Dynamics of Destructive Polarisation in Mainstream and Social Media: The Case...
13.11.2009, NEWSWIRE, Issue 94
1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 94, November 13, 2009
NEWS HIGHLIGHTS:
Business:
Companies ready to start building railway;
Chinese company wants to mine Mongolian copper;
Peabody “very interested” in Tavan Tolgoi;
Tavan Tolgoi should be sub-blocked, says mining specialist;
Leighton gets contract from MoEnCo for Khushuut mine;
Rio Tinto “still keen to work with Chinalco”, says CEO Albanese;
Rosneft fined for overcharging Mongolian companies;
Khan Bank‟s total assets reach MNT 1 trillion;
Coal miners resent restrictions;
Iron works completes one year;
China extends Rio probe, says Australian Minister;
Rio gains several advantages but not control of the region.
Economy:
MP explains what the Human Development Fund is all about;
Economists unhappy with draft budget proposals;
Lower tax collection, higher unemployment, more bad loans;
„Discover Mongolia 2009‟ mood upbeat;
Canada ready to share environmental lessons in mining, envoy tells Forum;
Private sector participation is crucial, stresses ADB chief in Mongolia;
World Bank loan sought to revamp energy sector;
With MNT32 billion due to them, power plants cannot repay Japanese loan;
IMF team meets PM, Speaker;
Diverting budget money to proposed fund will raise deficit;
NDIC publishes list of 26 priority projects;
Revenue from 15 deposits to yield MNT750 billion by 2020;
Tripartite agreement on labor signed;
105 attend BCM-PwC workshop on tax issues;
World Bank Chief Economist opposes yuan rise;
Gold strikes record as USD suffers;
Moody's lifts ratings outlook on China and its banks, keeps credit ratings;
Chinese company‟s bid to take ownership interest in U.S. energy assets;
Hong Kong Exchanges' net increases 33%.
Politics:
Flu death rises to 12, Government appeals for help;
MPRP nominates Zandanshatar as Foreign Minister;
PM axes head of Government Office;
MPRP to consider reduction in number of Government employees;
Getting to know the new Prime Minister;
U.S. Ambassador-Designate Addleton identifies five priority areas of relationship;
Work on new Parliament building may begin next year;
2. World Bank‟s Urban Hub to work in southern Mongolia;
Not letting parties contest by-election was against law, court rules;
Absence of union leads to harassment of workers;
Visiting cartoonist not allowed to exhibit in Pyongyang;
Narantuul traders defy closure order, pay fine;
MNCCI offers help to small traders;
5,500 drivers fined, campaign to continue;
China calls for transport cooperation among SCO states;
Gazelles retreat as more oil holes are dug.
BUSINESS
COMPANIES READY TO START BUILDING RAILWAY
Mr. G.Battsengel, a senior official of Energy Resources, has said the company is now ready to begin
work on the construction of the Ukhaa Hudag and Gashuun Sukhait railway in southern Mongolia in
cooperation with MAK. The Government resolution permitting this was passed in June, 2008. The
companies hope to use the services of mostly other domestic companies in the work. This will let
the national economy grow considerably.
Source: Onoodor
CHINESE COMPANY WANTS TO MINE MONGOLIAN COPPER
China‟s Daye Nonferrous Metals Co., aiming to double its copper output from about 250,000 metric
tons by 2015, is also looking to invest in copper mines in Mongolia and Kyrgyzstan so as to diversify
its sources of raw materials, Mr. Zhang Xupeng, deputy director of the investment department, has
said. Daye Nonferrous is China‟s fifth-largest copper smelter based on last year‟s output.
Source: Bloomberg.com
PEABODY “VERY INTERESTED” IN TAVAN TOLGOI
Aside from expanding organically in Australia, U.S.-based Peabody Energy has said it is "very
interested" in Mongolia's Tavan Tolgoi coking coal project. "Without an investment agreement on
Oyu Tolgoi, nothing on Tavan Tolgoi was going to happen. We're very interested in Tavan Tolgoi. It's
early (in the process) and we'd look to do it with a partner," Chief Executive Greg Boyce has said.
Other bidders on the shortlist for Tavan Tolgoi include BHP Billiton, Brazil's Vale, a Korean
industrial consortium, Jindal Steel, and China‟s Shenhua Group.
Peabody has recently spent USD23 million on a 50% interest in a Mongolian joint venture with
London-based Polo Resources Ltd.
Mr. Boyce also said Chinese coal imports are set to continue to grow strongly for metallurgical as
well as thermal coal as demand for electricity and high-quality coal increases. "China turning net
importer is a structural change. There is no question that coal demand is continuing to increase.
Spot prices for metallurgical coal are higher than benchmark prices and we are seeing economies
starting to recover," Mr. Boyce said.
Source: MarketWatch
TAVAN TOLGOI SHOULD BE SUB-BLOCKED, SAYS MINING SPECIALIST
After a recent visit to Mongolia, Mr. D.N. Abrol, an Indian mining professional, has said the Tavan
Tolgoi coal field can be best developed by sub-blocking it into 6/7 areas. Each of these areas will
have about a billion tons of resource, which is sufficient to support an annual production level of
10-15 million tons for a period of over 50 years. These sub-blocks can be formed by delineating
them with respect to geological structures like faults, thrusts etc.
He feels such a division will have several advantages. There will be a healthy sense of competition
leading to price control; more employment potential; faster economic development of Omnogovi
province; more revenue to the Government in the form of taxes and royalties; and a cascading
effect of developing many other industries dependent on coal. Explaining what happens when a
deposit is sub-divided, he said development of all the sub-blocks begins and proceeds more or less
3. simultaneously. So a bigger area is covered in a shorter period of time, resulting in larger output
and thus generating more revenue.
Calling a coal field “a microcosm of wider human society”, he said Tavan Tolgoi would require
everything any human habitation needs, including industry-specific development of logistics of
transport and coal washing to demands for education and health care, social infrastructure, and
development of local communities.
