1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 174, July 1 2011
NEWS HIGHLIGHTS:
Business:
Raised output target makes Aspire‟s Ovoot mine among the world‟s largest;
Prophecy‟s landmark shipment of coal to Buryatia;
Petro Matad spuds new well;
Eznis Airways‟ new jet starts scheduled services on July 1;
Prophecy advances Ulaan Ovoo and Chandgana projects;
Xanadu and C@ shares rise on coal finds;
Auditor says Mongolia Energy could incur “significant impairment loss”;
MIAT passengers stranded after South Korea refuses extra flights;
Eznis Airways to use BAE Systems‟ "Total Support" package;
Petro Matad breaks winning streak as DT-6 well comes up dry;
Underwritten private placement of CAD10-million East Asia common shares;
Marubeni to build Ulaanbaatar underground railway;
Local company seeks permission to extract copper from Erdenet waste;
SouthGobi Resources appoints new CFO;
MRC presentation at Emerging Growth Equities Summit in New York.
Economy:
Inflation reaches 9.8%;
Mongolia whittles down number of TT bidders, asks them to form group;
Choir-Sainshand Highway Project in sudden jeopardy;
Government accepts in principle MPs‟ demand not to sell TT shares to businesses;
Bechtel report on Sainshand complex by November 27;
Central Bank had deficit of MNT253.8 billion in 2010;
Sovereign funds, private equity flocking to Mongolia;
IFC invests in Mongolia‟s first private equity fund to support SMEs;
Energy reliance on Russia, China a key risk in Mongolia;
Toronto, London stock exchanges abort merger plans;
Standing Committee against using HDF allowance to repay debts;
Supplying to OT is a learning experience for Mongolian companies;
IFC helps improve food-related inspections through business reforms:
Indicator minerals show gold potential in Mongolia;
Korean help for savings insurance;
More robots may plug labor crunch in Australia‟s mines;
Brazil eyes new tax on big mining projects;
Beijing opens up fund sales market;
China's latest toxic export: fraudulent listings.
Politics:
Supreme Court registers Enkhbayar‟s party as MPRP;
Lundeejantsan resigns, MPP MPs elect Enkhtuvshin new head;
Court to rule on Khurts‟s appeal after two weeks;
Russian media talk again of the „debt‟ and want it repaid by control over resources;
2. Mongolia has made “amazing progress on its democratic journey”;
Russia links fuel supply to other issues, Zorigt tells PM;
Rosneft renews demand to set up 100 gas stations in Mongolia;
Rosneft offer is just history repeating itself;
World journalists‟ body begins campaign to get Mongolian Editor freed;
Road traffic apt metaphor for „rule-of-law‟ in Mongolia;
Removing parking areas will make matters worse;
ADB to help choose teams to build power plant;
China inaugurates bigger border post at Erilen;
PM sees state service reform as essential;
Women outnumber men in Mongolia;
More money for prison workers from next year;
Lawyers discuss increase in theft cases;
Proposal to grant some districts city status;
Mongolia‟s nomadic society is putting down some rich roots.
*Click on titles above to link to articles.
BCM MONTHLY MEETING RECAP
The monthly meeting on June 27, with Mr. Peter Morrow in the chair, was attended by 78
members. Vice Director Ser-Od Ichinkhorloo reported that membership now stood at 184, as against
147 in the corresponding period last year.
Five new members have joined since the last meeting. They are:
1. United Management Corporation (UMC), which specializes in retail financial services, investment
management and co-investment, private equity, and real estate portfolio management.
2. Credit Suisse, which provides companies, institutional clients and high-net-worth private clients
worldwide with advisory services, comprehensive solutions, and excellent products in areas such as
private banking, investment banking and asset management. It employs 50,100 people in 405
offices in 55 countries.
3. Mongolian Economy Magazine, which aims to provide accurate news of and informed insight into
what happens in the Mongolian economic, financial and business sectors. Apart from raising public
awareness, the bilingual magazine hopes its contents will help strengthen interaction between
domestic and foreign business institutions, and public-private partnerships.
4. CIS Mongolia, the local unit of the international organization which, since its founding in 1992,
has specialized in providing catering services in challenging environments to some of the world's
leading petroleum, mining, civil engineering and engineering companies, as well as to the armed
forces of many different nations.
5. Allens Arthur Robinson, an international law firm with offices throughout Australia and Asia.
Seventy-seven of Australia's, and 55 of the world's, top 100 companies choose Allens Arthur
Robinson as their legal adviser. With more than 30 years' experience on the ground in Asia across a
broad range of industries, the firm offers clients technical excellence combined with business and
cultural insights.
The first presentation of the evening was by Mr. David Lawson, Trade Commissioner, Australian
Trade Commission, on "Austrade: Enhancing Business between Australia and Mongolia". There are
now 87 Australian companies in Mongolia, and the number is set to grow. Austrade‘s mission is to
provide help to Australian exporters and investors. Any Mongolian company that wishes to access
information on business with and in Australia can also approach the recently opened Austrade
office in Mongolia. It has a Website in Mongolian.
Mr. Andrew Orgill, Director of International Office, Santis Educational Services and President of
Inlingua, titled his presentation "Recent Development in Education". Ulaanbaatar alone has 94 state
and 84 private schools, and its 23 universities are among the 200 or so nationwide. They will all
have to adapt to emerging global changes in the concept and structure of education which include
3. stronger response to market signals, accountability and diversification. Santis offers language
services specific to business and mining needs, but its emphasis is on enhancing English language
skills for use in various other areas in several ways, including through online learning which is low-
cost and flexible according to the needs in remote provinces. Prime Minister S.Batbold has called
for ‗domestication‘ of English, and Santis gives priority to training English language teachers,
especially because of the shortage in indigenous human resources. It also has special learning
programs for children.
Mr. D. Achit-Erdene, President, Mongolian Investment Capital Corporation (M.I.C.C.), spoke on ―The
Mongolian Investment Banking Landscape‖ which, despite promise and possibilities, remains
uncrowded, with not one major investment bank having an office in Mongolia. All Mongolian
investment banking deals so far would total USD2.325 billion. The 51 brokers at the Mongolian Stock
Exchange last year shared total commissions of just USD1.5 million. Things will change once the
MSE offers more security and services to entice Mongolian and Mongolia-focused international
investment companies to come here. Another encouraging step would be if the Mongolian
Government would open its pension fund to be invested in the market.
Ms. D. Onchinsuren, General Director, Onch Audit and Co-Chair BCM Tax Working Group, gave an
update on how the group has been interacting with a national working group on tax issues.
SPONSORS
Khan Bank Eznis Airways
Kempinski Hotel Khan Palace Mongolian National Broadcasting
Mongolian Star Melchers Breakthrough PR
BUSINESS
RAISED OUTPUT TARGET MAKES ASPIRE‟S OVOOT MINE AMONG THE WORLD‟S LARGEST
Australia-listed Aspire Mining has raised the eventual production target for its wholly-owned Ovoot
coking coal project to 12 million mt/year, from 10.5 million mt/year planned previously. Recent
coal washability test results confirmed a high theoretical yield of 80% with 8% ash content, giving
Ovoot the potential to be the lowest-ash coking coal producer in Mongolia, Aspire has said.
"It is clear from the results that coal from some areas of the deposit may not need to be washed,"
Aspire Managing Director David Paull said in a statement. That would result in lower operating costs
and need for less coal washing capacity, he added. Accordingly, the company has raised its output
projection for a second-stage development of Ovoot to 12 million mt/year, assuming run-of-mine
coal of 15 million mt/year, which would place Ovoot among the world's largest coking coal mines.
However, Ovoot's first stage development would be a much smaller scale project of 500,000
mt/year-1 million mt/year due to limitations of road trucking capabilities, Mr. Paull said. The first
stage targets a DSO, or direct ship ore, operation that is expected to commence production toward
the second half of 2012, pending the submission of a scoping study for approval this month, Mr.
4. Paull said. Output from the first stage of development would be trucked to the nearest railhead at
Erdenet and then transported via rail to eastern Russian ports, or south along the Trans Mongolian
Railway to China.
Read more…
Production from the second phase of development is expected to start sometime in 2016, pending
the results of a scoping study due for completion at the end of this year. Ovoot's proposed second
stage development into a major coking coal exporter will be related to a 550-km railway
infrastructure project with an estimated cost of USD1.7 billion, said Mr. Paull.
The rail project involves a USD500-million, 160-km first section linking the mine site to Moron, the
capital city of Khuvsgul province. He added Aspire would fund the link. The 390-km second section
of the rail project envisages a roughly USD1.2-billion, 20-million mt/year connection between
Moron and Erdenet. This section would also provide rail haulage to two other developments -- the
Burenhaa phosphate project and the Huren-Chuulet iron ore project.
Source: Platts.com
PROPHECY‟S LANDMARK SHIPMENT OF COAL TO BURYATIA
Prophecy Coal Corp. has exported a shipment of 650 tons of thermal coal, which is the equivalent
of ten wagons, from its Ulaan Ovoo mine to Russia‘s Buryatia Republic. The coal was loaded on a
train at Sukhbataar rail station which then crossed the border into the Republic of Buryatia via
Naushki. The coal was sold to Energy LLC, a company registered in Buryatia, to be used in local
power stations and boilers.
Mr. J. Batuyev, a Minister in the Buryat Government and Official Representative of the Buryat
Government to Mongolia, called this first ever shipment of Mongolian coal to Buryatia ―a historic
event‖ and expressed confidence that Ulaan Ovoo coal ―will become a significant source to feed
the energy sector of this region".
This export trade is valuable for Prophecy as it helps the company determine local sales logistics,
wagon loading times, export requirements and customs procedures to ensure smooth operations for
future coal export of larger quantities. To further facilitate trade between Mongolia's Selenge
province and Russia's Buryatia province, Prophecy is collaborating with a number of government and
private entities towards opening of the Zeltura border post, which is 15 km from the Ulaan Ovoo
mine. The opening of Zeltura would enable Prophecy to sell Ulaan Ovoo coal at mine gate to
Russian industrial consumers and translate into significant transportation savings for Prophecy.
Prophecy is preparing and ordering wagons for the next shipment in July 2011, destined for the port
of Sovetskaya Gavani, of which the company has secured annual capacity of 300,000+ tons.
Source: Prophecy Coal Corp.
PETRO MATAD SPUDS NEW WELL
Petro Matad has spudded the DT-7 well on its promising petroleum exploration and development
block in far eastern Mongolia. The well is being drilled vertically to an estimated target depth of
1,800 meters by the company‘s contractor, DQE International. DT-7 is 2.3 km south-southwest of
DT-6 and 3.2 km south-southeast of DT-2.
