BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmmongolia.org info@bcmongolia.org

Issue 102, January 22 2010 1

NEWS HIGHLIGHTS:

Business: PM wants new companies based on state owned property;

Open meeting discusses State plan to sell its shares in some companies;

Khan Resources welcomes lifting of mining license suspension;

Ivanhoe marks five years on New York Stock Exchange by ringing opening bell;

Friedland kills rumor he aims to sell his stake in Ivanhoe, blasts Dow Jones;

Voyager Resources acquires gold-copper property in Mongolia;

Unitel, Alcatel-Lucent and RIM launch the BlackBerry Solution in Mongolia;

Khan Bank granting new Employment Support Fund loans;

Australian exploration juniors eyeing Mongolia;

Meritus Minerals acquires Troy Resources‟ Mongolian assets;

Fifth US-Mongolia Business Forum draws delegates;

Canadian Embassy to hold seminar on corporate social responsibility;

Business leader calls on national companies to come together.

Economy: The state of the economy 2009;

Investors feel “inspired” about Mongolia, says analyst;

PM regrets Mongolia cannot invest in Tavan Tolgoi all by itself;

Ex-President Ochirbat wants investors to take more responsibility;

Investors bring not just dollars, but opportunities, too:

Marginal increase in total outstanding loans;

US Government supports up to USD25 million in SME loans;

Germany pledges help for Mongolian agriculture;

USD25-million Hungarian soft loan for vaccine plant:

Next week‟s meeting on Tianjin likely to reach decisions;

63% of those insured work outside Government;

Central Bank clarifies “easy” gold sale procedures;

City to raise money from public to implement large projects;

DP fears budget stability law could stymie development;

New website for capital market in Mongolia;

Copper market showed 132,000-ton surplus in October, reports study group;

Zambia's copper earnings boost trade surplus;

China beats annual growth target, points to tighter policy;

IMF chief urges nations to keep stimulus plans;

GFMS predicts new gold highs in 2010, warns of 'vulnerability';

China Inc.'s global growing pains;

A China that says "no" casts economic shadows.

Politics: Russia to invest USD3 billion on railway to “assert position on Tavan Tolgoi”;

“Great debt” settled, not investment loan, says Russian ambassador;

MPs question rejection of MCC grant to UB Railway;

Foreign Minister appeals for international help;

Red Cross asks for USD147,000 to help dzud-hit herders;

UN hails Mongolia's death penalty moratorium;

DP wants change in rules for senior appointments;

MPRP group supports judicial reforms with a „but‟;

MPs must place national interests ahead of political gains;

MP cites “reliable source” predicting water famine in Ulaanbaatar;

Mongolia joins forum for increased ties between East Asia and Latin America;

Calls everywhere inside the country now cost the same;

Number of students falls;

Chinese websites lay claim to Moriin Khuur;

Mongolian Altai Inventory Project completed after 18 field seasons.

MEETING NOTICE TO BCM MEMBERS

The next BCM monthly meeting for Members will be Monday, January 25, 2010 at 5 PM at the Open Society Forum. Our bilingual meeting will feature three presentations, by U.S. Ambassador Jonathan Addleton, Newcom Group CEO B. Bold, and National Development and Innovation Committee Chairman Ch. Khashchuluun. Dr. Addleton recently returned to Mongolia to assume new duties and will make his first address to BCM members with an update of U.S. Embassy activities. Mr. Bold was recently appointed to this key position after 9 years with J.P. Morgan in New York and London. He will give an overview of the upgrade of the human infrastructure at this trend-setting Mongolian-owned investment holding company. Mr.Ch. Khashchuluun‟s presentation will be on key projects with which NDIC is involved, including the founding of a National Development Bank and the enhancement of the Mongolian Stock Exchange. An update on the work of BCM‟s Capital Markets Working Group will be provided by its Chairman, Mr. Mandar Jayawant. We will again conclude the business part of the meeting by asking BCM members in the audience to briefly comment on specific problems, solutions, risks, opportunities and/or strategies affecting their businesses. BCM members can learn from one another by sharing good news and bad. Teleconferencing will again be available for Members not able to attend. The call number is (1-218) 936-7979, access code 771358 to be connected. The cost will be only that of the long distance call to the above U.S. number.

BUSINESS PM WANTS NEW COMPANIES BASED ON STATE OWNED PROPERTY The proposal submitted last week by Prime Minister S.Batbold to the Speaker for discussion and approval by Parliament mentions several measures to be adopted when state owned projects and properties are privatized this year. Among them is one to set up a Mongol Erdenes LLC, based on the Mongolian ownership of Oyu Tolgoi and other strategic deposits and of the joint ventures with Russia in Erdenet and Mongolrostsvemet. Shares in this new company will be listed at both domestic and foreign capital markets. Another company will be established, based on the Mongolian ownership of uranium deposits. The shares of this will also be sold inside and outside Mongolia. A similar practice will be followed in the case of the proposed Mongol Infrastructure LLC, to be based on the planned railways and strategic roads. Baganuur JSC reserves will be evaluated according to international standards and then 24% of its state owned shares will be sold at foreign markets. The new capital will be used to upgrade the dated technology and equipment of the company. More shares in electricity distribution companies will be sold to expand the capital base and the resources generated will be used to upgrade technology and equipment, so that operational costs are brought down.

Source: www.business-mongolia.com

OPEN MEETING DISCUSSES STATE PLAN TO SELL ITS SHARES IN SOME COMPANIES An open conference organized by the Mongolian Stock Exchange debated the Government‟s intention this year to sell to the public some of its shares in several established factories. The

Ministry for Minerals and Energy supports the idea of having public companies in exploration and production. The most important thing is to find reliable partners. Some participants at the conference were not so sure if it is a good idea to dilute state ownership in companies of proven merit and profitability and hoped the Government would do nothing in haste. Mr. S.Avirmed said privatizing 26 percent of the state‟s 51 percent ownership of Erdenet was a very risky move. Mr. R.Sodkhuu, director of the Mongolian Stock Exchange, said raising money to develop the economy may be a new concept for Mongolians, but it has been practiced elsewhere for more than 500 years. Selling shares to the public should not be restricted to the mining sector, and public companies with some Government capital and participation will be set up in the agriculture and health sectors also.

Source: en.News.mn

KHAN RESOURCES WELCOMES LIFTING OF MINING LICENSE SUSPENSION Khan Resources has announced that the legal counsel in Mongolia representing the joint venture company Central Asia Uranium Corporation Limited (CAUC) has said that a settlement has been reached with the Mineral Resources Authority of Mongolia whereby the suspension of CAUC's mining license 237A has been lifted. The mining license is one of the two primary licenses for Khan‟s Dornod uranium deposit, and its reinstatement was a prerequisite to re-registration of the license under the Nuclear Energy Law. CAUC is a joint venture between one of Khan‟s wholly owned subsidiaries (58%), the Russian company JSC Priargunsky (21%), and the Government of Mongolia (21%). “This is very good news for the project,” commented Mr. Martin Quick, President & CEO of Khan. "We continue our efforts to reach mutually satisfactory arrangements with the Government of Mongolia."

Source: www.khanresources.com

IVANHOE MARKS FIVE YEARS ON NEW YORK STOCK EXCHANGE BY RINGING OPENING BELL Ivanhoe Mines Ltd. marked five successful years of trading on the New York Stock Exchange on Tuesday when Executive Chairman Robert Friedland rang the opening bell in a traditional ceremony signaling the start of daily trading. Mr. Friedland was joined on the bell podium by guests and executives who included Mr. S. Bayartsogt, Mongolia's Minister of Finance. Mr. Friedland said that during the past five years Ivanhoe Mines has emerged as a significant developer of mineral projects in the Asia Pacific region. "North American capital markets have played an essential role in financing the exploration and development of our projects in Mongolia. Now Mongolia has embarked on a new era of economic and social growth, based on investment in the development of Mongolia's natural resources that hold the promise of unprecedented benefits for present and future generations," he added.

