CPSI NewsWire brings you market updates on Mongolia, compiled by CPS International, a Mongolian marketing arm of CPS Securities, a Perth, WA based stockbroking and corporate advisory firm, specialising in capital raising for mining and junior stocks.
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Mongolia passes watered-down foreign investment law
ULAN BATOR May 18 (Reuters) - Mongolia's parliament passed a controversial law aimed at capping foreign ownership in "strategic" industries like mining on Thursday, but investors expressed relief that the legislation was weaker than first anticipated.
The bill has been watered down considerably since it was first drafted by a group of backbench MPs alarmed by a decision by Canada's Ivanhoe Mines to sell its 58 percent stake in coal miner SouthGobi Resources to the Aluminum Corporation of China (Chalco).
The law stipulates that foreign investors are allowed to own a maximum of 49 percent of companies involved in the mining, finance, media and telecommunications sectors before being subject to scrutiny by a government panel.
But it only applies to deals valued at above $75 million, or ones involving state-owned companies like Chalco.
Aspire Mining, which owns the Ovoot coking coal mine and rail project in northern Mongolia, said the new law would provide more certainty for investors in Mongolian resources.
"The only impact for us is in terms of adding a layer of time in the approvals process," Aspire managing director David Paull told Reuters.
He said it was not likely to limit potential funding sources for Aspire's mine and rail project, expected to cost a total of $2 billion.
"If there's a foreign SOE (state-owned enterprise) in the funding structure, we will need to have that approved... It's really about finding the package the Mongolian government's comfortable with," he said.
Stakeholders said they were encouraged by the way parliament responded to the concerns of foreign investors about the law.
After the bill's first draft appeared, Mongolia's private sector banded together to lobby parliament, criticising the failure to define key terms like the "minerals" and "finance" sectors and its catch-all provisions about what is "strategic".
"The FI (foreign investment) Law bill caused an overwhelming coming together of the business community including key Mongolian entities affected as well," said Jim Dwyer, executive director of the Business Council of Mongolia. "I never have seen anything like it over the last 10 years."
Among the improvements was the reduction of the number of strategically important sectors to just four, headed by mining, he said.
SouthGobi, whose planned sale to Chalco first prompted lawmakers to act, declined to comment on how it would be affected by the new law.
SouthGobi Resources' licences are now believed to be suspended, but the company said it has not received any official notification.
According to Xinhua news agency, citing local media, the office of SouthGobi Resources' Mongolian subsidiary, SouthGobi Sands, was sealed off by authorities pending an investigation into corruption.
Related:
Mongolia’s new investment law: deterrent or clarification? – FT (Blog), May 18
Hogan Lovells: Mongolia's New Strategic Foreign Investment Law - A Temporary Inconvenience?
May 19 (Hogan Lovells) On 17 May 2012 the Parliament of Mongolia enacted the Law of Mongolia on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance (the "Strategic Foreign Investment Law" or the "SFI Law").
BACKGROUND
The enactment of the law comes at a tumultuous time of political posturing by Mongolia's political parties that are starting up campaigns for the general election to be held on 28 June 2012.
The developments stand in stark contrast to Mongolia's centuries-old reputation as a sleepy and quiet backwater. However, the country is undergoing profound change on account of its resource boom. Mongolia literally sits on mountains of coal, copper, gold, silver, iron, uranium and other essential metals eagerly sought by China to sustain its economic development. Next year, the Oyu Tolgoi copper mine will enter into production, thus providing the government with a rich flow of royalties. The stakes could not be higher as ambitious Mongolians seek to be in power at the time of this bonanza. For many seekers of political office, the rhetoric of resource nationalism makes for an attractive campaign platform, as further evidenced by recent proposals to Parliament to increase the levels of taxation on companies in the mining sector, which is generally perceived as foreign dominated.
While Parliament first contemplated a similar draft law in 2009, the immediate catalyst for the reconsideration of the foreign investment regime appeared to be the proposed acquisition by state-owned Aluminium Corporation of China of Ivanhoe Mines' fifty-six per cent equity stake in South Gobi Sands LLC. At the time of the announcement, Mongolian law did not expressly impose any notification or approval requirements upon offshore transactions affecting strategic sectors of the economy.
This briefing is based upon the final form of the law presented to Parliament prior to its approval and enactment and a review of the final Plenary Session of Parliament (the "Plenary Session").
Once the enacted form of the legislation is available, we will circulate an update of this briefing with details of any material changes.
KEY FEATURES
1. Strategic Importance
The SFI Law is underpinned by the concept of a "business entity of strategic importance" (a "BESI"). A BESI is any Mongolian company operating in one of three strategic sectors - minerals, banking and finance, and media and telecommunications. According to the SFI Law, these sectors are "strategically important for meeting the basic needs of the population, maintaining the independence and normal functioning of the economy, generating national revenue and ensuring national security".
These sectors are not specifically defined, and therefore the extent of the application of the law is unclear. The Plenary Session however confirmed that the "minerals sector" would include the oil and gas industry. It also is not clear whether the businesses providing services to these strategic sectors would be caught by the law, but given comments made in the Plenary Session, this appears unlikely.
The Plenary Session indicated that the list of strategic sectors may be amended by Parliament only on the basis of a recommendation from the Government.
2. Approvals for Non-State Foreign Investment
Pursuant to Article 6.1, the following transactions involving privately-owned foreign investors will require Government approval:
• The acquisition of, or the right to acquire 33 per cent or more of the shares in a BESI by a foreign investor;
• Where, as a result of a proposed acquisition of an interest in a BESI, regardless of the percentage of equity interest, a foreign investor has the right to:
o solely appoint the executive management or a majority of the board;
o veto decisions of the executive management or board of directors; or
o determine or implement management decisions and/or operations;
• Where, as a result of a proposed acquisition involving a foreign investor, regardless of the percentage of equity interest, the transaction:
o may potentially give rise to a monopoly (to either the seller or buyer) over mineral products on international or domestic commodity markets;
o may directly or indirectly influence the market or the price of mineral products exported from Mongolia; or
o may result in a potential reduction in the shareholding interest of a foreign investor.
The Government approvals for referred to above apply to indirect offshore transactions.
3. Approvals for Foreign State Investments or Operations
Any acquisition or operations by a state-owned foreign investor or by an international organisation will require the approval of the Government. This applies regardless of whether the acquisition in made in a strategic sector or otherwise. The level of state ownership in the investor is irrelevant for these purposes. However, in respect of international organisations, this provision does not apply if Mongolia was a party to the international agreement by which the organisation in question was founded. For example, investments or operations by EBRD and IFC would be exempt.
4. Parliamentary Approval
Article 3.7 provides that the approval of Parliament will be required for any acquisition by a foreign investor of an interest in a BESI if such acquisition is of more than 49 per cent of the BESI's shares and the value of the acquisition exceeds 100 billion Mongolian tugrugs (approximately US$76 million).
5. Tax
Any consideration paid by the foreign investor to the counterparty in relation to an acquisition of an interest of 33 per cent or more of a BESI will be subject to Mongolian tax, which must be collected through the BESI.
6. Procedure for Approval
The exact details of the approval procedure will be determined by the Government at a later date. However, the SFI Law does provide that a foreign investor wishing to enter into a transaction to which the law applies must first make a request for approval to the Foreign Investment Agency of Mongolia ("FIA"). Applications to FIA must be made by the BESI which is the subject of the investment. FIA will consider the following:
• Mongolian national security interests;
• the ability of the applicant to comply with Mongolian legislation and standard business practices;
• any anti-competitive or monopolistic consequences;
• any significant impact on the national budget or state policy; and
• any adverse impact on the strategic sector in which the investment is made.
FIA must submit its proposal to the Government on whether to grant approval within 45 days of receipt, and in turn the Government has 45 days to make a final decision on whether to approve the transaction. Within 5 days of the Government's decision, FIA must inform the applicant of the outcome.
7. Sanctions for Non-Compliance
The sanctions for non-compliance of the SFI Law set out in Article 9 are severe. Transactions concluded in violation of the requirements of the SFI Law shall be void, and the relevant authority regulating the offending BESI may terminate its operations or revoke any licences it holds. Corresponding amendments to the Minerals Law and Licensing Law were made by Parliament in order to enable the implementation of the sanctions in respect of revocation of licences.
