Wednesday, February 4, 2015

[56% says YES to OT path; IMF agrees to talks; MNT sets another low; FDI down 74%; and cabinet approves law on casinos]

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Wednesday, February 4, 2015

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Overseas Market

Mongolian verdict sends chill through mining community

By Frik Els

February 4 ( Mongolia is dependant on the mining sector to fuel growth and late last year rewrote rules on foreign investment, but the decline in foreign direct investment (and with it GDP) may now be even harder to turn around.

In 2013, FDI had contracted by nearly 45%. In the first five months of 2014 only $400 million was pumped into the country, a 64% year-on-year decline. Overall economic growth has steadily slowed from 2011's whopping 17.3%. In 2015 depending on Mongolian policy decisions, may range from a high of 12% to as low as 2%.

A drawn out dispute between Rio Tinto-controlled (LON:RIO) Turquoise Hill Resources (TSE:TRQ) and the Mongolian government about funding for the expansion of the massive Oyu Tolgoi copper and gold mine has taken much of the blame for stalling foreign investment.

But the Asian nation is not doing itself any favours by the way it treats foreigners visiting or working inside the country.

recent report from the US embassy in Ulaanbaatar states investors and local legal experts have regularly reported that Mongolian public and private entities can use administratively imposed travel bans to pressure foreign investors to settle civil disputes.

US ambassador to Mongolia, Piper Anne Wind Campbell, said "exit bans on foreign business executives whose companies are involved in business litigation in Mongolia have had significant, detrimental impacts on foreign direct investment."

Immigration officials may impose a travel ban for a variety of reasons, including an individual's involvement in civil disputes, pending criminal investigations, or for immigration violations. Exit will not be allowed until either the dispute is resolved administratively or a court renders a decision.

The Mongolian government does not impose similar travel bans for Mongolian citizens.

On Tuesday three ex-employees of SouthGobi Resources, a coal producer owned by Turquoise Hill, were found guilty of tax evasion by a Mongolian court. Under Mongolian law tax and other disputes are pursued in courts under the criminal code.

US citizen Justin Kapla and two Philippine nationals, Hilarion Cajucom Jr and Cristobal David, each received jail sentences of between five and six years, while the company was fined 35 billion tugrik ($18 million) for tax evasion. Money laundering charges of some 200 billion tugrik were dropped.

Turquoise Hill has denied the charges against it and its employees, who have been the subject of a travel ban since 2012, but only formally charged in May last year. They will beging serving their terms immediately according to a court spokesperson.

"A criminal conviction would make huge waves internationally," independent researcher Dale Choi who is based in Ulaanbaatar told Bloomberg ahead of the verdict:

"It would create very negative publicity. Foreign investors and executives would be scared of signing documents in Mongolia."

Click here to download the US State Dept statement on Mongolia's 2014 investment climate.

Link to article


2 Pinoys sentenced in Mongolia for tax evasion

February 3 (Sun.Star) TWO Filipino nationals were found guilty of tax evasion in Mongolia and were sentenced to imprisonment, the Department of Foreign Affairs (DFA) said Tuesday.

Charles Jose, Foreign Affairs spokesman, said in a press briefing that the sentence was handed down on January 28 by the Mongolian Court of Justice.

He added that the Philippine Embassy in Beijing, which has jurisdiction over Philippine affairs in Mongolia, already secured a permission from the authorities to visit the two Filipinos--Cristobal David and Hilario Cajucom Jr.

Officials from the embassy flew to Mongolia on Tuesday.

The Filipinos were former employees of the local unit of SouthGobi Resources Ltd., the SouthGobi Sands LLC.

The local unit also faced a tax evasion case.

Aside from David and Cajucom, an American, Justin Kapla, also faced the same charges for violation Mongolia's tax laws. The three earlier denied the charges against them.

SouthGobi is controlled by Rio Tinto Group unit Turquoise Hill Resources Ltd.

The investigation into the local unit and the three former employees started in 2012, with the three being placed in a travel ban since then.

Link to article


PH ready to help 2 Filipino mining execs convicted of tax evasion in Mongolia - Philippine News Agency, February 3


16 MPs submit questionnaire to Minister Enkhsaikhan on TT

February 3 ( Sixteen Members of Parliament have delivered questionnaire answers to Minster of Mongolia M.Enkhsaikhan regarding issues of the development of the Tavan Tolgoi deposit and the nation's economy. 

