Tuesday, September 17, 2013

[Parliament reconvenes with gunfire, Hogan Lovells explains Draft Investment Law, and up to $1b Samurai Bonds considered]

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Overseas Market

Petro Matad signs up Khet for seismic work on Blocks IV, V

September 16 (Proactive Investors) Petro Matad (LON:MATD) has hired a Mongolian geophysical contractor to carry out a 200 kilometre 2D seismic programme on Blocks IV and V.

The work is planned to start on October 1 and is expected to take around six weeks to finish.

The seismic data will give the company detailed coverage over two prospect areas identified by earlier seismic – also carried out by Khet – and should outline at least two locations for drilling in 2014.

Exploration Director Ridvan Karpuz said: "The geology of Western Mongolia is similar to that found in the Junggar and Turpan basins of China to the south, both of which are prolific hydrocarbon production areas. 

"To date there has been no drilling in the similar basins in Mongolia. The seismic survey is designed to define targets for a potential drilling campaign in 2014 and is an exciting step."

The company added that talks with a number of oil and gas companies are ongoing to progress exploration of its three PSCs [production sharing contract] in Mongolia – Blocks IV, V and XX.

"Whilst there is no certainty as to the outcome of this process the seismic programme outlined above for Blocks IV and V is in line with the continuing discussions," Petro Matad told investors.

Link to article

Link to MATD release


Mongolia Growth Group Ltd. Cancels Private Placement Offering

Ulaanbaatar, MONGOLIA, September 16, 2013 /FSC/ Mongolia Growth Group ("MGG") (YAK TSXV) or ("The Company") today announces that it is withdrawing its previously announced offering ("Offering") of units ("Units").

Due to unsettled market conditions, the company has opted to cancel its current capital raise. The Company ended the second quarter with $5.7 million in unrestricted cash and has no substantial capital outlays planned.

Link to release


Wolf Petroleum: Annual Report 2013

September 16, Wolf Petroleum Limited (ASX:WOF) --

Link to report


Rio Tinto's giant Mongolian mine gets new CEO

ULAN BATOR, September 11 (Reuters) - The top copper marketing executive at Rio Tinto Ltd will take over as the head of Oyu Tolgoi, the giant Mongolian copper and gold mine controlled by Rio Tinto, Oyu Tolgoi said on Wednesday.

Oyu Tolgoi's board, including three new Mongolian members, approved the appointment of Craig Kinnell as president and chief executive, replacing Cameron McRae from October 1. McRae is leaving Rio Tinto.

Kinnell takes over at a tricky time as Rio Tinto is trying to resolve disputes with the Mongolian government over terms for $4.2 billion (2.7 billion pounds) in project financing to fund an expansion at Oyu Tolgoi, which is crucial to Rio's and Mongolia's growth.

Rio put the $5 billion expansion project on hold in August and said it would have to cut up to 1,700 jobs due to the project financing dispute.

The board is meeting in Ulan Bator this week to try to resolve some of the issues. Some analysts have speculated that Mongolia's concerns about Rio Tinto's management fee, capital costs for the open pit mine, which is now producing, and the planned underground mine, will be hard to resolve.

"The best we can determine is that all stakeholders want the outstanding issues to be resolved and are confident they will be, but a number of items still need to be agreed before the OT board can go back to the project finance syndicate members," analysts at Resource Investment Capital said in a note on Wednesday.

There had been speculation Rio Tinto may appoint a Mongolian to head Oyu Tolgoi to help smooth relations with the government.

"Craig's years of experience running mines and selling minerals at international market prices make him the perfect choice to successfully lead the project in the coming years," Oyu Tolgoi Chairman Batsukh Galsan said in a statement.

Link to article

Link to OT announcement


Rio Tinto's Oyu Tolgoi new CEO set to end mine's, September 11


BDSec: Resolution of Issues Surrounding Phase 2 at Oyu Tolgoi Probably not Imminent

September 10 (BDSec) Prior comments from lawmakers implied the issue over Phase 2 financing was something the OT Board could (and should) resolve on its own, allowing underground operations to resume, this does not appear to be the case. In an interview with, EOT CEO Ganbold's comments could not be clearer on this subject: "This is not an issue that Board solves. There are issues to be solved on Board level, and there are issues to be solved on investors' and shareholders' level. Hence, Board, directors, management have different levels of decision-making powers. So, I'll try make decision within my power." As it relates to resolving the issues that are within his power, Ganbold's comments were likewise clear and pragmatic: "…I am reading all the documents related to the issue that's several hundred pages long. Because of the indecision on the issue, both parties faced significant loss. If things continue like this, there will be more loss. Therefore, I'll strive for middle ground and will find intermediate version. In general, any dispute whether it's of a family or between big corporations/between nations, there's never a party that is 100% right or wrong. If one party forced his position on the other, there must be certain degree of compromise made in order to move forward to the solution. If not, more time will be wasted. It's a lose-lose situation. Therefore, I'll solve the issue through intermediate version." CEO Ganbold's comments reflect a different and more sober reality than recent comments from lawmakers, who were predicting a quick resolution to outstanding issues and a resumption of underground operations in the near term.

Limited Power of OT's Board of Directors

While CEO Ganbold did not give specifics on how limited his powers to resolve these issues are, he clearly stated involvement at the shareholder level (read GOM and perhaps Parliament) is needed. We have heard for some time that a reaffirmation of the Investment Agreement by the GOM is one condition to resume underground operations, it would appear there is some credence to this belief based on Ganbold's comments. The OT board is scheduled to meet this week, but investors should temper their expectations for any meaningful progress, since 3 new members were just appointed, which include CEO Ganbold. Time is probably needed for the new members to acquaint themselves with the issues and formulate a strategy, before resolution can be a reality.

Complex Issues and the Need for Compromise

CEO Ganbold's reference to "several hundred pages" of documents related outstanding issues suggests to us resolution is not just around the corner. We interpret his emphasis on compromise as meaning the GOM is not prepared to cave in order to get quick resolution and that finding middle ground is needed to move the discussions forward. Our sentiment on this subject was reinforced through several conversations with contacts here on the ground in UB. For RIO & OT's part, it's difficult to know how willing they are to compromise since shutting down Phase 2 construction in August and laying off 1700 workers, either directly or through contractors. It's also not clear what outcome will benefit RIO the most, an expedited resolution through compromise, or a more lengthy battle with less compromise? Bear in mind, RIO's bridge loan to Turquoise Hill (TRQ) is due 12/31/13 and a rights offering is triggered in the event of default.

The News is not all Bad

We caution investors on being too focused on the day to day news commentary regarding the GOM and OT. It's been nearly a year since these problems began to surface and progress has been made. Asset prices already reflect the current negative outcome and the savviest of our investors are taking advantage, as others capitulate. No longer do we hear calls from the resource nationalist side of the spectrum, demanding 51% of the project, or to renegotiate and/or disregard the '09 Investment Agreement altogether. Leadership on both sides of the table has been changed, which will hopefully result in a lasting resolution allowing Mongolia to get back to the business of being the fastest growing economy in the world.

Link to report


Aspire Mining finds path to European markets for Ovoot Coking Coal

September 13 (Proactive Investors) Aspire Mining (ASX: AKM) has reached a port access agreement with the operator of Taman Port at the Black Sea, opening up the European market for its Ovoot Coking Coal Project in Mongolia.

Separately, it has also signed a non-binding Memorandum of Understanding signed with a terminal operator of the Nakhodka Port on Russia's Far East coast for exports to north Asian markets.

"These non-binding MOU's are important in outlining the Company's strategy for geographically diversifying the customer base for the Ovoot Coking Coal Project," managing director David Paull said.

"There is now an identified path for Ovoot Project coking coal from Northern Mongolia to penetrate European markets

"The agreement with the Russian Coal Terminal operator along with the previously disclosed Noble Agreement now provides for sufficient volume and flexibility in meeting the Ovoot Project's Far East Russian port needs in delivering coking coal into North Asia's seaborne markets".

Taman Port

The company has reached a non-binding MoU with OTECO, a Russian port capacity provider, to access a coal terminal, currently under construction at the Black Sea port of Taman, which is expected to be completed in 2015.

The Taman Port is designed to accommodate up to capesize bulk vessels – commonly used to transport coal, ore, and other commodity raw materials – that can travel to destinations either bordering the Black Sea or Europe.

This opens up the ability to deliver Ovoot Project coking coal to steel industries in Turkey, eastern and southern Europe.

The MoU term covers a period of five years commencing from the first delivery of coal, handling volumes up to two million tonnes per annum. 

Taman Port is directly accessible by Russian Railways Trans-Siberian Railway from the Mongolian/Russian border town of Naushki.

Nakhodka Port

Aspire has also reached an agreement with a terminal operator in Russia's Far East. This covers access to the Port of Nakhodka specifically but does not limit the provision of port services to this terminal alone. 

The term of the MoU is for a period of 5 years commencing from first delivery of coal, handling volumes of up to 2 million tonnes per annum.

The Nakhodka Port non-binding agreement compliments a MoU entered into in January 2013 with Noble Group that provided a mechanism to access Noble's recently acquired interest in a Russian Far East Port. 

Accessing Russian Far East ports enables Ovoot Project coking coal access to north Asian markets including Japan, Korea, Taiwan, Vietnam and southern China.

Ovoot Coking Coal Project

The company had recently made a fundamental shift in its development strategy with the identification of a low capital development for the project by using contractors wherever possible for a 5 million tonne per annum initial project.

This has reduced initial capital requirements to US$144 million from the original US$459 million for the original 6Mtpa Stage 1 plan.

Financing has also received support with the receipt of non-binding letters of intent from Deutsche Bank and BHF Bank to provide US$40 million and US$50 million respectively in Export Credit Agency backed loans to fund the wash plants and associated site works and engineering while a US$20 million working capital facility from Noble would be made available to the company.

Together, the new development plan and funding options remove a significant area of funding risk for its wholly-owned owned subsidiary Northern Railways and its proposed Erdenet to Ovoot Railway.

The company has also recently noted interest from potential customers to acquire Ovoot Project coking coal and had signed non-binding Memoranda of Understanding for coal sales for up to 5.5 million tonnes per annum, with significant additional interest from Russian, Chinese and Japanese customers.

Studies also found that coking coal from Ovoot had superior blend carrying capacity and could be blended with coal from the Government owned Tavan Tolgoi mine in southern Mongolia to upgrade the latter's coking coal properties.

Ovoot has a Probable Ore Reserve of 255 million tonnes Run of Mine. It has Open Pit Resources of 253.1 million tonnes and underground resources of 27.9Mt.

Aspire has a 100% interest in the Ovoot Coking Coal Project in northern Mongolia.


Aspire Mining is ringing in further markets for Ovoot Coking Coal Project, this time a deal to penetrate the lucrative European markets.

With the company having already reduced capital requirements and set financing options in place, it is likely to find faster favour from financiers for the remaining capital spend.

This is a building block for value accretion for Ovoot and for Aspire Mining.

Link to article

Link to AKM release


Sentosa Mining confirms large copper-gold porphyry potential near Rio's Oyu Tolgoi in Mongolia

September 10 (Proactive Investors) Sentosa Mining (ASX: SEO) has received two independent technical reviews of a recently completed aeromagnetic survey the over the north-western sector of the Darvii Naruu project in Mongolia.

Each confirmed the significant potential for large scale copper-gold, gold or nickel-copper-PGE mineralised systems within that sector of the project. 

The first review was conducted by Ozex Consulting, a firm of independent geological consultants, which focused on the geology and geochemistry of the Darvii Naruu Project. 

The second review, by Southern Geoscience Consultants, focused on the airborne and magnetic radiometric data itself. 

1620 line kilometres of aeromagnetic-radiometric data was collected in the Darvii Naruu survey, confirming a tectonic setting in a known porphyry mineral belt that hosts Rio Tinto's (ASX: RIO) giant Oyu Tolgoi copper porphyry deposit.

Relative age of host stratigraphy is consistent with other known porphyry systems within the belt including Oyu Tolgoi; strengthened by ore-grade mineralisation up to 5.8% copper and 34.4 grams per tonne gold found in outcrop over the Mushroom Reef prospect.

A large scale 2.5 kilometre by 2.5 kilometre circular magnetic low feature immediately north of Mushroom Reef is possibly indicative of a large intrusion at depth.

A discrete circular magnetic high, 600 metres by 600 metres, 4 kilometres north-west of Mushroom, is coincident with K-channel radiometrics, and may reflect deeper levels of a porphyry system, with magnetic elevation associated with magnetite in the intrusion, and the high-K radiometrics reflecting higher temperature potassic alteration.

In addition, the presence of gold, copper, platinum and palladium in rock samples from Anomaly 13 suggests potential for discovery of primary magmatic polymetallic mineral deposits.

Geochemistry confirms a suite of anomalous pathfinder elements including zinc and lead, which are a reliable porphyry system signature.

Several drill-ready magnetic and potasic targets, from 37 total, have been identified with drilling preparations underway.

Sentosa intends to exercise its option to acquire 100% of Mongolian project, subject to the company being satisfied with final due diligence enquiries.

Given the size of the targets, the location in an established copper-gold porphyry province and Sentosa's market capitalisation of around $1 million, the company's shares are leveraged to exploration success.

Link to article


Broker to placement CPS Capital Group (formerly CPS Securities)

MRL: Prospectus

September 13, Mongolian Resources Limited (ASX:MRF) -- For an offer of up to 5,000,000 Shares at an issue price of $0.20 per Share with an attaching free Option exercisable at 20 cents on or before 5:00pm (AEST) on 17 October 2016 (New Option) to raise up to $1,000,000.

Oversubscriptions of a further 2,500,000 Shares at an issue price of $0.20 per Share with an attaching free New Option to raise up to $500,000 may be accepted.

The offer is conditional upon Shareholders approving, at the General Meeting to be held on 9 October 2013, a change in nature and scale of activities and this Capital Raising. Please refer to Sections 2.2, 2.3 and 5.1 of this Prospectus for further details.

Link to prospectus

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Local Market


September 16 (MSE) Securities market participants legally obliged to report constantly to the public such as their financial reports and shareholders meeting etc. Pursuant to these obligation MSE has started to publish financial statement of JSC as an "excel" file.

By the 13 September, 2013 there are 182 companies have provided their  2012 year-end financial statement, 48 companies have provided their half-year statement of 2013 and reported through MSE's website.

In this connection with downloading financial statement as an excel file, we requesting to companies provide the financial statement on time that stated in Accounting law and listing rules of MSE.

Please click here to view financial statement of JSC. 

Link to release


Draft Law on Investment Funds

September 10 ( --

Link to draft (in Mongolian)


Forbes Contributor Stock Pick: APU

By Carl Delfeld

September 12 (Forbes) Mongolians love their vodka and APU JSC  (APU: Mongolian Stock Exchange) is the leading beverage player in that country, with a diverse product range that includes beer, spirits, mineral water, juices and milk. APU (which literally stands for Vodka, Beer, Drinks) has a 50% plus share of the Mongolian beer and vodka market and 20% of the water and juice market. The stock is trading at 12 times earnings and its pricing power makes it a solid core holding.

Link to article

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Total outstanding 1-week bills drops from 804.1 billion to 760.6 billion

BoM issues 1-week bills

September 16 (Bank of Mongolia) BoM issues 1 week bills worth MNT 108 billion at a weighted interest rate of 10.5 percent per annum /For previous auctions click here/

Link to release


BoM holds FX auction

September 12 (Bank of Mongolia) On the Foreign Exchange Auction held on September 12th, 2013 the BOM has received bid offer of USD and CNY from local commercial banks. BOM has sold 25.0 million USD and 60.0 million CNY to the local commercial banks. 

On September 12th, 2013, The BOM has received bid offer of 31.0 million USD for Swap agreement from local commercial banks and accepted the offer. Totally The Bank of Mongolia has supplied 65.8 million USD of foreign currency to the market.

Link to release


Hogan Lovells: Mongolia revises its regulatory framework for foreign and domestic investment

September 2013 (Hogan Lovells) --

The Government of Mongolia has proposed to amend its regulatory framework for investment activities in a bid to reverse a decline in foreign investment and to revive the economy.  Last week, the Government submitted the draft Law of Mongolia on Investment ("Draft Investment Law") to Parliament for consideration during an extraordinary session to be held from 16 September to 27 September 2013.  If adopted, the Draft Investment Law will replace the Law of Mongolia on Foreign Investment, enacted on 10 May 1993, as amended ("Foreign Investment Law") and the Law of Mongolia on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance, enacted on 17 May 2012, as amended ("SFI Law").

The current version of the Draft Investment Law on Parliament's website is a work in progress that will undergo further changes in content and wording during the extraordinary session.  It reflects the intention of the Government to return to a less complicated registration process that had made Mongolia an attractive private foreign direct investment ("FDI") destination, compared to other emerging jurisdictions in years past.  While this will be a step welcomed by foreign and domestic investors alike, the effectiveness of the new law will depend upon whether the Government has the political will to streamline its bureaucracy and facilitate registration procedures in order to increase capital flows into Mongolia. 