8. Local Content
Article 3.8 of the SFI Law states that the Government will determine regulations which give preference to domestic business entities registered in Mongolia for the procurement of any goods and services to the strategic sectors. This provision appears to have application beyond transactions involving foreign investment, as it applies to all BESIs, whether or not they have been subject to a foreign investment event. In the Plenary Session, the definition of "domestic entity" for the purposes of clause 3.8 was extensively debated and was ultimately diluted to entities with greater than 50 per cent Mongolian ownership.
9. Notification Procedure
In the event a foreign investor acquires an interest in a BESI of between 5 and 33 per cent, the BESI must notify FIA within 30 calendar days of the acquisition.
A BESI in which a foreign investor held an interest of 5 per cent or above as at the date of enactment of the SFI Law must notify FIA within 180 calendar days of such date with the details of the foreign investor's holding.
10. Entry into Force
The SFI Law expressly states that it shall enter into force immediately, rather than 10 days from the date of Parliament's approval as would be customary.
POINTS OF CONCERN
There are a number of potential issues for foreign investors in relation to the application of the SFI Law, including the following:
• the drafting of the law is imprecise and unclear, which gives rise to a considerable amount of uncertainty for investors and a large margin of discretion for authorities;
• the approval process set out in the SFI Law creates uncertainty and is cumbersome, involving applications first to FIA and then to the Government, or in some cases, Parliament. This is likely to cause considerable delay and may result in a complete suspension of the approval process whilst Parliament is in recess. Further, the application of the law to all transactions entered into by foreign state-owned enterprises, or by foreign investors in certain strategic sectors regardless of value, is likely to slow the process down even further;
• whilst the SFI Law as it is enacted does contain a monetary threshold for foreign investment in a BESI of over 49 per cent, it is not clear whether this threshold is calculated by reference to market value of shares, book value of assets or the value of the transaction;
• whilst the SFI Law is silent as to any retrospective application, the Plenary Session stated that there would be no retrospective effect. However, for foreign investors currently operating in Mongolia the law will apply, and therefore while existing positions will not have to be unpicked, any future transactions involving their equity investments would be subject to the law's provisions;
• the provisions relating to investment by state-owned companies or organisations are extremely restrictive, and have application regardless of the level of that interest or the sector in which the investment is made;
• the SFI Law provides that "if an international treaty to which Mongolia is a party is inconsistent with this law, then the provisions of the international treaty shall prevail". Mongolia has entered into bilateral investment and double taxation treaties with various countries, including China, Russia, the United Kingdom, the United States and the Netherlands, and has ratified the Energy Charter Treaty. These treaties generally accord "no less favourable" status to entities incorporated in such jurisdictions, and therefore it is not clear whether these entities would be excluded from the scope of the SFI Law. However, these treaties are often difficult to enforce and therefore the benefit of this provision for foreign investors is questionable. In any event, potential foreign investors need carefully to consider the legal ramifications of this provision.
CONCLUSION
Many long-term observers of Mongolia are hard pressed to disagree with the principle that is sought to be achieved under the SFI Law. As a land-locked country caught between two major superpowers, Mongolians are justifiably concerned about their national sovereignty and security.
Mongolia has a history of quickly introducing legislation and then repealing it or suspending its implementation when it has adversely affected the Mongolian economy. The so-called Windfall Profits Tax, which imposed a 68% tax on revenues derived from commodities, was enacted in 2006 and effectively repealed on 1 January 2011. The Law of Mongolia on the Prohibition of Mineral Exploration and Mining Activities in River Basins, Water Reservoir Areas, and Forested Areas, which seemed drastic when enacted in July 2009, is only now being implemented on a piecemeal and conservative basis.
Against this background, local commentators remain philosophical, as one put it – "before an election it's all about Mongolia, after the election it's all about the rest of the world". Mongolian politicians and the local business community, who to a large extent overlap, are not ignorant of the need for substantial foreign investment, indeed, their interests and those of foreign investors often align. The Parliament which rushed through the Strategic Foreign Investment Law is the same Parliament which has the power to rush through amending or repealing legislation, if it is so minded.
AKM closed -7.89% to 17.5c
Aspire: Update on Mongolian Foreign Investment Law
May 18, Aspire Mining Limited (ASX:AKM) --
The Parliament of Mongolia last night approved a law that regulates foreign direct investment into a number of key sectors of strategic importance which includes mineral resources. Unless vetoed by the President (which is unlikely), the Law will have immediate effect.
This law does not limit foreign direct investment. It does set up a process of review and approvals for significant investments into those industries of strategic importance to the country. The approvals regime is based on the following levels of investment:
• All foreign direct investments in excess of 5% in an entity operating in a sector of strategic importance must register with the Foreign Investment Agency of Mongolia ("FIA").
• Foreign direct investments in excess of 33% in an entity operating in a sector of strategic importance must receive Government of Mongolia approval.
• Foreign direct investments in excess of 49% in an entity operating in a sector of strategic importance and in excess of 100bn MNT (approximately AUD$75m), requires approval from the Mongolian Parliament.
• Foreign direct investments made by a company with state ownership will require Government of Mongolia approval.
This law does not apply retrospectively.
The enacting of this foreign investment law now provides legislative certainty surrounding future foreign direct investments into Mongolia and in particular into its rapidly growing resources industry. The regime is not dissimilar to regimes enacted in other resource rich jurisdictions such as Australia and Canada.
ERD closed -5% to 28.5c
Erdene Provides Project Updates and First Quarter Financial Results
HALIFAX, NOVA SCOTIA--(Marketwire - May 17, 2012) - Erdene Resource Development Corp. ("Erdene " or "Company") (TSX:ERD), today provided an update on the Company's principal projects in conjunction with the release of its first quarter 2012 financial results.
Highlights:
• Donkin Coal Project: The Donkin Joint Venture Partners announced that Xstrata is seeking an operating partner to assume its 75% interest; timelines remain unchanged with environmental assessment process, progression of engineering work and obtaining the necessary approvals for commencement of the underground exploration phase continuing on schedule.
• Zuun Mod Molybdenum-Copper Project: A strategic mine planning study, by independent technical consultant, Minarco-MineConsult, and an Environmental Assessment Study by Eco Trade, LLC continued in the first quarter.
• Altan Nar Gold-Silver Prospect: A 2000 metre drill program was completed in April targeting the Discovery Zone which is defined by numerous significant drill intersections, including 29 metres of 4.3g/t gold and 24.1g/t silver; results pending.
• Granite Hill Construction Aggregates Royalty Project: Aggregates USA commenced commercial production in January 2012; Erdene received a royalty payment of US$165,000 in the 1st Quarter
Project Summaries and Updates
…
Zuun Mod Molybdenum-Copper Project
During the first quarter 2012, the Company's independent technical consultant, Minarco-MineConsult ("MMC"), part of the Runge Group, continued to carry out work on a pit optimization study. Once completed, this study will provide high level production scheduling, a review of operating and capital costs, and economic modeling and will be used to determine the parameters of additional pre-feasibility level studies expected to be carried out in 2012-2013.
In June 2011, the Company announced the receipt of an updated resource estimate for the Zuun Mod project by MMC. Their revised resource estimate included an increase in the Measured and Indicated ("M&I") resources by 38 million tonnes as well as an increase in the average molybdenum and copper grades for the deposit.
Also in June 2011, the Company was granted a 30-year Mining License for the Zuun Mod project by the Mongolian Government. The Zuun Mod Mining License covers an area of 6,041 hectares and contains the South Racetrack and North Racetrack deposits, which host all of the M&I resources at Zuun Mod. The Mining License also contains the Khuvyn Khar copper prospect. Approval of an application for a second contiguous Mining License, south of the approved Mining License, is pending. This license application covers 358 hectares and contains the Stockwork deposit which hosts 17.8 percent of the Inferred resource at Zuun Mod.
