The document summarizes news from the Business Council of Mongolia newsletter. It discusses Mongolia's plans for developing the Tavan Tolgoi coal deposit. The key points are: - The Prime Minister confirmed Mongolia will pursue contract mining at Tavan Tolgoi rather than sell a stake, aiming to retain more benefits. This may involve production-sharing or hiring companies to extract coal. - Mining companies may accept contract terms, though it's a new model for Mongolia. The government would oversee contractors and mining could be done by one or several operators. - The Minister of Mineral Resources believes improved technology will allow mining much more coal from Tavan Tolgoi than estimated previously.

1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 105, February 12 2010
„HAPPY TSAGAAN SAR!‟
NEWS HIGHLIGHTS:
Business:
 PM confirms plan to use contract mining in Tavan Tolgoi;
 Tavan Tolgoi preference a challenge for mining companies;
 Zorigt sees investors agreeing to work as contract miners;
 Tavan Tolgoi has more coal than presently estimated, says Minister;
 Ochirbat against splitting Tavan Tolgoi management;
 Mongolia expects at least USD100 million from Oyu Tolgoi this year;
 Work on Oyu Tolgoi to formally begin by April 6;
 Mongolia to form mineral assets-based companies, then sell shares;
 East Asia Minerals named one of TSX Venture 50;
 Voyager starts due diligence on Mongolian gold project;
 Two Mongolian mining companies attract attention;
 Khan Bank refurbishes library reading room at MUST;
 Xanadu Mines sponsors exhibition on Mongolia in Sydney;
 Radisson Blu Hotel in Ulaanbaatar next year;
 Stratos provides connectivity to help locate Chinggis Khaan’s tomb;
 Be more worldly, Goldman advises U.S. investors;
 China indicts Rio Tinto employees;
 Rio Tinto moves to improve ties with China.
Economy:
 Mongolia to raise up to USD1.2 billion in first dollar debt sale;
 Batbold sees delays for dual listings;
 IMF expects sharp rebound in Mongolian economy this year;
 PM asks businesses to be export-minded;
 B.Javkhlan sees stability of banks as his first priority;
 Economic crisis far from over, says N.Zoljargal;
 Nothing wrong with 3% deficit budget, feels Khurelbaatar;
 Concession law to take effect on March 1;
 Nuclear authority annuls agreement signed by Mon-Atom;
 Uranium sector continues to be under wraps;
 Khan Bank team tells President how it is helping herders;
 Privatization goals right, details wrong, says analyst;
 IMF, WB officials discuss economy with Speaker;
 Breaking the resource curse in Mongolia;
 U.S.-China growing pains;
 Currency dispute likely to further fray U.S.-China ties;
 Why China keeps poisoning the milk;
 China battles housing boom;
 CIC's disclosure of U.S. investments reveals strategy;
 Asia sails smoothly through debt waters;

2.  Deutsche Bank sees more growth in ETFs.
Politics:
 Autumn session ends after adopting 104 laws;
 1.9 million animals die;
 Ex-President Enkhbayar leads aid team to 3 provinces;
 Governors tell President they should have more power;
 396 policemen get compensation;
 Russians trying to push their outworn technology, feels engineer;
 Every family spends around MNT800,000 during Tsagaan Sar;
 Mongolian “spy” takes refuge in Toronto church;
 Mongolian author carries books to children in remote areas;
 China finds tons of tainted milk powder in use again.
*Click on titles above to link to articles.
BUSINESS
PM CONFIRMS PLAN TO USE CONTRACT MINING IN TAVAN TOLGOI
Mongolia's decision not to auction a stake in the Tavan Tolgoi coal project will allow the nation a
greater return on the deposit, Prime Minister S. Batbold has said, confirming reports that the USD2-
billion sale would be canceled in favor of a plan to keep 100 percent share in State hands.
"This is to ensure that we benefit from value-added production," Mr.Batbold told the Mongolia
Economic Forum. "The option has been suggested and recommended to the task force responsible."
The plan would have to receive Parliament’s approval.
(Bloomberg, however, says the Prime Minister was not so categorical. It quotes him telling a press
conference, ―We have not ruled out foreign mining companies having a stake, but our preferred
option is complete state control.‖)
Mr. Batbold said, "For other strategic deposits we will consider each project on a case by case basis.
Maybe in some cases domestic national investment can be involved."
As for Tavan Tolgoi, the Government hopes to strike a deal with a global miner to develop the
deposit on a contract basis, without a significant equity holding in the project. "Contract mining is
widely used in the U.S. and Australia, so this should be useful to Mongolia. We must see how we can
create favorable conditions for foreign investment," Mr. Batbold said.
―Our preferred option is now to negotiate a contract agreement to develop the project,‖ Minister
of Mineral Resources and Energy D. Zorigt has said. ―We have been given a directive by the Prime
Minister.‖ He did not elaborate on what a contract agreement would entail, beyond that foreign
operator companies would execute the extraction, transportation and marketing activities.
Read more…
Shortlisted bidders for the stake in Tavan Tolgoi -- which holds estimated reserves of 6.5 billion
tons of coking coal -- included heavyweights BHP Billiton, India's Jindal, Brazil's Vale, U.S. coal
miner Peabody, and China's Shenhua. A South Korean consortium, a group of Japanese companies,
and a Russian consortium including Gazprom and Renova were also named as bidders. Mongolia's
State-owned Erdenes MGL was originally slated to own at least 51 percent of the project.
JP Morgan and Deutsche Bank were advising on the sale, but are no longer working on it.
Source: Reuters, Bloomberg
TAVAN TOLGOI PREFERENCE A CHALLENGE FOR MINING COMPANIES
The Prime Minister’s preference for full Mongolian ownership of Tavan Tolgoi potentially restricts
access to a source that has drawn strong interest from Western mining companies. His comments
confirm speculation that the Government is likely to back out of a plan to sell a 49% stake in the
deposit, opting instead for mining contracts or production-sharing arrangements.
Whatever arrangement the Government chooses to pursue has implications for mining companies
interested in operating in the country, as well as for the Government's own finances.
Under a production-sharing agreement, mining companies would bear the cost of developing the
deposits and share revenue with the Government. While the companies would not own the deposits
outright, the terms of an agreement can stretch 15 years or longer and can still be structured in a
way that makes them attractive.

3. Under a contract-mining arrangement, the Government itself would bear the cost of developing the
project and hire an outside company to do the extraction work. Opting solely for contract mining on
Tavan Tolgoi or other projects could be a challenge, given the high costs involved and the weak
finances of the Government.
Read more…
"I don't think you have to extrapolate that it's a wholesale shift [in government policy]," said Mr.
Alisher Ali Djumanov, chief executive of Eurasia Capital, an investment bank based in Hong Kong
with a focus on frontier markets. "There are limits on how much the Government can do. If they
own 100% of Tavan Tolgoi, that will put the Government in the driver's seat. It puts a lot of stress
on the ministries. As other mining projects start up, there will be a limit on how many projects the
Government can handle simultaneously."
Source: The Wall Street Journal Asia
ZORIGT SEES INVESTORS AGREEING TO WORK AS CONTRACT MINERS
Answering questions at a media conference, Minister for Minerals and Energy D.Zorigt said what
Prime Minister S.Batbold has suggested about the Tavan Tolgoi deposit basically means that the
State will keep 100 percent of the license without selling any share of this, and foreign companies
will make contracts with Erdenes MGL to mine coal. This way of working with private companies
will be new in Mongolia, but is followed elsewhere in the world. He clarified that the Government’s
ownership will cover the area for which the license is held by Erdenes MGL, and exclude the few
licenses already issued to companies such as Energy Resource.
Asked if companies would be willing to operate mines without owning them, Mr. Zorigt said once
the terms were finalized, he was ―sure there will be companies ready to accept them‖. He clarified
the Government would not be ―renting out‖ the deposit, but would ask ―companies to operate
under a contract to mine coal, on payment of fees‖. The details are being worked out and the
changed situation may lead to ―either an increase or a decrease‖ in the present number of 11
companies or consortiums who have expressed interest in Tavan Tolgoi.
―There may be one or several operators,‖ Mr. Zorigt said, adding that anyone ―holding operation
rights and making large investments‖ would prefer to have control over the management and over
the mining and selling of the coal. The Government will accept this, but ―we will of course monitor
and oversee the work‖.
Source: en.News.mn
TAVAN TOLGOI HAS MORE COAL THAN PRESENTLY ESTIMATED, SAYS MINISTER
Minister of Mineral Resources and Energy D. Zorigt has indicated that negotiations on Tavan Tolgoi
are likely to be based on significantly increased estimates of the coal in the deposit. Improved
extractive technology is expected to allow much more coal to be mined than a Russian feasibility
study in 1990 had concluded. Mr. Zorigt also said the selected investor will have to invest in the
railroad construction, but specific details of this will depend on which country that company will
be. For instance, if it is from either of the two neighbors, it will have to ensure uninterrupted
transport through that country’s territory at discounted tariffs. If it is a Japanese company, it will
be asked to cooperate with the international bank there.
The first phase of the work on the project, including building the railroad and a power station, will
provide 12,000 people with jobs, while 4,000-5,000 permanent jobs will be available when it starts
operating at full capacity. A new town and satellite habitations will also come up. At present value,
USD5.6 billion will come from the project within 30 years.
Source: Montsame
OCHIRBAT AGAINST SPLITTING TAVAN TOLGOI MANAGEMENT
The first President of Mongolia, Mr. P.Ochirbat, feels that whoever is chosen to work on the Tavan
Tolgoi deposits, the coal reserve should not be split. ―Regardless of the number of investors, the
management has to be one and consolidated,‖ he says, adding that the Zaamar gold mine is ―an
example of the destructive consequences and chaos when a large deposit is split‖.
Source: Udriin Sonin
MONGOLIA EXPECTS AT LEAST USD100 MILLION FROM OYU TOLGOI THIS YEAR
The Mongolian Government expects the Oyu Tolgoi mining project to cost about USD5 billion, of
which USD1 billion has already been invested, Mining Minister D. Zorigt has said. A feasibility study
which will provide the general framework for the project for at least the next five to ten years is
scheduled to be completed soon.

