08.01.2010, NEWSWIRE, Issue 100

BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
Info@bcmongolia.org
Issue 100, January 8 2010
NEWS HIGHLIGHTS:
Business:
 SouthGobi Energy set to raise USD400 million in Hong Kong IPO;
 China National Gold’s unit ties up with Monnis for gold exploration;
 SouthGobi aims to boost coal production sixfold;
 SouthGobi sells Indonesian coal project to focus on Mongolia;
 Highlights of Entrée Gold activities in 2009;
 Ivanhoe invites new options, keeps others guessing;
 SouthGobi appoints new Vice President, Corporate Development;
 EBRD plans equity investment in Petro Matad;
 ARMZ questions Khan directors’ rationale behind rejecting offer;
 Areva and Mitsubishi sign agreement on uranium exploration in Mongolia;
 Cameco closes the book on Centerra;
 Police unhappy at former Anod Bank Director’s release on bail;
 MPs to investigate foreign deals of two banks in liquidation;
 ELC establishes successor firm with Australian-based firm;
 Multiple scenario planning will help miners survive volatility;
 U.S. telecom company fined for bribing Chinese, Mongolian officials;
 Corporate transparency gaining ground;
 Russia to engage with investors on mineral law;
 Chinalco to buy further mining assets abroad.
Economy:
 Parliament rejects President’s veto of budget;
 Government dedicates 2010 to business reforms;
 PM calls for realistic plans and policies;
 Central Bank chief says financial system is stable;
 Weather concerns lift copper to new highs;
 Mongolia gets support from ADB, Japan to resolve banking problems;
 Work reports on Free Trade Zones reviewed;
 First privately built power plant coming up in Khuvsgul;
 Ambassador Addleton sees opportunities for American business;
 Temasek, CIC lead sovereign wealth funds into Mongolia;
 Mining Report sees strong growth in 2011;
 Mongolia seeks new foreign investors to balance China and Russia;
 Working group to examine electricity and heating tariffs increase;
 First installment of Human Development Fund allowance likely soon;
 Donors against the grant of allowances to all citizens, reminds official;
 New insurance payment rates announced;
 Korea’s bourse operator mulls setting up joint stock exchange in Mongolia;
 Japan, Mongolia to study free trade pact;
 Customs Authority claims its work getting better;
 Agreements will fulfill our economic potential, says President;
 Asia well placed to keep riding recovery, but not at pace of 2009;
 China’s Central Bank urged to invest forex reserves in resources;
 Central bankers say it with gold;
 Russia sheds debt burden of Soviet era, likely to issue bonds;
 China dethrones Germany as top goods exporter.

Politics:
 Mongolia carries on with its democratic breakthrough;
 Government approves national program to protect consumer rights;
 India helping Mongolia open its first major IT outsourcing center;
 Ex-President Enkhbayar visits South Korea to “attract investment”;
 Province Governors resent being “a soldier without a gun”;
 “People’s Heroes” will be chosen this year, too;
 Roy Dongen, two others receive first Altan Gerege awards;
 Rush to the altar before 4 allowances are stopped;
Impunity and injustice are legacy of July riots, says Amnesty International;
injustice are legacy of July riots, says Amnesty International;
 Mongolia-registered ship was “a rogue vessel”, probe into sinking reveals.
BUSINESS
SOUTHGOBI ENERGY SET TO RAISE USD400 MILLION IN HONG KONG IPO
Canada-listed coal miner SouthGobi Energy Resources plans to raise about USD400 million from a
Hong Kong initial public offering this month. The company, which started IPO premarketing on
January 4, is focused on expanding its coal production capacity in Mongolia, centered on its Ovoot
Tolgoi mine. It said it would use the proceeds of the share sale to expand production capacity and
access regional infrastructure.
According to a term sheet, 75 percent of the offering would be allocated to institutional investors,
15 percent to Canadian investors and 10 percent to Hong Kong retail investors. The company will
kick off a marketing road show on January 11, aiming to list on January 29.
Source: Reuters.com
CHINA NATIONAL GOLD’S UNIT TIES UP WITH MONNIS FOR GOLD EXPLORATION
Jinshan Gold Mines Inc. has entered into a memorandum of understanding with Monnis International
Inc. to jointly explore and develop gold projects in Mongolia. Monnis was established in 1998 as an
official distributor of Nissan Motor Co. in Mongolia. It has since expanded its activities and is now
active in the fields of geology, mining, energy, construction, international freight forwarding,
foreign trade, automotive service, communication, banking, and air industry, with over 600
employees.
Jinshan and Monnis will have 51 per cent and 49 per cent equity interest, respectively, in the
acquired projects. Jinshan will control and manage them and believes the partnership will allow it a
larger presence in Mongolia. Jinshan is listed on the Toronto Stock Exchange.
China National Gold, a Chinese state-owned enterprise and the largest gold producer in China, owns
approximately 41.2% of Jinshan's outstanding shares and continues to demonstrate its commitment
to Jinshan.
Source: Bernama.com, www.jinshanmines.com
SOUTHGOBI AIMS TO BOOST COAL PRODUCTION SIXFOLD
SouthGobi Energy Resources, 79 percent-owned by Ivanhoe Mines Ltd., aims to boost its coal
production in the Gobi desert by more than six-fold to 8 million metric tons by 2012, CEO Alexander
Molyneux has said at a media briefing at the Ovoot Tolgoi mine, about 950 km south of Ulaanbaatar.
At least USD500 million is needed for SouthGobi‘s development, which includes building a 40-km
railway track to the Chinese border, Mr. Molyneux said.
―The increases in production talked about by the company are executable and achievable,‖ said Mr.
Alisher Djumanov, managing partner of Singapore-based Eurasia Capital Management, which has
about USD100 million in investments in Central Asia and Mongolia, mainly in natural resources.
―Developing a rail link to the border is a good way to reduce overheads. One of the key issues they
have is how to get their products to customers in China.‖
The mine started production this year to supply power producers and steelmakers. This year Ovoot
Tolgoi produced 1.2 million tons of coal, currently carried by truck across arid dirt tracks to rail
links in the Chinese province of Inner Mongolia. The mine has 114.1 million tons of reserves. ―This is
our first year of production at the mine and we are now planning to increase this rapidly,‖ Mr.
Molyneux said.
Read more…

―Mongolia is a new frontier for coal,‖ said Mr. Djumanov. ―I have not seen other figures, but the
government estimates the country may have 100 billion tons of coal.‖
SouthGobi is seeking institutional investors to fund its operations in Mongolia, Mr. Molyneux said,
adding that the spending estimate for the next three years is still preliminary. The company has
secured USD500 million of financing from China Investment Corp., the country‘s sovereign wealth
fund.
Source: Bloomberg.com
SOUTHGOBI SELLS INDONESIAN COAL PROJECT TO FOCUS ON MONGOLIA
SouthGobi Energy Resources has closed the sale of its Mamahak coal project to Kangaroo Resources.
SouthGobi announced in October that it had suspended further development work at Mamahak
pending a more detailed operational review. Following various approaches and with the company‘s
strategic focus on Mongolia, it was determined that the project could be best developed and
operated by an Indonesian focused coal mining company. ―The sale will enable SouthGobi
management to further focus on our Mongolian operations and projects,‖ a company statement
said.
Source: www.southgobi.com
HIGHLIGHTS OF ENTRÉE GOLD ACTIVITIES IN 2009
The exploration and corporate highlights of Entrée Gold Inc. in 2009 include signing of the long-
awaited Oyu Tolgoi Investment Agreement between the Mongolian Government and Entrée‘s joint
venture partner, Ivanhoe Mines Ltd. and largest shareholder, Rio Tinto; the conversion of Entrée‘s
Shivee Tolgoi and Javhlant exploration licenses into mining licenses; and continued exploration of
Togoot coal deposits through additional drilling and the preparation of a Mongolian resource report
in advance of a mining license application.
The successful conclusion to negotiations that culminated in the signing of the Oyu Tolgoi
Investment Agreement in October 2009 provides stability to Entrée‘s Lookout Hill portion of the Oyu
Tolgoi project and sets the stage for future project development. Entrée‘s Hugo North Extension
and Heruga deposits are key elements for consideration as the Oyu Tolgoi project advances towards
production. Ivanhoe Mines is preparing an updated Integrated Development Plan that is expected
to provide a projected timeline and work program related to the construction and completion of
the Oyu Tolgoi mining complex.
Exploration programs are being prepared for 2010 to seek new mineralization on Entrée‘s 100%-
owned western portion of the Shivee Tolgoi mining license. Exploration was temporarily suspended
in 2009 to accommodate the protracted mining license conversion process. Entrée may now
continue investigating the potential of this prospective region of Lookout Hill without facing
imminent license expiry.
Read more…
On Entrée‘s 100%-owned Togoot exploration license, in-fill drilling continued at the Nomkhon Bohr
coal deposit in 2009. Drill testing of other coal targets in the northwest corner of the Togoot
exploration license was also conducted. A resource report is being prepared by Mongolian
consultants in collaboration with Entrée‘s technical team in preparation for submission of an
application to convert all or part of Togoot to a mining license.
Abolition of the 68% windfall tax, to take effect in January 2011, signaled an awareness that the
mining industry has an important role to play as Mongolia recovers from the economic crisis. The
industry welcomed this decision as the tax was perceived to be a deterrent to future mine
exploration and development by both domestic and foreign investors.
Further studies along the Oyu Tolgoi mineralized trend indicate several target areas could be drill
tested in order to expand known resources. Geophysical data gathered over the areas surrounding
the Heruga and Hugo North Extension deposits indicate promising trends suggesting the continuation
of mineralization associated with each deposit. Approximately 8 km of relatively untested ground
lies to north of the Hugo North Extension on the Shivee Tolgoi mining license, between the Hugo
North Extension deposit and the near surface Ulaan Khud copper showing.
Shivee West is geologically similar to the setting of the Oyu Tolgoi deposits. It is common in very
large porphyry copper-gold systems, such as those found in South America, for mineralization to
occur along parallel structural trends. Strong geophysical signatures, in combination with copper-
gold-molybdenum geochemical evidence, make Shivee West highly prospective.
Source: Entrée Gold Inc.

