BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 267 – March 29, 2013

NEWS HIGHLIGHTS:

Business

Turquoise Hill reports USD 182.4 million Q4 loss;

SouthGobi restarts Mongolia coal mine as outlook improves;

Chalco delivers Mongolia-borne coal to Japan, S. Korea;

SouthGobi widens Q4 loss on back of closed mine;

MEC alerts shareholders to expected 2012 loss;

Mongolia Growth Group February report;

Mongolian Airlines charged with infringing on MIAT’s brand;

Mongolian Railway receives bids for rail tenders;

Government awaits tender proposals for baby formula production;

Equipment rental company enters Hertz franchise agreement;

Hitachi to participate in power plant project;

Mongolia turns to new petroleum fuel suppliers;

Salkhit wind farm wins “Renewable Deal” award;

At Leighton, blame the parents;

Gazprom's eastern promise gets nearer.

Economy

MSE value may grow to USD 40bn with Securities Law, says CEO;

Mongolia to offer majority stake in planned industrial park;

Licensed areas for exploration decline by 45 percent;

Apartments sell for MNT 2m per square meter at apartment exhibition;

City authorities unveil JICA plan for UB subway;

Economy shows signs it's losing steam;

Stacking OT's reserves against Erdenet’s reserves;

Mongolia increases gold reserves to highest since August 2008;

Mongolia to investors: I want you back;

UB to build new city hall building;

Hidden value of the MSE;

The riches under OT;

Developing Asia’s protein basket;

Looking to market winter in Mongolia;

Mongolia suffers from spread of TB;

As pollution worsens in China, solutions succumb to infighting.

Politics

Parliament to receive SEFIL amendments;

Cabinet clarifies SEFIL with eased regulations;

Economic development official pledges stable investment environment;

Geologists speak out for legal stability;

Air Market head flees after becoming target in MIAT scandal;

Government punishes officials for false income statements;

Justice minister seeks to lower age for adult trials to 14 years old;

Japan premier's Mongolia trip to focus on energy issues;

Tony Blair visits Mongolia;

Parliament speaker meets U.S. House speaker;

Mongolia to lead this year's global environmental celebration;

Mongolia and Russia show military sheen;

Mongolia planning to buy U.S. military planes;

UB bans English signage;

Capital spelling;

Hold on to your foreign investors.

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Supermarket Price Comparison – February/March 2013;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank

Oxford Business Group

Major Drilling

Techenomics Mongolia

Breakthrough PR

International SOS

Mongolian National Broadcasting

BCM MONTHLY MEETING RECAP

The meeting on 25 March, with Executive Director Jim Dwyer in the chair, was attended by 110

members and invited guests.

Dwyer summarized past events during March, including a presentation by Brian Fisher of

BAEconomics on the projected impact of the draft Minerals Law released to the the public by the

Office of the President. Fisher's presentation focused on the significance of the mining sector in

Mongolia, noting aggressive legislation would be a detriment to both Mongolia's mining sector and

the Mongolian economy as a whole. He noted that if passed in its current it would result in 4

percentage points less gross domestic product (GDP) growth per annum over the course of the next

20 years. Dwyer also noted developments concerning the Strategic Entities Foreign Investment Law

(SEFIL), which was reportedly ready for amendment by the government, and the draft Minerals Law.

―We hope to see the SEFIL changed to apply just to foreign state-owned enterprises,‖ said Dwyer.

―We hope to see the draft Minerals Law vastly improved, but after allowing considerable time for

public comments and no sooner than in the fall session of Parliament.‖

BCM membership now stands at 247, up from 211 members a year ago. The three most recently

joined members are:

1. Alfred H Knight Ltd (AHK), established in the United Kingdom in 1881 and still remaining in the

ownership of the founding family, has been at the center of the global metals and minerals industry

throughout its history. The company has more than 2,000 staff with offices in 35 different

countries.

2. The Mongolian Coal Association is a national association for the coal sector of Mongolia,

established in January 1998. It is a not-for-profit and non-government organization with members

from coal producers, coal enterprises, coal related institutions, and professionals.

The association aims to participate in activities to direct the legal conditions of the Mongolian coal

sector through participating in policy drafting, implementation of state industrial policies,

developing rules and regulations, safeguarding the members' rights, providing services, developing

international cooperation, raising efficiency, introducing modern technologies, and strengthening

the management and personnel of the coal industry of the country.

3. ProCURE Global Development and Consulting LLC is an expert resource for both developed and

emerging market nations who desire to plan, build, staff, and operate sustainable hospitals and

specialty centers of excellence.

Its mission is to work collaboratively with governments and private entities to meet their growing

patient care needs using resources within their own country.

The first speaker of the day was Ruth Pulaski, Director of Marketing and Development at the

American University of Mongolia (AUM), to present the plans of the newly established university.

―Although predicted growth is bringing increased wealth and increased standards of living, it also

brings potential risks‖ said Pulaski.

She noted the importance of a liberal arts education in ―educating the whole person‖ while

instilling broad knowledge of the world, social responsibility, and strong intelligence and practical

skills.

Though a four year undergraduate program was scheduled to begin in 2014, the school may have to

delay that event. Until then, the school will focus on its executive education course, English

language institute, and global executive MBA program with the Kelley School of Business, Indiana

University. A fourth program is planned for engineering that will rely on a partnership with the

University of Alaska, Fairbanks.

AUM was established in 2011 by five U.S. and five Mongolian businessmen, educators, and

community leaders. She noted that Newcom LLC was the university's first sponsor when Pete

Morrow, the current chairman of the school, resided on the board. Newcom has been followed by

Rio Tinto PLC, the GE Foundation, and DAI.

The next speaker was Bayar Budragchaa of Economic and Legal Consultancy (ELC) LLC, who

provided an update to the Strategic Entities Foreign Investment Law (SEFIL).

Bayar presented on a letter distributed by his firm to clients that reported on a recent regulation

approved by the Cabinet of Ministers. The Regulation Regarding Receiving and Making Decisions on

Request of Entities Carrying Out Activities in Sectors of Strategic Importance was approved to

compliment SEFIL and provide more clarity to the law. The new regulation has the law apply only to

state-owned enterprises. It also designates the required approval from the minister of economic

development and the minister overseeing the sector from which the company in question operates.

―If approved, it is good news because it means Cabinet approval for these transactions,‖ said Bayar.

He added, ―It's our hope the project will be looked at again, but from a different angle.‖

Tony Burchill, Australian Consul-General and Trade Commissioner, gave the final presentation,

explaining the importance of Australia and other nations' third-neighbor relationships with Mongolia.

―We're entering the economic stage of a third neighbor policy, and I think we'll see a lot of

challenges come out of this,‖ he said.

Burchill explained that to Australia the third-neighbor policy is a bipartisan tenet of its foreign

policy to present excellent person-to-person links, expanding the presence of the Australian

government, and bringing together two great mining nations.

―The two countries have enormous things to offer each other,‖ he said. ―A lot of people comment

that Mongolia is a competitor. We don't rescind from that, but we want to work towards its

success.‖

BUSINESS

TURQUOISE HILL REPORTS USD 182.4 MILLION Q4 LOSS

Turquoise Hill Resources Ltd., the 66 percent owner of the Oyu Tolgoi copper-gold mine, is

reporting a net loss of USD 182.4 million in the fourth quarter, more than double its net loss of USD

85.8 million in the same period a year earlier.

The Vancouver-based company, formerly known as Ivanhoe Mines Ltd., says the loss, which amounts

to 18 cents per diluted share in the fourth quarter of this year, compared to four cents in 2011, is

largely attributed to non-controlling interests.

The final cost for Oyu Tolgoi, including development, equipment, plant and property costs, is

expected to be USD 6.2 billion, which is within three percent of the budget.

In the fourth quarter, Turquoise Hill reported revenue of USD 41.6 million, compared with revenue

of USD 51 million in the same quarter in 2011. In February the company had announced it was

selling its 50 percent stake in Kazakhstan miner, Altynalmas Gold Ltd., for USD 300 million to Sumen

Gold BV.

Source: Canadian Press

SOUTHGOBI RESTARTS MONGOLIA COAL MINE AS OUTLOOK IMPROVES

SouthGobi Resources Ltd. will restart production at its Ovoot Tolgoi mine as the outlook for prices

improves.

The company plans to produce 3.2 million metric tons of semi-soft coking coal over the remainder

of 2012, Vancouver-based SouthGobi said yesterday in a statement. Production at the mine has

been halted since the end of June 2012 after prices and customer purchases declined. SouthGobi's

relations with Mongolia became strained last year after Aluminum Corp. of China Ltd. launched an

ultimately unsuccessful bid for a stake in the coal producer.

