🛢 Oil in Mongolia | Interview | ₮500B Municipal Bond

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Honk Honk! The School Bell and Traffic Jams Return! 🚗🎒

Hold onto your yak carts, Mongolia! The school bells are ringing, and the streets are bustling with more traffic than a goat trying to navigate a maze of hay.

In today’s edition:

• The regular fall parliamentary session

• Oil refinery

• Ulaanbaatar Bond

Let’s dive in!

⚖ Bills to pay attention

The regular fall parliamentary session annually opens on the 1st of October. During the upcoming fall session, parliament will discuss 62 bill drafts, of which we’re highlighting three laws.

• The Land Law Amendment: This law came into force 11 years ago and has been amended 32 times. The revision of the law includes provisions of the Law on Investments that have a significant effect on eliminating restrictions on the use of land by foreigners.

• The Law on Minerals: The new term "important mineral" is included in the draft of the revision of the law. The government has arranged for the list of crucial minerals to be approved. In the near future, the term "strategic deposit" will be replaced with "mineral of strategic importance."

• The Law on National Wealth Fund: After three years, the government finally submitted the law to the parliament. The law, in short, concentrates the income from underground resources into the National wealth fund. In addition, the draft law stipulates that the fund will have three sub-funds: a Future Heritage Fund, a Development Fund, and a Distribution Fund.

If these bills are approved by Parliament, it will affect the capital market significantly. So, keep an eye on them.

DATA STORY: 🛢 Oil refinery

In 2016, the Government received a $1 billion soft loan from India's Exim Bank to build an oil refinery, which is scheduled to be operational in 2025. According to estimates, the plant will process 1.5 million tons of oil, 560,000 tons of Euro standard gasoline, 670,000 tons of diesel fuel, 107,000 tons of liquefied gas, and other products. Also, if the oil refinery is put into operation, the GDP can increase by 10%, and the manufacturing industry can double.

Mongolia’s first municipal bond

Ulaanbaatar City officials formally submitted its ₮500 billion bond introduction to the Financial Regulatory Commission (FRC). We had a conversation with J. Sandagsuren, the First Deputy Governor of Ulaanbaatar in charge of Economy and Infrastructure, regarding the bond.

While the idea of issuing municipal bonds has been discussed for years, this marks a historic moment as the first issuance of municipal bonds is now on the horizon. What led to this decision at this point?

J. Sandagsuren: The decision to proceed with municipal bond has not been hastily made. The Parliament firmly endorsed and approved the overhaul of the Law on the Legal Status of the Capital City, last year. Additionally, last month, both the Government and the Ministry of Finance allowed Ulaanbaatar City to issue municipal bond up to ₮500 billion. Subsequently, Citizens' Representative Khural (CRKh) of Ulaanbaatar city convened and decided to issue the bond. Therefore, this is a collective endeavor of the Parliament, Government, and CRKh.

Why now? Ulaanbaatar operates within a budgetary framework that inherently slows the pace of executing most projects due to budget constraints. Consequently, this situation results in increased costs and substantial missed opportunities. Against this backdrop, the city is embarking on the strategic endeavor to expedite the financing of urgent, high-impact societal projects, leveraging a novel financing mechanism aligned with international standards.

Could you elaborate on the scale, terms, and conditions underpinning the city's imminent municipal bond issuance?

J. Sandagsuren: BDSec (BDS) has been appointed as the underwriter. A plan is to raise ₮500 billion in 3 tranches. CRKh has set an upper limit of +5% above the policy rate on the interest rate. Naturally, our aim is to secure the lowest interest rate feasible. The projected tenure spans between 2 to 5 years, contingent upon the specific projects being financed.

🏃 QUICK STORIES

🔵 Suu (SUU)’s net sales income increased by 38% compared to the same period of the previous year and reached ₮73.5 billion. Profitability improved due to increased sales revenue and a 24.9% reduction in operational expenses, resulting in a gross profit margin of 26%-29%. As a result, the net profit increased 2.3 times to ₮8.9 billion.

🔵Real estate brokerage services increased 40.2% (YoY) reaching ₮992 billion. The boost resulted in 127 real estate brokerage organizations selling 707,600 square meters of land in 4,728 deals.

🔵During the celebration of the 247th anniversary of America's independence, Ambassador Richard L. Buangan remarked, "We firmly believe that Mongolia remains a shining oasis of democracy and an example for other countries in the Indo-Pacific region."

🔵Gobi (GOV) starts making shoes. The company introduced its first "Cashmere sneaker". Its shoe insoles are made of eco-materials containing 15% recycled algae from the lake. In addition, their revenue surged by 81.9% from the previous year and reached ₮83.5 billion in the first half of 2023.

⭐ TOP NEWS

• What?: A Mongolian marathoner’s secret weapon. (NYTimes)

• What to read: Pope Francis's first-ever visit to Mongolia. (TheConversation)

• Recommended: All about Mongolian history. (goodreads)

👀 WATCH: 11 ways to travel through Mongolia on a budget.

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Editor: E.Zolbayar
Writer: M.Khulan & Skh.Angirmaa

Disclaimer: The information Inside Mongolia provides is for educational and informational purposes only. It is not intended to be and does not constitute financial advice, trading advice, or any other advice. The decision whether to consider the information we provide is solely our readers' independent decision.