NDIC head interview

Ch. Khashchuluun: It’s possible that oligarchs will compete for Tavan Tolgoi

The government is working to complete Tavan Tolgoi project for the introduction to the Parliament. Also, the government head much earlier expressed his views on the ownership of how to exploit the deposit. Meetings on how foreign companies can participate in this project have been organized one after another and the government decision is being waited. Ch. Khashchuluun, the head of National Development and Innovation Committee has been invited for the interview regarding how national companies can participate in Tavan Tolgoi project and in what requirement they will be selected.

The PM has met several company delegates on domestic companies’ participation in Tavan Tolgoi. From that, what kind of outcome became clear?

Although Tavan Tolgoi project is a nationwide bigger deposit, it will be divided into several parts and implemented systematically once it’s in operation. For example, it’s clear that mining issue directly related to the exploitation will be implemented as a big project. In next steps, it will be broadened by subsidiary projects as infrastructure issue, railroad and auto road, power generation and building the town where workers live in related to the deposit exploitation start. Also there is big work to build coal processing and coking factories based on the mine and deposit. Here, a special program project should be implemented. In this regard, Tavan Tolgoi project will be implemented and operated as a unity of many subsidiary projects closely related to one another rather than one big project. The government is working on this and making researches on this. Of course, we are prioritizing domestic entrepreneurs to play important roles in these projects. Our domestic companies also expressed their interests to participate in the country’s biggest project.

It’s common that people are comparing Tavan Tolgoi with Oyu Tolgoi which is the current topic among the people in terms of its capacity and importance. Can you specify about this?

Compared with Oyu Tolgoi, Tavan Tolgoi needs double regulations on many things as road, transportation and export issues because not only mining works will be done but also concentration factory is going to be built. If you see from this point of view, people’s view to compare it with Oyu Tolgoi is almost correct. On the other hand, you can understand that as much transportation as 100 times of Oyu Tolgoi will be done in Tavan Tolgoi if you think of weight issue.

Is it true that once operation starts in Tavan Tolgoi, construction, investment, workplace and social issue there will be more than those of Oyu Tolgoi? Most importantly, civil society organizations consider the main weakness of Oyu Tolgoi agreement as this.

Of course, there will be a lot of workplaces. Other than that, main works that will be done there will be constructed by Mongolians as the government decided to own 100% of the deposit. Apparently, meetings to assign specialized foreign companies for the contract mining of the main works there are being done. Our country’s main principle is to construct the mine in a way that is according to modern mining technology and world standards. Therefore, we have met delegates from the bidding countries. I think that the public know the process is in selection stage. On the other hand, there is a need to find investors for the aforementioned subsidiary projects.

Some economists have been expressing their views to exploit big deposits as a whole and partially dividing among domestic and foreign companies is wrong. What is your stance on this?

All work can be solved and done in a complex but mining company doesn’t build road and bridge. We should consider that production processing company doesn’t have technical and human resource possibilities to take care of service and food provision. Therefore, Mongolian companies can use their experience, power and influence in their respective sector in these construction works. In this regard, the PM has held a special meeting with big domestic companies on cooperation in Tavan Tolgoi project.

What requirements should Mongolian companies satisfy to participate in Tavan Tolgoi project? Do your committee or the government have a special requirement principle?

As our companies can participate in Oyu Tolgoi, it’s possible for them to participate in Tavan Tolgoi. You can see that more domestic producers can participate in Tavan Tolgoi than Oyu Tolgoi. There is such much work as constructing roads and working in energy sector other than building a processing plant. Most importantly, government principle for Tavan Tolgoi project is already clear, any Mongolian company can cooperate. The government has made a resolution and sent invitations to all Mongolian companies. Thus, you should consider opportunity to participate in big national construction is open for private sector and the door is open. For example, managers from more than 40 bigger national companies came in the meeting held by the PM.

Even though the project is big, is it a lie if all Mongolian companies participate?

Of course, there are common principles to participate in a project. For example, how many year the company work in the sector, what kind of activity the company does and how viable in terms of finance will be asked. The companies whose corporate governance is open, financial statements are published regularly, company activities are reported to shareholders very often and good personnel are present will be selected. Probably, flour producing company won’t write a project document to participate in Tavan Tolgoi’s railway work. Thus, there is prediction that big national companies will compete for the project. However, it’s right to say that project hasn’t started to be implemented and companies haven’t submitted their proposals yet.

If you say big national companies, suspect and prediction that oligarchs are going to divide and exploit this big project will show up?

In our country, there are only 150 companies which represent 70% of all tax incomes. Probably, people are likely to call them as oligarchs. Nevertheless, they are employing 70% of all employees and providing SMEs with market in reality. Economic development of any country will be spoken when private companies become independent and are capable of taking responsibility of the markets. No one will deny that such private companies as APU, Suu, Tiger and Cola are pulling others in Mongolia. Several private companies are representing transportation service and most products of banking finance. Thus, I think that it’s time now that people should support private sector and help extend their businesses and get the benefits rather than seeing them as oligarchs. To be honest, life standard will improve by increasing oligarch numbers. As every Mongolian can’t work in public sector, I want to say that economy will grow by supporting private sectors. Therefore, 150 companies we hate now should be supported by state policy and strengthened so that they can compete in global level. From this, benefits of larger mining projects discussed nowadays will be seen. Otherwise, our oligarchs can neither compete in global level nor in the level of 2 neighbors in the current situation.

Everybody talks about how sufficiently big Tavan Tolgoi project is. But who will make evaluation on whether our national companies are such viable in terms of finance and human resource as keeping up with huge works when they work in such a big project?

I can’t deny that our domestic producers and companies aren’t viable for some works. However, there is a possibility to exploit their own or professional foreign companies’ forces in order to meet workload. For example, our Mongolian firm has been able to make a billion dollar agreement with Australian Leighton in Ukhaa Khudag, recently. What it means is that there are many companies who want to enter and cooperate in our mining sector. Rather, it confirms that we should exploit their forces smartly and with good management. However, what our companies’ common mistake is that they always invite Chinese companies when they cooperate with foreign companies. But companies from our south neighbor aren’t always advanced in terms of equipment and technology.