Since its adoption in 1993, the Foreign Investment Law has been the key piece of legislation providing the main regulatory framework for FDI in Mongolia.  Under the Foreign Investment Law, the Government set up a two-step registration process for the establishment of foreign-invested entities.  A foreign investor needed to register with the state administrative body in charge of matters related to foreign investment (presently, the Foreign Investment Registration and Regulation Department of the Ministry of Economic Development, or "FIRRD") and thereafter register its business entity with the Legal Entity Registration Office ("LERO").  The two-step process required relatively few supporting documents and considerably less time than other jurisdictions competing with Mongolia for capital.  

In 2012, the enactment of the SFI Law considerably altered the investment landscape by expanding the discretionary approval authority of the Government or Parliament for private and state-owned foreign investment in strategically important sectors, namely minerals, banking and finance, and media and telecommunications.  Further, changes in the equity structure of strategically important foreign-invested business entities also could trigger mandatory discretionary approval procedures.  

The SFI Law stipulated that any investments by a foreign state-owned entity required Government approval as a mandatory precondition.  The term "foreign state-owned entity" was left undefined. 

On account of shifting policies toward FDI, the authorities did not issue implementing regulations to clarify many of the broad terms of the SFI Law until March of this year.  This resulted in an extended period of inactivity in relation to new investments, which partly contributed to a reported 43% decline in foreign investment in the first six months of 2013 as compared to 2012. 

The Draft Investment Law removes some of the uncertainties under the SFI Law: 

·         It consolidates the approval process by stipulating that private investment from foreign or domestic sources need only register with LERO.

·         It removes the classification of strategic economic sectors for foreign investment.  

·         It defines a foreign state-owned legal entity ("FSOE") as a legal entity in which a foreign state directly or indirectly holds more than 50 per cent of the entity's equity. 

·         It states that the Ministry of Economic Development ("MED") is the approval authority for all investments by FSOEs.  

·         It authorizes the Investment and Business Promotion Agency ("IBPA"), a separate agency to be established under the MED, to issue a "tax stabilization certificate" to qualifying entities.  Holders of such tax stabilization certificates are entitled to enjoy stable treatment in respect of certain types of taxation for a certain period of time.

Earlier drafts of the law called for the creation of an "Foreign Investment Board" similar to that seen in the Australian regime, however this concept has been removed from the latest draft submitted to Parliament. 

In addition to the repeal of the SFI Law and the Foreign Investment Law, 11 other laws, including the Law of Mongolia on the State Registration of Legal Entities, enacted on 23 May 2003, as amended ("Legal Entities State Registration Law"), will be amended in order to implement the Draft Investment Law. 


The scope of the Draft Investment Law extends to the regulation, protection and promotion of investment by foreign and domestic investors in Mongolia.  "Investments" are classified into two categories; direct investments and portfolio investments.  The distinction between these two types of investments is the degree of involvement by the investor in the management of the investee.  Portfolio investments do not fall within the ambit of the Draft Investment Law unless they are made by FSOEs. 

The amount of investment determines whether the entity may apply for a tax stabilization certificate.  Under the Draft Investment Law, "investment" is calculated by reference to a balance sheet test applicable to both foreign and domestic investors according to relevant financial reporting and accounting standards.   

The Draft Investment Law expressly does not apply to investments in Mongolian state authorities using State funds nor to investments by international organisations, NGOs and private persons in the form of donations or ex gratia grants.   


The MED will continue to have the main authority to implement state policy and laws and regulations on investment. Among other powers, the MED issues approvals for an investment made by an FSOE. 

Further, the MED will create the IBPA with a mandate to promote, advertise and regulate investment activities in Mongolia. This agency will also be in charge of issuing tax stabilization certificates as well as ongoing monitoring and inspection of the activities of holders of such stabilization certificates. Unlike FIRRD, the IBPA will not have any role in registering foreign-invested entities established by private investors. 


Subject to approval requirements for FSOEs, investors may invest in any production or services sector which is not prohibited or restricted by law.  Prohibited sectors are specified as narcotics, gambling, pornography, or pyramid sales or marketing. Certain regulated sectors are also subject to licensing requirements.   

Registration Framework for Foreign Investment 

Under the Draft Investment Law, foreign investors may establish a presence to do business in Mongolia through a foreign-invested business entity or a representative office. No other form of corporate vehicle such as a branch, is currently provided for. It is also unclear whether foreign individuals or foreign limited liability partnerships may establish a presence in Mongolia through a foreign-invested partnership. Although a reference is made to "business entity" which may include any corporate forms for profit-making activities, in practice a limited liability company is the most common vehicle used to establish a presence in Mongolia.   

The Draft Investment Law expressly provides that a foreign or domestic investor may make an investment on the basis of registration of a legal entity in accordance with the Law of Mongolia on Companies, (as revised) enacted on 6 October 2011, the Legal Entities State Registration Law and other relevant laws and regulations. This is identical to the process under the Foreign Investment Law where foreign entities need to be registered with FIRRD and LERO, save that the two-stage process has become a one-step registration. However, an FSOE may only make an investment upon obtaining approval as specified in the Draft Investment Law. 

Accordingly, investment made by private foreign or domestic investors will no longer be subject to general approval requirements, other than registration to the extent required, and licensing or other requirements under sector-specific legislation. 

Regulation of Investment by an FSOE 

The Draft Investment Law stipulates that an FSOE must fulfil the MED's approval procedures for all investments (both direct and portfolio investment) or operations, or for the acquisition of a 25 per cent or more interest in Mongolian-incorporated legal entities. In the event of a breach of this requirement, the MED may impose an administrative penalty including the revocation of licences or termination of the operations of the related Mongolian entity. 


To ensure a stable regulatory framework, the Draft Investment Law provides that any proposed amendment to or repeal of the Draft Investment Law will only be effective upon the affirmative vote of at least two-thirds of members of Parliament. This could help to prevent arbitrary or sudden changes in the investment environment. Nonetheless, this provision may raise constitutional issues in the event that a simple majority of the members of Parliament enact the Draft Investment Law. 

Further, the State may issue a guarantee for stable tax treatment upon request by an investor in accordance with the Draft Investment Law. If approved, an investor would be entitled to enjoy stable tax treatment for a specific period of time. 

The Draft Investment Law provides general legal guarantees of investments such as protection from nationalization (by setting out conditions under which nationalization is permitted), protection of intellectual property rights, the right to repatriate profits (following the payment of relevant taxes), and freedom to choose a dispute resolution forum. 

Further, the Draft Investment Law sets out general rights and obligations of investors in relation to their operations.  Both foreign and domestic investors are obliged:

·         to comply with Mongolian laws and regulations;

·         to provide work and services that are in compliance with national and international standards;

·         to maintain accounting records and registers in accordance with applicable standards;

·         to provide necessary information to relevant state authorities;

·         to implement investment activities that are in the interests of customers, environment-friendly, and supportive of human development;

·         to recognise and observe workers' rights under the relevant legislation and to provide training and improve the professional skills of employees;

·         to introduce good corporate governance principles; and

·         to respect the traditions and customs of the Mongolian people.

Failure to comply with the statutory obligations will attract an administrative penalty following a 6 month grace period allowed to cure the breach. Imposition of sanctions for non-compliance with such open-ended obligations could be problematic in the absence of specific criteria. 


To promote large-scale investment in Mongolia, the Draft Investment Law proposes to introduce so-called tax stabilization certificates ("Stabilization Certificate"), which will entitle the holder to enjoy stable tax treatment for a period of up to 10 years in the case of heavy industry and 5 years in the case of light industry. Further, in the event the stabilised tax rates are reduced, a holder of the Stabilization Certificate is entitled to the more favourable tax treatment. 

The Stabilization Certificate will stabilise the applicable rates for the following taxes: (i) corporate income tax; (ii) customs duties; (iii) value-added tax; and (iv) minerals royalties. 

A Stabilization Certificate may not be issued in respect of investment made in activities relating to production, import, and sale of tobacco products or alcoholic beverages. Further, investors who already have entered into investment or stability agreements with the Government would not be eligible to apply for a Stabilization Certificate.  

The IBPA may issue a Stabilization Certificate if the investment:

·         exceeds MNT 15 billion in value (as of September 2013, approximately US$ 8.7 million);

·         is environmentally friendly;

·         creates new jobs; and

·         introduces new technology.

The Draft Investment Law sets out the procedures to apply for, issue, and terminate a Stabilization Certificate.  

As currently drafted, it appears that the Stabilization Certificate will become the only way of providing stable tax treatment in Mongolia and will replace the process for investment and stability agreements that provided tax stabilization guarantees for mining and larger-scale projects with foreign investment under existing legislation. 


Unless provided otherwise in sector-specific laws, the MED and its relevant agency will monitor investment activities. 

Holders of Stabilization Certificates have an obligation to issue annual investment reports and submit the same to the IBPA and the relevant tax authority. Failure to comply with these reporting obligations will attract a financial penalty. 


Non-compliance with the Draft Investment Law attracts administrative penalties as specified above.  Further, a financial penalty will be imposed on those who breach the regulations relating to the application, issuance and maintenance requirements for Stabilization Certificates.  


If passed, the draft law is a welcome development which should assist to stimulate the development of domestic and foreign investment in Mongolia. It has the benefit of removing the concept of strategic sectors for domestic and foreign investors, thereby eliminating some confusing and discretionary approval criteria that were set out in the SFI Law. It further will simplify the registration process before a single body in place of the previous dual registration with FIRRD and LERO. The concept of tax stabilization certificates suggests a more routine handling of significant investment from now on rather than individual, discretionary grants of tax stability or investment agreements for specific investors. 

The above said, Parliament could take the opportunity of enacting the Draft Investment Law to further clarify other aspects of the Mongolian investment regime. 

The Draft Investment Law does not expressly provide that foreign investors may form a limited liability partnership or a branch.  During the deliberation about the law, Parliament could include these investment structures that are important for financial institutions, auditing firms, and law firms as vehicles available to foreign business entities. 

There also remains a discretionary approval system for investment by FSOEs and relatively undefined and subjective criteria for tax stabilization certificates, such as the creation of new jobs, introduction of new technology and environmentally-friendly investment. 

The inclusion of general obligations on domestic and foreign investors to provide work and services in compliance with international standards, implement investment activities that are in the interests of customers, or support human development, introduce good corporate governance principles and respect the traditions and customs of the Mongolian people also appear to have a high degree of subjectivity  that may be subject to argument, and could result in selective enforcement if not better defined or consistently applied. This is especially important as non-compliance would be subject to an administrative penalty. 

Further, neither the law nor the supporting amendments at this stage address the issues in the current registration process, such as the lack of an online company registration process, the inability to conduct routine company searches, protracted registration handling times, and the complex company name selection and business scope approval process. 

While the Draft Investment Law is an important step in the direction of encouraging domestic and foreign investment and streamlining the process, the fundamental point is whether there is full policy support for its effective implementation.  Certainly the investment environment could benefit from a focus on removing the practical day-to-day obstacles to business as opposed to ambitious projects that may take many years to implement.  As sagaciously noted in an old Mongolian proverb, "it is better to eat lungs today than steak tomorrow".

Link to client note


Mongolia to Sell Up to $1 Billion in Samurai Bonds, Premier Says

September 15 (Bloomberg) Mongolia plans to sell as much as $1 billion worth of Samurai bonds this year and offer foreign investors a new way into its largest coal project as Prime Minister Norovyn Altankhuyag seeks to revive growth.

"This year we're hoping to launch a yen-denominated bond issue, which will be equivalent to as much as $1 billion," the prime minister said in an interview in Tokyo, citing expanding relations with Japan for the fundraising plan.

Mongolia's economic growth slowed to 11.3 percent in the first six months from a world-beating 17.5 percent in 2011 on slowing Chinese demand for its coal and a dispute with the nation's top foreign investor, Rio Tinto Group. Stricter laws on foreign investment have also damped overseas interest even as the $10 billion economy looks abroad for help to build the infrastructure needed to develop its mining riches.

Foreign direct investments shrank by $1 billion during the first half of the year, a 42 percent drop. After a decade-long commodity boom Mongolia's sovereign rating is in danger of a downgrade as state spending has been outstripping income, the nation's central bank said last month.

The World Bank in April cut its forecast for Mongolia's 2013 economic growth to 13 percent from 16 percent, citing declines in exports and foreign investment. The local currency, the tugrik, has weakened 18.3 percent against the U.S. dollar this year.

Better Climate

"These issues will not continue for a long time," the prime minister said Sept. 14 at the end of a four-day visit to Japan. The government plans new laws to improve the investing climate and also ways to boost exports, he said.

Mongolia's Parliament will consider next week a draft bill on investment that should bring more transparency and stability to the process, particularly for overseas investors, he said, without giving further details.

The country will also offer stock in its biggest coal project to foreign investors in power, rail and water projects around the Tavan Tolgoi basin, he said.

Companies that build the infrastructure at Tavan Tolgoi, which has reserves of more than 6.4 billion metric tons, will later have the chance to swap their investments for equity in the mine, Altankhuyag said. Investors may also choose to get paid in coal, he said.

Russia & China

The central part of the coal basin is being developed by state-owned Erdenes Tavan Tolgoi LLC, which sells all of its coal to the Aluminum Corp. of China Ltd, also known as Chalco. The Mongolian miner is in talks with China's Shenhua Group and Peabody Energy Corp. (BTU) of the U.S. on "strategic partnerships," Erdenes TT's Chief Executive Yaichil Batsuuri said Sept. 3.

Samsung C&T Corp. (000830), South Korea's second-biggest construction company and also a trader of metals and chemicals, said in May it won a contract to build a 217 kilometer (135 mile) rail line from Tavan Tolgoi to the Chinese border. Other foreign investors will take part in building power plants around Tavan Tolgoi, the prime minister said.

The government is still considering whether the rail from Tavan Tolgoi to China should be the wider gauge track used in Russia or the narrower gauge of China, which buys 90 percent of its commodity exports, Altankhuyag said. A Chinese gauge is one of the "many options" Mongolia has to help it boost exports, he said.

Coal exports to China plunged to $542.4 million in the first six month of the year from $1 billion a year earlier as total first-half exports fell 10 percent, Mongolian state data show. Mongolian Mining Corp. (975), which accounts for 42 percent of Mongolia's coal exports to China, said last month that average prices for its washed coal used in steelmaking fell 29 percent in the first half, versus the same period of 2012.

Capital Markets

As growth slows, Mongolia is turning to capital markets to raise funds. The country will consider debt sales either in yuan or yen to finance power plants and railways, central bank Governor Naidansuren Zoljargal said April 19.

The government sold its first international bonds in November with a $1.5 billion issue in the U.S. currency. Yields on the 10-year government debt known as Chinggis bonds have risen 273 basis points this year to 8.171 percent as of Sept 13, according to data compiled by Bloomberg.

After this week's visit to Japan, whose premier Shinzo Abe was among the first leaders to visit Mongolia since Altankhuyag took office in 2012, the nation landlocked between China and Russia is turning to the yen for fundraising.

The Japan Bank for International Cooperation in June gave Mongolia its first export credit line to the equivalent of 8 billion yen ($80 million), according to the bank's website.

Samurai Debt

State-owned Development Bank of Mongolia LLC will be the "main issuer" of yen-denominated debt, Altankhuyag said. The sale is not tied to any conditions that oblige Mongolia to buy Japanese equipment, he said.

The Development Bank of Mongolia sold $580 million of five-year debt denominated in the U.S. currency in March last year in its first public bond sale. The yield on the bonds rose to 8.99 percent as of Sept. 13 from a low of 3.833 percent on Oct. 23 last year, according to data compiled by Bloomberg.

Separately, the prime minister denied that there was a rift between the government and Rio Tinto, Mongolia's biggest investor and the world's second-largest mining company. The two sides jointly own the Oyu Tolgoi gold and copper mine.

"There are no issues between Rio Tinto and the government that we could not agree on," he said. "We are continuously saying that we are ready to discuss issues for the further development of this site."

Rio Tinto

In July, Rio Tinto, the world's second-biggest mining company, said it will delay work on a $5.1 billion underground expansion of Oyu Tolgoi pending financing approval by Mongolia's parliament. The mine, which has so far cost $6.6 billion to build, may expand Mongolia's economy by 30 percent when running at full capacity.

Since the first commercial copper shipments started in July progress on developing Oyu Tolgoi has stalled. Mongolia, which controls 34 percent, claims cost overruns are delaying future dividends and wants the mine's underground extension funded with revenue from sales. Rio manages the project via its 51 percent stake in Turquoise Hill Resources Ltd. (TRQ)

"Investment in the underground is a separate issue," and the need to move forward with this second phase of the project must be weighed against the currently weak global economy, Altankhuyag said. "We support project financing" for the development of the underground section, he said.

