The document summarizes news from the Business Council of Mongolia newsletter. Key points include: - Parliament will discuss draft changes to laws on taxes and infrastructure to facilitate an investment agreement for the giant Oyu Tolgoi copper/gold mine. - There is disagreement between mobile phone companies in Mongolia over rates, disrupting service for over 200,000 users. - Details revealed of the revised Oyu Tolgoi investment draft agreement, which would abolish the controversial 68% windfall profits tax and stabilize other taxes. - A mining industry seminar criticized recent laws seen as hampering the mining sector without economic benefit.

1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmmongolia.org
info@bcmongolia.org
Issue 82, August 21, 2009
NEWS HIGHLIGHTS:
Business:
 Party caucuses agree to discuss draft changes in Parliament;
 Mobile phone war keeps users silent;
 Terms of revised Oyu Tolgoi investment draft revealed;
 Majority of people want early agreement on the two Tolgois, says Minister;
 Parliament must cooperate with Government;
 Ivanhoe continues to develop Oyu Tolgoi mines;
 Mongolian shareholders in Ivanhoe meet;
 Mining sector calls for meeting on arbitrary laws;
 Erdene updates resource estimate for Zuun Mod project;
 Gulfside Minerals files report on Onjuul project;
 Leighton shares soar on bullish outlook;
 UB Railway: A “joint venture” where decisions are always unilateral;
 Amcor offers USD2 billion to Rio Tinto for Alcan unit;
 Cameco files prospectus to increase flexibility;
 Ernst & Young's AIM mining index jumps 47% in Q2;
 Peabody Energy sees slowing China coal demand.
Economy:
 IMF review feels chances of near-term recovery are dim in Mongolia;
 TDB president sees positive signs, but economic recovery is not near;
 Foreign trade deficit stands at USD179.2 million;
 Copper deficit in 2010, price may reach USD7,500/t: GFMS;
 Investment council makes a niche for itself;
 Builders welcome reported Government move to buy apartments;
 Actual costs make for 98% of fuel price, says Vice Minister;
 Felt manufacturers urge review of tender requirement;
 Plan ready for industrial complex in Sainshand;
 Indian loan to plug budget deficit;
 Mongolia can bypass fossil fuel era, feels award-winning economist;
 FX traders see MNT holding steady against USD;
 President has breakfast meeting with business leaders;
 China seen as warming to new credo: business first.
Politics:
 Medvedev’s visit will see formal launch of joint uranium company;
 Bayar gets good news on agriculture;
 “President has also hit a wall like us,” says hunger striker;
 Scholar says uranium has both economic and political value;
 3 new ambassadors present credentials;

2.  Qatar troops coming for joint exercise in October;
 Road repairs no reason to delay start of school year, feels Minister;
 All apartments to have water meter by 2011.
MEETING NOTICE TO BCM MEMBERS
The next BCM monthly meeting for Members will be Monday, August 24, at 5 PM at the Open Society
Forum.
Our bilingual meeting will feature a presentation by the Lt. Governor of the state of Alaska, Craig
Campbell, formerly Adjutant General of Alaska‟s National Guard, on relations between Alaska and
Mongolia as well as the recently completed Khaan Quest peacekeeping military exercises at Five
Hills.
Mr. Do.Ganbold, President of the MNMA, will update on the Mining sector at this crucial time in the
OT investment agreement negotiations. Officials representing BAUMA, the number one trade fair
show for construction and building material machinery and mining machines, will overview BAUMA
2010-Shanghai show. Ms. Evelyn Enkhbaatar, a student at National University of Mongolia, will
outline plans for assisting Mongolian-based companies in hiring AISEC interns. AISEC (English
translation from French is „International Association of Students in Economics and Business
Management‟) is the world‟s largest student-run organization active in over 1,700 universities in
more than 100 countries for some 60 years.
Teleconferencing will again be available for Members not able to attend. The call number is (1-
218) 936-7979, access code 771358 to be connected. The cost will be solely that of the long
distance call to the above U.S. number.
BUSINESS
PARTY CAUCUSES AGREE TO DISCUSS DRAFT CHANGES IN PARLIAMENT
With both party caucuses in Parliament agreeing to discuss in the special session of Parliament draft
amendments to four laws proposed by the Government, another step was taken on Wednesday
towards signing the investment agreement on Oyu Tolgoi. The laws which are sought to be amended
relate to the windfall profits tax, use of water, building roads, and corporate income tax.
Before taking the decision, the Democratic Party MPs asked questions of Prime Minister S.Bayar,
Minister for Finance S.Bayartsogt and members of the working group that has been negotiating with
the investors.
There was one lone dissenter in DP ranks but the major partner in the ruling coalition, the MPRP,
was unanimous in favoring the amendments to be discussed in a plenary session of Parliament,
accepting the Government‟s contention that the changes will facilitate reaching an agreement on
the project.
However, the drafts do not go to Parliament immediately. The standing committees under whose
purview each law falls have to decide whether the amendments should be discussed in Parliament.
Acting promptly, the committee on the budget and that on the environment met on Thursday and
favored such discussion of amendments to the laws on VAT and the windfall profits tax, and on
Water. The Standing Committee on the Economy will take a decision on corporate income tax only
after ascertaining the views of the Central Bank President.
Earlier, in his speech welcoming members to the extraordinary session, Speaker D.Demberel noted
that with 100 years of exploitable resources the Oyu Tolgoi deposits would play a significant role in
Mongolia‟s economic resurgence, so a decision has to be taken both quickly and carefully.
Parliament now has 74 members and 56 or 73.7% of them were present on Wednesday.
Source: en.News.mn

