1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmmongolia.org
info@bcmongolia.org
Issue 81, August 14, 2009
NEWS HIGHLIGHTS:
Business:
NSC approves new terms of OT agreement; now Parliament has to agree;
Windfall tax has outlived its purpose, says Minister;
Parliament Office asks Rio Tinto and Ivanhoe to apologize for letter;
No intention to influence decision, say Rio and Ivanhoe;
Mongolian relations with investors entering their third phase;
Copper retreats as data show China buying less;
Companies warned against selling uranium licenses;
Mongolia is merely correcting past mistakes, says tax official;
MNMA chief calls annulment of VAT refund illegal;
BHP Billiton returns USD32 billion to shareholders in seven years;
Cameco Q2 earnings rise 65%;
Denison Q2 loss widens;
Khan Bank to issue Union Pay cards free in August;
Centerra shares fall on Cameco sale plans;
Coke producing plant hopes to repay loan soon;
New civil aviation boss sets his priorities;
China charges Rio Tinto employees, but backs off allegations of spying;
Quotes from China state agency reports on Rio Tinto.
Economy:
China offers excellent opportunities, says Mongolian envoy;
July prices show 4.9% rise year-on-year;
Mongolia offering “equal opportunities” to all in mining;
True commodity picture won't be visible before 2010: BHP Billiton;
Who benefits from waiving employment fees for so many Chinese?
Revenue estimates met in first six months;
3 eastern provinces seek investment;
Butterfly larva destroying crops in Khovd.
Politics:
DP presents a united look, but for how long?
South Korean troops join Khan Quest for first time;
Joint Mongolian-Russian military exercise this year, too;
Restriction on journalists lifted;
President’s trip to Dornod criticized;
U.S. Congressmen meet Mongolian leaders;
New U.S. Ambassador to arrive in October;
Herders asked to move after 56 birds die of flu;
South Korean loan for new traffic lights;
Street cleaners not paid for 3 months;
2. People critical of road repair program;
Mongolia has no marmot plague vaccine in stock;
12,000 abortions recorded every year;
More lay claim to be WW II veteran to receive apartment;
Airport opts for solar power.
_____________________________________________________________________________________
BUSINESS
NSC APPROVES NEW TERMS OF OT AGREEMENT; NOW PARLIAMENT HAS TO AGREE
Finance Minister S.Bayartsogt and Minerals and Energy Minister D.Zorigt told media on Wednesday
afternoon that the National Security Council, at its meeting the day before, had approved the
terms in the draft of the investment agreement on Oyu Tolgoi as prepared after the latest round of
negotiations. The Government will now ask Parliament to ratify the text of the agreement at a
special session.
The Ministers announced that the Mongolian Government will own 34 percent share in the project
and invest MNT816 million, which is half of what had been agreed earlier. There will be no tax
relief measures for the investors, but now their initial outlay will be USD4 billion and not USD5
billion as earlier agreed.
The investors had previously offered to pay Mongolia an initial amount of USD125 million before
work began. USD25 million of this would have carried no interest, but the rest was to be repaid
with 9.9 percent interest. The revised draft raises the quantum of preliminary payment to USD250
million and the interest has been reduced to 5 percent.
All these are important gains for Mongolia. The investors, however, did not accept the proposal to
limit the first phase of the agreement to 15 years, after which it could be renegotiated. It will be in
force for 30 years, as decided before.
The 68 percent windfall profit tax will be in force when the agreement is signed, but the Minister
for Finance said the tax would be abolished with effect from January 1, 2011.
Source: en.News.mn
WINDFALL TAX HAS OUTLIVED ITS PURPOSE, SAYS MINISTER
Finance Minister S. Bayartsogt has been reported in the Mongolian media as saying that it was
necessary to annul the Windfall Profits Tax (WPT) to be able to move forward with the
development of Mongolian mining and exploitation of strategic deposits. He was quoted as saying,
―This is not related only to OT, but also to the Erdenet Mine and the gold miners. WPT has given to
Mongolia what it was meant to give. Now we have to re-consider its purpose.‖ It is widely known
that the Russian Federation has repeatedly protested in the strongest possible terms against the
WPT, because the only copper mine paying the tax is the Mongolian-Russian joint venture in
Erdenet.
Besides WPT, the Government is likely to propose amendments to the tax law on loss carry-
forwards to permit eight year carry-forwards of 100% of losses, as well as amendments to the Law
on VAT rebates for capital equipment imported for mining, the Law on Water and the Law on
Automobile Roads.
Source: www.nambc.org
PARLIAMENT OFFICE ASKS RIO TINTO AND IVANHOE TO APOLOGIZE FOR LETTER
In its reply to the letter Rio Tinto and Ivanhoe Mines sent to all MPs on July 27, Parliament Office
said on August 7 that the companies should seek an apology from the recipients for their rude
action. In English translation, the letter reads as follows.
―Dear Mr. Sam Riggall, Director of Trade Affairs of Rio Tinto and Mr. John Fognani, Director of
Legislative Matters of Ivanhoe Mines,
―Members of Parliament have read your words on the investment agreement on Oyu Tolgoi in your
letter of July 27, 2009 addressed to some MPs.
―The agreement draft prepared by the Government was discussed in Parliament which then passed
a resolution authorizing the Government to conclude the agreement. Accordingly we suggest that
3. your ‗questions or concerns that relate to the Agreement and the implementation of the Oyu Tolgoi
Project‘, as you call them in the letter, should have been addressed not to the MPs, but to the
Government of Mongolia. After the Parliament resolution only the Government has the right to
negotiate with you; similarly, you are also expected to discuss the issue with the Government, and
not individual MPs.