IVANHOE INVITES NEW OPTIONS, KEEPS OTHERS GUESSING
Colorful dealmaker Robert Friedland is seeking new options for his current venture, Ivanhoe Mines,
as it starts building a massive copper-gold mine near Mongolia's border with resource-hungry China.
The company, which has partnered with mining giant Rio Tinto in Mongolia, has hired investment
bankers to look at possibilities "to further enhance shareholder value". That might include offering
new shares or bonds, borrowing money or selling a subsidiary, as well as "various corporate
transactions". The company stressed that no specific deal was under consideration.
Analysts were reluctant to speculate on whether the statement meant that Ivanhoe could go on the
block, but one analyst said the language of the statement left the door open for a sale. A source
close to the Vancouver-based company also did not rule out the possibility of a sale, saying all
options were possible.
"With the excellent progress that now is being made on moving the Oyu Tolgoi copper and gold
project toward production, and with the strong performance of our SouthGobi Energy coal
subsidiary in Mongolia ... this is the right time to explore options," Mr. Friedland, Ivanhoe's
chairman, said in the statement.
Source: Reuters.com
SOUTHGOBI APPOINTS NEW VICE PRESIDENT, CORPORATE DEVELOPMENT
SouthGobi Energy Resources Ltd. has appointed Mr. Tony Pearson as its new Vice President,
Corporate Development, effective February 8, 2010. Mr. Pearson will be responsible for business
and corporate development initiatives. He currently works for the Australian Securities &
Investments Commission and previously held senior positions with Citigroup's Metals and Mining
Investment Banking team when he advised mining clients on capital raisings, mergers, acquisitions
and divestitures, with particular responsibility for Asian and Australian mining companies.
SouthGobi CEO Alexander Molyneux said Mr. Pearson‘s ―extensive experience in the mining industry,
together with his strong background in infrastructure financing, make him a valuable addition to our
company as we expand our coal-mining operations.‖
Website: www.southgobi.com
EBRD PLANS EQUITY INVESTMENT IN PETRO MATAD
The European Bank for Reconstruction and Development (EBRD) will be making a USD6 million
equity investment in Petro Matad Limited, the first Mongolian oil exploration and production
company. The majority share in the company is owned by Petrovis LLC, the largest oil products
distributor in Mongolia. Petro Matad holds production sharing contracts with the Government,
entitling the company to operate on three petroleum blocks, including the company‘s main asset
Block XX, located in Tamsag Basin, in the far eastern part of Mongolia, near the Chinese border.
The EBRD investment will be used to finance the drilling of three wells in the block, as well as to
support Petro Matad‘s further exploration in the recently awarded Blocks IV and V. The EBRD will
purchase approximately 17 per cent of Petro Matad‘s newly issued shares and will have a seat on
the company‘s Board.
―This transaction will strengthen the role of the private sector in the Mongolian economy, and will
help reduce Mongolia‘s energy dependency on external providers... In addition, the project will
bring new and improved environmental and corporate governance standards,‖ said Mr. Kevin Bortz,
EBRD Director for Natural Resources. On his part, Mr. Gordon Toll, Chairman of Petro Matad, said,
―Petro Matad takes pride in the fact our company has received such investment from the EBRD,
and this marks a meaningful path forward for the fast developing Mongolian private sector. ‖
Source: The FINANCIAL
ARMZ QUESTIONS KHAN DIRECTORS’ RATIONALE BEHIND REJECTING OFFER
JSC Atomredmetzoloto (ARMZ) has said the circular issued by the board of directors of Khan
Resources ―provides very little new information to support its recommendation to shareholders that
they should reject our offer‖ to acquire all of the issued and outstanding common shares of Khan
for an all-cash consideration of CAD0.65 per share. The offer remains open until 5:00 p.m. on
February 1, 2010. Mr. Vadim Zhivov, Director General of ARMZ, said, "Our offer represents full and
fair value for Khan shares and fully considers the economics of the Dornod Uranium Property in
Mongolia and the significant political and licensing risks inherent in its development."
Responding to some of the "Reasons for Rejection" mentioned by Khan's board of directors in the
circular, AEMZ has said ―the value per pound of resource attributable to Khan implied by the offer
compares favorably with the average value per pound implied by the four most recent transactions
involving exploration and development stage uranium companies, including the acquisition of

Western Prospector Group Ltd. by China National Nuclear Corporation (CNNC) which was
announced prior to the suspension of all uranium mining and exploration licenses by the
Government of Mongolia‖. Calling Net Asset Value (NAV) ―a theoretical valuation methodology‖
ARMZ said ―transactions involving unfinanced exploration and development stage projects with
unknown ultimate project ownership and an uncertain regulatory and licensing environment are
generally completed at a significant discount to NAV‖.
ARMZ agreed with Khan's board of directors that ―the challenges and uncertainty in Mongolia are
very real and unique issues facing Khan have a material impact on the value of the Khan shares‖,
but rejected any suggestion that the offer is "opportunistic".
Source: www.sedar.com
AREVA AND MITSUBISHI SIGN AGREEMENT ON URANIUM EXPLORATION IN MONGOLIA
Areva and Mitsubishi have agreed on terms for a partnership. A statement from the French state-
owned nuclear power group says it has invited Mitsubishi Corp. of Japan to participate in the
development of its uranium exploration assets in Mongolia, with the possibility of acquiring 34
percent of Areva Mongol over time. This agreement represents a substantial step in the
development of uranium resources in Mongolia. Through their joint efforts, Areva and Mitsubishi
Corporation will create value in the exploration and future exploitation of Mongolian uranium
resources based on proven expertise, professionalism and sustainable development practices.
Mitsubishi Corporation, Japan‘s largest general trading company, is seeking to reinforce its assets in
the uranium mining industry, while Areva Mongol has been conducting successful exploration
activities in Mongolia for more than 10 years and currently holds 36 uranium exploration licenses on
more than 14,000 sq. km.
Among the different areas to be explored, Dornogobi province has demonstrated a high potential
for uranium. This zone is the primary target with respect to a future exploitation. Future drilling
campaigns will be dedicated to identify new possible uranium resources.
Source: press@areva.com
CAMECO CLOSES THE BOOK ON CENTERRA
Cameco Corporation has sold 88.6 million shares in Centerra Gold for CAD871 million, and made
arrangements to transfer another 25.3 million shares it owns in the gold miner to the Government
of Kyrgyzstan. After the transfer is completed, Cameco will have sold its entire interest in
Centerra, ending its participation in the gold-mining business and freeing the company to focus on
its core uranium-mining and nuclear-energy businesses.
In the April agreement, which followed years of negotiations and delays, Centerra and Cameco
agreed to give the Kyrgyz Government an increased share in Centerra, in exchange for security of
tenure, a bigger concession area and a simplified, fixed tax regime of 14% of the gross revenue for
the Kumtor mine.
Cameco spun out its gold assets into Centerra in 2004. Besides Kumtor, Centerra also owns and
operates the Boroo mine, in Mongolia, and is planning a new operation, Gatsuurt, also in Mongolia.
Source: www.miningweekly.com
POLICE UNHAPPY AT FORMER ANOD BANK DIRECTOR’S RELEASE ON BAIL
The Police are unhappy that the Bayanzurkh district court recently granted bail to Mr. L.Ulambayar,
former Director of Anod Bank, without notifying the investigators. More than a year after he had
been named as a suspect in the Anod Bank case, Mr. Ulambayar was arrested on December 15 last
when he landed in Chinggis Khaan airport after failing to find asylum in the USA. His release on bail
came even though the charge against him is one of causing the state losses amounting to billions of
MNT. Mr. Ulambayar prayed for bail on health grounds and is reported to be receiving private
treatment at home.
Police contest the judge‘s argument that the three other suspects in the case are also free on bail.
They say the charges against Mr. Ulambayar are of a completely different nature. The other three
had to mortgage their cars and residences in order to raise the bail amount after being in jail for
more than six months, while Mr. Ulambayar had to pay only MNT3 million after he had been in
prison for 14 days. Mr. Ulambayar, against whom a warrant had been issued by Interpol, has said he
was waiting for a decision by U.S. officials on his request for political asylum. According to the
police, he was repeatedly notified that no asylum could be considered for a person wanted by
Interpol.
Source: en.News.mn

