1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 75, June 26, 2009
NEWS HIGHLIGHTS:
Business:
MPRP shifts focus to Tavan Tolgoi, DP smells a rat;
Talks on OT agreement have acquired “a sense of urgency”;
MPs divided over taking back all uranium licenses;
Elbegdorj supports free market economy, welcomes foreign investment;
“We have to take some quick economic decisions,” says S.Oyun;
New President could open up mining;
Anod employees see deliberate neglect, and worse;
Baganuur raises coal price, maybe too late;
IFC loan for XacLeasing to help MSMEs;
Court restores exploration license to original holder;
Copper market was in deficit in March, study group finds.
Economy:
Bayar to visit Japan with uranium on mind;
MPs keen to visit Gurvanbulag;
Foreign investment will drive Mongolia’s economy, says MP;
IMF approves disbursement, praises performance, recommends prudence;
Mongolia to get crisis funding support from ADB, Japan;
Wide support for changes in payment norms for construction;
84,000 livestock dead after weekend storm;
New freight complex at Zamiin-Uud;
Proposal to change regulations governing allowances;
Minerals prices rise, Development Fund gets rich;
Country dwellers may get allowance in cash;
First Deputy PM attends EBRD forum;
Meeting to strengthen Czech-Mongolian trade ties;
NGOs help fight corruption in provinces;
Transport problems hold back Russian coal exports;
U.S. recession to bottom out this year: OECD.
Politics:
USA ready to reprogram MCC funds;
Jefferson and Mongolia;
Medvedev confirms he is coming in August;
MPRP to change name;
President holds meeting of National Security Council;
School students to study democracy, human rights, freedom;
President serious about judicial reforms;
Report faults Mongolia for failure in tackling human trafficking;
2. Summary justice on Inauguration Day;
Parliament session likely to end on July 8;
Inheritance law to be formalized;
NASA grant for Michigan, China, Mongolia to study grassland life.
RECAP OF BCM MONTHLY MEETING
The BCM monthly meeting on June 22 was attended by 63 members. Executive Director Jim Dwyer
took the chair, and welcomed the four new members -- Tuul Songino Water Resources; Bulgan Alt;
the New Zealand Consulate; and the Australian Embassy in Seoul. BCM now has 121 members, 10
more than the total at the end of the 2008 membership year.
All 5 BCM Working Groups are busy, preparing recommendations. The Legislative Committee‟s
recommendations on the draft of the public-private-partnership law, submitted to the National
Development and Innovation Committee (NDIC), resulted in BCM being invited to join its Working
Group on „Private Sector Development Strategy‟ for the GoM. The Food & Beverage Working
Group‟s recommendations on duplicative inspection-based business barriers have been circulated to
the Ministry and to officials at the State Inspection Authority where the IFC has funded a project to
facilitate procedures. The Mining Supply Chain database project has registered 1,153 entities and is
finalizing the website development phase to incorporate the database information in BCM‟s
website.
In his update on bilateral relations, the Ambassador of the U.S. to Mongolia, Mr. Mark Minton, said
Foreign Minister Batbold‟s recent visit to the USA had been productive, with several developments
that were sure to promote ties of cooperation. The USA has agreed to divert the MCC funds to
projects other than the originally intended development of the railway, though the new specific
projects are yet to be identified and approved. Mongolia also offered to contribute troops to the
multinational peacekeeping force in Afghanistan. The USA will join international institutions in
providing direct financial help to tide Mongolia over its present economic crisis, and educational
exchange programs will be extended and expanded. Commercial engagement will continue to be
the priority area. The U.S. delegation to his inauguration told President Elbegdorj that the
investment environment has to be improved and a 7-member Congressional team will visit to carry
on from there.
Mr. Do.Ganbold, President, Mongolian National Mining Association, reviewed key developments in
the mining sector. BHP Billiton has closed its office here and some others might follow. He said
President Elbegdorj‟s suggestion that Mongolia should ask for taxes and profits from Oyu Tolgoi, and
not for equity ownership, would be very difficult to implement. He did not know what Parliament
thought of the proposal, but it was certainly not acceptable to the investors. The proposal from
certain quarters to develop Tavan Tolgoi piecemeal, and not as one single project, will be less
beneficial to Mongolia, he felt. His opinion was that uranium exploration licenses could not be
withdrawn by Government or parliamentary resolution.
Mr. Robert Coyle spoke of the environmental sustainability of projects funded or partnered by the
EBRD and said they were very happy with their experience in Mongolia in this regard. Mr. Mark
Mackintosh, Partner, UK-based Citrus, also talked about the environmental aspects of investing.
Mr. Mark Bailey, Executive Director, Leighton Asia, said as the largest contract mining group in the
world they worked on the basis of certain values and showed how this human commitment has
helped them "Build Relationships in the Gobi" in connection with their lead contracting role for the
Energy Resources mining project at Tavan Tolgoi.
For a fuller report on the meeting, please visit BCM website, BCM News & Press.
3. BUSINESS
MPRP SHIFTS FOCUS TO TAVAN TOLGOI, DP SMELLS A RAT
The impasse over Oyu Tolgoi has kept the other important issue of Tavan Tolgoi under wraps for
long but now there are demands from various quarters in the MPRP, especially its Administrative
Council, that work there should begin without much delay, if only to secure the funds to pay
citizens the Motherland Grant. The DP, however, sees no reason to change the present sequence of
signing agreements. The 6.5 billion tons of coal in Tavan Tolgoi is spread over five separate deposit
areas, each with its own license. The demand now is to make an agreement with an investor for
each deposit, instead of waiting for a comprehensive agreement with one of the many large
international companies or consortiums. The Government has often said it would attend to Tavan
Tolgoi only after the Oyu Tolgoi agreement issue is resolved. It is claimed that the Tavan Tolgoi
project was prepared on the basis of detailed study, but actual information on how the mining
would proceed is scarce. Impatient with the delay, and sensing popular discontent that the
promised payment from mineral resources is not forthcoming, the MPRP now wants the first level of
open pit mining to start in 2010 and the second in 2011. Simultaneously, the initial work on the
refinery can be completed in 2011. USD2.5 billion is needed to start open mining and USD600
million to set up a refinery. Energy Resources has returned all licenses except that for Ukhaa
Khudag and state-owned Erdenes MGL works the Tsanh, Bor Teeg, Shar Teeg and Bortolgoi deposits.
