BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org

info@bcmongolia.org

Issue 156, February 25 2011

NEWS HIGHLIGHTS:

Business:

Any Chinalco role in Oyu Tolgoi would need government approval: Batbold;

Eznis Airways to buy two Avro RJ85 regional jets;

TNK-BP and Mongolian Oil Agency sign MoU;

2010 drill program “a tremendous success", says Erdene Resource CEO;

Xstrata officials call on Batbold to show how their Australian mine works;

More Baganuur shares to be sold to public;

Khan Resources says Mongolia has named Arbitrator;

Gemcom opens office in Ulaanbaatar;

Indian steel firm seeks to buy two coal mines in Mongolia;

MIAT appoints German company its new GSA;

Garrison debenture holders claim default in payment;

Mongolia Investment not to issue compensation notes on Well Delight buyout;

AIDD Group appoints Peter Morrow Chairman of Board of Directors;

Behre Dolbear to open office in Ulaanbaatar.

Economy:

Four banks shortlisted for Tavan Tolgoi IPO in H1 2012;

Bankers pitch for Mongolian dollar bond;

PM sees sovereign bond issue as early as H2 2011;

Mongolia seeks Australian support for mining boom;

Banks back in the black;

More gold in Central Bank;

Trade Minister welcomes Austrade's Mongolian Mining Projects Report;

Mongolia surprises with financial savvy;

Banks attract more savings, issues more loans;

Only 12% in survey say they know about stock market;

Mongolian Railway receives formal permission to build railway:

20 companies likely to share railway construction work;

Equities in Mongolia continue to skyrocket;

Database on the anvil to help employers and employees;

Government to fix royalty rates every month;

Small businesses burdened by raised stamp fees;

MNT67.6 billion recovered under court orders;

Road construction companies urged to come together for more profit;

IMF representative warns of dangers of large public spending;

USAID to help set up training center for banks;

Restricted insurance system to replace guarantee on bank deposits;

Minister asked to draft amendments to law on oil products;

Mongolia gears up for mining bonanza;

Fists fly in fight to mine Mongolia;

Gold slips from seven-week high, silver hits 31-year peak;

“Workers are God now,” complains factory owner in China.

Politics:

Khurts to be extradited to Germany, rules British court;

Nobody in Mongolia can improve on the current criminal law, says Minister;

Search on for MNT84 billion to reduce air pollution;

Australian university to help Mongolian education;

Doubts about the veracity of voting figures in Parliament;

MP surprised at move to amend law banning mining in selected areas;

Each member of a household can now claim free land;

Bigger role envisaged for communities in reclamation;

Children of D.Enkhbat urge father’s name rehabilitation;

A new start for a land where Buddha meets Louis Vuitton;

Mongolia unlikely to be free of zuds;

The Gobi: Mongolia's desert playground;

The world needs an assertive but constructive China.

*Click on titles above to link to articles.

BCM MONTHLY MEETING NOTICE

BCM‟s next monthly meeting for members will be Monday, February 28, 2011 at 5 PM at the KEMPINSKI HOTEL KHAN PALACE, 2ND FLOOR, Altai Ballroom. Parking will be reserved in front of the hotel for BCM Members. The bilingual meeting will feature the following presentations: - A. Bilguun, Executive Director, Prime Info LLC: McCloskey Mongolia Coal & Infrastructure Conference 2011. - S. Munkhsukh, CEO, Eznis Airways: Aviation Sector Development and Its Impact on the Economy and Other Businesses. - Kh. Altai, Acting Executive Director, Mongolian Stock Exchange: Update on MSE. A networking reception will be held for all attendees immediately following the business portion of the meeting in rooms Khuvsgul and Hustai, also on the 2nd floor.

BUSINESS

ANY CHINALCO ROLE IN OYU TOLGOI WOULD NEED GOVERNMENT APPROVAL: BATBOLD Prime Minister S. Batbold told media in Canberra that if Chinese state-owned Chinalco wanted to take a stake in the Oyu Tolgoi project, its role would have to be approved by the Mongolian government. Mr. Batbold said Chinese investment in Mongolia had been welcome, but he said any change to the Oyu Tolgoi partnership agreement between Mongolia, Rio Tinto and Ivanhoe Mines would have to go through government approval procedures.

Source: Reuters

EZNIS AIRWAYS TO BUY TWO AVRO RJ85 REGIONAL JETS Eznis Airways has signed a Letter of Intent to purchase two Avro RJ85 regional jets from BAE Systems. The aircraft are scheduled to arrive in Mongolia in May and June 2011, and both will have a capacity of 93 seats, allowing Eznis to meet the growing demand for quality air transport services in Mongolia. Commenting on the purchase, Chief Executive Officer of Eznis Airways, Mr. S.Munkhsukh, has said, “Deliveries of the Avro RJ 85s will be yet another important step towards our aim to become the No. 1 choice for regional air service in North Central Asia by connecting Mongolia to nearby international markets. The Avro RJ85 is a four-engine aircraft that provides reliable, safe and distinctive performance. Moreover, it is the only jet engine aircraft approved for operation on gravel runways, which is ideal for the conditions of our country. The arrival of this aircraft will be

an important event not only in the history of our airline, but also for Mongolia‟s aviation industry as the Avro RJ85 is a new aircraft type for Mongolia.” Presently, Eznis Airways operates four 34-seat Saab 340B aircraft on its route network serving 14 domestic, scheduled, and charter destinations as well as two short-haul international markets - Hailar (China) and Ulan-Ude (Russia). Eznis has signed an agreement with Lufthansa Technik Switzerland GmbH to receive technical services for the future Avro RJ85 fleet covering engineering, maintenance, material, engine and training services.

Source: Eznis Airways

TNK-BP AND MONGOLIAN OIL AGENCY SIGN MoU Anglo-Russian joint venture TNK-BP and the Mongolian Government Oil Agency last week signed a memorandum of understanding concerning the delivery of Russian oil products to Mongolia. In accordance with the memorandum, TNK-BP will consider the possibility of concluding mutually beneficial agreements with Mongolian companies on the delivery of oil products. The mix of products, delivery methods, technical characteristics, prices and terms of payment will be agreed between TNK-BP and the Mongolian participants, as determined by the Mongolian Oil Agency. In the case of such agreements being concluded, TNK-BP will then explore the opportunity of delivering oil to Mongolian refineries, as soon as their respective operations start. “TNK-BP‟s emergence into the dynamic and developing Mongolian market will help promote a competitive environment and to satisfy the growing demand for quality oil products. One of TNK-BP‟s priorities is to diversify our sales markets, and the development of the Mongolian economy is opening up promising prospects for the expansion of our business in the country,” said Mr. Jonathan Kollek, TNK-BP Vice-President for sales, trading and logistics.

Source: The FINANCIAL

2010 DRILL PROGRAM “A TREMENDOUS SUCCESS”, SAYS ERDENE RESOURCE CEO Erdene Resource Development Corp. President and CEO Peter Akerley has said the 2010 drill program at its Zuun Mod molybdenum and copper project in southwestern Mongolia has been “a tremendous success", and added, "We have accomplished our main goal of expanding the higher-grade zones within this very large molybdenum-copper deposit and have discovered a significant new zone of porphyry copper mineralization situated over 2 km from the main deposit. As a result, we are now planning an expanded drilling program to further define these exciting new results." He listed the following highlights as he released the full results of the drilling program: - Higher grade molybdenum and copper zones expanded within the Racetrack deposits - New higher grade molybdenum and copper zones discovered at depth - A significant new copper zone, Khuvyn Khar, discovered 2.2 km northwest of the main Racetrack deposits - Recent results enhance potential for further mineral resource expansion and discovery - Major drilling program planning underway.

Source: Erdene Resource Development Corp.

XSTRATA OFFICIALS CALL ON BATBOLD TO SHOW HOW THEIR AUSTRALIAN MINE WORKS

Prime Minister S.Batbold received detailed information from senior Xstrata officials on how they operate the Mount Owen coal mine in Australia, which is believed to have certain similarities with the Tavan Tolgoi deposit. The Xstrata group is one of the bidders for the Mongolian deposit and its officials called on the Prime Minister in Australia to give a presentation on how they developed the infrastructure of the mine, and its present organization, including marketing and management practices. The mine extracts 15 million tons of coal a year. Source: Montsame

MORE BAGANUUR SHARES TO BE SOLD TO PUBLIC One of the largest coal mines in the country, owned and operated by the State, Baganuur, is likely to sell 24% more of its share to the public to raise private ownership to 49%. The sale is likely to take place in April, and the money raised will be spent on upgrading technology and improving operational efficiency.

Source: Zuunii Medee

KHAN RESOURCES SAYS MONGOLIA HAS NAMED ARBITRATOR Khan Resources Inc. has said that the Government of Mongolia has appointed its arbitrator for the international arbitration proceedings asked for by the company. The two appointed arbitrators

would now select a third arbitrator to preside over the arbitration tribunal. The procedure is expected to take upwards of 30 to 45 days. Khan Resources formally initiated an international arbitration action against the Government of Mongolia for its expropriatory and unlawful treatment of Khan in relation to the Dornod uranium deposit located in northeastern Mongolia. The claim seeks over USD200 million in compensation for losses and damages. Source: RTT News

GEMCOM OPENS OFFICE IN ULAANBAATAR Gemcom Software International Inc., the largest global supplier of mining software solutions, opened an office in Ulaanbaatar on Wednesday. Gemcom's software are already widely used in exploration and mining operations throughout the country. "Gemcom's software has been playing a key role in the Mongolian mining industry since 1995 when Minex was purchased by Baganuur Joint Stock Company," said Mr. Andrew Pyne, senior vice president, Gemcom AustralAsia. "Since then, we have established long-standing professional relationships with the Mongolian Government and many key mining entities such as Erdenes MGL and Centerra's Boroo Gold mine. The office gives us the opportunity to work even closer with our clients to help explore the full commercial potential of their operations."

Source: Gemcom Software International

INDIAN STEEL FIRM SEEKS TO BUY TWO COAL MINES IN MONGOLIA Steel Authority of India Ltd. (SAIL), the nation‟s second-largest producer, is seeking to purchase at least two coking coal mines in Mongolia, which holds the world‟s largest deposit of the steelmaking raw material. SAIL is in talks to build a USD3-billion factory in the land-locked country, and aims to buy one mine itself and another through a venture with other state-run metal and energy companies, Chairman C.S. Verma told reporters in New Delhi. The company has asked the Indian government for assistance in buying the mines, he said, without giving details about the size, location or time of investment.

Source: Bloomberg

MIAT APPOINTS GERMAN COMPANY ITS NEW GSA MIAT Mongolian Airlines has appointed the Germany-based AVIAREPS to act as its General Sales Agent (GSA) in ten European markets. The company, calling itself “the world‟s leading airline and tourism management company”, has said it has been asked to manage MIAT‟s sales, marketing and ticketing activities in Germany, Switzerland, Austria, the Netherlands, Belgium, Scandinavia, United Kingdom, France, Italy and Spain with immediate effect. Founded in 1956, MIAT operates from its base Chinggis Khaan International Airport and serves a total of six international destinations in Europe and Asia.

