1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 83, August 28, 2009
NEWS HIGHLIGHTS:
Business:
MPs approve all changes, OT agreement in two weeks;
Uranium agreement “a political signal”, says Rosatom head;
Khan Resources hopes “rule of law will prevail";
Central Bank studying Malaysian offer to buy Anod Bank;
Communication boss faults G-Mobile for lowering rates;
No progress on joint infrastructure development venture;
Entree Gold shares touch a 52-week high;
IFC launches project to promote good corporate governance, trade finance;
Mining at Khushuut to begin soon, away from public eye;
Text of agreement to be available in Mongolian;
Euromoney Conference only on September 8;
Entities urged to attend industrial fair in Germany;
Rio prepares for recovery after profit tumbles;
Peabody tweaks corporate structure to achieve Asia-Pacific growth;
Zambia says it will not reintroduce mine windfall tax.
Economy:
Central Bank will not lower interest rate;
Russia withholds loan as Mongolia “still has to repay the grand debt in full”;
World bankers suggest rebound may have begun;
MPs lock horns over discussing economic crisis;
Is the anti-crisis plan itself in crisis?
Mongolia identifies priority areas of IFC assistance;
Audit reveals taxes paid, but not received;
5 oil companies form consortium;
Crops growing well;
75% of Mongolians use cell phones;
Gold up on steady dollar, eyes equities;
Surge in coal exports to China through Erenhot.
Politics:
“We cannot change history,” says Medvedev, calling for more cooperation;
Russia sees Elbegdorj as no threat to deals;
Bayar calls on Medvedev to exchange views;
Parliament ends special session;
Hungary offers USD25 million to produce livestock vaccine;
Elbegdorj calls for new look at education;
Protesting workers block dumping of garbage;
Road repairs not to be finished before September 16;
2. This year’s Peace Corps volunteers sworn in.
MONTHLY MEETING RECAP
The BCM monthly meeting on August 24, with Mr. Laurenz Melchers in the chair, was attended by 70
and welcomed 7 new members, raising the strength to 128. They are Areva Mongol, Kempinski Hotel
Khan Palace, Wildlife Conservation Society, Anderson and Anderson, the North America-Mongolia
Business Council (NAMBC), the Australian Embassy in Seoul, and the New Zealand Embassy in
Beijing. Executive Director Jim Dwyer reported that the Mining Supply Chain database was now
finalized, contained information on 1,153 registered companies, and would be publicly launched in
the coming month.
Giving an update on key developments in the mining sector, MNMA President Do.Ganbold said the
speed with which the special Parliament session was dealing with the OT investment agreement was
encouraging. His happiness at the likely resolution of the impasse was, however, tempered by the
fact that several recent measures ―would have no positive impact‖ on mining businesses. MNMA has
signed an MoU with Ulaanbaatar Railway and BCM members facing any problem with the Railway
could ask MNMA for assistance.
Two visiting representatives of BAUMA, a major trade fair show for construction and mining
materials, machinery and equipment, gave a presentation on next year’s fair in Munich. They
expect visitors and participants from almost all over the world to attend the fair that will cover
555,000 sq. m. of space.
Ms. Evelyn Enkhbaatar, a student at National University of Mongolia, outlined plans for assisting
Mongolia-based companies in hiring interns through AIESEC, the world's largest student-run
organization active in over 1,700 universities in more than 100 countries for some 60 years.
Responding to expressions of thanks and appreciation for the help he rendered to BCM during his
tenure, US Ambassador Mark C. Minton, whose successor has been announced, graciously said
ambassadors come and go, but it was the private sector, led by BCM, that would now be responsible
for building and strengthening international relationships. He introduced Maj. Gen. Craig Campbell,
recently appointed Lt. Governor of Alaska, who referred to his long ties with the Mongolian military
in his capacity as Adjutant General of the U.S. state's National Guard, and said his new office would
help him develop ties beyond the present military partnership.
For a longer account of the meeting, please visit BCM website, BCM News & Press.
BUSINESS
MPs APPROVE ALL CHANGES, OT AGREEMENT IN TWO WEEKS
The special session of Parliament did what it was widely expected to do, and also did it faster at
the end. Around 8 on Tuesday evening Parliament approved the last of the four amendments the
Government had proposed to facilitate an agreement with the investors in the Oyu Tolgoi project,
allowing a relieved and jubilant Rio Tinto CEO Tom Albanese to say in distant Canada, "This is an
incredibly important milestone in bringing onstream one of the finest undeveloped copper-gold
projects in the world.‖
As shares in Vancouver-based Ivanhoe rose 24% in Toronto on receipt of the news, Rio and Ivanhoe
both said they now expect to formally sign the agreement with the Government of Mongolia ―in the
near future‖. The Mongolian Finance Minister has said the signing will take place within two weeks.
"The votes today by overwhelming majorities of the members present for the special session of
Parliament represent a significant step in Mongolia's commitment to attract foreign investment in
the development of the country's mineral resources," Ivanhoe president John Macken said. He was
certainly right about the majority support for the amendments. After long months of acrimonious
bickering and maddening uncertainty, the MPs approved changes to the law on water by a 90.9
percent majority, to the law on roads by 88.3 percent, and to the corporate income tax by 86.9
3. percent. The annulment of the windfall profits tax with effect from January 1, 2011 remained the
most contentious to the end, but only statistically so, gaining 85 percent support.
