BUSINESS COUNCIL of MONGOLIA NewsWire

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info@bcmongolia.org

Issue 104, February 5 2010

NEWS HIGHLIGHTS:

Business:

PM wants Tavan Tolgoi to remain 100% owned by State;

China's CNNC to buy Khan Resources for USD52.9 million;

CEO not surprised as SouthGobi drops sharply on Hong Kong debut;

Canadian consultancy says Tavan Tolgoi can have more than one operation;

Boroo Gold trade union sponsors industrial safety training;

MP charges Ministry with giving wrong information on worth of Khusuut coal;

Company denies pledging concessions;

MPs given Tavan Tolgoi output figures;

Orbitnet signs agreement with Telesat;

India's JSW Steel pursuing coal mining assets in Mongolia;

Khan Bank again donates MNT3 million to children’s medical fund;

AICG to open office in Ulaanbaatar;

MNMA volleyball tournament a success;

Pedersen & Partners takes over executive search firm in Russia;

Sale of Hummer brand to China firm is delayed.

Economy:

2009 deficit likely to be 5.4 percent of GDP, says World Bank brief;

New law gives Central Bank more regulatory powers;

PM promises more freedom to private sector;

MPs from both parties against privatization of Erdenet;

The dzud has lessons for policy makers, say World Bank economists;

Official calls proposed reforms comprehensive and substantial;

Parliament ratifies new Central Bank appointments;

Parliament agrees to discuss new minimum wage rates;

MRAM cancels 1,095 licenses covering 10.2 million hectares;

Crude for Mongolia to be refined in China;

Petrol prices lowered for Tsagaan Sar;

Proposal to raise water tariff for apartments by 50 percent;

China's gold output hits record in 2009;

Gold likely to retain lure for investors;

Barclays Capital sees copper price rising to USD8,000/t in H1;

Uranium to trade in USD40/lb to USD60/lb range for two years, says analyst;

China faces price pressures as economy shows strength;

China to maintain stable economic policies;

China leading global race to make clean energy;

Russian IPO rush in a buyer’s market;

Fear, uncertainty cast pall over Russian business;

Google takes aim at Beijing censorship;

Record number of patents in China last year;

Japan in the grip of out-of-control deflation;

Rising prices press Asian central banks.

Politics:

Politics must be kept out of national policies, feels Minister Zorigt;

Disbursement of Human Development Fund money begins;

President wants to know if July 1 deaths were “murders”;

Asashoryu retires after one scandal too many;

Mongolia pledges troops for Afghanistan;

China sends Mongolia six planeloads of aid material worth USD 1.5 million;

FAO warns of mass migration without timely aid;

Speaker asks MPs to take more care when drafting laws;

Budget committee head feels MPs need better inputs to make correct decisions;

Senior MIAT officials under scanner;

Busy time for President in Davos;

Enthusiasm for model mining contract;

Elbegdorj meets with world leaders in mining and metallurgy;

Populism popular at Davos Forum;

40 percent of high school students drink alcohol;

Indo-Europeans may have reached Mongolia 2,000 years ago.

*Click on titles above to link to articles.

BUSINESS PM WANTS TAVAN TOLGOI TO REMAIN 100% OWNED BY STATE Prime Minister S. Batbold has made it clear that he would prefer the Tavan Tolgoi deposit to remain under 100% state ownership, and not be developed as a joint venture like Oyu Tolgoi. The working group set up by Parliament to prepare the general guidelines for using the mine told him at a meeting earlier in the week that there were two options: foreign investors could be taken as partners with the State owning 51 percent, or the State will keep 100 percent ownership and give the selected investor(s) coal extracting rights under an agreement. He said he had advised the group to work on the second option. Soil removal work must start this summer if the Parliament directive to begin export from Tavan Tolgoi by 2012 is to be followed. Mr. Batbold has instructed the working group to ready its recommendations before Parliament begins its Spring session. The Government will finish negotiations with investors during the session. The tender will be floated in the summer. The Minister for Nature, Environment and Tourism told him the group is ready to present the plans for infrastructure, railway and water reserves. The project proposes to establish a power station with an initial capacity of 100 mw, to be gradually raised to 600 mw. The Ministry for Road, Transportation, Construction and City Development is working on choosing between the two possible railway routes: Tavantolgoi-Zuunbayan-Sainshand and Tavantolgoi-Oyutolgoi-Gashuunsukhait. The closest water source is Balgas Ulaan Lake, 65 km from the mine, but the water there can supply only about half the mine’s needs. Other sources will have to be identified. Minister of Minerals and Energy D. Zorigt said a fresh round of talks with 11 international companies and consortiums will be held this month. Norwest Corporation, a Canadian consultancy, is working as technical advisor, while JP Morgan and Deutsche Bank have been working as financial advisors. Individual consultants of the World Bank will also offer their services. The preliminary payment demanded will be no less than USD250 million. Source: Ardiin Erkh, Zuunii Medee CHINA’S CNNC TO BUY KHAN RESOURCES FOR USD52.9 MILLION Canada's Khan Resources Inc. has agreed to be bought by Beijing-based CNNC Overseas Uranium Holding Ltd in a deal that values the uranium explorer at USD52.9 million. If completed, this deal will give the Chinese firm which acquired Western Prospector and its adjacent Dornod uranium deposits in 2009 further access to the Dornod field in Mongolia. Khan Resources said CNNC, a subsidiary of China National Nuclear Corp, will pay 96 Canadian cents per share. In December, Khan Resources had rejected an offer of 65 Canadian cents a share from Russian state uranium miner ARMZ, or AtomRedMetZoloto, which owns a 21 percent stake in Dornod. Khan Resources, which holds a 58 percent stake in Dornod, has been looking to renew its licenses for the project, following the Mongolian Government's decision to regulate uranium mining. Dornod

has uranium reserves of about 22,000 tons and this amount could be significantly increased with further exploration. The company said CNNC has the right to match any superior offer made by another bidder and will be paid a termination fee of CAD1.6 million if the deal falls through in certain circumstances. Source: Reuters.com

CEO NOT SURPRISED AS SOUTHGOBI DROPS SHARPLY ON HONG KONG DEBUT Shares in Canadian coal miner SouthGobi Energy Resources Ltd. fell about 12 percent in their Hong Kong debut on January 29, hurt by the stock's overly high valuation and poor timing. SouthGobi, which raised USD439 million in its IPO, is the second company to list in Hong Kong in 2010 after Russia's Rusal. Both trade at double-digit percentages below their offering prices. SouthGobi, also listed in Canada, fell as low as HKD105.60 in early trade, compared with its IPO price of HKD126.04. "Peers have fallen by about 15 percent; where it's trading now, we are quite happy. We expected it to open down because it's a soft market," SouthGobi President and CEO Alexander Molyneux said. Hong Kong's benchmark Hang Seng Index has dropped 7 percent this year. Coal miners have been weak, with China Shenhua Energy down 15.7 percent since SouthGobi started its IPO roadshow on January 11. Read more… Analysts also noted SouthGobi's valuation was much higher than its peers and the company had suffered losses in recent years, though they expect a turnaround from this year. SouthGobi, owned by Canada-based Ivanhoe Mines, is valued at 51.6 times and 21.3 times 2010 and 2011 estimated enterprise value to earnings before interest, tax, depreciation and amortization respectively, according to BMO Capital Markets. SouthGobi sold 27 million new shares, about 16.8 percent of its enlarged share capital, and secured Asia's top sovereign wealth funds, China Investment Corp and Temasek Holdings, as cornerstone investors, each subscribing to USD50 million worth of shares with a six-month lock-up period. Of the offered shares, 64.5 percent were allocated to institutional investors, 25.5 percent to Hong Kong retail investors and 10 percent to Canadian investors. SouthGobi reported a USD41.7 million net loss in January-September versus a year-earlier net loss of USD52.6 million, due to substantial start-up mining costs. It has forecast a 2009 net loss of no more than USD111.2 million. Source: Reuters.com

CANADIAN CONSULTANCY SAYS TAVAN TOLGOI CAN HAVE MORE THAN ONE OPERATION It was revealed in the course of a discussion in Parliament on the minerals policy that Norwest, a Canadian consultancy whose services were acquired by State-owned Erdenes MGL last year, has recommended that it would be possible to allow more than one mining operation on the Tavan Tolgoi deposit. The most valuable part of the deposit is the Tsankhai field and Norwest identified China, South Korea, and Japan as the main export markets for the coal from Tavan Tolgoi. This could have a bearing on deciding where to build the railway to transport the mined coal. Source: Undesnii Shuudan BOROO GOLD TRADE UNION SPONSORS INDUSTRIAL SAFETY TRAINING The trade union at Boroo Gold Company recently organized a labor safety training course for 50 participants from heating and power generation plants, and from Baganuur, Berkh, Shariin Gol, Shijir Alt, Bor Undur, and Shivee-Ovoo mines. Mr. D. Battumur, head of the union at Boroo Gold, said their company placed the utmost importance on labor safety, followed by protection of the environment, with profit coming only after these two. The company did its best to ensure safe working conditions for every individual employee and also maintained a general environment stressing safety, never compromising on either to save money or to increase profits.

