19.12.2008, NEWSWIRE, 2008 YearEnd Issue

BUSINESS COUNCIL of MONGOLIA NewsWire

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www.bcmmongolia.org

Yearend 2008 Issue, December 19, 2008

The future gives us our frisson, but the past does not ever part with its power. That is why this last issue of the newswire in 2008 gives a selection of items published in the earlier 39 issues of the year, to remind readers of how the year progressed. If hopes were nipped, gains too were made. Some promises were not kept, but others were held out. No selection can meet everybody‟s expectations, but we do hope what we offer will kindle memories, and also be a handy reference tool. We start with reports on the meetings BCM hosted, and then present items divided into the usual three sections. Each of these presents related reports chronologically, beginning with the earliest. Almost all the items have been abridged, but the issue date is given to help find anything that might interest you to read further. This week‟s MSE review, inflation data, and currency rates appear as usual. The BCM Newswire takes a two-week break after this and our next issue will appear on January 9, 2009. Until then, we wish you all the best for the festive season and the new year.

RECAPS OF BCM MONTHLY AND OTHER MEETINGS

(May 2) It was nice seeing 65 members at our BCM monthly meeting this past Monday. The next monthly meeting will be held Monday, May 26. Pete Morrow opened the meeting and introduced the Council‟s new Vice Director, Ser-Od Ichinkhorloo and new BCM NewsWire editor, Julie Pitzen. He announced an interest in forming a working group for the privatization of the stock exchange and asked member to forward their thoughts on this to Jim. He also brought up the recent spate of negative articles about Mongolia including the full page ad in the Wall Street Journal and mentioned that BCM and top officials are unable to determine who is behind them. Executive Director Jim Dwyer announced that BCM membership has reached 95 members, an increase of six members from the last meeting. There will be a free round trip awarded on Eznis Airways for the 100th BCM member. He also mentioned the success of the International Tax Workshop co-sponsored with PricewaterhouseCoopers on April 15th. Jim asked members to please complete the survey that was sent out concerning the Legislative Standing Committee. Brian Goldbeck, Charge d‟Affaires, US Embassy, gave a briefing and introduced Robert Reid, Country Director for the MCC. Michael Richmond, Senior Commercial Specialist at the US Embassy spoke about grants for trade consulting services from US sources available for Mongolian projects. Our first speaker was Dr. Julian Dierkes, Assistant Professor and Coordinator for the Program on Inner Asia at the University of British Columbia. Dr. Dierkes spoke on his interests and many projects here in Mongolia particularly in the areas of development and mining. He also spoke of UBC‟s interest in creating a Chair in Mongolian Research and the need to create an endowment for this appointment and associated research projects. Dr. Dierkes is in the process of organizing an international conference, “Contemporary Mongolia – Transitions, Development and Social Transformations”, to be held in Vancouver, Canada, November 14-17, 2008. Interested participants and supporters may contact him at: [email protected]. Our second speaker, Betina Moriera Infante, Director, Breakthrough PR, spoke on how PR drives business results. She described PR as key in creating a proactive corporate image and how it plays a vital role in corporate strategy. She also spoke about branding and brand advocacy and how these are new concepts in Mongolia. (May 30) It was nice to see so many of you at this month‟s meeting. We had a near record turnout of 76. Our next meeting will be held Monday, June 30, at which we plan a Parliamentary election recap. Alain Fontaine, Vice Chair of BCM opened the meeting. Alain reviewed BCM‟s progress with cooperative agreements and interaction with Government ministries and agencies. He outlined

BCM‟s possible co-sponsorship of Euromoney‟s Investors Forum in UB in September and arrangements for a technology symposium, “Digital Mongolia”, in October with Intel Corporation as lead sponsor and local entities as co-sponsors. Executive Director Jim Dwyer announced that BCM membership has reached 101 members, an increase of six members from the last meeting. A free round trip ticket on Eznis Airways was awarded to Eagle Security for becoming the 100th BCM member. Jim also urged Members to submit business news for placement by the editor of the BCM NewsWire. H. E. Mr. Ichihashi, Ambassador of Japan to Mongolia, gave a brief update of activities and high level visits so far this year. In March, Foreign Minister, S. Oyun paid an official visit to Japan as well as Minister of Construction and Urban Development, M. Tsolmon. An agreement was signed between Mongolia and Japan regarding the support for construction of a new airport in Mongolia to be funded by soft loans from the Japanese Government totaling approximately US $300 million. The project is awaiting approval by Parliament. Mr. Do. Ganbold, President of MNMA, gave an update on the status of the draft amendments to the Minerals Law. The first hearing was held last Friday and “the future of mining in Mongolia is still pending”, he said. This week, the MPRP was still discussing the amendments. “It may be that the current session does not make a decision”, he said. An Election Panel was featured at the meeting. Speakers participating were: Mrs. S. Oyun, Chairperson of the Civil Will Party and Minister of Foreign Affairs; Mr. Munkh-Orgil, Mongolian Peoples Revolutionary Party and Minister of Justice; Mr. Amarjargal, Democratic Party and former Prime Minister, and Mr. G. Tsogtsaikhan, Policy Committee, Democratic Party. Mrs. Oyun began by presenting the main objectives of her Civil Will Party‟s platform. She noted that her party believes the Windfall Tax should be abolished completely. Mr. Munkh-Orgil, listed the MPRP‟s 12 platform points. Mr. Tsogtsaikhan of the Democratic Party mentioned that his party met with the press recently and gave a presentation of their platform for the upcoming elections. He pointed out that one of his party‟s main objectives was to create jobs. (July 4) The monthly meeting of the Business Council of Mongolia on June 30, attended by 78 members and guests, began with Yo. Otgonbayar, Secretary General and Election Campaign Manager of the MPRP, reviewing the election. He said the results were an expression of the people‟s satisfaction with the Government‟s performance, and their desire to give a clear mandate to one party to govern without hindrance. William S. Infante of the Asia Foundation which sent observers to 178 polling stations in the provinces was certain that the entire polling process had been fair and free. People had exercised their choice without any obstacle. L. Sumati, Director, Sant Maral Foundation, expected the MPRP to govern with more authority now that it would not have to keep coalition partners happy. Jim Dwyer reported that the induction of four new members since the last meeting -– Petrovis, the Turkish Embassy, Nomads Tours & Expeditions, and Tsagaan Alt Wool -- had taken BCM‟s strength to 105. The BCM website upgrade has been completed and a large portion of the site is now bi-lingual. South Korean Ambassador J. Park said firms there were eager to invest in the mining and construction sectors in Mongolia but lack of local skilled labor was a constraint. Mongolia‟s recent decision to import North Korean workers could also prove problematic. Mark Minton, Ambassador of U.S. to Mongolia, “completely corroborated” that the election had been fair. Expressing the hope that the new Parliament and Government would resolve the uncertainties about foreign investment, he said he deplored various recent efforts in the US media to “misrepresent developments” in Mongolia. The Embassy is working on ways to facilitate easier grant of business visas for Mongolians. With no meeting in July for Naadam, the next meeting has been fixed for August 25. It will be held with Alain Fontaine, CEO of Newcom, in the chair. He has succeeded Peter Morrow who was chairman of BCM and its predecessor entity, NAMBC-Mongolia, for 5 years. (August 29) The BCM monthly meeting on August 25, with Alain V. Fontaine in the chair, had as special guests a German delegation now in Mongolia to study the situation in the mining sector. Two new members have joined the Council since the last meeting in June. September will be a busy month. The Prime Minister meets with BCM members on September 1, the Euromoney Conference is scheduled for September 10 and 11, and the NAMBC Investors Conference will meet in Ulaanbaatar from September 17 to 19. The Ambassador of Turkey gave an overview of Turkish-Mongolian relations, and the Ambassador of

the USA introduced several top officials who have joined the Embassy recently. The German Ambassador then talked about a visiting delegation's itinerary and experience. Its leader revealed that a working group had been set up to follow up on the delegation's findings. This was followed by the featured World Bank presentation in two parts. The first was on the general business environment in Mongolia, which the Bank ranks 52nd among 174 countries evaluated for business-friendliness. The second concentrated on the mining sector, and stressed how the national economy needed quick political decisions to get mineral operations out of the doldrums. The next monthly meeting will be on September 29, and not on the usual fourth Monday of the month. (September 5) Meeting at Government House with the Minister for Trade and Industry Pressing political commitments did not permit Prime Minister S. Bayar to attend his scheduled meeting with BCM members at Government House on September 1. His place was taken by Kh. Narankhuu, Minister for Trade and Industry. He began by giving an overview of the current economic situation in Mongolia, mentioning that trade deficit had grown along with the volume of foreign trade, and that runaway inflation rates were the major concern. Questions had been submitted to Mr. Bayar and Mr. Narankhuu answered these. He expressed the inadvisability of making any specific commitments about policies and programs before a new Government took over, at most in two weeks' time. New members of Parliament will also most likely have fresh ideas to offer about the proposed amendments to the Mining Law, and these have to be considered carefully. However, the Minister assured the assembly - with 94 attendees, this was the most well-attended BCM meeting to date -- that "a practical and business-like approach" would be taken as "we don't have much time and the disputes cannot be prolonged". Thanking foreign investors for their contribution to Mongolia's economic growth, Mr. Narankhuu made it clear that serious investors, particularly those in mining, who were committed to developing the sector while observing the laws of the land, would face no problems in the coming days, as the Government was determined to "improve the business environment". It would however prefer the emphasis to shift from simple extraction of ores to processing of mineral products. For a fuller report on the afternoon's proceedings, please visit the BCM website, Showcases. (October 3) The BCM monthly meeting for Members was held on September 29, as usual at 5 PM at the Open Society Forum. Among those who attended were the two new members, Eurasia Capital Mongolia and National Life Insurance. Chairman Alain V. Fontaine could not be present and Jim Dwyer, Executive Director, gave a brief account of important events since the last meeting, and of future programs. Efforts are on to set up a meeting with Government representatives on the recent changes announced in the social insurance laws. In the absence of the Ambassador, the US Embassy report was presented by Economic/Commercial Section Chief Vincent D. Spera. This mentioned the recent visit of Ms. Michelle O‟Neal, US Deputy Undersecretary of Trade and Commerce who was accompanied by representatives of 10 companies. The embassy has now started issuing immigrant visas here. Mr. Tsagaan and his colleague, Oyuna, from the Bumrungrad International Hospital Representative Office here gave a presentation on the world-class Bangkok hospital and detailed the services they provide for intending patients in Ulaanbaatar. Randy Myer of Wagner Asia Equipment presented their plans to set up a vocational training institute, possibly as part of the Millennium Challenge program. Things are still at a preliminary stage but the institute is to be a public-private partnership project, and is expected to enroll its first 75 students in January 2009. The first courses to be offered are in automotive technology and power equipment. Members asked for inclusion of courses that would train Mongolians to work in the mining sector. This was the first monthly meeting offering teleconferencing facilities. A fuller account of the meeting can be read on BCM website, BCM News & Press. (October 31) With Mr. Alain V. Fontaine to leave Mongolia, the annual general meeting of the BCM on October 23 chose founding Chairman, Mr. J. Peter Morrow to resume the Chair until January. It also confirmed Mr. Sumati Luvsandendev to continue as Vice Chairman and inducted Mr. Ts.Boldbaatar, Chairman of Newcom, into the Board of Directors. As Mr. Morrow could not attend the monthly meeting on October 27, this was held with Mr. Layton Croft, a BCM Executive Committee member, in the chair and 65 in attendance. Recounting

developments since the last meeting, he said a BCM group had called on Ts. Sharavdorj, the Secretary General of the Parliament's Secretariat, who agreed to pass on comments and recommendations from the BCM to the concerned Working Groups of Parliament and, if necessary, to all individual MPs. This is a significant gain in the Council's advocacy program. In addition BCM began cooperation with the Ministry of Foreign Affairs & Trade after meeting with MFA&T's State Secretary, D.Tsogtbaatar. Two new members have joined BCM, taking total 2008 membership to 111. They are the Mongolian Employers Federation (MONEF), and Eagle TV. This meeting introduced a new practice. Two member organizations, Eznis Airways and Petrovis, talked briefly of their business issues, not just as something that affects them individually but as the general experience of everybody doing business here. The newly appointed Canadian ambassador, Mrs. Anna Biolik, at her first BCM meeting, talked about 35 years of successful Canadian-Mongolian diplomatic relationship and hoped this would grow deeper and the partnership richer. The South Korean ambassador, Mr. Jin-ho Park, gave information about Prime Minister S.Bayar's recent visit to Seoul and his talks there with Government and business leaders. Mr. D.Tsogtbaatar, State Secretary at the Ministry of Foreign Affairs & Trade, told the meeting of the present Government's commitment to being "open and professional" in all spheres of policy making and decision taking. He assured members that pragmatism, and not sentiment, would govern Government actions and there would be "no saying one thing and doing another". For a fuller report on the monthly meeting, please visit BCM's website, BCM News & Press. (December 12) The year‟s last BCM monthly meeting was held on December 8 with 72 in attendance, with Mr. Peter Morrow in the chair, before, as he said, retiring for the second time in eight months. Reporting on activities since the last meeting in October he said the success of the DIGITAL MONGOLIA Technology Symposium was so encouraging with a turnout of 160 from approximately 70 entities that it might be made an annual event. On December 3 the BCM hosted a reception to mark its first anniversary that was attended by important Government leaders and functionaries and other dignitaries. The Ministry of Education has asked for suggestions on reforming the vocational training system, and BCM members will be invited to a workshop in early 2009 to be jointly organized by BCM, the Ministry and GTZ to give their ideas. The President of Mongolia has asked BCM members to accompany him to the next World Economic Conference at Davos on January 28-February 1 and participate in arranging a Mongolia luncheon. Executive Director Jim Dwyer said attendance at monthly meetings was now three times more than earlier, but asked members to suggest ways in which they could be made more interesting and productive in the new year. He also reminded all members to renew their membership for 2009 without delay. Ms. Iva Stejskal from Ivanhoe Mines, a member of BCM‟s Legislative Committee, explained the provisions of the social insurance laws introduced last June, and the changes that the BCM wants, both in the law and the general policy. The draft of this recommendation will be reviewed by BCM‟s Executive Committee and the final letter sent to Government officials and certain members of Parliament. Mr. Bolorbat, head of Tavan Bogd‟s Nestle unit, spoke on the problems of enforcing food safety standards, and said the purpose was often defeated by excessive bureaucratic procedures. Ms. E. Sodontogos of the MNMA gave the Mining Report summarizing Parliament‟s decision to require draft Investment Agreements from the Government by January. Sodo also reported on the recent visit of a delegation to the China Mining Conference and also introduced the new Mining Journal whose second issue has just been published. Mr. Kh.Amarsaikhan gave a presentation on the Consultative Council on Investment Climate and Private Sector Development. It was set up in February and has met twice since then. He urged BCM members individually or the BCM as an entity to be involved in the work of the high-powered council.

Mr. Asun Arar, Ambassador of Turkey to Mongolia, spoke about the Eurasian Forum held in Turkey last month. Mr. Mark Minton, Ambassador of the USA to Mongolia, assured members that there should be no change in US policy towards Mongolia under the new administration. A business forum was being planned for April.

Mr. Arshad Sayed, Country Representative, World Bank, gave a presentation on the global economic crisis in Eastern Asia and its possible effects on Mongolia. Any prediction can only be very general as neither the depth nor the duration of the global recession could be foreseen and both will continue

to keep financial markets volatile. Despite some factors that help Mongolian resilience, there is no way the country will be immune to problems.

For a fuller report on the meeting, please visit the BCM website, News & Press.

AN ANNOUNCEMENT (November 28)

LAURENZ MELCHERS TAKES OVER AS BCM CHAIRMAN IN JANUARY The Business Council of Mongolia will begin the new year with a new Chairman, as Mr. Laurenz Melchers takes over from Mr. Peter Morrow, BCM's founding Chairman, who vacates the position he took up on a temporary basis when Mr. Alain Fontaine left the position. Mr. Melchers has been on the BCM Board of Directors since the middle of this year. What new direction does he hope to give to BCM work? Mr. Melchers said, “The BCM has a highly skilled and motivated staff, executive board and directors who are already working hard for it and achieving great results. It will be my goal to continue on this successful path and to put in my thoughts and ideas where needed. The Council‟s interest is to see Mongolia become a flourishing economy that will benefit all. If there are opportunities for BCM to be a catalyst in this process, it will take these up and act upon them.” Mr. Melchers is a co-founder of Mongolian Star Melchers Company (MSM) and has lived in Mongolia with his family since 1997. The MSM motto is Powerful Service. BCM members will be looking forward to some aces from their new Chairman.

BUSINESS

1. THE MINING LAW AND THE INVESTMENT AGREEMENTS

PRIME MINISTER’S SPEECH RENEWS HOPE FOR INVESTMENT AGREEMENTS (January 4) Prime Minister S. Bayar‟s speech to the Parliamentary Plenary session, December 13, following his appointment to his post, has renewed confidence the Mongolian Government will deal with stalled investment agreements in the mining sector. In Part Four of his five-part speech the Prime Minister targeted participation from an experienced foreign company to conclude the Oyu Tolgoi investment agreement in recognition the Mongolian nation did not have the capacity to do so itself.

