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BUSINESS COUNCIL of MONGOLIA NewsWire
www.bcmongolia.org
Issue 126, July 9, 2010
BCM wishes all readers of the NewsWire a happy Naadam. Our next
issue will be on July 23.
NEWS HIGHLIGHTS:
Business:
Chinalco looks to buy minority stake in Oyu Tolgoi;
More Mongolians employed at Oyu Tolgoi than stipulated, says Minister;
Peabody Energy completes Mongolia's first coal mine restoration project;
Boroo Gold praised for rehabilitation program;
EBRD to lend USD180 million for Energy Resources' coal washing plant;
Eurasia Capital and MonBiz Media launch MonBiz Hong Kong Index;
Entree Gold receives new coal mining license;
MIAT boss says only qualified people can hope to be appointed;
Khan Bank gets USD10 million South Korean credit facility for foreign trade;
New insurance services for bank customers;
Peabody, Winsway join forces in Mongolia;
OT board chairman sees himself as a bridge between partners;
Aspire Mining accelerates drilling at Ovoot project;
Sojitz to expand coal trade 18% with access to Mongolian mine;
Ming Hing buys Mongolian coal mine, to start operation this year;
Discover Mongolia to have two keynote speakers;
Banks share little information, ignoring new law;
MIAT rents aircraft;
First “department store” for construction materials opens;
Indian copper firm eyeing mines in Mongolia;
Japanese firms team up to win international power-plant contracts;
Rio Tinto completes divestment of Alcan Packaging unit.
Economy:
Parliament gives Government go-ahead to hold talks on Tavan Tolgoi;
No timetable set for share sales, says Zorigt;
Majority prefers to receive HDF money in non-cash ways;
PM wants MNT10,000 a month to be paid from August;
IMF advises tightening fiscal policy;
Program taken up to change personal income tax system;
Group set up to facilitate grant of licenses;
The proposed two parts of Tavan Tolgoi;
The five-pronged opportunities of Tavan Tolgoi;
Namibia seeks processing of minerals before export;
Duet or duel: tourism and mining in Mongolia;
AgBank of China IPO could well end up being the biggest ever;
Gillard stops digging mining tax hole;
Australian tax retreat a defeat for the global left;
Taxing troubles;
Miners hail Australian climb-down;
Australian government under new mine tax revenue attack;
Chinese pay disputes mirrored across region;
Chinese wage hikes will move manufacturers up the value chain;
Wen says China faces economic 'dilemmas';
China makes haste slowly with globalizing the yuan.
Politics: President decrees use of traditional script in official documents;
NEA official hopes for quick decision on Dornod Uranium;
MP provoked by ministers’ silence;
Finance Minister says he works for country, not party;
Bid to make MPs more responsive to ethical demands;
Brzezinski to talk on U.S. foreign policy;
Nepal, Mongolia to sign MoU on exchange of financial information;
Mongolia presents gender report at UN Ministerial Review meeting;
Australian MP has no beef with Mongolia;
Exhibition of photographs on Mongolian diaspora;
Japanese company wants to use bacteria in airag.
*Click on titles above to link to articles.
BUSINESS CHINALCO LOOKS TO BUY MINORITY STAKE IN OYU TOLGOI Rio Tinto's biggest shareholder, China's Chinalco, is considering buying a stake in the Oyu Tolgoi project, according to a regulatory filing. Oyu Tolgoi is billed as one of the world's biggest undeveloped mine deposits and is expected to cost USD4.6 billion to build. Rio said it was interested in converting its stake in partner Ivanhoe Mines, which discovered the deposit, into direct ownership of the mine project, Ivanhoe reported in a filing to the U.S. Securities and Exchange Commission. "Chinalco has indicated an interest in acquiring a minority equity stake in the company or acquiring, from the company, a direct minority ownership interest in the OT project," Ivanhoe said in the filing. "Rio Tinto's ongoing discussions with Aluminum Corporation of China (Chinalco) also continue." Rio is in charge of building and operating the mine but its holding in the deposit is indirect, through Ivanhoe. Rio has been holding talks with Ivanhoe about "the potential conversion of its ... equity stake in the company into a direct ownership interest‖ in the project, the filing said. The end result of talks could be a two-way or three-way agreement between Ivanhoe, Rio and Chinalco, it added. On June 29, Rio paid USD393 million to exercise warrants and increase its stake in Ivanhoe to 29.6 percent. Rio has also discussed the mine project with the European Bank for Reconstruction and Development and the International Finance Corp, the finance arm of the World Bank, the filing said.
Source: Mineweb.com
MORE MONGOLIANS EMPLOYED AT OYU TOLGOI THAN STIPULATED, SAYS MINISTER Minister of Minerals and Energy D.Zorigt has revealed that altogether USD758 million is likely to be invested in the Oyu Tolgoi project this year. This does not include the USD400 million worth of work for which domestic companies will be bidding. Mr. Zorigt was testifying before the Standing Committee on the Economy on behalf of the group of Ministers, comprising himself, Minister of Finance S.Bayartsogt, and Minister of Nature, Environment, and Tourism L.Gansukh that is charged by Parliament with monitoring implementation of the project. He conceded that delay in ―our preparatory work‖ had resulted in failure to invest USD47 million at the time planned. The number of Mongolian employees at Oyu Tolgoi was 300 in August, 2009 and has now reached 2,250. This is 70% of the workforce, even more than the 60% pledged in the agreement, he said. A number of ―indirect‖ employment positions have also been created. He confirmed speculation that a new state-owned company called Erdenes Tavantolgoi is proposed to be set up to hold 100% share of the Tavan Tolgoi deposit. Citizens will be allocated 10% of these shares free, while another 10% will be sold at a special price to all domestic companies registered before June 30, 2010. Another 30% will be traded on domestic and foreign stock exchanges.
Source: Undesnii Shuudan
PEABODY ENERGY COMPLETES MONGOLIA‟S FIRST COAL MINE RESTORATION PROJECT Peabody Energy has completed Mongolia's first coal mine restoration project at the former Ereen Mine near Bulgan town in northern Mongolia. The project involved restoration of a 16-hectare area to hardy pastureland with native forage species, and develops a new community well and a surface pond for livestock. "Peabody is proud to work with the Mongolian people to create a model for best practices in mining and land restoration that leaves a valuable legacy," said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. "We have 126 years of mining expertise and a long record of world-class practices in safety, productivity and land restoration. We continue to extend our hand of friendship to help the Mongolian people unlock the energy and economic benefits of their vast coal reserves in a way that preserves their rich environmental and cultural heritage." The completion of the project was commemorated at a ceremony attended by officials from Peabody, the area of the work, the province, and from the Ministry of Mineral Resources and Energy. They recalled how the program had been designed in consultation with the Mongolian government and developed by an international team, which included Peabody environmental scientists and engineers, Mongolian engineers from Peabody's Mongolian joint venture, the Mongolian Agricultural University and Dr. D.Tumenjargal of the Mongolian Forage Seed Producers Association. All the work on the ground was carried out by a local Mongolian workforce. The project has great importance to the Mongolian people, according to a Ministry official, Mr. B. Altsukh. "Bulgan province has always been a pioneer. We had the first Mongolian Olympic medalist from Bulgan, and now we have the first Mongolian coal mine reclamation. This project is the benchmark for responsible mining. It means a lot to us," he said. A key principle of Peabody's mission is to return mined lands to a condition that is equal to or better than before it was mined.
