BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 442 – September 2, 2016

BCM NewsWire provides short summaries of news collected from around the world. Each

article is kept to a maximum of 150 words for brevity, but click on the link next to

“Source” to read the full article.

NEWS HIGHLIGHTS:

Business:

• Moody's takes negative rating actions on 8 banks

• IFC Partners with Golomt Bank to Boost Mongolia’s Trade Industry

• Mongolia asks Rio Tinto to speed up work on giant copper mine

• TT prices dragging down Gobi coal profits, says Energy Resources CEO

• Sharp leads construction of solar power plant

• BCM director advocates for foreign investment to grow local companies

• Petro Matad continues exploration work

• Smart Oil Investment receives government product-sharing contract

• China group looks to Shivee Ovoo for energy import

• Makh-Impex cuts out middle-man in meat procurement

• Gobi aims to lead world in cashmere coat sales

• Tropicana to be sold in Mongolia

• Mongolian Mining debt restructuring hearing slated for 1 Sept.

• Tavan Bogd launches 888.6 mn share buy back

• Prophecy closes oversubscribed placement for $770,393

• ING Mongolia appoints new chief representative

• TerraCom hires advisory group

• Cabinet approves Erdenes Mongol’s board

• Erdenet labor union head demands disclosure of new owners

• Khan Bank branch robbed in Dornogobi

• Russian Railways to arrive in Mongolia to discuss railway expansion

Economy:

• Mongol Bank: FX auctions, swap agreements

• Consolidating Mongolia budgets is priority No. 1, minister says

• Moody's downgrades Mongolia's sovereign rating to B3

• Russia calls on Mongolia to cancel diesel tax

• Today’s high crop yields won’t guarantee against shortfall, agriculture minister

warns

• Cabinet approves plans for 50mwt expansion at CHPP3

• Mongolia, China sign quarantine protocol

• Adding up the costs from ASEM

• Olympic medalists awarded with apartments

• ADB to establish urban development offices for UB

• Bus rapid transit will solve traffic congestion in UB, ADB says

• Korean engineers on board to help install more lighting in UB’s ger districts

• New kindergarten planned for ministry workers’ children

• Swiss development brings environmental standards to artisinal miners

• Mongolia tightens belt as debt payments loom

• Tugrik meltdown seen cooling down Myanmar kyat

• Chinese banks braced over industrial restructuring

Politics:

• Parliament nods yes on tax hikes

• President pushes for ‘Blue Card’ to attract repats

• 20,000 civil servants to be made redundant

• New regulatory heads appointed

• President appoints new Chief of Staff

• B. Lkhagvaa appointed as new Consumer Protection director

• Mongolia considers joining Eurasian Economic Union

• Russia, Mongolia start Selenga-2016 military drills

• Koreas enter basketball competition in UB

• Arabs arrested for eagle poaching

• Local elections budget set

• Mongolia banned from international wrestling events

• Conservation threatens ruination for Mongolia's Dukha

BCM Updates:

• Announcements

• Advocacy Notes

• Working Groups News

• Job vacancies at member organizations

• Member-to-Member Special Offers & Benefits

• Websites Update - Presentations, Mongolia Reports, Interviews

Economic Indicators:

• Inflation

• Central Bank Policy Rate

• Currency Rates

*Click on titles above to link to articles.

SPONSORS

Khan Bank Wagner Asia Automotive

Mongolian Business Database International SOS

BUSINESS

MOODY'S TAKES NEGATIVE RATING ACTIONS ON 8 BANKS

Moody's Investors Service has downgraded the foreign currency long-term deposit ratings of

seven Mongolian banks to Caa1 from B3, and initiated a review for further downgrade. The

seven banks are: Bogd Bank LLC; Capital Bank LLC; Golomt Bank LLC; Khan Bank LLC; State

Bank LLC; Trade and Development Bank of Mongolia LLC; and XacBank LLC, Moody’s said

on a 26 August statement. The rating action on the seven banks' ratings is based on the

consideration that the creditworthiness of the Mongolian banking system is highly

correlated to that of the sovereign. The review for further downgrade is attributable to

considerable uncertainty regarding both Mongolia's current fiscal position and future

trajectory.

Moody's assigns b3 Baseline Credit Assessments (BCAs)—which reflect our opinion of a

bank's intrinsic or standalone financial strength—to six of the banks (except Capital and

the Development Bank of Mongolia), in line with the B3 issuer rating of the sovereign, and

have also placed the BCAs under review for further downgrade.

Click on the Source for details about specific banks.

Source: Moody’s

IFC PARTNERS WITH GOLOMT BANK TO BOOST MONGOLIA’S TRADE INDUSTRY

International Finance Corp. (IFC), a member of the World Bank Group, is providing a trade

guarantee of up to USD10 million to Golomt Bank LLC. This will help the bank to support

businesses, especially SMEs, to solidify import and export relationships within the energy,

agriculture and commodity sectors. “This engagement will help Golomt Bank to address

the increasing demand for trade finance, particularly as Oyu Tolgoi’s phase two ramps

up,” said Ganzorig Ulziibayar, chief executive officer of Golomt Bank.

Source: Golomt Bank LLC

MONGOLIA ASKS RIO TINTO TO SPEED UP WORK ON GIANT COPPER MINE

Mongolia's prime minister has asked Anglo-Australian miner Rio Tinto Group to step up the

pace of construction at the giant Oyu Tolgoi copper-gold mine, part of efforts to revive the

country's debt-ridden economy. Jargaltulga Erdenebat assured Rio Tinto's copper chief

Arnaud Soirat that Mongolia would honor its past agreements with Rio Tinto, and called on

the company to do the same. "You need to comply with contract obligations and speed up

the momentum of work," Erdenebat told Soirat, adding that Oyu Tolgoi should procure

construction materials like cement from Mongolian service providers only.

