BCM 2nd Annual BCM Summit

1. The 2nd
Annual BCM Summit: Regional Connectivity in Asia
The 2nd
Annual BCM Summit was held on 19 June 2017 at the Ikh Tenger Complex in Ulaanbaatar, with
around 250 individuals in attendance. The theme of the Summit was “Regional Connectivity in Asia.”
Below is a summary of the key points made during speeches and panel discussions.
Chairman B.Byambasaikhan’s opening remarks
Prime Minister J.Erdenebat’s opening speech
Panel 1: Regional Economic Integration: From Economic Necessity to Political Reality
Presentation by Shigeki (Sean) Miwa, Director, Executive Vice President, SoftBank Group: “Northeast
Asia Power System Interconnection.” Please click here for the full presentation.
Panel 2: Northeast Asia Power System Interconnection
Presentation by Declan Magee, ADB Senior Country Economist for Mongolia: “Overcoming Asia’s
Infrastructure Needs” (report). Please click here for the full presentation.
Panel 3: Overcoming Asia’s Infrastructure Investment Gap
Presentation by Benoit Ribesse, [Title], on “Future Summit Trends: Environment, Social and Governance
(ESG) performance.” Please click here for the full presentation.
Panel 4: Evidence on the ground: ESG as a competitive advantage
Closing remarks by Bayar Budragchaa, BCM Executive Committee Member and Managing Partner at ELC
Law Firm

2. Chairman B.Byambasaikhan’s opening remarks
- Theme is regional connectivity in Asia
- A region of 3.8 billion people, representing USD 22 trillion in GDP
- BCM has over 250 members, representing 60 percent of the economy of Mongolia , and 60,000
workers
Prime Minister J.Erdenebat’s opening speech
- 80% of trade turnover is mineral products
- Mongolia is aiming to diversify its economy into a multi-pillar economy, and will also support
agribusiness
- As with any landlocked country, Mongolia aspires to develop infrastructure to improve
efficiency
- Recently in Beijing, Prime Minister led a delegation that participated in the Belt and Road
Summit for International Cooperation. Mongolia will play a significant role in this initiative.
- Every opportunity for transit transport will be utilized, such as through the economic corridor,
and the government will support increased transport infrastructure and roads.
- Zamyn-Uud and Altanbulag border crossings will be expanded
- Mongolia’s development will be parallel to the Silk Road initiative and Eurasian Economic Union
- Mongolian government is fully committed to this
- The Economic Recovery Program adopted by the program is in its earnest implementation,
along with the IMF’s Extended Fund Facility (EFF).
- There are clear signs of economic stabilization
- The Oyu Tolgoi underground project (OT-2) and Tavan Tolgoi projects will provided significant
opportunities in trade, logistics, transport and expansion of supply chains.
- We must maintain the trust of investors to optimize the business environment
Panel 1: Regional Economic Integration: From Economic Necessity to Political Reality
The first panel discussion of the day was chaired by BCM Chairman B.Byambasaikhan. Panelists were:
Alex Gong, Executive Director and Senior Vice President of Fosun Group, and CEO of Fosun Property;

3. Xing Haiming, Ambassador of the People’s Republic of China to Mongolia; Oh Song, Ambassador of the
Republic of Korea to Mongolia; Iskander Kubarovich Azizov, Ambassador of the Russian Federation to
Mongolia; Ts.Tumentsogt, CEO of Erdenes Mongol; and V.Enkhbold from the Foreign Trade and
Economic Cooperation Department of the Ministry of Foreign Affairs.
Question to Korean Ambassador Oh Song: What is the role of government in regional integration?
Ambassador Song
- In the case of Korea, soft loans and grant aids projects are being implemented in Mongolia
- Korea is happy to be involved in the IMF program
- In 2011, South Korea signed a USD 300 billion agreement with Mongolia, of which 100 billion
has already used, with 200 billion remaining
- Korea also pledged an additional USD 500 billion to Mongolia, so in total, there is USD 700
billion to be used for infrastructure development in Mongolia
- At the working level meeting, we discussed in what areas these funds will be used.
- The Mongolian side hopes these funds will be used for environment, infrastructure and
agriculture
- The procedure is as following:
o Sign framework arrangement between the Korean government and the Mongolian
government
o Approve complete list of projects from the Korean side
o Currently, the two governments have discussed eco-friendly projects
- The role of government is to utilize these soft loans and grant aids in improving regional
integration and infrastructure development
Chairman Byambasaikhan: “Music to our ears”. Same question to Alex Gong: What does business
expect from government when it comes to regional connectivity?
Gong:
- Last 5 years, our company have been diversifying the portfolio of Fosun in different continents
- 4 ways the government can support regional development:
o Promote information sharing – what is the most attractive sector, where is the country
going?
o Infrastructure – quite straightforward. Fosun is a top 50 global infrastructure investment
company
o Process efficiency: For example, the Ulaanbaatar airport is small but well-organized
o Government must form a favorable trade policy, to form a complementary strategy with
neighbors.
Question to Ambassador Xing: Would you share with us your views China’s massive One Belt, One
Road (OBOR) initiative and its leadership in regional integration?
- Erdenetbat and over 30 world leaders participated in the OBOR Summit in Beijing
- At the Summit, China and Mongolia exchanged views on mutually beneficial development