Link to article


Mongolian economy suffers as another row erupts over flagship mining project

By Terrence Edwards

September 16 (bne) Mongolia has called a special two-week-long session of parliament to begin September 16 as it scrambles to relaunch the development of its flagship copper-gold mining project. 

Oyu Tolgoi has been a magnet for investment, and the circumstances surrounding it are how most investors gauge the investment climate in Mongolia. So it came as a shock when Mongolia's private partner in the project, diversified miner Rio Tinto, announced in August it would lay off 1,700 workers because the development of an underground mine would have to be suspended after it received word from the government it needed permission from Mongolian parliament to raise the financing for it. 

The government controls 34% of the project while Rio controls the remaining 66% through majority-owned Turquoise Hill Resources, though the partnership has been a volatile one. The tunnel mining is poised to propel the copper mine from being the fifth largest in the world to the third largest. Rio was pushing to get a $4bn financing package in place to fund development, but the government baulked, saying that reported costs of $6.5bn for phase one of the mine were already exorbitant. 

Rio has said that it will suspend operations until it receives parliamentary approval for the financing package. Meanwhile, the government is waiting to hear from Rio on some oustanding questions. "We are still expecting two replies that are supposed to be made from Oyu Tolgoi," Economic Development Vice Minister Ochirbat Chuluunbat told bne on the sidelines of the "Discover Mongolia" Forum in September. "There is the report about the investment that is being made; the second is about the feasibility study for the underground mining. It [the feasibility study] should have been submitted to the government." 

From bad to worse 

Mongolia was already seeing flagging foreign investment due to the 2012 "Strategic Entities Foreign Investment Law" (SEFIL), which raised obstacles for investors to clear before they could acquire assets in mining and other "strategic" sectors named in the legislation. According to government data posted on state-run website Montsame, in the first half of 2013 Mongolia saw foreign investment fall 43% from the same period last year, with the mining industry taking a hit of some 32%. Another industry hit hard was tourism, down 98.5%, where spending is largely related to mining because of foreign workers and investors visiting the country, and the chartering of planes to visit mine sites. 

Mongolia is also hurting from a decline in coal sales, caused by weak global economic conditions and slowing growth in the country that consumes over 90% of Mongolia's mining products, China. This shortfall in coal sales is leading to an ever-widening deficit in the state budget. According to a budget update from the Ministry of Finance in September, the deficit stands at MNT222bn ($129.3m), with about MNT830bn of budget spending still needing to be made. 

But if Mongolia was betting it had Rio up against a wall, the miner's response has had the government scrambling to fix the economic fallout. Since the August 14 announcement of redundancies at Oyu Tolgoi – mostly contractors specifically assigned to the construction of the underground tunnel – the currency has taken a nosedive, plummeting 9.5%. The tugrik is now 23% lower than it was a year ago. That has been particularly painful given Mongolia's reliance on imports for much of its groceries and retail goods. The government also has to service dollar-denominated bonds; it raised $1.5bn in a sale of bonds last year. 

The government has so far played it cool in public, with the prime minister and other officials repeatedly stating the economy is not such terrible shape as reported. "The country is not facing any difficulties," Dondogdorjyn Erdenebat, secretary general of the coalition-leading Democratic party, told a press conference in August. "We can survive without Oyu Tolgoi for a while. We have survived this long with our livestock." (Mogi: haha, funny)

In August, data showed that Mongolia's second-quarter economic growth accelerated from the first three months of this year as the government boosted spending on infrastructure. GDP grew 14.3% in the April-June period, compared with 7.2% in the previous quarter. That brought growth in the first half of the year to 11.3% on year, compared with an annual pace of 12.4% in 2012. 

The government is also quick to point out that annual inflation had fallen to 8.3% in in August compared with 15.6% a year ago. That may be, but year-on-year inflation has since climbed to 9.4% and analysts are predicting more trouble further down the line. "We believe that there are more negative implications for the Mongolian public to follow before this economic 'crisis' is over," Ulaanbaatar-based Mongolian Investment Banking Group wrote in a research note. "In addition to the impact on the Mongolian people, companies will also continue to face hardship. We know of many corporations both in mining and other sectors that have been forced to downsize due to a decrease in business activity. To this end, we believe that the widely publicized 1,700 jobs that were cut at [Oyu Tolgoi's] underground development could be the tip of the iceberg." 

Called back 

Despite the reassuring public face, the government is in overdrive, calling in members of its parliament early from recess for what they're calling an "extraordinary" session of parliament scheduled for September 16-19. (Mogi: 16-27)

Up for discussion at the session are five different pieces of legislation, including an investment law that would replace the original law from 1993 and scrap the 2012 SEFIL that has done so much to scare off investment. MIBG argues the new legislation would "create a significantly positive legal environment for existing and prospective foreign investors". 

The bank also notes the potential benefit from a law intended to create greater transparency in the gold mining industry and boost government revenues from it. "There are lots of changes in the gold sector for the positive," says Ankhbayar Bilguun, chief executive of MIBG. "It is a strong signal that Mongolia is taking action towards a hard currency… In the next five to six months, we're looking at a significantly revamped legal landscape." 

Oyu Tolgoi will be the main topic for discussion, though, and the official in charge of the government stake in the project, Davaadorj Ganbold, and the mining minister are planning to fly to London to discuss the points of contention with Rio management. "Those who are hoping for a quick resolution to the issues surrounding phase 2 [of Oyu Tolgoi] should temper their enthusiasm," reckons Nick Cousyn, chief operating officer of Ulaanbaatar-based broker BDSec, who alerts investors to comments made by Ganbold that the dispute could not be resolved solely by the shareholders, but by government too, probably extending the delay. 

Link to article


Mongolia Seeks to Ease Dispute Over Mine

Country Seeks to Ease the Concerns of Foreign Investors

DALIAN, China, September 13 (WSJ)—Mongolia is moving to smooth over a dispute with mining giant Rio Tinto PLC that has threatened the operation of the world's third-largest copper-gold mine, part of an array of measures the resource-rich country is deploying to try to restore the confidence of foreign investors.

The standoff at the $6.2 billion Oyu Tolgoi mine is emblematic of the fallout of Mongolia's assertion last year of national interests in controlling its resources, which led to a flight of foreign investment and shrouded the Mongolian economy in uncertainty. As a boom in minerals fades, it has sought to mitigate the effects of nationalist policies.

The Mongolian government, which owns 34% of Oyu Tolgoi via its state-owned vehicle Erdenes Oyu Tolgoi LLC, will now retreat from disputes between Rio Tinto—which owns the rest of the asset through a subsidiary—and the Mongolian firm, said Chimed Saikhanbileg, a government minister and chief of the Cabinet Secretariat.

Mongolia is committed to "a favorable business environment in the mining sector," he said on the sidelines of this week's World Economic Forum in the coastal Chinese city of Dalian.

The mining project has been mired in years of spats over matters including how to maximize returns and the ratio of foreigners in its workforce. Earlier this year, Ulaanbaatar refused to support Rio Tinto's fundraising efforts to develop the project.

The dispute with Ulaanbaatar deepened in August, when the Anglo-Australian miner said it would lay off as many as 1,700 employees and contractors from Oyu Tolgoi, barely a month after the mine began trucking Mongolian copper to customers in China.

Mr. Saikhanbileg said his government would let the two sides resolve their differences. To that end, the Oyu Tolgoi board would fly to London next week for a meeting, he said. Rio Tinto didn't respond immediately to a call for comment Friday.

"It's high time to sit down and relax and solve our problems at a board level," Mr. Saikhanbileg said.

Ulaanbaatar's eagerness to appease foreign investors underscores how the policies and the global commodities downturn has hurt resource-rich Mongolia. Foreign direct investment in the country has fallen 43% in the first half of the year, while its currency, the tugrik, has fallen 23% so far this year against the dollar despite $900 million worth of government intervention to defend it, according to a Resource Investment Capital report this week.

Mr. Saikhanbileg blamed the plunge in foreign investment on policies including a law since last May restricting foreign investment in "strategic" sectors including mining, and earlier legislation targeting miners operating near rivers and forests.

To ease investment procedures, the government will set up an agency called Invest Mongolia with a mandate to handle business-registration approvals. Modeled on a Hong Kong counterpart, it would commit to making a decision within 14 days of an application filed by a private-sector company. The Ministry for Economic Development would handle foreign enterprises with a majority government ownership that seek stakes of more than 25% in Mongolian assets. In these cases, a decision would be made within 45 days or it would be approved automatically, the minister said.

The government would guarantee that the tax rate on investments of more than $10 million remains unchanged for five to 10 years, depending on the size.

Achieving these changes will require political consensus in Mongolia's democratically elected and famously fractious parliament. Business-friendly groups have made promises of reform at international forums in the past only to find implementation of such proposals difficult back in Mongolia. Many ordinary Mongolians feel they have missed out on the riches generated by a mining boom that began to slow sharply in 2012.

Mongolia's parliament is meeting in an emergency session this month to consider the new laws, and Mr. Saikhanbileg said it could pass them by Oct. 1.

Other widely expected changes include the repeal of a law that prohibits mining within 200 meters of water bodies or forests. Mr. Saikhanbileg acknowledged that the decision to suspend hundreds of mining licenses under this law had come "like a bombshell." The local governments' discretion to interpret 200 meters is going to be disallowed, which will permit most companies to resume operations, he said.

Mongolia also plans to "give some kind of freedom in exploring for gold," abolishing a 5% tax on gold sales and halving 5% royalty payments under certain conditions. The aim was to halt smuggling and boost gold production.

Link to article


Mongolia's Choice on Investment

To ensure long-term growth, Mongolian leaders will have to take decisive action on mining regulation.

By Julian Dierkes

September 12 (WSJ) A sudden sense of economic crisis is spoiling the mood over Mongolia's three years of world-beating economic growth. This crisis stems from the massive decline in foreign investment and ongoing uncertainty surrounding the government's partnership with Rio Tinto in the $10 billion Oyu Tolgoi project. In the coming week, two events seek to address this crisis, one with long-term solutions, the other more immediately.

Mongolia has been on an economic tear with growth rates exceeding 10% for the past three years. This has not only brought rising incomes to many Mongolians and spawned a construction boom in Ulaanbaatar, it has also focused the world's attention on Mongolia in a new way.

The growth has been built almost entirely on mining exploration, coal production and construction associated with the Oyu Tolgoi project. Now, however, growth seems threatened by three challenges: scared foreign investors, a drop in Chinese demand for coal, and uncertainty surrounding Oyu Tolgoi.

Putting aside Rio Tinto's ongoing construction in Oyu Tolgoi, foreign investment has fallen precipitously following the passage of a foreign investment law in May 2012. That law may have been designed to keep out state-owned Chinese companies, but other investors saw it as so vague and comprehensive that they left in droves.

Meanwhile, the relative slowdown of the Chinese economy has led to a steep decline in purchases of Mongolian coal. Aside from the long-running Erdenet copper and gold mine, that was the only part of the mining industry that was actually producing and shipping its product.

Finally, Mongolian politicians and the public have been grappling with the implications of being a part-owner in the Oyu Tolgoi project and the governance and financial challenges that this ownership implies. When Oyu Tolgoi starts producing, it is expected to account for 30% of the country's GDP. But it is difficult to balance the population's expectations of immediate and equitable benefits with the need for foreign expertise and financing, as well as environmental stewardship.

The challenges found their expression in public disputes with Rio Tinto over the construction budget just as the project is poised for production. That led to a financing crunch; the company suspended underground construction activities and let 1,700 workers go.

The next week will see two events in Ulan Bator that will begin to address the sense of crisis that has been brought about by the Oyu Tolgoi firings as well as the tanking of the Tugrik by roughly 20% since the triumphant oversubscription of a Chinggis Bond last November.

At President Elbegdorj Tsakhia's request, World Economic Forum Strategic Foresight, a quasi-consultancy built around the "communities" involved in the annual Davos event, has drafted scenarios for the long-term context of Mongolia's development. Here, the likely focus will be on the further development of a mining industry in Mongolia, but also on its main customer, China, and on diversification opportunities. The scenarios will be presented in a workshop to which Mongolian parliamentarians and other policy makers and stakeholders have been invited to encourage consideration of how they make decisions.

Next, parliament will convene for an extraordinary session to discuss revision of the foreign investment law, as well as proposed changes to the mining law. Hints about the investment law suggest that it will retain controls over state-owned investments but clarify these to create less hindrances for the sale of assets by non-state-owned foreign investors. Specifics of these revisions will show whether they will actually be significant enough to lead to a return of investment, especially if discussions of the mining law remain at a relatively early stage. Neither of these initiatives addresses the on-going challenges surrounding Oyu Tolgoi, which is governed by an investment agreement.

While the lack of research capacity to support decision-making has been lamented in the past, it has become glaringly obvious in the current discussions of governance structures, construction budgets, and the integration of Mongolia into global financial flows. A radical investment in such analysis capacity and governance structures directly involving the Mongolian people may be one of the few solutions here.

Alternatively, a sale of the state's share in Oyu Tolgoi would allow the company access to financing. It would also confine the government's responsibility to regulation and decision-making about revenue streams that now seem threatened.

To continue on its path of rapid economic growth and development, Mongolian leaders will have to take decisive action on mining regulation and Oyu Tolgoi. They will need the backing of the Mongolian people, who continue to enjoy a vibrant democracy. Consideration of long-term scenarios and solutions for a lack of policy analysis capacity and governance challenges will play a crucial role in selecting courses of action.

Mr. Dierkes is an associate professor at the University of British Columbia's Institute of Asian Research and blogs at

Link to article


Structuring and implementing an investment in Mongolia: Commercial in confidence

September 13 (Allens) --

The Mongolian economy's rapid growth is placing increasing demands on the country's legal framework, which is expected to undergo significant changes and become progressively more sophisticated over the next decade. This is most evident in the area of foreign investment in Mongolia's resources sector.

In this guide, Partner David Wenger (view CV) provides a snapshot of some of the key legal considerations investors should take into account when looking to invest in Mongolia's growing economy, and highlights some of the knowledge gained through his experience advising on past and ongoing transactions in Mongolia.

Link to client update

Link to report


Mongolia needs foreign investments: minister

September 11 (CNBC) Chimed Saikhanbileg, Mongolian minister, comments on the government's decision to implement a new investment law to reverse the declining foreign investments trend.

Link to interview


World Economic Forum will be in Mongolia on 14-15 September

·         World Economic Forum to host its first Strategic Dialogue on the Future of Mongolia on 14-15 September

·         Mongolian government and leading domestic and international business leaders will take part

·         Leaders will explore sustainable pathways for Mongolia's future economic prosperity

·         For more information about the meeting, please visit


Geneva, Switzerland 12 September 2013 (WEF)–The World Economic Forum in cooperation with the Government of Mongolia will be holding its first "World Economic Forum Strategic Dialogue on the Future of Mongolia" which will take place on 14-15 September in Ulaanbaatar. The meeting will bring together the Mongolian government and other leading domestic and international stakeholders to explore sustainable economic pathways for the country. The President of Mongolia Elbegdorj Tsakhia, Prime Minister Altankhuyag Norov, Parliamentary Speaker Enkhbold Zandaakhuu and several members of the Cabinet and Parliament will take part.

Mongolia, one of the world's fastest-growing economies, is benefitting from an expanding mining industry, which is still far from realizing its potential. The country hopes to direct the wealth generated from this industry to improve infrastructure and foster growth across sectors. The number of Mongolians living in poverty has already decreased from 39.2% in 2010 to 27.4% in 2012. While the country's future prosperity will be determined by the actions of leaders in government, business and civil society, it will also be affected by a range of highly uncertain and external drivers of change. This meeting will explore a variety of potential policies that could take advantage of these drivers.

"Mongolia has all the right ingredients for future growth and prosperity. It is now crucial to tap into that potential in a way that benefits the maximum number of its citizens, because ultimately the success of a country's development has to be measured in the good it brings to its people. The World Economic Forum is proud to be part of the discussion on suitable policy options and the best way forward. And personally, I'm excited to work with a government that understands the need for long-term thinking," said Børge Brende, Managing Director and Member of the Managing Board, World Economic Forum.

Throughout 2013, the World Economic Forum has conducted interviews and meetings with nearly 150 domestic and international stakeholders and experts to develop a set of scenarios that explore the different ways in which Mongolia's future context may develop. The meeting will use these scenarios to discuss three key strategic decisions important for securing Mongolia's prosperity. These are:

1.    How should the development of the mining industry and its potential revenues be managed to maximize their benefit for the country?

2.    What forms of economic diversification should be pursued and how?

3.    What relationships (for trade and investment) need to be effectively pursued to achieve both?

By discussing these strategic decisions, participants will have the opportunity to contribute to the country's forward-looking policy agenda. The outputs of this meeting will also inform ongoing discussions between local and international stakeholders and the World Economic Forum's Scenarios for Mongolia project. This dialogue will be continued at the World Economic Forum's Annual Meeting in Davos-Klosters in January 2014.

