUSINESS FORUM established on February 24, 1972. Since that day, we have been supporting one another and participating in cooperation in all sectors of our country, through grants, In order to increase trade and investment between Mongolia and Japan, on May soft loans, and donations to build factories, schools, 20, 2021, the National Development Agency, Japan External Trade Organization kindergartens, a new airport, roads, and bridges. In (JETRO), Embassy of Mongolia in Japan, International Finance Corporation (IFC), other words, our children and future generations are and Irbis Ventures will be hosting Invest in Mongolia - Tokyo 2021, an online Mon- enjoying these results and benefits because of your golian-Japanese business forum. The Ministry of Foreign Affairs of Mongolia and creative work. Thank you to Japan for helping the the Ministry of Economy, Trade and Industry of Japan (METI) are also cooperat- people of Mongolia. ing as supporting organizations.
During the forum, Japanese investors and entrepreneurs will be intro- Under the leadership of the Prime Minister of Mongolia, duced to Mongolia’s economic cooperation, investment, and business climate we have launched comprehensive reforms to improve reform plans, and the success stories of Japanese investors and entrepreneurs the business and investment environment. This who have invested in Mongolia. comprehensive investment reform includes changes to the legal framework for investment, investment Projects selected and enhanced through the Project Capacity Building promotion and protection, e-government for investors Program, carried out in cooperation with the National Development Agency, Irbis during the pandemic, and the simplification of services Ventures, and GMG Consulting, will be presented at the forum based on their high for investors, carried out in cooperation with the investment potential. government and other agencies. Focus sectors: agriculture, IT & creative industry, renewable energy, organic pro- We are establishing the Investment Promotion Council, duction, and healthcare with its main functions being 1) to protect the legitimate rights and interests of investors by resolving their grievances before they become disputes in international courts of arbitration, and 2) to improve the investment climate by developing research-based FDI policy For more information, please visit: recommendations and strategies, and to provide advice www.japan.investmongolia.gov.mn to the prime minister and Cabinet.
The National Development Agency plans to expand economic and investment relations with Japan in May, and with Korea next month, and to provide Japanese Organizers: investors and businesses with the latest information on Mongolia’s investment and business environment.
If you have any suggestions regarding the newsletter, please send an email to info@ nda.gov.mn.
Deputy Chairperson in charge of Invest- ment and Multilateral cooperation
B.BULGANCHIMEG Supporting Organizations
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MONGOLIA AT A GLANCE
GENERAL INFORMATION
AREA Literacy Rate GDP 65% of working force Total fdi /1990-2020/ 1.564.116 KM² 98.2% $13.3 billion BETWEEN 15-65 $29.6 BILLION OF AGE POPULATION 3.2 MILLION
Foreign Trade EXPORT IMPORT $12.9 BILLION $7.6 BILLION $5.3 BILLION
INTERNATIONAL INDEXES ( IN EAST ASIA & PACIFIC COUNTRIES)
• Doing business in • Dealing with • Registering property • Getting credit • Protecting minority • Mongolia’s credit rating Mongolia (World bank) construction permits investors (Moody’s) 10TH 6TH 6TH 4TH 6TH B3 STABLE
ACCESS TO THE INTERNATIONAL MARKET
ASIA PACIFIC TRADE AGREEMENT JAPAN - MONGOLIA ECONOMIC EUROPEN UNION GSP+ USA GSP + (INDIA, SOUTH KOREA, SRI LANKA, PARTNERSHIP AGREEMENT (JMEPA) LAOS, BANGLADESH & CHINA) From Mongolia 5,700 products tariff discount on 10,667 types of Customs tariffs exemption for 7,200 More than 3,500 products customs From Japan 9,300 products products with six member countries products to EU countries tariff exemptions to the US market (direct and phased exemption from of APTA customs duties on reciprocal imports)
INVESTMENT OPPORTUNITIES IN MONGOLIA
• Exploration licences • To grow as an intensive farming- meat and dairy • Mongolia has over 300 sunny days a year and has • Invest in new opportunities – value-added product products one of the largest wind reservoir. The country’s plants suchas copper cathodes • Organic products: seabuckthоrn and honey combined wind and solar power potential is • Exploration and extraction of rare earth elements • Meat export egetable plants for domestic estimated to be equivalent to 2,600 gigawatts (GW) consumption of installed capacity or 5,457 terawatt-hours of clean electricity generation per year. • The amount is enough to meet the country’s energy demand (around 1.2GW as of 2018), and can meet northeast Asia’s regional energy demand with a suitable transmission infrastructure.
• Mongolia is a natural transport and logistics hub • The tech talent in Mongolia and the development of and the country is a reliable corridor for trade flows high quality startups have both seen a significant between Europe and Asia. The transit time is 11 days spike, many of the startups now competing globally. by train in comparison with 45 days via the sea. Some of the fintech companies have started exporting their business in Asia. 2 INVEST IN MONGOLIA May, 2021
AS AN INVESTOR YOU WILL ENJOY:
ENABLING LEGAL TAILORED PROMOTION FOR ENVIRONMENT YOUR NEED
• Non-discriminatory policy towards • Visit www.investmongolia.gov.mn for an foreign investors integrated information for investors; • Stabilization package for your business • Subscribe to monthly newsletter “Invest to prosper in Mongolia” for investors available in • Tax exemption for initial 5 years of English and Mongolian; qualifying businesses in economic free • Check out our Pitchbook 2021 for zones businesses to invest in • Land use rights up to 60+40 years and • Sign up for our next “Invest in Mongolia” many other benefits event Tokyo 2021, Seoul 2021 • More benefits to innovative business • Visit our social media sites below for start-ups offering sandbox approach, frequent updates environment to test new business ideas • https://www.facebook.com/ndagovMN without limitations • https://twitter.com/ndagovMN
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INVESTOR PROTECTION DIGITALIZED SERVICES MECHANISMS
• Check out the special covid-19 menu for • Grievances are resolved through investors on our website ipc.gov.mn or through Investment • Take our survey on improving policy and Council led by the Prime Minister services for investors during the covid19 • Judicial services are available to resolve • Drop by our one stop service center disputes per international treaties, where you can get 62 types of services conventions and national laws; from 5 government agencies in one stop • A competent office with qualified experts • Get your reference for visa extension visit / home doctors / is available to assist your business and investment at NDA • NDA officers will ensure protection of your business and investment by liasing with other parties on behalf of you in Mongolia • Invest-assist.Gov.Mn • Submit your grievances via ipc.gov.mn instantly
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MONGOLIA-JAPAN RELATIONS
iplomatic relations between Mongolia and Japan were established From 1977 to 2019, the Government of Japan provided Mongolia with 120.2 on February 24, 1972. The Mongolian Embassy in Tokyo was billion JPY in grants, 54.2 billion JPY in technical cooperation, and 157.9 Destablished in June 1972, and the Japanese Embassy in Ulaanbaatar billion JPY in soft loans, for an overall a total of 332.4 billion JPY (over 3 was established in 1973. Mongolia and Japan have been developing a billion USD) in loans and grants. comprehensive partnership since 1998 and a strategic partnership since 2010. Major projects and programs implemented in cooperation with the Government of Japan include: Some major legal documents signed between the Government of Mongolia and the Government of Japan include agreements on cooperation in the field of humanitarian aid and disaster relief, and an agreement on UN Peacekeeper training signed on June 2, 2015. Also, on February 10, 2015, the Economic Partnership Agreement was signed by Mongolia and Japan, and entered into force on June 7, 2016.
