Ulaanbaatar to have an alternative public transportation

On Monday, the Minister of Roads and Transportation A.Gansukh announced that the railway project, Bogd Khan Tumur Zam or Bogd Khan Railway, will be implemented and is planned to run along the southern side of Bogdkhan Mountain. The railway project will run from 2012 to 2016, and will connect the Mandal and Bagakhangai ports which have partaken in the project as well as a newly constructed a 170 km rail, crossing Tuv Province, Batsumber, Altanbulang, Sergelen, and Bayan soums. The Ulaanbaatar Railway is also one of the organizations that partook in the projects’ development. The cost of constructing the 170 km railway will amount to 326.8 million USD. The Bogd Khan Railway project, which will intersect Ulaanbaatar city with 35 km of railroad, will offer an alternative transportation method for the capital’s residents. When implemented the light railway transportation will be able to take people from one end of the city to the other in just 15 minutes. Specialists believe that the implementation of this project will add another means of transportation to the beleaguered city and thereby help reduce the city’s traffic congestions. At present, the traffic congestion in Ulaanbaatar city is centred most at intersections of the old railways and highways. The negative consequences of the old rail system includes fumes emanating from the locomotives, potential hazards caused by the chemically hazardous cargos and the loud noises produced all contribute to the violation of peaceful, healthy and safe environment of the capital residents. All of these issues can be potentially resolved by implementing the Bogd Khan Railway project. The Ministry of Roads and Transportation believes that it is best to implement the Bogd Khand Railway project by allowing private sectors to handle the implementation.

Mongolia:Cementing growth

Source: Oxford Business Group The government’s approval of a bond release over the next two years to help fund major infrastructure projects should provide a much needed boost to the construction housing and transport sectors, with affordable housing and road connectivity cited as top policy concerns. On September 19, the government confirmed the release of bonds worth up to $5bn from the Development Bank to fund “large-scale projects, such as improvement of the railway network, road construction, and energy and power supply developments”. The government has identified 5572 km of roads and 900 km of highways that require restoration under the umbrella of a MNT4.9trn ($3.5bn) development programme. Additionally, there are plans to overhaul rail links with Russia and China. In total, the government plans to invest MNT30.9trn ($22.11bn) in infrastructure, as well as a number of sectors, including mining, construction and energy, between 2010 and 2015. As part of its development plans, Ulaanbaatar also wants to build 100,000 affordable family homes across the country by 2016 as part of the Development Bank-funded “Homes for 100,000 Households” programme, with 75,000 of these to be built in 17 different locations in and around the city. The project will require approximately 2.3m cu metres of concrete mortar – an increase of at least 400,000 cu metres of concrete mortar annually – in the coming five years. Current market demand is around 800,000 cu metres annually, according to a report by Frontier Securities, a local securities firm. Speaking at an international conference held in September that focused on the plans for overhauling Ulaanbaatar’s housing and public transport network, Mayor E. Bat-Üül said he was studying Tokyo as a model for the city’s urban construction system, due to the speed, efficiency and safety levels seen in the Japanese city’s post-earthquake re-building. Given the expected rapid urbanisation that will likely see Ulaanbaatar’s population swell in the coming years as an indirect result of the wealth generated from the country’s vast coal and copper mines, such grand public transport schemes will be required to sustain growth. Ulaanbaatar is already home to 42% of the population, a figure expected to rise to 55% over the next 18 years. As development plans forge ahead, concerns over the supply of construction materials have eased with the announcement in September that FLSmidth, a Denmark-based cement and engineering firm, had been awarded a contract worth approximately $111.2m from Mongolyn Alt (MAK) Group to build a greenfield cement plant with a capacity of 3000 tonnes per day. The MAK plant will be located near a limestone deposit, some 330 km from Ulaanbaatar. Domestic firm Remicon JSC also confirmed earlier this year that it was planning to build an $8m cement production facility with a 250,000- to 300,000-tonne capacity. Should Remicon double its capacity and become the country’s principal supplier by 2016, analysts have suggested its earnings could rise more than sevenfold. According to a World Bank report, cement consumption has grown more than tenfold in the past decade and is expected to reach 2m tonnes in the near term. At present, some 80% of the cement currently supporting Mongolia’s surging construction growth is imported from China. However, transport delays for materials have worsened in the past year, the bank has written, with reports indicating that the amount of time required to import materials has increased from 15 days to around 45. Another major issue facing the industry is human resources. In a June 2012 update, the World Bank reported, “capacity constraints are likely to prove a significant impediment to the massive road building and social housing plans announced by the government, as well as to housing developments planned by the private sector”. The labour market is currently dependent on Chinese labour, but officials have complained that this raises nationalistic tensions. Critics also say that the government must enforce the laws that stipulate the number of foreign workers should not exceed 3% of the 2.8m population, and that nationals from one country should not exceed 1%. While the release of new funds raises the prospects of Mongolia achieving its ambitious infrastructure goals, measures that ease the supply of materials and labour to avoid timing and funding issues will also be necessary to continued building.