The issues addressed in the questionnaire include:  clarification of whether or not Mongolia can hold 51 percent of the Tavan Tolgoi investment, whether the 267 kilometer Tavan Tolgoi-Gashuunsukhait railway will be owned by Mongolia, and how the 1,072 shares disseminated to the Mongolian people will be handled following the selection of an investor. The questionnaire covered more than 20 questions and was submitted in the parliamentary session. 

M.Enkhsaikhan posted on Facebook, "I have received the questionnaire signed by the Members of Parliament this morning. The questionnaire contains important questions to create integrated ideas. I will give a written answer to it."

The Minster of Mongolia gave information regarding Tavan Tolgoi at a recent meeting of the Democratic Party and presented a discussion of the project.  

Link to article

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Local Market

MSE News for February 3: Top 20 +0.42% to 14,431.44, Turnover ₮34.5 Million, T-Bills 165.2 Million

By B. Khuder

Ulaanbaatar, February 3 (MONTSAME) At the Stock Exchange trades on Tuesday, a total of 78 thousand and 202 units of 25 JSCs were traded costing MNT 199 million 705 thousand and 087.00.

"Hai Bi Oil" /37 thousand units/, "Remikon" /20 thousand and 900 units/, "Olloo" /11 thousand and 199 units/, "Mongolia Development" /2,002 units/ and "Khokh gan" /1,570 units/ were the most actively traded in terms of trading volume, in terms of trading value were "Hai Bi Oil" (MNT 20 million and 350 thousand), "Gutal" (MNT two million 972 thousand and 700), "UB-BUK" (MNT two million and 850 thousand), "Material impex" (MNT two million and 088 thousand) and "Remikon" (MNT one million and 881 thousand).

The total market capitalization was set at MNT one trillion 386 billion 759 million 693 thousand and 657. The Index of Top-20 JSCs was 14,431.44, increasing 60.98 units or 0.42% against the previous day.

Link to article

Link to MSE trading report


MSE Primary: 165.2 Million 52-Week T-Bills Sold at 16.125% Yield

February 4 (MSE) On 03 February 2015, 52 weeks Government retail bonds worth MNT165,200,000.00 with 16.125% annual interest rate traded successfully on primary market at Mongolian Stock Exchange. 

Bellow member brokerage companies participated in the bond trading as follows:

Link to release


BDSec Market Watch Weekly Mongolia Update

February 2 (BDSec) --

Link to video


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IMF Agrees to Discuss Support for Mongolia as Economy Slows

By Michael Kohn and Yuriy Humber

February 3 (Bloomberg) -- Mongolia requested cooperation from the International Monetary Fund, as slowing growth and plunging foreign investment raise pressure on a government that's asked its citizens to vote on how to rescue the economy.

"The IMF has received a request from the Mongolian authorities to begin discussions of possible IMF support to Mongolia," Yuko Kinoshita, the fund's representative for the nation, said in an e-mail Tuesday. "The IMF will be sending a team to Ulaanbaatar soon to initiate these discussions."

Mongolia received an IMF bailout loan as recently as 2009 after "teetering on the verge of economic collapse" from the impact of the global financial crisis, the fund said at the time. The commodity-rich country recovered by riding the wave of rising coal and copper prices to post economic growth of 17 percent in 2011 before slowing with a slump in foreign investment.

"Economically, Mongolia sits on the razor's edge: Proceed with mega projects and resume rapid growth, or enter an economic ice age," said Nick Cousyn, chief operating officer for BDSec, Mongolia's largest brokerage. "It's unclear to us what the IMF can do until they know what will happen" with developments such as Tavan Tolgoi and phase 2 of the Oyu Tolgoi project, he said.

Growth was 7 percent in the nine months through September from a year earlier, according to the National Statistical Office. Foreign direct investment fell 70 percent last year from 2013, the central bank said.

Stand-by Program

The talks with the IMF will discuss any kind of cooperation that could benefit Mongolia, including a "stand-by program," the prime minister's adviser, Chuluunbat Ochirbat, told Bloomberg Television in Ulaanbaatar. The IMF made $229 million available in a stand-by arrangement in 2009.

The IMF mission will begin next week, according to Kinoshita.

As the nation sought funds for new infrastructure to expand mines by adding power sources and roads, the state-run Development Bank of Mongolia LLC and government sold more than $2 billion in bonds to foreign investors denominated in U.S. dollars and in yen.

The nation's bonds and currency sank to record lows last month as a slide in commodity prices and the dispute with Rio Tinto Plc over developing one of the world's largest copper and gold mines kept foreign investors away.