―We approached the content and intention of the letter as coming from a long-time partner
offering cooperation in Oyu Tolgoi for significant future development of the country. However some
things mentioned in the letter confused us. Parts of it read like giving direction to Mongolia on how
to be independent and what to do about development. Such coercion of MPs who received the trust
of the people and who work as the supreme legislative authority in the sovereign country of
Mongolia indicates that your companies lack basic political and business culture.
Read more…
―In the letter you mention that Mongolia has arrived at a crossroads. The people of Mongolia made
their choice about 20 years ago, approved their Constitution, defined the way they wanted the
country to develop, and chose the principles of democracy and the market economy as understood
at the international level today. That is why we do not think a company needs to tell us how our
country should develop. We have to make it clear to you that the people of Mongolia and their
State have the right to decide on any issue without outside interference.
―It is hard to believe that the letter, clearly meant to put pressure on the Mongolian State, reflects
the official stand of the directors of Rio Tinto and Ivanhoe Mines. Indeed, we believe the letter
would harm the reputation of the world famous Rio Tinto among the Mongolian people.
―You should seek an apology from the MPs for such a rude action. Rio Tinto and Ivanhoe Mines
must respect the laws and regulations of Mongolia. We hope that you will conclude a mutually
beneficial agreement with the Government and cooperate with us.‖
The letter was signed by Mr. S.Magnaisuren, Head of the Parliament Secretariat.
Source: www.parliament.mn
NO INTENTION TO INFLUENCE DECISION, SAY RIO AND IVANHOE
Acknowledging their letter, Mr. Sam Riggall, Commercial Director, Rio Tinto and Mr. John Fognani,
Legal Director, Ivanhoe Mines wrote to Mr. Magnaisuren, Secretary of the Parliament Office, on
August 11 that ―the only purpose of our letter dated 27 July 2009 was to offer all members of the
Great State Khural the opportunity to request any factual information they required in relation to
the Oyu Tolgoi Project and the draft Investment Agreement‖.
Emphasizing that in sending the letter ―we were not seeking to influence the decision-making
process being followed either by Parliament or by the Government‖, the two representatives of the
investors said they were ―deeply concerned that anybody might misconstrue our offer to provide
information as questioning Mongolia‘s commitment to democracy‖.
The letter ended with an expression of appreciation of ―your accurate perception of the Investors
as reliable, long-term partners ready to work with Mongolia to successfully deliver this large-scale
project, which will generate long-lasting benefits for all stakeholders‖.
Source: Ardiin Erkh
The full text of the letter, as published in the Mongolian media, can be seen on the BCM website,
Articles/Reports on Mongolia.
MONGOLIAN RELATIONS WITH INVESTORS ENTERING THEIR THIRD PHASE
A new phase has begun in the relationship between Mongolia and those who invest here,
particularly foreigners. Historically this can be seen as the third phase in an ongoing process where
economics has often been subservient to politics. The first phase saw Mongolia mostly begging for
what was always described as ―aid‖ from the then Soviet Union, with the term ―investment‖ hardly
ever used as it smelt of capitalist investment and exploitation. The second phase was in the years
when, after their plunge into the uncharted sea of the market economy, Mongolians accepted that
investors were entitled to preferential treatment and pulled out all the stops to offer favorable
conditions to them. Soft loans were made available to them and the tax environment was made
friendly and inviting.
Adoption of the guiding principle of ―Equal relations and cooperation‖ when dealing with investors
marks Mongolia‘s entry into the third phase. There is clear indication that there would not be any
further tax incentives, including preferential conditions and outright exemption. This was the clear
4. message sent out by the Spring session of Parliament. Small businesses holding uranium licenses
were forced off the stage and a new law prohibiting mining operation near water sources and forest
areas has also been passed. It is not that only small fry are being targeted in the new policy.
Parliament was overwhelmingly in favor of revoking all tax preferences to investment in the Oyu
Tolgoi mines. MPs also voted to impose restrictions on the generous refund to mining companies of
VAT they pay on production of their exported output.
Whether the swing is wrong or right or whether it is sustainable can be assessed only after its
effects are felt over a period of time.
Source: www.mongolianminingjournal.com
COPPER RETREATS AS DATA SHOW CHINA BUYING LESS
Copper slipped on Tuesday as the market paused to assess data from top consumer China on
economic growth and metals demand, showing an end to record inflows of the metal used in power
and construction. Three-month copper on the London Metal Exchange closed at USD6,030 a ton
after it had touched a 10-month high of USD6,258 a ton the day before. The metal is up about 50
percent since April, when markets started to think the worst of the recession could be over.
China's copper imports fell nearly 15 percent to 406,612 tons in July from June. An analyst said,
"China probably has enough in public and private stores to use as leverage to drive the price down
... What will also be bearish for commodity prices is money supply, which will probably not grow at
the same level."
A surge in imports of copper scrap cheered the market, but analysts said it was unlikely to last. "As
the economy stabilizes, more copper scrap will become available, which will weigh on China's
copper imports and, consequently, on prices," Commerzbank said in a note.
Source: Reuters.com
COMPANIES WARNED AGAINST SELLING URANIUM LICENSES
Uranium exploration and mining licenses are being re-registered after some weeding out. Mrs.