Around 40-50 million tons of coal can be extracted from these.
While the MPRP now wants to settle the Tavan Tolgoi issue before an investment agreement on Oyu
Tolgoi is signed, the Head of the DP group in Parliament, Mr. Ch.Saikhanbileg, says the two should
be discussed together. A DP MP, Mr. L.Gundalai, attributes the MPRP‟s sudden interest in Tavan
Tolgoi to Russian pressure to start work on a railway to the mines and to obtain rights to the
deposits.
Read more…
Mr. Kh.Badamsuren has estimated Mongolia will earn USD1 billion a year when all the deposits are
in use. The reserves will not be exhausted in possibly 100 years of mining. He is pressing for five
independent open pit mines, each with, if necessary, a different partner. Even when the open pits
are severally owned, the processing, concentration and power transmission will be under unified
control. He agrees that choosing partners is a tough act as the interested companies are world
leaders and will offer up-to-date technology and the countries backing them are long time donors
and, in some cases, neighbors.
Source: Ardiin Erkh, Undesnii Shuudan
TALKS ON OT AGREEMENT HAVE ACQUIRED “A SENSE OF URGENCY”
Asked on Tuesday if Ivanhoe Mines has said it would stop its Oyu Tolgoi operations unless the
investment agreement issue is resolved by September, Mr. Kh.Badamsuren, head of the
parliamentary working group on the agreement, refused to give a categorical answer either way. He
would only say that talks are on and they are being held in a spirit of urgency. Mr. Badamsuren is
also a member of the Standing Committee on the Economy that submitted several recommendations
and suggestions to the Government on the matter. The Government is now discussing them with the
investors. Considering that the final agreement has to benefit both sides, they are trying hard to
iron out differences and reach a compromise on most issues, he said.
However, the financial issues, as expected in a business deal, are proving more intractable than
others. There is no agreement as yet on how much the Government will get in taxes, in fees and in
dividends. How the profits will be shared is also a thorny issue.
Source: www.news.mn
MPs DIVIDED OVER TAKING BACK ALL URANIUM LICENSES
Strong passion on either side has marked the ongoing debate in Parliament on the national policy on
radioactive minerals and nuclear energy. There are 146 foreign and domestic companies with
licenses to explore uranium. Making no distinction between those of them suspected of using the
licenses for trading without making any exploration and others, Mr. L.Gundalai demanded a
summary cancellation of all licenses as they are held by private companies. He said the Government
could well be taken to court for this but still it has to be done, as otherwise “it will cause huge
4. damage to the country”.
The Head of the Standing Committee on the Economy, Mr. Ts.Bayarsaikhan, opposed any such rash
decision. He wanted the Government to identify responsible mining companies and leave them
alone while taking control of the strategic deposits at the other places. The private enterprises
would, however, be regulated carefully. The State budget will pay for MNT48 billion of the
exploration costs, while MNT29 billion will come from foreign aid and the rest from the private
sector.
Source: www.news.mn
ELBEGDORJ SUPPORTS FREE MARKET ECONOMY, WELCOMES FOREIGN INVESTMENT
Speaking on Radio Free Asia a little while before he was sworn in on June 18, President Ts.
Elbegdorj said the people‟s choice of him demonstrated “our country‟s success in linking
democratic reforms to free market economics”. The election featured how “my opponent and I
clashed over economic policy, the battle against corruption, the judicial system, the administration
of justice, and most important: how Mongolia should open regions of the country to mining and how
that revenue could be distributed for the betterment of the people”.
Saying that “the real work lies in governing and helping move the country ahead”, Mr. Elbegdorj
admitted the present recession “has hit my country hard” but there was hope because “we
Mongolians are resilient, and our land does provide abundant natural resources”. After years of
discussion and debate, he said, “final proposals are taking shape detailing the public-private
partnership that will be created to begin mining a vast copper deposit and coal vein”. Mongolia‟s
recovery and economic competitiveness “lie in reaching out beyond our borders and increasing the
integration of our country into the world economy”. A little over a decade ago, the bulk of
Mongolia‟s trade was conducted between our bordering countries, but today, more than 80 percent
of the foreign trade is conducted with states that include China, the Russian Federation, United
States, Britain, Japan, Canada, and South Korea. “It is imperative that we increase these ties and
expand this list of countries to include our neighbors in Southeast Asia, Europe, Africa, and the
Middle East,” Mr. Elbegdorj said.
Asserting that Mongolia cannot be “a land of haves and have-nots”, he said a middle class can come
up only under economic policies that “welcome foreign investment and promote domestic
reinvestment that can add value to our exports and create well-paying jobs”. Massive government
spending creates only “artificial growth” and full use has to be made of technology “that allows my
countrymen to bring their products and services to foreign markets, and also allows foreign markets
to find us”.
Source: www.rfa.org
“WE HAVE TO TAKE SOME QUICK ECONOMIC DECISIONS,” SAYS S.OYUN
Mrs. S.Oyun, MP and leader of the Civil Will Party, has a special place in Mongolian politics as the
only sister of S.Zorig, often called “the father of Mongolian democracy” whose murder has never
been solved. Asked about her reaction to the election of Mr. Ts.Elbegdorj as President, she said the
chances had appeared even and the contest was close. The final result was an expression of the
people‟s desire for change. They wanted to see that issues like unemployment, poverty, corruption,
ecological disbalance were being tackled.
Recalling the time when her brother and others like Mr. E.Bat-Uul, Mr. R.Gonchigdorj, and Mr.