―While a certain amount of volatility remains in the coal market, signs of improvement justify the

restart of operations,‖ SouthGobi said.

Source: Market Wire

CHALCO PLANS TO DELIVER MONGOLIA-BORNE COAL TO JAPAN, S. KOREA

Mongolian coking coal imported by the Aluminum Corp. of China (Chalco) is expected to reach the

shores of Japan and South Korea via the Qinhuangdao port in northern China. Chalco plans to import

4.2 million tons of raw coking coal this year from Mongolia and haul the coal to the Qinhuangdao

port, first by truck and then by rail, after being washed at self-owned Pusheng Preparation Plant.

Chalco was granted a 2.1 million-ton export quota for the first half of the year and will start

exporting from March, said a source familiar with the matter, noting the company has reached

preliminary agreements with Japanese and South Korean consumers.

Source: BDSec JSC, China Coal Resource

SOUTHGOBI WIDENS Q4 LOSS ON BACK OF CLOSED MINE

Mongolia focused coal miner SouthGobi Resources Ltd. on Monday said it had widened its quarter-

on-quarter loss as operations at its flagship Ovoot Tolgoi coal mine during the fourth quarter

remained suspended.

The miner during the quarter ended 31 December widened its net loss from USD 18.90 million in Q4

2011 to USD 51.81 million in Q4 2012, as revenue was mainly wiped out as a result of the mine

closure. Total revenue decreased from USD 179.0 million for all of 2011 to USD 53.1 million for

calendar 2012. Tonnage dropped from 4.02 million tons in 2011 to 1.33 million tons in 2012.

On 17 May last year, Parliament approved its Strategic Entities Foreign Investment Law (SEFIL),

which regulates foreign direct investment into a number of key strategic sectors, which included

mineral resources. Shortly after promulgating the SEFIL, the Mineral Resources Authority suspended

the exploration and mining licenses at a number of SouthGobi properties, including its flagship

Ovoot Tolgoi coal mine in southern Mongolia, leaving the company in limbo, as Chalco entered into

negotiations with the Mongolian government to clarify the conditions of its proposed USD 926

million 60 percent share takeover.

Chalco dropped its USD 926 million bid in September, as a result of rigid political resistance to

Chinese-and foreign-owned operations from Mongolia. Meanwhile, the company, which is majority-

owned by mining major Rio Tinto PLC, said it had restarted operations at Ovoot Tolgoi on Friday.

SouthGobi said it planned to produce 3.2 million tons of semi-soft coking coal over the remainder of

the year.

Source: Mining Weekly

MEC ALERTS SHAREHOLDERS TO EXPECTED 2012 LOSS

Mongolia Energy Corp. (MEC) Ltd. announced an expected gross loss for the financial year ending 31

March from the 2012 period.

The profit warning was based on the preliminary review on the currently available information and

the management accounts of the company, which had not been confirmed nor audited by an

independent auditor.

As shareholders had been previously informed, the company had experienced technical issues

including the need to improve its coal-screening capacities on site. Failing to do so would mean

continued increased operation costs and negatively impacting coal production quality. A change to

the mining contractor may result in a change to the valuation of the Khushuut coal mine.

The company opted to curtail operations in response to sluggish coal market conditions, technical

issues the company faces, and the issue of strategic deposits in Mongolia. However, a team is still

on site to prepare for the restart of operations.

The company is also reviewing the development potential of its other non-Khushuut licenses, so as

to cut down the mandatory exploration and routine maintenance costs to those properties.

Source: Mongolian Energy Corp. Ltd.

MONGOLIA GROWTH GROUP FEBRUARY REPORT

Mongolia Growth Group (MGG) Ltd. released its February letter to shareholders, informing them of

value-adding plans for their properties.

MGG reported on its need to upgrade the fire suppression systems in a number of buildings while

also completing maintenance overhauls which should save maintenance expenses. Also planned is

the installation of a vertical extension to one property as the company awaits its permit to upgrade

a number of its street-level retail store fronts. Replacing the brick walls facing the street with glass

windows, said the company, can increase the rents received by a third at the expense of less than

10 percent of total property costs.

February also marked the company's two-year anniversary. The company has grown to 98 employees

from just two in 2011, 90 of which are Mongolian.

Source: Mongolian Growth Group Ltd.

MONGOLIAN AIRLINES CHARGED WITH INFRINGING ON MIAT‟S BRAND

The Agency for Fair Competition and Consumer Rights (AFCCR) has charged that Mongolian Airlines

has infringed on the copyright brand of MIAT Mongolian Airlines.

Mongolian Airlines has mimicked the MIAT brand, said the agency, to confuse travelers into thinking

the two are the same. This includes painting the words ―since 1956‖ on the side of its aircrafts,

although the company has only operated since 2011. The company has also allegedly not obtained

the name Mongolian Airlines through the proper channels.

Source: UB Post

MONGOLIAN RAILWAY RECEIVES BIDS FOR RAIL TENDERS

Bidders to participate with state-owned Mongolian Railway in the development of rail infrastructure

were named on 27 March.

Bidders competing for the rail tender included companies from Japan, South Korea, the United

States, Australia, Canada, and the United Kingdom. In addition, four companies with experience in

working on mining and railway projects delivered bids for the tender as financial advisors to raise

capital to develop the project.

Three of the bidders are competing for the position of legal advisor for negotiations with investors

and to develop a contract for the project. Four will compete for the role of technical advisor to

help conduct geology, geodesy, and environmental impact assessments, develop construction and

technical plans.

Source: News.mn

GOVERNMENT AWAITS TENDER PROPOSALS FOR BABY FORMULA PRODUCTION

The Ministry of Industry and Agriculture has developed plans for the construction of a milk factory

in Ulaanbaatar for baby formula.

According to their plan, this factory would process more than five tons of formula a day. The

detailed technical plan for the project is currently under development while the Government

Procurement Agency awaits company proposals.

Monsuu LLC is one domestic producer of baby formula. Although the company supplies various baby

milk products, its capacity is not enough to fulfill demand.

Source: Unuudur

EQUIPMENT RENTAL COMPANY ENTERS HERTZ FRANCHISE AGREEMENT

Mongolia Equipment Rental Corporation (MERC), a subsidiary of Consolidation Services Inc., entered

into an international franchise agreement with Hertz Equipment Rental Corp. and Hertz Equipment

Rental System.

Under the franchise agreement, the franchisee will operate a business of renting, leasing, selling,

and maintaining equipment primarily for use in construction, materials handling and commercial

and industrial activities under the unique plan or system of the franchiser in Mongolia.

The license granted to MERC would commence on 1 July and span 10 years, unless renewed or

sooner terminated.

Source: Consolidated Services Inc.

HITACHI TO PARTICIPATE IN POWER PLANT PROJECT

Japan's Hitachi is poised to participate in the coal-fired thermal power plant construction project.

Vice Minister for Energy D. Dorjpurev and Kazuyoshi Akaba, a senior vice minister of economy, trade

and industry of Japan, discussed construction plans on 5 March. They plan to partner for the

installation of infrastructure such as energy-efficient transmission lines to reduce energy loss in the

outskirts of Ulaanbaatar.

Source: Cover Mongolia

MONGOLIA TURNS TO NEW PETROLEUM FUEL SUPPLIERS

Mongolia is turning to companies such as Switzerland's Ganvor to diversify its supply of petroleum.

Mongolia has been seeking out new sources for petroleum fuels as its main supplier, Russia's

Rosneft, continues to export petroleum products to Mongolia above market price. Mongolia has

agreed to import 20,000 tons of petroleum products from Ganvor and 14,000 from South Korea.

Prices are USD 100 to USD 200 below the cost of fuel from Rosneft.

Source: Zuunii Medee

SALKHIT WIND FARM WINS “RENEWABLE DEAL” AWARD

The Project Finance Awards awarded the 2012 ―Asia-Pacific Renewable Deal of the Year‖ award to

Clean Energy LLC, the clean energy production arm of Newcom LLC, for its Salkhit wind farm

project. The reward was granted on 21 March in Singapore at a ceremony recognizing 14 projects in

the region for innovation, potential for deal replication, and best practices.

―It is our pride to be the first awardee from Mongolia for this prestigious nomination,‖ said Enkh-

Amgalan Sengee, Chief Executive Officer of Clean Energy.

The USD 122 million Salkhit wind farm is the first independent power project of any kind in

Mongolia, currently under construction 70 kilometers from the capital in Sergelen Soum, Tuv Aimag.

