23We have talked with N.Enkhbat, Director of the “New Ulaanbaatar International Airport Construction Project”. The prject is the only mega project which is being implemented by the government of Mongolia. He started his career as a transport driver, he studied in Russia as a construction engineer, at National University of Mongolia majoring in foreign relation, also at the University of Finance and Economics as an economist. Since 1997, he has been working in the infrastructure sector. He began his service to the state after returning from America in 2008, in accordance with the agreement, concluded when he went studying Business administration MBA in the USA by treasury scholarship. In such a way, he was imposed a duty to manage the new airport project. Such an experienced man who has been managing such a large project from the beginning until the end for the years, is very few in Mongolia. There are very few people with this experience in foreign countries too. Thus, company which is cooperating currently and other talent networks have started offering him a position.
- What will be the benefits and significance of new airport in Khushig Valley to Mongolia?
Creation project feature is that it imports goods and materials to the country in which it takes place, also it empowers human resource. Also there are a number of benefits to the company which carries out the construction. There have been major changes in the construction industry over the past 20 years. At the same time, the project is the only one that comes with a new construction management structure in Mongolia.
Our large construction companies have wide structure, including sectors of design, concrete assemblies, plumbing and electricity. As a result, Mongolians perceive that all the construction companies are equipped with cranes, many employees and so on. However in the recent trend, construction management and engineering company are separate. This is a global trend. Therefore, the project is the first international project implemented professionally in Mongolia. This is a model project which teaches us how does construction industry, construction management and creations conduct.
- I have heard that the project has used many new technologies and interesting solutions. Please mention specific pursuits which have not been in Mongolia before?
There are lots of things with identification new, most and first. Particularizing it by range may immigrate to more specific things. In the first place, a new management structure was introduced in Mongolia. The largest building with the largest scale was constructed and the longest underground tunnel network was established. The first 3.6 km long concrete strip was built. From the professional perspective, vehicle technology which implements three actions at once was successfully applied for the first time in the world in a country with winter season to build a concrete strip. Professionals are very interested in this. There are so many first things like this. To talk from global perspective, Samsung C&T Corporation, which carried out projects skyscraper Burj Khalifa of Dubai and other tall buildings of Asia, has worked as a general subcontractor for our project. The company has a wide experience in huge airport projects. Before in other projects it had worked on the basis of partnership, but in our situation, it operated independently. Our project’s investment is at over 500 million USD. More than 95 percent of such projects have an expiration of time or international statistics that exceed the budget. As for this project, it was finished on time, saving the budget. Unfortunately, there are very few people who can appraise the success of the project team because of the suspicion that is spread in society.
- How long did all these take?
We have compromised to finish the airport construction in 1290 days or 43 months when the contract was concluded in 2013 and we finished the work just on time. Many people are attracted to our project by this criterion. Another singularity of the project is that it is a Green field development. Building an airport in such a place consumes time because the infrastructure is solved together with the construction of an airport. All the work started from zero. Due to winter season construction work was ceased in first two years. International airports around the world are often built close to infrastructure or are constructed under auspices of a ready infrastructure. Our case of building an airport at an uninhabited place, is very rare.
- Recently, buildings and facilities are becoming increasingly green. Can the new airport meet this requirement?
We really aimed to make it green. However, the first investment in environmentally friendly construction is high. It forms long-term benefits to energy and the environment, but economic benefits are also of long-term. However, we did not stand idle. We built thinking to use more natural lights to reduce electricity consumption. About 20 percent of the building’s roof is glass. There two tunnels which drop natural light from the roof to ground floor. We named it Eco yard. It is possible to save energy on the second floor in the daytime. There is a window with the same length of the building. Also we have installed solar panel bases estimating to install photovoltaic generators in the future. These are some of the features. There are many other specialties.
- It is not easy to implement long-term projects. Especially cooperating with the foreigners. What was your distress and delight?
