mongolia enhancing policies and practices for ger...

Mongolia

Enhancing Policies and

Practices for Ger Area

Development in Ulaanbaatar

Taku Kamata

East Asia and Pacific Region

The World bank

Table of Contents

I. Purpose

II. Analysis

a. Housing and Land

b. Water Supply

c. Municipal Road and Public Transport

d. Solid Waste Management

e. Heating

f. Electricity

g. Social Service-Education and Health

III. Policy Directions and Scenarios

IV. Implications for Planning and Development

PURPOSE

Purpose of Meetings

Recent effort: UB Mater Plan 2030

- To control spatial expansion

- To promote high-density development for UB

Limited success on policy implementation due to

- Lack of awareness and understanding of the public, policy makers

- Proper supporting mechanisms not in place

• Land Valuation Housing Finance

Public Awareness - key to successful implementation of

policies

Purpose and design of Analysis

Clarify Cost and Benefit of three different development paths

Analysis on three selected ger areas and 7 sectors

- Khoroo in Naran Ger (City Center Ger), Bayankhoshuu Ger (Mid-tier Ger), and Sharhad Ger (Fringe Ger)

- Housing & land, water, transport, heating, electricity, solid waste, social service

• City Center Ger - Conversion of ger areas into apartment building complexes1

• Mid-tier Ger - Gradual improvement of urban services for existing ger area2

• Fringe Ger - Further expansion of ger area at the fringe of the city3

HOUSING AND LAND

Housing and Land

Ger residents are generally satisfied with their housing conditions: except the fringe area

0 10 20 30 40 50 60 70

Fringe ger

Mid-tier ger

City center ger

Apartment area

4,4

46,8

9,8

32,1

37,3

46,7

63,2

53,2

8,3

5,3

20,2

9,2

50

1,2

6,8

5,5

Very dissatisfied Moderately dissatisfied

Moderately satisfied Very satisfied Unit: % of respondents

Housing and Land

Many ger residents in mid-tier ger area want to keep existing housing, but with improved living conditions.

16%

17%

18%

24%

24%

1%

Mid-tier ger

Build apartments in all khoroo areas

Redevelop the entire khoroo with a mix of apartments and detached houses

Build apartments in som khoroo areas

Develop a mix of apartments and detached houses in some ger areas

Do no redevelop the area but improve existing housing and supporting infrastructure

Housing and Land

Ger residents prefer small concentrations of low-rise, multi-family apartment buildings

Fringe Ger

Mid-tier Ger

City Center Ger

37,1

6,9

14,9

0

79,3

69,3

47,4

13,8

15,8

15,5

0

0

Others (ger, dormitory, etc)

Newly built detached houses

Low-rise Apartments

High-rise apartments

Unit: % frequency

Housing and Land

Housing in the ger areas is financed mostly through private

savings: only a small portion is from banks or formal sources.

Self-financing Loans from banks Total

mil TG (USD) %

mil TG (USD)

% mil TG (USD)

Apartment Area 31.245(22,309)

80.7 7.463(5,329)

19.3 38.709(27,638)

City Center Ger Detached house 7.197(5,139)

91.2 0.692(494)

8.8 7.888(5,632)

Apartment 31.510(22,498)

89.6 3.653(2,608)

10.4 35.162(25,106)

Mid-tier Ger Detached house 10.521(7,512)

97.7 0.242(173)

2.2 10.765(7,686)

Fringe Ger Detached houses 5.487(3,918)

95.3 0.267(191)

4.7 5.754(4,108)

Housing and Land

Income, Asset, and Housing Price: Apartment and 3 Ger Areas

Current Housing Price,

million Tg (USD)

AverageMonthly Saving ,

Tg (USD)

Total Assets, million Tg

(USD)

AverageMonthly

Income , Tg (USD)

Apartment area

Apartment 43.11 (30,781) 29,400 (21) 38.93 (27,796) 446,600 (319)

City Center Ger Apartment 61.23 (43,718) 204,400 (146) 80.62 (57,563) 488,600 (349)

Dethatched house

28.97 (20,685) 93,800 (67) 53.57 (38,249) 376,000 (268)

Ger 1.91 (1,364) 92,400 (66) 22.69 (16,201) 257,600 (184)

Mid-tier Ger Detached house 17.59 (12,559) 26,600 (19) 24.83 (17,729) 225,400 (161)

Ger - 4,200 (3) 8.74 (6,240) 190,400 (136)

Fringe Ger Detached house 18.69 (13,345) 16,800 (12) 21.37 (15,258) 225,400 (161)

Ger 1 (714) - 6.96 (4,969) 232,400 (166)

Housing and Land

A majority of residents in all three ger will not be able to

afford any of the apartment buildings the government propose to build.

