WASHINGTON, April 24, 2020 — The World Bank’s Board of Executive Directors today approved US$53 million in financing for Ulaanbaatar Heating Sector Improvement Project and Additional Financing of the Third Sustainable Livelihoods Project.
The US$41 million Ulaanbaatar Heating Sector Improvement Project will finance essential investments to expand transmission capacity and improve efficiency of the district heating network to meet increasing demand for heating services and improved air quality. The project will help upgrade and expand the district heating network, replace poorly insulated and leaking pipes and expansion loops, and modernize the pumping stations. It will also support policy and institutional reforms in the medium to long term and strengthen capacity of the Ulaanbaatar District Heating Company—a state-owned enterprise responsible for heat transmission.
In Ulaanbaatar, the world’s coldest capital city, access to reliable and clean heating services is essential for survival, yet remains a challenge. With increasing urbanization and economic development, the demand for district heating—currently connected to approximately half of the city’s population—is projected to grow by more than 5 percent a year over the next decade.
At the same time, lack of investment over the past decades resulted in high technical losses of the network. Half of the district heating pipelines will require replacement in the short to medium term. Furthermore, the transmission network is reaching its capacity limit, which has become a bottleneck in connecting more customers despite idle production capacity.
“The World Bank has been actively supporting the modernization of heating capabilities in urban areas to help develop a reliable and sustainable provision of central heating services and to reduce emissions in ger areas,” – said Andrei Mikhnev, World Bank Country Manager for Mongolia. “We are pleased to continue our support through this project which will help address key challenges in the district network and meet growing heat demand in a sustainable manner.”
The US$12 additional financing earmarked for the Mongolia Third Sustainable Livelihoods Project will scale up activities to improve the planning and delivery of priority local infrastructure investments in all 330 rural soums in Mongolia.
Building on the two previous phases of the Sustainable Development Program, the third phase has helped support participatory approaches in rural development through the Local Development Fund (LDF)—a key source from the budget for investment funding for aimags and soums. The new financing will continue to support the LDF at the soum level through performance-based grants based on the results of annual performance assessments. Soums that perform well in these independent performance assessments receive additional grants on top of the regular LDF allocation from the budget. Funds will be used following the normal LDF processes that require community participation in the planning and use of funds.
“The Local Development Fund serves as an important means of fiscal decentralization, allowing people and local authorities to prioritize investments at aimag and soum levels to improve citizen’s wellbeing,” said Andrei Mikhnev, World Bank Country Manager for Mongolia. “This additional financing will scale up investments in needed infrastructure with increased emphasis on public participation, transparency, and accountability at the soum level.”
In addition to providing two more rounds of grants to eligible soums, the additional financing will allow the government to further improve implementation of the LDF by enhancing the capacity of soum officials. It will also help improve community participation and citizen awareness of the operations of the LDF. The project will support activities to strengthen community facilitation mechanisms and promote use of modern technology to overcome the challenges of distance and population dispersion in rural areas. Measures to foster the participation of women, ethnic minorities, and other vulnerable groups in LDF planning activities will also be scaled up.