BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 107, February 26 2010

NEWS HIGHLIGHTS:

Business:

EBRD loan to Leighton to help promote contract mining in Mongolia;

Tavan Tolgoi still open to foreigners;

Boroo mine nearing the end of its mine life;

Centerra says heap leach permit not Mongolia's first priority;

Energy Resources mulls initial public offer, main shareholder says;

Rio selects partners for expanded technology program to cover Oyu Tolgoi;

Oyu Tolgoi feasibility study discussions continue;

Government subsidizes Eznis flights to Bulgan;

MPs unhappy that licenses in Mardai still not canceled;

Battle for Khan Resources more political than commercial;

Two Mongolian vodkas win medals at Moscow exhibition;

Getting the right grass for the golf course in Ulaanbaatar;

Nasser to succeed Argus as BHP Billiton chairperson in March;

Hummer deal collapses at Chinese end.

Economy:

Bitter winter puts Mongolia in bind over mining;

Livestock insurance project to cover all provinces by 2012;

Mongolia seeks the right path to a better future;

Mongolia’s success tied to mining, budget reform;

Official rules out lower coal export prices;

Central Bank official not optimistic about economy;

Railway to charge more for domestic coal transportation;

Selling bonds is unwise and a “romantic dream”;

Uranium demand seen picking up from 2011;

4000 Apartments project gets off the ground;

The Mongolian consumer is king only in name;

Emerging-market consumers outspend American counterparts for the first time;

China takes Fitch to task for downgrading two banks;

Local governments hit by tighter credit in China;

Asia leads the global trend against cheap credit.

Politics:

Several in MPRP eyeing Bayar’s seat;

Korean finance officials to serve as advisors in Mongolia;

President seeks to redefine relations with Parliament;

Trade union head explains step to direct public participation in decision making;

MP defends move to spend money on drafting good laws;

UN program to pay herders for cleaning up carcasses;

No solution for Ulaanbaatar’s refugee problem in sight;

National New Party wants more powers for President;

Ivanhoe helps find archeological treasures at Oyu Tolgoi;

Police major dismissed for saying Zorig’s killer has been found;

Construction of university town to cost USD 345 million;

Mystery crash from space;

Mongolia puts up big show in ITB Berlin;

Filipinos warned against taking domestic jobs in Mongolia;

Mongolians in Canada raise money for herders;

Homogeneous South Korea tested by migrant work force.

*Click on titles above to link to articles.

BCM MONTHLY MEETING RECAP

With membership now standing at 126 entities, some 35% more than the number last year, it was no surprise that attendance at the monthly meeting on February 22 was an almost record 90. After BCM Chairman Laurenz Melchers had welcomed them and called the meeting to order, Executive Director Jim Dwyer introduced the two newest members – B Television, and Master Properties. He also gave a brief report on BCM’s 6 Working Groups which include approximately 70 individual volunteers.

An update on the work of BCM’s Legislative Working Group was provided by its Chairman, Mr. Bayar Budragchaa. The WG’s efforts led by Mr. B. Enkhbat of Eznis Airways presented recommendations for the draft Concession Law to the Parliamentary Working Group headed by MP Ts. Munkh-Orgil. The Law was recently adopted by Parliament to take effect on March 1 and does reflect BCM’s comments and is mostly if not 100% reflective of best international practice.

The evening featured two presentations. In the first, Mr. Ya. Sodbaatar, Director of the State Specialized Inspection Agency (SSIA), detailed the reforms introduced and planned in the agency. The goal is to make its work business-friendly and not obstructive. Parliament will soon consider amendments to the law and regulations that govern the way the agency and its staff work. Reaching the targeted international standards will require ―a total u-turn in the mindset of many who are stuck in the 1930s‖, he said, adding that this is not going to be easy for the 3,000 workers at the agency, 1,700 of them employed as inspectors. However, he was confident that ―positive and tangible results‖ will be achieved by the steps being taken. He called for cooperation from BCM members and urged them for suggestions based on their international expertise and Mongolian experience.

South Gobi sands Executive Director David Bartel gave an overview of the company, mining coal at Ovoot Tolgoi and other deposits. Asserting that they are a ―good corporate citizen‖, Mr. Bartel talked about the jobs the company has created and about the expected multiplier effects of its expansion plans.

For a fuller report of the meeting, please visit BCM website - News, Monthly Meeting Recap.

BUSINESS EBRD LOAN TO LEIGHTON TO HELP PROMOTE CONTRACT MINING IN MONGOLIA

A loan from the European Bank for Reconstruction and Development (EBRD) will help the Mongolian arm of the Australian company Leighton Holdings finance its ability to offer high quality contract mining services. The EBRD is providing financing of up to USD35 million to Leighton Mongolia to finance the company's ability to offer contract mining services to the sponsors of at least two Mongolian projects. Leighton Mongolia is the wholly-owned subsidiary of Leighton Holdings, one of the world's largest contract mining companies, with a track record of applying high environmental, health and safety management. The proposed financing will support Leighton Mongolia's ability to procure state of the art mining equipment needed for efficient mining operations in Mongolia. It also further strengthens the establishment of Leighton in Mongolia as the first international mining contractor in the country. Underground contractor Redpath from Canada is already well established in the country undertaking work for Rio Tinto/Ivanhoe Mines at Oyu Tolgoi. Mr. Hamish Tyrwhitt, Leighton Asia's Managing Director, has said, ―This is another important step towards sustainable large scale mining within Mongolia. This will give Leighton the ability to further increase its already large equipment fleet to support the ramp up of mining.‖ The EBRD started investing in Mongolia in 2006 and has since provided financing totaling EUR131.7

million across a broad spectrum of sectors including financial institutions, food producing and mining. This is the EBRD's fifth investment in the natural resource sector of Mongolia, which has included debt and equity investments in coal mines, oil exploration as well as mining services. Source: www.im-mining.com

TAVAN TOLGOI STILL OPEN TO FOREIGNERS Foreign mining companies are likely to remain involved in developing Mongolia’s huge Tavan Tolgoi coal project, in spite of government statements indicating that it would prefer to keep 100 per cent equity ownership. A spokesman for Prime Minister S. Batbold on Tuesday denied reports that a plan to auction 49 per cent of Tavan Tolgoi to foreign investors had been canceled. ―Plans to privatize Tavan Tolgoi have not been canceled. We will announce a tender and we will choose which investors are suitable for us. The time of the tender has not been decided yet,‖ the spokesman said. Source: www.ft.com

BOROO MINE NEARING THE END OF ITS MINE LIFE

Centerra Gold has reported that its Boroo mine in Mongolia is nearing the end of its mine life and is expected to cease mining by the end of this year. A May 26, 2009, strike at Boroo, followed by the temporary suspension of Boroo's mine operating licenses by Mongolian authorities on June 12, 2009, generated USD4.3 million in standby cost, the company estimated. At the end of last year proven and probable reserves for the Gatsuurt Project, also in Mongolia, increased to 1.2 million ounces of contained gold, while measured and indicated resources are estimated at 480,000 ounces of contained gold. Centerra reported net earnings of USD60.3 million for 2009, down from USD134.8 million for 2008, which included unusual items of a USD37.7 million gain. Proven and probable reserves increased by 2.4 million ounces or 26% to 7.3 million contained ounces of gold. The company forecast that gold production will be in the 640,000 to 700,000 ounces range this year with a total cash cost of USD460 to USD505 per ounce. Boroo/Gatsuurt gold production is forecast to be 120,000 to 140,000 ounces in 2010. Source: Mineweb.com

CENTERRA SAYS HEAP LEACH PERMIT NOT MONGOLIA’S FIRST PRIORITY

Centerra Gold Inc. hopes its Mongolian processing operation will be up and running again shortly, but has no commitments from the Mongolian Government in terms of a timeline. ―We're making progress all the time. We see some positive signs coming out of Mongolia, but as far as the timing, it's difficult to say,‖ Mr. Jeff Parr, Centerra's chief financial officer, has said. ―We're hopeful that it's not going to last much longer.‖ The Toronto-based gold miner has been struggling to clear things up with the Government ever since its operating license for the Boroo mine was suspended in June because of issues such as record keeping, allegations of incorrect land use and improper operating procedures. The mine's main operating license was reinstated in July, but Centerra has not yet received its final operating permit for Boroo's heap leach operation, where cyanide is used to extract gold from ore. Mr. Parr said the heap leach operation - which will also be used to process ore from the Gatsuurt mine once it is fully operational in the third quarter - is not the Government's first priority when it comes to mining projects. ―Compared to some of the other projects they're dealing with, Gatsuurt is not huge, so it's just a little bit slow getting them focused,‖ he said. Although Mr. Parr wouldn't give a timeline as to when he expects to have the heap leach operation restarted, the company is assuming that it will be back online by mid-April. Centerra expects to produce 36,000 ounces of gold from the heap leach in 2010. It is in the process of building a 55-km road between Gatsuurt and Boroo so ore mined from Gatsuurt can be treated at Boroo's milling facility. Boroo is winding down its production as it reaches the end of its mine life, but its operations will be kept busy with ore from the new mine by the third quarter.