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Falling temperatures push swifter harvests

September 11 (UB Post) Farmers in Selenge and Bulgan Provinces have recently begun harvesting their crops. According to the Ministry of Factory and Agriculture's (MFA) preliminary crop estimate, Mongolia is likely to harvest 423,400 tons of grain, 65,200 tons of vegetable oil producing plants, and 21,000 tons of fodder. The National Agency of Hydrology, Meteorology and Environmental Monitoring have forecasted precipitation and snow in mountainous regions between September 9 and September 10, as well as between September 19 and 22, encouraging the Minister of the MFA to order all province governors and chiefs of agriculture agencies throughout Mongolia to quickly complete harvesting to avoid the loss of crops.

Mongolia now only has 110,000 tons worth of storage capacity for this year's harvest, which is merely one fourth of the expected crops this season. The MFA is now building several crop storage facilities, with the first to soon be operational in Ugtaaltsaidam soum in Tuv Province.

This storage facility, built with iron and concrete reinforcement, has a capacity of 36,000 tons and was built in 1988 but not completed until recently. Its construction had been halted at around 80 percent completion. Since 1988, the facility's building materials and equipment had been plundered. The government unsuccessfully tried to auction off the facility in 2003. In 2010, it was decided that construction would be completed with 3.4 billion MNT of grant-in-aid from the Japanese Government. It was expected to be operational last year but faced delays.

An additional 20,000 tons of storage at the Khalk River of Dornod Province, 10,000 tons of storage at Khurkh in Khentii Province, 16,000 tons of storage in Bayangol soum of Selenge province, 25,000 tons of storage in Darkhan-Uul Province, and 20,000 tons of storage at Baruunturuun of Uvs Province are planned to be operational by 2015.

Link to article


Fuel importers request to increase prices

September 11 (UB Post) Fuel importers have made a formal request to the Ministry of Mining, Petroleum Authority and the Consumer Rights and Fair Competition Regulatory Authority to increase petroleum product prices this week, due to aggressive currency depreciation.

Last year, the government and the Central Bank of Mongolia initiated the Price Stabilization Program which has helped to maintain fuel prices at current levels since then.

The Ministry of Mining has not yet given an official answer to the request.

The Petroleum Authority told local news agencies that fuel importers will not increase the tariff without the consent of the authorities.

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Gunfire Heard Outside Mongolian Parliament Today, Montsame Says

By Michael Kohn

Sept. 16 (Bloomberg) --  Mongolia put its parliament building on lock-down after shots were fired during a protest outside over plans to relax mining regulations meant to protect the environment, the state-owned Montsame News Agency said.

No one was hurt by the gunfire and four to five people were arrested, Montsame said. The parliament building, called Government House, was reopened soon after, it said.

The demonstration involved 10 groups protesting proposed amendments that would relax a law that prohibits mining at headwaters of rivers, forest areas and protected zones of water reservoirs, according to the report. Parliament opened an extraordinary session today to discuss the amendments.

The protesters brandished weapons and said they would resort to armed conflict if the regulations were changed.

One of the groups involved in today's protest, called Gal Undesten, or Fire Nation, has used violence in the past. Activists from the group shot at bulldozers at a gold mine in Selenge province in 2010 and shot arrows at Government House the next year.

(from Bloomberg Terminal)

Nationalist group threatens with bombs and guns

September 16 (Business-Mongolia) Gal-Undesten – an environmental protectionist and nationalist group in Mongolia threatened with bombs according to the local news. There were shots fired behind the parliament building causing an arrest of 9 people after police found and confiscated 2 rifles. The shots were fired in the air leaving no injuries. However, one of the person in the crowd was injured when the secret agency made an arrest. Also, another source said that a hand-grenade was thrown which didn't explode.

Foreign missions and embassies are all in high alert. The central square is under strict police control.

The initial protest was announced due to the planned amendments today at the special parliament session on the law with a long name, a law that prohibits mining operations on headwaters and protected zones etc. The change is yet to come, but, the parliament is planning to cancel two laws and make amendments on laws that has been a bottleneck for country's plummeting foreign investment.

The coordinator or head of the Gal-Undesten(Fire Nation) NGO Ts.Munkhbayar stated in an interview after the incident that it was an accident that the shots were fired. Soon after the shots, law enforcement and military forces checked the area surrounding Central Tower and 1 km around it. Unofficial source told us that a bomb was discovered. However, it is highly unlikely. It has been said that the growing resource nationalism is causing the activists to take extreme measures. Some believe that foreign forces are stirring things in the country.

The same NGO fired up an arrow before at the parliament building and shot at trucks on a mine site as a protest against environmental damages. Mr.Ts.Munkhbayar won the Goldman Environmental Prize back in 2007.

We will update our readers in due course as the General Intelligence Agency is going to make a statement soon.

Link to article (includes video)


Economic Imbalances: What Goes Up, Must Come Down

September 15 (The Mongolist) If you're trying to figure out what's currently happening with the Mongolian economy, the band Blood, Sweat, & Tears provides the most concise summation from their song "Spinning Wheel":

What goes up, must come down...1

Economists spend a lot of time talking about equilibriums. The reason is that economies and markets with their various opposing forces have a tendency to correct imbalances and return to their natural equilibriums over the long-run regardless of what policymakers might do to circumvent those forces in the short-run. If things go up artificially without proportional shifts in the underlying fundamentals, then eventually things have to come crashing down. Over the course of the last year, the Mongolian economy has seen significant reductions in its primary sources of income, coal exports and Foreign Direct Investment (FDI), while at the same time the government has gone on an off-budget spending binge with loose fiscal and monetary policies. In short, the economy is suffering from an income and expense imbalance that is under growing pressure for a correction.

Coal represents the largest source of export revenue for Mongolia. There was a nearly 50 percent year-on-year decline in coal export revenue through the first eight months of 2013.2 This was due to weakening demand in China, and was further exacerbated by the fact that Mongolian coal has a comparative disadvantage to Chinese domestic producers in production and transportation costs.3 The impact has been most visible at Tavan Tolgoi (TT) which has spent the year off-and-on producing coal at a loss to meet the terms of its $250 million (Mogi: $350 million) pre-payment supply deal with Chalco. Until the Chinese coal market recovers, there isn't much the government can do to get coal export revenues up. In the long-run, however, the government could get serious about reducing production costs and improving quality by attracting real and sustained international investment in transportation infrastructure projects and in deposits like Tavan Tolgoi.

And, that leads into the other major problem hurting the economy. FDI has declined significantly in the last year, and the unstable and erratic regulatory and legal environment in the country seems like the most likely suspect propelling the decline. Given that Mongolia produces mostly commodities for export and the domestic economy is too small to support billion dollar investment projects on its own, FDI is absolutely critical for the economy's continued growth.

The impact of these declines has been made worse by the fact that the government has moved a lot of spending to off-budget programs such as price stabilization, discounted mortgage loans, and infrastructure projects funded by the Chinggis Bonds. These programs have essentially amounted to printing tugriks to dodge the constraints of the new fiscal stability law which puts strict limits on the size of the budget deficit. The law was intended to make government policy and spending become counter-cyclical to commodities prices, but it has just encouraged efforts to hide spending. As a result, the tugrik is depreciating rapidly to record lows. Tugriks are being printed faster than real output in the domestic economy can produce or exports and FDI can counter-balance in foreign reserves.

So, what can the government do? Get non-tugrik revenue fast is the easy answer. On that basis, it should come as no surprise that the first international trip the Prime Minister has made in his tenure was to go to Japan last week to attempt to raise hundreds of millions of dollars in new bonds. The problem with this, of course, is that it does not address the underlying imbalances. It just kicks the problem down the road and buys the government some time to hope the Chinese coal market turns around and FDI starts growing again. That's not impossible, but Chinese market conditions are out of the government's control. FDI levels are arguably more within the government's control, but it is still not clear if the politicians who have pushed discriminatory and regressive policies aimed at FDI projects over the last few years are sufficiently convinced of the error of their ways.

The weeks and months ahead will prove a real challenge to the factious political environment within the government and parliament. The special session of parliament starting this week will provide a good first test of whether policymakers are serious about getting Mongolia's fundamentals right for the long-term. After all, if Blood, Sweat, & Tears are to be believed, what goes up, must come down...

Link to article


Draft Law on Investment

September 10 ( --

Link to draft (in Mongolian)


Draft Amendment to the "Law with the Long Name"

September 10 ( --

Link to draft (in Mongolian)


Draft Law on Establishing Transparency in Gold Trading

September 10 ( --

Link to draft (in Mongolian)


Draft Law on Commonly Found Mineral Resources

September 11 ( --

Link to draft (in Mongolian)


Mongolian parliament speaker demands stricter regulation of street currency exchangers

ULAN BATOR, Sept.10 (Xinhua) -- The Speaker of the Mongolian parliament, Enkhbold Zandaakhuu, has ordered Mongolia's financial regulatory body to strictly control street exchangers in order to curb the depreciation of the national currency, the togrog, against the US dollar.

According to a press release from the Mongolian parliament, Enkhbold met with heads of the Financial Regulatory Committee (Mogi: commission) on Monday afternoon to discuss the issue.

Of late, the Mongolian togrog has depreciated by 28 percent against the US dollar, with 1 USD equaling 1712 togrog.

Enkhbold told the top managers of the financial regulatory committee: "Non-bank financial institutions and currency exchangers are contributing to togrog depreciation against dollar. The exchange rate of last Saturday of 1780 togrog against dollar was pure currency speculation. You need to record who set this rate and find out anybody (who) purchased at this rate and who is spreading this speculation."

He also added: "If nobody purchased dollars at that rate, this means that rate is not real and it is artificial. If the currency exchangers did not write their exchange rate on board and deal outside on streets, their licenses need to be revoked. They shouldn't work like that."

According to some analyses, Mongolia is facing economic crisis as foreign direct investment fell by 41 percent compared to the same period last year. One reason for this fall is the halt of the expansion of a giant gold-copper mine managed by Anglo-Austrian mining company Rio Tinto as part of the Oyu Tolgoi project.

Amid disputes with the Mongolian government over the scale of investment and other issues, Rio Tinto halted the planned mine development in August. The company has previously estimated that 80 percent of the value of Oyu Tolgoi lies underground.

Most of Mongolian foreign trade is undertaken in USD, therefore the depreciation of the togrog is indicative of the economy's health.

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De Facto: Creating stability is more important than establishing agreement

By Jargalsaikhan Dambadarjaa

September 15 (UB Post) The Parliament of Mongolia will convene for an irregular session next week to discuss ways to overcome the current economic decline and bring back the foreign investment that has been flowing out of the country.

The underlying reasons for the present economic downturn are increased government involvement in economy, huge amounts of deficit run by state-owned companies, growing government debt, the strong persistence of corruption and an overdependence on the mining industry. However, it is not clear at the moment which of these problems will be focused on during the upcoming parliamentary session.

What is clear, is that the parliament is going to address a new law that will supposedly bring equality to domestic and foreign investors, encourage them to make more investments and create stability in the tax environment. They also seek to replace the "long-named law" that makes things confusing for everyone, and revoke not only the foreign investment law, but also the strategic entities foreign investment law.

The adventures Mongolia has had in recent years suggest that it is now time for us to look back at the achievements and failures we've experienced over the last 20 years, and pass a new foreign investment law, as well as a mining law, that is clearly written and can be implemented without great difficulty.

Foreign investment

The most important thing is that foreign investment policy has to be as clear as possible so that any confusion can be avoided. Foreign investors should be able to clearly see what they are required to do in order to make an investment. The requirements regarding permits, timelines or favorable conditions must be fully understood by an investor before any investment takes place. Therefore, this kind of information should be made available in many languages.

Mongolians commonly hold the view that foreign investment is essential to boosting economic growth and development and improving the livelihood of citizens. The government also supports foreign investment because it creates jobs, favors innovation, introduces new technology, opens doors to foreign markets, and encourages competition in the industrial sector.

However, there should be an Investment Council established in order to carefully assess whether a foreign investment is coherent with national interests or not. Also, taking national interests into account, this council can offer insight on the appropriate amount of foreign investment in a given economic sector.

Establishing such a council, which exists in Australia and Canada, will offer a flexible mechanism where discussions regarding whether a given foreign investment should be allowed to take place. The council would not interrupt foreign investment or disrupt the flow of investment. It will be a better mechanism than passing strict laws and enforcing them forcefully.

Our foreign investment policy should clearly set out that the government must take into account the interest of local community when making decisions regarding foreign ownership in a given Mongolian property. Also, it should have a clause that says any business decision coming from a foreign investor shall be regarded as aligned with the national interests of Mongolia only when the decision has derived from purely economic grounds with no non-strategic or non-commercial reasons and interests.

Furthermore, the new foreign investment policy ought to set out that any foreign investment proposals involving the interests of foreign governments or foreign-state owned companies should be sent to the Investment Council first.

Stability cannot be bought

Next week the parliament is going to discuss a draft law that allows the establishment of a "stability agreement" in order to attract foreign investment. The proposed stability agreement will allow foreign investors to be exempt from any change in law occurring after establishing the agreement for 15 years if their investment is more than 500 billion MNT (300 million USD) or eight years if it is more than 50 billion MNT.

A stability agreement is only needed when there is distrust. Many years ago, former communist countries used to sign stability agreements in order to create trust in their relations with foreign investors. Ironically, those stability agreements gradually created instability. It can also be seen from Mongolia's past experiences.

If the draft legislation is enacted next week, Mongolia will start establishing stability agreements with big investors. It means that there will be hundreds of different, independent legal environments in Mongolia, which will cause implementation issues when new laws are passed in the future. In other words, due to too many different legal environments, new laws will not be able to be implemented in some cases. It will violate the constitutional article that states, "All persons lawfully residing within Mongolia are equal before the law and the Court." Furthermore, the establishment of stability agreements requires taxation agencies to work under greater pressure because they are faced with the endless work of calculating taxes for huge companies that have thousands of employees, at different rates depending on the time of stability agreements were signed.

On top of that, stability agreements are unenforceable in the long term. Therefore, in order to ensure legal stability in the business environment, it is more efficient to actually create stability rather than establish an agreement.

Stability in the mining industry

We have to pay special attention to the mining industry, as it is different from others. A mining business requires long-term investment that includes huge amounts of fixed assets, and its profitability is more dependent on the market than the company. Also, it is difficult to predict final selling prices in this industry.

Central governments can receive three types of fees from mining companies. Firstly, the government can receive cash payments by auctioning the mining license. Secondly, they can impose a production tax on mining companies. Thirdly, they can receive tax imposed on the income and profits of a mining company.

Auctioning the mining license usually produces a final sum of money that is lower than expected because there are not many bidders to raise the price high enough. Production tax is almost no longer in use because it is based on production only and not dependent on profitability. A profit-based tax, on the other hand, can favor the interests of both the government and the mining company when used properly.

The government of the Republic of South Africa receives tax based on the profit to revenue ratio of their gold mining companies. They used the idea of Mongolia's windfall profits tax in a wiser way, and impose no tax if the company makes no profits (or low profits at around five percent of total revenue). Also, the companies with a profit to revenue ratio of 15 percent pay a 30 percent corporate tax, while those with a ratio of more than 30 percent pay a 37.5 percent tax imposed on their profits.

Australia, which has vast experience in the mining industry, employs the Foreign Investment Review Board (FIRB). A proposal to establish a council that has similar functions as the FIRB is included in the new draft law to be discussed by Mongolian Parliament next week. Last year, Australia passed a law to establish the Minerals Resource Rent Tax (MRRT), which stirred up a large controversy in the country and divided public opinion.

In Brazil, minimum and maximum rates of royalty rates are preset and the government issues a resolution each year to announce in advance which rates will be used that year. An approach that is being widely used, is that parties agree on the methodology of determining tax rates in a written agreement beforehand. For example, when calculating the cost of capital, parties can agree to use a formula that uses third-party rates (LIBOR adjusted as agreed).

In order to create legal stability in the long term, we have to look at international experiences such as the ones described above, apply them to our case wisely, and find a good balance between the interests of the government and investors. Only then will we have favorable conditions to attract foreign investment and Mongolia can be regarded as a reliable partner who meets their agreed commitments. Without foreign investment, it is unimaginable for any country to bring about development in the globalized world we are living in today.

Link to article


Mongolia opens new door to world's richest coking coal fields

Companies building roads, railways, dams and electricity infrastructure around the world's richest coking coal fields will be able to swap their investments for equity (or just plain coal).

September 15 ( Mongolia is desperate to turn around the slump in its economic growth and the steep fall-off in foreign investment.

The numbers certainly are ugly.

Foreign direct investment in the country dropped 17% to $3.9 billion in 2012.

This year it's even worse with the Asian nation attracting a full $1 billion or 42% less during the first half of 2013.

While the stalled $6.6 billion underground development of Oyu Tolgoi, the massive Rio Tinto copper-gold mine that shipped its first copper last month, is a huge issue, Mongolia's woes are mostly coal-related.