4. Mongolia is expected to get USD100 million to USD150 million in prepaid taxes from the project this
year, he said.
Source: Dow Jones
WORK ON OYU TOLGOI TO FORMALLY BEGIN BY APRIL 6
The Oyu Tolgoi investment agreement, signed on October 6, will take full effect by April 6 when
operations will formally begin. Ivanhoe Mines Mongolia Inc (IMMC) has already been renamed Oyu
Tolgoi LC. The investor’s technical and economic estimates were sent back at the end of 2009 for
revision. It is believed the Mongolian side wanted clarification on the reserve estimates and water
supply. Oyu Tolgoi LC has said the disagreement now is limited to only 2-3 minor issues.
USD1 billion has been spent on the project so far. An external audit is on and tax organizations are
also checking documents.
Source: Onoodor
MONGOLIA TO FORM MINERAL ASSETS-BASED COMPANIES, THEN SELL SHARES
Prime Minister S.Batbold has said Mongolia may transfer its gold, copper and coal reserves into
companies that would then sell shares to global investors. The country will start the process toward
listing this year and plans to sell shares first on the Mongolian Stock Exchange. International
investment banks are likely to be hired to help it sell shares abroad. This is what the draft
privatization law for 2010-2012 also says.
―Parliament has given the approval for the Government to start the preparation‖ for the share
sales, Mr. Batbold said. ―This is a demand and a necessity for Mongolia, to make best use of these
resources to develop the country. Mongolia has not yet decided whether to group all asset classes
into three companies, or to create smaller companies around specific commodities, Mr. Batbold
said.
―I think it makes sense as long as Mongolia puts sizeable assets into these companies,‖ said Mr.
Alisher Djumanov of Eurasia Capital Management. He estimates the country could raise as much as
USD3 billion in three years selling equity stakes in resource companies. ―It would also make it much
easier to market these companies if they were only dealing with one resource, such as copper,
uranium or coal,‖ Mr. Djumanov said.
Source: Bloomberg
EAST ASIA MINERALS NAMED ONE OF TSX VENTURE 50
The TSX Venture Exchange has named East Asia Minerals as one of the TSX Venture 50, a ranking of
strong performers listed on the venture exchange. The TSX Venture 50 lists 10 emerging companies
in five industry sectors that have been identified as leaders in Canada's public venture market.
"It is an honor,‖ said Mr. Michael Hawkins, President and CEO of East Asia Minerals. "This provides us
with the ideal environment to meet our growth goals and objectives."
East Asia Minerals is an Asian-based, Canadian mineral exploration company with gold and copper
exploration properties in Indonesia, and uranium exploration properties in Mongolia. It owns eight
uranium properties, including the advanced Ingiin-Nars, Ulaan Nuur and Enger uranium projects,
and two phosphate properties in Mongolia.
Source: www.EAminerals.com
VOYAGER STARTS DUE DILIGENCE ON MONGOLIAN GOLD PROJECT
Gold explorer Voyager Resources has initiated a due diligence study on the Tsagaan Chuluut gold
project in Mongolia, in which it has the option to acquire an 80% stake. The project is 3,971
hectares in size, and is situated in the Domod Volcanic Tectonic Belt, which hosted several active
gold placer mining operations.
Five separate mineralized zones have been identified within the project area to date, and 15
reverse circulation drill holes, and one diamond core drill hole had been completed.
Source: www.miningweekly.com
TWO MONGOLIAN MINING COMPANIES ATTRACT ATTENTION
Toronto-listed SouthGobi Energy Resources has attracted global attention after claiming to be a
strategically located premium coal producer in Mongolia. This may not be reflected in the stock's 11
percent slide on its first trading day in Hong Kong, but the future holds much promise for this
Canadian company, which raised USD439 million from its initial public offering.
Ovoot Tolgoi is SouthGobi's flagship coal mine while Tavan Tolgoi is the world's largest undeveloped
coal field. Both are to be connected with road and railway links to China's steel hubs such as

5. Jiayuguan in Gansu and Baotou in Inner Mongolia. Beijing has also approved huge coal-fired plants
for Jiuquan near Jiayuguan.
SouthGobi's coal quality is higher than that of Chinese coal producers. The forecast target volume in
2009 and 2010 is around 2 to 3 million tons as SouthGobi negotiates to boost sales. The firm is
aiming for a production surge of 15 million tons in 2015.
Transport of the coal will be made easier after both the Chinese and Mongolian governments
approved three coal corridors across their common border. Transportation has not been a problem
yet, since clients have been sending their own trucks to the coal mines to collect supplies daily.
One of SouthGobi's strengths is its versatile management team.
Another mining company, Mongolia Energy Corporation, appears to be transforming itself from a
single-project coal company to a multi-mineral resources developer. Its management is banking on
large scale exports from western Mongolia to the Xinjiang Autonomous Region whose transport
infrastructure is to be upgraded. Mongolia Energy has built a 310-kilometer highway to access the
Chinese market from its mines and also aims to develop copper mines connected to the coal
reserve.
Mr. Simon Lo Lin-shing, MEC's largest shareholder, is pushing the company to become a fully fledged
resource developer. Its main asset is the 34,000 hectares of coal concessions it acquired in 2007. It
has also carried out eight drilling projects involving oil and gas, iron and other minerals.
Generating revenue is one issue, but turning a profit can be an entirely different matter. Unless the
company can identify more profit-generating projects within two years, it is unlikely that MEC's
profit and loss statements will be stunning until at least 2014 or 2015. But one advantage is that
MEC faces weak competition from other firms seeking resources in western Mongolia.
From a mining perspective, Australia can be regarded as an elderly person and Indonesia an adult.
But Mongolia is just a baby which has yet to grow up to reveal its real potential.
Source: The Standard, Hong Kong
A clarification:
The Mongolia Energy Corporation has noted some factual inaccuracies in the report above. These
include:
1. The company has 330,000 hectares of concession areas in western Mongolia, and not 34,000
hectares. These concessions were acquired in 2007 and 2009.
2. In addition to the western Mongolia projects, MEC is also involved with projects in eastern
Mongolia, and in Xinjiang, China.
3. MEC aims to develop other mineral resources in western Mongolia, besides copper.
KHAN BANK REFURBISHES LIBRARY READING ROOM AT MUST
A ceremony was held at the Mongolian University of Science and Technology (MUST) last week to
dedicate to students, teachers, and other users the scientific reading room of the central library
refurbished by Khan Bank according to modern standards. The 60-seat and 170-sq. m. reading room
has 11,350 training and research works and 2,976 doctoral dissertations, master’s theses and
abstracts. It is distinct from other student reading rooms in that Khan Bank has equipped it with
Dell monitor, Athena computers, barcode scanner, anti-theft gate etc. at a cost of MNT15 million.
Source: www.khanbank.com
XANADU MINES SPONSORS EXHIBITION ON MONGOLIA IN SYDNEY
Xanadu Mines and the Mongolian Embassy in Australia have jointly sponsored an exhibition of 60
photographs of Mongolia taken by Australians Peter Sikes and Gregory Fornier at a Sydney gallery.
The exhibition, called ―Respect to Mongolia – the Country and its People‖, was inaugurated by
Ambassador Ts.Jambaldorj who referred to the severe winter conditions in Mongolia and appealed
for donations. The ceremony was attended by representatives of several Australian companies with
links to Mongolia.
Source: www.news.mn
RADISSON BLU HOTEL IN ULAANBAATAR NEXT YEAR
The Brussels-based Rezidor Hotel Group plans to open the Radisson Blu Hotel in Ulaanbaatar before
the middle of next year. "We are delighted to enter a new and fascinating destination and the 61st
country where Rezidor will be present", comments Mr. Kurt Ritter, President & CEO of Rezidor. "Our
co-operation will strengthen the business of both our companies, and bring a new clientele to
Mongolia", adds Mr. Jan Wigsten of Nomadic Journeys, owner of the hotel.
Already under construction, the hotel will have 175 rooms looking out to the Choijin Lama Temple,