Source: www.mongolianminingjournal.com
LEIGHTON GETS CONTRACT FROM MoEnCo FOR KHUSHUUT MINE
Leighton Holdings Ltd. announced on Thursday that Mongolia Energy Corporation (MoEnCo) has
named Leighton Asia as its mining contractor for the Khushuut coal mine in western Mongolia.
Leighton has initially been contracted to provide mining operations to deliver three million tons of
coal per annum, and in case of expansion eight million tons per annum.
Before that, Leighton will prepare the mine for production, including the mobilization of
equipment and personnel. "The extensive potential for mine expansion along with the quality of the
coking coal means the mine will become a significant exporter of coal from Mongolia," Leighton
Asia managing director Hamish Tyrwhitt said.
Leighton Asia already holds a production contract for the Ukhaakhudag coal mine in the south Gobi
region of Mongolia.
Source: AP
RIO TINTO “STILL KEEN TO WORK WITH CHINALCO”, SAYS CEO ALBANESE
Rio Tinto is still keen to work with China's state-owned Chinalco and both companies have held
talks recently, Rio CEO Tom Albanese said on Tuesday. Mr. Albanese said, “We are still keen to
work with Chinalco in the future on projects of mutual benefit. It's too early to say what these
might be, but I am encouraged that we've had some recent engagement," he said, without giving
details.
Rio's relations with Chinalco soured early in July after it snubbed Chincalco's offer for a bigger
equity partnership that would have seen the Chinese group invest another USD19.5 billion. Rio later
opted to form an iron ore joint-venture with rival BHP Billiton.
Source: Reuters.com
ROSNEFT FINED FOR OVERCHARGING MONGOLIAN COMPANIES
The Russian Office Against Monopoly has fined petroleum exporter Rosneft 5.2 million rubles
(USD3.5 million) for charging higher prices in violation of fair trade practices. It was found to have
overcharged the five companies that import 84 percent of the petroleum used in Mongolia. The
companies are NIC, Petrovis, Shunkhlai, Just Oil and MT. However, it is unlikely that any of them
will get back any of the MNT250 billion extra they had to pay. The Executive Director of NIC has
said it is not planning to approach Rosneft as the issue was an internal matter of Russia.
Source: Ardiin Erkh
KHAN BANK‟S TOTAL ASSETS REACH MNT 1 TRILLION
Khan Bank‟s total assets have risen a hundredfold since August 2000 when Mongolbank receivers
turned over the bank to the current management team. They now stand at a record MNT1 trillion
from the MNT10.1 billion nine years ago. Khan Bank delivers financial services nationwide through
its 488 branches.
Other financial indicators of the bank that achieved record results in the local banking industry
have continued to improve over the years. The bank‟s liquid assets reached MNT382.1 billion as of
October 31, up from MNT184.2 billion at the end of 2008.
The increase in total assets will boost the confidence of customers and the public in the banking
system, and enhance the bank‟s ability to offer a greater variety of products and services to its
customers. Khan Bank has decreased its loan interest rates in relation to the increase in assets, so
that it can support its clients in growing their business and increasing their profitability by making
available credit at competitive, low rates.
Source: www.khanbank.com
4. COAL MINERS RESENT RESTRICTIONS
Representatives of coal sector and MPs met on Monday to discuss pressing issues of policy and
implementation. Mongolia produces 10 million tons of coal every year, out of which 4 million is
exported. Miners said exports could be more and urged lifting of all control over pricing to help
them attain economic viability. They also refuted suggestions that their financial statements do not
reflect their real profits.
They said private companies have fulfilled their responsibilities in the face of odds and can do
better if there are no restrictive State intervention and if market forces are allowed to operate
freely.
Source: Udriin Sonin
IRON WORKS COMPLETES ONE YEAR
The first Mongolian factory in the private sector to process iron ore was established a year ago by
Khuh Gan Company in Arkhangai province. The project has been a success with all customers
expressing satisfaction with the quality of the product and the reasonableness of the price.
Source: Udriin Sonin
CHINA EXTENDS RIO PROBE, SAYS AUSTRALIAN MINISTER
Australian Foreign Minister Stephen Smith said Thursday the investigation by Chinese authorities
surrounding detained Rio Tinto executive Stern Hu has been extended by two months. Mr. Smith
also said he would meet with his Chinese counterpart, Yang Jiechi, later in the day where he will
discuss Mr. Hu's arrest.
The Chinese Government detained Mr. Hu, Rio Tinto's chief iron ore negotiator, and other
employees earlier this year, accusing them of stealing commercial secrets. Mr. Smith said "it is in
everyone's interest" that the matter is resolved as quickly as possible. "We have different systems,
different values and as a consequence of that from time to time ... differences will arise and we
understand and accept those differences," he said.
Source: The Wall Street Journal
RIO GAINS SEVERAL ADVANTAGES BUT NOT CONTROL OF THE REGION
Following its investment in Ivanhoe Mines, Rio Tinto has taken a significant position as a major
global mining company active in the mid-central Asia region. However, while Mongolia is rich with
its mineral endowment, infrastructure such as roads, railways, electric power, and water supply all
needs be developed extensively and urgently. Human resources with the skills necessary to explore,
develop, exploit, refine, and transport the mineral resources are also necessary. The ability to
successfully market the minerals, which are internationally-traded commodities, will be
competitive. Rio Tinto appears to have gained a strategic advantage in several areas.
Politically, Ivanhoe Mines has already demonstrated an ability to develop key relationships and to
successfully use these to attain its project development goals, and this gives Ro Tinto a readymade
advantage. Also direct knowledge of physical conditions as Oyu Tolgoi progressed from an
advanced-stage exploration project to one nearing development status has provided Rio Tinto with
geographical knowledge that will prove helpful to it in other projects in the wider region.
Major mining projects are capital intensive, but effective management of the human element is
also critical. This includes both the internal human element represented by employees, as also the
external such as local or regional communities, cultures, and economies. Rio Tinto's several years
of involvement with Oyu Tolgoi have provided it with invaluable experience in this area.