Dale Choi, an analyst for research firm Mongolian Metals & Mining, said the prime minister

has made it clear that Mongolia would not repeat past mistakes by interfering with the

running of Oyu Tolgoi. "The prime minister understands that the more quickly Oyu Tolgoi

develops, the more profitable it is for the government," he said.

Source: Reuters

TT PRICES DRAGGING DOWN GOBI COAL PROFITS, SAYS ENERGY RESOURCES CEO

The Tavan Tolgoi’s coal mine’s below-market sales to China’s Aluminum Corp. of China

Ltd. (Chalco) is dragging down revenues for other miners in the area, according to the

director for Hong Kong-listed Mongolian Mining Corp.’s (MMC’s) unit for the Ukhaa Khudag

mine. State-owned Erdenes Tavan Tolgoi LLC has sold coal to Chalco at discount prices

since the launch of commercial operations in 2011 to repay more than USD300 million in

debt to the company. Energy Resources had planned to raise its coking coal prices in June,

but dropped the plan because it could not compete with Erdenes TT. “Following the

international market price increase, we had tried to raise coking coal price by USD15 since

last June,” said the G. Battsengel, chief executive officer of MMC’s Energy Resources LLC.

“But because Erdenes Tavan Tolgoi fixed the price at USD25 for three months, we could

not do that.”

Remaining debt to Chalco currently stands at USD110 million, paying only USD11.2 million

since the start of the year. Erdenes TT pay USD900,000 a month in interest to Chalco.

Source: Udriin Sonin

SHARP LEADS CONSTRUCTION OF SOLAR POWER PLANT

Japanese tech company Sharp plans to commission a 10-megawatt solar power plant in

Darkhan-Uul by this December. Sharp is partnered with Japanese trading company

Shigemitsu Shoji and Mongolian partner Solar Power International for the project.

Construction launched last July.

Source: Mongolia.GoGo.mn

BCM DIRECTOR ADVOCATES FOR INVESTMENT TO GROW LOCAL COMPANIES

Mongolian private business needs investment to develop and become competitive just as

much as Mongolia’s economy needs it to grow, according to the head of the Business

Council of Mongolia (BCM). According BCM Executive Director Mergen Chuluun, Japan,

China, Russia, South Korea and more have already made partnerships with Mongolian

companies for the development of large infrastructure projects, including a partnership

with Newcom Group for a power plant at Tsogttsetsii Soum, Umnugobi and mixed solar-

wind energy farms. Foreign banks, too, can play a role, he said. “The prime minister said

four foreign commercial banks are ready to enter the Mongolian market. We need to allow

them to enter the market. Competition will lead to better services for ordinary citizens

and local businesses alike and it will drive improvement in services of local banks too.”

Source: Uls Turiin Toim

PETRO MATAD CONTINUES EXPLORATION WORK

Petro Matad Ltd. will move forward with seismic exploration work in central Mongolia with

the firm tapping on exit payments provided by Shell's affiliate company BG Mongolian

Holdings Ltd. The Mongolia-focused oil explorer has processed 2D seismic acquisitions from

Block IV and the data is now being interpreted. Meanwhile, it has acquired 152 mile (245

kilometer) of the 250 mile (402 kilometer) 2D seismic acquisition program. The seismic

program was suspended in early July due to dynamite quality issues. The remainder of the

seismic program seeks to de-risk leads and define a potential drill location in Block V.

Processing of data acquired to date is underway and interpretation and prospect

generation is progressing.

“The leads inventory of both Blocks IV and V will be peer reviewed and qualified prospects

will be high-graded to drill-ready status prior to exploration drilling, expected in mid-

2017,” the firm said in the release.

Source: Rig Zone

SMART OIL INVESTMENT RECEIVES GOVERNMENT PRODUCT-SHARING CONTRACT

An oil explorer has received a product-sharing contract from the government for. The

Department of Mineral Resources and Petroleum has awarded a contract to Smart Oil

Investment Ltd.

Source: Montsame

CHINA GROUP LOOKS TO SHIVEE OVOO FOR ENERGY IMPORT

The head of a Chinese energy development group has pointed to the Shivee Ovoo coal

mine as a potential fuel source for the launch of energy production sold throughout

northeast Asia. Liu Zhenya, chairman of the Global Energy Interconnection Development

and Cooperation Organization (GEIDCO) and the China Electricity Council (CEC) proposed

cooperation with Mongolia for Shivee Ovoo during a meeting with Parliament Speaker

Miyeegombo last week.

“It is expected that the China’s consumption will go up by nine trillion kilowatts; South

Korea by 12 trillion kilowatts, and Japan by 0.7 trillion by the year 2030,” said Liu. “It

means that the energy market will definitely broaden, and it is important to building up

the competitive energy network.”

Source: Montsame

MAKH-IMPEX CUTS OUT MIDDLE-MAN IN MEAT PROCUREMENT

Meat producer Makh-Impex has announced plans to cut out middle-men negotiators and

buy directly from herders to support the nomadic herding tradition. Makh-Impex is one of a

handful of company that currently exports meat products abroad, has promised to pay

herders 70 percent of meat purchases up front, with the reminder to be paid 45 days after

purchase. It has set a price of MNT4,000 for a kilogram of mutton, MNT3,100 for goat

meat, and MNT4,500 for beef.

Makh-Impex is also offering reduced-cost flour and animal feed to its suppliers.

Source: Udriin Sonin

GOBI AIMS TO LEAD WORLD IN CASHMERE COAT SALES

Gobi JSC has announced plans for growth to become the number-one producer of 100

percent cashmere coats in the world by 2020. “In 2020, our company aims to sell 100,000

coats, increasing the current sale by 10 times,” said the director for internal trade at

Gobi, Ts. Budkhuu. “In order to reach the goal, the company has made a decision to

increase job post by 200 people, in the result, workers` number will reach 1,515.”