Source: www.winnipegfreepress.com

ENERGY RESOURCES MULLS INITIAL PUBLIC OFFER, MAIN SHAREHOLDER SAYS

Energy Resources LLC, a closely held coking coal producer in Mongolia, is considering an initial public offering in Hong Kong or London, its majority shareholder has said. ―It’s just an idea at the moment, but we are looking to raise funds and an overseas listing is a good way to raise the profile of the company,‖ Mr. A. Gankhuyag, managing director of MCS Holding LLC, has said. No bankers

have been hired yet. Energy Resources is doubling coking coal production this year as global demand for the steelmaking ingredient increases with the economic recovery. The company ―knows the ability to raise money domestically is limited so it needs to look abroad to raise funds,‖ said Mr. Masa Igata, chief executive officer of Frontier Securities which advises investors on Mongolia. Energy Resources may need ―at least several hundred million dollars‖ as part of a plan to raise annual output to 10 million metric tons in a few years, Mr. Igata said. Mr. Gankhuyag declined to comment on how much the company is seeking to raise in the possible share sale. The company operates one pit at Ukhaa Khudag in the south of the country, which produced about 1.8 million metric tons of coking coal last year. Financial Director G. Baterdene said output may rise to as much as 4 million tons this year. MCS, described as a Mongolian private consulting company, owns more than half of Energy Resources. Other shareholders include the European Bank for Reconstruction and Development which invested up to USD30 million last year. Source: Bloomberg.com

RIO SELECTS PARTNERS FOR EXPANDED TECHNOLOGY PROGRAM TO COVER OYU TOLGOI

Rio Tinto is planning to expand its next generation technology program, Mine of the Future, to develop new equipment and systems for deep underground mines. Projects such as Oyu Tolgoi would use an underground block cave mining method, which requires construction of significant underground infrastructure prior to ore production. In anticipation of this need, Rio Tinto’s technology and innovation division has been engaged in a long-running development program to improve significantly both the safety and speed of constructing underground infrastructure such as shafts and tunnels. The company has selected Aker Wirth, Atlas Copco and Herrenknecht to work with it on the project. Aker Wirth, an equipment supplier, and Atlas Copco, an industrial solutions provider, would individually work with Rio to develop two new tunneling concepts, which it hoped would lead to fast and cost-effective tunnel creation. Herrenknecht, a mechanized tunneling specialist, would develop a new shaft boring machine, which would combine three separate processes - rock excavation, rock transport and structural support - into a single system. All three new concepts were a result of civil tunneling industry technologies, combined with input from Rio mining experts and contractor partners Redpath and Cementation. Source: www.miningweekly.com

OYU TOLGOI FEASIBILITY STUDY DISCUSSIONS CONTINUE

Discussions on the technical and economic feasibility study on Oyu Tolgoi continued this week, and Mr. Keith Marshall, President and CEO of Oyu Tolgoi LLC, has been asked to clarify within a fortnight points raised by the Professional Council on Minerals. The working group set up by the Standing Committee on Security and Foreign Policy to review the feasibility study met on Monday to discuss with Mr. Marshall some of the issues raised by the Council. Clarification has been sought on four aspects of the feasibility study. Source: Montsame

GOVERNMENT SUBSIDIZES EZNIS FLIGHTS TO BULGAN

The first Eznis Airways flight to Bulgan in Khovd since August 2008 left Ulaanbaatar on February 21. The resumption of service was prompted by concern for the people of Bulgan and two adjacent districts in Khovd -- Altai and Uench. Separated from the rest of the country by the Altai Range, they have been almost marooned since the recent heavy snowfall and blizzards cut off road access to them. The Eznis flights will operate on Thursdays and Sundays. Significantly, for the first time in Mongolia, the Government will be providing direct subsidies to a private airline to cover its operational losses. Passengers will have to pay the full commercial fare between Ulaanbaatar and Khovd but the Khovd-Bulgan sector will cost them MNT60,000 only, with the Government agreeing to recompense Eznis for its loss. Source: www.eznisairways.com

MPs UNHAPPY THAT LICENSES IN MARDAI STILL NOT CANCELED

The Government has reacted quickly to the charge that no action has been taken on an earlier complaint that 14 special licenses on uranium exploration and exploitation had been granted in Mardai in apparent violation of the law. On Wednesday it gave the Director of the Nuclear Energy Authority and officials of Mon-Atom Company 24 hours to submit a report on the matter, explaining how the licenses were issued.

The head of the Standing Committee on Security and Foreign Policy, Mr. Z.Enkhbold, told media on Monday that they had visited the Mardai uranium deposit area in August and discovered the matter. The Committee asked the Government to cancel the licenses and also to take action against the officials who had issued them, but now they find that only two of the licenses have been taken back. The group says the Mineral Resources Authority granted these licenses to Emeelt Mines, Western Prospector, and Adamas Mining, infringing the Mineral Law that clearly says, ―No part of the requested exploration area may overlap with an existing licensed area or the licensed area covered by a pending application.‖ The group feels the special licenses were invalid as they cover an area where exploration had already been made and which is ready to be exploited. Geological prospecting of the area in Dornod province began in 1971, and the uranium deposit was confirmed in 1974. The then Soviet and the Mongolian Governments signed an agreement on exploiting the deposit in late 1981. The concession reverted to Mongolia in 1995 after 510,600 tons of raw uranium had been extracted. The Soviets had constructed a 130-km railroad, some of it underground, to transport the ore. Soon after coming into Mongolian control, 30 kilometers of the railroad was removed and the rest was privatized without permission of Parliament. Source: en.News.mn, Montsame

BATTLE FOR KHAN RESOURCES MORE POLITICAL THAN COMMERCIAL Following unconfirmed reports that Russia’s state-owned AtomRedMetZoloto (ARMZ) is expected to announce that it has increased its bid to offer CAD1.01 per Khan Resources share, 5.2% more than the offer price from China’s state-owned CNNC on February 1, it would appear that the winner of the battle for Khan Resources is more likely to be a political choice rather than commercial. CNNC and AMRZ could keep offering Khan shareholders higher prices and more favorable terms. Whichever bidder wins the Canadian junior, the decisive action on the prospect of the Dornod project is likely to be taken by the Mongolian Government. Source: www.eurasiac.com

TWO MONGOLIAN VODKAS WIN MEDALS AT MOSCOW EXHIBITION

Chinggis Platinum and Golden Wheat, two vodkas produced by the Mongolian company Gem International, won medals at the recently concluded 17th PRODEXPO 2010, the largest annual specialized exhibition in Russia and Eastern Europe of food and beverage. This year’s exhibition was held in Moscow and was jointly organized by the Russian Government and the Russian Chamber of Commerce and Industry. Around 1,900 enterprises from 30 countries displayed their products and services. Source: Onoodor