Read more…
Ivanhoe Mines is smaller than Rio Tinto, but it has raised and managed resources of large enough
magnitude to attract Rio Tinto. The partnership will be significantly advantageous for Rio Tinto but
it will not be enough to preclude or overwhelm other firms, some of which are already active in
Mongolia and the broader geographic region. Taken as a whole, mid-central Asia is not a
homogenous region and the other players there who have either already have or can develop
relationships and the physical knowledge that Rio Tinto now has, will continue to be part of the
growth of a potentially very important mining/minerals industry.
Source: www.yourminingnews.com
5. ECONOMY
MP EXPLAINS WHAT THE HUMAN DEVELOPMENT FUND IS ALL ABOUT
Mr. D.Zorigt, who heads the working group of the DP on the Human Development Fund (HDF), issues
related to which are now being discussed in Parliament, has said the Fund is planned as an
institution to work for decades and has several objectives. The first of these is to realize the two
parties‟ election promise to the people but the idea is to go beyond that. Mongolia stands to earn a
lot in the coming years from mining and the Fund is meant to save the money, use it productively
to build wealth for the future generation instead of just spending it on welfare programs.
The draft is also meant to protect Mongolia from what is known as the „Dutch disease‟, to describe
an economic condition that, in its broadest sense, refers to negative consequences arising from
large increases to a country's income. The Government share of profits from strategic mines will be
put into this Fund which will have a special status under the law. All citizens of Mongolia, present
and future, living here or abroad, will have an equal share in the Fund during their lifetime, but
nobody will be allowed to sell, mortgage, or transfer the share. On death, every citizen‟s share will
revert to the corpus of the Fund.
The entire USD250 million from the advance payment for Oyu Tolgoi will be placed in the HDF. The
fund will also receive the royalty payments from mines, and the dividends to the Government from
its share in them. Mr. Zorigt said mining and infrastructure are important but more important is the
development of health, education, social insurance and of a place to live. The money in the Fund
will be used to provide these. If Parliament, the Government and political parties allow the Fund to
realize its potential, Mongolia will prosper in a way undreamt of. A part of the money in the HDF
would be invested abroad, but the returns will be placed in the Fund itself and not diverted
anywhere else.
Read more…
Parliament has rejected the Government proposal to give MNT50,000 to all after next year‟s
census. Once the HDF is set up, it will be an important part of the State budget. There can then be
discussions on how to spend the money, and whether some of it will be paid in cash. Paying MNT1.5
million in cash to every citizen would see inflation soaring to between 250 and 300 percent within
three months, wiping away much of the gains of the payment, and severely rattling the financial
structure.
Source: en.News.mn
ECONOMISTS UNHAPPY WITH DRAFT BUDGET PROPOSALS
Asked for their opinion on the draft budget for 2010, some economists and public figures expressed
concern that the desire for irresponsible spending seems to have returned. Calling the budget
exercise “an annual game”, the leader of the National Soyombo Movement, Mr. B.Lhagvajav said,
“We try to give it a happy ending as in a fairy tale, but it never works out like that. The deficit
merely grows in the absence of proper cuts.” He claimed officials some times, as in this year,
purposely cause delays in the budget discussion so that it has to be approved without a thorough
debate. This seems to be the case right now.
Honored Economist N.Dashzeveg expressed his disappointment that the budget makes big promises,
but is silent on realistic ways on how to overcome the crisis. It has no specific direction and seems
to favor spending over saving money. He favored trimming the huge structure of the Government
and disbanding unnecessary organizations to save public money. For example, he wondered what
purpose the Government Property Bureau served when the work of privatization is over. He also
urged Ministers to make fewer foreign trips.
Former Prime Minister D.Byambasuren said the budget was full of false optimism, without any
acknowledgement that the country is “still to see the worst of the crisis and the hardest time
actually lies ahead”. He hoped MPs would accept the reality and shun populist policies.
Director of the Institute of Finance and Economics D.Batjargal favored any surplus revenue to be
used to create jobs and not given to the people. He also wanted the whole budget process to be
open to people and called for devolution of financial powers to regional administrations.
Source: Ardiin Erkh
6. LOWER TAX COLLECTION, HIGHER UNEMPLOYMENT, MORE BAD LOANS
The latest figures released by the National Statistical Office, covering the first ten months of 2009,
show that unemployment has risen, the budget deficit has grown, and bad bank loans have
increased. Lower tax collection has led to less revenue in the budget.
The number of registered unemployed was 39,600, up by 27.8 percent from the same period in
2008. The consumer price index was 0.3 percent lower year-on-year, 1.8 percent more than in
December 2008, and 0.9% higher year-on-year for the 12 months ending October 31, 2009. At the
end of October, the budget deficit stood at MNT336.1 billion. Tax revenue was down 20.2 percent,
but non-tax income rose 28.6 percent over the same period last year. Total foreign trade turnover
was USD3.2 billion.
Source: The National Statistical Office
„DISCOVER MONGOLIA 2009‟ MOOD UPBEAT
The Children‟s Palace was busy for two days with adult concerns, with many of the world‟s major
mining investors attending the „Discover Mongolia 2009‟ conference on November 6-7 to exchange
views and information on the investment environment, the political situation, the trend in
Government policies as well as on how laws are, and are likely to be, implemented. The conference
offered investors a variety of information about all aspects of mining in Mongolia, especially on the
procedures to claim mining licenses, and arranged direct interaction with related officials.
This year‟s conference was significant as the signing of the Oyu Tolgoi agreement at long last has
raised the confidence of foreign investors, and economic analysts and observers said proceedings at
the conference clearly showed foreign investors have got over their doubts about the reliability of
the Mongolian Government. Attendance was high and there was optimism all around. Many
companies gave presentations on their discoveries, exploration work and development plans,
indicating their hopes in the future.
Source: Ardiin Erkh
CANADA READY TO SHARE ENVIRONMENTAL LESSONS IN MINING, ENVOY TELLS FORUM
Calling the Oyu Tolgoi agreement “a historic deal to signal Mongolia's transformation”, Dr. Anna
Biolik, Ambassador of Canada, told delegates at „Discover Mongolia 2009‟ that for mining to
thrive, it must combine two forms of value. It must be “good at generating economic value, while
also demonstrating social and economic values”. She pointed out that “whether we realize it or
not, metals and mining products are as close to us as the air we breathe‟, and asserted that no
industry can prosper unless it is “strongly committed to its environmental performance and to
protecting public and employee health and safety”. Canada has learned from some of the mistakes
it made and is “willing and eager” to share the fruits of these lessons with emerging mining powers
such as Mongolia, she said.
