BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 157, March 4 2011

NEWS HIGHLIGHTS:

Business:

Ivanhoe assessing future options, such as auctioning Oyu Tolgoi;

JORC Compliant Resource Estimate quadruples coal inventory for Sharyn Gol;

Noble Group seeks more coal deals in Mongolia;

Voyager “extremely pleased” with drilling results, extends program;

Haranga Resources starts drilling at Shavdal iron ore project;

Ivanhoe puts spotlight on Oyu Tolgoi silver potential;

Eznis and Lufthansa Technik sign agreement for technical services;

Gold price boosts Centerra earnings;

Awards for Erdenet Copper, its director general;

MCS cannot import methanol for its coal gas production;

North Asia Resources sees further loss in 2H10;

Mongolia’s first Apple store opens;

Prophecy Resource makes senior appointments.

Economy:

PM identifies priorities in development strategy;

Governance main theme at Mongolian Economic Forum;

Mongolia’s challenges: inflation, currency flows;

Batbold renews commitment to stable investment environment;

Bond sales to help fight MNT appreciation pressure;

Banks ready to meet demands of mining boom, says R. Koppa;

MP wants more statutory independence for Development Bank;

Austrade to open office in Mongolia later this year;

Private sector sees contradiction in Government policy;

Cashmere prices start rising;

Citigroup sees Mongolia as the next Equity Market superstar;

Mongolia: really a new frontier or merely a temporary bright spot?

Railway decision makes geopolitical sense, but at what cost?

Banks picked for Tavan Tolgoi IPO face many unknowns;

Tavan Tolgoi IPO will be a complicated transaction;

Mongolia likely to list depository receipts in Hong Kong, J.P. Morgan says;

U.S. Embassy releases 2011 Mongolia Investment Climate Statement;

10.8% more tourists in 2010;

World Bank grant for new software at tax office;

Mongolia wants to study Azerbaijani pension insurance model;

Private sector wants more information on PPP, Concession Law;

Views on the Concession Law;

Xinjiang to import more coking coal from Mongolia;

Difficult for China to invest in commodities, says FX chief;

China holds more U.S. debt than previously estimated;

China manufacturing growth eases;

Minister warns pollution can threaten China’s growth;

China reduces growth goal and vows to curb inequities;

U.S. warns extreme food prices will stay.

Politics:

“MPRP” leader says Minister trying to influence Supreme Court against them;

Khurts appeals British extradition ruling;

Ulaanbaatar metro to be ready by 2017;

340 households to be moved to provide land for transformers;

National network formed to reduce alcohol use;

PM hopes people’s trust in health services will be revived;

Mongolia seeks South Korean help to be seafaring;

Speaker seeks citizens’ views on Constitution amendments;

Hopes pollution will be reduced are more ambitious than realistic;

Green Star award for ecofriendly MP;

Students question sale of Erdenes TT shares to businesses;

U.S. Ambassador asks future public servants to accept challenges.

*Click on titles above to link to articles.

MONTHLY MEETING RECAP

BCM‘s monthly meeting on February 28 was attended by 75 members. Mr. Peter Morrow, founding Board Chairman and Executive Committee member, was in the chair. Executive Director Jim Dwyer reported that two members of BCM's Tax Working Group have been appointed members of the task force at the National Tax Authority with the mission to improve tax laws. BCM membership now stood at 159, a 25% year-on-year increase. The three newest members are 1. ING Bank, a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services. The corporate and investment banking arm of the company operates out of a representative office in Ulaanbaatar and provides clients with a range of products and services in the areas of project finance, trade and commodity finance, debt capital markets, and initial public offerings. 2. XacBank, a community development bank and microfinance institution headquartered in Ulaanbaatar. It provides equitable access to transparent, reliable and responsive banking products and services to clients, including micro-entrepreneurs as well as small and medium businesses. 3. Energy Resources, which owns and operates the Ukhaa Khudag deposit, and is one of the largest coking coal producers of the country with potential and outreach to sustain a successful development model at an international level. Its shareholders include MCS, Petrovis, the Shunkhlai Group and the European Bank for Reconstruction and Development. Mongolian Mining, ER‘s parent company, raised approximately USD700 million in its highly successful IPO on the HKEx in October 2010. Mr. Layton Croft, a founding BCM Board member, updated all on his January move to Peabody Energy as head of International Government Relations Asia. Peabody, the world's largest coal company, was a Platinum Sponsor of this week‘s Mongolian Economic Forum and will join BCM as member. The first presentation of the evening was by Mr. Kh. Altai, Acting Executive Director, Mongolian Stock Exchange (MSE). He mentioned some salient features of the recent agreement between the MSE and the London Stock Exchange and said a clearer picture of how the MSE would be restructured will emerge only after a Master Service Agreement is signed in April. Mr. A. Bilguun, Executive Director, Prime Info LLC, spoke on the McCloskey Mongolia Coal & Infrastructure Conference 2011, scheduled for April 7 and 8. The event for producers, traders, financiers, logistics operators, and buyers is still under preparation but speakers and partners have been confirmed. Mr. S. Munkhsukh, CEO, Eznis Airways, described the huge scope for developing the aviation sector in Mongolia and how such growth would impact the economy and other businesses. A job in aviation

creates 5-8 other jobs and USD1 invested in the sector generates USD8.7 in revenue for other businesses. Eznis has a zero-accident and zero-incident track record and the two new aircraft it plans to acquire to augment its present fleet of 4 have been specially chosen for their ability to be operational on limited runways.

BUSINESS

IVANHOE ASSESSING FUTURE OPTIONS, SUCH AS AUCTIONING OYU TOLGOI Ivanhoe Nickel & Platinum Ltd., the mining company known as Ivanplats, plans to go public this year in an offering that could raise between USD750 million and USD1 billion. Mr. Robert Friedland, the chief executive of Ivanhoe Mines Ltd., is a controlling shareholder of Ivanplats, with a stake of about 30%. Ivanhoe, which owns 8% of Ivanplats, is also considering its own sale or breakup. The potential public offering of Ivanplats comes as Mr. Friedland's other company, Ivanhoe, assesses its future options with the help of Citigroup, people familiar with the matter say. One plan would involve spinning off all its assets, except for a stake in Mongolia's Oyu Tolgoi mine, to shareholders, followed by an auction for the Mongolian asset, they said. Ivanhoe owns 66% of Oyu Tolgoi, one of the world's largest untapped gold and copper mines; the Mongolian government owns the rest. In this scenario, Ivanhoe's assets in Kazakhstan, Australia, Indonesia and the Philippines would become a separate company led by Mr. Friedland. Another plan would involve Ivanhoe selling its stakes, except for Oyu Tolgoi, to individual buyers and then running an auction for the remainder of the company. Its Kazakhstan gold mine and Ivanhoe Australia are valued upward of USD1 billion each. A third option is to run an auction for the entire company, although that could be difficult to do given that Anglo-Australian miner Rio Tinto owns 42.1% of Ivanhoe and has the right to raise its stake to 49%. Mr. Friedland owns 15.5% of Ivanhoe. In 2006, Mr. Friedland was lauded in the mining industry for securing Rio as a partner to develop the Oyu Tolgoi mine. But the project's future had been up in the air amid a dispute between Ivanhoe and Rio over Ivanhoe's desire to raise equity to fund the project. After the two sides settled their spat in December, Ivanhoe on January 27 said that it had raised almost USD1.2 billion in a rights offering. The funding will help finance construction of the gold and copper mines in southern Mongolia. While Rio doesn't have a direct stake in Oyu Tolgoi, it effectively has operating control of it because of its position in Ivanhoe. The talks about the future of Ivanhoe and its Mongolian mines are still under way and a final decision has yet to be made, people familiar with the matter say. That could happen over the next few months, and before January 2012, when a standstill agreement between Rio and Ivanhoe ends.

Source: The Wall Street Journal Asia

JORC COMPLIANT RESOURCE ESTIMATE QUADRUPLES COAL INVENTORY FOR SHARYN GOL Sharyn Gol JSC has mentioned the following as highlights of the final results of the 2010 JORC Resource Estimate undertaken by independent geological consultants for the Sharyn Gol Mining Project. • JORC Compliant Coal Resource totaling 374 Mt reported. • 190.5 Mt Measured, 84.4 Mt Indicated and 98.9 Mt Inferred JORC Categories. • 337.6 Mt reported above 300 meters from surface signifies the continuation of open cut mining for decades to come. • JORC resource estimate calculated from a significantly larger non-JORC Coal Inventory. • Adjacent exploration targets identified demonstrating potential for further large increases to the existing coal resource base. • New open cut area containing 220.3 Mt down to 300 meters identified adjacent to existing open pit. • All resources reported are entirely contained within the company‘s 100% held mining lease. • Coal quality and washability test work indicating strong potential to produce a high yield, low ash, moderate to low sulfur, and high calorific value thermal coal product suitable to export to international markets. The company owns 100% of the Sharyn Gol mining lease and is owner operator of the mines located 215 km north of Ulaanbaatar. The operations are strategically located on a 65 km long dedicated rail spur, which was built specifically to service the mining operation, and gives the company a competitive advantage over its peers in Mongolia. The company currently mines approximately 50,000 tons of coal per month,

which is largely sold into the domestic regional market. It has now engaged a reputable international mining engineering consultancy to look into the expansion and redevelopment of the existing operation to allow both a substantial increase in production and quality control. Source: Sharyn Gol JSC

NOBLE GROUP SEEKS MORE COAL DEALS IN MONGOLIA Noble Group Ltd., the Hong Kong-based supplier of energy, food and mining commodities, sees Mongolia as its next opportunity to expand in coal and build on its record 2010 profits. ―We have staff looking at several opportunities‖ in Mongolia, especially in exploration companies, Chief Executive Officer Ricardo Leiman has said. ―Mongolia will be an area specifically for quarter two. We look at developing a similar model there to what we have in Indonesia and Australia.‖ Noble won exclusive overseas marketing rights for PT Berau Coal, Indonesia‘s No. 5 producer, in November, adding to its Australian assets. The company posted record annual net income of USD606 million from USD57 billion in sales. Aspire Mining Ltd., which explores for coal in Mongolia, said on January 17 that Noble bought 4.1 percent of its shares and is in preliminary talks on how the two can cooperate. Xanadu Mines Ltd., which plans to develop coal and iron ore fields in Mongolia, said on February 3 it has struck an alliance with Noble. The company has an office in Mongolia and ships coal from the region, Mr. Leiman said. Noble has completed 28 deals worth USD3.37 billion since January 2000, as it transforms its business from trading to buying and running some energy and food producing assets. Noble is ―well positioned to leverage its supply chain to expand our business further,‖ Mr. Leiman said. However, the earnings and price gains hadn‘t filtered through into the stock. In the past 12 months, Noble has fallen 0.7 percent, compared with a 10 percent gain in Olam, and double-digit growth of Japanese trading houses including Marubeni Corp., Itochu Corp., and Sumitomo Corp. Returns on Noble‘s acquisitions will become apparent in 18 months, Mr. Leiman said. Source: Bloomberg

VOYAGER “EXTREMELY PLEASED” WITH DRILLING RESULTS, EXTENDS PROGRAM Voyager Resources has said it is ―extremely pleased‖ with initial drilling results which have confirmed the high quality of the Khongor Copper Gold Project located in the South Gobi Arc Terrain that hosts the Oyu Tolgoi Copper Gold Deposit. The drilling program has been extended with a total of 14 drill holes now completed. Complete results have been received from four of the first eight drill holes. Voyager has an Exploration Target for Khongor of 100Mt to 200Mt at 0.7% to 1.0% copper. In the company‘s Tsagaan Gold Project, located approximately 165 km south east of Ulaanbaatar, a diamond core drilling rig has been mobilized to target intense chargeability anomalies.