Source: Petro Matad
EZNIS AIRWAYS‟ NEW JET STARTS SCHEDULED SERVICES ON JULY 1
Eznis Airways‘ new Avro RJ 85 jet plane flew a crew of officials, celebrities and media to
commemorate the opening of the new Deglii Tsagaan airport in Turgen soum, Uvs province on June
25 before beginning from July 1 to operate scheduled services from Ulaanbaatar four times a week,
connecting Ulaangom and Khovd to the capital, as well as to each other. The plane will also be
used by mining companies for charter flights to mining sites.
Thus, within a week of its arrival at Chinggis Khaan International Airport early in the morning of
June 24, the plane was adding to the growth of Mongolia‘s economy by enhancing the country‘s air
transportation links. The aircraft was financed by Khan Bank, illustrating how Mongolia-based
companies are collaborating to further invest in Mongolia‘s development.
The 93-seat Avro RJ 85, built by BAE Systems with advanced technology, is widely used by leading
European airlines, such as Swiss International Airlines and Lufthansa. It provides ample room for
carry-on luggage, as well as safely operates on gravel and short runways. Additionally, the four jet
engines permit fast and quiet travel, allowing for a reliable, safe and comfortable onboard
experience.
Read more…
―We‘re very proud to introduce the aircraft to the Mongolian skies. It will be the first jet aircraft
5. to fly scheduled flights domestically within Mongolia on a year round basis, offering our customers
the opportunity to reach their destination faster while flying comfortably in a spacious cabin. Eznis
Airways aims to be the No. 1 choice for regional air service in North Central Asia, and the arrival of
the Avro RJ 85 is yet another important step in this direction,‖ stated the Chief Executive Officer of
Eznis Airways, Mr. S.Munkhsukh
To ensure the highest standard of maintenance and technical services for the Avro RJ, Eznis Airways
has partnered with Lufthansa Technik Switzerland. Lufthansa Technik is also providing world-class
technical training for Eznis engineers and technicians that will lead in-house maintenance services.
Source: Eznis Airways
PROPHECY ADVANCES ULAAN PVOO AND CHANDGANA PROJECTS
Prophecy Coal announced positive operational results for its first quarter last week, despite
widening losses. The Mongolia-focused coal development company said that its losses stem from its
merger with Prophecy Holdings and Northern Platinum, since larger companies often incur greater
expenses. However, the first quarter saw Prophecy repay its USD5 million debt facility, completely
clearing the company of its debt.
At its Ulaan Ovoo coal mine near the Russian border in Mongolia, Prophecy said it produced nearly
230,000 tons of thermal coal, removing over 1.5 million bank-cubic-meters of waste in the process.
The Vancouver-based company also added 20,000 tons of coal, ready for export, to its stockyard.
Similarly, the Chandgana Power Plant, Prophecy‘s flagship operation, which is located on the
company's Chandgana coal project in southeast central Mongolia, is progressing. Prophecy received
a mining license for 141 million tons of coal, and submitted a feasibility study to the Mongolian
Ministry of Natural Resources and Energy for approval, which it hopes to receive in the third
quarter.
Source: Prophecy Coal
XANADU AND C@ SHARES RISE ON COAL FINDS
Shares in two Australian-listed companies rose sharply after they announced coal discoveries in
Mongolia. Xanadu Mines says an initial drill hole at the new Nuurstei Coking Coal Project confirms a
wide intersection of coal 70 meters deep. Nuurstei is part of a 50:50 joint venture between
Mongolia-focused Xanadu and Hong Kong-based commodities trading house Noble Group.
Shares in former health care turned resources company C@ also rose after it released positive
drilling results on Wednesday. The company has made major coal finds based on results from its
first two drill holes in the Ovorhangay Province, in Mongolia's south. The company has eight
prospective coal licenses in South Gobi, near the Chinese border.
Source: ninemsn
AUDITOR SAYS MONGOLIA ENERGY COULD INCUR “SIGNIFICANT IMPAIRMENT LOSS”
Mongolia Energy Corporation's independent auditor has said the Group would incur a significant
impairment loss on the related mineral properties and/or exploration and evaluation assets if its
five mining concessions and/or exploration concession in Mongolia worth about HKD13.2 billion is
revoked due to the Mining Prohibition Law. Although the affected license holders are to be
compensated, a significant impairment loss will be recorded if the compensation received is
significantly less than the consideration the Group paid to acquire these concessions.
As at 31 March 2011, the Group's current liabilities exceeded its current assets by about HKD2.02
billion. There are also uncertainties about the commencement of the commercial production of the
Khushuut Coking Coal Mine and the related capital commitments that may cast significant doubt
about the Group's ability to continue as a going concern.
Source: ETNet
MIAT PASSENGERS STRANDED AFTER SOUTH KOREA REFUSES EXTRA FLIGHTS
Failure to get the expected permission for extra flights in summer led to about 200 passengers
booked on a MIAT Seoul-Ulaanbaatar flight being stranded in Seoul airport for five days or longer
from June 22. MIAT had planned two extra flights on June 22 and 23 and issued tickets for them,
without waiting for approval from South Korean authorities. A MIAT spokesperson told media that
the airline retuned the passengers the ticket money. She could give no reason why South Korea held
back permission, saying that as a national carrier, MIAT operates under a bilateral governmental
agreement.
Source: News.mn
6. EZNIS AIRWAYS TO USE BSE SYSTEMS‟ “TOTAL SUPPORT” PACKAGE
Eznis Airways has agreed to a three-year support package with BAE Systems Regional Aircraft for its
newly acquired fleet of two Avro RJ85 regional jetliners. This ‗Total Support‘ package covers
JetSpares as well as ongoing Continuing Airworthiness and Technical Support.
JetSpares is a customized rotable spares support program which is designed to allow an airline to
concentrate on its operations while BAE takes care of spares inventory, logistics and repairs. The
priority is to keep the airline‘s business running smoothly by providing a first-class support service.
BAE Systems is providing an extensive on-site stock of spares at the airline‘s Ulaanbaatar base
which it will manage.
―As a new operator of our aircraft, Eznis will benefit from the comfort that the JetSpares program
allows them and be able to concentrate on their initial operations as they build up experience on
the type,‖ said Mr. Sean McGovern, Business Director Support for BAE Systems Regional Aircraft.
Eznis has also committed to a three-year BAE Systems‘ Tech 21 service for all technical and
engineering support. Under this program, an annual payment entitles the airline to enjoy priority
technical support (AOG), including regular customer support reviews on fleet dispatch reliability,
the services of a dedicated customer engineer and continuing airworthiness support.
Deliveries have just started of the airline‘s new 93-seat fleet of RJ85s – the first jet equipment to
be operated by Eznis. The high wing configuration of the Avro RJ makes it readily adaptable for
unsealed runway operation and BAE Systems has designed a comprehensive unpaved runway
modification which is being installed on both aircraft so that Eznis can operate the aircraft safely
from a number of unsealed and gravel runways on the airline‘s network.
Source: AmtOnLine
PETRO MATAD BREAKS WINNING STREAK AS DT-6 WELL COMES UP DRY
Petro Matad‘s winning streak has come to an end. Thursday afternoon last week, it confirmed that
the Davsan Tolgoi-6 (DT-6) well, on Block XX in Mongolia, had failed to find hydrocarbons. The
preceding five wells all discovered oil. Chairman Douglas McGay described the outcome of DT-6 as
―disappointing (but) statistically acceptable‖.
"The absence of hydrocarbons in DT-6 is disappointing,‖ Mr. McGay said. ―When taken into the
context of the previous five successful wells and the complex nature of the Davsan Tolgoi Prospect,
it represents a statistically acceptable result.‖
DT-6 was drilled to total depth of 1,923 meters into volcanic basement rocks, below the
Tsagaantsav reservoir objectives. Petro Matad completed wireline logging and petrophysical
analysis, but found no hydrocarbons through either method. The well has now been cased and
cemented.
Read more…
The well was targeting the center of a large seismic anomaly in the Uppermost Tsagaantsav
formation. In DT-6 the target was 404 meters lower than the oil accumulations encountered in both
DT-1 and DT-2. Petro Matad said that the well encountered this primary objective between 1,532
and 1,690 meters, where the reservoir rock exhibited good reservoir development but negligible
hydrocarbon saturation.
It will now integrate the results from DT-6 and DT-5 results, along with 3D seismic interpretation.
―The presence of significant hydrocarbon saturation at DT-5 and its absence at DT-6 will require
adjustment to the initial trap model for Uvgan Gol Prospect,‖ the company said.
Meanwhile the site for DT-7 is being prepared. This next well is designed to test a different target,
the Davsan Tolgoi Mod prospect – about 2.25 km southeast, and approximately 360 meters higher
than DT-6. Mr. McGay added, ―The company is pursuing an evolving, but aggressive exploration
program on Davsan Tolgoi and the data from this and previous wells are assisting our exploration
professionals in their understanding of the Prospect, and the location of future drilling."
Source: Petro Matad
UNDERWRITTEN PRIVATE PLACEMENT OF CAD10-MILLION EAST ASIA COMMON SHARES
A syndicate of underwriters has agreed to purchase, on an underwritten private placement basis,
3,450,000 common shares of East Asia Minerals at a price of CAD2.90 each for aggregate gross
proceeds of CAD10 million. The Company has granted the underwriters an option to purchase up to
an additional 15% of the offering. The net proceeds will be used primarily for exploration and
development at the company's Miwah property and for general working capital purposes. The
offering is scheduled to close on or about July 13.
East Asia Minerals owns seven uranium properties, including the advanced Ingiin-Nars, Ulaan Nuur
and Enger uranium projects, and two phosphate properties in Mongolia.
7. Source: East Asia Minerals Corporation
MARUBENI TO BUILD ULAANBAATAR UNDERGROUND RAILWAY
Japan will partner with private companies to build four railway projects in Vietnam, Mongolia and
Indonesia, at a total cost of USD6.60 billion, the Nikkei newspaper has said. In Mongolia, Marubeni
Corp will construct a two-track underground railway in Ulaanbaatar. JGC Corp and others will
prepare the feasibility studies. The total cost is expected to reach USD2.22 billion.
All the projects will come up as public-private partnerships and feasibility studies will begin in
August, the daily said. The undertakings are likely to be funded under Japan's official development
assistance program, through JICA and the Japan Bank for International Cooperation.
