1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmmongolia.org
info@bcmmongolia.org
Issue 53, January 16 2008
NEWS HIGHLIGHTS:
Business: Central Bank man at Anod invites State supervision; Banks plead for more practical
help; Minerals Minister wants to begin talks, but does not yet have a brief; Meeting
pleads for transparency in mining negotiations; China's Shenhua eyes Rio coal stake;
Gurvanbulag feasibility study finds project economics profitable, says Western; Aero
Mongolia ordered off the sky; Eznis picks ATR 42-500; Gobi sees exports rise; 6 new
names in Top-20 Index on Mongolian Stock Exchange; Illegal exchange centers asked to
close down; Tractors to be assembled in Erdenet; SS Mongolia appoints Director of
Mineral Programs; Official leaves ADB to join investment firm.
Economy: China to be approached for USD3 billion loan; Top businessmen chart ways out of the
economic crisis; New Central Bank chief lists priorities; High-powered working group
to tackle economic crisis; MPs unhappy with regulatory committee’s performance;
Draft on new fuel taxes goes to Parliament; Prices rise as USD and Yuan grow
stronger; Rise in USD rates blamed on speculative trading; Call to flush out the
“hidden” economy; Ministry mulling 116 agro-based factories in provinces; Money and
award for mothers to cost MNT11.6 billion; Crisis will pass, assures Central Bank
official; Key environmental contract for MCC railway project signed; Defense officials
urged to spend less; Less power lost in transmission; Ban on sale of sports property
proposed.
Politics: Search on for a consensus presidential candidate; Only 25 choose party membership
over a State job; DP denies receiving money from US senator; City official stresses
need to control migration; Air pollution continues to grow; Hydro power station
causes flooding, trapping men and animals; Leader denies DP wanted to choose
Central Bank vice president; Health sector donors hold coordination meeting;
Mongolia a fully free country, report finds; 400 new buses before July, 60 of them
next month; Peace Avenue to be modernized to mark city’s 370th
anniversary;
Protected areas may be opened up as pastureland, if necessary.
BUSINESS
CENTRAL BANK MAN AT ANOD INVITES STATE SUPERVISION
The situation in Anod Bank is fast returning to normal, but the controversy over what led to the
mess in the first place continues unresolved. The Central Bank representative who is now running
the bank, Mr. S. Nasanjargal, has refuted a claim by the lawyer of the Anod Bank directors that the
bank would not have been in trouble if the Government had repaid the MNT40 billion that it had
borrowed. In addition, some companies were not able to clear their debts as they had outstandings
due from the Government. Mr. Nasanjargal says the problems went beyond these. He said it was not
possible to publish the list of defaulters, as that would breach corporate secrecy. For the same
reason he refused to reveal just how much the Government owed the bank. “There is also no need
to reveal the exact figure,” he said.
Later on Monday evening, Mr. Nasanjargal spoke on TV about the urgent need for the bank to be
placed under government supervision. The Central Bank has all along said that its representative
would run the troubled bank for a year to normalize affairs, so this statement after only a month of
his appointment has triggered speculation that the Government is trying to take over the bank.
What is the need for the Government to take control if the Central bank representative is
succeeding, as is claimed, in putting things in order? Mr. Nasanjargal‟s exact words on TV were:
2. “There is a series of actions to be taken. One is the Government taking control of the bank. Another
becomes necessary if the stakeholders and the investors cannot put more money into running the
bank. The Government will then have to make the necessary investment. This is an urgent priority.”
Source: Ardiin Erkh
BANKS PLEAD FOR MORE PRACTICAL HELP
Senior bankers told a conference of businessmen last week that placing money in commercial banks
was not enough, and the Government should take other measures that would show more immediate
results. Executive Director Khurelbaatar of the Trade and Development Bank said it would help
banks, consumers and even construction companies if the Government “bought” all outstanding
apartment loans, which now amount to MNT240 billion. He felt the effect of the Central Bank‟s
“misconceived decision” in June to artificially prop up the MNT against the USD is being seen only
now. He was also suspicious of the provision in the Government decision to place money with banks
which allowed it to acquire shares in a bank that would fail to repay the bail-out amount on time.
Banks feel that the six months given to them to pay back the bail-out sums is too short. Agreeing
that banks needed more, and more practical, help, Golomt Bank CEO John Finigan said, “It is too
much to expect commercial banks to bear the entire burden. We just can‟t do it.”
Source: www.news.mn
MINERALS MINISTER WANTS TO BEGIN TALKS, BUT DOES NOT YET HAVE A BRIEF
Mineral and Energy Minister D. Zorigt plans to begin preliminary talks with mining companies this
week, but the Government does not yet know with absolute certainty what its stand will be on the
mining deposits agreements. These should be presented to Parliament by February 1. If the working
group entrusted with the work comes up with new ideas, the deadline could be missed.
An internationally reputable investment bank will also have to be appointed to advise the
Government in the negotiations. Companies such as JP Morgan, Deutsche Bank, and Goldman Sachs
have expressed interest in offering their services, but it will take several weeks of discussions to
enter into a final agreement with any of them. This too may cause some delay in the process of
reaching a final agreement.