Source: Udriin Sonin

TROPICANA TO BE SOLD IN MONGOLIA

GN Beverages LLC is planning to introduce Tropicana juice in the Mongolian market in 2017

after its recent success with PepsiCo's Sting energy drink brand. Enkhjin [Source does not

include a full name -ed], head of marketing and sales, said the company is studying

concepts, marketing policy, customer awareness, taste and packaging of this brand.

Source: Agrabusiness Intelligence

MONGOLIAN MINING DEBT RESTRUCTURING HEARING SLATED FOR 1 SEPT.

Mongolian Mining Corp. will appear for a hearing scheduled on 1 September to determine

the next steps for its debt restructuring. The Hong Kong-listed coal miner has already

completed a report from joint provisional liquidators submitted to a grand court of the

Cayman Islands on 25 August with conclusions on the company’s management and their

investigations into the company and its financial position.

Source: AA Stock, Mongolia Mining Corp.

TAVAN BOGD LAUNCHES 888.6 MN SHARE BUY BACK

Tavan Bogd Trade is making offers to buy back a remaining 32.3 percent of shares held by

investors. The trader has offered MNT42,091 per share for 21,111 shares by 9 September.

Source: Tavan Bogd Trade, Cover Mongolia

PROPHECY CLOSES OVERSUBSCRIBED PLACEMENT FOR $770,393

Prophecy Development Corp. has raised USD770,393 from an over-subscribed non-brokered

private placement originally set for USD570,000 from the sale of 150,000 units. Each unit

sold at a price USD3.80 consists of one common share and one half of a share purchase

warrant that entitles a holder to acquire an additional share. Each warrant is priced at

USD4.40 for up to five years from the date of issuance.

Source: Prophecy Development Corp.

ING MONGOLIA APPOINTS NEW CHIEF REPRESENTATIVE

ING Bank has named Erik Versavel as the new chief representative for Mongolia from 15

September as the former country head takes on a new role at the Dutch lender. A banking

veteran who has been part of the industry for 30 years, Versavel’s credentials include

holding several leadership roles in different countries. He replaces Howard Lambert.

Source: Global Capital

TERRACOM HIRES ADVISORY GROUP

TerraCom Ltd. has hired Foster Stockbroking Pty. Ltd. for corporate advisory and capital

market services. FSB has been hired for a total of 30 million unlisted options in two equal

tranches with no cash retainer. “The engagement of FSB is an important part of the

establishment of a strong and diverse investor base which should build on the interest in

Australia and already being generated in Asia and Europe,” said TerraCom Chairman

Cameron McRae.

“The recent positive restructuring of the balance sheet has enabled the Company to focus

and make significant progress toward becoming a global independent mining company

operating in three countries and is confident of further positive news flow on this progress

shortly,” McRae said.

Source: TerraCom Ltd.

CABINET APPROVES ERDENES MONGOL’S BOARD

Erdenes Mongol LLC’s new roster for its board of directors has been approved by Prime

Minister Jargaltulga Erdenebat’s Cabinet Secretariat. Board members now include the

deputy head of the Cabinet; the state secretary of of environment and tourism; head of

the Cabinet Secretariat’s department of monitoring and internal audits; the head of state

income for the Finance Ministry; and the head of foreign cooperation for the Ministry of

Mining and Heavy Industry.

Three independent members have still yet to be named.

Source: Montsame

ERDENET LABOR UNION HEAD DEMANDS DISCLOSURE OF NEW OWNERS

A labor union for employees at the Erdenet copper mine is demanding more information

about the new 49 percent stakeholders following a purchase by a private Mongolian

company last June. Former Prime Minister Chimed Saikhanbileg announced that a company

known as Mongolian Copper purchased its stake from Russia for USD400 million just days

before the election. But still very little is known about the purchase other than some

capital was provided by Trade and Development Bank of Mongolia LLC.

“Structural changes in divisions of the company have already begun,” said labor union

head N. Batbaatar. He added, “There are many fears and lots of alarm among workers.”

Source: Udriin Sonin

KHAN BANK BRANCH ROBBED IN DORNOGOBI

A branch of Khan Bank LLC in Dornogobi Aimag lost MNT20 million from armed robbery.

The robbers, who were armed with knives and a gun, are on the run after taking robbing

the bank in Mandakh Soum, plus the mobile phones of the bank’s workers. The bank had no

security worker on duty or camera to catch the crime on tape.

Source: Udriin Sonin

RUSSIAN RAILWAYS TO ARRIVE IN MONGOLIA TO DISCUSS RAILWAY EXPANSION

The head of Russian Railways will be in Mongolia this month to discuss the construction of

new railway here for expanded trade with Russia and China. Oleg Belozerov, 45, will arrive

in Ulaanbaatar [Source did not include exact date-ed] for an annual council meeting

presiding over the Trans-Siberian transport lines. This year’s three-party conference

between Mongolia, China and Russia is the first to be held in Mongolia and will focus on

targets for the volume of freight transported and the construction of a new railway

corridor linking Russia and China.

Source: News.mn

ECONOMY

MONGOL BANK: FX AUCTIONS, SWAP AGREEMENTS

The Bank of Mongolia on 30 August sold USD12 million to commercial banks at currency

auctions (out of bids totaling USD15.5 million and CNY1.7 million) for a closing rate of

MNT2,230. Also that day, it accepted an equivalent of USD68.4 million in tugrik swap

agreements with banks.

Source: Bank of Mongolia

MOODY'S DOWNGRADES MONGOLIA'S SOVEREIGN RATING TO B3

Moody's Investors Service on 26 August downgraded Mongolia's government issuer rating to

B3 from B2, and initiated a review for further downgrade. The key driver for the

downgrade is the sharp deterioration in fiscal metrics, which Moody's does not expect will

reverse materially in the next few years. Compounded by weak growth and already very

low foreign exchange buffers, this will significantly exacerbate fiscal challenges and

liquidity risks facing the government.

