BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 279 – June 21, 2013

NEWS HIGHLIGHTS:

Business

Rocky road for Rio in developing world;

TT wash plant feasibility study complete;

Erdenes-TT to repay Chalco debt this year;

Mongolian, Japanese banks open TDB Leasing;

Mongolian company taps North Korea oil potential to ease Russian grip;

Clean Energy signs CDM agreement with Swedish Energy Agency;

Newera intersects coal in northern section of Shanagan East;

Airline opens new route to Baruun Urt;

Alaska professors build AUM engineering program 'from scratch';

Asia Foundation closes out environmental program;

PwC receives new country head;

Voyager to explore minerals licenses in Brazil;

Lessons from Rio Tinto’s woes.

Economy

The first five months of 2013;

Mongolian export revenue drops 3.3% as coal prices decline;

Mongol Bank issues MNT 400 billion bonds;

2012 government income fell 13.4 percent short of budget;

New mortgages drive up property prices;

UB City to dam Tuul River to increase water reserves;

New machines to provide automated government services;

Mongolia to cut mortgage rates to support middle class growth;

Government finances construction sector;

Mongolia could get back to business after election;

Securities Law will help Mongolian companies raise money;

Advice to retailers: Put Mongolia on your map;

Film highlights Mongolia's health challenges;

Scientists observe Mongolia gazelles to study foraging communication;

Why are emerging markets tanking?

Tumbling investment dragging down the Russian economy.

Politics

Elbegdorj leads the polls;

President's chief of staff denies allegations of mining swindle;

OSCE releases pre-election report;

Cameras to broadcast from polls;

Mongolians abroad cast their votes;

President to give communities partial control of budget;

Government asks investors about its policies;

Germans to receive 30-day visas;

Mongolia, Germany to intensify defense cooperation;

Mongolia to host WEF meeting in September;

Mongolia and partners request continued duty-free access to U.S. markets;

IAAC investigates former MP;

International Mongolian criminal makes move for the U.S.;

Police warn against counterfeit bills;

Foundation laid for new City Hall;

Hogan Lovells explains anti-money laundering Law;

Proving the naysayers wrong.

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank

Major Drilling

International SOS

Wagner Asia Automotive

Wagner Asia Equipment

Oxford Business Group

Mongolian National Broadcasting

Breakthrough PR

BCM MONTHLY MEETING NOTICE

BCM‘s monthly meeting for members will be on Monday, June 24, 2013 at 5PM at the KEMPINSKI

HOTEL KHAN PALACE, 2nd floor, Altai Ballroom.

The bilingual meeting will feature the following presentations:

- Call to Order/Business Council of Mongolia: B. Byambasaikhan, Chairman, BCM

- BCM Report: Jim Dwyer, Executive Director, BCM

- Yana Stankova, Country Director, Oxford Business Group – ―Oxford Business Group and ‗The

Report: Mongolia 2014‘‖

- L. Sumati, Director, Sant Maral Foundation – ―Update on Presidential Elections‖

- Takenori Shimizu, Ambassador of Japan to Mongolia – ―Economic relationship between Japan and

Mongolia ~ Toward the strengthened relationship in the future‖

- U. Ganzorig, President, Mandal General Insurance – ―Risk Environment in Mongolia: 10 risks to look

at‖

- Adrienne Youngman, Partner, Mongolia Talent Network – ―Presentation of Employer of the Year

2012 Award‖

A networking reception will be held for all attendees immediately following the business portion of

the meeting in the ―Tenger‖ restaurant, 1st floor, Kempinski Hotel Khan Palace.

BUSINESS

ROCKY ROAD FOR RIO IN DEVELOPING WORLD

When Rio Tinto PLC's top brass reflect on June 2013, they are likely to see a month where they took

one step forward and one step back in their mission to create a foothold in the developing world.

As the company prepares to cut the ribbon on the Oyu Tolgoi copper-gold mine, its dream of

replicating its Australian iron ore business in the wilds of West Africa looks further away than ever.

The Simandou iron ore project in Guinea has been sliding from prominence for some time within Rio

Tinto's portfolio, and on Wednesday its development was revealed to be even more unlikely when

Guinean Mining Minister Lamine Fofana revealed costs could be double previous estimates.

On the surface, the major problem at Simandou is the disagreement between Rio and the

government over how much financing Guinea should bring to the table. In reality, Simandou would

struggle to win approval from Rio Tinto's board even if all its ducks were in a row. The miner is in

money-saving mode, and is already over-reliant on iron ore.

All the more reason for Rio Tinto executives to put their interests in Mongolia. But a ceremony

expected to celebrate first sales from Oyu Tolgoi had been canceled, with Rio refusing to explain

why.

Sources close to Oyu Tolgoi suggest a ceremony is still likely before 30 June. Some believe the delay

has more to do with public relations than any rising geopolitical tensions.

Rio's performance in developing nations carries extra importance given it is one of several

differentiators between it and BHP Billiton. While Rio Tinto has played major hands in Mongolia and

Guinea, BHP's operations in northern Africa and Asia are trivial to its bottom line. BHP's most

important operations are found in wealthy, developed countries such as the United States and

Chile, while its best growth prospects are in Canada and Australia. Rio Tinto needs success in places

such as Mongolia to balance its failures in Mozambique and, in all likelihood, Guinea.

Source: WA Today

TT WASH PLANT FEASIBILITY STUDY COMPLETE

The feasibility study for a coal-washing plant for the Tavan Tolgoi coking coal mine's East Tsankhi

block received approval from the Mineral Council on 13 June.

The study estimated a capacity for processing 459 million tons of coking coal and 29.4 million tons

of thermal coal over a period of 15 years. Estimated costs were projected at MNT 17.5 trillion and

overall profits of MNT 24.6 trillion. The plan has plotted a timeline of four years and two months to

recuperate the costs for the plant's construction and development.

Participating in the project are IMK LLC, Grand Power LLC and academics from the Science and

Technology University of Mongolia.

Source: Business-Mongolia

ERDENES-TT TO REPAY CHALCO DEBT THIS YEAR

Erdenes Tavan Tolgoi LLC's chief executive said it expected to conclude its contract with Aluminum

Corp. of China Ltd. (Chalco) in 2013.

Erdenes-TT is currently selling coal to Chalco at USD 56 a ton as repayment for total debt from 2011

of USD 350 million. Chief Executive Officer Yaichil Batsuuri said currently the company has

outstanding debt of USD 170 million, but it would take four to five months to pay that sum off.

Erdenes-TT has suffered from poor coal prices, and the challenges is likely to grow worse as

Batsuuri said the price for coal sold to China would likely fall when it sets a new price.

―The price for the next season will be established on the first of July. Generally, the coal market

looks dim. The price is more likely to fall.‖

The company has awarded a tender to mine at its West Tsankhi site to Gobi Power LLC for MNT 17

billion. Some have speculated that this would prevent a strategic partnership with foreign

companies, but Batsuuri said that a strategic consortium is not yet off the table.

―The consortiums are keen on participating as a strategic investor and expressed their interests,‖

he said. ―There is a working group formed that had long talks with the investors. We are yet to see

progress on these talks.‖

Additionally the company has negotiated for deliveries at a new port that Batsuuri said would save

the company tens of millions of dollars.

Source: Business-Mongolia.com

MONGOLIAN, JAPANESE BANKS OPEN TDB LEASING

Mongolia and Japanese leading banks have established TDB Leasing Company to provide financial

leasing services.

A subsidiary company of Japanese Sumitomo Mitsui Banking Corp., MG Leasing Corp. and TDB

Capital, a subsidiary of Trade and Development Bank of Mongolia (TDB) LLC, have established a

corporate alliance agreement to launch a new company under TDB Leasing on 11 June. The

corporate alliance signing ceremony took place at the TDB building, where President and Chief

Executive of MG Leasing Corp Shigemasa Sonobe and TDB Chief Executive Balbar Medree have inked

the document.

―We are happy to have an opportunity to share our experience on financial services including

leasing and installment payments with [TDB]. We believe the newly established TDB Leasing

Company will contribute greatly to the demand of Mongolia's growing financial leasing service.

Source: Info Mongolia

MONGOLIAN COMPANY TAPS NORTH KOREA OIL POTENTIAL TO EASE RUSSIAN GRIP

A Mongolian company has tapped one of the world's most closed markets by taking a stake in a

North Korean oil refinery to help Asia's fastest growing economy ease its energy reliance on Russia

and China.

