Mongolia mulls HK sale of rail stake

PUBLISHED : Friday, 28 October, 2011, 12:00am
UPDATED : Friday, 28 October, 2011, 12:00am


Mongolia is considering a Hong Kong flotation of up to 49 per cent of Mongolia Railways, the nation's new rail-building firm, to help finance a US$5 billion expansion programme.

Manlaibayar Yondon, the director general of the department of finance and investment at the Ministry of Roads, Transportation, Construction and Urban Development, said the privatisation plan was being considered by the parliament.

'We hope it will approve it within weeks. We want to start with a domestic initial public offering and then go international. While the Mongolian Stock Exchange is working with the London Stock Exchange, I think Hong Kong will be our better bet,' he said on the sidelines of the Mongolia Investment Summit.

In April, Mongolia started preparation work on the first stage of a 1,040-kilometre rail link to an existing line that connects Ulan Bator to the Chinese border.

Yondon said economic necessity and the fact that major mining projects would be starting production meant it was better to build the second stage of the rail link simultaneously.

China is the biggest market for Mongolia's coking coal and copper.

Yondon expects the first stage to be completed in 30 months, but World Bank senior infrastructure specialist James Reichert said he believed three years was the minimum because of the nation's short construction season and the fact that financing had not been confirmed.

Ulan Bator is talking to foreign investors in the giant coking coal project Tavan Tolgoi about including them in the investment for the second stage of the railway project.

The US$5 billion railway plan is part of a US$30 billion development blueprint that includes US$13 billion of industrial parks and US$5 billion of roads. Mongolia's economic output was only US$6 billion last year.

'We are trying to borrow from the future income of our mines to build the infrastructure, but we can't wait for the mines to generate enough revenues to build the infrastructure,' Yondon said. 'For us, it's not a chicken and egg issue, it's chicken.'