No agreement on the railway transportation policy is in sight. No decision can be taken on this very important part of the wider minerals policy as MPs continue to be stuck on both the direction of the new network and on the width of the track. Some MPs give their view.

S.Oyun: I think it would be wrong to have the same width everywhere. A combination would be a better option, depending on where the track is leading. Companies who are investing ought to estimate their needs. I would give more importance to economic factors than to political considerations when deciding on the railway policy. Similarly, the final choice of the route, whether it goes south or north or both ways will depend on the amount needed and the transportation benefits.

R.Amarjargal: Our national security and foreign policy concepts should be the deciding criteria. The first says Mongolia will develop an equal relationship with its two neighbors. That has to be followed no matter whether the rail gauge is wide or narrow.

R.Rash: Our position of lying between two superpowers makes it a difficult decision. We already have a long railway built by the Soviet Union and we cannot change the gauge used in it. We should not have two gauges within the country. However, new tracks built exclusively to connect to ports that will link us with Japan or South Korea can have the more international narrower gauge. We already have a few km of such narrow track between Zamiin-Uud and Erlian in China.

Work on taking Ulaanbaatar Railway to Umnugobi, where an industrial district will be built soon, must start immediately. Building a railroad takes a long time and those who say it can be done in two years are wrong. Take the Yeruu railroad. We have completed only 60 km in two years, and the remaining 30 km may not be finished this year. We must be realistic. We can utilize Tavantolgoi only after we have built the railroad. The present practice of transportation by trucks is not viable, economically, environmentally, and practically.

Source: english.news.mn

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

Parliament last Friday approved the appointment of Mr. D. Dorligjav as the country’s Prosecutor General, with 92 percent of MPs accepting his nomination by the President.

Talking to reporters after the Parliament vote, Mr. Dorligjav said his priority will be to ensure that prosecutors at all times abided by the law. “Their main responsibility is to ensure that people’s legitimate expectations are met, and they must never lose sight of the fact that their power stems from the legal principles that they are expected to uphold,” he said.

People who have been sincere and conscientious will certainly not be disturbed. “Indeed, I shall offer them all assistance to be more effective. But I have already told Parliament I shall not retain those with problems of ethics and shall show no mercy to those who abuse their power and bring disrepute to the judiciary,” he told media. He clarified it would be wrong to blame prosecutors alone for all the problems in the judicial sector.

The proposed reforms program envisions a comprehensive and systemic overhaul of the sector, and piecemeal or ad hoc amendments to individual laws are not being favored. Instead, the emphasis will be on changing the big overall picture. He admitted it will not be easy to change entrenched mindsets but people’s faith in the judiciary must be restored by enforcing that cases are decided strictly on a legal basis, and on no other consideration.

Mr. Dorligjav asserted that he had no political bias. He also dismissed suggestions that transparency would mean that all details of investigations and interrogations will be made public, saying the very nature of their work meant much of what the police, the courts and the prosecutors do will have to be in secret. “But this cannot be an excuse to shut the people out of everything. They have a right to know much more than they are commonly allowed. I’ll stand by this principle,” he said.

Source: Undesnii Shuudan and Ardiin Erkh; highlighted in the 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

This has got to be Chinese press at its finest. I cannot fathom any Mongolian person agreeing to One-China policy, certainly not any of our politicians, however faulty they may be.  It’s really unbelievable.  Read on.

Here is the excerpt from the Chinese Press:

Xi said China  would like to work with Mongolia  to expand bilateral cooperation.

Batbold proposed the two countries work more closely in economy, trade, finance, minerals, energy, infrastructure and people-to-people exchanges.

Batbold reaffirmed Mongolia would adhere to the one-China policy.

Batbold was one of 2,000 political and business figures and experts from Asia and around the world who gathered at the island resort in south China’s Hainan Province for the BFA annual session.

Here is the link: China, Mongolia underline stronger cooperation

Probably, the article should read “China agrees to One-Mongolia Policy”, but too bad our economy and population is just too small to make that a reality. 

I still can’t believe something like this can be posted on an online website that has the 198th highest usage in the world according to Alexa.