Source: The Mongolian National Mining Association
PRIVATE SECTOR PARTICIPATION IS CRUCIAL, STRESSES ADB CHIEF IN MONGOLIA
Mr. Adrian H. Ruthenberg, Asian Development Bank Mongolia Country Director, feels that given the
challenges and needs Mongolia is facing, mobilizing resources from the private sector will be
“essential to render our assistance even more effective”. For example, he said that prolonged ADB
help to the energy sector had not created sufficient benefits in the absence of requisite policy
reforms – especially relating to tariffs. “The sector urgently needs to be put on an efficient and
sustainable path,” he said, pinning hopes on “the demonstration effect of building CHP5 through a
state-of-the-art public-private-partnership model”.
Saying that most of Mongolia's infrastructure will have to be built and operated by the private
sector, Mr. Ruthenberg predicted that Omnogovi and Dornogovi provinces would “experience an
explosion in urban population” following greatly increased trade and mining investments.
Ensuring that residents benefit from economic development opportunities in these towns will
depend on effective urban planning and an expansion in the availability of basic urban services.
Given the high cost of investments in power, transportation, and urban services – to name just a
few - it is impossible to finance all infrastructure needs from public resources. Securing private
sector participation is crucial, not only because that will reduce the burden on the State budget,
but also because the private sector will bring the necessary expertise and experience to develop
and operate these projects.
7. Source: www.mongolianminingjournal.com
WORLD BANK LOAN SOUGHT TO REVAMP ENERGY SECTOR
Parliament‟s Standing Committee on the Economy has supported the proposal to take a USD10
million loan from the World Bank to build several sub-power plants to improve and expand the
distribution network, install electricity connection to new apartments, and ensure uninterrupted
power supply in Ulaanbaatar. The request for the loan will now be discussed at the Standing
Committee on Defense and Foreign Policy.
Minister for Minerals and Energy D.Zorigt told the committee the Government is also seeking an
additional USD6 million in loans, but did not specify its purpose. He said prices of both coal and
electricity have remained the same almost since the 1990s and this has left the energy sector,
including coal mines and power plants, with losses of more than MNT 50 billion.
Source: Ardiin Erkh
WITH MNT32 BILLION DUE TO THEM, POWER PLANTS CANNOT REPAY JAPANESE LOAN
The country‟s power plants are in a mess and no one seems to be bothered. They were all built
during the socialist period and spare parts for their equipment are no longer available as they have
become obsolete in Russia now. An overhaul is thus out of the question and all but the most routine
repair or maintenance work is a headache for the management.
This is also more so as only one of them is in private hands, and the State-run ones can neither
raise rates to meet production costs nor put any pressure on those who owe them money. Their
combined loss stands over MNT24 billion. Of the MNT31.7 billion outstanding, 41.1% is collectable
from companies, while the remaining is from individual customers. Neither is ever in a hurry to pay
up, which means that the plants cannot repay the soft loan of USD400 million they got from Japan
in the 1990s. They present a perfect example of what is wrong with the State sector, where nobody
in particular takes responsibility for taking unpleasant decisions.
Source: Zuunii Medee
IMF TEAM MEETS PM, SPEAKER
An International Monetary Fund team led by Mr. Steven Barnett and including Mr. P. Ramlogan, the
IMF Resident Representative in Mongolia, called on Prime Minister S.Batbold and Parliament
Speaker D.Demberel on Monday. Mr. Barnett expressed the IMF's satisfaction at the progress of an
agreed-upon economic program to run until September 15, 2010, and stressed the need to keep the
budgetary deficit within the determined limit. "Budgetary policy is the key issue in the program.
We support and approve the measures and policies on reducing the budgetary deficit between 2011
and 2013. The revenue situation may become more difficult in 2011 when the windfall profits tax
will no longer be there," Mr. Barnett said, adding that Mongolia should take urgent measures to
strengthen the banking sector. The IMF Board of Directors will discuss issues concerning Mongolia at
a meeting late in December.
Both Mongolian leaders said the country was determined to put the economy back on its feet and
thanked the IMF for its advice and assistance. In terms of the agreement made in March 2009,
Mongolia will receive a soft loan of USD 15.3 million from the IMF in December.
Source: Montsame
DIVERTING BUDGET MONEY TO PROPOSED FUND WILL RAISE DEFICIT
The draft on the Human Development Fund (HDF) says MNT116 billion included in the 2010 budget
as coming from strategic mines royalty will now go to the HDF instead. If no way is found to raise
an equivalent amount, the budget deficit will rise to seven percent of the GDP from the present
five percent.
Source: Undesnii Shuudan
NDIC PUBLISHES LIST OF 26 PRIORITY PROJECTS
The National Development and Innovation Committee (NDIC) has collected comprehensive
information and prepared preliminary estimates on 26 major projects to form part of the
Government program on implementing its Action Plan. Earlier, a Government decree required
several Ministries and also the NDIC to submit to the Government before the end of 2009 a list of
projects to be offered to foreign and domestic investors. Mr. Ch.Khashchuluun, NDIC Chairman, has
8. said the aim of the exercise is to diversify the national economy and make it a multi-pillared one,
as well as attract investment.
He explained that the basic NDIC criteria for selection were that the project should require a
minimum investment of USD200 million and should meet priority needs of economic and social
development. The 26 proposals were selected after an evaluation of their impact upon exploitation
of mineral resources deposits, industrialization, and infrastructure, and after considering their
economic and social significance, feasibility and likelihood of implementation, and likely
contribution to sustainable economic development and to the furtherance of research and
production of high technology.
