Mongolia is experiencing unprecedented growth and mining investment but admits it is lagging behind on the infrastructure side, which may hamper further resources investment.
Mongolian Ministry of Road, Transportation, Construction and Urban Development department director Yo Manlaibayar told the Mongolia Investment Summit the country plans to spend around $5 billion on rail between 2012 and 2016.
The government already completed a $700 million bond issue for railway construction but will need much more.
Manlaibayar said the government hoped to raise part of the funds via the initial public offering of Erdenes Tavan Tolgoi, which is expected to raise more than $3 billion.
The government also plans to create a new company called Mongolia Railways, which will own the new rail infrastructure.
Manlaibayar said there had been discussions to privatise up to 49% of Mongolia Railways.
“Which we hope will also raise funds for construction of the railways,” he said.
The next four years will also see the construction of 5572km of new roads connecting the capital Ulaanbaatar to the provinces at a cost of $4.8 billion.
The construction of the first 3000km has already started.
The government will also spend $2-2.5 billion on a 990km trans-Mongolian road connecting Russia
to China, which is also set to be completed by 2016.
A further $800 million will be allocated to roads around Ulaanbaatar for new roads and the rehabilitation of existing roads.
In an earlier presentation, World Bank Mongolia senior infrastructure specialist James A Reichert said the government was seeking private investors for road infrastructure but the amount of overloaded vehicles currently on the roads could hamper investment.
He said construction of major projects was more difficult, expensive and time consuming in landlocked countries like Mongolia.
Around 45% of the country’s 2.9 million people live in Ulaanbaatar but it is estimated around 60% live in substandard housing.
The government plans to spend $6.2 billion to build 100,000 new housing units around the capital.
Manlaibayar said the government would require third-party investment to complete its plans.
“Obviously we cannot wait for the mining operations to generate that revenue because we need the infrastructure for the mining,” he said.
“So for us it’s not a case of the chicken or the egg – it’s the chicken.”
GE recently opened an office in Ulaanbaatar and chief representative Tumentsogt Tsevegmid said the company was looking to be a leading infrastructure provider in Mongolia.
This article first appeared in ILN's sister publication Miningnews.net.
