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EBRD activities in Mongolia and Support to Business Associations December 3, 2018

EBRD activities in Mongolia and Support to Business Associations December 3, 2018. Irina Kravchenko, Head of Resident Office, EBRD Baigalmaa Sanjjav, Principal Manager, ASB, EBRD. OFFICIAL USE. Contents. Introduction to the EBRD and EBRD Mongolia Small Business Initiatives

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EBRD activities in Mongolia and Support to Business Associations December 3, 2018

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  1. EBRD activities in Mongolia and Support to Business AssociationsDecember 3, 2018 • Irina Kravchenko, Head of Resident Office, EBRD • Baigalmaa Sanjjav, Principal Manager, ASB, EBRD OFFICIAL USE

  2. Contents • Introduction to the EBRD and EBRD Mongolia • Small Business Initiatives • Support to Business Membership Organisations OFFICIAL USE

  3. Introduction to EBRDWho we are Shareholding Structure Cumulative Business Volume (excluding Guarantees) EBRD Promotes transition to market economies whilst fostering sustainable development and inclusive growth. EBRD owned by Mongolia and 66 other countries and two EU bodies. EUR >120bn invested since 1991 >5,000 projects since 1991 EUR 9.7bn Across 412 projects , 71% private sector and 95% debt in 2017. OFFICIAL USE

  4. Where we are OFFICIAL USE

  5. The EBRD in MongoliaTrack record • At a glance • Largest FI investor in private sector • 99 • projects in Mongolia to date • €1.6 billion • Cumulative EBRD investment • 99% • Private sector share of portfolio • €810 million • Current portfolio of projects OFFICIAL USE

  6. EBRD Transactions: Case StudiesOyuTolgoi, Mongolia – Large-scale gold-copper mine expansion EBRD Finance USD 1.2bn 15-year syndicated project financing, of which USD400m are for the account of the Bank and USD 821m for the account of 15 commercial lenders. This is part of a larger USD 4.4bn financing package that involves the IFC, MIGA and the ECAs of Canada, the US and Australia. The Borrower is OyuTolgoi LLC (OT), owned 66% by Turquoise Hill (the project manager, majority owned by Rio Tinto) and 34% by the State. Project OT is one of the world’s largest copper-gold deposits, with JORC resources of 40bn lbs of copper and 20 Moz of gold. The project involves the development, construction and operation of an open pit and underground facility in the southern Gobi. Environmental Impact A very comprehensive environmental and social appraisal has been carried out by the lenders including EBRD and IFC. The detailed ESIA is published online. Transition Impact (1) Support to the private sector; (2) transfer of skills; (3) high standards of transparency, EH&S and governance. 2015 Signed in Natural Resources OFFICIAL USE

  7. The EBRD renewable investment in Mongolia • 50 MW Salkhit wind farm – 2012 • Tuv province • First renewable project in Mongolia • EBRD finance: debt USD 42m and equity USD 5 million • Co-Lender: FMO USD 42 million and equity USD 5 million • 50 MW Tsetsii wind farm - 2016 • Umnugobi province • EBRD finance: USD 25 million • Co-Lender: JICA USD 64 million • Emission savings: reducing CO2 emissions by up to 151,280 tons per year OFFICIAL USE

  8. The EBRD renewable investment in Mongolia • 55MW Sainshand wind farm – 2017 • Sainshandsoum, Dornogobi • EBRD finance: USD 30 million • Co-Lender: EIB and USD 45.6 million • Emission savings: reducing CO2 emissions by up to 150,000 tons per year • 30 MW Desert solar power – 2018 • Sainshandsoum, Dornogobi • EBRD finance: USD 10.2 million • Co-Lender: FMO & Triodos USD 10.27 million each • Emission savings: reducing CO2 emissions by up to 47,000 tons per year OFFICIAL USE

  9. EBRD Transactions: Case Studies Gobi Corporation JSC • Client • Gobi JSC is the largest vertically integrated cashmere and camel wool processor and garment manufacturer in Mongolia. Shares of Gobi are traded at the Mongolian Stock Exchange. • EBRD Finance • USD 3.5 million in 2009 and USD 5.0 million in 2011 with a tenor of 5 years. • Use of proceeds and EBRD value added / impact  • The investments in 2009 and 2011 were used for equipment modernization following the privatization of the factory, improvement of product quality, optimization of the production process and for capacity increase. • EBRD’s involvement supported the Company to offer higher quality products into international market and increase its production capacity. • Manufacturing & Services OFFICIAL USE