Source: www.bcmmongolia.org/BCM News & Press

PRESIDENT PUSHES MINERALS LAW AMENDMENT (February 29)

President N. Enkhbayar initiated a meeting with leading politicians February 20, and the joint working group of Parliament and Government looking at the Minerals Resources law in an attempt to expedite amendments to the Law. Outcomes suggested there might be a decision released next week showing opponents have reached mutual understanding on amendments to the Law keeping 51 percent of the strategically important deposits under State ownership.

Source: Montsame

POLITICAL LEADERS AGREE ON MINERALS LAW AMENDMENTS (March 14)

A bill to amend the Law on Mineral Resources is ready to submit to Government and Parliament for approval. The bill stipulates that Mongolia will own no less than 51percent share of total capital fund and foreigners will own no more than 49 percent share if Mongolia has joint ownership in strategically listed deposits with foreign legal entities. Leaders of Mongolia‟s two leading parties, the MPRP and the DP, reached consensus on the form of the amendment to the Minerals Law. It is expected to be submitted to Parliament in an extraordinary session, on or about March 17. Oyu Tolgoi is on the list of 15 strategic deposits.

Source: http://newswire.mn

STAKEHOLDERS AIR ANGER OVER GOVERNMENT/PARLIAMENT POSITION ON MINERAL LAW (March

21) The Mongolian National Mining Association (MNMA) has led key stakeholders in a public condemnation for what they see as Government ineptness and a return to State control. Their criticism has targeted the latest Government efforts to address outstanding and long awaited issues in the Minerals Law holding up approval of draft investment agreements for foreign investors. The MNMA released a statement March 18 stating, „The MNMA profoundly regrets the Mongolian Government and Parliament‟s gross ignorance in their decision and law making practices on views and opinions of the private sector, whose rights and benefits are at stake and are eventually to be regulated by the very laws and regulations, becoming increasingly unrealistic to enforce.‟ Stakeholders who added their signature to the statement included the Mongol Coal Association, the Drillers Association and the Mongolian Geology Association.

Source: MNMA Statement, BCM website-„Articles/Reports on Mongolia‟

MINERALS LAW IN A SEA OF UNCERTAINTY (March 28) The Democratic Party has blocked attempts to get the draft amendments to the Minerals Law approved in Parliament before the April spring session, by taking a break. It has established its own working group from an urgent Party meeting to look at the draft amendments and claimed not enough time had been provided to digest them and they required further checking, „provision by provision‟ to ensure accuracy. The DP is also unhappy with the transfer of „the people‟s interests‟ to the Government. The composition of their working group remains unclear. The delay is in a line of many and leaves foreign investors with interests in Mongolia‟s largest deposits, Tavan Tolgoi, Oyu Tolgoi and Asgat Silver Deposit, in limbo. Meanwhile, the Government has decided to select a team of international counsellors to advise them on issues surrounding the strategic deposits, in particular on the legal environment surrounding Oyu Tolgoi and Tavan Tolgoi projects. The team will be selected according to the regulation on „selection of counselling service contractors‟ from the Law on Purchase of Goods and Services with State and aimag budget funds.

Source: Montsame; Minerals News Daily

MINISTER SAYS 51 PERCENT OWNERSHIP OF DEPOSITS PHASED IN OVER TIME (March 28) In an interview Industry and Trade Minister, Kh. Narankhuu explained the 51 percent proportion of Government ownership of strategic deposits could be „phased in‟ during the first 10 to 15 years of operations and it was possible the Government would contract foreign, experienced professional managers and specialists to conduct the work in mining, especially for Oyu Tolgoi and Tavan Tolgoi. Minister Narankhuu said the dominant proportion was vital to Mongolia securing government participation, regulation and control in the mining sector and if development on the sector was wrong it could have a devastating impact on Mongolia‟s economy. He said negative messages to the public had caused the Government to intervene in development in the minerals sector.

Source: Onoodor reported in the Minerals News Daily

TAX RATE ON GOLD TO BE CHANGED (May 23) The Government has drawn up amendments to the law on minerals which aim to alleviate the tax burden on gold mining companies, increase the volume of gold sold to the MongolBank, allocate revenue from taxes imposed on the gold sold, and annul the windfall tax to bring royalties to international standards. In May 2006, the Parliament approved a law on windfall tax on some products. Before this, the volume of gold sold to MongolBank had increased annually. Since 2006, it has drastically decreased. Last year, 10.5 tons of gold were sold to the MongolBank, and a total of MNT 72.1 billion windfall taxes were imposed on extracted gold, but only MNT 34.2 billion was allocated in the state budget.

Source: Montsame

PARLIAMENT RATIFIES STRATEGIC DEPOSIT LIST (May 30) Last Friday, the first discussion of the drafts was held, incorporating the draft law initiated by 19 MPs. A task group, headed by N. Batbayar unified the drafts law. According to this, strategic deposits include gold deposits with resources of more than 100 tons, copper deposits with resources of more than 5 million tons, silver deposits with resources of more than 500 million tons, and iron deposits with resources of more than 150 million tons estimated in accordance with international

standards, Uranium, rare-earth elements and pure quartz deposits that are of special significance to the National Security shall be included in the strategic list without considering resource amount.

Source: www.business-mongolia.com

MODIFICATION OF WINDFALL TAX ON GOLD PENDING (May 30) Mongolia collects a considerable portion of its budget from the windfall tax imposed on copper and gold. This week, the Government submitted a proposal to revoke the provision for the windfall tax on gold to the Economic Standing Committee. Democratic Party members expressed their support. Although gold extraction has not diminished, the amount of gold sold to the Bank of Mongolia has sharply declined since the introduction of the tax. If the Government proposal is approved and the windfall tax imposed on gold is abolished, it will result in royalty increases.

Source: Zuunii Shuudan, Mineral Daily News/www.miningmongolia.mn

RIO TINTO, IVANHOE MAY SHARE PRODUCTION WITH MONGOLIA (June 13) Rio Tinto Group and Ivanhoe Mines Ltd. may share production or profits from a Mongolian copper and gold mine with the nation's government to win approval to continue developing the site. The production-sharing plan at the Oyu Tolgoi project may replace a 34 percent equity stake included in an agreement proposed last year, Ivanhoe Chief Executive Officer John Macken said, in an interview. Asked whether the government would demand a share of production corresponding to the previously proposed 34 percent equity stake, Macken said, “It'll probably be closer to 50 percent.''

Sources: www.forbes.com, www.bloomberg.com

MONGOLIA SHOULD “TAX MORE, OWN LESS” (July 25) A new government in Mongolia could finally pass deals to tap mineral deposits, but analysts say these would be less than ideal for either Mongolia or foreign investors. They feel the country will be better served by taxing its mineral wealth, rather than seeking direct government ownership in massive mines, writes Lindsay Beck. An investment agreement with Ivanhoe Mines and Rio Tinto for the Oyu Tolgoi project, still under negotiation, would be the first such deal. Since Oyu Tolgoi's discovery in 2001, Mongolia's laws have gone from being among the most attractive in the world for foreign miners to being increasingly protectionist, on populist fears the country would trade its wealth for an environmental disaster. During that time, metals prices have soared to record highs. The government is unlikely to take an active management role, but has not specified how it would manage its stakes or whether it would set up a separate body to do so. "It creates a conflict of interest for the government -- do you represent the people or the shareholders in a company," said Adrian Ruthenberg, Asian Development Bank's Mongolia director. Partial ownership by the government, rather than taxation or royalties, also leaves it more vulnerable to dips in production, said D. Ganbold, president of the Mongolian National Mining Association. There has been talk of giving the Government a 51 percent stake in Oyu Tolgoi. In exchange, the project would be exempt from a 68 percent windfall profits tax while it built a copper smelter in the Gobi. Even at 51 percent, Rio and Ivanhoe say they could go ahead. "We're totally comfortable" with a sizeable government stake, said Andrew Cuthbertson, head of Rio Tinto Mongolia. "The investors are really waiting for the government to take the leadership and make a decision and move on."

Source: www.reuters.com

PRESIDENT SAYS INVESTORS MUST GET 51% SHARES, BUT FOR 25 YEARS ONLY (October 3)

In his speech opening the Autumn session of Parliament on Wednesday, President N.Enkhbayar said the new mining policy should create “a win-win situation for both parties”. Cooperation was essential for mining exploration, as Mongolia did not have the resources to “go it alone, without foreign investors”. Only they can provide the enormous financial outlay, technology and experts. “Initially investors will own 51 percent and control investment policy, even as they bear the risks. It is common practice. This can continue for 25 years, and from the 26th year, the Mongolian state will own 51 percent,” the President said. Even in the 25 years when investors will own 51% of the project, Mongolia‟s share of the revenue, including dividends, royalty and taxes, will exceed what it would get from a 51% ownership.”

Source: en.News.mn, www.miningmongolia.mn

MINISTER STRESSES NEED TO BALANCE NATIONAL AND INVESTOR INTERESTS (October 3)

D.Zorigt, Minister of Minerals and Energy, feels it is imperative for Mongolia to have a stable legal environment to allow investors to operate without having to worry about frequent amendments that affect plans and prospects. This applies all the more to the minerals sector, as initial investments there have to be big, especially in deposits of strategic importance. Before it embarks on spending billions of dollars on a project, any company has the right to ask for some sort of guarantee that the rules of the game will not be changed.

This does not mean that the interests of Mongolians have to be overlooked while offering stability and sustainability to satisfy investors‟ requirements. Indeed, any government has to accord top priority to the concerns of the people of Mongolia as they are the ultimate rightful owners of their country‟s natural resources. The challenge before everybody right now is to devise an agreement that balances the interests of the people with those of investors, one that will see to it that these are not presented as mutually incompatible.

Source: Zuunii Shuudan

RIO TINTO NOT TO CEDE CONTROL OF OYU TOLGOI (October 3)

Bret Clayton, chief executive officer of Rio Tinto Copper, has said the Group will not cede control of the Oyu Tolgoi project to the government. “We have made it very clear that 51 percent ownership by the state is unacceptable and that the sharing of the pie has to be about 50:50,” Mr. Clayton said. “We can look at different ways to share it, but we can't go any higher than that or the economics of the project don't stand up.” The options include the government gradually increasing its stake in the project, changing the mix of royalties and taxes levied, or a production-sharing accord.

Mr. Clayton, who met Prime Minister Sanjaa Bayar in Mongolia two weeks ago, said there “were very encouraging signs that they wanted to proceed quickly”, adding, “Our hope is to get something done by the end of the year to get it through parliament early in the new year before presidential elections due around mid next year.” The timing may enable Rio to begin development in the spring.

Source: www.bloomberg.com

OYUN SEES NO NEED TO CHANGE “GOOD” MINERALS LAW (November 14) “We have lost our golden chance and now must make sure the silver or the bronze does not elude us,” said Ms. S. Oyun, a mining professional and a former foreign minister, who is now a member of the MPs‟ group entrusted with drafting amendments to the 2006 Minerals Law. Talking to media she recently said the law as it stands “is good” and she saw no reason to change it in any way. She said the group‟s members were seriously assessing the implications of the Government owning 51% of strategic deposits. They understand that the financial responsibility would be huge and could be difficult to fulfill. They are not sure if the Government should dare take the risk, or if it should leave ownership and development costs to the private sector and just tax them on their profits. In any case, she said, a government did not have to insist on majority shareholding to exercise control over a project. The terms of any investment agreement could give it sufficient leeway to monitor progress and enforce its wishes. Ms. Oyun was clear that the windfall profits tax is counterproductive and should be scrapped. Calling product sharing “not the perfect alternative”, Ms. Oyun said, “It is sensible to make separate agreements for, say, Asgat and Tavan Tolgoi.”

Source: www.business-mongolia.com

MPs’ GROUP FAVORS 51% SHARE IN TAVAN TOLGOI, 34% IN OYU TOLGOI (November 21)

The Government of Mongolia is likely to try to pin down a deal that will give it 34 percent ownership of the country's giant Oyu Tolgoi copper deposit as falling commodity prices push it to back away from seeking majority control. A parliamentary working group studying revisions to the

country's minerals law has proposed that agreements for Oyu Tolgoi as well as for the big Tavan Tolgoi coal project be negotiated before the law is finalized.

The proposal would include a recommendation for the state to hold 34 percent in Oyu Tolgoi and 51 percent inTavan Tolgoi, Mongolian media have said and sources close to the working group have confirmed. The Government is unlikely to invest any money on developing either project. Its proportionate share of such expenses will be adjusted against taxes, royalty and other fees, dividends and advances.

Source: www.reuters.com, en.news.mn

DRAFT RESOLUTION VAGUE AND DISAPPOINTING, SAYS Do. GANBOLD (November 28)

Do.Ganbold, President of the Mongolian National Mining Association, says that while the basic outlines of the draft resolution prepared by the MPs' working group on mining were better than the suggestions during discussions in Parliament, many of the details in it were impracticable. There were also contradictions. For example, on Tavan Tolgoi the proposal to work within the framework of the 2006 law is soon followed by another to study the possibility of setting up a company where the Mongolian side will own not less than 51 percent. This is against the 2006 law which put the State's ownership share in projects where the prospecting work had been done at State expense at 50 percent, and not more.

Investors were generally disappointed, he said. It was clear that the draft "was prepared by people who don't understand mining at all". Also, much in it had been left vague and will merely make for uncertainty as time goes on, something they were most keen to avoid. He could not be sure whether these inconsistencies were innocent lapses or deliberate equivocation.

Anyway, Do.Ganbold saw little chance of any further progress on the mining issue before the new year. Calling the ideas about asking investors to pay taxes and fees in advance "an absolutely impossible demand", Do.Ganbold said, "We don't need to produce tons of paper before beginning talks. It is not a matter of who won and who lost. We need to cooperate at a time of global crisis."

Do.Ganbold rated as bleak Mongolia's chances to find money for its share of expenses in Oyu Tolgoi and Tavan Tolgoi unless it went for big loans. Asked about product sharing, he said, loud and clear, "That is impossible."

Source: Ardiin Erkh

PARLIAMENT ASKS GOVERNMENT TO PREPARE BOTH MINING AGREEMENTS BY FEBRUARY 1 (December 5)

Parliament approved on Thursday the draft resolution prepared by the MPs‟ working group on the Oyu Tolgoi and Tavan Tolgoi deposits and instructed the Government to finalize the draft of the two separate agreements before February 1. Earlier, when the draft was discussed on Wednesday by the Standing Committee on the Economy many MPs had asked for quick Parliamentary approval as delay in finalizing the agreements was losing Mongolia money.

Parliament thus agreed with the working group that amendments to the 2006 Mining Law could wait but investment agreements on both Oyu Tolgoi and Tavan Tolgoi can and should be pursued. The Government wants 34% ownership in the former, gradually raising it to 51%, and in the case of the latter, it will have 51% from the beginning.

In Parliament the only dissenting voice was that of Ts.Davaasuren (MPRP) who said, “I have heard that Ivanhoe Mines has raised CAD3.7 billion for these two projects. We are sacrificing our unique wealth because of a financial crisis and because we have no money. Our music will now be played by an orchestra of foreigners.”

The man who led the working group, Kh.Badamsuren, told him, “We have heard many stories about how Ivanhoe Mines raised huge sums of money. Our leaders made 286 foreign visits and looked for investors. At the same time the Mongolian state wants to have a share of the mining income. If the state policy and the legal environment are not stable foreign investors will be confused. So we have to decide once for all. There is no time to lose.”

Source: en.News.mn

DRAFT CAPS FOREIGN SHARE IN STRATEGIC DEPOSITS AT 49% (December 5)

The draft amendments to the Minerals Law, as proposed by the MPs‟ group, include a provision that says the State will own not less than 51% of any strategic deposits, irrespective of where the funds for the initial exploration came from. Ts. Damiran, an MPRP member of the group, has said foreign companies‟ participation should not exceed 49 percent and can be less, according to the draft.

The draft calls for amending 10 articles of the 2006 Minerals Law. Mr. Damiran says DP and MPRP members of the group jointly developed the general concept. He claims the term strategic deposit has now been more clearly defined as regards location, resource and utility. Also minerals licenses will be granted after an application is processed at three levels.

He also says the minimum 51% ownership will rest not only with the state “but with Mongolians as well”, and adds, “If people want to sell their ownership percentage to a foreign company, the decision will have to be taken by the Government of Mongolia. In order to maintain transparency, that process will be the responsibility of a National Council, with representation from the civil society.”

Source: www.business-mongolia.com

DRAFT OF INVESTMENT AGREEMENTS TO BE READY BY JANUARY 20 (December 12)

At an extraordinary meeting of the Government on Friday, following Parliament approval of the draft resolution on investment agreements on the Oyu Tolgoi and Tavan Tolgoi deposits, Prime Minister S. Bayar instructed Finance Minister S. Bayartsogt, Minerals Minister D. Zorigt and Nature and Environment Minister L. Gansukh to prepare a draft of the agreements proper before January 20, 2009.

The meeting also decided to establish a working group to devise methods and means of distributing the promised Country Share of the mineral wealth. The group will have representatives from the Finance Ministry, the Justice and Interior Ministry, the Social Welfare and Labor Ministry, the Committee on Financial Regulation, and from Erdenes-MGL. Social Welfare and Labor Minister T. Gandi told the meeting that MNT3.9 trillion would be required to give every citizen MNT1.5 million of the “wealth”. Present Government thinking sees most of the money being distributed in the form of shares, apartment bonds, education or health cards, social insurance allowance, and enforced savings, while some part would be paid in cash.

