BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 252 – December 14, 2012

NEWS HIGHLIGHTS:

Business

EBRD arranges USD 46 million XacBank SME financing;

Mongol Bank loans MNT 13.9 billion to Magnai Trade;

Mongolia, South Korea establish JV seafaring entity;

Newera begins second drilling campaign;

FeOre receives updated Ereeny iron ore project study;

Aspire sees low production costs for Ovoot coking coal project;

Shearman & Sterling and Allen & Overy legal advisers on landmark bond;

German-Mongolian school of technology to open 2013;

Khan Resources progresses arbitration against Mongolia;

BPI lays the foundation of its Quality Supplier Development Center;

Four iron-ore miners under investigation;

Reporters and TV crew leave TV9;

Credit Suisse upgrades MMC to “neutral”;

Mongolia Mining Journal names best in the industry for 2012;

Rio Tinto agrees to sell stake in South African copper mine;

Centerra consolidates ownership of Turkish project;

Canada approves big energy investments by foreign state-owned firms.

Economy

Chinggis bonds rebound;

Mongolian bonds: it‟s laws, not lawmakers, that matter, says Moody‟s;

The economic challenge;

Inflation 14.4 percent year-over-year nationwide at end of November;

ADB to provide USD 720 million for development of UB's ger districts;

Coal and iron ore exports see growth while gold and copper dip;

Mobile telephony rings change;

UB turns to buses to resolve traffic issues;

Coal prices to rise on increased Chinese, U.S. demand;

Asian cities „air quality getting worse, experts warn.

Politics

President calls for more accountability following bond offering;

DP requests solidarity from MPRP;

MNDP has no plans to exit coalition;

DP officials say MPRP cannot dissolve government;

Could the MPP and MPRP reunite?;

Draft law to cut red tape in import-export;

MPs form anti-nuclear energy sect;

Parliament guarantees savings deposits of up to MNT 20 million for a year;

Mongolia makes strong comeback on Transparency International's corruption list;

Ambassador appointments confirmed;

Mongolia, Vietnam acknowledge market economy status;

Mongolia, Japan make headway in carbon credit trade;

Poor not yet benefiting from growth, says U.N. independent expert;

Enkhbayar speaks from jail;

In Mongolia, a back door to the “Hermit Kingdom”;

Learning from Australia how to make most of mining boom.

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Breakthrough PR Oxford Business Group

BCM MONTHLY MEETING RECAP

The meeting on 10 December with Laurenz Melchers in the chair was attended by 80 members and

invited guests. Executive Director Jim Dwyer thanked Melchers for his three-years of success as

chair, as this would be the last meeting he would hold the position.

Dwyer next reported on BCM‘s 6 working groups‘ activities, involving over 130 member volunteers,

which included the Risk Working Group's preparations for the 3rd Risk Forum on February 26 and the

Education Working Group's success with its ―BCM in the Classroom‖ series which recently held two

events with 100 people in attendance at each at the Institute of Finance & Economics. Also, about

five members of the Tax Working Group were hard at work to form a joint working group with the

Mongolia Tax Authority‘s ―Large Taxpayer Office‖ to improve efficiencies and resolve questions in a

customer friendly way.

190 members have renewed BCM membership since the 2013 drive began in late October.

Reminders are going out to those yet to renew. Dwyer reiterated that BCM‘s membership is ―our

lifeblood‖ and anticipates membership reaching a new record high of 275 by October, 2013.

The seven most recently joined members are:

•Allen & Overy is an international legal practice with approximately 500 partners and 5,000 people,

working in 42 offices worldwide. Its lawyers are involved in many of the most influential

commercial ventures and are known for providing clients with pioneering solutions to the toughest

legal challenges.

•Alpha Plant Maintenance provides maintenance and management services for mining equipment.

Alpha Plant Mongolia LLC has currently available a new EX1900-6 Hitachi excavator and 4 new 785-7

Komatsu dump trucks that can be quickly mobilized as well as a wide variety of ancillary

equipment. Alpha Plant Mongolia can also procure earthmoving equipment through its extensive

worldwide network for supply to the Mongolian mining and construction industries.

•Applus Velosi is an international recruitment and workforce solutions firm. It has been active in

Mongolia since 2006 with its experienced industry professionals. Services include executive search

and staff appointments; contract recruitment, national and expatriate; human resource consulting,

payroll, travel, work visas and logistics.

•Cliveden Trading AG is a professional and trusted trading and marketing company. It specializes in

offering bespoke services to Junior Miners. It has combined raw materials trading experience of

over 50 years.

•Global Supreme Group has more than fifty years experience providing support to clients who

operate in some of the world's most challenging environments. Supreme has proven expertise

supplying food, equipment, fuel and complex logistical solutions in remote and difficult locations.

•Mongol Daatgal LLC was established in 1934, and is the first and leading insurance company in

Mongolia that provides valuable insurance services throughout the country. It has 29 branch offices

in every district and province of Mongolia. It sells more than 60 types of insurance products into the

market. Core insurance products are: property all risks insurance coverage, financial insurance

products, liability insurance products, international health, and personal accident insurance

products.

•Teck is a diversified resource company committed to responsible mining and mineral development

with business units focused on copper, steelmaking coal, zinc and energy, and is also a significant

producer of specialty metals such as germanium and indium. It has expertise across a wide range of

activities related to mining and minerals processing including exploration, development, smelting,

refining, safety, environmental protection, product stewardship, recycling and research.

The evening began with a presentation from Adrienne Youngman, executive director of Mongolia

Talent Network, ―Human Talent in Mongolia.‖ In the year her company has operated, she and her

10-member team have focused on executive searches, recruitment and training. This time spend

has allowed her to find lots of potential for the Mongolian workforce.

―Anyone that's been operating here will know it's a relatively small pool of talent,‖ said Youngman.

―We see lots of potential with strong literacy, people having worked overseas, people with strong

aptitudes for foreign languages, and lots of motivation for pursuing education.‖

This year Mongolia sees 31,203 graduates earning their Bachelor's degree. Of those, 24 percent are

in business administration, 16 percent in teaching, and 10 percent in economics.

However, there seems to be a disconnect between the jobs available and what students are working

toward. Although mining is the largest growing sector in the Mongolian economy, Mongolia's two

largest universities saw only 235 mining graduates. Mongolia faces a diversity challenge, too, with

only 36 percent of graduates male. There is also a lack of clarity for the kinds of salaries workers

should be earning, with some who are new to the workforce having too-high expectations and

others who have worked years with pay far below what they deserve.

Jan Hansen, Asian Development Bank Mongolia Resident Mission's senior country economist, and E.

Enerelt, the bank's associate investment officer, presented an outlook for the Mongolian economy.

The bank has seen vulnerability from economic slowdown in China and growing pressures from the

balance of payments. Enerelt reported falls in both export and import activity and a current

account deficit equal to 30 percent of last year's gross domestic product (GDP). He also pointed out

government's overly optimistic revenue projections, difficulty in complying with the Fiscal Stability

Law, and public debt that equaled 40 percent of GDP strongly evidenced a pro-cyclical boom-bust

fiscal policy.

Hansen next pointed out the risks presented by off-budget spending by the Development Bank of

Mongolia. He strongly recommended spending be reigned in from all sides and the Bank of Mongolia

continue its policy for a flexible exchange rate.

―The main priority for economic policy is restraining fiscal spending and deficits because there are

few reserves in the Fiscal Stability Fund (2 percent of GDP), which are not enough,‖ said Hansen.

B. Tsendsuren, head of the CDM National Bureau for the Climate Change Coordination Office at the

Ministry of Environment and Green Development, spoke next on the opportunities Mongolia had for

the carbon market. She spoke on the CDM system that allows offset credits for trade.

―CDM is a mechanism Mongolia could participate that allows countries to implement projects to

reduce GHG [greenhouse gas] emissions and sell credits earned,‖ she said

However Mongolia faces technical barriers, such as the need for approved methods and market

barriers, such as the fact that some regions won't accept CDM credits.

The BCOM/JCM Japanese initiative may address this issue. It is a partnership between Japan and

Mongolia that would decentralize the trade process and allows more flexibility. It also would

provide upfront assistance from Japan and easier logistical methods.