MPs TO INVESTIGATE FOREIGN DEALS OF TWO BANKS IN LIQUIDATION
The Parliamentary Standing Committee on Security and Foreign Policy has set up, at the bidding of
Parliament Speaker D.Demberel, a working group to investigate the foreign transactions of the two
banks that are being liquidated. Its members, MPs Kh.Narankhuu and D.Khayankhyarvaa, have been
asked to specially study how the liquidation of Anod and Zoos banks has affected the financial
system as a whole and how much damage their deals with Nomaring and Itochu companies caused.
The head of the Standing Committee, Mr. Z.Enkhbold, said the study had been found necessary
after the Central Bank did not provide information on the foreign relations of the two banks.
Source: en.News.mn
ELC ESTABLISHES SUCCESSOR FIRM WITH AUSTRALIAN-BASED FIRM
Economic and Legal Consultancy (ELC), run by Mr. Bayar Budragchaa in Mongolia since 2000, has
now been succeeded by Budragchaa Kennedy and Associates after a partnership between ELC and
Michael I. Kennedy & Associates was established.
Mr. Bayar, Head of BCM's Legislative Working Group, was named one of the world's 262 leading
mining lawyers in 2009. MIKA was established by Mr. Michael Kennedy, the other Governing Partner
of the new firm, in Cambodia in 1995 and in the Lao PDR in 1997 with its base in Melbourne,
Australia. Another partner is Mrs. Taivan Natsagdorj, who served as a Senior Prosecutor at the
Prosecutor General's Office of Mongolia.
The new firm will continue to offer international and Mongolian professional consulting expertise
across all business sectors with a special focus on major commercial and infrastructure projects
which call for the coordination of multiple tasks and skills. It will continue to advise multinational
and multilateral clients and individuals on matters of law with respect to wide ranging issues.
Read more…
Issues include, but are not limited to:
Drafting, review and advice on legislation and regulatory issues, due diligence analysis and
reporting;
Commercial and company law activities, mergers/acquisitions, joint ventures, shares and stock
purchases, contracts;
Banking, taxation, funds transfer and related financial services;
Mining, energy, transportation, telecommunications, and environmental issues; and
Commercial dispute resolution, mediation, arbitration and if necessary, litigation.
Source: ELC newsletter
MULTIPLE SCENARIO PLANNING WILL HELP MINERS SURVIVE VOLATILITY
The best strategy for mining companies in the current environment is a flexible one, Deloitte
analysts have suggest in a recent report. The professional services firm has drawn up what it
believes are the top ten issues facing the industry, but prefaces the list with a warning that the
winners will be those that learn to manage volatility by coming up with responses to a range of
possible market scenarios.
Unfortunately, mining companies are more often influenced by short-term outlooks, as evidenced
by the ―almost giddy‖ rush to expand capacity when commodities were hitting record highs two
years ago. Then, when commodity prices fell in the wake of the downturn, companies started
preaching cost containment, cutting across the board and shedding noncore as well as high-quality
assets, halting production, scaling back workforces and putting deals on hold.
With commodity prices and demand rebounding once again, companies need to balance the risk
that too conservative a view could prevent them from capitalizing on opportunities, while
considering whether demand fundamentals can sustain prices at these levels.
Read more…
According to its 'Tracking the trends: A look at 10 of the top issues mining companies will face,
Deloitte's number-one issue emerging within the mining sector is whether demand from growing
economies like China are sustainable.
Here, the need for multiple scenario planning is clear: while some industry stakeholders speculate
that stockpiling by emerging nations is unsustainable and maybe artificially inflating prices, other
experts point to underlying demand likely to resurge as China, India and other countries continue to
modernize.
―Given the plausibility of numerous scenarios, mining companies need the strategic flexibility to
adapt to either one,‖ Deloitte comments.
The second issue highlighted in the report is more a trinity of challenges, dubbed 'commodities,
currency and costs', while third place goes to the tricky decisions related to when mining companies

should ramp up production that was curtailed during the downturn.
The other issues in Deloitte's 2010 list are:
Four: The spread of sustainability – the pressure on companies to earn a social license to operate;
Five: A shortage of available capital, which in turn puts a damper on growth;
Six: The risk to the mining industry from climate change, which is becoming an increasingly
important consideration;
Seven: 'Extreme mining' – the search for the industry's new frontier, which at the moment appears
to be under water;
Eight: Hesitation over consolidation, as the need to merge still exists but the desire does not.
―Where buyers are in fact actively trying to take advantage of lower market valuations to acquire
quality assets, sellers are attempting to ignore the stock market on the belief that they are being
undervalued—making it nearly impossible to find a middle ground,‖ Deloitte says;
Nine: Government intervention; and
Ten: Rising infrastructure costs.
U.S. TELECOM COMPANY FINED FOR BRIBING CHINESE, MONGOLIAN OFFICIALS
UTStarcom Inc., a U.S. telecom company, has agreed to pay USD3 million in fines for bribing
Chinese officials with Hawaiian vacations and other junkets. The U.S. Justice Department said UTSI
had agreed to pay a USD1.5 million fine for violating the Foreign Corrupt Practices Act by providing
"travel and other things of value" to employees of state-owned Chinese telecom firms. The
Securities and Exchange Commission (SEC) said the California company had agreed to pay an
additional USD1.5 million for authorizing millions of dollars in unlawful payments to Asian
government officials.
"UTStarcom spent millions of dollars on illegal bribes to win and keep customers in Asia," the SEC
said in a statement. "It is important for corporate America to recognize that resorting to these
methods of boosting profits contributes to a culture of corruption that cannot be condoned under
U.S. law."
The SEC said UTStarcom made improper payments to "sham consultants" in China and Mongolia,
while knowing they would pay bribes to foreign government officials.
Source: AFP
CORPORATE TRANSPARENCY GAINING GROUND
Much like transitions to democracy over the past four decades transformed governments from
mostly authoritarian to mostly democratic, we are currently witnessing a transformation of global
corporations from a more or less opaque shareholder-centric model to a more transparent multi-
stakeholder model.
Successful transitions occurred in such diverse places as South Africa, the Philippines, Indonesia,
Mongolia and even Iraq. The case of China remains a unique experiment in the liberalization of
economics, but not politics. Despite some business-related legal reforms, China may remain the
exception that proves the rule.
As to global companies, increased government pressure and stakeholder demands for accountability
(from employees, investors, customers, non-governmental organizations and others) are creating a
similarly catalytic turning point that is beginning to yield a more transparent business model. Will
greater corporate transparency evolve from this turning point in a manner similar to the
democratization that began in the early 1970s? We think so.
Read more…
Governments are lending a hand. Global anti-corruption efforts provide a clear example. In the past
month alone, governments around the world have stepped up the pressure. December 9 was
International Anti-Corruption Day; among other activities, the 38 signatory nations of the
Organization for Economic Cooperation and Development Anti-Bribery Convention reaffirmed their
commitment to expanded enforcement efforts around the world. In November, Mr. Lanny Breuer,
chief of the Criminal Division of the U.S. Department of Justice, promised to deliver on an
aggressive Foreign Corrupt Practices Act enforcement agenda, noting that they ―will be intensely
focused on rooting out foreign bribery‖. He emphasized that the department will focus on the
investigation and prosecution of executives, stating that ―culpable individuals must be prosecuted
and go to jail‖. Mr. Breuer counseled businesses to have a ―rigorous F.C.P.A. compliance policy that
is faithfully enforced‖, and to ―seriously consider voluntarily disclosing‖ discovered violations, and
to remediate the source of any violations. He noted that smart companies already have these
measures in place.