The review will allow Moody's to assess the speed and effectiveness of the policy response

to these heightened challenges, and their implications for growth and the management of

external liquidity, which would depend partly on the availability and cost of external

financing. Concurrently, Moody's has downgraded the government's senior unsecured debt

rating to B3 and the senior unsecured tugrug rating to (P)B3. The review for downgrade

also applies to these ratings. The short-term issuer rating remains unchanged at “Not

Prime.”

Source: Moody’s

CONSOLIDATING MONGOLIA BUDGETS IS PRIORITY NO. 1, MINISTER SAYS

Priority No. 1 for the newly elected government in Mongolia is consolidating all off-budget

expenses into one budget to enhance transparency, said Munkh-Orgil Tsend, the country’s

foreign minister. The government is trying to bring together multiple budgets—including

the state budget, Development Bank budget, central bank expenditure as well as costs

incurred by state-owned enterprises—which contributed to a blowout in spending, Munkh-

Orgil said Tuesday at an American Chamber of Commerce meeting in Ulaanbaatar. Off-

budget spending by the previous government comes close to 2 trillion tugrik (USD895

million), said Munkh-Orgil, who is a lawyer and Harvard graduate. Mongolia’s budget

deficit through the first seven months of this year increased 32.6 percent compared with

the same period a year ago, according to the National Statistical Office.

Mongolia is now engaging with foreign and domestic partners to resolve the economic crisis

in the short, medium and long term, said Munkh-Orgil. The International Monetary Fund

and “some other financial institutions’’ are part of the talks, he added. The IMF has

repeatedly provided money to Mongolia in times of economic crisis, most recently in 2009.

With just USD1.3 billion in foreign reserves and more than USD1 billion in bond repayments

coming due in 16 months, Mongolia is running out of time to boost reserves.

Source: Bloomberg

RUSSIA CALLS ON MONGOLIA TO CANCEL DIESEL TAX

Russia has threatened to halt the recently launch test of running transit from China’s

Tianjin Port through Mongolia to Ulan-Ude in Russia if Mongolia does not cancel a tax on

diesel fuel costing billions of tugrik each year. Mongolia’s joint-venture railway operator

with Russia, Ulaanbaatar Railways JSC (UBTZ), is expected to pay MNT36 billion this year

in excise tax on diesel fuel. The tax has made great leaps in recent years and compares

with MNT2.4 billion in 2014 and MNT36 billion in 2015.

So far, a standing committee in Parliament has not rejected the proposal to cancel the tax

from the Russian Embassy in Mongolia. Meanwhile, UBTZ is falling behind on a JPY115

billion loan to the Japanese government.

Source: Unuudur

TODAY’S HIGH CROP YIELDS WON’T GUARANTEE AGAINST SHORTFALL, AGRICULTURE

MINISTER WARNS

The Minister of Food, Agriculture and Light Industry has signaled some caution regarding

wheat and vegetable crops this fall, despite high yield projections, in reaction to recent

weather alerts. Minister P. Sergelen has estimated 491,000 tons of wheat, or 1.8 percent

more than demand requires. Also projected are 174,700 tons of potatoes, 117,500 tons of

vegetables, 32,500 tons of cooking oil crops, and 43,400 tons of fodder.

Source: Undesnii Shuudan, Montsame

CABINET APPROVES PLANS FOR 50MWT EXPANSION AT CHPP3

Mongolia plans to increase the capacity of Power Plant No. 3 and another in Choibalsan

Soum in preparation for greater energy demand in the years to come. The power capacity

at the aging Combined Heat and Power Plant No. 3 (CHPP3) will be expanded by MNT250

megawatts and by 50 megawatts at Choibalsan. No plan has be announced to finance the

upgrades, but government has settled on a completion date of sometime in 2018.

Source: Udriin Sonin, Montsame

MONGOLIA, CHINA SIGN QUARANTINE PROTOCOL

Mongolia and China have agreed to new terms for the quarantine of meat goods for

regulated travel between their borders. The memorandum of understanding for goods such

as mutton, beef, and goat meat was signed by the acting head of the General Authority of

Specialized Inspection, N. Tsagaankhuu met and the visiting vice minister of China’s

General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ), Mei

Kebao. It also created a framework for hygiene and veterinary service along the Mongolia-

China border.

Source: Montsame, 2

ADDING UP THE COSTS FROM ASEM

The hosting of the Asia-Europe Meeting (ASEM) this summer as well as costs related to

Mongolian athlete’s competing in Brazil for the Rio Summer Olympic Games have

reportedly exacerbated out-of-control spending. About MNT538 million was spent on ASEM,

including the purchases of 52 Toyota Prius vehicles for 1.67 million and two Mercedes Benz

for USD258,222.

Source: Mongolia.GoGo.mn

OLYMPIC MEDALISTS AWARDED WITH APARTMENTS

Mongolia’s has awarded its two medalists at the Rio Summer Olympic Games with

apartments. Silver medalist for judo D. Sumiya and bronze medalist for boxing D.

Otgondalai have both received one- bedroom apartments for their victories this year.

Source: News.mn

ADB TO ESTABLISH URBAN DEVELOPMENT OFFICES FOR UB

The Asian Development Bank (ADB) and European Bank for Reconstruction and

Development (EBRD) are building a head office for the urban planning of Ulaanbaatar’s ger

districts, which is the source of much of Mongolia’s smoke in winter from wood-burning

stoves. Offices will be built by 2018 for an estimated cost of USD27.5 million at

Bayankhoshuu and Doloon Buudal, where 200 residents currently reside. Current plans

include the construction of kindergartens for 240 children and a vocational training center,

in addition to new roads and a sewage-drainage system. The second phase of the project

will cover ger areas in Dambadarjaa and Denjiin 1000.