Source: Reuters
LOCAL COMPANY SEEKS PERMISSION TO EXTRACT COPPER FROM ERDENET WASTE
Mr. D.Altankhuyag, director of Share of Copper Mineral Co.Ltd, a company he says is registered with
30,000 shareholders, claims that MNT15 billion can be made from a waste dump at the Erdenet
copper plant that has been there and growing for over 30 years. He says a Mongolian-U.S joint
venture Erdmin has been recycling parts of the waste, which is actually soil that came up with the
copper underground, and retrieves enough copper to make the business profitable. Now local
citizens have formed Share of Copper Mineral and have asked for permission to use the pile to
produce pure copper and other by-products. This company may well be the biggest Mongolian
company in terms of the number of shareholders.
Mr. Altankhuyag says the State Property Committee forwarded the company‘s proposal to the
Erdenet management and after a long delay, the factory gave the opinion that the plan was not
economically viable. This has surprised Share of Copper Mineral as Erdmin, which was set up with a
capital of USD10 million, continues to produce over 3,000 tons of copper annually from the soil
dump. Their cost of production is around USD1,800 per ton, and the sale price has sometimes been
USD9,000 per ton. Share of Copper is ready to invest USD26 million in a plant with double the
capacity of Erdmin‘s but they cannot proceed without the Erdenet factory‘s permission to use the
dump. Mr. Altankhuyag hopes some pressure will be put on the Erdenet factory to review its
decision and grant the necessary permission, opening the way for thousands of local shareholders to
make some money.
Source: Undesnii Shuudan
SOUTHGOBI RESOURCES APPOINTS NEW CFO
SouthGobi Resources has appointed Mr. Matthew O‘Kane its Chief Financial Officer, effective July 1,
2011. Mr. O‘Kane replaces Mr. Terry Krepiakevich, who will remain as a Senior Advisor to the
company over the next reporting period. Mr. O‘Kane joined SouthGobi last January.
Source: SouthGobi Resources
MRC PRESENTATION AT EMERGING GROWTH EQUITIES SUMMIT IN NEW YORK
Mongolian Resource Corporation, which is listed on the Australian Stock Exchange, was among the
presenting companies at NBT Equity Group's inaugural Emerging Growth Equities Summit on June 21
at the Princeton Club in New York City. The host and moderator for the event was Mr. Tobin Smith,
Founder and CEO of NBT Equity Group and contributor and guest anchor of Fox News and Fox
Business Channel. Mr. Smith recently traveled to Mongolia where he met with Redwood Capital,
Mongolian Resource Corporation, and Prime Minister S. Batbold.
Each of the companies presenting at the NBT event was provided a 25-minute time slot, and the
presentations were followed by a 25-minute breakout session and then one-on-one meeting
opportunities. The MRC presentation was made by Mr. Tony Bainbridge, a member of The
Australasian Institute of Mining and Metallurgy who has 30 years of experience running mine
operations.
Source: Redwood Group International
ECONOMY
INFLATION REACHES 9.8%
The Central Bank revealed at its monthly press conference last week that base inflation at the end
of May stood at 9.8%. The consumer price index increased y-o-y 4.2% nationwide and 2.8% in
Ulaanbaatar. Prices of meat, vegetable and building materials rose mainly as fuel shortage affected
supply, while large inflow of money from foreign countries was behind real estate and apartment
8. prices going up.
The Bank has kept policy interest rate at the present 11.5% but has not ruled out an increase. The
volume of bank loans increased by 44% but bad loans could also be on the rise. The Bank noted that
people‘s purchasing power has improved.
Source: The Central Bank
MONGOLIA WHITTLES DOWN NUMBER OF TT BIDDERS, ASKS THEM TO FORM GROUP
Mongolia's government has whittled down the number of companies in the running to gain rights to
the country's giant Tavan Tolgoi metallurgical coal deposit and is attempting to persuade those
bidders to work together to develop the mine, coal industry sources said Wednesday. "Of the six
original bidders, they're now down to three or four," said Ms. Louisa Pratt, conference producer at
Coaltrans, who organized a coal congress in Mongolia last week.
Mr. Luiz Sarcinelli, director of Brazil-based coal consultancy Sage Consultoria Tecnica Ltda., said he
was "reliably informed" that four companies or groups are still in the running, namely the
consortium involving Russian interests, the consortium involving Chinese interests, Brazilian miner
Vale SA, and steelmaker ArcelorMittal. The Mongolian government is working out a proposal for the
shortlisted companies to work together "to get the project going more quickly", according to the
consultant.
Read more…
Investments required to develop Tavan Tolgoi's western block -- which is to be put out to private
sector operation -- have been estimated at USD7.3 billion. A Mongolian state-owned company has
been slated to develop the eastern block at the deposit in the Gobi desert, which has estimated
reserves of 5 billion metric tons and is expected to produce as much as 10 million tons a year of
metallurgical coal for global steelmakers hungry for new sources of the raw material.
However, industry observers attending a Coaltrans event in Rio de Janeiro this week said that while
the Mongolian Government is seeking a "multi-company solution", companies may find managerial
decision-making trickier in a bigger group. "Can we really see Vale and ArcelorMittal working
together on this kind of project?" one observer said.
Representatives of Mitsubishi Corp., which isn't involved in the shortlist for Tavan Tolgoi, said they
foresee further slight delays in the announcement of the winners of the bid, which should be known
during July rather than this week as was recently expected. Mr. Marcelo Matos, Vale's general
manager of coal marketing and sales, said on the sidelines of the Rio event that Vale has a group of
people in Mongolia "involved in the Tavan Tolgoi tender", declining to give further details. Vale
already has an existing "large" coal exploration project in the country, he said.
Source: Dow Jones Newswires
CHOIR-SAINSHAND HIGHWAY PROJECT IN SUDDEN JEOPARDY
The South Korean company constructing the Choir-Sainshand Highway as a Millennium Challenge
Account project has declared bankruptcy and stopped all work. Faced with the possibility of the
MCA halting release of funds, the director of the Auto Highway Project, Mr. P.Batsaikhan, has asked
the subcontractors to carry on with the construction.
Work on the highway was inaugurated at a ceremony last year that was attended by the Prime
Minister and the US and Korean Ambassadors. The construction was to be completed by September
1, 2013, and the progress so far has been hailed as the best construction project that the
implementing agency of the Government was handling. It remains to be seen how the unforeseen
events affect the considerable amount of work remaining.
Source: Udriin Sonin
GOVERNMENT ACCEPTS IN PRINCIPLE MPs‟ DEMAND NOT TO SELL TT SHARES TO BUSINESSES
The Government has accepted in principle a proposal made jointly by some MPs – Mr. Kh. Jeckei,
Mr. D.Odbayar, Mr. Ya.Batsuuri, and D.Khaynkhyarvaa, all from the MPP, and Mr. B.Batbayar of the
DP -- that Parliament should change its decision to sell 10 percent of the total shares of Erdenes
Tavan Tolgoi to Mongolian businesses. Instead, these shares would be added to those to be
distributed free to citizens. The MPs felt it would be discriminatory to favor entrepreneurs over
others, and the present decision, if followed, would make the economy in general more dependent
on mining.
Source: Udriin Sonin
BECHTEL REPORT ON SAINSHAND COMPLEX BY NOVEMBER 27
The National Development and Innovation Committee and Bechtel Corporation indicated last week
9. that they would present to the Government their basic report on setting up an industrial complex in
Sainshand by November 27, which is when the six months after Bechtel was awarded the project
end. The two are working jointly and intends to divide the report into 12 sections, including
identifying funding sources. It will also review the feasibility of setting up the six proposed
processing units, and suggest the best location for them. Bechtel, which will receive USD 2.4 million
for its work, will also suggest how many companies in which areas will be needed for the total work
on the complex and international tenders will be floated once the Government accepts the report.
Source: Montsame
CENTRAL BANK HAD DEFICIT OF MNT253.8 BILLION IN 2010
The Inspecting Council of the Central Bank recently discussed its financial report for 2010 which
says the Bank ended the year with a deficit of over MNT253.8 billion, because of currency rate
differences. The Council recommended issuing bonds to plug the deficit.
Source: News.mn
SOVEREIGN WEALTH FUNDS, PRIVATE EQUITY FLOCKING TO MONGOLIA
Sovereign wealth funds, private equity and some of the world's multi-billionaires have descended
onto Mongolia to sniff out investment opportunities, as they bet the country's booming resources
sector will produce big winners. Mongolia, blessed with abundant mineral resources, sits on the
doorstep of the world's largest resource consumer, China. But getting the minerals out of the
ground to its southern neighbor and elsewhere is a big challenge with no sea port.
Major infrastructure spending is also needed and it could be years before Mongolia can cash in on its
untapped wealth. Still, foreign investors believe that Mongolia's proximity to China -- also called the
"stomach without a bottom" -- would turn some the small exploration and mining companies in the
country into sizeable producers.
"We see all kinds of investments coming to Ulaanbaatar on a daily basis. These range from sovereign
wealth, to private equity to high net-worth individuals to the top six of the 250 billionaires in the
world," Mr. Eric Zurrin, head of boutique investment firm Resource Investment Capital, said. "It's
pretty staggering. From my experience in the last 10 years in the city, the amount of capital
seeking opportunities in Mongolia is amazing." Mr. Zurrin said most investors were eyeing
opportunities in mining firms with quality assets, while mining equipment and services companies
also rank high on their lists.
Read more…
Still, the risks are high. The application of laws and regulations are unpredictable, official public
records to identify ownership and control of locally-registered businesses are hard to find and
corruption is widespread. In November 2010, the government surprised the international community
by suddenly suspending 254 gold mining licenses, citing a 2009 law which protects Mongolia's forests
and river basins. Although some international companies have appealed and successfully had their
licenses reinstated, others have not been so lucky.
With a parliamentary election scheduled in 2012, there is a political risk also, although local
observers say the chances of a regime change are slim. "Investment funds in the U.S., Australia and
so on mostly hold the view that even if the government changes, the momentum to develop the
resource sector is here to stay," said Mr. Jason Bahnsen, chief executive officer of Gobi Coal &
Energy, which is planning an IPO on the Toronto exchange later this year.
Part of the hunger for private investments stems from Mongolia's small banking sector. Its three
commercial banks can only issue a maximum USD60 million in loans after syndication. "The
commercial markets are too small to fund the large deals, especially in the mining sector where we
are easily talking about tens and hundreds of millions," Mr. Jim Dwyer, Executive Director of the
Business Council of Mongolia, said.
While the Mongolian Stock Exchange has posted strong returns over the last decade, its low
liquidity, restrictions on foreign investors and weak financial reporting standards, means miners
often seek capital elsewhere. But there are signs of change. The exchange has sought the help of
Korean, Singaporean and Hong Kong stock exchanges to help with its development and attract more
foreign investment, while it has also inked an agreement with the London Stock Exchange to install
a new trading platform.
