BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 302 – November 29, 2013

NEWS HIGHLIGHTS:

Business

Mongolia wants to resolve mine dispute with Rio Tinto by early 2014;

Turquoise Hill to proceed with $2.4bn rights offer;

SouthGobi provides first bi-weekly update on restated financials;

Erdenes MGL to establish copper holding company, smelters, says CEO;

Permafrost poses new challenges for PP5;

IAAC investigates Skytel management in relation to ZTE crimes;

Human Rights Commission sues Capital Bank;

Tribunal hears Khan Resources case;

MGG agrees to management buyout of Mandal by UMC Capital;

EBRD‟s 'fast response team' for small businesses;

Petro Matad eyeing two drill targets;

MNB gets new automation software;

New shopping channel starts broadcasting;

Xanadu Mines appoints new chairman;

Moody's upgrades Winsway to Caa3; outlook remains negative;

Turquoise Hill rating lowered to underperform at Bank of America;

MGG to host Mongolian Stock Exchange in New York;

BCM launches new LinkedIn company page;

Rio sells more noncore assets.

Economy

World Bank‟s Mongolia economic update;

Financial reality forcing Mongolia to accept investors like Rio Tinto;

Mongolia to embrace illegal gold miners;

Mongolia to move up food chain;

Taiwan delegation to visit Uvs to investigate sea buckthorn trade opportunities;

Japan-Mongolia direct flights to increase;

Japan to fund five “grassroots” projects;

IFC report urges Mongolian companies to improve corporate governance;

Commercial banks pledge to support green projects;

MCC helps fight spread of non-communicable diseases among Mongolians;

UN to assist in forest management and research;

„Green wall‟ planted to stop Chinese desert from spreading;

University of Law Enforcement to train traffic police officers;

Heart and cerebral trauma center opens at Hospital No. 3;

Teenage pregnancy rates soar in Mongolia;

Constrained capital markets number-one constraint for junior miners.

Politics

DP rejects MP Amarjargal's resignation request;

Myanmar invites Mongolia to make investment in country;

Elbegdorj visits Vietnam for business forum;

Mongolian President in Singapore on state visit;

President speaks at 'The World in 2014' gala dinner;

Mining minister breaks the ice ahead of Russia-Mongolia talks;

Mongolia negotiates expanded military cooperation with Japan;

Mongolia establishes diplomatic relations with Rwanda;

Russia to hold drills with China, Mongolia in 2014;

Supreme Court rules against MPP for Lenin Museum;

Mongolia pushes to see that “FDI figures will fly”.

ECONOMIC INDICATORS

Monthly Macroeconomic Overview – October 2013;

Supermarket Price Comparison – November 2013;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

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International SOS

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BUSINESS

MONGOLIA WANTS TO RESOLVE MINE DISPUTE WITH RIO TINTO BY EARLY 2014

Mongolia hopes the USD 5 billion expansion of the giant Oyu Tolgoi copper and gold mine can start

next year as it works to resolve a dispute with global miner Rio Tinto PLC, its partner on the

project, a government source said.

But Rio Tinto may be reluctant to push on too quickly due to bleak market conditions, the source

said, with copper prices down more than 10 percent in 2013 and expected to drop further on a

flood of new supplies from South America and Africa.

"Our side is committed to starting the second phase as soon as possible and we can agree on certain

issues in December or January and plan development," said the source, which is involved in

Mongolia's discussions with Rio Tinto but did not want to disclose his name.

Craig Kinnell, Rio Tinto's new representative in Mongolia and the chief executive of the Oyu Tolgoi

project, said one of his four priorities would be to prepare the project for future growth, but he

gave no timeframe for the expansion.

"I am as expectant as everyone for the day that the issues under discussion will be resolved. But

speed is not the measure of success," Kinnell said in his first public speech in the job at the

Mongolian Investment Summit in Hong Kong last week on Tuesday.

Mongolia has complained about first phase costs being USD 2 billion higher than originally planned,

the source said. The source said the overruns would mean it would take longer for the Mongolian

government to pay back what it owes on the project, meaning that it would take longer before it

started receiving dividends. He said Mongolia also continues to object to Rio Tinto's financing and

management costs.

Erdenes Oyu Tolgoi, the government entity that holds Mongolia's 34 percent stake in the project,

said in a statement on Tuesday that Mongolia remained fully committed to the project and to the

terms of the original 2009 agreement. Some interpreted the statement as a sign that the

government is prepared to be flexible to resolve a deadlock that has forced Rio Tinto to lay off

1,700 staff at the mine.

Source: Reuters

TURQUOISE HILL TO PROCEED WITH $2.4BN RIGHTS OFFER

Turquoise Hill Resources Ltd., the Rio Tinto Group unit that operates the Oyu Tolgoi copper mine in

Mongolia, will proceed with a USD 2.4 billion rights offer to repay credit facilities.

Investors will get one right for each Turquoise Hill share, entitling them to buy another share for

either USD 2.40 or CAD 2.53, the Vancouver-based company said yesterday in a statement. That

represents a discount of 42 percent to 25 November closing prices in New York and Toronto

respectively. Turquoise Hill expects to double the number of outstanding common shares with the

offer, which will be open for 27 days through 7 January. London-based Rio, which has a 51 percent

stake in the company, will buy stock not taken up by other investors. The proceeds will be used to

repay a USD 1.8 billion interim credit facility, and a USD 600 million bridging facility with Rio.

Turquoise Hill said on 14 November it was readying a rights offer after failing to obtain long-term

project financing for Oyu Tolgoi because of disagreements with the Mongolian government. In July,

Rio delayed work on a planned underground expansion of the mine, which is expected to cost about

USD 5.1 billion, while it talked with the government to resolve disagreements on funding and other

issues.

Source: Bloomberg

SOUTHGOBI PROVIDES FIRST BI-WEEKLY UPDATE ON RESTATED FINANCIALS

SouthGobi Resources Ltd. released the first of its voluntary bi-weekly updates for restated

financials.

SouthGobi has continued to work with PricewaterhouseCoopers LLP, its current auditors, and

Deloitte LLP, its auditors during the 2010 and 2011 fiscal years, to complete the restated financials,

expected on 13 December. It said management was enhancing internal controls over financial

reporting by developing a more thorough review process in evaluating complex sales arrangements

in each reporting period. The remedial controls that have now been implemented must operate for

a sufficient period of time before management can conclude, through testing, that these controls

are effective and therefore that the material weakness identified and referred to in SouthGobi‘s

third quarter 2013 financial and operating results could be remediated by the expected date of 31

December.

SouthGobi said it would provide bi-weekly updates until restated financials were filed.

Source: SouthGobi Resources Ltd.

ERDENES MGL TO ESTABLISH COPPER HOLDING COMPANY, SMELTERS, SAYS CEO

State-owned mining assets holding company Erdenes MGL plans to consolidate its copper assets

under a single company, said the state-appointed chief executive.

Erdenes MGL will consolidate its holdings of the Oyu Tolgoi, Tsagaan Suvarga, and Erdenet Mines

under the company Mon Zes, said Chief Executive Officer O. Sainbuyan. As the company is already

taking charge to lead construction projects for roads, railways, water delivery, and border ports, he

said, the company will be tasked with establishing a smelter plant at either Sainshand or Erdenet.

Officials are also looking at the possibility of providing smelting facilities at each of the mines.

However, doing so would mean research into new technologies for Mongolia.

―To build up Mongolia‘s smelting capabilities, we need the technology to process sulphuric acids,‖

said Sainbuyan. ―The conventional technology cannot handle this.‖

Sainbuyan said the company was looking into the use of solvent extracts for this, which he said is

used in the United States and other Western developed nations.

Source: Zuunii Medee

PERMAFROST POSES NEW CHALLENGES FOR PP5

Permafrost at the location selected for Power Plant No. 5 will be a significant challenge as

construction begins in 2015, said a Newcom LLC official.

