1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 223 – May 25, 2012
NEWS HIGHLIGHTS:
Business:
OT helps build Mongolia's infrastructure;
Ivanhoe to make USD 1.8 billion rights offering;
2nd Coaltrans Mongolia recap;
Macquarie Group lands lead role in Mongolian iron-ore IPO;
Kumai IPO to draw interest from investors betting on China;
Moody's downgrades Mongolia's top four banks;
CRML to surrender rights to molybdenum mine;
KPMG opens in Mongolia at Blue Sky Tower;
Samsung secures USD 192 million Shangri-La project in Mongolia;
Erdene Resources: Q1 report;
Private sector meets for renewable energy potential;
Nova chairman steps down;
General Electric reverses crisis legacy;
BHP considers delaying projects to cut spending.
Economy:
Mongolia looks to renegotiate double-taxation treaties with 4 countries;
Government plans 19 percent economic growth in 2013;
Rail line construction from TT to China border to begin in June;
Inflation expected to follow cash payments next week;
30 percent of Mongolia’s population in poverty;
MRAM eases fears Mongolia is falling into hands of foreign investors;
Debt hits USD 9.6 billion in 2011;
Renewable energies made priority;
Who gets the water?;
New Foreign Investment Law leaves much yet to be explained;
Aussie coal miners feel the burn;
With China's growth easing, premier calls for stimulus.
Politics
No need to fear new FI Law, says Parliament's deputy speaker;
Draft Securities Law explained;
Enkhbayar makes his case;
Parliament closes spring session;
Mongolia's presence felt at NATO summit;
Mongolia wrestles with dinosaurs, neighbors and politics;
President disputes USD 1.05 million sale of dinosaur;
President proposes cash handouts to children;
Elbegdorj expresses confidence in fair elections;
New Foreign Investment Law: deterrent or clarification?;
Foreign Investment Law: Not the end of the world;
IT center receives upgrade;
Education system leaves students ill-equipped to join workforce;
2. Delegation attends international economic conference;
Mongolia and Germany aim for food security in Ulaanbaatar;
Mongolia reaches out to neighbors to fight forest fires;
Mongolia cleared from Chinese territorial entanglements.
ECONOMIC INDICATORS:
MSE Top 20 Index by Market Capitalization;
Foreign-listed Companies with Mongolian Assets;
Monthly Macroeconomic Overview – April 2012;
Inflation;
Central Bank policy rate;
Currency rates.
*Click on titles above to link to articles.
SPONSORS
Khan Bank Eznis Airways
Kempinski Hotel Khan Palace Mongolian National Broadcasting
Breakthrough PR Oxford Business Group
BCM MONTHLY MEETING NOTICE
BCM‘s next monthly meeting for members will be Monday, May 28, 2012 at 5PM at the KEMPINSKI
HOTEL KHAN PALACE, 2nd floor, Altai Ballroom.
The bilingual meeting will feature the following presentations:
- Call to Order/Business Council of Mongolia: Laurenz Melchers, Chairman, BCM
- BCM Report: Jim Dwyer, Executive Director, BCM
- D. Munkhjargal, Manager for the Center for Executive Education, Newcom - "Introducing the
Center for Executive Education"
- S. Otgonbat, YPO Mongolia Membership Chair 2012-2013 and O.Batbayar YPO Mongolia Chapter
Chair 2012-2013 – ―Introducing YPO‖
- Olin McGill, Senior Business Environment Reform Advisor, Business Plus Initiative, USAID project –
―Staggering Costs of Inefficient Regulation in Mongolia‖
3. - Ch. Khashchuluun, Chairman, NDIC – ―Mid-term Development Priority‖
- Houston Spencer, Vice President Communications and Media Relations, Oyu Tolgoi –―Oyu Tolgoi's
Economic Contribution to Mongolia‖
A networking reception will be held for all attendees immediately following the business portion of
the meeting in ―Oasis‖ restaurant, 1st floor, Kempinski Hotel.
BUSINESS
OT HELPS BUILD MONGOLIA'S INFRASTRUCTURE
While Oyu Tolgoi LLC will bring some road infrastructure and electricity to the residents of
Umnugobi Aimag, ultimately it will be up to the government to determine how the wealth from
mining will improve the lives of people there, said Cameron McRae, the firm's Chief Executive
Officer.
―The Mongolian government will have to make the decision to how to spend the revenue earned
from the Oyu Tolgoi project.‖ He later added, ―We did not promise anything, but we did increase
the skills and knowledge of the residents.‖
McRae listed infrastructure projects in development by the firm, such as the construction of a
reservoir, a road running through to the Mongolia-China border, and its plans to deliver electricity
to local communities. Additionally, it has plans to build a district community for its workers to live
in.
Currently water use and the attainment of a power source are two chief issues the project's
developers must address. Oyu Tolgoi has submitted a request for permission from the government
to build a power plant, and is waiting for the greenlight. It will also be up to the government to
decide how to transmit energy from Oyu Tolgoi and neighboring Khan Bogd Soum.
Oyu Tolgoi received permission from the Water Authority to construct pipelines to pump water from
a distance of 70 kilometers. McRae promised that the plans for water use would have no impact on
the water supply of nearby residents, and that his company is currently investigating water issues
concerning the residents of Khan Bogd.
Source: Zuunii Medee
IVANHOE TO LAUNCH USD 1.8 BILLION RIGHTS OFFERING
Ivanhoe Mines Ltd announced its intention to launch a rights offering open to all its existing
shareholders that would raise about USD 1.8 billion in proceeds.
The rights offering, in which all Ivanhoe Mines shareholder could participate, is part of a
comprehensive financing plan to continue the development of the Oyu Tolgoi copper-gold project in
Mongolia, the company said.
Rio Tinto PLC, which owns a 51 percent stake in Ivanhoe Mines, said it plans to buy the maximum
number of shares it is permitted to acquire under the terms of the rights offering.
Source: Reuters
2ND COALTRANS MONGOLIA RECAP
Calm seemed to return to the business community at the 2nd Coaltrans Mongolia forum following
the passage of the foreign investment law by Parliament. At the two-day coal mining event were
225 attendees from 21 countries, joined by 12 exhibitors and 7 sponsors.
The event enlisted 36 speakers, including the heads of mining firms to present their developing
projects to investors, experts in the industry hoping to influence the course the coal mining sector
takes, and representatives from government explaining their efforts to built up the infrastructure
and the business environment companies need to operate efficiently and profitably. Infrastructure
has long been a trouble for enterprises looking to sell their goods, as its lacking creates bottle necks
to production and sale. Naturally, this was a common topic throughout the two days of
presentations.
4. One presentation of particular interest to delegates was one by Steven Katzman, President of
Bechtel Asia, who introduced plans to develop the Sainshand Industrial Complex. The project, born
from government Resolution 118, aligns stakeholders with government interests to create factories
and processing plants for the raw materials coming out of Mongolia's mines. This includes a coking
plant, copper smelter, iron processing facilities, and a cement mixing plant.
Originally a power plant had been planned for the complex as well, but project planners have
instead opted to connect with the country's existing energy grid as new power plants will be
established in the Gobi with the various mining projects that will be needing electricity.
Additionally, the complex will be built on the rail lines for the ease of transport of raw materials.
―The goal here is to build a world-class environmentally friendly solution,‖ said Katzman.
Additionally were various presentations on how Mongolia would be addressing its needs in energy,
transportation of commercial goods, and water resources. Already falling short on meeting the
energy needs of the country, Mongolia is looking to expand its energy grid with help from the
private sector. This includes the search for contractors for Power Plant No. 5, Prophecy Coal Corp.'s
plan to build its Chandgana Power Plant in Tuv Aimag and various projects in the highly prospective
renewable energies sector, including General Electric and Newcom Group's planned Salkhit wind
farm.