Source: Voyager Resources

HARANGA RESOURCES STARTS DRILLING AT SHAVDAL IRON ORE PROJECT

Australia-listed Haranga Resources Ltd. has announced commencement of its maiden drill program at the Shavdal iron ore project in Mongolia. This follows ―excellent magnetic survey results‖ from the company‘s flagship Selenge iron ore project.

Source: Haranga Resources Ltd.

IVANHOE PUTS SPOTLIGHT ON OYU TOLGOI SILVER POTENTIAL The Oyu Tolgoi project in Mongolia is better known as one of the biggest copper/gold deposits in the world, but owner Ivanhoe Mines also wants investors to take a closer look at the silver contained at the asset, especially with silver prices trading around 31-year highs. Oyu Tolgoi will produce an average of more than three-million ounces a year of the precious metal during its first ten years of commercial production, starting in 2013, the company said in a statement on Thursday. "Oyu Tolgoi will rank as a very substantial silver producer when commercial production begins in 2013," said Ivanhoe CEO Robert Friedland. "While we have not routinely itemised the silver content of Oyu Tolgoi's porphyry ore in our discovery reports, the buoyant global silver market has fuelled the interests of investors and has prompted us to more widely circulate the projections for silver production that have been prepared as part of our project planning and development studies." Investors may not have considered how much the revenue from silver and other by-product metals like molybdenum will help reduce the average cost of production for copper and silver, Friedland

said. Silver was trading above $34/oz, the highest level since October 1980. Oyu Tolgoi will produce a copper concentrate containing gold, silver and molybdenum. The operation is expected to produce more than 1.2-billion pounds of copper, 650 000 oz of gold and three-million ounces of silver a year during the first ten years. Ivanhoe said it is ahead of schedule on the first phase of construction at the big mine, and expects first production late next year. Cash costs were estimated at 45c/lb of payable copper after gold credits during the first ten years. However, the calculation was made based using $2/lb for copper, $850/oz of gold and a silver price of $13.50/oz. Prices for all three metals are currently considerably higher.

Source: Mining Weekly

EZNIS AND LUFTHANSA TECHNIK SIGN AGREEMENT FOR TECHNICAL SERVICES

Eznis Airways has signed an agreement with Lufthansa Technik Switzerland GmbH to receive technical services for the two Avro RJ85 aircraft which the airline hopes to start flying in Mongolia by June and July of 2011. The agreement covers all technical services including aircraft engineering, ongoing maintenance, spare parts inventory, and engine overhauls, as well as training, and will be in force for at least five years. Experienced maintenance staff from Lufthansa Technik will be assigned to Ulaanbaatar to ensure quality maintenance services from the very beginning as well as for a long-term knowledge transfer to Eznis.

Source: Eznis Airways

GOLD PRICE BOOSTS CENTERRA EARNINGS Centerra Gold increased net income in the fourth quarter by 9.4%, thanks to a 22% year-on-year increase in gold prices. The company earned USD153.1 million, compared with USD140 million in the fourth quarter of 2009. Centerra owns the Kumtor mine, in Kyrgyzstan, and the Gatsuurt project in Mongolia. The firm ended operations at another Mongolian mine, Boroo, in November. Centerra had planned to replace the production from Boroo with ore from its Gatsuurt project, which is located about 50 km away. However, the firm is still waiting to hear how the project will be affected by a new water and forests law enacted in Mongolia and the final permitting for Gatsuurt will not be approved until the uncertainty under the new law is dealt with. CEO Stephen Lang last week said the company is ―optimistic‖ the issue will be resolved, but the uncertainty over timing means Gatsuurt has not been included in 2011 forecasts. Source: Mining Weekly

AWARDS FOR ERDENET COPPER, ITS DIRECTOR GENERAL There were two awards for Erdenet Copper Corporation at a ceremony organized in London on March 2 by the Europe Business Assembly. The Britain-based independent corporation for development and management of economic, social and humanitarian collaboration selected the Russia-Mongolia joint venture as the number one economic entity and best producer in Mongolia in 2010. It also named Mr. Ch.Ganzorig, Director General of Erdenet, as The Best Manager -2010.

Source: News.mn

MCS CANNOT IMPORT METHANOL FOR ITS COAL GAS PRODUCTION MCS Holding is faced with a problem as it begins work on setting up a plant to produce coal gas for heating ger district households. It finds that like all other technical spirits, methanol, an essential component in producing coal gas, is in the list of items that are not allowed to be imported into Mongolia. The company hopes Parliament will agree to amend the present laws to remove the ban to help reduce air pollution.

Source: Ardiin Erkh

NORTH ASIA RESOURCES SEES FURTHER LOSS IN 2H10 North Asia Resources said it expects to record a further loss for the second half of the financial year ended 31 December 2010 as compared to the first half. The company attributes this to an impairment on the goodwill from acquisition in the previous year, as a result of the decrease in the business enterprise value of a subsidiary of North Asia Resources. Source: ETNet

MONGOLIA'S FIRST APPLE STORE OPENS Mongolia‘s Apple aficionados are thrilled that an official Apple store has, at long last, opened its doors in Ulaanbaatar. The Bodi Electronics Apple Retail Store officially opened on March 1, but it

had been open for business since February 21. It carries the full range of Apple products but does not currently stock iPads, preferring to wait for the rumored update. Similarly, iPhones are also off the wish-list as there are currently no carrier arrangements in Mongolia. Source: M.A.D. Corporate Services

PROPHECY RESOURCE MAKES SENIOR APPOINTMENTS

Prophecy Resource Corp. has appointed Mr. Paul F. Venter, VP Energy Operations, Ulaanbaatar and London, to oversee its Mongolian mining and power operations; Mr. Christiaan H.B. (Ronnie) Van Eeden, VP Mining Operations, Ulaanbaatar, to be in charge of Mongolian mining operations and coal to liquids technology; Mr. O.Enkbaatar, VP Mongolia Country Manager, to liaise with government on statutory and regulatory framework for both mining and energy operations; and Ms. Irina Plavutska, Interim CFO, Vancouver and Ulaanbaatar.

Mr. John Lee, Chairman of Prophecy, has said the company "is now endowed not only with world class assets, but with world class management."

Source: Prophecy Resource Corp.

SPONSORS

Khan Bank Eznis Airways

Mongolia Web Mongolian National Broadcasting

ECONOMY

PM IDENTIFIES PRIORITIES IN DEVELOPMENT STRATEGY

Inaugurating the two-day Mongolia Economic Forum on Wednesday morning, Prime Minister S.Batbold expressed happiness that this opportunity to discuss development policy issues was becoming an annual feature and hoped the forum would continue to encourage open debate among scholars, politicians, businessmen and civil representatives on all aspects of development. This year‘s forum had the theme ―Together to Development‖ and chose four priority areas for discussion: Development Policy, Human Development, Infrastructure, and Governance. Altogether 15 panel meetings covered various areas of these four basic concerns.

Batbold said human welfare is the ultimate goal of development and Mongolia‘s economic success would be judged by how much it improved its citizens‘ life. For this, he said, ―We should first improve governance. This can be done by putting in place the right mechanism, by a proper division of power and by a clear demarcation of political parties‘ rights and responsibilities. Citizens‘ participation has to be encouraged.‖

Development is possible only when the right strategy is adopted and this, he warned, is not a short-term exercise. ―We must have a long-term vision to ensure sustainable development for our people.‖ He emphasized the importance of developing human resources ―through providing better education, and giving people wide access to knowledge and skills‖. He also wanted urgent attention to be paid to infrastructure development because ―mining, tourism, small and middle enterprises and regional development depend on infrastructure‖.

Source: News.mn

GOVERNANCE MAIN THEME AT MONGOLIAN ECONOMIC FORUM Governance was the main theme at the Mongolian Economic Forum, as the country begins to come to terms with its newfound status as a major global player in critical resources.

The country has sometimes struggled with the transition from decades of mismanagement to its new status as a resource rich state sandwiched between two superpowers, and is undergoing a transition that could either be a great success story or lead it to the alternative path, trodden by other nations, of its natural wealth becoming a curse.

The event, an NGO-sponsored platform inaugurated last year, attracted major players such as Peabody, Rio Tinto, TDB, Goldman Sachs, Tenger, the IFC among other international organizations, foreign governments and related trade, investment and commercial organizations, in addition to the highest office of the Mongolian government. It is intended not as a showcase, but as a genuine and critical examination of where and how Mongolia should be developing its newfound, and extraordinary wealth. For a democratic nation of just 2.7 million people, this has major implications.

