1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmmongolia.org
info@bcmongolia.org
Issue 84, September 4 2009
SPECIAL ISSUE: EUROMONEY’S 4th
ANNUAL MONGOLIA INVESTMENT FORUM
NEWS HIGHLIGHTS:
Business:
Zorigt thanks MPs for approving “visionary project”;
Agreement “not perfect but better than earlier ones”, says MPs’ committee chief;
Development vindicates “our belief in Mongolia”, says Erdene CEO;
“We have to rely on the Government,” says Speaker;
OT agreement takes pressure off beleaguered Rio boss;
Fair trade authority finds G-Mobile broke no law;
Anod Bank likely to be declared bankrupt;
Shenhua posts record profit, reiterates interest in Tavan Tolgoi;
Anomalies in new law on use of MNT;
U.S. grant for feasibility study on cement plant;
Petro Matad opts for placement to raise USD5.4 million for Mongolian projects;
New tender for airport runway repair.
Economy:
Mongolia’s journey to prosperity has just begun;
IMF representative counsels prudent spending of mining revenues;
OT agreement: WB specialist sees “enormous and immediate” benefits;
The ripple effect of the OT agreement will make big waves in the economy;
Copper near 2-week low on demand worry;
Gold prices likely to remain range-bound in short term: Fitch;
Tavan Tolgoi could begin by fall, says Erdenes CEO;
Elbegdorj proposed building gas pipeline from Russia;
World Bank group studying investment scene;
Structural changes in commercial banks by early next year;
Inspection reveals how “funds” misuse their money;
15 projects needing investment of USD 200 million prepared;
120 attend investors’ forum for western region;
Mining firms in Zambia cheer move to annul windfall tax there;
China’s curbs on overcapacity assert strength of recovery;
China to subsidize loans for raw material imports;
Coal on its way to a cleaner future.
Politics:
Official says Mongolia has settled all debts;
2. Builders worry about corruption in apartment sales;
ADB, Japan boost preschool access among Mongolia's poor;
Amnesty law helps those in sensational cases, too;
Students not prepared for the job market;
203 plots of land to be kept free of commercial use;
Students take to crime to pay for tuition;
U.S. Embassy staff provides school supplies to orphanage children;
86-year-old in Khuvsgul starts getting younger.
*Click on title to link to story.
BUSINESS
ZORIGT THANKS MPS FOR APPROVING “VISIONARY PROJECT”
Thanking Parliament for the way it “approved a visionary project for the development of Mongolia”,
Minister of Mineral Resources and Energy D.Zorigt has said that small details in the draft agreement
have to be finalized in the days before it is signed with the investors in Oyu Tolgoi. He revealed
that Parliament has instructed the working group responsible for the agreement to see what can be
done to set up a smelting facility and fresh talks on this will be held with the investors. At its
present stage the agreement allows any third party to build a smelting facility, and if this is done
mined copper will be sent there at the international market price.
Referring to the concern of MPs that the total abolition of the windfall profits tax will affect the
Government‟s ability to keep on paying the children‟s allowance, Mr. Zorigt said “at the moment
the tax was being paid only by the Erdenet copper plant, making the tax burden on it possibly the
heaviest in the world”, and added, “It was imperative to review the law given the present
economic environment.” He was optimistic that once the private sector starts getting stronger and
also as a result of the several large budget loans made available to Mongolia by international
institutions, the coffers of the Mongolia Development Fund would continue to be reasonably full.
Read more…
The USD250 million of advance payment will be paid in installments. Mongolia‟s share of the equity
investment will amount to MNT2.4 billion at the most. However, the investors will pay this on
behalf of Mongolia and repayment will be adjusted against dividends. This means that Mongolia will
start earning profits only after 2023, but not that there will be no income before that. Depending
on commodity prices and other factors, the Government hopes to earn taxes much before that.
Mr. Zorigt ruled out using the USD250 million advance payment from the investors to pay for any of
the allowances promised to the people, but said the money would finance an economic action plan
aimed at producing wealth to be distributed in the long run. For the moment, Mongolians would get
the chance of earning an average monthly salary of USD1,500.
Source: Udriin Sonin, Onoodor
AGREEMENT “NOT PERFECT BUT BETTER THAN EARLIER ONES”, SAYS MPs’ COMMITTEE CHIEF
Mr. Ts.Bayarsaikhan, Chairman of the Standing Committee on the Economy which will be
responsible for monitoring the implementation of the Oyu Tolgoi investment agreement, feels the
present revised agreement “is not perfect, but is certainly an improvement on the previous ones”.
He favors amending the minerals law endorsed in 2006 for optimum use of the country‟s mineral
resources. Erdenes MGL will be the designated holder, on behalf of the government, of the 34
percent of shares in the project and will bear all legal responsibilities as the shareholder.
Source: Ugluunii Sonin
DEVELOPMENT VINDICATES “OUR BELIEF IN MONGOLIA”, SAYS ERDENE CEO
Mr. Peter Akerley, President and CEO of Erdene Resource Development, has said the Mongolian
Parliament's approval of amendments to four mining laws, aimed at benefiting the country's mining
industry, vindicates the company‟s faith in and choice of Mongolia. He said in a statement, "Erdene
made a long-term commitment to Mongolia because of its combination of world class deposits, high
prospectivity for mineral discovery and strategic location relative to China. The amendments have
3. reinforced our belief that the country provides one of the most attractive locations globally for
investment in the mineral exploration sector. Our company will now be accelerating our efforts on
all fronts in Mongolia."