Peace bridge to be expanded

The government is planning for a three-phase project that would expand Peace Bridge to reduce automobile traffic coming into the city center. Due to the growing population and car ownership, traffic into the city center has grown worse with each passing year. Using financing from the Asian Development Bank, the government plans to employ this project to reduce traffic and create the environment for a safe railroad system. An economic study for the expansion to the bridge will be ready by August, with construction to begin in spring 2013. The project includes plans for a special lane designated for buses on the 42.5 kilometers of road to be built. The project is a part of the larger Investment for Ulaanbaatar's Public Transportation initiative.

Macroeconomic indicators by April

GDP by production approach reached 2277.4 bln.tog at current price, 980.2 bln.tog at 2005 constant price in the first quarter of 2012, up by 30.2 percent at current price and 16.7 percent at constant price compared to the same period of the previous year. The national consumer price index in April 2012, increased by 0.5 percent compared to the previous month, 8.2 percent compared to the beginning of the year, and 16.0 percent compared to same period of the previous year. The increase in national index compared to the previous month was mainly due to 0.7 percent increase in food and non-alcoholic beverages and 2.0 percent in clothing, footwear and cloth. According to the report of the Bank of Mongolia, money supply (broad money or M2) at the end of April 2012, reached to 6362.9 bln.tog, increased by of 258.1 bln.tog or 4.2 percent compared to the previous month, and increased by 1012.4 bln.tog or 18.9 percent compared to same period of the previous year. At the end of April 2012, currency issued in circulation reached 708.9 bln.tog, increased by 60.4 bln.tog or 9.3 percent compared to the previous month, and increased by 80.3 bln.tog or 12.8 percent compared to same period of the previous year. Loans outstanding at the end of April 2012, amounted to 5936.0 bln.tog, up by 154.5 bln.tog or 2.7 percent compared to the previous month, and up by 1962.1 bln.tog or 49.4 percent compared to same period of the previous year. Principals in arrears at the end of April 2012 reached 71.2 bln.tog, increased by 9.8 bln.tog or 16.0 percent compared to the previous month, decreased by 11.0 bln.tog or 13.4 percent compared to same period of the previous year. At the end of April 2012, the non-performing loans over the bank system reached 316.6 bln.tog, showing decreases of 3.6 bln.tog or 1.1 percent compared to the previous month, of 64.9 bln.tog or 17.0 percent compared to same period of the previous year. In April 2012, there were 21 trading days and 14.4 mln.shares valued at 4.1 bln.tog were traded. In the first 4 months of 2012, total equilibrated revenue and grants of the General Government Budget amounted to 1465.8 bln.tog and total expenditure and net lending amounted to 1513.8 bln.tog, representing deficit of 48.0 bln.tog in the equilibrated balance of General Government Budget. Current revenue of the General Government Budget amounted to 1460.8 bln.tog and current expenditure reached 1231.9 bln.tog. Thus, the budget equilibrated current balance was in surplus of 229.0 bln.tog. Compared to same period of the previous year, tax revenue increased by 229.7 bln.tog or 21.5 percent. The increase was mainly due to the increases of 102.0 bln.tog or 27.5 percent in taxes on goods and services, 67.8 bln.tog or 55.9 percent in social security contribution, 35.1 bln.tog or 12.8 percent in income tax, 14.6 bln.tog or 6.9 percent in other taxes and 8.8 bln.tog or 9.9 percent in taxes on foreign trade. Compared to same period of the previous year, non-tax revenue increased