Mongolia's sovereign dollar bonds rose after the report of discussions with the IMF, pushing the yield down 30 basis points to 7.92%, according to data complied by Bloomberg.

The tugrik has fallen almost 43 percent against the dollar in the past three years and was at 1,944.24 to the dollar on Feb. 2, according to the Bank of Mongolia website.

Link to article


Mongolia Requests IMF Cooperation for Slowing Economy

Feb. 4 (Bloomberg) -- Mongolia requested cooperation from the International Monetary Fund as slowing growth and plunging foreign investment raise pressure on the government. Bloomberg's David Ingles reports on "First Up."

Link to video


Early morning bank rates: Khan (Buy 1,935 Sell 1,946), TDB (Buy 1,935 Sell 1,946), Golomt (Buy 1,938 Sell 1,946), XacBank (Buy 1,934 Sell 1,946), State Bank (Buy 1,936 Sell 1,947)

BoM MNT Rates: Tuesday, February 3 Close




































































1-Year MNT vs USD, CNY Chart:

Link to rates


2014 Preliminary BoP: FDI - 74% to US$541.8m, Current Account Deficit -69% to $985m

February 3 (Bank of Mongolia) --

Main indicators:

Current account deficit stands at US$ 985.0 million which is decrease of 69 percent from the previous year. This is due to US$ 2,322.7 million or 176 percent decrease in deficit of trade in goods, thus showed surplus of US$ 1,002.0 million.

Even though capital and financial accounts showed surplus of US$ 813.1 million, this is a decrease of 43 percent or US$ 625.0 million from 2013. This was caused mainly by reduction of 74 percent of foreign direct investment to Mongolia which equals to US$ 1,556.3 million.

While, portfolio investment showed surplus due to Samurai bond, decline in deficit of other investment was triggered by swap agreement between Bank of Mongolia and People's Bank of China, external borrowings of Development Bank of Mongolia and higher enterprises' trade credit assets.

·         Balance of Payment for the 12 Months of 2014

·         External sector statistics

Link to release


BoM FX auction: US$16.2m, CNY65.5m bids declined, $20m MNT, $20m USD swap offers accepted

February 3 (Bank of Mongolia) On the Foreign Exchange Auction held on February 3rd, 2015 the BOM has received bid offers of USD 16.2 million in a closing rate of MNT 1944.25-1945.90 and CNY 65.5 million in a closing rate of MNT 310.60-311.26 from local commercial bank and BOM has not accepted the offer.

On February 3rd, 2015, The BOM has received MNT Swap agreement bid offer in equivalent to USD 20.0 million and USD Swap agreement bid offer of USD 20 million from local commercial banks and accepted the offer.

See also:

·         FX Auction Statistics

Link to release


8% Mortgage Program Update: ₮548.2 Billion Refinanced, ₮1.64 Trillion Newly Issued

February 3 (Cover Mongolia) As of January 30, 548.2 billion (₮546.9 billion as of December 25) existing mortgages of 18,645 citizens (18,649 as of December 25) were refinanced at 8% out of 820.3 billion (₮819 billion as of December 25) worth requests.

Also, 1,636.7 billion (₮1,563.8 billion as of December 25) new mortgages of 29,106 citizens (27,707 citizens as of December 25) were issued at new rates out of 1.65 trillion (₮1.6 trillion as of December 25) worth requests.

Link to release (in Mongolian)

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Politics & Legal

Mongolia Text Referendum: 56.1% Votes for Development Path #1, Moving Forward OT, TT

February 4 (GoGo Mongolia) PM Ch.Saikhanbileg asked the nation which route Mongolia is to choose for its Development Path for Mongolia 2015-2016.

Total of 365,841 votes had submitted and out of 63,830 votes were not eligible due to people sent different texts or empty text. 

Thus, 56,1% of residents voted for developing its bigger projects such as OT vote 1 while 43,9% of residents voted for saving on its expenditures and stabilize the exchange rates vote 2.

Ts.Munkhtur, Advisor to PM said: "Residents were not responsible for attending the poll. The Government is to choose Development Path not only based on the result of the poll. In order to determine the attitude of the public, the Government asked the nation. There were no cost for the poll. Telecommunication companies accepted the social responsibility for the cost."

Link to article


Mongolian "text referendum" backs Oyu Tolgoi copper mine expansionReuters, February 4


Mongolia "text referendum" could help resolve investment impasse

By Terrence Edwards

ULAN BATOR Feb 3 (Reuters) - Mongolia's prime minister will learn later on Tuesday if a "text message referendum" will deliver the support he needs to move forward with the multibillion dollar expansion of the Oyu Tolgoi copper mine, which has been repeatedly delayed.