The NDIC list includes five priority considerations. These are: developing the mining sector by
exploiting mineral resources deposits and setting the foundation for heavy industry; developing
intensified agriculture and implementing the industrialization policy; developing infrastructure;
providing sustainable development through improving human resources and protecting the
environment; and improving governance and supporting the private sector.
Source: www.mongolianminingjournal.com
REVENUE FROM 15 DEPOSITS TO YIELD MNT750 BILLION BY 2020
The Ministry of Finance has estimated that the proposed Human Development Fund will have
MNT748.8 billion in it by 2020. The accrual is expected to begin in 2010 and will come from 15
mining deposits including Erdenet, Oyu Tolgoi, Tavan Tolgoi, Nariin Sukhait , Tsagaan Suvarga,
Burenkhaan.
Source: Zuunii Medee
TRIPARTITE AGREEMENT ON LABOR SIGNED
A tripartite agreement for 2010 and 2011 was signed on Tuesday by the Government of Mongolia,
the Mongolian Labor Union, and the Union of Mongolian Employers. This follows five rounds of talks.
Minister for Social Security and Labor T.Gandhi stated that the two unions helped the Government
define policy and negotiated hard between themselves. The main thrust of the agreement is to
create jobs and provide apartments to citizens.
The head of the Labor Union, Mr. S.Ganbaatar, said he would make sure the terms of the
agreement are observed. The two sides will also monitor how the MNT30 billion in the Small and
Medium Industry Fund and the MNT20 billion in the Labor Encouragement Fund are spent. The
agreement also calls on employers not to fire employees indiscriminately and supports the
Government plan to create 60,000 jobs.
The sides will now work on amendments to six laws concerning labor and social insurance as well as
ratify several conventions according to international norms.
Source: Zuunii Medee
105 ATTEND BCM-PwC WORKSHOP ON TAX ISSUES
Altogether 105 participants, including 25 non-BCM members, attended a workshop on „International
and Domestic Tax Issues‟ on Tuesday. The Business Council of Mongolia (BCM) arranged the
workshop and co-hosted it with PricewaterhouseCoopers (PwC). The main speaker was Mr. Tomas
Balco, Senior Tax Manager at PwC-Almaty, and Mr. Cliff Isaak from PwC-Georgia acted as
moderator.
Excellent contributions were made at the panel discussions by Mrs. D.Onchinsuren, General
Director, Onch Audit and Head of BCM Tax Working Group; Mr. B.Ganhuleg, Tax Manager,
Centerra/Boroo Gold; Mr. D. Bayaraa, Head of Taxpayer Communication Department, General
Department of Taxation of Mongolia; Mrs. R. Munkhtuya, Deputy CEO, Khan Bank; and Mrs. D.Hulan,
Executive Vice President, Tavan Bogd Group.
Key recommendations on the issues discussed will be finalized by the BCM Tax Working Group and
submitted to the Ministry of Finance, the Tax Authority, other relevant Government bodies and key
officials.
Simultaneous translation was provided from English to Mongolian and vice versa.
See BCM website, BCM News & Press for the two main presentations by PwC and BCM Tax Working
Group.
Source: BCM NewsWire
9. WORLD BANK CHIEF ECONOMIST OPPOSES YUAN RISE
China should not be forced to let its currency appreciate as a way to rebalance the world economy,
World Bank Chief Economist Justin Yifu Lin has said, staking out a strong position that runs contrary
to calls from the International Monetary Fund and policy makers in the U.S., Europe and Asia.
"Currency appreciation in China won't help this imbalance and can deter the global recovery," he
said in a lecture Monday at the University of Hong Kong.
Mr. Lin said a yuan move upward could snuff out the global recovery. It would depress U.S.
consumer demand because imported Chinese consumer goods would be more expensive. And it
wouldn't shrink the U.S. trade deficit because the types of goods China exports to the U.S. for the
most part aren't made domestically in the U.S. So, he said, American consumers would simply pay
more for goods either from China or from another country.
On the Chinese side of the equation, Mr. Lin said, a stable yuan is critical to keeping the Chinese
export economy humming, which will in turn spread economic health to other countries. "China's
dynamic growth is very important to the global recovery," he said. Mr. Lin said short-term currency
moves won't fix what is wrong with the global economy. He said "structural reform" is needed. That
includes the U.S. putting its fiscal house in order and China creating conditions to lower its high
savings rate and to increase domestic consumption.
Read more…
Officials from the U.S., Europe and the IMF have called for China to allow its currency to strengthen
as a way to get Beijing to boost domestic consumption and to rely less on exports. Such
"rebalancing" is necessary, they argue, to produce more sustainable global growth. A recent World
Bank report endorsed the need for rebalancing, but didn't specifically address the currency issue.
World Bank President Robert Zoellick's advice to Beijing has largely been to boost spending and
sustain growth as a way to help global growth.
Mr. Lin, the first Chinese national to be the World Bank's chief economist, said the lecture
reflected his views "as a scholar," rather than being an official World Bank policy position. A
professor on leave from Peking University, he earned a doctorate in economics from the University
of Chicago in 1986 and later served as a deputy of China's People's Congress. He was appointed
World Bank chief economist last year.
It is far from clear that Mr. Lin was looking to pick a fight with the IMF. Rather, he has taken some
unorthodox views on his native country, including arguing that Chinese companies "are subsidized
through the lower wages" they pay workers -- echoing complaints of U.S. labor unions.
Source: The Wall Street Journal
GOLD STRIKES RECORD AS USD SUFFERS
Gold powered to another record high on Monday on safe-haven buying as the US dollar slipped and
after a weaker-than-expected US unemployment rate revived worries about the health of the global
economy. Gold has gained more than 25% in 2009, driven by persistent weakness in the US currency
that has lost more than 6% versus the euro so far this year, and recently by the failure of a meeting
of the Group of 20 finance officials to talk more specifically about the dollar's decline.
Cash gold hit a high of USD1,104.80 an ounce, surpassing Friday's lifetime high of USD1,100.90, with
a jump in oil prices and India's recent purchase of IMF gold adding to the bullish sentiment.