by 35.4 bln.tog or 28.3 percent. The increase was mainly due to the increases of 28.0 bln.tog or 48.8 percent in revenues from budget entities, 8.7 bln.tog or 89.4 percent in revenues from others, 3.7 bln.tog or 32.9 percent in revenues from interest, 3.2 bln.tog or 22.7 percent in revenues from oil petroleum and 1.9 bln.tog or 16.3 percent in navigation fee although there was decreases of 10.3 bln.tog or 50.1 percent in revenues from dividends. In the first 4 months of 2012, total expenditure and net lending of the General Government Budget increased by 364.3 bln.tog or 31.7 percent to 1513.8 bln.tog compared to same period of the previous year. This was mainly due to increases of 129.9 bln.tog or 2.0 times in capital expenditure, 116.6 bln.tog or 27.7 percent in expenditure of goods and services, 93.1 bln.tog or 16.1 percent in subsidies and transfers, 16.9 bln.tog or 2.8 times in lending minus repayments and 7.7 bln.tog or 46.7 percent in interest payments. In the first 4 months of 2012, spending of 255.4 bln.tog on capital expenditure increased by 129.9 bln.tog or 2.0 times compared to same period of the previous year. This was mainly due to increases of 125.8 bln.tog or 2.0 times in capital expenditure of domestic sources and 4.1 bln.tog or 2.3 times in foreign financed capital expenditure, compared to same period of the previous year. In the first 4 months of 2012, Mongolia traded with 118 countries from all over the world and total external trade turnover reached 3373.1 mln.US dollars, of which exports made up 1292.4 mln.US dollars and imports made up 2080.6 mln.US dollars. Foreign trade balance showed a deficit of 788.2 mln.US dollars in the first 4 months of 2012, reflecting 366.8 mln.US dollars or 87.0 percent increase compared to same period of the previous year. The foreign trade deficit in the first 4 months of 2012 was mainly caused by the fact that the import growth was higher by 20.1 points than the export growth. Total external trade turnover increased by 626.2 mln.US dollars or 22.8 percent, of which imports up by 496.5 mln.US dollars or 31.3 percent, and exports up by 129.7 mln.US dollars or 11.2 percent, compared to same period of the previous year. Mineral products, natural or cultured stones, precious metal, jewelry, coins, raw & processed hides, skins, fur & articles, animal origin products, textile articles and auto & air transport vehicles & their spare parts thereof accounted for 98.3 percent of the total export value amount.

Government needs balanced EXPENDITURES for sustainable growth, says ADB

Source: CPS International
The Mongolian government should review and re-direct government expenditure to critical areas such as transport, energy, water, education and health care to ensure sustainable economic growth, an expert of the Asian Development Bank (ADB) said.
The Mongolian government budget for 2012 had very substantial increase in public investment including infrastructure investment, which is very necessary to develop the country's natural resource sector to diversify the economy and to enhance general and inclusive growth, said Jan Hansen, a senior financial specialist of ADB resident mission in Mongolia.
Speaking at a launch ceremony of ADB's flagship annual economic publication Asian Development Outlook, Hansen emphasized that the government should ensure that the country's macroeconomic stability was preserved and inflation was kept at a low and acceptable level.
According to the ADB report, Mongolia's gross domestic product could grow by 15 percent in 2012 and 17.5 percent in 2013, driven by mining-related investment and output. Mongolia’s economy expanded by 17.3 percent in 2011. Inflation has increased by 15.3 percent in March 2012 and is expected to remain in the double digits over the next two years.