Source: Travel News Gazette

GARRISON DEBENTURE HOLDERS CLAIM DEFAULT IN PAYMENT Garrison International Ltd. (TSX Venture: GAU) has received notices from holders of debentures having a principal amount outstanding of USD1,475,000 that they consider Garrison to have defaulted on its obligations on those debentures. The debenture-holders have demanded repayment of all principal and interest due. The debentures were originally issued as part of a secured debt financing in December 2009 and February 2010. Debentures having a principal amount of USD3,000,000 were issued in the financing, all bearing interest at 10% per annum, with interest payable semi-annually (on June 30 and December 31). Garrison failed to make the most recent interest payment of USD150,000, and has now received default notices from holders of approximately half of the secured debt. The Garrison management is optimistic that it will soon reach an acceptable solution to resolve this matter.

Source: Garrison International

MONGOLIA INVESTMENT NOT TO ISSUE COMPENSATION NOTES ON WELL DELIGHT BUYOUT Mongolia Investment Group Limited (formerly known as Ming Hing Waterworks Holdings Limited) has said that no compensation note will be issued to Best State Holdings Ltd regarding the acquisition of Well Delight Holdings Ltd and its subsidiaries. In June 2010, the group completed its acquisition of the entire interest in Well Delight, which together with its subsidiaries holds four mining licenses

for a coal mine in Tugrug Valley, southeast of Ulaanbaatar. According to the agreement, Mongolia Investment may issue compensation note to Best State in case the fair value of Camex LLC (a wholly owned subsidiary of Well Delight) and its subsidiaries (excluding the value of the TNE mine and its licenses) as shown in the second technical and valuation reports being not less than HKD1,550 million within eight months of the completion of acquisition. However, as the technical report for the valuation of the other mines has not been completed by the deadline, no compensation note will be issued to Best State.

Source: ETNet

AIDD GROUP APPOINTS PETER MORROW CHAIRMAN OF BOARD OF DIRECTORS Mr. Peter Morrow, who recently retired as CEO of Khan Bank where he spent the past 10 years transforming it into the largest and most profitable bank in Mongolia, has been appointed Chairman of the Board of Directors of AIDD, the Mongolian mining services group. Mr. James Polson, CEO and co-founder of AIDD Group, sees this as “a very exciting and important appointment” and anticipates that Mr. Morrow “will visibly contribute to the future sustainable growth of AIDD, both at home in Mongolia but also internationally”. Mr. Morrow has said he is “excited to become part of the group” and sees “an exciting future for the company”. AIDD LLC was founded as a Mongolian company in 2004 and over the past 7 years has completed extensive drilling projects across Mongolia, China and Kazakhstan. The European Bank for Reconstruction and Development invested in AIDD Group in 2007 and currently holds a 39.4% stake in the company. The AIDD Group‟s goal is to become Mongolia‟s leading international mineral drilling service provider in the North East and Central Asian region by offering high quality services at best value to mineral exploration, mining, and geotechnical companies operating in the region.

Source: AIDD Group

BEHRE DOLBEAR TO OPEN OFFICE IN ULAANBAATAR Behre Dolbear Hong Kong LLC has signed a joint venture agreement with Mine Info LLC to open an office in Ulaanbaatar. The agreement will allow Behre Dolbear to offer its entire suite of services to clients operating in Mongolia and/or thinking of investing there. In addition, the joint venture brings additional Mongolian- and Russian-speaking professionals to its business. Source: Behre Dolbear

SPONSORS

Khan Bank Eznis Airways

Mongolia Web Mongolian National Broadcasting

ECONOMY FOUR BANKS SHORTLISTED FOR TAVAN TOLGOI IPO IN H1 2012 Mongolia took a step closer to the initial public offering of the world's largest untapped coking coal deposit on Thursday, shortlisting four global banks to manage the country's biggest ever share sale. Mining Minister D. Zorigt said the sale of shares in state-owned company Erdenes Tavan Tolgoi would happen no later than first half of 2012. BNP Paribas, Deutsche Bank, Goldman Sachs and Macquarie Group have been shortlisted to manage the IPO, Erdenes Tavan Tolgoi said. The size of the IPO is still unclear with bankers estimating it will be in the range of USD1.5-USD5 billion.

The share sale attracted huge interest from global banks to win the coveted mandate, with some 150 bankers converging on Ulaanbaatar earlier this month to pitch for the deal. "I think it shows the project is quite competitive and that Mongolia as a mining destination is becoming more and more attractive," said Mr. Zorigt, when asked about the intense interest from banks. The Mongolian government plans to distribute 10% of shares in the company free to all citizens and another 10% to Mongolian corporations. Erdenes Tavan Tolgoi, the state-owned company in charge of the eastern block of the deposit, plans to keep 50 percent of the project, and will sell 30 percent in the form of the IPO. The separate western section is subject to contract bids and 15 global companies have bid for the right to mine the coal, Mr. Zorigt said. No timeframe was given for making a decision on the western section development, but Mr. Zorigt said willingness to invest in infrastructure would be a crucial point. Read more… The first phase of Tavan Tolgoi will add 15 million tons of coal per year to Mongolia's total production, eventually rising to 30 million tons, said Mr. Zorigt. The country, expected by some analysts to be one of the fastest growing economies of the next decade, is poised to overtake Australia to become China's largest coking coal supplier this year. It exported 16.6 million tons of coal to China in 2010, up nearly three-fold from the preceding year and just 2.5 million tons in 2005. "[Tavan Tolgoi] will take Mongolia to the next level as a coal producer," said Mr. Zorigt. "We will become one of the price setting producers in the region."

Source: Reuters

BANKERS PITCH FOR MONGOLIAN DOLLAR BOND A debut Mongolian sovereign bond is back on the agenda as the country looks to raise funds for capital investment projects. Senior bank officials have been feverishly pitching in recent weeks for Mongolia's inaugural dollar bond issue. A sovereign bond out of Mongolia has long been rumored, but the country has not been successful in bringing it to market. "A Mongolian sovereign bond has been on the agenda for several years. But it hasn't come to market because there has been no urgency. Mongolia doesn't really need commercial external borrowings. It still has [access to] sufficient multi-lateral and bilateral concessionary lending at low rates and with long maturities. Another reason why it has not come to market is changes in government, which tends to delay an initiative like this, when there are no compelling economic reasons," said Mr. Agost Benard, a Singapore-based credit analyst at Standard & Poor's covering Mongolia. "The main reason why they want to tap the market now is to raise funds for capital investment projects for which concessional funding is not available, as well as to establish a benchmark to [help] Mongolian companies access the capital markets. The bond proceeds may potentially be used for the construction of downstream processing facilities for minerals. This is part of the vision to add value to the basic mineral commodity before exporting it," he added. Read more… Mongolia is rated BB- by Standard & Poor's. It is rated B1 by Moody's and B by Fitch. In June last year, Mr. B. Batbayar, Director of the Financial & Economic Policy Department in Mongolia‟s Finance Ministry, told participants at a FinanceAsia conference that discussions were under way to issue its maiden dollar bond. The size talked about at that time was up to USD1.2 billion, but since then the expectations have been for a less ambitious deal size. Bankers are not expecting a debut bond from Mongolia to launch until late this year. If it materializes, it would offer investors a chance to diversify their Asian sovereign bond portfolio and it would be expected to attract interest from US investors. “A bond from Mongolia will be driven by US emerging market funds. It could fly as investors want to diversify their holdings, but it really depends on the rate and sentiment at that time,” said one Hong Kong-based investor. A successful deal would offer a reference point for Mongolian companies planning to issue dollar bonds. So far, the only dollar bonds out of Mongolia are from the Trade and Development Bank of Mongolia, which has tapped the dollar market three times.

Source: Haymarket Media

PM SEES SOVEREIGN BOND ISSUE AS EARLY AS H2 2011 Prime Minister S. Batbold said in Singapore last week the country may issue a sovereign bond as early as the second half of this year. "We are still working on it. The latest is next year, but it might be in the second half of this year. We might come with a bond issue," he said. Last November, an official of the Mongolian central bank in London said the nation may raise as

much as USD700 million from a debut international bond issue. The bond could be launched in early 2011, Ms. Enke Enkhjargal, chief representative of the London office of Mongolia's Central Bank, said at that time.

Source: Reuters

MONGOLIA SEEKS AUSTRALIAN SUPPORT FOR MINING BOOM Mongolia's attempt to develop its vast mineral wealth of uranium, gold, coal and copper featured in discussions in Canberra on Wednesday between Prime Minister Julia Gillard and her Mongolian counterpart, Sukhbaatar Batbold. Ms. Gillard officially welcomed Mr. Batbold at Parliament House and four bilateral agreements were signed in areas of education, training, cabinet processes and scientific transfer. "This is a remarkable day in the history of Australian diplomacy. This is the first visit by a Mongolian prime minister in the history of our Commonwealth," Ms. Gillard said. The land-locked country maintains strong ties with neighbors Russia and China, but in a policy called Third Neighbors it has consciously been building partnerships with other Asian and key Western nations. Mr. Batbold says he has great hopes for the development of Mongolia and felt the Oyu Tolgoi project “would be very important for this". Mongolia urgently needs infrastructure development, education and skills training for its workers, along with agricultural aid and technological transfer, particularly in mining. "Mongolia does have a relatively young democracy for about 20 years but we are very proud that we have achieved a lot," Mr. Batbold said. "For these achievements we are very grateful to our friends and partners." Ms. Gillard remarked on Mongolia's strong prospects for the future. "Your country has some of the world's richest mineral deposits and we know that Mongolia seeks partners in foreign investment and technical expertise to help realize that potential. Australia has such expertise and we offer it as friends," she said. Austrade will open a permanent office in Ulaanbaatar to support the growing number of Australian companies operating there, she announced, adding that Australia is also boosting aid to Mongolia.

