Interview – Bayanjargal Byambasaikhan

Bayanjargal Byambasaikhan founded Nova Terra and investment and project management firm. He was the CEO of Mongolia’s Sovereign Wealth Fund, Erdenes Mongol, chief negotiator for the government of Mongolia ending a 5 year dispute with Rio Tinto and has set up capital intensive copper mining projects.

In this interview with Enkhzul Orgodol, he talks about the direction of Mongolia’s renewable energy sector, explains why Mongolia is a competitive for business investments and the impact of China’s slowdown. There is more to hear and it’s well worth knowing more about a major practitioner in Mongolia’s hottest sectors of mining and energy.

Interview Transcript

Enkhzul Orgodol: Mr. Byambasaikhan, you have worn many hats, both professionally and personally throughout your career. Some of the highlights are former CEO of the Sovereign Wealth Fund Management of Mongolia, World Economic Forum, Young Global Leader, Chairman of Business Council of Mongolia. So please tell me, which hats are you actively wearing these days?

Bayanjargal Byambasaikhan: In addition to my business, NovaTerra, which is a company that develops and invests into renewable energy projects in Mongolia. For example, we recently established a partnership with an international solar energy developer, called Symbior, and we are jointly developing and investing into a Solar PV project in the Gobi region of Mongolia. That is an area that we specialized in and we have experience with previous projects and we feel that developing such projects according to international standards, and having bankable projects will allow us to, number one, attract investment and financing. Be able to complete the project on time, and be able to supply the grid, but in future, as I said, we want to really be in position to export that clean power. Therefore, there will be many such renewable energy project developments in the coming 10, 15 years and we are actively engaged in that. We also have an advisory function that helps various international clients to do their business and to create value in Mongolia.

I am an active member of BCM, which is the Business Council of Mongolia. BCM is really 250 companies.

Enkhzul Orgodol: 250?

Bayanjargal Byambasaikhan: Yeah. They are all actively operating in Mongolia and we represent those businesses to help them get more information about the market, so that companies can improve their revenues and sales. Also, we advocate on their behalf on economic policies, investment issues, and issues that are important in improving business climate in Mongolia.

I think the fact that Mongolian economy is an economy that is emerging, that is growing. If you look at where Mongolian economy was, say just six years ago, it has tripled in size. So despite what is happening around the world, as well in the economy, this economy will continue to grow for many more years. Infrastructure, particularly energy infrastructure, will be critical to this sustainable growth. Mongolia does have a lot of potential, in terms of producing cleaner energy, that it can supply the neighboring markets. That is something that will interest many investors, technology companies, and engineering companies, as I said, for the next 10, 20, maybe 30 more years. That is an area that I’m working in now and been fortunate enough to lead the team that built the countries first wind farm. It was-

Enkhzul Orgodol: How is the progress of that farm?

Bayanjargal Byambasaikhan: Well, it’s operating so I think it’s doing-

Enkhzul Orgodol: Any export?

Bayanjargal Byambasaikhan: No, Mongolia currently does not export power, except for peak energy balancing that it does with a Russian grid. In the future, Mongolia does have a tremendous potential to be an exporter of clean energy to China, as well as the neighboring markets.

Enkhzul Orgodol: How long is the future you’re talking about?

Bayanjargal Byambasaikhan: Well I’m talking about the next, as I said, the next 20, 30, 40, maybe 50 years.

Enkhzul Orgodol: Okay.

Bayanjargal Byambasaikhan: This economy is currently, as you well know, had been built on the back of mining commodity projects. That is very volatile. That market is very volatile. We feel that in the future, once we are able to build up the infrastructure that will allow us to export that clean energy to these neighboring markets, this will be another base for the economy and this will be actually a very strong and sustainable base that will allow this market to have growth on one side, to get more investment and to earn more foreign currency.