Altan Nar Gold-Silver Prospect
At the end of the first quarter 2012, the Company announced the commencement of the 2012 field program at the Altan Nar prospect with drilling started in early April. The 2012 drilling program will include delineation drilling of the Altan Nar Discovery Zone, additional drilling to follow-up on encouraging preliminary drill-results and scout drilling on a number of untested geochemical and geophysical targets. Additional field work, including planning and execution of close-spaced soil and rock geochemical sampling and geophysical surveys has started. The initial nine hole (2,030 metre) 2012 drill programs focused on the Discovery Zone and concluded in late April. All samples have been submitted for analysis with results pending.
Exploration work in 2011 on the Company's Tsenkher Nomin property, located in southwestern Mongolia, identified a number of previously unknown gold and base metal mineral occurrences. The Company has carried out initial scout drilling on two of these prospects, Altan Nar and Nomin Tal, (located 2.5 kilometres apart). Both prospects have returned very encouraging initial results.
The Altan Nar prospect consists of a broad (2 kilometres by 3 kilometres) polymetallic-gold-in-soil anomaly hosting multiple prospects containing gold-bearing epithermal-style quartz veins. A series of 24 holes were drilled over a 1km2 area of the Altan Nar prospect in 2011 and the presence of anomalous gold-bearing mineralized zones in 15 of the 24 holes confirmed the widespread nature of the Altan Nar mineralized system. In one area where multiple holes have been drilled in close proximity ('Discovery Zone'), results have confirmed the lateral and vertical continuity of mineralized zones. Hole TND-19 was drilled 50 metres below the mineralization intersected in TND-09 (55 meters of 1.02g/t gold and 12g/t silver), and intersected 29 meters averaging 4.3g/t gold and 24.1g/t silver, suggesting an increase in intensity of gold mineralization at depth. Additional drill intersections, northeast from TND-9, 19 along a magnetic low feature, suggest a single or multiple mineralized zones over a 300 metre strike length. The lateral and vertical extent of mineralization in other widely spaced drill holes remains untested.
At Nomin Tal, drilling has intersected copper-gold mineralization in a series of drill holes along a 750 metre strike length which included 2.7g/t gold, 0.9% copper and 6g/t silver over six metres (48 to 54 metres) in TND-6, drilled under historic workings where mineralization is exposed on surface.
…
NOVA closed flat at 6.75p
Nova: Board Changes
Resignation of director
May 17 -- The Directors of Nova Resources Limited (AIM: NOVA.L) announce the resignation of Mr Charles Green, non-executive director and Chairman, with immediate effect. Mr Green is leaving to pursue other business interests; however the Board wishes to thank him for his valuable contribution to the Company and wishes him well for the future.
The Directors are actively seeking to appoint a replacement to Mr Green in due course. In the meantime, Mr Chan Fook Meng, Chief Executive Officer of Nova, will also act as interim Chairman.
MSE FINISHES WEEK UP 0.36%, BDS INDEX DOWN 0.31%
18 May 2012 (BDSec) – MSE Top 20 rose 0.33% or 67.60 points to 20,402.70 points and BDS index added 0.37% or 16.44 points to sit at 4,517.43 on Friday. MSE top 20 finished the week up 0.36% while BDS index dropped 0.31% for the week.
A total of 210,650 shares were traded with a value of MNT 90.8 million (USD68.8k). In the Mongolian Stock Exchange, most stocks were in the green as 15 stocks gaining value and 6 dropping. E-Trans Logistics (ETR), Remicon (RMC), State Department Store (UID), Aduunchuluun (ADL), Gobi (GOV), Shivee-Ovoo (SHV) and Baganuur (BAN) gained over 1%.
Today’s biggest gainer was direct reduced iron (DRI) producer Khukh Gan (HGN) which jumped 7.69% to close at MNT 210. Khukh Gan is running at 100% capital utilization rate, which is 30,000 tonnes of DRI per annum, after it launched its second line in December, 2011.
Hermes (HRM), a real estate company, lost 4.82% to finish at MNT 79. Hermes posted earnings of MNT 396.4 mln or MNT 5.05 per share in 2011, 2.3 times more than fiscal 2010, and paid dividends of MNT 4.29 per share.
Local News in Brief
- The Mongolian parliament approved a new investment law Thursday that caps future foreign participation in strategic assets. The legislation will take effect immediately unless President of Mongolia rejects it. When it goes into effect, the law will require foreign investors to obtain government review and parliamentary approval for investments at 49% and above into strategic significant industries, namely resources, banking and finance, media and communications. The cap is specific to deals valued above MNT 100 billion (about USD76 million).
- A 5-year USD 94 million combination of a subordinated Tier 2 (USD 32m) and senior (USD 62m) syndicated facility agreements arranged for Khan Bank by FMO (the Netherlands Development Finance Company) was signed by a group of participating development banks on May 16. It is the first syndicated loan to a commercial bank in the country's history.
- Mongolia Growth Group Ltd. (YAK - CNSX), MGG has agreed to and signed a binding term sheet agreeing to sell shares of Mandal General Insurance (MGI) to UMC Capital, the operators of MGI, at a purchase price equivalent to MGG's original funding cost in June of 2011. Following the closing of this transaction, UMC Capital and MGG will respectively own approximately 16% and 84% of Mandal's currently outstanding shares.
Mongolia Renewable Energy -2012 International Conference opens in Ulaanbaatar
May 17, 2012, Ulaanbaatar, Mongolia (Mongolia Economic Forum) A two-day international conference Mongolia Renewable Energy-2012 opens in Ulaanbaatar, Mongolia today. The International conference aims at bringing together the key stakeholders in Mongolia’s renewable energy sector – the government, businesses, scholars and engineers, academia, media, NGOs - to discuss the potentials of Mongolia’s renewable energy resources, recent developments, future plans, possible challenges in the efforts to harness renewable energy resources as well as various forms of cooperation in developing Mongolian renewable energy potentials.
B. Byambasaikhan, Chief Executive Office of Newcom Group, opened the Conference and D. Zorigt, Minister of Mineral Resources and Energy, delivered an opening speech. President of Mongolia Tsakhia Elbegdorj conveyd greetings and message to the participants of the Conference and His Excellency’s greetings were presented by Mr. P. Tsagaan, Senior Advisor to the President of Mongolia.
In his greetings, President Elbegdorj underlined:” ...While the world’s carbon market is working fretfully to have polluters pay and the polluted compensated, “time waits for no man”, and our blue planet is dauntingly browning. The simplest, the rightest solution is just to stop polluting. How? Mongolia can offer the solution. Mongolia can produce clean and renewable energy and offer it to the world.
I ardently look forward to a day when the Mongolian Gobi becomes the hearth of the regional renewable energy production – the Gobi-Tech, a Gobi-centered powerhouse localizing global tehcnological progress. This day is to be realized by Mongolian and foreign engineers, scholars and businessmet. Therefore, your cooperation and partnership is instrumental in this effort”.
Minister of Mineral Resources and Energy Mr. D. Zorigt said:”... One of the priorities of the Mongolian energy sector by 2020 is to develop Mongolia’s renewable energy sector and build a capacity to meet 20-25% of our energy needs with renewable resources.
Responding to the growing energy need of the Mongolian population, and consistently with the global energy development trends and tendencies, the Mongolian government is set to expand the use of renewable energy thus substantially reducing Mongolia’s ecological footprint.
Mongolia is home to enormous renewable energy resources – wind, solar, water, geothermal – and Mongolia’s ecological and climatic conditions are well befitting to the effective use of these resources”.
The Country Director of the Asian Development Bank Robert Schoellhammer informed the audience that the Asia-Pacific region is pioneering the global renewable energy drive and is aiming to attain a 50 GB capacity by 2050. He emphasized that the use of renewable energy is critical to achieving sustainable growth as the renewable energy is eco-friendly and can sustainably provide for energy security.
The International Conference Mongolia Renewable Energy -2012 is organized by Mongolia’s leading investment company Newcom Group, Asian Development Bank, General Electric, Mongolian Economic Forum and the Mongolian Chamber of Commerce and Industry upon close cooperation and support by the Ministry of Mineral Resources and Energy.