Editor’s note: I found this article online today.  It gives an overview of events involving the Dornod Uranium mines.  The players include Khan Resources, ARMZ, Russian Government, and Mongolian Government…

Despite the potentially huge profits, it can be difficult to do business in a former communist country — particularly one that is in Asia. Western companies have learned this the hard way.

One current example is in Mongolia, involving a Canadian company, Khan Resources, and a rapid chain of events that put the company on the verge of losing vast amounts of money and essentially being kicked out of Mongolia. In the end, however, Khan Resources would have the last say.

In early 2009, Khan Resources, which Richard Lockhart describes as a “minor, Toronto-listed uranium explorer” owned a 58 percent interest in the Central Asia Uranium Company (CAUC), with the remaining 42 percent split evenly between the Mongolian government and ARMZ, “which is an arm of Rosatom and ultimately part of Russia’s state-owned nuclear conglomerate.”

Lockhart is an editor at Newsbase, a British-based news service that publishes reports on the international energy sector, including on conventional fuels and alternative energy resources.

Both those partners wanted a greater share in CAUC, which mines the Dornod uranium deposit in northeastern Mongolia. Dornod contains at least 28,000 tons of uranium, and Russian experts in particular believe further and better exploration could uncover twice that amount.

The Russian government gave its support to ARMZ. Prime Minister Vladimir Putin visited Mongolia in May 2009 for talks with Mongolian officials that focused on Russian participation in mining Mongolian uranium.

According to Lockhart, in July 2009 the “Mongolian government changed the law saying now that Mongolia has to take at least a 51 percent stake in such ventures.”

Khan responded that it was hoping for a “reasonable accommodation” with Mongolia’s government, but threatened to take Mongolia to international arbitration court. Both parties eventually started talks on a compromise.

Russian Pressure

In late August, Russian President Dmitry Medvedev arrived in Ulan Bator accompanied by Rosatom chief Sergei Kiriyenko.

As Putin had done in May, Medvedev and Kiriyenko met with Mongolian officials to discuss the participation of Russian companies in uranium mining on the territory of its former communist ally. The two sides signed agreements that promised greater Russian participation in extracting Mongolia’s uranium.

In September, the head of ARMZ, Vadim Zhivov, said the Mongolian government was reviewing Khan Resource’s contract and announced that “all the licenses” for the Dornod site had been temporarily “suspended.”

Things got even worse for Khan Resources a month later, when a hostile bid was made for the Canadian company’s CAUC shares. “This was obviously one way by the Russians to cement their control” of CAUC, Lockhart says, “and ultimately of the Dornod deposit in eastern Mongolia.”

The Russians offered 65 Canadian cents per share (about 35 million U.S. dollars) for Khan’s CAUC stake, which it “refused point blank saying that their assets there were worth much more,” Lockhart says. “Khan refused ARMZ’s offer and refused it not only because of its low value but Khan has also accused ARMZ of negotiating with the Mongolian government without recognizing Khan’s interest in the deposit.”

Lockhart says ARMZ accused Khan Resources of negotiating with the Mongolian government over the Russian company’s interests in Dornod.

A White Knight?

At the start of 2010, Khan Resources’ situation seemed hopeless. The company’s license to work at the Dornod site was suspended and ARMZ would not withdraw its hostile bid despite Khan’s refusal to accept it.

The Mongolian government lifted the suspension in January, but the Russian bid remained on the table and Khan was still at risk of losing at least half its share in CAUC. Khan and the Mongolian government signed a new memorandum of understanding in late January.

But the beleaguered Canadian company received another bid in February. “Khan accepted a rival offer from the Chinese at 96 cents [Canadian], so that’s a considerable premium over the Russian’s offer,” Lockhart says.

The bid came from CNNC Overseas Uranium Holding, a Hong Kong-registered unit of the China National Nuclear Corporation, China’s main state-owned nuclear company. Khan had found a buyer that could stand up to the pressure by the Mongolian government and the Russian company and disburse some 53 million U.S. dollars.

