1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 163, April 15 2011
NEWS HIGHLIGHTS:
Business:
Xanadu Mines, Noble Group finalize terms for strategic alliance in Mongolia;
Petro Matad upgrades reserve estimates;
Firebird raises shares in Berkh-Uul JSC to over 50%;
Silk Road Management raises USD30 million for Mongolia Human Capital Fund;
ASX-listed Alamar Resources to be called Mongolian Resource Corporation;
OT looks to Chile for mining engineers;
Silk Road Mongolia Index gained 9.3% in 1Q2011;
Hochtief gives profit warning after Leighton reviews outlook;
With loss looming, Leighton seeks cash;
Guildford Coal signs call option deed for Mongolian investment;
MCS wins tender to build power transmission lines;
Boeing 737s around the world face new scrutiny;
With shares ready to hit AUD100, Rio Tinto all set to return to respectability.
Economy:
Tavan Tolgoi winners may be named next month;
MSE remains best performing equity market globally;
EBRD invests USD10 million in Mongolia Opportunities Fund;
MSE super deal based on hopes for a commodities super-cycle;
LSE hopes deal will give it advantage when Mongolia finally “emerges”;
London's drive to Hong Kong, via Mongolia;
6 banks in Mongolia to lend USD14.2 million for LSE fees;
Hong Kong Stock Exchange team visits Ulaanbaatar;
Quam Silk Road Mongolia Fund launched;
SME loans help set up 581 factories in 2010;
Financial Regulatory Authority wants more amenities, equipment;
Standing Committee finds Food Ministry’s report incomplete;
Workers in closed mines to get two months’ minimum salary;
Japanese study group calls for trade talks with Mongolia;
Wind farm to be built near Sainshand;
Inner Mongolia alone has one-third of China's wind power capacity;
Global macro policy agenda has become more urgent, says IMF;
China posts first quarterly trade deficit in seven years;
Dollar still in downdraft;
Dangers threaten to hamper the success of fast-growing China.
Politics:
Government “cheating the people”, says Standing Committee;
Russia stalling progress on transit transport rates, Minister tells MPs;
Party leaders pledge not to compete in offering cash allowances;
Draft suggests extra money for state staff in remote regions;
Mongolian metals to make London Olympic medals;
Elbegdorj certain that movements for democracy will succeed;
2. New appeals court to hear cases against officials;
Officials discuss issues relating to new election law;
Prison psychologists doing good work;
China to fund rehabilitation center for Mongolian troops;
Names to succeed Sangaragchaa being considered;
Women’s NGOs send MPs their demand note by post.
*Click on titles above to link to articles.
BUSINESS
XANADU MINES, NOBLE GROUP FINALIZE TERMS FOR STRATEGIC ALLIANCE IN MONGOLIA
Xanadu Mines Ltd. has announced finalization of terms for a strategic alliance with Noble Group to
explore and develop coking coal, iron ore and ferro alloy opportunities in Mongolia. Following
execution of formal agreements, Xanadu and Noble will participate in the strategic alliance through
a joint venture company with each party holding a 50% interest. The existing assets held by Xanadu
will not form part of the present alliance. The initial focus of the joint venture will be the pursuit
of a number of opportunities already identified to maximize the benefits of Xanadu‘s and Noble‘s
respective country experiences and strengths.
The agreement includes a placement of ordinary shares to Noble of up to 9,688,367 shares, which
will take Noble‘s equity interest in Xanadu (through its subsidiary) to 9.9%. The agreement contains
a right until 31 December 2014, for Noble to "top-up" its shareholding in Xanadu in the event that
Xanadu issues new shares. The funds from the placement, together with a similar amount
contributed to the joint venture by Noble, will be applied exclusively to the exploration and
development of coal, iron ore and ferro alloy opportunities in Mongolia.
Commenting on the alliance, Xanadu‘s Chairman Brian Thornton said, ―The completion of formal
agreements will enable the joint venture to advance and bring to fruition a number of opportunities
that the companies have been evaluating in Mongolia. With the transfer of Noble‘s exploration team
to Xanadu to support the joint venture, our total personnel in Mongolia now number 24. The
alliance, while focusing on coking coal, iron ore and ferro alloys, will also allow Xanadu to continue
to advance its existing Galshar and Khar Tarvaga thermal coal projects and its copper gold assets in
north west Mongolia and the south east Gobi.‖
Source: Xanadu Mines
PETRO MATAD UPGRADES RESERVE ESTIMATES
Mongolia-focused oil explorer Petro Matad delighted its growing fan base with a bullish operations
update in March. The firm, run by Australian veteran Doug McGay, announced a meaty upgrade to
its own reserve estimates after re-working the data on its core exploration prospect, Block XX, in
the far east of the country. Petro Matad shares hit an all-time high on the back of the news, but
with the next 12-18 months set to be an exceptionally active time for the company, the hope is
that in-fill testing, additional seismic work and more drilling on the huge acreage within its
Mongolian licenses will identify a major new oil producing area.
Mongolia itself is in an ―embryonic‖ stage according to the company, both in its economic
development and also in exploiting its own natural resources. That includes its largely untapped oil
fields. At present, it imports all of its oil requirements and is keen to substitute home produced for
imported. As a result, it has established a reasonably benign regime for oil companies to explore.
Politically also, it is stable.
Even so, interest has been patchy compared with the frenetic activity offshore Brazil, Africa and
the Gulf of Mexico. Indeed, Petro Matad can claim the title of the only internationally-listed firm
operating in the country, with the exception of a subsidiary of Ivanhoe Energy (TSE:IE), which
operates one PSC.
Its principal asset is the 100 percent owned production sharing contract for 14,250 sq-km Block XX.
It also has two other Blocks, IV and V, located in central Mongolia and which jointly cover 71,040 sq
km. In Block XIX, next door to Block XX, Chinese-owned PetroChina has drilled extensively and is
inching forward towards meaningful commercial production, but infrastructure still remains
primitive with any oil produced shipped out by road.
Petro Matad still has some way to go to reach even that stage. So far, it has drilled only three
complete wells on Block XX, on the prospect it now calls Davsan Tolgoi (or DT), and any meaningful
3. production remains a way off, though it is a testament to the potential that even with the limited
drilling so far the current market value is nearly £370 million (USD 600 million).
Read more…
A fourth well on Davsan Tolgoi was suspended three–quarters of the way down just before the end
of 2010 as the Mongolian winter really kicked in. Temperatures can dip below minus 20 degrees
centigrade and Petro Matad took the decision to avoid reaching a critical stage of drilling just as
temperatures plunged to potentially dangerous levels.
Using a reassessment of the information from the wells drilled last year, Petro Matad raised its
forecast of the amount of recoverable oil in Block XX by nearly 200 percent. It also increased its
targets for possible additional discoveries to 18 prospects and three leads.
According to the March statement, the data led to a much greater understanding of the target
area‘s geological characteristics, while, as a huge bonus, it also made a potentially significant new
discovery.
As a result, DT is now estimated to contain total unrisked recoverable resources of 293 million
barrels, with a risked recoverable resource of 225 million barrels. In terms of unrisked recoverable
resource, it represented an ―approximate tripling of what was previously postulated for at Davsan
Tolgoi,‖ the statement said.
The new discovery provided most of the upgrade in reserves and will also form the basis of the 2011
drilling program, chief executive Doug McGay added. "The discovery and definition of the new
UvganGol paleovalley prospects are very exciting and add a new dimension to resource definition in
this region,‖ he said. Total oil-in-place estimates for this eastern corner of Block XX now stand at
1.87 billion barrels, a figure that includes the recent drilling plus estimates for an adjoining area of
228 sq km immediately to the east.
Financially, Petro Matad is also solid enough. It raised USD54 million last year through a placing.
That has given it cash enough for the immediate plans. How quickly it burns through it depends on
how quickly the drilling program and other in-fill work accelerates. In addition to appraisal work,
there is also a possible fifth well on DT while an initial seismic survey is planned for Blocks 1V and V
with possible drilling here later in the year if those results throw up some interesting results.
To fund all that may mean Petro Matad has to come back to shareholders again for more money,
but a major plus is that institutional support so far has been very solid. All of its major shareholders
took shares in last year‘s placing including Mongolian oil products importer Petrovis, which has a 20
percent stake, and also the European Bank for Reconstruction and Development (EBRD), which owns
17.3 percent.