Source: Odriin Sonin MP CHARGES MINISTRY WITH GIVING WRONG INFORMATION ON KHUSUUT COAL ―Does anyone among you know English and read news of the Hong Kong Stock Exchange?‖ asked Mr. Z. Enkhbold. When none of the 10 officials from the Ministry of Minerals and Energy and the Mineral Resources Authority, including the Deputy Minister, responded, the DP MP showed them what he had learnt of the stock exchange news on his cell phone. The information contradicted what the officials had said earlier. The MP warned that if such things continued to happen and Parliament was thus kept misinformed, the Ministry will have to employ young people who can retrieve

information from international capital markets on a daily basis. What had excited the MP was news that Mongolia Energy Corporation has pledged its mining license at Khushuut as a security at the Hong Kong Stock Exchange to issue shares. The company foresees a profit of USD1 billion at the beginning of the 4th year after exploitation work starts in Khushuut, which is spread over 330,000 sq km in Darvi soum of Khovd province. Mr. Enkhbold wanted the Ministry of Minerals and Energy to clarify why such a big and profitable deposit is not included in the list of strategic deposits. The Ministry had earlier said the coal at the mine would fetch much less than what MoEnCo has now offered as its own estimate and the MP suspected the motives behind the apparent discrepancy. Source: Undesnii Shuudan

COMPANY DENIES PLEDGING CONCESSIONS Mongolia Energy Corporation's (ultimate parent of ―Mo En Co‖) response to our questions confirmed that it has ―not conducted any pledge over (our) mining concessions in Mongolia. Any such pledge requires registration with MRAM and must involve a bank in Mongolia in accordance with Mongolia laws and regulations which it abides in all regards to. All our operations in Mongolia were financed by our internal resources and from our shareholders.‖ The company is incorporated in Bermuda. Its main operations are in Mongolia. Like many other international companies in the resources business, including those with operations in Russia and Mongolia, it is currently listed on the Hong Kong Stock Exchange. Its status as a listed international company allows any individual or interests, including Mongolian individuals or interests, to trade in its shares and securities. The company is at the stage of development of its mine plan and there are substantial start-up costs involved. ―We hope to create trade and employment opportunities for Mongolia and wish to work with Mongolia to create a win-win situation for this international project,‖ it says. Also, the company’s license area for coal in Khovd is 2,732 hectares, not 330,000 sq. km. Source: BCM Newswire MPs GIVEN TAVAN TOLGOI OUTPUT FIGURES MPs P.Altangerel (DP), S.Byambatsogt (MPRP), D.Gankhuyag (DP) and G.Zandanshatar (MPRP), who had submitted some questions on Tavan Tolgoi to the Prime Minister, were told by Head of the Prime Minister’s Office and Minister of Mongolia Ch.Khurelbaatar (MPRP) that nine production licenses covering 71,754 acres of the deposit have been issued. Energy Resource LLC owns five exploration licenses covering 70,569 acres. The MPs had wanted to know why the deposit was not registered as a national asset, since it had been explored with money from the state budget. Speaking in Parliament in the absence of the Prime Minister, Mr. Khurelbaatar said Tavan Tolgoi LC began work in 1967 and mined 9.8 million tons of coal until September 2009. The output was used locally until exports started in 2005. Energy Resource began mining in April 2009 and has so far produced 1,800 tons. Erdenes MGL and Daitsuki have not mined anything. Mr. N.Ganbyamba (MPRP) said state property is being exploited by private companies, both domestic and foreign, because the regulations are vague and not strong enough. ―License holders also own the underground water. Will this system continue as it is?‖ he asked. Mr. Khurelbaatar said the Government will formulate a special policy on this. Mr. Kh.Badelkhan (MPRP) wondered why China buys Tavan Tolgoi coal at the same price as coal produced in its Shanxi province. A representative of the Ministry for Minerals and Energy clarified that coal prices are not fixed globally. At present the Tavan Tolgoi coal is sold for USD50 per ton and the price is reviewed every month.

Source: Undesnii Shuudan ORBITNET SIGNS AGREEMENT WITH TELESAT Mongolian Internet service provider Orbitnet has signed a multi-year agreement with Telesat to purchase Ku-band capacity on the Telstar 18 satellite. Orbitnet will use the capacity to offer broadband connectivity to business, government and cellular operators in Kazakhstan, Mongolia and surrounding regions in Asia. ―Our company began using Telstar 18 in 2008, and our customers are very impressed with the quality of service we have been able to deliver. Orbitnet's business in Mongolia is going well,‖ the company’s Technical Director, Mr. S. Pagvajav said in a statement.

Source: Satellite TODAY

INDIA’S JSW STEEL PURSUING COAL MINING ASSETS IN MONGOLIA India's third-largest steel maker JSW Steel Ltd. is aggressively pursuing coal mining assets in Australia, the USA, Canada, Russia and Mongolia, executive director Tuhin Mukherjee recently said in Singapore. "We are actively looking for good quality coal mining assets," he said. "Investment bankers are approaching us and we are also doing direct buyer-seller talks." Asked if the negotiations were at an advanced stage, Mr. Mukherjee declined to comment. He said the company now primarily imports its coking coal needs from Australia, but it is targeting to meet 50 percent of supplies through its own internal sources, including buying up global mining assets. Source: Reuters.com

KHAN BANK AGAIN DONATES MNT3 MILLION TO CHILDREN’S MEDICAL FUND Following its initial donation of MNT 3 million last year, Khan Bank Foundation has contributed a similar amount to the ―Say Yes for Children‖ campaign sponsored by big names in the Mongolian music industry. The money raised by the campaign goes to arranging for medical treatment of children with cancer. Khan Bank Foundation does not entertain individual requests for grants. Source: www.khanbank.com

AICG TO OPEN OFFICE IN ULAANBATAR The American Independent Capital Group, Inc (AICG) and three other individuals have reached an agreement to open a branch office of AICG in Ulaanbaatar, expected to be operational in March. AICG is an international company that provides assistance to enterprises seeking capital funding for business projects. AICG will own 51% of the new enterprise. The remaining 49% is owned by Ms. Si Qin, a Mongolian citizen, Mr. David Borjiking, a Mongolian residing in the US, Mr. Hasi Bateer, a Chinese citizen and ethnic Mongolian, and Mr. Chen, a Chinese citizen. AICG and its partners believe that now is the ―right time to enter into a market that is expected to be a hotbed of international investment in the near future‖. Currently the main areas for foreign investment in Mongolia are mining, tourism, infrastructure, and agricultural processing. AICG plans to utilize the cultural understanding, local knowledge, and language skills of its Mongolian partners to provide access to funds for companies doing business in Mongolia. Source: PR.com

MNMA VOLLEYBALL TOURNAMENT A SUCCESS Blast LLC won the MNT 1.2 million cash award in the volleyball tournament organized by The Mongolian National Mining Association in the last days of January. Xanadu Exploration Mongolia was runner-up and claimed the MNT900,000 second prize, while Mine Info LLC was placed third and received an award of MNT700,000. Over 200 athletes representing 17 companies participated in the tournament that generated great enthusiasm. Source: The Mongolian National Mining Association PEDERSEN & PARTNERS TAKES OVER EXECUTIVE SEARCH FIRM IN RUSSIA Pedersen & Partners, a leading executive search firm, has announced the take-over of the Russian operations of EWK International, a well-established player in the Russian executive search market. The combined team will work under the Pedersen & Partners’ brand with offices in Moscow and St. Petersburg. The two founders and owners of EWK International Russia, Mr. Sergei Serdioukov and Mr. Maxim Chouvaev, joined the Pedersen & Partners team as Partners, with Mr. Serdioukov taking over as the Country Manager for Russia for the combined operations. Pedersen & Partners operates 37 wholly owned offices in cities spread around the world, including one in Ulaanbaatar.

Source: www.pedersenandpartners.com SALE OF HUMMER BRAND TO CHINA FIRM IS DELAYED A Chinese machinery manufacturer said Monday it has postponed for a month its deal to buy General Motors Co.'s Hummer truck brand as the companies wait for Beijing to approve the agreement. The deal between GM and Sichuan Tengzhong Heavy Industrial Machinery Co. now has until the end of this month to close. The original deadline was the end of January.