Mongolia is also launching its PIPES initiative to deliver electricity to every community in Mongolia,
which includes plans for a 220-megawatt power plant along the Egiin River, in addition to other
projects. Nuclear energy remains on the table but is a long way from implementation, said Mark
Dougan, Executive Director of Trinity Development LLC.
―Concepts and plans are in the very early stages, but we hope we can them in during the next five
years to benefit from Mongolia's uranium resources,‖ he said.
Source: BCM
MACQUARIE GROUP LANDS LEAD ROLE IN MONGOLIAN IRON-ORE IPO
Macquarie is the latest investment bank to unearth a rich seam of potential fees in Mongolia's
resources sector after securing a lead role in the proposed initial public offering of one of the
country's biggest iron ore producers.
Macquarie and Bank of America-Merrill Lynch have been appointed joint global coordinators and
bookrunners for the proposed listing of the Altain Khudur, which owns the Tayn Nuur iron ore mine
in the southwest of Mongolia, said a source familiar with the matter. The initial public offering
(IPO), which could be worth USD 1 billion, is targeted to take place in Hong Kong in the fourth
quarter of this year.
Altain Khuder produces iron ore from the Tayan Nuur mine around 168 kilometers from Mongolia's
border with China and has been exporting to customers including a unit of China's Baosteel since
October 2009. Iron ore exports have risen from virtually a standing start. Exports in the first quarter
of 2009 totaled less than 200,000 tons, but have increased more than eight-fold since then to above
1.6 million tons in the fourth quarter of 2011.
This prospectivity led China Investment Corp., China's sovereign wealth fund, to invest USD 300
million in Hong Kong Lung Ming Investment Holdings—the owner of Eruu Gol iron ore project near
Mongolia's border with Russia—in 2009. The Eruu Gol mine has the ability to produce around 3
million tons of iron ore annually from an overall resource totaling more than 300 million tons.
ASX-listed companies are also exploring for iron ore in Mongolia, including AUD 51 (USD 49.7) million
valued Haranga Resources, which owns a deposit close to Eruu Gol. FeOre, a smaller competitor
worth AUD 46 ( 44.9) million, owns the Ereeny and Dartsagt projects in central Mongolia.
Mongolia's iron ore is mostly of a lower quality to deposits in Australia's Pilbara, but interest is being
kindled by its proximity to China, which accounts for roughly 60 percent of the world‘s imports of
the key steelmaking material.
Source: Wall Street Journal
KUMAI IPO TO DRAW INTEREST FROM INVESTORS BETTING ON CHINA
Australia's position as the pre-eminent supplier of minerals to China has faced competition from
5. Mongolia during recent years. The entrance of coal miner Kumai Energy Ltd. is yet another example
of a firm looking to profit off of China's growing demand for energy from its neighbor Mongolia.
About 1 percent the size of Australia's mineral exports by value, Mongolia's mining industry has the
opportunity to grow further. However, despite being physically closer to end markets in China,
remoteness stands as a challenge for new developments.
Regional infrastructure is undeveloped in Mongolia, but the coming listing of Kumai Energy aims to
meet the demands of frontier exploration. Underpinning the float are four projects spanning about
700 square kilometers in Mongolia's south east. Coal is Kumai Energy's prime focus, although the
license areas are currently absent of established resources with limited historical exploration
activity.
Driving Kumai Energy's interest in the licenses is the close proximity of two abandoned mines where
coal seams with a combined thickness of 94 meters have been recorded. Drilling is planned for this
year to assess whether those measures extend into Kumai Energy's properties.
Source: The Australian
MOODY'S DOWNGRADES MONGOLIA'S TOP FOUR BANKS
Moody's Investors Service has downgraded the foreign currency long-term senior unsecured debt
ratings of Mongolia's four top banks to ―B1‖ from ―Ba3.‖ The four banks are Golomt Bank, Khan
Bank, Trade and Development Bank of Mongolia, and XacBank.
The downgrade comes as part of an ongoing global review affecting all banks whose standalone
ratings are higher than the ratings of the government to the country they operate in. It formally
concludes the review for downgrade on the four Mongolian banks that was initiated on 26 March.
The downward revision of the four Mongolian banks' standalone rating reflects Moody's view that a
bank's rating cannot be considered from outside the context of the government's credit worthiness.
It believes the standalone ratings of the banks should be positioned in line with the ratings of
Mongolian government to capture the appropriate credit risks of the banks' relatively low level of
cross-border diversification in their operations. Ultimately, the creditworthiness of the sovereign is
highly correlated to the banks', and as such their rating cannot stand above it.
While Mongolia is experiencing a transformation spurred by the boom of the mining industry, risks
of overheating, inflation, and a boom-bust cycle threaten the well being of the banks as well as the
sovereign's credit profile. Yet, Moody's notes that these banks have relatively low direct exposures
to the government. Furthermore, the banks have low reliance on wholesale funding. These factors
may hedge risks, but do not merit rating the banks above the sovereign.
Source: Moody's Investors Service
CRML TO SURRENDER RIGHTS TO MOLYBDENUM MINE
China Reservoir Mining Limited (CRML) has been ordered to return the rights of Aleinuer Mine of its
Reservoir Moly Mongolia LLC joint-venture to partner Nomin Deposit LLC.
The Mongolian Arbitration Center issued an arbitral award in relation to the Mongolian proceedings
pursuant to which the Mongolian Arbitration Center ruled that the mining right to the Aleinuer Mine
had to be returned by Reservoir Moly to its Mongolian joint-venture partner. CRML, a subsidiary of
China Daye Non-Ferrous Metals Mining Ltd., lodged an appeal to Mongolia's court of appeals against
the arbitral award, and received a written ruling on 1 December which annulled the arbitral award
issued by the Mongolian Arbitration Center due to procedural irregularities. Afterward CRML sought
another hearing.
On 18 May the Mongolian Arbitration Center issued its final arbitral award after the rehearing,
ruling that the rights to the Aleinuer Mine must be returned by to Nomin Deposit. No further appeal
is possible.
The Aleinuer Mine has not yet commenced any commercial production. Reservoir Moly is a firm in
Mongolia with the mining rights to molybdenum in Sukhbaatar Aimag.
Source: China Daye Non-Ferrous Metals Mining Ltd.
6. KPMG OPENS IN MONGOLIA AT BLUE SKY TOWER
KPMG, one of the world's big four auditors, opened its Mongolian office in the Blue Sky Tower. The
firm's opening and partnership with NIMM Audit establishes it as one of the country's largest audit,
tax and advisory service providers.
KPMG officially opened its office on the 6th floor of the Blue Sky Tower in a ribbon-cutting
ceremony and reception, officiated by D. Khayankhyarvaa, Mongolia's finance minister.
―Being a part of the KPMG family will give our local professionals the opportunity to learn from
KPMG's extensive experience, and help KPMG in Mongolia to provide world-class audit, tax, and
advisory services to our clients,‖ said L. Enkh-Amgalan, senior partner at KPMG in Mongolia.
Source: KPMG
SAMSUNG SECURES USD 192 MILLION SHANGRI-LA PROJECT IN MONGOLIA
Samsung C&T Corp. one of South Korea's leading construction and trading companies, said it won
three overseas orders worth USD 726 million, which includes plans to build a hotel and an office
building in Mongolia.
The company said it secured a high-rise development building remodeling project worth a combined
USD 534 million in Singapore, and USD 192 million hotel/office/commercial project for construction
in Mongolia. The two orders in Singapore involve construction in the Marina Center in the city state's
central business district.
The order in Mongolia involves the construction for Shangri-la of a 34-story Shangri-La hotel and
apartment suites building, a 24-story office tower and five-story theater and commercial building.
The 34-story building will include 110 hotel rooms which will be in addition to the 285 room
Shangri-La hotel already under construction on the site to open in 2013.
Source: Yonhap News
ERDENE RESOURCES: Q1 REPORT
Erdene Resources Development Corp. reported progress in its metals mining projects in its first
quarterly report in 2012.
