financing investment in mongolia 2009
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Financing Investmentin Mongolia
Europe Mongolia Investors Forum
Randolph S. KoppaPresident
Trade and Development Bank of Mongolia
EBRD Headquarters, London December 3, 2009
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Mongolia
Wedged between two powerful neighborsWedged between two powerful neighbors
With a vast market close at hand, Mongolia seeks the help of theseWith a vast market close at hand, Mongolia seeks the help of these
two, plus third neighbors, to help make it happen.two, plus third neighbors, to help make it happen.
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Scope of presentation
Magnitude of future investment needs, by sectorMagnitude of future investment needs, by sector
InfrastructureInfrastructure EnvironmentEnvironment
SocialSocial
Agriculture and IndustryAgriculture and Industry
Sources of financeSources of finance
DomesticDomestic
ForeignForeign
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Focus on South Gobi
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Source: World Bank
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Major South Gobi opportunities
Source: World Bank
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Storyline
Copper: OT investment $Copper: OT investment $44 billionbillion
$$22 billion annual revs. (Net: $billion annual revs. (Net: $00..55-- $$11 bn.)bn.) Coal: TT and other investmentCoal: TT and other investment 11-- 22 billionbillion
$$33 billion annual revs. (Net: $billion annual revs. (Net: $ 11..44 billion)billion)
Gold, Zinc, Iron, Fluorspar, Uranium,Gold, Zinc, Iron, Fluorspar, Uranium,Petroleum investment $Petroleum investment $22+ billion+ billion
$$22+ billion annual revs. Net: $+ billion annual revs. Net: $00..55 billionbillion
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Storyline ( cont.)
GDP of Mongolia to double withinGDP of Mongolia to double within 55 yearsyears
Growing GDP lifts Mongolian people out ofGrowing GDP lifts Mongolian people out ofpovertypoverty
Mongolia eventually becomes a wealthyMongolia eventually becomes a wealthycountry along the lines of Norway or Qatarcountry along the lines of Norway or Qatar
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How to get there
Infrastructure:Infrastructure:
a enges an pportun t esa enges an pportun t es
PowerPower
RailroadsRailroads
Roa sRoa s
Urban DevelopmentUrban Developmenta era er
SocialSocial
Agriculture and IndustryAgriculture and Industry
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Power
Source: World Bank
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Power
Need to double capacity in next five yearsNeed to double capacity in next five years
$$22..22 billion investment neededbillion investment needed
Mine site plants can be project financedMine site plants can be project financed
Financing of UB plants?Financing of UB plants?
s can e ps can e p
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Railroad
Source: World Bank
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Railroad
Line from TT to Chinese border $Line from TT to Chinese border $687687 mnmn..
Financing from ChinaFinancing from China
Line fromLine from NariinNariin SukhaitSukhait to Chineseto Chinese
border $border $250250 mnmn. Financing from China. Financing from China
Other lines from mines to mainline or UBOther lines from mines to mainline or UB
-- .. nn eac . nanc ng rom uss aeac . nanc ng rom uss a
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Roads
South Gobi:South Gobi: 10001000 km. $km. $300300 millionmillion Source: World Bank
Elsewhere:Elsewhere: 20002000 km. $km. $700700 millionmillion
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Urban development
UB and major cities:UB and major cities: 100100,,000000 housinghousing
units: $units: $55 billionbillion
Cities needed in South Gobi as populationCities needed in South Gobi as population
triples totriples to 120120,,000000: $: $11 billionbillion
Other Urban development needs: $Other Urban development needs: $11 billionbillion
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Water
Source: World Bank
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Water
Water resources for South Gobi:Water resources for South Gobi:
$$300300 million for ground watermillion for ground water
Diverting from elsewhere:Diverting from elsewhere:
nee s:nee s:
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Environment
Land degradationLand degradation
ne ec ama onne ec ama on
PollutionPollution
Grazing accessGrazing access
DeforestationDeforestation
Water qualityWater quality
Costs to address:Costs to address: 11-- 22 billionbillion
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Social
EducationEducation
MigrationMigration
Community involvementCommunity involvement
Wealth distributionWealth distribution
HealthHealth
Estimated costs: $Estimated costs: $11 billionbillion
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Agriculture and Industry
Grain self sufficiencyGrain self sufficiency
Value added processingValue added processing
SmeltingSmelting
Coal asificationCoal asification
Estimated costs: $Estimated costs: $22 billionbillion
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Summary of Investment needs
Major minesMajor mines $$77 billionbillion $$1010 billionbillion
PowerPower $$22 billionbillion
RailroadsRailroads $$44 billionbillion RoadsRoads $$11 billionbillion
UrbanUrban DevelDevel.. $$77 billionbillion
WaterWater $$00..55 billionbillion
..
