2012 inflation numbers are not out yet. CPI rose 13.1% Jan-Nov 2012
Mongolia Economic Growth Moderates to 12.3% as Coal Exports Slow
January 14 (Bloomberg) Mongolian economic growth slowed last year to 12.3 percent after moderating expansion in China curbed demand for its exports of coal.
Gross domestic product, as measured by production, grew last year to 13.9 trillion tugrik ($10 billion), the National Statistical Office of Mongolia said on its website today. The country’s exports fell 9 percent to $4.38 billion and imports rose 2.1 percent to $6.74 billion, resulting in a trade deficit of $2.35 billion, according to the statistics office.
A mid-year decline in the price of coal, the nation’s biggest export product, was the largest reason for the slowdown from 2011’s record 17.3 percent pace of expansion, said Coralie Gevers, the World Bank (CBW)’s country director for Mongolia. Slower economic growth in China, which buys 92 percent of Mongolia’s exports, also contributed.
“There was a global slowdown which they could not avoid,” particularly a drop in coal exports to China, Gevers said in a telephone interview from Ulan Bator. The growth rate “is along the lines of what was expected by the IMF and the World Bank. It’s still among the highest rates in the world. GDP growth is not going to be a problem over the next few years.”
Measured by expenditures, Mongolia’s GDP expanded 12.2 percent to 14.6 trillion tugrik, according to the statistics bureau. Gevers said the World Bank uses GDP figures measured by production for its analysis.
Mongolia’s economic growth has been driven by a mining boom and influx of capital to bankroll major projects, such as the $6 billion Oyu Tolgoi copper and gold mine operated by Rio Tinto Group. (RIO) A milestone was reached in December when the mine’s concentrator was turned on, starting a process that will allow the mine to export copper concentrate later this year.
Mongolia’s other flagship project has not fared as well. Erdenes Tavan Tolgoi LLC, which is developing the nation’s largest coal field, has had to delay its initial public offering because of weak capital markets. In addition, the Mongolian government’s talks to bring in foreign investors including St. Louis-based Peabody Energy Corp. (BTU) and China’s Shenhua Group Corp. to develop the coal deposit have stretched 17 months without an agreement.
Last year’s GDP growth rate is a concern, Dale Choi, an analyst at private equity company Origo Partners, said in a telephone interview from Ulan Bator. “A lot of this is from investment stalling, a weak external environment and a weak internal environment as well,” Choi said.
Centerra Gold Reports 2012 Gold Production of 387,076 Ounces and Provides 2013 Guidance
TORONTO, ONTARIO--(Marketwire - Jan. 14, 2013) - Centerra Gold Inc. (TSX:CG) -
Centerra Gold Inc. announced today that its 2012 consolidated gold production totalled 387,076 ounces, which includes 315,238 ounces of gold from the Kumtor mine, located in the Kyrgyz Republic and 71,838 ounces of gold from the Boroo mine, located in Mongolia.
"The Boroo operation performed well in the fourth quarter, exceeding our gold production forecast for the year by about 7,000 ounces. The heap leach operation received final permitting and was restarted in the quarter, reaching solution breakthrough sooner than anticipated. We have also begun discussions with the new Mongolian government on a way forward for the Gatsuurt deposit. We have not included any production from Gatsuurt in our production guidance for 2013 due to the associated uncertainty of approval and commissioning of the project."
Centerra's 2013 gold production and unit costs are forecast as follows:
(ounces of gold)
($ per ounce produced)
($ per ounce produced)
550,000 - 600,000
342 - 373
853 - 931
55,000 - 60,000
1,055 - 1,151
1,225 - 1,336
2013 Exploration Expenditures
In Mongolia, approximately $7 million is allocated for exploration programs that will focus on expanding the mineral resource at the Altan Tsagaan Ovoo ("ATO") project and evaluating targets in the greater ATO district.
2013 Capital Expenditures
Centerra's capital expenditures for 2013, excluding capitalized stripping, are estimated to be $107 million, including $75 million of sustaining capital and $32 million of growth capital.
Capital expenditures (excluding capitalized stripping) include:
(millions of dollars)
(millions of dollars)
Mongolia (Boroo & Gatsuurt)
At Boroo, 2013 sustaining capital expenditures are expected to be $10 million primarily for raising the tailings dam at Boroo ($6 million), and maintenance rebuilds and overhauls.
Growth capital for the Gatsuurt deposit is forecast at $1 million, related to environmental studies.
LionGold Scraps Proposed Mongolia Acquisition Due To Mining Prohibition Law
January 14 -- LionGold Corp Ltd (“LGC” or the “Company”) refers to its announcements on 23 June 2011, 29 June 2011, 4 July 2011 and 24 April 2012 (“Announcements”) in relation to the Proposed Mongolia Acquisition. LGC also refers to the Circular, in particular, paragraphs 5.10.8 to 5.10.11, 5.10.36 to 5.10.40 and 5.11.19 to 5.11.20 wherein information relating to the Proposed Mongolia Acquisition was provided.
(Terms defined in the Announcements and the Circular have the same meanings when used herein)
LGC wishes to announce that owing to uncertainties arising from the application of the Mongolian law on “Prohibition of exploration and exploitation of mining at river, water resources, water protected areas and forests (2009)”, it has deemed its due diligence investigations to be unsatisfactory. The Company has informed the Vendor, Mr Nelson Fernandez accordingly and the parties have agreed to terminate the conditional sale and purchase agreement dated 23 June 2011 without any recourse to either party.
Save for professional fees aggregating approximately S$580,000, the Company has not expended any other funds in or for the Proposed Mongolia Acquisition.
Asia Resources: UPDATE ON THE BUSINESS DEVELOPMENT OF MONGOLIAN MINING RIGHT
January 15, Asia Resources Holdings Limited (HK:835) --
This announcement is made pursuant to the Inside Information Provisions (as defined under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”)) under Part XIVA of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and Rule 13.09 of the Listing Rules.
Reference is made to the announcement (the “Announcement”) of Asia Resources Holdings Limited (the “Company”) dated 2 January 2013, in relation to, among other matters, the business development of the Mongolian mining right of the Company and the new legislation passed by Mongolian Parliament that may affect the Iron Mining Licence. Unless otherwise defined, capitalised terms used herein shall have the same meanings as those ascribed to them in the Announcement.
As disclosed in the Announcement, the Board has sought further legal advice from its legal advisers as to Mongolian laws on the provisions of the new law (the “Law”) on “To prohibit mineral exploration and mining operations at headwaters of rivers, protected zones of water reservoirs and forests areas” and its impact on the Iron Mining Licence. The representatives of the Board, comprising the three executive Directors, have also visited Mongolia and met with the Director of the Ministry to discuss further on the impact of the Law and to explore any possible remedial actions.
On 11 January 2013, the Board has received a second legal opinion from its legal adviser as to Mongolian laws and was advised that the Law has not been implemented until 2012 when regulations related to its implementation were issued and the boundaries of river basins, forested areas and protected zones, which defines the Protected Area affected by the Law, were decided. According to the legal advisers as to Mongolian laws, there were some exploration and mining licenses already cancelled upon the Law becoming effective.
It is also estimated that more licenses relating to mines located within the Protected Area will be cancelled under the Law. To the best of the information, knowledge and belief of the Directors, as at the date of this Announcement, the list of licences to be cancelled is not officially issued, but the Board was also advised that such list could be announced by the Ministry any time.
The Board was further advised that, although there is no specific time for the cancellation of the Iron Mining Licence is provided up to the date hereof, the cancellation of licences will first, be executed in several designated provinces, including Selenge Aimag, where the Mongolia Mine locates. The Mongolian government will formally notify the Company upon the cancellation of the Iron Mining Licence.
The Board is of the view that, should the Iron Mining Licence be cancelled, further impairment in the fair value of the Mongolia Mine shall be made, and the amount to be impaired would be decided subject to further independent valuation results. The Board will then analyse the valuation results and assess the impact on the Group’s financial performance.
The Board is also considering any possible actions that the Company could take to minimize the loss arising from the cancellation of the Iron Mining Licence should it materializes.
Further announcement will be made as and when appropriate to update the Shareholders and potential investors if formal notification of cancellation of the Iron Mining Licence is received.
Shareholders and investors should exercise cautions when dealing in the securities of the Company.
Mongolia Growth Group Ltd. Publishes December 2012 Monthly Letter to Shareholders
January 15, Mongolia Growth Group Ltd. (TSX:YAK) --
December 2012 Shareholder Letter
To the Shareholders of Mongolia Growth Group Ltd.,
I want to start this letter by apologizing for not publishing a November letter. This was necessitated by the need to have no changes in any information prior to the final review of our application for our recently completed TSX Venture listing. Until January 8th, our shares traded on the Canadian National Stock Exchange (CNSX) and they now trade on the TSXV. We believe that moving to a more widely followed exchange will increase the liquidity of our shares and our ability to continue to attract new investors.
At the same time, this change has not occurred without considerable expense. To date, management estimates that this listing change has cost the company in excess of CDN $300,000 and taken up thousands of hours of management’s time. Additionally, this expense has also been partly responsible for the company showing a small loss before stock option expense for the past two quarters. Fortunately, this process is now behind us and I would like to thank everyone who has put their time into helping with this process.
During November and December of 2012, MGG did not complete the purchase of any property assets, but continued to dispose of “held for sale” assets. We are still actively involved in researching a number of sizable property assets that we are looking to purchase, but there can be no certainty that we will be able to agree to acceptable terms for a transaction.
On the 26th of November, we filed our third quarter financial results. Our company reported a combined pre-tax profit of $27,516 for the three months ending September 30, 2012 when you exclude share based payments. I should note that this profit included a $199,080 unrealized gain on fair value adjustment on investment property. This was a non-cash accounting entry and is not expected to be recurring. Excluding this fair value adjustment, we reported a loss of $171,564. We had expected to report a slight profit for the quarter, but changes in the Mongolian Togrog/Canadian Dollar exchange rate, TSXV listing expenses, certain previously unrecorded acquisition expenses and pre-development expenses in Mongolia that could not be capitalized, continuing marketing expenses and higher than expected claims at Mandal, our insurance company, led to the small loss that you see. We anticipate that our current small recurring losses will become small gains upon the conclusion of the TSXV listing expenses and the completed lease out of our three office properties undergoing renovations.
Division Pre-Tax Profit (Loss) Before Share Based Payments
Property $359,398 ($160,318 excluding a property fair value adjustment)
Certain highlights from the three month period ending September 30, 2012 include;
• Disposed of investment property with a fair value of $519,065 for a $45,065 gain
• Rental revenues increased to $407,769
• Quarter end vacancies declined moderately to 2.6% vs. 4.5% % of rentable properties in the second quarter
• Initiated a sizable renovation program on three office assets. When fully leased, these assets are expected to substantially increase rental revenues with minimal additional expected costs
• Revamped our leasing website, http://www.mggleasing.com which includes portfolio assets and 3rd party assets that are for lease or sale
• Net premiums earned of $107,025
• Incurred total insurance claims of $72,793
• Has grown to 73 total employees (65 Mongolian and 8 foreign)
For more information on our third quarter results, please see our interim financial statements and Management Discussion & Analysis as filed on SEDAR.COM
In summary, we remain happy with the progress that our company continues to make. While it is somewhat disappointing that we remain slightly short of profitability, these results are in line with our expectations as we continue to spend on longer term growth initiatives at the expense of short term economic gains.
On a final note, I’d like to point out that as investors, we like to talk about the upside we see in Mongolia, but the unfortunate truth is that the gains from the current boom are not being evenly distributed to all Mongolians. As in any developing economy, education is a key component in economic advancement. Here at MGG, we want to ensure that students in the ger districts have access to the same materials that students in the downtown find essential. In 2011, we selected 3 schools to support by donating over 450 text-books and other reading materials to. This year, we have continued our support of these schools by donating an additional 300 books. Our intention is to substantially increase our efforts towards education as our company begins to show regular profitability. As long term investors in Mongolia, we see education as a primary way to facilitate continued economic growth and ensure that everyone participates in this growth. Below are a few pictures taken at the various schools when the books were donated.
