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BUSINESS COUNCIL of MONGOLIA NewsWire
www.bcmongolia.org [email protected]
Issue 216 – April 6, 2012
NEWS HIGHLIGHTS:
Business
Chalco to buy control of SouthGobi Resources;
Trafigura purchases 5 percent stake in Golomt Bank;
Prophecy Coal to raise USD 800 million for Chandgana power plant;
Black Ridge tests for rare earths;
FeOre prepares for construction at Ereeny project;
Guildford uncovers fluorite deposit;
Petro China's request for more land raises questions;
CGBEM operations create unrest in Uvs;
MIAT to focus on Asian routes;
XacBank debt offering hits the road;
Chalco, Rio, and Ivanhoe all benefit from SouthGobi deal;
Oyu Tolgoi awards contract for Levelok braking systems;
Hogan Lovells advises Macquarie Capital on USD 85 million placement by Petrovis;
Khan Bank and Mandal Insurance sign first ever Banker’s Blanket Bond policy;
Haranga appoints new non-executive director;
Undur Tolgoi Minerals appoints new director to its board;
XacLeasing appoints new chief executive;
Executive's leave from Mobicom stirs corporate shuffle;
Moody's downgrades General Electric.
Economy
Mongolian petroleum importers turn to South Korea to diversify supply;
President's visit to Germany establishes economic cooperation;
Moody's considers downgrade to Mongolia’s four largest banks;
Mongol Bank bolsters national currency with gold holdings;
PricewaterhouseCoopers LLP survey finds growth in salaries and benefits;
Mongolia’s boom turns Germany’s head;
U.S. investment consortium opens for Mongolian business opportunities;
New lab opens to study pollution from mining;
Mongolia ranks fifth globally in IQ abilities;
Key political risks to watch;
Analysts lose confidence in copper prices;
Sorting out conflicting data on China's economy;
China to allow more foreign investment in its capital markets;
More flooding in Australia keeps coking coal prices afloat.
Politics
Cabinet to submit Securities Law to Parliament in spring session;
City government offers up more land;
Parliament sets spring agenda;
Environmental group protests nuclear power plant construction;
Elbegdorj arrives in Kyrgyzstan;
Elbegdorj to attend NATO conference;
Mongolia and United States celebrate 25 years of diplomacy;
Vietnamese Association receives license to operate as NGO in Mongolia;
German, Mongolian delegates collaborate for development of private sector;
Mongolian tensions increased by Chalco's offer for SouthGobi;
Government's responsibility toward mining;
How ethics of public servants influence public governance;
NATO's Central Asian Strategy. *Click on titles above to link to articles.
SPONSORS
Khan Bank Eznis Airways
Kempinski Hotel Khan Palace Mongolian National Broadcasting
Mongolian Star Melchers Breakthrough PR
Asia Pacific Securities Oxford Business Group
LETTER FROM THE EDITOR
Dear Readers, Thank you to the 76 members who participated in our NewsWire survey. Your input and comments are gratifying. BCM's NewsWire will continue to deliver the most comprehensive English source of Mongolian business, economic, and political news. Providing pertinent information to our members and stakeholders in Mongolia's private sector is of paramount importance to BCM. As the editor, my primary focus is to deliver the news as best I can to our audience. That means tailoring every article to the Mongolian perspective and summarizing them to be short and digestible. This also entails a format that is both engaging and intuitive. I can imagine staring at 45 articles can look overwhelming at first glance, which is why we have always had our titles up top so readers can skim them and read those that look most interesting. Also, as a rule articles will not exceed 350 words, with the occasional exception made for complex and important news. Today there are others providing a similar service as BCM's NewsWire. I would like to remind our readers, however, that BCM is a Mongolian NGO which has no sales pitch to deliver. The news is delivered as unbiased and fair as we can make it, sometimes even more so than the original article. Presenting news that does not appear in the other email news distributions is another priority. Making use of our in-house translator who puts local news into English is one way we do this. A bit more editorial work is also applied to make some news more clear or balanced than it may have originally been.
It is a real pleasure to read all the positive feedback from our members. If you have any specific comments or suggestions for the NewsWire, please feel free to contact me at [email protected] with the subject line ―ATT: NewsWire Editor.‖ I also invite our members to take their thoughts and comments to our Facebook page for further discussion of the topics presented in NewsWire each week. Regards, Terrence Edwards Editor-in-Chief BCM's NewsWire
BUSINESS CHALCO TO BUY CONTROL OF SOUTHGOBI RESOURCES Chalco agreed to buy up to 60 percent of SouthGobi Resources Ltd. and will make a tender offer of C$8.48 per share by July 5, a 29 percent premium over its closing price last Friday. The Chinese firm has signed a lock-up agreement with SouthGobi Resources current 57.6 percent major shareholder, Ivanhoe Mines Ltd. The proportional offer will be made by way of a takeover bid circular under British Columbia law and will be made to all SouthGobi Resources shareholders. The deal will allow SouthGobi to offer up to 100 percent of its salable coal to Chalco, with the latter obligated to purchase the coal at market prices over 24 months. Chalco would also assist SouthGobi procure electricity for it operations through a direct connection to grid power, or through development of a conveniently located power plant. It would also provide support to SouthGobi Resource‘s coal-haul highway project. ―This is a very surprising acquisition and should be positive to Chalco‘s share prices as earnings growth in the company‘s aluminum business is limited and diversifying into coal is a good move,‖ Robi Tsui, an analyst at BOCI Research, said. He added, ―Chalco is debt heavy but it is a central government-owned company and should have no problem in terms of funding, and have no danger of default,‖ he added. Chalco is a subsidiary of Chinalco Group which owns a 12.9 percent stake in Rio Tinto PLC, which in turn holds a 51 percent stake in Ivanhoe Mines, the majority stakeholder in the Oyu Tolgoi project. Chinese miners have been stepping up overseas acquisitions of natural resources to feed the country‘s rapidly growing energy demand. Monday‘s deal was Chalco‘s latest in an effort to diversify from aluminum.
Source: SouthGobi Resources Ltd., Reuters TRAFIGURA PURCHASES 5 PERCENT STAKE IN GOLOMT The world's third largest commodity trader, Trafigura, has bought a 5.02 percent stake in Golomt Bank for MNT 21.2 billion. Its purchase makes Trafigura now the third largest stakeholder in Golomt. The deal follows an earlier purchase of a 10.7 percent stake by Swiss-MO AG in June 2011. Trafigura follows behind Swiss-MO and Bodi International LLC, which has over 80 percent ownership. The purchase comes after a 50.1 percent expansion in the Mongolian banking sector in 2011. The sector-wide net earnings exceeded USD 130 million that year, with assets surging to USD 6.7 billion and bank assets to gross domestic product (GDP) ratio reaching the record-making 86.5 percent in 2011. It's likely this purchase is part of an emerging trend that includes a 4.8 percent stake purchase by Goldman Sachs Group Inc. of Trade and Development Bank of Mongolia (TDB). ―The financial sector is considered as one of the most geared to Mongolia's rapid economic growth, which is being fueled by development of its world class mineral resources,‖ according to a Eurasia Capital source. Trafigura first entered the Mongolian market in 1998 when it started buying copper concentrate from Erdenet Mining Corp. The company sees Mongolia as a top priority in the context of its global expansion strategy, intending to expand its activities to deliver more iron ore, coal, and copper to the Chinese market. In 2011 it secured its first iron-ore and coal supply agreements in Mongolia and started shipments from the country.