Project Finance has hosted the Project Finance Awards for 14 years. The magazine covers news and

analysis of benchmark deals in a range of sectors, including oil and gas, power, renewables, water,

and infrastructure.

Source: Newcom LLC

AT LEIGHTON, BLAME THE PARENTS

A house is only as stable as the ground it is built on. Australia's Leighton Holdings, the parent

company of Leighton Contractors (Asia) Ltd., has been shaken at the foundations by concerns about

corporate governance and the rights of minority shareholders.

The company has moved quickly after its chairman and two directors quit last week citing a dispute

over board independence with Germany's Hochtief, the company's majority owner. Leighton swiftly

named long-serving director Bob Humphris as chairman. But the shake-up raises concerns. The

departed directors said Hochtief no longer supports an independent board. The German company

denies it acted inappropriately and says it is sticking to a non-binding agreement, in place for

decades, where the majority of Leighton directors and management are not directly tied to

Hochtief.

Those assurances only go so far. The resigned directors are Australian corporate heavyweights

whose experience and heft will not be easy to replace. Also, Hochtief noted it's free to reconsider

the existing governance agreement at any time. Hochtief's own largest shareholder, Spain's

Actividades de Construccion y Servicios (ACS), has gradually tightened its grip on the German

company and last year installed one of its own as Hochtief's chief executive.

Any lingering questions over board independence could now be key. Standard & Poor's Rating

Services says it may downgraded Leighton's BBB- credit rating if it determines ACS has ultimate

control over Leighton—that would mean the Australian company should be treated as a subsidiary to

ACS, which swung to a EUR 1.9 billion (USD 2.5 billion) loss last year and has debt of EUR 5 billion.

Source: Wall Street Journal

GAZPROM'S EASTERN PROMISE GETS NEARER

Gazprom, one of the oil suppliers Mongolia is negotiating with for a cheaper petroleum fuel supply,

signed a memorandum of understanding with the CNPC, owner of PetroChina, that will make China

into Gazprom's biggest single-country customer from 2018. The deal potentially boosts Gazprom's

annual revenue by USD 12 billion, or 8 percent according to Sanford Bernstein.

The news won't be enough to recoup the 60 percent loss in Gazprom's shares over the past five

years: It is still suffering amid weak European demand, a European Union probe into its alleged

anticompetitive practices and rising domestic competition. But signs of a Chinese deal getting

closer should spark investors' interest.

Russia's state-owned Gazprom's need for a deal is becoming pressing. With plans to invest USD 50

billion in gas fields, pipelines and a liquefied natural gas plant in eastern Russia, it needs a reliable

long-term customer. The U.S. shale-gas revolution has robbed Gazprom of one alternative market.

But neighbor China should be a natural buyer. It wants to rely less on highly polluting coal for

energy: Chinese gas demand should increase by fivefold from 2010 to 2035, the International Energy

Agency estimates.

Gazprom wants to stick to its principle of linking gas prices to oil, fearing its European customers

will press harder for discounts if it offers China favorable terms. But China seems set on paying USD

250 per thousand cubic meters, around the same it pays for gas from Turkmenistan. That is 40

percent below the average price Europeans paid for Gazprom's gas last year, Bernstein said.

Source: Wall Street Journal

ECONOMY

MSE VALUE MAY GROW TO USD 40BN WITH SECURITIES LAW, SAYS CEO

The passage of a Mongolian securities law allowing dual listings would boost the value of the

nation's stock exchange by 33-fold to USD 40 billion within five years, said the bourse's chief

executive officer.

The legislation may be passed during the spring session of Parliament, which runs from April until

July, Khangai Altai said in an interview in Ulaanbaatar yesterday. The bourse, which has a

capitalization of USD 1.2 billion, has been waiting for regulatory changes for more than a year, he

said.

―We have just laid down the fundamentals and imposed the rules. Now what we need are the legal

changes. Many internationally listed companies that do business in Mongolia have an interest in

listing.‖

Mongolia is seeking to attract more investors to the nation's stock market when the benchmark MSE

Top 20 Index has stumbled 11 percent this year, Asia's worst performer. The country's Central Bank

cut interest rates in January for the first time since 2009 after economic growth declined to 12.3

percent last year from a record 17.3 percent in 2011.

At current prices, a USD 40 billion market value would rank Mongolia as the 16th-largest stock

market in the Asia Pacific region, Vietnam is presently the 15th-largest with a value of 43.2 billion

―There are 40 internationally listed companies with operations in Mongolia, which do have the

appetite to list their shares to set up a connection with the local community,‖ Altai said.

Once dual listings are allowed, liquidity will flood the market, providing an environment for most

local companies to list their shares, he said.

Source: Bloomberg

MONGOLIA TO OFFER MAJORITY STAKE IN PLANNED INDUSTRIAL PARK

Mongolia hopes to bring factories, offices, technology and jobs to a corner of the Gobi Desert

provided it can get investors for an industrial park envisioned next to a railway line that slices

through the country and connects Russia and China.

The government approved a plan to sell 66 percent of the Sainshand industrial complex.

Myagmarsuren Batgerel, director of the department of restructuring and policy implementation in

the State Property Committee, said today.

About USD 4 billion is needed to build infrastructure such as a power distribution network and a

waste water facility, said Chuluunkhuu Ganbat, managing director of Liberty Partners, which is

advising companies to invest in the park. Potential investments in the park, designed by civil

engineering company Bechtel Group Inc. of the United States, may exceed USD 10 billion, according

to a Bechtel presentation.

―This industrial complex is going to help diversify the economy, bring technology, create jobs and

provide more opportunities for Mongolia,‖ said Ganbat, a Columbia University-educated banker,

who spent six years working for Germany's Commerzbank AG on Wall Street.

Sainshand, a city of 20,00 people about 420 kilometers southeast of the capital Ulaanbaatar, may

eventually house coking coal plants, a copper smelter and facilities to process food, make clothes,

iron pellets and cement, he said. Raising the USD 4 billion could take as many as five years and an

investor presentation is scheduled for early April, Ganbat said. Development Bank of Mongolia is

considering lending MNT 15.1 billion to cover engineering and environmental impact studies for the

project.

Source: Bloomberg

LICENSED AREAS FOR EXPLORATION DECLINE BY 45 PERCENT

The number of special licenses for exploration has fallen by 1,872 or 45 percent.

The number of exploration licenses in circulation fell from 4,111 to 2,239 [dates not provided by

source -ed]. On 1 March, only 880,000 hectares of land was under special license in Mongolia.

Source: Zuunii Medee

APARTMENTS SELL FOR MNT 2M PER SQUARE METER AT APARTMENT EXHIBITION

Prices for a square meter of an apartment ranged between MNT 1.8 to 2 million at the New

Apartment 2013 exhibition in Ulaanbaatar.

50 construction companies were in attendance at the exhibition as well as mortgage lenders Golomt

Bank LLC and Trade and Development Bank (TDB) of Mongolia LLC. The cheapest price proposal at

the event was MNT 1.35 million from the Orchlon Construction company for an apartment in the

Songino Khairkhan District. Eco Construction and Bishrelt Properties were the most expensive, at

MNT 3 million per square meter, mostly due to the location of their buildings.

Source: Unuudur

CITY AUTHORITIES UNVEIL JICA PLAN FOR UB SUBWAY

The chair of the Department of Strategy, Policy and Planning at the Ulaanbaatar Governor's Officer

introduced a plan to build a 17.5 kilometer subway line from Tolgoit to Amgalan.

Japan International Cooperation Agency (JICA) led development of the plan, which projects a cost

of USD 1.5 billion and completion by 2020. The project proposal will be discussed by Parliament this

Spring. The Japanese government offered to lend USD 600 million with 0.2 percent interest for the

project.

The project plan projects ticket costs of MNT 600 and travel at the speed of 80 kilometers per hour,

said N. Gantumur, vice chairman of Ulaanbaatar's transportation infrastructure. He said the rail line

would create 150,000 new jobs in the service sector, including restaurants, a cinema, cafeteria,

and retail. He added that the subway line would help reduce traffic by 16 percent and help in the

effort to reduce air pollution.

JICA's plan has construction scheduled to begin in 2016.

Source: Zuunii Medee, Udriin Sonin

ECONOMY SHOWS SIGNS IT'S LOSING STEAM

Indicators of the Mongolian economy from the first two months of the year suggest a slight decrease

in economic activity for 2013 compared to the same period of last year.

Moving forward, the minerals exploration sector of the country will likely be slower in 2013 than

that experienced in 2012 due to the pending changes in the country's Minerals Law. Also coal,

copper, iron ore, and to a lesser extent fluorspar prices have a direct affect on the country's

economy and continue to be a focus of our analysis.

