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Blue Wolf Mongolia Countdown: 67 days left till liquidation
Rio Tinto Said to Set Terms for Dispute-Hit Mongolia Mine Loans
February 13 (Bloomberg) Rio Tinto Group proposed initial terms on a $4 billion project financing for the Oyu Tolgoi copper-gold mine in Mongolia as it tussles with the government over profits, three people with knowledge of the deal said.
The world’s second-largest mining company sent a request for proposals to lenders after holding bank meetings, said the people, who asked not to be named because the transaction is private. They have been asked to respond by mid-March, the people said.
Rio Tinto is seeking about $2 billion of 12-year loans from banks and a further $2 billion from export credit agencies and international development funds for the project, the people said. The company is said to be considering a temporary halt to work as the government demands a greater share of profit from the mine.
David Outhwaite, a London-based spokesman for Rio Tinto, declined to comment.
The mine, in the South Gobi desert 80 kilometers (50 miles) from Mongolia’s border with China, is controlled by Rio through its 51 percent stake in Turquoise Hill Resources Ltd. which holds a 66 percent stake in the project. The Mongolian government owns the remaining 34 percent stake.
President Tsakhia Elbegdorj said Feb. 1 Mongolia should have more control of the mine that will be the biggest contributor to the country’s economy once it’s in full production.
Interest Rate
About half of the bank debt will pay an interest rate of 2 to 3 percentage points more than benchmarks and be insured against political risks by the World Bank’s Multilateral Investment Guarantee Agency, according to the people with knowledge of the financing.
The cost of building the first phase of mine rose to $6.6 billion from an initial 2010 costing of $5.7 billion, along with $500 million of interest payments on existing loans, according to a Feb. 5 statement on Oyu Tolgoi’s website. The project financing will enable the next stage of development of the mine and help reduce costs for shareholders, Oyu Tolgoi said.
Turquoise Hill predecessor Ivanhoe Mines selected BNP Paribas SA and Standard Chartered Plc to arrange the financing in July 2010, along with the European Bank for Reconstruction and Development, the World Bank’s International Finance Corp. and Export Development Canada.
Export-Import Bank of the U.S., Australia’s Export Finance & Insurance Corp. and the World Bank’s MIGA unit subsequently joined the deal, according to the IFC’s website.
Turquoise Hill selling stake in Kazakhstan gold project for US$300M
VANCOUVER, February 13 (The Canadian Press) - Turquoise Hill Resources (TSX:TRQ) is selling its 50 per cent stake in Kazakhstan miner Altynalmas Gold Ltd. for US$300 million to Sumeru Gold BV.
Altynalmas is a private company that owns the Kyzyl gold project in northeastern Kazakhstan.
Turquoise Hill — formerly known as Ivanhoe Mines — acquired an interest in the project in 1996 and acquired its stake in Altynalmas in 2008.
The Vancouver-headquartered company, now 51 per cent owned by Rio Tinto (NYSE:RIO), has been selling off non-core assets.
Its primary operation is a 66 per cent interest in the Oyu Tolgoi copper-gold-silver mine in southern Mongolia, which is expected to begin commercial production in the first half of 2013.
Other assets include a 58 per cent interest in Mongolian coal miner SouthGobi Resources (TSX:SGQ) and 57 per cent interest in copper-gold miner Ivanhoe Australia (TSX:IVA).
The sale of its stake in Altynalmas to closely held Sumeru is expected to close in the second quarter, subject to regulatory approvals in Kazakhstan.
On the Toronto Stock Exchange, Turquoise Hill shares were up two cents at $7.67 in morning trading Wednesday.
Rio Tinto trips up in Mongolia
Terrence Edwards in Ulaanbaatar
February 13 (bne) When things get too heated, sometimes it's best to take a step back and let cooler heads prevail. Perhaps that's what the world's second-largest miner Rio Tinto is hoping after talks on the future of the prized Oyu Tolgoi copper/gold mine with the Mongolian government were put on hold until after the country's lunar new year celebrations.
The latest heated talks took place in Ulaanbaatar on February 7 and centred on issues relating to the soaring cost of the gold and copper venture, furthering Mongolian participation in its management, and increasing the number of local companies that can benefit from the project, including the use of a Mongolian bank, the government said in a statement.
Rio Tinto is increasingly facing the prospect of losing the right to exploit the deposit to local companies (Mogi: huh?)– as has already happened to other unlucky multinationals hoping to profit from Mongolia’s cornucopia of natural resources (Mogi: who?). Fears were heightened by remarks from President Tsakhia Elbegdorj on February 1 that Mongolia should have more control of the mine, which is 34% owned by Mongolia’s government, with the other 66% owned by Rio Tinto unit Turquoise Hill Resources.
The upsurge in tensions is primarily down to costs for the project ballooning, which means Mongolia will have to wait for its dividends that are paid out after the private investors recuperate their initial investment. On February 5, Rio Tinto admitted that the first phase of developing Oyu Tolgoi would be 16% higher than originally planned at $6.6bn. According to an e-mailed statement from the government to Bloomberg, the total cost of the Rio Tinto-operated development in southern Mongolia has jumped to $24.4bn, versus the company's earlier estimate for a total cost of $14.6bn.
A lot is at stake. The mine will account for about a third of Mongolia's economy by itself after it becomes fully operational, says Rio Tinto. Naturally, the government is extremely interested in the project and the Mongolian parliament was already pushing for a bigger slice of the Oyu Tolgoi pie at the end of 2011 and again in 2012. "Although it is hard to see how Rio would benefit from overspending on this project, discrediting the [investment agreement] could work in the government’s favour in their intention of increasing the state’s share of the mine," reckons Vidur Jain, an analyst at Ulaanbaatar-based Monet Capital.