Source: Peabody Energy
BOROO GOLD PRAISED FOR REHABILITATION PROGRAM Boroo Gold, Shijir alt, MonPolimet are among the not many mining companies that have been found to have duly completed rehabilitation work. The State Inspection Agency (SIA) reveals that a review of mining activities has found that over 2,000 entities did not do fulfill rehabilitation requirements in 2009. The agency had special words of praise for Boroo Gold‘s commitment and performance. The company has rehabilitated 52 hectares and will start work on 56 hectares more, following approval of its plans by the Ministry of Environment and Tourism and the SIA. In all this area under rehabilitation, the soil would need weekly irrigation for 3-4 years to help the 10,860 trees planted to survive. The company‘s rehabilitation project covering 207 hectares will be over in 2015 and is estimated to cost USD17.5 million.
Source: Udriin Sonin
EBRD TO LEND USD180 MILLION TO ENERGY RESOURCES FOR COAL WASHING PLANT The European Bank for Reconstruction and Development said Tuesday it has agreed to a USD180 million loan for the construction of the first coal washing plant in Mongolia at Energy Resources' Ukhaa Khudag (UHG) coking coal mine in South Gobi. The new coal handling and preparation plant at the UHG mine will allow Energy Resources to boost exports and increase competitiveness in both international and domestic markets. The EBRD said in March 2009 it was taking an equity stake in privately-held Energy Resources through an investment of up to USD30 million. The Ukhaa Hudag deposit in southern Mongolia, about 200 km north of the border with China, has an expected production life of over 100 years, the EBRD said at the time. Energy Resources is a privately-owned Mongolian consortium, comprising three domestic groups.
Source: www.platts.com
EURASIA CAPITAL AND MONBIZ MEDIA LAUNCH MONBIZ HONG KONG INDEX Eurasia Capital, a Hong Kong-based investment bank, and MonBiz Media Ltd. have launched the MonBiz Hong Kong Index, the first index that includes Mongolia-related companies listed on the Hong Kong Stock Exchange. It will track the share price performance of Hong Kong-listed companies with assets and operations in Mongolia. It is market capitalization-based and is meant to be a leading benchmark for Hong Kong-listed companies with growing activities in the country.
To become a member of the index, a company has 1. to be listed on the Hong Kong Stock Exchange, 2. to have minimum market capitalization of HKD250 million, and 3. to have at least 33% of its market value derived from assets and operations in Mongolia.
Currently, there are six HKEx-listed companies that are members with total market capitalization of USD4.8 billion. They are: Mongolia Energy Co Ltd., SouthGobi Resources Ltd., Kiu Hung Energy Holdings Ltd., North Asia Resources Holding, Solartech Intl Holdings Ltd., and Bestway Intl Holdings Ltd. Speaking at the launch, Mr. Alisher Ali, Chairman of Eurasia Capital, said Hong Kong was becoming an important source of capital for resource companies in Mongolia, and expressed the hope that Mongolian companies from the private sector alone would raise at least USD3 billion through IPOs and equity capital raising in Hong Kong in the next three years.
Source: Eurasia Capital
ENTRÉE GOLD RECEIVES NEW COAL MINING LICENSE Entree Gold Inc. has received a mining license covering its Nomkhon Bohr coal discovery, outlined through exploration efforts in 2008-2009. The new license covers approximately 14,030 hectares in the northwest corner of the former Togoot exploration license. The portion of the property included in the license is mainly underlain by Permian sediments which are known to host rich coal deposits in this part of the Gobi Desert. "We have worked closely with our Mongolian resource consultants and the Minerals Council over the last several months to meet the criteria for a mining license. Our 100% ownership of the property and the 30-year initial term of the license give us many strategic options," said Mr. Greg Crowe, President and CEO of Entree. The Nomkhon Bohr thermal coal occurrences lie within Permian sedimentary rocks thought to be of similar age to those hosting the multi-billion ton Tavan Tolgoi thermal and metallurgical coal deposits. Tavan Tolgoi is located approximately 80 km to the northwest. Two groups are currently mining and trucking coal to China along an improved dirt road that passes immediately north of Nomkhon Bohr. This road is in the process of being paved. A railway, which will follow a similar route to the current road, is planned to service both Tavan Tolgoi and Oyu Tolgoi and provide greater access to markets in China.
Source: www.entreegold.com
MIAT BOSS SAYS ONLY QUALIFIED PEOPLE CAN HOPE TO BE APPOINTED In his first media conference since being appointed Executive Director of MIAT, Mr. Ts.Orkhon recently said that appointing technical and professional personnel with the right qualifications, and solely on the basis of qualifications, was a priority of the present administration of the national carrier. For example, since he took over, MIAT has recruited five people in its marketing service from among as many as 250 applicants. Justifying the presence of around 125 people in security and maintenance work for only two or three planes, Mr. Orkhon said many of them were Mongolians posted abroad. It would have cost much more to appoint foreigners, even if their number was fewer. Repair work on the damaged wing of an Airbus 310 will have to be completed with help from the manufacturers. It will cost around USD 1.3 million, and the aircraft should be ready to fly before the end of this month. Asked when MIAT will be privatized, Mr. Orkhon said they have nothing to do with such decisions of State policy, but indicated that a decision on this was highly unlikely before 2012.
Source: Onoodor
KHAN BANK GETS USD10 MILLION SOUTH KOREAN CREDIT FACILITY FOR FOREIGN TRADE Khan Bank, the largest commercial bank in Mongolia, and South Korea‘s state-owned Export Import (EXIM) Bank have signed a loan agreement to support export and import trade financing in Mongolia. EXIM now offers USD10 million credit facilities to Khan Bank so that it can provide to its clients financial services like credit, guarantee and assurance in the next two years. The two-year credit facility will help companies engaged in foreign trade with its flexible repayment terms, low interest rates, and protection from financial risks. Trade does not have to be limited to South Korea.
Source: Khan Bank
NEW INSURANCE SERVICES FOR BANK CUSTOMERS The National Life Insurance LLC (NLIC) of Mongolia has signed an MoU with two Mongolian entities,
Golomt Bank, and Bodi Daatgal, a general insurance company, and with Sun Reinsurance Brokers of UAE. The goal is to introduce a distribution model in Mongolia that will maximize bank customers‘ services with life insurance through the provision of wider range of products and solutions. NLIC is the first and, so far, only life insurer in Mongolia licensed by the Financial Regulation Committee.
Source: The National Life Insurance Company
PEABODY, WINSWAY JOIN FORCES IN MONGOLIA Coal producer Peabody Energy Corp. has joined forces with Winsway Coking Coal Holdings Ltd. to form a Mongolian joint venture. The collaboration, Peabody-Winsway Resources, was formed after Winsway acquired a 50% interest in the joint venture from Polo Resources. Winsway is the largest off-taker of Mongolian coking coal and supplier of imported high-quality coking coal in China. Peabody-Winsway Resources has coal and uranium licenses in Mongolia, and is actively exploring the South Gobi region.
Source: Zacks.com
OT BOARD CHAIRMAN SEES HIMSELF AS A BRIDGE BETWEEN PARTNERS Mr. G. Batsukh, chairman of the Oyu Tolgoi LLC executive board, was trained as a diplomat and was Mongolia‘s ambassador to Canada and China before returning home in December 2009. His tenure in both countries was marked by an increase in bilateral trade relations. He has said that several international organizations, including UN agencies, as well as multinational companies offered contracts to him before the Ivanhoe opportunity came. He ―clearly understands the expectation Mongolians have from him as also the trust they repose in him‖ and will try his best to ensure that the ―substantial project is piloted properly‖. His fellow members on the Board are ―thorough professionals‖ and have the specific skills and the commitment to take the project forward smoothly to the start of extraction in 2013. He saw himself, ―as others also might‖, as a bridge between partners and was sure there would be no conflict on the way to increasing the Mongolian share in the project. During the construction phase, the ratio between domestic and foreign workers must be 60:40 and Mongolians must get enough chance to work as subcontractors and suppliers.