SocialSocial $$11 billionbillion
--------------------------------------------------------
TotalTotal $$3030 billionbillion -- $$3535 billionbillion
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Sources of financing
Domestic Banking SectorDomestic Banking Sector
Domestic Capital Market BudgetDomestic Capital Market Budget
Foreign BorrowingForeign Borrowing
oc ar eoc ar e
Foreign Capital MarketsForeign Capital Markets
ss DonorsDonors
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Foreign Investment
4
USDbillion
will be fundedwill be funded3
3,5
investmentinvestment2
2,5
0,5
1
,
0
2007 2008 2009 2010 2011 2012 2013 2014
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Banking sector
Banking sector is small compared to otherBanking sector is small compared to otheremerging countries:emerging countries:
Mongolia bank loans to GDP onlyMongolia bank loans to GDP only 3434%%
USA, Korea, China overUSA, Korea, China over 100100%%
To reach CEE level inTo reach CEE level in 55 years will require $years will require $200200million of outside equity capital as GDP doublesmillion of outside equity capital as GDP doubles
Banks could provide $Banks could provide $11..55 billion in investmentbillion in investmentfinancing, apart from working capital funding.financing, apart from working capital funding.
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Banks capital needs
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Stock Market
Mongolia stock market very small: approx. $Mongolia stock market very small: approx. $400400million market ca which ismillion market ca which is 2424% of domestic% of domestic
bank credit and $bank credit and $150150 per capitaper capita Develo in countries ratios aroundDevelo in countries ratios around 5050% or% or
$$30003000 to $to $55,,000000 per capitaper capita
Develo ed countries market ca e uals bankDevelo ed countries market ca e uals bankcredit, with $credit, with $4040,,000000 or more per capitaor more per capita
PotentiallPotentiall 22 billion or more could be raisedbillion or more could be raised
under properly organized stock exchange asunder properly organized stock exchange asmarket cap reachedmarket cap reached 4040% of domestic credit% of domestic credit
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Public debt
Mongolia has virtually no public debtMongolia has virtually no public debt
Mongolia needs to establish a domestic capitalMongolia needs to establish a domestic capital
marketmarket
This will enable a forward rate which willThis will enable a forward rate which will
attract foreign investorsattract foreign investors
Up toUp to 2020% of GDP should be possible based on% of GDP should be possible based on
other emerging countriesother emerging countries
This would mean up to $This would mean up to $22 billion could bebillion could be
raisedraised
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Investment by businesses
Spending by business on fixed assets willSpending by business on fixed assets willincrease from current estimatedincrease from current estimated 55% of GDP% of GDP
General level of developing countries isGeneral level of developing countries is 2525%%
Moving toMoving to 2525% of GDP will generate over $% of GDP will generate over $66,, ..
could be provided by domestic banks. Thecould be provided by domestic banks. Thebalance requires funding from profits or capitalbalance requires funding from profits or capital
mar ets an ore gn sources.mar ets an ore gn sources.
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Budget
Current Budget expenditures approx $Current Budget expenditures approx $11billion with small deficitbillion with small deficit
Increased revenues from mining can enableIncreased revenues from mining can enable
infrastructural needsinfrastructural needs
Fund aims to use surplus mining revenuesFund aims to use surplus mining revenuesto meet such needsto meet such needs
Estimate: $Estimate: $11 billion or morebillion or more
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Foreign Debt
Mongolia has less than $Mongolia has less than $22 billion in foreignbillion in foreign, ,, ,
aboutabout 4040% of GDP.% of GDP.
There is capacity to raise sovereignThere is capacity to raise sovereign
commercial debtcommercial debt
WithinWithin 55 years, additional $years, additional $33 billion couldbillion could
e ra se an eep e ra o e owe ra se an eep e ra o e owof GDPof GDP
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Bilateral
China has already expressed interest on upChina has already expressed interest on upto $to $33 billion in bilateral financing aimed atbillion in bilateral financing aimed at
rail, mining and mining infrastructurerail, mining and mining infrastructure
Russia has also targeted a similar amountRussia has also targeted a similar amount
Mongolias borrowing on debt marketsMongolias borrowing on debt markets
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Summary
The Domestic sources could provide about oneThe Domestic sources could provide about onethird of the investment needs or $third of the investment needs or $1010 billionbillion
FDI in mining should provide $FDI in mining should provide $1010 billionbillion
erer oo onon
From Sovereign and Bilateral loans $From Sovereign and Bilateral loans $33 to $to $55onon
Foreign Lenders, such as IFIs and InternationalForeign Lenders, such as IFIs and International
an s w nee o cons er up oan s w nee o cons er up o onon Donors and NGOs $Donors and NGOs $11 to $to $22 billionbillion
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A reachable goal?
Consider: OT and TT alone will generate $Consider: OT and TT alone will generate $33
Additional mining projects will add $Additional mining projects will add $11 to $to $22on a year n expor son a year n expor s
High rate of GDP growth should continueHigh rate of GDP growth should continue
Preconditions are political stability and strongPreconditions are political stability and strong
GovernanceGovernance
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What can you do?
Mongolia is on the RADAR SCOPE and warrantsMongolia is on the RADAR SCOPE and warrants
For example: City of LondonFor example: City of LondonAccountinAccountin
LawLaw
BanksBanksStock ExchangeStock Exchange
Investment BanksInvestment Banks
r va e qu yr va e qu yInsurance and PensionInsurance and Pension
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Shall we make a deal?