ADB has also announced plans for next year to help build 10 primary healthcare centers

and a more general medical center at the ger districts.

Source: Mongolia.GoGo.mn, Montsame

BUS RAPID TRANSIT WILL SOLVE TRAFFIC CONGESTION IN UB, ADB SAYS

The state-run agency responsible for Ulaanbaatar’s urban development, Ulaanbaatar

Development Corp. is developing a timetable for financing of a bus rapid transportation

(BRT) system the city hopes will ease traffic congestion. “Without a viable system of

public transport, Ulaanbaatar will soon experience even more serious traffic congestion

that will negatively impact economic development and quality of life,” said the Asian

Development Bank (ADB), which is signed on as a partner for the project, in a report on

the project’s progress.

Source: UB Post

KOREAN ENGINEERS ON BOARD TO HELP INSTALL MORE LIGHTING IN UB’S GER

DISTRICTS

The Korea Electrical Engineering Association has established an agreement the Ulaanbaatar

district with the largest so-called ger districts that are cut off from some utilities. The

Korean team is signed on to assist with providing energy to more homes in

Songinokhairkhan for the next three year.

Source: Montsame

NEW KINDERGARTEN PLANNED FOR MINISTRY WORKERS’ CHILDREN

A new kindergarten will be built in Ulaanbaatar for the children of personnel who work at

three government ministries. The school will take in 65 children from the Foreign Affairs

Ministry and 10 more from the Ministry of Health [Source does not include details about a

third ministry to be included -ed] for the school, which is estimated to cost between

MNT870 million from the state for construction and between MNT250 million and MNT300

million a year for operation.

Ministry workers have donated funds to help complete the project during this current

period of economic strain and budget cuts by government.

Source: News.mn

SWISS DEVELOPMENT BRINGS ENVIRONMENTAL STANDARDS TO ARTISINAL MINERS

The end of August will mark the end of the second phase of the Swiss Agency for

Development and Cooperation’s project to bring together the main stakeholders in

artisanal and small-scale mining (ASM) environmental management. The Engaging

Stakeholders in Environmental Conservation Project (ESEC II) has aimed to integrate best

ASM environmental practices and supports the inclusion of formalized ASM contributions to

local sustainable development.

Based on the experiences and results of the 17 frugal rehabilitation demonstration (FRD)

projects implemented throughout 2014-2015, ESEC II developed a frugal rehabilitation

methodology (FRM) that enables ASM rehabilitation approaches that are economically

affordable, socially acceptable and ecologically viable, with benefits for both ASM

communities and affected stakeholders. Through the Responsible Mining Initiative, the ASM

National Federation and Era Ecology NGOs, ESEC II supported the training, development

and monitoring of rehabilitation action plans that outline how the FRM should be

developed and implemented.

Source: Montsame

MONGOLIA TIGHTENS BELT AS DEBT PAYMENTS LOOM

Mongolia’s new government has revealed a budget deficit equivalent to nearly one-fifth of

economic output, underlining the dire financial conditions that have sent the currency

tumbling. Even after stringent cost-cutting measures outlined by the Mongolian People’s

party, the country faces a gap between its revenues of MNT5.34 trillion (USD2.67bn) and

MNT9.7 trillion ($4.87 billion) expenditure. This hasn’t surprised Erdenebayar, owner of a

quiet lunch restaurant in the middle of a ger district, the sprawling settlements that ring

Ulaanbaatar, the capital. “I can tell from the sales I make and the lives of my customers,”

he said.

Nationwide, family income is down about 10 per cent year-on-year and unemployment is

rising due to the downturn in mining and construction. “People say the government has a

lot of debt and can’t pay,” Erdenebayar added. “The prime minister said it will stabilize

by November, and I hope so. If not, the winter will be a lot worse than now.”

Source: Financial Times

TUGRIK MELTDOWN SEEN COOLING DOWN MYANMAR KYAT

The freefall in Mongolia’s exchange rate may be cooling down the Myanmar kyat, which

had been the world’s best-performing exotic currency this year until the tugrik started its

epic 14 percent slide to a record low. The crisis that saw Mongolia’s new government

struggle to pay salaries is a “wake-up call” for investors to be cautious about Myanmar,

says Hirofumi Suzuki, an economist at Sumitomo Mitsui Banking Corp. in Singapore. The

two countries—one to China’s north, the other to the south—have wide current-account

deficits and are dependent on exporting commodities to their giant neighbor.

Logon to the Source for an included chart.

Source: Bloomberg

CHINESE BANKS BRACED OVER INDUSTRIAL RESTRUCTURING

China’s banks are set to be the biggest losers in the sweeping bailouts of the country’s

steel and coal industries. The reliance on the banking system to shoulder the burden

comes at an inopportune moment, with China’s banks already mired in bad debt—about

CNY15 Trillion (USD2.25 trillion). Profit growth at the banks has also fallen over the past

two years and could deteriorate further as many of the country’s largest industrial players

renege on loans for better state-brokered deals.

China’s State Council outlined in February that it would cut 500 million tons of annual coal

output over the next three to five years and 100 million to 150 million tons of steel output

over the next five years, but progress has been stunted and the cutbacks to production

have led to a series of government-brokered bailouts.

Source: Financial Times

POLITICS

PARLIAMENT NODS YES ON TAX HIKES

Parliament has signaled that it will pass a series of budget cuts and tax rates introduced by

the Jargaltulga Erdenebat government to prevent the economy from sinking under growing

debt. Anyone who earns more than MNT30 million a year be taxed at 25 percent compared

with the flat tax of 10 percent currently held. According to a 2016 survey by KPMG global

audit services, average PIT rates in Asian countries stands at 28 percent, 39 percent in

Europe and 33 percent worldwide. Also to be introduced are taxes on personal savings, a

hike the luxury tax and on the excise taxes for tobacco, alcohol and heavy carbon-emitting

vehicles.