―It is said that this land is located at a dangerous permafrost area,‖ said D. Gankhuyag, Newcom‘s

director of infrastructure and energy. ―Now we are discussing this problem. These challenges

regarding the land have increased costs.‖

Mongolia awarded the contract for construction of the power to a consortium that includes France‘s

GDF Suez, Japan‘s Sojitz Corp., Korea‘s Posco Energy, and Newcom Group. Khuliin Gol was chosen

as the location for the plant after multiple relocations, and was one of more than 10 locations to

choose from at the time. The government will be responsible for the installing thermal and water

lines to the power plant while the rest of construction will be undertaken solely by the consortium.

―Now we are working to negotiate the general principles of the project with the government of

Mongolia as well as the joint working group that includes the Minister of Economic Development and

Ministry of Energy,‖ said Gankhuyag.

Source: Undesnii Shuudan

IAAC INVESTIGATES SKYTEL MANAGEMENT IN RELATION TO ZTE CRIMES

The Independent Agency Against Corruption (IAAC) has opened an investigation into

telecommunications firm Skytel.

Although IAAC has not yet commented on why it has opened its investigation, an unofficial source

said it is connected to dealing with China‘s ZTE. According to the source, Skytel‘s chief executive,

Su Min, allegedly bribed public officials to set up its telecommunication lines. Also being

investigated for the case are Skytel‘s head of auditing, Ch. Gansukh, his son Ch. Enkhbat, and

company inspector Byambasuren.

Investigators reportedly found MNT 16 billion in an account held by Gansukh, MNT 1 billion in his

father‘s account, and over USD 1 million of one of Gansukh‘s sons other than Enkhbat, said the

source. Gansukh allegedly has had personal involvement in the tax matters of ZTE.

ZTE is allegedly being investigated for tax avoidance and the illegal import of banned goods in

return for bribes. The tax avoidance is being treated as a separate case and was the reason for the

investigation of former Education Minister E. Otgonbayar. The IAAC suspected that Otgonbayar

accepted bribes from ZTE. If investigators are able to prove that ZTE was guilty of the alleged

crimes, Mongolia‘s Communications Regulatory Commission would also become involved.

Source: Udriin Sonin

HUMAN RIGHTS COMMISSION SUES CAPITAL BANK

The National Human Rights Commission filed a lawsuit against Mongolia-based Capital Bank for

alleged human rights abuses on Wednesday 27 November.

NHRC said it has received numerous complaints that the bank has violated the civil rights of its

employees. An audit revealed that female employees at the bank were prohibited from becoming

pregnant for two years after signing a labor contract as well as dozens of other offenses against the

civil rights of its employees.

Directors of the local commercial bank denied the claims and the bank has failed to respond to a

notice from NHRC that ordered that the bank address these claims, saying the complaints were

baseless.

Source: News.mn

TRIBUNAL HEARS KHAN RESOURCES CASE

Khan Resources Inc. announced that the hearing by an international arbitration tribunal slated for

11 to 15 November was completed as scheduled.

Arguments were heard by the tribunal from Khan and from the Mongolian government on the merits

of the case and the damages incurred by Khan due its claim of illegal expropriation in 2009 of the

mining and exploration licenses for the Dornod uranium project in northeastern Mongolia. Khan is

seeking damages in the amount of USD 326 million.

"This hearing was the culmination of a long and expensive process,‖ said Grant Edey, president and

chief executive officer of Khan. ―Our case continues to be very robust and we remain confident in a

favorable outcome for our shareholders."

The tribunal has asked for the submission of two post-hearing briefs before rendering their decision.

The first post-hearing brief is scheduled for the end of January, 2014 and the second for the end of

March, 2014. After receipt of the two briefs, it is expected that the Tribunal will then formulate

and render their decision.

Source: Khan Resources Inc.

MGG AGREES TO MANAGEMENT BUYOUT OF MANDAL BY UMC CAPITAL

Mongolia Growth Group (MGG) Ltd. has agreed to sell Mandal General Daatgal LLC to UMC Capital

LLC.

The management and board of directors of MGG has determined that, while Mandal has continued

to make progress, it is non-core to the company's much larger property business that has been

created over the past two and a half years. This sale will allow the management of MGG to focus its

energy, corporate resources and capital on its core commercial real estate business with the goal of

creating the most successful institutional property company in the rapidly growing economy of

Mongolia.

"Disposing of Mandal will allow MGG to lower its cost structure and re-focus the business on

property assets that are leveraged to the growth of the Mongolian economy," said Harris

Kupperman, chairman and chief executive of MGG.

―I want to thank our friends at MGG for their support in helping us launch a company with the vision

to create the largest, most innovative and most responsible insurance company in Mongolia. Mandal

now enjoys a solid reputation as a major risk management institution in Mongolia and our

operations shall continue reflecting the best international standards.‖ said Ganzorig Ulziibayar,

President of Mandal and Chairman of UMC Capital.

Subject to TSX Venture Exchange approval, MGG expects that this transaction will be closed during

the fourth quarter of 2013.

Source: Mongolian Growth Group Ltd.

EBRD‟S 'FAST RESPONSE TEAM' FOR SMALL BUSINESSES

Hundreds of companies in Mongolia are developing new strategies and improving their products'

quality with the help of business advice from the European Bank for Reconstruction and

Development's (EBRD's) Small Business Support (SBS) program.

Mongolian companies such as Hungun Beton, cashmere garments manufacturer Ezio Foradori and

the kitchen cabinet maker Kitchenall have grown into market leaders since SBS first started working

with them. SBS puts businesses together with the best local and international experts, and quality

control is especially popular in Mongolia. Learning how to work with international partners is crucial

too—especially to companies like the cashmere garment manufacturer with an unexpectedly Italian

name, Ezio Foradori, which supplies menswear to Dunhill. It also helps prepare companies to apply

for and receive financing from banks, including multilateral banks like the EBRD itself.

"You can call us the fast response team, because we can start working with the donor resources in

new countries of our operations, before the EBRD is able to start financing as a bank,‖ said

Charlotte Ruhe, the Director of the Small Business Support. "This was the case in Mongolia: we

started here before the Bank was able to start lending.‖

The program works both with individual enterprises and with the organizations in the country that

support the small-medium enterprises (SME) sector, like the SME Department in the Ministry of

Labor, the Chamber of Commerce, and the Banking and Finance Academy. Since 2001, SBS has

provided over 350 small businesses in Mongolia with know-how and expertise. One of these women-

managed SMEs is Hungun Beton, the concrete blocks manufacturer, which developed an investment

business plan and received support with management and human resources. The female chief

executive is soon expected back from her maternity leave; her team knows that big changes are on

the way.

"Our factory last modernized in the 1980s,‖ said Odbileg, the engineer. "Thanks to our previous

cooperation with SBS and EBRD bankers, we know our direction; now we need to find financing and

get going.‖

Source: 4-Traders

PETRO MATAD EYEING TWO DRILL TARGETS

Oil explorer Petro Matad expects to identify at least two drilling locations from its recent 2D

seismic acquisition.

The explorer completed the acquisition of 200 kilometers of data on Blocks IV and V in Mongolia on

19 November. Preliminary analysis confirmed previous interpretation of initial brute stacks of

seismic across the prospect area in Block V and, subject to further processing, should delineate at

least two prospective drilling locations for 2014, it said.

In addition, Petro said the initial brute stacks across Block IV indicated an additional trap closure in

this area and a further 30 kilometers of seismic would be acquired to confirm this closure as a

potential drilling prospect for 2014. The group has three production sharing contracts with the

government. Block XX has an area of 10,340 square km in the far eastern part of the country.

Source: Proactive Investors

MNB GETS NEW AUTOMATION SOFTWARE

Mongolia‘s state-funded broadcaster Mongolian National Broadcasting (MNB) has ordered new audio

automation systems from French software house NETIA.

MNB will use NETIA‘s Radio-Assist suite in its studios. The software will be installed with the help of

local partner Career Mart.