4. - This year, Mongolia has made big strides in improving its economy, which China fully supports
- The China-Mongolia-Russia economic corridor will require great investment, which China is
ready to provide in order for economic integration
Same question for Enkhbold:
- We have up to two-times higher costs in logistics, which is why enhanced connectivity has even
greater significance. For that reason it is a priority matter for the government.
- Due to being landlocked, regional integration has been limited, and so diversification and
building a multi-pillar economy are key priorities
- The soft aspects of integration, such as the legal environment and cross-border checkpoints,
must be well harmonized and coordinated
- Trade facilitation will increase so bilateral and multilateral mechanisms must play a key role
- The Russia-Mongolia-China Economic Corridor has agreement at the highest levels, and so
concrete movements in this direction are expected to be rolled out soon.
Byambasaikhan: Trade costs being so high must be addressed by regional connectivity. Same question
to Russian Ambassador Azizov: What is the role of government in integration?
- It has been year a since the Tashkent meeting, where the trilateral economic corridor was
agreed by the heads of state of Mongolia, Russia and China.
- Nabatchikova (panelist) will provide a better briefing on the 32 projects reflected in this
program, 7 of which are railway and transport projects
- We agree on the fact that the biggest challenge to meaningful integration is the weakness of
physical infrastructure. It is expected that further impetus will be provided for such integration.
- The government is responsible for enabling business by creating a pro-business environment,
namely by focusing on the following four things:
o 1) Having a consistent political environment
o 2) The legal environment is crucial, so businesses’ potential can be unlocked
o 3) For potential key players in regional economic integration, the conduciveness of the
investment environment, including adequate political support and adequate business
environment, is important
o 4) On thing that cannot be ignored, especially when it comes to government officials, is
refraining from nationalism, refraining from discriminatory practices against business.
This will be beneficial to the nation.
Byambasaikhan: Political consensus is the foundation of regional connectivity. Other aspects are in
line with BCM’s own agenda, which is to have the right business and legal environment that serves
everyone equally.
Question to Nabatchikova: Bridgens does work on the economic corridor, what do you do and what is
your strategy moving forward?
- Bridgens is an official consultant in the economic corridor program and is part of the Russian
working group

5. - Usually people view the state as the proponent of major projects, but it’s important to look at
social trends, such as immigration flows and scientific advancements
- New projects must be integrated into global production and distribution processes
- We should view things long-term: who will produce, who will use – need strong cooperation in
this
- OBOR is a great initiative
- Only by unlocking the potential of the three countries can we harness the huge opportunities in
infrastructure and logistics
- Northern Railway corridor will be strong economic corridor by boosting links to Russian and
global networks
- For Mongolia, this means there will be development and income in northern and western
provinces
- For China, it means easier access to Europe
Question for Tumentsogt: How do you see the role of government in integration, especially as the
head of a company owned by the government operating in mining?
- Erdenes Mongol is an SOE which manages strategic mining assets of Mongolia, such as Oyu
Tolgoi and Tavan Tolgoi
- Estimates say there could be up to USD 2.5 trillion worth of mineral resources. Most important
ones are owned by the state.
- The key challenge to developing these assets is infrastructure
- Transport costs are the key “tax” hindering business
- We welcome the recent initiative by leaders of the 3 countries
- There are 5 infrastructure links in the econic corridor, including in power, railway out of the 32
project concepts
- There will never be “perfect” legal and regulatory environment among the three countries due
to unique differences, but the Mongolian leadership fully supports the economic corridor
- This is especially important for Erdenes Mongol as an SOE, and the company needs a total USD
12-13 billion in financing to unlock assets
- Even if you have good plans, without financing, they will go nowhere, so I encourage all the
investors in this room and in neighboring countries
- Need creative financing mechanisms for trade and export
Byambasaikhan: Political support and consensus are key. That nobody invests in a country with a poor
invest environment is a given. There are companies working the development of projects related to
the economic corridor. A shift in paradigm is happening. Infrastructure finance is critical, along with
different ways of financing, such as climate finance. Recently, the Prime Minister of Mongolia went to
Russia and China for economic forums.
Question to ambassadors: what were the key takeaways from those events?
Ambassador Enkhbold:

6. - Last 2 months was quite busy for leaders of the three countries
- Mongolian PM went to China and signed 21 agreements
- He also discussed a Free Trade Agreement between two countries
- An MoU was signed to harmonize china’s OBOR with Mongolia’s Steppe Road initiative
- During the St. Petersburg forum, Russia and Mongolia agreed to jointly work towards
implementing some of the activities specified under the economic corridor program
- Regarding role of government in integration: most important role of government in regional
integration is to set the rules of business, then let businesses operate along the rules.
- This year, our main goal is to shortlist the 32 projects, to see which 2-3 priority projects can be
started.
- “When the governments reach consensus, we will leave it to businesses to do business.”
Ambassador Azizov:
- St. Petersburg was important in establishing working relations between the new Mongolian PM
and Putin
- Identified several areas of key focus: energy, agriculture, and transportation, including
Ulaanbaatar Railway, which is partially owned by Russia.
- As for trilateral cooperation, most important thing is to launch trilateral mechanism to focus on
2-3 projects to start from the 32 agreed projects
- We must make more efforts towards developing this mechanism
- Most importantly, we have to develop infrastructure, not just railways, but other soft
infrastructure such as legal and other infrastructure
- SOEs’ participation is important because of specific features of the three economies
Ambassdor Xing:
- At the highest level the three countries have agreed
- Cooperation agenda of the three is underway
- China is ready to invest in any concrete project
Question to Ambassador Song: what are the biggest challenges you see and how can we address those
challenges?
- Businesses consider the risk in the Mongolian market and seek guarantees.
- Korea and Mongolia are discussing an Economic Partnership Agreement (EPA) and have
completed two rounds of research. We are looking forward to third round, which will be
completed this fall, and then will move to more concrete negotiations.
- EPA will be the framework for Korean businesses to invest in Mongolia
- One complaint from private sector of Korea is the political inconsistency of Mongolia
- On Mongolian election: “We hope that there is continuity of government policy in implementing
projects or economic initiatives”
- The Korean and Japan Industrial and Technological Cooperation foundations will hold an event
in Ulaanbaatar, which will take place July 18 or 19
- They are seeking to make joint investment in Mongolia, to share risk
- Large businesses from Japan and Korea will participate in the dialogues

7. Question to Alex Gong: as infrastructure financiers, given the context of discussions today, what are
the 3 most important things that a fund such as Fosun Group looks at prior to investing?
- 1st
: stability of the economy
- 2nd
: do they need capital? When looking for big projects, we could spend perhaps half a year or
even years negotiating projects
- 3rd
: political consensus
Byambasaikhan: The ADB says Asia needs USD 26 trillion in investment. Question for Tumentsogt:
Regarding the 32 projects of the economic corridor, very few companies are aware of them, even
though the agreement was made a year ago.
- For the Mongolian side, the minister of foreign affairs is the key person in charge of economic
corridor affairs
- Since the identification of the projects at the government level, the general public is not aware
because the list is just on paper
- There is a need to disseminate information and increase public awareness, to expand
stakeholders in the business community.
Nabatchikova:
- I agree that 2-3 projects to start now must be short-listed
- Some kind of body or think-tank is needed to serve as a center of investment planning
- The work done at the OBOR summit and St. Petersburg summit were really fruitful, and this
momentum must continue
Question for Enkhbold: Would you discuss a bit more about the 32 projects?
- At every stage, we have to have consensus among the 3 countries and then move forward
- First thing to do is to develop a trilateral mechanism to move forward with this process
- We (the government) have to set the rules
- We agreed on the principles and on the 32 projects, but not on how
- Mongolia has proposed to shortlist 6 out of 32, which Russia also supported
- China proposed 4
- These are the projects that the 3 countries agree on currently, so they will most likely be the
ones to be short-listed
- We have to sit together to finalize the draft for the trilateral mechanism, and have relevant
ministers sign them
BB: Political support and consensus is important for any project, but politically-driven projects can
also be problematic. Projects must be able to stand on their own. Involving business expertise in
choosing the projects is key so things don’t fall apart from the start.
Question from the audience for Ambassador Xing: How are the Chinese viewing regional integration?