Erdene wholly owns the Zuun Mod molybdenum project, which is now advancing to the stage of a
mining license application. Drilling results at its Erdenet copper project in north-central Mongolia
have indicated the extension of both near surface oxide and deeper sulfide porphyry copper
mineralization. Besides these, Erdene, together with Xstrata Coal Canada, is involved in a
comprehensive coal generative program that evaluates numerous prospective metallurgical and high
quality thermal coal deposits throughout Mongolia.
Source: www.erdene.com
“WE HAVE TO RELY ON THE GOVERNMENT,” SAYS SPEAKER
Speaker D.Demberel has said that the special session of Parliament fulfilled the purpose for which it
had been convened. The annulment of the windfall profits tax raised the most concern among MPs.
He said the tax would continue to be in force for another year and a half, bringing USD300-400
million to the state budget.
He was of the view that the second working group had worked out a draft that was better than the
previous one. Now it is for the Government to implement the terms of the agreement. “What can
Parliament do except rely on the Government? It would be the Government‟s sole responsibility to
make sure that the agreement does not turn out to be unrewarding or underproductive.”
He felt the construction of a copper smelter should now become the State‟s responsibility.
Parliament should discuss the issue during its Autumn session.
Source: Udriin Sonin, Onoodor
OT AGREEMENT TAKES PRESSURE OFF BELEAGUERED RIO BOSS
The Mongolian Government might just have saved the neck of Rio Tinto's chief executive, Mr. Tom
Albanese, by putting back on track, after more than three years of delays, the development of the
monster Oyu Tolgoi copper-gold project, which Mr. Albanese took Rio into in 2006 in a USD1.5
billion deal with Mr. Robert Friedland's Ivanhoe.
Before the breakthrough, Mr. Albanese's tenure at Rio was under extreme pressure on a number of
fronts. First there was Rio's ill-timed Alcan acquisition in 2007. Then his dogged refusal to engage
with BHP Billiton on last year's generous takeover bid. And this year, Mr. Albanese inflamed Rio's
relationships with China by walking away from the Chinalco refinancing deal. But now he can claim
to have positioned Rio to participate in what is shaping up as one of the world's biggest copper-gold
mines. In 2006 Mr. Albanese said Rio had to go where the big ore bodies were if it was to own the
next generation of mines to feed the hungry dragon on Mongolia's doorstep, China.
The Mongolian Government will own 34 percent of Oyu Tolgoi and Ivanhoe the rest. Rio's
involvement is through an arrangement to move to 46.65 percent of Ivanhoe through placements
and the exercise of options.
Source: The Sydney Morning Herald, Forbes.com
FAIR TRADE AUTHORITY FINDS G-MOBILE BROKE NO LAW
The Fair Trade and Consumers‟ Rights Authority has given a clean chit to G-Mobile, saying it
violated no law or regulation in the whole recent episode when MobiCom, Skytel and Unitel cut off
their subscribers‟ links to G-Mobile to protest against its unilateral reduction of tariff. On the other
hand, the other three and bigger mobile operators were found to have “rudely violated” the rights
of subscribers and to have been solely responsible for the unfortunate incident. They have been
warned that any similar action in future may lead to loss of their operating licenses.
Source: Ardiin Erkh
ANOD BANK LIKELY TO BE DECLARED BANKRUPT
The Central Bank is yet to announce its decision on the offer from an organization in Sweden, made
through a company in Malaysia, to buy Anod Bank for MNT180 billion. At first sight this seems a good
offer for the troubled bank, but rumors are afloat that other considerations will prevail.
The bank, now under direct Central Bank management, has cut its work force by 68 percent and
closed down more than a dozen of its 20 branches. It is believed that announcement of Anod Bank‟s
bankruptcy is imminent. This would be a convenient and legitimate way of avoiding repaying the
4. MNT200 billion Anod owes to foreign banks.
Source: www.news.mn
SHENHUA POSTS RECORD PROFIT, REITERATES INTEREST IN TAVAN TOLGOI
China Shenhua Energy, the world's most valuable coal producer, is still interested in Mongolia's
Tavan Tolgoi, President Ling Wen has said. Shenhua is one of 10 bidders keen for a stake in what is
known as the world's biggest untapped coking coal deposit, with a coal reserve of 6.5 billion tons in
the Gobi desert. Other bidders include U.S. coal producer Peabody and mining giant BHP Billiton.
Shenhua has announced plans to invest USD39.5 billion through 2013 to expand production capacity.
The company, which has invested in coal mines in Indonesia and Australia and which also has
power, rail and port divisions, will earmark about 30-50 percent of the total investment for capital
expenditure, Chairman Zhang Xiwu told a news conference on Tuesday, without giving further
details. "This investment should help the company fund its plan to more than double its annual
capacity to 500 million tons in five years," said an analyst.
China's top coal miner last week posted record quarterly profits of USD1.3 billion on higher sales
and output. Shenhua plans to build strategic coal reserves of 30 million tons in the eastern,
southern and central parts of China, Zhang said, but gave no details on the project's scale or
timeframe. "In line with national strategy, building coal reserve bases not only secures national
energy safety, but facilitates our integrated operations."
Source: Reuters.com
ANOMALIES IN NEW LAW ON USE OF MNT
Economic and Legal Consultancy (ELC) has called attention to discrepancies in the new law on the
use of MNT in transactions. For example, the law prohibits both “making payments and settlements
and announcing and promotion in foreign currency or calculation units” without the consent of the
Central Bank, and “setting prices in foreign currency or calculation units”. ELC feels if “setting” of
prices is interpreted as “announcing and promotion” the ban is redundant. If, however, the word is
interpreted as “the internal/commercial process of coming up with an amount before announcing a
price”, then the prohibition violates the fundamental right of an individual or a legal entity to act
in a free market environment.