Tsendsuren outlined a plan where Mongolia had already garnered consensus from government and

begun its feasibility studies over the past two years. Next, the country will have to test its

methodologies and, beginning next year, implement pilot projects.

Bayarmaa.A, a carbon finance specialist at Clean Energy LLC, Newcom Group, provided a brief

illuminating real world overview of the handling of carbon credits in the Salkhit wind farm CDM

project.

The final presentation was given by Efrain Laureano, Chief of Party at USAID's Business Plus

Initiative (BPI). BPI has worked in Mongolia to improve the business environment in Mongolia

through its support of private sector growth and competition. Two projects it has implemented to

meet these aims are the establishment of its Quality Management Center of Excellence to address

quality restraints while building capacities and the introduction of its Supplier Development

program, which sets out to build capacities for transaction making.

―We have identified an opportunity that has worked itself to include new participation for the

sector and work with trainers so they can be supplying from the start as we see the Quality Supplier

Development Center take off in the new year.‖

This month BPI will register the center. It also has targeted February for its focus on transaction

assistance.

BUSINESS

EBRD ARRANGES USD 46 MILLION XACBANK SME FINANCING

The European Bank for Reconstruction and Development is arranging a senior USD 46 million loan to

Mongolia's XacBank LLC, the fourth largest bank and a leading small business lender in the country.

This will be the first syndicated financing facility for the EBRD in Mongolia's financial sector

involving commercial banks, and one of the first syndicated loans in the country, in general. The

loans will be structured as follows: USD 15 million for the EBRD's own account and USD 23 million

(A-loan) syndicated to commercial lenders (B-loan). The B-lenders are JSB Rosevrobank, ING Bank

NV, Singapore Branch, Bank Im Bistum Essen EG, OJSC Promsvyazbank and Demire-Halk Bank NV.

International Bank, headquartered in Moscow, will join the facility in parallel with USD 8 million.

―The syndication proved to be successful, with over 100 percent over-subscription achieved. The

EBRD was able to attract USD 31 million in co-financing against the initially-targeted USD 15

million,‖ said Muzaffar Zukhurov, the EBRD syndications banker in charge of the deal. ―This year

again demonstrates the importance of co-financiers attached to the EBRD's involvement when

taking exposure to difficult markets such as Mongolia.‖

The loan will provide XacBank with longer tenor funding that will be used for long-term loans to

small-and medium-sized businesses (SME). The financing package will help the bank increase its

market share in the growing SME segment.

Source: FinChannel

MONGOL BANK LOANS MNT 13.9 BILLION TO MAGNAI TRADE

Magnai Trade LLC received a MNT 13.9 billion loan from the Bank of Mongolia.

The loan holds 3.8 percent interest for a one-year term. Magnai Trade is the fifth company to

receive a loan from the Central Bank. In total, the bank has loaned MNT 76.7 billion.

Source: Zuunii Medee

MONGOLIA, SOUTH KOREA ESTABLISH JV SEAFARING ENTITY

Landlocked Mongolia is hitting the seas, with a new joint-venture (JV) sea transport operation with

South Korea.

Each participant is set to invest USD 500,000. Korea has agreed to train 10 Mongolian personnel at

its maritime school for a year and a half.

In November, Korea's deputy minister of land transportation and sea affairs visited Mongolia to seek

opportunities for cooperation. During his visit an inter-government protocol was signed for the

establishment of the venture that outlined the details for the transportation of mineral goods, the

training of maritime specialists, and research for the development of infrastructure.

Mongolia already has one such JV with Singapore. That company has a fleet of 320 ships bearing the

Mongolian flag.

Source: Zuunii Medee

NEWERA BEGINS SECOND DRILLING CAMPAIGN

Newera Resources Ltd. announced the commencement of its second drilling program at the

Shanagan East Coal project.

The deeper three-to-four hole program is currently underway and is designed to test for further

extensions to the known coal seems identified in Newera's initial drilling program. Coal samples will

be extracted from a hole and sent to SGS Laboratories in Mongolia for washability testing.

Newera Resources also received results from a 15-line kilometer induced polarization survey by

Geomaster LLC and the National University of Mongolia from coal samples taken there that

identified two new potential 500 meter wide coal bearing zones some 700 to 1,000 meters to the

west of the previously identified coal seams.

―The Shanagan Project is still an early stage exploration project, that being said, all our exploration

work at Shanagan project has exceeded our expectations,‖ said Newera Executive Chairman Martin

Blakeman.

―Armed with the new information from the geophysical survey and Professor Arvisbaatar's

recommendations, the implementation of this second drilling program gives Newera the opportunity

to undertake a limited test of the professor‘s theories and while our expectations are positive but

cautious, there is no reason to believe at this point that our explanation success will not continue.‖

Source: Newera Resources Ltd.

FEORE RECEIVES UPDATED EREENY IRON ORE PROJECT STUDY

FeOre Ltd. is currently reviewing an updated Chinese technical study completed by Baogang Group

Design & Research Institute for the company's Ereeny iron ore project. The translation and review

of the study is slated for completion by the end of January 2013.

The study estimated the total investment for the Ereeny project would be about USD 107 million

and that first production is expected to occur in mid-2014. The initial production capacity is

expected to be around 1 million tons of iron ore concentrate.

FeOre noted that there had been changes in regulatory requirements for the commencement of

mine construction, in areas such as explosive storage and environmental assessments, and that the

updated study had considered the latest regulatory regime. There have also been ongoing

discussions on project debt financing concerning regulations on the ability for project financiers to

create security over assets.

Source: Proactive Investors

ASPIRE SEES LOW PRODUCTION COSTS FOR OVOOT COKING COAL PROJECT

Aspire Mining Ltd. has completed its economic study for its Ovoot coal project.

According to the study, Aspire Mining could extract 14 million tons per annum of coking from the

open pit plus another 0.75 million tons per annum for 20 years from the mine mouth. Life of mine

ex mine gate cost is estimated at $36 per product ton of quality coking coal.

Free On Rail costs for quality coking coal into China are forecast by Xstract Mining Consultants at

just $91 per ton (excluding royalties) for the first five years of full production.

This is against a projected medium term average coking coal price of $200 per ton, showing a strong

margin for Aspire.

Aspire‘s managing director David Paull said, ―I am pleased to be able to report that the PFS Revision

has demonstrated that the Ovoot Project is one of the lowest cost potential sources of coal into

China which is the world‘s largest consumer of coking coal and coke. The 23% increase in Coal

Reserves announced in November 2012 has contributed to the significant increase in the Project Net

Present Value and overall cash surplus. The company is now well positioned to commence

commercialization negotiations to advance funding and project development.‖

Following the release of the study, its stock value jumped 16 percent on the Australian Stock

Exchange (ASX).

Source: Zuunii Medee, Proactive Investors

SHEARMAN & STERLING AND ALLEN & OVERY LEGAL ADVISERS ON LANDMARK BOND

Shearman & Sterling has advised the Mongolian government on its debut USD 1.5 billion global bond

offering, with Allen & Overy advising the underwriters.

The securities were issued under the Mongolian government's USD 5 billion global medium-term note

program in two tranches: the Series A USD 500 million 4.125 percent notes due 2018 and Series B

USD 1 billion 5.125 percent notes due 2022. The underwriters were Bank of America Merrill Lynch,

Deutsche Bank, HSBC, J.P. Morgan and TDB Capital. Lehman Lee & Xu and GTs Advocates acted as

Mongolian counsel for the Mongolian government and the underwriters, respectively.

Source: Legal Business Online

GERMAN-MONGOLIAN SCHOOL OF TECHNOLOGY TO OPEN 2013

Cooperation between the Ministry of Education and Science (MES) and International Community

Institution of Germany has resulted in plans for a German-Mongolian technical university.

The ministry and German organization signed a memorandum to realize plans for the Technology

University of Mongolia and Germany. During the official visit of German Chancellor Angela Merkel,

she and President Ts. Elbegdorj agreed to cooperate on business and education.

The university will prepare a workforce for engineering and technology. It is planned for

commissioning for the 2013-2014 school year.

Source: Undesnii Shuudan

KHAN RESOURCES PROGRESSES ARBITRATION AGAINST MONGOLIA

A U.N. Commission on International Trade Law has progressed the international arbitration between

project developer Khan Resources Inc. and the Mongolia government to the quantum and damages

phase, the company reported on Tuesday.