The Bank of Mongolia released its February inflation figures and the monthly CPI rate for February

was 1 percent compared to that of February 2012, which was 2.5 percent. On a year to date basis

CPI has increased 2.8 percent and was 11.3 percent year-over-year nationwide at the end of

February. The Bank of Mongolia has claimed to have taken an aggressive stance against inflation in

2012 during which time Mongolia saw a CPI increase of 14 percent.

Positive news from the banking industry was released last week with loans outstanding at the end of

February being MNT 7.169 trillion, up by 25.6 percent year-on-year. The non-performing loan

balance was recorded at MNT 305.9 billion, which was a decrease of 5.4 percent compared to the

same period last year.

During the first two months of 2013, foreign trade turnover reached USD 1.317.3 million, of which

USD 506.1 million was exports and USD 811.2 million was imports. Foreign trade deficit for the

month of February was USD 88.6 million compared with USD 154.8 million in 2012, representing a

42.7 percent decrease in the foreign trade deficit. Overall foreign trade turnover has decreased by

10.1 percent during the month of February of 2013 compared to the same period of last year.

Source: Mongolian Investment Banking Group

STACKING OT'S RESERVES AGAINST ERDENET‟S RESERVES

The reserves found at the Oyu Tolgoi copper-gold mine dwarf those found today at the Erdenet

Copper mine, which currently generates Mongolia's largest copper-export revenues.

A feasibility study approved in March 2010 reported indicated resources at OT of 3.775 billion tons

of iron ore, with 19.7 billion tons of copper, 810 tons of gold, 5,905 tons of silver, and 75,600 tons

of molybdenum. Also reported were inferred resources of 3.38 billion tons of iron ore, with 380

million tons of copper, 1,328 tons of gold, 7,601 tons of silver, and 81,600 tons of molybdenum. The

study also showed Oyu Tolgoi's reserves are three to four times larger than the iron ore found at the

Erdenet copper mine, including seven times as much copper resources.

The Erdenet mine had total indicated resources of 1.544 billion tons of iron ore, with 8.058 billion

tons of copper and 2,223,874 tons of molybdenum. After 30 years of commercial production,

Erdenet Copper Corp. reported in 2009 inferred resources of 1.087 billion tons of iron ore, 4.79

billion tons of copper and 131,034 tons million tons of molybdenum.

Source: News.mn

MONGOLIA INCREASES GOLD RESERVES TO HIGHEST SINCE AUGUST 2008

Mongolia raised its gold reserves for a third month to the highest in more than four years in

February as the metal capped its longest monthly losing streak since 1997.

The country's holdings expanded 1.5 metric tons to 5.8 tons, the most since August 2008, according

to the International Monetary Fund's website. Kazakhstan holdings increased 4.9 tons, Azerbaijan‘s

climbed one ton and Ukraine's rose 0.6 tons. Canada's reserves dropped 0.1 ton, the Czech Republic

cut them by 0.2 tons and Mexico's holdings fell 0.1 ton.

Nations added 534.6 tons to reserves last year, the most since 1964, even as prices averaged a

record USD 1,669 an ounce, the London-based World Gold Council said last month. Bullion slid for

five consecutive months through February and investors sold metal from exchange-traded products

this year amid signs the U.S. Economy is improving and as Federal Reserve policy makers debated

the pace of stimulus. Gold is trading 17 percent below its September 2011 record of USD 1,921.15.

―Given the depreciation rates of the major currencies in the world and the debt crisis, especially in

the euro zone, there's definitely a lot of room to buy gold,‖ Daniel Briesermann, a commodities

analyst at Commerzbank AG in Frankfurt, said. ―The percentage of gold in currency reserves is still

very low in emerging markets, so there's a lot of catch-up potential to the industrialized countries.‖

Source: Bloomberg

MONGOLIA TO INVESTORS: I WANT YOU BACK

The government of minerals-rich Mongolia is beginning to exhibit a return of warm feelings toward

investors with winter‘s thaw.

After nearly 10 months of increasingly frosty relations with foreign investors that began with the

passing of the Strategic Entities Foreign Investment Law (SEFIL) in May 2012, the government is

making noises about drawing up an amendment to the law that relaxes restrictions on private

investors.

―For many seekers of political office, the rhetoric of resource nationalism is an attractive campaign

platform, as further evidenced by recent proposals to increase the levels of taxation on mining

firms, which are generally perceived as foreign dominated,‖ wrote law firm Hogan Lovells to its

clients as the SEFIL legislation was being considered by policymakers.

The next strike was a proposed new Minerals Law that greatly restricted how entities could manage

their mining licenses. According to Dr. Brian Fisher of BAEconomics at a BCM-organized

presentation on March 18, if enacted the draft Minerals Law would result in 4 percentage points less

annual gross domestic product (GDP) growth on average over the next two decades. Inevitably

foreign direct investment (FDI) began slipping away with the deteriorating investment climate.

Ulaanbaatar-based Mongolian International Capital Corp. (MICC) reported that January saw the

lowest inflow of FDI on record since 2010.

But in recent weeks the government has appeared to put the stick away. President Tsakhia

Elbegdorj announced plans to revise the mining legislation, and Prime Minister Norov Altankhuyag

announced plans to amend SEFIL to diminish its scope to just state-owned entities. But if Mongolia

is going to continue riding this wave of goodwill employed by these gestures, analysts say the

politicians will have to learn that FDI doesn't necessarily mean it must be shackled to the interests

of a few foreign corporations and governments. It will also have to learn to stand by agreements

made, no matter who holds the reins over the country. After all, you can only throw one out into

the cold so many times before they finally find a new home and hearth to warm up by.

Source: BNE

UB TO BUILD NEW CITY HALL BUILDING

The City of Ulaanbaatar is planning to build a new city hall building.

The nine-by-nine hectare site for the new building is owned by Khaniin Materials JSC. The facility

will consist of four main buildings, including a governor‘s administration house, a Citizens‘ Council

building, meeting hall, exhibition space, a cafeteria, and office space for city agencies.

The complex will contain 50,000 square meters of paved areas and 125 square meters of green

space. Construction will require a gasoline station be moved and the attainment of 19 square

meters of land. Also required will be the demolition of six buildings.

Source: Udriin Sonin

HIDDEN VALUE OF THE MSE

Though Mongolia has recently been the subject of more positive news than as of late, Mongolia's

stock market is still seeing stock prices fall. This has been the case as good news does not always

translate into share price increases on the Mongolian Stock Exchange (MSE).

Political influence has been fairly irrelevant to local market performance as it appears on

international media. When taking a closer look at the components of the MSE Top 20 index it

becomes apparent that many have performed exceptionally well apart from a few coal stocks,

which encountered unique challenges in 2012. Low coking coal prices globally hurt not only the

locally listed stocks, but also larger companies such as Hong Kong-listed Mongolian Mining Corp.

The main component of the coal stocks index is Tavan Tolgoi JSC, which has nearly 30 percent

weighting of the whole index, skewing overall performance. Tavan Tolgoi is one of many local coal

exporters hit heavily by disappointing coking coal industry performance and saw more than a 80

percent decline in its 2012 net profits. This explains the large selloff in the overall index.

Non-mining companies are doing fairly well even if the mining sector contributes hugely to the

economy. They are seeing strong growth, along with ever-increasing gross domestic product (GDP)

per capita and business opportunities. Despite their solid growth over the recent five to seven

years, the stock market as a whole has always been overly influenced by local mining stocks, most

of which having no relation to the international markets, such as thermal coal producers.

Given the influence of Tavan Tolgoi on the whole market, the first catalyst to look for in relation to

a potential recovery would be coking coal prices in China. However, a noticeable strong recovery in

the thermal coal price has emerged, which would certainly affect the coking coal price, as the

Chinese economy gets better in the second half of 2013. Whereas, the impressive performance of

the copper price in recent months signals commodities prices are gaining strength and may rally in

2013.

Source: BDSec JSC

THE RICHES UNDER OT

Beneath the Gobi desert are enormous reserves of gold, silver and copper—but exploiting them is

proving to be a tricky balancing act for the Mongolian authorities.

Samand Sanjdorj was on the exploration team in the late 1990s sent deep into the Gobi desert of to

investigate what he described as ―an interesting extrusion.‖ Sanjdorj and his fellow geologists were

by no means the first prospectors there. The local name for this ―extrusion‖ is Oyu Tolgoi. The

green stains that gave it its name are a clue to the mineral within.