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If yes,
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Mongolias leading bank
Mongolias leading corporate bankMongolias leading corporate bank
TDB is the largest corporate lender in Mongolia withTDB is the largest corporate lender in Mongolia with 2525%%corpora e en ng mar e s ares. serves approx ma e ycorpora e en ng mar e s ares. serves approx ma e y
major Mongolianmajor Mongolian corporatescorporates in all major business sectors.in all major business sectors.
ea er n nternat ona an ngea er n nternat ona an ng
Having established overHaving established over 8080 correspondent relationships withcorrespondent relationships with
international financial institutions and correspondentinternational financial institutions and correspondent
offers a wide range of international banking services designedoffers a wide range of international banking services designedto appeal to both domestic and international clients.to appeal to both domestic and international clients.Currentl TDB maintainsCurrentl TDB maintains 2525 nostronostro accounts inaccounts in 1414 currenciescurrencies
withwith 2020 top rated foreign banks oftop rated foreign banks of 1515 countries. Total amountcountries. Total amountof trade finance lines reached USDof trade finance lines reached USD115115 million.million.
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Mongolias leading bank
Leader in foreign exchange and money marketLeader in foreign exchange and money market
TDB is a leading player in the domestic money market ,TDB is a leading player in the domestic money market ,.. ..
also dominates Mongolias foreign exchange and gold bullionalso dominates Mongolias foreign exchange and gold bullionmarkets with amarkets with a 4040% and% and 6060% market share respectively.% market share respectively.
First Mongolian issuer of debt on the international publicFirst Mongolian issuer of debt on the international publicmarketsmarkets
In JanuaryIn January 20072007, TDB successfully completed the first ever, TDB successfully completed the first everpublic placement of debt by Mongolian bank in the internationalpublic placement of debt by Mongolian bank in the internationalcapital markets with a USDcapital markets with a USD7575 mlnmln. Senior unsecured bond issue. Senior unsecured bond issuewithin a USDwithin a USD300300 mlnmln. EMTN program, arranged by ING Bank.. EMTN program, arranged by ING Bank.
by Moodys Investor Services. Despite the world economic andby Moodys Investor Services. Despite the world economic andfinancial turmoil, TDB recently has prepaid successfully overfinancial turmoil, TDB recently has prepaid successfully over4545% of its debit.% of its debit.
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Mongolias leading bank
Mongolias longest established bankMongolias longest established bank
TDB was established in OctoberTDB was established in October 19901990 and over past decade hasand over past decade hasecome a ea ng an ng an nanc a serv ces prov er necome a ea ng an ng an nanc a serv ces prov er n
Mongolia, offering overMongolia, offering over 6060 types of international standard andtypes of international standard anduniversal banking products. As the longest serving commercialuniversal banking products. As the longest serving commercialbank in Mon olia the bank acts as a rimar lender to most of thebank in Mon olia the bank acts as a rimar lender to most of thecountrys leading corporations.countrys leading corporations.
Investment bankingInvestment bankingAs the first Mongolian company issued bonds in the internationalAs the first Mongolian company issued bonds in the internationalcapital market, TDB enhanced its reputation on the internationalcapital market, TDB enhanced its reputation on the internationalmarket. As a result the bank became able to offer its corporatemarket. As a result the bank became able to offer its corporate
active participation in syndication financing.active participation in syndication financing.
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Financial Results
(mln.USD)(mln.USD) 2006 2007 2008 2009/3Q
Total Asset 336.3 444.5 520.3 510.3
Total Loans 198.7 307.2 347.4 302.9
Total Deposits 256.1 362.6* 404.6* 372.3**
Total Equity 32.9 47.5 54.0 50.3
Net Profit 9.3 12.9 12.9 6.5
Capital Adequacy 19% 13.8% 14.7% 13.8%
ROAA 3.1% 3.5% 2.8% 1.5%
ROAE 27% 32% 24.9% 16%
MNT/USD = 1426.01*
09 30 2009
million bonds
** Including $41 millionbonds
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Bank Ratings by Moodys
Senior Unsecured EMTN (foreign currency)Senior Unsecured EMTN (foreign currency) BaBa33
LT/ST Bank Deposits (foreign currency)LT/ST Bank Deposits (foreign currency) BB22/NP/NP
LT/ST Bank Deposits (domestic currency)LT/ST Bank Deposits (domestic currency) BaBa33/NP/NP
Subordinated ObligationsSubordinated Obligations BB11
Bank Financial StrengthBank Financial Strength DD--
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THANK YOU
Trade and Development Bank of MongoliaTrade and Development Bank of Mongolia
uu c nuu c n reeree --
BagaBaga ToiruuToiruu -- 1212Ulaanbaatar, MongoliaUlaanbaatar, Mongolia
Tel:Tel: 976976--1111--31 99 4331 99 43
Fax:Fax: 976976--1111--31 24 1831 24 18
http://www.bankcard.mnhttp://www.bankcard.mn
http://www.mongolianbusinessguide.comhttp://www.mongolianbusinessguide.com
ma : corr an ng m.mnma : corr an ng m.mn
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