Source: Reuters
IFC INVESTS IN MONGOLIA‟S FIRST PRIVATE EQUITY FUND TO SUPPORT SMEs
IFC, a member of the World Bank Group, will provide a USD7.5-million equity investment to
Mongolia Opportunities Fund I L.P., the first private equity fund in the country focused on providing
10. small and medium firms much-needed capital and expertise to help them grow and create jobs.
Despite strong growth prospects, SMEs in Mongolia find it difficult to obtain financing because most
investments go toward large mining projects. The fund will provide capital to companies, such as
those involved in agribusiness and those along the mining supply chain but not directly engaged in
mineral extraction activities. The fund will also provide quality management support to these firms.
―IFC‘s investment in the fund will have a strong impact as it will promote economic, financial, and
private sector development as well as ensure social and environmental sustainability among small
and medium enterprises,‖ said Mr. Mandar Jayawant, Managing Director of Mongolia Opportunities
Fund. ―This is a good example of how an investment can bring development as well as commercial
returns.‖
Read more…
IFC will also help the fund adopt best practices in transparency and corporate governance as well as
environmental and social standards.
―Small and medium enterprises, representing over 99 percent of all Mongolian firms, are important
for job creation and for a diversified economy. IFC‘s investment will not only provide capital to
these businesses but will also support about 400 new jobs and the development of the supply chain
around the mining sector,‖ said Mr. Hyun-Chan Cho, IFC Country Manager for China and Mongolia.
IFC played a strong catalytic role in mobilizing institutional investors to support the fund. IFC‘s
early involvement during the formation of the fund helped it attract interest from other
development finance institutions and several private institutional investors.
Source: The FINANCIAL
ENERGY RELIANCE ON RUSSIA, CHINA A KEY RISK IN MONGOLIA
Mongolia's growing dependence on neighboring Russia and China for fuel and power poses a major
risk to its booming mining sector that investors need to consider. Landlocked Mongolia, which hopes
to raise some USD25 billion over the next five years to build roads, railways and mining towns,
imports about 90 percent of its petroleum products from Russia, while the rest comes from China.
The sprawling country, which produces only about 4 billion kilowatt hours of power annually,
already relies on imports from its northern neighbor Russia for around four percent of its current
consumption and is in talks to import power from China. Officials say electricity import needs are
set to rise sharply.
Reliance on essential energy supplies makes Mongolia vulnerable to supply shocks and price rises,
especially as Russia has been known to turn off supply taps, for example during price disputes with
Ukraine, according to Mr. Paul Aston, a partner at law firm Holman Fenwick William, which helps
conduct risk assessments for mining companies. This vulnerability has been felt acutely this year,
after Russia cut oil and diesel exports to Mongolia in April due to shortages on its own domestic
market, a move that crimped mining activity while driving up pump prices and bus fares.
The continued shortfall has come at a critical time, with diesel demand from construction,
agriculture and mining peaking during the summer months when productivity is at its peak.
According to local media, the diesel shortage has forced the Mongolian government to order a
temporary halt of diesel supplies to some miners, suspend some railway operations and to dip into
its emergency stockpile.
Read more…
Supplies from Russia have yet to resume. Some miners have now resorted to refueling their trucks
from China and the Mongolian government has also been buying small amounts from China, although
they are 40 percent more expensive than those from Russia. "There is a real shortage of diesel...and
the impact is felt across wide sectors in the country, especially miners," said Mr. Jim Dwyer,
Executive Director of the Business Council of Mongolia, representing foreign firms. "Mongolia needs
its own refinery and that's the only way it can break out of its dependence on Russia for its fuel
needs."
Mongolia has suffered numerous fuel shortages since the 1990s after the dismantling of the
communist system and the government has drawn up plans to build its own refineries. The earliest
start of its first refinery is set in the autumn of 2014, under a plan by Japan's Marubeni Corp, Toyo
Engineering Corp, and Mongolian Mongol Sekiyu to build a USD600-million plant in Darkhan city,
about 200 km north of Ulaanbaatar.
"These sort of fuel shortages can threaten project timeline and push up mining costs, so it's a risky
business. There may be plans for a refinery, but that will only come three years later and
construction delays are not uncommon," said a mining executive who asked not to be identified.
Mongolia uses about 1 million tons of petroleum products annually, with diesel accounting for up to
60 percent of such consumption. To feed growing demand for electricity from miners, the
11. Mongolian government is looking to build new power plants in the south Gobi region and as well as
near the massive Oyu Tolgoi copper-gold mine project.
The government has also given approval for Oyu Tolgoi investors Rio Tinto and Ivanhoe Mines to
build an electricity line to the Mongolia-China border to import power from China.
Source: Reuters
TORONTO, LONDON STOCK EXCHANGES ABORT MERGER PLANS
The London and Toronto stock exchanges abandoned plans for a CAD3.6-billion merger on
Wednesday, as it became clear they would not win enough shareholder support for their
transatlantic alliance. In brief statements issued just one day before a shareholder vote, the
exchanges said they realized TMX Group shareholders would not give them the two-thirds majority
they needed to approve their friendly deal.
The London Stock Exchange would have owned 55 percent of the new venture, designed as a
powerhouse in resource and energy equity. It could now become a takeover target itself in the
wave of global exchange consolidation. Abandoning the plan represented an embarrassing
climbdown for both exchanges, but especially for the LSE, which is left red-faced after a courtship
which began in February.
Source: Reuters
STANDING COMMITTEE AGAINST USING HDF ALLOWANCE TO REPAY DEBTS
The Standing Committee on the Budget last week voted against amendments to the law on the
Human Development Fund that would permit the monthly HDF allowance of MNT21,000 to be
directly used to repay bank debts of herders, elders and SME businessmen. However, since the
majority fell short of two/thirds, the draft will now be discussed in Parliament.
Speaker D. Demberel accepted that the indebted, particularly herders, would benefit if their loans
were repaid with a lump sum grant of the HDF but asked MPs to remember that this was not what
the election promise of the parties was. The Finance Minister felt it would not be possible to find so
much cash at one go.
Source: News.mn, Zuunii Medee
SUPPLYING TO OT IS A LEARNING EXPERIENCE FOR MONGOLIAN COMPANIES
With the Oyu Tolgoi project expected to buy USD 2.4 billion of goods and services this year, it is a
big opportunity for Mongolian companies who can supply these, says Mr. S.Balchindorj, head of the
Suppliers‘ Consortium. Ten national companies formed this group, and they include construction
and freight logistics businesses. Still, Mr. Balchindorj feels Mongolian companies cannot qualify for
many of the more lucrative contracts as, ―to be honest, our financial capacity and customer service
skills are much below what is needed to meet the requirements of a world class purchaser which
works so transparently‖. Some 2,300 entities are registered as potential suppliers, but only about
60 of them have been receiving orders, mostly for minor needs. The big contracts are all going to
foreign companies, but there should be no quarrel with this as ―we see how much there is for us to
learn and to improve, including how to earn and retain business trust over time‖.
Mr. Balchindorj sees the exposure to the sheer scale of OT as allowing Mongolian companies ―to
think big, to expand and to challenge themselves‖. He feels developing business clusters in
Mongolia is a sensible goal, and hopes contractor companies will use their experience of and profits
from OT to eventually become investors themselves. ―It is not beyond us to buy 5% of OT shares,‖
Mr. Balchindorj feels. There is a lesson in this for ―those who wanted to stop the project and still
create problems‖.
Source: Udriin Sonin
IFC HELPS IMPROVE FOOD-RELATED INSPECTIONS THROUGH BUSINESS REFORMS
IFC, a member of the World Bank Group, and the Mongolian Food Industry Association are helping
raise public awareness on food-safety issues and promote the adoption of international food-safety
practices and standards among Mongolian food business operators to boost consumer confidence in
their products and improve their products‘ export potential.
IFC participated in the Mongolia Food Safety Forum 2011, organized by the Mongolian Food Industry
Association and the Ministry of Agriculture, Food, and Light Industry, on June 24. It identified
current challenges on food safety in Mongolia, suggested possible solutions, and shared its global
knowledge and expertise on the issue. The forum was attended by more than 150 participants from
the government, business community, and academia.
―The forum provided an opportunity for state agencies, nongovernmental organizations,
12. international organizations, businesses, and manufacturers to jointly discuss and exchange ideas on
Mongolia‘s food safety policy and its strategy on food supply, quality, safety inspections, and
prices,‖ said Mr. D. Terbishdagva, President of the Mongolian Food Industry Association and a
member of Parliament. ―I fully support activities on food safety-related inspections reforms that
are to be carried out by the government under the guidance of IFC.‖
Read more…
Launched in 2009, IFC‘s business inspection reform program helps the government make inspection
rules and practices more transparent, efficient, and less costly. It also helps introduce best
practices in the inspection process of food business operators. With assistance from IFC, the
General Agency for Specialized Inspections, the main inspecting body in Mongolia, has adopted
more than 10 checklists this year to be used during inspections of food business operators. IFC,
together with the association, also has conducted a series of training workshops on food-safety
international best practices for private businesses.
Source: The FINANCIAL
INDICATOR MINERALS SHOW GOLD POTENTIAL IN MONGOLIA
The abolition of the Windfall Profit Tax this January has seen a 15 percent increase in gold exports
from Mongolia as of the end of April compared to a contraction of 47 percent last December.
"Mongolia has finally arrived on the global mining scene," investment banker Boldbaatar recently
told a mining executives attending a conference in Ulaanbaatar.
With a banking sector that remains relatively weak, the Government is now enforcing stricter
supervision regulations. Financial deepening is high on the agenda, including the development of
local bond markets, with companies and the government likely to compete for long term sources of
financing. Improvements in the Mongolian Stock Exchange's institutional and operational capacity
are well under way, and once they are in place the focus will shift to bond markets and the
Securities Clearing House.
As a note of caution, Mongolia purchases 95 percent of its petroleum products and a substantial
amount of electric power from Russia, leaving it vulnerable to price increases. The Government
has also been involved in litigation with foreign commercial mining interests.
Read more…
Copper has long been used as an indicator mineral in the search for gold and diamonds, with
geologists increasingly examining the chemical and physical properties of indicator minerals. The
USGS has estimated nearly one-quarter of the gold in undiscovered resources is estimated to be
contained in porphyry copper deposits. Last year, Mr. Peter Munk, the founder and chairman of
Barrick Gold Corp., the world's biggest gold miner, underscored this thesis when he said, ―The
future of gold mining likely lies in mixed-metal mines. Gold finds are becoming more and more
difficult right now. What most large companies do now, they look for mixed-metal mines, where
gold is a part of other metals and other minerals.‖
Ivanhoe Mines, currently involved in a joint venture to build a mine at the Oyu Tolgoi deposit,
which has the potential to become one of the world's top three copper producing mines, discovered
in March a new shallow copper, molybdenum and gold zone located about 10 kilometers north.