B.Dolgor, Head of the Government Secretariat, has warned all companies that licenses they hold
will be immediately suspended if these are sold to others. According to a new law, to qualify for
holding a license, a company must have considerable experience in the field of mining, own
adequate assets and be from a country acceptable under the national security policy of Mongolia. It
must also guarantee that it will use only environment-friendly technology in its work. So far three
mining and 146 exploration licenses have been issued.
Source: Zuunii Medee
MONGOLIA IS MERELY CORRECTING PAST MISTAKES, SAYS TAX OFFICIAL
Dr. Ya.Ayushjav, Head of the State Budget section at the General Taxation Authority, has justified
the recently amended VAT law as being essential for the health of the state budget. Admitting that
the refund of VAT is standard international practice, she said while most Asian countries gave back
only 6-7% of the VAT paid, in Mongolia the refund rate was 48%. Other businesses were taking
advantage of this by joining the mining sector, and then claiming VAT refund on what had actually
been paid on producing their non-export items. ―This was a ridiculous distortion of the principle
behind offering tax relief,‖ she said.
Asserting that Mongolia is ―a country with the lowest tax rate‖, she expressed surprise that foreign
investors in mining were unhappy with recent developments. ―When they complain that our MPs are
making things tough for them, they should be reminded that in their home countries or in other
countries where they work, the legal environment and the tax regime are likely to be far tougher,‖
she said, adding they ―cannot pretend to be surprised that Mongolia has realized the mistakes it
made. It is a pity that our realization and corrective measures did not come earlier‖.
Source: www.mongolianminingjournal.com
MNMA CHIEF CALLS ANNULMENT OF VAT RELIEF ILLEGAL
Mr. Do.Ganbold, President of the Mongolian National Mining Association, sees the annulment of the
VAT refund law as an appalling mistake and untenable in law and practice. ―We wonder if our
legislators were aware of what their approval of the law meant or if they passed the amendment
without realizing the full import of their action,‖ he has said, expressing his disappointment that
―nobody sought the informed opinion we could provide as a professional organization‖.
5. Saying that Mongolia is going to have the dubious honor of being the first country to impose VAT on
exports, he feared international sanctions might follow. In any case, exports will become more
expensive and less competitive. ―All the time we hear that jobs must not be lost, and new work
places created, and then comes a decision which in effect says, ‗Stop the work and make your
employees redundant‘‖, he said, adding that ―short-term political considerations are taking
precedence over long-term economic sense‖.
He found it strange that the tax authority is presenting the annulment as if it had been offering a
grant to companies all these years, while actually it was just paying back what it owed under the
law and under international practice.
Source: www.mongolianminingjournal.com
BHP BILLITON RETURNS USD32 BILLION TO SHAREHOLDERS IN SEVEN YEARS
Diversified mining major BHP Billiton, whose record 2009 dividend represents a sixfold growth in
seven years, has paid a massive USD32 billion in cash to shareholders since BHP and Billiton merged
in 2001.
This year's dividend payout of USD4.6 billion, in the teeth of the worst economic downturn since
the 1930s, was not only an all-time company record, but it also totaled considerably more than its
entire net operating cash flow of 2002, the first reporting year after the merger.
The record 2009 dividend was 17.1% higher than in 2008, and more than six times more than in the
first reporting year following the merger.
The company also generated record net operating cash flow of USD18.9 billion, despite commodity
prices plummeting, and pressed on with its almost USD11-billion capital-expenditure program. The
company said it had had difficulty in illustrating the value and strength of its strategy of scale,
diversification and tier-one quality during the prolonged upward cycle pre-October 2008, but was
having no difficulty illustrating that value now. "In a split second, we moved from high prices and
insatiable demand to free falling prices and consumer destocking. While individual commodities
were cyclical and volatile, the strategy of diversification, scale and tier-one quality was providing a
natural buffer against volatility and cyclical impact. The company's margins had resiliently kept
above the 30% level.‘
Source: miningweekly.com
CAMECO Q2 EARNINGS RISE 65%
Canadian uranium miner Cameco Corporation earned CAD247 million in the second quarter of this
year, 65% higher than net earnings of CAD150 million posted in the same period a year earlier.
Excluding once-off items, adjusted net earnings rose 1%, to CAD140 million. Profit was helped by
increased earnings in the group's fuel services and electricity businesses, partly offset by weaker
performances in the uranium and gold units. Cameco owns Boroo Gold through its shares in
Centerra Gold.
Source: miningweekly.com
DENISON Q2 LOSS WIDENS
Canadian uranium miner Denison Mines has reported a second-quarter net loss of USD18.2 million,
more than the USD13.8 million loss for the same period last year. Denison has uranium mining
assets in the US and Canada, as well as exploration properties in Zambia and Mongolia.
Source: miningweekly.com
KHAN BANK TO ISSUE UNION PAY CARDS FREE IN AUGUST
Khan Bank has announced it will mark the first anniversary this month of the introduction of Union
Pay cards in Mongolia by issuing fresh cards free through August and by allowing customers to put
money into their card and use it locally or at merchants or ATMs overseas through the bank‘s
nationwide online branch network. The Union Pay card was launched in March 2002 jointly by over
80 banking and financial institutions in China. The card network covers 99% of Chinese territory and
also has a global presence.
