Interview: President Ts. Elbegdorj

To what extent is your focus on transparency and how are you ensuring the rule of law protects domestic and foreign investors?

PRESIDET TS. ELBEGDORJ: The legal environment for investment is very important, of course. One of the core areas of my activities is to ensure the rule of law. Mongolia used to have a Soviet-style legal and judicial system, and this is currently being reformed. Our goal is to change it from a system that serves those in power to one that serves the public. It is important to note that when we say “the people” we are also referring to our foreign investment partners. I am glad to report that we have been making substantial progress in this respect.

To reform the legal and judicial system, we need to change around 20 laws – half of which have already been enacted. The rest will come into effect in 2013-14. The issues that are most important to tackle are those related to environmental regulation, infrastructure and a qualified labour force. What I would like to see as the legacy of my administration is a fairer society where justice prevails in spite of changes in leadership and government.

What key measures are being taken to reduce environmental problems in Ulaanbaatar and to ensure that new mining projects have a minimum impact on the local ecosystem?

ELBEGDORJ: The two basic pillars of my policies are the environment and the people, and my government has taken numerous initiatives to protect them both. In the past, many Western cities had similar problems to what we face now. We need to learn from those experiences, make use of modern technologies and create the necessary legal and regulatory frameworks to overcome environmental damage, such as pollution. In spite of our vast land, inefficient policies of the past have led to a concentration of 40-50 % of the Mongolian population in Ulaanbaatar alone. To resolve the issue in a comprehensive way we need to develop our infrastructure as well as our social services to facilitate the spread of the population more evenly throughout the country.

What is the status of corruption within the government and how should it be dealt with?

ELBEGDORJ: Growing up in my family we were eight siblings and the rules were always the same for each one of us. That is just how it should be in our government as well – each person should be held equally accountable for his or her actions. I have been struggling against corruption since 1987 – including during two terms as prime minister. An open society free of corruption has been my lifelong mission. Fighting against corruption is a demanding task and a true test for public officials. In order to establish justice, action is needed. It is quite alarming to see people within the ranks of my predecessor being charged with corruption.

Apart from capital, technology and know-how, what role can foreign direct investment (FDI) play in putting Mongolia on a sustainable path?

ELBEGDORJ: Being a fast growing economy should be considered a success and great news. On the other hand, it entails many challenges and contains the hidden message that we still have many shortcomings as well. Mongolia needs to diversify its economy. One of the main sources of current economic growth has been FDI, and we consider attracting foreign investment to be in line with our interests.

It is especially important in terms of offering a way to transfer technology, skills, know-how and best management practices to Mongolia.

Environmental and social needs are issues that cannot be overlooked. The sectors where we would like to see more foreign investment include industry, processing, infrastructure, agriculture and technology. There are three issues that need to be resolved immediately. First, strong infrastructure (including railways) is lacking; second, energy resources need to be tapped into (we have coal as well as the potential to produce clean energy at a low cost); and third, we need fuel, which as it stands primarily has to be imported from Russia.

We would like to see more processing facilities for different materials since Mongolia has enormous potential to become a major centre in the region. Thanks to our geographic location, we can easily export products to China, Russia and East Asia. Therefore, investing in the domestic production of fuel is also vital. In recent years we have discussed the potential of these projects. Now that we know what measures must be taken to complete these projects, such as what needs to be built, we have a roadmap that we can navigate. All we need now is to consolidate a more comprehensive stance supported by necessary legal and financial frameworks.

In which sectors do you see the potential for value-added production and how can such expansion be accomplished most efficiently?

ELBEGDORJ: At the moment we have an economy based on the mining sector. We want to diversify our markets and have a “rainbow economy” consisting of at least six or seven sectors. In relation to the former we have many large copper deposits as well as coal and rare earth minerals. If we process these commodities internally we can count on the world’s largest market, China, to be just across the border.

In addition to the growth potential in mining, we have high hopes for the cashmere sector, as Mongolia is the second-largest exporter of cashmere.

What areas do you believe should be the focus of Mongolia’s investments to help realise its full potential for growth and diversification?

It is important to note that Mongolia is an open country, meaning that people are free to participate in the country’s development. I have a lot of faith in the minds of my countrymen. When we look at other countries endowed with mineral resources we can see that the success stories are the countries that are open to participation. Therefore, I have faith that investment will go to the right places.

Importantly, we have adopted laws promoting education in recent years, and this is crucial to achieving our goal of economic diversification. Even if some Mongolians do not have spare tugrik for their daily consumables, they send their children to school.

Parents take out loans for their children’s schooling, indicating that people highly value education. Investments in the sector and into children, their schools, and their tuitions, along with education financing, are the best forms of investment.

Mongolia’s future is one full of healthy, educated and ethical people. Therefore, we must prioritise investments into each Mongolian citizen, into his or her developmental opportunities and into expanding the prospects for our people.

The diversification of our economy opens up other avenues for investment. The agricultural sector possesses immense potential for Mongolia. Our livestock herd today accounts to 47m heads. Our country comprises 2.7m people and we are located between two huge markets with large populations.

We could supply a percentage of our neighbours’ food needs with our high-quality produce. Additionally, Mongolia’s population is scattered throughout our lands. We have a very high land per capita rate. This, again, is an opportunity.

An area that very critically needs investment is developing our infrastructure. Expanding our transport capacities and building new rail networks is crucial to our growth. We have the resources to produce energy for domestic consumption as Mongolia is home to huge coal reserves that can easily be tapped into and used. Yet, we have shortage of energy because of poor infrastructure. Until we resolve these inefficiencies we cannot be self-sufficient.