Source: ABC News

BANKS BACK IN THE BLACK The Central Bank feels the banking sector has turned the corner. Vice President B.Javkhlan told a press conference on Wednesday that at the present 6.7%, bad loans stood at their lowest since before the economic crisis. The total capital of commercial banks now amounts to MNT640 billion, substantially higher than the MNT450 billion before the crisis hit. It had subsequently fallen to MNT170 billion. Banks have posted a healthy profit of between 11% and 12% on average. During the days of the crisis, most banks were in the red, he said. The Directors‟ Council of the Central Bank decided earlier this week to make no change in the policy interest rate. Source: News.mn, Montsame

MORE GOLD IN CENTRAL BANK The repeal of the 68% windfall profit tax from January 1 has led to more gold in the Central Bank. The Bank bought 224.7 kg of gold up to February 18, 132 kg or 2.4 times more than in the same period last year. Source: Ardiin Erkh

TRADE MINISTER WELCOMES AUSTRADE’S MONGOLIAN MINING PROJECTS REPORT Austrade's Mongolian Mining Projects Report 2011 was launched on Monday at the Mongolia Australia Business Forum in Sydney, in the presence of visiting Prime Minister S. Batbold, and an accompanying business delegation. Welcoming the report that outlines promising investment opportunities for Australian mining companies in Mongolia, Trade Minister Craig Emerson said, "Australia and Mongolia are natural partners in minerals development and there are real opportunities in Mongolia for Australian mining companies." Dr. Emerson called the report “a useful resource for Australian mining companies wanting to understand more about Mongolia's mineral resources, its system of mining regulation and the broader market for resources in North Asia, including rare earths". Mongolia's mining sector has some of the world's richest deposits of gold and copper, uranium, coal, fluorspar and rare earths such as tantalum, niobium, yttrium and zircon. Mining accounts for the majority of Mongolia's exports and its industry has benefited in recent years

from increased foreign investment and the application of foreign technical expertise to new mines. "Australia's long-standing expertise in mining and mining services continues to offer Mongolia the opportunity to use the best technologies in the world to manage their mining operations," Dr. Emerson said. "The fact that many Mongolians are now being educated in Australia under our scholarship programs and then returning to leading roles in Mongolian business and government is also creating closer and friendlier ties, and the Australian Government welcomes that development." Source: Austrade

MONGOLIA SURPRISES WITH FINANCIAL SAVVY For a land of nomadic herdsmen, Mongolia is surprisingly savvy at finance. The Central Asian state is about to hire banks to float a stake in its giant Tavan Tolgoi coal field. With coal prices high, the government in Ulaanbaatar should be able to pay off its debts and cash in without selling a stake to the mega-miners, as is customary. Investors, meanwhile, will have to weigh some unusual risks. At some 6 billion tons, Tavan Tolgoi is one of the world‟s largest high-quality untapped coal beds. China, the world‟s hungriest consumer, is just 250 km away by land. At the mooted valuation of USD15 billion, the mine is worth around 1.5 times Mongolia‟s 2009 GDP. Raising a third of that amount would pay off Mongolia‟s external debts twice over. Miners like Rio Tinto, Xstrata and BHP Billiton would love a piece of Tavan Tolgoi, but they are unlikely to get the chance. Rather than sell a big stake to a strategic partner, as is customary, Ulaanbaatar plans to float 30 percent of Erdenes Tavan Tolgoi, the coal field‟s holding company, in Hong Kong or London some time in 2012. Miners may be allowed in only as contractors or licensees, not owners. With spot coking coal prices some 50 percent higher than a year ago, the timing looks wise. Mongolia would diversify its risks, too, by ensuring miners don‟t get a big equity stake to use as a bully pulpit. Australia learned that lesson when it decided to crank up mining taxes in 2010. The likes of Rio Tinto simply put billions of dollars of investment on ice until the terms had been watered down. Read more… For the miners, getting frozen out is probably a disappointment they can live with. Politicians make risky partners, especially if their priorities aren‟t profits but national finances, which in Mongolia‟s case are generally thin. Add in persistent corruption, export delays and terrible infrastructure, and Mongolia comes with sizable risks. BHP gave back the right to mine Tavan Tolgoi in the nineties, when prices were lower. The risk is that Ulaanbaatar sees institutional investors as an easier sell. If commodity prices stay red hot, they might well be. Would-be shareholders should then consider whether a “Mongolia discount” might be in order. Source: Reuters Breakingviews

BANKS ATTRACT MORE SAVINGS, ISSUES MORE LOANS It has been officially announced that the economy grew by 6.1% at the end of February over the same period last year. If figures from the shadow economy were included, the real growth figure could well be 10%. There can be no such speculation over figures to do with commercial banks. Their assets have increased by 55% or MNT4.5 trillion in comparison with February, 2010. The total amount they have given as loan has increased by 25% or MNT3 trillion. Not much should be read into how much capital banks have, but the increase in loans does indicate the economy is recovering. It has also been revealed that 90% of the total savings in banks is in the name of only 3% of account holders. This does include some foreign sources, but mostly they are domestic accounts. That the more well-to-do 3% of Mongolians have earned and saved more does not mean an improvement in the economic situation of the overall population. The rise in saving certainly shows that trust in commercial banks is returning, but their increased liquidity also raises fears of inflation. Right now, the rate of inflation is 13.8% but the International Monetary Fund feels this could reach 25% this year. Bankers say they are granting more loans and repayment rates have also improved.

Source: English.News.mn

ONLY 12% IN SURVEY SAY THEY KNOW ABOUT STOCK MARKET The Mongolian Stock Exchange is carrying an Internet survey on Mongolians‟ awareness and knowledge of how the stock market works. On the day when the number of respondents reached

4,000 it was found that 36% of them had admitted to knowing nothing about the market, whereas only 11.9% said they had fair idea of what a stock market is for.

Source: Zuunii Medee

MONGOLIAN RAILWAY RECEIVES FORMAL PERMISSION TO BUILD RAILWAY At a ceremony last week, the Minister for Road, Transportation and Urban Development, Mr. Kh.Battulga, formally handed over to the Director of Mongolian Railway LLC, Mr. B.Batzaya, the authority to build the 1,100 km Dalanzadgad-Tavan Tolgoi-Tsagaansuvarga-Zuunbayan-Sainshand-Baruun urt-Khuut-Choibalsan railway. Mongolian Railway is a company totally owned by the Mongolian state. Construction is expected to begin in the first half of this year. Studies of the technical and economic aspects of the project, as also geological and geodesic studies, are under way. International tenders to select contractors for the work will be announced soon. The railway will serve coal, copper, tungsten, zinc and fluorspar mines in Tavan Tolgoi, Tsagaan Suvarga, Aduunchuluun, Chandgana, Talbulag and Khuut. Mr. Battulga hoped for an early resolution of export tariff issues. The Government plans to build altogether 5683.5 km of railway in stages.

Source: Ardiin Erkh, Montsame

20 COMPANIES LIKELY TO SHARE RAILWAY CONSTRUCTION WORK The Ministry of Road, Transportation and Urban Development has indicated that it will distribute the work of building the 1,100-km Tavan Tolgoi-Tsagaan Suvarga-Zuunbayan-Sainshand-Choibalsan railway among 20 companies. This will allow the work to proceed simultaneously in several small stretches and help get the railway ready in two years.

Source: English.News.mn

EQUITIES IN MONGOLIA CONTINUE TO SKYROCKET Mongolian equities were the world‟s best performing last year, gaining an eye-watering 140 percent in dollar terms. It is, it seems, the place to buy into China‟s booming demand for commodities – mainly coal – and has investment bankers literally slugging it out for a piece of the business. If 2010 was the year when equities on the exchange in Ulaanbaatar skyrocketed, then 2011 looks like the year they went into orbit. The MSE TOP 20 has been up 370 percent since the start of 2010. This year it‟s already up over 100 per cent again, and almost 300 per cent in local currency. You have to wonder whether, with Mongolia‟s citizens entitled to shares of any state-owned assets listed on the exchange, the country‟s 2.7m people may one day enjoy GDP per capita akin to Abu Dhabi or Qatar.

Source: The Financial Times blog

DATABASE ON THE ANVIL TO HELP EMPLOYERS AND EMPLOYEES The Labor Market Department in the Labor and Welfare Service Office, which is an implementing agency of the Government, has recently concluded the first ever comprehensive survey of the current constitution of the labor market in Mongolia. The program was funded by the Millennium Challenge Account and has gathered material to define the extent and nature of labor demand at present and in the coming years. It will also be used to prepare a central database to improve the efficiency of job matching services. The survey reveals that Mongolia has 1.8 million people in the working age, but only 1.7 million of them are fit for work. Some 142 000 citizens are currently jobless, but only 38,000 of them are registered with the agency and hence are mentioned in official documents. The expansion of mining has generated new employment opportunities in some provinces, and the survey lists the 20 types of workers most in demand. The greatest need is for operators of heavy machinery. In most provinces, however, there is a mismatch between demand and local supply, mainly because of lack of information. The agency is working with both employers and employees to make the database comprehensive, to help both sides. The agency also plans to bring together employees and employers at 3 events in 2011.

Source: Zuunii Medee

GOVERNMENT TO FIX ROYALTY RATES EVERY MONTH The Government has decided that the royalty for mineral resources to be paid by owners of special licenses will henceforth be determined on the basis of the monthly price announced at the website of the Ministry of Mineral Resources and Energy.

Source: News.mn

SMALL BUSINESSES BURDENED BY RAISED STAMP FEES

Small and medium-size businesses feel Government measures to encourage their development are being neutralized by several recently taken decisions. They cite as example the amendments to the stamp tax which have raised stamp duties on eight staple products by up to 60 times, from an existing MNT167,000 to MNT 10,250,000. Many small industries fear this will put them out of business. The National Union of Food Product Sellers claims that many of its smaller members now have to pay more tax than the profits they expect to make.

Source: Zuunii Medee

MNT67.6 BILLION RECOVERED UNDER COURT ORDERS

The Office for Execution of Judicial Decisions has revealed that it last year paid to several kinds of claimants MNT67.6 billion recovered from individuals and organizations under 5,304 court decisions. This is, however, less than half of the MNT168 billion the courts had ordered to be collected as unpaid dues in 10,288 cases. The money includes unpaid taxes, detected frauds, unpaid alimony, misappropriated State budget money including siphoned-off social welfare allowances and such instances of financial wrongdoing. The largest number of cases in an average year relates to tax evasion, which is primarily a corporate phenomenon. Among companies last year found by courts to have failed to pay taxes ranging from MNT300 million to MNT15 billion are Mongol Gazar, Golden East, Jump, Eermel, Altjin, Max Impex, Education Fund Orleonok, Fashion House, Naima Sharga and Zohiomj universities. According to the office which is responsible for enforcing the court orders, many companies simply ignore the courts‟ directives. Source: Zuunii Medee

ROAD CONSTRUCTION COMPANIERS URGED TO COME TOGETHER FOR MORE PROFIT The Federation of Auto Road Companies has appealed to all road construction companies to join it in forming a consortium to get a larger share of the Government program New Creation. The program calls for construction of 5,572 km of auto roads, 997 km of highways, and 1,100 km of railway beds. Implementation of such large scale projects requires not just labor, technology and equipment but also financial capacity, and domestic companies can hope to provide this only if they come together and pool their resources.

Source: Udriin Sonin

IMF REPRESENTATIVE WARNS OF DANGERS OF LARGE PUBLIC SPENDING Mr. P. Ramlogan, the IMF‟s resident representative in Mongolia, has warned the large government spending could result in higher inflation and surging imports. Addressing a press conference last week, Mr. Ramlogan said economic growth for Mongolia for 2011 is projected to remain strong and is set to accelerate to around 10 percent. Higher copper prices and rapid increase in coal production are fueling strong export growth that has helped boost international reserves to an all-time high. Despite such positive economic signs, the representative warned, "large government spending is creating excess demand that will result in higher inflation and surging imports. Inflation rate could reach some 20 percent by year-end." A statement issued earlier by the IMF had warned such high inflation would have an especially hard impact on the poor by pushing prices of staple food items even higher. It had suggested the Central Bank should adopt a more proactive policy and promptly initiate a tightening cycle starting with an up-front hike in interest rates in line with the surging inflation.