Given the affordability issue, low-cost housing options should

further be examined as alternatives.

Housing finance mechanism is needed

WATER AND WASTEWATER

Water and Wastewater

Satisfaction with water service is relatively high – Compared to other infrastructure i.e. solid waste collection, local

pathways, and drainage.

– Affordability is not a major issue

• Household expenditure for water: less than 3% of ger residents’ average income

• This is because consumption is very limited due to inconvenient transportation: 5-10 liters /person, day

– Even though ger residents pay the highest tariffs - Tg1000 per m3


Utility Company– USUG is in charge of water supply and wastewater except for 90

kiosks contracted to private operators.

– Kiosks are in loss

＊ Full unit cost of central water is 10 time cheaper than Kiosks

: Tg 280 ($ 0.2)/m3

– Each kiosk incurs annual losses: Tg 10 mil - Tg 26 mil ($7,100-$18,600)

– USUG annual operating loss in 2008: Tg 4.1 bil ($ 2.9 mil)

Existing tariff Tg 1000 ($0.71)/m3

Full unit cost Tg 3,200 – Tg 4,300 ($2.29 – $.3.07)/ m3


Wastewater– No wastewater service in ger areas

– Disposal of wastewater is not a major issue for now but need long-term solution

– Unless convert ger areas to fully-served apartment dwellings, wastewater collection will be challenging due to low level of consumption of water and extreme climate

Sanitation– Most ger residents use pit latrines, most of which are not ventilated.

– Residents do not have incentive to invest in latrine investment, either

– Negative environmental impact requires attention for solution

– No detailed analysis is done on sanitation issue, due to the lack of clear solution.


City Center Ger– Options: A large scale development of apartment is expected with tap

water and hot water supply.

– Costs: Tg 1.855 billion ($1.325 million) + Tg 770,000 ($550) per household for installing booster pumps

– Implications

• Drastic increase in water usage coming from the conversion of gers to apartments (Ger resident use 5-10 liter/person, day vs. Apartment resident uses 270 liter/person, day)

• Current heavily subsidized tariffs will worsen the financial losses of USUG. (Losses from apartment residents in 2008: Tg 41 bil/$29.3 mil)

• MUB is making debt and interest payment on behalf of USUG.

• If tariff is not increased, the fiscal performance of MUB will also deteriorate.


Mid-tier Ger– Options:

• No private connection of water service is available in UB, but some pilots are underway under World Bank-financed USIP2

• Insulation against freeze will be a challenge

• If no wastewater network serves the area, alternative solution such as mini-treatment plants will have to be pursued.

– Costs: Tg 5.6-16.1 mil ($4,000-11,500)/ household, excluding in-house materials like sinks and faucets

• Details of capital cost for private connection breakdown are following

• Affordability and willingness-to-pay would be major issues

• Cost-sharing and public contribution can be considered.


Mid-tier Ger

– Implications

• Consumer economic benefits from increased level of water consumption: ten-fold increase in some cases

• Utility company: If the tariff reflects the actual operational cost, but if the current heavily-subsidized apartment residential tariff is applied to private houses, the utility company will incur substantial losses.

• Fiscal Implications: The municipality could suffer from a fiscal burden depending on who bears the cost of connecting private plots to the water distribution mains.


Fringe Ger– Options

• Desirable option: construction of more on-site well-fed kiosks

– Cost

• Cost of building kiosk is relatively small: Tg 12.6 mil ($ 9,000)

• Unit cost of Kiosk water supply: Tg 3,280-Tg 4,260 ($2.3-$3)


Fringe Ger– Implications

• Consumer economic benefits: Consumption level will remain at the similar level

• Financial implications: For USUF, kiosks will be a growing deficit operation with the current tariff of

Tg 1,000 ($0.71)/ m3

One kiosk is making Tg 19 mil ($13,600) loss per year and there are more than 550 kiosks in UB

• Fiscal implications: USUG will not be able to meet debt repayment obligations as lont as the

current tariff continues.

Therefore, MUB will have to assume the debt repayment obligations for USUG.

