PM Altankhuyag addresses current state of government

Belt-tightening policies to continue in 2014

PM Altankhuyag and Baatarkhuyag, director of the Montsame News agency during the interview


On January 14, Prime Minister
of Mongolia N.Altankhuyag granted
an interview to the MONTSAME
news agency

Q: Last year, the cabinet
addressed parliament made efforts
to approve a law that created a stable
legal and tax environment for foreign
investors. Do you see any benefits
from this law?
A: Last year, we passed a new law
on investment. This law fulfilled its
purpose to create a favorable condition
for both domestic and foreign
investors: therefore, the matter of
the tax environment has been clearly
determined and the legal environment
has become stable. We provided
investors with good conditions for
making investments in a sustainable
environment based on investment
size.
In addition, the ‘Invest Mongolia’
agency or the Investment Department
has been set up to help investors
through the laws and ease the criteria
for investing in the country. The
agency also aims to support investors
in studying the market and in getting
familiarized with the national legal
environment. Account managers are
working in charge of every sector of
investment. Briefly, we aim to abolish
any pressure on investors.
Q: Does it mean that anyone can
apply to the Invest Mongolia when
willing to invest in Mongolia?
A: Yes. If the investments are
small, they can register with the State
Registration Authority (SRA).
Q: Our tax system is quite
simple and comprehensible. Called
‘Four tens’, it has been created by
the democratic forces and mimics
Hong Kong in the world. In reality,
the investors have worries about
sustainability of the tax environment
rather than the size of the investment
they make. How long will this tax
policy last?
A: It is simple: based on the size
of investment, the periods of the tax
stability ranges from 7 to 22 years.
Q: What other measures attract
investors?
A: The amended law on Stock
came into force on January 1 this year,
giving investors economic rights to
work at the national stock market to
issue shares of Mongolian companies
at the world market and where
Mongolians can buy stocks of foreign
companies. Moreover, investment
funds can carry out activities in
Mongolia.
Q: Our national companies
proved themselves to make big
investments. For example, the
‘Ukhaa khudag’ mining company
wants more favorable terms, equal to
those of foreign investors. How will
the cabinet assist these investors?
A: One of the key features of the
newly adopted law on investment
is that both Mongolian and foreign
investors are supported equally.
Q: Mongolia has gained
achievements in becoming more
independent from any nation;
but in economic terms, it seems
many problems are caused due to
a dependence on one big investor.
What results has Mongolia reached
so far in the course of ongoing talks
with investors of the Oyu Tolgoi
project? I suspect that the tendency of
many investors is expected to become
clearer after tackling this matter.
A: In the last year, our government
and the Rio Tinto Group cooperated
actively and fruitfully. For example,
the sides managed to resolve 30
questions, now we only have some 5-6
matters left.
Our biggest achievement in 2013
was to export the first part of gold and
copper concentrate extracted from
Oyu Tolgoi. This is a big success. By
the plan of 2014, the capability of the
Oyu Tolgoi mine will surpass Erdenet
Mining Corporation’s. It means that
Oyu Tolgoi intends to extract more
than 500 thousand tons of concentrate
a year. Apart from this, our cabinet
is discussing the issue of raising
capital for the underground mine with
investors.
Q: Late in 2013, the government
insisted on belt-tightening policies.
Will it continue this year?
A: Yes it will. A rapid increase
in government budget expenditures
has become a greater weight on the
shoulder of the government. In 2011-
2012, a system was in force that allowed
expenditure growth in accordance
with a raise in budget income thanks
to a bump in foreign investment. To
abolish this mechanism, tolerable costs
have been saved in the State Budget of
2014 with an aim to keep the budget
deficiency under two percent of GDP.
Rapidly increased costs have caused
an investment freeze of over Tgs200
billion. This year, the government
managed to not only save on budget
investment expenses, but also on
its operational expenditures. Thus,
the government has reduced budget
expenditures. The same policies will
continue in 2014.
Q: Parliament has a strong
position in preventing a swell
in foreign debt. However, the
government needs a large amount
of money to fund infrastructure
development in a country as vast in
territory as Mongolia. What major
infrastructure projects have taken
place? What solutions can the
government find in this regard?
A: Last year, the government
raised bond capital of USD 1.5 billion
from the foreign market. The bond
capital was not spent to cover any
budget deficiency or welfare program.
Instead, the government financed
infrastructure and industrialization
with the bond capital. Paying great
attention to export increases and
import substitutions, we are spending
capital of the Chinggis Khaan Bonds
to support industrialization in the
nation.
Q: The government issued
a foreign debt instrument that
accounted for over a billion dollars
(the Chinggis Bond) for the first time.
What sectors will receive funding
from the capital of the Samurai
bonds?
A: The bond capital is intended to
fund industry sectors. The government
is planning to make the greatest ever
investment of Tgs 1 trillion (about
600 billion from Chinggis bonds and
over 300 billion from Samurai bonds)
to national manufacturing operations.
The government decided to support
national industrialization under the
motto ‘Let’s Produce in Mongolia’.
Q: Upon hearing about the
economic growth of Mongolia, the
French Foreign Minister joked
if the comma in the number was
misplaced. The Mongolian people
seem discontented with a drop in the
nation’s economic growth. What do
you think?
A: Mongolia needs foam-free,
stable economic growth. In the first
11 months of last year, the nation
witnessed economic growth of 11.5
percent. In late 2013, great revivals
occurred in mining and animal
husbandry. The final results will come
out this February. We are expecting
economic growth of at least 12
percent. Another primary indicator of
economic growth is inflation, which
had been estimated at 14 percent in
previous years. However, inflation
declined to 10.5 percent in 2013,
showing a decrease of 3-4 percent. In
2013, commodity prices went down
while the economy grew significantly
nationwide.
Q: There is a conflict between
Mongolia’s need of efficient minerals
exploitation and foreign investors’
interests which caused political
tension in the last years. However,
the government has been operating
in a well-balanced manner. Would
a lately discussed draft law on
restriction for double office holding
in the government and parliament
affect political stability of the nation?
The investors greatly emphasize
political stability as well as legal and
taxation environments?
A: We are talking about the
issue of double office holding for
20 years, experimenting with every
available alternative and even forming
a government with no parliament
members. This matter further refers to
many subjects including the election
structure. I believe a parliament
member can work in the government
at the same time. The law will be put
into effect before the 2016 parliament
elections in order to prevent any
political tensions.

Thank You for the interview.
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