Source: www.ivanhoe-mines.com

FRIEDLAND KILLS RUMOR HE AIMS TO SELL HIS STAKE IN IVANHOE, BLASTS DOW JONES The Dow Jones news agency certainly generated a storm when it published a report last week that Ivanhoe Mines founder and chairman, Mr. Robert Friedland, would be selling his 23% stake in the company - possibly to an unnamed Chinese sovereign wealth fund. Mr. Friedland immediately issued an extremely strong denial and presumably persuaded the news agency to at least publish the denial, but perhaps not to the extent he might have wished despite a statement suggesting an unqualified climbdown by Dow Jones. Mr. Friedland has an important point to make here. Dow Jones is a highly respected agency and its viewpoints carry weight in the markets, and this particular article was seen as damaging to Ivanhoe given Mr. Friedland's huge personal charisma - he still packs conference halls when he is speaking - and his important personal role in developing Ivanhoe and its flagship Oyu Tolgoi project in Mongolia. This has been hugely significant for the company. Mr. Friedland generates mixed emotions in the resource sector but is undoubtedly one of its most interesting entrepreneurs. But to publish an article suggesting an offloading of his stock to the Chinese without asking for denial or confirmation has rightly generated Mr. Friedland's ire as noted in the following damning second statement on the matter: Read more... "I accept the unqualified correction published by Dow Jones Newswires that helps set straight the public record on my ownership of shares in Ivanhoe Mines Ltd. The correction, headlined „Ivanhoe Investor Says Stake Isn't Up For Sale,‟ acknowledges that earlier Dow Jones news reports had

incorrectly stated that I was seeking to sell my 23% founder's stake in Ivanhoe Mines and also had incorrectly stated that my stake had been „shopped‟ to a Chinese sovereign-wealth fund. "The record should be perfectly clear. I have never offered my Ivanhoe Mines shares for sale to anybody, in any context - and nobody has been authorized to make such an offer on my behalf. I am not considering unsolicited offers for my Ivanhoe shares. The allegation that I would put my personal interest ahead of the company's at this important stage of our development was false and repugnant. "Following publication of the original, incorrect Dow Jones stories on January 14, and following the distribution of the denial that I was obliged to issue to attempt to counter the false information, investors rightly were questioning the motives of the unnamed, purported sources of information cited by Dow Jones and why they were being given credibility and anonymity by Dow Jones. "It bears noting that all of this damaging misinformation could have been avoided if Dow Jones had made the effort to thoroughly check the accuracy of its information before publishing its incorrect original story."

Source: Mineweb.com

VOYAGER RESOURCES ACQUIRES GOLD-COPPER PROPERTY IN MONGOLIA Voyager Resources, formerly known as Lafayette Mining, has said it is all set to acquire 100% of the Argalant Gold-Copper Project in Mongolia for USD50,000 and 2 million VOR shares. Argalant is located within a similar geological setting to the nearby Golden Hills Gold-Copper Project that hosts a combined resource of 1.1 million ounces of gold, 7.4 million ounces of silver and 323,000 tons of copper. Voyager has also acquired the option to earn up to 70% (Mandal Ovoo) and 80% (Tsagaan) in two separate gold projects in Mongolia. Due diligence has already commenced on those properties and further work is planned.

Source: Commodity Online

UNITEL, ALCATEL-LICENT AND RIM LAUNCH THE BLACKBERRY SOLUTION IN MONGOLIA Unitel Corporation, Alcatel-Lucent, and Research In Motion have announced the commercial launch of the BlackBerry® solution in Mongolia. Unitel customers will now be able to enjoy the productivity benefits of using BlackBerry smartphones to stay connected, benefiting from enhanced communications, with easy, wireless access to email, phone, calendar, web, multimedia and a range of other business and leisure applications. Unitel is offering BlackBerry Enterprise Server for corporate customers and BlackBerry Internet Service for smaller businesses and individual users. “We are pleased to offer BlackBerry smartphones and services to both corporate customers and consumers. It is an innovative and revolutionary solution that is already used by millions of people worldwide,” said Mr. G. Bold, Chief Marketing Officer for Unitel. “This agreement strengthens Alcatel-Lucent‟s already strong relationship with Unitel in helping them deliver advanced communications services to their business and consumer customers,” said Mr. Alexander Tikhonov, Head of Alcatel-Lucent‟s Business in CIS.

Source: www.alcatel-lucent.com

KHAN BANK GRANTING EMPLOYMENT SUPPORT FUND LOANS An agreement with the Labor and Welfare Service Authority has authorized Khan Bank to disburse MNT5 billion as Employment Support Fund loans in the two Ulaanbaatar districts of Baganuur and Bagakhangai. The loans will be repayable in a year and will carry 1.25% interest per month. Since 2006 Khan Bank has lent MNT10.8 billion under this program in 16 provinces, thereby helping create 15,834 jobs. The 9,000 borrowers include 4,600 unemployed individuals, 2,000 herders, 2,000 informal workers, and 250 business entities. Some 7.8% of the total borrowers have been ger district residents while 1.5% have been physically challenged.

Source: www.khanbank.com

AUSTRALIAN EXPLORATION JUNIORS EYEING MONGOLIA Eight hundred years on, Mongolia is discovering the reverse of what it was like when the legendary Chingis Khaan's hordes descended on, and plundered, most of central Asia. This time around, the hordes are descending on Mongolia, with the world's mining community looking to take advantage of the tiny state's mostly untapped mineral wealth - not to mention its convenient proximity to China's voracious resources maw. Mongolia's GDP on a purchasing power parity basis was USD9.5 billion in 2008, so the foreign money will have a huge impact.

Last month, Prime Minister S. Batbold pondered whether he should list separate companies on international markets, somewhat like China did last decade, with one holding mining assets, another the energy assets, and the third infrastructure. That last would be interesting, because Mongolia's infrastructure is largely under construction. It still sources some of its electricity requirements from Russia, and most of its oil, and has a very limited rail network once you get outside the capital. There have been confident predictions that over the next decade Mongolia will become Central Asia's version of Dubai in GDP terms. A lot of that hyperbole has, perhaps unsurprisingly, sprung from the lips of Mongolian bank chiefs, but there is little doubt the blood is up amid stories of China looking to secure sources of coking coal and Mongolia theoretically having sufficient resources to meet those demands. As such, deals are starting to emerge among Australian exploration juniors, eager to have some of the gloss of Mongolia rub off on them. Read more... Windy Knob Resources wants shareholders next month to approve getting out of gold exploration and into buying the Ovoot coking coal project, not to be confused with SouthGobi's mine. Windy has agreed to buy Ovoot by paying an initial USD500,000 and a bucket of its own stock for all the shares in Mongolian company Khurgatai Khairkhan.. There will be more deals like Windy's as local explorers seize the opportunity for small steps on to the big steppes.

Source: www.smh.com.au

MERITUS MINERALS ACQUIRES TROY RESOURCES‟ MONGOLIAN ASSETS An Australian company, Meritus Minerals, has entered into agreements with Troy Resources to acquire Troy's Mongolian assets through the purchase of all of the shares in Troy's 100% owned subsidiary Troy Mongolian Alt Resources (TMAR). TMAR's assets include an 80% shareholding in another Mongolian company Gutai Davaa LLC (GD), various technical data, a data base on gold in Mongolia and in particular the results of an extensive study carried out by the Centre for Exploration Targeting of the University of Western Australia as well as exploration equipment. Troy‟s work has identified a number of areas of particular interest for gold exploration. The consideration payable for the assets being acquired is a mixture of cash (USD500,000) to be paid in two tranches, the issuance of 7 million common shares in seven equal tranches over 30 months and the issuance of 7 million three-year share purchase warrants. In total seven areas have now been identified as containing gold in quartz veins. Two of the areas have been drilled with significant drilling on one, Toordogiin Shil Prospect.