Source: en.News.mn

“CONTRADICTION” IN OWNERSHIP SHARE TERMS EXPLAINED (December 12)

Prior to the approval of the draft guidelines on the investment agreements formulated by a MPs‟ working group, a parliamentary standing committee asked the group several questions about their recommendations. One of these related to the apparent contradiction between the present law saying that the State “is entitled to own up to 50% of Tavan Tolgoi” and the group‟s suggestion that “the Government of Mongolia shall seek to own up to 51%…”. Kh. Badamsuren, who led the working group, explained this by saying that while the law talked about “State ownership”, the draft wanted the share to be owned by “the Mongolian people”. He also said the Government would announce a tender bid when all formalities were over and one could not speculate on the number of investors who would show interest. N. Narankhuu reminded members that this tender could not be an open one under the current law.

Source: www.business-mongolia.com

2. POLICY ADVOCACY

GOVERNMENT- PRIVATE SECTOR UNITE FOR DEVELOPMENT STRATEGY (February 1) A Government-private sector meeting targeting Mongolia‟s private sector development has started the process for a „Private Sector Development Strategy‟ to support Mongolia‟s draft National Development Strategy (NDS) and bring the two sectors together through partnerships. The government will work out the strategy from 2008 until 2015, by February reflecting the proposals and recommendations from the meeting. Prime Minister S. Bayar told meeting participants it was time to show foreign partners that Mongolia was open and reliable and would work to refine the biggest projects with high quality and

implement them with increased transparency and less bureaucracy. His general comments hold promise for renewed ways of working from Government. He said the Government would have to „change its mindset‟ and get rid of the way it did business making promises and public declarations without full consideration of issues of its capacity and available financial resources, raising false hopes and expectations for business people. Representatives from Government and the private sector, including the Business Council of Mongolia, met to discuss the Strategy at the fourth bi-annual, „External Partners Technical Meeting on Private Sector Development,‟ in State House from January 28 to 29. The Business Council of Mongolia played a strategic role as the only entity representing a broad group of foreign and domestic investors. Business Council of Mongolia Executive Director, Mr Jim Dwyer presented specific recommendations to be included in the strategy on behalf of BCM members. In summary they suggested: � Finance social entrepreneurship through training (particularly women); capitalize a Venture Capital Fund; encourage Private Equity Capital. � Publicize and establish regulatory mechanisms to enforce the Corporate Governance Code promulgated by the Financial Regulatory Commission to foster transparency in businesses. � Privatize the Mongolian Stock Exchange. � Implement tax reform by revising Windfall Tax. � Cap enterprises‟ payments in the social insurance scheme per individual and exempt foreigners from Social Insurance payments and exclude them from all benefits. � Substantially revise the proposed amendments to the Foreign Investment Law.

Sources: newswire.mn/index, The Mongol Messenger, Odriin Sonin Check: BCM website for details of BCM recommendations on the Legislative Committee page

THIRD US-MONGOLIA BUSINESS FORUM HELD (May 9) The U.S. Department of Commerce hosted the 3rd U.S.-Mongolia Business Forum in Washington DC on April 23-24, 2008. Some 150 participants attended the forum, including representatives of both countries' health/pharmaceutical, trade, agricultural, construction and mining companies. Secretary of Commerce, Carlos Gutierrez stated that Mongolia was "an increasing focus of the world's attention" and that this forum had become "an important venue for helping the United States and Mongolia to expand the economic dialogue". Topics of discussion included Mongolia's current trade policies, the state of the pharmaceutical and light industry, export-import of agricultural and construction equipment, challenges and opportunities of doing business in Mongolia, and the latest developments of Mongolia's mining sector. Deputy under Secretary for the International Trade Agency of the Department of Commerce, Ms. Michelle O'Neill, hosted a luncheon for the forum participants. During the luncheon, there was a "business match-making session" whereby participants had informal discussions of potential projects with mutual interest. The Mongolian group attended a workshop at the U.S. Dept. of Commerce about investing in the U.S. economy, and services available for small and medium enterprises. Mongolian businesses also had an opportunity to visit a construction site in DC arranged by the General Contractors Association of America, the Rio Tinto office in DC, and Larriland farm in Maryland.

Source: Montsame

US BUSINESSES READY TO INTRODUCE LATEST TECHNOLOGY (September 19)

Ms. Michelle O'Neill, Deputy Under Secretary for International Trade of the US Department of Commerce, called on President N. Enkhbayar on Wednesday. Greeting the visitor, the President recalled how "President Bush referred to Mongolia as the third neighbor of the USA", and was optimistic that the USD 285 million US aid to Mongolia from the Millennium Challenge Account would "make great contributions to the development of our country". Ms. O'Neill said that US businesses were at present meeting their Mongolian counterparts to expand cooperation. Among them are representatives from movie restoring companies holding a dialogue on restoring and saving Mongolian movies made during the socialist period, she added. Representations from US mining companies such as Rio Tinto are also included in the business team. "We are ready to introduce all up-to-date technology to Mongolia to fairly compete in the Mongolian

market," she said. Source: Zuunii Medee

3. INDIVIDUAL COMPANY NEWS

ASGAT DEPOSIT ON ROCKY ROAD (January 18) Ownership of Asgat silver deposit in Mongolia‟s extreme northwest Bayan Ölgiy Aimag has reached a stalemate. The deposit is one of Mongolia‟s richest underground resources and internal debate in the Mongolian Government has split views in two. Prime Minister Bayar and his supporters say it is best with 50 percent ownership in the hands of the Russian-Mongolian venture, Mongolrostsvesmet Company, owned by Russian oligarch Suleyman Kerimov, because it invested in testing the ores; has the closest metallurgical processing plant and the only route to the site from Russia. MPs opposing the suggestion claim Asgat is 100 percent in Mongolian territory, 600ms from the closest Russian border point and it is possible to construct an eight km road to the site through marshes, currently a barrier to access from the Mongolian side. They are concerned that the two aimags‟ MPs have not opposed Russian ownership and failed to protect job creation and wealth to the region. Prime Minister Bayar‟s suggestion as per Mongolia‟s Minerals Law of 50 percent to Mongolrostsvesmet Company, who would mine the deposit through their subsidiary, „Asgat Polimetal,‟ and 50 percent to the Mongolian Government, has raised suspicions among some MPs. They said an earlier agreement, which was supposed to have been cancelled under the previous Prime Minister, might not have been cancelled at all. The deposit‟s reserves are valued at over USD one billion. The debate continues in Parliament as of January 16.

Source: www.russia-intelligence.fr; Udrin Sonin

ERDENE GOLD DEPOSITS FOUND IN WIDER AREA (March 14) Erdene Gold Inc. announced March 11 drilling results which showed mineral deposits extended much farther than previously estimated at their Zuun Mod site. The site holds major deposits of molybdenum and copper. As a result of drilling, deposits have been found extending by 250 meters to the east and by 300 meters south. In a statement released by Erdene Gold, President and CEO, Peter Akerley, said, “As molybdenum demand continues to increase, driven by China's growth and increased use in the energy sector, amidst a tightening supply environment, it is more evident that strong molybdenum prices can be maintained for the long term and the development of world class molybdenum deposits will be required.” Zuun Mod is located about 200 km north of the Chinese border.

Source: www.montsame.mn

QGX SINGS PRE-MINING AGREEMENTS (May 9) Canadian-based QGX Ltd. announced last week that it signed a pre-mining agreement for the Golden Hills and Undur Tsagaan projects with Mongolia's government. The agreement specifies that QGX will conduct a final feasibility study, complete an environmental impact study, and gain approval for final plant design for both sites. The pre-mining operations for Golden Hills and Undur Tsagaan are to be completed by April 2011. Exploration at Undur Tsagaan has shown promising deposits of various metals. "These agreements pave the way for the projects to obtain all necessary permits and approvals for mining. Once completed, operations are expected to reach full production within one year," said Paul Zweng, president and chief executive officer of QGX Ltd.

Sources: Montsame, www.tradingmarkets.com

PEABODY ENERGY INTERESTED IN MONGOLIA (May 16)

Officials from Peabody Energy presented a proposal to President Enkhbayar on developing the Mongolian coal industry. The proposal was written by leading American entities. In summary, the proposal consisted of legal, financial, organizational and environmental requirements for the exploitation of coal deposits. A single authority should manage the coal production and it should be offered at the highest possible market price. Mongolian workers would be trained and a social fund for Mongolian citizens governed by an independent board. The minerals should be 100% state

property until unearthed. The Director of Government Relations for Peabody Energy, Cartan Sumner said, “Mongolia has become the center of world minerals. Therefore, the proposal was based on the idea of establishing equality between interests of the state, citizens and investors.” President Enkhbayar said: “Mongolia has minimal experience of exploiting large deposits. I think it would be right to classify the deposits into groups explored by the state and private sector, establish laws and regulations; then, the state should find the right partners and cooperate with them. Our decision makers need to exchange information and gain experience in this field.”

Sources: www.olloo.mn, The Mongol Messenger, www.miningmongolia.mn

ERDENE GOLD’S ZUUN MOD SITE ONE OF ASIA’S LARGEST MOLYBDENUM DEPOSITS (June 13) Erdene Gold Inc. (TSX: ERD) announced that the Zuun Mod site in southwest Mongolia may be one of the largest molybdenum deposits in Asia. "Today we have established Zuun Mod as one of the largest and most advanced pre-development molybdenum projects in the North Asia region, an area with the largest growth in molybdenum consumption globally," said Peter Akerley, Erdene Gold President and CEO. "We are excited to begin the feasibility stages and the great potential we see for discovering additional deposits within this tremendously large mineralized complex." The Zuun Mod property is within 180 kilometers of China's border and close to where China is building its infrastructure to access Mongolia's mineral resources.

Source: www.mongolia-web.com

SOUTH GOBI ENERGY RESOURCES COAL MINE OPENED (June 20) South Gobi Energy Resources celebrated the opening of its Ovoot Tolgoi coal mine in southern Mongolia last week. More than 100 guests, including political leaders and employees attended the opening ceremony. The mine is located 45 km north of the Mongolia-China border. A railroad was built to the Ceke border point for loading coal. The Mongolian government is also transforming the Shivee Khuren (Ceke) border point into a full-time crossing that will allow daily deliveries of coal to China. Since receiving its mining license in September 2007, 180 employees have been recruited and are involved in all phases of mining activity. Open-pit coal production began in April of this year, and the mine is now operating 24 hours per day. Three coal products were identified for export from the mine: thermal coal, premium thermal coal and metallurgical coal.

Source: www.mongolia-web.com

EBRD SYNDICATED LOAN TO MCS, FIRST IN MONGOLIA (August 15) As its first syndicated loan in Mongolia the EBRD is providing a US$13 million credit to MCS Coca-Cola LLC to help it raise production, expand its product range, and most importantly, improve its wastewater treatment and recycling processes. MCS will use the funds to construct a green field bottling plant to increase its production capacity. The new wastewater treatment and recycling plant, to be used by a neighboring MCS-APB brewery, will allow the company to recycle water up to five times more than now to discharge to the municipal sewage system (once treated). MCS, which holds the franchise for Coca-Cola products in Mongolia, is one of the largest private companies in the country. According to the President of MCS Holding LLC, this expansion project partially funded with EBRD support will help take the company's business to a different level and promote local manufacturing, employment, and environment-friendly production.

Source: www.maximnews.com

NEW US$22 MILLION COCA-COLA PLANT OPENED (August 29) A US$22 million green field Coca-Cola bottling plant was opened in Ulaanbaatar on August 24 by Muhtar Kent, President and CEO of The Coca-Cola Company, and Odjargal Jambaljamts, Chairman & CEO, MCS Group. "I'm delighted to see MCS Coca-Cola continue to exceed all projections in sales volume and profit. By posting an average annual volume growth of nearly 50% year on year, the Mongolian business has established itself as one of the strongest performing operations globally," said Mr. Kent on the occasion. On his part, Mr. J. Odjargal credited "the burgeoning beverage market in Mongolia" for the existing plant "running out of manufacturing capacity 7 years ahead of schedule". In 2002, the average annual per capita consumption "was 4 Coca-Cola products, but right now, we are selling an average of 67 beverages to every Mongolian consumer," he said.

For more on the plant and the inauguration ceremony, go to the BCM web site, Business Profiles.

Source: Business Wire

MONGOLIIN ALT TO BUILT RAILWAY (August 29)

The Government has accepted the proposal of Mongoliin Alt LLC to construct a railway in Umnugobi province linking the Nariin Sukhait coal mine with Shivee Khurent on the Chinese-Mongolian border, a distance of 47.2 km. It can then be connected to the Uigur Xinjiang railway of China. The company will bear the entire costs of the construction. After it has recovered its costs, or after 10 years of running the railway, whichever is earlier, the Government will take over 51 percent share of the operations.

Source: Onoodor; Ardiin Erkh

ENTREE GOLD DISCOVERS COAL IN LOOKOUT HILL (August 29) Entree Gold Inc. announced on Monday a new coal discovery on its 100% owned Togoot license, which forms the western portion of its Lookout Hill Property in Mongolia. Exploration in 2008 is focused on a number of geological targets on the Togoot license including the new coal discovery, Nomkhon Bohr, located about 60 km northwest of Ivanhoe Mines' Oyu Tolgoi copper-gold deposits and 70 km southeast of the Tavan Tolgoi coal deposit. Greg Crowe, President and CEO, stated, "The location is particularly important as it occurs close to the haulage road currently used to ship coal from the Tavan Tolgoi deposit to China." Ivanhoe Mines and Rio Tinto are major shareholders of Entree, holding approximately 15% and 16% of issued and outstanding shares respectively.

Source: Marketwire

CENTERRA GOLD PREPARES FOR GROWTH (September 19) Toronto-based Centerra Gold is confident of its mining future in Mongolia. The company is improving and expanding facilities at the Boroo gold mine, as well as developing the Gatsuurt project. The company has hired new executives to prepare for its growth in Mongolia, including a vice president for business development.

Source: Montsame

LEIGHTON ASIA’S FIRST MINING CONTRACT IN MONGOLIA (October 3) Leighton Asia has secured a mining contract for the Ukhaakhudag coal mine project in Mongolia. This contract for the mine start-up and box cut for the mine is the first project in Mongolia for Leighton, a company that has developed a strong working relationship with Energy Resources LLC, the owner of the Ukhaakhudag coal deposit which sits adjacent to the Tavan Tolgoi deposit in the South Gobi region. This is a significant entry for Leighton Asia into contract mining in Mongolia. Its work at the mine site will commence in October.

Source: www.leightonasia.com

KOREAN CONSORTIUM PROPOSES TRANSPORTING TAVAN TOLGOI COAL BY SEA (October 24) The Korean investment consortium that met Prime Minister Bayar during his recent visit to South Korea to express their interest in investing in the Tavan Tolgoi deposits came prepared with a detailed and carefully planned project proposal. The consortium is ready to make a huge amount of investment to develop the high-quality coal reserves to meet the energy needs of the South Korean economy. Anticipating that the amount of coal will be too large to be transported by train through China, the Korean investors have made other plans. They will build a railway from Tavan Tolgoi to the Altanbulag border to help carry the coal to Vladivostok, and then take it by sea. The Russian port of Vanina will be the hub of this movement, and thus Russian cooperation should be forthcoming. The consortium includes Korea Resources, Samtan, Daewoo, Keangnam, Samsung, Hanhwa, and LG Corp.

Source: Onoodor

IVANHOE “WELL-POSITIONED” TO PURSUE “FOCUS” ON OYU TOLGOI (November 21)

Ivanhoe Mines remains focused on opportunities to advance the company's flagship Oyu Tolgoi copper-gold project. In a statement accompanying the release of its results for the third quarter ending September 30, President and Chief Executive Officer John Macken said that despite a net loss of USD88 million in third-quarter 2008(or USD0.23 per share), largely a result of USD59.7 million in exploration expenses, and of forex losses and other expenses amounting to USD20 million, the company is well positioned with quality assets and a significant cash position of approximately USD460.8 million, to fund its minimum obligations for at least the next 12 months. Mr. Macken said, "We are prepared to reconsider our projected pre-construction spending on the Oyu Tolgoi Project and, if necessary, act decisively to further curtail spending if sufficient progress is not made toward the timely conclusion of an Investment Agreement with the Mongolian Government."

Source: www.ivanhoemines.com

ERDENE “OPPORTUNISTIC IN THIS PERIOD OF UNCERTAINTY” (November 21) Erdene Resource Development Corp. released its third quarter financial results on Monday and provided an update on the company's principal projects that include the Zuun Mod molybdenum project and coal exploration in Mongolia. Erdene lost USD887,425 or USD0.01 per share for the three-month period, and had approximately USD20.6 million of cash and cash equivalents on hand compared with USD8.7 million as of December 31, 2007. Mr. Peter Akerley, President and CEO, said, “(We) remain opportunistic in this period of uncertainty." Calling Zuun Mod the most significant new metals discovery in Mongolia since Oyu Tolgoi and perhaps one of the largest new primary molybdenum discoveries globally in the past two decades, the report says, "Zuun Mod continues to provide tremendous potential for additional expansion and discovery, and situated on the doorstep of the world's largest steel producing and fastest growing molybdenum consuming region, is uniquely positioned to take advantage of future growth."