HB Oil JSC, an oil trading and refining company based in Ulaanbaatar, said it acquired 20 percent of

the state-run entity operating North Korea's Sungri refinery. It intends to supply crude to Sungri,

which won't be fully operational for up to a year, and export the refined products to Mongolia.

―Mongolia has had diplomatic relations with North Korea for many years,‖ Ulziisaikhan Khudree, HB

Oil's chief executive, said in a 12 June interview in Ulaanbaatar. ―There are certain risks, but other

countries do business with North Korea so I am quite optimistic the project will be successful.‖

The HB Oil deal looks like a ―one-off‖ at this point as rhetoric for economic change in North Korea

has not translated into real investment—a sign that ―real reform‖ has yet to come, said Daniel

Pinkston, a Seoul-based analyst with the International Crisis Group. Still, like Mongolia, North Korea

needs to diversify its sources of supply, technology and investment away from China, and business

offers that try to improve its own energy securing problems will be seen as favorable by Kim Jon

Un's regime, said Pinkston.

Under the transaction, worth as much as USD 10 million, the Mongolian Stock Exchange-listed HB Oil

would swap shares for full ownership of Ninox Hydrocarbons (L) Berhad, a private Malaysian

company that owns 20 percent of KOEC International Inc., and issue convertible notes to fund

investment at Sungri. The rest of KOEC International is held by North Korea's national oil company,

Korea Oil Exploration Corp., which also has oil production and exploration rights in North Korea.

HB Oil is part-owned by New York-based private equity firm Firebird Management LLC. Additionally,

HB Oil has signed an option to buy 51 percent of Blacktip Energy Inc., another Ninox Energy Ltd.

subsidiary and owner of Korex Ltd., which is an offshore explorer focused on the sea east of North

Korea.

Source: Bloomberg

CLEAN ENERGY SIGNS CDM AGREEMENT WITH SWEDISH ENERGY AGENCY

The Swedish Energy Agency and Clean Energy LLC have signed an agreement for the transaction of

approximately 600,000 Certified Emission Reductions generated by the Kyoto Protocol Clean

Development Mechanism (CDM) project, the Salkhit Wind Farm, the fourth CDM project and the first

wind power project to be registered in Mongolia.

Salkhit Wind Farm will generate renewable electricity using wind power resources, with the output

to be sold to the National Electricity Transmission Network (NETN) on the basis of a power purchase

agreement. The wind farm, the first independent power producer in Mongolia, with 31 wind

turbines from General Electric Co. will have a total capacity it 50 megawatts and generate about

170 gigawatt hours of electricity per year. Leading the project is Newcom Group, the parent

company of Clean Energy.

As the grid is dominated by thermal power generation, the Salkhit wind farm will contribute to

greenhouse gas (GHG) emission reductions, approximately 180,000 tons of CO2 equivalent per year

once the wind farm is fully operations, expected by mid-2013.

―In addition to the emission reduction, Salkhit wind farm's contributions of renewable electricity to

the Mongolian national grid helps the country's transformation towards a sustainable energy

system,‖ said Ola Hansen, head of International Carbon Market Unit at the Swedish Energy Agency,

which is responsible for the governmental CDM program in Sweden.

Source: Newcom LLC

NEWERA INTERSECTS COAL IN NORTHERN SECTION OF SHANAGAN EAST

Newera Resources Ltd. has intersected thick, near surface coal from drilling at a new northern

section of its Shanagan East project in Mongolia.

The new intercepts from the recently completed phase three drilling program sit partly outside the

current exploration target area and provide significant upside potential in both coal tonnage and

quality. Notably, two of the holes intersected significant shallow coal in the stratigraphically

lowermost inferred mapped coal Seam 1. This lower seam was not specifically targeted during

phase one or two drilling.

Sufficient core sample material has also been collected to undertake general and coking coal

analysis testing through a qualified analytical laboratory. Progress has also been made in locating a

suitable mining contractor to sink a 30-meter-long inclined shaft to collect enough coal for a bulk

sample that will allow consultants Sedgman Ltd. to design a washing process and undertake

comprehensive washability testing of the Shanagan coal collected. It is expected that the shaft

sinking and sample recovery exercise will take one month to complete.

Source: Proactive Investors

AIRLINE OPENS NEW ROUTE TO BARUUN URT

Airline company Tengeriin Ulaach (tr: Sky Horse Aviation) has commissioned a flight route between

Ulaanbaatar and Baruun Urt, Sukhbaatar Aimag.

Using a L410 plan made in the Czech Republic that can hold nine passengers, travel time takes one

hour 30 minutes. The company plans to make flights once a week for MNT 90,000 each way. The

company is also providing private travel for USD 2,000 an hour.

Sukhbaatar Aimag is most visited by travelers to visit Altan Ovoo and see the Whooper swan.

Source: Info Mongolia

ALASKA PROFESSORS BUILD AUM ENGINEERING PROGRAM 'FROM SCRATCH'

Seven professors from the University of Alaska Fairbanks are helping to establish an engineering

school at the new American University of Mongolia (AUM).

Professors are helping develop curriculum and designating classrooms at the new university, located

in Ulaanbaatar. The university signed a contract with AUM last spring. UAF Mining and Geological

Engineering Program Chairman Rajive Ganguli, who is leading the project, said Alaska and Mongolia

are similar when it comes to mining in the far north.

―Our cold climate engineering expertise is very relative to Mongolia, and they can benefit from it.

And so we have academic agreements with the Mongolian Institute of Science and Technology and

with Erdenet Mining Corporation,‖ he said.

There is no federal funding to help start the school, which is estimated to cost in the millions of

dollars. Ganguli said most of that will come from private-sector mining companies in Mongolia. He

added that helping start the new school is a very exciting prospect for the Alaska professors

involved.

―It is wild to think you're going to [create an] engineering school from scratch,‖ he said. He said

―the stuff we hate‖ about the education system, ―we get to remedy.‖ He added that his team will

―review engineering education in some of the top universities—and we have our own ideas—and

we'll steal from the best.‖

Source: Associated Press

ASIA FOUNDATION CLOSES OUT ENVIRONMENTAL PROGRAM

The Asia Foundation held a closing workshop for the Engaging Stakeholders for Environment

Conservation program (ESEC) on 13 June.

The goal of ESEC was to advance responsible resource use and environmental conservation by

engaging stakeholders—government, mining companies, and citizens—in the development of

Mongolia's mineral sector contributing to sustained prosperity for all Mongolians. The program had

two main objectives: (i) Facilitate positive negotiations between local communities, mining

communities, artisinal miners and local government at the county level; and (ii) Achieve positive

changes in environment behavior at the county level. In the 45 counties of 14 provinces, the

program worked with government agencies, non-governmental organization, and mining companies

to promote responsible mining practices, to mitigate negative environmental impacts, and to

reduce conflicts between stakeholders.

Key results of the program include the establishment and institutionalization of 31 local multi-

stakeholders' councils consisting of mining companies, selected artisinal miners, local governments

and communities. Beginning June 2013, in partnership with UNICEF, the Asia Foundation is

implementing a new year-and a-half-long program for household water use in Khuvsgul Aimag. The

project builds on the water quality monitoring work of the ESEC program and aims to reduce the

incidence of water-borne diseases by building the capacity of local institutions and partners, and to

monitor water quality at the point of source and point of use.

Source: Asia Foundation

PWC RECEIVES NEW COUNTRY HEAD

PricewaterhouseCoopers announced the exit of its first country managing partner to be replaced by

Matthew Pottle.

Outgoing Country Manager Carolyn Clarke took the practice in Ulaanbaatar from 20 people to 80 in

just over two years. Under her leadership in 2012, PwC was awarded the best international

company award by the Business Council of Mongolia.

―I am proud of all we have achieved in Mongolia building the leading professional services practice,

introducing international quality training for all our people, working with all of the major

organizations to improve their financial reporting and providing training and professional

development through MoniCPA and other organizations,‖ said Clarke.

Her replacement, Pottle, has been with PwC for over 20 years, leading delivery of audit and

assurance services to a wide range of clients in emerging markets. In his latest role Pottle was the

regional human capital managing partner for Central and Eastern Europe automotive, managing

partner for Slovakia, and PwC Central and Eastern Europe automotive leader.

―We have a great team in PwC Mongolia and we are very proud to be fully integrated into PwC's

global network,‖ said Pottle.