Elbegdorj all together did “such a great job for Mongolia”, she said they dismantled
authoritarianism but “we have not as yet received the benefits of true democracy”. Most
Mongolians are still in poverty, with development halted as politicians have not been able to take
important decisions. “We have been talking about the Oyu Tolgoi investment agreement for five
years without coming to a conclusion,” she said. “Of course we have to negotiate carefully, but we
are not the first country to have an investment agreement. We have to see what other countries did
and how they fared and take a quick decision.”
Source: www.news.mn
5. NEW PRESIDENT COULD OPEN UP MINING
Mr. Ts.Elbegdorj was elected president of Mongolia by a people looking for help out of economic
doldrums. Tapping into the country's vast mineral resources could be a start.
Mongolia is seeing economic pressure as commodity price falls have hurt its exports of gold, copper
and coal, which had fueled growth of 9 percent a year from 2004-08, and its deficit has grown
forcing unpopular budget cuts. Now that he is president, one of Mr. Elbegdorj's first points of
business will be to assure foreign investors that his plans will involve them. There have been
successful mining deals before, notably for the country's coal reserves. There were nine bids in
February for rights to win the Tavan Tolgoi mine, which is said to contain 6 billion metric tons of
coal, suggesting that many people believe business can be done with Mongolia.
Mongolia has extensive gold and copper deposits, among other minerals. There have been
predictions that, should the copper fields be fully developed, Mongolia would be one of the top 10
producers of the metal in the world. In 2008 Ivanhoe said Oyu Tolgoi contained 45.2 million ounces
of gold and 78.9 billion pounds of copper. That estimate came after an investment of USD450
million from 2000-07 by Ivanhoe. The company said the project would create nearly 8,000
Mongolian jobs.
Those statistics haven't meant enough to convince Ulaanbaatar to finalize the project. There have
been signs of frustration among possible foreign investors, but Ivanhoe continues to express interest
in working in Mongolia. However, there is a desire that a deadline be set for a deal to be
completed. Mr. Elbegdorj has said he wants to tweak legislation so that Mongolia would receive 50
percent of profits rather than a half equity stake and also said he would seek a change in the
country's windfall tax law. Any such changes will go through the Government and Parliament, and
that will take more time. Some analysts said the additional delay may be as long as three years.
Source: United Press International
ANOD EMPLOYEES SEE DELIBERATE NEGLECT, AND WORSE
Anod Bank employees have charged the Central Bank with deliberately destroying their bank‟s
goodwill, viability as a financial institution, and chances of recovery. Their version of the sequence
of events narrating how this was done begins with rumors being spread, just when board members
were abroad, that the bank was in trouble. This led to panic withdrawal by customers. Most of the
loans the bank had issued were for 10-15 years and were not due for repayment, so gradually the
bank fell short of cash. Similar rumors had been spread about Golomt Bank as well, the employees
said, but these could be assertively denied immediately, while the Anod directors could not do this
from abroad.
On coming back the directors assessed the situation and decided to ask borrowers to pay back part
of their loans. They included Mr. D.Narankhuu who owns the bank‟s headquarter building, which the
directors had agreed to rent to help him repay a big loan. In response he stuck a “Sale” sign on the
building, adding to popular concern. Anod asked the Central Bank for clearing credit but the
request was denied. When a Swiss bank announced its intention to invest in Anod, spirits rose, only
to fall again when, just two days before the Swiss deal was due, an emergency was announced and
the Central Bank appointed a plenipotentiary to run Anod. He overruled the deal and in all the
months since then, has not initiated any move to rescue the bank.
The employees see in all this a well-thought out plan to bankrupt Anod Bank. The original directors
remain in jail, with no charges brought against them. No serious effort is made to put the bank on
secure financial footing. This can still be done if only the will is there, for the bank has several
expensive immovable assets.
Read more…
The board members were all arrested and the six Central Bank appointees did not give any
indication of their knowledge of how the financial system works or of their banking skills. Instead,
they kept encouraging customers to withdraw their savings. They closed the bank‟s internet site,
and then everything started mysteriously closing down. L.Ulambayar, one of the directors who had
not been arrested and who had frequently been told off by his colleagues for his unhelpfulness and
suspect dealings, left for the USA two days before the Central Bank took over. Interestingly, his
lawyer is a man who was once dismissed from his job at the bank and who took a big loan.
6. Source: Udriin Soniin
BAGANUUR RAISES COAL PRICE, MAYBE TOO LATE
Coal from the Baganuur mines is going to cost 28% more from July 1. The board of management
recently decided there was no other way for the company to meet the economic challenges it
faced. A similar move is under way in the Shivee Ovoo coal mine.
For Baganuur Mining this may be too little too late. It is described as a company owned by
shareholders, but with the state owning 75%, the individuals and organizations who control the
remaining 25% have no voice in determining policy and priorities. For example, they cannot say
anything about the price the company fixes for its coal, not even when the state keeps it below
market level so that the power plants can get cheap fuel. This is why and how the company ended
last year with debts of MNT83.8 billion and a loss of MNT32.5 billion. The power plants did not pay
anything at all for the coal it used in the last quarter of 2008. Now Parliament is going to discuss
the fate of the mine which is one of the most important coal deposits of the country. It has over
500 million tons of brown coal, employs over 1,000 miners and is the ultimate source of energy for
Ulaanbaatar, Darkhan and Erdenet cities. Can it be that the company is being pushed to bankruptcy
on purpose?
Source: Zuunii medee, www.mining.mn
IFC LOAN FOR XacLeasing TO HELP MSMEs
IFC, a member of the World Bank Group, and XacLeasing LLC have signed an investment agreement
to support financial leasing services to micro, small, and medium enterprises in Mongolia. Under the
agreement, IFC will provide a USD1 million, six-year loan and advisory services to XacLeasing, a
company with a mandate to support MSME commercial leasing in Mongolia. “This investment from
IFC will provide important support for the growth of XacLeasing and deepen our institutional
capacities,” said Ms. G. Bolormaa, CEO of XacLeasing. “It is a real vote of confidence in our
company.”