Source: www.khanbank.com
6. CENTERRA SHARES FALL ON CAMECO SALE PLANS
Uranium giant Cameco Corporation moved on Monday to calm market speculation regarding the
potential sale of its 49% stake in Centerra Gold which owns Boroo Gold in Mongolia. Shares in
Centerra fell more than 9% on Monday, after a newspaper reported that Cameco had hired
investment banks to sell the shares, likely through a prospectus filed with securities regulators.
Cameco, which spun out its gold assets into Centerra in 2004, has made no secret that it plans to
sell the shares as soon as it can get a decent price.
Source: www.miningweekly.com
COKE PRODUCING PLANT HOPES TO REPAY LOAN SOON
The Mongolian-owned Ajnai Corporation, which runs the first metallurgic plant in the country in
Bayan Ovoo district of Umnugovi province, hopes to be able to repay before long the USD20-million
loan it took from China to set up the unit. While the export price for raw coal from Tavan Tolgoi is
between USD10 and USD20 per ton, that of the coke produced at the company is generally between
USD70 and USD100. The company has the capacity to mine 2 million tons of coal annually and
export 100,000 tons of coke to China.
Source: Zuunii Medee
NEW CIVIL AVIATION BOSS SETS HIS PRIORITIES
Mr. G.Davaa, the new director of the General Civil Aviation Authority, has promised the induction
of modern Western management principles and techniques in running the sector from now on.
Referring to his long years of work in civil aviation, he said he knows very well where to start.
He identified three priorities. First, there should be more involvement of private companies;
second, new airports have to be built; and third, air links to all provinces have to be established. In
internal administration, decision making will be decentralized, with line managers given more
authority to take financial decisions independently, and charged with more responsibility for
planning and coordinating activities. All programs must be based on a financial cost plan,
something that is rarely followed at present.
Source: Zuunii Medee
CHINA CHARGES RIO TINTO EMPLOYEES, BUT BACKS OFF ALLEGATIONS OF SPYING
China formally arrested an Australian citizen and three other employees of the British-Australian
mining giant Rio Tinto late Tuesday on suspicions of commercial bribery and trade secrets
infringement in a case that has rocked the global steel industry and created a diplomatic uproar. In
a Government filing, which was reported by the official Xinhua news agency, China appeared to
back away from the much more serious charges of espionage or violation of the country‘s state
secrets law, which Beijing had earlier alleged and which had recently frayed relations between
China and Australia.
A spokesman with the Shanghai bureau of the Supreme People‘s Procuratorate said early
Wednesday that the four employees had not yet been indicted on the charges and that the
investigation was ongoing.
Australia‘s Department of Foreign Affairs and Trade, however, said Wednesday that Chinese
officials had informed the Australian Government that the four Rio Tinto employees had not been
arrested on charges related to the country‘s tough state secrets law. The decision is a major shift
in a case that generated significant anxiety among foreign corporations and investors worried that
China could stifle business by pressing state secrets charges against executives.
Read more…
In the statement released through Xinhua, prosecutors said the four Rio Tinto employees had used
―improper means‖ to obtain commercial secrets from China‘s government-controlled iron and steel
industry. Although commercial bribery is a criminal charge, the sentence for anyone convicted of
the crime is significantly shorter than those for state secrets violations. The announcement came
more than a month after the four employees were detained in Shanghai and accused of stealing
state secrets from China‘s steel industry and harming the nation‘s economic interests. It followed
weeks of diplomatic pressure from the Australian Government, which had complained about a lack
of transparency in the case.
The Chinese Vice Minister of Commerce, Mr. Fu Ziying, said the four would receive a "fair verdict" —
a term suggesting a trial is certain — and said it showed his Government wanted to create a fair and
7. open marketplace. "I believe this case will not, and should not, affect the healthy and stable
development of Chinese-Australian bilateral trade and economic relations," he said.
The detentions of the four employees, including three Chinese citizens, stunned many
multinational companies doing business in China because the government had invoked its murky
espionage law in a case many legal experts said involved allegations that sounded like commercial
bribery rather than spying.
The accusations also caused turmoil in China‘s steel industry, the world‘s largest, and disrupted the
country‘s already contentious annual iron-ore negotiations with some of the world‘s biggest
producers, including Rio Tinto.
Rio Tinto has strongly denied wrongdoing and insisted that the company had no evidence that its
employees, including Stern Hu, a Chinese-born Australian citizen, had engaged in bribery or
wrongdoing.
Earlier, Rio Tinto shares fell more than 3 percent on Monday after China had stepped up its spying
allegations. Analysts said USD102 billion, the amount reported as being overpaid by Chinese steel
mills, was more than double Rio Tinto's total annual iron sales revenue of USD42.6 billion over the
past six years.
Source: The New York Times, Reuters.com
QUOTES FROM CHINA STATE AGENCY REPORTS ON RIO TINTO
Here are quotes from the two Chinese-language reports about the Rio Tinto case from a magazine
published by China's National Administration for the Protection of State Secrets and issued on its
website (www.baomi.org). Author Jiang Ruqin in an article headlined "What does the Rio Tinto case
reveal?" writes:
1."The large amount of intelligence and data from our country's steel sector found on Rio Tinto's
computers and the massive damage to our national economic security and interests are plainly
obvious. The economic espionage in this case involved winning over and buying off, prying out
intelligence, routing one by one, and gaining things by deceit over 6 years. This virtually
blackmailed Chinese steel businesses to pay the heavy price of an extra 700 billion yuan or more for
imported iron ore."
