Economic Policy Reform and Competitiveness Project (EPRC)—USAID

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Economic and Trade Policy Support

Inter-agency support for and coordination of trade facilitation measures. To ease the introduction of risk management-based inspections in customs, the project is working closely with the Mongolian Customs General Administration (MCGA) to organize an inter-agency consultative meeting on trade facilitation measures under the auspices of the National Security Council. EPRC and MCGA have developed a three-month action plan that places the introduction of customs risk management in the wider framework of trade facilitation measures that other agencies must undertake. The meeting will improve inter-agency understanding and support for the introduction of risk management inspections, and coordinate measures to facilitate trade.

Financial Markets Support

Banking sector reform. EPRC continues to take a leading role in coordinating technical and financial assistance from the international financial institutions (IFIs) to the Bank of Mongolia (BoM) in conjunction with the banking sector meltdown. As part of this effort, EPRC was especially focused in July on helping the BoM resolve the conservatorship of Anod Bank. In July the project facilitated expressions of interest from four qualifying banks to enter into a purchase and assumption transaction for certain of the assets and liabilities of the bank, and EPRC continues to help the Conservator facilitate due diligence and structure a transaction.

Mongolian Corporate Governance Development Center (MDGDC) increases corporate memberships, gets IFC backing, and secures corporate pledges. With project assistance, the MCGDC expanded its corporate and individual memberships. By the end of July, ten Mongolian corporations had paid in their institutional membership fees and individual memberships had grown to 50 Mongolian professionals. Seven Mongolian corporations have pledged an average of $5,000 each in financial support to the MCGDC. EPRC/USAID will match these contributions up to a total of $25,000. Also with project assistance, the MCGDC negotiated an agreement in principle with The International Finance Corporation (IFC) to provide assistance to the center to develop corporate governance assessment and consulting services and to acquire intellectual property rights to corporate governance books and translate them into the Mongolian language. The MCGDC has developed a calendar of course offerings for the remainder of the year, and in July offered a course on two corporate governance modules to fee-paying participants. Twelve more such courses are planned for the balance of the year.

Energy Sector Support

Tariff reform status. Per a project proposal under the Tariff Reform Program for the energy sector, the Energy Regulatory Authority (ERA) proposed increases of 18 percent and 32 percent for electricity and heat respectively, effective 1 August 2009.  The Cabinet rejected this proposal pending a review by the Ministry of Finance to determine the effect on the GoM budget and a presentation to Parliament by the ERA. Based on a letter that the ERA sent to Parliament, the Economic Standing Committee replied that no presentation to Parliament is required. The ERA has submitted all the required data and analyses to the MoF and is expecting results from the MoF in mid-August. After the MoF review, ERA will resubmit the request for tariff increases effective 1 October. If the increases are approved, the average end user tariff per Kwh will be 80MNT—69% of the estimated 116MNT per Kwh currently required to cover operations and maintenance costs (O&M). The current average end user tariffs of 68MNT per Kwh cover 58 percent of estimated O&M costs. 

Development of the new competitive power market rules.  The ERA, with project assistance, completed its third revision of the new competitive power market rules. The working group on the new market rules will consider final approval once the project completes work on the financial assurance portion of the rules. EPRC continued work revisions to the grid code and a pro forma vesting contract to support the new market rules.

Consensus Building, Public Education, and National Dialogue Support

Workshop on corporate governance held for journalists. To improve public understanding and media reporting on corporate governance issues, the project held a workshop for journalists on 30 June 2009 in collaboration with the Press Institute and the MCGDC. The workshop included group work, discussion and case studies intended to help journalists understand the basic principles of corporate governance, such as transparency, accountability, responsibility and fairness. Two TV stations covered the workshop on the evening news, and several articles were produced by journalist participants following the workshop.

Seminar on “Public-Private Partnerships for Infrastructure Investment in Mongolia” held. EPRC teamed up with The World Bank Institute, The ADB Institute and the Ad Hoc Parliamentary Committee to hold a two-day Public-Private Partnership (PPP) seminar on 2 and 3 July at the Government House. The seminar brought together Mongolian and international experts and decision makers from the public and private sectors to examine, discuss, and learn from best international practices in PPPs for mobilizing private investment for infrastructure projects. Major recommendations of the seminar included (i) building of consensus around the draft Concessions Law and a proper PPP policy framework; (ii) the development of a portfolio of potential PPP projects and working with the National Development and Innovation Committee (NDIC) to prioritize these and not treat PPPs as ad hoc transactions; (iii) consensus on the institutional locus and mandate for a PPP unit responsible for management and implementation of the PPP portfolio; and (iv) the importance of proper risk allocation among parties to investments.

As the draft Concession Law has now been submitted to Parliament, the project will provide assistance to help develop a consensus around key amendments that will be required to bring the current draft law into closer conformity with best international practices to facilitate private investment through proper recognition and allocation of risks.