Source: en.News.mn
MEETING PLEADS FOR TRANSPARENCY IN MINING NEGOTIATIONS
Responsible Mining Initiative recently organized a meeting on “Responsible mining and transparency
in the Oyu Tolgoi and Tavan Tolgoi investment contracts”. Among those who spoke at the event
were the resident representative of the Asia Foundation, members of the MPs‟ working group on the
agreements, Mr. S. Ganbaatar, head of the Mongolian Labor Union, and representatives of some
NGOs. They expressed their views and thoughts on the criteria constituting public transparency and
on how to ensure that these were followed in the forthcoming negotiations on the mining
investment contracts on these two deposits.
Source: Ardiin Erkh
CHINA’S SHENHUA EYES RIO COAL STAKE
China Shenhua Energy, the country's biggest coal miner, plans to bid for a major stake in global
miner Rio Tinto's USD3.7 billion coal unit, as it chases overseas reserves, the South China Morning
Post reported on Monday. Rio is looking for bidders for a 76 percent stake in Australia's Coal &
Allied Industries. Analysts say an acquisition would be a good move for Shenhua as it looks to secure
resource assets beyond China. The company is also pushing Rio for more assets to be included in the
sale, the report said, adding that chairman Chen Biting had previously said Shenhua was looking for
acquisitions in Mongolia, Indonesia and Australia.
Other likely bidders for Rio's stake in Coal & Allied and its other diverse collection of assets include
Japan's Mitsubishi, BHP, Brazil's Vale, China's aluminium giant Chinalco, parent of Chalco, and
Switzerland-based Xstrata. Rio is saddled with high debt after buying aluminium producer Alcan for
USD38 billion. It has already cut its forecast iron ore production estimates, more than halved
3. capital expenditure, announced axing of 14,000 jobs, and is seeking buyers for a host of core and
non-core assets after bigger rival BHP Billiton walked away from a USD66 billion hostile bid in
November.
Source: Thomson Reuters
GURVANBULAG FEASIBILITY STUDY FINDS PROJECT ECONOMICS PROFITABLE, SAYS WESTERN
Western Prospector Group Ltd. has announced positive economics from the Definitive Feasibility
Study (DFS) it has received for its 100% owned Gurvanbulag Central uranium deposit in Mongolia.
The deposit can produce a yearly average of 1.85 million pounds of U3O8, as calcined yellowcake,
for a nine year production life. The study further indicates economic viability, with an estimated
pretax internal rate of return (IRR) of 9.2% based on a constant selling price of USD65.00 per pound.
The IRR translates to 1.3% on an after-tax basis, incorporating all taxes currently in effect in
Mongolia.
The pre-production capital cost estimate, based on currency exchange rates prevailing during the
second quarter of 2008, is USD280.2 million with a further USD137.5 million for sustaining capital
costs during mine life. The site operating cost per ton mined is USD94.62, which results in an
operating cost per pound of yellowcake of USD29.00. Capital costs have increased since a
Preliminary Economic Assessment completed in 2007 by USD148.7 million (55%), while operating
costs have only increased by USD10.64 per ton, maintaining a competitive cost per pound of
yellowcake production.
Production could start by January 2012, assuming all Mongolian Government permits are in hand by
the end of May 2009. During construction, a comprehensive training program would be instituted to
ensure that, by start up of production, the project is employing the maximum number of Mongolian
nationals. This training program would complement and extend the scholarship and professional
training program already under way. The means of project financing is yet to be determined.
Source: www.westernprospector.com
AERO MONGOLIA ORDERED OFF THE SKY
After an Aero Mongolia plane flying to Ulaanbaatar from Bayan-Ulgii had made an emergency
landing in Murun city, Khuvsgul last Thursday, the Civil Aviation Authority (CAA) prohibited the
company from operating any flights for an indeterminate period of time. Eznis Airways will instead
fly to Khovd, Uvs and Bayan-Ulgii provinces until the ban is lifted.
Aero Mongolia runs 60 percent of all domestic flights in Mongolia and has been facing problems for
several weeks now following a strike by a section of its engineering staff. There have been doubts
that the disruption is affecting proper observance of flight safety procedures.
According to other reports neither the strike nor the forced landing was responsible for the
suspension order. The move followed the failure of the airline to submit within a stipulated
deadline its original registration certificate along with a notarized copy of it to the Ministry of
Transportation and the CAA.
Source: en.News.mn, Undesnii Shuudan
EZNIS PICKS ATR 42-500
Eznis Airways is negotiating with French aircraft-maker ATR, the largest manufacturer of regional
aircraft, to acquire an ATR 42-500 that it wants to put into operation at the end of May when the
summer travel season commences. Eznis CEO Glen Pickard says the airline's board has granted
approval for the measure and he is now negotiating with ATR and securing financing. The airline
plans to place an order for one ATR 42-500, possibly with an option for a second for delivery in
2010.
The airline picked a 50-seat turboprop because some of its domestic routes can support the larger
aircraft, it is starting to do mining charters for companies that require 50-seat aircraft, and it plans
to launch international commercial passenger services, Pickard says. Eznis currently operates a
fleet of three Saab 340Bs but has no immediate plans to add any more of them.
