Ulaanbaatar /MONTSAME/ The Asian Development Bank (ADB) has approved a $35 million loan to help state-owned asset management firm, Erdenes Mongol LLC, strengthen its management and investment capacities, allowing it to more effectively support the country’s drive for economic diversification, the ADB’s website reported Friday.
“Shifting away from an over-reliance on income from mining is crucial for sustainable and inclusive growth in Mongolia and Erdenes Mongol would play a key supporting role in the government’s efforts to diversify the economy,” said Hiroko Uchimura-Shiroishi, an ADB Financial Sector Specialist. “However the company’s performance is hindered by current constraints in its corporate structure and capacity. This technical assistance project will help it manage assets and identify investments more effectively, in line with its mandate,”
Mining in Mongolia accounts for 20% of the country’s gross domestic product and this heavy reliance makes it vulnerable to commodity demand and price volatility. In the past, Mongolia has also lacked an effective mechanism to channel funds raised from natural resources into the broader economy.
State-owned Erdenes Mongol was created in 2007 to manage state assets and to raise funds for infrastructure investments needed to broaden the economy. However, the company has been hampered by legal, corporate and management limitations, which the government is seeking to address through regulatory changes including amendments to the Human Development Fund Law, which were approved in January 2016. This will allow the company to strengthen its finances and operate as a commercial entity.
ADB’s technical assistance loan will help the company draw up a full corporate strategy for its operations, with midterm and long-term targets. It will support Erdenes Mongol for its project development and management in line with international standards. Erdenes Mongol will embed proper systems for investment decision making, sound corporate governance, and prudent risk management.
To accompany ADB’s loan, Erdenes Mongol is providing counterpart support equivalent to $6.2 million for the project, which will be carried out over 3 years, with an expected completion date of April 2019.
