Sainshand Industrial Complex was ineffective, expert concludes

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-- 81 witnesses attend second evidence analysis hearing of Development Bank case --

The ad hoc committee responsible for reviewing the implementation of projects and programs financed by Development Bank of Mongolia, results, loan issuance and repayment progress organized the second evidence analysis public hearing from February 6 to 8 at the State Palace.

In the evidence analysis hearing, the utilization, expenditure and results of loans granted to 355 projects and measures with the condition of repayment from the state budget were reviewed.

A total of 134 witnesses were called at this stage of the hearing, 81 of them participated, while 27 witnesses expressed their inability to participate through official letters, petitions and requests. Law enforcement agencies, the officials of the Development Bank and representatives of non-governmental organizations participated as observers.

During the hearing on February 8, in particular, information was heard on issues related to the 8.1 billion MNT loan provided by the Development Bank for the construction of Sainshand Industrial Complex. In connection with the issue, a total of 15 people were called as witnesses, such as former President of Mongolia Kh.Battulga.

In 2014, Sainshand Industrial Complex received financing of 8.1 billion MNT from the bank. More than 6.2 billion MNT of the funding was spent on research and analysis, and 604.8 million MNT was spent on legal consulting services. Although certain funds were allocated for the construction of an industrial complex in Sainshand soum of Dornogovi Province, the complex has not yet been built. The analyst concluded that this project was ineffective.

 At the hearing, former President Kh.Battulga stated, “Parliament and the government decided that Mongolia should develop or produce its underground resources. I am proud of the work I have done. In specific, 412-kilometer railway and road were built connecting Tavan Tolgoi with Sainshand. Instead of liquidating the complex, we should attract foreign and domestic investors. Unfortunately, since 2015, the criminal police investigated and imprisoned many people. Environmental assessment of 35,000 hectares of land is not an easy task. The research done by the Russians in 1984 on the Khuuvur River should be re-examined. Since 2015, the investors who worked to build the industry in Sainshand were investigated by the Independent Authority Against Corruption.”

Head of the public hearing, member of Parliament B.Enkhbayar asked him if former director of Industrial Co., Ltd J.Dulguun worked as his adviser. 

Kh.Battulga replied, “I don’t want to talk about small things such as advisor. Ts.Uuganbayar was ‘tortured’ a lot because he was my adviser. I don’t know if J.Dulguun was advisor. Why can’t Mongolia become industrialized? I would like to talk about the work done in connection with this project. We don’t have to judge each other by speaking someone else’s gossip.”

Parliamentarian B.Enkhbayar stressed that according to the expert’s conclusion, the Sainshand Industrial Complex should undergo an environmental assessment, and that the tender conditions changed from the detailed environmental impact assessment. 

Witness N.Zoljargal explained, “The expert wrote his conclusion incompletely. In 2013, the tender was announced according to the government decree. In 2014, it was changed to environmental and social impact assessment. I didn’t find out why it changed. The land that was originally given was changed due to a landslide in June 2014, and the conditions of the tender may have changed due to the change of land. When we first announced the tender, we didn’t violate the government’s degree.”

“Mongolia should develop its industry. Infrastructure and chemical plants should be financed. Kh.Battulga assumed that the government would provide 34 percent of the capital and foreign and domestic investors will provide 66 percent. How much investment did you expect to bring in at that time? Did you talk to the investors? The expert opinion said the project was ineffective,” member of Parliament T.Dorjkhand said.

Kh.Battulga responded, “The government already invested two billion USD. Logistics and land issues were resolved and highways and railways were built. Now, regarding the 66 percent, we should renew our relations and cooperation with foreign and domestic investors. The money that goes into infrastructure is called investment.”

Legislator T.Dorjkhand commented, “The expert concluded that there is no benefit. It is said that the railway was built, but it is a dead end. There is no water in the place where the complex will be built. Didn’t you do it without researching well?”

“There is a possibility to build an industrial complex. It is true that foreign investors are driven away. Now we need to work on bringing them back. It’s not a dead-end railway. You must not have seen the railway yourself. There is a difference of understanding. A study was conducted and it was concluded that its products will be exported to East Asia. About 2 million cars are produced annually in Northeast China. There is an iron consumption. We extract raw iron ore. Our targeted market is East Asia. Iron consumption will continue to grow. About 50 percent of the world’s steel is produced in China,” Kh.Battulga said.

During the third phase of the hearing, which will take place between March 13 and 17, the spending and results of 2,550 project and program loans provided through commercial banks with the resources of Development Bank will be evaluated, according to B.Enkhbayar.

He highlighted that the results of these hearings will be combined and presented at the 2023 spring session of Parliament. Representatives of four non-governmental organizations such as Open Society Forum, Intellectual Innovation, National Center for Comprehensive Development, and Youth Watch Policy participated in the hearing as auditors, experts and external observers appointed by the ad hoc review committee.

Misheel Lkhasuren