MUNICIPAL ROADS AND PUBLIC TRANSPORT

Municipal Roads and Public Transport

Paved road is rarely available in ger areas, especially in mid-tier and fringe ger areas: average 10%, but only 3% if excluding the City Center Ger

0% 20% 40% 60% 80% 100%

Fringe Ger

Mid-tier Ger

City Center Ger

97%

96%

73%

3%

4%

27%

Earthen Roads Paved Roads


Poor condition of unplanned and unstructured earthen roads

in ger areas is serious concerns expressed by ger residents

– Impassable for vehicles passing

– Drainage problems

– Traffic safety hazards

– Source of dusts

– Lack of street light contributing to crime


Residents in fringe gers rely on public buses

38%

34%

28%

UB

Bus

Walk

Family Vehicle

58%29%

13%

Ger Areas


But, residents in mid-tier and fringe ger areas must walk long

distances from the drop-off points, as buses cannot operate on the narrow roads in ger areas

Travel Times/ Distance UB Ger Areas

To Work 32 min / 4.5 km 25 min / 8.0 km

To School 27 min / 3.3 km 43 min / 2.5 km


Road improvements are largely a fiscal capacity issue for

Municipality of UB

Sustainability is another issue: Fairs are not at the cost

recovery level and public bus companies are facing financial deficits


City Center Ger

– Service Improvement Options and Cost

Option Cost Per Capital Cost

Mil TG

USD Thousand

TGUSD

Option 1 Upgrade and pave 1.2 km from micro road to TV bus terminal

190.4 136,000 15.5 11

Option 2 Remove restrictions on microbusoperators (East-West road)

133 95,000 10.9 7.8

Option 3 Provide sidewalk from microbusterminal to kindergarten

42 30,000 3.4 2.5


City Center Ger

– Economic benefits to residents• Improved road conditions, more reliable and high frequency of bus

service

• Safer walking conditions, created by Sidewalk to the kindergarten

• Access to markets, schools, health clinics, other public services and employments

• Improved air quality due to the reduction of dust in roads

– Fiscal implications• Maintenance of improved roads will require

TG/ year USD/ year

Road 840,000 - 1 mil/ km 600-720/ km

Streetlights, 50m intervals 1.1 mil 800


Mid-tier Ger

– Option and Cost for service improvement

– Economic Benefits• Reliable year-round access to north-south corridor

• Faster travel times, possible opening of microbus service

• Safer and cleaner walking conditions due to the sidewalk and streetlights

• Increased access to markets, schools, health clinics, other public services, and employment


Option Cost Cost per Capital

Mil, TG USD Thousand, TG

USD

Upgrade and extend gully road

324.94 232,000 40.7 29


Mid-tier Ger

– Fiscal implications

TG/ year USD/ year

Road without extension 1.2 mil 840

with extension 1.75 mil 1,250

Street lights without extension 1.26 mil 925

with extension 1.96 mil 1,400


Fringe Ger

– Option and cost for service improvement

– Economic Benefits• Time saving from and to Sharhad Bust Station

• Increased access to markets, schools, health clinics, other public services, and employment


Option Cost Cost per Capital

Mil, TG USD Thousand, TG

USD

Upgrade road from Sharhad Bus Station to Eej Khairkan

240.16 171,500 21.6 15.5


Fringe Ger

– Fiscal Implications

TG/ year USD/ year

Road 1.26 mil 900

Streetlights 1.4 mil239 / capita

1,0000.17 / capita

SOLID WASTE MANAGEMENT

Solid Waste Management

Ger residents cite solid waste management as one of the

worst public services

– Collection: solely by vehicles, unreliable, and infrequent

– Low operation efficiency

• 100 households a day by one vehicle in summer, less in winter

• While waste quantity varies significantly: 1 - 0.9 kg per household in winter

0.2 – 0.3 kg per household in summer


Current Waste Disposal Situation in Ger Areas

Outside houses Hill or Yard Around Lake


Solid Waste Management in Three Ger Areas


Solid Waste Tariff in Three Ger Areas


Option for Service Improvement– City Center Ger: If the City Center Ger is turned into an apartment area,

existing equipment and works are enough to manage garbage collection and transportation in the area.


Option for Service Improvement – Most Desired Option– Mid-tier Ger and Fringe Ger

• Option 1: Collection Service by Sanitation Workers


– Mid-tier Ger and Fringe Ger

• Option 2: Collection Service by Residents


– Mid-tier Ger and Fringe Ger

• Option 3: Vehicle-based Collection – Most Expensive and Inefficient


Comparison of Different Options for Service Improvement

Advantage Disadvantage

Option 1Collectionby sanitary worker

1. Creation of jobs2. Increased collection frequency solves waste

stagnancy at hh3. Door-to-door collection system increase

efficiency in collection and transportation4. Operation of transfer station allows

