Mongolia Water Challenges & Potential
Spanish Delegation to Ulaanbaatar
June 5, 2014
IFC Overview
Private Sector Arm of the World Bank Group
Investment
Services
Advisory
Services
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Loans
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Access to finance
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Equity
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Investment Climate
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Trade finance
•
Sustainable Business
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Syndications
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Securitized finance
Public-Private
Partnerships
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Risk management
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Blended finance
$49.6 b portfolio (FY13)
$232 m (FY13)
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IFC Asset
Management
Company
• Wholly owned subsidiary
of IFC
• Private equity fund
manager
• Invests third-party capital
alongside IFC
$5.5 b under mgmt (FY13)
IFC FY13 Committed Investments: $24.8 Billion
IFC Also Growing in Mongolia: Over $400m in cumulative financing:
Financial Services, Wind-Power, Housing, Hotel, Agribusiness…
•3
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IFC Water & Waste Business Globally
$2.1bn committed across 126 projects since 2003
(1)(2)
CAF
• $138mm committed
• 12 investments
• 4.6mm people reached
CEA
• $521mm committed
• 26 investments
• 21.5mm people reached
ECA
• $463mm committed
• 20 investments
• 6.4mm people reached
LAC
• $537mm committed
• 36 investments
• 30.1mm people reached
Note: As of June 2013.
1. Includes water related deals in Water, Waterwaste, Manufacturing, Agribusiness and Services sectors.
2. Includes Organica transaction which is not reflected in any above mentioned regions.
Including Some Spanish Companies in UB Today:
Abengoa, Acciona, Gamesa, GNF (other infra sectors)
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MENA
• $232mm committed
• 9 investments
• 10.1mm people reached
SA
• $229mm committed
• 22 investments
• 8.4mm people reached
Mongolia: Strong GDP Growth…
Recent declining trend: 11.7% 2013, Est. 10% 2014
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…With Challenges…
• Investment Climate and Macro-economy need
more long-term stability (FDI down 54% 2012, 65%
Q1 2014; MNT Depreciated ~30% in past 18 months)
• Concentrated Markets (China & Russia; landlocked)
• Infrastructure and logistics gaps need to be
developed to lower costs and support growth
• Standards remain low limiting value-add, exports
• Small domestic market limits interest by foreign
investors and risks oversupply in medium-term
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…But Improving “Doing Business” Ranking…
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…And Long-Term Growth Drivers
• Mining is foundation of strong growth (OT mine
alone expected to contribute more than 30% of GDP
once completed; TT and others to come)
• Infrastructure (power, heat, transport, urban) will
need to be built (estimated need of over $20 billion
in next several years)
• Non-mining exports has potential to vastly expand
(agri, green power, import substitution)
• Urbanization, young demographics (56% under 30),
and rapid middle class growth (potential to double
income every 4-5 years w/low teens GDP growth)
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Mongolia’s Water Challenge: UB
Water supply and demand gap in Ulaanbaatar
Source: Tuul Water Basin Integrated Water Management Plan, New Ulaanbaatar City Master
Plan, PwC/ Deltares calculations
Right Pricing, Investment, Sustainable Use
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Key take-aways:
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Water demand exceeds
current supply capacity in all
scenarios.
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In the high and medium water
demand scenarios,
Ulaanbaatar will run out of
water within the next 10
years.
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Existing water resources are
vulnerable to pollution.
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The water supply and
wastewater infrastructure is
in need of a major overhaul
and expansion, esp. in the Ger
areas.
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Mongolia’s Water Challenge: South Gobi
Water supply and demand gap in South Gobi
Key take-aways:
•
In the high demand scenario water
demand is estimated to exceed
available water resources between
2021 and 2030.
•
High water risks, incl. quality and
quantity, are expected locally in all
scenarios.
•
Competing water demands create
conflicts between the mining
sector, herders and local
communities.
•
Non-compliant (mining) companies
and ninjas have negative impacts
on the environment.
Source: MEGD: Integrated Water Management Plan of Mongolia, 2013, PwC/ Deltares
calculations
Note: incl. water basins: Umard Goviin Guveet-Khalhiin Dundal Tal, Galba-Uush-Dolodiin
Govi and Altain Uvur Gobi Basins
Water Mgnt, Monitoring, Info Sharing
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Key Take-Aways (1)
• Rising demand for water (Household & Mining):
UB: fast urbanization, rising middle class, more
modern housing means higher water
consumption – big need for modern water infra
• Constraining supply: Low precipitation, high
evaporation, poor infra (high leakages), climate
change impact – Efficient & sustainable usage
• Old and missing infra capacity: 30% of soums
(counties) do not have water systems (MOEGD);
Prioritizing fiscal, private, and PPP financing
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Key Take-Aways (2)
• Sensible policies (pricing), legal framework (PPP):
Subsidized (under) pricing for households, but
industrial tariffs have been raised; international
standard PPPs framework (water & other infra)
• Sustainable usage of water (societal awareness):
Livestock is biggest water user in Mongolia (need
to fix overgrazing); Recycling for mining (i.e. OT
recycles 70-80% of water use)
• Much needed investment & technology:
“Bankability” is critical to attract private sector.
Key: stable & predictable investment climate
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Thank You
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