  10. EBRD Transactions: Case Studies TavanBogd Group Teso LLC One of the largest conglomerates in Mongolia with subsidiaries in manufacturing and services, tourism and hospitality, trade, and financial services sector. Partially led by Mrs. Khulan, the executive vice president of the company. EBRD client since 2009, receiving several long term debt financing on its subsidiaries. One of the largest local food and beverage manufacturing companies in Mongolia, producing ice cream, snacks, noodles, dairy products and beverages. Led by one of the shareholders Mrs. Narankhuu. EBRD client since 2014, becoming the first company to receive corporate loan in local currency. OFFICIAL USE

  11. Case study: Mobicom Corporation • ICT sector in Mongolia Client Mobicom Corporation is Mongolia’s first and largest mobile operator. Since its inception in 1996, MobiCom has played a important role in transforming Mongolia’s economy by providing the telecommunications services and technology that are essential to families and businesses across Mongolia. EBRD Finance USD 11.1 M synthetic MNT denominated loan signed in 2015 • Use of proceeds and EBRD value added / impact  • Following debt financing from EBRD, Mobicom financed its network capex requirement in expanding its 3G network in the regions and drive the broadband internet penetration growth. • EBRD’ financing supported Mobicom’s investments in wireless network in the regions of Mongolia where the existing network is obsolete or not adequate to meet increasing demand for voice and data services. OFFICIAL USE

  12. EBRD Priorities in Mongolia • Enhancing Mongolia’s resilience by strengthening the competitiveness of the non-extractive sector and easing access to finance • Debt and equity investments to non-mining companies including smaller transactions to nurture and develop entrepreneurial spirit, including dedicated debt facilities focused on the SME sector with our partner banks. • Promoting institutional building and corporate governance of selected banks and NBFIs through equity and debt finance, TFPs and local currency funding. EBRD does not compete with commercial investors. EBRD invites other banks to participate in its operations (syndication, co-financing). Non- extractive Sector Mining Sector • Leveraging a well-governed mining sector to enhance sustainability and maximise value creation: • Debt and equity investments to mining companies, including smaller projects, upstream and downstream oil projects and infrastructure related mining projects • EBRD will continue to support responsible mining, in particular through foreign investment, and will seek to deepen value-chain opportunities through upstream financing (both value chain and factoring) and deeper downstream processing. • EBRD will support municipal infrastructure projects, especially private sector related projects, renewable energy projects by cooperating with WB, ADB and bilateral donors. Infrastructure and Energy Efficiency • Improving the quality and sustainability of infrastructure services through • increased efficiency, commercialisation and “green” solutions • EBRD will support municipal infrastructure projects, renewable energy projects by cooperating with WB, ADB and bilateral donors. • EBRD employs donor grant funds to blend with its projects.  Donor funds and the Bank’s own resources are used to fund technical assistance for projects. EBRD provides assistance in executing investments with significant energy and resources efficiency. OFFICIAL USE

  13. EBRD Product Flexibility tailored to project needs Debt Guarantees Equity EUR10mln + (less in less advanced countries) EUR5-7mln + (less in less advanced countries) Typically EUR50 ths – EUR50mln Typical size Term 5-7 years (up to 10-15 years in case of infrastructure investments) Typically from 3-7 years 1.5-2 (up to 3) years Currency Major foreign currencies as well as local currency Approach Finance up to 35% of the project (60% with syndication) Minority stake Mainly through Trade Facilitation Programme • Import/export operations • Pure guarantees, cash advance trade finance Structures • Senior, subordinated or convertible, • Project finance • Floating or fixed rates • Portage equity finance • Risk equity Applications • Greenfield/Brownfield, JVs, • Capex for expansion/modernization, including resource efficiency improvements • Ownership change: acquisition, consolidation, privatisation • PPPs, etc. • Issues to international banks • Takes the risk of transactions of the banks in the EBRD’s countries of operations Exact terms depend on specific needs and market conditions OFFICIAL USE

  14. Introduction to the EBRD and EBRD Mongolia • Small Business Initiatives • Support to Business Association OFFICIAL USE

  15. An integrated toolbox for SMEs Financing through financial institutions (FIF) Co-financing with financial institutions (RSF) Direct financing for small business (DFF) Business advice Policy dialogue • 200+ partner financial institutions • €1+ billion of finance each year • Benefitting hundreds of thousands of small businesses • Lessening the risk of financing small businesses • Helping partner financing institutions to make their money go further • Providing direct financing for small businesses, coupled with business advice • Instilling higher standards of corporate governance and financial transparency • Providing business advice • Ranging from strategy to operations, financial reporting, energy efficiency and much more. • Taking targeted policy actions alongside our investments • Engaging effectively with policy-makers across our region

