BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 244 – October 19, 2012

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NEWS HIGHLIGHTS:

Business

Royalty and tax proposals threaten OT project;

China-Mongolia relations not cause for delayed power negotiations, says Rio;

Oyu Tolgoi stands behind IMF‟s „71 percent benefits‟ figure;

Oyu Tolgoi defends water use;

Herders demand “just compensation” from Rio;

Mongolia eyes Peabody for TT West Tsankhi's development;

Cougar partners with Hulaan to develop UCG industry;

Prophecy dwindles down short list for EPC tender;

Newcom and partners negotiate details for Power Plant No. 5 construction;

Mobile phone service providers to provide new pay scheme;

BSB to get new store and warehouse;

Inspectors close four Sod Mongol petrol stations;

Non-executive directors resign from MMC;

BCM sends second business mission to London;

KIT digital gets Bloomberg TV Mongolia on air.

Economy

Cash allowances for children begin this week;

Parliament proposes tax on bank savings accounts;

Producers and farmers group settle on MNT 550 a kilo for flour;

BCM in the Classroom;

Trade fair displays innovative technology for ger life;

Narnii bridge opens;

Government plans new rail line to cut traffic;

FAO, Mongolia sign cooperation agreements;

Charting the budget;

Former president supports research of shale resources;

Citizens see inflation growing to 16.2 percent in the capital city;

When economic growth is not necessarily a good thing;

China's obstacles to investment in Mongolia;

China reports slower Q3 growth, but sees signs of possible revival;

China guides RMB to highest level since '94.

Politics

MPs propose mining development committee to review OT agreement;

President makes court appointments;

Court rules against MPP candidates for disputed Uvurkhangai seats;

Enkhbayar‟s 4-year sentence upheld by Court of Appeals;

Enkhbayar's sister wanted by Interpol;

DP looks to past budgets, learns from past mistakes;

MPs oppose 2013 budget's allowance for uranium exploration;

Government hopes to amend investment agreements to replenish HDF;

ACA investigates university officials for corruption;

Government monitors human rights conditions in minerals sector;

Women's conference calls on women to participate in reforms;

Ulaanbaatar removes Lenin statue;

Dinosaur trader arrested for smuggling dinosaur bones;

The misunderstood “marauder”.

*Click on titles above to link to articles.

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BUSINESS

ROYALTY AND TAX PROPOSALS THREATEN OT PROJECT

Rio Tinto PLC's biggest new mining project is under threat after the government of Mongolia said it

was considering whether to renegotiate an investment agreement involving the USD 6 billion Oyu

Tolgoi copper mine.

Mongolia's new government is in the process of passing a 2013 budget with a draft proposal that

includes increasing taxes and royalties on the mine by USD 300 million. The original 2009 agreement

with Turquoise Hill Resources Ltd., then Ivanhoe Mines Ltd., froze tax rates over the life of the

mine. It safeguarded the project for Rio Tinto and its suppliers, which began spending billions of

dollars to build a vast copper mine in the Gobi Desert.

Even an attempt at renegotiation could hurt Rio Tinto. If the company seeks international

arbitration to resolve the issue, it could delay the start date for the mine. Construction is almost

complete, with commercial production expected to start in 2013. In Ulaanbaatar, however,

investors and foreign governments are more worried about the effect of renegotiation on the

country's growth rate.

―If there appears to be an attempt at renegotiating or somehow reneging on the investment

agreement, that could have a possibly catastrophic effect on the country,‖ said David Wyche, the

Economic Section Chief at the United States Embassy in Ulaanbaatar. ―It could stop the flow of

foreign capital into Mongolia.‖

Last week, the caucus of Mongolia's Democratic Party (DP), which leads a coalition government in

place since August, passed a budget proposal that called for a new sliding royalty on Oyu Tolgoi's

revenue that would rise to 20 percent depending on the copper price. The 2009 investment

agreement set the royalty rate at 5 percent. The new plan would also raise Oyu Tolgoi's effective

tax rate by eliminating income tax allowances. The government would bring in USD 160 million from

the royalty and USD 163 million from corporate income tax, according to estimates in the draft

budget proposal.

This week the plan is expected to reach Parliament, which will decide whether to adopt or modify

the proposal. The budget is crucial for Mongolia, which faces a fiscal deficit this year that is

expected to widen next year. Revenue from coal, the country's biggest export, plunged over the

summer, national statistics show, because of a drop in both price and volume. Mongolia's mining

boom depends on commodities demand from China, whose economy has slowed this year.

To date, Rio Tinto and its partners in the Oyu Tolgoi project have spent USD 6.2 billion building the

mine. The project still requires billions of dollars to expand the mine underground.

Source: New York Times

CHINA-MONGOLIA RELATIONS NOT CAUSE FOR DELAYED POWER NEGOTIATIONS, SAYS RIO

Rio Tinto PLC insists the ancient rivalry between Mongolia and China is not contributing to delays in

sourcing a crucial power link for the company's most important growth project.

Negotiations to supply Chinese electricity across the Mongolian border to help run Rio Tinto's

massive Oyu Tolgoi copper and gold mine have been under way for more than a year and are still

incomplete despite first production from the project expected in coming weeks.

The power link is needed if Rio Tinto is to achieve commercial production from the project in the

first half of next year, and fears of an international contention have grown as the impasse has

continued. But Rio Tinto's head of copper, Andrew Harding, said the impasse was entirely

commercial.

―I can guarantee there is nothing of a geopolitical nature that is actually infiltrating itself into the

negotiations... It is absolutely about commercial terms in the contract,‖ he said.

Source: Sydney Morning Herald

OYU TOLGOI STANDS BEHIND IMF‟S „71 PERCENT BENEFITS‟ FIGURE

The Oyu Tolgoi copper and gold mine will not be a source of great debt while its investors ignore

the need for the country's development said the company in an unofficial statement.

The company continues to drive home the fact that Mongolia has benefited from the investment

agreement since day one when the agreement has signed. Since that day, Mongolia has received

MNT 1 trillion in advanced payments, and more when income tax paid by Oyu Tolgoi LLC, social

insurance payments and indirect payments are accounted for.

Oyu Tolgoi has made the development of Mongolia's infrastructure and its people a top priority,

despite claims in the media to the contrary. Infrastructure already completed or underway includes

the road to the Gashuun Sukhait border, high-voltage electricity transmission lines for the project

to Khanbogd Soum, and an airport that meets international standards. The company has also

invested heavily into vocational training, renovating and building schools in Darkhan, Choir,

Dalanzadgad, Erdenet, and Nalaikh.

The company has also refuted claims from MPs that the advertisement that 71 percent of the

benefits from the Oyu Tolgoi copper and gold mine will go to Mongolia is untrue and is not

supported by any study. It explained that Mongolia is set to receive 71 percent of the cash flow

from the project, as reported by the International Monetary Fund (IMF) in a 2010 report. To see the

complete report, visit BCMongolia.org, News section.

Source: Oyu Tolgoi LLC

OYU TOLGOI DEFENDS WATER USE

Oyu Tolgoi LLC has refuted claims that the mine will consume water for free and become a serious

detriment to water sources in the Gobi Desert, in an unofficial statement.