Industry magazine FlightGlobal says Eznis, owned by Newcom Group, signed a „letter of interest‟
for seven Bombardier C-Series aircraft in September, and plans to sign a firm contract in 2010 after
4. it determines the best routes and configuration of the 110-to 130-seat aircraft. Bombardier refused
to confirm the report, its spokesman John Arnone saying the company considers these discussions
confidential and will only reveal them when firm commitments are made. Pickard previously
worked as CEO of Canadian regional carrier, Regional 1 Airlines, which operates Bombardier
turboprops.
Eznis hopes to launch its first international passenger service in February, from Ulaanbaatar to
Irkutsk in Russia. Last year it also received traffic rights for services from Ulaanbaatar to Ulan Ude
in Russia, Hailar and Harbin in China, and Ust-kamenogorsk in Kazakhstan. It will be launching the
Irkutsk service using a 340B, but it plans to use a 50-seat turboprop on many of its international
services, says Pickard. If Eznis ends up ordering an ATR 42-500, it will be the first ATR in Mongolia.
MIAT is the only local carrier that right now serves international markets with the exception of Aero
Mongolia which has a service to Hohhot in China's Inner Mongolia.
Source: Air Transport Intelligence, THE CANADIAN PRESS
GOBI SEES EXPORTS RISE
Mongolia‟s top cashmere company, Gobi, is enjoying a rapid rise in the volume of its exports.
Executive Director Ts.Baatarsaikhan has said the company hopes to increase its cashmere yarn
production by 60 percent this year, to meet overseas demand. The company traces its success to
two basic reasons – improved quality of its totally natural yarn, and fall in demand for the Chinese
competing product. Japan is the main buyer for most of Gobi‟s raw cashmere and also its processed
products.
Source: Ardiin Erkh, Business-Mongolia.com
6 NEW NAMES IN TOP-20 INDEX ON MONGOLIAN STOCK EXCHANGE
The Top-20 list of companies trading on the Mongolian Stock Exchange has been revised, based on
performance in the second half of 2008. Gobi, Bayangol Hotel, Spirt Bal Buram, Jenco Tour and
Zoos Bank are among the 14 companies that retain their place among the 20 best, while the six new
entrants are Khuh Gan, Tavantolgoi, Naco-Oil, Hai-Bi-Oil, Mongol-Leather and Hermes Center.
Shareholders of Zoos Bank, Spirt Bal Buram, Bayangol, Moninjbar, State Department Store,
Mongolian Telecommunication and NIC will soon receive dividends for 2007, and Hermes Center will
distribute dividends for 2008.
Source: Ardiin Erkh
ILLEGAL EXCHANGE CENTERS ASKED TO CLOSE DOWN
A team from the Financial Regulatory Committee found during a surprise inspection of 25 currency
exchange centers that 11 of them had proper permission to operate, another 11 did not, and the
application of the other three was pending with the authorities. The illegally operating centers
were asked to close their business within this month. It was found that almost none of these
exchange centers provided customers with any record of the transactions and also did not notify the
Central Bank of transactions above MNT20 million. Both failures violated banking laws.
Source: Niigmiin toil
TRACTORS TO BE ASSEMBLED IN ERDENET
The mechanical workshop of the Erdenet Mining Corporation will this year start assembling small-
scale tractors from spare parts imported from Ukraine. This is mainly to cut costs, as a tractor can
be imported for around USD14,000, but an assembled one will be substantially cheaper and may
create a few jobs also. In the first ever venture of its kind, it is initially planned to assemble ten
tractors.
Source: Montsame
SS MONGOLIA APPOINTS DIRECTOR OF MINERAL PROGRAMS
Ms. Denise Lothrop has taken over as Director of Mineral Programs, a new position at SS Mongolia.
She now assumes direct authority and supervision of all activities of the company, including
5. direction of its Ulgii Branch with the assistance of the SSM General Director, responsibility for all
purchases, deliveries, shipments, approval of bonuses (if any), approval of hiring and firing of most
upper level managers, and all government relations. She will also be responsible for conducting
business with Kainar Company, Monwolfram Company, all other wolfram related companies and
individuals and activities associated with other mineral projects in Mongolia.
Source: SS Mongolia
OFFICIAL LEAVES ADB TO JOIN INVESTMENT FIRM
Mr. Mandar Jayawant has resigned from his position as Deputy Country Director-Mongolia at the
Asian Development Bank (ADB) to join Frontier Investment & Development Partners. He will
continue to be in Ulaanbaatar as a Principal for FIDP which is a Singapore-based private equity firm
currently managing the Mongolia Investment and Development Fund.
Source: BCM NewsWire
ECONOMY
CHINA TO BE APPROACHED FOR USD3 BILLION LOAN
The Government has instructed Deputy Prime Minister M. Enkhbold, in his capacity as head of the
Mongolia-China intergovernmental committee, to begin negotiations with the Chinese Government
for a USD3 billion loan. USD1 billion of this is planned to be spent on measures to shore up the
Mongolian financial and banking sectors against the world economic crisis, and the other USD2
billion will be used to finance development projects in the framework of the bilateral economic
cooperation between Mongolia and China. These are likely to be in the spheres of agriculture,
railways and paved roads, and other forms of infrastructure.