Equipment leasing is an effective means of providing micro, small, and medium enterprises with
longer term financing. IFC is drawing on its global experience in leasing and support for MSMEs in
making the investment and providing advisory services. IFC has been a partner of XacBank, the
sister company of XacLeasing, for eight years. “We are pleased to make this long-term investment
in XacLeasing,” said Mr. Michael Ipson, IFC Country Manager for Mongolia. “Micro, small, and
medium enterprises are an engine of growth, and financing their acquisition of equipment will
increase their productive capacity and create new jobs. IFC assisted in the drafting of the leasing
law, and this investment is a natural follow-up to that effort.”
Source: www.ifc.org, www.xacleasing.mn
COURT RESTORES EXPLORATION LICENSE TO ORIGINAL HOLDER
The ordinary citizen likes nothing more than to see arrogant bureaucrats brought down a notch by
forces of law. This is what just happened in Sukhbaatar province recently and local people are
feeling happy and vindicated.
In August 2006, the Citizens‟ Representatives‟ Assembly in the province resolved to cancel the
exploration license held by FGTM Co.Ltd, without assigning any reason, and instead transferred it to
a company called Olgoi Bulag. FGTM sought justice from the Administrative Court of Ulaanbaatar
and the court has now instructed the Cadastral Registration Center of the Mineral Resources and Oil
Authority, which collaborated with the Assembly, to restore the license to the original holder. In
the process it was discovered that 21 employees at the cadastral center had not submitted a true
account of their income and assets to the anti-corruption authority. The general public is putting
two and two together.
Source: Zuunii medee
COPPER MARKET WAS IN DEFICIT IN MARCH, STUDY GROUP FINDS
World demand for refined copper exceeded supply by about 50,000 tons during March, the
International Copper Study Group reported on Monday.
7. This followed a supply deficit of 27,000 tons in February, and a surplus of 124,000 tons in January.
For the first quarter of 2009, the copper market showed a surplus of about 50,000 tons, compared
with a production deficit of 67,000 tons a year earlier, the ICSG said. The increased deficit in March
was mainly owing to continued high net Chinese imports of refined copper.
In the first quarter of 2009, world usage fell by 4% compared with the first quarter of 2008. The
decline would have exceeded 10%, the ICSG said, had it not been for a very high apparent usage in
China. This grew by 36%, as net imports of refined copper almost doubled to about 750,000 tons,
partially offsetting a decrease of 19% in the rest of the world.
Markets were particularly weak in the EU-15 countries, Japan, and the USA, where usage decreased
by 25%, 46%, and 27%, respectively. These three regions currently represent around 30% of the
world total copper usage.
Source: www.miningweekly.com
ECONOMY
BAYAR TO VISIT JAPAN WITH URANIUM ON MIND
Prime Minister S.Bayar is planning to pay an official visit to Japan after Naadam. The main item on
his agenda will be cooperation in the uranium sector, encompassing everything from exploration to
production of nuclear energy and human resource development. Mr. Bayar is also expected to ask
for support from the Japanese in establishing a national development bank in Mongolia, and to
finalize how the promised loan of USD60 million would be delivered.
The Japanese leaders are expected to ask for special opportunities for their companies to invest in
Mongolian uranium, and this might be tricky for Mr. Bayar, as the Mongolian Government has often
said it wants to offer equal opportunities to all potential investors, from wherever they come.
Indeed, the Government appears to be deliberately delaying joint activity by MonAtom and state-
owned RosAtom of Russia, which intends to grab the Dornod uranium deposits by using Japanese
technology. Russia is busy recalling and reviving its historical fraternal ties with Mongolia, but it has
a strong competitor for Mongolia‟s affections in the south: China which has wealth. Last month, Mr.
Putin talked about partnership with a Japanese company to excavate Mongolian uranium. Now the
Prime Minister might get a chance to show that Mongolia can choose its friends by itself and does
not necessarily need the Kremlin to act as an intermediary between Mongolia and Japan.
Source: Zuunii medee, Undesnii Shuudan
MPs KEEN TO VISIT GURVANBULAG
There is a rush among MPs to visit the Mardai Gurvanbulag mine. So many have expressed a desire
to join the trip planned immediately after the present session of Parliament adjourns that a plane
from Russia is likely to be brought to ferry those who cannot be accommodated in the Mongolian
plane available.
Source: www.mining.mn
FOREIGN INVESTMENT WILL DRIVE MONGOLIA’S ECONOMY, SAYS MP
Asserting that foreign investment must be the force behind Mongolia‟s economy, MP O.Chuluunbat,
ex-Governor of the Central Bank, has said that if Mongolia deliberately creates problems for foreign
business, it will end up like North Korea and Cuba. Referring to Boroo Gold, he said in the last 6-7
years the Mongolian economy earned USD720 million from its operations. The company paid around
USD120 million in various taxes, and local energy, transport, food, coal and fuel companies earned
large amounts from Boroo Gold, almost half of whose total revenue was paid to Mongolian business
units and stakeholders.
Mongolia‟s record of changing its laws frequently has turned stability agreements into documents of
instability for investors. In the USA laws remain effective for 10-20 years, while in Mongolia they
are amended, sometimes radically a few times within 2-3 years. He was not sure why some civil
movements have chosen to be so active about a couple of projects and wondered if they were doing
politics or if there was any money in it for them. Whatever it is, it would have “a very negative
impact on foreign investment”, he felt, as social instability invariably scares away businessmen.
8. Source: Udriin soniin
IMF APPROVES DISBURSEMENT, PRAISES PERFORMANCE, RECOMMENDS PRUDENCE
The Executive Board of the International Monetary Fund (IMF) completed on June 23 the first review
of Mongolia's economic performance under a program supported by an 18-month Stand-By
Arrangement (SBA). The completion of the review enables the immediate disbursement of an
amount equivalent to SDR25.55 million (about USD39.4 million), bringing total disbursements under
the arrangement to an amount equivalent to SDR76.65 million (about USD118.2 million).
Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, has said the Mongolian authorities‟
“strong policy implementation is effectively stabilizing the economy”. At the same time, “there are
still important challenges ahead”. He particularly mentioned as commendable the introduction of
foreign exchange auctions, the continued commitment to a flexible exchange rate, and the skilled
calibration of monetary policy. Inflation has come down and international reserve buffers have
been built. However, “private sector credit conditions remain tight, and there is probably space for
a further gradual and cautious easing of monetary conditions”.