After a more than 20% drop during the first half of the year, met coal prices used in steelmaking have recently improved, but at around $150 a tonne, is still close to marginal costs for the land-locked country. And a long ways away from the $330 a tonne hit in 2011.

The price of thermal coal is approaching global financial crisis levels, recently falling to below $80 for the first time since October 2009 and down from around $100 at the start of the year.

At the same time Mongolian coal exports to China, which buys 9 out of every 10 tonnes have plummeted, to $542 million compared to $1 billion worth during the first half of 2012.

Mongolia now only makes up 17% of Chinese imports, while Australia has made the most of the drop-off, supplying 38% of China's total imports.

Investors have been thinking twice about committing money after China's state-owned Aluminum Corp's bid for coal producer SouthGobi Resources was blocked by Mongolian authorities.

To stem this negative tide Mongolia is considering drastic changes to its foreign ownership laws of its resources.

It is also relaunching talks with international miners on developing the western block of Tavan Tolgoi in the South Gobi desert, the world's largest deposit of high-quality coking coal.

State-owned Erdenes Tavan Tolgoi coal-mining company controls the main block of the 6.4 billion tonnes deposit that has been mined since the 1960s, but the Tsankhi section which is being offered to foreigners on its own holds some 1.2 billion tonnes.

Mongolia struck a deal with US giant Peabody Energy, China's Shenhua and a Russian-Mongolian consortium in July 2011, only to cancel the whole process two months later.

The much-vaunted multi-billion dollar IPO of Tavan Tolgoi which was first mooted more than five years ago also remains on ice, but now Bloomberg reports, Prime Minister Norovyn Altankhuyag is offering foreign investors a new way into Tavan Tolgoi.

The Tavan Tolgoi area lacks the roads and railways needed to economically deliver the coal to markets. It also lacks the power and water supplies to support big mining camps.

Mongolia is proposing to offer stock in Tavan Tolgoi to foreign investors in power, rail and water projects around the basin, Altankhuyag said:

Companies that build the infrastructure at Tavan Tolgoi, which has reserves of more than 6.4 billion metric tons, will later have the chance to swap their investments for equity in the mine, Altankhuyag said. Investors may also choose to get paid in coal, he said.

Link to article


Softbank's Son battling to overhaul Japan's electric industry landscape with "Asia Super Grid"

GOBI DESERT, Mongolia, September 11 (The Asahi Shimbun) A dry wind howls through a highland stretching as far as the eye can see in the lonely desert here in southern Mongolia.

Harnessing this eternal wind to generate electricity, and transmitting it some 3,000 kilometers to Tokyo via cross-border grids in Asia, is the grandiose project known as the "Asia Super Grid."

It's the brainchild of Masayoshi Son, president of Softbank Corp., a Japanese telecommunications giant, who started championing renewable energy sources following the accident at the Fukushima No. 1 nuclear power plant.

Son also envisages sending electricity generated by different energy sources such as solar power in Mongolia and hydropower in Russia, on this vast super grid.

Son, 56, is the third richest Japanese, with personal assets estimated at $9.1 billion (910 billion yen), according to the 2013 ranking of the world's wealthiest people by U.S. business magazine Forbes.

His Softbank Group has grown into one of the largest business entities in Japan, with 3.4 trillion yen in sales in fiscal 2012, about 30 years after he founded Softbank.

Softbank's reach has also extended beyond Japan. It acquired Sprint Nextel Corp., the No. 3 U.S. wireless carrier, in a high-profile takeover this summer.

Son laid out his vision for supplying Japan with power using renewable sources via high-voltage grids through Asia after the crisis erupted at the Fukushima No. 1 nuclear plant, the worst nuclear disaster in the nation's history, triggered by the Great East Japan Earthquake and tsunami on March 11, 2011.

He established a joint venture between Softbank and Newcom Group, a Mongolian investment firm, last year in a bid to translate his green-energy concept into reality.

The venture, Clean Energy Asia LLC, is conducting research on the wind and the amount of sunlight in the Gobi to prepare for electricity generation.

The company has acquired a permit to lease 220,000 hectares of land in the desert, an area exceeding that of the Tokyo metropolitan area, from the Mongolian government.

With a population of only 2.8 million, Mongolia has a land area of 1.56 million square kilometers, about four times that of Japan.

Purevdagva Nayanbuu, project manager at Clean Energy Asia, said wind power in the desert holds the potential to generate electricity equivalent to that produced by seven to 10 nuclear reactors.

"Our calculations show that it will be possible to produce 10 gigawatts," he said. "Even if we exclude windless places, we will be able to produce 7 gigawatts."

With little rain in the desert, he added, solar power also holds much possibility. Son put costs for wind power generation in Mongolia at 2-3 yen per kilowatt-hour.

"Even if we include costs to transmit it to Japan, we can produce electricity at a cost less than nuclear power (which is estimated at slightly less than 10 yen per kilowatt-hour)," he said.

The biggest of many hurdles, Son said, is the installation of a network of transmission lines across neighboring countries.

"Europe has a cross-border network of grids," he said. "Why won't Asia build one?"

The project envisions transmitting power to northern Kyushu via cables laid on the seabed after power generated in Mongolia passes through grids in China and South Korea.

To become a reality, Japan needs to build a cooperative relationship with China and South Korea. To lay the groundwork, Son has wasted no time in lobbying the leaders of both countries.

In May 2012, he visited South Korea to seek cooperation from President Lee Myung-bak for the project, explaining the estimated costs for wind power generation in Mongolia.

Two months before his meeting with Lee, Satoshi Shima, 55, Son's close aide who runs the president's office at Softbank, sat in on a meeting between former Prime Minister Yukio Hatoyama and Xi Jinping, the Chinese vice president slated to succeed Hu Jintao as China's top leader. Shima, a former Lower House member of the Democratic Party of Japan, was on good terms with Hatoyama, who previously headed the DPJ.

Hatoyama suggested at the meeting that Japan and China work together in the field of renewable energy.

Another formidable obstacle Son will have to overcome is the virtual stranglehold that Japan's electricity industry holds.

Electricity brought in from overseas cannot be transmitted freely because regional electric utilities monopolize transmission lines in their jurisdictions.

To change the status quo, Son once mulled acquiring a regional utility, according to people close to him.

But that would entail the decommissioning of nuclear reactors that the potential takeover target owns. Son is staunchly opposed to nuclear energy.

The process would make it impossible for the utility to stay in business due to the huge losses involved in shutting down reactors before the end of their lifespans.

Son eventually abandoned the idea. He knew that shareholders of Softbank, a listed company, would never accept that scenario.

Son strongly believes in the future of renewable energy and has no intention of dropping his opposition to nuclear power.

"There are many alternatives to nuclear power," he said. "I am opposed to bringing idled reactors back online one after another when we have yet to come up with a clear path to decommission them."

Link to article


Shale Oil Exploration Coming to Mongolia

September 12 (Value Walk) Nestled between Russia and China, Mongolia's vast steppes and grasslands have remained largely untouched by the march of globalization. Now, however, oil companies are looking to set up exploration efforts to discover and eventually exploit shale oil and gas. While the development of a shale oil could spur the development of a modern Mongolian economy, many remain worried that the costs to the environment will outweigh any benefits.

Mongolia's economic valuation

Mongolia is one of the least developed countries in the world, with a national economy valued at just over 10 billion dollars. Mongolia is home to only 3 million people, with the largest city, Ulan Bator, home to about 1.3 million of them. Outside of the capital city, there are few modern roads and limited infrastructure.

The Mongolian government appears to be trying to reduce its dependence on Russian energy imports. By developing a domestic energy industry, Mongolia should be able to reduce, if not eliminate, its dependence on the Russians. Stuck between Russia and China, Mongolia has found itself in an uncomfortable geopolitical landscape. While conditions have improved since the Cold War, Mongolia must still tread carefully when dealing with both Russia and China. Reducing energy dependence could help Mongolia place itself on firmer geopolitical footing.

Traditionally, Mongolia's economy has relied on mineral extraction and agriculture. While agriculture provides employment and income, pay is low and there are few opportunities to produce profits or drive the development of a modern economy. With global demand for minerals slowing down, however, foreign direct investments have been tapering off in recent months. Now, Mongolia is looking to create new industries that can drive investments, generate revenue, and provide jobs.

Shale oil industry to provide jobs

The development of a shale oil industry would create well-paying oil and gas jobs for both skilled and unskilled workers. The nation's infrastructure would also have to be built up in order to support the industry. Pipelines, processing facilities, roads, and other aspects of a modern infrastructure would have to be build and expanded. This would create even more job opportunities and could drive the increased development of the nation as a whole.

Still, extracting shale oil has become controversial in recent years in light of the impacts on the environment and questionable profit margins. Fracking involves the use of dangerous chemicals that can have huge impacts on the environment, if handled incorrectly. The fracking process itself is expensive, particularly for oil. Some analysts are questioning whether Mongolia offers an economically viable opportunity to extract oil.

International NGOs raising questions

As such, some activities and international NGOs are questioning whether developing a shale oil industry is the right move for Mongolia. The nation's steppes are in near pristine condition, though in some instances mineral extraction has already caused damage. Shale oil extraction could cause extensive disruption to the environment and local ecosystems. Further, Mongolia's economy has been recording strong growth in recent years, even without shale oil extraction, and poverty rates are declining. As such, some analysts have questioned whether Mongolia really needs to push for developing shale oil extraction efforts.

Link to article


Invest Mongolia 2013: Post Conference Report

(Frontier) --


Frontier's annual conference is the longest running and the most comprehensive forum on investing in Mongolia and is by far the largest Finance and Capital Raising event in Mongolia.

·         Invest Mongolia 2013 conference welcomed 381 attendees and 67 speakers

·         Attendees came from 27 different countries representing almost every continent, making the conference truly international

·         This year's conference gathered 200 Mongolian and foreign organizations and companies from various industries including mining, real estate, tourism, agriculture and technology

·         This year's local attendees included: Government of Mongolia, Ministry of Mining, Ministry of Economic Development, Ministry of Environment and Green development, Ministry of Finance in Mongolia, Bank of Mongolia, Mongolian Stock Exchange, State Property Committee, Development Bank of Mongolia, Oyu Tolgoi, Erdenes Tavan Tolgoi, Khan Bank, TDB, Golomt Bank, major embassies and many others

·         The international attendees include: Moody's Investors Service, PricewaterhouseCoopers, EBRD, World Bank, IFC, Rio Tinto, BNP Pariba, Mitsubishi UFJ Investment Service, Societe Generale, Hogan Lovells, Shearman & Sterling, CRU, Tokyo Stock Exchange, JICA, GIZ just to mention a few

·         The event was sponsored by 3 international finance institutions including QUAM Financial Services Group, PricewaterhouseCoopers and Moody's Investors Service

·         The conference also had 16 media partners, including ABN Newswire, BarclayHedge,, bne, FinanceAsia, FocusEconomics, Goldletter, HedgeWeek, HKIMA, Milestone GRP, Mongolian Economy Journal, Oxford Business Group, The Asset,, and Quamnet.

Link to report


Mongolia: Asia's Wild Frontier for Investors

Brash, undisciplined, promising Mongolia

September 16 (Asia Sentinel) If there is any place in Asia that can still be considered the wild frontier, it is Mongolia, wedged between China and Russia and uneasy with both of them. To give some idea of the size of the economy, the amount of T-bills and other assets the US Fed buys about every three and a half days is the equivalent of Mongolia's entire 2012 GDP. 

"Mongolia is a reality check for the modern economist," said Dr Jim Walker, the founder and managing director of the Hong Kong-based independent research firm Asianomics. "Here is a real economy with a population of 2.8-2.9 million, untold mineral wealth and traffic jams in its major city like most of the rest of Asia. It is a real, live place."

It is also a suspicious one. Its geopolitical relationship with its two giant neighbors -- China and Russia -- is not good. With regard to China in particular there is traditional animosity. As an example, Mongolian coal miners recently refused to supply Chinese companies with coal at prices below what they felt were reasonable. China retaliated, with Mongolian shipments to China falling by 8.6 percent annually. "Nationalist feelings run deep and populism based on these nationalist tendencies strikes a chord with the young electorate. But putting these two together -- nationalism and haste -- can lead to bad, often downright bizarre, policy decisions," Walker wrote after his visit to the country. 

In a subscribers-only report to his clients, Walker pointed out that in 2011, real GDP soared upwards an annual 17.5 percent pace, followed at 12.3 percent in 2012 (Mogi: revised to 12.4%). GDP is expected to grow by another 13 percent in 2013 at a time when global GDP is forecast to hit 3.9 percent and the advanced economies are expected to make only a 1.9 percent pace. Three-year nominal GDP growth unadjusted for price changes -- zoomed upward by an average 29.8 percent, with the government's 2013 fiscal deficit projected to reach 9 percent of GDP. 

There are obvious economic problems. Government spending is running at over 40 percent of GDP annually, not bad compared with, say Greece, one of the world's basket cases, at just over 50 percent per annum. Consumer price inflation is another story, with the 2012 figure at 14.2 percent. The Bank of Mongolia, in an attempt to bring inflation down to single digits, has set its current policy rate at a whacking 13.25 percent. 

Given that inflation rate, the government increased the minimum wage by 36.7 percent on Sept. 1 to the equivalent of US$114 per month. Civil servant salaries were increased by 50 percent earlier this year ahead of the June 26 general election. As a result, the tughrik, as the currency is known (Mogi: tugrug please), was the worst performer in Asia this year, tumbling 17.4 percent against the US dollar since Jan. 1, just slightly worse than the Indian rupee at 17 down against the dollar. 

The civil service and minimum wage increases, along with other means, allowed the incumbent President Tsakhiagliin Elbegdorj to squeak in with 50.9 percent of the popular vote, keeping the Democratic Party in power in both the Presidency and the legislature, known as the State Great Khural

In an economy as small as Mongolia's it doesn't take much to blow it on or off course, according to the report. Rampant 2010 money supply growth at more than 60 percent was directly associated with the beginning of the first phase of the Oyu Tolgoi copper and gold mine, out in the middle of the Gobi Desert, which cost more than 60 percent of annual GDP to develop. Thus the resulting growth, inflation and current account deficit are not surprising in the context of the gigantic size of the project relative to the economy. But the swings in money supply, inflation, government spending and the currency were exacerbated by government policies when they should have been damped by them. 

The overwhelming conclusion one arrives at when reading official assessments of Mongolia by the IMF and the World Bank, as well as speaking to economists, journalists and bankers, Walker said, is that this is an economy "in a hurry to make up for lost time under communist rule (1921-1990), in a hurry to provide a good standard of living for its people, in a hurry to grow and in a hurry to take advantages of its natural resources.

The government has ramrodded through a striking series of important laws since 2010, including on fiscal stability, an integrated budget and social welfare. 

"Taken together these seem like sensible moves and adopt sensible policies," Walker says. "However, on-budget and off-budget accounts have not been integrated and the position of the Development Bank of Mongolia and the central bank, Bank of Mongolia, with respect to fiscal policy and funding is questionable to say the least. In short, fiscal responsibility is a pipe dream." 

The parliament also passed a Strategic Foreign Investment Law (prepared and passed within one month and now under review with the help of the World Bank), a Mining Law (also in the process of revision), a Mortgage Financing scheme and a Price Stabilization Program. 

"The last two of these call into question the independence of the central bank and prospects for truly containing inflation. All-in-all, Mongolia stands accused -- not least by people within the economy -- of trying to do too much, too fast and without thinking through the consequences of their actions. As one commentator put it to us, "The government will elicit four opinions on a particular piece of legislation -- and then take option number five. Policy making is not predictable." 

One contact, Walker said, bemoaned the government's short-termism and, at the same time, berated the advice given by international financial institutions as regards monetary management. In his view classical monetary policies applied to Mongolia were part of the problem, not the solution. Mongolia suffered from supply side issues, not demand problems. These supply side issues could be addressed by the government and central bank identifying preferred sectors and providing loans at preferential interest rates to entrepreneurs and the private sector in these sectors. 

Mongolia, Walker concluded, "badly needs more fiscal discipline. It also needs to let the central bank take care of what should be its primary focus; controlling the amount of money and credit in the system ie, inflation. In addition to fiscal discipline, the government needs some legislative discipline. Bouncing from one bad solution to the next less bad solution to the next is not a legislative process, it is just a mess."

Link to article


UN analysts assess risk at Mongolian aviation companies for workers

September 16 (UB Post) The United Nations sends its analysts to countries for assessments o politics, economics and food conditions in order to ensure the health and safety of its workers all over the world. One of the UN's assessments is conducted in the aviation sector, specifically looking at passenger safety as practiced by aviation companies and during flights.

In the 1990s, the UN warned its workers not to use Mongolian aviation services, and use only other means of transportation, as it ran high safety risks at the time.