The Government is also negotiating with the International Monetary Fund for a possible loan, the
Finance Minister has said. He did not indicate how much money Mongolia was asking for, but only
that IMF officials were in Ulaanbaatar for talks.
Source: Zuunii medee, forbes.net, Associated Press
TOP BUSINESSMEN CHART WAYS OUT OF THE ECONOMIC CRISIS
The Mongolian National Chamber of Commerce and Industry recently organized an open conference
where the “Top-100” companies of Mongolia discussed the present economic situation, particularly
the problems stemming from the fall of the MNT against the USD. Participants said the Mongolian
economy usually needs USD3-4 billion in the first half of the year, and urged the Government to
make this available to keep the economy going, if necessary by taking loans. Several businessmen
felt that after years of warning, Mongolia is now showing clear symptoms of the “Dutch disease”.
Most companies are reporting a drop in sales and face the tough choice between retrenchment and
general salary reduction. A dissenting voice was heard from Golomt Bank CEO John Finigan. Loath
to accept that the country‟s economy is in a crisis, he felt things easing down in recent days, and
wanted the media to make an objective assessment of the situation and not create panic among
people.
The business leaders regretted that Mongolia loses a lot of money as it has no facilities to process
gold and cashmere before they are exported. They urged the Government to raise the export taxes
on raw cashmere which could encourage traders to set up processing units here instead of carrying
away the raw material. Several anomalies which queer the pitch for Mongolian companies were
mentioned. For example, import tax on printed material is lower than that on paper, which makes
it difficult for domestic printing companies to be competitive. “People buy books printed in China
as they are cheaper because of the low tax,” said Mr. Otgonbayar, director of Obi Capital.
Government rules for tenders were also criticized. Drug companies, for instance, can be paid only
after 45 days of supplying hospitals with medicine. In practice, full payment often requires 2-3
years. This long delay puts them in serious financial problem, almost forcing them to go bankrupt.
In a situation like the present, currency fluctuation can lead to big losses in just a couple of days,
let alone weeks or months, and the Government was urged to review the rules.
6. The “Top-100” hoped the Government would understand that this was no time to spend money on
unproductive programs or to raise expectations with populist promises. They pleaded for less
bureaucratic control over business. They also criticized themselves for talking more about problems
than offering concrete solutions.
Source: Ardiin Erkh
NEW CENTRAL BANK CHIEF LISTS PRIORITIES
Shortly after Parliament had approved of his nomination as President of the Central Bank, Mr. L.
Purevdorj answered some questions from media on his priorities in the hot seat. Saying that he was
yet to take charge and to meet with his new colleagues to learn more about the details of the
economic situation in the country, he nevertheless was clear that his first task would be to increase
money supply to the market. Another urgent need is to shore up US dollar reserves. More foreign
exchange has to be earned, and for this the Government plans to encourage export.
Stimulating the economy is no problem, he said, for countries like the USA and China which have
enough money, but Mongolia‟s currency reserve did not give much freedom to maneuvering. Only a
clever monetary policy can encourage exports, and discourage unnecessary imports, thus leading to
a happy foreign trade balance, without putting risks on the ways of banking.
He stressed the need to attract more funds and capital from the foreign market, but “in order to
get through the recession, it is most important to fully utilize our local capacity and the country‟s
resources. Every kilogram of gold extracted in Mongolia should be accounted for, and gold should be
sold not only to the Central Bank but to other commercial banks too,” he said.
In his opinion, the present crisis has been brought about by the fall in copper price, and “this
situation, when one mineral holds such an important place in the national economy, has to be
changed”.
Source: Ardiin Erkh, Business-Mongolia.com
HIGH-POWERED WORKING GROUP TO TACKLE ECONOMIC CRISIS
A working group headed by Prime Minister S. Bayar and tasked with devising measures to ride over
the possible effects of the global financial crisis held its first meeting last week. Commensurate
with its responsibility, the group is a high-powered one, with Parliament naming the Vice Prime
Minister as its deputy leader and its other members including Minister for Finance S. Bayartsogt,
Minister for Mineral and Energy D. Zorigt, and Minister for Social Security and Labor T. Gandi.
An earlier working group set up in September had come up with several ideas to tackle the
economic and financial crisis. Its success had led two MPs, Mr. S. Bayartsogt and Mr. Ts.
Davaasuren, to propose the establishment of another group to work specifically on effective and
innovative crisis management plans in specific areas of the economy.
Source: Ardiin Erkh
MP’s UNHAPPY WITH REGULATORY COMMITTEE’S PERFORMANCE
The Standing Committee on the Economy has reviewed a report by a parliamentary working group
on the Financial Regulatory Committee (FRC) which oversees all financial activities except
commercial banking. Sources declining to be identified say the report rates the work of the FRC as
“fairly bad”. This is the first audit of FRC performance since its establishment.
The FRC authorized Anod Bank to become a public listed company on the Mongolian Stock
Exchange, with MNT20 billion worth of shares. The report also notes that the Exchange, while
attracting an increasing number of investors, has not been able to raise its activities to basic
international standards. Of the 376 companies listed on the MSE, only 30 have announced dividends
to shareholders.