Another anomaly appears when the law authorizes the Government to demand correction of any
violation and, at the same time, to confiscate the revenue generated, though another section of
the law mentions fines if the violation is not remedied. No due process is set out (i.e. notice first
and then upon failure to act on the notice, sanctions following), nor is any time frame provided for
the correction. “It is likely that confiscation of revenue in foreign currency will be imposed right
away for „the first strike‟,” ELC says and advises discretion.
Source: www.mol.mn
U.S. GRANT FOR FEASIBILITY STUDY ON CEMENT PLANT
The U.S. Trade and Development Agency has awarded a grant of USD250,000 to Yalguun
International, a Mongolian-owned company, to do a feasibility study on the development of a dry
process cement plant. “Assisting with this type of infrastructure development is an important
aspect of our partnership with Mongolia,” U.S. Ambassador Mark C. Minton said at the signing
ceremony. “Strong economic growth in recent years has boosted cement consumption in Mongolia,
but the product is over 90 percent imported. Both the high demand and transportation costs have
contributed to cement's high price, which in turn have impeded growth in the country's construction
sector.”
Yalguun will use the grant to fund a feasibility study on its plans to build a plant to provide cement
to the Mongolian market. The plant has a projected annual capacity of one million metric tons,
roughly equivalent to Mongolia‟s total annual cement consumption. “This project will have a
dramatic impact on construction costs in Mongolia by building the capacity for a domestic cement
producer and increasing supplies,” said USTDA Acting Director Leocadia Zak. “USTDA is excited to
partner with Yalguun in this effort, which will bring U.S. technologies and services to bear in
reducing the cost of infrastructure development in Mongolia.”
Yalguun has selected FLSmidth, a supplier of cement processing equipment based in Bethlehem,
Pennsylvania, to perform the feasibility study for this project. FLSmidth will contribute additional
resources toward the completion of the feasibility study.
5. Source: mongolia.usembassy.gov
PETRO MATAD OPTS FOR PLACEMENT TO RAISE USD5.4 MILLION FOR MONGOLIAN PROJECTS
Petro Matad, the parent company of a group focused on oil exploration as well as future
development and production in Mongolia, raised up to USD5.4 million through placing of 23,636,785
new ordinary shares. In addition to over USD3.3 million raised through the placing of 14,706,609
shares, Petro Matad issued 5,000,000 new shares to Petrovis LLC following another issue back in
July, which raised USD1.06 million. Another 3,930,176 new shares will be issued through direct
subscriptions. The placing shares will be admitted to trading on the Alternative Investment Market
(AIM) of the London Stock Exchange on September 3.
Petro Matad has raised a total USD6 million during the summer to fund the three well drilling
programs at its core asset Block XX in Mongolia, which is slated for completion in spring 2010, as
well as conduct further exploration on Bogd Block IV and Ongi Block V for which it secured
production sharing contracts in July.
The company is currently examining quotations it received from the drilling companies operating in
the region and expects to mobilize a suitable rig to Block XX shortly. The total cost of the drilling
program and ancillary works has been budgeted at USD10 million.
Petro Matad is the Mongolian Government‟s sole contractor in Block XX, a petroleum block of
14,250 sq km located in eastern Mongolia, in close proximity to the country‟s largest producing
oilfield. Blocks IV and V are located just 500 km south of Ulaanbaatar and jointly cover 73,498 sq
km.
Source: www.petromatad.org
NEW TENDER FOR AIRPORT RUNWAY REPAIR
A fresh tender has been floated for repairs to the runway of Chinggis Khaan Airport, after a Chinese
firm chosen for the job failed to make a contract within the stipulated time with the relevant
authorities. In a related development the Government has chosen a consultant company for the
construction of the new airport in Khushigt valley and signed a contract with it.
Mongolian and Chinese aviation authorities have also reached an agreement to begin flights
between Choibalsan and Khailaar later this year.
Source: en.News.mn
ECONOMY
MONGOLIA’S JOURNEY TO PROSPERITY HAS JUST BEGUN
Investors in Mongolia are jubilant after Parliament passed a package of laws that could turn the
poor agrarian country into a powerhouse of mining and resources. To some, the vote has unlocked
the door to economic growth that will turn Mongolia into Dubai within a decade. To others, the task
of turning a rich land into a rich population is one that is fraught with pitfalls, and the journey has
only begun.
"Predicated on this decision, Mongolia will generate the highest rate of growth of GDP of any
country in the world over the next 10 years, surpassing that of Qatar, which had fulfilled that role
over the past decade and a half," said Mr. John Finigan, CEO of Mongolia's Golomt Bank. "This is
transformational."
Parliament‟s decision, which still needs presidential approval, widely seen as a formality, unlocks
USD5 billion in investment from Rio Tinto and Ivanhoe Mines in the next five years, a huge boost to
Mongolia's gross domestic product, which is running at USD5 billion a year. "Mongolia has 100
percent of its GDP available for a stimulus program, and it doesn't even have to come up with the
money," said Mr. Peter Morrow, chief executive of Khan Bank.
The World Bank estimates that by 2015, mines in southern Mongolia could be exporting enough
coking coal to satisfy Chinese demand of about 20 million tons a year, with overall coal exports of
45 million tons, up from about 5 million tons now. Coked coal could bring in revenues of USD2
billion and thermal coal another USD1 billion, on top of the USD2.3 billion a year from Oyu Tolgoi's
output of 2 million tons of 30 percent copper concentrate, the bank estimates. Government
revenues could swell further from gold, uranium and even oil.