The key in the next few months will be the appraisal test results for the flow rate and quality of oil
at Davsan Tolgoi, which should follow once drilling resumes at DT-4, which is expected to occur
fairly quickly now that the weather has improved, and further testing is carried out on the three
previous wells.
Source: Proactive Investors
FIREBIRD RAISES SHARES IN BERKH-UUL JSC TO OVER 50%
Firebird Mongolia Fund recently purchased 1,865,993 shares of Berkh Uul JSC (MSE: BEU) from
Petrovis LLC, bringing its total holding in the diversified mining company to over 50%. Berkh Uul has
fluorspar, coal, and gold properties. Firebird has made a number of large investments in fluorspar
mining companies in countries including South Africa, Kenya, and Canada.
Source: BD Securities
SILK ROAD MANAGEMENT RAISES USD30 MILLION FOR MONGOLIA HUMAN CAPITAL FUND
Silk Road Management has received commitments of USD30 million for Mongolia Human Capital
Fund, L.P., the first Mongolia-focused venture capital and private equity fund. The Fund intends to
pursue attractive investment opportunities in non-resource sectors in Mongolia. This successful
result exceeds the original target of USD25 million as Silk Road Management has attracted strong
investor interest from Asia, the Middle East, Kazakhstan and Russia. These investors are primarily
family offices and high net worth individuals.
"We are very pleased," stated Mr. Alisher Ali, Managing Partner of Silk Road Management. "We are
committed to bringing capital to early-stage, dynamically growing Mongolian companies and, at the
same time, providing international investors with access to high growth sectors in Mongolia beyond
mining and resources."
Mongolia Human Capital Fund, L.P. seeks industries where human capital is a key factor for the
success of companies and therefore intends to back strong and innovative management teams
capable of building businesses and unlocking significant shareholder value. The Fund will pursue
4. investment opportunities in such sectors as financial services, media, information technologies,
health care, education, professional services and other human capital intensive industries.
Source: Silk Road Management
ASX-LISTED ALAMAR RESOURCES TO BE CALLED MONGOLIAN RESOURCE CORPORATION
S3 Investment Company, Inc./Redwood Capital has completed the acquisition transaction, ASX
listing and a USD10-million Public Offering capital raise for its client Mongolian Resource
Corporation (MRC). As a result of the acquisition, Alamar Resources Limited, which is traded on the
Australian Stock Exchange, will change its name to Mongolian Resource Corporation Ltd. Redwood
Capital acted as the Asian merchant banking financial advisor for MRC.
Alamar Resources Limited has said that the capital raised will be used to fund the acquisition,
exploration and development of the MRC Mongolian assets and for general working capital purposes.
Mr. Jim Bickel, Chairman and CEO of S3/Redwood, is one of three new directors appointed to the
Alamar Resources Limited board as part of the transaction. Redwood‘s Managing Director Matthew
Totty stated, ―I am extremely excited about Mongolia and working full time in country on a number
of new projects with our local partners. We feel the ASX is a natural place for Mongolian mining
companies to list and MRC has been well received.‖ MRC is a diversified mining company engaged in
the acquisition, development and operation of resource properties in Mongolia, particularly late
stage or current producing mines.
Source: S3 Investment Company, Inc.
OT LOOKS TO CHILE FOR MINING ENGINEERS
Splashed over half a page on a recent Sunday edition of the Chilean newspaper El Mercurio was an
advertisement attempting to entice Chilean mining engineers to Mongolia to work on Rio Tinto‘s
flagship Oyu Tolgoi project. The timing couldn‘t have been more appropriate: that day, several
hundred bankers, traders and miners descended on Santiago for the largest annual gathering of the
copper industry.
On the tightness of the copper market, the delegates disagreed; on the tightness in the labor
market, they were unanimous. ―I think the number one tightest area that I experience regularly is
in the supply of talented, experienced mining industry professionals,‖ said Mr. Andrew Harding,
head of Rio‘s copper division. The trend is more than just a boon for anyone with a degree in mine
engineering (and a boon it is: in some parts of the world, salary inflation is running well in excess of
10 per cent). More importantly for investors in metals and mining, it underscores the challenges
miners are finding as they attempt to respond to record copper prices.
The difficulties obtaining engineers and, increasingly, equipment such as large trucks and mills, will
only prolong the tightness in the market. In particular, with prices of other minerals such as iron
ore and coal also at record levels, it sets up a competition between different commodities to
secure resources. While that is unlikely to be a big issue for the likes of Rio or BHP, it is making life
difficult for smaller miners.
Source: The Financial Times
SILK ROAD MONGOLIA INDEX GAINED 9.3% IN 1Q2011
Providing its first quarter 2011 update for Silk Road indices, Silk Road Management has said Silk
Road Mongolia Index now has 31 members and exceeds USD38 billion in total market capitalization
(as of March 31, 2011) after strong performance of Mongolia-related companies. Two new
companies have been added to the index: Aduunchuluun JSC (ADL:MO) and BDSec JSC (BDS:MO),
both listed on the Mongolia Stock Exchange (MSE). The number of MSE-listed companies has reached
9, representing 29% of total number of the index members.
Silk Road Mongolia Index gained 9.3% in 1Q2011 mainly thanks to robust performance of locally-
listed companies and internationally listed large- and mid-caps: Ivanhoe Mines (+19.8%), SouthGobi
Resources (+17.3%), Aspire Mining (+108%), and triple digit gains in Mongolia listed companies:
Sharyn Gol (+117.1%), Baganuur (+126%) and Shivee Ovoo (+146%).
In 1Q2011, the share of locally-listed companies increased to 4.6% (USD1.75 billion) in total market
capitalization of the index members from the 2.7% (USD836 million) at the end of last year. The
management believes the weight of the Mongolia-listed companies in this index will further
increase thanks to a series of expected domestic share offerings, in particular the Mongolian state-
owned enterprises (SOEs), especially highly anticipated IPO of Erdenes Tavan Tolgoi.
Silk Road Composite Index, Silk Road Central Asia Index and Silk Road Hong Kong Index have been
rebalanced as Bestway International Holdings (718:HK) and Oxus Gold (OXS:LN) have been excluded
from these indices since they do not meet the index requirements anymore.
5. Source: Silk Road Management
HOCHTIEF GIVES PROFIT WARNING AFTER LEIGHTON REVIEWS OUTLOOK
The German construction company Hochtief AG issued a profit warning last week after its Australian
unit Leighton Holdings Ltd. said it would review its outlook amid concerns that it may announce
write-downs and a capital increase. The resultant drop in Hochtief's share price presents an
opportunity for Actividades de Construcción y Servicios SA to increase its stake in the company,
which for months has resisted the Spanish builder's unsolicited, hostile bid to compile a majority
holding.
Previous profit warnings from Leighton in November and February had been played down by
Hochtief, but last week the German company said it expected "significant adverse effects" on its
own 2011 forecast. "There is no indication that Hochtief's forecasts for the business years 2012 and
2013 are affected," Hochtief said.
The announcement came after Leighton requested the Australian Stock Exchange halt trading in its
shares, pending an update on its targets. The problems at Leighton come at an awkward time for
Hochtief. ACS, which aims to build a stake of more than 50% in Hochtief, raised its holding in the
Essen-based company to about 41% at the end of March. Leighton's woes caused analysts to
downgrade it, citing the possibility of write-downs and a capital increase.
Source: The Wall Street Journal
WITH LOSS LOOMING, LEIGHTON SEEKS CASH
Leighton Holdings Ltd. has said it will conduct a USD800-million capital-raising, a move that comes
as the Australian construction company warned that it will post a loss this year. The profit warning
prompted ratings agency Moody's Investors Service to place Leighton's credit rating of Baa1/Stable
on review. "The rating action reflects concerns in relation to the write-downs, and the weakening in
Leighton's business profile particularly if further disappointments emerge," Moody's said in a written
statement.
The capital-raising, through a 1-for-9 rights issue at AUD22.50 a share, will represent one of the
largest cash calls in Australia this year.
Source: The Wall Street Journal
GUILDFORD COAL SIGNS CALL OPTION DEED FOR MONGOLIAN INVESTMENT
Guildford Coal Limited has signed a Call Option Deed with certain affiliated funds of Och-Ziff
Capital Management Group LLC with respect to Terra Energy LLC. On March 31, Guildford
announced the acquisition of a 20% stake in Terra Energy LLC with the option to increase its
shareholding to 70%. Terra Energy LLC holds a 100% interest in 6 exploration permits that are
prospective for thermal and coking coal in the South Gobi and Middle Gobi regions.
