In addition to being a successful banker, B. Medree edited the book “From Good to Great” a few years ago. He has now edited an exciting book called “How Georgia Succeeded”. We welcome you to a glance at the career and a personal view of B.Medree, Chief Executive Officer of the Trade and Development Bank of Mongolia.
- I’d like to share some news with our readers. The Mongolian-Japanese business forum will be organized on July 22nd of this year. A sizeable group of government officials and private sector representatives are going to visit Japan. Isn’t that correct?
- Yes, a group of 100 people from both public and private sectors of Mongolia are visiting Japan, and about 300 people from Japan are going to participate in this forum. I was informed that Mr.Elbegdorj, the President of Mongolia, will give a speech during the forum, and Shinzo Abe, Prime Minister of Japan, will also pay a visit. I am positive that such an extensive forum organized mutually will have a great impact on cooperation between the two countries. Mongolia has established a strategic partnership agreement with Japan, and therefore, the President, the Chairman of the State Great Hural, the Prime Minister, and the Minister of Foreign Affairs pay an official visit once every four years to evaluate and summarize work performance and to discuss future plans. N.Altanhuyag, the Prime Minister, made the most recent visit to Japan in September 2013, as a result of which, both parties signed a Memorandum of Understanding and released a statement to cooperate in certain sectors of the economy.
- The Mongolian-Japanese business forum will be held at a very interesting time looked at it in the bigger picture. Mongolia entered into a strategic partnership with Japan, and Russia and China established an agreement to supply natural gas last spring.The main subject of discussion at the moment is issues surrounding railway construction and banks.
- In my opinion, the two countries need to focus on realizing agreements and negotiations previously made at the state and government levels. Mongolia and Japan have discussed short, medium, and long term prospects of cooperation a number of times. This time, I believe that they will discuss additional proposals and initiatives that suit the present day situation, as opposed to new aspects of cooperation.
In the 42 years since Mongolia started diplomatic relations with Japan in 1972, we have been cooperating effectively in political, social, economic, and cultural arenas as well as in sports.
Since Mongolia made the transition to a market economy in 1990, cooperation between the two countries has been developing and expanding steadily based on the common values of human rights, democracy, and market economy.
Since 1990, Japan assisted Mongolia in building factories and plants which are the pillars of the industrial sector of Mongolia, for instance, the iron plant of Darkhan, the Makh industrial complex, the Gobi industrial complex in Ulaanbaatar city, and other experimental factories.
Japan has provided numerous aid and support in our difficult times of development. One of the examples is the “Uvsnii undes” project under which many secondary schools and kindergartens were built and renovated in rural areas. Even today, Japan continues to assist Mongolia by building a new international airport in Khushigt valley. Japan has made many contributions in the fields of art and culture. Cultural representatives of Mongolia, for example, N.Norovbanzad, the Mongolian labor hero and public artist, have created enormous value by introducing the folk art of Mongolia to the Japanese people. This practice still continues today.
- There is so much to discuss in the education sector. The immediate example is the young people of Mongolia who were sent to schools in Japan in Soviet times.
- There were very few students studying in Japan before 1990. As the country transitioned to a democratic system, the number of students studying in Japan increased dramatically. For example, this year, 1,000 Mongolian students were granted non-refundable scholarships by the Japanese government to study for undergraduate degrees, masters’ degrees, and doctoral degrees in Japan.
- Moreover a sizable infrastructure project construction is being planned in Mongolia. Is this the metro construction project?
- Yes, Mongolia will have a metro. This is going to be a significant event in our history. Mongolia and Japan have signed an agreement to cooperate in building a metro line in Ulaanbaatar city, as well as renewing the sewage treatment plant complex, developing tourism, building hotels, tour camps, increasing trade and investment, implementing a technical cooperation project to reduce air pollution in Ulaanbaatar city, and building a semi coking compact fuel plant. I believe that these plans will be realized. Moreover, I am sure that Japan will provide further assistance if Mongolians come to a common understanding about the railway, narrow and broad gauge. I also assume that Japan will cooperate in producing liquefied natural gas. In general, I would like to emphasize that collaboration between Japan and Mongolia has been expanding in all sectors.
- Recently, large Japanese corporations have expressed their interest in investing in Tavan Tolgoi project. However, as you may know, there has been talk that Mongolia left Japanese and South Korean investors “outside the circle”. Do you think that their interest in investing in South Gobi remains the same for such investors? Do you have updates on this matter?
- Most definitely. Mongolia is focusing on expanding cooperation with Russia and China in the first place. But also it is striving to bring cooperation with northeast Asian countries, such as Japan, South Korea, Hong Kong, and Macao, to a new level. Our country has enormous wealth in natural resources. On the other hand, Japan is one of the eight leading industrial countries of the world with top economic factors listed after the USA and China. It has great knowledge, expertise, and new technology. Therefore, I think it is absolutely necessary to collaborate with Japan in an even broader sense. However, I would say that Mongolia should look carefully into expanding cooperation in producing value added products. For instance, we can export coal and uranium processed at a certain level, and copper as an end-product to Japan. There can be many initiatives when it comes to processing commodities.
Mongolia is considered to be one of the ecologically clean countries of the world and has a distinctive weather conditions. It can be +30°Centrigade in the daytime and +10°Centrigrade at night. Food grown in Mongolian soil and its livestock products are of good quality because of these extreme weather conditions.
If we can manage well the hygiene and safety aspects, we have great potential to supply organic food products and semi and fully processed meat products to Japan, as organic farming and ecologically friendly products are the world trend.
Although Mongolia has abundant natural resources, it is not the path or model of development. It may be seen as one of the basic industries to assist in accumulating monetary assets. I think this is the proper way of looking at the natural resources and their usage.
