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Mongolia to join data center frenzy with Chinggis Khaan sovereign wealth fund
TOPSHOT – A general aerial view shows houses and Yurts in Ulaanbaatar, Mongolia on June 25, 2024.
Hector Retamal | Afp | Getty Images
Mongolia, long reliant on mining, plans to build data centers powered by renewable energy as it prepares its first sovereign wealth fund aimed at channeling its mineral wealth to social welfare and infrastructure.
“We have a massive land with a very favorable climate for activities like [hosting] data centers,” Temuulen Bayaraa, CEO of the sovereign fund, told CNBC on the sidelines of the Milken Institute Asia Summit in Singapore on Friday.
The landlocked East Asian nation is developing special economic zones dedicated for data centers, she added, referring to the Hunnu City that is envisioned as a smart, sustainable urban city.
The Chinggis Khaan Sovereign Wealth Fund, established by law in April last year, has $1.4 billion in reserves and seeks to tap global demand for computing power and clean energy. Its investment strategy is still pending the government’s review and final approval.
A host of Asian countries have accelerated efforts to develop data centers this year amid growing demand for cloud computing and artificial intelligence. Japan, Singapore and Malaysia have ramped up investments in building out their data center capacity.
The recent explosion in AI workloads globally requires vast computing power, electrical power, cooling and networking infrastructure. Goldman Sachs expects global power demand from data centers to rise 50% by 2027 and by as much as 165% by 2030.
Aside from data centers, part of the fund’s returns will also be used to build “mega-scaled” renewable energy power grids and projects, as part of the country’s efforts to boost green energy exports to neighboring countries, Bayaraa said. Mongolia, sandwiched between Russia and China, has upgraded its ties with both superpowers to the level of “comprehensive strategic partnerships” in recent years.
The plan comes as the Mongolian government pledged to boost the share of renewable energy, especially wind and solar power, in the country’s electricity capacity to 30% by 2030, up from 18.3% in 2023.
The fund’s investment strategies will also center on countering risks associated with price fluctuations in commodities, Bayaraa said, as the funds’ sources are “very dependent on commodities.” The Chinggis Fund is managed by Erdenes Mongol, a government-owned holding company that owns a share in the country’s mining assets.
The sparsely-populated country, with just about 3.5 million residents, has benefited from a boom in prices for its rich supplies of critical minerals, including coal, copper, uranium and rare-earth elements.
Rebuilding trust
The Mongolian government has been under growing pressure to distribute its mineral wealth among its people and put an end to corruption in the sector. Anti-corruption protests in its capital, Ulaanbaatar, earlier this year forced Oyun-Erdene Luvsannamsrai to step down as prime minister.
“People didn’t feel like mining contributed to the wealth, betterment of their livelihoods while eroding the natural resources. But now the sovereign wealth fund is positioned in a way to rebuild that trust,” Bayaraa said.
The fund will play a central role in the country’s development plan aimed at providing more transparency and equity in wealth distribution, she added, by pulling in mineral wealth to be “managed and disbursed in a ring-fenced manner to support people, their educational needs, financing, educational, healthcare and housing needs.”
“The critical work is to build a governance model [for the fund],” she added. Citizens will be able to access on an app details of the fund’s sources, allocation and balance. “It’s very targeted intervention for expanding middle class, pushing labor market participation,” she said.
The fund’s leader plans to hire members of the Mongolian diaspora with experience in the banking, investment, and wealth management industries to return home and help manage the fund.
“For the longest time, Mongolia has been attracting investment into Mongolia. For the first day, we are becoming an investor to contribute to the global agenda,” Bayaraa said.
