Mongolia plans
to sell its debut dollar-denominated bond “in the near future,” to finance
expansion of the mining industry and build roads and bridges, Bloomberg has
quoted President Ts. Elbegdorj as sying during his visit to the USA. The
Government is talking to investment banks in New York about underwriting the
planned $500-million debt sale, said Naidansuren Zoljargal, deputy governor of
the Mongol Bank, who was with the president. “Mongolia is in a good shape in
terms of issuing bonds and paying back those things,” Elbegdorj, 48, said in an
interview. “Our economic growth is good.”

Mongolia’s MSE
Top 20 Index rose 108 percent in the past 12 months, the world’s best performer
among 91 stock benchmark measures tracked by Bloomberg, and the local currency
gained 9 percent against the dollar as the country’s exports of coal and copper
surged. Resource-rich Mongolia, where Elbegdorj said the economy is growing at
a rate of 7 percent to 8 percent, needs to quadruple the size of its rail
network, add power and water plant, and build more roads to boost metal and
mineral exports.

The government
is also negotiating with Russia to secure currency swaps, according to
Elbegdorj. He said he expects trade in local currency with Mongolia’s two
neighbors, Russia and China, to increase. A currency swap agreement signed with
China last month paved the way for the planned five-year bond because the
“safety belt” will boost investors’ confidence in its debt market, Zoljargal
said.

Policy makers
are also keen to develop five-, 10- and 15- year benchmarks for its
local-currency government bond market to secure financing and take advantage of
growing interest from foreign investors, Zoljargal said. The Development Bank
of Mongolia also plans to sell $700 million of domestic-currency bonds this
year, he said.

A partnership
agreement with the London Stock Exchange signed in January and aimed at
overseeing the development of the Mongolian bourse and its sale to investors,
will help spur international participation in the equity markets, where
domestic investment is now dominant, Elbegdorj said. “We are focusing on
developing our stock exchange,” he said.

The planned bond
sale would open the international capital markets for the government and local
companies to raise funds to finance $50 billion of investment projects in the
next decade, said Zoljargal. Mongolia’s B1 rating at Moody’s is four levels
below investment grade, while S&P ranks it a step higher at BB-. “We are watching
the market carefully,” said Zoljargal. “The government really wants to have
this. The benchmark itself is a very important thing for the private company to
go to the market.”

Jeremy Brewin,
who manages $3.3 billion of emerging market assets as a fund manager at Aviva
Investors in London, said he’s interested in Mongolian dollar debt because of
the nation’s debt levels and commodities-driven economy. “We’re quite keen as
it has very little debt outstanding and the resources, the declared resources,
suggest that Mongolia is asset rich,” he said. “Until proven otherwise, we like
idea of investigating the credit with prospects for participating in the deal.”

A mining boom in
the world’s most sparsely populated nation promises great influx of wealth for
Mongolia.  Economic growth may surge to
23 percent in 2013, more than twice the forecast expansion in China, as large
mining projects begin production, the International Monetary Fund said in a
March report.

International
companies such as Rio Tinto Group, the world’s No. 2 mining company, are
flocking to the landlocked country to tap its natural resources. Rio Tinto is
developing the nation’s natural resources Oyu Tolgoi copper and gold deposit,
which it expects will account for 30 percent of Mongolia’s gross domestic
product when completed.

Mongolia may
award its Tavan Tolgoi coal mining project, one of the largest in the world, to
a group of companies as soon as this month, Elbegdorj said. He said he’s
concerned about how to “manage” the surge of foreign investment and ensure the
windfall spreads among the nation’s citizens. More than 33 percent of
Mongolians live below the poverty line, and per capita income in the nation of
2.7 million is $2,111, the IMF said in 2010.

“Earlier days,
we focused on attracting investment,” Elbegdorj said. “One of the biggest
challenges is how to manage the money flowing from the mining to the benefit of
our people.”

 “Our best interest is to balance investments
and trade between our two neighbors, Russia and China, and other parts of the
world,” Elbegdorj said. “I’m trying to encourage investment from the United
States.”