Drilling on these tenements is expected to commence this month and the first mining license is
expected before the end of 2011. The Call Option Deed provides the Och-Ziff Funds with the right
to acquire a 25% stake in Terra Energy LLC for AUD25 million in cash. Should the option be
exercised by the Och-Ziff Funds, Terra Energy LLC will be in a strong financial position to fund the
development of its Mongolian coal projects.
Source: Guildford Coal Limited
MCS WINS TENDER TO BUILD POWER TRANSMISSION LINES
MCS International LLC has won the tender to build the transmission lines for a power plant to come
up in the near future to provide electricity to some parts of the Gobi and to mines there, according
to information from the Ministry of Minerals Resource and Energy.
Source: News.mn
BOEING 737s AROUND THE WORLD FACE NEW SCRUTINY
The Boeing 737 is a workhorse of international aviation. And the accident in which the roof of a jet
ripped open 34,000 feet over Arizona has brought scrutiny to the hundreds of older-model 737s
around the world that could be similarly vulnerable because of tiny, hard-to-find stress fractures in
the aluminum skin. The planes will now be subjected to repeated examinations as the problem
revealed by the fuselage crack on the affected flight resonates through the world's 737 fleet.
The incident has forced airlines and governments around the world to take swift action. What the
plane manufacturer usually does in this kind of situation is to issue a "directive" to all users of the
plane in question around the world. This would normally contain, among other things, a description
of the problem and clear instructions on what to do/not to do, to ascertain if those planes can
6. continue flying or need immediate grounding. Industry observers assume Boeing has already done so
and is working this out with all 737 users, including MIAT. However, MIAT has made no public
revelation of what, if anything, it is doing, together with Boeing, to ensure the safety of their 737
fleet.
There are about 6,000 737s in operation worldwide."Some airlines may not always maintain the
records that they need to and certainly not all airlines will maintain their airplanes to the highest
levels of safety," said Mr. Henry Harteveldt, an aviation analyst. However, special inspections are
needed for planes that have reached the threshold of 30,000 takeoffs and landings. The inspections
are high-tech and labor-intensive, and take two experts in aircraft service about eight hours.
Repairs on any fatigue cracks will take a day or two at most. The checks will have to be repeated
every 500 flights.
A 737-200 model flying for Aloha Airlines in 1988 had one of the most spectacular aviation incidents
in modern history when its roof ripped off while flying from Hilo to Honolulu. A flight attendant was
sucked out of the plane and plunged to her death, and dozens of passengers were injured.
Source: The New York Times, BCM Newswire
WITH SHARES READY TO HIT AUD100, RIO TINTO ALL SET TO RETURN TO RESPECTABILITY
If the pundits are on the money, Rio Tinto shares will hit AUD100 in the near future -- the first
triple-digit dazzler to grace the ASX boards since the onset of the financial crisis. For Australia‘s
second-biggest miner, the pending moment will symbolize ―mission accomplished'' for Rio's return to
respectability after its near-death experience of its ill-fated Alcan acquisition in 2007. Rio shares
peaked at AUD115 in May 2008, but by the end of that year it tumbled to AUD30.
In recent history, blue-chip stocks have struggled to surpass the AUD100 level. Unlike Americans
who happily mortgage their condo for one USD125,000 Berkshire Hathaway share, local investors
have been reluctant to embrace ``expensive'' shares. But cracking the ton means bragging rights for
the investor-relations guys. ``There's certainly something romantic in a stock being over AUD100 in
our market,'' says Austock Securities senior private adviser Michael Heffernan.
What's more pertinent is the company's overall earnings and dividend pools, which are divided
between the shares on issue. A company with 100 million AUD1 shares on issue has more mouths to
feed than an entity with one million AUD100 shares on issue. Share buybacks -- such as BHP Billiton's
and Rio's current efforts -- increases EPS and in theory boosts the value of the remaining shares by a
similar amount.
Rio is generating billions from the commodity boom, but is valued on a miserly current year price-
earnings ratio of under 10 times. As with BHP Billiton, investors simply don't believe the commodity
price growth -- especially for iron ore -- can continue. Based on the average valuation (or target
price) of 12 analysts, Rio shares are predicted to hit AUD106. Rio's tragic twist is that it would
already be an AUD100-plus stock if it hadn't been for the emergency rights issue at the height of the
downturn, which increased the miner's share base by one-third.
Source: The Australian
SPONSORS
Khan Bank Eznis Airways
Kempinski Hotel Khan Palace Mongolian National Broadcasting
7. Mongolian Star Melchers
ECONOMY
TAVAN TOLGOI WINNERS MAY BE NAMED NEXT MONTH
Mongolia may announce the winning bids to develop Tavan Tolgoi next month. ―Negotiations are
still ongoing,‖ Mr. E. Amarkhuu, Director-General of Fuel Policy at the Ministry of Mineral Resources
and Energy told reporters in Beijing on Tuesday. Mongolia will choose more than one of the six
groups shortlisted for the project, he said.
Talks are under way on the contract for the central and western part of the site. The shortlist
includes Peabody Energy Corp., a Shenhua Group Corp.-Mitsui & Co. joint venture, Vale SA, a
Russia-Japan-South Korea consortium, ArcelorMittal, and Xstrata Plc.
―Definitely not one,‖ Mr. Amarkhuu said, when asked about the number of winners. ―It‘ll be a
combination of the companies.‖ The Government is seeking mining expertise and commitment to
infrastructure development, including railway construction, Mr. Amarkhuu said. Mongolia is also
targeting ―value-added production‖ including coal-to-liquid and coal-to-gas projects, he said.
The Government hopes 90 percent of the employees at Tavan Tolgoi will be local, Mr. Amarkhuu
said. ―It‘s difficult because it heavily depends on availability of qualified personnel,‖ he said. ―We
have to see whether Mongolia has a sufficient number of them.‖ Foreign companies can bring in
their own staff while training locals ―as fast as possible‖ and gradually replacing the imported
workforce with Mongolians, Mr. Amarkhuu said.
Source: Bloomberg News
MSE REMAINS BEST PERFORMING EQUITY MARKET GLOBALLY
The Mongolian Stock Exchange (MSE) had an impressive year in 2010 as the best performing equity
market globally. Driven by positive investor sentiments, the market retains the title until now,
climbing +64% YTD (+73% in USD terms due to a 4.9% YTD appreciation of the MNT against the USD
as of March 31). We anticipate such strong performance will continue throughout 2011, fueled by
resource-linked investments and developments.
The MSE Top Index, the benchmark for the country's domestic equities, hit our projected level of
20,000 two weeks (on January 26) after we released our 2011 end-year estimate in our Mongolia
Outlook 2011 report (January 11, 2011). The benchmark continued its rally to peak at 32,955
(increasing 123% YTD) on February 25. The MSE has since seen a 27% correction, falling to 24,187 as
of March 31. In our view, the rally was driven by over speculation and did not reflect the market
fundamentals. This sharp volatility is the result of low liquidity and small free-float of listed
companies. Since the start of the year until February 25, the MSE gained USD1,736 million in total
market capitalization with a total trade volume of USD7.9 million (or slightly over USD210,000 in
average daily trade). During the following correction, USD780 million in total market capitalization
was lost through a mere USD388,000 daily trade volume. In our view, low liquidity will remain a
concern in 2011.
We expect the MSE to enjoy growing investor interest thanks to a strong economic outlook in 2011
and beyond. The country's GDP is expected to grow at least 10% this year and continue double-digit
expansion annually for the rest of this decade. Our 2011 year-end target for the MSE Top Index has
been upgraded to 27,500 (from previous 20,000) that represents +15% upside to current level and
+86% for 2011. The rationale for the upward revision are stronger outlook for prices for the
Mongolian export commodities (coking and thermal coal +6% by end-2011); expected economic
growth of 10.3% projected by IMF; estimated +60% y-o-y surge in physical volume exports in 2011;
and as a result along with resources stocks, MSE-listed non-resource companies are also expected to
experience robust earnings thanks to strong performance in the resources sector.
Source: Eurasia Capital
EBRD INVESTS USD10 MILLION IN MONGOLIA OPPORTUNITIES FUND
A senior delegation from the European Bank for Reconstruction and Development (EBRD), led by
President Thomas Mirow, was in Mongolia on April 8-9. Mr. Mirow was accompanied by Mr. Olivier
8. Descamps, Managing Director for Turkey, Eastern Europe, the Caucasus and Central Asia, and Mr.
Paul Vlaanderen, EBRD Board Director for the Netherlands and Mongolia.