GRANT 1AID
7.985 BILLION JPY FOR CONSTRUCTION OF THE JAPAN-MONGOLIA TRAINING HOSPITAL
SCHOOL #109
SCHOOL #53
SCHOOL #149
2.379 BILLION JPY FOR THE RENOVATION OF PRIMARY AND SECONDARY SCHOOL BUILDINGS IN ULAANBAATAR
SCHOOL #75 5 INVEST IN MONGOLIA May, 2021
2SOFT LOANS 65.6 BILLION JPY FOR THE NEW ULAANBAATAR INTERNATIONAL AIRPORT PROJECT
№ SOFT LOANS: AMOUNT
1 Development policy loan for budget, social and economic reforms 850 million USD
2 Two-stage loan to support SMEs and protect the environment 80 million USD
3 Developing higher education in engineering and technology 7.5 billion JPY
4 Development of a master plan for value-added networks in agriculture 2 million USD
5 Veterinary Capacity Building Project - Phase 2 4.5 million USD
EFFORTS TO MITIGATE THE EFFECTS OF THE COVID-19 PANDEMIC The Government of Japan continues to support Mongolia’s efforts to mitigate the effects of the COVID-19 pandemic, including:
• JICA’s technical cooperation: Through • A total of 1 billion JPY (9.3 million USD) • The Government of Japan is preparing international organizations, 2.09 million in medical equipment has been provided to provide a total of 25 billion JPY USD was provided for the supply of medical through non-project grant aid (approximately 230 million USD) to Mongolia equipment. through its urgent soft loan program.
Source: Ministry of Foreign Affairs
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JAPANESE FOREIGN DIRECT INVESTMENT IN MONGOLIA
Japan’s foreign direct investment in Mongolia foreign direct investment companies registered in from 1990 to 2020 was about 1 billion USD, ranking Mongolia. Trade and catering account for 63.13 ninth out of 123 countries. Japan accounts for 4.4 percent of these enterprises (423), light industry percent of foreign direct investment in Mongolia. for 10.30 percent, banking and financial activities Trade and catering accounted for 45 percent of for 7.01 percent, tourism for 2.69 percent and investment; 8.23 percent was in light industry; other sectors for 16.87 percent. 14 percent was in construction, engineering, and construction materials; 9.6 percent was in banking and finance; and 23.17 percent was invested in other sectors. There are 670 Japanese
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NUMBER OF REGISTERED JAPANESE INVESTED COMPANIES IN MONGOLIA BY SECTOR 1990-2020 THE JAPANESE CONTRIBUTION TO FOREIGN DIRECT INVESTMENT IN MONGOLIA
Trade and catering services
300000 15% Light industry 243690 250000 Banking and financial 2% services
200000 Tourism 132300 15% 45% 150000 123600 Construction engineering and
94200 91800 92632 construction materials 100000 61300 5% 34244 Information and 50000 21460.7 13327.5 10% telecommunications 7125.4 8% 0 Others 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Amount of Foreign Direct Investment MONGOLIAN-JAPANESE NUMBER OF REGISTERED JAPANESE INVESTED COMPANIES IN MONGOLIA FROM 2010-2020 TRADE TURNOVER / 242 Japanese invested companies were established from 2010-2020 / /2015-2020/ 45 42 38 Mongolian-Japanese trade turnover reached 416.5 million USD by the end of 40 36 2020, a decrease of 30.7 percent compared to the previous year. Mongolia’s 35 exports to Japan reached 9.68 million USD and imports reached 406.7 30 24 million USD in 2020, which is a year on year decrease of 38.6 percent and an 25 20 increase of 30.6 percent respectively. 20 17 16 15 14 15 11 The main export items were combed cashmere and cashmere products, 9 10 while the main import items were passenger vehicles, trucks, public transport
5 vehicles, rice, and synthetic fabrics.
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Number Of Registered Japanese Invested Companies YEAR TRADE TURNOVER IMPORT EXPORT
2015 294.9 274.6 20.31 2016 344.6 330.6 14.03 REGISTERED FDI OF JAPAN IN MONGOLIA BY SECTOR 1990-2020 2017 378.0 363.1 14.81 2018 588.0 561.0 26.5
2% 2% Trade and catering services 2019 600.9 585.4 15.51 3% 3% Others 2020 416.5 406.7 9.684 7% Tourism Information and telecommunications 20% Transportation Construction engineering and 63% construction materials
Culture, educationscience
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MONGOLIA AND JAPAN TO CELEBRATE THE 50TH ANNIVERSARY OF THEIR DIPLOMATIC RELATIONS
The 50th anniversary of diplomatic relations between Mongolia and Japan will be widely celebrated in 2022. The Government of Mongolia has established an organizing committee to organize events for the anniversary in the following fields:
• Economic and development cooperation • Culture, sports, and promotion • Political cooperation
9 с
INVEST IN MONGOLIA May, 2021
NATIONAL DEVELOPMENT AGENCY PROGRESS REPORT ON THE FIRST 100 DAYS OF CABINET
During the 100 days of the Government of work together to improve the investment climate the Asian Development Bank, and the World Mongolia’s, the National Development Agency and resolve investor grievances. Bank, as well as the public and private sectors, was responsible for the following activities which who discussed project indicators and issues to was included in the plan. Organize public-private dialogue mechanisms at be addressed. In addition to economic benefits, the national and local levels, listen to the voices of many indicators such as social and environmental Preparations have been completed to establish an local businesses, address issues facing them, and impacts and public access have been considered “Investment Promotion Council” under the Prime if necessary, discuss and resolve issues through in the ranking of projects that have an impact on Minister to protect and promote the interests of the Business Council under the Prime Minister. national and long-term development using an investors and provide policy advice to the Prime international evidence-based approach. Minister and the Government and to establish a Methodology, evaluation and ranking of “100 “Business Council” with a mechanism to identify projects and activities to be implemented in the The ranking, which was jointly developed by the barriers to the business environment, develop leading sector” were developed in cooperation Ministry of Finance and the National Development solutions, present them to the Prime Minister and with the Cabinet Secretariat and the Ministry of Agency in three stages and three versions, aims the Government, and engage in policy dialogue Finance and presented to the Cabinet meeting. to see the development picture of our country in between the public and private sectors. the long run and to accelerate its implementation. In order to ensure full participation of the parties, The projects were presented to the public within Within the framework of this work, consultative a series of consultation meetings were organized 100 days of the government. meetings were held with representatives of the with representatives of international financing private sector and research organizations, their organizations, private sector, professional Project Development Fund will be established suggestions were consolidated, proposals on associations, and the capital city and local to compile a project compilation based on the structure, functions and composition of the authorities. These meetings were attended by 100 projects and activities that are feasible councils, and draft regulations were developed. more than 40 representatives from more than for the private sector, economically viable, and ten international organizations, including the investment-seeking, and to ensure its readiness. Create a team of home doctors in each sector and United Nations, the International Monetary Fund,
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PREPARING INVESTMENT PROJECTS FOR THE INTERNATIONAL MARKET
Last April, in order to support domestic - Chimege Systems (software, voice tech, AI/ The implementation of the program shows manufacturers, enterprises, companies, and NLP) that the public and private sectors are both start-ups interested in attracting foreign - Solongo Kharaa Company (health) focusing on economic diversification, avoiding direct investment, to strengthen and improve - Clinica App (health) dependency on the mining sector, and that their projects, as well as to connect them to - Urban Lily (agriculture) the government is not only supporting mega investors, the National Development Agency - Zoson Fashion (light industry) projects, but also SMEs and startups. The two launched the Project Capacity Building rounds of the program selection process were Program in collaboration with Irbis Ventures The five selected projects will be involved in conducted on https://oasis.irbis.sg/ in an open, and GMG Consulting LLC. the Project Capacity Building Program for one transparent, and fair manner. month. the program will support projects with On April 19, 46 projects in the fields of tourism, the development of project estimations and agriculture, health, information technology, feasibility studies; provide training on how to construction, food production, jewelry, fashion, highlight, pitch, and promote a business; share trade, marketing, fintech, and renewable energy information on the advantages and difficulties were received on the Irbis Oasis online platform. of pitching projects to investors; and how The first round of selection was made on April to establish a trustworthy relationship with 20, by a panel of judges from the National investors. Development Agency, GMG Consulting, and Irbis Ventures, and 12 projects were selected. The program will provide valuable advice and guidance to the projects from local and On April 21, the selected projects were virtually international investors and mentors, and will presented to an independent panel of judges support their entry into the international arena consisting of 14 representatives from the by providing them with a great opportunity public and private sector. Five projects were to meet with potential Japanese and Korean selected from among those 11 projects: investors in May and June.