In recent news, PwC has been investing in people development and training and had five PwC staff

members successfully pass the recent Mongolia tax examinations. PwC also acted as a platinum

sponsor to the third Coaltrans Mongolia conference held in Ulaanbaatar this week where Pottle

delivered a presentation on the impact of regional developments on Mongolia's coal market. The

conference attracted nearly 200 national and foreign delegates and covered a wide range of

business and economic issues relevant to coal mining industry in Mongolia.

Source: PricewaterhouseCoopers

VOYAGER TO EXPLORE MINERALS LICENSES IN BRAZIL

Voyager Resources Ltd. announced an agreement with a subsidiary of Xstrata Copper Ltd. that gives

it exposure to Brazil's minerals opportunities.

The agreement with Xstrata Do Brasil Exploração Mineral Ltda. transfers licenses from its claims in

the Carajas region of Brazil to Voyager. In consideration for these licenses being granted, the

company plans to commit a minimum USD 1 million mineral exploration program in the next two

years.

Xstrata retains a back in right, in the event of a large copper discovery made by Voyager with a

minimum 750,000 tons of contained copper.

Also, Voyager signed a strategic alliance agreement with Avanco Resources Ltd. and FFA Legal Ltda.

Source: Voyager Resources Ltd.

LESSONS FROM RIO TINTO‟S WOES

The last time Rio Tinto PLC shares were trading at last week's three-and-a-half-year low, the miner

was receiving only USD 60 a ton for its iron ore. Today the price is USD 112 per ton.

The trend is repeated across the sector, as investors fall out of love with natural resources. Fund

managers polled by Merrill Lynch have only once been so negative towards commodities in the

survey's history: December 2008. So far, the ―end-of-the-supercycle‖ trade has paid off. The ratio

of Europe's Stoxx basic resources index to the broader Stoxx 600 has fallen to a level last touched

during the depths of the 2008-2009 crisis.

Then, however, the world economy was on the brink of a sharp contraction. Few believe that is the

case now, for all the concerns about sluggish growth and rising yields. The United States appears to

be recovering, and the International Monetary Fund is predicting global growth of 3.3 percent this

year. In such an environment, commodities—demand for which is highly geared to economic

growth—usually rally. Indeed, as Barclay's notes, the performance of commodities since the

financial crisis has been the weakest during any global economic recovery of the past 40 years.

There are two main arguments why commodities will struggle nonetheless. First, even if the world

is growing, China is slowing. That means demand growth for most commodities will slow. Second,

the supply side is responding to years of high prices, with rising production of iron ore, oil and

wheat putting pressure on prices regardless of the economic backdrop. Both arguments suggest the

era of rapidly rising prices is over. But neither justifies investors' negativity. China is still the

fastest-growing major economy; forecasts of enormous supply growth seem optimistic as producers

cut back spending. Either the resources sector is undervalued, or it is signaling that we should be

very worried about outlook for growth.

Source: Financial Times

ECONOMY

THE FIRST FIVE MONTHS OF 2013

The National Statistical Office of Mongolia has released its economic indicators for the first five

months of 2013. The slumping Mongolian economy may be decelerating further as foreign trade

increases, while disinflation indicates that the aggregate demand of the economy is faltering.

First quarter economic growth came in at 7.2 percent year-on-year, far below expectations.

Meanwhile inflation and foreign trade decreased significantly, and the trend will like continue. At

the end of the first five months of 2013 CPI stood at 9.7 percent year-on-year. At the end of May

money supply (M2) in the economy grew by 17.5 percent year-on-year. The Source said the cooling

of CPI is likely related to a drop in the aggregate demand within the Mongolian economy.

Foreign trade activity in the first five months of the year totaled USD 4.1 billion, down 5.4 percent

compared to the same period of 2012. Imports dropped by 6.8 percent, while exports dropped 3.3

percent compared with the same period last year.

Overdue loans within the banking system of Mongolia reached USD 100 million, a 240 percent

increased compared with the same period from last year. Bad loans in domestic banks grew by 0.7

percent year-on-year at the end of May, however the figure showed a 1.9 percent year-on-year

decrease in April. The sudden surge of overdue loans and bad loans may signal troubling times for

domestic financial services enterprises.

Source: Mongolian Investment Banking Group

MONGOLIA TO CUT MORTGAGE RATES TO SUPPORT MIDDLE CLASS GROWTH

Mongolia's Central Bank plans to cut interest rates on mortgages by almost half to 8 percent from

around 15 percent this month, following a new policy approved by the government to ease financial

burdens on the middle class.

The new mortgages require a down payment of 10 percent to 30 percent and must be paid back in

20 years, the Bank of Mongolia's chief economist, Sandagdorj Bold, said yesterday in a telephone

interview. The loans are valid for apartments smaller than 80 square meters (861 square feet),

qualified applicants must have a full-time job, and monthly payments cannot exceed 45 percent of

the family income, he said. The policy goes into effect on 17 June.

―The intended purpose is to support the middle class and support the long-term sustainable

economic growth by increasing the savings of the middle class,‖ said Bold, adding that the 8

percent figure is meant to track the Bank of Mongolia's target rate for inflation. ―It can vary plus or

minus depending on the performance of inflation.‖

Outstanding loans in Mongolia are MNT 900 billion, said Bold. Certain qualified homeowners can try

to refinance their bank loans, if their income falls within a certain level. Bold called the level a

―middle-class income,‖ without providing specific figures. The 14 percent to 16 percent interest

rates that home buyers have been willing to carry ―shows the real potential of bank lending in the

financial market and the capability of lending the mortgage loans,‖ said Bold. ―This is the reality of

the Mongolian financial system. The market decided the interest rate.‖

The new lower rates represent ―a profound positive on several fronts,‖ Nick Cousyn, chief operating

officer at BDSec JSC, wrote in a note to investors. ―Fixed housing expense will increase disposable

income, which will be spent in the local economy, growing GDP.‖

The lower interest rate could help absorb the increasing number of vacant units outside the city

center and will also help to modernize the ger districts, said Cousyn.

Source: Bloomberg

MONGOLIAN EXPORT REVENUE DROPS 3.3% AS COAL PRICES DECLINE

Mineral rich Mongolia's export income dropped in the first five months of this year as a result of

falling coal prices paid by China, the nation's largest trading partner.

Mongolia's exports fell 3.3 percent to USD 1.64 billion in the first five months of this year from the

same period last year, the National Statistical Office said in a release on its website yesterday. The

value of coal shipments declined 44 percent to USD 448.6 million, while volumes dropped 14

percent to 6.33 million tons, according to the statement. Imports were USD 2.477 billion in the

period, down 6.8 percent from the same period a year earlier, leaving a trade deficit of USD 824.7

million, according to the statistics bureau.

The value of gold shipments more than tripled to USD 126.2 million in the first five months from

USD 38.9 million a year ago, according to the agency. Three tons of gold was exported compared

with 0.9 tons a year earlier, the statistics office said. Mongolia exported 1.79 million barrels of oil

during the first five months of the year, up from 1.26 million barrels a year earlier, the statistics

office said. The value of the exports rose 33 percent to USD 169.5 million this year.

Exports of iron ore were 2.32 million tons during the first five months of the year, falling from 2.39

million tons in the same period last year, the statistics office said. The value of the shipments rose

56 percent to USD 262.4 million from USD 168.2 million a year ago, according to the agency.

The nation's consumer price rose 9.7 percent in May from a year earlier and gained 0.3 percent

from April, the agency said. The number of registered unemployed fell to 40,500, the statistics

office said, a 30 percent decrease from the same period last year.

Source: Bloomberg

MONGOL BANK ISSUES MNT 400 BILLION BONDS

The Bank of Mongolia issued on Wednesday one-week bills worth MNT 400 billion at a weighted

interest rate of 11.5 percent per annum.

The one-week CBBs, a main monetary policy instrument of the Central Bank, play an important role

on managing bank reserves. This CBB rate represents the Central Bank's policy rate and guides the

interbank money market. In July 2007, the CBB with stable rate and unlimited bidding was

introduced with auctions to be held on every Wednesday. This really had attracted the banks'

interests providing the possibility for the banks to place their excess reserve in short-term assets.

There has been a substantial change in the way banks manage their reserves. For the favorable

adjustment of CBB rate and loan principles along with the well balance of the tugrug and foreign

exchange, one-week CBB has been held in a type of competing by rate since May 2005. The auction

average rate is the targeted rate variable of plus or minus 2 percent from the policy rate and it

frames to make the interbank rate as the operational target in the midterm.