3. MOBILE PHONE WAR KEEPS USERS SILENT
A mobile phone war is on in Mongolia, with more than 200,000 G-Mobile users unable to reach
MobiCom, Skytel and Unitel numbers since midnight of August 18-19, causing consternation and
anger. The three companies are apparently protesting the G-Mobile move to allow its users to call
Mongolian Telecom, railway, civil aviation, and government numbers free of cost. The Director of
the Communication Regulation Department, B.Boldbaatar, has called the action of the three
companies “a clear violation of the law”, at the same time faulting G-Mobile and Mongolian
Telecom for not “letting us know about the rate reduction”. Mobicom, Skytel and Unitel
representatives from abroad are expected to arrive to settle the issue.
Mr. D.Narankhuu of G-Mobile has said they have urged the National Security Council to intervene as
the dispute affects the country‟s communication system. Asserting that the laws of the land must
be above corporate interests, he urged all companies to respect the consumer‟s rights. Senior
officials of Mobicom, Skytel and Unitel either refused to comment on the issue to media or could
not be reached.
Source: Ardiin Erkh
TERMS OF REVISED OYU TOLGOI INVESTMENT DRAFT REVEALED
The draft of the revised agreement to be made with investors in the Oyu Tolgoi deposits, if ratified
by Parliament, will be the culmination of a long, and often tortuous, process in dealing with foreign
investment. The Government wants this to be seen as relating not just to Oyu Tolgoi, but as the
template for all future investment proposals. According to Minister of Finance S.Bayartsogt and
Minister of Mineral Resources and Energy D.Zorigt the present revised draft follows Mongolian laws
and at the same time improves the policy on taxes, infrastructure, and environmental protection.
The goal is to encourage foreign investment and develop the mining sector to the greatest benefit
to national interests.
The terms that the National Security Council approved and that are now being debated in
Parliament include the following 16 points.
Read more…
1. The 68 percent windfall profits tax will be abolished with effect from January 1, 2011.
2. The Government will own 34 percent of the project. The capital the Government has to
contribute will be no more than USD816 million, down from the USD1.7 billion earlier proposed by
the investors. According to the Finance Minister this decreases the Government risk by half.
3. Investors will not be exempted from paying any tax and will also not get any compensation
beyond what the law permits.
4. Investor-dependent entities and subcontractors will also work under the proposed new tax
environment.
5. The following eight types of taxes will be stabilized:
- Company income tax,
- Customs tax,
- VAT,
- Special taxes, not including fuel tax,
- Mineral reserve usage tax,
- Payment for minerals exploration,
- Real estate tax,
- VAT on certain products.
6. Investment tax rebates will be allowed only during construction.
7. During construction, foreign labor will not exceed 60 percent of the work force.
8. The initial amount of investment in the project will be no more than USD4 billion.
9. No more than 60 percent of the total investment expenses will be met by sale of ordinary shares.
The rest will come from preferential shares and direct financing. This will bring in more tax to
Mongolia.
10. The Government will raise this amount on its own. In case it fails to find ways of raising the
money, the Government can seek collaboration with the investors.
11. The Mongolian side will save USD268 million from the new system of collecting VAT. The
Mongolian side will also get USD90 million more by adopting new Customs regulations. Together
these work out to USD358 million and this will start coming in as soon as work on the project starts.
12. Investors will make an initial payment in the form of a loan of USD250 million. This will be

4. repaid with 5 percent interest. Previously the investors had offered USD125 million, of which USD25
million was to carry no interest, while the interest on the rest was set at 9.9 percent.
13. Exploration expenses will not be met with this loan.
14. All provisions in the March negotiations that were beneficial for Mongolia have been retained.
15. Currently, the estimated value to Mongolia of the project‟s revenues has increased from the
March estimate of USD5.3 billion or 58 percent return to USD5.4 billion or 59 percent return. The
nominated price or money to take every year was previously estimated at USD28.8 billion, and now
it has risen to USD29.1 billion. The total cost of the project is estimated at USD4.1 billion.
16. Besides annulling the WPT, three other laws are sought to be amended.
i) The law on corporate tax will be amended to allow 100% loss to be carried forward for 8 years.
“We have followed the advice of foreign organizations on this,” the Finance Minister has said.
ii) The existing law permits roads to be built only at State expense. The proposed amendments will
allow investors to build paved roads for their needs. “This is very beneficial to Mongolia,” the
Ministers said.
iii) “Water is of great importance to continue this project successfully. We have now proposed
incorporation of several new articles and paragraphs in the existing law,” the Ministers said.
Source: The Mongolian National Mining Association, www.gogo.mn, www.news.mn, TV coverage.
MAJORITY OF PEOPLE WANT EARLY AGREEMENT ON THE TWO TOLGOIS, SAYS MINISTER
Minister of Roads, Transportation, Construction and Urban Development Kh.Battulga has said an
overwhelming majority of Mongolians want work on Oyu Tolgoi and Tavan Tolgoi to start without
delay, expecting these to provide them with jobs and income. “During Parliament elections both
parties promised they would develop the two projects and distribute wealth. It is time to act now,”
he said. He reminded MPs who are still opposing the deal that they may choose to forget what they
said, but “people will not forgive them if they do so”. If Parliament fails to ratify the agreement it
will show the outside world that “we do not have a mindset compatible with the modern business
world, and are unreliable partners for investors”. He stressed the long-term need to look beyond
neighbors. “This is a mold we must break, if we do not wish to return to our pre-1990 position, and
also if we do not wish our very small economy to be totally dependent on another,” he said.
The Minister said proper infrastructure has to be developed before Mongolia can hope to fully
utilize its mineral wealth. Otherwise, he said, “the situation is like a having a house without any
utilities connection.”
Source: Udriin Sonin
PARLIAMENT MUST COOPERATE WITH GOVERNMENT
By the very nature of things, the present coalition Government and Parliament are bound together
by something akin to an umbilical cord. They must work unitedly to serve the interests of the
country that they have been entrusted to lead. Implementing big mining projects will lead to an
annual GDP increase of over USD1.5 billion on an average, and to creation of over 45,000 jobs. The
benefits are so obvious that MPs should accept the Government proposal to abolish the 68% windfall
profits tax which is now widely seen as serving no worthwhile purpose, and which scares away
international investment. Parliament should carefully and without prejudice consider the proposals
that are being offered by the Government after prolonged discussions and that have been found
reasonable by the National Security Council.
Source: Zuunii Medee
IVANHOE CONTINUES TO DEVELOP OYU TOLGOI MINES
The special session of the Mongolian Parliament will consider a Government request to enact a
series of legislative changes to support the investment agreement on Oyu Tolgoi. Ivanhoe, and
partner Rio Tinto, have been trying for five years to lock down an agreement for the giant
copper/gold mine. Under Mongolian law, the agreement provides for tax and investment stability,
which Ivanhoe needs before it goes ahead with the large-scale capital investment required for the
mine. The current version is the third draft agreement for Oyu Tolgoi to be produced in the last two
years.
Diversified resources giant Rio Tinto owns 10% of Ivanhoe, but can increase its holding to more than
40% by providing funding for the development of the mine. Ivanhoe has said that it expects
construction of the mine to take 30 months, once the investment agreement has received final