Khan Resources said it had early this month submitted to the tribunal seven volumes of

documentation in support of its claim totaling USD 326 million, including interest from July 2009

date of the expropriation of the Dornod uranium deposit by the Mongolian government. During July

the company said the U.N. tribunal hearing the matter in May ruled in Khan Resource's favor on

matters of jurisdiction and has dismissed all of Mongolia's objections to the continuance of the suit.

Khan Resources said the seven volumes total about 500 pages of documentation of the claim itself,

along with thousands of pages of supporting documentation. The documentation includes two

independent valuation reports: one by Raymond James and one by the Berkeley Research Group.

Also included is a report by an independent legal expert on Mongolian law in support of Khan

Resource's claim.

The Mongolian government has until 5 April 2013 to respond and then Khan Resources will have until

28 June 2013 to respond to the government's defense. The tribunal will meet from 11 November to

15 November 2013 to hear the claim and their ruling would be expected in the first half of 2014.

―While the process of international arbitration is long—we initiated our suit in January 2011—we

remain confident in a favorable outcome and that we will receive value for our investments in

Mongolia,‖ Khan Resources Chief Executive Officer Grant Edey said.

Khan Resources alleged that during 2009 the government of Mongolia in concert with Russian

partner AtomRedMetZoloto (ARMZ) took actions that amounted to the illegal expropriation of the

company's mining and exploration permits. Just as the company was preparing for construction in

October 2009, said Khan, the two governments in January made a statement that they intended to

exploit the resource, and by August, had formed a Dornod Uranium joint venture (JV).

Source: Mining Weekly

BPI LAYS THE FOUNDATION OF ITS QUALITY SUPPLIER DEVELOPMENT CENTER

USAID's Business Plus Initiative (BPI) gathered private sector support this past month for the

establishment of an institution to focus on fostering economic diversification in Mongolia through

the development of small-and medium-sized entities (SMEs).

The Quality Supplier Development Center will focus on addressing cross-cutting quality assurance

constraints as well as eliminating specific bottlenecks that stand in the way of Mongolia SMEs

closing transactions with large firms. Partners to this initiative include the Business Council of

Mongolia (BCM), Mongolian Star Melchers, Nomin Holding, Wagner Asia Equipment LLC, and XacBank

LLC.

BPI intends to register the center and begin activities this month.

Source: Business Plus Initiative

FOUR IRON-ORE MINERS UNDER INVESTIGATION

The Independent Authority Against Corruption has begun investigating the operations of four iron-

ore firms following a suit against them for negligence to the environment.

The IAAC is investigating Chamin Alt, Selenge Mining, Khunanjini and Kharanga Khuder in response

to a suit by the Association of Lawyers for the Mongolian Environment—all of whom operate in

Selenge Aimag.

Chamin Alt, which is headed by famous wrestler B. Gantogtokh and has already liquidated its

assets, has reportedly caused MNT 10.7 billion worth of damages to the environment. Also, there is

a claim that two-thirds of the gold extracted was not presented to the state, as legally required.

Source: Zuunii Medee

REPORTERS AND TV CREW LEAVE TV9

Forty journalists from the TV9 television station resigned on 6 December after a dispute with

management.

Nearly half of the network's some 80 total employees delivered their resignation notices in a move

to oppose top brass there. Journalists and producers said new executives had barred them from

running select news pieces. They said they requested new methods for supervising and different

figure heads, but that request was denied.

TV9 is owned by the currently incarcerated former President N. Enkhbayar, and was an asset under

dispute during his trial for corruption. It is also presumed to be a mouth piece for Enkhbayar's

Mongolian People's Revolutionary Party (MPRP).

Source: News.mn

CREDIT SUISSE UPGRADES MMC TO “NEUTRAL”

Credit Suisse lifted its target price for Mongolian Mining Corp. (MMC) HKD 3.3 from HKD 3 and

upgraded the stock from ―underperform‖ to ―neutral.‖

The research house decreased its earnings estimates by 64 percent and 17 percent for 2012 and

2013 to reflect MMC's disappointing realized average selling price and revised coking coal prices

forecast. However its estimated valuation will be gradually improved by USD 800 million capex

saving in 2012 to 2015, if government takes over the railway project from MMC.

Source: etnet

MONGOLIA MINING JOURNAL NAMES BEST IN THE INDUSTRY FOR 2012

Mongolia Mining Journal awarded Energy Resources LLC its highest award at this year's Mining

Journal Awards.

Ukha Khudag coal miner Energy Resources received 608 votes for the title, while J. Odjargal the

head of its board of directors, won 18 percent of the votes for the ―Man of the Year‖ nomination.

Twenty two researchers, scientists, businessmen, and non-government organization (NGO) workers

were nominated for the award awarded for personal achievements.

Also, Erdenet Copper received the award for most responsible mining operations, and Boroo Gold

LLC won ―Most Eco-Friendly Mine.‖ Wagner Asia Equipment LLC won ―Best Mining Equipment

Supplier.‖

The jury who selects the winners is made up of industry professional and experts in mining.

Source: News.mn

RIO TINTO AGREES TO SELL STAKE IN SOUTH AFRICAN COPPER MINE

Oyu Tolgoi investor Rio Tinto PLC and Anglo American PLC have agreed to sell their stakes in

another copper asset, South Africa's Palabora Mining, to a consortium of Chinese and domestic

companies.

Rio Tinto said it had reached a binding agreement to sell its 57.7 percent share in Palabora for USD

373 million, while Anglo American said it had agreed to sell its 16.8 percent holding in the copper

company for ZAR 893 million (USD 103 million).

―Palabora is a good business, but is no longer a natural fit within Rio Tinto's portfolio,‖ said Guy

Elliot, chief financial officer of Rio Tinto. ―Selling our stake reflects Rio Tinto's policy of continually

reviewing our portfolio to generate best value for shareholders.‖

The deal values the copper miner at RAZ 5.31 billion. Palabora produces about 80,000 tons of

refined copper a year, according to its website, and has a refinery that produces continuous cast

rod for the domestic market and cathodes for export.

Source: Financial Times

CENTERRA CONSOLIDATES OWNERSHIP OF TURKISH PROJECT

Toronto-listed gold miner Centerra Gold Inc. on Wednesday said it would buy explorer and project

developer Stratex International's remaining 30 percent interest in the Oksut gold project, located in

the Kayseri region of central Turkey, thereby securing its foothold in the Eurasian country.

Centerra, which operates the Boroo gold mine, acquired Stratex's interest in Oksut for USD 20

million in cash and a 1 percent net smelter return royalty on the project that is capped at USD 20

million. The company said closing of the transaction is conditional on the conversion of six

exploration licenses to two operation licenses, which are currently under application and are

expected before the end of the first quarter of 2013, and other customary conditions.

Centerra Gold started with 50 percent interest in the project by advancing USD 3 million to the

Centerra Gold-Stratex joint venture (JV) through to 2011 and acquired an additional 20 percent

interest with another USD 3 million. Through November, Centerra Gold has advanced USD 6.8

million for exploration work on the Oksut gold project.

―This transaction consolidates our interest in the Oksut gold project as we expect to transition the

project from exploration to development,‖ said Ian Atkinson, Centerra Gold's chief executive

officer.

Source: Proactive Investors

CANADA APPROVES BIG ENERGY INVESTMENTS BY FOREIGN STATE-OWNED FIRMS

The Canadian government last Friday approved more than USD 20 billion in investments by foreign,

government-controlled companies in its energy patch, but it slammed the door on most other

prospective deals in Canada's oil-sands development by state-owned enterprises. Mongolia played

out a similar scenario that resulted less favorably for investors last spring following a bid by a

Chinese state-owned firm for Toronto Stock Exchange and HKEx listed SouthGobi Resources Ltd.

Canada approved CNOOC Ltd.'s USD 15.1 billion takeover bid for oil sands operator Nexen Inc.

clearing a major hurdle for the Beijing-based energy giant in completing what would be China Inc.'s

biggest foreign acquisition. It is also the most ambitious bid by a foreign government-owned entity

so far to enter North America's booming energy industry. The deal, which has already won

shareholder approval, still needs U.S. and British government sign offs, since Nexen has significant

assets in those jurisdictions. But Friday's decision was CNOOC‘s biggest—and most closely watched—

obstacle.