The miner said it pays for its water usage monthly, with fees coinciding with Mongolian law. In

response to claims that Oyu Tolgoi will use water resources that ―we never will be able to recover,‖

it said its usage will fall below that of the maximum set by the government.

―The Water Authority of Mongolia allowed Oyu Tolgoi LLC to use 870 liters of water per second,‖

said the statement. ―According to the ESIA report, 696 liters of water will be used per second if

100,000 tons of ore is processed per day. In addition to this, Oyu Tolgoi reuses 100 percent of its

recovered water and this brings down the amount of water we will be using by three times.‖

In its effort to protect the Undai River, which flows through the Oyu Tolgoi mine site, the company

has proposed diverting it to maintain its downstream flow for herders and wildlife. It will also

contribute to the rehabilitation for the local area and replenish the Boroo Ovoo spring. The

company added that its assessment is included in the ESIA report.

Source: Oyu Tolgoi LLC

HERDERS DEMAND “JUST COMPENSATION” FROM RIO

A group of Mongolian goat and camel herdsmen are taking on global mining giant Rio Tinto PLC,

claiming the Oyu Tolgoi mine has driven them off their ancestral plains.

The herders are demanding ―just compensation‖ for the impact of the Oyu Tolgoi copper and gold

mine. A spokesman for Mongolian campaign group OT Watch said Rio Tinto was ―manipulating

herders‖ into signing meager compensation contracts and had failed to help them relocate to good

pastures.

The World Bank is expected to offer Rio Tinto a USD 900 million loan and USD 1 billion in risk

insurance for the mine. But OT Watch has applied to an internal World Bank ombudsman to halt any

assistance until herders are compensated.

Source: Daily Mail

MONGOLIA EYES PEABODY FOR TT WEST TSANKHI'S DEVELOPMENT

State-owned miner Erdenes Tavan Tolgoi has asked the U.S. firm Peabody Energy Corp. to draw up

logistic and infrastructure plans for the project's western Tsankhi block, its chief operating officer

Graeme Hancock said.

―We have to make sure that we are designing everything, including the transport infrastructure and

the wash plants for West and East Tsankhi... so the sooner we have another partner... to help us

work through these issues, the better,‖ Hancock said.

Talks with Peabody could begin next week, he added.

―Any initial operation would be similar to what we have with MacMahon on East Tsankhi, where

they are operating as a contractor—they deliver the coal to the stockpile and we as [Erdenes-TT]

market it. We anticipate the same sort of arrangement in the short term until such time as the

consortium arrangements are completed.‖

Hancock said inviting Peabody Energy to do the initial survey and infrastructure work was not

connected to the longer-term development of west Tavan Tolgoi, which is still expected to involve

firms from China, Russia, Japan, and South Korea. However, analysts see the decision as a clear sign

that the government has its favored partners and that Peabody Energy is now in a stronger position

that others in the consortium.

―There is the political context. It fulfills Mongolia's third-neighbor policy. The U.S. government

wants Peabody here,‖ said Dale Choi, an analyst at London-listed Origo Partners PLC.

Introduction of the foreign investment law, which demands government review of any acquisition of

an entity of strategic importance, is likely to complicate matters further.

―Since Shenhua is a state-owned enterprise, it's very unlikely that they will maintain their 40

percent equity stake in the Tavan Tolgoi project that was discussed last year,‖ said Oscar Mendoza,

managing partner at Mongolia Asset Management, an Ulaanbaatar-based investment advisor group.

―Shenhua is a very strong off-taker, but so was Chalco. Perhaps they will not get more than a 25

percent equity stake in the project, but they can still participate in the off-take because there is no

limit on who you sell your coal to.‖

Source: Reuters

COUGAR PARTNERS WITH HULAAN TO DEVELOP UCG INDUSTRY

Cougar Energy's expanding Asian strategy has become early fruit with a memorandum of

understanding (MoU) reaching with Mongolia-focused Hulaan Coal Corp. for a potential underground

coal gasification (UCG) project.

The MoU allows Cougar Energy Ltd. to undertake due diligence on Hulaan's coal resources and those

under its direct management in Mongolia, and assess their potential for UCG development.

―Once a suitable coal resource is identified, we will negotiate the terms under which a subsequent

UCG project could be developed. We have already discussed a broad outline of such terms and look

forward to a long and prosperous relationship with Hulaan,‖ Cougar Managing Director Rob Neil

said.

Cougar has already undertaken a preliminary review of two coal areas with a combined resource in

excess of 500 million tons of thermal coal.

―Much of this coal is deeper than 150 meters and, subject to further analysis, is likely to be suitable

for UCG,‖ Neil added.

If UCG is found to be a suitable development option, the resulting gas production could be used to

develop both small-and large-scale power projects for either regional use or for transmission to

Ulaanbaatar. Gas can also be converted into compressed synthetic natural gas for domestic use.

―This also has significant environmental benefits as it would replace the current burning of coal,

and help in reducing the current pollution problems around the capital city,‖ Neill said.

Source: Proactive Investors

PROPHECY DWINDLES DOWN SHORT LIST FOR EPC TENDER

Prophecy Power Generation LLC is conducting its final evaluation of three tenders from

engineering, procurement, and construction (EPC) firms to build its proposed 600-megawatt

Chandgana power plant project in Mongolia.

Prophecy Coal Corp. subsidiary Prophecy Power's Chandgana project is one of Mongolia's leading 600

megawatt mine-mouth, thermal power plant projects. In spring 2012, eight EPC firms accessed

Prophecy Power's project data room and conducted project site tours in Mongolia. Prophecy Power

received six tenders by the submission deadline of 1 May in the first round. For the second round in

July, Prophecy Power requested more detailed tenders which resulted in shortlisting three EPC

contractors based on completeness of tenders, construction capability, equipment quality, time for

deployment, and price.

In August Prophecy Power's technical team met with those firms qualifying for the second round.

The team discussed detailed owner technical specifications and requirements, Mongolian customs,

transport and insurance taxes, permits, labor policies, and the project time line. During a meeting

with the short-list for a tender holder, Chief Executive Officer John Lee negotiated financing

proposals. The company hopes to have at least partial financing in place to begin construction in

2013.

Source: Prophecy Coal Corp.

NEWCOM AND PARTNERS NEGOTIATE DETAILS FOR POWER PLANT NO. 5 CONSTRUCTION

Negotiations are underway between Newcom Group, its partners and the government for the

construction of Power Plant No. 5, said Newcom's chief executive.

Chief Executive Officer B. Byambasaikhan said his company and partners will raised USD 1.3 billion

for the project, which would make the project the largest unrelated to mining in Mongolian history.

The two parties are currently working hard to speed up the negotiations process, he said, and the

government has targeted October 2015 for energy production to begin.

Newcom and partners are currently preparing detailed designs for construction as well as an

environmental assessment. Construction could begin as early as March 2013, said Byambasaikhan.

Compared with Power Plant No. 3, the new power plant would generate three times as much energy

while consuming two times less water.

The need for a new power plant comes with increasing demand for energy from the country and its

capital in line with the growing economy. The new power plant would use modern European

technology and standards and would cut down on air pollution.

