June 2010
Why have investment banks and funds around the world started shifting their focus from developed countries to those developing? Following the economic crisis, most developed economies have been adopting protectionist policies to safeguard their own interests, and protect the domestic market. If the USA starts shutting its doors, where will the heaps of money with the Chinese go? The second wave of the crisis, this time experienced in Europe, was a hard nudge to major investment funds to target other markets. New routes have indeed begun to appear on the map guiding the money flow.
Credit Suisse has expressed interest in operating in Mongolia as an investment bank. The Zurich-based financial services company is an investor in Golomt Bank but now wants to spread its wings in Mongolia. Another company with keen interest in investing in mining projects in Mongolia is China Investment Corporation. This Fund was established in the fall of 2007 and last year announced that it would invest $500 million in the Ovoot Tolgoi coal mine, located almost at the border with China. Soon after, it increased the amount to $750 million. That was certainly moving fast.
It is no surprise that Western investment banks and funds and Chinese reserve funds should set their eyes on funding mining projects in Mongolia. The country’s economic growth dynamics, prospects, and, most important, its strategic geographical closeness to energy-starved China all make it a priority target market. With so many mining and infrastructure projects beckoning, Mongolia is irresistible.
The Mongolian Mining Journal has been regularly providing information and reports on major projects. During the last one year, the Journal has written about almost 400 projects announced by the Mongolian Government as part of its foreign economic policy. We also published the list of 26 major projectsthat the National Development and Reform Committee has prioritised for foreign investors. The present June issue contains an introduction to the South Gobi project. It will be covered in more detail in the July issue. The project is important because it reflects the long-term policy and comprehensive strategy of the Mongolian Government to develop the infrastructure for mining operations in the south. The South Gobi project has been approved by the Cabinet and will soon be submitted to Parliament.
The National Development and Reform Committee will be presenting to the Government this month the National Program of Corporate Governance that it has prepared. With so many projects vying to be implemented, domesticcompanies need access to capital and this should not be difficult for business entities with a track record of good management. This is why proper corporate governance is being promoted by the state.
Another good news for MMJ readers is that Mongolia is about to announce its consolidated stage-wise development policy. Our next issue will carry the list of mining projects to be implemented in 2010-2012 and then in 2012-2016. The Government has estimated that it will need $8 billion for all these projects. That should not be difficult to raise, withinvestments banks so eager to get into the act. They are just waiting for the policy to be clear. Once everything falls in place, not only will the Government have the potential to raise money in foreign markets, but Mongolian companies also will be welcomed there. The waiting will end once the Government acts with speed and initiative.