Source: Xinhua

USAID TO HELP SET UP TRAINING CENTER FOR BANKS The Economic Policy Reform and Competitiveness (EPRC) project, funded by USAID, last week signed a Memorandum of Understanding with the newly established Banking and Finance Academy to assist the Academy to become an independent training institution for the Mongolian banking sector. Ms. D. Khangal, EPRC‟s financial markets specialist, will work as Acting Executive Director of the Academy until June 15, 2011. At the signing ceremony, Ms. Khangal said the event was the culmination of almost two years of efforts by Mongolian banks to build an independent academy to provide the trainings they need. She said she was “honored to take the challenge of leading this center in its initial stage”, and revealed that her key duties will include the development of curriculum and course modules for

loan officers‟ training, preparation of prospective teacher-trainers, and overall center management. Eight private banks and the Mongolian Bankers Association raised MNT80 million to establish the Banking and Finance Academy in late 2010. In line with the recommendations following from USAID‟s assessment in December 2009 of the banking sector‟s training needs, the Academy will provide training for loan officers, tellers, and executives that banks need to improve and standardize their services. Initially, the center will focus on standardizing loan officers‟ skills for effective loan underwriting based on proper risk assessments of borrowers. The Academy will also support research in banking and finance and promote and protect the rights of the banking sector. The accomplishment of these objectives will benefit not only commercial banks, but also non-bank financial institutions, savings and credit cooperatives, and others that function as efficient and viable financial sector institutions.

Source: EPRC/USAID

RESTRICTED INSURANCE SYSTEM TO REPLACE GUARANTEE ON BANK DEPOSITS Finance Ministry officials have indicated that some kind of “a restricted deposit insurance system” is likely to be introduced when the present guarantee of bank deposits is withdrawn in 2013. The focus will be on protecting small depositors and the measure under consideration is likely to fix an upper limit for amounts in deposits to be so insured. It is also likely that accounts in only State owned banks will come under the scheme, and commercial banks left out of it. These are among the many suggestions made by experts from the Government of South Korea who have been advising the Mongolian Ministry of Finance for some time now. Source: Undesniii Shuudan

MINISTER ASKED TO DRAFT AMENDMENTS TO LAW ON OIL PRODUCTS Mineral Resources and Energy Minister D. Zorigt has been instructed by the Government to draft amendments to the law on oil products, and to prepare a new state policy for the oil sector, to be in force until 2015. He has been given until the end of the 1st quarter of 2011 to submit the drafts. On matters more specific, the Minister, together with the head of the Petroleum Authority, D.Amarsaikhan, has been told to seek the help of the Professional Council for Mineral Resources to prepare product sharing contracts to be signed with Petro China Daching Tamsag LLC, and Donshen Oil Mongolia LLC and to grant them exploration licenses in accordance with the related laws within the 2nd quarter of 2011. Source: Udriin Sonin

MONGOLIA GEARS UP FOR MINING BONANZA Days after the Rio Tinto executive, Stern Hu, was arrested in Shanghai, the company's chief executive, Mr.Tom Albanese, was driven in a small convoy of Land Cruisers through drizzling rain to the heart of Mongolia's annual Naadam festival. Hundreds of seven- and eight year-old boys were racing horses over distances of up to 30 km, while spectators lined up on one side of the finish line and horse owners mingled in their yurts on the other. Mr. Albanese was late, so there were no seats in the stand, and he found himself as guest of honor in somebody's yurt. There are conflicting accounts about who was proposing the toasts and why Mr. Albanese stayed in Mongolia as long as he did - opting to return to London via Seoul rather than Beijing - but nobody disputes that he became thoroughly acquainted with Mongolia's famous vodka and its notorious fermented horse milk, airag. Those festivities lasted for two full days. ''This is my first opportunity to relax and my cell phone doesn't work out here,'' Mr. Albanese told his host and friend of 30 years, Mr. Edward Rochette, who married into one of Mongolia's premier horse breeding families. ''Let's just say he had an opportunity to enjoy himself and let his hair down,'' says Mr. Rochette. When Mr. Albanese stopped for his drink at Ulaanbaatar, in July 2009, the Oyu Tolgoi copper and gold project was still an idea stuck in the Mongolian bureaucracy and Mongolia's main share index was trapped beneath 5000. But months later the Mongolian government inked the Oyu Tolgoi investment agreement. And last year the agreement officially commenced, construction began, international money began pouring in and Mongolia's share market index more than doubled to become the best performer in the world. In the first six weeks of this year the index has doubled again and the International Monetary Fund predicts the Mongolian economy will this year grow faster than China's. Indeed, it would be hard

not to grow at double digits given that construction of Oyu Tolgoi is already generating about one-third of the country's GDP, and the mine's exports will contribute a similar proportion when they come on stream from late next year. ''We're spending about USD7 million a day, which is kind of awesome,'' says Mr. Andrew Harding, who heads Rio Tinto's copper division and oversees the Oyu Tolgoi project. Read more… Oyu Tolgoi may be set to become one of the world's top three copper mines in one of the world's smallest economies and located just across the border from the world's biggest copper consumer. But the story has already been relegated to the bottom of the nation's business pages. That's because its Gobi Desert neighbor, Tavan Tolgoi - a coal project - is getting off the ground. It is the world's second largest coal deposit, after China's Shengli. The government has been weighing its options on how to develop and structure the mine and investment bankers have been swarming through Ulaanbaatar hoping for a piece of the deal. ''We had the top 55 international banking institutions here two weeks ago,'' said Mongolian Prime Minister S. Batbold, in an interview at his Ulaanbaatar residence on the eve of his present visit to Australia. ''Now it's time to raise the sophistication of the institutions of democracy and civil society and basic economic institutions including the stock exchange.'' Mr. Batbold, arguably Mongolia's richest man, is one of several young and capable Mongolian leaders who do not need reminding that the world is littered with energy-rich dictatorships and failing democracies. ''Many investment banks believe the economy will double every three years,'' says Mr. Ch.Gankhuyag, 36, the deputy minister for finance who is advising Mr. Batbold on structuring the Tavan Tolgoi deal. ''We need to shovel coal across the border and turn Mongolia's 2.7 million people into dollar millionaires. 'If we really want double digit growth from this year, then we need to continue educating people and policy makers about the dangers of resource dependency,'' he says. And to use the resources, he says, the country first needs to unlock its infrastructure bottlenecks. Down at Tavan Tolgoi, where temperatures sometimes dip as low as minus 50 degrees, miners are just beginning to scratch the surface of 6.5 billion tons of high-grade coal - equivalent to 2,400 tons for every Mongolian. A small pocket of the vast reserve has been set aside for the Mongolian Mining Corporation and its subsidiary, Energy Resources. The mining contract has been given to the Australian company Leighton and the site looks like any world-class operation. The pit is two km long and 50 meters deep and may one day extend as far as 10 km and 350 meters underground. They are currently shoveling the ''No. 3'' seam of high grade coking coal, which is between 9 and 12 meters thick and begins just 10 meters beneath the surface. International shortages are once again beginning to bite, with each new tire on the 240-ton Caterpillar tip truck costing upwards of USD30,000. But the biggest shortages are for labor. MMC has been exempted from a law that bans female truck drivers - a throwback to when only the strongest drivers could handle Mongolia's Russian-made trucks. ''Women are better drivers because they have respect for what they are doing, whereas men just go flat out,'' says the Australian training director, as he demonstrates a driving simulator which is programmed to replicate the mine and simulate snow, ice and emergency conditions. ''And we need any operator we can get.'' MMC is spending whatever it needs to overcome acute labor and equipment shortages, as it ramps up production to 7 million tons this year. But the picture of world class efficiency ends at the mine gate. The dirt road to China is so dangerous it takes each of 400 trucks a full day to complete the 200 km to the Chinese border. Many have landed on their sides when the road freezes over and drivers lose control. When the trucks get to the border they dump their loads at the edge of a showcase city of skyscrapers and formidable Chinese infrastructure. MMC has urgent plans to pave the road to China, but a series of political hurdles stand in the way of a railway line. The Mongolian Parliament has legislated that the government first has to connect Tavan Tolgoi with a Russian gauge line to the Russian rail network, which would entail a journey of nearly 7000 km to the Pacific port of Vladivostok. ''We are landlocked, we would like to see we have options in both direction through Russia and through China,'' says Mr. Batbold, explaining a desire for market leverage. While Mongolia is suffering from labor and equipment shortages and acute infrastructure bottlenecks, and its Parliament is once again debating whether to renegotiate the Oyu Tolgoi investment agreement and hasn't agreed on how to develop Tavan Tolgoi, the question has shifted from whether Mongolia will become the world's new mining frontier to how it will handle the boom. ''I'd like to focus here on how the people of Mongolia get the benefits of the project as soon as possible,'' says Mr. Batbold. The country has come a long way since the Prime Minister was merely a

businessman, albeit the one who personally acquired the Tavan Tolgoi tenement after it was returned to the government by BHP Billiton. ''This was up to BHP, it was a completely free commercial decision,'' says Mr. Batbold, who was later required to hand it back to the government. ''Everybody thinks it was like this 15 years ago, but it was very different at the time.'' Mr. Edward Rochette, who hosted Mr. Tom Albanese during the Naadam festivities and was the Mongolia representative for Robert Friedland's Ivanhoe Mines, won't hazard a guess as to the current value of those Tavan Tolgoi mining rights. But he notes that the 4.5 per cent owned by MMC is currently valued at USD4 billion on the Hong Kong Stock Exchange. It reminds Mr. Rochette of an earlier episode, when he had personally negotiated for BHP Billiton to sell its rights in Oyu Tolgoi to Mr. Friedland's Ivanhoe Mines. ''Friedland sent me down to Melbourne to negotiate with BHP,'' says Mr. Rochette. ''The purchase price was USD5 million … and it's now projected to be the third largest copper mine in the world.'' Since then, Mongolia has defied the odds to stand on its feet, Ivanhoe's Robert Friedland has become a multibillionaire and Rio's Tom Albanese has negotiated his way into the driver's seat at Oyu Tolgoi. With copper prices up more than 50 per cent in six months and hovering around USD10,000 a ton, and the value of Oyu Tolgoi's gold production alone covering the mine's operating costs at current prices, the Gobi Desert seems awash with profit. ''This decade is going to be a great decade, great demand and [with] supply struggling to keep up,'' says Mr. Harding, the copper chief at Rio Tinto. ''And from everything I see, the following decade is going to be much the same. It will take much more than another Oyu Tolgoi coming on to satisfy that demand.''