Source: Montsame

2012 GOVERNMENT INCOME FELL 13.4 PERCENT SHORT OF BUDGET

A budget report for 2012 presented to the Cabinet of Ministers has revealed that although

government income grew by 15.5 percent, it fell 13.4 percent short of projections.

Source: Udriin Sonin

NEW MORTGAGES DRIVE UP PROPERTY PRICES

Low-interest mortgage loans are driving up apartment prices in Mongolia.

Apartment prices have grown by MNT 200,000 to MNT 400,000 per square meter since 20 May. The

highest price growth has been seen in Ulaanbaatar in contrast to past years when apartment prices

grew cheaper in warmer months. The price growth seems to have directly followed the release of 8

percent mortgages.

Source: Undesnii Shuudan

UB CITY TO DAM TUUL RIVER TO INCREASE WATER RESERVES

The City of Ulaanbaatar is planning to dam the Tuul River in an effort to deliver more water to city

residents.

―The building of the water dam at Tuul River will help in collecting water from the river itself, rain,

and underground water, which will be used for the regulation of river flow,‖ said T. Bat-Erdene,

deputy of ecology and green development for Ulaanbaatar.

The city is planning for a 40-meter high dam for a total cost of USD 300 million. He said the city will

need to commission technical and economic studies for the dam construction, but it expects

construction to begin next year and to continue over the following four to five years.

―By preliminary estimations, this dam will provide water reserves to Ulaanbaatar until 2050,‖ he

said.

Bat-Erdene said that city officials were also considering the construction of a new water treatment

plant that would be commissioned by 2016.

Source: Udriin Sonin

NEW MACHINES TO PROVIDE AUTOMATED GOVERNMENT SERVICES

Prime Minister Norov Altankhuyag presented one of the first 17 Government Service e-Machines,

which are intended to simplify and bring government services closer to citizens.

The machines use the electronic identification cards held by every citizen and can be used to make

payments for electricity bills, order daily newspapers and receives six types of civil registration

documents, such as marriage registration, and tax documents. The machines can also be used to

deliver complaints to government.

―Government services have come to your door,‖ said Altankhuyag to an audience at Khutul of

Bayankhushuu in Ulaanbaatar. ―By autumn, there will be 230 of these machines installed throughout

the country.‖

Source: Info Mongolia

GOVERNMENT FINANCES CONSTRUCTION SECTOR

The government has allotted MNT 116.9 billion to loan to construction companies to maintain

continued construction activity.

The government is also providing MNT 117.6 billion for loans for imported materials. Loans interest

will range between 5.5 and 7 percent.

An initial tranche has been distributed to construction companies.

Source: Undesnii Shuudan

MONGOLIA COULD GET BACK TO BUSINESS AFTER THE ELECTION

Financial institutions are sizing up their prospects in Mongolia's emerging capital markets weeks

before a presidential election that is expected to restore some confidence in the largely mining-

based economy.

After a period of little political progress, this month's election may be another positive

development for would-be dealmakers after the Mongolian parliament passed a revised Securities

Law late last month. The new rules are intended to make it easier for multinational companies—

especially those with interests in Mongolia's vast mining reserves—to list on the Mongolia Stock

Exchange by allowing dual listings with overseas bourses.

The law will take effect at the beginning of next year. Until then, a lot of details still have to be

sorted out, said Altai Khangai, Chief Executive of the Mongolian Stock Exchange.

―There are many companies with mining operations in Mongolia that are listed outside the country,

but local citizens would like to buy their shares,‖ he said. ―The provision for dual listings can

enable this.‖

Typical of other frontier markets, however, the level of uncertainty in Mongolia's economy and

political system has given investors and issuers pause before going ahead with bigger plans.

―One thing that has slowed things down in Mongolia has been political uncertainty,‖ said Lee

Cashell, chief executive of Asia Pacific Investment Partners. ―It should pick up after the

presidential elections.‖

The MSE has been working on upgrading its capabilities for years. In January 2011 the London Stock

Exchange signed a strategic partnership with the MSE to improve the latter's technology,

management and market expertise. The full benefits of the partnership have still not fully

developed, sources said. Meanwhile, the new law encourages foreign and local companies to list in

Mongolia and abroad with updated practices for public and private placements of securities that

line up with international rules and modernized payments systems for listing and buying securities.

Source: IFR Asia

SECURITIES LAW WILL HELP MONGOLIAN COMPANIES RAISE MONEY

The new Securities Law, due to become effective on 1 January 2014, has yet to be fully released,

but is expected to introduce provisions that will allow for the highly anticipated triple-listing of

state-owned Erdenes Tavan Tolgoi LLC and bring local disclosure and financial statement reporting

requirements in line with other emerging markets

―The previous law was mostly prohibitive in terms of activities to be carried out in the securities

market, whereas the new one introduces more flexibility, which is a necessity for the market to

grow,‖ said Saruul Ganbaatar, deputy chief executive officer and chief regulatory officer.

Business Council of Mongolia (BCM) Executive Director Jim Dwyer believes the law is a critical

component for companies to tap the capital markets. Noting the abysmal initial public offering

(IPO) volumes in Mongolia in the past two to three years, he believes the country's equity market

has not been working, despite the London Stock Exchange's good work in setting up a new platform.

The new law enables Mongolia-listed companies to issue global depository receipt programs and

companies listed elsewhere to issue Mongolian depository receipts. Previously, companies that

wanted to list in Mongolia had to be Mongolia-incorporated, significantly limiting opportunities for

those with significant business in the country but based outside Mongolia to tap opportunities in the

country. Several Mongolia-based companies are listed on exchanges that target natural resources

issues, such as the Toronto Stock Exchange and the Australia Securities Exchange.

The Securities Law also introduces the concept of custodian banks to the Mongolian market. This is

important for the development of both the depositary receipts and collective investment scheme

businesses. Like the regulations on depositary receipts, the drafting of the regulations on custodian

operations has already begun.

A template deal will be needed to revive the country's public offering market. According to BCM's

Dwyer, one good public offering enabling the market to see how the listing process, regulatory

regime and financial disclosure practices work could prompt 10 to 20 decent-sized Mongolian

entities to consider local as well as overseas listings.

Source: International Financial Law Review

ADVICE TO RETAILERS: PUT MONGOLIA ON YOUR MAP

As western retailers reach beyond their home markets in search of emerging-market consumers, the

so-called BRIC countries of Brazil, China, India and Russia should not be the only ones on their radar

screens.

In the 2013 A.T. Kearney Global Retail Development Index report published this week, Armenia

jumped for the first time to the top 10 most-attractive country list. Mongolia rose to the seventh

place from ninth place, the second time it has landed among the top 10. The sub-Saharan African

country of Namibia made the top 30 list for the first time while Botswana jumped to No. 25 from

No. 20.

China dropped one place to No. 4. However, for apparel retailers, the country remains the most

attractive, partly because of its growing online sales, of which 75 percent is apparel, Althea Peng, a

partner at A.T. Kearney and co-authored of the study, said in an interview. She added Internet sales

account for about 6 percent of China's retail industry, compared to less than 1 percent of sales in

most emerging markets. Wal-Mart WMT has called out China as a big online investment focus.

Mongolia, thanks to its copper and coal mining industries, has become Asia's fastest growing

economy, ripe with opportunities for both general merchandise retailers and specialty retailers,

Peng said, adding French big-box chain Carrefour had entered the market, along with other high-

end brands including LVMH and Apple Inc.

Source: MarketWatch

FILM HIGHLIGHTS MONGOLIA'S HEALTH CHALLENGES

Landlocked Mongolia is in the midst of unbridled growth and a mining boom, yet it is also at the

crossroads of health, which could well decide its future trajectory.

Mongolia is seeing a rise in noncommunicable diseases (NCDs), including heart disease, diabetes,

mental illness and cancers. The rapid transition to a capitalist economy and the influx of foreign

processed food is leading to massive changes in lifestyle and diets. Austrian doctor and Harvard

Fellow Alessandro Demaio says some of those changes are fueling the rise of NCDs.

―[It] is leading to a rapid rise in these types of diseases and also the risk factors in such things as

child obesity,‖ he said.