8. Xing:
- One issue viewed by the Chinese is that decisions of the Mongolian legislature sometimes
confuse Chinese entities who do business in Mongolia
Azizov:
- Within the tripartite mechanism, President Elbegdorj played a key role, such as in the Shanghai
Cooperation Organization meeting, which I appreciate
- President Elbegdorj said the next meeting will be held with a new president of Mongolia
Statement from audience: “Stay away from politics, but watch politics.”
Question from audience, Ambassador of Italy: I wrote a report to my government saluting the
trilateral agreement. I would like to ask frankly, was this wishful thinking, or is there a concrete plan
for companies? If so, how can they stay updated with developments in this regard?
Xing:
- Recently in Beijing at the OBOR event, the Mongolian PM had kind words which we appreciate
- This OBOR is for the well-being of the entire globe, not just central Asia
- From Asia to Russia to European countries, it is a very inclusive process
- As for infrastructure, Italy is very much a part of it. Italy will play an integral part.
Azizov:
- As for the Russia-Mongolia-China corridor, what are the advantages of it traversing across
Mongolia? It provides cost and time advantages, being a shorter route
- Economic connectivity is indeed greatly relevant to all parts of the world
- One of the more successful projects is the horizontal railway corridor
- A 546km section of the railway is to be commissioned shortly, and the Erdenet-Ovoot railway
section is to be commissioned, which the 3 countries supported at the political level.
- This launch of this project involved not only Mongolia, Russia and Chnia, but also Australia’s
Aspire Mining, and indeed all the countries stand to benefit.
Question from audience: What opportunities do you see in renewable energy in the development of
the economic corridor?
Azizov:
- Nuclear energy safety concerns have risen in recent years
- Not just Mongolia and Russia, but China and Korea could participate in renewable energy
initiatives
- Each country has individual renewable energy policies
- Sharing of know-how and other information is available

9. Question from audience, Mr. Jargal DeFacto: The three presidents agreed to create a project-planning
center, but we have not seen it in Mongolia. Where is the center for project planning? Could you
please elaborate?
Xing:
- The joint planning center issue is under discussion
- At the principle level, the trilateral corridor has an agreement, but the service provided by the
center is under discussion by the three parties.
- I have confidence that you will hear news on that soon
Azizov:
- I want to reiterate my Chinese colleague, in that it is an ongoing process. It may not be as slow
as Mr. Jargal said, and we expect the announcement soon.
- Participation of the business and investment community is important, because it will put these
projects out for their judgment.
Byambasaikhan: Regional connectivity is not a choice anymore; it is the only way for us to plan our
business, to have strategies that go beyond one’s own borders. Mongolia, with its small population and
low GDP relative to the region, must improve competitiveness. Regional connectivity will be in BCM’s
agenda for the foreseeable future.
Presentation by Shigeki (Sean) Miwa, General Manager of the CEO Project Office of SoftBank Group,
and Director and Executive Vice President of SB Energy Corp: “Northeast Asia Power System
Interconnection.” Please click here for the full presentation.
Asian Super Grid
- Mongolia can supply all the power for Asia, including China, theoretically
- Why not export power all the way to Japan
- SB Energy Corp totals 524MW (37 sites), making it one of the top renewable energy proponents
in Japan
- Mongolia’s Tsetsii 50MW wind farm construction is on schedule, expected completion in
December
- India: 350MW project in Andhra Pradesh, 400 MW project in Rajasthan (3.8c per kW)
- Soft Bank’s vision is to promote the transition from fossil fuels to renewables
- 4-party MoU to study feasibility of the Asian Super Grid was signed by Japan, Korea, China and
Russia
- For a first project: we will make a “Golden Ring”
Project necessity and key benefits of the Asian Super Grid:

10. - Promote peace and stability in Northeast Asia
- Contribute to maximum utilization of clean and renewable energy
- Bring economic benefits by introducing international competition
- Diversify energy sources by trading electricity
- Closed electric market of each country turns into larger open market area of NE Asia
- Deep reciprocal relationship of countries
- Promote renewable energy development while stabilizing power output fluctuation
- More stable power supply by cross-regional operation
o Increased renewables leads to better electricity reserve ratio
o Larger power pool leads to more stable supply of electricity
- Contribute to Japan’s non-fossil fuel electricity target (i.e. 44% or more by 2030)
- Take advantage of each country’s different supply and demand patterns
Continue talking
- Cost of electricity in Japan is 25c per kW, which is too high.
- 3 key factors for successful Asian Super Grid implemention
o Technically feasible, yes
o Economically feasible, yes
o Politics, law and regulations are the big challenge
- SoftBank is enhancing investment day by day in this area
- Japan’s stance on the Russia-Japan route: agreed to study feasibility of grid interconnection
project without a preset conclusion. Russia-Japan intergovernmental Working Group has been
established
- Japan wants to create the “Golden Ring” by the 2020 Tokyo Olympics, producing 2GW
Panel 2: Northeast Asia Power System Interconnection
The second panel discussed integration of power systems in Northeast Asia, and was chaired by Philippe
Lienhart, Strategy, Innovation and New Business Manager at Electricite de France.
Panelists were: Shigeki (Sean) Miwa, General Manager of the CEO Project Office of SoftBank Group, and
Director and Executive Vice President of SB Energy Corp; Vladimiar Sofyin, Director of the Department of
Technological Development and Innovation at Rossetti; Mika Ohbayashi, Founding Member and Director
of the Renewable Energy Institute; Florian Bennhold, Managing Director at Symbior Solar; Teruhisa Oi,
Principal Energy Specialist at the Energy Division of the East Asia Department of the Asian Development
Bank; Karim Karoui, Technical Director of the Energy Transition Department at Tractebel Engineering;
and Yeren-Ulzii Batmunkh from the Energy Policy and Planning Department of the Ministry of Energy.
Shigeki Miwa’s question: what is the basis of success for power integration in Asia?
Karim:
- We are speaking not in gigawatts, but terawatts of energy potential.

