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Friday, November 8, 2013

[Mongolia 3Q GDP +11.5%, World Bank urges to tighten economic policies, MRAM revokes 106 licenses, and Metals Mongolia 2013 is today]

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Friday, November 8, 2013

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Overseas Market

KCC flat at 25c with no Thursday trading

Kincora Copper has two Mongolian exploration licences revoked

November 7 (Proactive Investors) Junior copper and gold explorer Kincora (CVE:KCC) revealed it has had two exploration licences revoked by the Mongolian authorities but its flagship Bronze Fox is in good standing.

The Tourmaline Hills licence and the North Fox, owned by subsidiary Golden Grouse, were included in a list of 106 licences that were revoked.

It is estimated that 11 foreign and 67 local groups make up the total owners of these 106 licences

Currently 24 companies holding 31 licences of these 106, including Kincora, are actively seeking direct discussions with the government authorities, said Kincora.

The firm highlighted that its flagship Bronze Fox licence remains in good standing and is not on the list.

It was the focus of one of the most active copper exploration programmes in Mongolia during 2013.

Meanwhile, Kincora was unable to explore on the Golden Grouse licenses following uncertainty relating to criminal legal proceedings against former Government officials, which has brought into question the legal rights and interests for the owners of 106 exploration licenses.

In April 2012, Kincora paid $5 million in script for the two licenses, incurred approximately $71,000 in legal costs and has spent around $1.85 million in exploration costs since.

Last month, the firm said it had identified a number of "large scale, high priority" follow up targets at Bronze Fox.

Particularly, these are near surface and merit further drilling, the firm said, updating on previous and current fieldwork and corporate matters.

It comes after a recently completed Induced Polarization (IP) study and other geological work.

Link to article

Link to KCC release

 

Mogi: it's not just the foreigners crying fould, as the article itself says 67 out of the 78 firms affected are domestic
Foreign investors cry foul as Mongolia revokes mine licenses

Nov 7 (Reuters) - Mongolia has annulled more than 100 exploration licenses as part of an investigation into mining sector corruption, raising further concerns among foreign investors about the risks of doing business in there.

Mongolia-focused Kincora Copper said on Thursday that it had received a letter from the Mineral Resources Authority saying that two of its licenses had been revoked following a criminal investigation into former government officials accused of illegally issuing a total of 106 exploration licenses between 2008 and 2009.

All of the 106 licenses have been cancelled.

Kincora Copper said the move, which will affect the licenses of an estimated 11 foreign and 67 domestic firms hoping to explore for a range of minerals, highlighted the uncertainty facing a growing legion of foreign investors.

"Security of tenure and a transparent legal system are key cornerstones for both domestic and foreign private sector investment," said Sam Spring, president and chief executive of Kincora Copper, in an email.

With legal proceedings already underway, the company suspended exploration activities on the two properties, known as North Fox and Tourmaline Hills, at the start of the year.

Mongolia's Ministry of Mining could not immediately be reached for comment. Representatives of the Mineral Resources Authority were also unavailable.

SOLD ON THE CHEAP?

Surenjav Odbayar, head of research at Ulan Bator-based brokerage National Securities, said the case related to two government officials caught up in a crackdown on corruption that was launched ahead of Mongolian President Tsakhia Elbegdorj bid for re-election this year.

Elbegdorj won a second term on June 27 and there have been no more additional allegations against the officials since then, she said.

Foreign firms in Mongolia have long expressed concern that a populist, resource-nationalist streak amongst lawmakers could put their operations at risk, with legislators routinely complaining that Mongolian resources - including the flagship Oyu Tolgoi copper mine run by Rio Tinto , are being sold on the cheap to overseas interests.

Business confidence was hit further by an unpopular 2012 law restricting investments in "strategic" assets like mining, and foreign investment in the first half of this year dropped 43 percent on the year. The law has since been replaced.

Another Canada-based explorer, Khan Resources, is suing the Mongolian government for $326 million in damages after the Mongolian government refused to reissue its licenses for the Dornod uranium property in 2010.

The International Arbitration Tribunal will begin a five-day hearing into the case on Nov. 11 in Paris, with Khan accusing Mongolia of breaking its own licensing laws in order to accommodate a uranium development deal signed with Russia's AtomRedMetZoloto (ARMZ) in January 2009.

Kincora's Spring said arbitration for his own company would only be a last resort, and that they would first seek to resolve the matter directly with the government.

He said Kincora acquired the licenses last year following a takeover, and while it could still reclaim them, it would have to participate in a competitive bidding process, even though it had already spent heavily on developing the properties.

"While the majority of the 106 license holders would much prefer not to engage in legal proceedings, further court action would obviously not be good for the government, either financially or reputation-wise, given the current environment."

Link to article

 

ERD down 14.29% to 9c

Erdene Closes Oversubscribed Private Placement

HALIFAX, NOVA SCOTIA--(Marketwired - Nov. 7, 2013) - Erdene Resource Development Corp. (TSX:ERD) ("Erdene" or "Company"), is pleased to announce that it has closed its non-brokered private placement financing with the issuance of 9,797,500 units (the "Units") priced at $0.07 per Unit for gross proceeds of $685,000. The $500,000 private placement previously announced on October 18th, 2013 was oversubscribed and was increased to the maximum to satisfy strong investor demand. Each Unit is comprised of one common share of the Company and one-half of one common share purchase warrant, with each whole common share purchase warrant entitling the holder to purchase one common share of the Company at a price of $0.10 for a 24-month period.

All securities issued pursuant to the private placement are subject to a four month hold period. No commissions or finder's fees will be paid in connection with the placement. Net proceeds of the private placement will be used to advance the Company's projects in Mongolia and for general working capital. For more details on Erdene's projects please visit Erdene's website at www.erdene.com.

Teck Resources Limited ("Teck") has subscribed for 2,142,857 Units of the private placement for a total of $150,000, bringing Teck's holdings of Erdene's outstanding common shares to 10.4%. This investment will reduce the minimum amount of additional equity investment required to be made by Teck on or before April 23rd, 2014 from $500,000 to $350,000 in order to maintain the Strategic Alliance between Teck and Erdene (see April 11th, 2013 Erdene press release - Erdene Establishes Strategic Alliance in Mongolia).

Link to release

 

Teck Announces Subscription to Erdene Resource Placement

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 7, 2013) - Teck Resources Limited (TSX: TCK.A, TCK.B, NYSE: TCK) ("Teck") announced today the closing of a CAD$150,000 private placement in Erdene Resource Development Corp. (TSX: ERD) ("Erdene"). Teck subscribed for 2,142,857 units of Erdene (the "Units") at a cost of $0.07 per Unit, as part of a broader private placement of 9,797,500 Units conducted by Erdene. Each Unit comprises one common share and one-half of one share-purchase warrant exercisable at $0.10 within 24 months of closing of the placement. The shares, and shares that would be issued on exercise of the warrants, represent 11.8% of Erdene's issued common shares, calculated on a partially diluted basis assuming the exercise of the warrants held by Teck only. Teck holds 7,142,857 common shares of Erdene following the private placement.

Erdene is a mining company focused on the acquisition, exploration and development of base and precious metals in Mongolia.

The subscription was made for investment purposes. Teck may otherwise determine to increase or decrease its investment in Erdene depending on market conditions and any other relevant factor. This release is required to be issued under the early warning requirements of applicable securities laws.

Link to release

 

MATD up 0.52% to 2.89p

Petro Matad data acquisition on track, exploration director to leave

November 6 (Proactive Investors) Oil explorer Petro Matad (LON:MATD) has acquired over half of the 200Km of 2D seismic earmarked for its licences on Blocks IV and V in Mongolia.

The seismic programme is designed to provide detailed coverage over two prospect areas and to confirm at least two locations for drilling in 2014.

Acquisition of the remaining data is progressing well, it added, though fieldwork was slightly delayed, and is expected to be completed prior to the winter shutdown.  Processing of the data acquired to-date has already started.

Petro Matad has also been re-interpreting the data generated by its unsuccessful drilling campaign in the northern part of Block XX, a process it said is now largely complete.

This re-working has indicated that none of the wells in that campaign were in three graben areas identified as a part of a trend extending into the adjacent and producing field to the north, Block X1X.

"Possible extension of those fields into Block XX therefore remains untested," Petro Matad said.

Scout data from Block XIX is being integrated with the existing database in order to evaluate how best to pursue this potential.  The re-interpretation work also identified a number of similar basins in the southern part of Block XX and seismic to further delineate these basins is planned for 2014.

Separately, Petro Matad announced the departure of the exploration director who is carrying out the re-interpretation work.

Ridvan Karpuz is leaving at the end of the year to take up a new position elsewhere though he will remain as a non-executive and oversee the exploration programme.

Karpuz joined in August of last year and was responsible for the re-appraisal and re-interpretation work on the Mongolian acreage.

Executive directors John Henriksen and Amarzul Tuul will manage the group's operations in Mongolia until a new exploration director is appointed.

Petro Matad holds the sole operatorship of three Production Sharing Contracts (PSCs) with the Government of Mongolia.

Block XX has an area of 10,340 sq km in the far eastern part of the country.

Blocks, IV and V are located in central Mongolia.  Block IV covers approximately 29,000sg km and Block V approximately 21,150 sq km.

Link to article

Operational Update – Petro Matad

Management Change – Petro Matad

Similar:

Khet Completes Half of a 2D Seismic Acquisition Program in Central Mongolia – Petro Matad for RigZone, November 7

                                                            

UTM up 200% to 3c

Undur Tolgoi to Acquire Mongolian Road Construction Company

ULAANBAATAR, MONGOLIA--(Marketwired - Nov. 7, 2013) - Undur Tolgoi Minerals Inc. ("UTM" or the "Company") (CNSX:UTM) is pleased to announce that it has entered into an agreement to acquire, through its wholly owned British Virgin Island-registered subsidiary, Jucca Holdings Ltd., a 100% interest in Great Hoard Holdings SARL, a Luxembourg entity that holds a 75% of the share capital of Ashid Munkhiin Zam LLC ("AMZ"), a Mongolian company, in an exchange for 5,363,636 newly issued shares of UTM. AMZ holds road construction, repair and maintenance permits. AMZ intends to seek road construction contracts and tenders in Mongolia.

Road construction is one of the fastest growing industries in Mongolia. The government intends to build over 10,000 kilometers of paved road in the next 10 years. As part of its goal, the government passed a law in 2012 mandating paved roads between Ulaanbaatar and each of the country's 21 province centers by 2016.

Last year Mongolia raised USD$1.8 billion in its first ever bond offering (Mogi: $1.5 billion). Shortly afterward the government announced that most of the bond money would be spend on development of infrastructure and allocated USD$335 million to the road budget.

Mongolia's roads officially total 49,294 km, but only about 25% of the roads are currently paved. Most roads are little more than dirt tracks, which are usually dusty and occasionally muddy. By undertaking straightforward grading work, the roads would be quite similar to those servicing many of the mining and outback communities in Australia.

UTM's CEO, Donald Padgett, stated, "UTM is grateful for the support of its largest shareholder, Firebird Management, and its affiliated team in Mongolia, in assisting the company in the identification and incubation of new venture opportunities in Mongolia."

Following completion of the acquisition, UTM will have 64,351,484 shares outstanding.

James Passin, UTM's Chairman, commented, "We are excited to enter the road construction industry in Mongolia. For the benefit of its shareholders, we are committed to building UTM into a significant and successful Mongolian-focused public company. Following a strategic review of the company, the Board of Directors is refocusing the company away from mineral exploration in order to participate in Mongolia's massive infrastructure growth potential."

Link to release

 

CNSV flat at US$0.495 with no Thursday trading

Consolidation Services Inc Announces the Board Appointment of Former IFC World Bank Official, Hieronymus Niessen

The Company is continuing to build an international team and operational capabilities for its wholly owned subsidiary Mongolia Equipment Rental Corporation, the exclusive Hertz Equipment Rental franchisee for Mongolia.