One of the chief challenges was to persuade Chinese regulators that Hummer can produce trucks that are more fuel efficient and environmentally friendly than its lineup at the time, which became synonymous with Americans' attraction to gas-guzzling sport-utility vehicles. Beijing is trying to encourage the use of low-emission vehicles, offering tax breaks for the purchase of smaller cars and subsidies for fleet purchases of alternative-energy vehicles. Source: The Wall Street Journal Asia

ECONOMY 2009 DEFICIT LIKELY TO BE 5.4 PERCENT OF GDP, SAYS WORLD BANK BRIEF The just released World Bank Monthly Brief says after its third quarterly review of Mongolia's economic performance under the 18-month Stand-By Arrangement (SBA), the IMF emphasized the good progress on the macroeconomic stabilization made thus far and the positive economic growth outlook for 2010, driven by the spillover effects of the Oyu Tolgoi mining investment. At the same time, the IMF also stressed the need for continued fiscal adjustment and discipline, adherence to the flexible exchange rate and a monetary policy geared towards maintaining low inflation, and for the authorities to deal proactively with problems in the banking sector. Mongolia is experiencing winter conditions that are even more severe than usual, leading to large livestock losses that will have a significant impact on the well-being of vulnerable households. There is potential for the disaster to place considerable strain on the existing relief system, fodder supplies, and donor resources. While this is likely to have an adverse impact on agricultural GDP in the first quarter of 2010, initial estimates show GDP growth rebounded in the fourth quarter of 2009. The growth of 3.9 percent year-on-year follows three consecutive quarters of contraction, with Q3 down 4 percent. As a result, GDP contracted by 1.6 percent as a whole in 2009. Preliminary fiscal data show a full-year deficit for 2009 of 5.4 percent of GDP, below the 5.8 percent target in the June 2009 budget amendment. Revenues in 2009 were down 7.5 percent on 2008 in nominal terms with expenditure restraint leading to a 5.7 percent lower figure than in 2008. Capital expenditures and subsidies contracted particularly sharply relative to 2008. The fiscal stability law, a key component in improving the policy framework for managing future fiscal revenues associated with Mongolia’s mineral resources, was submitted to Parliament in early January for discussion and approval. Read more… In the banking sector, total lending growth remains flat as real lending rates on loans increased to 19 percent in December from 17 percent in November. The ratio of non-performing loans to total loans stabilized in December, but remains at almost 23 percent. A sustained proactive approach from policy-makers to the ongoing solvency problems in the sector is required in order to ensure a timely recovery in the provision of credit, which is a key pillar in supporting the recovery in economic activity, and in order to limit the potential fiscal cost associated with any government support. A particularly strong recovery in Q4 was seen in the transport and communication sector. Construction and wholesale and retail trade sectors continued to contract. The recovery in the external sector continues, with annual export growth turning positive in November and December, supported by strong growth in China and buoyant commodity prices. In 2009 as a whole exports fell 25 percent. This was less than the level of import contraction, down 34 percent for the year as a whole, and as a consequence the 12-month trade deficit has improved to around USD230 million, down from over USD1 billion in late 2008 and early 2009. Source: www.worldbank.org For the full World Bank Monthly Brief, please refer to BCM website, Resources-Mongolia Reports. NEW LAW GIVES CENTRAL BANK MORE REGULATORY POWERS Parliament last week approved a new Central Bank Law and amended the present banking law. The moves were found necessary after the debacles in Anod and Zoos Banks had been blamed on lack of proper supervision by the Central Bank. The Central Bank President is confident the new law will give it more teeth to prevent a recurrence. It allows the Central Bank to monitor big loans that could exceed the lending bank’s capacity, keep track of changes in bank ownership, and to inspect foreign deals. Mr. D.Baldan-Ochir (MPRP), who headed the working group on the law, said the Representative Administration Council in every bank will have nominees of depositors and small share holders, besides bank officials. Besides, the Central Bank has been given the right to interrogate and investigate companies and organizations that deal with commercial banks.

All banks will have to keep the Central Bank informed of any major changes in its share holding, and must seek its permission before issuing fresh shares or securities. The Central Bank must take a decision on such requests within 60 days of receiving. Anyone holding substantial shares in a bank without the Central Bank’s knowledge will have to sell them, without claiming any dividends on them, and cannot ask for other shareholders’ support. Mr. N.Ganbyamba (MPRP) regretted that the new law does not have ―a word about bringing commercial banks under international audit‖. Source: en.News.mn, Montsame, Zuunii Medee PM PROMISES MORE FREEDOM TO PRIVATE SECTOR Prime Minister S. Batbold told participants at a conference organized by the Mongolian National Chamber of Commerce and Industry that the business environment cannot be improved overnight but promised, as a start, the Government will not interfere in the growth of the private sector. Over 700 member organizations of the MNCCI had forwarded their views to the Prime Minister before the meeting. Some participants deplored the popular perception that the Government saw the private sector as a competitor, while some others felt the Government often favored foreign investors over domestic ones. Mr. D. Tsend, Executive Director of the National Association of Construction, said foreign companies dominated the construction sector primarily because they had the resources to claim the best land. If the Government gave suitable land to domestic companies at a lower price, the cost of residential apartments for the people will come down. Land should not be traded just like a commodity, he said. XacBank Executive Director M. Bold said a strong and stable banking sector could help growth in all other sectors, but companies must realize that access to money is not all there is to business. It is imperative to develop entrepreneurship skills and to have skilled and qualified employees. Source: Zuunii Medee

MPs FROM BOTH PARTIES AGAINST PRIVATIZATION OF ERDENET Both the MPRP and DP groups in Parliament last week discussed the state property privatization proposals and said they were against any move to change the status of Erdenet. The MPRP group was also against privatization of Mongolrostsvetment and Oyu Tolgoi, but agreed to have a debate in Parliament on both. There was general support for privatization of MIAT, but the MPs wanted a fresh review before a decision is taken. The DP group did not favor the idea of putting either strategic deposits or infrastructure under the authority of one company to raise funds on the international stock market. MPRP MPs stressed that privatization must contribute to the interests of economic security and benefit the people. The MPRP group also discussed amendments to the terms of the contract made between Russia and Mongolia in 1949 to run UB Railway as a joint venture. Earlier, speaking on another occasion, Ch. Ulaan (MPRP) had said Erdenet was the country’s milk cow and should be left undisturbed. Advisor to the Prime Minister S. Demberel said selling shares of state owned property ―was not right‖, but only the private sector could develop the economy quickly. Source: en.News.mn, Zuunii Medee THE DZUD HAS LESSONS FOR POLICY MAKERS, SAY WORLD BANK ECONOMISTS Mr. Arshad Sayed, Country Manager, the World Bank in Mongolia, and Mr. Roger van den Brink, a lead economist for Mongolia with the World Bank, feel that the hard lesson learnt by Mongolia’s herders this winter can perhaps be studied by those managing the country’s economy as well. Finding ―interesting parallels‖ between the herders’ situation and the management of Mongolia’s economy, the two economist observers say summer months and financial boom periods are not times to relax, but times to prepare. Chile and the many other countries that have implemented a Fiscal Stability Law were relatively unscathed during the recent global financial crisis. Unlike Mongolia, these countries were well prepared. Pasture and fodder management is as important to the survival of livestock, as fiscal management is to the health of the Mongolian economy. A fiscal stability law will ensure the health of Mongolia’s economy, the stability of its currency and the continuity of government-funded social services provided for the people of Mongolia, especially the poor. Parliament will soon discuss such a law proposing to adopt a structural balance rule. ―It would be a great pity if Parliament passes up this opportunity to implement a law that will benefit future generations of Mongolians‖ the two feel. They end their rumination recalling a Mongolian proverb,

―A dzud will kneel in front of a hard-working herder; a lazy herder will kneel in front of a dzud.‖ Source: en.news.mn

OFFICIAL CALLS PROPOSED REFORMS COMPREHENSIVE AND SUBSTANTIAL State Secretary at the Ministry of Finance D. Battur has expressed optimism that the proposed reforms of issues and procedures related to state finance and the budget will have a smooth passage. The Ministry worked on the proposals for two years and Mr. Battur saw them as wide ranging and of seminal importance. Altogether some 20 laws are expected to be amended. Taken as a complete package, this would be the most comprehensive and most substantial reform since 1990, and would help facilitate economic sustainability, improved management of state funds, and effective coordination among economic, fiscal and budgetary policies. In this, Mongolia will only be following long-standing international practices of encoding and determining specific responsibilities and accountability. Mr. Battur was confident that once the reforms are put in place, there would be no possibility, whatever the temptation, of squandering resources during boom periods. Source: Odriin Sonin

