Dalanzadgad is the capital of the South Gobi province and fastest growing provincial capital in Mongolia.

Our Firm (Eurasia Capital) estimates that the population of Dalanzadgad will quadruple in the next five years and by 2015 this town will enjoy the highest GDP per capita in Mongolia. South Gobi is home to two crown jewels of Mongolia: Tavan Tolgoi, the world’s largest untapped coking coal deposit and Oyu Tolgoi, the world’s largest undeveloped copper & gold mine.  We anticipate Dalanzadgad becoming a regional center for dozens of mining companies and hundreds of firms in multi-billion dollar mining supply chain.

FYI, Erdenet, the second largest city in Mongolia has estimated US$6,400 GDP per capita, the highest in Mongolia.  Erdenet is the capital of the Orkhon province, founded in 1975 as a new industrial center after discovery of the world class Erdenet copper mine in 1974. Erdenet is home to Erdenet Mining Corp., Mongolia’s largest company, biggest taxpayer and exporter, and accounts for 13% of the country’s GDP.

Source: Eurasia Capital

An MPRP MP, Mr. D.Baldan-Ochir, has told reporters that he would soon submit a proposal for wide ranging changes in the tax system.

He wants all citizens to be included in a general data base, where everybody’s income and assets will be registered. No income can be concealed, putting an end to the rampant tax evasion and bribery in today’s Mongolian society. The database will also help in the efficient delivery of social welfare benefits.

Mongolians “hardly ever volunteer information” on their sources of income or pay taxes on their total earning, he claimed. A “tax education” program to raise popular awareness has been initiated in partnership with JICA. This will include school lessons on the tax system and the duty to pay taxes.

A series of discussions are planned with the civil society, government officials, citizens and professionals to devise practical suggestions on reforming the personal income tax system.

Source: Unuudur; highlighted in the BCM Newswire by Business Council of Mongolia

ULAANBAATAR – According to a working group, air pollution level of Mongolia’s capital city has increased by 28% despite efforts.

A working group led by MP D.Terbishdagva has found during its evaluation of the impact of programs aimed at reducing air pollution that only MNT8.2 billion was spent on them last year, despite a Parliamentary resolution in 2007 allocating MNT50 billion annually from the State budget. It also found that the pollution level, far from going down, has actually increased by 28%. The group has recommended more coordination among the organizations responsible for the work and has also called for more accountability.

Source: Unuudur; highlighted in the BCM Newswire by Business Council of Mongolia

The majority of respondents in a survey carried out by Sant Maral Foundation in April said unemployment is the main problem in Mongolia today.

While 38.6 percent held this view, 21.1 percent said the standard of living is the main problem, while 8 percent believe inflation is the key issue. The representative sample of 1,200 respondents from Ulaanbaatar and from Dornogobi, Dundgobi, Zavkhan, Khentii and Arkhangai aimags was collected from April 16 to April 23. The survey is sponsored by the Konrad Adenauer Foundation of Germany.

Asked about the present economic situation in the country, 42.8 percent of the respondents said it was “bad”, 36.3 percent “not good, nor bad”, 3.8 percent answered “good” and 6 percent said “very good”. While 29.5 percent consider the economic situation to be “in decline”, 47.5 percent said it is “in stagnation”, while 14.3 percent said it is “improving”.  In five years, the economic situation will be “slightly better”, said 40.2 percent, “much better” according to 4.4 percent and 20.2 percent thought it will remain “the same”.

To the question “How satisfied are you with democracy and the present political system?”, 18.8 percent said they are “satisfied”, 39.4 percent “rather satisfied”, 22.2 percent “rather not satisfied” and 16.7 percent were “not satisfied”.
Replying to a question on which party they would you vote for if parliament elections were held tomorrow, 35.1 percent favored the MPRP, 39.5 percent the DP, 4.5 percent the Civil Will Party and 5 percent the New National Party.

Asked to choose a country as the best partner for Mongolia, 75.7 percent favored Russia, 18.8 percent China, 27.4 percent the USA, 10.6 percent the European Union, 15.8 percent Japan, and 11.4 percent South Korea.

Source: Montsame; highlighted in the BCM Newswire by Business Council of Mongolia (BCM). For the complete Sant Maral Foundation April 2010 survey, see Mongolia Reports within Resources section of the BCM website.

