For the last 30 years or so, ADB has been an unwavering partner of Mongolia, supporting the country’s development in various sectors, such as public sector management, transport, energy, urban development, health, social protection, education, and trade facilitation. With regards its contribution, ADB’s Country Director for Mongolia, Shannon Cowlin has recently sat with us to talk about the bank’s involvement in Mongolia’s development in the past as well as future. ADB has shifted its focus on inclusive and climate-conscious development whilst still improving infrastructure to help economic diversification and resilience and Shannon has shared about the shift with us. We have also reported from the 57th Annual Meeting of ADB that was organized in Tbilisi, Georgia and we are presenting this interview as the last series of that meeting coverage.
Thank you for accepting our interview invitation. Could we please start our conversation with what has ADB been helping Mongolia in terms of economic growth for the last 30 years?
Thank you for the opportunity to discuss ADB's work in Mongolia and themes from our 57th annual meeting in Tbilisi, Georgia, as it is truly an honor, as the country director, to represent our support to Mongolia over the past 30 years. Since 1991, ADB has approved 4.24 billion USD in sovereign loans and grants, and 265 million USD in non-sovereign assistance, and we currently have 31 ongoing projects totaling around 1.8 billion USD.
Our work is guided by the Country Partnership Strategy (CPS) for 2021-2024, aimed at helping Mongolia recover from COVID-19 and laying resilient foundations for inclusive, sustainable growth. In the early part of the CPS period, we focused on COVID-19 response and a shock-responsive social protection program. Later, we assisted the government in addressing impacts from border closures with China and the Russian invasion of Ukraine. Then as these challenges became less critical, we shifted to core sectors like education and infrastructure.
For instance, we approved additional financing for an education project building schools and a new road project to improve 263 kilometers of state roads, including the Khovd-Ulaangom and Altai-Uliastai sections. The latter project also includes road asset management and safety components. Late last year, ADB also approved a project to upgrade facilities and systems at three border crossing points.
As in many Asian countries, climate change is a major concern for Mongolia, where we are seeing increasing frequency and intensity of natural disasters like floods and droughts. These impact livelihoods, food and water security, health, and infrastructure. Our infrastructure projects, like road improvements, consider flood risk at the design phase to minimize future maintenance and rehabilitation costs.
Mongolia is projected to face increased frequency of zud as a result of climate change as well. In the last decade, Mongolia had six zud years, compared to the historical average of one per decade. To address the government’s response to this year’s zud, ADB approved a 2.8 million USD grant last March. But it is also important for us to support building long-term resilience as well.
Another significant project with climate components is the Aimags and Soums Green Regional Development Investment Program, approved last year. This project aims to improve urban infrastructure in provinces and soums, develop them into green agribusiness hubs, and support sustainable rangeland management. This program is crucial for the next decade, and we will collaborate closely with the government to ensure its success.
Climate change also presents economic opportunities. As the world transitions to net-zero emissions, there will be increasing demand for technologies and services that reduce emissions and adapt to climate change. Mongolia, rich in natural resources, can benefit from this transition by supplying resources essential for technologies like electric vehicles and wind turbines. We are working with the government to identify relevant opportunities to generate income and enhance Mongolia's economic prospects as part of the global net-zero transition.
You have talked about how this CPS is focused on dealing with COVID-19 aftershocks. Can you tell us more about that?
The COVID-19 pandemic had severe economic effects in Mongolia, causing a reduction in exports, foreign direct investment, and private investment. MSMEs, employing 70 percent of Mongolia’s workforce, were particularly affected. However, some companies accelerated their adoption of digital technologies and sustainable practices, which will enhance their competitiveness.
As Mongolia recovered from the pandemic, we saw strong growth last year due to the full reopening of borders and increased mineral production. We continue to work with the government on improving the business environment and addressing significant infrastructure gaps. Mongolia's transport and logistics infrastructure remains underdeveloped, impacting logistics and trade performance. The energy sector also faces issues with an aging, inefficient power system reliant on coal and power imports from Russia. This inadequacy is evident outside Ulaanbaatar, where companies struggle to expand due to insufficient power supply. Urban infrastructure, particularly in Ulaanbaatar, faces pressure from inward migration from rural areas, which strains municipal resources.
Addressing these infrastructure gaps is crucial. While supporting the government with policy and regulatory issues, ADB plays a significant role in preparing, structuring, and financing infrastructure projects. By providing public and private financing, we aim to help Mongolia execute these critical projects effectively.
What do you think Mongolia should focus on to keep up the work it has been doing in the business environment and private sector? How has ADB been supporting Mongolia in this sector?
Private sector support is crucial across all ADB countries. It plays a significant role in addressing development challenges in core areas and can be more economically efficient than the public sector. We aim to strategically engage with governments to create an enabling environment and support private sector enterprises. Mongolia has made progress in this regard, but there's room for improvement, especially in streamlining regulations. For instance, establishing a new business in Mongolia takes three times longer than in neighboring economies, mainly due to bureaucratic processes and lengthy court procedures. Subsidies to state-owned enterprises also hinder private sector competitiveness.