ARMZ simply said it was leaving its bid open, but according to Lockhart, the company chose not to renew it when a March 9 deadline arrived. By then, Khan had accused ARMZ of “opaque political maneuvering and unsubstantial allegations without recognizing the rights of Khan or its shareholders.”

Endless War Of Words

So is the matter finally settled? Not at all. Khan’s agreement to sell its shares to CNNC is not finalized and there are already objections to that deal.

“Since the CNNC put this offer on the table, I understand the offer is valid until mid-April,” Lockhart says. “The Mongolian government has also said that any deal selling Khan’s interest in Dornod to the Chinese would require the Mongolian government’s approval, and Khan Resources denies this.”

ARMZ, Khan Resources, and the Mongolian government continue to trade accusations about breaches of their agreement. The Mongolian government has also opened an investigation into the legality of Khan Resources’ licenses in Mongolia.

Khan fired off an open letter on March 26, saying the company found it “difficult to understand why only the Canadian partner should be investigated when there are two other partners in the joint venture. Are they to be investigated as well?”

The letter said “inaccurate information” was being fed to the public and media, and that Khan was “surprised and disappointed that the ARMZ has made speculative and unsubstantiated comments about the events that could take place in regard to the uranium licenses in Mongolia.”

In the document, Khan accused the Russian company of releasing false information and “telling the government of Mongolia what to do and what not to do.”

Source: Canadian Mining Company Faces Troubles In Mongolia
by Radio Free Europe Radio Liberty (www.rferl.org)

The ensuing MPRP general conference promises to be a lively affair with former President N. Enkhbayar bluntly accusing party chairman and former Prime Minister S. Bayar of being “the mastermind behind the well-orchestrated sabotage” of his re-election bid last year.

Mr. Enkhbayar prefaced his salvo, in a long and wide-ranging interview published in the newspaper Zuunii Medee, by saying, “It does not help if the finger of blame is forever kept sheathed,” and added he was coming out with “the truth now as several events can now be seen in proper perspective” and also because “the party has to be stopped from committing suicide by allowing its leaders to deliberately betray its interests”.

Mr. Enkhbayar was certain he had polled more votes in the nationwide election “but fraud in six districts changed the outcome”. He charged that “a handful of MPRP leaders” under Mr. Bayar had originally “rehearsed in some constituencies in the 2008 parliament election the rigging they would later practice in the presidential election to defeat me”.

Recalling his brief speech conceding victory to Mr. Elbegdorj on the morning after the election, Mr. Enkhbayar asserted he had not said he accepted the people’s verdict but, instead, had said, “I honor the results announced by the General Election Committee.” His explanation was, “They are different. We all know how the GEC works and how its declarations do not always reflect the real results of the voting.” Another consideration that had weighed with him was maintaining public peace. Discontent with results as they had been declared had led to the July I protests and “we could not risk triggering another disorder that could endanger people’s lives”.

Mr. Enkhbayar traced events from time considerably before the  presidential election to show how he thought Mr. Bayar was “planning his conspiracy”, and claimed the MPRP under Mr. Bayar and the DP had struck a deal that extended to the DP forfeiting the Chingeltei by-election. “They lost an MP but gained a President,” he said. It was significant, he said, “that the result of the presidential election has never been discussed in any party forum”, and regretted that Mr. Bayar’s actions “have “caused more harm to the party than to me”.

Referring to the “many failures” of the present government, Mr. Enkhbayar said there was no compulsion for Mongolia to admit that it still owed Russia USD180 million. “Mongolia acknowledged the debt solely in order to make someone a scapegoat, to blame N.Enkhbayar after all I had done to settle the ‘great debt’ to Russia,” charged the former President.

He foresaw “the death of our young democracy if elections are not made honest”, saying, “We cannot afford to have a system where liars win.”

Mr. Bayar, who resigned as Prime Minister but retained his party chairmanship in a departure from the MPRP tradition, is now in the USA for medical treatment and is expected to return home this week to start preparing for the party conference next month.

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

President Ts.Elbegdorj’s meeting last week with the citizens of Erdenet turned into an indictment of the way legal and judicial organizations worked in the province of Orkhon.