Demaio says unless something is done to address cardio vascular diseases, the leading cause of

deaths in the country, their frequency could double in the next 30 years. In an attempt to present

the challenges these developments are having on health, to both the public and politicians, Damaio

is producing a film with NCD Free, a global social movement fighting NCDs.

Using new media and social platforms such as film, Facebook, and Twitter, Demaio is also trying ―to

connect with a new generation and try to bring a call to action on this issue. His film focuses on an

inspiring young Mongolian trainee cardiologist who addresses other related problems like poverty

and lack of opportunities in the treatment of cardio vascular diseases. The film will be shown in the

United States and also at the Melbourne festival of ideas in November.

Source: Radio Australia

SCIENTISTS OBSERVE MONGOLIA GAZELLES TO STUDY FORAGING COMMUNICATION

A team of physicists and ecologists applied a simple model demonstrating how a herd of animals

might use vocalizations to help each other find food to data on Mongolian gazelles roaming the

Asian steppe.

Researchers found that the typical distance over which the gazelles communicate is roughly what's

needed for an efficient search strategy that allows all herd members to reach grazing areas. The

team modeled a herd of animals as ―particles‖ moving in a two-dimensional space that charted the

richness of vegetation in an area, communication used to direct movement, and ―white noise,‖

which mixed an element of randomness. From satellite imagery the researchers generated a map of

vegetation richness across this area.

The best results came about for a communication frequency of just over one kilohertz, comfortably

within the range of sounds the gazelles are known to produce, and corresponding to a plausible

communication distance of a few kilometers.

Source: American Physical Society

WHY ARE EMERGING MARKETS TANKING?

Remember all that talk of ―decoupling?‖ That was the idea that the stock markets of fast-growing

economies, particularly in Asia, would no longer be beholden to Wall Street's every move. They

would better reflect the attractive characteristics of their home countries and soar—while western

markets drowned in a soup of huge debts, worsening demographics and burdensome regulation.

Decoupling is indeed happening, but not quite in the way originally imagined. In the land of the

free—where a giant debt clock in Times Square chronicles the inexorable growth of America's

indebtedness and bickering politicians cannot even agree what day of the week it is—the main stock

index is up 14 percent so far this year. Most emerging markets lag way behind this and some are

even down on the year so far—Brazil has slumped 20 percent.

What's going on? Several things. One is that China is transitioning to a slower rate of economic

growth based on internal consumption, rather than frantic construction and exports. That's bad

news for any country whose economy depends on exporting raw materials to China—most obviously

Australia, but also countries such as Brazil, Russia, Chile, and parts of Africa. Another is that Japan

has decided to cheapen the yen, so countries such as South Korea suddenly look a lot less

competitive.

The performance of developing markets has also constrained flows of money into emerging ones.

And there's liquidity. Emerging countries' stock markets are much smaller than developed ones, so

big movements of money have proportionately more impact. Also, when fund managers need to

repay investors, they sell the shares that are easy to sell—the biggest ones. These tend to be the

ones that have the highest weight in the indices, so the indices fall heavily. Finally investors forgot

that economic growth is not in itself an indicator of future market returns, and never was. The

main beneficiaries of China's growth, for instance, have been the hundreds of millions of ordinary

Chinese lifted out of abject poverty since the late 1970s—not shareholders in Chinese companies.

Source: Financial Times

TUMBLING INVESTMENT DRAGGING DOWN THE RUSSIAN ECONOMY

Output in the economy of Russia, an important partner to Mongolia and its northern neighbor, is at

a standstill with falling investment leading the way.

Russian industrial production in April was supported by one-off factors, but investment demand

continues contracting. Negative real growth of budget spending and weak commodities pricing

combined with weakening consumer demand, still present a challenge. May's data is likely to be

even worse, affected by extended holidays, suggested VTB.

Fixed investment has been dropping off, and is now starting to lead the slowdown in the economy.

The trend mirrors falling business confidence, which is due to a number of factors. Fear over the

ongoing anti-corruption crackdown, persistently high inflation, savings rate amongst consumers

unsure of what will happen next are the major factors, and form a formidable team.

Source: BNE

POLITICS

ELBEGDORJ LEADS THE POLLS

Two polls show that Elbegdorj has a wide lead over his opponents for the 26 June presidential

election.

The Sant Maral Foundation released a poll surveyed from 14 to 16 June on the very last day

Mongolian law allows polls to be published. The poll surveying 1,480 people in Ulaanbaatar showed

that 54 percent intended to vote for incumbent president Tsakhia Elbegdorj, 37 percent for

Badmaanaymbuug Bat-Erdene, and 9 percent for Natsag Udval. On turnout, 70 percent said they

were definitely planning to vote on 26 June. Voters indicated that the most important issue was

―standard of living‖ (selected by 26 percent of those polled), closely followed by unemployment

(25.6 percent).

A separate exit poll of the 273 of the 2,724 overseas voters who voted in Washington D.C., San

Francisco, London and Seoul was also published. However, as the number of overseas voters

represents only a fraction of one percent of the total electorate, the ballots are not likely to

provide much sway over the election, with exception for an extremely tight race. The poll reported

195 votes for Elbegdorj (71 percent), 69 votes for Bat-Erdene (25 percent), and nine for Udval (3

percent).

Although the methodology employed for the exit poll appears less than scientific, the group who led

the poll, We have a Right to Vote, defended its accuracy by pointing to last year's election. The

group noted that its polls of overseas voters showed 46.3 percent and 24.9 percent favored the

Democratic Party (DP) and Mongolian People's Party (MPP), respectively, compared with eventual

turnout of 45.3 percent of the electorate for the DP and 24.9 percent for the MPP.

Click here to view the whole poll published by the Sant Maral Foundation.

Source: North America-Mongolia Business Council

PRESIDENT'S CHIEF OF STAFF DENIES ALLEGATIONS OF MINING SWINDLE

Presidential Chief of Staff P. Tsagaan has denied claims by foreign news that associates of the

president had conned a South Korean investor into donating to the president's campaign in return

for a gold mine license that was later found to be empty.

Tsagaan was mentioned in a report from Asian News International and disseminated on the Indian

news website Zeenews.com that said an unnamed Korean citizen was offered a gold mining license

for a deposit worth USD 10 million. The report claimed that the license was a gift for ―humanitarian

assistance‖ that helped reduce winter smog in Ulaanbaatar by installing heated floorboards to gers

that would otherwise burn coal. In return presidential cabinet members asked for a donation of USD

2 million. Due diligence, alleges the report, showed there was no gold at the deposit.

―Such slanders and libels started the month before the presidential election campaign was

launched,‖ he said. ―There were numerous attempts to discredit the president, his team, and his

advisors. But each time such defamations and unabashed accusation were proven to be lies, by

law.‖

Tsagaan said that the inclusion of the presidential election date indicated that the article may be

related to election interests. The chief of staff said that President Tsakhia Elbegdorj was

committed to combating corruption and no mineral license had been issued since June 2010 [to

clarify, no exploration license has been issued -ed]. He noted that licenses issued after that were

later revoked by Mongolian courts. He noted that similar lies were spread in the 2009 election

before Elbegdorj was first elected as president and that it was also possible that more slander

would be spread.

―Those who libel us must be aware of the responsibility they bear in front of the law,‖ Tsagaan

said. He added, ―Libels, slander, lies such as this one will not break our will to fight down

corruption. They will not break the desire of the Mongolian people to live in a just and fair society.‖

Source: News.mn

OSCE RELEASES PRE-ELECTION REPORT

Election observers from the Organization for Security and Co-operation in Europe have delivered a

report on the presidential election in advance of when citizens will head for the polls on 26 June.

The report covers what it had monitored from 10 May to 3 June, making their analysis on the legal

environment of election and electoral system, election organization, registration, nominating

process, advertisements, press, and complaints from citizens. The report noted that the General

Election Committee was competent in preparing for the election and the electoral process was

moving forward without incident.

The 300 observers come from 24 European countries will be in attendance to observe the election

at the polls.

Source: Udriin Sonin

CAMERAS TO BROADCAST FROM POLLS

The General Election Committee (GEC) has ordered the installation of IP cameras at polling stations

in Ulaanbaatar to protect against vote tampering during the 26 June election.

GEC is cooperating with the Information Technology Authority (ITA) to install the cameras in 368

electoral districts. Cameras in 66 sub-electoral districts will be connected via fiber optic cables to

broadcast video from the polling station in real time. ITA has sent six teams to install the cameras

by 23 June.