―Equipped with tools that simplify and streamline operations, NETIA‘s automation software will

provide MNB Radio with a straightforward and scalable solution for file-based production,‖ Daria

Globus, NETIA sales representative for Eastern Europe, Russia, and Central Asian countries

―By enabling a high degree of efficiency across the broadcast workflow, Radio-Assist also will give

MNB Radio greater flexibility in providing listeners with quality radio programming.‖

Source: Asia Radio Today

NEW SHOPPING CHANNEL STARTS BROADCASTING

Shop Mongolia broadcasted its television-based shopping venue for the first time on 19 November.

The shopping channel was launched by EGON, which was founded by the sons and daughters of the

founders of Channel 25, A. Enkh-Amgalan, P. Gerel, G. Oyun and B. Nandintushig.

―Shop Mongolia is one more step towards better standards in the history of Mongolian shopping

channels. All products that will be sold during the initial stage of the channel were imported from

the U.S. and Japan. We also plan to sell high quality national products as well,‖ said Oyun.

The channel will focus solely on sales, but will also broadcast programs that explain the

manufacturing process and contents of well-known products. Consumers will be able to return

goods they find unsatisfactory or faulty in any way.

Source: UB Post

XANADU MINES APPOINTS NEW CHAIRMAN

Xanadu Mines Ltd.‘s made changes to management, including the decision to reject director Denis

Gately‘s confirmation as chairman.

The board has appointed Mark Wheatley as the company‘s new chairman, and Gately is no longer a

director. Wheatley is an experienced independent non-executive director, having served as

chairman of Gold One International, Norton Gold Fields, and Goliath Gold, and as a director of St.

Barbara Mines and Uranium One Inc.

The board also appointed Janine Rolfe as company secretary and the person responsible for

communications with the Australian Securities Exchange (ASX). Rolfe will assist Xanadu in

conducting an overall review of the company‘s corporate governance framework. She is also a

director of Company Matters Pty. Ltd., a governance and legal consultancy. Rolfe replaces Mark

Langan, who will continue to serve as the company‘s chief financial officer.

Source: Xanadu Mines Ltd.

MOODY'S UPGRADES WINSWAY TO CAA3; OUTLOOK REMAINS NEGATIVE

Moody's Investors Service has upgraded Winsway Coking Coal Holdings Limited to Caa3 from Ca. At

the same time, Moody's has affirmed the company's Ca senior unsecured debt rating. The outlook

for the ratings remains negative.

"The upgrade reflects Moody's expectation that the recovery prospects for Winsway's creditors have

improved following the completion of its exchange offer for the senior notes due 2016 and because

of its improved cash position due, in turn, to better inventory management," said Alan Gao, a

Moody's Vice President and Senior Analyst.

Source: ETA News Agency

TURQUOISE HILL RATING LOWERED TO UNDERPERFORM AT BANK OF AMERICA

Bank of America Corp. downgraded shares of Turquoise Hill Resources Ltd. from a buy rating to an

underperform rating in a research note released on Friday morning, Stock Ratings News reported.

Separately, analysts at Zacks downgraded shares of Turquoise Hill Resources to a neutral rating in a

research note to investors on Monday, September 23 September. They now have a USD 5.10 price

target on the stock. Two research analysts have rated the stock with a sell rating and four have

issued a hold rating to the stock. Turquoise Hill currently has a consensus rating of ―Hold‖ and a

consensus target price of USD 6.53.

Shares of Turquoise Hill traded down 1.22 percent during mid-day trading on last Friday, hitting USD

4.06. The stock had a trading volume of 2,957,135 shares. Turquoise Hill has a 52-week low of USD

3.81 and a 52-week high of USD 9.62. The stock has a 50-day moving average of USD 4.47 and a 200-

day moving average of USD 5.44. The company‘s market cap is USD 4.085 billion. Turquoise Hill also

was the recipient of unusually large options trading on Friday. Stock traders purchased 8,424 put

options on the stock. This represents an increase of approximately 623 percent compared to the

typical volume of 1,165 put options.

Turquoise Hill last released its earnings data on Monday, 11 November, when the company reported

USD 0.09 earnings per share for the quarter, above the consensus estimate of USD 0.06. During the

same quarter in the previous year, the company posted USD 0.12 earnings per share. Analysts

expect that Turquoise Hill will post USD 0.20 earnings per share for the current fiscal year.

Source: WKRB News & Analysis

MGG TO HOST MONGOLIAN STOCK EXCHANGE IN NEW YORK

Mongolia Growth Group Ltd. will sponsor a multi-city road show undertaken by the Mongolian Stock

Exchange (MSE) to educate investors about recent positive changes to the Investment Law, the

Securities Markets Law and the Investment Fund Law of Mongolia.

As part of this road show, MGG will host a presentation by Altai Khangai, chief executive officer of

the MSE, and Saruul Ganbaatar, deputy chief executive officer, on 5 December in New York City.

Following the presentation will be a question and answer session moderated by Harris Kupperman,

MGG's chairman and chief executive.

Source: Mongolian Growth Group Ltd.

BCM LAUNCHES NEW LINKEDIN COMPANY PAGE

The Business Council of Mongolia has launched a new company page on the social networking

website LinkedIn to network its members and followers including small-medium enterprises (SMEs).

The new page will allow BCM to alert followers to the latest news and information critical to their

businesses. Members‘ businesses will be promoted. Additionally, BCM plans to deliver monthly

infographics on the latest data as well as videos and other media content as they come. The bulk of

the content on the new page will be in Mongolian language to better cater to BCM's Mongolian-

speaking audience and members.

Source: BCM

RIO SELLS MORE NONCORE ASSETS

The exploration arm of diversified miner Rio Tinto PLC has continued with its asset divestment, this

time selling the Borborema iron-ore project, in Brazil, to Australian Securities Exchange (ASX)-listed

Latin Resources.

Under the terms of the agreement, Latin Resources would pay USD 200,000, as well as about USD

45,000 for legal costs and taxes, and a 3 percent net smelter royalty for the 24 exploration claims

and application claims making up the Borborema project. The project covers 40,483 ha in the Rio

Grande do Norte state, and was in line with Latin Resources' strategy of identifying and acquiring

iron-ore assets close to existing port infrastructure.

―We are very pleased to have been able to capitalize on Rio Tinto‘s exploration work in this very

exciting new iron-ore district in Brazil. This move into Brazil fits in with Latin Resources‘ strategy of

developing projects close to port and infrastructure to enable near-term production,‖ said Latin MD

Chris Gale.

The sale of the Borborema iron-ore project followed shortly on Rio‘s decision to dispose of two coal

exploration licenses in Queensland.

Source: Mining Weekly

ECONOMY

WORLD BANK‟S MONGOLIA ECONOMIC UPDATE

The Mongolian economy will likely show another double digit growth in 2013 but is exposed to

downside risks, said the World Bank for its November economic update.

The baseline growth forecast for 2013 has been revised to 12.5 percent from its previous forecast

(13 percent) in the April Economic Update, reflecting the softer growth in China than had been

previously projected in April and lower-than-expected pace of recovery in mining. Inflation

remained at a single-digit level but shows growing inflationary pressure in recent months. The

national headline inflation picked up to 9.4 percent in August and further to 9.9 percent in

September on year-on-year basis, after a steady downward trend earlier this year.

Rising off-budget spending remains a concern as large portion of the Chinggis bond proceeds have

been used to finance public investment projects outside the budget, mainly through the

Development Bank of Mongolia. The monetary authorities have embarked on aggressive monetary

easing programs in 2013 to offset the slowing credit growth early this year. Loose monetary policy

has led to accelerating credit growth in recent months, particularly in construction and housing

sectors.

The current loose economic policies are not sustainable given the mounting balance of payments

pressure and will undermine macro-economic stability going forward. The downside risk will likely

be exacerbated if the Mongolian economy faces growing headwinds from an unfavorable global

economic environment. In light of the growing external imbalances and uncertain global

environment, the growth-oriented economic policies need to be tightened toward economic

stability. Fiscal policy should be further tightened and start rebuilding fiscal space and should focus

more on ―spending well.‖ Monetary policy should be adjusted toward economic and financial

stability. Supervision and monitoring of the banking system should be strengthened. Continuous

improvement of investment climate is important.