Source: Undesnii Shuudan
DRAFT ON NEW FUEL TAXES GOES TO PARLIAMENT
After a spirited discussion on Tuesday, the Standing Committee on the Budget forwarded to
Parliament for approval proposals to levy a special tax and to reimpose the valued added tax (VAT)
7. on oil companies, now that they have to pay considerably less for their imports. The State budget
stands to gain MNT15-20 billion from these taxes. MPs opposing the move worried that consumer
prices of everything tend to rise as Tsagaan Sar (the lunar new year) approaches, and these taxes
would help raise them even further.
Russia recently announced a further reduction of USD100 per ton in the export tax on oil products
and lawmakers resent that fuel importers have not lowered their prices. Importers are waiting to
see what becomes of the draft proposals and fear higher taxes would nullify the gains from buying
petroleum products cheaper. Also, the weaker the Tugrug is against the US dollar, the more
unlikely it is that anything imported will cost less.
The Mineral and Oil Administration has pointed out that in phases the Russian export tariff has
decreased by almost USD200 in recent months and this leaves the importers enough margin, even
after taxes are raised, to reduce prices by MNT90-180 a liter.
Source: en.News.mn
PRICES RISE AS USD AND YUAN GROW STRONGER
With both the US dollar and the Chinese yuan getting stronger, the price of all imported goods of
daily use has gone up. Both rice and flour are more expensive and only meat prices appear stable.
The exchange centers are selling charging MNT1,500 for one USD, while many banks are not selling
any yuan. There is considerable worry that the present free fall of the MNT will end only when the
USD is pegged at MNT1,800-2,000.
Some traders in Narantuul (the “black” market) recently kept their shops closed for a few days and
raised prices on re-opening. Russian candies and sweets being generally more expensive, people
usually go for Chinese products, but with Chinese candies that sold for MNT1,700 per kg now costing
MNT2,100, customers have taken to buying by the piece. New Year sales have been much lower. “It
is clear people do not have money,” a trader said. A packet of cigarettes can now be bought for
MNT800-1,000 more than the normal price.
Many Mongolian traders buy on credit from Chinese in Ereen. If they cannot pay back on time the
interest rate becomes much higher. The prospect of being in such huge debt to the Chinese is
worrying almost all traders, who feel the only solution is in Mongolia producing more goods for its
own use.
Source: Ardiin Erkh
RISE IN USD RATES BLAMED ON SPECULATIVE TRADING
According to G. Delgermaa, head of the Foreign Exchange Department at the Central Bank, the
dramatic rise in the exchange rate in the past few days has no logic and is the result of speculative
tactics effectively employed by traders at the Naiman Sharga market. However, business there
accounts for only 0.01% of foreign exchange transactions, and the interbank rates continue to be
less than what traders manipulate to offer. She also said the country has foreign reserves of
USD645.2 million.
Source: Udriin Sonin
CALL TO FLUSH OUT THE “HIDDEN” ECONOMY
Business leaders think the present economic crisis has offered an excellent opportunity to the
Government to crack down on the “hidden economy” which puts honest businesses under extra
stress. For example, there are some 10,000 importers in Mongolia, half of them working as
individuals. Only 300-400 of them pay their taxes, and the hidden economy keeps growing, eroding
the base of the national economy. One way to curb its spread would be, the businessmen
suggested, to make it mandatory for all business transactions to flow through banks, and not in
cash.
Source: www.News.mn
MINISTRY MULLING 116 AGRO-BASED FACTORIES IN PROVINCES
The Ministry for Food, Agriculture and Light Industry thinks the best ways to stop the price of
8. agricultural produce from falling to levels uneconomic for the herder are to establish a reserve
stock and to set up agro-based industries. This will release the primary producers from the
compulsion to sell even when prices are low.
A new survey has raised hopes that 116 factories can be run in the provinces, all dealing with some
farm product. Depending on the area, it could be a dairy plant, or a meat processing unit, or a wool
and cashmere processing center. Establishing these will require about MNT10 billion, but the
Ministry is optimistic that the money could come from the state budget, foreign investments and
loans.
Source: en.News.mn
MONEY AND AWARD FOR MOTHERS TO COST MNT11.6 billion
More than 155,000 mothers, regardless of age, will receive monetary grants accompanying the
award of the Meritorious Mother title in 2009. MNT11.6 billion has been allotted from the budget
for this award to women who have many children. In 2006, MNT6.8 billion was granted to 69,700
mothers, in 2007, MNT8.5 billion to 130,700, and MNT8.5 billion to 132,000 mothers in 2008. This
year those in the 1st Rank will get MNT100,000 each, and those in the 2nd MNT50,000.
Source: Montsame
CRISIS WILL PASS, ASSURES CENTRAL BANK OFFICIAL
Mr. D. Boldbaatar, director of the monetary policy and research department at the Central Bank,
feels that the way Mongolian commercial banks expanded their activities in the last three years
with the help of foreign sources negatively affected the domestic market once the global crisis set
in. He traces the cash crunch to this development. After a few years of pursuing a monetary policy
that controlled money supply, the Central Bank began in 2008 to put more money in circulation and
allocated MNT230 billion to commercial banks.
