November 21, 2011
Reposted from the Oxford Business Group
As Mongolia marks 85 years since its building sector was formally established, intensive demand for private and public construction is creating jobs and furthering the need in the residential segment, while domestic involvement in foreign-led mining projects is adding to the overall demand in the sector.
The government has announced ambitious spending plans for the next few years, with confidence fuelled by rising foreign investment in the country’s resource wealth. Big-ticket projects such as the plan to build 100,000 homes and give citizens MNT1m ($772) towards the purchase of their own home are under way and are expected to boost Sukhbaatar Batbold administration’s chances in the parliamentary elections due in 2012. Meanwhile local and foreign firms are stepping up the construction of vast copper and coal mines set to come on-stream in the next five years.
Capitalising on the momentum, Mongolian investment, trade and industry group Barilga held its fourth international construction expo in the capital, Ulaanbaatar on September 2-5, welcoming 120 organisations as well as representatives from the US, China, Japan and Russia. Supported by the Ministry of Roads, Transportation, Construction and Urban Development as well as the Mongolian Builder’s Association, Barilga – formed in 1992 as a successor to the state-owned Mongolian Construction Company – the event was aimed at establishing trade links and introducing new building technologies.
The conference came as rapid growth is being registered in a building industry made buoyant by expected wealth from the vast Oyu Tolgoi copper-gold project and Tavan Tolgoi coal mine. These are estimated to double GDP in the next five years and raise per-capita income from the current $3200 to some $10,000.
The government’s statistics body revealed in January that 2010 saw spending of MNT350bn ($270.3m) nationwide on construction, a 25.6% year-on-year rise, while the World Bank said in March that the building sector registered 38% year-on-year growth. The World Bank also found that 26% of the total listed companies on the Mongolian Stock Exchange were involved in construction, just 2% lower than the country’s mainstay industry of mining.
Among the government’s key modernisation plans is a strategy to build 100,000 new housing units in the capital to improve urban living conditions as well as water supply and sanitation nationwide. The administration has pledged to pay MNT1m ($772.20) to each eligible citizen towards the purchase of a new housing unit, with an apartment block with 15,000 units already under construction on Ulaanbaatar’s Yarmag Hill. Officials have said the project will cost MNT800bn ($617.8m), MNT467bn ($360.6m) of which would be allocated to the construction sector.
In September, the head of the cabinet secretariat of government, Ch. Khurelbaatar, gave a report to cabinet members on the implementation of a middle-term programme that involves the cabinet selecting enterprises to execute 41 works reflected in the programme with capitals of MNT13.3bn ($10.3m). The project will be undertaken with loans from the Development Bank of China and cooperation with the Investment Department of Kuwait.
Work on a new international airport for Ulaanbaatar is scheduled to begin in early 2012 and take three years to complete. Built with a $270m loan from Japan, the new facility will be able to service all larger modern aircraft and provide better protection from high winds. The transport link comes amid plans to develop an eastern link from the Trans-Mongolian rail line heading east from Ulaanbaatar to the eastern Trans-Siberia route, which will link Mongolia directly to a sea port for the first time, ending the current reliance on China for export of raw materials, goods and products.
With the Oyu Tolgoi mine expected to employ some 14,000 workers – 60% of which will be Mongolian – and the demand for other mining-related construction workers potentially exceeding the capacity of country’s widely spread population of 3m, an important issue arising in construction is labour.
The chief of the Building and Apartment Policy Board of the Ministry of Road, Transportation and Urban Development, B. Baasan said in August that the ministry’s policy would be to train Mongolian workers to build the 100,000 apartments. And that 70% of the building material would come from domestic factories by 2016.
Photo Credit by the Oxford Business Group