Ulaanbaatar, Mongolia (PRWEB) November 07, 2013 -- Consolidation Services Inc (the "Company") (OTCBB: CNSV) and its wholly owned subsidiary, Mongolia Equipment Rental Corporation, are pleased to announce that Hieronymus "Jerome" Niessen has been appointed to the Board of Directors of the Company.

Jerome Niessen is co-founder and Managing Director of NedPower LLC, a global infrastructure development and advisory services firm, focused on power and renewable energy. NedPower has developed wind farms internationally ranging from a 20 MW plant in India to a 264 MW plant in Mount Storm, West Virginia. The NedPower Mount Storm facility, completed in 2008, is the largest wind farm in the Eastern United States and is now owned by energy major Shell and Dominion Resources.

Mr. Niessen has over 25 years of project development and infrastructure financing experience. He spent close to 10 years with the IFC-World Bank Group, where his responsibilities included infrastructure, oil, gas and mining in South Asia, Latin America and Northern Africa. While at the IFC-World Bank, he consummated transactions in India, Pakistan, Peru, Chile, Venezuela and Argentina. Mr. Niessen earned a law degree from Leyden University in the Netherlands and an MBA from Baylor University. He is fluent in English, Spanish, French, German and Dutch.

Company Chairman and Former US Ambassador, E. Michael Ussery stated: "We are very pleased to attract an experienced international finance and infrastructure development professional like Jerome Niessen to the Consolidation Services team. His enthusiasm for our Hertz Equipment Rental business in the rapidly growing economy of Mongolia is invigorating."

About CNSV: 

Consolidation Services Inc., through its wholly owned subsidiary Mongolia Equipment Rental Corporation, is the Hertz Equipment Rental franchisee in Mongolia. The exclusive franchise for Mongolia allows the Company to operate a business of renting, selling and maintaining equipment for use in construction, mining, materials-handling, commercial and industrial activities under the unique plan and system of Hertz Equipment Rental Corporation and Hertz Equipment Rental System.

For more information, please visit: http://consolidation-services.com or http://mongoliaequipment.com.

Link to release

 

AKM up 5.8% to 7.3c this morning

Aspire Mining poised to benefit: "Mongolia open for business"

November 7 (Proactive Investors) Aspire Mining (ASX:AKM) will gain a filip from the Mongolian Government's new legislation that clearly signals the country is open for foreign investment.

The net result is that it should enhance perceptions of foreign companies doing business in the country.

The new Mongolian Investment Legislation achieves this by providing the political and legal stability as well as clarity that investors have been looking for.

In addition, with effect from 1 November 2013, foreign investors will not be distinguished from Mongolian nationals, removing previous requirements for government or parliamentary approval.

It also proactively provides additional investment incentives that are expected to further improve sentiment towards Mongolian related investments.

This gives company's the confidence to progress their projects from development into construction and production phases.

Mongolia had recently approved a full repeal of the Strategic Entity Foreign Investment Legislation (SEFIL), implemented in May 2012 to protect its minerals, rail infrastructure, telecommunications, media and defence sectors.

This resulted in increased political and legal uncertainty and is linked to a 17% drop in foreign direct investment during 2012 and a further 47% during January - August 2013.

Mongolian President Ts Elbegdorj publically confirmed in December 2012 that implementation of SEFIL "made Mongolia's investment environment unfavourable".

The new legislation was enacted on 4 October 2013 with the full bipartisan support by both the Government and the opposition.

New Investment Law

Provided an investor is not 50% or more owned by a foreign government, there are no restrictions on the level of investment.

It also includes provisions to ensure that any future changes must have 66% or more votes in favour by Parliament and has the support of both the major political parties.

The new law also provides the following:

-       Tax stabilisation through a Stabilisation Certificate granted to eligible investors upon application which cannot be changed by future legislation unless those changes benefit the investor;

-       Protection of investor interests with the formation of a specially appointed Council of non-salaried members appointed for this specific purpose;

-       Relaxation of the percentage of foreign workforce employed;

-       No restriction on the movements of assets in or out of the country;

-       Provisions protecting against nationalisation of investors' assets.    

The introduction of a tax Stabilisation Certificate means that investors which meet the criteria will have the current set of rates applied to corporate income tax, customs duties, VAT, and royalty frozen over a period.

Within the "stabilisation period", these rates cannot be amended by the implementation of future laws unless the amendment benefits the investor.

Criteria must be met upon application for a tax Stabilisation Certificate, one of which is the investment amount to new and existing projects. 

Projects that commenced within 5 years of enactment of the new Investment Law, and meet the requirements, will be eligible for tax stabilisation benefits.

Alternatively, an investor who proposes investment of 500 billion Mongolian Tughrik (A$313 million) or greater, has the option of entering into an Investment Agreement with the Government which not only stabilises taxes but also stabilises the operational environment. 

The period of the Investment Agreement is similar to that of the Stabilisation Certificate.

For development of rail and mine infrastructure, Aspire would likely meet the criteria applicable for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.

Impact on Sentiment

The new law has resulted in a shift in recent media coverage from negative to positive headlines.

Khan Investment Management, a Mongolian investment fund, noted the new law is a clear sign the country is on the cusp of a significant and sustained recovery.

Positive impact

This would also be positive for companies such as: Aspire Mining, Mongolian Mining Corp (HKG:0975), Modun Resources (ASX:MOU), Centerra Gold (TSE:CG), Prophecy Coal (CVE:PCY), FeOre Ltd (ASX:FEO), SouthGobi Resources (TSE:SGQ, HKG:1878) and Wolf Petroleum (ASX:WOF) which have each received various approvals from the Government within this time.

Analysis

The new legislation makes Mongolia a far more attractive business destination by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.

Significantly, for Aspire, it looks likely to meet criteria for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.

As importantly, the changes are far wider in their scope as they positively impact market sentiment toward companies operating in Mongolia like Aspire, whose Ovoot project ranks as Mongolia's second largest coking coal reserve and one of the higest quality coking coals in the world.

Sentiment is all important in investment markets and previously the market perceptions were not tuned optimally  toward Mongolia.  Proactive Investors believes it has held back market valuations of companies operating in Mongolia and we expect a gradual re-rating of the Aspire Mining share price to be not far away as the reverberations of "Mongolia is open for business" - filter through.

Link to article

Source: Aspire Mining Limited note to Stakeholders – Mongolia is open for business, November 7

 

975 closed up 1.57% to HK$1.29 Thursday

MMC: NOTICE OF EXTRAORDINARY GENERAL MEETING

November 7 -- NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the "EGM") of Mongolian Mining Corporation (the "Company," HKEx:975) will be held at Hennessy Room, Level 7, Conrad Hong Kong Hotel, Pacific Place, 88 Queensway, Admiralty, Hong Kong on 27 November 2013 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. "THAT

(a)   the entering into of the Fuel Supply Agreement with NIC (as defined in the circular of the Company dated 8 November 2013 (the "Circular")) of which this notice forms part) entered into between Energy Resources LLC and NIC LLC (a copy of the Fuel Supply Agreement with NIC was tabled at the meeting marked "A" and signed by the Chairman for the purpose of identification) pursuant to which NIC LLC supplies fuel products and provide other related services for the mining activities and site operations at the UHG mine site and BN mine site to the Company and its subsidiaries (the "Group") and the transactions contemplated thereunder and the annual caps for the three financial years ending 31 December 2016 be and is hereby approved, ratified and confirmed; and

(b)  any one director of the Company be and is hereby authorised to execute all documents, do all acts and things and take all steps which in his/her opinion he/she may consider necessary, desirable and expedient for the implementation of and giving effect to the Fuel Supply Agreement with NIC and the transactions contemplated thereunder."

2. "THAT

(a)   the entering into of the Fuel Supply Agreement with Shunkhlai (as defined in the Circular of which this notice forms part) entered into between Transgobi LLC and Shunkhlai LLC (a copy of the Fuel Supply Agreement with Shunkhlai was tabled at the meeting marked "B" and signed by the Chairman for the purpose of identification) pursuant to which Shunkhlai LLC supplies fuel products and provide other related services at the UHG mine site and TKH site for the Group's coal transportation and logistics operations to the Group and the transactions contemplated thereunder and the annual caps for the three financial years ending 31 December 2016 be and is hereby approved, ratified and confirmed; and

(b)  any one director of the Company be and is hereby authorised to execute all documents, do all acts and things and take all steps which in his/her opinion he/she may consider necessary, desirable and expedient for the implementation of and giving effect to the Fuel Supply Agreement with Shunkhlai and the transactions contemplated thereunder."

Link to release

CONTINUING CONNECTED TRANSACTIONS – MMC, November 7

 

PCY closed flat at 9c

Prophecy Extends Date for Sale of Prophecy Platinum Corp. Shares

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 6, 2013) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) - Further to its news release of October 17, 2013 the Company advises that the closing date for the sale of Prophecy Platinum shares has been extended to November 8, 2013 by agreement between the parties. Proceeds of the sale will be used to repaying outstanding debt due to Waterton Global Value LP.

Link to release

 

MNP closed +10% C$0.055, MNAP closed 45.61% to US$0.0597

Manas Petroleum Corp. Company Update

BAAR, SWITZERLAND--(Marketwired - Nov 6, 2013) -  Manas Petroleum Corp. ("Manas") (TSX VENTURE: MNP); (OTCBB: MNAP) is pleased to provide the following update.

Mongolia

Current exploration phase of both licenses have been extended until May 20, 2015, based on a one (1) year moratorium agreed to with the Government of Mongolia. This moratorium was entered between the Petroleum authority of Mongolia and Gobi Energy (the operator of the Mongolian assets) to allow time to add certain acreage which is between the two blocks.

Link to release

 

Rio Copper Chief: Rio Tinto pioneers Mongolian joint ventures

November 7 /www.mongolianeconomy.mn/ Jean-Sébastien Jacques was appointed chief executive of Rio Tinto's  copper group in February 2013. He joined Rio Tinto in October 2011 as president of international operations for copper, where he led a senior team and oversaw Rio Tinto's interests in the Palabora Mining Company in South Africa, the North Parkes Mines in Australia, Kennecott Eagle Minerals, the Pebble Mine in the United States and Sulawesi in Indonesia.

Prior to joining Rio Tinto, Sebastien spent more than 15 years working across Europe, Southeast Asia, India and the United States in operations and strategy for aluminium, bauxite and steel mining operation. He served as group director of strategy and was on the executive committee at the Tata Steel Group from 2007 to 2011. 

What are your thoughts on Mongolia after having visited more than once?

Last time I was there was a week ago for the ceremony of the first shipment and it was emotional for all parties. The reason why I'm saying this is because some of our colleagues have been working on the project for 15 years and some of them have been working for 20 years. When the first truck of concentrate left the mine, for those individuals you could see some tears in their eyes. It was a nice thing to watch. 

The other piece was that the government was there. I think it was important for them as well. I believe it was emotional for the team as well because it was twelve years of hard work and USD 7 billion of investment. It has been a bumpy ride. There were some downs, but people were very proud of what they achieved. I think that there were a lot of emotions.

Given the current situation, how confident are you about the Mongolian economy for the long-run?

I think it should be a great story because there are lots of minerals there. You build a mine with lots of development.

We are committed that over 90 percent of the people working in the mines will be Mongolian nationals. We are committed to increase the Mongol content. We wanted to have a strong, capable supplier base. What we agreed with the government is that we need to have a power station and we needed to build infrastructure around it. From our perspective, we think that OT will have a direct and indirect impact on the Mongolian economy.

Rio Tinto is a leading mining companies in the world. What makes it a world-class mining company?