A woman said she had been practically living in courts trying to get the truth established after the court ordered her son to 8 years’ imprisonment for theft of two mobile phones. Many at the meeting sympathized with her, saying they, too, “knew how judges treat poor people and how they please those with money and power”. The audience urged the President to boldly carry on with his plans to reform the judiciary so that reliable justice was available to all.

After listening to numerous cases of abuse of law and power in the judiciary, the President explained the core tenets of his judicial reforms agenda and assured citizens that “I do have the strong will and I am committed to fulfilling my pledge”.  However, he cautioned of problems on the way. “Frankly speaking, I am not fully convinced that authorities of some organizations share the same belief and conviction. Those who acted irresponsibly are protected by legal provisions, and their wrong actions are concealed from scrutiny. A thorough overhaul is needed, not patchwork corrections and we are working on our draft law,” he said, urging legal and judicial officers to respect human rights in the discharge of their duties.

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

Goldman Sachs is believed to have filed a case against Mongolia in an international arbitration court in matters relating to Mongol Gazar and the Olon Ovoot mines.  This news comes in the wake of unconfirmed but strong reports that the Mongolian Government has lost the case against the Russian-owned Altan Dornod.

Mr. B.Lhagvasuren, director of the Inspection Department at the Central Bank, has denied any information about Goldman Sachs filing any case
Mr. Ts. Myanganbayar, a business magnate, mortgaged the Olon Ovoot gold mine license to several banks and to Goldman Sachs to borrow a total of MNT 210 billion. Of this, Zoos Bank, now known as State Bank, gave him MNT 60 billion, Anod MNT 30 billion, and Goldman Sachs MNT 15 billion.

Goldman Sachs is a global investment banking and securities firm but is not registered in Mongolia, nor does it have any accredited representative here. Accordingly, it may not have the legal right to enter into any commercial transaction in the country.  A man with only a visiting card is said to have been representing the company to meet Mongolian officials.  Nobody knows anything more about him, or what position, if any, he holds at the company.

It is believed that the Olon-Ovoot license was mortgaged to a company calling itself Goldman Sachs International.  The Mineral Department agreed to the mortgage but this is now being contested as mining licenses can be mortgaged only to banks or non-banking financial organizations and they have to be legal entities in Mongolia.

Source: Ardin Erkh newspaper; translated and delivered via the BCM Newswire by Mongolia Business Council

Mongolia Business Podcast Summary: Mongolia’s 2009 business news highlights; Coping with winter weather in Mongolia; Parliament approves 324 billion tugrugs in handouts to citizens

Mongolians playing a traditional Mongolian ice game called "musun shagai", which literrally means "ice ankle bone".

Mongolia Business Podcast Highlights: Parliament recently approved to allocate 324 billion tugrugs, roughly 220 million USD, which essentially gives money away to Mongolian citizens.  Human Development Fund distribute 120,000 tugrugs for each citizen, 70,000 before Tsagaan Sar, or Mongolian New Year, and 50,000 tugrugs after the Tsagaan Sar…

SouthGobi Energy Resources may spend up to $800 million USD to improve operations and better supply customers in China…

Some big events in 2009 were headed by the signing of Oyu Tolgoi (OT) agreement on October 6, 2009, a very good auspicious day.  There was a collapse of two major banks and a merger of two other banks.  In March 2009, Mongolian tugrug fluctuated from 1100 tugrugs to up to 1700 tugrugs before heading back down to 1500 tugrugs.  Prime Minister Bayar resigned…

Weather in Mongolia is currently -30 to -40 degrees Celsius (-40 degrees Celsius is -40 degrees Fahrenheit).

How do we cope with it?

1. Stay inside.
2. Dress with too many layers or wear fur
3. Eat Mongolian diet
4. …

Why Mongolians crank up the heat to about 25 degrees (85 Fahrenheit) inside?  It’s freezing outside, but people are wearing shorts inside…. Black stuff on roads is the ice.  Another tip to stay warm?  Turn into a ninja.  Only show your eyes and cover everything, wear layers of clothing, eat mutton, and don’t go out too much…

Click here to listen to entire podcast episode: Mongolia Business podcast by Mongolia Business Blog (MBB)