PROJECT CAPACITY BUILDING PROGRAM 4/22-5/20 • The 5 winning projects were enrolled in the Project Capacity Building Program developed by FINAL SELECTION 4/21 Irbis Ventures and GMG Consulting LLC, from April 22 to May 20. • Some of the projects will be • The selected projects were virtually presented at Invest in Mongolia – presented to an independent 3 Tokyo 2021 on May 20. team of judges consisting of 14 representatives from the public FIRST ROUND • 5 projects were selected out of 11 SELECTION 4/20 projects • 4 judges from NDA & 4 judges 2 from Irbis Ventures and GMG 1Consulting LLC
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In its essence, Chimege is an NLP-based automatic speech recognition (ASR) API product that captures speech, identifies the exact words First of all, thank you for your excellent event in the speech, and produces corresponding text supporting domestic startups. As a high-tech AI (vice versa for text-to-speech products). “company, our team consists of people with mostly technical backgrounds, such as software engineers, AI Using this technology, all types of appliances experts, and computational linguistics specialists, so can now capture a person’s commands and it was natural for us to participate in such a business conduct corresponding actions. This technology program. We are highly pleased with first prize in this has been offering convenience and efficiency competition. We really enjoyed that the auditions were across many sectors in regions where high- transparent and the results were announced directly. resource languages are spoken, such as English, We have a lot of questions about investment and French, and German. business development, so we hope to get the best answers from this program. However, low-resource languages have been -S.Badral, Founder overlooked in these advances, despite the substantial need for their applications. Chimege Systems launched its NLP-based API products for the Mongolian language to fill this gap, seeing the vast potential for improving efficiency in business and services.
The speech-to-text and text-to-speech products that Chimege launched in the Mongolian market have been groundbreaking in reducing operational costs.
WEB: www.chimege.mn E-MAIL: [email protected] FACEBOOK: chimegesystems TWITTER: chimegesystems PHONE: 77111140
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SOLONGO LASIK CENTER
The project goal is to create a “beautiful” business that is effective, friendly, and promising, with the help of technology, skills, and the know-how to address the rapidly growing number of cases of corneal deformity and vision loss among people around the world, especially in the Asian region.
With the purchase of a Schwind AMARIS 1050RS system, leading laser eye surgery technology from Germany, 600-800 LASIK surgeries can be performed annually. This machine’s advantages over other machines include: corneal correction laser beam speed of 1,050 Hz, which is 10 times faster than the machine currently being used (correction can be made in 4-8 seconds), and new 7D tracking technology that tracks the eye during scanning.
This improves the aim of the laser shot and shortens the time it takes to complete coverage of the corneal incision, allowing you to feel the results of the laser surgery immediately. In addition, this machine has the advantage of also being able to treat keratoconus, which could not be done in Mongolia before. It is now possible to provide such treatment that was otherwise only available abroad.
“Inarguably, one of the most effective programs carried out during the WEB: solongohospital.mn COVID-19 pandemic has been the 2021 Program for Improving Project Capacity, organized by the National Development Agency. The selection FACEBOOK: SolongoClinic process felt like an episode of the TV show “Shark Tank”, with introductions E-MAIL: [email protected] being presented as short pitch decks. We are grateful for the workshops [email protected] and information provided by Irbis Ventures and GMG Consulting. May PHONE: 88885578 there be many more delightful projects bridging the gap for investors and supporters! -G.Chinzorig, CEO
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CLINICA TELEMEDICINE APPLICATION
Clinica is a startup creating mobile telemedicine applications, helping patients find easily accessible healthcare service. In Mongolia, it can take 5-21 days to get a doctor’s appointment at a public hospital and 1-3 days at private hospitals.
Mobile telemedicine solves two challenges: addressing limited info on available alternatives to public health providers, and linking clients to professional medical service providers in a timely manner. Times such as the COVID-19 pandemic make getting in- person appointments for minor illnesses even more difficult due to safety precautions.
What’s good about a mobile platform is that it offers alternatives for patients looking for doctors and departments, with references to years in practice years and public reviews. Clinica is also planning to launch an online pharmacy, patient monitoring program and AI models for further development.
“ WEB: www.clinica.mn FACEBOOK: Clinicaapp The Clinica team is extremely grateful for being able to participate in this E-MAIL: [email protected] program. The selection process, quality of judges, and program’s offerings PHONE: 88885578 were top quality. We are looking forward to connecting with potential investors, strategic partners, and mentors for support. It brings us one step closer to accomplishing our goal of providing quality healthcare to the public. -D.Baasandorj, CEO
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URBAN LILY
ongolia’s transition to a market economy flowers domestically, and almost 100 percent identified varieties that can thrive in Mongolia’s in 1990 has changed the social and of the flowers here are imported. According climate and conditions, and how soil content, Meconomic situation, and everything to statistics, the number of imported flowers composition, and water quality affect growth, as is developing in its own space. However, the is growing every year. Our company started well as market capacity. The main flower of the development of ornamental flower farming in experimenting with growing ornamental project is the lily, but it will be possible to grow our country is weak, and the business space flowers in Mongolia in 2015. For the third year about 10 different varieties of flowers. in this area is empty. This is because there in a row, we have been supplying local flower are no companies that grow ornamental shops with lilies in the fall. In the past, we have
I first heard about the Project Capacity Building Program on TV. Indeed, it is a golden opportunity to address the biggest challenges facing startup companies. As soon as I heard this news on TV, I started preparing “ materials for submission. Regarding this program, there is a high expectation that it will provide valuable knowledge and skills at a professional level, and it is unique in that it is a joint program, implemented by government development policy-making authorities and an internationally recognized and experienced private sector organization.
The competition was transparent from the beginning. In the final round, 20 judges representing the public and private sectors made the selection and provided valuable advice on the projects, which I think made the selection more realistic. We will take advantage of this opportunity very effectively and are keen to accumulate the missing knowledge and experience for our bright future. -B.Amarsanaa, CEO
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SUSTAINABLE CASHMERE FASHION INDUSTRY /SUSTAINABLE FASHION/ A source from upcycled fabrics
he main motto of our company is to its preparation are challenges for producers. have recently received a new offer from Japan prioritize sustainability and become an Therefore, Zoson aims to be responsible to keep supplying cashmere products in 2021. Tenvironmentally friendly brand. We are producer, not only a big producer. Cashmere We aim to make our brand more sustainable and developing products by purchasing waste from products are 10 percent of our total production greener by increasing our cashmere production cashmere factories at low prices, since the at Zoson. We create new designs by re-using by up to 40 percent. In the next phase of our trend in fashion internationally has become upcycled fabric from cashmere factories in project, we plan to build and ecosystem for sustainability. In the case of cashmere, the Ulaanbaatar. We successfully exported some of camel and yak wool, from raw materials to origin of its raw material and the ecosystem for our products to Japan in 2020. In addition, we finished products.
SUSTAINABLE CASHMERE
A source from upcycled fabrics
We had great opportunity to attend to this key event, with the contributions of the National Development Agency of Mongolia and “professional investment consultants. We are sure that our project can succeed as a result of this event. Thanks to all of the organizations that provided their generous support for sustainable business. -R.Ariunbold, Managing Director
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“100 PROJECTS AND ACTIVITIES TO BE IMPLEMENTED IN LEADING SECTORS”, SERIES OF CONSULTATION MEETINGS WERE HELD WITH REPRESENTATIVES OF INTERNATIONAL ORGANIZATIONS, PRIVATE SECTOR AND PROFESSIONAL ASSOCIATIONS.
The National Development Agency (NDA), along with the Cabinet Secretariat and the Ministry of Finance, were tasked with compiling a comprehensive list of 100 projects and activities to be implemented in leading sectors with the first 100 days of Cabinet, and ensuring coordination in their development between the government and the private sector.