The company has been here for 140 years. Some of the key aspects include the quality of exploration and the ability to find good deposit. It's not easy. We have been very strong in finding new deposits. The second aspect is the ability to operate the mine in a safe and cost-effective way. The third aspect is about the value of the group. I think that is important.

What is the main objective of your company?

Like all companies, we have an intent to create strategy for investors, which isn't' different from other companies. What is different is that we want to create a first-class portfolio of low-cost, long-scale, and large-scale strategies. That is one of the key periods of our strategy.

If you look at some facts about OT, it's a bit over budget and ran over time. Why is that?

I don't think it was over time. It's an interesting question in the sense of that the team had not done a good job, then we wouldn't have been on time. We were late by nine days to do the first shipment.

After twenty years of hard work and planning, we planned to send out the shipment in June but we did so on July 9. The government pulled the plug on the ceremony two weeks before so I believe we were on time.

If you guarantee that people can be late by nine days after over twelve years of hard work, then I think that's good and on time.

Safety issues are the most important thing. What are your safety procedures?

This one is simple: In Rio Tinto we have one standard and it doesn't matter if you're in the US, Australia, or in Mongolia. There is only one standard. All of the safety procedures and systems that are being implemented elsewhere are being implemented in Mongolia as we speak.

The second aspect is that we have to transfer people from all over the world in order to make sure it happens. The third aspect, I can say, is that we are constantly training Mongolian nationals—not only in Mongolia, but in London, Australia and the US in order for them to have a first-hand experience. It's training in and outside of Mongolia.

What is Rio Tinto doing to build a future workforce in Mongolia for underground mining?

As I mentioned, we have a few Mongolian nationals outside Mongolia working in existing mines. For obvious reasons, we can't transfer thousands of people outside Mongolia. It just doesn't work.

We started working underground about five years ago. We currently have two shafts. To answer your question, we have a training center in OT where there is state-of-the-art simulation. Here you can train people in a safe environment. So we've got all the techniques to train people in a safe environment before we put them underground.

Rio Tinto has also come across some legal challenges for Oyu Tolgoi. What would you do to change the government's stance on underground mining?

It's not our job. If the government wants any input, we are more than happy to help. The responsibility of writing the laws is not with Rio Tinto, it's with the government. As we do in Australia and the US, if the government wants any input, then we will help out.

What can you do to promote human resources?

We've got these big graduate programs. We spend hundreds of millions to make it happen. The biggest challenge is human resources and development capabilities, which is why we spend so much time, effort and money. We have so many expatriates for one main reason, and that is so they can train people in order to build capability. That's the investment we are doing as we speak.

You have one experienced person working with a Mongolian and after some period of time, you remove the expatriates and the colleagues from Mongolia will be able to work on the project. That's what happens across the entire site. The quantum of training is absolutely massive.

As I said, the intent is to have over 90 percent of the workers to be Mongolian nationals on site. We need to train people and that's what we're doing as we speak.

What are your thoughts on the downward trend being seen in the global mining sector?

The mining industry is changing and it's facing a challenging time. Everybody has to prioritize their capital. It's a challenge, but it's an opportunity as well. 

The important piece to understand is that it's not just about money. When you have a big project and spend billions of dollars on it, you want to make sure the A-team is working on it. So it's not only about money, it's about people. 

When we take up a project, we don't look at just the costs. We look at the long-term aspects of it. The prices are wherever they are because I can't change the prices. What are important for me are two things. One thing is making sure that we are adding the right decisions in terms of long-term perspective. The second thing is to make sure that I create value for all stakeholders. 

What are the principles of responsible mining for Rio Tinto, and what is its long-term strategy for responsible mining in Mongolia?

What you want to make sure at the end of the day is that you have a net positive impact in the region where you did operate. Responsible mining is a broad thing that includes lots of things such as water management, environment management, and the development of the local community. 

When you step back, you have to make sure that you're creating a net positive impact. The way it is delivered may vary from one location to another. 

What are you planning to do in terms of environmental issues?

We've got teams on the ground. If you want to go outside and see what we're doing in terms of preserving water and making sure that we don't damage the environment in which we operate, you have to check it out. I think if you go there, you'll see some pretty good stuff and you'll be impressed. I can't give you all the statistics unless you see it with your own eyes.

Rio Tinto has many different mining projects around the world. You have 140 years of history and how do you react with resource nationalism in different countries?

It's a very good question. I think that if you look at other large companies besides Rio Tinto, we have a portfolio of projects. This is not only a question for Rio Tinto. At the end of the day, we have limited capital and limited resources. It's not just about capital; it's about people as well.

The truth of the matter is, the money and the people will go to the best project globally. I know that many people don't want to hear that, but that's the reality of life. If I have two projects and one gives me 100 and the other gives me 50, then there is no point in choosing the one that will give me 50. That's what people need to understand.

The capital and resources are done on a global scale. It is very important in two ways. We spend billions and billions of dollars so it's critical to have stability of the environment as well as consistency. We go to the project that has that entire framework. That's not only for the mining industry. It's across all industries. If you want to attract investors, stability of the framework is absolutely critical. Otherwise, the capital will go elsewhere.

It's also not just about Mongolia. It's about all economies. When you want people to invest billions of dollars and send lots of their people, you just have to make sure that you have the right environment to invest.

Mongolia recently passed a law setting the criteria for corporate governance. Rio Tinto could be a good example of corporate responsibility. What is philosophy for corporate governance in Mongolia?

Once again, all the standards that we expect people to do are being implemented in Mongolia. There is only one standard and there is no difference whether you are in the US or in Mongolia. The expectations on our behalf are exactly the same. We don't do politics and we are absolutely against nepotism and conflicts of interests. We have a clear set of rules and we implement a clear set of checks.

We need third parties to make sure that all the companies are compliant with the rules. I've said several times that there is only one standard. We implement this standard in Mongolia the same way we do it in the US or in Australia. There's no difference on this one.

What type of difficulties do you find when you work with Mongolian companies?

If you do a project in Mongolia or elsewhere, there is no difference. When you start a project anywhere you have to develop your supplier base and so forth. You're facing the same challenges. You don't always have the right set of suppliers at the start so you need to find a way to develop those suppliers so you need some time.

I don't think there is a big difference between Mongolia, the US, or Australia. With OT, there was nothing around it. There was no power or water. If you had to do OT in the middle of Chile, you would face the same issues. I don't think Mongolia is different from anywhere else.

What will be Rio Tinto's real contribution to Mongolian development?

My sense of the following is that the OT project will have a huge impact on the impact of the economy in Mongolia. Importantly, I believe that it's important for all parties to make a success out of OT. The reason being is that everyone is watching OT and it's a test case. If OT can be a success, then I think that Mongolia can attract a lot of investment.

Do you think Rio Tinto already brought good standards?

The government wants to look at what we have in terms of process and standards. If they want to use it elsewhere then so be it. They know they have access to everything and they can audit what they want. If they want to learn from it, it's not a big problem.

What are some of the advantages and disadvantages you have seen in the Mongolian business environment?

That's a very good question. What we are very pleased with is the quality of the workforce. People are very keen to learn. They are very committed and they really want to make a success out of OT. They know what they are doing and how to make a positive impact on the Mongolian economy. 

We, as Rio Tinto, did agree to invest billions of dollars on the back of aseries of documents called the investment agreement [IA] that was signed by the government as a binding document. We expect the government to comply with what they signed a few years back. That's very important.

Lots of people have asked to renegotiate the IA. We are very clear that those documents are regarded as binding. You can't ask to change it. If you have a situation when the government signed an agreement and they change their mind several years later, it makes it hard for investors to buy. They want to have stability and consistency. If you change the rules every five minutes, the money will flow elsewhere.

What do you think of Baatar Bold's appointment at Rio Tinto? Many here in Mongolia are happy to see a Mongolian president of the copper group. What's the benefit of having a Mongolian in this position?

I am very happy because I did appoint him. I promoted him and he is doing my previous job. I am very pleased. 

Bold was promoted on the back of his capabilities. The second aspect is that if you want to run a global company, I think it's very important to have different nationalities at the top. If you have a lot of assets in South Africa for example, it's important to have people from this region. 

The truth of the matter is you have to fully understand the culture. The best way to understand the culture and to close any cultural gaps or challenges is to have people coming from those regions working with you. This way you can truly understand those differences.

Back to what we discussed about training, we want to understand what the culture is about and we want Mongolians to understand Rio Tinto culture as well. Once again, there is one standard. There is no difference. The rules of the game and the rules of engagement are the same. We want to have people who can understand Rio Tinto culture because there is only one culture.

Link to interview

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Local Market

NatSec MSE Trading News, 6 November: Top 20 -0.81%, Turnover 57.1 Million

November 6 (National Securities) On the bourse today the MSE TOP-20 Index declined -0.81% to 14,898.78. 101,092 shares in 19 JSC's traded with a value of 57.1 million MNT. 7 shares were up, 9 shares were down and 3 shares were stable.

The biggest gainer was Auto Road (AAR) which soared 14.99% to 4,057 MNT. In rising 10.79% to 1,550 MNT, Telecom Mongolia (MCH) was the 2nd biggest gainer. On the decliners side, coking coal miner, Tavan Tolgoi (TTL) was the biggest loser. It closed down -5.37% to 3,880 MNT. Bayangol Hotel (BNG) dropped -4.44% to 43,000 MNT. Remicon (RMC) was again the most active share, now for two days running. It's 61,292 shares were traded with a worth of 10.6 million MNT. It's price closed down -0.86% to 173 MNT.

Please click here to see the detailed news

Link to report

 

MSE News for November 7: Top 20 -1.89%, Turnover 22.88 Million

Ulaanbaatar, November 7 /MONTSAME/ At the Stock Exchange trades held Thursday, a total of 43 thousand and 433 shares of twenty JSCs were traded costing MNT 22 million 883 thousand and 212.00.

"HB Oil" /35,000 units/, "E-Trans Logistics" /3,582 units/, "State Department Store" /1,548 units/, "Khukh Gan" /1,000 units/ and "APU" /900 units/ were the most actively traded in terms of trading volume, in terms of trading value--"HB Oil" (MNT 12 million hundred thousand), "APU" (MNT three million 555 thousand), "Sharyn Gol" (MNT two million 220 thousand), "UB BUK" (MNT 937 thousand and 500) and "Tavan Tolgoi " (MNT 772 thousand and 115).

The total market capitalization was set at MNT one trillion 495 billion 845 million 612 thousand and 572. The Index of Top-20 JSCs was 14,616.74, decreasing by MNT 282.04 or 1.89% against the previous day.

Link to article

 

Mandal Asset Management: Overview of the Investment Funds Law

Early October this year, the Parliament of Mongolia has approved the first ever Investment Funds Law (IFL). This went relatively unnoticed, as all attention at the time was focused on Investment Law. Nonetheless, it should be noted that the IFL is of great importance to the future of Mongolia's economic growth and financial sector development. The IFL establishes a fundamental basis to lead the soft infrastructure of financial markets into the right direction.

The purpose of the IFL is to regulate the basic relations related with the establishment of an investment fund, issuance of a license for the fund, regulation fund management companies, custody of fund assets and protection of investor rights and interests. The law comprises 11 chapters and 58 provisions.

Investment funds will have a legal status of a special purpose vehicle (SPV), and have an extension of "investment fund" following the legal entity name.

The law defines two main types of investment funds - private and mutual, and different regulatory norms will apply. Private funds will be allowed to be established by sophisticated investors only and will be subject to limited regulation from the Financial Regulatory Commission of Mongolia (FRC). These funds are not allowed to do public marketing, and can raise funds only through private offer to qualified investors.

Mutual funds are defined as funds which can raise funds through public offering to 50 or more people. After prospectus is registered with the FRC, mutual funds will be given up to 6 months to raise funds stated in the documentation, and will be halted if they fail to do so in the given timeframe.