Source: Udriin Sonin

MOBILE PHONE SERVICE PROVIDERS TO PROVIDE NEW PAY SCHEME

The Office for Fair Competition and Consumer Interest has proposed a new payment method for

phone calls.

The OFCCI mediated negotiations between companies and the Information, Communications

Technology and Post Authority (ICTPA) to have companies offer a payment plan that allows

customers to be charged by the second rather than the minute and provide deferred payments. It

named Mobicom, Unitel, Skytel, and G-Mobile as the parties with which it had reached a consensus

for the plan.

―Four mobile phone service providers will move to a plan for call rates by the second beginning 1

March 2013,‖ said Ts. Jadambaa, chairman of ICTPA. ―Customers can choose from two options

where customers pay by the second or the minute.‖

He added that deferred payment for service would take effect beginning 1 October.

Source: Unuudur

BSB TO GET NEW STORE AND WAREHOUSE

The European Bank for Reconstruction and Development is continuing to support the diversification

of the Mongolian economy with a USD 4 million senior loan and USD 2 million mezzanine loan, one

of the first in the country, to support leading electronic retailer BSB Service.

The proceeds of the senior loan will be used to build a large, modern and specialized retail store in

the Khan Uul District in Ulaanbaatar. The mezzanine loan will be used for inventory financing of

new stores and to finish the construction of a new warehouse. According to the EBRD, BSB Services

offers the widest range of international consumer electronics brands in the country and is the sole

distributor of several global brands.

In Mongolia consumer goods and electronics sales are still lagging behind the rapid gross domestic

product (GDP) growth. The market is expected to continue its growth in the near future, as

improving economic conditions allow the broader population to afford new domestic appliances,

computers, and other equipment.

―We are planning to open a new six-story MegaMall store with an area of 6,000 square meters in a

high density district in Ulaanbaatar city and it will offer worldwide-recognized brand products of

furniture, consumer electronics and computer appliances to our customers,‖ said B. Jargalsaikhan,

general director of BSB Service. ―The new MegaMall store will expand BSB operations to all seven

districts to Ulaanbaatar, while taking advantage of the economy's fast growth for BSB and fulfilling

our goal of cementing our position as Mongolia's top electronics retailer.‖

Source: European Bank for Reconstruction and Development

INSPECTORS CLOSE FOUR SOD MONGOL PETROL STATIONS

City government has closed four Sod Mongol petrol stations upon discovering they lacked permits for

their operations.

The inspections of 51 petrol stations by the Professional Inspection Agency (PIA) included 11 petrol

stations run by Petrovis LLC, 7 by Shunkhlai LLC, 6 by Just Oil LLC,9 by Magnai Trade LLC, 14 by Sod

Mongol Group, two by Badral, one by JM Oil Co., and one by M-Oil Ltd.

The inspections revealed that four petrol stations run by Sod Mongol were operating illegally,

without the necessary permits for land use. The City of Ulaanbaatar charged the company with

violating land-use law and building two petrol stations in a ger district. The city government has

sent a notice that they must vacate those properties.

The inspection also revealed that 17 petrol stations were open without having yet received approval

from a technical commission.

Source: News.mn

NON-EXECUTIVE DIRECTORS RESIGN FROM MMC

Two members of Mongolian Mining Corp.'s (MMC's) board of directors have resigned.

The board announced the resignation of Philip Huber ter Woort and L. Gantumur from their

positions as non-executive directors. Each cited other business engagements requiring more of their

time as the reason for their resignation. Also, both confirmed that there was no disagreement

between the board and them.

Source: Mongolian Mining Corp.

BCM SENDS SECOND BUSINESS MISSION TO LONDON

The Business Council of Mongolia (BCM) held its second business mission to London from 6 to 12

October to introduce investors to business in Mongolia.

Delegates included representative of Uuls Trade, NetCapital, Allens Arthur Robinson, and Technique

and Technological University for a visit to the International Restaurant Trade Fair. The event was

received support from the London Stock Exchange (LSE) Group, Anglo American and

PricewaterhouseCoopers.

During the visit John Grogan of the Mongolian British Chamber of Commerce gave a presentation

entitled ―Doing Business with Mongolia‖ to an audience in London. Other presentations were

delivered by Claire Keast-Butler of Latham & Watkins, I. Ser-Od, vice director of BCM, Jessica

Holdsworth of Jack Brodie Ltd., Cobbetts LLP and Omar Hamid of Exclusive Analysis.

A third mission to London hosted by BCM will be sent in October 2013, coinciding with the 50th

anniversary of diplomatic relations between Mongolia and the United Kingdom.

Source: BCM

KIT DIGITAL GETS BLOOMBERG TV MONGOLIA ON AIR

KIT digital Inc. partnered with Trade and Development Bank of Mongolia LLC (TDB) to launch

Bloomberg TV Mongolia.

The high-definition channel went on the air on 8 October 2012, using a tightly integrated production

and playout platform designed and built by KIT digital. The production team, which includes more

than 30 local journalists trained by Bloomberg, will create five hours of content each week

reflecting the business world in Mongolia and the Asia-Pacific region. The rest of the channel output

will be delivered by Bloomberg's international content.

―This was a project where our integration skills were brought to bear on a typical modern

challenge: the need to create a highly productive, highly flexible environment which could be

operated intuitively by journalists and technicians in a new venture,‖ said Nicole Dixon, managing

director of KIT digital Asia Pacific. ―In a rapidly changing media world, agility is critical if

opportunities are to be seized as they are presented.‖

Work on the project began in April 2012, with a tight timescale of just six months to create the

whole system and complete training and rehearsals for the launch.

Source: KIT digital Inc.

ECONOMY

CASH ALLOWANCES FOR CHILDREN BEGIN THIS WEEK

Minister of Human Development and Social Welfare S. Erdene reported that 800,000 citizens have

applied to 13 commercial banks to receive their financial assistance for children.

The government plans to enact a program to distribute MNT 20,000 each month for every child

under the age of 18. Minister of Finance Ch. Ulaan has been ordered to dispense the funds by 17

October.

Source: Udriin Sonin

PARLIAMENT PROPOSES TAX ON BANK SAVINGS ACCOUNTS

Parliament has proposed to begin taxing savings accounts in banks above MNT 100 million.

Savings in banks in Mongolia total to MNT 4.6 trillion, with 97 percent belonging to only a small

percentage of the population. No matter what the outcome, Parliament has decided it will keep its

savings in U.S. dollars tax free.

Source: Zuunii Medee

PRODUCERS AND FARMERS GROUP SETTLE ON MNT 550 A KILO FOR FLOUR

Representatives from nine flour producers and non-government organization Mongolian Farmers

have signed a memorandum vowing not exceed the price of MNT 550 per kilogram of flour.

The price was determined based on the base price for wheat, operation costs, and international

prices for wheat futures. Producers agreed to buy standard wheat for no less than MNT 280,000

while maintaining a price of MNT 550.

Source: Zuuni Medee

BCM IN THE CLASSROOM

Business Council of Mongolia (BCM) has been pushing forward with its ‗BCM in the Classroom‘ series

since March 2012. Led by BCM‘s Education Working Group, the program provides lectures at

universities to help inspire students and give them direction for their future careers.

