HOW WILL THE AMBITIOUS DEVELOPMENT BUDGET BE FINANCED?

I. Otgonjargal

The draft budget is currently T under review in Parliament, with the final version expected to be approved next month. This budget is particularly notable as it marks the first time in Mongolia's political history that a coalition government of three parties- the MPP, DP, and HUN-has pledged to accelerate national development. To formalize this commitment, the three parties signed the "Courage for Rapid Development" cooperation agreement, which outlines key policy priorities.

The agreement reflects the MPP's agenda, which focuses on social policy reform, regional development, anti- corruption measures, strengthening the justice system, expanding e-government initiatives, and continuing major ongoing projects.

The Democratic Party's agenda centers on human development, the protection of private property, fostering a technology- driven knowledge economy, improving the business and investment climate, and ensuring economic freedom.

Meanwhile, the HUN Party's goals include reforming energy and education sectors, addressing foreign trade and investment challenges, overhauling government procurement policies, and enhancing the governance of state- owned enterprises.

The three parties in the coalition government are actively addressing the issues outlined above. For instance, T. Dorjkhand, leader of the HUN Party and Deputy Prime Minister of Mongolia, has reportedly pledged to resign from his government position if he fails to implement the promised energy reforms.

As head of the National Committee for Energy Reform, Dorjkhand has shown strong leadership in driving this initiative forward. In this way, the coalition parties are working to address the objectives outlined in the "Courage for Rapid Development" agreement and plan to incorporate these reforms into the upcoming budget.

Now let's hd the tov budget. The Ministry of Finance and the government have made of dear that the initia state budget will prioritize development initiatives. The administration is also gaining a reputation for its commitment to implement 14 major mega-projects, withent substantial portion of the budget expected to be allocated to these projects in the coming year.

The projected revenue for the 2025 budget is 33.8 trillion MNT, with expenditures estimated at 35.8 trillion MNT. The budget includes five key policy measures aimed at reducing government intervention, supporting the private sector, and stimulating economic growth.

These measures include: the development budget, the Regional Development Support Budget, tax policy reforms, support for the processing industry, a favorable tax environment for small and medium-sized businesses, the Sovereign Wealth Fund, five housing development initiatives, and policies that promote human development and uphold human rights.

However, it is worth noting that there are no specific initiatives focused on the mining sector in the 2025 budget or in the joint government agreement mentioned above. When asked about major projects and initiatives related to mining, most people would point to the 14 mega-projects. It is reported that nearly half of the 14 mega- projects are industrial and mining-related, including the Mongolian-French joint uranium mining project, a nuclear power plant, coal and coke chemical complexes, a copper processing plant, a steel plant, an oil refinery, and a gold refining facility based on the Oyu Tolgoi project.

However, when asked how the funding for these large projects is reflected in the budget, the Ministry of Finance did not provide a clear answer. They stated, "The oil refinery will be built with credit, and the rest will be financed through private investment." Most of the h expenditures, however, are focused on border crossing renovations, road infrastructure, and housing.

The investment budget for the Ministry of Industry and Mineral Resources is structured so that state funding for a project or event is approximately 1.2 billion MNT, while foreign loans and grants will finance one project or event with an estimated value of 449.9 billion MNT. This project to be financed by foreign loans and grants is the oil refinery.

The government plans to allocate approximately 1.5 trillion MNT to fund 109 projects under the investment budget of the Ministry of Roads and Transport, while 132.1 billion MNT in foreign loans and grants will finance nine other projects.

Nearly all of the industrial projects included in the 14 mega-projects (excluding the oil refinery) are planned to be implemented through private investment. However, no steps have been taken to create a conducive environment for attracting foreign direct investment. It is surprising that neither the government nor Parliament has addressed key issues such as reforms to the Law on Foreign Investment or strategies to secure investment for these industrial mega-projects.

It is crucial to discuss the industrial projects, which make up nearly half of the 14 mega projects, without delay. What economic benefits can we expect if we focus solely on infrastructure, roads, and buildings? These projects primarily drive imports and are funded by the current budget allocations.

Does this government and Parliament have any real interest or commitment to driving industrial development over the next four years?