MGG the Heavy Hand of Government Lightens Up

7/31/2019 MGG the Heavy Hand of Government Lightens Up

1/3

Below, is a translated version of the DPs action plan (Mongolian to English). Should the DP be

VXFFHVVIXOLQLWVHIIRUWVZHH[SHFWWKH\ZLOOEHLQSRZHUIRU\HDUVWRFRPHWRWKHEHQHWRIWKH0RQ

golian people and foreign investors alike.

The main concepts of the action plan:

'HYHORSDQHFRQRP\EDVHGRQWKHH[SDQVLRQDQGSURVSHULW\RIWKHPLGGOHFODVVFUHDWLQJWUXH

value

5HGXFHWKHUROHRIJRYHUQPHQWLQWKHSULYDWHVHFWRU

(QVXUHDQHTXDOLW\EDVHGVWUXFWXUHRIGHPRFUDF\

)RFXVRQWKHGLVWULEXWLRQRIZHDOWKEDVHGRQPHULWDQGVHHNWRHOLPLQDWHFRUUXSWLRQ

The main action plans:

,PSOHPHQWEXGJHWQDQFHDQGPRQHWDU\SROLFLHVGLUHFWHGWRFRQVLVWHQWO\DGGUHVVWKHQHHGV

of its people, and to create a long term self-supplying and internationally competitive economy

,QFUHDVHWKHQXPEHURIMREVUHGXFHWKHGHSHQGHQF\RQJRYHUQPHQWDQGDKDOWWRFDVKKDQG

outs. Going forward, social welfare will focus on child poverty, veterans and the disabled.

'HFUHDVHGHFRQRPLFGHSHQGHQF\RQWKHPLQLQJVHFWRUWRHQVXUHPRUHVWDEOHDQGVXVWDLQDEOH

growth.

%ULQJ3XEOLF3ULYDWH3DUWQHUVKLSVWRDQHZOHYHODQGFUHDWHDPRUHEXVLQHVVIULHQGO\OHJDOHQ

vironment.

3UHSDUHWKHIXWXUHZRUNIRUFHE\LQFUHDVLQJWKHTXDOLW\RIHGXFDWLRQ

We have reviewed the DPs action plan, which was passed earlier this week during an ex

traordinary session of parliament. Investors should be very encouraged and impressed by

WKHGHWDLOVRIWKLVSODQZKLFKZHYLHZDVDFULWLFDOLQHFWLRQSRLQWIRU)RUHLJQ'LUHFW,QYHVWment. Not only was the oppositions effort to renegotiate the OT agreement defeated, the DP

proposed and passed a thoughtful, free market approach for Mongolias future. While the

opposition has vowed to not give up on an effort to renegotiate the OT agreement, inves-

tors should dismiss further rhetoric as noise as this plan is iron clad for the next 4 years

This is especially positive for investors in RIO (Rio Tinto) & TRQ (Turquoise Hill, formerly

Ivanhoe), as headline risk on OT can now be put to rest. It is also clear to us that the DP wil

amend and reform prior restrictive and damaging mining legislation, while maintaining Mon

golias sovereignty and independence.

The Heavy Hand of Government Lightens Up

The New Government

W

Nick Cousyn

&KLHI([HFXWLYH2IFHU

[email protected]

^Zd^:^

^

1


2/3

,QFUHDVHWKHSUROHRIWKHFRXQWU\E\SURPRWLQJ0RQJROLDQFXOWXUHDQGKHULWDJHDQGVXSSRUW

national sports and athletes

,QFUHDVHJRYHUQPHQWWUDQVSDUHQF\UHPRYHFRUUXSWLRQDQGEXUHDXFUDF\IURPJRYHUQPHQWVHU-

vice, and ensure government employees act more like civil servants as opposed to privileged

bureaucrats

More detailed action plans:

5HIRUPWD[SROLF\HVSHFLDOO\LQWKHQDQFHVHFWRUZLWKDSXUSRVHWRVXSSRUWEXVLQHVV

5HGXFHLQWHUHVWUDWHVWRVLQJOHGLJLWVIURPWKHPLGWHHQVFXUUHQWO\

5HIRUPWKHFDSLWDOPDUNHWV

6KLIWLQWRDV\VWHPZKLFKDGGUHVVHVWKHLQDWLRQSUREOHPLQDIUHHPDUNHWPDQQHULQVWHDGRI

instituting government mandated price controls

5HGXFHXUEDQL]DWLRQ

6XSSRUW6PDOO DQG0HGLXP(QWHUSULVH 60(VZKRVHDQQXDO UHYHQXHGRHVQWH[FHHG

billion MNT. Support for SMEs will exclude the following industries: mining, oil products import

and export, mobile phone operator, vodka, spirit, and cigarette production. SMEs not in these

sectors will receive tax rebates of 90%

&UHDWHQHZMREV

6XSSRUWWKHGHYHORSPHQWRIIROORZLQJVHFWRUVZLWKSURSHUHFRQRPLFSROLFLHV

o Manufacturing

o Cashmere

o Milk and traditional herding

o Tourism

o Bio and information technology

o Manufacturing of import replacing and export products

o Services

Our conclusion:

7KHQH[W\HDUVZLOOEHDVLPSRUWDQWDVHYHUIRUWKHQHZO\IRUPHGJRYHUQPHQW7KHELJJHVWSURMHFW

in Mongolias history, Oyu Tolgoi (OT) is nearing production and will have a massive impact on the

economy. The more important part of this action plan is implementing policy that supports long term

economic growth.

This is a welcome change from the prior administrations policies, which focused on large deals with

LQWHUQDWLRQDOLQYHVWRUVRQLWVZRUOGFODVVPLQLQJSURMHFWVDQGIUHHFDVKKDQGRXWVWRLWVFLWL]HQV7KLV

KDVOHIWWKHFRXQWU\WRVWUXJJOHZLWKKLJKLQDWLRQDQGWRRPXFKGHSHQGHQFHRQWKHRXWVLGHZRUOG

for its economic growth. This time, the new government has come up with a number of fresh ideassuch as reforming the education system to give the next generation the skills they need to succeed.

(FRQRPLFSROLF\ZLOOEHGLUHFWHGWRZDUGVVXSSRUWLQJWKHPLGGOHFODVVDQGJKWLQJDJDLQVWLQDWLRQ

,WVYHU\FOHDUWKDWWKHQHZJRYHUQPHQWLVGHWHUPLQHGWRVSHQGDORWRIPRQH\RQWKHGHYHORSPHQW

SURMHFWVDVZHOODVLQIUDVWUXFWXUH7KHEHVWZD\WRGRWKLVLVWRSDUWQHUZLWKLQYHVWRUVZKRVHFDSLWDO

would stay in the country for the long term via robust and transparent capital markets. We believe

this will lead to structural reforms in Mongolias capital markets, in particular, on its current legal

IUDPHZRUNZKLFKZRXOGXOWLPDWHO\KHOSVROYHORQJVWDQGLQJOLTXLGLW\LVVXHV

Institutional Sales & Research Department

2


3/3

The information contained in this report is for general information purposes only. This report and its content is copyright of BDSe-

curities and all rights reserved. This report- in whole or in part- may not, except with the express written permission of BDSecurities

be reproduced or distributed or commercially exploited in any material form by any means whether graphic, electronic, mechanical

or any means. Nor may you transmit it or store it in any other website or other form of electronic retrieval system. Any unauthorised

use of this report will result in immediate proceedings.