6. 3 restaurants (including a Paulaner micro brewery), a wellness center and 1,500 sq. m of
conference and meeting space.
Source: www.rezidor.com
STRATOS PROVIDES CONNECTIVITY TO HELP LOCATE CHINGGIS KHAAN‟S TOMB
Stratos Global Corporation is supplying Inmarsat BGAN (Broadband Global Area Network) mobile
satellite communications service to University of California San Diego (UCSD) researchers to support
their ambitious archaeological survey in the Valley of the Khans (VOTK) as they search for the tomb
of Chinggis Khaan. The VOTK research project (www.valleyofthekhans.org), supported by the joint
National Geographic Society/Waitt Grants Program, is led by UCSD research associate Albert Yu-Min
Lin. Dr. Lin initiated this project using a new, non-invasive scientific approach.
The project aims to locate the tomb utilizing modern digital tools from a variety of disciplines,
including digital imagery, computer vision, non-destructive surveying, and on-site digital
archaeology. The search seeks to locate the tomb without disturbing it, thus maintaining respect
for local customs while enabling protective measures through organizations such as UNESCO. The
VOTK research project was recently nominated as one of National Geographic Adventure magazine's
2010 Adventures of the Year.
Source: www.prnewswire.com
BE MORE WORLDLY, GOLDMAN ADVISES U.S. INVESTORS
The most promising investment opportunities are increasingly found outside the USA, yet the vast
majority of Americans place little stock in overseas markets. That is a huge mistake, considering
that China, India and other emerging markets promise superior growth, said Mr. Brent Ciliano, a
portfolio strategist at Goldman Sachs Asset Management. "The world is massively global. It follows
your portfolio should be what the world is," he said.
The facts should speak for themselves, Mr. Ciliano said: 70 percent of small-cap stocks, about 55
percent of global equities, and two-thirds of REITs are outside the USA. Yet most U.S. investors
have no more than 5 percent to 10 percent exposure to foreign markets.
Thanks to the slowdown in developed markets, and the expansion of Asian markets, the rest of the
world will represent a bigger and bigger share of the global marketplace. Mr. Ciliano cited research
showing the U.S. share of the world's financial markets could shrink to 30 percent by 2030, down
from about 45 percent at present. It was as high as 70 percent in the 1970s. However, the share
held by other countries is increasing at a must faster clip now, which means the U.S. share could
fall to 30 percent in just five years.
Source: Reuters
CHINA INDICTS RIO TINTO EMPLOYEES
China has indicted four Rio Tinto employees held since July and plans to prosecute them on
allegations of bribery and violating commercial secrets. The State-run Xinhua news agency cited on
Wednesday prosecutors' allegations that the four men, including Australian national Stern Hu, asked
for and accepted "huge" bribes from several Chinese steel enterprises on multiple occasions, and
used "improper" means to obtain Chinese commercial secrets from them on several occasions. The
report gave no dates for any trials.
The indictment comes amid broader concerns from foreign executives and analysts about a
worsening atmosphere for foreign businesses in China. The Rio case in particular has shocked the
international business community and caused tensions in Sino-Australian relations.
The indictment means it is highly likely the men will be punished. Few Chinese prosecutions end in
acquittal, especially in such high-profile cases. China has not yet published specific details of the
case against the four salesmen, who were formally arrested in August. A police investigation into
the case ended last month and it was handed over to Shanghai prosecutors.
Read more…
State media in the past have quoted government officials as alleging that the Rio employees took
large bribes in the course of driving the multibillion-dollar mineral-sales business in China for the
giant Australian miner. Steel producers in China's highly fragmented industry compete intensely for
supplies of iron ore.
Mr. Zhang Peihong, a lawyer for one of the three Chinese employees who worked for Mr. Hu at Rio,
said he had not yet been informed of the indictment by officials.
Rio Tinto has previously denied that it or its four employees, who have not been reachable and have
not appeared in public, had done anything wrong. The company has also taken steps to improve its
relations in China, where it has a major business supplying minerals to the world's largest steel

7. industry.
Chinese authorities, in past statements, have sought to portray the matter as a straightforward
criminal probe, although initially officials raised allegations involving Chinese state secrets. Chinese
officials have since said Australia would have considered Mr. Hu's activity unlawful if it had
happened there.
Source: The Wall Street Journal Asia
RIO TINTO MOVES TO IMPROVE TIES WITH CHINA
Mining giant Rio Tinto has appointed Mr. Ian Bauert as MD for its Chinese operations, a move that
underlined, according to CEO Tom Albanese, the importance the company placed on improving its
relationship with China. ―I am deeply committed to developing our relationship with China.
Bauert’s experience and leadership will provide strategic direction and help guide all aspects of our
engagement with China, one of our most important partners,‖ Mr. Albanese said.
Mr. Bauert reports to Mr. Doug Ritchie, who last year assumed direct responsibility for Rio Tinto’s
activities in China, in addition to his role as CE for energy. ―This appointment recognizes the
importance of China as a long-term partner with our organization and our intention to foster new
and dynamic relationships as China's development continues,‖ said Mr. Ritchie.
Source: www.miningweekly.com
ECONOMY
MONGOLIA TO RAISE UP TO USD1.2 BILLION IN FIRST DOLLAR DEBT SALE
Mongolia plans to sell as much as USD1.2 billion of bonds overseas later this year, its first sale of
dollar-denominated debt, to fund infrastructure supporting its mining industry, Finance Minister S.
Bayartsogt has said.
Investment banks are advising Mongolia to issue bonds with maturities of between five and 10 years,
Mr. Bayartsogt has said. The Government plans to meet investors in Hong Kong, London and New
York, he said. The offering will take place after International Monetary Fund restrictions on the
country issuing debt end in October.
Source: Bloomberg
BATBOLD SEES DELAYS FOR DUAL LISTINGS
Initial public offerings of Mongolia's State-owned mineral assets could take more time, as the
Government works on upgrading the stock exchange to facilitate dual listings, Prime Minister S.
Batbold has said. "We'd prefer to list [companies] in Mongolia first, but it may take more time than
we expected to list on the local exchange because things are not running properly in terms of
infrastructure and management and real-time functions," Mr. Batbold said.
The Prime Minister would like to see dual listings of Mongolian assets, with companies offering
shares on exchanges such as Hong Kong, London or New York as well as on the Mongolian Stock
Exchange. State-owned companies up for listing include Erdenes MGL LLC, which owns licenses for
the Tavan Tolgoi coal mine as well as other mineral deposits; Erdenet Mining Corp., and MIAT.
The Government is hiring managers with international experience for the exchange, he said. Among
the issues that need to be addressed is establishing regulatory standards that are in line with
international rules. Mr. Batbold said he would also like foreign companies that hold Mongolian
assets and are listed abroad to list a 10% stake on the local exchange. Such companies include
SouthGobi Energy Resources and as Mongolia Energy Corp., both listed on the Hong Kong Stock
Exchange.
Source: The Wall Street Journal Asia
IMF EXPECTS SHARP REBOUND IN MONGOLIAN ECONOMY THIS YEAR
IMF mission chief Steven Barnett has said after a visit to Mongolia that the International Monetary
Fund expects the Mongolian economy to rebound sharply this year thanks to the Oyu Tolgoi project,
while inflation should remain under control. The fund's board would likely review the country's
performance under the USD236 million IMF loan agreement approved in April 2009 "in the coming
weeks" and release the next loan tranche of about USD24 million.
"The Government and the Central Bank have implemented policies that have helped Mongolia
cushion and adjust to the global economic crisis," Mr. Barnett said, noting that this year's severe
winter would impact the economy. Gross domestic product growth was set to rebound to around 7
percent this year, boosted by the USD3 billion to USD5 billion development of the Oyu Tolgoi mine.
Mongolia expects the mining project to make a big difference to an economy that generated less