For the duration of the project, it was completed in the 10th year since the feasibility was carried out. In 2007, the first research team came to present their results. The loan agreement was approved by the Parliament in 2008. The real project lasted for eight years since its first launch in 2009. During that time, six governments and nine ministers of the sector were replaced. Political instability has affected significantly. People who have received new jobs needed to study the project from the beginning, and problems have been slowed down in the decision-making level. However, in January, 2017 we were able to complete the construction and issued a certificate to receive the creation. Despite the fact that there were few cabinets and ministers, no one was against of the project. All of them supported the project willing to create new airport opening a new door for Mongolia. More than ten foreign engineers have been working on the project of which Japanese and Korean citizens were prevailing. A Korean company worked on its completion while the Japanese side was monitoring their operation. There were times when conflicts arose on the workplace between the people due to the countries being at war with each other in their history and now are rivals in the technology field. It was challenging for me as the project leader, to move forward directing this kind of crew to one direction. Looking back, we had a team of unity, and the results of it came true.
- There was a need to wait for the decisions and time was lost. What are your thoughts on this?
Looking to the past, the lost time period was net two years. It was five months in the design stage and we lost 1.8 years in the contractor selection process. In 2007, the Japanese conducted a six-month study of the design and drawing. There were quite a few things that were not suitable to be implemented Mongolia and some things were missing. In addition, the planning was too little as for the country’s central airport. Therefore we aimed to enlarge it and include estimation for the future expansion. Currently, there are six terminals, but in the future it can be multiplied to 20. In this connection, the cost of everything will increase with the width and depth of the pipes and the underground lines. The next building would have been ten yards away, but in the the future, it could be up to a 100 meters long so the cost of everything including lines and networks connecting these two, was increased.
Usually, in order to replace heat line, roads are usually digged, but not in our case. That kind of thing is gone. There are underground tunnels, so that people can go in there, replace the network and make an expansion. For one example, the first plan estimated that all buildings were heated by small kerosene stoves used in field camps, but then kerosene is an import product, thus the price is high and not regular. The cheapest energy source is coal. Even though kerosene heaters are easy to make, the operation cost is too high. Accordingly, we have built 42 MW capacity boiler estimating its future potential. The first research of Japan was nine building project with a 42,000 square meter area. We constructed a complex consisting of 75 buildings within a total area of 220 thousand square meters. People were not aware of all these, and this was an expense which was not planned in the beginning. We introduced the revised version of the project including all these to Japan in 2010, but they told us to stop the project. Hence, the project was ceased for five months. At that time, the sector Minister Kh.Battulga and the Minister of Finance S.Bayartsogt carried out a good negotiation with the Japanese side, and the project was released from deadlock. Subsequently, 1.8 years were lost in the bidding period for the reason that the two bids were unsuccessful and the contractor was selected on then third one. The project was completed in six years with the design and construction eliminating the two years mentioned above. Despite the pullbacks, we are assuming that we have implemented the project in a reasonable time.
- Is it possible that the majority of the lost time is related to the future expansion or reform?
No. Japan urged three requirements to grant the soft loan. First, Japanese consulting company will be responsible for designing and construction supervision, second, Japanese contractor will carry out the execution and third, to purchase minimum of 30 percent of the contract amount from Japan. In this regard, some Japanese companies said that they are unable guarantee its equipment in a place where temperature reaches -40 of Celsius during winter, and great work of restoration was happening in Japan to erase damage caused by tsunami which took place in March, 2011. Thus, Japanese executives were not willing to work in a foreign country bearing high risk. This situation became a major reason why the project was ceased for one year and eight months. Our side had organized four meetings with the Japanese companies to advertise our project as well as we have mitigated the condition. At that time, the Korean Samsung company worked on the development of "Shangri-la" in Ulaanbaatar. It also worked on the contract to construct the Gashuun Sukhait railway. Our project was interesting for them, although it was allowed only Japanese company work on the project, we concluded that it would be possible for Samsung to negotiate with a Japanese company to work as a subcontractor. In such a manner, Mitsubishi corporation, one of the top three companies of the world and Chiyoda came in partnership together with the agreement with Samsung company to operate as a subcontractor. Samsung had an office in here, had data about workforce and information of material pricing. The company which have no experience working in here gives higher pricing estimating its risk, however experienced company gives much realistic pricing because it experienced everything and makes true estimation. In this sense, Samsung seems to have lowered costs.