Most recently Saha Meyanathan, co-chair of BCM's working group, J. Unenbat of the Corporate

Governance Development Center and a former Central Bank head, and Mandar Jaywant of

Mongolian Opportunities Partners gave a presentation titled ―The International Financial System and

Its Implications in Mongolia‖ to an audience of more than 140 graduate students and teachers at the

Institute of Finance and Economics on 17 October.

I. Ser-Od, vice director of BCM, noted that the lecture was the first at that institution and that BCM

would be pleased to continue its cooperation with a school of such high esteem in Mongolia.

Source: BCM

TRADE FAIR DISPLAYS INNOVATIVE TECHNOLOGY FOR GER LIFE

The latest technology for improved ger life was introduced at a trade fair held at Sukhbaatar Square

this week.

GNT LLC introduced a water heater to suit ―five-wall‖ gers for MNT 330,000. The company offers a

one-year guarantee for the device, which is projected to create an added expense of MNT 30,000 to

MNT 70,000 to electric bills, depending on the size and insulation of the ger. It was first introduced

to the market in 2011 advertising that it would not produce smoke or other toxic inhalants.

Another device from Richcreate Mongolia LLC works by creating a heating system that operates

under the floor was introduced, but costs considerably more at a price between MNT 800,000 and

MNT 1 million. If the device could be produced in Mongolia, it could be sold at a cheaper price, said

the company representative.

Source: Udriin Sonin

NARNII BRIDGE OPENS

A ceremony was held this week for the commissioning of the Narnii Bridge, connecting downtown

Ulaanbaatar with the 19th.

Funding for the construction of the 262-meter-long bridge came from JPY 3.7 billion (USD 46.9

million) in grants from the government of Japan in 2009. Approval for the commissioning of the

bridge came from the Ministry of Roads and Transportation upon the completion of construction.

Commissioning comes in advance of its target date, which was set for 30 November. Technical

approval came early due to fair weather conditions.

The new bridge has four lanes to allow for two directions of traffic and can allow the passage of

heavy machinery. The bridge's construction was led by the Engineering Corp. of Japan (JFE).

Source: News.mn

GOVERNMENT PLANS NEW RAIL LINE TO CUT TRAFFIC

The government will build a railway to ease worsening traffic conditions and air pollution.

Roads and Transportation Minister A. Gansukh said the new Bogd Khan Railway would run along the

foot of Bogd Khan mountain, south of the city, and go through Ulaanbaatar to Tuv Aimag. Unlike the

old railway in the capital, the 170-kilometer line will not affect the already heavy city traffic as it

will pass through the sparsely populated areas of Ulaanbaatar. It is expected to ease traffic

congestion by diverting passengers and cargo from the old railway. Estimates project passengers

will be able to cross the city in only 15 minutes once the line is built.

Ulaanbaatar's population doubled from some 600,000 people in 1989 to more than 1.2 million in

2010, while the number of registered vehicles has increased 4.4 times from 1998, causing severe

traffic congestion and air pollution.

Source: News.mn

FAO, MONGOLIA SIGN COOPERATION AGREEMENTS

The U.N. food agency has signed five cooperation memorandums with Mongolia as the country aims

to become a wheat and livestock production base in the Asia-Pacific region.

Jose Graziano da Silva, Director General of the U.N. Food and Agriculture Organization (FAO), spoke

highly of Mongolia's achievements in farming and animal husbandry during a meeting with Khaltmaa

Battulga, the Mongolian Minister for Industry and Agriculture.

He said the FAO will expand its cooperation with Mongolia and support its efforts to build farms,

improve food production and ensure food safety. Battulga said the Mongolian government has

proposed to improve the quality of agriculture and livestock products for export and turn Mongolian

into a wheat and livestock production base in the Asia Pacific.

Thanks to good weather this year, Mongolia has seen bountiful harvests for its farmers and herders.

The government has said grain and potato production can fully meet domestic needs. Since its third

land reclamation campaign in 2008, Mongolia's grain production has increased for four years

running, and its grain output in 2011 totaled 430,000 tons, making it self-sufficient.

Source: Xinhua

CHARTING THE BUDGET

With a budget of MNT 7 trillion in expenditures projected for 2013, Parliament and the Central Bank

will have to work closely to ensure that the budget meets limitations for budgetary laws to take

effect this year.

The Law on Fiscal Stability and other restrictions on state spending will keep deficit spending to

below 2 percent of gross domestic product this year. The government has based its budget on a

projection of USD 6,628.90 per ton of copper and USD 131.50 for a ton of coal. Yet, a worrisome

global economy could put a damper on these high hopes for a balanced budget. With commodities

prices down, tax revenues to government are also on the decline.

―Income from taxes has started to drop,‖ said B. Erdenbat, a professor at the School of Economics

at the National University of Mongolia. ―Last year 56 percent of tax revenue derived from mining.

This year an estimated 60 percent was planned for collection from this sector. However, this goal

cannot be met.‖

However, the Ministry of Finance has a different view of the situation. With the Oyu Tolgoi copper

and gold mine set to begin commercial production next year and production to ramp up at the

Tavan Tolgoi coal project, the additional production could float the economy.

The government says it has abandoned wasteful social spending, such as its MNT 21,000 monthly

payments, but has planned to give out payments of MNT 20,000 to children under18 years old. A

bond sale of USD 5 billion planned by the government could put even greater pressure on the

government if the government does not plan for it properly.

The best defense the government has is its Fiscal Stability Fund. The Ministry of Finance has

planned to send MNT 103.9 billion to the fund from copper exports alone, with another MNT 66

billion to come from coal.

Source: Mongolian Economy

FORMER PRESIDENT SUPPORTS RESEARCH OF SHALE RESOURCES

Mongolyn Alt LLC (MAK) has established a working group to develop a proposal for policy to support

the study of shale oil in Mongolia. Leading the work group is former President P. Ochirbat.

In the past MAK studied opportunities for shale oil production after building a laboratory. From 1980

to 1990 the government felt the venture would be unprofitable, but given the recent attention the

industry has been given by other countries the government is being asked to now rethink that

decision.

Shale oil extracted in Mongolia reportedly has heat values between 2,000 and 2,500 kilocalories per

kilogram. In addition to shale, the government is interested in studying opportunities for the

country's lignite (brown coal) resources, which can be used for coal-to-liquid (CTL) fuel production.

Given the vast deposits of coal in Mongolia, the government has paid little mind to its lignite and

shale resources, resulting in very little research on them today. The Khut deposit, where MAK has

explored, reportedly holds a unique mixture of coal and shale. MAK has appealed to the government

for assistance, saying that the undertaking would be too large for a single company.

Source: Zuuni Medee

CITIZENS SEE INFLATION GROWING TO 16.2 PERCENT IN THE CAPITAL CITY

Ulaanbaatar citizens feel inflation could grow as high as 16.2 percent in UB, according to data

collected by the Bank of Mongolia.

The projection is derived from surveys encompassing data from 1,004 citizens from 135 khoroos and

9 districts. Of those surveyed, 73.3 percent believed commodity prices will increase by December

2012 compared with 34.7 percent who said they would increase rapidly. Another 26.1 percent of

those surveyed said they expected interest rates for credit to grow too.