The report has been prepared by BDSecurities Joint Stock Company. The information and opinions contained herein has been

compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith. Such information

KDVQRWEHHQLQGHSHQGHQWO\YHULHGDQGQRJXDUDQW\UHSUHVHQWDWLRQRUZDUUDQW\H[SUHVVRULPSOLHGLVPDGHDVWRLWVDFFXUDF\

completeness or correctness, reliability or suitability. All such information and opinions are subject to change without notice. This

document is for information purposes only, descriptions of any company or companies or their securities mentioned herein are not

intended to be complete and this document is not, and should not be construed as, an offer, or solicitation of an offer, to buy or

VHOODQ\VHFXULWLHVRURWKHUQDQFLDOLQVWUXPHQWV,QQRHYHQWZLOO%'6HFXULWLHVEHOLDEOHIRUDQ\ORVVRUGDPDJHLQFOXGLQJZLWKRXW

limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising out of, or in connection with the use

of this report and any reliance you place on such information is therefore strictly at your own risk.

This publication contains forward-looking statements that involve known and unknown risks and uncertainties. These statements

are based on our own information and on information from other sources we believe to be reliable and generally indicated by the

use of forward-looking terminology such as believe, expect, estimate, plan, project, may, will, should or other similar

words that express an indication of actions or results of actions that may or are expected to occur in the future. You should not place

undue reliance on these forward-looking statements, which apply only as of the date of this publication. Any opinions or estimates

KHUHLQUHHFWWKHMXGJPHQWRI%'6HFDWWKHGDWHRIWKHSXEOLFDWLRQDQGDUHVXEMHFWWRFKDQJHDWDQ\WLPHZLWKRXWQRWLFH

BDSecurities may, to the extent permissible by applicable law or regulation, use the above material, conclusions, research or anal-

ysis in which they are based before the material is disseminated to their customers. Not all customers will receive the material at

WKHVDPHWLPH%'6HFXULWLHVWKHLUUHVSHFWLYHGLUHFWRUVRIFHUVUHSUHVHQWDWLYHVHPSOR\HHVUHODWHGSHUVRQVDQGRU%'6HFXULWLHV

PD\KDYHDORQJRUVKRUWSRVLWLRQLQDQ\RIWKHVHFXULWLHVRURWKHUQDQFLDOLQVWUXPHQWVPHQWLRQHGRULVVXHUVGHVFULEHGKHUHLQDWDQ\

WLPHDQGPD\PDNHDSXUFKDVHDQGRUVDOHRURIIHUWRPDNHDSXUFKDVHDQGRUVDOHRIDQ\VXFKVHFXULWLHVRURWKHUQDQFLDOLQVWUX -

ments from time to time in the open market or otherwise, in each case either as principal or agent. BDSecurities may make markets

LQVHFXULWLHVRURWKHUQDQFLDOLQVWUXPHQWVGHVFULEHGLQWKLVSXEOLFDWLRQLQVHFXULWLHVRILVVXHUVGHVFULEHGKHUHLQRULQVHFXULWLHV

underlying or related to such securities. BDSecurities may have recently underwritten the securities of an issuer mentioned herein.

Disclaimer

BDSec Headquarter BDSec Express Branch

Zaluuchuud Avenue 27-1

8th Khoroo, Sukhbaatar District

Ulaanbaatar, Mongolia

3KRQH)D[

Website: www.bdsec.mn

Express Tower

Peace Avenue

Ulaanbaatar, Mongolia

3KRQH)D[

Email: [email protected]

Institutional Sales & Research Department

SKRQHID[PDLOUHVHDUFK#EGVHFPQ WUDGHUV#EGVHFPQ

Dagiijanchiv Chuluunbaatar

5HVHDUFK

email: GDJLLMDQFKLY#EGVHFPQ

Odbayar Oyunbaatar

5HVHDUFK

email: [email protected]

Sainbayar Jadamba

,QVWLWXWLRQDO6DOHV


Munkhtulga Ganbold

+HDGRI,QVWLWXWLRQDO6DOHV


Nick Cousyn

&KLHI2SHUDWLQJ2IFHU


Documents

MGG the Heavy Hand of Government Lightens Up