The delegation met President Ts. Elbegdorj, Parliament Speaker D. Demberel, Minister of Finance
S. Bayartsogt and the Governor of the Central Bank, Mr. L. Purevdorj. It also held negotiations with
the Bank‘s existing and potential business partners and signed an EBRD-funded transaction with
Mongolia Opportunities Fund, the country‘s first private equity fund serving the fast-growing small
and medium-sized businesses sector.
The delegation reinforced the Bank‘s strong commitment to supporting the economic development
of Mongolia with a view to promoting and supporting further private sector development, including
micro, small, medium and large local enterprises and ensuring sustainable development of
Mongolia‘s emerging and important natural resources sector as well as to contribute to a
strengthening of the country‘s financial sector. The USD10 million equity contribution by the EBRD
to the Mongolia Opportunities Fund, signed by Mr. Mirow and Mr. Mandar Jayawant, the Fund‘s
Managing Partner, is aimed at increasing the availability of equity capital for the growing SME
sector in Mongolia.
A specific feature of the Fund is that it is dedicated to the non-natural resource sector. It will
support companies along the mining supply chain operating both in services and manufacturing,
food processing and food supply sectors, as well as small scale infrastructure development. The
Fund will make a significant contribution to balanced growth in the Mongolian economy. It will
consider making equity investments in Mongolian SMEs with individual investment ranging from
USD2.5 million up to USD7.5 million.
Read more…
―With this investment the EBRD will take a 25 per cent stake in Mongolia Opportunities Fund that
will play an important role in developing the private equity market in Mongolia. Jointly with our
partner investor International Finance Corporation, the Fund will provide support to the country‘s
small and medium-sized businesses, especially, at a time when long-term equity financing remains
a scarcity in the country,‖ Mr. Mirow said.
Since the beginning of its operations in Mongolia in October 2006, the EBRD has committed about
USD 425 million to 36 projects in various sectors of Mongolia‘s economy, with 100 per cent of the
projects being related to private sector debt and equity investments.
Source: The FINANCIAL
MSE SUPER DEAL BASED ON HOPES FOR A COMMODITIES SUPER-CYCLE
London Stock Exchange staff fed up with working in the Big Smoke are about to be offered the
chance to spread their wings – and fly off to Mongolia. Ulaanbaatar‘s Mongolian Stock Exchange last
week took a big step towards modernization with a deal with the London Stock Exchange under
which a number of LSE staff will effectively run the Mongolian bourse for two or three years.
The deal is remarkable on three levels. First, Mongolia is hoping to use London as a gateway
through which to source inward capital flows and investment as a counter-weight to growing
Chinese and Russian involvement in Mongolia‘s booming mineral and natural resources sectors.
Second, the British exchange is gambling that by getting involved it makes London the obvious
destination for Mongolian mining and natural resources companies wanting to list abroad. Much of
this is based on LSE CEO Mr. Xavier Rolet‘s firm belief in the longevity of the commodities ―super-
cycle‖.
Third, the LSE will not merely be providing technical assistance – what usually happens in these
situations. The LSE will appoint a management team at the Mongolian exchange ―to oversee its
development and privatization‖, according to a statement by the companies. One project is to
implement an international-standard Mongolian market index.
The LSE‘s Sri Lanka-based technology provider, Millennium IT, will provide trading, surveillance and
post-trading infrastructure. A representative from the Mongolian Exchange will be based
permanently at LSE headquarters in Britain too.
This is very deep involvement of a foreign exchange in the running of another country‘s and is as
unusual as it is creative. But for both sides, whether this pans out as hoped will still depend on one
thing: whether the super-cycle lasts.
Source: beyondbrics in The Financial Times
LSE HOPES DEAL WILL GIVE IT ADVANTAGE WHEN MONGOLIA FINALLY “EMERGES”
Last week Mr. Xavier Rolet, chief executive of the London Stock Exchange, could be found not in
Canada – where a proposed LSE merger with its counterpart in Toronto is being scrutinized by
regulators – but in Mongolia. Ulaanbaatar may seem an unlikely destination for the man running an
9. exchange whose future may well depend on the successful completion of its merger with TMX
Group, but Mr. Rolet was there to sign a deal with the Mongolian Stock Exchange. The British bourse
is providing advice to the Mongolians as they try to modernize their 20-year old exchange.
But this is no standard deal involving one mature western exchange and a relatively undeveloped
minnow in a remote emerging market. The LSE is also sending a team from London to take over the
management of the Mongolian exchange and to ―oversee its development and privatization‖ under
a two-year contract.
For the LSE, the bet is that getting involved early in the development of Mongolia‘s nascent market
structure will put it in pole position to capitalize on the country‘s emergence as a mining and
natural resources hot spot, amid what economists are calling the commodities ―super-cycles‖.
Mr. Rolet will be hoping that big initial public offerings coming from Mongolia in the future will
choose London over Hong Kong or New York. Next could come dual listings of Mongolian companies
in Ulaanbaatar and London. One Mongolian company is already listed on the LSE: Petro Matad, an
oil and gas explorer quoted on Aim since May 2008.
Read more…
Asked why Mongolia would go as far as handing the management of its national exchange to
foreigners, Mr. E. Oyun, deputy chairman of the Mongolian Government‘s State Property Committee
– which owns the exchange – said, ―If you have a new Ferrari and you are not a good driver, how
can you drive it? We want to put a Formula One driver in here.‖
Mongolia is watching as China, eager for Mongolia's commodities such as coal and copper, is
becoming increasingly active in extractive industries. Mr. Oyun said Ulaanbaatar hopes to use
London as a gateway through which to channel inward capital flows. ―We need to diversify our
sources of investment,‖ he said. That is one reason why a representative from the Mongolian
exchange will be based at LSE headquarters.
Mr. S. Batbold, Prime Minister of Mongolia, has said that the LSE was ―the best possible partner‖ to
support the country‘s ambitions for its bourse. His government has tried to harness the boom in
foreign-led mining and metals investment to national development goals. One example is the
scheme for privatizing Tavan Tolgoi, an enormous coal deposit in the Gobi desert. But until then
liquidity remains thin and the exchange is relatively rudimentary. ―The distribution of shares in
Erdenes Tavan Tolgoi and other announced privatization initiatives involving local capital market
listings require as a precondition a relatively liquid and reasonably functioning stock exchange,‖
said Mr. James Passin, principal at Firebird Management, a New York-based fund that is one of the
country‘s largest foreign investors.
Mr. Oyun said, ―We are expecting much from the LSE. After two or three years we want to have a
‗mini LSE‘ in Ulan Bator.‖
Source: The Financial Times
LONDON’S DRIVE TO HONG KONG, VIA MONGOLIA
Mongolia Stock Exchange is the prettiest pink-and-white, neoclassical fairytale affair, once a
children's cinema, across the road from the parliament in Ulaanbaatar. It was founded by
Naidansurengiin Zolzhargal, a descendant of Genghis Khan, some 20 years ago and, although it is
the smallest exchange in the world by market value, it is also the best-performing. Mineral-rich
Mongolia is bursting with resources, including hectare after hectare of forests, tons of fish, gold,
iron ore, fluorite, uranium and coal, and foreign direct investment is growing at 30 per cent per
annum and likely to hit USD11 billion in a few years.
So it's no wonder that Mr. Xavier Rolet, the boss of the London Stock Exchange, has jumped at the
chance to set up a new partnership with the Mongolian exchange. He visited the capital last week
to celebrate the deal, which is a great one for both parties. For Mongolia, it brings the stamp of
London's approval and its reputation for transparency, which is so vital in a fast-growing economy
such as this. One of its biggest companies, Tavan Tolgoi, a USD8-billion state-owned coal mine, is
already on its way to a London listing (although it's likely to head for Hong Kong as well), and there
are many more companies seeking new capital and investors. It's a full-on partnership, with London
providing the new technology, new rules, new regulations and everything else it takes to build a
modern stock market; it will also help with the privatization of the exchange.
As London is showing with Mongolia, exchanges move to where capital is needed and the Far East is
going to be gobbling up a lot for a long time to come. Mongolia is an exotic first step, but the longer
journey for Mr. Rolet should be to go further east.
Read more…
This brings me to the latest tie-ups of exchanges elsewhere in the world. As predicted, the
Americans have reacted with what you might call naked protectionism to Deutsche Börse's bid for
10. the NYSE Euronext. There's no doubt in my mind that the Americans have encouraged a rival offer
from the hi-tech Nasdaq and the Intercontinental Exchange to trump the Germans. So, bar divine
intervention, it looks as if they will succeed in creating one of the world's biggest exchanges.