N. Zoljargal, President of the Central Bank, said he plans to cap inflation at 8 percent in 2013. Yet

citizens believe it could grow as high as 16.9 percent at the end of 2013.

Source: Unuudur

WHEN ECONOMIC GROWTH IS NOT NECESSARILY A GOOD THING

Rich in minerals, Mongolia's geology has enticed numerous mining companies, which has

transformed the traditionally agriculture-based economy. But while for some these trappings of

mine-funded modernity are gladly received, traditionalists often feel threatened by the loss of

social values, widening poverty gaps, increased materialism and corruption.

There are now growing concerns that the burgeoning mining wealth stays with the government.

There are also regional health and environmental concerns. Mining has been blamed for triggering a

rise in respiratory problems, and for causing disruptions to natural water supplies, which

pastoralists use for animal grazing. The government promises the environmental damage caused by

the mines will be cleaned up once they have been decommissioned. Nevertheless, many residents

do not believe such pledges will result in action.

Mongolia is clearly benefiting from natural resource extractions. However, the nation is prone to

the classic problems of development, which different generations respond to accordingly. Although

the young tend to embrace modernity, older residents often fear materialism and corruption. When

a nation develops, customs and traditions can disappear. Mongolia's varied landscape and extreme

climates collectively fashioned an iconic and unique nomadic lifestyle that has for centuries

characterized the region.

Socio-economic progress threatens to dilute Mongolia's varied landscape and damage its pristine

expanse of wilderness. This loss of traditions could influence the national psyche, which has

typically enabled Mongolians to survive in this challenging land. What seems inevitable is that

these changes will have major repercussions for future generations, especially in this age of

predicted climate change and environmental uncertainties.

Source: Policymic

CHINA'S OBSTACLES TO INVESTMENT IN MONGOLIA

In 2010 Chinese state-owned mining companies began making several ambitious bids for stakes in

Mongolian coal and metals mining operations, reflected Beijing's efforts to offset its demand for

natural resources by gaining control over international supply chains. However multiple failures of

acquisition by state-owned companies in Mongolia reflect a growing concern among recipients of

Chinese investment about the political and geopolitical implications of ceding control of domestic

resources to Chinese state-owned enterprises.

The bids by Aluminum Corp. of China Ltd. (Chalco) failed after five months of contentious

negotiations with Mongolian Parliament and the Mineral Resources Authority (MRA). Chalco is not

the only Chinese mining firm to feel the pinch of Mongolian regulatory politics. In 2011, Shenhua

Group, a state-owned enterprise and the world's largest coal mining company by volume, won a 40

percent stake in the western portion of Tavan Tolgoi. However, the decision was quickly rescinded

for review after it was announced, and some speculate in Chinese media that the company may lose

its entire claim.

Acquiring major stakes in projects such as Tavan Tolgoi or Ovoot Tolgoi is a key part of Beijing's

plan to build integrated ―coal-rail-power‖ hubs that would allow China at least partial control over

every step of the coal supply chain. Naturally this dynamic is unnerving in Ulaanbaatar. While

Mongolia is heavily dependent on Chinese investment and demand, it is also wary of ceding control

of the country's most valuable assets to Beijing. In this context, the law overseeing foreign

investment in strategic sectors is not just motivated by domestic political needs, it is also a logical

first step toward building a regulatory system capable of preventing monopolies.

Regulatory roadblocks aside, Chinese state-owned firms have other footholds in Mongolian coal and

metals. For example, Chalco's parent company, Chinalco, is the largest shareholder in global mining

giant Rio Tinto PLC—the company that currently owns Turquoise Hill Resources Ltd. and, by

extension, SouthGobi Resources Ltd. Ulaanbaatar must avoid alienating Chinese investors, even as

the government seeks to prevent Chinese state-owned enterprises from monopolizing the country's

fledgling mining sector.

Source: Stratfor Global Intelligence

CHINA GUIDES RMB TO HIGHEST LEVEL SINCE '94

China guided the yuan higher against the U.S. dollar to the strongest in almost two decades,

perhaps a conciliatory gesture to Washington from Beijing weeks ahead of the U.S. presidential

election. China is a main source for imported goods in Mongolia, so a change in currency could

affect trade. China has also lobbied Mongolia to hold more of its currency in its reserves.

The 0.2 percent gain Friday also comes as money rushes into China and other emerging markets

following the latest round of U.S. quantitative easing aimed at lowering treasury yields. The

People's Bank of China set the central parity level, the morning daily reference rate around which

the currency can fluctuate each day, at CNY 6.3264 per dollar. The yuan then gained throughout

the day, and finished at 6.2672 per dollar, compared with 6.2770 at the end of Thursday last week.

Throughout the week the yuan has been hovering near the upper limit of its daily trading band,

which is set at 1 percent above or below central parity.

Analysts said the yuan's strength is not out of proportion with the dollar's level compared with other

currencies, which could reflect an attempt by Beijing to pre-empt resurgent U.S. criticisms of its

currency regime ahead of the presidential election. The Obama administration continues to publicly

push China to let its currency appreciate faster, while Republican presidential challenger Mitt

Romney has said he would name China a ―currency manipulator‖ if elected. Some U.S. business and

lawmakers have accused Beijing of keeping the yuan artificially weak to help its exporters.

The outlook for the yuan is mixed as some traders worry a faster pace of gains may pose a risk to

the country's economic growth, which has slowed to its lowest level since the global financial crisis.

A stronger yuan hurts China's key export sector because it makes Chinese goods more expensive

abroad in terms of dollars. Investors are bracing themselves for the release of a set of closely

watched economic indicators from China, ranging from foreign trade to overall economic output in

the coming weeks, starting from Saturday.

Source: Wall Street Journal

CHINA REPORTS SLOWER Q3 GROWTH, BUT SEES SIGNS OF POSSIBLE REVIVAL

New economic data from China on Thursday showed that the world's second-largest economy

expanded at its slowest pace since 2009 during the third quarter of this year—though surprisingly

strong data for the month of September also showed that the deceleration may, for now at least,

have come to an end. China and Mongolia's growth are inherently linked, as the former consumes

nearly all the latter's raw material exports.

The weak global environment has weighed on China's export sector, slowing China's once red-hot

economy. Government policies aimed at combating inflation and soaring property prices in 2010 and

2011 have also slowed growth.

China's economy expanded by 7.4 percent in the third quarter, compared with a year earlier—in line

with analysts' expectations. It was the slowest pace of growth since early 2009, when the global

economy was still reeling from the financial crisis. Separate data from September, however,

appeared to show that the slowdown has been bottoming out, and that an improvement may now

be on the way. Industrial output grew 9.2 percent compared with a year earlier and retail sales

expanded 14.2 percent.

―The data is mostly above consensus and confirms that growth is picking up and that China is not at

risk of hard landing,‖ said Dariusz Kowalczyk, an analyst at Credit Agricole in Hong Kong. ―Clearly,

concerns over continued slowdown can now be put to rest.‖

The data, Kowalczyk said, ―means there is no room, or need, for any further major stimulus,‖ such

as another cut in interest rates. At the same time, China's exports rose 9.9 percent in September,

compared with a year earlier, much more rapidly than analysts had expected, as shipments to the

United States and Southeast Asia improved.