The Donking coal project joint-venture partners announced that Xstrata PLC is seeking an operating
partner to assume its 75 percent interest. Timelines remain unchanged with environmental
assessment process, progression of engineering work and obtaining the necessary approvals for
commencement of the underground exploration phase continuing on schedule.
The Zuun Mod molybdenum-copper project is undergoing a strategic mine planning study.
Additionally, a 200-meter drill program was completed in April targeting the ―discovery zone‖ at
the Altan Nar gold-silver prospect, where 29 meters of 4.2 grams per ton of gold and 24.1 grams per
ton of silver was found, has been completed. Results are pending.
Source: Erdene Resources Development Corp.
PRIVATE SECTOR MEETS FOR RENEWABLE ENERGY POTENTIAL
A two-day international conference, Mongolia Renewable Energy-2012, was held in Ulaanbaatar,
aiming to bring together key stakeholders in Mongolia's renewable energy sector.
At the event representatives of government and business, scholars and engineers, academics, media
and non-government organizations (NGOs) gathered to discuss the potentials of Mongolia's
renewable energy resource recent developments, future plans, possible challenges in the efforts to
harness renewable energy resources as well as various forms of cooperation in developing Mongolian
renewable energy potentials.
While the world's carbon market is working fretfully to have polluters pay and the polluted
compensated, time waits for no man, and our blue planet is dauntingly browning,‖ said President
Ts. Elbegdorj in his greeting.
Country Director of the Asian Development Bank Robert Schoellhammer told the audience that the
Asia-Pacific region is pioneering the global renewable energy drive and is aiming to attain a 50 GB
capacity by 2050. He emphasized that the use of renewable energy is critical to achieving
sustainable growth as it is eco-friendly and can sustainably provide for energy security.
7. Organizers of the event included Newcom Group, the Asian Development Bank, General Electric
Co., Mongolia Economic Forum, and the Mongolian Chamber of Commerce and Industry upon close
cooperation and support by the Ministry of Mineral Resources and Energy.
Source: Mongolia Economic Forum
NOVA CHAIRMAN STEPS DOWN
Nova Resources Ltd. announced the resignation of Non-executive Director and Chairman Charles
Green.
Green is leaving to pursue other business interests. The company's board of directors is now seeking
to appoint a replacement to Green. In the meantime, Chan Fook Men, Chief Executive Officer of
Nova, will also act as interim chairman.
Source: Nova Resources Ltd.
GENERAL ELECTRIC REVERSES CRISIS LEGACY
For the first time in three years, General Electric Co., the main supplier of wind turbines to
Newcom Group's Salkhit wind farm, can take cash out of its finance arm, an important step as the
industrial conglomerate moves to leverage the global resource boom and win back investor favor.
Responsible for about 40 percent of the company's profits, GE Capital became a heavy drag in the
aftermath of the financial crisis, when its access to funds was threatened as short-term commercial
paper markets dried up and the value of its assets sank. GE Capital has spent the last three year's
repairing its balance sheet, using profits to reserve for bad loans, and exiting its real-estate
portfolio.
GE Capital said it would pay its parent a USD 475 million quarterly dividend, and plans to pay a USD
4.5 billion special dividend this year. The dividends are an essential part of Chief Executive Jeffrey
Immelt's plan to win back investors by tapping the cash inside the capital unit to help GE's industrial
businesses expand their portfolios, develop new products and penetrate new global markets,
especially to countries like mineral-rich Mongolia.
The company will use the cash from the finance unit to buy back shares that were issued during the
financial crisis. The funds will also help with Immelt's promise to focus on common share dividends,
and build the industrial businesses through bolt-on acquisitions. General Electric also announced the
purchase of two mining companies as it seeks to build up its exposure to the sector.
Source: Wall Street Journal
BHP CONSIDERS DELAYING PROJECTS TO CUT SPENDING
BHP Billiton, the world's biggest miner, is likely to delay signing off on at least two mega projects as
its chairman put the brakes on an USD 80 billion plan to grow the company's iron-ore, copper, and
energy operations, analysts said.
Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP Billiton to
join rival Rio Tinto PLC in reconsidering the pace of their long-term expansions in countries such as
Australia and Canada.
―The major message is: 'We can't approve anything right now. We don't' have a spare cent to
spend,‖ UBS analyst Glyn Lawcock said.
In BHP Billiton's bleakest outlook yet, Chairman Jacques Nasser said on Wednesday the company
expects commodity markets to deteriorate further and that investors have lost confidence in the
longer-term health of the global economy. Nasser stopped short of announcing a spending cut, but
said BHP was rethinking its expansion plans ―everyday‖ and that the company won't spend USD 80
billion over five years as outlined by CE Marius Kloppers in 2011.
BHP Billiton's plan to get into the potash business with a project in Canada possibly put on hold, as
well as the USD 10-billion initial expansion to the Olympic dam. But no one expects the projects to
face the ax. BHP wants to expand into potash for agriculture eventually, but sees that as a longer-
term prospect as places like China and India move away from rapid industrial expansion to
consumer-driven growth.
Source: Reuters
8. ECONOMY
MONGOLIA LOOKS TO RENEGOTIATE DOUBLE-TAXATION TREATIES WITH 4 COUNTRIES
Parliament will consider a bill that would cancel its double-taxation treaties with various nations.
The bill would annul the law that ratified treaties between the Mongolian government and the
governments of the United Arab Emirates, the Netherlands, Luxembourg, and Kuwait that
surrenders its right for double taxation on income. The Cabinet has finished its discussion of the law
and is ready to submit it to Parliament.
Source: Montsame
GOVERNMENT PLANS 19 PERCENT ECONOMIC GROWTH IN 2013
Parliament has approved a number of main directives for Mongolia's social and economic
development that it hopes would result in 19 percent economic growth.
These actions include the continuance of its 2008-2012 action program policy, drafts of main
directives that includes 26 goals and 171 measures, requiring the financing of MNT 4.4 trillion, 38
percent of all investment directed to domestic bodies, the Mongolian Stock Exchange's (MSE's)
partnership with London Stock Exchange (LSE) Group, and its commitment to keep the budget
deficit below 2 percent of the country's gross domestic product (GDP).
For 2013 the government has forecasted real GDP growth of 19 percent to reach MNT 19 trillion and
USD 4,900 GDP per capital. This came along with forecasts of 2 percent population growth, and
unemployment kept below 6.1 percent.
The government has also decided that in the future the policy rate of the Bank of Mongolia should
be reduced to ease inflation and develop a balanced economy. The government also planned for a
positive trade balance to the budget and stable macroeconomic factors maintained. It also paid
mind to the ever-present risk of inflation, following a rapid rise in demand, aiming it to keep
inflation figures in the single digits.
As for Mongolia's booming minerals sector, the government has target the majority of its investment
in to the Tavan Tolgoi-Sainshand railroad. For the Tavan Tolgoi-Gashuunshukhhait and Nariin
Sukhait-Shivee Khuren railroads, the government has set aside 30 percent of investment. It has also
begun work on a series of energy projects, including the construction of a 400-megawatt power
plant for Tavan Tolgoi and powerlines connecting it to surrounding communities. It has also planned
for a series of renewable energies projects such as a 50-megawatt wind farm at Tuv Aimag and the
Sainshand Industrial Complex.
Source: news.mn, Frontier Securities
RAIL LINE CONSTRUCTION FROM TT TO CHINA BORDER TO BEGIN IN JUNE
The government has reached its final decision to begin construction of a rail line from Tavan Tolgoi
to the Gashuunsukhait China-Mongolia border point for June.
Last March the government issued its decree to begin measures that would lead to the construction
of a rail line running from Tavan Tolgoi to the now-planned Sainshand Industrial Complex, Ukhaa
Khudag and Gashuunsukhait. According to the minister of transportation, construction and urban
development, D. Naranpurev, the rail will be open and running in both directions by 2014.