Deutsche's bid is just one in a long line of foreign takeovers that America has managed to rebuff.
This opens up a wonderful opportunity for Mr. Rolet: he should make Frankfurt his next pit stop, to
chat to Deutsche's Reto Francioni about a possible merger. And, even though the German exchange
is worth three times as much, there's no reason why London shouldn't emerge as at least an equal.
The last time the two tried to walk to the altar it ended in disaster, but memories are short and the
people at the top very different, so there seems no reason why they shouldn't get the structure
right now.
There's another stopover that Mr. Rolet should make in his travels and that's Hong Kong, which
recently expressed interest in talking to partners. Hong Kong is still the best way into mainland
China, certainly until it opens its own market, and would give London the eastern leg of the golden
triangle. Most of the new listings out of China and Asia are looking at dual listings in London and
Hong Kong anyway, so it is logical the two should share more than a common language.
Source: The Independent
6 BANKS IN MONGOLIA TO LEND USD14.2 MILLION FOR LSE FEES
A consortium of commercial banks led by the Trade and Development Bank (TDB) agreed on Monday
to provide the Mongolian Stock Exchange (MSE) with USD14.2 million to be paid to the London Stock
Exchange as fees for its management of the MSE and IT investment for two years, to develop the
country‘s capital market to meet global needs and standards. This is the first such big loan from
commercial banks and the State Property Committee is the guarantor.
The consortium includes, besides the TDB, Golomt Bank, Khan Bank, XacBank, Ulaanbaatar City
Bank, and State Bank.
Source: News.mn
HONG KONG STOCK EXCHANGE TEAM VISITS ULAANBAATAR
The signing of the Master Service Agreement between the London Stock Exchange and the State
Property Committee managed to overshadow a visit to Ulaanbaatar by senior officials from the
Hong Kong Stock Exchange around the same time. The HKEx team included Mr.Ronald Arkulli, a
Director on the Board, Mr. Mark Dickens, Head of its Listing Department, Mr. Romesh Lamba, Head
of its Market Research Department, and Mr. Eric Landkhiir. They are believed to have explored the
possibility of Mongolian companies opting for an IPO, following the very successful one of Energy
Resources last year.
Source: Undesnii Shuudan
QUAM SILK ROAD MONGOLIA FUND LAUNCHED
Investment management firm Silk Road Management (SRM) has announced the launch of the Quam
Silk Road Mongolia Fund, a new hedge fund investing in globally listed companies primarily exposed
to the Mongolian economy. ―Mongolia has a significant undeveloped mineral wealth, including some
of the world‘s largest undeveloped copper, gold and uranium deposits and it is believed to have the
largest untapped supply of coal,‖ Mr. Alisher Ali, Managing Partner of Silk Road Management and
Chairman of Eurasia Capital, said. ―Developing its massive resources will allow Mongolia to become
the world‘s fastest growing economy throughout the next decade.‖
The new fund targets long term investment growth through investment in companies with strong
fundamentals and whose main business operations and/or assets are based in Mongolia. The hedge
fund is an open-end investment vehicle, primarily investing in liquid stocks which are members of
the USD38-billion Silk Road Mongolia Index.
Source: HedgeCo.net
SME LOANS HELP SET UP 581 FACTORIES IN 2010
The MNT30 billion the Government lent to SME projects in 2010 led to 581 factories being
established. Total production was increased by 10%, while the processing sector alone grew by
11.4%, 24% of which was in food, 17% in goods, 35.6% in wood, 29.6% in iron and 54% in mineral
elements processing. Altogether 4,044 organizations were registered in 2010.
Source: Udriin Sonin
FINANCIAL REGULATORY AUTHORITY WANTS MORE AMENITIES, EQUIPMENT
The Standing Committee on the Economy this week reviewed the work report of the Financial
11. Regulatory Authority (FRA) and found its performance satisfactory. The FRA has mentioned certain
obstacles to its working better, particularly when it will have to cooperate with the London Stock
Exchange to develop the capital market. Its computers are not high-speed enough and are also not
secure against hacker attacks, posing a threat to the confidentiality of individual and corporate
financial data. The FRA also does not have its own office and lacks enough mining finance
professionals. It wants to send its officials abroad for training in mineral resources trade.
Source: Undesnii Shuudan
STANDING COMMITTEE FINDS FOOD MINISTRY’S REPORT INCOMPLETE
Members of the Standing Committee on Nature, Environment, Food and Agriculture found Minister
T.Badanjunai‘s report on implementation of the Government program between 2008 and 2012
inadequate and decided to send their views to the Standing Committee on the Economy. The report
contained several heartening figures. Flour production at the end of October, 2010 was 55.8% more
than in the same period of 2009. Also 24,100 tons of processed meat was produced and 15,300 tons
of this was exported. MNT625 million was given as loan to 64 SME organizations and imported food
processing equipment and spare parts for them were exempted from paying customs and value
added tax. The Government spent MNT5.9 billion on livestock disease prevention and veterinary
equipment.
Members were, however, critical of the slow progress in solving problems of unemployment,
poverty, nature protection, environmental recovery, support to SMEs, and unsafe food, and said
these issues should have found a place in the report.
Source: Udriin Soniin
WORKERS IN CLOSED MINES TO GET TWO MONTHS’ MINIMUM SALARY
The Government has decided to grant MNT280,400, or two months‘ minimum salary, as
compensation to miners whose work places have been closed down in Nalaikh, Bor-Undur, and
Berkh of Khentii province, in Saikhan-Ovoo of Bulgan province, and to workers of Nalaikh glass
factory. Giving this information to journalists, the Minister for Social Welfare and Labor, Ms.
T.Gandhi, said the meeting had taken three significant decisions related to social welfare. The one
on compensation to miners was taken on the basis of the Ministry‘s recommendations prepared
after consultation with the Prime Minister who is also Chief of the National Committee to Support
Employment. The compensation will be paid after rules are passed.
The second decision was to open a center in South Korea to help and advise Mongolian citizens
there, especially women married to Koreans. The center will also help with documents for children
of Mongolian-Korean marriages, and offer assistance in incidents of property dispute, domestic
violence, and human trafficking.
The third relates to selection of people who wish to work in South Korea. Up to 15,000 citizens are
registered every year and 2,000 of them are sent. It was decided that those not chosen will not
have to pay fresh registration fees to the Ministry if they wish to go another year.
Source: Unuudur
JAPANESE STUDY GROUP CALLS FOR TRADE TALKS WITH MONGOLIA
Japan and Mongolia should promptly start bilateral economic partnership talks, a study group
comprising Japanese government officials and private-sector experts has recommended. It says such
partnership would help Japan raise automobile exports and secure steady supplies of mineral
resources, while bringing more foreign investment to Mongolia.
Japan intends to put the talks on a fast track in light of the need to reduce its dependence on China
for rare-earth metals, the earthquake and its aftermath have made things uncertain. Japan's trade
with Mongolia totaled about 10.4 billion yen in 2009, accounting for less than 0.1% of its total
foreign trade. Mongolia imposes tariffs on about 99.7% of items shipped from Japan, including cars
and electronics.
Source: The Nikkei
WIND FARM TO BE BUILT NEAR SAINSHAND
The Energy Regulatory Authority has granted special permission to Sainshand Wind Farm LLC to set
up a wind farm at a place 15 km away from Sainshand, the center of Dorngobi aimag. The farm will
have a 52-mw capacity and would annually supply 171.6 million kw to the national network.
Source: Ardiin Erkh
12. INNER MONGOLIA ALONE HAS ONE-THIRD OF CHINA’S WIND POWER CAPACITY
Inner Mongolia Autonomous Region in north China has become the country's first province-level
region to have over 10GW of wind turbines installed and connected to the power grid. This makes
up about one third of China's total grid-access wind installed capacity.
By the end of February 2011, Inner Mongolia had 10.9GW wind turbines integrated to the grid,
including 4.8GW installed in 2010. The region has 150GW of exploitable wind power resources,
about half of the country's onshore exploitable wind power resources. Inner Mongolia hosts two of
the country's eight 10GW-level wind power bases.
Over the past six years, Inner Mongolia realized more than 100 percent of annual growth rate in
grid-access wind power installation. Five of its cities had their respective grid-access wind capacity
exceeding 1GW. In 2010, wind farms in Inner Mongolia generated 19.92 billion kwh of wind power,
up 73.2 percent year on year. The region plans to build another 3.5GW of wind farms this year.
