Economic Policy Reform and Competitiveness Project (EPRC)—USAID

Chemonics
www.eprc–chemonics.biz

Economic and Trade Policy Support

Start up of a risk management program at Customs -- With help from international expert Jorge Montoya, in August EPRC helped the Customs General Administration of Mongolia perform an initial institutional assessment for implementation of a risk management program at Customs, and develop an action plan.

Financial Markets Support

Problem bank resolution -- EPRC continues to help the Bank of Mongolia (BoM) resolve the conservatorship of Anod Bank. As of the end of August, the project had facilitated the reception of expressions of interest to assume certain assets and liabilities of the bank, detailed information on the loans in memo and data room format, and drafted necessary agreements to complete a transaction. The next step in the process is for the BoM to announce the receivership of Anod and invite the four Mongolian commercial banks that have expressed interest to complete due diligence and negotiate a purchase and assumption transaction.

Banking sector reform – EPRC undertook a review of proposed draft amendments to the banking and central bank laws that were submitted to Parliament for consideration during the upcoming fall session. The review examined the current legislation and proposed amendments in terms of their fit with best international practice. The recommendations presented to the BoM do not require a shift in focus of either law, but rather a tightening of the language of the central bank law to enhance the independence, transparency and accountability of the central bank. Broadening the concepts of governance and transparency in the bank law was also recommended, in order to strengthen the central bank’s ability to regulate, supervise and enforce sound core banking principles as set out in the Basel Committee's Core Principles for Effective Banking Supervision—the generally accepted international standard. EPRC is also helping the BoM with the development of communications and advocacy action plans to increase the level of awareness of the banking crisis, obtain stakeholders’ support for the amendments to the laws, and strengthen donors’ and BoM coordination in addressing the banking situation.

Energy Sector Support 

Tariff program implementation – In August, the cabinet failed to concur with the Energy Regulatory Authority’s (ERA’s) proposal for a significant tariff increase to be effective on 1 July, in keeping with the EPRC/ERA Tariff Reform Plan/Program.  Instead, the Cabinet ordered the Ministry of Finance (MoF) to conduct a review of the proposal regarding its effect on consumers, the economy, inflation, etc. The MoF established a working group that submitted a letter to Minister Zorigt on 18 August that basically agreed with the need for a tariff increase, although their recommendation was a bit less than the ERA proposal. In the meantime, the railroad requested a 170% tariff increase (7 MNT per ton/km) for transporting coal to the power plants. The Cabinet is scheduled to address these issues at an upcoming meeting.

New competitive electricity market design and implementation --   The ERA, the National Dispatch Center (NDC; the operator of the new market) and EPRC have all agreed on the final version of the market rules. NDC is taking the lead on revising the grid code with project assistance, while EPRC continues work on a pro forma vesting contract and on allocations for inclusion in vesting contracts. It has been agreed that a detailed training program for NDC concerning the operation of the new market will commence in October based on a request and an outline provided by NDC. Training of all other market participants will also commence later this year.

Energy Working Group -- The next Energy Working Group (EWG) meeting is scheduled for 22 September.

Consensus Building, Public Education, and National Dialogue Support

Broadcast of Hot Topix TV program on Zamyn Uud  --  The third program of the Hot Topix TV series, ‘Zamyn Uud: Gateway of Development’ was broadcast in August just before the evening news. The program is designed to educate the public on the logistics issues associated with Mongolia’s southern border port. EPRC is producing the Hot Topix TV series to provide the Mongolian public with easy-to-understand information on topics of interest and importance to Mongolia’s economic development. Each program is 10-12 minutes long and focuses on one salient issue to convey essential information using an array of media—including interviews, graphs, hosts, animation and live footage. Each program broadcasts about three times. A flash video version of the program and other programs of the series can be found at the EPRC Project website (http://www.eprc-chemonics.biz/index.php/documents/multimedia/21-multimedia.html).