Public-Private Infrastructure Investment and Deposit Insurance in Mongolia Public-Private Infrastructure www. Investment and Deposit Insurance in Mongolia ksp .go.kr 2011 Ministry of Strategy and Finance, Republic of Korea Government Complex 2, Gwacheon, 427-725, Korea Tel. 82-2-2150-7732 www.mosf.go.kr Korea Development Institute 130-740, P.O.Box 113 Hoegiro 49 Dongdaemun-gu Seoul Tel. 82-2-958-4114 www.kdi.re.kr Knowledge Sharing Program Center for International Development, KDI 2011 ● P.O. Box 113 Hoegiro 49 Dongdaemun-gu Seoul, 130-740 MINISTRY OF STRATEGY ● Tel. 02-958-4224 AND FINANCE Korea Development Institute ● www.ksp.go.kr Public-Private Infrastructure Investment and Deposit Insurance in Mongolia Public-Private Infrastructure Investment and Deposit Insurance in Mongolia Project Title Public-Private Infrastructure Investment and Deposit Insurance in Mongolia Prepared by Korea Development Institute (KDI) Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea Prepared for The Government of Mongolia In cooperation with Ministry of Finance of the Government of Mongolia Program Directors MoonJoong Tcha, Managing Director, Center for International Development (CID), KDI Kwang-Eon Sul, Former Managing Director, CID, KDI Taihee Lee, Director, Policy Consultation Division, CID, KDI Project Officer Sae-Byul Chun, Research Associate, Policy Consultation Division, CID, KDI Project Manager Kang-Soo Kim, Research Fellow, KDI Authors Chapter 1: Hyungtai Kim, Research Fellow, KDI Tsend-Ayush Sosor, Senior Specialist, Ministry of Finance, Mongolia Baljinnyam Davaadorj, Officer, National Development and Innovation Committee, Mongolia Chapter 2: Kang-Soo Kim, Research Fellow, KDI Zayabal Batjargal, Head, State Property Committee, Mongolia Chapter 3: Jae-Youn Lee, Research Fellow, Korea Institute of Finance Seungkon Oh, Research Fellow, Korea Deposit Insurance Corporation Bayarkhuu Tsookhuu, Officer, Ministry of Finance, Mongolia Battulga Ulziibat, Senior Supervisor, Bank of Mongolia English Editor Minah Kang, Freelance Editor Government Publications Registration Number 11-1051000-000124-01 ISBN 978-89-8063-538-2 93320 Copyright ⓒ 2008 by Ministry of Strategy and Finance, the Republic of Korea Knowledge Sharing Program Public-Private Infrastructure Investment and Deposit Insurance in Mongolia 2011 MINISTRY OF Korea Development STRATEGY AND FINANCE Institute Preface In the 21st century, knowledge is one of the key determinants of a country’s level of socio-economic development. Based on this recognition, Korea’s Knowledge Sharing Program (KSP) was launched in 2004 by the Ministry of Strategy and Finance (MOSF) and the Korea Development Institute (KDI). KSP aims to share Korea’s development experience and knowledge accumulated over the past decades to assist socio-economic development of the partner countries. Former high-ranking government officials are directly involved in policy consultations to share their intimate knowledge of development challenges, and they complement the analytical work of policy experts and specialists who have extensive experience in their fields. The government officials and practitioners effectively pair up with their counterparts in development partner countries to work jointly on pressing policy challenges and share development knowledge in the process. The Program includes policy research, consultation and capacity building activities, all in all to provide comprehensive, tailor made assistance to the partner country in building a stable foundation and fostering capabilities to pursue self sustainable growth. Year 2010 is the first to conduct Knowledge Sharing Program with Mongolia. Written demand survey forms were submitted by the Ministry of Finance of the Government of Mongolia via official channels in December 2009 and April 2010. Upon the request, 2010-2011 KSP with Mongolia, entitled ‘Public Private Infrastructure Investment and Deposit Insurance in Mongolia,’ was launched in June 2010 to focus on the following three areas: Improvement on the Preliminary Feasibility Study (PFS) System of Mongolia; Improvement in Legal and Procedural Public Private Partnership (PPP) System in Mongolia; and A Study on the Foundation for Introducing Limited Deposit Protection Scheme in Mongolia. I would like to take this opportunity to express my sincere gratitude to Senior Advisor Dr. Jung-Taik Hyun and Project Manager Dr. Kang-Soo Kim, as well as all the project consultants including Dr. Hyungtai Kim, Jae-Youn Lee and Seungkon Oh for their immense efforts in successfully completing the 2010 2011 KSP with Mongolia. I am also grateful to Managing Director Dr. Kwang- Eon Sul, Program Directors Mr. Taihee Lee, Dr. Wonhyuk Lim and Program Officer Ms. Sae Byul Chun, all of whom are the