Mongolian Power 2012 Conference: Policies and Green Energy Development
May 17 (UB Post) The Mongolian Power 2012: Sustainable Energy, Investment and Technology international conference was organized and hosted by the Ministry of Mineral Resources and Energy and held in Chinggis Khaan Hotel on May 15th – 16th. This conference is part of the 90th Anniversary of the Mongolian mining sector.
Legal background, jurisdiction, laws and policies on the Mongolian energy sector, sustainable energy, green economy and the participation of the private sector within the industry along with investment partnership opportunities and concerns were openly discussed at the conference.
The international forum “Mongolian Power-2012” started yesterday, on May 15, at the Chinggis Khaan Hotel, in Ulaanbaatar.
The Ministry of Mineral Resources and Energy held a very optimistic view on Mongolia’s future in energy, noting that Mongolia is home to a large amounts of energy resources from coal to the windy steppes and many new power plants are due to be built--such as the new 450 megawatt thermal power plant to be in operation by 2015. In the near future, three more plants will be built each with 600 megawatts of capacity, located in the proximity of UB and around the central area of Mongolia.
“Power and energy sources are facing new challenges as we struggle to develop and expand both our infrastructure and mining industry,” Minister D. Zorigt says. “We are organizing this conference with an aim to improve and assist the energy sector in its current issues. We will improve our environmentally friendly energy production to further encourage investors and private enterprises to invest in this field,” he said, emphasizing the production of wind power in Mongolia.
According to D. Zorigt, a major problem faced by investors in the Mongolian energy sector is the set price of energy distribution, controlled and maintained by the Government. He says that the Government will take considerable measures to liberalize energy distribution prices.
Ts. Tsengel, a policy maker, said that the energy sector will enjoy steady growth if certain policy constraints are resolved. In order to deal with the debts accumulated between coal mines and thermal energy plants, the Government is taking measures, such as providing funding support to make sure that power generating companies are financially capable of running their operations.
As said during the conference, Mongolia is aiming to make the renewable energy output account for 20% to 25% of its total energy production by the year 2020. It is known that Mongolia has high potential for production capacity of electricity generated by wind turbines due to its vast steppes, and with nearly 300 days of sun, Mongolia is also very suitable for producing solar energy.
The conference included representatives from around 90 domestic and foreign investors, companies, organizations and institutions, such as the Asian Development Bank, European Bank for Reconstruction and Development, United Nations Development Program, JICA, KOICA, GTZ-German Technical Cooperation, MCS International, NewCom Group, Hythro Power Corp., Prophecy Coal Corp., Mitsui & Co and Marubeni Corp.
Hogan Lovells supports International Legal Forum hosted by the Office of the President of Mongolia
ULAANBAATAR, 18 May 2012 (Hogan Lovells) – Hogan Lovells is delighted to be the lead international legal partner at the forthcoming International Legal Forum hosted by The Office of the President of Mongolia and held at the Ikh Tenger residence on May 29 and 30. The theme of the forum is: Fostering inclusive economic growth through legal reform.
The Forum will bring renowned Mongolian and international legal practitioners and members of the business community together to discuss international legal issues that are relevant for Mongolia's rapidly developing economy and on-going legal reform. Consisting of high-profile panel sessions which will review the current state of Mongolia's legal and institutional framework in a local and international context, the Forum aims to create a common consensus among practitioners, policy makers and the business community to provide policy recommendations for enabling a legal and institutional environment which supports economic growth and business in Mongolia.
Hogan Lovells speakers at the Forum include Ulaanbaatar Office Managing Partner Michael Aldrich and partner Chris Melville who has recently relocated to our Ulaanbaatar office, along with international partners Jamie Barr, James Harris, Anthony Raven and Laurent Gouiffes.
The Forum will open with an interview with the President of Mongolia by David Pilling, Asia Editor of the Financial Times.
Also supported by the Mongolian Bankers Association and international media partners the Financial Times and Bloomberg, the International Legal Forum will be the first high-profile gathering of Mongolian and international practitioners to assess Mongolia's legal development over the past twenty years and debate whether we are on the right path.
The Office of the President intends that the Forum will provide a blueprint for legal reform.
Commenting ahead of the Forum, Ulaanbaatar Office Managing Partner Michael Aldrich said:
"We are proud of our strong track-record in Mongolia where we have been for three years now. To be able to support a Forum of this nature is a rare privilege. We look forward to what will be a realistic assessment of whether the laws and business practices in Mongolia fulfill the developmental aspirations we all have for this important country."
Mongolia builds NATO ties as 'counterbalance'
May 17 (China Daily) Close links between Mongolia and NATO is a step forward for Mongolia to implement its "third neighbor" policy of building ties with partners other than neighboring Russia and China, analysts said.
The links also came amid the strategic shift of NATO and the United States toward the Asia-Pacific, analysts said.
Mongolia is scheduled to attend the 2012 NATO summit in Chicago on May 20, with the Individual Partnership and Cooperation Program status for the first time.
In March, Mongolia and NATO signed their first bilateral cooperation program under NATO's new policy of developing more flexible partnerships with countries that engages significantly with international security affairs. Under the program, Mongolia will cooperate with NATO in security, disaster prevention and personnel training and exchange.
Since the Cold War ended, Mongolia has been focusing on strengthening cooperation with Western countries and major international bodies, under the "third neighbor" policy to counterbalance the pressure of lying between two neighboring powers, China's and Russia, said Zhang Xiaoming, a professor at the School of International Studies with Peking University.
The most-prominent third neighbors have been the US, the European Union, Canada, Japan and South Korea, Julian Dierkes, an Asian studies expert from University of British Columbia, was quoted by East Asia Forum as saying.
NATO could help Washington accelerate its shifting strategic emphasis to the Asia-Pacific by growing toward the East, said Zhai Dequan, deputy secretary-general of the China Arms Control and Disarmament Association.
"Despite Mongolia's limited armed forces, Ulaanbaatar has joined some of the NATO's international tasks to add to its military strength, economic development and intentional status," he said.
Mongolia, with a population of 2.8 million, has provided troops for the NATO-led International Security Assistance Force in Afghanistan since 2010. It also sent two contingents to support NATO's peacekeeping mission in Kosovo from 2005 to 2007.
Resource-rich Mongolia plays populist card in run-up to polls
* Mining investors worry about increasing resource nationalism
* Corruption charges against opposition politician fabricated, family says
* Case could give opposition party an edge in June elections
ULAN BATOR, May 19 (Reuters) - Mongolia's bid to discredit one of its most popular opposition politicians, a staunch supporter of resource nationalism, could backfire and strengthen his party in approaching elections, putting at risk mining investments in the central Asian nation.
Former president Nambar Enkhbayar, freed on bail this week over corruption charges his family says were fabricated, is the most popular figure fighting the June 28 election, opinion polls showed just before his arrest on April 13.
Conspiracies abound in Mongolia, a former Soviet satellite that has become one of the world's most attractive investment destinations with first-quarter GDP growing 16.7 percent, and some speculate the robustly nationalist stance of Enkhbayar, president from 2005 to 2009, played a role in his arrest.
He wants to renegotiate a landmark 2009 deal that gave 66 percent of the huge Oyu Tolgoi copper project to Canada's Ivanhoe Mines, and also says the 7.5-billion tonne Tavan Tolgoi coal mine - expected to be listed on overseas stock exchanges next year - should remain in Mongolian hands.
Enkhbayar is likely to emerge stronger as a result of his arrest, said Luvsandendev Sumati, director of the Sant Maral Foundation, which polled voters in April.
"I think the aura of victimisation will boost his popularity," he said, adding that a surge in his support would make it less likely that a single party could form a government.
Enkhbayar leads the Mongolia People's Revolutionary Party (MPRP), a breakaway faction of the ruling Mongolia People's Party (MPP). Before his arrest, he was expected to be a kingmaker in the new parliament.
"He is the father figure for resource nationalism, and the MPRP will definitely try to capitalise on this and maximise their chances to get more MPs in parliament," said Dale Choi, an analyst with Ulan Bator-based Frontier Securities.
"In parliament they will pursue their resource nationalism agenda, which will create more trouble for foreign investors."