Mr. Kato said “continued spending restraint will be needed” to ensure that this year‟s deficit target
of 6 percent of GDP is achieved. In addition, “it will be important that lending to gold mining
operations be repaid during the course of the year”. The government should also proceed
“expeditiously on a comprehensive reform of the social transfer system to safeguard the poor
through better targeting while lessening the fiscal burden of such programs”.
Calling strengthening the banking system “a key priority”, Mr. Kato said reforms underway to
strengthen supervision and the institutional framework should continue. He urged the authorities to
be “prudent in undertaking any new nonconcessional external borrowing”. The prospects for donor
support are good and to “avoid contingent fiscal liabilities, the government should continue to
refrain from guaranteeing external loans”.
Source: www.imf.org
MONGOLIA TO GET CRISIS FUNDING SUPPORT FROM ADB, JAPAN
The Asian Development Bank (ADB) Board of Directors has approved a loan equivalent to USD43.1
million and a grant of up to USD16.9 million from its concessional Asian Development Fund for the
Mongolia Social Sectors Support Program. The loan is to be repaid in 24 years, with an annual
interest charge of 1.0% during the 8-year grace period, followed by 1.5% for the rest of the term.
The Japan International Cooperation Agency, funded by the Japanese government, will provide
cofinance of up to USD50 million. A technical assistance grant of USD700,000 to provide strategic
capacity development is also being extended by the ADB, with the Mongolian government providing
a further USD100,000 equivalent.
Mongolia is one of the most exposed countries in the world to poverty fallout from the global
economic crisis, because of its reliance on volatile mining revenue. “Unless the Government is able
to bring about an orderly adjustment to this external shock the social consequences will be severe,
potentially unwinding the gains of recent years and threatening the attainment of the Millennium
Development Goals,” said Ms. Wendy Walker, Social Development Specialist in ADB‟s East Asia
Department. The program is being harmonized with assistance from the IMF, the UNDP and the
World Bank, to help the Mongolian government bridge fiscal shortfalls for social sectors in 2009 to
2011 as part of an economic stabilization plan.
Read more…
The proposed policy measures will pave the way for associated education and health projects, such
as a new medicard program for the poor and the expansion of a household micronutrients scheme.
The Japan Fund for Poverty Reduction, funded by the Japanese government and administered by
the ADB, will provide a USD3 million grant to finance and assist in the implementation of these
programs.
Source: www.adb.org
WIDE SUPPORT FOR CHANGES IN PAYMENT NORMS FOR CONSTRUCTION
MPs across party lines have expressed support for changes to the practice of paying private
9. companies for their construction work only after it is finished that has put cash-strapped companies
in an untenable situation. According to Finance Minister S.Bayartsogt, these reimbursement terms
are being followed in 46 infrastructural works, 33 of them under the Road, Transportation and City
Construction Ministry and 13 under the Minerals and Energy Ministry. These include projects such as
carrying power to Oyu Tolgoi and Tavan Tolgoi, generating more power for Ulaanbaatar and building
roads in the provinces. Altogether they are to cost over MNT1 trillion. Private companies execute
such works with their own finances and get paid the money in three years. Now the companies are
demanding 50 percent payment when 70 percent of the work is done and the rest after completion.
One MP feels one reason to support the private companies is that their work is almost always better
than of budgeted organizations. Another, however, feels the entire money can be released only
after the end of a pre-fixed warranty period.
Source: Ardiin Erkh
84,000 LIVESTOCK DEAD AFTER WEEKEND STORM
The weekend gale in the three eastern provinces of Khentii, Dornod and Sukhbaatar provinces when
the wind speed reached 15-28 meters per second has led to the death of 84,000 heads of livestock.
No damage to human life has been reported, but nine people who lost their way had to be rescued
by a search team, while 31 gers collapsed, and 46 buildings saw their roof blown away. At latest
count, 25,315 heads of livestock are lost.
Dornod province suffered the biggest loss, alone accounting for about 70,000 livestock deaths. They
are being buried, and extensive areas are being sterilized. Preventive measures assume more
importance because of fears of swine flu and bird flu. Watch is also being kept to prevent rustling
and other possible crimes.
Earlier this year a strong storm in Gobisumber, Tuv, Khentii, Sukhbaatar and Dornod provinces left
52 people and 242,000 animals dead in May.
Source: Onoodor
NEW FREIGHT COMPLEX AT ZAMIIN-UUD
A new freight unloading complex has started work in Zamiin-Uud helping with easier and faster
unloading and reloading. Chinese trucks are unloaded there and the freight brought to Ulaanbaatar
on Mongolian trucks. The work is now being done with equipment bought and installed with Russian
money. The complex also has secure storage facilities. Apart from distributing the work load, the
expanded complex will provide jobs to many people. Traders until now often had to wait for a week
to load their freight and cases of theft were common.
Source: Ardiin Erkh
PROPOSAL TO CHANGE REGULATION GOVERNING ALLOWANCES
Last week‟s Cabinet meeting decided to submit to Parliament for its approval a draft law on easing
the conditions governing the payment of the unemployment allowance and a compensatory
allowance to a parent on leave from work to look after a sick child. The decision was taken to offer
relief to vulnerable sections hit by the crisis. The quantum of money to be paid will not go up but
the eligibility criteria have been relaxed so that more people can claim the allowance, and do it
more often. If the draft law is approved, 9,000 people will receive MNT2.4 billion from the
unemployment insurance fund, and 140,800 parents will be paid about MNT4.9 billion for taking
care of their sick children between July 1, 2009 and January 1, 2011.
Source: www.news.mn
MINERALS PRICES RISE, DEVELOPMENT FUND GETS RICH
Finance Minister S.Bayartsogt told journalists on Wednesday that the Mongolian Development Fund,
almost empty until recently, now has MNT72.9 billion, thanks to increasing world prices of gold and
copper. Flush again, the Government has decided to spend MNT47 billion on the children‟s
allowance, MNT12.9 billion on paying road construction companies, MNT25 billion on apartments for
war veterans, and MNT3.5 billion on rural development.