Read more…
6. "There is potential for oil production to ramp up. It will more than cover Mongolia's domestic needs,
but there is no refining capacity here and the production is too small to hold up refining capacity,"
said the bank's senior mining specialist Graeme Hancock. "Once they find enough, it would justify
pipeline development into China."
Oyu Tolgoi is also expected to trigger a building boom. "With more companies coming, there will be
improvement in commercial real estate, the building of apartments, and that will mean overall
more jobs and activity for the people that are supplying for this mine," said Khan Bank CEO Morrow.
Not so fast, say some Mongolians -- and some foreigners. The country needs to learn to walk before
it can run. Mr. Arshad Sayed, the World Bank's country manager in Mongolia, said the country is just
emerging from its own credit crunch, in which the Government spent foreign reserves to prop up a
see-sawing currency and the banks reined in lending. "The economy had almost gone into cardiac
arrest by the beginning of this year," he said. "Now this agreement has revived it but you can't
expect it to start running immediately. It's too early to call victory right now." He said the "best
guess" for economic growth was still only 2-3 percent this year, rising to 5-7 percent or more next
year.
Expectations needed to be kept in check, said Mr. Sayed, not least among the 900,000 Mongolians in
poverty - a third of the population - who are unlikely to see much change for years.
Much of the delay in agreeing on terms for Oyu Tolgoi was down to wariness about releasing a genie
that could unleash a "curse" of mineral wealth -- corruption, inequality and inefficiency. To plan for
the future, Mongolia could set up a budget stabilization fund similar to those run by Chile and
Russia. Mr. Sayed said the Deputy Prime Minister was travelling to Chile to study such a fund and
other "fiscal responsibility measures". "History has not been kind to countries with natural
resources," Mr. Sayed said. "They don't want to make the same mistakes that other countries have
done."
Source: Reuters.com
IMF REPRESENTATIVE COUNSELS PRUDENT SPENDING OF MINING REVENUES
The Resident Representative of the IMF in Mongolia, Mr. Parmeshwar Ramlogan, has said start of
work at Oyu Tolgoi would certainly mean higher export and budget revenues for Mongolia and this
would have an impact on poverty alleviation programs. Indeed, the positive effects of the
agreement will be seen in all spheres of the national economy and will lead to long-term economic
growth.
The most important issue is, however, determining the most appropriate way to spend the revenue
thus generated. It must be remembered that minerals are nonrenewable assets and so the bonanza
will one day end, however distant that day might seem now. Spending the money on overgenerous
cash allowances might later turn out to be wasteful. Instead, Mr. Ramlogan felt, Mongolia should
concentrate on building permanent assets with long-term prospects. The temptation to spend the
money on politically expedient projects, or on showy expensive projects of dubious economic value
has to be resisted. However, vulnerable groups must not be forgotten, he said.
Source: Zuunii Medee
OT AGREEMENT: WB SPECIALIST SEES “ENORMOUS AND IMMEDIATE BENEFITS”
Mr.Graeme Hancock, Senior Mining Specialist at the World Bank Office in Mongolia, has termed the
Oyu Tolgoi project “quite challenging in its technical aspects”. Rio Tinto is one of the only five
companies in the world which can competently use the block caving technology that will have to be
applied. Thus Mongolia has made “a wise choice”.
However, when Oyu Tolgoi starts mining copper and gold, mineral products exports will make up
80% to 95% of the Mongolian economy. “Such absolute dependence on one sector carries some
risks”, Mr. Hancock warned. This aside, he feels several economic benefits of the project will be
“enormous and immediate”. Apart from the jobs created during the initial stage of infrastructure
development, over 4,000 more work places will be directly related to the mining work.
Opportunities will open up for many smaller companies. When mining starts, USD1 billion will
accrue as tax revenue annually. Besides, some 60% of the total income before tax will also be
Mongolia‟s.
Source: Onoodor
THE RIPPLE EFFECT OF THE OT AGREEMENT WILL MAKE BIG WAVES IN THE ECONOMY
7. The Oyu Tolgoi investment agreement will provide the template, long awaited by many potential as
well as current private sector investors, for much needed Foreign Direct Investment (FDI) in
Mongolia. In a letter addressed to all Members of Parliament the Business Council of Mongolia
(BCM) said in early July, “The Project is critical and the effective way for Mongolian economic
development and poverty reduction. We look forward to your leadership so that the mine will start
operation and employ thousands of Mongolians with major positive economic effects on the supply
chain nationwide.” This is now going to pass.
The ripples from the OT project will spread wider and wider and be ever expanding like when a
stone is thrown into a still pond. The fastest noticeable effect will be in the supply chain. Many
new jobs will be created such as those envisioned by Ivanhoe in its “10,000 new jobs” campaign.
These will be not only in Umnugovi province, but nationwide. Vocational training will have to be
ramped up dramatically to provide trained and qualified Mongolian workers.
The database prepared by BCM of Mining Supply Chain suppliers will soon be uploaded publicly. Its
1,153 registrants run the gamut – from current suppliers to Ivanhoe to obvious future suppliers to
Ivanhoe and the mining sector, to many less-than-obvious and potential suppliers to the mining and
other sectors. The size of this nationwide database will grow as the ripple effect caused by the
initial splash made by the OT agreement spreads.