Read more…
Some of its opponents remained unconvinced to the end. Mr. N.Batbayar, one of the MPS who had
initiated the tax that was passed in 2006, said after the vote, ―The Mongolian Government has just
gifted USD20 billion to foreign companies.‖ Many of the MPs who did favor the annulment shared his
concern that the tax, which has brought MNT960 billion to the state budget, will be difficult to
replace. The Government’s answer has been that times have changed, the tax has served its
purpose, and continuing with it would scare away investment, killing the goose that laid the golden
eggs.
The agreement gives the Government 34% shares in Ivanhoe Mines Mongolia, the company that will
run the project. Other key terms include a stable and operational tax environment in relation to
the development and operation of the project and certainty regarding the term of the investment.
Rio Tinto owns just under 10% of Ivanhoe at present, but an agreement the two companies signed in
2006 allows it to buy another 9.95% for USD388 million when the investment agreement is signed.
Rio also gave Ivanhoe a USD350-million loan in 2007 so that project development could continue.
Rio could increase its holding of Ivanhoe to approximately 46.5% if all its options are converted to
shares.
Ivanhoe expects construction of the mine to take 30 months, but work will begin only after the
agreement is approved and signed by the Government and both companies' boards. At the moment,
production is targeted for as early as 2013, with a five-year ramp up to full output, Rio said on
Tuesday. The Oyu Tolgoi project is located in the South Gobi region just north of the Chinese-
Mongolian border, and is expected to produce 440,000 tons of copper and 320,000 ounces of gold
annually, with a 45-year mine life.
Source: en.News.mn
URANIUM AGREEMENT “A POLITICAL SIGNAL”, SAYS ROSATOM HEAD
An agreement on establishing a joint venture on prospecting, production and processing of uranium
was signed between Russia and Mongolia on Tuesday, with the beaming presidents of both countries
looking on. Both partners in the joint venture are state-owned companies – AtomMon in Mongolia,
and Rosatom's mining arm, AtomRedMedZoloto, in Russia. Its first operation will be to develop the
Dornod deposit, which holds seven times as much uranium as Russia produced last year.
Mr. Sergei Kiriyenko, head of Rosatom, called the agreement "an important political signal" and said
the joint venture is based ―on parity of interests‖. Investment in the project would reach "hundreds
of millions of dollars", he said, declining to give an exact figure. Dornod holds 28,000 tons of
uranium reserves and the amount can be doubled with further exploration. He would not commit
himself to a specific date but said the venture would get off the ground soon. ―We believe that the
main work can be completed even this year,‖ he added.
Source: Ardiin Erkh
KHAN RESOURCES HOPES “RULE OF LAW WILL PREVAIL”
The Mongolia-Russia partnership in a uranium mining venture has raised concerns for the Canadian
miner that owns the deposit. Toronto-listed Khan Resources, which still owns a 58 percent interest
in the mining license for the Dornod deposit, is seeking to determine how Mongolia's new law on
nuclear energy will affect its investment in the country. President and CEO Martin Quick said, "The
new nuclear energy law may have a detrimental impact on the project, so we need to canvass our
partners' thoughts on that." Mongolia last month passed a law that gave the state the right to own
51 percent of any strategic uranium deposit.
The two companies that form the joint venture, Mongolian state firm AtomMon and Rosatom's
mining arm, AtomRedMedZoloto, already owned 21% each of the license, Mr. Quick said. "Hopefully
we can come to some reasonable accommodation with our partners and the Mongolian
Government," he said. "It is a democracy and hopefully the rule of law will prevail."
Source: Reuters.com
CENTRAL BANK STUDYING MALAYSIAN OFFER TO BUY ANOD BANK
A Central Bank official has confirmed that an unidentified Malaysian company has offered to buy
Anod Bank for MNT180 billion, along with a guarantee worth 100 million euro from a Swiss bank.
4. However, he said, ―We do not intend to sell it to anyone who makes a bid. A decision will be taken
only after thorough examination of various aspects of any offer.‖ The bid, received on July 31,
covers all debts and risks and would be adequate to return the bank’s activities to normal.
The Representative of the Central Bank in Anod Bank, Mr. S.Nasanjargal, has said the bank
continues to be in very bad shape. Only seven branches are now working. When asked about the
offer, he said it is being studied but he had heard the Malaysian company was not very reliable.
Asked about the fate of shareholders of Anod Bank, Central Bank President L.Purevdorj told
Parliament later in the week that the principal shareholders would not be given back their
responsibilities in the bank. They had concealed a loss of MNT50 billion from the Central Bank and
an audit by an international organization has found that the bank has about MNT230 billion in debts.
The many small shareholders should not suffer, but no way has as yet been found to revive the
bank’s finances. Confirming that a foreign company has offered to buy the bank he said this would
help shareholders get their money back. ―However, we have to study the offer carefully as it is not
clear why someone would want to buy a troubled bank in this time of crisis,‖ he said.
Source: Ardiin Erkh
COMMUNICATION BOSS FAULTS G-MOBILE FOR LOWERING RATES
Mr. B.Boldbaatar, director of the Communication Regulatory Agency, told a press conference last
week that a special working group is trying to ascertain which of the three cell phone operators --
MobiCom, Skytel and Unitel -- first proposed to cut off connections with G-Mobile for two days last
week, but he would not say if any action would be taken against whoever was found responsible for
causing widespread inconvenience to users. The head of the public relations department of
MobiCom, Mr. D.Bolor, who was also present, said G-Mobile had violated several provisions of the
Communications Law by reducing tariffs drastically.