Source: Marketwire

RIO TINTO TO CUT 14,000 JOBS, SLASH SPENDING (December 12)

Global miner Rio Tinto, saddled with nearly USD40 billion in net debt, has said it will cut 13 percent of its workforce, slash capital spending and boost asset sales as it battles a collapse in commodity markets. Rio has been under pressure to detail plans to cut borrowings since its share price slumped after larger rival BHP Billiton scrapped a USD66 billion takeover bid for the company last month. Rio said it would reduce its global headcount by 14,000, including nearly 6 percent of its own employees and more than half its contractors, and increase the range of assets it was looking to sell, but said it was too early to be specific. "Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximize cash generation and pay down debt," Rio Tinto Chief Executive Tom Albanese said. The measures announced meant Rio Tinto would not need to sell new shares to help pay down debt. It would also hold its dividend steady. Analysts agree that the measures Rio Tinto plans should be enough for it to meet the USD10 billion in debt reduction it has targeted. Rio will also defer exploration expenditure. Mr. Albanese said, “We will minimise our operating and capital costs to appropriately low levels until we see credible and meaningful sings of a recovery in our markets, but will retain our strategic growth options, and expand further the scope of assets we are targeting for divestment. By taking these tough decisions now, we will be well positioned when the recovery comes.”

Source: www.reuters.com, MiningNewsNet

SOUTHGOBI MEETS TARGET AHEAD OF SCHEDULE AND BELOW BUDGET (December 12)

SouthGobi Energy Resources Ltd. announced on Monday that the Ovoot Tolgoi mine in southern Mongolia has produced its first 1,000,000 tons of coal ahead of schedule and below budget. SouthGobi is 80 percent owned by Ivanhoe. Ovoot Tolgoi surpassed its budgeted production for 2008 of 1,000,000 tons of coal on November 29 and is on track to produce 1,100,000 tons in 2008. The actual site cash cost of production at the Ovoot Tolgoi mine through October 31, 2008 was approximately USD8.20 per ton of coal produced, 32% under budget. The Ulaanbaatar office

overhead costs through the same period were approximately USD3.20 per ton of coal mined, 27% under budget.

Sources: Marketwire, www.southgobi.com

URANIUM LURES MANY TO MONGOLIA (December 12)

The number of governments and private companies showing interest in the uranium deposits in Mongolia, constituting about one-fifth of the world‟s known total, keeps on increasing. Among recent visitors who came for exploratory talks have been a former Prime Minister of Russia, Mr. M. Fradkov, the head of the RosAtom Agency, Mr. S. Kirienko, and the Director of the Federal Council of the Russian Federation, Mr. B. Mironov. Among companies making their pitch have been Bazovy Element, Renova, and Severstali from Russia, Mitsui from Japan, a joint French and Japanese company STIC, the Australian Paladina and BHP Billiton, the French Areva, and the Brazilian CVRD. Companies that would like to expand their present uranium exploring activities are UGL, Central Asian Uranium, and Western Prospector.

The price of uranium in the world market increased around 1,100 percent in four years, from USD12 per pound in 2003 to USD130 in 2007. There has been a fall since then, but analysts feel this is a temporary development and the gap between supply and demand will soon lead to another price rise. They believe the price will return to USD120-130 before the end of 2008 and will climb to USD150 soon thereafter.

Source: Undesnii Shuudan

4. DEALS DONE AND MISSED

KERRY HOLDINGS AND MCS HOLDINGS TO ACQUIRE QGX FOR C$259 MILLION (July 25)

QGX Ltd. announced that it has entered into a definitive support agreement with Kerry Holdings Limited, MCS Holding LLC and Mongolia Holdings Corp. to acquire all of the issued and outstanding common shares on a fully diluted basis of QGX for Cdn$5.00 per Share in cash. The offer values QGX at approximately Cdn$259 million representing a 32% premium based on the volume weighted average closing price of QGX's common shares on the TSX for the 20 previous days ending July 21, 2008 and a premium of 52% to the last close before the Company announced it was exploring strategic alternatives on February 12. Source: The TSX Venture Exchange

KHAN RESOURCES ANNOUNCES OFFER FOR WESTERN PROSPECTOR (May 16) Khan Resources Inc. has announced that it will seek to acquire all outstanding common shares of Western Prospector Group Ltd. to consolidate its position in the Saddle Hills district of Mongolia and achieve significant synergies from the joint development of Khan Resources' Dornod uranium deposit and Western Prospector's Gurvanbulag uranium deposit in that district. The offer is valued at approximately $35 million. Khan Resources already operates Dornod uranium deposit and Western Prospector's Gurvanbulag uranium deposit in Mongolia. The acquisition of Western Prospector is expected to result in a combined savings of US $100 million, as a result of the construction of one common mill and the sharing of infrastructure.

Sources: MARKET WIRE via COMTEX News Network, Mineral News Daily

WESTERN PROSPECTOR ADVISES SHAREHOLDERS NOT TO TAKE ACTION (May 23) Western Prospector Group Ltd. has announced that it is reviewing the unsolicited takeover offer by Khan Resources Inc. The Company's Board of Directors appointed a committee of advisers to assist the Board in fulfilling its fiduciary duties. The Khan offer is open for acceptance until June 20, 2008. Western Prospector will carefully review and consider the Khan bid with the assistance of its independent advisers. Western has urged its shareholders not to take any action in relation to the Khan offer until they have received the Board‟s recommendation.

Source: www.westernprospector.com

WESTERN PROSPECTOR REBUFFS KHAN BID (May 30)

Two weeks after Khan Resources lobbed a hostile bid at Western Prospector Group, the Vancouver-headquartered target advised shareholders not to tender. It has formed a special committee and together with management is “working to evaluate strategic alternatives that may enhance shareholder value.” It also said that it has received overtures from “third parties who have expressed an interest.” Western Prospector argues that Khan‟s offer is inadequate and fails to reflect the true value of Western relative to Khan. “It is an opportunistic attempt by Khan to acquire Western prior to the release of its feasibility study and completion of its strategic partnering program, which Western made public prior to the Khan offer. Western is much further advanced toward a production decision than Khan, which is one of the reasons why Khan needs Western more than Western needs Khan,” said Eric Bohren, the company‟s chief executive.

Source: Financial Post, www.nationalpost.com

TINPO’S C$74 MILLION CASH OFFER FOR WESTERN PROSPECTOR (July 25) Western Prospector Group Ltd. and Tinpo Holdings Industrial Company Limited announced on July 15 the execution of a definitive agreement for Tinpo to acquire all the outstanding common shares of Western for C$1.34 per share in cash, valuing Western's equity at approximately C$74 million. The offer represents an 86% premium to Western's closing price of C$0.72 on July 14, 2008, and a 168% premium to Western's closing price of C$0.50 on May 9, 2008, which was the last trading day prior to the unsolicited takeover bid by Khan Resources Inc. The offer also represents a 130% premium to Khan's bid.

Source: www.westernprospector.com

WESTERN AND TINPO RESUME TALKS ON FAILED DEAL (October 3) Western Prospector and Tinpo announced on October 2 that they had begun discussions on a fresh Tinpo proposal to reactivate its original offer to acquire all common shares of Western for cash consideration of Cdn.$1.34 per share. All other terms of the offer will be substantially similar to, and no less favorable to Western's shareholders than were made in the previous offer that Tinpo had withdrawn on September 30. Since withdrawing that offer, Tinpo has come to understand that “the current government of Mongolia intends to respect the rights of foreign investors in the uranium industry”. Earlier, an announcement from Tinpo on October 1 said it had withdrawn its offer after “becoming aware” on September 29 of a resolution passed, but not published, by the National Security Council (NSC) of Mongolia some months before the Offer. This instructed the Government to explore the full nationalization of the uranium industry in Mongolia. In the light of this determination having been made by the NSC, and given that Western Prospector„s uranium projects are all in Mongolia, Tinpo determined, “in accordance with the conditions of the Offer to withdraw the Offer”. Confirming the development, Western Prospector said Tinpo notified representatives of Western of the withdrawal of the offer, for the reason given above, after the close of markets on September 30. Western is of the view that Tinpo has no right, contractual or otherwise, to withdraw the Offer.

Source: The TSX Venture Exchange, www.westernprospector.com

TALKS FAIL, WESTERN TO PURSUE LEGAL ACTION AGAINST TINPO (October 31) Tinpo has terminated discussions with Western Prospector concerning a proposal to make a renewed offer to acquire all of the latter's common shares. The original offer by Tinpo was made on July 15 and then withdrawn on September 30. Tinpo contacted Western again on October 2 and indicated they would like to re-engage in discussions under similar terms. Western now intends to pursue vigorously all of its rights and remedies against Tinpo for "breaching its obligations".

Source: Marketwire

WESTERN PROSPECTOR GOES TO COURT AGAINST TINPO (November 21) Western Prospector announced on Tuesday that it has commenced legal proceedings against Tinpo Holdings and others in connection with the withdrawn by Tinpo of an offer to acquire all Western shares. Western has filed a Notice of Application with the Ontario Superior Court of Justice seeking certain remedies. Western will provide its shareholders with additional information as it becomes available.

Source: Marketwire

WESTERN PROSPECTOR TO APPEAL JUDGEMENT FAVORING ADAMAS (October 24) Responding to a Mongolian district court's ruling in favor of Adamas Mining regarding its claim for release of the joint venture exploration license from escrow to Adamas, Western Prospector Group said on Wednesday, "We do not believe there is any merit in this ruling and we will continue with all courses of action to constructively bring about the final joint venture agreement with Adamas so that the project can be advanced to a production decision." The Western-Adamas joint venture involves exploration covering the Mardiagol and Nemer deposits, and a portion of the Dors deposit. The dispute does not impact Western's classified resources or the Feasibility Study for Gurvanbulag, which is scheduled for completion in the fourth quarter of 2008. Western has complied with all its obligations set out in the agreement, which include a cash payment to Adamas of C$750,000, a four-year exploration work program of at least C$1.35 million and payments of yearly license fees. The agreement states that on or before December 31, 2007, Western would have earned its 70% ownership in the joint venture and the right to be sole operator once these payments were made. However, Adamas has refused to sign the final joint venture agreement and to cooperate with Western to advance the project into production. In July 2007, Mr. Koyanagi, President of Adamas, sent a letter to Western stating that due to the increase in uranium prices, Western should increase its cash payment to Adamas from C$750,000 to C$2.5 million. Given that the joint venture terms had already been agreed upon, and that Western had already made cash payments to Adamas, Western believes that this demand was in violation of the Letter of Agreement.

Source: www.westernprospector.com

BHP BILLITON CALLS OFF RIO TINTO TAKEOVER BID (November 28)

Global miner BHP Billiton Ltd has called off its USD58 billion bid for rival Rio Tinto Ltd, citing worsening market conditions and demands for both iron ore and coal asset sales from European regulators as a condition of the deal. Chairman Don Argus said the decision was first and foremost about BHP Billiton shareholder value and risks to it.

Source: www.reuters.com, www.bhpbilliton.com

5. BANKS AND BANKING

INTERNATIONAL MICROFINANCE CONFERENCE IN ULAANBAATAR (May 30) Over 500 representatives will attend the 11th Conference of the Center of International Microfinance in Ulaanbaatar from May 29-31. The conference will bring together officials from large banks and businesses in the region to review the progress of the country‟s banking industry as well as discuss investment opportunities. This is the first time the conference has been held in Asia and is meant to coincide with the tenth anniversary of the Xac Bank. The Center of International Microfinance has its headquarters in Poland and cooperates with more than 110 organizations in East and Central Europe, and Central Asia.

Source: Montsame

BANKS TO EXCHANGE INFORMATION ON BORROWERS (July 4) Several commercial banks operating in the country, including Xac Bank, Khaan Bank, and the Mongol Post Bank, have signed an agreement with Mongol Bank to exchange information on borrowers. With the banking network expanding in recent years and banks opening more and more branches throughout the country, the number of borrowers has gone up considerably. A review of the situation was recently made by Mongol Bank, the country‟s central bank. This showed that banks‟ risks went up when the same person or entity borrowed from more than one source. Now with the exchange of information in place, any bank will be able to check on a prospective borrower‟s credit status with other banks.

Source: en.News.mn

MONGOL BANK TRACES ECONOMIC DEVELOPMENT TO TRANSPARENCY (August 1)

According to Mongol Bank, the earlier situation when investment in the Mongolian economy was mostly from foreign loans and aid has changed. In recent years, it has come from within the country, with both balance of payments flow and assets accounting showing a surplus. These and other indicators of the state of the economy emerged at a seminar organized by the Mongol Bank on July 25 on “Balance of payments and statistics of foreign investments”. The central bank advised business entities conducting foreign trade and service activities, especially those seeking loans from abroad, to minimize their exchange rate risks by using the latest internationally accepted financial methods. Mongolia has been successfully implementing a flexible policy of open-market economy since it changed over to the „freely convertible currency/floating exchange rate‟ principle, as well as freeing up foreign trade, asset and financial flows. The difference between investments and the internal economic balance in the GDP now is a positive 2.6 percent, from the earlier shortfall of 8.7 percent. Foreign trade turnover has reached USD 3.6 billion, or 127.5 percent of the GDP. One reason behind the present sustainable economic development was given as the economy becoming more transparent. There is still considerable dependence on external economies, however, and this makes the internal economy vulnerable to sudden changes. Measures taken to reduce such risks include developing the internal financial markets and improving governing capacities.

Source: Montsame

BANK BAILOUT PLAN APPROVED, BUT KEPT ON HOLD (October 31) In a development totally unreported in the Mongolian media, the Cabinet met on Tuesday to authorize a capital injection into the nation's commercial banks but, government officials said, the measure was not going to be implemented immediately. Finance Minister S. Bayartsogt said the Central Bank had made a convincing case that there was no need for a bailout at this time. Former Central Bank Governor O. Chuluunbat, now an MP, had said earlier that a rescue package of around USD500 million could be ready as early as next week for the country's pressured banks, struggling for months with a frozen mortgage market. The Central Bank feels confident that the country's commercial banks meet its prudential requirements, though other officials say the USD500 million is needed to allay public concerns and ensure liquidity. "It depends, because if everything is safe you don't need to... We have already discussed it in Cabinet, and I have the right (to act) if something is wrong," Bayartsogt said. "Now all banks have fulfilled the requirement of the Central Bank, and (the Central Bank Governor) has said everything is fine," Bayartsogt said. He did not disclose the size of the capital injection authorized by the Government, but did say that unofficial discussions with heads of banks had indicated they needed about MNT500 billion (USD437 million) to work "normally" for the next nine to 12 months. Ch. Khurelbaatar, head of Parliament's standing committee on the budget, also said there was no need for a bailout in Mongolia because fewer than 3 percent of bank loans had turned sour. "Maybe by the beginning of next year, the monetary policy will be a little looser to fix the problem," he said. Mongolia's banks have frozen most mortgage lending since May, as interest rates have risen and concerns have grown about a rapid deterioration in their loan portfolios. That, in turn, has dried up sales of apartments and squeezed the construction sector. Small businesses have also found it hard to get credit.

Source: www.reuters.com

CENTRAL BANK TOTALLY REJECTS MP'S VIEWS (October 31) Reacting to the Reuters account of its correspondent's talk with MP O.Chuluunbat, The Bank of Mongolia issued a press release on October 28 clarifying that Chuluunbat's views were those of a private individual and did not reflect the official position of either the Government of Mongolia or the Central Bank. There is no need or demand to bail out the Mongolian banking system by injecting money into commercial banks' capital base. The Mongolian banking system does not have any US sub-prime mortgage products, and is not under any sort of repayment pressure to pay short-term foreign funding. It is a banking system mostly funded by a domestic deposit base with consequent placement in domestic real projects or consumption. The fundamentals of Mongolian banking system are sound and strong. Afterwards, B Enhhuyag, first deputy governor of the Bank of Mongolia, told Reuters, "We are officially stating: the banking system does not need any bailout. Our banks are adequately

capitalized." he said. Source: www.mongolbank.mn, www.reuters.com

BANKERS ASSESS ECONOMY, SEE HOPE (November 7) Four of the country's senior bankers were asked for their opinion on how the global financial crisis would affect Mongolia. Here is what they said: Governor of MongolBank, A.Batsukh: It will not directly affect our economy. But foreign investment will certainly decrease and prices will go up. Mongolia must increase the liquidity and manage the economy better so that existing assets do not lose their value. This way, we will have less risk. Director of Golomt Bank, D.Bayasgalan: Mongolia will not be affected directly because no Mongolian financial organization has anything to do with foreign bond and loan markets. But we have also to cope with the fall in copper price, the Chinese economic slowdown, and the fall in value of some currencies. Mongolian commercial banks will most likely have to do without foreign funding. The sharp fall in oil prices will have direct positive effects. CEO of Khan Bank, Peter Morrow: The main forces behind the global financial crisis have little to do with Mongolia. Also, we have few relationships with foreign markets and international stock exchanges. However, it will now be more difficult for us to approach foreign markets and some of the planned projects are likely to be postponed because of lack of funds. Prices of commonly used items are falling and inflation, too, is being controlled. President of Trade and Development Bank, Randolph S.Koppa: I am confident of Mongolia weathering the crisis, but government policy on the economy has to be clear and investment terms on exploration of principal mineral deposits have to be resolved soon. The banking system here is not dependent on world financial markets, and the turmoil there should leave us unaffected. Economic slowdown has, however, already started. Fall in prices of and demand for commodities and raw materials are affecting exports. The Chinese market, however, is likely to maintain its demand for mining products from here. Once mining resumes in earnest, the economy will look up. Commercial banks have lent MNT230 billion in the last three years to prospective buyers of houses and apartments. The Mongol Bank, the Mongolian Bankers' Association, and the Mongolian Housing Corporation (MIK) are working in tandem to keep on financing the housing market. MIK is expected to borrow from commercial banks to improve their liquidity.