2."The Rio Tinto case of the foreigner comprador Hu Shitai colluding with the senior ranks of some
major steel enterprises...is in essence the same, showing that these are not merely individual
cases, but the tip of the iceberg. If they are not swiftly investigated and dealt with, this will be
disastrous.‖
Read more…
Another author, Luo Jianghua, writes in a report headlined "Secrets protection by state-owned
businesses demands urgent strengthening":
3."In recent years, many economic spies in our country have acquired advanced technology,
information about important negotiations and a range of other state economic, technological
secrets and commercial secrets, inflicting major economic damage on China."
4. "The Rio Tinto spying case has again sounded the alarm over secrets protection by our country's
state-owned enterprises and corporations, forcing us to a thorough awareness that their protection
of secrets must only be strengthened and cannot weaken. As one central leader sharply pointed
out, protecting the secrets of the Party and the state, including secrets in the economic and
technological spheres, is a major concern for the interests of the nation, state and people."
5. "Interest groups from abroad generally acquire economic intelligence in China by using their
offices and people in China to engage in passing on benefits, policy lobbying and collection of
commercial intelligence."
Source: Reuters.com
ECONOMY
CHINA OFFERS EXCELLENT OPPORTUNITIES, SAYS MONGOLIAN ENVOY
The Ambassador of Mongolia to China, Mr. Galsangiin Batsukh, feels China offers excellent
opportunities at the present moment of global economic crisis, and Mongolia should grab them. He
sees the present situation as being one where Mongolia has what China needs, and China has what
Mongolia needs, ―a perfect basis on which to expand our cooperation‖. Mining and the development
8. of infrastructure, and China‘s investment of capital, technology and manpower to implement large
export-oriented mining projects in Mongolia, to meet China‘s demands and more, would be the
major trend in the near future, according to him.
―Being geographical neighbors allows us to achieve so much more at less cost and also quicker.
Chinese skills, technology and practices will be an asset in road building and other areas of
construction,‖ he says. Noting that China‘s status in the world economic order will definitely be
higher when the crisis is finally at an end, he said, ―This pre-eminence of a neighbor offers a host
of advantages and opportunities‖ to Mongolia, and added, ―We have to act appropriately to make
the maximum use of this favorable situation, to grab opportunities that are offered.‖
Source: www.mongolianminingjournal.com
JULY PRICES SHOW 4.9% RISE YEAR-ON-YEAR
The National Statistics Office has revealed data showing the national consumer price index in July
fell 1.3% from June and was only 4.9% higher than in July 2008. A year-on-year rise of less than 5%
must be heartening news for policy makers.
GDP in January-June 2009 was 1.3% less than in the same period last year.
Source: www.nso.mn
MONGOLIA OFFERING “EQUAL OPPORTUNITIES” IN MINING TO ALL
Presenting his paper at the 3rd Ulaanbaatar Forum of East Asian Countries where 25 scholars and
researchers from 6 countries, mainly from North-East Asia, discussed ―Finance and Tourism‖ over
two days, a senior official in the Policy Department of the Finance Ministry, Mr. B.Batjargal, said
that GDP in Mongolia would rise by 30 percent once the Oyu Tolgoi output began to be sold.
Gradually the present per capita GDP of USD1,497 would reach USD 5,000. Since this could be
achieved only after massive investment, he said Mongolia was offering ―equal opportunities to
neighboring countries and third neighbors‖ to exploit the deposits. He also stressed the importance
of meeting domestic energy needs by internal production, without relying on imports.
Source: www.news.mn
TRUE COMMODITY PICTURE WON’T BE VISIBLE BEFORE 2010: BHP BILLITON
Although economic conditions have been stabilizing over the last three months, the true underlying
demand for commodity products would not be visible before 2010, BHP Billiton CEO Marius Kloppers
feels. After the collapse of commodity prices last year, there has been a rebound and the velocity
of recovery in China has been positively surprising, he has said, adding that the extent to which the
Chinese recovery was the result of pent-up demand from a much-depleted inventory chain, or real
demand, now had to be determined.
"It's our view that restocking in China is essentially complete," Mr. Kloppers said. Although it would
not be until 2010 before underlying demand is clearly visible once more and not masked by
inventory effects, BHP Billiton did expect a more predictable demand scenario in the coming
financial year. It continues to be the company's view that it would emerge from the recession less
strong than it had emerged from previous commodity cycles.
Source: miningweekly.com
WHO BENEFITS FROM WAIVING EMPLOYMENT FEES FOR SO MANY CHINESE?
A series of Government resolutions beginning from April 2008 has allowed almost 20,000 Chinese to
work in Mongolia, exempting a large number of them from paying the employment fee for foreign
workers. The Minister of Social Security and Labor should explain why no Mongolians can do at least
some of these jobs and how much money the country has lost by not insisting on the MNT210,000
monthly employment fee for so many workers. The money could have been used to train Mongolians
for jobs in sectors where they have negligible presence or to create jobs elsewhere. There is also
talk that some money was collected from companies to be later refunded to them, but few know
for certain what happened to this amount.
Source: Udriin Sonin
REVENUE ESTIMATES MET IN FIRST SIX MONTHS
Finance Minister S.Bayartsogt has said total revenue in the first six months was only 0.7 percent
less than the estimated amount and down by 20 percent compared to last year‘s figure.
9. Approximately 72.8 percent of the total income came from taxes, 21.6 percent from non-tax
sources and 0.2 percent was income from assets.
