Mongolia: Directives for Privatization and Restructuring of State Owned Entities
Currently, there are 102 State enterprises operating in Mongolia. Most of these enterprises are wholly owned by the State whereas some have less than 100% State ownership. Out of these 102 entities, 10 are operating under Erdenes Mongol LLC and 5 under the Ministry of Finance while 87 are operating under the Government Agency for State Property Policy and Coordination. The Parliament decides the timing, method of privatization, and restructuring for the Government to undertake the actual implementation.
Privatization is still continuing in phases since Mongolia first legalized the concept of private property and approved privatization laws in the early 1990s. The Parliament enacted main directives for privatization (‘Privatization Directives’) over the years, specifically 2001-2004, 2005-2008, 2010-2012, and 2015-2016, which were amended and, in some cases, partially invalidated from time to time. These main directives set forth the list of State-owned entities that must be privatized or restructured along with specific method, timing, and use of proceeds. Due to various circumstances and challenges, not every directive is implemented within the specified timeframe. Therefore, in some years, the Parliament directed the Government to undergo the then-existing Privatization Directives, without approving a new one.
The 2015-2016 Privatization Directives, which was approved by the Parliament Resolution #70 dated July 03, 2015, is currently effective. In order to implement this resolution, the Government issued Resolution #330 in 2015, specifying the privatization method and timeframe for each State entity identified in the directives (see below).
| State entities | Privatization proportion and method | Implementing timeframe |
| CHP2, CHP3, CHP4 Darkhan Power Plant Erdenet Power Plant | The state keeps 70%; 30% dilutive secondary offering | 4th quarter of 2015 |
| Ulaanbaatar Power Transmission Grid | Separate the power supply business to a new company and privatize a newly created company | 4th quarter of 2015 |
| Erdenet-Bulgan Power Transmission Grid | Open tender | Unclear |
| National Dispatch Center | Restructure to a commercial operator company | Unclear |
| Erdenes Tavan Tolgoi | Sell the State owned shares through public offering | Unclear |
| Shivee Ovoo Coal Mine Baganuur Coal Mine | State keeps 70%; 30% dilutive secondary offering | 2016 |
| Khutul Cement and Lime Factory | 100% privatization | 4th quarter of 2015 (implemented) |
| Orgil Sanatorium Resort | 100% privatization | 4th quarter of 2015 (implemented) |
| College of Film | Sell 51% currently held by the State through open tender | 4th quarter of 2015 (implemented) |
| Auto Impex | Sell 51% currently held by the State through open tender | 4th quarter of 2015 |
| Mongol Post | State keeps 66%; 34% dilutive secondary offering | 4th quarter of 2015 (implemented) |
| Mongol Telecom | Sell 51% currently held by the State through open tender | 4th quarter of 2015 |
| Agricultural Commodity Exchange | State keeps 34%; 66% dilutive secondary offering | 2016 |
| Mongolian Stock Exchange | 100% privatization | Unclear |
| State Bank | 100% privatization | Unclear |
As shown above, only 4 companies (Khutul Cement and Lime Factory, Orgil Sanitorium Resort, College of Film, and Mongol Post) were privatized by the Government to date.
The Parliament amended the 2015-2016 Privatization Directives in November 2015 and November 2016, respectively, and directed to the Government to implement it until the new directives for 2017-2018 are approved. However, the new directive has not been approved.
According to some sources, the Government is working on the 2018-2020 Privatization Directives. The scope and timing of such directives are unclear at present. It is likely that the State enterprises that are listed in the previous directives would be included in the new directive but with revised method and timing.
