Erdenet City
Erdenet is the 3rd most populated city in Mongolia (after Ulaanbaatar and Dahan) but it has the largest purchasing power per capita as it is the center for Mongolia’s largest company and thus largest contributor to the state budget, Erdenet Mines.
At first sight, Erdenet is a dirty, industrial city surrounded by a sea of gers, on closer inspection; Erdenet is a dirty, industrial city surrounded by a sea of gers. Built by the soviets in the 70’s and 80’s, it is made of up of derelict temporary housing in a style known as the Kruchnevsky’s, large scale, imposing public buildings and wide boulevards that divide the city.
Erdenet Mines is the 3rd largest copper and Molybdenum mine in the world. It is jointly owned and managed by Mongolian and Russian entities. Established in 1978 it is the largest employer in the city with 5,800 employees. In addition to the mine, the Erdenet carpet factory “Erdenet Hivs” employs around 2,200 employees; it is the largest carpet manufacturer in Mongolia and a public traded company on the Mongolian Stock Exchange.
In addition to those two “giant” employers, the city is home to a thriving private sector with a number of foreign invested companies set up there. For example the American and Mongolian Joint Company “Erdmin” is becoming a leading player in the field of copper flotation waste. Thanks to the Beijing-Irkutsk railway line which is crossing the city, it has gradually become an important trading center for wool, meat and paper manufacture amongst other things.
Erdenet is wildly considered to be a wealthy city; the average salary at the mine site is around 900,000MNT per month (around 700USD) when the comparable average wage in the country is estimated to be 190,000MNT (around 140USD). The city infrastructure is considered to be well managed when compared to the rest of Mongolia but is still in need of improvements. The French government has undertaken an 11 million euro project to refurbish or replace the city’s waste water treatment plant, this project is managed and carried out by Erdenet Factory LLC and is due for completion in 2010.
Erdenet has 2 coal powered power stations with 1 dedicated to the operations of the mine while the other operates for the benefit of the city. There is a current overcapacity of power generated for the city. There are further plans to build a copper smelter within the city limits but construction of this project has not yet begun.
Erdenet is strategically located 180kms away from UB (on a good paved road) and 140kms to the Russian border (on a less good paved road). Its main strategic advantage is that it has its own railway line linking the mine (and the city) to the main trans-Siberian rail-link linking it directly to both China and Russia.
1 - Erdenet’s current housing situation
Erdenet city is divided into three distinct urban zones, the ger district (Mongolian traditional nomadic housing), the residential zone and the industrial zone.
The residential zone is itself divided into 6 districts while a 7th is under planning. Around 50% of the 110,000 inhabitants of the city still live in gers while the rest live in the old “Russian” apartments.
Due to the nature of the current housing stock, there is little differentiation between the quality of the residential units, prices fluctuate according to location, not necessarily quality. There are currently no low cost nor high end housing available, it is all aimed at a single middle class.
The mortgage market in Mongolia is generally considered to be severely underdeveloped with high interest rates (average of 18%) and short term durations of a maximum of 5 years. Erdenet is no different to the country average; this means that few people are able to transition from the ger district to an immoveable property (apartments).
This lack of financing to individual home owners is also the case for developers. Local banks have little reserve of capital to lend to construction companies or developers. This lack of capital means that whatever little financing is available is charged at very high rates of interest and again on the short term. Construction companies find it hard to achieve a sufficiently high level of profit to outweigh the costs and the risk levels.
The cost of land is relatively low in the city but only construction leases can be purchased, this is to limit speculations on rising prices of land.
All the apartment blocks are connected to the main power station on which they rely for hot water, heating and electricity. Utilities are not metered but rather a flat fee is paid according to the size of the property.