Government intrusions
Projects on an economy-sized scale are always intensely political and prone to cost-related problems. On the one hand, the government wants to grab as much revenue as they can out of what lies in the ground; on the other, foreign investors tend to play down the costs initially in order to win the right to exploit the deposits in the first place.
Shell fell into the same trap with the Sakhalin-2 field in Russia’s Far East. The Kremlin was incensed after Shell announced in 2006 that development costs were going to come in at double the original estimate, meaning that the state would have to wait a lot longer for its first payout. The Russian government promptly suspended Shell’s license and arranged for state-owned Gazprom to buy a majority stake in the project – about half of Shell's 55% stake and half of Japan Mitsui & Co's – for a paltry $7.5bn. To add injury to insult, Shell also got itself into trouble on environmental grounds by disturbing the important local fishing industry.
The partners developing the giant Kashagan oilfield in Kazakhstan also found themselves facing environmental impact allegations after the operator presided over long delays and cost overruns. Instead of 2005, delays now mean that Kashagan won't see first oil until later this year, while costs have soared from the initially envisaged $57bn to $136bn. A long drawn-out dispute with the Kazakh government was finally resolved in late 2008 when the shareholders in the project – Eni, Shell, Total, Exxon Mobil, ConocoPhillips and Inpex – agreed to give up part of their shares in the project to allow the state-owned KazMunaiGas to raise its stake to 16.81% from 8.33%. Further, a new operating company called the North Caspian Operating Company replaced the previous operator, Eni subsidiary Agip KCO.
Rio Tinto has got into similar trouble by disrupting the centuries-old herding patterns of Mongolia's nomadic population in the Gobi desert. Indeed, the environmental problems could come back to haunt Rio Tinto. Oyu Tolgoi Watch, an NGO dedicated to monitoring the mining activities at Oyu Tolgoi, in cooperation with the Bank Information Center and London Mining Network, sent out a press release last year criticizing the International Financial Corporation (IFC), the World Bank's financing arm, for even considering a loan for the project. It described the environmental and social impacts assessment (ESIA) as "an elaborate and costly hoax” that only concentrated on the construction phase of the mine while ignoring the impacts once commercial production began.
Rio Tinto has also done little to uphold the "social contract" that was part of the package, argue its legion of critics. The company has earmarked only $1.5m to set up vocational training programme and the renovation of four schools. Mongolian MPs have become increasingly vocal about these shortcomings.
Sainkhuu Ganbaatar – Mongolia’s second most popular political figure according to the Sant Maral Foundation, a local pollster – remains unconvinced of Rio’s sincerity. "They're just making show – it's show business. They pay some wages and give the odd scholarship to some young people or create an official training centre, and make a show for TV," said Ganbaatar in an interview last August.
Speaking on the growing number of unemployed youth in Mongolia, he added: "They spend a lot of money on media, but they don't give any guarantee to get them employed."
Rio Tinto in January forced out its CEO Tom Albanese in January following $14bn in write-downs. With so much riding on Oyu Tolgoi, a disaster at this project could spell disaster for Albanese's successor, Sam Walsh.
Mogi: Included in the 107 licenses were also ones owned by MAK, and Xanadu/Noble JV. Probably there’s more high profile names with a closer look.
Kincora Copper seeks clarity on licence position after court case
February 11 (Proactive Investors) Kincora Copper (CVE:KCC) is continuing to seek clarity on the position of two of its licences following a court case, it told investors today.
The company notes a recent report in the Mongolian media concerning the recent trial and conviction of the former chairman and the former director of the Geology, Mining and Cadastral Department of the Mineral Resources Authority of Mongolia (MRAM).
The piece alleged that 107 licences issues by the body, including those to foreign listed companies, violated Mongolian law and that they could be repatriated with compensation expected to be paid before any licence is cancelled.
Included are two licenses held by Kincora’s subsidiary, Golden Grouse - the GG licences.
Indeed, MRAM granted a three year extension to the nine year exploration period in the third quarter of last year, notes Kincora.
"The two GG licenses adjoin Kincora’s flagship Bronze Fox project and host the Tourmaline Hills and North Fox earlier stage exploration targets. The company’s Bronze Fox project is held by a separate wholly owned subsidiary to GG and has not in any way been associated with the above-noted case.
"Despite our efforts, neither the company nor GG have been able to determine if the allegations included in the local media report are in any way accurate with no official statement from the court nor correspondence from a Mongolian government authority, including MRAM, yet available," the company said today.
"Kincora is investigating the issues that have been raised and will continue to inform the market of any material
China Best (00370) buys CB & PN of North Asia Res (00061)
[ET Net News Agency, 6 February 2013] China Best (00370) said it has conditionally agreed to subscribe for convertible bonds and promissory notes issued by North Asia Resources (00061) each in an aggregate principal amount of US$7 million (equivalent to about HK$54.6 million) at their face values.
Both convertible bonds and promissory notes will have a maturity term of three years, bearing an interest of 8% per annum and 12% per annum. The conversion price of the convertible bonds of HK$0.31 per share is the same as the closing price. A maximum of about 176 million shares will be issued to China Best upon the exercise of the conversion rights attaching to the convertible bonds, representing about 0.65% of North Asia Resources' share capital immediately after the conversion of all convertible preference shares and convertible bonds. (HL)
BDSec WEEKLY: “LUNAR NEW YEAR” SPECIAL
February 10 (BDSec JSC) --
Highlights:
• Market closed at lower value on the verge of Lunar New Year: MSE TOP20 index went down by 0.3% to 17,627.3 points whilst BDS index dropped by 2.0% to 3,767.0 points.