Erdene Resource Development Corp. is expanding a detailed program of regional exploration to
identify areas, principally in southern Mongolia, with the potential to host porphyry related gold,
copper and molybdenum mineralization. Recently the company announced that drilling has
commenced on the Nomin gold and copper prospect and upon completion, drilling is set to continue
on the Khuvyn Khar copper and silver prospect.
Source: Gold Investing News
KOREAN HELP FOR SAVINGS INSURANCE
A memorandum of understanding was signed between the Central, the Ministry of Finance, and the
Savings Insurance Corporation of South Korea last week to introduce and popularize savings
insurance in Mongolia. The Korean company would offer technical advice and assistance in setting
up the system and train staff.
Source: News.mn
MORE ROBOTS MAY PLUG LABOR CRUNCH IN AUSTRALIA‟S MINES
Some Australian mine workers may soon find themselves trading in their steel-toed boots for a
headset and computer mouse, as mining companies automate to help plug labor shortages and ramp
up output to feed Asia's voracious demand for minerals. Jobs in Australia's Outback mines can mean
grueling 12-hour days, scorching temperatures and long commutes -- conditions perfect for
13. machines from driverless trucks to drilling robots.
The resources industry has roughly USD400 billion in new projects on the drawing board in Australia
and, along with the construction industry, will need an additional 260,000 workers over the next
five years, according to government estimates. "There's a shortage of both skilled and unskilled
workers and that tends to lead to automation," said a commodities analyst in London.
The use of remote-controlled mining could even replace one of the stock characters of Australia's
mining bonanza -- the truck driver without a degree who can rake in more than USD100,000 per
year. A guidance system, in a box near the front bumper, and a couple of radar-dish sensors
remotely steer the driverless trucks which are otherwise identical to the towering yellow-painted
behemoths now in use.
Read more…
"They will be doing everything. The whole (mining) pit will be fully autonomous -- nothing that goes
in or out of there that's not on a computer screen," Mr. Gervase Greene, spokesman for Rio Tinto,
said. "It works from an efficiency point of view fantastically. You'll find load time is quicker, they
are always in position, exactly the same position."
Rio Tinto already runs many of its mines from a center in Perth, some 1,500 km away from the
Pilbara. At the operating centre, which resembles a NASA control room and is far removed from the
dusty outback, employees sit in front of desks with multiple screens detailing mine operations.
From the serene atmosphere of the control room, Rio employees guide machines that do most of
the work at the mines -- from loading trains and ships to controlling mine power and water supply,
Mr. Greene said. Rio had even begun investing in driverless trains, but suspended the program as it
tried to cut back on costs when the global financial crisis hit.
Rapidly growing Asian economies such as China and India have kept Australia's miners producing at
breakneck speed, 24 hours a day, seven days a week. With production set to pick up and major
miners planning to pour money into expanding operations, having robots do the job speeds
operations up. Machines tend not to get tired -- they will just keep doing the same thing over and
over again... plus they are able to work through shift breaks and reduce travel time," a mining
official said.
Companies typically need to see a 10% to 20% annual saving or improved productivity to encourage
investment in high-cost robots, he said. Off-the-shelf technology can take about a year to pay off,
while companies developing bespoke technology can wait up to ten years to break even, he said.
Some of the machines -- such as the popular Load, Haul, Dump or LHD vehicle -- can be sent into
mine shafts for long periods of time, saving humans from deep descents which can put them in
hazardous situations. From a mining company's point of view, cutting the number of accidents can
be advantageous as well. Automation has gained cautious union support for its potential to improve
safety.
Although miners emphasize that they do not intend to substitute robots for people, some say union
pressure could be one of the factors driving automation. Western Australia's Pilbara is not
unionized, but unionized coal miners in eastern Queensland are in a dispute with BHP Billiton and
Mitsubishi. "Given the current situation of the growing standoff between mining unions and some of
the nations big miners, there's somewhat of a longer term incentive to potentially reduce employee
numbers," said a senior resources analyst.
Using robots to do some of the more backbreaking jobs is another potential advantage. "What we do
is we take the people out of those jobs in the pit and put them somewhere where they are doing
better stuff. They are not getting replaced by (driverless) trucks by no means -- not one person,"
Rio Tinto's Greene said. Some mining jobs will likely become extinct, just as the computer phased
out the typing pool.
Source: Reuters
BRAZIL EYES NEW TAX ON BIG MINING PROJECTS
Brazil could create a new tax on large mining projects as part of the government's overhaul of the
mining code, a move that would be costly for mining giant Vale. The mining and finance ministries
are considering imposing a so-called "special participation" tax on large mining projects similar to
one that already exists in the oil sector for high productivity fields, a newspaper reported, without
naming sources.
The proposal would levy the tax on 25 percent of the existing mining concessions, the paper said,
including the main projects of Brazil's Vale, the world's largest iron ore miner. The proposal would
make up part of a broader overhaul of regulations covering Brazil's mining sector, which would also
include a potential increase in royalties that companies must pay to the government. The special
participation tax would be applied to gross revenues from production, and deducted from
14. investments in exploration and operational costs, the report said.
It would come on top of royalties that mining companies already pay that currently stand at roughly
2 percent of net revenue. Analysts in recent months have said they expect the government to raise
royalty rates. The mining industry opposes tax increases, particularly the royalty increase, saying
that it would reduce the Brazil's competitiveness because mining companies already have a high
overall tax burden.
Source: Reuters
BEIJING OPENS UP FUND SALES MARKET
Beijing has moved to loosen restrictions on its fund industry, allowing foreign banks to sell local
mutual funds and creating competition for domestic lenders, who dominate the field. The China
Securities Regulatory Commission said last week that independent financial advisers and locally
incorporated foreign banks would be able to obtain sales licences starting October 1. The change
was brokered in talks between US and Chinese officials in May.
Independent fund companies have long been barred, with sales restricted to commercial banks and
securities brokerages. Under the new rules, companies with a registered capital of USD3.1 million
will be able to sell fund products. Foreign banks will also be able to operate under the new rules,
while individuals with at least 10 years‘ experience in the fund industry will be permitted to own
shares in fund companies. There are more than 60 mutual fund houses in China with about
Rmb2,400 billion under management, and 136 financial institutions in total licensed to sell fund
products.
Because funds were not allowed to charge higher fees for value-added services the Chinese industry
has remained largely flat. Many Chinese investors have preferred offshore funds of large
international asset management companies, especially those of star managers. The new rules allow
fees for value-added services, which the CSRC believes will encourage fund companies and
commercial banks to offer better asset management services to investors. ―The move is aimed at
encouraging competition in the fund industry and raising the overall quality of professional asset
management services,‖ it said.
The new rules have the potential to dramatically change the mutual fund landscape in China. In the
short-term, however, there will be little change as domestic banks prevail in the Chinese market.
Source: The Financial Times
CHINA'S LATEST TOXIC EXPORT: FRAUDULENT LISTINGS
The uproar over alleged frauds at Chinese companies listed in the West is entering a new stage as
accounting problems mount, higher-profile listings come under suspicion, and bigger-name investors
turn out to have been hit. This is part of a pattern: First China shipped tainted pet food overseas,
then contaminated toys. Now it turns out China also exported toxic listings.
It's an apt comparison. Investors, regulators and commentators so far have focused on the simple
fraud aspect of many of these stories: forged bank statements, falsified inventories, faked forests
and factories. The food- and product-safety scandals likewise featured a heavy dose of old-
fashioned deceit.
But as with those earlier scandals, there's also a structural element to the stock fracas. Dangerous
goods made it to market because China lacked -- and still does -- the systemic protections
consumers in the West enjoy, from effective regulation to brand identity to a legal system that
metes out damages when problems slip through the cracks. Structural characteristics of the Chinese
economy also lurk beneath the surface of many alleged stock frauds.
Read more…
Consider the case of Sino-Forest Corporation. The Toronto-listed shares first came under attack
from short-sellers early in June with publication of a report from Hong Kong-based Muddy Waters
Research highlighting what it claimed were serious flaws with the company's accounting. Many of
the company's revenues flow through so-called authorized intermediaries, companies whose
relationships with Sino-Forest are at present poorly understood.
Also poorly understood, and more poorly documented, is Sino-Forest's ownership of its forest assets.
Muddy Waters says such "unnecessary" -- Muddy Waters' word -- complexity has been a cover for
fraud. The company says it's all perfectly legitimate.
They could both be right. The real purpose of these intermediaries appears to have been to make
tax payments on behalf of Sino-Forest. Muddy Waters is correct that such an arrangement in a
Western company would raise eyebrows. Not so in China, where executives face a bewildering array
of ever-shifting local, regional and national tax burdens in what a Deloitte survey found to be Asia's
most complex tax system.
15. The most efficient way to manage tax liabilities in such a regime -- simply to gain some level of
predictability -- is to build a web of related companies among which money can be moved in ways
to minimize the tax burden. Along with this strategy come a variety of tricks of variable legality,
including under- or over-invoicing and potentially dodgy accounting for inventories and the like.
This would count as tax dodging in the West, where rates and enforcement are predictable. In
China it's a survival instinct. This illustrates the broader point that the skills necessary to stay afloat
in the regulatory quicksand of China's not-nearly-a-market economy are not conducive to satisfying
the nit-pickiness of Western investors.
So too with the other uses of complexity and opacity. Such as self-protection for individual
entrepreneurs, especially at a time when Beijing seems increasingly willing to jail businessmen who
grow a little too successful. Consider Huang Guangyu, founder of Gome Electrical Appliances
Holdings, a well-known retailer. Mr. Huang disappeared for months in late 2009 before surfacing in
a jail cell in May 2010, whereupon he was promptly convicted for supposed white-collar crimes
related to another of his companies and sentenced to 14 years.
Gome's corporate complexity allowed Mr. Huang to hold onto his company in the face of this
onslaught. He had wisely vested ownership of one-third of the company's stores, plus intellectual
property such as a well-known former logo, in a company distinct from Gome's listed unit. Thus,
when management and a foreign private-equity firm tried to exploit his legal troubles to pull the
listed Gome out from under him, he had some leverage.
