Let’s build brighter future

CONTENTS
1. Objectives and scope of our business
2. Economy outlook of Mongolia
3. Development PROSPECTS of Mongolia
BANK
4. Our philosophy
5. Legal status of the Development Bank of Mongolia
6. Our activities
7. Our organizational structure
8. Partnership
Objectives & Scope of Our Business

Take a lead in developing an •Provide long-term funding for priority industries

export oriented, innovation under the industrialization policy
and knowledge based • Assist creation of new technologies and
economy industries, facilitate “know-how” transfer

•Provide risk sharing mechanism to promote

Mobilize international and
domestic funds and promote
cooperation with
development financial
institutions globally
foreign capital inflow and foster domestic capital
formation
•Provide capital raising services for public /
private entities in domestic and international
markets

•Provide financial and capacity support to regions

Support sustainable under comprehensive regional development plans
regional development and •Provide long-term funding for infrastructure
reduce eco-system projects to reduce urban-rural disparities,
imbalances promote renewable energy and eco-friendly
technologies

•Build national savings from mining revenues, set

stability and emergency funds, prudently manage
Provide Safety Net functions them prudently
against economic shocks •Provide emergency financing in response to
and natural disasters natural disasters; build capacities for crises
management
ECONOMY OUTLOOK OF MONGOLIA

Table. Macro-economic indicators of Mongolia

2011 2012 2013 2014 2015
Growth of Real GDP /percent/ 8.2 7.8 20.8 15.7 14.0
Agriculture 4.3 3.2 2.6 3.0 2.8
Industry 9.3 7.9 50.7 27.0 20.3
Service 8.9 9.3 11.1 13.2 13.3
GDP per capita /thous.MNT/ 2942.2 3292.7 4113.4 5005.7 5894.1
GDP per capita /thous.USD/ 2254.6 2623.7 3357.9 4178.4 5050.7
National consumer price index, percent, from
9.7 8.6 8.1 8 8.5
the beginning of the year
GDP, at 2005 constant prices /billion MNT/ 4146.49 4469.16 5396.54 6243.8 7117.9
GDP, at current prices /billion MNT/ 8290.2 9463.9 12070.9 15025.75 18059.66
1 USD in MNT exchange rates 1305.0 1255.0 1225.0 1198.0 1167.0
Population /thous. Person/ 2817.6 2874.2 2934.6 3001.7 3064
Unemployment rate 2.9 2.8 2.7 2.6 2.5
GDP /million USD/ 6352.6 7541.0 9853.8 12542.4 15475.3
Sources: Ministry of Finance

Mongolia, land of the ancient cultures, is now facing the

opportunities to become a new ancient miracle. With
the boom of north East Asian economy, Mongolia
transferring to an emerging market is attracting international investors.
Development PROSPECTS of Mongolia
Bank
ongolia’s Socia-Economic
M Development Priorities for 2010-
2015 is about to be verified by the
Government of Mongolia. According to the
concept of this document, the development
policies of Mongolia shall focus on main
five areas:
 Priority 1. Develop responsible and
ecological mining sector and
establish base of heavy industry –
metallurgy, copper smelting, oil
processing, chemical industry;
 Priority 2. Implement industrial
policy and develop intensified
agriculture;
 Priority 3. Develop infrastructure in
order to sustain mining and
industrialization;
 Priority 4. Human development,
sustainable development;
 Priority 5. Improve Governance,
support of private sector;
The Development Bank of Mongolia has
been established to create a new source of
funding in addition to the Development fund
of Mongolia, international loans and grants
and the government bonds; expand the
cooperation and investments from private
sectors and international investors in
implementing the development projects in
primary sectors of the economy; improve the
profitability of the projects through the
establishment of appropriate organizational
structure, professional and efficient
management and utilization of
comprehensive feasibility studies for
financing the investments, monitoring the
implementation of projects and raising the
required funds in international markets.
Therefore, the Development Bank of
Mongolia shall perform a key role to
achieve above mentioned goals by
distributing mining sector revenue
efficiently.
OUR PHILOSOPHY is not to compete, but to cooperate.

