B.Ganbaatar, head of the development and investment policy department of the National Development and Innovation Committee (NDIC), tells E.Saikhantuya about the work being made to implement the Sainshand industrial park program. Let’s start with the outlines of the program.Sainshand is in Dornogobi aimag. The total program includes building a 1,100-km railway line from Tavan Tolgoi to Choibalsan, where it will connect to the Russian Trans Siberian railway, to reach sea ports. Coal from Tavan Tolgoi, iron ore from Darkhan, and copper concentrate from Oyu Tolgoi and Tsagaansuvarga are to be transported by railway to Sainshand to be processed in plants there before being exported. The park requires an investment of over USD10 billion and many of the planned facilities, including processing, will be built with private investment. There will be jobs for 5,000 people in the park when all the units begin working.
How will such an ambitious program be fulfilled?The proposed industrial park will play a significant role in the production of value added products. The projects to be set up there have been designated as being of priority importance. Two working groups have been set up. One of them is chaired by the Prime Minister and acts as the Sainshand project’s Governing Board. Another group under this is headed by the Chairman of the Government Secretariat, Ch.Khurelbaatar. NDIC is represented on the Board.
Setting up Erdenet Corporation was the last major development project in Mongolia, but the Sainshand complex is ger and also different from Erdenet in that its focus will be on processing of resources like copper concentrate, iron ore, crude oil etc. Since we lack the proper experience locally, it was decided to hire two international consultants to work on separate aspects of the project.
What exactly will they do and how will you find them? We have published two advertisements so far, one for a technical consultant and the other for a legal consultant. The first will study the technical and economic aspects of the whole project and prepare a general work plan. An engineering company is likely to be selected, preferably one that has experience of building such an industrial complex.
The legal consultant will handle the work on the agreements to be made with the various companies that will build and run the planned plants.
How did you advertise?They were published at the end of October and in the middle of November respectively. We chose daily newspapers, The Mongolian Mining Journal, newsletters of Embassies and the World Bank, and the Financial Times. They are also available on the NDIC website.
How was the response? A total of seven companies applied, and we are reviewing six of them. Four of these are interested in the engineering and technical aspects and two in legal consultancy.
The first four are US Bechtel Corp., Flour Inc., Worley Parsons, and Hatch Corp., while the other two are Hogan Lovells Lee&Lee, a consortium of two companies, and Liberty Partners, a consortium of three companies.
When will the selection be announced? It should be in January. Once the final agreements are signed, the studies will begin and, based on their findings, we shall float tenders on building the plants. We hope to do this in July or August, 2011.
What are the terms under which the consultancies will work?The Government will pay them for their consultancy services. They have submitted their rates and these are negotiable. There will be the usual terms and conditions. Maybe the technical consultants will also like to build one or some or all of the units.
Which processing plant is to be built first? It is too early to say. An oil refinery will need the railway to Choibalsan to be ready, and so maybe a coal processing unit will come up first. This can be a coking or a washing or a gasification plant.
What form will the cooperation with the private sector take? First, we have to have the environment to encourage the private sector to invest. It will need a clear indication of how profitable its investment is likely to be. The state will have to provide mediatory services. For example, the investors in the copper smelter would certainly like a guarantee that all the Oyu Tolgoi copper will come to them. The legal consultancy will make sure the agreements give them incentives that work out to be mutually beneficial in the long run.