This year, the construction sector set a record for buildings rising left and right in the capital city. We interviewed the Deputy Minister of Construction and Urban Development, G.Baigalmaa, about the ministry’s operations.
-The construction sector has completed a record number of projects this year. The year is coming to an end; how would you evaluate the work accomplished so far?
-We all know that our country has a great amount of land but a small population. But the number of people moving into the capital has increased dramatically in recent years. In order to decrease migration to the capital city, it is crucial that we take decisive action and build in provincial areas as well as cities without prioritizing one over the other. For this reason, the reform government has appointed the Ministry of Construction and Urban Development to oversee the sector’s operation and management.
Since our operations started last year we have resolved some structural and management issues, as well as numerous major projects. We have many more projects planned ahead of us. We had Government Resolution 171 approved, which concerns the development of domestic construction material production.
Within the framework of the project, the joint resolution of the Governor of the Central Bank of Mongolia and the Minister of Construction approved the Support Construction Sector and Housing Price Stabilization sub-programs. The sub-programs will grant soft loans to importers of basic construction material such as cement and reinforcement steel, on the condition that they maintain prices at a given rate for certain periods. We have managed to maintain the prices of basic construction material so far.
Furthermore, a sub-program to issue loans to contractors with incomplete projects has been issued, on the condition that they complete construction within 18 months, which will reduce the gap in supply and demand of housing, stabilize prices and accelerate the development of the sector.
-Cement prices increased suddenly a month ago. What measures will the Ministry take to keep cement prices stable?
-Stable prices for cement and reinforcement steel will ensure the stability of housing prices. Cement price stability has been a major concern of the Ministry since spring – prices have remained stable so far because of those programs. For instance, the price of a ton of cement was stable at 130-150 thousand MNT from April to the latter half of last month. Cement prices only rose in October. Many things contributed to the increase such as the decreasing value of MNT and the price increase at Chinese cement factories.
-The government has planned many infrastructure and construction projects. How are they progressing so far?
-The government and the Ministry of Construction and Urban Development have listed the construction of a housing project for 100 thousand households in each province. Ulaanbaatar will house around 75 thousand households through the project and the rest will be built in the provinces. Each province will have 1,000 household residences. To prepare for this large scale project, the state is building 56 types of infrastructure related projects. From this, 23-24 have already started, and the ger district redevelopment project has also commenced. In all, 416 billion MNT has been allocated from the state budget. Some will be completed by the end of this year and the others will be ready next year. By next year, the state will have completed all infrastructure projects, and contractors will be able to start building straight away.
-Ulaanbaatar authorities seem to be focusing more on ger district redevelopment and decentralizations issues. What is the Ministry’s policy on these issues?
-As noted before, our goal is to decentralize and decrease migration. Infrastructure for the 17 towns are being built at Buyant Valley, New Yarmag and Buyant Ukhaa. We are working very closely with Ulaanbaatar’s administration. Mayor E.Bat-Uul is actively supporting the ger district redevelopment plan.
We are talking further about giving settlements with a population of more than 15 thousand people, city status. This will help decentralize Ulaanbaatar. We want to make Darkhan and Zuunmod cities. Soon, the 100 thousand household housing projects adjacent to the under-construction Khushigt Airport will be ready. We want Baganuur district to be a youth-friendly city and develop Bagakhangai and Nalaikh, which both have railways.
We can’t decentralize and redevelop the ger district without the above measures. The contribution of residents is also very important. I want everyone to understand that all we want is to build a comfortable environment for the nation.
-There are many critics that say that although the policy is directed at ensuring price stability, prices are still high and the policies are not working?
-We have seen 24 years since the transition to a free market economy, where businesses compete with each other. Today, the construction sector is held up by the private sector. So we can’t tell them to keep prices low. The once popular land market has also contributed to the construction sector and housing prices.
Since most construction material is imported, foreign currency rates also play a vital role in the sector. The cost of infrastructure is also increasing, which is the foundation of all buildings. We also can’t forget that construction worker’s wages have to increase. There are many variables that affect housing and construction prices.
-When the government loan projects first began, it was said that housing projects for around 16 thousand households would be completed in 2013. Has this goal changed?
-Nationwide, housing for 16 thousand families were estimated to be ready within this year. This number was calculated in spring. Now the number of residences has increased. Our policy and projects were successful and managed to exceed our expectations. So far, housing projects for 7,812 households have been completed. In the remaining three months, this will increase to 18,814.
-Housing prices greatly vary depending on location. Centrally located houses are more expensive, but the Ministry’s decentralization plan is expected to make the outer city the new city center. When can we expect this?
-The decentralization program has already commenced. We expect the program to mature in late 2014 or early 2015. The infrastructure linking Bayangol Valley, Buyang Ukhaa, and Yarmag will be completed next year. The operations of construction companies will center in those locations.
New development and infrastructure projects will be ready by 2014 and 2015. When this happens, the outskirts of the city will become the center. We have also initiated plans to develop the eastern section of the city. When US-15 Plant and Thermal Power Plant No.5 are built, the city will move out towards the east.
To see why this will happen, we have to examine why people move into the city center. It is easier to take children to school, and closer to work. At least vehicles will be used less if you live in the city center. This condition will be met around the outskirts of the city in 2015.
-The Khutul Cement Factory’s expansions are nearly complete. How will the cement price stabilization program proceed in the future?
-Next month, the expansions of Khutul Cement Factory, which will increase the plant’s capacity twofold, will be complete. Furthermore, two new cement factories will be built in Dornogobi Province which will have a combined capacity of one million tons of cement a year. This will mean that by 2015, Mongolia will be able to meet its own cement demands.
We aim to build concrete, reinforcement and granite factories in the future with the funds we are circulating at the moment. In general, our aim is to meet our domestic demand for construction material.
-Will the Central Bank make any changes to the joint projects that will be implemented next year?
-We will continue to work together in projects aimed at supporting the construction sector. The results of the projects will be evident by the end of this year and next year. The ministry is planning to build loading and distribution terminals for construction materials on the west and east sides of the city. This will be a unified construction material park.
This saves contractors from the seasonal inflation of construction material prices. They can gather construction parts during the winter and assemble during the summer. The Ministry also aims to introduce new technology to decrease human error and costs.
-The construction sector worked tirelessly this year. But how much attention was directed to the integration and unification of these projects?
-A forum was organized last year to discuss the government’s direction and governance policies it will take. The forum also served the dual purpose of attracting foreign investors. This month, the Construction Mongolia 2013 International Conference and Exhibition was held. More than 60 foreign companies from 11 countries participated to introduce their goods, services and projects.
The conference also provided an opportunity for domestic companies to form relations and partnerships with foreign companies. Although the construction season is coming to an end, they agreed that they can still hold talks about next year’s projects and cooperation. This will enhance the cooperation and support by all parties in upcoming projects and increase the sector’s efficiency.
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