11. - As agreed in the Paris Agreement, it is important to reduce the carbon footprint in all energy
sectors.
- Renewable is simply a must
- In Europe, offshore wind farms no longer need subsidies.
- Marginal costs will reduce, but the great bottleneck will be power transmission. In Europe,
substations are perhaps 10km apart, but in Asia, they can be 100km or 1000km apart. This is the
next challenge.
- In addition, a huge amount of energy is needed on top of solar.
- Infrastructure is key for a decarbonized energy system.
Vladimir Sofyin presentation: Possibility of the Russian national grid integration with Northeast Asia
power interconnection [ask for presentation]
- Rosseti is the operator of Russian grids
- Provides cross-border transmission of electricity, and has 140 border transmission points
- 2 advantages of Russia: high degree of integration and geographical position (can be major
bridge of power from Asia to Europe)
- In Siberia and Russia Far East, power generation capacity is at 60% in the summer, whereas as
Japan and Korea tend to operate at peak capacity.
- Rossetti, along with the largest power companies in Europe, Korea and Japan, are forming major
networks, including the Asian Super Grid and Caspian Grid.
- Integration needs: general market rules; unified tech standards; and new regulatory platform
- Russia has 11 trans-border power transmission lines with Mongolia
- Energy integration is impossible without harmonization of tech standards and synchronized
development.
- Power integration is a tool for better economic integration and reliability.
Question for Yeren-Ulzii: what are the stakes for Mongolia?
- 6 strategic goals in state energy policy
- One of these is better energy integration with neighboring countries
- Mongolia seeks to be involved in the Asian Super Grid, which is reflected in the state energy
policy guideline and is in the government’s plans for the upcoming 4 years
- Mongolia wants share of renewable energy to be 20% by 2020 and 30% by 2030
- In 2015, the Customs Law was amended to reduce customs tax and VAT for renewable energy
equipment and parts to 0%.
- If foreign investors implemented a USD 100 billion project in Mongolia, the investors have
around USD 10 billion in savings.
- In the international level, Ministry of Energy is actively supporting the Asian Super Grid concept.
- Ministry is working with the ADB by receiving technical assistance on renewable energy projects.
- Lots of cooperative efforts going on currently in which the Ministry of Energy is actively
engaging
Mika Ohbayashi:
- The larger the market becomes, the more competitive rates will be introduced.

12. - Japan stands to benefit from cheaper electricity sources when talking about integration
- This will also bring a safer more reliable source of electricity
- In some areas of Japan, solar PVs supply more than 70% of electricity needs
- Renewables are becoming the cheapest source of electricity in many parts of the world. Solar
power may become as cheap as USD 0.01 (1 cent) per kWh in the coming decade.
- In some parts of India, power went down from 27 cents per kWh to under 3cents/kWh in just 7
years.
- If China, Japan and Korea integrated, it would become the largest electricity market in the world
– 7500 TWh.
Bennhold:
- What are the steps in the near future to achieve these goals in Mongolia? Before we talk about
GW-scale, let’s talk about MW-scale.
- As with the case in India, projects went from the MW-scale to the GW-scale in 7 years.
- We have seen a massive drop in equipment prices for solar equipment
- All the costs of renewable energy are in the beginning, so cheap financing sources are key.
Mongolia needs financing to move forward, which everyone in the region will benefit from.
Question for panelists: what are the main challenges for a successful Asian Super Grid?
Shigeki:
- There are so many policymakers and bureaucrats, so let’s talk about actual numbers.
- Our first project is just a 1GW initiative.
- Most politicians are worried about security. If they are really concerned about security, worry
about the internet, not electricity.
- The biggest challenge is facilitating political agreement.
Karim:
- Technical, economic, and legal/political/regulatory challenges.
- Two technologies for long-distance transmission: we must forget AC, and use HVDC (high-
voltage direct current).
- If are to connect 1, 2 or3 GW, we can have point-to-point connection
- We are talking about 20, 30, 40% renewable sources on the grid.
- HVDC breakers is a key technological challenge
- Europe wants to export 110GW via the North Sea.
- If two blocks are interconnected with 10 or 20% of the energy, it means we are coupling the two
systems, which needs more much coordination.
- A higher penetration of renewables means more intelligence in the systems. It is achievable but
it is also a limit.
Yeren-Ulzii:
- The geographical conditions make China look like the hub nation in regional integration.
- China has made achievements in ultra-high-voltage long-distance electricity transmission.

13. - Political and regulatory issues are a key challenge to the development of this concept.
- Ministry of Foreign Affairs held meeting last year and reiterated the political barriers to energy
connectivity in NE Asia.
- One question: some international organizations say NE Asia’s energy demand may double by
2040, so to supply that demand, should we still burn coal? Should we double coal consumption
up to that year? We have no choice but to increase the share of renewable output.
Teruhisa:
- Everybody wants to work together; I don’t see any severe major political hindrance.
- There is no major impediment in realizing these initiatives.
- I do hope that Mongolia can export renewable energy sources, or any energy sources, as it
suffers as a mineral-exporting country.
- If Mongolia can find a second export commodity, renewable energy or another energy source,
that would be very beneficial to the economy and will greatly increase government revenue.
- Coal is still dominant in Mongolia, so the country must gradually decarbonize. Not today or
tomorrow, but gradually.
- A regional smart grid is necessary, and you also need the technical intelligence to manage it.
- There are huge business opportunities. Without business opportunities, there will be no
innovation.
Mika Ohbayashi:
- Government role is to establish the business framework, and let business engage in fair
competition.
- We need a wide range of business sectors to join in on the initiatives to make the Asian Super
Grid a reality.
Florian:
- Every renewable energy project across the world, energy development policy is the critical
factor that determines the speed of development.
- A good policy with fast regulatory approval can make big changes in only a matter of months.
Statement from audience, from the President of Mongolian Renewable Energy Association:
Government has a responsibility to its citizens today and future citizens. We have the same dream,
the same idea. It’s not about the technology; it’s about the people. Renewables are the only choice.
Statement from audience, a lecturer at the NUM: There is little challenge when it comes to economic
or technical feasibility; there is only the political question.
Afternoon plenary remarks by Dugar Jargalsaikhan, BCM Executive Committee Member and Chair of
Gund Investment LLC