Saying that a global economic crisis, by definition, will have some negative impact on the economy
of Mongolia, Mr. Boldbaatar was confident that the country would weather the storm with minimum
damage.
Source: Montsame
KEY ENVIRONMENTAL CONTRACT FOR MCC RAILWAY PROJECT SIGNED
A consortium of Switzerland-based Poyry Infra AG and Altan-Eco Company of Mongolia has been
awarded the contract on Environmental Impact Assessment (EIA) related to the MCC-funded railway
project, after it had won the international bid called in June, 2008, by MCA-Mongolia. Work on the
EIA will begin in early March. The assessment is considered crucial to ensure the positive impact of
the Millennium Challenge Account railway project in its environmental and social aspects. The
assessment process will include a study of the environmental management plan, the mitigation and
monitoring programs, proposed consultative and institutional measures, and of the social analysis
and resettlement action plan.
Source: Montsame
DEFENSE OFFICIALS URGED TO SPEND LESS
Reflecting the economic crisis in the country, the chief of the Mongolian Military Staff, Lt. Gen Ts.
Togoo, has directed all Defense officials to be very careful in spending State funds. He has urged
them to ensure use of power and heating only where they are needed, to physically travel less for
seminars and training and instead use the Internet more, and not to go on unimportant inspections.
He also advises them to economize wherever possible so that the saving can go into a fund to be
used outside the budget in an emergency situation. He wants fewer competitions to be organized
and the telephone used less.
Source: www.news.mn
LESS POWER LOST IN TRANSMISSION
The Energy Regulation Authority (ERA) has announced some success in reducing losses in both power
9. transmission and distribution and thus earning more revenue. In 2001 losses in transmission and
distribution accounted for 23.6 percent of the electricity generated. This fell to 17.4 percent in
2007 and to 16.8 percent in 2008. The ERA has set itself a goal to bring down the losses to 15
percent by 2010.
The savings in 2008 amounted to MNT1.57 billion in monetary terms and to 29.4 million kW in terms
of production.
Source: Montsame
BAN ON SALE OF SPORTS PROPERTY PROPOSED
As part of a national program on development of physical training and sports, to harness the
popular enthusiasm after last year‟s successes in the Olympics, the Government now wants to
prohibit the sale of gymnasiums and sports stadiums to land developers and to insist that their
purposes cannot be substantially altered. All this will be incorporated in proposed amendments to
the existing law on physical culture and sports. These will also call for the construction of a new
Sportsmen‟s Town and a sports complex for members of all national teams to live and train.
Source: Montsame
POLITICS
SEARCH ON FOR A CONSENSUS PRESIDENTIAL CANDIDATE
Some MPRP members of Parliament have begun holding informal consultations among themselves
and with their DP fellow MPs on finding a consensus candidate for the next presidential election.
Since only parties represented in Parliament can put up a candidate, it would save considerable
expenses if a common candidate is chosen beforehand, obviating the need for an election. A large
amount of money can be saved thus.
Source: Ardiin Erkh
ONLY 25 CHOOSE PARTY MEMBERSHIP OVER A STATE JOB
The deadline for State workers to choose between their job and party affiliation, under a new law
in force since January 1, expired yesterday. Mongolia has 139,382 state workers, of whom 98,236
were not members of any political party before the present exercise. Some 20 percent of the total
government positions are by definition political appointments, and thus the law does not apply to
them. They include the President, MPs, Cabinet Ministers, Deputy Ministers, Governors at all levels,
their deputies and advisers and directors of state owned entities.
Of the 41,146 obliged to take a decision, 40,839, including all State secretaries, have resigned their
party membership, while 25 have said they would leave their job. The others have not decided
either way.
Asked for his own views on the proposed amendments to the law that was passed only last year, Mr.
Zumberellkham said he saw no need for any change. “I headed the working group on this law, and
am convinced an employee should not have partisan loyalties. It is a fact of life that a governor
anywhere will have to distribute more fodder to members of his party, or give more of other things
to them. This has to stop. He may still give more to his relatives, and we have to keep a watch over
that. This law is very important,” he said.
Source: en.News.mn, Mongolia-business.com
DP DENIES RECEIVING MONEY FROM US SENATOR
Mr. Ts. Sukhbaatar, head of the Foreign Relations Department of the DP and also a secretary of the
party, has strongly denied rumors about the party receiving money from a US senator before the
last parliamentary election. The party also plans to sue Unen, the newspaper that published the
allegation. Mongolian law summarily debars from politics any party funded by a foreign source.
According to him Unen (Truth) published an article in its December 13 issue, alongside a mostly
illegible reproduction of a letter that it claimed had been sent by the DP to US Senator Robert
Lugar. It was written in bad English. “We examined the letter and found it was not written on the
10. letterhead DP has been using since 2001 for official foreign correspondence. It was a complete
fake, written on paper DP uses for general domestic letters. The signature of D.Dorligjav, secretary
general of the DP, was also counterfeit,” he said.