GETTING THE RIGHT GRASS FOR THE GOLF COURSE IN ULAANBAATAR

Ms. L. Bayasgalan is the First Lady of golf in Mongolia, but she’s never swung a golf club. That would be understandable, of course, considering that there is no golf course in the country. But golf is coming to Mongolia in 2011, and Ms. Bayasgalan — a woman renowned for her botanical skills — will be charged with keeping her nation’s first golf course alive in one of the harshest climates in the world. She was in San Diego recently to attend the Golf Course Superintendents Association of America Education and Golf Industry Show, to see the latest and greatest in growing and maintaining grass. Her education included visits to golf links where she sat in on staff meetings and toured the courses to see how the turf is cared for. The Sky Resort in Ulaanbaatar will feature the country’s first 18-hole golf course later this year. It will double as a ski resort as the golf season will be no more than six months. Snow-making machines might actually have to be used to insulate the grass before the most severe weather hits. The course, which will be around 7,000 yards in length, is situated on a gentle slope that moves down to a river. There’s not one tree, though. ―I’m interested in a new way of growing these new types of grass,‖ she said. She planted patches of 20 different grasses in the summer and watched as the snow arrived and buried them. Come late spring, it will be fairly obvious which variety will be most useful on the golf course. ―The one that is alive,‖ she said. Read more… Ms. Bayasgalan, 48, was not seeking a golf job when the developers of the Sky Resort came calling. She was sought because her family is renowned for its vegetable and flower growing practices. From a young age, she learned about botany from her father, who grew plants as a hobby away

from his job as a chemical scientist and eventually became one of the country’s leading suppliers of vegetables. She said her curiosity is scientific, not sporting.

Source: www.signonsandiego.com

NASSER TO SUCCEED ARGUS AS BHP BILLITON CHAIRPERSON IN MARCH

BHP Billiton chairperson Don Argus would retire at the end of March, giving way to Mr. Jac Nasser, who is currently a non-executive director, the company confirmed on Wednesday. Mr. Argus has been with BHP Billiton for 13 years. ―Argus will be remembered for being instrumental in transforming and truly internationalizing BHP through the merger with Billiton to become BHP Billiton, the world's largest diversified resources dual-listed company,‖ said Mr. Nasser, a former Ford Motor Company executive. He added that Mr. Argus had introduced leading corporate governance practices, an active approach to institutional and retail shareholder engagement, and built a multi-skilled and diversified board supported by a first-class management team. Mr. Argus was chairperson during a time when BHP Billiton increased its market capitalization from USD31 billion in 2001 to USD190 billion today, operating 100 assets in over 25 countries. Source: www.miningweekly.com

HUMMER DEAL COLLAPSES AT CHINESE END General Motors said on Wednesday that it would shut down Hummer, the brand of big sport utility vehicles that became synonymous with the term gas guzzler, after a deal to sell it to a Chinese manufacturer fell apart. The buyer, Sichuan Tengzhong Heavy Industrial Machines, has said in a statement that it withdrew its bid because it was unable to receive approval from the Chinese Government, which was trying to put a new emphasis on limiting China’s dependence on imported oil and protecting the environment. Tight financial markets also hurt the deal. When the commerce ministry did not bless the transaction, the well-capitalized Chinese banks became reluctant to lend money to Tengzhong, even though it tried to set up an overseas subsidiary to buy Hummer. That left Tengzhong trying to borrow money from Western banks that have been curtailing their lending even to established borrowers, much less a little-known company from western China. Read more… A spokesman for Hummer said G.M. had no specific timetable for completing its wind-down, but left open the possibility that G.M. would be open to new bids. G.M. had been trying to sell Hummer for nearly two years, and struck a preliminary deal with Tengzhong in June. The two companies had planned to complete the USD150-million deal by the end of January, then delayed the deadline by a month in the hopes of receiving approval from China. The deal would have made Tengzhong the first Chinese company to sell vehicles in North America, though it planned to keep Hummer’s operations in the United States. Its bid for Hummer was an audacious move, particularly by Chinese standards. The company is privately held, so it did not have the connections that many government-owned enterprises enjoy; by contrast, government agencies own part or all of China’s 10 largest automakers. Source: The New York Times

ECONOMY BITTER WINTER PUTS MONGOLIA IN BIND OVER MINING

As Mongolia cowers under the brutal thrall of its worst winter in decades, questions are being asked as to whether the country should end its reliance on nomadic herders and dig deeper into its mineral reserves instead. Mongolia has been extremely cautious about developing its huge but untapped reserves of coal, copper, gold and uranium, but the Government's hand might now be forced by massive fiscal debt, coupled with a crippling humanitarian problem as nomadic herders, fleeing a freezing winter that is killing their herds, overwhelm the capital. The Government needs cash quickly to relieve the strain on Ulaanbaatar and provide jobs and an education for a million

struggling nomads. The cash can only come from opening up its mining sector to foreign firms. ―You

have to have revenues coming from somewhere and that is going to come from mining. If you do dodgy deals, then yes you will have a problem, but I don't think Mongolia should be holding back,‖ said Mr. Arshad Sayed, Country Representative of the World Bank. Most of Mongolia's resources remain unexplored, particularly in the South Gobi region, but copper reserves from the Oyu Tolgoi deposit alone are second only to Chile. Its inferred uranium reserves are also estimated to be the world's second largest, behind Australia. Yet this underground wealth provides little solace for the millions of refugees who huddle from the cold in Ulaanbaatar's makeshift shanty towns. Read more… The Government is currently in the middle of a long debate about how Mongolia should take advantage of its largely unexplored reserves. The Mongolian economy was badly hit by the financial crisis, and the World Bank expected 2009 growth to have slowed to 2.7 percent, down from 8.9 percent in 2008. The impact of the harsh winter on meat prices is also expected to push inflation up to 8 percent this year, according to IMF forecasts. Analysts predict Mongolia will take over from Angola and Azerbaijan as the fastest growing economy in the world, albeit from a very low base, over the next decade. The IMF is a little more conservative and says it will be the fourth fastest growing economy. Source: Reuters.com

LIVESTOCK INSURANCE PROJECT TO COVER ALL PROVINCES BY 2012

The World Bank has approved a USD10 million scale-up of the Index Based Livestock Insurance Project (IBLIP) in Mongolia that, since 2006, has been providing herders with insurance through partnering with local private insurance companies, to get protection against climate-related losses to livestock. The additional funding was approved following the success of the pilot project which is currently being implemented in four provinces. With the new funding, IBLIP now has the potential to reach all 21 provinces by 2012. ―Since IBLIP began, the technical viability of the insurance has been sufficiently demonstrated for a gradual scale-up to be appropriate. The number of herders purchasing insurance has increased every year and local insurance firms remain committed to selling the product. In 2009, indemnity payments were made to all 2,117 herders who were eligible following livestock losses,‖ Mr. Andrew Goodland, Senior Agriculture Economist and the Task Team Leader, has said. The program is a combination of self-insurance, market based insurance and a social safety net. Herders bear the cost of small losses that do not affect the viability of their business, while larger losses are transferred to the private insurance industry. Only the final layer of catastrophic losses is borne by the Government. World Bank Country Representative Arshad Sayed expressed happiness that the Government of Mongolia has supported this scale-up with an additional USD10 million equivalent credit. IBLIP is co-financed by the Japanese Government and the Swiss Agency for Development and Cooperation. A grant from the Korean Government is also pending.