8. than USD5 billion in GDP in 2008.
The economy grew by 8.9 percent in 2008 but growth was expected to slow to 2.7 percent in 2009,
according to the World Bank. Meanwhile, inflation could pick up to around 8 percent by year-end,
driven in part by higher meat prices from the loss of livestock, before stabilizing at some 6 percent
in 2011.
"The relatively favorable outlook is due in large part to prudent macro-management and continuing
structural reforms," Mr. Barnett said. Pushing ahead with economic reforms while maintaining sound
policies, including a prudent fiscal stance, flexible exchange rate, and monetary policy geared to
containing inflation, would help the economy expand, reduce poverty and contain inflation, he
said.
Source: Reuters
PM ASKS BUSINESSES TO BE EXPORT-MINDED
Opening the recent 4th
annual "Made in Mongolia" exhibition, Prime Minister S.Batbold expressed
happiness that both the range and quality of domestic products have been improving over the
years. The exhibition was jointly sponsored by the Government and the United Council of Mongolia's
Professional Unions. He assured local businesses, particularly SMEs, of continued Government
support.
He reminded producers and manufacturers of the need to be competitive when seeking export
markets, and asked them to use modern technology and equipment satisfying international
standards.
Source: Montsame
B.JAVKHLAN SEES STABILITY OF BANKS AS HIS FIRST PRIORITY
Mr. B.Javkhlan, the just appointed First Vice President of the Central Bank, sees ensuring stability
in banking operations as his first priority. Asked by media about MPs’ comments on the lack of
proper audit in commercial banks, he clarified that they were unhappy about external audits. The
Central Bank’s role is limited to internal audits following clear monitoring and control procedures.
In answer to a question, he said he was a member of the MPRP but when asked if his appointment
had been influenced by this, he said, ―It would be better for the people that appointed me to
answer this question. My party found me suitable for this important work and the Central Bank
President agreed. The final decision was taken by Parliament. This is all that matters.‖
Source: en.News.mn
ECONOMIC CRISIS FAR FROM OVER, SAYS N.ZOLJARGAL
The following is a selection from the questions Mr. N.Zoljargal, the new Vice President of the
Central Bank, was asked at a Press conference following his appointment and his answers:
Why did your appointment raise such a lot of questions?
It is good if all public appointments are similarly scrutinized. I shall certainly benefit from the many
suggestions offered. I am happy that doubts were erased and Parliament saw it fit to appoint me.
It was said you are a gambler in casinos and some MPs were worried that you will spend the bank
money in casinos.
Not all that is said is true. I don’t go to casinos.
MPs from the MPRP doubted your qualification for the job...
I have worked for many years in the banking sector and consider myself fully qualified to meet the
requirements of the position.
What is your party affiliation?
I am not a member of any party.
Read more…
What truth is there to talk that you bribed some MPs from the MPRP and that is why they voted for
you?
I do not know those people well. I’m just familiar with their faces. There was no political lobbying.
Some commercial banks are in a difficult situation.
What will you do if the new vice presidents are blamed if and when they fail?
Of course we will be blamed if something goes wrong in the banking sector. It is true banks are in a
difficult situation. The economic crisis in Mongolia is nowhere near its end. I think things will be
more difficult in the coming six months. Banking operations must be made transparent to lessen the
chances of banks going bankrupt.
Source: Ardiin Erkh

9. NOTHING WRONG WITH 3% DEFICIT BUDGET, FEELS KHURELBAATAR
Commenting on stratagems employed by MPs to get more State investment in their electoral
constituencies, Mr. Ch. Khurelbaatar, Minister and Head of the Cabinet Secretariat, has said they
are aware of this circumvention and are working on corrective measures. Referring to the U.S.
practice of subjecting budget proposals to scrutiny spread over nine months, Mr. Khurelbaatar said
in Mongolia Parliament gets only three weeks from the time of its first discussion to pass the
budget, and this is not sufficient time to sift all the many proposals that are submitted.
However, it will be wrong to blame MPs for, in many cases, they are also the people who best know
the needs of their constituencies. The entire process, he felt, can be improved if local governments
are given more authority and power to plan and spend.
He also said that as an economist he did not agree that a state budget always has to show a surplus.
A deficit of about 3% of GDP is perfectly acceptable. He also favored less concentration of revenue,
which makes monitoring difficult, and is also more risky as the entire money could be lost if the
bank where it is kept is in trouble. The presently proposed amendments will take care of these
anomalies and make for long-term improvements.
Source: Zuunii Medee
CONCESSION LAW TO TAKE EFFECT ON MARCH 1
The concession law, approved by Parliament last month, will come into effect on March 1. MP
Ts.Munkh-Orgil (MPRP), head of the working group to draft the law, MPs S.Byambatsogt (MPRP) and
D.Odkhuu (DP), and D.Bailikhuu, adviser in the State Property Committee, told journalists last week
that this would open up State and regional property for better investment opportunities without
being privatized. That would release Government money to be spent on developing infrastructure
and providing improved social services to citizens.
The law will cover state and regional property as well as property of government organizations, and
assets of State-owned industrial entities. Investors will be able to select property where they wish
to get the concession. The law allows seven types of concession, such as construct-transfer,
construct-use-transfer and construct-own-use.
The Government will soon publish a list of property that is to be offered on concession. Provincial
governors will have the right of selection in their regions.
Source: Udriin Sonin
For complete versions of the Concession Law in Mongolian and English, refer to BCM website,
Resources-Laws of Mongolia.
NUCLEAR AUTHORITY ANNULS AGREEMENT SIGNED BY MON-ATOM
The Nuclear Energy Authority has invalidated the agreement between the State-owned Mon-Atom
and Khan Resources but the Mon-Atom Director, Mr. R.Badamdamdin, says he ―has not studied the
reasons yet‖.
The agreement was to take control of 51 percent of the deposit held by Central Asia Uranium (CAU)
under license as it had been explored with State money. Before the agreement, the Mongolian
Government and the Russian company Atomredmetzoloto owned 21 percent each of CAU, while the
rest was held by Khan Resources. The agreement took 8 percent from Atomredmetzoloto and 22
percent from Khan Resources, giving the State 51 percent of the total.
Mr. Badamdamdin recalIed that Russian President D.Medvedev had expressed interest in buying the
Khan Resources license area during his visit last year, but now Mongolia has 51 percent of it.
However he ―did not know‖ if this had angered the Russians.
Source: en.News.mn
URANIUM SECTOR CONTINUES TO BE UNDER WRAPS
All developments in the uranium sector remain hidden from public knowledge even as certain
companies operating in Eastern Mongolia are reported to be ready to export the yellow cake.
Mongolia has huge uranium resources and has made agreements with Russia, Japan, France, and
India. The Director of the Nuclear Energy Agency has hinted similar cooperation agreements with
South Korea and China will follow soon.
The reasons behind absence of transparency in this sector are that it is governed by a special law
and by a State-owned company which keeps mostly quiet. Also, popular interest is focused on Oyu
Tolgoi and Tavan Tolgoi. Few NGOs, scientists, and analysts speak about uranium, even though it is
so important for the economy, for foreign relations, and also, in a way, for the environment. China
aims to reduce its coal consumption by producing more energy from the sun, the wind, and nuclear
plants. This is the general trend elsewhere also. Also, both our neighbors have nuclear arms. Our