Giving details of how much was spent on social welfare, Mr. Bayartsogt said the allocation was
MNT27.8 billion for child money, MNT3.3 billion for new births, MNT8.9 billion for honored mothers,
MNT7.6 billion for newly weds, MNT3.2 billion for elders and MNT7.8 billion for pregnant women
and for mothers with infant children.
Investment costs amounted to 25 percent of all budgeted expenses, an increase over last year‘s.
Source: en.News.mn
3 EASTERN PROVINCES SEEK INVESTMENT
The Ministry of Foreign Affairs and Trade and FIFTA jointly organized the ―Eastern Region: Investors
Forum-2009‖ in Choibalsan in Dornod province on August 06. More than 220 participants, including
the Turkish and South Korean Ambassadors, exchanged views on how to attract foreign investment
to help in the region‘s development, and the opportunities and advantages the region offered.
Among the speakers were Foreign Minister Batbold, three provincial Governors, the Head of the
Eastern Economic Region Council, the Chairman of FIFTA, and the Director of PetroChina Daqing
Tamsag.
Speakers emphasized the need to change the authorities‘ regulatory-oriented mindset if investors‘
interests were to be promoted and the three regional Governors – of Dornod, Khentii and
Sukhbaatar – were urged to follow up the ideas expressed and ensure that proposed projects
conformed to sustainable development criteria. The provinces are seeking investment in steel
rolling, cement, steel and glass, paper recycling, roads, slaughterhouse, piggery, wool washing and
combing, cheese making, seed farms, sea buckthorn, and irrigation. Those interested in any of
these investment areas can contact the BCM office for more information and/or help.
Foreign Minister Batbold made a special mention of the several BCM members present and invited
more of them to attend the next regional forums. The one for the western region will be held in
Khovd on August 28, and will include presentations on the Tsagaan Nur Free Trade Zone as well as
opportunities in agriculture, raw materials, natural resources and tourism.
Source: BCM Newswire
BUTTERFLY LARVA DESTROYING CROPS IN KHOVD
Ulaanbaatar might not receive vegetables grown in Khovd this year as the crop in over 1,670
hectares of land in six districts of the province has been infested by the larva of a butterfly that
threaten to eat up young leaves of plants and trees. The local Department of Food, Agriculture and
Small Medium Businesses is worried that the damage could spread to fresh grass too, destroying
pasture lands. Samples of the larva have been sent to Ulaanbaatar seeking suggestions on how to
control the pest.
Source: Onoodor
POLITICS
DP PRESENTS A UNITED LOOK, BUT FOR HOW LONG?
Ever since the election of Mr. Ts.Elbegdorj as President, the simmering internal dissension in the
Democratic Party has been under a lid. Demands for the resignation of the party head, Mr.
N.Altankhuyag, are also not heard. Most people think the DP factions have reached some
reconciliation since the party‘s success in the presidential election. Observers, however, say this
peace is more apparent than real.
The façade of unity will be tested when a decision is taken on who is declared elected to
Parliament from Bayangol. If the head of the Metropolitan unit of the party, Mr. S.Erdene, is finally
declared the winner, peace is likely to prevail and Mr. Altankhuyag will continue. However, if Mr.
Erdene fails to take his seat in Parliament, the DP head will be blamed for sacrificing Mr. Erdene
for his own political goals. Resentment will then break out, ultimately threatening the status of the
coalition.
Source: Ardiin Erkh
10. SOUTH KOREAN TROOPS JOIN KHAN QUEST FOR FIRST TIME
South Korea will dispatch a platoon of Marines for the first time to a multinational peacekeeping
exercise to be held in Mongolia later this month. The country has participated in the annual ―Khan
Quest‖ exercise since 2006 as an observer by sending working-level officers. This year's exercise
will take place from August 15 to 25 at a training camp about 40 miles west of Ulaanbaatar.
The general staff of the Mongolian Armed Forces, with the support of the U.S. Pacific Command,
has organized the summer peacekeeping exercise since 2001. For the first five years, only
Mongolian and U.S. troops participated in the exercise. The joint drills have expanded since then to
include many other countries. About 450 troops from some 20 nations, including Germany, India,
Bangladesh and Cambodia, are to take part in this year's exercise.
During Khan Quest, instructors who have experience in peacekeeping operations overseas lead
practical lessons in realistic conditions. Troops also introduce their weapons and military vehicles
to each other.
Source: www.koreatimes.co.kr
JOINT MONGOLIAN-RUSSIAN MILITARY EXERCISE THIS YEAR, TOO
Mongolian and Russian armed forces will hold a joint field exercise and training in peacekeeping
operations this month. The main aim of the joint exercise is to improve human skills and adapt
equipment and techniques to the special needs of international peacekeeping operations. This
year's exercise, called Darkhan-2, will have three stages and will bring together some 600
servicemen from the two neighbors.
Darkhan-1 last year was attended by 250 Mongolian troops and technical experts and 400
servicemen from Russia‘s Siberian Military District. They jointly repaired 482 pieces of equipment
and tested 722 meteorological devices.
Source: Montsame
RESTRICTION ON JOURNALISTS LIFTED
Authorities finally gave in last week by withdrawing all restrictions on journalists‘ movement in
Government House, after they had been in force for three days. Head of Security G.Lhagvasuren,
Director of the Parliament Press Department B.Zolbayar, representative of the President S.Batzaya
and Director of the Government‘s Press Department L.Ninjinjamts jointly met journalists to give
them the news and also to apologize for the trouble.