Source: The World Bank MONGOLIA SEEKS THE RIGHT PATH TO A BETTER FUTURE

For places with natural resources, the future will never come. There will always be a new field to tap, a new workover for a slowing field. In energy, there are the environmentalists, who are against fossil fuels, worried about climate change and pro-future; those in the business, who are pro-drilling, concerned about the here and now, and the sustenance of the industry; and those in places with natural gas or oil (or minerals), who have a different view. For these last, there is no future without fossil fuels. It just doesn’t exist, because it can’t. Many places that rely on oil or gas (or mining) actually have nothing else, or at least not that much. They never did. This does not threaten so much the more populated and sophisticated countries: if you pushed Iran and Iraq hard enough — or even for that matter Russia, Nigeria, or Indonesia — these countries could and would find something else to develop an economy from. For them, green becomes a matter of financial readjustment and inconvenience. But what about the ones without the population, the geography, or the momentum to get something else going? Now it’s Mongolia’s turn to figure out how to handle its mineral resources. The country has gold, copper, uranium and lots of coal. Under-populated and poor, Mongolia has to figure out the age-old resource question: use the money to feed the poor and build an infrastructure now, or save it for the future? The current government is interested in developing the country’s resources and is also determined to keep as much of the money for itself as possible. It recently decided not to auction

the large Tavan Tolgoi coal field, opting to use outside contractors to develop the mine. (Usually developing countries with large deposits, but little technical expertise, offer lucrative concessions to external extraction companies to get them to develop the resource for them.) Read more… ―The 100 percent (Mongolian) ownership option for Tavan Tolgoi is to ensure that we will benefit from value-added production,‖ Prime Minister S. Batbold has explained, adding that the option has been suggested and recommended to the task force responsible. Mongolian officials are also working with the World Bank to weigh a sovereign wealth fund or a variation on the Alaska Permanent Fund Dividend model, to distribute some monies to the poor. The country is overhauling its social welfare system to direct aid only to the poor. It also plans to improve roads and railroads, creating access to new mines and helping herders bring cattle and sheep to market. It is also leveraging the democratic system to build support for policies including greater investment in transportation and a new budget law aimed at curbing the impact of volatile metals prices.

Source: energy.foreignpolicyblogs.com

MONGOLIA’S SUCCESS TIED TO MINING, BUDGET REFORM

Mongolia is seeing its fortunes change as a burgeoning mining sector is putting the country in the driver’s seat of its own development. The Mongolia Economic Forum held earlier this month was a chance for the country to ―discuss and define what the goals are and how to achieve them‖, Prime Minister S. Batbold has said. The Government had thought of the forum to build consensus around defining sustainable economic developmental polices and addressing pressing challenged faced by the country. To this end, one of the main areas the forum focused on was the country’s mining sector, and how, with the coming influx of mining revenue, the state budget would need to be reformed to provide stability and growth. Aware of past failures by other countries suddenly confronted by a largess of wealth, the Mongolian Government has proposed a law that would save surplus mining revenues when prices are high to stabilize the budget when prices fall. At the forum, several NGOs including the World Bank called on the Mongolian Government to stabilize the tax regime and enforce environmental laws, saying the country’s polices were ―not consistent with international practices‖. Calling the forum a place ―to discuss very important issues‖, President Ts. Elbegdorj provided impetus to the discussions by inviting the Peruvian economist Hernando de Soto to deliver a keynote address on the second day of the conference. In the speech, Mr. de Soto laid out what he described as five necessities to achieve economic success: rule of law; trust; respect for nature and man and the rule of law; relating value not only to labor but also to documentation; and political will. Read more… That political will is now seen in the stance of the Prime Minister in calling for the country to retain full ownership of Tavan Tolgoi. ―Contract mining is widely used in the U.S. and Australia, so this should be useful to Mongolia,‖ he has said. He has indicated that his recommendation was still under discussion. Under the arrangement the Prime Minister appears to favor, the Government would bear the cost of developing Tavan Tolgoi and an outside company would do the extraction work. This approach, however, would put a lot of strain on the Government as the high costs involved could be a challenge for Mongolia’s cash-strapped ministries. The Government has targeted USD10 billion to USD15 billion in new mining investment over the next five years, with a priority on building infrastructure, which is seen as a key to stimulating the sector.

Source: www.2point6billion.com/news

OFFICIAL RULES OUT LOWER COAL EXPORT PRICES

Commenting on a journalist’s reference to complaints from private companies that the coal export price is too high, Mr. B.Altsukh, senior specialist at the Fuel Policy Department in the Ministry of Mineral Resources and Energy, has said that this is something peculiar in Mongolia. The mines want to increase the domestic price and decrease that for export. The Ministry of Mineral Resources and Energy and the Ministry of Finance jointly set the minimum export price, basing it mainly on prices in China. This price, inclusive of VAT and transport costs, varies between USD35 and USD40 per ton. Some exporters want the price to be pegged at between USD10 and USD20. Explaining why this does not make sense, Mr. Altsukh says exporters cannot be allowed to undercut one another. A few years ago Tavan Tolgoi coal was sold at USD8 per ton. He advised exporters not to think only about immediate and individual profit, especially as the Chinese importers work very

closely with one another. Favoring the establishment of a spot market for both local and foreign trade, Mr. Altsukh also wanted marketing of coal should be left to professional organizations, and not to producers. Once this is done, opportunities will arise to sell coal not only to China but to other countries, too. Mongolia now exports more coal than it consumes domestically. The State has been promoting exports and offering preferential terms all along. Mr. Altsukh feels it is now time to think about wider national interests. Exporting companies should have accumulated enough capital by now to invest in infrastructure and processing facilities, with or without State collaboration. Source: The Mongolian Mining Journal

CENTRAL BANK OFFICIAL NOT OPTIMISTIC ABOUT ECONOMY

Mr. D.Boldbaatar, Director of the Monetary Policy Research Department at the Central Bank, fears the economy will grow less than expected. The GDP has fallen because of the swine flu followed by the severe winter. The foreign trade deficit is also likely to rise. Inflation has also been rising, but neither of the main triggers -- the heavy snowfall and the heating price increase -- is a permanent factor, so there is hope it will come down. Source: Onoodor

RAILWAY TO CHARGE MORE FOR DOMESTIC COAL TRANSPORTATION Mr. M. Gantulga, Head of the Planning and Economic Department of Ulaanbaatar Railway, has said that the Energy Regulatory Authority has agreed to raise by 25% charges for transportation of coal meant for use in the country. The increase will be effective only after the heating season ends. Coal for export will not be charged more. According to Mr. Gantulga, the existing rates for domestic coal transportation do not cover even 40% of the railway’s cost. Source: Udriin Sonin

SELLING BONDS IS UNWISE AND A “ROMANTIC DREAM”

Reacting sharply to the reported plan to raise USD1.2 billion by selling bonds in international capital markets, Mr. B. Lkhagvajav, Head of the National Soyombo movement, has said the State budget cannot be pledged as security to fulfill the romantic dream of the Minister of Finance. The Government, he said, was taking advantage of the absence of any provision here that restricts how much it can borrow. USD1.2 billion is almost 25% of the country’s GDP and Mongolians will have to keep repaying long after any particular Minister or Prime Minister has left the stage. He hoped Parliament ―will see reason and not endorse the move‖. He also faulted the Government for its ―overdependence on China‖ as the buyer for the coal from Tavan Tolgoi. The total demand for coking coal in Japan, Korea, Taiwan, and India will be around 170 million tons in 2015, several times more than Chinese consumption. Mongolia must not lose sight of the possibilities beyond China and must develop infrastructure accordingly, he said. Source: Zuunii Medee

URANIUM DEMAND SEEN PICKING UP FROM 2011

The demand for uranium is likely to increase significantly from 2011 onwards, as nuclear power is expected to play a more prominent role in the global energy mix. A 1-GW nuclear power station would go on line every month by 2014, uranium developer Toro Energy MD Greg Hall has said. Demand for the nuclear fuel would increase from 2011 onwards, as power suppliers vied for long-term supply contracts. Long-term prices would pick up as demand increased. This was also likely to see some uranium explorers converting their operations from purely exploration to implementing bankable feasibility studies, and putting contracts in place. Source: www.miningweekly.com

4000 APARTMENTS PROJECT GETS OFF THE GROUND

The Apartment Financing Corporation has prepared procedures for taking loans, and for their registration and repayment, for both the general public and government employees, as also a draft contract with government organizations, in connection with the 4000 Apartments project. The general budget governor has permitted apartment loans to be given to 1,391 government employees. So far 805 applications have been received. Of these 620 had completed all the necessary paperwork and more than sixty percent of them have already chosen their apartments. The Finance Ministry will issue MNT 5.5 billion worth Government bonds to finance the program.

