We interviewed Mrs G.Baigalmaa, Vice Minister of Construction and Urban Development.
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-The only one thing that folks want from the authorities is good and comfortable living condition. In order to fulfill their wish, the Government has issued a long-term mortgage loan with 8% interest per year. What have you done to ensure enforcement of this policy?
-Mortgage loan with 8 per cent interest has benefited many citizens. The housing demand was high. It is of great importance to support the construction industry while maintaining normal rates of supply of housing and avoiding price bubbles. Therefore, with the purpose to develop domestic production, our Ministry implemented a sub-program to support construction industry in 2013 in cooperation with the Bank of Mongolia. Four types of soft loan were issued with the purpose to maintain stable prices of construction materials, including the loan to support unfinished construction of apartment buildings, the loan to stabilize prices of cement and re-bar, and the loan for construction material producers to purchase of current assets. Also, soft loans were issues to individuals who are starting their businesses. Thanks to these loans thenumber of companies has improved their businesses and housing supply has increased. The number of apartments built and commissioned has doubled in the past decade. In other words, 12,000 apartments used to be commissioned nation-wide on average per year but after implementation of this program this number reached to 25,000.

-Many apartment buildings have been built nowadays. But what about the purchasing power?
-According to the commercial banks qualifications, 30 per cent of the total cost of apartment have to be paid before receive mortgage loan. However, those citizens who are able to pay such advance payment have already purchased apartments. A study showed that the households that cannot pay the 30 per cent advance payment are left without apartments. But at the same time, the demand for apartments is still high. According to surveys 11349 apartments were commissioned in 2011 and 24744 in 2014. Over 7000 apartments of those commissioned in 2014 were not sold in the same year. We expect about 25,000 apartments to commission this year, thus, there are about 32,000 apartments for sale on the market. Along with this sufficient supply, the purchasing power is weak. Thus, construction industry is slowing down. 

-The one of the main sector of Mongolia economy is definitely construction industry. As you said the industry is now facing challenge. What should be done to move it forward?
-The Government and the Ministry of Construction and Urban Development are pursuing a policy to provide soft mortgage loans to public service employees such as physicians, teachers, nurses, police officers and military staff with many years of service. Although these people have a permanent job and reliable source of income, they have no savings. They deliver the public services directly to the population and perform highly responsible and important job duties. Regulation to provide housing for public service employees was reflected in the initial Law on Public Services adopted in 1994. Article 27.5 of this Law provides the public service employees must be “provided with housing from the state”. According to the latest information, there are about 183,000 public officials and 68% of them are in the public service units and about 19% in the state special services. Most of them are physicians, teachers, police and military officers. The Governments of all times have implemented many programs and policies to provide housing for public service staff, but due to growth of the population and migration, more and more youth are joining and expanding education, health and military force organizations. The matter of social security and housing of these new and young staff has always been an issue. Separate laws that regulate sectors such as education and health and military force organizations have provisions to ensure social security of respective staff and secure their stable employment conditions. Therefore, in consideration of specifics of their job duties and revenue, the Government will issue a bond which will enrich the social insurance fund and make easier to collect and pay the 30 per cent advance payment for mortgage loans with 8 per cent interest per year. In other words, the advance payment will be 10 per cent.We are working to create an opportunity that the advance payment ispaid to a bank through the Government’s bond to guarantee the remaining 20 per cent. It means the job of the respective citizen will serve as a guarantee. This is not a new issue. We are just studying to develop a regulation to grant mortgage loans thattakes into account the current situation and income of the people. All social and economic industries, not only construction, depend on seasons. Mongolian economyrallies in warmer seasons. Therefore, one way to improve currency flow is to intensify the construction industry. As a result of decreasing the advance payment of the mortgage loan down to 10 per cent, many apartments will be sold and people will become able to create their comfortable living conditions.

-Citizens are slightly afraid and concerned that banks will consider the risks and raise the criteria after the change of advance payment. What policy do you have for this issue?
-It will be clearly set in the regulation. Let us take an example of a teacher. Salary rates of teachers who work at secondary schools, universities and colleges are clear. It is the same for the police staff. So, the monthly payment for mortgage loanto be actually paid by the staff can be estimated in detail. Then a list of jobs/positions that are paid at the rate sufficient to apply for the mortgage loan shall be specified in the regulation. New graduates or people who did not do their professional jobs for many years are not eligible to apply for the mortgage loan. It will be regulated that only people who meet criteria such as beingexperiencedand who will stably work in the future should be allowed for the mortgage loan. Guarantee from the Government’s Guarantee Fund for the remaining 20 per cent of advance payment shall serve as fulfillment of criteria set by commercial banks. Therefore, the banks will not change the criteria to grant a mortgage loan. It is a kind of a support from the State to improve its citizens’ social housing environment. It is estimated that 70 per cent of the mortgage loansobtained from commercial bankswill start to be paid after a year and a half or two years depending on the monthly amount paid to the mortgage loan and living standards of a household. In other words, at first the Government willbe paid back its 20 per centthat was paid from the Guarantee Fund.