10. Source: Ardiin Erkh
COUNTRY DWELLERS MAY GET ALLOWANCE IN CASH
The Standing Committee for Social Policy, Education, Culture and Science has begun work on a
scheme to pay the Motherland Allowance in cash to those living in the countryside and to elder
citizens anywhere, while people in the city will get it in the form of apartment or school fees.
The Asian Development Bank will help the committee in changing the law concerning health
insurance. The main goal is to help families of those who die before claiming their pension to
access the money already in their accounts.
Source: Zunii Shuudan
FIRST DEPUTY PM ATTENDS EBRD FORUM
Attending the 15th forum of the EBRD's multi-donor fund for “early transition countries” held in
Switzerland earlier this week, First Deputy Premier N. Altankhuyag gave a comprehensive account
of the impact of the global financial crisis on Mongolia's socio-economic condition, of the
government's plans to overcome the difficulties, and of the steps taken and proposed to promote
the private sector and improve the business environment. He also discussed the implementation of
projects and programs financed by the Mongolia Cooperation Fund at the EBRD, and reviewed the
direction of future projects.
Source: Montsame
MEETING TO STRENGTHEN CZECH-MONGOLIAN TRADE TIES
Some 50 mining, geology, water resource exploration, construction, agriculture and freight
forwarding companies attended a seminar last week in Prague on investments and trade prospects
in Mongolia. The seminar was jointly organized by the Czech Economic Chamber and the Czech-
Mongolian Commercial Chamber and among those who addressed it were senior officials of both
countries.
Traditional trade and economic ties were weakened in the beginning of the 1990s when both
countries were undergoing a transformation but they have begun picking up again, with trade
turnover reaching USD16.5 million in 2008. FIFTA head B.Ganzorig said 63 Czech companies last
year invested USD6.3 million in Mongolia and mentioned opportunities in the mining, construction,
urban development, infrastructure and agricultural sectors. The Czech Export Bank reported on how
it finances projects in Mongolia, and said it is ready to offer more help.
Source: Montsame
NGOS HELP FIGHT CORRUPTION IN PROVINCES
A senior official at the Anti-Corruption Authority has praised NGOs for their contribution to the fight
against corruption, especially in the provinces. Local NGOs in all 21 provinces accepted the
suggestion to form a network and then make an agreement with the province government to
regularly meet citizens‟ representatives to monitor transparency in administration and in
implementation of resolutions. The agreement also allows them to conduct anti-corruption
workshops. The networks cannot investigate any complaint about bureaucracy or bribery and
certainly cannot act against anybody, but they can, and do, pass all information to the central anti-
corruption office. The official appreciated the several good ideas suggested and implemented by
these rural networks; for example, they have successfully campaigned against costly graduation
parties.
Source: Zuunii medee
TRANSPORT PROBLEMS HOLD BACK RUSSIAN COAL EXPORTS
Limited rail capacity and poor port infrastructure are frustrating the ambitions of Russia's leading
coal producers to increase exports quickly to make up for weak domestic demand during the
country's recession. Industry executives and experts feel that state-controlled transport costs are
too high and years of underinvestment are taking a toll on shipping and rail links.
11. For Mr. Alexander Kovalchuk, director of the Coal Market Research Institute, the problem is shown
by bottlenecks at SUEK's new Vanino coal terminal in the Far East, which began handling shipments
for the company, Russia's largest coal producer, in December. "Vanino suffers a lot because the
Baikal-Amur Mainline railway doesn't have sufficient capacity, it is underserved by 40-50 percent,
according to SUEK estimates," Mr. Kovalchuk said.
Exports are becoming increasingly attractive to both steam and coking coal producers as China and
India continue growing their economies while Russian industry sputters. Market players estimate
Russia exported 7.2 million tons of coal in April, compared with 7.5 million tons a year ago.
However, transport costs continue to rise. Railway tariffs, like gas and power rates, are regulated
by the state. The government is debating whether to cap price hikes at more modest levels than
previously planned to support the economy in downturn, which saw industrial production plunging
17.1 percent year-on-year in May.
Source: www.miningweekly.com
U.S. RECESSION TO BOTTOM OUT THIS YEAR: OECD
A severe U.S. recession will bottom out this year, but any recovery will be weak due to anemic
markets and shrunken consumer wealth, the Organization for Economic Cooperation and
Development said on Wednesday. "In this environment, a considerable degree of economic slack,
especially in the labor market, is likely to persist ... bringing inflation to very low rates," the Paris-
based OECD said in a twice-yearly report on global economic conditions. It estimated that U.S.
national output will contract 2.8 percent in 2009 but grow 0.9 percent in 2010.
Source: Reuters.com
POLITICS
USA READY TO REPROGRAM MCC FUNDS
Mr. Ts. Elbegdorj's accession to the presidency will have three important effects: it will give the
Democratic Party leader a voice in foreign affairs, defense and judicial matters wherein the
president has specific constitutional roles. He will also have a "bully pulpit" from which to influence
economic and other policy matters. Second, it will spur the government and parliament to conclude
a series of long-stalled and heavily debated mining investment agreements. Mr. Elbegdorj had
pledged to share more of the country's mineral wealth with the public. Finally, it will rebalance
Mongolia's relations with Russia in relation to its southern neighbor, China, and "third neighbors",
which include the United States, Japan and Europe.
Just before the election, the Russian government forced the cancellation of a U.S.-funded
Millennium Challenge Compact project to upgrade the Mongolian Railway, one of several legacy
condominiums with Russia. It was perceived that Prime Minister Bayar caved in to Russian pressure
and canceled the railway component, which was worth nearly USD190 million. Preferring
appeasement rather than keeping the deal, or, better yet, working out a joint U.S.-Russian
development scheme for the creaky and inadequate main trunk railway, Mr. Bayar appealed to the
Obama administration to reprogram the funds into other projects.