PARLIAMENT RATIFIES NEW CENTRAL BANK APPOINTMENTS Parliament has ratified the appointment of Mr. B.Javkhlan and Mr. N.Zoljargal as First Vice President and Vice President respectively of the Central Bank, as suggested by its president, Mr. L.Purevdorj. The Standing Committee on the Economy had earlier agreed to the proposal. The ratification was delayed by a lack of quorum last week, but on Wednesday 93.9 percent of the MPs present voted for Mr. Javkhlan and 87.2 percent for Mr. Zorjargal. The Speaker congratulated the new vice presidents and hoped they would work well together with the Central Bank President. The new appointments take effect from February 4. Mr. Javkhlan’s name was originally suggested by the MPRP, while Mr. Zoljargal was the DP choice. Mr. Javkhlan worked at the Central Bank’s Inspection Department, and was its representative in the former Agricultural Bank. He had also worked as vice president in TDB. After working in banking for 13 years, he is now studying for a master’s degree in finance at Indiana University in the USA. On his part, Mr. Zoljargal worked as accountant in the State Bank, the earlier name of the Central Bank, as economic director in TDB, as executive director of the Mongolian Stock Exchange, and was adviser to the Prime Minister. He currently works for a Munich company. Mr. Ts.Davaasuren (MPRP) regretted that qualified professionals at the Central Bank are squeezed out by political pressure, and that, despite the DP’s previous assurance, the new appointments were also based on their party affiliation. Source: Ardiin Erkh, Montsame

PARLIAMENT AGREES TO DISCUSS NEW MINIMUM WAGE RATES Parliament has agreed that the minimum wage should be fixed on the basis of hours worked, and not months, as has been the practice since the socialist times. The draft amendment was sent to the concerned Standing Committees which will prepare it for the next reading in Parliament. Once it becomes law, the minimum wage would become MNT640 per hour and MNT5,120 per day. At present, they are MNT108,000 per month. Source: Udriin Sonin

MRAM CANCELS 1,095 LICENSES COVERING 10.2 MILLION HECTARES Mr. B.Tuvshinjargal, Director of Administration Department at the Mineral Resources Authority of Mongolia (MRAM), says the organization revoked 1,095 licenses covering 10.2 million hectares of land in 2009. The decision was challenged by 51 companies, but 68% of the rulings upheld the MRAM stand. A book has now been produced that lists all laws related to mining, and should help investors avoid doing anything that may lead to cancellation of license. Mr. Tuvshinjargal has claimed a marked improvement in the transparency, quality and accountability in the organization’s work. A new department of inspection and monitoring has been set up and an anti-corruption plan it formulated has proved to be quite effective. The coal experiment center, previously affiliated to the Energy Department, is now part of MRAM and focuses on coal processing, liquefaction and gasification of coal, coking, and producing other kinds of non-smoke fuel using advanced technology. The number of new licenses granted in 2009 was 271, about 1,000 less than in 2008. A new system is being prepared for announcement of bidding for licenses. These will mostly cover territories in the southern region where licenses have been revoked or have expired and reverted to the state.

However, governors of some provinces do not accept this procedure and since the law is not clear about what to do in such a situation, progress is held up. Source: Udriin Sonin

CRUDE FOR MONGOLIA TO BE REFINED IN CHINA An agreement was signed at the third meeting of the Mongolia-China working group that allows crude oil for Mongolia from Arab countries to be refined in Dunziang free trading port before being sent to Mongolia. The refinery has the capacity to produce 300,000 tons of oil products per year. The products will bear the label ―Made in Mongolia‖. The agreement was signed by representatives of the Ulaanbaatar Representative Office in Tianjin, Tavan Tolgoi Trans Company, the Dongjiang Free Trade Port Zone and Tianjin city's Blue Star oil refinery.

Source: Montsame

PETROL PRICES LOWERED FOR TSAGAAN SAR Petroleum importing companies have reduced prices of petroleum products by MNT30-40 a liter as a special gesture before the Tsagaan Sar holidays. Source: Onoodor PROPOSAL TO RAISE WATER TARIFF FOR APARTMENTS BY 50 PERCENT The Water Channel Administrating Authority has said it has no alternative to raising the water tariff following the increase in electricity and heating costs. It has asked the Public Household Administration Authority for permission to raise the tariff for apartments by 50 percent. Apartment residents now pay MNT0.16 per liter of water while ger district residents pay MNT 1. The proposed increase will not affect the latter. The WCAA spends MNT5 billion per year for the electricity it uses and expects this to go up considerably. Mr. Z. Enkhbold, Chief Inspector at the Fair Competition and Consumer Protection Agency, later said any such proposal has to be supported with properly documented evidence that will then be reviewed by specialists at his agency. In any case, he said, no such proposal has yet been made. Source: Onoodor

CHINA’S GOLD OUTPUT HITS RECORD IN 2009 China's gold output jumped 11.34% to a record of 313.98 tons in 2009, making the country the world's largest producer of the yellow metal for the third straight year. The China Gold Association said on its website last week that this was the first time China has produced more than 300 tons of gold in a year. China has dramatically opened bullion markets to active trade in the past decade, including allowing gold to be traded freely on the Shanghai Gold Exchange. Gold hoarding was initially outlawed in 1949 when the Communists took power. That year, China produced a mere 4.07 tons of gold. China had around 700 gold producers in 2009, down from more than 1,200 firms in 2002 as the industry has consolidated. The China Gold Association gave no figures for last year's consumption, but China consumed 395.6 tons of gold in 2008. China said last April its official gold holdings had risen to 1,054 tons from 600 tons in 2003, with the increase attributed to purchases of domestically produced gold to help soak up unsold output. Metals consultancy GFMS said last month that China would overtake India as the world's largest gold consumer in 2009. Total demand is forecast at 432 tons as wealthy investors defy record bullion prices.

Source: www.miningweekly.com GOLD LIKELY TO RETAIN LURE FOR INVESTORS World investment demand for gold jumped from 885 tons at the end of 2008 to 1,820 tons at the end of 2009, accounting for a year-on-year gain of 105%. The yellow metal, generally seen as a safe haven investment, has been luring investors looking for insurance against uncertainty during these unpredictable times. This high demand for physical gold and gold-backed exchange-traded funds (ETFs) was initially spurred when the economic crisis first hit more than a year ago. Investors wanted to secure some safer assets, away from other unstable investor vehicles, such as property, equity, bonds and shares. The aim was to increase the existing holding of gold in company portfolios. In the longer term, prudence alone could keep investors in gold. People are concerned about the

loss of integrity in financial markets. A weaker USD encourages investors to stay or even increase their investment in gold, taking into account that most commodities are dollar-priced. Physical gold provides liquidity and is seen universally as the ultimate form of insurance against financial woe. Read more… An alternative scenario sees demand for physical gold starting to fall off in 2010. The launch of platinum- and palladium-backed ETFs on the New York market has given US investors their first opportunity to invest in the physical metals. These novel investment vehicles are seen as a precursor to a wave of investment buying in anticipation of a recovery in industrial demand.

Source: www.miningweekly.com BARCLAYS CAPITAL SEES COPPER PRICE RISING TO USD8,000/T IN H1 UK-based Barclays Capital is bullish on the copper outlook for 2010, expecting the commodity's price to increase to USD8,000/ton in the first half of the year. Its research team forecasts that copper prices will increase to record highs in the next couple of years. They are anticipated to average USD6,875/t this year, rising to USD7,000/t next year and a high of USD8,500/t in 2012. The optimistic price forecast was seen against a very low base of USD3,200/t experienced in 2009. Although copper demand was down 10% year-on-year in 2009, global copper demand was growing again. Chinese demand for copper was still robust and imports of the metal were rebounding, which was supported by steady construction and infrastructure activity in the country. However, it was expected that China would import one million tons less copper this year as it cut back on purchases of refined copper because of expanded domestic refinery capacity. China had also built up its stock levels of the metal. The decrease in Chinese imports would be offset by strong demand from OECD as indicators pointed to a strong OECD demand rebound in 2010. While demand was increasing robustly, supply would be constrained in the future. Mine output was growing, but there were few major mine projects coming on stream in the next two years. The seven top copper producers’ forecasts showed a decrease in capital spend on copper production from a peak of USD40 billion in 2008.

