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Blue Wolf Mongolia Countdown: 51 days left till liquidation
Mogi: hmm, if that revoked order was not for issuing licenses, then what does this make of the Mining Ministry’s statement that it did concern exactly that. What the H is going on?
Entree Gold Provides Update on Status of Licences in Mongolia
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 27, 2013) - Entrée Gold Inc. (TSX:ETG)(NYSE MKT:EGI)(FRANKFURT:EKA) ("Entrée" or the "Company") advises that, contrary to reports in the media, the Oyu Tolgoi LLC-Entrée Gold joint venture mining licences have not been cancelled. The Company has today received official notification from the Mineral Resources Authority of Mongolia ("MRAM") advising the Company that, while the joint venture mining licenses MV-15225A and MV-15226A have not been revoked, Order No. 167 issued on July 10, 2009 by the Ministry of Mineral Resources and Energy has been cancelled. This Order concerned the registration of reserves related to the joint venture deposits which is one step in the process to convert an exploration licence to a mining licence. Order No. 167 was not concerned with issuing of the mining licences.
The Company understands that the joint venture mining licenses MV-15225A and MV-15226A have been put under suspension for a temporary period. This suspension means that Entrée is not allowed to sell or transfer the licences for the time being.
The Company believes it followed all Mongolian laws and regulations in conjunction with the issuance of the joint venture mining licenses. These licences were issued to Entrée as a condition precedent to the Investment Agreement between Entrée's joint venture partner Oyu Tolgoi LLC (formerly known as Ivanhoe Mines Mongolia XXK), Rio Tinto International Holdings Limited, Turquoise Hill Ltd. (formerly known as Ivanhoe Mines Ltd.) and the Government of Mongolia in October 2009.
To help ensure that this matter is resolved as soon as possible, the Company will work with Oyu Tolgoi LLC, who, as manager of the Oyu Tolgoi mining complex, is responsible for maintaining the licences in good order.
Mogi: no news from the meeting this morning so far. Thrilling indeed.
Mongolia puts pressure on Rio Tinto ahead of Oyu Tolgoi talks
February 27 (Reuters) The cancellation follows a string of complaints by the Mongolian government over Oyu Tolgoi, which is controlled by Rio Tinto through its Turquoise Hill Resources unit, in the lead-up to a presidential election due in June.
The fight is crucial to both sides. At full tilt, Oyu Tolgoi will account for nearly a third of Mongolia's economy, while Rio Tinto is dependent on Oyu Tolgoi to drive growth outside its massive iron ore business. (Mogi: “dependent” I think is too strong of a description of their reliance on OT)
Mongolia's Mining Ministry this week said it had cancelled a decision made in 2009 when it converted into mining licenses the Shivee Tolgoi and Javhlant exploration licenses held by Oyu Tolgoi and Entrée Gold.
Mongolia is now reviewing the decision, originally part of the 2009 investment agreement for Oyu Tolgoi, to ensure the move was valid.
Oyu Tolgoi owns an 80 percent interest, and Entree a 20 percent interest, in production from the mining licenses.
"At this time, the company has not received formal notification from any government agency regarding the status of the licenses and is seeking clarification," Entrée told the Toronto stock exchange.
The move on the Shivee Tolgoi and Javhant mining licenses adds to other issues unsettling Oyu Tolgoi just as it ramps up for commercial production, due to start in June.
Rio Tinto has vowed to negotiate hard to protect the pact and said it would not start selling copper from the project until the problems were resolved.
"Subject to the resolution of these issues, first commercial production from Oyu Tolgoi is scheduled to commence by the end of June 2013," Rio said in a results announcement on Feb. 14.
Among the issues raised by the Mongolian government, it has accused Oyu Tolgoi of failing to pay taxes and overspending on the project, which is eventually expected to produce 425,000 tonnes of copper and 460,000 ounces of gold a year.
Following the first meeting of Oyu Tolgoi shareholders on February 8, which was adjourned for the Lunar New Year holiday, Finance Minister Chultem Ulaan said no tax had been paid for the mine in 2012.
Rio said that was incorrect, adding that it had agreed in 2010 to lend the government $250 million in the form of a "tax pre-payment (Mogi: $150m was tax prepayment, while the $100m was dividend prepayment), with repayment coming in tax credits."
There was also a dispute over development costs, which Mongolia's president said had surged above $7 billion. Rio contends the project is on budget at $6.2 billion.
The government says the additional costs would mean waiting 14 years more to collect on dividends, whose distribution is blocked by the terms of the pact until investors have recouped their original investments.
There are also reports that the government has antagonized the company by temporarily freezing the project's bank accounts.
An Oyu Tolgoi spokesman declined to comment, and Mongolia's tax authorities could not be immediately reached for comment.
Mongolia fears the agreement may not be in its best interests. Some within government would like a majority stake in the project, in which Mongolia now has a 34 percent stake.
Others feel the aggressive actions are designed to play to nationalist concerns ahead of this year's presidential election.