Source: Marketwire

FIFTH US-MONGOLIA BUSINESS FORUM DRAWS DELEGATES Several dozen delegates from Mongolia met with delegates from the United States at the recent Fifth U.S.-Mongolia Business Forum in Orlando to discuss how the two countries can better work together. Several speakers urged more U.S. companies to invest in Mongolia. In a message to participants, Mr. Kh. Bekhbat, Ambassador of Mongolia to the United States, said funds generated by foreign investment in Mongolia‟s mineral resources are helping the country provide jobs, and improve its education and health care services. Mongolia would also like to see U.S. investment and participation in the agriculture sector, expected to play an increasingly important part in the economy,” Mr. Bekhbat said.

Source: MongolianBizForum

CANADIAN EMBASSY TO HOLD SEMINAR ON CORPORATE SOCIAL RESPONSIBILITY The Canadian Embassy, with the collaboration of Agriteam Canada Consulting Ltd and USAID/EPRC, is holding a seminar on Accountable Mining: modern approaches to Corporate Social Responsibility (CSR) on January 25 from 9 to 1 at the Conference Hall, Main Entrance of the Ministry of Foreign Affairs and Trade, in Ulaanbaatar. There will be simultaneous translation in English and Mongolian. The seminar will discuss CSR in the extractive industries and local enterprise development. Presentations of concrete CSR initiatives in Mongolia by Canadian and Mongolian companies will follow, to close with a panel discussion to answer questions and comments from the participants.

Source: The Canadian Embassy

BUSINESS LEADER CALLS ON NATIONAL COMPANIES TO COME TOGETHER Mr. J.Oyungerel, Vice Chairman of the Governing Board of Petrovis LLC and Board Member of Energy Resources LLC, feels that the decision on building railways has to be taken on the basis of

not whether it is technically or economically possible, but rather on how much it will help in the transport and export of Mongolia coal. Export capacity cannot be achieved without cost efficiency and he wants serious negotiations with both the Chinese and Russian Governments to start without delay work on reliable transportation routes through their territory into sea ports. He also hopes the issue to be well separated from politics. Mr. Oyungerel says Mongolia may have to work very hard to get such deals and the Government needs all help from the private sector in this. Their interests are complementary and there is no reason or time to quarrel with each other. The state also has to learn to trust the private sector. A major mining complex is being developed and the railway must be ready in time. “For the last 20 years we have been hearing that we shall have an export-driven economy. Let us see something happen on the ground,” he said. Read more... He also called upon Mongolian national companies to come together to jointly participate in such major economic projects. “This will assert our national independence and also serve the economic interests of Mongolia,” he argued. A difficulty is that Mongolian companies do not have the experience of collaboration. “The total Mongolian economy itself is smaller than many medium-size global companies but even then our business entities prefer being at loggerheads,” he said, and suggested, “We should pool together whatever money, experience and competence we have and jointly work on major projects that will define the future of the country.This is no time to compete internally among ourselves.”

Source: The Mongolian Mining Journal

ECONOMY THE STATE OF THE ECONOMY 2009 Figures released by the National Statistics Office show that the national economy continued to be in trouble during 2009. Some of these are given below. GDP Gross domestic product in 2009 totaled MNT6,055.8 billion at current prices, equivalent to MNT3,564.3 billion at 2005 constant prices. This is an increase by 0.6 percent at current prices and a decrease by 1.6 percent at 2005 constant prices against the previous year. Industrial output Total industrial output fell 3.3 percent in 2009 from 2008. The drop was 14.2 percent in the manufacturing sector and 6.2 percent in mining of metal ores. Domestic companies carried out 89.7 percent of the total construction and installation work. Unemployment The number of registered unemployed all over the country was 38,100 at the end of December, 2009, an increase of 27.7 percent over the same period the previous year. CPI The national consumer price index at the end of December 2009 rose 0.7 percent over November and 4.2 percent over December 2008. Foreign trade Mongolia‟s trade with 118 countries in 2009 led to a total turnover of USD4,033.9 million, of which exports accounted for USD1,902.6 million and imports for USD 2,131.3 million. The deficit of USD228.7 million was 3.1 times less than in 2008. The total external trade turnover itself declined 30.2 percent, exports falling 24.9 percent, and imports 34.3 percent. Budget deficit The year 2009 ended with the General Government budget showing a deficit of MNT328.6 billion, a rise of MNT 32.2 billion over the previous year. Revenue decline was 2.3 percent higher than the total expenditure decrease. The current account in the budget, however, showed a surplus of MNT173.4 billion. Tax revenue Tax revenue fell 14.6 percent during the year. Income from the windfall profits tax fell 51.1 percent, corporate income tax 18.9 percent, VAT 11.5 percent and excise taxes 6.6 percent. Non-tax revenue increased by 34.6 percent. Capital expenditure was 26.7 percent lower than in 2008. Stock trading Some 89.9 million shares valued at MNT23.2 billion were traded at the Stock Exchange which worked on 255 days in 2009. The number of shares traded decreased by 47.2 percent and the value of traded stocks by 62.8 percent against 2008 figures. Transport

All types of transport taken together moved 3.5 per cent more freight and 0.3 per cent more passengers in 2009 than in 2008. Freight carried by road rose 14.1 per cent. Some 2.1 million more people traveled by road, while the numbers carried by the railway and the airlines were 1.3 million and 56,400 fewer respectively.

Source: Montsame

INVESTORS FEEL “INSPIRED” ABOUT MONGOLIA, SAYS ANALYST Eurasia Capital Group Executive Director Alisher Ali Djumanov feels that even before the beginning of construction at the Oyu Tolgoi project, the news that an agreement had been finally signed “was enough to inspire investors”. Their approach to Mongolia has become different. He foresees uninterrupted double-digit growth for Mongolia for at least a decade beginning in 2011. With its GDP likely to reach more than USD30 billion by 2020 Mongolia will develop as much as Malaysia, for instance. However, the Government has to deal with its mineral resources correctly. Asked to choose between constructing a railway toward either Russia or China, Mr. Djumanov said business and trade sense would support a railway to China but he understood the political compulsions that might lead Mongolia “to choose a more expensive export route”. He suggested choosing both options and thus avoiding dependence on one market.

Source: Onoodor PM REGRETS MONGOLIA CANNOT INVEST IN TAVAN TOLGOI ALL BY ITSELF Prime Minister S.Batbold told journalists last week that it would have been much more profitable for the nation if Mongolians could themselves develop the Tavan Tolgoi deposit and regretted that no serious study had been made to determine how much money the Mongolian Government could raise in the international market for this. Ensuring that 10 percent of the shares in strategic mines are traded in the Mongolian Stock Exchange would give some part of the ownership of these deposits to Mongolians “even though it would not be the same as running the projects themselves”, Mr. Batbold said. “Actually, selling shares in Mongolian markets is all about entering the world markets. When a private company decides to trade its shares in the Mongolian Stock Exchange, the world hears about it. There are 11 foreign brokerage companies operating in the stock exchange. The Mongolian Stock Exchange is ready to make any amount of trading. The problem is that public limited companies are not being established in Mongolia,” said the Prime Minister. Asked whether a failure of supervision had led to the failure of two banks, leaving 1,200 shareholders with a total loss of MNT9 billion, the Prime Minister said, “We have taken a lot of time to understand the complexities of the market,” adding that the mistakes that led to the mess in Anod and Zoos Banks must not be repeated. “The Government must behave responsibly and create a legal environment which would erase public misgivings about the financial market,” he said and added, “It is also important to bolster consumer confidence.”

