Altan San Securities - Mongolia Investment - Wide support for changes in payment norms for construction

Wide support for changes in payment norms for construction

The practice of paying private companies for their construction work only after it is finished has put cash-strapped companies in an impossible situation and changes to the present law have been proposed. The Standing Committee on the Economy has finished its first discussion of the draft.
According to Finance Minister S.Bayartsogt, these reimbursement terms are being followed in 46 infrastructural works, 33 of them under the Road, Transportation and City Construction Ministry and 13 under the Minerals and Energy Ministry. These include projects such as carrying power to Oyutolgoi and Tavantolgoi, generating more power for Ulaanbaatar and building roads in the provinces. Altogether they are to cost MNT 1 trillion and 2.6 billion. Private companies used to execute such works with their own finances and get paid the money in three years. Now the companies are demanding 50 percent payment when 70 percent of the work is done and the rest after completion.
MPs across party lines favor the proposed changes. D.Gankhuyag feels one reason to support the private companies is that their work is almost always better than what the budgeted organizations do. R.Bud, however, feels, the entire money should be released only after the end of a pre-fixed warranty period.

Source: www.news.mn

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