Download of Mongolia

Capitalizing on Mongolia’s mineral resources as key engine
for infrastructure development and economic growth
May 2010 • Beijing
Mongolia’s Ministry of Road, Transportation, Construction and Urban Development prepared this presentation
according to resolution decree # 68 issued by the Prime Minister of Mongolia on July 8, 2009, as well as National
Development Strategy, endorsed on January 31, 2008 by resolution 12 of Parliament of Mongolia.
Ministry of Road, Transportation, Construction and
Urban Development of Mongolia
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Overview of Mongolia
Macro-economic goals of Mongolia
Comparative advantage of the country
Potential exports markets
Capitalizing on its mineral resources as key engine for economic growth
Taking a long-term view of railway infrastructure in Mongolia
Potential socioeconomic impact of the industrial park and new railway infrastructure
2
Mongolia has a comparative advantage in natural resources and is
looking to transform it to a competitive advantage
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Mongolia
"BB" Median
Ukraine
Phillippines
Indonesia
Nigeria
Venezuela
Major Rating Factors (1)
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Strengths
S&P Rating Detail (December 19, 2008)
Mongolia
Sovereign Credit Rating
• Improved growth prospects on the back of a
burgeoning mining sector
• Strong donor country and multilateral
support
• A comparatively stable political environment
for this rating category
(1)
• Vulnerabilities inherent in a small,
undeveloped, primarily commodity-based,
low-income economy
• High degree of financial sector
vulnerabilities as a result of ongoing robust
credit growth, relatively high level of pastdue loans, and the need for continued
improvement in banking supervision
BB-/Stable/B
Sovereign Credit Ratings History
24-Dec-07
BB-/Stable/B
22-Dec-06
B+/Positive/B
28-Dec-05
B/Positive/B
Mongolia Select Statistics
Weaknesses
Real GDP per capita growth comparison
In %
• A heavy reliance on
commodity exports,
inadequate infrastructure,
and vulnerability to high
energy prices, preclude
stable, broad-based growth
12%
(1)
‘BB’
Median
2007f
Per capita income (US$)
2,931.0
Real GDP (% chg.)
6.2
Real GDP per capita (% chg.)
5.1
General government balance (% of GDP)
(1.2)
General government gross debt (% of GDP)
38.4
General government net debt (% of GDP)
31.8
Gen. gov. interest expenditure/gen. gov. revenue (%)
8.6
Dom. credit to private sector and NFPEs* (% of GDP)
na
CPI inflation (average % chg)
6.2
Economic Prospects
10%
8%
2007f
1,588.0
9.0
8.2
(0.7)
36.3
22.3
1.4
35.3
7.5
f - Forecast
• Continued delays in
negotiating new mineral
investments point to
challenges ahead
6%
4%
2%
0%
Mongolia
"BB"
Median
Ukraine
Philippines Indonesia
Five-year average 2002-2006
Nigeria
Venezuela
• High minerals prices, vast
copper and coal potential,
and increased tourism
make medium-term growth
prospects robust
2007 forecast
(1) Standard & Poor’s Research: Mongolia, December 19, 2008 revision
3
Vision
National
Development
Development
Strategy
Strategy
(NDS)
of Mongolia
of Mongolia*
Mongolia is a country of contentment
with vast lands, abundant natural
resources, admirable history, and
glorious future.
We, Mongols, shall respect our
history and culture, have our national
dignity, be highly educated and
confident in ourselves so as to
realize our desires and aspirations,
live comfortable, prosperous and
contented lives in our homeland.
Strategy
2007
2007
2015
2015
period
Goals
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Millennium Development Goals based Comprehensive National
Development Strategy of Mongolia
•
•
•
•
Synchronize EGSPR with NDS
Increase jobs (unemployment rate at max 3%)
Create a nation-wide database
Provide economic incentives for new jobs
GDP growth: 14%
GDP per capita: $5,000
Mongolia’s development is a
guarantee of its security and
independence. The root source of its
development lies in the national
unity.
2016 – 2021 period
• Enhance coordination for poverty reduction
• Create a sovereign wealth fund
• Reduce poverty
GDP growth: 12%
GDP per capita: $12,000
Mongolia successfully developed its economic growth vision and
now it is working on the process on how to achieve these targets
* Parliament of Mongolia resolution 12 dated Jan. 31, 2008 endorsing National Development Strategy of Mongolia
4
Mongolia’s National Development Strategy objectives in perspective
with other Asian advanced and developing countries
$40,000
30,000
25,000
20,000
15,000
2021 Objectives: GDP per capita $12,000
10,000
2015 Objectives: GDP per capita $5,000
5,000
Singapore
Japan
Brunei
Hong Kong
Korea
Taiwan
Malaysia
Thailand
Fiji
Maldives
China
Samoa
Tonga
Vanuatu
Bhutan
Indonesia
Mongolia
Sri Lanka
Philippines
Kiribati
Papua NG
Solomon Isd
Vietnam
India
Pakistan
Laos
Cambodia
Bangladesh
Myanmar
Timor-Leste
Nepal
0
Afghanistan
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
35,000
Achievement of the National Development Strategy would place Mongolia into
one of the key economic powers in the regions
* International Monetary Fund, World Economic Outlook Database, October 2009
5
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Mongolia has some of the largest undeveloped reserves in the world – a
comparative advantage for long term growth
Highlights of Mining Deposits
in Southern Mongolia
Tavan Tolgoi is the largest coal
reserve in the world by proven reserves
Oyu Tolgoi is the largets by inferred copper
and gold resources
Tavan Tolgoy coking coal reserves in comparison
with total coking coal reserves of selected countries
%
100
Bln lbs of
copper reserve
Source: Southern Mongolia Infrastructure Strategy, World Bank, 4/2009
World's largest copper mines
80
Production
Deposit name
Minerals Mine Life
Capacity
Tavan Tolgoi
Coal
200+ 15,000-20,000
Ukhaa Khudag
Coal
40
10,000
Baruun Naran
Coal
20
6,000-10,000
Tsagaan Tolgoi
Coal
20
2,000
Nariin Sukhait
Coal
40
2,000-4,000
Ovoot Tolgoi
Coal
50
14,000
Sumber
Coal
50
5,000
Ouy Tolgoi
Copper
50
2,000
Tsagaan Suvraga Copper
20
250
79
68
80
Inferred copper resources
60
Measured and indicated copper resources
60
40
32
40
57
20
20
49
28
22
12
Comparative
share in country's
reserves
0
Canada
Poland
USA
Germany
Australia
12
8
5
2
0
Oyu Pebble Petaqu Galore Mirado HerugaProspe Brisas
Tolgoi
illa Greek
r
rity
USA
Mongolia
Source: The Boston Consulting Group, Erdenes MGL LLC
11
As mine life could be as high as
200+ years, Mongolia needs to have
a long-term development view
Canada
Panama
Mongolia
Canada
Venezuela
Canada
6
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
A new railway infrastructure planning should consider linking all
mineral deposits of Mongolia(1)
Coal Deposits
Precious Metals Deposits
Copper Deposits
Oil Deposits
1) The minerals study prepared by Mr. Odkhuu, D., a Member of Parliament, lead group of geologists from Geosan LLC, Mongolia.