ADB collaborates with the government to identify regulatory and policy impediments and streamline business processes. One example is assistance to the General Authority for State Registration in decentralizing services and introducing digital certificates to enhance efficiency, particularly in property registration, expected to benefit over 200 soums. Workforce development is also crucial. Aligning education systems with industry skill needs is essential for current and future shifts. We're supporting reforms in education and skills development through ongoing technical assistance and planned investments.
We also supported the government in the development of the Public-Private Partnership (PPP) law and continue to support operationalization of the PPP development center. We also have a new financial intermediation loan, where ADB proceeds will be lent to small and medium-sized agricultural enterprises along with technical assistance to support in scaling up their businesses. ADB also supports tourism-related infrastructure and micro and small enterprises in the tourism industry.
These are examples of our sovereign support, which focus on creating a favorable business environment and nurturing small businesses. However, we are eager to expand lending to private sector entities in Mongolia and other countries to further stimulate economic growth.
Could you please tell us more about the private sector loans ADB has issued?
Last year, ADB committed three loans to private sector enterprises. One, a 30 million USD loan to GOBI JSC, will support raw cashmere procurement and processing, benefiting 1,200 herders and 1,300 industry employees while promoting sustainable practices. Another loan, totaling 10 million USD, was provided to InvesCore NBFI JSC, to expand financial inclusion for micro, small, and medium-sized enterprises, especially those owned by women. Third loan, a tugrug equivalent of 10.2 million USD, was extended to Intermed hospital for the construction of an 80-bed hospital annex in Ulaanbaatar and 10 outpatient clinics and three inpatient centers in rural parts of the country.
This year, we've approved two loans in the banking sector to expand green climate finance. Beyond that, we're exploring new opportunities in education, agribusiness, healthcare, and infrastructure to further Mongolia's economic development. Through our PPP support, we aim to identify projects where the private sector can deliver public services effectively and to work with the government to structure these projects to attract strong private sector interest.
Besides providing technical assistance, loans and grants, does ADB work with the government on policy implementation level?
In all sectors, we provide technical assistance grants alongside our long-term projects, focusing on policy reform and capacity building. Additionally, we offer policy-based loans to support governments in implementing policy frameworks effectively. For instance, the Strengthening Fiscal, Financial, and Economic Resilience Program, approved last year, focuses on medium-term structural reforms to enhance Mongolia's resilience to commodity market volatility. The first part of this program was approved in 2023, and the next part is expected to be approved in 2025. The policy reforms under this program include improvements in tax administration and policy, debt management, banking supervision, financial consumer protection, and private sector development, and ADB's technical assistance supports these policy actions. We're currently preparing a similar program focused on climate actions, aiming to mobilize and manage climate finance, and improve investment climate for low-carbon and resilient transitions.
ADB released Flagship Outlook report and it predicted Mongolia’s GDP growth at six percent in 2025. Would you elaborate on this?
ADB's flagship report, the Asian Development Outlook, released annually in April, highlighted Mongolia's robust economic rebound post-COVID, with a remarkable 7 percent growth last year. We project GDP growth at 4.1 percent in 2024 and 6 percent in 2025, driven primarily by the mining sector, particularly the expected doubling of copper concentrate production at the Oyu Tolgoi mine by 2025. However, GDP growth for 2024 was affected by the zud. We anticipate a recovery in agriculture, mining expansion, and services growth in 2025, hence the stronger projected growth for that year. The Asian Development Outlook also discussed various risks, including upside potential, such as stronger commodity prices or expanded coal sales. Conversely, downside risks include further pressure on agriculture due to the zud or reductions in coal purchases, potentially leading to lower growth than projected.
It is going to be one year anniversary of your appointment soon. What are your work principles to follow during your tenure as a country director?
My top priority is maintaining strong relationships with the government, private sector, and development partners to effectively deliver our current Country Partnership Strategy (CPS) from 2021 to 2024. Ensuring smooth project implementation is crucial, as some projects have faced delays and cost overruns due to border closures and the Russian invasion of Ukraine. So, it's important to me that we put those projects on track because the benefits for the country and the people of Mongolia are not realized unless the projects are completed. Efficient project delivery, strong contract management, and achieving intended results are key focuses.
As we near the end of our CPS, we're preparing for the next strategy, considering both current challenges and future opportunities. With Mongolia's vulnerability to climate change and the global transition to net-zero in mind, we're focusing on four initial key areas. But this will be more crystallized in time. Firstly, we will be supporting agriculture and sustainable range land management to alleviate strain on pastureland, which is exacerbated by a changing climate. Secondly, we aim to enhance resilience to economic shocks by diversifying exports within and beyond mining, including through agricultural production, improved processes, and value-added processing. Thirdly, we will be addressing infrastructure gaps in transport, logistics, and energy to enhance sustainability and efficiency. Lastly, we're committed to promoting social inclusivity by providing education, healthcare, and opportunities for underserved communities, persons with disabilities, and survivors of domestic violence. Our goal is to ensure that all Mongolians benefit from the country’s economic growth and development.