Source: Eurasia Capital PROPHECY COAL TO RAISE USD 800 MILLION FOR CHANDGANA POWER PLANT Canadian energy firm Prophecy Coal Corp. expects to raise USD 800 million in debt and equity financing by September this year to build a coal-fired 600 megawatt power plant in Mongolia and
expects to conclude a power purchase agreement with the Mongolian government by May 2012. Joseph Li, a director and chief operating officer of Toronto-listed Prophecy Coal, said that the price is expected to be slightly less than the USD 0.08 per kilowatt the government currently pays for importing electricity from neighbor Russia. The agreement is expected to last at least 25 years. The power plant will be built next to and fueled by Prophecy Coal's Chandgana coal deposit, which has an estimated 140 million tons of coal. An engineering procurement and construction contractor will be selected from a group of six bidders by May 2012. The contractor will be responsible for building and operating the plant, and will also make an equity investment that will result in a 50 percent or 51 percent stake in the project Around 70 to 75 percent of the USD 800 million needed to fund the project will come from debt financing, another 15 percent to 20 percent from the contractor's equity investment, with Prophecy Coal raising the rest from its existing shareholders. Construction is expected to start in early 2013, with the first 150 megawatts of the plant due to start operations in September 2015. Another 150 megawatts will be added every six months thereafter in three phases until 600 megawatts of full capacity is reached.
Source: Reuters BLACK RIDGE TESTS FOR RARE EARTHS Black Ridge Mining has sent out a notice of its due diligence in its rare-earths project, sending investors a reminder of the untapped potential as companies seek out alternative sources to China. If Black Ridge‘s prospect passes the due diligence now underway, it may get the greenlight to mine heavy rare earth ore, such as yttrium, lanthanum, scandium, and cerium. Its plan is to offer an alternative to China, now a source of 97 percent of the world‘s rare earths. The junior would use its Mongolian deposit to target customers in the United States, Japan, South Korea, and India. Japan recently signed a free trade agreement with Mongolia to ensure supplies of minerals including rare earths. The project also could hold vanadium, tungsten, chrome, and scandium, complementing Black Ridge‘s Unaly Hill vanadium project in Western Australia, where the company has an estimated resource of 86 million tons at 0.42 percent vanadium. The project is located in Tuv Aimag, 80 kilometers east of Ulaanbaatar, and is easily accessible via paved roads. There it can take advantage of the road and rail transportation hub, with the city‘s rail connected to systems in Russia and China already. Rare earth ore from Black Ridge‘s project could be transported by rail through Russia to the international port of Vladivostock, enabling the company to export to numerous international markets.
Source: MarketWire, The Australian FEORE PREPARES FOR CONSTRUCTION AT EREENY PROJECT FeOre is permitted to commence construction of infrastructure and other facilities at the Ereeny iron-ore project after receiving government approval for the project's feasibility study. The company has reached this milestone just three months after listing on the Australian Securities Exchange (ASX). The study was approved by the Minerals Authority of Mongolia, with certain provisions related to environmental aspects, local authorities' requirements and renewal or modification of the feasibility study after three years. Approval of the study is an important milestone leading up to when the Ministry of Minerals and Energy will appoint a commission that will decide on the approval of mining operations. The 108.8 million-ton Ereeny iron ore project is located 60 kilometers from the major trans-Mongolian railway line between Russia and China. The project covers approximately 3.26-square meters and extends to depths of over 400 meters. It hosts an indicated JORC resource of 57.3 million tons and 51.4 million tons inferred. FeOre is aiming to have the Ereeny project in operation by the end of 2013. The company hopes to begin transporting its product by rail beginning within 24 months of its listing on the ASX last December.
Source: Steel Guru GUILDFORD UNCOVERS FLUORITE DEPOSIT Guildford Coal Ltd. has discovered fluorite mineralization at its Mid Gobi exploration licensed property. Laboratory results of field grab samples reveal fluorite mineralization with potential ceramic grade. Magnetic survey preliminary findings show a feature overlaying the area of outcrop and grab
sampling location with an approximate size of three-square meters. Initial drilling and further field mapping is scheduled to begin in this month. Exploration will also help determine if there are any other valuable minerals associated with fluorite, such as galena, barite, and sphalerite (lead, barium and zinc).
Source: Guildford Coal Ltd. PETROCHINA'S REQUEST FOR MORE LAND RAISES QUESTIONS PetroChina Daqing Tamsag LLC has requested from the government another 650-square kilometers of land for its oil extraction operations, meanwhile the firm has failed to meet the reclamation requirements imposed by the government. The Memengiin steppe is famous in Dornod for its superb nature, and it has been preserved by the people living there. However, it seems it is inevitable that this land will be consumed by the operations of Petro China for oil exploration and extraction. PetroChina is the main company of the 20 operating at the Tamsag region, where oil reserves are taken and distributed to Sukhbaatar and Dornogobi Aimags. Hundreds of thousands of barrels of oil have passed through the Memengiin plains by truck, bringing great damage to the land. Examinations of the operations of Munkh Oril Trade at Matad Soum made in September 2010 estimated damages to be worth MNT 1.3 trillion. That particular case will be heard at the Bayanzurkh court. The Petroleum Authority and heads of PetroChina agreed in June 2011 to increase the extent of its operations by annexing the 650-square kilometer Toson Uul XIX site. The proposal has been presented to government, and there is word that the Ministry of Mineral Resources and Energy has already given its approval. The company has operated there since 2010. The Petroleum Authority has handed PetroChina orders for reclamations for both 2010 and 2011, which have reportedly since been ignored by the company. Last year the government decided to rescind the company's rights of the site Buire XXII after it had excavated 5.3 million barrels of oil. Although the government ordered that land restoration commenced, there have been no reports of any activity conducted toward that cause. Furthermore, PetroChina has failed to make good on its promise to build an oil refinery, instead sending its production to Hohhot in China for refining.
Source: Unuudur CGBEM OPERATIONS CREATE UNREST IN UVS Residents of Bukhmurun Soum, Uvs Aimag have organized a sit-down strike to protest CGBEM LLC, the owner of the Khar Altat Bag. CGBEM is partly owned by Calgary-based Mongolia Minerals Corp., with exploration rights over the 4,116 hectares of Khar Altat Bag of Bukhmurun Soum. Also there are some 1,000 residents who have taken to protest alongside residents of neighboring community Nogoon Nuur Soum, Bayan-Ulgii Aimag. Protestors have demanded that the company's mining rights be revoked and have sent a letter to head of the Secretariat Ch. Khurelbaatar, and renowned Mongolian singer S. Javkhlan appealing their case. They are asking that the land be conserved and have threatened to hunger strike if drilling begins.
Source: Udriin Sonin MIAT TO FOCUS ON ASIAN ROUTES MIAT is considering changing its business model to become more profitable. The airline is considering giving up at least some of its European routes to concentrate on the Asian region. Flights via the large Boeing 767 plane and the smaller Boeing 737 to Europe during the winter season have only resulted in losses, said MIAT Executive Director Ts. Orkhon. He added that present market conditions have failed to align with demand, competition and cost. However, as a state entity, the airline must keep in mind the importance of Mongolia's relations with Germany and Russia, he said. MIAT is a state-owned firm regulated under the government's instruction, but has historically not received any financial backing from the state. Although Mongolia opened up its air force and air transportation network as early as 1925, permanent air passenger flights were not offered until 1956. It was able to direct local air traffic to create Mongolia's own airline network, despite serious losses in its early days of inception. MIAT managed to renovate its air fleet step by step, replacing its Soviet era TU-154 plans with western classic Boeing 727 and 737 planes in 2002. Last year it leased an Airbus 310 and a Boeing 767. The airline is still looking for financing and investment for the leasing of those planes for the
benefit of foreign tourism and connecting Mongolia to the international community. Source: Unuudur
XACBANK DEBT OFFERING HITS THE ROAD Mongolian lender XacBank started a roadshow this week to pitch a dollar bond to investors in Europe and Asia, becoming the third issuer from the country to approach the market this year. XacBank is hoping to follow the success of Mongolian Mining Corp. and Development Bank of Mongolia, which drew USD 11.75 billion of demand between them, demonstrating the strong appetite from Mongolian credits. ―Real money investors have now opened up for Mongolia, so these issuers are taking advantage of this,‖ said a banker away from the deal. The bank met investors in Hong Kong, Singapore, and London in the last week and may issue a Reg-S bond next week, depending on feedback from investors and the condition of the market. ING Bank and UBS are arranging the roadshow. XacBank's transaction will be drawn from its USD 300 million Euro Medium-term Note program, set up by ING and UBS last year. Bankers in the deal are hoping that investors' appetite for the two recent Mongolian issuers will also apply to XacBank—and will be more than enough to overcome Moody's plan to downgrade XacBank, along with three other Mongolian banks. ―Given the strong momentum and investor sentiment that we have seen towards Mongolian credits, we are hopeful that XacBank will go very well,‖ said a banker close the deal. Moody's, rated the deal Ba3, placed XacBank on review for downgrade, as well as Golomt Bank, Khan Bank, Trade and Development Bank of Mongolia (TDB). Moody's expects XacBank to be downgraded by one notch, bringing its rating in line with the sovereign. XacBank will use the proceeds of the bond sale for debt refinancing and general corporate purposes, said Fitch, which has rated XacBank's proposed bond deal ‗B‘.