ANTI-INVESTOR LAWS, DELAYS
More anti-investor legislation would be worrying, but an extended period of post-election uncertainty could also further delay action on crucial issues such as new mining laws and the development of Tavan Tolgoi.
The Tavan Tolgoi pact has been postponed several times, and its IPO has been delayed as the government struggles to find a way to satisfy domestic and foreign interests.
"We aren't sure who will win (the election) and I don't think this uncertainty is very helpful if Mongolia is to pass the laws it needs to pass," said a foreign mining executive.
Foreign investors have long coveted Mongolia's largely untapped mineral reserves, which have been valued at about $1.3 trillion, banker Macquarie says, even though just 27 percent of the country has been geologically mapped.
Its coal and copper deposits are among the biggest in the world, and southern neighbour China is a guaranteed market.
But while worries about Mongolia's frail legal system and volatile politics may have been sharpened by the arrest, few think the country - central Asia's only democracy - faces an extended period of disruption.
"I genuinely see it as electioneering and jostling by the candidates," said Eric Zurrin, chief executive of Resource Investment Capital, a fund with interests in Mongolia.
Foreign investors were already alarmed by a bid by vote-hungry rebel lawmakers to pass a law to ensure majority state ownership in strategic sectors such as mining and banking, but Zurrin said stability would return once votes are counted.
"Naturally foreign investors are cautious but this is exactly what we saw in Peru last year prior to the election, which then calmed substantially after a new government was brought in."
Experts say Mongolia's courts remain weak and vulnerable to political pressures, and even Enkhbayar's fiercest critics concede the case against him has been handled badly.
"The main political troublemaker in this country is Enkhbayar himself, and there has definitely been an attempt by our political elite to isolate and neutralise him," said Sumati.
POPULIST MOVES
Critics say Mongolia's showboating lawmakers have grown accustomed to parliamentary democracy, but remain ill-equipped to tackle tougher issues, preferring instead to draw up laws designed just to please voters.
The law to limit foreign investment, passed in diluted form on Thursday, was submitted by a group of rebel backbenchers who were also behind a much-criticised windfall tax imposed in 2006 and repealed in 2009.
"This law was not submitted because it is important for Mongolia - it's because election time is coming and they need to be loved and need to be liked," said Sambuu Demberel, head of the Mongolian National Chamber of Commerce and a prospective parliamentary candidate.
Mongolia's willingness to put populist politics first was in evidence recently with SouthGobi Resources. The new foreign investment laws were prompted by SouthGobi's parent company Ivanhoe's plans to sell its majority stake to Chinese aluminium giant Chinalco. SouthGobi has since seen its licenses suspended pending a corruption investigation.
Fears about China were central in another case involving a Canadian miner, Khan Resources, which is suing Mongolia after being stripped of rights to develop uranium in the country's northeast.
Khan, accused of trying to sell out to the China National Nuclear Corporation, said it only turned to China after it became clear Mongolia was trying to kick out the company to appease Russia.
Enkhbayar won bail after a hunger strike and a global campaign by his family and legal team.
"The current actions of the government have proved Mongolia is not a democracy, and it clearly shows the rule of law doesn't work over here," said Batshugar Enkhbayar, a former investment banker with J P Morgan and the ex-president's son.
"The MPRP has very strong support and therefore, my father's opponents made these false charges right before the elections."
Though Enkhbayar's family said the government broke its own laws to defeat him, critics of the former president said his arrest was proof that Mongolia's legal system had improved and that no one is above the law - not even elder statesmen.
"For me, and as far as investors are concerned, it is a positive development because there seems to be some progress in enforcement of anti-corruption regulations," said Choi.
But the election was unlikely to produce a government willing to turn against foreign investors, he said.
"Economic realities mean the ordinary Mongolian is more concerned about getting a job and not about transactions involving Chinese corporations."
Related:
Genghis Democracies: Once-promising Mongolia takes an authoritarian turn – WSJ, May 18
Treatment of Former Mongolian President Raises International Concerns
May 17 (VOA) A former president of Mongolia is now in a hospital, recovering from the effects of a hunger strike he staged while imprisoned by the government that replaced his.
The situation in Mongolia was brought to international attention when Senator Dianne Feinstein from the U.S. state of California stood before the U.S. Senate in Washington Monday describing the case of Nambaryn Enkhbayar, the president of Mongolia from 2005 until 2009.
The Senator, referring to the former president as a distinguished international statesman, said he is now facing “so-called allegations” of corruption in the country he led “so well and so long.”
Mr. Enkhbayar was forcibly arrested by Mongolian SWAT teams on April 13thafter what the Mongolian government said was his failure to appear for questioning on charges dealing with instances of corruption.
At the time of his arrest, Mr. Enkhbayar, who was defeated for Mongolia’s presidency by current president Elbegdorj, had been making an attempt at a political comeback. He had formed a third party in anticipation of Mongolia’s next national election in June and had proclaimed himself a candidate for the Parliament.
Senator Feinstein said the corruption charges brought against the former president were brought by Mongolia’s anti-corruption agency, an organization that Mr. Enkhbayar had established while he was president. While applauding vigorous efforts to fight corruption, the Senator added “it is equally important that those fighting corruption avoid a sense of involvement in such practices themselves.” Senator Feinstein continued, “to say the least, the bringing of charges against the political leader in the midst of an important election campaign is, to say the least, unusual.”
While incarcerated, Mr. Enkhbayar, according to the Senator, was not permitted adequate access to family and to counsel and reportedly received abusive verbal treatment.
The former Mongolian president then initiated a dry hunger strike to protest those circumstances, he was denied adequate medical treatment. The Senator said it was only when his health started to fail that he was released on bail. The charges remain.
The California Senator says the promise of Mongolia “can be negatively impacted by the practices we have seen in the case of Mr. Enkhbayar.”
Mark Minton, the U.S. Ambassador to Mongolia from 2006 to 2009, tells VOA that the growth of the rule of law and democratic institutions in Mongolia over the last two decades has been “phenomenal.” He adds none of those who he calls the “friends of Mongolia” want to see a “backsliding on the progress that has been made.” He says the treatment of former president Enkhbayar contained enough irregularities that questions arising from the treatment need to be answered.
Ambassador Minton said Mongolia’s success in instituting democratic processes and the rule of law brings this case to the forefront of international concern. Also, says the former ambassador, there is a great deal of interest being shown by international investors into Mongolia’s rich trove of natural resources. Minton says those investors need to believe that Mongolia is a place where the rule of law is maintained and that the country is politically stable. He says the U.S. has both political and economic interest in Mongolia.
He adds that what is needed in the case of Mr. Enkhbayar in addition to his receiving effective medical treatment is the application of a credible due process with full rights of the defendant observed carried out in a “timely and transparent way.” That, he says, would reaffirm Mongolia’s status as a country where the rule of law prevails.
DRAFT RESOLUTION WILL BE DISCUSSED TO STRENGTHEN IAAC
Ulaanbaatar, Mongolia, May 18 /MONTSAME/ Some 76 per cent of the MPs voted for considering a parliamentary draft resolution on approving new structure and staff of the Independent Authority Against Corruption of Mongolia /IAAC/ on May 18.
By submitting this project, the IAAC wants to renew and strengthen its structure and increase its staff considering that the law on regulating personal and public interest in public service, started from May 1, needs such actions.
The MPs did not ask any questions, so the bill was sent to Standing committee on Justice for preparing it for the first discussion.
World's fastest-growing economy wary of neighbor
May 17 (Marketplace.org) Tess Vigeland: Quiz show time: Which country had the fastest-growing economy last year? We can pretty much eliminate the one we live in. Europe doesn't have many eligible contestants. And so the answer is... Mongolia!
Didn't see that one coming, did you? Genghis Khan and yurts come to mind. But Mongolia is also home to one of the world's largest untapped deposits of coal. And that has not escaped the notice of its neighbor, China. Our China correspondent Rob Schmitz reports.
Rob Schmitz: Mongolia’s recent discovery of a treasure trove of coal is sort of like discovering oil in your backyard. Your neighbors will soon come snooping around.
Terrence Edwards of the Business Council of Mongolia says that can make you nervous.
Terrence Edwards: It’s a very small remote population in a very large country, and they’re very protective of their culture and their people and their resources.