Angered that none of the three companies has apologized to users, journalists asked why MobiCom
did not take legal action against G-Mobile. Mr. Bolor said they had sent several letters to G-Mobile
with a request not to reduce tariff so much. ―We had no choice when they did not respond,‖ he
said.
Mr. Boldbaatar was then asked if his agency favored users paying more since he, too, has opposed
reduction in rates. His answer was that ―any sudden and drastic reduction could be very hazardous,
and so our position is that prices can be lowered, but not by too much‖. He justified this by saying
that cheap products would affect reliability and quality of service, and also impair healthy
competition. Mr. Bolor was asked if he agreed that high prices ensured quality, in view of users’
experience that MobiCom was the most expensive among cell phone operators and also the one
which faced the most network problems. He did not give a direct answer, saying only that their aim
was to constantly improve the quality of service.
Source: www.news.mn
NO PROGRESS ON JOINT INFRASTRUCTURE DEVELOPMENT VENTURE
The Director of the Russian Railway Association, Mr. V.I.Yakutin, told officials of the Ulaanbaatar
Railway Association on Tuesday that the present program of repairing only 108 kilometers of
railroad tracks will be gradually extended to the entire length of the railway in Mongolia. Work on
laying new railway tracks will begin once the agreements on the different mining deposits are
finalized. Already 1,000 freight wagons and one locomotive have been delivered and ten leased
locomotives would also be reaching Mongolia soon.
Referring to the proposed joint venture to develop infrastructure, he said the decision to establish
the company has been taken in principle, but no date has yet been set on when it begins work nor
any arrangement made about its finances. The Mongolian share of the MNT526-million initial
investment will come as a soft loan from Russia, and its repayment terms would be decided in the
framework of the debt issue between Mongolia and Russia, he said.
Source: Zuunii Medee
ENTRÉE GOLD SHARES TOUCH A 52-WEEK HIGH
Entree Gold Inc. was the most active stock on the AMEX on Tuesday and touched a new 52-week
high, following its announcement that it has completed due diligence and received regulatory
approval for the option agreement with HoneyBadger Exploration Inc. Entree Gold is engaged in the
exploration of mineral resource properties in Mongolia, China and the USA. As of December 31,
5. 2008, the company had six wholly owned subsidiary companies. Among them is Entree LLC, which
holds all of its assets in Mongolia, but will eventually hold only those that are subject to the Entree-
Ivanhoe Joint Venture.
Entree and HoneyBadger intend to explore for and develop porphyry copper targets in the Yerington
porphyry copper district of western Nevada. This agreement with HoneyBadger is part of Entree's
strategy to use the knowledge and experience gained from working on its projects in Mongolia and
North America.
In Mongolia, Entrée Gold holds three exploration licenses comprising the 179,590-hectare Lookout
Hill property that completely surrounds the 8,500-hectare Oyu Tolgoi project of Ivanhoe Mines, and
hosts the Hugo North Extension of the Hugo Dummett copper-gold deposit and the Heruga copper-
gold-molybdenum deposit. The company continues to explore its large landholdings in Mongolia,
including the coal discovery Nomkhon Bohr. Ivanhoe Mines and Rio Tinto are major shareholders of
Entree, holding approximately 15% and 16% of issued and outstanding shares respectively.
Source: TransWorldNews, Entree Gold Inc.
IFC LAUNCHES PROJECT TO PROMOTE CORPORATE GOVERNANCE, TRADE FINANCE
IFC, a member of the World Bank Group, last week signed a memorandum of understanding with
the Mongolian Parliament for a training program to help private companies improve economic
performance through increased transparency and accountability. IFC also signed an agreement with
Khan Bank under IFC’s Global Trade Finance Program to provide a facility of USD2 million.
Supporting trade finance is an IFC strategic initiative in Mongolia at a time when the financial crisis
has reduced the availability of trade funding worldwide.
Under the Mongolia Corporate Governance project entered into with the Standing Committee on
Economics, IFC agreed to train the Mongolian private sector in best business practices. The project
is funded through the Netherlands-IFC Partnership Program. IFC’s project team will work closely
with the Government to improve existing regulations, and partner with local training and
educational institutions to develop the necessary skills to enhance corporate governance. IFC will
also work directly with companies to implement good governance standards and assist banks in
assessing their clients’ corporate governance practices to reduce their exposure to corporate loan
defaults.
―Improving corporate governance in Mongolia will help us attract investment and make our
economy more competitive,‖ said Mr. Ts. Bayarsaikhan, Chairman of the Standing Committee. ―This
project is particularly important given the impact of the global economic crisis.‖
Mr. Lars Thunell, IFC Executive Vice President and CEO, said the program complements IFC’s new
project to reform business inspections in Mongolia. ―Supporting the private sector in Mongolia is a
priority for IFC. We value our Mongolian banking clients in particular because they serve more than
400,000 families,‖ he said.
