The Premier N.Altankhuyag: Development needs a thorough stability

Ulaanbaatar /MONTSAME/ The Prime Minister of Mongolia Mr N.Altankhuyag Tuesday gave an interview to A.Baatakhuyag, the head of the MONTSAME news agency. Q: Last year, the cabinet addressed a parliament left-wing opposition and nationalists and put in all effort to approve the law that has created stable legal and tax environment for foreign investors. Do you feel any benefit of this law? A: We passed last year the new law on investment. This law has fulfilled its purpose to create a favourable condition for both domestic and foreign investors, therefore, a matter on tax environment has been clearly determined, and a legal environment has become stable. We have provided the investors with good conditions for making investments, in a sustainable environment based on investment sizes. In addition, the “Invest Mongolia” agency, or the Investment Department, has been set up to help investors through the laws and to ease criteria for investing in the country. The agency also aims to support investors in studying the market and in getting familiarized with the national legal environment. Account managers are working in charge of every sector of investments. Briefly, it aims to abolish any pressure on investors. Q: Does it mean that anyone can apply to the Invest Mongolia when willing invest in Mongolia? A: Yes. If the investments are smaller, they can get registered at the State Registration Authority (SRA). Q: Our tax system is quite simple and comprehensible. Called “Four tens”, it has been created by the democratic forces and has been put after Hong Kong in the world. In reality, the investors have worries about a sustainability of the tax environment rather than a size of investment they make. How long will this tax policy last for? A: It is simple: based on sizes of investments, the periods of the tax stability ranges from seven to 22 years. Q: What are other measures to attract the investors? A: The amended law on Stock came into force from January 1 this year, giving investors economic rights to work at the national stock market, to issue shares of Mongolian companies at the world market, whereas the Mongolians can buy stocks of foreign companies. Moreover, investment funds can carry out activities in Mongolia. Q: Our national companies have proved themselves to make big investments. For example, the “Ukhaa khudag” mining company wants more favourable terms, equal to those of foreign investors. How does the cabinet assist in it? A: One of the key features of the newly adopted law on investment is that both Mongolian and foreign investors are supported equally. Q: Mongolia has gained achievements in becoming more independent from any nation, but, in economic terms, many problems are caused due to a dependence on one big investor, I think. What are the results Mongolia reached so far in a course of the long-lasted talks with investors of the Oyu Tolgoi project? I assume that tendency of many investors is expected to become clearer after tackling this matter. A: In the last year, our government and the Rio Tinto Group cooperated actively and fruitfully, for example, the sides managed to resolve a huge deal of 30 questions, now we have some 5-6 matters left. Our biggest achievement in 2013 was to export a first part of gold and copper concentrates extracted from the Oyu Tolgoi. This is a big success. By the plan of 2014, a capability of the Oyu Tolgoi mine will surpass the Erdenet Mining Corporation's. It means that the Oyu Tolgoi intends to extract more than 500 thousand tons of concentrate a year. Apart from this, our cabinet is discussing with the investors an issue of raising a capital for the underground mine. Q: Late 2013, the Government insisted on the belt tightening policies. Will it continue this year? A: Yes, it will. A rapid increase in the Government Budget Expenditure has become greater weight on the shoulder of the Government. In 2011-2012, a system was in force that allowed expenditure growth in accordance with a raise in the budget income thanks to a bump in foreign investments. To abolish this wrong mechanism, tolerable costs have been saved in the Government Budget of 2014, with an aim to keep the budget deficiency under two percent of the GDP. Rapidly increased costs have caused an investment freeze of over 200 billion togrog. The Government, this year, has managed to save not only the budget investment expenses, but also its operational expenditures. Thus, the Government has reduced budget Expenditure. The same policies will continue in 2014. Q: Parliament has strong position in preventing a swell in foreign debts. However, the Government needs a large amount of money to fund infrastructure development in a country with vast territories like Mongolia. How about major infrastructure projects that have been taken place? What are solutions the Government could find in this regard? A: Last year, the Government raised a bond capital of USD 1.5 billion in foreign market. The bond capital has not been spent to cover any budget deficiency or welfare program. Instead, the Government financed infrastructure and industrialization with the bond capital. Paying great attention to export increase and import substitution, we are spending the capital of Chingis Khaan Bond to support industrialization in the nation. Q: The Government has issued a foreign debt instrument accounted for over billion dollars (the Chingis Bond) for the first time. What sectors will receive funding from the capital of the Samurai bonds? A: The bond capital is intended to fund industry sectors. The Government is planning to make the greatest ever investment of one trillion togrog (about 600 billion from Chingis bonds and over 300 billion from Samurai bonds) to national manufacturing sectors. The Government has decided to support the national industrialization, under a motto of 'Let's Produce in Mongolia'. Q: Upon hearing the economic growth of Mongolia, the French Foreign Minister joked if the comma in the number was misplaced. Mongolian people seem discontented with a slight drop in the economic growth of the nation. What do You think about it? A: Mongolia needs a foam-free, stable economic growth. In the first 11 months of the last year, the nation witnessed an economic growth of 11.5 percent. Late 2013, great revivals occurred in sectors of mining and animal husbandry. Final results will come out this February. We are expecting an economic growth of 12 percent at least. Another primary indicator of economic growth is inflation, which had been estimated at 14 percent previous years. However, inflation declined down to 10.5 percent in 2013, showing a decrease of 3-4 percent. The commodity price went down, while the economy grew significantly nationwide in 2013. Q: There is a conflict between Mongolia's need of efficient minerals exploitation and foreign investors' interests, which has caused political tensions in the last years. However, the Government has been operating in a well-balanced manner. Would a lately discussed draft law on restriction for double office holding in the Government and parliament affect the political stability of the nation? The investors greatly emphasize the political stability, as well as legal and taxation environments. A: We are talking the issue of double office holding for 20 years, experimenting every alternative available, and even forming a Government with no parliament member. This matter further refers to many subjects including election structure. I believe a parliament member can work at the Government at the same time. The law will be put into effect before the 2016 parliament elections, in order to prevent any political tensions. -Thank You for the interview.