Source: Onoodor
ASPIRE MINING ACCELERATES DRILLING AT OVOOT PROJECT Since its last update on June 2, Aspire Mining Limited has accelerated its drilling and exploration work at the Ovoot Coking Coal Project in northwest Mongolia with two drilling rigs now working 24 hours a day. A total of 99 samples have been dispatched with further samples and metallurgical test work samples being prepared to be sent to a laboratory in China. There are now three components to the company‘s exploration and drilling program: resource definition drilling, regional exploration of the Ovoot Coal Basin, and metallurgical test work and coal sample analysis for JORC Compliant Resource estimation.
Source: www.aspiremininglimited.com
SOJITZ TO EXPAND COAL TRADE 18% WITH ACCESS TO MONGOLIAN MINE Sojitz Corp. will boost coal trading by about 18 percent after the Japanese trading company won an agreement from Prophecy Resource Corp. to market the fuel to China from a Mongolian mine. Coal trading will rise to about 20 million metric tons a year in the year starting April 1, 2012, from 17 million tons, Mr. Yoshikazu Ichikawa, a spokesman for the Tokyo-based company, has said. Sojitz has agreed to jointly market power station coal from its Canadian partner‘s 208-million-ton Ulaan Ovoo coal deposit. Our purpose is to secure Mongolian coal as a new procurement resource,‖ Mr. Ichikawa said. ―We will market the coal mainly to China and are also looking to sell to Japan.‖ The Japanese trader will start selling 250,000 tons of Mongolian coal in the year to March 2011, and 3 million tons two years later.
Source: Bloomberg.com
MING HING BUYS MONGOLIAN COAL MINE, TO START OPERATION THIS YEAR Ming Hing Waterworks Holdings has acquired Mongolia Tugrug Nuur coal mine owned by Well Delight Holdings and plans to put it into operation by the fourth quarter of this year. Tugrug Nuur is estimated to have 92 million tons of coal, mainly thermal coal used for fuel. The coal mine is expected to produce 100,000 tons each month, totaling 300,000 tons in the first three months of operation. However, the annual production is targeted to be 2 million tons next year and
to reach 8 million tons by 2019. Source: en.sxcoal.com
DISCOVER MONGOLIA TO HAVE TWO KEYNOTE SPEAKERS The keynote speakers at the Discover Mongolia Investors Forum on 8-10 September will be Mr. Bernard J. Guarnera, President of Behre Dolbear Group Inc., and Mr. Warren Gilman, Managing Director and Head of Asia Pacific Region, CIBC World Markets. The Forum‘s main focus will be on Mongolia‘s mining and exploration industry, with emphasis on global and regional trends. ―I am sure having such distinguished speakers will add more excitement to the event,‖ said Mr. G.Ankhbayar, Chairman of the Organizing Committee. This year‘s premier sponsor will be SouthGobi Resources. The Gold sponsors are Erdene Resource Development Corp, Prophecy Resources Corp, Hunnu Coal Limited, Geosan LLC, and Micromine Mongolia LLC.
Source: PRWeb
BANKS SHARE LITTLE INFORMATION, IGNORING NEW LAW The new law under which banks must reveal the names of their directors and major shareholders took effect on July 1. The avowed purpose was to help people decide where to keep their money, depending on what sort of people ran the bank. The other aim, not so clearly stated, was to track the involvement of individuals, mainly politicians according to many, in banking. However, even after a week, the web sites of most banks give information that is too sketchy to help in either. A few do mention names of the members of their executive board, but some do not. Almost none gives any information on shareholding. Four of the major banks give no information at all.
Source: Ardiin Erkh
MIAT RENTS AIRCRAFT MIAT‘s problems have been solved for the time, allowing it to cope with the demands of the peak tourist season. Its international flights schedule was facing difficulties even since one of its three Boeing 737-800 aircraft had been badly damaged during maintenance service in May. Now MIAT has rented an Aerobus 330-300 from a Turkish airlines. The plane is being used for flights to and from Berlin. It has 318 seats and can carry 15 tons of luggage. The pilots have more than 20 years‘ experience of over 20 years. The aircraft was manufactured in 2001.
Source: Udriin Sonin
FIRST “DEPARTMENT STORE” FOR CONSTRUCTION MATERIALS OPENS MonHorus International has turned its Amper House into the country‘s first store for all construction materials under one roof. The inauguration of the ―department store‖ on Monday meets a long-felt need for products and services of international standards of advanced technology. Shopping for goods in the new environment is not merely comfortable, but also offers a wide choice and, what is more, advisory services.
Source: Onoodor
INDIAN COPPER FIRM EYEING MINES IN MONGOLIA State-owned Hindustan Copper has informed an Indian Parliamentary panel of its plans to acquire mining assets in countries like Chile, Peru, Mongolia and Namibia, the Mines Ministry has said. Hindustan Copper has an annual production capacity of 3.2 million tons of copper and is working to increase it to 12 million tons. Source: Business Standard
JAPANESE FIRMS TEAM UP TO WIN INTERNATIONAL POWER-PLANT CONTRACTS Japan has moved to secure its role in the global, civil nuclear sector by setting up a government-backed organization to promote Japanese technology and fight off competition for multibillion-dollar contracts from rivals such as South Korea. Six companies—Tokyo Electric Power Co., Chubu Electric Power Co., Kansai Electric Power Co., Toshiba Corp., Hitachi Ltd., and Mitsubishi Heavy Industries Ltd.—said Tuesday that they have set up a preparatory organization to sell nuclear-power-plant construction and operation technologies overseas. "This is the first, important step toward promoting Japan's nuclear-power technologies in emerging countries by private- and public-sector cooperation," said Mr. Masayuki Naoshima, Japan's Minister of Economy, Trade and Industry, following the joint announcement. The government hasn't
disclosed the value of its planned investment in the group. Of the six companies, Hitachi and Mitsubishi Heavy already are in cooperation with General Electric Co. and Areva SA in the nuclear-power sector. The two Japanese concerns' participation in the six-company organization won't affect their current relationships, and they will continue to work with GE and Areva when necessary. Source: The Wall Street Journal Asia
RIO TINTO COMPLETES DIVESTMENT OF ALCAN PACKAGING UNIT Rio Tinto has completed the divestment of its Alcan Packaging business with the sale of its two outstanding assets. The Medical Flexibles unit was acquired by packaging specialist Amcor for USD66 million, while the Alcan Beauty Packaging unit was sold for an undisclosed amount.
Source: www.miningweekly.com
ECONOMY PARLIAMENT GIVES GOVERNMENT GO-AHEAD TO HOLD TALKS ON TAVAN TOLGOI Parliament approved on Wednesday the Government proposal on Tavan Tolgoi without almost any debate after the Standing Committee on the Economy had finished with it. There some MPs had expressed their reservations about the proposal to distribute 10 percent of the deposit‘s shares to companies registered prior to June 30, 2010. There are 35,000 such companies, and if all of them own shares, ―it might weaken the economy‖, they felt. Their demand for deletion of the provision was, however, rejected by the head of the Committee on the ground that no change was possible at this late stage. What Parliament approved is not any final agreement. It is more correct to say that it has given formal permission to the Government to hold talks and reach a consensus on preliminary conditions with investors interested in certain parts of the Tavan Tolgoi deposit. There is no indication as yet of what the final agreement would contain, or which company or companies will be selected to sign it.