Promises to close the mining sector to foreign investment were used by candidates at Mongolian parliamentary elections last year to try and attract votes.
Disputes would continue until after the election, said Chris MacDougall, managing director of Mongolian Investment Banking Group.
"Then we'll see the rhetoric change and Oyu Tolgoi progress. I don't think we will see any material changes for Oyu Tolgoi," MacDougall said.
Mogi: not true it seems
Mongolia revokes key Oyu Tolgoi licences
February 27 (FT) Mongolia has revoked the licences (Mogi: no it has not) for a key portion of the Oyu Tolgoi copper-gold mine, amid a mounting dispute between Rio Tinto and the Mongolian government over costs, revenues and taxes.
Rio is meeting with the government on Wednesday and Thursday (Mogi: just Wednesday, statement to be made Thursday), as the two sides are under pressure to reach agreement before funding runs out for the $6.6bn mine. If an agreement is not reached either the mine will suspend operations or Rio will extend credit to the mine, according to a person with direct knowledge of the matter.
Oyu Tolgoi is one of the largest undeveloped copper mines in the world and is controlled by Rio, with the Mongolian government holding a one-third stake. It is set to begin commercial production in June but has become mired in an increasingly acrimonious dispute with the government, as the Mongolian parliament questioned budget overruns and raised concerns over the government’s share of revenues from the project.
Mongolia’s economic growth has been fuelled by mining developments, but overseas investment dropped sharply after a new law on foreign investment was passed last year, and some investors say they are concerned by an increasingly difficult investment environment.
The latest turn of the Oyu Tolgoi quarrel was the Mongolian government’s announcement late on Tuesday that it had annulled the mining licences (Mogi: technically not true) – held by Canada-listed Entrée Gold – for the areas immediately surrounding the Oyu Tolgoi licence.
Although the licences were not directly owned by Rio (Mogi: neither is OT. Rio owns 13%, TRQ owns 11% of Entrée, 2 largest shareholders), Oyu Tolgoi had an agreement with Entrée Gold to jointly develop the rich mineral deposits that are a continuation of the Oyu Tolgoi vein.
Rio stands to suffer from the revocation of the mine licences because Rio is Entrée Gold’s biggest shareholder, with 23.6 per cent of the shares. The area covered by the licence contains 25 per cent of the inferred mineral resources of the Oyu Tolgoi vein, according to Financial Times calculations based on technical reports.
The dispute is the first big test for Sam Walsh, Rio’s new chief executive, and Jean-Sebastien Jacques, the recently appointed head of its copper division. Oyu Tolgoi is one of the miner’s most important growth projects, as Rio seeks to diversity its earnings beyond the Pilbara iron ore deposits in Western Australia, according to analysts.
In a speech to an investor conference in Florida on Tuesday, Mr Walsh repeated his concerns about “recent political signals” from Mongolia that had “called into question” certain aspects of the investment agreement between Rio and the government of Mongolia.
“This puts at risk future investment, not only by Rio Tinto, but also by others who are considering investing in Mongolia,” he told delegates.
Entrée Gold had an agreement with Oyu Tolgoi to jointly develop the Heruga and Hugo North Extension areas, with Oyu Tolgoi taking a share of up to 80 per cent in the joint venture. Those two areas have inferred resources of more than 25bn pounds of copper equivalent, according to technical reports.
Entrée Gold said in a public statement it was seeking clarification on the status of its licences, and had not received “formal notification from any government agency regarding the status of the licences”. Mongolia wants to transfer the licences to Oyu Tolgoi (Mogi: as per the OT Investment Agreement said Mongolian government),, according to a government statement, thus allowing the government to enjoy greater revenue benefits from the Heruga and Hugo North Extension areas.
Rio has already pushed back a decision on whether to proceed with the second stage of the project, which will expand underground operations. This will be made in the first half of next year when a feasibility study has been completed.
BCM: OPEN LETTER TO MEMBERS OF THE MONGOLIAN PARLIAMENT AND THE GOVERNMENT & OT INVESTORS
February 28 -- The Business Council of Mongolia represents all investors, Mongolian and international, on business climate issues in Mongolia. Our core purpose is to promote investment in Mongolia and foster an open business environment for the prosperity of Mongolia. That is why the BCM is taking this opportunity to share its concerns with leaders in both the private and public sectors over some developments in the past few months.
As a business organization, we recognize that constructive partnerships between the government and private enterprises are essential to keep our country moving forward.
Of recent concern to our members has been the apparent tension between the Government and Oyu Tolgoi, one of the largest private sector projects in Mongolia. The public rhetoric about Oyu Tolgoi over the past two months has worried our member businesses, both Mongolian and foreign managed.
We encourage all parties involved in the Oyu Tolgoi discussions to approach any open issues with a cooperative spirit and a willingness to honor contracts and business practices instead of promoting what might be expedient for any single stakeholder.
Oyu Tolgoi is simply one example of what the international investment community looks at to gauge its desire to invest in a country like Mongolia.