Today, the Mongolian Parliament will consider legislation to bar foreign state-owned companies from controlling Mongolia’s resources. The bill is aimed at Chalco, a Chinese state-owned enterprise that has bought a controlling stake of one of the country’s big coal mines.
Dale Choi, Mongolian investment strategist for Frontier Securities, says this deal scares Mongolian politicians.
Dale Choi: They don’t want Chalco to be the buyer, the seller, and the producer at the same time.
Choi thinks the bill might deter foreign investors, but by singling out Chinese firms it might attract competing U.S. investors. Next month, Mongolia will hold national elections. Terrence Edwards says many Mongolians are pushing politicians to take a stand against their Southern neighbor, which is having an increasing influence on Mongolia’s economy.
Edwards: China has 50.99 of all foreign investment into the country. And then you look at the next one, No. 2, that’s Canada. And they have 8 percent, and that’s a huge difference.
Edwards says Mongolians are conflicted about China: Without China, Mongolia loses 80 percent of its import and export trade. But with China comes Chinese influence and control over Mongolia’s precious national resources.
In Shanghai, I’m Rob Schmitz for Marketplace.
NPR: Previewing New Series On Mineral-Rich Mongolia
May 18 (NPR) Next week on Morning Edition, NPR's Frank Langfitt will have a four-part series on Mongolia. Extracting Mongolia's vast mineral resources may imperil its traditional way of life.
Mongolia eyes foreign help to extinguish spreading wildfires
ULAN BATOR, May 18 (Xinhua) -- Mongolian Deputy Prime Minister M. Enkhbold has said his country would ask China and Russia for help to extinguish the spreading wildfires should the current situation worsen further.
Enkhbold, also chairman of the National Emergency Committee, made the remarks on Thursday during an emergency meeting held to seek measures to control the wildfires.
The National Emergency Management Authority reported that at present there are a total of 20 forest and steppe wildfires within its territory, among which 14 are still burning.
Some wildfires broke out in mountainous areas, and there was no road for vehicles to pass through. So the firefighters had to walk dozens of kilometers to launch their fire-fighting operation.
Moreover, strong winds and their often changing directions further increased the difficulties for the fire fighting efforts.
Since the beginning of 2012, there have been a total of 129 forest and steppe wildfires in Mongolia and most were caused by human factors.
Mongolia has long been stricken by a drought since this spring and the forests and steppe are highly exposed to fire risks. The National Emergency Committee has ordered local authorities to strengthen their fire prevention work.
Mongolian Education and Unemployment: A Problem of Our Generation
May 17 (UB Post) In nearly every conference, meeting or forum concerning mining, the organizers and concerned parties and participants always seem to have a particular problem with human resources in Mongolia. Observing the recent international conferences on mining and energy – Coal Mongolia, Mongolian Economic Forum, Mining Mongolia and the Energy Conference – numerous delegates representing the mining industry have spoke on difficulties faced by respective industries. One issue remaining from conference to conference, from speaker to speaker: the lack of workers.
The apparent high rate of unemployment can be attributed to a number of factors.
The Mongolian Labor Exchange, commissioned by the Ministry of Social Welfare and Labor, conducted comprehensive research on Mongolian unemployment and released its results last April. It was revealed that the high unemployment rate was due to Mongolians not being qualified for the available jobs even though last month, there were 47,068 active jobs registered at the Mongolian Labor Exchange.
The reason for the lack of qualification according to the research on currently unemployed Mongolians is they are reported to have “low work ethics, unsatisfactory professional and language skills, the inability to take on prolonged work pressure and responsibilities, the rejection of work and salary, lack of teamwork and the inability to use high end technologies.” It also reported that that many workers are not inclined to stay in one position over a long period of time. Yet, one learns basic abilities like taking on pressure and prolonged work from schools.
Mongolians never learned this from our schools. As a person who was educated in a western country, I realize that the difference in middle school education can have vast long-term effects on both the person and society and it seems that the reason for the lack of workers is Mongolia’s education system.
In middle schools in Mongolia, students are heavily institutionalized, following a strict schedule and strict time: remnants of the old Soviet education system. The strict nature of these schools may be effective, but the fact that the middle school students do not practice the skills necessary for work is not learned, most important being charisma and teamwork. Today, Mongolian public schools do not have comprehensive lesson plans on developing practical skills and they are entirely up to the teachers whether to teach them or not. This was so since the Soviet times and although the new market system in 1990 brought about many changes such as the new Education Law, the general lesson plans and teaching methods remained the same, spawning at least two generations of people with no practical skills and the ones that are stably working are the ones that have their own skills and abilities that never depended on the education received from middle schools.
The above research is based on surveys on mining companies. Mongolia lacks specialized training centers.
Another reason that companies lack qualified employees is that the most skilled and able individuals tend to go to other countries for employment, because obviously, the salary in Mongolia cannot be matched to those of other countries.
Architect A. Jargalsaikhan from the Mongolian University of Science and Technology, who has worked as an advisor on many construction projects in Mongolia – both buildings and monuments – said that the construction companies tend to make contracts with Chinese organizations to have Chinese workers come and work at the construction sites as Mongolian workers are risky, have too many productivity issues and pose certain threats to the stable operation of construction.
Now we must understand that we are in a different political and economic system where personal ambition and charisma – all of which were somewhat scolded upon in the pre-1990 Mongolia – are very important for getting employed today.
Atal Bihari Vajpayee Centre in Mongolia upgraded
New Delhi, May 18 (IBNS) The Ministry of External Affairs (MEA) on Friday said it has just completed a major upgradation and modernization of the Atal Bihari Vajpayee Centre for Excellence in Information & Communication Technology at Ulaanbaatar, Mongolia.
A team of experts from the National Informatics Centre (NIC) recently visited Mongolia for this purpose.
The Centre was established by the Government of India in 2003 with a Grant-in-Aid of USD 1 million.
The Centre produces IT experts and helps develop software for Mongolia.
It has become an important facilitator of communication between Ulaanbaatar and 21 regional centres. Members of Parliament utilize the Centre extensively to connect with their constituencies.
"The AB Vajpayee Centre continues to be a shining example of India’s assistance to Mongolia," said the MEA in a statement.
Stop the Tarbosaurus Auction!
May 19 (Wired) Tomorrow, a tyrannosaur will go up for auction in New York City. It shouldn’t. The Tarbosaurus – lot 49315 – was illegally collected and smuggled out of Mongolia.
Fossil theft is a major problem. It can happen anywhere, but dinosaur poaching is especially persistent and pernicious in China and Mongolia. Prime specimens are regularly ripped from the rock to be sold to private individuals elsewhere around the world, all against the heritage laws meant to regulate the responsible collection and curation of dinosaurs and other prehistoric creatures. (In 2009, the United States government returned to China a cache of fossils that had been stolen from that country.) As explained to me by paleontologist and Mongolian Academy of Sciences representative Bolortsetseg Minjin, Mongolia only grants permission for fossil collection to reputable scientific establishments. “Anything against that is illegal,” she said. And excavated fossils either remain in Mongolia, or, with the permission of the Mongolian Academy of Sciences, may be studied and displayed elsewhere under temporary loans.
There is no doubt the Tarbosaurus in question came from Mongolia. All the major Tarbosaurus specimens we know of have been found there. And, according to the specimen’s official description, “The dino was discovered within the past decade and has been in storage in England, still in its field jackets, for the last 2-1/2 years.” Mongolia had fossil collection regulations a decade ago, just as they do today, and the fact that this undocumented specimen went from the field to a private collection outside Mongolia is a sure sign that the specimen was illegally collected and smuggled elsewhere.