First up, the good news. As in China, where when the government talks, everyone else listens and questions are largely brushed aside as irrelevant, the Mongolian plenary session included Prime Minister S. Batbold, a host of Cabinet officials, and the mayor of Ulaanbaatar. So far, so familiar. Unlike China, Mongolia being a democracy, the moderator was the outspoken, U.S. educated, pro-reform and anti-corruption lawyer, Mr. Jargalsaikhan. Being democratic, Mongolia certainly knows how to keep its politicians on their toes as awkward questions concerning government policies and performance were asked, including of the PM. This did not strike me as a country about to fall into cronyism any time soon. When the somewhat hapless mayor of Ulaanbaatar – a city possessing the largest amount of Mongolia‘s academic and institutional resources, and over 50 percent of the national population – was confronted with a litany of problems ranging from pollution to corruption and lack of public services, and then reminded his was not actually an elected position, sparks were going to fly, and the forum did not disappoint.

Read more…

The jaded could argue that it was a show, and that Mongolia‘s well known problems were being outed in a routine display of the government showing it was listening, but I don‘t think this cynicism was the case. Rather, the exercise seemed more akin to a momentous change occurring in the country, and local politicians and lawyers being passionate about the outcome. This is a very positive sign.

Recognized also was the fact that in possessing such natural resources, Mongolia has emphatically joined the club of about 50 nations whose wealth largely depends upon natural resources. These range from Zimbabwe to Norway; however, the path to sustainable prosperity still has to be laid down. The theme of ―the curse of resources‖ cropped up time and again at the forum, and it is the responsibility of the government to ensure they get this right. To that end, Prime Minister Batbold described the need to ―define boundaries‖ and introduce structures defining the influence of government between interfering, regulatory, support and when to stand aside. Such comments are wise.

Definition was also needed, he continued, to define the boundaries between public and private sector involvement, while calls were also made from the floor to better regulate Mongolia‘s political parties to prevent them making election promises of financing that lay far beyond the country‘s fiscal capabilities.

Indeed, the managing of Mongolian people‘s expectations and the capabilities of the government to deliver were all discussed at some length. Your average Chinese investment seminar, with reams of statistics and well-rehearsed lines were far removed from what was going on in Mongolia‘s Parliament building at this event.

Other issues, such as the mismatch of the Mongolian labor market, were also discussed. Mongolia exports large numbers of workers to Korea, yet imports labor from China, and has an unemployment problem. Training and education, in addition to labor law and the wages on offer in Mongolia all came to the fore in a debate that attracted much heartfelt participation. A statistic of note was that 20 percent of all Mongolian workers and engineers have work experience overseas.

Moving on, it was announced that Mongolia would be investing in a Heavy Industry Development Zone based in Sainshand, in the South Gobi. The site is expected to cover 3,500 hectares, and provide a base for mining exploration, heavy industry, in addition to added value productions such as manufacturing and components in addition to the export of readymade final products. The government is committed to public-private partnerships, as in the Indian model, and is actively

seeking investors. Coal/coke, oil, copper, and iron ore are all expected to be the key products for the Sainshand Zone.

In terms of competitiveness, the government commissioned an independent study, comparing Mongolia with some 55 other countries of similar size, economy, political situation and resources. This report is apparently available in English and was released on February 28 this year. Apparently, Mongolia scores well on matters concerning the role of women in society, decision making, and education. However, to close the circle for this article, governance remains poor.

It is obvious that major changes, some of which will affect the global supply of important commodities, are happening to Mongolia. The international community is well aware of this, and appears committed to ensuring Mongolia does not experience ―the resource curse‖ – where corrupt officials take power and divert resources away for the building instead of family dynasties or short term gains. Quite how Mongolia will adapt, with a relatively small and inexperienced government, has still to be flushed out. But on the basis of its performance at the forum, I‘d suggest there‘s more right with Mongolia‘s move towards governance than there is wrong.

(Mr. Chris Devonshire-Ellis, the principal of Dezan Shira & Associates, wrote this after the first day of the Forum on Wednesday.)

Source: www.2point6billion.com

MONGOLIA’S CHALLENGES: INFLATION, CURRENCY FLOWS

Surging inflation and interest in trading the nation's currency, the togrog, are key challenges facing the Bank of Mongolia, a top central banker said Thursday. The economic costs of inflation— "our biggest enemy"—are well understood by the Central Bank, said Deputy Gov. N. Zoljargal. In an interview after speaking on a panel at the Mongolian Economic Forum here, he said a primary Central Bank mission is to manage confidence in the currency. As the profile of the togrog rises with traders, he said, the policy is "don't fight the trend," but ensure it happens smoothly.

The togrog was among the world's strongest currencies in 2010, gaining as the economy rebounded from the global financial crisis and amid expectations copper and coal mining will sustain the trend. Speaking at the same conference, Mongolia President Ts. Elbegdorj said the government's job is to ensure the mine sector creates an economic foundation, including creating employment. He said the government is considering new mining regulations, but wasn't specific. The International Monetary Fund mission chief in Mongolia, Steven Barnett, who spoke on the same panel as the central banker, said the flexibility of the currency system is acting like a shock absorber and is "working very, very well." Mr. Barnett, however, reiterated the IMF estimate that inflation is heading toward 20% without more fiscal restraint. The Central Bank deputy said intervention by the Bank of Mongolia in the currency market has been almost nonexistent this year, as the business community grew to trust the policy would be aimed to smooth the currency appreciation. "The market takes you to the wrong direction when they don't trust you," he said. Mr. Zoljargal said monthly currency-market flows, about $400 million early in 2010, surged past $1 billion by August and hit $1.5 billion by year-end. "To manage it is an art, believe me," he said. He said the flows remain high, but there has been less upward pressure on the currency. He put foreign-exchange reserves at $2.3 billion.

Source: Wall Street Journal Asia

BATBOLD RENEWS COMMITMENT TO STABLE INVESTMENT ENVIRONMENT Prime Minister S. Batbold has reassured investors that his government is committed to a stable and predictable investment environment. His comments came during a discussion broadcast over Radio Australia. The participants were Linda Mottram, journalist, Mr. Batbold, and Mr. Julian Dierkes, who holds a Chair in Japanese Research at the University of British Columbia. The following is a transcript of the program. MOTTRAM: In a language laboratory on the campus of the Australian National University, Mongolia's Prime Minister, Sukhbaataryn Batbold, joined with local students of the Mongolian language and counterparts across the globe in the United States. They even sang a popular children's song together, the prime minister smiling at these signs of success in his country's determined efforts at

building wide international ties, including with distant Australia. BATBOLD: There are a lot of things in common between our two countries, we have a big vast land and we are blessed also with abundant natural resources, but the important thing is how do we develop those resources to the benefit of the people of our countries. MOTTRAM: Cooperation in resource development and agriculture is key to Mongolia's development strategy. Twenty years down the post-socialist path with its democratic credentials now well established, its economy is growing possibly faster than China's but its population of 2.8 million is small. BATBOLD: We think that the management and development of the natural resources and development of the agriculture and the management and know-how and on top of that, the development of education. MOTTRAM: Prime Minister Batbold has signed a range of agreements with Australia during the visit - in education, science and agriculture. And Australia has agreed to open an Australian trade commission office in Ulaanbaatar, though not yet an embassy in the capital, despite Mongolia's urging. But it's foreign investment and mining know-how that Mongolia craves most and is vigorously pursuing. BATBOLD: I was talking to Australian companies and business representatives that they should also work close with communities in Mongolia and to support the local communities and to train the Mongolians there and to get better training and education. So I think there would be many areas that would serve our common interests and the interests of our relations. MOTTRAM: Julian Dierkes researches Mongolia at Canada's University of British Columbia. DIERKES: There's a strong pull factor certainly from China. Anything that is going to be produced in Mongolia, especially minerals, is going to be sold in China, it just makes a lot of sense, it's right next door, so there's certainly a strong pull factor. Whether there's a government push there as well is a little harder to tell, we haven't seen much evidence of it for China, but we have seen a bit more of it from Russia, especially recently when it comes to uranium mining. Read more… MOTTRAM [to Batbold]: And just on the wider strategic environment in Asia, you're the only post-Soviet democracy in Asia and extraordinary position sandwiched between two giants. In Australia, one of our preoccupations is China - is China's rise going to be peaceful and stabilizing or otherwise? How do you view it from where you are? BATBOLD: I think people of Mongolia have got strong commitment to build a democracy and a market economy. And we are very proud that we have made these achievements with support and cooperation with our friends and partners from the third neighbor concept, North Americans, Europeans and Australians and Japanese. And of course on top of that we have very friendly and important relations with our neighbors and we think that China is a great partner and neighbor for us for the development of Mongolia. MOTTRAM: The uranium situation sees (a Canadian company) seeking international arbitration over a uranium development agreement that Mongolia dumped in favor of one with Russia. On top of that, last year Mongolia canceled a raft of gold mining licenses - in part for environmental reasons - but also fueling concern about the operating environment for business. At a news conference in Canberra after talks with his Australian counterpart, Julia Gillard, Prime Minister Batbold offered reassurance. BATBOLD: This is a relatively young democracy and we have made lots of achievements for the last 20 years of transition to the new system of market economy. We have made certain steps which we needed to amend and to make it to the best interests of the people of Mongolia and the best balanced interests of investors. But we know and we bear in our mind that we need to provide a stable and predictable environment which we will pursue. MOTTRAM: As well as growing its own capacity to develop its resources, and balancing against environmental concerns, Mongolia needs major infrastructure upgrades to fully exploit its mineral riches. Some big players are already in there - for example, the Anglo Australian giant, Rio Tinto, which is partnered with Mongolia's government in the Oyu Tolgoi project, the world's largest undeveloped copper and gold deposit in the south Gobi region. But even there a challenge looms. China's state owned Aluminum Corporation, Chinalco, wants a role in that operation. Mongolia's leader says any change to the existing agreement with Rio would have to win government approval.

Source: Radio Australia

BOND SALES TO HELP FIGHT MNT APPRECIATION PRESSURE

Mongolia is planning its first sale of sovereign bonds, seeking some $500 million to help companies

raise funds from credit markets. ―We‘re looking at an issuance of inaugural sovereign bonds in order to set up a benchmark and open up a window for private companies to go and raise money,‖ the Deputy Minister of Finance, Mr. Ch. Gankhuyag, has said. The sale will ―probably‖ take place this year, pending Parliament‘s approval.

