Ot sets up a network of reliable suppliers

Mongolia’s economy shrank during the pandemic and entrepreneurs had no choice but to curtail their businesses. Months of lockdown and transport logistics bottlenecks have dealt a heavy blow to international trade businesses. However, the suppliers of Oyutolgoi overcome these challenges easily as OT was able to prevent disruptions to tax payments and export revenues with uninterrupted operation during Covid, and most importantly, 600 subcontractors and suppliers carried out the production and operations without stopping. After a threeyear break, the management of many companies that participated in the “Oyu Tolgoi Suppliers-Expo 2022”, which was opened during the “Mongolian Mining Week”, shared that they were able to pull through Covid situations without much difficulty.

About 100 companies cooperating with the company participated in this year’s “Supplier Expo”. In addition to major national companies such as MIAT and Khaan Bank, SMEs and companies from Umnugovi also took part in the exhibition with their products. The fact that Oyutolgoi, which was heavily dependent on foreign experts and imported goods, held out two years of lockdown without difficulty is largely related to their supply policy. OT has made great efforts to create a network of reliable domestic suppliers. The closer the supply of goods and services is to the consumer, the cheaper and, most importantly, the more reliable. “We have seen the results of supporting domestic producers and service providers with our policy, and we were able to carry out our activities without delay during the lockdowns,” says G.Batbaatar, manager of procurement policy and strategy at OT’s procurement department. OT employees consume over 160,000 types of products regularly. This will remain throughout the lifetime of the mine, which is about 100 years. Providing over 14,000 employees with daily services and necessary goods without interruption is a very high responsibility. The suppliers should maintain stability and provide goods and services despite the company’s profitability. To have a reliable supplier in the long term, it is important to understand the partners, support their activities, and establish good relationships. Deirdrй Lingenfelder, CEO of “Oyu Tolgoi” LLC, opened the Supplier Expo with a remark, “We should proudly note that we have maintained the relationship and strengthened cooperation with our suppliers. 600 of our 800 suppliers are Mongolian enterprises. 9 out of every 10 US dollars are spent domestically. I would like to note that there are over 40,000 jobs behind our supply chain. This major success is the power of cooperation and partnership,” she said, indicating how satisfied she is with the suppliers. In addition, the company pays a great deal of attention to the development and expansion of SMEs. By supporting producers of leather products such as “Mongol Shevro” and “Darkhan Nekhii”, the price of sheepskin, which had been depreciating, has increased again along with the output of producers. The price of animal skins is the biggest help in the lives of 100,000 herdsmen.

The most competitive product from Mongolia on the world market is leather gloves. Therefore, manager G.Batbaatar made no secret of his interest to support and prepare industries in this area and eventually see their products exported. “If we can support certain government policies and cooperate with other mining companies, we would like to produce raw materials for some products domestically. For example, a workwear fabric factory can be established. It will be fairly small if it is for the needs of our company alone. G.Batbaatar is an experienced specialist who has been working in the procurement department of OT for many years. But OT was not satisfied with all this. To absorb more benefits to the domestic economy, more industries and services must be established. If the Oil Refinery and Steel Complex are put into operation, it will be possible to produce a large number of products domestically. The production of goods that are imported raw materials from abroad is currently the downside factor. If the chemical and steel industries develop, it will be possible to domestically produce a large number of products needed in the mining industry. This will not only save consumers a lot of money and time but also open up opportunities for local manufacturers and entrepreneurs to benefit from large-scale mining projects such as Oyu Tolgoi. Subcontractors account for a good amount of the national expenditure of the Oyu Tolgoi project. In the first few years, companies with the best experts and leading technologies from countries such as Australia and Canada were hired as subcontractors, but in recent years, the number of Mongolian companies and engineers has increased. Especially during the Covid lockdown, foreign specialists and engineers were unable to travel, which gave Mongolian engineers and technicians a great opportunity to grow. For example, the open pit ore conveyor system and its maintenance used to be done by a Canadian company, and now it is handled by a national company MMS Engineering.

Another national company NBIK is now in charge of construction instead of large enterprises. OT people say many national companies are replacing foreign subcontractors. The most important thing is that these companies are competing with foreign companies and winning bids. This is the result of the fact that OT has been insisting on foreign companies hiring more Mongolian workers when doing business with them. Mongolian experts who have worked and studied with foreign experts for over 10 years are now participating in the development and operations of OT by establishing independent companies or in cooperation with foreign enterprises. This is fully consistent with OT’s procurement and supply policy. Deirdrй Lingenfelder noted, “We will always aim to increase the benefits. In this context, I would like to emphasize that OT is achieving tremendous success in the direction of increasing the financial and knowhow to stay in Mongolia by paying attention to foreign purchases from the domestic market,” which was a promise to share the benefits of the project to Mongolian entrepreneurs and manufacturers.