Mongolia Business Blog

Erdenet Citizens Urge President to Go Ahead with Judicial Reforms

mergen — Mon, 15 Mar 2010 01:29:01 +0000

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 Mongolia Business Council

Only Economic Diversification Can Assure Survival, Says Former PM

mergen — Sat, 13 Mar 2010 05:07:52 +0000

Former Prime Minister D. Byambasuren does not see any “quick exit from the present economic crisis, even if some superficial indications may look promising”.

The distribution of cash has led to an overall increase in prices of items in daily use. Banks are still troubled with outstanding loans and the long-term impact of the dzud will be clear only with time. Livestock is the economy’s key sector and difficulties there will be felt in many areas of life: herders’ livelihood, the consumer market, and health of the banking system. Herders, he felt, are not receiving adequate support, but abandoning them will have disastrous consequences.

Canceling the export tax on raw cashmere or providing compensation based on the number of goats does not have any sustainable effect. Instead, Mr. Byambasuren urged easier credit facilities and fairer marketing opportunities for herders.

He regretted that there is no progress in setting up a copper processing industry, even 40 years after production began in Erdenet, and the landmark Oyu Tolgoi investment agreement was signed.

Profligacy in public expenditure has led to a severe imbalance in foreign trade figures. “On top of this domestically driven crisis came the global downturn and the Government had no clue to how to get out of the mess,” he said.

Raw commodity prices will always move in cycles and “Mongolia’s survival in a tough world” can be ensured “only by a diversification of the economy and strengthening the economic structure”, he said.

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

Environmentalists Urge Mongolian State Authorities to Probe “Illegal” Activities of Petro-China

mergen — Fri, 12 Mar 2010 14:49:23 +0000

A coalition of environmental protection movements in the country has sent a report to the President, the Parliament Speaker, the Prime Minister, and the Ministers of Minerals and Energy, Finance, and Labor and Social Welfare detailing “illegal activities” by Petro-China Dachin Tamsag and demanded an inquiry into how the company has been allowed to violate Mongolian laws, pollute the environment, and harm local communities in several ways.

Petro-China has been working in three oil fields in Dornod aimag since 2005 on the basis of a product sharing agreement with the Government. Petro-China has refused to make available to the coalition a copy of the agreement, as also of its performance and monitoring reports, even though the NGOs have a constitutional right to the information. Petro-China says these are “company secrets that cannot be disclosed to a third party”.

The coalition has referred in its report to the numerous cases of violations and improprieties in the company’s working revealed during inspections by the National Audit Office and the Specialized General Inspection Agency. Petro-China has consistently refused to take corrective measures. The coalition now wants a detailed enquiry into specific terms of the agreement which, it says, violate several Mongolian laws. It also wants to know why the contents of the agreement are not made public.

The coalition also seeks a clarification from the Mongolian state authorities on if it is tenable for the Petroleum Authority to defend and justify Petro-China’s actions by saying, as it has done, that “Chinese rules, procedures, and standards are being observed as the Chinese workforce follows Chinese technique and technology”. The Authority has also accepted the Petro-China argument that an “evaluation of its work and future plans was made in China” and that this should be sufficient.

Petro-China employs 3,620 Chinese nationals, all of whom are exempted from paying the required fees to the Mongolian Government.

Source: Udriin Sonin newspaper; translated and delivered via the BCM Newswire by Mongolia Business Council

Goldman Sachs May File Case on Olon Ovoot

mergen — Fri, 12 Mar 2010 13:52:53 +0000

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

Curry For A Cause

mergen — Thu, 04 Mar 2010 11:53:56 +0000

Taste the Savory Indian curry at its Best. Your participation will enable a needy Mongolian family live in a house called home. A worthy cause.

A Buffet Charity Dinner will be organized on the 13th of March, 2010 at the Taj Mahal Restaurant at 6.00 – 10.00 p.m. located on 6th floor of the Ulaabaatar Hotel. Entrance fee 21,000 MNT per person

Curry for a Cause Event Program:

Welcome Habitat for Humanities (HFH) Mongolia Blue Sky Build Presentation
Dinner and then after dinner some fun Games
Auction – Items, A saree from India, Another dress called Salwar
Kameez, some Indian Handicrafts, Famous Mongolian artists paintings
Music and Dance

Come and join Hands to lend a Helping Hand . All proceeds to be given to Habitat for Humanity Mongolia.