Energy Resources JSC has been permitted for the construction of a rail line between Ukhaa Khudag
and Gashuunsukhait at its own expense. Since the government gave its permission in 2008, the
company has drawn up its own feasibility study and sought out the financing for the project.
Currently the company is waiting for the go-ahead from the government before commencing
construction.
In addition, the feasibility study for a rail line between Tavan Tolgoi and Sainshand is ready.
Construction of the railway will be divided into two phases, with Russian Railways and Eastern
Railways responsible for one phase each. All railways require a concession agreement between the
government and the owner of the railways.
Source: Undesnii Shuudan
9. INFLATION EXPECTED TO FOLLOW CASH PAYMENTS NEXT WEEK
It seems greater inflationary pressures are on the horizon with government ready to roll out its MNT
1 million cash payments to senior and disabled citizens next week and polls showing an
overwhelming majority of people looking to sell their Tavan Tolgoi shares.
Finance Minister D. Khayankhyarvaa announced that the government will begin its issuance of MNT 1
million cash handouts next week. According to the Ministry of Social Protection and Labor, 272,582
seniors and developmentally challenged persons have opted to receive their MNT 1 million bounty
and shares of Erdenes-Tavan Tolgoi JSC in cash. According to an interview with the finance
minister, the remaining 90 percent opted to keep their shares.
Data from 15 May shows 738,917 citizens expressed their desire to sell their shares, of which 97
percent will receive cash. Another 21,000 will use their payments to help pay for their homes, and
294 will direct those funds toward education and health care payments.
The cabinet plans to finalize the nominal prices for the Erdenes-TT shares. Afterward, the
government will begin to sell those shares to companies. Additionally, MNT 50 billion will be
transferred to the Bank of Mongolia to enroll citizens in 6 percent mortgages and another MNT 50
billion to support small-medium enterprises. The finance minister also announced that the
government has worked out the financing issues to fund construction of its new rail road lines.
―We expect continued significant inflationary pressure,‖ said Dale Choi, chief investment strategist
of Frontier Securities. He later added, ―Inflation is to impact exchange rate to a certain degree and
vice versa.‖
Read more…
According to data from the National Statistical Office, currency issued in circulation reached MNT
708.9 billion, a 9.3 percent increase from a month earlier. Compared with a year ago, the amount
of currency released for circulation increased 80.3 billion, or 12.8 percent
Next week's payments will direct MNT 660,000 to 272,582 seniors and developmentally challenged
citizens, an equivalent of 2.82 percent of all money currently in circulation.
Source: Frontier Securities
30 PERCENT OF MONGOLIA‟S POPULATION IN POVERTY
Statistics from the World Bank and National Statistical Office of Mongolia reported that nearly a
third of Mongolia's population lives in poverty.
The joint study entitled ―Social and Economic surveys on Family,‖ reports that 29.8 percent of
Mongolia's population, or 837,600 citizens, live in impoverished conditions. Those people are unable
to afford the groceries they need for their families.
Source: Udriin Sonin
MRAM EASES FEARS THAT MONGOLIA IS FALLING IN THE HANDS OF FOREIGN INVESTORS
The Mineral Resources Authority of Mongolia (MRAM) has refuted rumors that 76 percent of Mongolia
is owned by foreign companies, informing the actual figure is a far smaller 14 percent.
Civil movements and organizations have falsely reported that 76 percent of the country and 18,000
special licenses are in the hands of foreign investors, reported the MRAM. In actuality, in Mongolia
are 301 foreign companies and 151 joint-ventures operating compared to 1,370 national companies.
Mongolia has 3,644 firms with licenses, including joint ventures, comprising 22.3 million hectares.
The total number of licenses accounts for 14.3 percent of Mongolia's landmass, of which 0.5 percent
is used for mining and 1.8 percent for exploration.
China owns 241 special licenses (or 3.6 hectares of land). Most of the licenses issued in 2005
accounted for 44.4 percent of the country's land. That figure has since shrunk to 37.7 percent in
2006, 26.7 in 2007, and 14.3 in 2012.
Source: Udriin Sonin
DEBT HITS USD 9.6 BILLION IN 2011
MP N. Batbayar reported total foreign debt of USD 9.6 billion.
That figure includes all debts belonging to the private sector, government and the central bank,
10. and is taken from the fourth quarter of 2011. It is still unknown how much added debt has been
gathered this year.
MPs agreed to move forward on discussions for the 2013 budget as well as expectations for 2014 and
2015.
Source: Zuunii Medee
RENEWABLE ENERGIES MADE PRIORITY
Energy Minister D. Zorigt announced that renewable energies would be regarded as a top priority by
Mongolia's energy sector at the Mongolian Renewable Energy 2012 International Conference on
Friday.
―Mongolia is home to enormous renewable energy resources—wind, solar, water, geothermal—and
Mongolia's ecological and climatic conditions are well befitting to the effective use of these
resources,‖ the minister said.
Currently the country's electricity consumption is growing between 8 to 10 percent annually. In his
announcement, Zorigt set the goal to have renewable energy provide 20 to 25 percent of Mongolia's
energy needs by 2020. B. Byambasaikhan, chief executive officer of Newcom Group, said Mongolia
boasts abundant wind and solar power resources, but difficulties in technology and investment
stand in the way of development.
Mongolia's first wind farm, the currently under-construction Salkhit Wind Farm, is being
development by Newcom and General Electric Co. It will provide clean energy for Ulaanbaatar,
situated about 70 kilometers away.
Source: EcoSeed
WHO GETS THE WATER?
While Mongolia's untold riches of copper, coal, and gold might help pull the third of its population
living in poverty out of their economic turmoil, the mining industry is also reshaping Mongolia's
landscape and nomadic culture. Camel and goat herders worry that new mega-mines will siphon off
precious water in an area already suffering from the effects of climate change.
―When we come to the well, we can see the level of the well water is eight inches lower than it
used to be,‖ said M. Ayur, a herder whose livestock grazes near the Oyu Tolgoi mine.
Officials from Oyu Tolgoi say the mine will draw water from a deep aquifer that will not affect
wells like Mijiddorj's. But he and other herders have already felt mining's impact and are suspicious.
Herders say mine trucks hit their animals and kick up dust that chokes pasture land. The mine has
offered herders compensation, including simple jobs helping livestock cross roads. Many herders
have signed compensation agreements, but there are complaints of coercion.
―Oyu Tolgoi employs people for maybe USD 230 a month,‖ said M. Myagmardorj, a local government
official. ―When the people are reluctant to sign the contract, they say: 'You are an employee and
you have to sign it or there will be measures.‖
Oyu Tolgoi denies that the company has pressured anyone and says the complaints are just a
negotiating tactic. The company's compensation scheme is modest. One option, for instance, would
provide an affected family with a USD 3,800 scholarship to put a child through college.
Mark Newby, Oyu Tolgoi's principal advisor for water resources, said the company has monitored
more than 100 herder wells in the area for years but found no connection between the herder
wells, which go down as far as 30 feet, and the aquifer the mine will draw from, which begins about
150 feet below the surface. If herders' wells are affected, Oyu Tolgoi says it will fix the problem.
Managing the perceptions and helping herders already struggling for water will be the bigger
challenge, he said.
Source: Reuters
NEW FOREIGN INVESTMENT LAW LEAVES MUCH YET TO BE EXPLAINED
Parliament passed its Law on the Regulation of Foreign Investment in Business Entities Operating in
Sectors of Strategic Importance during a tumultuous time of political posturing in preparation for
elections.
11. For many seekers of political office, the rhetoric of resource nationalism is an attractive campaign
platform, as further evidenced by recent proposals to increase the levels of taxation on mining
firms, which are generally perceived as foreign dominated. The law revolves around the concept of
a ―business entity of strategic importance‖ (BESI), or any company operating in the minerals,
banking and finance, or media and telecommunications sectors. These sectors are not specifically
defined, but government has confirmed that the ―minerals sector‖ would include the oil and gas
industry.