- People are saying “The economy is in crisis”. How about the climate in the banking and financial sectors?
-Since the transfer to the free market, we have established a two tier banking system: the Central bank and commercial banks. International organizations such as the International Monetary Fund, World Bank, the Asian Development Bank and the European Bank for Development and Reconstruction, have provided immense support in building this system. Due to the technical assistance from international organizations in the areas of training human resources, contracting international audit companies, introducing information technology, providing assistance in the process of credit and risk management services, the Mongolian banking and financial sector has introduced international standards to its operations, which are presently in use. At the beginning of the 1990s, inflation in our country reached 396 percent, while today it is 13 percent. However the effect of this high rate of inflation is still prominent in the development of business. The bank credit interest rate includes the inflation rate and profit on top of expenses. Therefore the interest rate in the banking sector is very high. In worldwide terms, the interest rate is stated “annually”, however in our country it is stated in “monthly” terms. Therefore the macroeconomic policy should be determined right and coherently, and commercial banks cannot decrease the interest rates on their own. In other words, with the cooperation of the government and decision makers, this issue can be resolved. It is a matter of time. As of today, the operations of commercial banks are not in crisis, however due to the lack of cash in the market, the operational scope is very limited.
- A topic of interest to the public is the spending of the “Chinggis” and “Samurai” bond proceeds. Has the issuance of these bonds contributed to the commercial banks?
Capital raised from the bonds is disbursed according to the Development Bank policy, whereas the commercial banks conduct the transaction of payments and provide on-lending to certain projects and programs.
Basically, was it right that Mongolia issued the security called bonds after the transfer to the free market system? The answer is yes. Also it is true that the challenge of issuing these bonds was assigned to the new government. To be honest, it was a job someone had to do. Therefore the government took a very brave step and issued the “Chingis” and “Samurai” bonds. The bonds are necessary to finance industrial and development projects. And of course the spending of the bond proceeds should be under the close observation of scholars and journalists. “The bond proceeds were spent on the construction of the roads”. If you ask if we need roads, the answer is yes. However, it is important to monitor and control how much to spend on construction of how many kilometers of road and what type of industrial projects should be financed with what amount of bond proceeds. Naturally there will be questions and criticism. For example, our country is exploring and exporting 3 million barrels of crude oil annually. We have to build the refineries that process crude oil as soon as possible.
- If we look at the history of the Trade and Development Bank, it has been quite a while since the bank started to cooperate with three Japanese banks.
We transacted the payments of the two countries with “Bank of Tokyo Mitsubishi UFG” since the time of socialism. Since the transfer to a free economy, we established correspondent relationships with SMBC and Mizuho banks. The Bank of Tokyo and SMBC have established representative offices in Ulaanbaatar. TDB has been successfully cooperating with JCB for two decades and every JCB card holder can freely access services via TDB branches.
- TDB conducts 52 percent of the foreign transactions. Is it overburdening you?
In 1924, Russians established a bank in Mongolia, and presented it to the Mongolians in 1954. The foreign transactions were conducted through this bank. And the Trade and Development Bank was established on the base of “the foreign payment unit” of that bank. During that time, our bank conducted 100 percent of the foreign transactions, and now we conduct 52 percent. On brief, we can say good competitors have emerged. On the other hand, we understand that our customers have more trust in TDB.
- Last year you established TDB Leasing with MG Leasing Corporation of Japan. Could you provide more information about it?
TDB Leasing was established to provide financial rent or leasing services. We established TDB Leasing with investments of 10 percent from TDB, 45 percent TDB Capital and 45 percent from “MG Leasing Corporation” on August 6, 2013.
Briefly, “MG Leasing Ltd” is the leader in the financial leasing sector of Japan. It was established with investments from “Sumitomo Mitsui Finance and Leasing” and “Marubeni Corporation” in 1993. MG Leasing provides necessary financial leasing services in the USA, Europe, Africa, Asia, and the Pacific. In particular, the managing director of TDB Leasing, Mr. K. Fujimoto, has worked in Marubeni Corporation and has extensive experience in credit, risk management, and the legal area. In addition, Mr. Fujimoto has been working as the Mongolia Representative of Marubeni since 2005, therefore he is familiar with the Mongolian economy.
- How about the operational scope of TDB Leasing?
With the expansion of the financial service needs of business customers, credit financing from the banks and financial institutions has become unsatisfactory. Therefore, TDB Leasing provides financial leasing services to support equipment financing. As of today, the company provides financial leasing of equipment and machinery in the sectors of Mongolian infrastructure, construction, road, transportation, mining, and industry.
Even though it has been only a year since the establishment of TDB Leasing, the company is actively cooperating with the main distributors of infrastructure, mining, agricultural, and industrial equipment and machinery. Some examples of the companies are: the official distributor of Japanese Hitachi equipment, “Za Main”, the official distributor of Komatsu equipment, “Transwest Mongolia” Ltd, the official distributor of Shima Seiki equipment, “Shima Seiki MFG” Ltd, the official distributor of Japanese “Kobelco” Ltd, “Adamant” Ltd, the official distributor of USA “Caterpillar” equipment, “Wagner Asia Equipment” Ltd, and South Korean and Chinese companies such as “Hera Equipment”, “Niseech International, “Aode” and “Monmach”.
- How favorable are the terms and conditions of the financial leasing services to business customers?
Because TDB Leasing has an investment from MG Leasing Corporation, it provides international standard financial leasing services to its customers with fair terms and conditions based on reliable and cheap foreign currency financial sources. Even though it has not been long since its establishment, and economic conditions in Mongolia are not stable, the company has provided USD 22 million in financial leasing for mining and industrial sector equipment.
Thank you for the interview. Good luck