Source: BCM NewsWire
For the full article see BCM Website, BCM News & Press
COPPER NEAR 2-WEEK LOW ON DEMAND WORRY
Copper fell to a near-two week low on September 2, as investors worried that prices in industrial
metals had overheated, while fundamentals remained weak. Copper for three-month delivery on
the London Metal Exchange was last bid in LME ring trading at USD6,082 a ton from USD6,200 at the
close on September 1 and compared with a session low at USD6,025. It was at the lowest levels
since August 21.
Global equity markets fell sharply, spooked by uncertainty over the health of financials and
economic concerns. "Demand is still ambivalent. We are getting indications of a pick-up but some of
the fundamentals aren't helping the picture," said an analyst, adding, "Part of this is locking in the
handsome gains we've had."
Copper, used in power and construction, has seen prices double this year, as a combination of
Chinese stockpiling, speculative buying and improving macro data boosted prices. Most recently,
this positive data included purchasing manager numbers from China, the first expansion in U.S.
manufacturing in more than 18 months and a rise in pending home sales.
Analysts warn that a correction in copper prices may be on the cards, with fundamentals remaining
weak. Highlighting weak demand, copper stocks rose 3,000 tons to 302,950 tons, the highest level
since early June. Analysts also say that concerns that Chinese efforts to tighten monetary policies
and avoid the chances of an overheated economic recovery could lead to price corrections.
Source: www.miningweekly.com
GOLD PRICES LIKELY TO REMAIN RANGE-BOUND IN SHORT TERM: FITCH
The price of gold is not expected to move too much in the short term, at least until the next real
shift in global markets, Fitch Ratings said on September 2. In a report on the outlook for the yellow
metal, Fitch analysts predict that while the gold price remains near historic highs, as a result of
investors seeking safety from more volatile assets, prices will likely remain "range-bound" in the
short term.
The precious metal has largely hovered around the USD920/oz to USD965/oz range over the last
three months, although it was a bit stronger on September 2, at USD977/oz, buoyed by weaker
equity markets and economic concerns.
Of course, waves of loss of confidence in the economy or weakening of the dollar will continue to
send investors scuttling back to the safety of gold, “but we don't expect it to move around much
from where it's currently been trading, until 'the next new thing' happens,” Fitch Ratings said.
Source: www.miningweekly.com
TAVAN TOLGOI COULD BEGIN BY FALL, SAYS ERDENES CEO
Interfax has quoted Mr. B.Enebish, CEO of Erdenes MGL which represents the Mongolian Government
in strategic mineral resources projects, as saying development of the Tavan Tolgoi coal field in
8. which some major Russian companies have expressed an interest, could begin next fall. Mr. Enebish
told a special edition of the news service, published to coincide with Russian President Dmitry
Medvedev's visit to Mongolia, that "an investor and partner for this project could be selected before
long. I think it might be possible to start developing Tavan Tolgoi by next fall."
The investor will be selected by tender, the first round of which has taken place. A Russian
consortium formed in November 2006 submitted its investment proposals to the Mongolian
Government in January this year.
Source: Steelguru
ELBEGDORJ PROPOSED BUILDING GAS PIPELINE FROM RUSSIA
Mongolian President Ts. Elbegdorj proposed construction of a natural-gas pipeline from Russia
during his Russian counterpart Dmitry Medvedev‟s visit last week. The two countries are seeking
various ways to expand cooperation in energy and infrastructure projects.
No decision has been taken on this particular suggestion but a bilateral strategic partnership
declaration signed during Mr. Medvedev‟s two-day visit agreed to expand projects to explore for
uranium, copper, and other mineral resources in Mongolia.
Source: Bloomberg.com
WORLD BANK GROUP STUDYING INVESTMENT SCENE
A team of experts from the World Bank‟s Doing Business group is now in Mongolia on invitation from
the National Development and Innovation Committee to study the investment environment in the
country and then to submit recommendations on how to improve it and how to encourage more
professional entrepreneurship. The group will submit its report to the Ministry of Finance.
Source: Udriin Sonin
STRUCTURAL CHANGES IN COMMERCIAL BANKS BY EARLY NEXT YEAR
Speaker of Parliament D.Demberel has said that structural changes will be made in commercial
banks after the Central Bank completes a review of the performance and potential of all the 15
commercial banks in the country. Banks with adequate competence and capacity will be allowed to
function independently, but the others may have to be merged with a bigger bank or with one
another.
The banking sector needs to be made stronger and more reliable as more and more foreign
investment is now expected. The changes are likely to be effected by early 2010.
Source: Zuunii Medee
INSPECTION REVEALS HOW “FUNDS” MISUSE THEIR MONEY
The General Professional Monitoring Agency has found after a review of the accounts and activities
of a number of funds, in both Ulaanbaatar and the provinces, that they usually spend only 30
percent of their money on the work for which they were set up. The rest goes to celebrations,
pleasure trips, and such matters unrelated to their purpose.
There are around 800 such funds in Mongolia. About 10 of them are financed from the Government
or a provincial budget. The present inspection was made because the respective governor‟s offices
failed to submit the mandatory annual report. Governors have now been instructed to stop the
operation of state budgeted funds such as Road Fund, Soum Development Fund, and Child Fund.
Source: Ardiin Erkh
15 PROJECTS NEEDING INVESTMENT OF USD200 MILLION PREPARED
The National Development and Innovation Committee has finalized 15 projects calling for over
USD200 million of investment. It plans to announce them this month so that preliminary work may
begin and investment details completed next year. The planned projects include an oil refinery, a
power plant for Tavan Tolgoi, a copper smelter, a coking coal plant, a new railway, complete
renovation of Ulaanbaatar roads, construction of a paved road to Umnugovi province, and a
chemical factory. The Government has promised all assistance and cooperation when
implementation of the projects begins.