Mr. Huang managed to keep a couple of his proxies on the listed company's board. In the West it
would be absurd to think this was a good outcome. But in the West, a conviction is a somewhat
more reliable indication that wrongdoing occurred. And when you can't trust the fairness of the
legal system either in criminal or corporate matters and always sit beneath the Damocles sword of a
corrupt and rapacious state, it pays to be prepared.
All of which offers some perspective on the current spate of scandals. The Chinese corporate
structure can leaves plenty of scope to defraud investors -- having set up a system to deceive
regulators, why not deceive shareholders, too? The bigger problem, though, is that otherwise
legitimate companies often have to resort to such tactics, too.
Some argue that transparency is a Chinese company's best defense to the onslaught of Western
short sellers. Good luck with that when transparency abroad risks corporate suicide at home.
Chinese companies need to improve corporate governance to win and keep the confidence of
Western investors. They won't be able to do it until they operate in an environment that won't
punish them for good behavior. And until China's economy rewards "good" behavior, the wisdom of
listing on stock exchanges designed for Western-style companies will be open to question.
Source: The Wall Street Journal
POLITICS
SUPREME COURT REGISTERS ENKHBAYAR‟S PARTY AS MPRP
The political field has been opened to all sorts of realignment with the Supreme Court granting
permission on Friday last week to the newly formed political group to call itself MPRP. The court
also said the group, which is led by former President N.Enkhbayar, has been formally registered as a
political party under that name. The Supreme Court did not release any further detail, nor give any
reason behind its decision which confounded all parties in the case, including perhaps many of
those in the MPRP itself.
Their leaders had asked the Supreme Court, which was considering their plea to be registered as
the MPRP, to get the constitutional validity of Article 15 of the Law on Political Parties ascertained
by the Constitutional Court. This says that in the event a party changes its name, members who do
not agree to the change will not have the right to use the previous name. When the Constitutional
Court said the article does not violate the Constitution, it was a seen as a blow to Mr. Enkhbayar
and his followers. They had raised their claim after a majority in the old MPRP had decided on MPP
as its new name. Indeed, one of their leaders said the ―decision was taken under orders from
elsewhere‖.
The Supreme Court‘s ruling may have been surprising but it is binding. The MPP which went into a
huddle soon after it was announced, refused to criticize the ruling, restricting itself to saying it saw
political reasons behind the decision, and asserting that ―the new party, even when it is called the
MPRP, has no relation to the original MPRP that remains the forebear of the MPP‖. It said, ―The MPP
is the legal and logical successor of the party which was established on March 1, 1921 and has a
history that goes back 90 years. This is totally different from a party that has been registered only
on June 24, 2011. We are sure that the thousands of members and supporters of our party will know
16. and understand the great difference between the two. We in the MPP are not worried that our
history and record of 90 years can be usurped so easily.‖
Read more…
Mr. Enkhbayar‘s reaction to this was to say it is ―absurd to talk of owning history‖. The history of
the MPRP ―is the nation‘s history and, accordingly, part of every Mongolian`s history‖, he said. His
party will certainly participate in next year‘s election to expose the coalition government which ―is
almost dictatorial in its unconcern for people‘s interests‖. He was particularly worried that ―no
progress has been made on important matters like identifying those guilty of the July 1 riots and
changing provisions of the Tolgoi agreement‖.
Asked by media about possible efforts to overturn the Supreme Court decision, Mr. Enkhbayar said
there was no scope for an appeal. As the MPRP has been registered officially, ―according to Article
8.7 in the law on political parties, it now becomes illegal for any organization or individual to put
any pressure on an established party or on any Mongolian citizen who works for one‖.
Source: English.news.mn
LUNDEEJANTSAN RESIGNS, MPP MPs ELECT ENKHTUVSHIN NEW HEAD
The MPP group in Parliament got a new head and deputy head last week after both incumbents had
resigned. No reason was given for the resignations, either by Mr. D.Lundeejantsan and his deputy,
Mr. D.Dondog, or by the party but MPs criticized their decision to quit at a time when important
matters like the draft law on election are being discussed. A special meeting of the group elected
Mr. U.Enkhtuvshin as the new leader. He polled 22 of the 41 votes against the other contestant, Mr.
Ts.Munkh-Orgil. Mr. Su.Batbold is the new Deputy Chief of the group.
Source: Ardiin Erkh
COURT TO RULE ON KHURTS‟S APPEAL AFTER TWO WEEKS
A London court will give its ruling on the case of Mr. B.Khurts, Head of Administration at the
National Security Council, after two weeks. Mr. Khurts‘s appeal against extradition to Germany was
heard on June 23-24. Mr. Khurts was arrested at Heathrow airport in September on the strength of a
long pending European Extradition warrant against him on the charge of kidnapping a Mongolian
citizen from France, driving him to Germany, drugging him and then taking him to Mongolia.
During the two days of hearing, the court heard how the UK visit of Mr. Khurts, who looked after
intelligence issues, was sanctioned at the ―highest level‖ although he was arrested for kidnap on his
arrival. The lawyer for Mr. Khurts claimed he had been lured to Britain on a government mission
and is entitled to diplomatic immunity.
The Court of Appeal heard that Mr. Khurts was visiting Britain to talk about closer security links
between the countries. His visit followed a meeting between the Mongolian Ambassador to London
and Mr. William Nye, Director of Britain‘s National Security Secretariat. Mr. Khurts was supposed to
meet Sir Peter Ricketts, the head of the National Security Council, who reports to the Prime
Minister, although the meeting was never formally agreed.
Read more…
When an official from the Serious and Organized Crime Agency (SOCA) heard about Mr. Khurts‘s
planned visit, the UK Border Agency (UKBA) delayed his visa application while a copy of the
European Arrest Warrant was obtained from Germany. A UKBA official offered to ―contact the
applicant and ‗apologize‘ for not being able to issue his visa in time‖ according to one email
disclosed to the court while another official offered to ―ask more questions‖.
Mr. William Dickson, the British Ambassador to Mongolia, warned the Foreign Office that he would
be ―hauled in at the weekend for a protest and explanation and thrown to the media‖, the court
was told, and added, ―Obviously we need to get our lines sorted out by cop [close of play]
tomorrow.‖
The following day a business visa was issued, marked ―has been authorized at the highest level‖.
The Foreign Office has said it ―did not consent to his visit as a special mission, no invitation was
issued, no appointments were arranged, no subjects of business were agreed or prepared.‖
But Mr. Alun Jones, appearing for Mr. Khurts, told the Court of Appeal that Mr. Dickson had
encouraged the visit and talked of the need for ―new horizons in relations between Britain and
Mongolia‖ and the need to fight the ―continued growth or Islamic extremism‖ in the country,
although he was apparently unaware of the intention to arrest Mr. Bat at the time.
Mr. Jones said the ―clear encouragement‖ for the visit meant that Mr. Khurts was entitled to be
considered a special envoy under the UN convention. ―Consent in international law cannot mean,
‗You know I consented but I crossed my fingers at the time,‘‖ he added.
Mr. Khurts was arrested on board a Russian plane when it landed at Heathrow on September 17 last
17. year carrying his diplomatic passport, working papers, internet photographs of the people he was
planning to meet, and gifts from Mongolia. Ms. Clair Dobbin, counsel for the Foreign Office, said
they had no interest in luring Mr. Khurts to Britain and believed he was visiting the Mongolian
ambassador.
Source: Ardiin Erkh, The Telegraph, UK
RUSSIAN MEDIA TALK AGAIN OF THE „DEBT‟ AND WANT IT REPAID BY CONTROL OVER RESOURCES
While leaders of the two countries talk of their ―eternal friendship‖ it seems Russia wants Mongolia
to remain eternally indebted to it. The Russian media organization Commersant has said in a
commentary on current events that the resources of Tavan Tolgoi might not be enough to settle the
debt that Mongolia owes to Russia. One is surprised by the regular reappearance of this "debt"
factor, as there never was a word about debt during the old times, when the USSR and Mongolia
exchanged resources to mutual benefit. Government statements on the matter are ignored in the
Russian media, which has been harping on the dimensions on the debt particularly since the
discovery of massive resources in Mongolia. Mr. Dmitry Yakunin, a Russian Government media
official, has been quoted in their press as saying, "The debt shall be repaid by Mongolia gradually by
implementing mutually agreeable projects", which include Tavan Tolgoi, uranium deposits and the
railway. Our giant neighbor is also showing shameless reluctance to come to an agreement on 8
residential apartment buildings the Soviet Union left behind in Ulaanbaatar.
Russia has already pressured the Mongolian Government into deciding to build a new railway
according to their specifications, and Commersant has said this is "one of the ways Russian officials
have used to fight for TT". Creating difficulties for Mongolian coal supply to China also protects
Russia‘s interests in not losing its own coal export market. Commersant has catered to popular
Russian sentiments by writing, "Mongolia once was a part of the Soviet Union, when 90% of all its
copper, molybdenum, coal, zinc, red meat, and animal products used to come to us. Today China
imports 79%, Canada 9%, Japan, the US and others some more, leaving only 3% for us." After this, it
continues, "Nevertheless, Mongolia can never stay away from us, unless it shifts geographically, and
it shall resume giving its products to us."
Russia forced Mongolia to forgo the Millennium Challenge Corporation grant of USD188 million for
Ulaanbaatar Railway, arguing that "free cheese can be found only in a trap". We can only wonder
what kind of a trap is being set for us when Mr.Yakunin of Russian Railway proposes to invest
USD1.5 million in the Mongolian railway sector.
The blood ties always mentioned in official statements would appear to refer only to the blood of
innocent Mongolians, including monks and the intelligentsia, shed during the years of purges and
persecution. Similarly all the debt is also on one side only.
Source: Zuunii Medee
RUSSIA LINKS FUEL SUPPLY TO OTHER ISSUES, ZORIGT TELLS PM
Even as the Mongolia-Russia intergovernmental commission meets at Ulaan-Ude to discuss issues
relating to Russia‘s fuel supply to Mongolia and Rosneft‘s conditional offer of regular exports,
Minister for Mineral Resources and Energy D.Zorigt has told Prime Minister S.Batbold that Russia
always responds to requests for increased fuel supply by raising issues of Ulaanbaatar Railway and
Tavan Tolgoi. Mr. Batbold called Mr. Zorigt and the Chief of the Petroleum Authority, Mr.
J.Amarsaikhan, to a meeting on Tuesday to discuss the petroleum situation.
He expressed surprise and unhappiness that all sorts of contradictory rumors were being allowed to
spread, adding to uncertainty and panic buying. Mr. Zorigt said the situation regarding diesel is
getting normal, with supply to mining companies and to meet the needs of agriculture already
stable. However, even as diesel availability eased, rumors of petrol shortage led to 5,000 tons being
sold a day instead of the usual 2,000 tons. There is two weeks of petrol in stock now. Mr.