Source: www.miningweekly.com URANIUM TO TRADE IN USD40/LB TO USD60/LB RANGE FOR TWO YEARS, SAYS ANALYST The spot price of uranium was likely to remain steady for the next two years, averaging between USD40/lb and USD60/lb, TradeTech CE Gene Clark has said. The uranium spot price enjoyed a strong rally between 2003 and 2007, rising from about USD10/lb to more than USD130/lb, before retreating to USD45/lb in October of 2008, as the global financial meltdown took hold. During 2009, the price traded sideways, averaging around USD46/lb. However, 2010 held some promise of a modest recovery, as utilities - especially from Asia, where nuclear-energy programs were on the rise - came back into the market. The expansion of nuclear power would also increase demand for uranium and spur investment in uranium companies. For that reason, the price was expected to rise to between USD55/lb to USD65/lb in the longer term.

Source: www.miningweekly.com

CHINA FACES PRICE PRESSURE AS ECONOMY SHOWS STRENGTH China's economy made a strong start to the year, according to a pair of business surveys released on Monday that also underlined the mounting challenge policymakers face to curb inflation. An index based on an official survey of purchasing managers last month eased from a 20-month high in December but remained firmly in expansionary territory, while an index derived from a companion poll by HSBC scaled an all-time high. What the two reports did have in common was evidence of a further increase in cost pressures. In the case of the HSBC survey, prices that industrialists paid for their raw materials and charged to their customers rose at the fastest pace since July 2008. "Industrial activity continues to accelerate, implying stronger GDP growth in the first quarter. But rising input and output prices also point to greater inflationary pressure, which will likely prompt more tightening measures in the coming months," it said. China might increase interest rates once consumer inflation exceeds the one-year benchmark deposit rate of 2.25 percent, a prominent government adviser has said. Consumer prices rose 1.9 percent in the year to December. But in an illustration of the uncertainty surrounding Chinese policy at this juncture, a central bank researcher suggested that tightening could take the form of stiffer reserve requirements rather than higher interest rates. Read more…

A half-point increase in required reserves that took effect on January 18 locked up 300 billion yuan. World markets tumbled in response to the tightening, which occurred much earlier than investors had expected. "Whether China will increase interest rates or not will be decided by the price situation, and prices in the first quarter won't be too high," the deputy head of the central bank's postgraduate school told the official China Securities Journal. The Economic Information Daily, which is published by the official Xinhua News Agency, said that the central bank would rely more heavily on quantitative and administrative tools, not interest rate increases, to control lending. Illustrating the forcefulness with which one-party China can implement such measures, figures provided by the paper pointed to a sharp slowdown in lending in the last 10 days of January after regulators ordered banks to pull in their horns. Until recently, Chinese policymakers had bent all their efforts on pulling the world's third-largest economy out of a downturn induced by the global financial crisis. The message from Monday's surveys of purchasing managers was that, with the economy now back at cruising speed after growing 10.7 percent in the fourth quarter from a year earlier, Beijing is now justified in paying more attention to rising prices. Both reports also showed strength in export orders, suggesting a further improvement in global demand going into 2010. Source: Reuters.com CHINA TO MAINTAIN STABLE ECONOMIC POLICIES Chinese Vice-Premier Li Keqiang said in a speech delivered at the World Economic Forum in Davos that even as the Chinese economy rebounds following steps taken to deal with the crisis, the government needs to stick with its moderately easy monetary policy. It also needed to maintain its active fiscal stance even if the world's third-largest economy was likely to expand at a rapid clip in 2010. "There still remain many uncertainties in (the) domestic and external economic environment," said Mr. Li. "To tackle these problems, we will keep continuity and stability of our macro economic policies, continue to follow a proactive fiscal policy and moderately easy monetary policy...," he said. Steering clear of the sensitive topic of the Chinese currency, Mr. Li also said that China needed to manage inflation in an appropriate way. Underscoring major challenges such as pressures on natural resources and environmental woes, he reiterated government goals of trying to spur consumption as a major driver of economic growth so that China could lean less on exports. Such moves would create ample business opportunities for foreign businesses, he said in response to the only question posed after his speech concluded. Read more… Turning to the global economic crisis and the role of governments, Mr. Li called for greater coordination and careful consideration of the way in which countries unwound stimulus packages. "The international community should increase coordination and cooperation in macro-economic policies, identify the right direction and priorities of their economic policies," he said. Mr. Li also used his speech to sound a warning over protectionism. Chinese state-owned firms have been blocked from proposed resource investments in the USA, Canada, Australia and Chile over the past five years, due to labor opposition and national security concerns. "Trade protectionist practice will only exacerbate the economic crisis, slow down the recovery process and ultimately harm the interests of the very countries who apply such measures," he said. Source: Reuters.com

CHINA LEADING GLOBAL RACE TO MAKE CLEAN ENERGY China vaulted past competitors in Denmark, Germany, Spain and the USA last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year. It has also leapfrogged the West in the last two years to emerge as the world’s largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants. These efforts to dominate renewable energy technologies raise the prospect that the West may some day trade its dependence on oil from West Asia for a reliance on solar panels, wind turbines and other gear manufactured in China. President Obama has sounded an alarm that the USA was falling behind other countries, especially China, on energy. The USA and other countries are offering incentives to develop their own renewable energy industries, and Mr. Obama called for redoubling American efforts. Yet many Western and Chinese executives expect China to prevail in the energy-technology race.

Multinational corporations are responding to the rapid growth of China’s market by building big, state-of-the-art factories in China. Vestas of Denmark has just erected the world’s biggest wind turbine manufacturing complex in northeastern China, and transferred the technology to build the latest electronic controls and generators. Read more… Renewable energy industries here are adding jobs rapidly, reaching 1.12 million in 2008 and climbing by 100,000 a year, according to the government-backed Chinese Renewable Energy Industries Association. Yet, renewable energy may be doing more for China’s economy than for the environment. Total power generation in China is on track to pass the USA in 2012 — and most of the added capacity will still be from coal. China intends for wind, solar and biomass energy to represent 8 percent of its electricity generation capacity by 2020. That compares with less than 4 percent now in China and the USA. Coal will still represent two-thirds of China’s capacity in 2020, and nuclear and hydropower most of the rest. China’s top leaders are intensely focused on energy policy: last week, the Government announced the creation of a National Energy Commission composed of cabinet ministers as a ―superministry‖ led by Prime Minister Wen Jiabao himself. Source: The New York Times RUSSIAN IPO RUSH IN A BUYER’S MARKET Russian initial public offerings are set for a comeback. Some USD20 billion of Russian share sales are forecast this year, including dozens of IPOs. With plenty of options, investors should be able to drive a hard bargain. After a two-year lull in activity, bankers are excited at the prospect of a return to the heady days of 2006 and 2007, when Russian companies raised some USD37 billion in 42 international stock offerings. Russian new issues have been understandably popular with investors. They tend to be sizable and offer exposure to high-growth sectors. The Russian stock market also appears less expensive than other emerging markets on some measures. But the managers of issuing companies often have inflated estimates of what they are worth. Around two-thirds of all Russian IPOs have underperformed in the local stock market since issue date, in some cases losing 80 percent of their value. That suggests the prices of previous Russian IPOs were too high. This time, it should be different. Many Russian companies are under pressure to raise money quickly. They borrowed heavily before the crisis and need cash fast. Investors in the last wave of Russian IPOs were too willing to overpay. This time, it should be more of a buyer’s market. Source: www.breakingviews.com

FEAR, UNCERTAINTY CAST PALL OVER RUSSIAN BUSINESS Russian businessmen at the World Economic Forum last week in Davos struck a gloomy note, with many uncertain about the country's direction and others warning a climate of corporate fear could hamper growth. The wealthy businessmen who ran Russia 10 years ago under President Boris Yeltsin lost their political influence during Mr. Vladimir Putin's presidency in 2000-08. During the global economic crisis, many have gorged on state bailouts. The state now controls about 60 percent of the economy and President Dmitry Medvedev's call for modernization to lessen the dependency on oil is falling on deaf ears as entrepreneurs are too scared to show initiative after years of what they see as state bullying. Mr. German Gref, CEO of Russia's largest lender Sberbank, was the only Russian in Davos who spoke openly about the mood of fear gripping the private sector since the state takeover of oil major YUKOS several years ago. Mr. Gref, who also sits on the board of Russia's largest private oil firm LUKOIL, said that since the YUKOS affair, "the main issue on LUKOIL's agenda has been not development, but self-preservation". Talking to an audience of investors, as LUKOIL's head and shareholder Vagit Alekperov looked on, Mr. Gref then called for a push to privatize state assets, suggesting a start with the bank he heads. YUKOS assets were nationalized and former CEO Mikhail Khodorkovsky jailed for tax evasion after a protracted legal battle that has become a symbol of the fear and uncertainty governing business in Russia. Even the word YUKOS is taboo and officials and other businessman rushed to play down Mr. Gref's words. Read more… "It is for the government to decide" about bank privatization, said another state banker Andrei Kostin, CEO of second largest bank VTB. Finance Minister Alexei Kudrin said that the sale was "too

early to even talk about". "It was very bold of Gref to say that," said another businessman, who declined to be identified. Mr. Gref, a prominent political and business figure, drafted the liberal reform program for Mr. Putin's first presidential term. His plans were implemented but then partly reversed during the second term, with the YUKOS takeover seen as a turning point toward more authoritarian policies. Prime Minister Putin, whose speech in Davos on the state of the global economy last year was met with skepticism by international investors, did not come to the gathering this year -- but even in his absence the businessmen did not talk freely. "There is no modernization. To carry out modernization you need leadership and there is no leadership," said the head of a large Russian company. He declined to be identified, saying he did not want to put his business at risk. "I have thousands of people working for me." The depth of Russia's economic troubles last year brought new reform plans, with officials loudly talking about a new wave of privatization and even political liberalization, but rising commodity prices have put those ideas on the back burner. Mr. Anatoly Chubais -- the architect of Russia's first wave of privatization who now heads a state firm tasked with developing the hi-tech sector -- was among those issuing a stark warning. "It is either modernization or degradation. There is no middle way for Russia," he said. Source: Reuters.com