-Private sectors are left out of the state benefits. They also want to live in apartments. What policy do you have for them?
-Public service employees and citizens who have lower income than average income of the society get benefits from the State. People who are working in private sectors have one difficulty which is again related to the afore-mentioned seasonal activation of the economy. People who work in industries such as tourism, agriculture and mining have higher income in warm seasons and they are at stand-by state during winters. It means that their income is not stable and varies from time to time. Therefore, banks consider such person as the one with high risk to pay back the loan as his/her monthly income is not regular and the person will have a difficulty to pay back his loan during colder seasons. Such a person is likely to fail to meet the bank criteria. Except for that, we are working to create an equal and accessible opportunity for everyone.

-Mortgage loan with 8 per cent interest per year is being issued in rural areas as well. What are the results?
-The State is providing citizens in rural areas with an equal opportunity in acquiring own housing. Construction of apartments for 1000 households in every province is reflected in the Government’s Program. The Ministry has done considerable works related to engineering networks and infrastructure in couple of years. In addition, the Ministry developed the general and partial development plans of rural provinces. In such way, the Ministry has been constructing apartments and blocks of buildings that are at affordable prices in agreement with local authorities and construction companies. In other words, land was providedfree by the state. The Ministry is setting price requirements for one square meter area of the apartments for construction companies and requiring them not to exceed such rates.

-Many factors including raw materials influence the price of apartments. What is the development of manufacturing of construction materials like in Mongolia?
-Soft loans that support manufacturing of construction materials are granted within the scope of sub-program being implemented in cooperation with the Bank of Mongolia. In particular, technological reform is ongoing at the Khutul Cement and Lime Factory. Cement factories of MAK and Monpolymet companies will be commissioned in Dornogobiprovince this year. Each of the factories has a capacity to manufacture one million tons of cement per year. Now cement is imported from China as the construction season is at its peak. Starting from next year we will no longer need to import cement from abroad. There is an estimate that above factories will be sufficient to fully supply the domestic needs. The Law on Common Minerals was adopted last year. Many factories of construction materials started to be established due to certain legal environment. Samples and assays of these factories operating in rural areas have to be brought to Ulaanbaatar for testing. Laboratories covering the provinces will be established. As of now, testing and sampling laboratory for construction materials has been commissioned and its equipment has been installed in Arkhangai province. Samples from factories of construction materials that are operating in Khuvsgul and Zavkhanprovinces could be tested here. Furthermore, every province will have sampling and testing laboratory in its center. This is one step to support manufacturing of construction materials. Development of raw materials manufacturing will create jobs in rural areas. In other words, there will be high economic value due to reduction of construction costs, transportation costs and to reduce outgoing flow of currencies by import.

-Citizens who are going to purchase apartments complain that price of one square meter of apartment is very high and there is a possibility to reduce the price. But there is no expectation of price fall.
-We estimated true cost of one square meter of apartments. Three factors affect the price. For instance, we get about 60 per cent of construction raw materials by import. Therefore, fluctuation of foreign currency rates such as yuan and US dollars has a direct impact. Moreover, land price is very high due to its infrastructure and engineering pipeline systems. Buildings are being constructed on land that is purchased at high costs. Additionally, commodity pricesare growing from day to day which leads construction companies to increase salaries of their workers. Today, people are not willing to work for a daily wage of MNT 25,000. Apartment cost is soaring on these conditions, thus it is impossible to reduce the price. Currently, there is no land to construct a building in Ulaanbaatar. Therefore, there is a need to develop a satellite city and reduce centralization. Mongolia has a small population and vast land but it is centralized due to infrastructure and engineering systems. Even in the capital city, population is centralized in the center of the city.

-What is the Ministry of Construction and Urban development doing to reduce the centralization?
-Engineering systems and infrastructure were established in Nisekh, Yarmag and Bayangol Valley in the past two years. Construction companies acquired land in these areas. Now infrastructure will be developed around Bogd Mountain to connect Ulaanbaatar with settlements in the south of the city. In other words, highway, railway and overpass roads will be built. A Working Group assigned by the Cabinet Secretariat is working on establishing Maidar Eco City, a settlement near the new airport in Zuunmod town, Khushigt valley. The project to establishMaidar Eco City will be implemented in four phases. Designs and planning of this city were developed in cooperation with German architects and engineers and the city will have a population of 300,000.  DGNB, an international organization, issued a certificate that is issued to green cities. This organization regularly monitors whether or not it complies with international standard requirements for the green cities. Therefore, it is a significant responsibility for us. Planning to make Zuunmod town out of the center of Tuvaimag was developed. The new airport is being built in 16 km from this town in Khushigt Valley.Designs and planning were developed to establish two settlements near the airport. So we need to study whether or not there is a need to establish a new settlement area. We are working on reducing centralization and establishing new settlements. It is impossible to reduce centralization of Ulaanbaatar without issuing a status of a town to a settlement with population of over 15,000 and developing it independently.