Source: Xinhua
GLOBAL MACRO POLICY AGENDA HAS BECOME MORE URGENT, SAYS IMF
The International Monetary Fund highlighted new risks to the economic recovery and feeble efforts
to tackle existing hazards, but left its projection for global economic growth unchanged at 4.4%,
from 5% last year. The risk of a major supply disruption that spikes oil to USD150-a-barrel levels and
the potential for Europe's sovereign-debt crisis to spread to its core economies are the biggest
threats to the global recovery, the IMF said in its annual World Economic Outlook.
Fears of a double-dip recession have faded as the global recovery gains steam, weakening the
political will for world leaders to tackle some of the fundamental vulnerabilities in the global
economy. Policy advice given to advanced countries last year by the IMF has "so far has been only
partly heeded", said Mr. Olivier Blanchard, the IMF's chief economist. ―Overall, the macro policy
agenda for the world economy remains the same, but with the passage of time, it has become more
urgent."
Rich countries need to slash their bloated and unsustainable budgets, reduce their mountains of
debt overhang and cultivate stronger growth. Emerging nations need to let their currencies
appreciate and bolster domestic demand. Unless the U.S. soon begins earnestly getting its fiscal
house in order, China lets the yuan appreciate at a faster pace, and European and emerging nations
implement ambitious economic restructuring, "little progress will be made with respect to
rebalancing and the recovery will stand on increasingly hollow legs," the IMF warned.
Source: The Wall Street Journal
CHINA POSTS FIRST QUARTERLY TRADE DEFICIT IN SEVEN YEARS
China on Sunday registered its first quarterly trade deficit in seven years, reflecting the rising
prices of imported commodities and highlighting concerns that China's foundations of growth may
be weakening. Most economists predict another banner year for Beijing and forecast further
growth—especially with a boost from the U.S. economy's gradual recovery—although slightly less
than last year's 10.3%. But the Chinese trade deficit suggests that commodity prices surging at
faster than anticipated rates could blunt some of the gains.
The weakening of China's net exports could undercut the arguments of those within China pushing
for faster appreciation of the yuan —something the U.S., Europe and other trading partners have
been demanding. In March, China managed to eke out a small trade surplus, the government said
Sunday, as the trade balance swung to a USD139 million surplus in March from a USD7.3 billion
deficit in February.
China's imports in March rose 27.3% from a year earlier, up from February's 19.4% rise. Exports rose
by 35.8% from a year earlier, up from February's 2.4% increase, which was suppressed due to the
Lunar New Year holiday that month, when many exporters shut down production. For the first
quarter, however, China registered a deficit of USD1.02 billion, the first time China reported a
quarterly trade deficit since the first three months of 2004.
For the full year, China is still widely expected to post a significant trade surplus. Its foreign trade
tends to go through a cycle in which companies stock up on imported raw materials early in the
year; those are then processed into exports. But the annual surplus is likely to narrow over the
coming year as a slowly strengthening currency, rising labor costs and general inflation are making
exports somewhat more expensive, while rising commodity prices are inflating the costs of imports.
An economist for UBS estimates China's trade surplus this year will be around USD150 billion, which
would be down nearly a fifth from last year's level and mark the third straight year of decline.
Read more…
The Chinese Government has made scant progress on tapping the country's potentially vast
13. domestic market. The percentage of the economy accounted for by consumer spending has fallen
and is about 35% of GDP—about half the level of the U.S.
The ability of China to continue its 30-year record of 10% annual growth faces other challenges,
including a roughly 5% annual rate of inflation. That is nearly twice the pace of a year ago, and is
widely expected to move higher in the next few months despite the Chinese central bank's recent
tightening of interest rates and bank reserve requirements. A bursting of China's property bubble
would be especially damaging.
Source: The Wall Street Journal
DOLLAR STILL IN DOWNDRAFT
The beleaguered greenback won a reprieve from the last-gasp agreement averting a shutdown of
the U.S. Government, but many investors remain inclined to punish the dollar. Away from
Washington, most market signs still point to further declines for the greenback.
The main problem for the dollar continues to be that the U.S., like Japan, continues to be
perceived as a laggard when it comes to raising interest rates. Investors are still concerned about
the Fed's so-called quantitative-easing bond-purchase plan, which has weighed on the dollar for
months and goes through June.
Loose monetary policy has contributed to rising global inflation. Central banks have responded by
raising rates, making assets denominated in other currencies more appealing. Last week, the
European Central Bank raised interest rates by one-quarter of a percentage point.
In response to this overall dynamic, last week was a bad one for the dollar. The euro rose to its
highest levels since January 2010, and the dollar fell further against higher-yielding currencies,
such as the Australian dollar, which hit its highest level against the greenback since the currency
began to float freely in 1983. The dollar even lost slightly to the yen on Friday, despite predictions
by many analysts of lasting damage to Japan's economy from its multiple disasters. Late Friday, the
euro was at USD1.4457, compared with USD1.4223 a week ago. With the dollar so beaten down,
some analysts say it can't slip much further. Still, another round of dollar selling may be on the
way—the result of continued wrangling in Washington.
Source: The Wall Street Journal
DANGERS THREATEN TO HAMPER THE SUCCESS OF FAST-GROWING CHINA
As finance ministers converge on Washington this week for a meeting of the International Monetary
Fund, the world economy is leaning ever more heavily on China. Over the past three decades, the
Chinese economy has grown at an annual clip of around 10%, a pace that stands out this year
especially as the global economy is gripped by turmoil in Japan, the Middle East and parts of
Europe.
World Bank chief economist Justin Yifu Lin says China accounted for about one-quarter of global
growth between 2000 and 2009, edging out the U.S. for the top spot, and well ahead of any other
nation. But Beijing's continued success isn't a sure bet. Many fast-growing countries have flamed
out.
Here are three problems that could turn China into an also-ran over the next few years.
The property bubble bursts: In China's three dozen largest cities, prices have shot up by about 50%
over the past two years, according to Dragonomics Research, a Beijing consulting firm. Ordinary
Chinese have become real-estate speculators, figuring that real-estate prices can only go up. Unlike
Americans, Chinese have few options to invest their money outside real estate. Bank deposit rates
are set well below inflation; the stock market is seen as rigged; and the Government won't let them
invest overseas.
Big state-owned industries are also big speculators. In late 2008, China ordered state-owned banks
to boost lending to fight the global recession. Many of those loans went to state-owned
manufacturers which poured money into real estate, according to economist Yongheng Deng of the
National University of Singapore. The price of land acquired through auctions in eight big Chinese
cities doubled in 2009, he found.
The Chinese Government is trying to let the air out of the real-estate bubble by increasing
mortgage down payments and introducing property taxes, among other measures. But that may not
be enough. Local governments depend on revenue from land sales to fund their operations—and as
opportunities for graft. UBS Investment says it will be "very difficult" for China to avoid a burst
bubble in the "medium term", which usually means in the next three to five years. But some China
hands warn that a reckoning could come earlier. China specialist Nicholas Lardy says a real-estate
collapse could shave 2.5 percentage points off Chinese growth—a deeper hit than the country took
at the start of the global financial crisis.
14. Read more…
Unbalanced rebalancing: China has grown rapidly by massive investments in highways, airports,
shipping terminals, mines, steel mills and other projects and by helping exporters through low
wages and an undervalued currency. But that economic strategy may be losing steam. Although
investment has risen to nearly 50% of gross domestic product, job creation is limping along at 1% a
year. China's exports, meanwhile, are unlikely to match the pace of past years because of
diminished demand in Europe and the U.S.
China's leaders know they need to focus far more on the country's potentially vast domestic market.
Shifting toward domestic demand has been the leadership's formal goal since at least 2007, but the
government has made scant progress. Indeed, the percentage of the economy accounted for by
consumer spending has continued to fall and is now about 35% of GDP—about half the level of the
U.S.
Recently, China's leaders again declared they would "rebalance" their economy, this time by
promising to lift workers' incomes so they at least kept up with the rate of growth. But they
announced few concrete policies to make China more consumer-friendly. The magnitude of the
problem is enormous," says Peking University finance professor Michael Pettis, because the country
isn't making strides to a new growth model while the old one is topping out.
Political unrest: China's leaders talk about a "harmonious society," but are now cracking down on
democracy activists emboldened by the Middle East demonstrations, even though there have been
few, if any, Chinese street protests. Although Chinese citizens get enraged at land grabs by local
authorities and other abuses of power, demonstrations are sporadic and rarely spread nationally.