members of the Center for International Development, KDI, for their hard work and dedication to this Program. Lastly, I extend my warmest thanks to the Ministry of Finance of Mongolia, related Mongolian government agencies, local project consultants, program coordinators and participants for showing active cooperation and great support. In your hands is the publication of the results of the 2010-2011 KSP with Mongolia. I sincerely hope the final research results including policy recommendations on the selected areas could be fully utilized to help Mongolia in practicing PFS and PPP and implementing limited deposit insurance system in the near future. Oh-Seok Hyun President Korea Development Institute 2010 KSP with Mongolia 2010 KSP with Mongolia was initiated in December 2009 when the Ministry of Finance (MOF) and the National Development and Innovation Committee (NDIC) of the Government of Mongolia submitted a written Demand Survey Form. The form was officially channeled through the KOICA Mongolia office, the Embassy of Korea in Mongolia and the Ministry of Strategy and Finance (MOSF). The Government of Mongolia sent an additional written Demand Survey Form with priority listing in April 2010. There were 8 topics requested in total: Developing Public-Private Partnership in Mongolia; Developing a Deposit Insurance Scheme in Mongolia; Sovereign Bond Issuance; Introducing Livestock backed Loans in Rural Area; Preliminary Feasibility Study; Improving Fiscal Policy and Public Financial Management; Development of Accepted Standards and Procedure for Long, Medium Term National Development Strategic Planning and Macroeconomics Policies; Strategies for Developing Knowledge based Enterprises through Enhancement of University and Industry Collaboration. Based on the priority listing of the topics submitted by the partner country, the Korea Development Institute (KDI) tried to select and provide consultation in the areas where Korea has the necessary know-how and is ready to share its experience. Under such consideration, the following three topics were reviewed with great interest: Preliminary Feasibility Study (PFS); Public Private Partnership (PPP) and Deposit Insurance (DI). With the above three topics in mind, a Korean delegation composed of 8 members headed by Dr. Jung Taik Hyun, Chairman of Korea Trade Commission, visited Ulaanbaatar to conduct High-Level Demand Survey and a Pilot Study from June 30 to July 7, 2010. During the visit, the Korean delegation met with Mr. T. Ochirkhuu, then-Vice Minister of the Ministry of Finance of Mongolia, to finalize the topics for 2010 KSP with Mongolia. Participants from both countries engaged in an active discussion about the current economic state of Mongolia. The discussion covered a wide range of issues - from dealing with the great shortage of public infrastructure in Mongolia, to formulating an exit strategy from the current blanket deposit guarantee system. Mr. Ochirkhuu showed great enthusiasm for the aforementioned three topics, and requested Korean experts to share their knowledge in the given areas. The Korean experts subsequently held meetings with Mongolian government officials and specialists from the Bank of Mongolia, Financial Regulatory Commission (FRC), MOF, NDIC and State Property Committee (SPC) to decide on the specific research topics. The delegation also met with local consultant candidates to discuss the scope of research and to request relevant information and data updates from Mongolia. In addition, the Korean delegation visited the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB) regional offices to collect necessary information and data. KDI and the MOF of Mongolia then signed an MOU to ensure continued cooperation throughout 2010 KSP. After the first visit to Mongolia, MOSF, KDI and Dr. Kang-Soo Kim, the Project Manager for 2010 KSP with Mongolia, settled on the grand theme of Public Private Infrastructure Investment and Deposit Insurance in Mongolia covering the three areas with the following research titles: “Improvement on the PFS System in Mongolia”; “Improvement in Legal and Procedural PPP System in Mongolia”; and “A Study on the Foundation for Introducing Limited Deposit Protection Scheme in Mongolia.” From August 29 to September 3, 2010, a Mongolian delegation composed of 7 members from the Bank of Mongolia, FRC, MOF, NDIC and SPC visited Consultation Topics Korean Researcher Mongolian Researcher Improvement on the PFS System in Ms. Sosor Tsend-Ayush & Dr. Hyungtai Kim Mongolia Dr. Davaadorj Baljinnyam Improvement in Legal and Procedural Dr. Kang-Soo Kim Mr. Batjargal Zayabal PPP System in Mongolia A Study on the Foundation for Dr. Jae-Youn Lee & Mr. Bayarkhuu Tsookhuu & Introducing Limited Deposit Protection Dr. Seungkon