But a recent evaluation by UN analysts gave MIAT Mongolian Airlines a rating of "B", which means passengers shouldn't have concerns about MIAT's service. Eznis Airways also earned a "B", Aero Mongolia was given a "C" rating, and the much criticized Khunnu Airways  received a rather poor assessment due to its lack of an airplane repair center.

The assessment is not for the public, but intended for UN workers worldwide.

Aeroflot, Korean Air and Turkish Airlines, which carry many Mongolian passengers, also received favorable assessments.

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Chinese company to build "Beijing street" in Mongolian capital

ULAN BATOR, Sept. 10 (Xinhua) -- The municipal office of the Mongolian capital city signed a memorandum of understanding with a Chinese construction company here on Tuesday to launch the "Beijing street" project.

Gantomor Nyamdavaa, deputy mayor of Ulan Bator in charge of road, transportation and infrastructure, and China's Mongolia branch of the Beijing Corporation Engineering Group (BCEG) signed the document, according to a press release.

Funded by the Chinese government with 60 million RMB (about 10 million U.S. dollars), the project will update a bridge in the city and build a four-lane road in the city, which will be named after China's capital of Beijing.

With their ample experience and high-technology, more and more Chinese construction companies, including BCEG, are participating in Mongolia's infrastructure and construction.

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Foreign Policy Roundup: Sept. 2-15, 2013

By Brandon Miliate

September 15 (Mongolia Focus) Missed something in Mongolian foreign policy news over the past two weeks or just need to review the headlines? Below you will find brief summaries of news in foreign affairs, translated from Mongolian-language news sources, and organized by region.

Central Asia

The Director of the Mongolian Parliament, Z. Enkhbold, received Kazakhstan's Ambassador to Mongolia, K. I. Koblandin. The ambassador noted Kazakhstan's intention to further engage with Mongolia and that he hoped both countries would support each other in international organizations, ahead of Kazakhstan's membership on the UN Security Council in 2017-2018.

President Elbegdorj attended the meeting of the Shanghai Cooperation Organization in Bishkek, Kyrgyzstan. 


Z. Enkhbold met with the President of the European Development Bank, on his official visit to Ulaanbaatar. Since joining the organization in 2006, the Bank has arranged over $1 billion in direct investment and loans to the country.

The first meeting of the French-Mongolian Governmental Cooperation Group was declared a success. Among other things, they discussed the fact that a French company had won the contract for the development of a new power station.

The Prime Minister of Belarus made an official visit to Mongolia. Mongolia's relations with Belarus have been making headlines lately with visa liberalization and a technology agreement between the two countries coming to light recently. During the visit a newagreement on cooperation on military-technology was signed.

Mongolian diplomatic passport holders will now be allowed to stay in Italy up to 90 dayswithout a visa.

Tony Blair visited Mongolia to consult with government on policy issues ranging from education and health to foreign direct investment.

G. Tsogtsaihan, of the Ministry of Foreign Affairs, met with Spain's Minster of Foreign Affairs in Madrid, where they discussed their bilateral relations in the context of Mongolia's security cooperation with the European Union.

Mongolia's Ambassador to Serbia presented her credentials to the Serbian President. During the meeting, she expressed Mongolia's wish for increased societal and economic relations with the country.

A meeting on EU-Mongolian cooperation was held in the Government Palace. 


PM N. Altanhuyag began his first official international tour in Japan. During his trip, he met with representatives of the Mongolian-Japanese Economic Commission. Following the meeting, the Japanese Cooperation Bank announced that it would be extending an 8 billion yen loan to Mongolia. In the final days of the visit, he met with representatives of the Japanese Parliament, and the Japanese Emperor. He also met with Mongolian citizensworking and studying in Japan. Finally, he signed a new official agreement between the countries outlining their strategic partnership for the next five years. 

Middle East and Africa

The Ministry of Foreign Affairs circulated an internal memo condemning the use of chemical weapons in Syria, and expressed a hope that fighting would be stopped and solution between all sides be found.

As part of Mongolia's goal to establish diplomatic relations with all members of the UN,relations with Togo were formally established on September 6 in New York. 


Minister of Foreign Affairs, L. Bold, met with a series of new ambassadors, including those from Spain, Argentina, Greece, Brazil, Australia, Pakistan, Bangladesh, and Columbia.

Director of Parliament, Z. Enkhbold, met with representatives from 14 countries to exchange opinions on various facets of Mongolian policy, including domestic matters.

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Chinese, Mongolian presidents meet on promoting cooperation

BISHKEK, Sept. 12 (Xinhua) -- Chinese President Xi Jinping met with Mongolian President Tsakhia Elbegdorj here on Thursday and both leaders agreed to promote bilateral cooperation.

Xi said China, following the win-win principle, will strengthen its economic and trade cooperation with Mongolia in the three major areas of mineral resources exploitation, infrastructure construction and financial cooperation.

The three areas are integral parts of the overall bilateral cooperation and plans to promote cooperation in them should be drafted as a whole, Xi said, adding the two countries should also implement some big interconnection projects.

China has always attached importance to developing its ties with Mongolia and respected the country's sovereignty, independence, territorial integrity and the development path chosen by the Mongolian people themselves, Xi said.

The Chinese leader believed the China-Mongolia strategic partnership will continue to make progress through the joint efforts of both sides.

For his part, Elbegdorj said Mongolia has been implementing the strategy of revitalizing the country by developing its rich mineral resources.

Mongolia hopes to increase cooperation with China in areas such as energy, mineral resources, economy, trade and infrastructure, he said.

The country would like to implement some big landmark cooperation projects, and take measures to create a good environment for bilateral cooperation, he added.

The Mongolian leader also said his country is willing to strengthen communication and coordination with China on regional and international affairs.

Xi arrived here late Tuesday for a state visit to Kyrgyzstan, the last stop of his ongoing four-nation Central Asia tour.

He will also attend the 13th meeting of the Council of Heads of the Shanghai Cooperation Organization Member States slated for Friday in the Kyrgyz capital.

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EDITORIAL: Japan should push democracy, not just deals on resources, in Central Asia

September 15 (Asahi Shimbun) The important efforts to strengthen Japan's ties with resource-rich countries must not be preoccupied with short-term interests. Instead, a constructive and lasting involvement is needed.

The Central Asian country of Turkmenistan boasts the world's fourth-largest reserves of natural gas. And in East Asia, Mongolia has a wealth of mineral resources ranging from coal and copper to rare metals. The leaders of these two countries recently visited Japan and met with Prime Minister Shinzo Abe.

Japan agreed to increase the number of Japanese companies operating in Turkmenistan, mainly in the area of natural resources development. Companies from the two countries will cooperate on a project worth 1 trillion yen ($10 billion) that includes the construction of gas chemical-related plant.

Tokyo also reached a long-term agreement to have Mongolia supply coal to Japan.

Central Asian countries used to be part of the Soviet Union, and Mongolia was one of its satellite states. They are invariably rich in natural resources and are also important on the Eurasian continent due to their strategic locations between China and Russia.

The confusion that ensued after the "Arab Spring" uprisings as well as the current situation in Syria has rapidly made the energy supply from the Middle East more nebulous. In such times, it is increasingly important for Japan to strengthen its ties with emerging resource-rich countries.

But there are also concerns.

During the latest presidential visit, the governments of Japan and Turkmenistan agreed to oppose any unilateral attempt to change the existing situation in the global community by force, no matter which countries are involved. Japan and Mongolia also agreed to cooperate on common values, such as freedom and democracy.

These agreements strongly reflect the "values-based diplomacy" that Abe is promoting in light of the territorial dispute over the Senkaku Islands and the one-party rule of China by the Communist Party.

However, China's president, Xi Jinping, also recently visited four countries in Central Asia, and was quite successful in his version of resources diplomacy, including an agreement with Turkmenistan to increase China's natural gas imports.

For Central Asian countries as well as Mongolia, China is a dominant stakeholder in their trade and foreign investment. They have no choice but to rely on their neighbor's economic power to help them build their countries and develop their natural resources. That is the reality in the region.

Given the geopolitical situation there, Japan should not pit itself against China. Japan's focus should be to assist this region in ways that China, with its one-party rule and state-led economy, would find difficult. For example, Japan's assistance should be about helping things like democracy, fair market economies and positive investment environments take root and thrive in those countries.

Since gaining independence, many Central Asian countries have seen nothing but autocratic rule with the media and the judiciary monopolized by the government to clamp down on opposition.

There is no chance for healthy opposition parties or a healthy middle class to expand their ranks. And there is always the potential for anti-government uprisings similar to those of the "Arab Spring."

Offering the kind of steadfast assistance that will remove these anxieties could ensure stability in the region, which in turn would be beneficial to Japan.

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Japanese, Mongolian Leaders Vow to Promote Ties

September 15 (Jiji Press) Prime Minister Shinzo Abe and his Mongolian counterpart, Norov Altankhuyag, agreed on Friday to promote bilateral cooperation in political, security and economic fields.

The two leaders made the pledges in a joint statement issued after their meeting in Tokyo while adopting an action plan for the cooperation.

Under the plan, the cooperation will last through 2017.

The action plan called on Japan and Mongolia to open regular dialogue between senior foreign policy and defense officials and sought to hold policy talks involving the two nations plus the United States at an early date.

On the economic front, the action plan called on Japan to cooperate with development in Mongolia, as Abe pledged during his visit to Mongolia in March.

The action plan also said that Mongolia supports Japan's effort to resolve the issue of Japanese abducted by North Korean agents decades ago.

Speaking to a joint press conference after the meeting, Abe said he wants to develop the strategic partnership between Japan and Mongolia to a higher level.

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Mongolia agrees to join talks on abductions

September 14 (Kyodo) Prime Minister Shinzo Abe and visiting Mongolian Prime Minister Norov Altankhuyag have agreed to hold regular talks in conjunction with the United States on resolving North Korea's abductions of Japanese.

Mongolia has diplomatic relations with the reclusive communist state. The abductions, committed in the 1970s and '80s, have prevented Japan and North Korea from establishing diplomatic ties.

"I hope we can further strengthen the relationship of mutual benefits," Abe told a news conference after meeting with Altankhuyag on Friday.

"Mongolia supports Japan's position that the abduction and other issues of concern that remain unsolved must be addressed in a comprehensive manner," Altankhuyag said.

The leaders agreed on a five-year action plan to deepen security and economic cooperation between their nations.

They also discussed free trade talks initiated by Japan and Mongolia last year.

They agreed to "energetically proceed with and soon conclude the economic partnership negotiations to dramatically expand trade and investment between the two countries and lift our economic relations to a new stage," according to a joint statement released with the action plan.

The trade liberalization deal would be Mongolia's first.

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Iran, Mongolia presidents review bilateral ties

September 13 (IRNA) Iranian President Hassan Rohani and his Mongolian counterpart Tsakhiagiin Elbegdorj met and conferred on the sidelines of Shanghai Cooperation Organization (SCO) Summit on Friday. 

During the meeting, the two presidents called for expansion of cultural, sport, industrial and agricultural cooperation between Iran and Mongolia

President Rohani arrived in Bishkek, Kyrgyzstan to attend the 13th SCO Summit meeting at the invitation of his Kyrgyz counterpart. 

The SCO is a Eurasian political, economic and military organization which was founded in 2001 in Shanghai by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. 

Except for Uzbekistan, the other countries had been members of the Shanghai Five, founded in 1996; after the inclusion of Uzbekistan in 2001, the members renamed the organization. 

The Islamic Republic of Iran joined the organization as an observer member in 2012. 

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Mongolia-EU Joint Committee Discusses Partnership Progress

Ulaanbaatar, September 10 /MONTSAME/ Mongolia and the European Union (EU) have exchanged information about present situation of the Mongolian politics and socioeconomic life and have concluded an implementation of the Partnership and Cooperation Agreement.

The sides did so at the 15th meeting of their Joint Committee on Tuesday in the State House, Ulaanbaatar. The meeting was co-chaired by Ch.Saikhanbileg, the head of the Cabinet Secretariat for Government, and by Mr Viorel Isticioaia Budura, the Managing Director for Asia and the Pacific in the European External Action Service.

Following the meeting, the parties signed a joint statement which reflects works on intensifying the bilateral cooperation in many directions such as increasing both an effectiveness of EU's projects and programmes and a present volume of the bilateral trade and investments, working out and realizing the 2014-2020 developmental cooperation programme, and activating the inter-citizen ties and agricultural and innovation collaboration.  

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MCC Wraps Up Success In Mongolia

September 12 (VOA) Mongolia recently celebrated the successful completion of a $285 million Millennium Challenge compact with the United States.  The Millennium Challenge Corporation, or MCC, is an independent U.S. government corporation that is helping lead the fight against global poverty.

MCC is coming up with more effective ways to deliver U.S. foreign assistance by focusing on good policies, country ownership, and results.

The Mongolia-MCC partnership has succeeded in putting its people on a path to economic growth. "Our investment has strengthened property rights, improved health, reduced air pollution, built a major north-south road, and trained the workforce of tomorrow. Each component plays a role in generating economic growth," said MCC Senior Advisor Cassandra Butts in Mongolia. First among these was implementing the right policy reforms.

The right legal, policy and operational frameworks were put in place, including measures to sustain our investments. From reforms regarding vocational education to land to road maintenance, these policies support MCC's growth-enhancing investments. 

MCC invested $15 million to improve the efficiency, accuracy and accessibility of the land privatization and property registration process to make it easier, faster and more cost-effective for Mongolian citizens to register and transfer land.

The second key factor to the Compact's success has been a focus on building clear links to private sector priorities.  Building the right infrastructure or ensuring the sound health and modern training of Mongolian workers are essential for attracting private sector investment, which is the ultimate engine of jobs and economic growth.

Finally, the focus has been on inclusive development that benefits both men and women, while minimizing environmental impacts.  Women's participation in the economy is a key contributor to a country's growth and development.  From securing property and land rights to treating cervical cancer to installing energy-efficient stoves in women-headed households, MCC work in Mongolia has been a model for gender equality, said Ms. Butts.  Moreover, Mongolia identified and mitigated environmental risks, demonstrating national leadership in safely identifying, removing and disposing of hazardous materials like asbestos and lead during renovations.

MCC has been proud to partner with Mongolia on the success of the compact.  It is now up to the government and program participants to sustain all the good this compact has achieved.

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Mongolia Buffeted by Global Winds

By Julian Dierkes

[For another version of  observations of the current situation in Mongolia, see my piece in the Wall Street Journal Asia on September 13. This piece has been  posted on the World Economic Forum blog as well.]

September 11 (Mongolia Focus) For most of the past 100 years, Mongolia has existed in somewhat splendid isolation from global forces of politics and capitalism. Over the past two years it has been buffeted by the winds of global capitalism, jumping from the triumph of the issuance of oversubscribed Chinggis Bonds in late 2012 to its current crisis of a sputtering mining project that growth is almost entirely dependent on. More than ever before, Mongolia's development path will depend on its decision-makers' understanding of global dynamics and reaction to these dynamics.

Since gaining independence from Qing China in 1911 and then carrying out the world's second socialist revolution in 1921, Mongolia existed under the Soviet Union's economic and political wing until 1990. Even after its democratic revolution in that year and an increasing focus on its "third neighbours" beyond Russia and China, the world found little reason to take notice of Mongolia until 2011. Yes, well-connected Tibetan politicians and activities introduced their Mongolian co-religionists to policy-makers around the world in the 1990s and Mongolia's success in establishing itself as Asia's only post-state socialist democracy caught the attention of some international relations officials, but this attention remained quite limited in scope. The 2000s were a decade of mineral exploration in Mongolia that culminated in an Investment Agreement between Anglo-Australian mining giant Rio Tinto and the government of Mongolia in 2009 as a framework for production at the immense Oyu Tolgoi gold and copper deposit in the Gobi desert. Construction investment related to that and other mines pushed economic activities to such heights in 2011 that the country was declared the fastest-growing economy in the world. And the world took notice!

In 2012, as Oyu Tolgoi construction was fueling this rapid economic growth, Mongolian coal exports were generating income, tax revenue and employment. In the Fall, the issue of a first US$-dominated sovereign "Chinggis Bond" was massively oversubscribed. All this good economic news gave a boomtown feel to Ulaanbaatar. Riding on the elevators of new commercial buildings were 20-something Mongolians oozing confidence. Mongolia seemed poised to conquer the world – once again.

Then China's manufacturing industry sneezed and Moncoalia caught a major cold. Just before catching this cold defenses were already weakened by the hasty passage of a foreign investment law that clarified little and created a lot uncertainty. Now, coal sales to China have tumbled, the giant Tavan Tolgoi coal project is no longer the object of transnational investment desires, and direct investment in Mongolian ventures other than Oyu Tolgoi seems to have evaporated. To add to these woes, Mongolian politicians have been wrestling with cost-overruns in the construction of Oyu Tolgoi and how they are to understand themselves as 1/3 part owners of that mine. These doubts have cast a pallor over this mighty project and financing for its on-going construction. Construction of underground portions of the mine has been suspended and at the end of August 1,700 workers were let go. The Tugrik lost approximately 10% of its value against major currencies in August. Confidence has been shattered and parliament will be meeting in an emergency session in the coming week.