Source: Euroweek CHALCO, RIO, AND IVANHOE ALL BENEFIT FROM SOUTHGOBI DEAL When Rio Tinto PLC finally gained control of Ivanhoe Mines Ltd. and its prized Oyu Tolgoi copper-gold mine in Mongolia earlier this year, it appeared probable that it would oversee slimming down of its acquired firm to focus on the massive project. That process has now started. Ivanhoe Mines has announced it had received notice that Aluminum Corporation of China (Chalco) plans to make a proportional takeover bid for between 56 percent and 60 percent of the shares in SouthGobi Resources Ltd. SouthGobi produces nearly five million tons a year of thermal and coking coal, selling it into China. Chalco is a subsidiary of China's state-owned Chinalco group which is Rio Tinto's biggest stakeholder. Despite the collapse of a proposed USD 19 billion alliance in 2009, negotiated when Rio Tinto was under extreme financial pressure, the companies have formed a strong relationship. Chinalco has also expressed some interest in gaining a share of Oyu Tolgoi. The offer for SouthGobi, which values that group at about USD 1.5 billion, will release between about USD 514 million and USD 866 million for Ivanhoe Mines, which has entered a lock-up arrangement with Chalco that binds to tender its shares into the offer. Ivanhoe said it planned to use the proceeds to help fund the development of Oyu Tolgoi. While the sale of a majority of its SouthGobi holding might not be part of a grander design, it will focus more interest on the fate of the other non-Oyu Tolgoi assets within Ivanhoe Mines. The Kyzyl gold project in Kazakhstan and Ivanhoe Australia Ltd. could both be worth up to USD 1 billion each, and they represent a potential billion-dollar cash injection for Ivanhoe Mines if it does pare down to the Oyu Tolgoi interest. It is conceivable that those assets could be distributed to existing shareholders, including Ivanhoe Mines Chief Executive Officer Robert Friedland, to increase Rio Tinto's stake in Ivanhoe Mines while simplifying the companies in the process. That might also make it simpler and cheaper for Chinalco to offer to take out the minorities in Ivanhoe—Rio currently owns 51 percent—to create another partnership between the two companies.
Source: Business Spectator OYU TOLGOI AWARDS CONTRACT FOR LEVELOK SYSTEM BRAKING SYSTEMS Horne Conveyance Safety (HCS), the Canadian subsidiary of South African Horne Group, has installed Levelok chairing and emergency-braking systems on a cage earmarked for Canada-based international company Ivanhoe Mines' Oyu Tolgoi number one shaft, in Mongolia. HCS's order was manufactured by the group's Johannesburg factory over six weeks, and was shipped
to North America on 14 January for supervised installation on the Canadian-manufactured mine cage. The technical development of a solution for the Oyu Tolgoi application was also undertaken at the factory. ―We are sending Horne staff from South Africa to undertake commissioning and final testing of the system,‖ said Eric Bruggeman, an HCS management consultant. ―We shipped some [spare parts] along with the system but for the next five years at least we will be sending our staff to Mongolia to carry out the maintenance on the system. The Horne Levelok system was chosen from Oyu Tolgoi because it provides controlled deceleration when operating on the steel shaft guides used in the project. Additionally, Mongolian mining regulations require an emergency braking system that can arrest the fall of a mine cage carrying personnel if rope failure occurs.
Source: Mining Weekly KHAN BANK AND MANDAL INSURANCE SIGN FIRST EVER BANKER‟S BLANKET BOND POLICY Khan Bank is pleased to announce that it is now protected by a ―Banker‘s Blanket Bond‖ insurance policy, the first ever to be issued by underwriters for a Mongolian bank. As always, Khan Bank strives to be the leader in bringing innovative financial products and services, risk management tools to Mongolia. With the involvement of Mandal General Insurance, the Lloyd‘s of London backed Banker‘s Blanket Bond policy was put into effect starting March, providing Khan Bank with added security and a lowered risk profile. Having a Banker‘s Blanket Bond is a norm in banks around the world as the coverage is mandated by law in many countries. Khan Bank is paving the road for other commercial banks of Mongolia to seek this type of insurance policy by being the first bank to do so and creating awareness. The banking sector of Mongolia would be one step ahead by having this insurance in place for all commercial banks as the sector is geared towards tremendous growth.
Source: Khan Bank, Mandal General Insurance HOGAN LOVELLS ADVISES MACQUARIE CAPITAL ON USD 85 MILLION PLACEMENT BY PETROVIS Hogan Lovells advised Macquarie Capital Securities Ltd. in the placing of 86 million shares of Mongolian Mining Corporation owned by Petrovis Resources Inc. The placement raised HKD 660 (USD 85 million). The Hogan Lovells team was led by Hong Kong partner Terence Lau and included consultant Thomas Tarala, associate Priscilla Lee and paralegal Setlla Wang, all based in Hong Kong.
Source: Hogan Lovells HARANGA APPOINTS NEW NON-EXECUTIVE DIRECTOR Haranga Resources Ltd. has appointed Daniel Crennan as a new member of its board as a non-executive director. Crennan is a barrister who practices primarily in Melbourne and Perth. Crennan‘s areas of expertise include corporation law, commercial law, trade practices, and intellectual property. He is also a former non-executive director of Mongolian coal explorer Hunnu Coal Ltd., and a current director of Castillo Copper Ltd.
Source: Haranga Resources Ltd. UNDUR TOLGOI MINERALS APPOINTS NEW DIRECTOR TO ITS BOARD Mineral explorer Undur Tolgoi Minerals Inc.'s board of directors has reappointed former director Paul Rapello following the resignation of S. Ganbaatar. UTM is entirely focused on Mongolia and owns 100 percent of the Undur Tolgoi mineral exploration license through its wholly-owned subsidiaries. The license consists of 9,620 hectares of property situated 100 kilometers from Oyu Tolgoi. UTM's management is actively reviewing potential acquisitions and strategic industry alliances.
Source: Undur Tolgoi Minerals Inc. XACLEASING APPOINTS NEW CHIEF EXECUTIVE The board of directors of XacLeasing LLC has selected Philipp Marxen as the firm's new chief executive officer to replace D. Jargalsaikhan. Marxen has previously worked with TenGer Financial Group, XacLeasing's holding company, as investment officer. In this position, besides facilitating new investments of the group, he had the opportunity to assist XacLeasing on its strong growth path. Moreover, Phillip has international experience in consulting, entrepreneurship, and finance. He graduated from Goethe University in
Frankfurt, Germany with a Master in Sinology and a Master of Sciences in Business (Finance). Jargalsaikhan announced his resignation on 28 February 2012, citing his desire to focus on his roles in media and civil society.