5. approval. In the meantime, Ivanhoe's project team has continued with engineering and
development work, as it waits for the final go-ahead to begin mine construction.
During the second quarter of 2009, activity was focused on preparation for the first ventilation
raise, to supply fresh air from the surface to the underground workings. Exploration work has also
continued. For the second quarter, Ivanhoe, which also controls Mongolian coal-miner SouthGobi
Energy Resources, recorded a net loss of USD24.9 million, compared with a USD127.5 million profit
a year earlier.
Source: www.miningweekly.com
MONGOLIAN SHAREHOLDERS IN IVANHOE MEET
Mongolian shareholders in Ivanhoe Mines held a meeting on Monday to discuss the prospects of their
investment. They hoped for an early resolution of all the differences on the investment agreement
on Oyu Tolgoi and expected the Government and citizens to understand that the continuing delay
was adversely impacting share prices.
Source: Zuunii Medee
MINING SECTOR CALLS FOR MEETING ON ARBITRARY LAWS
A resolution adopted by participants at a seminar last week on the “Present legal environment of
the mining sector in Mongolia” has regretted that the Mongolian Parliament and Government have
been passing numerous laws and legal documents apparently aimed at hampering the development
of the mining sector development and of no discernible economic and social value. The seminar was
organized by the Mongolian National Mining Association.
The resolution gave several examples of measures that “inflicted heavier tax and bureaucratic
burdens” on the industry. Among these was the windfall profits tax passed in May, 2006 which has
proved to be utterly counterproductive. Then there was the law passed last month prohibiting
exploration and mining near river basins and forests. The revenue loss resulting from revoking
around 200 exploration and mining licenses in the name of protecting forests, water resources and
the environment will, according to the resolution, actually facilitate their destruction. Artisanal
miners will fill the vacuum and their use of outdated technology and hazardous chemicals is much
more ruinous than the responsible activities of professional business entities whose operations
contribute to community development and to protection from illegal mining, wood cutting and
hunting.
Referring to the amendment to the law on VAT, also passed last month, the resolution said the
decision was “ignorant and wrong”. The new regimen will increase operation costs and severely
affect companies that are yet to find their feet. Similarly, by giving the state no less than 34%
ownership of uranium companies that bore their own exploration costs, the law on nuclear energy is
tantamount to nationalizing equity.
Read more...
The participants deplored the numerous “illegal resolutions” pertaining to deposits of strategic
importance that violate the basic Constitutional principle that “the State should uphold the
supremacy of law, equality and justice”. Entrepreneurs are being forced to lose their trust in the
Mongolian state. In addition, Governors of some provinces and also some citizens‟ representatives‟
assemblies were taking measures to “illegally extort donations from license holders”. In cases
where they did not receive the money demanded, valid licenses were being arbitrarily revoked.
The participants have asked the Parliament Speaker, and the Chairmen of concerned Standing
Committees, to sit with a delegation of mining companies at an early date to review these
grievances.
Source: The Mongolian National Mining Association
ERDENE UPDATES RESOURCE ESTIMATE FOR ZUUN MOD PROJECT
Erdene Resource Development has updated its National Instrument 43-101 compliant resource
estimate for the Zuun Mod molybdenum project in Mongolia. "Our goal for Zuun Mod was to expand
on resources in the range of 0.06% Mo and to better define higher grade domains within the deposit
for the initial mining phases." said Mr. Peter Akerley, President and CEO. "We have achieved this
with a significant increase in total resource for that grade range and also defining a higher grade
domain within the South and North Racetrack deposits continuing to indicate the deposit is one of
the largest and most advanced pre-development molybdenum projects in the North Asia region."

6. Located in south-western Mongolia, Erdene's wholly-owned Zuun Mod property is within 180
kilometers of China's border. The project is 215 kilometers from the railhead transporting
metallurgical and thermal coal into China from the Ovoot Tolgoi and Nariin Sukhait coal mines.
Zuun Mod remains a relatively new discovery with significant room for expansion and further
definition of higher grade zones reflected in these results based on a relatively small drill program.
Source: www.erdene.com
GULFSIDE MINERALS FILES REPORT ON ONJUUL PROJECT
Gulfside Minerals Ltd. has filed the preliminary National Instrument (NI) 43-101 technical report
relating to the Onjuul Coal Project in Mongolia. The company has received conditional approval
from the TSX Venture Exchange for the acquisition, subject to closing of the announced financing.
The report outlines the history and findings of previous work done on the property and its historical
significance.
Mr. Robert Card, President and CEO, has said the company is “excited about the opportunity that
the Onjuul property outlines”. It will continue to confirm resources in its summer drill program, and
hopes to be able to report on the full amount of coal available on the property step by step. A
complete NI 43-101 report, which will describe the quality of this property, is estimated to be ready
by the end of the year. The company's licenses cover an area of 2,156 hectares. All the previous
work was done on about 25% of this.
Source: www.gulfsideminerals.com
LEIGHTON SHARES SOAR ON BULLISH OUTLOOK
Australia‟s largest mining and building contractor, Leighton Holdings, has swept aside jitters over
its earnings outlook by posting a better-than-expected full-year profit and predicting its order book
will balloon next financial year.
The group's chief executive, Mr. Wal King, said the ''trend [was] continuing upwards'' and the
company could soon expand its reach into Africa and Central Asia. ''The tide is coming in and every
time the tide has come in it's gone to a new high water mark.'' Leighton's shares have gone up
nearly 8.7 percent, trading at AUD33.15.
Mr. King remained bullish on the promise coal-rich Mongolia could provide the group.
Source: SYS-CON Media Inc.
UB RAILWAY: A “JOINT VENTURE” WHERE DECISIONS ARE ALWAYS UNILATERAL
Strange things have been happening at Ulaanbaatar Railway, not all of which gets reported in the
Mongolian media. One reason for this is the total silence of Mr. V.Otgondemberel, the Mongolian
Director of the joint venture company. This leads many to wonder what purpose is served by having
him there.
 The company has taken a loan from the Russian energy giant Gazprom, putting all its
locomotives as collateral. So if it cannot repay the loan, the company will become virtually
Russian property.
 The company rejected at almost the last moment USD188 million from the Millennium
Challenge Corporation.
 It asked workers to go on unpaid leave.
 Its suppliers have to wait long to be paid.
 A USD125-million investment from the Mongolian side is suddenly being taken by the
Russians as part repayment of “the grand debt” to Russia.
The company has outstanding debts of MNT158 billion. The Government has considered raising
more capital, but has kept mum on how to treat a USD150-million grant from Japan that Mongolia
spent on upgrades and acquisitions. This was Mongolian investment in a joint company. Now we
hear another USD36 million will be spent on repairing tracks and Russia has been approached for a
loan of USD125 million. Any loan has to be paid back. Why is the Mongolian Government accepting
burdens that will be borne by innocent tax payers?
Despite an agreement that the Director of Ulaanbaatar Railway will come from the two sides in
turn, no Mongolian was given the post for 50 years until 1991. Now things have changed but the
conduct of the present incumbent leads us to wonder if he really represents Mongolian interests or
if the Russian side continues to call all the shots. The Russians have always insisted that everything