Source: The Sydney Morning Herald

FISTS FLY IN FIGHT TO MINE MONGOLIA Mongolia is poised to name the banks that will underwrite the flotation of the world's largest untapped seam of coking coal - and the proposed listing has launched rival financiers on a sub-zero, testosterone-charged scramble for the wealth of Ulaanbaatar. The process has included an ego-fueled brawl in an Irish-themed bar in, of all places, the Mongolian capital as bankers punctuated their pitch documents with their fists. Some of those involved have described the process as "one of the most aggressive, ill-tempered competitions in recent memory". The initial public offering, billed as "transformational" for the three million citizens of Mongolia, comes as natural disasters in Australia and relentless Chinese demand have triggered a sharp rise in global coal prices. The listing of Erdenes Tavan Tolgoi on either or both the Hong Kong and London exchanges may raise as much as USD5 billion and could value the company at more than USD15 billion. Propelling the furious contest is the promise of a slice of the action in Mongolia, the resources-heavy country whose proximity to China could make it the fastest-growing Asian economy of the next decade. The Mongolian authorities are expected to announce their decision within the next few days, possibly offering roles to as many as four banks. Analysts say that the success of the listing implies a potentially huge flow of other business for bankers as Mongolia attracts investment and develops infrastructure to support its mineral ambitions. Read more… One of the weaknesses of the Tavan Tolgoi deposit is that it lies about 400 km from the nearest railway line, an isolation that can be addressed only by raising capital. Benchmark prices for coking coal used in steel blast furnaces are 50 per cent higher than they were a year ago and have given Chinese coal producers a spectacular run of profitability. Even if prices stabilize, Mongolia believes that the six billion tons of coal beneath Tavan Tolgoi could double GDP by 2015. Over the past fortnight, teams from more than 20 global investment banks, including JP Morgan, Deutsche Bank, Morgan Stanley and Goldman Sachs, have descended on Mongolia's frozen capital to make their pitch. Private Mongolian companies have listed shares in Hong Kong, but Tavan Tolgoi is a government sale and is invested with huge political significance. While the government will retain a 51 per cent stake in the holding company, and 30 per cent will be offered to global investors, the plan is to distribute 10 per cent of the shares to every Mongolian and the remainder to local companies. If the logistics of that distribution are managed well, the deal could mark a turning point in dragging the country from poverty, analysts say. The deal is substantial by any standard, but the real prize lies in the kudos of receiving the official nod, which could lead to mandates for other deals in the private and public sectors.

Source: The Australian

GOLD SLIPS FROM SEVEN-WEEK HIGH, SILVER HITS 31-YEAR PEAK Gold slipped on Tuesday after rising to its highest in seven weeks, but sentiment was still underpinned by deadly unrest in North Africa and West Asia as well as uncertainty over the future of oil prices, while silver jumped to its strongest level since 1980. High oil prices sparked by violence in Libya fed fears of inflation, one of the main concerns of investors, who are otherwise in a generally bullish mood on expectations that the global economic recovery is now sustainable. Spot gold fell to USD1 401.90. It had risen as high as USD1,410.65/oz. Bullion was below a lifetime high around USD1,430 struck in December. Silver jumped to its highest since 1980 above USD34/oz on high gold prices and also on hopes of a sustainable recovery in the global economy. Spot silver is seen as making a limited gain to USD38.20/oz over the next four weeks, as pointed out by a trendline, because the current wave is unlikely to extend. The gold-silver ratio, used to measure how many ounces of silver can buy one ounce of gold, fell to a 13-year high around 41. Forward silver was cheaper than cash prices, indicating tightness. Source: Mining Weekly

“WORKERS ARE GOD NOW,” COMPLAINS FACTORY OWNER IN CHINA Labor shortages for manufacturing workers have dominated headlines in the Chinese media as migrant workers return from their holidays, but some employers are proving more able to hire workers than others. While smaller factories struggle with a nationwide tightening in the labor market, larger firms that offer better wages and benefits – those that are more likely to have Human Resource managers – are able to recruit the staff they need. Across the country, local governments have been raising the minimum wage. Next month, Guangdong province, home to a large share of China‟s manufacturing, will raise the minimum wage by 18 per cent. In Dongguan, a city in the province that is home to many of China‟s light manufacturing factories, employers are promising an annual bonus, annual leave, and even rewards on their birthdays in a bid to sign up workers. “Workers are God now,” complains one factory owner. His hyperbole underlines an important demographic shift. China‟s once endless supply of workers is looking less infinite. The cohort of those entering the workforce, defined in China as those between 15 and 24 years old, peaked in 2005 at 227 million and is expected to fall to 150 million by 2024. Read more… Mr. William Fung, who heads Li & Fung, the largest supply chain company in the world with half of its manufacturing operations in China that makes everything from garments to furniture, says the world must brace itself for “a bout of cost-push inflation”. Alongside double-digit increases in the cost of labor in China in 2010 and 2011, input prices are also soaring. The price of cotton, for example, is up more than 150 per cent over the past year. “The reality is that [suppliers] will have to pass these costs on,” says Mr. Fung. There is also likely to be a divergence between the fortunes of multibillion-dollar companies like Li & Fung, which saw half-yearly sales as of June 2010 rise by almost 20 per cent, and the small, low-tech Hong Kong firms many of which are based in the Pearl River Delta that are not well integrated into their developed world customers‟ businesses. Guangdong is not the only region facing labor shortages. In poor provinces like Anhui, which has traditionally been a source of migrant workers, higher wages nearer home mean more migrant workers are opting not to travel long distances to seek work. Li Weining, 23, left his job at the Honda parts plant in Guangzhou that had a strike last year and chose instead a factory in Zhanjiang, 400 km from the city, because it is closer to his home town and living costs are lower. Mr. Li‟s calculus for moving closer to home is simpler than that of multinationals comparing costs of production in different countries. Most companies are unlikely to shift manufacturing operations in China to countries like India or Bangladesh. Dragonomics, a research consultancy, calculates that labor productivity in China grew by 13 per cent annually in apparel manufacturing between 2003 and 2010, offsetting most of the increase in wages. China‟s rate of labor productivity growth comfortably outstrips that of Brazil, Vietnam, Indonesia and Turkey, it says. Moreover, for industries such as the assembly of electronic components, efficient and tightly knit supply chains passing products from factories in Japan or Taiwan to the Pearl River Delta for labor-intensive work make it difficult to move manufacturing facilities elsewhere. And behind the headlines about China‟s exchange rate lurks a more lethal secret. China‟s infrastructure is on a par with South Korea, according to the World Bank. Dragonomics says than means China combines “Third World wages with First World infrastructure”.

Source: The Financial Times

POLITICS KHURTS TO BE EXTRADITED TO GERMANY, RULES BRITISH COURT A British Court last week ruled Mr. B. Khurts should be sent to Germany on a European arrest warrant. The 41-year-old head of administration at the National Security Council of Mongolia has been described in Western media as the country‟s spy chief. He is wanted in Germany for the kidnap and false imprisonment of a Mongolian national suspected of murdering a government official. His lawyer said he intended to appeal. Mr. Khurts was allegedly involved in the 2003 kidnap of D. Enkhbat, who was taken from France to Berlin, drugged and flown to Ulaanbaatar. Mr. Enkhbat was wanted in connection with the murder of Mongolia's Infrastructure Minister S. Zorig in 1998. Mr. Khurts was remanded in custody and will be extradited within 17 days, unless his appeal is successful. His lawyer, Alun Jones QC, claimed Mr. Khurts should not have been detained at Heathrow Airport in September because he was covered by diplomatic immunity. Mr. Jones said Mr. Khurts was lured to the UK by the Foreign Office, on the pretense of attending high-level government talks on intelligence co-operation, so he could be arrested and extradited to Germany. Mr. Jones said Mr. Khurts had been granted a business visa for a visit during which he was supposed to meet Britain's National Security Adviser, Sir Peter Ricketts, and strategy and counter-terrorism director, Mr. William Nye. Judge Purdy said he believed Mr. Khurts was invited for genuine security talks, but the Serious Organised Crime Agency (Soca) had heard about it and were aware of the outstanding warrant from Germany. The judge said, “To my mind it is clear the Mongolian authorities thought Bat Khurts was travelling with full immunity... equally clearly, the UK authorities, once aware of the European Arrest Warrant, most certainly did not regard the trip as attracting any immunity from arrest."

Source: www.bbc.co.uk

NOBODY IN MONGOLA CAN IMPROVE ON THE CURRENT CRIMINAL LAW, SAYS MINISTER Minister of Law and Internal Affairs Ts.Nyamdorj has explained his recent summary rejection of any need to amend the criminal law. His blunt opposition was mainly responsible for the decision of the Standing Committee on Justice not to proceed with consideration of draft amendments proposed by 12 members of Parliament, led by Mr. Sh.Saikhansambuu (MPRP). Mr. Nyamdorj says the last amendment to the law, initiated by himself, among others, assures both citizens and the police of adequate protection and needs no tinkering with. He has recalled how he sought and received advice from local lawyers and foreign legal experts, particularly through the German organization GTZ, at that time. The merit of the measure, he says, is borne out by how all criticism and concern that “it will put all Mongolians in jail” have been shown to be unfounded. Mr. Saikhansambuu, however, asserted that many judges had told him they found several provisions of the current law to be too harsh and strict, and not in keeping with modern humane principles. The MP also pointed to the rising number of convictions on minor offences, that brands people, many of them young, as “criminals” and gives them no opportunity to reform themselves. Mr.Nyamdorj has said there is nobody in the country who can suggest any actual improvement in the present criminal law. He called the draft “a document prepared by a hired brain and then signed by 12 MPs”. There is “no one in Mongolia who is knowledgeable and experienced enough to improve on what we did in 1998 and again in 2002”, he said.

Source: Zuunii Medee

SEARCH ON FOR MNT84 BILLION TO REDUCE AIR POLLUTION Representatives of the Air Quality Office told a meeting attended by a number of MPs and senior officials of Ministries that a minimum MNT84 billion is needed to reduce air pollution in Ulaanbaatar. They asked the attending members of Parliamentary Standing Committees and representatives of Ministries to allocate the money so that work may start. The head of the Standing Committee on Nature, Environment, Food and Agriculture said the money would have to be found now that a law on air pollution reduction has been passed. Failure to implement the law would make officials liable to censure.

Source: Undesnii Shuudan

AUSTRALIAN UNIVERSITY TO HELP MONGOLIAN EDUCATION Prime Minister S. Batbold has signed a memorandum of understanding with Australian National University (ANU) vice-chancellor Ian Chubb that pledges ANU commitment to Mongolian studies in a bid to enhance education in the country. The agreement will allow the ANU to have access to

resources at the Mongolian National University and increase its research capacity in the fields of archaeology, anthropology, and traditional Mongolian culture. The ANU already has a bilateral agreement with Indiana University (IU) in which the ANU teaches American students Indonesian, and in return IU teaches Australian students Mongolian. The latest agreement will add Mongolia to this international knowledge exchange. ANU Professor of Asian Studies and Law Kent Anderson says it is an important agreement as Mongolia is developing an enormous resource sector.