Source: en.news.mn

EX-PRESIDENT OCHIRBAT WANTS INVESTORS TO TAKE MORE RESPONSIBILITY The Ministry of Minerals and Energy, the working group on Tavan Tolgoi, and Erdenes Mongol recently came together to organize an open forum, the first of several such meetings planned to prepare a Government Working Group for negotiations with investors. Participants at the first forum included minerals and mining analysts, those involved in the exploration of the Tavan Tolgoi coal deposit, and some former Ministers. They discussed the likelihood of Tavan Tolgoi containing considerably more coal than the present estimate and the need to ask Russia to lower its transit transport tax if the coal is to be moved through its territory. Former President P. Ochirbat urged quicker development of parts of the Tavan Tolgoi deposit where licenses are held by Mongolian companies at present. He also felt the finally chosen investors must be given a say in choice of the export railway route. “Let them build their railways in two directions if they want,” he said and felt the Government should be careful not to accept “more responsibility than is warranted by its 51% ownership”.

Source: Undesnii Shuudan

INVESTORS BRING NOT JUST DOLLARS, BUT OPPORTUNITIES TOO When production starts at Oyu Tolgoi in 2013, as it should if everything goes on schedule, not only will there be a substantial increase in the state budget revenue, several thousand Mongolian will also directly benefit from holding jobs at several levels or by supplying material and providing services. Mr. B. Enebish, Director of Erdenes MGL, estimates that the average salary for Mongolians

in the mining sector will be around USD1,500. The investment agreement stipulates that 90% of the total employees will be Mongolian. Apart from them, domestic suppliers will have great opportunities. However, we can make the best of these chances only if we can meet the standards set by these renowned international companies. Making money should not be the only objective of those who get involved. Lasting benefit can be gained only if everybody, from miners to suppliers, would observe and learn how to compete at the international market and how to develop new skills and improve existing ones. Vocational workers must aspire to be technicians and then engineers. All should try to learn a foreign language. The extension of the economy can be sustained only when there is proper development of local human capacity.

Source: Onoodor

MARGINAL INCREASE IN TOTAL OUTSTANDING LOANS Money supply (broad money or M2) increased to MNT2,880.0 billion at the end of December 2009, recording a rise of 6.1 percent over November 2009 and of 26.9 percent over December 2008. Currency in circulation was 2.2 percent higher than in November 2009, but 8.7 percent less than in December 2008. Loans outstanding at the end of December 2009 amounted to MNT2,655.0 billion, an increase by 0.9 percent over November 2009, and by 0.7 percent over December 2008. However, principals in arrears decreased by 26.9 percent over November 2009. Non-performing loans reached MNT462.0 billion, which was 17.4 percent of the total loans outstanding and an increase of 1.3 percent over November 2009, and 2.4 times more than in December 2008.

Source: www.mongolbank.com

US GOVERNMENT SUPPORTS UP TO USD25 MILLION IN SME LOANS U.S. Agency for International Development (USAID) Representative Chuck Howell, CEO of Xac Bank M. Bold, and Deputy CEO of Khan Bank D. Batsaikhan signed an agreement last week to support up to USD25 million in lending to small and medium enterprises (SMEs). This USAID program under the US Development Credit Authority is the first such program in Mongolia and is aimed at helping save jobs and creating more employment. The agreement will help mobilize and leverage financing to SMEs. The primary beneficiaries are small businesses and the people who depend on them for jobs and services. Targeted small businesses will include, but not be limited to, those working in the agriculture, construction and housing sectors, as well as start-ups associated with logistics and supply operations of the mining sector. This program will help maintain and generate employment across these targeted sectors by promoting lower collateral requirements and longer term loans, and thus will minimize the effects of the global financial crisis on the Mongolian economy.

Source: mongolia.usembassy.gov

GERMANY PLEDGES HELP FOR MONGOLIAN AGRICULTURE During a recent visit to Germany, Minister of Food, Agriculture and Light Industry T.Badamjunai told Ms. Gudrun Kopp, Parliamentary State Secretary to the German Federal Minister of Economic Cooperation and Development, that the Mongolian Parliament has identified agriculture as “a key development sector", and asked for German aid and assistance in developing farming, food manufacturing, animal husbandry, use of agricultural machinery, and in introducing a proper and effective cooperative system. Ms. Kopp noted that some changes have recently been made to the international development aid policy of the German Government and pledged help in setting up a model “German farm” in Mongolia, and to disseminate agricultural techniques, and supply appropriate machinery. She also promised assistance in processing and exporting animal-based raw material. Germany is the biggest donor country to Mongolia in the European Union.

Source: Montsame

USD25-MILLION HUNGARIAN SOFT LOAN FOR VACCINE PLANT Hungary will grant Mongolia a soft loan of USD25 million to upgrade Biokombinat, the state-owned enterprise that mainly produces livestock vaccine. Some of the money will also be used to increase collaboration between customs organizations in the two counties. An agreement to this effect was signed at the third Mongolia-Hungary inter-governmental meeting of cooperation in trade, economy, and sciences.

Source: Montsame

NEXT WEEK‟S MEETING ON TIANJIN LIKELY TO REACH DECISIONS A meeting between Mongolian and Chinese officials next week is expected to settle issues relating to the land lease terms and conditions at Tianjin Free Trade Zone. Mr. J.Gankhuyag, Director of the Mongolian Representative Office at the port, has said that according to convention and also under the MoU signed between the two governments in April last year, Mongolia as a landlocked country will enjoy certain privileges, including tax exemption, in its use of facilities in Tianjin. However, China is yet to respond to a Mongolian request to be allowed to build factories processing agricultural raw materials there. The Tianjin Free Trade Zone is divided into 4 sub-zones. The 30-sq.-km area allotted to Mongolia has all necessary infrastructure and is ready to begin operation once the coming meeting gives the green light.

Source: www.business-mongolia.com

63% OF THOSE INSURED WORK OUTSIDE GOVERNMENT The number of insured people stood at 556,600 in 2009. Some 63 percent of them were employed at private enterprises, and 36.7 percent were government employees. MNT333.8 billion were paid out from the social insurance fund, 72.0 percent of this going as pension for the elderly people, 13.4 percent to the disabled, 8.0 percent to orphans, and 6.6 percent to former military personnel. Apart from them, 1.4 million people received benefits and assistance totaling MNT120.1 billion from various social welfare service programs. Their number was 0.6 per cent more than in 2008, and the money spent 4.7 per cent more. Source: Montsame

CENTRAL BANK CLARIFIES “EASY” GOLD SALE PROCEDURES A Central Bank official has clarified that neither individuals nor businesses need intermediaries to sell gold to the bank. All intending sellers have to meet three requirements. First, the gold must be smelted and cast into a bar; second, it has to be assayed by the State Inspection Agency to certify its purity; and third, its weight must be over three grams. Once these requirements are satisfied, the gold can be offered for sale at the rates fixed for the day. Payment is made to the seller‟s account, and never in cash.

Source: Onoodor

CITY TO RAISE MONEY FROM PUBLIC TO IMPLEMENT LARGE PROJECTS The Ulaanbaatar city administration intends to set up a public company under the New Century Program to raise resources on its own for the city‟s development. The Mayor and the Mongolian Stock Exchange have already signed an agreement whereby the city administration will trade in bonds to pay for large projects, particularly those related to infrastructure, construction and roads. People‟s interest to invest in these will now be generated through information and publicity.

