Leaders from the Banking, Finance, and Capital Markets Sectors Discuss the Sovereign Wealth Fund
To accelerate the implementation of the Sovereign Wealth Fund Law, establish a fair, transparent, open, stable, and responsible system, and build a mature asset management institution, a panel discussion titled "The Sovereign Wealth Fund: Current Situation and Pressing Issues" was held on March 20.
Representatives from relevant ministries, government agencies, and the banking, finance, and capital markets sectors participated to share their insights and perspectives.
B. Ulziibayar, CEO of Ulzii & Co. Capital LLC: "Both the strategic direction and the asset management of the Wealth Fund must be strictly independent of politics. That is the only way to ensure sound capital allocation. Our nation's ultimate goal is to channel mining revenues into other sectors to diversify the economy, and the Sovereign Wealth Fund is the mechanism to achieve this.
Today, Mongolia's capital market operates at a completely different level than it did a decade ago. The capacity and the opportunities are here. Focusing on supporting the domestic economy through collaborative market efforts will ultimately best serve Mongolia's national interests."
G. Enkhbat, Chairman of the Board of the Mongolian Association of Securities Dealers: "If we are planning for the Future Heritage Fund with a 40- to 50-year horizon, we must appoint a legal entity as the fund manager capable of visionary leadership to spearhead this initiative. Eventually, diversifying investments across various financial instruments, such as equities, is unavoidable.
Furthermore, we should systematically allocate a portion of the Savings Fund into the domestic market early on by investing in bonds and equities issued by national enterprises. Beyond just investing capital, the Fund can also serve as a vehicle to attract capital from foreign institutional investors. We tend to view the Fund's assets purely from the asset side, but there is significant potential to implement liability-side management as well."
J. Delgersaikhan, Economist, Ph.D., and Professor: "Today, one-third of our budget revenue is generated from mining royalties and other sector revenues. Over the past few years, we have extracted tens of trillions of MNT from mining and consumed it through the state budget. This consumption continues today. Therefore, we must carefully consider how the balance of consumption between current and future generations will impact the Sovereign Wealth Fund system.
The fundamental objective of the Sovereign Wealth Fund is to transform today's non-renewable resources into tomorrow's inexhaustible wealth. Looking at the history of international wealth funds, they generally avoid the principle of 'direct distribution.' We must strictly adhere to the rule of not touching the Fund's principal corpus. Utilizing only the investment returns to support the budget is the foundation of the Fund's long-term sustainability.
I see two major risks: the Wealth Fund becoming a stopgap to cover budget deficits, or facing liquidity pressures if drawn upon to support foreign exchange reserves. We need to focus on establishing strict, unbreakable rules to prevent the Fund from being drained for budgetary or other short-term purposes.
The Sovereign Wealth Fund Law is merely the beginning; robust governance and asset management structures have not yet been fully established. We need to critically evaluate whether it is a healthy system for the same state administrative body that manages the state budget to simultaneously manage the Wealth Fund. Going forward, its management must absolutely be independent. Spending rules must also be unequivocally clear.
Globally, wealth funds are always forward-looking—designed for economic and fiscal stabilization. The ultimate purpose of the Sovereign Wealth Fund is to provide a guarantee for how our country and our future citizens will survive and thrive once natural resource revenues are depleted."
G. Orgil, Chairman of the Board of OCHUN LLC: "A critical objective of the Sovereign Wealth Fund is to mitigate economic volatility. When the Mongolian economy faces downturns, the Fund's assets must remain secure and stable.
Today, the Savings Fund is financing 6 percent mortgage loans, which yields a return below our target levels and below the inflation rate. If we are going to inject the Fund's capital into the domestic market, we should establish a framework to invest in top-tier domestic enterprises. This would allow the Fund to share in the wealth generated by Mongolia’s leading companies."
The academic conference was attended by representatives from relevant ministries, agencies, governmental and non-governmental organizations, the Mongolian Academy of Sciences, university scholars and researchers, mining sector NGOs, local governments, and the private sector.