Projects that have an impact on national and long- term development are included in the list, according to an international evidence-based approach, taking into account not only their economic benefits, but also social benefits, environmental impact, and accessibility to the population, which have become requirements for international funding.
This series of meetings was moderated by B.Bulganchimeg, Deputy Chairperson in Charge of Foreign Direct Investment and Foreign Cooperation, who presented the comprehensive reforms initiated by the NDA in the legal environment for investment, investor protection, promotion, and digital services, which are essential for project implementation. Kh.Batjargal, Chairman of the National Development Agency, explained the importance of the 100 projects, future plans, and implementation coordination.
He also highlighted the importance of Mongolia preparing more environmentally friendly green projects and putting them into economic circulation. B.Dulguun, Deputy Chairperson in Charge of Research, Development Policy and Planning, answered questions about the methodology utilized to create the list of 100 projects, and their impact on the macro economy. The 100 projects were announced to the public within the first 100 days of the cabinet.
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THE THINK GLOBAL AMCHAM APRIL MONTHLY CONFERENCE 2021 MEETING: HOW TO RESTORE
On April 12, the National Development Agency of INVESTOR CONFIDENCE Mongolia attended the International Trade Council’s Think Global Conference, the world’s largest event focused on helping businesses expand internationally. The American Chamber of Commerce in Mongolia (AmCham Mongolia) held a virtual April Monthly Ms. B.Bulganchimeg, Deputy Chairwoman of the NDA, Meeting titled “How to Restore Investor Confidence”, delivered a presentation on doing business in Mongolia on the April 13, 2021. with foreign investment. Panelists for the event were Mr. Amartuvshin, Member of Parliament; Ms. B.Bulganchimeg, Deputy Chairwoman of the NDA; and Ms. D.Jigjidmaa, Senior Private Sector Specialist at International Finance FOREIGN INVESTMNET Corporation (IFC). The meeting was attended by representatives of the AmCham community, foreign CLIMATE FORUM - and national investors, and representatives from EUROCHAMBER MONGOLIA foreign embassies in Ulaanbaatar. EuroChamber Mongolia organized the Foreign Deputy Chairwoman Ms. B.Bulganchimeg stated that Investment Climate Forum on April 13, 2021. There was the National Development Agency is initiating pro- strong attendance by a broad range of participants. investment climate reforms, noting that Mongolia’s Ms. B.Bulganchimeg, Deputy Chairwoman of the economy is struggling in the midst of the pandemic, like NDA, spoke on how expectations have changed in the that of any other country. The meeting’s participants context of doing business in Mongolia with foreign also exchanged views on the current investment investment. climate in Mongolia.
Speakers and panelists included Mr. Marco Ferri, Deputy Head of the European Union Delegation to Mongolia; Ms. Anastasia Rodina, Associate Director of Governance and Political Affairs, EBRD; Mr. Quinton McGeer, CEO of Barloworld Equipment Eurasia; Mr. Mark Eberst, partner at KPMG Mongolia; Mr. Samuel Williams, General Manager of Major Drilling Mongolia; and Mr. Leon Coetzer, CEO of Thiess Mongolia. There were interesting exchanges of views from representatives of leading foreign-invested companies, with the sharing of experiences and expectations in the context of doing business in Mongolia with foreign investment.
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ongolia’s long and medium-term development policies and plans, as well as the Government’s LIVESTOCK MAction Plan, contain specific references to the objective of developing agro- production and marketing chains, fully meeting domestic needs for key food SECTOR products through domestic production, supporting import substitution, and the production of products with export potential. To enhance the level of productivity in the meat, wool, cashmere, and the skin and hide processing industries, some specific projects and programs have been initiated for the implementation of specific objectives, such as the creation of environmentally friendly industrial complexes for processing commodities of animal origin and the intensified development of the livestock sector.
Mongolia’s food, agriculture and light industry sectors constitute 31 percent of the country’s GDP. Therefore, based on considerations of the total resource base and the size of the domestic market, Mongolia has strong potential to effectively develop export-oriented food, agriculture, and light industries based on sustainable livestock and crop production.
The International Finance Corporation (IFC) having prioritized support for the development of the agricultural sector, has been implementing the Investment Policy and Agricultural Investment Promotion Project since Fall of 2016. Studies undertaken in 2017 clearly point to the potential of intensified meat and dairy farms, dairy processing, slaughtering, and meat processing industries, as well as downstream cashmere processing to attract foreign direct investment. Among these, intensified livestock farms will play an especially important role. For that reason, concrete activities were implemented for the application of international best practices and to support investment sentiment. Project awareness-raising activities targeting private sector companies in Mongolia, which were organized in May 2018 with support from the Japanese company KNS and its CEO, Tsukasa Kaeda, led to some very innovative ideas.
To follow up, a series of seminars, experience sharing, peer- to-peer meetings, and events involving representatives of leading meat processing companies were organized. Furthermore, a study tour featuring Kazbeef Company, which operates a purebred cattle farm, 10,000-head feedlot, and a state-of-the art slaughtering and meat processing plant in Kazakhstan, was organized in June 2019.
There are numerous cases of knowledge and experience being gained from such learning opportunities put into practice. One example is the development of the
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National Development Agency’s strategic plan to attract investment to Mongolia’s agricultural sector, which is waiting for final approval and adoption. “Cattle Feedlot Farm Development Manual” was published and distributed within the public and private sectors in October 2020. This manual is expected to be useful to national and international investors, as it contains specific estimates of initial capital requirements for starting feedlot operations in Mongolia.
The manual is beneficial for cluster development and capacity building among farmers capable of cooperating with potential Japanese investors in the meat sector. considerations for developing feedlots and beef cattle farms in Mongolia. As this manual was developed based Furthermore, in order to address critical issues concerning the feed and nutritional on actual lessons and experiences from WE WOULD LIKE TO developing feedlots in Mongolia, as well constraints of beef cattle on breeding and as insights into international experience, feedlot farms, a thematic virtual meeting EXPRESS OUR SINCERE such as that of Global Beef of the USA and on cattle feeding was organized on March “ GRATITUDE TO THE Kazbeef of Kazakhstan, and authored by 4, 2021. During the meeting, interesting GOVERNMENT OF JAPAN both international and domestic experts, presentations were provided by Mr. the manual has already been well received Kitagawa Masayuki, associate professor at FOR FUNDING THE by both operating and aspiring feedlot the School of Agriculture of Kyoto University, INVESTMENT POLICY businesses. The launch of the manual and D.Byambaa, who shared findings from a AND AGRIBUSINESS cattle feed and nutrition study undertaken was attended by D.Byambaa, an animal INVESTMENT specialist at Hirai Tamba Cattle Farm near in Japan. The meeting provided a valuable Kyoto, Japan, who holds a BSc from the opportunity to Mongolian participants to PROMOTION PROJECT IN School of Agriculture at Kyoto University. gain rare insight into the entire lifecycle of MONGOLIA. Byambaa provided detailed insight into cattle breeding and handling practices. feeding, breeding, and handling practices at Japanese cattle farms, and shared The IFC is planning to implement new candid views on issues that should be key projects focusing on food safety in the meat sector, attracting investment, reducing barriers to trade (export), and the use of new technologies.
Prior to this, the International Financial Corporation has focused a great deal of attention on strengthening food safety systems in Mongolia, and has contributed technical assistance to the development of the Food Safety Law, which was adopted in 2013. Further assistance was extended to support its implementation, with special attention paid to capacity development and the streamlining of best practices within the private sector. Manuals containing recommendations for food manufacturers were developed and disseminated to various stakeholders, with 1,500 copies provided to caterers and food hygiene inspectors.