Source: www.ifc.org
MINING AT KHUSHUUT TO BEGIN SOON, AWAY FROM PUBLIC EYE
Popular preoccupation with Oyu Tolgoi and Tavan Tolgoi has kept the Khushuut coal mines out of
the limelight, but some 2,000 Chinese workers are expected to arrive soon to start excavating the
4.4 billion tons of coal there. Located near the Sutai Mountain in the west, Khushuut is 1,290 km
from Ulaanbaatar and 310 km from the border with China. A Chinese company has been granted
eight different exploitation licenses covering 34, 265 hectares and valid for 70 years.
Source: www.olloo.mn
TEXT OF AGREEMENT TO BE AVAILABLE IN MONGOLIAN
Finance Minister S.Bayartsogt has said the full text of the Oyu Tolgoi investment agreement will be
soon made available in Mongolian so that anybody can know its details. Even before that, the
Government plans to publish the main terms and provisions of the landmark agreement.
Source: Undesnii Shuudan
EUROMONEY CONFERENCE ONLY ON SEPTEMBER 8
The ensuing 4th
Annual Mongolia Investment Forum in Ulaanbaatar, organized by Euromoney, will
now be held on September 8, and not be spread over the usual two days. BCM is a Supporting
Organization of the event. The agenda and the list of speakers have not yet been finalized.
6. However, important officials and policy makers of Mongolia, business leaders, journalists and
financial analysts will be attending and offering views and opinions.
There will be several panel discussions. The subjects are expected to include the state of and
prospects for the Mongolian economy, an exploration of Mongolian mining beyond Oyu Tolgoi,
opportunities in infrastructure and energy, how to make money from the mining supply chain, and a
focus on tourism, healthcare and agriculture.
Source: www.euromoneyconferences.com
ENTITIES URGED TO ATTEND INDUSTRIAL FAIR IN GERMANY
Last June, when a Mongolian business team visited Germany to talk with their counterparts and the
Government there, a working group was established to study cooperation opportunities in
processing raw hides and mineral resources to make end-products. Now the Ministry of Natural
Resources and Energy, the National Chamber of Commerce and Industry, and the German
Engineering Federation, speaking on behalf of this group, have in a joint statement urged Mongolian
entities to participate in BAUMA 2010, an international exhibition on the latest technology in
equipment, material and machinery in mining and construction to be held in Munich in April. Mr.
Eugen Egetenmeir, representing the Federation, said the fair, held once in three years, is an
international event and the biggest exposition of environmentally friendly, economically efficient
and technologically advanced equipment, ideally suited to meet the needs of the upcoming
expansion of mining operations in Mongolia.
Source: www.gogo.mn
RIO PREPARES FOR RECOVERY AFTER PROFIT TUMBLES
Rio Tinto, the world's second-largest miner, has positioned itself for a comeback after posting last
week a record drop in half-year profit and selling off shares and assets to slash debt. Rio said it was
more confident about the future after cutting a greater-than-targeted 16,000 jobs, or 15 percent of
its workforce, reducing production at its higher-cost operations and paying off almost 40 percent of
its debt. "Rio Tinto is now a stronger, fitter business and we can now look to the future with a
higher level of confidence," Chief Executive Tom Albanese said.
First-half underlying profit fell 54 percent to USD2.565 billion, matching analysts' forecasts, as
metals prices and demand collapsed. Its aluminum business, which it expanded two years ago with
the costly takeover of Alcan, slid to a loss of USD689 million. Rio Tinto, which lightened its debt
burden with recent asset sales and a USD15.2 billion share sale, said cost cuts would pay off in the
second half and, in a sign of its confidence, said it expected to pay a final dividend. Mr. Albanese
said he expected some recovery in western demand in 2010. Rising demand from China, the biggest
consumer of many industrial metals, had lifted metal prices from 2008 lows.
Read more…
Saying that the Rio employees detained in China were in good health, and that the company was
relieved that the grounds for their arrest were not as serious as the spying allegations first made,
Mr. Albanese said, "From an overall perspective, I am committed to building our relationship with
China, which of course is of great importance to Rio Tinto."
Rio's bottom line was hit by writedowns and a USD195 million break fee paid to Chinalco for
spurning the Chinese state-owned group's planned USD19.5 billion tie-up in June. Mr. Albanese said
Rio Tinto still sees opportunities to work with Chinalco and has had some early discussions with
them. "I personally am interested in seeing that happen," he said.
Source: Reuters.com
PEABODY TWEAKS CORPORATE STRUCTURE TO ACHIEVE ASIA-PACIFIC GROWTH
US-based Peabody Energy, with joint venture and business development activities under way in
China, Mongolia, Australia and other countries, has adjusted the reporting channels for its coal
sales and coal trading units, to reflect the company's focus on expanded access to the fast-growing
Asia-Pacific markets.
Last year, Peabody sold 256 million tons of coal and reported USD6.6-billion in revenue. According
to the company, its coal products fuel 2% of worldwide electricity.
Source: www.miningweekly.com
7. ZAMBIA SAYS IT WILL NOT REINTRODUCE MINE WINDFALL TAX
In a bid to boost foreign mine investment, Zambia said on Tuesday it will not reintroduce the
controversial windfall tax it applied when copper prices rose last year, despite the current rally in
metals prices. The introduction of a 25% windfall tax and other taxes in 2008 was backed by the
World Bank to help Zambia raise funds required to build schools, roads and provide health and
education services.
The country’s Mines and Minerals Development Minister said the Government would not reintroduce
the tax, which was scrapped in January, as it could scare away foreign investors. "We believe that
the government’s policies should not be determined by short-term conditions such as the price of
copper," he said. ―We realized that the windfall tax was an addition to the cost of production and
that it was discouraging investment."
