The Ministry of Economic Development organized the “Mongolian State-Private Sector Partnership, Today and Future” conference in association with a team of experts from the Japanese International Cooperation Agency (JICA), on September 16.
Principles of state-private partnership and the Law on Concession were introduced at the conference. Over 50 delegates from the Ministry of Economic Development, private sector, and JICA attended the conference.
Below are opinions from Chief of Innovation at the State-Private Partnership Department of the Economic Development Ministry S.Bekhbat and CEO of NTB LLC S.Sainbayar.
S.Bekhbat: Six projects are being implemented under concession agreements.
The conference was attended mainly by private sector entrepreneurs. Information about concession agreements ought to be imparted not only to the state, but also companies executing projects. This conference was significant for discussing international and domestic experiences. Currently, six projects are being implemented under concession agreement. The Law on Concession was approved in 2010. Therefore, projects are being carried out in the framework of a law that has been in effect for four years. We have learned certain lessons and warnings throughout these years. So, improving the legal environment and working on implementation mechanisms and methods are crucial. Prior to the introduction of concessions, projects were funded by the state budget. But now, companies carry out projects with their own funds. Once projects are implemented, companies have two alternatives to see return on their investments: either payment from the state budget or by charging consumers with fees. This year, the participating companies were invited to the conference. In general, more so than state companies, the increased capacity of private sector companies positively affects the economy.
B.Sainbayar: The first project under a concession agreement has been successfully implemented.
RDCC LLC is the owner of a concession on construction of the Nariin Sukhait – Shivee Khuren road designed for heavy haul trucks. Our company is working as the general executor. The road has been worked on for three years and will open on September 27. The validity term of the road is 15 years. This project is the first project successfully implemented under concession agreement in Mongolia. Implementing a project with state budget funds poses considerable difficulty for the budget itself. Concession agreements may have become an internationally adopted method of implementing projects because of this. We built a 43.2 kilometer long, 12.4 meter wide and 24 cm thick cement-paved road with a reinforced embankment of 25 cm thick cement for heavy haul trucks. A total of 110 billion MNT was invested in the construction work. This investment was funded by Monnis Group and SouthGobi Sands LLC. Obviously, the investors would earn back their investment from fees on coal transportation, but coal transportation rates were high at the time the concession agreement was established. For instance, over 1,000 vehicles a day used to pass through the southern border at the time. But now, the number has decreased to 200. So, circumstances became totally different from how we estimated. Accordingly, if circumstances stay constant, the investors can earn back their initial investment. So, we are waiting for an increase in coal transportation. This is a risk a project carried out under concession agreement faces.