7. is all right with the Railway and there is no need for electrification or capacity increase. They have
recently said, “It is not Russia‟s responsibility to provide the other side with modern technology.
Our only concern is increasing load and transportation volume.” Will Director Otgondemberel
explain what benefit there is for Mongolia in a joint venture where decisions are unilateral?
Source: Zuunii Medee
AMCOR OFFERS USD2 BILLION TO RIO TINTO FOR ALCAN UNIT
After a year of tough negotiations, Amcor, the Australian packaging maker, has entered a binding
offer to buy parts of Rio Tinto‟s Alcan Packaging unit for slightly more than USD2 billion, the two
companies announced Tuesday. For Amcor, the deal offers the prospect of a larger role in the
global packaging industry as well as an improvement in its earnings per share. For Rio Tinto, the
sale would yield funds to pay down the mining company‟s huge debt, which it estimated at USD23.2
billion in June.
Rio said Tuesday that over the last year and a half, it had struck deals to sell USD6.6 billion in
assets — not including the latest sale. It has announced plans to sell yet more as it rids itself of non-
core assets, many of which were acquired when it bought Alcan for about USD38 billion in 2007 and
took on a heavy debt load.
“To raise USD2 billion in this environment is not a bad thing,” an analyst said, “although before the
recession, it would have been worth more.” One factor behind the lengthy negotiations, he said,
was the difficulty of “finding someone who is willing to pay cash”, adding that “they would have
preferred to sell the whole thing as a unit”.
Source: The New York Times
CAMECO FILES PROSPECTUS TO INCRERASE FLEXIBILITY
As promised, Canadian uranium miner Cameco has filed a preliminary “shelf” prospectus with
securities regulatory authorities for the issuance of up to CAD1 billion in senior unsecured
debentures. Once a receipt for the final shelf prospectus has been obtained, Cameco may offer and
issue from time to time one or more series of senior unsecured debentures during the 25-month
period that the final prospectus remains valid. The prospectus will increase the group's financial
“flexibility” to take advantage of opportunities that arise, CEO Jerry Grandey said.
Cameco owns Boroo Gold in Mongolia through its shares in Centerra Gold.
Source: www.miningweekly.com
ERNST & YOUNG’S AIM MINING INDEX JUMPS 47% IN Q2
Advisory services firm Ernst & Young has said its index of the biggest 20 mining firms on London's
Alternative Investment Market (AIM) jumped 47% over the second quarter helped by a recovery in
base metal prices. "Confidence in the junior mining sector on AIM appears to be making a return,
but uncertainty remains the prevailing factor. The economic and market conditions ... continue to
stress the have/have-not cash divide between junior mining companies. While some companies
remain necessarily focused on short-term survival, others are shifting their strategic focus toward
pursuing new opportunities for growth," it said in a report on Monday.
The index has surged 89% since the start of the year, still down 57% from the record high last
March, as metal prices have been lifted by demand from China, the world's top consumer of many
industrial metals. Copper prices have almost doubled this year and all of the base metals have risen
from the depressed levels at the end of 2008.
Frontier Mining, a copper and gold explorer and developer in Kazakhstan, made the biggest
recovery with its share price soaring almost 1,000% during the second quarter helped by news of a
financing agreement. Five mining firms delisted over the period, while no new companies joined
AIM for a third consecutive quarter, reducing the number of mining firms to 168, Ernst & Young
said.
Source: www.miningweekly.com
PEABODY ENERGY SEES SLOWING CHINA COAL DEMAND
U.S. coal miner Peabody Energy Corp sees slowing Chinese demand for thermal and metallurgical
coal after a strong first six months of the year. Chief Executive Greg Boyce thinks China has built up
stockpiles of steel and other products and he is skeptical the country would maintain the pace of its
metallurgical and thermal coal imports in the second half of the year. Last month, Peabody said