Source: News.mn

MONGOLIANS ABROAD CAST THEIR VOTES

A total of 6,233 Mongolians abroad exercised their rights to vote in the presidential election from 14

to 16 June at all Mongolia's diplomatic missions.

The voter's registration was held from 5 to 19 May through 39 sub-commissions, and 6,478 people

had earlier been listed to vote in the election. However, 240 of them were ―crossed out‖ due to

some documentation problems. The largest number of voters was registered in Seoul, South Korea

with 1,454 people and in Washington DC, United States, with 838 people.

The voting process was held until 10 p.m. at all diplomatic missions, and the ballot papers were

sent to the General Election Commission (GEC) before being sent to Mongolia. These papers will be

counted together with the ballot papers from the polling stations in Mongolia. Instructions on how

Mongolians abroad will vote were also given by the Ministry of Foreign Affairs, General Authority of

Registration and GEC.

Source: Bernama

PRESIDENT TO GIVE COMMUNITIES PARTIAL CONTROL OF BUDGET

Mongolia will battle corruption by giving more power to communities to decide how money is spent,

President Tsakhia Elbegdorj said in an interview less than two weeks before elections in which he's

the front runner.

Communities will get MNT 270 billion to spend at their discretion, Elbegdorj said in an interview

with Bloomberg TV Mongolia in Ulaanbaatar on 14 June. The government will also require all

agencies to report their finances on the Internet to foster transparency, he said.

―Once the citizens start to control their own budget, they will be able to see what was spent

wrongfully and the next time they can have their input,‖ Elbegdorj said. ―Even the citizens will be

able to have their say in their own budget.‖

Elbegdorj, who led his nearest rival by 13 percentage points in a May public opinion poll, is seeking

to address corruption concerns and the wealth gap in a country where a fifth of the almost three

million citizens get by on USD 1.25 a day. He said tackling graft is a crucial issue as the government

seeks to instill confidence among investors looking to tap the country's 1.3 trillion trove of

resources.

―If we continue to fight corruption, there will be money in Mongolia, and it is clear there will be

confidence in Mongolia,‖ Elbegdorj said. ―Mongolia fights corruption, it moves toward good

governance, its money won't be expropriated by the officials.‖

Elbegdorj's anti-corruption effort has included a number of investigations last year, among them

into Enkhbayar, who argues that the verdict against him was politically motivated.

Source: Bloomberg, Cover Mongolia

GOVERNMENT ASKS INVESTORS ABOUT ITS POLICIES

The government is releasing a new survey that aims to receive feedback on foreign investment

policy.

Leading the survey is the Foreign Investment Regulation and Registration Department of the

Ministry of Economic Development. The two goals are to evaluate the current foreign investment

policy framework and determine the perceptions regarding Mongolia's legal environment of foreign

investors.

The questionnaire is available at InvestMongolia.com and will be closed on 27 June.

Source: Info Mongolia

GERMANS TO RECEIVE 30-DAY VISAS

Mongolia will begin providing German citizens with 30-day visas on 1 September.

―Our two countries have signed a mutual visa exemption agreement for diplomatic passport holders

that is the start of visa-free travel for passport holders of other categories in the future,‖ said

Foreign Affairs Minister Luvsanvandan Bold when presenting a formal notice in Germany.

Source: News.mn

MONGOLIA, GERMANY TO INTENSIFY DEFENSE COOPERATION

Mongolia and Germany have agreed to boost bilateral relations and cooperation in the defense

sector, especially in peacekeeping operations and military training and exercise.

The two countries reached this agreement at the 10th consecutive defense ministry meeting held in

Germany 10 June. Both countries shared views on defense ties and cooperation, which have been

intensively developed in the framework of bilateral comprehensive partnership relationship. They

also expressed satisfaction with the joint services of Mongolian and German peacekeepers in

Afghanistan since 2009.

Since the establishment of the military diplomatic relations 20 years ago, bilateral relations have

also been developing in the political and economic sectors.

Source: Bernama

MONGOLIA TO HOST WEF MEETING IN SEPTEMBER

Mongolia will host a meeting of the World Economic Forum in September.

Foreign Affairs Minister Luvsanvandan Bold traveled to Tokyo, Japan for a meeting from 9 to 12

June where he met with Japanese Prime Minister Shinzo Abe and Foreign Affairs Minster Fumio

Kishida. Each party provided remarks of gratitude, with Bold noting the significance of Abe's visit to

Mongolia in March.

Bold also met with the founder and executive chairman of the World Economic Forum, Klaus

Schwab, and other forum officials. Bold extended an invitation to all the forum dignitaries to travel

to a forum meeting scheduled for September in Mongolia.

Source: Info Mongolia

MONGOLIA AND PARTNERS REQUEST CONTINUED DUTY-FREE ACCESS TO U.S. MARKETS

The Alliance of GSP Countries (A-GSP), a loose group of 15 developing nations that includes

Mongolia, has urged the U.S. government to extend the duty-free treatment of U.S. imports from

their countries.

The Alliance enjoys duty-free facility under the generalized system of preferences, which expires

on 31 July, 2013. They are now seeking for Congress a renewal of the GSP, saying if it fails to do so

these countries' workers and economies will suffer and U.S. companies will pay USD 2 million daily

in unexpected tariffs for essential raw materials and product inputs, it said in a statement. In

addition to Mongolia the members are Algeria, Bangladesh, Ecuador, Fiji Georgie, Indonesia,

Moldova, Pakistan, Philippines, Sri Lank, Thailand, Tunisia, Uruguay, and Yemen.

―GSP benefits more than 3.8 billion people living in two-thirds of the world's economies. The GSP

also strengthens the U.S. economy by generating tens of thousands of jobs and providing U.S.

manufacturers with needed inputs,‖ said the Alliance in a letter to U.S. Congress. ―In 2012, alone,

the GSP saved U.S. companies and consumers USD 750 million in duties on USD 20 billion of U.S.

imports. Seamless GSP renewal is a priority for many American companies that keep competitive

through importing raw materials, intermediary goods, and machinery duty-free.

Source: Fibre2Fashion

IAAC INVESTIGATES FORMER MP

Former MP Kh. Narankhuu is currently under investigation by the Independent Authority Against

Corruption for bribery.

Authorities suspect Narankhuu of receiving bribes while director of Erdenet Mining Corp. The case

has been linked to an investigation into Shim Technology LLC, a joint venture with Erdenet Mining

Corp. and 70 percent investment from Israel. The company was responsible for processing leftover

ore at the mine.

Source: Undesnii Shuudan

INTERNATIONAL MONGOLIAN CRIMINAL MAKES MOVE FOR THE U.S.

Interpol put a notice that the a Mongolian citizen wanted by them had made an immigration request

to the United States, announced the Independent Agency Against Corruption..

Interpol has responded to a recent request made by T. Bilegt to immigrate to the United States by

requesting details on him from the IAAC. Bilegt is a former leading member of the Citizen's Council

in Ulaanbaatar.

Also wanted by Interpol are two cohorts of incarcerated former President Nambar Enkhbayar. They

are his sister, Enkhtuya, and his assistant, B. Khuyag.

Source: Udriin Sonin

POLICE WARN AGAINST COUNTERFEIT BILLS

The General Police Department on 18 June issued a warning about fake bills circulating in Mongolia.

Last weekend a 36-year-old woman was caught trying to make a payment with a counterfeit MNT

10,000 bill at a night club in Khoroo 1 of Baganuur District. Police are in the process of investigating

the incident further.

Source: News.mn

FOUNDATION LAID FOR NEW CITY HALL

City workers laid down the foundation stone for new Administration Office of the City of

Ulaanbaatar at Songino-Khairkhan District.

The new complex will comprise four blocks, including the Citizens Council, the Administrative

Office, a conference hall, and agency offices. Construction is expected to last two years and cost

MNT 37.1 billion.

Source: Montsame

HOGAN LOVELLS EXPLAINS ANTI-MONEY LAUNDERING LAW

New legislation passed on 30 May aims to combat white-collar crime by giving authorities greater

power to track down and arrest criminals.

The law aims to reinforce the authority of the Financial Intelligence Unite (FIU) in preventing and

combating money laundering and terrorism financing. The revised law introduces a number of

changes to strengthen the existing regime and to overcome shortcomings. It broadens the scope of

the law by way of making more institutions subject to reporting obligations and extends the range

of reportable transactions. Further, it requires reporting entities to identify their customers'

ultimate beneficial owners. It further imposes obligations to strictly monitor transactions made by

politically exposed persons.