Source: ABC News

DOUBTS ABOUT THE VERACITY OF VOTING FIGURES IN PARLIAMENT There appears to be a simple answer to the mystery why certain laws get approved with support from 90% or more MPs. It is still common for members present at that particular voting to vote on behalf of those absent, or press the button twice. This was once again seen in the last days of the Fall session when holiday celebrations kept many MPs away, as would be borne out by records of attendance. Another reason for the low attendance on those days was the general meeting of the “MPRP” as also the meeting of the National Committee of the Democratic Party. However, records of proceedings in Parliament on one of these days show that amendments to the notary law were approved by 92% of MPs, while amendments to the law on sending workers abroad were favored by 90%, amendments to the mineral law by 86%, to the land privatization law by 88.2%, to the family law by 80.4%, and to the citizenship registration law 84.3%. Why do we need Parliament to sit for so long if so many important issues can be decided on just one day? The majority count is easy to achieve. A vote by an absent member can be recorded simply by pressing three buttons, no questions asked.

Source: Zuunii Medee

MP SURPRISED AT MOVE TO AMEND LAW BANNING MINING IN SELECTED AREAS Mr. B.Bat-Erdene, an MPP MP, has hinted at the likelihood of a “foreigners' lobby” being behind the move to revoke the law banning all operations near river basins and forest areas. He regrets that a perception has been sought to be created that the law aims at “stopping all mining operations in Mongolia, which is not true”. He describes it as no more than “an essential environmental protection law” that “very rightly restricts mining operating only in areas where they destroy the balance of the ecology”. He said “Mongolians must not be blind to” how uncontrolled mining has damaged the environment, polluting rivers with chemical substances used in washing up gold, denying local community and livestock access to potable water. Mr. Bat-Erdene has claimed that several foreign companies have been consistently demanding a repeal of the law and “their hard work toward this goal” has now borne fruit with some members of Parliament initiating an amendment to the law, “possibly with the Government‟s blessings”. He finds it strange that none of the MPs behind the amendment voted against the law when it was passed. They have not explained why they have “veered round to a stand that appears to favor the interests of foreign miners,” he said.

Source: Zuunii Medee

EACH MEMBER OF A HOUSEHOLD CAN NOW CLAIM FREE LAND Mr. M.Buyandelger, Head of the Department for Registration and Use of Land, says that a recent amendment to the land privatization law now allows every member of a household to be allocated 0.07 hectare of land free of charge. So far this was the area allowed to be owned by a household. The registration fees remain the same at MNT13,200 per sq.m. This amounts to MNT9,240,000 for a 700-sq.m plot.

Source: Zuunii Medee

BIGGER ROLE ENVISAGED FOR COMMUNITIES IN RECLAMATION Deputy Minister of Environment and Tourism Ch.Jargalsaikhan has said officials of the department in every province government will now have an increased say in enforcing responsible mining. All activities in the mining sector – not just extraction of mineral resources, but also things like construction of schools, hospitals and roads -- will now be assessed and evaluated in terms of their impact on the environment. “We did not have this system, though it was widely practiced elsewhere, and its introduction here means added responsibility for concerned officials,” he said. Noting that 566 sites have so far been identified where no reclamation had been done after “destructive mining activities”, Mr. Jargalsaikhan said the present policy will ensure more involvement of local communities in reclamation and rehabilitation work. A thorough review is to

be made of existing laws related to environmental protection as well as of national programs to halt desertification and water shortage.

Source Onoodor

CHILDREN OF D.ENKHBAT URGE FATHER’S NAME REHABILITATION E.Zolboo and E.Zolboobayar, children of D.Enkhbat, have written to President Ts.Elbegdorj to rehabilitate their father‟s name. The letter reads: “Our father D.Enkbat had been suspected of having murdered S.Zorig and was illegally abducted from France in 2003. The case against him was not proved and he was released from prison, only to die after a few days, in 2004. We were small and believed our mother‟s words that he would come back to us soon. We now want our father‟s name to be cleared of all suspicion as there has been no proof of his involvement in the murder of S.Zorig. Our father died in dishonor after being illegally abducted in total violation of his human rights. This matter has come to the fore at the trial of B.Khurts, Chief of Administration at the National Security Council, in Great Britain. Our father was a victim of an organized crime and died of torture. We request you to officially rehabilitate his name, in the name of justice.”

Source: News.mn

A NEW START FOR A LAND WHERE BUDDHA MEETS LOUIS VUITTON Weathered old folk in fur hats and goatskin gowns and young couples wearing designer sunglasses are squeezing into Gandan monastery to lay money at the feet of a small and ornate statue of Buddha. The room has the yak butter smell of monasteries in Lhasa but the scene is otherwise more natural, lively and shambolic. Portly old monks in maroon robes are counting bundles of money and child trainees are stifling yawns. They've been sitting and chanting all day and into the night for most of the two-week celebration for Mongolia's lunar new year. I ask my friend what they are chanting about as he stops my coat from catching fire on the coal stove. ''I don't really know,'' he says. ''Actually, nobody does. It's all in Tibetan - we just have to trust them.'' Ninety-eight per cent of the country's 2.7 million people count themselves as Tibetan Buddhists, thanks to ties that go back centuries. But only a few hundred trained monks can read the scriptures of their faith. My friend, a Mongolian neighbor from Beijing, has brought me here to pray for good health and fortune in between his meetings about national politics and personal uranium exploration. He has also been dodging a guy from Goldman Sachs who wants his help in getting in on the next mega-mining float. We push our way out through the in-coming crowd into the central Asian sun. ''Spring is coming,'' he says, as I glance again at the weather gauge on my phone. We resume an old argument about whether minus 27 degrees is ''cold''. Admittedly, it doesn't feel that bad, so long as the sun is shining and the wind doesn't blow. ''If you want to really see leapfrog development you'll notice we don't have McDonald's or Starbucks but we do have very good French, Japanese and Korean restaurants with international chefs,'' says Ch. Gankhuyag, another of the country's rising stars, who is the Vice-Minister of Finance. ''Mongolians didn't really shop around for Levi's. We went straight from riding horses to Louis Vuitton.'' Read more… Tibetan Buddhism is not the only foreign idea that Mongolia has absorbed and adapted in its own idiosyncratic way. Only two decades ago the country flicked a switch from being a dour Marxist-Leninist satellite of the Soviet Union to a boisterously democratic market economy. ''We have 17 free-to-air TV stations and 16 cable channels,'' says a market researcher, A. Enkhtuvshin. ''And every politician feels they need to own their own newspaper because it's cheaper than advertising.'' He calculates that the entire media market is valued at only USD35 million. As night falls, down at the main square, the ice rink is filling up with young folk spinning and slipping over to Guns N' Roses and Mongolian hip-hop, while wishing each other ''Happy Valentine's Day''. The stately little building on the east side of Sukhbaatar Square used to be the old Soviet cinema. It has now been painted pink and revamped as the Mongolian Stock Exchange. It would be wrong to suggest this bourse ranks among the world's cleanest and most efficient but, like most things in Mongolia, it seems to be heading in the right direction. ''Our 344 listed companies have a market capitalization of about USD2 billion and daily trading volumes of about USD200,000,'' says Mr. Kh. Altai, the acting executive director of the stock exchange. ''It's not the biggest in the world, but it has become critical for us to build capacity.'' On the Square's southern edge is an impressive all-glass high-rise in the shape of a sail. I was told it was bought by the former Thai Prime Minister, Mr. Thaksin Shinawatra, while he spent a month at

the Chinggis Hotel. I was also told it was owned by a former Mongolian prime minister, and the South Koreans, and that they were fronting for the Japanese Yakuza, and that it would have to be torn down because it was crooked. The real and surreal seem happily interchangeable around here. On the west side of the square is the city's tallest building, where three years earlier I had watched Chinese construction workers laying bricks on its second floor. They had been there all year but hadn't once left the site. The first two floors of this now-sparkling 17-floor edifice are occupied by the likes of Ermenegildo Zegna, Mont Blanc and Louis Vuitton.

Source: The Sydney Morning Herald

MONGOLIA UNLIKELY TO BE FREE OF ZUDS Months after the winter of 2009-2010, one particular Mongolian nomadic herding family seemed unaffected. For the father it was more of a question of having one-half of his livestock left rather than a loss of one-half. The summer rains and the warmth came back and life has stoically gone on, but at the time this was a terrible event for all nomadic families to deal with. A zud is an extreme event when heavy snow occurs following a dry summer when little grass grew. This means animals have difficulty digging through the snow to get at the grass. It was made worse in the winter of 2009-2010 by the fact that in late autumn there had been rain, which was immediately followed by snow and frosty conditions causing a layer of ice to cover the grass. By early February 2010, 90 per cent of the country was covered in at least 20cm of snow. In the far northwest the snow was nearly one meter deep. Some areas were still under snow as late as May. Temperatures had fallen to as low as -46 degrees. By May, about 8.5 million animals had died; the final death toll was estimated to be 12 million (27 per cent of Mongolia's livestock total). This was one million more than in the last zud, which lasted for three consecutive winters from 1999-2002. The livestock had tried to survive the cold and lack of food by resorting to eating litter and dirt - anything really, but in the end many succumbed. By early February, 2010 about 21,000 herder families had lost over 50 per cent of their livestock. By late March nearly 10,000 herding families had lost all their livestock. For the nomads, livestock are their existence: cash, food, clothing, fuel, transport, wealth, pride and the future. Read more... People died too. Some 17 herders froze to death while looking after their animals. Three women died in childbirth because they were unable to get to a hospital. Food and fuel supplies in the countryside were low. Cases of pneumonia, psychological stress and malnutrition occurred. Some 22,000 children were unable to return home from school in the winter holiday. They had to stay in the school dormitories, which were often poorly heated, and they had only limited amounts of food. It was estimated that by mid-May nearly 800,000 people had been adversely affected. Flash floods in spring made the situation worse. Many families sold what was left of their livestock and migrated to the cities, especially Ulaanbaatar. There they faced further problems: finding housing, a job and enough money, and also adjusting to a new way of life. Various organisations and governments provided money (for disposal of animal carcasses, health and social services, water supplies, sanitation, cash for families), supplies (fodder, medicines, food, bedding, fuel, machinery, vehicles), and longer term aid. These included, in order of contribution: the Mongolian Government, the UN Emergency Regional Fund, France, the Asian Development Bank, Red Cross, Australia, Japan, Switzerland, local organisations in Mongolia, the Czech Republic, Canada, Germany, Russia, China, Turkey and the Philippines. Mongolia really is at the mercy of its weather and climate. Although the world is warming overall, specific variations can occur. In the case of zud conditions this means an extra cold and dry scenario. Such a situation is related to the distribution of storm tracks and associated depressions. These lower troposphere phenomena tend to follow the path of the mid-latitude jet stream in the upper troposphere. In the winter of 2009-2010, this jet stream was in turn pulled south and pushed north in response to an El Nino condition (where the water off the Peruvian coast warms with a resulting humid weather pattern there) to follow a windy path allowing very cold Arctic air to move farther south in some places, for example Mongolia, and warmer mid-latitude air to move north over other places. In the winter of 2010-2011, the opposite to an El Nino, a La Nina, prevailed. This brought very cold air over the Korean Peninsula, but relatively "warmer" air over Mongolia. So while the preceding summer in Mongolia was drier than normal, snow melt from the preceding winter and the less severe temperatures seem to have lessened any zud effect. Extra fodder and shelter for animals, with better roads and goods and services for nomadic families seems the obvious way to reduce the impact of future zud conditions, but this would be difficult to

implement given the style of nomadic herding and the lack of cash. So it is likely that impacts of future zuds will continue to be strongly felt, as they have for centuries before.