The tyrannosaur – as well as a set of several other Mongolian dinosaur specimens – was scheduled for auction several weeks ago. During the past forty eight hours, Mongolian officials and paleontologists have been rallying to stop the auction. Elbegdorj Tsakhia, president of Mongolia, issued a statement yesterday questioning the details of how the Tarbosaurus was collected. If the dinosaur really was discovered in Mongolia’s Gobi Desert, the statement noted, “President Elbegdorj Tsakhia said that it was illegal to auction the T-Rex and the fossil must be returned to Mongolia.” And American Museum of Natural History paleontologist Mark Norell, who is an expert on Mongolia’s dinosaurs and has frequently excavated fossils there, wrote a letter to Heritage Auctions affirming that the Mongolian dinosaurs slated for auction were almost certainly excavated illegally:
In the current catalogue Lot 49317 (a skull of Saichania) and Lot 49315 (a mountedTarbosaurus skeleton) clearly were excavated in Mongolia as this is the only locality in the world where these dinosaurs are known. The copy listed in the catalogue, while not mentioning Mongolia specifically (the locality is listed as Central Asia) repeatedly makes reference to the Gobi Desert and to the fact that other specimens of dinosaurs were collected in Mongolia. As someone who is intimately familiar with these faunas, these specimens were undoubtedly looted from Mongolia. There is no legal mechanism (nor has there been for over 50 years) to remove vertebrate fossil material from Mongolia. These specimens are the patrimony of the Mongolian people and should be in a museum in Mongolia. As a professional paleontologist, am appalled that these illegally collected specimens (with no associated documents regarding provenance) are being sold at auction. [You can see the entire letter at Love in the Time of Chasmosaurs.]
Other paleontologists, volunteers, and concerned parties have been adding their signatures to an online petition to stop the auction, created by paleontologist Neil Kelley. These dinosaurs do not belong in someone’s mansion or at a corporate headquarters. They should be returned to their country of origin. “If we can succeed, the best thing for those specimens is to go back to the country. That’s who they belong to,” Minjin said.
But Heritage Auctions may not budge. When I asked Minjin if the auction house showed any sign of cooperating with the Mongolian government, she said that their response “wasn’t really encouraging.” Now that several statements from Heritage Auctions have been published, I can see what she means.
The president of Heritage Auctions, Greg Rohan, wrote a snippy letter in response to the online petition trying to save the dinosaur for science. “You should all be aware that this auction has been publicicized [sic] broadly for 4 weeks,” Rohan wrote “and the Mongolian Governments request issued today less than 48 hours before the auction is unreasonable and inappropriate.” As if the timing of the protest has anything to do with whether the dinosaurs were obtained illegally or not. And, strangely, Rohan claims that the Tarbosaurus was discovered at a different time than what the auction’s official listing states. While the dinosaur’s description is clear that the tyrannosaur was excavated “within the past decade”, Rohan claimed that “Mongolia won its independence in 1921 and this specimen is obviously quite a bit older than that.” That’s quite a discrepancy, and I have no reason to take Rohan’s word for it. Based on what the official documents state – and the fact that no one even knew that tyrannosaurs existed in the Gobi until Tarbosaurus was described in 1955 – the dinosaur in question was undoubtedly collected during a time when Mongolia’s heritage laws were already in place.
Frustratingly, despite the fact that the Mongolian dinosaurs were illegally acquired and transported, other countries do not necessarily have laws forbidding the import or sale of fossils that have been improperly obtained. The excavation of transport of the Tarbosaurus was illegal, but, now that the dinosaur is here, the dinosaur’s sale might be legal. And Heritage Auctions has not been swayed by the appeals of the Mongolian government and the scientific community. In a statement to Dan Vergano’s Science Fair blog at USA Today, lawyer Carl Soller – who represents Heritage Auctions – said that there appeared to be no legal boundaries to the dinosaur’s auction tomorrow. “Our client has no reason to believe that any laws enforced by the United States have been violated,” Soller said, “and we are unaware that Mongolian law would have prevented export from Mongolia.” The auction is still on.
Whether or not the dinosaur was looted seems irrelevant to Heritage Auctions. They want to keep their centerpiece for tomorrow’s auction – a tyrannosaur they expect to go for about a million dollars. And the company seems unmoved by the implication that such sales only fuel the impression that dinosaurs can rake in massive amounts of cash – a perception that gives more impetus to poachers and thieves who trash field sites for specimens which wind up as status symbols for celebrities.
The Tarbosaurus, Saichania, and other Mongolian dinosaur specimens should be pulled from auction. Rohan’s statement that it is “unreasonable and inappropriate” to protest the auction is a loathsome and limp response. The timing of the objection is irrelevant. These fossils were illegally collected, and auctioning them off only fuels additional criminal activity. To put the dinosaurs on the block tomorrow would be a completely reprehensible action by Heritage Auctions, and I don’t believe that it would be all that difficult to pull the controversial specimens from the schedule.
Fossil poaching is a major threat to paleontology, and robs scientifically-significant specimens from everyone. Speak out against the auction. Sign the petition calling for a stop to the dinosaur auctions, and email Heritage Auctions via Bid@HA.com. These dinosaurs are part of Mongolia’s natural history, and that of our planet. They should be treated as such, and not as home decor for the affluent.
UPDATE (5/19/2012):
I just received the following press release, courtesy of Painter Law Firm PLLC, which states that the auction of the Tarbosaurus specimen will be halted thanks to a temporary restraining order. I have asked for more details on the fate of the other Mongolian dinosaur fossils due to go up for auction tomorrow, and will update this post as I find out more.
Judge Issues Restraining Order Stopping Sale of Possibly-Smuggled Mongolian Dinosaur
May 19 (Painter Law Firm LLC) The Honorable Carlos Cortez, a Dallas, Texas district court judge, granted a “Temporary Restraining Order” (TRO), after an application by Houston attorney Robert Painter, legal counsel for His Excellency Elbegdorj Tsakhia, President of Mongolia.
The TRO prevents Dallas-based Heritage Auctions, Inc. from selling a rare national treasure that paleontology and dinosaur experts believe may have been illegally removed from Mongolia.
The emergency TRO was issued Saturday morning to stop a New York City auction tomorrow of the dinosaur remains to a private buyer in New York City. At issue is an extremely rare near-complete skeleton of a Tyrannosaurus bataar, a cousin of the North American T-Rex.
This is not the first time that looters have desecrated excavation sites. However, this sale is particularly unique. It is of grave concern to officials in Mongolia that Heritage Auctions, Inc. has declined requests to disclose the owner and provenance, or to answer questions about whether the dinosaur was illegally smuggled out of Mongolia. Further, it is rare for a near-complete and mounted dinosaur body, at 24-foot long and 8-feet tall, to be sold as a whole unit.
Mongolia is particularly vulnerable to looters taking advantage of the country. Because of the country’s expansive size, it is very difficult to secure all excavation sites.
When President Elbegdorj learned of this imminent auction, he knew that he had to take action to preserve Mongolia’s history, culture and treasures.
Attorney Painter said, “The temporary restraining order preserves the status quo, while the true ownership of the Tyrannosaurus bataar is legally proven and decided in court. President Elbegdorj was wise to use this legal procedure to protect the interests of the Mongolian people.”
The auction house was served with the TRO on Saturday afternoon. Robert Painter will be in New York City for the auction to ensure that Heritage Auctions, Inc. complies with the TRO terms.
Related:
Tyrannosaurus auction protested by Mongolia – USA Today, May 18
Mongolia Wrestles With Dinosaurs, NATO and Politics
May 19 (New York Times) Squeezed between geopolitical giants Russia and China, Mongolia has long struggled for independence and visibility.
Two events on Sunday promise to raise the global profile of the country of just 2.8 million people: the planned sale in New York of a stunning skeleton of Tyrannosaur bataar, an Asian cousin of Tyrannosaurus rex; and a meeting in Chicago of NATO, the North Atlantic Treaty Organization, which Mongolia will attend as a formal, though not full, partner, for the first time.
The events are freighted with very different emotions.
Mongolia has protested the planned sale of the nearly intact dinosaur skeleton – its teeth alone are six inches (15 centimeters) long – by Dallas-based Heritage Auctions.
The origins of the eight-foot-high, 24-foot-long (2.4 meters high, 7.3-meters-long) raptor is unclear but there are suspicions it came from Mongolia, as this statement from President Elbegdorj Tsakhia shows.
In promotional material, the auction house mentioned the dinosaur inhabited the Gobi Desert, long ago, and in his statement, President Elbegdorj noted that, saying if the skeleton originated in Mongolia, the auction was illegal and “the fossil must be returned to Mongolia.” He called on the auctioneers to immediately disclose its origins.