GOOGLE TAKES AIM AT BEIJING CENSORHIP Talking to media in Davos, Google Inc. Chief Executive Eric Schmidt defended his company's recent threat to pull out of China in some of his most extensive comments on the controversial move. "We like what China is doing in terms of growth ... we just don't like censorship," Mr. Schmidt said, speaking at the World Economic Forum's annual summit here. "We hope that will change and we can apply some pressure to make things better for the Chinese people." Mr.Li Keqiang, the vice premier of China, did not address the Google case during a speech, but at a private session emphasized the importance of following China's rules. The Chinese government has repeatedly defended its handling of the Internet, and has rejected accusations that China is responsible for cyber attacks against foreign entities. Mr. Schmidt maintained Friday that Google wants to continue operating in China. But he said the company did not want to do so if it had to operate under China's censorship laws. To operate its Web site, Google.cn in China, Google had to agree to censor its results. "We would very much like to stay in China. We would very much like the censorship we oppose to improve in China," Mr. Schmidt replied. Yet one Chinese participant said that Google's move had likely ended its business prospects in the country, where the company held a 30% market share. Source: The Wall Street Journal Asia RECORD NUMBER OF PATENTS IN CHINA LAST YEAR China said it issued a record number of patents in 2009, but concerns are growing that new regulations and other initiatives may damp that growth. The State Intellectual Property Office, announcing that the more than 580,000 patents issued in 2009 showed an increase of 41% from a year earlier, said it is working to increase public awareness of intellectual-property-rights protection and to "further improve the level and quality of patent applications". Multinational companies in sectors ranging from information technology to pharmaceuticals say the Government's efforts to boost China's local high-technology sector have spawned protectionist policies—and that this could crimp foreign companies' willingness to invest in cutting-edge technology development in China. China revised its national patent law in October 2009 and then issued implementation guidelines in January. The revisions were an attempt to decrease patent fraud and streamline the filing process, but critics say many aspects of the new rules remain unclear. Chinese authorities say their policies do not discriminate against foreign companies, but foreign industry officials say certain aspects of the policies still need to be clarified. Source: The Wall Street Journal Asia JAPAN IN THE GRIP OF OUT-OF-CONTROL DEFLATION It has been clear for years that the economy of Japan -- Mongolia's largest donor -- never quite recovered from the post-1980s bust and that deflation was a constant worry. It is starting to reach alarming proportions. Prices in Tokyo, considered a leading indicator of trends elsewhere, fell 2% in December compared to the same month a year earlier. Nation-wide core deflation (excluding food and energy) was 1.2% - the steepest fall since the Government started tracking such data in 1971.

This is happening even as the unemployment rate fell slightly, to 5.1% from 5.2%, and industrial production rose. Yet politicians seem completely at a loss over what to do about it. If inflation and deflation are partly a game of shaping expectations, the current Tokyo crew is doing a terrible job. The message to businesses and consumers is that they will face squeezes on profit margins or reasons to delay consumption until 2012. The central bank for its part is telling Japanese businesses it expects deflation to continue for the next year or two. Granted, part of Japan's woes is beyond Tokyo's control, but much of the blame lies closer to home. Japan's economy needs truly stimulative policies to shock it out of its torpor. So far the Government has not delivered that kind of stimulus. If it does not start delivering some shock and awe soon, Japan risks sinking even deeper into malaise. Source: The Wall Street Journal Asia

RISING PRICES PRESS ASIAN CENTRAL BANKS Inflationary pressures are growing across a wide swath of Asia, upping the pressure on central banks across the region to begin tightening monetary policy. Part of the increase is due to an unusually low base of comparison a year earlier, when Asian economies were struggling through the depths of the global recession, but part is due to higher costs for a range of goods, including foodstuff and oil, that may continue to rise. Central banks in the region's two major emerging economies, China and India, already have begun taking preliminary steps to tighten policy in the face of rising prices and rampant bank lending. With those two countries, and Asia in general, helping to pull the global economy out of recession, any moves to tighten policy across the region will likely raise fears that the global recovery will be set back. Source: The Wall Street Journal Asia

POLITICS POLITICS MUST BE KEPT OUT OF NATIONAL POLICIES, FEELS MINISTER ZORIGT Minister of Minerals and Energy D. Zorigt sees the Economic Forum in Ulaanbaatar next week becoming over the years something like the World Economic Forum in Davos, an event that will bring together government officials, private sector representatives, analysts and academics to exchange views in an effort to reach a consensus on national policy and challenges. ―We tend to see everything through a political prism and this must give way to dispassionate and nonpartisan debate,‖ he said. Prime Minister S. Batbold has suggested that the priorities before this year’s forum should be mining, a green economy, competitive capacity, and source of finance. Mr. Zorigt said big projects can ―no longer wait for us to reach a political consensus‖, and hoped perceptions would change after participants listen to the views of internationally reputable economists who have been invited to speak. One of them is Hernando de Soto, whose topic will be ―The key of economic success‖. He is president of Peru's Institute for Liberty and Democracy, and is best known for his work on the informal economy and on the importance of business and property rights. Mr. Zorigt feels Parliament and the Government must feel the pulse of the people, who are the actual target of all economic development. Any consensus will have to consider how any proposal will affect their life and interests. Mr. Zorigt wanted serious discussions to begin on whether to amend the Law on Minerals or keep it as it is, and also on developing sub-sectors that will complement the expansion in mining. This expansion itself must be kept environment-friendly at all stages. Source: Zuunii Medee DISBURSEMENT OF HUMAN DEVELOPMENT FUND MONEY BEGINS People started receiving money from the Human Development Fund on Tuesday after the formal inauguration of the process the day before. The Labor Care Service Agency of the Government expects 500,000 children, elders and disabled citizens to get the money before Tsagaan Sar. According to the law, women over 55 and men over 60 qualify as elders. People who receive pension early on any of several grounds will also get the money. Altogether 1.6 million account books have been printed and MNT 97 billion put in banks to give MNT70,000 each to 1.3 million citizens. Everybody will get MNT69,600 after paying for the account book and service charges. The entire money is expected to be disbursed before Naadam.

Claimants have to get themselves registered at designated offices in areas where they live. Adults have to produce their ID cards and the birth certificates of their children to be registered. There is no other document needed. Once the account book and other documents have been filled in, their names will be registered in the information database, and they can go to any of the seven banks authorized to make payment and claim the money. Source: www.news.mn