Source: XacLeasing LLC EXECUTIVE'S LEAVE FROM MOBICOM STIRS CORPORATE SHUFFLE The leave of the director of mobile phone service provider Mobicom Corp. seems to have created disappointment within the company. R. Arvintsogt has stepped up to serve as executive director for a third time. D. Bolor has left Mobicom Corp., the mobile communications arm of Newcom LLC, to serve as the head of Skytel Company, Ltd. Bolor, who had worked at Mobicom for nine years, cited the company's practice of rotating personnel and his interest in not leaving the field of mobile communications as the main reasons for his leave. ―Of course the decision by D. Bolor to join a competitor's company is not in Mobicom's favor, but anyone has the right to make his own personal decisions,‖ said Arvintsogt. Arvintsogt would not go into detail about the new initiatives Mobicom would take under his helm, but mentioned there would be some changes in management. He said communications in Mongolia needs a great deal of investment, pointing out that the mobile phone network technology it uses is outdated. He said his company is looking to upgrade its current third-generation technology to that of the fourth-generation.
Source: Udriin Sonin MOODY'S DOWNGRADES GENERAL ELECTRIC Moody's Investors Service lowered its credit rating on General Electric Co. the equipment provider to Newcom LLC's Salkhit wind farm, noting risks associated with the conglomerate's lending unit. Moody's downgraded General Electric's senior unsecured debt rating by one notch to Aa3, the firm's fourth-highest rating. Moody's lowered its rating on General Electric Capital Corp. (GECC) by two levels to A1, a notch below its parent's rating. The outlook is stable. The actions conclude a review for possible downgrade initiated by Moody's last month. The firm had pointed to new risks the financing unit could pose in the event of another credit crisis. GE defended its credit-worthiness, noting the company has more than USD 80 billion in cash and a healthy balance sheet. Moody's said the risk profiles of market-funded financial institutions, such as GECC, are higher than was previously reflected in their ratings. Though GECC has improved its liquidity and capital levels since the credit crisis, Moody's noted material risks associated with its funding model remain. Meanwhile, Moody's said GE's rating reflects its strong competitive positions and expectations that the company will continue to demonstrate solid operating performance, generate strong levels of profitability, and free cash flow. It expects General Electric‘s performance will continue to improve. It also expects General Electric‘s long-cycle businesses to continue to outperform peers, despite a cautious economic environment and tight credit market conditions.
Source: Wall Street Journal
ECONOMY MONGOLIAN PETROLEUM IMPORTERS TURN TO SOUTH KOREA TO DIVERSIFY SUPPLY Domestic oil importer M-Oil Group plans to import as much as 5,000 tons from a leading South Korean producer, said its chief executive. Largely dependent on Russia for gas and oil, Mongolia has been at the mercy of Russia's agenda, as many have speculated Russian oil producers have raised prices when events do not work in the country's favor. R. Batbayar, M-Oil's Chief Executive Officer, has announced plans to diversify its sources of petroleum products beginning with a shipment of 4,000 to 5,000 tons of gasoline on 4 April. It seems as though past price fluctuations to Russian petroleum products, such as happened in January when gas prices rose over MNT 200 a liter, was a strong drive for the decision. ―Gasoline depletion and unstable prices in the past years gave us all the reasons to find a third source of gasoline for Mongolia,‖ said Batbayar. The Asian partner will deliver Euro-4 standard gasoline, which Batbayar said burns much cleaner and more efficiently than the Euro-2 standard gasoline products used today in Mongolia. The gasoline product is the same as that is sold in Japan and South Korea. The importer also plans to begin selling Euro-4 standard diesel. However, the executive said the supply would only work as an ―emergency source‖ as it is not possible to provide the entire country with South Korean petroleum products. Bottle necks at the
Zamiin-Uud border point limits import to just 5 to 8 percent of the country's annual demand, he said. The company has planned for a monthly import of 1,800 tons that may change depending on demand. Currently the maximum amount that could be imported through the check point at its current capacity is 10,000 tons.
Source: UB Post PRESIDENT'S VISIT TO GERMANY ESTABLISHES ECONOMIC COOPERATION Germany's interest in Tavan Tolgoi is another sign of expanded trade opportunities and diversification. While China will likely remain the main consumer of Mongolia's coal products, other customers such as Japan and South Korea are important to defend the economy from any economic turns to China's economy, such as slowed growth. The Ministry of Foreign Affairs & Trade recently reported on the recent visit by President Ts. Elbegdorj, confirming a strategic relationship between the Germany and Mongolia and cooperative efforts in industry. During the visit officials signed an agreement that initiates the planning for a coal-to-liquid (CTL) fuel plant. The factory would be equipped with the latest environmentally friendly technology. Preparation work would comprise two years of research and five years of construction. The ministry also reported a positive review from German officials after inspecting an analysis of the coal produced at Tavan Tolgoi. No trade agreement was made, however. Elbegdorj also received a positive response to his initiative to establish a Mongolian-German joint university of technology. German officials plan to come to Mongolia to begin work on this issue this month.
Source: Udriin Sonin MOODY'S CONSIDERS DOWNGRADING MONGOLIA‟S FOUR LARGEST BANKS Moody‘s Investors Services Inc. is considering downgrading four Mongolian banks by one notch, bringing them in line with the rating it has given to the sovereign. Khan Bank, Trade and Development Bank of Mongolia, Golomt Bank, and XacBank could all have their ratings cut. The review follows the release of Moody‘s new rating implementation guidance last month, which stated that any company or bank rated above a country where it is based needs to not only be ―fundamentally stronger than the sovereign,‖ but also be insulated enough from any domestic woes that would follow a sovereign default. The review is being done in other countries besides Mongolia, including Turkey, Brazil, India, and the Philippines. But there are few banks in India and the Philippines rated higher than the sovereign, a Moody‘s analyst said. Mongolian banks‘ exposure to the country‘s boom-bust economic cycles is their main credit vulnerability, given the volatility of commodity prices, according to Moody‘s. The rapid growth in domestic lending—Mongolian loan volumes jumped by more than 70 percent last year—is another concern, it said. But while loans have jumped in a way that other Asian banking systems would envy, deposits have not kept up the pace, growing by around 40 percent. ―The high volume of unseasoned loans makes the banks more vulnerable to any economic dislocation that could arise in a scenario of sovereign distress,‖ said Moody‘s. The downgrade on the four banks will likely be one notch, which will bring their ratings at the same level as the sovereign, which is rated B1.
Source: Euroweek MONGOL BANK BOLSTERS NATIONAL CURRENCY WITH GOLD HOLDINGS Mongolia is likely to continue backing up its national currency with gold holdings at its central bank, predicts the source. According to the National Statistical Office, money supply increased by MNT 1.37 trillion, or 28.2 percent year-on-year, and reached MNT 6.24 trillion. The Bank of Mongolia reported last month that international investment comprised USD 175.85 million worth of monetary gold as of December 2012 compared to USD 91.56 million's worth the year before. Nearly doubling from the year before, gold now apparently comprises 3.74 percent of Mongolia's monetary supply. Mongolia added 1.2 tons to take gold reserves to 3.5 tons, according to the International Monetary Fund (IMF) last December. Discussions in Parliament regarding the Oyu Tolgoi project has led to a debate over whether it is best to deposit gold into the Bank of Mongolia or export it for sale. Parliament debated how it could handle reserves of between 1,800 to 2,000 tons of gold from Oyu Tolgoi. Current independent estimates measures gold resources at almost 21 million ounces, plus an
additional 25.4 million ounces of inferred resources. The source predicts Mongolia's large untapped deposits of gold would make Mongolia a major holder of the commodity, leading it to believe it would continue to increase backing the tugrug with gold. It projected that over the coming year Mongolia's gold holdings will back 10 to 25 percent of the tugrug money supply.