- Lines and networks are prepared which enable expansion of the airport. How much can it be expanded in the future?
When the project research was done in 2007, overall demand and supply of passenger and freight projection was made until 2024. During the project implementation it was remade until 2032. According to the passengers’ flow, a projection to reach three million in 2024 and 4.8 million in 2032 is based on GDP growth based formula or global methodology. The number of international and domestic passengers entering the air border has set a record in 2018, reaching 1.4 million. It has been 1-1.2 million before. I think it's because of the fact that the economy is getting better and the big projects are being implemented.
We must plan the building in accordance with the market demand. The project would become unprofitable, if we build it like Incheon, how people expect. Unused spaces’ costs are high, even though they are not being used they need to be heated and cooled. Thus, we built it to be able serve three million passengers. It is possible to carry out the operation until 2024. Further, the airport operation can be expanded by adding more terminals step by step. For instance, two terminals can be added to the current six to make it eight and it can be continued until it reaches 20 terminals and will be able to serve 20 million passengers. However, we cannot foresee when the capacity will reach 20 million.
- Was an estimation was carried out on profitable operation of the project, such as making transit transportation or attracting aviation companies?
This is a correct question. The airport has the potential to increase its capacity, if we make it a hub (passenger and truck nodes). To do this, the first issue is to attract new airlines. For example, land service fee should be as small as possible, and that service should be appropriate. Aircrafts which pass by above our airport will be interested to depart here to get reliable service at reasonable price and also replace its passengers and cargo. The next is fuel. Whether adding the number of passengers or loading more fuel is the management issue of the airline operator. Singapore and Hong Kong provide the opportunity to fly with low-fuels and heavy freight. Our geographic location is an interesting location for the flights between Southeast Asia and North America since the formation of North Pole flights.
Today, 30.0 MNT per 100.0 MNT of MIAT ticket is spent on fuel. In addition, air transport agreements are made with the government in Mongolia. We just have recently discovered that there is a deal where only two companies can carry out flights between Korea and Mongolia, and the flight number is limited. As a result, flights are rare when there is high demand, thus price is raised and tickets are unavailable. It was announced that Asiana was selected as an airline operator. Now Korean air and Asiana will fly to Mongolia. Such chances are erased by intergovernmental agreement. Unless it will be freed, nothing will change how much we talk at minor level. They say that if flights would be carried out from Asia and Europe, it would grab MIAT’s market and Mongolia will get into trouble, in the absence of national carrier. However, we need to consider interest of three million people of Mongolia rather than 1000 employees of MIAT. We have no visa to Russia. So, it is possible to attract Russian airlines and make the management to enter Asian countries.
- How was the fuel issue was addressed in the project and where will it be imported from?
Fuel storage is not a cheap facility. The company to build the storage will want to obtain profit of the investment. So, in that case, fuel cannot be cheap. The exact scene is shown at "Buyant-Ukhaa" airport. National carrier MIAT fills out its fuel from abroad, comes to Mongolia to get the passengers and flies back to fill the fuel again. It was well understood by the current President, Kh.Battulga, who was our minister at that time. Hence, the project was excluded from concession list, and we started working on it because the state had to build it. When Mr. Shinzo Abe, Prime Minister of Japan visited Mongolia in 2013, our side managed to get the project fund from Japan. In addition, we assumed that the fuel storage facility should be carried out by a hydrant system. It means that the aircraft would be refueled right from the underground pipe which will locate beneath its wing. Today, aircrafts at “Buyant-Ukhaa” are filled from the cistern trucks with 20-40 tons of content. In order to attract the transit planes, we need to fill large-scale planes as fast as it is possible. The hydrant system was also the first in Mongolia. We have seen from the beginning that we have to add the least cost to the fuel imported from Russia and China, and deliver it to the airlines. Over ten people from Civil Aviation Authority are being trained to work on this technology. Another alternative of the government is to transfer the project into the ownership of a private company by concession. I think it is best to employ Civil Aviation team, whose wages are at low expense. Only in that case, fuel price can be low.