While the government budget has expanded to a volume where such a downturn can be buffered, these measures require the mortgaging of future mining revenues. Mongolia's ability to rely on foreign donors is disappearing quickly. As the country transitions from a developing country to an emergent resource nation numerous donors will reduce their activities or shift gears from grants to long-term loans.

International investment interest has been a boon to Mongolia's aspirations and economic development. But it is also introducing pressures and an urgency that decision-makers and the public have been challenged by. Policy analysis capacity in government, but also in civil society, remains low. The press is free and active, but has struggled in adopting professional practices that inform public debates rather than fanning flames, all in the context of widespread political ownership of media.

Rather than developing long-term strategic visions Mongolian political leaders have been reacting to developments outside their own control. The recent presidential election campaign that saw the current president, Ts Elbegdorj, win re-election in late June, was devoid of alternative conceptualizations of Mongolia's economic development and the impact this will have on social and political development.

The choices that Mongolia faces require much more domestic research and policy analysis capacity. Ideally, this could be built in a non-partisan fashion over the coming decade, possibly in lockstep with the need for capacity building in such areas as financial administration, mining regulation, and vocational education.

But Mongolia's integration into regional and global dynamics of investment and economic integration also necessitate the consideration of scenarios for the country's future. Next week, World Economic Forum Strategic Foresight will host a discussion of such scenarios just before parliament convenes in an extraordinary session to consider responses to the current crisis. Discussions of scenarios as well as consideration of changes to investment laws might lay the groundwork for less tumultuous development in coming years that could bring equitable and sustainable growth to this landlocked nation with its extraordinary nature and people.

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Malaysia postpones "Endless Possibilities" campaign launch indefinitely after linked to Mongolia

September 12 (The Malaysian Insider) Putrajaya's new "Endless Possibilities" campaign launch in the country has been postponed from the September 17 date, possibly indefinitely after it was found that Mongolia had used the same tag line some 19 months before Malaysia.

The Malaysian Insider understands the campaign officials were red-faced due to the link to Mongolia, a sensitive subject as two Malaysian police commandos were charged and later acquitted for the murder of Mongolian Altantuya Shaariibuu.

"The Malaysian launch is off. There is no new date," a source told The Malaysian Insider.

The campaign tag line was officially used for the first time in Davos during last January's World Economic Forum (WEF) although the Tourism Ministry had promoted it in Dubai in October 2012.

Pro-government bloggers had criticised the campaign, saying it copied a similar Israeli campaign which began last April. But they later found out that Mongolia had produced a video on global news broadcaster CNN using the same tag line.

But a spokesman for the campaign said it would be launched. There was no definite date.

"The initiative will be launched. 17th was one of the dates considered," said the spokesman who declined, to be named.

September 17 was chosen as it is a day after Malaysia celebrates 50 years of its founding when Malaya, Singapore, Sabah and Sarawak formed the nation in 1963. Singapore left in August 1965.

The Malaysian Insider learnt the campaign and tag line was refined by two foreign consultancies and a market research firm after discussions with the Prime Minister's Department.

"The consultants refined it from the phrase 'Endless Opportunities' which was used in a speech to 'Endless Possibilities'," he said, adding they were unsure whether the consultants had checked if other countries used the tagline.

An advertising agency was then called in to create the logo, which the Tourism Ministry used together with the tag line last year before it was officially launched in Davos.

The Malaysian Insider first broke news of the campaign launch on August 21 and it was confirmed the same day by Prime Minister Datuk Seri Najib Razak, who said it would complement and not replace the 1Malaysia slogan introduced in 2009.

Calling it the new "complementary campaign",  Najib said the latest campaign was part of a national branding plan.

"This is going to be promoted by Malaysia," said Najib, who was seen donning a new badge of the new campaign in addition to one with the 1Malaysia logo.

Sources told The Malaysian Insider that the "Endless Possibilities" slogan was to be launched before the polls but the government postponed it to prevent possible confusion.

Pos Malaysia had even planned to launch a new stamp titled "Malaysia: Endless Possibilities" on May 30, 2013 but there has been no sign of the stamp set.

A source said the new campaign actually began earlier this year at the prestigious World Economic Forum (WEF) in Davos, Switzerland, and in several Tourism Malaysia drives.

A 60-second video clip featuring Najib was also launched and aired by global news broadcaster CNN.

There have been several print advertisements with the new slogan in international magazines for both business and tourism purposes in the past eight months. But sources said the main push would be after the September 17 launch.

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Social, Environmental and Other

Price of Gold: Always More Desert to Mine

September 12 (OC Weekly) Globalization's growth has shrunk the world's need for local labor. In many countries with large rural populations, herding and farming families find their work dwindling while foreign enterprises claim resources faster and in greater quantities than the natives possibly can. Mongolia—in which Sven Zellner's documentary Price of Gold takes place—is an example. Among the landlocked, largely desert nation's chief natural resources is gold, the mining rights to which have been seized and divided by international companies, making it illegal for Mongolians to excavate their own soil. The scant income to be earned from animal meat and fur, however, often leaves them with little choice.

Price of Gold focuses on a small group of "ninjas," the popular name for the roughly 100,000 nomadic Mongolians who illegally dig for gold today in the Gobi Desert. The film's six human subjects—two organizers, three younger manual diggers and a woman responsible for the most cooking she has ever done—appear in the south Gobi performing daily routines. While most ninjas dig at the surface level, this group goes farther, using dynamite underground. We see the bosses providing coil, helmets and tools to the workers, who then descend into dark pits to drill at quartz, empty their haul into the light, crush it into dust and sift.

A day's work might, at best, yield a handful of gold, to be eventually sold on the black market or to large companies at a discount. Nighttime brings on meals eaten in a circle within a shared tent, with the bosses sometimes still agitated from how the day has gone. Then the film cuts to black, and the next day arrives.

The movie grew out of the four years German debut filmmaker Zellner (who co-directed Price of Gold with Mongolian journalist/guide/translator Chingunjav Borkhuu) spent in Mongolia photographing these men and their families, resulting in a photographic exhibition titled Ninjas. The still photos often catch in-process workers regarding the camera, their faces filled with haunting poetry, as though existing both within a specific moment and somehow outside of time.

In Price of Gold, by contrast, the men's faces often vanish as they go underground, threatened with permanent disappearance: the risk of dynamite bursting early, or of rope breaking and leaving them trapped. The filmmakers find those faces again in private interviews aboveground, each miner sitting away from the others to discuss how he feels about the job. A young man named Eegii wishes that his superiors would be easier on him; one of them, Ochiroo Akh, longs for the right to a handful of his own soil. Both sadly accept how the damage they do to the land violates their religion, which will keep them social outcasts.

The ninjas are occasionally seen wrestling or throwing stones at bottle targets, and a sense emerges of the men playing to distract themselves from tedious despair. They do not want to be doing this forever, though their situation looks unlikely to improve. Price of Gold's last scene takes place 273 days after its opening, with Ochiroo Akh in debt to his workers, who are still digging. Meanwhile, mercury contaminates the air of a desert that, as with global wealth, is expanding.

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Green policy needs green literacy

By Michelle Borok

September 10 (UB Post) As economies develop, industries boom, and populations grow, countries inevitably must tackle the question of the environmental impact of change. Concern about the environment began at the start the first efforts of civilization to capitalize on natural resources. Water and soil conservation made sense to the world's first agriculturalists, as they make sense now to entrepreneurs invested in the green food movement. We reap what we sow, and if we don't sow thoughtfully, we will reap nothing at all.

As often as herders and their growing herds of goats in the Gobi are blamed for the country's desertification, responsible herders understand the benefits of "living green". They know that when less people occupy a shared space, resources can be more easily managed, and if many must share, they should learn to responsibly manage the resources that are limited. Preservation of clean water, trees, and fertile grasslands is as crucial to their livelihood as the price of wool and meat that they earn from their herds.

Responsible management of resources is also understood by governments and businesses with their eye on long-term sustainability. Mongolia understands this, at least on the surface, as official talks in the highest levels of government have included green policies overseeing investment, development and economic growth. President Elbegdorj's "Champion of the Earth" award from the UN Environmental Program is evidence of the global recognition of Mongolia's public efforts to do development right.

Last week's National Renewable Energy Forum is more evidence of a strong desire to create alternatives in Mongolia. The need for alternatives arises when nations realize their choices are limited. A nation in debt, dependent on imports tough to purchase with weak currency, and desperate to sell its commodities to neighbors unwilling to purchase them, realizes that there need to be new routes explored along the road to economic independence and sustainability. Perhaps ones lightly tread and conscious of carbon footprints. More developments like the Salkhit Wind Farm might be just what's needed to truly make a dent in the nation's goals to cut carbon emissions and improve air quality.

My first published writing about Mongolia, a lighthearted travel piece, shared magazine pages with an article by environmental activist, Onodelgerekh Ganzorigi, founder of Mongol Environmental Conservation, now known as the Mongol Ecology Center (MEC).

From the MEC's website, "Once having broken through them, Chinggis Khaan did not allow dams, irrigation systems and embankments to be rebuilt. He saw that irrigation was used to transport water into grasslands that did not have enough rainfall to sustain farming. With the irrigated water, the farmers could produce bountiful crops, but they destroyed good pastureland and drove the animals to graze in ever more marginal lands. As a herder, he always valued animals over crops, and wherever he went his army destroyed the irrigation systems that threatened the pastureland."

Obviously, a lot has changed since the reign of Chinggis, but Mongolia now has a leader who promised river diversion projects in the north to win presidential election votes in the south.

Mongolian environmental concerns rarely make international headlines. It takes "neo-Nazis" in tank tops and suspenders surveying active mines to gain the interest of the West. The "news" that local nationalist groups had decided to "go green" got more media attention than local environmental movements and ordinary citizens who organize hunger strikes, protests at the capital, and organize press conferences to have their concerns heard.

Nomad Green is a citizen led media project trying to raise public awareness about environmental issues facing the country. They look past the annual tree-planting events attended by the president, and keep a crowd-sourced watch on government agencies, businesses and private citizens. They do what they can to improve the environmental literacy of their fellow Mongolians, but they are volunteers dependent on the vigilance of other volunteers.

The biggest challenge facing all groups working for green policy change in Mongolia is the environmental education of Mongolian voters. It will take more than a few novelty publicity stunts picking up trash along the Tuul with teenagers to change the way that the average Mongolian thinks about the long-term cost of the driving forces behind the nation's economic growth. It will take politicians who are dedicated to green policy, and not just the idea of it to gain the favor of foreign agencies.

A government believed to be corrupt is going to have a hard time telling "Ninja Miners" in Khuvsgul that they have to stop what they're doing or face prosecution. Foreign exploration and resource extraction companies that refuse to speak to non-investment journalists about their current projects in the country are going to have a hard time winning the support of locals who aren't getting rich from doing business with them – locals who vote.

This past week's Discover Mongolia Investors Forum included a discussion of "Mongolian Perspectives on Oil Shale". Which Mongolians? The Mongolians working with foreign investors to bring untried and experimental extraction techniques to a country with a fragile system for environmental recovery? The Mongolians who are being displaced from their land by the companies promising Parliament energy independence? What about the perspectives of Mongolians who know very little about oil shale, but could be persuaded to consider it an alternative?

Perspective comes from observation, education and the exchange of ideas. When only a precious few have access to those things, you are left with a passive people who will simply have to live with the consequences of their elected decision makers. You have a people who live a life not so different from one that was lived before democracy was established.

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Making gains in Mongolia

September 11 (Massey University, New Zealand) Blind people in Mongolia are making amazing gains after learning mobility skills from instructors trained by a Massey University professor

Last August Professor Steve LaGrow, head of Massey's School of Health and Social Services, spent three weeks in the former communist state preparing six instructors to teach orientation and mobility for the blind. 

Prior to that the country had no mobility training programme and blind people had very limited opportunities. 

A year on, Professor LaGrow, who is based at Massey's Manawatū campus, returned to Mongolia to see how the instructors were doing. The instructors have now taught up to 50 blind people how to use white canes and adaptive skills to move safely within communities and cities. Each person receives at least 60 hours of instruction.

"The environment is really challenging but they're doing an amazing job," Professor LaGrow says. "I'm certainly impressed with the impact they're having on blind people's lives, it's stunning really."

Professor LaGrow, who has more than 35 years experience in rehabilitation of blind people and those with low vision, spent a fortnight in Mongolia travelling between the capital Ulaanbaatar and regional cities to visit each instructor. 

He worked with each to improve their teaching, and talk through any problems they may have experienced, and met the students whose lives they had helped change. "The gains they have made in these people's lives are just amazing. They have gone from nothing to something." he says.

"For example, there was one woman we met who was 28 years old, had been blind since birth, lived in a nomadic herding family, and had never in her life set foot outside the ger (family home) she lived in without being on someone's arm. 

"When I got there she had had two weeks of instruction – out of four weeks, which is the standard level instruction they are giving – and she now had the ability to travel about four blocks, crossing streets and keeping track of her location. She just couldn't get the grin off her face, she was just so delighted.

"She has moved out of her family's ger and into the city, where she is taking a course to become a massage therapist.

"And everybody I met, it was the same, they couldn't say enough about what had happened in their life, since they've started this instruction. It's something we take for granted here [in New Zealand], but in Mongolia they had nothing, blind people were completely reliant on sighted people to get around, now those who have received instruction can begin to lead independent lives." 

The project was sponsored by the Mongolian National Federation of the Blind and paid for by the Danish Association of the Blind.

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The Boy Genius of Ulan Bator

September 13 (The New York Times) Days before I was to meet Battushig Myanganbayar at his home in Mongolia, he sent me an e-mail with a modest request: Would I bring him a pair of tiny XBee wireless antennas? Electronic parts are scarce in Mongolia (he used components from old elevators for some of his projects), and packages ordered online take weeks to show up.

When I arrived, antennas in hand, at his apartment in the middle-class neighborhood of Khan Uul, in Ulan Bator, Battushig, 16, led me down a steep incline into the building's underground garage to show me what they were for. Many children in the city play in their apartment buildings' driveways, but this one seemed oriented in a particularly dangerous way. Battushig worried about his 10-year-old sister and her friends being hit by an exiting car. Standing in the concrete space, its aqua walls nicked, he pointed overhead to a white box containing a sensor from which he had run wires to a siren with a flashing red light outside in the building's driveway. His Garage Siren gave his sister and the other children time to get out of the way when a car was coming.

Battushig, playing the role of the car, moved into the sensor's path to show me how it worked, but it was clear he was not entirely satisfied with his design. "The use of the long wires is very inconvenient for my users," he said, almost apologetically, clasping his hands together in emphasis. He realized that contractors would be reluctant to install the siren in other buildings if they had to deal with cumbersome wiring, so he was developing a wireless version. Thus, the antennas.

Battushig has the round cheeks of a young boy, but he is not your typical teenager. He hasn't read Harry Potter ("What will I learn from that?") and doesn't like listening to music (when a friend saw him wearing headphones, he couldn't believe it; it turned out Battushig was preparing for the SAT). His projects are what make him happy. "In electrical engineering, there is no limit," he said. "It is like playing with toys." He unveiled Garage Siren in August 2012, posting instructions and a demonstration video on YouTube. The project impressed officials at the Massachusetts Institute of Technology — where Battushig planned to apply for college — but at that point they were already aware of his abilities. Two months earlier, Battushig, then 15, became one of 340 students out of 150,000 to earn a perfect score in Circuits and Electronics, a sophomore-level class at M.I.T. and the first Massive Open Online Course, or MOOC — a college course filmed and broadcast free or nearly free to anyone with an Internet connection — offered by the university.

How does a student from a country in which a third of the population is nomadic, living in round white felt tents called gers on the vast steppe, ace an M.I.T. course even though nothing like this is typically taught in Mongolian schools? The answer has to do with Battushig's extraordinary abilities, of course, but also with the ambitions of his high-school principal. Enkhmunkh Zurgaanjin, the principal of the Sant School, was the first Mongolian to graduate from M.I.T., in 2009, and he has tried since then to bring science and technology labs to his students. "My vision," he told me, "is to have more skilled engineers to develop Mongolia. To do that, everything has to start from the beginning." In the past decade, Mongolia, which had limited landlines, invested heavily in its information technology infrastructure and now has an extensive 3G network. Most homes in Ulan Bator have Internet connections, and almost everyone, including nomads, has at least one cellphone. Even on the steppe, with only sheep in sight, you can get a signal.