David Herskowitz, director of natural history at Heritage Auctions, told Bloomberg Business News that the fossil was initially exported to Japan and then to England, from where it entered the U.S. legally and was prepared.
The skeleton is on public display today at Center 548 (548 W. 22nd Street,) New York.
From dinosaurs to a more modern kind of might: President Elbegdorj is due to attend NATO’s annual meeting in Chicago on Sunday, representing a freshly minted partnership with the alliance.
NATO’s Web site reports here on Mongolia’s participation in the new “Individual Partnership and Cooperation Programme” (Mongolia is the first country to have formal relations with NATO on this basis):
Since 2005, Mongolia has collaborated with NATO, in Kosovo and Afghanistan, as a way to counter the enormous power of neighbors China and Russia, neither of which are NATO members. Just over 1,300 Mongolian soldiers have served alongside NATO- or American-led forces, NATO said.
Dubbed the “Third Neighbor” policy, Chinese analysts are following the balancing act closely.
Huo Wen, a Mongolia-based reporter for the state-run People’s Daily, wrote that NATO was “roping in” Mongolia as an “important part of its eastwards expansion strategy.” In the article, he wrote:
“Especially against the background of the United States ‘return to Asia’ strategy, Mongolia’s position within NATO’s strategy becomes increasingly important.”
The China Daily noted the development too, adopting a low-key tone.
As if all that weren’t enough, the country is embroiled in a politics-and-corruption scandal that some fear endangers Mongolian democracy, according to a report in the Wall Street Journal entitled “Genghis Democracies.”
For a Mongolian take on some detail of the corruption allegations rocking politics, follow a report in The UB Post and another by Reuters.
Perhaps as part of maneuvering for elections set for June 28, the current president and his popular predecessor, Nambaryn Enkhbayar, are locked in an intense rivalry that may have led to Mr. Enkhbayar’s recent jailing on corruption charges, Bloomberg Business News reported.
Mr. Enkhbayar was granted bail on Monday and will remain hospitalized after refusing water for 10 days to protest his detention. He and his family have said his arrest last month, on charges dating as far back as 2000, was an attempt by the government to keep him from taking part in the elections, Bloomberg reported.
The vote is likely to be contentious. At stake is management of a massive resource boom that has seen Mongolia’s economy surge 16.7 percent in the first quarter of 2012, after very fast growth in 2011.
Mongolia is debating how to retain control of its wealth in the face of Chinese interest – China currently accounts for more than 80 percent of its import and export trade – and interest from foreign mining companies, according to a report from Bloomberg.
“Our struggle to get political freedom was a long one and we cherish that.We will not let foreign government-owned entities control strategic assets in Mongolia,” Vice Finance Minister Ganhuyag Chuluun.
From Bankruptcy to Buoyancy
May 18 (Mongolian Economy) The energy sector has begun to rid itself of its losses and debts collected over the many years. However, the mindset among society to save and spare energy has not changed a bit. If they don’t learn and teach their children how to save energy, they might not be able to deal with inevitable higher energy expenses. Maintaining balanced household budgets requires that they support a green economy and change their mindset to one for efficiency.
The 72nd Article of the energy law, introduced in 2010 to provide guidelines to the fuel energy sector passed by Parliament states that actions directed towards the fuel and energy sector should support this sector, which nearly collapsed due to inefficient operations, before it falls at the nation’s feet. In order to save this sector, a kilowatt of electricity would have to cost MNT 115 by 2014. This directive is meant to provide citizens with stable electricity as well as the ability to live warm and comfortable lives. Thus, energy prices, which have steadily increased, must be carefully correlated with national demand. Protective actions for consumer rights have already been taken .
Operators in the mining sector pay MNT 100 for every kilowatt of electricity, the highest fee regarding energy imposed in Mongolia. Residents in the central provinces pay around MNT 84 per kilowatt. However, if this price does not reflect true market value, losses will be impossible to avoid.
End users consume electricity at a true cost of over MNT 100. Liberalised prices are scheduled to be financed through MNT 15 billion in subsidies from the annual state budget up until 2014. It is assumed by then that energy producers will operate independently by then and the payouts will stop. That means people will have to pay real prices when that happens.
“The price for energy in Mongolia is below the international average”, said T. Tserenpurev, the head of the Energy Regulatory Committee .
If people continue to live as they do now, then households in Mongolia will have to pay large sums for their electric bills.
Discounts for Saving
A household that consumes a maximum of 150 kilowatts an hour of electricity will pay MNT 79. The Energy Regulatory Committee will increase that price once a household passes that threshold, according to the aforementioned 72nd Resolution.
“Although the price of energy have increased from MNT 79 to MNT 84, it’s not enough to make up the losses”, explained N. Myagmarsuren, coordinator at the Energy Regulatory Committee.
Mongolia has the cheapest prices for electricity for consumption at night. It is also included in the list of countries where a discount and welfare policy is enforced, allowing, it to enjoy cheap prices for electricity. That calls for a change in mindset. Beginning in 2014 one kilowatt of electricity will cost MNT 115. Imagine how much more you will pay then.
The price of energy is cheaper than its true value, which results in losses to producers. Energy producers experienced a loss of over MNT 39 billion last year. The energy law was amended in 2011, stating it would pursue “profitable prices close to real prices”.
However, instead of seeking profits, the committee has been operating only to make up for its losses. It is no secret that there is widespread opinion that price hikes would put a great deal of pressure on people’s lives. For that reason, the price for energy will increase gradually until reaching MNT 115 per kilowatt two years later.
Prices that account for all expenses incurred through production would have the following results:
(1) Better quality services: Companies with special licences function to produce, deliver and supply energy and heat. Higher prices would allow energy producers to operate without incurring losses, and therefore allow improved technical services from servicing companies. That would be passed on to provide customers with more reliable and quality services as well.
(2) Investment: A more efficient price scheme would attract more foreign investors. Prices that fail to earn profits will not attract anyone’s attention or investment dollars.
(3) Cost savings: Families would be forced to pay more mind to their energy consumption and use more energy-efficient thinking.
(4) Green habits: Energy savings are key to the green energy movement.
Indexing energy
When the new price is introduced in 2014, analysis and research to their impact can begin to help develop a price index. This index would be used to adjust price depending on the expenses incurred by fuel costs (coal and oil as well as their transport).
Such costs comprises up to 50 percent of spending in the energy sector. There is also the currency exchange rate to account for. Because all of the equipment needed in this sector must be imported, trade must be done in foreign currencies. The same goes for imported energy, which amounts to over 200 million kilowatts in addition to interest collected from long-term credits each year. Indexed energy prices would allow the sector to adjust electricity and heating fees so they align with fuel prices, exchange rates, and consumption price indexes.
“Energy consumption is increasing every year. Supplying rising demand has become a headache for the sector”, said N. Nyamsuren, another coordinator at the Energy Regulatory Committee . “Of course, a new energy source is needed immediately. Also, people must learn to save energy. There is so much heat lost. We lose so much heat through windows, the walls and doors. We are too wasteful”.
He added, “The sector has recovered over the last two years. Debts are being lessened quickly. Before, debts were greater than profits. Now the opposite is true. That debt will soon vanish. But that doesn’t mean everything will be fine. These are just the first signs of improvement”.
Last year, most of the debt from coal mines and power plants were repaid. Representatives from this sector have confirmed that it has switched over to a policy that obligates immediate payment for the coal it purchases. Experts also have noted that foreign investments in the sector have increased.
From now on, the energy sector might operate with fewer losses and function with a positive balance sheet.
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"Mogi" Munkhdul Badral
Senior Client Manager / Executive Director
CPS International LLC
Telephone/Fax: +976-11-321326
Mobile: +976-99996779
Email: mogi@cpsinternational.mn
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CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSLicense Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.
Disclosure/Disclaimer
CPS Securities, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions mentioned in correspondence from CPS International.
CPS International advise this email contains general information only and does not include advice. In preparing this communication, CPS International did not take into account the investment objectives, financial situation and particular needs of any person. As with any speculative mining company there are significant risks.
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