8. China would continue to be a big buyer of metallurgical, or coking coal, due to growing steel
production.
Second quarter results at Peabody, the world's largest private coal company, were hit by a sharp
drop in global steel production, which forced it to cut metallurgical coal output. Mr. Boyce said
Peabody continued to look for investment opportunities in all coal producing regions, “whether it is
the recent joint venture we did in Mongolia, whether it is the things we are doing in China".
Source: Reuters.com
ECONOMY
IMF REVIEW FEELS CHANCES OF NEAR-TERM RECOVERY ARE DIM IN MONGOLIA
The International Monetary Fund (IMF) feels that the prospects of a “near-term (economic) recovery
(of Mongolia) now appears somewhat weaker than previously foreseen”. An IMF mission reached this
conclusion after a second review of the country's Stand-By Arrangement (SBA) from August 3 to 13.
The SDR USD229.2-million SBA was approved by the IMF on April 1 and the first review was
completed on June 23.
A statement issued at the conclusion of the visit by the mission says, “Since the SBA was put in
place in April, the Government's policy strategy has put Mongolia on a path toward achieving
sustainable and equitable growth accompanied by low inflation. However, the near term recovery
now appears somewhat weaker than previously foreseen. As a result, the authorities have
recalibrated their economic program to modestly increase the budget deficit targets for this year
and next to provide support for the economy, allow automatic stabilizers to operate, and to smooth
the path of fiscal adjustment. At the same time, the Government's plan to adopt a Fiscal
Responsibility Law will help secure a lasting improvement in public finances. In addition, the
planned reform of social transfers will yield fiscal saving through efficiency gains while safeguarding
the poor through improved targeting.
“The Central Bank continues to be fully committed to a flexible, market-determined exchange rate
and will focus its monetary and foreign exchange policies toward lowering inflation and achieving
the targets for a continued build-up in international reserves. The Bank's plans to switch to a
neutral bias for monetary policy is, therefore, appropriate in the current circumstances given the
significant reductions in interest rates that are already feeding through to economic growth.
Read more…
“As a result of the authorities' strong policy implementation, the end-June targets underlying the
authorities' program have been fully met. This IMF mission reached a staff-level agreement with the
Mongolian authorities on the conclusion of the second review under the SBA. The Executive Board of
the IMF is expected to consider the second review of the arrangement in September. The
completion of this review would enable Mongolia to draw SDR worth about USD24 million.
“The authorities' commitment to steadfast implementation of a strong policy package has been
critical to their success so far. We are encouraged that this same commitment will help meet the
ongoing challenges and risks, especially in improving public finances and strengthening the financial
system. With continued prudent macroeconomic management, the Mongolian economy will be able
to successfully navigate the current global downturn toward a path of sustainable growth, falling
poverty, and low inflation.”
Source: www.imf.org
TDB PRESIDENT SEES POSITIVE SIGNS, BUT ECONOMIC RECOVERY IS NOT NEAR
Mr. Randolph Koppa, President of the Trade and Development Bank of Mongolia, has said in an
interview that the economy is still far from recovery but there are positive signs. Business activity is
still 15% or more behind the levels of late 2007 but so are imports, easing the pressure on the
country‟s balance of payments. Inflation is down. The tight money policies of 2008 and the interest
policy of 2009 designed to protect the MNT against the USD have kept interest rates high. There has
been a notable increase in bank deposits in the second quarter so liquidity has improved during the
summer and autumn to increase the country‟s exports.
The tight money situation has made it difficult for banks to lend more to construction projects and
to make mortgage loans to eligible buyers. A recent agreement the Bank of Mongolia has made with
MIK (Mongolian Mortgage Corporation) will support the issuance of MIK bonds up to MNT25 billion to

9. buy mortgages from banks and enable them to redeploy those funds to new mortgage loans. Up to
20% of the pent-up urgent financing needs could be met this way. If approval is received from the
FRC, this could prompt the start of a real domestic debt market leading to further such bond issues
next year to get housing finance activity on a proper track.
Saying that the Government must maintain fiscal discipline, Mr. Koppa felt some further measures
needed to be taken to strengthen the banking sector. But the most important thing was to conclude
an agreement on Oyu Tolgoi, he said, and added, “It is, of course, important to get the right
agreement with the right partner… From my perspective as a foreign banker working for several
years in Mongolia, and as someone asked to assess the current economic situation, I can say that as
soon as an agreement (is) reached, even though the ore would not be exported for a few years,
there will be an immediate significant uptick in the local economy… Overnight, a sense of optimism
will overtake the current mood of caution, and investment decisions, locally and abroad, will be
made, all of which will quickly impact this still small and fragile economy.”
Read more…
Referring to his own Bank‟s performance, Mr. Koppa said TDB “continues to have over 25% of the
loans to the corporate sector and is conscious of its role and responsibility as the country‟s main
corporate bank”. Capital adequacy and liquidity positions have been maintained at a high level.
There has been an increase in deposits and the bank is selectively increasing its lending activities.
Source: www.tdb.mn
FOREIGN TRADE DEFICIT STANDS AT USD179.2 MILLION
The volume of this year‟s foreign trade stood at USD2,151.6 million on August 15, showing a deficit
of USD179.2 million. Imports totaled USD1,165.4 million and exports USD986.2 million.
Copper concentrate accounted for 25.1 percent of total exports, unrefined and semi-refined gold
for 17.3 percent, zinc for 6.2 percent, iron ore for 4.1 percent, crude oil for 4.6 percent, combed
cashmere for 3.9 percent, and fluorspar for 2.6 percent. The price of copper concentrate rose 1.8
percent over July levels, and that of zinc 0.4 percent.
Petroleum imports in the first seven months cost USD8 million more in 2009 than last year. The cost
of electricity imports also rose by USD191,400.
Source: National Statistics Office
COPPER DEFICIT IN 2010, PRICE MAY REACH USD7,500/T: GFMS
A copper deficit of 88,000 tons is likely in 2010 when the copper price may top USD7,500/t, London
base-metals consultancy GFMS forecast on Wednesday. It said that the forecast was the result of a
strong recovery in consumption and slower mine production. It expected the deficit to grow to
121,000 tons in 2011 and to 176,000 tons in 2012, which would trigger additional investor interest.
Strong Chinese consumption and an expected late-2009 recovery elsewhere would result in marginal
growth for 2009 as a whole. GFMS expected the copper surplus to drop to 245,000 tons, from an
earlier estimate of 441,000 tons.
Fourth-quarter copper prices of USD6,500/t would not be surprising during the current period of a
shortage of concentrate. The consequent decline in spot treatment charges was sending "bullish"
long-term signals through the market.
Source: www.miningweekly.com
INVESTMENT COUNCIL MAKES A NICHE FOR ITSELF
The EBRD-funded Consultative Council on Investment Climate and Private Sector Development, or
the investment council in popular abbreviation, has become an oft-used vehicle for dialogue
between the Government and the private sector in Mongolia. First Deputy Prime Minister N.
Altankhuyag, who has chaired the council‟s meetings, has said in an interview that he was struck by
the way these encouraged and facilitated discussions on the problems and obstacles businesses
face.
The council, he feels, has assumed the function of a permanent pressure group against bureaucratic
red tape, forcing the Government to become more efficient. In its four meetings so far, the council
has formulated several priorities. The Government has agreed to pay special attention to law
enforcement. It will also establish 'a single electronic window' for foreign trade facilitation. Special
attention will also be paid to strengthening public-private partnerships. The goal is to turn PPPs
into effective mechanisms to attract long-term investments in innovative projects in various