Sometimes, the Chinese look at Beijing as an ally in fighting corrupt local officials, not as a target
of protest.
But political tumult, almost by definition, comes as a surprise. A Japan-style nuclear disaster, for
instance, would be "a catastrophe for the regime" in China, said Dragonomics' managing director,
Arthur Kroeber, because nuclear-plant construction is likely to be shoddier than in Japan, and the
Government's ability to manage a crisis far more limited. That could produce outrage aimed at
Beijing.
In the past, when Beijing has seen signs of political unrest, officials have tried to head off dissent
through economic improvement. One reason the Government is focusing on inflation—at 5%, about
twice the pace of a year ago—is because anger over high prices has preceded political unrest, most
notably during the Tiananmen Square protests of 1989.
The biggest blemish on China's economic record came in the two years following Tiananmen, when
China's growth rate fell by two-thirds to an average of just 4%. Political unrest produced economic
stagnation.
Source: The Wall Street Journal
POLITICS
GOVERNMENT “CHEATING THE PEOPLE”, SAYS STANDING COMMITTEE
The Standing Committee on State Structure has criticized the pace of implementation of the
Government program between 2008 and 2012. Members did not accept the claim of the Chief of the
Cabinet Secretariat, Mr. Ch.Khurelbaatar, that 83% of it has been implemented, and were
particularly unhappy that several goals, such as increasing pension and state officials‘ salaries
three-fold, and ensuring a minimum household income of MNT1 million, have not been met. They
also complained that the program of new apartments has not yet begun, even though it was passed
in June, 2010. Nor has there been any work on building the 1,100-km railway. The Government
program was to generate 60,000 jobs, but so far only 15,875 citizens have got jobs. They criticized
the Government for ―cheating the people‖ as most of these were election pledges.
Source: Ardiin Erkh
RUSSIA STALLING PROGRESS ON TRANSIT TRANSPORT RATES, MINISTER TELLS MPs
Taking part in a meeting of the Standing Committee on Security and Foreign Policy, Minister for
Foreign Affairs and Trade G.Zandanshatar said Russian intransigence was holding up progress on
transit transport rates. Replying to a question on the issue from Mrs. S.Oyun, the Minister explained
that Mongolia, Russia and China concluded a trilateral agreement on transit transport in 2005 but
Russia ―has been unwilling‖ to attend any meeting since then to discuss changes, unless ―the
revisions it wants are accepted‖. Mongolia and China are not agreeable to this.
Another MP, Mr. D.Terbishdagva wanted to know what had happened to the USD300 million loan
15. from China that has been talked about since 2003. Mr. Zandanshatar said China has released only
USD40 million of this, to be spent on information technology programs, but Parliament wants it to
be used differently, and is yet to take a decision.
Source: English.News.mn
PARTY LEADERS PLEDGE NOT TO COMPETE IN OFFERING CASH ALLOWANCES
Leaders of political parties, including those not represented in Parliament, last week signed a
pledge that they will not compete with one another in promising cash allowances during next year‘s
local and parliamentary elections. The memorandum of understanding they signed at a meeting in
Government House also said they will respect national security concerns and all national laws. It
also reiterated their faith in the parliamentary system of governance and said they would set up
working groups to improve the parliamentary structure and strengthen democratic principles. It is,
however, not clear if this self-imposed self-restriction is only on raising the amount promised or if it
applies to the very first announcement of such allowance by any party.
Those who signed the memorandum were the leaders of the Mongolian People‘s Party, the
Democratic Party, the Green Party, the Civil Will Party, the National New Party, the Social
Democratic Party, the Republican Party, the Traditional United Party, and the Motherland Party.
Source: Undesnii Shuudan
DRAFT SUGGESTS EXTRA MONEY FOR STATE STAFF IN REMOTE REGIONS
A draft law prepared by 30 MPs has been submitted to Parliament, seeking monetary compensation
for state employees posted in remote settlements and in the Gobi region. A similar draft prepared
by 24 MPs in 2009 was rejected by Parliament.
The draft lists 91 districts in Gobi-Altai, Bayan-Ulgii, Zavkhan, Uvs, Khovd, Khuvsgul, Bayankhongor,
Sukhbaatar and Dornod provinces as remote regions, and 87 districts of Gobi-Altai, Bayankhongor,
Sukhbaatar, Uvurkhangai, Uvs, Dundgobi, Dornogobi, Gobisumber and Umnugobi provinces as being
in the Gobi region. They have been so identified on the basis of their distance from Ulaanbaatar,
cost of living, social and economic amenities, and climate.
The draft proposes that state employees working there be paid 20% extra salary every month and
six months‘ extra salary after five years‘ employment. It also wants all imports through border
points of Bayan-Ulgii, Khovd, Uvs, Zavkhan, Dornod, Gobi-Altai, Sukhbaatar and Umnugobi provinces
to be exempted from paying excise tax to make life there easier.
Source: News.mn
MONGOLIAN METALS TO MAKE LONDON OLYMPIC MEDALS
Gold, silver and copper from Oyu Tolgoi will be used to make the 4,700 medals for the London 2012
Olympic and Paralympic Games. Mining major Rio Tinto will provide all the metal for medals
awarded at the two events, according to the London Organizing Committee of the Olympic Games
and Paralympic Games, and the company has said the metals will come from its Bingham Canyon
mine in the United States and from the mine in Mongolia that Rio Tinto is developing in partnership
with Ivanhoe Mines. Rio Tinto will become a Tier 3 sponsor of the Olympics, which means it will be
among those to provide products and services rather than cash.
The opening ceremony for the Olympic Games is July 27, 2012, while Oyu Tolgoi is due on stream in
August 2012. But timing is not an issue, as the small amount from there will be derived from metal
obtained during exploration activities, a Rio Tinto spokesman said.
Global miner BHP Billiton supplied the metal for the Beijing Olympics medals.
Source: Reuters
ELBEGDORJ CERTAIN THAT MOVEMENTS FOR DEMOCRACY WILL SUCCEED
President Ts.Elbegdorj has said popular protests in the Middle East are ―ushering in a new age
where the seeds of democracy can at last find fertile ground‖. Watching the throngs of
demonstrators, he says he was ―gripped by the same feeling that swept Mongolia's Sukhbaatar
Square two decades earlier. Back then, as one of the organizers of our democratic uprising against
the communist-run government, I stood for days in the biting cold, freezing but exhilarated because
the fear that our rulers instilled in us -- to bend us, and ultimately break us into subservience -- was
gone. We were not backing down. There was no certainty that freedom would prevail, but in the
end, it did.‖
Saying that the present movements should not come as a surprise, for it has long been clear that
―people deprived of freedom will naturally seek it, fight for it, and if necessary, die for it‖,
President Elbegdorj called upon the leaders of the concerned states to ―acknowledge this fact and
16. unleash the tremendous potential of their countrymen through political liberalization‖. He recalled
how, in 1990, following the overthrow of the then ruling Politburo, Mongolia‘s democratic leaders
has asked a simple question: What next? ―It was easy to be against something,‖ but the difficult
work began only later. Countries that emerge from these democratic revolutions should study the
experience of countries such as Mongolia that have transitioned to democratic governance. ―Our
customs and cultures might be different, but sharing advice from our successes as well as our
failures can prove invaluable in helping these countries get back on their feet‖, he said, and added,
―Having lived under and fought against the tyranny of communism, there's one thing I know: There
is no dictatorship, no military regime, and no authoritarian government that can stand against the
collective will of a people who want to be free.‖
Source: Foreign Policy
NEW APPEALS COURT TO HEAR CASES AGAINST OFFICIALS
An Appeals Court of Administrative Cases has started working, taking forward President
Ts.Elbegdorj‘s Judicial Reform Program. A special court to hear citizens‘ grievances against
decisions and actions by State officials was set up seven years ago, meeting a long felt demand.
However, appeals against the ruling of this court were placed before criminal and civil courts. The
Senior Advisor to the President, Mr. P.Tsagaan, likened this practice to ―asking a dentist to treat a
patient‘s kidneys‖, and said at a press conference that the Appeals Court would ―provide further
protection to citizens from state administrations‘ and officials‘ illegal actions‖. The court in full
strength will have 7 judges.