Strong government incentives, good governance and corporate citizenship can be mutually
reinforcing factors and they are playing a key role in shaping important issues in the growth of
corporate transparency. There are other critical global business issues — human rights, anti-fraud,
environmental compliance — that all point in the same direction: For their own good and that of
their multiple stakeholders, companies are trending in the inevitable direction of adopting greater
transparency and integrity programs.
Whether they do so voluntarily or by regulatory mandate, companies are beginning to embrace the
new transparency imperative in five key ways: Adopting better governance with stronger
shareholder rights, board rules, director accountability and pay for performance. Integrating
corporate integrity programs into business strategy and leadership development. Pursuing dialogue
with multiple and increasingly vocal stakeholders. Engaging proactively with regulators intent on
trans-border cooperation and enforcement (especially regarding anti-corruption, anti-money
laundering, antitrust and anti-fraud). Catering to two critical constituents — employees and
customers — who have shown greater willingness, and ability, to ―vote with their feet‖.
Is ethics to business what democracy is to politics? Is the role that transparency and integrity play
in the private sector similar to the role that democracy plays in the public sector? We think so. Less
enlightened entities will come along under the pressure of increasingly proactive stakeholders and
regulators. And the irreversible Internet revolution that now ―outs‖ what previously could be
hidden will only further the irreversible progress to greater transparency that is already under way.
Source: The New York Times
RUSSIA TO ENGAGE WITH INVESTORS ON MINERAL LAW
Russia will seek opinion from foreign companies on proposed changes to investment laws needed to
unlock the country's lucrative oil, gas and metals reserves, the head of Russia's anti-trust agency has
said. Long-awaited revisions to Russia's strict laws on foreign investment in strategic mineral fields
should be ready by the end of January 2010, when they will be presented to potential investors, Mr.
Igor Artemyev told reporters.
"The prime minister has ordered that the changes to foreign investment laws be discussed with
investors, both Russian and foreign, prior to their being passed by the government," said Mr.
Artemyev, who heads Russia's Federal Anti-Monopoly Agency.
Prime Minister Vladimir Putin has said in comments posted on the government's website, "I have no
doubt those who approach us today with investments and technology will have competitive
advantages not only in the Russian market, but in international markets. On our part, we will do
everything necessary to create the best conditions for attracting capital to Russia".
A spokesperson for a Western company present on the Russian market said, "For us, one of the main
points is the possibility for keeping the license on a field if, during exploration work, it turns out
the deposit falls under the 'strategic' category."
CHINALCO TO BUY FURTHER MINING ASSETS ABROAD
Chinese metals conglomerate, Aluminum Corporation of China (Chinalco), is on the lookout for
opportunities to acquire mining assets overseas as it restructures amid fierce competition, its
president has said. The firm will also seek joint ventures and strategic cooperation with suppliers of
resources, energy and raw materials.
"Chinalco must adopt profound business restructuring in order to maintain our leadership in the
industry," he said.
ECONOMY
PARLIAMENT REJECTS PRESIDENT’S VETO ON BUDGET
Parliament has rejected the President‘s veto of the State Budget Law of 2010, with the support of
44 or 77.2 percent of the 57 MPs present. MPs R.Amarjargal, B.Batbayar, Z.Enkhbold, Ch.Ulaan,
Kh.Temuujin, S.Oyun, Z.Altai, D.Enkhbat, Ya.Batsuuri, Kh.Jekei, L.Gantumur, G.Bayarsaikhan and
D.Odkhuu, however, supported the President‘s stand on the MNT76 billion allocated to every MP for
their constituencies. MPs faulted the President‘s action on several counts and Mrs. D.Arvin called it
―an infringement on the rights of MPs‖.
Explaining the rationale behind the President‘s veto, his adviser on legal matters, Mr. G.Ganzorig,
refused to explain why the budget for the President‘s Office was sought to be doubled as it was
unrelated to the veto. MPs greeted this with laughter.

Source: www.news.mn
GOVERNMENT DEDICATES 2010 TO BUSINESS REFORMS
The present year will be observed as ―The Year to Reform the Business Environment‖, according to
a decision taken by the Government at its 86th
and last meeting in 2009 on December 30. A draft
law will be formulated, setting out the planned reforms in the business environment, ways to
implement them, particularly through cooperation between the Government and the private sector.
An action plan will be formulated, with inputs from regional officials on their local priorities.
The Prime Minister will head a council to be set up to enforce, supervise, and monitor the reforms
and will have the First Vice Prime Minister as his deputy. The other members of the council will
come from various Ministries, the Central Bank, the Financial Regulation Bureau, the Stock
Exchange, the Customs Authority, the General Authority for Intelligence and others. The Prime
Minister has instructed officials to make regular reports to the public.
Source: Zuunii Medee
PM CALLS FOR REALISTIC PLANS AND POLICIES
Prime Minister S.Batbold has told representatives of the financial and economic sectors that
Mongolia is set to take the road to quick development, and for this ―it is very important to
formulate clear and realistic plans, emphasizing the creation of the appropriate legal environment
to implement them‖. He wanted a policy on State expenses to be ready before work begins on the
budget for 2011 and revealed that the Ministry for Finance and the National Development and
Innovation Committee have been asked to prepare a comprehensive database to help in this.
The Prime Minister called for coordination between big projects and development strategies and
hoped that the proposed Budget Stability Law would restrict the dependence of the budget on
revenue from the mining sector, which could instead be used to enrich the stabilization fund.
Regional administrations should get more freedom to spend money according to local needs. In
general also, government expenses must be determined by following uniform norms, and freed from
any personal pressure from high-powered people. Tender bids should be decided cleanly and kept
free of corruption. Financial resources can be best utilized only with advance planning.
Expressing satisfaction that the General Customs authority has succeeded in reducing corruption
and red tape and was working more efficiently, Mr. Batbold said Mongolia should have a clear vision
of its border trade, customs and foreign policies, reducing waiting time at ports and providing fast
and quality service.
Source: Ardiin Erkh
CENTRAL BANK CHIEF SAYS FINANCIAL SYSTEM IS STABLE
Central Bank President L.Purevdorj has not ruled out the contribution of inadequate supervision to
the mess in Zoos and Anod Banks, but has asserted that in general the financial system in the
country is ―stable‖. A clear sign of this, according to him, is provided by the ―increasing number of
bank accounts and the return of public confidence‖. He defended the sale of Government bonds or
guaranteeing people‘s deposits as ―measures taken throughout the world‖, adding that ―banks are
going bankrupt not only in Mongolia, but also in many developed countries‖.
Mr. Purevdorj explained that the assets and deposits of the now defunct Zoos Bank have been
transferred to the new State Bank and the Central Bank has accepted the liabilities, including all
bad loans. The State Bank is working well and ―once the tide turns, we plan to privatize it‖.
Saying that ―it was not possible to establish another state-owned bank‖, Mr. Purevdorj explained
that the Central Bank was providing a MNT170 billion loan to keep Anod Bank afloat. The Central
Bank did not have the authority to declare any bank as bankrupt. ―Only the National Security
Council can do this as such a move carries the risk of engendering instability in the country. If the
NSC asks us for our views, we are ready to offer them,‖ the Central Bank President said.
Source: Ardiin Erkh
WEATHER CONCERNS LIFT COPPER TO NEW HIGHS
Copper rose to new multi-month highs on Wednesday, as bullish market sentiment was reinforced
by upbeat US new factory orders data, aided by concerns over harsh cold weather in parts of China.
Shanghai's benchmark third-month copper futures contract hit a 17-month high of 61,850 yuan a
ton, before ending at 61,650 yuan, up 2%, its biggest daily gain in two weeks. Three-month copper
on the London Metal Exchange hit USD7,606, highest since August 28, 2008, before easing to
USD7,590 a ton.
Some analysts warned the frenzy could fizzle soon. "The upward momentum in copper is nearing an

end, partly as prices are under the pressure from commodity index rebalancing. The growing LME
stocks also weigh," said one.
MONGOLIA GETS SUPPORT FROM ADB, JAPAN TO RESOLVE BANKING PROBLEMS
The Japan Special Fund, funded by the Government of Japan and administered by the Asian
Development Bank (ADB), will provide a USD2 million technical assistance grant to Mongolia to
strengthen institutional capacity for banking supervision. The process of implementing reforms in
the banking sector will include a review of the regulatory environment and help develop guidelines
to strengthen corporate governance and improve risk management.
The expected outcome of this project will be the establishment of an improved policy and
operating framework for managing risks in the banking sector and for resolving the problem of
distressed assets, which in turn will help deliver a strong, broad-based economic recovery.
Mongolia‘s economy has come under pressure as a result of the global downturn, with copper prices
slumping and domestic growth slowing sharply since the end of 2008. This in turn has caused a
weakening of the country‘s financial institutions. The Central Bank is the executing agency for the
project, which is due for completion by the end of 2012.
Source: NNN-ADB
WORK REPORTS ON FREE TRADE ZONES REVIEWED
Three years have passed since the Government announced its decision to establish four free trade
zones, in Zamiin-Uud, Altanbulag, Tsagaan-Nuur and Choir. The regional councils established to
implement the work have recently submitted progress reports. USD31.7 million will be spent to
bring Zamiin-Uud on par with Ereen, only a few km across the border. Construction of housing
complexes and roads is continuing. Technical and economic evaluation of a project to improve the
infrastructure there has also been completed. Officials of concerned Ministries have reviewed both
reports and talks will be held on securing a concessional loan from China.
As regards Tsagaan-Nuur, however, no investment was made in 2009. Private businesses have built a
loading terminal and installed a weighing machine with their own money in Altanbulag to expedite
movement of their goods. Construction of a similar terminal in Tashanta to improve the Customs
capacity there has been started by a Russian company. This year a sum of MNT4.3 billion has been
allocated for the development of all four free trade zones.
Source: Undesnii Shuudan
FIRST PRIVATELY BUILT POWER PLANT COMING UP IN KHUVSGUL
The first power station built with private investment in Mongolia is going to come up in Khuvsgul
province. The 60-mw plant at the Mogoin Gol coal deposit is being built by the joint Mongolia-China
Yuanda group, together with the New Asia Mining group. The power station is estimated to cost
USD110 million and is likely to take 20 months to be completed.
Source: Udriin Sonin
AMBASSADOR ADDLETON SEES OPPORTUNITIES FOR AMERICAN BUSINESS
U.S. Ambassador Jonathan Addleton has said he was surprised by the fact that he was named
ambassador to a country where he had previously served, which is not a customary practice, but he
enjoyed his previous service in Mongolia and is happy to be back there. He feels the evolving
economy of Mongolia presents great opportunity for American business, noting that the mining
industry in particular is poised to expand rapidly. There is only about USD100 million in annual
trade currently between Mongolia and the U.S., while for Panama, with a similar population, the
figure is USD5 billion.
―Coca-Cola was one of the early arrivals,‖ Dr. Addleton said. ―There are now two Coca-Cola
bottling plants. A lot of the exports from the U.S. right now are in the consumer goods area and
mining equipment. So in these areas, there are prospects for American companies.‖ Tourism is also
a growing field in Mongolia, particularly adventure tours, with companies offering guided trips,
some that include overnight stays with nomad families.
Source: GlobalAtlanta.com
TEMASEK, CIC LEAD SOVEREIGN WEALTH FUNDS INTO MONGOLIA
According to a report issued by Eurasia Capital, Mongolia is becoming an attractive investment
destination for Asian and Middle Eastern sovereign wealth funds (SWFs) that seek gaining exposure
to massive untapped natural resources in this frontier land, strategically located at the doorsteps of