Source: Frontier Securities PRICEWATERHOUSECOOPERS LLP SURVEY FINDS GROWTH IN SALARIES AND BENEFITS PricewaterhouseCoopers LLP (PwC) has released salary results suggesting salary growth, in addition to certain benefits that includes bonuses based on performance. The Paywell Survey analyzes the compensation policies of 29 companies operating in Mongolia during 2011 and 2012 to provide statistics on salary amounts in a range of positions and general polices on compensation and benefits in 2011. Findings indicate that increases in salaries vary significantly for different categories of staff. Sales staffs have seen up to 20 percent growth in salaries compared with 15 percent to operational and administration staff. The survey found that executives support this finding and suggest the range of increases is due to growing demand for specialized personnel in the local market. However, they also suggested that next year salary levels may not increase so quickly. Along with the salary increase companies are focusing more widely on their compensation and benefits system. In particular, policies on providing performance bonuses are developing. More than half of the survey participant provided some form of performance bonus to their employees, mostly paid on an annual basis. The average payout during 2011 was approximately 18 percent of the gross annual salary.
Source: PricewaterhouseCoopers LLP MONGOLIA‟S BOOM TURNS GERMANY‟S HEAD Mongolian President Ts. Elbegdorj is in Germany and has met with his counterpart Joachim Gauck and Chancellor Angela Merkel. The two countries are keen to expand their cooperation in the field of natural resources. With demand for natural resources set to double over the next 30 years, the global race is on to secure access to much-coveted minerals. Mongolia is one of the 10 countries in the world with the most natural resources, harboring abundance of gold, copper, iron ore, coal, oil, rare earth elements, and much more under the surface of its huge land mass. As most of the delegates at the 10th Mongolian-German Forum organized by the center-right Konrad Adenauer Foundation in Berlin agreed last week, current cooperation between the two countries in terms of natural resources is currently at a very low level indeed. However, what they all hailed was the potential. This sentiment encouraged Merkel to visit Mongolia last October, as part of the Berlin government‘s new natural resources strategy, which provides a supportive framework to domestic companies looking to secure minerals. Merkel and her Mongolian counterpart S. Batbold signed an intergovernmental agreement on cooperation in the raw materials, industrial and technology sectors that is also supposed to promote sustainable economic and social development in both countries. Former Mongolian President P. Ochirbat confirmed last week that the agreement had ―created the legal framework for cooperation.‖ ―Now it has to be filled with life,‖ he explained. The first democratically-elected president said that a lot could be learned from Germany in terms of its experience of decentralized administration and its know-how in high-tech and renewable energies. Read more… Wedged between China and Russia, landlocked Mongolia is aware of its need to be more independent, which is why it is seeking ―third partners‖ so intensively, said Ochirbat. Moreover, Manfred Grune from the ruling Christian Democratic Party pointed out it is an ―equal partnership,‖ where both partners can benefit. Mongolia‘s interest in attaining new technologies also makes it a good fit to resource-interested Germany.
Source: DW U.S. INVESTMENT CONSORTIUM OPENS FOR MONGOLIAN BUSINESS OPPORTUNITIES The Embassy of Mongolia in Washington, DC recently hosted the inaugural gathering of the Mongolian-American Investment Consortium (MAIC), whose goal is to leverage Western experience and capital to develop high potential business opportunities in Mongolia. ―There are tremendous opportunities available in Mongolia for dramatic growth in invested capital
together with a once-in-a-lifetime chance to help build the financial, industrial and core infrastructures of this sovereign nation with such a remarkably rich cultural heritage,‖ said Dan Hodges, MAIC‘s first chairman and president of the Medusa Companies. The executive director of the Ulaanbaatar office of MAIC, M. Munkhsaikhan, will be responsible for receiving investment proposals from Mongolia and presenting them to interested consortium members.
Source: Mongolian-American Investment Consortium NEW LAB OPENS TO STUDY POLLUTION FROM MINING A grand opening celebration was held this week in honor of a new laboratory that will focus on analyzing the pollutants that come from mining activities. The institution is a result of a partnership between International South Korean aid organization KOICA and the Mining Reclamation Corporation (MIREC) to conclude the effects mining operations are affecting Mongolia's environment. The initiative is part of KOICA's East Asia Climatic Cooperation project. Since 2011 it has worked on the project investigating the pollution that results from mining operations and establishing a fund to reduce pollution and restore land. Within three years, project organizers have opened a laboratory dedicated to these purposes. The laboratory will be used to examine soil and water samples, in addition to polluted elements that emerge from mining activities. Mongolia will also have the opportunity to take this research to the national scale if these operations are able to attain the USD 1 million worth of equipment it needs. The equipment would be used to conduct detailed analysis of hazardous and heavy metals, organic polluters, and establish the current status of pollution caused by Mongolia on a country-wide scale. Project organizers hope to begin with the analysis of 120 mines in the eastern part of Mongolia.
Source: Zuunii Medee MONGOLIA RANKS FIFTH GLOBALLY IN IQ ABILITIES An English study on the mental abilities of populations around the world has ranked Mongolia fifth with an average IQ level of 101. The study covered people from 113 nations, including China, South Korea, and Russia. At number one was Singapore, followed by South Korea, and Mongolia at number five. At the bottom of the list was North Korea. The study was led by Richard Lynn British, a professor and psychologist, and Finnish scientist Tatu Vanhanen.
Source: Undesnii Shuudan KEY POLITICAL RISKS TO WATCH The following is a summary of key political risks to watch: Capital raising Mongolia wants to launch a USD 3 billion initial public offering of the Tavan Tolgoi coal deposit. State-owned Erdenes-Tavan Tolgoi had been planning to list 29 percent of the company in London and Hong Kong by May, but it cannot until Parliament passes the recently finalized draft of the Securities Law. The initial proposal to hand development to China's Shenhua, Peabody of the United States, and a Russian-Mongolian consortium was rejected so it could include Japanese and South Korean partners. Erdenes-TT will need to raise up to USD 400 million this year. Investors will watch the progress of new laws, parliamentary elections in June (Shenhua has said its negotiations to invest in Tavan Tolgoi are likely to restart after the vote), and more inward investment. The resource ―curse‖ Mongolia's dependence on mining has alarmed environmentalists and opposition politicians, and the country is already showing classic symptoms of ―Dutch disease,‖ including soaring inflation and high interest rates. The government is to bring in structures that would protect against fluctuating commodity prices, and wants to use the proceeds from mining to pay for infrastructure, health and education, and develop other sectors. Under pressure to spread the wealth, the government has extracted pre-payments from foreign firms in from both the Tavan Tolgoi and Oyu Tolgoi projects to give money to the public. Investors will watch how the government uses money from mining projects and how it deals with rapid economic change. Getting on with the neighbors Many of Mongolia's 2.7 million citizens are concerned about growing Chinese and Russian influence. China already dominates Mongolia's economy, buying 90 percent of the country's exports in the first half of 2011. Reliance on Russia and China for fuel, power and transportation also poses a major risk. Mongolia plans to build itself a railway network capable of transporting coal to foreign markets
is likely to be delayed. Investors will watch if these dependencies ease and how the government handles growing nationalism.
Source: Reuters ANALYSTS LOSE CONFIDENCE IN COPPER PRICES Copper traders are the most bearish in two months after stockpiles tracked by the biggest metals bourse rose for the first time in five weeks and Goldman Sachs Group Inc. cut its recommendation on commodities to neutral. Eleven of 25 analysts surveyed expected copper to drop next week, the highest proportion since 6 January. Seven were neutral. Inventories reported by the London Metal Exchange rose 1.4 percent on 27 March, the first gain since 22 February. The retreated the following two days and rose again today. Reserves in Shanghai's bonded warehouses tripled since November and any strengthening in demand next quarter may be ―tepid,‖ Barclays Capital said in a report in March. China is the biggest copper buyer, using two in every five metric tons, and Premier Wen Jiabao cut the nation's growth target to 7.5 percent earlier this month, the lowest since 2004. Economists anticipated a recession in Europe, which accounts for 18 percent of copper demand. That's outweighing signs of an accelerating U.S. expansion and paring this year's rally in prices of as much as 15 percent. Growth in Chinese copper demand will slow to 5 percent this year, from 9.5 percent in 2011, Barclay's estimates. European consumption will drop to 3.71 million tons in 2012, from 3.79 million tons last year. Hedge funds and other money managers are getting more bullish, raising their bets on higher prices by 20 percent to 17,060 futures and options in the week ended 20 March, commodity futures trading commission data shows. That's the biggest so-called net-long position since August. Goldman's research team is forecasting a copper price of USD 9,000 in six months.