Source: World Bank

FINANCIAL REALITY FORCING MONGOLIA TO ACCEPT INVESTORS LIKE RIO TINTO

Just over a kilometer south of Chinggis Khaan's statue in front of Mongolia's government house sits

the headquarters of Oyu Tolgoi LLC. The gaze of the 13th-century leader of the Mongol horde, said

to be on watch against invaders from the south, meets the logo of Oyu Tolgoi, which is developing

the biggest foreign investment project in the country's history. But while the old warrior stands

guard, the current government's wariness about foreign investors taking away the country's minerals

is easing.

After years of clashes over the USD 6.5 billion Oyu Tolgoi mine, the first copper shipments are at

last reaching customers. That is not to say the government has resolved all conflicts with approval

of a planned USD 4 billion financing package to build an underground mine is facing an uncertain

fate in parliament. Turquoise Hill Resources, the company through which Rio has invested, said 14

November that it may instead raise USD 2.4 billion through a rights offering share offer. The

company halted digging of the shaft in July, resulting in the layoff of 1,700 workers, shortly after

the open-cut section of the mine went into production. Parliament, though, has softened its tone in

light of the country's faltering finances. The chastened parliament endorsed a new foreign

investment law. To narrow the deficit, parliament is now considering budget amendments that

would cut spending for the year by 10.8 percent, to MNT 6.6 trillion. Expected revenue has fallen

13.7 percent to MNT 6.3 trillion.

For Mongolia, the good news is that royalties are finally coming in. Shipments to companies in

China, the primary customers for the mine, were held up until 19 October. The copper languished

at a bonded warehouse just over the frontier, blocked from entry by Chinese customs officials

ostensibly over missing paperwork. A positive resolution of the Oyu Tolgoi saga is critical for

reassuring foreign investors, such as U.S.-based Peabody Energy Corp. and French uranium miner

Areva S.A. that Mongolia will not continually seek to revise terms of investment.

Source: Nikkei Asian Review

MONGOLIA TO EMBRACE ILLEGAL GOLD MINERS

The government of Mongolia signed a deal Monday with the country‘s gold producers association,

which aims to reduce illegal extraction of the metal by reducing barriers for them to become formal

miners, Xinhua reported.

The memorandum would also allow small miners to upgrade their equipment and raise funds, while

forcing them to follow Mongolia‘s regulations over its huge gold reserves, which were only

discovered after the former Soviet satellite began democratic reforms in 1990. Currently an

estimated 100,000 Mongolians work as informal miners, producing more gold than the formal

industrial sector, which alone contributes more than 20 percent of Mongolia's gross domestic

product. This is one of the reasons why the government has for years turned a blind eye to the so-

called ―ninja miners,‖ as they are frequently spotted working at night with their plastic gold-

panning basins slung over their backs, resembling the characters of the TV cartoon Teenage Mutant

Ninja Turtles.

These miners are constantly shoved onto smaller pieces of land by mining giants, but today‘s

announcement may soon change their faith, as the government also announced it has set up a

council that will oversee the implementation of the memorandum.

Source: Mining.com

MONGOLIA TO MOVE UP FOOD CHAIN

Mongolian agricultural officials envision their organic meat and vegetables being served on Chinese

dinner tables and are looking to foreign investors for help in making this a reality.

―Usually, the money coming into Mongolia is for mining. There is never much interest in the

agricultural sector… But we see great potential,‖ Duursakh Luvsandorj, a department director at

the Ministry of Industry and Agriculture, said on the sidelines of the Mongolia Investment Summit in

Hong Kong.

According to ministry data, Mongolia has 41 million head of livestock, including sheep, goats and

camels, worth USD 7.15 billion. The country supplies 21 percent of the world‘s unprocessed

cashmere. Only 10 percent of animal products are processed locally, with the remainder sent to

Russia or China. In some cases, the final product is then imported back into Mongolia. The ministry

wants to focus on the export of organic produce. Last year, the country received USD 3.8 billion in

foreign direct investment. According to the ministry, agriculture employs 35 percent of the

workforce, including herders practicing traditional nomadic and pastoral farming.

―I see the potential but also the challenges,‖ said Henry Lee, director of Quam Capital and co-

manager of a Mongolia investment fund. ―Do they have the ability to produce and ship everything?

The same infrastructure challenges that affect the mining industry also affect the agricultural

industry.‖

Upgrading the country‘s farming sector will require the construction of dairies, animal barns and

greenhouses to help overcome the elements. In some areas, a fragile top soil means that only

pastoral herding is appropriate, as overgrazing leads to soil degradation and sandstorms, making it

unsuitable for large-scale animal husbandry that benefit from economies of scale. To encourage

investment, the government has announced a series of incentives, including rent-free land leases

and tax breaks on construction of agricultural farms and factories and on farming machinery.

Source: Southern China Morning Post

TAIWAN DELEGATION TO VISIT UVS TO INVESTIGATE SEA BUCKTHORN TRADE OPPORTUNITIES

A Taiwanese business delegation is expected to visit Uvs Aimag to see the province's production of

sea buckthorn for possible trade of oil made from the fruit.

The trip follows a recent visit to Taiwan by Uvs Governor D. Tsendsuren to Taiwan, where he first

invited the Taiwanese business people to his province in northwest Mongolia. The invitation was

made to companies that had already researched possible opportunities for trade for the berry.

Uvs is the source of 800,000 sea buckthorn berries a year. A major concern with sea buckthorn

producers is the need for additional processing plants, warehousing, and pricing. Uvs currently has

six processing plants for sea buckthorn.

Source: Zuunii Medee

JAPAN-MONGOLIA DIRECT FLIGHTS TO INCREASE

Mongolia and Japan have negotiated a greater number of direct flights between the two countries

each week following a meeting with the state secretary for the ministry of road and transportation

and Japanese airline authorities from 20 to 21 November.

State Secretary Baasandorj Batzaya met with the director of the air communications office for the

Civil Aviation Bureau at the Ministry of Land, Infrastructure, Transport and Tourism of Japan, Taro

Kobayashi, where they negotiated to broaden bilateral cooperation in air travel. There was a

proposal that the frequency of direct flights between Chinggis Khaan International Airport and

Narita International Airport in Tokyo, Japan be extended from five to seven days a week.

Liberalized air traffic in Mongolia is also a key issue under discussion for the new airport to open at

Khushigt Valley, which has Japan providing financing and leading the discussions.

Source: Info Mongolia

JAPAN TO FUND FIVE “GRASSROOTS” PROJECTS

Japanese Ambassador Takenori Shimizu on Wednesday approved five projects to be implemented in

Mongolia using Japanese government financing, reported Montsame.

The 5 new projects are in addition to the existing 10 projects that have been implemented here

under "Grassroots-Human Security Grant Aid" program by the Government of Japan. The projects

includes capital repairs in schools in Biger, Bayanhongor, Devshil, Saikhan, and school for children

with hearing disabilities in the city's Sukhbaatar district. Japan plans to provide a grant of USD

507,000 for the new projects.

The "Grant Assistance for Grassroots Projects (GGP)" is a scheme aim to support projects proposed

by various bodies such as non-governmental organizations (NGOs) and local government authorities.

The GGP program provides non-refundable financial assistance to NGOs, hospitals, primary schools,

research institutes and other non-profit associations, to help implement their development

projects. The availability of GGP funding in each eligible country provides the Japanese Official

Development Assistance with new means of cooperation that has a direct impact on the well-being

of the communities.

Source: Bernama

IFC REPORT URGES MONGOLIAN COMPANIES TO IMPROVE CORPORATE GOVERNANCE

A new report by International Finance Corp. (IFC), a member of the World Bank Group, urges

Mongolian companies to improve their corporate governance in order to enhance their

competitiveness and performance, attract investment, and better contribute to Mongolia‘s long-

term economic growth.

Entitled ‗The Corporate Governance Scorecard for Mongolia 2011‘, the report is an independently

produced survey of corporate governance practices in Mongolia. It finds that the average corporate

governance score for Mongolia‘s top 20 listed companies during 2011 was only 27.5 percent,

indicating inadequate implementation of the country‘s corporate governance rules and regulations.