China, the world‘s largest consumer of commodities. In a space of three months, Ulaanbaatar
received visits by senior executives of eight sovereign wealth funds including from China,
Singapore, Korea, the UAE, Kuwait, Libya and others.
Among SWFs, Temasek was the first to make foray into Mongolia. Last year Singapore‘s USD120-
billion fund, together with Hopu Investment (a USD2.5-billion private equity fund where Temasek is
the largest investor) invested USD300 million in then Lung Ming (now Iron Mining International), a
developer of iron ore mine in Mongolia. China Investment Corp, China‘s USD300-billion SWF made
headlines by committing USD1.2 billion in two transactions within one week in October, agreeing to
invest USD500 million in SouthGobi Energy, a coal miner, and up to USD700 million in Iron Mining
International.
Thanks to these above three deals, USD1.5 billion investments by SWFs already represent 30% of
Mongolia‘s USD5-billion GDP. To put this figure in perspective, Kazakhstan and Vietnam, two
prominent frontier markets, would need to attract USD40 billion and USD27 billion respectively in
sovereign investments to reach such ratio. While natural resources are the main area of interest for
sovereign investors, visiting executives identified a broad range of industries where they expect
attractive investment opportunities due to the huge economic boom Mongolia is poised to
experience. These include energy, transportation, infrastructure, banking, construction and
property.
SWFs are expected to join both strategic and portfolio investors that are expected to pour billions
of dollars in investments per year into Mongolia. This will allow Mongolia to become one of the
world‘s fasting growing economies throughout the next decade.
Source: Eurasia Capital
MINING REPORT SEES STRONG GROWTH IN 2011
The Mongolia Mining Report Q1 2010 says significant changes made recently to the Mineral Law
(1997), in particular the repealing of the 68% windfall tax, have opened up the market for foreign
investment in Mongolia. The current Government concedes that Mongolia has to appeal to foreign
investors as it is unable to invest independently in domestic mining projects, and will benefit from
the new technology and expertise that outside investors bring.
Mining output is expected to increase significantly from 2010 onwards. The Tavan Tolgoi deposit has
numerous investors lined up to bid. It is anticipated that after an almost 50% contraction in 2009,
the mining industry will return with strong growth of 26% and 18% in 2011 and 2012 respectively.
The country seems to be just finding its feet with regard to its relationship to the mining industry.
The Government has struggled to find a balance between passing on the profits from its rich
resources to impoverished citizens without deterring essential foreign investment into the country.
Source: www.companiesandmarkets.com
MONGOLIA SEEKS NEW FOREIGN INVESTORS TO BALANCE CHINA AND RUSSIA
Mongolia is attempting to attract fresh foreign investors to balance China and Russia, its dominant
traditional partners and neighbors, as it embarks on a series of privatizations and initial public
offerings of its extensive mineral assets. Mining companies from China and Russia - states that have
dominated Mongolia historically - are among those vying for licenses to develop Tavan Tolgoi, a
state-owned deposit of more than 6 billion tons of coking coal.
By a program of privatizations during 2010, Mongolia's government intends to balance applications
of Chinese and Russian companies against those from the US, India, South Korea and elsewhere.
That is the commercial corollary of its "third neighbor" foreign policy - which aims to recognize the
importance of its neighbors, while inviting third-party interests to prevent Chinese or Russian
dominance.
"We welcome investment both from our neighbors and our third neighbors," said Mr. Dashdorj
Zorigt, Mongolia's Minister for Mineral Resources and Energy. "There is the issue of commercial
interests, and ensuring that any deals we make are in line with our foreign policy. We will not base
our decisions purely on political considerations - but they will also not be based purely on business
considerations. We will be balanced." Mr. Zorigt declined to say whether the Government's 34 per
cent stake in the Oyu Tolgoi project would guide other agreements.
On November 23, Prime Minister S. Batbold said the Government would prepare state enterprises
with strategic assets for international IPOs. "Next year we hope to see the first IPOs," Mr. Zorigt
said. That would be the focus of his ministry during the next year.
Source: The Financial Times

WORKING GROUP TO EXAMINE ELECTRICITY AND HEATING TARIFFS INCREASE
A meeting of representatives from the Mongolian Labor Union, the Union of Employers, and the
Energy Regulation Department discussed the decision to raise electricity and heating prices with
effect from January 15, and set up a working group consisting of experts to examine the
calculations made by the Energy Regulation Department. The Labor Union is against the increase.
Its head, Mr. S.Ganbaatar, has asked for a meeting with the Prime Minister to discuss the issue. ―It
is wrong to provide support to some companies by making people pay more. The decision was taken
without considering other options. The problem the energy sector faces is related to the
incompetence of its officials, and we oppose this move to make the people bear the burden for
their actions,‖ said Mr. Ganbaatar.
Saying that corruption and fraud marked the spending of public funds in the sector where low-
quality products were regularly bought at the behest of officials, Mr. Ganbaatar remarked that the
increased tariffs will lead to more unemployment by hitting small and medium industries hard.
Mr. R.Myagmar of the Energy Regulation Department told the meeting that the Government was
requested to raise electricity tariffs by 24 percent and heating tariffs by 20 percent in 2010. It
decided to provide MNT15 billion as subsidy so that the increase was kept lower. However, this
amount works out to only 29 percent of production costs. Asked about the impact on prices, he
said, ―The energy tariff is being raised according to law. As for the price of other products, it is an
issue for the companies concerned.‖
Source: Onoodor, Ardiin Erkh
FIRST INSTALLMENT OF HUMAN EVELOPMENT FUND ALLOWANCE LIKELY SOON
Parliament Speaker D.Demberel told a Press conference on Monday that MNT324 billion from the
Human Development Fund will be distributed to citizens in 2010. ―So far MNT 130 billion was paid
yearly as Child Money. This year citizens will get three times as much. We are considering giving
MNT70,000 each to elders, children and disabled citizens before Tsagaan Sar,‖ said Mr. Demberel.
The rest will get their turn only after a civil registration process is completed, likely by October.
This is different from the census. It aims to gather detailed information about citizens and will
become the basis of the census, which has been postponed to November. The heads of two Standing
Committees said the payment of MNT70,000 to each citizen will not trigger inflation or lead to price
rise because it will be given in installments. Also, most recipients will use the money to pay school
tuition fees or such other expenses, and not to buy things.
Source: Ardiin Erkh
DONORS AGAINST THE GRANT OF ALLOWANCES TO ALL CITIZENS, REMINDS OFFICIAL
Commenting on the ongoing move to distribute MNT70,000 to every Mongolian citizen, Mr. B.
Batjargal, Director-General of the Budget Policy Department at the Ministry of Finance, has sought
to remind MPs that at an international conference of donors in March 2009, Mr. Arshad Sayed,
Resident Representative of the World Bank in Mongolia, stressed the need to ―maintain budgetary
discipline at all levels‖, and that donor countries and international financial institutions like the
World Bank and the IMF, would not favor this initiative. The straying from the ―principle of efficient
capital distribution‖ is a political decision that will have a negative impact on efforts to ―extend
the economic platform‖.
Asked if the distribution could lead to a cancellation of the agreement with the IMF, Mr. Batjargal
said this was unlikely but the IMF had been very clear that it wanted the Government to review its
welfare program and to ensure that money reached only those who needed it and was not
distributed in an undisciplined manner.
NEW INSURANCE PAYMENT RATES ANNOUNCED
The Government has fixed the amount of health insurance payment for 2010. Salaried workers will
continue to pay 4 percent of their total income, but rates have changed for those whose insurance
is paid by the Government. They include children, students of universities, institutes, colleges and
professional training centers, herdsmen and prisoners. The monthly payment for them has been
raised by MNT170 and will now be MNT670 but the entire burden will be borne by the State. A
foreigner or unregistered citizen will pay MNT4,000.
Source: Udriin Sonin
KOREA’S BOURSE OPERATOR MULLS SETTING UP JOINT STOCK EXCHANGE IN MONGOLIA
South Korea's bourse operator Korea Exchange (KRX) is studying a reform plan that includes setting