Source: News.mn
NO TIMETABLE SET FOR SHARE SALES, SAYS ZORIGT Minister for Minerals and Energy Dashdorj Zorigt has said in a telephone interview after the Parliamentary vote that no timetable has been set for the share sales overseas or a preference made for where they should be held. The government is still negotiating with overseas mining companies over whether they will help develop Tavan Tolgoi on a contract basis, said Mr. Zorigt. The government will report back to Parliament on the issue later this year, he said. ―We are now working to develop Tavan Tolgoi as fast as we can and hope to go into production in one or two years.‖ Even in the absence of specifics, ―finally there is clarity in terms of the government policy and the way to move forward,‖ said Mr. Alisher Ali Djumanov, chief executive officer of Eurasia Capital Management, based in Beijing. ―We would be a buyer considering the strong long-term potential of this company and the coal sector in Mongolia.‖
Source: Bloomberg.com
MAJORITY PREFERS TO RECEIVE HDF MONEY IN NON-CASH WAYS The Head of the Government Office, Minister Ch.Khurelbaatar, has told the Government that 2,358,432 options have been received about distribution of the allowance from the Human Development Fund in ways other than cash. Many gave more than one option and these have been counted separately. This shows that 87.3 percent of the people are willing to receive the allowances in some non-cash way. - 22.1 percent of those who voted want the money to go to health insurance and pension payment; 9.2 percent preferred health insurance, while 12.9 percent chose pension. - 14.6 percent wanted the money to cover some health service payment, like vaccination, ambulatory diagnosis, and diagnosis and treatment. - 18.5 percent voted for education. - 18.1 percent would use the money to buy an apartment or to pay interest on loans. - 31.4 percent wanted the money to be adjusted against outstanding livestock loans. The opinion poll was part of the exercise undertaken by certain Ministries that have been asked by the Government to devise ways in which every citizen can be granted MNT1.5 million from the Human Development Fund to be constituted with revenues from the minerals sector.
Source: English.news.mn, Montsame
PM WANTS MNT10,000 A MONTH TO BE PAID FROM AUGUST Prime Minister S.Batbold has said the Government proposes, pending Parliament‘s approval, to give from August 1 every citizen MNT10,000 a month from the Human Development Fund. The amount will be raised in stages from 2011, to finally reach MNT21,000. The Government feels that the earlier distribution of MNT70,000 as a lump sum could have been a factor in prices rising and that such risks can be avoided if a lesser amount is given at more regular intervals. Everybody, irrespective of age, will receive the monthly sum. The Prime Minister said the Government expected families to spend the money on education, health, and social issues.
Source: Ardiin Erkh
IMF ADVISES TIGHTENING FISCAL POLICY The risk of a slowdown in the global economic recovery has risen sharply, but governments should continue planning to tighten fiscal policy, the International Monetary Fund has said. Updates to the IMF‘s regular world economic outlook and assessment of global financial conditions, released on Thursday, said jitters in financial markets in May and June threatened confidence and growth worldwide. ―In the near term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk,‖ the world economic outlook said. ―This could lead to additional increases in funding costs and weaker bank balance sheets and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in relative exchange rates.‖ The IMF called for most governments in advanced economies to use monetary rather than fiscal policy as the ―first line of defense‖ to any weakening in demand, in spite of the fact that interest rates across much of the industrialized world are near zero. Read more… The IMF did not change its forecast for 2011, regarding these problems as a threat rather than a central projection. But it warned that the stress in financial markets would pose difficult challenges for policymakers. ―Potential downside economic risks and the strains in interbank and sovereign markets have complicated exits from the extraordinary fiscal, monetary and financial policies initiated some months ago,‖ the report said. The fund was one of the first big economic institutions to call for fiscal stimulus to help the world economy ride the storm created by the credit crunch in 2007-2008. But in recent months it has fallen into line with many others, including the World Bank and the Organization for Economic Co-operation and Development, in emphasizing fiscal consolidation rather than keeping the public spending taps open. ―Most advanced economies do not need to tighten before 2011, because tightening sooner could undermine the fledgling recovery, but they should not add further stimulus,‖ it said.
Source: The Financial Times
PROGRAM TAKEN UP TO CHANGE PERSONAL INCOME TAX SYSTEM An MPRP MP, Mr. D.Baldan-Ochir, has told reporters that he would soon submit a proposal for wide ranging changes in the tax system. He wants all citizens to be included in a general data base, where everybody‘s income and assets will be registered. No income can be concealed, putting an end to the rampant tax evasion and bribery in today‘s Mongolian society. The database will also help in the efficient delivery of social welfare benefits. Mongolians ―hardly ever volunteer information‖ on their sources of income or pay taxes on their total earning, he claimed. A ―tax education‖ program to raise popular awareness has been initiated in partnership with JICA. This will include school lessons on the tax system and the duty to pay taxes. A series of discussions are planned with the civil society, government officials, citizens and professionals to devise practical suggestions on reforming the personal income tax system.
Source: Onoodor
GROUP SET UP TO FACILITATE GRANT OF LICENSES The Government has set up a working group to design an appropriate legal environment to regulate grant of business licenses and to ensure that licensees carry out economic activities under the terms of the licenses. The move is expected to help realize the goals of the Year of Business Environment Reform. Deputy Premier M.Enkhbold will chair the group whose members will be state officials experienced in dealing with business people, and representatives of NGOs and private enterprises.
Source: Montsame
THE PROPOSED TWO PARTS OF TAVAN TOLGOI Some details have emerged on how the Government has been advised by Norwest to divide the Tavan Tolgoi deposit into two parts. The State-owned company will work in the eastern part, which has sites such as Ordiin Tsanhi-1, Burteekh-1, Onch Kharaat and East Bor Tolgoit. Additional exploration works will be needed here, particularly in East Bor Tolgoit. The selected strategic partner will do the extraction in the other part of the deposit which lies more to the west and includes sites like Ordiin Tsanhi-2 and Burteekh-2. The southwest part of Tavan Tolgoi does not fall into either division.
Source: Onoodor
THE FIVE-PRONGED OPPORTUNITIES OF TAVAN TOLGOI The development of the Tavan Tolgoi deposit offers five opportunities for the country: - to define the coal policy of the entire world, - to become industrially developed, - to improve roads, infrastructure, - to achieve high economic growth, and - to attract foreign investment. It also gives Mongolians the opportunity: - to work in one of the biggest mines of the world, - to one of 22,000 participants in a national reconstruction campaign, - to achieve personal development and growth, - to own shares in a big company, and - to get rid of poverty and unemployment. Similarly, there are five opportunities for business entities as well. They can: - work and grow with world class companies, - own shares via the domestic stock exchange, - be one of the 35,000 domestic companies participating in national reconstruction, - be a supplier of Mongolia-made products and services, and - acquire competence to participate in global projects.
Source: Udriin Sonin
NAMIBIA SEEKS PROCESSING OF MINERALS BEFORE EXPORT Namibia wants foreign mining companies to start processing minerals before exporting them to create jobs and enable the government to raise more revenue through export tax, Prime Minister Nahas Angula has said. He said Namibia, which is planning to launch its Transformation of Social and Economic Empowerment Framework (TESEF) program in 2011, would at some point intervene to ensure foreign mines start to add value to minerals and urged them to award more supply contracts to local people. Namibia is one of the world's largest diamond producers and also has minerals such as uranium, while foreign firms are also exploring for gold, lead, zinc and iron ore. ―(The) government is not in favor of the export of Namibian minerals without adding value to them," Mr. Angula said at a recent Rio Tinto meeting. He said little had been done to include locals on boards and managements of foreign companies, and proposed that a fund be set up for the mining industry to facilitate mainly training for Namibians. "Much of what we have seen so far is window dressing and divide and rule type of employment equity," Mr. Angula said.