The report urges businesses to improve in key areas such as protecting the rights of shareholders

and stakeholders, improving companies‘ disclosure, transparency and governance structure, and

making boards accountable for company decisions.

―Businesses should raise their awareness of good corporate governance, which paves the way for

more investments at lower costs,‖ said Mongolia‘s Financial Regulatory Commissioner Ganbayar

Davaa. ―The goal of the scorecard is also for the authorities to identify strengths and weaknesses in

the corporate governance framework, leading to further regulatory reforms.‖

The report reviews the corporate governance practices of the 20 largest companies by market value

listed on the Mongolian Stock Exchange as of 3 January 2011, which together represent nearly 90

percent of the Exchange‘s total market value. It aims to develop a benchmark of corporate

governance practices by examining compliance with local laws and regulations and global best

practices.

This is the first corporate governance scorecard produced as part of the IFC Mongolia Corporate

Governance Project, which was launched in 2009 in cooperation with the Financial Regulatory

Commission of Mongolia.

Source: International Finance Corp.

COMMERCIAL BANKS PLEDGE TO SUPPORT GREEN PROJECTS

The Mongolian Bankers Association has introduced a new pledge for commercial banks to contribute

to Mongolia‘s goals for green economic growth.

The joint declaration includes pledges from the Ministry of Environment and Green Development

and 14 banks, including Trade and Development Bank (TDB) of Mongolia LLC, Golomt Bank LLC,

XacBank LLC, and Khan Bank LLC. The public declaration aims to introduce mechanisms that would

help fund projects that align with the country‘s long-term goals for environmentally friendly and

sustainable development.

Source: Info Mongolia

MCC HELPS FIGHT SPREAD OF NON-COMMUNICABLE DISEASES AMONG MONGOLIANS

In Washington this summer was a weeklong set of meetings with Millennium Challenge Account

(MCA) staff and representatives from all of MCC‘s health-focused projects. It provided a wonderful

opportunity for us to discuss the challenges and successes we have seen in our projects.

Among the achievements made by the Millennium Challenge Corporation (MCC) in Mongolia in

combating non-communicable diseases and injuries in its five years were the project has provided

training for more than 18,000 medical and administrative staff from all 21 regions in Mongolia,

awarded competitive grants to 219 organizations in the health sector and helped bring the world‘s

top researchers to Mongolia by sponsoring two international conferences for non-communicable

diseases and injuries in Ulaanbaatar in 2010 and 2013—the first conferences of this type in the

country‘s history.

One of the things emphasized during the meetings was how well partnerships worked in the MCC

project. As part of the project, Merck, an American pharmaceuticals company, donated 14,000

vaccines for human papillomavirus (HPV) to help protect Mongolians against cervical cancer. The

partnership helped open doors for further investment in health from the private sector in Mongolia,

including by Merck itself. Through a partnership with The George Washington University, the

project supported 35 health care workers in a Masters of Public Health (MPH) program in

Ulaanbaatar. The MPH program incorporated field practicums in which the students focused on a

project in their local health clinic. These 35 MPH graduates will serve as a new cohort of public

health and NCDI advocates in Mongolia.

The author Adiya Munkhtaivan is the Millennium Challenge Account director of Mongolia‟s health

projects.

Source: Millennium Challenge Corp.

UN TO ASSIST IN FOREST MANAGEMENT AND RESEARCH

Mongolia is to receive support from the U.N. Reducing Emissions from Deforestation and Forest

Degradation (REDD) for forestry, said an official from the Ministry of Environment and Green

Development.

―We are discussing ways to study forests‘ reserve changes and determine the causes of

deforestation, degradation and growth by introducing a permanent monitoring system,‖ said B.

Otgonsuren, a forest protection official for the ministry. It was too soon to talk about funding, he

said, adding that the financial needs could be determined after further study.

Mongolia joined the REDD initiative in 2011.

Source: UB Post

„GREEN WALL‟ PLANTED TO STOP CHINESE DESERT FROM SPREADING

We start walking up ridges as high as 10 staircases, slipping as the grains of sand tumble underfoot,

grabbing a hand to keep from falling, pushing to get to the top of the next dune to see the sea of

sand undulating in the distance.

―We are on the front line of a huge Chinese Dust Bowl advancing east,‖ says former South Korean

ambassador to China Byong Hyon Kwon, an activist in the global fight against deserts on the move.

Creeping deserts are a global problem. About one-third of the earth is exposed to desertification,

according to a 2004 U.N. study. What makes desertification so problematic in Asia is the movement

of sand toward population hubs. The Gobi Desert in China‘s northwest is the most dominant.

With an annual budget of about USD 1 million, Future Forest has planted about 6.2 million trees

since 2006. Every year, 30 percent of the new plants die and have to be replaced. When completed,

the barrier of trees is to run north-south for about 10 miles, a green ribbon about a half-mile thick,

as a choke point to divert the sands from their easterly path. The goal is to plant 100 million trees

and thicken the green wall into habitable green space. Growing a green wall takes years. Because

the dunes move constantly in the wind, 5-foot-square frames are set in the sand and then wired

together to make a grid that is heavy enough not to get blown away. Trees are then planted inside

the squares. If the tree survives, it should reach a man‘s height in about four years.

Kwon‘s project is a small initiative in the larger strategy by governments in China and

nongovernmental organizations to combat desertification. Kwon wants to demonstrate that

carefully selected local shrubs, trees and grasses can survive.

Source: Seattle Times

UNIVERSITY OF LAW ENFORCEMENT TO TRAIN TRAFFIC POLICE OFFICERS

The University of Law Enforcement will introduce a new class meant to prepare students to become

traffic police officers.

In the past officials had to receive vocational training in the former Soviet Union. The university

plans to register 170 of its undergraduate students into the class. The Ministry of Justice and

General Police Department has ordered that the number of students be cut to 30 through

examinations.

―We will enroll as many students necessary for traffic police officers depending on the need,‖ said

police colonel and professor Ch. Ganbat.

Source: News.mn

HEART AND CEREBRAL TRAUMA CENTER OPENS AT HOSPITAL NO. 3

The World Health Organization and Millennium Challenge Account have completed a project with

the Ministry of Health to open a heart attack and cerebral hemorrhage treatment center at State

Hospital No. 3.

―It is the first time that Mongolia‘s health sector is opening a center specialized in the treatment of

specific illnesses. The center will act as a model for other hospitals and set a new benchmark,‖ said

Hospital Director Ts. Tumur-Ochir.

The facility is equipped with 124 pieces of diagnostic, treatment, recurrence prevention, and

recovery equipment, 40 beds and it offers 24-7 emergency services. The doctors and staff working

there have received training for the MNT 14 billion worth of equipment installed there.

Source: UB Post

TEENAGE PREGNANCY RATES SOAR IN MONGOLIA

A new U.N. report has shown teen pregnancy has grown to its highest level in the past 15 years in

Mongolia.

Deputy Health Minister, J. Amarsanaa, and Representative for the U.N. Population Fund (UNFPA)

Mongolia, Naomi Kitahara, announced the release of the report on Friday 22 November. The report

highlighted that every year 7.3 million girls gave birth before they reached 18 years old, globally.

Teenage pregnancy has become a challenging issue for developing countries, including Mongolia.

The teenage pregnancy rate in Mongolia has risen continuously since 2006. Now the figure has

reached its high level in the past 15 years at 33 teenage births per 1,000 women.

Teenage pregnancy may harm girls' health as well as limit their opportunities to build careers and

make life choices. Compared with older mothers, a baby born to a teenage mother is at higher risk

of premature birth, low birth weight, other serious health problems, and also death.

―We have to encourage young women to make the right choices when they plan their own family

and future,‖ said Kitahara.

A lack of knowledge on reproduction was identified as a key factor contributing to the high birth

rate for teens. In Mongolia, reproductive health services are run at community health centers. Six

more reproductive health services are expected to be built near student campus areas with the

support of the Ministry of Health this year.