Source: Udriin Sonin
120 ATTEND INVESTORS’ FORUM FOR WESTERN REGION
9. More than 120 participants, among them the South Korean Ambassador, attended the “Western
Region: Investors Forum-2009” in Hovd in the province of the same name on August 28.The Ministry
of Foreign Affairs and Trade and FIFTA jointly organized the forum to discuss how to attract foreign
investment to help in the region‟s development, and the opportunities and advantages the region
offered. Among the speakers were Deputy Prime Minister M.Enkhbold, five provincial Governors – of
Bayan Ulgii, Gobi Altai, Zavkhan, Uvs and Khovd provinces – the Head of the Western Economic
Region Council, the Deputy Chairman of FIFTA, Trade and Investment Policy Advisor of JICA, and
Director of Mon N Co (Coal) company.
Speakers emphasized the need for the authorities to be more investor-friendly and to take their
role in development as more than obstructive regulators. The provinces are seeking investment in
eco tourism, steel rolling, cement factory, agriculture, livestock, wool and leather processing and
irrigation.
Those interested in any of these investment areas can contact the BCM office for more information
and/or help.
Source: BCM NewsWire
MINING FIRMS IN ZAMBIA CHEER MOVE TO ANNUL WINDFALL TAX THERE
A decision not to reintroduce a windfall tax in Zambia will spur fresh investments in Africa's largest
copper producer as metals prices rally on the global market, an industry official in Lusaka has said.
In a bid to boost foreign mine investment, Zambia has announced that despite the current rise in
world metals prices it will not reintroduce the controversial windfall tax it imposed when copper
prices rose last year.
"We are confident that a well considered policy stance along the lines outlined will enable Zambia
to have a mutually equitable tax regime that recognizes national interest and provides an
atmosphere that accommodates a favorable investment climate," Mr. Nathan Chishimba, president
of the Chamber of Mines of Zambia (CMZ), which represents foreign mining firms, said. He said it
was "unfair" to mining companies for the Government to base policy considerations for the industry
only on the price of copper.
Copper mining is Zambia's economic mainstay and the mines are a major employer for many of its
12 million people.
Source: www.miningweekly.com
CHINA’S CURBS ON OVERCAPACITY ASSERT STRENGTH OF RECOVERY
Premier Wen Jiabao‟s curbs last week on steel and cement production show the Chinese
Government is confident the economy is now strong enough to tackle industrial overcapacity
created by record lending this year. China‟s State Council called on authorities to “resolutely” curb
overcapacity as the economy is still in a “critical period”. The restraints on steel and cement
output, as well as parts of the coal, glass and power industries, come as Chinese economic growth
rebounded to 7.9 percent in the second quarter and Japan, France and Germany exited recession.
China‟s benchmark Shanghai Composite Index has gained 62 percent this year.
Fixed-asset investment in China increased 33.5 percent in the first half as local banks made a
record USD1.1 trillion of new loans in the first six months. That fueled growth in steel production to
record levels in July, leading to a 12 percent drop in China‟s benchmark steel prices in the two
weeks ended August 21. The China Iron & Steel Association had said last month that the risk of a
“market glut is piling up”.
The USD585-billion stimulus package is aiding the economy, with manufacturing exhibiting signs of
recovery, the State Council, the nation‟s cabinet, said on July 27 after a meeting chaired by
Premier Wen. Authorities should “guide the healthy development of industries” through the
coordinated use of industrial, environmental, land and financial policies, it said. Controls on stock
and bond sales by companies in targeted sectors will be strengthened, according to the State
Council‟s statement.
Read more…
Rio Tinto Group, BHP Billiton Ltd. and other commodities companies fell on concern China‟s curbs
would cut demand for their ore. Rio Tinto, which got 19 percent of its sales in China last year, fell
2.8 percent in Sydney trading. BHP Billiton, the world‟s biggest mining company, declined 1.2
percent.
In addition to curbs on industrial production, Chinese regulators are planning to tighten capital
10. requirements for banks. China‟s central bank said it would carry out “dynamic fine-tuning” of the
nation‟s monetary policy. The People‟s Bank of China also said it will maintain a “moderately
loose” monetary policy and guide “appropriate” loan growth.
Source: Bloomberg.com
CHINA TO SUBSIDIZE LOANS FOR RAW MATERIAL IMPORTS
China will cut costs of raw material imports by subsidizing the interest on loans taken out to pay for
shipments, China's top planning body, the National Development and Reform Commission (NDRC),
has said. The imports include concentrates and ores of metals such as copper, nickel, lead, zinc,
uranium and chromium, as well as clean energy equipment such as solar and nuclear power
components. The NDRC did not give any information about the size of the subsidy.
The offer of import loan subsidies is the latest in a string of measures designed to support China's
industry. Other steps have included a loosening of credit, a USD585 billion stimulus package, tax
adjustments on imports and exports, and a commodity stockpiling campaign by the central and
local governments. But China has suspended its state purchases of metals, leaving many smelters
facing an oversupply of their products on the domestic market.
Source: Reuters.com
COAL ON ITS WAY TO A CLEANER FUTURE
Significant resources are being put into transforming coal into a cleaner technology, and a new era
needs to dawn for the fossil fuel which will be an irreplaceable part of the energy mix for some
time. Coal has gone from being perceived as an enabler of affordable electricity and production,
and an alternative producer of liquid fuel, to taking the blame for future catastrophes likely to be
brought about by climate change - attributed to its combustion and release of carbon dioxide (CO2)
emissions.