Source: Ardiin Erkh, Odriin Sonin

PARLIAMENT GUARANTEES ALL BANK DEPOSITS, RAISES GOLD TAX THRESHOLD (November 28)

Jittery over small bank runs and falling commodity prices, Mongolia's Government is guaranteeing all bank deposits. Parliament approved the law Tuesday to try to shore up confidence in Mongolia's 16 commercial banks, which hold USD1.1 billion in deposits, and to ensure banks keep lending to buoy the economy.

"The world economic crisis is not affecting Mongolia directly. However, we are feeling the shock," Prime Minister Bayar told reporters. He said some Mongolians had started to withdraw their savings from banks out of concern they might collapse and that in part prompted the Government to act to issue its 100 percent guarantee for deposits.

"The Mongolian banking system is sound and stable. It is not on the edge of collapse or anything like that," Finance Minister Bayartsogt told Parliament when urging legislators to approve the guarantee. "This law is designed to safeguard the banking system against collapse." To further bolster the banks, the Government has asked Parliament to approve a law to inject USD250 million in state treasury funds into the commercial banks to encourage lending.

In an effort to curb widespread tax evasion and replenish revenues, Parliament also raised the threshold price for the windfall profit tax on gold. The 68 percent tax on profits will be now imposed when gold prices climb above USD850 an ounce, rather than the USD500 mark set two years ago. The USD2,600 a ton threshold for copper remains unchanged.

Source: Associated Press, International Herald Tribune

PRESIDENT HOLDS TALKS WITH PETER MORROW (November 28)

President N. Enkhbayar received Khan Bank CEO Peter Morrow Thursday last week to discuss the current situation and trends in the banking-financial sphere of Mongolia. "At a time when the world

is facing a financial crisis, when prices and inflation are rising in Mongolia, I am glad to meet with the CEO of the bank that occupies an important position in Mongolia's banking system," said the President. Mr. Morrow said that although Mongolia's banking institutions are linked with the international financial world, the crisis has had no direct effect on them, and that ways need to be found to solve the present problems of high inflation and tight money that restrict access of Mongolians to credit.

The meeting discussed issues in the financial and business spheres, the chances of heavy investments and identifying financial sources, ways to restrict inflation, interest policy, foreign investments, and the role of the bank in reduction of poverty and unemployment in rural areas.

Source: Montsame

CENTRAL BANK TAKES CHARGE OF ANOD BANK, ALL DEPOSITS SAFE (December 12)

A Mongolbank representative took charge of all operational activities of the Anod Bank on Wednesday to stabilize the situation there. The Central Bank has said it took the decision to ensure the safety of deposits in the bank, and has clarified that there was no fear of the bank being about to go bankrupt. The Governor of the Central Bank, Dr. A. Batsukh, and its First Deputy Governor, Mr. B. Enkhhuyag, made this announcement at a news conference, ending a day of speculation and wild rumors. The bank is now closed to customers and will reopen on Monday.

Mr. Batsukh said five audits of the bank‟s operations had been carried out in the past two years and the last of these convinced the Central Bank that it had to step in to restore financial stability there. Mr. Enkhuyag said as a precautionary measure they were isolating the Anod Bank from the national banking network. He said everything was well with all other banks. However, “their accounts, too, are being checked in the same way that we used here”.

The Central Bank officials discounted any possible link between the situation and the world financial crisis. They blamed the failure of the management to instill proper financial discipline for the mess. Checks so far have revealed that the bank has MNT145 billion in deposits while its outstanding loans total MNT180 billion, MNT80 billion of it given since January 2008. Some major shareholders of the bank are among the borrowers. “Our first job is to trace all these loans. Some of them are good, but some are suspect. The present cash shortage has resulted mainly because many customers opted for premature encashment of their term deposits,” said Mr. Batsukh. The immediate task of the representative would be to ensure that all depositors had full access to their savings held in about 200,000 accounts.

Source: Ardiin Erkh, Onoodor

6. ODDS AND ENDS

MPRP’S EXPOSE ON MONGOLIA-RUSSIAN RELATIONS (March 14)

MPRP General Secretary, Yondon Otgonbayar, has told Moscow News that Mongolia would like to see a higher Russian presence and more Russian investment. The General Secretary commented on a range of issues including Northeast Asian relations; Mongolia's foreign policy priorities; Mongolia's principal economic problems; Russian-Mongolian trade and economic cooperation; MPRP party membership; Mongolia‟s political situation; Mongolia‟s role as an observer at the Shanghai Cooperation Organization (SCO); and Mongolian society‟s perception of democracy and whether European or American political models could be taken as a models for Mongolia.

He said Mongolia was at a crossroads of change with globalization, on the one hand opening great opportunities for the country, but on the other, faced formidable challenges.

Source: http://mnweekly.rian.ru/world/20080208/55308635.html

TEXTILE HANDICRAFTS TO ENTER USA DUTY FREE (July 25)

Following an agreement signed by the U.S. Embassy, the Ministry of Industry and Trade of Mongolia, and the Mongolian National Chamber of Commerce and Industry, certain Mongolian textile handicrafts can now be sold in the USA duty free. The Mongolian Government will have to certify that the products claiming commercial export without having to pay duty are traditional textile

products that have been made entirely by hand from hand-loomed fabrics.

Source: www.mongolweb.com

WORK ON COMPUTERIZED MINING REGISTRY SYSTEM TO BEGIN (November 21)

GAF AG begins work this month on installing a new computerized mining registry system for Mongolia, a big step towards creating a transparent system to grant, manage and cancel mining permits. Professional management of mining titles is considered a prerequisite to increasing investment and growth in the mining sector of Mongolia. The project's objective is to strengthen the property rights and enforcement of agreements and contracts within Mongolia's mining industry, improve the transparency of the mineral licensing process and the Government's regulatory capacity through information and management. Existing computerized and non-computerized systems will be brought together within the new system. The project is expected to be completed in 24 months.

Source: www.mongolia-web.com

BAYAR CONSULTS WITH CHILEAN MINISTER ON MINING COPPER (November 21)

Prime Minister S.Bayar recently met with Santiago Gonzales, Minister of Mining in Chile. They discussed ways of cooperation in the mining sector. Mr. Bayar expressed interest in details of the legal environment in Chile's mining sector, how it attracts and decides on investment, its export regulations, norms followed in copper exploitation, and the processing industry. Mr. Gonzales favored setting up a consultative committee to expedite cooperation.

Source: www.news.mn

7. COMMENTS

RUSSIAN AGENDA IN MINING ACTIONS (March 28) In four recent opinion pieces, US based pundits have blasted the Government of Mongolia (GOM) for ongoing delays in finalizing major minerals deals and cutting back the role for foreign ownership in Mongolia‟s lucrative mineral resources sector. They also cite a possible bias against American investors in favor of Russians. These pieces with similar themes have appeared over the last few weeks with some sources speculating they are related. At the same time, US, Canadian and other financial analysts‟ reports continue to grow more seriously critical of the Mongolian Government‟s mining policies. Most recently, Senior Research Fellow in Russian and Eurasian Studies and International Energy Security at the Heritage Foundation, Dr Ariel Cohen, suggested Mongolia‟s move to exert greater control over its natural resources mirrors similar efforts by other central Asian governments, in particular Kazakhstan, which has been especially assertive in recent months in its dealings with foreign investors. He claims while Mongolia‟s State budget could benefit in the short-term from likely legislative changes, its economy could suffer due to investor distaste for high costs and large risks over the longer term. He cited criticisms of Parliament from key stakeholder groups for not seeking input from the country‟s private sector when formulating legislative changes. While these views do not necessarily reflect those of the BCM, they are published in the BCM NewsWire to keep members aware that international criticism of the GOM has become more intense.

Source: www.eurasianet.org

GROUP URGES CUTTING OFF AID TO MONGOLIA (May 2)

A full page ad published in the Wall Street Journal last week, called on the U.S. government to cut off aid to Mongolia unless the Mongolian government acts to “eliminate corruption and protect private property.” The Center for Individual Freedom (CFIF) published the ad, calling on President George W. Bush and Secretary of State Condoleezza Rice to, according to the ad, "Send a Clear Message to Mongolia: Eliminate Corruption and Protect Private Property - Or Risk Losing U.S. Foreign Aid."

The ad was published as the U.S. Commerce Department hosted a delegation of Mongolian officials

at the third U.S. - Mongolia Business Forum in Washington D.C. In the ad, CFIF highlighted trends they call “disturbing” which they claim have arisen since Mongolia received a nearly $300 million grant from the U.S. taxpayer-funded Millennium Challenge Corporation (MCC). In part, the ad read, "Mongolia has begun a full-scale assault on the rule of law, disregarding legal contracts, shaking down private companies through confiscatory taxes on mining interests, and intimidating Western businesses into relinquishing ownership to the State."

CFIF also emphasized that MCC grants must be used for countries that demonstrate a commitment to upholding western values, "Millennium Challenge grants are intended to encourage countries to eliminate corruption, uphold the rule of law, and protect property rights -- all Western ideals and interests. MCC grants should not be used to subsidize countries headed in the wrong direction."

Founded in 1998, the Center for Individual Freedom is a Constitutional and free-market advocacy organization with more than 250,000 supporters and activists in the United States.

Sources: Montsame, Wall Street Journal

ECONOMY

1. INFLATION AND PRICE RISE

MONGOLIA’S INFLATION ON THE RISE (February 22) Possibilities that Mongolia is facing an inflationary phase and overheating – with the country‟s physical capacity unable to keep pace with demand for goods and services - have arisen. 2007 data released in the World Bank‟s, „Mongolia Quarterly February 2008 Report‟ identified inflation in 2007 at 15.1 percent as the highest in the decade and showed general price rises in increased demand for goods and services and how increased consumption reduced supplies in essential food items. Although the report holds back its judgment on overheating, it describes data that positions Mongolia in a precarious position as it enters 2008. The report examines the causes of overheating: rising inflation, particularly in non tradables; rising current account deficits; substantial increase in liquidity and increasing bottlenecks in the economy.

Source: http://newswire.mn, www.alertnet.org/thenews Full report: BCM website-'Articles/Reports on Mongolia'. Point 2 (Recent Econ Developments) plus

points 20-29

MONGOLIANS PROTEST OVER PRICE HIKES (April 25) More than 20,000 people flooded the center of Mongolia's capital last Friday to demand that the government do something about rising food prices that have nearly tripled. Holding banners saying "Stop inflated food prices" and "Let the salaries of the working class increase," the protesters marched peacefully to demand that prices for rice, meat and flour be stabilized. "We demand that the government of Mongolia take concrete action to stop the rising consumer prices which enrich a few companies and make lives of thousands of Mongolians unbearable," said S. Ganbaatar, president of the Mongolian Confederation of Trade Unions, which organized the protest. He said the price of a 55-pound bag of flour had risen to $21.40 from $7.70 four months ago. He said the confederation would organize a nationwide strike if the government does not act to lower prices.

Sources: Montsame, Agritsam Canada Consulting Ltd., www.agritsam.ca

MONGOLIA’S RUNAWAY INFLATION HIGHEST IN ALL EAST ASIA (July 25) According to the June 2008 World Bank Quarterly, inflation in Mongolian is the highest in all of East Asia. It was 27 percent in April, and food prices rose 48 percent. Food product imports increased by only seven percent, with an apparent substitution effect occurring, as expensive imports like potatoes and fruit are decreasing in volume, while less expensive rice imports are increasing. Flour imports from Russia, subsidized by an agreement, have increased in volume by 57 percent. Much of the inflation can be explained by food items, while oil prices contributed a small but increasing portion. The respective prices of flour and meat have increased by 68 and 39 percent over the last 12 months, with no sign of slowing down. As per capita income rises, the percentage of income spent on food is decreasing. This does not imply that food price increases have no impact on household welfare: poor consumers (among

them, the urban poor bear most of the shock) are hit especially hard by the rise in prices. As incomes increase, consumption patterns become more diversified. Meat consumption is declining and consumers turn increasingly to more flour-related products, potatoes and vegetables, while fruit consumption, which was negligible in 1995, has gone up. Meat products account for 36 percent of food consumption, and their prices are more dependent on domestic rather than external factors. On the other hand, a significant share of Mongolia‟s non-meat food products is imported, bread and cereals coming from Russia and fruits and vegetables from China. There is some evidence that domestic policies are fuelling domestic price increases but further analysis needs to be conducted to ascertain the relationships between domestic and border price movements. Some of the short-run trade policy options considered may limit longer-term solutions. The World Bank feels Mongolia can mitigate the effects of global food and oil price increases. Cash transfers could be accompanied by food for work programs. The bank also suggests closely monitoring the fiscal sustainability and economic incentives of the subsidies. Developing Mongolia‟s own oil and natural gas refinery capacity must be carefully assessed as refineries require a number of pre-conditions to be economically viable.

Source: The World Bank - Mongolia Quarterly Report, June 2008; see BCM website

CONSUMER PRICES RISE 32.6 PERCENT IN 12 MONTHS (August 8) The monthly bulletin for June 2008 prepared by the National Statistical Organization of Mongolia (NSOM) reveals that the consumer price index during that month rose by 0.3 percent over the previous month‟s, by 18.8 percent from the end of 2007, and by 32.6 percent from June 2007. In the first six months of the year, the prices of foodstuff increased by 38.7 percent, health care by 21 percent, alcoholic beverages and tobacco by 8.9 percent, restaurants and hotels by 16.8 percent, and those of clothing and footwear by 5.9 percent.

Source: NSOM Monthly Bulletin of Statistics, June 2008

INFLATION THE MAIN TARGET OF MONETARY POLICY 2009 (November 21) Parliament last week approved the draft resolution on general guidelines for the state monetary policy for 2009 after just one reading. The monetary policy enjoins the Central Bank to keep inflation rates, measured in relation to the consumer price index, at an average 9.5 percent between 2009 and 2011. The expectation is that it will stand at 12 percent at the end of 2009, 10 percent in 2010, and 6.5 percent in 2011. In 2009, monetary and fiscal policies will be coordinated more effectively to help control inflation and raise the living standards of the population. During the debate several MPs blamed the Central Bank for letting inflation reach 34 percent (yoy) this year. Others faulted the previous Parliament for increasing Government expenditures in the mistaken certainty that mineral prices would forever be high.

Source: Montsame

2. ECONOMIC INDICATORS GDP ROSE IN 2007, DESPITE FALL IN EXPORTS (September 19) Figures released last week put Mongolia's Gross Domestic Product (GDP) in 2007 at MNT 4,599.5 billion at current prices and at MNT 3,325.9 billion at 2005 constant prices. This is an increase of 10.2 per cent against the previous year's figure. The main source of the increase was livestock which, at 40.3 million, grew 15.8 percent over 2006. The mining sector grew by 2.9 percent and the manufacturing sector by 29 percent, chiefly because of the expansion of services such as cellular mobile telephones. The private sector's contribution to the GDP was 67.9 percent, a decrease of 1.3 points from 2006. However, the contribution of net exports to GDP decreased 7.0 percent. This is despite the continuing increase in global commodity prices, mainly because the volume of gold export has fallen. GNI per capita at current prices was MNT 1,761,100 and at 2005 constant prices MNT 1,273,400.

Source: The National Statistics Office

TOURIST ARRIVALS GROW 35% IN 7 YEARS (September 26)

Altogether 454,576 foreign tourists spent time in Mongolia in 2007, an increase of 34.8 percent against the 2000 figures. The number so far this year is 451,598. Between 2000 and 2007, there were 28.2 percent more tourists from Africa, 23.5 percent more from East Asia and the Pacific countries, and 19.6 percent more from South Asia, while the growth for America and Europe was 17.5 percent and 15.5 percent respectively. The highest growth of 38.3 percent was recorded by arrivals from the "Near East and with no citizenship". The countries that showed the largest increase in the number of travelers to Mongolia were China, Great Britain, South Korea and Germany.

Source: The Mongol Messenger

FINANCE MINISTER SEES 2009 AS ALL ROSY, EXCEPT FOR COPPER PRICE FALL (October 10)

Finance Minister S.Bayartsogt shared with journalists last week his Ministry's positive projections for the national economy in 2009. The most important among them were:

- The economy will grow 14.1%

- GDP will reach MNT 7.95 trillion, based on present prices

- GDP per capita will reach US$2,274

- The net foreign currency reserve will reach US$1,272 million and CPI rise will be limited to 12%

- The Tugrug will be stronger against the USD by 0.6%

- The population will grow by 1.6% and reach 2.7 million

- The unemployment rate will be 2.7%.

Next year should see a zero deficit budget, even after providing for construction of a new international airport, resolution of the energy problem resolution, and distribution of minerals revenue shares to the citizens.

The Minister did say that there was one cloud on the otherwise bright horizon. Since export of copper accounts for one fifth of the total revenue of Mongolia, the fall in global copper prices could undermine the Mongolian economy, but its extent cannot be gauged in advance.

Source: www.miningmongolia.mn

388 MINERALS LICENSES ISSUED TO FOREIGN INVESTORS IN AUGUST (October 24) The Open Society Forum has been keeping track of mining licenses this year and reports that despite the weeks of relative inactivity following the election to Parliament, investors continue to be interested in Mongolia. In August foreign investors obtained 388 minerals licenses, including Centerra Gold's 4 in Mandal soum of Selenge province. However, the size of the territory under the licenses shrank by 1.6%. The number of exploration and exploitation licenses now stands at 4,781. The Mineral Resources and Petroleum Authority canceled 21 licenses in August.