14. - Sustainable business opportunities in Mongolia
- The study “Better Business, Better World”:
o Asia will need USD 26 trillion in investment for sustainable growth. That is USD 1.7
trillion per year until 2030.
- Is there money? Yes the money can be found, but is the private sector ready?
- One idea is “blended financing”, supported by the World Bank, ADB and IFC.
Presentation by Declan Magee, ADB Senior Country Economist for Mongolia: Overcoming Asia’s
Infrastructure Needs (report). Please click here for full presentation.
Infrastructure comprises 4 subsectors: Energy, road and transport, telecom, and water and sanitation
- 3 objectives of the report
o Examine how infrastructure conditions vary across Asia
o Update estimates of infrastructure investment needs for developing Asia for 2016-2030
o Discuss policy actions for meeting infrastructure investment needs
- Key messages
o In 2015, ADB estimated developing Asia needs USD 26 trillion; per year up to 2030, that
works out to USD 1.7 trillion per year.
o Excluding climate factors, the needs are USD 22.5 trillion, or USD 1.5 trillion per year
o These are more than double the 2009 estimates
o Infrastructure gap varies across countries
o For 25 developing countries of ADB, the gap is 2.4% of projected GDP; excluding China,
it is 5% of projected GDP
o Both public and private sector investment is needed, but private is more important
- There is a strong correlation between GDP per capita and infrastructure development
- More than half of all investment needs to go to the power sector, next is transport at 31.9%
- Policies to close the gap in investment:
o Fiscal reforms
 Tax reforms
 Spending re-orientation
 Prudent borrowing
 Nontax revenues
o Promoting private participation
 Create conducive investment climate
 Make greater use of PPPs
 Deepen capital markets
o Better project planning, design and execution
- Role for MDBs
o MDB infrastructure financing in Asia is 2.5% of current investment
 10% without China and India
o MDB finance for infrastructure will rise.
 Scale up annual loan and grant approvals from USD 17.5 billion per year in 2016
to more than USD 20 billion by 2020.

15. Panel 3: Overcoming Asia’s Infrastructure Investment Gap
Panel chair: Enkhmunkh Temuulin, CEO of the Sustainable Development Initiative: “Private sector would
need to invest USD 250 billion per year in the future.”
Panelists are: Mattew Bersani, Global Head of Corporate Finance, Sheaman and Sterling LLP; Luvsandorj
Dulmazul, Board Member of the Ulaanbaatar Chamber of Commerce and Managing Director of Wolfson
Capital; Hirotake Hirose, Chief Representative of the Bank of Tokyo-Mitsubishi UFJ Ltd.; Declan Magee,
ADB Senior Country Economist for Mongolia; A.Munkhbold, Director of the Research Department of the
National Development Agency; and Aihua Xie, General Manager of the Hengyuan International
Engineering Group.
First question for Declan Magee: We saw your presentation and saw this huge number, USD 26
trillion. How did you arrive at this number, and how do you envision the accomplishment of this huge
investment in infrastructure in the region?
- The USD 26 trillion number comes from: the energy sector, road and transport, telecom, and
water and sanitation.
- First we estimated what the needs are, by examining the association between those types of
infrastructure along with economic factors such as GDP and population.
- It was very much a top-down approach, which is much better to use those numbers for these
kinds of discussion, talking about aggregate needs.
- A bottom-up study would require a much more detailed study
- It is going to require lots of government leadership
- ADB can support direct financing needs, and can also work with countries to improve their
private sector
Question for A.Munkhbold: What kinds of investment research is your organization conducting? How
are you integrating policies on development and sustainability?
- Mongolia is directing policies to be in line with the Sustainable Development Goals of the UN.
- Whatever stage of development Mongolia may be, we will strive to be involved in infrastructure
development.
- Today, about 160 projects have been received, and about 70 of these are reflected in the
national investment program, amounting to about MNT 44 trillion. Of that, about MNT 28
trillion is for infrastructure, including: MNT 4.5 trillion for roads; MNT 5.5 trillion for railways.
- We want to keep investment around 6 percent of GDP
Question for Bersani: You have spent over 20 years in Asia. Do you think the ADB’s estimate for
infrastructure investment needs can be provided by the private sector?
- Frankly, no. There must be much more investment from the private sector.
- Projects need to be commercially viable from the investor’s point of view.
- How the government and the private sector views a project is completely difference.

16. - Transparency is crucial, legal consistency is crucial. Laws and regulations cannot go against one
another.
- We need to be more creative in terms of how we are financing these projects. For example, we
just did a high-yield bond offering for a renewable project in India call Greenco. Entities buying
the bonds were all private.
- We must look to the bond and capital markets for solutions to project financing.
Question for Dulmazul: What are the big challenges you face when working on projects in Mongolia?
- I’ve been working in CIS nations for the past 3-4 years.
- In terms of financing structure, most have some credit guarantees, sometimes facilitated by
international organizations. It is important to work multilaterally to find creative financing
solutions.
- In the case of Turkmenistan where I was working two years, 3 projects worth 3 billion were
closed almost within one year. What this says is that the decision-making process was very
quick.
- In the case of Mongolia, projects such as Thermal Power Plant 5 and Tavan Tolgoi have taken a
long time to be approved due to many layers of approval needed and become stalled.
Question for Hirotake: Can you tell us about the Bank of Tokyo-Mitsubishi UFJ’s strategy in terms of
its private sector point of view on infrastructure financing?
- We are getting involved in infrastructure development in Mongolia
- 2 things to consider: public-private cooperation and commercial viability.
- The 50th
annual meeting of the ADB was held in Japan last month. Two important points of
emphasis: role-sharing between public and private organizations – private sector is more in tune
to risks, but public sector can draw financing better. The key is to find an optimal balance.
- The second is commercial viability – a deeper and long-term engagement of the private sector
should be encouraged. This is also the case for Mongolia.
Question for Xie: You mentioned that you have worked on some projects in Mongolia. Can you share
your thoughts on what Mongolian regulators and companies can do to support foreign investment
groups such as yours?
- Our group conducted the construction of a cement plant
- We are also involved in a power plant project
- Last few years, we are focusing on EPC projects. It is more difficult to go after these types of
projects, not just in Mongolia, but generally in the region.
- For the Mongolian government, we haven’t faced a major problem, as we follow the law and tax
regulations.
Question for Munkhbold: you mentioned that there is MNT 44 trillion needed for investment. You
mentioned the projects your organization is looking to implement. How commercially viable are these
projects?
- These are projects delivered to us by ministries, and they will need to be updated as time
passes.