up a joint stock exchange in Mongolia. It also plans to cut 10 percent of its 750-strong workforce to
boost efficiency, slash wages by 5 percent and reduce executive positions in a bid to cut costs.
Source: Yonhap
JAPAN, MONGOLIA TO STUDY FREE TRADE PACT
Japan and Mongolia have agreed to launch talks over the possibility of a free trade pact. The
Japanese foreign ministry has said an agreement to this effect was reached in a meeting in late
December in Tokyo between Japanese Foreign Minister Katsuya Okada and his Mongolian
counterpart Gombojavyn Zandanshatar. Mr. Zandanshatar, visiting Japan for the first time since he
assumed the post of Minister of Foreign Affairs and Trade in November, reaffirmed Mongolia‘s goal
of a broad economic partnership agreement (EPA) with Japan, including a free trade deal. The two
countries agreed to start government-level talks to study the economic benefits. Mr. Zandanshatar
also called on Japan to cooperate in developing his country‘s mineral resources, including uranium.
Mr. Okada promised to enhance Tokyo‘s support and asked Ulaanbaatar to create an environment
for Japanese companies to ‗operate smoothly‘ in Mongolia.
Source: AFP
CUSTOMS AUTHORITY CLAIMS ITS WORK IS GETTING BETTER
Officials of the General Customs Authority have detailed the various steps being taken to improve
customs services which are popularly perceived to be unfriendly and inefficient and riddled with
corruption. Much of the documentation work in border posts will be digitalized, responding to the
Prime Minister‘s call for a ―green economy‖. Animal skins and unprocessed hunting products will
not be allowed to leave or enter Mongolia. There will be rewards for law abiding organizations.
The officials cited a study by the Sant Maral Foundation showing that the level of corruption among
customs workers has decreased. A meeting between Customs officials and businessmen supported
the contention. Russian and Chinese businessmen who attended the meeting in Zamiin-Uud felt
Mongolian Customs services were getting more and more helpful and competent.
The Director of the General Customs Authority, Mr. D.Tseveenjav, wanted specific and sustained
plans for the development of border ports and explained that outdated and inefficient
equipment kept productivity low. There are plans to keep some ports such as Shiveekhuren,
Gashuunsukhait and Khangimandal operational for 24 hours a day.
The Customs Authority employs 1,250 employees and there is a case to raise their salaries. The
number of corruption cases fell to 4 in 2,000 in 2009 from 5-12 in the preceding years.
AGREEMENTS WILL FULFILL OUR ECONOMIC POTENTIAL, SAYS PRESIDENT
In his New Year message to the country, President Ts. Elbegdorj said in 2009 Mongolia ―saw the
greatest number of newlywed couples and the greatest number of babies being born in the past 20
years‖. Referring to the success of athletes, artists, farmers and national industries, Mr. Elbegdorj
said, ―Destiny smiles on those who try.‖ He called the Democratic Revolution 20 years ago ―our
collective achievement, putting an end to the years-long divide‖.
Observing that consolidation of the achievements of democracy and freedom is seen in all areas of
national life, the President said, ―Important decisions were made and agreements concluded which
will notably contribute to improving our lives, fulfill our economic potential and guarantee our
citizens the right to be the true owners of the country‘s assets.‖
Source: Montsame
ASIA WELL PLACED TO KEEP RIDING RECOVERY, BUT NOT AT PACE OF 2009
Last year's rebound in Asian markets will be a tough act to follow, but that doesn't mean stocks
can't continue to rise. Asia outside of Japan led the world out of the global financial abyss in 2009,
producing some of the biggest market gains of the year. The widely used MSCI AC Asia Ex-Japan
Index rose 68.3% as confidence built that Asia's fastest-growing economies — especially China, India
and Indonesia — were on more advanced recovery paths than their Western counterparts.
Few expect markets to repeat that kind of performance but 2009 confirmed that Asia, led by China
with its large government reserves and broadly solvent banking system, avoided the leverage
problems that ignited the crisis in the West and is in a better position to take advantage of the
global rebound. Markets, however, always slow in the second year of a recovery, and while 2009's
performance sowed optimism among investors, new challenges could damp the party mood, namely
fears of rising interest rates, inflation, capital outflows and asset bubbles. A resurgence of the USD
has historically coincided with down years in Asian markets.

The best-performing Asian markets in 2009 were those that were most insulated from the world-
wide collapse of trade. Indonesia's and India's domestically driven economies fall into that category.
They also benefited from confidence-inspiring elections in 2009. Indonesian stocks rose 87% and
India's Sensitive Index, or Sensex, rose 81%, but both countries face the risk of inflation in 2010.
What surprised many investors in 2009 was the ability of China, usually seen as an export-
dependent economy, to quickly spur domestic demand. A giant government stimulus plan helped
investment and consumption keep the economy humming. China's stock market anticipated that
spending gusher and powered out of the gates in early 2009, avoiding hitting a new low even as
markets in much of the rest of the world found their nadirs in early March. The benchmark Shanghai
Composite Index hit its low point in October 2008. It rose 80% in 2009, but remains 45.7% below the
October 2007 peak.
Read more…
Currencies in South Korea, Japan, Thailand, Indonesia and Australia all posted strong increases
against the USD in 2009. Hong Kong's and Singapore's stock markets, two of the region's most liquid,
became major buying targets for overseas investors seeking to benefit from China's growth. The
benchmark Hang Seng Index rose 52%, its biggest one-year leap in a decade, and Singapore's Straits
Times Index climbed 64.5% to end at its highest close since August, 2008.
Despite the gains in 2009, investors believe that as corporate earnings expand during the recovery,
stocks can continue to rise without valuations rising too high. Asian stocks trade around 2.1 times
book value. They are betting Asia will expand healthily on the back of continued government
stimulus and rapidly growing domestic consumption. Even modest growth in the U.S. and Europe,
the usual source of demand for Asia's exports, would be enough to keep Asia's companies humming.
And should demand pick up in the West faster than expected, Asia could enter a period of
supercharged growth. But that also would raise fears of inflation and put pressure on policy makers
to hit the brakes.
Source: The Wall Street Journal
CHINA’S CENTRAL BANK URGED TO INVEST FOREX RESERVES IN RESOURCES
China's massive foreign exchange (forex) reserves must directly tap into strategic resources
including oil, according to the president of a provincial branch of the central bank. The remark,
published in a newspaper run by the central bank, is the Government's clearest message thus far
that forex reserves will be diversified by investing in resources.
The safety of China's massive forex reserves, mostly consisting of USD-based assets, has become a
hot issue during the economic crisis. By the end of September last year, these reserves were the
world's largest, totaling USD2.27 trillion, according to figures released by China's State
Administration of Foreign Exchange. China's holdings of US Treasury bonds totaled USD798.9 billion
by the end of October, making China the largest financer of US debt, according to the latest data
released by the US Treasury.
Many Chinese economic analysts want China to boost its strategic resources reserves to hedge
against the risks of the devaluation of the dollar. They fear that the country's USD assets would
likely face losses if inflation occurs in the USA or if the purchasing power of the USD drops. Though
US Federal Reserve Chairman Ben Bernanke stated last month that "inflation could move lower from
here", some fear that the US will see inflation in the near future.
Read more…
The consumer price index (CPI), a main gauge of inflation, rose 0.4 percent in November from
October, and over the past 12 months the CPI reading increased 1.8 percent, posting the first
positive change year-on-year since February last year, according to data released by the US Bureau
of Labor Statistics (BLS). The producer price index, a main measure of inflation at the wholesale
level, rose 1.8 percent from the previous month in November, the BLS said.
The Chinese official said that investment in resources should be carried out by professional
investment firms by purchasing foreign exchange assets from the forex market or the central bank.
Source: Global Times
CENTRAL BANKERS SAY IT WITH GOLD
Strong dollar equals falling gold price, right? Except, perhaps, when Asia's central bankers are
involved. Some three quarters of the region's USD5 trillion in foreign-exchange holdings are parked
in U.S. dollars. A desire to diversify away from the greenback, though, has become evident. The
dollar's share in reserve accumulation dropped to less than 30% in the third-quarter, Barclays
Capital estimates. Analysts think most diversification in 2009 favored the euro.
As they seek to diversify their foreign-exchange reserves, Asia's central banks could buy gold. Some