20 INVEST IN MONGOLIA May, 2021 MONGOLIAN BEE & JAPANESE MANAGER – MIHACHI HONEY
We would like to highlight Mihachi LLC, run by its operations in order to produce safe, a Japanese woman named Tomoko Ibukuro, healthy, and tasty products in accordance who has been living and working in Mongolia with international standards, to supply the for 24 years. domestic market and supply its products to foreign markets in the future. Mihachi LLC operates a bee farm in Selenge Mihachi LLC Director, Province, Mongolia, and provides three types According to the Economic Partnership TOMOKO IBUKURO of services: beekeeping, honey production, Agreement between Mongolia and Japan, and honey trade. There are 350 beehives Mongolian honey is included in import tax being reared, and 55 kg of honey is harvested exemptions, which helped the company fulfil from each hive. Although the company is not its first export order to Japan. Their honey is a large honey production company, it leads now being sold in Japanese grocery stores the same type of business with the amount of and online stores. honey harvested from a single hive.
Mongolia imports 300 tons of honey a year, while domestic producers supply 1,000 tons, so there is enough space to replace imports. Mihachi strives to continuously improve
WEB: http://www.mihachi.mn/ FACEBOOK: MIHACHI / МИХАЧИ MONGOLIAN BEEKEEPING COMPANY E-MAIL: [email protected]
21 May, 2021
MONGOLIAN-JAPANESE BRAND GUAMARAL
akarajima Japan LLC, a Japanese provinces is processed in and imported directly shop in Tsukuba, Ibaraki Prefecture, Japan, company, established the “Made in Japan” from Mongolia, and the final product is produced and through online stores such as Amazon and Tbeauty and health brand GUAMARAL, in Japan. Rakuten. to introduce Mongolian sea buckthorn to the Japanese market. ЧIn addition to using sea buckthorn to WEB: https://guamaral.com/ produce sea buckthorn drinks, juices, and oils In terms of raw materials, the company that contain vitamins, support the immune cooperates with the Mongolian company Shar system, and prevent disease, GUAMARAL also Doctor LLC to import sea buckthorn. The best produces cosmetics and soaps for women, and quality sea buckthorn grown in Uvs and Selenge successfully sells its final products in its own
22 INVEST IN MONGOLIA May, 2021
INTRODUCING MONGOLIAN ANIMAL HIDE TO THE WORLD - MONY BALL
Japan’s Yamaguchi Sangyou LLC has introduced Using a MONY ball, you can do rugby exercises MONY balls can be purchased at the following human and environmentally friendly leather with your family and co-workers to support your link. processing technology to Mongolia, for the health and fitness. After the product hit the http://camp-fire.jp/projects/view/346467 production of MONY (Mongolia + Yamaguchi) Japanese market, Japanese companies began stuffed rugby balls in Mongolia and selling them to buy it so employees could do rugby exercises in the Japanese market. before the start of work to start the day full of energy.
Mongolian sheepskin is processed using russet Through this project, Yamaguchi Sangyou tanning (un-dyed) methods, and MONY balls are LLC aims to introduce Mongolian leather to made from the mature leather produced. This the world, contribute to Mongolian industrial leather is waste-free, human and environmentally development, and contribute to solving social friendly, and harmless to children. and environmental pollution problems.
23 INVEST IN MONGOLIA May, 2021
HOT SPRINGS OF MONGOLIA ONON HOT SPRING SHARGALJUUT HOT SPRING
non Hot Springs are located 120 km west of Batshireet soum in Khentii hargaljuut Hot Springs are in the Erdenetsogt soum of Province, north of Duut Yaan, a branch of the Khentii Mountain Range. Bayankhongor Province, in southern Mongolia. These hot OThe springs cover two areas, with an 8 km distance between them. Ssprings are located in Shargaljuut Valley of the Khangai Previously, there were 108 spring water sources that were part of Onon Hot Mountain Range. Sulphur-rich Shargaljuut, with its 108 springs, is Springs, but due to natural phenomena and other impacts, only 10 wells are known for the healing properties of its waters. Its waters stream now accessible. out of granite and crystalline rocks at temperatures of 45 to 96 degrees Celsius.Its waters are believed to improve circulation and Onon Hot Springs have colorless, clear waters with a small amount of the beneficial secretions of internal organs. Each of Shargaljuut’s hydrogen sulfide and gas, and are made up of 24 springs with temperatures springs is dedicated to healing a different part of the body. Many ranging between 14-98 degrees Celsius. The water is believed to have healing people visit these hot springs yearly and enjoy their exhilarating properties, beneficial for treating arthritis, kidney pressure, brucellosis, high features. The spring’s waters are said to be effective for treating blood pressure, skin disorders, and diabetes. The ideal time to visit Onon Hot skin disorders, blood pressure problems, stomach ailments, Springs is from December 25 to February 15, which is the coldest period in rheumatic fever, and diseases affecting the nervous system. winter.
Mineral and hot springs have long been an important part of Mongolian traditional medicine. There are springs that heal and others that are meant for relaxation. There are more wild springs than developed springs in Mongolia. There are around 20 businesses in Mongolia that use hot springs commercially. There are more than 270 hot springs and geysers, and around 130 hot and warm springs in Mongolia that are accessible to the public and meet international criteria for therapeutic benefits.
• Hot springs: 42 • Steaming springs: 1 • Cold mineral springs: more than 60 • Warm mineral springs: more than 30 • Steaming springs: 1
24 INVEST IN MONGOLIA May, 2021
“AND GLOBAL” SUCCESS STORY
AND Global successfully concluded a 10.3 related business know-how fits harmoniously million USD investment agreement and strategic with Marubeni Corporation’s market knowledge partnership cooperation with Japan’s Marubeni and years of business expertise. Corporation. How long did the negotiations last? Also, can you tell us more about the cooperation As for qualifying for the investment, our team had between the two companies? to meet high standards in many areas, including business, finance, taxes, laws, technology, and As you’ve mentioned, to kick off our Series A security. However, thanks to our diligent, ethical, round of investment, we raised a combined and far-sighted business practices to date, 10.3 million USD from Japan’s Marubeni we were able to go through the process rather Corporation and the venture arm of American smoothly. accelerator Techstars. This investment is very significant for our company, since it will provide AND Global has operations in the Philippines. us with opportunities to accelerate our path Can you tell us briefly about your activities on becoming a world-class tech company. In in the country? Are there any plans to expand particular, the Strategic Partnership Agreement into other international markets and secure and the Investment Agreement with Marubeni additional investment in this regard? Corporation have led to a close partnership between a young Mongolian tech company and We first launched our in-house built, tech-based a Japanese conglomerate with over 160 years products in the Philippines in 2018, with the of experience. We believe this is a significant goal to provide access to financial services to step not only for the two companies, but it’s the underserved and underbanked not only in In this “Success Story” section, we’re also a notable milestone in Japanese-Mongolian the Philippines, but also the millions of others in highlighting AND Global Pte. Ltd., a team bilateral relations. Southeast Asia who are unable to access basic of highly skilled Mongolian engineers and financial services. entrepreneurs who are working together to As for the partnership, specifically, it all started disrupt the technology sector and change when we first met with Marubeni Corporation in Since then, our product offering to our Filipino market trends through innovation. Today we are summer of 2018. Since then, we’ve consistently customers have diversified and we now offer interviewing B.Khos-Erdene, CEO of AND Global. been in touch and have learned a lot about each a variety of fintech products to enable availing other’s cultures, values, and vision over the of basic necessities and public transportation First of all, thank you for accepting our invitation last 2.5 years. Based on mutual understanding services, in addition to the initial financial need. and being a guest for our special issue. Please and a shared vision, AND Global and Marubeni We leverage our valuable partnerships with introduce AND Global Pte. Ltd and yourself to Corporation closed the deal in late 2020. local companies, such as 7-Eleven and Beep, our readers. In regard to our plans for cooperation, AND with the means to reach a large portion of the population to ensure that our products are Hello, and thank you for extending your invitation Global and Marubeni are working together easily accessible to our customers. This is just to speak with you on behalf of our company. to enhance the global expansion of the FaaS the beginning for us, and we are working with First of all, let me give a brief introduction to (fintech as a service) product with the mission Marubeni Corporation, as well as our soon-to- the company. AND Global was founded four to help thousands of financial and non-financial be strategic partner, another major Japanese years ago to demonstrate the accomplishments institutions, including those in Marubeni’s global fintech conglomerate, to create a digital Mongolians can achieve by working together network, to integrate fintech solutions into their ecosystem that is more inclusive and accessible for a common goal, and to raise recognition of existing and new businesses. to our customers. the Mongolian people on the world stage. We currently operate fintech businesses in Mongolia Why do you think Marubeni Corporation chose to invest in AND Global? In other words, what do We are currently focusing on expanding our and the Philippines, and based on our experience you think is the secret to AND Global’s success operations by supplying our technology to the in the sector thus far, we are now working on in securing this investment? international markets. As of today, negotiations exporting our technology and business know- are underway in more than 10 countries, how to more than a dozen other countries. including Japan, South Korea, Singapore, Rather than establishing a strictly investment- Indonesia, Hong Kong, Cambodia, and Malaysia. As for me, I previously worked in the banking centric relationship with Marubeni Corporation, As I’ve briefly mentioned, we are in the final sector in Japan - namely with the Swiss we were able to build a mutually valuable stages of securing another strategic investor investment bank UBS and Mizuho Bank, one of relationship, whereby each side brings valuable with fintech expertise in Japan to further grow the three mega banks of Japan. I joined AND skills and know-how to the table. In short, we our operations in other markets, and to supply Global in 2018, as the company’s mission and believe AND Global’s young team, innovative more innovative and advanced technologies. vision really spoke to me. thinking, agility, innovative technologies, and