―The government of Canada has determined that foreign-state control of oil sands development has

reached the point at which further such [deals] would not be of net benefit to Canada,‖ Prime

Minister Stephen Harper said in a statement. Harper said the deal approvals should not be seen as

the ―beginning ―of a trend, but the ―end.‖

With small capital markets of its own, Canada has long relied on foreign investment to help it

develop its mineral and oil reserves. The government says it needs some CAD 650 billion (USD 657.5

billion) over a 10-year period to develop its energy resources. Given that dependence, the decision

to effectively block new foreign-government investment in the oil-sand sector raised alarm among

some investors.

The government also released new general guidelines for foreign investment. Harper said they are

an attempt to provide clarity, but also set conditions on investments by state-owned enterprises.

Under the revisions, they will be expected to adhere to Canadian standards of corporate

governance—from commitments to transparency to the appointment of independent board of

directors.

―When we say that Canada is open for business, we do not mean that Canada is for sale to foreign

governments,‖ Harper said.

Source: Wall Street Journal

ECONOMY

CHINGGIS BONDS REBOUND

Liquidity dried up as investors paused to assess the market ahead of the nonfarm payrolls report in

the United States last week on Friday. Traders at both high-yield and high-grade desks reported a

very quiet session with hardly any quotes even making the screens.

In spite of the lack of activity and the downbeat mood, Mongolia's bonds rebounded with the 2018s

quoted at 97.50/98.50 and the 2022s around 98.15/99.15. This was a steep recovery from levels as

low as 93.50 and 94.50 for the two bonds, respectively. The recently priced bonds had come under

pressure the day before—which also happened to be their settlement date—amid reports that the

Mongolia People's Revolutionary Party (MPRP) was quitting the governing coalition, a move that

could cause the government to fail.

Following the news, fast money was said to have sold their bonds. However, institutional investors

were picking them up that day, which boosted prices by as much as USD 5. The bonds, though, were

still below re-offer at 99.996 and par and have not recovered to the 101.50/102.00 which they

reached shortly after being priced.

Source: Reuters

MONGOLIAN BONDS: IT‟S LAWS, NOT LAWMAKERS, THAT MATTER, SAYS MOODY‟S

―When the Mongolian People's Revolutionary Party (MPRP) threatened to quit the country's ruling

coalition last week, the bond market panicked. Mongolian government bonds—which are brand new

to the market—sank as much as 8 percent.

It may have been a rude awakening for investors and the government alike, but a report released

from rating agency Moody Investor's Services argues that such local politics is not the real problem

facing the country. Mongolia's bond issue was a real milestone for the fast-growing resource-rich

nation wedged between China and Russia. It successfully raised USD 1.5 billion in its first ever foray

into the bond markets, and enjoyed 10 times over subscription. It also marked a positive signal

after new laws had torpedoed investor sentiment over the past year while the equity market has

slumped.

As Moody's explained, legal issues remain the real concern: ―Even if Mongolia's governing coalition

breaks up, the implications are likely not material to the country's credit story. The majority

Democratic Party in the coalition would gain in relative political strength; it is already close to

having a governing majority. We expect the parliament would continue to function.‖

The real question is whether progress could be made on the new Foreign Investment law and the

Fiscal Stability law, which Moody's said are ―essential.‖

―The investment law is needed to finance the infrastructure projects required to develop the

country's mineral resources, and to attract foreign capital to compensate for its thin domestic

capital markets and inadequate domestic savings. The Financial Stability law is necessary to ensure

greater macroeconomic stability and to reign in profligate spending during boom times and to build

up a fiscal cushion for lean times in the commodity cycle.‖

So investors should be paying attention to what happens in Parliament—but it is the legislative

agenda, and not the makeup of the cabinet, that will determine whether Mongolia's economic

dream can get going again.

Source: Financial Times

THE ECONOMIC CHALLENGE

Mongolia has repeatedly insisted that its doors are open for business to all countries with a genuine

interest in participating in the country's sustainable growth. How much of this policy is lip service

though and how fair is the bidding process for prospective foreign investors?

Mongolia's long-awaited initial public offering (IPO) for its lucrative coal mine in Tavan Tolgoi will

have to wait at least until 2013. The uncertainty over the Western Tsankhi's investors has created a

five-chair shuffle in which East Asia's largest power brokers are competing to have a lasting

economic footprint in Mongolia.

The under-performing price of coal in the financial markets is pushing the IPO deeper into 2013.

The Tavan Tolgoi IPO, which is expected to raise USD 3 billion, has also been pushed back due to

legal constraints involved in listing Tavan in three international markets—London, Hong Kong, and

Ulaanbaatar. Reports of the delay come amid frustrations with Hong Kong's increasingly complicated

legal framework and restrictions.

Meanwhile Elbegdorj's foreign economic policy seems to be increasingly about diversity, both

thematically and regionally in order to shake Mongolia's reputation as a ―mineral state in Asia.‖

―The Mongolian economy mostly has one color, and we would like to make this a rainbow economy.

I have a message to our investors—don't see Mongolia as only mines. There are great opportunities

in investing in other sectors,‖ said Elbegdorj to local media.

However, Mongolia still has a considerable amount of work to do before it assuages Western

concerns about corruption and pegged contracts. This seems to be a priority for Elbegdorj which

stands in stark contrast to the corrupt kleptocrats that populate much of Central Asia. Curtailing

corruption has at times proved controversial, as did the arrest of former President N. Enkhbayar.

A smooth IPO of Tavan Tolgoi would demonstrate to investors in the West and elsewhere that

Mongolia is a safe and profitable place to do business. Government officials point to 2013 as a new

time frame for the IPO—but it is best to wait for the ink to dry first.

Source: The Diplomat

INFLATION 14.4 PERCENT YEAR-OVER-YEAR NATIONWIDE AT END OF NOVEMBER

November inflation increased by 0.2 percent from the month before and totaled 14.4 percent

nationwide compared with the same time a year ago.

Inflation since the start of the year has risen 13.1 percent. One factor contributing to inflation is

the price of clothes and shoes, which grew 1.5 percent. At the close of November this year, total

money in circulation was some MNT 7 trillion, a 15 percent increase from the same period last year.

Cash turnover grew by 6.4 percent to MNT 722.1 billion

Also, Mongolia's budget deficit grew to MNT 706.7 billion on 1 December. Revenue totaled MNT 4.3

trillion compared with expenses of MNT 5.03 trillion.

Source: Zuunii Medee

ADB TO PROVIDE USD 720 MILLION FOR DEVELOPMENT OF UB'S GER DISTRICTS

Asian Development Bank (ADB) has agreed to provide USD 720 million to finance the construction of

heating and water sewage infrastructure for Ulaanbaatar's ger districts.

ADB signed a memorandum with the City of Ulaanbaatar for the agreement for the project to be

spread out through the course of the decade. The city's development plans divide the ger districts

into eight sections. The first phase of development to take place in Bayankhoshuu District and in

119 hectares of land comprising Doloon Buudal and Chingeltei Districts. Planning will cost USD 1.5

million, which will be provided by the Japanese Fund for Poverty Reduction.

Development will begin sometime around June 2013 and is planned for completion in 2020.

Source: Unuudur

COAL AND IRON ORE EXPORTS SEE GROWTH WHILE GOLD AND COPPER DIP

Despite the slowed demand from China, Mongolia has seen exports of coal and iron ore grow in

2012.

This year Mongolia exported 18.8 million tons in the first three quarters compared with 18.4 million

tons in the same period last year. Total coal exports amounted to 24 million tons last year. Iron ore

output and sales, too, grew abroad, with exports climbing by some 377,000 tons to a total of some

5.74 million tons. Output from Mongolia iron ore mine's grew by 30 percent to 7.16 tons compared

with 5.49 last year.

Gold and copper exports, however, are on the decline with Mongolia exporting 2.3 million tons this

year compared with 3.2 million tons last year. Experts said gold output grew to 5.5 million tons

compared with 5.4 million tons in the year-ago period. Mongolia saw copper exports fall to 524,000

tons from 544,000 tons last year.