The bond sale would mark a turnaround from 2010 when Mongolia scaled back and then dumped plans to borrow USD1.2 billion abroad to survive the global economic slump. The plans have been revived as gains in the MNT trim returns from rising prices of copper and coal, Mongolia‘s biggest exports, and the nation faces a 10 percent budget deficit.

Mongolia also wants to sell domestic currency denominated bonds this year to ―soak up extra liquidity‖ in the banking sector that amounts to about MNT1.5 trillion (USD1.2 billion), Mr. Gankhuyag said, adding the sale would fight currency appreciation pressure arising from soaring commodity exports. The MNT has gained by 15.4 percent against the dollar since January 1 last year and 19.2 percent against the euro.

Read more…

The currency‘s climb endangers domestic industries outside of mining, such as cashmere production and agriculture, said Mr. Stephen Kreppel, who was charged by the Mongolian government this year to start a task force to help promote the nation‘s non-resource-based industries abroad.

―We need to be cautious because of the pressure on the MNT‖ due to rising foreign direct investment and revenue from commodity exports, Mr. Gankhuyag said. ―To find ways to mitigate that risk the government will issue MNT-denominated bonds locally. Investors are also interested.‖

Mongolia is trying to stop inflation from exceeding 10 percent this year as the government raises investment in infrastructure and seeks to meet election promises of four years ago to transfer more wealth to citizens. The budget deficit is expected to be 10 percent this year, Mr. Gankhuyag said.

Inflation may run to 20 percent by the year‘s end, hurting private business and strengthening the MNT, according to a February 17 report by the International Monetary Fund, which lent money to Mongolia last year. Economic growth is forecast at 10 percent this year, from 6.1 percent last year, on a rapid increase in coal production, the IMF said, noting that one-third of Mongolians live below the poverty line.

Mongolia is rated B1 by Moody‘s Investors Service, four levels below investment grade. Standard & Poor‘s rates the nation BB-, the third- highest non-investment ranking.

Oyu Tolgoi, a copper and gold mine being developed by Rio Tinto Group with Ivanhoe Mines Ltd. and the Mongolian government, will account for 30 percent of the country‘s gross domestic product when fully operational, according to a presentation by the mine development company. Oyu Tolgoi will reach full capacity in 2020, the company said in the presentation distributed at a forum in Ulaanbaatar this week.

Erdenes Tavan Tolgoi, the state-run company developing half of the nation‘s biggest coal field, plans to start mining the fuel this year and may produce about 1 million metric tons, Mr. L. Ganbat, a company board member, said on Wednesday. Annual output may reach 15 million tons in three years, he said.

Until Mongolia adds a rail link to the Tavan Tolgoi field, which is estimated to hold 6.4 billion tons of coal used to make steel and burn in power stations, transportation will be done by trucks, Mr. Ganbat said. Output from the projects could push the MNT to appreciate as much as 10-fold, a factor the country must mitigate with a sovereign wealth fund sterilizing foreign currency denominated commodity revenue, Mr. Gankhuyag said. ―It‘s not that we‘d like to or that we need to create the sovereign wealth fund,‖ Mr. Gankhuyag said. ―To manage the economy, we need to steer the economy, we need to be in control.‖

The Finance Ministry, the Central Bank, the Financial Regulatory Authority, and the National Development and Innovation Committee are engaged in preparing the framework for the sovereign fund, Mr. Gankhuyag said, without giving a deadline for when it will be complete.

Source: Bloomberg

BANKS READY TO MEET DEMANDS OF MINING BOOM, SAYS R.KOPPA Mr. Randolph Koppa, President of Trade & Development Bank, has said in an interview that the boom in the coal mining sector in Mongolia is just starting. New big deposits, apart from the known ones in Tavan Tolgoi and in Nariin Sukhait in the north, have been discovered and all of them are sure to bring in considerable revenue. However, ―optimum and efficient extraction and export will depend on significant investment in infrastructure and transport‖.

Asked about the likely impact on the economy of the increasing inflow of foreign currency and the consequent strengthening of the MNT, Mr. Koppa said this is generally bad for exports but ―certain items, such as cashmere, have an intrinsic value which is less price sensitive‖. Local producers of consumer goods and building materials will have difficulty competing with cheaper imports, but this phenomenon has been seen before in other resource rich countries, and Mr. Koppa was confident the Government is aware of this potential problem, and will adopt measures that have proved effective elsewhere. ―Strong fiscal discipline and sound monetary policy will help manage the forces of growth and inflation, despite the currency appreciation.‖ He said Mongolian banks are ―ready to manage the dramatically increasing flow of investment‖. The bigger ones are all set to ―deliver a range of international standard banking services, such as LC, export financing, factoring, leasing and trade financing‖. The TDB, for one, works closely with foreign investors in cash management, trade finance and supplier loans as well as personal banking services. In addition, the bank is developing its investment banking activities to be able to help clients in raising funds on international markets.

Source: Udriin Sonin

MP WANTS MORE STATUTORY INDEPENDENCE FOR DEVELOPMENT BANK MPP MP and a major shareholder in the erstwhile Zoos Bank, Mr. Ch.Ulaan, has revealed that he walked out of Parliament when it passed the law to set up the Development Bank to register his protest against the absence of any provision in the law to ensure the bank‘s sustainability and to guarantee that it will not follow several other banks into bankruptcy. He regrets that there is no statutory protection for the Development Bank‘s independence from political interference and Government pressure. The law categorically states that the bank ―shall provide funds for projects approved by the Government‖. This, says the MP, is a clear indication that it will work as an adjunct of the Government. He claims his proposal to grant more autonomy to the bank did not receive support from any of his fellow MPs. By the nature of things, Parliament will approve projects that political parties prefer for their apparent social impact, even when they are of suspect economic value. ―MPs did not accept my suggestion to re-word the provision to say the bank ‗shall provide funds for economically viable projects‘, even as they wanted the bank to succeed. It seems either they are not sure what being successful means for a bank, or they do not mind if their words and actions are contradictory,‖ Mr. Ulaan said.

Source: Onoodor

AUSTRADE TO OPEN OFFICE IN MONGOLIA LATER THIS YEAR The Australian Trade Commission will open a trade mission in Mongolia towards the end of this year, Trade Minister Craig Emerson announced last week following a state visit by the Mongolian Prime Minister, Mr. S. Batbold, to Australia where he discussed the growing relationship between the two nations. Dr. Emerson has expressed the hope the office will help foster trade relations in the areas of agriculture and resource mining. ―Mongolia is a rapidly growing economy with enormous mineral potential, which large Australian mining companies and related services businesses have been helping develop.‖ There are already approximately 30 Australian companies operating in Mongolia and Dr. Emerson expects Australian involvement in the country‘s economy to increase as banks and legal firms follow resource companies into the developing nation. Rio Tinto has made a significant investment, opening a mine site in a joint venture with Canada‘s Ivanhoe Mines. Dr. Emerson expects junior mining companies will follow. Mr. Batbold has indicated he welcomes foreign investment in the resource sector but adds that he hopes to balance Mongolian interests with those of foreign investors. Source: Dynamic Export

PRIVATE SECTOR SEES CONTRADICTION IN GOVERNMENT POLICY Businessmen some time ago requested Parliament to amend the law it passed in 2010 that raised stamp duties by as much as 60 times, from MNT165,000 to MNT10.25 million. The Parliament Office advised them to approach the Ministry of Finance as that had initiated the law and so was best placed to consider amendments. In its turn, the Ministry of Finance has asked the businessmen to submit their request to the Ministry of Justice, as only it can do anything about a law that has been approved. Those seeking the amendment are surprised that important state organization should treat a request for something of such vital interest in this manner. They feel anything that hurts production is against economic development and that good results can be achieved only if right

laws are passed. Judging from the experience of 2010, declared as the year for business environment reform, when there was no change in the taxation policy and little real reform, the private sector is not very optimistic about what will be achieved in 2011. This has been declared as the year of employment, but many citizens could lose their job because the rise in stamp fees threatens the survival of about 8,000 economic entities. Also, 1,700 workers in mining companies could find themselves redundant if the law banning mining exploration and exploitation near rivers and forests is enforced.

Source: Ardiin Erkh

CASHMERE PRICES START RISING China‘s Xinhua News Service reports that the price of Mongolian cashmere fell from MNT45,000 or USD 41.6 per kg in 2000 to MNT21,000 per kg in the later part of 2010. A similar fall was seen two years ago, but then it rose from MNT18,000 to MNT30,000 per kg. Even at the higher figure, Chinese traders make a huge profit. According to the website of Hebei Diamond Cashmere Products, a leader of the trade in China, it is selling cashmere for USD100-USD116 per kg, depending on the grade of the prize fiber. During their campaign in the 2008 election, politicians promised that cashmere would not sell below MNT40,000 per kg. They have been quick to forget this, nor has much been heard of the other promise to pay herders MNT5,000 per goat. However, things may be looking up for producers as cashmere sold at Emeelt market in mid-February fetched MNT45,000 per kg. Supply has been hit by the loss of a large number of goats in the dzud, and prices could go up even more. One wonders how much longer our herders will be at the mercy of such imponderables of the market. Just about MNT30 billion is needed to set up end-product units in the country that will bring stability to the trade, but politicians prefer to spend money on cash allowances.