Source: www.miningweekly.com
DUET OR DUEL: TOURISM AND MINING IN MONGOLIA Back in the 90‘s when the doors to a market economy first opened and privatization began, tourism was the new gold rush in Mongolia. From the single State-owned Juulchin Corporation, 495 registered private tour companies now stake out their portion of travelers to the vast nomadic landscape of Mongolia. ‗Untouched wilderness‘, ‗pristine landscape‘, ‗the last frontier‘, ‗last great expanse‘, are choice words and by no means false testimonies with which millions have been wooed into this country contributing to 10% of GDP. But mining generates more than 30% of GDP, and has always been the dominant industry here. The multi-billion dollar Oyu Tolgoi has set the precinct for the government to eye more of what lies beneath as the only way to lunge the country‘s economy ahead, leaving questions on the survival of those reliant on selling Mongolian soil as the last bastion of nomadic heritage. ―Mining is definitely going to impact the tourism and the ecology of the country‖, says Nara
Delgersuren, Marketing Director of Juulchin World Tours, one of Mongolia‘s largest tour operators. ―It will help in some ways by bringing in more people, expats who‘d want to travel, and also by improving the infrastructure‖. The complete article by Pearly Jacob can be seen on the BCM website, Mongolian Business News. AGBANK OF CHINA IPO COULD WELL END UP BEING THE BIGGEST EVER Agricultural Bank of China Ltd., the last of China's four big banks to go public, raised USD19.21 billion in Hong Kong and Shanghai and is still in the running to pull off the biggest initial public offering of stock on record. AgBank and its advisers set the per-share price for the Hong Kong portion of its IPO at 41 U.S. cents, near the middle of the indicative range, people familiar with the matter said. In Shanghai, its shares were priced at about 40 U.S. cents, at the top end of the range, they said. That means China's fourth-largest lender by assets could raise USD22.1 billion if both overallotment options are exercised, besting its peer, Industrial & Commercial Bank of China Ltd. ICBC's USD21.9 billion IPO in 2006 is the world's largest to date. Even so, the offering falls short of its USD23 billion target, which in turn was well below the USD30 billion top amount that the bank was pushing to raise just weeks ago. The ability to execute the deal despite rocky markets illustrates investors' faith in China's growth story. Global investors view Chinese banks as one of the best ways to gain exposure to the world's fastest-growing major economy. It also highlights China's importance to international capital markets. During the past decade, the country's top lenders have turned to global markets to become more market-oriented, to improve transparency and disclosure, and to fortify their capital bases. Source: The Wall Street Journal Asia
GILLARD STOPS DIGGING MINING TAX HOLE Australia's new Prime Minister, Ms. Julia Gillard, has stopped her government from sinking into a hole of its own making. Reaching a compromise on how to tax mining profits will allow Ms. Gillard to call an election with a troublesome issue resolved. With big mining companies keen to invest again in Australia, tax revenues from their future profits should eventually start swelling the Treasury's coffers, if the reworked mining resources rent tax becomes law. Still, that benefit to the Treasury has been pushed out. New mining projects, for example, won't be liable for the tax until the cost of their investment is covered. Moreover, the cut in the effective tax rate is actually bigger than the nominal reduction of the rate to 30% from 40%. An "extraction allowance" of 25% on all mining projects reduces the effective rate to 22.5%. On top of other technical changes made—the tax can now be based on the market value, rather than book value, of projects—this raises a question over whether Canberra is now being over optimistic about the hit tax revenues will take. The government now forecasts the revamped tax will cost it only USD1.3 billion in potential revenue over the next four years. For sure, the government has made some clawbacks as a result of the compromise. But if tax revenues fall short in the years ahead, further political problems could surface. Ms. Gillard has stressed that it is still a priority to bring the fiscal budget into surplus by 2013. Already, a planned lowering of corporate taxes has had to be curtailed as a result of the concession to miners. Despite the government's climb-down, the compromise with the miners is an immediate political gain for Gillard. But if Australia's other taxpayers end up taking even more of a hit for the miners in the near to medium term, the fruits of peace could start to go off.
Source: The Wall Street Journal Asia
AUSTRALIAN TAX RETREAT A DEFEAT FOR THE GLOBAL LEFT That was fast. Australia's new Labor Prime Minister Julia Gillard took all of 10 days in office to dump her predecessor's punitive tax on mining companies. Mark it down as another defeat for a global left that thought it could use the financial panic to return to its postwar salad days. At issue is the previous government's proposal to sock mining companies with a 40% retroactive "super-profits" tax. Prime Minister Kevin Rudd and then-Treasurer Wayne Swan pitched it as a way to make the miners pay their "fair share" of taxes, but it was really a revenue grab to plug a gaping budget deficit of Labor's own making after a stimulus spending binge. Miners are the country's biggest exporters and a major engine of economic growth, and they fought back with rare unity. The Minerals Council of Australia, which represents the big players, dared to point out that the industry is the country's largest corporate income tax payer, that one man's super profit is another man's pension, and that arbitrary tax changes deter investment.
Sure enough, mining shares dove on the tax announcement, and the companies put billions of dollars of investment on hold from Queensland to Western Australia. At one point after the super-profits proposal, BHP Billiton had lost more of its market capitalization than BP suffered from the Gulf oil spill. Canada's government announced it would be happy to welcome any disaffected companies. The Australian public revolted. Mr. Rudd's approval ratings plunged, the conservative Liberal Party pulled even in the polls, and even Labor state ministers abandoned the PM, seeing their own demise flash before their eyes. Labor dumped Mr. Rudd—the first time an Aussie prime minister has been fired by his own party before contesting an election. Ms. Gillard spun her retreat as a ―breakthrough agreement that moves Australia forward.‖ It is in reality a major defeat for the Labor left, which is discovering that voters don‘t want to return to the days when Australia was a union-run economic backwater. Read more… Having grown up in the union movement, Ms. Gillard is no instinctive centrist in the mold of Bill Clinton or Tony Blair. She has typically favored higher taxes and greater union power. This makes her decision to retreat from the Rudd proposal all the more significant because it shows she understands her party was headed toward defeat if it had persisted. The deal now announced is far from ideal, but the renamed "minerals resource rent tax" is far smaller in scope. The headline rate falls to 30%, and an exemption for exploration costs will make the effective rate 22.5%. The tax will apply only to new investments, only to profits made at the point of extraction (not downstream), and only to iron ore and coal producers, rather than to all minerals. The tax nonetheless makes Australia among the world's most expensive places to mine and sets a precedent for taxing other mineral classes when Canberra thinks that's politically feasible. Smaller miners were excluded from Ms. Gillard's negotiations with the big companies, and they rightly worry they'll be hit harder because the government has dropped promises to reimburse them for taxes paid on failed projects.
