J.Bat-Erdene: Foreign Investors are highly interested in the list

Mr. J.Bat-Erdene, the State Secretary of the Ministry of Roads, Transport, Construction and Urban Development has information to share in his field of responsibility.

Late July, the Government of Mongolia approved the list with 95 points, during its Cabinet Meeting, which will be implemented through concession in 2010-2012. It was approved at preliminary level. This list will be reviewed and commented by the State Property Committee and other Ministries. This will be adopted by this Cabinet Meeting. 95 points are increased to 124.

Q: What projects are included in the concession list?

J.Bat-Erdene: Many projects, such as 14th housing district and its infrastructure, East Selbe district, GandanTegchilen District and road building projects.

Q: How much of this list belong to your Ministry sector?

J.Bat-Erdene: over 70% of the list will be implemented through our ministry. The Ministry managed many works during this holiday period. Projects related to roads, transport, construction and urban development are set at top priority. New industrialization, 100 thousand household, railroad, Sainshand Industrial Complex are approved. We set priority levelt o our scheduled programs within 2010-2012. When building the districts, we should develop feasibility study and its complete drawing for construction and infrastructure. Then we should start building the houses and apartments. Considering all these connections and investors’ interest and demand, we planned works in 2010. In the past, the Ministry signed MOU with over 20 companies. Over 5000 kms road is planned within the framework of new industrialization. Besides it, planned roads, approved by the SGK resolution, are included in the concession agreement and over 6000 kms of road is planned.

Q: How much fund is required for it?

J. Bat-Erdene: Investment worth of over MNT15trn or US$10bn is required. Foreign investors are
interested in the list. Their concern is on the compensation. Some of them are interested in projects that can make profit and surrender to the state later. Others are talking about transfer to the state immediately after the building and options of compensation or refunding. Our state budget can’t host such a huge industrialization works. 6 roads are included in 2010, under the condition of compensation, 50% after the completion of 50% of the project, 45% after completion of the project and 5% is under the deposit to secure against any damages or ill implementation. Upon approval of Law on Concession, investment can be drawn to concession without bringing burden to the state budget. The Government will make decision only on financing.

Q: Do you have options how to make the funding?

J.Bat-Erdene: Through selling of mineral products, especially granting one of the section of TavanTolgoi deposit, to the buyers with purpose of funding the concession list. According to the international experience, development bank deposits fund and release funding to the projects according to the concession agreement. It is still unclear for us, when to establish such bank and start exercise accordingly. If we solve this issue immediately, the planned work can be implemented within short period.

Q: How to select contractors?

J.Bat-Erdene: There are presentation is developed in accordance with the concession categories. There are two regulations on implementation and organization of concession. According to this regulation, tender bid will be announced. The State Property Committee will take advantage in announcing and organizing the tender, which will be internationally open.

Q: 14th district of over 10,000 families’ household is included in the concession list. Can the domestic construction companies manage to complete such huge construction and planning work?

J.Bat-Erdene: Minister Kh.Battulga held meeting with construction companies operating in Ulaanbaatar and during the meeting the Ministry called construction companies to be organized under single management, like “Mongol 999” Consortium, within the framework of “New Creation and Construction” project. Foreign companies will enter to Mongolia by themselves, but we should consider domestic construction companies. Domestic companies will develop further under the unity.

Q: How much is the cost of building 1 km long asphalt road?



J. Bat-Erdene: It was around MNT300mn up until now. Due to material price increased, it reached up to MNT400 million. Local companies asked more funding due to this cost surge. But there are others which just to increase their margin only.

Q: What was the main reason of cost increase?

J.Bat-Erdene: Price of 1 ton bitumen was $500 last spring, but it is over $1000 now.