MONGOLIA ECONOMIC FORUM 2016

Ulaanbaatar, 30 March
Keynote Speech
Ayumi Konishi
Director General, East Asia Department, Asian Development Bank

I.

INTRODUCTION

Honorable Prime Minister Saikhanbileg, distinguished guests, ladies and gentlemen:

I am truly honored to participate in this prestigious Forum. I first would like to express my
sincere appreciation to the organizers for inviting me to address this Forum today.
I am particularly delighted to be here to speak immediately after the Honorable Prime Minister,
because this year the Asian Development Bank is celebrating 25 years of our partnership with
Mongolia. I am proud that ADBs assistance has played an important role in transforming
Mongolia into a middle-income economy. I congratulate the government of Mongolia for the
outstanding achievements since 1991.
Today, I want to look back to what Mongolia has achieved in partnership with the international
community, including ADB, and then look towards the future and discuss what we can possibly
do together. I, myself, as well as ADBs Country Director for Mongolia, Robert Schoellhammer,
find ourselves particularly fortunate because we have personally witnessed Mongolias
transformation since early 1990s, and now again working on this beautiful country. We are very
excited at Mongolias future prospects and opportunities, although of course there are
challenges that need to be addressed, particularly in the short run.
As ADB is launching today our flagship annual publication, the Asian Development Outlook
2016, I also would like to introduce some of its key messages.

II.

25 YEARS OF PARTNERSHIP

ADB was one of the first international financial organizations to enter Mongolia when the country
adopted the market economy and started opening up a quarter of a century ago. Today, ADB is
by far Mongolias largest multilateral development partner, with cumulative assistance of $2
billion in grants and loans. The total approved projects in 2015 alone amount to $300 million,
and we have an active portfolio of projects totaling $860 million.
ADBs country strategy for Mongolia has evolved over the years to match the changing needs of
the country. Assistance has been provided to help deepen market-oriented reforms, stabilize
and broaden financial markets, establish or rehabilitate key infrastructure, develop agri-

business, improve services in secondary towns and cities, and restructure social services
including education and health.
Together with other development partners, ADB has supported transport infrastructure
development to enhance connectivity and build regional and global market links, which are
essential to diversify Mongolias economy and generate employment. The Regional Road
Development Project, approved in 2004, completed the 997km north-south road link from
Altanbulag on the border with Russia to Zamyn-Uud on the border with China. This corridor is
part of the Asian Highway Network and is also recognized as a regional corridor under the
Central Asia Regional Economic Cooperation Program (CAREC). The road promotes broad and
inclusive economic growth of Mongolia, including connecting isolated communities along its
route. More recently, we are assisting the Western Regional Road Corridor which runs through
Bayan-Ulgii and Hovd aimags, and which links Mongolia to its main trading partners. At the
same time, we are improving and connecting local roads in Mongolias remote western region,
where more efforts are needed for growth and to improve opportunities.
In the past 25 years, ADB supported the development of the aviation services including the
rehabilitation of the Chinggis Khan Airport and construction of the terminal, and financed the
navigation equipment which enabled Mongolia to collect fees from airplanes flying its airspace $70 million annually is generated from a $15 million investment! Development of mobile
communication, or telecommunication industry, was also supported by ADB. In late 1990s, we
also supported the rehabilitation of the CHP-3 to ensure reliable supply of heat and power to the
residents of Ulaanbaatar.
ADBs assistance has also focused on underpinning the urban development process, as well as
catalyzing investment through the use of publicprivate partnerships and innovative financing.
This resulted in an increasing focus on the institutional and financial sustainability of urban
services. Specifically, ADB has sought to improve public transport and reduce air pollution,
enhance water supply and strengthen wastewater management services. A flagship project is
the ongoing Ger Area Development program of $320 million, in cooperation with the City of
Ulaanbaatar.
Education and health are two key areas that I should not forget to mention. Education has been
a main focus of our assistance since ADB began its partnership with Mongolia 25 years ago,
and we are proud to have worked in every single soum in Mongolia. Support was initially
provided to design a long term plan to reform the education sector, and then we focused on
supporting basic education infrastructure and set the foundation to improve the quality of
education. In the mid-2000s, this strategy evolved into a more refined approach focusing on
aligning the skills and education of the labor force with market demand to mitigate growth
constraints due to skills shortages. Mongolia can be rightly proud that it is one of the most
educated countries in Asia.
In the health sector, ADB and the Government have worked together with other development
partners to upgrade health care standards, with remarkable achievements in primary health
care, both in urban and rural areas. Progress has also been achieved in terms of increasing
medical attention in the rapidly developing ger areas in Ulaanbaatar.