Source: The Wall Street Journal Asia
TAXING TROUBLES Mr. Kevin Rudd lost his job as Australian prime minister last month because of his maladroit handling of a planned supertax on the country‘s mining companies. It was not just the proposals that enraged the miners, Australia‘s most powerful lobby; it was the prime minister‘s refusal to consult them. So ferocious was their resistance that Labor started to bleed support from voters in mining areas, nervous about the economic fallout. Ms. Julia Gillard, Mr. Rudd‘s successor, moved fast to resolve the standoff. She has preserved the principle of restructuring mining taxation, but has reduced the tax‘s reach and rate. It remains an advance on the status quo, but the miners have been rewarded for their truculence. The government has given away too much. The purpose of resource taxation is to capture for the nation the ―economic rent‖ of its natural resources – profits in excess of normal rates of return, caused by selling prices far above the cost of extraction. Yet Ms. Gillard‘s tax will apply to just iron ore and coal. While it makes sense to exclude low value mining such as gravel, it is unclear why it should not apply to, say, gold or rare earths. Ms. Gillard has satisfied the miners and relieved a public alarmed by the noisy suspension of mining projects. But there is a cost. General corporation tax will now be lowered to 29 percent, rather than the 28 percent in Mr. Rudd‘s plan. Ms. Gillard has therefore allowed the miners to capture more of the economic rent from their activities than Mr. Rudd would have. That is the price of his mishandled reform. Read more… The tax is structured so the government takes a share of the profits in return for bearing the same share of costs, making it a silent equity partner with carried interest. This is a common arrangement used in the global oil industry. But while Mr. Rudd wished to take a cut of 40 per cent (the same as for the oil industry) Ms. Gillard is only proposing a headline 30 per cent (and an allowance may reduce this further). It is hard to explain why open cast miners deserve a more generous tax regime than offshore oil exploration. This is especially the case given the other concessions Ms. Gillard has made. Some of these recognize legitimate concerns. The hurdle rate for the tax has been lifted from the government bond rate by adding a 7 percentage point premium, reflecting more closely the real rate at which private miners raise capital. Existing production can now be put under the revised regime at market
rather than book value. Source: The Financial Times
MINERS HAIL AUSTRALIAN CLIMBDOWN Australia's newly appointed Prime Minister, Julia Gillard, last week lifted mining spirits when she scrapped the proposed 40% tax on ‗super profits‘ in favor of a mineral resources rent tax (MRRT). The newly proposed MRRT at a rate of 30% would only apply to iron-ore and coal from July 2012, with all other mineral resources exempted. Small miners with profits below A$50 million a year would also not have to pay the new tax. The new tax arrangement will apply to the value of the resource, rather than the value added by the miner. It will do this by setting the taxing point at the mine gate where possible, and using appropriate pricing arrangements to ensure only the value of the resource is taxed. It also recognizes the preference of industry for more generous recognition of past investment, through a credit that recognizes the market value of that investment written down over a period of up to 25 years. The MRRT was introduced a day after negotiations with diversified miners BHP Billiton, Rio Tinto and Xstrata were concluded and comes only a week after Prime Minister Kevin Rudd, whose government proposed the 40% tax on super profits, was ousted. All the companies welcomed the government‘s proposed changes, saying they satisfied the core principles that eluded Mr. Rudd‘s tax, including ensuring that the new tax was not applied retrospectively so that existing projects were not adversely affected. Read more… The MRRT also ensured a competitive tax rate that would not disadvantage Australia as an investment destination, the companies said. ―As we have previously stated, BHP Billiton believes that tax reform that is prospective, competitive, differentiated and resource-based will ensure that the Australian mining sector continues to grow through investment in the industry which benefits all Australians,‖ said BHP Billiton chief Marius Kloppers. Rio Tinto MD for Australia, David Peever, said that the recognition of market value for existing mines and a reduction in the headline tax rate represented significant progress in achieving tax reform. ―We all want a minerals taxation system that grows the mining industry in Australia. A strong mining sector keeps the Australian economy strong, spreading prosperity to all Australians,‖ Mr. Peever said.
Source: www.miningweekly.com
AUSTRALIAN GOVERNMENT UNDER ATTACK ON NEW MINING TAX REVENUE Australia's opposition accused the government on Tuesday of misleading voters over billions of dollars in lost tax revenue, reigniting a row over a politically damaging mining tax ahead of an expected election. Prime Minister Julia Gillard ended a three-month dispute with global miners on Friday by announcing a watered-down tax, but revelations the new tax revenue was based on higher commodity forecasts put the tax back in the public spotlight. The Labor government said it would lose only USD1.26 billion in revenue, but the conservative opposition said the loss could be three times more under commodity forecasts for the original tax. "There has been a misstatement of a magnitude of three times by the government of the effect of these (tax) changes," Liberal Senator George Brandis said. Economic management is traditionally a major election issue in Australia and Gillard is trying to salvage voter support ahead of expected August elections. Labor is on course for a narrow victory, but the opposition has vowed to repudiate the tax if elected. BHP Billiton, Rio Tinto and Xstrata all signed off on the new tax and none has commented on the reported revenue shortfall. Rio said on Tuesday that Australia remained among the highest resource tax regimes in the world and that the new tax needed deeper examination before it committed to further iron ore expansion in Australia.
Source: Reuters.com
CHINESE PAY DISPUTES MIRRORED ACROSS REGION Chinese labor unrest is being replicated in south-east Asia where factories that compete with China to supply low-cost goods face walkouts as employees demand better pay and benefits. In Cambodia, workers are poised to stage a three-day strike this month in a dispute over the minimum wage while in Vietnam, thousands of workers at a Taiwanese-owned shoe factory staged a strike demanding higher salaries. The disputes match similar action in China, where growing worker dissatisfaction has led to
industrial unrest and higher wages. As a result, foreign factory owners are increasingly moving production from southern and eastern China – long seen as the ―workshop of the world‖ – to the interior and other Asian developing nations. Labor costs in countries such as Cambodia, Vietnam and Laos remain a fraction of those in China. But, while their governments have been jostling to attract foreign manufacturers, unions are keen to protect their members and industrial action is on the rise, together with minimum wages across the region. Read more… The average garment worker in Cambodia, where the minimum wage is one of the lowest in the world, earns USD50 per month plus a USD6 living allowance bonus. The government has proposed a USD5 increase but the Free Trade Union, which represents more than 80,000 laborers, intends to go ahead with the strike unless minimum pay is increased to USD70. The Vietnamese government increased the minimum wage for workers at foreign-owned companies to USD52.50 this year. In Laos, the minimum wage rose last year from USD35 to USD42 per month. Cambodia‘s open business environment, in which companies can be 100 per cent foreign owned, is expected to attract increasing foreign investment. The World Bank estimates foreign direct investment in Cambodia will grow to USD725 million in 2010, up from USD515 million in 2009, partly as a result of an increase in Chinese investment. While Vietnam is relatively well established as a manufacturing base, the number of multinational companies operating in Cambodia and Laos remains small. Poor infrastructure, high energy costs and corruption all act as obstacles to investment for global groups. However, predictions of economic growth in both countries and government plans for stock exchanges have attracted increased attention.