25 INVEST IN MONGOLIA May, 2021
What do startups need to focus on in order to in both resource allocation and time. However, this gateway with more companies like us. find the right investors and attract investment? I would encourage startups to be patient and I’d like to take this opportunity to invite other Can you share your experience? committed to finding the right investor if their businesses who share this goal of competing I think finding the right investor is the most resources allow. internationally to reach out to us. important part of securing an investment. It is important for startups to first carefully define Mongolia is similar to Singapore in the way With regard to potential support from the their goals for the investment, and then target that our local market is suitable for testing government, I believe one of the most effective compatible counterparts whose values and new solutions and business models, and then actions the government can take is to establish mission are aligned with theirs. supplying them to foreign markets. A clear confidence among foreign investors. From my example of this is the Japanese company experience in meeting with foreign investors, As for AND Global, we were seeking an investor KDDI, which has successfully implemented one of the biggest challenges was the lack of who was the right partner for our vision and business and technology know-how from confidence in Mongolian startups. Therefore, I mission, and Marubeni Corporation was looking running Mobicom in Mongolia to their business think if the government takes proactive action to for a technology partner to supply innovative in Myanmar. So, I would say that although build investor confidence in Mongolia, it will have tech solutions to the world. Our search for an Mongolia is a rather small market, it offers an immensely positive effect on the activities of investor who truly understood and respected our favorable conditions for businesses to pursue the private sector. vision and trusted our work was successfully cooperation and investment. fulfilled when we met the team at Marubeni Thank you so much for taking the time Corporation. As our interview comes to an end, can you to share your story with us. I wish you share with us AND Global’s future plans? Also, According to the data on foreign investment, please share your thoughts on the potential for and your team every success in your Japanese investment in Mongolia’s technology public-private partnerships to attract foreign future endeavors. sector is relatively small compared to other investment? sectors. What are the opportunities for investors in the startup sector and opportunities to Currently, we are working towards aggressively expand cooperation between the two countries expanding our international business. In this in the field of technology? context, we are in the final stages of completing an investment and strategic partnership deal As I see it, there is ample opportunity for with a large fintech conglomerate. investment and cooperation, since there are many startups in Mongolia’s tech sector that Personally, I strongly believe that AND Global offer high quality products and services that are has created value in the partnerships we have in demand. I would say that Japanese investors established, in a way that allows for a gateway and businesses tend to spend a significant Interview prepared by for businesses like ours to reach international NDA Foreign Relations Officer amount of time and energy on understanding markets. We really would like to see more their potential partners. For startups, this Mongolian startups compete on the global G.MUNKHTUYA process can seem challenging and extensive, stage, so we want to share our experience and
26 INVEST IN MONGOLIA May, 2021
“VISION 2050” MONGOLIA’S LONG-TERM DEVELOPMENT
POLICY AND COOPERATION WITH JAPAN Counselor of the Embassy of Mongolia in Japan and Head of the Trade and Economic Division B.BAYARSAIKHAN, PH.D.
A country’s development policy is a and methodologies, will be improved, favorable to be implemented in three stages in 2030, comprehensive and consistent document that conditions will be created for the adoption of 2031-2040, and 2041-2050. As a starting point, integrates cross-sectoral and inter-provincial science-based and research-based policies, and Five-Year Guidelines for the Development (regional) development issues, and creates an development policy and planning documents of Mongolia in 2020-2025 were approved, economic structure that will greatly increase will be harmonized. As a result, projects and and an accompanying document, Mongolian employment. A sound policy is designed to programs funded by state and local budgets, Investment Program for 2021-2025. implement a green development policy that foreign loans, grants, and the private sector will creates a comfortable living environment for be successfully implemented. International cooperation is essential to changing citizens; to create a stronger legal environment the economic system, which is highly dependent for democracy that protects fundamental Mongolia ranks 92nd out of 177 countries in on mining, to support the goal of diversifying the human rights; and to achieve the goals of terms of human development, 99th out of 140 industrial sector with the active participation sustainable development within the framework countries in terms of economic competitiveness, of the private sector, and to achieve the goals of a country’s development philosophy. 74th out of 190 countries in terms of its business set out in Vision 2050. In order to achieve environment, and 93rd in terms of corruption. these goals, it is important to intensify and In November 2019, the Parliament of Mongolia However, Mongolia is below the regional average successfully implement cooperation between approved amendments to the Constitution of in many areas of development. Therefore, Mongolia and Japan within the framework of Mongolia. The amendments state that “public the government considered it appropriate to their Economic Partnership Agreement. policy on the use of natural resources shall be review the whole of the past 30 years to create based on long-term development policies” and a development policy document for the next 30 The Economic Partnership Agreement will that “development policies and planning shall years, and developed and approved Vision 2050, increase investment and trade flow between be sustainable”. Subsequently, amendments to a long-term development policy document in the two countries, as well as people-to-people the Law on Development Policy and Planning line with the UN’s 2030 Agenda for Sustainable contacts; create new opportunities for the were approved by the Parliament in May 2020, Development. private sector to expand and invest; and bring due to the need to bring legislation in line with the two countries’ economic relations to a amendments to the Constitution. Vision 2050 has nine chapters: Unified National new level of reciprocity. For the successful Values, Human Development, Quality of Life implementation of this agreement, it is important With the adoption of amendments to the and the Middle Class, Economy, Governance, for Mongolian and Japanese businesses to know Constitution, Mongolia’s long, medium, and Green Development, Peaceful and Safe each other’s situation. In this regard, examples short-term development policy and planning Society, Regional and Local Development, and of areas and sectors in which the two countries documents, as well as development procedures Ulaanbaatar and Satellite Cities. It is designed can cooperate, not only nationally but also regionally, include:
27 INVEST IN MONGOLIA May, 2021
TOURISM: PROCESSING INDUSTRY: It is necessary to plan and implement activities Mongolia produces 45 percent of the world’s raw technology, financial services, education, to increase the capacity of this sector and reduce cashmere, but makes up only two percent of the human resource development, the environment, seasonality. In order to attract Japanese tourists market for finished cashmere products. information and communications technology, to Mongolia, special projects and programs need and other areas agreed upon between the two to be implemented. A total investment of more than 300 million USD governments. is needed to supply raw cashmere and produce In this context, we believe that more effective final products, which would create 13,000 Finally, we believe that the legal environment for results can be achieved if we can establish a jobs and increase exports to Japan, helping sustainable development policy and planning in mechanism for mutually beneficial cooperation to improve the trade balance between the two Mongolia will create a more favorable and stable with major Japanese tourism companies and countries through the Economic Partnership environment for Japanese businesses to do corporations to establish quality standards for Agreement. business in Mongolia. We have the potential to service that meet the expectations of Japanese intensify cooperation between the two countries, tourists, and to develop infrastructure and we hope that the Economic Partnership Agreement will be a close economic relationship and a major bridge for the development of INFRASTRUCTURE: TRADE AND INVESTMENT: multilateral relations between Japan and Mongolia. For landlocked Mongolia, the areas of Trade between the two countries has increased For more information on joint projects and infrastructure in need of development that since the signing of the free-trade agreement, programs, please watch my presentation for would benefit from economic cooperation with but our country’s trade deficit has increased. the webinar organized by the Japan Institute of Japan are air transport and information and Mongolia needs to develop trade through Economics, Trade and Industry on April 7, 2021. communications technology. joint projects, reduce trade deficits by selling products to Japan and third markets, and https://www.rieti.go.jp/jp/events/21040701/ Air transport is a critical area of infrastructure for intensify economic partnership agreements handout.html maintaining direct communications with Japan. between the two countries. A Japanese-Mongolian project is underway to build a new airport with a concessional loan Mining products account for 88.4 percent of from Japan, and to develop its management the country’s total exports. Therefore, in order through a concession agreement. There is an to diversify the economy and improve the trade opportunity to deepen the economic partnership balance, it is necessary to develop cooperation between the two countries by establishing a in areas such as agriculture, forestry, joint economic and trade-free zone based on the industry, small and medium-sized enterprises, new airport in Khushig Valley. construction, urban development, science,
28 INVEST IN MONGOLIA May, 2021
BY ATTRACTING INVESTMENT IN THE ENERGY SECTOR, MONGOLIA WILL BE
Director for Energy market research ABLE TO EXPORT and Cooperation division of Energy Regulatory Commission (ERC) of Mongolia ENERGY L.JAMBAA
Can you share with us the current state of energy in Mongolia, its use and demand, and the share of renewable energy in development for the future?