Source: News.mn

MOBILE TELEPHONY RINGS CHANGE

The mobile telephony market in Mongolia is fast maturing, with expanding 2G and 3G coverage set

to drive up connections and penetration surpassing 100 percent by the end of the year.

Mongolia is forecasted to have 3.1 million mobile connections by 2015, mirroring an expected rise in

penetration rates from 30 percent in 2006 to 117 percent in 2012. Its forecasts were supported by

market leader MobiCom Corp.'s announcement in September that it had connected 359 urban

centers through its GSM network, with coverage extended to Undurkhangai Soum, Uvs Aimag in the

far west.

Although the upswing in Internet access through mobiles is expected to put data pricing in the

spotlight, Mongolia's charges have proved to be competitive. One gigabyte of computer-based

mobile-broadband access for a one-month period currently costs prepaid customers an average of

just USD 10.40, which is one of the most attractive deals in the region. Pricing is, however, likely to

be scrutinized more closely as 3G coverage increases and 4G plans, touted by MobiCom, take shape.

An estimated 49 towns were covered by 3G in 2012, up from 31 in 2010. Unitel launched a 3G

network in 2009, with Mobicom introducing 3.5 G in the same year.

―Traditional voice and message services are changing and margins are getting lower, so future

revenues life in mobile broadband services such as IPTV, high-speed mobile Internet, voice over

Internet protocol, contents and applications,‖ D. Bolor, the chief executive officer of Skytel, said.

―Within the next few years, we expect to start rolling out 4G or long-term evolution (LTE)

technologies.‖

Critics say that forthcoming restrictions on foreign investment into the industry, such as the new

law to come into effect in May requiring new foreign telecoms operators and investors to obtain

parliamentary approval if foreign ownership is greater than 49 percent could have a negative

impact on further expansion. Analysts will also continue to highlight the need for the government to

put measures in place aimed at encouraging greater private sector participation in the

marketplace. Only then is this sector's contribution to growth likely to significantly increase.

Source: Oxford Business Group

UB TURNS TO BUSES TO RESOLVE TRAFFIC ISSUES

On the streets of Ulaanbaatar, a people renowned for their horse-riding skills have to contend every

day with ever more Hummers, Land Cruisers and Range Rovers. But now the authorities hope to

alleviate the gridlock by spending more than $200 million on a bus rapid transit system (BRT), in the

hope that commuters can be tempted out of their vehicles.

The hulking cars filling the streets are a symptom of the country's economic rise as it caches in on

its vast reserves of coal, copper and gold. Now Ulaanbaatar has more than 210,000 registered

vehicles almost quadruple the number in 2006.

Many Ulaanbaatar denizens prefer to walk in the city center, as taxis and buses get snarled in

traffic, But for businessmen and women in freshly pressed suits or high heels, pedestrian progress is

not always the best option with all the dust in the air and freezing temperatures.

The Asia Development Bank is supporting the BRT project with a USD 217 million loan. Only BRT

buses will be allowed to use the 14 kilometers of dedicated lanes running down the center of the

city's main north-south corridor, so they will not get jammed in the usual stream of cars, trucks,

and local buses. Work on the first section is due to start in spring and later phases will see the

system expand to 64.5 kilometers.

―In terms of operating costs, BRT is cheaper than rail systems and can be built in a small number of

years. Constructing a rail system would take a decade or more,‖ and coss at least 20 times as much,

said Shane Rosenthal, ADB's deputy country director.

In the meantime, Mayor E. Bat-Uul has tried to control the traffic problem by restricting vehicles

based on their license plate numbers. Since September, cars with plates ending in one and five have

been banned on Mondays, two and six on Tuesdays, and so on.

Source: Asia One

COAL PRICES TO RISE ON INCREASED CHINESE, U.S. DEMAND

Rising coal prices are restored profitability to high-cost Australian mines that were making a loss

due to an oversupplied global market earlier this year, and prices are set to rise further in 2013,

Deutsche Bank said on Friday. Coal is currently Mongolia's top export, with most of that sent to

China.

Healthy coal exports from major producers such as Australia, Indonesia, South Africa and Colombia

have been met with poor demand in key markets such as Europe and China. This caused a decline in

coal prices this year that led expensive mines to produce at a loss, but prices have been recovering

since the end of the summer.

―This rise in spot prices since October will have restored profitability to marginal Australian mines,

relieving the pressure on producers to moderate short-term volumes, and improving the outlook for

the March contract negotiations,‖ Deutsche Bank said in a research note.

Deutsche Bank said that high Chinese coal inventories and mines returning to production would be

headwinds for further prices rises in the short-term, but added that it expected coal prices to rise

over the course of next year.

―We believe that fundamental drivers will improve over the course of 2013 as U.S. gas prices

stabilize at a higher level and Chinese economic activity accelerates towards the trend rate of

growth in the second half of the year.‖

A sharp drop in U.S. gas prices on the back of the North America shale gas production boom has

made natural gas more attractive for power generators in the U.S., leading American miners to

export their coal to European users, adding to an already oversupplied market. But Deutsche Bank

said that higher gas demand in the United States would push American gas prices up, leading to a

reduction of U.S. coal exports, while Chinese demand for coal imports would rise, further

supporting coal prices.

Source: Reuters

ASIAN CITIES‟ AIR QUALITY GETTING WORSE, EXPERTS WARN

Air pollution has worsened markedly in Asian cities such as Ulaanbaatar in recent years and presents

a growing threat to human health, according to experts at a conference that began on Wednesday.

Clean Air Asia, a regional network on air-quality management, aggregated data from more than 300

cities in 16 Asian countries and found that levels of fine particulate matter—a key pollutant in terms

of its impact on human health—were below targets recommended by the World Health Organization

(WHO) in just 16 cities. Pollution levels in 70 percent of the cities, mostly in fast-growing, less

developed countries such as China, India, Bangladesh and Mongolia, exceed even the most lenient

of several targets recommended by the WHO.

―The economic rebound in Asia following the global economic crisis of 2008 has accelerated sales of

both passenger and freight vehicles as well as power generation,‖ said Sophie Punte, Clean Air

Asia's executive director in a statement. This ―is putting pressure on urban air quality in the

region,‖ she added.

The number of people living in cities in developing Asian nations is expected to swell by 1.1 billion

over the next 20 years, making urban air pollution a particularly relevant issue for the region. A

study by the WHO published in 2008 estimated that outdoor air pollution caused 1.3 million

premature deaths worldwide per year, 800,000 of them in Asia.

Similarly, a report by the Organization for Economic Cooperation and Development this year warned

that air pollution could become the biggest environmental cause of premature death by 2050 if

action is not taken to improve air quality. The number of premature deaths from exposure to

particulate matter is projected to reach 3.6 million a year globally, by then, with most of the

deaths occurring in China and India, the report said.

Source: New York Times

POLITICS

PRESIDENT CALLS FOR MORE ACCOUNTABILITY FOLLOWING BOND OFFERING

President Ts. Elbegdorj gave advice on the use of the money earned from the so-called ―Chinggis

Bonds,‖ adding that government officials will have to think more carefully about the declarations

and statements they make.

The government raised USD 1.5 billion from its international debt offering, which is equal to about

a fifth of the country's economy. On 6 December, following news of the successful debt sale,

President Ts. Elbegdorj held a meeting with authorities of the Mongolian government where he

explained that sending the wrong message to investors could cost the country a great deal.

The president warned members of Parliament against making rash, poorly thought out statements

to draw out attention in Mongolia because of the fallout from international spectators.

―Statements or actions intended for political populism are not acceptable in this country anymore,‖

said Elbegdorj. ―False or inaccurate statements voiced or released by government officials will cost

the country millions. When a member of Parliament makes an irresponsible statement, it could

easily cost our nation USD 10 million in debt repayment for bonds.‖

The president also went further to admonish Parliament against squandering the money earned

from the debt offering. He presented an official list of recommendations from the National Security

Council (NSC) for its proper spending, the monitoring of its use and regulating the repayment

structure. The recommendations primarily focused on using the funds to finance large-scale

infrastructure projects able to generate future returns.

Elbegdorj gave special emphasis against using that money on social welfare spending.