With an eye to Ukraine, Georgia, the Baltic states, and elsewhere on the former Soviet rim,
Washington did not want to provoke a bilateral spat with either Mongolia or Russia over this new
heavy-handed exercise of "Putinism". Instead, Secretary of State Hillary Clinton told visiting Foreign
Minister S. Batbold that the administration would consider other projects. No doubt the election of
Mr. Elbegdorj led the Obama administration to support democracy rather than seek confrontation.
Read more…
Mongolia is preparing to make a modest troop contribution to the 46-nation coalition in
Afghanistan. Mongolian troops performed admirably in Iraq and other peacekeeping missions, and
Mongolian trainers also assisted the Afghan forces in recent years to operate Soviet-era military
hardware. Thus, Mongolia's new commitment fits a pattern of alignment with pro-western interests.
Though details remain to be worked out, the Obama administration should be pleased with this
demonstration of Mongolian common resolve.
Mr. Elbegdorj's elevation to the presidency has positive hallmarks: a restoration of balance in
12. governance, wherein the MPRP can no longer be seen as the "natural party of government", a
stimulus to conclude badly need mining and energy investment agreements that are critical to pull
the country out of the global recession, and a commitment to remain oriented toward the West and
other Asian democracies. Washington has signaled its approval of the presidential election results
by agreeing to the Millennium Compact renegotiation. Now the rest is up to Ulaanbaatar to
establish a new governing equilibrium.
Source: The Asia Pacific Bulletin, produced by the East-West Center in Washington.
For the full article by Mr. Alphonse F. La Porta, a retired U.S. Foreign Service Officer who served as
chief of mission in Ulaanbaatar from 1997-2000, please visit „The Presidential Election:
Safeguarding Mongolia's Democratic Future‟ by Alphonse F. La Porta on BCM website,
Articles/Reports on Mongolia.
JEFFERSON AND MONGOLIA
For the first time since Mongolia transitioned to democracy in 1990, an opposition party candidate
has won the presidency. Elbegdorj Tsakhiagiin was sworn in as president last week.
What draws our interest is the steady, patient march of democracy. A country cannot truly be said
to be democratic until its parties can peacefully trade power. It is easy to hold elections. It is
another matter for the governing party to accept the verdict of the people and peacefully step
aside.
The unrest in Iran is there precisely because the ruling elite cannot accept the will of the people
and yield power. Another parallel, more in line with Mongolia's recent electoral milestone, was the
American election of 1800 in which Democrat Thomas Jefferson defeated Federalist John Adams
after a bitter campaign. The young republic moved forward in peace. The respect of the world and
the trust of the people deepened in watching this simple, but powerful, transition.
Read more…
Since its move away from communist rule, Mongolia has pursued free-market policies to best exploit
its richness in natural resources. This has triggered a sharp upward climb in economic well-being.
Mongolia also has maintained a liberal political climate. Freedom House ranks Mongolia as a free
country, which is quite a feat for a mountain state sandwiched between the more authoritarian
Russia and China.
Mongolia has been a solid friend and ally of the United States, contributing troops to the efforts in
both Iraq and Afghanistan.
We applaud Mongolia's latest successful step along the path of democratic development and hope
the United States will take strides to strengthen the economic, educational and cultural ties
between our two countries. We urge the Obama administration to support Mongolia by negotiating a
bilateral free-trade agreement, which could become a model for trans-Pacific economic
cooperation. America needs to show that it is beneficial for other nations to be our friends in this
world of ever-increasing dangers.
While the State Department is busy reaching out to the rogue states of the world, it is important to
remember the numerous fledgling democracies like Mongolia that play by the rules. Mongolia
already has extended the warm hand of comradeship to the United States. The Obama
administration just has to accept it. Here's hoping it does.
Source: The Washington Times (www.washingtontimes.com)
MEDVEDEV CONFIRMS HE IS COMING IN AUGUST
During his visit to Mongolia to attend the inauguration of President Ts. Elbegdorj, the Chairman of
the Federal Council of the Federal Assembly of the Russian Federation, Mr. S.Mironov, met with
Parliament Speaker D. Demberel and handed over a letter from the Russian President. In this, Mr.
D.A Medvedev confirms that he will take part in the 70th anniversary celebrations in August this
year of the victory of Soviet-Mongolian forces at the Khalkh River battle. Mr. Mironov said the
Russian President would use the visit to hold negotiations with Mongolian state leaders to boost
bilateral relations and cooperation.
Source: Montsame
13. MPRP TO CHANGE NAME
The several MPRP intra-party meetings since the presidential election have concentrated more on
reforms than on analyzing the party‟s defeat. As a first step towards a refurbished image it is
almost certain the party will change its name, becoming Mongolian Democratic Development Party
from Mongolian People‟s Revolutionary Party. The change is expected to make it more acceptable
to young people and has the added advantage that its Mongolian acronym, the way it is universally
referred to by the people, will remain the same as now -- MAXN.
Source: www.news.mn
PRESIDENT HOLDS MEETING OF NATIONAL SECURITY COUNCIL
President Ts.Elbegdorj called a meeting of the National Security Council, of which he is ex-officio
head, on June 23. The meeting reviewed the state of the economy, particularly in banking and
finance, and asked Parliament, the Government and the Central Bank to work with diligence and
vigilance in these difficult times.
Meanwhile, the Civil Will Party leader, Mrs. S. Oyun, has reiterated in an interview that her party
would like an expansion of the council. They had suggested to the former President that leaders of
all parties represented in Parliament should be included in the council. This did not happen, but Mr.
Enkhbayar called these leaders individually for several informal meetings. “Now we want a formal
seat in the council, not just informal meetings. It is always more productive to have a group
discussion than one-to-one meetings,” she said.
Source: Onoodor; en.News.mn
SCHOOL STUDENTS TO STUDY DEMOCRACY, HUMAN RIGHTS, FREEDOM
President Ts.Elbegdorj has issued his first decrees. The first of these calls for inclusion of lessons on
democracy, human rights and freedom in secondary school curricula. The second sets up a working
group to recommend reforms in the justice sector, while the third is related to a law on pardon to
be applied on the 20th
anniversary of the democratic revolution.