Source: Udriin Sonin

DP FEARS BUDGET STABILITY LAW COULD STYMIE DEVELOPMENT The vice head of the DP group in Parliament, Mr. L.Gantumur, has said in a statement after a meeting of the group that the party‟s MPs accepted the need for a budget stability law but felt concerned that it might “end up immobilizing the economy”. They felt the example of other resources-rich countries to have a similar law was not relevant as their economic condition cannot be compared with Mongolia‟s. “What we need today is unfettered development and massive expansion of infrastructure. We must not allow our development goals to be stymied in the name of budget stability,” he said.

Source: Ardiin Erkh

NEW WEBSITE FOR CAPITAL MARKET IN MONGOLIA The FXMN.BIZ website, recently launched by EFX Company to help develop the capital market in Mongolia, offers up to date news and information on the local market, as well as on the international economy, key currencies and trading in stock markets abroad. A browser can watch Bloomberg TV and trade in stocks at exchanges such as Dow Jones, S&P500, and NASDAQ. The electronic library in the website has books that can be downloaded for free. Another attraction is that anybody joining the FX club will be trained on aspects of Forex trade.

Source: Onoodor

COPPER MARKET SHOWED 132,000–TON SURPLUS IN OCTOBER, REPORTS STUDY GROUP The supply of refined copper in October exceeded demand by around 132,000 tons, according to preliminary data from the International Copper Study Group (ICSG). For the first ten months of 2009, the market had a production surplus of about 78,000 tons, compared with a deficit of about 58,000 tons in the first ten months of 2008, the industry group said on Wednesday. In the January to October 2009 period, world usage is estimated to have decreased by 1% compared with that in the same period of 2008. Chinese apparent usage, which accounted for 40% of world usage over this period, grew by 1.8-million tons (43%) and nearly offset an 18% decline in the rest of the world. World mine production grew by 1.9% in the first 10 months of 2009 compared with the same period of 2008. Concentrate production grew by 0.5%, while solvent extraction-electrowinning was up by 7.3%. Mine production capacity utilization fell to 79.7% compared with 81.7% in the same period of 2008. Primary production increased by 0.3% while secondary production (from scrap) decreased by 2%. Refined production capacity utilization fell to 77.8% compared with an average rate of 80.9% in the same period of 2008.

Source: www.miningweekly.com

ZAMBIA‟S COPPER EARNINGS BOOST TRADE SURPLUS Zambia's copper export earnings climbed sharply in the fourth quarter of 2009, helping swell the surplus on the trade account but a change in the tax regime saw the Government earn less revenue from mining. Zambia is Africa's top producer of copper and the industry is the mainstay of the economy, accounting for more than 60% of the country's foreign currency earnings. Despite higher export earnings, revenue from the mining sector fell after the Government changed tax rules and some mining companies scaled down operations. Zambia last year abolished a 25% mineral windfall tax and Mines Minister Maxwell Mwale said there were no plans to reintroduce it despite pressure to do so.

Source: www.miningweekly.com

CHINA BEATS ANNUAL GROWTH TARGET, POINTS TO TIGHTER POLICY China easily beat its 2009 growth target after a blistering performance in the fourth quarter that forms a powerful springboard for it to jump over Japan this year to become the world's second-largest economy. Gross domestic product expanded 10.7 percent between October and December, compared with a year earlier, below market expectations of 10.9 percent but up sharply from a revised 9.1 percent in the third quarter. For all of the year, the economy grew 8.7 percent. That handily exceeded the official target of 8 percent, a goal deemed the minimum needed to preserve social stability and one that some skeptics dismissed as fanciful well into 2009. "Obviously the month-on-month growth momentum is very strong," said Xing Ziqiang, an economist at CICC in Beijing. "So I think the chances for us to see an interest rate rise in the first quarter are increasing." Indeed, banks have been lending so freely of late that policymakers have turned their attention to nipping inflation in the bud. Read more... The National Bureau of Statistics, which released the GDP figures, also reported that consumer prices rose 1.9 percent in the year to December, a marked acceleration from November's reading of 0.6 percent. Alarmed by a new burst of credit at the start of January, the central bank last week increased the proportion of deposits that banks must hold in reserve, rather than lending out, and followed through this week by ordering some of them to sharply curtail lending for the rest of the month. Economists said it was only a matter of time before Beijing tightened monetary policy further. So far China has resisted international pressure to let the yuan resume its rise after an 18-month pause, but expectations are growing that Beijing will relent in coming months. A stronger exchange rate would damp down inflation and encourage domestic demand, thus helping rebalance the Chinese as well as the global economy. Source: Reuters.com

IMF CHIEF URGES NATIONS TO KEEP STIMULUS PLANS The head of the International Monetary Fund has urged global policy makers to maintain stimulus until private demand picks up and to shift some of the support into job creation. The IMF will be releasing updated economic forecasts showing that the global recovery is occurring "significantly"

faster than expected, said Managing Director Dominique Strauss-Kahn at a news conference last week. Calling the recovery "stronger but fragile", Mr. Strauss-Kahn said given weak private demand in many parts of the world economy, "policy support should be maintained until there are clear signs that a sustainable recovery appears also in the private demand side". Given that labor markets are expected to remain weak for months, "we cannot say the crisis is far behind us," he said and added governments should start directing some of their stimulus money into job markets.

Source: The Wall Street Journal Asia

GFMS PREDICTS NEW GOLD HIGHS IN 2010, WARNS OF „VULNERABILITY‟ The price of gold this year will likely rise above 2009's record of USD1,226/oz and could even climb as high as USD1,300/oz if the global economic recovery proves sufficiently sluggish and new investment money continues to enter the market, according to Mr. Philip Klapwijk, chairperson of consultancy GFMS. However, he has cautioned that the big role being played by investment demand leaves the gold market vulnerable to a major correction if and when investors start looking elsewhere. Investors have been buying gold as a safe haven investment, as a hedge against inflation and in the expectation that the metal's price will continue to rise. While investment inflows into gold remain significant, and look likely to continue that way, the market reliance on investment is “somewhat worrying” in the longer term. Because of the market's dependence on investment, the biggest threat to the gold price will obviously be the eventual shift to “business as usual” in the world's economies, Mr. Klapwijk said. “The honeymoon won't last forever. At some point, the scenario does change, and then the investment case for gold becomes less appealing.”

Source: www.miningweekly.com

CHINA INC.‟S GLOBAL GROWING PAINS Chinese companies are snapping up natural resources firms across the globe and picking over the carcasses of car marquees laid low by the financial crisis. The value of Chinese outbound M&A, at USD42.6 billion last year, was below a record USD3 billion from 2008, but nonetheless accounted for China's highest share yet of the global total at 7.5 percent. The international ambitions of Chinese firms, not content with their 1.3 billion-strong domestic market, can only accelerate. With an eye to the added value in expertise, Beijing is especially keen to encourage its companies to forage abroad for high-technology, clean-tech know-how and established brands in addition to securing further supplies of oil, gas and commodities to feed the country's thrumming industries. But bankers and consultants say the obstacles that Chinese firms must overcome are immense: money cannot buy overnight the managerial expertise and cultural sensitivity needed to build a multinational with operations and brands spanning the globe. Read more... Some Chinese firms have already learned the hard way about the importance of adapting to the local environment. In 2007, President Hu Jintao had to cancel plans to cut the ribbon on a USD200-million smelter at a Chinese-owned copper mine in Zambia after miners rioted over harsh working conditions. Chinese contractors also periodically spark anger for relying excessively on Chinese labor and materials when building roads, dams and housing across the continent. Chinese suitors looking to buy Hummer from General Motors and Volvo from Ford are certainly overlooking a track record in high-profile manufacturing acquisitions that to date can charitably be described as patchy. The jury is still out on the purchase by computer maker Lenovo of IBM's laptop business in 2005. TCL Corp has two disasters to its name: the electronics manufacturer was hailed as a trailblazer for China when it formed a joint venture with its French rival Thomson SA in 2003. But it failed to tap into growing demand for flat-screen TV sets and the venture was declared insolvent in 2007. TCL's subsequent purchase of then-Alcatel's handset business was also a fiasco, largely because the Chinese company did not anticipate the high integration costs and found its phones were not competitive on the global market. So Chinese companies seeking to trade up the value chain will clearly first need to broaden their skills. The business of digging up iron ore or extracting oil is a world away from manufacturing and selling global retail products, and China has scant experience of managing overseas workforces or marketing to sophisticated consumers. Given all the deterrents, it is not surprising China has a long way to go on outbound investment. According to the United Nations Conference on Trade and Development, China's foreign direct investment outflows are still puny relative to the size of its economy. China's total FDI stock at the

