1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmmongolia.org
Jim@bcmmongolia.org
Issue 18, March 21 2008
NEWS HIGHLIGHTS:
Business: Shivee-Ovoo Fuel and Energy study underway; Kazakh NBFI targets SMEs; Saudi Arabia and
Mongolia to cooperate in tourism; Innovation in advertising
Economy: MongolBank tightens monetary policy; MSE Chief says ‘no need to hurry privatization’;
Director lays groundwork for MCC project; Promises to curb fuel not met; Tourism stakeholders input
into plan; Community radio to get new facility
Politics: Stakeholders air anger over Government/Parliament position on minerals law; Three sent to
prison over Savings Bank fraud; Mongolian business delegates to attend US forum
NOTICE TO BCM MEMBERS AND INVITED FRIENDS:
The next BCM meeting for BCM Members, and friends with meeting invitations, will be Monday, March
24 at 5 PM at the Open Society Forum. Speakers include Eznis Airways Vice President, B. Enkhbat who
will review plans of Eznis Airways‟ route and fleet expansion and the Mongolian civil aviation sector;
Ambassador of India to Mongolia, Yogeshwar Varma; Ambassador of France to Mongolia, Patrick
Chrismant; and MNMA‟s President, Do. Ganbold, and Advisor, Ms. Sodontogos.
BUSINESS
SHIVEE-OVOO FUEL AND ENERGY STUDY UNDERWAY
The Mongolian government has supported a project to construct a fuel and energy complex at Shivee-
Ovoo coalmine. Fuel and Energy Minister, Ch. Khurelbaatar has been charged with the preparation of a
feasibility study to accelerate the project, which, according to preliminary estimations will require US
$2.9 billion investment.
The project follows the Chinese-Mongolian governments memorandum of cooperation in coal and
electricity signed during President N. Enkhbayar‟s visit to China in 2005. In meetings following the visit,
the Mongolian Fuel and Energy Minister, Central Region Electricity Grid State company, the Chinese
State Grid Corporation and Lu Neng Group signed an agreement for the first phase of a feasibility study
on building the coal and electricity base in Mongolia to supply electricity to China, on June 1, 2006.
The sides agreed to conduct the study on three open pit coalmines in Mongolia with capacity to
produce 15 million tonnes of coal per annum including a 3,600 MW thermal power station and 500kV
high voltage electricity lines.
Source: Montsame National Newsagency
KAZAKH NBFI TARGETS SMES
Halyk Astana Dornod LLC, a subsidiary organization of JSC Halyk Savings Bank of Kazakhstan in
Mongolia, received a certificate from the Financial Regulatory Commission of Mongolia authorizing
Halyk Astana Dornod LLC to carry out non-banking financial operations in the territory of Mongolia for
three years, on February 28.
The creation of a subsidiary organization in Mongolia is in line with Halyk Bank‟s 2008-2010 strategy
and offers the Bank further exposure to an attractive market which has benefited from significant
2. economic growth in recent years.
Halyk Astana Dornod LLC will focus on financial leasing of fixed assets to small and medium enterprises
(SMEs) and large corporate clients. Halyk Astana Dornod LLC is targeting a four percent market share in
all key segments and four percent market share in total assets of Mongolian commercial banks by the
end of 2012.
Source: http://eng.halykbank.kz
SAUDI ARABIA AND MONGOLIA TO COOPERATE IN TOURISM
President Enkhbayar has prioritized tourism in bilateral relations with Saudi Arabia during a meeting in
Ulaanbaatar with His Royal Highness Prince Al-Walid bin Talal bin Abdul Aziz Al Saud and Her Royal
Highness Princess Ameera of the Kingdom of Saudi Arabia, on March 19. At a meeting, the President
said, "Tourism is one of Mongolia‟s most important sectors.” He also noted the importance of
developing rural area infrastructure, in particular to seal roads and construct power plants.
His Royal Highness told the President his visit was to study feasibility of investing in Mongolia,
particularly through cooperation in tourism.
The President awarded an „Honored Medal of the 800th anniversary of the establishment of the Great
Mongol Empire‟ to His Royal Highness.
Source: Montsame National Newsagency
INNOVATION IN ADVERTISING
Local Mongolian B.I.T Company employees have introduced an innovative opportunity for companies for
advertise their products and services. They have manufactured and sold bus handles made in China, on
public buses for advertising. To date, 300 advertisements have been put in place.
The company said their orders were increasing, in particular with election advertising for the
forthcoming Parliamentary elections.
According to a professional organization‟s survey, 60 percent of Ulaanbaatar‟s citizens travel by public
bus and 2500 to 3000 travel on one bus, per day.
Source: Onoodor
ECONOMY
MONGOLBANK TIGHTENS MONETARY POLICY
MongolBank has released its „Quarterly Monetary and Financial Review‟ for the Fourth Quarter, 2007.