Funds will be established my fund management companies, which will be regulated entity licensed by the FRC. Management companies will have to comply with licensing requirements the regulator puts forward. All funds will be allowed to run for up to 10 years.

There are 12 asset classes all funds can invest into. These are


1.    Government bonds

2.    Municipal and aimag bonds

3.    Listed stocks

4.    Private company shares

5.    Public debt instruments

6.    Private debt instruments

7.    Foreign government bonds

8.    Asset backed securities

9.    Derivatives

10.  Foreign and local currency

11.  Gold and other commodities

12.  Real estate


From these, mutual funds can invest only in public instruments, such as government and municipal bonds, listed stocks, public debt, and asset backed instruments.

One chapter of the IFL is dedicated to custodian services. Along with Securities market law, the IFL brings the concept of custodian services in order to protect investors. Custodian banks will responsible for custody of fund assets, registration of fund units, verification of net asset value of funds and also exercise some control over management companies.

As a government entity and a regulator, FRC is given many supervisory powers, especially with regard to mutual funds. However, the IFL clearly states that the government shall not bear any responsibility for the decline or loss of investments, and that all risks shall be borne by investors themselves.

Foreign funds are not allowed to raise funds in Mongolia without licensing, but these funds can carry out investment activities after going through a registration process with the FRC.

As an SPV, investment funds will not be taxed as a business entity, however investors will pay income taxes on returns subject to effective tax regime.

The law shall become effective from 1 January 2014, and it is expected that the FRC shall come up with a set of detailed regulations, which will help enforcement of the law.

Link to overview

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Economy

Mogi: Mongolia's GDP preliminarily grew 11.5% as of end of 3Q says NSO

ДОТООДЫН НИЙТ БҮТЭЭГДЭХҮҮН 11.5 ХУВИАР ӨСЖЭЭ

11-р сарын 6 (ҮСХ) ҮСХ улирлын ДНБ-ийг үйлдвэрлэлийн болон эцсийн ашиглалтын аргаар, оны болон зэрэгцүүлэх үнээр урьдчилсан байдлаар тооцож, улирал бүрийн дараа сарын 1-нд тархааж байна. Түүнчлэн ДНБ-ий үйлдвэрлэлийн аргаарх тооцооллыг өссөн дүнгээр болон тухайн улирлын дүнгээр хийж байна. Үйлдвэрлэлийн аргаарх ДНБ, 2005 оны зэрэгцүүлэх үнээр, эхний 9 сарын байдлаар өмнөх оны мөн үеийнхээс 11.5 хувиар өссөн бол улирлын нөлөөллийг арилгаж тооцсон ДНБ энэ оны 3 дугаар улиралд өмнөх улирлынхаас 2.5 хувийн өсөлттэй байна...

Эх сурвалж

 

Mongolia FDI Falls 49% to $1.923b in First Nine Months

By Michael Kohn

Nov. 6 (Bloomberg) -- Mongolia foreign direct investment falls to $1.923b in first nine months of this year from $3.784b a year earlier, according to the nation's central bank.

* FDI for month of September was $108.5m, falling 71% from $375.3m a year earlier, according to Bank of Mongolia statement.

Current account deficit for first nine months was $2.639b, compared with $2.641b a year ago, according to the statement.

* Current account deficit for the month of September was $255.2m, compared with $311.7m a year ago, statement says.

 

The World Bank Urges Mongolia to Tighten Economic Policies toward Economic Stability

Ulaanbaatar, November 6, 2013 (World Bank) – In its newly released semi-annual Mongolia Economic Update, the World Bank said that the persistent large balance of payments imbalance is a key challenge to the Mongolian economy. The World Bank underscored that the current fiscal and monetary policies should be tightened further to address the growing current account deficit and to ensure macro-economic stability going forward.

In 2013, the economy is expected to maintain double digit growth due to expansionary economic policies and the start of production of the Oyu Tolgoi mine. Meanwhile, the current account deficit will reach around 30 percent of GDP in 2013. The large external imbalance reflects weak mineral exports but it also stems from expansionary economic policies that have been boosting import demand since 2011. Macro-economic policies continue to be focused on economic stimulus in 2013, adding to the pressures on the balance of payments and inflation.

The recent amendment of the 2013 budget shows the Government's commitment to keep the official budget deficit within the ceiling of the Fiscal Stability Law. Yet, the fiscal policy will remain highly expansionary in 2013 and 2014 as a large portion of the Chinggis bond is used to finance public investment projects outside the budget, mainly through the Development Bank of Mongolia (DBM). The budget deficit including the spending by the DBM is expected to reach over 12 percent of GDP in 2013 even though the official budget deficit is contained at 2 percent of GDP.

Monetary policy has been expansionary as well. The Bank of Mongolia has been injecting liquidity equivalent to around 20 percent of GDP in the form of central bank's policy lending to revamp the credit growth amidst the declining FDI and to support economic growth. As a result, outstanding bank loans increased 62 percent in one year in September. The rapid credit growth has been reflected in volatile exchange rate movement and rising inflation in recent months.

 "These expansionary measures contributed to the double digit economic growth this year and also to the current account deficit as growth has been largely driven by domestic consumption growth and construction boom that are reliant on imports. Compared with other countries in the East Asia region, Mongolia's economic management has been highly expansionary and resulted in larger current account deficit and higher inflation. The current loose economic policies may not be sustainable going forward." said Taehyun Lee, World Bank Senior Economist.

Under the current economic policy framework, the large balance of payments pressure will not likely ease in the near future in light of the high import demand and weak minerals market prospects. The downside risk will be exacerbated if the Mongolian economy faces an unfavorable economic environment from further softening of China's economic growth, adverse impact of likely tapering of global quantitative easing, and the continued weak minerals market.

Considering the growing external imbalances and uncertain global environment, the growth-oriented economic policies need to be tightened toward economic stability. The Government took positive steps in recent months. The recent adoption of the new Investment Law will provide a positive momentum to restore foreign investment in Mongolia. The fiscal consolidation plan including the recent amendment of the 2013 budget is also a step toward a more sustainable fiscal path.

Yet, further efforts are needed in order to address growing current account deficit and be prepared for a possible external shock. Fiscal policy should be tightened further and the off-budget spending should be included in the budget and controlled under the fiscal discipline of the Fiscal Stability Law. The Bank of Mongolia should curb the rapid growth of credit and phase out policy lending programs.

"By slowing down the expansion of investments and by focusing on those investments that will have the greatest economic impact, the government will be able to address progressively the development needs of the country while maintaining economic stability. If one stimulates the economy too much in a global environment that is uncertain, it runs the risk of generating economic volatility which will hurt poor people and will make it hard for businesses to plan and finance their operations" said Ms. Coralie Gevers, the World Bank Country Manager in Mongolia.

The World Bank expects Mongolia's economy to grow at 12.5 percent for 2013, a downward revision from its previous forecast (13 percent). The revised forecast reflects the facts that  economic growth in China and the recovery of the minerals market have been slower than expected. "Mongolia is expected to show one of the highest growth rates in the world. However  it may come at the expense of economic stability, reflected in large current account deficit and rising inflation. It is time for policy makers to ponder how to maintain economic stability and put economic growth in a more sustainable path." concluded Taehyun Lee, the Senior Economist of the World Bank.

Link to release

Link to Mongolia Economic Update page

Direct link to Update

 

BoM holds FX auction: CNY 75 million, USD 80 million Swap Agreements

November 7 (Bank of Mongolia) On the Foreign Exchange Auction held on November 7th, 2013 the BOM has received bid offer of USD and CNY from local commercial banks. BOM has sold 75.0 million CNY to the local commercial banks.

On November 7th, 2013, The BOM has received bid offer of USD for Swap agreement from local commercial banks and sold 80.0 million USD.

Link to release

 

Total outstanding rose slightly by 30.6 billion to 1.35 trillion

BoM issues ₮588.5 billion 1-week bills

November 6 (Bank of Mongolia) BoM issues 1 week bills worth MNT 588.5 billion at a weighted interest rate of 10.5 percent per annum /For previous auctions click here/

Link to release

 

GoM auctions 22 billion 12-week treasury bills at average 8.093%

November 6 (Bank of Mongolia) Regular auction for 12 weeks maturity Government Treasury bill was announced at face value of 22 billion MNT and each unit was worth 1 million MNT. Face value of 22 billion /out of 48.0 billion bid/ Government Treasury bill was sold to the banks at discounted price and with weighted average yield of 8.093%.

Link to release

 

Mortgage Program Update: ₮467.7 Billion Refinanced, ₮606.6 Billion Newly Issued at 8%, In Total 1.074 Trillion

November 7 (Cover Mongolia) As of November 6, 467.7 billion (₮466.4 billion as of October 31) existing mortgages of 16,621 citizens (16,564 as of October 31) were refinanced at 8% out of 796.7 billion (796.4 billion as of October 31) worth requests.

Also, 606.6 billion (₮594.6 billion as of October 31) new mortgages of 10,460 citizens (10,256 citizens as of October 31) were issued at new rates out of 686.2 billion (₮674.4 billion as of October 31) worth requests.

Link to release (in Mongolian)

 

Monetary Policy – a Priority

November 7 /www.mongolianeconomy.mn/ The State Great Khural is now discussing a bill for its 2014 monetary policy. The draft is supposed to focus on mid- and long-term economic development. After so recently brushing up against the edges of economic crisis, one might wonder how the government plans to avoid future flirtations with disaster. One central bank official is promising more of the same.

"The monetary policy for 2013 is to be continued next year", said S. Bold, an advisor to the central bank governor. "Some measures will be taken to help strengthen the financial and economic stability, and to maintain the real economy via the monetary policy. Through the policy, the economic immunisation will be improved and macroeconomic stability will be strengthened".

The monetary policy for 2014 aims to maintain the current inflation rate of 8 percent In addition to fewer external influences on the domestic economy, less independence of the mining industry, improved long-term economic competitiveness, and strengthened economic defences. The Bank of Mongolia intends to facilitate the stability of short-term economic growth and to improve the circulation of foreign currencies to maintain long-term economic growth stability on the basis of national manufacturing and bank deposits.

"A monetary policy is a strong macroeconomic instrument which is flexible. The policy demonstrates the opportunity to make specific short-term changes to the economy", said B. Altantsetseg, a PhD and senior lecturer at the School of Economic Studies at the National University of Mongolia.

The implementation of the state-backed mortgage programme can continue into 2014 with support from the Bank of Mongolia. That would provide an opportunity to develop the stock market so that it would be guaranteed by real estate and bring capital to the Social Insurance Fund. According to central bank officials, this would bring greater transparency to the labour market and taxation.
"By creating a mortgage fund, citizens can benefit by using their income for saving rather than consumption", said Bold.

The monetary policy for 2014 comes amid tough economic circumstances, when there is 47 percent decline in foreign investment, or USD 1.6 billion less investment during the first six months of the year compared to 2012, a slowdown in China that dragged down the Mongolian economy, some 50 percent decline in mining product prices, and an expected USD 1.4 billion deficit in the current account balance. Although Mongolia's economy is still fragile, it has shown signs of improving.

To achieve its objectives, the Bank of Mongolia will combine conventional and unconventional monetary tactics that would ultimately stabilised the prices of goods and protect the income of citizens.
The unconventional tactics would be extending the Price Stabilisation Programme into 2014. The programme is meant to be financially independent of the central bank once it launches its self-financing principles.

Mongolia has covered its foreign trade deficit using foreign investment. However, next year, warned Asian Development Bank Senior Country Economist Jan Hansen, Mongolia will needs to temporarily avoid expansionary policies. Both the Asian Development Bank and World Bank have said Mongolia has already supplied enough money for the market this year.