MGG employees, speaking to senior students at school 17:
MGG employees, introducing the selection of books to the senior students and principal at school number 37:
Principal, high school manager and Librarian at school number 17 reviewing the donated books:
Students at school 67 receiving their new books:
I want to conclude by thanking all employees of Mongolia Growth Group, those in our property business and those at Mandal Insurance, for their help in making 2012 amazingly successful for our company. In particular, I want to thank our shareholders as Jordan and I could not have created this company without your investment in MGG. As stewards of your capital, we take this responsibility very seriously. We have big plans for 2013 and want to once again thank everyone for their continued support.
Chairman & CEO
Mongolia Growth Group Ltd.
Thoughts From the Frontlines on Asia’s Next Tiger
Mongolia is growing rapidly, but the media continues to downplay the country’s economic expansion. After spending 5-months on the ground, the opportunities seem even greater now to invest in the world’s most exciting growth story.
January 15 (Capitalist Exploits) Yes, we are beating this (Mongolia) to death once again. However, when we believe in a trade we go for it. We’re speculators, plain and simple. We’re often early and we’re sometimes wrong. That’s the rub. With Mongolia we think we’re right, as we said in our post, The End of The World… So, Why Are We Buying NOW in Mongolia?
To get a feel for a place you either have to spend significant (I don’t mean a few day or a week) time on the ground, as we do, or you have to have well-placed friends you trust…ideally both!
Sometimes even when your gut tells you to jump, human nature keeps you from going all-in exactly when you should. Mongolia seems to be at that point right now. One of my favourite tells is when the media goes on a rampage against the country, as it has in recent months. Mainstream media can’t stop fixating on a “corrupt” (is there really any other kind?) government and the (yawn) Oyu Tolgoi negotiations. How can any rational person believe the Mongolians are going to hobble this project?
Meanwhile, Peace Avenue (the main road in Ulaanbaatar) is a virtual parking lot with all the vehicles and people buzzing around.
Don’t get me wrong, there are issues, but they are overblown in our opinions. Therefore, I want to touch on some specific economic points the media fails to cover. As you’ll see, Mongolia is truly an entrepreneur’s wet dream.
#1: Think outside of the mining sector
When most investors think Mongolia they think mining. Oyu Tolgoi and Tavan Tolgoi will be mainstays of the economy for decades; there’s no doubt about that. Though, the mining sector is subject to political risk from both Mongolia and its neighbors, something that is too uncertain for our liking. Why not get away from it all and invest in a sector not dependent on mining?
Speaking with a friend who operates in the mining supply chain, tyres specifically, he mentioned the challenges he faces supplying product to the mines. Logistics is a big one, not to mention finding local talent. But beyond that, we spoke about how difficult it is essentially being hostage to commodity prices and Chinese demand. Think about it, who wants their business to suffer if the Dalai Lama comes to Mongolia again and the Chinese shut the border?
Going beyond mining, some of our good friends on the ground are doing just this. They are operating businesses that run the gamut from foreign exchange services to real estate to cashmere de-hairing, fire safety equipment and textiles…and they are making a killing.
Mongolia is the only FSU country that is a fully-fledged democracy. It is easy to start a business, there are no foreign exchange controls and FDI is encouraged, regardless of what has happened in the mining space as of late.
Some sectors I have been investigating include agriculture, fire safety, cashmere trading, and import and export. I forgot to mention parking structures, valets for restaurants, maid services, interior design, personal chefs, anything to do with luxury goods…you get the point.
#2: Import? Why not export?
As a species not keen on change, when people move somewhere new they tend to want the creature comforts of home. Therefore, there is a tendency to fill the void with imports, and it can be justified as a business opportunity.
Unfortunately, for the aspiring importer, Mongolia is well saturated with a variety of consumer products. For example, Nomin (a local conglomerate) alone has exclusivity for over 400 international brands. Just walk into the State Department Store and you’ll see what I mean. Beyond that, trading works on volume as margins are low. Unfortunately, Mongolia’s population of 2.8 million isn’t going very far, very fast.
But I digress; I foresee the real opportunity being in export. Find out what the country produces and identify an end-market. One product ideal for export is vodka. Mongolians have been distilling vodka for hundreds of years and it just so happens to be that they produce some of the best in the world. The major players are Gem, UFC and APU and they are selling vodka retail for under $20 per litre. The global vodka market is in the billions, so being successful with vodka could be highly profitable.
Another exciting industry is meat processing. Mongolia has 40 million head of cattle and, to reiterate, has 2.8 million people. That’s almost 16 cattle per person! With so many animals, whoever moves into meat processing for export will make multiples on their investment, if executed correctly of course. It would be hard to fail, as there are 1.6 billion hungry Chinese down south who are demanding ever-greater quantities of protein.
#3: Mongolia should be an export powerhouse in agriculture and electricity
A frequently repeated question of this century will be “what does China want.” Two things I forecast the country needing are food and electricity; two things Mongolia has the land for and potential to do very well.
Upon arrival in Mongolia it doesn’t take long to realize how desolate the place is. After all, it is the least densely populated country on the planet. This sets the stage for Mongolia, and the rest of Central Asia for that matter, to become the breadbasket – and “battery” – of the continent.
Supplying that which China needs is already underway with mineral resources, though if the Chinese can’t eat and power their homes, then they won’t want copper and coal. Surely this will take time to evolve, but if the Mongolian government is smart and incentivizes clean energy production and agriculture, the country could be wealthy for centuries.
#4 Move to Mongolia if you want to gain maximum leverage
I think one of the best kept secrets about Mongolia is that no one wants to live there. As I write this, it is -42 Centigrade, walking on the street is noxious due to exhaust fumes and the air pollution is among the worst in the world. However, for the intrepid entrepreneur the bounties can be enormous.
Once you arrive, identify a problem (there are plenty) and go from there. The proverbial door remains wide-open in many industries and until people open shop, they won’t have direct leverage to the growth of what could become Asia’s next Tiger.
On that note, if you are pumped about the opportunity but less excited about moving to Mongolia, you can invest without leaving home! Back in July 25 investors, hedge fund managers and entrepreneurs joined us for our Meet Up in Ulaanbaatar. If you missed it you can still get the scoop from those who are making their fortunes in Mongolia right now. Our Mongolia: Boots on the Ground video and investor package will get you up to speed. Get it here with our 10-day money back guarantee if you aren’t completely satisfied.
“If you have men who will only come if they know there is a good road, I don’t want them. I want men who will come if there is no road at all.” – David Livingstone
CapitalistExploits.at Announces the Release of Mongolia: Boots on the Ground
A comprehensive collection of video interviews, special reports and country research targets equity and real estate investors
Ulaanbaatar, Mongolia - January 2 - CapitalistExploits.at, an online resource dedicated to frontier markets investing has just released a comprehensive collection of video interviews, special reports, proprietary essays and country research on investing in Mongolia.
The package, aptly named: Mongolia: Boots on the Ground is available for purchase as a digital download containing over 3 hours of video with 13 CEO's, investment bankers, real estate professionals and entrepreneurs focused on Mongolia.
For more information and to purchase the package please visit here.
The package includes over $1,500 in bonus content, including the R2 Research Mongolia Real Estate Report 2012, the Oxford Business Group Mongolia country report and Resource Investment Capital’s Mongolia 101 report.
Video interviews were conducted with the following:
Christopher DeGruben, CEO of M.A.D. Investment Services
Harris Kupperman, CEO of Mongolia Growth Group (OTC:MNGGF)
Oscar Mendoza, Country Director for Prophecy Coal (OTC:PRPCF) and Founder and Managing partner at Mongolia Asset Management
Lee Cashell, CEO of APIP Group
Bilguun Ankhbayar, CEO Discover Mongolia
Eric Zurrin, Director General Resource Investment Capital
Nick Cousyn, COO of BDSec brokerage
Jim Dwyer, Director Business Council Mongolia
Altai Khangai, CEO Mongolia Stock Exchange
Chris Melville, Partner Hogan Lovells
Ganzorig Ulziibayar, President Mandal Insurance and the MFA
Roy Dongen, Founder Ganymedes Consulting
Travis Hamilton, Managing Director Khan Asset Management
Transcripts and corporate presentations from each are also included, as is a series of essays from some of the top frontier markets investors operating in Mongolia.
The Mongolia: Boots on the Ground package is ideal for investors looking to allocate capital into Mongolia's equity or real estate markets now.
Chris Tell, co-founder of CapitalistExploits.at commented, "We're proud to be bringing this product to investors looking to deploy their capital into one of, if not the fastest-growing economies on the planet. We spent months on the ground meeting with CEO's, bankers, attorneys and local business owners researching and putting this package together."
He added, "We held an exclusive Meet Up in Ulaanbaatar this past July that was attended by 25 investors from around the world, all focused on Mongolia. This package was inspired from that gathering and it therefore offers the best opportunity we know of to gain unique insights and understanding of Mongolia without actually putting your 'boots on the ground'."
CapitalistExploits.at is offering the product for sale on their website at the following link here and also through a network of global affiliates.
For information on offering the Mongolia: Boots on the Ground package to your clients you may contact Capex Ltd. at the link below.
Our Mission: Educate and enlighten capitalists around the world to the exciting opportunities available in Frontier Markets by bringing our collective thoughts to the table, and by collaborating with our global networks and the Capitalist Exploits community.
We’re a couple of globe-trotting capitalists looking for unique and profitable investment opportunities in exotic and Frontier Markets, typically in the private equity space. We’ll share them with you, not because we’re philanthropists (God no!), but because, well… Our objective is to create value in the world by enabling opportunity, not by charity.
Rosneft pressures Mongolia again over fuel prices
January 16 (news.mn) The Mongolian economy is heavily dependent upon Russia for fuel since the collapse of the former Soviet Union. Due to the increase of import fuel prices by 50-100 MNT last December primary products prices have also increased by up to 50-1000 MNT at 17 different markets in Ulaanbaatar city.
The Russian oil giant Rosneft is putting pressure on Mongolia suggesting an increase in fuel prices again.
The notice said that they intend to increase diesel prices by 90 US dollars per ton as well as other fuels by 30 US dollars per ton.
This is the set price of the first quarterly fuel supply being shipped to Mongolia which is already on the way. Rosneft`s move left no choice for Mongolia. If Mongolia refuses to pay the increase there will be no fuel reserve in February.
An official commented that “Since the supply is on the way, we have no choice but to increase retail prices.”
Mongolia’s Tavan Tolgoi Seeking State Loan, CEO Says
January 14 (Bloomberg) Mongolia’s Erdenes Tavan Tolgoi LLC, the country’s largest state-owned coal company, is seeking a $400 million to $500 million government loan to repay debt and build infrastructure, its chief executive officer said.
“Our financial situation is very complicated at the moment and we have to cover our debts and finance all our infrastructure projects and operations,” Yaichil Batsuuri, a former member of Parliament who has led Erdenes Tavan Tolgoi since October, said in a telephone interview yesterday.
Erdenes Tavan Tolgoi, which signed a $250 million contract in July 2011 to supply coal to companies including Aluminum Corp. of China Ltd., gave about 300 billion tugrik ($214 million) to the government’s Human Development Fund in 2011 and 2012, the UB Post newspaper reported in September, citing the company’s then chief executive Baasangombo Enebish. The fund hands out cash to Mongolian citizens as part of a government effort to redistribute the nation’s mining wealth.
The mining company is developing Mongolia’s Tavan Tolgoi area, the nation’s largest coal field, with 6.4 billion metric tons of reserves. It’s also preparing for an initial public offering overseas, which has been postponed at least twice because of market conditions and a lack of laws to regulate its equity offering.
