August 1 2008

1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmmongolia.org
Jim@bcmmongolia.org
Issue 32, August 1 2008
NEWS HIGHLIGHTS:
Business: Mongolia climbs up in business-friendly ranks; Russia keeps Mongolia in the
dark as Erdenet shares change hands; Data show 28% of land in Mongolia is
for mining and exploration; Meeting with Japanese businessmen this month;
Khan Resources extends offer deadline to buy Western Prospector; Western
Prospector Group issues update; Mongolia at Middfest-2008; Herders to get
Tg 273 million from insurance. (Click to go to Business section)
Economy: Mongol Bank traces development to increased transparency; New fuel and
freight rates announced;
Diesel price up by Tg 150 a liter; Deal struck for 10,000 tons of A-I 93 from
China every month; Mongolia in PECC as full member; Professor Michael
Porter charts the way for Mongolia. (Click to go to Economy section)
Politics: What they agree on, and what remains unresolved; President interested in
reversing brain drain, easing visa norms; 22 ger districts to be rebuilt; No
decision yet on land in Ulaanbaatar. (Click to go to Politics section)
BUSINESS
MONGOLIA CLIMBS UP IN BUSINESS-FRIENDLY RANKS
The latest Forbes ranking of the “Best Countries for Business” has put Mongolia up 10 places (from
69 last year to 59) among more than 120 nations. At 44th, Mongolia is also reasonably high, given
the competition, in the “freedom of trade” category. Countries that come after Mongolia include
India, Kazakhstan, Ukraine, China and Russia, in that order.
The editors analyze the business climates in all the national economies, focusing on degrees of
personal freedoms, such as the right to participate in free and fair elections, or freedom of
expression and organization. As Forbes explains, “We examine the misuse of corporate assets for
personal gain. Together with economic policies supportive of free trade and low inflation, these
key points form a snapshot of countries' suitability for capital investment.” Countries that have
done well in this year‟s list are all marked by success in limiting bureaucracy standing in the way
of entrepreneurs hoping to do business within their borders.
Source: www.forbes.com
RUSSIA KEEPS MONGOLIA IN THE DARK AS ERDENET SHARES CHANGE HANDS
V.Putin, Russia‟s President-turned-Prime Minister, has issued an order to transfer the 49 percent
stake held by the Russian Government-owned Mongolrostevetment in the Mongolian-Russian joint
venture Erdenet Mining Corporation to a private company, Rostechnology. It is entirely an internal
affair of Russia how assets are transferred there. Mongolia can also have nothing to say if Sergey
Chemezov, who owns Rostechnology, happens to be a close friend of Putin. However, Mongolia
can certainly protest if legal obligations are not observed.
The Russian side has so far received some USD 100 million in dividends from Erdenet. A
partnership without mutual trust may run into problems. By presenting Mongolia with a fait

2. accompli, Rostechnology has raised doubts about the future of a partnership that is economically
vital to Mongolia.
Source: Zuunii medee
DATA SHOW 28% OF LAND IN MONGOLIA IS FOR MINING AND EXPLORATION
The Open Society Forum has released statistics revealing that 43.8 million hectares, or 28 percent
of Mongolian land, has been set aside for mining and exploration. The number of mining and
exploration licenses stood at 4,717 in June 2008, compared to 4,361 in November 2007. In June
alone, 73 new licenses were issued for mining, and 66 for exploration.
Of the total licenses, 22 percent are for mining and the rest for exploration. The three provinces
with the highest concentration of licenses are Dornogobi, Selenge, and Omnogobi. Gobi-Altai has
the highest ratio (1:16) of mining to exploration licenses.
Most of the mining licenses are in Tov province, followed by Selenge and, then, the Ulaanbaatar
territory. In Ulaanbaatar 462, or 44 percent of the 1,060 mining licenses are for gold. Most of the
others are for coal, fluorspar and iron.
The largest area under license is controlled by the national Mineral Resources and Petroleum
Authority. It has 55 licenses that cover 5.2 million hectares. Ivanhoe Mines and Gobi Coal and
Energy lead other companies in the size of the area they control under exploration licenses. Both
are responsible for more than 2 million hectares each, and their licensed areas together are larger
than the whole of Selenge province.