Source: www.miningweekly.com
MOODY‟S LIFTS RATINGS OUTLOOK ON CHINA AND ITS BANKS, KEEPS CREDIT RATINGS
Moody's Investors Service on Monday lifted its ratings outlook for China to positive from stable as
the country emerges from the global financial crisis. The upgrade for China was the first by a major
ratings agency since the global crisis hit late last year and comes as confidence is growing among
Chinese policy makers and analysts that the rebound in the domestic economy is firming.
Still, Moody's said that for further positive rating actions, it would need to be reassured that China's
Government-led stimulus program has not distorted long-term growth prospects or given rise to
destabilizing asset bubbles. Moody's also lifted Hong Kong's credit outlook to positive from stable,
while keeping the territory's credit rating at Aa2. Moody's currently has an A1 credit rating for
China.
At the same time, Moody's lifted to positive from stable the credit outlook on seven Chinese banks:
Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd.,
10. Agricultural Bank of China, China Development Bank, Export-Import Bank of China, and Agricultural
Development Bank of China.
Fitch Ratings and Standard & Poor's Ratings Services have „stable‟ outlooks for China.
Source: The Wall Street Journal
CHINESE COMPANY‟S BID TO TAKE OWNERSHIP INTEREST IN U.S. ENERGY ASSETS
Statoil, the Norwegian energy giant, has sold a partial interest in some of its American energy
development leases to the China National Offshore Oil Corporation, known as Cnooc. It is the first
time that a Chinese company would take an ownership interest in energy assets in the US.
Statoil, through its American-based subsidiary, is a major player in the Gulf of Mexico, winning
many leases over the years from the U.S. Government to explore and develop the region. Energy
companies seldom develop a lease alone and usually form partnerships with others to share the
risks. So when Statoil solicited bids from rivals, Cnooc, the Chinese State-controlled offshore oil
conglomerate, apparently outbid several major oil companies.
The interest that Cnooc is acquiring is quite small, but it is significant because a Chinese State-
owned company would own it. Only four years ago, Cnooc‟s USD18.5-billion bid for the American oil
company Unocal collapsed under pressure from U.S. Congress amid concerns about American oil
assets falling under the control of the Chinese Government. Since then, the Chinese have been
wary of bidding on American energy assets.
To be approved to do business, Cnooc would need to create an American subsidiary and be
approved by the Minerals Management Service before the transfer would be considered. The deal
may be just small enough to gain approval. The failure of the Unocal deal may now be seen as a
Chinese effort to acquire too much too fast. If the Statoil deal goes through, the Chinese may now
try to gain a foothold in the American energy infrastructure by slowly building up their presence
through similar lease-sharing agreements.
Source: The New York Times
HONK KONG EXCHANGES‟ NET INCREASES 33%
Hong Kong Exchanges & Clearing Ltd. said third-quarter net profit rose 33% from a year earlier amid
higher trading volume and an increase in initial public offerings. Despite the rebound in global
financial markets, economies remain weak and excessive liquidity might lead to excessive
investment and asset bubbles, Hong Kong Exchanges said.
Hong Kong Exchanges, Asia's largest listed exchange by market capitalization, said net profit was
1.27 billion Hong Kong dollars (USD163.9 million) in the three months ended September 30, up from
HKD959.6 million at the same time last year. But it was down 7% from the HKD1.37 billion profit
reported in the second quarter due to lower trading volumes and lower net investment income.
Market momentum gathered pace in the second quarter but faded in the third quarter, as investors
became concerned about the timing of exit strategies for stimulus measures announced by nations
at the height of the financial crisis and the sustainability of rapid loan growth in China.
Source: The Wall Street Journal
POLITICS
FLU DEATH RISES TO 12, GOVERNMENT APPEALS FOR HELP
The death toll from the A/H1N1 flu has risen to 12 in Mongolia while the number of infected people
has climbed to 955 with 737 in Ulaanbaatar alone, according to figures released by the Health
Ministry on Wednesday. Among those dead are two pregnant women. Only 3 of the 21 provinces are
so far unaffected. The country has been in a state of high disaster preparedness since November 4
in the wake of the spread of the virus.
The first case was registered on October 12 and since then the authorities have taken a series of
measures against the spread of the virus and the Government has earmarked USD4.5 million to buy
vaccines and anti-viral medication as well as medical diagnostic equipment, and restricted cultural
and sports activities. Schools remain closed.
The Mongolian Red Cross Society has asked for direct assistance to provide support to the affected
population. The Mongolian Government plans to distribute supplementary nutrition to vulnerable
groups to strengthen their immunity system. It is also looking for vaccines from sources other than
11. the World Health Organization as the WHO supply can meet only one-quarter of the need. Many
international and domestic organizations, such as World Vision, G-Mobile, MT Co., Monos Group and
Nakhia have contributed to the effort. The Government has issued an appeal for donations that can
be paid into Xac Bank account No. 21000130 (H1N1).
Source: www.chinaview.cn
MPRP NOMINATES ZANDANSHATAR AS FOREIGN MINISTER
Talk that the MPRP wanted the Finance Ministry and would give up the Foreign Relations Ministry to
the DP was put to rest when the MPRP Governing Board met on Tuesday and decided to propose Mr.
G.Zandanshatar to succeed Mr. Batbold as Foreign Relations Minister. Others in the running were
MPs like Mr.Ts.Munkhorgil and Mr. N.Enkhbold, and also the present State Secretary, Mr.
D.Tsogtbaatar.
It appears rumors about a move to appoint Mr.R.Bold, Director of the Intelligence Authority, the
new Foreign Affairs Minister were floated last week to divert attention from the intense lobbying
going on for the job.
Source: Zuunii Medee
PM AXES HEAD OF GOVERNMENT OFFICE
A special session of Parliament on Monday ratified the structure of the Cabinet of Prime Minister
S.Batbold. With 11 Ministries and 15 Ministers it has no changes from the previous government
under Mr. S.Bayar. Some faces will change, though. Mr. Batbold has dismissed Mrs. B.Dolgor,
Minister and Head of the Government Office, and brought in Mr. Ch.Khurelbaatar, at present Head
of the Standing Committee on the Budget, in her place.
