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Laying the path for development

Interview - April 9, 2014
In Mongolia, only 24% of the roads are paved. The government’s goal is to have 100% of the roads paved by 2020, implying the paving of one thousand kilometers of road every year. Mr Munkhbaatar, executive director of Map Road LLC, speaks to United World about this ambitious plan and how local companies need foreign investment to help them to finance government-tendered projects
What are your thoughts on this ambitious plan? And what role would Map Road play in this program?

Many companies are being established in this sector and some of them are growing rapidly. Our company is one of those companies and from my own point of view, the government plan is achievable. Probably, the financing side of the project might be the main obstacle. Generally, Mongolian companies now have become relatively competent. The situation was quite tough in the 1990s, there were very few companies which were state owned, operating in the market with a little Russian technology. However, since 2000, I have seen lots of companies being established and become successful.

Financing is one of the problems in the sector. Do you think that the possibility of privatizing or maybe partial privatization would help the development of the infrastructure here in Mongolia?

Mostly, private companies are executing construction projects. Participation of state owned companies to development and construction projects is rare. The government should encourage in terms of financing, otherwise it is really tough for private companies to execute a project using their own financing.

How would foreign investment help local companies?

We need investment. Currently, concession agreement tenders are being announced. This is a project type where companies execute a project using their own financing and use it for a certain period of time and transfer it to the state. Concession tenders are announced on projects that the government is not able to finance. Local companies are not able to execute these projects independently, thus they need to cooperate with foreign investors on these types of projects.

How do private companies earn money with road? Is there a fee to pay when we use the road?

There are number of types, one of them is to have a road investment refunded by the government within two to three years upon completion and submitted to the state commission. There are very few local companies and one Chinese company executing road projects this way. Another way is to charge a usage fee from the project for a long time and later give it to the state. This is tough for companies though.

You mentioned before that you have been working as an assistant executor and then became a sub contractor for other big Mongolian companies. What is the advantage, how do you position your company, what is your role in the market?

Even now, our company is still operating as an assistant executor. Even though it has already been 8 years since our establishment, we work on all the projects as an assistant executor. The general executor of the railroad project is Samsung and we are again operating as an assistant executor.
You are often contracted by big companies in Mongolia. Why do you think they choose you over other companies? What is your competitive advantage over other companies.

Since our establishment, projects that we could act as an assistant executor on have generally been in sewage and dams, in which we have specialized. Ninety percent of all the assistant executor projects are related to artificial facilities. We have been executing dam projects since 2012 and until that time, all the projects we worked on were artificial facilities.

You have also mentioned something about the railway. How is your company involved in railway business?

We were contracted by Energy Resources, which initiated a railroad project in 2012. As the government was changed in 2013, it was decided that the project couldn’t be executed by private companies and as a result, the government transferred the project cost to Energy Resources and the project was transferred to the Mongolian Railway company. Mongolian Railways contracted Samsung company as the general executor on 267 km of road. At that time, our execution of 13 km of road was valued and an additional 13 km of road was given to our company. Thus, we are executing 26 km of road in this project. This railroad project is divided into 10 pieces, of which our company is executing artificial facility projects on 3 pieces.

In 2012, I know your company visited Germany. I was wondering how you communicate with international companies?

As we don’t have a specific strategy, we are limited to our current projects. Thus, we are looking for an investor who would be willing to comply with the requirement set by the government and cooperate with our company.
Our company’s mission is “Create together and Develop together”. Our policy is that our employees should grow and develop together with the company. Engineers make an agreement to be supported by the company on apartments, for example, they can possess an apartment by working for 3 years and the apartment will be transferred to their ownership after 3 more years.

Regarding other employees, even though we don’t state any apartment policies in our employment agreement, we implement a policy to give them an apartment after 5 to 6 years of employment. In 2013, in total of 9 employees were given apartments of which 6 of them were employees who didn’t have any apartment agreement in their employment agreement. We can get the most out of our employees through this policy.

We will also pursue the same policy with our partners – Create together and Develop together. I think, there are very few companies that encourage their employees to address their social matters, which is a very unique aspect of our company. It is not common to focus on the human resources for any company.

I have just one last question, many companies in the road sector have Mongolian names. But your company’s name is in English. Why did you give this name to your company?

It was tough to give a name to the company. One of my relatives actually recommended this name. Actually this name is related to my dream that we would participate in all road projects shown on the map. So far we have only worked on projects as an assistant executor, and we are willing to participate as a general executor. However as our operation might stop this summer, we are willing to participate on concession agreement projects cooperating with foreign investors.