However, lawmakers said they would not allow for a 12.6 percent hike in social insurance

payments, as it would put too much stress on small companies.

Source: Mongolia.GoGo.mn, 2

PRESIDENT PUSHES FOR ‘BLUE CARD’ TO ATTRACT REPATS

The president is pushing new legislation to release so-called “Blue Cards” for repatriating

citizens, or repats, in order to recapture some of the country’s best and brightest talent.

Last February, Parliament opened discussions on amendments to the Law of Mongolia on

Citizenship. Since 1995, approximately 58,000 Mongolians have renounced Mongolian

citizenship and taken up a different nationality, and Mongolia does not allow for dual

citizenship.

To receive a Blue Card proposed by the Office of the President, one would have to be an

ethnic Mongolian and be fluent in Mongolian language. The individual must also have

qualifications that are useful to Mongolia, such as a high-level qualification or experience

in science, technology, art, or sports and should have made some form of investment in

Mongolia.

Source: UB Post

20,000 CIVIL SERVANTS TO BE MADE REDUNDANT

The government will make 20,000 civil servants redundant, according to Finance Minister

Battogtokh Choijilsuren. The layoffs were announced to Parliament on 26 August, with a

promise from the finance minister that job creation would be a chief focus for the

government.

Mongolia’s total number of state workers grew by 22 percent to 1.79 million between 2012

and 2016 under the Democratic Party’s rule of government.

Source: News.mn

NEW REGULATORY HEADS APPOINTED

The Cabinet Secretariat has appointed new heads to various state regulatory agencies. Ts.

Sergelen has been appointed as the chair of the Border Protection Authority following the

retirement of his predecessor, Sh. Lkhachinjav; B. Batkhishig will head the General

Customs Authority; and L. Byambasuren is chair of the Civil Aviation Authority upon the

dismissal of the acting chairman, G. Nyamdavaa.

Kh. Gantsogt has been dismissed as State Secretary of the Ministry of Finance.

Source: Montsame

PRESIDENT APPOINTS NEW CHIEF OF STAFF

President Tsakhia Elbegdorj has appointed Ts. Bayarsaikhan has his new chief of staff.

Bayarsaikhan Tsevelmaa received the seal for his office on 29 August. He held office in

Parliament in 1996 and 2004, and has worked as the head of Standing committee on

Economy, the minister of social welfare and labor and as the ministry of construction and

urban development.

Bayarsaikhan’s successor, P. Tsagaan, gave notice of his resignation at his own request on

24 August so that he could run for chair of the Democratic Party. Tsagaan had worked as

the chief advisor since 2009.

Source: Montsame

B. LKHAGVAA APPOINTED AS NEW CONSUMER PROTECTION DIRECTOR

A new head of the Authority for Fair Competition and Consumer Protection has been

named by the new government under Prime Minister Jargaltulga Erdenebat. B. Lkhagva on

24 August was selected to replace former director D. Munkhtur.

Source: News.mn

MONGOLIA CONSIDERS JOINING EURASIAN ECONOMIC UNION

Mongolia is considering joining the Eurasian Economic Union (EEU), reads a press release

by the press service of the Eurasian Economic Commission (EEC). “This is not only, for

example, export of goods from Mongolia to our Union. These are also the issues related to

the establishment of joint ventures, investment projects. We do not limit the range of

topics that may interest our Mongolian partners,” Eurasian Economic Commission's

Chairman Tigran Sargsyan said.

The Ambassador of Mongolia noted that a study group had been established with the aim

of developing the economic dialogue between the EEU and the Government of Mongolia

and agreed to hold a meeting of the study group in October.

Source: Belarusian Telegraph Agency

RUSSIA, MONGOLIA START SELENGA-2016 MILITARY DRILLS

The Russian-Mongolian Selenga-2016 military exercises started on Tuesday in Russia's

Republic of Buryatia, the head of Russia’s Eastern Military District press service said. The

Selenga exercise has been carried out annually since 2008, with Russian and Mongolian

troops engaging in collaborative field exercises to identify, block and destroy illegal armed

groups.

"Opening ceremony of Russian-Mongolian Selenga-2016 military drills took place at Eastern

Military District's training facility Burduny in Republic of Buryatia," Alexander Gordeev

said. He added that some 1,000 servicemen and 200 pieces of military equipment from

both sides were participating in the drills.

Source: Sputnik News

KOREAS ENTER BASKETBALL COMPETITION IN UB

The second Chinggis Khaan Basketball Cup” competition will take place from 7 to 11

September in Ulaanbaatar. National teams from the Russian Republic of Buryatia, North

Korea, and Korean Basketball League as well as Hohhot University will participate in the

competition. This will be the first time North and South Korean teams will compete in

Ulaanbaatar.

Last year the cup was won by the Mongolian national basketball team.

Source: News.mn

ARABS ARRESTED FOR EAGLE POACHING

Hunters from the United Arab Emirates (UAE) have been detained for illegally catching

falcons in Khuvsgul Aimag, local authorities said. The suspects are now waiting for

permission to catch 13 falcons from the Ministry of Environment and Tourism of Mongolia.

Mongolian falcon trappers require a Government-issued permit to catch and export the

birds.

Mongolia has a quota allowing for the capture of between 240 and 300 birds a year. The

price for one falcon is US11,760.

Source: News.mn

LOCAL ELECTIONS BUDGET SET

Mongolia has budgeted MNT13.9 billion for local elections scheduled for 19 October.

Source: News.mn

MONGOLIA BANNED FROM INTERNATIONAL WRESTLING EVENTS

Mongolian freestyle wrestler G. Mandakhnaran will receive a gold medal from a local

organization just as the United World Wrestling officials has banned Mongolia from

participating at international tournaments indefinitely. The punishment is in reaction to

the two Mongolian coaches who stripped off their clothings in front in anger against

referees’ decisions that cost Mandakhnaran the bronze. The Uzbek opponent received

points that clinched the win for him after Mandakhnaran slipped away in the last 18

seconds of the match, danced around his opponent to effectively run out the clock and his

coaches disrobed in protest or referees’ penalization.