10. sectors.
Source: www.consultativecouncil.mn
BUILDERS WELCOME REPORTED GOVERNMENT MOVE TO BUY APARTMENTS
Builders are generally upbeat about the Government‟s reported intention to buy apartments from
them to sell them later to its employees. Most say they would be happy to sell provided they got a
fair price as this would lift them out of a difficult situation. Whether the Government later sold
them to its employees at a cheaper price was of no concern to the builders. The President of the
Construction Association, MP O.Chuluunbat, hoped the companies and the Government would agree
on the prices, adding that the possibility of granting easy loans to Government employees was being
considered. He also saw nothing wrong in the Government doing something for its own employees,
saying that private sector companies should take care of their workers in a similar way.
Some companies are not so enthusiastic, however. They feel ad hoc measures would not solve the
larger problems of the construction sector as a whole. Instead of offering temporary reprieve to
some, the Government should try to meet the widespread demand for apartments among citizens
by making things easy for builders.
Source: en.News.mn
ACTUAL COSTS MAKE FOR 98% OF FUEL PRICE, SAYS VICE MINISTER
Vice-Minister of Mineral Resources and Energy B.Ariunsan has blamed two developments for the
recent fuel price rise. The global price of petroleum products has gone up and Mongolia can do
nothing about this. Also, the exchange rate has made the MNT weaker against the USD, so more
MNT has to be paid for imports. A group comprising representatives of importer companies and
some ministries regulates fuel prices and tries to ease the burden on consumers as much as
possible. At present, real costs account for up to 98% of the price, with the other 2% covering the
companies‟ business costs. However, Mr. Ariunsan said if Russia increases its fuel prices again,
Mongolia will have to follow suit.
Source: Undesnii Shuudan
FELT MANUFACTURERS URGE REVIEW OF TENDER REQUIREMENT
Felt manufacturers have protested against the tender floated by the Minerals and Energy Ministry
for an Asian Development Bank project to reduce air pollution in ger districts, to be financed by the
Japanese Anti-Poverty Fund. They are objecting to the condition that heating material for gers
must be made of silicon imported from China.
Felt manufacturers feel this denies them a chance to earn MNT2 billion and herders an opportunity
to sell 3,000 tons of wool and want the Ministry to support them by removing the condition.
Application of felt will also provide employment to some 500 Mongolians.
Source: Ardiin Erkh
PLAN READY FOR INDUSTRIAL COMPLEX IN SAINSHAND
The Ministry of Agriculture and Light Industry estimates that the planned heavy industrial complex
in Sainshand in Dornogobi would create 396,000 workplaces and contribute USD12.4 billion to the
Mongolian GDP. The location was chosen for its proximity to big mineral deposits and railway
connectivity. The complex is planned to have smelters of copper, iron-ore and steel, an oil refinery,
coke and cement plants, an electricity generating unit, a new railway terminal, and a residential
area. Over 200 ancillary industries will also come up.
Once Parliament approves the detailed plan for the complex, construction work will begin and is
projected to end in 2012.
Source: Montsame
INDIAN LOAN TO PLUG BUDGET DEFICIT
India has granted a USD25-million loan to Mongolia to help it stabilize the budget, mainly by
adopting measures leading to narrowing the budget deficit. A team led by Mr. D.Battor, State
Secretary at the Ministry of Finance, has returned from India after finalizing the terms of the
credit. There will be no repayment of principal and interest in the first 10 years of the 30-year loan
that carries an annual interest of one percent. These terms are easier than other loan programs of
international organizations and donor countries.

11. India has made it clear that the loan cannot be used for any political and military purposes and is
meant solely to help Mongolia reduce its budgetary deficit.
Source: Montsame
MONGOLIA CAN BYPASS FOSSIL FUEL ERA, FEELS AWARD-WINNING ECONOMIST
Economist Woodrow Clark, a member of the Intergovernmental Panel on Climate Change, which
shared the 2007 Nobel Peace Prize, feels the world is poised for the third industrial revolution. The
way that developed countries use resources is affecting the world climate, but things can change,
he has said, using the example of Mongolia, which is rich in coal, a resource used throughout the
world for energy production.
Calling "clean coal" an oxymoron, Mr. Clark said Mongolia is intriguing because the area does not
need to transition from coal to fossil fuels. With natural resources including wind, geothermal and
sun, Mongolia has the opportunity to leap-frog past the fossil fuel era and go right into what Mr.
Clark envisions as the third industrial revolution.
Mr. Clark also said that the current energy grid system, with central production and mass
distribution, should become history. For renewable energy, different technologies should not be
isolated, but can be considered as a whole. Each building can be considered for how it can be self-
sustaining — solar panels on roofs, wind generators along freeways. Other options, not yet fully
developed, could include anaerobic digesters that create fuel from waste products.
Source: Contra Costa Times
FX TRADERS SEE MNT HOLDING STEADY AGAINST USD
The most recent monthly survey by ACI Mongolia reveals that analysts and FX traders in the largest
banks in the country continue to believe that there will be no sharp drop in MNT prices against the
USD in the near future. In the past few weeks the MNT has fallen from 1,430-1,440 to 1,440-1,450
against the USD. Traders foresee a maximum of MNT1,530 for one USD in a one-year period, but
expect the median rate to be MNT1,408.
Source: www.fma.mn
PRESIDENT HAS BREAKFAST MEETING WITH BUSINESS LEADERS
President Ts.Elbegdorj held a breakfast meeting with Mongolian business leaders on Wednesday.
Among his guests were representatives of MobiCom, G-Mobile, MCS, Khas Bank, and Golomt Bank.
The Deputy Director of the Central Bank, Mr. B.Enkhkhuyag, and the chairman of the National
Chamber of Commerce and Industry, Mr. S.Demberel, were also present. Such meetings are to be
held regularly.
Source: Onoodor
CHINA SEEN AS WARMING TO NEW CREDO: BUSINESS FIRST
Last week saw the World Trade Organization rebuff China in an important case involving Chinese
restrictions on imported books and movies. The Chinese Government dropped explosive espionage
charges against executives of the Anglo-Australian Rio Tinto, after a global corporate outcry. And
the Government said it had backed off another contentious plan to install censorship software on all
new computers sold in the country. Throughout its long economic boom, China has usually managed
to separate its aggressive push into the global business arena from domestic politics, which
remained tightly controlled by the Communist Party. But these events raise the question of just
how long it will be before the two meet.
In each of those matters, politics and business collided, and business won. Business does not always
win, and when it does, as in these cases, the reasons are as often as not a matter of guesswork. But
in at least some high-profile matters, China appears to be facing the reality that the outside
business world can be freewheeling and defiant when its profits are threatened. And so China‟s
authoritarian system may also have to evolve in ways its top leaders may not readily endorse.
Beijing has a global footprint now, a consequence of its booming domestic growth and breakneck
international expansion. And decisions that once were made on purely parochial grounds — like
censoring Web sites, protecting the interests of its state-owned companies and restricting the flow
of foreign news and entertainment into China — now have international ramifications.
Read more…
“This is a country in the middle of a big transition in its global role,” said Mr. Kenneth Lieberthal, a