-Now new blocks of apartments are being towered every single day in Ulaanbaatar. But planning does not meet basic needs of citizens.
-Citizens want to live in new areas that have schools and kindergartens with green facilities. Midterm program “New development”was developed by the Ministry of Construction and Urban Development in 2010. Program to build apartments for 100,000 households was developed within the scope of the above mentioned program.  Construction of apartments for 75,000 households in 17 blocks of apartments and micro districts was specified under the program. Also, construction of new apartments for 25,000 households in rural areas was approved. One example is a block of apartments called “New Yarmag”. This block of apartments has a planning that complies with construction norms and regulations. For instance, it has a secondary school, kindergarten and vocational training center. Jobs will be created during construction. Unqualified people will be trained and employed. The project “New Yarmag” will be completed in six years. The Resolution to implement the project was approved by the Government last April. This is a development of the Public Private Partnership. 2500 jobs will be created during construction of “New Yarmag” apartment block. Over two years passed since commencement of construction works. Price of one square meter is affordable because it has been built on a new land and there was no need to free the land. Mongolians will be employed here. Goods and materials will be supplied from domestic sources. Apartments of 4000 will be built in this block of apartments.

-You have recently attended an international urban development forum in Germany. The project to establish Maidar Eco City was presented during the conference. Could you brief our readers about the city?
-Yes, during the international urban development forum in Berlin, we introduced the Maidar City Project. Participants were very interested in the project because planning was developed by German architects and engineers and establishing a city on a new land is easier and quicker than restoring the old one. Investors expressed their interests to visit Mongolia and cooperate with us.Also they were interested in how it is being supportedwithpoliciesbythe Government and Parliament of Mongolia.Maidar Eco City will occupy an area of 27,000 hectares. The project will be implemented in four phases. First phase will continue until 2030. Planning of the city should be understood properly. All conditions to ensure comfortable living of the residents must be created during the first phase of the project.For instance, all facilities such as schools, kindergartens, police department and green facilities that are necessary for a city were planned to be established. The matter of establishment ofMaidar Eco City was discussed by the Cabinet meeting last May. The Cabinet decided to submit a draft resolution regarding issuing the land for the project to the Parliament and the land matter is in the process of discussion.

-Building a town or a city will require huge funds and labor force. Most importantly, how will you resolve the issue of financing?
-This is the first question asked by everyone. Establishing a town or a city definitely requires a lot of time and enormous funds. We have an opportunity to get investment from European countries, especially Germany. There is basically no more need or requirement for European countries to plan and build new cities or infrastructure. Thus their Governments issue long-term soft loans to the companies that operate in the construction, development and infrastructure sectors and their employees in order to ensure they find a source of income. These companies are interested in getting such loans and implementing projects in cooperation with the Government of Mongolia. The entire world has shifted to environmentally-friendly green technologies and aims at having eco food, eco houses and eco living conditions. Everything that is being used has been upgraded or improved. Therefore, it is required to use green technologies in construction and establishment of buildings, facilities and infrastructure that is going to be newly built. Even wastewater treatment facilities recycle the waste and separate the sludge and waste water. The waste water is treated, disinfected and used for fish farming, for example.The sewage sludge is also treated, disinfected and turned into fertilizer to be used in gardening and farming. We need to introduce this new technology. On the other hand, many countries are using renewable energy. Throughout the year, Mongolia has about 300 sunny days. Thus, it has a great opportunity to utilize solar energy. Mongolia can even sell the excessive energy left from its own use. Thus the most up-to-date technologies will be introduced in Maidar City and are reflected in its urban planning. Briefly, European norms and standards on urban development will be introduced in Mongolia. Establishment of Maidar will reduce population growth and centralization of Ulaanbaatar. It will create a number of new jobs. A vocational training center will be built in the first place which will provide training on European norms and standards for the people who would be involved in development activities. The large development project will create many jobs and ensure life guarantee for people employed there.

-The Khushigt airport is under construction process. Probably an urban settlement will be established there. Does the Ministry have any plans in this regard?
-Yes, we do. The company that is building the Khushigt Valley airport notified us it would commission the airport within the approved schedule unless there is a delay due to a force majeure. The Ministry has development plans for settlements such as Maidar City, Zuunmod town and Khushigt Valley airport. The planning for these settlements must vary and be unique for each of them. For instance, Maidar city will become a unique city focused on Buddhism symbolism and mostly dedicated for tourists. Zuunmod town will become an industrial center that provides comfortable living environment.