Source: Udriin Sonin

THE MONGOLIAN CONSUMER IS KING ONLY IN NAME

Despite a number of laws that gives the impression that the consumer is indeed king in the marketplace, consumer rights do not count for much in Mongolia, says Mr. L. Damdinsuren, Honorary President of the Food Association of Mongolia. People accessing goods and services have severely limited options, and the quality of products continues to be suspect. Instances of food poisoning are common, and there is widespread failure to impose hygiene and nutrition norms. The worst part of this violation, according to him, is that consumers have become inured to it and are no longer shocked by authorities’ failure to impose discipline in the marketplace. Misleading advertisements are published with impunity and promote unfair competition. Source: Zuunii Medee

EMERGING-MARKET CONSUMERS OUTSPEND AMERICAN COUNTERPARTS FOR THE FIRST TIME

The global recession was made in America. The recovery is being made in Asia. This week's headlines well illustrate the striking contrasts: Thailand said its economy expanded at a 15.3% annual rate in the fourth quarter, and Taiwan said it grew at an 18% pace. But Germany said its economy didn't grow at all in the quarter, and the only reason it didn't contract was that German industry managed to boost exports to healthier economies. ―The slump was very synchronized. The recovery? Increasingly less so,‖ says Mr. Olivier Blanchard, chief International Monetary Fund economist. Take a quick tour of the world economic recovery room. None of the rich, mature economies—the U.S., Europe and Japan -- is healthy yet, but the U.S. is doing better than the others. Forecasters at J.P. Morgan Chase, more optimistic than some others, predict that U.S. output of goods and services, its gross domestic product, will be back at prerecession levels by mid-2010. Europe and Japan won't reach that point until well into 2012. Europe still looks ill. The big question hanging over all these economies, despite all these differences: As fiscal stimulus wanes and central banks inch toward the exit from extraordinarily low interest rates, will consumer and business demand revive and sustain the recovery? Wander now to the new wing of the recovery room, the emerging markets of Asia. They're not only out of bed, they're back at work and doing push-ups. China led the way, demonstrating that one advantage of an authoritarian government is that it can inject massive doses of stimulus quickly and order banks to lend. The policy has been so successful that the Chinese central bank now is restraining bank lending to avoid over-stimulating the economy and provoking bubbles in asset markets. Read more… The other countries in the neighborhood are benefiting, offsetting some of the weakness in exports to the U.S. by exporting more to China or drawing more tourists from China. Among Asian economies, those more tightly linked to China—such as Taiwan, Malaysia, Singapore— have shown stronger recent growth. But Asian consumers are doing their part, too. Auto sales in Malaysia in January were up 33% from a year earlier, for instance; India's were up 50%. In contrast, U.S. vehicle sales were up only 6% in January. Indeed, one milestone passed without much notice during the crisis. Emerging-market consumers, more numerous and better off than they were a couple of decades ago, outspent American consumers for the first time in modern history. Emerging-market consumers will account for 34% of global consumption and U.S. consumers 27% this year, J.P. Morgan calculates. Twenty years ago, the shares were 23% and 29%, respectively. ―It's not too much of an exaggeration to say emerging-market consumers did for the world in 2009 what U.S. consumers did in 1998 [during the Asian financial crisis],‖ says an economist there. Asia cannot propel world growth by itself, though. Its economies remain dependent on exports, and that means they, too, are watching, waiting and hoping for a revival of consumer spending and business investment in the mature economies. Source: The Wall Street Journal Asia

CHINA TAKES FITCH TO TASK FOR DOWNGRADING TWO BANKS

A senior Chinese Central Bank official took issue on Monday with Fitch Rating Inc.'s recent credit-rating downgrades of China Merchants Bank Corp. and China Citic Bank Corp., and said the operations of all Chinese banks are sound, despite the global financial crisis.

It is not unusual for China to fight back on such a research note. In May 2006, Ernst & Young LLP received a sharp rebuke from Beijing for the auditing firm's estimate of the size of bad loans in China. Four days after China lashed out against the report, Ernst & Young retracted its opinion and made an apology. But in a departure from that time, Mr. Xuan Changneng, head of the Financial Stability Bureau of the People's Bank of China, acknowledged that China's lending spree last year exposed domestic banks to huge credit risk. The downgrades have had little effect on capital markets in China, but they highlighted growing concerns about the long-term health of the country's banking system following extraordinary credit growth in 2009. Chinese banks extended a record USD1.406 trillion in new yuan loans last year, nearly double the amount in 2008. On February 2, Fitch lowered the ratings of the two banks to D, which signifies ―weaknesses of internal and/or external origin‖, from C/D. It was the first time in more than six years that Fitch had downgraded a Chinese bank. The company cited an aggressive increase in lending by the two banks in the January-September period last year, as well as the subsequent erosion of the amount of capital they hold against each loan. Read more… ―We hope major rating agencies, including Fitch, make fair judgments on China's financial institutions based on objective criteria,‖ Mr. Xuan said in a question-and-answer interview published by the PBOC-backed Financial News. ―Chinese banks have successfully withstood the impact of the global financial crisis and kept a solid trend of development. Compared to their global peers, Chinese banks maintain higher capital-adequacy ratios and higher quality of capital,‖ he said. Source: The Wall Street Journal Asia

LOCAL GOVERNMENTS HIT BY TIGHTER CREDIT IN CHINA

China's local governments, which ran up huge debts during the record-breaking lending spree of the past year, are now feeling the pinch as authorities in Beijing tighten credit. Off-balance-sheet borrowing by cities, counties and provinces helped finance a wave of public-works construction last year that contributed to the nation's growth. Now regulators in Beijing, worried that local governments won't be able to pay back all their loans, are increasing their scrutiny of this kind of debt. That's likely to constrain the number of infrastructure projects that local governments launch this year, meaning a smaller boost to the economy as the nation's stimulus program enters its second year. The lion's share of that stimulus consists not of government funding but enormous lending by state banks. Estimates of the total debt accumulated by investment vehicles set up by local governments range from around USD878 billion, widely cited in the Chinese media, to almost double that as calculated by a U.S. professor. Those sums—on the same order of magnitude as all the official debt of China's central government—have drawn high-level concern. Read more… The Shanghai Securities News reported Wednesday, citing unnamed sources, that banks had been ordered to stop issuing new loans to investment vehicles that are backed only by local governments' future revenue and have no registered capital. Although local governments in China are generally prohibited from going into debt, most manage to circumvent the law by setting up their own companies to do the borrowing. Supported by land holdings and the promises of officials, such firms found plenty of obliging banks during the recent lending spree. And with most tax revenue going to central government coffers in Beijing, local agencies had no other way of paying for the new bridges and dams called for in the stimulus. Local governments' plans for the year appear to have factored in a tighter fundraising environment. Of the 28 provinces that announced a formal target for investment growth this year, 26 are aiming for lower growth in 2010 than in 2009; the remaining two want to keep growth steady. On average, the provinces are targeting an increase in investment for 2010 that is 11 percentage points below what they achieved in 2009. The central government will ultimately have to pick up the tab for any debts the local governments can't sort out themselves. Source: The Wall Street Journal Asia

ASIA LEADS THE GLOBAL TREND AGAINST CHEAP CREDIT

The U.S. Federal Reserve kick-started its cautious exit from unprecedented emergency lending measures last week — but the process has been going on for months in the Asia-Pacific region,

underscoring the two-speed path of the global recovery. Countries from Australia to China have been leading the global march away from easy credit as their economies rebound strongly, while Europe and the USA are still trying to find a solid footing. ―The historic shift in the center of economic gravity to the Asian region is continuing, and, if anything, it has been highlighted by the different performances during the crisis and initial recovery,‖ Mr. Glenn Stevens, the governor of Australia’s central bank, has said. Last October, Australia became the first major economy to start raising the cost of borrowing. At that time, higher lending rates were still out of the question in the USA and Europe. The bank has now raised its key cash rate a total of three times, by three-quarters of a percentage point, to 3.75 percent. And Mr. Stevens has signaled that more moves are on the way. In China, where growth has once again reached breakneck levels and inflation is becoming a worry, the authorities have deployed a different tool to cool an economy that some believe may be in a bubble. Rather than raise outright interest rates, the country’s central bank has instructed state-owned banks to set aside a larger portion of their reserves — a move that limits the amount they can lend to consumers and businesses. India, which likewise avoided the banking collapses that beset the Western world, also has deployed the cash reserve ratio tool, raising the requirement for banks in late January. Read more… Several other countries in the region are widely expected to start nudging up the cost of borrowing again in coming months — albeit carefully. South Korea, for example, earlier this month kept its benchmark interest rate at 2 percent for the 12th successive month, but the governor of the country’s central bank has said that a rate increase was likely not far off. Japan remains the odd man out in Asia. Unlike the region’s fast-growing emerging economies, Japan faces anemic growth this year — meaning that the Bank of Japan is widely expected to keep interest rates at their current ultra-low levels for the foreseeable future. Source: The New York Times