L.JAMBAA: Good afternoon, everyone. I would like to Ньюком группын talk openly with you about the current situation in the ТУЗ-ын гишүүн energy sector. Electricity, heat, and gas are defined in the Э.ОРЧЛОН Mongolian energy law as energy, but this also includes renewable energy.
According to 2020 year-end statistics, Mongolia produces a total of 80.7 percent of its electricity domestically, while the remaining 19.3 percent is supplied by imported electricity. The import and export of electricity is a common Newcom group, phenomenon in many countries around the world and is Board Member & CIO important for the reliable operation of power systems. E.ORCHLON The fact that our country has lost control of its export- import ratio and imports about 20 percent of its consumed Good afternoon, we truly appreciate our guests accepting our energy shows that the country is in a risky situation in invitation to be a special guest for this monthly newsletter, which terms of energy security. Especially during peak hours, has been launched for investors by the National Development between 7 and 10 p.m., we buy electricity from Russia for a Agency. short period of time.
I would like to thank L.Jambaa, director of the Market Research Oyu Tolgoi receives electricity from our southern neighbor, and Cooperation Division of the Energy Regulatory Commission, Inner Mongolia. In the future, we will be connected to and E.Orchlon, member of the Board of Directors of Newcom the energy systems of our neighboring countries, but we Group. are working to reduce the current amount of imported electricity. For Mongolia, as well as for the energy system, Today’s interview is very special, because it includes a government energy and electricity dependence is at risk, so we need to perspective on Mongolia’s renewable energy resources, have 20 percent of our available resources to ensure our opportunities, operating permits, tariffs, and regulations, as domestic supply of electricity and security. In addition, we well as perspectives from a private entity that has successfully have set a goal to fully supply domestic energy in the short invested in renewable energy for the first time. term and to export electricity in the long term.
29 INVEST IN MONGOLIA May, 2021
What are the main reasons for the construction terms of whether or not the private sector could of the Salkhit Wind Farm and the Tsetsii Wind attract investment and build. As Mongolia’s energy sector alone Farm, which are major developments in the generates more than half of the country’s energy sector? What is the level of renewable At the beginning of this project, we conducted a greenhouse gas emissions, it is necessary to energy resources and wind speed in Mongolia? large amount of basic research over the years, take major measures to reduce greenhouse gas and worked together to attract investment and emissions. A national contribution identification loans from international organizations and document for Mongolia’s GHG reduction has E.ORCHLON: Good afternoon, everyone. Thank financial institutions based on our resources, been updated and submitted to the United you for inviting me for this special interview. capabilities, and needs; the basis on which Nations. The goal is to reduce greenhouse gas The Newcom Group built the first private-sector we were able to reach an agreement with emissions by 22.7 percent compared to 2010 power plant in the renewable energy sector, and government policymakers to conclude an energy by 2030, and this will be achieved by promoting Mongolia’s first renewable wind power plant, the purchase agreement. This means that, on one renewable energy and energy efficiency. Salkhit Wind Farm, was commissioned in 2013 hand, the government would invest, and on the Approximately 700 million USD is required to and has been in operation for more than eight other hand, the private sector would invest, such implement the projects and programs included years. Following this development, it can be as JICA and the EBRD. in these objectives. said that the door and opportunity for further investment in the renewable energy sector has The Ministry of Energy says that it is right to What has been invested in the opened for our country. supply energy domestically by conducting renewable energy sector in the past is that the research and calculations. Based on their Renewable Energy Law was passed in 2007, In 2017, the second project, a 50 MW wind farm, findings, the government will buy energy if a and the feed-in tariff (FiT), a support tariff, is was commissioned in Sers soum, Tsogttsetsii. private power plant is built. We are also fully included in the law. This was because the cost The cost of each of the two projects was 128 responsible for the risks of construction and of renewable energy equipment was high at million USD, for a total investment of 256 million wind speed for the power plant. This agreement the time and government support was needed. USD, from domestic and foreign sources. In was made with the understanding that the All nine large-capacity solar and wind farms the future, we have as much solar and wind as government would buy the electricity if it was operating today are operating within the tariffs Mongolia needs to meet Asia’s annual energy built and generated. Based on the agreement, of that time. In 2013, the first 50MW Salkhit needs, and we see a huge opportunity to use we are raising funds, and the stability and wind farm was commissioned, at a cost of these resources to export renewable energy, immobility of the agreement is the foundation. more than 100 million USD. Since then, a total such as for the mining sector in China, or to In terms of time, it takes 20 years, because of about 600 million USD has been invested in South Korea and Japan. To this end, we are the energy sector requires a huge amount of the renewable energy sector. In the future, there conducting a huge amount of wind research and investment, and the return on investment period are opportunities to support renewable energy analysis, and are participating in a feasibility is very long. It is an industry that stable, tolerant, projects through foreign direct investment, study. We have been researching wind resources and long-term investors invest in. as well as climate change financing in the for 10 years. Where will the wind speed be higher framework of renewable energy. when building a wind farm? Where is the best What is the total amount of investment in the windy place? How much will it cost to build a line How prepared was our country in terms of from there? How much electricity will it produce? Mongolian energy sector? How do you see the growth of investment in the future? human resources and the labor force for this These projects are based on research. large-scale construction in Mongolia? If a foreign investor is interested in investing in this As of today, the feasibility study for the Asia L.JAMBAA: When the Energy Regulatory sector, what would you tell them? Super Grid Project is nearing completion. It is Commission approves tariffs for energy possible to invest 57 billion USD in the sector companies each year, they include the amount of by 2051. There is a demand for electricity in the repairs and company-wide investments required E.ORCHLON: We are not yet fully trained in Gobi to supply electricity to China, South Korea, for that year. In terms of investment, there is a this field, but we are still learning. In the case and Japan. What to do is a matter of time. These practice of making large investments through of the Salkhit power plant, the contractor was countries have significant demand for electricity the state budget. International organizations, a foreign company, the main contractor being and data, but are unable to meet their domestic the World Bank (WB), Asian Development Bank an Australian company called Leighton, and energy needs, which opens up the possibility (ADB), and the European Bank for Reconstruction most of the decision-making engineers had of obtaining energy from Mongolia and Inner and Development (EBRD), have also recently experience abroad, with 98 percent of the Mongolia. invested heavily in the energy sector, including people working on the Tsetsii wind farm being renewable energy. The most recent example is Mongolians. In the future, it is necessary to train How and where did you find foreign investment the WB and ADB jointly implementing a 45MW good engineers and create a working group in to implement this costly project? What were solar, wind, and energy storage project in the the field of renewable energy regarding the Asia the challenges and successes of the initial Western provinces. According to a study in the Super Grid. investment? World Bank’s Energy Master Plan, approximately 4 billion to 5 billion USD in investment is needed Our vocational schools must pay attention to E.ORCHLON: Prior to 2013, the concept of the in the energy sector by 2030. This includes this, and then the more we will be able to build private sector raising capital to build a power unresolved funding sources for solar and the most competitive development. It is easier plant and supply energy was lacking in the wind power plants, hydropower, coal power to compare the renewable energy sector to renewable energy sector, and electricity and plant expansion, and network and equipment the Oyu Tolgoi underground mine, which is a heat were considered to be resources provided upgrades. Renewable energy investment is complex and difficult project in terms of mining by the state. The first big challenge for us was expected to be high due to Mongolia’s goal of around the world, and requires very advanced the legal environment and public morale, in reducing greenhouse gas emissions (GHGs). technology in the next 5-10 years, such as very
