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Mongolia's urbanization

Interview - April 2, 2014
Economic development has led to rapid growth of the real estate sector, particularly residential as more and more Mongolians find themselves in a position to buy their own homes. Established in 1991, Odcon is one of leading construction companies in Mongolia. Mr L. Munkhbat, Executive Director of Odcon, speaks to Untied World about the development of the construction sector, his company and its commitment to employee development and welfare
Odcon holding has been fundamental part of Mongolia’s business landscape since 1937. Please comment on the evolution of Mongolia’s business climate and what needs to be done, both by public institutions and private companies to increase the nation’s competitiveness?
Well it was a state owned entity called Common Trust. But 2001 was the year where Odcon was established first as a new company. It was one of 8 companies borne from the Trust. Now aside from personal efforts public/state intervention is vital to allocate profits earned from mineral resources to the in-need social sectors.

Unfortunately, public institutions and the government need to brighten their sights. The government must try to form a new management style. When you look at private and public companies you will see totally different pictures. The best example is the Power station built by MSC within a short period of time. The government is now struggling with the power station No.5 project in Ulaanbaatar city for many years. The government should leave more space for private companies.
It is a golden moment for Mongolia’s real estate sector. The market is highly focused on Ulaanbaatar, which is under pressure due to a speedy rate of urbanization: supply constraints due to capacity, weather, geography and capital. Please share your thoughts regarding the major challenges that the construction sector is currently facing and how Mongolia is going to avoid the construction bubble.
The years between 1960 and 1990 were years of great urbanization and construction – years of rapid growth. But everything was state owned and allocated. In 2000 however, privatization started, but very rashly and maybe not well organized. Now even the ministry of urban development can manage the price boom; they have no control over it. In fact private investors are the ones who set prices, which means construction companies, have a limited role in setting prices. 
The residential sector is likely to be under the most pressure to grow at the fastest possible rate. Per capita GDP is forecast to triple by 2016 what will increase the housing demand. What is your view on the government’s strategy to meet the housing demand and how are private companies upgrading their capacity to meet market growth expectations.
An average family can’t afford pricy resident apartments on the market today. The government is obliged to provide affordable but quality residential buildings to those people. It should always seek potential and possibilities to make it affordable by cooperating with private sectors.  Long term, maybe 20 years, and low interest loan or mortgage should be finally available to those who in needs.  Moreover as I stated, residential buildings can be well less pricy.
Ulaanbaatar is home to around 1.3 million of Mongolia’s 2.8m people as of late 2013. Please share Odcon Holding’s vision towards the sustainable construction development of Ulaanbaatar and its contribution to the responsible urban development of the city.
The construction sector should take steps towards international standards. We don’t want just a building, but an energy-saving, eco-friendly, healthy and stylish building. Our role towards reaching these goals would be by providing products to the Mongolian construction market and provide the best service. Of course we want educated and trained engineers and workers. I think we need to develop Ulaanbaatar as an urban complex with several satellite cities since we cannot extend it as we want. We need to promote migrants to live in those small cities through better infrastructure and special tax policy etc. A population of 1.3 million people is too much for one city like Ulaanbaatar.
How important is it to decrease the costs of material and machinery while upgrading the quality of construction in accordance with international standards?
Of course it is important. The Mongolian construction market is too dependent on import materials. If the price goes high, the property price will go up and this is a problem we have today. So, as many other private companies would agree, we must produce raw materials using our domestic resources. Yet, we must be aware that we can’t produce everything, we will always be dependent on import products. But remember, we can always choose our partners. Better cooperation brings better technology. We should invest in the education of a young work force. Let them learn from others.  Institutional cooperation is equally important. 
 You have a range of strategic partners worldwide. How important has working with international brands been for the development of the company in accordance with international standards? 

Our cooperation is not limited to trade but educational exchange. Our partners are our door to new technology and information. 
What has been the strategy that has placed Odcon Holging among the best construction companies in Mongolia? How are you different from other companies of the sector?

The main difference is that we provide complex services to a project or site: electric, heating, sewage and potable water installations and ventilation. In a country like Mongolia with the coldest capital city in the world, those services are priority. Complex service means complex responsibility and efficient work and financial advantage. 
Which are the values that have accompanied Odcon Holding along these years? 

There are many factors that we cannot control especially in our hectic society. Despite that, we have to be responsible and knowledgeable about what we are doing. I won’t say it always succeeds; but we try.  In fact there are very few middle sized or big companies that are 100% indigenous. Most of them have foreign investment. We are one of the few companies who started from zero and developed on our own. There have been ups and downs in the past 20 or so years. But we’ve never failed to issue our salary on time. Employees must be certain that their work is valued and they have jobs. Jobs must be completed as planned. 
 What is the social corporate responsibility of Odcon Holding?

Well, we cooperate with professional training and production centres and vocational centres help to train their students and provide financial and technical support if necessary. And try to employ their students. In our own workshop, we train students for welding. 
In which ways would you like United States to work more closely together with Mongolian companies, particularly in the construction sector?
Surely, advanced technology is needed here. Aside from that, I wish that Mongolian young people would learn from Western business culture, work relations, management and all these working methods. We are ready to cooperate with you if you have latest technology for such a cold country.  Alaska especially could be our great companion. We are ready to cooperate with you in trade, service and electric, sanitary, ventilation.