• With an earnings surprise of Sharyn Gol (SHG), reported 27% sales volume growth and 31% sales revenue growth in 2012, company witnessed MNT 183.04 earnings per share which is 344% higher than the previous year. Sharyn Gol (SHG) is the largest 100% privately owned coal company on the MSE.
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BoM issues 1-week bills
February 13 (Bank of Mongolia) BoM issues 1 week bills worth MNT 576.75 billion at a weighted interest rate of 12.50 percent per annum /For previous auctions click here/
Mongolia: Gauging Inner Asian Tensions over Railways
By Jargalsaikhan Mendee – mendee@alumni.ubc.ca
February 12 (Asia Pacific Memo) Broad gauge or standard gauge railway? This domestic Mongolian debate reflects Inner Asian ambivalence toward economic opportunities through engagement with China, as well as broader geopolitical and economic competition between Russia and China. After he was fired from the post of Director of the Mongolian Railway on January 10, former Prime Minister M. Enkhsaikhan criticized the government’s plan to extend the domestic broad (Russian) gauge railroad network. Instead, he argued for a 267 km standard (Chinese) gauge railroad from Tavan Tolgoi, a coal mining deposit, to Gashuun Sukhait, a Sino-Mongolian border post. With this argument Mr. Enkhsaikhan triggered another round of the debate over narrow vs. broad gauge.
In 2010, the Mongolian parliament prioritized rail links connecting major mining sites in the south to the trans-Mongolian and Russian railways to reduce reliance on Chinese markets and to support the establishment of mineral processing factories for value added exports. Mining companies had been lobbying for direct narrow gauge links with the Chinese rail network to increase exports and to minimize environmental damage. The current coalition government formed following the parliamentary election in June 28, 2012, reaffirmed the 2010 decisions, emphasizing employment and development opportunities for Mongolia.
The gauge problem is not unique to Mongolia. Chinese plans to increase its land bridges over the vast Eurasian terrain also provoke debates within Central Asian states, especially Kazakhstan and Kyrgyzstan. Despite talk of building standard gauge rail through Kazakhstan linking China and Southeast Asia to Europe, Kazakhstan has chosen broad gauge for its latest rail connections with China. Kyrgyzstan, which offers a convenient transit route, prefers a broad gauge for an expected new rail link with China because of domestic gauge standards and bilateral arrangements with Russia. Thus any new railroad connections between China and Central Asian states require cross border transshipment facilities.
Gauge debates in Mongolia and Central Asian republics reflect their ambivalent attitudes to China, emphasizing economic benefits on one hand, but security concerns on the other. At the same time, the Sino-Russian geopolitical and economic competition cannot be overlooked in these landlocked Inner Asian states where Russia still maintains strong influence.
Jargalsaikhan Mendee is a PhD student in the Department of Political Science at the University of British Columbia, and an Institute of Asian Research Fellow, 2013. Memo #11, Memo #87, Memo #161, Memo #169.
Licensing Woes
February 7 (Mongolian Economy) Mongolia’s parliament has quietly passed two key pieces of legislation that has international firms worried they may be left out in the Siberian cold.
The recently passed Law on the Legal Status of Lawyers and Law on Tax Specialised Consultancy place more stringent controls over the services legal and tax advisory professionals can provide in Mongolia. It is another round of controls over participation by foreign investors since Mongolia’s Strategic Entities Foreign Investment Law (SEFIL), passed late May 2012, which suffered from similar debilitations that have put a plug on investment dollars for Mongolia’s booming mining sector. The legislation, which requires government approval for foreign acquisition of a third or more of any companies within the communications, finance and banking, and minerals sectors, has left foreign companies at a standstill out of fear of violating the law—which could have the government barring a company from operating in the country.
In an email, MahoneyLiotta Partner Darin Hoffman wrote that the laws would exclude law and tax advisory firms from providing their services and “are symptomatic of the general shift towards increased regulation over foreign investment and foreign citizens living and working in Mongolia that began with the adoption of the Strategic Entities Foreign Investment Law”...
The legislation puts new limitations on auditing and lawyer firms that require practicing professionals to pass state exams similar to the United States’ bar and CPA exams, said Budragchaa Bayar, a managing partner at domestic law firm Economic Legal Consultancy. As far as anyone can tell, the exams will only be administered in Mongolian language—a language spoken by just some five million in the world—and will add even more red tape to the country’s already Byzantine legal system.
The lawyer law is a “revamping of the legal profession” that “should be big news for worldwide legal professionals”, said Bayar, who was also involved in the drafting of the law.
He said the key difference of the law is all law firms will have to register themselves as limited liability partnerships rather than companies. While LLCs in Mongolia may acquire a single license to operate in Mongolia, LLPs do not, which means licensing will only be granted to individuals. Without licensing, legal professionals will not legally be allowed to call themselves lawyers.
Bayar said the law is effective January 1, 2014, but MahoneyLiotta said it was informed that date had been pushed up to April 15 this year.
The tax advisory law similarly asks tax advisors to pass a state-administered exam for licensing. The law also requires auditing firms such as Ernst & Young to establish a separate organisation for its tax advising services. Any firm that fails to meet these conditions will likely face penalties after June 1, 2013.
For their licensing, lawyers and tax advisors in Mongolia will have to answer to the Mongolian Lawyers Association and the Tinz agency, respectively. However, there is some uncertainty with how the law will be enforced and how government services will be administered.
“We are not sure how long it will take for licensing”, said Mandal Uyanga, chief executive officer of Ernst & Young Mongolia Audit. She added, “This is really a new thing, so we need to communicate with Tinz”.
It’s the lack of clarity in the law regulating lawyers that has law firm MahoneyLiotta, who in Mongolia represents Rio Tinto Group and the London Stock Exchange, worried how the law will eventually be enforced by government.