30 INVEST IN MONGOLIA May, 2021 long pipelines. It is not only Mongolians who The advantage of our country over other and the engines will be hybrid, which will reduce can do this work, but it is also the foundation countries is that the Gobi has high wind the amount of fuel and diesel consumed, and for joint development with a large company like resources and speed, and if we build a wind farm increase the amount of electricity needed. And Rio Tinto. there, there is no conflict with other sectors, data is growing so fast, for example, artificial such as agriculture, animal husbandry, or the intelligence, machine learning, and 5G are all However, when it comes to equipment and possibility of it becoming an urban area. Another based on data. Data means energy is needed; turbines in the renewable energy sector, we advantage of this is that the construction of a electricity is limited because resources will be are able to cast a foundation, and build the wind farm in the Gobi saves a lot of water. Coal- depleted if we deal with this infinite consumption substations and related lines ourselves, which fired power plants use a huge amount of water. with a traditional approach. The right way to shows that we have the potential to build By standards set in other countries, it is rare to solve this problem of finite resources is to human resources specializing in the renewable build a wind farm that doesn’t come into conflict provide solar and wind energy without having energy sector. With this knowledge and skills, with other industries. any negative impact on the environment. As it is possible to lead other countries and share mentioned earlier, China, South Korea, and experiences. How do you see the renewable energy sector as Japan will need a lot of electricity in a decade, a potential market for our country? so we have the opportunity and the market to What is the supply and demand in the export. We are working to make Mongolia an renewable energy market in Mongolia? What are E.ORCHLON: The potential of renewable exporter of renewable energy. the visions and goals of this industry? energy is a question of whether or not there is consumption. Our country has not developed a What kind of support and subsidies does the fully independent energy system, and importing government provide to increase renewable L.JAMBAA: Our country has set a goal to from our two neighbors is huge. It is possible to energy sources, raise investment, and increase the use of renewable energy to 20 meet domestic demand with either a traditional implement projects? percent of the total installed capacity by 2015, coal-fired power plant or a renewable energy and 30 percent by 2030. By 2020, we had not power plant. The latest trend in the world’s major L.JAMBAA: In 2019, the Renewable Energy yet reached our target of 20 percent, but we countries is to raise investment and funding for Law was amended to include open tenders, for have achieved a good 18.3 percent. The target coal-fired power plants. That’s why we have to example, when investors spend a lot of time of 20 or 30 percent is the lowest level, so it is solve our domestic problems with renewable acquiring access to land, conducting basic possible to increase it even more. The target is energy. research, developing projects, and meeting with 18.3 percent of renewable energy capacity, but government agencies. If you used to bear the less than 9.1 percent, or both, of 20 percent. On the other hand, by 2030, most of the cars risk, now the government needs to do the basic in neighboring countries will be electric and research, give you all the details about where Renewable energy can be developed in the the engines will be hybrid, which will reduce and at what capacity you can generate energy, future. At the current level, it is possible to use the amount of fuel and diesel consumed, and prepare the land, and know where to connect, solar, wind, and geothermal power plants for increase the amount of electricity needed. And and what contracts, agreements, and conditions small households and enterprises, and the legal data is growing so fast, for example, artificial must be met. environment is in place. Competitive renewable intelligence, machine learning, and 5G are all energy procurement is the basis for large-scale based on data. Data means energy is needed; This means that the tender will be announced construction. I heard that the Ministry of Energy electricity is limited because resources will be when it is ready. With this amendment, an is planning to announce a large-scale power depleted if we deal with this infinite consumption investor will be able to focus on raising capital, plant project next year in preparation for this with a traditional approach. The right way to setting up a company, building, and sustaining year. solve this problem of finite resources is to operations, and the relevant professional provide solar and wind energy without having organizations will be responsible for what the In addition, foreign investment is required, any negative impact on the environment. As government needs. Therefore, the costs and and investors will be able to participate in mentioned earlier, China, South Korea, and risks are reduced for the project. In previous open international tenders. In the long run, Japan will need a lot of electricity in a decade, projects, the project developer was overworked Mongolia has the opportunity to participate in so we have the opportunity and the market to and their work was time-consuming, with many the Northeast Asian Integrated Power System. export. We are working to make Mongolia an risks and costs. The new law has reduced these Researchers from Japan, South Korea, and exporter of renewable energy. risks and project costs. Another form of support China estimate that Mongolia will be able to is that renewable energy equipment is exempt build a 12GW solar and wind power plant by How do you see the renewable energy sector as from customs duties and value added tax, thus 2030, approximately 8 times the country’s a potential market for our country improving the investment climate. current capacity. As a country, we are making our policies and plans. E.ORCHLON: The potential of renewable Thank you very much to our two energy is a question of whether or not there is guests for their valuable time and this What environmental, occupational safety, and consumption. Our country has not developed a health measures does Clean Energy Asia LLC fully independent energy system, and importing interesting conversation with us. I wish take? from our two neighbors is huge. It is possible to you success in your work. meet domestic demand with either a traditional E.ORCHLON: Of course, the health and safety of coal-fired power plant or a renewable energy our workers, and the safety of the environment, power plant. The latest trend in the world’s major are our top priorities for any construction countries is to raise investment and funding for project. One of the things our team is very proud coal-fired power plants. That’s why we have to of is that all of our stations have been operating solve our domestic problems with renewable and developing without any injuries. So far, the energy. On the other hand, by 2030, most of the focus has been on security. cars in neighboring countries will be electric
Interview prepared by Investment policy and Planning department, officer S.BERTSETSEG 31 INVEST IN MONGOLIA May, 2021
WE PROTECT INVESTORS LEGITIMATE RIGHTS AND INTERESTS
Mongolia and Japan signed a bilateral investment treaty in 2001 and an economic partnership agreement including investment provisions in 2015. The economic partnership agreement has become the main document regulating investment issues between the two countries.
Mongolia is establishing the Investment Promotion Council under the Office of the Prime Minister, and its main functions are (1) to protect the legitimate rights and interests of investors by resolving their grievances before they become disputes in international courts of arbitration, and (2) to improve the investment climate by developing FDI attraction plans for specific sectors.
National The Council Development Agency
Investment Policy and Planning Division
Office of the Prime Minister
Improvement of Investment the investment protection and climate aftercare
Online Grievance Registration and Monitoring System (SIRM)
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Together, the Office of the Prime Minister, National Development Agency, and International Financial Corporation developed the Online Grievance Registration and Monitoring System (SIRM) and it went live in June 2020.
The system was launched to give investors the opportunity to monitor the resolution of their grievances, simplify the exchange of information between government agencies, and protect the legitimate rights and interests of investors. For more information about the council and the SIRM system, please visit the website www.ipc.gov.mn.
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