B.Batjargal: Development Bank to finance railroad projects first

B.Batjargal, the head of the Budget Policy Board of the Finance Ministry and the head of the Representative Managing Council of the Development Bank (DB), answered our correspondent’s questions about the DB’s recent activity.

Q: The DB announced a bond issue last week. Why did the DB decide to issue the bonds at this time?

A: Foreign investors have favorable opinions of Mongolia, however global financial markets have not been favorable. The DB is planning to issue bonds worth USD 600 million by the end of the year and next year in phases. This means that Mongolia is issuing debt documents with low rates in comparison to similar countries.

The DB also has rights to issue bonds worth USD 20 million after signing of a contract last week.

Q: When will the USD 20 million be issued to the DB?

A: USD 20 million came in to the DB last Friday from ING Group. This is a big indicator because the DB has begun its activity with the Government guarantee on the international market in a short period of time.

Q: Why will the capital be allocated to the railway sector first? There are some projects, such as the “100,000 Apartments” program, still waiting for financing.

A: Railway is basic infrastructure and we should build it in the first step. Then we can build a power plant, big processing factories, and apartments. It’s the right plan.

The Government has asked the DB to finance new railway projects in 2011. That is why USD 20 million will finance railway construction. In this case Mongolia can sell mining products on the international market at competitive prices.

Railway construction needs a total of USD 5 billion, and USD 55 million will be financed at first, according to the plan. Railways from Dalanzadgad to Tavantolgoi and Zuunbayan, from Sainshand to Baruun-Urt and Choibalsan will be started in the first phase.

Contracts between the new railway project and 30 companies are currently held. The contracts cost USD 31.8 billion and the DB will finance them and monitor implementation.

Q: What sector will be financed next?

A: The next projects are Sainshand Industrial Complex and New Creation. But projects can not be financed directly. Projects that meet technical and economic requirements at the international level will be financed. The DB will finance projects that support economic growth, reduce foreign trade loss, increase investment profit, and generate new jobs.

Q: The DB was supposed to issue MNT 800 billion in bonds in 2011 but never did. What about that?

A: The DB had planned to issue MNT 800 billion in 2011 and it has issued MNT 300 billion so far. I agree that the DB is still inexperienced. The DB will issue a guarantee of MNT 1.5 trillion in 2012. Also we have planned the DB fund of MNT 33 billion in 2012. Then the DB could raise a financial fund of MNT 2.2 trillion next year.

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