According to Mongolia’s central bank data on the balance of payments, foreign investment fell 45 percent from USD 321.5 million in June to USD 176.9 million in November, last year.
Hoffman said that work on almost all public offerings had been halted since the passage of SEFIL, largely due to the uncertainty felt by investors.
“Even though the SEFIL was adopted on 17 May 2012 the foreign investment regulator has still not created the approval process so no large equity offerings like this can be done until the approval process is created (and an approval is obtained)”, Hoffman said.
Bayar, too, worried on the vagueness of the law and how licensing bodies would behave. He has experienced firsthand how Mongolian licensers can “run like a business”.
“In 2005, when I sat in the exam by the [to-be-dissolved licensing agency] Advocates Association, everyone was young. I was the only one with white hair”, he said. “When I got my certificate there was a ceremony to hand out the certificates. Finally I saw several people with gray hairs. I don’t recall seeing them in the exam”.
Mongolia: Tackling retail rights
February 13 (Business-Mongolia.com) Efforts by Mongolia’s government to improve conditions for increasingly wealthy local consumers bode well for the fledgling retail industry. There are concerns, however, that watchdogs and legislation will not be able to keep pace with the rapid growth of the industry.
A national consumer conference titled “The People are King” was held in November in Ulaanbaatar with the aim of educating both consumers and producers on the importance of product quality. Consumer representatives said that manufacturers should guarantee quality at the beginning of a product’s lifespan, and that distributors should not ignore reasonable demands by customers. More than 800 representatives from around the country attended the event, with many raising questions over consumer awareness regarding rights protection.
The main issue tackled at the conference – consumer protection – is expected to grow in importance as the retail sector plays a larger role in the economy. In the first quarter of 2012, wholesale and retail trade expanded by 51%, following growth of 70.5% in the final quarter of 2011.
In July 2012, a mission from the UN Conference on Trade and Development (UNCTAD) presented findings of a peer review it had conducted on the Authority for Fair Competition and Consumer Protection (AFCCP), which is responsible for proposals to the government on consumer protection law and policies.
UNCTAD found that the agency had limited experience of joint work with the police in consumer protection cases, with, “no transfer of investigatory skills from professional investigatory agencies to the AFCCP”. It also noted the lack of a public relations policy, stating that the agency must develop a consistent policy for human relations, staff development, knowledge management and experience sharing.
Meanwhile, the European Bank for Reconstruction and Development (EBRD) has taken a lead role in developing the retail sector through the provision of a $4m senior loan and $2m mezzanine loan in October 2012 – one of the first in the country – to support BSB Service, a leading electronics retailer. The EBRD said the proceeds of the senior loan will be used to build a large, specialised retail store in the Khan Uul district of the capital.
Such growth reflects confidence in a sector that already hosts a number of luxury retail giants, such as Louis Vuitton, Hugo Boss, Cartier, L’Occitane and Dunhill. In mid-June, Mongolia also made its first appearance in the AT Kearney Global Retail Development Index, achieving ninth place in the respected survey of the world’s top 30 emerging retail markets.
Wealth expected to be generated by vast coal and copper mines should see GDP grow six-fold in the next decade, potentially placing the country in the top five of millionaires per capita by 2020. As an affluent middle class emerges, urban migration is expected to see local nomadic traditions dissipate the capital’s population hit around 1.4m by 2020 compared with its current 1m.
As a sign that it is preparing to be more assertive in protecting consumers, in November the AFCCP imposed a MNT 4.97bn ($3.58m) fine on NIC, the largest retailer of petroleum products in Mongolia, for the “creation of a false shortage of gasoline in the market”, reported Business Mongolia, a local business news website. On November 6 and 7, NIC limited the sale of gasoline and diesel products to raise fears of a shortage that would drive prices up, an AFCCP investigation found.
Further consumer protection steps have been taken by the central bank, including a MNT61bn ($43.88m) soft loan for flour mills that will allow them to supply first-grade flour at a maximum wholesale price of MNT550 ($0.40) per kg and a maximum retail price of MNT650 ($0.47) per kg.
MIDDLE CLASS: DO WE HAVE ONE IN MONGOLIA?
February 7 (Mongolian Economy) Economic development is the primary objective of the majority of the world’s nations. This truth is accepted almost without controversy. To raise the income, well-being, and economic capabilities of peoples everywhere is easily the most crucial social task facing us today (Development Economics, Debraj Ray).
The government of Mongolia is implementing a series of policy reforms oriented to enhance economic growth and reduce poverty with more pro-poor orientation during the last decade. There has been observed a notable economic growth in the economy of Mongolia since 2003, however, the social development, namely the living standards of the population including poverty and inequality has not succeeded adequately. The percentage of the population that is poor in Mongolia has been around 35 percent in the last decade and Household Socio- Economic Survey (HSES) concluded that 29.8 percent of the total population of Mongolia is living in poverty in 2011. As measured by the Gini coefficient of 0.33, the gap between rich and poor widened. The richest 20 percent of the population consumes five times the amount consumed by the poorest 20 percent of the population. The overall findings suggest that poverty changes have been mainly driven by the growth component. Inequality has mostly contributed in an opposite direction. In general, had inequality not increased that significantly, the decline in poverty would have been more pronounced.
Increasing trend of inequality means there are different groups of households which one classify as “wealthy”, “better-off”, “average”, “middle-income”, “poor” and “very poor”. The preliminary answer to the question does Mongolia have a middle class in Mongolia is yes. However, in-depth investigation needs to be carried out on who they are, how they are different from others, how it changed over time, what are their economic, social and political roles, and so on. Furthermore, analysis of the middle class and its role in society have become an important issue and area of research in order to get a better implementation of the policies to reduce poverty and inequality.