But first the Soviet teams and then, more recently, those Western mining companies that examined

it, dismissed the deposit as too small to warrant commercial exploitation. Sanjdorj's work told a

very different story.

―Every day our data showed the potential ore body was bigger and bigger,‖ he said. ―I couldn't wait

to get up the next day and explore further. We were pretty confident we'd found something

important.‖

The USD 6 billion that the Anglo-Australian mining giant Rio Tinto PLC spent building this place was

enough to help power Mongolia to the top of the list of the fastest-growing economics on earth. The

company is predicting that the Oyu Tolgoi mine will generate more than USD 8 billion every year for

the next 40 to 50 years. It is an astonishing windfall for a country with fewer than three million

people.

But the Mongolian government wants its cash now and it is asking Rio Tinto for hundreds of millions

of pounds more than was agreed for this year. The head of the mining company operations in

Mongolia hinted darkly that changing the rules risks killing the goose before it has laid any golden—

or for that matter copper—eggs. Though this does not necessarily mean a threat to the project, the

government will somehow have to ensure that every Mongolian benefits for Sanjdorj's extraordinary

discovery without chasing off the investors who can extract it.

Source: BBC

DEVELOPING ASIA‟S PROTEIN BASKET

Despite widespread poverty and malnutrition, Ltd. Col. Douglas Riley believes Mongolia, with its

vast amount of livestock, could be Asia‘s ―protein basket.‖ Of course, to reach its potential and

feed the continent‘s many hungry people, changes have to be made.

That‘s why the U.S. Air Force veterinarian has been visiting the country. To date, he‘s made four

trips to Mongolia and on his most recent visit, Riley worked with Mongolia‘s armed and border

forces to show veterinarians how to produce healthier herds.

―What‘s really ironic is that Mongolia being part of Asia, sits in the poorest section of the world

with the most malnutrition in the world,‖ said Riley, who‘s assigned to the 13th Air Force

Cooperative Health Engagement Division. ―Yet Mongolia has the ability, with its livestock alone, to

feed the vast majority of Asia through the protein if its animals if the ground were managed

properly.‖

The U.S. Department of Defense and Air Force interest in humanitarian operations in countries such

as Mongolia is to foster a more stable country, one more difficult to be infiltrated by terrorists. On

the ground in Mongolia, Riley hoped his work assisted this effort.

―If we can find a way to build a partnership, maybe, just maybe, at the end of the day, we won‘t

have to worry about country or state-on-state war,‖ he said. "Because we are so small a world now,

through globalization and the ability to move from point to point, if we don‘t find a way to tie

ourselves together with an understanding, we are missing an opportunity that is far greater than

any weapon we could create. We are missing an opportunity to tie societies together to better each

other.‖

Source: DoD Live

LOOKING TO MARKET WINTER IN MONGOLIA

Mongolia‘s sweeping steppe and nomadic heritage attract tens of thousands of tourists from around

the world each summer. Come winter, though, popular tourist spots are eerily deserted; tour

operators have traditionally hibernated. But some are starting to ask: ―Are we missing an

opportunity?‖

Tourist season in Mongolia typically lasts from mid-May to mid-September. Most operators rely on

revenue generated during these months to survive for the rest of the year.

―No matter how successful you are in summer, winter is a dead season,‖ said Gereltuv Dashdoorov,

director of operations at Nomadic Expeditions, a tour agency. ―That‘s the same story for most

companies.‖

The actual drop in tourist numbers between seasons is hard to calculate as official statistics define

tourist as anyone who enters Mongolia on a tourist visa and stays for a minimum of three days.

Dashdoorov said the drop in bookings for most agencies is between 85 and 90 percent. Winter

visitors are mostly passengers on the Trans-Siberian Railway on a three-day layover in Ulaanbaatar—

the world‘s coldest capital—between trains.

There are other challenges, besides winter. Mongolia‘s tour operators have struggled to compete

with the mining industry for trained local staff. And mining-led inflation is making Mongolia an

increasingly expensive destination for tourists. But the seasonality of the sector continues to limit

growth. Dashdoorov also pointed out a lack of winter products for tourists to enjoy.

A handful of companies have been trying to extend the tourist season by collaborating with local

communities to organize annual events. In recent years, these have included the Golden Eagle

Festival in the western Altai Mountains each October. March events include the Huvsgul Ice Festival,

the Thousand Camels Festival in the southern Gobi Desert, and a camel polo tournament near

Ulaanbaatar. The festivals have yet to draw high numbers of international tourists, though some

have gained a reputation as colorful local affairs, said Dashdoorov, whose companies helped kick-

start the eagle and camel events.

For organizers, poor infrastructure proves as challenging as the weather. The central government

has pledged greater support for the festivals and recognizes their potential to draw visitors.

Source: Pearly Jacobs

MONGOLIA SUFFERS FROM SPREAD OF TB

Mongolia sees 4,000 new cases of tuberculosis a years, said D. Doljinsuren, head of the tuberculosis

study at the National Research Center of Communicable Diseases.

Nations observed World TB Day on 24 March, a day when organizations try to raise awareness about

this global epidemic. The illness has spread since 1990 as an effect from increasing unemployment,

poverty, migration, population density, air pollution and uncontrolled uses of medications.

Mongolia's annual rate of tuberculosis infection is four times that of the much more heavily

populated Australia. Mongolia has registered 20 cases when the infection was resistant to

medication compared with just one in Australia. Statistics show that the total number of registered

cases of tuberculosis resistant to medication grew from 185 in 2010 to 210 in 2011.

About 60 percent of tuberculosis patients are between 16 and 44 years old, which can have a

dramatic impact on the social development of young people.

Doljinsuren said 56 percent of tuberculosis cases were registered in Ulaanbaatar, with particularly

strong concentrations in Bayanzurkh and Songinokhairkhan Districts. In the countryside, Darkhan,

Selenge, Khentii, Dornod, and Gobi Sumber lead the country in infection rates.

In 2013 the country has already seen 133 cases of tuberculosis in Mongolia.

Source: Zuunii Medee

AS POLLUTION WORSENS IN CHINA, SOLUTIONS SUCCUMB TO INFIGHTING

China's state leadership transition has taken place this month against an ominous backdrop. More

than 16,000 dead pigs have been found floating in rivers that provide drinking water to Shanghai. A

haze akin to volcanic fumes cloaked the capital, causing convulsive coughing and obscuring the

portrait of Mao Zedong on the gate to the Forbidden City. These side effects of disregard to the

environment mirror that of Mongolia which, too, suffers from toxic smoke in winter.

Infighting within the government bureaucracy is one of the biggest obstacles to enacting stronger

environmental policies. Oil companies have delayed for years on improvement in the diesel fuel

vehicles burn, resulting in 23 times more sulfide in diesel to that of the United States. China's three

biggest power companies are all repeat violators of government restrictions on emissions from coal-

burning plants.

The cost of upgrading could lead the oil companies to ignore new standards put in place by

government, which is what they did when the State council in 2009 ordered a phase-in diesel

standard. Another standard must be issued by December and phased in by 2017, said the state.

Beijing officials have said that vehicle emissions account for 22 percent of the main deadly

particulate matter in the air, known as PM 2.5, and another 40 percent is from coal-fired factories

in Beijing and nearby provinces.

In February, the Ministry of Environmental Protection issued stricter factory emissions standards for

six coal-burning industries. First on the list is the power industry, which accounts for about half the

coal consumption in China. But compliance by the state-owned enterprises could be a problem. An

annual list of factories that have violated emission regulations shows that the factories are all run

by the biggest power companies. Another problem is low penalties: fines are generally capped

around USD 16,000, not much of a deterrent, said Zhou, a Greenpeace representative. She said the

violating factories ―should be required to stop production temporarily—that would then force

companies to take this seriously.‖

Source: New York Times

POLITICS

PARLIAMENT TO RECEIVE SEFIL AMENDMENTS

The Mongolian government submitted a draft law Wednesday to revise a controversial ―strategic

foreign investment law‖ (SEFIL) in a bid to ease the path for foreign investment.

The strategic investment law, adopted by Parliament in May, stipulates foreign investment in

strategic sectors that exceeds MNT 100 billion (USD 75 million). It defines those strategic sectors as

mining, banking and finance, and communications. Pro-business organizations and foreign investors

considered the law too harsh and said it created too much red tape for foreign investment.

Parliament said Wednesday in a press release ―the legal requirement of parliamentary approval for

foreign investment deals that exceed MNT 100 billion reduces interest by investors.‖

The draft law eliminates the threshold of MNT 100 billion and proposes Parliamentary approval be

required only on deals involving companies with 49 percent state ownership.