Source: Ardiin Erkh

EXTERNAL TRADE TURNOVER RISES, ALONG WITH DEFICIT (November 14) Total external trade turnover reached USD5,165.5 million in the first 10 months of 2008, of which exports accounted for USD2,160.9 million and imports USD3,004.6 million. The resultant deficit of USD843.7 million was USD654.5 million more than what it was in the same period last year. Compared to the same period in 2007, the total external trade turnover increased 65.1 percent, exports 47.1 percent and imports 81.2 percent. Mineral products exports increased by USD365.3 million. The volume of copper concentrate export decreased by 4.6 percent but its value in US dollars increased 12.3 percent. For the first 10 months in 2007, the average price of copper concentrate per ton was USD1,312.4, but this year it rose to USD1,545.9, an increase of 17.8 percent. The volume of gold, unwrought or in semi-manufactured forms, exports increased by 60.6 percent and their value in US dollars increased 2.3 times against the same period of 2007. The average price in the first 10 months has increased 41.2 percent this year over 2007. Imports of mineral products increased by USD365.7 million, of auto, air and water transport vehicles and their spare parts by USD224.2 million, of machinery equipment, electrical appliances, recorders, TV sets and spare parts by USD173.2 million, of base metals and articles thereof by USD101.0 million, and of food products by USD73.7 million. Compared with the same period last

year, petroleum import increased by 28,800 tons or USD123.3 million; car import by 15,000 pieces or USD90.9 million. Some 45,500 tons more flour was imported at an increased cost of USD32.3 million.

Source: The National Statistical Office

ECONOMIC GROWTH TO REACH 9.8 PERCENT (November 14) According to figures revealed by the National Statistical Office (NSO) economic growth in 2008 would be 9.8 percent. Costs of common products and services fell 1.1 percent in October from what they were in September. However, they were still 27.9 percent more than in October 2007. Food prices were down by 3.3 percent, and transportation costs by 1.6 percent. Even the rich harvest has not been enough to fully meet domestic needs. The average household expense was determined to be MNT374,000, 22.1 percent more than in October last year. Average salary has increased to MNT273,700. This is the first time the NSO has prepared an apartment price index for the public. The cheapest apartments are in Bayangol and Songinokhairkhan districts. Prices there have fallen 1.5 percent, but in the other districts they have gone up by up to 2.9 percent. Some of the main construction material now cost 12.5-28.6 percent less. Altogether 30,979 people are registered as unemployed, a fall of 4.4 percent when compared to October 2007. Among them, 58 percent or more than 18,000 are women.

Source: Montsame

GDP EXPECTED TO RISE 28.2% OVER 2007 (November 21) The National Statistical Office has estimated that GDP in 2008 would reach MNT5,895.5 billion at current prices, equivalent to MNT3,650.6 billion at 2005 constant prices. This will be an increase of 28.2 percent at current prices and by 9.8 percent at 2005 constant prices over 2007. GDP per capita then works out to MNT2,218,400 at current prices or MNT1,373,700 at 2005 constant prices. The major contribution to the rise comes from livestock, whose number will reach 43.1 million, an increase of 7 percent over 2007 figures. Crop production has gone up 21.0 percent, mining and quarrying 1.4 percent, manufacturing 8.7 percent, and services 13.9 percent.

Source: The National Statistical Office

BUDGET DEFICIT INCREASES (November 21) With total revenue and grants amounting to MNT1,774.9 billion and total expenditure and net lending of MNT1,845.7 billion the general government budget showed an overall deficit of MNT70.8 billion in the first 10 months of 2008, an increase of MNT67.7 billion over the previous month's balance. The budget current balance however posted a surplus of MNT371.3 billion, an increase by MNT10.9 billion from the previous month. Compared with the same period in 2007, total tax revenue increased by 38.3 percent, with taxes from foreign trade increasing by 50.1 percent and excise taxes by 36.5 percent.

Source: The National Statistical Office

MONEY SUPPLY, FOREIGN CURRENCY DEPOSITS FALL (November 21) The Bank of Mongolia reports that money supply (broad money or M2) at the end of October was 6.6 percent or MNT167.3 billion less than in September. At MNT2,357.7 billion this was an increase of 4.1 percent over the figures for September, 2007. Currency in circulation decreased by 8.8 percent at the end of October from September, while showing an increase of 1.9 percent over October, 2007. Time saving deposits decreased by 3.6 percent from September, 2008. Foreign currency deposits decreased by 12.2 percent from September, even as they increased by 9.3 percent over October, 2007. The amount of loans outstanding at the end of October increased by 39.5 percent. A break-up shows outstanding personal loans increased by 38.4 percent, private sector loans 41.6 percent, in other sectors by 2.4 times, and in other financial corporations by 2.1 times, while outstanding loans in the public sector decreased by 9.8 percent. Principal amounts in arrears increased by 16.9 percent, and substandard and doubtful loans by 25.3 percent. Non-performing loans accounted for 3.1 percent of the total loans outstanding. The nominal rate of the togrog against USD was 2.8 percent stronger at the end of October than it was 12 months ago. This also showed a gain of 0.2 percent since September. Against the Euro the

nominal rate of the togrog was 10.9 percent stronger at the end of October than it was a year ago. The gain in the past one month was 8.0 percent. Against the CNY however, the nominal rate of the togrog weakened by 6.2 percent in a year, even as it rose by 0.1 percent in the last one month.

Source: Montsame

FOREIGN COMPANIES ACCOUNT FOR 67,000 WORK PLACES (November 28)

Today there are 3,083 foreign-invested companies from 124 countries doing business in Mongolia in sectors such as tourism, mining, infrastructure, information technology and agriculture. Joint ventures account for 60.4% of total foreign investment. Foreign invested companies have created 67,000 jobs.

Source: www.gogo.mn

EBRD SAYS MONGOLIA WILL GROW NO MORE THAN 3.4% IN 2009 (December 5) The European Bank for Reconstruction and Development (EBRD) predicts in the just released 2008 Transition Report that the Mongolian economy would slow to 7.3% this year from 8.5% last year, and drop to 3.4% in 2009. EBRD‟s chief economist, Mr. Erik Berglof, said countries like Mongolia face “much less benign international background and outflows of capital from emerging markets” and that “risk aversion and the recession in key OECD economies would test the resilience of transition countries”. The latest figures represent a downgrade from forecasts on November 5. "The depth and duration of the global crisis are unclear, but the region is now bracing itself for higher unemployment and lower consumption growth," said Mr. Berglof. There was a risk of even slower growth if external funding for the region suddenly fell away.

Source: www.reuters.com

BUDGET WITH DEFICIT OF 6 PERCENT OF GDP APPROVED (December 5)

The 2009 budget adopted by Parliament last week results in a deficit of 6 percent of the national GDP. Time constraints forced the third and fourth readings to be combined. At the end of the Parliament sitting, Speaker D. Demberel spoke to journalists about the budget and the discussions. He said things had been made difficult this year by the world financial crisis. Parliament “could not expand the scope and areas of state spending very much even though this was essential to economic growth, but instead had to chop and prune much of the projected investment”. Finally, it was decided that next year‟s investments will be MNT50 billion more than this year‟s. Some members were worried about the deficit but understood that “in the current world situation it is not possible to have a surplus or even balanced budget”. There was hope that the deficit could be met by foreign loans or investments. There were also suggestions for a cut in social welfare allowances like the children‟s money to save MNT60 billion but finally MPs decided to keep them as they are. However there was a general demand for a further 10.2 percent cut in state expenditures.

Budget accounts have been calculated on the basis of estimates that the price of copper will be USD3,400 per ton, and that of zinc USD1,100 per ton. These together mean corporate income taxes would fall by MNT312.6 billion, and fees for minerals exploration by 27.1 billion MNT. Budget revenues from customs duties will fall by MNT8 billion, from VAT by MNT25 billion, and from excise taxes by MNT3 billion. The Mongolian Development Fund is expected to get MNT45.2 billion. All these figures are based on expectations that work will begin in Oyu Tolgoi, Tavan Tolgoi and Shivee Ovoo during the year.

Source: Ardiin Erkh, Montsame

3. TAXES 57 GOLD MINING COMPANIES PAY WINDFALL TAX, 15 DO NOT (October 3) Gold mining companies are scheduled to meet with the Prime Minister, the Parliament Speaker, and the Minister of Minerals and Energy soon to ask for a reconsideration of the 68% windfall profits tax that, they claim, has brought them near bankruptcy. Talking recently to journalists about the situation, L.Zorig, Chairman of the Mongolian Taxation Authority, said as of August 31, 57 companies that extracted gold had paid their taxes and contributed MNT 8.1 billion to the Mongolia

Development Fund. The number of companies that have not paid the 68% tax at all in 2008 is 15. By not submitting an account of their operations and paying the tax, these companies make themselves liable to be fined. A part of the windfall profits tax is put into the Mongolia Development Fund. This amount from the gold companies amounted to MNT 4.9 billion in 2006, MNT 34.2 billion in 2007, and MNT 10 billion in the first eight months of this year. In addition, gold mining companies paid MNT 15.2 billion in 2006 and MNT 22 billion in 2007 as royalty. Zorig said while the amount accruing to the fund was increasing, some major companies failing to pay their taxes encouraged other companies to follow their lead.

Source: Onoodor

ARBITRATION COURT WRITES TO MINISTRY, ALTAN DORNOD (October 10) The International Arbitration Court has written to both the Ministry of Justice and Internal Affairs and Altan Dornod Mongol setting out some norms to be observed before the company's case against paying windfall profits taxes comes up for hearing in April. The Government has been asked not to release misleading information and not to demand payment of the tax till the court gives a decision. The company has been instructed to deposit in a third country the money claimed so that there is no loss to the Mongolian Government if the decision goes in its favor.

Source: Onoodor

TAX REVENUE FROM MINERALS UP, BUT LESS GOLD IS SOLD (October 10) The Mongolian Tax Administration has released figures to show tax revenue from excavation and export of gold and copper has gone up to MNT322.6 billion in the first nine months of 2008, compared to MNT319.5 billion in the same period last year. However, there has been less from the windfall profit tax, mainly because the Russian-owned Altan Dornod Mongol has gone to court on this. A total of 68 companies and 28 individuals sold 7.2 tons of gold to the Central Bank and other commercial banks in the first 8 months of 2008, compared to the 77 companies and 38 individuals who sold 7.9 tons of gold in January to August, 2007. The fall is not considered significant.

Source: Zuunii shuudan

TAX BOSS HOPEFUL OF MEETING THIS YEAR'S GOALS (November 21) The new Head of the National Tax Administration (NTA), Ts. Oyunbaatar, has said it is a tough challenge to collect at least MNT250 billion before the end of the year to meet the revenue expectations of the government and regional budgets, but he was hopeful this goal would be attained. Registration of tax sources has been improved, now this wider tax base has to be covered, and the shadow economy shrunk. Conditions have to be created where everybody follows the law, and proper tax service procedures have to be developed. As it is, lower prices of major export products make it difficult to fulfill revenue goals but several measures are being worked out to ease the position. Mr. Oyunbaatar pinned his hopes for increased collection on the gradual implementation of a tax management improvement project funded by the World Bank, wider use of information technology, and foreign assistance and support. The NTA will foster cooperation with tax services in selected foreign countries to help it focus on foreign-invested and joint-venture companies.

Source: Montsame

4. PETROLEUM NEW LAW TO LIMIT FOREIGN OIL SUPPLIERS AS ROSNEFT PROPOSAL IS CONSIDERED (May 9) In last week‟s Parliament session, Prime Minister Bayar submitted the Government policy in regards to the Russian Rosneft Company‟s proposal on its price for petroleum products to be delivered during May. The company supplies 90 percent of Mongolia‟s oil. Rosneft is expected to increase its petroleum price in May by US $62-89. Rosneft says that the price can be reconsidered if Mongolia accepts the company‟s proposal to build 100 petroleum stations in Ulaanbaatar, Darkhan and along the Millennium Road line. “World market prices continue to escalate, reaching $113 per barrel and may reach $170-200. For this reason we have to accept Rosneft‟s proposal and amend the Law on

Petroleum Products approved in 2005,” the Prime Minister said. Meanwhile, a bill has been drawn up for Parliament to regulate foreigners wishing to sell oil in Mongolia. Under the new law, it would be necessary for foreign oil companies to negotiate terms for a sale through a judicial representative of the government. Additionally, no single oil producer will be allowed to sell more than 30 percent of the oil consumed by the Mongolian domestic market. Some MPs suggested stabilizing the petroleum price by subsidizing domestic entities and not necessarily by accepting the Russians company‟s proposal.

Source: Montsame

ROSNEFT PROPOSAL FOR 100 GAS STATIONS REJECTED (May 30) The Rosneft Company granted Mongolia a discount of USD 4.8 million last February and March. The majority of committee members expressed their rejection of establishing 100 Russian gas stations in order to supply 10 percent of imported oil. Some members suspect there may be private interests related to gas stations. During the session, members agreed on some measures of increasing oil product supplies. A task group, headed by Ts. Munkh-Orgil, is working on modifications to the oil product law, but at this time the discussion has been postponed. Kh. Narankhuu, Minister of Industry and Trade said the Government should have a policy for an oil processing plant.

Source: MongolWeb

DEAL STRUCK FOR 10,000 TONS A-I 93 FROM CHINA EVERY MONTH (August 1) Mongolia‟s total reliance on Russia for its petrol is going to end soon. A team led by the Deputy Head of the Minerals and Oil Authority, D.Amarsaikhan, was in China recently to conclude an agreement with the Oil Corporation of China. This allows Mongolia to import 10,000 tons of high octane A-I 93 petrol every month. This will meet 20 percent of Mongolia‟s present needs.

Source: Montsame

PLANNED OIL REFINERY IN DARKHAN TO MEET ENTIRE DOMESTIC NEEDS (October 10) Mongolsekiu LLC and Toyo Engineering Corporation of Japan have formally submitted to the Mines and Energy Ministry their plans to set up an oil refinery in Darkhan city. The crude will come from Kazakhstan along a pipeline and by train. Its output of 44,000 barrels a day is projected to fully meet Mongolia's demands in petroleum, diesel and aircraft fuel. The total cost of the joint venture is estimated to be more than US$1.2 billion and will be mostly borne by the Japanese Government and the International Cooperation Bank of Japan. The Japanese firm will have 60% share and Mongolsekiu 40%. Construction will begin in spring 2009, a pilot plant is expected to start operating in the first half of 2010, and the refinery will work at full capacity from June, 2012. When it starts working the refinery should relieve Mongolia of its stifling dependence on foreign fuel.

Source: Ardiin Erkh

HIGH-LEVEL TEAM IN KUWAIT TO DISCUSS OIL IMPORT (OCTOBER 17)

The newly appointed advisor to Prime Minister S. Bayar on issues relating to foreign investment, K. Sairaan, swung into action immediately on taking up his newly created position by leaving for Kuwait along with D. Zorigt, Minister of Minerals and Energy, looking for investment. Sairaan has experience of working with Arab countries where he served as Ambassador. They will also discuss details of oil import from Kuwait. This follows talks D Amarsaikhan, vice head of the Mineral Resources and Petroleum Authority of Mongolia, held in Kuwait earlier this month. The Ministry of Foreign Affairs & Trade was then asked to prepare a memorandum of understanding on importing oil from Kuwait at discounted rates. Further negotiations will be the responsibility of Minister Zorigt. Kuwait has said it prefers to work with an authorized Mongolian company. Zorigt will also choose this company, in accordance with related laws and regulations.

Source: Zuunii Medee

OIL IMPORT DEAL SIGNED WITH KAZAKHSTAN (November 7) Mongolia will import 150,000 tons of oil products and 1.2-2.0 million tons of crude oil annually for five years starting 2009 from Kazakhstan. An agreement to this effect was signed recently in

Astana. The CEO of the MonOilGas consortium, O.Sodbileg, signed for the Mongolian side and the president of Kazmunaigas Company, Kabaldin, for Kazakhstan. Efforts to diversify oil product import sources are bearing fruit. Chinese Prime Minister Wen Jiabao is believed to have favored a suggestion to bring the Kazakh crude through China.

Source: en.news.mn, www.business-mongolia.com

5. RAILWAY MUCH AT STAKE IN MASSIVE RAILWAY REFORMS (July 25) US$188.38 million of the Millennium Challenge Corporation grant of almost US$285 million to the Government of Mongolia is planned to be spent on projects targeted at improving the efficiency and capacity of the railway system, thereby creating new jobs directly and indirectly through increased economic growth. To ensure sustainability, the projects will promote improved operations and management practices, transparency in financial transactions, and commercialization of the railway system. It is planned to purchase 30 locomotives, more than 150 modern freight wagons, signal equipment, and communication and maintenance facilitation services. An antiquated infrastructure, and dated equipment and practices keep the railways system from fulfilling its potential as the backbone of the Mongolian economy. By encouraging growth in both domestic and foreign trade, the railway reforms should make a significant contribution to controlling inflation.