10. uranium will be in demand for all this, but are we ready?
There is talk from time to time of building an atomic power plant in Mongolia itself to meet its
energy needs, but no one knows how far or how near it is. Meanwhile, only 5% of the license holders
in uranium are domestic companies, and around 20 foreign companies dominate the sector. Our
southern neighbor is believed to have been showing increased interest in seeking fresh licenses on
uranium deposits. We have to come out with a clear policy and more public information. For a
start, the uranium company could think of offering shares to the public.
Source: Zuunii Medee
KHAN BANK TEAM TELLS PRESIDENT HOW IT IS HELPING HERDERS
A high-power Khan Bank team, led by CEO Peter Morrow, recently briefed President Ts.Elbegdorj on
measures the bank has taken to provide succor to herders who borrowed from it and now find
themselves in distress because of the harsh winter. Applications for fresh loans for fodder were
being processed quickly and granted with a low interest. The bank is also making allowances for
those who have lost animals. "In general, we give priority to herdsmen with whom we have been
cooperating for ten years," they said.
The President stressed the need in the present emergency to extend the repayment period and to
ease the terms of fresh loans. He urged the bank to design a livestock insurance system in
cooperation with other institutions.
As of January 1, 64,600 or some 37 percent all herders owed money to the bank, with 95 percent of
them making regular repayment. The average individual loan is for MNT 970,000.
Source: Montsame
PRIVATIZATION GOALS RIGHT, DETAILS WRONG, SAYS ANALYST
Prof. Dr. G. Purevbaatar feels that the three avowed goals of the present privatization policy --
selling shares in State-owned companies to raise money for investment elsewhere, finding fresh
resources for power stations and power distribution companies on the verge of bankruptcy, and
developing the Mongolian Stock Exchange -- are unexceptionable, but many of the specific details
are wrong, or at least dubious and contradictory. For instance, there can be no justification for
disposing of shares in State-owned companies like Erdenet, Mongolrostsvetment, and Mongolian
Telecom which consistently earn profits and contribute to the State budget.
Such sale could also lead to the present partners in these, Russia and South Korea, to gain majority
control in units in sectors of strategic economic and political importance. The Darkhan factory and
uranium deposits also fall in this category. The Government must retain control over them, and if
partners are unavoidable, their number should be kept low, instead of allowing too many interests
in any deposit, Mr. Purevbaatar said.
Source: Zuunii Medee
IMF, WB OFFICIALS DISCUSS ECONOMY WITH SPEAKER
Parliament Speaker D.Demberel last week discussed the 4th stage of the "Stand-by" program
Mongolia is jointly implementing with the IMF, with Mr. Steven Barnett, Permanent Representative
of the Fund here, and Mr. Rogier van den Brink, a senior economist of the World Bank for Mongolia.
Mr. Barnett felt Mongolia has passed the worst of the crisis and entered a stage of economic revival.
Lauding the way Mongolia has been following a successful path, Mr. Barnett cautioned about
―challenges at the policy level that lie ahead".
Mr. Van den Brink was happy international organizations have been able to offer help as Mongolia
battles the crisis. The International Development Association (IDA) will give USD10 million more
than the initially promised USD20 million and another USD12 million as technical assistance.
The Speaker thanked both institutions for their constant support and was happy they thought
Mongolia would grow 9% this year. The country’s own projection was a growth rate between 7-8
percent.
Source: Undesnii Shuudan
BREAKING THE RESOURCE CURSE IN MONGOLIA
These days Ulaanbaatar is looking decidedly prosperous. Traffic jams snarl up the streets, a new
Louis Vuitton store is reportedly outselling the branch in Lyons, new bars and restaurants are
popping up, and prices are rising. And there are a lot more foreigners than there used to be. The
rising optimism is centered on Mongolia’s largely untapped mineral wealth. Everyone has known
that Mongolia was, literally, sitting on gold – the reserves proven, the locations known – but
exploiting it is a major political issue.

11. Everyone wants in on the action. The Mongolian Government has said it is open for business and the
customers are starting to flock. But Mongolia is not a highly controlled one-party state like China,
or a country producing crony capitalism and oligarchs, like Russia. Mongolia is a multi-party
democracy with vibrant and sometimes hectic elections. There is a free and highly vocal press and a
citizenry keen to see some rewards from their mineral wealth.
Hence the buzz phrase everyone is talking about, on TV, in the newspapers, on the shelves of the
bookshops: ―resource curse‖. This refers to the paradoxical situation of the world’s resource-rich
countries being among the poorest.
Read more…
In the past the Government held back from opening the floodgates. The perception of giving the
wealth away had led to demonstrations, sometimes violent. Still, the process has started – Canada’s
Ivanhoe Mines and the Anglo-Australian Rio Tinto are licensed to start work in the massive Oyu
Tolgoi field of copper and gold.
Limited liability companies have been formed, with the Government holding a 34% interest. But
worries persist. Is the Government experienced enough to maintain a close watch on these new
entities?
But Mongolia is not China. Bad practices will be made public and demonstrations will occur. Foreign
miners entering Mongolia know that workplace safety is a major concern and both the Government
and the press are watching – public opinion is a factor in Mongolia. And to help ease concerns the
Government is encouraging local mining companies to modernize and compete.
Several deals were put on hold recently over concerns about corruption. The foreign miners are
bringing a lot of money into what is still generally a poor country, so it is interesting to note that
the Government has not simply grabbed the cash, but is remaining cautious. Similarly with the
environment – new laws require that mining companies put in place reclamation projects at the end
of the extraction process.
There will be more licensing and more miners entering Mongolia. To help avoid the resource curse,
NGOs and pressure groups are being formed to lobby for the wealth to be spent on social
infrastructure – electricity, water and schools. But others worry and see elite groups of local
politicians and foreign businessmen forming cartels.
There will, inevitably, be a learning curve but that with a free press, politicians who can be elected
or deselected and a vibrant public debate, Mongolia could just become one country to escape the
curse.
Source: EthicalCorp.com
U.S.-CHINA GROWING PAINS
Despite the recent squall in U.S.-Chinese relations, both countries have powerful reasons to
cooperate with one another. These have grown over the past two decades, a progression that both
countries seem to recognize. In fact, both countries might well be playing the same game: feigning
public outrage to satisfy domestic audiences.
But there are two trends that could take a manageable situation and make it something more
worrisome. The first is a growing perception in China that it is no longer as reliant on the West, and
in particular the USA, as it was. Today, China is awash in capital; it has many top-notch local
companies; and this year for the first time, the primary engine of Chinese growth has been its
domestic market, not exports. As China expands, that internal market will probably become its
dominant concern.
Today, China commands respect across the globe. It is confident, even cocky, in bilateral and
multilateral forays. None of this is nefarious. But Beijing's newfound arrogance is not joined with a
broader vision. The country does not appear ready to play a global role. In international summits
Beijing has been largely focused on pursuing its interests in a fairly narrow sense.
Read more…
The second factor that could exacerbate Sino-U.S. tensions is America's economic fate. There is
great fear that the U.S. economy is in deep structural decline. If American politicians cannot
muster the courage to make the U.S. economy competitive again and Beijing perceives that it is
dealing with a superpower in inexorable decline, relations between China and America will change
fundamentally. Of course, if that happens, America will have plenty else to worry about as well.
Source: washingtonpost.com
CURRENCY DISPUTE LIKELY TO FURTHER FRAY U.S.-CHINA TIES
The Obama administration is reviving American pressure on China to stop artificially depressing its
currency, a policy that fuels its persistent trade gap with the USA. The White House is also weighing

