Unlocking the economic potential Unlocking the economic potential of Mongoliaof Mongolia’’ s resources sectors resources sector

Mr. Randolph S. Mr. Randolph S. KoppaKoppaPresidentPresident

Trade and Development Bank of MongoliaTrade and Development Bank of Mongolia

““ Mongolia 2010 Investment SummitMongolia 2010 Investment Summit””Hong Kong 14 October 2010Hong Kong 14 October 2010

A new era has begunA new era has begun

• OT agreement Oct. 2009

• Clearer government vision and direction

- Tavan Tolgoi structure

- Privatization

- Listing of key resources

- Reform of stock exchange

- Stabilization fund

- Sovereign debt issue

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What does it mean?What does it mean?

• IMF predicts Mongolia’s GDP will double in five years from current level of below $5 billion

• GDP growth will average 20% p.a. 2013-16

• GDP will more than double again by 2020

• Per capita GDP grows from $1,916 to $9,000 in ten years

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Unlocking the potential in next 5 yearsUnlocking the potential in next 5 years

• Mine Development $ 9 bn. to $ 10 bn.• Infrastructure $ 5 bn. to $ 7 bn.• Urban development $ 5 bn. to $ 7 bn.• Agriculture $ 1 bn. to $ 2 bn. • Industry $ 8 bn. to $ 11 bn. • Environment $ 1 bn. to $ 2 bn.• Social $ 2 bn. to $ 3 bn.• Industrial park $ 8 bn. to $ 10 bn.

Total: $ 39 bn. to $ 52 bn.

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How to fund the need? Opportunities for investorsHow to fund the need? Opportunities for investors

• Foreign Direct Investment

• Domestic banking sector

• Domestic stock exchange

• Domestic debt market

• Sovereign borrowing

• International capital markets

• Foreign borrowing

• Grants and other

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Foreign InvestmentForeign Investment

Most of development of new major mining projects will be funded through foreign investors.

Mongolia’s FDI has been growing 30% annually.

This rate would mean $11 billion in new FDI in next five years.

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USD billion

BudgetBudget

• Current Budget expenditures approx $1 billion, with small deficit

• Increased revenues from mining can enable increased budget to meet many social and infrastructural needs

• Establishment of Homeland Development Fund aims to use surplus mining revenues to meet such needs

• Estimate: $2 billion or more

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Banking sectorBanking sector

• Banking sector is small compared to other emerging countries

• Mongolia bank loans to GDP only 34%

• Central and Eastern Europe over 50%

• USA, Korea, China over 100%

• To reach CEE level in 5 years will require $250 million of outside equity capital as GDP doubles

• Banks could provide $1.5 billion in investment financing, apart from working capital funding.

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Loan growth has resumedLoan growth has resumedMNT billion

41.5%

66.3%

25.8%

-12.0%

45.8%

Lending will need to grow, as will capitalLending will need to grow, as will capital

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Investment by businessesInvestment by businesses

• Spending by business on fixed assets will increase from current estimated 5% of GDP

• General level of developing countries is 25% with US at 14% and China at 40%

• Moving to 25% of GDP will generate over $6 billion in investment, of which $1.5 billion could be provided by domestic banks. The balance requires funding from profits or capital markets and foreign sources.

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Stock MarketStock Market

• Mongolia stock market very small: approx. $600 million market cap which is 27% of domestic bank credit and $200 per capita

• Developing countries ratios around 50% or $3000 to $5,000 per capita

• Developed countries market cap equals bank credit, with $40,000 or more per capita

• Potentially, $2 billion or more could be raised under properly organized stock exchange as market cap reached 40% of domestic credit

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Public debtPublic debt

• Mongolia has virtually no public or publicly traded debt

• Mongolia needs to establish a domestic capital market

• This will enable a forward rate which will attract foreign investors

• Up to 20% of GDP should be possible based on other emerging countries

• This would mean up to $2 billion could be raised

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Foreign Sovereign DebtForeign Sovereign Debt

• Mongolia has less than $2 billion in foreign debt, much on concessionary terms, or about 40% of GDP.