Source: The Financial Times
CHINESE WAGE HIKES WILL MOVE MANUFACTURERS UP THE VALUE CHAIN Foxconn, the contract assembler of electronics for brands such as Apple, saw its image tarnished after a recent string of worker suicides. The company reacted by increasing wages and deciding to relocate its main factory from the southern coastal city of Shenzhen to Hebei province in the north of China. But rather than just damage control, Foxconn's response to crisis is representative of Chinese manufacturing trends. A virtuous cycle is accelerating the shift to the country's next development phase. Rather than signaling the end of China as the world's go-to low-cost manufacturer, wage hikes pave the way for the migration of low-value added jobs to the less developed areas of the country and for higher value-added sectors to develop in the wealthier, traditionally manufacturing-oriented coastal areas. Accelerating pressure on wages should come as no surprise to Beijing. The gradual depletion of surplus labor has long been telegraphed by China's demographics, which point to a looming decline in new entrants to the workforce. By all accounts, the central government recognizes that its extraordinarily successful export-driven growth model is threatened and is preparing for the difficult transition toward more balanced growth. This means not only greater balance between exports and domestic demand, but also faster development of inland provinces relative to coastal ones. Read more… Beijing has been promoting the migration of manufacturing jobs to inland provinces in order to bring labor-intensive manufacturing activities to areas where the supply of cheap labor remains abundant. This creates jobs in areas that have been left behind during the export boom experienced by the coastal areas over the last three decades. It also helps Chinese manufacturers maintain their global cost advantage, at least for some time. The conditions are set for wages to finally grow faster than GDP as the bargaining power shifts from manufacturers to labor. The concern for China going forward will be less about losing low-end manufacturing jobs, many of which will migrate to its underdeveloped inland provinces, than matching new opportunities with skilled talent in its coastal areas. Wage increases not only put pressure on companies to shift capacity to inland areas but also facilitate the shift toward greater consumption growth. After years of orchestrating implicit household subsidies to exporters, China's central government is finally setting the stage for tangible gains in household purchasing power by allowing accelerated increases in wages at the same time as it has resumed the yuan revaluation process. Cynics might argue that the government didn't have much of a choice on either count, but the outcome is all that matters. As more companies decide to shift production capacity inland, what will stay in Shenzhen? They will
be the private companies that are moving up the value chain and require more sophisticated talent—engineers, programmers and managers, rather than large volumes of low-skill labor. Companies such as EVA Precision can continue to thrive in Guangdong province, enabling them to attract top talent. Guangdong's recently announced 20% hike in the minimum wage is of little relevance given average wages that are, in EVA Precision's case, twice as high for non-engineers and five times higher for engineers. By contrast, Foxconn's model relies on a very high volume of low-skilled workers, making necessary the move to Hebei, where average wages are 25% lower. The greater concern lies with the smaller manufacturers that rely on low-skilled labor but don't have the scale to relocate, add new factories or invest in more automated processes. They will need to merge or shut down. And they are unlikely to find much support from the central government. For all the talk about Beijing's obsession with preventing job losses, it has encouraged consolidation in several of China's fragmented industries—implicitly by, for instance, imposing higher environmental standards in the textile industry or explicitly by mandating the closure of lower-grade mills in the cement industry. Allowing wages to increase significantly is another way to promote both industry consolidation and inland migration of production capacity. Will multinational companies and large-scale domestic manufacturers eventually choose to locate manufacturing capacity outside of China? Many have already done so. But offshore migration will only affect the low-end of the value chain. Despite increasing wages, there are many incentives for sophisticated manufacturing to stay, not least the fact that local demand is bound to increase. Source: The Wall Street Journal Asia
WEN SAYS CHINA FACES ECONOMIC „DILEMMAS‟ Chinese Premier Wen Jiabao has said the country's economic policies "face increasing dilemmas" because the impact of the global financial crisis is more serious than expected, but he reiterated that China won't hold back steps to restructure the economy for growth. The remarks were made after two purchasing managers' indexes issued last week showed China's manufacturing economy slowed in June and after China last week revised upward its gross domestic product growth for 2009. The GDP revision means China's year-to-year growth will have a higher comparison base for the second and following quarters, so the growth may be lower than economists' expectations. Despite the widely expected slowdown, Mr. Wen reiterated that China will continue its economic policies but increase their flexibility, to "solve current significant and urgent problems" while "laying foundations for stable and relatively fast economic growth of 2011 and in a longer term". He was speaking at an economic forum. "China's current economic situation is sound, but the domestic and global economic environment is extremely complicated," Mr. Wen said. He said Beijing will try to maintain relatively fast economic development while managing inflation.
Source: The Wall Street Journal Asia
CHINA MAKES HASTE SLOWLY WITH GLOBALIZING THE YUAN Each journey of a thousand miles begins with a single step. Yet for the trek of turning the yuan into a global currency, China is only just lacing up its boots. According to this skeptical line of thinking, it will take Beijing a generation to make the yuan a fully convertible currency that can rub shoulders with the dollar and the euro. But a more tantalizing interpretation of events is that China is proceeding quite nicely in expanding the use of the yuan beyond its borders, underlining its determination to eventually wield more influence in global financial affairs. What has got optimists excited is the extension on June 17 of a pilot program permitting imports and exports to be settled in yuan, also known as the renminbi, rather than in dollars or other foreign currencies. The scheme was widened to firms in 20 Chinese provinces, not just five southern cities, and to counterparties in all countries, not just in Hong Kong, Macau and Southeast Asia. The experiment got off to a slow start last July but has picked up as procedures have bedded down. Total trade settled in yuan doubled between the end of March and the end of May to 44.6 billion yuan. That remains a drop in the ocean. But if China stands by the promise it made on June 19 to make the yuan more flexible, the attraction for domestic companies of avoiding foreign exchange risks by invoicing in their home currency can only grow. As for exporters to China, the consensus that the yuan is headed higher is a big incentive to hold renminbi. "We expect more than half of China's total trade flows, primarily bilateral trade with emerging markets, to be settled in renminbi in the next three to five years," Mr. Qu Hongbin, chief China economist at HSBC in Hong Kong, concluded in a report. It gets more intriguing. Companies outside China will be wary of holding yuan unless they have
somewhere to invest it. Putting the money on deposit in Hong Kong, the main conduit for yuan settlement, yields a pittance. Read more… On cue, plans are afoot to broaden the range of renminbi investments available in the territory. A toll-road company has announced the first non-financial renminbi corporate bond issue in Hong Kong. Yuan-denominated insurance policies are expected soon, and the authorities are drawing up plans to let brokerages take yuan deposits and invest them in the mainland capital markets. As always with financial liberalization in China, the pace will be sensible, not stunning. And not to be forgotten, China has it will make it easier for domestic firms to move money overseas for purposes unrelated to trade or investment. This gets to the nub of the political motives at work. Resentful of the "exorbitant privilege" the United States enjoys in issuing the leading reserve currency, China would prefer to build up claims on the rest of the world in yuan -- raising its profile in the process -- rather than in a dollar it distrusts. The IMF is committed to shifting at least 5 percent of its voting powers to its emerging market members, and Managing Director Dominique Strauss-Kahn would like to add new currencies to the SDR basket -- starting with the yuan. If cross-border trade in yuan booms and market forces are gradually allowed to set the yuan's value, China will presumably grow more comfortable with the idea of convertibility. Bringing the yuan into the SDR would be more feasible. "These are baby steps, not big steps," said an analyst, about Beijing's initiatives. "But they are all steps in the direction of making the renminbi into a more international currency that is commensurate with China's global role, opening up the capital account and moving toward convertibility."
Source: Reuters.com
POLITICS PRESIDENT DECREES USE OF TRADITIONAL SCRIPT IN OFFICIAL DOCUMENTS President Ts. Elbegdorj has issued a decree to promote the use of the traditional Mongolian script with effect from July 11. It says, "Official letters by the President, the Speaker of Parliament, the Prime Minister and members of the cabinet to officials of other countries in similar positions shall be written in the traditional Mongolian script and will be translated to the language of that country or any of the official languages of the United Nations and be attached." The decree also mandates the use of the script in documents such as birth and marriage certificates, educational certificates and diplomas along with the Cyrillic alphabet. The traditional Mongolian script was in use in Mongolia until 1946 when the Cyrillic alphabet was introduced under pressure from the Soviet Union. It was reintroduced in secondary schools in 1992 but most Mongolians above their twenties do not know how to write and read it. A program to encourage wider use of the Mongolian script was adopted in 2008. The President has called for its quicker implementation, setting 2011 as the deadline. That year marks the 100th anniversary of Mongolia‘s independence from the Manchus.
Source: Xinhua, English.News.mn
NEA OFFICIAL HOPES FOR QUICK DECISION ON DORNOD URANIUM The Director of the Nuclear Material Department of the Nuclear Energy Agency, Mr. T.Bayarbayasgalan, hopes the government will be able to take a decision soon on establishing the proposed Russia-Mongolia joint Dornod Uranium Company. A working group led by Minister for Foreign Affairs G.Zandanshatar is reviewing the foreign relations aspects of the issue and the agency has submitted to the Government a report detailing possible sources of funding and a review of proposals made by Russia. A third partner is acceptable to both Russia and Mongolia and ―Japan may be a good choice‖, he said. Representatives of Japanese companies such as Marubeni, Mitsui, and Toshiba have made visits to Mongolia lately and expressed their interest to cooperate in the sector. He told a reporter that Khan Resources, whose uranium licenses have been canceled, ―is a relatively small company compared to these Japanese firms and it also violated several laws‖. He ruled out the possibility of revoking the cancellation. Mr. Bayarbayasgalan was confident that the court case the company has filed against the Agency ―will be decided in our favor‖.
Source: Ardiin Erkh
MP PROVOKED BY MINISTERS‟ SILENCE MPRP MP Ts.Batbayar has informed Mr. Ch.Khurelbaatar, head of the Government Secretariat, that he would initiate proceedings in Parliament demanding dismissal of the ministers of finance and minerals. His annoyance with both stems from what he sees as their deliberate refusal to provide information about the present status of the Oyu Tolgoi project during discussion of the draft resolution on Mongolia‘s socio-economic development in 2011 at the Standing Committee on the Budget. Mr. Bayartsogt feels his rights as an MP have been violated.