Source: Ardiin Erkh
CITY OFFICIAL STRESSES NEED TO CONTROL MIGRATION
The Deputy Governor of Ulaanbaatar, Mr. B. Monkhbaatar, told a meeting on Tuesday that unless
migration from rural areas was checked, none of the urgent problems facing the city could be
solved except on a patchwork basis. Between 2003 and 2007, 198,000 people constituting 45,100
households moved from the provinces to settle in the city's ger areas. About 45 percent of those
who live in the 15 such new areas that have come up to accommodate these migrants live on less
than half the income of those in apartments. About 28,000 families have settled in areas legally
closed to human habitation.
The city has spread from 6,500 hectares in the early 90s to 14,000 hectares today, and it is a
challenge to find the resources to develop ger areas into apartment districts, provide them with
electricity, heating, gas and other essential infrastructure facilities.
Source: Montsame
AIR POLLUTION CONTINUES TO GROW
Air pollution in Ulaanbaatar continues to grow. All the money spent so far -- the Government has
allocated MNT10 billion this year -- no real progress seems to be made in mitigating the menace.
However, results of various tests keep attesting to the seriousness of the problem. Three thermo
electric power plants burn five million tons of coal, and some 250 steam stoves 400 tons, together
releasing 200 kinds of poisonous substances into the air of the city. In addition, 136,000 households
in the ger areas burn 625,000 tons of coal and 237,000 cmt of firewood. On the roads, 95,000 motor
vehicles emit exhaust gases.
Source: Montsame
HYDRO POWER STATION CAUSES FLOODING, TRAPPING MEN AND ANIMALS
The Durgun hydro power station in Khovd province has been forced to shut down operations almost
as soon as it started generation. This follows the unexpected diversion of the water in the Chono
Kharaikh River which feeds the plant. Power supply to 13 districts has been cut off, and their needs
have to be met by importing electricity from Russia.
The power station began work on January 7. The top of the river was frozen, and the water below
escaped in several directions. Much of it fell into the nearby Khar Us Lake which burst its banks.
With some 50,000 acres of pasture land under ice from 60-120 centimeters of water, 17,847 animals
owned by 62 families cannot graze. The power station is also unable to work as no water is being
fed into it. The region will need 174,000 tons of fodder for at least 50 days to keep the trapped
animals alive. With such a wide area under ice the nearest place with enough grazing is more than
200 km away and herders say their animals are too weak to go that far. Province authorities have
asked the Government for financial assistance to cope with the emergency.
Source: Ardiin Erkh, Zuunii medee
LEADER DENIES DP WANTED TO CHOOSE CENTRAL BANK VICE PRESIDENT
In the latest 4:11 meeting – so called as it is held on the fourth day of the week at 11a.m. – DP
leaders spoke to journalists about some of their plans for 2009. Among the senior leaders who
attended the meeting were the head of the party, Mr. N. Altankhuyag, the leader of the DP group
in Parliament, Mr. Ch. Saikhanbileg, the DP secretary general, Mr. D. Erdenebat, and the newly
appointed secretaries, Mr. Ts. Sukhbaatar, Mr. Ts. Jadamba, Mr. B. Urgamaltsetseg and Mr. D.
Gantulga.
Recalling that the democratic movement started in February 1989, Mr. Altankhuyag said the 20th
anniversary of the development would be appropriately observed in the present year. The
presidential election would be another important event. Mr. Saikhanbileg said working groups would
11. soon be set up to determine when and how the Motherland Money of MNT1.5million can be
distributed to each citizen.
Taking questions from the media, Mr. Altankhuyag denied that the party had demanded the right to
choose the vice president of the Central Bank, and said the DP was happy with the new president
choosing his own deputy. “Our party does not have anything to do with that appointment,” he
clarified.
Asked about the apparent anomaly in some DP members pressing for an amnesty law when Mr.
Altankhuyag has publicly stated such a law should not be initiated by any party, Mr. Saikhanbileg
said they were working for a parliamentary consensus on the amnesty. Discussion on the
compensation law has also been postponed for the same reason. The two measures should go
together. He also said a special session of Parliament could be held with the sole agenda of dollar
shortage and the unstable currency market.
The DP does not favor the current law calling for Government employees to formally abandon their
affiliation to any party. A total of 40 DP members in the National Consultative Committee have had
to resign from the Party under the law.
Source: en.News.mn
HEALTH SECTOR DONORS HOLD COORDINATION MEETING
Donor agencies and international organizations involved in more than 10 projects currently under
implementation in the health sector recently met at a Partners' Coordination Meeting organized by
the Millennium Challenge Account-Mongolia (MCA-M), aimed at initiating collaboration in future
efforts. Representatives of major health projects, including WHO technical assistance projects,
ADB-assisted Health Sector Development-2 and Health Sector Development-3 projects, UN projects
on Reproductive Health, Child Health and Nutrition, World Vision projects on Community Health,
HIV/AIDS and several others, made presentations on the programs and activities focusing on their
scope, results and some monitoring indicators, ongoing activities and on some lessons learned. The
speakers highlighted common areas of activities and ideas for possible collaboration to make for
maximum effectiveness.
Participants agreed to develop a donor coordination framework in the field of Non-Communicable
Diseases and Injuries (NCDI) prevention and control. It was suggested that the MCA-M Health Project
take a lead in this coordination.
