If you are looking forward to sustainably rewarding infrastructure projects, where you can place your investment and obtain lingering profit over a period of time, then the concession in Mongolia is the new gateway for your next project.

As a reflection to the past five years of prudent research and discussion amongst stakeholders, the Parliament of Mongolia on 28 January 2010 finally passed the Law on Concession, enabling new forms of investments in Mongolia’s infrastructure development sector. As stated in the Law on Concession, the concession is regarded as “sovereign grant for contractual right to use, possess, develop or build state or local government owned properties, which will serve the infrastructure or basic social services”. Types of the concession allowed under this law include BOT, BT, BOO, BLT and BOOT schemes.

If it tickles your financial imagination, you may bid for the projects enlisted in the concession projects. The list will be approved by the Government upon submission by the competent authority in charge of the concession, (i.e.the state property committee for state property and Citizens Representative Khural n submission by the Governor for the local properties). In addition , if you have on hand estimates and profit calculations, you enjoy the right to propose projects to be included in the list. The list will reflect names and types of the concession projects, main services to be performed, clarification on whether budgetary guarantee or financial support will be provided or not and method of granting concession.

The principal methodology of granting the concession is based on competitive bidding. However, if the concession project involves intellectual property owned by the participants, or  no prior  proposal has been submitted and it’s likely that there will be on further competition, or right under concession project has been transferred to financier, then direct contracting will commence.

Bidding shall be announced in no less then two months from the last date of receiving the proposals from bidders and it shall be published in leading national dailies. Foreign or domestic corporation and its consertiums are eligible to bid for the projects.

There shall be a two step evaluation used. In the first stage, the bidders will be evaluated by their financial, technical, human resources capacity, previous experiences, if  the concession project involves licensing, then fulfillment of general licensing requirement and other requirements and other requirements proclaimed by the announcement. Eligible bidders fulfilling the above mentioned requirements will be invited for detailed evaluation and will be handed over the bidding documents.

Detailed evaluation shall be carried out covering the following aspects:-

(a)     Technical proposal.

(b)     Quality of proposed service.

(c)     Work and services to be provided during the concession.

(d)     Proposed service tariffs.

(e)     Amount of investment to be made.

(f)      Financial proposals.

(g)     Country’s social and economic impact resulting from the project.

(h)     Requirement on environmental protection.

Bidding proposals shall be ranked by its scores achieved on evaluation and shall be subjected to negotiations with the competent authority. The winning bidder will be the entity who offers best proposal for the best proposal for the concession agreement This will be decided by the competent authority with the consent of the Government of Mongolia.

The terms of the concession agreement shall be identified on the basis of the project’s sector specialties, amount proposed to be invested, the plan of action, breakthrough period and the expected lifespan of the project.

If the concession involves land rights or licensing, then the winning bidder will enjoy immediate issuance of such right or license. In addition to this, the concessioner may enjoy financial support from the state including sovereign guarantee, partial financing from the state, tax holidays as referred in tax legislation, insurance, compensation and guarantee on minimum income from the service. It also has a right to pledge concession rights/include future acquired income, receivables and newly acquired property rights under concession/  or it shares to financier.

It is prohibited for the concessioner:

(a)     To transfer the concession rights unless allowed by the legislation or concession agreement.

(b)     To pause or discontinue the services under concession  and transfer the ruling stocks to third party without prior consent of competent authority.

Although the concession is a novel and emerging alternative for investment in Mongolia, government  of  Mongolia  is optimistic toward attracting investment in infrastructure projects lucratively in near future. While the year 2010 is the year for preparation and planning as the state property committee drafts the list of the concession projects, one can be sure that 2011will be the year for successful initiation of  the concession projects in Mongolia.

MONGOLICA Summer 2010


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