Source: Montsame

RAILWAY TO INCREASE ALL TARIFF (October 31) After incurring a loss of more than Tg20 billion so far this year, Ulaanbaatar Railway Company has decided to raise both domestic cargo tariff and passenger fares. The company says the increase will not help them make a profit, but is aimed at recovering losses. The Railway used to make most of its money from carrying transit cargo. This income has decreased, while the volume of low-rate high-expense transport of domestic cargo has gone up. Maintenance costs have risen and the price of diesel has increased 6.8 times since 2001, while freight rates have gone up only 82 percent during the time. The date and the extent of the freight rate raise are yet to be> announced but passenger fates will go up 50% from November 5.

Source: en.News.mn, Odriin sonin

MCC TO FUND ONLY AFTER UB RAILWAY SUBMITS AUDIT REPORT (November 21) Mr. Robert Reid, Resident Representative of the Millennium Challenge Corporation, told Transport Minister Kh. Battulga on Tuesday that some requirements have to be met before the MCC funds are released. The Minister had met with Mr. Reid to learn why no part of the USS188 million earmarked for Ulaanbaatar Railway was available as yet. The MCC official clarified that the Railway, a joint venture between Mongolia and Russia, has not yet submitted its audited financial report, which was a must before the grant could be released. Sources in the Ministry of Transport say the delay or the failure is because the Mongolian Government cannot reveal the audit report without the agreement of the Russian side, and this has not yet been forthcoming.

Source: Onoodor

NEW RUSSIAN-MONGOLIAN COMPANY TO UPGRADE RAILWAY SYSTEM (December 12) A cooperation agreement was signed over the weekend between V.I.Yakutin, the visiting President of the Russian Railway, and Kh.Battulga, Minister for Road, Construction and City Development, to set up a new entity that will supervise modernization of technology used in Ulaanbaatar Railway and construction of new lines. The long-term goal is to provide railway connection to all major mining centers. The new company will be based in Ulaanbaatar and both sides will have 50% ownership. Asked if this company was necessary in view of the Millennium Challenge Corporation‟s promised investment in the Mongolian railway system, Mr. Yakunin commented, “Mongolia and Russia use the same technology and their railway standards are the same. Introducing new standards and technology will clearly be more expensive and cannot be that beneficial.” He also said the project was “not so much for money as for mutual benefit”.

Source: Ardiin Erkh, Onoodor

6. PRIVATIZATION MAJOR COMPANIES TARGETED FOR PRIVATIZATION (January 4) Mongolia‟s two State-owned giants, Mongolia Telecom and MIAT Airlines lead the draft list of entities to be privatized in 2008, according to a submission from the State Property Committee to the Government.

Source: www.gateway.mn

GOVERNMENT APPROACHING END OF PRIVATIZATION PROCESS (May 30) B. Sukhbaatar, Chairman of the State Property Inventory, Control and Monitoring Department of the State Property Committee and Chairman of the Central Commission for Inventory, has said, “We are approaching the end of the privatization process. There are 700 state owned entities, mostly schools and hospitals. 75 entities are barely balancing their budgets. This year, the Committee is giving special attention to the privatization of MIAT and AeroGeodesy-Cement, Lime and Ferrous metal factories of Khutul.”

Sources: Onoodor, Mineral Daily News/www.miningmongolia.mn

7. THE STOCK EXCHANGE MSE TRADING VALUE EXCEEDS 100 BILLION MNT (January 4) The Mongolian Stock Exchange (MSE) and professional organizations participating on the Mongolian capital market set a goal to reach trading value of MNT 80 billion in securities trade in 2007; to fulfill a mission to protect and honor security issuers and investors rights and to conduct fair transparent effective securities trade. A further goal was to dedicate benefits for each individual and organization to the country‟s economy. By the week of December 25, 2007 the MSE‟s trading value exceeded MNT 102 billion. The Top-20 Index reached 10,558.94 units.

Source: www.mse.mn/en

BLOOMBERG TO BROADCAST MONGOLIAN STOCK NEWS (May 2) Bloomberg will soon begin broadcasting stock information from the Mongolian Stock Exchange which currently trades stocks from over 300 companies. Financial organizations of foreign countries are interested in the economic state and stock information of Mongolia.

Sources: Bloomberg, Minerals News Daily

ASIAN DEVELOPMENT BANK AND MSE TO JOINTLY DEVELOP SECURITIES MARKETS (June 20) The Asian Development Bank (ADB) and the Mongolian Stock Exchange will jointly implement a project developing the securities markets of Mongolia. The project will officially launch this September. Officials of the ADB are currently working on the evaluation of Mongolian governance, and the social and financial sector development, especially the availability of financial services to the general public.

Sources: Onoodor, Minerals Daily News

ONLINE STOCK TRADING TO BEGIN THIS MONTH (July 4) Media reports indicate that a NASDAQ-hosting system will allow individuals and companies to monitor, buy and sell worldwide company stocks from Mongolia. This will not only provide opportunities for Mongolian investors, but also offer exposure to new forms of raising capital for Mongolian companies. An important part of the program allows investors to directly buy and sell stocks without a broker.

Source: www.mongolia-web.com

8. FINANCIAL RATINGS MONGOLIA’S FINANCIAL RATINGS LOWERED BY FITCH (June 13) Fitch Ratings Service has lowered Mongolia‟s international financial ratings. In their report, a

revised outlook on Mongolia's long-term foreign and local currency issuer default ratings (IDRs) was lowered from positive to stable, and assigned a rating of 'B+'. This was based upon Mongolia's deteriorating current account balance and an ongoing acceleration in inflation. Fitch officials cautioned that more serious erosion in Mongolia‟s account balance could harm Mongolia's external financial position.

Sources: Thomson Financial News

MONGOLIA NO CAUSE FOR WORRY, FEELS RATING AGENCY (November 14) The rating agency Standard & Poor's says while “no country in Asia is immune from the global turmoil,” the five countries that give it the “least concern” are Mongolia, Hong Kong, China, the Philippines, and Cambodia. Ms. Elena Okorotchenko, head of Asian sovereign ratings at S&P, has said, “These five are on different rating levels but they are stable in their respective ratings.”

Source: Bloomberg.com

FITCH DOWNGRADES MONGOLIA’S RATING (December 12)

Fitch on Wednesday downgraded Mongolia‟s credit rating to a negative outlook from “stable”, amid concerns that the country would struggle because of high inflation and a weakening fiscal position. In its report on Mongolia, Fitch underlined the threat from inflation, at 28 per cent in October, as well as the likelihood that recent fiscal surpluses, starting this year, would be transformed into deficits, of up to 6.2 per cent of GDP. “The change in the commodity price cycle underscores an urgent need to improve economic policy co-ordination and implementation, which have been beset by uncertainty and inconsistencies, particularly regarding important mining projects,” wrote Mr. Vincent Ho, associate director in the sovereign group of the credit rating agency.

Source: www.ft.com

9. CORRUPTION

MINISTER RASH ISSUED WARNING BY IAC (May 9)

The Independent Authority against Corruption (IAC) issued a serious warning last week to R. Rash, Minister of Road, Transport and Tourism regarding his credibility in the fight against corruption. The IAC also called the ministry to remove M. Mendbayar, Deputy Director of the Civil Aviation Authority who released false information on property and earnings statements to the anti-corruption agency. Rash has refused to remove Mendbayar from the position, which the IAC said severely compromises his ability in the fight against corruption.

Source: UB Post

ANTI-CORRUPTION AGENCY SURVEYS CORRUPTION LEVEL (May 9)

The Anti-Corruption Agency is working on a mission to monitor the implementation of the government‟s anti-corruption related law and regulation. As of April 24, 2008, more than 400 officials from several Ministries submitted their income reports. More than 40 applications which were not submitted are under investigation.

Meanwhile, The Asia Foundation in Mongolia called a press conference Tuesday in the Government House to summarize its survey on scope, case and affect of corruption. The survey was conducted for the fifth time involving 600 households from Ulaanbaatar city and Ovorkhangai, Khovd, Dornod and Tov aimags. The survey revealed that the Anti-Corruption Agency has been effectively fighting against corruption and its rating is constantly increasing, B. Davaasuren, Program Manager of the Asia Foundation said. One of the biggest changes is that there has been a decrease in the number of respondents who said "I would offer a bribe if I had money". 61 percent said they would not accept a bribe. The number of participants who had offered a bribe has reduced to 19 percent.

Sources: www.news.mn, Montsame

601 CORRUPTION PROBES LAST YEAR (September 12)

In a report on the work done by the Anti-Corruption Agency (ACA) over the past one year since its establishment, Deputy Chairman D.Sunduisuren said 601 people were investigated on the basis of 917 complaints received. Of those chosen to be probed, 519 worked for the Government, or some

State agency, or some special service, 76 were private people, and 6 were foreigners. After investigation, 57 cases were forwarded to the prosecutors' office or court organizations. The investigated complaints related to altogether MNT 34 billion in loss or misappropriation, and about MNT 2 billion were recovered, while property worth about another MNT 2 billion was confiscated.

Source: Montsame

10. MINGLE-MANGLE

MONGOLIANS ABROAD SEND HOME USD1 MILLION EVERY TWO DAYS (November 21) Officially their number is put at 130,000 but actually some 430,000 Mongolians live, work, or study in a foreign country. This means 1 in every 15 of its citizens is outside Mongolia. A Mongol Bank study has revealed that these expatriates annually remit USD195million into the country. This is more than USD one million every two days.

Source: www.business-mongolia.com

SOCIAL POLICY TO SHIFT DIRECTION FROM CASH TO JOBS (November 28)

Social Welfare and Labor Minister T.Gandi has indicated that the thrust of the Government's social policy would be changed to make it more effective. Instead of aiming to provide relief to people with low income, the policy will now target families as a whole, particularly those in the medium income bracket. The emphasis would shift from distributing cash to spending the money on creating durable assets. The goal is to find a job for someone in every family and to help increase the income of 50,000 families by 2012.

Source: www.news.mn

MONGOLIA SEEKS INVESTORS IN HONG KONG (Dec 5)

Mongolia is pushing its commodities companies to sell shares in Hong Kong next year to raise funds, President Nambaryn Enkhbayar has said. “Next year will be a very important and crucial year for Mongolian companies to list here,” Mr. Enkhbayar said in an interview in Hong Kong on Tuesday. “Mongolian companies have been planning to do IPOs here, but because of the financial situation of the world market, they've decided to delay.” The planned share sales come at a time when banks and financial services companies have posted almost USD1 trillion of credit losses and writedowns, and Hong Kong's benchmark Hang Seng Index has fallen 52 percent this year. Some investors are also cutting back on their projects in the country. Mongolia is counting on its proximity to China which made up almost 70 percent of its investments last year. “Because of the geographical closeness, the Chinese market is the main market for Mongolian companies,'' Mr. Enkhbayar said. “Hong Kong is their preferred place.”

Source: www.bloomberg.com

POLITICS 1. ELECTION AND AFTER MONGOLIA CLEANS UP CAPITAL UNDER UNEASY CALM (July 4) Ulaanbaatar was calm on Thursday. The city mayor said officials were clearing away about 40 tons of debris left by a night of deadly riots as Parliament convened an extraordinary session to decide how to move forward after violence over alleged election fraud. "Parliament has debated the declaration of the state of emergency by the President and has approved it," said Speaker Lundeejantsan in remarks carried on state television. The General Election Committee announced preliminary results on national television late on Wednesday. The MPRP won 45 seats, giving it a comfortable majority in the 76-seat Parliament. "I think one thing now is very clear -- the election results will remain," said Chuluundorj, a retired Mongolian diplomat. "Maybe there will be disputes about some constituencies, but the main results can't be changed."

The special session of Parliament, which convened late on Wednesday, continued on Thursday, with members discussing how to prevent political violence -- rare in Mongolia -- in future. Lundeejantsan spoke of a need to form a government in order to move forward with the country's business, in particular tackling inflation at a decade-high and easing the poverty which has been blamed in part for the rioting. The uncertain political situation threatens to further delay deals that could unlock vast reserves of copper, coal, uranium and other resources beneath the country's vast steppes and deserts, seen as key to lifting the landlocked Central Asian state out of poverty. The biggest project at stake is at Oyu Tolgoi, also known as Turquoise Hill, backed by Ivanhoe Mines of Canada and Rio Tinto. The two companies propose to spend up to $3 billion developing the field, which they say could raise Mongolia's GDP by more than a third.

Source: Irja Halasz, Ulaanbaatar (Reuters UK)

DEADLOCK BROKEN, PARLIAMENT MEMBERS TAKE OATH (August 29) With elected members of all parties taking their oath at a hastily summoned meeting of the new Parliament on Thursday afternoon, the political deadlock has at long last been broken. The breakthrough follows the Democratic Party members deciding on Wednesday to reverse their earlier stand that all 76 results have to be officially announced and approved before they would join Parliament. The way is now clear for a Government to be formed. Most members were happy that they could be sworn in on a Thursday, auspicious in the Mongolian calendar as the day of the rabbit.

Source: en.News.mn

BAYAR TO BE PM AGAIN, FAVORS DP IN GOVERNMENT (September 5) The MPRP plenum on Wednesday chose incumbent S.Bayar to continue as Prime Minister, after deciding to support his proposal to include the Democratic Party in the next Government. His choice was without a contest and his idea of a joint Government was favored by 213 of the members present, with only 15 against. Earlier, reporting on the current political situation, Bayar said that the MPRP had an absolute majority in Parliament and needed no support to form a government but he would still favor some DP representation as the need of the hour was for a national consensus. N.Altankhuyag, who was elected leader of the Democratic Party on Saturday, also favors joining an MPRP-led Government as it would be more effective in tackling national problems and would be able to take quicker decisions.

Source: en.News.mn

LEADERS PLEDGE TO WORK TOGETHER (September 5) An informal meeting on Monday between MPRP and DP leaders saw the chairmen of both parties pledge themselves to work in tandem to solve the major problems facing the country. The MPRP leader, Prime Minister S.Bayar, told N.Altankhuyag, the newly elected Head of the Democratic Party, that the two parties should work together to solve the many problems in the economic, social and political sectors. Altankhuyag welcomed the ruling party's offer of cooperation but was clear that "this must be realistic". He revealed that he placed so much value on joint work that he had included this in his program when he stood for the DP leadership. The new DP leader assured Bayar that he preferred conversation to confrontation. "We are all Mongolians and have common interests. It's possible to achieve goals if the issues in governance are shared. Running a country is not only a matter of appointing Ministers or allocating portfolios. We must never forget that our main responsibility is to make citizens' lives better. The DP is looking forward to cooperating with the MPRP for this," he said.

Source: en.News.mn

BAYAR'S TASK LIST FOR COLLEAGUES (September 26) Prime Minister S.Bayar reminded his Cabinet colleagues at their first meeting on Saturday after formation of the new government that popular expectations ran high, "and all of you must work for the general good of the Mongolian people and not do anything to lose their confidence". The Prime Minister, who was to leave soon for a ten-day visit to the USA, gave them a few suggestions on how to get down to business. Among these were:

- To start getting acquainted with their work from Sunday on; - Not to carry out any unilateral personnel reshuffle; - To begin drawing up policies on mining operations and foreign investments to be implemented in accordance with already set out guidelines; - To identify the issues likely to arise from sharing among all the people wealth from mining resources, and to ensure collaboration between the coalition partners in this matter; - To prepare draft programs for all Ministries and to suggest the best ways of structuring the administrative set-up for best results; and - To prepare position papers on budgetary issues, and on fuel supply and prices.

Source: Montsame

BAYAR ADDRESSES UN, PLEADS FOR MORE MARKET ACCESS (October 3) Addressing the 63rd session of the UN General Assembly in New York last week, Prime Minister Sanjaa Bayar urged “developed countries to open their markets to products from those developing”. He said the UN itself needed reform to adapt to evolving global realities, and that small States, who made up the majority of the UN membership, should be a driving force behind the democratization process. Regretting the failure of the Doha round, he urged “more trade possibilities to be opened for developing countries, particularly those which really need them”. He spoke of energy cooperation among States of North-East Asia and said Mongolia was “cooperating with other countries in the region to develop technology to enable cleaner use of coal”. Mongolia has been hampered in its recent past by partisan division, but to make sure the country did not allow “a historical chance” to slip away, Bayar said his party, even with an absolute majority, had asked the main opposition to join the government.

Source: Montsame, en.News.mn

WARNING AGAINST EXPORTING LABOR (November 7) First Vice Prime Minister N.Altankhuyag told the National Manufacturers‟ Conference on Tuesday that the Government‟s plans to set up 100,000 manufacturing units in the next four years might be adversely affected if the present trend of exporting Mongolian labor were to continue. More than 100 representatives from 21 provinces heard Mr. Altankhuyag express the fear that the present labor migration would slow down Mongolia‟s own development, and call for putting a stop to the practice in time. The industrialization plans will cover the entire country but will take into account the special needs and resources of every region. Local features like the unemployment rate and the human development index will be carefully considered before final decisions are taken on the industry to be set up. However, the choice notwithstanding, efforts will be made to see every single soum has a small or medium enterprise. After possibilities are evaluated, financing will have to be arranged. The Government plans to set up a fund for each province. Mr. Altankhuyag criticized the present attitude of Mongolian manufacturers to maintaining standards, and ensuring efficiency and quality. He said all these have to be substantially improved if Mongolian products were to be exported in the next four years. International competition is quite different from producing for a captive domestic market.