Source: Zuunii Medee

CITIGROUP SEES MONGOLIA AS THE NEXT EQUITY MARKET SUPERSTAR Forget China. The fastest growing country over the next 20 years will be its diminutive neighbor Mongolia, according to a report released by Citigroup last week. The report, written by economists Willem Buiter and Ebrahim Bahbari, predicts that the Mongolian economy will expand 8.7 per cent annually (in purchasing power parity terms) between now and 2030. A low base, favorable demographics and a high savings and investment rate are expected to be the biggest contributors to its explosive growth. The country‘s growth potential has already been recognized by some investors: strong demand for Mongolian equities made them the best performing in the world in 2010. The report calculates countries‘ growth potential using a novel ―Global Growth Generators‖ (3G) index. This is a weighted average of six growth drivers selected by Citigroup: domestic savings/investment, demographics, health, institutions and policy, and trade openness. The 3G index yields some surprising results. Among the highest ranked countries are Bangladesh, Egypt, Iraq, Nigeria, the Philippines and Sri Lanka. None of these countries, however, is expected to grow as fast as Mongolia over the next 20 years. The next fastest, India, is predicted to expand 7.7 per cent annually – a full percentage point lower than Mongolia. What explains Mongolia‘s world-beating growth prospects? Three factors are especially important. Read more… The first is a low base. Mongolia‘s 2010 level of real per capita income (in PPP terms) is USD3,674, putting it in 51st place globally, below countries such as the Republic of Congo, Fiji and Honduras. Favorable demographics will also give it a boost. Mongolia‘s population is ―small, young and growing‖ in Citigroup‘s words, and expected to increase from 2.7 million in 2010 to 3.5 million over the next 40 years. Its working age population will grow by 18.7 per cent over the same period. Finally, the Mongolian economy will benefit from a domestic investment boom. From 2006 to 2009, its investment rate was 38.5 per cent and its saving rate 39.1 per cent – among the highest in the world. As long as these rates stay relatively stable, Mongolia‘s labor productivity should increase rapidly – just like that of its frugal neighbor China over the past 30 years. While Mongolia performs weakly on the policy and institutions component of the 3G index, it has so far succeeded in avoiding the ―natural resource curse‖ that has blighted so many low-income commodity exporters. Copper, coal, tin, tungsten and gold account for a large proportion of the Mongolia‘s industrial production. As Citigroup says: ―Mongolia‘s economy is overwhelmingly based on resource extraction. It is therefore a prime candidate for the natural resource curse. Unlike most of the other central Asian

countries, however, Mongolia has thus far avoided the lure of personalized autocracy or strong-man rule, and the bureaucracy, although weak, is some distance from the kleptocratic end of the ‗kleptocratic-technocratic‘ continuum.‖ Investors can be reasonably confident, then, that their money is safe in Mongolia. And if strong growth translates into higher investment returns – as it did last year – Mongolia may be about to become a lot more popular.

Source: The Financial Times

MONGOLIA: REALLY A NEW FRONTIER OR MERELY A TEMPORARY BRIGHT SPOT? Ever heard of the tugrik? It's the official currency of Mongolia -- the land of Genghis Khan where, over the past few years, foreign investors have flocked to the sparsely population country in search of riches. It was also the world's best-performing tender in 2010. Mongolia's vast minerals deposits, particularly copper, gold and coal, have helped drive unprecedented demand for the tugrik. The currency finished the year 15% higher against the U.S. dollar, outperforming the world's currencies and coming close only to the South African rand, which appreciated 14%, and the Australian dollar that rose by 13%. "When I came to Mongolia seven years ago they had just discovered all these deposits -- the buzz was that Mongolia was literally sitting on a gold mine," says Mr. Christopher de Gruben, who in 2004 founded Make A Difference Corporation Services, a Mongolia-based firm that specializes in renovating dated Soviet Union-style homes and corporate relocation home searches. Like many investors, Mr. Gruben is hopeful, if not simply in awe, by the country's vast mining potential and "the boom about to happen". Read more… Indeed, the tugrik has fast become the best thing no one's ever heard of. Most major Wall Street banks don't follow the tugrik, and few economists or analysts track the landlocked country bordered by Russia to the North and China to the South. Not that it would have been easy. Some parts of the country still operate under an informal barter system, paying for everything from food to clothing with livestock and the like. It was only in 2009 that the Parliament of Mongolia closed a loophole allowing the use of any currency for local transactions. Now the tugrik must be used for most domestic transactions. But it's hard not to wonder if Mongolia can really be called a new frontier or merely a temporary bright spot ripe for get-rich quick investors. "People are getting rich very quickly," Mr. Gruben says, pointing to the Louis Vuitton (LVMHF) store that opened in Ulaanbaatar in 2009 as evidence. "There's this whole race about who has the fastest car and who has the most money here." Mongolia might certainly be a new frontier, if not just for its vast minerals but also its central location near resource-hungry China. The way it will grow, however, will be something to watch for. And almost certainly something to question. Source: CNN Fortune

RAILWAY DECISION MAKES GEOPOLITICAL SENSE, BUT AT WHAT COST? It is important to take a closer look at the decision behind the controversial ‗east-west‘ railway project approved by the Mongolian Parliament. The decision makes geopolitical sense as Mongolia seeks to diversify its reliance on export to China. But the pertinent question that needs to be asked as always is: at what cost? A Chinese broker‘s estimate that the transport costs will be tripled is confirmed by a World Bank study. That study estimates that the ‗profit margins on exporting to the rest of Asia via a Russian port could be less than one-tenth of those earned by transit through China‘. A 90 percent reduction in export revenue seems like quite a high price that Ulaanbaatar is prepared to pay for perceived economic and political threats from China. Mongolia‘s decision to build the railway connecting with Russian Pacific ports seems more heavily influenced by Russia than the consideration of the ‗Third Neighbor‘ policy. Moscow exerts influence on the railway project through its 50 per cent ownership of the Mongolian railway network. The legacy of Soviet Russian influence on the upper echelons of the Mongolian political elite might also have swayed support for a project that favors Russia over China. Criticism of the railway decision is principally economic; it does not appear rational for Mongolia to forgo the significant cost advantage that it enjoys in exporting commodities with the burden of higher transport costs. The financial feasibility of the project is still in doubt as Mongolian leaders court potential backing in international financial centers, most interestingly in Hong Kong of all places. If Mongolia‘s pursuit of a Third Neighbor strategy is the rationale for this self-imposed handicap, it is a strategy that pushes it further into the arms of its former imperial master, Russia,

and the assessment that Mongolia‘s national strategy is often a depressing choice between the lesser of two evils still stands. Read more… There cannot be any suggestion that China should own major mines in Mongolia. Limitations on outright or even substantial Chinese ownership of major Mongolian mining assets may well be sound policy, even on economic grounds. But excluding China from any meaningful participation in major projects, such as Oyu Tolgoi, is a different story. There are well-known reasons for such linkages along the chain of resource supply to major customers. It is common practice for major consumers of resources to take equity stakes in supplier projects and equity investment is essential in developing resource sectors. Japanese investment in the Australian resource industry is a good example of that and companies such as Mitsui and Mitsubishi are major investors in Australia‘s coal industry and also happen to be major buyers.

Source: East Asia Forum

BANKS PICKED FOR TAVAN TOLGOI IPO FACE MANY UNKNOWNS Goldman Sachs Group Inc., Deutsche Bank AG, BNP Paribas SA and Macquarie Group Ltd. –the four banks chosen by Mongolia to manage its multibillion-dollar initial public offering of the state-owned Erdenes-Tavan Tolgoi Co., owner of the world's largest coking-coal deposit -- could rake in substantial fees from managing the sale, which could value the company at USD10 billion to USD12 billion. However, it isn't clear which of Erdenes-TT assets will be included, who will mine the deposit and how much in royalties the operator pay, making estimates on the size of the deal little more than educated guesses for now. The banks competed aggressively to manage the deal, in part because it is Mongolia's biggest share sale to date and partly because it could lead to more mandates as Mongolia's fledgling democratic government privatizes more mining assets to enrich its 2.9 million citizens, many of whom live in poverty. Bankers said the line-up could change ahead of the IPO, with banks such as J.P. Morgan Chase & Co. and Citigroup Inc. lobbying hard for inclusion based on their experience handling Mongolian mining IPOs. Consultancy McKinsey & Co. has been advising the government on its privatization plans, people familiar with the matter said. The government has set a deadline for completing the listing before year end—a target some bankers call too aggressive given the amount of work that needs to be done. Still, appointing the banks could make it more likely that the government hits its target, which is ahead of elections set for next year. Decisions are likely to be taken swiftly on the logistics of the share sale and on which assets to include. Read more… The project on the ground will remain a huge undertaking that may take years to complete and will involve building mining infrastructure, as well as massive road and railway networks to transport the coal. Only after an operator is selected can there be any estimates of when the first coal could come out of the ground. The Tavan Tolgoi deposit has about six billion tons of coal reserves, according to both the government and mining data firm Raw Materials Group. At least a quarter of the supply is coking coal, which is used in making steel. The government is to award a contract license for the eastern half of Tavan Tolgoi shortly and is soliciting offers to develop the western part. Erdenes-TT is likely to get royalties from the concession operator. Source: The Wall Street Journal Asia

TAVAN TOLGOI IPO WILL BE A COMPLICATED TRANSACTION Mongolia has moved closer to the IPO of the world's largest untapped coking coal deposit with the announcement of four global banks being appointed to manage the country's biggest ever share sale. The government has stated that Tavan Tolgoi will be publicly listed in the international markets before H2 2012. The coveted role of global coordinator spurred the arrival of 18 investment banks and upwards of 150 investment bankers meeting shoulder to shoulder in the bars and restaurants of UB, typically quiet in the winter months. And this is before the work begins preparing for the USD2-3 billion share sale internationally. The IPO may prove to be one of the more complicated transactions emanating from Mongolia. Aside from plans to distribute 10% of shares free to all citizens and another 10% to Mongolian corporations while coordinating the international listing, educating the Mongolian citizens with a broader awareness and knowledge of TT, the uses of a ―share‖ and the function of the stock exchange

needs to take place. In a recent survey, 36% of Mongolian respondents admitted to knowing nothing about the stock market and only 12% said they had a fair idea of what a stock market is. All in a time when TT has emerged as the highest profile priority in Mongolia. The government has made very positive steps thus far with TT. The next 15 months should prove to be a fascinating time in Mongolia. Source: ResCap

MONGOLIA LIKELY TO LIST DEPOITORY RECEIPTS IN HONG KONG, J.P.MORGAN SAYS As quarterly earnings continue to impress and company guidance reveals strong growth prospects this year, capital raising through depository receipts (DRs) can be expected to grow at a steady pace, J.P. Morgan says in a report. And, as in the past few years, Asia-Pacific is expected to be the most active region for such capital-raising with China and India dominating the new issuance. Mongolia, meanwhile, is sitting on a vast quantity of currently untapped mineral wealth, and with global demand for mineral commodities growing quickly, its medium- to long-term economic future is promising, J.P. Morgan argues. To fund the development of these resources, Mongolian companies are expected to turn to the international capital markets, but rather than look all the way to the US or Europe, they are expected to make use of the possibility to list DRs in Hong Kong, which will allow them to access Hong Kong retail investors, as well as international institutions. ―Much of Mongolia‘s economic focus is on China, and as a result, Hong Kong will likely benefit in the coming years as a destination for Mongolian enterprises seeking to better align their growth strategy with China. As such, it follows that Hong Kong‘s HDR platform will benefit from this alignment,‖ says the report.