Mongolia’s government has promised every citizen 1,072 shares of common stock in the company.
Erdenes Tavan Tolgoi coal exports halted due to unpaid bills
January 14 (news.mn) Erdenes TT failed to pay service fees to the Altangovi company that is in charge of the coal transport loading facility area in Tsagaan khad that is linked to the coal border crossing point Gashuunshukhait. Therefore coal transport is suspended temporally.
According to an official source the coal loading and transporting operation has been suspended since last Friday. Due to this suspension the transportation companies have come to a standstill meaning some of them had no choice but to protest against it.
A source said that Erdenes TT coal transport suspension has also affected China causing its transport to come to a standstill too.
The so called reformist Government is in negotiations to bailout Erdenes TT for 200 million US dollar via the Development Bank of Mongolia, but the bailout process is slow. If the Government does not bailout the project coal exports by Erdenes TT could potentially be halted for an extended period.
BDSec Weekly (Jan 7-11)
January 14 (BDSec) --
• Last week (Jan 7th - 11th), MSE TOP20 index gained 0.56% to 18,103.8 points whilst BDS index went up by 0.83% to close at 3,985.0 points and total market cap reached 1,819.6 bil MNT (~ 1,311.0 mil USD), which is 0.6% higher than the previous week’s value. In total of 759.9 million MNT (~567.9 k USD) worth of equity trading was executed on the stock exchange.
• Successful bond issue as well as government plan to encourage manufacturing and infrastructure sectors are having positive effect on MSE listed manufacturing stocks.
Mongolia's proposed law to affect mining
ULAANBAATAR, Mongolia, Jan. 14 (UPI) -- Mongolia's proposed new mineral law threatens foreign investment, warns the country's business council.
The Business Council's 250 members include mining giant Rio Tinto -- whose Oyu Tolgoi copper-gold project is expected to account for about 30 percent of Mongolia's gross domestic product when it reaches full production -- Peabody Energy, General Electric Co. and Mitsubishi Corp.
The council's letter to Mongolian President Tsakhia Elbegdorj's office, obtained by the Financial Times, warns: "The impact of the draft law on the minerals industry will be to halt current minerals exploration and development in Mongolia and greatly discourage any future investment. ... Collateral damage is likely to include all other sectors of supply, including but not limited to the construction and real estate sectors, imposing a significant chain-reaction burden on the banking and financial institutions which they may not be able to withstand and leading to a deepening crisis."
While year-end statistics have not yet been released, just in the first half of 2012, Mongolia's economy grew 13.2 percent, figures from the government show.
Mineral product exports account for more than 90 percent of Mongolia's exports.
Dale Choi, an associate with private equity investment firm Origo Partners MGL, told Bloomberg that the proposed law would make mining projects aligned with the interests of the state. Also, settlements as small as a village would be allowed to decide whether or not to accept prospecting and exploration on land near them, Choi said.
"Nobody expected that the law would be so tough on mining," Choi said, adding that the majority of the population might be in favor of the law, particularly because local people feel they don't directly benefit from mining as does the country as a whole.
The proposed new law is also seen as an attempt to boost support for the re-election of Elbegdorj in the country's presidential elections, slated for June.
In their election campaigns last summer, many members of parliament said they would get tougher on foreign miners. And in the fall, more than 20 parliamentarians had petitioned to rewrite the investment agreement that governs Oyu Tolgoi.
In a report on Mongolia's evolving foreign investment regime for the East Asia Forum, Julian Dierkes, associate professor at the Institute of Asian Research, University of British Columbia, said "where foreign investors see resource nationalism, Mongolians see an attempt to preserve the resource wealth of their country and to reap its benefits for current and future generations."
Still, there is some element of "knee-jerk nationalism" in Mongolia and the Mongolian parliament, "with some leaders ignoring the fact that ownership of mineral resources does not necessarily automatically lead to profit," Dierkes wrote.
"Mongolia needs some of the skills, technologies and capital that foreign investors can provide," he stated.
Worries mount over draconian Mongolian mining bill – mining.com, January 15
DRAFT MINERALS LAW POSES RISKS OF REVERSING PROGRESS MONGOLIA HAS MADE SIGNING OYU TOLGOI INVESTMENT AGREEMENT
January 14th (Origo Partners) --
Highlights of Events
· The Office of the President of Mongolia has published a revised draft Minerals Law on its website on December 7, 2012 (http://www.president.mn/mongolian/node/3080). Feedback is welcome via the e-mail address firstname.lastname@example.org until January 18th, 2013.
· The current Minerals Law has 66 Articles and was introduced in 2006. The +100 pages long draft Law with 145 Articles is a revision to the existing framework that has been pending for the last few years and seeks to introduce a new regulatory regime with many new concepts. It is a notable shift toward a more state-centric framework, increasing regulation and requirements with particular emphasis on national, local and environmental interests whilst reducing security of tenure relative to the existing Law and most globally recognized Mineral Laws.
· The Mongolian National Mining Association (“MNMA”), the largest exploration and mining industry group in the country, and Business Council of Mongolia (“BCM”), which represents the largest domestic and foreign investor base in the nation, are leading the industry’s response to the President’s Office.
· The Legislative Working Group of BCM has submitted a +200 page Memorandum to the Office of the President on January 7, 2013 calling the draft contrary to its purpose of “promoting economically viable mining”, with the likely impact “to halt current minerals exploration and development in Mongolia”, ”greatly discourage any future investment” and “damage Mongolia’s brand as an investment destination”. BCM has called for open dialog and public comment for at least a 6 month period.
· Head of drafting subsection of the taskforce responsible for the draft Law, lawyer D.Munkhtuya, vowing that “no comment will be unattended”, recently highlighted that “feedback from investors and producers is insufficient” and that “only less than a dozen companies provided comments”.
· Consultation with the Mongolian public and potentially impacted stakeholders, including exploration and mining companies, is scheduled by the President’s Office for January 18, 2013 at Blue Sky Tower.
· A review of the draft Law by the Ministry of Foreign Relations and other ministries and agencies is expected before being submitted to the Cabinet. By Mongolian law, the Cabinet is obliged to state its position regarding the draft in 30 days, which will be a critical stage to determine if the draft law has wider support from the Government and the Parliament.
· It is expected that a final draft will be submitted to the Parliament in Spring Session in April, and will rank high on the session’s agenda. It is anticipated that the bill then would be finalized before the end of the session and Presidential elections of 2013.
· Presidential elections are expected in late June of 2013. Incumbent President Ts. Elbegdorj is expected to be again nominated by the Democratic Party of Mongolia (“DP”), which controls 33 seats in the 76 seat legislature and in coalition with minor political parties has formed the Government after the Parliament elections of 2012 and appointed Parliament Speaker (Chairman).
· Timing of the proposed legislation is aimed to be finalized before the Presidential Elections and leaves no choice but to conclude that the legislation is one component of overall DP nationwide election campaign strategy.
· The development strikingly resembles another precedent of largely politically motivated and hastily approved legislative initiative in the run up to the Parliament Elections of 2012 – Strategic Entities Foreign Entities Law (“SEFIL”), which is proposed to be already amended by the Government
· Given minerals sector reform was an election priority of the DP in the 2012 Parliamentary elections and the draft Law is coming directly from the President’s Office there is a high likelihood that it will be passed in some shape or form
Origo Partners View
· Noting a natural maturity and some positive developments in the draft Minerals Law, we find it encouraging that the Office of the President is actively seeking consultation ahead of legislating such a critical law to Mongolia and its economy. However, there are a number of proposed Articles and areas requiring clarity and interpretation that we find are of a significant concern and not consistent with the purpose of the law as outlined in Article 1, to “promote economically viable mining”, coherent with the national interests of Mongolia by being “within economic, social and environmental policies of the State”, as explained by members of the taskforce. We highlight the draft Law is a dramatic move away from the free market principles of private sector which has driven recent Mongolian rapid economic growth boosting infrastructure development, training, living standards and rankings in anti-corruption, transparency and ease of doing business.
· In our view the proposed draft Law in its current form would significantly impact Mongolia’s relative attractiveness for foreign investment capital and create in fact a globally uncompetitive investment destination by increasing regulation, state rights, the effective tax rate, various kinds of mandatory requirements and obligations to license holders. The proposed law would likely to limit the ability to advance most projects to the stage of commercialization and have a profoundly negative impact on Mongolia’s economy and tax revenues by reversing progress that Mongolia has made since signing of landmark Oyu Tolgoi Investment Agreement in October of 2009. The legislation would make it unlikely to establish similar investment agreements in the future. Moreover, approval of the law as presented will very likely to send Mongolia back into the bottom 10 scorers in the rankings of attractiveness of mining jurisdictions in the world (refer to Exhibit A below) and reduce likelihood of significant exploration pipeline of discovered future world class deposits on a scale of Oyu Tolgoi (which is yet to reach commercial production) and Erdenet (in production since 1978).
· Furthermore, we note that just a preliminary observation of the impact of previous similar legislative policies, such as the Windfall-Profits Tax, the Nuclear Energy Law, sliding scale royalties, cancellation of VAT for mining exports, the SEFIL and approval of budget with amending Oyu Tolgoi Investment Agreement shows that levels of investment will be impacted across a wide range of sectors – not just mining. Thus the significant increase in bureaucracy, uncertainty and effective rate rate/local ownership requirements resulting from this draft would be expected to be felt across a broad range of sectors and result in a re-evaluation of the country’s sovereign risk profile, with the likely result of repelling, instead of attracting foreign direct investment. We find it surprising that the draft law is yet to attract any significant Mongolian political and media attention.
· As we understand, no study has been undertaken by the draft law taskforce to quantify potential impact of the draft law and our key point is that the legislation is leaning to the abstract ideological concepts instead of being based on economic reality.
· We strongly believe that at the very minimum a study and quantification of the potential implications of proposed changes is required to ensure all stakeholders and the draft law initiators understand in depth the likely impact to future foreign investment, development of the natural resource sector and net benefit to Mongolian society .
· We are confident that Mongolia would benefit from engaging internationally reputable, independent consultation and review from globally recognized experts who previously advised other emerging market, natural resource lead economies on their legislative framework.
Summary of key concerns regarding the draft Law
· Effective tax rate in excess of 50% for strategic deposits: The implications of the current drafting are that the Effective Tax Rate (“ETR”) will significantly exceed 50 per cent for strategic deposits. If the ETR goes beyond an acceptable range, the empirical evidence tells us that investment will be likely to be stifled. Evidence shows a strong correlation between countries that have high levels of investment in the mineral sector and a balanced taxation system, typically an ETR of 40%-50% for base metals. Countries with tax systems that lack clarity or exceed 50% ETR see significantly lower overall tax receipts and lower investment into their economies.
· Lack of clarity: The current drafting lacks clarity on many points leaving investors unclear as to where they stand on many issues. Examples include security on license tenure, due process, dispute resolution, and overlaps with existing legislation among numerous other points. Without acknowledgement of existing agreements and licenses there would be little investor and corporate confidence that the proposed and future legislation and contracts will have standing, which is a cornerstone for attracting foreign investment.
· Increased bureaucracy: The proposed draft will result in a lack of a centralized point of control and increased bureaucracy. This will result in no centralized entity providing oversight or a framework for dispute resolution and increased complexity.
Further significant issues include:
· The a lack of guidance in relation to the laws proposed implementation, in particular whether it will be applied retrospectively in strict sense;
· Articles 13-15 and 86 create significant uncertainty over whether the legal standing of existing licenses will be honored;
· Article 66 appears to circumvent the Foreign Investment Law and outlines potential ownership structures that would be untenable;
· The law currently contains no provisions for entities holding and complying with the conditions of a Mining License to be granted a “privileged right” to obtaining a Processing License;
· The inflationary impact of a flat line minimum level of domestic use across all industries will damage the competitiveness of the industry (in particular existing foreign groups) and raise concerns regarding the availability of appropriately skilled domestic companies; and
· Article 69, as it currently is worded, could require a company to mine low grade, uneconomic material and/or not achieve optimal returns for shareholders as stated under the feasibility study which was the basis of their contribution of the majority of the capital to develop the mining operation.