Source: en.News.mn

GOVERNMENT TIGHTENS BELT (November 21) Faced with the need to cut MNT157 billion from the draft budgetary expenses to cope with the anticipated fall in revenue resulting from the drop in global commodity prices, the Government decided at a special meeting on Tuesday to: - restrict official travel, both within and outside the country, to save Tg1 billion 82 million; - reduce petroleum consumption to the tune of Tg650.6 million; - impose a uniform bonus payment system in state organizations, thus saving Tg648.2 million; - stop dispensing grants worth Tg465.4 million to political parties represented in local assemblies; - cut down on cell phone allowances to staff, thereby saving Tg285.7 million; - reduce expenses on stationery by Tg242.2 million; and - save Tg35.1 million by cancelling newspaper subscriptions of ministries and agencies.

Source: en.News.mn

2. WOMEN IN POLITICS WOMEN CANDIDATES FACE SETBACK (January 4) Women as candidates for elections faced a setback with an amendment to the provision of the Election Law that specifies, „not less than 30 percent of candidates should be woman.‟ The amendment, submitted to parliament by two male MPs revokes the quota and created controversy among female politicians and supporting male MPs. The amendment reverses the Parliamentary position to implement state policy with step-by-step measures, „increasing women‟s participation in decision-making levels and providing gender equity‟ in the Mongolia‟s Millennium Development Goals, approved with the 25th resolution by Parliament, April 21, 2005.

Source: The Mongol Messenger

WOMEN PROTEST OVER ELECTION QUOTA (February 13) The National Network of Mongolian Women‟s NGOs (MONFEMNET) has broken new ground with the first video-conference with women activists from nine aimags and one remote district. It convened the video-conference on January 25, to listen to aimag women‟s views on parliamentary actions to first, repeal the 30 percent minimum quota for women candidates in national elections and then, to take a re-vote on the Presidential veto, as the first vote resulted in accepting the veto on the repeal law. The women were unanimous on two criteria and stated they resolutely opposed and condemned parliamentary actions to repeal the quota for women candidates and said they believed the action had been dictated by the desire of incumbent male parliamentarians to hold onto their political power at all costs and their failure to liberate themselves from traditional views that held women inferior to men.

Source: The Mongol Messenger

WOMEN FIGHT BACK (February 29) In a counter attack to the loss of the 30 percent quote of women candidates in elections, Mongolian women have united to form a female-dominated party, „Mongolian Women‟s Party.‟ Social psychologist Dr B. Sarantsetseg initiated the Party and called a press conference on February 22 to outline the Party‟s modus operandi. She said, “At first we plan to nominate three to five members to the 2008 Parliamentary election. Our women can be leaders in all sectors and we will work to raise the profile of women with high intellectual capacity and creativity.”

Source: Odriin Sonin

POLITICAL CONSULTANT TO ADVISE MONGOLIAN WOMEN CANDIDATES (April 25) Veteran Democratic political consultant Ron Dotzauer is heading to Mongolia to provide insight on campaigning to women running for office. He‟ll be working with Battsetseg Shagdar, a candidate for Parliament and other members of the Democratic Women's Union. Shagdar led a group of women political activists on a visit to Washington State in December.

Source: Herald Net, Everett, Washington

66 WOMEN AMONG 401 FINAL CANDIDATES (June 27) The General Election Commission (GEC) revealed on June 23 some final figures for the election next Sunday. The 76 seats in Parliament will be filled from 26 constituencies. Altogether 1,561,248 people will choose from among 401 candidates, including 45 independents. They include 66 women.

Source: en.news.mn

3. BITS AND PIECES NATIONAL LIFE INSURANCE COMES TO MONGOLIA (February 22) The Mongolian Financing Regulatory Committee (FRC) has granted the National Life Insurance Company a special license to offer life insurance in Mongolia. The FRC approved a list of forms of voluntary life insurance and pertinent regulations concerning the activities of actuaries.

Source: Montsame

ISRAELI COMPANY TO INTRODUCE NEW IRRIGATION SYSTEM (May 23) Netafim, an Israeli-based agribusiness company and global leader in innovative agricultural solutions, plans to introduce its drip irrigation system to Mongolia. While in Israel, President Enkhbayar and a Mongolian delegation visited Netafim and were very impressed by the drip irrigation system. The enterprise plans to introduce the system in Mongolia with the aim of producing more and better crops, but with less water.

Sources: Jerusalem Post, www.jpost.com, www.netafim.com

UB MAYOR ORDERS BAN ON PLASTIC BAGS (May 23) On May 19, Ulaanbaatar Mayor, T. Bilegt, announced that all types of plastic bags will be prohibited from use in all shops and trade centers beginning June 1. This campaign was initiated as a means of addressing the litter issue in UB. The Mayor‟s order says that trade and service centers should promote the use of paper and cloth bags.

Source: www.news.mn

HUGE INCREASE IN VEHICLES SINCE 2000 (June 20) Mongolia has seen a nearly 70 percent increase in motor vehicles driven on its roads since 2000. The total number of vehicles in Mongolia now stands at 202,000. Statistics from 2007 reported that 344 people were killed last year and 932 were injured. Also, 1,096 traffic citations were issued by police.

Sources: www.Mongolia-web.com

EZNIS MAKES FLIGHTS CHEAPER FOR EXPATS (July 4) Foreigners who have a valid residence permit for more than 90 days and are subject to local tax laws will no longer have to pay more than Mongolians when travelling by Eznis Airways. The airline officially eliminated such fare differentiation from July 1 after it found that the practice, followed by other airlines and in several other sectors, had no basis in law in the country.

Source: www.eznisairways.com

HERDER GROUPS TO LEASE OWN PASTURES (July 25) Groups of herder families living in settlements around Ulaanbaatar, Darkhan and Erdenet will now be allowed to lease 300 hectares of land for their exclusive use. This experimental departure from traditional policy is expected to help these herders raise their income and also to increase production of food items. The new project calls for herders who have moved nearer urban centers to be organized into groups to own pastures under a long-term contract. US $5.8 million will be spent on this project to be implemented over five years. Work will begin soon to identify lands to be leased, to draw up a scheme of proper pasture exploitation, to dig wells on the lands, to provide materials for erection of livestock fences and to form groups of herders. The experiment acquires significance as it introduces a new concept of pasture ownership, encourages settled ranching instead of nomadism, facilitates integrated animal husbandry, and increases trade in milk products with urban consumers.

Source: Montsame

MONGOLIA ENDS UP 5TH IN OLYMPIC GOLD MPC RANKINGS (August 29)

Mongolia slipped to the 16th place in the final total medals per capita (MPC) ranking as the Beijing Olympics concluded on August 24. Its four medals meant there was one for 749,020 Mongolians, while the topper, the Bahamas, won two medals, thus giving one to 153,725 of its people. Based only on gold medals won, the top 10 in the MPC ranking were Jamaica, Bahrain, Estonia, New Zealand, Mongolia, Australia, Norway, Georgia, Slovakia and Slovenia.

Source: Couriermail.com.au; The Los Angeles Times

PLANS FOR NUCLEAR ENERGY (August 29) A nuclear energy commission is planned to be set up soon to facilitate the setting up of a nuclear power plant in Mongolia. France has offered support for the project, which will exploit the country's rich uranium deposits. The cabinet is slated to discuss the structure of the proposed commission as

also the establishment of a state-owned company to be called Atom to be responsible for the plant. Source: Zuunii Shuudan

SAME PUNCH, ANOTHER ARENA (September 5) In a letter to President N. Enkhbayar congratulating him on Mongolia's success at the Olympic Games, Arshad Sayed, World Bank Country Manager and Resident Representative in Ulaanbaatar, has expressed the hope that "in the same fashion as the judo thrusts of Tuvshinbayar and the punches of Badar-Uugan, you will now take on the economic challenges and have similar success!"

Source: The media service of the President of Mongolia, Olloo.mn

INTERNET USE MORE THAN DOUBLES IN FIVE YEARS (October 17) The ways in which Mongolians access information have changed much in the last five years. According to a survey by the Press Institute made in August and September, the number of people who rely on television for news has fallen to 66.5 percent from the peak of 91 percent in 2003. Newspaper readers are now 30.8 percent from the earlier 47 percent, and radio listeners are just 9.3 percent in place of the 34 percent five years ago. Internet use has more than doubled, from nine percent in 2003 to 19.6 percent now.

Source: www.news.mn

USD20,000 FOR CUBA (October 24) The Government of Mongolia has decided to render aid worth USD20,000 to the Cuban people, hit between October 1 and 8 by hurricanes Gustav and Ike.

Source: Montsame

44% MORE MOBILE TELEPHONE USERS IN A YEAR (October 24) The number of mobile telephones continues to rise fast even as those of both landline and wireless telephones keep falling. At the end of September the number of landline telephones stood at 151,400, a fall of 800 in 12 months, while 1,561,500 mobile telephone users were registered, an increase of 44.3 percent. Wireless telephone sets were fewer by 25.2 percent. Altogether 106,100 households have cable television, registering an annual increase of 18.2 percent.

Source: The National Statistics Office

CRITICAL SHORTAGE OF PURE WATER FEARED (November 14)

Fears have been expressed in a Government report that Mongolia will face a critical shortage of pure water if steps are not taken soon. The effects of global warming are shown by the country‟s average temperature rising by 1.8 degrees in the last 60 years. If things are allowed to drift, warns the report, Mongolia could face a pure water famine by 2070. Aware of the threat, the Ministry of Environment has cancelled a license awarded to a Korean company to build a golf course on 50 hectares of land that is part of a water basin. The Ministry is also considering steps to utilize the water in some of the rivers that flow from Mongolia to other countries.

Some time ago, an official of the Water Supply Agency told media that at the present rate of use Mongolia may not have enough pure water in ten years‟ time. According to him, an average apartment household uses about 280 liters of water a day, while ger district residents make do with 7-8 liters. The waste can be controlled only when water meters are installed in every household. If this is done the country‟s present pure water reserve will last for more than 20 years. Between 5-15 years of work is needed to find new sources and arrange for supply.

Source: Ardiin Erkh, Montsame

KOREA TO TAKE FEWER WORKERS (November 28)

South Korea has decided to take 5,000 workers from Mongolia this year than the expected 8,000. It plans to meet the shortfall with laborers from Vietnam.

Source: www.news.mn

SURFACE WATER SOURCES DRYING UP FAST (November 28)

A survey has found a sharp fall in the last four years in the number of surface water sources in the

country, raising fears of a severe depletion of water supply in the not too distant future. Over 1,200 of the 5,100 rivers and streams flowing in 2004 are now dry. Of over 3,700 lakes enumerated then, some 2,600 have no water any longer. The number of springs has come down from 93,700 to 70,000. There were more than 400 mineral water sources four years ago, of which 110 have disappeared. Z. Batbayar, the Water Authority head, feels the immediate responsibility lies with irresponsible and unregulated gold mining and tanning, both of which use up an enormous quantity of water.

Source: www.mongolia-web.com

4. EVALUATION REPORTS FORBES MAGAZINE RANKS MONGOLIAN TOURISM 5TH IN WORLD (April 25) Mongolia is included in the best routes of the world tours, according to Forbes magazine which issued a list of the most interesting tourism routes in the world. According to the list, Mongolia ranked 5th. Travel costs which average US $4,500 provide tourists with the opportunity to experience nomadic life.

Source: Ardiin Erkh

MONGOLIA CLIMBS UP IN BUSINESS-FRIENDLY RANKS (August 1) The latest Forbes ranking of the “Best Countries for Business” has put Mongolia up 10 places (from 69 last year to 59) among more than 120 nations. At 44th, Mongolia is also reasonably high, given the competition, in the “freedom of trade” category. The editors analyze the business climates in all the national economies, focusing on degrees of personal freedoms, such as the right to participate in free and fair elections, or freedom of expression and organization. As Forbes explains, “We examine the misuse of corporate assets for personal gain. Together with economic policies supportive of free trade and low inflation, these key points form a snapshot of countries' suitability for capital investment.” Countries that have done well in this year‟s list are all marked by success in limiting bureaucracy standing in the way of entrepreneurs hoping to do business within their borders.

Source: www.forbes.lists

MONGOLIA RANKED 58TH "ON EASE OF DOING BUSINESS" (September 19) Doing Business 2009, sponsored by The International Finance Corporation and the World Bank, puts Mongolia 58th, three places down from last year, amongst the world's 181 economies on the overall ease of doing business. Doing Business ranks economies based on 10 indicators of business regulations that track the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes and closing a business. “Mongolia is included among the top 11 countries in East Asia which have made reforms in paying taxes and trading across border. Documents needed for export were reduced from 10 to 8 and total time reduced by 9 days," the report says.

Source: www.doingbusiness.org

MONGOLIA SLIPS 3 PLACES IN CORRUPTION RANKING (September 26) Mongolia has slipped three places, from 99th in 2007 to 102nd, in this year's Corruption Perceptions Index (CPI), launched by Transparency International (TI). The CPI score indicates the degree of public-sector corruption in a given country as perceived by business people and country analysts and is a composite index, drawing on different expert and business surveys. The 2008 CPI scores 180 countries on a scale from zero (highly corrupt) to ten (highly clean). At 3.0 Mongolia's score remains the same as in 2007.

Source: www.transparency.org

MONGOLIA MOVES UP TO BE RANKED THE WORLD'S 62ND FREEST ECONOMY (September 26) Mongolia's economy is 62.8 percent free, according to The Heritage Foundation and the Wall Street Journal 2008 assessment, which makes it the world's 62nd freest economy. Its overall score is 3 percentage points higher than last year, mainly reflecting improved scores in four of the 10 economic freedoms. Mongolia is ranked 10th out of 30 countries in the Asia-Pacific region, and its overall score is slightly higher than the regional average. By implementing trade liberalization and fiscal reforms that include lower tax rates, Mongolia showed the most improvement in the region,

moving up to "moderately free" from "mostly unfree" in the 2007 Index. Commercial registration and licensing are efficient, but closing a business takes longer than it should. Inflation is fairly high, but the government has eliminated almost all of its price supports and market distortions. Mongolia has very weak property rights, the Index finds. The judicial protection of these rights is still weak, and judges often do not validate previously agreed contracts. The judiciary is also hampered by corruption. Mongolia's scores in the individual sectors are: Business Freedom - 71.1%; Trade Freedom - 81.4%; Fiscal Freedom - 85%; Freedom from Government - 71.7%; Investment Freedom - 60%; Financial Freedom - 60%; Property Rights - 30%; Freedom from Corruption - 28%; Labor Freedom - 62.4%.

Source: www.heritage.org/index

MONGOLIA FARES BADLY IN INTERNATIONAL MINING REPORT (October 31) This year's Behre Dolbear Group report on political risk assessment of countries of import to the mining industry ranks Mongolia last in the 'Tax Regime' criterion among the 25 countries surveyed. Mongolia's overall 2008 ranking declined by one rank to 13th, also because of its continued unfavorable mining tax policies. The full report can be seen on BCM's website, Articles/Reports on Mongolia.

Source: www.dolbear.com

MONGOLIA 100TH IN COMPETITIVE INDEX (October 31)

Mongolia has been ranked 100th in this year's Global Competitiveness Index (GCI) by the World Economic Forum. This is up one place from last year. The rankings are decided on the basis of both publicly available data and the Executive Opinion Survey, a comprehensive annual survey which, in Mongolia, is conducted by the Open Society Forum together with the World Economic Forum. The survey is designed to reflect a broad range of factors affecting the business climate of a country. The GCI is based on 12 pillars of competitiveness: Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labor Market Efficiency, Financial Market Sophistication, Technological Readiness, Market Size, Business Sophistication and Innovation. For the full report that includes comprehensive listings of the main strengths and weaknesses of countries, please go to BCM website Articles/Reports on Mongolia and/or http://www.weforum.org/documents/GCR0809/index.html

Source: Open Society Forum

SPONSORS

ECONOMIC INDICATORS MSE WEEKLY REVIEW

For the week ended December 12, 2008, trading activity on the Mongolian Stock Exchange (MSE)

totaled 663,900 shares with 32 companies traded. Total market value of transactions was MNT

175.1 million. Total market capitalization of the 358 stock companies listed on the MSE was MNT

527.7 billion, and decreased by MNT 22.4 billion or 4.1% from the previous week.

The Top-20 Index decreased by 372.93 points or 6.1% compared to the previous week, closing at

5,756.93 points. The MSE Composite Index decreased by 139.19 points or 4.6% compared to the

previous week, closing at 2,859.20 points.

Most active stocks traded were: Hermes Center (303,400 shares), Anod Bank (111,400 shares),

Remicon (67,400 shares), Olloo (56,700 shares), and Genco Tur Buro (48,300 shares).

Major share price percentage gainers were: Olloo (38.0%), Hermes Center (22.6%), Dornod Autozam

(15.0%), Zoos Goyol (7.9%), and Gazar Suljmel (3.7%). Major share price percentage losers were:

Bayangol Hotel (17.1%), Gobi (15.8%), Darkhan Nekhii (15.0%), Mongeo (13.2%), and

Mon.Tsakh.Kholboo (12.2%).

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

Year 2007 Avg. 9.0% [source: NSOM]

Year 2007 *15.1% [source: NSOM]

November 30, 2008 *24.2% [source: NSOM]

*year over year (yoy)

CURRENCY RATES – December 18, 2008

Currency name Currency Rate

US dollars US 1230.06

Euro EUR 1708.49

Japanese yen JPY 13.73

British pound GBP 1899.89

Hong Kong dollar HKD 158.72

Chinese yuan CNY 179.76

Russian ruble RUB 44.59

South Korean won KRW 0.92

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.