Source: Onoodor
FINANCE MINISTER SAYS HE WORKS FOR COUNTRY, NOT PARTY Provoked by repeated criticism from MPRP members for not including payment of child money in the budget, and by the innuendo that this was because it was a program they supported, Mr. S.Bayartsogt told Parliament last week that he was certainly a member of the Democratic Party, ―but as Minister of Finance of the Mongolian Government, I take decisions on grounds of national interest, not partisan‖. His department has studied the issue carefully and was clear that getting stuck on family allowances was not the best way to take the national economy forward. He urged fellow MPs not to politicize the issue too much.
Source: Onoodor
BID TO MAKE MPs MORE RESPONSIVE TO ETHICAL DEMANDS Mr. G.Bayarsaikhan (DP), head of the Ethical Sub-committee of Parliament, has expressed ―regret and dismay‖ at how members of Parliament violate both the general law and their own code of conduct when it comes to providing correct, detailed, and timely information on their income and assets. They have also ―strongly resisted‖ any effort to hold a discussion on how these can be satisfactorily monitored. The sub-committee held its first meeting recently and agreed to pursue the issue and also to quickly dispose of any citizen‘s complaint on any matter relating to MPs‘ ethics. It also wanted some measures to help MPs ―not to make inadvertent ethical mistakes‖.
Source: Onoodor
BRZEZINSKI TO TALK ON U.S. FOREIGN POLICY Former U.S. National Security Advisor Dr. Zbigniew Brzezinski will be visiting Mongolia during Naadam at the invitation of Prime Minister S.Batbold. The highlight of his visit will be a talk on ―The foreign policy of the USA and Eurasia" to an invited audience of politicians, businessmen and scholars. His wife will be with him. Their visit is being coordinated by Mr. R.Bold, a former Mongolian ambassador to the USA.
Source: Montsame
NEPAL, MONGOLIA TO SIGN MoU ON EXCHANGE OF FINANCIAL INFORMATION Nepal and Mongolia will sign a Memorandum of Understanding (MoU) on exchange of information to prevent money laundering and terrorist financing at the 13th annual general meeting of the Asia-Pacific Group on Money Laundering (APG) to be held in Singapore from July 12-16. The MoU will make it mandatory for the two sides to provide each other information on bank transactions, and investment in real estate and shares by persons under suspicion.
Source: nepalnews.com
MONGOLIA PRESENTS GENDER REPORT AT UN MINISTERIAL REVIEW MEETING Mongolia's presentation at the recent meeting of the UN Economic and Social Council Annual Ministerial Review — which this year featured a record 13 countries making voluntary presentations on actions to mainstream a gender perspective into all sectors and achieve international targets relating to gender equality and women's empowerment — flagged the key lesson learned — promoting women's rights required integrated actions, strong cooperation and broad consultation among all branches of Government, as well as civil society and international development partners. Several speakers highlighted the links between gender inequality and poverty, and further, between poverty and violence against women and urged incorporation of a gender perspective in initiatives aimed at realizing the Millennium Goals. The Mongolian delegation was led by Ms. T.Gandhi, Minister for Social Welfare and Labor.
Source: Media Newswire
AUSTRALIAN MP HAS NO BEEF WITH MONGOLIA Australian MPs spent AUD4.62 million on overseas trips in the last six months of last year. They are required to lodge travel diaries detailing their taxpayer-funded jaunts and the diaries can become a source of some amusement around Parliament House. The Queensland Liberal MP, Mr. Peter Lindsay, spent AUD37,203 on a seven-day trip to Mongolia. His travel diary contains insights into the local culture such as the fact that the capital of Mongolia and Perth have roughly the same size population and that Mongolians do not tend to behave in a ''silly'' way. ''Ulaanbaatar is the coldest capital city in the world - typically minus 40 degrees in winter,'' Mr. Lindsay wrote. ''Mongolians have a far better work and safety ethic than Australians. Their philosophy is ingrained based on the premise 'I have to take care of myself'. No one does anything silly.'' Mr. Lindsay did not elaborate on what constituted ''silly'' behavior, but he did recommend to Parliament that Australia set up an embassy in Mongolia.
Source: The Sydney Morning Herald
EXHIBITION OF PHOTOGRAPHS ON MONGOLIAN DIASPORA An exhibition of photographs, sponsored by the MCS Group, XacBank and Oyu Tolgoi LLC, and on show until June 10 at the art gallery in the Cultural Palace, gives evidence of the contemporary effect of the Mongol Empire on societies in the huge landmass it controlled, as also of how Mongolian-origin communities dispersed in diverse areas of the world over centuries are trying to preserve their historical, linguistic, and cultural roots. The 120 pictures have been chosen from some 30,000 used in a very popular multi-part program broadcast by Mongolian National Broadcasting TV and Educational TV. President Ts.Elbegdorj, a patron of the project, inaugurated the exhibition on July 6 at a ceremony attended by diplomats, local dignitaries, and scholars, as also by a delegation of ethnic Mongolians from China's Tsinghai province.
Source: Onoodor, Montsame
JAPANESE COMPANY WANTS TO USE BACTERIA IN AIRAG A new dispute between developing and industrialized countries is expected to reach a head at the 10th Conference of the Parties to the Convention on Biological Diversity (COP10) meeting in Nagoya in October. Developing countries are demanding a larger share of benefits from their supplies of the plants and micro-organisms that form the raw materials for many food, pharmaceutical and cosmetics products. Companies in industrialized nations that develop these products already fear that these "genetic resources" may no longer be readily available if new rules favor developing countries. In summer 2007, Mr. Gentaro Yasuda of Calpis Co. traveled to Mongolia in search of new types of lactic acid bacteria. He visited the portable tent dwellings of nomadic tribes to sample and compare airag, a type of homemade fermented horse milk liquor whose recipes date back thousands of years. Calpis, with a research institute affiliated with the Japanese Ministry of Economy, Trade and Industry, concluded an agreement with the Mongolian government that stipulates that bacterium will be isolated at a Mongolian laboratory, the isolated strains will be stored in both countries, and a fixed sum will be paid to the Mongolian side at the time of any patent application. The United Nations Environment Program estimates that the market using genetic resources is worth USD800 billion to USD1 trillion annually. In 2002, developing countries formed an alliance, saying that most of the benefits derived from genetic resources are being monopolized by businesses and research institutes from industrialized nations.
Source: The Asahi Shimbun
ANNOUNCEMENTS
“BSPOT" on B-TV
BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.
____________________________________ “MM TODAY” on MNB-TV
BCM is pleased to announce that 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 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ____________________________________ NEW POSTINGS ON BCM WEBSITE‟S „MONGOLIAN BUSINESS NEWS‟ As some of you might have noticed, 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. The draft Tavan Tolgoi Investment Agreement which was submitted by the Government to Parliament is posted to BCM‘s websites (www.bcmongolia.org) and (www.bcm.mn), ‗Mongolian Business News‘ for your review.
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ECONOMIC INDICATORS
Please note the MSE Top 20 has been updated of which five companies were replaced.
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]
June 30, 2010 *11.4%[source: NSOM]
*Year-over-year (y-o-y)
CENTRAL BANK POLICY LOAN 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]
CURRENCY RATES – July 8, 2010
Currency name Currency Rate
US dollars US 1,368.47
Euro EUR 1,721.95
Japanese yen JPY 15.70
British pound GBP 2,065.43
Hong Kong dollar HKD 175.63
Chinese yuan CNY 201.86
Russian ruble RUB 44.01
South Korean won KRW 1.12
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.
