Mr. Thomas Mirow, President of the European Bank for Reconstruction and Development, was in Mongolia for a brief visit in April. This was his first time here, but not the first visit by an EBRD President. This came when Mr. Jean Limier visited Mongolia in 2006, to open the bank’s representative office in Ulaanbaatar. Mr. Mirow answered wide-ranging questions from MMJ during his stay here. You have paid a first ever working visit to Mongolia. What were your anticipations before coming here? How were they different from what you have experienced? I was very pleased to pay my first official visit to Mongolia. It is always important to have the opportunity to meet our partners both in government and in business and to see the impact our activities have in the countries where we operate.
I had the pleasure to meet the President, the Speaker of Parliament, the Prime Minister, the Minister of Finance, the Governor of the Bank of Mongolia and representatives of the business community. I am also pleased to report that during our visit the EBRD signed the acquisition of a 25 per cent-stake in a Mongolia dedicated equity fund, the Mongolia Opportunities Fund.
I was very impressed by the current dynamics in Mongolia, the scope and breadth of our projects and activities in the country and by what I saw and heard during my visit both in Ulaanbaatar and to the Oyu Tolgoi mine in the South Gobi. The EBRD shares the Mongolian authorities’ view about the enormous potential of your country. But naturally these opportunities come with challenges of their own such as ensuring that mining revenues are managed in a proper and transparent way in order to benefit all of the Mongolian people.
What were the objectives of your visit to Mongolia? Have you accomplished your objectives? What were the accomplishments of this visit? My meetings with the Mongolian authorities provided a better understanding of the challenges Mongolia is facing and I was able to discuss ways the EBRD can further support Mongolia in its transition process.
We looked at the country’s infrastructure needs of Mongolia, both in the mining sector, but also in the power sector and in municipal services, as well as in the corporate sector. We look forward to continuing our successful cooperation in Mongolia.
The EBRD signed an agreement to invest USD 10 million in the Mongolian Investment Fund. What do you expect from this investment? The US$ 10 million equity stake in the Mongolia Opportunities Fund is aimed at increasing the availability of equity capital for the growing sector of small and medium-sized enterprises (SME) in Mongolia. Importantly it is dedicated to the non-natural resource sector, supporting companies along the mining supply chain operating both in services and manufacturing, food processing and food supply sectors, as well as small scale infrastructure development.
The EBRD investment will also contribute to the development of a private equity market in Mongolia and provide support to the country’s small and medium-sized businesses at a time when long-term equity financing remains scarce.
In your meetings with the authorities, you indicated that the bank is focusing on technical assistance in the area of sustainable development of mining, infrastructure development, and introduction of environmentally-friendly technology. Would you please elaborate on your work in this respect? The EBRD aims to link all of its mining projects to technical assistance programmes. One example would be a capacity building program for the Mongolian Secretariat of the Extractive Industry Transparency Initiative. An effective EITI office will contribute to proper and transparent revenue management and benefit the Mongolian people.
Other technical assistance programmes will support renewable energy projects that will help to diversify the economy away from a heavy dependence on coal. In Mongolia especially, wind generation could play a particularly important role in this process. The EBRD has been working with a Mongolian company in structuring what is likely to be the most advanced wind power project in the country, a 50 MW wind park near Ulaanbaatar. The Bank has taken a 25% equity stake in the development company and is currently sharing 25% of the start-up costs.
The EBRD has many projects around the world and I believe, the projects reflect specifics of the host country. What are the key features and differences of Mongolian projects?The mining sector is particularly dominant in Mongolia. It is essential to develop this sector in a sustainable – and environmentally and socially responsible -- manner so that it benefits the entire population and acts as a catalyst for broader industrial and SME development. The EBRD has put considerable effort into supporting the growth of a sustainable mining industry.
Secondly, Mongolia is faced with a substantial infrastructure gap which must be urgently addressed. Better infrastrucutre would improve people’s living standards and also create a better environment for industry and commerce. The EBRD is working to improve water and waste water services as well as urban transport systems, especially in Ulaanbaatar which is faced with a continuous and substantial inflow of people from the countryside.
Thirdly, a large part (35%) of the Mongolian population are living below the poverty line and a main challenge will be to offer perspectives for these people through employment, one reason why EBRD focusses on the development of a strong SME sector in Mongolia.