Chimed Saikhanbileg, appointed in November, said last week that Mongolia would hold an unprecedented vote via mobile phone text message on whether the cash-strapped nation should introduce further budget cuts or do whatever it takes to get the country's multi-billion dollar mines growing again.

Voting closes at 10 p.m. on Tuesday and the final result will be announced on Wednesday morning.

About 8.8 percent of the country's 3.3 million mobile phone subscribers had responded to the poll by Tuesday afternoon. Media reports said 59 percent had responded in favour of more investment by Monday evening, but a government spokesman said he could not verify the figure.

Mongolia's mineral-dependent economy has been hit by declining global commodity prices, a slowdown in neighbouring China and a series of disputes over the future of key mining projects like the $6.5 billion Oyu Tolgoi copper mine, which is being developed by Rio Tinto .

Foreign investment fell 74 percent in 2014, according to the latest data from the country's central bank.

The $6.5 billion Oyu Tolgoi project was specifically mentioned in the text message delivered to all mobile phone subscribers asking them to vote. It is one of the world's largest copper deposits and the largest mine in the country.

Rio Tinto, which controls Turquoise Hill Resources, the 66-percent owner of the mine, put plans for the underground second phase of the project on hold in August 2013 because of disagreements with the government over costs.

More recently, the government said the mine owed an extra $30 million in tax, which Rio denies.

"The referendum shows that (the prime minister) is willing to advance the Oyu Tolgoi project further," said Mongolian Investment Banking Group Chief Executive Officer Bilguun Ankhbayar.

Mongolia's parliament raised its debt ceiling to 58.3 percent from 40 percent last month after the decline in foreign investment and a number of sovereign bond sales.

The country introduced budget cuts for 2015 and raised taxes on imports such as fuel. The budget cuts have mostly affected investment into infrastructure, but have stopped at cutting social welfare programmes that provide allowances for mothers, children and students.

"Some criticise that both choices (austerity and investment) are doable," said Bilguun. "It's not as if the government is doing large-scale projects and spending all the money again. They're not mutually exclusive."

Link to article


Cabinet to Submit Law on Casinos to Parliament

February 3 ( The regular Cabinet meeting of the Coalition Government was held on Monday, February 02 and one of the issues resolved was to submit a bill on "Law on Casino" to the State Great Khural (Parliament).

Mongolia's competitiveness rank in tourism industry stands at the 99th place out of surveyed 140 economies, nevertheless, at the 19th place out of 25 countries in Asia and Oceania. In 2013, over 417 thousand tourists visited Mongolia and revenue from this sector reached 263 million USD that comprised 5.29 percent of GDP.

The bill initiators deem, it is necessary to resolve one of the reasons to slow down the tourism flow into Mongolia and in the scope of increasing the international competitiveness, the country's 2020 goal is to create about 14 percent of gross domestic product and therefore by launching casino activity in Mongolia it would stimulate the tourism development and increase the flow of foreign currencies.

The draft Law on Casino was initiated and developed based on international standards and practices relied on the needs of casino gaming activities adhered to regulate relations regarding issuing limited casino license, registering and revoking the license as well as clarify the state control system and mechanisms for casino activities in the territory of Mongolia.

Back in 1997, Mongolia enacted the "Law on Casino", but it ended up with imprisonment of high profile politicians due to corruption charges and unconditional enactment of Law on prohibiting Casino activities within Mongolian territory as a result of social, economic and political situation of that time.

In 2006, Ministry of Justice and Home Affairs initiated drafting of Law on Gaming, in order to regulate the casino and gaming activity, but the draft did not get support from the Cabinet and was rejected. Following failure of this draft, several more attempts were made with initiative from MP's, including "Law on Limited Casino" in 2007 and 2010, but were not supported to date.

In recent mass media, it was boomed that two Mongolian artists won a jackpot of $355,870 in the "Wheel of Fortune" during their visit to Hong Kong in January 2015.

Link to article


The Government decision to legalise, February 3

Draft law on Casino to be submitted to ParliamentMontsame, February 3

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Mineral license issuance causing problems for the government

February 3 ( The issuance of exploration licenses, which was suspended for almost five to six years, resumed on January 26, which has lead to loud complaints, sensationalized stories, disputes, and claims.

The Ministry of Mining and the Head of the Mineral Resources Authority of Mongolia stated that the issuance of licenses would be transparent and clear, without any conflicts of interests, that it would use secure software with precise accuracy and high quality equipment. However, in the first three days, the system experienced errors and malfunction and which became a headache for the government.