About The Blue Sky Build

Building 30 houses for 30 Mongolian families with low incomes. A sign up paper will be available for people to sign up as volunteers during the actual days of the Blue Sky Build 28th June – 2nd of July, 2010.

For reservation of a seat, please phone into Tajmahal restaurant – 98110562 OR the Habitat for Humanity Director Charles Jolliffe -99041137

2009 Highlights, Coping with Winter Weather, & Money to Citizens

mergen — Wed, 13 Jan 2010 10:15:26 +0000

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?

Stay inside.
Dress with too many layers or wear fur
Eat Mongolian diet
…

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)

“Mongolian Law and Legal Environment” with James Liotta of Lehman Lee & Xu

admin — Mon, 21 Dec 2009 01:17:28 +0000

Overview: Mongolia has a developing judicial system, sometimes even described as “rotten to the core”. People need to do due diligence before coming to Mongolia to do business. Following the law to your best ability from the beginning will help prevent issues later.

For business news, the state budget containing 76 Billion tugrugs or 1 billion tugrug per each MP, has been passed, even after a veto by the President of Mongolia. Millennium Challenge Account is investing more than hundred million USD for clean air and road infrastructure projects. Boroo Gold mining company has agreed to donate 1 million USD for new national park being developed in Ulaanbaatar.

For “Mongolia Business” podcast update, we received some recommendations from one of our listeners. We also received a five star review on iTunes.

Podcast can be downloaded from iTunes or from our website. For directions, visit: Mongolia Business podcast

This week’s podcast talk show was recorded on December 18, 2009 and published on December 20, 2009. Below are highlights, not a verbatim transcript, of the recording.

Mongolia Business Blog PODCAST update

We received a suggestion for improvement from one of our listeners. Bachi Nyangar mentioned that we should have a starting and ending music and maybe a female co-host. He also suggested that we start covering mining stock prices and getting sponsorships for the show.
We also received our first five-star review on iTunes. Mendorshikh, young Mongolian studying computers in the US, is a big fan of our show and mentioned that our podcast is THE FIRST EVER Mongolian podcast in the world.

Some business & mining news from last week:

There was a big news event over the past week with the 76 billion tugrugs in the state budget. This 76 billion was to be 1 billion per each parliamentary member to spend on their own districts. This portion of the state budget received quite a lot criticism as being a “pork barrel” spending. Media outlets pointed out that the spending of 1 billion by each MP is going to lack transparency and that the funding would have been much better spent on larger national issues such as healthcare, education, and infrastructure. Mongolian President Elbegdorj used his veto powers to veto this bill. Some MP’s joined in on the call and refused to support the bill. However, in the end, it was approved with 40+ MP’s voting for their rights to receive 1 billion each.
Boroo Gold mining company agreed to invest $1,000,000 for the new National Park Project for Ulaanbaatar. The public and media have been questioning the 76 billion tugrugs that was approved as part of state budget and why we Mongolians cannot ourselves spend the money on important matters such as healthcare and education.
Millennium Challenge Account is going to invest in two new projects: Clean Air Project ($127 million) and Road Project (road between Choir & Sainshand City and road to Nalaikh due in about three years). MCC is chaired by US Secretary Hillary Clinton.
Ivanhoe Mines announced it will spend $786 million this year on ramp-up for mining the Oyu Tolgoi mine site
H1N1 curfew ended few weeks ago. Minister of Health announced it doesn’t know what to do with all of the Swine Flu vaccines. They arrived late, but now that they are here… nobody wants them now. Just a few weeks ago, people could not walk into buildings without a mask
Because of the H1N1, there will be no state funded New Year’s party. Maybe we can get the MP’s to pitch in from the
Lots of foreign aid to Mongolia, but what is Mongolia itself doing? Maybe we need to be more responsible and take matters into our own hands?

“Mongolian Law and Legal Environment”

Interview with guest speaker James Liotta, Managing Director of Lehman, Lee, & Xu. Below is an abridged highlight of what was discussed. It is not verbatim.