"Under the Price Stabilisation Programme the volume of loans issued by the Bank of Mongolia for the government of Mongolia has sharply risen", said B. Tuvshintugs, director at the Economic Research Institute. "It means that the huge supply of money to the market has affected the exchange rate of the Mongolian tugrug against the U.S. dollar. When the amount of money in the market increases the tugrug is being gradually undervalued".

Some people would agree that the Bank of Mongolia has successfully sidestepped crisis. Central bank Governor Naidansurengyn Zoljargal said that if it had not supplied MNT 2.8 trillion to the market and employed the Price Stabilisation Programme the economy could have collapsed. Effects might include a 50 percent increase in the price for petroleum. The money injected by the central bank represents some 13 percent of GDP, raising economic growth to 11 percent. Observers should remember at what cost economic growth came to the government when GDP is tallied for the end of the year.

According to the proposed monetary policy, the target for inflation is no more than 7 percent for 2015 and 2016. Whether personal savings will grow will depend on  inflation. The exchange rate for the tugrug will likely depend on market regulations.

For the government's part, said Zoljargal, it should encourage foreign investment once again and increase its gold reserves. A more resilient monetary policy is a pre-condition to macroeconomic stability.

"Stable inflation is creating positive conditions for making contributions to domestic manufacturing to replace imported goods, encourage exports, reduced the foreign trade deficit and current account deficit, and improve economic defences and competitiveness", reads the monetary policy.

Year One for Manufacturing

"The main purpose of a monetary policy in any independent central banking system is to manage inflation and maintain the inflation rate at a low level", said economic researcher B. Oyunbilegt.

Thus strengthening the stability of the macro economy and the financial sector through stable inflation is a main priority of the proposed 2014 policy. The proposed monetary policy has calculated GDP growth for next year to be 14.4 percent.

"The result of a multi-lateral policy implemented by the Bank of Mongolia is thought to be risky. The bank actually needs to focus on stabilising inflation and the financial system", said Altantsetseg from the National University of Mongolia.

The good news is 2014 could be the beginning of years of contributions to domestic manufacturing. Although nobody knows what the direct impacts of the policy will be, the hope is to freeze inflation, contribute to exports, expand the mortgage programme and, finally, to expand Mongolia's middle class.

Link to article

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Politics

Russia, Mongolia Committee Holds Meeting on Ulaanbaatar Railway JV Behind Doors

November 7 /www.news.mn/A committee meeting for the "Ulaanbaatar Railway" Mongolia-Russian Joint Venture was held on Wednesday November 6th in Ulaanbaatar City behind closed doors. At the Committee meeting issues surrounding the appointment of a director and railway renovation were thought to be discussed in advance of the 17th meeting of the Russian-Mongolian Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation in Moscow on 25th and 26th November.

Attending the Committee meeting were the First Deputy President of the General Committee of Ulaanbaatar Railway, the First Vice President of Russian Railways JSC, the Deputy Minister of Transport, the Director-General of the Department of Railway and Maritime Transportation of the Ministry of Road and Transportation Mongolia, an official of the Ministry of Economic Development, a member of the General Committee of Ulaanbaatar Railway and the chairman of the Mongolian Railway Workers" Trade Unions as well as member of the General Committee, T.Erdene. 

One of the most highlighted issues raised at the Committee meeting was the appointment of a director for Ulaanbaatar Railway.  There was high speculation that former MP D.Odkhuu might be appointed to the post before the Committee meeting. 

The post which has been replaced by an acting director was publicly focused on for one year. The Committee meeting reached a decision to maintain the current acting director G.Sereenendorj as he received a good evaluation. 

The Committee meeting delayed the issue until the next Committee meeting, which is scheduled for February, 2014. 

The Committee meeting was held behind closed doors but there is speculation that issues of the renovation of the railway was raised. Mongolia is urging renovation of the railways and is formulating policy around it. 

The Committee is expected to announce the results of the meeting next week.

Link to article

 

Mongolia Joins Open Government Partnership

Ulaanbaatar, November 7 /MONTSAME/ Mongolia has joined the Open Government Partnership (OGP), an international platform for domestic reformers committed to making their governments more open, accountable and responsive to citizens.

Mongolia has introduced its Action Plan and joined as a member to OPG at its London Summit, where over thousand delegates from sixty countries came together from October 31 to November 1.

The three key priorities of Mongolia's OGP Action Plan are improving public service, increasing a transparency of public institutions, and enhancing a justice and reducing corruption. Under these priorities, Mongolia commits to strengthen its transparent budget system, improve a quality of public service, and pursue fair, accountable policies. This will promote open and transparent government in Mongolia. Our Government shall fully implement its commitments in conformity with principles set out in the OGP Declaration.

Commitments under the OGP reflect Mongolia's experience and aspiration to develop open and transparent government. The adoption of the Anti-Corruption Law and the Law on Information Transparency and the Right to Information in 2011, as well as accession to the UN Convention against Corruption in 2005 were important milestones on the way to join the OGP Initiative.

The Government for Reforms shared its experiences providing real examples in developing open governance at this Summit, and then won a rare opportunity to deliver a special introduction about its best experiences at the next summit in Indonesia, highlighted Ch. Saikhanbileg, a Chairman and Cabinet Secretariat of Government of Mongolia, who attended the Summit in London.

OGP was launched in 2011 to provide an international platform for domestic reformers committed to making their governments more open, accountable, and responsive to citizens. Since then, the partnership has grown from 8 countries to the 62 participating countries, where government and civil society are working together to develop and implement ambitious open government reforms.

Link to article

 

ТӨР ХУВИЙН ХЭВШЛИЙН ХАМТЫН АЖИЛЛАГАА ДУТМАГ БАЙГААГ БИЗНЕС ЭРХЛЭГЧИД АНХААРУУЛЛАА

/2013.11.06/ Хувийн Хэвшлийг Дэмжих Үндэсний Зөвлөлийн (ХХДҮЗ) санаачлагаар Монголын хувийн хэвшлийг дэмжигч байгууллагууд, бизнес эрхлэгчид төр хувийн хэвшлийн хамтын ажиллагааг дараагийн төвшинд хүргэх зорилготой "Хувийн Хэвшлийн Хөгжил" сэдэвтэй хоёрдугаар дугуй ширээний уулзалтыг өнөөдөр өрнүүллээ.

Уулзалтаар хувийн хэвшлийн идэвхи бүхий тэргүүлэх гишүүд болон дэмжигч байгууллагууд Засгийн Газарт хүргүүлж байсан өмнөх санал зөвлөмжүүдийн үр дүнг авч хэлэлцсэн бөгөөд хувийн хэвшлийн санал санаачлагыг хэрэгжүүлэхэд Засгийн Газар төдийлэн анхаарахгүй байгаа гэдэг дүгнэлтэнд хүрсэн юм. 

Тиймээс хувийн хэвшлийн зөвлөлүүд болон холбоодуудын санаачлагаар тэдгээр санал зөвлөмжүүдийг албан  ёсоор нэгтгэж, нийт ажиллах хүчний 70 гаруй хувийг бүрдүүлж буй хувийн хэвшлийн хөгжлийг дэмжихэд төрийн эрх баригчдыг бодитой алхамуудыг хийж, хамтран ажиллахыг шаардаж байна. Ингэхдээ Хувийн хэвшил хөгжих эрх зүйн таатай орчинг бүрдүүлэх үүднээс Засгийн Газар-Хувийн хэшлийн зөвлөлдөх хороог ХХДҮЗ-ийн тэргүүлэх оролцоотойгоор яаралтай байгуулах тал дээр хувийн хэвшлийн төлөөллүүд санал нэгдэж байгаа юм.

Түүнчлэн Хувийн Хэвшлийн зүгээс төр засгийн эрх баригчдад мэдээлэл, судалгаанд үндэслэсэн эдийн засгийн тогтвортой хөгжлийг хангах бодлогын зөвлөмжүүдийг боловсруулахад туслах үүрэг бүхий хараат бус "Үндэсний Стратегийн Хүрээлэн"-г хувийн хэвшлийн дэмжлэгтэйгээр байгуулах санаачлагыг дэвшүүлж байгаа юм.

Энэхүү хувийн хэвшлийнхний хоёр дахь удаагийн дугуй ширээний хэлэлцүүлгээс гарсан санал зөвлөмжүүдийг энэ Баасан гарагт Засгийн Газарт өргөн барих юм.

ТӨГСӨВ

Нэмэлт мэдээллийг Б.Сайнбаяр, 89112028 эсвэл О.Гэрэлтуяатай 88779173  утсаар холбогдон авна уу.

Хувийн Хэвшлийг Дэмжих Үндэсний Зөвлөлийн Тухай 

Хувийн Хэвшлийг Дэмжих Үндэсний Зөвлөл (ХХДҮЗ) нь Монголын хувийн хэвшилд манлайлагч бизнес эрхлэгчид, гүйцэтгэх захирлуудын байгуулсан эдийн засгийн хөгжлийн төлөөх төрийн бус  байгууллага юм.  

Зөвлөл нь Монголын хувийн хэвшлийнхний санал санаачлага, дуу хоолойг нэгтгэж төрийн бодлого боловсруулагчид болох УИХ, Засгийн газар нөгөө талаас бизнес эрхлэгчдийн зөвлөл, мэргэжлийн холбоод, эрдэмтэн судлаач нартай албан ёсны, нээлттэй хамтын ажилллагааг бэхжүүлж улмаар эдийн засаг, хувийн хэвшлийн хөгжлийн бодлогын тэргүүлэх чиглэлүүдийг боловсруулж, хэрэгжилжүүлэхэд хамтран ажиллах зорилготой. 

Түүнчлэн ХХДҮЗ нь төрөөс хувийн хэвшлийг дэмжихэд баримтлах бодлого болон бизнес, хууль эрх зүйн орчинг боловсронгуй болгох чиглэлэлээр Засгийн газартай урт хугацаанд хамтран ажиллаж, нийгэм эдийн засгийн хөгжилд дорвитой хувь нэмэр оруулах зорилгоор "Үндэсний Стратегийн Хүрээлэн"-г байгуулан ажиллаж байна. 

Дэмжигч байгууллагууд: 

Монголын Бизнесийн Зөвлөл

Монголын Гүйцэтгэх Захирлуудын Клуб

Монголын Үндэсний Худалдаа Аж Үйлдвэрийн Танхим

Монголын Ажил Олгогч Эздийн Нэгдсэн Холбоо

Монголын Уул Уурхайн Үндэсний Ассоциаци 

Эх сурвалж

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Business

Mongolia: Investing in Asia's New Frontier

(FTI Consulting) Mongolia's vast and untapped mineral reserves have allowed it to be called the "Kuwait of Asia." However, political issues and the lack of infrastructure have hindered the country's ability to reap the rewards of its natural resources that are scattered across its vast expanses. FTI Consulting's Alex Horbasz, based in Ulaanbaatar, shares his views on the country's current and future opportunities.

Since communism collapsed more than 20 years ago, Mongolia's political and economic systems have undergone profound change as this young democracy has moved to a market-driven economy. Foreign investors and advisers who have chartered the country's path of reform and liberalisation have often been surprised by the erratic course of progress, and observers have expressed concern regarding certain shifts in economic and political policy.

However, for the first time in its democratic history, the four most important political positions in Mongolia are in the control of one party – giving hope for a period of political stability. The President, Prime Minister, Chairman of the Great State Khural (Parliament) and the Mayor of the City of Ulaanbaatar are all from the Democratic Party. With no elections due for approximately the next three years, the government will be able to focus on addressing critical issues through objective analysis, rather than by reacting to public sentiment.

Critical to measuring the government's success during this term will be its ability to accelerate development of the Oyu Tolgoi (OT) gold and copper project. This project has been the center of prolonged negotiations between the government and its foreign investors, including British-Australian multinational Rio Tinto. Without rapid progress on this massive project, Mongolia will find it difficult to achieve its much vaunted potential and meaningfully improve the lives of its three million people.