There is no global dataset or fixed definition to determine what the middle class is. However, a number of household surveys have been given around the world, and from each of these surveys one could extract information on groups of households based on consumption or income level.
Growing trends of inequality mean there are different groups of households which one would classify as “wealthy”, “average”, “middle-income”, “poor” and “very poor”. Whatever method or definition we use there are groups that we call the middle class. Therefore, the research answer to the question whether or not Mongolia has a middle class is yes.
Middle-class individuals are much more likely to have salaried jobs and tend to have smaller family sizes. In terms of asset ownership, the middle class is typically associated with widespread ownership of major household durable goods such as cars. In terms of residence, middle-class households tend to reside in bigger and more modern housing such as apartments. The vast majority of the middle class in urban areas is likely to have income from wage and public remittance. In rural areas the middle class is likely to derive its income from livestock business and public remittances.
The middle class could also be defined as a peaceful, contented life without worries about basic livelihood needs. Having a family and children, being wise, striving to live well, having specific goals and being hard working can also be the main determinants of the middle class.
When we asked survey participants to estimate how much money it takes for an average family (four members) to live a middle class lifestyle in their community, the median of all responses was MNT 10.300.000–close to the third quintile (MNT 7.5 million) and fourth quintile (MNT 9.2 million) of the population.
Examination of mean income shows that the per capita income grew by 67.4 percent between 2007 and 2011 at the national level. However, per capita income declined by 8 percent in real terms (after adjusting for inflation) . Moreover upper-middle class households experienced a notable decrease (11.33 percent) while low-middle households experienced less decrease (1.9 percent).
Survey participants reported that the in general, livelihood had improved compared to five years ago. According to them, the share of better off households has increased whereas the share of poor households has declined. However, the middle class share has not changed. Moreover, increasing inequality is related to, on the one hand, the widening gap between the rich and poor, but, on the other hand, is due to the fact that the number of people who moved upwards from the average position to the higher or from the poor to average is relatively small.
Nothing seems more middle class than having a steady well-paying job. They run businesses and they work for all sectors, especially for state organisations. It is interesting to speculate whether this has something to do with the kind of jobs they have. A good job is a steady, well-paid job–a job that allows one the mental space needed to do all those things the middle class does well. Stable work, job security and well paid salary are priority issues for the middle class. In addition, there is a need for providing graduates with jobs as the middle class puts more attention to and spends a lot on their children’s education; however there are limited job openings for young people.
The salary, pension and other allowances compose the majority of the earnings for the middle class and the increase in earnings in recent years have had certain positive impacts; though they enable the other sources of business revenue to be available (fourth quantile).
These years the prices of consumer goods has increased and have put substantial pressure on lives. Although the salary, pension and other allowances that compose the majority of the earnings of the middle class had increased, inflation has increased, too.
There are many pressing issues in regard to access to loans and loan conditions. High loan interest, short terms of repayment, and limits on amounts of collateral for loan repayment lead many middle-class individuals in a net of debt, especially for private business. As mentioned, the middle class is the largest group making use of the banking system through the attainment of different types of loans—such as pension loans, salary loans, and long-term housing loans—as they have regular incomes. Although middle-class people have regular income, they are the ones said to live from one paycheck to the next.
There are many private business people who belong to the middle class. According to them, it would be appropriate if the tax system was a bit more flexible so that it could allow them exemption in the initial stage before further taxes can be collected.
Middle-class people had a lot of opinions regarding governance and law implementation, especially about promises made during the election campaign. That includes share utilisation of natural resources. According to them, this money should not be distributed in cash but should be spent for efficient purposes such as investment.
Citizens also mentioned government bureaucracy, corruption, bribery, and discrimination present among government employees.
Suggestions also were made regarding improving public services. For example, because schools and kindergartens are not adequate, much cost is incurred by the middle class enrolling their children to private schools. Re-considering mortgage loan requirements and enabling the middle class to receive services with their insurance need to be considered.
The Dark Side of Mongolia's Mineral Boom
A new mine promises to provide great wealth to Mongolia. But at what cost?
February 12 (The Atlantic) The launch this year of Oyu Tolgoi, the world's largest untapped copper-and-gold mine, has ignited a debate in Mongolia about how to avoid a massive rise in income disparity. While most of the country's wealth accrues in the nation's capital, the vast majority of nomadic herders, who make up a third of Mongolia's population, remain skeptical that they will reap any benefits from this new venture. The herders who live near Oyu Tolgoi in the Gobi Desert say they are getting both the best and worst of the deal.
Australia-based mining giant Rio Tinto is courting Gobi nomads and offering impressive compensation packages -- particularly when compared to national salary averages -- to win over locals. New schools, full-ride scholarships, guaranteed lifetime employment, part-time positions that don't interfere with herding schedules, lump sums of cash, and new sheds and animal pens for each family are just some of the incentives to entice natives to move off ancestral grazing land and make room for the mega-mine.
"Besides herding animals, we do two days of work a week for Oyu Tolgoi," says Erdenejargal, a herder who lives a few miles from the mine's open pit. "It's better to have both jobs."
Most herders in the area have similar arrangements with Oyu Tolgoi. They earn roughly 450,000 Tugrik (about US $330) a month from part-time work at the mine in addition to their herding income. The extra cash is a significant windfall in a country where the current average monthly income hovers around $400. Erdenejargal says most people are glad for the opportunity to work two jobs.
However, these gifts pose an unappetizing choice: either take what is offered, or become displaced and be left with nothing at all. As a result, Gobi herders take the incentives with a heavy dose of pragmatism -- as well as a healthy skepticism of government.