Source: News.mn

CONSTRAINED CAPITAL MARKETS NUMBER-ONE CONSTRAINT FOR JUNIOR MINERS

Junior miners and explorers are still faced with constrained capital markets, with about 41 percent

of respondents holding a cash balance of less than USD 2 million.

This is according to a Grant Thornton report, which also stated that 46 percent of junior miners and

explorers would need to raise capital within the next six months, with more than half of the

respondents expected to price their next equity raise at a significant discount to share prices. Grant

Thornton noted that the volatility of commodity prices was the second-highest constraint for juniors

during 2013, while deteriorating share prices was listed as the third-biggest constraint. The impact

of the falling share price also resulted in further difficulty in raising capital, which resulted in

delays in progressing projects and thus building further value for the companies.

―While the immediate environment is particularly difficult for junior companies, capital will return

in the medium to long term,‖ the report said.

It added that current levels of exploration expenditures were likely to be insufficient to provide a

pipeline of mines to meet future demand for commodities. As this shortfall is identified, the laws of

supply and demand would result in capital flowing back to the companies.

The report added that the ability to add advanced exploration projects with proximity to their

current portfolios would be appealing for junior producers, especially if current mining operations

could benefit from additional scale and synergistic benefits.

Source: Mining Weekly

POLITICS

DP REJECTS MP AMARJARGAL'S RESIGNATION REQUEST

The Democratic Party on 26 November rejected the request of MP R. Amarjargal to resign from

Parliament during a meeting with the Standing Committee on State Structure.

The majority of the Standing Committee said the request was not necessary. The plenary session

meeting of Parliament will hold a vote on the issue this week to decide if Amarjargal will be

required to stay in Parliament. Amarjargal submitted a request to resign from Parliament to the

Speaker Zandaakhuu Enkhbold on 12 November.

―Parliament must have Amarjargal. It is not only his own business,‖ said Enkhbold.

Amarjargal resigned after raising queries about who should take responsibility over the budget

deficit during discussions on amending the 2013 budget.

Source: News.mn

MYANMAR INVITES MONGOLIA TO MAKE INVESTMENT IN COUNTRY

Myanmar has invited Mongolia to make investment in various sectors of the country following the

enactment of the new Foreign Investment Law, state media reported last week on Thursday.

The invitation was extended by Myanmar Minister of National Planning and Economic Development

Kan Zaw and President of the Union of Myanmar Federation of Chambers of Commerce and Industry

(UMFCCI) U Win Aung at a Myanmar-Mongolia business forum and business networking held there

last week on Wednesday. Addressing the forum, visiting Mongolian President Tsakhia Elbegdorj

disclosed that plans are underway to order chartered flights between the two countries as the

tourism industry is a main business for Mongolia. The participants also discussed the current policy,

financial situation and investment environment in Mongolia.

The Mongolian president had talks with his Myanmar counterpart U Thein Sein in Nay Pyi Taw on

promoting bilateral relations, cooperation in regional and international issues, exchange of high-

level official visits, the broadening of people-to-people access and Association of Southeast Asian

National (ASEAN)-Mongolia relations. The talks also touched on cooperation in the sectors of tourism

and mining. Moreover, the two leaders exchanged view on Mongolia's democratic transition since

1990. Following the talks, Myanmar and Mongolia signed an agreement on mutual visa exemption for

holders of diplomatic and special passports.

Elbegdorj is the first Mongolian leader to have visited Myanmar since the two countries established

diplomatic ties in 1956.

Source: Global Times

ELBEGDORJ VISITS VIETNAM FOR BUSINESS FORUM

President Tsakhia Elbegdorj traveled to a Mongolia-Vietnam business forum in Ho Chi Minh to give a

message encouraging trade and business relations between their two countries.

Mongolia always tries to open up the friendly environment for foreign investors,‖ said Elbegdorj.

―Through our newly adopted Investment Law, we guarantee the stability of businesses.‖

Elbegdorj noted the importance Mongolia puts on its ―Third Neighbor‖ policy and invited Vietnam to

join that fold. He said Mongolia would be interested in the trade of pharmaceuticals and seafood as

well as the export of Mongolian meats to Vietnam. He proposed a worker exchange program and

that Mongolia-Vietnam tourism should be a point of focus for their countries, adding that talks were

already underway to settle issues with visas.

Source: 4-Traders

MONGOLIAN PRESIDENT IN SINGAPORE ON STATE VISIT

Singapore President Tony Tan Keng Yam on 25 November hosted a state banquet in honor of

Mongolian President Tsakhia Elbegdorj, where he expressed a warm welcome to the leader and gave

the assurance that Singapore would continue to share its developmental experience with

Ulaanbaatar.

Singapore and Mongolia are similar in many ways, Tan said. Being small countries that have made

remarkable efforts in transforming themselves, both share many similar experiences. They also

enjoy warm and friendly bilateral relations, he added.

―As Mongolia opens up its economy and resources sector, it will create more business and

investment opportunities between our two countries," Tan said.

There is room for economic and trade relations to grow, with bilateral trade last year amounting to

USD 87.5 million, he added. To date, 1,000 Mongolian officials have taken part in the Singapore

Cooperation Program in areas such as finance and economic development.

Source: Straits Times

PRESIDENT SPEAKS AT 'THE WORLD IN 2014' GALA DINNER

President Tsakhia Elbegdorj met with the executive editor of the Economist magazine for the

―World in 2014‖ event on Tuesday.

The gala dinner sets the agenda for the coming year, highlighting upcoming global trends in all

areas of life, as predicted by leading visionaries from around the world. It was there that Elbegdorj

spoke about the challenges to democracy in Mongolia, his recent visit to North Korea and speech at

the Kim IL Sung University, the results of his visit to Myanmar, Mongolia-China relations, economic

development, and foreign investment to Mongolia and its mining sector. Executive Editor Daniel

Franklin spoke highly of Elbegdorj‘s brave comment that "No tyranny lasts forever" in his speech

given to Kim IL Sing University, and asked how his words were received.

"The people live for the sake of three, two of whom have already passed away, and there was anger

in the eyes of the people," said Elbegdorj. He added that it was likely the Kim Jong Un would bring

some change to the country.

Elbegdorj also talked about many of Mongolia‘s most vital initiatives aimed at improving the lives of

its citizens. The President also said Mongolia expected to see an 11 to 12 percent GDP increase in

2013, and stressed that Mongolia‘s new investment law will bring a raise in foreign investments.

Source: Montsame

MINING MINISTER BREAKS THE ICE AHEAD OF RUSSIA-MONGOLIA TALKS

The Minister of Mining met with Russia‘s new ambassador to discuss proposals he would like to see

discussed at the upcoming Intergovernmental Committee meeting in Moscow at the end of this

month.

During the meeting, Minister Davaajav Gankhuyag and the newly appointed Russian Ambassador, I.

K. Azizov shared views for joint ventures in mining. Gankhuyag said Mongolia would like to push

forward negotiations for the import of crude oil from Russia for when Mongolia has an operational

oil refinery. Discussions also covered a proposed joint venture for the Asgat silver-copper deposit in

Bayan-Ulgii Aimag following the recent completion of a paved road leading to the deposit.

Gankhuyag said Mongolia‘s interests were to see the construction of a railway, paved road and oil

pipelines that lead to China through Mongolian territory.

Source: Info Mongolia

MONGOLIA NEGOTIATES EXPANDED MILITARY COOPERATION WITH JAPAN

A Mongolian military delegation led by the State Secretary of the Ministry of Defense, Z.

Boldbaatar, made an official visit to Japan at the invitation of Administrative Vice-Minister of

Defense, Masanori Nishi, from 25 to 28 November.

On the first day of the visit, Z. Boldbaatar held official talks with the Administrative Vice-Minister

Masanori Nishi to discuss global and regional security issues and bilateral relations, collaboration in

defense. They negotiated to deepen their partnership in military engineering and hospital affairs,

and agreed to collaborate in peacekeeping operations and experience exchanges. They also

discussed transitioning Mongolia‘s Tavan Tolgoi military field into a regional peacekeeping

destination, and expanding the number of Japanese ground units to participate in the annual Khaan

Quest military exercises.