end of 2008 at USD148 billion was 3.4 percent of its GDP that year. By comparison, the figure was 14 percent for developing economies and 26.9 percent for the global economy. Successful expansion overseas would enable China to reduce its dependence on energy-intensive, polluting manufacturing and take production closer to the markets it serves. Aluminum Corp of China Ltd made such a move in 2007, agreeing to co-build a 1-million-ton-a-year aluminum smelter costing USD3 billion in Saudi Arabia. Depending on the industry, it makes sense for Chinese firms to start close to home. Just over half Chinese M&A investments overseas are within the Asia Pacific region. Such acquisitions are easier for managers to handle, not least because the time-zone difference is smaller and they are more likely to be able to recruit ethnic Chinese who can bridge the culture and language gap.

Source: Reuters.com

A CHINA THAT SAYS “NO” CASTS ECONOMIC SHADOWS In areas as diverse as Internet security and human rights, China has staked out a hard line that is increasingly putting it at odds with the international community. Beijing's virtual snub of talks in New York on Saturday on Iran's nuclear program was just the latest example of what many China watchers see as a growing assertion of its self-interest. One Western political leader said after Beijing took the lead in blocking a deal at last month's Copenhagen climate talks that he had not expected China to be throwing its weight around in such a way for another 10 to 15 years. Some diplomats bluntly say China is becoming arrogant. "There is a fundamental change unfolding in the way China sees itself relating to the outside world," said an analyst with a strategic advisory firm in Singapore. The global financial meltdown has further buttressed China's confidence. Whereas the West suffered a deep recession because of reckless bankers and feckless regulators, China escaped with barely a scratch. The role of the state in restoring China's blistering growth has further emboldened the central government and state-owned enterprises, whose influence has grown at the expense of private and foreign companies. Read more... Overseas businessmen are aghast over recent rules to promote technological innovation that they say blatantly discriminate in favor of national champions. According to one line of thinking, China can afford to be more assertive because it sees the United States stretched militarily and weakened financially; Japan in irreversible decline; and Europe unable to get its act together. However, Beijing does not look ready to take up the leadership role being thrust upon it, according to some others. "The fundamental driver -- and you can talk about this for the currency and especially for climate change -- is that Beijing is simply not going to be willing to sacrifice any of its domestic growth or domestic political and economic stability goals for any kind of global agreement or cooperation," one said.

Source: Reuters.com

POLITICS RUSSIA TO INVEST USD3 BILLION ON RAILWAY TO “ASSERT POSITION ON TAVAN TOLGOI” Russian Minister of Infrastructure Igori Levitin has announced his Government will spend USD3 billion on upgrading the Mongolian Railway, according to the website http://www.gudok.ru. The money will be used mainly on infrastructure development and on laying a new freight line towards the Tavan Tolgoi coal deposit. The money will be remitted to Ulaanbaatar Railway and Mongolia will also invest an equal amount. Apart from this, according to Mr. G. Bessenov, Head of the Department of International Relations at Trans-Siberian Railway, the Ulaanbaatar- Naushik railway line will be upgraded and new tracks laid between Zuun Bayan and Dalanzadgad by Russian workers. Ten locomotives will also be bought from Transmash Holding. The website quotes Mr. Bessenov as saying, “According to an intergovernmental agreement, Russia will be given certain rights on exploiting the Tavan Tolgoi coal deposit and that is why the Russian Federation agreed to invest USD1.5 billion on railway upgrading in Mongolia. However, the Government of Mongolia has not yet done anything to implement the terms of this agreement. In the meantime, the Chinese Shinhua Company has already built a railway line from Tavan Tolgoi towards their territory. Russia must strengthen its position and status, otherwise the Chinese will take unilateral control of all Mongolian natural resources.” Mr. Bessenov expressed his confidence that the issue will be resolved during a planned meeting on transportation in Russia next month.

Source: Onoodor

“GREAT DEBT” SETTLED, NOT INVESTMENT LOAN, SAYS RUSSIAN AMBASSADOR Russian Ambassador to Mongolia Victor Vasilievich Samoilenko has reiterated his country‟s claim that while several rounds of negotiations had managed to settle most of the differences over Mongolia‟s financial debt to Russia, the loan given to Mongolia as its capital investment in the joint venture Mongolrostsvetment has not been paid back. “There is no document to show that the investment debt has been settled,” he said, clarifying that this was no part of the commonly called “great debt”. The Ambassador looked forward to 2010 being a fruitful year for bilateral collaboration and cooperation, marked by the Mongolian President‟s visit to Russia. He felt the abolition of the 68% windfall profits tax would promote further development of the Erdenet factory. Asked about the status of the Mongolian request to waive visas for travel between the two countries, Mr. Samoilenko said it was Mongolia that had asked for visas after the end of socialism and that was now asking for a return to the pre-1990 practice. However, Mongolia will have to guarantee its citizens‟ return to their homeland if they were to be traveling to the EU through Russia, as Russia and the EU are negotiating on visa-free visits.

Source: Undesnii Shuudan MPs QUESTION REJECTION OF MCC GRANT TO UB RAILWAY Tuesday‟s joint meeting of the Standing Committees on the Economy and on the Budget to discuss amendments to the appendix of the Millennium Challenge Contract signed between the Governments of Mongolia and the USA was marked by a heated debate to fix responsibility for the decision to reject the USD188-million grant from the Millennium Challenge Fund meant for UB Railway. Mr. Ts.Bayarsaikhan wanted the Government to explain “how and why it could unilaterally change Parliament‟s decision” to accept the grant. Mr. S.Byambatsogt wondered why the Government had been “powerless to control an organization registered in Mongolia and how it could allow Mongolia‟s interests to be ignored”. Mr. Ts.Bayarsaikhan felt “the whole thing should have been brought back to Parliament” after the Government had been “seen to be too weak to have its way with a company operating in Mongolia”. Regretting that Mongolia has missed an “excellent opportunity”, Mr. R.Rash said it was unfortunate the Government failed to convince Russia about its importance for the country. “Once before also, the Russians were not keen on taking a USD71-million loan from Japan for the same joint venture, but we were able to make them see reason. This time the Mongolian side was not able to come up with good arguments and the Mongolian Millennium Challenge Fund did not try hard enough,” he said. Read more... It was left to Vice Minister for Finance T.Ochirkhuu and Minister for Road, Transportation and City Development Kh.Battulga to defend the Government. Mr. Ochirkhuu said the whole thing began when the Millennium Challenge authorities wanted an audit of the UB Railway accounts. The railway is a joint venture and the Russian representatives on its board refused to allow the audit. The Government of Mongolia repeatedly pleaded with them to agree but the Russians did not relent. “Thus the decision was changed against the interests of the Mongolian Government and also the MCC program,” he said. Mr. Battulga denied any failure on the part of the Government. Instead, he said Parliament had taken a doubtful decision. The MCC grant is for developing countries and was not be used for a joint venture. “The Government met the ambassadors of the USA and Russia to discuss the issue. We then proposed to establish a Mongolian Railway Company which will be 100 percent state property and accept the grant but the MCC said this was not possible because the new company would not have any assets and would not own the tracks to be upgraded,” he said.