have already started. The Reserve Bank of India stirred up markets when it revealed it purchased
200 tons of gold from the International Monetary Fund in October, taking gold's share of the central
bank's reserves from 3.6% to nearly 6.4%.
Even if other central banks don't start making large purchases like India's, they'll likely remain a
substantial buyer as reserves continue to pile up. In the 12 months through November, the banks
added around USD800 billion to their foreign-exchange holdings, a side effect of their efforts to
slow the appreciation of local currencies.
China, which has seen its reserves rise by more than 50% in the past two years to about USD2.3
trillion, has bought 450 tons of gold during the period, Merrill Lynch estimates. That is a substantial
chunk in a market where annual turnover is about 3,800 metric tons. Accumulation of reserves by
Asia's central banks will likely continue as long as strong regional growth and high interest rates
continue to attract foreign investors.
Read more…
A shift in portfolios, like India's, would only add to this, and there is scope for this to happen. Gold
currently accounts for around 2% of reserves in emerging markets, Merrill Lynch calculates. That
compares with a 10% average globally, and more than half of all holdings in the case of the U.S.
Federal Reserve, as well as France's and Germany's central banks.
Asia's central bankers will move slowly, particularly with gold prices still above $1,000 per ounce.
But a shift toward the global average would mean more buying in store — regardless of what the
dollar does.
RUSSIA SHEDS DEBT BURDEN OF SOVIET ERA, LIKELY TO ISSUE BONDS
Russia has rid itself of Soviet-era debt, paving the way for it to re-enter international capital
markets after a decade. This happened when Russia recently exchanged USD405.8 million of cash
and sovereign Eurobonds maturing in 2010 and 2030 to the remaining outstanding bondholders of
Soviet debt. "Completion of the last exchange represents the settlement of one of the most
complex and comparatively large categories of the external state Soviet-era debt," Russia's Finance
Ministry said.
The Government had said it intended to finish the exchange before issuing new bonds. The size of
Russia's Eurobond issue could be up to USD17.8 billion, according to Finance Minister Alexei Kudrin,
depending on the price of oil, the country's major export. The nation's re-entry comes as fresh
emerging-market sovereign debt is expected to reach critical mass. Demand is not expected to be a
problem for any of the likely new issuers.
Russia's Finance Ministry has said it will lean more heavily on overseas debt markets through 2012 to
finance annual deficits, as Russia's oil wealth funds run down. Standard & Poor's has said that
Russia's net government borrowing requirement could come in at 6% of gross domestic product in
2010. Recently, the ratings firm raised the sovereign outlook on Russia to stable from negative and
affirmed its rating at triple-B, noting that budget and balance-sheet performance will gradually
improve. Mr. Kudrin said the move created a "good environment" for the anticipated Eurobond
offering.
Russia holds an investment grade rating from all three international ratings firms, due partially to
its USD440-billion gold and currency reserves, the worlds third largest next to China and Japan.
CHINA DETHRONES GERMANY AS TOP GOODS EXPORTER
China took over the mantle of the world's top merchandise exporter from Germany in 2009,
according to the latest figures, aided by a global economic crisis that has taken a greater toll on
other trading powers. China exported USD957 billion of goods in the first 10 months of 2009,
compared with USD917 billion for Germany, according to customs data compiled by Global Trade
Information Services, a Geneva-based firm. No changes in November or December are expected to
overturn the Chinese lead, trade experts say. China is likely to publish trade figures for the full year
next week.
China's claiming of the title of world‘s largest exporter was widely expected, with annual growth in
its exports regularly exceeding 20% during the past decade. China in 2007 overtook Germany as the
world's third-largest national economy, and is on track to soon surpass Japan to become the second-
largest economy after the U.S.
China's ascendancy has been accelerated by the international financial crisis, from which it has
suffered less than other major economies. With trade in tatters around the world, Chinese exports
fell 20.4% during the first 10 months of 2009, compared with 27.4% for Germany and 21.4% for the

U.S. The trade figures don't include transactions in services, which are significant in developed
economies but a weak point for China.
Read more…
Germany suffered a particularly heavy drop in 2009 exports because of its concentration in
machinery and other capital goods, which were hit by a slump in investment spending by industries
world-wide. Global consumer spending fell by less than corporate investment, benefiting China's
exports of low-cost consumer goods relative to Germany's high-end equipment.
High export volumes don't necessarily translate into overall economic success. Many economists
criticize both Germany and China for focusing too much on export volumes, and doing too little to
promote sustained growth in domestic demand and improve living standards. Many of China's
exporters earn relatively slim profits churning out goods designed and marketed by other
companies.
Source: The New York Times
POLITICS
MONGOLIA CARRIES ON WITH ITS DEMOCRATIC BREAKTHROUGH
Mongolia, a formerly communist nation sandwiched between two autocratic and powerful
neighbors, once seemed an unlikely candidate for democratic reform. But while its mighty
neighbors China and Russia are allowing authoritarian tendencies to diminish rule of law,
impoverished Mongolia has persisted in building a more accountable government.
In one of the most underreported stories of 2009, Mongolia is forging ahead with reforms aimed at
making its society more open and less subject to the endemic corruption that has plagued many
former communist states. It is moving more rapidly in a democratic direction than any of the
former Soviet republics of Central Asia. And its new leaders vowed early on to quickly privatize
state enterprises and create a free-market economy.
But progress has come with some difficulty. When the Soviet Union cut off subsidized trade and
economic aid in 1990, Mongolia‘s gross domestic product dropped by as much as a third. Food
shortages followed. Prices skyrocketed. Agricultural and industrial output fell drastically. During a
visit in mid-1992, two well-meaning but young and inexperienced Mongolian reformers lost nearly
all of the country‘s foreign exchange in a series of currency dealings that went sour.
Mongolia has managed to foster good relations with China and Russia as well as with the United
States, Japan, and both North and South Korea. In the early 1990s, many feared that an ever more
powerful China might dominate the country.
Read more…
Although China is clearly a big player in Mongolia‘s trade and mining sectors, it has so far refrained
from disrupting Mongolian politics. But things could still go terribly wrong. President Ts. Elbegdorj
has warned that corruption could threaten much hoped-for gains from the mining sector. ―Now we
have some profit, some money from mining,‖ he said. ―If you have bad government, it‘s going to be
a curse.‖ Mr. Elbegdorj has said that the key will be reform of the judicial system and an anti-
corruption agency that can work more effectively, because ―corruption is deep-rooted in this
country‖. He has set an ambitious goal of making the judicial system more open, accountable, and
independent by 2011.
The world should stay tuned.
Source: The Christian Science Monitor
GOVERNMENT APPROVES NATIONAL PROGRAM TO PROTECT COMSUMER RIGHTS
The Government has approved the introduction of a national program to protect the rights of
consumers. The first law on this was passed in 1991 and amended in 2003, while the general
procedure for protecting consumer rights was adopted in 1992. However, implementation has fallen
below intention. Funding for the program will be included in the state and provincial budgets.
Source: en.News.mn
INDIA HELPING MONGOLIA OPEN ITS FIRST MAJOR IT OUTSOURCING CENTER
Mongolia and India are working together in a number of fields, but information technology (IT) is
one in which they have the closest collaborations, according to the Mongolian Ambassador to India,
Mr. Voroshilov Enkhbold. He said, "We do have BPOs, but with India's help we are going to set up a
major IT outsourcing center very soon. About four-five years back an India-Mongolia IT school was
established in Mongolia with the Indian Government's help. Initially the staff there was trained by
Indian experts, but now we are on our own."

In order to build their own skills so that they can further develop the IT sector in their country, a
growing number of Mongolian youngsters are making way to India to pursue higher studies in the
field. ―This year more than 500 students came here,‖ Mr. Enkhbold said.
Mining is another sector in which the two countries are forging strong ties, with companies like
Jindal Steel and MESCO Steel Limited setting up manufacturing units in the central Asian country. A
country half the size of India but with less than three million people, Mongolia is also seeking
collaborations in the tourism sector.
Source: The Economic Times
EX-PRESIDENT ENKHBAYAR VISITS SOUTH KOREA TO “ATTRACT INVESTMENT”
Former President N.Enkhbayar told a Seoul newspaper during his recent visit to South Korea that
the Mongolian economy is reviving but is still in a difficult situation. New opportunities have come
up for foreign businessmen to invest in minerals and the infrastructure sector. He specifically
mentioned five countries – the USA, Japan, China, Russia and South Korea – which should find it
advantageous to invest in Mongolia. Indeed, he said, the aim of his present visit was to meet with
Korean companies and to attract their investment. There are 1,800 Korean companies operating in
Mongolia, but they are all small and medium enterprises and big corporations such as Samsung and
Hyundai should now appear on stage, he felt.
PROVINCE GOVERNORS RESENT BEING “A SOLDIER WITHOUT A GUN”
A recent seminar in Government House heard several province Governors express unhappiness over
how their region is treated when the state budget is implemented. Khuvsgul Governor L.Tserenjav
said not enough money is ever available for work in provinces and complained that MPs spend their
constituency money according to their personal wishes. Khuvsgul‘s population of 130,000 is more
than that of Gobisumber, Dornogobi and Gobi-Altai together but they all get MNT500 million to
support small and medium industry.
Khovd Governor G.Nyamdavaa wanted a bigger role for the province administration in determining
budget priorities, instead of the MPs. The local Civil Representatives should also have a say in what
to do in a province.
Bulgan Governor M.Oyunbat said MPs spend their money on big programs, while numerous small
works that must be done languish for lack of funds. ―This is because the province authorities have
no role in formulating the budget. The Ministry of Education, Culture and Science decides on
whether and how a school or a kindergarten will be constructed. Someone very rightly described a
province governor as a soldier without a gun. More spending rights for province authorities would
make for greater the people‘s participation,‖ he said.
Source: en.News.mn
“PEOPLE’S HEROES” WILL BE CHOSEN THIS YEAR, TOO
The public opinion poll sponsored by the Zuunii Medee newspaper and the TV-9 television channel
will continue to be held in 2010, to select ―People‘s Heroes‖. These are people perceived by
ordinary citizens to have done worthy things for the country, without any self-interest and without
Government recognition.
For one month in 2009 thousands of people from all corners of the country proposed 150 candidates
for the honor. Ten of them were shortlisted and finally five were chosen. This year will select a
fresh group of honorees.
ROY DONGEN, TWO OTHERS RECEIVE FIRST ALTAN GEREGE AWARDS
The first Altan (Golden) Gerege awards were recently presented by Foreign Minister G.Zandanshatar
to Mr. Roy Dongen, a BCM member, Prince Andrew of the UK, and Mr. Tokuji Yanagisawa, head of
the Japan-Mongolia Association. The awards have been instituted to honor foreigners and
Mongolians who advertize Mongolia abroad, or protect the interests of Mongolians in a foreign
country, or develop relations with foreign countries in politics, economy, education, arts, culture
and sports. The Gerege is the golden seal which was used as a diplomatic passport in the time of
Chinggis Khaan.
Mr. Dongen is Chairman of the Mongol Saikhan Foundation which, since its foundation in 2001, has
been organizing a wide range of activities. It gives financial support to the State Theatre of Opera
and Ballet to arrange productions abroad, and has granted scholarship to a student to study in the
Netherlands.