Finally, Mongolia is one of the coldest countries in the world. Improving energy efficiency is thus of particular importance and also a key EBRD priority.
What kind of economic developments and trends do you see in the countries where you implement projects? Could you reflect on the recent events in your region?
In 20 years of operations we have learned a lot about the countries of our region. We have witnessed historic progress in the countries where we invest and we have also witnessed setbacks – the 1998 Russia crisis and the 2008 global financial crisis were serious tests. Yet in both cases the EBRD was able to respond swiftly, firmly and decisively. We are proud that we have been able to play a role – in close cooperation with other international financial institutions – in the efforts to combat the crisis and today we are working with equal determination on securing the recovery. Our guideline is: The strength of our countries of operations is our strength and their success is, for us, the ultimate goal and success.
Today this is visible and can be experienced throughout our region: new residential developments, a modern banking sector, refurbished power plants or a district heating system of the highest standards. The EBRD imprint is truly in many places; in over 3,000 projects the mandate of the Bank finds its clearest and most impressive expression.
Our performance has attracted wider attention, particularly in the Southern Mediterranean, and the EBRD will never fail to hear our shareholders’ call of duty. If we were to take on new tasks, this would only happen in addition to our still much-needed activities in our current countries of operations.
What is your assessment of Mongolia’s economic development? What should be the areas where the authorities need to pay more attention?
Mongolia has seen a remarkable economic turnaround in the aftermath of the global crisis. But many challenges remain and the EBRD is determined to play a constructive role.
The country’s rich natural resources have been arousing high level of interest among investors. Time and again we have seen examples of countries where rich natural resources turned from a blessing into a curse. Today, it is almost impossible to read anything about Mongolia’s economy without a mention of the phrase “Dutch disease”. It is crucial that Mongolia avoid the pitfalls and problems that so often have arisen in countries with rich natural resources.
The expected expansion of mining projects requires developing basic infrastructure. The two large projects currently under preparation - the Oyu Tolgoi copper gold and the Tavan Tolgoi coal deposit - will significantly shape Mongolia’s future development. This is complemented by important accompanying measures ranging from infrastructure development to the establishment of a stabilisation fund.
As the Government faces many demands especially in the social sphere, it is likely that part of the much needed infrastructure will have to be funded by the private sector. Therefore, it is good to see that the Government has taken the initiative and established a legal framework to allow concessions to be granted.
The EBRD’s goal in Mongolia is to underpin and strengthen the country’s potential with our investments. This covers a wide range from local enterprises to agribusiness to the financial sector and infrastructure. Equally important is the work of our TurnAround Management and Business Advisory Service programmes that are supporting the development of a vibrant SME sector in Mongolia which could become the backbone of Mongolia’s economy.
How do you see Mongolia’s development opportunities?
Given Mongolia’s enormous wealth in natural resources, balancing the country’s economic development may seem like a problem most policy-makers in the world would probably like to have. But this does not make the task any less demanding.
One priority must be a strengthening and further development of its financial sector in order for the sector to cope with the anticipated large inflow of revenues from the mining operations as well as to provide finance at competitive rates to the emerging mining supply.
Another important task for the government is to balance its books. Mongolia’s 2010 Fiscal Stability Law and its implementation as a major step forward towards fiscal sustainability.
In your view, what is the EBRD’s legacy so far, as it enters its third decade of operations?
My visit to Mongolia coincided with the eve of the EBRD’s 20th anniversary of the inaugural meeting of the EBRD’s Board of Governors in London on 15 April 1991.
In the 20 years since the Bank has started its activities, I believe that our institution has achieved quite a bit in support of the transition process. By the end of 2010 the EBRD had committed over €60 billion and mobilised third party financing of €115 billion for overall investments with a total value of nearly €180 billion.
The unique model our founders have envisaged for the EBRD turned out be quite effective: The Bank is owned by governments and international organisations, yet its main task is to promote private businesses. We support change but also serve as an anchor of stability in times of uncertainty and crisis.
How do you see the future of cooperation between Mongolian and the EBRD?
When Mongolia became an EBRD country of operations in 2006 we said that “our experience and our expertise will help move forward the process of economic and political transformation.” Almost five years on I am pleased to report good progress and I would like to use this opportunity to reaffirm our commitment to Mongolia and our activities in your country.