Source: FinanceAsia

U.S. EMBASSY RELEASES 2011 MONGOLIA INVESTMENT CLIMATE STATEMENT The U.S. Embassy has released its 2011 Mongolia Investment Climate Statement, based on the perceptions as well as the experiences of many foreign and domestic companies with extensive in-country experience. It has 18 chapters, including those on Openness of Government to Foreign Investment, Conversion and Transfer Policies, Expropriation and Compensation, Dispute Settlement, Protection of Property Rights, Legislative and Regulatory Transparency, Competition from State-owned Enterprises, Corporate Social Responsibility, Corruption, Bilateral Investment Agreements and Taxation Issues, and Labor. The analysis presents the investment picture for Mongolia as one that is a mix of opportunities and challenges, highlighting how commercial entrepreneurship is getting easier even as concerns about some aspects of the legal, administrative and business environment linger. Source: The U.S. Embassy

10.8% MORE TOURISTS IN 2010 A total of 456,000 tourists came to Mongolia in 2010, an increase of 10.8% over 2009 figures. Tourism revenues reached USD222.4 million. The Tourist Office of Mongolia expects more tourists this year because of the 2220th anniversary of the Khunnu state and other anniversaries.

Source: Udriin Sonin

WORLD BANK GRANT FOR NEW SOFTWARE AT TAX OFFICE Crown Agents of Great Britain, Daewoo International Corp and Daewoo Systems of South Korea will install the latest software at the National Taxation Office under a World Bank grant of USD2.3 million. This will make operations at the tax office transparent and also reduce volume and expense of work. It will also link central organizations with their local branches. The project would be implemented within 16 months.

Source: Mongoliin Medee

MONGOLIA WANTS TO STUDY AZERBAIJANI PENSION INSURANCE MODEL Following the World Bank‘s recommendation that the pension insurance model developed in Azerbaijan can be a benchmark for transition countries, Mongolia and Turkmenistan have made an official request to the State Social Protection Fund (SSPF) there to study how the system works. The Social Insurance Fund of Mongolia wants to send its officials to Azerbaijan as soon as arrangements can be made.

Source: Azerbaijan Business Center

PRIVATE SECTOR WANTS MORE INFORMATION ON PPP, CONCESSION LAW First Deputy Prime Minister N.Altankhuyag chaired a meeting of the Consultative Council on Investment Climate and Private Sector Development on Monday. Participants exchanged views on how to strengthen public-private partnership (PPP), how to more effectively implement the Concession Law and how to have better correlation between state organizations in border areas. The PPP law was passed in 2009, and the Concession Law last year, but the private sector feels it still has imperfect understanding of both. A survey found 98% of employers and union members did not have any clear idea of what the laws were meant to achieve and how this was to be done. The meeting decided to redress the situation. Several delegates blamed the bureaucracy in Ministries and Agencies for this failure and others. Mr. Altankhuyag assured them he would attend to their criticism. The meeting also discussed transportation and Customs issues and the Executive Director of the National Transportation Mediators‘ Federation, Mr. T.Zanashir, said that partisan and motivated inspection was encouraging corruption and smuggling and demanded enforcement of proper procedures in all cases to do with border Customs.

Source: English.News.mn

VIEWS ON THE CONCESSION LAW A cross section of officials and citizens give their views on the law. Currently over 170 separate projects—ranging from a major rail expansion to the northeastern border with Russia to education centers—are listed as available for private entities to engage with the GOM. D.Zorigt, Minister of Mineral Resources and Energy: The law will have an enormous impact on our economic growth. Indeed, it laid the foundation for beginning work on the Tavan Tolgoi deposit, and also made adoption of the comprehensive railroad policy possible. Ts.Munkh-Orgil, MP: This law allows private investment in state assets without having to privatize them, thus lessening the burden on the state budget to developing infrastructure. Ch.Khurelbaatar, MP and Head of the Government Secretariat: It provides huge opportunities to the private sector. B.Lkhagvajav, Head of Civil Movement: This law should have come much earlier. It allows the state to keep ownership of its resources while allowing private investors to develop them under strict monitoring. I hope it will be used to properly resolve ninja issues and help bring in new technology. It is a pity that some major mining projects had to be approved before the Concession Law was adopted.

Source: Zuunii Medee

XINJIANG TO IMPORT MORE COKING COAL FROM MONGOLIA China‘s far western province Xinjiang is seeking to boost coking coal imports from Mongolia to meet demand from its rapidly expanding steel sector. The region plans to raise crude steel capacity from roughly 7 million tons per year now to more than 22 million tons per year by 2015. However, local deposit of coking coal resources is scarce, compared with huge steam coal reserves estimated at more than 2 trillion tons. In Qinhe county of Xinjiang, local authorities are pushing forward the construction of a 1 million tons per year coking project with necessary washing facilities by 2015. The project is located at the border crossing Takeshiken which will be a major outlet of Mongolian products after several infrastructure upgrading programs are completed in the next few years. This includes the construction of railway and road projects that funnel coal and ore products into factories in Xinjiang. Source: Steelguru

DIFFICULT FOR CHINA TO INVEST IN COMMODITIES, SAYS FX CHIEF China cannot invest much of its foreign currency riches in the global commodities market, because doing so would only push up the prices of the raw materials that the economy depends on, the country's top money manager says. Mr. Yi Gang, head of the State Administration of Foreign Exchange (SAFE), has also said that monetary easing in wealthy countries was driving down China's returns on its USD2.85 trillion in official currency reserves, the world's biggest such stockpile. "Some have argued that we should buy oil, buy gold, buy iron ore, or even buy into companies and land. But it is much easier said than done," Mr. Yi said in a speech at Peking University. "If we go into the spot market to buy commodities, we will immediately push up prices. These markets, compared to the size of our foreign exchange reserves, are too small. If China gets into these markets and pushes up prices to extremely high levels, the Chinese people will bear the cost at the

end of the day as China is often the key buyer in these markets," said Mr. Yi, who is also a vice governor with the People's Bank of China. Mr. Yi also said that it was not easy for China to use its reserves to conduct acquisitions. Global oil, iron ore and gold markets have their own rules and mechanisms, and it would be hard for China to shop around, he said. Read more… Loose monetary policies implemented by wealthy countries in an attempt to power their economies towards recovery from the global financial crisis were another complication. "Due to quantitative easing and near-zero interest policies, investment returns of (our foreign exchange reserves) are increasingly moving towards lower and lower levels. Although we have achieved fairly good returns through management, it should be said that the environment is not optimistic," he said. China had to take "herbal medicine" in a mixture of gradual policies, rather than a radical approach, he said. "We will work hard this year to expand domestic demand a little bit; to reduce reliance on external demand a little bit; to increase wages and social insurance a little bit, enhance environment checks a little bit, reform resource pricing mechanisms a little bit, relax outbound investments a little bit, and make the yuan a little bit more flexible," he said.

Source: Reuters

CHINA HOLDS MORE U.S. DEBT THAN PREVIOUSLY ESTIMATED The U.S. Treasury has dramatically revised data on foreign holdings of U.S. government debt, estimating that China owns more Treasuries than previously thought while the UK holds only about half as much. The figures released on Monday suggest fears that China has been reducing its US dollar holdings may have been overstated. The revised figures show that China owned USD1,160 billion of Treasuries at the end of 2010, compared with a prior estimate of USD892 billion, published only two weeks ago. They also show a large rise in foreign central-bank holdings of Treasuries at the expense of the private sector. Foreign central banks held USD3,156 billion of Treasuries, compared with the previous estimate of USD2,800 billion. Overall foreign holdings of Treasuries were revised up to USD4,440 billion from USD4,373 billion. Even with the revised numbers, China still owns a little less US government debt than the U.S. Federal Reserve itself. The U.S. central bank currently holds USD1,205 billion in Treasuries and is expected to own USD1,600 billion by the end of June. Source: The Financial Times

CHINA’S MANUFACTURING GROWTH EASES Growth in China‘s manufacturing industry eased for a second consecutive month in February as activity slowed to a six-month low in the face of tighter monetary policy and rising commodity prices. The official Purchasing Managers Index, published on Tuesday by the China Federation of Logistics and Purchasing, fell to 52.2 from 52.9 in January – the lowest since August. However, the February figure was higher than the median forecast of 52 in a Reuters survey of economists, indicating that the sector remains healthy in spite of interest rate increases and other measures intended to cool inflation. The PMI index gives a snapshot of overall activity in manufacturing, including output, order flows and pricing, with a figure above 50 indicating growth in activity and a figure below that level indicating a contraction. Much of the slack in the index was attributable to February‘s week long lunar New Year holiday, which would have disrupted industrial activity for up to three weeks in total. Source: The Financial Times

MINISTER WARNS POLLUTION CAN THREATEN CHINA’S GROWTH China‘s environment minister has issued an unusually stern warning that pollution threatens to imperil growth, positioning it as a central theme of the next five-year plan to be launched at the annual National People‘s Congress this weekend. ―Natural resources are shrinking, degenerating and drying up. Ecological and environmental decay has become a bottleneck and a serious obstacle to our economic and social development,‖ said Mr. Zhou Shengxian. ―If our homeland is destroyed and we lose our health, then what good does development do?‖ His comments echoed those of Premier Wen Jiabao in a web chat on Sunday, in which he emphasized the need for slower, cleaner growth and announced a new, lower, gross domestic product growth target of 7 per cent. The timing of the remarks hints at the political battles being waged behind the scenes by the

fledgling ministry of environmental protection, which was formed only three years ago, as it jockeys with older ministries for the power to enforce environmental standards. The next five-year plan includes broader environmental goals than ever before. In addition to targets for reducing energy intensity and carbon dioxide intensity, it will focus on a wider range of pollutants, including nitrogen oxide, which is produced by cars, and ammonia nitrogen, a water pollutant. Mr. Zhou has become increasingly outspoken about the environmental costs of China‘s breakneck growth. China is now the world‘s biggest emitter of greenhouse gases from burning fossil fuels and human activities that scientists say are causing global warming. It is the world‘s biggest polluter and biggest consumer of resources across other measures. In 2009, nearly 20 per cent of the length of China‘s monitored rivers and lakes had pollution worse than Grade 5, making the water unfit for even irrigating crops, according to government statistics.

