Mongolia: Enhancing Private Sector Outreach

Industry and trade / Large and medium industries

The government of Mongolia has requested the Asian Development Bank (ADB) to provide a knowledge and support technical assistance (TA) to expand ADB's nonsovereign operations (NSO) in Mongolia. The TA will focus on (i) increasing the private sector's awareness of ADB's financial products, investment principles and eligibility criteria; and (ii) enhancing project readiness and implementation.

The TA is aligned with ADB's Strategy 2030 and the goals of ADB's Operational Plan for Private Sector Operations, 2019-2024. The TA is included in the country operations business plan for Mongolia, 2021.

Over the past 7 years, ADB has intensified its NSO efforts and has approved a total of nine projects in Mongolia amounting to $167.2 million from ADB's ordinary capital resources (as of March 2021). Before the coronavirus (COVID-19) pandemic, ADB has increased the number of missions fielded to Mongolia from the Resident Mission in Beijing and its Headquarters in Manila to identify and negotiate small-scale private sector projects in the infrastructure, financial institutions, agribusiness, and social sectors. This effort has been recognized and appreciated by the government.

The government has highlighted the importance of a more dynamic private sector to Mongolia's future economic prospects. In the near-term, the government has identified an ambitious infrastructure pipeline and recognizes that private sector financing is essential for the successful implementation of this pipeline. Over the longer-term, Mongolia wants to develop dynamic, private-sector-led economic sectors, in the non-mining space to support continued efforts to diversify the economy. The government has underlined the catalytic role that international financial institutions (IFIs) can play to provide finance, build capacity and given increased confidence to prospective investors. As such, the Ministry of Finance has requested ADB to further expand its efforts to reach out to Mongolia's private sector companies and to increase its pipeline of NSOs in the country.

ADB's nonsovereign engagement adds significant value to private sector financing in Mongolia and ADB coordinates closely with the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), the two other major actors on private sector operations. ADB's absence in the mining sector allows for a dedicated focus on supporting and developing the non-mining private sector, a situation which is unique amongst IFIs. ADB is also well placed to use its large sovereign portfolio to complement the success and lessons from NSOs with upstream efforts to strengthen the investment climate an important priority for ADB in Mongolia given the recent stagnation in Mongolia's business climate reforms in recent years. This complementarity between NSOs and sovereign work and the focus on investment climate reform will be a core priority of the upcoming country partnership strategy for Mongolia and the proposed TA will be a key part of this approach. ADB is already showing leadership amongst the IFIs in complementing NSOs with upstream sovereign work. For example, ADB is coordinating a joint position paper on the investment climate in Mongolia with the other IFIs. This builds on the excellent collaboration between ADB and other IFIs at the transaction level, which will continue to underpin ADB's approach on NSOs going forward.

The success of fully expanding ADB's NSO financing depends on the depth of ADB's engagement with the country's private sector, which is a time- and resource-intensive process, especially for smaller transactions. Further outreach to the business community will require additional human resources to provide the necessary expertise and ignite the momentum for NSO. Challenging economic and geographic conditions call for a further boost of the business development capacity within the country. With this TA, ADB will recruit experienced business development professionals to reach out to private sector companies and state-owned enterprises and drive new project pipeline growth in Mongolia on behalf of ADB. The TA will complement ADB's Private Sector Operations Department's (PSOD) business development efforts, market research, transaction support, and portfolio management activities in the country.

Readiness for ADB's NSO financing enhanced

Awareness of private sector on ADB's financial products investment principles and eligibility criteria increased