Although China is the main market for Mongolian commodities, other
alternative markets, such as Japan, Korea, India, exist
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Coal imports into Asian countries will grow ~9%
a year between 2009-2015
China is the biggest Asian market for copper,
concentrate makes the bulk of imports
Coking coal consumption (M t)
Copper consumption (M t)
~2500
55
68
1,317 1,337
~1,151
* 11
~435
2009 2015
China
56
35
*
2009 2015
Japan
30
2009 2015
1,558
1,504
6
3,812
Japan
2,178
9
2009 2015
Taiwan
14
2009 2015
23
2009 2015
Republic of Korea
2009 2015
India
China
593 669
585 766
2009 2015
Taiwan
446
406
618
492
2009 2015
2009 2015
India
Republic
of Korea
Copper concentrate imports
Domestic consumption supplied by domestic production
Coking coal imports
Source: The Boston Consulting Group, Railway infrastructure development strategy for Mongolia, October 16, 2009
Copper cathode imports
Domestic consumption supplied by domestic production
8
In order to achieve its NDS objectives, Mongolia is facing a choice
between an extractive versus industrial economy
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Objectives
National Development
Strategy 2007-2021
How to achieve NDS goals?
Extractive economy
Industrial economy
Outcome
Becoming one of the key
economies in the region
vs.
Cabinet resolutions:
R#68 – Natural resources supply forward
contract arrangement for building
industrial facilities.
M#52 – Establishment of industrial park in
Sainshand or Choir.
Mongolia has clearly chosen an industrial path, which requires significant capital investments.
However, due to complexity of the task, Mongolia needs help with an investment Master Plan.
9
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
In consideration of 4 key principles of industrialization proposed by BCG and all
potential locations for an industrial park, Mongolia is tending to choose
Sainshand for establishment of the industrial park
Source: The Boston Consulting Group, Railway infrastructure development strategy for Mongolia, October 16, 2009
10
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
The industrial park in Sainshand would provide basis for further
economic diversification of Mongolia
Source: The Boston Consulting Group, Railway infrastructure development strategy for Mongolia, October 16, 2009
11
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Building of a new and modernization of an existing railway network
would play a vital role in the achievement of the NDS objectives
Source: Ministry of Road, Transportation, Construction and Urban Development of Mongolia
12
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Existing and planned regional rail routes would enable Mongolia access
to the main and alternative markets for commodities
13
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Mongolia would need totally about $14 bln in investments, of which $8.3
bln are in Sainshand industrial park, excluding highways
Source: The Boston Consulting Group, Railway infrastructure development strategy for Mongolia, October 16, 2009
14
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Due to complexity and inter-relation of railway and industrial facilities, the
Government will retain local and international advisors to provide an integrated
solution for implementation of these projects
The Task Force Team will engage
alongside with the Project Manager:
•
•
•
•
Local advisor
International and local counsel
Financial advisor
Technical advisors
Government
Task Force Team
Global
Project Manager(1)
Railway EPC(M)
contractors
Industrial EPC(M)
contractors
Coke
Plant
Met.
Facilities
Coal
Chemical
Facilities
Copper
Smeling
Power
Plants
1) Bechtel and Fluor have expressed interest in the Global Project Manager’s role. US Eximbank formally issued a letter of interest to support project development activities of
these companies.
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
According to BCG’s socioeconomic impact for building railways and
Sainshand industrial park…
1
3
2
4
16
Source: The Boston Consulting Group, Railway infrastructure development strategy for Mongolia, October 16, 2009
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
BCG estimates that industrialization would bring $41 bln to Mongolian GDP over
11 years compared to $28 bln on extraction and exports option
Source: The Boston Consulting Group, Railway infrastructure development strategy for Mongolia, October 16, 2009
17
MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT OF MONGOLIA
Contact address, telephone:
Ministry of Road, Transportation, Construction and Urban Development of Mongolia
Investment Task Force Team
Government Building XII
Barilgachdyn Talbai
Ulaanbaatar, Mongolia
Telephone: 976-51-263319
Fax: 976-11-329190
Ministry of Road, Transportation, Construction
and Urban Development of Mongolia
18