Transactions that will require government approval include acquisitions of 33 percent or more in a
BESI by a foreign investor. The details of the approval procedure has yet to be determined,
however, the law requires foreign investors stepping into a transaction under the scope of the law
to request approval from the Foreign Investment Agency (FIA). Afterward, it would send a proposal
to the government for its approval, giving each body 45 days to decide. FIA must inform the
applicant of government's decision within five days after deciding.
Sanctions for non-compliance are severe, and include voiding the deal and perhaps even
terminating the operations of the offending BESI. The law also states that government will
determine regulations which give preference to domestic business entities registered in Mongolia
for the procurement of any goods and services to the strategic sectors. Further, the provision
applies to all BESI, whether or not they are involved in a foreign investment deal.
There are a number of potential issues for concern to foreign investors. The approval process set
out creates uncertainty and is cumbersome. It is likely to cause considerable delay or complete
suspension while Parliament is in recess. It is unclear if the monetary threshold refers to the market
value of shares, book value of assets or value of the transaction. The provisions to state-owned
companies are extremely restrictive, applying to any deal regardless of the level of interest.
Finally, it is unclear how companies based in countries with treaties with Mongolia will be affected.
Many long-term observers of Mongolia are hard pressed to disagree with the principal that is to be
achieved under the law. However, Mongolia has a history of quickly introducing legislation and then
repealing it or suspending its implementation when it has adversely affected the Mongolian
economy. Against this background, local commentators remain philosophical, as one put it—―Before
an election it's all about Mongolia, after the elections it's all about the rest of the world.
Source: Hogan Lovells
AUSSIE COAL MINERS FEEL THE BURN
Thermal coal used in power generation was once seen as Australia's safe bet, especially because
Asian economies would increasingly need to turn on lights. The second-biggest exporter of the black
stuff to China, behind Mongolia, Australia ships about 150 million tons a year worldwide, with about
35 more thermal coal projects or expansions due for construction. Recently, though, the safe bet
has begun to look risky.
Australian thermal coal has fallen 21 percent from its average daily price in the first quarter of
2011. It is hard to see prices powering back anytime soon. There are concerns about lackluster
demand from China, where electricity output grew just 0.7 percent in April over a year earlier, the
lowest rate in nearly three years.
In Japan, the Fukushima disaster blighted the country's nuclear industry and supported demand for
other sources of energy, including thermal coal. But Australia's shipments to Japan are under threat
from the United States, where a glut of natural gas is depressing domestic demand for coal.
The economic slowdown in Europe has reduced coal demand for coal there; it fell 3 percent last
year. Colombian and Russian thermal coal that would have been sold to Europe is now sold in Asia.
Mongolia has also entered the fray and is starting to feed China's energy needs. Meanwhile,
Indonesia, the world's largest exporter of thermal coal, ramped up exports by 6 percent to 302
million tons last year.
Meanwhile, Australian coal miners are already grappling with rising wages, higher freight rates and
new taxes that have pushed up costs by 140 percent since 2006. The black stuff is now significantly
less profitable at current prices than it was a year ago. Executives from mining giants BHP Billiton
and Rio Tinto PLC are recalculating the value of billions of dollars of investment in Australia amid
12. concerns about global growth. Rising supplies of thermal coal makes the math look shakier still.
Source: Wall Street Journal
WITH CHINA'S GROWTH EASING, PREMIER CALLS FOR STIMULUS
Premier Wen Jiabao is calling for Chinese economic policies to tilt a little more toward fostering
growth, the latest sign of concern in China about a faltering in the country's economic expansion.
Signs of growth are good news to Mongolia as China is its chief consumer of commodities, and it
could suffer along with China if it succumbed to a ―hard landing.‖
Wen recently endorsed existing policies, but also indicated a new willingness to countenance
economic stimulus. In April, industrial production in China slackened to its slowest growth in nearly
two years, fixed-asset investment grew at its weakest pace in nearly a decade and imports
practically stopped growing, all signs of eroding confidence in the business environment.
Jing Ulrich, chairwoman of China markets at JP Morgan Chase, said that the comments made it
likely that China would decrease the minimum reserves that banks must set aside as protection,
leaving banks with more cash available to lend.
Yet Wen carefully hedged his remarks, endorsing existing policies but not offering new ones. He
reaffirmed his signature policy of popping the country's real estate bubble so as to improve the
affordability of housing. He even exhorted local authorities to continue tightening real estate
regulations. He also strongly hinted that authorities are not yet worried enough to embark on a
repeat of the expansionary monetary policy and heavy lending by state-controlled banks that pulled
China out of the global financial crisis three years ago.
The premier mentioned repeatedly over the weekend the importance of fighting inflation and
maintaining prudence in monetary policy decisions. He also reiterated his support for replacing
sales tax with value-added taxes.
Investors and economists closely scrutinize the comments of Chinese leaders like Wen because the
country's top political figures play a crucial role in setting policy on interest rates, bank lending
rules, and other economic policies. The People's Bank of China, the country's central bank, has no
political independence, operating at the direction of the cabinet, which Wen leads. Investors in
mainland China and Hong Kong appeared guarded about the extent to which Wen's remarks
represented a significant shift in policy.
Source: New York Times
POLITICS
NO NEED TO FEAR NEW FI LAW, SAYS PARLIAMENT'S DEPUTY SPEAKER
Parliament's deputy speaker has spoken out to ease fears among the private sector that the new
Foreign Investment Law would freeze foreign investment into Mongolia.
The new investment law aims to build a framework for regulating foreign investment rather than
building a wall to keep it from entering, said N. Enkhbold. He emphasized his point that the new
law has only created steps that would allow the government to screen deals and make sure that
they were in the best interests of Mongolia's national security.
The deputy speaker added that both Parliament and the laws drafters received enormous input
from the private sector that helped create its final outcome. The new law mandates that any deal
involving a stake any larger than 33 percent of an enterprise within Mongolia's ―sectors of strategic
importance‖—which include minerals, finance and banking, and media and telecommunications—
must be reported to the government. Additionally, it requires any deal that involves one of these
enterprises, includes the transfer of 49 percent or more of a company, and is worth more than MNT
100 billion (approximately USD 75 million) would be subject to Parliamentary approval. Any deal
involving state-owned companies, such as the Aluminum Corporation of China Ltd. (Chalco), will
always require approval, no matter how small.
Source: Zuunii Medee
13. DRAFT SECURITIES LAW EXPLAINED
Mongolia's long-awaited draft Securities Law aims to modernize the Mongolian Stock Exchange
(MSE). Investors anticipate the proposed changes to be announced ahead of the landmark Erdenes-
Tavan Tolgoi initial public offering (IPO), which is expected by the first quarter of 2013.
The Securities Law has been drafted in collaboration with the MSE's strategic partner, the London
Stock Exchange, and the non-profit Business Council of Mongolia. It was sent to Parliament in
September 2011. But it is unclear how the law has changed since it entered Parliament. Darin
Hoffman, a partner at Ulaanbaatar law firm MahoneyLiotta, said the legislative process has been
largely opaque.
There is little information about the draft's status, though recent news indicates that the law will
not be adopted until after elections. The current Mongolian Securities Market Law, however, is not
well-regarded by legal professionals. Hoffman said the law had a very limited scope.
―It only applies to companies listed on the MSE,‖ he said. ―This presumably was not the intention of
the drafters.‖
Under current guidelines, all companies listed on the MSE must be registered in Mongolia and
comply with Mongolian law. The draft law includes provisions for companies to pursue MSE listings
without compulsory dual compliance. To encourage dual listings, the MSE is also hoping that the law
includes listing rules compatible with the Hong Kong Stock Exchange's standards, which would add
Mongolia to a list of approved jurisdictions.
Erdenes-Tavan Tolgoi JSC is a litmus test for the MSE. If the listing raises a lot of money and is well-
managed by the MSE and other securities regulators, Mongolia's capital markets could attract new
listings.