The software program for license issuance was written in a secret environment by highly paid IT engineers. Frankly speaking, this was the correct procedure.

Recent practices show us that when information is provided mostly to powerful officials, we have to  resolve a so called  "battle of  wrestlers" at the gate of the Mineral Resources Authority. Applicants have been registering online with the help of technical engineers of the Mining Authority and the National Data Center, thus, applicants should consider that this a risk for the creation of indirect manipulation.

The Mineral Resources Authority keeps information about which company wrote the program highly confidential, along how much it cost them.      

So far, only three licenses have been issued, two of which were made with mistakes and one that became invalid.  The government should re-consider this issue and pay attention to it.

Link to article

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New Ulaanbaatar International Airport Construction Runs Out of Money

By B. Erdenechimeg

February 3 ( New Ulaanbaatar International Airport construction project funds of soft loan issued in 2008 is to finish in July. Thus, to ensure the normal construction work flow, additional loan issue needs to be resolved urgently.

The Government agreed on the principles of project "Additional loan agreement on constructing the New Ulaanbaatar International Airport" and that will be signed between the Government of Mongolia and the Japan International Cooperation Agency. The State Great Khural is planned to discuss on the agreement with related standing committees. 

The soft-loan agreement of ¥2.8 billion will be paid back within the next 40 years by the Government of Mongolia, for which it has annual 0.2% interest was approved by the State Great Khural in May, 2008. 

In March 2013, during the visit of the Prime Minister of Japan Shinzo Abe to Mongolia, it was agreed between two Governments to start its construction. 

It is arranged that the new funds will be equivalent to the previous loan terms and will be funded with soft loan source. 

Link to article


Additional credit agreement for new airport to be consideredMontsame, February 3

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Energy Minister receives US Ambassador

By B. Amarsaikhan

Ulaanbaatar, February 3 (MONTSAME) The Minister of Energy D.Zorigt received Tuesday the Ambassador Extraordinary and Plenipotentiary of the USA to Mongolia Ms Piper Campbell.

Mr Zorigt mentioned that the consultants of the US Agency for International Development has served in the development of Mongolia's general legal document on Energy, the Law on Energy which was adopted in 2001, and cooperated actively in introducing to Mongolia's energy sector the model of one purchaser and in establishing the Energy Adjustment Bureau. He said that the USA has made enormous contribution in settling the contemporary tariff system.

The wind turbines of the General Electric have been operating normally since the commissioning of the Salkhit Wind Park, located in Sergelen soum of Tov aimag, added the Minister.

"In regard of the upcoming implementation of the Second Millennium Challenge Account program, the Ministry intends to include its intention to establish Thermal Power Stations in ten aimag centers in the financial plan of the program" he said and requested the Ambassador's support on this matter.

He also asked the Ambassador to study the possibilities for the USA to share its practices with Mongolia on promoting energy sector with legal provisions, and to invite again the experts who co-developed the tariff system in Mongolia.

Ms Campbell thanked the Minister for receiving her and expressed her satisfaction with the expansion of Mongolia-US relations in energy sectors. She also promised to pursue the requests of the Minister and put efforts to mobilize them.

Link to article


Chairman of Standing Committee on Environment, Agriculture meets US Ambassador

By B. Khuder

Ulaanbaatar, February 3 (MONTSAME) Head of the parliamentary Standing committee on environment, food and agriculture S.Batbold Monday received Ms Piper Anne Wind Campbell, the Ambassador Extraordinary and Plenipotentiary of the USA to Mongolia.

Expressing the satisfaction with meeting the US Ambassador, the Standing committee head underlined the Mongolia-USA relations and cooperation have been developing in many spheres. He thanked the Board of the Millennium Challenge Account (MCA) for making a decision to involve Mongolia in the second Compact Contract, and then said the previous project has been implemented successfully.

Mr Batbold emphasized Mongolia is working to make the agriculture and food priorities of the national economy although the mining sphere plays a crucial role in it, so the country intends to augment the meat production and to export it to foreign countries.

Thanking the Standing committee head for an audience, the US Ambassador pointed out the MCA's next project is about to be realized in Mongolia. So, Ms Campbell recommended that Mongolia now should analyze factors causing difficulties to the national economy because the project will be implemented at a high level in terms of time and development range.

The Ambassador said she is confident the US side will deepen the ties and collaboration with Mongolia in it. 

Link to article

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