Boldbaatar also met with the highest-ranking military officer in Japan that day, Chief of Staff of the

Joint Staff Council of Japan‘s Ground Self-Defense Force (GSDF), General Shigeru Iwasaki, and Vice

Chief of Staff of the Joint Staff Council of GSDF, General Kiyofumi Iwata. The visit also saw

Mongolian military officials familiarize themselves with the Central Hospital at the GDSF training

site.

Source: Info Mongolia

MONGOLIA ESTABLISHES DIPLOMATIC RELATIONS WITH RWANDA

Mongolia established diplomatic relations with the Republic of Rwanda on Monday.

This ceremony took place in New York City and follows the President Tsakhia Elbegdorj's goal to

establish such ties with every U.N. member nation. The two countries have agreed to strengthen

cooperation. Mongolia and Rwanda's permanent representative to the United Nations, O. Och and

Eugene Richard Gasana, respectively, inked an official joint statement for the establishment of

diplomatic relations that was later registered with the United Nations. Also, a letter to U.N.

Secretary General Ban Ki-moon was sent to officially inform U.N. member nations of the event.

Source: Montsame

RUSSIA TO HOLD DRILLS WITH CHINA, MONGOLIA IN 2014

The Russian military next year will hold major joint exercises with China and, separately, Mongolia,

a spokesman for Russia‘s Eastern Military District said.

Russia‘s Pacific Fleet will participate in the Vigilant Eagle-2014 drill with the Chinese Navy, the

spokesman said on Saturday. Separately, Russian mechanized infantry will train together with

Chinese troops in China as part of the ―Peace Mission‖ anti-terrorist exercise. The ―Peace Missions‖

are held since 2005. Infantry troops from the republic of Buryatia in Russian Siberia will also hold

the Selenge exercise with the Mongolian army, organized annually since 2008.

The exact dates for all next year‘s joint drills will be set up at military conferences also in 2014,

the spokesman said.

Source: RIA Novosti

SUPREME COURTS RULES AGAINST MPP FOR LENIN MUSEUM

The Supreme Court has ruled against the Mongolian People‘s Party‘s claim of ownership over the

Lenin Museum. The Democrat Party-leading government wishes to use the location for a new

dinosaur museum that would house many of the returned fossils illegally taken from Mongolia.

Source: Udriin Sonin

MONGOLIA PUSHES TO SEE THAT “FDI FIGURES WILL FLY”

Mineral-rich Mongolia has had something of a fall from grace with international investors since a

2012 law introduced tight investment limitations, including government and parliament approval for

deals in key sectors such as mining, telecommunications, banking and finance. Foreign investment

plummeted in 2013 and a widespread skepticism fell over the Ulaanbaatar business community as

troubles at major projects like Rio Tinto PLC‘s multi-billion Oyu Tolgoi (OT) copper-gold mine hit

the headlines.

In a push to improve the business climate, the new Democrat Party-led government sent to

parliament a new, friendlier foreign investment bill, which was eventually approved in October.

The new law establishes Invest Mongolia Agency, the country‘s first investment development

agency, as a vehicle for investment promotion and development. Javkhlanbaatar Sereeter, Acting

Director of the Invest Mongolia Agency, said that Investment Mongolia would be independent to best

work with investors, although it is under the umbrella of the Ministry of Economic Development.

However, he said the agency would benefit from a single director‘s management, compared with

the layers of bureaucracy found at other Mongolian agencies. Investors will benefit from the new

law from the tax stability for value-added taxes, customs, corporate taxes, and royalties for

between 5 and 22 years and the removal of a requirement that had private investors seek

government approvals for making investment in ―strategic sectors‖—mining, telecommunications

and media, banking and finance.

―The new law introduces a more liberal business environment,‖ Javkhlanbaatar said adding that it

would take a two-thirds majority vote by Parliament to make any changes to the law.

Mongolia expects USD 2.5 billion in total foreign investment for 2013 compared with USD 4.4 billion

in 2012. For next year it will depend on investor appetite and recognition that Mongolia is doing its

best to better cater to them.

―If the government and private investors strike an agreement on some big projects in the pipeline,

FDI figures will fly. Then, nobody will be surprised if FDI reaches USD 10 billion per year,‖ per

Javkhlanbaatar.

Source: The Diplomat

NEW MONGOLIAN LAWS

The following amendments to laws were published in the latest weekly Government bulletin. Unless

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

Date Laws

22.11.2013 Amendments to Law on 2013 Budget of Mongolia

Amendments to Law on 2013 Social Insurance Fund Budget

Amendments to Law on 2013 Human Development Fund Budget

Please visit BCM's website, Legislative Working Group, for a summary of 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

“MM TODAY” ON MNB-TV, FRIDAY, 19:00 TO 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 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.

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

___________________________________________

ENGLISH WEBSITE: 'PRESENTATIONS', 'MONGOLIA REPORTS', „INTERVIEWS„, MONGOLIAN

BUSINESS NEWS‟, „PHOTO GALLERY‟

The following 13 presentations are from the Mongolia Investment Summit- 2013 in Hong Kong,

November 18-20:

- Regulatory Update: Navigating Mongolia‘s legal framework for foreign direct investment,

Javkhlanbaatar Sereeter, Director General, Foreign Investment Regulations and Registration

Department, MINISTRY OF ECONOMIC DEVELOPMENT OF MONGOLIA;

- Investment keynote: Investing into Mongolia in 2013 – Where do the opportunities lie?, James

Passin, Co-Founder and Manager, FIREBIRD MONGOLIA FUND;

- Development keynote: Key challenges and opportunities for continued growth in Mongolia,

Randolph Koppa, President, TRADE AND DEVELOPMENT BANK OF MONGOLIA;

- Outlining government policies and long-term plans for Mongolia‘s mining sector, Amarjargal

Khurelbat, Head of International Cooperation Division, MINISTRY OF MINING OF MONGOLIA;

- From copper to met coal: Demand and price outlook and expected impact on Mongolia‘s economy,

Ghee Peh, Managing Director, Metals and Mining Research, UBS SECURITIES ASIA;

- How Mongolian banks and financial institutions are dealing with the challenges and opportunities

of a fast growing economy, Norihiko Kato, Chief Executive Officer, KHAN BANK;

- Update on the Mongolian stock market – Impact of the new Securities Law, Altai Khangai, Chief

Executive Officer, MONGOLIAN STOCK EXCHANGE;

- From investment banking to trade finance to micro credits to insurance, Amartuvshin Hanibal,

Managing Director, TENGER FINANCIAL GROUP LLC

- Spotlight presentations: Showcasing Mongolian investment opportunities, Peter Morrow, Board

Director, ASIA PACIFIC INVESTMENT PARTNERS;

- Spotlight presentation: Showcasing Mongolian investment opportunities, Munkhbat Davaatseren,

CEO of Golomt Securities, GOLOMT BANK;

- Spotlight presentation: Showcasing Mongolian investment opportunities – Natural Resources,

Batmunkh Batkhuu, Chairman, SHARYN GOL JSC;

- Spotlight presentation: Showcasing Mongolian investment opportunities – Natural Resources,

Jimmie Wilde, Chief Operating Officer, BERKH UUL JSC;

- Spotlight presentation: Showcasing Mongolian investment opportunities – Natural Resources, Mona

Forster, Executive VP, ENTRÉE GOLD INC;

The following two presentations are from the ―ANTI-CORRUPTION LEGISLATION/POLICY,

INTERNATIONAL BEST PRACTICE ON TRANSPARENCY‖ training seminar for businesses, in

Ulaanbaatar, November 18, 2013:

- ―International business standard on transparency‖ by Jelena Pesic, Director, PwC;

- ―Finland‘s best practice on transparency and anti corruption‖ by Dr. Pekka Hallberg (as it is

world‘s number one), Emeritus President of the Supreme Administrative Court of Finland;

The following 15 presentations are from the Mongolia Mining Summit, Perth, Australia, October 29-