12. whether to designate China as a country that manipulates its currency, when the Treasury
Department issues its semiannual report on foreign currencies in April.
Reopening the battle with Beijing over its currency may pay political dividends for Mr. Obama at a
time of double-digit unemployment and growing fears that China is stealing American jobs, but
experts say this will give the President even less leverage over Beijing than President George W.
Bush had as he prodded China for years to adjust its exchange rate with little success.
China, they say, is determined to reignite its export machine after a global recession that sapped
demand for Chinese goods. A cheap currency is vital to that goal. And China’s leaders have grown
impatient with lectures on economic policy from their chief debtor, the USA.
An expert said the Chinese are puzzled by the criticism. They think they should be praised for
keeping their currency stable at a time of global turmoil. Criticizing China’s policy is likely to
worsen a relationship already frayed by irritants on both sides.
Read more…
Exchange rates are an arcane subject, but they influence easy-to-understand issues like the
competitiveness of American exports and job security. The currency issue has the potential to
become a very hot political issue in the latter part of this year.
One factor affecting the U.S. administration may be shifting economic fortunes in both countries.
China is rebounding faster from the recession than the USA, and as it does, the imbalances that
result from its artificially depressed currency could become even starker.
Economists estimate that China’s currency, the renminbi, is undervalued by at least 25 percent and
as much as 40 percent, relative to the dollar and other currencies. That gap, they say, is wider than
at any time since 2005, when Beijing, under pressure from the Bush administration, allowed the
renminbi to rise modestly.
Source: The New York Times
WHY CHINA KEEPS POISONING THE MILK
Prime Minister S.Batbold has advised Mongolian businesses to keep strict watch over the quality of
their products if they wish to compete in the international market. In this context it is interesting
to see how China and Japan are tackling their own unique quality crises. In China, officials are
hunting for 170 tons of contaminated milk powder that is still on shelves more than a year after the
melamine scandal was first exposed. And in Japan, discussions are focused on all that has gone
wrong with its automotive industry after Toyota's recent recalls. But a closer look at the two
scandals shows how far apart the countries are in their approach to quality—and how much China
stands to learn from Japan.
China's quality challenge has at times been compared to Japan's efforts in the 1950s and 1960s to
transcend a bad reputation for manufacturing low-quality goods. At that time Japan also suffered
tragic industrial disasters, like the mercury poisoning in Minamata that left 1,000 people dead. But
Japan's leading companies have since been able to establish strong reputations for quality. Although
the automotive recalls currently underway are extensive, design errors and electronic malfunctions
are in a different league from China's instances of willful product manipulation, especially when
that manipulation has involved artful efforts at circumventing third-party controls.
In China, operators display an incredible willingness to place public safety at risk in exchange for
only the smallest gains in profit. The dairy industry's 2008 scandal is instructive. The trouble started
when dairy farmers began adulterating milk with water, prompting dairy companies to test protein
levels. Milk suppliers next discovered they could trick laboratory equipment into believing protein
concentrations were higher by adding a toxic, chemical compound —melamine. Over time, more of
the chemical was added, along with more water, and no one knows how little real milk was in the
final product by the time the scandal broke. We only know the end result: six babies died, 300,000
were sickened and over 50,000 were hospitalized, causing untold grief to Chinese families.
The melamine scandal is by far the most disturbing of all the quality crises China has faced in
recent years. It was not just the amount of suffering endured, but the fact that the contamination
was an open secret shared by possibly hundreds of individuals at dozens of companies. While some
people involved in the 2008 scandal might have been able to claim that they did not know
melamine could do so much harm, those caught using melamine more recently cannot possibly
plead ignorance.
Read more…
Making matters worse has been the government's wrongheaded response. Beijing reacted to this
year's melamine scandal with a heavy-handed cover-up. Chinese journalists have been warned not
to report details surrounding milk cases. Parents of children sickened by melamine-tainted products
who have attempted to organize themselves to protest or seek compensation risk being sent to jail

13. for "social disruption".
China's State-directed legal system has failed to provide justice to victims. The government meted
out severe punishment to only a small number of perpetrators engaged in the distribution and
production of poisoned milk—two were executed—and a far greater number were let off the hook.
China's response to past scandals has been to protect industry with a government shield, so no one
should be surprised when fraud recurs in such an environment.
The melamine case illustrates the dangers of Chinese manufacturers' pathological focus on short-
term profitability. Accidents can happen in almost any production process, but melamine did not
coincidentally make its way into milk. China's obsession with thrift is a virtue often carried to a
fault. Police have noted that the current melamine scandal was made possible by the many tons of
melamine that remained from the 2008 scandal. Some distributors chose to repackage the tainted
powder and put it on store shelves. They could not stand the thought of throwing away so much
milk powder, even if it was dangerously contaminated, and even if it meant running the risk of
being punished for it.
Japan's reputation for high quality in recent decades owes much to W. Edwards Deming, the father
of "total quality management". Were he around today, Deming would remind us that negative
reinforcement mechanisms are no way to improve quality standards. Quality must be seen as
something positive; it must be seen as something that drives long-term growth. It must be a goal
shared by all stakeholders. As it stands today, a small number of unscrupulous actors in China
threaten to ruin the export opportunity for many.
When he arrived in Japan in the 1950s, one of Deming's goals was to drive fear out of manufacturing
processes. Workers ought to have an open line of communication with management. There must be
an opportunity to report incidences and concerns from the factory floor. Partly thanks to the work
of Deming, Japan is today an economy that places a high value on the pursuit of quality for its own
sake, and that vision has helped Japan to become an innovator in a wide variety of manufacturing
sectors.
In China, workers are too afraid to report even the most obvious production errors or the most
egregious cases of unethical misconduct. In many factories, line operators are reluctant to report
anything at all. Managers ignore issues that might cause embarrassment. Everyone involved is
making a risk calculation, determining that staying silent reduces the likelihood of trouble, at least
in the short run. Where workers ought to speak up, the inclination is to look the other way instead.
One of China's problems is that efforts to improve quality are focused on the finished product only.
Every time a scandal erupts, the answer has been to test more of the finished product. This after-
the-fact approach is no match for an emphasis on continual, systemic improvement. As Deming
suggested, "We should work on our process, not the outcome of our processes."
China should not take Japan's recent stumble as an opportunity to gloat. Japan's quality problems
are unfortunate, but they are an aberration not representative of the manufacturing industry there.
Now more than ever, China should be looking to its easterly neighbor as an example of how its own
economy can adopt a philosophy of quality and product development that is the envy of the world.
Source: The Wall Street Journal Asia
CHINA BATTLES HOUSING BOOM
Chinese authorities are intensifying efforts to prevent a potentially destabilizing housing bubble
from forming in the world's third-largest economy. With inflation picking up and expected to flirt
with 5 percent this year, people are waking up to the fact that their savings are at risk sitting in
bank accounts. Investment alternatives are few and far between in China. The stock market has
been sluggish for nearly half a year and foreign investments are all but closed to ordinary people.
The big question hanging over the Chinese property sector is the extent to which demand has come
from owner-occupiers as opposed to investors hoping to quickly flip homes for a profit. Rampant
price rises in recent months persuaded Beijing to begin clamping down on speculators, fearing the
fallout if any bubble were left to grow to monstrous proportions.
The Government is winning the battle, for now. A succession of pledges to crack down on reckless
investment and steps to make second mortgages and transactions more costly have dampened
sentiment. Programs to build more affordable housing are also weighing on prices, even as they
shape up as an engine of real estate investment in the coming years.
Read more…
When real interest rates fell in 2007 as inflation rose, households shifted vast amounts of savings
into the stock market, fueling a steep rally. Its sudden collapse contributed to a loss of confidence
that slowed the economy over the next year. The obvious answer now would be to raise interest
rates. But doing so could draw hot money from abroad into an economy already awash in cash and