Political Landscape

Of the country's array of political parties, the Democratic Party is the most pro-Foreign Direct Investment (FDI). However, a rising tide of resource nationalism remains an impediment to growth. Therefore, the new government will need to ensure that national interests are seen to be protected. At the same time, it will continue to encourage FDI by creating a more business friendly environment. In the past, whenever laws were found to negatively impact business, government has moved quickly to revisit government policies and laws. Mongolian politicians are very practical and pragmatic.

In recognition that some existing laws and attitudes are hindering both FDI and economic growth, the government called for a special session in September to discuss the current economic crisis prior to Parliament's 2013 Autumn Session which commenced 1 October 2013. Although no major decisions were made, an important consensus was reached by the two major parties (the ruling Democratic Party and the Mongolian People's Party), whereby both agreed to work together in a constructive manner to find solutions to address the outstanding economic issues. In particular, special attention would be placed on ratifying the proposed amendment to the "Strategic Entities Foreign Investment Law" (SEFIL) and related mining regulation and law.

Economic Conditions

In recent years, Mongolia's economy has become one of the fastest growing economies in the world, achieving GDP growth of 17.5% in 2011. This growth was due to two major drivers in the mining sector – coal and iron ore exports to China and a US$6 billion investment in Rio Tinto's OT project. The growth in the mining sector also had a significant spillover effect on other sectors of the economy, most notably in the real estate sector and for the small and medium enterprise (SME) mining services and product providers. However, over the last year there have been factors in the mining sector negatively impacting the Mongolian economy:

      The softening of economic growth in China, resulting in falling commodity prices and a significant decrease in coal export volumes.

      The on-going disputes between the government and Rio Tinto related to the OT project, which have resulted in Phase II (underground mine development) being postponed. Accompanying this development were layoffs of approximately 1,700 employees and an almost 50% drop in FDI as foreign investors adopted a wait and see attitude on how the dispute is resolved, prior to committing to any new investments.

As a result of the above, the current account deficit has grown and the Mongolian Tugrik has depreciated by over 15%.

The slowdown in China's economy has had a drastic effect on Mongolian coal and iron ore exports to China – down by approximately 50%. There is little that the government can do in this area. As the Chinese economy picks up speed, so will Mongolian natural resource exports.

The on-going disputes between the government and Rio Tinto related to the OT project have created uncertainties specific to the project and more generally for FDI. FDI enters a country based on long term contract stability. The current dispute based on a multitude of issues, including budget overruns, accusations of tax evasion, wage variances between Mongolian and foreign workers, decision making transparency and how to finance Phase II (estimated at US$5 billion), has forced Rio Tinto to reassess its longer term investment strategy for OT. Foreign investors have followed Rio Tinto's lead and placed new investments in Mongolia on hold.

Recognising the negative impact that uncertainty is having on the OT project and the economy, the government is now taking a fast track approach to resolving the situation. It sent the three government board members of OT to Rio Tinto's HQ in London at the end of September to advance discussions. Initial feedback from the meetings has been positive with resolution now anticipated by year end.

Although the Mongolian economy has taken a significant hit, the economy is showing resilience. The downturn in the mining sector has been partially offset by the growth in the agriculture sector which grew 20.6% in 2012. Also, using funds available from the Chinggis Bond (US$1.5 billion) the government has created a mini-boom in the property development and infrastructure construction sectors. It is providing funding to support 8% mortgages for apartments under 80m2, making new housing for low-medium income families more affordable and improving their standard of living. This initiative is expanding the construction sector and creating new opportunities for construction material suppliers, for both importers and local manufacturers. Chinggis Bond funds are also being used to build essential infrastructure, which is key to developing the mining industry and growing exports.

The overall net effects have been that the 2013 GDP growth forecasts have been revised down by economists to below 10% and the Tugrik continues to be under pressure. However, once the OT disputes are settled and further amendments to the foreign investment and mining laws are ratified by Parliament, the Mongolian economy is expected to achieve GDP growth rates previously forecast by the IFC/World Bank of around 20% per annum.

Business Environment for the Foreign Investor

As a rapidly growing emerging market, Mongolia presents many opportunities for foreign investors. At the same time, there are also many challenges in understanding the local business culture and practices, finding the right partner and appreciating the political and regulatory risks.

In recognition of the need to make Mongolia more FDI friendly, on 3 October 2013 the Great State Khural passed an investment law that ends the application of different rules for domestic and foreign private investors. Mongolia's new law eliminates earlier rules that were perceived as discriminatory against foreigners and sets stable tax periods. The new investment law will take effect immediately and voids the SEFIL, passed in 2012, which limited foreign investment and ownership in the strategic sectors of mining, banking and communications.

The new law contains tax stabilisation measures and provisions (corporate income taxes, VAT and duties) for periods of five to 22 years, based on the size of investment and the location within Mongolia. The new law also contains provisions that will prevent future changes to legislation. To encourage large scale developments, investments of more than US$300 million will be eligible for additional stability conditions. These amendments are intended to provide investors with the confidence and assurance they require. The new law retains the provisions in the SEFIL that apply to foreign government State-Owned Enterprises (SOE). In instances where an SOE aims to hold more than 33% of a company, it will still require government approval.

This is the first of a number of changes to existing laws effecting FDI that we expect to see Parliament pass within the next six months. Some of the expected new laws/amendments will relate to the mining sector – including a redefinition of what is considered to be a "Strategic Deposit" and redefining the "Law with the Long Name" (limiting mining exploration and development of deposits near rivers and forests).

How Can FTI Consulting Assist Companies Looking to Do Business in Mongolia?

Mongolia is filled with significant opportunity but also with substantial risk. With that said, companies that are interested in doing business in Mongolia are well-served when they work with partners that can help them navigate the market and support their business goals.

FTI Consulting has a dedicated on-the-ground team in Mongolia and we offer a full suite of services across several of our practice areas: Global Risk & Investigations, Strategic Communications, Corporate Finance and Economic Consulting.

Whether you are interested in researching the market opportunity, identifying and measuring the political risks of doing business or driving visibility and understanding of your company's plan for investing in Mongolia, FTI Consulting is able to help. We can create an integrated team to help you make informed investment decisions and support the success of your efforts in this fast moving market.

Link to report page

 

Launching Mining Projects in Mongolia – A Major Contractor's Perspective: Orica

October 30-31 -- At Mining IQ's inaugural Mongolian Mining Summit, we were joined by Eric Erdenebat Tseveendorj, Country Manager, Orica Limited. Eric gave a fantastic presentation to the very senior delegation, covering:

1. Key issues of working in Mongolia (including a focus on why China is so important)

2. Mongolia: Needs, wants and challenges

3. How to succeed in Mongolia

Mongolia is a growing region of great interest to many, and Orica are certainly one of the most successful international companies to be established there.

Link to report page

 

Golomt Bank Receives Best Internet Bank Award from Global Finance

Ulaanbaatar, November 7 /MONTSAME/ Golomt Bank of Mongolia Tuesday received the best Internet bank award from Global Finance magazine, internationally renowned financial magazine which selects the best financial institutions around the world annually.

In the recent years, Golomt bank has been paying special attention to its internet banking services and products; as a result, it has received this reputable award. Golomt bank introduced "Smart bank" service for smart phone users in the first time in Mongolia and renewed their Internet banking service entirely. Furthermore, "Smart Bank" application has been registered as the first banking application in Mongolia and top financial application.

The bank have introduced self-service banking, which is still the only self-service banking available in Mongolia and standing order service in which customer can automatically make transfer to any account at any time. 

Global Finance's World Best Internet Bank Awards are based on submissions from banks that wish to be considered. This year, 250 individual banks from around the world entered the competition. Representatives from Infosys, a global leader in consulting, technology and outsourcing solutions, comprised the judging panel.

Based on the judge's evaluations, Global Finance's editors made the final selections. Winners were selected based on strength of strategy for attracting and servicing online customers, success in getting clients to use web offerings, growth of online customer base, breadth of products offered, evidence of tangible benefits gained from Internet initiatives, and web site design and functionality. Sub-category winners were selected on the basis of relative strength products and services.

Link to article

 

ChTZ- URALTRAC to deliver a one-of-a-kind loader to Mongolia

CHELYABINSK REGION, November 6 (RusBusinessNews) ChTZ-URALTRAC, LLC, a subsidiary of the Uralvagonzavod Research and Production Corporation, is going to ship a PK-65 loader to Mongolian miners. At the customer's request, a specially designed, five-cubic-meter bucket will be installed on the machinery, which is 1.5 cubic meters larger than the equipment on the standard model.

The loader will be operated in a major open-pit coal mine.

UVZ's press office told RusBusinessNews that in 2012, Mongolian businesses purchased parts and assemblies from ChTZ- URALTRAC worth $72,000 USD, plus $35,000 spent on spare parts in 2013. In 2010, Mongolian gold miners purchased two B10 bulldozers from the Chelyabinsk-based company.

Link to article

 

BUSINESS PLUS INITIATIVE: REQUEST FOR PROPOSAL FROM IT FIRMS

The United States Agency for International Development (USAID) funded Business Plus Initiative (BPI) project seeks Request for Proposals (RFP) from IT firms.

The BPI project is currently supporting the efforts of the General Department of Taxation (GDT) to improve paying taxes in Mongolia. In this regard, BPI is working with GDT to establish a new E-Payment Module through which taxpayers can make payments via online services offered by participating local commercial banks. The BPI project is implemented by Chemonics International Inc, which is issuing this RFP in order to identify a firm to develop the e-payment application in close coordination with the GDT.

For the full RFP and detailed application information please visit this link and download file: Document -RFP epayment module for eTax

All questions and/or clarifications regarding this RFP must be submitted via email to msimic@bpi-chemonics.biz with a subject line Questions in Response to RFP No. BPI-2013-01. Questions must be received no later than 17:00 on 13 November 2013. No phone calls or in-person inquiries will be answered; all questions and inquiries must be in writing.

Proposal deadline: 17:00, Wednesday,  November 20, 2013

Proposals must be submitted electronically to msimic@bpi-chemonics.biz

Link to proposal

 

DPRK: An Open Door to a Closed Country – MIH Group CEO

November 7 /www.mongolianeconomy.mn/ Mongolian Economy interviewed D. Jargalsaikhan, chief executive at MIH Group, about his recent visit to North Korea. He speaks on life in the recluse nation, its economy, and businesses opportunities

What brought you to North Korea?

Last year Mongolian delegates went to the Democratic People's Republic of Korea (DPRK or North Korea) at the invitation of the DPRK Chamber of Commerce and Industry. The purpose of the visit was to discuss and agree on the opportunities of cooperation between the business communities of North Korea and Mongolia.

We met the representatives of North Korea's ministries and entrepreneurs. According to them, we found that they have much interest in cooperation with Mongolia. Upon our return from North Korea, the delegates established the Mongolian and East Asian Cooperation Council (MEACC). North Korea's geographic location demonstrates an opportunity for developing a regional cooperation between the two countries. Mongolia being a land-locked country, this would a big chance for its geopolitics.

On the other hand, it seemed that North Korea has sought opportunities for opening relations with countries in the world through cooperation with Mongolia. Under this cooperation, some four North Korean companies were invited to visit Mongolia to discuss a variety of business opportunities.

As a result, we have been invited again by the DPRK Chamber of Commerce and Industry this year.

And MEACC's members had a second visit to the DPRK. When we got there they were celebrating the 60th anniversary of victory, which is the largest celebration. The DPRK gives high priority to this celebration. We found that North Korean citizens have the greatest respect for celebrating this anniversary, and we were informed that representatives from more than 70 countries were invited to attend the event. During our visit, there were surprisingly 100 Mongolian tourists travelling in North Korea.