· The inclusion of the incremental steps for prospecting and processing licenses and addressing the increasingly common practice of groups seeking to convert exploration licenses to mining licenses without having undertaken exploration and feasibility studies on a comparable level required in most other mining regions is a positive development if implemented with the required security of tenure.
· The nature and extent of liability to executive management and board of directors needs to be clarified so that company's management understand and can manage exposure appropriately (both for local and foreign individuals). Without knowing the potential liability this could significantly impact and limit certain future activities.
· State-owned entities shall have a preemptive rights to licenses.
THE POLITICAL ENVIRONMENT
· Significant conceptual changes in the draft come from the 2012 DP election platform such as strengthened state regulation and control, limitation of state participation to strategic deposits, support for participation of national enterprises and citizens, significant local powers, hence, we believe the proposed minerals sector reform has been “allocated” to the President within overall political strategy and “division of labor” within the party. This apparently makes sense in view of critically important for the Presidential elections rural local vote. It’s would be worth remembering that the incumbent closely defeated the former President N.Enkhbayar in 2009 due to a victory in Ulaanbaatar as opposed to rural vote, where Mongolian People’s Party( “MPP”), current major opposition, is traditionally strong.
· We see no significant contenders from the MPP of the stature to challenge the incumbent.
· We believe that overall legislative framework has already been started be advertised through simplified key concepts (state participation and control, support for national companies, etc.) to reach the masses of voters and given average Mongolian voter would react positively and strongly to those concepts, we would be hardly surprised by Mongolian popular and political support for the bill, the President and the DP.
· Following overall hostile to foreign investment trend of recent legislative policies, the initiative further compounds debate in Mongolia about what constitutes ‘fair business’ with foreign investors and indicates a widening “disconnect” between both sides.
· Political motivation has been constant feature of Mongolian investment story as it went in recent years in somewhat different direction and fundamentally up to now we believed in consensus opinion on core issues to emerge relatively soon with the policy to support progressive economic development.
· Although we still believe in the long term Mongolian growth story, eventual pragmatism and progressive economic development policy, the approval of the draft minerals law in its current form would lead us to re-examine our expectation for prospects of such policy in short and midterm. It appears that Mongolian authorities are intent on learning lessons from previous painful experiences such as Windfall Profits Tax by going through over similar experience yet again.
· The uncertainties created by previous legislative initiatives we mentioned above have already significantly impacted the ability and terms on which mining and exploration companies operating in Mongolia can raise funding and advance projects towards production with most equities with significant Mongolian exposure trading currently at or near 52 week lows. The key drivers for this concern relate specifically to market perception of political, contractual and legislative stability in Mongolia.
· The proposed Minerals Law draft in its current form is expected to compound this trend and its approval would likely to significantly alter Mongolian investment landscape going forward with likely negative impact on the next round of funding for underground mine development at Oyu Tolgoi (potentially adversely influencing the value of the Mongolian Government’s stake in the project) , capital raising and IPO for Tavan Tolgoi and repayment of current and issuance of next tranche of planned Mongolian sovereign bonds.
Corrs and Clayton Utz land hot Mongolian deal
January 15 (Lawyers Weekly) --
Firms: Corrs Chambers Westgarth (Aspire Mining Limited); Clayton Utz (Noble Group)
Deal: Agreement struck between Aspire and Noble regarding the funding of a railway link to Aspire’s Ovoot coking coal project in Mongolia
Key players: Corrs acted for the ASX-listed Aspire Mining and Clayton Utz acted for Noble. Both companies are long-standing clients of their respective firms.
The Corrs team was led by M&A partner Russell Philip (pictured), with support from banking and finance partner Jeremy King and associate James Nicholls.
The Clayton Utz team was led by Sydney-based corporate partners Rory Moriarty and Bruce Cooper.
Deal significance: Noble have agreed to contribute to the pre-development costs associated with Aspire’s new railway linking the Ovoot coal mine to the Trans-Mongolian railway, which is being progressed through Aspire subsidiary Northern Railways LLC. Noble will also have an option to acquire 10 per cent of Northern Railways should it be successful in being awarded a rail concession from the Mongolian government to construct the proposed new railway.
The Noble Group is headquartered in Hong Kong while Aspire is an ASX-listed company.
“The Corrs team worked closely with our client on this complex deal, involving a mix of equity and debt funding for Aspire and Northern Railways, as well as providing a framework for developing the supply chain logistics arrangements for delivering Ovoot coal to market through Mongolia, China and Russia,” said Russell.
As part of the arrangements, Noble will subscribe for shares in Aspire, taking its shareholding to just under 15 per cent of Aspire, with a representative also being appointed to the Aspire Board.
Aspire’s share price has more than tripled since the deal was announced less than a week ago.
China, Mongolia to deepen cooperation in mining, energy sectors
ULAN BATOR, Jan. 15 (Xinhua) -- China and Mongolia have broad prospects to deepen cooperation in mineral resources and energy, a senior Chinese official said Tuesday.
Zhang Xiaoqiang, deputy director of China's National Development and Reform Commission, said the two countries should enhance cooperation in mining and energy areas through joint development of big mining projects and construction of transportation infrastructure.
Zhang made the remarks at the third meeting of the China-Mongolia cooperation commission on mineral resources and energy.
Boosting cooperation in mineral resources and energy, which account for the bulk of China-Mongolia economic and trade relations, is in the interests of both countries and can help Mongolia turn its advantages in resources into economic development, Zhang said.
Mongolian Mining Minister D. Gankhuyag highlighted the rapid development of Mongolia-China economic and trade cooperation, saying that Mongolia has seen Chinese investment rapidly increasing in the country in the last few years.
The minister also suggested the two sides strengthen cooperation in deep processing of resource products and adopt measures to solve difficulties in coal transportation.
U.S. Embassy releases 2013 Mongolia Investment Climate Statement
January 15 --
A.1 OPENNESS OF GOVERNMENT TO FOREIGN INVESTMENT
The Government of Mongolia (GOM) has consistently said that it supports foreign direct investment (FDI) in all sectors. As recently as December 2012, President of Mongolia, Ts. Elbegdorj, publicly stated that the GOM will keep key foreign investment commitments because it recognizes the value of FDI for Mongolia.
However, investors assert that Mongolia’s support for FDI seems more an aspiration than a reality. Specifically, they report that government action affecting both FDI and resource extraction show a declining GOM commitment to the transparent rule of law and free market principles.
U.S. Embassy: Year in Review: 2012 Highlights
January (U.S. Embassy, Mongolia) The year 2012 was a great year for the United States and Mongolia, as we celebrated the 25th Anniversary of Diplomatic Relations.
The United States and Mongolia share many common values, and there are many programs and projects that the U.S. Embassy works closely with Mongolian partners to implement in areas such as defense, civil society, empowerment of women and youth, and fostering a greater inclusion of people with disabilities.
Here are 10 Highlights from 2012.
1. The bilateral relationship between the United States and Mongolia continued to broaden and deepen since its establishment in 1987. And in the year 2012, together we commemorated the 25th anniversary of diplomatic relations throughout the year.
To view related speeches, photo galleries, read articles and remarks, click here.
2. On July 9, Secretary of State Hillary Clinton visited Mongolia. She met with President Elbegdorj and Prime Minister Batbold, addressed the fourth meeting of the Community of Democracies Governing Council and the International Women’s Leadership Forum, and helped launch the Leaders Engaged in New Democracies Network (LEND).
To read Secretary Clinton's remarks at the International Women’s Leadership Forum, click here.
3. In 2012, we welcomed the ninth U.S. Ambassador to Mongolia, Ms. Piper Anne Wind Campbell, who has served 22 years in diplomatic service. On August 24, 2012, Ambassador Piper A.W. Campbell presented her credentials to the President of Mongolia. Ambassador Campbell officially assumed her duties from the time the credentials were presented.
To read the article, "Ambassador Piper Anne Wind Campbell Presents Credentials to the President of Mongolia", click here.
4. Both Mongolia and United States held elections in 2012, giving the citizens of both countries the opportunity to participate directly in democracy by either running for an office or by casting their votes. On June 28, 2012, Mongolians voted in the seventh parliamentary election and elected 76 members of the State Great Khural. On November 6, 2012, President Obama was re-elected to a second term in the 57th presidential election.
To read the article, "U.S. Election Celebrated in Mongolia", click here.
5. Also in 2012, we took part in two events designed to promote regional peace and security, Khaan Quest 2012 and the 2012 Security in East Asia Seminar (SEAS).
Khaan Quest 2012, the seventh combined joint exercise hosted by the Mongolian Armed Forces in partnership with USARPAC, was held last summer, with the participation of more than one thousand members of the military from the U.S., South Korea, India, Canada, New Zealand, Australia, Japan, France, the U.K., Germany and Mongolia.
To read the article, "Khaan Quest 2012 Opening Ceremony Demonstrates Continued Strength of Multinational Relationships in the Pacific-Region", click here.
Embassy Ulaanbaaar hosted the last part of SEAS 2012, an annual program that brings together participants from the East Asia and Pacific region to discuss security issues. Participants from throughout East Asia and the Pacific region gathered with Mongolian representatives of government, NGOs, and universities to discuss disaster response and mitigation.
6. The American Cultural and Information Centers in Ulaanbaatar and Khovd each renovated a new program room with funding from the State Department. These new spaces are a resource for public programs, events, and meetings, held by both Embassy and public libraries, which will benefit many residents in both cities.
To read the article, "Public Affairs Section opens new Program Room", click here.
7. In September 2012, Embassy Ulaanbaatar and the U.S. Agency for International Development (USAID) held “The Art of Caring,” an art exhibition in support of the rights of persons with disabilities. At the exhibition opening, six Mongolian paralympian athletes shared with audiences their stories of journeys and triumphs that led them to Athens, Beijing and London. The exhibit was hosted by the 976 Gallery.
8. In the last year, Embassy Ulaanbaatar invited two speakers to Mongolia.
In July, Robin Quarrier, a counsel for the Center for Resource Solutions, visited Mongolia to discuss women and renewable energy with representatives of civil society and government. Besides attending a roundtable meeting at the Gender Center for Sustainable Development and the International Women’s Forum, Robin Quarrier also met with representatives of several NGOs, research centers, and journalists to talk about renewable energy.
To read the article, "Counsel for the Center for Resource Solutions visits Mongolia", click here
In October, 2012, Dr. Judy Shepherd, Associate Professor of the University of Alaska, Fairbanks, came to Mongolia to discuss social service needs in remote areas, as well as the potential role of the emerging social work profession in addressing these needs. She traveled to Dundgovi aimag to meet with small business owners, local government and NGO representatives.
9. Last year, the Energy and Envirionment Project implemented by the Millennium Challenge Account –Mongolia (MCA-Mongolia) and funded by the U.S. Government’s Millennium Challenge Corporation (MCC) concluded more than two years of product subsidies towards energy efficient stoves and other products. During the course of the project, MCA-Mongolia helped about 100,000 households in Ulaanbaatar’s ger districts to save money and contribute to a cleaner environment.
To read the article, "MCA-Mongolia Product Subsidies End", click here.
10. USAID and Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) collaborated in a thermo-technical retrofitting project that will reduce greenhouse emissions and help make Ulaanbaatar a more environmentally friendly city. This 13-month project used clean energy – through solar power and thermal insulation – to increase heat levels in the school buildings. In addition to introducing these technologies, local contractors, engineers, and architects received on-the-job training on application of environmentally-friendly techniques, and lessons on clean energy were also provided to the teachers and students.
To read the article, "USAID partners with GIZ to reduce greenhouse emissions in Mongolia", click here.