In a carbon-costly world, carbon capture and storage (CCS) is viewed as a vital technology, part of a
suite of emissions reduction options. Most advances in CCS technology are taking place in developed
countries, largely because they have emissions reduction targets under the Kyoto Protocol, which
acts as a driver.
CCS is not a new technology and has been used for decades to enhance oil recovery by pumping CO2
into a nearly depleted oil well, to force out the remaining oil. This has economic advantages, but,
with the exception of Norway, which has a carbon emissions tax, CCS has yet to be commercially
deployed purely for reasons related to geological storage. Despite this fact, many heavy emitters
are relying on the technology to be commercialized, as a way to reduce emissions, which they will
otherwise not be able to do, unless business stops.
Read more…
The global nature of climate change means there is a need to limit greenhouse gas emissions
worldwide, and the IEA's technology road map for CCS envisages 30 commercial-scale demonstration
plants will be needed globally by 2020. In Asia, Japan has experience with CCS research, and ran a
demonstration project from 2002 to 2007. China currently has a CCS demonstration project starting
up. It will have three phases, ending with a 400-MW plant with hydrogen production, fuel cell
power generation, hydrogen turbine combined-cycle generation and CCS by 2015. The Asian
Development Bank has agreed to provide a USD1.25-million technical assistance loan to promote
CCS demonstration projects in China.
One of the major concerns related to CCS is the safety of the technology, as long-term storage of
CO2 is relatively new. Fears exist that CO2 could leak into the atmosphere; either from the storage
location, or from pipelines transporting CO2 to storage location, causing suffocation. Scientists say
it is unlikely that leaks will occur, but, even if they do, they will be slow leaks that could be
resealed. There is also no risk of explosion, as with methane.
Source: www.miningweekly.com
POLITICS
OFFICIAL SAYS MONGOLIA HAS SETTLED ALL DEBTS
Mr. D.Angar, Chairman of the Debt Management Group at the Ministry of Finance, hopes the
differences over the status of the financial debt to Russia will be resolved by the end of the year.
11. Explaining the history of the issue, he said the debt arose in 1973, when the Governments of the
two countries established Mongolrostsvetmet and Mongolia‟s share of the authorized capital was
shown as a loan from Russia. In 2003, the Prime Ministers of the two countries signed a
memorandum of understanding on the larger matter of what is called “the grand debt to Russia”,
which included repayment of the Mongolrostsvetmet loan.
Mr. Angar said Mongolia has observed all the terms of the memorandum and was sure of its position
when the Ministry of Finance wrote to its counterpart in Russia that the Mongolrostsvetmet debt
issue had been completely settled. The Russian side has a different perception of the matter and
this discrepancy now awaits resolution.
Source: Udriin Sonin
BUILDERS WORRY ABOUT CORRUPTION IN APARTMENT SALES
Construction companies are not happy that the Government wants to use the Apartment Financing
Corporation to execute its program to buy 4,000 apartments and then sell them to its own
employees. Around 80 companies involved in the program worry that the whole process will be
marked by favoritism and corruption. A senior functionary of the National Construction Association
has told media that they would prefer all transactions to be done through commercial banks,
keeping the Government organization away. He favored the suggestion to set up a “4,000
apartment register” which will allow people to choose their apartments and then take loans from
banks. The loans will be given against the apartment so the repayment period may be fixed at 10
years.
Source: Undesnii Shuudan
ADB, JAPAN BOOST PRESCHOOL ACCESS AMONG MONGOLIA’S POOR
The Asian Development Bank is partnering with Japan to fund a pilot project aimed at improving
access to preschool education among the poor in Mongolia. ADB has said the Japan Fund for Poverty
Reduction, which it is administering, was extending a grant of USD2.89 million to help rural,
nomadic and migrant children aged 3-6 years to get preschool education. The project seeks to
develop financially sustainable programs in four provinces with training of caregivers, preschool
teachers and support provided for mobile learning.
A total of 400 equipped kindergartens would also be established in the ger districts of Ulaanbaatar,
while social workers would get specialist training in early childhood education. ADB education
specialist Jazira Asanova said the Mongolian Government currently has no comprehensive system for
delivering quality preschool education to rural, nomadic ethnic minority children. The Government
would provide counterpart funding equivalent to USD133,000, while local governments and
communities would contribute logistics worthUSD67,000.
Source: www.earthtimes.org
AMNESTY LAW HELPS THOSE IN SENSATIONAL CASES, TOO
The amnesty law has come to the rescue of some 1,200 people beyond those convicted of crimes
related to the July 1 incidents. They include several figures involved in cases that made headlines.
They include Ts.Chimedtseren, the accountant at Savings Bank who misappropriated MNT14.2
billion over a period of seven years. Now three years of his ten-year prison term has been
commuted. B.Enkhbat, who led an ultra-nationalist organization and fatally shot his daughter‟s
boyfriend because he studied in China, was sentenced to 25 years in prison. Under the amnesty his
sentence has been reduced by two years.
General P.Dash, former director of the Emergency Authority, was sentenced to four years and six
months‟ imprisonment for abusing his position to cause the state a loss of more than MNT521
million. He has been released along with a former Minister for Emergency, S.Otgonbayar.
O.Chuluunbat, former president of the Central Bank and now an MP, has not been as lucky as the
charges against him for abusing power and causing loss to the state are still being investigated.