Source: President of Mongolia

DP REQUESTS SOLIDARITY FROM MPRP

The Democratic Party (DP) stated following a party meeting on Monday that the Mongolian People's

Revolutionary Party (MPRP) would be invited back into the fold of the coalition government

following its decision last week to pull out.

―The Justice Coalition was invited to the coalition only for solidarity. And the term is still

available,‖ said DP leader D. Erdenbat.

Parliament had already been facing delays due to protest by the Mongolian People's Party (MPP)

after five new members of Parliament were sworn in. Two of those members were of the DP and

were awarded those seats that were originally declared for the MPP by the General Election

Committee (GEC) after the election body found the MPP candidates had violated the Law on

Elections.

―We strongly insist that the MPP respect the law,‖ said Erdenbat. ―Parliament should follow the

decision made by the General Election Committee, who submitted its decision to have the five new

MPs take their oaths.‖

The DP also announced they would consider the amendments submitted by President Ts. Elbegdorj

on the Law of Arrangements for Parliament and the Law on Parliament.

Source: News.mn

MNDP HAS NO PLANS TO EXIT COALITION

The Mongolian National Democratic Party (MNDP), who makes up the Justice Coalition alongside the

Mongolian People's Revolutionary Party (MPRP), has decided it would not exit the ruling government

coalition with the MPRP.

―The MNDP believes it is not appropriate to withdraw from the coalition government. For the MPRP,

the secretary general is in talks about the current political situation,‖ said MNDP MP N. Battsereg.

―Their decision will depend on how the political situation turns out.

Source: News.mn

DP OFFICIALS SAY MPRP CANNOT DISSOLVE GOVERNMENT

Democratic Party (DP) members have clarified that the Mongolian People's Revolutionary Party

(MPRP) would not be able to dissolve the governing coalition in Parliament alone.

Ts. Oyundari, acting secretary of the DP, and party Secretary D. Ankhbayar, said the agreement

developed when the MPRP and Mongolian National Democratic Party (MPDP) first established their

Justice Coalition mentioned nothing on how a member could exit. However, a government could

only dissolve if over half of all members agree to resign.

As the MPRP only has three sitting ministers, it would not be enough to dissolve the government.

Source: Undesnii Shuudan

COULD THE MPP AND MPRP REUNITE?

The turmoil coming out of Parliament has many wondering if changes to party alliances could be

made.

Daily newspaper Unuudur compared the Mongolian Revolutionary Party (MPRP) and Mongolian

National Democratic Party's (MNDP's) pact in the Justice Coalition to that of a husband and wife—

united not only by affection but also by a marriage certificate. Talk of a break up of the coalition,

which holds 11 members in parliament and four ministers in the Cabinet, surfaced after the MPRP

announced its intention to exit the governing coalition.

Some have suggested that the MPRP could reunite with the Mongolian People's Party (MPP). The

MPRP is, after all, an offshoot of the MPP. Enkhbayar left the MPP to form a new party because he

felt the party no longer stood for its original values. That would leave the MNDP to ally itself with

the Democratic Party (DP). The MPP would have the most to gain from such a scenario, as the MPP

had weakened from the original breakup, and the MNDP is a relatively minor player.

Former Prime Minister S. Batbold warned a few weeks ago that the DP would be unstoppable unless

the MPP and MPRP joined forces. Then, yesterday, Enkhbayar told newspaper Uls Toriin Toim he

would approve of such.

Few believe the controversy stirred up by the MPRP will result in dissolution of government.

However, it does demonstrate how fragile and polarized the ruling coalition is.

Source: MICC

DRAFT LAW TO CUT RED TAPE IN IMPORT-EXPORT

The Cabinet of Ministries will submit a draft law that would reduce bureaucracy in the customs

process.

Mongolia requires business to process 11 different documents for the import of goods, while exports

require 10 documents and 50 days of wait. Moreover, business must pay USD 2,555 per container for

export.

The draft law would expedite the process. For example, it would bring down the number of

documents for export to four.

Source: Zuunii Medee

MPS FORM ANTI-NUCLEAR ENERGY SECT

A multi-party sect has formed within Parliament to oppose the exploration and extraction of

uranium in Mongolia.

MPs. A. Bakei, Kh. Bolorchuluun, S. Byambastogt, and S. Ganbaatar formed the group with support

from Minister of Culture, Sports, and Tourism Ts. Oyungerel. They have declared they will work in

favor of safety and health in Mongolia while opposing any activities connected to nuclear energy.

The sect will also work toward introducing stricter regulations on uranium exploration and

mandating advanced payments for remediation from foreign companies. Also, only Parliament

would have the authority to allow uranium exploration.

N. Tegshbayar, chief of the Atomic Energy Agency (AEA), submitted the request.

Source: Udriin Sonin

PARLIAMENT GUARANTEES SAVINGS DEPOSITS OF UP TO MNT 20 MILLION FOR A YEAR

Parliament has approved the amendments to the Law on Savings.

Commercial banks will be responsible for any savings exceeding the government guarantee of MNT

20 million for every depositor for one year.

Having failed to establish a structure for a permanent savings guarantee, the amendment provides

an extension to existing, yet temporary, conditions.

Source: Udriin Sonin

MONGOLIA MAKES STRONG COMEBACK ON TRANSPARENCY INTERNATIONAL'S CORRUPTION LIST

Mongolia leaped 80 places on Transparency International's Corruption Perception Index this year.

The nation moved to 94th place from 174th last year. Although last year was seen as a major fall

from its ranking in 2010, this year Mongolia flew past its positions two years ago when it stood at

120th. President Ts. Elbegdorj, who has spent much of his time as president combating corruption

and introducing strong mechanisms for law and order, said Mongolia can be recognized worldwide

for its achievements in introducing such rapid change.

Mongolia ranks among India, Moldova, and Senegal, as well as Greece, which ranked the lowest

among European Union member nations. China ranked at 80th place, slipping from 75th in 2011,

and Russia stands at 133rd place with Kazakhstan nearby. The top performers on the list include

New Zealand, Singapore, and Finland.

Source: Business Mongolia

AMBASSADOR APPOINTMENTS CONFIRMED

Parliament approved a series of ambassador appointments last week on Friday.

For the Middle East and Central Asia O. Dambiinaym received 89.6 percent confirmation as

ambassador to Afghanistan, S. Enkhbat got 79.2 percent for Kuwait, and J. Sukhee got 87.8 percent

for Kazakhstan. For Asia B. Ganbold received 91.5 percent for South Korea. For Europe and North

America, B. Batkhishig received 91.8 percent confirmation for ambassadorship to Turkey, Kh.

Davaadorj got 91.8 percent for Belgium, G. Batjargal got 87.8 percent for Austria, and B. Altangerel

got 87.8 percent for the United States.

Source: News.mn

MONGOLIA, VIETNAM ACKNOWLEDGE MARKET ECONOMY STATUS

Vietnam and Mongolia have officially recognized their market economy status in a bid to enhance

the bilateral tradition friendship and cooperation.

During his reception for the Mongolian ambassador to Vietnam, D. Enkhbat, deputy foreign minister

Bui Thanh Son said the relations between the two countries have been flourishing over the past 60

years. Son said the mutual recognition is part of the effort to implement the Vietnam-Mongolia

Friendship and Cooperation Treaty. He asked the two sides to further diversify cooperation,

contributing to the maintenance of peace, security, stability, and development in the region and

the world.

The Mongolian diplomat affirmed that his country always attaches importance to the multi-faceted

cooperation with Vietnam. Both sides agreed the recognition would help boost the two-way

potential from the current USD 20 million.

Source: Tuoitre News

MONGOLIA, JAPAN MAKE HEADWAY IN CARBON CREDIT TRADE

Japan has agreed to cooperate with Mongolia on carbon credit trade.

Mongolia and Japan signed the Joint Statement on Environmental Cooperation, Climate Change and

the Joint Crediting Mechanism on 6 December during the 18th Session of the Conference of the

Parties (COP18) of the United Nations Framework Convention on Climate Change (UNFCCC) in Doha,

Qatar. During a talk between the government of Mongolia and Japan, Hiroyuki Nagahama, Japan's

Minister of Environment signed the agreement with S. Oyun, Mongolia's Minister of Environment and

Green Development.