The global perception of the DPRK is of a poor country with strict economic controls. Many believe the state has distorted the views of its people as well. What is the truth versus the reality?

I had my own expectations before I got there. In general, our imagination comes from what we see on the [television] screen. I had imagined the same as you, but we were welcomed into a much different environment than we expected. 

Its streets were clean and there were many buildings with modern designs. I saw many modern cars on the road. It seemed to me that this country is developing the same way as other developing nations. The lives of its citizens were not much worse than we expected. The prices for food was a little bit cheaper than the prices in Ulaanbaatar. Their clothes were clean and nice. There was supply of foreign currencies, including the U.S. dollar and Chinese yuan, and trade was free. However, the government set the official exchange rate. Things in North Korea were different from how we imagined. We were brought to the Kumsusan Palace of the Sun, which is a Mausoleum dedicated to Kim-Il-sung.

When we got inside, it displayed a number of awards. I was so excited to see Sukhbaatar's medal, a souvenir presented by the Mongolian Peace Commission that mostly belonged to the Communist era, and some photos were taken during the meeting held between the North Korean representatives and Jambyn Batmunkh, the general secretary of the Central Committee of the Mongolian People's Revolutionary Party.

What industries are North Korea's business people interested in working with Mongolia?

North Korean business people expressed their interests in some industries including mining, trade, infrastructure and even in the petroleum industry. North Korea has succeeded in high-tech development for itself. They were interested in introducing technology to Mongolia. They were also interested in importing mine and food products from Mongolia. Although this would bring several challenges, there could be some room for mutual benefits.

The first challenge is transport and logistics. The next one is trade and service infrastructure as well as bank transfers. If a Mongolian businessman, for instance, wants to consign freight to North Korea, he might face difficulty processing the transaction. Because the DPRK holds nuclear weapons it is subject to international trade sanctions. This in some part hinders the development of mutually beneficial cooperation.

Yet, there is an advantage between the two countries. In the beginning of the 1990s, in order to attract foreign investment, Mongolia took lots of measures, such as the improvement of its legal environment and international advertising for the country. The same thing is now happening in North Korea to attract foreign investment and to protect foreign investors. This could be a chance for Mongolia. But more importantly is the intention of the North Korean state and entrepreneurs to cooperate with Mongolia. There could be some solutions. However, there are large risks with cooperation.

You said that North Korea is interested in attracting investment from Mongolia. What do they gain from Mongolia and how did they decide on us?

North Korea is thought to be separate from the European and US markets. The West is closed to North Korea. Its 24 million population is very small compared with China. I think North Korea is wary of too much dependence on China, just like Mongolia is always wary of dependence on one country. At this crucial time, when the DPRK is looking for a third neighbour for a safe partner, Mongolia might be the most suitable choice, I think. Mongolia's economy is developing very fast while it has the chance to benefit more in businesses from its geographic location.

Also there are historic and traditional relations between the two countries, and the current diplomatic relations are excellent. There are many advantages.

Most importantly to North Korea, Mongolia could be the most likely with which it could establish an equal partnership. If North Korea chose to pursue this with China, it might face a number of issues, some political. Thus, they need a partner that they can cooperate mutually and beneficially, on equal terms.

It's easy to see one obvious thing from North Korea's policy on international relations: When any large events take place they always invite to North Korea ambassadors from the embassies of China, Russia, Vietnam and Mongolia—nobody else.

How can Mongolia and North Korea expand their relations?

I have seen what is called the Rason port on the northeast tip of North Korea. The port is always open throughout the year. This port could create a number of advantages for both nations, I think. One goal for Mongolia is to export its mining products to third neighbours for high-priced sale. Mongolia is interested in exporting coal to Japan and South Korea, but lacks the infrastructure. Thus, there is potential to transport coal to Japan and South Korea through this port.

On the other hand, North Korea has demand for the import for mining products from Mongolia. There are a number of countries where mining products are needed, and Mongolia is interested in exporting its coal to foreign countries. This is not possible because of a lack of infrastructure. But meeting North Korean demand gives Mongolia the opportunity to exports its mining products abroad.

You mentioned earlier of North Korea's technological development. What technology from North Korea should Mongolia adopt?

North Korea has highly developed nanotechnology. Also its agricultural development for crops and poultry is incomparable to that of Mongolia. Rather than discuss North Korea's developed industries, it would be better to research this further.

Although much is known about the politics in North Korea, the economic system is still a mystery to the world. What sector contributes most to the North Korean economy thus far?

There is the Juche Idea, a political thesis formed by Kim Il-Sung. Its main concept is that the North Korean masses are the masters of the country's development and they can do everything themselves. Under the Idea, national manufacturing is seemingly managed to supply domestic demand. Also it is much richer in mineral resources than South Korea. I think, therefore, the mining industry would be the main driver of North Korea's economy in the near future. Additionally, there is also a developed industry for sea products.

The 24 million population is a much bigger market than Mongolia's. If North Korea could make its economic policy more open, there are large markets and demand surrounding it.

Link to interview

 

Bring in the Start Ups: Supporting SMEs in Mongolia

November 7 /www.mongolianeconomy.mn/ Small businesses have never been old-fashioned nor in vogue in Mongolia. Small-and medium-size enterprises (SMEs), however, are still important to the economy.

Assisting SMEs has been challenging to past governments in Mongolia, which spent billions of tugrugs in soft loans to contribute to SME development. Despite these efforts, small business owners still complain that not enough has been done.  

"It is not true that milk and dairy manufacturers are funded by the Chinggis bond", said an audience member at a discussion on SMEs at the CEO Summit held in September. "We heard that only some large companies received funds, but so far SMEs have not received any of it".

There are some funds that exist for attaining soft loans. Two of them are the Employment Support Fund and the Soum Development Fund, but they do not seem to be reaching their targets.

"Soft loans that are supposed to go to SMEs are usually stuck with the middle man, the bank", said E. Ariuntugs, chief executive at the Mongolian Financial Non-Banking Institution's Association. "You may wonder why. SMEs complain that commercial banks have long criteria when they apply for loans, including bank deposits sums and years of employment. For business start ups, they often do not meet the criteria required by banks. Those who meet the criteria are large companies that are in businesses with billions of tugrugs",

There are also many who say that soft loans do not go to SMEs at all, but instead go to large companies. So, how does one tackle this issue? The answer is easy: Introduce a mechanism that issues soft loans through non-banking financial institutions (NBFIs) instead of banks. Unfortunately, NBFIs in Mongolian have a tarnished reputation due to their association with failed cooperatives.
"People are afraid of NBFIs; that they will go into bankruptcy just like what happened to SCCs [savings and credit cooperatives] in the past. But total statutory funds of NBFIs that operate in Mongolia amount to MNT 150 billion", said B. Bat-Amgalan, director at the SME department at the Ministry of Labour. "At present, none have gone into bankruptcy. Now it is time for NBFIs to conduct public awareness among the general public on how they are reliable and financially sound".

Sorting out the differences

There are three entities that provide loan services in Mongolia: banks, SCCs, and NBFIs. Each has different rules and features.

SCCs collect money from member participants. That money is then credited to other members. But an NBFI is different. It operates within numerous financial activities, where 70 percent of total assets are held by investors. Conversely, in the banking sector a mere 10 percent is investor-owned, with the remaining 90 percent financed through deposits. 

These differences are the main determinants of their risk-taking abilities in the financial market. While SCC provides financial services among its members, NBFIs cover a much wider scale, including micro-financiers, store owners, service providers, craftsmen and SMEs. 

Most SMEs who fail to meet the threshold put up by banks are left with no choice but to knock on the doors of NBFIs. SME start ups are typically classified as high risk by banks. Companies with many years of experience and have already carved out their places in the market are more likely to repay their loans. This allows those companies to attain lower interest as well.

"Banks cannot take risks because 90 percent of its total assets are clients' deposits", said D. Bat-Ochir, chief executive at Khas Bank, explaining the need for caution by banks.

But an NBFI is different from the bank. They provide services for about 60 percent of SMEs, with some 390,000 clients typical among them. In total MNT 320 billion is circulated among NBFIs in Mongolia, of which about 70 percent is investors-owned equity. This gives more leeway to take risks and provide fewer obstacles for small business owners to attain credit.

"The total assets of NBFIs in Mongolia comprise a mere 2 percent of the total assets of banks," said A. Altansukh, director general at Bid NGFI. "However, in terms of owned equity, NBFIs comprise about 20 percent, and in terms of statutory funds, they comprise 45 percent among the financial market."
Altansukh said that was enough for NBFIs to take more risks than banks. Thus, banks can continue loaning to large, low-risk companies while NBFIs attend to small-business start ups. This sort of model is common throughout the world.

More advantages

Mongolian banks comprised 93 percent of the financial market in 1993 compared with 96 percent today. The growth in banking is pushing other financial institutions out of the market, but it does not necessarily mean that competing institutions are weak. Their strength comes from state policy as the implementation of projects and programmes employed by the government are most often funded by banks. The disadvantage is that the economy depends solely on the banking sector, giving banks hold of a dangerous monopoly. The lack of competition may also be disincentivising banks from lowering the interest rates on loans. 

A larger number of micro finance institutions have the power to make financial services more available to people, reduce interest on loans and increase the size of loans, said N. Oyunchimeg, director of the microfinance department at the Financial Regulatory Commission. It has been already 20 years since Mongolians wanted to bring the annual loan interest to the single digits. SMEs usually lag behind in opportunities for getting low-interest loans because they do not meet the criteria of banks. Those who cannot attain soft loans may ask banks for loans with higher interest, but the strain can be difficult to manage. 

"If the current situation further remains the same, the banks will comprise 99 percent of Mongolia's financial market and other financial institutes will be removed from the market", said Bid's Altansukh.
He added that large manufacturers and companies will have all the advantages, while smaller businesses fall to the wayside. 

Approval of the Investment Law by the State Great Khural is a large step forward in the right direction for Mongolia's financial sector. However, this too is likely to be of most benefit for the country's largest companies. Only NBFIs have the power to directly address the situation.

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Ulaanbaatar

This Asian City Is Killing Its Locals With Coal

As winter descends on Mongolia's cold and polluted capital of Ulaanbaatar, toxic coal heating is turning on everywhere. An estimated one resident in 10 dies from the effects of pollution.

ULAANBAATAR, November 6 (Worldcrunch) — Winter is already falling on Ulaanbaatar, Mongolia, and the sight of the greyish smoke rising from yurts in the suburbs of the coldest capital city on Earth is enough to worry 29-year-old Bolormaa Oyunbileg.

"As soon as the hard season begins, things become terrible," she complains. "Often, we can't even see the cars at the end of the street anymore." 

This is because of the coal stoves Mongolians use to heat their yurts. Ryan Allen, environmental health researcher at Simon Fraser University (British Columbia, Canada) and author of one of the rare studies on pollution-linked mortality in Ulaanbaatar, attributes one in 10 deaths in the "coal city" to pollution. 

The traditional Mongolian shelter is renowned for its capacity to protect nomad families from the cold in the steppes. A stove in the center heats the only room, the shape of which allows for the heat to spread. With 60% of Ulaanbaatar's 2.8 million inhabitants living in yurts, the issue has become a matter of public health.

Toxic fog

During the harshest winters, travelling shepherds are forced to settle down in the slums surrounding Ulaanbaatar. According to a 2010 census, between 30,000 and 40,000 people occupy these slums every year. If the winter is a particularly harsh one, a family can lose its entire herd of cattle. When this happens, the whole group takes to the road and moves near the capital, hoping to find jobs.