"The only thing we can get out of this are the little candies [Oyu Tolgoi] gives us," said Narantsetseg, a 54-year-old herder who lives near the mine. "Even the government cannot provide us with these things, so it's important for us that Oyu Tolgoi can."
In 2009, a presidential election year, the two main parties -- the Democratic Party and the Mongolian Peoples' Party -- promised cash handouts totaling 1.5 million Tugrik to every citizen as a way to distribute mining wealth among the populace. But later that year, Parliament authorized payments of only 120,000 Tugrik per person because of a shortfall in expected mining revenues. Another round of cash handouts was scheduled to be disbursed in July of 2012, just after parliamentary elections, causing widespread suspicion that the handouts were an attempt to buy votes. Many Mongolians are skeptical that the earlier promises will ever be fulfilled. Still others argue that in a country lacking roads and basic infrastructure in rural areas, the cash handouts are an ineffective use of federal money.
Although many Gobi nomads are grateful for their second jobs and the opportunity to send their children to school -- perhaps to become mining specialists -- they pay for these bright futures with their homeland, lifestyles, and cultural values. Removed from their traditional pastures, they continue to worry about the mine's effect on the land. Most fear for the local water supply , which, in a desert area, is scarce enough without an enormous mine operating at an estimated 204 gallons of water per second. According to several Mongolian NGOs, such as OT Watch, Rio Tinto has not adequately proved the availability of water resources for the 30-to-60-year life cycle of the mine.
Others wonder if the land can survive the effects of increased desertification. Trucks carry construction materials, ore, and workers to and from the mine nearly 24 hours a day over unpaved land, kicking up a perpetual veil of dust over the region. Families in the area have stopped eating animal innards -- a staple of the Mongolian diet -- due to a buildup of dust found inside the animals' respiratory and digestive systems. Some herders wonder if their own bodies are being harmed in the same way from constant inhalation and ingestion of particulate matter.
Meanwhile, nationalists in government are fighting to increase the country's share of the mine from its current 34. Rio Tinto, in turn, has threatened to halt production at Oyu Tolgoi, and the path to an agreement looks rocky. While the majority of the nation wonders if they will ever see a slice of the pie, herders in the Gobi look at the slice they've already been given and wonder if it was worth it.
UNDP organizes discussion on utilizing mining revenue iin Mongolia
Need for medium-term development strategy highlighted
28 January, 2013 (UN) – Nearly 100 representatives from Government, international development partners, civil society, academia and the media participated in a panel discussion on “Utilising mining revenue for Mongolia’s development” organized on January 28 by the United Nations Development Programme (UNDP) and the Government of Mongolia with support of the UK embassy in Mongolia. This was the third event of UNDP’s Development Dialogue series organized in partnership with the Ministry of Finance.
Mineral reserves are critical for Mongolia’s development. The mining sector accounts for 89% of total exports, generates almost one-third of government revenues, and accounts for roughly 22% of the country’s GDP. Mining revenue offers a unique opportunity for resource-rich countries to transform their development prospects. However, not all countries benefit from such an opportunity. Which way will Mongolia go? In managing its mining revenues, how can Mongolia balance between the current development needs and the need to accumulate capital for future generations? Many large mining projects are likely to come on-stream in 2013 which makes these questions all the more pertinent.
Panelists included Mr. Ts. Davaasuren, Member of Parliament and the Chairman of the Standing Committee on Budget Policy; Mr. Gantsogt, the State Secretary of the Ministry of Finance; Mr. Ch. Khashchuluun, ex-Chairman of the National Development and Innovation Committee; Ms. Coralie Gevers, Country Manager of World Bank in Mongolia; and Mr. D. Jargalsaikhan, economist and media representative. The discussion was moderated by Dr. Saurabh Sinha, UNDP’s Senior Economist.
Opening the discussion, Sezin Sinanoglu, UNDP Resident Representative said that “The sheer size of Mongolia’s mineral resources and potential revenue flows are staggering which places a huge responsibility on the government as it faces tough policy choices on how to use this wealth wisely for the benefit of all. When making those choices, the key words will be equity, sustainability and accountability, all of which underscore human development.” She further emphasised that while resource flows from mining are finite, ways have to be found to ensure that the ‘benefit flows’ continue for longer and are enjoyed also by future generations of Mongolians.
In his opening remarks, Kh.Gantsogt, State Secretary of the Ministry of Finance emphasized Mongolia stands for maximizing the benefits of mining and distribute the benefits on the principle of equity between the generations. The Government plans to use the mining revenue for the Human Development Fund and the Stabilisation Fund. “For the last three years, the mining sector has contributed 2.9 trillion tugriks into the state budget, making up one-fourth of the budget revenue. Of this, one-third has been distributed to the Mongolian population as mining benefits and the remaining has been used to fund the budget expenditure and 335 billion tugriks put in the Stabilization Fund. So that the mining revenue benefits not only the present generation but also future generations, Mongolia is learning from the experiences of countries such as Norway, Chile and Arabian countries, to expand its economy, promote the wellbeing of its people, and most importantly, reserve the wealth for future generations”. A Law on Sovereign Wealth Fund is presently being drafted to keep a part of the mining revenue for future use. There are also plans to provide tax support to promote SMEs in the non-mining sector.
The discussion and the question and answer session that followed covered a number of areas. Most panelists talked about trade-offs between investments, especially between meeting present needs and keeping aside money for future generations; and between investing in infrastructure and building human resource capacity through investments in social sectors. The panelists talked about the need to develop a medium-term development strategy to manage the mining revenue better, especially since the new Budget Law now will lead to greater availability of resources at local levels through the Local Development Fund. It is hoped that fiscal decentralization will enable expenditure decisions to arise from broad based consultation and common understanding at different levels.
