Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Mongolia based on a desk review. It applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective SusPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country overview" section with an maturity rating and graphic, key achievements and remaining gaps, and timeline of key events.
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.

The Factsheet is intended to be a living document that will be revised and improved as new information is uncovered and advances are made. It is designed to support the ADB training programs on SusPP.

If you have new information, please contact ychu@adb.org.

Mongolia has transformed into a vibrant democracy with an aspiration to be a leading middle-income country with a multi-sector stable economy. The country has committed to a sustainable development pathway since 2010, a vision reinforced through its National Green Development Policy (NGDP), Sustainable Development Vision 2030 and Vision 2050.

Public procurement has been officially recognized as a key financing mechanism for green growth, with goals set to achieve 30% green procurement by 2030 and 50% by 2050. Mongolia has made significant progress in building a modern public procurement system. A 2019 amendment to the Public Procurement Law of Mongolia (PPLM) introduced provisions on green procurement. A significant revision to PPLM is currently under Parliament review and offers added momentum to strengthen sustainable procurement provisions.

The country faces several environmental challenges. More than 50% of its population lives in the capital Ulaanbaatar where extreme air pollution is common in winter months. Its economy is 7.5 times more carbon intensive than the OECD average (tonnes of CO2 equivalent per $ GDP), mainly from agricultural activities and an electricity grid dependent on coal and imported fuel. Renewable energy has grown slowly from 1% in 2013 to 7.9% in 2021 of total energy generation due to generous feed-in tariffs.

>> Snapshot of Sustainable Procurement Maturity Level

Key Achievements

• Clear policy commitment to SusPP in key national development policies
  
• Linkages to policies on GHG reduction, renewable energy, construction waste management, wastewater treatment and reuse, plastics reduction
  
• Specific SPP policy and action plan has been drafted (but not formally endorsed)
  
• Procurement legislation reformed to allow environmentally-friendly procurement
  
• Training and financial support available for SMEs to adopt green technologies
  
• Market engagement activities have been held for large-scale infrastructure projects (offering a model for replication)
  
• Clear targets have been set to track adoption of SPP and related activities
  

Remaining Gaps

• Procurement legislation sets “lowest price” as the basis for contract award, not “best value for money”
  
• Lack of clarity/ownership by MOF on SPP implementation and no interministerial coordination body
  
• Need to integrate SPP into existing procurement tools (e.g. professionalisation programs, marketplaces, standard documents)
  

>> Timeline of Implementation of SusPP Policies and Activities

2000

2014

2017

2019

2022

Public Procurement Law (PPL) of Mongolia enacted

Vision 2050 & National Green Development Policy prioritizes green public procurement

Review of PPL conducted and amendements proposed for SusPP

1st draft National SusPP Action Plan developed

Guideline for SusPP developed

Amendment to PPL introduces environmentally friendly procurement

2nd draft National SusPP Action Plan developed

SME Training on Circular Economy and Green Supply Chain conducted

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as an adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

Sustainable Public Procurement

The country's National Green Development Policy specifically mentions "green procurement", defined as ‘purchasing goods and services that are designed or designated toward ensuring the efficient use of energy and natural resources, the sustainability of ecosystem services, climate change adaptation and the creation of a green living environment’.

Vision-2050 sets out an ambitious vision to “transform public procurement to Green Public Procurement. This vision aims to achieve several goals: to support private sector, support domestic businesses in the construction sector that produce energy efficient products and “support recycling industry to recycle solid waste from the construction, road and transportation sectors in an environmentally friendly manner.

The country has prepared draft versions of a National Action Plan on Sustainable Public Procurement (SPP), first in 2017 and then updated in 2022. However, it does not appear that these drafts have been formally endorsed.