Col. Lhagvasuren said their intention had not been to limit Press freedom in any way. They had only
wanted to impose ―better discipline‖ inside the ―sensitive‖ building. It has been decided that the
number of reporters accredited to Government House will be brought down from January 1.
Source: Ardiin Erkh
PRESIDENT’S TRIP TO DORNOD CRITICIZED
President Elbegdorj‘s recent visit to the eastern province of Dornod has raised eyebrows. Billed as a
working trip, it looked more like a family outing for pleasure. The ostensible purpose of the visit
was to oversee preparations for the 70th
anniversary celebrations of victory in the Khalkh Gol war.
It was not clear why the Head of State should be responsible for this, and not some official under
him, especially when there is a commission already in place for organizing the celebrations. The
President also did not ask any of the local MPs to accompany him, nor was there any reporter to
cover his program.
Source: Zuunii Medee
U.S. CONGRESSMEN MEET MONGOLIAN LEADERS
A six-member team of U.S. congressmen, led by Mr. John Boehner (R-Ohio), House of
Representatives Minority Leader, called on President Ts.Elbegdorj and Prime Minister S.Bayar
during their two-day visit to Mongolia on August 9 and 10. Apart from Mr. Boehner, the members of
the delegation were Mr. Dan Boren (D-OK), Mr. Jo Bonner (R-AL), Mr. Dave Camp (R-MI), Mr. Tom
Latham (R-IA) and Mr. Greg Walden (R-OR).
The delegation discussed the sound state of U.S.-Mongolian relations. ―We enjoyed candid,
substantive discussions on the broad range of issues that the U.S. and Mongolia confront in the 21st
century,‖ said Mr. Boehner. The group visited U.S. Government funded aid projects in Ulaanbaatar
and the surrounding countryside.
11. Source: mongolia.usembassy.gov
NEW U.S. AMBASSADOR TO ARRIVE IN OCTOBER
The U.S. Senate has confirmed by unanimous consent the nomination of Mr. Jonathan S. Addleton
as Ambassador to Mongolia in succession to Mr. Mark C. Minton. Mr. Addleton is expected to arrive
in Mongolia in the second week of October. His nomination, hearings and the final vote were
completed in less than five weeks, which is unusual.
Mr. Addleton was USAID Mission Director in Ulaanbaatar from 2001 to 2004 during the tenures of US
Ambassadors John Dinger and Pam Slutz. He is the first U.S. ambassador to Mongolia to have had a
prior assignment in the country. At the time of his nomination, Mr. Addleton was Counselor for
International Development at the U.S. Mission to the European Union in Brussels.
Source: www.nambc.org
HERDERS ASKED TO MOVE AFTER 56 BIRDS DIE OF FLU
Sixteen herder households and their more than 800 heads of livestock were asked to move away
from around Duruu Tsagaan lake in Arkhangai province after 56 birds of 5 species were determined
to have died there of avian flu transmitted by the H5N1 virus. The birds are likely to have come for
the summer from Jankhai Lake in China.
Source: Zuunii Medee
SOUTH KOREAN LOAN FOR NEW TRAFFIC LIGHTS
Mongolia has so far borrowed USD12.8 million from South Korea to change traffic lights in
Ulaanbaatar. There are 51 of them in the city and the cost of installing each new set is USD8,000.
Work is progressing and 45 new sets should be in use by October.
Source: Zuunii Medee
STREET CLEANERS NOT PAID FOR 3 MONTHS
Over 40 street cleaners wearing the trademark yellow jacket of the TUK Company recently
demonstrated at the Sukhbaatar District Governor‘s Office to complain that they have not been
paid any salary for the last 3 months, and their health and social insurance premiums have not been
paid since 2005. They demanded action from the city authorities who have a contract with the
company, but received no clear assurances.
Source: Udriin Soniin
PEOPLE CRITICAL OF ROAD REPAIR PROGRAM
Traffic movement in Ulaanbaatar is seriously affected by the simultaneous repair work on more
than one arterial road. These will continue for some weeks by which time people will come back
from vacation and students will be arriving from the provinces to begin a new academic year. This
will add to the congestion. People wonder why the work had to begin so late. Does the answer lie
in the dismissal last May of Mr. D.Bat-Erdene, Head of the Ulaanbaatar Road Authority, for
corruption, as City Mayor G.Munkhbayar informed the Anti-Corruption Authority? It is believed MNT6
billion earmarked for roads had gone missing, delaying the repair program. People also wonder why
the priority every year is roads where the more affluent live and work, while poorer areas are
never touched, allowing roads there to get worse and worse.
Source: Zuunii Medee
MONGOLIA HAS NO MARMOT PLAGUE VACCINE IN STOCK
Expressing concern that the cases of marmot plague in China could pose dangers to Mongolia, the
director of the infectious disease research center, Mr. D.Otgonbaatar, told a press conference last
week that Mongolia has no vaccine against the plague in stock. Apparently the vaccine used to
come from Russia which has now stopped manufacturing them and no new supply source has been
found.
Source: Onoodor
12,000 ABORTIONS RECORDED EVERY YEAR
With no restrictions placed on the right of a woman to have one, the total number of abortions in
Mongolia in the last 20 years has been estimated by some at 200,000. About 12,000 women have
12. abortions each year in recognized hospitals in Mongolia, more than half of them in Ulaanbaatar.