POLITICS SEVERAL IN MPRP EYEING BAYAR’S SEAT There is no confirmation, but the MPRP is likely to hold its conference on March 20 where a successor to Mr. S.Bayar as party chairman is also likely to be chosen. MPRP Secretary General U.Khurelsukh has gone to the USA, apparently to discuss with the ailing party chairman the rising demands in the party for a change in leadership. The former Prime Minister who has retained his party post has made no political statement in recent days except to say that the coalition government must run its full course. However, in his absence, a party conference, even if it does not dismiss him, is quite likely to decide against the coalition. The search for a new party leader has already begun. The current Prime Minister, Mr. S.Batbold, stands the best chance, as traditionally the two posts have always been held by the same person. An exception was made in the present case as the resignation of Mr. Bayar as Prime Minister was so much of a shock for the party that its members accepted his decision to retain the chairmanship. With the passage of time, they have begun to question the wisdom of the decision. However, Mr. Batbold is unlikely to challenge Mr. Bayar if the latter decides to carry on. In any case, he has his hands full reforming the way the Government works, developing the financial market, beginning work on Tavan Tolgoi, and overhauling the higher education system. Among those eyeing the party chairmanship are Deputy Prime Minister M.Enkhbold, Minister for Internal Affairs Ts.Nyamdorj, ex-president N.Enkhbayar and Secretary General U.Khurelsukh. Read more… Mr. Enkhbold has little support within the party generally but he has his own men in key places and has the financial resources to run a successful campaign. Mr. Khurelsukh has been quite active in recent weeks and has a strong following among workers at the middle and lower levels of the party. His rise may presage a return to the pre-1990 days of the party. Recent setbacks are believed to have dimmed Mr. Enkhbayar’s chances but he has not formally said anything either way. Mr. Nyamdorj is believed to be keen to have a try. A new name that is making the rounds is that of U.Enkhtuvshin, MP and head of the Standing Committee on Government Organization. His chances are rated to be good as he is a former Secretary General of the party, and a leader of its Tradition-Reform-Democracy-Justice wing. He may also be acceptable to other powerful factions as he gained access to classified information when he led the working group to investigate the role of State organizations during the July 1 incidents. He is thus one of the few people who know the truth of what former president

N.Enkhbayar and former Prime Minister S.Bayar did at the time. He may end up as the choice because he knows secrets that must not be revealed. Source: Ardiin Erkh

KOREAN FINANCE OFFICIALS TO SERVE AS ADVISORS IN MONGOLIA

Two top Korean public servants will work in Mongolia for a year as financial advisors to the country, a move intended to help create stronger ties between the nations. Mr. Koh Young-kwon, director of the Ministry of Strategy and Finance, is already in Ulaanbaatar to serve as adviser to Finance Minister S. Bayartsogt. Mr. Lee Byung-rae, director at the Financial Services Commission, is due to arrive next month, pending final approval from the Mongolian Government, to act as advisor to Central Bank Governor L. Purevdorj. The two officials are being sent to Mongolia as World Bank consultants under a USD500,000 program to help the country modify and strengthen its financial systems. Mongolia has received financing from the International Monetary Fund, much as South Korea did more than a decade ago. Mongolia has a fledgling financial industry that includes 16 banks. However, due to the global economic crisis, many of its financial companies are hanging by a thread, similar to the situation South Korea faced during the Asian financial crisis in 1997 and 1998. ―If the opportunity presents itself, I will contribute to Mongolia’s economic recovery by using advice learned from our past experience,‖ Mr. Lee said. Read more… Early last year, Mongolia asked South Korea for a USD100-million loan to help it ride through the economic turbulence. South Korea, though, was suffering from the global downturn as well and felt it wasn’t in a position to help other ailing countries. ―By sending Korean officials to Mongolia, it feels as though we are giving some help that we couldn’t provide before,‖ said an official in Seoul who requested anonymity. Source: JoongAng Daily

PRESIDENT SEEKS TO REDEFINE RELATIONS WITH PARLIAMENT

Presidential Adviser G.Ganzorig has said a draft law initiated by the President seeking to amend procedures of Parliament meetings has the wider goal of clarifying how the President can suggest amendments and how these are to be discussed by the Standing Committees. It also indicates how the President or his representatives will explain their suggestions before different forums that discuss the draft. As such, the draft sets out to redefine the relationship between the President and his office and Parliament. Source: en.News.mn

TRADE UNION HEAD EXPLAINS STEP TO DIRECT PUBLIC PARTICIPATION IN DECISION MAKING

A memorandum recently signed between the Parliamentary Standing Committee on the Budget and the Confederation of Mongolian Trade Unions (CMTU) is likely to have long-term and far-reaching significance, according to Mr. S.Ganbaatar, CMTU President. It allows direct popular involvement in debates on how mining revenues are to be spent, and also in deciding and monitoring how allocations in State and local budgets are actually spent. It gives self-governing bodies at all levels, as well as representatives from education, health care, and mining sectors, the responsibility and the authority to control relevant budget expenditures. For example, he said, residents of a soum should gather once in two weeks or once in month to discuss in detail how money in their budget has been spent and also how they want to spend what is left. Since financing usually attracts much attention, everybody will actively participate in such meetings. ―Where is the money we paid in taxes, what is it being spent on?‖ they will ask. If the soum governor goes to the province center twice in a month, they will ask him why he went and what he achieved, because the expenses for his trips were met with tax payers’ money. To make it easy for people to participate effectively in this process, the CMTU will train trade unions at all levels on how to analyze budgets and how to monitor and track expenditures. The goal is not to put undue pressure on Governors or Ministers, but to make them more alert and responsive. Local independent experts will be roped in to act as facilitators and arbiters. Read more… He also urged greater decentralization. ―Local authorities must be given the power to take decisions locally, and bear the responsibility for local affairs. There cannot be real self-government if the purse strings are held centrally,‖ the MCTU head said. No Minister or senior official can visit all soums to check things for himself and solve local problems, which will have local characteristics and so require individual evaluation.

Regretting the present practice of ―using big words and large figures that not all people understand well‖, when mining and the state budget are discussed, he said that is why they remain abstractions and ―are left to be decided by smarter people‖. This is also why there is no active popular participation in the decision-making process. ―Our economists and politicians are also used to speaking in a manner that makes everything look complex. Maybe they do not understand things well themselves, but they also do this on purpose, to deliberately confuse people. If people do not understand what is going on, what the rationale behind any decision is, they have the right to ask questions and seek clarifications. Decision makers have a mandatory obligation to explain their actions and logic,‖ Mr. Ganbaatar said. Source: The Mongolian Mining Journal