ADB also helped to promote private sector development, with many household names seen in
shops across the country having been beneficiaries of ADB support. We assisted the
government to encourage private sector participation in financing and managing infrastructure
and social services. ADB has assisted to create an enabling environment for the private sector
to engage in publicprivate partnerships. Efforts include the development of model transactions
in the power, transport, and urban sectors. ADBs private sector operations in Mongolia to date
amount to about $200 million including $100 million in the Trade Finance Program.
Mongolia is an active member of CAREC, and it uses CAREC as an effective platform to open
up export markets. In this connection, I would like to congratulate the government of Mongolia
for successfully hosting a number of CAREC events including the Ministerial Conference as the
chair last year. We also appreciate the successful organization of the first ever CAREC
Investment Forum.

III.

LOOKING TO THE FUTURE

Mongolias vast mineral wealth has attracted significant foreign direct investment (FDI) that
turned Mongolia into the fastest-growing economy in the world in 20112012. Rapid economic
growth made Mongolia a middle-income country in 2011.
While economic development has brought great prosperity to the country, there is room to make
growth more inclusive. Transforming Mongolias mineral wealth into assets for sustainable and
broad-based development is the countrys most important development challenge. In this
context, making mining-led growth inclusive, and managing the environmental impact of mining
and rapid urbanization is critical for Mongolias future growth.
Long-term prospects for the country are promising. Large ongoing mining projects are expected
to significantly increase economic growth in the future, produce resources to generate new
employment opportunities, and create surpluses in the fiscal budget and the balance of
payments.
However, the current external environment, characterized by falling commodity prices, modest
FDI inflows, and slowing growth in China, is constraining Mongolias mineral production, exports
and fiscal revenue collection. It is also depressing GDP growth. The Asian Development
Outlook 2016 is forecasting Mongolias GDP growth at 0.1% this year, and 0.5% in 2017.
The economic slowdown underscores the importance of strengthening social protection in
Mongolia. This is particularly important in the context of the government commitment to
economic restructuring and adjustment. The needed fiscal consolidation and monetary
tightening required to ensure macroeconomic stability could have a short-term contractionary
effect. There is a danger that reductions in the welfare budget will reverse the commendable
achievements in poverty reduction since 2010. Against this background, ADB is supporting
social protection and the strengthening of social safety nets to ensure adequate living standards
while prioritizing job creation.

Climate change adds to the challenge demanding rapid solutions as pollution, desertification,
water scarcity, and deforestation can jeopardize the countrys future. These are particularly
challenging for nomadic life and pastoralism, which are integral parts of Mongolian traditions.
Looking ahead, ADB, together with the entire development partner community, seeks to
continue supporting inclusive economic and social development of Mongolia through
competitive, sustainable, and regionally integrated growth that is closely aligned with the
countrys Sustainable Development Vision 2030.
As we plan to formulate our new Country Partnership Strategy for Mongolia for the 2017-2020
period following the elections in June, we hope to build on solid experience and expertise in key
sectors accumulated throughout 25 years of successful partnership and policy dialogue. We
look forward to fruitful discussions to design a new partnership strategy to support structural
reforms in a challenging external environment.

IV.

CONCLUSION

In closing this keynote speech, let me congratulate once again Honorable Prime Minister
Saikhanbileg and his economic team for skillfully managing the countrys economy during a very
difficult period to ensure its stability. We appreciate that fiscal and monetary tightening is not
necessarily a popular policy, but we firmly believe that it has been absolutely necessary for the
countrys sustainable growth.
We often say that one cannot jump with his or her knees completely stretched in fact we need
to bend our legs before we jump.
In our Asian Development Outlook 2016, we commented that consistent fiscal policy, effective
continuing efforts to diversify the economy, and ensuring social protection are important
challenges of economic management in Mongolia.
Mongolia has come a long way. I still remember the dark cold airport, dark streets with very few
old Soviet cars, no hotels of international standards, government department store with only a
few goods, and no vegetables in restaurants. Although there were some difficulties time to time,
I do believe Mongolia has developed so much in the last 25 years and I have no doubt it has a
very bright future.
The Asian Development Bank will continue to be Mongolias strong development partner, not
only on sunny days but also on rainy or snowy days.
I also want to send my best wishes for the success of Mongolia Economic Forum 2016.
Thank you.