Source: en.News.mn
PRESIDENT SERIOUS ABOUT JUDICIAL REFORMS
Mr. G.Ganzorig, a former judge of the State High Court who later ran a law firm in the USA for eight
years, is the law advisor to President Elbegdorj. He told newsmen that the President is very serious
about his oft-repeated intentions to carry out judicial reforms. The ultimate goal is to put in place
a system of dispensing justice that will be free of corruption and bureaucracy. Opinions will be
sought from various quarters before the necessary changes and effective innovations are
formulated.
One of the first acts of the President has been preparing a draft amnesty law. Mr. Ganzorig says this
will cover not only those convicted of crimes related to the July 1 incidents, but will have a broader
reach as it is meant to mark the 20th
anniversary of democratic revolution.
Source: Onoodor
REPORT FAULTS MONGOLIA FOR FAILURE IN TACKLING HUMAN TRAFFICKING
In its annual report on worldwide human trafficking, the U.S. State Department has said while
Mongolia “does not fully comply with the minimum standards for the elimination of trafficking… it is
making significant efforts to do so”. However, “despite continued reports of complicity by
government officials in severe forms of trafficking”, there have been no investigations or
prosecutions. It also called the Mongolian government‟s efforts to protect trafficking victims
“inadequate”.
The government did make some progress in enforcing its anti-trafficking laws in 2008 and secured
the conviction under Article 113 of 10 offenders, compared to seven in the previous year. Thirty-
three other people were convicted under the lesser offense of forced prostitution. Police, judges,
and prosecutors continued to exhibit a lack of knowledge regarding trafficking. Anecdotal reporting
suggests that some high-level government and police officials have been clients of minors exploited
14. in prostitution.
Given its limited resources, the government did not run or fund shelters for victims of trafficking;
nor did it provide direct assistance to Mongolian trafficking victims repatriated from other
countries. It also did not undertake any significant new trafficking prevention activities during the
reporting period.
Read more…
Mongolia is a source country for men, women, and children trafficked for the purposes of sexual
exploitation and forced labor. Mongolian trafficking victims were documented over the last year in
a greater number of destinations. Some Mongolian women who enter into marriages with foreign
nationals were subjected to conditions of involuntary servitude after moving to their spouse‟s
homeland. The country continues to face the problem of children trafficked internally for the
purpose of commercial sexual exploitation, reportedly organized by criminal networks. There is also
concern about involuntary child labor in the Mongolian construction, mining, and industrial sectors.
Source: www.state.gov/g/tip
SUMMARY JUSTICE ON INAUGURATION DAY
Eyebrows were raised when the Civil Cases Department of the Supreme Court disposed of 10 cases
in a little over an hour on June 18, devoting an average of seven minutes to each. The parties could
not protest publicly at the summary dispensation of justice as the judges were in a hurry to attend
the new president‟s swearing in, but their disappointment was clear.
Source: Udriin Soniin
PARLIAMENT SESSION LIKELY TO END ON JULY 8
The present spring session of Parliament is likely to be over before Naadam, most possibly on July
8. Several important laws like the one on amnesty, and another on the Motherland Allowance have
to be passed before that. MPs from both parties are holding meetings, apart from their regular
schedule, to finish the pending business.
Source: Undeshnii Shuudan
INHERITANCE LAW TO BE FORMALIZED
The Standing Committee for Social Policy, Education, Culture and Science has told Parliament that
it is working on clarifying and formalizing inheritance laws. Divorces are getting commoner,
especially among Mongolian couples living abroad, and this is leading to confusion about family
property. Also, some 73,000 or 11.5 percent of all households are headed by single women who
would also benefit once the inheritance law is formalized.
Source: en.News.mn
NASA GRANT FOR MICHIGAN, CHINA, MONGOLIA TO STUDY GRASSLAND LIFE
The U.S. space agency is giving USD900,000 to researchers in Michigan, China and Mongolia to study
how people adapt to climate change on the treeless Mongolian Plateau. The University of Michigan
in Ann Arbor, Eastern Michigan University in Ypsilanti and the academies of sciences in Mongolia and
China are collaborating on the project.
Principal researcher Dan Brown at the University of Michigan has said the study will look at how
herders in the semiarid grasslands adjust to changes in the plateau, which covers much of Mongolia
and China's Inner Mongolia. The researchers will measure productivity of the grasslands, survey
residents, and look at the public policy implications of changing conditions.
Source: Associated Press
15. ANNOUNCEMENT
“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 9:20 PM tonight. Tune in to watch this program that reports stories from today‟s BCM
NewsWire.
SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended June 19, 2009, trading activity on the Mongolian Stock Exchange (MSE) totaled
426,800 shares with 30 companies traded. Total market value of transactions was MNT 122.3
million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 462.9
billion, and increased by MNT 12.5 billion or 0.6% from the previous week.
The Top-20 Index decreased by 48.56 points or 1.0% compared to the previous week, closing at
4,738.91 points. The MSE Composite Index decreased by 20.02 points or 0.8% compared to the
previous week, closing at 2,463.31 points.
16. Most active stocks traded were: Khuh gan (324,300 shares), APU (57,000 shares), and Nako tulsh
(30,000 shares).
Major share price percentage gainers were: UID (10.0%), Ikh Barilga (4.5%), Makhimpex (3.7%), Spirt
bal buram (3.6%), and Moningar (2.4%). Major share price percentage losers were: UB Hotel
(15.0%), HB Oil (14.7%), Buligaar (10.4%), Monnoos (10.3%), and Zoos Bank (8.7%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
May 31, 2009 *8.0% [source: NSOM]
* year over year (yoy)
CURRENCY RATES – June 25, 2009
Currency name Currency Rate
US dollars USD 1430.81
Euro EUR 2018.87
Japanese yen JPY 15.01
British pound GBP 2371.28
Hong Kong dollar HKD 184.62
Chinese yuan CNY 209.38
Russian ruble RUB 45.85
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.
