Mongolia is taking part within the knowledge heart insanity with the sovereign wealth fund Chinggis Khaan

A view from the statue of Genghis Khan in Ulaanbaatar, Mongolia, on April 4, 2022.

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Mongolia, which has long relied 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 into social welfare and infrastructure.

“We have a huge country with a very favorable climate for activities like [hosting] Data centers,” Temuulen Bayaraa, CEO of the sovereign wealth fund, told CNBC on Friday on the sidelines of the Milken Institute Asia Summit in Singapore.

The landlocked East Asian country is developing special economic zones for data centers, she added, referring to the city of Hunnu, which is envisioned as a smart, sustainable urban city.

The Chinggis Khaan Sovereign Wealth Fund, legally established in April last year, has $1.4 billion in reserves and seeks to meet global demand for computing power and clean energy. The investment strategy still needs to be reviewed and finally approved by the government.

Many Asian countries have accelerated their data center development efforts this year amid growing demand for cloud computing and artificial intelligence. Japan, Singapore and Malaysia have increased their investments in expanding their data center capacities.

The recent explosion in AI workloads worldwide requires massive computing power, power, cooling and network infrastructure. Goldman Sachs expects global data center power demand to increase by 50% by 2027 and 165% by 2030.

Aside from data centers, part of the fund’s proceeds will also be used to build “megascale” power grids and renewable energy projects, as part of the country’s efforts to boost green energy exports to neighboring countries, Bayaraa said. Sandwiched between Russia and China, Mongolia has expanded its relations with both superpowers to the level of “comprehensive strategic partnerships” in recent years.

The plan is based on the Mongolian government’s commitment to increase the share of renewable energy, particularly wind and solar, in the country’s electricity capacity to 30% by 2030, up from 18.3% in 2023.

The fund’s investment strategies will also focus on addressing risks associated with commodity price fluctuations, Bayaraa said, as the funds’ sources are “very heavily dependent on commodities.” The Chinggis Fund is managed by Erdenes Mongol, a state-owned holding company that owns a share of the country’s mining assets.

The sparsely populated country of almost 3.5 million people is benefiting from a boom in prices for its rich reserves of important minerals, including coal, copper, uranium and rare earth elements.

TOPSHOT – A general aerial view shows houses and yurts in Ulaanbaatar, Mongolia on June 25, 2024.

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Restore trust

The Mongolian government is under increasing pressure to distribute its natural resources among its population and to end corruption in the sector. Anti-corruption protests in the capital Ulaanbaatar forced Oyun-Erdene Luvsannamsrai to resign as prime minister earlier this year.

“People did not feel that mining was contributing to prosperity and improving their livelihoods while simultaneously eroding natural resources. But now the sovereign wealth fund is positioned to rebuild that trust,” Bayaraa said.

The fund will play a central role in the country’s development plan, which aims to ensure greater transparency and equity in wealth distribution, she added, by including natural resources that will be “managed and disbursed in a ring-fenced manner to support people in their educational, financing, educational, health and housing needs.”

“The critical work is to build a governance model [for the fund]” she added. Citizens can access details of the fund’s sources, allocation and balance through an app. “It is a very targeted intervention to expand the middle class and promote labor force participation,” she said.

The head of the fund plans to hire members of the Mongolian diaspora with experience in the banking, investment and asset management industries to return home and help manage the fund.

“Mongolia has been attracting investment to Mongolia for a long time. On day one, we will become an investor contributing to the global agenda,” Bayaraa said.