PRESIDENT WANTS TO KNOW IF JULY 1 DEATHS WERE “MURDERS” President Ts.Elbegdorj thinks there is only one thing about the incidents on July 1, 2008 that needs to be known. Parliament and the Government acted according to the civil law by reimbursing losses to property following the violence, but the President wants to find out whether abuse of power by political leaders or officials led to people being killed. If the Mongolian Government did not give permission to shoot, then murders were committed. If that is so, the President wants the guilty to be identified and punished after a proper criminal investigation. This was revealed by Mr. D. Dorligjav, Director of the President’s Office, when he was answering journalists’ questions on what Mr. Elbegdorj had done in the past six months. Referring to talk that the President’s Office is trying to change the director of the Anti-Corruption Authority, Mr. Dorligjav would only say that the Authority seems intent on protecting its own doings. It does not release information, or take kindly to suggestions offered. The country’s President has the right to be kept informed. Denying that the prosecutor general is being pressurized to resign, Mr. Dorligjav said the President intends to improve the working of the system by talking to those who run it, understanding and analyzing the situation together. All public servants are appointed for a certain period of time, but this does not give them immunity against removal because of poor performance. The law is also clear on this. Source: Ardiin Erkh ASASHORYU RETIRES AFTER ONE SCANDAL TOO MANY Troubled sumo grand champion Asashoryu announced his retirement on Thursday. The Mongolian national icon, known for his temperamental nature, leaves the sport amid a recent scandal in which he was accused of seriously injuring a man during a drunken rampage. The Japan Sumo Association had ordered an investigation into the incident on Tuesday, leaving him with little option. "I am grateful for everything. I will retire," said Asashoryu, 29, who won his 25th Emperor's Cup at the New Year Grand Sumo Tournament to move into sole possession of third place on the all-time list for most title victories in sumo. "I have caused a lot of trouble in the world. Right now, my head is clear." Sumo's self-styled enfant terrible, Asashoryu is no stranger to controversy and his frequent breaches of protocol led to an increasingly strained relationship with the sumo establishment. In a 2003 bout he was disqualified for yanking the hair of compatriot Kyokushuzan, a no-no in sumo. He picked a fight with Kyokushuzan in the locker room afterward and was later accused of smashing the side mirror of the same wrestler's car. Asashoryu, whose real name is Dolgorsuren Dagvadorj, is the first Mongolian-born wrestler to reach sumo’s pinnacle of yokozuna. Source: Kyodo News, Reuters.com MONGOLIA PLEDGES TROOPS FOR AGHANISTAN Mongolia is among the four countries most recently to join the NATO-led peace-keeping operation in Afghanistan, bringing the number of countries involved in such operations to 47. Armenia, Mongolia, Montenegro and South Korea - all non-NATO countries – will together provide nearly 800 troops to bolster the estimated 85,000 International Security Assistance Force (ISAF) troops on the ground, the bulk of the new troops coming from South Korea. The announcement was made at the international conference on Afghanistan held last week in London. Defense Minister L.Bold represented Mongolia at the conference.

Source: www.hindustantimes.com CHINA SENDS MONGOLIA SIX PLANELOADS OF AID MATERIAL WORTH USD1.5 MILLION Six military planes carrying aid material worth USD1.5 million as donation from China landed in Ulaanbaatar on Monday. The material began to be moved to the worst hit provinces the same day. The planes carried 43 tons of food, 1,050 boxes of broiled meat, 3,850 boxes of sausage, 2,500 boxes of ready food, 400 generators, 16,000 blankets and 500,000 kg rice.

Deputy Premier and head of the State Emergency Commission M.Enkhbold formally received the aid. He expressed gratitude to China's people and government for this expression of fraternal and friendly relations. The Red Cross Society of China has also announced a donation of USD30,000. The original decision to send the material by train was revised because time was of the essence. Given the gravity of the situation, China also decided to send the aid first, without waiting for formal paperwork to be completed. A 34-car special train of Russian Railways (RZD) arrived in Ulaanbaatar on Tuesday, carrying fuel and lubricants, medicines, warm clothes, and hay and straw for agricultural animals. Altogether the aid is worth about USD500,000. Australia has pledged USD1 million in humanitarian assistance and has said it will ―channel this through the UN and humanitarian agencies who can respond quickly on the ground in Mongolia‖. Australian officials are working with the Mongolian Government, the United Nations, and the International Red Cross and Red Crescent movement to respond to the crisis. In Brussels, the European Union pledged USD210,000 as help after talks between visiting Mongolian President Ts. Elbegdorj and the European Commission chief Jose Manuel Barroso. The EU aid would fund 57 per cent of relief operations managed by the International Federation of Red Cross and Red Crescent Societies.

Source: Montsame, Itar-Tass FAO WARNS OF MASS MIGRATION WITHOUT TIMELY AID The U.N. Food and Agriculture Organization (FAO) has said in a report that Mongolian herders will need around USD6 million of short-term help to make it through the winter, a figure similar to government estimates. The cash would cover food and veterinary care for weak animals until spring, and jobs for those who have lost most of their herds, the FAO and an Agriculture Ministry official said. Without assistance, the disastrous weather pattern is likely to spark mass migration to cities later this year, the report warned. In the past the shift to urban life has been extremely traumatic for herder families, because they have to make huge changes in their way of life, and often struggle to get employment, healthcare and education. FAO research showed that 21,000 families spread across eight provinces have lost over half their herds of 100 to 300 animals. Source: Reuters.com

SPEAKER ASKS MPs TO TAKE MORE CARE WHEN DRAFTING LAWS Speaker D.Demberel told Parliament on Friday that 28 draft laws are on the list of business for the Spring session beginning in April. These are the most important of the total 68 drafts submitted for possible discussion. Mr. Demberel called on MPs to work better on their drafts as the Government usually has to change 40-60 percent of every draft it receives from them. Poorly prepared drafts risked getting ignored, he warned. Source: en.news.mn

BUDGET COMMITTEE HEAD FEELS MPs NEED BETTER INPUTS TO MAKE CORRECT DECISIONS Mr. Ts. Davaasuren, head of the Standing Committee on the Budget and also Coordinator of the MPRP wing called ―Tradition-Reform-Democracy-Justice‖, feels that even with the best of intentions, individual MPs lack the time, resources and expertise to ensure the best use of the money they get to spend in their respective constituency. They also need more inputs from research workers to help them suitably prepare to discuss and meaningfully contribute to the debates on important measures. Asked about his initial reservations about the efficacy of a coalition government, the MP said he saw no reason to change his mind after one year. Irresponsible decisions are taken because of pressures from the minority partner in the coalition and national interests take a back seat. Patchwork agreements and compromises are destroying the imperative of enforcing responsibility in issues of serious import.

Source: Undesnii Shuudan

SENIOR MIAT OFFICIALS UNDER SCANNER The Anti-Corruption Authority (ACA) is investigating Mr. B.Khurts, now with the National Security Council and formerly the MIAT representative in Seoul, and Mr. R.Bat-Erdene, former executive director of the airline, for causing financial loss to the state by allowing freight to be transported at a low rate. Pleading his innocence of any wrongdoing, Mr. Khurts told newsmen that he did allow

freight to be carried in space left in the passengers’ baggage hold for the cheap rate of USD1.2 per kilo, but this was only to stop ―stealthy‖ freight transportation. ―The ACA is being hypercritical,‖ he said, adding, ―I did not take a single penny from this. All of it was shown in MIAT accounts.‖ Source: Ardiin Erkh

BUSY TIME FOR PRESIDENT IN DAVOS President Ts.Elbegdorj had a busy time in Davos. Among those he met with were South Korean President Lee Myung-Bak, Mexican President Felipe Calderуn, and Mr. Larry Summers, director of President Obama's National Economic Council and the White House economic team. Mr. Elbegdorj also met with Mr. Bill Gates, the founder of Microsoft who now heads the Bill and Melinda Gates Foundation, dedicated to bringing innovations in health and learning to the global community. Mr. Elbegdorj asked for his help to secure Mongolians places at good schools abroad as also jobs in big companies and asked if students at Mongolian IT schools could not link their software programs directly with Microsoft. He also urged that the Word-2007 program be translated into Mongolian this year. He thanked Mr. Gates for employing Mongolians at Microsoft. Mr. Elbegdorj also met with financier George Soros who said he was happy with the work done by a special mining team he sent to Mongolia. On Saturday, the President was invited to a meeting of Harvard alumni. That evening the Ambassador of Mongolia to Switzerland, Mr. L.Orgil, invited 100 guests to a dinner in honor of Mr. Elbegdorj. Most of them were from present partners of Mongolia like the French Areva group or prospective investors like the Mittal group of India. Read more... The guests were given a copy of Mongolica, a magazine produced by the President’s Office and the Foreign Ministry, The Economist that wrote about Mongolia and First, which carried an interview with Mr. Elbegdorj. Morin khuur players, contortionists and khuumii singers entertained the guests.