TUGRUG STRENGTHENS AS MONGOL BANK LOWERS PRESSURE ON EXCHANGE RATE

The Mongolian tugrug has strengthened nearly 7 percent this year due to a combination of tightened monetary policy, Central Bank intervention in the forex market and strong capital flows, reported the source. The source had a bullish outlook on the Mongolian currency for the long-term, while making exception for short-term volatility in the second quarter of 2012. The tugrug hit the target exchange of MNT 1,300 against the U.S. dollar last week compared with MNT 1,396 on 31 December 2011. On 19 March the Bank of Mongolia raised the policy rate by 50 basis points to 12.75 percent and on April 18 another 50 basis points to 13.25 percent, saying it intended to slow down inflation and lower pressures on the exchange rate with the increase. The Central Bank reported that it had sold USD 242.75 million to commercial bank year-to-day as part of its efforts to avoid the downward pressure on the currency caused by surging imports. It allowed gradual depreciation in 2011, from its peak MNT 1,195 to MNT 1,396 by the end of last year. Amid strong political pressure to control inflation and contain the currency's depreciation, the Central Bank became active in the forex market, beginning in November last year, to ease tensions before the June 2012 parliamentary elections. The Central Bank spent at least USD 200 million to bolster the tugrug last year. The bank said its policy is to intervene only to prevent sudden swings in exchange rate in either direction. The recent agreement between the Bank of Mongolia and the People's
Bank of China to expand swap agreements to CNY 10 billion to MNT 2 trillion provides additional support. The bank sold CNY 269 million (USD 42.7 million) to commercial bank year-to-day. The tugrug also received support from strong foreign investment this year worth USD 395 million, offsetting the current account deficit of USD 474.1 million. Finally, the bond offerings issued by the Development Bank of Mongolia and Mongolia Mining Corp. (MMC) raised nearly USD 1.2 billion in international debt markets, providing even greater criteria for strength. Extensive capital raising in international markets by Mongolian banks would provide further support.

APARTMENT PRICE INCREASES

If compared January this year apartment price increased by MNT500.000 to MNT1,000.000 per square meter said N.Byambaa. He has three children and waited a much this loan to moved from ger district to modern apartment.

“Government suggested to us get a loan till MNT 50,000.000. But I couldn’t find two room (one bedroom and one living room) apartment close to downtown. So I have to choose apartment quite far from downtown” said N.Byambaa to our reporter.

Source news.mn

Mongolia: Hot Property

THE REAL ESTATE MARKET IN MONGOLIA IS EXPECTED TO EXPAND SIGNIFICANTLY IN THE COMING YEARS, THANKS IN PART TO INCREASING INCOMES AND RAPID URBANISATION CREATED BY THE COUNTRY’S MINERAL WEALTH.

According to the World Bank, revenues from Tavan Tolgoi, a coking coal mine, and Oyu Tolgoi, a copper mine, are expected to propel real GDP growth from the current level of $7bn to $24bn in the next decade. GDP per capita, meanwhile, is expected to soar from $3000 to $8000 by 2016. The government has also pledged to increase the salaries of state workers by 53% in 2012.

To prepare for the expected influx of people into the city, the government is developing a “100,000 Apartments Programme” that will see 75,000 homes built in the city and 25,000 constructed in the countryside. In January, city officials also announced a series of projects aimed at improving Ulaanbaatar’s infrastructure, with MNT70bn ($51.28m) allocated for road repair and construction, MNT45.3bn ($33.19m) for public transportation and MNT330m ($241,758) for the construction of 40 kindergartens.

In September 2011, the US Agency for International Development and the Mongolian Mortgage Corporation announced a guarantee facility that will cover approximately $4m in mortgage-backed bonds, of which the US Treasury guaranteed 50%.