Companies holding mining licenses are registered in 30 countries. Two-thirds of all licenses have
been issued to Mongolian companies. Companies registered in “tax havens” own about 12 percent
of all mining licenses.
Source: The Open Society Forum
MEETING WITH JAPANESE BUSINESSMEN THIS MONTH
The second joint consultative meeting of representatives from the governments and the private
sectors of Japan and Mongolia will be held on August 14 in Ulaanbaatar. The meeting is expected
to help develop bilateral commerce and investment collaboration. Proposals presented by the
private sector in Mongolia will be discussed. Companies here that export to Japan, and those
looking for collaboration with Japanese companies will find the meeting a good place to establish
direct contacts to further their interests.
The first consultative meeting was held in November, 2007 in Tokyo, and was attended by 120
private sector and government representatives of the two countries. It heard views on how to
strengthen bilateral economic relations, including Japanese financial assistance to expand trade,
and Japanese investment in the private sector here.
Source: Montsame
KHAN RESOURCES EXTENDS OFFER DEADLINE TO BUY WESTERN PROSPECTOR
Khan Resources Inc. announced July 24 that its offer to acquire the outstanding common shares of
Western Prospector Group Ltd. for 0.685 of a Khan common share would be extended to August 8.
On July 15, Tinpo Holdings Industrial Company Limited announced its intention to make an offer

3. to acquire all outstanding Western Prospector common shares. Tinpo's offer was expected to be
filed on or before July 29.
"We are extending our offer to expire after Tinpo files its offer documents so that we can properly
assess the Tinpo offer before determining how to proceed. We would like to give Western
Prospector shareholders the opportunity to consider Khan Resources' offer as an alternative to this
all-cash offer which caps Western Prospector shareholders' upside at the bottom of the upturn in
the uranium cycle, at a time of increasing acceptance of nuclear power throughout the world and
after the people of Mongolia have recently elected a majority government," said Martin Quick,
CEO of Khan Resources.
Source: www.mongol-web.com
WESTERN PROSPECTOR GROUP ISSUES UPDATE
Western Prospector Group Ltd. issued an update on July 30 to its July 15 press release announcing
the agreement between it and an affiliate of Tinpo Holdings Industrial Company Limited, pursuant
to which the Tinpo has agreed to acquire all of the issued and outstanding common shares of
Western, other than common shares beneficially owned, directly or indirectly, by Tinpo, its
affiliates and joint actors, for a cash consideration of $1.34 per share.
Discussions are ongoing regarding technical matters relating to the Offer, which discussions will
result in a short delay in the mailing of the Offer documents. The technical matters being
discussed are unrelated to the commercial terms of the Offer. Western expects that the
discussions will be concluded shortly and will provide a further update at the appropriate time.
Source: www.westernprospector.com
MONGOLIA AT MIDDFEST-2008
Middfest International Business Exchange & Conference is organizing a “Mongolia at Middfest-
2008” business program from October 1 to 3 in the tri-state area of Ohio, Indiana and Kentucky of
the USA. Businessmen from the two countries will attend it to explore the products and services
on show, discuss cooperation and expansion of business, and learn more about each other‟s
business protocol and etiquette.
The Exchange will provide visits to businesses and a setting to interface with world-class
companies in a variety of sectors. Fields identified to date include: engineering, construction and
building materials, mining and technical services, education, information technology and services,
Mongolian crafts and natural commodities. Participants will be matched with local business
entities in their sector of interest.
BCM members are invited to this event. Please visit the BCM website for more information and
contact Middfest International officials directly to register.
Source: a_laporta@yahoo.com; See BCM website Calendar of Events
HERDERS TO GET TG 273 MIILION FROM INSURANCE
Herders in 12 soums in Uvs province will collect Tg 273 million from the “indexed insurance of
livestock” program introduced by the World Bank for the 250,000 of their livestock that died and
the 40,000 that were otherwise lost until now in 2008. Last year herders got a little more than Tg

4. 26 million for the death of 53,000 animals. Herders who benefited then numbered 566. This year a
total of 600 of them joined the IIL and will reap the rewards now. Apart from the insurance
money, they will get some Government compensation.