Fundamentally, we all need to pledge to act like reasonable partners and build relationships that are based on trust and respect. We all must work together to send a big, positive signal that Mongolia is ‘open for business.’ We cannot afford to go backward at a time when maintaining foreign direct investment is vital to our economic growth and to the prosperity of all Mongolians.
BUSINESS COUNCIL OF MONGOLIA BOARD OF DIRECTORS
MONGOLIAN MINERAL RESOURCES COUNCIL REGISTERS THE COAL RESOURCES AT THE NUURST PROJECT IN MONGOLIA
Highlights:
· The Mineral Resources Council has granted approval to register the Coal Resources for the Nuurst Project
· This is a significant and critical milestone in the progress towards obtaining a Mining Licence
February 28 -- Coal explorer Modun Resources Ltd (ASX:MOU) (Modun) is pleased to announce that the Mongolian Mineral Resources Council has reviewed and approved its application to have its Coal Resources registered with the Mineral Resources Authority of Mongolia (MRAM).
Under Mongolian Law, a Mining Licence can only be granted on a project where its exploration report, resources and reserves have been reviewed in detail, approved and officially registered with MRAM. This is a significant part of the application process for converting the Nuurst Project from an Exploration Licence to a Mining Licence.
Rick Dalton, the Managing Director of Modun said “This is a major milestone for Modun and it is a significant step towards obtaining a Mining Licence for the Nuurst Project. It is pleasing to see progress of such an important milestone with the Mongolian Authorities and this paves the way for approval of the Mining Licence which keeps us on a 12-18 month timeframe towards first production of coal.”
As part of the next step in the application process, Modun has requested the Ministry of Nature Environment and Green Development to conduct an Environmental Assessment and Impact Report. Once completed, Modun will re-submit to MRAM to have a final review of its Mining Licence application.
Modun: Half-Year Report
February 27, Modun Resources Ltd (ASX:MOU) --
MUB: Bank Facility Details
February 27 -- Mongolian Resource Corporation Limited (ASX:MUB) would like to provide further details of the financing package announced on Monday 25th February. The Facility is a line of credit that is immediately available to the company ensuring MUB full solvency. Interest rate on the facility is 12% per annum over a one (1) year term.
The next choice proposed to the company from Australia was a straight loan at more than 25% interest rate. Repayment of principal is due at the end of year one (1). The bank loan is currently unsecured but the bank will review this depending on drawdown amounts and company progress. An early payout is possible with no penalty.
The board will implement a budget in line with the company situation and cash position and observing the new direction Mongolia is taking. In the interest of all shareholders, the board felt a straight debt solution was the best choice rather than a previously offered highly dilutive share issue. The board will continue to review its position for other finance including share issue as our share price recovers.
Like most Mongolian listed companies, the board sees our current low share price as reflecting Mongolia's current changes to investment environment e.g. new draft mining law etc. The company believes it has an advantage, because of its near production status, high representation of Mongolians on the board and the fact that gold prices remain high. The board will endeavour to make the most of this situation.
Solartech: 2012/2013 Interim Results
February 27, Solartech International Holdings Limited (11
3. TURNOVER AND SEGMENTAL INFORMATION
(a) Reportable segments
…
On 4 May 2010, the Group completed its acquisition of mining operation located in the State of Mongolia and became engaged in the mining business, details of which are set out in the Company’s announcements dated 30 November 2009 and 4 May 2010, and circular dated 9 April 2010. However, no active operation took place between the date of acquisition and 31 December 2012 and therefore the directors of the Company consider that the mining operation did not constitute a business segment as at 31 December 2011 and 2012 and for the periods then ended for the purpose of segment reporting.
…
10. MINING RIGHT
The mining right represents the right to conduct mining activities in the location of Nergui, Delgerkhangai soum, Dundgobi aimag, the State of Mongolia, for a period of 30 years, expiring on 23 November 2039. The mining operating license is issued by the Mineral Resources Authority of the State of Mongolia. It is extendable by 2 successive 20 years each.
11. EXPLORATION AND EVALUATION ASSETS
As at 31 December 2012, the amount represented exploration permits in the locations of Uguujit of Orkhontuul soum in Selenge province and Undur of Bugat soum in Gobi-Altai province, the State of Mongolia. These exploration permits were granted for an initial periods of 3 years. As at 31 December 2012, the residual valid period of the permits was within 4 months. In the opinion of the directors, in the event that the exploration and evaluation works have not been completed before the respective expiry dates of the exploration permits, the Group is confident that it can renew all exploration permits before the respective expiry dates.
…
MANAGEMENT DISCUSSION AND ANALYSIS
…
Mining
The investment environment in Mongolia was quite uncertain after its parliamentary election. The Foreign Investment Act and new acts which prohibit mineral exploration and mining operations in riverheads, reservoir preservation areas and forest regions have been implemented, and a new draft minerals act is also in the course of consultation for revision. The new minerals act is expected to establish new regulations governing the minerals industry. Considering the current economic conditions and the market environment, the Group is updating the feasibility report for the copper mine in Dundgobi Aimag, based on which our management would optimise its decision in relation to the development direction of this project in the future.