Source: Wall Street Journal

POLITICS

MPS PROPOSE MINING DEVELOPMENT COMMITTEE TO REVIEW OT AGREEMENT

MPs in opposition to the Oyu Tolgoi investment agreement have proposed establishing a temporary

committee for mining development.

Led by MPs S. Ganbaatar, B. Bat Erdene. G. Uyanga, and O. Baasankhuu they handed a proposal

with 29 signatures to Prime Minister N. Altankhuyag. The MPs said that the Oyu Tolgoi contract

needs citizen review and 57 days had passed without any input from citizens. Further, they argued

that debate on the agreement should be postponed since no one from the prime minister's office

had yet seen the Oyu Tolgoi report on reclamation and social development.

MPs also said they worried over the use of groundwater at the site, given the delicate nature of the

Gobi Desert's ecosystem. They said it was unwise to give a mining company use of underground

water resources for 20 years.

Uyanga and Bat-Erdene concluded their statements by saying that the proposal was not meant to

dismiss foreign investors, but instead to defend the equal interests of both parties at stake.

Source: Zuunii Medee

PRESIDENT MAKES COURT APPOINTMENTS

President Ts. Elbegdorj has appointed B. Khukhiisuren and S. Kheemchig as judges to the State

Supreme Court.

The appointments were made as part of a number of appointments made to various courts. O.

Jargalsaikhan and Kh. Chadgaa joined the Ulaanbaatar Court, Ts. Vand-Ochir joined the Inter-Soum

First Court in Arkhangai Aimag, R. Makhai joined the Administrative Court of Bayan-Ulgii, Sarantuya

joined the Soningo-Khairkhan District Court, and Kh. Borolzai joined the Chingeltei District Court.

Following his appointments, Elbegdorj asked that the newly appointed judges to maintain the

people's trust and respect for justice.

Source: News.mn

COURT RULES AGAINST MPP CANDIDATES FOR DISPUTED UVURKHANGAI SEATS

The Khan-Uul District Court has ruled that the two victories by candidates from the Mongolian

People's Party (MPP) in last June's parliamentary elections were indeed false, settling the disputed

results over that election.

Currently 71 of the 76 seats of Parliament are filled with the remaining seats still under contention.

A runoff vote has been set for 21 November for the Bayanzurkh and Nalaikh districts, as none of the

candidates received the minimum 28 percent vote to win. Finally approval for the last seat is

currently under postponement for the Justice Coalition's candidate Ts. Oyunbaatar for unspecified

reasons.

The dispute over the seats representing Uvurkhangai, the 10th electoral district, was settled under

the provision of Resolution No. 148 from the General Election Commission. On 16 October, the

General Election Committee (GEC) informed Parliament Speaker Z. Enkhbold that candidates N.

Tumurkhuu and S. Chinzorig had violated the election law and therefore must forfeit their

parliamentary credentials. In their stead, two members of the Democratic Party (DP) were sworn

into Parliament.

Parliament is soon to have 73 of the 76 seats filled, with local administrations to be filled following

elections also set for 21 November.

Source: Info Mongolia

ENKHBAYAR‟S 4-YEAR SENTENCE CONFIRMED BY COURT OF APPEALS

A court of appeals has confirmed former President N. Enkhbayar's 4-year sentence on counts of

corruption.

Members of the Court of Ulaanbaatar handed the verdict to Enkhbayar who was at the 2nd

Polyclinic of Ulaanbaatar for undisclosed reasons. Enkhbayar's lawyer, S. Narangerel, said a

complaint would be filed with the Supreme Court. Mongolian law allows for complaints to be filed

to the Supreme Court within two weeks after a verdict is made.

Source: Udriin Sonin

ENKHBAYAR'S SISTER WANTED BY INTERPOL

The Anti Corruption Authority (ACA) is currently investigating a number of people related to the

recent conviction of former President N. Enkhbayar, including his sister, Enkhtuya.

A former president and head of the Mongolian People's Revolutionary Party (MPRP), Enkhbayar

received a four-year sentence to prison for corruption, with the decision confirmed in an appeal.

Since Enkhbayar's arrest the ACA has been investigating individuals possibly connected to the

Enkhbayar case. This includes former MP Ts. Batbayar, former chairman of the City of Ulaanbaatar's

Citizens Representative Council T. Bilegt, and former Minister of Education, Culture, and Science N.

Bolormaa.

Bilegt has since escaped to the United States, slowing the investigation down. Bilegt as well as

Enkhbayar‘s sister Enkhtuya and B. Huyag, who is the brother of Deputy Minister for Nature,

Environment and Green Development B. Tulga, are all wanted by Interpol.

Enkhtuya is under investigation for the suspicion of illegally selling the Mongolian flag when she

worked as an exclusive authority to process applications for ships registered under the Mongolian

flag. Enkhtuya is said to be a head of the Blue Sky Tower, for which the ACA is investigating the

MNT 27 million she invested into it.

Source: News.mn

DP LOOKS TO PAST BUDGETS, LEARNS FROM PAST MISTAKES

The Democratic Party (DP) has made investment into the middle class a chief objective in its

monetary policy, as part of a general aim to make the 2013 budget more efficient and wiser than

past years.

The party reported that even spending up to MNT 1.2 trillion on reducing poverty would still leave

80 percent of the population suffering from inflation. Instead, it hopes to help build a strong middle

class as a foundation for the economy. One directive for this aim is to focus on launching the Homes

for 100,000 Families project as soon as possible. It also proposed using identification cards to allow

people to collect their children's financial assistance.

Party members criticized the country‘s heavy dependence on mining, preferring that more focus be

put on agriculture. Review of the 2011 budget showed that much of it was spent wastefully and

inefficiently. For the 2013 budget, the DP plans to debate spending on the state versus investment

for private interests. To ensure that funds are spent properly, the Anti Corruption Authority (ACA) is

currently investigating provincial governors and their administrations.

Source: Udriin Sonin

MPS OPPOSE 2013 BUDGET'S ALLOWANCE FOR URANIUM EXPLORATION

MPs criticized the 2013 budget as a welcome mat for exploration activity for uranium extraction at

a press conference.

MPs Ya. Sodbaatar, S. Ganbaatar, and J. Erdenbat spoke out to criticize exploration set for reserves

in Dundgobi, Dornogobi, and Gobi-Sumber Aimags. They said these desert areas have a weak

ecosystem held together by underground water basins that could be threatened by mining activity

there. Further, the policymakers opposed uranium exploration all together.

―Exploring and using radioactive natural resources is welcomed by the draft budget for 2013, by

government, and by the prime minister,‖ said Sodbaatar. He added, ―Uranium exploration violates

the laws and regulations of Mongolia.‖

Source: News.mn

GOVERNMENT HOPES TO AMEND INVESTMENT AGREEMENTS TO REPLENISH HDF

The government has set a target of an additional MNT 445.8 billion from taxes collected for the

2013 budget via amendments to agreements for deposits of strategic importance.

The government hopes to collect a total of MNT 7.09 billion in tax revenue, using the additional

funds to replace what was lost to social welfare causes such as the MNT 21,000 monthly cash

allowances to Mongolian citizens.