Mogi: Reported in previous issue, but couldn’t say no to Bloomberg
Mongolian Plans to Build First Refinery by 2015, Montsame Says
January 14 (Bloomberg News) Mongolia targets ending its reliance on imported fuel by 2015 with the completion of the country’s first oil refinery, the state-owned Montsame News Agency reported.
The plant will be able to process two million metric tons of oil per year, sufficient for domestic needs, the news agency reported Jan. 12, citing a government meeting held that day. Japan’s Toyo Engineering Corp. (6330) will build the refinery, in conjunction with unidentified Mongolian companies, with financing for the project to be discussed with Japanese banks next month, the report said.
The refinery is planned for Darkhan city, according to the report. Darkhan, which means “blacksmith” and is located 140 miles north of the capital Ulan Bator, was established in 1961 with assistance from the Soviet Union as an industrial and agricultural hub.
Domestic production of gasoline will help cut prices 6-8 percent, according to Montsame. The investment in the refinery could be recouped in four years, the agency reported. Mongolia currently relies on imported gasoline and other oil products, nearly all of which comes from Russia.
Mongolia has been in talks with Japanese companies to build the refinery since at least 2011. An article published by the news portal infomongolia.com in June 2011 said the facility would be built within three years. The report said $600 million was expected to be invested in the project.
Former president N. Enkhbayar moved to different prison
January 15 (news.mn) The former president, the head of MPRP, N.Enkhbayar was delivered to detention center 441 or Gantskhudag prison at 10.00 pm on Monday from the hospital of detention center 401 where he had been for treatment. After three stages in the courts he was sentenced to 2.6 years in prison.
An official source from the Court Decision Enforcement General Office said:
“Detention center 401 or the transit center is the place to hold a convict until the prison where he should serve his time is determined. Every convict is transferred from the detention center to prison. In accordance with this rule, as a convict N.Enkhbayar was transferred to detention center 441 or Gantskhudag. The move is not because of the announced hunger strikes by MPRP supporters.”
Hunger strike of mothers for Enkhbayar underway
January 16 (news.mn) Supporters of the former president, the head of MPRP N.Enkhbayar, have been on a hunger strike for 150 hours at the MPRP party building. Currently four women are on a wet hunger strike; seven women first called the hunger strike demanding for N.Enkhbayar to be released from prison on January 9th, but two protesters were delivered to Sukhbaatar district hospital due to health problems.
Some elders who supported these women`s moves arrived to support them at the Mongolian People`s Revolutionary Party building on Tuesday.
The supporters of N.Enkhbayar said that another five women who came from the countryside are to join the hunger strike. They have been advised see doctors first in order to have a health diagnosis to avoid serious damage before participating in the strike.
Trial for former chairman of Mineral Resources Authority postponed
January 14 (news.mn) The trial for the former chairman of the Mineral Resources Authority of Mongolia postponed until January 28. The trial was scheduled to take place at 8.00 am at the Bayangol District Court today but attorneys failed to attend to the Court hearing. D.Batkhuyag has been accused of abuse of power and corruption issuing mining licenses illegally during his term of office. The Anti-Corruption Authority revealed that D.Baykhuyag, former chairman of the Mineral Resources Authority of Mongolia abused power issuing over 120 mining licenses illegally, violating the National Security Council`s decree to limit exploration licenses issued during their investigation.
D.Batkhuyag was also convicted for reinstating South Gobi Sands four mining licenses and transferring a license to his friend N.Jargalsaikhan, the executive director of Zelem company. In accordance with the investigation those five mining licenses expired so were cancelled by the Mineral Resources Authority inspectors.
Mongolia ranks #75 of 177 countries in 2013 Economic Freedom
January 14 (Business-Mongolia.com) Mongolia slightly improved its ranking in the 2013 Index of Economic Freedom, published annually by The Wall Street Journal and The Heritage Foundation, which was released yesterday. Out of 177 countries evaluated, Mongolia ranked #75, with a numerical score of 61.7, two-tenths of a point above its 2012 score, high enough to be categorized as “Moderately Free” and above the global average score.
The world average score is 59.6; the Asian regional average is 57.4. Mongolia ranked seven places below Kazakhstan but above Slovenia, Ghana, Croatia and Uganda. For the 19th consecutive year, Hong Kong was ranked #1 globally (89.3 points), followed by #2 Singapore, #3 Australia and #4 New Zealand. North Korea ranked last, #177 of 177 with a point score of 1.5. The full report in an interactive format is available free at http://www.heritage.org/index/country/mongolia
By way of comparison to Mongolia at #75, Russia ranked #139, China #136, India #119, South Korea #34, Japan #24, USA #10, and Canada #6. Launched in 1995, the Index evaluates countries in four broad areas of economic freedom: rule of law; regulatory efficiency; limited government; and open markets. Based on its aggregate score, each of the 177 countries graded was classified as “free” (i.e. combined scores of 80 or higher); “mostly free” (70-79.9); “moderately free” (60-69.9); “mostly unfree” (50-59.9); or “repressed” (under 50).
The world average score of 59.6 was only one-tenth of a point above the 2012 average. Since reaching a peak in 2008, the Index editors noted, global economic freedom has continued to stagnate. The overall trend for last year, however, was positive: Among the 177 countries ranked in the 2013 Index, scores improved for 91 countries – including Mongolia — and declined for 78.
Population to reach up to 3 million in 2017
January 15 (news.mn) The National Statistics Committee updated the population rate between 2010 and 2040.
The estimation was made based on the nationwide population and property census of 2010. Experts said that the census would be helpful to develop a demography and economical program.
The estimation was made over six different versions.
According to the first of these six versions the population of Mongolia would be 3 million by 2017. The population was estimated to reach up to 3.9 million in 2040.
The versions that showed the structure of age demonstrated that there would be a trend of aging in 2040.
While the demographic weigh was 46.7 percent in 2010, it is estimated to be 48.7 percent in 2040.
On the other hand, the number of elderly would increase and the number of births would decrease.
The aging trend in population would be seen to increase especially from 2030 in Mongolia. By 2040 7.9 percent of the population would be elderly. This is twice the current amount. For sex statistics it is estimated that there will be more women than men.
According to the population rate in aimags, the least densely populated aimag would be Zavkhan with a decrease of twice the current amount. In contrast the population in Umnugovi would increased by double the population.
Foreign Investment to Mongolia: Restrictions and Comparisons with Canada
By Julian Dierkes
January 14 (UB Post) There has been a flurry of writing on foreign investment in Mongolia in English-language media recently, from newspaper accounts to more scholarly arguments from think tanks and the like. To my mind, many of these writings have taken the perspective of a foreign investor, rather than the perspective of Mongolian policy-makers or any Mongolian, really.
Since the Chalco bid for South Gobi Resources prompted the passage of a Foreign Investment Law by the Mongolian parliament in May I’ve been struck by some of the parallels between this law and its counterpart in Canada. Below I examine these parallels and Mongolian policy regarding foreign investors in light of the recent decision by the Canadian government to approve two bids by state-owned companies for companies in the Canadian oil sector.
Feeding the Hungry Dragon
One of the most substantial pieces on Mongolia has been a policy update for the Canadian Defense and International Affairs Institute (“Feeding the Hungry Dragon: Canada, Mongolia and China’s Resource Strategy”, November 2012) by Charles Krusekopf and Hugh Stephens, two authors definitely worth paying attention to. Krusekopf is the founder and continues to serve as the Executive Director of the American Center for Mongolian Studies. [Disclosure: I serve on the Executive Committee of the Board of Directors of the ACMS.] Stephens has had a stellar career with the Canadian foreign service and in the private sector, mostly in Asia. He knows policy-makers and policy-making processes in Asia intimately.
In their piece, Stephens and Krusekopf argue that Mongolia offers a cautionary tale for the Canadian government as it makes decisions about resource investments in Canada by foreign investors. They echo some of the concerns – or complaints – voiced by many other writers about foreign investment in Mongolia. They argue that the foreign investment law has raised the political risk for investments in Mongolia, particularly for Chinese investors, but as a quasi-collateral damage, for all foreign investors.
Similarities and Differences between the Mongolian and Canadian Foreign Investment Law
Before I turn to developments in Mongolia, a quick note on the parallels between the Canadian and Mongolia Foreign Investment Law. This is relevant as Canada is not only an established mining jurisdiction, but has been identified in Mongolia as a potential model for regulatory decisions about the extractive industry.
The greatest similarity is the fact that such a law exists and that this law demands a government review of foreign investments in certain industries.
The Canadian government recently reviewed the bids of two Asian state-owned companies for Canadian companies. Chinese CNOOC bid for Nexen, a company active in the oil sands, and Malaysian Petrobas planned to purchase Progress, a natural gas company. These bids were approved on December 7 after months of delays and active debate.
With their approval the government announced that in the future bids from state-owned enterprises (SOEs) would only be approved under “exceptional circumstances” and that bids exceeding $330mil from SOEs would require review, while private bids would only be scrutinized if they surpassed $1bil. The argument that the government presented for the restrictions on SOEs focused on the fear that such bids would put an important sector of the Canadian economy that was emerging in a free market context under more or less direct control of a foreign government. Memorably, Prime Minister Harper argued that, “When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments.” While the government denied that this was a response specific to Chinese investments, clearly the decision was made in a context of expectations of increasing investments from China.
The Mongolian law has also made an explicit distinction between private and SOE bids. It outlines sectors that it applies to (the resource sector is included, naturally) and thresholds at which different kinds of reviews are triggered. A large bid by a foreign investor or any bid by an SOE would thus trigger a review by parliament.
One of the differences between the Canadian and Mongolian context is that decisions on FDI in Canada come in the context of a stable regulatory regime that offers predictability and the attempt to balance investors’ expectations with Canadians’ needs. Stability in the regulatory regime has not been the strong suite of Mongolian mining regulation.
Mongolia as a Cautionary Tale?
Resource nationalism has been one of the themes that non-Mongolian writings about a the Mongolian context have focused on. This is generally equated with some evil movement aimed at nationalization of resource assets.
In Mongolia this claim is most commonly linked to the demand by some parliamentarians and parts of civil society that the Investment Agreement for the Oyu Tolgoi mine should be revisited.
But one observer’s resource nationalism is another person’s attempt to preserve the resource wealth of a country and to reap its benefits for current and future generations. The former is a foreign investor, while the latter is a Mongolian.
I would be the first to agree that the process by which Mongolian policy-makers have arrived at some decisions has not been ideal (in the sense of a careful decision that is based on a thorough and dispassionate analysis of available information) – in fact, this process has been awful at times, including the unproductive broad calls for renegotiation without acknowledgement that such renegotiations require the agreement of both parties – but I cannot fault Mongolians or their leaders for their desire to get this decision “right” and their fears of getting it “wrong”.
Striking the appropriate balance between material needs, social aspirations, environmental and cultural protection, and, yes, financial rewards for investors, is not an easy decision. Jurisdictions that have had decades to arrive at appropriate mechanisms for this decision are still struggling with these issues.
Clearly, discussions and legislative initiatives in Mongolia have raised political uncertainty in investors’ eyes. But have enough investors been scared to have an impact on Mongolia? Is the OT mine not such a gigantic project in a resource-hungry world that scaring off some investors might not have a negative impact?
Sure, there is a line where all investors might be scared, but I do not think that Mongolia has crossed that line. Witness the Chinggis Bond sale late last year, raising $1.5b, but attracting orders for ten times that amount. Yes, Mongolia with its BB- S&P rating is paying 5 1/8% on these bonds, but that is cheaper credit than Italy has been able to get recently, so not too many bond investors seem scared off. In the end, there are many investors in the world who have read the news that Mongolia was the fastest growing economy in 2011 and who want to participate in this presumed bonanza.
If a country is so dependent on mining for its future, is a slowdown not a reasonable cost to pay for a more careful (if not always carefully executed, and sometimes even recklessly so) deliberation?
