Christina Ching The Straits Times, Singapore
Mongolian state-owned investment company Erdenes Mongol creates value for the country
Mongolia is a country blessed with great assets and natural resources. It is the world’s 10th largest reservoir of gold, copper and coal. The country has bountiful opportunities for clean energy and an endless source of solar energy – 300 out of 365 days are sunny with high solar radiation. “If you add up the wind energy, Mongolia can be the energy hub for the entire Asian continent,” says Mr Bayanjargal Byambasaikhan, 38, chief executive officer of Erdenes Mongol.
Erdenes Mongol is a state-owned investment company with operating assets and projects in energy, infrastructure and natural resources. Founded in 2007, its objective is to become a leading national company in Mongolia’s key economic sectors, including mining, infrastructure and energy. The company seeks to help Mongolia to effectively and efficiently use its natural resources, and to enhance the country’s economic performance and encourage diversification.
Says Mr Byambasaikhan: “We seek to invest in real assets, existing companies, and compelling new projects. Erdenes Mongol believes that through smart, effective investment in natural resources, infrastructure, industry, and our own human capital, we can create value for the citizens of Mongolia.”
Erdenes Mongol strives to become a globally recognised corporation, similar to Singapore’s Temasek Holdings, with best corporate governance, management and operational practices.
“The Temasek model is seen as the long-term goal for Erdenes Mongol. We respect the strategies and operating models of Temasek and will seek to develop our corporate model based on this successful corporation,” says Mr Byambasaikhan.
“Erdenes Mongol owns a world-class portfolio. It now needs to transform itself – from an inefficient state-owned enterprise with negative cash flow into a modern-day business that creates and delivers value for its three million shareholders.”
The process of transformation, he explains, spans from corporate restructuring to international financial audit, even as it works on improving its governance and policy standards, as well as efficiency in procurement practices.
The Mongolian economy has made great strides, having grown tenfold over the past decade.
“Having travelled a long and uneasy journey of ruling and being ruled, falling and rising, Mongolia has arrived at where we are today – a vibrant and plural democracy, vocal civil society and growing economy,” says Mr Byambasaikhan.
However, last year was a tough year for Mongolian businesses. Weaker global demand for commodities, declining foreign direct investment, and multiple disputes between the government and investors had a significant effect on the country’s economy.
Mr Byambasaikhan stresses that there is a fast-growing need to stimulate confidence in Mongolia as a place where investments would be respected and supported.
“Foreign investments come knocking on the doors when the market is open, regulations are predictable, policies are supportive, the government is stable, roadmaps are clear and opportunities are available. All these factors articulate an attractive and sustainable investment climate.”
He notes that Mongolia is currently in “turn-around mode” – business-led and government-supported – asserting that “Mongolia cannot afford to lose time, opportunities or trust.”
“Today, just owning great assets is not enough. It requires a culture focused on managing our cost and value creation,” he points out.
“Transforming our underlying assets into world-class operations is our short-term challenge.”
Mr Byambasaikhan’s key focus now is Mongolia’s roadmap for achieving international standards of performance and levels of competitiveness.
He explains: “Mongolian businesses have entered the arena of global competition for capital. Investors will only turn to companies that develop their projects in accordance with international standards, and who adopt best corporate governance practices.
“We are beginning to appreciate the value of global standards. Go to any investment house in Ulaanbaatar, and an investor will be presented with a pipeline of mining, energy, real estate or manufacturing projects ranging from less than US$1 million ($1.34 million) to more than US$1 billion in size.
“Progress in upcoming years will be defined by companies that develop quality projects and attract smart investments in the process.”
Into the future
Mr Byambasaikhan believes that Mongolia will become the region’s energy hub and has the means to be Asia’s top exporter of clean power. However, he asserts that in order for this to become a reality, Mongolia needs to first increase its competitiveness in the mining sector.
“To make mining success an economic reality, businesses today continue to push for a predictable policy and legal climate so that investors regain confidence in the economy. Local companies now know the pain and gain of being an integral piece of the global commodities market.
“The only way for Mongolian mining to achieve this is by being ‘smart’, adopting the best practices and investing in new technologies.”
He adds that clean technology will continue to be critical to business growth.
“From construction to mining to food production, companies are looking for the most energy efficient machines. Energy efficiency is being mainstreamed into production chains. The shortest way to bridge the energy gap is through investing in the right technologies. More and more Mongolian banks are opening energy efficiency credit lines to finance non-traditional and innovative projects. Mongolian businesses are poised to make our country a clean technology paradise.”
Monday, July 11, 2016