Source: Reuters.com
ECONOMY
CENTRAL BANK WILL NOT LOWER INTEREST RATE
Reporting in Parliament on the state of the economy, Central Bank President L.Purevdorj and
Finance Minister S.Bayartsogt told members that the situation continues to be grim and banks’
problems with bad debts persist. Mr. Purevdorj then answered MPs’ questions. Ruling out any
lowering of policy interest rate which stands at 11.5%, he said this is a time to continue to hold fast
and not take risks. In any case banks still do not have much money to lend, at whatever interest.
Asked if losses in the banking sector have really reached MNT36.1 billion and why this should have
happened, Mr. Purevdorj said the losses were the result mainly of banks’ reduced income because
they could not provide enough loans, and of borrowers’ failure to repay. Restructuring of banks
would have 2-3 stages and various suggestions are still being studied. A roadmap is expected to be
ready by the end of the year.
Source: Ardiin Erkh
RUSSIA WITHHOLDS LOAN AS MONGOLIA “STILL HAS TO REPAY THE GRAND DEBT IN FULL”
The long-promised USD300-million agriculture loan from Russia will not be available as Russia
considers that Mongolia is yet to pay back around USD150 million of the ―grand debt‖. Mr.
Ts.Sukhbaatar and Mr. D.Dorligjav from the Presidential Office were recently in Russia to finalize
preparations for President D.Medvedev’s visit to Mongolia. When they suggested that a reference to
the USD300 million agriculture loan on easy terms be included on the visiting President’s agenda,
they were told by the Russian Presidential Office that this could not be done as under Russian law
no commercial loan can be given to a country which already owes Russia money. The Mongolian side
said their perception was that all outstanding Mongolian debt to Russia had been waived, but were
told this was not so and ―some debt remains‖. According to the Russian position, Mongolia still has
to pay USD150-160 million.
It appears when Prime Minister and later President Enkhbayar negotiated on the debt with the
Russians in 2004, he was told Mongolia should put this money into the Mongolian-Russian joint
venture Mongolrostsvetmet as part of its capital. Mr. Enkhbayar said a decision on the issue could
be taken later. When he returned to Mongolia, however, Mr. Enkhbayar did not make any public
revelation of this proposal. Instead, he repeatedly said he had persuaded Russia to waive all debt,
and this claim won him many votes, and perhaps the victory also, in the presidential election of
2005. During his four years in office Mr. Enkhbayar is not known to have referred to the issue on any
occasion.
Mr. Sukhbaatar says the Russian claim comes as a bolt from the blue. The truth has to be
ascertained and the issue resolved without delay. For the moment, however, it is clear there will
be no USD300 million loan immediately. Interestingly, earlier Russia had withheld the loan on the
ground that the Mongolian Government would have to stand guarantee that commercial banks
would repay the money. There was no talk then about Mongolia being ineligible for a loan because
it still owed Russia money.
Source: en.News.mn
8. WORLD BANKERS SUGGEST REBOUND MAY HAVE BEGUN
Central bankers from around the world expressed growing confidence last week that the worst of
the financial crisis was over and that a global economic recovery was beginning to take shape. ―The
prospects for a return to growth in the near term appear good,‖ declared Mr. Ben S. Bernanke,
chairman of the U.S. Federal Reserve. Though the Fed chairman repeated his warning that the
economic recovery was likely to be slow and arduous and that unemployment would remain high for
another year, he echoed the growing relief among European and Asian central bankers that their
own economies had already started to rebound.
Even as they indulged in a bit of self-congratulation over what had been achieved since the
financial crisis of last year, central bankers attending the Fed’s annual retreat were beginning to
focus quietly on another big task, how they will unwind the vast emergency measures they put in
place to fight the crisis. The mood of relief and cautious confidence among central bankers and
economists was almost palpable — a stark contrast to the anxiety and tension that permeated their
retreat one year ago.
Read more...
―It is reasonable to declare that the worst of the crisis is behind us, and that the first signs of global
growth have appeared earlier than we generally expected nine months ago,‖ said Mr. Stanley
Fischer, governor of the Bank of Israel and a top former official at the International Monetary Fund.
In the past week, France and Germany both surprised forecasters by reporting positive growth after
a string of quarterly contractions. Japan followed with its own growth report.
Mr. Jean-Claude Trichet, president of the European Central Bank, cautioned against assuming that
the world was back to normal. ―We still have a lot of work to do,‖ he said, adding that ―it would be
a catastrophe‖ if governments failed to heed the lessons of the crisis and financial regulation.
Source: The New York Times
MPs LOCK HORNS OVER DISCUSSING ECONOMIC CRISIS
MPs are divided over the suggestion made by Finance Minister S.Bayartsogt and the Central Bank
President L.Purevdorj at a meeting of the Standing Committee on the Economy that the state of the
economy continued to be grim and several issues needed to be discussed by Parliament in its
present special session.
Mr. Batj.Batbayar said the discussion can wait until the autumn session to begin in only about a
month from now. ―The special session has only one week left. What decisions can we possible reach
in that time?‖ he asked. Mr. Z.Enkhbold opposed this view and said, ―Who will be responsible if the
crisis deepens further in this one month? The measures so far taken are not proving effective. We
should have a discussion without delay.‖ The final decision was to have both the bank chief and the
Minister make statements in Parliament on the last day of the special session, with some MPs asking
questions afterwards.