The drilling and surveying works for the copper mine in Bayan-Ulgii Aimag, Mongolia, which accounted for 10% of the equity interests for the Group, have not yet completed before last winter. These field works will continue to proceed after the weather becomes warm.
…
A Conversation with Harris Kupperman – Part 1
For long time readers, Harris Kupperman (Kuppy) needs no introduction. For more recent readers Harris is a friend, fellow cynic, hedge fund manager and CEO of Mongolia Growth Group (Ticker: YAK.V). Someone crazy enough (we are very grateful) to move from sunny Florida to Ulanbaatar (Mogi: Ulaanbaatar please Chris) in order to take advantage of the growth there.
February 21 (Capitalist Exploits) Harris writes periodic commentary on his excellent website Adventuresincapitalism.com, which I encourage you to check out.
I decided to transcribe a recent conversation I had with Kuppy, the first part of which you’ll find below for your enjoyment.
——-
Chris: lets talk about this Mongolian political saga first Harris. What do you make of it?
Harris: Politics is always fascinating. The key thing to remember is that Mongolia just had a democratic election last summer. The Democratic Party is now in charge. It is only natural to expect some changes as the new party takes control.
Chris: Indeed, you know OT contributes just 7% to NPV for Rio so RIO walking away from it would not be completely unrealistic. On the other hand OT contributes directly and certainly indirectly to multiples of that for the Mongolian economy and government. In short Mongolia needs OT more than Rio needs OT. Under this setup it seems foolhardy for the government to do anything that seriously puts OT in jeopardy.
Harris: OT is now producing copper. No one wants to stop the mine from increasing production. I really do not expect anyone to do anything that would threaten the mine. There is some discussion over who pays what going forward. There’s a lot of attention paid to this, but we’re talking about small changes overall. I see nothing that will alter my thesis about this one mine totally changing the economic picture in Mongolia. OT will be good for the Mongolian people. OT will be good for Rio Tinto.
Chris: Mongolian equities have been hit hard this last year. As you know we’ve been buying. Is your hedge fund involved in Mongolian equities any longer and if you were not the CEO of MGG what do you think your hedge fund would be positioned like right now?
Harris: I made a conscious decision to exit almost all of my fund’s MSE positions this summer so that I could avoid any perceptions of conflict of interest and we have nearly completed that process. The only position that I will keep is BDSec (the largest broker in Mongolia). That said; I’d certainly be using weakness in share prices on the MSE to add to positions or initiate new ones if I were an investor on the MSE. Mongolia has a very bright future and moments like this are the time to buy bargains.
Chris: MGG has grown unbelievably quickly since inception and you’ve managed to continue to conclude accretive transactions to the company. What does 2013 look like for real estate in Ulaanbaatar and for MGG?
Harris: I think that the current liquidity crisis in the banking system will continue as the central bank fights inflation. This will make it difficult for people to roll over mortgages and it will lead to many construction projects in need of financing. We are actively researching a number of distressed properties and construction projects that we hope to either partner on, or purchase and complete. I think these distressed assets are the real opportunity right now.
In 2012, we were lucky in our timing in terms of exiting a number of non-core properties and generating nice gains. We are now looking to use the decline in prices to acquire additional properties at prices that are a good deal below the highs that we saw in 2012.
In summary, 2013 is a year to be an aggressive buyer, particularly if you have the capital to take over distressed construction projects and complete them. Many of these projects are now being offered at twenty to thirty percent implied yields upon completion. In a world with very low yields, these numbers are quite attractive, especially when you consider that these yields should continue to grow with GDP growth in Mongolia.
Chris: You recently listed your shares on the TSX Venture exchange, which is a substantial improvement from the CNSX. I can actually get a live price quote now! (laughs)
Harris: This was a long time in coming. When we originally did our listing, we were searching for an exchange that would be affordable and let us move quickly with less paperwork and oversight. I wanted to put my money into Mongolia, not legal fees. As the company grew, we realized that we needed to move our listing to a more prominent exchange. It took almost 9 months of paperwork and substantial legal expense, but I’m glad the process is finally over.
Chris: Can you talk about that process?
Harris: Let’s just say that the exchange’s due diligence process is exhaustive. We did 3 separate sets of title opinions on our properties, we had 2 sets of title opinions on our corporate structure, we had a Canadian broker do an on-site visit to see our operations and we had our auditors do a mini-audit to show that our third quarter numbers were accurate. Our books and assets were reviewed by over a dozen independent firms. I’m glad that this process is now done, as it very seriously distracted the management team from running our business. That said, I think it was worth it. Since we listed on the TSX-V, our average daily liquidity has increased substantially and much more importantly, as you say, we now have live quotes that any broker can monitor.
