State-Ownership Model Is Under Review
National air carrier MIAT plane. Photo credit: Montsame
The Cabinet discussed in November 2021 the draft list of companies to keep under 100 percent state ownership. The list included so-called “strategic” 30 entities in the mining sector (Erdenet copper mine, Erdenes Mongolia mining holding) and usual suspects in utilities (heating, electricity) and infrastructure (railways and roads).
Except for the Erdenet copper mine and the Tavan Tolgoi coal mine, which generate 80 percent of total earnings for the government, all state entities lose money, according to the finance ministry. However, due to the "strategic" character of these enterprises, they require direct state backing and management as part of the government's public service commitment.
The privatisation of Tavan Tolgoi coal mine appears to be over, since sourcing international funding for a coal mine is becoming more difficult with the global climate change actions and Environmental, Social and Governance (ESG) drive.
Erdenes Oyu Tolgoi (34 percent owner of the Oyu Tolgoi copper mine) is also on the list, indicating that Mongolia is not ready to reopen the debate about exchanging equity for a greater royalty.
What's more, the draft list excludes the national airline MIAT, which is preparing for direct flights to the United States.
This could signify the beginning of Mongolian aviation deregulation, with additional favourable consequences for the air transportation and tourism sectors.
The Mongolian Stock Exchange (MSE), which enjoyed a record year, is also missing. It is expected that MSE governance and operations would be more commercial and its shares will be available to the public.
This could help to open up Mongolia's financial market to international investors.
The state ownership policy is still being debated, but it is expected to be approved soon. The final list of 100 percent state-owned enterprises is subject to revision. The full list of privatizations will likely be made public in early 2022.
Amar Adiya is editor-in-chief of Mongolia Weekly newsletter and regional director at Washington-based strategic advisory firm BowerGroupAsia.