The document summarizes Mongolia's potential competitive advantage in minerals like copper and coking coal due to its proximity and access to China's large market. It discusses Mongolia's abundance and quality of resources, as well as infrastructure investments linking it to China. However, recent political and economic uncertainty has led to mixed economic performance and concerns from foreign investors. The document outlines five key issues - fiscal policy, debt financing, foreign investment laws, the Oyu Tolgoi mine development, and the Tavan Tolgoi mine - that if addressed could help Mongolia realize its potential and diversify its economy.

1. Mr O. Orkhon
First Deputy CEO
August, 2011
Hong Kong
Mongolian Financial Services IndustryMongolian Investment Summit
MONGOLIA’S potentially
sustainable competitive advantage:
Can it be realised? What does it mean for you?
Randolph S. Koppa
President,
Trade and Development Bank of Mongolia
April 17, 2013

2. OUTLINE
• What is the advantage?
• Key factors
• How is it going so far?
• Current challenges
• Growth regeneration
• Opportunities

3. THE POTENTIAL ADVANTAGE
Mongolia is located next to the second
largest economy in the world which will
continue to grow at a high rate and which
will require increasing amounts of key
minerals Mongolia is blessed with. There
are two key minerals, copper and coking
coal, on which Mongolia can establish a
preferred position in serving China and
the rest of East Asia

4. BASIS OF THE ADVANTAGE
• Abundance
• Quality
• Scale
• Yields
• Production costs
• Proximity

5. LINKING TO THE MARKET
Size 1,040 km
Investment US$ 5.0 bn
Time frame 2013-2017

6. REQUIREMENTS
• Foreign investment
• Financing
• Infrastructure
The above three require:
• Political solidarity
• Legislative stability
• Fiscal and monetary discipline

7. GROWING GDP, DRIVEN BY INVESTMENT IN MINING
5.17
4.57
6.69
7.94
10.02
0
2
4
6
8
10
12
2008 2009 2010 2011 2012
GDP Growth
(US$ bn)
Source: National Statistical Office of Mongolia

8. CONSIDERABLE FOREIGN INVESTMENT
0.8
1.0
1.6
5.3
3.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2008 2009 2010 2011 2012
Foreign Direct Investment
Source: Bank of Mongolia, National Statistical Office of Mongolia; exchange rate of USD : MNT = 1392.1

9. RISING EXPORTS
Export Sector
Source: Bank of Mongolia, National Statistical Office of Mongolia; exchange rate of USD : MNT = 1392.1
2.5
1.9
2.9
4.8
4.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2008 2009 2010 2011 2012

10. LED BY FOUR COMMODITIES
Mln Mt/brl 2010 2011 2012
Coal 16.7 21.1 20.9
Copper 0.56 0.57 0.58
Iron Ore 3.6 5.8 6.4
Crude Oil 2.1 2.5 3.6
Source: National Statistical Office of Mongolia
Export Volume

11. 2013 PERFORMANCE HAS BEEN MIXED
• Coal exports down
• Q1 exports down 7.8% YoY
• FDI down dramatically
On the other hand
• Inflation down; now below 10% YoY
• Q1 imports down 17.3% YoY
• Budget being managed
• Funds raised for infrastructure

12. SOME INSIGHT
• 2012 Parliament and 2013 President elections
• Rise in populist and nationalist rhetoric
• Softening coking coal prices and demand
from China
• Reactive strategic enterprises foreign
investment law
• Unclear draft of new minerals law
• Chinggis bond raised international
observation of Mongolia’s affairs

13. RESULT: UNCERTAINTY
• Continuing as new “reform”
government administration moves
to implement change
• Creating a lot of foreign investors
“watching from the sidelines”
In recent months economic and
business concerns have revolved
around five issues:

14. FIVE MAIN TOPICS
• Fiscal and monetary policy
• Chinggis Bond and infrastructure
• SEFIL and minerals law
• Oyu Tolgoi
• Tavan Tolgoi (Erdenes Tavan
Tolgoi)

15. REPRESENTING A PENTAGRAM

16. CLASSIC SYMBOL OF WHOLENESS
• Fire
• Water
• Air
• Earth
• Psyche

17. FIVE INTERDEPENDENT ISSUES

18. A FORM COPIED IN NATURE

19. WITH REGENERATIVE CAPABILITY

20. TO RESTORE OPTIMUM CAPABILITY

21. DAMAGED ARMS REGENERATING

22. PROGRESS IS NOTED
• Inflation 9.8% in March; down 4% this year
• Fiscal surplus in February; lower spending
• New foreign investment law being readied
• Chinggis bond projects identified; railway
tendering commenced
• OT production continuing towards exports
this midyear; project financing being finalized
• TT (Erdenes Tavan Tolgoi) reengaging with
Chalco

24. GETTING BACK ON TRACK
Towards achieving the sustainable
competitive advantage which can help
Mongolia ride through the commodity
price cycles by achieving a preferred
supplier status.
In addition, progress can be made in the
strategy of value added processing such as
in the Sainshand Industrial Park

25. TOTAL FINANCING INVESTMENT NEEDS AND
OPPORTUNITIES 2010 TO 2015
• Mine Development $ 12 bn. to $ 20 bn.
• Infrastructure $ 8 bn. to $ 12 bn.
• Urban development $ 6 bn. to $ 8 bn.
• Agriculture $ 1 bn. to $ 2 bn.
• Industry and Commerce $ 15 bn. to $ 20 bn.
• Environment $ 1 bn. to $ 2 bn.
• Social $ 1 bn. to $ 2 bn.
• Financial Sector $ 1 bn. to $ 2 bn.
Totals: $ 45 bn. to $ 68 bn.

26. POTENTIAL SOURCES OF FUNDS 2010-2015
• FDI $ 11 bn. to $ 14 bn.
• Domestic sources $ 12 bn. to $ 18 bn.
• Sovereign Borrowing $ 3 bn. to $ 6 bn.
• Foreign Capital Markets $ 11 bn. to $ 16 bn.
• IFI & Foreign bank Loans $ 7 bn. to $ 12 bn.
• Donors and NGOs $ 1 bn. to $ 2 bn.
Total $ 45 bn. to $ 68 bn.

27. USD bln
* Chinggis bond USD 1.5 and DBM USD.6 bln
** Pending USD 4 bln OT project finance incl.
PROGRESS TO DATE

28. PLANELOADS OF OPPORTUNITIES
Please engage to generate, or regenerate,
your interest

29. Thank you for your attention!
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