Source: Bloomberg SORTING OUT CONFLICTING DATA ON CHINA'S ECONOMY The gap between the official China factory index and the one produced by HSBC Bank Holdings PLC reached its widest point in two years in March, raising an important question: Which has a better handle on the country‘s economic growth? For those who believe that the Chinese economy will have a soft landing, it seems that the more bullish official purchasing managers index appears to be more closely correlated with economic conditions and a better predictor of things to come. Although China's growth in demand for commodities, much of which comprise Mongolian borne minerals and energy products, is not likely to be anywhere near double digits, prices will remain stable. The official purchasing managers index (PMI) rose to an 11-month high of 53.1 in March from 51 in February, topping forecasts of 50.5. A reading above 50 signals expansion. The official measure is also well above the 48.3 of the HSBC index, which barely moved from its February reading of 48.1. The official index is largely based on data from the large state-controlled enterprises that dominate China's economy, while the HSBC measure is more focused on small to mid-sized business. The two indicators suggest that the big end of town is recovering far faster than smaller business. Neither points to a hard landing, and it will be important for the Official PMI to continue to post readings above 50 to assure the worst has past. Third, the weakness in the HSBC index may encourage authorities to relax credit for smaller business in coming months. Apparently, when the official PMI exceeds the HSBC flash measure, the economy is indeed poised for a rebound. Conversely, when the HSBC flash index is above that of the official measure, the economy appears to be heading for a soft spot. The official measure appears better at picking the turning point in the overall Chinese economy, while the HSBC index capture the conditions facing smaller enterprises.
Source: New York Times CHINA TO ALLOW MORE FOREIGN INVESTMENT IN ITS CAPITAL MARKETS China has almost tripled the amount of money foreign institutions can invest in its capital markets, in the latest move aimed at loosening strict capital controls and internationalizing the renminbi. China's speed of development directly impacts Mongolia, as its metals and coals are consumed for China's growth. The China Securities Regulatory Commission has announced that international fund managers would be allowed to invest a combined total of USD 80 billion in China's onshore capital markets—up from the previous limit of USD 30 billion—in an expansion of the so-called qualified foreign institutional
investor (QFII) scheme. Beijing also increased the total amount of renminbi that foreign investors can raise in Hong Kong for investment back on the mainland, from CNY (USD 3.2 billion) to CNY 70 billion. Together the moves will allow the global financial institutions to play a more active role in China's largely closed domestic equity market and breathe life into a market that was one of the world's worst performing last year. On the same day, China's premier Wen Jiabao endorsed bolder financial reforms when he declared that the government intended to ―smash the monopoly‖ of the country's big state-owned banks, for whom he said profits come too easily. His comments appeared aimed at advancing reforms that would remove the current cap on deposit rates and floor on lending rates that guarantee banks a healthy profit margin. The reform is also a necessary step towards full convertibility. Read more… One crucial precondition for full convertibility of the currency will be liberalization of the government-capped interest rates in China, something policy makers have been debating fiercely over the last year. Individuals in China are not allowed to buy or sell more than USD 50,000 worth of renminbi per year and foreign individuals are completely banned from investing directly in China's equity markets. Although the Shanghai Composite Index has fallen 62 percent since its peak in October 2007, foreign institutions have grown their approved investments from USD 24.6 billion to a combined total of 42.2 billion, and they now account for about 1 percent of the total free-float market capitalization in China.
Source: Financial Times MORE FLOODING IN AUSTRALIA KEEPS COKING COAL PRICES AFLOAT BHP Billiton's decision to declare force majeure at mines in Queensland, which produce about one-fifth of the world's seaborne coking coal, could help underpin prices for the commodity while demand from steel mills in Japan and other key markets remains subdued. Australia's loss is Mongolia's gain as any fall in exports from Australia are made up by Mongolia, not to mention the benefits of higher prices. The BHP Billiton Mitsubishi Alliance (BMA) told customers on Monday that it might not be able to honor contracts from its seven mines in the Bowen basin because of recent heavy rains and months of industrial inaction. Analysts estimate heavy rain and industrial inaction have resulted in about two million to three million tons of lost production for BMA since the labor unrest began 10 months ago. BMA primarily produces premium hard coking coal, which has fallen 6 percent this year and trades at about USD 210 a ton in the spot market. But because the market for coking coal is nowhere near as tight as early last year, when production in Queensland was halted because of heavy flooding and prices were pushed to a record USD 330 a ton, analyst say it is difficult to see the BMA's dispute having a big impact on prices, unless there is prolonged industrial inaction.
Source: Financial Times
POLITICS CABINET TO SUBMIT SECURITIES LAW TO PARLIAMENT IN SPRING SESSION The Cabinet has announced that it has completed preparations to its draft Law on the Securities Market and will submit it for review by Parliament in its spring session. The law is set to align the market regulations with the Mongolian Stock Exchange's (MSE's) direction of development, impose regulations and transparency within the financial sector, protect the interests of the public and investors, and improve regulation, supervision, and inspection by the state. Mongolia currently has 88 brokerage and dealing firms. Approval of the law will be a milestone for the development of Mongolia's capital market. It will also provide market education and performance training to market participants, technology for market performance, and investor protection. It will have a heavy influence on the Tavan Tolgoi listing rules as well, which is set to list in London and Hong Kong, but delays and controversy have plagued the Hong Kong listing. Additionally, the law will grant remote access to international brokers after membership rules have been introduced, custody services, and reduced fees. The government also hopes the law will help to advance more general goals such as the implementing state privatization, attracting foreign workers and repatriation, developing domestic firms, and introducing foreign listings.
Source: Frontier Securities
CITY GOVERNMENT OFFERS UP MORE LAND Ulaanbaatar city government has decided to offer up more land for privatization. Mongolian law makes every citizen eligible for a free plot of land to settle. Citizens are able to apply for land until next year for 0.07 hectares of land. However some have complained that very little land is left for privatization around Ulaanbaatar. In response the City Land Office has announced it would designate more land for privatization in its removed districts - Bagakhangai, Nalaikha, Gachuurt, Bayanzurkh, and Songinokhairkhan districts. Bagakhangai will receive citizen requests, beginning 1 May, said a City Land Office official.
Source: News.mn PARLIAMENT SETS SPRING AGENDA The spring session of parliament began on 5 April. According to the Law on Parliament, a decree which arranges the order of issues for discussion must be released at least a week before. T. Magnaisuren, chief of the Parliament office, reported that policy makers will debates 11 issues, including environmental and cultural heritage regulations, in addition to amendments to the Law on Donations, the Law on Innovation. Additionally, Parliament has scheduled time for urgent issues concerning the legal sector. For instance, policymakers have made it a priority to discuss a report on the state budget so they can show a full picture of the state of the nation before elections. Parliament will also discuss the date for elections, as it obligated to announce that date as per the Law on Elections at least 60 days prior.
Source: Undesnii Shuudan ENVIRONMENTAL GROUP PROTESTS NUCLEAR POWER PLANT CONSTRUCTION A Mongolian environmental group staged a protest last Thursday over the government's plan to build Mongolia's first nuclear power plant. More than 100 people gathered in Sukhbaatar Square in central Ulaanbaatar, holding posters and shouting slogans. Mongolian Environmental Protection Organization Federation President J. Batbold demanded Parliament annul the nuclear energy law adopted in 2009, drop the power plant plan, and suspend the issue of a uranium mining permit. The government plans to start construction of the plant in 2021. Mongolia has abundant uranium reserves, estimated at 1.4 million tons. Batbold also asked the government not to accept nuclear waste, which has been a sensitive issue since widespread local media reports last year, denied by the government, that Mongolia was considering receiving nuclear waste from Japan and the United States.