This is all part of the process of turning what was essentially a start-up operation into a very professionally-minded organization. Last week, we had our 2 year anniversary as a company, and it’s amazing to think about how far we’ve come from day one when it was just Jordan and I. The Mongolian economy has done exactly what we expected it to do in terms of growth, but now we have the infrastructure and team to much more effectively take advantage of the opportunities that we see. I think that the next few years will be a period of very strong value creation for our company.
Chris: Uggggh, the paperwork involved running a public company or even a hedge fund just makes me want to blow my brains out. Not a day goes by that I am not grateful for not having to deal with this. On a different note, you spent a little time checking out Cambodia, a country we’ve been looking at as well. What was your overall impression of the place when you last visited?
Harris: I think Cambodia will be a growth story, and a success, but I just don’t see any catalyst. There are lots of poor places that will be less poor in 20 years, and if you get behind that trend it will be good for you. The question is then why Cambodia instead of any other country that is in a similar situation?
Chris: Good question, though if we’re looking at a growth story then we don’t need a catalyst per se. In the growth and success story space there are a few good opportunities, however there are some unique characteristics to Cambodia. Unlike countries such as Myanmar for example, they have a stock exchange and about a dozen listings in the pipeline for 2014 and beyond. Provided they are managed correctly I can certainly see Cambodia attracting not only listed equity investors, but private equity as well with a view that a conduit for exit exists where it previously didn’t.
The other aspect is that of valuation. I mean I like some of these emerging or frontier economies, but in some of them the valuations don’t make a whole lot of sense to me. Myanmar at the moment is a little frightening, as every Johnny-come-lately seems to be diving in with scant regard for risk or valuation. Cambodia as a whole doesn’t have a bunch of paper MBA’s swooning all over it and competing with us.
Harris:: Good points.
Chris: Well then, let’s hope to have a beer in Phnom Penh in April at our Meet Up if you can swing it..?
Harris: Love to.
——-
…to be continued…
- Chris
A Conversation with Harris Kupperman – Part Deux
We ended the last post (the first part of a discussion with Harris Kupperman – “Kuppy”) discussing Mongolia and then Cambodia. In this discussion Harris and I moved on to the state of the world economy, and Japan in particular.
February 26 (Capitalist Exploits) --
Mogi: wow! I’ve never seen anyone explain “What’s the Matter with Mongolia?” this well.
TAVAN TOLGOI AND TAVAN CHALLENGES
February 20 (Jargal de facto via UB Post) --
If there are no certain laws that put some sort of restraint on the government and its authority, politicians will readily do anything in order to be re-elected. In Mongolia, a new and young democracy, lawmakers managed to seize the executive power for themselves. This turned the government upside down, altered the meaning of public governance and allowed the government structure to serve small interest groups instead of the people.
Due to distortion in public governance, our economy is experiencing many negative consequences as well as failing to decrease the inflation rate and reduce poverty. Therefore, if we don’t identify the underlying reason of this risk our governance is facing and resolve it properly, some serious harm will begin to threaten our national security.
Five clear challenges faced by Mongolia’s public governance today are illustrated here by the example of the Tavan Tolgoi deposit, which is partly owned by the central government. Recently this has caused much doubt and suspicion, despite the faith and hope it has carried from the beginning.
CHALLENGE I: OVEREXPANDING GOVERNMENT
Government involvement in the economy shrank for the first ten years that followed the democratic revolution. However, it has been expanding back over the last ten years. In spite of big expectations to strengthen the principles of a market economy and democracy, the “reformist” government is encouraging this trend where the government is more involved in the economy.
Cases such as Erdenes Tavan Tolgoi and MIAT have unveiled the corruption nest in state-involved companies where it is possible to steal from public money and property. Furthermore, the government is establishing more state-owned companies regardless of the fact that they witness previous companies like these going bankrupt. When one takes all of these things into consideration, it is absolutely intriguing why the members of parliament are opposed to the idea of privatizing those state-owned companies.
As the government is expanding, more public money is being lost to the wrong hands and our debt is increasing. No one takes any responsibility for the badly planned factories of different kinds that were built with billions of tugrugs. However, it has become a common phenomenon that their deficit is compensated by the money accumulated from taxes paid by ordinary citizens and businesses. Political parties are still building palaces for themselves and dignitaries keep riding their luxury cars.
When there is a decline in the prices of coal, copper, and gold, the government (who got used to toying with the money from public budget) is increasing tax rates instead of cutting its expenditure. Instead of facing and managing a crisis, they are making the people bear every burden. As a result, the private sector can no longer create a surplus and everyone is trying to work for the government.
Our national debt has become twice as big as it was before the negotiations were made with Russia to “fully settle” the debt. And, the Russian debt was the biggest debt Mongolia had ever had. The government today has found a “clever” way to make up its deficits by acquiring foreign loans to implement projects.
The two political parties that formed the government together gambled on the future sales of Tavan Tolgoi coal and received advance payments in order to live up to their previous election promises by distributing cash to people for free. Erdenes Tavan Tolgoi is a state-owned company, which means that the government used the capital of this company for political reasons and misspent it through the Human Development Fund.