Amarsaikhan also blamed panic buying and hoarding for aggravating the shortage.
The Prime Minister heard them out and asked them to submit regular reports on developments so
that decisions on excise and custom duty and prices could be taken. Earlier, Mr. Zorigt told oil
importers at a meeting on Monday evening to immediately stop selling petroleum against cards or
tokens and not to make any similar arrangement in the future. He instructed them to sell for cash
from Tuesday.
Mongolia has requested China for immediate supply of 22,000 tons of AI-92 petroleum and of regular
monthly supplies of 10,000 tons thereafter.
Source: English.news.mn
18. ROSNEFT RENEWS DEMAND TO SET UP 100 GAS STATIONS IN MONGOLIA
The President`s Foreign Policy Advisor, Mr. L Purevsuren, last week set to rest media speculation on
the contents of a purported letter from the Director of the Rosneft Group in Russia to Mr.
Ts.Elbegdorj when he said there was no such letter. At the same time, an official of The Petroleum
Authority revealed that a letter was indeed received by Mineral Resources and Energy Minister
D.Zorigt after the President`s visit to Russia in June where talks were held on fuel supply to
Mongolia.
There is nothing new to Mongolians in the letter. Rosneft has merely repeated the offer to set up
100 gas stations in Mongolia that it first made in 2008 when, too, there was a fuel shortage. Implicit
in the offer then, as now, was an assurance of uninterrupted supply if the demand was accepted. In
the event, nothing came of the offer/demand as the crisis blew away. Rosneft can be allowed to
own 100 gas stations in Mongolia only if the oil product law is changed. At present it bars exporters
who supply more than 30 percent of the domestic use from selling directly in the domestic market.
Source: News.mn
ROSNEFT OFFER IS JUST HISTORY REPEATING ITSELF
In 2008, Mongolia was at the edge of a shutdown in exploration -- no more diesel. Petrol stations
ran dry (of diesel) and prices started to climb quickly as the shortage fueled (pardon the pun) a
crisis. Coincidentally, there was an offer from Moscow to set up 100 gas stations and participation
in an oil refinery in Mongolia, with an assurance of uninterrupted supply if the offer was accepted.
Over the last 6 weeks a diesel crisis has once again emerged, this time with more severe
consequences, where some of the exploration/drilling camps across Mongolia were left idle for days
and weeks. Talks from the Mongolian government implying a continued shortage would result in
demanding diesel be returned from the mining sector. Rosneft has again repeated its offer to
establish a footprint of 100 petrol stations in Mongolia, stake ground in what many believe is
already an oil rich (but unexplored) country and tap into the downstream market.
A change in law is needed to allow Rosneft to enter the downstream oil market in Mongolia. For a
delicate economy in its infancy, Mongolia is searching for stability that cooperates with all of its
―neighbors‖ in a path of least resistance. Maybe this time we are less likely to see history repeat
itself.
Source: ResCap
MONGOLIA HAS MADE “AMAZING PROGRESS ON ITS DEMOCRATIC JOURNEY”
In 1206, Mongols, under the leadership of Chinggis Khaan, rode out from the Mongolian steppe and,
using military tactics (speed and maneuver) still in use today, and technology (a short re-curved
bow easily used on horseback) the Great Khan and his successors conquered roughly 22 percent of
the world‘s total land area. It was, and remains, the greatest empire the world has ever known.
Over time, Mongol influence receded. It would take more than 600 years for my country to re-
emerge on the world stage — in a far more benevolent manner.
Last year Mongolia celebrated its 20th anniversary of democratic governance and freedom. It
proved to be a time of reflection for us. Peaceful demonstrations by thousands of my countrymen
led to the collapse of communist tyranny. Democratic elections were held, a new constitution was
drafted (that guaranteed individual human rights, freedom of speech and assembly, and established
the rule of law), and free market reforms were implemented.
Read more…
With generous financial and technical assistance from the U.S. and other countries Mongolians took
advantage of their newfound economic and political freedoms and unleashed their creativity.
Businesses began sprouting up, trade slowly increased, and gradually our standard of living began to
improve. One would not recognize the skyline of our capital city from just two decades ago.
Now, recent discoveries that include coal, copper, and rare earth mineral resources have set
Mongolia‘s GDP to triple over the next decade. Mongolia has an open-door foreign investment policy
that, coupled with investor friendly laws and transparency within the legal system is attracting
attention and new businesses — especially from the West.
My country has made great strides but much more remains to be done. I am committed to
improving Mongolia‘s educational system and helping ensure that as we take advantage of our
natural resources it is done in a manner that is respectful of the environment. By making each
Mongolian a stockholder in the country‘s largest mining operation we want to ensure that the
wealth extracted from our land is shared directly with our people. This will help to create a social
safety net for those less fortunate and provide a revenue stream that will allow Mongols to decide
for themselves how best to invest their national dividend.
19. I believe Mongolia has made amazing progress on its democratic journey. If someone had told me
twenty years ago, as we stood outside Parliament demanding the resignation of the Politburo,
Mongolia would one day be asked to lead the Community of Democracies (CD) I would have shaken
my head in disbelief.
Yet this month Mongolia has assumed the presidency of the CD. We look forward to lending our
guidance, advice, hard work and support to this organization as new democracies struggle to be
born, and others seek to strengthen democratic governance. I believe Mongolia can be the anchor in
eastern central Asia for helping to convey the virtues of democratic governance within our region.
The U.S.-Mongolian bilateral relationship is based first and foremost on shared values: Individual
liberties, human rights, and equal justice under laws passed by democratically elected bodies. I am
proud of the fact that Mongolian soldiers have served with collation forces in Iraq and today stand
boot-to-boot with U.S. troops and NATO forces in Afghanistan. It was no coincidence that my first
official visit in Washington was to Walter Reed Medical Hospital. It will be a privilege for me to
meet and be among those wounded warriors and their families that have sacrificed so much for the
cause of freedom.
My goal during my visit was to deepen and broaden U.S.-Mongolian ties. Increased trade coupled
with U.S. foreign investment will strengthen economic links. Exchanges among educators and those
in the think tank community can accelerate the understanding of events in our region and visits by
elected officials and senior government leaders of both our countries can ensure that the roots of
our relationship grow deeper.
Despite the physical distance between our two countries, our values bring us close together. I am
convinced that with work and effort, our friendship will grow and our peoples will prosper greatly
from it.
(This was written by President Ts. Elbegdorj in connection with his recent visit to the USA.)
Source: The Hill
WORLD JOURNALISTS‟ BODY BEGINS CAMPAIGN TO GET MONGOLIAN EDITOR FREED
The International Federation of Journalists (IFJ) has, along with its affiliate, the Confederation of
Mongolian Journalists, called for the immediate release of Ulaanbaatar Times editor-in-chief D.
Chuluunbaatar, who has been held in custody since his arrest on March 24. The call comes as
Parliament passed a new freedom of information legislation, known as the Law on Information,
Transparency, Right and Freedom to Access Information. The law, passed on June 16, will take
effect on December 1.
The IFJ has written to President Ts. Elbegdorj to protest the continuing detention of Mr.
Chuluunbaatar, 51, who was arrested on charges of ―illegal privatization and serious damage of
public property‖ for his alleged involvement in the privatization of the newspaper and its offices in
Ulaanbaatar in 2008.
Read more…
Mr. Chuluunbaatar, who is also Secretary-General of the Confederation of Mongolian Journalists,
faces up to 15 years in prison if found guilty. He is held at Detention Center No. 461 and has been
refused bail on nine occasions, while denying any wrongdoing.
―The IFJ is extremely concerned for the welfare of Mr. Chuluunbaatar, who has serious health
problems that require urgent medical assistance,‖ IFJ Asia-Pacific Director Jacqueline Park said.
―We call on all concerned people and organizations to join the campaign to see Chuluunbaatar
freed on bail so that he can seek treatment and contest the charges.‖ The IFJ has urged individuals
and organizations to join the global campaign to see Mr. Chuluunbaatar freed, by writing to
President Elbegdorj and sending him a message via Twitter (@elbegdorj or use
#freeChuluunbaatar).
The IFJ represents more than 600,000 journalists in 131 countries.
Source: International Federation of Journalists
ROAD TRAFFIC APT METAPHOR FOR „RULE-OF-LAW‟ IN MONGOLIA
If you want a sense of the outcome of rule-of-law reform efforts in Mongolia over the last two
decades, spend a few hours driving in Ulaanbaatar. Your immediate impression is likely to be one of
chaos. This is especially true at any intersection where police are not present to control traffic –and
drivers are thus expected to follow traffic rules on their own. At such intersections, vehicles are
typically gridlocked as drivers fight inch-by-inch to get to the other side, seemingly oblivious to the
traffic signals above them.
Your second reaction is likely to be fear — either because of the cars flying towards you on the
wrong side of the road or because of the number of drivers who apparently conflate red with green.
20. As you watch more closely, you may sense that some drivers — typically those in luxury cars with
special license plates — are ‗more equal than others‘. These vehicles, usually occupied by
politicians, government officials, or other Ulaanbaatar elite, cut others off with impunity and are
free to disregard traffic rules even in the presence of police officers (whose directions they are also
apparently free to ignore).
Read more…
While the above description might fit any number of developing countries, it is also an apt
metaphor for ‗rule-of-law‘ in Mongolia. First, a ‗rule-of-law culture‘ has not taken hold. Laws are
routinely flaunted unless enforced by some immediate positive authority. Second, the higher one‘s
position or status, the less one is bound by the law.
These messages are conveyed in many other ways as well, including the illegal and disorderly
construction of luxury apartment buildings south of the city in Zaisan, part of the Bogd Khan
National Park, in open and blatant disregard of a law barring construction of such structures there.
Indeed, development in Zaisan stands as a highly visible symbol of corruption and the impotency of
the law — a point underscored not only by the fact that many high-ranking government officials now
call Zaisan home, but also by the irony of the Constitutional Court itself having moved to a new
building there.
But what has happened in Zaisan, or what happens daily on Ulaanbaatar‘s roads, is not exceptional.
The same open disregard for the law is a defining characteristic of post-transition Mongolia — and
corruption seems to permeate every level of Mongolian society.
This is not to say that no one follows the law. To the contrary, most Mongolians do stop at traffic
lights and don‘t go barreling down the wrong side of the road. Moreover, most Mongolians would
prefer a society with less corruption, where the law was applied democratically. But Mongolians
must survive in the society in which they live — and this frequently means disregarding the law.