Source: en.News.mn
ECONOMY
MONGOL BANK TRACES ECONOMIC DEVELOPMENT TO TRANSPARENCY
According to Mongol Bank, the earlier situation when investment in the Mongolian economy was
mostly from foreign loans and aid has changed. In recent years, it has come from within the
country, with both balance of payments flow and assets accounting showing a surplus. These and
other indicators of the state of the economy emerged at a seminar organized by the Mongol Bank
on July 25 on “Balance of payments and statistics of foreign investments”. The central bank
advised business entities conducting foreign trade and service activities, especially those seeking
loans from abroad, to minimize their exchange rate risks by using the latest internationally
accepted financial methods.
Mongolia has been successfully implementing a flexible policy of open-market economy since it
changed over to the „freely convertible currency/floating exchange rate‟ principle, as well as
freeing up foreign trade, asset and financial flows. The difference between investments and the
internal economic balance in the GDP now is a positive 2.6 percent, from the earlier shortfall of
8.7 percent. Foreign trade turnover has reached USD 3.6 billion, or 127.5 percent of the GDP. One
reason behind the present sustainable economic development was given as the economy becoming
more transparent. There is still considerable dependence on external economies, however, and
this makes the internal economy vulnerable to sudden changes. Measures taken to reduce such
risks include developing the internal financial markets and improving governing capacities.
Source: Montsame
NEW FUEL AND FREIGHT RATES ANNOUNCED
Announcing the new electricity and heating rates to be effective from July 15, the Minister for
Fuel and Energy, Ch.Khurelsukh, defended the all-round increase by saying that companies
generating, distributing, and supplying energy had been facing financial pressure as their revenue,
based on rates fixed years ago, did not match present-day costs. They were making large losses
and running up debts. They could not buy spare parts on a regular basis, leading to frequent
disruption. Intervention by international donor and aid organizations was imperative to eliminate
the sector‟s financial difficulties.
Apartment residents will now pay Tg 748 more every month if they use less than 150 kw, Tg 2,376
more if consumption is between 150 and 251 kw, and Tg 4,070 more for monthly consumption
above 251 kw. Charges for supplying hot water rise by Tg 568 per person per day. Heating charges
go up by Tg 81.9 per sq.m of the apartment area.
Power distributing companies, and those making bread and other flour products will continue to
pay at the old rates. Energy consumed between 9 pm and 9 am will cost 50 percent less in
apartments, though it is not clear how this will be determined.
Railway freight rates have been raised by 16 percent for everything except fuel and foodstuff,
which will not cost more to be transported. The new rates are expected to help Ulaanbaatar
Railways meet part of its ever increasing expenses and reduce its loss by 10 percent.

5. Source: en.News.mn
DIESEL PRICE UP
The Mongolian Oil and Gas Association (MOGA) raised the price of diesel by Tg 150 per liter on
July 28. This unilateral decision was taken after MOGA had waited more than two weeks for a
Government response to its proposal to raise the price of all oil products. Gasoline, however, will
continue to be sold at the same price as now.
O.Enkhchimeg, CEO of Petrovis, defended the MOGA decision, saying there was no other way
before the oil companies which “are on the edge of bankruptcy”. She said, “We are in a situation
when Parliament cannot meet, and no decision can be taken on any issue. We raised the price
just a little, and that, too, of only diesel. This is mostly used by mining companies and so will not
hit citizens too hard. We cannot wait indefinitely for the Government to make up its mind. We
have not yet got the promised compensation and face a severe cash crunch.”
Source: en.NEWS.mn
DEAL STRUCK FOR 10,000 TONS A-I 93 FROM CHINA EVERY MONTH
Mongolia‟s total reliance on Russia for its petrol is going to end soon. A team led by the Deputy
Head of the Minerals and Oil Authority, D.Amarsaikhan, was in China recently to conclude an
agreement with the Oil Corporation of China. This allows Mongolia to import 10,000 tons of high
octane A-I 93 petrol every month. This will meet 20 percent of Mongolia‟s present needs.
