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Business Community calls for political stability

Хуучирсан мэдээ: 2016.01.26-нд нийтлэгдсэн

Business Community calls for political stability



26 January 2016

On 19 January 2016, 19 members of the Parliament called for the Prime Minister’s resignation in an official letter submitted to the Speaker of the Parliament. In response to this call, the business community represented by the Business Council of Mongolia (BCM) is making this statement in support of the stability of the Government.

First of all we regret that the call for Prime Minister’s resignation was based on reasons related to the signing of the Oyu Tolgoi Underground Mine Development and Financing Plan. OT’s investment agreement has been made as a result of negotiations continued over a decade. Now we need to implement it in order to enable Mongolia attracting much needed foreign investment and high paid jobs. It is in everyone’s interest for the economy to recover.

The business community firmly stands in support of the current Government and Prime Minister for the continuation of existing policies and decisions. On behalf of the private sector and investors, both local and foreign, we strongly emphasize the need for sound and rationale government policies to keep businesses going forward, to restart investors coming into Mongolia and to speed up the country’s development. We urge the Parliament members to maintain political stability and to avoid further deterioration of the financial and economic situation especially during this time of slowdown. The political environment’s volatility is already high given the upcoming election.

We support statements made by President Ts. Elbegdorj that the government should work with stability and clear continuity and carefully consider how political actions affect the whole country. We urge Parliament members to consider the cost of any political action that will damage the investor’s confidence and sovereign credit ratings. All investors are observing the political landscape to decide their next steps. Wrong decisions or political battles can have severe costs affecting existing and upcoming investment flows.

Although global markets are turbulent, there is investors’ interest in the current roadshow to market U.S. dollar notes to be issued by the Government. This would be Mongolia’s first such offering since 2012, when the sovereign issued its USD1.5 billion Chinggis Bonds. The dollar debt due in 2018 is now priced at record lows with a current yield at 10.2%. This is the first time yields have exceeded 10% since the notes were issued. If bonds approximating USD500 million could be placed at about 10%, that would represent a rate approximating 6% higher than in 2012. The annual interest cost would increase USD30 million a year and by a total of USD150 million over the 5-year maturity. If one-half of the additional cost is attributed to government political instability, separately from market turmoil, that represents an additional cost to Mongolia of USD75 million. In addition, political instability will result not only in higher cost for borrowing by the Government but equally by private businesses too.

We need to focus on Government’s sovereign debt issue as the country’s currency and sovereign debt prices and yields remain under downside pressures. Politics should not be a reason to down-grade the state sovereign credit rating. We stand in non-investment grade with a label of “extremely weak” political and economic profile.

The Parliament and the Government should be facilitating private sector growth and its initiatives and investments to contribute to the economy. The private sector is not asking for Government financial support, it is asking for political stability so that economic and business activities continue in a predictable and stable environment. We should be united to take measures to reduce the cost of borrowings for the Mongolian Government, domestic banks, private sector and investors to enable the country’s development.




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