Those in Mongolia who most resist the rule-of-law are those who benefit most from its absence. In
this light, the chaos of Ulaanbaatar‘s roads seems less a product of a developing society, than a
product of design. A chaotic and lawless society facilitates the goals of the corrupt elite by
normalizing their behavior. Moreover, because traffic affects the lives of every Mongolian city-
dweller on a daily basis, it‘s where they learn their primary lessons about the role of the law in
society. These lessons don‘t bode well if the goal is to develop (or regain) respect for the law.
For this reason, however, beginning by addressing the lawlessness on Ulaanbaatar roads would offer
an opportunity to teach different lessons about the rule of law and to develop a rule of law culture.
For example, it might offer lessons about the utility of law (reduced traffic accidents, congestion,
and commute times) that go beyond positivist rationales for obeying the law. Moreover, it might
begin the process of inculcating ‗habits of obedience‘ to the law in a society were disregard for the
law has become a norm. Finally, were traffic rules enforced evenhandedly, it might also teach the
important lesson that no one stands above the law. Indeed, if the Mongolian elite were forced to
follow even traffic laws, then perhaps it would not seem so unreasonable to expect that they follow
other laws as well – and that public officials carry out their duties without corruption.
Unfortunately, because lawlessness and chaos benefit the corrupt elite, there is little chance that
they will address it (on the roads or elsewhere) — especially not now in the new age of Minegolia.
Lest the West point its finger, it bears remembering that the current political, legal, and economic
system in Mongolia was put in place with the assistance — and insistence — of the international
donor community. Whether one agrees that endemic corruption in post-transition Mongolia is a
direct product of these reforms, it is at least powerful evidence of their failure to effectively
advance the rule of law.
(This article by Mr. Brent White, an Associate Professor of Law and Affiliate Professor of East Asian
Studies at the University of Arizona, was published in the most recent edition of the East Asia
Forum Quarterly on Asia‘s Regulatory Awakening.)
Source: www.eastasiaforum.org
REMOVING PARKING AREAS WILL MAKE MATTERS WORSE
Little Ring Road is being totally overhauled and repaved. Drivers will soon be gliding along pot-hole
free streets. But the city is strangely removing parking areas along this road. For example, in front
of the Flower Center (where Peace Ave and Baga Toiruu meet) they have blocked off the parking
area. The same has been done in front of the Golomt Bank up the road and other spots. Whether
there is a logical explanation for this, or its just bad planning, is unknown.
One explanation is that the planners may be trying to increase green spaces where parking areas
once were. But even if there are more green spaces, the traffic pile-ups caused by a lack of parking
could make matters worse. Drivers will inevitably have to stop to do business here and they will end
21. up blocking courtyard entrances or perhaps they will just stop on the road and block a lane.
Source: ubchildrenspark.blogspot.com
ADB TO HELP CHOOSE TEAMS TO BUILD POWER PLANT
The Asian Development Bank has agreed to help The Ministry of Mineral Resources and Energy and
the State Property Committee in preparing the tender for international companies to help build the
5th
power plant as public- private-partnership, in negotiating terms and conditions with the
applicants and in making the selection.
Minister for Mineral Resources and Energy D.Zorigt and an ADB representative signed a
memorandum of understanding to this effect last week. The tender would be for three teams to
work in legal, financial and technical spheres. The selection is likely to be made by the end of this
year.
Source: Ardiin Erkh
CHINA INAUGURATES BIGGER BORDER POST AT ERILEN
A grand ceremony was held on June 16 to inaugurate an expanded and renovated freight and
passenger transit point at Erilen in China. The new border post has 6 big entry gates for loaded
trucks. The whole work has cost the equivalent of MNT24 billion, much of which came from the
border crossing fee paid people and freight carriers. Several Chinese officials at the ceremony were
heard to say they have done what was needed to facilitate the increase traffic and it is now
Mongolia‘s turn to work on its side. They also expressed their readiness to help develop road and
other infrastructure, if this was asked for.
Except for some construction work last year that needed MNT 2.25 billion, nothing has been done to
expand or improve facilities at the border on the Mongolian since 1990. The revenue from Zamiin-
Uud was MNT100 billion last year, but nothing of this was plowed back. Reports say a company has
been finally selected to turn the border point into a larger and more efficient customs post, able to
handle the anticipated exponential rise in export traffic once the two Tolgois start production.
Human traffic will also increase much.
Source: Udriin Sonin
PM SEES STATE SERVICE REFORM AS ESSENTIAL
Prime Minister S. Batbold told delegates at a forum last week on reforming state services that such
reforms were essential as Mongolia needed a great number of competent public servants ―to seize
the development opportunity of the next 20 years‖. There are 150,000 public servants in Mongolia,
and complaints of inefficiency, incompetence and corruption are common.
A professional public service has strong correlation with economic and social development, visiting
Canadian Public Service Commission President Maria Barrados told the forum. She also stressed that
a nonpartisan public service was fundamentally important to peaceful and orderly succession after
a general elections. Mr. Batbold said Mongolia could learn from Canada's experience in reform.
The forum was jointly organized by the Mongolian Government and the Canadian Public Service
Commission. Ministers and members of Parliament were among the 600 participants at the forum.
Source: Xinhua
WOMEN OUTNUMBER MEN IN MONGOLIA
Detailed results of the last census reveal that the population of Mongolia stood at 2,754,685 on
November 10, 2010 and 107,140 Mongolian citizens had been abroad for six months or more at a
stretch before that. Foreign citizens and stateless people in Mongolia numbered 16,428. Men were
49.5% of the population and women 50.5%. Children under 14 were 27.3% of the total population,
those between 15 and 64, 69.0% and those over 65, 3.7%. The population grew by 381,200 or 16.1%
since the 2000 enumeration.
Source: Undesnii Shuudan
MORE MONEY FOR PRISON WORKERS FROM NEXT YEAR
The Government has decided to grant extra wages to prison staff because of the tough conditions
under which they have to work. The decision takes effect on January 1, 2012. Workers in special
regime prisons, Prohibition Center 461 and Women‘s Prison 407 will be paid an extra amount of 20
percent of their salary. Those who work in detention centers, common regime prisons, Teenagers‘
Prison 411, the center for drug addicts, forced labor centers and prohibition centers in aimags will
receive 10 percent more.
Source: Zuunii Medee
22. LAWYERS DISCUSS INCREASE IN THEFT CASES
Cases of theft have been rising so much that practicing lawyers, employees of legal organizations,
and legal scholars met at a conference last week to discover the possible reasons what deterrent
and other measures were called for. According to the Chief of Ulaanbaatar Civil Representatives‘
Assembly, T.Bilegt, 29% of the 8,547 cases of crime registered in Ulaanbaatar since the beginning of
the year until the end of May were related to theft. The Senior Inspector at the Center for
Information and Research at the Police General Department took a longer look back and revealed
that 200,000 theft cases have been registered in the last ten years. The total loss to citizens was
MNT350 billion, of which 20% could be restored to them.
Source: Unuudur
PROPOSAL TO GRANT SOME DISTRICTS CITY STATUS
The Government has approved a draft resolution on giving some districts the status of a city. If
Parliament passes it, Khovd, Uliastai, Kharkhorin, Erdenet, Darkhan, Zuunmod, Choibalsan,
Ondorkhaan, Sukhbaatar (Selenge province), and Zamiin-Uud (Dornogobi province) will be known as
cities. Most of them have important industries, service organizations, and universities while
Sukhbaatar and Zamiin-Uud are international transport junctions. The new status will allow these
areas to develop more and in diverse ways and this is expected to halt migration to Ulaanbaatar.
Source: Montsame
MONGOLIA‟S NOMADIC SOCIETY IS PUTTING DOWN SOME RICH ROOTS
There he stands alone on his horse, a fierce giant shimmering out of nowhere rising 131 feet against
the vast Mongolian sky. Eight hundred years after he declared the Great Mongolian State in 1206,
Genghis Khan rides again, all 250 stainless-steel tons of him. As I bump along on one of the few
paved roads 20 miles outside the capital, this kitschy monument to the new mineral-rich and
independent Mongolia seems more like a huge middle finger raised to its powerful neighbors, China
and Russia.
July marks the 21st anniversary of Mongolia's robust democracy after more than 200 years of
despised Chinese rule followed by 70 years as a satellite of the Soviets, during which time the proud
history of Genghis Khan, who spawned the largest contiguous empire in world history, was banned
from public view and utterance. Today, owing to deposits of 80 different minerals, including
immense reserves of coal, copper, gold and uranium, as well as ongoing exploration of oil, this
sparsely populated country, twice the size of Texas, is undergoing a dizzying transition. No other
nation today so squarely faces the choice that Mongolia does. Will it become Nigeria or Chile?
Venezuela or Australia?
"Mongolia really is the land of opportunity," says Mr. Howard Lambert, head of corporate banking
for ING in Mongolia. "Everything can be done here. The financial infrastructure doesn't exist, so you
can be a part of building it. Instead of sitting in an office in London turning a wheel, you can build
the machine. Every day I see new buildings, developments going up—people buying sports cars in a
country that doesn't have roads. The social divide is getting wider."
Read more…
Nothing illustrates the topsy-turvy nature of Mongolia today more than the capital city's main
Sukhbaatar Square, where a bronze statue of Lenin once presided. Now a gleaming Louis Vuitton
store, opened in October 2009, offers clients champagne in a circular VIP room outfitted with a
lavish ceremonial Mongolian saddle and antique caviar case. Outside the store, however, several
hundred yards away, a group of dissident poor have pitched their round felt and wood yurts (gers in
Mongolian) to protest the government's cozying up to foreigners and not doing enough for them.
"We want jobs. The poor need to have a better quality of life," 52-year-old I. Baganuur tells me.
"The government is implementing policies for themselves, not for its citizens."
Source: The Wall Street Journal
Sharing the same luxury mall with Vuitton are Burberry, Zegna, Emporio Armani and Hugo Boss.
Burberry is planning a second store in a Shangri-La hotel currently under construction. Ferragamo
and Dunhill are also looking for space. At the same time, the capital, which boasts the most vibrant
democracy in Central Asia, does not have street addresses and has just begun to introduce zip
codes. "The irony for Mongolia," says American ambassador to Mongolia Jonathan S. Addleton, "is
the more successful they are, the more challenging it becomes."
How could it be that luxury retailers have come to Mongolia? The country has only 2.8 million
people, almost half of them living in a capital built for 500,000, including 700,000 destitute former
nomads whose gers crowd the surrounding hills and who burn coal and even plastic bottles in the
harsh winters, choking the city with extreme pollution. I wanted to understand how a luxury brand