By the end of 2007, compared with the same period in 2006, total money (M2), total deposits and total
loans increased 56.3 percent, 50.9 percent and 68.1 percent respectively. Expansionary fiscal policy
continued to manifest itself through civil servants‟ salary increases and increased social welfare
handouts. Increased prices of crude oil and some food items on the world market and inflation in
neighboring countries with large shares of foreign trade with Mongolia caused high inflation during the
second half of 2007, pushing annual inflation to 15.1 percent in December 2007.
The Mongol Bank has responded to the high inflation by adopting three policy measures though a
monetary policy to curb the growth rate of monetary aggregates and to limit inflation. Since October of
2007, the interest rate of a one-week Central bank bill has risen from 6.4% to 9.75%. The reserve
requirement ratio for the commercial banks increased by 0.5 point to 5.5 percent. The M2/GNP ratio of
52.7 percent indicated widening financial intermediation.
It has informally advised commercial banks that in the second quarter it expects to raise the minimum
3. bank capital requirement from 10 percent to 12 percent to increase loan interest rates and slow
lending growth.
Source: Montsame National Newsagency
MSE CHIEF SAYS ‘NO NEED TO HURRY PRIVATIZATION’
The Mongolian Stock Exchange (MSE) privatization issue has been raised again with debate over the
privatization model – to include or exclude State ownership. MSE director, R. Sodkhuu said, “Large
international stock exchanges mostly belong to the private sector. The Mongolian Stock Exchange
privatization issue has been discussed for several years, however, considering our stock exchange
market development status; it is not the right time to privatize the stock exchange. State-owned
organizations‟ privatization hasn‟t finished yet. Today, over 400 companies have been registered on
the Stock Exchange. If we privatize the Stock Exchange fully it will be clear that a foreign company will
buy it.”
He said on the one hand while organizations were still being privatized it was important for the MSE to
remain under State control but, on the other, foreign companies don‟t like stock exchanges under State
authority. He said there was no urgency in the move and it remained an issue of State policy.
Source: Onoodor
DIRECTOR LAYS GROUNDWORK FOR MCC PROJECT
The US Millennium Challenge Corporation‟s (MCC) Mongolia Director, Mr Robert Reid visited Mongolia
March 7 to 14 to begin implementation preparations for the US-Mongolia Compact. He met US
Ambassador, Mark Minton and other Embassy officials and began the process of establishing the MCC
resident office in the US Embassy. He visited Cabinet Secretariat Chief, N. Enkhbold and thanked him
for facilitating the transition between Mongolia‟s MCC National Council and the newly established
Millennium Challenge Account (MCA)-Mongolia, which will be responsible for carrying out the US $285
million MCC Compact grant projects.
Mr Reid encouraged the MCA-Mongolia Board to meet soon to review and appoint 12 key staff members
to manage and supervise Mongolia‟s projects. He also met the Ministers of Health, Education, Science
and Culture, Construction and Urban Development, and Roads, Transportation, and Tourism (all MCA-
Mongolia Board members), among others, to discuss initiation of the MCC Compact‟s health, vocational
and technical education, land registration and railroad improvement projects. He will return in late
April to take up residence in Mongolia for the duration of the five-year Compact.
Source: The Mongol Messenger
FUEL PRICES CONTINUE TO RISE
The Government‟s promises to prevent fuel price increases in March and April have not been met.
Fuel prices increased by MNT 90 to MNT 170 on March 16 at 10.00 pm: AI-80 fuel increased by MNT 230
and AI-92 fuel increased by MNT 250, despite Government attempts to stabilize them by subsidizing
fuel-importing companies.
Prime Minister S. Bayar said on the price rise, “We buy petroleum from Russia at January‟s prices and
Cabinet intends to take further action. It has become impossible to regulate the matter under the
budget at home. Like other products, everything will be regulated according to market laws.”
The impact could be felt in taxi fares which have reached MNT 400 while Mineral Petroleum and
Resource Authority staff said the increase should have only been to MNT 350.
Consumer goods retailers have increased prices over the last 10 years under the guise of fuel price
4. increases. Onoodor newspaper appealed to retailers to stop the unreasonable price hikes.
Source: Onoodor
TOURISM STAKEHOLDERS INPUT INTO PLAN
The Ministry of Road, Transportation and Tourism Ministry, the Tourism Union and the Presidential
Office will organize a national forum of tourism on March 28 at State House for 500 delegates. The
forum‟s goal is to receive input from private sector tourism industry stakeholders for further
development of the sector.
There will also be a discussion on the last three year‟s achievements and a tourism exhibition will be
opened for the duration of the forum.
Source: Onoodor
COMMUNITY RADIO TO GET NEW FACILITY
One of Mongolia‟s most listened to local radio stations, Community Family Radio WIND-FM 104.5 will
open a new facility five years after its original buildings were completely destroyed by fire in 2003. It is
scheduled to be finished by May 2008, with funds from donations, and Finnish volunteers with the help
of local labor are building it from the ground up.