MP DEFENDS MOVE TO SPEND MONEY ON DRAFTING GOOD LAWS

Mr. J.Sukhbaatar, a lawyer-MP, has defended the recent move to give MNT20 million to MPs to help them prepare better draft laws with professional help, especially from those with legal training, saying that taxpayers’ money cannot be said to have been wasted if it is used to achieve what will ultimately benefit them. Saying that voters often complain that laws passed by Parliament do not meet the conditions of real life, he admitted that drafting is often sloppy because an MP cannot be expected to have the special skills and qualifications that are needed. Nor can he afford the time needed for thorough research. Whether a draft law is submitted by the President, an MP or the Government in the collective, professional help is a must. This help does not come free and the MNT 20 million will be spent on good grounds. Asked how the work has been done so far without money, Mr. Sukhbaatar said a few wealthy MPs have always hired lawyers, while some others asked for help from volunteers. Work on a good law, prepared with assistance from the best professionals, will be an asset to the nation and may require more than MNT 20 million. Asserting that everybody will act responsibly and no MP will claim money to prepare an indifferent draft, he said the country has fewer than 50 professionals who can draft good laws and they are the ones whose help will be sought. ―There may be MPs who will not bother if the new move gets derailed but there are also others who need this monetary help to perform better,‖ he said. Source: Ardiin Erkh

UN PROGRAM TO PAY HERDERS FOR CLEANING UP CARCASSES

Extreme cold in Mongolia has killed so much livestock that the United Nations is starting a program to pay herders to clean and collect the carcasses. More than 2.7 million livestock have already died and another 3 million carcasses are expected by June. The UN Development Program now proposes a cash-for-work program aimed at producing income for herders whose livelihoods have disappeared due to the weather. Concern is also high for the risk of disease posed by piles of rotting dead animals. Once melting of the snow starts, this poses the threat of the spread of diseases such as anthrax and salmonella, infection and soil pollution. The Government has asked various UN agencies for USD4 million to help it clean up the carcasses. ―While immediate needs of food, shelter, heating and health care must be met, this approach also helps herders to feed their families during the Zud,‖ said Mr. Akbar Usmani, a UNDP representative in Mongolia. ―Livestock is the cornerstone of existence for so many Mongolians and many people have lost all their direct income and food source.‖

Source: news.bbc.co.uk

NO SOLUTION FOR ULAANBAATAR’S REFUGEE PROBLEM Some 800 years ago, Mongolia's nomadic herdsmen were surging across the steppe and conquering China, Tibet and much of central Asia. Today, most of their descendants are at the mercy of the hostile Mongolian weather or crammed in Ulaanbaatar, where they struggle to make a living. The country’s underground wealth provides little solace for the millions of refugees who huddle from the cold in the capital’s makeshift shanty towns, stuffing rudimentary stoves with coal and wood or anything else that burns, and casting the city in a sulphurous fog. Ulaanbaatar's refugee problem began after the collapse of the Soviet Union, when herders facing new Russian export restrictions began to flee the harsh pastures and erect gers on the hills that encircled the capital. Now the collective farms have disappeared, herds are more dispersed and the Soviet-era supply chains have broken down, forcing herders in far-flung regions to rely on middlemen to sell their meat. When the bad weather comes, those middlemen don't arrive. Not everybody has found a permanent home in the city. Thousands of orphans and vagrants descend

through manholes into the capital's crumbling Soviet-era hot-water system each winter to seek refuge from the bitter cold. They are often pelted with stones by city regulators trying to push them out of the underground labyrinth. The Prime Minister has admitted that the Government does not yet have the means to deal with the winter refugees, or with the thousands arriving at the ger districts to find work. ―They can stay, but to get registration and social benefits, they need help from the authorities and that needs to be based on our capacity,‖ he said. Read more… As Mongolia tries to forge ahead with efforts to convert its vast underground wealth into tangible gains, aid workers suggest many nomads are the victims of the laissez-faire economics that dominate the country's solidly business-oriented parliament. In the 1990s, herders were encouraged to apply for cheap loans to expand their herds, but few had the wherewithal or experience to sustain those herds through the brutal winters, leaving the country's banks with a mountain of bad debt. In addition, the marginal land could not sustain the expanding livestock. This was especially the case when soaring cashmere prices encouraged nomads to breed more goats, which have long been the scourge of sustainable agriculture in poverty-stricken farmland throughout Africa and Central Asia as goats eat through crops and leave grassland barren. Ms. Rana Flowers, UNICEF's representative in Mongolia, said the Government might need to consider more proactive measures. ―They have allowed herds to increase in an uncontrolled way, and unless they are prepared to deal with it, they will face a dzud every year,‖ she said. Experts say herds have increased by half in the last two decades, and Mongolia's barely fertile land can no longer feed them. With fodder supplies already hit by a summer drought, large numbers of animals are now starving. Ms. Flowers feels large-scale mining projects could create the employment and housing for many displaced nomads. But this would require a significant lifestyle change and would take a long time to develop. ―There are probably some tough decisions to be made about regrouping the population, and we might see it happening around the mining companies, with populations moving in the hope that employment will emerge,‖ she said. Source: Reuters.com

NATIONAL NEW PARTY WANTS MORE POWERS FOR PRESIDENT The National New Party, which does not have any representation in Parliament, wants to replace the present Constitution with one it has prepared, with emphasis on protection of national interests over allowing leaders to further their own agendas. It also wants Parliament to have two chambers, each acting as a check on the other. The party’s leader, Ts. Tsolmon, told media it was time to clearly define the role and the responsibilities of the President in the Mongolian political system. It does not prescribe a Presidential form of government, but favors more executive power and authority to be vested in the President. The President will have control over foreign relations and national security, whereas the Prime Minister under him will look after domestic issues. Parliament members will be barred from holding any post in the government. Mr. Tsolmon will now submit the proposed new constitution to be debated following well-set procedures. He hopes it will be approved and adopted but was ―apprehensive that foreign and domestic oligarchs will stand against it‖. The people must unite ―if they are not to be swallowed by the oligarchs who have sprung up in the past 20 years and who will never allow a fair election, as that is certain to go against them‖, he said. In a statement after its recent 10th conference, the party has said, ―Officials are corrupt and enjoy a foreign lifestyle, while ordinary people are burdened with debts, and are short of food, clothing, firewood and housing. They also have to bear the burden of 76 MPs. People want to live like human beings. They want new policies, a new life, new laws, a new government and a new future. Let’s be the true owners of our land. The National New Party is calling on the people to stand up for a national revolution.‖ Source: Onoodor, Ardiin Erkh IVANHOE HELPS FIND ARCHEOLOGICAL TREASURES AT OYU TOLGOI

Defying concerns that the interests and priorities of archeologists and miners working in the same area are likely to clash, cooperation between the Archeological Institute of the Academy of Science and Ivanhoe Mines in Oyu Tolgoi has been a happy experience for both. Mr. B. Gunchinsuren, Secretary of the Institute, has said the cooperation began in 2001, and some items already found indicate that copper was being extracted on Chandmani mountain as early as the Bronze Age. These

include stone hammers and other implements. Around 300 tombs have also been found. These are unique in that the bodies are placed face down, with big stones put on their head, feet, and waist. The present hypothesis is that this was done to ensure that the souls of the dead did not return from the earth. Mr. Ch. Amartuvshin of the Institute added that Ivanhoe Mines has been very supportive of all archeological work. That all the names of places – Oyu Tolgoi, Oyut Ulaan, Oyut, Zest, Zelt, Khurel Unegt, etc. – indicate the presence of minerals clearly shows that a pre-nomadic culture once thrived there. He hoped with the beginning of proper extraction, more artifacts will be found. Source: Undesnii Shuudan

POLICE MAJOR DISMISSED FOR SAYING ZORIG’S KILLER HAS BEEN FOUND

A police major has been dismissed from service for giving a newspaper the totally wrong information that the murderer 12 years ago of S.Zorig, one of the leaders of the democratic revolution, has finally been found. When the President read the news, published early in January, he wanted more information and then it was discovered that neither the police director nor the Minister for Internal Affairs knew anything about it. The major has worked for 25 years and was on the verge of retirement. Source: en.News.mn

CONSTRUCTION OF UNIVERSITY TOWN TO COST USD345 MILLION

Prime Minister S.Batbold yesterday met with ministers and officials to discuss their report on the establishment of a university town outside the city in order to reduce the population pressure on Ulaanbaatar. The report identifies Buyant-Ukhaa in Khan-Uul district and Urgakh Naran in Bayanzurkh district as the best locations for the proposed complex. USD300 million is needed for construction of buildings, and USD45 million more for the engineering work. The campus will have dormitories and a swimming pool. The Prime Minister said a final decision will be taken after further review of the plan and the work must proceed step by step. The Government will also have to decide whether all this will be financed by the budget or by taking a long term loan. Source: en.News.mn