Source: www.news.mn
MPRP TO CONSIDER REDUCTION IN NUMBER OF GOVERNMENT EMPLOYEES
The DP group in Parliament will hold talks with the MPRP group on investments in the provinces and
some devolution of financial powers. The MPRP group has also been discussing the draft Budget and
has established a working group to recommend how expenses can be restricted and revenues
raised. One idea being considered is a reduction in the number of Government employees.
Source: Udriin Sonin
GETTING TO KNOW THE NEW PRIME MINISTER
Recommending Mr. Su. Batbold to succeed him as Prime Minister, Mr. S.Bayar is reported to have
said that no one else in the Government matched his qualities. This is high praise from one who was
possibly the most successful Mongolian Prime Minister in the last 19 years, but do people know
enough about Mr. Batbold to form their own conclusions? His political career started in the 2000-
2004 Parliament when the MPRP was in power, but there was not much that he did as Minister for
Trade and Industry. He was Foreign Minister in the coalition government, but that is a Ministry
which does not ignite popular passion or even much curiosity.
In quite a few ways, the new Prime Minister is a change from his predecessors in office. Apart from
Mr.Ts.Elbegdorj, none of them graduated from more than two institutes or was educated in the
West. His experience of working as director of the export department in Mongol Impex Union in the
last years of the socialist era helped him form and run Altai Trading Company after the beginning of
democracy. He also started work on the Boroo gold reserve, later selling the mining license to
Centerra Gold, but keeping his shares in it. He was criticized for favoring the company in tax
matters when the stability agreement was signed, but we tend to overlook that Mongolian
companies have so far earned USD240 million from Boroo Gold. Mr. Batbold is known as somebody
who knows where the money is, but he also has a relatively clean image.
This is his most important qualification at the moment. His predecessors were primarily politicians
who had little knowledge of the ways of high finance. At a time when Mongolia will build its
economy through mining agreements, it needs someone who understands international investors.
He is one of the wealthiest men in the country but is known to be a polite and suave man, and
enough of a diplomat to put everybody at ease. He takes decisions after careful thinking, and
sometimes gives the impression of being a plodder but he has rarely made a bad mistake.
Read more…
12. Since he owes his appointment to negotiations between two parties and to direct pressure from Mr.
Bayar, there is talk that he could well be a puppet. Some even say that the two parties have told
him what he can do and also things he cannot do. Many think that actual power now is wielded by
the two Deputy Prime Ministers. Time will tell how much this lack of a political base will affect his
functioning. For now, Mongolians expect Mr. Batbold to make the right decisions on economic
policy based on his business experience. Let us think of Mongolia as a company with 2.7 million
employees, with Prime Minister Batbold as CEO responsible to keep the company away from
bankruptcy.
His first test will be on Tavan Tolgoi. He is a shareholder in Energy Resources which has mining
interests there, which thus creates a conflict. As Prime Minister he will have to place national
interests above his own. The people will be watching.
Source: Ardiin Erkh
U.S. AMBASSADOR-DESIGNATE ADDLETON IDENTIFIES FIVE PRIORITY AREAS OF RELATIONSHIP
Mr. Jonathan Addleton was sworn in as U.S. Ambassador to Mongolia by the U.S. State Department
on November 9 and will arrive in Ulaanbaatar shortly to present his credentials. At the end of
October, he gave the keynote speech at the opening of the new branch of the American Center for
Mongolian Studies (ACMS) at the University of Wisconsin at Madison. There he revealed that during
his confirmation hearings he had told the U.S. Senate that would work to strengthen the U.S.-
Mongolia relationship in five main areas: (1) development; (2) private investment; (3) democracy
and good governance; (4) security; and (5) people-to-people relationships.
Asserting that development in Mongolia will remain unrealized unless it is also accompanied by the
expansion of a vibrant private sector, one that promotes economic diversity, creates jobs, expands
incomes and contributes to a growing national tax base that in turn is needed to strengthen and
deliver needed social services in health, education and other areas, Mr. Addleton said that the
ability of any private sector to thrive hinges on the Government's success in creating a level playing
field, one that recognizes the vital role that fairness, stability and transparency plays in promoting
entrepreneurship and giving Mongolians the incentive needed to invest in their own country.
Noting that the Oyu Tolgoi negotiations were handled in an open and fair manner and the two lead
foreign firms bring best industry practices to the table while simultaneously stimulating the
economy and creating jobs, he said Tavan Tolgoi presents similar opportunities, especially given
the interest of firms such as U.S.-based Peabody that have significant experience in managing
natural resources efficiently and effectively, are sensitive to environmental concerns and tie that
development to broader economic growth.
Source: U.S. Embassy Ulaanbaatar, Commercial Section
WORK ON NEW PARLIAMENT BUILDING MAY BEGIN NEXT YEAR
Three years after Kuwait promised to pay for a new building for Parliament, work on it is likely to
begin next year, though a formal decision is yet to be made. There was no agreement on a suitable
site but it now seems the building will come up where the garden behind Government House is.
However, the choice is strongly opposed by the Civil Will Party, the Green Party and several
citizens‟ groups. The delay has seen prices of everything rise and the funds promised by the Kuwait
Government will not be enough any longer. The extra money could come from the State budget
next year.
Source: en.News.mn
WORLD BANK‟S URBAN HUB TO WORK IN SOUTHERN MONGOLIA
The World Bank has announced that its Urban Hub has taken on its first three projects, where it
will provide advisory services and capacity-building training to China, southern Mongolia and
Vietnam. The Urban Hub, based in Singapore, is a research centre for urban solutions.
It will be involved in capacity-building in southern Mongolia to develop mining infrastructure.
Source: channelnewsasia.com
NOT LETTING PARTIES CONTEST BY-ELECTION WAS AGAINST LAW, COURT RULES
The Constitution Court has ruled that the refusal to allow the National New Party and the
Republican Party to contest the by-election in the 24th
constituency on the ground that they had
13. not submitted accounts of the previous election was against the law. The case will now be heard by
a bigger bench.