increased collection of recycle materials5. Most economic option

1. New tariff system required levying tariff at the time of collection

2. Land for transfer station3. Risk of fire at transfer station4. Local resident’s complaints on dust,

stench, and noise from transfer station

Option 2Collection by residents

1. Awareness raised of residents as a part of collection system

2. Reduced cost of waste collection and transportation

3. Reduced stagnancy of waste at hh

1. New tariff system required levying tariff at the time of collection

2. Voluntary participation of residents3. Land for transfer station4. Local resident’s complaints on dust,

stench, and noise from transfer station


Comparison of Different Options for Service Improvement

Advantage Disadvantage

Option 3Collectionby vehicle

1. Most familiar system, supplementing existing system

2. Most preferred option by residents and public officials

1. Long interval of collection2. Collection vehicle and containers

required for better quality3. Collection rate remain very low4. Current tariff system is not

financially viable and a new tariff system is reuiqred


Financial and economic implications

– City Center Ger: No additional cost as existing vehicles and equipments are enough for City Center Ger which will be transformed to apartment areas

– Mid-tier and Fringe Ger Areas : Wide variation among options.

(Detailed comparison on next slide)


Initial investment and operation cost

Option 1Sanitary workers/

handcarts

Option 2Small transfer stations

Option 3Improved status quo

Initial investment

Operation/year

Initial investment

Operation/year

Initial investment

Operation/ year

Mid-tier Ger

Mil Tg 13.2 16.6 241 8.1 76 16.2

USD 9,424.8 11,852.4 172,074 5,783.4 54,264 11,566.8

FringeGer

Mil Tg 19.8 35.7 434.6 39.5 152 58.7

USD 14,137.2 25,489.8 310,304.4 28,203 108,528 41,911.8

HEATING

Heating

Types of heating in UB– Centralized heating

– Small heating systems for groups of buildings (heat-only boilers/ boiler house)

– Individual heating systems (water heaters)

– Household stoves

Problems– Use of raw coal and air pollution in UB

– High cost of individual connections

– Low heat density

– High rate of heat loss due to the lack of insulation in gers and houses

– Lack of heating capacity in UB district heating network

– Unplanned and temporary location of hashaas

Heating

Service improvements– Connecting more residences to district heating services

– Creation of small heating systems for groups of buildings

– Improving the efficiency of household stoves to reduce air pollution

– Reducing the use of raw coal for heat-only boilers and individual stoves, using cleaner fuels

Cost of new connection

Mil Tg USD

Apartment buildings 0.56-0.7 400-500

Connection in dispersed location Up to 11.2 8,000

Small business and households to district heating

2.8 – 5.6 2,000-4,000

Heating

Connecting individual gers to district heating system is not

cost-effective– Heat load density for individual ger connection is 40-50 times lower

– No proper heat insulation in gers:

• Ger loses 4-5 times more, while individual house twice compared to national insulation standards

Tariffs needs significant reform– Not at cost recovery level

– Regressive pricing:

• Apartment residents pay based on the house size not based on actual usage

• Ger residents pay market price for coal and firewood

– Lower income families spend up to 40% of total income on heating

ELECTRICITY

Electricity

Problems– Voltage drops due to the capacity shortage

– Insufficient capacity of transformers and substations

– A small number of households without electricity

Most households in all three ger areas under study have

electricity except about 120 newly migrated families

Ger residents use 100 – 110 kWh of electricity and pay 4-5 %

of income: Within internationally recognized affordability level

Electricity

Service improvement for existing customers– Increasing capacity at nearby substations and improved metering

and wiring

– Cost between Tg 280,000 – Tg 560,000 per household

Cost of new connection in the ger areas– Tg 840,000 – Tg 1,120,000 per connection

ERA’s lifeline tariffs for low-income households– Few subscribed as they are not registered yet or they have not paid

electricity bills

Lack of proper planning and enforcement among district and

municipal authorities also makes it difficult to provide new connections.

SOCIAL SERVICE-EDUCATION & HEALTH

Social Service - Education

Schools in ger areas lack facilities to absorb the increasing

number of students

To improve the educational service, investment is requires for – Facilities

– Adding teachers

– Supporting infrastructure i.e. roads, water supplies and sanitation

City Center Ger Mid-tier Ger Fringe Ger

Number of Secondary School 2 1 1

Pupil-teacher ratio N/A 64 35

Class shift per day 3 3 to 4 4

Average travel time (min) 25 35 36

Average travel distance (km) 3.2 2.5 1.8

Social Service - Education

Cost of service improvement– Target service output: to provide normal single shift class and

supporting infrastructure (excl. remuneration for teachers)

– Tg 1.8 mil per capita

Interim measure to prevent juvenile delinquency– Provision of Youth and recreational centers