Source: The Financial Times

CHINA REDUCES GROWTH GOAL AND VOWS TO CURB INEQUITIES Premier Wen Jiabao reduced China‘s economic growth goals and said that the government would focus on ensuring the benefits of expansion were more evenly distributed. He said the government had set an economic growth goal of 7 percent for the five-year period through 2015. China‘s goal was 7.5 percent for the period from 2006 through last year, with actual growth exceeding that each year. In a two-hour online interview with citizens on Saturday, Mr. Wen pledged to reduce food costs and tackle surging property prices. He also promised to punish corruption and address China‘s growing wealth gap. He spoke as hundreds of police officers were deployed in Beijing and Shanghai at the site of protests against graft. In Shanghai, at least seven people were taken into police vans. In Beijing, several foreign journalists were removed from a shopping district. ―The party leadership needs to reassure the people that in the absence of political reform they can nonetheless meet the people‘s rising expectations,‖ said Mr. Willy Wo-lap Lam, an adjunct history professor at Chinese University of Hong Kong. ―China is a rich country, yet food prices are sky high,‖ said a 23-year-old student in Shanghai.

Source: The New York Times

U.S. WARNS EXTREME FOOD PRICES WILL STAY The world faces a protracted bout of extremely high food prices, the US government has warned, overwhelming farmers‘ ability to cool commodity markets by planting millions of additional hectares with crops. The U.S. Department of Agriculture (USDA) last week forecast nominal record farm-gate prices for corn, wheat and soybeans in the crop year that begins with the 2011 harvests. It added that food inflation would surge in the second half of this year as wholesale prices filtered through the supply chain, affecting consumers. The warning at the USDA Outlook Forum in Washington, the biggest annual gathering of the agribusiness sector, is likely to fuel global concerns about rising inflation and the potential for destabilizing food riots in developing countries. Mr. Joseph Glauber, USDA chief economist, told the conference that while it is ―often said that the cure for high prices is high prices, even with additional supplies expected this year, it is likely that the tight stocks-to-use situation will not be entirely mitigated over the course of one or even two growing seasons‖. As the US exports half of the world‘s corn and a third of the world‘s soybeans, changes in US acreage and hence the potential supply has a global impact, affecting international buyers such as China. Source: The Financial Times

POLITICS “MPRP” LEADER SAYS MINISTER TRYING TO INFLUENCE SUPREME COURT AGAINST THEM MP Ts.Shinebayar has accused Minister for Justice Ts.Nyamdorj of ethical and legal misconduct in the matter of the newly formed political group seeking registration as MPRP. He says the Minister, as a member of the Courts‘ General Council, should not express any opinion on anything that is under the Supreme Court‘s consideration, but Mr. Nyamdorj has publicly criticized those who established the political party, and also commented that the Supreme Court would refuse to grant the new group the name MPRP. Mr. Shinebayar, who is deputy head of the new grouping under former President N.Enkhbasyar, said this was a blatant attempt to influence the court. He hoped the Supreme Court would nevertheless decide on the request strictly on its legal merits.

Source: English.News.mn

KHURTS APPEALS BRITISH EXTRADITION RULING

Mr. B. Khurts, Head of Administration at Mongolia's National Security Council – a position that makes him the country‘s spy chief, according to Western media -- has lodged an appeal against a ruling by a British judge that he can be extradited to Germany on an arrest warrant for kidnapping. He was detained as he flew into London's Heathrow airport on September 17, for allegedly abducting a Mongolian murder suspect in 2003. The 41-year-old claimed he was lured to Britain so he could be detained on the European arrest warrant. He has been in custody in a London prison since his arrest. The case has threatened to derail diplomatic and trade relations between the two countries as Mr. Khurts claimed he was invited to London by the British Foreign Office to hold anti-terror talks with British authorities. Judge Quentin Purdy dismissed arguments from Mr. Khurts' lawyers at earlier hearings that he had immunity either as a member of a special mission or as a high official. He said Mongolian officials and the British ambassador in Ulaanbaatar at first both genuinely wanted Mr. Khurts to attend the talks in London, but the position changed once British judicial officials became aware of the warrant. The European arrest warrant issued by Germany alleges Mr. Khurts was a member of a team that kidnapped and drugged Mongolian refugee Damiran Enkhbat, wanted for the assassination of a Mongolian minister, in France in May 2003. It claims that Mr. Khurts drove a car carrying Mr. Enkhbat to the Mongolian consulate in Brussels and then to Germany, where he was put on a flight to Ulaanbaatar. Source: AFP

ULAANBAATAR METRO TO BE READY BY 2017

A South Korean consortium has been selected to build an underground railway in Ulaanbaatar. Construction is likely to begin in 2013 and completed by 2017. The railway will have two main lines. One, from the western part of Ulaanbaatar to Amgalan, will cover 28.3 km, and the other, from the 17th secondary school to Buyant-Ukhaa, will be 21.3 km long.

Initially 3 or 4 trains will run along tracks that would be over the ground in suburban areas. A total of 40 stations would be built, at a distance of between 800 meters and 1 km between one another. Tickets would be priced similar to bus tickets.

Source: News.mn

340 HOUSEHOLDS TO BE MOVED TO PROVIDE LAND FOR TRANSFORMERS A subcommittee on energy has been set up by the President‘s Office to conduct further studies on measures needed to implement the law initiated by the President and approved by Parliament to reduce air pollution. This allows ger district residents in certain specially demarcated zones to pay at half the normal rates for electricity they consume between 6 pm and 9 am, as an incentive to shift from burning coal to using electricity for heating. The subcommittee has found that 350 subtransformers would have to be built for the purpose at an estimated cost of MNT23 billion. Also, 340 households will need be relocated to find land for the subtransformers. The cost of this has not yet been computed.

Source: English.News.mn

NATIONAL NETWORK FORMED TO REDUCE ALCOHOL USE Eight Government organizations and 31 non-government ones have come together to set up Citizens‘ Voice, a network to campaign in support of President Ts.Elbegdorj‘s appeal to Mongolians to cut down on drinking alcohol and smoking tobacco. Among the organizations in the network are the Confederation of Mongolian Trade Unions, and The Council of Preventive Policy on Crimes under the Ministry of Justice and Internal Affairs. Many people who attended a ceremony to mark the launch of the network expressed solidarity with its goal by signing a pledge. Another meeting this week, held jointly by several NGOs focused on women and the President‘s Office, expressed similar support for the President‘s appeal to women to celebrate International Women‘s Day on March 8 without alcohol. The President‘s wife, Ms. Sh.Tsevelmaa, and the Speaker‘s wife, Ms. M.Dolgorsuren, attended the meeting.

Source: Udriin Sonin, Ardiin Erkh

PM HOPES PEOPLE’S TRUST IN HEALTH SERVICES WILL BE REVIVED Prime Minister S.Batbold has revealed that Kuwait will help build a children‘s hospital in Ulaanbaatar at a cost of USD35 million, according to an agreement reached during his recent visit

to that country. Emphasizing the need and right of every Mongolian citizen to be healthy, educated, employed and housed, Mr. Batbold told a meeting of senior health sector officials that the Government has been providing all support to reach this goal. Investment in health has been raised and both maternal and newborn mortality rates have come down, raising hope that Millennium Development Goals in this regard will be reached. The Government will also set up diagnostic and treatment centers with latest equipment and technology that would meet international standards. The Prime Minister hoped all this would revive the people‘s trust in the nation‘s health services and persuade them not to go to foreign countries for treatment that will be available here.

Source: News.mn

MONGOLIA SEEKS SOUTH KOREAN HELP TO BE SEAFARING Landlocked Mongolia is breaking free of the restrictions enforced by geography. Minister for Road, Transport and Urban Development Kh.Battulga signed several memorandums during his visit to South Korea between February 24 and 26 that seek to give the country a role on the high seas. These include one which promises South Korean technical support for Mongolia‘s ocean fishing prospects, another allowing Mongolia use of the South Korean sea port Pyantaik, another setting up a joint shipping venture with a South Korean company, and another for training up to 100 Mongolian students in the Maritime University of South Korea.

Source: Ardiin Erkh

SPEAKER SEEKS CITIZENS’ VIEWS ON CONSTITUTION AMENDMENTS Speaker D.Demberel has issued a notification asking people to send their opinions and suggestions on the proposed amendments to the Constitution. The last date for submission of these views is March 15. These are to be sent to the Standing Committee on State Structure, at either Parliament or Government House, or online.

Source: News.mn

HOPES POLLUTION WILL BE REDUCED ARE MORE AMBITIOUS THAN REALISTIC Deputy Mayor D.Ganbold is the latest official to promise that air pollution will be reduced by 50% by 2012. What he did not say is that a recent meeting he attended on the issue was told that hopes that things may soon start looking up seem more ambitious than realistic. MCS Holding, which plans to produce coal gas for heating, now finds there is a ban on import of methanol, an essential ingredient. Steppesolar LLC, which plans to produce energy from underground heat, finds it will have to use high cost equipment to implement its project, and without state subsidy, its product would be too expensive for household consumers. Much is being made of the plan to heat ger district households with electricity. It has already been decided that use of power for that purpose will cost 50% less. The money for the supply of electricity has also been found. However, the energy sector has not been asked if it will be able to generate the extra electricity required for the purpose.

Source: Ardiin Erkh

GREEN STAR AWARD FOR ECOFRIENDLY MP The Union of Civil Movements for Environmental Protection presented the Green Star award to DP MP G.Bayarsaikhan at a recent ceremony in Government house. The annual award is given to ―the most ecofriendly MP‖ and its previous recipients include Mr. Ts.Sedvanchig and Mr. G.Batkhuu.

Source: Zuunii Medee

STUDENTS QUESTION SALE OF ERDENES TT SHARES TO BUSINESSES The Constitution Court has received a petition from students questioning the validity of the Parliamentary resolution on the basis of which the Government has decided to issue 10% of shares of Erdenes Tavan Tolgoi to Mongolian businesses registered before a certain date. The petitioners claim this violates the Constitutional obligation on the state not to make any discrimination among citizens on any ground. The plan to issue shares to national entities that were officially registered prior to June 30, 2010 and that have paid taxes regularly thus discriminates against those who did not have a chance to set up a business, or those who did not need to. The petition also claims that allowing foreigners to buy shares in the company violates Mongolians‘ Constitutional right to equality as they would be at a disadvantage because of their obviously lower financial resources.