Source: Montsame
MONGOLIA A FULLY FREE COUNTRY, REPORT FINDS
The just published Freedom House report on global freedom, issued annually since 1972, concludes
that freedom was on the march downward in 2008, especially in sub-Saharan Africa and the former
Soviet Union. It is the third year in a row that the private democracy watchdog organization has
judged a drop in global freedom, though the pace of the decline slowed. The group analyzed 193
countries and found 89 were free, representing 46 per cent of the global population. That total was
one fewer than in 2007. By comparison, 42 countries earned the "not free" designation. They
account for 34 per cent of the population - with just one "not free" nation, China, making for nearly
three-fifths of that total. The number of countries called “partly free” increased by two to stand at
62, with 20 per cent of the world's total population.
Mongolia was rated a full member of the free club. The former Soviet Union was the only region to
show consistent decline during the past decade. Among the factors attributed were the presence of
a number of "petro-authoritarian" states in the region, such as Russia, Kazakhstan and Azerbaijan,
and the continued authoritarian legacy of the Soviet Union and the strong influence of Russia on its
neighbors.
Source: www.freedomhouse.org
400 NEW BUSES BEFORE JULY, 60 OF THEM NEXT MONTH
The Metropolitan Public Transport Office has placed orders for 400 new buses, each costing
USD62,000. The first 60 of them will arrive next month, 80 more in March and so on through the
months, with the last 20 due in July. They will replace the ageing buses that now ply on
12. Ulaanbaatar roads. Many of these have covered one million kilometers even though they were
meant to be retired after running 350,000 km in eight years. Mr. P. Narantsetseg, head of the
Metropolitan Public Transport Office, said 200 of the new buses would be given to the State-run
transport companies, while the rest will be sold to private operators. There was no indication
where the money for the 400 buses was coming from.
Big buses will charge MNT300 and microbuses MNT400 for a ride. The Government has budgeted
MNT4.6 billion to be paid to bus companies in lieu of free travel for around 80,000 students carrying
proper documentation but private bus companies are rejecting the arrangement, demanding
instead that students pay the regular fare. The administration is working to solve the problem.
Source: www.news.mn
PEACE AVENUE TO BE MODERNIZED TO MARK CITY’S 370TH
ANNIVERSARY
The present year is also the year of the 370th anniversary of the capital city. A number of activities
are planned for the occasion. Residents are being urged to participate in various ways in the
celebration of the landmark. Every individual who is found to have contributed in some way to the
development of the city will be awarded a certificate, and a book detailing the best 370 such
contributions will be published.
The city administration plans various improvements, such as modernizing the 28.2-kilometer Peace
Avenue, and construction of a new road connecting Yarmag Road with the Bayanzurkh traffic post.
MNT154.6 billion has been allotted for these, with part of the money coming from the Mongolia
Development Fund and the rest from the Metropolitan budget of 2009.
Source: www.news.mn
PROTECTED AREAS MAY BE OPENED UP AS PASTURELAND, IF NECESSARY
In a move likely to alarm conservationists, Mr. N. Batsuuri, State Secretary General at the Ministry
for Food and Agriculture, has said they are considering permitting the use of protected areas and
border regions as pastures for livestock in distress following heavy snow in several provinces. “It is
possible to sustain 531,400 livestock in 16 of the 24 government protected areas. More than 1.5
million livestock can spend the winter in border regions,” Mr. Batsuuri told newsmen as he gave the
assurance that the Government was ready to offer emergency assistance anywhere regional
authorities found themselves unable to cope with problems posed by the weather. A drier than
usual summer last year made it difficult for animals to store enough body fat for the winter and
spring months.
Source: en.News.mn
13. _______________________________________________________________________________________________
SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended January 9, 2008, trading activity on the Mongolian Stock Exchange (MSE)
totaled 101,800 shares with 27 companies traded. Total market value of transactions was MNT 34.1
million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 503.7
billion, and decreased by MNT 13.4 million or 2.6% from the previous week.
The Top-20 Index decreased by 30.95 points or 0.6% compared to the previous week closing at
5,565.23 points. The MSE Composite Index decreased by 34.22 points or 1.2% compared to the
previous week, closing at 2,764.16 points.
Most active stocks traded were: Erdenet Zandan (39,900 shares), Genco Tur Buro (25,700 shares),
Khuh gan (17,100 shares), APU (9,600 shares), and NIC (2,200 shares).
Major share price percentage gainers were: Gobi (6.3%), APU (4.7%), Zoos Bank (2.1%), NIC (0.3%),
and Mogoin Gol (0.1%). Major share price percentage losers were: Erdenet Zandan (15.0%),
Bayangol Hotel (15.0%), Takhi Co (15.0%), Talkh chicker (13.0%), and Mon.Tsakh.Kholboo (12.0%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 Avg. 9.0% [source: NSOM]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
14. * year over year (yoy)
CURRENCY RATES – January 15, 2009
Currency name Currency Rate
US dollars US 1332.75
Euro EUR 1773.02
Japanese yen JPY 14.84
British pound GBP 1951.68
Hong Kong dollar HKD 171.81
Chinese yuan CNY 195.03
Russian ruble RUB 42.20
South Korean won KRW 0.99
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.