The government has decided that its use of the Human Development Fund (HDF) for social welfare

cash payments has been ineffective. However, it will continue to provide MNT 20,000 to children

up to age 18 from 2012 to 2016.

Source: Zuunii Medee

ACA INVESTIGATES UNIVERSITY OFFICIALS FOR CORRUPTION

A number of high officials at several universities are currently under investigation for suspicion that

they received large donations as bribery for the enrollment of certain students.

The Anti Corruption Authority reported that a large sum of money was placed into the National

University of Mongolia's (NUM's) development fund account at Khan and Khadgalamj banks. The

agency also said that the university spent MNT 50 million illegally on its 70th anniversary

celebration.

In addition to the money concerns, the ACA found the children of university employees were given

special admittance into NUM, and did not have to pay extra fees if their scores fell below the

threshold for entrance exams.

The ACA has vowed to take the appropriate measures against the university officials and report on

it by 25 October.

Source: Udriin Sonin

GOVERNMENT MONITORS HUMAN RIGHTS CONDITIONS IN MINERALS SECTOR

The government has begun taking new approaches to regulate mining activities via inspection and

feedback from local residents.

Three officials from the National Human Rights Commission (NHRC) visited 15 towns in eight

provinces to observe the activities of mining companies and so-called ―ninja‖ miners, the illegal

artisanal miners in search for precious minerals at well-known deposit sites.

One of the conditions for permission to hold a mining license is to provide consensus with

community for the seasonal grazing pastures for herders near mines sites. On these grounds, Tseel

Soum, which resides near the operations of Altain Khudur, has ordered the operations moved 30 to

40 kilometers away following decisions made at a Citizens Representative Council meeting.

However, no decision has been made by the provincial government.

Operations in the area have reportedly exacerbated air and water pollution in addition to land

degradation. Representatives have called the means used for transporting minerals illegal because

of the dust kicked up by trucks traveling on dirt paths rather than paved roads. Also, residents

complain of damage to the land where animals once grazed freely.

At Bumbugur and Bayan Ovoo Soums in Bayankhongor Aimag, gold diggers have joined the

Friendship co-op and have begun to pay taxes to the government.

An event was held from 10 to 11 October focusing on the human rights of workers in the minerals

sector. Partnering organizations for the event include the United Nations Development Program

(UNDP), United Nation's Work Group for Human Rights in Industry and the Swiss Development

Cooperation.

Source: Udriin Sonin

WOMEN'S CONFERENCE CALLS ON WOMEN TO PARTICIPATE IN REFORMS

More than 800 delegates from all across Mongolia discussed women's role in social reforms and ways

to promote their employment during the third women's conference last week.

Prime Minister N. Altankhuyag said during the opening ceremony that his government hoped to see

a more active role in all kinds of reforms by the majority of the nation's female population, adding

their participation was very important. He also said women in Mongolia were a main force in

business and production.

Some women delegates said they would be an active part in government reforms, calling on the

authorities to further improve relevant policies to protect women's and children's rights and

increase job opportunities for women. A representative said although more females than males in

Mongolia accepted higher education, their employment rate was lower than that of the males.

Source: Nzweek

ULAANBAATAR REMOVES LENIN STATUE

Ulaanbaatar has removed its last bronze statue of Vladimir Lenin, denouncing the communist leader

as a ―murderer.‖

The monument was hoisted from its plinth in a park and dropped on the back of a flat-bed lorry at a

ceremony attended by city mayor Bat-Uul Erdene. During the Cold War, Mongolia was effectively a

Soviet satellite state.

Bat-Uul said the statue would be auctioned off with a starting price of about USD 280. In a 10

minute-speech, he denounced Lenin and his fellow communists as ―murderers.‖ Mongolia had

suffered at the hands of the communists but had moved on to create an open society, he said.

For decades Lenin was worshiped by Mongolian schoolchildren as Teacher Lenin. In 1990 the country

abandoned its one-party state system and embraced political and economic reforms.

A crowd of around 300 people gathered to watch the statue being taken down. A few threw old

shoes at it to display their distaste at the former Soviet leader. Many statues of Lenin, who died in

1924, remain standing around Russia and other countries once under Soviet control.

Source: BBC

DINOSAUR TRADER ARRESTED FOR SMUGGLING DINOSAUR BONES

A U.S. citizen described as ―a one-man black market in prehistoric fossils‖ was arrested on

Wednesday on charges of smuggling dinosaur skeletons from Mongolia, authorities said.

The arrest of Eric Prokopi, 38, of Florida, United States comes amid an international custody battle

over a Tyrannosaurus baatar skeleton seized by the U.S. government shortly after it was auctioned

in Manhattan in May for USD 1.05 million.

―Our investigation uncovered a one-man black market in prehistoric fossils,‖ he said.

The dinosaur seizure and subsequent charges against Prokopi were sparked by Mongolia's claim that

the 70-million-year-old skeleton was stolen from the Gobi Desert and should be returned. Mongolia

law prohibits the removal of dinosaur remains for private gain.

The charges against him are punishable by up to 35 years in prison.

The criminal complaint said Prokopi often undervalued the contents of shipments in shipping

documents and mislabeled them as ―fossil specimens‖ from Japan.

According to the complaint, Prokopi told the auction house that handled the sale of the bataar that

efforts by Mongolian President Ts. Elbegdorj to prevent the sale would simply make stopping the

trade in fossils even more difficult.

―If he only wants to take the skeleton and try to put an end to the black market, he will have a

fight and will only drive the black market deeper underground,‖ Prokopi wrote in an email quoted

in the criminal complaint.

Source: Reuters

THE MISUNDERSTOOD “MARAUDER”

A new museum exhibition in the United States challenges Chinggis Khaan's reputation as a ruthless

marauder, making the subtle argument that his empire ushered in a new peace that paved the way

for a more civilized world. The Genghis Khan exhibition, which opened 5 October at Fernbank

Museum of Natural History in Atlanta, Georgia, USA proposes that the Mongolia may have been the

world's first globalists, bent on creating an interconnected world where goods and ideas could flow

between East and West.

―I hate to say something as silly as, 'I think Genghis Khan was a little misunderstood,' but I think he

was a very complex individual and I think a lot of his lasting legacies have been overlooked really in

favor of focusing more on body count and death and destruction,‖ said Bobbi Hohmann, the

museum's curator and director of special collections.

Contrary to other conquerors, Chinggis Khaan (as Genghis is known in Mongolia) allowed religious

freedoms in the areas he ruled, a revolutionary notion in a world where ideology was usually the

driving force behind conquest. Buddhist temples, Christian churches and Islamic mosques could all

be found in Kharakhorum, the great headquarters of the empire formed by formerly nomadic

clansman. But the largest land empire in history also spread more practical innovations: paper

money, post offices, and a messenger pass that was for the empire what a passport is in global

travel today.

Comprised of more than 200 individual objects, including the preserved remains of a Mongolian

woman and her coffin from the 13th century, the exhibit takes a panoramic view of the world in

which Chinggis Khaan rose to power. A cross-section of a full-size Mongolian ger shows how

Temuujin, the great khaan's given name, would have grown up on the steppes. Swords and saddles

show how Mongolians used cavalry to overcome armies that far outnumbered them, while life-size

siege equipment, including a trebuchet and three bow siege crossbows illustrate how new

technologies helped them overtake walled cities.