– Est. cost

• Capital cost: Tg 175,000 per child

• Operational cost: Tg 18,200-Tg 25,200 per child per year

Social Service - Health

Health indicators in Mongolia is competitive due to the

traditional role of government as the main health service provider

– Gov’t expenditure account for 63% of total health expenditure (2003)

– Gov’t spending on helath-6.9% of GDP

– Private out-of pocket expenditure is relatively low

Gov’t reform to promote Primary health care (PHC)– Still, not enough PHC and far too many hospitals 23.4 per 100,000

people ( twice than EU countries and other transitional economies)

– 5.5% of total health funding to PHC, 2/3 of state health budget to hospitals

– Poor area in UB and fringe ger areas are left with insufficient facilities

Social Service - Health

Service improvement– Expand or add primary care providers is essential in remote ger areas

– Est. cost: Tg 505,400 per capital (excl. salaries and variable costs)

– Securing competent doctors and staffs should be given a priority to prevent underutilization of facilities

POLICY DIRECTION

Policy Direction

Smart growth as a long-term principle direction

– Increase the density in the city center, and control further expansion at the outskirts of the city

– Public’s awareness on the benefit of dense development: low-rise apartments, collective housing with utility services

– Realistically, most of ger areas will remain due to the complexity of dense development

Policy Direction

Central Ger Area : Conversion to apartments will take time

– Ger residents hardly afford the cost of apartments in the city center

– Lack of mortgage finance makes the purchase of large assets difficult

– Absence of functioning real estate market, including proper pricing mechanism, has impeded the development of new housing

Policy Direction

Mid-tier Ger: Retrofitting urban service is exorbitantly

expensive– Established ger residents are relatively content with the current

neighborhood and like to have improved urban service than to convert to high-rise apartment

– These areas are not suitable for conversion to large high-rise apartment complex: not close to network infrastructure

– To upgrade current minimum level infrastructure service to the full-fledged level will be too expensive or impossible.

• Unit costs of services to individual houses several times higher than for apartment units

– Improvement in housing, i.e. conversion to low rise, smaller collective dwellings could be envisaged if residents income level increases

Policy Direction

Fringe Ger: Room for relocating fringe ger residents

– Residents in fringe ger areas are recent migrants with low income level

– Far from the economic activity, insufficient infrastructure service, and little access to health and education services

– Therefore, residents of these areas are very dissatisfied with current living conditions, and are ready to relocate

– Affordability is key as most of them do not have sufficient income

IMPLICATION FOR PLANNING AND DEVELOPMENT

Implication for Planning and Development

1. Access roads within ger areas– Ger residents are disadvantaged by poor access to markets, work

place, education and other services

– Modes improvement in the secondary access roads from major corridors to inside the khoroos would be cost effective option for improvement

– Community-driven initiatives on land re-plotting would facilitate to plan roads and provide access for utilities

2. Better heating systems to improve efficiency and reduce air pollution

– Need for short-term measure to improve air quality

– Better access to cleaner and more efficient stoves and fuels, programs to increase the energy efficiency of houses


3. Solid waste management and community infrastructure– Inefficient and costly solid management: One of the series

concerns of ger residents

– Community infrastructure: pathways, foot bridges and community youth centers will be useful to meet day to day needs of many gercommunities

4. Research on affordable collective housing in mid-tier gers– Apartment development so far has targeted high-income residents

in the city center.

– Residents in older, established ger areas are willing to consolidate individual plots and develop low-rise collective housing: easier and less costly access to utility service


5. Fringe gers– Provision of network utility service in fringe ger area is very

expensive: Min. humanitarian level service should be provided than major expansion

– Residents are dissatisfied with the current living conditions and might want to find better housing and opportunities elsewhere

– Social integration of new migrants is fundamental issue: lessons’ from social housing in Singapore and Hong Kong may help.

6. Utility capacity expansion and reforms– Most utility service already reached capacity limits

– Capacity should be expanded along with gradual progress on housing and utility service

– Reforms of pricing and regulations of utility service is essential prerequisites


7. Further research in related sectors– Limited UB budgetary resources: Tg 30 mil – Tg 60 mil/ year

– Large subsidies in infrastructure service and slow progress in price reform

– Large investment required for expansion of key network infrastructure: Tg 30 bil – Tg 50 bil

– Other constraints: inadequate housing development, lack of mortgage financing, problems in the banking sector

– Further research on municipal finance and the banking sector may help the government to develop clearer policy direction

Closing

Development plans should compare cost and benefit in order

to choose for cost effective option

Understanding of implications of various options by ger area residents is the key

mongolia enhancing policies and practices for ger...

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