Source: Ardiin Erkh
STUDENTS NOT PREPARED FOR THE JOB MARKET
The percentage of the Mongolian population that continues studies after finishing school is higher
than that in the USA or Russia. The problem is that many of the 34,000 students entering 151
universities and institutes this year will find when they graduate that they do not meet employers‟
12. requirements and so they will be constantly facing uncertainty about job prospects. There is no
report by the National Statistics Office on how many Mongolians can make no proper use of the
skills they learned or the disciplines they studied. Meanwhile unemployment rises and so do
disguised unemployment and underutilization of human resources.
Source: Zuunii Medee
203 PLOTS OF LAND TO BE KEPT FREE OF COMMERCIAL USE
The Civil Representatives Assembly will soon ratify a list of 203 plots covering 8,767 acres in
Ulaanbaatar which would not be allowed to be commercially used in any manner. These include 53
sites that are already demarcated as green areas, public areas, hospitals, schools and protected
water sources. Recently, 11 plots that were surreptitiously sold have been returned to the schools
and kindergartens of which they were part.
Source: www.news.mn
STUDENTS TAKE TO CRIME TO PAY FOR TUITION
A new academic year has just begun and observers of the social scene are worried about reports of
how students are resorting to various ways to earn money to pay for their education. The economic
situation is too grim to allow many parents to afford the rising tuition fees, so students are left to
fend for themselves. With few legitimate ways open to earn money, many have joined the drug
trade or criminal gangs, while for the women, the biggest temptation is to go for dancing in night
clubs, more straightforward prostitution, or offering sexual gratification through TV chats.
Source: Zuunii Medee
U.S. EMBASSY STAFF PROVIDES SCHOOL SUPPLIES TO ORPHANGE CHILDREN
The Consular Section of the U.S. Embassy has provided school supplies worth more than MNT300,000
to the children of the Verbist Center Orphanage, including notebooks, colored paper, pens, pencils,
erasers and pencil cases for each child. The money was raised from the U.S. Embassy community.
The Consular Section has formed a special relationship with the orphanage as part of a community
outreach program.
Volunteers from the section, with help from the children, had some time ago completely re-
landscaped the playground at the orphanage by refurbishing play equipment, removing rocks and
broken glass and planting flowers and grass. This project was funded by a MNT725,000 grant from
IWAM to purchase dirt, sand, seeds and plants. Several hundred man-hours of voluntary labor over
three work days were required to complete the project.
Source: mongolia.usembassy.gov
86-YEAR-OLD IN KHUVSGUL STARTS GETTING YOUNGER
An 86-year-old reindeer herder in Khuvsgul province, A.Dorjkhand, has caused a sensation by aging
backward. A Mongolian State Honored Figure of Culture, S.Oyun, who investigated the
phenomenon, has confirmed that the man‟s grey hair has begun to turn black and more of it is
growing. Four molars have reappeared, and his failing eyesight is once again as keen as a young
person‟s.
The rejuvenation process began about two years ago. According to S.Oyun, Dorjkhand has been
serving the community as a traditional medicine man for long and knows more than 200 kinds of
medicinal plants and herbs that grow in the taiga. He would not reveal just which of these have
helped him reverse the natural order of things, but admits that he is not recovering his hearing
powers. He is locally revered for his ability to see into the future with the help of the shoulder
blade of a sheep set on fire.
Source: Montsame, Zuunii Medee
ANNOUNCEMENTS
“MM TODAY ON MNB-TV
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BCM on “MM Today”. This English news program is aired every Friday for 10 minutes and is
13. scheduled for 9:15 PM tonight. Tune in to watch this program that reports stories from today‟s BCM
NewsWire.
SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended August 28, 2009, trading activity on the Mongolian Stock Exchange (MSE)
totaled 1,225,400 shares with 35 companies traded. Total market value of transactions was MNT
222.2 million. Total market capitalization of the 358 stock companies listed on the MSE was MNT
509.3 billion, and increased by MNT 21. 1 billion or 4.7% from the previous week.
The Top-20 Index increased by 416.21 points or 8.2% compared to the previous week, closing at
5,523.18 points. The MSE Composite Index increased by 116.34 points or 4.5% compared to the
previous week, closing at 2,685.64 points.
Most active stocks traded were: HB oil (217,400 shares), Naco tulsh (131,300 shares), Khuh gan
(26,000 shares), Genco tur buro (19,700 shares), and APU (15,000 shares).
Major share price percentage gainers were: HB oil (32%), UB buk (23.7%), Khuh gan (21%), APU
(16%) and Genco tur buro (14%). Major share price percentage losers were: Takhi Co (26.8 %),
Erdenet khuns (14.3%), Mongol shevro (8.6 %), Shariin gol (8.2 %), and Naco tulsh(3.2%).
14. INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
July 31, 2009 *4.9% [source: NSOM]
*Year over year (yoy)
CENTRAL BANK POLICY LOAN RATE
December 31, 2008 9.75% [source: IMF]
March 11, 2009 14.00% [source: IMF]
May 12, 2009 12.75% [source: IMF]
June 12, 2009 to present 11.50% [source: IMF]
CURRENCY RATES - SEPTEMBER 3, 2009
Currency name Currency Rate
US dollars USD 1419.12
Euro EUR 2017.14
Japanese yen JPY 15.32
British pound GBP 2287.62
Hong Kong dollar HKD 183.08
Chinese yuan CNY 207.75
Russian ruble RUB 44.34
South Korean won KRW 1.14
Disclaimer: Except for reporting on BCM‟s activities, all information in the BCM NewsWire is
selected from various news sources. Opinions are those of the respective news sources.