Many others go to unregistered clinics or take some alternative methods to terminate their
pregnancy. Ninety percent of the women say they choose to abort the fetus either because the
pregnancy was unwanted or because they feared they would be unable to raise a child.
Abortion in Mongolia was made legal in 1990. Taking pills has reduced the number of surgical
abortions but is a greater threat to the health of the woman because a considerable quantity of
these pills, imported from China, has been found to be substandard.
Source: Udriin Sonin
MORE LAY CLAIM TO BE WW II VETERAN, TO RECEIVE APARTMENT
More Mongolians are putting forward claims that they took part in World War II that ended in 1945,
all of 64 years ago. According to the Mongolian Elders‘ Union 36 new names have been added to the
previous list of 1,816 people who took part in the 1939-1945 war. The process began after
Parliament decided to grant an apartment to every war veteran. Many people are claiming
certificates from the state archives to that effect in order to be eligible to receive an apartment.
The director of the union has clarified that the children of war veterans who died after June 6,
2008 are also entitled to an apartment. Meanwhile the Government‘s decision to put elders who
had all worked as veterinarians in apartments in the same building has been criticized as a violation
of one‘s right to choose where to live.
Source: Undeshnii Shuudan, Udriin Soniin
AIRPORT OPTS FOR SOLAR POWER
As requested by the Mongolian Government, the Japan International Cooperation Agency (JICA) will
prepare and submit a report on generating and using environment-friendly electricity from solar
energy at Chinggis Khaan International Airport. The Civil Aviation Authority plans to use solar power
for all the needs of its flight management service as the first step to turn it into a "green‖ airport.
Source: Montsame
NEW MONGOLIAN LAWS
The following new laws and amendments to current Mongolian laws were published in two recent
weekly Government Bulletins. Unless decided otherwise by Parliament, the 37 new laws and
amended laws take effect ten (10) days after publication.
Date Laws
07.30.2009 Addendum to Law on Government special fund
Law on Mortgage
Law on Regulation to comply law on mortgage
Amendments to Civil code
Amendments to Law on State registration of property ownership rights,
other relative property rights
Amendments to Law on Bank, competent legal body's money savings,
settlement, loan activity
Addendum to Law on Non-bank financial institution activity
Annulment of Law on Regulation of non-judicially regulated acquisition,
sale of hypothec object
Addendum to Law on State and local property
Amendments to Law on Land
Law on Compensation to victim
Amendments to Law on Acquisition of product, work, service with state
and local property capital
Addendum to Law on Government organization administration, financing
Amendments to Law on Granting allowance to mothers, children and
providing financial aid to child, mother, family
Law on Regulation to comply certain provisions of law on social insurance
13. Amendments to Law on Granting unemployment allowance from social
insurance fund
Amendments to Law on Granting pension, allowance from social insurance
fund
Law on Exemption from customs tax
Law on Exemption from VAT
Law on Conducting settlement in national currency
Amendments to Law on Civil code
Amendments to Law on Currency regulation
Law on Prohibition of minerals exploration, mining on river stream source,
protected area of land with water reservoir, forest reservoir
Law on Regulation to comply law on prohibition of minerals exploration,
mining on river stream source, protected area of land with water reservoir,
forest reservoir
Amendments to Law on Minerals
08.06.2009 Law on Nuclear energy
Law on Regulation to comply law on nuclear energy
Annulment of Law on radiation protection, security
Amendments to Law on Minerals
Amendments to Law on General Taxation
Amendments to Law on Fee for sign of Mongolia
Amendments to Law on Special permits for business
Addendum to Law on Government special fund
Addendum to Law on Energy
Addendum to Law on Land
Amendments to Law on Company
Amendments to Law on VAT
Please visit BCM‘s website, Legislative Committee, for a summary of new Mongolian laws.
BCM members who wish complete versions of the laws in Mongolian language are welcome to call or
email the BCM office (11-332-345; info@bcmmongolia.org) to arrange for a convenient pickup.
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.
14. SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended August 7, 2009, trading activity on the Mongolian Stock Exchange (MSE) totaled
262,900 shares with 41 companies traded. Total market value of transactions was MNT 82.3 million.
Total market capitalization of the 358 stock companies listed on the MSE was MNT 464.0 billion,
and increased by MNT 8 billion or 1.7% from the previous week.
The Top-20 Index increased by 173.74 points or 3.6% compared to the previous week closing at
4,953.99 points. The MSE Composite Index increased by 55.96 points or 2.4% compared to the
previous week, closing at 2,436.16 points.
Most active stocks traded were: Genco tur buro (115,800 shares), Khuh gan (77,200 shares), UID
(18,300 shares), BD Sec (14,800 shares), and APU (13,500 shares).
Major share price percentage gainers were: Khusug Trade (13.0%), Khuh gan (11.1%), UID (11.1%),
BD Sec (9.8%), and Makhimpex (8.8%). Major share price percentage losers were: Uguumur
Zuunmod (14.0%), Tavilga (14.0%), Altai (12.0%), Zoos goyol (10.0%), and Genco tur buro (4.0%).
15. 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)
CURRENCY RATES – August 13, 2009
Currency name Currency Rate
US dollars USD 1448.98
Euro EUR 2045.02
Japanese yen JPY 15.21
British pound GBP 2378.94
Hong Kong dollar HKD 186.94
Chinese yuan CNY 211.98
Russian ruble RUB 44.23
South Korean won KRW 1.16
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.