31, 2013:

• Mongolia‘s Minerals Future and Development by Otgochuluu Ch, Director General, Department of

strategic policy and planning at Ministry of Mining, Mongolia at the Mongolian Mining Summit 2013,

Perth, Australia, Oct 29-31, 2013

• Mongolian Economy: Investment Opportunities/Challenges, Jim Dwyer, Executive Director,

Business Council of Mongolia at the Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31,

2013

• Oyu Tolgoi: Lessons from the Gobi, Houston Spencer Vice President, Communications and Media

Relations, Oyu Tolgoi at the Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31, 2013

• Market dynamics for Mongolian coking coal in the Chinese market, Graeme Hancock, President

and Chief Representative at Anglo American, Mongolia at the Mongolian Mining Summit 2013, Perth,

Australia, Oct 29-31, 2013

• Speech by Mr. Ariunbold Byamba, Deputy Director, Erdenes MGL LLC at the Mongolian Mining

Summit 2013, Perth, Australia, Oct 29-31, 2013

• Launching Mining Projects in Mongolia–A Major Contractor‘s Perspective, Eric Erdenebat

Tseveendorj, Country Manager, Orica Limited at the Mongolian Mining Summit 2013, Perth,

Australia, Oct 29-31, 2013

• Investing in a dynamic legislative environment, Elisabeth Ellis, Managing Partner Ulaanbaatar,

Minter Ellison at the Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31, 2013

• Sandvik In Pit Crushing & Conveying (IPCC), Doug Turnbull, Principal Mining Engineer, Sandvik

Mining Systems, at the Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31, 2013

• Ovoot Coking Coal Project, David Paull, Managing Director Aspire Mining, at the Mongolian Mining

Summit 2013, Perth, Australia, Oct 29-31, 2013

• The business of being a third neighbor, David Landers, General Manager, East Asian Growth

Markets at the Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31, 2013

• Nuurst Thermal Coal Project, Daniel Rohr, Chief Financial Officer, Modun Resources Ltd, at the

Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31, 2013

• Culture matters in building sustainable long-term business relationships, Hana Tserenkhand

Byambadash Business Development Consultant. AusMon Consulting and Dr Christine Hogan Adjunct

Professor, Curtin University. Consultant & Author at the Mongolian Mining Summit 2013, Perth,

Australia, Oct 29-31, 2013

• Maximizing Business Benefits from Your IT Investment, Brad Skeggs, Executive Director, COSOL, at

the Mongolian Mining Summit 2013, Perth, Australia, Oct 29-31, 2013

• Presentation by Battsengel Gotov, CEO, Mongolian Mining Corporation, at the Mongolian Mining

Summit 2013, Perth, Australia, Oct 29-31, 2013

• Mongolian Mining Sector "Present and Future Developments", N.Algaa, Executive Director,

Mongolian National Mining Association, at the Mongolian Mining Summit 2013, Perth, Australia, Oct

29-31, 2013

The ―Mongolia Reports‖ section includes the following:

- ―Ministry of Finance of Mongolia, 2013 Government Debt Auctions‖ by Bank of Mongolia;

- ―Doing Business in Mongolia: 2013 Country Commercial Guide for U.S. Companies‖ by U.S.

Embassy;

- ―Real Estate Report 2013‖ by Mongolian Properties;

- ―Selected Macroeconomic Indicators, November 20, 2013‖ by International Monetary Fund‖

- ―2013 Second Annual Mongolian CEO Survey‖ from PricewaterhouseCoopers Audit LLC;

- ―Selected Macroeconomic Indicators; data through October 16, 2013‖ by International Monetary

Fund;

- ―IMF Completes 2013 Article IV Mission to Mongolia‖ by International Monetary Fund;

The following are added to Interview Section from the Oxford Business Group, Mongolia Reports

2013 book:

• B. Byambasaikhan, Chairman, Business Council of Mongolia: ―Talk is cheap‖;

• President Ts. Elbegdorj: ―Diversifying for growth‖

• Jim Dwyer, Executive Director, Business Council of Mongolia: ―Non-mining sectors budding‖;

• Peter Morrow, Chairman, American University of Mongolia: ―Filling in the blanks‖;

• N. Zoljargal, Governor, Bank of Mongolia: ―Sustainable vision‖;

• Gansukh, Minister of Roads and Transportation: ―Accessing new markets‖;

• J. Od, President, MCS Group: ―Building interest‖;

• B. Chuluunbaatar, President and CEO of Monnis Group: ―Climbing the ranks‖;

• Cameron McRae, President and CEO, Oyu Tolgoi: ―Sitting on a copper mine‖.

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.

BCM Football Cup 2013 pictures are posted to the website - http://bcmongolia.org/en/photos/350-

en/album?albumid=200

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.

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.

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

business environment in Mongolia today.

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

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

We have now 2,448 fans on our Facebook fans page, 1,526 connections on LinkedIn network, and

831 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 NEWS

Business Council of Mongolia (BCM) has been pushing forward with its ‗BCM in the University

Classroom series‘ since March 2012. Led by BCM‘s Education Working Group, the program provides

lectures at universities to help inspire students and give them direction for their future careers.

The series has grown to include an average of 10 lectures per academic year. Now 1,055 students

and teachers have participated with BCM in the University Classroom Project.

Most recently Peabody Energy was invited. Sunjidmaa Jamba, Public Relation Manager, and

Amarjargal Sharhuu, Manager Operation Development and Dr. Gunbilig Disan, Environmental

Coordinator gave a presentation entitled ―Mining and Environment‖ to an audience of 68 students

and teachers and graduate students. Also the Mongolian University of Science and Technology

students attended the lecture on 22nd of November 2013. During the lecture students learned of

mining rehabilitation procedures and asked professional questions from lecturers who exchanged

experiences with them. Therefore the lecture was very effective.

The next ‗BCM in the University Classroom series‘ will be held on 5th of December 2013 at the

Institute of Finance & Economics. Achit-Erdene Darambazar, President of Mongolian International

Capital Corporation, will be invited to speak.

___________________________________________

BCM WORKING GROUP MEETING

The BCM Environmental Working Group met on Thursday, 28 December 2013 with 22 members

attending.

Bayarmaa A, Chair of BCM`s Environmental WG and Carbon Finance Specialist at Clean Energy,

Newcom Group moderated the session.

New members: Zolbayar Kh-MCS; Enkhjin B and Purevdorj B from Zorig Foundation

Participants: Bulgan A from JICA; Bayarlkham B, JICA ―Two step loan‖; Undarmaa Kh, Ministry of

Environment and Green Development; Unurbayar S, Urban Development Sector Project.

Guests: Charlotte O`Connell, The solar project of Mongolia; Batdelger B and Ariunsanaa B from

National University of Mongolia; Munkhtuul O, Health Sciences, University of Mongolia.

Speakers and topics were:

- Implementation of the President‘s initiative in partnering with private sector to reduce air

pollution and opportunities for cooperation, Tuvshintur E, Project Specialist of the National

Committee for Reducing Air Pollution

- Air Pollution Reduction in Mongolia: A Framework for Setting Suitable Subsidies, Susanne

Roelofs, Economist at Mott MacDonald (EBRD Clean Air Project)

- JICA‘s capacity building project for air pollution control, Keiko Kaneda, Project Formulation

Adviser, JICA

Presentations are available at BCM Environmental WG‘s web page.

Please contact: erka@bcmongolia.org

SUPERMARKET PRICE COMPARISON – NOVEMBER 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]

October 31, 2013 *10.8% [source: NSOM]

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

Note: 9.5% y-o-y, Ulaanbaatar city, October 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]

June 25, 2013 10.50% [source: Mongol Bank]

CURRENCY RATES – NOVEMBER 28, 2013

Currency Name Currency Rate

US dollar USD 1,745.75

Euro EUR 2,370.73

Japanese yen JPY 17.09

British pound GBP 2,848.89

Hong Kong dollar HKD 225.18

Chinese Yuan CNY 286.55

Russian Ruble RUB 52.65

South Korean won KRW 1.64

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.