  16. Support for Mongolian Economic Diversification through SME Access to Finance Funded with the Support of the European Union • The Programme supports the Mongolian economic diversification by improving SMEs’ access to finance: • (a) through loans to Participating Financial Institutions (PFIs) for on-lending to SMEs; and • (b) through risk sharing with PFIs on their loans to SMEs. • The Programme also provides capacity building or business advisory services directed at SMEs, PFIs and business associations and contributes to the improvement of business environment and domestic financial intermediation. • The favourable business environment is a precondition to improve SMEs’ access to finance and promote economic diversification OFFICIAL USE

  17. Highlights: Business Advice-Mongolia, 2016-2017 Funded with the Support of the European Union 155 advisory projects • 173 projects : 155 local advisory and 18 international advisory since start of the project • 38% of clients are from rural areas • 24% are micro enterprises, 23% are medium and 53% are small • Trained 44 local consultants through 2 GYCB courses and Export Strategy Consultancy Course. 75% Growth of employees Highlights: Business Advice-Mongolia 65% Growth in turnover 30% Access to finance OFFICIAL USE

  18. Funded with the Support of the European Union Best case I-Khugjil Trade LLC Clients that secured new investment 30% Median investment €95,800 Total investment €478,800 Khugjil trade LLC secured a new investment for working capital and the equipment. It also increased the revenue by 84% and employment by 10%

  19. Funded with the Support of the European Union Best Case II: Khuvsgul Titanic LLC • Bread and bakery producer • Started its operation in 1996 • Advisory project targeted on assessing current operation of the company, developing 5-year strategic planning and introducing new products • Local consultants: Strategic planning, market research, financial statement, HR and marketing • As a result sales income increased by 33%,productivity by 25% and developed new products.

  20. Introduction to the EBRD and EBRD Mongolia • Advice to Small Businesses • Support of Business Associations OFFICIAL USE

  21. Strengthening Business Membership Organisations Funded by the European Union BENEFICIARY ASSOCIATIONS: Mongolian National Construction Association (130 member SMEs)  Mongolian United Association of Private Sector Health Organisations (350 member clinics), Mongolian Beekeeper’s Association (40 SMEs), Mongolian Hotel Association (45 Hotels), Mongolian National Fruits and Berries (100 member SMEs and 50 individuals, 18 branches in aimags), National Association of Mongolian Agricultural Cooperatives (18 branches, 600 cooperatives) Federation of Mongolian Freight Forwarders (36 member SMEs), Mongolian Food Industry Association (300 member SMEs nationwide, 18 branches in aimaks), Mongolian Wool and Cashmere Association (90 member SMEs nationwide) CCI in Khentii (50 member SMEs in the region)       CCI in Sukhbaatar (80 member SMEs in the region)       CCI in Gobi-Altai (65 member SMEs in the region)       Mongolian Management Consultant’s Association Mongolian Management Consultant’s Institute OFFICIAL USE

  22. Strengthening Business Membership Organisations Funded by the European Union Dec, 2017 launched “Building Effective Business Membership Organizations” 12 business associations selected from different sectors First 4 months were spent for assessment, members’ needs, action planning Next 12 months for coaching and implementation of action per association OFFICIAL USE

  23. Strengthening Business Membership Organisations Funded by the European Union • Strengthening the eco-system of SMEs through building internal capacity of BMOs as a catalyst for SME development: • Internal management capacity, incl. Corporate governance, organisation and advocacy • Membership and outreach • New services • Financial sustainability through increased dues–payments and income generation • Examples: • Gaziantep Chamber of Commerce and Mersin Chamber of Commerce and Industry in Turkey under the Refugee Response Programme (one-on-one support) • Building a network of 15 Business Support Centres in Ukraine (bundled approach) • Strengthening 10 BMOs in Tunisia, (bundled approach) • Strengthening 10 BMOs in Mongolia (bundled approach) • Strengthening the capacity of the Chamber of Commerce and Industry of the Republic of Uzbekistan (one-on-one support) OFFICIAL USE

  24. Thank you! • EBRD Mongolia Resident Office MCS Plaza 3rd Floor, Seoul street - 4A Ulaanbaatar 14251, Mongolia Tel: + 976 – 11 317974 24 OFFICIAL USE

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