"The main reason why Mongolia has wished us to operate here is to create new jobs by helping foreign investors to come, and by better funding of micro and small businesses. We are here to support both Mongolian and foreign businesses without guarantee of the state,” Mr. Lemierre said.

The EBRD also agreed to provide a grant of up to US$80,000 to support capacity-building in the Mongolian mining industry. The bank provides technical and financial training programs, targeting some 20-30 key decision and policy makers in the mineral resources sector. The training is expected to mainly focus on the appraisal of mining projects and the financing, risk management, and negotiation of mining projects, as well as environmental and safety issues in the industry.

“In the countries we operate in, there two main differences: some economies are mainly driven by the political process of EU enlargement; some are highly driven by the high price of oil, gas and commodities - and mining for Mongolia," he said. "One of the key challenges for these countries is that there is a flow of income with resources, which is good for them.

"At the same time, it does create new challenges, which is how to do this, and how to use this in a sustainable way because market conditions can change. The price of copper is higher today, it can be lower tomorrow. When you think about this, you need to have diversification of the economy. Successful economies have never been built on the high price of oil or copper. You need to have much more diversification. You need to create jobs everywhere in the economy and as many as you can within the private sector.”

Mr. Lemierre is in Mongolia to open a Resident Office in Ulaanbaatar, which is to be headed by John Chomel-Doe, following the decision to admit Mongolia as the EBRD’s newest Country of Operation.

Mr. Lemierre will hold meetings with senior government officials, including President N.Enkhbayar, Prime Minister M.Enkhbold and the Speaker of the Great State Hural (Parliament) Ts.Nyamdorj during the September 12-15 visit. There will also be discussions with representatives from the banking sector and members of the local and foreign business community.

“All the discussions I've had with the Prime Minister and the Minister of Finance and the Speaker of Parliament have shown to me very strong messages that they have to have good investment.”

He said Mongolia's banking system had much higher interest rates and the maturity period was much shorter.

"What is very crucial is to be able to increase maturities at a reasonable cost to meet the needs of those small businesses who want to buy equipment, for example a sewing machine. With a six-month loan, you cannot; it is not really reliable and credible to borrow money to buy equipment. You need longer maturity, let’s say a year or a year-and-a-half. This is a step by step process we are trying to do."

The XacBank loan, which has a five-year term, is scheduled to be disbursed after October 15, the date on which Mongolia officially becomes an EBRD Country of Operation.

The EBRD has already been working with the country on various donor-sponsored technical assistance projects. Mongolia became a member country in 2000. In 2001, the bank set up the Mongolia Cooperation Fund, with total funds of €10.3 million contributed by Japan, the Netherlands, Luxembourg and Taiwan.

The EBRD, which was established in 1991, is owned by 60 countries and two intergovernmental institutions. Its aim is to foster the transition from centrally planned systems to market economies and democracies in 27 countries from Central and Eastern Europe and the Commonwealth of Independent States.

(All images copyright Luke Distelhorst )