We need to undertake privatization in state-owned companies that have no certain owner and allow inappropriate involvement of politicians. We need to introduce a system where representatives of shareholders are given a term to have a seat on their representative board.
CHALLENGE II: UNACCOUNTABLE GOVERNMENT
Public property now belongs to whichever political party wins the election and is only serving the interests of a certain group. Accountability is overly dependent on the relationship between political parties, which is why some corruption cases have a culprit and some don’t.
When the business environment is unstable and confusing, no investment – domestic or foreign – is made in the economy. There are now changes made in laws before almost every election destabilizing the business environment in Mongolia. This is causing foreign investors to demand for a stable agreement. As a consequence of making these special agreements, many different business environments are set in one country which makes it impossible to provide supervision and oversight.
Politicians are not held accountable for the decisions they make. So, they are comfortably making changes to the laws anytime they want and are creating favorable conditions for companies they like. There is an absence of an opposition party that is supposed to provide scrutiny over decisions and the two winning political parties usually establish a coalition government. On top of that, members of parliament are appointed as ministers. Therefore, an accountability system in governance is on the verge of vanishing.
The younger generation of Mongolians are all aspiring to get into politics because politicians, especially those who get to have a seat in the parliament or government, are provided with every chance that allows them to chase their own interests without being held accountable for their unlawful actions.
The current Prime Minister and other ministers were all present when Erdenes Tavan Tolgoi established an agreement with Chalco. It is an utterly irresponsible action that, after the two political parties spent all that cash for election purposes, they are now attempting to make changes to the agreement claiming it does not benefit Mongolia.
CHALLENGE III: BAD GOVERNANCE
It seems that the workforce policy of the government only exists on paper. Efficiency and quality of public services are falling hard because public servants are hired based on their political party preference or place of origin instead of knowledge, education and skills.
Public office has become a tool to serve self-interests and, as soon as a new political party wins an election, almost all of those positions are newly appointed. In a way, they have no other way but to replace some officials because they were appointed to their positions without having the necessary knowledge or skills.
The new government recently announced that the Erdenes Tavantolgoi Agreement was a bad one. They say it needed changes so that Mongolia would benefit from it. It is true that, despite the market price of coal was USD $90, they agreed to sell the first million tonnes of coal for USD $70 a tonne. Also, the agreement set out that, after the first million tonnes, the price of coal will be multiplied by changes in four kinds of price indices (not changes in the price, but changes in the price indices). Therefore, they are now going to sell the coal for a cheaper price that actually outweighs the cost. If there had been a skilled, knowledgeable team, they would have never made such an agreement. On the other hand we see that Oyu Tolgoi has already sold its first three-year’s worth of copper concentrate which hasn’t even been produced yet, for a considerably high price.
CHALLENGE IV: RENAISSANCE OF AUTHORITATIVE GOVERNANCE
Because it is not based on principles, our governance is experiencing changes as time goes by. The principal characteristic of a weak government is authoritative governance. Firstly, it makes numerous structural changes, and then strictly defines what one can do and cannot do. After that, it spends a fortune to check if its implementation is going the right way. This will then comprise the largest proportion of total expenditure. Due to lack of a clear, transparent system that is based on principles and correctly measured results, every action is perceived and assessed by emotions only.
Rights and responsibilities of judicial and enforcement agencies have been greatly extended and the number of postponed court hearings has started to rise significantly. Law enforcement is becoming more and more dependent on political views, positions, connections and election terms. Also, personal or group interests are now more prioritized than the public interests are.
Chief officials in state-owned companies today are sending their resignation letters claiming they are quitting for personal reasons. Even the chief of Erdenet suddenly requested to “step down.” The ruling political party then just appoints one of its members to the newly vacated position. This is often before resignations letters are even sent. Changing positions in public office by means of “personal reasons” or “threatening” is much easier for these people because it is not followed up with questions and inquiries.
Furthermore, there is a trend that middle-and lower-level officials in public governance are being threatened to be held accountable and replaced. This sort of replacements is definitely not a sign of an improvement in public governance. It is a sign that public offices have turned into a tool for trading. Governance over public property has become more secretive.
There is an emerging desire to set prices with an authoritative approach rather than by market economy principles. The supply of certain goods can be altered in the short term by creating a reserve, but it cannot be accomplished in the long term. In order to avoid a shortage of goods, market competition must be created. A monopoly supply, on the other hand, has to be broken down using authoritative measures so that consumers will have a broader range of choices.
CHALLENGE V: LACK OF VISION
Every branch of government operations is now governed by election terms. However, a proper policy in public governance should be based on long term outcomes and public interests rather than short term outcomes and the interests of a select few.
The Mongolian government’s short term policy is now aimed at chasing away investment from third neighbor countries and letting the two neighbors to fill in that gap. However, Russia and China are not trying to attract foreign investment; they are working to acquire more technology.
