DBM AND MINISTRIES FORM WORKING GROUP TO INVESTIGATE LOANS PROVIDED WITH FUNDS FROM CHINGGIS BOND

The Development Bank of Mongolia (DBM), mandated to ensure sustainable economic growth and support the leading economic sector, held a press conference to present its annual report. CEO of DBM B.Batbayar and Deputy CEO Ch.Enkhbat introduced the report to the media.

In 2017, DBM underwent legislative reform and modified its company policy, rules, and procedures in line with the new Law on the Development Bank.

DBM sourced funding from several sources including the Chinggis Bond and the Samurai Bond, using it to finance large-scale projects. There has been a lot of criticism regarding DBM investing this money into unbeneficial projects and mainly investing in infrastructure, roads, and city maintenance.

During a regular session on December 6, Cabinet delegated several ministries the responsibility of investigating further into the selection process, fiscal cost, capital expenditure, quality of execution, and the legality of 348 projects costing 3.184 trillion MNT that were transferred from DBM to Cabinet.

From the projects financed by the Chinggis Bond, the selection process, fiscal cost, and the execution regarding the Street Project, Amgalan thermal power station, Rural Road project, and State Housing Corporation have been the most problematic. DBM has transferred the issue regarding the Street Project to law enforcement agencies.

In addition, DBM has formed a working group with several ministries to probe into whether or not the funds were misappropriated. In the framework of this effort, the bank has formed a joint working group with the Ministry of Food and Agriculture to investigate the estimated 820 billion MNT that was lent through commercial banks to 1,600 companies operating in the agricultural sector. With the Ministry of Construction and Urban Development, DBM will be investigating State Housing Corporation, which received funding to build housing in addition to Erel LLC, which received money to develop a construction factory.

As of September 30, 2016, 26.7 percent of DBM’s loans were classified as stable. In December 2017, this figure improved to 70.1 percent of all loans. In terms of loans that were classified as volatile, the percentage decreased from 59.3 percent to 18.5 percent. In 2017 alone, DBM received more than one trillion MNT in loan repayment and interest payment.

In the past year, DBM took steps to ensure stability in the banking and financial sector. In cooperation with Cabinet, the bank drafted plans to refinance foreign debt and in the first quarter of 2017, refinanced 580 million USD. In total, 750 million USD was repaid in time of the maturation of the bonds, helping to improve Mongolia’s international reputation. Following this, the securities and bonds issued by Mongolia in international markets have increased value and a better chance of investment.

DBM also received 106.5 million USD in funding from a new source and opened up a line of credit up to 300 million USD from the Development Bank of the Republic of Belarus. In line with the reform on the Law on the Development Bank, DBM sourced funding from external sources independently and without backing from Cabinet, as agreed upon with the approval of IMF’s extended fund facility. In addition, other negotiations regarding attracting additional funding is underway.

In Article 8.2 of the Law on the Development Bank, it states that at least 60 percent of the funding provided by DBM will go towards supporting projects aimed at exports. In 2017, loans were provided to seven sectors, 67 percent of which went towards supporting exports. Of the 67 percent, 46 percent was provided to refinery factories, 18 percent to agriculture, 13 percent to mining, nine percent to construction, six percent for loans provided through commercial banks, six percent for health and social services, and one percent to the energy sector. Furthermore, projects aimed at domestic production and increase exports have already begun preparation. Among these, the Eg Gol hydrothermal power station, the oil refinery, Emeelt light industry factory, technology park, and the expansion of Thermal Power Plant No. 4.

Also in 2017, DBM established its equipment and machinery leasing company DBM Leasing LLC and investment fund DBM Asset Management LLC. The Eximbank of Russia provided a three to five year 10 million USD loan to implement the renewal of equipment and machinery in farming as part of the Atar 3 initiative. As of today, 131 companies and individuals are leasing 282 machinery and equipment.

At the end of 2016, DBM had a deficit of 191.7 billion MNT. With the new administration taking the reins, as of December 22, 2017, DBM reported a profit of 42.51 billion MNT before taxes.