When speaking with the media in August 2011, Kh. Battulga, former minister of roads, construction, transportation and urban development, stated that the country’s Development Bank is backing the 100,000 Apartments Programme, adding that citizens with low and average incomes will be able to take part in the programme with 12-year loans at 4% a year. “It is estimated the project will cost MNT800bn ($586.08m),” he said.

According to data from the National Statistical Office released in May 2011, housing prices in Ulaanbaatar ranged from MNT850,000 ($623) per sq metre to MNT1.48m ($1084) per sq metre, while luxury apartment prices ranged from MNT2m ($1465) per sq metre to MNT10m ($7326) per sq metre.

“The high-end real estate market is displaying remarkable growth,” noted local real estate firm MAD Investment Solutions in its 2012 report. “Prices for [high-end residential] units … nearly doubled from the first quarter of 2010 to the first quarter of 2011.”

MAD said some of the highest prices it has seen were among units in the city centre’s 40,000-apartment area, adding that the knowledge-based economy that is being created by the influx of international capital has resulted in an increase in demand for office space.

“Grade-A offices in the city experience high occupancy rates, typically over 85%, although new developments such as Blue Sky Tower are presently exhibiting higher vacancies – 10% or more. Over 73% of the total grade-A office supply in Ulaanbaatar is located within the Sükhbaatar district, at the heart of the central business district,” the report noted.

The expected influx of foreign workers, entrepreneurs and investors from major firms such as Rio Tinto, Ivanhoe Mines and Peabody Energy should also create an increase in demand for the hotel and serviced apartments segments.

Research firm R2 predicts there will be 130 serviced apartments available by 2013, but that this will expand once the Hong Kong-based Shangri-La Group opens its 273-room hotel, scheduled for the same year. Hyatt Regency Ulaanbaatar is also scheduled to open in 2014 with 259 rooms, including 43 suites and 22 serviced apartments.

Other areas expecting to see growth are towns located near the country’s vast mining projects. Indeed, the government announced in January 2012 that 3000 apartments, roads, a school, kindergarten, hospital, hotel and shopping centres will be built near Oyu Tolgoi, with the MNT100bn ($73.26m) project to be financed by Ivanhoe Mines, Rio Tinto and the state-run Tavan Tolgoi firm.

While Mongolia’s mineral wealth is generating unprecedented optimism in the country’s property sector, key infrastructure will need to be built at a parallel speed to new housing construction. If the government’s plans for infrastructure works continue on schedule, there should be plenty of opportunities in accommodations development.

Source: M.A.D Mongolia

MONGOLIAN GOVERNMENT PASSES APARTMENT LOANS AT SIX PERCENT INTERESTS

Finance Minister D.Khayankhyarvaa has been asked to decide apartment loan interests difference that citizens have borrowed apartment loan higher than six percent interests, focus on compensation of loan interests difference to 2013 budget proposal, account bond and interests payment. Also Deputy Prime Minister and Chief of National Committee M.Enkhbold has been asked to monitor loan granting and the protocol implementing.

Prime Minister S.Batbold estimated the Ministers of Finance and of Road, Transportation and Urban Development for their active work and organization of the apartment loans’ issue. He also noted that goals to house citizens have now become work and citizens could decide apartment purchase without financial difficulties.

According to statistics, commercial banks have lent MNT485.4 billion for 15,000 households for apartment purchase in 2011.

The Government meeting also passed “National Program for Mongol Studies Development”. The program has aimed to develop Mongol studies, regulate correlation between Mongol studies’ sectors, intensify Mongolia’s participation to prepare young researchers’ generation abroad, and keep Mongolia’s position to be a center of Mongol Studies.

Education, Culture and Science Minister Yo.Otgonbayar has been asked to pass program plan and monitor the program implementation. Needed capital for the program would be financed by the minister’s budget.

source: M.A.D Mongolia