Other National Policies

SusPP can contribute to the achievement of several other national policy objectives in Mongolia including:

• Reduction of 14% of greenhouse gas emissions (GHG) by 2030 compared to Business-As-Usual (BAU) in the priority sectors of construction, agriculture and energy (INDCs to the Paris Agreement on Climate Change)
  
• Increase use of renewables for electricity generation by 30% by 2030, start using electricity from nuclear power plants by 2030
  
• Conservation of raw materials, reduction of waste at source, establishment of the 3R (reduce, reuse, recycle), and promotion of extended producer responsibility as well as mechanisms to convert waste into value-added products (Law on Waste and National Waste Management Improvement Strategy and Action Plan)
• Increase use of recovered waste materials in the buildings and construction sector (Regulation on Construction and Demolition Waste 2020)
• Promotion of wastewater treatment and reuse (Technical Standard of treated wastewater reuse 2019)
• Ban on raw coal burning in Ulaanbaatar and ban on single use plastics implemented in 2019
• Reorient and increase green investment flows towards a low-carbon, climate resilient and circular economy (Sustainable Finance Roadmap 2018)

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

The Public Procurement Law of Mongolia (PPLM) was first enacted in 2000 with technical assistance from the ADB. The legislation included allowance for preferences to national suppliers. A review of Mongolia’s procurement law was conducted in 2017 under the Partnership for Action on Green Economy (PAGE) program, which proposed several amendments to prepare the country for sustainable public procurements.

An 2019 amendment to the procurement law introduced environmentally friendly procurement and a list of goods subject to be supplied only by domestic manufacturers. PPLM para. 11.1.1 introduces “sustainable procurement criteria” that can include purpose, energy and natural resource efficiency, economically viable consumption, usage, quality level, and other technical characteristics.

Notably, while sustainable procurement criteria can be considered in the technical specification, the legislation still maintains the “lowest price” concept as the key criteria for procurement award. The draft 2022 National SPP Action Plan notes that gaps remain that hinder SusPP adoption and recommends additional reform, including the adoption of the “best value for money” concept and innovation procurements.

Pillar 3: Institutions & Capacity

Lead Agencies on SusPP

The Ministry of Finance’s (MOF) Procurement Policy and Coordination Department (PPCD) acts as the central procurement policy agency in Mongolia. The PPCD was temporarily dissolved in 2016 then reestablished to Procurement Policy Division as its absence was linked to delays in investments and construction activities, increased costs, and wasted time. The Ministry of Environment and Tourism (MET) is active in promoting SPP in the country within the context of UNEP and EU-funded programming. However, the 2022 SPP Action Plan highlighted the need for a clear national lead agency on SPP (between MOF and MET) and recommended recruitment of a dedicated SPP officer within the PPCD and establishment of an SusPP Steering Committee composed of key governmental institutions relevant to public procurement

Training

The MOF has participated in activities related to SusPP including a technical consultative meeting on the 2017 National SPP Action Plan held in Ulaanbaatar. The meeting was attended by 60 representatives across government including the Ministry of Finance, PPCD, Ministry of Nature, Environment and Tourism, Ministry of Road and Transportation Development, Ministry of Education, Science, Culture and Sport, Ministry of Defense, Ministry of Construction and Urban Development, Ministry of Justice and Internal Affairs, Ministry of Defense, and Ministry of Health. However, no formal interministerial body exists to coordinate a government-wide approach to adoption of SPP.

Pillar 4: Market Practices

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

Training and Financing

Several initiatives are underway to assess and improve the capacity of national businesses to deliver environmentally friendly goods and services. The Mongolian Sustainable Energy Financing Facility (MonSEFF) is a credit line developed by the EBRD that enables Partner Banks in Mongolia to finance businesses seeking to invest in energy efficiency. A Training on Circular Economy and Green Supply-Chain for SMEs was conducted in February 2022 to enable more than 70 SMEs from diverse sectors (agriculture, cashmere and sewing, city planning, construction, start-ups and scientific research, tourism, and trade).

Market Engagement

An innovative market engagement approach was organized by the Millennium Challenge Account Mongolia (MCA-Mongolia) to inform local firms about upcoming procurement opportunities to construct major water purification and wastewater treatment plants. An informational session was organized in October 2020, followed by an online pre-bid conference in January 2021. A key objective was to promote inclusion of local companies through partnerships or joint ventures with international firms. This market engagement approach offers a model that could be replicated in the future to support sustainable procurements in ADB projects.