14. make it difficult for local governments to service the piles of debt that they racked up last year.
The central bank's moves in recent weeks to curb excessive loan growth have already hastened the
slide in Chinese shares prices and roiled markets worldwide.
Sales of new apartments and existing homes in Beijing fell some 70 percent in the first three weeks
of January from a month earlier. But policymakers would be premature in assuming that they have
seen off a housing bubble.
Source: Reuters
CIC‟S DISCLOSURE OF U.S. INVESTMENTS REVEALS STRATEGY
It is a rare event when the world gets a peek into the stock portfolio of a USD300-billion Chinese
sovereign-wealth fund. Thanks to a regulatory filing that China Investment Corp. made with U.S.
securities regulators, investors are now able to do just that. They can see, for instance, that CIC
holds shares of American International Group Inc., Apple Inc. and Citigroup Inc., as well as the same
sorts of index funds many small investors buy to get broad exposure to different markets.
What insights can investors glean about the fund's strategy and how the people who run it view the
markets? Here are some answers to these and other questions raised by CIC's disclosure.
Is China building strategic stakes in major U.S. companies like Apple and Coca-Cola Co. through its
sovereign-wealth fund?
Unlikely. CIC held just 30,000 shares of Apple at the end of 2009, representing an insignificant
amount of the 907 million shares outstanding. The same calculation works for the other U.S. blue-
chip holdings: each is a tiny number, mostly less than 1%. The exceptions are its negotiated
investments in companies such as Morgan Stanley and BlackRock Inc. In both those cases, the
company's management sought out and welcomed CIC's investment.
Chinese companies attempting to buy major stakes in U.S. firms have at times met with political
resistance and rejection, and CIC's management is aware of the sensitivities that would be raised by
its own presence as a major shareholder in certain companies. In fact, CIC management has said so
in the past.
How much of CIC and China's overall portfolio does this represent?
A relatively small portion. The USD9.6 billion invested in U.S.-listed equities is less than 10% of CIC's
USD110 billion allocated for international investments. It is an even smaller fraction of the Chinese
Government's overall portfolio if you consider the USD2.27 trillion in reserves held by the State
Administration of Foreign Exchange at the end of September. The U.S. Securities and Exchange
Commission is concerned with U.S. public-market investors, so stakes in unlisted holdings by CIC are
not included. Many of the holdings disclosed in the filing are shares in foreign companies with
American depositary receipts or exchange-traded funds whose underlying assets are outside the
U.S.
What does the filing tell us about CIC's strategy?
It appears CIC is giving its in-house portfolio managers a chance to construct investing strategies
with a tiny proportion of CIC's own money to deploy into relatively blue-chip companies that they
believe either have strong growth prospects or are undervalued. Names on the list such as insurer
AIG and Citigroup were hit hard in the financial crisis and would benefit from a rebound in the U.S.
economy.
Read more…
Does that mean that China is bearish on the U.S. market?
Hard to say. It is likely that CIC has much more invested in the U.S. and elsewhere on its behalf by
outside managers. Some estimate CIC has put more than USD25 billion into markets through outside
managers. CIC has not released any indication of the size of those allocations in 2009, which will
probably only be disclosed in its annual report later this year. It has also placed billions of dollars
into fixed-income products, hedge funds and private-equity funds. None of those is covered by its
13F filing with the SEC.
For the record, CIC is becoming a major presence in Mongolia, having invested a total of USD1.55
billion last year in SouthGobi (USD 550 million), MoEnCo (up to USD700 million), and iron ore mines
(USD 300 million).
Is China's sovereign-wealth fund becoming more transparent by making such a disclosure?
The SEC requires any institutional investors holding more than USD100 million in U.S.-listed
securities to submit the same sort of 13F filing that CIC made. So it is fair to say that CIC was not
doing this because of a desire for transparency, even if transparency is the end result.
In fact, CIC's president, Mr. Gao Xiqing, has said he does not believe it is smart for CIC to reveal its
holdings and positions because it allows the market to move against them.
Source: The Wall Street Journal Asia

15. ASIA SAILS SMOOTHLY THROUGH DEBT WATERS
While rising government debt is a growing concern in Europe and the USA, Asia’s economies remain
remarkably resilient, even buoyant, underscoring how economic might is shifting from West to East.
China has been repaying some of what little foreign debt it owes, even as economists wonder
whether Greece will require an international bailout and ask how long the USA can sustain record
budget deficits.
Even the Asian economies that have shrunk during the recession, like Malaysia and Cambodia,
escaped the worst ravages — with the notable exception of Japan, Asia’s first industrialized
country. Because of the Asian financial crisis of 1997, many Asian countries have been more
conservative about borrowing and spending over the last decade than Western nations, which went
on a debt binge during the good times and continued to increase their borrowing during the
recession to try to turn around their economies.
The Asian country hurt the most by the global financial crisis was arguably Mongolia, where a steep
but temporary decline in world copper prices prompted the Government to obtain a USD224 million
IMF loan.
Read more…
Many economists say countries have to spend during recessions, increasing deficits and debts. But
investors and economists alike worry about the long-term effect of mammoth debt on the vitality of
Europe and the USA. The longer it takes Western capitals to confront their overspending, the higher
and more rapid Asia’s rise will be, many economists say.
In India, the Government’s debt is nearly 80 percent of the gross domestic product, but it owes
more than 90 percent of that money to its own citizens. Of the rest, a big chunk is held by agencies
like the World Bank, which, are not likely to press for quick repayment. China has been repaying
some of its small external debt as it comes due, a luxury that a country with more than USD2
trillion in foreign reserves can afford.
A few smaller Asian nations have had difficulties in the last year and a half. But they have been
hurt more often by political strains than by economic troubles. Like Greece, Pakistan and Sri Lanka
have relied heavily over the years on overseas borrowing. That started to dry up in late 2008, as
fighting with insurgents in both countries began to scare off foreign lenders. Both ended up
receiving assistance from the International Monetary Fund, and that has shored up their finances, at
least for now. Thailand and the Fiji Islands both had ratings downgrades last year because of civil
unrest as well, although neither required I.M.F. assistance.
Source: The New York Times
DEUTSCHE BANK SEES MORE GROWTH IN ETFs
There is a lot of scope for growth in exchange-traded products (ETPs) and exchange-traded funds
(ETFs), including gold and platinum ETFs, as investors seek to diversify away from only investing in
equities, Deutsche Bank head of ETF Structuring Manooj Mistry has said. There have been strong
inflows into single commodity-linked ETPs, also called exchange-traded commodities, like gold and
platinum funds, in the past few years.
Mr. Mistry noted that while there has been a lot of growth in all forms of ETPs, globally, in the past
two to three years, this only totaled less than 2% of global investments. However, he expected the
growth trend to continue, with the total global ETF market estimated to increase its assets under
management to between USD1.2 trillion and USD1.4 trillion this year.
There has been a lot of interest from European investors in investing in ETFs through developing
market and emerging market equities, as well as in commodities. ETFs often gave investors access
to markets, which were difficult to access through traditional means.
Source: www.miningweekly.com
POLITICS
AUTUMN SESSION ENDS AFTER ADOPTING 104 LAWS
Parliament adopted a total of 104 laws and resolutions in its Autumn session that ended on February
4, after working on 91 days. The new laws included those on the 2010 State Budget, the Budget
Monetary Policy, the Human Development Fund, Concession, Basic Guidelines on Privatization of
State Properties in 2010-2012, and Property Valuation.
In his closing speech, Speaker D. Demberel appreciated the work put in by MPs. He said much work
had been carried over from the previous session and this led to the 'abandonment’ of discussion on
certain drafts considered not so significant.
Source: Onoodor