Mongolia adopted its first comprehensive law on combating money laundering and the financing of

terrorism on 8 July 2006, which imposed obligations on certain fiscal institutions to have their

customers verified with ―know your customer‖ producers and to report certain transactions.

Further, it created FIU at the Bank of Mongolia to collect and analyze information received from

reporting entities and monitor implementation of the law. Although enacted several years ago with

the intention of providing a comprehensive regulatory regime for the old law, it was considered by

many to have shortcomings.

Adopted and amid a number of recent high profile money laundering and corruption investigations,

the revised law extends the scope and nature of the prior legislation with increased reporting

requirements and investigative authority. With increased authority, FIU will be in a position to

actively promote and implement the legislation and to investigative suspicious transactions.

However, compliance with the new law will likely impose additional costs on both reporting entities

and the state authorities. Implementing regulations will be issued by the relevant authorities and

will provide detailed guidelines for the implementation of the law.

Source: Hogan Lovells

PROVING THE NAYSAYERS WRONG

Observers say he is a sure thing. His party hopes he is. In what is a three-way competition,

Mongolian President Tsakhia Elbegdorj will be seeking to retain power in the presidential election

scheduled for 26 June, keeping his Democratic Party the dominant force in government at least

until the next legislative election.

Elbegdorj is the tried and tested candidate whose political career dates back to the country's

democratic beginnings, when he helped launch the democratic revolution in 1990s. He's been prime

minister twice, non-consecutively, and is a proponent of foreign investment to keep the Mongolian

economy growing. His main rival Bat-Erdene is one of a younger breed of politicians who has largely

campaigned on the strength of his ―clean hands.‖ The final challenger, Natsag Udval, is something

of a stand-in for the currently incarcerated Nambar Enkhbayar and also runs on the novelty of being

the country's first female candidate for the presidency.

―Some say there are those who try to own this democracy, but democracy is quite widely

accepted,‖ said Perenlei Erdenejargal, executive director of the Open Society Forum‘s office in

Mongolia. ―The Mongols are traditionally very individualistic people, and the nomadic culture

always exercises individual freedoms and human rights. Those 70 years were a change, but

historically this is how we lived.‖

Mongolia has in recent years introduced new voting regulations and measure to prevent voter fraud.

For the parliamentary election last year, the country used electronic voting machines for the first

time and it has distributed new identification cards that come with a computer chip to verify a

person's identity. The 2012 election also saw the acceptance of ballots from Mongolian citizens

living outside the country. Most telling, though, was the successful dispute against three candidates

for breaking the election law, which eventually resulted in two of them having their results

forfeited.

Erdenejargal is confident this year's election will be uncontroversial. The only uncertainty is

whether or not a run-off vote would be needed. Victory requires 50 percent of the electorate plus

one vote. But whatever the final tally, for Mongolia an uneventful election is a successful one.

Source: The Diplomat

NEW MONGOLIAN LAW

The following law was published in the latest weekly Government bulletin. Unless otherwise

decided by Parliament, it will take effect ten (10) days after publication.

Date Law

17.06.2013 Law on Exemption from Value Added Tax

Please visit BCM's website, Legislative Working Group, for a summary of new Mongolian laws. BCM

members who wish to access complete versions of the laws and regulations in Mongolian language

are welcome to email the BCM office: info@bcmongolia.org.

ANNOUNCEMENTS

FUTURE MONGOLIA, 19-22 JUNE, ULAANBAATAR

The Future Mongolia international trade fair will be held at the Buyant Ukhaa Sport Palace in

Ulaanbaatar, near the Chinggis Khaan International Airport, from 19 to 22 June, 2013.

After the successful premier with nearly 100 exhibitors from 14 nations and some 4,200 visitors, we

cordially invite you to the second Future Mongolia. This international trade fair offers the

opportunity on an enlarged exhibition space to present modern and sustainable solutions and

responses to the present needs of Mongolia and its population.

BCM members will get 5% discount on raw space. Please contact Saruul at saruul@bcmongolia.org to

get a special discount code. For more information, visit Future-Mongolia.com.

___________________________________________

"MSE-BCM SECURITIES LAW OVERVIEW SESSION", 4 JULY, KEMPINSKI HOTEL

BCM and Mongolian Stock Exchange are organizing a "MSE-BCM Securities Law overview

session" on July 4, 2013 from 9:30 am-12:30 pm at the "Altai" conference room, Kempinski Hotel.

Speakers will elaborate on key items in this new Securities Law. MSE speakers will also detail the

planning to be undertaken by January 1, 2014 when the law becomes effective.

Speakers include:

- Saruul.G, Mongolian Stock Exchange (confirmed)

- Altai.Kh, Mongolian Stock Exchange (confirmed)

- Randolph Koppa, Trade and Development Bank (confirmed)

- Michael Aldrich, Hogan Lovells (invited)

- Robert Rooks, PwC-Hong Kong (confirmed)

- Nick Cousyn, BdSec (confirmed)

Registration is FREE. To register please send name, position, affiliation and contact email

address of the attendee by email to tugi@bcmongolia.org. The first 125 members registered will

be admitted. The deadline for registration is Friday, June 28.

___________________________________________

LAST CALL FOR BCM FOOTBALL CUP 2013 SPONSORED BY GOLOMT BANK

BCM successfully organized the first ―BCM Football Cup 2012‖ as part of BCM‘s 5th year anniversary

on July 7, 2012. BCM would like to invite you to participate in the "BCM Football Cup 2013"

tournament which will be held on High School # 5's football field on Saturday July 6, 2013 as a team

or as a spectator.

BCM Football Cup 2013 Registration procedures:

- Will register 10 teams from BCM members by June 28 (application fee is 250,000 MNT) on a first

come, first registered basis.

- Please list each player‘s name and position at your company. Each team can have 11 or more

players named, but just 9 players including the goalkeeper on the field due to size of the field.

Note: Professional players will not be accepted.

- The competition will be among 12 teams in two Groups.

- Will announce the teams for the competition on Monday, July 1, 2013. We will have a lottery for

the groups and technical session on Thursday, July 4 with the captains of the teams.

Awards will be given to the top 3 teams, the "Most Valuable Player" and ―Most Valuable

Goalkeeper‖.

We are seeking one main sponsor/partner for this event which will have a specific sponsorship

package.

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

additional information.

___________________________________________

“MM TODAY” on MNB-TV, Friday, 19:00-19:10

BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with

BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is

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

today‘s BCM NewsWire.

___________________________________________

BCM‟S MINING SUPPLY CHAIN DATABASE

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

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

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

content and use of information technology opportunities.

As of December 31, 2012 suppliers registered on the database totaled 1,405. During 2012, 251 new

supplier entities joined the Database and 236 prior supplier registrants updated their company

profiles. In addition, 22 buyers were also registered and 82 tender announcements were posted.

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

Database. Please visit here for registration—FREE!

If you have any questions regarding the database, please contact 317027.

BCM WEBSITES

MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

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

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

government website Open-Government.mn are regularly updated.

Ulaanbaatar Presidential Election Survey by Sant Maral Foundation

S. Oyun, Minister of Environment and Green Development, presentation at BCM monthly meeting on

May 27 added to Mongolian website, bcmongolia.org/mn/илтгэлүүд

- Байгаль орчин, ногоон хөгжлийн сайд С.Оюун, Байгаль орчин, ногоон хөгжлийн шинэчлэлийн

бодлого, үйл ажиллагаа, МБЗ-ийн сарын уулзалт 5 сарын 27, 2013

The following presentations were added from "Foreign Investment in Mongolia: Challenges, Risks

and Solutions" conference (in Mongolian) on April 19 at the Kempinski Hotel organized by the

Business Council of Mongolia (BCM) and UB Risk Management Consulting:

• Гадаадын хөрөнгө оруулалтын өнөөгийн байдал, хэтийн төлөв, Төв банкны ерөнхий эдийн

засагч С.Болд, ―МОНГОЛ УЛСДАХ ГАДААДЫН ХӨРӨНГӨ ОРУУЛАЛТ –ЭРСДЭЛ, СОРИЛТ,

ШИЙДВЭРЛЭХ АРГА ЗАМУУД‖сэдэвт эрдэм шинжилгээний бага хурал, 2013 оны 4 дүгээр сарын