- In the future, the airport operation is to be run on the basis of negotiation with Japanese side. Which side will be responsible for the management?
In order to pay back the loan quickly, we got carried out a survey by a Japanese company Nomura to determine how to run the airport. The alternatives were: the management is to be made by the government, private company by concession, own by lease or even attract external teams. With regard to the returns from these four scenarios, the concession agreements are considered to be the highest. The same conclusion was made when the French EGIS conducted a survey. So it was fixed as concession. The Japanese side had already offered to work on management in 2014. Mitsubishi, the biggest two airports of Japan Narita and Haneda, and Jalux, a subsidiary of Jal airline group have proposed to take the management in cooperation. They proposed to take no less than 51 percent of the share, because they are willing to establish a new company instead of the current company of the state and appoint their own director and implement their management. The remaining percentage is decided by the Mongolian side whether to give to the government or to the private sector. Currently, an agreement was concluded which states that 51 percents are at Japanese four companies’ possession and the rest 49 are at “Airport at Khushgyn Valley” state-owned profit oriented enterprise. In this way the management will take place at the beginning and then when the Mongolian side will be 100 percent responsible, a matter to leave it in state ownership or grant to a private company with concession, would be decided.
- The new airport would have been commissioned two years ago. The Director of the National Development Agency implied that it would be commissioned in March, 2020. Currently, problems are there for the airport to start operating?
The first projection period is May, 2017. This is because of the fact that the loan project was to be completed in 2017, and it was estimated that it would have a trial of 5 to 6 months. In order to do so, the exploiter needed to start the preparation work at least in 2016. Unfortunately, due to the absence of steady management, the work that had to be done was lost. As I mentioned earlier, the Japanese side submitted their proposals, but two years have passed with no solution. However, recently, the contracting process and the preparation processes are intensified.
Before conducting the airport operation, a preliminary test called Operation Readiness Airport Transfer is carried out. The most important thing is to ensure the safety performances such as strip, ground service and fuel, of the plane. So the Japanese side told us to give them time of one year period. Now they imply that they need 10 months for the preparation work. They told us: “Let us start operating with full of confidence after it.” Therefore, it is impossible for to tell someone exactly when will the new airport be opened, as it is at the stage of discussion with other party. It is appropriate for the Japanese company, to declare the opening date of the airport. To my mind, it is improper for some politician or for some chairperson to speak about it. Air carriers usually build aircraft airsheds on their own. We saved five billion yen (about 50 million USD) from the loan. This is a soft loan with 40 years term and with the interest rate of 0.1 per annum. Although we had a chance to return this sum subtracting from the total loan, government made a decision to use it. Our team has been assigned to build an airshed, and we are carrying out this task.
We are in need of a highway and public transport due to the isolation of the airport from Ulaanbaatar by 40 kilometres. The main expected issue is that about 2000 jobs will be created and there is a demand for housing in other words, a satellite city has to be built. Due to frequent changes of the government, these projects have not been able to keep up with the main project. The highway to the airport will be opened in spring. A total of six rows of highway with rows on one side is being constructed by the Chinese fund to the south of Ulziit area over Gavjyn Shand.
- Repayment of the project loan is disbursed for the first ten years. Beginning from 2018, 20 billion MNT will be paid for the rest of the period. Has the repayment process begun?
Soft loans were taken in 2008 and 2015. The loan repayment began in 2018, second loan repayment begins in 2025. Looking at this, there will be two repayments between 2025 and 2048. So, by 2025, we should deliver the airport into new business condition by making good management and we should reach the level to make repayment with the airport’s profit after 2025.
- How is the process of supplying energy from wind farm?
In addition to wind farms, solar power is ready to be set up. However, the airport cannot be secured only by renewable energy. The airport must be provided from two permanent energy sources. One side is connected to Nalaikh and is being fared from it. Another one is currently underway from Songino subway station from Ulaanbaatar side.
- Even though the airport is ready, we are in waiting mode and not using it. How will its maintenance would be provided until its opening? Who would be responsible for it? There must be some expenses, right?