Due to the increasing lack of long term policy and vision, our economy is going after short term income instead of improving its competitiveness. Therefore, social labor productivity is not increasing. Basically, despite owning no capital, we have begun to dismiss foreign investment.
We are misusing and wasting our long term capital because we fail to have a long term vision. No one is saying a word about the Pension Fund anymore. They had no interest to maintain the Resources Fund. That is why they turned it into the Human Development Fund and used it only for bribery during elections.
There is no long term thinking, which is why air pollution is only discussed in autumn and winter, but gets totally forgotten about in summer. They are going to lay the foundation stones of the 5th power plant for the seventh time because construction will take more than five years.
In summary, we, the Mongolian people, are losing our reputation due to our inability to overcome these five abovementioned challenges. A business agreement is not something you can toy with. The fate of a market economy is closely dependent on contract enforcement. However, our government is far from enforcing an agreement because it does not even manage to follow the agreement they established. Politicians and their associates who lack knowledge and skills are representing the government and conducting poor negotiations with foreign countries and companies. A Mongolian should always live up to his promises. We have a saying, “A lost horse can be caught, but a given promise cannot be retrieved.”
If they want a change now despite having already established the agreement during the coalition government, will future governments keep making the same demand?
The government is a governance structure and it does not belong to any political party. Therefore, it has to inherit everything, both good and bad, from the previous government. Isn’t it clear that, if there is no inheritance, it will eventually pose a risk to our economy and national security?
We, the Mongolian people, have to stand together as one and successfully overcome these five challenges with all costs. Let us have a vision that is as wide as our beautiful steppe.
Mongolia cancels tax treaty with the Netherlands because the Dutch encourage tax abuse
February 27 (Tax Research UK) I’ve just had it drawn to my attention that reports suggest that Mongolia has cancelled its double tax treaty with the Netherlands.
The Google translation of the original Dutch report says:
Mongolia at the end of last year the tax treaty with the Netherlands canceled because it claims to be the victim of multinationals that the Dutch tax laws used to evade taxes in Mongolia. It is exceptional that a country with a tax unilaterally terminates
If that is the reason then Mongolia is entirely justified: most tax treaties with the Netherlands are used to exploit the domestic tax law of the country with which it has concluded a treaty. It’s my suggestion that many more countries could benefit from following Mongolia’s example. The Netherlands is an aggressive tax haven and needs to be sanctioned if it is to be forced to change its behaviour.
They might also want to do the same with Ireland.
Related:
PwC Tax Alert, 3 January 2013: Update on the Cancellation of Mongolia’s Double Tax Treaties with Netherlands, Luxembourg, Kuwait and UAE
Belarus, Mongolia agree to exchange high-level visits, business delegations
MOSCOW, 26 February (BelTA) - Belarus and Mongolia will exchange high-level visits and business delegations. This and other issues were discussed in a meeting between Ambassador Extraordinary and Plenipotentiary of Belarus to Russia Igor Petrishenko and Ambassador Extraordinary and Plenipotentiary of Mongolia to Russia and Belarus Doloonjin Idevkhten in Moscow, BelTA learnt from the press service of the Belarusian diplomatic mission.
The Ambassadors discussed a wide range of issues of cooperation between Belarus and Mongolia, including the development of the legal framework and trade-economic relations.
The diplomats confirmed the commitment to continued engagement across all areas of bilateral relations, including within the framework of international organizations.
Diplomatic relations between Belarus and Mongolia were established 24 January 1992. In 2012, the export of Belarusian goods to Mongolia amounted to $112 million (up 44.8% as against 2011). Belarusian major exports were oil products ($84.3 million, up four times), transport vehicles and farm machines ($21 million), food, wallpaper, medicines. In 2012 Belarus started exporting cranes ($115,000), footwear ($91,000), and cotton fabric with artificial fibers ($71,000). Belarus exports more than 110 items to Mongolia.
Mogi: on TV it said the law bans import of foods without Mongolian, English or Russian labels. Reading from below you don’t that impression. Which is it?
NEW FOOD SAFETY LAW REQUIRES FOOD LABELS TO BE ONLY IN MONGOLIAN, RUSSIAN AND ENGLISH
February 26 (InfoMongolia) New law – Food Safety Regulations will be in effect beginning March 01, 2013. This new law regulates hygiene and safety of food and food materials during preparing, processing, producing, packing, labeling, storing, transporting, selling, serving and importing and exporting stages. A person or entity that are in the food and beverage industry must fully be responsible for their actions and any damages to customers due to negligence in their service.
Highlight of the law are:
· Environmental impact study must be done before starting the operation.
· Food must only be exported and imported by legal entities that are registered in Mongolia.
· Exporter must be contracted either directly to the state factory or their authorized seller.
· Importer must import products from a plant or factory that has implemented all appropriate food and hygiene standards.
· Food products that have more than two thirds of its expiration period are only allowed to be imported.