Source: The Office of the President
OFFICIALS DISCUSS ISSUES RELATING TO NEW ELECTION LAW
The Standing Committee on State Structure this week organized a meeting to facilitate exchange of
views on a new Election Law among members of the working group considering the issue, on the
one hand, and representatives of the General Election Committee (GEC), the Supreme Court, the
Central Bank, the General Police Department and the Union of Mongolian Journalists, on the other.
They discussed the laws needed to stop electoral irregularities, to resolve disputes, and to set out
the role of the participating organizations.
GEC Secretary Ch.Sodnomtseren said electoral district officials should have the power and authority
to collect the evidence to impose penalties for misconduct. They should also have the power to
decide on disputes, which the Constitutional Court has recently transferred to courts. He felt this
will take a long time, and the meeting favored an amendment in the interest of prompt settlement
of disputes. There should also be clarity on who is the final authority to decide on disputes of a
criminal nature, the GEC or a criminal court.
Source: Zuunii Medee
PRISON PSYCHOLOGISTS DOING GOOD WORK
Psychologists were attached to 18 of the country‘s 24 prisons last year to provide counseling service
to a particularly vulnerable section of the population. An official of the Court Decision
Implementing General Board has said the success of this experimental measure has led to a decision
to have two psychologists in all jails with more than 250 inmates. Finances are a constraint right
now. Work with prisoners has special needs and requires new facilities, but a properly equipped
room costs between MNT2 million and MNT3 million to build, and other facilities even more. The
psychologists, who held a meeting among themselves recently to share views and experience, felt
they needed access to books and research papers to achieve better results in the special kinds of
counseling they have to provide.
Source: News.mn
CHINA TO FUND REHABILITATION CENTER FOR MONGOLIAN TROOPS
Mongolia and China have signed an agreement to use a grant of CNY40 million to set up a
rehabilitation-and-relaxation center for Mongolian troops who return from UN peacekeeping
operations. Mr. Ts.Sukhbaatar, Ambassador of Mongolia to China, and Maj-Gen Jia Xiaoning, deputy
director for foreign affairs of the Chinese Defense Ministry, also agreed to name the center after
the two countries. The center is expected to be ready for use in September, when the Defense
Ministry of Mongolia celebrates its 100th anniversary.
Source: Montsame
17. NAMES TO SUCCEED SANGARAGCHAA BEING CONSIDERED
It will take at least three months to dispose of the appeal by Anti-Corruption Authority head
Sangaragchaa against his conviction, but Parliament has the legal authority to dismiss him on the
basis of the decision of the lower court. Thus, even though the Speaker has asked the ACA staff to
continue work as usual, some names are actively being considered to succeed Mr. Sangaragchaa
now in hail. Among the front runners are Mr. J.Enkhsaikhan, Vice-president of the Attorneys‘
Association and a former director of the National Intelligence Agency, Mr. G.Ganzorig, a former
Legal Advisor to the President, Mr. T.Lkhagva, a former head of the General Customs Authority,
and Mr. T.Bilegt, another former director of the National Intelligence Agency.
Source: Undesnii Shuudan
WOMEN’S NGOs SEND MPs THEIR DEMAND NOTE BY POST
As MPs did not receive it by hand when women‘s NGOs prepared a demand note after a discussion
on increasing women‘s participation in decision making on March 7, the National Alliance of
MonFemnet, the Center for Citizens‘ Alliance, the Center of Human Rights and Development and
Women Leaders Foundation has now sent it to all 76 MPs by post.
The note demands women‘s active involvement in all decision making as they constitute 50% of the
country‘s population and number of tax payers. The women‘s organizations want politicians in
power to accept this basic principle of societal justice as stressed in international agreements and
conventions. They especially want a quota for women in next year‘s parliamentary election.
Source: Ardiin Erkh
ANNOUNCEMENTS
MONTPELIER GROUP’S WEALTH MANAGEMENT EVENING, ULAANBAATAR, MAY 4
The Montpelier Group is holding a Wealth Management Evening on May 4 at The Corporate Hotel
between 6 pm and 8 pm. Mr. Peter Davies, Managing Director of the Group will present ―An
Introduction to Montpelier‖, outlining the Group‘s presence in Mongolia and how it can benefit
expatriates living here. Mr. Matthew White. Regional Sales Manager, Friends Provident
International, calls his presentation ―Saving for the Future – The Cost of Delay‖, and will cover
important and fundamental areas of financial planning for expatriates. Mr. Chris Ivinson, Area
Manager, Royal Skandia, will give ―A Global Account for Mobile Investors‖, explaining how investors
can avoid the currency trap and plan their taxation issues. Reservations
The numbers of seats for this event is limited. For reservations please email
jmeaburn@montpeliergroup.com or call +66 (0)2 661 5150. There is no charge for this event.
______________________________________
RUNGE’S COURSE ON MINING FOR NON-MINERS, ULAANBAATAR, MAY 19-20
Runge will hold a course on Mining for Non-Miners in Ulaanbaatar, designed for people of a non-
mining background who interact with mining personnel. The confirmed dates are May 19 and 20,
with one day focusing on coal mining and the other on metal mining. The course is aimed at
providing those from a non-mining background with a comprehensive understanding of the mining
industry. After attending it, participants will have a greater understanding of the operational
practices pivotal to the mining industry, and will be able to interpret essential terminology and feel
more comfortable interacting with core mining staff.
The course fee for non-members is USD2,000 but Runge is offering a massive 50% discount to BCM
members, who pay USD1,000. Initial response has been extremely positive. The number of
participants is limited. Please send your expression of interest via return email by Monday, May 2,
if you are interested in attending this course to saruul@bcmongolia.org, or telephone 332345.
Runge is a world class mining consulting, software and training company with an office in
Ulaanbaatar with expat and local staff. The entire schedule of its upcoming courses for Q2 2011 can
be found in the BCM website, Events Calendar.
___________________________________________
MONGOLIA INVESTMENT CONFERENCE, ULAANBAATAR, MAY 25
Eurasia Capital is organizing the 2nd Annual Mongolia Investment Conference on May 25 in
Ulaanbaatar, to provide a better understanding of a range of Mongolia-based opportunities across
various industries and asset classes. With participants drawn from the highest levels of the
Mongolian government, the conference offers investors and companies the chance to meet key
decision-makers in Mongolia and to acquire first-hand insights about key market drivers, risks and
18. influences that shape the Mongolian market.
High level government officials, representatives of local business groups, international financial
institutions, CEOs of mining and non-resource companies will be among the speakers. They will
provide information on the current market environment and outlook for the Mongolian economy
offer insight into industries that are attracting growing interest
assess the risks and rewards
evaluate the comparative advantages of various business opportunities
present a clear understanding of opportunities worth investing in.
To download the preliminary agenda please click here http://enews.eurasiac.com/cgi-
bin19/DM/t/hIEW0CUnT0Ddg0PLK60EM. For more information and applications please contact: Ms.
Zhyldyz Sadyralieva by email: zhyldyz.sadyralieva@eurasiac.com or phone: +976 99061673.
___________________________________________
“MM TODAY” on MNB-TV, Fridays at 21:15
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 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM
NewsWire.
___________________________________________
“BSPOT” on B-TV, Monday to Friday at 21:30
BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every
evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.
___________________________________________
NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIA REPORTS'
Presentations from BCM‘s monthly meetings in the 2011 first quarter, several from the very
successful Mines and Money Hong Kong‘s ‗Mongolia Investment Summit Morning‘ on March 25, and
by Voyager Resources‘ CEO in both English and Mongolian at a March 16 MICC-sponsored gathering.
In addition Mongolia Reports including the U.S. Embassy Mongolia‘s Commercial Section‘s ―2011
Mongolia Investment Climate Statement‖ are among the presentations posted on BCM's website
(www.bcmongolia.org) in the "Resource, Presentations" and ―Resource, Mongolia Reports‖ sections
for your review.
We are now posting some news stories and analyses relevant to Mongolia on the BCM website's
‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in
the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will
incorporate items that are already on the home page, so that it presents a consolidated account of
the week‘s events.
20. INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
Year 2009 *4.2% [source: NSOM]
March 31, 2011 *8.0% [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]
May 12, 2010 11.00% [source: IMF]
CURRENCY RATES - April 14, 2011
Currency Name Currency Rate
US dollar USD 1,205.89
Euro EUR 1,748.42
Japanese yen JPY 14.44
British pound GBP 1,971.09
Hong Kong dollar HKD 155.08
Chinese Yuan CNY 184.66
Russian Ruble RUB 42.74
South Korean won KRW 1.11
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.