MYSTERY CRASH FROM SPACE

While Mongolian media report that one round steel object, with a 7.5-meter diameter and with the number 02728 on it, fell from the sky in Buren of Tuv province on February 19 and that it is most possibly a dead satellite, a report in the Mutual UFO Network (MUFON) witness database says that the number of objects that crashed was actually two. One weighed 10 kg, while the second larger object weighed approximately 2 tons. UFOers are having a field day, calling the image that accompanied the report a "leaked UFO crash" picture. But the object looks suspiciously like a rocket or jet engine, or perhaps a rocket nose cone. Source: en.News.mn, io9

MONGOLIA PUTS UP BIG SHOW IN ITB BERLIN

A large number of exhibitors from the central and inner Asian region attended last week’s ITB Berlin which drew together people working in the travel industry and people who want to catch up on the most beautiful travel destinations. The combination of trade exhibition, public exhibition and the biggest professional convention worldwide attracted tens of thousands of visitors, exhibitors and media representatives. This year was the 30th anniversary of the International Tourism Exchange (ITB). Exhibitors from Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan offered their varied range of products and attractions under one roof. Mongolia emphasized the uniqueness of the nomads of the steppes and their fascinating culture. Visitors understood how mystical traditions and an untouched natural world combine to create a breath-taking experience, and were made aware of the traditional hospitality of a proud people. On the Active and Adventure Tours stand visitors saw for themselves a genuine yurt, giving them an authentic impression of the everyday life of the nomads. Source: www.ftnews.com

FILIPINOS WARNED AGAINST TAKING DOMESTIC JOBS IN MONGOLIA

The country’s Department of Foreign Affairs has warned Filipinos planning to work abroad against accepting job offers for domestic helpers in China and Mongolia, as it would be unlawful to work as

one in both countries. Philippine Ambassador to Beijing Francisco L. Benedicto said in a dispatch to the DFA that China’s and Mongolia’s border control and immigration authorities were stepping up their campaign to apprehend illegal workers and immigrants. ―Filipinos who are promised jobs as domestic helpers in China and Mongolia are always in danger of being arrested because foreign nationals are not allowed to work in that capacity in China and Mongolia,‖ he said. Mr. Benedicto said that illegal recruiters continued to victimize foreign job seekers, which resulted in the increasing number of foreigners coming and staying in China and Mongolia with inappropriate visa or working permits. ―Our kababayans have been victimized by unscrupulous recruiters in both countries,‖ the ambassador said. Source: Philippine Daily Inquirer

MONGOLIANS IN CANADA RAISE MONEY FOR HERDERS

Mongolian residents in Calgary in Canada have raised MNT1 million to help dzud-affected herders. They handed over the money to Ambassador T. Zalaa-Uul when he visited them last week to discuss, among other things, extraction of natural resources in Mongolia, dual citizenship, and allocation of money from the Human Development Fund. Source: www.mfat.gov.mn

HOMOGENEOUS SOUTH KOREA TESTED BY MIGRANT WORK FORCE

With the lowest birth-rate in the developed world and an aging population, South Korea needs foreign workers to keep its economy going, but this has caused rifts in the homogeneous state that has yet to decide if it can trust its future to foreigners. Critics say the biggest problem is the central government, which treats migrants as temporary help and has not prepared for the permanent presence of a foreign work force to keep the country competitive. There have been numerous complaints from foreign workers, a scathing report from human rights group Amnesty International about exploitation and government crackdowns on foreign workers, but not on employers who stray from the system. The biggest winners seem to be the factories who can hire labor at cut-rate wages for what are known as 3-D jobs -- short for dangerous, dirty and difficult. ―Thousands of migrant workers find themselves at the mercy of employers and the authorities who mistreat them knowing their victims have few legal rights and are unable to access justice or seek compensation for the abuse,‖ Amnesty International said in a report issued last year. The migrant workers typically receive salaries that are far better than what they would get paid at home. Their main complaints are less about their wages than about employers taking advantage of their vulnerability and being unable to seek remedies in a system that they say is rigged to favor Korean employers. South Korea allowed in 34,000 migrant workers last year, with half being ethnic Koreans living abroad and the others from countries with which South Korea has reached agreements on guest labor. Information provided by the ministry to Korean firms on the various ethnic groups they hire could accentuate racial bias. The ministry tells employers that Mongolians are ―very independent, simple and tend to be relaxed‖, and ―they have a tendency to drink more than other laborers from other regions‖. Source: Reuters.com

NEW MONGOLIAN LAWS

The following were published in a recent weekly Government bulletin. Unless otherwise decided by Parliament, they take effect (10) days after publication.

Date Laws 2.19.2010 Addendum to Law on Military force Law on Banking (revised version) Annulment of Law on Banking Amendments to Law on Central Bank /Mongol Bank/

Please visit BCM’s website, Legislative Working Group, for a summary of new Mongolian laws. BCM members who wish complete versions of the laws and regulations in Mongolian language are welcome to call or email the BCM office (332345; info@bcmongolia.org).

ANNOUNCEMENTS

MONGOLIA’S 1st RISK MANAGEMENT CONFERENCE, MARCH 3, KHAN BANK THEATER

Prime General Insurance has initiated Mongolia’s first ever ―Risk Management Conference‖ (RMC) at the Khan Bank Theater on March 3 from 9 AM to 3 PM. The RMC attendees will be chosen on an invitation-only basis with a limited number of guests from applications to this event from Mongolia’s top corporations. The RMC is an educational forum where business leaders will discuss policies and strategies to manage risk exposure and increase yields. Speakers include Philippe Piette, Partner, Institutional Risk Analysis, New York and Advisor to Al Rashi & Associates of Dubai and Samba Financial Group of London and Ryad; Prof. Pierre Bultez, Professor in Finance, Maastricht School of Management and Chairman of the Executive Committee of AXA Group Luxembourg; Ganzorig.Ulziibayar, CEO of Prime General Insurance and Founder/President of Financial Markets Association; Prof. Tomas Balco, Professor at KIMEP, Almaty who works with developing country taxation with focus on Central Asia; and Jim Dwyer, Executive Director of the Business Council of Mongolia (BCM). BCM is a Conference Sponsor. Further information on applying for invitations can be obtained by contacting Zaya at 312-234, 9902-9286, or E>zaya@prime.mn.

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“MM TODAY” ON MNB-TV

BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today’s BCM NewsWire.

SPONSORS

ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the three trading days ended February 19, 2010, trading activity on the Mongolian Stock Exchange (MSE) totaled 291,900 shares with 24 companies traded. Total market value of transactions was MNT 582.9 million.

Total market capitalization of the 358 stock companies listed on the MSE was MNT 668.3 billion, and increased by MNT 16.9 billion or 2.6% from February 12, 2010.

The Top-20 Index increased by 249.29 points or 3.8% compared to the previous week, closing at 6890.08 points. The MSE Composite Index increased by 112.02 points or 3.5% compared to the previous week, closing at 3,345.67 points.

Most active stocks traded were: Shariin gol (205,500 shares), Khukh gan (64,900 shares), and Gobi (6,700 shares).

Major share price percentage gainers were: Shariin gol (31.6%), Talkh chikher (25.0%), and Azik (15.0%). Major share price percentage loser was: Suu (14.7%).

INFLATION

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

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

January 31, 2010 *5.7% [source:NSOM]

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

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

CURRENCY RATES – February 24, 2010

Currency name Currency Rate

US dollars USD 1,445.14

Euro EUR 1,955.78

Japanese yen JPY 16.01

British pound GBP 2,231.66

Hong Kong dollar HKD 186.14

Chinese yuan CNY 211.68

Russian ruble RUB 48.10

South Korean won KRW 1.25

Disclaimer: Except for reporting on BCM’s activities, all information in the BCM NewsWire is

selected from various news sources. Opinions are those of the respective news sources.