17. - They are mainly Build-Transfer or Build-Operate-Transfer projects.
- These projects aim to be profitable for the project proponents.
Enkhmunkh Temuulin: These B-T or B-O-T projects tend to get stuck when it comes to tariffs. Foreign
investors want to know about the margins of such projects and their profitability.
Question for Declan: Do you have any idea regarding how the ADB envisions shifting project interest
to the private sector?
- The ADB is placing a great emphasis on the private sector in its organizational vision.
- The ADB has a private sector operations department based in Manila.
- I would expect that we would see significant increases for non-sovereign (private) operations.
Sovereign operations are still critical, but there will be much more non-sovereign operations.
- The ADB also seeks to facilitate more public-private partnerships. It is not a panacea, but will be
very critical to project financing.
- As for sovereign operations, the ADB will work with governments to help develop policies
conducive to business and investment.
Question for Bersani: You saw the transformation of countries when they began to implement public-
private partnerships (PPP). What can Mongolia learn from other countries in terms of implementing
PPP projects sooner?
- Every country is different; democracy is messy. We shouldn’t compare Mongolia with China.
There are a lot of material and other important differences.
- There are a lot of issues concerning legal infrastructure.
- The most important thing the government can do is get together and come up with a set of
documents, detailing what the country can live with. This is what Pakistan did. Pakistan is a very
good example of a success story.
- Coming up with a consensus on the government side early on; coming up with a set of
commercially acceptable arrangements that you stick to going forward, so you don’t reinvent
the wheel every time, is my advice for government.
Question for Dulmazul: would you share with us some success stories on which you have worked in
Asia?
- Emerging market countries tend to have long lists of infrastructure projects, and some of them
are not commercially or financially viable.
- An example in Myanmar: they had a list of 60 major projects. However, they didn’t have
regulations set, no study of viability.
- ADB helped them reduce that number to 6 projects that are financially and commercially viable.
- It is better to focus on a few projects, and implement them one by one, instead of trying to work
with a huge list.
Question for Hirotake: What major challenges do you see that the private sector faces when it comes
to cooperation in development plans?
- Since IMF’s Extended Fund Facility, Mongolian economy has shown signs of improvement.

18. - Ratings agencies have not changed their rating of Mongolia yet, however.
- In order for us to think about how we may make new financing into Mongolia, is to collaborate
with IFIs such as IFC, ADB, EBRD, World Bank, and so on. They have the capability to provide
guarantees, which mitigates risks for potentially interested entrepreneurs.
- Until credit ratings improve, we have to work with international financial institutions.
Question for Munkhbold: Foreign investors talk about guarantees. But if Mongolia wants to provide
guarantees, questions about the debt ceiling are raised. Does the National Development Agency have
any plans for this?
- This is mainly a question for the Ministry of Finance.
- Essentially, we need to create a system that supports domestic enterprises. One important this
in this regard is transport and logistics networks.
- A study by JICA agreed with this notion on regional connectivity.
Question for Dulmazul: In Mongolia there are numerous mega projects being discussed, but none
have become a reality so far. What needs to be done to implement these projects?
- First of all, I am glad that the Oyu Tolgoi financing has been completed.
- Thermal Power Plant 5 (TPP5) and Tavan Tolgoi have been discussed for a long time. Tariffs are a
major issue along with regulatory issues. Hopefully this will be resolved in the coming 2-3 years,
creating the environment where people can invest in these projects.
- 2 factors for improving the state of megaprojects:
o Capacity building for implementation, and having independent advisors and expertise.
o Need to create commercially and financially viable projects. We need to select only
realistic projects and focus on them.
Bersani comment:
- Mongolia has an evolving legal environment, but it has created some uncertainties
- For TPP5, one of the main issues of land use. The concessions law said one thing, another law
stated another thing. It may seem like a small detail to some, but to someone who wants to
invest in a project, that’s a big deal.
- In order to create a level of confidence on the part of investors, these are the issues that need
to be solved before you sit down with investors.
Statement from Audience, Eric from ING Bank: You talked about the ratings. All of us are aware of the
reality of financing for even simple things in Mongolia. Let’s all be aware that international banks
have frozen or cancelled international trade facilities. Interest rates are very high, even for short-
term. It will be very difficult to get private sector or bank financing for infrastructure financing in this
situation.
Comment by Hirotake:
- The reason why we are still doing banking in this country is because the international
organizations have provided some guarantees.

19. - The Japanese government has operated various types of new types of financial programs, in
order to facilitate public-private collaboration.
- Perhaps there can be a forum to discuss what kind of financing is possible for specific cases of
projects.
Comment by Bersani:
- There is an image problem. The private sector is very sentiment-driven.
- The image of the country must be improved. The country must invest in re-making its image.
The image is excessively negative, in my view.
- Success stories, such as the resolution of the Rio Tinto dispute, must be told to the world.
Question from audience, BCM Chairman Byambasaikhan: If this panel happened 2 years ago, or even
5 years ago, we would be talking about the same thing. There have been many panels where we sit
and say the same things. Is there anything we can do a little bit differently? Are there little things we
can do in the meantime while the big changes are yet to occur?
Bersani:
- My impression is that each new government spends the first few months undoing what the
previous government did. This is the opposite of what you need to move these things forward.
Munkhbold:
- As a representative of the state on this panel, I will say that in order to develop infrastructure,
the money is there. Given that the money is in the private sector, how can we entice the private
into investing in infrastructure? The answer is that there must be minimal risk.
- When we talk about investment, people think it comes from some rich person or institution, but
it can be anything that facilitates the development of projects.
- Having an Investor Protection Council in one sense gives the wrong message to the public, that
we only care about investors.
Question from audience for Bersani by Tuvshin, Editor at BCM: What is one simple thing that
Mongolia, the government or NGOs, can do turn its image around?
Bersani:
- Stop talking about Rio Tinto. It just creates a negative underlying image.
- It’s behind us; let’s move forward.
- To me, it’s kind of a microcosm of what drags the image down internationally.
- The best way to deal with this is investment: every country in the world hires a PR team. The
New York subway has ads for a tourism campaign by India.
Question from audience for Dulmazul by Tuvshin, Editor at BCM: You spoke about not having a long
list of projects. Instead, you said pick a few and focus on them. If you could choose the one project to
focus much more attention to, which project would that be?
- There are actually many economically viable projects.