The Professional Freestyle Wrestling Association of Mongolia now plans to honor

Mandakhnaran with their own medal and about MNT20 million in donations collected so

far. “We want to give a bronze medal made out of fine gold to Mandakhnaran who was

robbed of his medal by the actions of the judges," said Dashzeveg Altankhuyag, a governing

board member of the association.

Source: Xinhua, UB Post

CONSERVATION THREATENS RUINATION FOR MONGOLIA'S DUKHA

Originally from Russia, the Dukha (who are also called Tsataan in Mongolian) are closer in

traditions and way of life to Laplanders, the reindeer herders of the Arctic, than to

Mongols of the steppe, as they are nomadic. Under Mongolian law, hunting is forbidden in

the Tengis Shishged national reserve, as are fishing and chopping wood, and only limited

migrations are allowed, in order to preserve biodiversity.

Recently, rangers have been deployed to protect the area. A few months ago, five Dukha

hunters were arrested for poaching while searching for food. “The Dukha don’t understand

our work,” laments Tumursukh, a conservationist for the area. “Our goal is to preserve the

taiga and to create strictly protected areas in which humans will not be able to destroy

nature. These resources must be preserved for future generations. If we don’t create this

reserve, these resources will disappear. We can’t let that happen.”

Source: The Guardian

BCM UPDATES:

UPCOMING EVENTS

INVEST MONGOLIA 2016 FRONTIER'S 10TH ANNUAL CONFERENCE IN ULAANBAATAR

The “Invest Mongolia 2016” conference will be held in Ulaanbaatar on 5 and 6 September.

The 11th Asia-Europe Meeting held in Ulaanbaatar and the change of power in government

to the Mongolian People’s Party are expected to improve investor sentiment. However, the

really important issues from now on will be whether the government’s plan of action for

the next four years will be feasible, consistent, friendly and acceptable for investors. This

conference is one the of the largest events in Mongolia, and it serves as a platform of

bringing in people from the government, key industry players, financial institutions and

global investors all in one place where they get a chance to talk about several socio-

political and economic developments from throughout the year.

Registration is free of charge. For further inquiries, email conference@frontier.mn.

BCM members will get 15% discount on Green & Yellow badges.

14TH ANNUAL DISCOVER MONGOLIA, 8-9 SEPT.

The 14th annual Discover Mongolia International Mining Investors’ Forum will be held at

the Corporate Convention Center in Ulaanbaatar on 8 and 9 September. This year’s Forum

will concentrate heavily on the new government’s policies for mining and exploration in

Mongolia with the over-arching theme of “For Stability.” In recent year’s political

instability in Mongolia has resulted in significant damage to the private and public mining

companies as well as international investors’ sentiment towards Mongolia. Now with a new

parliament in power for the next four years investors are expecting certain stability.

Logon to discovermongoliaforum.com to learn more or click here to register. For more

information, call 976-11-314877, or email office@miningmongolia.mn.

Conference registration rate for BCM members will be the same as MNMA member rate.

BCM’S ENERGY & ENVIRONMENT WORKING GROUP MEETING, 15 SEP 2016

The session will take the form of a facilitated discussion between a panel of government

representatives and BCM members, exploring the new Government's agenda for Energy and

the Environment issues. Panel will be represented from (i) UB City Mayor’s Office, (ii)

Ministry of Energy, and (iii) the Ministry of Environment and Tourism. As we prepare the

panel discussion topics, we invite you to submit potential questions or issues that you

would like to hear the panel address. Please send us your suggestions by COB, 2 Sep 2016,

to Bayarmaa@bcmongolia.org.

BEST PRACTICES IN PROJECT MANAGEMENT CONFERENCE, 7-8 OCT.

PMI is hosting its third international workshop and conference with its theme “Best

Practices in Project Management” at the Blue Sky Tower & Hotel in Ulaanbaatar on 7 and 8

October. All engaged in the Project Management profession; Business Analysts; those

wanting to learn more about Project Management; and those interested in the latest tools

and techniques should attend for 12 workshops, networking opportunity and more.

Continental lunch and refreshments at breaks are included with registration fees of

between MNT50,000 and MNT175,000 per attendee. BCM members will receive a 20

percent discount. For more information, visit pmimongolia.mn. Phone calls can be made to

9901-7317, 9994-7237; or email registration@pmimongolia.mn.

2016 GERMAN-MONGOLIAN CORPORATE DAYS, 11-12 OCTOBER

GIZ’s Integrated Mineral Resource Initiative (IMRI) and the German-Mongolian Business

Association (DMUV) are jointly organizing the 2016 German-Mongolian Corporate Days

"Made in Germany" on October 11-12, 2016 in Ulaanbaatar.

With more than 400 visitors per day and more than 100 German exhibitors expected, the

German-Mongolian Corporate Days are the most important bi-lateral economic event in

Mongolia. The exhibition’s lecture program covers various disciplines and allows direct

contact with the general public and trade visitors, as well as the decision-makers in

business and government.

Participation in the conference is free of charge, while exhibition booths will be available

for a small fee. Click here for more information or email rebecca.schmuecking@dmuv-

mn.com.