―It is conceivable that many more companies with assets in Mongolia will try to access the global
capital markets through the MSE,‖ said Hoffman. He later added ―Although some foreign investors
have looked in the MSE, many require a stronger regulatory framework before committing to the
capital markets.‖
Source: IFLR
ENKHBAYAR MAKES HIS CASE
As he prepared to go on trial for corruption on Thursday, Mongolia's third president lay in a wrinkled
hospital bed, where he was recovering from a 10-day hunger strike he waged to protest being held
in detention by the current government.
Enkhbayar and his supporters in Mongolia and abroad view the trial as worrying evidence of the
country's slide away from rule of law and a fair and open democratic process. By contrast his
opponents describe Enkhbayar's prosecution as long delayed justice for a man they say routinely
twisted the law for his own benefit when he was prime minister and later president.
After losing to his rival, current President Ts. Elbegdorj, three years ago, Enkhbayar broke away
from the party of the current prime minister and founded the Mongolian People's Revolutionary
party, which has formed a coalition seeking to challenge the government in next month's elections.
Enkhbayar, in his first interview with a Western news organization since being released from
detention, cast his trial as part of a conspiracy to prevent him from reclaiming the ill-gotten
treasure of current politicians for the broader public.
―Mining is the reason they're so cruel and antidemocratic in trying to prosecute me,‖ he said.
―Copper and gold have made people crazy.‖
Those who support the prosecution say Enkhbayar is no innocent victim, but simply trying to regain
power to get his own hands on Mongolia's mineral wealth.
―This is really a case of him finally being brought to justice after years of people being too afraid to
file complaints,‖ said O. Tsedevdamba, a Stanford University-educated member of the current
president's Democratic Party.
She said that during Enkhbayar's time in power the police were much more brutal than today and
that the government arrested journalists for writing critical articles under a law banning slander of
the state. This case, she said, proves that Mongolia has made significant progress.
Mongolia's vibrant media has watched Enkhbayar's detention and trial closely, and much of the
14. controversy has unfolded in the glare of cameras. The government recently broadcast images of him
walking around and acting aggressively toward medical personnel. That has fractured the image of a
frail victim mistreated by the authorities.
―His team was portraying him as half dead, but footage shows him in quite good shape,‖ said
Sumati Luvsandendev of the Sant Maral Foundation. ―How he was portrayed in the local media has
really damaged his credibility. It's one thing to be accused of corruption and another to be
ridiculed.‖
Enkhbayar supporters, in response, publicized a report from a medical commission set up to assess
his health condition that suggested he needed more time for his body to recover.
Source: New York Times
PARLIAMENT CLOSES SPRING SESSION
Parliament ended its spring session on 23 May. The 76 members of Parliament will continue their
duties until the next session of Parliament opens.
Members will also likely begin their campaign activities for the 28 June parliamentary election.
Members of both the Mongolian People's Party and Democratic Party have held session to finalize
the names of candidates for that election.
Source: Unuudur
MONGOLIA'S PRESENCE FELT AT NATO SUMMIT
Mongolia seems to be filling a vacuum as NATO tries to garner more participation from Central Asian
countries. Mongolia's president was one of only three heads of state to attend the NATO conference
in Chicago as the region becomes more important to NATO's security strategy.
Central Asia's presidents would have a lot to talk about at the NATO summit, given the region's
importance to the group's focus on Afghanistan. But all five of Central Asia's presidents were no-
shows, in spite of being on NATO's official list of leaders ―expected to attend‖ and their regular
attendance at the last few summits. Instead, they all seem to have sent their foreign ministers.
One analyst believed Russia was at the center of the snub.
―One can make various guesses and speculation about why none of the leaders of Central Asian
countries responded to the invitation and why all of them are sending their foreign ministers. One
of the main reasons, which is on the surface, could be solidarity with Russia,‖ said Kyrgyzstan
analyst Orozbek Moldaliyev.
In addition to Mongolian president Ts. Elbegdorj, the presidents of Georgia and Azerbaijan
attended. And China has taken a dim view of Mongolia's ties with NATO, according to a report in
People's Daily, which said the alliance is ―roping in‖ Mongolia as an ―important part of its eastwards
expansion strategy, Mongolia's position with NATO's strategy becomes increasingly important.
But if NATO is ―expanding East‖ to rope in Mongolia, it looks like it's having to skip over a lot of
space in Central Asia to do so.
Source: Eurasianet
MONGOLIA WRESTLES WITH DINOSAURS, NEIGHBORS AND POLITICS
Two events have raised the global profile of Mongolia: the sale in New York of a stunning skeleton
of Tyrannosaur baatar; and a meeting in Chicago of NATO, which Mongolia attended as a formal,
though not full partner, for the first time.
Mongolia has protested the sale of the nearly intact dinosaur skeleton—its teeth alone are 15
centimeters long—by Dallas-based Heritage Auctions. The origins of the 2.4-meter high, 7.3-meter
long raptor is unclear but there are suspicions it came from Mongolia. In promotional material, the
auction house mentioned the dinosaur inhabited the Gobi Desert, long ago, and in a statement,
President Elbegdorj said if the skeleton originated in Mongolia the auction was illegal and ―the fossil
must be returned to Mongolia.‖ He called on the auctioneers to immediately disclose its origins.
David Herskowitz, director of natural history at Heritage Auctions, said that the fossil was initially
exported to Japan and then to England, from where it entered the United States legally and was
prepared.
15. From dinosaurs to a more modern kind of might: President Elbegdorj attended NATO's annual
meeting in Chicago on Sunday, representing a freshly minted partnership with the alliance. Since
2006, Mongolia has collaborated with NATO, in Kosovo and Afghanistan, to counter the power of
neighbors China and Russia. Just over 1,300 Mongolian soldiers have served alongside NATO- or
American-led forces, NATO said. Dubbed the ―Third Neighbor‖ policy, Chinese analysts are following
the balancing act closely.
As if all that weren't enough, the country is embroiled in a politics-and-corruption scandal that
some fear endangers Mongolian democracy. Elections set for 28 June are overshadowed by
controversy due to former president N. Enkhbayar's recent jailing on corruption charges. The vote is
likely to be contentious, given leadership during Mongolia's mining boom is at stake. Mongolia is also
debating how to retain control of it its wealth in the face of Chinese interests.
Source: New York Times
PRESIDENT DISPUTES USD 1.05 MILLION SALE OF DINOSAUR
The nearly intact skeleton of a Tyrannosaurus under dispute by the Mongolian government due to
questions whether it was obtained legally sold for USD 1.05 million at auction on Sunday
The skeleton of the Tyrannosaurus baatar, a smaller Asian cousin of the fearsome Tyrannosaurus
Rex that roamed North America during the Cretaceous period about 80 million years ago, measures
eight-feet tall and 24-feet long. It was discovered in the Gobi Desert, which stretches across
portions of northern China and southern Mongolia.
Heritage Auctions President Greg Rohan said he does not know in which country the skeleton was
found. The sale will not be completed, however, until a court fight launched by the Mongolian
government last week is resolved. The Mongolian government obtained a temporary restraining
order against the sale in Texas state district court in Dallas, where Heritage is based.
Rohan said a restraining order from a state court in Texas was not enforceable in New York, where
the sale occurred. Nonetheless, he said, Heritage has agreed not to complete the sale until ―a court
signs off on it.‖
In a statement last week, Mongolian President Ts. Elbegdorj said if the skeleton had been found in
Mongolia, ―it was illegal to auction the T-Rex and the fossil must be returned to Mongolia.‖ Rohan
said the remains ―entered the United States legally‖ and were offered for sale by a ―reputable
consignor who is well known to us.‖
Source: Reuters
PRESIDENT PROPOSES CASH HANDOUTS TO CHILDREN
President Ts. Elbegdorj has submitted a package of laws for the budget and taxes as well as a bill to
grant cash allowances to children.
The president's draft for the budget reflects the decision to reign in state spending. This includes
limits on spending to social insurances and the Human Development Fund.