After all, the natural resources in question are unlikely to vanish in Mongolia (or in Canada) and nor is demand for them, at least in the medium-term future.
It is important to note, however, that foreign direct investment seems to be somewhat of an example of herd behaviour, especially in the mining industry. The perception of political risk might thus be more important in some circumstances than the actual risk. This is certainly more the case for a place like Mongolia where much of the information (including this discussion) is about perception rather than a measured empirical reality and where information about the country is still relatively limited internationally.
Canada and Mongolia are not alone in the world in wrestling with the appropriate regulation of the natural resource sector. While Canada has a long-established resource sector and its provinces have developed regulatory practices over many years, the need and scope for regulation in Mongolia is much more urgent and larger given the sudden nature of the expansion of its mining industry.
The greatest hurdle to the development of a successful regulatory regime (i.e. one that makes the greatest possible benefit to all Mongolians possible while minimizing social convulsions and environmental impacts associated with rapid development) are the selfish actions of leaders. Mongolian decision-makers must surely be aware of the responsibility that they are carrying for ALL Mongolians.
The next challenge is an on-going lack of policy-analysis and policy-making capacity within Mongolia. As the demands for policy-making are accelerating with the impact of a mining boom on all areas of government activities and social relations, this will be what might hold Mongolia back, not a lack of foreign investment.
When members of the mining industry in advanced industrialized countries complain about governance and regulatory uncertainty in places like Mongolia, they would do well to note shared challenges and some of the parallels in the solutions that policy-makers hit upon.
There ARE lessons in the current discussions for Mongolia, to be sure. An awareness of the perception of regulatory initiatives abroad is surely important to build up.
Mongolian policy-makers might also put themselves in the shoes of the next generation of Mongolians when it comes to investments. If the current generation succeeds in building (financially) sustainable success in the current boom times to carry them through leaner years that will certainly come, then this success might well include some version of a sovereign wealth fund.
Such a fund would seek to diversify its holdings internationally and would be regarded as an SOE in some jurisdictions. If Mongolian policy excludes some forms of such investments now, policy-makers should not be surprised if they will be excluded in the future.
Julian Dierkes is an associate professor at the University of British Columbia’s Institute of Asian Research in Vancouver, Canada. He has been actively building interest in and expertise on Mongolia at his university and in Canada more broadly for some years. He is the editor of Change in Democractic Mongolia – Social Relations, Health, Mobile Pastoralism, and Mining (Brill, 2012). He has received some donations to support research on Mongolia and Mongolian graduate students from private individuals and corporations in the mining industry, and the Canadian government in the past. Follow him at twitter.com/jdierkes or read his “Mongolia Today” blog posts at blogs.ubc.ca/mongolia
Mongolia Confronts Modern Malaise
Country Faces Pollution, Traffic and Other Ills As It Reaps Riches From Mining
ULAN BATOR, Mongolia, January 14 (WSJ)—The world's coldest capital is seeing the downside of its country's rush from nomadism to modernity.
The air in Ulan Bator is choked with smoke from fires that now-settled nomads burn in their homes to stay warm in minus 30-degree Fahrenheit weather. Traffic is so bad from all the new car owners, it's faster to bundle up and brave a 10-minute walk than to drive short distances.
A sparsely populated nation of herders, Mongolia has gone from post-Soviet basket case to one of the world's fastest growing economies, thanks to a mining boom. Money has flooded in to exploit deposits of coal and copper, mainly to sell to China, the biggest consumer of natural resources, which sits conveniently next door.
That's a big contrast to the post-communist era, when roads in Ulan Bator were empty and the big concern was whether the city's hulking power plant, its sole source of power and for many people steam heat, would get through the winter. For some at least, basic needs have given way to desires filled by global luxury brands like Burberry and Mercedes Benz, which have come to the capital.
But now the land of Genghis Khan is struggling with the fallout from that growth. Besides the pollution and the traffic gridlock, a backlash has developed against the mining investments meant to enrich the country. Many people are concerned the big projects give away too much to the Chinese, who many Mongolians fear and hate, sprouting from centuries of war and occupation.
The big mining wealth isn't trickling down to everyone. While the economy grew 17% in 2011 and around 12% last year, unemployment is 9% and a third of the country's 2.8 million people live in poverty. Prices of milk and meat, which make up most of the Mongolian diet, rose 50% the past year as the money supply swelled and the economy heated up. A United Nations official visiting Mongolia in early December said the mining boom has "left behind" the poorest sectors of society.
Politicians seeking to block a Chinese company from buying a Mongolian coal mine passed a controversial foreign investment law in April. Then the government in October sought to renegotiate the terms of a deal Mongolia struck with mining giant Rio Tinto PLC in 2009 to develop the country's biggest project, a $7 billion copper mine called Oyu Tolgoi. Rio declined to comment.
The new investment law requires big foreign investments in mining, banking and telecommunications to gain approval of the central government's cabinet or parliament, an uncertain process in the country's topsy-turvy democracy. The jailing of an ex-president on a corruption conviction and presidential elections set for May have added to a sense of uncertainty.
A separate proposed law to more tightly regulate mining in Mongolia is also drawing the ire of the business community. The law "threatens to shut down the entire minerals industry of Mongolia," said the Business Council of Mongolia last week.
New foreign direct investment has already dried up since mid-2012, local government officials and business leaders say.
The new law "doesn't look good for foreign investors. It is showing Mongolia is not a safe place to invest," said Ganzorig V., director of strategic planning for Shunkhlai Group, one of Mongolia's business conglomerates, with investments in real estate, vodka, telecommunications and mining.
Even as foreign investment has slowed, Ulan Bator has seen an influx of urban migrants attracted by the prospect of jobs, a more modern lifestyle and education for their kids.
Many packed the felt tents they used in the countryside and erected them in the city. But instead of dotted across the steppe, miles between neighbors, the tents are jammed next to each other without sewage disposal, water and heating.
So far jobs continue to lure the nomads to the city. Hotels and apartment blocks are rising. In a showroom for a condominium project called River Stone, two-bedroom units with wood floors and triple glazed windows imported from Germany cost $80,000. That's cheap by Western standards, but a lot for a country where per capita income is $3,500.A new bridge built with aid from the Japanese government opened last year, spanning the railway tracks that bisect the city. The new connection set off a real estate frenzy, said Baasansuren B., a project manager for River Stone (Mongolians often use an initial for their last name.)
He points to another developer's building across a frozen creek. "They've raised prices 20% since the bridge opened," he said.
Construction workers are busy putting the finishing touches on the River Stone complex despite the brutal cold. One man wearing thick mittens moves paving stones into a wheelbarrow while another pounds a mound of frozen earth with a pick. They make $10 to $15 a day. "They work to live," Mr. Baasansuren said.
Across town, a quarter of Ulan Bator's population live in traditional circular felt tents, known as gers, or in rudimentary concrete houses, jammed together onto hillsides. After an influx of population from the steppe, Ulan Bator now holds more than 40% of the country's people, up from about 30% of the population at the start of the millennium.
In these makeshift neighborhoods, known as ger districts, roadside vendors sell bags filled with coal or wood, which locals burn to keep warm, a major contributor to the city's air pollution. Each bag, about the size of the Manhattan yellow pages, costs 1,200 tugriks, or 90 cents. It routinely gets to -30 degrees Fahrenheit at night in December. The high temperature is around zero.
For water, locals rely on communal pump houses where it costs a few cents to fill up a bottle. Going to the bathroom means a trip to a primitive unheated outhouse. For showers, locals go to bathhouses, which cost about a $1, so some people avoid washing regularly.
The migration from the steppe to Ulan Bator has created a metropolis without the infrastructure to support it. Charities are trying to fill the gap. Showers for kids is one example: Because they aren't getting clean at home, the Mongolian chapter of the Rotary Club raises money to build showers and toilets in schools.
In a school for the deaf near a ger district, audiologist and doctor Dangaasuren B. shows off the communal shower room the Rotary built. Most of the 300 pupils use the shower once a week in 15 minute shifts."Parents are very happy and we can see very clean kids," he said, wearing three sweaters and a white lab coat to keep warm inside the school. He leafed through a notebook covered with a picture of soccer star David Beckham in which a caretaker keeps records of the showers.
"Before they were dirty. It's very successful," he said.
UB air pollution and the recent Beijing air pollution crisis
January 14 (Cooperative Institute for Research in Environmental Sciences) I’ve gotten a couple of requests over the past few days to compare the recent air pollution crisis in Beijing to UB air pollution. So let’s try to take a quantitative look.
First: Please note, this is not an exhaustive analysis but a cursory glance to give some perspective to the air pollution problem in UB.
Alright, onto the comparison. Al Jazeera said, PM2.5 measurements were “600 micrograms per square [they must have meant cubic] metre at some monitoring stations in Beijing and was as high as 900 on Saturday.” This information does not specify critical information like what sort of time interval these measurements were performed over, but at least it gives us a ballpark number. Additionally, the @BeijingAir twitter feed (which, by the way, is the site that inspired @UB_Air!) reported that the highest PM2.5 24-hr average in the past few days was 630.6 micrograms per cubic meter (measured on January 13). Let’s use this number for our comparison. Though again, I have to put some heavy caveats and disclaimers on this: This is one measurement at one location within a giant city.
But how “crazy” is a PM2.5 24-hr average of 630.6 micrograms per cubic meter? @BeijingAir usually gives a very short health statement at the end of their tweets, like “unhealthy” or “hazardous.” But for this one? It reads “Beyond Index.” This value exceeds the WHO PM2.5 24-hr average guidelines by a factor of 25.
What about PM2.5 measurements in UB? Currently it is difficult to find this information in an up-to-date manner (check out a previous blog post to see one small way this is changing in the next few months). But we can compare the Beijing value to PM2.5 measurements in UB from previous years. Check out this chart from Annex A of the Dec 2011 World Bank report on UB air pollution (pdf here) that shows monthly UB PM2.5 values at different locations with in the city:
PM2.5 monthly average mass concentrations at locations within Ulaanbaatar. Source: World Bank Dec 2011 report, Annex A.
I’ve modified this table from the original to just focus on the winter months, when the pollution is at its peak (and also most comparable to this January 2013 Beijing air pollution crisis). I’ve also put red squares around monthly values that are comparable (or far exceed) that 630.6 micrograms per cubic meter 24-hr PM2.5 measurement from @BeijingAir.
Why do I keep bolding/italicizing/underlining “monthly?” Because I want to emphasize that we are comparing this Beijing air pollution – measured in days and ridiculously high daily PM2.5 values with monthly values at locations within UB. Those values in that chart are what, on average, you would encounter every day of the month – not just for a few short excursions into crazy high values for a few days. Every day of the month.
So who wins “worst pollution contest?” Beijing during its bout of horrible air quality the past few days or UB over its whole winter? I don’t know. As I said, this isn’t an exhaustive study to parse that out. I also think that it’s a very sad contest to have. But I do think this comparison underscores yet again the serious nature of the pollution problem in this city – especially in ger areas – every single day this winter.
Competitiveness ratings among Mongolian provinces: Orhon is leading
January 15 (Business-Mongolia.com) Ulaanbaatar capital is representing 65% of Mongolian GDP, while Orhon province, where Mongolia Russian joint Erdenet mine is located, is producing 10% of the nation’s economic output. The remaining 20% is widely distributed among the 20 other provinces throughout the country. According to the latest study conducted by Economic Policy & Competitiveness Research Centre (EPCRC), a Mongolian think-tank, GDP per capita in Ulaanbaatar city is more than tripled compared to figures in rural areas. 70% of all business entities are established and are operated in the capital city, creating central hub, the study notes.
Using 180 various indicators related to economic capacity, governance and employment, the Aimag Competitiveness Report, to be published by EPCRC later this month, will rank all of the 21 provinces in Mongolia. The top performers in the study include Umnugovi, Darhan-Uul, Dorno-govi and Selenge provinces.