Source: Udriin Sonin
ABSENCE OF UNION LEADS TO HARASSMENT OF WORKERS
Membership in the Workers‟ Union of Trade and Service Industries has fallen from 16,000 to less
than 100. There are now 52,000 entities that have no workers‟ union and so there is no redress of
regular complaints of sexual harassment of workers or of sundry other violations of laws and
conditions. The absence of anybody to speak for them with the authorities leaves workers at the
mercy of employers.
Source: Zuunii Medee
VISITING CARTOONIST NOT ALLOWED TO EXHIBIT IN PYONGYANG
During a recent visit to North Korea, cartoonist S.Tsogtbaatar was not allowed to show his cartoons
to the public for “ideological reasons”. Only foreign diplomats were allowed entry. Two others in
the Mongolian team -- Honored Artist D.Sosorbaram and the head of the Gamma photo studio, Mr.
S.Tsatsralt – had better luck. Their exhibitions were held as scheduled. Mr. Tsatsralt was also
allowed to take photographs.
Source: www.News.mn
NARANTUUL TRADERS DEFY CLOSURE ORDER, PAY FINE
The Narantuul Market has been ordered to shut down temporarily to stop the spread of the H1N1
virus, but traders continue to sell outside. Inspectors of the Professional Monitoring Authority are
fining them MNT 10,000-MNT50,000 but the traders return before long, saying they have to make
money for their daily repayment of bank debts. They also criticize the decision to close down all
markets where “the poor people buy and sell”, while “it is business as usual in supermarkets for
the more affluent”.
Source: Ardiin Erkh
MNCCI OFFERS HELP TO SMALL TRADERS
The Mongolian National Chamber of Commerce and Industry (MNCCI) has offered to issue free
certificates of force majeure to small traders, particularly at Narantuul market, who cannot repay
their bank loans because their operation has been suspended under Government orders in an effort
to stem the spread of the H1N1 virus. This will allow them more time to pay rent or bank interests.
The MNCCI sees this as a public service as neither the Government nor the banks give them any
relief.
An application for a certificate has to be accompanied with a copy of the certificate of registration
of the business and also of the agreement with the bank. The application should give the facts of
the case and explain clearly how external factors have affected their ability to pay. The issue of
the certificate will not waive the interest; it will only defer the date of repayment. It will not work
if the loan agreement specifically mentions that force majeure does not apply. The Chamber
investigates the facts set out in the application and once it is satisfied, issues the certificate in 3
days.
Source: www.News.mn
5,500 DRIVERS FINED, CAMPAIGN TO CONTINUE
The Metropolitan Police Department has revealed that in just one week 5,500 drivers were fined for
not stopping at the stop line. The campaign will continue.
Source: Onoodor
CHINA CALLS FOR TRANSPORT COOPERATION AMONG SCO STATES
Chinese Vice Premier Zhang Dejiang has called on member states of the Shanghai Cooperation
Organization (SCO) to work out an agreement on facilitation of road transport as soon as possible,
to lay a sound legal basis for regional transportation. Mr. Zhang made the remarks at the fourth
conference of SCO transport ministers in Beijing on Tuesday. He urged SCO member states to make
transport a priority of cooperation, and jointly formulate the Plan on Road Network Development
14. Coordination, and expedite the negotiation on the Agreement on Facilitation of International Road
Transport.
The SCO, established in 2001, comprises China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and
Uzbekistan. Mongolia, India, Pakistan and Iran hold observer status. Afghanistan was a special
invitee.
Source: www.chinaview.cn
GAZELLES RETREAT AS MORE OIL HOLES ARE DUG
Altogether 25 Chinese companies drill oil in Matad soum of Dornod aimag and transport the crude
by truck to China immediately. They employ around 6,000 Chinese and only around 700 Mongolians.
This year many new holes have been dug and the area has become like somewhere in China, as it is
not a place where many Mongolians live.
This sudden influx of people is affecting the environment. The famous gazelle herds of the Menen
Eastern Steppe have retreated to safer areas. There should be a proper assessment of the
environmental damage caused by men and machinery.
Source: Zuunii Medee
ANNOUNCEMENT
“MM TODAY” ON MNB-TV
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scheduled for 9:15 PM tonight. Tune in to watch this program that reports stories from today‟s BCM
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15. ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended November 6, 2009, trading activity on the Mongolian Stock Exchange (MSE)
totaled 538,600 shares with 41 companies traded. Total market value of transactions was MNT
543.7 million. Total market capitalization of the 358 stock companies listed on the MSE was
MNT 669.3 billion, and decreased by MNT 19.9 billion or 3.0% from the previous week.
The Top-20 Index decreased by 251.80 points or 3.5% compared to the previous week, closing at
7,026.71 points. The MSE Composite Index decreased by 33.13 points or 1.0% compared to the
previous week, closing at 3,403.49 points.
Most active stocks traded were: Zoos bank (152,700 shares), Naco tulsh (139,400 shares), Genco tur
buro (78,600 shares), Khuh gan (45,500 shares), and Apu (43,600 shares).
Major share price percentage gainers were: Jinst uvs (64.4%), Zoos goyol (21.5%), Apu (16.7%),
Gazar suljmel (15%), and Baaz (14.9%). Major share price percentage losers were: Shivee ovoo
(27.7%), Talkh chicker (13.6%), Zoos bank (13.5%), Eermel (13.3%), and UID (11.9%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
October 31, 2009 *0.9% [source: NSOM]
*Year-over-year (y-o-y)
CENTRAL BANK POLICY LOAN RATE
December 31, 2008 9.75% [source: IMF]
March 11, 2009 14.00% [source: IMF]
May 12, 2009 12.75% [source: IMF]
June 12, 2009 11.50% [source: IMF]
September 30, 2009 10.00% [source: IMF]
CURRENCY RATES – November 12, 2009
Currency name Currency Rate
US dollars USD 1424.25
Euro EUR 2137.73
Japanese yen JPY 15.82
British pound GBP 2385.19
Hong Kong dollar HKD 183.77
Chinese yuan CNY 208.64
Russian ruble RUB 49.64
South Korean won KRW 1.23
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.