Source: Undeshnii Shuudan
IS THE ANTI-CRISIS PLAN ITSELF IN CRISIS?
Parliament approved in February a comprehensive national plan to overcome the economic crisis.
The Government which had prepared the plan presented it to the nation as Mongolia’s answer to
the crisis. Six months later, what has the plan achieved?
Commercial banks are still waiting for the promised funds to reach them so that they can resume
lending to business, particularly small and medium enterprises, so that economic activity does not
stagnate. This failure of the Government to rejuvenate the market, says Mr. D.Batjargal, Director
of the Finance and Economics Institute, will push the recession deeper down. The unemployment
rate has reached 29.4%, the national GDP has decreased 1.3%, and the number of ―very poor‖
people has risen to be 3.2 times more than in 2002. It seems the anti-crisis plan itself is in crisis.
Source: Zuunii Medee
MONGOLIA IDENTFIES PRIORITY AREAS OF IFC ASSISTANCE
First Deputy Prime Minister N.Altankhuyag told Mr. Lars H. Thunell, Executive Vice-President and
CEO of the International Finance Corporation (IFC), at a meeting last week that Mongolia would
welcome policy recommendations, technical assistance and capital support from the private sector
arm of the World Bank to lift itself out of the present economic crisis. The seasonal GDP indicator
in the first seven months of 2009 was 1.3 percent, and gross industrial production has fallen 9.1
9. percent, mainly because of the stagnation in the construction sector. The banking sector continues
to face problems of liquidity.
He indicated several areas where Mongolia sought IFC assistance. The first of these is increasing
production to ensure food safety. Processing units working in an eco-friendly manner have to be set
up to make maximum use of abundantly available raw animal products. SMEs need assistance. The
financing system operated mainly by the Government offers credit at a high rate of interest.
Several other problems also stand in the way of delivering optimal help to struggling SMEs.
Read more…
The banking sector needs help to reduce the total size of non-performing loans. The Government
plans to issue bonds and grant loans to state servants to buy apartments to revive the construction
business and thus to put some money back into banks. It welcomes IFC suggestions on how to
stabilize the banking sector and on restructuring activity in the real economy. It also looked
forward to cooperating with the IFC in developing roads, railways, energy, water supply and urban
development projects as, without proper infrastructure in place, there can be no maximum
exploitation of mineral deposits such as in Oyu Tolgoi, Tavan Tolgoi and Tsagaan Suvraga.
Mr. Thunell said all this was possible ―but it is important to first create a favorable environment for
work‖. The IFC, he said, would like to begin with increasing the Government’s capacity to issue
guarantees on loans and risks. Development of infrastructure ―will be taken care of when we
cooperate in the agricultural sector," he said, adding that IFC would be happy to collaborate in
tourism development also.
Source: Montsame
AUDIT REVEALS TAXES PAID, BUT NOT RECEIVED
Crane White & Associates, an Australian auditors’ firm that assists developing countries through
transparency, accountability, regulatory and capacity building consulting, found that MNT25 billion
paid in tax by several mining companies in 2006 disappeared before the actual money could reach
the state budget. Altogether the books of 28 mining companies – 12 in gold, 6 in coal, 3 in copper
and molybdenum, and the others in fluorspar, petroleum, zinc, and polymetal – were checked.
These recorded that the companies had paid more than MNT492 billion in tax, but State receipts
from them were shown as more than MNT25 billion less. The discrepancy has never been publicly
explained.
A similar auditing exercise for 2007 is now being conducted by Ernst & Young from Malaysia. Their
report is expected in September.
Source: Zuunii Medee
5 OIL COMPANIES FORM CONSORTIUM
Mr. D.Amarsaikhan, Head of the Petroleum Authority, has revealed that five large Mongolian
companies have come together to establish Mon Oil and Gas, a consortium which plans to work in
different areas of the petroleum sector. It will import crude petroleum from Kazakhstan, refine it
in Mongolia, and then export it, if needed.
Source: Zuunii Medee
CROPS GROWING WELL
Altogether 1,084 individuals and companies are growing crops this year on 282,200 hectares, up
from the Government’s plan of 280,000 hectares. So far things have gone well, except for some
damage in Selenge province following rain and hails, and harvesting is likely to begin in September.
The Government hopes the output will meet 78 percent of the domestic demand for wheat, 60.8
percent for vegetables and 100 percent for potato.
Source: www.news.mn
75% OF MONGOLIANS USE CELL PHONES
According to unofficial but reliable estimates MobiCom has 900,000 users in Mongolia, Skytel
600,000, Unitel 400,000 and the only Mongolian operator G-Mobile 200,000. Even with many people
subscribing to more than one cell phone service, the figures suggest that three fourths of
Mongolians use cell phones. This is a much higher percentage than in China, which has 60 million
cell phone users in a population of over a billion.
Each user spends MNT10,000 a month on an average.
10. Source: Ardiin Erkh
GOLD UP ON STEADY DOLLAR, EYES EQUITIES
Gold prices inched up on Wednesday as the dollar barely moved after slipping the day before, but
investors were wary about rising equities drawing money away from bullion. They kept their focus
on the dollar for near-term market direction, as a firmer dollar makes gold priced in dollars more
expensive for non-dollar holders and dampens interest in bullion as an alternative asset.