Source: Xinhuanet ELBEGDORJ ARRIVES IN KYRGYZSTAN President Ts. Elbegdorj has made an official visit to Kyrgyzstan. He was invited by head of state Almazbek Atambayev. The president is expected to sign a number of bilateral documents concerning politics, trade and economics. He also intends to hold a Kyrgyz-Mongolian business forum with participation from business representatives of both countries. Elbegdorj has also scheduled time to meet together with Atambayev, Kyrgyz Parliament Speaker Omurbek Babanmov and Parliament Speaker Asiibek Zheenbekov for negotiations. Additionally, the president will meet with students and teachers of Kyrgyz National University and take a trip to visit Issyk-Kul province.
Source: 24.kg News Agency ELBEGDORJ TO ATTEND NATO CONFERENCE President Ts. Elbegdorj is slated to attend the NATO Summit in Chicago from 20 to 21 May. Elbegdorj will be among 50 heads of state and government representing NATO members and NATO partner countries. On 19 March NATO's governing body formally approved an individual partnership and cooperation program with Mongolia to formalize and further develop relations. Preexisting relations stem from participation in Afghanistan and earlier in Kosovo. ―NATO's partnership with Mongolia aims to promote common understanding through consultation and cooperation... based on a shared commitment to peace, democracy, human rights, rule of law, and international security,‖ said NATO. Negotiations regarding the program of cooperation had been ongoing since James Appathurai, a NATO official for Political Affairs and Security Policy, visited Ulaanbaatar for high-level talks in May
2011. There Appathurai met with Prime Minister S. Batbold, former Defense Minister Lu. Bold, and other senior government officials, where he lauded Mongolia's cooperation in U.N. peace keeping efforts. NATO feels Mongolia welcomes the greater ties to ―develop its capacity to support multilateral peace-support efforts,‖ while addressing emerging security issues such as cyber defense. Sources say Batbold, whose government negotiated the NATO partnership, may be unable to attend the Chicago meeting because of parliamentary elections only a few weeks afterwards.
Source: NAMBC MONGOLIA AND UNITED STATES CELEBRATE 25 YEARS OF DIPLOMACY Mongolia and the United States jointly launched an archive exhibition Friday to mark the 25th anniversary of diplomatic relations between the two countries. Speaking at the opening ceremony of the exhibition, Mongolian Deputy Foreign Minister G. Tenger, said since the two countries forged diplomatic ties in 1987, cooperation in the fields of politics, economy, trade, investment, culture, education and defense have developed, and the bilateral relations have been upgraded to a comprehensive partnership. He hoped the exhibition will introduce to the public the development of cooperation between Mongolian and the United States. U.S. Ambassador Jonathan Addleton said his country and Mongolia shared a long history of friendship and exchange, and their relations are marked by the development of partnerships involving commercial ties and people-to-people exchange. Mongolia and the United States established diplomatic relations 27 January 1987.
Source: Xinhuanet VIETNAMESE ASSOCIATION RECEIVES LICENSE TO OPERATE AS NGO IN MONGOLIA Mongolia has recognized the Vietnamese Association as a non-government organization by granting it a license and a seal to operate in the country. At the license granting ceremony last week, Vietnamese Ambassador to Mongolia Hoang Tuan Thinh said the association was a favorable legal entity for Vietnamese people doing business in the country. He expects the association to remind people to abide by local laws and take responsibility for each other in their personal and business lives. About 450 Vietnamese people currently work, study and live in Mongolia. Most are involved in a variety of businesses, such as painting cars, welding, supplying Vietnamese goods, opening restaurants, and photography. On average, they earn between USD 1,000 and USD 1,500 per month. They typically send USD 2 million to USD 3 million in remittances back to their families in Vietnam each year. The association was established in August 2010.
Source: Viet Nam News GERMAN, MONGOLIAN DELEGATES COLLABORATE FOR DEVELOPMENT OF PRIVATE SECTOR The Federal Ministry of Economics and Technology of Germany has hosted the first joint meetings of both the Mongolia-Germany working group and an economic committee of private entities. The working group is responsible for implementing an inter-governmental agreement on cooperating in mineral resources, industry and technological sectors. The meeting the economic committee has been co-chaired by E. Schulz, a head of the committee for the German party and his Mongolian counterpart B. Enebish. A memorandum on the implementation of a project on water supply of Taishir Altai has been signed by both Mongolian and German representatives. Mongolia's MCS Holding and Petrovis LLC, as well as Germany's Lurgi AG have established a memorandum on supplying facilities for liquidizing coal. Moreover, Mongolia's Tsetsens Mining and Energy LLC, Germany's Lurgi AG, and GTLF1 have linked a cooperation contract on coal liquidizing equipment based on GTLF1 technology. Each delegation agreed to cooperate in refining upon a legal environment for geological exploration and the mining sector, to realize a project on liquidizing coal, to collaborate in the renewable energy sector, to reduce pollutant factors, and to establish the Mongolia-Germany Joint academy of mining. The working group's second meeting will run in September 2012.
Source: Montsame MONGOLIAN TENSIONS INCREASED BY CHALCO'S OFFER FOR SOUTHGOBI The head of the Mineral Resources Authority has affirmed that the government has no say in the proposed 60 percent acquisition of SouthGobi Resources Ltd. The acquisition may be raising fears
among Mongolians about China's ever-growing presence in the country's mineral sector. ―According to our current laws, there is no need for any permission,‖ said Mineral Resources head M. Ariunbayar. He added, ―Control over this is something lacking in our laws and we are looking for this to be changed.‖ Ivanhoe Mines Ltd. is ready to accept up to USD 912 million for its current 57.6 percent stake in SouthGobi Resources. It plans to use those funds to invest in its Oyu Tolgoi copper and gold project. The Chinese Aluminum Corporation (Chalco) has offered to buy up to a 60 percent stake in the firm with an agreement to buy up the entirety of its production in the 24 months following the deal and work to provide electricity. The deal comprises mining rights to Ovoot Tolgoi, Sumber, Zag Suuj, and Zagaan Tolgoi and its 500 million coking coal reserves. State-owned wealth fund Chinese Investment Corp. will become up to a 14.4 percent shareholder in the firm as a result of the deal as well.
Source: Undesnii Shuudan GOVERNMENT'S RESPONSIBILITY TOWARD MINING As elections approach the government is caught in the middle of a feud between a populist-driven sentiment among the populace and forward-thinking business policies among those in the financial and mining sectors. Politicians used to run politics for themselves. Now they run it for the nation's leading sector,‖ said the head of the Save the Mining movement, B. Agvaandodov. ―It is true that the contributions from mining in our country cannot be erased. Experts warn that the mining sector's involvement in politics is growing.‖ People associated with the mining sector fear what may happen as elections near. It's impractical to make political decisions based on development for the mining sector, said B. Tuvshintugs, co-director of the Economic Research Institute. She said it instead might only result in disadvantages. At last year's Discover Mongolia mining forum, Bernard Guarnera, chief executive officer of Behre Dolbear, noted that there was uncertainty in taxes, license granting, and regulations. However, he said things used to be much better in these areas, but the situation has only deteriorated. Today Mongolia has over 500 operating licenses of the 1,200 registered by the Mineral Resource Authority. Those license holders fear the government might turn their back on their promises after this year's election in June.
