Business Council of Mongolia, Kempinski Hotel, Ulaanbaatar Mongolia, 27th August 2012

Improving Transparency in Mongolia

Монголд ил тод байдлыг сайжруулах нь

ТӨСЛИЙН УДИРДАГЧ: САНГИЙН ЯАМ

-2-year project lead by the Mongolian Ministry of Finance.

- Working with The University of Sydney.

- Other partners include Financial Regulatory Commission of Mongolia and Mongolian Stock Exchange.

- Funding provided by the Australian Government (AusAID).

- The project goal is to improve transparency and accountability in the Mongolian public sector

Four project outcomes:

1) identify material deficiencies in the current practice of public sector disclosure;

2) build capabilities in key public institutions in the areas of disclosure;

3) develop a locally contextualised best-practice framework; and,

4) design systems for the aggregation and dissemination of public sector performance that conform to international best-practice.

INTERNATIONAL BENCHMARKS

A number of international ratings play a material role in defining the quality of transparency and accountability in Mongolia.

* Transparency International – Corruption Perception Index

* World Bank – Doing Business Report

* IMF and World Bank – Observance 0f Standards and Codes

* The Extractive Industries Transparency Initiative

They aggregate data from:

•business surveys;

•assessments by risk analysts; and

•country experts from international institutions.

TRANSPARENCY INDEX RANKING

0

20

40

60

80

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011

Mongolia ranking

All countries

TRANSPARENCY INDEX RANKING

61

4552

58 60

73

0

20

40

60

80

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011

Mongolia ranking

All countries

Perceptions of corruption are

increasing

EASE OF DOING BUSINESS RANKING

0

20

40

60

80

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011 2012

Mongolia ranking

All countries

EASE OF DOING BUSINESS RANKING

61

4552

58 60

73

86

0

20

40

60

80

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011 2012

Mongolia ranking

All countries

Regulatory environment constraining

business activity

REGULATORY QUALITY

Worsening perception of the ability of the

government to formulate and

implement sound policies and regulations

that permit and promote private sector

development.

CONTROL OF CORRUPTION

Worsening perceptions of the extent to which

public power is exercised for private

gain, including both petty and grand forms

of corruption, as well as "capture" of the state by

elites and private interests.

EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE

2010 was the first year that Mongolia was

considered compliant

Decrease in discrepancies between

taxes and royalties companies disclose

they have paid and the amount government

discloses it has received

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2006 2007 2008 2009 2010

Company payments

Government reciepts

SOVERIGN CREDIT RATING

Mongolia’s sovereign credit rating is ranked as BB- (non-investment grade).

Comparative analysis suggests that governance indications are comparatively weak.

The sovereign credit rating is influential in informing the investment decision choice and the cost of borrowings for:

- The Mongolian Government

- Domestic banks

- Domestic private sector

- Foreign investors

SOVEREIGN RATING CRITERIA

Source: Criteria For Rating Sovereigns, Standard & Poor’s

1 5432

SOVEREIGN RATING CRITERIA

Source: Criteria For Rating Sovereigns, Standard & Poor’s

SOVEREIGN RATING CRITERIA

Source: Criteria For Rating Sovereigns, Standard & Poor’s

SOVEREIGN RATING CRITERIA

Source: Criteria For Rating Sovereigns, Standard & Poors

SOVEREIGN RATING CRITERIA

Source: Criteria For Rating Sovereigns, Standard & Poors

SOVEREIGN RATING CRITERIA

Source: Criteria For Rating Sovereigns, Standard & Poors

EAST ASIA DEBT ISSUANCES

Source: Mongolia Quarterly Economic Update, The World Bank, June 2012, p. 12

EAST ASIA DEBT ISSUANCES

Source: Mongolia Quarterly Economic Update, The World Bank, June 2012, p. 12

A+

AAA

A+

A+

A+

BBB-

BBB-

BB-

SAVINGS FROM FUTURE BORROWINGS

Mongolia’s National Development and Innovation Committee (NDIC) estimate that Mongolia will require USD$50 Billion in funding in next five years (2013-2017).

If borrowing at BB- rating where to remain at 5.75%, the annual interest bill would be a staggering USD$2.875 Billion

SAVINGS FROM FUTURE BORROWINGS

Mongolia’s National Development and Innovation Committee (NDIC) estimate that Mongolia will require USD$50 Billion in funding in next five years (2013-2017).

If borrowing at BB- rating where to remain at 5.75%, the annual interest bill would be a staggering USD$2.875 Billion

An improvement in sovereign credit rating which leads to a one percent (100 bps) reduction in interest equates to USD$500 million in savings every year for Mongolia.

These savings can be used to fund other valuable economic and social priorities for Mongolia.

CONTACT