Please share with us the opportunities and challenges of this promising sector of the Mongolian economy and how builders association is encouraging best practices in accordance with international standards?
Regarding the opportunities, I think the peak and high growth of the construction sector of Mongolia will come during this new parliamentary cycle. The coalition government entered into the right direction by spending income from the mining into construction and development, which is a really favorable situation for us. For example, a 100 thousand household project is being implemented in Mongolia, of which 75 thousand household apartments will be built in Ulaanbaatar city. Those 75 thousand apartments will be built in 16 towns and micro-districts. The remaining 25 thousand apartments will be built throughout these 21 provinces in 1000-household apartments each.
The reason why such a favorable investment situation was formed is that the mortgage program with 8% interest has been actively implemented. Thus, through this mortgage system, citizens have access to real estate financing so they can afford to buy an apartment.
From my viewpoint as a builder, the second necessity to build apartments is that due to the air pollution in Ulaanbaatar city. In Ger districts, more than 380 thousand households burning raw coal surrounding the city create huge amounts of pollution. The only solution to get rid of this pollution is to build as many apartments as possible and move these ger districts into apartments. That’s why the government of Mongolia will focus on building apartments in the next 10 to 15 years.
Around 380 thousand household apartments should be built in order to reduce UB’s air pollution. Of course, it is not easy to finance such large-scale projects on a state budget alone, so the government needs foreign investment. As the president of the Mongolian Builders Association, I think we can build those 16 micro-districts in cooperation with foreign investors using technology of those countries, for example, constructing the New-York district with US investors and Toronto district with Canadian investors. Is a way of urban development that we have done in the past with the Moscow district with Russian investments.
Regarding the construction sector, the current situation is favorable to execute large-scale projects. But, it has to be mentioned that Mongolian construction companies and builders are not in good shape.
The first problem is that when the country transitioned into a free market economy, the construction sector of Mongolia became basically non-existent with the recession. All the state property was privatized and now there is no government owned Construction Company. As of today, there are 2500 legal entities that operate in the construction sector with special licenses. This number is simply too high and most of these companies are too small and don’t even have sufficient capital. There are even around 600 small construction companies as a member of this association. I tell these companies to unite and form a consortium so that it will be easier for these companies to cooperate with foreign investors, investors such as from the US.
The second problem of the construction sector is the need of new technology. It is necessary to introduce new technology in the sector. In Mongolia, there is only a 6-month period to construct a building. Thus, we should be able to make buildings throughout the year. So the main technology is concrete pumping throughout the year and we are cooperating with the builders’ association of the US – National Association of Home Builders. Also, the Mongolian Builders Association sends our builders to the US every year to participate in the “Concrete Fair”. We participated in this fair just a month ago. In Mongolia, there is an American company introducing whole-year concrete pumping technology.
The third is, improving the skills of the builders. So, we send them to international fairs and train them. In order to attract international investors, our association is thinking of organizing a summit for specific investors, the same as that for coal mining. I realized lots of investors in the US cooperating with Chinese partners have already established companies in China. Thus, I’m looking to attract such investors to Mongolia.
Why is it important for you to attract American investors?
The reason I’m looking to attract American investors is that in the case that an American investor come into Mongolia, it can be a good practice for other investors of different countries. Another problem is that from china we only receive bad-quality construction materials, the easiest ones for being imported into Mongolia. So, if we could introduce other quality technology from the US, Korea and Japan, we can avoid such bad quality materials from China.
This is the first time in Mongolia’s history that the most emblematic US newspaper comes to the country with an official invitation from the Mongolian Ambassador in Washington. When we interviewed him, he really mentioned the potential of the construction sector.
We are so thankful to the US Embassy in Mongolia. In the last 15 - 16 years, we have been going to the US every February and the minimum of 20 and maximum of 50 people’s visas are easily issued upon the letter from the Home Builders’ Association. This is really a big opportunity and change. A total of 500 to 600 Mongolian engineers have visited the US fair. This is really a “bridge” between Mongolia and the US in construction sectors.
What is your final message for those American construction companies and potential investors that will read your words in our special report on Mongolia?
Generally, I know that the mortgage system is successfully implemented in the US and construction and apartments are in high demand. As a result, here in Mongolia, the opportunity in the construction sector is huge. I would like to invite US investors to come to Mongolia and cooperate with Mongolian companies and with the members of this association.