Understandably, Umnugovi Aimag, located in the Southern Gobi Region, where mining boom is taking place, leads the ranking with very high GDP per capita and immense business opportunities. Oyu Tolgoi LLC, operating one of the world’s largest copper and gold mines in Umnugovi’s Khanbogd soum, will begin the commercial production in 2013, and it employs thousands of local and international workers. In addition, Energy Resources, a coking coal mine in Tsogt-tsetsii soum, is already operational, selling its products over the border to China. Other significant mining projects in the region include Tavan Tolgoi, MAK and South Gobi Sands.
In the bottom of the list are Dundgovi, Arhangai, Bayanhongor, Hovsgol and Govi-Altai provinces. Interestingly, agriculture and livestock herding play an important role in the economies of all of these provinces, and there is very little processing or manufacturing sector.
EPCRC’s goal is to enhance Mongolia’s national economic competitiveness to enable a strong, sustainable business environment and socio-economic framework; one that improves the quality of life of all citizens. It conducts research and advocate on issues that directly affect Mongolia’s ability to compete in a global economy. More details about the organization can be obtained at http://www.ecrc.mn/.
Steppe by Steppe
DALANZADGAD, Mongolia (The New York Times) — The fire went out at 3 a.m. The cold on the floor of the ger woke me up. It was mid-December and minus-7 degrees Fahrenheit on our scrap of the Gobi Desert. As I lay awake, on the other side of the ger from a family of three, I thought that of all the people in the world, Gobi nomads must be the toughest. Drought and cold and sandstorms and isolation confound the gathering of the materials that perpetuate life, and yet these people survive.
But for how long? The Gobi desert is losing its nomads — just over 1 percent of the total population — to the mining industry: Mongolia had the world’s fastest growing economy in 2011, thanks to mining activity and the foreign direct investment it attracted. Mongolia’s two largest untapped mines — Oyu Tolgoi (copper and gold) and Tavan Tolgoi (coal) — are also two of the most promising mines in the world.
A match illuminated the ger’s interior and then ignited desert brush in the stove. The morning’s first whispers concerned the tending of the camel herd grazing a few miles across the snow-patched sand. It would be another day of challenges and honest rewards. We sipped milk tea and broke off hardened dough with our back teeth. The old herder woman, Tsetsegma, said that of 300 traditionally nomadic families in the South Gobi, 80 remained.
According to a recently completed (not yet published) social impact study funded by the World Bank, Gobi nomads would largely prefer to maintain their traditional ways. The government has tried to move some nomads to other parts of the country, away from the advance of the mining life. But, the study shows, many of the relocated nomads complain that their herds have thinned because the new grounds offer inadequate animal housing and reduced access to pasture and water.
Erdenebolor Baast, one of the report’s authors, told me a few weeks ago in Ulan Bator, the capital of Mongolia: “Pastoralism is not only an economic activity. It incorporates the whole culture of Mongols. So do we want to see a Gobi that is populated by expats and domestic migrants smelling of gasoline and oil, looking like a huge industrial complex, where some people make billions of dollars? Will it still be Mongolia?”
I asked if the country might indeed lose a way of life that has existed since the time of the great khans. “It’s more than real,” he said. “It’s going to happen, and there’s nothing we can do about it.”
Actually, there is.
The Mongolian government is rightly trying to translate the presence of international mining companies into economic development — higher salaries, investment in infrastructure, improvements in health and education. But it is stuck haggling with them over royalty payments and ownership stakes.
And its subsidy program is inadequate. According to Baast, it provides about $3.60 per kilogram of cashmere and $1.40 per kilo of wool. A herder who owns a combined 200 animals, which is average for a family, might get something like $500 per year in assistance. Even the new subsidies expected to take effect later this year — $11 for a hide of camel, cow or horse; $2 per skin of sheep or goat — can’t compete with salaries from the mining companies, some of which pay a truck driver up to $1,000 per month.
A better alternative is a new plan under discussion in academic and legislative circles in Ulan Bator. It calls for privatizing public lands so that they could be held and shared by a collective of nomads. To encourage this process, the government would increase subsidies to those nomads who agreed to collectivize.
This proposal isn’t a case for building a living museum. It’s a case for preserving the unique lifestyle of Mongolia’s nomads by offering them a diversity of financial and social choices.
That morning a few weeks ago, I laced up my boots, ducked through the door of the ger and walked out onto the Gobi. The sun was bursting orange on the prickled desert edge. It was cold. But it felt warmer for knowing that, sparse as the land was, it belonged to the people who had always been there.
Mongolia: Harsh winter puts harvests under pressure
January 15 (Oxford Business Group) Mongolia is bracing itself for a colder-than-average winter following a harvest that, while strong, failed to meet agricultural targets. Severe weather conditions are raising fears of a dzud, otherwise known as a summer drought and severe winter, which in previous years decimated Mongolia’s herds and sent agricultural output spiralling.
However, while some crops have been lost to frost, others met or exceeded targets, paving the way for the government to work towards its aim of building food self-sufficiency, while also encouraging the key cashmere and meat sectors to improve husbandry and crop yield programmes in the spring.
The Ministry for Food, Agriculture and Light Industry warned delegates from 21 aimags (provinces) during a video conference in November that 80% of Mongolia’s territory was covered with snow, saying: “This winter seems already to be harsh and the provinces might suffer from winter drought”. It also cautioned that seven provinces were unable to provide sufficient pasture grass for feeding livestock.
The season, which typically lasts from mid-October until mid-May, can send temperatures plummeting to -30 degrees centigrade, with some farmers known to have lost up to 70% of their livestock in 2009 and 2010 due to dzuds.
Prospects of a harsh winter are likely to increase pressure on the short harvest season, and the ministry has put a number of narrowly missed targets for key crops down to frost in its October yield estimates. Cereals and wheat both fell short of their targets, albeit by just 10,000 tonnes, although the potato harvest of 232,000 tonnes exceeded its 209,000-tonne goal. Preliminary results suggest the country also notched up 100% self-sufficiency in wheat crops this year, while achieving 52% in “other major food items”.
Improving self-sufficiency is a key aim for the Minister of Industry and Agriculture, Kh. Battulga, who lamented the current shortfall of local food supplies at a meeting with Mongolia’s food producers in October. “I always found it strange that a country like ours, a country with vast land, more than 50m livestock and with a population of only around 3m isn’t able to supply sufficient food material for its own people,” he said. “This is disgraceful.”
The government will be hoping that a deal signed in November to lease 10,000 ha of land in Laos for various uses, including cultivation, marks a significant step forward in its bid to tackle the issue of food security.
The deal comes on the back of numerous initiatives launched in Mongolia aimed at boosting production in the agricultural sector, including a key crop rehabilitation programme. The initiative, which ran between 2008 and 2010, set out to bring more advanced technologies and techniques to the sector, while also establishing legally and economically favourable conditions for farming and vocational programmes.
A law was also passed in June 2011 establishing a state-run commodities exchange to help determine fair market pricing and encourage farmers to form independent cooperatives. However, the initiative has been hit by delays, which sparked protests from food producers in October and prompted Battulga to blame its suspension on a poorly-designed legal framework.
Agriculture was the dominant force in Mongolia’s economy before copper and coal finds triggered the mining boom towards the end of the last decade. The farming industry, which centres on goat and sheep herding for meat and cashmere, employed around 40% of the labour force in 2011, contributing 18.1% to GDP growth.
Meat supply and prices fluctuated wildly in 2012, with export optimism generated by a large order from China in late 2010 and advances in hygiene accreditation thought to have contributed to a sharp rise of almost 12% in mutton prices, turning around years of overproduction.
Last year also proved to be turbulent for Mongolia’s cashmere industry, which was hit hard by volatile pricing. While output in the January to July period reached 2500 tonnes of raw and 220.9 tonnes of combed cashmere, generating revenues of $99m and $20m, respectively, prices fell as low as MNT40,000 ($28.6) per kilo in the March-April buying season. Mongolia produces around 6700 tonnes of raw cashmere annually, accounting for about 28% of total world supply. Raw cashmere exports were valued at $105m in the first 11 months of 2011.
Observers suggest the cashmere industry should shift its focus from quantity to quality, saying this would help herders achieve more sustainable practices. However, it is widely acknowledged that such a move would require greater government support.
The government, meanwhile, is calling for a united stance among industry players to address key agricultural issues such as price volatility, improving technology and achieving greater self-sufficiency. However, while joint efforts are likely to make more headway, the government will need to offer businesses better protection against outside speculators and more attractive incentives if it is to boost private sector participation.
Kazakhstan & Mongolia to sign extradition treaty
January 15 (Kazakh TV) Kazakhstan and Mongolia are planning to sign an extradition treaty. A corresponding issue topped a meeting involving the Prosecutors General of the two countries. Askhat Daulbayev noted that this document will serve for the good of the citizens, who have faced criminal prosecution. The Prosecutor General of Mongolia Dambii Dorligjav thanked the Kazakh side for the reception and expressed his willingness to deepen bilateral relations.
Askhat Daulbayev, General Prosecutor of Kazakhstan:
- We have an agreements with Mongolia about cooperation in all spheres, exchange of experience, solutions to the issues of defending the rights of Kazakhstan’s citizens, as well as the rights of Mongolian citizens in Kazakhstan. I think that this cooperation will be helpful for our legal systems.
Dambii Dorligjav, General Prosecutor of Mongolia:
- We have such a document with other countries. It is very important for us. Therefore, partnership between the Prosecutor Generals’ offices of Mongolia and Kazakhstan will be helpful for both sides.
The Mongolian Prosecutor’s delegation also paid a visit to the Committee on Legal Statistics and Special Records as part of their working trip to Kazakhstan. Prosecutors of two states also discussed important professional issues and prospects of partnership of the two countries.
Civil Liberty I
January 13 (Jargal de facto via UB Post) The Constitution of Mongolia states that the law shall protect the immunity of residence and the confidentiality of letters and other forms of communication of a citizen.
Civil liberty is the backbone of democracy. Any decision coming from a democratic government must have the ultimate purpose of strengthening civil liberty in general, civic rights and freedom in particular.
A market economy can only flourish when there is a true democracy. The primary duty of a democratic state is to protect the rights, freedom and property of its people. However, since the state is an enforcement institution, it can and sometimes does violate the rights and interests of all its citizens while claiming to be protecting the interests of a smaller group. This is viewed as a fast and efficient approach by many countries. For instance, cameras were installed on every pedestrian path in London and their government failed when they attempted to pass a law that would have allowed them to listen to phone conversations of their citizens. Every government prefers a “stick” approach rather than a “carrot” one.
Therefore, in order to keep their civil liberty, people have to stand together as one and fight against every single intrusion coming from the government. If the government’s power apparatus can restrict civil liberty today, it can do the same to our rights and freedom tomorrow. Our rights and freedom are the most precious things we have.
Today in Mongolia
There are still intended or unintended government violations of civil liberty going on in Mongolia. In 2011, a total of 141,000 crime reports were received and 22,000 of them were registered, which was 20 percent higher than the year before. Furthermore, as the country develops and becomes more prosperous, we are seeing a wide range of new, big crimes such as smuggling and drug usage, human trafficking, kidnapping, criminal threats, money laundering and stealing money from bank accounts online.
In order to fight these emerging crimes, we need to foresee them coming, take preventive measures, learn from the experiences of other countries and conduct a comprehensive policy that ensures proper regulation of the interactions between law enforcement agencies and their alignment.
The organizations that are supposed to fight, put an end to and prevent crime are doing nothing but making a fuss long after the occurrence of a crime, pressuring private sector institutions and punishing their employees for fulfilling their duty and abiding by the law. Claiming they are trying to prevent crimes, the government has been trying very hard to acquire access to personal information of citizens, breaking their confidentiality and liberty.