This is what Bolormaa and her husband had to do six years ago. They left the region near Lake Khuvsgul, one of Mongolia's northernmost spots. At least in the capital, her husband is employed part-time in construction — but they'd prefer to return to rural life. "The smoke is thicker in the morning and in the evening when people cook," Bolormaa says. "During the whole season my throat hurts and I can't stop coughing. I have a baby, and I fear for her health." At dawn during December and January, when the outside temperature is -30 °C (-22 °F), the city disappears in this toxic fog.

In December 2011, the World Bank concluded that the exposure in Ulaanbaatar to particulate matter was 10 times higher than the standard for air quality in the country, and six to seven times higher than what the World Health Organization recommends. According to the World Bank, there is no doubt that the Mongolian city is the most polluted capital on the planet.

In the Sharkhad neighborhood, Tuya Gerel, who has been the doctor at the free clinic for three years, says she noticed a surge in the number of respiratory problems, coughing syndromes and allergies. "But it's difficult to say with certainty whether each case was caused by coal," she says. "I must say that some of my patients have predispositions." Oyuna Bata, a local social welfare worker, is not so cautious: "There are no figures, but there are more and more miscarriages, and more and more newborns with pulmonary problems."

"In my family, everybody coughs"

Thanks to support from international development agencies, the Mongolian government recently implemented a program to help families buy more efficient stoves that use less coal. The stove price for families has fallen from $240 to $35.

Oyuna Bata says some families have availed themselves of the new stoves, but others have different budget priorities and seem resigned to poor air quality. Also, in the winter, the whole neighborhood buys the cheapest, poorest quality coal from a mine in Baganuur, 130 kilometers east of the city. Forty kilos cost the equivalent of $2, but it burns faster and creates much more toxic smoke. "In my family, everybody coughs, and even those who don't smoke have black lungs," Oyuna Bata says angrily.

Year after year, Bolormaa's neighbor, 62-year-old Gantuya Damdin, has seen the air quality of the city worsen. As long as these yurt slums, which are not connected to the central heating system, grow, she doesn't see how the capital of the "land of the blue sky" can rid itself of this black halo.

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Diplomacy

Peacekeepers from Mongolia renovate school and teach students about role of UN Mission in South Sudan

5 November 2013 (UN Mission in South Sudan) Pupils of a school in Rubkona County today learned about the role of UNMISS during the visit of a joint team of mission civilian and Mongolian military peacekeepers.

About 90 children from classes six and seven in Friendly Primary School, which was recently renovated by the Mongolians, participated in the meeting. 

"We are glad that we've learnt a lot about UNMISS," said 14-year old pupil Maliah Tot. "We know now that UNMISS is here to help maintain peace in South Sudan and support the Government of South Sudan."

Elizabeth Nyagak, aged 15 years, appreciated UNMISS for patrolling danger-prone areas in the state. 

"We learnt today that UNMISS is patrolling the remote counties in the state and alerting the local authorities when there is risk of conflict in the counties," she said. "The presence of UNMISS will help bring peace in our community."

The pupils also learned about the culture and lifestyle of Mongolian people and participated in an art exercise to illustrate what they had learned. 

Using coloured pencils and crayons donated by the UNMISS teams, the children drew pictures of Mongolian soldiers near local South Sudan settings like tukuls (local huts), the church and their school. They also drew the Mongolian flag.

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What's happened to Putrajaya's appeal, ask Mongolia and Altantuya's dad

November 6 (The Malaysian Insider) Setev Shaariibuu, the father of murdered Mongolian Altantuya Shaariibuu, and the Mongolian government want to know what is happening to Putrajaya's appeal against the acquittal of two former police commandos for killing her in 2006.

They noted that it has been more than two months since the acquittal of former chief inspector Azilah Hadri and corporal Sirul Azhar Umar, but there has only been silence from the Attorney General's Chambers.

Lawyer Karpal Singh, who is holding a watching brief for Setev, said his client had been in touch with him constantly to find out the progress of the appeal.

"Two weeks ago the Mongolian Ambassador in Bangkok, who is also in charge of Malaysia, wrote to me to inquire about the case," Karpal told The Malaysian Insider.

He said the Mongolian government intended to send a delegation to follow the proceedings in the Federal Court, the court of final appeal.

"This case has not only grabbed the attention of locals, but is also closely followed by others abroad, including those in Mongolia," he said.

Karpal said the high profile murder appeal could be concluded speedily only if the Federal Court took the initiative to fix a hearing date.

"The Federal Court can make an exception to this case which is of public interest, both locally and internationally," he said in response to the matter being left idle for more than two months.

Karpal drew comparison with the sodomy case of opposition leader Datuk Seri Anwar Ibrahim where the Federal Court had set the appeal date expeditiously.

On September 18, the Court of Appeal dismissed Anwar's application to disqualify Umno lawyer Tan Sri Muhammad Shafee Abdullah's appointment as deputy public prosecutor on grounds that the appointment was valid and in accordance with the provisions of the law.

In a criminal case, it is a practice for the court to fix the appeal date once an appellant filed his petition of appeal (grounds for appealing a decision).  However, before Anwar could file his petition of appeal, the Federal Court had fixed the appeal date.

Anwar's appeal to disqualify Shafee will now be heard on November 11.

During the opening of the 2013 legal year, Chief Justice Tun Arifin Zakaria said in order to ensure a speedy disposal of criminal cases in the Federal Court, all appeals would be heard three months from the date a complete appeal record was received.

"So there is an exception to the general rule like in Anwar's matter," said Karpal who is also counsel in that case.

He said Putrajaya appeared to be dragging its feet on the appeal against the acquittal of Azilah and Sirul.

The prosecution filed its notice of appeal on August 23, the same day the policemen's appeals were allowed.

The written judgment was made available on August 26.

A three-man bench chaired by Datuk Seri Mohamad Apandi Ali said in their judgment, among other things, the prosecution's failure to call DSP Musa Safri, a former aide-de-camp of Datuk Seri Najib Razak, had weakened the prosecution's case.

AG Tan Sri Abdul Gani Patail had gone on record to state that the prosecution's case would be intact, even without Musa being called to testify.

Karpal said the AG's Chambers could have filed its petition of appeal and stated reasons why the Court of Appeal was wrong when it acquitted the two policemen based on the written grounds of the judgment.

"They could have expedited the appeal process to the Federal Court even without having the entire record of appeal," Karpal told The Malaysian Insider.

He said Gani too, as an officer of the court, had a role in ensuring trials and appeals were disposed of without delay.

A check with lawyers appearing for the two former policemen revealed that the AG's Chambers had yet to file any appeal record since no copies were extended to the counsel.

Both cops were found guilty of murdering Altantuya in 2006.

Political analyst Abdul Razak Baginda, who was Altantuya's lover, was acquitted by the High Court of abetment without his defence being called.

Altantuya's father, Setev, also wants a speedy end to this case as he has a RM100 million suit against Abdul Razak, Azilah, Sirul and the government over his daughter's death.

His suit, however, cannot be heard until the criminal case is concluded.

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Social, Environmental and Other

The Englishman looking to take the Mongolian Premier League by storm

November 7 (Back Page Football) Paul Watson has proven in the past that he doesn't shirk a footballing challenge. His previous role in management involved leading the island of Pohnpei in the Federated States of Micronesia (a place that suffers a 90% obesity rate, tropical storms every day, mass unemployment and a substance abuse problem) to their first ever victory in Guam.

Now Paul has moved to Mongolia, the most sparsely populated country on Earth (with 30% of Mongolians living a nomadic existence) that experiences temperatures as low as -30 degrees Celsius, and has been tasked with creating from scratch a club for next season's Mongolian Premier League. Paul generously gave up his time to speak to me about the project and lay out his plan for the year ahead.

How did it come about that you became manager of Khuree FC, in the Mongolian Premier League?

A director of the Mongolian Premier League called Enki Batsumber saw an article in Vice Magazine about what Matt and I did in Pohnpei. They have been looking for some time to set up a club in Mongolia which is the strongest team in Mongolian history and runs like a professional English club. So, Enki approached us and asked if we'd be interested in setting up this club. He then came to England, we saw that he was someone we could work with and so said yes.

What goals are you setting for yourself and the team during your time in Mongolia?

The process will have to take place in several stages. First we need to get the club up and running. We will be holding open trials but also approaching players at other clubs and signing them. At the same time we are building an academy system for kids. Part of that involves going into schools where often kids have never been coached before and running some sessions as well as picking the most talented to join the academy. In the long term we have to create the best team in Mongolia – nothing else would be seen as a success.

What do you see as your biggest obstacles?

I think the main obstacle is the timescale. It can take a while to build a team from scratch and we need to have a team capable of winning the league by next April. We are also constantly on the lookout for sponsors as the whole thing will need some financial backing to succeed. The weather is troublesome as it's below freezing and set to get closer to -10 or -20 over the next two months, so we will be training indoors but there are very few good indoor facilities and so the ones there are tend to be pretty expensive.

What have you identified as the biggest cultural differences between Mongolia and the UK so far?

That's a tough one! There are quite a few! Driving here is absolutely crazy – there are no rules. I saw a bus pull off a U-turn yesterday. People are quite bemused by an Englishman arriving in the middle of winter but everyone's pretty friendly.

Your time with the Pohnpei national football team, and the successes you enjoyed, has been widely reported. What skills will you be able to transfer from that position to your new one?

I think the Pohnpei role allowed me to gain experience in building a project from scratch and also working with fairly thin resources. It also taught me to work in a foreign culture that at first seems quite strange and to understand the importance of learning as much as you teach.

In Pohnpei the lack of funding was a recurring problem. Will you have financial backing at Khuree FC?

We do have financial backing but we are also on the lookout for more. Our plan is a pretty big one so it will need some sponsors. However, it is my first professional post, which after Pohnpei is a nice change.

Your time in Pohnpei will be brought to the big screen at the end of the year in The Soccermen. How excited are you about the forthcoming production?

It's extremely exciting, but also a little scary! I think all coaches like to think they are smooth Jose Mourinho types but I'm sure that in reality I was a jibbering wreck at the most tense periods. It will be a great documentary though I'm sure, Matt has put in an awful lot of work and I can't wait to see it.

Your collaborator in Pohnpei and with The Soccermen was your good friend Matthew Conrad. Will he once again be joining you in Mongolia?

Matt will be coming out soon. He's just finishing up The Soccermen and then he'll be jetting into Ulan Bator. It'll be fantastic to have him out here – he's a brilliant coach and a really positive presence. I could never have coped in Pohnpei without him.

You can follow Paul Watson on Twitter.

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Skateboarding kids in Mongolia are building a skate park in Ulaanbaatar. Here's how you can help

November 6 (Boing Boing) Michelle Borok is a culture-blogger from Los Angeles who has expatriated to Mongolia, where she is raising a family. She shares word of a really cool project there that could use your help:

This new film by Uukhai, a Mongolian skateboarding association, sheds intimate, honest and unpretentious light on a growing community in Ulaanbaatar. The video features interviews with skaters involved with the organization, and tons of footage of street skating shot this summer.

This look at a blossoming scene is the perfect inspiration for the jaded. Their old school is young, and they are devoted to bringing up brand new skaters. It's also become a focal point for expatriates and repatriates. Take nothing for granted, certainly not your pristine sidewalks!

Uukhai is working to raise funds to provide young skaters with decks, components, and eventually an indoor skatepark. Support from abroad is very much welcome, and rarely bestowed on this community. In a city that offers young people very few creative outlets, Uukhai is supporting skating for all the right reasons, and could use your support as well.

They're looking for donated components, decks, or anything else people might feel the kids could benefit from. They aren't set up for cash donations from abroad just yet. Shipping to Mongolia can be arranged. They can be reached at: uukhaiskateboarding@gmail.com.

• The video
• Uukhai's Facebook Page

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Munkhdul Badral Bontoi

Founder & CEO

Email: mogi@covermongolia.mn

Mobile: +976 9999 6779

Skype: mogibb

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