Source: Montsame
MONGOLIA IN PECC AS FULL MEMBER
Mongolia and France (Pacific Territories), both associate members of the Pacific Economic
Cooperation Council (PECC), have finally been accepted as full members of the association of
businessmen from 26 countries, represented by committees. For example, Mongolia‟s
representation is officially known as the Mongolian National Committee on Pacific Economic
Cooperation. The two new members join, among others, Australia, Canada, China, Japan, South
Korea, Taiwan, and the USA. The two institutional members are the Pacific Trade and
Development Conference (PAFTAD), and the Pacific Basin Economic Council (PBEC).
The PECC was established in 1980 to link entrepreneurs of the region, to ensure favorable
conditions for commerce and investment, to develop multilateral economic cooperation and to
conduct market research and surveys. The PECC has always had close links with the Asia-Pacific
Economic Cooperation (APEC).
Source: info@pecc.org
PROFESSOR MICHAEL PORTER CHARTS THE WAY FOR MONGOLIA
Michael E. Porter, professor at Harvard Business School, is often called “the father of the modern
strategy field” in the economic development of nations. This global authority on competitive
strategy talked to an assorted audience of politicians, diplomats, academics, development
workers, corporate planners, and students at the National University of Mongolia on July 26 about
what Mongolia should do to improve its competitiveness in the world of globalization. The lecture
was organized by the World Bank office in Mongolia.

6. Porter made it clear he was not issuing prescriptions. With its business sector not too well
developed, and limited export potential, Mongolia‟s fast GDP growth has been more a matter of
good luck than an indication of sustainable growth. Too many sectors needed encouragement, and
policy makers, instead of trying to intervene everywhere with little impact, should choose certain
fields as their priority where strategic inputs will have better results.
Porter wants Mongolia to focus on tested and tried areas, to be very good in a few industries than
average in many. To achieve international standards of productivity, infrastructure has to be put
in place, the private sector encouraged, management and manufacturing skills and practices
imported from wherever they are available.
Productivity in an individual industry depends very much on the capability of the total economy
and the level of sophistication in the local competition. Right now, Porter felt, in Mongolia “the
business environment is more advanced than the firms doing business here”. Among the many
things essential to improving the situation here were, not necessarily in order of importance,
setting up business schools, easier access to loans, encouragement of venture capital, identifying
property rights and then upholding them, and enforcing regulatory standards.
He favored decentralization of activities and collaboration among regions and called for “synergy
across borders”. Instead of the present Government-driven decision making and apportionment of
incentives, there should be a demand-driven process of cooperation at multiple levels, involving
the Government, private companies, academic institutions and all stake holders in national
prosperity.
Answering questions, Porter said a company should be selected for investment in any field “not
because it cuts the best deal”, but only if it promises more to the economy. He also termed
impracticable a model of governance that “puts economic policy here, and social policy there”.
Warning against any “commingling of business and political interests”, of either individuals or
groups, he favored independent watchdog groups.
Source: BCM NewsWire
POLITICS
WHAT THEY AGREE ON, WHAT REMAINS UNRESOLVED
D.Demberel (MPRP) and Z.Enkhbold (DP), leaders of the two working groups that negotiated to
end the political stalemate, met journalists on July 28. Demberel revealed that agreement had
been reached on some points, like amending the Local Administration Law in the Constitution,
amending the Mining Law and distributing to citizens what has been called the “treasure share”,
and taking urgent steps to increase job opportunities, alleviate poverty, and control inflation.
But, he said, “we haven‟t reached an agreement as yet on how new members can take their
oath”.
Enkhbold explained why. The DP insists that the election results should be based on the minutes
of a GEC meeting on July 10, after which the first list was submitted to the President. The DP
does not accept the list the President was given on July 14. “If the first list is not brought back,
DP members will stay away and there can be no session of Parliament with members being sworn
in,” he said.
Meanwhile, the new MPRP members came to Parliament House for the third day on July 29 but
could not take their oath as their DP counterparts were not there, denying a quorum.
Source: www.news.mn

7. PRESIDENT INTERESTED IN REVERSING BRAIN DRAIN, EASING VISA NORMS
There are some 70,000 Mongolians living abroad, in South Korea and in Europe and North America,
studying and working. Their remittances home help the Mongolian economy, but as the country
develops it will be better served if they come back and utilize the skills they acquire abroad to
help in Mongolia‟s efforts to industrialize and modernize its agricultural sector. Apart from what
they study at institutions, their exposure to and familiarity with entrepreneurial practices, the
forces that propel a market economy, and democratic principles should help transform Mongolia
into finding its proper place in a globalized world.