MONGOLIA BUSINESS BLOG: Can you briefly describe Lehman Lee & Xu and what it does?

JAMES LIOTTA: Lehman Lee & Xu is a Mongolian firm with networks throughout Asia and has been in Mongolia for about seven years. Company focuses mainly on mining and private sector, but it also works with NGO’s and governmental organizations as well. Over the past seven years, there has been a growing need for development of rule of law.

MONGOLIA BUSINESS BLOG: Can you describe the legal environment of Mongolia for people looking to do business & invest in Mongolia?

JAMES LIOTTA: #1 thing I recommend to anyone is to do “due diligence”. There are a lot of cowboys that come here and think they can do anything they want. There is a lot of law out there, and when implanted, it can cause some headaches if you are ill prepared. It is a civil law system. There is more help to develop the Mongolian legal system. There is regression in rule of law in Mongolia. There was a recently published review which called the Mongolian judicial system as “Rotten to the Core”.

MONGOLIA BUSINESS BLOG: What are the major challenges for your clients?

JAMES LIOTTA: We have a diverse group of clients. The biggest problem is that they can’t count on the judiciary here. The courts do not appear to be separated from politics entirely. The courts do not seem to be using or importing sophisticated concepts of law. For instance, if there is a complex commercial matter, the judge who has opened the case is not going to be equipped to properly handle the case. The problem is not that always it is the case of corruption, but clients need to understand that they are entering into a developing judicial system. And, their best defense is to comply with the law as best as possible…

MONGOLIA BUSINESS BLOG: So what happens that when clients do end up in courts?

JAMES LIOTTA: I think it is pretty obvious that courts do have preference to Mongolian companies and individuals… I think I should divide it up here. There are those who are “cowboys” who have not made any efforts to comply with the law. They often do get slapped with fines, and they probably should be fined. The clients I feel sorry for are ones that do everything they should and still get fined. There is sometimes a notion that “foreign entities have the money; why not fine them?” What we recommend to our clients is to try and take the arbitration outside of Mongolia…
…

To get the full interview, you will need to either listen or download the podcast. Please visit our podcast page: Mongolia Business podcast

Democracy, Railroad, & Jim Dwyer of Business Council of Mongolia

mergen — Sat, 12 Dec 2009 13:05:44 +0000

MONGOLIA BUSINESS PODCAST #4 HIGHLIGHTS

20th anniversary of Mongolian democracy, railroad, & BCM Executive Director Jim Dwyer

December 11, 2009: December 10th is a very important day in Mongolian history. On this date, Mongolians gathered at the square and peacefully protested for democracy of Mongolia. It was one of the most peaceful yet successful demonstrations in history… (Download the podcast here: Mongolia Business podcast)

There is a dispute over the railroad between the private sector and Mr. Battulga, the Minister of Road and Transportation. Additionally, there is a need for a railroad in South Gobi. Current transportation methods do not meet the needs to transport the mining resources. Leighton LLC has just been contracted to build the railroad, separately from the mining contract…
Jim Dwyer, Executive Director of Business Council of Mongolia (BCM), has been in Mongolia for a total of 8 years. The membership of BCM has far outpaced expectations. Membership is now over 140. The needs of the business community, both foreign and Mongolian, are the same. BCM represents business community as a whole. Half of the 14 member board are represented by Mongolian companies…

Nuclear Energy and Uranium in Mongolia

mergen — Fri, 11 Dec 2009 05:46:31 +0000

Mr. Eric de SEZE, General Director & CEO of Areva Mongolia, “Nuclear Energy and Uranium” “PART TWO of BCM Meeting Highlights”

On Monday, December 7, 2009, Business Council of Mongolia (BCM) held its last meeting of the year. Guest speakers Mr. B. Enhuyag, First Deputy Governor of Bank of Mongolia and Mr. Eric de SEZE, General Director & CEO of Areva Mongolia discussed “Views on Current Macro-Economics and Mongolia’s Banking Sector” and “Nuclear Energy and Uranium”, respectively.

Rather than spit out their presentations verbatim, I will highlight points that I found interesting.

Please note these highlights are written NOT written verbatim; they are written in my own words and, in some cases, there may be quite big errors. Personally, I did not even anticipate that I might post some highlights online for view of the public at large. Please bear with me.