Source: Zuunii Medee

U.S. AMBASSADOR ASKS FUTURE PUBLIC SERVANTS TO ACCEPT CHALLENGES Addressing a recent gathering of more than 150 professors and students at the National Academy of Governance, a state institution for graduate and post-graduate studies in public administration and civil service, U.S. Ambassador Jonathon Addleton said his present tenure here from 2010 until 2012 coincided with three important Mongolian anniversaries. Last year was the 20th anniversary of democracy, this year is the 100th anniversary of the reassertion of independence, and next year marks the 25th anniversary of diplomatic relations between the United States and Mongolia, ―a relationship that continues to grow and flourish.‖ He divided his review of Mongolian-American relations into five main areas: development; commercial ties; political support, including in the area of democracy; security; and people-to-people relations. An ―obvious step‖ for Mongolia is to ―move beyond aid relationships to commercial ones‖, and Mr. Addleton saw ―opportunities for Mongolians and Americans to benefit mutually through their business ties‖. Indeed, in 2010 U.S. exports to Mongolia increased by more than 140 percent, and they could well reach USD200 million in 2011. Noting that ―strong people-to-people relations are essential for ties between two countries to be sustained and flourish over a long period of time‖, the Ambassador revealed that over the last twenty years, the U.S. Embassy has issued more than 50,000 visas to Mongolians, and right now, significant number in a country numbering less than three million. At this point, more than 1,000 Mongolian students are studying in the U.S. Turning to public service and its challenges, Ambassador Addleton said, ―The sky is the limit in terms of what Mongolia might accomplish, if it works together as a society and makes wise decisions about the future.‖ As a resource rich economy, Mongolia must realize ―the importance of transparency, accountability and ‗checks and balances‘, and of the value of significant investments in education. And, perhaps more than anything, the importance of ‗good governance‘ in all its many forms.‖ Read more… Mr. Addleton had a word of advice for those in his audience who would take up Government jobs. Public office, he underscored, should not be used for private gain, he said and added, ―The ‗best bureaucrats‘ are those that remember their common humanity and recall the time when they too needed to seek a service; and the ‗worst bureaucrats‘ are those who turn into a sort of robotical ‗Mr. No‘, taking pleasure in making things more rather than less complicated and taking delight in erecting barriers rather than tearing them down.‖ Noting that public servants ―almost always play a central role‖ in the business environment – ―sometimes in a positive way, but all too often in a negative way‖ – the Ambassador stressed the need to follow ―the principles of fairness, transparency and avoidance of ‗public office for private gain‘‖. Mongolia‘s future depends on ―a stable, supportive, consistent and effective business environment‖, and Mr. Addleton ended by wishing ―every student here today all the best as you complete your studies and as you move on to the next stage of your life, whether in government service or the private sector‖, and then reminding them that ―as a public servant, your role will be vital, either as an official who helps set policy or as an administrator charged with administering that policy fairly, honestly, transparently and with compassion‖.

Source: U.S. Embassy in Mongolia ____________________________________________________________________________________________________

NEW MONGOLIAN LAWS AND REGULATIONS

The following new laws, amendments, regulations and annulments were published in the latest two weekly Government bulletins. Unless otherwise decided by Parliament, they will take effect ten (10) days after publication.

Date Laws et al 25.02.2011 Amendments to Law on Value Added Tax Gender equity Amendments to Law on Government of Mongolia Addendum to Law on Labor Amendments to Law on Civil Service Addendum to Law on National Human Rights Commission of Mongolia Regulation for gender equity law compliance Prohibition on issuance of new special permits for minerals exploration Addendum to Law on Personal income tax Addendum to Law on Corporate income tax Amendments to Law on Value added tax

Addendum to Law on Parliament of Mongolia Amendments to Law on National holiday, celebration day Amendments to Law on Dwelling Amendments to Law on Dwelling proprietor union's legal status, property of collective ownership of dwelling for public use Reduction of Capital city's air pollution Amendments to Law on Air Addendum to Law on Personal income tax Addendum to Law on Corporate Income tax Date Laws et al 28.02.2011 Notary Amendments to Law on Special permits for corporate activity Amendments to Law on Arbitration Amendments to Law on Quarantine control, examination during border import of animal, plant and raw material, products made from it Amendments to Law on Sending labor force abroad and getting labor force, specialist from abroad Amendments to Law on Minerals Amendments to Law on Foreign investment Amendments to Law on Land ownership to citizen of Mongolia Amendments to Law on Family Amendments to Law on Civil Registration Amendments to Law on Cadastre topography, land cadastre Amendments to Law on Mongolian citizen's travel to foreign country on personal matter, immigration Amendments to Law on Fight against money laundry and terrorism financing Amendments to Law on Friendship Amendments to Law on Renewable energy Amendments to Law on Control on circulation of explosives, explosive tools Amendments to Law on State registration of legal body Amendments to Law on Free zone Addendum to Law on Registration of property ownership rights, other property ownership rights related to it Amendments to Law on Court settlement of civil case Amendments to Law on Selection of judge Amendments to Law on Small, medium enterprises Amendments to Law on Parliament elections of Mongolia Amendments to Law on local khural election Amendments to Law on Transformed living organism Annulment of Law on Notary Mongolia Development Bank Annulment of some parts of Law on Budget sustainability Addendum to law on Central Bank /Mongol Bank/ Addendum to Law on Bank Addendum to Law on State and local property Addendum to Law on Purchase of goods, service with state and local property Amendments to Law on Consolidated budget of Mongolia Annulment of Some provisions of Law on Coordination of foreign loan, grant Please visit BCM's website, Legislative Working Group, for a summary of new Mongolian laws. BCM members who wish to access complete versions of the laws and regulations in Mongolian language are welcome to call or email the BCM office: 332345 or info@bcmongolia.org.

ANNOUNCEMENTS

FRANCHISING & BUSINESS OPPORTUNITIES EXPO, SYDNEY, APRIL 1-3 The Business Council of Mongolia and Saki Partners (Australia) will be hosting the Mongolian Business Mission to the Franchising & Business Opportunities Expo in Sydney. The Expo will feature over 100 businesses, in cosmetics, food and beverage, tanning, ice cream, pizza, child care, home

improvement, education, health care, tax prep, and so much more. By joining the official delegation, you will receive free business support as an international buyer. Benefits available to delegation members are: - Free admission to Expo and exhibits - Free matchmaking - Free assistance arranging and scheduling appointments with Australian exhibitors and companies before and during the Expo - Access to the International Business Center, including a separate registration area to pick up badges, and meeting rooms to meet with exhibitors - Special franchising seminar and workshop - Assistance with travel and hotel bookings - Assistance with logistics at the show - Friendly local language support. Register with the Business Council of Mongolia today. Call BCM at 976-11-332345 to register or for questions about the event. Registration closes on March 7, 2011. ___________________________________________ MINETECH 2011, ULAANBAATAR, MARCH 3-5 The Mongolian National Mining Association is organizing MINETECH 2011 at Misheel Expo Center from March 3 to 5. This is the fourth year of the annual exhibition and trade show for mining equipment producers, suppliers and service providers. Over 60 foreign and domestic companies will participate in the exhibition, offering a brilliant opportunity for manufacturers, suppliers, service providers and users to interact and understand one another‘s needs in Mongolia, where the mineral sector grows with tremendous speed. For more information about the exhibition, please call 99095791, 99109059, or 314877. ___________________________________________

2012-2013 FULBRIGHT STUDENT FELLOWSHIP The Public Affairs Section of the U.S. Embassy to Mongolia is now accepting applications for the 2012 -2013 Fulbright Student Fellowship Program. Fulbright Student Fellowships are part of a U.S. Government-funded academic exchange program, and fund graduate-level (M.A., M.S) studies at U.S. universities. Fulbright Student Fellows are selected by the Public Affairs Section of the U.S. Embassy. Deadline: April 11, 2011. Visit: http://mongolia.usembassy.gov/fulbright_2012-2013.html ___________________________________________ 2012-2013 HUBERT HUMPHREY FELLOWSHIP This is a one-year, non-degree professional exchange program. It provides approximately a year of study and related professional experience in the U.S. to mid-career professionals working in the following public service fields, in either the public or private sector: agricultural Development/Agricultural Economics, communications/Journalism, Substance Abuse Education, Treatment and Prevention, Economic Development, Finance and Banking, Educational Administration, Planning and Policy, Higher Education Administration, HIV/AIDS Policy and Prevention, Natural Resource and Environmental Policy and Climate Change, Human Resources Management, Public Health Policy and Management, Public Policy Analysis and Public Administration, Teaching of English as a Foreign Language, Technology Policy and Management, Trafficking of Persons, Policy and Prevention, Urban and Regional Planning, Law and Human Rights. Application deadline: April 15, 2011. Visit: http://mongolia.usembassy.gov/sholarship_announcements/humphrey2012.html _________________________________________________

“MM TODAY” on MNB-TV, Fridays at 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ___________________________________________ “BSPOT” on B-TV, Monday to Friday at 21:30 BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.

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NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIA REPORTS' Presentations from BCM‘s monthly meetings on February 28 and January 24, the BCM Environmental Working Group meeting on February 2 and the Haranga Resources investor‘s meeting sponsored by MICC on February 23 as well as Mongolia Reports including the U.S. Embassy Mongolia‘s Commercial Section‘s ―2011 Mongolia Investment Climate Statement‖ are posted on BCM's website (www.bcmongolia.org) in the "Resource, Presentations" and ―Resource, Mongolia Reports‖ sections for your review. We are now posting some news stories and analyses relevant to Mongolia on the BCM website's ‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‘s events.

ECONOMIC INDICATORS

INFLATION

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

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

January 31, 2011 *13.8% [source: NSOM]

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

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

CURRENCY RATES – March 3, 2011

Currency Name Currency Rate

US dollar USD 1,252.23

Euro EUR 1,724.88

Japanese yen JPY 15.26

British pound GBP 2,033.18

Hong Kong dollar HKD 160.72

Chinese Yuan CNY 190.50

Russian Ruble RUB 43.76

South Korean won KRW 1.11

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.