Enkhzul Orgodol: The next question I prepared is right exactly related to what you just said about renewable energy. It’s actually rather long, so please bear with me. Your consultancy company, NovaTerra, assists businesses to take on mega projects in Mongolia, particularly in the infrastructure and energy fields, mostly renewable energy you mentioned earlier, right? Embarking on mega projects has it’s pros and cons, of course. On the pros side it can bring substantial amount of financial benefit to the investors. On the other hand, it can also be crippled by complicated multi stake holder engagement, or prolonged negotiation process, and maybe even unwanted encounter with publicists. What I’m trying to ask is, according to the company profile, Nova Terra has wide experience in strategically positioning it’s clients in the Mongolian political and economic environment. Also, the company’s quoted to have proven track record in winning negotiations and agreements with the Mongolian government, which is not something anyone can do.

I would like your expertise, I would like to seek your expertise in this field because mega projects, the kind of projects you just mentioned, be it in the field of renewable energy or in the mining, or infrastructure, we need them. However, there are different sizes of businesses who want to be part of this kind of projects, but they would not have the capacity or capability to have the service of professionals, like yourself. I would like you to give some practical tips or share some stories in dealing this kind of project with the Mongolian government.

Bayanjargal Byambasaikhan: As I said earlier, Mongolian economy is an emerging market. The risks and the rewards are aligned with similar markets. This market can grow fast and it can transform quickly. The fact that you have businesses continuing to invest in this market, particularly in the renewable energy area, tells you that the market is good. What I can tell you is there’s a lot of people who will say that dealing with government is difficult here in Mongolia. I will tell you that, from my experience, dealing with any government is difficult. Try to get a permit in America or try to get a permit in Australia, and compare it with the effort it takes to get that similar permit in Mongolia. People who are in that line of business will tell you that Mongolia is actually a favorable place to work in.

Enkhzul Orgodol: Really?

Bayanjargal Byambasaikhan: Yes. Yes, there is issues with the fact that some of the industries can be quite new to this country and there will be a long process to get support from all the stakeholders. That said, over the last 25 years, this market has always grown. This market has always adapted to new things. Therefore, the difficulties that you will face in Mongolia, are no different than those difficulties that you will face in other emerging markets. I like to tell my potential partners and clients, be prepared. Mongolia will give you it’s bumps in the road, but as one who is experienced, will know that if you come for an off road adventure driving, you can not come with a Ferrari and expect the roads be –

Enkhzul Orgodol: Highway.

Bayanjargal Byambasaikhan: Yes. Therefore, you have to come prepared. The most important advice that I give people is, “Find the right partner.” Finding that suitable partner that understands you, that has-

Enkhzul Orgodol: You would advise a local partner, right?

Bayanjargal Byambasaikhan: Yes, a local partner that shares the same values will help you tremendously. You may spend hours and a month, trying to understand the local practices, etc. Having the right partner will help you really win in terms of time and money. Find that right partner and then, of course, build that relationship. Also, respect the local traditions when you do business in this country. The laws and regulations in this country, some people will complain that they’re too cumbersome, but on the other hand as I said, those who have experience will tell you that this is actually a pretty liberal environment to be in. Look Mongolia, there is no restrictions in bringing money in and taking money out. We’ve seen many foreign investors that have invested in the country and have been able to exit without any issues, making lots of money. Whether it’s in the banking sector, mining sector, and other sectors. So again, making money, taking money out, is no issues and creating new businesses, again this is one of the most liberal environments that there is in this region.

Enkhzul Orgodol: Would taking money or exiting without much taxation, etc., apply to any investor from any country? Or that would depend on the bilateral agreements with their government?

Bayanjargal Byambasaikhan: No, I think there is no restrictions in taking money out of Mongolia. As I said, yes, there are certain taxation that you’ll have to abide with, but that said, corporate tax is very low in this country, personal income tax is very low in this country, so I think the overall taxation regime was designed to attract new investors into this country. Yes, there are issues sometimes when it comes to differences in local standards, as well as international standards. But increasingly, the tax system is moving from that local standard into the international standard. I think five years from now, things will be a lot more sophisticated in terms of tax rules and regulations. We will have more precedence, which means there will be clarity for others to come in.