Zurgaanjin had students watch the Circuits and Electronics MOOC lectures at home, just like thousands around the world, but he wanted to supplement them with real-world labs. Tony Kim, a college friend working on his Ph.D. in electrical engineering at Stanford, agreed to visit Mongolia for 10 weeks and guide students through the labs using real equipment. Kim brought three suitcases of electronics supplies, immediately making his classroom one of the best-equipped labs in the entire country. Because the class was not approved by the ministry of education, students had to take it in addition to their regular courses. Battushig persuaded his parents to upgrade the Internet speed at their home from 1 megabit per second to 3 (the average in the United States is 8.6) to make it easier to watch the lectures.

Battushig was one of 20 students, ranging in age from 13 to 17, to enroll in the class. About half dropped out. The course is difficult in any setting — M.I.T. sophomores often pull all-nighters — and the Mongolian students were taking it in a second language. Battushig, however, thrived. "I can't compare it to a regular class," he said. "I had never done that kind of thing before. It was really a watershed moment for me." To help his classmates, he made videos in Mongolian that offered pointers and explanations of difficult concepts and posted them on YouTube. Kim, who had taught similar classes at M.I.T., told me, "If Battushig, at the age of 15, were a student at M.I.T., he would be one of the top students — if not the top."

In the past year and a half, more than 100 schools, including Harvard, Caltech and the University of Texas, have invested millions of dollars in MOOCs. Many in higher education believe that these courses can make a quality education more affordable and accessible to far more students and eventually provide additional revenue streams for the universities that offer them. Critics, though, argue that MOOCs threaten the economic survival of nonelite colleges and are an inadequate replacement for the teaching and support of live professors. Anant Agarwal, a professor of Circuits and Electronics and the president of edX, a MOOC platform started last year by M.I.T. and Harvard, said that seeing Kim and Zurgaanjin combine his online lectures with in-person teaching spurred edX to help organize 20 such "blended" classes. "It was extraordinarily creative," he said. "It changed the way I think."

Battushig's success also showed that schools could use MOOCs to find exceptional students all over the globe. After the course, Kim and Zurgaanjin suggested that Battushig apply to M.I.T., and he has just started his freshman year — one of 88 international students in a freshman class of 1,116. Stuart Schmill, the dean of admissions, said Battushig's perfect score proved that he could handle the work. Schmill also said that although M.I.T. already seeks students from around the world, many come via special programs organized by charities or international schools. (Zurgaanjin attended the United World College in Wales before applying to M.I.T.) "The MOOCs may well offer the opportunity for us to get more students from remote areas who haven't been in these magnet cultures," Schmill said.

Battushig, who is now 17, settled into his German-themed dorm last month, a single in Desmond House. He has begun classes, including introductory courses in electronics, solid-state chemistry and biology, and had his photo taken with the renowned physics professor Walter Lewin (which he posted on Facebook). He joined photography and tennis clubs — and, he said, discovered that "I'm really a great player at billiards." He is heeding his mother's warning not to overindulge on pizza (he has a self-imposed limit of two slices a week). Battushig may be embracing student life, but as his father told me months earlier when we sat down to a family lunch of Korean-style kimbap, rice-noodle salad and cooked sheep: "He is thinking, all the time, how to solve problems. He has so many ideas. He often says to me, 'I want to make good things for humans.' If he does good things for humans, he does a great thing for us."

Laura Pappano is an education journalist and the writer in residence at Wellesley Centers for Women at Wellesley College. She is the author of several books, including "Inside School Turnarounds."

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Mongolian Teen Aces an MIT Online Course, Then Gets Into MITBoston Daily, September 13


Genghis Khan, the father of 8% Asian males

Ulaanbaatar, Mongolia, September 13 (Daily Bhaskar) Genghis Khan is known as the father of Mongolian nation. But, if genetic structures of male population of the world are studied, Genghis Khan could become the father of the nation in true literal sense. 

More than 16 million males of the world have the genes of Genghis Khan

A huge chunk of male population of the world has the same set of Y-chromosome as carried by the Mongol leader. 

Genghis Khan's philandering lifestyle had created a lineage of more than 20,000 individuals, within a century of his birth. 

More than 8 percent of the male population of Central Asia traces their genealogy to the Mongol conqueror. That amounts to almost 0.5 percent of world's population

Some traces of Genghis Khan's genes have also been found in present Jat population living in northern part of India

It was also found that the geographical spread of possessors of the chromosomes almost exactly matched that of Genghis Khan Empire. 

The dynasty was known for its philandering ways. His brothers and sons fathered hundred of children. These children carried forward the legacy practiced by their fathers. 

It is said, when Mongol armies attacked, their spoils were shared among the troops and officers, with one exception. The most beautiful women were reserved for Khan. 

A study conducted on Hazara population residing in Pakistan found that they are the direct descendants of Genghis Khan

Khan was born around 1162 in Mongolia, and in his forties he began a campaign of conquest, ultimately creating an empire stretching from the Caspian Sea to the Pacific. Khan had a great many children, both with his wives and with other women. 

His sons, who expanded the Mongol Empire into Europe, had many children of their own. Although the empire broke up in the decades following Khan's death in 1227, his male descendants ruled large chunks of it for centuries. And like their ancestor, they had many children as well.

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Falcon population to pick up thanks to UAE initiative in Mongolia

UAE project in Mongolia sees hatching of 2,000 chicks in 2013

Abu Dhabi, September 12 (Gulf News) The Environment Agency-Abu Dhabi (EAD) has confirmed that nearly 2,000 Saker Falcon chicks were hatched in 2013, as a result of its artificial nesting programme in Mongolia. The project, which is implemented in partnership with the Ministry of Nature, Environment and Tourism in Mongolia, was launched in 2010 with an aim of increasing the wild Saker falcon population.

This announcement was made as the Saker Falcon Task Force – Stakeholders' Action Planning Meeting concluded Wednesday in Abu Dhabi and which was hosted by EAD. It was held to discuss developments on the Saker falcon (Falco cherrug) Global Action Plan.

In 2010, EAD – on behalf of the UAE Government – signed an agreement with the Government of Mongolia with the aim of building 5,000 artificial nests in the Mongolian steppes in a bid to encourage breeding among the species and increase the world's population of Saker falcons. EAD reported that 3,700 chicks have been born since the project was first launched.

Razan Khalifa Al Mubarak, Secretary General of EAD, said the initiative was introduced to promote sustainable breeding practices and to provide birds with safe and secure breeding environments in a bid to boost global population. "I am happy to report that, in addition to the success we have seen with the breeding, we have also built up the capabilities of local biologists and have incorporated an educational programme in schools in Mongolia as well as two schools in Abu Dhabi, in partnership with the Abu Dhabi Education Council," she said.

Several of the artificial nests placed have been fitted with a camera which records continuously, allowing officials to record the falcons' eating habits and predator threats. This year, the project has also been extended to address the problem of Saker falcons being threatened by power line electrocution – a major cause of falcon mortality in Mongolia and China - which affects almost one falcon each week. Officials took a number of steps to address this issue including adding insulation covers on the power lines.

"By leading global efforts to save one of the world's most endangered falcons, we can help boost population numbers for a fragile species whose population has dwindled globally to a mere 11,000 pairs. By working with the Mongolian government, we are achieving our common vision of preserving this endangered species and safeguarding an important symbol of Emirati culture and heritage," Al Mubarak added.

Locally known as 'Hurr', meaning free in Arabic, the Saker falcon is the second largest falcon in the world and is also considered one of the toughest. They are the most well suited falcon for Arab falconry, due to their adaptability to desert climates and their resilience. Their willingness to engage in ground combat with their prey makes for a fierce and reliable hunter. The Saker falcon is predominantly a bird of open landscapes, occupying a diverse range of habitats from agricultural land, steppe, deserts and semi-deserts and mountains. Saker falcons are the most commonly used raptor by Arab falconers.

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2,000 Saker Falcon chicks hatched under Environment Agency - Abu Dhabi project in Mongolia in 2013 – WAM, September 11


Mongolian Steppe munched into desert by goats and sheep

Overgrazing threatens the grasslands that cover the Mongolian Steppe, destroying a valuable carbon sink

September 9 (Responding to Climate Change) Forget coal plants and gas flaring.

Hungry goats are the latest threat to climate, say scientists studying the cause of degraded land in the Mongolian Steppe.

According to researchers at Oregon State University, overgrazing by millions of sheep and goats has caused about 80% of the vegetation loss that has occurred in the area over recent years.

Reduced precipitation as a result of climate change accounts for the rest. The findings were published today in Global Change Biology.

In terms of total volume, this makes up quite a meal for the roaming animals – in a country twice the size of Texas, which consists of 79% grassland, about 12% of biomass has completely disappeared, while 70% of grassland is now considered degraded.

This has led to desertification, as the Gobi Desert in the south rapidly spreads across the country, not only damaging the ecosystem, but also contributing to global climate change.

Grasslands can either act as a significant carbon sink or a source for atmospheric carbon dioxide.

"This is a pretty serious issue," said Thomas Hilker, an assistant professor in the OSU College of Forestry.

"Regionally, this is a huge area in which the land is being degraded and the food supply for local people is being reduced.

"Globally, however, all ecosystems have a distinct function in world climate," he said. "Vegetation cools the landscape and plays an important role for the water and carbon balance, including greenhouse gases."

Livestock numbers have almost doubled to 45 million animals since 1990 in Mongolia, partly due to the socioeconomic changes linked to the breakup of the former Soviet Union, said the report, when high unemployment caused a return to domestic herding.

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Mongolia: Pristine beauty in the 'Land of the Eternal Blue Sky'

September 11 (Travel Weekly) There are few places of undisturbed beauty left on this earth, where the inroads of tourism are still nascent and the guarantee of adventure comes free of risk (or WiFi).

Mongolia is one such place, its wide-open steppes home to a famously hospitable and good-natured people who follow a peaceful if hardscrabble lifestyle little-changed over time.

Possessing a last-place-on-earth allure that is not easy or inexpensive to access, it shows up on the bucket lists of veteran travelers. It certainly did on mine.

Mongolia is the least densely populated independent country in the world, a once-nomadic country at a crossroads: Vast numbers of livestock herders are moving to the capital city of Ulaanbaatar after a recent raft of summertime droughts and flock-devastating winters.

The discovery of a treasure trove of natural resources, including copper, gold and coal, attracts them to the big city with the promise of work opportunities and running water.

"Vast numbers" is something of an exaggeration, as the entire country — nearly two-and-a-half times the size of Texas — has a population closer to that of Chicago, about 3 million. Around half of them are now living in or near this sprawling city of snarled traffic, construction cranes and sleek Armani stores.

Although Ulaanbaatar, aka UB, has its own curious charm, no one comes to Mongolia to linger there.

Our Nomadic Expeditions group of 15 returned to the city's Genghis Khan Airport a number of times when making connections to the country's far-flung corners. (The pronunciation of Hunnu, one of the country's efficient domestic airlines, provided us with our "Who knew?" inside joke when finding Snickers in the middle of nowhere, or when discovering that Genghis Khan vodka was not half bad.)

It turned out the magnificent countryside we had come to see was not always so remote: We spent one night at the idyllic Gun-Galuut Nature Reserve, where the steppes merge with wetlands some 2.5 hours by car from UB ("nearby" by local standards). 

En route, we stopped at the newly built 131-foot monument to Genghis Khan, a steel-clad hilltop statue of the legendary horseman and national icon who, together with his descendants and their Mongol armies, conquered half of the known world in the 13th century and continues to invoke great national pride. The peace-loving, mostly Buddhist Mongolia we were visiting was one-fifteenth the size of his empire, which stretched from the Pacific Ocean to the heart of Europe.

There are precious few roads in this ancient land where an equestrian culture persists. The occasional two-lane highways were recently paved, but encounters with cars were infrequent.

We sped along, past endless, fenceless grasslands listening to CDs of the otherworldly music of the country's famous throat singers (it's hypnotic), transfixed by the tersely blue sky and the changing configurations of white clouds that unfurled across its expanse.

Called the Land of the Eternal Blue Sky, it is reminiscent of Montana's Big Sky country for its light, space and emptiness — but on a more colossal scale. The magic continues at night when the stargazing is astonishing, thanks to a dense black backdrop devoid of city lights and pollution.

Mongolia deserves to be seen soon. It is impossible to ignore the economic surge and changes wrought by the mining boom that has made this one of the world's fastest-growing economies. In the past decade, Mongolia's gross domestic product has doubled.

And so has tourism. In the first half of 2012, some 280,000 travelers visited Mongolia. Americans comprised the fourth-largest group after those from China, Russia and South Korea. With such negligible numbers, foreign visitors will feel they have the undulating countryside to themselves.

Until Mongolia broke free from the Soviet orbit in 1990, it was virtually closed to the outside world.

Across the nation, independence is celebrated on and around July 11 with the Naadam Festival, the summer's biggest draw. Centered on the manly games of wrestling, horseback racing and archery, the age-old contests are often associated with the training of warriors in the time of Genghis Khan but can actually be traced back long before that.

The televised national games take place in UB with growing pomp and glamour, and they draw on increasing numbers of tourists.

But Nomadic Expeditions, trailblazers in the business for more than 20 years, knowingly arranged for our group to enjoy the festivities in a small city in the Gobi desert, by far a more intimate and genuine experience.

If there were any other tourists, I didn't see them as we strolled and mingled, filling memory cards with photos that could never begin to capture the colors, excitement or smiling welcome offered to us at every turn.

We posed for photos with the local folks fancied up in their finest traditional dress, and checked out the most popular tent on the grounds where airag, the fermented mare's milk so beloved by Mongols, was being dispensed. Let's just say it's an acquired taste.

The Gobi is the world's most northern desert. It occupies the southern third of the country and — contrary to the sameness that its name might suggest — is a fascinating and varied region, one of the most diverse ecosystems on earth.

One of the trip's most rewarding treks took us through the surprisingly green Yol Valley, alongside a rushing stream whose banks were carpeted with wildflowers.

In stark contrast, the next day saw us atop the shaggy double-humped Bactrian camels common in this area, lumbering through a sweeping desert of golden dunes.

Our Jeeps then struck off (across a roadless expanse) to the red sandstone Flaming Cliffs, famous for an American paleontologist's 1923 discovery of the world's first nest of fossilized dinosaur eggs.

Now recognized as one of the world's greatest dinosaur fossil fields (second in importance after the U.S.), we had come instead for its stunning natural beauty and delicious sunset dinner set up and awaiting us at the end of an exhilarating hike.

The Three Camel Lodge is the award-winning ecolodge of the Gobi, and indeed in all of Mongolia. Not quite glamping, it was our oasis-in-the-middle-of-nowhere home, created and professionally managed by Nomadic Expeditions.

Run entirely by a can-do Mongolian staff, it was the nicest of the trip's selection of rustic "ger" camps. The circular ger is the traditional white felt-lined tent of the nomadic herder, elsewhere called the "yurt," its Turkish name.

More rudimentary gers had also been our perfectly situated accommodation on the shore of Lake Hovsgol, the country's second-largest lake and primary freshwater resource. Mongolia's deepest lake, Hovsgol is found in the northernmost region, at the border with Russia, and shares a similar ecosystem and type of natural beauty with nearby Lake Baikal in Russian Siberia.

We spent days hiking through pristine larch and pine forests to visit the Tsaatan, the legendary reindeer people, who had set up a seasonal teepee-style tent and had a handful of handcrafted souvenirs for sale.

There was horseback riding for the daring among us, dropping in to visit local herders (their ger had a satellite dish out front, a common sight), and motorboating on incredibly crystal clear waters.

Our last afternoon was spent deconstructing a ger (with a lot of help) to illustrate just how practical it was as a traveling home for a nomadic family.

Just a word about the often-maligned Mongolian food: With meat (especially mutton) and dairy products (think yogurt, dried curd and cheese) the mainstays of the national diet, we didn't expect our ger camps to offer fine dining (though some restaurants in UB came close). But selections were plentiful, fresh and kept everyone sated and happy.

The occasional appearance of tourist concessions such as peanut butter, bacon and lettuce prompted more of those "who knew?" moments. We appreciated the constant attempts by our Mongolian hosts to show how welcomed we were in their remarkable Land of the Eternal Blue Sky.

Patricia Schultz is the author of "1,000 Places to See Before You Die," a New York Times best-seller.

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Second edition of Mongolia's first guide to local birds published

September 16 (UB Post) Professor from the Center on Conservation of Freshwater Reserves and Nature of Mongolia, Sh.Boldbaatar, recently released "Photo Guide to Birds of Mongolia". The guide will serve as handbook for ornithologists and bird lovers. The guide includes over 525 pictures of 175 species in 175 classes. Out of 175 species, 30 are rare and endangered species.

The first version of the guide was published in 2008. The revised version includes 50 more species of birds, special features, and a feature on each bird in both Mongolian and English, as well as habitat map.

The guide also provides information about things to keep in mind while bird watching, instructions for the book's usage, the main habitats of different species, classifications, state protections for birds, and an updated reference list.

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Katya Zol Spring 2014

Mongolian fashion designer Katya Zol presents her Katya Zol Spring 2014 collection fashion show, during Couture Fashion Week, September 8, 2013.

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