Source: www.mfat.gov.mn
RUSH TO THE ALTAR BEFORE 4 ALLOWANCES ARE STOPPED
The Social Allowances Law has been amended to stop the payment of monthly and quarterly child
allowances, and allowances for newborn babies and newly married couples beginning January 1,
2010. Of the more than 1.4 million Mongolian children, about 950,000 used to receive Child Money,
with the rest not claiming it either because they lived abroad or their parents did not need the
MNT136,000 annually for every child. However, there are many families that depended on this
allowance to meet household expenses. Mr. D.Bayarsaikhan, Director of the State Labor and
Welfare Service Department, held out some hope for such families by saying that beginning in the
near future every citizen will be granted MNT120,000 from the Human Development Fund annually.
The announcement that the allowances will be stopped saw a rush in the last days of the year on
the banks that distributed the allowances, leading some of their branches to declare that they had
no money in their accounts. Mr. Bayarsaikhan agreed that the number of claimants showed a large
increase once word had spread about the decision and the budgeted allocation was not enough.
December also saw a surge in marriages as many young people wanted to take the MNT500,000. The
Finance Ministry agreed to make money available to meet the unexpected rise in demand.
IMPUNITY AND INJUSTICE ARE LEGACY OF JULY RIOTS, SAYS AMNESTY INTERNATIONAL
The Government of Mongolia has failed to effectively respond to human rights abuses that took
place during the July 2008 riot in Sukhbaatar Square and its aftermath, leaving a legacy of impunity
and injustice, Amnesty International has said in a year-end report. The report describes how
hundreds of people were taken to police detention centers where they were held in over-crowded
cells without food or water for up to 72 hours during the riots. Police beat detainees while they
were in custody and during interrogations to extract ―confessions‖.
One year on from the riot, the scope of the investigation conducted remains limited. Allegations of
torture and other ill-treatment in detention, and excessive and unnecessary use of force by police
have largely been ignored. ―Investigations into allegations of human rights violations have been
delayed, ignored or inadequately investigated‖, said Ms. Roseann Rife, Asia-Pacific Deputy Program
Director at Amnesty International. ―A year on from the riot and there is no accountability on the
part of authorities and no justice for the victims.‖
Procedures for prosecution of ten police officers and four senior police officials suspected of using
and authorizing the use of live ammunition during the riot was stalled by the defendants and their
lawyers for over seven months until early November 2009. The case file is now being read by the
families of the victims and their lawyers. All in all, the report charges Mongolia with failing to
comply with its international obligations which require them to take a range of legislative, judicial,
administrative and other measures to prevent human rights violations and bring those responsible to
justice and ensure victims receive reparations in line with international standards.
On 1 July 2008 thousands of people protested at Sukhbaatar Square amid allegations of widespread
election fraud. The riot was unexpected and unexpectedly violent. At least nine people were shot
by the police, four fatally, and a fifth person died allegedly from smoke inhalation.
Source: Amnesty International
MONGOLIA-REGISTERED SHIP WAS “A ROGUE VESSEL”, PROBE INTO SINKING REVEALS
A Mongolian ship that sank in the Bay of Bengal in September was ―a rogue vessel with fake
papers‖, a preliminary probe by Indian Government agencies has said. MV Black Rose had entered
the Paradip port without valid documents to carry illegally extracted iron ore. ―The ship was 32
years old and evidently not seaworthy. It had gained access to the Paradip harbor on September 4
despite having no valid documents. Even the insurance papers submitted were found to be fake,‖ a
source said.
The ship left the port on September 9, five days after its arrival, and sunk hours later. ―The ship
had left the harbor without filing proper documents and taking customs clearance for the cargo,‖
the report said. Nearly 23,843 tons of ore was loaded in addition to 971 tons of inflammable
furnace oil and substantial quantities of lubricant oil, the probe has revealed.
Suspicion about the vessel, registered in Ulaanbaatar but owned by Singapore-based Black Rose
Maritime Ltd, deepened as no one had come forward to make any claims after it capsized.
Source: The Telegraph, Calcutta

NEW MONGOLIAN LAWS
The following amendments and annulments to current Mongolian lawS were published in a recent
weekly Government bulletin. Unless otherwise decided by Parliament, the amendments and
annulments take effect (10) days after publication.
Date Law
12/18/2009 Amendments to the Law on Consolidated budget of Mongolia
Annulment of Law on Mongolia development fund
Amendments to the Law on Social welfare
Amendments to the Law on Annulment of some provisions of Law on
Consolidated budget of Mongolia
Amendments to the Law on Civil Health Insurance
Annulment of Law on Granting allowance to mother and children, providing
financial support to children, mother and family
Amendments to Law on Government's Special Fund
Annulment of some provisions of Law on Corporate income tax
12/11/2009 Addendum to Law on Medicine, medical tools
Please visit BCM‘s website, Legislative Working Group, for a summary of new Mongolian laws.
BCM members who wish complete versions of the laws in Mongolian language are welcome to call or
email the BCM office (332345; info@bcmongolia.org)
ANNOUNCEMENTS
ASIAN FINANCIAL FORUM IN HONG KONG, JAN 20-21
―Asia in the New Economic Order‖ will be the theme of the next Asian Financial Forum, January 20-
21, 2010, at the Hong Kong Convention and Exhibition Centre. Renowned international speakers will
discuss the opportunities and challenges facing Asia and, in particular, China. They include:
Dominique Strauss-Kahn, Managing Director, International Monetary Fund; Nouriel Roubini,
Professor of Economics, New York University; E. Gerald Corrigan, Managing Director, Goldman
Sachs; and senior government officials from the region. Over 1000 business leaders and senior
executives will attend the Forum. BCM is pleased to be a Sponsor of this prestigious event.
For registration information, please send Email to aff@hktdc.org or call at (852) 2584 4372.
________________________________________
“MM TODAY” ON MNB-TV
BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with
BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is
scheduled for 22:25 tonight. Tune in to watch this program that reports stories from today‘s BCM
NewsWire.

SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the abbreviated trading week ended December 31, 2009, trading activity on the Mongolian
Stock Exchange (MSE) totaled 31,100 shares with 29 companies traded. Total market value of
transactions was MNT 19.3 million. Total market capitalization of the 358 stock companies listed on
the MSE was MNT 620.7 billion.
The Top-20 Index increased by 227.37 points or 3.8% compared to the previous week, closing at
6189.91 points. MSE Composite Index increased by 79.56 points or 2.7% compared to the previous
week, closing at 3,043.86 points.
Most active stocks traded were: Khuh gan (12,400 shares), UID (5,500 shares), and Apu (4.800
shares).
Major share price percentage gainers were: Tuul Songino Usnii Noots (32%), Shivee Ovoo (32%),
Takhi Co (14.5%), Teever Achial (12.1%), and Baganuur (7.7%). Major share price percentage losers
were: Almaas (8.0%), Ulaanbaatar ZB (7.1%), UID (7.1%), Eermel (6.5%), and BDSec (5.9%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
November 30, 2009 *3.5% [source: NSOM]
*Year-over-year (y-o-y)
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 11.50% [source: IMF]
September 30, 2009 10.00% [source: IMF]

CURRENCY RATES – January 8, 2010
Currency name Currency Rate
US dollars US 1463.79
Euro EUR 2103.17
Japanese yen JPY 15.77
British pound GBP 2333.06
Hong Kong dollar HKD 188.74
Chinese yuan CNY 214.39
Russian ruble RUB 49.01
South Korean won KRW 1.29
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.

08.01.2010, NEWSWIRE, Issue 100

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08.01.2010, NEWSWIRE, Issue 100