Tender: Capital Market Development Strategy for Mongolia
Mongolia, 02 March 2017
The Early Transition Countries (ETCs) SME Local Currency Programme Technical Cooperation (TC) Framework (the Framework) is being implemented by the European Bank for Reconstruction and Development (EBRD or the Bank) within its key Local Currency and Capital Markets Development (LC2) Initiative and funded by the Japan-EBRD Cooperation Fund. The Framework supports necessary capital market reforms to 1) make ETCs more resilient, 2) develop access to alternative sources in local currency for the domestic market participants, and 3) facilitate local currency funding by the EBRD and others in ETCs under the EBRD's SME Local Currency Programme (LCYP).
The Framework covers 5 areas with TC work:
Reforming the legal and regulatory environment to support modern capital market activities, instruments, and infrastructure.
Providing capacity building programmes for central banks, market participants and regulators.
Developing capital market products by providing a feasibility study, implementation roadmaps, and education on the new or uncommon instruments such as corporate bonds, covered bonds, basic securitizations, repos, basic derivatives (e.g. FX or interest rate swaps), and equity listing support programs for SMEs.
Reforming capital market infrastructure, covering exchange, clearing, settlement, and depository entities, as well as relevant market infrastructure areas of the central bank (e.g. money market systems, government bond trading platforms and registries, and payment and settlement systems).
Developing the local and international institutional investor base including pension funds.
The capital markets in Mongolia are still underdeveloped; the Mongolian banking sector dominates the financial system with more than 95% of total assets. Although Mongolian policy makers recently implemented several measures to develop local capital markets, challenges still remain in the capital markets overall. There is no corporate bond market in Mongolia and the equity market today is a relatively limited trading venue for few shares and does not play a significant role in providing financing to the broad economy. The Mongolian financial market also lacks long-term financing sources, as there are no substantial institutional investors, such as life insurance providers and pension funds, which can invest in long term financial products.
In the efforts to overcome the overall economic and financial difficulties faced in Mongolia and to stabilise the economy, the Economic Recovery Programme was created as part of the Action Plan of the Government 2016-2020 and approved by the Cabinet on the 28th of December 2016. The Ministry of Finance of Mongolia (MoF) is mandated to develop a Financial Sector Strategy 2025 which will include a road map plan for creating an active secondary market of government securities and improving capital market infrastructure.
Thus, the EBRD wishes to engage a consulting company (the Consultant), under the SME LCY Programme Framework to support MoF to develop a capital market strategy that will form part of the Financial Sector Strategy 2025 and to propose the necessary capacity building programmes for policy makers and market participants.
Assignment Description: The EBRD now intends to engage a Consultant to assist the MoF in its capital market development by:
Identifying barriers to capital market development in Mongolia.
Identifying improvement levers and providing recommendations.
Providing a comprehensive implementation roadmap for the identified measures and recommendations.
Designing the necessary capacity building programmes for policy makers and market participants to achieve the milestones that are defined in the implementation roadmap.
The selected Consultant is expected to carry out the following activities:
Activity 1: Identifying barriers to capital market development in Mongolia. The aim of the Activity 1 is to conduct as assessment and identify the barriers that prevent the development of the capital market.
Activity 2: Identifying improvement levers and provision of recommendations. Based on the findings of Activity 1, industry trends and the Consultant's capital market expertise, the Consultant will identify improvement levers and provide recommendations for the development of capital markets in Mongolia. The Consultant will provide the rationale, justifications and a clear set of arguments for each retained specific solution. Recommendations will cover a capacity building and training needs assessment for market participants based on identified skills and knowledge gaps.
Activity 3: Drafting an implementation roadmap.
The Consultant will prepare an implementation roadmap, where measures are divided into short-term actions with immediate impact, and medium-term actions to ensure sustainable development after the end of the TC Assignment. The implementation roadmap will be a comprehensive 5-year step-by-step action plan covering recommendations and required reforms described in the Activity 2.
Activity 4: Designing the necessary capacity building programmes for policy makers and market participants to achieve the milestones that are defined in the Implementation Roadmap.
Activity 5: Organising the final workshop to present the findings and proposed Implementation Roadmap to the stakeholders.
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