Source: Mongolian Economy HOW ETHICS OF PUBLIC SERVANTS INFLUENCE PUBLIC GOVERNANCE The ethics of public servants are a huge factor in a country's public governance, quality of life, economic power and work efficiency. It is the duty of both the state and society to allow people to monitor public spending and to hold those who have misused public funds responsible for their actions. In the United States primary elections serve as an important instrument in developing and improving public governance, and providing people with adequate information and knowledge. Republican nominee front runner Mitt Romney was recently found to have broken the Massachusetts Public Recording Law, which states that all documentary materials, which are considered to be public records, including documents, computer files and emails of every public official, must be disclosed upon request. Some popular politicians such as Karl Rove and Sarah Palin damaged their careers because they broke these laws by using their own private email accounts when conducting state business. Ken Ard, lieutenant governor of South Carolina, submitted his resignation last week after an investigation found he had used campaign expenditures to purchase an iPad and video game console for personal use. Ard, who had been lieutenant governor since November 2010, was fined USD 48,400 in July 2011 after it was discovered the he misspent campaign funds on gas, meals, hotel and dresses for his wife, and tickets to a football game. If just some of the codes of conduct to public servants in the United States existed in Europe, the quality of its governance would significantly improve. The government tenders would become transparent and secret land trades would diminish. At the very least, government officials would be prohibited from using state-owned cars for their election campaigns. If Mongolia managed to make every public servant in Mongolia follow a code of conduct they have sworn to, it would reduce the future possibilities of misconduct. It may indeed open a door to a better life as well.
Source: UB Post
NATO'S CENTRAL ASIAN STRATEGY Today, China has its eyes on Central Asia as a source of energy raw materials for its expanding economy, as well as a ―critical frontier‖ for its trade expansion and ethnic stability. Chinese state-owned enterprises have penetrated deep into the infrastructure and energy sectors across the region, while the government has sought to increase its soft power by sponsoring a large network of Confucius Institutes in the region's capitals. In what seems to be both a response to NATO's expansion in Eastern Europe and an attempt to keep the United States and China's Central ambitions at bay, Russia—the traditional Central Asian power—has been seeking to expand its power in, and relevance to the region since the late 1990s. Moscow exerts great influence over the politics of Central Asian states and is a crucial market for the region's surplus labor. NATO could go at it alone and try to capitalize on Central Asian regimes' desire for their continual engagement with the region as a counterbalance to Russia and China in return for a permanent base. Although appreciative of Chinese investment, regional states are nonetheless fearful of becoming a ―mere raw materials appendage‖ to China. Russia, on the other hand, is distrusted due to its continuous meddling in the internal affairs of Central Asian states. Alternatively, NATO could forge an alliance with Russia. Russia has proven incapable of contributing to peacekeeping operations there, while Moscow is genuinely concerned about its dwindling economic influence in the region through China. Not only have both NATO and Russia vested interests in curbing drug trafficking and terrorism, but they also have common interests in limiting Beijing influence in Central Asia. As NATO member states prepare for an upcoming meeting in Chicago, there is an urgent need for prompt discussions and contingency planning on Central Asia. Since both Russia and NATO have a broad range of common strategic interests in Central Asia, efforts must be made to pave the way for NATO-Russo cooperation in Central Asia, as this presents the least detrimental option available at NATO's disposal. The author, Nima Khorrami Assl, is a security analyst at the Transnational Crisis Project in London.
Source: Aljazeera
ANNOUNCEMENTS
FUTURE MONGOLIA, 16-19 MAY, UB SPORTS PALACE Mongolia first-ever world-class exhibition, Future Mongolia, will open from 16 to 19 May at Buyant Ukhaa Sports Palace in Ulaanbaatar. Future Mongolia is an international trade fair and conference for sustainable development. Future Mongolia is on the best track to become the leading trade fair in Mongolia for the
international capital goods industry. Industry giants, e.g. Caterpillar, Liebherr and the mining
equipment manufacturer TAKRAF already confirmed their participation. The organizer is confident
that the envisaged number of more than 100 exhibitors will be reached. BCM is a Supporting
Organization for the trade fair. For more information visit the website. Those interested in the
event can call at +49 89 244 41 9370 or email [email protected].
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REGISTER NOW FOR MONGOLIAN MINING DIRECTORY-2013 Mongolian Mining Directory-2013 which provides information database for mining companies, investors, suppliers, service companies, government and non government organizations will be published for the fourth year to commemorate the 90th anniversary of the Mongolian mining industry. The MMD is distributed free of charge to international and domestic mining companies, international conferences and exhibition, embassy offices in Mongolia and foreign country investors. BCM welcomes everybody who is interested in advertising their products and services in Mongolian
Mining Directory-2013 to Mongolian mining industry participants. For more information please visit:
www.mining.mn, www.mongolianminingdirectory.mn or call +976-7011 5590.
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“MM TODAY” on MNB-TV, Fridays at 18:30 [TONIGHT]
BCM is pleased to announce Mongolian National Broadcasting continues its cooperation with BCM on
―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for
18:30 tonight! Tune in to watch this program that reports stories from today‘s BCM NewsWire.
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“BSPOT” ON B-TV, MONDAY TO FRIDAY AT 18:20
B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every
evening from Monday to Friday at 18:20, taking most of the stories from the BCM NewsWire.
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POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' SECTIONS
AND BCM‟S MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS
New for 2012 is a ‗Presentations‘ section on the BCM Mongolian website which can be reached via
link to bcm.mn/itgeluud. Several presentations already posted including 9 from Coal Mongolia on
February 9-10, 2012.
As a key component of BCM‘s Mongolian website, ‗News‘ section, articles from the Government‘s
―Open-Government.mn‖ site are regularly posted.
On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 2 presentations
from BCM monthly meetings on March 26, 2012, 11 presentations from Coal Mongolia 2012, 7
speeches from the Mongolian Investment Summit on December 8-9 in London, several speeches at
the Risk Management Forum on November 8 co-organized by BCM and Mandal Insurance, speeches at
Discover Mongolia 2011, and speeches from BCM‘s monthly meetings in 2011-2012.
Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note "Blitz and Lead" by
Sant Maral Foundation on August 2011, Z. Batbayar, Deputy Director of the Water Authority, at
BCM‘s Environmental Working Group‘s recent meeting and the Polit Barometer-May 2011 from Sant
Maral Foundation.
We are now posting some news stories and analyses relevant to Mongolia on the BCM website's
‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in
the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will
incorporate items that are already on the home page, so that it presents a consolidated account of
the week‘s events.
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NETWORK WITH BCM
The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.
Keep up to date on the latest business deals in Mongolia and how the climate for investment is
improving each day with BCM.
Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-
MONGOLIA/129826330435540 to read the latest announcements and comment on events with the
community. Hear breaking news and announcements as they happen when you follow BCM on
Twitter at http://twitter.com/#!/bcMongolia. Connect with BCM on Linked-in to join the diverse
group of professional contacts creating a better business environment in Mongolia today.
Of course for news information, interviews, and announcements regarding our organization, visit
the official BCM website at bcMongolia.org and bcm.mn.
ECONOMIC INDICATORS
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
Year 2009 *4.2% [source: NSOM]
Year 2010 *13.0% [source: NSOM]
Year 2011 *10.2% [source: NSOM]
February 29, 2012 *12.5% [source: NSOM]
*Year-over-year (y-o-y)
CENTRAL BANK POLICY RATE December 31, 2008 9.75% [source: IMF]
March 11, 2009 14.00% [source: IMF]
May 12, 2009 12.75% [source: IMF]
June 12, 2009 11.50% [source: IMF]
September 30, 2009 10.00% [source: IMF]
May 12, 2010 11.00% [source: IMF]
April 28, 2011 11.50% [source: IMF]
August 25, 2011 11.75% [source: IMF]
October 25, 2011 12.25% [source: IMF]
March 19, 2012 12.75% [source: Mongol Bank]
CURRENCY RATES – April 5, 2012 Currency Name Currency Rate
U.S. dollar USD 1304.25
Euro EUR 1714.31
Japanese yen JPY 15.81
British pound GBP 2074.34
Hong Kong dollar HKD 168.35
Chinese yuan CNY 206.66
South Korean won KRW `1.16
Russian ruble RUB 44.31
Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is
selected from various news sources. Opinions are those of the respective news sources.