· Importer must have or contracted with organizations that have storage facilities and transportation vehicles that satisfy all appropriate standards.
· Food supplements, yeast, food that is produced with new technology, bio organism sourced food items that are registered and without international labels must not be imported.
· Food label must only be in either Mongolian, English or Russian languages.
· Animal and vegetable products' Importer must notify appropriate authorities and agencies 30 days in advance to shipping.
· Bio organism sourced raw food products that are not registered and evaluated by risk assessment must not be supplied to the market.
Teaching Against the Odds: I ......... English at my school. a) study b) to study c) am studying
February 27 (The Mongolist) The Ministry of Education (MoE) regularly gives students multiple choice tests in order to compare student and school performance, to check teachers are teaching the correct material, and to award medals and honors. Regardless of how one feels about the efficacy of standardized tests as a tool for assessing performance and educational outcomes, it is difficult to defend the practice of giving students tests riddled with mistakes and testing knowledge outside the prescribed curriculum, yet this routinely happens.
English exams from the MoE are distinguished by their mistakes, multiple right answers, lack of right answers, questions on non-English language based knowledge (e.g. How many legs does a butterfly have?) and inclusion of vocabulary or grammar inappropriate for the testing level. After every official MoE test my students come to me all worked up because they didn’t understand many of the questions. They are justified in their worries because often the material in the tests is from a higher level of the curriculum than they are studying or is nowhere in the 7 years of English curriculum at all. When a 9th grade student who is just starting to learn about irregular verbs (eat-ate, run-ran; etc) takes a test on English idioms not covered in the coursework such as "my father is a big cheese at work," what chance of success does she have?
To add to the frustration, even when students are given questions on material they have studied in class, it may be wrong or misleading. The best example is when there are two or more correct answers but only one is considered correct by the official graders. The title of this post is an example of this type of question, and it is from an actual test. I can honestly say that even as a native speaker of English, I probably could not get one-hundred percent on the MoE tests.
It doesn’t have to be this way. The MoE has resources at its disposal if it seeks out assistance. Aside from all the native English speakers teaching at private schools and educational organizations in Ulaanbaatar, there are over 100 Peace Corps volunteers working in schools across the country who are potential contributors to improved testing materials. The best service any native English speaking educator can provide is proofreading and assessing the grading criteria for the tests--tasks that are not difficult to coordinate with minimal administration. I live only about 30km (18mi) away from my province’s MoE educational center, but to my disappointment I haven't yet been asked to help design or grade tests. If my students fail a high quality, well-designed test on knowledge I have covered with them, then I have failed them as a teacher. But if they fail a test filled with mistakes and impossible questions, then the system has failed them. The only thing my colleagues and I can do is try to sooth their bruised egos.
About the Author
Sarah (Sadie) Munson currently lives and works in Umnugobi Province as an English teacher. She holds a bachelors degree from the University of Montana and a Masters of Human Ecology from the University of Wisconsin. Her professional interests and experiences include primary and secondary education, child development and family education, and community development. She can be reached at sarahmunson@gmail.com
UNESCO supports efforts to end violence against women in China and Mongolia
Recently, the UNESCO Beijing Office has been converging and intensifying its contribution to efforts to end violence against women in China and Mongolia, teaming up with governmental partners and other UN Agencies.
February 26 (UNESCO) -- …
In both China and Mongolia, UNESCO has started a pilot project, with funding from its Intersectoral Platform for a Culture of Peace, to strengthen the capacities of youth and young women to prevent and respond to violence, using mobile and internet technology to convey information on laws, legislation, services available and promote community assisted reporting. A recent project proposal submitted to the UN EVAW Trust Fund, in collaboration with UNFPA and UN Women, if successful, will allow UNESCO to amplify actions under this pilot project and to enhance capacity building and awareness on the Mongolian law against domestic violence, as called for in the Memorandum of Understanding signed between UNESCO and Mongolia on 9 July 2011.
Violence against women is one of the most widespread violations of human rights, and is defined by the United Nations as “any act of gender-based violence that results in, or is likely to result in, physical, sexual or mental harm or suffering to women, including threats of such acts, coercion or arbitrary deprivation of liberty, whether occurring in public or in private life”.
Published statistics on the prevalence of the problem, where available, have been questioned. Nevertheless there is widespread recognition of the need for focused and continued action to support policy and strategic operations to end violence against women in Mongolia and China, including within the UN Development Assistance Frameworks (China 2011-2015) and (Mongolia 2012-2016).
UNESCO’s contribution to the UN Taskforce project in China is being implemented at zero additional cost (only staff time for research and writing). The Organization received US$1.3 million for the UN EVAW project in China (2009-2012). Its own Intersectoral Platform for a Culture of Peace provides US$75.000. And UNESCO has also requested US$300.000 out of 1 million for the UN EVAW project in Mongolia.
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“Mogi” Munkhdul Badral
Cover Mongolia
Email: mogi@covermongolia.mn
Mobile: +976 9999 6779
Skype: mogibb
