bne IntelliNews -
Mongolia's Prime Minister Chimed Saikhanbileg submitted to parliament on December 3 a new government structure that will serve as the foundation for his proposed “super coalition” government.
The steady pace at which Saikhanbileg builds his government provides further evidence that the government transition will be a smooth one, and will raise hopes that he will be able to lift up again Mongolia's fallen mining industry.
Saikhanbileg's “choice of a new cabinet over the next two weeks will be critical,” writes Marius Toime, a projects partner at international law firm Berwin Leighton Paisner, in the Financial Times' beyondbrics blog. “Including more professionals and experienced bureaucrats, rather than officials elected for political reasons, would signal a recognition that corruption must be addressed.”
Already dubbed the “Government of Unity” by Saikhanbileg, it will include the once-opposition Mongolian People's party. The idea is to forge out of multiple pacts an effective government, all working towards a single goal: restoring the economy to levels comparable to 2011, when Mongolia experienced peak growth of 17.5%.
If parliament approves, the new cabinet will have 19 posts divided between five parties. The government will have 16 ministries, the same as before, compared to the 13 proposed by former premier Norov Altankhuyag Norov just before he was ousted in November.
Noticeably absent, however, is the Environment and Green Development Ministry, which had been praised internationally for having the mission of steering development in a clean, environmentally friendly direction.
What's new is a mysterious post with no description at all, (the job is simply referred to as “minister”). That role will be anyone's guess. “The real reason I suspect is to find a middle ground with the coalition partners who all wanted a different structure,” says Badral Munkhdul, the chief executive of market analyst firm Cover Mongolia, in a note alerting clients to the news of Saikkhanbileg's proposal. He reckons that the job will be to manage a few key national programmes.
Quick action is needed as Mongolia's deadlines for its two largest mining endeavours approach. Moving forwards in both, says Saikhanbileg, is essential to his strategy to reboot the economy.
Foreign investment was down 57% for the first 10 months of the year compared with the same period in 2013, reported Mongolia's central bank. That is a large reason why the World Bank is predicting only 6.3% growth this year, which is still respectable but less than half of three years ago.
Activity at both the Oyu Tolgoi copper and the Tavan Tolgoi coking coal mines would help return some of that lustre from 2011. Construction of an expansion project at Oyu Tolgoi has been on suspension since August 2013 because of disputes between the government, which owns 34% of the $6.5 billion project, and 66% stakeholder Rio Tinto. The diversified Anglo Australian miner needs the government to consent to a $4bn project financing package that would pay for the expansion.
Also underway is a bidding process in which private companies take part in mining of the country's largest coal mine, the Tavan Tolgoi basin, owned by Erdenes Tavan Tolgoi. Hong Kong-listed Mongolian Mining Corp, which is owned by Mongolia's largest local holding company, in addition to companies from Japan and China are bidding for the rights to mine as a consortium. Mongolia plans to release a shortlist for the bidding by December 15.
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