China is the largest market in the world. The largest economy, the largest consumer of effectively everything. We are fortunate to be next to this large economy now. We feel that connectivity is important for Mongolia, meaning that we want to be connected with the Chinese economy, also we want to be connected with the other economies that are in our region. When you look at this economy that is so large in size, despite the fact that it has slowed down in terms of growth in the last several years, that growth is still the largest growth that the world has ever seen. For us not to benefit, or not being able to benefit from that growth, is just wrong.

We need to position ourselves to be able to benefit from this phenomenal growth that our neighbor brings to us. In order to do that, we need to attract more capital in this country, more modern technologies into this country, better management. This will allow us to build those businesses that will constantly supply products to the market in China, as well as neighboring markets. China market is an opportunity for Mongolia, is an opportunity for investors who are interested in Mongolia, and all who have invested in Mongolia.

Enkhzul Orgodol: It all sounds so promising when you talk about Chinese growth potential and our proximity to China, etc. However, due to different factors, namely political factors, I would say, a lot of the projects have been withheld and it seems like we’ve been moving too slow to get a fair share of this development. Would you agree with that?

Bayanjargal Byambasaikhan: Mongolia is a democracy. When somebody owns and manages a business in this country, we know that every years there will be an election. We know that there will be some changes in policy. That’s a given. That’s probably one of the reasons why people would invest in Mongolia, the fact that it is a democracy and it has a system where the people elect the government, and the government hopefully continues with the growth policies, etc. As I said, the economy grew three times its size in the last five, six, years. Which means, yes, it is growing. Do we want things to be faster? Absolutely. But do we want things to be right? That’s the key, which means businesses must understand the competitive nature of the market that we are in now. We are effectively competing against companies in Indonesia, Australia, or Canada. We have to play by those rules. Mongolian companies are working to improve their business standards and ways of doing business, so that it can be competitive and it can be a part of this growth where China is providing you the opportunities.

Enkhzul Orgodol: Yeah, I do understand the scheme or the scope of your business expertise is more in mega projects like, infrastructure and renewable energy, that takes time and immense amount of effort to see the result. How about the businesses or investors that are looking into Mongolia and thinking, “What can I do in Mongolia to get my benefits in the short term and not as long as this kind of mega project?” Which kind of sectors would you advise to look into? Is there any intellectually driven sectors that are immune from all this infrastructure, lack of infrastructure development?

Bayanjargal Byambasaikhan: Well if you look at Mongolia in the last 20 or so years, since we’ve had internet, and since we had the mobile phones, meaning really, information, or access to information, then that industry has developed tremendously. I can tell you that we probably have better mobile service than one would experience in New York City. I can tell you-

Enkhzul Orgodol: Where you’ve lived?

Bayanjargal Byambasaikhan: Yes, where I lived. We may have better have internet speeds than some European countries, for example. It tells you that those industries where it was less government involvement and competition was allowed amongst the private companies, then you can really see the difference in terms of maturity of a sector. You can see that customers at the end of the day, benefit from better quality service as well as lower prices. Again, in Mongolia, if you invest in technology, you can see that it can transform lives of people. Also, it can transform the way we do business. That really is thanks to technology.

Two things, number one, of course, information technology, as I mentioned. So that’s internet as well as cellphones. The technology that also helped Mongolians to transform their life, in the last 20 years, was renewable energy. So the solar panels that all the families use across the country now, helped to really overnight from having a candlelight, to an information age. Now this allows the children, for example, who are living in those remote areas, to watch the same content as my children who are growing up in the city. When I was growing up, the information divide between the person who was growing up in the rural areas, as well as in the city, was really different. There was a huge gap. Nowadays, there is no gap. It tells you that technology can transform people’s lives and we’ve seen good examples for it. We hope that technology developments and improvements in future, will also help us to be more competitive.

Enkhzul Orgodol: Okay Mr. Byambasaikhan, thank you very much for your time and all the insights that should be informative, not only to the viewers we are target, but also to anyone who’s interested in the international relations and future development. So thank you very much, and I invite the viewers to subscribe to our website because we’re planning to make up a business guide book with all these interviews we’re collecting from the chosen 12 business leaders operating in Mongolia. I’ll be looking forward to send you copy of the e-book and looking forward to seeing your comments on that. Thank you.

Bayanjargal Byambasaikhan: All right, thank you.

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