After the collapse of the socialist regime,

a two-tiered banking system comprising
of the Bank of Mongolia (central bank)
and other commercial banks was created
in 1991. Currently, there are 14
commercial banks in Mongolia.
Those numbers of commercial banks exist
only for 2.8 million people seem
Mongolia is one of the most overbanked
countries in the world. On the other hand,
current commercial banks are insufficient
for facilitating demand of mid-long term
loans that is very crucial to promote the
economic growth. According to statistics
of the Bank of Mongolia as of Aug 31,
2010, total amount of loans ranging from
500.0 million up to 1.0 billion tugrik
accounts for 11.9 % of the total loan.
As, a new financial institution in
Mongolia, the Development Bank of
Mongolia not only fills the gaps that
commercial bank’s activities can’t reach,
but also creates a new market
opportunities such as syndicated loan for
them.
TODAY
Based on Mongolia’s Law on
Amendment to the 2010 Budget, Law on
State and Local Government Property’s
Clause 9.5 of Article 9, Banking Law’s
Clause 18.1 of Article 18, Clause 2.1.31
of the Government Action Plan for
2008-2012; the Government of
Mongolia decreed to establish the
Development Bank of Mongolia and
approve the charter of this bank as set in
its annex on 26 July, 2010.
In 10 February 2011, the State Ih Khural
(the parliament) passed the Development
Bank of Mongolia Law.
Currently, the Development Bank of
Mongolia is a state owned (government-
owned) legal entity.
TOMORROW
Under charter of the Development Bank
of Mongolia, The Development Bank
shall be a partially state owned legal
entity engaged in business activities of
providing financial services for the
development of priority sectors verified
by the Government of Mongolia, growth
of the value added export and
improvement on economic
competitiveness.
As a founder of the Development Bank
of Mongolia, the Government of
Mongolia will continue to hold its shares
until the partial privatization is achieved.
Board of Directors
The Board of Directors consists of three
independent and six permanent members.
Our Activities
Filling gap in the national banking
system and promote foreign capital
inflow through risk sharing and
cooperation with foreign investors and
support young domestic industries and
business entities.

Under its law and charter, the

Development Bank shall be engaged in
activities of providing financial services
such as making mid-long term loans for
the development of priority sectors
verified by the Government, growth of
the value added export and improvement
on economic competitiveness.

The Development bank shall not carry

out the activity of accepting deposits..

The Development Bank of Mongolia will not

compete with commercial banks in their funding
activities and will not gather deposits from
individuals and companies; it will provide long
term funding for large, technology intensive
industrial projects, thus provide conditions for
harmonious and mutually beneficial cooperation
with commercial banks. The Development Bank
of Mongolia will cooperate with commercial
banks in funding large projects through loan
syndication, assist in raising funds in international
markets, and provide new financial services such
as providing guarantees to private sector.
Domestic commercial banks will be allowed to
participate in equity and become shareholders of
the bank.
 The establishment of the Development Bank of Mongolia will assist in exploiting the
strategically important mining deposits, accelerating economic growth through
implementation of large industrialization projects, development of processing
industry, re-structuring economy and promoting competitiveness of Mongolia in a
global arena.

Figure1. Business Model of the Development Bank of Mongolia

International
Capital Market

Domestic
Development Capital Market
Customer Bank of
Mongolia
International
Commercial Organizations
Bank
/Syndicated Government and
loan/ its funds
The Government Funds and the Development Bank of Mongolia

The Government of Mongolia and its funds shall be main financial sources of the Development
Bank. According to the researches, capital flow from the mining sector will increase from 2013
that tends to positively impact on the domestic economy. For financing the paid-in capital of the
bank, the Development Bank issues bond which will be purchased by the capital sources of
Stabilization Fund, and Social and Health Insurance funds that are placed in Human
Development Fund (Appendix 5). By 2015, those funds seem to have potential to provide up to
1.0 billion USD financing. Regarding this issue, Human Development Fund has the chance to
become one of main financial sources of the Development Bank. It is specified in the 5.1 article
of Human Development Fund Law “For the purpose of amassing, capital of the fund shall be
invested in following financial instruments….” which shows the fact that Human Development
Fund can purchase the bond of the Development which composes capital sources required for its
operation.

Figure2. The Development Bank of Mongolia and the Human Development Fund

Strategic Mineral
Deposits

A license holder of a Strategic

Mineral Deposit

A legal entity that owns government shares of a company that

holds a license of strategic mineral deposit

Human Development
Fund

Bond
issued by
Income
the DBM

Development Bank of
Mongolia

Loan
Income
 INVESTMENT PROJECT
OPPORTUNITIES EXAMPLE

Economic Growth
According to the macro-economic forecasts
done by the international organizations,
Mongolia’s GDP seems to reach to 44 trillion
tugrik by 2020 which is 6 times higher than
that of 2010. In coming years, Mongolian
tugrik will appreciate against foreign
currencies, provided that foreign currency
inflow is increased due mineral products export
income. This favorable condition in the TAVAN TOLGOI THERMAL POWER
domestic economy will influence positively to
PLANT
the domestic industry development.
It is worthwhile to channel investments geared Maximum 400 MW thermal power plant
towards promoting the industry development with air-cooling system and dry ash
removal will supply electricity to the
through the Development Bank of Mongolia.
Central Electricity System of Mongolia’s
south Gobi region.