12. veteran China analyst now at the Brookings Institution. “They‟ve always looked in the past to
what‟s good for China, and they still do. But for the first time, added to that is the consideration
that they‟re in the position of being rule-takers, not just rule-makers.” China‟s leaders, he said,
“are just beginning to learn how to handle that”.
The Chinese legally may appeal the WTO decision, but Foreign Minister Yang Jiechi indicated that
simply ignoring it was not an option. China worked for years to join the global trading system and is
bound, as much as other nations are, by its rules. “China will never seek to advance its interests at
the expense of others,” Mr. Yang said.
Similarly, while the Rio Tinto employees still face lesser charges of bribery and theft of trade
secrets, the espionage threats stirred broad unease among foreign companies operating in China,
which feared that they could face persecution and closed-door trials for engaging in what much of
the world would regard as bare-knuckle business tactics.
Yet whether such instances represent trends or exceptions — or neither — remains a matter of some
debate. Increasingly, many experts say, Chinese officials appear to be aware that their actions have
far broader ramifications than they might have had even a few years ago. “Fifteen years ago, the
mantra in China was, „We‟re the victims of a system that‟s stacked against us,‟ ” said Mr. James V.
Feinerman, an expert on Chinese law and policy. China‟s entry into the world trading system, he
said, is slowly helping to change the nation‟s view of itself from that of an outsider to an insider
with a stake in the global system‟s success.
Other experts note, however, that what outsiders see as carefully calculated policy changes may in
fact be nothing of the sort. In any case, few experts are willing to stake their reputations on a
prediction that Beijing‟s recent softening of some positions signifies a strong trend. Mr. Jonathan
Hecht, an expert on Chinese law, said that developments in China should be viewed against a
history of great leaps forward on such matters, followed by equally great retreats. “I‟ve given up
predicting long-term trends,” he said.
Source: The New York Times
POLITICS
MEDVEDEV’S VISIT WILL SEE FORMAL LAUNCH OF JOINT URANIUM COMPANY
Russian President D.Medvedev is coming to Mongolia next week to participate in the 70th
anniversary celebrations of the victory of joint Russian-Mongolian forces over the Japanese army in
the Khalkh River war, but the visit will be more than just a remembrance of past events. The other,
and possibly more important item on his agenda is the formal establishment of Dornod Uran, a joint
Mongolian-Russian company in the uranium sector. MonAtom and AtomRedmedZoloto, the two
state-owned entities that will be equal partners in the company, have indicated that they will
collaborate with Japan.
Mongolian-Russian cooperation in uranium dates back a long way. In 1969, Soviet geologists
established that Mongolia had uranium deposits and the next year the two Governments signed an
agreement to conduct exploration in Mongolian territory. This exercise led to the discovery of the
Dornod, Mardai and Gurvanbulag deposits. The present partnership is thus an extension of a
tradition, with both countries well aware of the facts on the ground.
Nothing has been said about where Dornod Uran will begin its work, but the Dornod deposit seems
the most likely location.
Source: Undesnii Shuudan
BAYAR GETS GOOD NEWS ON AGRICULTURE
Prime Minister S.Bayar, who has been the force behind the national emphasis in the past two years
on increasing agricultural output, was told during his visit to Selenge that the northern province
alone is expected to harvest 210,000 tons of crops this year compared to last year‟s nationwide
figure of 200,000 tons.
“By 2010, Mongolia will supply 100 percent of its own domestic needs with its home-grown wheat
and vegetables,” Mr. Bayar told media. The Government plans to buy 150,000 tons or more of
wheat for a state reserve fund that will meet next year‟s needs for seeds. The purchase price is
now being negotiated with growers and flour producers.
Source: Undesnii Shuudan