Mr. Davaasuren MP highlighted the central importance of investing in education to improve skills and capacity. Proper and effective utilisation of mineral revenue requires a suitable institutional framework with transparency and effective governance. Mr. Jargalsaikhan was of the view that institutional arrangements should not depend upon political personalities. Panelists agreed that greater accountability and transparency in the use of mining revenue will greatly enhance its impact on welfare.
Overall, Mongolian economy is heavily dependent upon mineral exports and the revenue is affected by the fluctuations in global prices. In 2008-09 global copper prices declined sharply and put Mongolia’s growth into negative territory. So a mineral-rich economy always faces a high risk of fluctuation in global commodity prices. With the introduction of the Fiscal Stability Law, Mongolia is better prepared this time to deal with such a crisis. In the open discussion that followed, the Vice Minister for Industry and Agriculture made a strong pitch for using mining revenue to promote industrial development which would also help in diversification of the economy.
UNDP intends to organise dialogues on a regular basis each year. Two more dialogues in this series are planned for until March 2013 on Mongolia’s “National Strategy on Green Growth” and “Including Youth in Mongolia’s Development”. Further details will be available on the website www.undp.mn/dialogues.
Police denies media report Zorig murder suspects arrested in the US
February 13 (news.mn) There have been local reports that two suspects were arrested on Monday in the USA over the murder of prominent politician, leader of the 1990 democratic revolution, Zorig Sanjaasuren, which sparked controversy.
The General Police Department have made a statement that the reports are baseless and misguided. The General Police Department of Mongolia asked if there was an arrest made by related organizations, but it was found that the report was mistaken.
Therefore news.mn is issuing an announcement that the local reports regarding arrests over the Zorig case were made in error.
Two suspects arrested over Zorig murder – news.mn, February 13
MONGOLIA REAFFIRMS COMMITMENT TO ACHIEVING ITS MILLENNIUM DEVELOPMENT GOALS BY 2015
February 13 (InfoMongolia) The Fifty-First Session of the Commission for Social Development has convened at the United Nations North Lawn Building (NLB) in New York, US on February 12, 2013.
The priority theme this year is "Promoting empowerment of people in achieving poverty eradication, social integration and full employment and decent work for all".
Representing Mongolia, Director of the Department of International Organization affiliated the Ministry of Foreign Affairs of Mongolia, Narkhuu TULGA has delivered a speech to reaffirm Mongolian Government’s policy on Millennium Development Goals by 2015.
The 51st Session of the Commission for Social Development
February 12, 2013
New York
Madam Chair,
First of all, I wish to express my delegation’s high appreciation to the Secretary-General for the thought-provoking report exploring the linkages between empowerment and poverty eradication, full employment and decent work for all, and social integration, in addition to sustainable development.
I wish to reaffirm my Government’s strong commitment to achieving the Millennium Development Goals (MDGs) by 2015.
According to the Fourth National MDG Report of Mongolia, 77.9 percent of them have already been achieved or are likely to be achieved by 2015. Despite the progress made so far, some MDGs targets including those on poverty and environmental sustainability are progressing slowly and require targeted interventions to achieve them.
Madam Chair,
It has become increasingly evident that promoting empowerment of people, enhancing their economic participation and empowerment constitute an integral part of the national development agenda. It is also one of the cross-cutting issues and it requires a cross-sectorial coordination. Empowerment is interconnected with the three core goals that world leaders at the 1995 World Summit for Social Development in Copenhagen committed to achieving: poverty eradication, social integration and full and productive employment and decent work for all.
Due to the world economic and financial crises, the rate of poverty reduction is slow. According to the SG's report, while poverty has been substantially reduced in some countries, it remains widespread in other parts of the world, namely in sub-Saharan Africa and in Southern Asia. Due to the recent slowdown in growth, the world economy is likely to create only half of the 80 million jobs needed over the next 2 years to reach the pre-crisis employment rates. Job creation is one of the priorities of the Government of Mongolia. As a result of sound policy measures, including a major legislature reform, improvement of job registration and services, as well as targeted allocation of soft loans to small and medium businesses, some 73 thousand jobs were created and the rate of unemployment decreased by 37.4 percent in 2012.
Madam Chair,
Mongolia highly appreciates the contribution of cooperatives in social and economic development. As we all know that cooperatives based on full member participation, serves as an important tool for the creation of decent employment as well as poverty reduction and social integration. One of the objectives of the International Year of Cooperatives (2012) was to support the exchange of best practices on how to achieve this empowerment. Today in Mongolia there are some 2,400 cooperatives operating in many areas of national importance. These include fields such as: the processing of raw materials; savings and credit; sales, supply and procurement; services; and housing construction. So as part of its International Year of Cooperatives activities, in order to further assist rural areas, the Government of Mongolia inaugurated a three-year “Campaign to promote the rural cooperative movement.”
Madam Chair,
I wish to reaffirm Mongolia's commitment to promote social integration by fostering societies that are stable, safe and just and that are based on the promotion and protection of all human rights, as well as non-discrimination, tolerance, respect for diversity, equality of opportunity, solidarity, security, and participation of all people, including disadvantaged and vulnerable groups and persons. In order to provide basic social protection floor for all, we are taking measures aimed at targeting social welfare support and assistance to vulnerable groups.
We also support the recommendation of the SG report that strategies to empower women, youth, persons with disabilities, the elderly and other marginalized groups should be treated as a matter of urgency by, inter alia, addressing their basic needs and concerns in the mainstream development agenda, in particular in the areas of full employment and decent work, equality, agriculture and infrastructure development, and financial inclusion, including access to microcredit.