Source: Global Atlanta

ANNOUNCEMENTS

MONGOLIA INVESTMENT SUMMIT 2012, HONG KONG, OCTOBER 30-31

The Mongolia Investment Summit 2012 will be held from 29 to 30 October at the Four Seasons Hotel

in Hong Kong to once again bring the best of Mongolia's investment opportunities to Asia's leading

investment hub.

Now in its third year, the summit has strongly cemented its position as the largest Mongolian

investment event outside of Ulaanbaatar, providing foreign investors with the most comprehensive

overview of Mongolia's key economic growth sectors all under one roof.

Speakers to the event include Altai Khangai, Chief Executive Officer of the Mongolian Stock

Exchange (MSE), Cameron McRae, President and Chief Executive Officer of Oyu Tolgoi LLC, and

James Passin, Co-founder and Manager of Firebird Mongolia Fund.

BCM is again a Supporting Association for the event. For more information, find a brochure to the

event by logging on to the website: mongoliainvestmentsummit.com.

___________________________________________

MONGOLIA INVESTMENT CONGRESS 2012 IN SHANGHAI, 10 December

Mongolian Investment Congress 2012 will be held in Shanghai, China on 10 December. The event is

presented by BCM along with the Mongolian Stock Exchange and Mongolian National Mining

Association, and INBC Global.

From mining, export infrastructure, and power generation to financial services, energy projects,

property development and more, Mongolian Investment Congress 2012 offers investment and

development opportunities at every turn.

Highlights for topics of discussion include international investment opportunities in Mongolia,

challenges for foreign investors in the mining industry and the coal reserves and resources.

___________________________________________

REGISTER NOW FOR MONGOLIAN MINING DIRECTORY - 2013

Mongolian Mining Directory-2013 which provides information database for Mining companies,

investors, suppliers, service companies, government and non government organizations will be

published for the fourth year to commemorate the 90th anniversary of the Mongolian mining

industry. The MMD is distributed free of charge to international and domestic mining companies,

international conferences and exhibition, embassy offices in Mongolia and foreign countries to

investors.

BCM is a Supporting Organization of the MMD and welcomes Mongolian mining industry participants

who are interested in advertising their products and services in Mongolian Mining Directory-2013.

For more information please visit: www.mining.mn, www.mongolianminingdirectory.mn or call

+976-7011 5590.

___________________________________________

REGISTER FOR BCM‟S MINING SUPPLY CHAIN DATABASE AT NO COST

The new version of BCM‘s Mining Supply Chain Database is ready for use. Following the initiative of

Oyu Tolgoi LLC, the BCM has maintained the Mining supply chain database since March 2009. It is

honor to introduce you to the new version of the database which is totally upgraded as to its

content and use of information technology opportunities.

We are inviting all Mongolian mining suppliers and buyer companies to join the Mining Supply Chain

Database. Please visit here for registration.

If you have any questions regarding the database, please contact Undral at undral@bcmongolia.org

or 317027.

___________________________________________

“MM TODAY” on MNB-TV, Friday‟s at 19:10

BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with

BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is

scheduled from 19:10 to 19:20 tonight. Tune in to watch this program that reports stories from

today‘s BCM NewsWire.

BCM WEBSITES

MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

The new ‗Presentations‘ section on BCM‘s Mongolian website can be reached via bcm.mn/itgeluud.

Several presentations already posted include the World Bank‘s Mongolia Quarterly Economic

Update–June 2012 and 11 speeches from the 2nd Coaltrans forum, held on 23 to 24 May in

Ulaanbaatar.

As a key component of BCM‘s Mongolian website, articles from the ‗News‘ section and the

government website Open-Government.mn are regularly updated.

___________________________________________

ENGLISH WEBSITE 'PRESENTATIONS', 'MONGOLIA REPORTS' AND „MONGOLIAN BUSINESS NEWS‟

On BCM‘s English website, the ―Resources‖ and ―Presentations‖ sections are available to find recent

postings from BCM‘s 24 September monthly meeting and 9 presentations from Discover Mongolia

2012. The ―Mongolia Reports‖ section includes Taxes for Expatriates in Mongolia from

PricewaterhouseCoopers and the 2012 Mongolia Investment Climate Statement by the Economic and

Commercial Section of the U.S. Embassy.

BCM's English website includes the ―Mongolia Business News‖ section where the Open Letter to

Parliament and Government is available for download.

BCM continuously posts news stories and analysis of relevance to Mongolia at ‗Mongolian Business

News‖ before they are all put together each week for Friday's weekly NewsWire.

NewsWire will continue to be issued each Friday, incorporating items already on the home page for

a consolidated account of the week‘s events.

___________________________________________

SOCIAL NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.

Keep up to date on the latest business deals in Mongolia and how the climate for investment is

improving each day with BCM.

Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better

business environment in Mongolia today.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events carried in

the NewsWire with the community.

Hear breaking news and announcements as they happen when you follow BCM on Twitter at

http://twitter.com/#!/bcMongolia.

Of course for news information, interviews, and announcements regarding our organization, visit

the official BCM website at www.bcmongolia.org and www.bcm.mn.

BCM WORKING GROUP MEETINGS:

The BCM Risk Management Working Group met Thursday, October 11, with 12 members attending.

Co-chairs Ganzorig U, UMC, and John Henriksen, Petro Matad, moderated the session.

New members Steven Forster /Wagner Asia Equipment/, Colin Brown /Deloitte Onch/, Tumentsogt

Ts /General Electric/ were welcomed.

Meeting discussion was on the following topics:

- Risk Survey results;

- PRMIA local chapter;

- Risk Forum III in Feb 2013.

Next meeting - Wednesday, October 24, American University of Mongolia meeting room.

___________________________________________

The BCM Environmental Working Group met Thursday, October 18, with 18 members attending.

Chair Amanda Fine, WildLife Conservation Society, moderated the session.

New member Hasar E, /SEC/ LLC/, was welcomed.

Guests: Enkhee Devee /Green Focus Facilitator NGO/, Rebecca Darling/ International Finance

Corporation/.

Speakers and topics were:

-Anthony Wooley, Delgermaa A,/Hogan Lovells/ -Revision of Environmental Laws in Mongolia and

its impact on the mining sector.

-Chimed-Ochir, /WWF Mongolia & Consultant to ADB/ - Introduction to the Development of

Guidelines for Implementation of the new EIA Law.

ECONOMIC INDICATORS

INFLATION

Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

September 30, 2012 *14.8% [source: NSOM]

*Year-over-year (y-o-y), nationwide

Note: 15.1% y-o-y, Ulaanbaatar city, September 30, 2012

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

March 19, 2012 12.75% [source: Mongol Bank]

April 18, 2012 13.25% [source: Mongol bank]

CURRENCY RATES – OCTOBER 18, 2012

Currency Name Currency Rate

US dollar USD 1,383.72

Euro EUR 1,810.81

Japanese yen JPY 17.53

British pound GBP 2,230.21

Hong Kong dollar HKD 178.22

Chinese Yuan CNY 221.48

Russian Ruble RUB 45.00

South Korean won KRW 1.25

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