Source: Ministry of Environment, Trade, and Industry of Japan

POOR NOT YET BENEFITING FROM GROWTH, SAYS U.N. INDEPENDENT EXPERT

While the Mongolian economy has experienced continued growth, this has not benefited the

country's poor, a U.N independent expert warned, urging the government to adopt poverty

reduction strategies based on human rights approaches.

―While some parts of the country are being transformed, poverty remains very high and is becoming

entrenched not only in rural areas but also in urban centers as the income gap widens and

inequality increases,‖ said the special rapporteur on extreme poverty and human rights, Magdalena

Sepúlveda, following a visit. She added, ―The fact that poverty levels remains high and there are

increasing inequalities is a clear demonstration that the benefits of economic growth have not

trickled down to the poor.‖

Sepúlveda expressed concern for groups vulnerable to poverty and social exclusion. She urged the

government to immediately address the critical needs of the poorest and most marginalized,

ensuring that their rights are protected and they are provided with adequate resources and access

to basic services. She also recommended accountability mechanisms to monitor the implementation

and progress of poverty reduction strategies.

―Mongolia must foresee the necessary budgetary implications and ensure sustainability in the long

term and implement the strategy with some cross-sectoral coordination through the leadership of a

designated ministry,‖ she said. ―Those living in poverty in Mongolia can wait no longer.

Source: United Nations

ENKHBAYAR SPEAKS FROM JAIL

Confined to a well-appointed suite in a dreary Soviet-era hospital, the disgraced, yet influential ex-

president of Mongolia is still roiling politics despite his isolation.

His four-year jail sentence was reduced to two and a half years by Mongolia's Supreme Court, but

now he was in the hospital for a hunger strike. Enkhbayar's Mongolian People's Revolutionary Party

(MPRP) threatened last week to withdraw from the ruling coalition, in part to protest Enkhbayar's

imprisonment. The news of the threatened defection sent Mongolia's newly issued sovereign bonds

tumbling in value. They later recovered, as it appeared the ruling Mongolian Democratic Party (DP)

would hold onto power despite the potential defection.

Enkhbayar called himself a political prisoner and says the majority of Mongolians want him freed.

Yet since his arrest, there has been little outcry among the population, with no mass protests or

demonstrations. Enkhbayar said it's natural to suspect everyone in high levels of government and

business in Mongolia.

―Because the whole country is corrupt, the first person suspected is the one having the highest

official post... It's very, very real that I should be suspected of being corrupt because I was the

president.‖

He said President Ts. Elbegdorj has used his influence over the courts and prosecutors to keep

Enkhbayar out of the political arena leading up to the 2013 presidential election in spring. He

predicted Elbegdorj would pardon him after the next election. If he was released, he said, he would

press for Mongolia to renegotiate the Oyu Tolgoi copper-gold project. He compared the agreement,

signed in 2009, to the 70 years of Soviet domination Mongolia endured until 1990.

Asked whether Mongolia's economy would be better served to respect the Rio Tinto PLC agreement,

he responded: ―The Soviets were saying the same words... 'The October Revolution of 1917

happened, you cannot do anything about this; it's done.‖

He later added: "We have to find the right balance between democracy and capitalism. Capitalism

means private entrepreneurs trying to get as much profit as possible. But democracy sometimes

causes problems to them because people want changes. Let's try to find this right balance."

Source: Wall Street Journal

IN MONGOLIA, A BACK DOOR TO THE “HERMIT KINGDOM”

Mongolia has cultivated perhaps the warmest relationship of any country with the notorious ―Hermit

Kingdom‖.

Intelligence and diplomatic officials see the Mongolian connection as a source of information on the

North's activities, as well as a potential conduit for dialogue with the unpredictable regime in

Pyongyang. With the North again rattling swords—a long-range rocket now stands ready for launch—

opportunities to sound out senior officials are rare. At the moment, for instance, North Korea

watchers are reading tea leafs, trying to figure out whether the longtime defense minister, Marshal

Kim Johng Gak, has been replaced by General Kim Kyok Sik, who is reputed to have closer ties to

the ruling Kim Jong Un.

―This is exactly the kind of stuff that drives me crazy,‖ a Western diplomat in Seoul said, requesting

anonymity. Kim Kyok Sik ―commanded the units that launched the unprovoked artillery attack on

the South that killed a bunch of people in 2010.‖

―Working through China is very difficult,‖ the diplomat said. ―But the Mongolians might be able to

just make a phone call.‖

Mongolia also has strong ties with two energy-rich Central Asian states known for their standoffish

attitude, Uzbekistan and Turkmenistan. And it has kept strong ties with China, its largest trading

partner, in spite of open criticism in Mongolia's press about the suppression of their ethnic cousins

in China's province of Inner Mongolia. But it is the relationship with Pyongyang that stands out most

starkly.

During the Korean War, when Mongolia was effectively a communist satellite caught between China

and Russia, Mongolia sent 200,000 heads of cattle to help feed the North's population. The tacit

alliance ended in 1990, when Mongolia recognized South Korea and embraced market reforms and

democracy. But after some rocky times later that decade, ties have flourished again.

To date, the Mongolian government has held its ground against sending back defectors who use

Mongolia as a gateway to South Korea, winning praise from human rights groups. But land-locked

Mongolia also has serious economic interests in developing the so-called Rahon Special Economic

Zone, a port development at the northern tip of North Korea that offers Mongolia a way to export

manufactured goods via the trans-Siberian railroad, bypassing Chinese and Russian ports.

There is also a controversial arrangement whereby some 5,000 North Koreans work in Mongolia's

booming mines and factories. Many work under miserable conditions, and are likely forced to turn

their pay over to Pyongyang—in effect, allowing North Korea to raise hard currency otherwise

banned under sanctions. The fact that neither the United States, South Korea, nor Japan has made

an issue of these workers suggests there are good reasons not to upset Mongolia's ties with the

North. But do not oversell the Mongolia-North Korea friendship, experts say.

―These [North Korean] ties are based neither on common interests nor shared values, but

exclusively on the psychological imperative to defend maximum sovereignty and maintain room for

maneuver,‖ wrote Munkh-Ochir Dorjjugder, director of Mongolia's Institute for Defense Studies, in a

paper for the Brookings Institution. ―The last thing the Mongolian government is willing to do is to

act, once again, as the ‗mouthpiece‘ and promoter of ideology of any neighbor, real-world or

virtual.‖

Source: Global Post

LEARNING FROM AUSTRALIA HOW TO MAKE MOST OF MINING BOOM

As it prepares to face the corporate hordes keen for its minerals, Mongolian government officials

have headed for Australia to learn how to make the most of it.

Griffith University in Brisbane hosted a group from Mongolia's Ministry of Finance to teach them how

best to tax mining and establish a fund for national development. Course convener Tapan Sarker

said it was a chance to work with the World Bank, International Monetary Fund and the Mongolian

government. He said Nigeria and Nauru both struggled to properly harness the mining industry

whereas the tiny island nation of Kiribati still earns 30 percent of GDP from its national fund.

―It is to train up these high-level government revenue officers who play an important role not just

in revenue collection but in making policies that can help both now and in the future.‖

Mongolia world fund director O. Khuyagtsogt said the group would learn from Australia's ―long and

rich history‖ in dealing with mine companies.

―We have a lot of attraction from foreign firms because of the natural wealth (in Mongolia),‖ Ognon

said. ―There are quite big challenges that policymakers have had—taxes on mining areas and

revenue management from the mining sector. Learning from the past experience of the Australian

government and its taxation experience in the mining sector is very important to us.

Ognon said it would not copy Australian practices directly. It was the second year Griffith has

hosted Mongolian delegates to provide policy advice.

Source: Gladstone Observer

ANNOUNCEMENTS

INTERNATIONAL MINING INVESTMENT, SERVICES AND EQUIPMENT TRADE FAIR “PDAC 2012”

MARCH 3 - 6, 2013, TORONTO, CANADA

The Business Council of Mongolia with support of the Trade Department of Canadian Embassy is now

registering Mongolian business delegation to participate to International Mining Investment, Services

and Equipment trade fair ―PDAC 2013‖ which will be organized in Toronto, Canada from March 3 to

6, 2013.