The bill on cash payments to children would grant MNT 20,000 to school-aged children living in a
low-income household every month beginning July this year.
Finally, the amendments to Mongolia's tax laws submitted by the president would double the
threshold of earnings before taxes are taken. The law provides exemptions to anyone whose income
is lower than twice the minimum wage.
Source: Montsame
ELBEGDORJ EXPRESSES CONFIDENCE IN FAIR ELECTIONS
President Ts. Elbegdorj offered his impression that elections this year will be fair and free from
tampering following a review of election bodies. In 2008, it was Elbegdorj who stated that he felt
the election was rigged in favor of the Mongolian People's Party, which led to protest.
During a visit to the General Authority for State Registration and the General Election Committee in
light of upcoming election, the president expressed his confidence that this year would be free
from election rigging. During his visit with the registration authority, he heard a report concerning
the progress made on the registration of citizens and their electronic identification cards. According
16. to the report, about 1.9 million citizens, or 95 percent of the all citizens eligible to vote, have been
registered since 1 May.
―I am here personally to check how the voters will vote and that the election shall be held without
complications,‖ said Elbegdorj during his visit.
One precaution taken will be the use of finger prints during the voting process.
Afterward, the president gave a report expressing his positive outlook on the election procedures.
He called for active participation this year amongst the population as well as responsible
competition among parties and coalitions.
Source: Udriin Sonin
NEW FOREIGN INVESTMENT LAW: DETERRENT OR CLARIFICATION?
Parliament has passed its new law requiring both government and parliamentary approval for any
foreign investments worth more than MNT 100 billion for the buy of a stake of more than 49 percent
of a business in certain strategic sectors.
The law has been softened significantly from an initial version that would have limited foreign
stakes to 49 percent in wide swathes of the economy, including sectors as varied as food,
transportation and real estate. The finals version of the law has foreign investment needing
approval if they fall into any of the three ―strategic‖ sectors: minerals, banking and finance, and
media and telecommunications. Investments in these sectors of more than USD 76 million for a
stake of more than 49 percent will have to be approved by Mongolia's Foreign Investment and
Foreign Trade Agency (FIFTA), and subsequently Parliament. Each has 45 days to decide, bringing
total approval time to around 90 days. Certain other transactions may need approval as well, such
as those that may affect commodity exports or create a monopoly in certain commodities markets.
Some investors have expressed relief at the final draft of the law, while others said that
uncertainties over the law—and over elections in June—have left some major deals hanging.
As Mongolia prepares for June's nationwide parliamentary elections, managing the country's
resources in a way that best benefits Mongolians is a key political issue. The deal proposed by the
Aluminum Corp. of China Ltd. (Chalco) to buy up to 60 percent of Mongolian miner SouthGobi
Resources Ltd. that sprang the law now appears to be on the rocks after Mongolia threatened to
suspend some of the mining licenses owned by the company it was trying to buy. With the new law
in place, perhaps foreign investors will at least have a clearer idea of what they are in for from now
on.
Source: Financial Times
FOREIGN INVESTMENT LAW: NOT THE END OF THE WORLD
Implementation of the new Foreign Investment Law including regulations issued by the government
may be as significant as the law itself.
At this point, the reaction of most observers is generally that ―it could have been worse‖--and that
the final version is a vast improvement on early drafts. Concerns still abound that the government
could use this law to justify a large degree of intervention—including an assertion of extra-
territorial jurisdiction—into foreign corporate governance. Similarly investors await a better
understanding of the breadth of government discretionary authority in applying the law.
This new law is not necessarily happy news, but it‘s not the end of the world. And all sources,
including the deputy chairman of Parliament, say it is not retroactive. The fact that it was not
worse is due to the quiet, behind-the-scenes educational efforts by several foreign embassies and
international organizations, steady delivery to MPs of descriptions of the best practices used
worldwide by the Business Council of Mongolia's Legislative Working Group as well as intensive
lobbying by both President Ts. Elbegdorj and Prime Minister S. Batbold.
Every democracy produces some unusual legislation prior to an election. Elected officials are
naturally inclined to play to the crowd during a campaign. However, there are two key main points
to keep in mind: (1) Mongolia has a proven track record of correcting mistakes; (2) it's never over.
Source: NAMBC
17. IT CENTER RECEIVES UPGRADE
The Ministry of External Affairs (MEA) announced the completion of an upgrade and modernization
effort to the Atal Bihari Vajpayee Centre for Excellence in Information and Communications
Technology in Ulaanbaatar.
A team of experts from the National Informatics Centre (NIC) recently visited Mongolia to see the
results of the project. It was established by India's government in 2003 with a grant-in-aid of USD 1
million. The center produces information technologies experts and helps develop software for
Mongolia.
The center has also become a facilitator of communications between Ulaanbaatar and its 21
provincial capitals. MPs utilize the facility extensively to connect with their constituencies,‖ said
the MEA in a statement.
Source: India Blooms
EDUCATION SYSTEM LEAVES STUDENTS ILL-EQUIPPED TO JOIN WORKFORCE
Research from the Mongolian Labor Exchange shows the high unemployment prevailing Mongolian
society is related to lack of qualifications held by Mongolians.
Reasons for the lack of qualifications include ―low work ethic, unsatisfactory professional and
language skills, the inability to take on prolonged work pressures and responsibilities, lack of
teamwork, and the inability to use high end technologies.
Middles schools are heavily institutionalized, following a strict schedule and strict time table—
remnants of the old Soviet education system. The strict nature of these schools may be effective in
some instances, but it does not impart to students practical working skills, such as those named
above. Mongolian public schools lack comprehensive lesson plans on how to develop practical skills,
and it is entirely up to the teacher whether or not students can gain these attributes.
Although Mongolia's education law promised great change, lesson planning and new teaching
methods were generally not introduced, spawning at least two generations of people with no
practical skills. Mongolia's most skilled workers tend to find employment in foreign countries,
attracted mainly to the larger salaries.
Source: UB Post
DELEGATION ATTENDS INTERNATIONAL ECONOMIC CONFERENCE
A Mongolian delegation participated in the 68th session of the Economic and Social Commission for
Asia and the Pacific (UNESCAP) in Bangkok last week.
The Mongolian delegation, headed by Vice Minister of Foreign Affairs G. Tenger, delivered speeches
on the Mongolian government's economic positions and proposed collaboration in trade investment,
transportation, environment, sustainable development, information technologies, and social
development between Mongolian and ESCAP at the senior official segment.
Tenger introduced to his peers the policies of government and present socio-economic situation in
Mongolia. He underlined the principle that despite growth to economic criteria, Mongolia is still
vulnerable to economic crisis, the fluctuation of prices to raw materials, and the negative
consequences of rising consumption. Additionally, he advocated the goal of introducing green
economics and environmentally friendly technologies, as well as the importance of establishing a
think tank for landlocked developing countries.
While last week's segment was a meeting of senior officials in government, this week will have
ministers come to meet and discuss the topics ―Growing Together: Economic Integration for an
Inclusive and Sustainable Asia-Pacific Century‖ and ―Steering Inclusive Development amidst Global
Turbulence and Volatility.‖ This year's event has brought together delegations from some 60
countries.
Source: Montsame
MONGOLIA AND GERMANY AIM FOR FOOD SECURITY IN ULAANBAATAR
Parliament approved a bill that would grant funding to improve food supplies to the capital.
The bill ratifies a Mongolia-Germany intergovernmental agreement on the financial cooperation, a
18. credit and project agreement for the Energy Efficiency-2 project, and a collateral additional credit
agreement for a project of a developing the regional transportation infrastructure with an aim to
improve the food supply of Ulaanbaatar.
The deal has been formally established by the Mongolian government and the Deutsche Bank for
Reconstruction and Credit.
Source: BDSec
MONGOLIA REACHES OUT TO NEIGHBORS TO FIGHT FOREST FIRES
Deputy Prime Minister N. Enkhbold said his country would ask China and Russia for help to
extinguish the spreading of wildfires should the current situation worsen further.