Source: Ardiin Erkh

FOREIGN MINISTER APPEALS FOR INTERNATIONAL HELP Mr. G. Zandanshatar, Minister for Foreign Affairs and Trade, has issued a statement appealing to foreign governments and international organizations for help in the present harsh winter in Mongolia, which has hit herders the most. Recalling that the “international community gave us help” at the time of the previous dzud ten years ago, Mr. Zandanshatar says, “The Government and the population at large are doing their best, but the severity and the duration of such extreme weather could overwhelm our capacity and resources.” Recalling that the worst usually happens in April and May, the Minister told “our donors and partners” that Mongolia “might need additional assistance and support” and appealed to them to

supply emergency essentials like warm clothing, portable power and heating devices, high calorie foods, first-aid kits, and also fodder and shelter for animals. “It is not yet a „Red Alert‟ situation,” he said, but added, “We seem to be moving closer to it and prevention is better than cure.”

Source: www.mfat.gov.mn

RED CROSS ASKS FOR USD147,000 TO HELP DZUD-HIT HERDERS The Mongolian Red Cross Society has asked the international organization‟s Disaster Relief Emergency Fund for USD147,220 to deliver immediate assistance to some 1,500 households or 6,000 people affected by the severe winter, known locally as dzud. The current situation has caused loss of hundreds of thousands of livestock, leaving numerous herders without any source of livelihood. The dzud is a slow-onset disaster which continues for weeks and months. The relief operation is expected to be implemented over three months. Local media indicate that approximately 90 per cent of the country is suffering from dzud conditions, with snowfall reaching between 20-100 centimeters. As of 10 January 2010, a total of 198 districts in 19 provinces were suffering from these harsh conditions, together with severe snow storms or blizzards that are classified as between dangerous to extremely hazardous by the National Emergency Management Agency (NEMA). NEMA estimates that a total of 454,000 heads of livestock have died, out of which up to 89 per cent belong to the ten worst affected provinces. The total loss of livestock is approximately 10 per cent of the estimated number of livestock in Mongolia. However, unofficial sources report that livestock losses may reach up to two million across the country. Human casualties have been low but a dzud poses various health risks and social challenges: • Frostbites and increase in acute respiratory infections; • Logistical challenges in delivering health care to remote communities and lack of medicines; • Need for emotional support, as snowbound families become isolated for months and people lose their entire livelihoods; and • Mass migration of herder families in search of pastures and separation of families.

Source: www.ifrc.org

UN HAILS MONGOLIA‟S DEATH PENALTY MORATORIUM UN human rights chief Navi Pillay has hailed the move by President Ts. Elbegdorj to introduce a moratorium on the death penalty, saying that it sets a "leadership example in Asia". The President last week told the Mongolian Parliament that all death sentences -- carried out by gunshot -- would be commuted to 30-year prison terms, as he could not bring himself to sign any execution orders. "I congratulate President Elbegdorj on this historic step which further strengthens human rights protection in Mongolia," Ms. Pillay, the UN High Commissioner for Human Rights, said in a statement. "Unfortunately, the Asian region includes some of the world's most prolific executioners, but also some countries like Mongolia that have taken a principled stand on this fundamental issue," she added.

Source: AFP

DP WANTS CHANGE IN RULES FOR SENIOR APPOINTMENTS MPs from the Democratic Party have said that the present criteria for appointing people to senior administrative positions in government are observed only in the breach and need to be revised. According to the existing law, agency directors are appointed by the Government Service Council. It is expected to select people with relevant professional experience but 95 percent of the present directors have been appointed on political grounds. Most of them are former MPs, Government members and people who lost in parliamentary elections. The DP MPs think the aim to keep government service away from politics has not been fulfilled. They favor an amendment that only someone who has worked for more than 10 years in government service should be appointed director of an agency. They also want the door to be kept open for those highly skilled, and with experience of working in the related field.

Source: en.News.mn

MPRP GROUP SUPPORTS JUDICIAL REFORMS WITH A „BUT‟ After the MPRP group in Parliament had discussed the reported resignation of State Prosecutor- General M.Altankhuyag, the group‟s head, Mr. D.Lundeejantsan, told journalists that there has so far been no official statement on rumors about Mr. Altankhuyag‟s resignation, but some MPs did comment on the matter. Mr. Lundeejantsan felt it is “unacceptable behavior” to deliberately attack an individual and demand his removal. “Court officials and prosecutors are separate from

politics. They are appointed for a six-year period and while we support the call for judicial reforms, we prefer things to be done according to law,” he said. The MPRP group also called for a change in the system used in the 2008 election to Parliament.

Source: Zuunii Medee

MPs MUST PLACE NATIONAL INTERESTS AHEAD OF POLITICAL GAINS This is an appropriate time to usher in the proposed radical reforms in our economic, banking and political life as the nation celebrates the 20th anniversary of the democratic revolution. It will be a busy year for MPs and it is good that 2010 is not an election year as they can approach their task without succumbing to any political compulsion. They will also have to accept that as MPs‟ say in financial issues is curtailed, it will be the job of mainly the Government to formulate the budget, and plan expenses. Parliament is responsible for making legislation and should not interfere in monetary or fiscal issues. The country demands a sustainable economic program, a clear and unequivocal agenda and coherent planning. The near collapse of the law on the budget of 2010 at the end of last year showed how precarious our planning and management process is at the moment. Our Parliament has been shown to lack foresight, preferring, instead, to take up issues as they come. May 2010 make our MPs less myopic! Another draft law likely to be discussed at the spring session is the law on development planning. It will discourage the mindset that favors big projects whenever they are proposed. Instead, the plan is to list development projects in order of importance and only then looking for methods of funding them. The number of people acknowledging that Mongolia is facing a structural crisis is increasing. The time has come to go for reforms in a really big way. Since Mongolia is poised to join the international economy, it must observe world norms. As we train our sights on a healthy and sound future, 2010 has dawned as a most favorable time to introduce systematic reforms in our political and economic life.

Source: The Mogolian Mining Journal

MP CITES “RELIABLE SOURCE” PREDICTING WATER FAMINE IN ULAANBAATAR Minister for Nature, Environment and Tourism L.Gansukh has told Parliament that stretches of the Tuul River were “extremely polluted” by chemical and organic substances. The pollution level in these areas was found to be between 3 and 30 times more than the acceptable level. Among measures planned to be taken to remedy the situation are setting up a Tuul-Songino water treatment complex, upgrading the existing equipment in such plants, and quickly settling the ownership issue of Khargia LLC‟s sterilization facilities so that foreign investment can be attracted to improve the technology there. MP D.Baldan-Ochir cited “a very reliable source” saying that Ulaanbaatar will face a drinking water famine in five years. MP S.Byambatsogt wondered if chemical waste from leather washing factories was keeping the Dund River flowing through the city from freezing. The discussion then moved on to specially protected areas. Many of the 391 individuals and companies which have constructed buildings in the Bogd Khan Mountain region have violated laws. However, nothing much can be done as the law does not provide for taking the land back when such violations are detected. The Ministry made 386 investigations in 2009 and collected MNT30.93 million in fines. MP Z.Enkhbold said previous ministers had granted permission generously to build in specially protected areas, with the result that many who had said they planned tourist resorts ended up building private houses.