Source: Xinhuanet

CABINET CLARIFIES SEFIL WITH EASED REGULATIONS

Economic & Legal Consultancy (ELC) LLC advised clients that a new regulation passed by the

Cabinet of Ministers would ease requirements mandated by the Strategic Entities Foreign

Investment Law (SEFIL).

The Regulation Regarding Receiving and Making Decision on Request of Entities Carrying out

Activities in Sectors of Strategic Importance brings further clarity to the law that regulates

transactions concerning assets within Mongolia's strategic sectors—banking and finance, mining, and

information technology and communications. ELC presented an unofficial translation to clients,

pointing them to passages that indicate the law would only apply to state-owned companies and

companies with stakes in foreign companies. The approval process has been defined as a thirty day

period for deals that include state ownership would need approval from the Minister of Economic

Development in addition to the minister overseeing the sector within which the company in

question operates. Acquisitions for above 49 percent of a company and valued above MNT 100

billion would also require Parliamentary approval.

Source: Economic & Legal Consultancy

ECONOMIC DEVELOPMENT OFFICIAL PLEDGES STABLE INVESTMENT ENVIRONMENT

The economic development deputy minister promised to work toward a stable political environment

for the sake of investment.

Deputy Minister O. Chuluunbat hosted an event to respond to criticisms reported by the UNCTAD, a

branch of the United Nations that seeks to promote the development-friendly integration of

developing countries into the world economy. It recommended that the government establish an

agency devoted to the task of attracting foreign investment.

―I am against protectionist policy and there is no sector in Mongolia at this moment to protect from

the foreign market,‖ said Chuluunbat.

Chuluunbat said a working group had been established to improve the environment for investment,

and that both the president and prime minister were aware of its activities. So far, the minister

said, the working group has recommended that government promise stable regulation to both

domestic and foreign investors. It said investment of USD 10 million should be guaranteed stable,

unchanged regulations for five years, USD 100 million would need 10 years, and USD 1 billion would

need 20 years.

Chuluunbat said the recommendations made by the working group were due to come before the

Cabinet of Ministers soon.

Source: Udriin Sonin

GEOLOGISTS SPEAK OUT FOR LEGAL STABILITY

About 500 geologists voiced their concerns over how political legislation was hindering their

profession at the Mongolian Geology 2013 conference held on 21 March.

Geologists said that the financial risk spurred on by legislation had prevented some domestic and

foreign companies from operating. They called for more stable legal conditions.

Source: Undesnii Shuudan

AIR MARKET HEAD FLEES AFTER BECOMING TARGET IN MIAT SCANDAL

The head of the Air Market travel agency has escaped authorities investigating him for the

perpetually growing MIAT embezzlement scandal.

Air Market was established 10 years ago when the fund was established that set aside USD 5 dollars

from every ticket sold in case of a terrorist incident or act of war. The company is an official

retailer of tickets for a number of airline companies, including MIAT, Air China, and Korean Air.

Source: News.mn

GOVERNMENT PUNISHES OFFICIALS FOR FALSE INCOME STATEMENTS

The government has dismissed three officials who lied on their income declarations.

According to a report that mentions disciplinary action towards government officials for false

declarations, in addition to the three dismissed officials, two have been ―called down‖ [meaning

unclear -ed] while another four have received demotions and 30 percent salary cuts for three

months. Most of the officials found to have provided false information were employed at the State

Specialized Inspection Agency.

Mongolian law mandates that all public officials declare their income each year. Any civil servant

that provides false information is recommended for dismissal.

Source: News.mn

JUSTICE MINISTER SEEKS TO LOWER AGE FOR ADULT TRIALS TO 14 YEARS OLD

Minister of Justice Khishigdemberel Temuujin has drafted a bill that would lower the age for youths

to be tried as adults to 14 years old.

The bill is one of 11 drafted by the justice minister for submission to parliament. He reasoned that

the law was necessary as criminals were getting younger in Mongolia.

The number of crimes committed by teenagers has increased in recent years, particularly in the

area of cyber crime. The draft introduces one clause that says pleading guilty would result in

reduced sentences.

Source: Unuudur

JAPAN PREMIER'S MONGOLIA TRIP TO FOCUS ON ENERGY ISSUES

Japanese Prime Minister Shinzo Abe will visit Mongolia Saturday and Sunday and meet Mongolian

President Ts. Elbegdorj and Prime Minister Norov Altankhuyag.

Japan's relationship with Mongolia is particularly important given the Asian nation's rich coal and

precious mineral deposits. Chief Cabinet Secretary Yoshihide Suga told a news conference, adding

that the summit will include meetings on energy-related issues.

Suga also noted that the suspension of most of the nation's nuclear power plants because of the

Fukushima triple-meltdown crisis has cost the country more than JPY 3 trillion each year to import

energy resources from overseas.

―We'd like to further develop the strategic partnership with Mongolia,‖ Suga said.

Source: Japan Times

TONY BLAIR VISITS MONGOLIA

Former U.K. Prime Minister Tony Blair made a one-day working visit to Mongolia on Friday by

invitation of Ch. Saikhanbileg, Minister of the Cabinet Office of Ministers.

Blair arrived in Ulaanbaatar at 6 a.m. before he was received by President Tsakhia Elbegdorj and

Prime Minister Norov Altankhuyag. He was also scheduled to meet with Saikhanbileg and Foreign

Minister L. Bold.

Blair established the Tony Blair Associates firm to provide strategic advice on political and

economic matters.

Source: Montsame

PARLIAMENT SPEAKER MEETS U.S. HOUSE SPEAKER

Parliament Speaker Z. Enkhbold met with John Boehner, Speaker of the U.S. House of

Representatives, last week on Wednesday during an official visit to the United States.

Enkhbold expressed gratitude to Boehner for 25 years of U.S.-Mongolian diplomatic relations and

cooperation. Each nation's legislative body has cooperated with visits from high-level officials that

have contributed to bringing bilateral relations and cooperation to the next level. U.S. Congress has

passed a number of resolutions since 1991 in support of Mongolia's democracy, free elections, and

transition to a market economy.

Enkhbold also noted Mongolia's good relations with both the North and South Korean nations and

offered to act as mediator in any possible future disputes. He also invited members of U.S. Congress

to a parliamentary forum scheduled for the seventh ministerial conference of the Community of

Democracies, to be held this February in Ulaanbaatar.

Enkhbold also met with Ed Royce, head of the standing committee on foreign affairs of the U.S.

Congress, to share views on the ties and cooperation between the legislative bodies and their

factions.

Source: Montsame

MONGOLIA TO LEAD THIS YEAR'S GLOBAL ENVIRONMENTAL CELEBRATION

Mongolia will host this year's World Environment Day celebration on 5 June. Mongolia was chosen to

host the events in recognition of its shift toward a green economy.

―Mongolia is facing enormous challenges, including growing pressure on food security, traditional

nomadic herding and water supplies as a result of the impacts of climate change,‖ said UNEP

Executive Director Achim Steiner.

He added the Mongolia has seen a 2 degree Celsius increase in temperatures over the last seven

decades in addition to less precipitation in all but the western region of the country. He lauded the

government for its efforts in creating a ―less-polluting and more sustainable future,‖ with its mining

and environmental regulations in addition to plans to tap into the country's renewable energies

potential.

World Environment Day dates back to 1972 as an event to raise awareness of the environment and

encourage political action. This year the event will focus on reducing waste from foods with the

motto ―Think. Eat. Save. Reduce Your Footprint.‖

Steiner also announced that a UNEP mission to Mongolia was scheduled to depart in April to assist

the country in its transition to a green economy in areas such as energy, land and water.

Source: News.mn

MONGOLIA AND RUSSIA SHOW MILITARY SHEEN

Defense Minister Dashdemberel Bat-Erdene led a military delegation to Moscow from 17 to 21

February for discussions that included preparations for their annual joint exercises.

Possibly to smooth over the fact that he had not quickly paid an official visit to his Russian

counterpart since his August 2012 appointment as Mongolia‘s defense minister, Bat-Erdene

emphasized that his trip was the first that he personally had led abroad: ―I wished to start my

foreign visits with Mongolia‘s most reliable friend—the Russian Federation.‖

For his part Minister Shoigu emphasized the importance of maintaining friendly relations with

Mongolia as one of the priorities of Russian foreign policy. The Russian side offered the Mongolians

assistance in training military personnel at Russian military academies and to continue training

young Mongolian cadets at the Suvorov Military School in Yekaterinburg.