Source: www.suite101.com

THE GOBI: MONGOLIA’S DESERT PLAYGROUND

Mongolians have a word for it: zud. A zud is a winter so harsh that animals cannot feed through the frost and ice encrusting the steppe. In the winter of 2009-10 Mongolia suffered its worst zud for nobody knows how long – "for decades", some say; or "in living memory". Ten million head of livestock are reckoned to have died. As I gazed from the vehicle window at the stony desert steppe I wasn't sure whether I was seeing the dramatic fallout of that zud, or whether the rib cages and skulls were the usual cull exacted by nature in this most thrillingly harsh of environments. Whatever the case, the black vultures, sitting like homeless undertakers on the scattered boulders, were making the most of it. We were traveling through the South Gobi, the largest and most sparsely populated of the five provinces that make up the Gobi Desert. The Gobi is the No-man's-land between China to the south and the rest of Mongolia and the Central Siberian Plateau in the north. It is also a byword for the most barren place of the imagination. But deserts, like imaginations, are invariably fertile, even this one. The Gobi is not just sand and gravel and dead animals. It diversifies into mountains and evergreen forest and geological freak shows – including a dune system as long and high as a mountain range – and sustains an array of endangered species that includes wild ass, wild camels and snow leopards. That dune system – Khongoryn Els – was our immediate goal. The only road in the South Gobi runs for a handful of miles between Gurvan Saikhan airport and the provincial capital of Dalanzadgad. Arriving on a flight from Ulaanbaatar, we headed the other way: off road, off map, into emptiness. Read more… Our ship of the desert was a Russian-built Purgon, a military vehicle adapted for civilian use and uniquely suited to this terrain. Up front sat the driver, Uulzi, a native of Dalanzadgad, and James Moreton, a Mongolian speaker and the owner of a Britain-based travel company that specializes in Mongolia. Bouncing along in the back were myself and Don Morley, a former U.S. Air Force colonel who happens to be a world-class modern pentathlete. After we had driven past a pile of brown blankets that turned out to be a dead camel, Don reached into his pocket and produced a palm-sized electronic device that he held up to the raised sunroof of the Purgon. "Spot Messenger," he said, explaining that it was now firing off emails to 10 designated recipients with a link to Google Earth that pinpointed his position. "One of the recipients is a two-star general who worked at the Pentagon," he added casually. For a moment I thought I had woken up in a remake of Dr. Strangelove, but this was just Don's way of making sense of space that made even his home state of Texas seem claustrophobic. My preferred coping strategy for the Gobi, in those first few hours, was to hallucinate. As we drove west, following a skein of tire tracks that constantly diverged, subdivided and converged across the scrubby steppe, distant mountain ranges took on the shape of city skylines while wooded islands shimmered in petroleum-fume seas along the horizon. Above, altocumulus lay like bubble wrap in the blue. The corollary of those murderous winters is summers that turn the vast, stony plains into sizzling frying pans with no respite of shade. We slipped in through an autumn window of pleasantly warm days and evenings. Even now, in such balmy Mediterranean weather, it was hard to imagine people living and laughing in such emptiness. But they do. Mid-morning we stopped by a well, where nomadic herders had brought their flocks of cashmere goats and fat-tailed sheep. Their gers – traditional movable dwellings, circular and made of felt – lay in the distance, looking like squishy buttons on the ragged brocade of the steppe. The watering of the livestock was a focus of activity. Wearing deels, traditional calf-length tunics, the men came and went on motorbikes while their children showed off by riding horses bareback. The life of the desert herders is unimaginably harsh, but it has bred in them a unique sense of hospitality. Or, as James Moreton put it, "These are nomadic people still living as Genghis Khan did, but they invite you in for tea." Not just tea, but fermented mare's milk, feasts of freshly slaughtered goat – and tales of survival. Meeting these people, understanding both the meagerness and nobility of their existence, is like touching fingertips with one's ancestors – and, who knows, with one's descendants too, for one day we may all need again to live so frugally. One herder woman I met in the remote south-west of the province talked somberly of climate change. "There has been a sequence of dry summers followed by bad winters," she said. "The wells

are drying up. I see less and less wildlife…" Last winter, in that terrible zud, many young people gave up the herder's life and headed to the towns and cities in search of work. Those who are left – in the case of many families, just the women and the elderly – are pessimistic about what will become of their way of life if nature does not turn kinder. From the well we rattled on west, driving for six hours and 130 miles (and passing just one road sign and two other vehicles) to reach our first night's camp. Juulchin Gobi 2 Camp is a group of gers with bathroom and dining blocks, within a mile or two of one of the South Gobi's most dramatic and distinctive features. The sand dunes of Khongoryn stretch for more than 100 miles and rise 1,200ft above the plain at their highest point. To reach them we walked across a channel of spring water with vivid green margins where hoopoes flitted in the soft evening light. As we puffed to the top of the ridge the setting sun was turning the vast particulate drifts lilac, and malachite-green, and what in a fashion catalogue might be termed teal, or possibly taupe. That evening the balloonists arrived in camp. The Gobi Desert is forever acting as a vacuum on the human imagination, sucking in restless energies. While we were there, for instance, a Swiss woman named Sarah Marquis was pushing a shopping trolley across it. The Great Mongolian Balloon Adventure was in the same tradition, but with rather more point. No one, you see, had flown a hot-air balloon in Mongolia before, let alone in the Gobi Desert. So a bunch of European balloonists – mostly English, with some French, Germans and Swiss – had brought over four balloons and were trucking around and taking off in them at every available opportunity, creating fires and spheres in the desert skies and astonishing the herders, not to mention their camels. The following morning we watched them sail into the sunrise, then headed back through a wide corridor of steppe between two mountain ranges, the southerly range being shadowed by the dunes of Khongoryn. Winding up through the mountains we came across a Buddhist monastery that had been razed in the Communist purges of the Thirties. The monks who lived here were no doubt executed, as some 17,000 Buddhist monks lost their lives in a countrywide extermination. In the Memorial Museum of the Victims of Political Persecution in Ulaanbaatar there is an exhibit of 20 monks' skulls, each with a single bullet hole in it. But we were travelling back to a more innocent time in the history of Mongolia. No one epitomizes the spirit of madcap adventure that finds challenge and inspiration in the Gobi more than Roy Chapman Andrews. He was the gung-ho American adventurer said to have inspired the character of Indiana Jones, and in the 1920s he made a discovery that put the Gobi Desert on the front page of every newspaper in the world. At a place called Bayanzag there is a convulsive gash in the steppe, a geological phenomenon of wind-sculpted sandstone known as The Flaming Cliffs. It was given this name by Chapman Andrews because the sandstone glows red in the light of the setting sun. He also called it "this treasure vault of world history" because of what he found here. The Flaming Cliffs are a dinosaur boneyard. Chapman Andrews camped at Bayanzag on a series of expeditions out of what was then known as Peking. He found not just lots of dinosaur bones but "the first dinosaur eggs ever seen by a human being". Two were broken in half, revealing the white bones of unhatched baby dinosaurs. In the moment of that discovery, a new branch of science was born: paleoembryology. As Chapman Andrews noted, this is a hugely significant site in the history of planet Earth. Were it in any other country it would be marked by a car park, a museum and visitor centre, interpretation boards, waymarked footpaths – and a shop selling Indiana Jones figurines. Here there is almost nothing – certainly not a car park, for there are not even roads. A few herders have set up trestle tables to sell drinks and draughts sets (the pieces are tiny gers). And there is a museum – housed in a ger and containing about three dinosaur bones – but it is pitiful. Among the entertainingly shaped rocks that Chapman Andrews likened to medieval castles, no one popped up to offer to guide us, or to pass off a camel scapula as a piece of old velociraptor. Instead my companions and I made our own fun, seeing vast thigh bones and eye sockets everywhere, though in truth we hardly knew what to look for. Our only definite reptile sighting was of a living one, a scuttling sand lizard. That evening the balloon circus rolled into Gobi Mirage camp, where we were staying, and the following morning I hitched a flight on a claret balloon called Road to Mandalay. According to its owner, Phil Dunnington, Mandalay had "sat in a bag in Frinton-on-Sea for 10 years" before receiving this unlikely airing in a place so different it seems incredible they share planet-space. In the oblique and dusty light of dawn we lifted free of the steppe in our wicker basket with its leatherette lip. With height attained, the pilot, Phil's wife, Allie, closed the gas valve that fed the

envelope with propane. The roar of flame died. Peace. No sound came from below. For as far as one could see there were no roads, no cars, no dwellings, no fences or boundaries, no buildings, no pylons or poles, no advertising. Just a motionless ocean of land.