We wish to encourage Member States to fully implement the Madrid International Plan of Action on Ageing, 2002, the World Programme of Action for Youth, the Convention on the Right of Persons with Disabilities, which all advocate social empowerment through the removal of social, political, legal and economic barriers and the active participation of marginalized social groups in society.
Madam Chair,
In 2012, world leaders agreed to renew their commitment to sustainable development, and to ensure the promotion of an economically, socially and environmentally sustainable future. We could build our future with inclusive and transparent society. In this regard, we need to accelerate our efforts to implement the Millennium Development Goals and internationally agreed development goals. We, Member States and UN system are looking forward to formulating new goals in the post 2015 development agenda. Social issues, in particular promotion of empowerment of people in achieving poverty eradication, social integration and full employment should be included in this new development agenda.
Thank you.
Youth, Mongolian held from Ghaziabad for cyber crime
INDORE, February 9 (The Times of India) City crime branch on Friday has claimed to have busted an international cyber crime gang and arrested two accused- an Indian Varun Batra, and a Mongolian national Munndro from Ghaziabad in Uttar Pradesh. Two other accused a Mongolian identified as Tamir and a Sri Lankan national Hassim are on the run.
Varun, 21-year-old, a resident of Ghaziabad who has passed high school (10th) along with his associates from Mongolia and Sri Lanka has siphoned around Rs 9.79 lakh (Mogi: lakh is a unit of 100,000) from nine different bank accounts of Hindi daily 'Nai Dunia' in September 2011. A case was registered at Annapurna police station in December 2011 and after one-and-half year of investigation by Indore police gang was busted.
Inspector general of police (Indore) Anuradha Shankar said, "This is one of the rarest of rare cyber crime cases and probably this is the first time when a district-level police has cracked such a case."
Elaborating about the case, IG said, accused has used fake documents to get data card which was used for the crime and fake email address to execute their plan. To make matter more complex accused had used data cards from different locations from across India.
Varun learned hacking online and after trying his hands on hacking small sites and got in touch with hackers from Mongolia and Sri Lanka through 'hacker forum' on internet and hatched a plan to withdraw money from corporate accounts and to execute their plan they got access to passwords of bank accounts through cyber logs and attacked the routers which were vulnerable without knowing the actual owner of accounts.
Accused siphoned money from nine accounts of Punjab National Bank (PNB) of the Hindi news daily and transferred it to CC-Avenue (a gaming website based in China) from there the money was transferred to mol.com and redeemed in Shanghai. A share of money was transferred to a bank account in New Delhi from which Varun withdrew his share.
IG said it was very difficult to trace the accused as perpetrators used fake addresses, documents and changed places, but the user log of data card- which was used for crime came handy while tracing the accused. "Data card was in use only for 45 days."
She said the accused Varun has confessed withdrawing his share of money transferred to him within three days of the crime and also admitted to the involvement in other internet frauds. They have been recharging mobile numbers of people by siphoning money from any random account through internet. "Everyday they used to withdraw around Rs 50,000 for recharging mobile number but they were withdrawing not more than Rs 500 from one particular account," said she.
Deputy inspector general (DIG) Rakesh Gupta said that he has informed the higher officials about the incident and the two details of accused, one Mogolian and a Sri Lankan who are on the run.
Dukha = Tsaatan (Reindeer) people
TIKA sends aid to Dukha Turks in Mongolia
February 12 (World Bulletin / News Desk) -- Turkish International Cooperation Agency (TIKA) sent aid packages to Dukhas, a small Turkic community living in Mongolia.
According to a statement released from TIKA on Tuesday, the Office of the Ulanbataar Program Coordinator organized relief aid reached north of Mongolia, the Tsagaannuur province after 7 hours of journey.
Heading to the city centre to get the relief aid, after taking their aid packages of winter materials, Dukhas returned their homes after loading TIKA aid packs onto deers.
Misc
Mogi: funny stuff
Mongolian Oddities
February 3 (Terra Nova) Andy and Ihab have both lived and worked in Mongolia as volunteers and loved the country so much they stayed. Andy has left recently and on their trip home they talked about the oddities of living in Mongolia.. their concept of time; a confusing address system; life on the buses, and more....
MONGOLIAN ICE SCULPTURES WIN TOP AWARDS AT THE ART MEETS ICE 2013 FESTIVAL IN FINLAND
February 13 (InfoMongolia) The International Ice Sculpting Festival themed Art Meets Ice 2013 was held in Helsinki Zoo, Finland in two stages in February of this year.
The Festival brought 24 top Sculptors from 8 countries to Helsinki Zoo, where the first stage competition for individuals titled “Life on the Baltic Sea” concluded on February 02-03 and the next stage for a team named “My Sea” presented its winners on February 09-10, 2013.
In individual category, Lkhagvadorj DORJSUREN received the first place prize with his “The Lunch” creature that describes a bird looking for its food among garbage from polluted sea, moreover the second place winner was also a Mongolian, Tsagaan MUNKH-ERDENE with “If I Was Big”, who received an audience award as well, and the third place prize came to Timo Koivisto with “First Snow” from host nation Finland.
Also, in the team (pair) competition, Baatar DORJNAMJIL and Tsagaan MUNKH-ERDENE with their “Interesting Life” art sculpture have achieved to win the first place astonishing the audience. Besides, other Mongolian artists Bazarsad BAYARSAIKHAN (“A Breath Of Fresh Air”) and Dorjnamjil BAATAR (“The Puffer Melody”) in individual category, and Lkhagvadorj DORJSUREN & Bazarsad BAYARSAIKHAN with "Sunken Heroes" have successfully attended the festival.
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“Mogi” Munkhdul Badral
Cover Mongolia
Email: mogi@covermongolia.mn
Mobile: +976 9999 6779
Skype: mogibb
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