A weaker dollar supports gold if investors are selling the US currency to buy other assets including
gold. If the dollar's weakness is due to US-related concerns, it also boosts the appeal of gold as a
hedge against risks.
Source: Reuters.com
SURGE IN COAL EXPORTS TO CHINA THROUGH ERENHOT
Customs statistics from Erenhot show that driven by increasing domestic demand, China imported in
the first seven months of the year 186,200 tons of coal from Mongolia through that port, worth
USD9.73million. The figures show an increase of 115.76% and 155.61% respectively over those in the
same period last year.
China has offered two explanations for the surge. First, demand weakened in the international
market, thus sparing resource in Mongolia for China to import, and, second, economic development
was rising rapidly in China’s eastern coastal areas, generating more demand for power output, and
as thermal coal demand surged, imports of coal were pushed up.
Source: Steelguru
POLITICS
“WE CANNOT CHANGE HISTORY,” SAYS MEDVEDEV, CALLING FOR MORE COOPERATION
Presidents Ts.Elbegdorj and Dmitry Medvedev held a press conference on Tuesday after signing a
declaration affirming the two countries’ strategic partnership. Asked why trade tariff continues to
be high for Mongolia even after 20 years of talks, Mr. Medvedev said Russia appreciated Mongolian
concerns and was ―ready to review existing agreements‖. About the recent confusion over Russia
claiming that a part of the ―great debt‖ was still to be repaid, both leaders said a memorandum
signed in 2003 between two Prime Ministers had all the details. Mr. Medvedev added that Russia
had indeed waived 98 percent of the debt but ―some small issues still remain unsolved‖. These will
be ―attended to so that the bilateral strategic cooperation could develop freely‖, he assured,
adding that ―related organizations would be instructed to work on them on a priority basis‖.
Asked if Russia would continue to play a dominant role in Mongolian politics and economy, now that
other countries, including China and the USA, were also interested, the Mongolian President said
their shared historic and unique relationship grants Russia an important role in Mongolia’s
development. Saying that he had little to add to this, Mr. Medvedev asserted that ―every country
has a right to choose its partners, but we cannot change our history‖. Pointing to the great success
of cooperative ventures like Erdenet, Mongolrostsvetmet and Ulaanbaatar Railways, the Russian
President said he saw ―no need to change something that was going so well‖. The only way to go is
forward, he said, and added, "New infrastructure and energy projects, the development of atomic
industries, processing uranium ore -- this is a future that looks extremely interesting to me."
Source: www.news.mn
RUSSIA SEES ELBEGDORJ AS NO THREAT TO DEALS
Chief Kremlin foreign policy aide Sergei Prikhodko told reporters ahead of the Russian president's
visit to Mongolia that Russia was confident planned investments in uranium fields and the rail
network there will not be undermined by the country's new leadership. "There was speculation
around the new president ... But we have not felt any fundamental changes in the approach to
strategic cooperation with Russia," Mr. Prikhodko said. "We feel the new leadership of Mongolia is
disposed to preserving everything that has been achieved in recent years."
Russia's state rail monopoly in May signed a deal potentially totaling USD7 billion to upgrade
Mongolia's rail network and improve access to untapped deposits of uranium, coal and other
minerals in the Gobi desert. Mongolia has also offered Russia access to its uranium deposits as the
11. Kremlin seeks to position itself as a major supplier to the growing nuclear fuel industry. "Dialogue is
continuing on establishing cooperation with Mongolia via state corporation Rosatom in the areas of
exploration, extraction and processing of uranium ore," Mr. Prikhodko said.
Moscow has been trying to break into the prosperous nuclear markets of the USA and the European
Union, and has been eyeing possible alliances in the world market. Russia holds more than 10
percent of the world's uranium reserves. It is also among the world's biggest providers of
enrichment services and has ventured abroad to seek additional raw materials.
Source: Reuters.com
BAYAR CALLS ON MEDVEDEV TO EXCHANGE VIEWS
Prime Minister S.Bayar called on President D. Medvedev on Tuesday at the Marshal Palace of the Ikh
Tenger complex on Tuesday and exchanged views on bilateral and international issues. Mr. Bayar
expressed satisfaction that the President was visiting at the time both countries were celebrating
the 70th
anniversary of their victory in the Khalkh River battle as this was a landmark in the history
of Mongolian-Russian relations. He hoped the present visit will strengthen these relations.
President Medvedev reciprocated the friendly sentiments and expressed confidence that his visit
and talks here would be fruitful.
Source: Montsame
PARLIAMENT ENDS SPECIAL SESSION
Parliament ended its extraordinary session on Wednesday immediately after approving the last of
the amendments that pave the way to signing the investment agreement on Oyu Tolgoi. Speaker
D.Demberel thanked members for making the session a success by accomplishing everything on the
agenda. ―What Parliament has done will be of great significance in the future development of
Mongolia, and now it is up to the Government to sign the agreement and use its provisions most
beneficially and constructively,‖ he said.
Source: Udriin Sonin
HUNGARY OFFERS USD25 MILLION TO PRODUCE LIVESTOCK VACCINE
The Standing Committee on the Economy has discussed the USD25 million interest-free loan that
Hungary is offering for the technical upgrading of the State-owned Biofactory to enable it to
produce enough livestock vaccine to meet the entire domestic demand. At present the Government
spends MNT4 billion on the factory every year, but its production is sufficient for only 15% of the
country’s needs.