Source: The Telegraph, UK

THE WORLD NEEDS AN ASSERTIVE BUT CONSTRUCTIVE CHINA In a departure from the largely successful policy of reassurance it adopted in the late 1990s under the slogan “peaceful rise”, in the past two years China has damaged its relations with the United States and most of its neighbors. Mistrust of Beijing throughout Asia and in Washington is palpable. Observers often claim that China has become more assertive, revising its grand strategy to reflect its own rise and America‟s decline since the financial crisis began in 2008. China‟s counterproductive policies are better understood as reactive and conservative rather than assertive, and Beijing should be encouraged by the United States and its allies to return to the more assertive but more constructive policies Beijing adopted in the two years just before the financial crisis. In that period China was actually more innovative, proactive and assertive than it is today. By softening its traditional prohibitions on interference in the internal affairs of other states, Beijing was able to play a constructive leadership role in addressing global problems and improve U.S.-China relations in the process. In late 2006 and early 2007 Beijing pressured North Korea multilaterally and bilaterally into agreeing to disable the nuclear reactor at Yongbyon, the only concrete progress in the six-party talks. Beijing also changed course on Darfur, from simply shielding Khartoum from international pressure to backing the United Nations‟ peace plan in late 2006 to committing in 2007 to send the first non-African peacekeepers to the region. In late 2008, China also agreed to send a naval contingent to the Gulf of Aden to assist in international antipiracy efforts under a U.N. resolution that permits hot pursuit of pirates into Somalia‟s territorial waters. Unfortunately, since 2009, China has lost this positive momentum by reacting abrasively to events driven by others, hardly the stuff of an assertive and confident new grand strategy. Read more… Early last year China adopted a rhetorically strident posture in response to long-held policies of the United States relating to Taiwan, Internet freedom and Tibet. In July 2010, Chinese Foreign Minister Yang Jiechi responded to Secretary of State Hillary Clinton‟s innovative multilateral confidence-building initiative for the South China Sea by warning Southeast Asian neighbors in caustic terms against coordinating with outside powers in managing territorial disputes with Beijing. Later that year, Beijing demanded an apology and compensation from Tokyo even after Japan, under Chinese pressure, had released a Chinese captain whose fishing boat had collided with a Japanese coast guard vessel. After two severe military provocations by North Korea and a clear violation of Pyongyang‟s existing nuclear commitments, China not only refused to condemn Pyongyang directly, it prevented the U.N. Security Council from doing so. Instead, Chinese officials twice warned the United States and South Korea against conducting naval exercises in nearby international waters. Chinese leaders thereby alienated many in the international community, especially South Korea, Japan and the United States. Beijing‟s new more truculent posture is rooted in a strange mix of confidence on the international stage and insecurity at home. Since the onset of the financial crisis in 2008, Chinese citizens, lower-level government officials, and media and Internet commentators have often exaggerated China‟s rise in influence and the declining power of the United States, insisting that China push back against perceived slights and reduce international cooperation with the United States and its allies. According to my Chinese interlocutors, top officials in Beijing have a much more sober assessment of China‟s global position and of the development challenges ahead. Yet those nationalist domestic voices have created a heated political environment. Party elites are acutely concerned about long-term domestic stability and hope to avoid criticism along nationalist lines, a theme that has the potential to galvanize the many otherwise disparate local protests against Chinese officials into a national movement. Particularly during the leadership transition that will culminate in the Communist Party‟s selection of President Hu Jintao‟s successor in 2012, individual officials need to foster their reputations as protectors of national pride and domestic stability. Fortunately, those same interlocutors report that there are real policy debates in Beijing, particularly about North Korea. In order to influence these debates, Washington and its partners need to consistently offer China an active role in multilateral cooperative efforts on North Korea, Iran, etc. But they must also emphasize that, while Chinese cooperation is greatly preferred, they will react to provocations with or without Chinese cooperation and that China‟s interests will suffer

if it obstructs those efforts or even stands on the sidelines. In 2010 the Obama administration responded well to this challenge. It is a gross exaggeration to say the United States has “returned to Asia” under Obama, but Washington‟s engagement in the region has been intense, including many high-level visits. More concretely, the U.S.–South Korean military exercises in the Yellow Sea and the trilateral meeting of Japanese, Korean and U.S. security officials in Washington demonstrated that the United States and its partners have diplomatic and security options regarding North Korea even without China‟s active cooperation. Beijing is unlikely to look with favor on the prospect of greater U.S.-Japan-South Korea security coordination on issues such as missile defense, anti-submarine warfare, searching of North Korean ships as part of the Proliferation Security Initiative, or the potential development of Japanese offensive strike weapons to counter North Korean missile threats. All the more reason for China to return to a more creative, assertive and reassuring set of policies to address the problem. To date, Washington‟s approach has had a positive, albeit limited effect. Beijing sought to improve bilateral relations in the lead-up to President Hu Jintao‟s visit to the United States in January, for example, by restoring military-to-military dialogue and hosting U.S. Defense Secretary Robert Gates in Beijing. There are also signs that China is beginning to reach out to ASEAN member states to address ongoing security concerns that were exacerbated by Beijing‟s bullying at the July ASEAN Regional Forum. China may also have played a constructive role in preventing North Korea from carrying through on its military threats against South Korea in response to the latter‟s artillery exercise in December 2010. However, we have not seen a return in Beijing to the proactive and assertive mind-set exhibited in 2006-2008. For the United States and its allies and security partners, securing this kind of Chinese cooperation in the future may be the highest hurdle to clear but will be essential in addressing problems from proliferation to financial instability to climate change. In this one important sense, the United States needs a more assertive China. (The author of the above, Mt. Thomas J. Christensen, a former U.S. deputy assistant Secretary of State, is professor of politics and international affairs at Princeton University and the author of “Worse Than a Monolith: Alliance Politics and Problems of Coercive Diplomacy in Asia.” A longer version of this essay appears in the March/April issue of Foreign Affairs.)

Source: The New York Times

ANNOUNCEMENTS

FRANCHISING & BUSINESS OPPORTUNITIES EXPO, SYDNEY, APRIL 1-3 The Business Council of Mongolia and Saki Partners (Australia) will be hosting the Mongolian Business Mission to the Franchising & Business Opportunities Expo in Sydney. The Expo will feature over 100 businesses, in cosmetics, food and beverage, tanning, ice cream, pizza, child care, home improvement, education, health care, tax prep, and so much more. By joining the official delegation, you will receive free business support as an international buyer. Benefits available to delegation members are: - Free admission to Expo and exhibits - Free matchmaking - Free assistance arranging and scheduling appointments with Australian exhibitors and companies

before and during the Expo - Access to the International Business Center, including a separate registration area to pick up

badges, and meeting rooms to meet with exhibitors - Special franchising seminar and workshop - Assistance with travel and hotel bookings - Assistance with logistics at the show - Friendly local language support. Register with the Business Council of Mongolia today. Call BCM at 976-11-332345 to register or for questions about the event. Registration closes on March 3, 2011. ________________________________________________

MONGOLIA INVESTMENT FORUM, ULAANBAATAR, MARCH 4 The Mongolia Economic Forum is organizing the Mongolia Investment Forum 2011 on March 4, following the second Mongolia Economic Forum on March 2-3, to be held in cooperation with the Foreign Investment and Foreign Trade Agency (FIFTA), the Mongolian National Chamber of Commerce and Industry, the Business Council of Mongolia, the CEO Club of Mongolia and other

partners from the private sector. The Mongolia Investment Forum is strongly supported by the Government. The event will provide an excellent opportunity to gain an in-depth understanding of the current macroeconomic and political dynamics of the country and to interact with high-ranking policy-makers, opinion-shapers, and business leaders. The agenda of the Investment Forum is centered on the following two subjects: Mining Sector and Related Opportunities, and Stock Market Reform and Privatization of State-owned Assets. In addition to these discussions, it will provide an opportunity to Mongolian business owners and investment banks to showcase specific investment-seeking projects to international investors. The Organizing Committee of the Mongolia Investment Forum cordially invites you to submit your expression of interest in attending. You may alternately consider expressing interest in attending the Mongolia Economic Forum; Mongolia Economic Forum participants will also be entitled to attend the Mongolia Investment Forum. For details, please consult with the Forum website: www.meforum.mn. Coordinator – Bat-Erdene – 99009797 – Contact: baterdene@mongolfund.com. __________________________________________________

MINETECH 2011, ULAANBAATAR, MARCH 3-5 The Mongolian National Mining Association is organizing MINETECH 2011 at Misheel Expo Center from March 3 to 5. This is the fourth year of the annual exhibition and trade show for mining equipment producers, suppliers and service providers. Over 60 foreign and domestic companies will participate in the exhibition, offering a brilliant opportunity for manufacturers, suppliers, service providers and users to interact and understand one another‟s needs in Mongolia, where the mineral sector grows with tremendous speed. For more information about the exhibition, please call 99095791, 99109059, or 314877. ___________________________________________ MINES & MONEY HONG KONG 2011, MARCH 22-25 Asia‟s premier and largest mining investment event already has 600 people confirmed to attend and looks set to attract well over 1,500 attendees making it THE event where miners and investors come together to do business. Over 150 mining companies are exhibiting. The Business Council of Mongolia is a supporting association of this event and as such this entitles all its members to a 15% discount on the conference price. The event has a strong focus on Mongolia again this year with Robert Friedland, Executive Chairman of Ivanhoe Mines, giving a keynote address and both South Gobi Resources and Hunnu Coal are Gold Sponsors. On top of this there is a morning on the 25 March dedicated to Mongolian Mining Investment. This special session highlights key developments in Mongolia‟s mining industry and the investment opportunities that reside there. This event promises to deliver a large number of investors all looking for their next big opportunity. For registration, simply visit the website www.minesandmoney.com/hongkong and click on the registration button. If you are interested in sponsorship opportunities then please contact Toby Duckworth on +44 20 7216 6074 or toby.duckworth@aspermontuk.com. Among the speakers are: - Robert Friedland, Chairman, Ivanhoe Mines - Andrew Forrest, CEO, Fortescue Metals Group - Zheng Zhi, Chairman , China Mining United Fund - Jing Ulrich, MD & Chairman , China Equities & Commodities, J.P. Morgan - Bernard J. Guarnera, President & CEO, Behre Dolbear & Company - B. Enebish, Executive Director, Erdenes MGL - Peter C. Akerley, CEO, Erdene Resource Development. ___________________________________________

COALTRANS MONGOLIA CONFERENCE, ULAANBAATAR, JUNE 21-22 The first Coaltrans conference in Mongolia plans to bring together leading Mongolian government officials, senior coal mining executives as well as a number of key overseas speakers, and will thus provide an opportunity for delegates to understand at first-hand developments in what is one of the last remaining coal mining frontiers. Specifically, the conference will address: - The spectacular growth prospects for the Mongolian economy, coming on the back of the development of the country‟s wealth of mineral assets with values estimated in excess of USD1.3 trillion

- Opportunities that many large scale coal investments offer – in particular the Tavan Tolgoi coal deposit containing 6.4 billion tons of coking and thermal coal which will be partly privatized - The prospects for export of 25-40 million tons per annum of coal into China and in the longer term through Russia to Pacific markets - The obstacles facing Mongolian transport infrastructure in delivering coal exports across the border into China‟s burgeoning steel industry and power sector - The challenge of operating coal mines in extreme weather conditions and in isolated and remote areas far from existing infrastructure. In addition, there will be optional fieldtrips to key coal mining operations (Tavan Tolgoi and Energy Resources UHG), both before and after the conference. Register online at www.coaltrans.com/mongolia before 6 May 2011 and save up to USD200. 1st delegate - USD1,549, 2nd delegate -USD1,349, 3rd delegate - USD1,149 Mongolia resident delegate -USD375. For further details please contact Matt Ackroyd on +44 7779 8084 or email mackroyd@euromoneyplc.com. __________________________________________________

“MM TODAY” on MNB-TV, Fridays at 21:15 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. ___________________________________________ “BSPOT” on B-TV, Monday to Friday at 21:30 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. _________________________________________________

NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIAN BUSINESS NEWS' Presentations from BCM‟s monthly meeting on January 24, the BCM Environmental Working Group meeting on February 2 and this week‟s Haranga Resources investor‟s meeting sponsored by MICC on February 23 are posted on BCM's website (www.bcmongolia.org) in the "Resource, Presentations" section for your review. 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.

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]

January 31, 2011 *13.8% [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 – February 24, 2011

Currency Name Currency Rate

US dollar USD 1,253.20

Euro EUR 1,719.39

Japanese yen JPY 15.15

British pound GBP 2,029.81

Hong Kong dollar HKD 160.85

Chinese Yuan CNY 190.57

Russian Ruble RUB 42.89

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.