What will happen if every police officer could pry into personal information of anyone they desired, take a look at their bank statements, read their emails, listen to and record phone conversations, go into computer folders, see their internet history, get their location and, ultimately, spy on people in real time? Will we have the “Thought Police” just like George Orwell described in his novel “1984”? What institution in Mongolia oversees the operations of law enforcement organizations and checks if they can actually protect personal information or not?
Who can have access to personal information?
If police or judiciary organization demands a bank to provide a person’s bank statement or transaction information, is the bank obliged to comply with their request? No. The bank can only grant their wish when there is a prosecution filed against the individual. In this regard, I protected the private information of a customer ten years ago when I worked as a CEO at a bank. A court can only prove if the criminal defendant is guilty or not. Documents acquired in unofficial ways are considered illegitimate; therefore they cannot be used as evidence in court.
Shortly before the New Year’s Day, the first ever kidnapping crime happened in Mongolia. The kidnapper hid his number when he called the parents for ransom money. Although the parents and the police demanded the mobile network company to disclose the dialing number, the company complied with the law and fulfilled their request only after they received an approval document of prosecution. Afterwards, executives of the company were detained due to being accused of “causing disruptions in investigation process.”
A little kid almost lost his life due to lack of regulations that must ensure immediate decision-making of relevant institutions during an emergency where a human life was at risk. What has been done in order to speed up the decision-making process of prosecution and improve its alignment with other relevant institutions in case anything like this happens again?
According to Article 18 of the Law of Mongolia on the Public Prosecutor’s Office, the Public Prosecutor General shall check whether the organization that is granted the right to fight, investigate and register crimes, protect social security and sentence the offenders is complying with the law or not when they implement their rules and procedures that restrict rights and freedom. So, Mr. Prosecutor General, do you have a system that ensures fast reactions during any criminal events and a certain set of procedures that are revised at least once a year for improvement?
Mobile network operator companies should also include in their contracts with clients certain terms and conditions that will set out the company’s procedure during times of emergency such as disclosing hidden numbers when the dialer’s identity is required by police or other institutions that protect social security. What is stopping them from including certain clauses in the law so that it will be clearly set out what confidentiality can be disclosed in what situations? Unfortunately, our law makers are not coming to their office these days and parliament sessions can not function some days. We are all governed by our laws, thus, there will be social disorder unless every single one of us complies with the law.
Reason why people should stand together as one
Your phone call history is protected by the Confidentiality Law in the same way your bank statement is. Also, Article 4 of the law includes other confidentialities such as letters and messages and other information about personal health, property and family. Article 12 of the Law on the Public Prosecutor’s Office sets out that, except when there is a court order, crime registration, investigation and sentences that restrict or violate human rights, freedom, confidentiality and immunity of residence and properties must be approved by prosecution beforehand.
This is the law that those executives of mobile network companies followed – yet they were still detained afterwards. Their detention is a violation of civil liberty by the government. We, the citizens of this country, must fight to protect our liberty.
(To be continued)
Saving this dinosaur took a skeleton crew
The urgent message went well beyond Robert Painter's usual areas of legal expertise — personal injury, commercial disputes, medical malpractice.
January 14 (Los Angeles Times) In less than 48 hours, the skeleton of a Tyrannosaurus bataar, a fierce cousin of Tyrannosaurus rex, would be up for auction.
"Sorry for the late notice," the email said. "Is there anything we can do to legally stop this?"
The president of Mongolia, whom Painter had met 10 years before at a public policy conference, was now asking the Houston lawyer to block the sale of a fossil that scientists believed had been looted from the Gobi Desert. The auction catalog described the specimen:
"The quality of the preservation is superb, with wonderful bone texture and delightfully mottled grayish bone color. In striking contrast are those deadly teeth, long and frightfully robust, in a warm woody brown color, the fearsome, bristling mouth and monstrous jaws leaving one in no doubt as to how the creature came to rule its food chain."
The sheer size and condition of the fossil seemed guaranteed to fetch a seven-figure price. When Painter read the email May 18, it was already 6:30 p.m. on a Friday. The auction was Sunday.
In the days that followed, Painter, a New York auctioneer, a Texas judge, federal prosecutors, the Mongolian president and a self-described "commercial paleontologist" would come together somewhat like the skeleton they were fighting for, disparate parts brought together through dogged effort and mysterious circumstances.
The fight would play out in federal courts in a case known as United States of America vs. One Tyrannosaurus Bataar Skeleton.
Since 1924, the Mongolian constitution has classified dinosaur fossils as "culturally significant," meaning they cannot be taken from the country without government permission. Over the years, the punishment for illegally keeping or smuggling dinosaur bones has varied from up to seven years in prison to 500 hours of forced labor or paying up to 500,000 tugriks, the Mongolian currency. (That's about $356.50.)
Cultural heritage is a sensitive subject for a people who, their history of Genghis Khan's empire-building notwithstanding, saw powerful, aggressive neighbors invade their lands repeatedly.
After advertising for the auction caught the attention of paleontologists worldwide, Mongolian officials and journalists quickly learned of the fossil with the "delightfully mottled grayish bone color."
"The dinosaur has the color of the Gobi sand," said Oyungerel Tsedevdamba, an advisor to Mongolian President Tsakhiagiin Elbegdorj. "Such color is very particular and familiar to us and belongs to this country."
On May 18, as Tsedevdamba was preparing to leave her home in the Mongolian capital, Ulan Bator, for a meeting, her husband, a science enthusiast, pointed out a news report he'd found online: A Tyrannosaurus bataar was going to be auctioned in New York.
Auctioned fossils are usually too expensive for universities to buy, and private sellers typically don't provide enough details on how or where they got them. That leaves many of the bones in the hands of wealthy fossil buffs, or museums that look the other way.
"Technically, public institutions are neither ethically allowed to own poached specimens, nor are scientists supposed to publish on poached specimens," said Philip Currie, a University of Alberta paleontologist who studied the Gobi Desert region for 15 years. "In other words, they become scientifically useless."
The Tyrannosaurus bataar was 24 feet long, stood 8 feet high and weighed two tons. Still, the beast was only two-thirds grown when it died 70 million years ago.
Though it never grew into a 34-foot adult, the Tyrannosaurus thrived on the abundant prey attracted to the Nemegt Basin, then a lush river plain that straddled what is today the Gobi Desert on the Mongolia-China border. The carnivore's main competitors were its own kind.
The creature's jaw still carries bite marks, apparently inflicted by another Tyrannosaurus bataar.
These predators were "scrappy," Currie said. "They weren't overly playful."
After her husband pointed out the news story, Tsedevdamba opened her email to alert the Mongolian Academy of Sciences' representative in New York, but the representative had already sent her a panicked note asking what to do about the impending sale. She quickly scheduled a meeting with President Elbegdorj.
Soon after, the representative relayed a demand from the president to Heritage Auctions: Cancel the sale. The auction house refused.
The Mongolian government turned to Painter. He had done some work for the Mongolian government in the past, but "I've never done anything to do with dinosaurs before."
His first challenge that Friday evening was finding a judge. Though the auction was to take place in New York, Heritage Auctions is based in Dallas, so he reached out to colleagues there. After about 20 calls, success. A judge agreed to see him Saturday.
But he still had to craft his legal arguments. Throughout the night, every court document Painter drafted was sent to Mongolia to be translated and approved by the president. He finished the paperwork at 3 a.m.
After a bit of sleep, Painter flew to Dallas and by 11:32 a.m. had the signature of Dallas' 44th Civil District Court Judge Carlos Cortez approving an emergency temporary restraining order to stop the sale. A process server delivered it to Heritage Auctions' New York office.
By Saturday afternoon, Painter was boarding a plane for New York.
The auction was less than 24 hours away.
"The sale of this next item will be contingent upon a satisfactory resolution of a court proceeding dealing with this matter," the auctioneer said.
Painter watched from his seat in the audience at Heritage Auctions' Park Avenue office. A photographer and videographer Painter brought along documented what happened next.
The auctioneer, referring to the imposing display at the back of the hall, continued: "This is the signature item, a crown jewel item … the Tyrannosaurus bataar skeleton."
Bidding started at $875,000, then picked up, the auctioneer rattling off the numbers.
"I'm sorry," Painter said, standing up. "I have to stop this."
As the video shows, the lawyer didn't make it 10 steps before he was corralled by two auction house employees. Painter held up his cellphone and said the judge who had ordered the company to halt the sale was on the line. The employees pushed his hand away and escorted him out.
He wasn't there to hear it, but the sale went forward. Final price: $1,052,500.
Outside the auction house, Painter gave interviews to reporters while Heritage Auctions issued a statement.
"We have legal assurances from our reputable consignors that the specimen was obtained legally," said Greg Rohan, president of Heritage Auctions. "As far as we know, the Mongolian government has not produced any evidence that the piece originated in its territory, but the final determination will be up to the American legal system."
The next morning, as Painter waited on the tarmac for his Texas-bound plane to take off, his phone rang for the umpteenth time. Probably another reporter, he thought.
It was the U.S. attorney's office for the southern district of New York.
Would the Mongolian president, the prosecutors asked, want to help with their investigation?
After the frenzied two days leading up to the auction, the next events unfolded over months, not hours.
Documents turned over to federal authorities by Heritage Auctions led investigators to Eric Prokopi, owner of Everything-Earth.com and a commercial paleontologist who sold fossils. Prokopi said he had purchased the skeleton legally from a dealer in England and had spent a year assembling the bones at his home in Gainesville, Fla.
On June 5, the courts agreed to allow an international panel of scientists to examine the Tyrannosaurus. Among them were Currie, the Mongolian science representative and paleontologists from San Diego, England, China and Belgium.
Painter also attended. "I would just stop and look at it and think of all the places that thing had been," he recalled.
The panel was in virtual unanimity: The Tyrannosaurus bataar must have come from the Nemegt Basin in Mongolia.
The bones' shapes and color, matching the Gobi sand just as Tsedevdamba had said, were trademark Asian dinosaur characteristics. North American dinosaur bones are frequently dark brown or even black. The experts said the skeleton most likely had come from an area known as the Dragon's Tomb.
The government moved to seize the dinosaur in June and filed smuggling and other charges against Prokopi in October. Last month, Prokopi, 38, admitted that the skeleton originated in Mongolia and pleaded guilty to smuggling and other charges. Authorities seized other fossils, including two more Tyrannosaurus bataars and a hadrosaur. Free on $250,000 bail, he is scheduled to be sentenced in April and faces up to 17 years in prison.
Amid the controversy, the winning bidder backed out of the purchase.
The Tyrannosaurus bataar eventually will be returned to Mongolia, but for now the bones are stored in several crates at a windowless, bricked-up government warehouse in Queens known as the Fortress.
And in Mongolia, officials are considering declaring May 20 — the day of the auction — Dinosaur Heritage Day.
Mongolia to build dinosaur fossil museum – Xinhua, January 15
A steppe ahead
(The Water Channel) The largest temperate grassland in the world is the Eurasian steppe, extending from Hungary to China. It reaches almost one-fifth of the way around the Earth. Only in Eastern Mongolia does the steppeland survive intact. Covering an area almost the size of Japan, horses, gazelles and a spectacular selection of wildlife far outnumber the semi-nomadic human population.
The private sector wants to invest to get money for the country: modernization through university, electricy, transport. But behind that, the steppe has valuable oil and gold reserves, which are the focus of attention of foreign companies. The infrastructure needed including roads or railways lines, quemicals into the water system and the increase of the number of people, could break up the Eastern steppe making migrations for animals and people a thing of the past. The population there coexist with the nature. They feel part of it and they survive thanks to it. The land has always been shared for all ,they have no concept of the ownership of land. They bet on an ecologic development.
The Global Environment Facility is supporting an ambitious conservation effort. Beijing-based film-maker, John Liu travelled the steppe for Earth Report to assess the chances for safeguarding the grassland ecosystem and a way of life the warriors of the great Khans would recognise.
“Mogi” Munkhdul Badral
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