Source: www.gogo.mn
ELBEGDORJ CALLS FOR NEW LOOK AT EDUCATION
President Ts.Elbegdorj last week met the Minister of Education, Culture and Science and senior
officials at the ministry to discuss the state of education in the country. A new academic year
begins next week. Minister Yo.Otgonbayar reported that 40,000 children graduated from secondary
schools this year while 53,000 will be joining the first grade. The Ministry was reducing some
expenses not directly related to education so that tuition fees of universities did not have to be
increased.
The President urged a new approach to education in Mongolia. He favors steps to make education
more science-oriented and thinks it will be a good idea if people returning from studies in foreign
universities are utilized to give a new direction to the education policy.
Source: Onoodor
PROTESTING WORKERS BLOCK DUMPING OF GARBAGE
Public service workers in two districts of Ulaanbaatar stopped garbage trucks from entering the
Ulaanchuluut dump over the weekend in support of their demands. More than 40 of them have lost
their job and those still on the rolls have not been paid in July and August. New garbage trucks
have been bought with money from the Mongolia Development Fund, and new employees are being
hired and trained.
Source: Udriin Sonin
12. ROAD REPAIRS NOT TO BE FINISHED BEFORE SEPTEMBER 16
With traffic in total disarray, affecting daily life of citizens, Deputy Mayor B.Munkhbaatar last week
met representatives of companies executing the road repairs and was told that the work would not
be finished by the scheduled date of September 1 and was likely to continue until September 16.
One reason for the delay was that material from China is being held up by Customs. One company
has had to stop its work because it has not been paid. It won the tender for the same work two
years ago, but could not take up the work because of some problem. This year, it started and then
found that the money for the program was not included in the Metropolitan budget.
Source: Ardiin Erkh
THIS YEAR’S PEACE CORPS VOLUNTEERS SWORN IN
The 66 members of the 20th class of Peace Corps volunteers, the largest annual contingent ever,
were sworn in by US Ambassador Mark C. Minton last week in a lively ceremony at the Mongol
Tuurgatan Theater, Zuun Mod, in Tuv province. Foreign Minister S. Batbold took time off from the
special session of Parliament to attend the event. He thanked the Peace Corps for its contribution
to Mongolia and the volunteers for being here.
After short addresses by Mr. Minton and the Peace Corps Director in Mongolia, Mr. Jim Carl, several
of the new volunteers gave speeches in Mongolian, while some others rendered traditional
Mongolian songs and dances. The 200-plus audience showed its appreciation by clapping and singing
along. Around 800 volunteers have served in Mongolia since 1991.
In another development, Australian Ambassador Sam Gerovich signed an agreement with the
Ministry of Finance last week to extend and augment the Australian Young Ambassadors for
Development program in Mongolia. So far 103 such ―envoys‖ have worked here since 1999, with a
group of 17 coming earlier this month. They work in state organizations and with NGOs for between
3 months and a year.
Source: Montsame
ANNOUNCEMENTS
“MM TODAY” ON MNB-TV
BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with
BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is
scheduled for 9:15 PM tonight. Tune in to watch this program that reports stories from today’s BCM
NewsWire.
___________________________________________________________________
“COMMERCIAL NEWS USA” MAGAZINE
BCM regularly receives the bi-monthly ―Commercial News USA‖ from the U.S. Embassy’s UB
Commercial Section. This magazine contains trade shows, product showcases, and profiles of best
U.S. exporters. We would be pleased to share this information with BCM members. Also, we would
urge other BCM diplomatic mission members to submit trade information to the BCM.
13. SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended August 21, 2009, trading activity on the Mongolian Stock Exchange (MSE)
totaled 467,100 shares with 33 companies traded. Total market value of transactions was MNT 412
million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 488.2
billion, and increased by MNT 27.5 billion or 6% from the previous week.
The Top-20 Index increased by 228.34 points or 4.7% compared to the previous week, closing at
5,106.97 points. The MSE Composite Index increased by 158.70 points or 6.6% compared to the
previous week, closing at 2,569.30 points.
Most active stocks traded were: Khuh gan (217,400 shares), Baganuur (131,300 shares), Naco tulsh
(26,000 shares), Genco tur buro (19,700 shares), and Moningbar (15,000 shares)..
Major share price percentage gainers were: APU (30.4%), Baganuur (27.2%), NIC (17.5%), Gazar
suljmel (15.0%), and Gobi (11.0%). Major share price percentage losers were: Takhi Co. (22.8%),
Erdenet khuns (15.0%), Mongol shevro (7.4 %), and Shariin gol (6.7 %).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
July 31, 2009 *4.9% [source: NSOM]
*Year over year (yoy)
14. CENTRAL BANK POLICY LOAN RATE
December 31, 2008 9.75% [source: IMF]
March 11, 2009 14.00% [source: IMF]
May 12, 2009 12.75% [source: IMF]
June 12, 2009 to present 11.50% [source: IMF]
CURRENCY RATES – AUGUST 27, 2009
Currency name Currency Rate
US dollars USD 1437.25
Euro EUR 2058.79
Japanese yen JPY 15.27
British pound GBP 2343.87
Hong Kong dollar HKD 185.44
Chinese yuan CNY 210.39
Russian ruble RUB 45.78
South Korean won KRW 1.15
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.