Mr. Eric de SEZE, General Director & CEO of Areva Mongolia, “Nuclear Energy and Uranium”

97-98% of enriched uranium can be recycled.
Uranium is typically found at 1-2.5% and enriched is considered at 3%.
Everything has radiation, including the water we drink. The question is the level or radiation. Radiation experienced by an average person is 2.4 mSv (per year?) while a radiation experienced by a person living at 1,500m altitude is 3.6 mSv
On Uranium pricing, the media tends to focus on the volatile spot price of Uranium, but the industry insiders and traders focus on contract pricing. Example pricing showed spot pricing at $42.50/lb and contract pricing at $65/lb.
Dornod & Dulaan Uul uranium reserve could propel Mongolia to #4 in the world (in term s of uranium mining?).
Rio Tinto mines 18% of Uranium in the world
Mongolia’s “almost neighbor“ Kazakhstan could become world’s #1 uranium mining country in either 2009 or 2010
There are three basic mining methods: rock 65%, sand 25%, by product 10%
Although Mongolia has two or three large uranium mining deposits, the methods needed will be at least two completely different methods. The mining north will be the more standard “rock” mining, whereas the deposits in Gobi or to the South, will require “sand” mining techniques, which is completely different in exploration and mining methods from the former.
World reserve for uranium mining is 4.5M tU, which is enough to use for 70 years. However, this number stays roughly the same year after year because more are found as more are used.
Mongolia is officially #14 in determined uranium reserve, which is basically the same as India, a country which has been doing uranium mining and using nuclear energy for decades now
Mongolia’s reserve is roughly twice that of China and 1/3 that of Russia
Uranium is two times heavier than lead. 1 Cubic Liter of Uranium will weigh 19+ times more than water… almost 20 kilos per cubic liter!

Current Macro-Economics and Mongolia’s Banking Sector

mergen — Fri, 11 Dec 2009 05:43:38 +0000

Mr. B. Enhhuyag, First Deputy Governor of Bank of Mongolia, “Views on Current Macro-Economics and Mongolia’s Banking Sector” “PART ONE of BCM Meeting Highlights”

On Monday, December 7, 2009, Business Council of Mongolia (BCM) held its last meeting of the year. Guest speakers Mr. B. Enhhuyag, First Deputy Governor of Bank of Mongolia and Mr. Eric De SEZE, General Director & CEO of Areva Mongolia discussed “Views on Current Macro-Economics and Mongolia’s Banking Sector” and “Nuclear Energy and Uranium”, respectively.

Rather than spit out their presentations verbatim, I will highlight points that I found interesting.

Mr. B. Enhhuyag, First Deputy Governor of Bank of Mongolia, “Views on Current Macro-Economics and Mongolia’s Banking Sector”

Inflation in 2008, 2009 YTD, 2009 Estim, and 2010 Estim are as follows: 34%, 2%, 3.5%, and 6%
Looking into questionable Mongol Gazar loans by Banks
Savings Bank and Post Bank merger evaluation pending (this was originally proposed as a three-way bank merger along with Zoos Bank)
Economic crisis revealed deficiencies in banking: over lending, fraudulent activities, and obscure ownership
Golomt Bank and Trade and Development Bank of Mongolia are in compliance with Central Bank regulations. Khan Bank is currently under evaluation, but so far its portfolio is looking OK.
These three large banks account for 70-75% of deposits and/or lending activities in Mongolia
There are, in total, 16 banks in Mongolia. This is far too many. We need fewer but stronger banks. As such, we hope this trend of consolidation in the banking industry will continue.
2010 budget spending as per Ministry of Finance is looking to remain high, especially in the first half of the year. As such, Central Bank of Mongolia may need to tighten its monetary policy.
When alluding to reasons for some of the banking/lending woes, Mr. Enhhuyag mentioned Goldman Sachs for its lending of 187 billion tugrugs (roughly 128 million USD) into the Mongolian economy/banking/mining (? Sorry, this was not quite real clear, but the focus was on the amount of money loaned by Goldman).
When addressing questions for expected GDP for 2009, Mr. Enhhuyag mentioned that essentially Mongolian economy is a 6 billion tugrug (meant USD, I believe) economy.