WIND can potentially reach one million inhabitants in Ulaanbaatar and eventually as many as six million
total Mongolian speakers living in Mongolia and Chinese Inner Mongolia via international broadcaster,
the Far East Broadcasting Company (FEBC‟s) shortwave signal from Saipan.
Source: http://wind.reuhkala.com
POLITICS
STAKEHOLDERS AIR ANGER OVER GOVERNMENT/PARLIAMENT POSITION ON MINERAL LAW
The Mongolian National Mining Association (MNMA) has lead key stakeholders in a public condemnation
for what they see as Government ineptness and a return to State control. Their criticism has targeted
the latest Government efforts to address outstanding and long awaited issues in the Minerals Law
holding up approval of draft investment agreements for foreign investors.
The MNMA released a statement March 18 stating, „The MNMA profoundly regrets the Mongolian
Government and Parliament‟s gross ignorance in their decision and law making practices on views and
opinions of the private sector, whose rights and benefits are at stake and are eventually to be
regulated by the very laws and regulations, becoming increasingly unrealistic to enforce.‟
The Association accused some political parties of prioritizing their election aspirations over the
fundamental concepts and principles of a free market economy and developing policies that were
short-sighted and would setback Mongolia‟s mineral sector development for many years to come.
Stakeholders who added their signature to the statement included the Mongol Coal Association, the
Drillers Association and the Mongolian Geology Association.
Read more: MNMA Statement, BCM website-„Articles/Reports on Mongolia ‟
THREE SENT TO PRISON OVER SAVINGS BANK FRAUD
Judges deliberated for three hours over the Savings Bank fraud case before sentencing those accused of
embezzling millions in a Korean casino last year and discovered during the Bank‟s privatization process.
Trial Judge, Judge G. Byannemekh from Chingeltei District Court sentenced former Savings Bank‟s
Registration and report department head and senior accountant, Ts. Chimedtseren to 10 years
imprisonment; former Savings Bank accountant, D. Enkhtuya to six years imprisonment for embezzling
5. MNT 200 million with Ts. Chimedtseren; and Member of Parliament, U. Khurelsukh to five years one
month, suspending three years so he will only serve two years one month. U. Khurelsukh said he would
appeal against the Court‟s decision. If he looses his appeal he will serve the full five years. Reporters
are questioning the sentencing of Mr Khurelsukh as an MP under Parliamentary privilege.
Source: Odriin Sonin
MONGOLIAN BUSINESS DELEGATION TO ATTEND US FORUM
Mongolia‟s Foreign Investment and Foreign Trade Agency (FIFTA) is registering all companies and
entities interested in developing business relations with US companies for a forum to be held in
Washington DC. The Mongolian Embassy in the US, the US Trade Ministry and FIFTA will organize the
„Mongolian-American Business Forum‟ in Washington in late April.
The objective to introduce Mongolian business projects and the business environment to American
counterparts.
The forum will provide an opportunity to increase US investment in Mongolia and broaden the types of
export and import products between the countries.
Source: Ardiin Erkh
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended March 7, trading activity on the Mongolian Stock Exchange (MSE) totaled 692,300
shares with 42 companies traded. Total market value of transactions was MNT 446.1 million.
The Top-20 Index declined by 64.59 points or 0.5 % compared to the previous week closing at 12,294.46
points.
Most active stocks traded were: Jenco Tour Bureau (284,900 shares), Olloo (261,600 shares), UID
(32,500 shares), Tuul Songino Water (20,800 shares), and NIC (18,700 shares).
Major share price percentage gainers were: Atar Urguu (32.2%), Teever Achlal (15.0%), APU (14.8%),
Uran Barilga (8.1%), and Buunii Khudaldaa (7.7%).
Major share price percentage losers were: Zoos Bank (17.4%), Buligaar (14.6%), UID (13.9%), Material
Impex (12.8%), and Moningbar (10.8%).
Total market capitalization of 358 stock companies listed on the MSE was MNT 836.2 billion, down MNT
11.3 billion from the previous week.
Source: Montsame National Newsagency
6. INFLATION
Year 2006 6.0% [source: IMF]
Year 2007 15.1% [source: World Bank]
Jan 2008 *17.5% [source: IMF]
*12 months YOY
CURRENCY RATES – MARCH 20, 2008
Currency Name Currency Rate
US dollar US 1170.0
Euro EUR 1838.83
Japanese yen JPY 11.83
British pound GBP 2354.68
Hong Kong dollar HKD 150.47
Chinese Yuan CNY 165.63
South Korean won KRW 1.16
North Korean won KPW 8.18
Canadian dollar CAD 1193.31
Australian dollar AUD 1083.36
Taiwan dollar TWD 38.09
Indonesian rupiahs IDR 0.13
Malaysian ringed MYR 368.56
Singapore dollar SGD 847.55