20. - One project I would focus on if I had a billion dollars in my pocket would be to bring Tavan
Tolgoi into commercial production, because it will bring in revenue and also supply energy for
Oyu Tolgoi. Each year Mongolia spends lots of money importing electricity from China.
- Bringing Tavan Tolgoi online would be great in this regard.
Presentation by Benoit Ribesse, CEO of Engie Mongolia, on Future Summit Trends: Environment,
Social and Governance (ESG) performance. Please click here for full presentation.
- 90% of energy in Australia used to be supplied by coal-fired plants
- Some states in Australia have reached 40% renewable supply
- Over the past 5-10 years, South Australia has evolved into a state dominated by renewables
- The demand (average 1,500MW) has been eroded by increasing rooftop PV (800MW installed) –
reduces grid-based demand
- Increasing wind sources built due to renewable subsidies – intermittent in nature
- 2012-2016: brown coal (740MW) and gas (CCGT 220MW) baseload generation closed down due
to ‘low price market conditions’
- The result: the fragility of the state has been evident
- Severe weather on 28 September 2016 caused a major blackout in South Australia
- Just prior to blackout, generation mix had only 300MW of thermal generation on load, to meet
demand of ~1800MW
- Five transmission faults occurred; Entire state blacked
- 5% of energy generated from renewables in Mongolia
- Now is an opportune time to talk about renewables in the country
Lessons learnt for the Mongolian industry:
- Stalled energy policy over the last decade constrained the Aussie energy sector
o Uncertainty on carbon price
o Changing renewable target
o Poor planning processes
- Outdated market design (commenced in 1998)
- Lack of central planning
- Resulted in number of issues, mainly:
o Emergence of grid stability issues
o Rapid rise of wholesale electricity prices
Looking forward: transition to a low emission future
- Government responses to challenges with transition to a low emission future:
- Improve reliability (standards, ancillary services)
- System security (reserve capacity)
- Planning for closure of old generation assets (minimum time 3 years)
- Reward demand side management (energy efficiency)
- Certainty in commitment to reduce its emissions (28% by 2030 for Australia)

21. - System planning – integrated national grid plan
- Establish new Energy Security Board to oversee the electricity market
Panel 4: Evidence on the ground: ESG as a competitive advantage
The last panel discussion of the day was chaired by Benoit Ribesse, CEO of Engie Mongolia, and
discussed new trends (climate, social) and best practices in implementing infrastructure, energy and
mining projects.
Panelists: T.Bulgan, Director of Green Development at the Ministry of Environment; Bayanjargal
Byambasaikhan, BCM Chairman and Managing Partner at NovaTerra; Vanchig Ganzorig, Chairman of Bat
Solutions Partners; Hulan Davaadorj, Founder and Director of Natural Essentials (Lhamour); Benoit
Ribesse, BCM Board Director and CEO of Engie Mongolia; and Tuul Galzagd, Director of Eco Bank at
XacBank.
Question for Bulgan: What are the key environmental issues and main policy objectives in relation to
environmental management for the private sector?
- Addressing air and environmental pollution is the key objective. We are striving to involve all the
many sectors in this regard to find comprehensive solutions.
- The moderator introduced us to Australia’s experience, which we can learn from.
- In 2014 Mongolia ratified the Green Development Guideline. This is the main policy document
for sustainable development.
- Nowadays development automatically means green development.
- In March 2017, the government approved a program to combat air pollution. It outlines the
involvement of citizens, businesses and other organizations duties for combating air pollution.
Follow-up question for Bulgan: what specific role do you have or do you advise in this program to
combat air pollution?
- This policy ratified in March 2017 before anything aims to address the sources of pollution and
minimize them. Part of this means increasing access to sanitary and hygiene needs, by
introducing technological solutions.
- As for small businesses, for example, if they choose electric heating, the government is working
with the private sector to establish a National Green Fund.
- If SMEs want to manufacture solutions, they will have a source of capital.
- There are also certain tax incentives the Ministry is offering also.
Question for Byambasaikhan: What value do you see that companies can bring into Mongolia in terms
of environmental measures?
- When you see the Mongolian Economy, it’s one of the places where there has been rapid
transformation. The first was with gers and solar panels; it was an energy access project. It was
the world’s most successful. We don’t think of it like that because nowadays it’s common.

22. - 10 or 15 years ago, those families did not have any source of power. It went from candles to
solar power overnight.
- We also went from no landlines to having almost full penetration of voice and data.
- Sometimes you see modern day projects being implemented in Mongolia without realizing it
would have been impossible 5 years ago.
- Despite everything, Mongolia is a good place for technology to quickly find its place and a good
place for new methods of governance.
- I would urge BCM members, when they hear a bank’s requirements, don’t be scared, because
you will have the trained personnel already, who understand the essence of why such things are
required.
- Very strong traditions regarding nature do not mean it is incompatible with business. Take
Salkhit, for example, there is a huge tower and with a wide foundation, and underneath it is a
called a thing called “bumb” (бумба), which is a spiritual tradition in which wherever you are
touching the ground, you are telling the gods that you will do good things. There is one under
each tower at Salkhit. So you always find a way to work. Traditions do not prohibit business; you
just have to understand it. Many misunderstandings simply stem from miscommunication.
Question for Ganzorig: With the different companies you have worked with, what do you see as the
added value of good governance?
- As stated earlier, infrastructure is feasible economically and physically, but politics is the
problem.
- Each soum in Mongolia has their own culture and unique problems.
- Sometimes, unfortunately, it is enough only to get a signature from an official to run a mine.
When they start real operations, challenges arise at the local, provincial, and even national
levels.
- Lack of knowledge, lack of information flows and lack of people exchange are problems.
- My recommendation is that it would be wise if companies align their company strategy with the
local communities’ challenges.
- At the individual level, we have to change our attitudes. We have to gain knowledge and
disseminate what we know to the other people, to the herdsmen.
- At the company level, the old private companies are all family-owned. Family-governance is the
new trend, with children and grandchildren taking over companies. The challenge is to hire an
outside expert for CEO, or go with a family member.
- If you look at the MSE, there is still a big gap in order to reach international standing.
- I agree with a previous notion of Mongolia having a bad image. There is political inconsistency.
The new government’s first task is undoing the previous government’s job. This shows that
there is no nationwide vision of who we are, where we want to go.
- This leads to the question: what is Mongolia’s national identity today? Is there one?
Question for Tuul Galzagd: You spoke about eco-finance. If you look at Mongolia in terms of climate
finance, what advantages has this brought to XacBank?
- We clearly understood one thing: pushing and encouraging business to implement green
projects.
- We need more long-term concession loans.