BCM ADVOCACY NOTES

VOICE OF BUSINESS COMMUNITY RAISED & DELIVERED TO GOVERNMENT OF MONGOLIA

A detailed multi-media PR plan promoting the 1st Annual BCM Summit Proceeding was

developed with the main goal to inform, raise awareness and get support of the public on

key messages of private sector towards the new Government. Another main goal is to have

as many inclusions as possible to the new Government Action Plan. A publication titled

“BCM 1st Annual Summit Proceeding – Key Messages to Government Leaders” is produced

in Mongolian language. The publication along with an official letter was sent to the

President, Prime Minister, Deputy Prime Minister, Parliament Members, Ministers and

Standing Committee chairs on Aug 16th. Following the plan the key messages were

promoted through Bloomberg TV interview on Aug 16th, articles in Zasgiin Gazriin Medee

newspaper edition Aug 18th and Udriin Sonin newspaper edition Aug 19th. Engaging social

media posts are continuously made through BCM twitter and Facebook accounts.

CERTIFICATE OF ORIGIN (CO) ISSUES RAISED TO GOVERNMENT OFFICIALS

Following up the Consultative meeting on CO dated Aug 3rd, an official letter requesting

postponement of effective date of regulation to Jan 1st, 2017 was sent to the General

Customs and Tax Authority. Furthermore, a meeting was held with V.Enkhbold, head of

Foreign Trade and Economic Cooperation Department (under MFA) and its officials in

charge of foreign trade issues on Aug 16th. It was informed that the department will

further study the issue and will try to resolve on mutual consensus. Official letter was

sent to Ts.Munkh-Orgil, Minister for Foreign Affairs on Aug 18th stipulating overall analysis

on how the new regulation contradicts international practices and how it burdens the

private sector. The postponement was also requested.

BCM WORKING GROUP NEWS

- Energy and Environment Working Group Meeting on "ENERGY EFFICIENT HEATING &

ROUNDTABLE DISCUSSION" 24 June 2016

- Risk and Legislative Working Groups' Joint Meeting on the "DRAFT AMENDMENT OF THE

LAW ON DISASTER PROTECTION" 16 June 2016

- Business Ethics Working Group Meeting on “CSR, GIFTS AND HOSPITALITY POLICY”, 7 June

2016

- Education Working Group Meeting on “BCM SSUMMIT PROCEEDINGS”, 5 May 2016

- Capital Markets Working Group Meeting on “OYU TOLGOI UNDERGROUND PROJECT

FINANCING”, 5 April 2016

- Tax Working Group Meeting on “VAT LAW”, 2 March 2016

JOB VACANCIES AT MEMBER ORGANIZATIONS

- Sandvik Mongolia LLC is hiring Junior Accountant. Deadline for application: Sep 15, 2016.

For more information, please contact at (976)-70121930

- Atlas Copco is hiring Warehouse Supervisor and Office Administrator. Deadline for

application: Sep 05, 2016. For more information, please contact at (916)- 70129294)

- Areva is hiring Accounting and Reporting Manager. For more information, please contact

at 11 320698 (115)

- Areva Mongol is hiring French Language Translator. For more information, call (976)

320698 ext-115

- Canadian Embassy is hiring Trade Commissioner. Deadline for application: Sep 06, 2016.

Additional information about the Embassy can be found at: www.mongolia.gc.ca

Please click here to view full list of Job Vacancies at member organizations.

MEMBER-TO-MEMBER SPECIAL OFFERS & BENEFITS:

- Orchuulga 24 is providing 15% discount on written translation services to BCM Members

- MNC HD TV offers BCM members 20% discount from the fee to be showcased in their “The

Story of Business/Бизнесийн түүх” TV program.

- American University of Mongolia is offering BCM members a 20% discount on all of ELI

Summer Courses.

- Matoza LLC is offering 15% special discount to BCM members on Intensive Business English

Language Course in Poland with a Sightseeing Trip.

Please click here to view full list of Member-to-Member special offers & Benefits.

WEBSITE UPDATES: PRESENTATIONS, MONGOLIA REPORTS

PRESENTATIONS:

BCM Monthly Meeting, 30 May:

- B. Byambasaikhan, Chairman, BCM - “BCM Summit Proceedings”

- Ch. Mergen, Executive Director, BCM - "BCM Report"

- Anthony Woolley, Senior Associate, Hogan Lovells - “CIT Draft Law Update”

- D. Bat-Oktyabri, Director APAC, Techstars - “Start-up community in Mongolia”

- Michael Morrow, Executive Director, MACU & Ya. Enkhee, Owner & Partner at Gandan

Live House, Mexikhan & Guantanamera Restaurant - “It’s all about wine & cheese” event

- New Members Introduction

Please click here to view full list of Presentations.

MONGOLIA REPORTS:

- ADB, “Asian Development Outlook 2016: Asia’s Potential Growth” (forecasts of the next 2

years for the 45 economies in Asia and the Pacific including Mongolia)

- Invest Mongolia, “Your Guide to Invest in Mongolia” 2016

- BTI, “Mongolia Country Report” 2016

- World Bank, “Doing Business: Economic Profile of Mongolia 2016"

Please click here to view full list of Reports.

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]

Year 2012 *14.0% [source: NSOM]

Year 2013 *12.5% [source: NSOM]

Year 2014 *11.0% [source: NSOM]

May 31, 2016 *1.8% [source: NSOM]

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

Note: 1.8% y-o-y; 3.2% Core - Ulaanbaatar City, May 31, 2016

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]

January 25, 2013 12.50% [source: Mongol Bank]

April 8, 2013 11.50% [source: Mongol Bank]

June 25, 2013 10.50% [source: Mongol Bank]

July 30, 2014 12.00% {source: Mongol Bank}

January 14, 2015 13.00% {source: Mongol Bank}

January 14, 2016 12.00% [source: Mongol Bank]

May 6, 2016 10.50% [source: Mongol Bank]

CURRENCY RATES – 1 September 2016

Currency Rate

U.S. dollar USD 2,207.70

Euro EUR 2,461.59

Japanese yen JPY 21.37

British pound GBP 2,902.35

Hong Kong dollar HKD 284.61

Chinese Yuan CNY 330.50

Russian Ruble RUB 33.82

SouthKorean Won KRW 1.97