16. 1.9 MILLION ANIMALS DIE
The latest count shows that more than 1.9 million heads of livestock have perished nationwide,
according to the Ministry of Food, Agriculture and Light Industry. It reports that 65 soums of 12
provinces have been declared ―disaster area‖, while 68 soums of 11 provinces have been classified
as suffering from dzud, and 117 soums of 17 provinces have been warned to prepare against severe
winter.
Sky News reports that local experts have told the Red Cross the animal death toll may reach 20
million. This is half the entire country's livestock. A Sky News team that traveled through remote
regions in Central Mongolia found cattle, goats and sheep frozen to death across the plains, with
some herds almost completely wiped out.
Fears are also growing for thousands of herders who live in remote mountain regions in south-
western Mongolia. There has been no word from thousands of people cut off in their villages by the
heaviest snow fall in decades.
Source: Ardiin Erkh, News.com.au
EX-PRESIDENT ENKHBAYAR LEADS AID TEAM TO 3 PROVINCES
Former President N.Enkhbayar, who heads an NGO called Countryside Development Center, is
visiting some areas badly hit by the severe winter. He and his team plan to cover more than 2,000
km in 60 soums of Uvurkhangai, Arkhangai and Khuvsgul provinces. They will distribute aid material
worth MNT 70 million to 1,240 families, each getting things like candles, matches, medicine and
food costing about MNT 50,000.
Apart from this, experts in the team will offer advice on how best to survive the dzud. Members of
the NGO include MPs, scientists, researchers and livestock husbandry professionals. Its main goal is
to bring intensive economic development to the provinces.
Source: Udriin Shuudan
GOVERNORS TELL PRESIDENT THEY SHOULD HAVE MORE POWER
Several provincial Governors urged President Ts.Elbegdorj at a meeting on Tuesday to change the
present practice of delegating very little power, particularly in financial matters, to regional
administrations. Many offered instances of how urgent and long-standing regional needs were not
met by the budget planners.
Some other suggestions were also made. These include adoption of new livestock management
methods, monitoring how companies actually worked after they are selected by tender, more World
Bank and UN programs in the provinces, tax benefits to support national companies, and a new
agricultural campaign in the western region. The President promised to consider all the suggestions
carefully.
Source: en.news.mn
396 POLICEMEN GET COMPENSATION
Altogether 396 policemen injured during the July 1 incident have received MNT 442.5 million as
compensation. The individual amounts paid depend on the nature and extent of the injury and vary
between 3 and 36 times their monthly salary.
Minister for Internal Affairs Ts.Nyamdorj personally handed over the money to the three policemen
who were most severely injured during the clash with protesters.
Source: Undesnii Suudan
RUSSIANS TRYING TO PUSH THEIR OUTWORN TECHNOLOGY, FEELS ENGINEER
Railway engineer O. Suren feels that the railway to be built at Tavan Tolgoi must have the wider
gauge found almost everywhere in the world. This makes construction cheap and also allows easier
access to advanced technology. It would also save transportation time and require no change en
route.
One reason why Russian Railways is putting pressure on Mongolia to build the new railway according
to Russian specifications, says Mr. Suren, is that it will allow Russia to sell its outworn technology
and equipment.
Source: Zuunii Medee
EVERY FAMILY SPENDS AROUND MNT800,000 DURING TSAGAAN SAR
A random survey of ordinary households in Ulaanbaatar reveals that Tsagaan Sar expenses reach
around MNT800,000 on an average. The main items of expenditure are meat and flour to make
1,500 buuz and other food for guests, and gifts for their children. Every household expects 100

17. visitors to come and exchange greetings. It is mandatory to visit older relatives.
Source: Udriin Sonin
MONGOLIAN “SPY” TAKES REFUGE IN TORONTO CHURCH
A Mongolian psychologist who admits to spying for China against his own country – and vice versa –
has found sanctuary at a Toronto Anglican church. "I am terrified to return to Mongolia," Mr.
Gankhuyag Bumuutseren says in a court affidavit.
The Immigration Refugee Board has ordered him deported, but pastor Rev. Murray Henderson says
he is harboring the man on humanitarian grounds. Mr. Bumuutseren is going blind, cannot work,
collects an Ontario disability pension and "does not represent a threat to national security," Rev.
Henderson says.
Deportation would also split up a family. Mr. Bumuutseren's wife and two of their three children
were refused refugee status, but have been granted a new hearing. The couple and two children
arrived in Canada in 2006. They have since had a third child – a Canadian.
Read more…
In his affidavit, Mr. Bumuutseren says he went to China in 1992 to buy produce for resale in
Mongolia. A Mr. Hishige befriended him. Two years later, Mr. Hishige offered him money for
information. Later, he realized he was spying for China. Mostly, he spied on activists with the
independence movement for the Chinese province of Inner Mongolia.
When the Mongolians found out he was spying, they turned him into a double agent. When the
Chinese discovered he was a double agent, they jailed him for two years and tortured him, a claim
not disputed by Canadian authorities.
Source: The Toronto Star
MONGOLIAN AUTHOR CARRIES BOOKS TO CHILDREN IN REMOTE AREAS
Among the delegates to the recent international conference on children’s libraries — called Building
a Book Culture — in Delhi was Mr. Jambyn Dashdondog from Mongolia, known to bring joy to
children through his ―mobile library‖. Author of 108 books, he makes sure children even in the
remotest part of Mongolia have story books to relish.
Traveling vast expanses of his country, with books in tow, Mr. Dashdondog wants to enable students
in the countryside — the nomadic groups of Mongolia — to ―spend their holidays reading books‖. He
read children’s literature and started translating these into Mongolian, and has spent 18 years
loading his books on any means of transport — horses, cows, camels, reindeers or automobiles — to
access rural areas with his mobile library.
He started the Mongolian Children’s Mobile Library project in 2002, with the help of many
volunteers including students, writers and artists, as well as his own family. Mr. Dashdondog won
the International Board on Books for Young People (IBBY)-Asahi Reading Promotion Award in 2006,
given biennially to a project run by a group or an institution making a lasting contribution to
promote reading among children and youth.
Source: The Indian Express
CHINA FINDS TONS OF TAINTED MILK POWDER IN USE AGAIN
China has found an additional 170 tons of tainted milk powder in an emergency crackdown that has
made it increasingly clear many products discovered in the country's 2008 milk scandal were
repackaged for sale instead of being destroyed. China's 10-day emergency crackdown on the
products is set to end Wednesday, and it was not clear whether it would be extended.
In the latest discovery, officials recalled more than 170 tons of milk powder tainted by the
industrial chemical melamine and closed two dairy companies in the northern region of Ningxia
Monday. They seized 72 tons of the powder but were still looking for the rest, which had been
repackaged and sold to factories in the neighboring region of Inner Mongolia and the bustling
southern provinces of Guangdong and Fujian.
The tainted powder should have been destroyed in the 2008 scandal, and Ningxia Tiantian Dairy got
it from an unnamed company as a debt payment. "Our small companies were in total trust of their
partners because they've been doing business and having good relations with them for a long time,"
an official of the Ningxia Dairy Industry Association said. "They didn't expect those companies would
hurt them." He said many small dairies do not have the technology to even test for melamine.
Mongolia imports milk powder from China and also did not have the technology in 2008.
Source: Dow Jones, AP

18. ANNOUNCEMENTS
MONGOLIA‟S 1st
RISK MANAGEMENT CONFERENCE, MARCH 3, KHAN BANK THEATER
Prime General Insurance is hosting Mongolia’s first ever ―Risk Management Conference‖ (RMC) at
the Khan Bank Theater on March 3 from 9 AM to 3 PM. The RMC attendees will be chosen on an
invitation only basis with a limited number of guests from applications to this event from Mongolia’s
top corporations.
The RMC is an educational forum where business leaders will discuss policies and strategies to
manage risk exposure and increase yields. Speakers include Philippe Piette, Partner, Institutional
Risk Analysis, New York and Advisor to Al Rashi & Associates of Dubai and Samba Financial Group of
London and Ryad; Prof. Pierre Bultez, Professor in Finance, Maastricht School of Management and
Chairman of the Executive Committee of AXA Group Luxembourg; Ganzorig.Ulziibayar, CEO of Prime
General Insurance and Founder/President of Financial Markets Association; Kelly Rendek,
professional actuary in Canada and Ireland; and Jim Dwyer, Executive Director of Business Council
of Mongolia.
BCM is a Conference Sponsor. Further information on applying for invitations can be obtained by
contacting Zaya at 312-234, 9902-9286, or E>zaya@prime.mn.
_____________________________________
“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 21:15 tonight. Tune in to watch this program that reports stories from today’s BCM
NewsWire.
SPONSORS

19. ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended February 5, 2010, trading activity on the Mongolian Stock Exchange (MSE)
totaled 209,900 shares with 29 companies traded. Total market value of transactions was MNT 80.8
million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 648.0
billion, and increased by MNT 5.5 billion or 0.9% from Jan 29, 2010.
The Top-20 Index increased by 44.32 points or 0.7% compared to the previous week, closing at
6610.35 points. MSE Composite Index increased by 21.88 points or 0.7% compared to the previous
week, closing at 3,214.55 points. Most active stocks traded were: Khukh gan (54,400 shares), Hi bi
oil (51,400 shares), and Jenco tour bureau (50,200 shares).
Major share price percentage gainers were: Hi bi oil (16.2%), Shimtleg (14.7%), and Mongol shevro
(12.5%).
Major share price percentage losers were: UID (12.9%), Darkhan teever (8.7%), and Moninjbar
(3.5%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
Year 2009 *4.2% [source: NSOM]
January 31, 2010 *5.7% [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 – February 11, 2010
Currency name Currency Rate
US dollars USD 1,446.80
Euro EUR 1,990.80
Japanese yen JPY 16.03
British pound GBP 2,265.76
Hong Kong dollar HKD 186.20
Chinese yuan CNY 211.89
Russian ruble RUB 47.81
South Korean won KRW 1.25
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.