13. “PRESIDENT HAS ALSO HIT A WALL LIKE US,” SAYS HUNGER STRIKER
After all his fellow protesters were removed to hospital following a deterioration in their health,
Mr. J.Enkhabayar, whose son was shot dead during the July 1 incidents, is now the only one on
hunger strike near Government House. He has completed three weeks of his protest and though he
looks weak and pale, he asserts he is feeling fine. Their protest is against applying the amnesty law
to those suspected of firing the fatal shots and also against the meager amount of compensation
announced for the victims‟ families.
Mr. Enkhbayar says their letters to the Government and Parliament remain unanswered. Only the
President‟s Office sent a reply and people from there also come to see him regularly. Expressing his
faith that the President “wants to help us” Mr. Enkhbayar adds, “but he cannot achieve anything by
himself, with every official intent on a cover-up. The President has hit a wall just like us,” he said.
Source: www.news.mn
SCHOLAR SAYS URANIUM HAS BOTH ECONOMIC AND POLITICAL VALUE
Ms. A.Undraa, who teaches at Stanford University and is Director of the Mongolian-American Mon-
Ame Center, believes the uranium reserves in Mongolia will assume great significance as the world
moves away from coal-based power generation to nuclear energy. The confirmed reserves of 63,000
tons is probably only a part of what the country actually has, and this may well rank Mongolia
among the top three uranium sources in the world. Common people in most countries wrongly think
that uranium is an explosive, she says, adding that the present sophistication in mining technology
makes excavation totally safe.
Going beyond economics, Ms. Undraa feels its uranium resources will be of immense political
significance to Mongolia if they are properly handled. She is happy that the recently adopted law on
nuclear energy addresses the processing aspect of uranium so as to ensure the maximum economic
benefit to the country, but has warned that both transforming uranium into gas and building a
concentration plant are going to be very expensive and several aspects will have to be carefully
considered before a decision is taken on either.
Asked what should be the extent of state participation in the nuclear energy sector, she said this
was total in France, Russia, India and China while the USA and Japan allowed active private sector
involvement. Mongolia has to define its strategy in every step of the nuclear cycle and find the right
partner accordingly.
Source: Odriin Soniin
3 NEW AMBASSADORS PRESENT CREDENTIALS
Monday saw three new ambassadors to Mongolia presenting their letter of credentials to President
Ts.Elbegdorj. They were Mr. Sam Gerovich of Australia, Mr. Carl Worker of New Zealand and Mr.
William Andrew Dixon of the United Kingdom. Australia and New Zealand do not have an embassy
here. Mr. Elbegdorj thanked all three for their countries‟ support for Mongolia‟s democratic reforms
and continuing help in various sectors. The new ambassadors all pledged to work for increased
bilateral collaboration in existing and new areas.
Mr. Gerovich later called on Mr. S.Bayar, who will be visiting Australia from September 7 to 12, the
first Mongolian Prime Minister to do so. Mr. Bayar said Mongolia sees Australia as “a good partner”
and wanted to send more students to Australian universities and institutes, especially in
engineering, economics, management and mining. Mr. Gerovich offered wider Australian
collaboration in the mining and energy sectors, particularly in uranium exploration.
Source: Montsame
QATAR TROOPS COMING FOR JOINT EXERCISE IN OCTOBER
More than 200 soldiers from Mongolia and Qatar, as well as observers from the USA and the Republic
of Korea, will participate in a joint military exercise in October. Instructors of Qatar's armed forces
will offer theoretical training at the first stage, while the second will see training in tactical
shooting, field march and training of special forces. The exercise will contribute to strengthening
the mutual trust and cooperation between the armed forces of the two countries, with Mongolia
expressing the hope that Qatar will continue to help with capacity building of military personnel.
The two countries agreed in 2007 that Qatar will help Mongolia build the Tavan Tolgoi military
training center near Ulaanbaatar.

14. Source: Xinhua
ROAD REPAIRS NO REASON TO DELAY START OF SCHOOL YEAR, FEELS MINISTER
Minister for Education Yo.Otgonbayar has rejected outright a suggestion from the Ulaanbaatar
Mayor‟s Office to postpone the beginning of the new school year by a month because of the ongoing
road repairs. He has asked Metropolitan officials to make arrangements to ease the traffic
situation.
Meanwhile, metropolitan officials have been assured that all repair works that started this month
are progressing well and on schedule. MNT5.4 billion was budgeted for these and work worth
MNT3.1 billion has already been done.
Maintenance and repair of heating pipes is 79.7 percent done and 82 percent of the school and
kindergarten repairs program is finished. Around 40 percent of the road repairs project has also
been done.
Source: Ardiin Erkh
ALL APARTMENTS TO HAVE WATER METER BY 2011
The Water Network Control Department hopes to install water meters in every apartment by 2011.
This will make households stop wasting water. All office buildings now have water meters, but only
25 percent of apartments have meters.
Source: Onoodor
ANNOUNCEMENTS
“MM TODAY” ON MNB-TV
BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with
BCM on “MM Today”. This English news program is aired every Friday for 10 minutes and is
scheduled for 9:15 PM tonight. Tune in to watch this program that reports stories from today‟s BCM
NewsWire.
_______________________________
“COMMERCIAL NEWS USA” MAGAZINE
BCM regularly receives the bi-monthly “Commercial News USA” from the U.S. Embassy‟s UB
Commercial Section. This magazine contains trade shows, product showcases, and profiles of best
U.S. exporters. We would be pleased to share this information with BCM members. Also, we would
urge other BCM diplomatic mission members to submit trade information to the BCM.

15. SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended August 14, 2009, trading activity on the Mongolian Stock Exchange (MSE)
totaled 130,000 shares with 26 companies traded. Total market value of transactions was MNT 31.4
million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 460.7
billion, and decreased by MNT 3.3 billion or 0.7% from the previous week.
The Top-20 Index decreased by 75.36 points or 1.5% compared to the previous week, closing at
4,878.63 points. The MSE Composite Index decreased by 25.56 points or 1.1% compared to the
previous week, closing at 2,410.60 points.
Most active stocks traded were: Khuh gan (53,800 shares), Genco tur buro (23,400 shares), Naco
tulsh (15,300 shares), Moningbar (10,100 shares), and APU (9,200 shares).
Major share price percentage gainers were: Gazar suljmel (15.0%), Genco tur buro (4.7%), and APU
(1.1%). Major share price percentage losers were: Moningbar (8.5%), Eermel (5.7%), NIC (5.4 %),
Spirt bal buram (5.3 %), and Erdenet khivs (5.0%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
July 31, 2009 * 4.9% [source: NSOM]
* year over year (yoy)

16. CURRENCY RATES – August 20, 2009
Currency name Currency Rate
US dollars USD 1447.44
Euro EUR 2040.38
Japanese yen JPY 15.35
British pound GBP 2382.41
Hong Kong dollar HKD 186.71
Chinese yuan CNY 211.78
Russian ruble RUB 45.28
South Korean won KRW 1.15
Disclaimer: Except for reporting on BCM‟s activities, all information in the BCM NewsWire is
selected from various news sources. Opinions are those of the respective news sources.