In 2017, our construction was completed and we submitted it to the Pre-operating administration of the Civil Aviation Authority. The unit now operates with more than 100 people. This team is being responsible for all maintenance, storage, heat, and dirt problems for two years. In the future, this duty will be transferred to the Japanese company. Indeed, expenses are being made. I remember that we spent one billion MNT on expenses before the airport was commissioned. So, today’s cost must be the same.
- What problems do you face when managing such a big project?
Firstly, the project must be financed before its implementation. Stable legal environment is needed. These two are the most important. The state should not be involved. The projects fail when state is involved. But I am not saying that the government is bad. The government generally needs to provide policy and direction and observe the implementation. According to our project, the state can not be involved in technical specific works. So if the government starts instructing, then the project will slow down or become stagnant.
I am managing this project for the 11th year. In view of the current situation in this society, I am losing the interest to work on a government project. The main reason is meaningless blind distrust. The government has a right to suspect the workers. But this time it is exceeding the norm. The mistrust involving with the social media may affect person’s personal life. So, people who are responsible cannot make a courageous decision due to the fear caused by the society.
I mean that when people with fear lead the project, it does not move quickly. Therefore, in order to implement the project, it is important to employ professional and capable people and support them in the future. Freedom of decision making must be given. Results should only be evaluated within the scope of the agreement. For instance, our project was finished on time and saved the budget, but the suspicion of money embezzling causes discourage of working. If such a case happened in foreign country, the person at least would have been awarded. As for me, I am thinking of how to finish my work without hurting my reputation. This is the psychology of our society.
- What do you think about using the old airport?
Here, I will tell you my personal point of view. I have implied my idea in many places. Those many places are Civil Aviation Authority, ministry and the office. Looking at the situation, dividing the market of 1.4 million people into two airports will lead to an unprofitable operation of both. I see it from the economic side. Once a new one is built, we have to support it. There is no problem in transferring the old one to another use or making it a training place. The main issue is that if we chase two rabbits by dividing the flights into two airports, we will end up with none. That’s why we need to empower one.
- How do you see the economic significance and benefits of the Khushgyn Khundii airport project?
The annual revenues from navigation of the Aviation industry are increasing, but revenues from airports are still low. As the number of travelers around the world increases, especially as neighboring China's wealthy population increases, Mongolia has now got new airport infrastructure. From the very beginning, we can increase tourism and transit revenues if we manage this airport with good management and policy. I think that Japan’s offer of concession was a timely offer.
- The design of Aero city, a satellite city to be built near the new airport was approved in January. How the new city planning was carried out in coherence with the airport?
The first general plan of the city was approved in 2012. At that time government approved the initial planning with 100 thousand population. But nothing has been done since then. A clarification was done in the planning, to have population of 30 thousand people. We have built thermal and sanitary sewer facilities with the reserve to supply the first buildings.
- This project in which you took part from the beginning will become a big city in the future. How do you imagine the development of the satellite city in 20 years time?
Despite the decision to establish several satellite towns in order to decentralize Ulaanbaatar, none of it was materialized. I believe that projects have not been implemented due to fact that the new locations did not have jobs.
There will be more than 2000 aviation and non-aviation jobs at the new airport. Certainly not all, but some of those 2000 employees would settle down in the new city because of their job. According to city planning theory, five people go along with one job. At least 6000 people will leave Ulaanbaatar if we calculate that a minimum of three people will go along with one job.
Shops, kindergartens, schools and other services which will emerge following those people, they will also create new jobs. It is hoped that the satellite city under the auspices of the new airport will create a possibility for the people to migrate from the city in case profitable places are established.
In addition, the “Bogdkhan Railroad” and "Altanbulag-Zamyn-Uud" highway projects are planned to pass through the new airport. The project is being implemented through a logistics center connecting the three main types of transport of a landlocked country. There is also a provision in the “Civil Aviation Policy Paper” on the establishment of a free economic zone in Khushig Valley. I think it will become an investment zone of high interest if a good policy is conducted. Most importantly, we have to make great promotions and attract the investors.