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

Mongolia has undertaken significant reforms to build a modern, transparent and accountable public procurement system. Green and social procurement has not yet been integrated into these systems, however the potential to do so is significant. The central procuring body has developed a three-tier procurement professionalisation program and partners with educational institutions and NGOs to deliver trainings at national and local levels. SPP modules can be added to this program. A course on construction and demolition waste has been developed by the Mongolia University of Science and Technology (MUST). An e-procurement system, framework agreements and online marketplace are in place, as well as standardised procedures, model tender documents and form contracts.

A Guideline for sustainable public procurement was developed in 2017, largely adapted from materials used in other PAGE projects. With PAGE support, environmental and social criteria for the procurement of six product categories have been developed: paper, toner cartridge, light-weight concrete blocks, furniture, computers and paints. Further work is recommended to create training materials and procurement tools better adapted to the Mongolian context.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

Progress to date:

Mongolia’s 2014 National Green Development Policy sets out a comprehensive set of indicators to track progress. The Policy sets out specific goals to increase green procurement to 10% by 2025, 20% by 2030 and 50% by 2050. Other indicators that could be achieved through sustainable public procurement include:

• 30% renewable energy in total installed capacity
  
• 40% reduction in building heat loss
  
• 40% waste recycling share
  
• 30% green facilities in Ulaanbaatar and other urban areas
  

The MOF is responsible for monitoring of objectives, targets and achievements of the annual Procurement Plan and presents each year to the Cabinet.

A network of 16 organizations across Mongolia have been gathered to monitor public procurement in Mongolia, that could be engaged to monitor sustainable procurements.

Projects Supported by ADB

ADB will focus its operations in the country during 2021-2024 on three strategic priorities: (i) foster inclusive social development and economic opportunity; (ii) climate-resilient infrastructure to drive competitiveness and diversification; and (iii) resilience for sustainable, green, and climate-conscious development.

ADB will work closely with the government to meet Mongolia’s nationally determined contributions on climate change and secure a greener future for Mongolia, in particular through gradual shift away from coal, adoption of better livestock practices, and a transition away from the intensive resource use that characterized much of Mongolia’s development. ADB will use innovation to promote a more resilient development trajectory based on informed decision-making about the value and use of Mongolia's natural capital.

Other Initiatives supported by National/International Agencies

Progress to date:

UN Partnership for Action on Green Economy: Mongolia joined the PAGE program in 2013 and activities have been carried out to advance SPP aligned with the UNEP methodology, mainly with the Ministry of Environment and Tourism as the key counterpart. PAGE supports technical studies on the reform of energy tariffs to promote renewable energy development and the potential of renewable energy generation to create opportunities for the agribusiness sector.

EU SWITCH-Asia Programme: The European Union has supported an update to Mongolia’s SPP Action Plan for the Ministry of Environment and Tourism (MET), and catalysed the Regulation on Construction and Demolition Waste. Its SCP Facility has hosted multi-stakeholder consultations and provided training on Sustainable and Green public procurement as well as conducted a baseline study on Mongolian policies and stakeholders relevant to sustainable consumption and production goals.

European Bank for Reconstruction and Development: EBRD focuses on economic diversification, infrastructure and the private sector. It has contributed to the Ulaabaatar District Heating Project, Green City Action Plan, Ulaanbaatar Solid Waste Modernisation Project, and a Construction and Demolition Waste Plant (CDW).

Resources

ADB, 2022. ADB and Mongolia: Fact Sheet.

ADB, 2022. Completion Report: Mongolia: Strengthening of Public Procurement for Improved Project Implementation.

Government of Mongolia, 2014. National Green Development Policy 2014-2030.

Government of Mongolia, 2014. Vision 2050.

Ministry of Environment and Tourism (MET) of Mongolia, Ministry of Finance of Mongolia, 2017. Sustainable Public Procurement Action Plan.

Ministry of Environment and Tourism (MET) of Mongolia, 2022. Sustainable Public Procurement (SPP) Action Plan in Mongolia (Draft).

Ministry of Finance of Mongolia, UNEP, 2017. A Guideline for Sustainable Public Procurement.

Ministry of Finance of Mongolia, UNEP, 2016. Review of the Public Procurement Legal Framework of Mongolia.

Official website of the State Procurement Agency.

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