Sensitive financial issues were discussed at a “secret” meeting on Monday attended by members of the Standing Committee on the Economy, and representatives of the International Monetary Fund, the MongolBank, and the National Statistics Office. They talked mainly about the budget deficit and the threat of inflation.

The Finance Ministry has proposed revisions to the 2010 budget following the increase in the price of copper and gold. If this has meant MNT 364.2 billion in extra revenue, the decision to increase the salary of civil servants by 30 percent, and reinstatement of the child allowance will lead to more expenses. Some new public projects have also been proposed. Taken together, these will take the budget deficit beyond the proposed 5% of GDP as stipulated by the IMF.

The resultant inflation may nullify the 30 percent increase in salary.  The Government’s hopes of keeping inflation under six percent have been belied. It has already reached 10 percent and many analysts predict an even darker future with inflation hovering around 27 percent by the end of the year.

The IMF, which has lent money to keep the budget deficit within manageable limits, is strongly recommending austerity measures. There seems to be rethinking in the Finance Ministry and Parliament seems to have suspended further discussion on the revised budget. These are likely to resume on Monday, after MPs will have considered what was discussed at the meeting.

Source: english.news.mn; highlighted in the weekly BCM Newswire by Business Council of Mongolia

In an open letter to Prime Minister S. Batbold, two Democratic Party MPs, Hero of Mongolia E. Bat-Uul and Mr. Ya. Batsuuri, have lamented the unchecked growth of corruption, bribery, and bureaucracy in government organizations, greatly hindering economic progress and the development of a democratic ethos. If no corrective action is taken, the trend will eventually disgrace the nation on the international stage, they feel.

Political parties and leaders talk a lot about action against corruption during elections, but allow it to thrive when they are in a position to take remedial action. Hidden business deals involving high officials, their fingers in the pie in any major budgetary investments, and misuse and abuse of the funds of state owned businesses have got out of control and reached proportions that endanger national security. Citizens wait in vain for signs of official action, but there is no change in the authorities’ apathy.

Reminding Mr. Batbold that in a democracy people’s feelings cannot continue to be ignored, the two MPs have urged the Government to come out with a comprehensive statement on its stand on the matter. As a first step, they have said, companies and organizations like Erdenet Copper, Ulaanbaatar Railway, MIAT, and the Civil Aviation Authority of Mongolia should immediately have their accounts audited by firms with international exposure.

Source: Udriin Sonin; highlighted in the BCM Newswire by Business Council of Mongolia

Several economists have expressed their reservation about the Government’s announcement that every Mongolian citizen will receive MNT1.5 million by 2012.

Mr. Ts. Demberel appreciated that both parties were in a bind, having made this the basis of their election campaign. However, it still will be unwise to distribute so much cash. “Most of this will end up in the hands of Chinese manufacturers, and a much better decision would have been to spend it on infrastructure that benefits all,” he said.

Mr. Ch. Khashchuluun, Chairman of the National Development and Innovation Committee, said it is not yet clear how the money will be actually distributed. “It is important to guard against inflation as that would nullify any benefit to people,” he said.

Mr. D. Batjargal, Director of the University of Finance and Economy, wondered where the money will come from and hoped the Government would not have to take foreign loans to fulfill its pledge.

Mr. D. Jargalsaikhan said the total amount needed would be MNT6.25 trillion, “far more than the country’s present annual GDP” and was certain the country “does not have the economic capacity to implement the Government’s decision”.

Honored Economist N. Dashzeveg refused to comment without knowing where the Government hoped or planned to get the money from.

Source: Zuunii Medee; highlighted in the BCM Newswire by Business Council of Mongolia

Finance Minister S.Bayartsogt has said that the total foreign debt of Mongolia has reached MNT2.8 trillion, equal to the whole annual state budget. Of this 31.7 percent is in USD, 26.5 percent in Japanese yen, 28.1 percent in euro and 13.7 percent in other currencies. He was speaking at a joint meeting of the Standing Committees on the Economy, on Security and Foreign Policy, and on the Budget which discussed a loan offer from Monaco, and a draft cooperation agreement with the Asian Development Bank for additional financing on a project to develop regional roads.

Both drafts were approved and would now go to Parliament, but several MPs expressed their unhappiness with aspects in both. Some felt that Monaco, with which diplomatic relations were established only two years ago, is offering assistance worth no more than MNT30 million only to help it join the European Union. The ADB loan carries a low interest but has preconditions which make it less acceptable than high interest loans. Mr. Bayartsogt stated that Mongolia will no longer take loans with such preconditions.