Economic Development Project in brief: Investment

The Development Bank of Mongolia, a new  Project cost

financial institution, has been established to 1) $184.7MM ($25.7 MM for 12MW;
create a new source of funding in addition to $159.0 MM for 100MW), $ 360.0 MM
the development fund of Mongolia, (300MW)
international loans and grants and the  Source of proceeds
government bonds; 2) to expand the 30% equity ($55.4 MM); 70% debt
cooperation and investments from private (129.3 MM (Bankable Feasibility
sectors and international investors in Study by Parsons Brinckerhoff)
implementing the development projects in  Debt terms
primary sectors of the economy; improve the
10 years maturity; 7% annual interest
profitability of the projects through the
establishment of appropriate organizational
structure, professional and efficient
management and utilization of comprehensive
feasibility studies for financing the
investments, monitoring the implementation of
projects and raising the required funds in
international markets.
 Annex of Government of Mongolia’s Decree No. 320, 2009

LIST OF PROJECTS WITH TOP PRIORITIES TO BE IMPLEMENTED FOR THE GOVERNMENT

Estimate of
№ Project name cost Timeframe
/$ million/
Priority one: Developing mining sector by exploiting mineral resources deposits and
setting the foundation of heavy industry
1 “Oyu Tolgoi” project 4,000.0 2010-2015
2 “”Tavan Tolgoi” project 800.0 2010-2015
3 “Copper smelting factory” project 1,000.0 2010-2015
4 “Black metallurgy complex” project 1,000.0 2011-2016
5 “Coking coal industry” project 700.0 2010-2015
6 “Petroleum oil industry” project 900.0 2011-2015
7 “Chemical factory” project 1,000.0 2010-2015
8 “Construction materials factory” projects 800.0 2010-2015
Priority two: Developing intensified agriculture and implementing industrialization policy
“Healthy food” projects to make livestock healthy and increase
9 150.0 2010-2015
meat and dairy production
10 “Supporting development of irrigation fields” project 50.0
11 “Agricultural products and raw materials stock market” project 50.0 2010-2011
“High-technology-based industrial complex and science parks”
12 400.0 2010-2015
project
Priority three: Developing infrastructure
13 “Tavan Tolgoi Power Station” project 400.0 2010-2015
“New railroad” project from tavan Tolgoi-Zuunbayan- Sainshand
14 800.0 2010-2015
– Choibalsan: /920 km/
15 “Providing Gobi region water needs from Orkhon river” project 540.0 2010-2015
16 “National satellite for communications of Mongolia” project 100.0 2010-2015
17 “Renewal of Ulaanbaatar city auto roads” project 900.0 2010-2015
18 “Building international, national and domestic auto” project 1,200.0 2010-2015
19 “Highway from Altanbulag – Ulaanbaatar – ZaminUud” project 1,200.0 2010-2015
20 “Ulaanbaatar 5 th energy power station” project 300.0 2011-2016
21 “Providing population with housing” project 2,100.0 2010-2015
22 “Generating electricity from waste and biomass” project 200.0 2010-2015
Priority four: Providing sustainable development through human
development and protecting the environment
23 “Industrial training complex for Information technology” project 100.0 2010-2015
24 “Students town” project 300.0 2010-2015
th
25 “Khar khorum – 13 century” tourism project 500.0 2010-2015
“ECO” project to purify domestically and industrially polluted
26 200.0 2010-2015
water
 ORGANZATIONAL STRUCTURE
Figure3. Organizational structure of the Development Bank of Mongolia

The Shareholders
Meeting

Board of
Directors

Supervisory
Board

Executive
Body

Risk Management Committee

Asset Liability Management Committee

Loan Analysis and Evaluation

Committee

Asset and Liability Loan Policy and Monitoring and Risk Management
Management Planning Administration Department
Department Department Department

Financial Intermediary Representative

Companies Offices
PARTNERSHIP
We would welcome any suggestions of fruitful
partnership.

The Development bank of Mongolia’s main goals are implementation

of the projects in accordance with the Government Action Plan,
Comprehensive National Development Strategy and Mongolia’s Socio-
Economic Development Priorities verified by the Government of
Mongolia by collaborating with the financial institutions, foreign
investors and increasing foreign capital flows into Mongolia. The
Development Bank of Mongolia needs to collaboration with foreign
development banks as well as learn from their experience. Foreign
investors are expected to hold a certain percentage of the Development
Bank Mongolia shares.

We believe that the paid-up capital should increase step by step while
international financial institutions and foreign/domestic investors will
be offered equity participation up to 49 percent of the bank capital. By
allowing international development financial institutions to partake in
it, the DBM will be able to disseminate their best experiences and the
achievements into its activities. The international management team
consisting of foreign and national professionals shall act as the
executive body of the bank and will help in human resource capacity
building.

Development Bank of Mongolia is a new development financing

institution and is currently cooperating with Korea Development Bank
and Development Bank of Japan as well as with many international
development financing organizations.
TSOGBAYAR Enhmaa
Officer/Secretary of the Board of Directors
National Development and Innovation
Committee of Mongolia
Tel: (976)-51-261577
E-mail: tsogbayar@ndic.gov.mn