Enkhbold, also chairman of the National Emergency Committee, made his remarks during an
emergency meeting held to seek measures to control wildfires. The National Emergency
Management Authority reported that at present there are a total of 20 forest and steppe wildfires
within its territory, among which 14 are still burning.
Some wildfires broke out in mountainous areas, and there is no road for vehicles to pass through. So
the firefighters had to walk dozens of kilometers to launch their fire-fighting operation. Since the
beginning of 2012, there have been a total of 129 forest and steppe wildfires in Mongolia and most
were caused by human factors.
Mongolia has long been stricken by a drought since this spring and the forests and steppe are highly
exposed to fire risks. The National Emergency Committee has ordered local authorities to
strengthen their fire prevention work.
Source: Xinhuanet
MONGOLIA CLEARED FROM TAIWANESE TERRITORIAL ENTANGLEMENTS
Taiwan's Mainland Affairs Council announced that Mongolia is not included in the territory of the
Republic of China (Taiwan) under its constitution.
The council made the clarification after a legislative hearing, during which Mainland Affairs Council
Minister Lai Shin-yuan was shown three maps and asked to point to the one showing ―the territory
of the Republic of China according to its existing national boundaries,‖ as according to the
constitution. While one of the three maps shows Mongolia and China as one country, another shows
them separate and the third was just of Taiwan.
Lai chose the second map, showing Mongolia to be a separate nation, but was criticized by
Democratic Progressive Party (DPP) Legislator Chen Chi-mai for choosing a map of China. However
the council defended Lai's choice by pointing to the Ministry of the Interior's regulations on maps,
which began treating Mongolia as independent after Taiwan set up a representative office there in
2002 during the former DPP administration.
Mongolia became an independent country in 1945 after the Chinese government signed a treaty
with the former Soviet Union. However the Republic of China revoked its recognition of Mongolia's
independence after the treaty was abolished by the legislature in 1953 because of a breach of the
deal by the Soviet Union.
Source: Taipei Times
ANNOUNCEMENTS
ALS THREE-DAY COAL QUALITY COURSE BEGINS 28 MAY
The ALS Coal Quality Course will begin run 28 until 30 May at the Blue Sky Tower Hotel.
The course is a comprehensive introduction to the broad issues of coal quality, from mining and
preparation through the end user. It is delivered in bite-size modules to assist students in
understanding how to obtain the maximum benefits from a coal product.
Students will attend the three-day comprehensive course on broad issues of coal quality, from
exploration, to mining, testing and preparation through to delivery to the end user, delivered by
expert presenters.
19. Registration fee is USD 1,500. For more information call 343882, 99092732, or email
b.sainbileg@alsglobal.com for additional information about the course.
___________________________________________
MINExpo INTERNATIONAL 2012, LAS VEGAS, 24-26 SEPTEMBER
The Business Council of Mongolia (BCM) and the Mongolian National Mining Association (MNMA) with
the support of the U.S. Embassy‘s Commercial Section in Ulaanbaatar are now registering a
Mongolian business delegation to participate in ―MinExpo International 2012‖ which will be
organized at the Las Vegas Convention Center on September 24-26, 2012.
MinExpo International 2012 is the world's largest and most comprehensive exposition dedicated to
mining equipment, products and services. More than 1,400 exhibitors in eleven exhibit halls will
display the latest technology, equipment, components, parts and services for exploration,
extraction, safety, environmental remediation and preparation and processing of metallic ores,
coal, industrial minerals and more!
Registration deadline is 5 pm, 15 June. Please contact BCM at 70114442, tugi@bcmongolia.org or
MNMA at 314877, enkhbold@miningmongolia.mn for registration and additional information about
the event.
___________________________________________
“MM TODAY” on MNB-TV, Fridays at 18:25 [TONIGHT]
BCM is pleased to announce 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
18:30 tonight! Tune in to watch this program that reports stories from today‘s BCM NewsWire.
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POSTINGS ON MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS
The new ‗Presentations‘ section on BCM‘s Mongolian website which can be reached via link to
bcm.mn/itgeluud. Several presentations already posted include 9 from Coal Mongolia in February
9-10, 2012.
As a key component of BCM‘s Mongolian website ‗News‘ section, articles from the Government‘s
―Open-Government.mn‖ site are regularly posted.
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POSTINGS ON ENGLISH WEBSITE 'PRESENTATIONS', 'MONGOLIA REPORTS' AND „MONGOLIAN
BUSINESS NEWS‟
On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 4 presentations
from BCM‘s April 23 monthly meeting; 3 speeches from ―Corporate Governance Training for
Directors‖ on April 27-28; 12 presentations on Mongolian entities at Mines and Money Hong Kong
2012 on March 21-23; 11 presentations from Coal Mongolia 2012 on February 9-10; 7 speeches from
the Mongolian Investment Summit on December 8-9, 2011 in London; several speeches at the Risk
Management Forum on November 8 co-organized by BCM and Mandal Insurance; speeches at
Discover Mongolia 2011; and speeches from all BCM‘s monthly meetings in 2011-12.
Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note the Polit
Barometer, April 2012 by Sant Maral Foundation (Mongolian and English versions); ―Preliminary
estimates of staggering costs of inefficient trade regulation in Mongolia‖ by Olin McGill, consultant
to USAID BPI; ADB‘s Asian Development Outlook, April 2012; detailed results of BCM‘s NewsWire
survey of March 2012; World Bank‘s Mongolia Quarterly Economic Update, February 2012; Executive
Summary of the Mongolian Real Estate Report 2012 by M.A.D. Investment Solutions; Mongolia –
World Bank Country Survey 2011; Welcoming remarks by Jim Dwyer, BCM at Mongolia Investment
Summit 2011 Hong Kong, Mining Journal Supplement for Mongolia, October 2011; and ―Mongolia‘s
Mining Services Cluster 2010‖, Professor Michael E. Porter, Harvard University, The Microeconomics
of Competitiveness.
We are now posting some news stories and analyses relevant to Mongolia to BCM website's
20. ‗Mongolian Business News‘ as they come, instead of waiting until each Friday to put them all
together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday,
and will incorporate items that are already on the home page, so that it presents a consolidated
account of the week‘s events.
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SOCIAL NETWORK WITH BCM
The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.
Keep up to date on the latest business deals in Mongolia and how the climate for investment is
improving each day with BCM.
Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better
business environment in Mongolia today.
Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-
MONGOLIA/129826330435540 to read the latest announcements and comment on events carried in
the NewsWire with the community.
Hear breaking news and announcements as they happen when you follow BCM on Twitter at
http://twitter.com/#!/bcMongolia.
Of course for news information, interviews, and announcements regarding our organization, visit
the official BCM website at bcmongolia.org and bcm.mn.
ECONOMIC INDICATORS
21.
22.
23.
24. 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]
Year 2010 *13.0% [source: NSOM]
Year 2011 *10.2% [source: NSOM]
April 30, 2012 *16.0% [source: NSOM]
*Year-over-year (y-o-y), nationwide
Note: 17.8% y-o-y, Ulaanbaatar city, April 30, 2012
CENTRAL BANK POLICY 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]
May 12, 2010 11.00% [source: IMF]
April 28, 2011 11.50% [source: IMF]
August 25, 2011 11.75% [source: IMF]
October 25, 2011 12.25% [source: IMF]
March 19, 2012 12.75% [source: Mongol Bank]
April 18, 2012 13.25% [source: Mongol Bank]
CURRENCY RATES – May 24, 2012
Currency Name Currency Rate
U.S. dollar USD 1,320.64
Euro EUR 1,655.82
Japanese yen JPY 16.62
British pound GBP 2,066.27
Hong Kong dollar HKD 170.11
Chinese yuan CNY 208.19
South Korean won KRW 1.13
Russian ruble RUB 41.62
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.