Source: en.News.mn

MONGOLIA JOINS FORUM FOR INCREASED TIES BETWEEN EAST ASIA AND LATIN AMERICA Thirty-four East Asian and Latin American nations, among them Mongolia, have agreed to deepen economic ties at a cooperation forum in Tokyo. The Tokyo Declaration issued at the end of the Fourth Foreign Ministers' Meeting of the Forum for East Asian-Latin American Cooperation (FEALAC), said, "We share the view that cooperation and mutual learning through sharing experiences and technologies, capacity building, knowledge and lessons, in particular the development and transfer of environmental friendly technology, is beneficial and should be further promoted.'' FEALAC was launched in 1999 to promote deeper political understanding and greater economic cooperation between the two regions. “Trade between East Asia and Latin America has quadrupled, far outpacing the increase of other region-to-region trades in the world," the declaration noted. The document welcomed the admission of Mongolia as a new member of the forum made up of 16 countries in Asia and 18 in Latin America. This was the first time Mongolia took part in the meeting.

Source: www.Xinhuanet.com

CALLS EVERYWHERE INSIDE THE COUNTRY NOW COST THE SAME Telephone calls between all places in Mongolia now cost the same. This follows an agreement signed between the Government on the one hand and Mongol Post, the Communication Regulation Bureau, MobiCom, Skytel, Unitel, G-Mobile and Mongolian Telecom on the other. The Prime Minister has said that from February 1 Internet tariff will also be the same everywhere in Mongolia.

Source: Odriin Sonin

NUMBER OF STUDENTS FALLS While population rises, the number of students in educational institutions of all types taken together fell 2.4 percent at the beginning of academic year 2009-2010 from the figure in the previous year. Excluding Mongolians studying abroad and those attending evening classes, this number stood at 841,100, a drop of 20,700 in a year. Girls were 52.1 percent in kindergartens, 50.3 percent in general educational schools, 50.3 percent in technical and vocational schools, and 47.0 percent in universities and colleges.

Source: Montsame

CHINESE WEBSITES LAY CLAIM TO MORIIN KHUUR Chinese international broadcasting services have quoted claims made on Chinese websites in several European languages that the horse-headed fiddle is the musical instrument of a Chinese minority group. The fuller contents on the websites would lead one to believe that Mongolia is a Chinese region. The fiddle, known locally as the Moriin Khuur, is considered by Mongolians to be part of their national heritage.

Source: Onoodor MONGOLIAN ALTAI INVENTORY PROJECT COMPLETED AFTER 18 FIELD SEASONS The University of Oregon has completed a project to document and analyze a remote, little-known, yet fascinating area of the world. The Mongolian Altai Inventory Project is an atlas, website and digital photo archive that showcase ancient archaeological discoveries from the mountainous region of northwestern Mongolia that was home to hunters and pastoral nomads for thousands of years. The published 224-page atlas, "Archaeology and Landscape in the Mongolian Altai: an Atlas", the corresponding website, "Archaeology and Landscape in the Altai Mountains of Mongolia", and a digital photo archive are the result of 18 field seasons in the Altai Mountains of Russia and Mongolia. The project was made possible by a USD316,000 Research Materials Grant from the National Endowment for the Humanities in the USA. The inhabitants of the region erected large stone altars, burial mounds, standing stones and image stones in the valleys. They also left behind vast concentrations of rock art in the high valleys; these images tell their life stories. With vivid maps and photographs, the atlas and website present the cultural heritage of a rugged environment, focusing on the interconnection of the surface human-made structures and the landscape. The project was developed to appeal to geographers, archeologists, educators and general readers interested in ecotourism, preservation, geography and ancient human cultures.

Source: mongolianaltai.uoregon.edu

NEW MONGOLIAN LAWS AND REGULATIONS

The following rule, amendments and addendums were published in a recent weekly Government Bulletin. Unless otherwise decided by Parliament, the rule and amendments take effect (10) days after publication. Date Law of Mongolia 25/12/2009 Budget of Mongolia for 2010 Social Insurance Fund budget for 2010

Human Development Fund budget for 2010

1/12/2010 Law of Mongolia Law on Forensics

Amendments to Law on Criminal procedure

Addendum to Law on Military pension, allowance

Amendments to Law on Court decision execution

Annulment of some provisions of Law on Police organization Amendments to Law on Settlement of administrative case

Amendments to Law on Judicial settlement of civil case

Addendum to Law on Civil council Amendments to Law on Health

Approval of Loan agreement Legal status of Production, technology park

Addendum to Law on Special permits for economic operations

Addendum to Law on Land

Parliament Decree

Transfer of asset from state property to local property

19/01/2010 Law of Mongolia

Addendum to Law on Corporate income tax

Addendum to Law on Land fee

Addendum to Law on Immovable property tax

Amendments to Law on Criminal code

Please visit BCM website, Legislative Committee, for a summary of new Mongolian laws. BCM members who wish complete versions of the laws in Mongolian language are welcome to call or email the BCM office (332-345; info@bcmongolia.org) to arrange for a convenient pickup.

ANNOUNCEMENTS INTERNATIONAL FRANCHISE EXPO 2010 IN WASHINGTON DC ON APRIL 09-11 The Business Council of Mongolia and the US Embassy‟s Commercial Section will be hosting the Mongolian Business Mission to the International Franchise Expo 2010 in Washington DC on April 09-11, 2010. The Expo will feature over 80 businesses, including in cosmetics, food and beverage, tanning, ice cream, pizza, child care, home improvement, education, health care, tax prep, and so much more. Seminars at various levels are being designed, from basic how-to sessions to advanced, in-depth examinations of different franchise relationships. Intending participants are requested to register with BCM early. They can call 976-11-332345 or e mail to serod@bcmongolia.org to register or to get more information.

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ACCOUNTABLE MINING SEMINAR The Canadian Embassy, with the collaboration of Agriteam Canada Consulting Ltd and USAID/EPRC, is holding a seminar on Accountable Mining: modern approaches to Corporate Social Responsibility (CSR) on January 25, 2010 from 9h00 to 13h00, at the Conference Hall, Main Entrance of the Ministry of Foreign Affairs and Trade, in Ulaanbaatar. There will be simultaneous translation in English and Mongolian. Following short welcoming words from the Canadian Ambassador Dr. Anna Biolik, we will discuss CSR in the extractive industries and local enterprise development. Presentations of concrete CSR initiatives in Mongolia by Canadian and Mongolian companies will follow, to close with a panel discussion to answer questions and comments from the participants. Please kindly confirm your attendance by Thursday 21 January, 2010 to reserve seating by contacting Ms. Galsandorj at oyundari.galsandorj@international.gc.ca or by phone at +976 11 325379. ____________________________________

“MM TODAY” ON MNB-TV 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 22:25 tonight. Tune in to watch this program that reports stories from today‟s BCM NewsWire.

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ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the week ended January 15, 2010, trading activity on the Mongolian Stock Exchange (MSE) totaled 413,200 shares with 47 companies traded. Total market value of transactions was MNT 440.3 million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 617.8 billion, and increased by MNT 4.2 billion or 0.68% from Jan 8, 2010. The Top-20 Index increased by 93.94 points or 1.5% compared to the previous week, closing at 6238.22 points. MSE Composite Index rose by 32.60 points or 1.08% compared to the previous week, closing at 3,059.22 points. The most active stocks traded were: NIK (298,700 shares), Apu (31,600 shares), and Tulga (24,300 shares). Major share price percentage gainers were: Tulga (15.0%), 22nd Baaz (14.8%), and Khuvsgul Khuns (14.8%). Major share price percentage losers were: Sor (14.9%), Erdenet Khuns (14.8%), and Khai Bi Oil (12.5%).

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-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]

CURRENCY RATES - JANUARY 21, 2010

Currency name Currency Rate

US dollars USD 1447.30

Euro EUR 2052.63

Japanese yen JPY 15.92

British pound GBP 2353.17

Hong Kong dollar HKD 186.34

Chinese yuan CNY 211.99

Russian ruble RUB 48.70

South Korean won KRW 1.27

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.