Mongolia will join Genghis Khan Sovereign Wealth Fund and Data Centre Frenzy

Long-reliant on mining, Mongolia is planning to build a data center with renewable energy to prepare its first sovereign wealth fund aimed at directing mineral wealth towards social welfare and infrastructure.

“We have huge lands with a climate that is very favorable for activities such as data centres (hosting) data centres,” Sovereign Fund CEO Temuulen Bayara told CNBC, a bystander at the Milken Institute Asia Summit in Singapore on Friday.

Inland East Asian countries are developing economic belts exclusively for data centres, she adds, referring to Hunnu cities, which are considered clever and sustainable urban cities.

The Chinggis Khaan Sovereign Wealth Fund, which was established by law last April, has a $1.4 billion reserve and is looking to capitalize on global demand for computing power and clean energy. Its investment strategy is still pending government review and final approval.

Many Asian countries are accelerating their efforts to develop data centers this year amid growing demand for cloud computing and artificial intelligence. Japan, Singapore and Malaysia are stepping up their investments to build capacity in their data centres.

The recent explosion in AI workloads requires vast computing power, power, cooling and networking infrastructure. Goldman Sachs expects global electricity demand from data centers to rise 50% by 2027 and 165% by 2030.

Apart from data centers, some of the fund’s returns will also be used to build “mega-scale” renewable energy power grids and projects as part of a country’s efforts to boost green energy exports to neighboring countries, Bayara said. Mongolia, caught between Russia and China, has recently upgraded its relationship with both superpowers to the level of “comprehensive strategic partnerships.”

The plan comes as the Mongolian government has pledged to increase the share of renewable energy, particularly wind and solar, in the country’s electricity capacity by 2030, from 18.3% in 2030.

The fund’s investment strategy focuses on combating the risks associated with product price fluctuations, as the source of funds is “highly dependent on the product,” Bayaraa said. The Chinggis Fund is managed by Erdenes Mongol, a government-owned holding company that owns a share of the country’s mining assets.

A sparsely populated country with only 3.5 million residents benefit from the price of a rich supply of important minerals, including coal, copper, uranium and rare earth elements.

The Mongol government is increasing pressure to distribute mineral wealth among its people and end corruption in the sector. In an anti-corruption protest in the capital, Uraanbaatar was forced to resign from Oyun Elden Luvsannamsrai as prime minister earlier this year.

“People didn’t feel that they were contributing to wealth and improving their livelihoods while eroding natural resources. But now sovereign wealth funds are positioned in a way that rebuilds that trust,” Byara said.

The fund will play a central role in the country’s development plan, which aims to provide more transparency and equity in the distribution of wealth. She added that mineral wealth was drawn in and “managed and supported in a ring fenced way to support people, educational needs, educational, healthcare and housing needs.”

“The key task is to build a governance model (for the fund),” she added. Citizens will have access to the details of the fund’s source, allocation and balance app. “It’s a highly targeted intervention to expand the middle class and promote participation in the labour market,” she said.

The fund leader plans to hire members of the Mongolian diaspora with experience in the banking, investment and asset management industries, and is returning to help manage the fund.

“For a long time, Mongolia has been attracting investments in Mongolia. On the first day we are becoming investors contributing to the global agenda,” Bayara said.