23. - Climate change is the most critical issue of our time.
- Climate funds are different from typical international banks. It’s not about the size of the
portfolio, but how they are used, and you have to report back on emissions reductions and
energy efficiency.
- The benefit for the bank is access to cheaper funds, but there are many beneficiaries aside from
the bank. This includes businesses that will implement green projects.
Question to Hulan: How does your company approach its carbon footprint. Does this approach give
value to your company in terms of branding?
- Our production is 100% non-waste. Products not used in production of something are used for
something else. Our company won the “most responsible SME in Asia” award due to this.
- For consumers, we focused on packaging that is made of recycled paper and getting rid of
plastic bags. At first people just saw it as ugly brown paper, but once you explain it to
consumers, they appreciate it and in turn begin to demand it.
- Getting the consumer to acknowledge such things may be difficult in the beginning, but has
long-run payoffs. Now our regular customers demand it (recycling, being environmentally
friendly).
- We plan to replicate this success in Korea, and I think this can be done across the world.
Do you see a direct impact on sales?
- We see it in the messages we receive from customers. We know that customers are repeat
buyers because they appreciate the environmentally friendly stance.
Question for Byambasaikhan: Having worked for several organizations, is there any example of a
company whose approach to environmental responsibility has made a real difference, in any sector?
- We are developing a solar project with Symbior. Part of the process is getting permits,
particularly land acquisition.
- Pasture land is a very sensitive issue in Mongolia, despite the fact that we have so much land.
- There are two types of citizens: residents of UB, and the more privileged residents outside of
UB, because they have pasture land entitlements that are sometimes even hard to legally
define.
- In order to make sure the permit process is done right, we talk to local stakeholders and talk to
families, and explain the benefits of a project.
- When I go to XacBank to apply for financing, I can be proud to say that the local stakeholders of
a project support the project.
- It is true that we are a young democracy that is still learning. The first private companies were
established in 1989-90. At the same time, we have seen significant jumps in technology,
business, and finance.
- Mongolians as a society, we have to cope with each and every change.
- Good governance practices when dealing with people and the environment, is not hard.
Question for Bulgan: Regarding government targets on renewable energy, how are businesses
affected by these?

24. - In stating our objectives, researchers and multilateral discussions took place.
- What is environmental sustainability in general? It is the guarantee for sustained growth for
businesses and society.
- In recent years, solar and wind energy projects have taken off.
- However, we also want to implement hydropower, but there are also investment issues as it is a
mega project.
- Technology has improved to the level where waste recycling plants can be economically viable.
- The Ministry of Environment has implemented five ISO 14000 standards last year, and plan to
implement 5 more this year for the nation.
- In May 2017, a new law on waste was approved, obligating greater responsibility to
manufacturers regarding their usage of packaging and bottling.
Question to panelists: If you look 3-5 years from now, how do you see climate financing?
Tuul:
- With the economic downturn, one question is whether climate financing can be profitable.
- During a time of recession, businesses should strive to save energy, to cut costs.
- Investing in energy efficient and renewable sources could save you money.
- Mongolia will reach 14% carbon emissions reduction by 2020, and renewable energy production
should be 20% by 2020.
- There are many initiatives in the private sector, especially the banking sector. In 2015, all
commercial banks agreed to conduct environmental assessments for loans of more than 15
million MNT. It assesses environmental issues, labor rights, and gender equality.
- Banks are the main financiers of businesses, so if the banks do these assessments, it is a signal
that businesses should go for more environmentally friendly practices.
Byambasaikhan:
- If you look around this room, you can see that these bulbs are the more energy-efficient ones,
and this is a government building.
- People understand quality, that it’s better in the long run. Companies, when building a new
apartment building, are more and more going for energy efficient solutions. These kinds of
changes can happen quickly in Mongolia.
- If you bring the right technology, it can be quickly absorbed in Mongolia.
- Despite everything that has happened in the past few years, one sector that was continually
developing was renewable energy.
Bayar Budragchaa, BCM Executive Committee Member and Managing Partner at ELC Law Firm, closing
remarks:
- Just a few days ago, Mongolian lawyers had their first forum, the Legal Forum. We tried to
emulate the economic forum model.
- One topic of interest was the session entitled “Time for lawyers to address the client’s
concerns”. We had been quietly suffering as businesses, and never had this platform.

25. - Another session was entitled “Keeping the balance between employers and employees”. As you
know, it’s very difficult to hire somebody in Mongolia. There are a lot of lawsuits. We discussed
this in the presence of regulators.
- What BCM has done today, with all the topics, is a great thing.
- There has been one common trend: the government still has to do a lot, and we as private
businesses have to improve cooperation with the government.
- Using the runner’s analogy: it’s nice when the government runs with you, not when they are the
judge and put hurdles in front of you.
- On ESG: Mongolian businesses, as late starters, are unlucky. While developing businesses, we
also have to follow this international trade.
- Triple bottom line is the ESG.
- According to the UN, it’s not only permitted to integrate ESG issues into investment analysis, but
it is part of their fiduciary duty to do so.
- Likewise, it is the fiduciary duty of Mongolian businesses and citizens to protect the
environment.
- Today is a showcase of how far our businesses have come up.