Source: www.news.mn ENTHUSIASM FOR MODEL MINING CONTRACT A meeting on the nature of a model investment contract in mining was held on the sidelines of the World Economic Forum in Davos and generated considerable interest among participants who included President Ts.Elbegdorj and Minister for Foreign Affairs and Trade G.Zandanshatar, the head of the London-based International Mining Association (IMA), Mr. Anthony Hodge, and Australia’s Trade Minister Simon Crean. The participants agreed to the Mongolian President’s suggestion that mining contracts must follow certain internationally approved norms. He also described the checkered progress of the Oyu Tolgoi investment agreement. There was general agreement that any model mining contract must be preceded by discussions among representatives of the government, investors, regional administrations, citizens and NGOs. The talks must be transparent and the media have to be kept informed. The IMA will pursue the matter and would consider holding a meeting at the initiative of the Mongolian President, Mr. Hodge said. Source: en.News.mn ELBEGDORJ MEETS WITH WORLD LEADERS IN MINING AND METALLURGY President Ts.Elbegdorj attended a meeting of world mining and metallurgy leaders in Davos on January 29, hosted by Mr. R.Niblett, director of the think-tank Chatham House, and inaugurated by Alcoa Group President and CEO K.Kleinfeld. In his speech, the President detailed Mongolia’s expectations from development of its mining sector. The participants showed keen interest and asked many questions about how Mongolia hopes to ensure balanced development of all economic sectors, to develop infrastructure, to implement environment-friendly technology, to train world class personnel, to process raw resources and export value added products. They agreed with the President that mining raised local expectations for a better life and stressed the importance of following a balanced policy and of spending mining revenues properly. Rio Tinto Chairman Jan du Plessis said his company will work in Oyu Tolgoi for many years. Representatives from BHP Billiton, Severostali, Bazovii Elemenet, Rusal, New Mount and Glencore companies also attended the meeting. Source: Ardiin Erkh

POPULISM POPULAR AT DAVOS FORUM The World Economic Forum is the last place where one expects to encounter the new populism. But when a venerable European central banker, a man whose very bearing connotes the old capitalist values, says privately that he is now convinced that the financial system is too important to be left to the free market, one knows one is wondering into new territory. The value of this alpine kaffeeklatsch is that it can tell you when ideas have reached critical mass. And that seems to have happened this year in the general enthusiasm for what can be called "post-bubble" rules among the political and business leaders gathered here. They take it as a given that the free market failed in the crash of 2008 and that the new system will be more regulated, more interventionist, more prudential than was the old. This change in the Davos consensus is important because for the past few decades, the forum has been the leading symbol of the freewheeling economic model known as "globalization" -- a connected world that was fostered by lower tariff barriers, deregulated markets, and borderless flows of capital and labor. In years past, calls at Davos for more financial regulation would have been met with guffaws and an escort to the anti-globalization "Open Forum" down the road. The Davos vision of globalization -- of ever-rising tides that lifted ever more boats -- was itself a bubble. We can see this now. It burst in the financial crisis in 2008, with pulverizing consequences for the real economy in 2009. But it was not until this year that the forum fully reckoned with the mood shift. Its work was no longer to celebrate globalization but, in the words of this year's conference theme, to "Rethink, Redesign, Rebuild". To quote from one of the session summaries: "There will be no return to 'business as usual.' ... More intrusive regulation of the financial system is now inevitable." Read more… The leading rabble-rouser was French President Nicolas Sarkozy, who opened the conference with a speech urging global citizens to reform the system. "From the moment we accepted the idea that the market was always right," he said, "globalization skidded out of control." An overemphasis on free trade had "weakened democracy", he argued. Human values had been undermined by soulless speculators for whom "the present was all that mattered". When Mr. Sarkozy had finished his anti-capitalist rant, he got a standing ovation from an audience made up mostly of wealthy capitalists. The Davos magic, you might say. This sort of anti-market talk was the patter of this year's Davos, coming from financier George Soros, World Economic Forum Executive Chairman Klaus Schwab, Swiss President Doris Leuthard, and various other business leaders and economists. When the pendulum swings this far and this fast, you are sure to be getting some overreaction that will cause problems later. Americans need to understand that the 2008 financial crisis proved a point that many Europeans and Asians have been arguing for decades: Economic "liberalism", of the sort found in Britain and the United States, creates a dangerous overreliance on the market. During the boom years, their complaints seemed like just so much whining. Not any more. In the new world, citoyens, we can expect lectures from Chinese officials about the need "to bring stability on a balanced level" by controlling exchange rates, as one Chinese attendee said privately. We can expect demands for global labor standards that mirror the rigidities imposed by European unions (as Mr. Sarkozy demanded). This is the price of globalization's failure. Source: Op-ed column by David Ignatius at The Washington Post

40 PERCENT OF HIGH SCHOOL STUDENTS DRINK ALCOHOL A World Vision survey among high school students of Mongolia has found that 40 percent of them are used to drinking alcohol. Many senior students confessed they drink when they feel depressed. Source: Ardiin Erkh

INDO-EUROPEANS MAY HAVE REACHED MONGOLIA 2,000 YEARS AGO DNA extracted from the bones of a skeleton in one of more than 200 tombs recently excavated at a 2,000-year-old cemetery in western Mongolia pegs him as a descendant of Europeans or central Asians or northern Indians. "Yet he assumed a prominent position in ancient Mongolia's Xiongnu Empire," said geneticist Kyung-Yong Kim of Chung-Ang University in Seoul, South Korea, and his colleagues. The Xiongnu Empire ruled a vast territory in and around Mongolia from 209 B.C. to A.D. 93, including the major trading route known as the Asian Silk Road, opening it to both Western and Chinese influences. "Researchers have yet to pin down the language spoken by Xiongnu rulers and political elites," said archaeologist David Anthony of Hartwick College in Oneonta, New York. But the new genetic evidence shows that the 2,000-year-old man "was multi-ethnic, like the Xiongnu

polity itself," Mr. Anthony remarked. The Duurlig Nars man's genetic signature supports the idea that Indo-European migration to northeastern Asia started before 2,000 years ago. Read more… This long-dead individual possessed a set of genetic mutations on his Y chromosome, which is inherited from paternal ancestors, that commonly appears today among male speakers of Indo-European languages in eastern Europe, central Asia and northern India, according to Mr. Kim's team. The same man displayed a pattern of mitochondrial DNA mutations, inherited from maternal ancestors, characteristic of speakers of modern Indo-European languages in central Asia. Two other skeletons from the cemetery show genetic links to people who live in northeastern Asia, according to Mr. Kim's team. Source: www.sciencenews.org

ANNOUNCEMENTS

2nd ANNUAL MONGOLIA-ASIA INVESTMENT FORUM, MARCH 25, THE WESTIN BEIJING

Euromoney Conferences invites you to apply for your free place at the 2nd Annual Mongolia-Asia Investment Forum at the Westin Beijing on March 25.

The Panels: Investing in Mongolia’s Mining Assets; Investing in Infrastructure to support the mining industry; Developing Mongolia’s capital markets; Mining Supply Chain Management; Investing in Mongolia’s property market. Click here for a copy of the latest agenda.

BCM will again partner with Euromoney on organizing this Forum, to be held in Beijing for the first time, to strengthen cooperation and trade relationships between Mongolia and the rest of Asia. Further information on registration will be distributed to BCM members early next week.

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UNIDO INDUSTRIAL POLICY WORKSHOP ON FEBRUARY 24-25

The Research and Statistics Branch of UNIDO is organizing a workshop on industrial policy on February 24 and 25 at the Ministry of Foreign Affairs and Trade. The objective of the workshop is to bring to the discussion table all stakeholders involved in the industrial policy of Mongolia. National entrepreneurs, directors of multinational companies, academics, and union representatives are among those expected to attend. Apart from discussions on the general structure of the Mongolian economy, special attention will be given to textile/cashmere, mining, and meat processing.

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“MM TODAY” ON MNB-TV 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 for 21:15 tonight. Tune in to watch this program that reports stories from today’s BCM NewsWire.

SPONSORS

ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the week ended January 29, 2010, trading activity on the Mongolian Stock Exchange (MSE) totaled 425,100 shares with 40 companies traded. Total market value of transactions was MNT 122.9 million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 642.5 billion, and increased by MNT 13.1 billion or 2.1% from Jan 22, 2010. The Top-20 Index increased by 205.64 points or 3.2% compared to the previous week, closing at 6566.03 points. MSE Composite Index increased by 84.17 points or 2.7% compared to the previous week, closing at 3,192.67 points. Most active stocks traded were: Khukh gan (196,300 shares), Jenco tour bureau (67,000 shares), Moninjbar (62,900 shares), UID (40,300 shares), and APU (18,400 shares). Major share price percentage gainers were: Darkhan teever (15.0%), Darkhan khuvun (14.9%), UID (14.8%), Moningbar (14.0%), and HB oil (13.1%). Major share price percentage losers were: Atar urguu (17.2%), Gazar suljmel (14.9%), Khishig uul (14.8%), Erdenet khivs (14.7%), and Mongol shevro (11.1%).

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-over-year (y-o-y)

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]

CURRENCY RATES – February 4, 2010

Currency name Currency Rate

US dollars USD 1454.01

Euro EUR 2032.34

Japanese yen JPY 16.09

British pound GBP 2331.51

Hong Kong dollar HKD 187.24

Chinese yuan CNY 212.99

Russian ruble RUB 48.64

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.