• There is capacity to raise sovereign commercial debt

• Within 5 years, additional $3 billion could be raised and keep debt ratio below 50% of GDP

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Foreign Equity MarketsForeign Equity Markets

• Several successful overseas listings already: SGE, MoEnCo, Hunnu, North Asia Resources, Winsway, Mongolian Mining Corporation; others in pipeline

• Hong Kong, London AIM, Australia, Toronto

• Government plans to list key assets

• Potentially, $5 bn. to $10 bn. required

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Foreign Debt MarketsForeign Debt Markets

• Already one issuer: TDB in 2007 for $75 million

• Sovereign Issue planned late 2010 will establish benchmark

• As credit ratings improve, more access possible.

• Potential of $3 billion or more

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Project and structured financeProject and structured finance

• IFIs and international banks already active as direct lenders.

• PPP and export finance structures expected

• Syndication market small but growing

• Potential need of $5 billion or more

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SummarySummary

• FDI $ 10 bn. to $ 12 bn.• Domestic sources $ 12 bn. to $ 13 bn.• Sovereign Borrowing $ 3 bn. to $ 5 bn.• Foreign Capital Markets $ 8 bn. to $ 12

bn.• IFI & Foreign bank Loans $ 5 bn. to $ 8 bn.• Donors and NGOs $ 1 bn. to $ 2 bn.

Total $ 39 bn. to $ 52 bn.

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A Reachable Goal?A Reachable Goal?

• Consider: OT, TT and other major strategic mines will generate $4 bn. to $7 bn. of exports per year, with $2bn. to $3 bn. in net income per year, providing significant revenues to the State in taxes, royalties and dividends.

• Significant increases in profits and tax revenues from other economic sectors

• Continuing growth in GDP and increasing personal incomes.

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Preconditions Preconditions

• Political Stability

• Strong legal and regulatory environment

• Governance

• Fiscal discipline

• Stabilization fund

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Risks and ConcernsRisks and Concerns

• Inflation

• Populism

• Dutch Disease

• Boom Bust cycles

• International financial markets

• China growth trend

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ConclusionsConclusions

• New era is beginning

• Mongolia is on the RADAR SCOPE and warrants the attention of international investors

• Many opportunities for investors in mining and all other sectors

• Steady growth path is possible

• Potential for a healthy wealthy state

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If interested, If interested, please contact usplease contact us

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MongoliaMongolia’’ s leading banks leading bank

• Mongolia’s leading corporate bank

TDB is the largest corporate lender in Mongolia with 25% corporate lending market shares. It serves approximately 360 major Mongolian corporates in all major business sectors.

• Leader in international banking

Having established over 80 correspondent relationships with international financial institutions and correspondent accounts with major clearing banks around the world TDB offers a wide range ofinternational banking services designed to appeal to both domestic and international clients. Currently, TDB maintains 27 nostro accounts in 14 currencies with 20 top rated foreign banks of 15 countries. Total amount of trade finance lines reached $115 million.

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Financial ResultsFinancial Results

(mln.USD) 2007 2008 2009 2010.08

Total Asset 444.5 520.3 567.0 653.1Total Loans 307.2 347.4 281.2 360.5Total Deposits 362.6* 404.6* 408.0 496.1Total Equity 47.5 54.0 47.3 61.6Net Profit 11.5 11.5 10.6 9.9Capital Adequacy 13.8% 14.7% 12.9% 13.7%**ROA 3.5% 2.8% 1.9% 2.3%ROE 32% 24.9% 19.5% 24.4%

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MNT/USD = 1301.808/31/2010

* includes USD 75.0 million bonds** 12.9% under revised calculation effective August 2010

Bank Ratings by MoodyBank Ratings by Moody’’ ss

� Senior Unsecured EMTN (foreign currency) Ba3

� LT/ST Bank Deposits (foreign currency) B2/NP

� LT/ST Bank Deposits (domestic currency) Ba3/NP

� LT/ST Issuer Rating Ba3/NP

� Subordinated Obligations B1

� Bank Financial Strength D-

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THANK YOUTHANK YOU

Trade and Development Bank of Mongolia

Juulchin Street - 7

Baga Toiruu - 12

Ulaanbaatar, Mongolia

Tel: +976 11 319943

Fax: +976 11 312418

Email: corrbanking@tdbm.mn

http://www.tdbm.mn

http://www.bankcard.mn

http://www.mongolianbusinessguide.com

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