Source: Undesnii Shuudan; highlighted in the BCM Newswire by Business Council of Mongolia

ULAANBAATAR, MONGOLIA – The National Statistics Office has published social and economic data. All figures are for February alone or for the first two months in 2010 and, unless otherwise mentioned, all comparisons are with the corresponding period in 2009.

CPI

The consumer price index rose 3.0 percent over January, 5.4 percent over the end of 2009, and 8.3 percent over February 2009.

State budget

The overall balance in the General Government budget in the first two months of 2010 showed a deficit of MNT51.4 billion, MNT 0.8 billion less than in the same period of the previous year, mainly because revenue increased 53.8 percent more than did expenditure.

The current account deficit was MNT36.6 billion. Tax revenue was 74.8 percent more than in 2009. Windfall profits tax yielded 227.4 times more, corporate income tax 2.2 times more, and value added tax 34.6 percent more. Non-tax revenue was up by 91.3 percent.

FDI

Foreign direct investment in the fourth quarter of 2009 was USD284.1 million, 2.2 times more than in the same period in the previous year.

Trade balance

Total turnover in trade with 86 countries in the first two months of 2010 was USD607.6 million, of which exports were USD311.7 million and imports USD295.8 million. The total turnover increased 38.7 percent, exports 34.1 percent, and imports 43.7 percent.
The trade balance surplus was USD15.9 million, 40.0 per cent less than in the same period of 2009.

Industrial output

Total industrial output in the first two months of 2010 was MNT266.2 billion, an increase of 17.0 per cent at 2005 constant prices. Industrial products worth MNT507.3 billion at current prices were sold at domestic and foreign markets.

Domestic companies executed 66.3 percent of the total construction and installation work worth MNT3.9 billion.

Passengers, freight

The number of railway passengers in the first two months of 2010 rose 7.1 percent, and the volume of freight 21.2 per cent. The corresponding rise in airlines passengers and freight was 29.0 percent and 29.4 percent respectively. The combined revenue of railway and air transportation increased 22.2 percent.

Unemployment

The number of registered unemployed people at the end of February 2010 rose 11.6 percent over January. Women were 54.3 percent of the total. Of the 3,000 registered unemployed persons who got a job in the first 2 months of 2010, 18.1 percent were employed by government or state-owned enterprises and the rest by companies, cooperatives or small-scale private businesses.

Labor Force Survey

The latest Labor Force Survey (LFS), conducted in the fourth quarter of 2009, puts the number of economically active Mongolians aged 15 and above at 1,120,300, with men accounting for 53.2 per cent of them. People holding jobs numbered 977,400 and 142,900 were unemployed. The rate of unemployment in the quarter was 12.8 per cent nationwide, 16.5 per cent in urban areas and 7.9 percent in the provinces.

Household economics

A nationwide sample survey of 2,802 households in the last quarter of 2009 found average monthly monetary income was MNT349,100, an increase of 1.6 percent, while the average monthly monetary expenditure was MNT368,300, rising by 0.9 percent.

Source: Montsame; highlighted in the BCM Newswire by Mongolia Business Council

The Central Bank has said it sees no reason to worry about the health of Trade and Development Bank (TDB). The bank administration has also strongly denied there is any problem whatsoever. The reassurances were found necessary after the city had been abuzz with rumors about the bank, with customer confidence continuing to be low following what happened at Zoos and Anod banks.

The bank’s Executive Director, Mr.  B.Medree, told media that one account holder who had extended his account by six months later complained that he had meant it to be extended for a year and demanded interest for a year. The bank refused this, explaining that it had his signature for a 6-month extension but he refused to listen to reason and threatened to write to the Prime Minister and the media. He then had articles published in newspapers that TDB had secretly met the Ministry for Finance and was about to go bankrupt. This is totally untrue. “In any case, the Ministry for Finance does not control the banking sector. The Central Bank does this and the Central Bank has no problems with us,” Mr. Medree said.

The Director of the Inspection Department at the Central Bank, Mr. B.Lhagvasuren, said they are “satisfied that TDB is doing well and there is nothing to worry”.

Source: News.mn; highlighted in the BCM Newswire by Mongolia Business Council