The Korean delegation led by Chu Kui Ho was in Mongolia at the invitation of President Enkhbayar
to discuss how Mongolians and South Koreans could more easily travel to and work in each other‟s
country. It also met with Prime Minister Bayar. Both leaders thanked South Korea for its good
treatment of the about 35,000 Mongolians living and working there, and wanted it to examine the
possibility of issuing more multiple-entry visas, extending visa periods, and also of waiving the
need for visas altogether. “This would be an important basis on which to build far-reaching
bilateral ties and collaboration,” Bayar said.
Source: Montsame
22 GER DISTRICTS TO BE REBUILT
Apartment blocks and individual dwelling units will replace all existing structures in 22 “ger
districts” spread over six districts of Ulaanbaatar in three phases. The first phase (2008-2011) will
be given to surveys and data collection. Basic plans will be prepared in keeping with the location,
topography, consumption pattern, and capacity of each ger district. The second phase (2012-
2015) will develop each ger district into a separate micro district with apartment buildings fully
equipped with infrastructural provisions like water, heating, and electricity. The third phase
(2016-2020) will see construction of private houses and smaller apartment blocks.
Source: en.News.mn
NO DECISION YET ON LAND IN ULAANBAATAR
No decision has yet been taken about applications to own a piece of land as personal property in
Ulaanbaatar. The law states that in the capital city people will be given land near the roads.
However, that could pose problems when, as is inevitable, the city expands. Roads will need to be
widened and new roads will have to be built. Urban planners would like new plots of land to be
given in areas where infrastructure is easy to build. Ulaanbaatar citizens may be asked to choose
land near existing roads or in uptown places where roads are planned to be built. Those who
already have land in their name can transfer the ownership to someone else in the family and
apply afresh.
Source: en.News.mn
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8. ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended July 25, 2008, trading activity on the Mongolian Stock Exchange (MSE) totaled
4.0 million shares with 43 companies traded. Total market value of transactions was MNT 1.3
billion.
The Top-20 Index decreased by 51.46 points or 0.5 percent compared to the previous week closing
at 9,907.17 points. The MSE Composite Index decreased by 20.80 points or 0.5% compared to the
previous week, closing at 4,426.20 points.
Most active stocks traded were: Naco tulsh (2,700,000 shares), Hermes (616,600 shares), APU
Company (138,900), Genco tur buro (126,100 shares) and Anod Bank (92,600 shares).
Major share price percentage gainers were: Naco tulsh (36.8%), UID-State Department Store
(16.7%), Orgil Gobi Altai (15.8%), Erdenet zandan (15.1%), and Spirt bal buram (15.1). Major
share price percentage losers were: Talkh chicker (-10.1 %), Mon.Tsakh.Kholboo (-9.9%), Olloo (-
6.9 %), Erdenet khivs (-6.8%), and Moningbar (-5.7. %).
Total market capitalization of the 358 stock companies listed on the MSE was MNT 785.9 billion,
and increased by MNT 57.2 million or 0.8% from the previous week.
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 Avg. 9.0% [source: NSOM]
Year 2007 *15.1% [source: NSOM]
May 31, 2008 *32.6 % - UB City [source: NSOM]
*Year over year (yoy)
CURRENCY RATES – AUGUST 1, 2008
Currency Name Currency Rate
US dollar US 1155.35
Euro EUR 1803.10
Japanese yen JPY 10.70
British pound GBP 2290.42
Hong Kong dollar HKD 148.06
Chinese Yuan CNY 169.03
South Korean won KRW 1.14
Russian ruble RUB 49.32
AIESEC EVENT: WEDNESDAY, AUGUST 7, KHAN BANK THEATER AT 7 PM
AIESEC, the world's largest student organization, aims to foster leadership, entrepreneurship, and
cultural understanding through internship exchange. It has been working in Ulaanbaatar this
summer to establish AIESEC in Mongolia.
AIESEC cordially invites all BCM members to attend a kick-off event on August 7 at 7 PM in the

9. Khan Bank Theater to learn more about how to collaborate on building AIESEC in Mongolia.