19

• Шууд хөрөнгө оруулалтын өнөөгийн байдал, тулгамдсан асуудал, шийдвэрлэх арга зам,

Монголын Бизнесийн зөвлөлийн дэд дарга И.Сэр-Од, ―МОНГОЛ УЛСДАХ ГАДААДЫН ХӨРӨНГӨ

ОРУУЛАЛТ –ЭРСДЭЛ, СОРИЛТ, ШИЙДВЭРЛЭХ АРГА ЗАМУУД‖сэдэвт эрдэм шинжилгээний бага

хурал, 2013 оны 4 дүгээр сарын 19

• Үнэт цаас, хувьцааны зах зээлийн хөрөнгө оруулалт: эрсдэл, сорилт, цаашдын хандлага,

Монгол банкны Ерөнхийлөгчийн зөвлөх, санхүүгийн тогтвортой байдлын зөвлөлийн ажлын

албаны дарга Д. Ган-Очир, ―МОНГОЛ УЛСДАХ ГАДААДЫН ХӨРӨНГӨ ОРУУЛАЛТ –ЭРСДЭЛ,

СОРИЛТ, ШИЙДВЭРЛЭХ АРГА ЗАМУУД‖сэдэвт эрдэм шинжилгээний бага хурал, 2013 оны 4

дүгээр сарын 19

___________________________________________

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

„PHOTO GALLERY‟

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

- ―The growing role of financing backed by Export Credit Agencies (ECA) within the Mongolian

market‖, Hakan Aksünger, Senior Regional Manager at Financial Institutions Dept. and responsible

for Mongolia at the 2nd Mongolia Trade and Commodity Finance conference, May 14, 2013, Chinggis

Khan Hotel

- ―Mongolyn Alt Corporation‖,Tselmuun Nyamtaishir, Vice President of Trading & Investment

Department at the 2nd Mongolia Trade and Commodity Finance conference, May 14, 2013, Chinggis

Khan Hotel

- ―Introduction to Panel Discussion: The Role of Multilateral Institutions in Developing External

Trade‖, Marco Nindl, Associate Banker EBRD, at the 2nd Mongolia Trade and Commodity Finance

conference, May 14, 2013, Chinggis Khan Hotel

- ―Global Trade & Supply Chain Solutions‖, International Finance Corporation at the 2nd Mongolia

Trade and Commodity Finance conference, May 14, 2013 Chinggis Khan Hotel

• ―Gobi‘s Resort‖, Nick Cousyn, Chief Operating Officer, BDSec JSC, at the BCM Monthly meeting

April 22, 2013

• ―Analyzing Mongolian Politics from the "Middle Layer", Brian White, Editor, The Mongolist, at the

BCM Monthly meeting Apr 22, 2013

• ―Brief introduction on mining policy‖, Ch. Otgochuluu, Head of Strategic Policy and Planning

Department, Ministry of Mining, at the BCM monthly meeting Apr 22, 2013

• ―The current flow of investment into Mongolia‖, S. Bold, Chief Economist, Central Bank, at the

"Foreign Investment in Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at

the Kempinski Hotel

• ―About regulation on FDI‖, S. Javkhlanbaatar, Foreign Investment Regulations and Registration

Department Head, Ministry of Economic Development of Mongolia, at the "Foreign Investment in

Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at the Kempinski Hotel

• ―Legal issues of regulation of foreign investment‖, B. Amarsanaa, Academic Secretary of National

Legal Institute, at the "Foreign Investment in Mongolia: Challenges, Risks and Solutions" conference

on April 19, 2013 at the Kempinski Hotel

• ―Investment in stocks and equities in Mongolia: risks, challenges and trends‖, D. Gan-Ochir, Head

of Financial Stability Council, Advisor to President of Central Bank, at the "Foreign Investment in

Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at the Kempinski Hotel

• ―On current state of equities foreign investment‖, D. Achit-Erdene, CEO, MICC, at the "Foreign

Investment in Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at the

Kempinski Hotel

• ―Market Update‖ by Mandal General Insurance LLC

• ―Annual Report 2012‖ by International Monetary Fund

• Ruth Pulaski, Director Marketing & Development, American University of Mongolia – ―American

University of Mongolia: Integrating a Liberal Education Approach to Learning‖ at the BCM monthly

meeting, March 25, 2013

• B. Bayar, Managing Director, ELC LLC – ―Update on Legal Developments Regarding Foreign

Investment‖ at the BCM monthly meeting, March 25, 2013

• Tony Burchill, Australian Consul-General & Trade Commissioner, Austrade – ―The Business of Being

a Third Neighbor‖ at the BCM monthly meeting, March 25, 2013

Other recently added presentations:

• Dr. Brian Fisher, Managing Director, BAEconomics, "Economic Impact of draft Minerals Law" at the

Kempinski Hotel, March 18, 2013, Ulaanbaatar

• Dr. Ch. Khashchuluun, CEO of UBRM Consulting, ―Mongolia and Mining, The policy evolution:

What's the next?‖ at the Kempinski Hotel, March 18, 2013, Ulaanbaatar

• Martin Pow, Partner, Enterprise Risk Services and Learning Leader, Deloitte Onch LLC, ―Black

Swans: Fact or Fiction,‖ A different risk management philosophy at the BCM Risk Management

Working Group meeting, March 14, 2013

• ―Current state of coal sector of Mongolia and future trends‖ by Minister of Mining D. Gankhuyag at

the Coal Mongolia 2013, Feb 21, SS Convention Center, Ulaanbaatar;

• ―Economic Reform Objectives‖ by Vice Minister, Economic Development, H.E. Mr. O. Chuluunbat

at the Coal Mongolia 2013, Feb 21, SS Convention center, Ulaanbaatar;

• ―Presentation for Coal Mongolia 2013‖, Norihiko Kato, CEO of Khan Bank, Feb 21 at the SS

Convention Center, Ulaanbaatar, Mongolia.

• Presentation by Bold Baatar, CEO of Altan Dornod Mongol, ―Mongolian Mining Investment

Environment‖ at the Mining Industry Open Discussion, February 1, 2013, at Kempinski Khan Palace

Hotel

Please note the presentations from each of the BCM monthly meetings.

The ―Mongolia Reports‖ section includes the following:

- ―Ulaanbaatar Presidential Election Survey‖ by Sant Maral Foundation;

- ―Selected Macroeconomic Indicators for Mongolia, as of June 2013‖ by International Monetary

Fund;

- ―Polit Barometer April, 2013‖ by Sant Maral Foundation;

- ―Regional Economic Outlook: Asia and Pacific‖, April 2013 by International Monetary Fund;

- ―Highlights of 2012, Mongolia‖ by European Bank for Reconstruction and Development (EBRD);

- ―Official statement of Oyu Tolgoi LLC in relation to information, data and facts related to Oyu

Tolgoi discussed during open session of the State Great Khural‖, dated 1 February, 2013‖;

- ―2013 Mongolia Investment Climate Statement‖, by the Economic and Commercial Section of the

U.S. Embassy;

- ―Mongolia Foreign Labor Force Ratio for 2013‖ by Hogan Lovells International LLP;

- ―How Mongolia will perform in 2013?‖ by Mandal Asset Management;

- ―Mongolia Business Owner and CFO Survey result‖ by BDSec JSC;

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

- ―Taxes for Expatriates in Mongolia‖ by PricewaterhouseCoopers.

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

Parliament and Government is available for download.

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

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

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

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

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

___________________________________________

SOCIAL NETWORK WITH BCM

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

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

improving each day with BCM.

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

business environment in Mongolia today.

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

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

the NewsWire with the community.

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

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

We have now 1,202 fans on our Facebook fans page, 1,293 connections on LinkedIn network, and

699 followers on Twitter.

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

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

ECONOMIC INDICATORS

INFLATION

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

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

May 31, 2013 *9.7% [source: NSOM]

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

Note: 8.4% y-o-y, Ulaanbaatar city, May 31, 2013

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

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

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

January 25, 2013 12.50% [source: Mongol Bank]

April 8, 2013 11.50% [source: Mongol Bank]

CURRENCY RATES – JUNE 20, 2013

Currency Name Currency Rate

US dollar USD 1,438.02

Euro EUR 1,925.72

Japanese yen JPY 15.13

British pound GBP 2,251.51

Hong Kong dollar HKD 185.39

Chinese Yuan CNY 234.74

Russian Ruble RUB 44.74

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.