Bat-Erdene confirmed that more than 60 percent of Mongolians performing in military training

abroad today are in Russia. Such training programs appear to be Moscow‘s response to the annual

multi-national peacekeeping exercise in Mongolia called Khaan Quest that are conducted under the

aegis of the General Staff of the Mongolian Armed Forces and the U.S. Pacific Command.

Among other topics of the bilateral discussions were preparations for the now annual Russian-

Mongolian joint military field exercises, held every fall since 2009, either in Mongolia or Russia‘s

Eastern Military District. Last year‘s exercises, ―Selenga 2012‖ focused on defeating a simulated

terrorist attack and securing the area afterward. Bat-Erdene also suggested both sides begin

planning for the 75th anniversary celebration in 2014 of the Khalkin Gol joint victory by the Soviet

Army and Mongolian Revolutionary Army over the Japanese Kwantung Army in eastern Mongolia.

The visit also had called for economic talks, chiefly centering around the construction of Mongolia‘s

first heavy-duty paved road to the Chinese border and a 20,000-hectare industrial park called Bayan

Gobi Nutag in the south Gobi region, which will include the country‘s first coke-chemical plant, a

12-megawatt power plant and a coal-washing plant.

Source: Asia Times Online

MONGOLIA PLANNING TO BUY U.S. MILITARY PLANES

Mongolia is in discussions to buy American-made military transport airplanes, and is getting U.S.

help in learning how to operate the aircraft. That ambitious purchase appears to signal that

Mongolia has mining money to spend, and it's using some of it to upgrade its armed forces.

Mongolia is looking at buying three C130J transport airplanes, manufactured by Lockheed Martin.

The planes would likely be used to transport the country's armed forces on its increasingly

ambitious international peacekeeping missions. The Alaska National Guard sent airmen to Mongolia

to conduct training on C-130 training as part of its Partnership program, which pairs U.S. states with

countries with whom the U.S. cooperates.

―We are in detailed discussions with the Mongolians,‖ said Lockheed Martin, spokesman Peter

Simmons.

In a 2009 interview with Jane's Defense Weekly, then-defense minister Luvsanvandan Bold said the

country's defense budget wasn't enough to consider procurements. He said that circumstances was

only likely to change after 2015, when incomes from the country's booming mining economy started

to come in.

Right now it [defense spending] is very low, about 1.4 percent of GDP [gross domestic product]. We

want to bring it up to 2 percent to really maintain a professional, capable army that meets all our

needs,‖ Bold said.

But it looks like that is changing a little ahead of schedule. Mongolia announced a couple years ago

that it was going to buy Russian MiG-29 fighters, but nothing seems to have come of that, and this

analysis suggest that there may have been nothing behind the announcement, anyway. Either way,

the thinking would still apply now. Jane's Defense reported:

―This follows the pattern that the U.S. has established in other post-Soviet countries, most notably

Kazakhstan: understanding that the military ties with Russia are too great to supplant entirely, the

U.S. will instead focus on training and equipping small, niche forces to take part in U.N.

Peacekeeping and U.S.-led military operations like Iraq and Afghanistan.‖

Source: Eurasianet

UB BANS ENGLISH SIGNAGE

The City of Ulaanbaatar approved a motion to ban signs and commercial billboards from using

English language and its alphabet.

Resolution 37 orders all signs and billboards be written in only Cyrillic or the classical Mongolian

script. It applies to both government and non-government entities with penalties for failure of

compliance to include the loss of operating permits.

The resolution was written to address the problem of company and entity names displayed on signs

and billboards in Ulaanbaatar using foreign letters, often with misspellings. Sukhbaatar District is

now reportedly in the midst of identifying the companies in violation of the resolution and sending

notices for compliance.

The Sukhbaatar District deputy governor, A. Lkhagvasuren, said work would begin on the renovation

and repair work needed for streets and public spaces in the district in early April. During that work

officials will be checking that the signs of government offices are printed in the same color and

design. Public trade centers, however, will be permitted to have unique designs.

Source: UB Post

CAPITAL SPELLING

Now that Mongolia is firmly on the international investment map, an online campaign has been

launched to ensure that the country's capital is spelled correctly as ―Ulaanbaatar.‖

Many Mongolians have been irked by the continuing use of the Russian spelling of their capital, Ulan

Batar or Ulan Bator, not to mention numerous other variations. While Mongolian, like Russian, uses

the Cyrillic script, the two languages have different spellings for the Mongolian capital, with the

Mongolian version correctly transcribed into Latin as Ulaanbaatar.

The name Ulaanbaatar—the Mongolian translation of ―Red Hero‖--was given to the city in 1924,

when it became the capital of the Mongolian People's Republic. Previously, the settlement had

several titles including Urga and Khuree.

Munkhdul (Mogi) Badral, owner of the Cover Mongolia newswire, has even launched an online

campaign at the change.org website, urging the English speaking world to ―Please spell Mongolia's

capital correctly, 'Ulaanbaatar' 'not Ulan Bator.'‖ Badral is also the initiator of another petition

linked with spelling. ―It's 'Chinggis Khaan' not 'Genghis Khan,‖ pointing out to English speakers that,

―Genghis is just simply not how it's pronounced. How would you like it if George Washington was

spelled Jorj Vashington?‖

Source: BNE

HOLD ON TO YOUR FOREIGN INVESTORS

Mongolia is suffering from dwindling foreign investment due to a lack of confidence in political

stability, said the president of Mongolia International Capital Corp. (MICC).

―Every four years, our governments are likely to adopt completely new policies and amendments to

laws, whether they were right or wrong during the former government, and revise agreements that

had already been drawn up,‖ said Darambazar Achit-Erdene. ―Then when the opposition party wins

in the next four years, everything changes all over again.‖

He noted that investors look for predictable political environments that create a fair business

climate. He echoed the worlds of Japanese Ambassador Takenori Shimizu who said during a

television interview with Dambadarjaa ―De Facto‖ Jargalsaikhan: ―The foreign countries make

agreements only with Mongolian government, but not with any political party. It should be as such.‖

The MICC head pointed to both the Strategic Foreign Investment Law (SEFIL) passed last year and

the draft Minerals Law released to the public this year as examples of government rushing to pass

legislation for short-term benefits but with long-term negative effects. He explained that SEFIL put

companies within and outside the ―strategic‖ sectors outlined in the law at a standstill out of fear

of violating it. The draft law, too, appeared to be an aggressive move against foreign investment.

Achit-Erdene noted that Mongolia was not in a position to stand on its own yet, and would still need

foreign investment to continue funding its development. He explained that his firm and the Business

Council of Mongolia have compared Mongolia's position today to other developing and developed

countries and concluded ―we are not yet powerful enough to purely finance ourselves.‖

Source: Zuunii Medee

ANNOUNCEMENT

FUTURE MONGOLIA, UB, 19-22 June

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 have 5% discount for raw space. Please contact Saruul at email

saruul@bcmongolia.org or 99131377. For more information, visit Future-Mongolia.com.

___________________________________________

NEW YORK INTERNATIONAL FRANCHISE EXPO, New York City, 20-22 June

The New York International Franchise Expo will be organized in New York, USA from 20 to 22 June

2013.

BCM and the U.S. Embassy's Commercial Section are inviting members to register and join thousands

of entrepreneurs and business owners at the International Franchise Expo, the largest franchise

expo in the country. Meet hundreds of proven franchise opportunities. Every industry. Every

investment level. Full-time and part-time.

The registration deadline is 6 p.m. on 19 April. For more information or to register, contact

317027, 99131377 or email saruul@bcmongolia.org.

___________________________________________

FOREIGN INVESTMENT IN MONGOLIA CONFERENCE, APRIL 19, UB

BCM and UB Risk Management Consulting (headed by Dr. Khashchuluun, former Chair of NDIC) are

organizing a "Foreign Investment in Mongolia: Challenges, Risks and Solutions" conference on April

19, 2013 at the Kempinski Hotel.

As we know, Mongolian economy has been rapidly growing with 17.5% in 2012 and 12.3% growth in

2013. During 2010-2012, foreign investment in Mongolia increased at a rapid speed, contributing

significantly to economic growth, creating more jobs and financing various projects in the country.

However, the OT copper gold project, long a cornerstone of Mongolia‘s increased FDI, is almost

completed. The timing of other potentially large FDI projects such as PPP power stations and the TT

project are not clear. The result could be that inflows into Mongolia may not grow as much as in

previous years.

Speakers include:

- S. Bold, Chief Economist, Central Bank

- S. Javkhlanbaatar, Foreign Investment Regulations and Registration Department Head, Ministry of

Economic – Development of Mongolia

- B. Amarsanaa, Academic Secretary of National Legal Institute

- D. Gan-Ochir, Head of Financial Stability Council, Advisor to President of Central Bank

- D. Achit-Erdene, CEO, MICC

Attached is the Agenda of the event. FREE registration, please contact tugi@bcmongolia.org,

317027.