This four-day annual Convention has grown in size, stature and influence since it began in 1932 and

today is the event of choice for the world‘s mineral industry. In addition to meeting over 1,000

exhibitors and 30,000 attendees from 125 countries, it allows you the opportunity to attend

technical sessions, short courses as well as social and networking events.

The program also includes business and entertainment activities in Toronto.

Please contact at 317027, 99197985 or otgoo@bcmongolia.org, for registration and additional

information about the event.

Registration deadline is 6:00 PM, January 15, 2013.

___________________________________________

COAL MONGOLIA 2013, 21-22 FEBRUARY, SS CONVENTION CENTER

The Coal Mongolia 2013 3rd International Coal Investors Conference and Exhibition‘s main

objectives are to introduce new investment opportunities in coal exploration, production and

processing projects in Mongolia and bring in environmentally friendly, new and efficient

technologies, create lucrative partnerships. The Conference is presenting Mongolia‘s ―New

Government Position‖ on coal mining Investment policy and legal environment for the first time

since the election.

At this time, we are give you the huge opportunity to visit TWO major coal mine companies not only

in Mongolia and also international, which are ―Erdenes Tavan Tolgoi‖, state-owned coal miner and

―Ukhaa Khudag‖, the nation‘s biggest coking coal exporter.

You can find out for more information and Field trip agenda from

http://www.coalmongolia.mn/index.php/field-trip

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THIRD RISK FORUM, 26 FEBRUARY, BLUE SKY TOWER

BCM is hosting the third annual Risk Forum of Mongolia on 26 February at the Blue Sky Tower.

The forum is co-organized by BCM and Mandal Insurance. It is the most focused and informative risk

management event in Mongolia. This year, the forum will feature excellent participation of key

stakeholders of risk management and aims to become the catapult of change in Risk Management

practice of Mongolia.

For more information call 11 317 027.

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REGISTER NOW FOR MONGOLIAN MINING DIRECTORY - 2013

Mongolian Mining Directory-2013 which provides information database for mining companies,

investors, suppliers, service companies, government and non government organizations will be

published for the fourth year to commemorate the 90th anniversary of the Mongolian mining

industry. The MMD is distributed free of charge to international and domestic mining companies,

international conferences and exhibition, embassy offices in Mongolia and foreign countries to

investors.

BCM is a Supporting Organization of the MMD and welcomes Mongolian mining industry participants

who are interested in advertising their products and services in Mongolian Mining Directory-2013.

For more information please visit: www.mining.mn, www.mongolianminingdirectory.mn or call

+976-7011 5590.

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REGISTER FOR BCM‟S MINING SUPPLY CHAIN DATABASE AT NO COST

The new version of BCM‘s Mining Supply Chain Database is in use. Following the initiative of Oyu

Tolgoi LLC, the BCM has maintained the Mining Supply Chain Database since March 2009. It is an

honor to introduce you to the new version of the database which is totally upgraded as to its

content and use of information technology opportunities.

As of November 30, suppliers registered on the database totaled 1,402. In addition 20 buyers were

also registered. During October and November, 72 tender announcements were posted.

We are inviting all Mongolian mining suppliers and buyer companies to join the Mining Supply Chain

Database. Please visit here for registration.

If you have any questions regarding the database, please contact Undral at undral@bcmongolia.org

or 317027.

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“MM TODAY” on MNB-TV, Friday‟s at 19:00

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 from 19:00 to 19:10 tonight. Tune in to watch this program that reports stories from

today‘s BCM NewsWire.

BCM WEBSITES

MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

The new ‗Presentations‘ section on BCM‘s Mongolian website can be reached via bcm.mn/itgeluud.

Several presentations already posted include the World Bank‘s Mongolia Quarterly Economic

Update–June 2012 and 11 speeches from the 2nd Coaltrans Forum, held on 23 to 24 May in

Ulaanbaatar.

As a key component of BCM‘s Mongolian website, articles from the ‗News‘ section and the

government website Open-Government.mn are regularly updated.

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ENGLISH WEBSITE: 'PRESENTATIONS', 'MONGOLIA REPORTS', „MONGOLIAN BUSINESS NEWS‟,

„PHOTO GALLERY‟

On BCM‘s English website, the ―Resources‖ and ―Presentations‖ sections are available. The

following 5 presentations were added from the BCM December Monthly meeting:

•Bayarmaa A, Carbon Finance Specialist, Clean Energy LLC, Newcom Group ―Case of Salkhit wind

farm CDM project‖

•Tsendsuren Batsuuri, Head of CDM National Bureau, Climate Change Coordination Office, Ministry

of Environment and Green Development – ―Carbon Market Mechanisms: current status and

opportunities for Mongolia‖

•Adrienne Youngman, Executive Director, Mongolia Talent Network – ―Human Talent In Mongolia‖

•Jan Hansen, Senior Country Economist, Mongolia Resident Mission, ADB and Enerelt Enkhbold,

Associate Investment Officer, MNRM, ADB – ―Outlook for the Mongolian Economy―

•Efrain J Laureano, Chief of Party, Business Plus Initiative - BPI – USAID Contractor - "Supplier

Development in Mongolia‖

Please also note 25 presentations from the Mongolian Investment Summit 2012 on 30-31 October in

Hong Kong; recent postings from BCM‘s 5 November and 24 September monthly meetings; and 9

presentations from Discover Mongolia 2012.

The ―Mongolia Reports‖ section includes ―Mongolia Business Owner and CFO Survey result‖ by BDSec

JSC; ―The fiscal regime for mining - a way forward‖ by IMF Fiscal Affairs Department; ―Mongolia-a

supplement to Mining Journal‖ from Mining Journal October, 2012; ―Macro Overview‖ September,

2012 by EPCRC; ―Taxes for Expatriates in Mongolia‖ from PricewaterhouseCoopers and the ―2012

Mongolia Investment Climate Statement‖ by the Economic and Commercial Section of the U.S.

Embassy.

BCM's English website includes the ―Mongolia Business News‖ section where the Open Letter to

Parliament and Government is available for download.

BCM continuously posts news stories and analysis of relevance to Mongolia at ‗Mongolian Business

News‖ before they are all put together each week for Friday's weekly NewsWire.

The ―Photo Gallery‖ contains photos from the 5th Anniversary BCM Gala dinner on November 5.

The BCM NewsWire will continue to be issued each Friday, incorporating items already on the home

page for a consolidated account of the week‘s events.

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SOCIAL NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.

Keep up to date on the latest business deals in Mongolia and how the climate for investment is

improving each day with BCM.

Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better

business environment in Mongolia today.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events carried in

the NewsWire with the community.

Hear breaking news and announcements as they happen when you follow BCM on Twitter at

http://twitter.com/#!/bcMongolia.

We have now 781 fans on our Facebook fans page, 915 connections on LinkedIn network, and 500+

followers following us on Twitter.

Of course for news information, interviews, event photos, and announcements regarding our

organization, visit the official BCM website at www.bcmongolia.org and www.bcm.mn.

BCM WORKING GROUP MEETING

The BCM Risk Working Group met Tuesday, December 11, with 6 members attending.

Co-chair Ganzorig U, UMC Holding, moderated the session.

Meeting discussions were on the following topics:

-Risk Management Forum Finalization. /Date, Venue, Agenda, Sponsors, Collaborators/

-Some Risk analysis-why are we holding this Risk Forum.

Next meeting: On Thursday, January 17, 2012 at Mandal‘s office at 16:30PM.

Please contact: erka@bcmongolia.org.

ECONOMIC INDICATORS

INFLATION

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

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

November 30, 2012 *14.4% [source: NSOM]

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

Note: 14.2% y-o-y, Ulaanbaatar city, November 30, 2012

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

March 19, 2012 12.75% [source: Mongol Bank]

April 18, 2012 13.25% [source: Mongol bank]

CURRENCY RATES – DECEMBER 13, 2012

Currency Name Currency Rate

US dollar USD 1,394.66

Euro EUR 1,825.19

Japanese yen JPY 16.89

British pound GBP 2,250.84

Hong Kong dollar HKD 180.45

Chinese Yuan CNY 223.63

Russian Ruble RUB 45.53

South Korean won KRW 1.30

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.