___________________________________________

MONGOLIA INVESTMENT SUMMIT 2013, APRIL 16-18, LONDON

Business Council of Mongolia members are invited to attend the Mongolia Investment Summit

London 2013 and receive a 15 percent discount on their registration fee.

Mongolia Investment Summit London has over 200 delegates registered to attend in April. With

significant amounts of investment in Mongolia traditionally coming from Asia there are new

opportunities to be explored in the Western Hemisphere. Investor interest is high from the west and

fund managers, private investors and financiers want to gain exposure to Mongolian growth.

Mongolia Investment Summit London in April will provide an important opportunity to meet these

investors, raise the profile of Mongolia and promote your business.

The event provides an excellent opportunity to meet with major investors, mining groups,

government officials and real estate specialists to identify new business partners. At the event, the

views on the country will be discussed by investors from companies such as Barclays Natural

Resource Investments, HSBC Global Asset Management, Collabrium Capital and more. The event

provides an opportunity not to be missed.

Enter the discount code ―Business-Council-Mongolia-Special‖ when you register to receive the early

bird discount plus an additional 15 percent off.

___________________________________________

3RD RISK MANAGEMENT FORUM, 1 MAY, ULAANBAATAR

The 3rd Risk Management Forum of Mongolia will be held on 1 May 2013 in Ulaanbaatar at the Blue

Sky Tower.

This is the largest risk event in Mongolia, co-organized by the Business Council of Mongolia and

Mandal General Insurance. The Risk Forum will provide the most comprehensive overview of risks

that Mongolia faces today and the status of risk management all under one roof. Risk management

techniques and tools will be shared and best practices promoted across industries.

Last year, the event had attracted over 250 representatives of Mongolia's top corporations and

government agencies and resulted in the formation of Risk Institute of Mongolia. This year, the

expert speakers will be address topics concerning Macro Risks, Business Risks, and Community Risks.

For more information, visit RiskForum.mn.

___________________________________________

MONGOLIA ENERGY AND INFRASTRUCTURE SUMMIT, 15-16 MAY, ULAANBAATAR

Business Council of Mongolia members are invited to attend the Mongolia Energy and Infrastructure

Summit and receive a 15 percent discount on registration fees.

On the 15th and 16th May 2013, the Mongolia Energy and Infrastructure Summit will bring together

independent power providers, asset management firms, local and international banks, law firms,

and government officials to discuss the business opportunities and challenges facing the Mongolian

energy and infrastructure sector.

Key coverage includes:

- Renewable energy and the future of clean energy in Mongolia

- Infrastructure needs for the mining industry

- Insurance and political risk considerations for investors and developers

- Power and infrastructure projects for Ulaanbaatar‘s urbanization

- Financing challenges and the role of ECAs and multilaterals

For more information, please visit the event website: www.euromoneyseminars.com/MEI13

Enter the discount code ―MEI_BCM‖ when you register online to receive 15 percent off.

___________________________________________

COAL PROCESSING & MINING TECHNOLOGY EXPO, 4-5 JUNE, 2013

The Coal Processing & Mining Technology Expo will be held in Ulaanbaatar from 4 to 5 June 2013.

The expo is co-located with the Transportation & Logistics Expo, and because of this co-location you

will be able to meet with a more diverse and broader group of attendees. With many international

as well as local Mongolian companies already signed up to exhibit, you will be a part of what is

becoming the premier event for the mining and transportation industries serving Mongolia.

BCM members will receive a special 10 percent discount. To register and receive your discount

email Saruul at saruul@bcmongolia.org. For more information about the exhibition, contact Glenn

Scott atgscott@uexpos.com or visit the website coalexpomongolia.com.

___________________________________________

“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 15 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, 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 Undral at undral@bcmongolia.org

or 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.

___________________________________________

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

„PHOTO GALLERY‟

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

added:

• 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

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

The following 3 presentations were added from Coal Mongolia, 21-22 February:

―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. Please also note 25

presentations from the Mongolian Investment Summit 2012 on 30-31 October in Hong Kong; and 9

presentations from Discover Mongolia 2012.

The ―Mongolia Reports‖ section includes ―Highlights of 2012, Mongolia‖ by European Bank for

Reconstruction and Development (EBRD); the ―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; ―Mongolia-a supplement to Mining

Journal‖ from Mining Journal October, 2012; ―Macro Overview‖ September, 2012 by EPCRC; ―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 1,021 fans on our Facebook fans page, 1,178 connections on LinkedIn network, and

645 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.

BCM WORKING GROUP MEETINGS

BCM TAX WORKING GROUP met on Tuesday, March 26, with 20 members attending.

Co-chairs Arthur Cookson, OT, and Onchinsuren D, Deloitte Onch, moderated the session.

New member Maitsetseg Ulaan, /ISG Holding/, Enkhjavkhlan Tseyen /Tax and LLC/ were welcomed.

Meeting discussion was on the following topics:

Law on Professional Tax Services and the amendments to the Law on Lawyers

- Chuluunbaatar B, Executive and Founder at LexLosi

Update on Professional Tax Service Law

- Enkhjavhlan Ts, Board member and Training manager of Mongolian Association of Certified Tax

Consultant NGO

___________________________________________

BCM EDUCATION WORKING GROUP - March 2013 meeting

TVET:

MCA Update:

• Invested 46 million into TVET sector (in areas of policy-Law on TVET, teacher training/curriculum

development, setting up of Agency/NCVET, equipment and facilities, studies)

• Competency Based Training and links to industry (this work and assessment is not finished, other

donors could support this)

• Work through private training colleges with competitive training grants (other donors could

support this)

Comments on EU project to be implemented shortly:

• Key is for enough allocation to build capacity at Ministry/NCVET and schools/teacher training

• Should deepen the work started on Qualification Framework

Comments on NCVET:

• Met once under new government, new Minister of LSW heading it

• Private sector component still the same but government team changed and made up of state

secretaries of relevant ministries

• NCVET was conceived to facilitate ―industry driven TVET‖ but this still has not happened

AUSAID

• Visited Mongolia this month, from April will have presence here and located at the Australian

Consulate General‘s Office

• They would join the BCM Education WG

KOIKA and GIZ

• Will join forces to embark on TVET ―skills testing‖ initiative

• They will link this to the ―World Skills‖ initiative

ADB

• The ADB TVET project ($25 million) has started preparing the project details

• Project will approach the TVET issues/interventions from the ―school-end‖ side, i.e. ―bottom-up

approach‖

• It is envisaged that there will be over-laps with the EU/SDC/GIZ projects

Government reform group at Cabinet Secretariat

• This group is also looking at issues for reform of the TVET sector

HIGHER EDUCATION:

AUM:

• EXECUTIVE MBA PROGRAM to commence this September

• The two-year EMBA degree is awarded by Indiana University, and offered in partnership with AUM.

ADB:

• $20 million soft loan for Higher Education Project

• Will focus on Improving Quality and Relevance of Higher Education programs, Improved

Governance of Higher Education Institutions, Improved financing, Improved equity and access to

higher education

• Will engage capacity training development of stakeholders, especially in ministry and universities

• Will also improve learning outcomes (investments in labs, e-learning, equipment etc)

• Other aspects of project: Improving Research Capacity (joint research with MIT and for Mongolian

students to earn credits from MIT, Links with Stanford University on research university system);

labor market surveys; tracer studies

• Pilot initiatives on Higher Education autonomy, accountability, and governance reforms

• Other areas improving credit transfer system between universities; improving access to state

training funds

OTHER EVENTS:

SANTIS:

• Role of English and Economic Growth Symposium; Education Fair; Jobs Fair 2013

• Dates: April 18-21, Blue Sky Hotel, 3rd Floor

• BCM supports this event and will publicize to its members

Please contact: erka@bcmongolia.org

ECONOMIC INDICATORS

SUPERMARKET PRICE COMPARISON – FEBRUARY/MARCH 2013

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]

February 28, 2013 *11.3% [source: NSOM]

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

Note: 11.1% y-o-y, Ulaanbaatar city, February 28, 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]

CURRENCY RATES – MARCH 28, 2013

Currency Name Currency Rate

US dollar USD 1,410.47

Euro EUR 1,804.13

Japanese yen JPY 14.90

British pound GBP 2,137.57

Hong Kong dollar HKD 181.76

Chinese Yuan CNY 226.98

Russian Ruble RUB 45.44

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.