BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org

info@bcmongolia.org

Issue 117, May 7, 2010

NEWS HIGHLIGHTS:

Business:

Supreme Court rejects Altan Dornod appeal on tax assessment;

Mongolian directors on Oyu Tolgoi Board named;

ING posts head of corporate and investment banking in Ulaanbaatar;

Khan Resources caught in the middle of a cold war;

Rosatom boss says Mongolian decision on joint venture soon;

Food producers’ team visits MCS Tiger;

Cash Minerals acquires Mongolian uranium properties;

Government wants Chinese miner’s license revoked;

Energy Resources offering scholarship to MUST students;

Australian PM firm on resources tax, as miners fume;

Rio Tinto halts new projects in Australia;

Brands flock to Shanghai Expo.

Economy:

IMF says revised budget infringes terms of agreement;

World Bank warns about return to boom-and-bust cycle;

Revised budget to reflect copper price rise;

Parliament approves proposal for copper smelter;

MP sees no smelter soon, calls decision “an expression of intent”;

Group working to reduce number of business laws and regulations;

Mining, global warming blamed for loss of 4,000 rivers, lakes;

Minister worries more salary may lead to inflation;

China gives CNY40 million as grant;

Modest growth in Internet and e-commerce usage;

India bans coal mining in dense forests;

China ignites global coal market;

Gold prices hit highest levels in 5 months;

China slowdown fears affect commodity prices;

Chinese buyers may enter uranium term market soon;

ASEAN Plus Three group unveils fund to spur bond issuance;

Yuan gains world-wide clout, rivals dollar;

EBRD set for timely boost in capital;

Americans again spending more than they earn;

Asian stocks fall, raising doubts on recovery pace;

IMF boosts Asia growth forecast.

Politics:

Order amended to allow transfer of mining licenses;

MPs not to get MNT1 billion to spend in constituency;

Prosecutor General resigns;

MPs urge Prime Minister to curb corruption;

Three MPs join international anti-corruption organization of lawmakers;

Minister accuses anti-corruption MP of overstepping limits;

Elbegdorj’s China visit “defines a new era”;

Better to be a woman than a child in Mongolia;

Central Bank denies political role in appointments;

No new petrol/diesel stations in Ulaanbaatar;

Shanghai Expo imagines future, redreams past;

Japanese woman plants 100 cherry trees in annual ritual;

Indonesia teaches Chinese at schools to attract trade favors. *Click on titles above to link to articles.

BUSINESS SUPREME COURT REJECTS ALTAN DORNOD APPEAL ON TAX ASSESSMENT

Mr. S. B. Paushok of Altan Dornod Mongol must be ruing his decision to go on appeal against Mongolian tax authorities. A Supreme Court bench has ordered the Russian investor to pay MNT5.2 billion in unpaid taxes, interest and penalty relating to 2006 and 2007. This is almost double what a lower court had decided was due from him. Mr. Paushok had moved the higher court hoping it would further reduce the amount determined by the Municipal Administrative Court which had accepted Mr. Paushok‘s claim that the initial demand of some MNT7 billion in evaded tax, interest and penalty by the tax authorities was unjust. Mr. Paushok moved a lower court to fix the amount at MNT6 million. The court did not agree but substantially reduced the amount claimed by the State. The international arbitration tribunal is yet to give its verdict on Altan Dornod‘s case that the Mongolian Government had no legal authority to levy the windfall profits tax on it. This apart, the company is embroiled in litigation with the Government and the present case is just one of the many that has now been finally decided. Source: Udriin Sonin

MONGOLIAN DIRECTORS ON OYU TOLGOI BOARD NAMED The State Property Committee decided on Wednesday that the Mongolian directors on the Board of Oyu Tolgoi LLC would be former President N.Bagabandi, Advisor to the President P.Tsagaan, and Executive Director of Xac Bank Ch.Ganbold. Source: Ardiin Erkh

ING POSTS HEAD OF CORPORATE AND INVESTMENT BANKING IN ULAANBAATAR

ING Groep NV has appointed a head of corporate and investment banking for Mongolia, possibly the first major bank to create such a post dedicated to Mongolia. Mr. Howard Lambert, head of Asia structured credit trading in Singapore, will be moving to Ulaanbaatar and will work closely with Mr. Sergelen Tsedendamba, ING's chief representative there. Source: Dow Jones Newswire

KHAN RESOURCES CAUGHT IN THE MIDDLE OF A COLD WAR

As President Ts. Elbegdorj returned home from a visit to China, the question on the minds of some in the uranium market is whether or not the battle over Mongolia‘s Dornod uranium deposit was discussed in his talks there. The fight over Dornod has been playing out between Russia‘s state-owned ARMZ, the Mongolian government, Canadian-miner Khan Resources, and now state-owned China National Nuclear Corporation (CNNC). If the five-year struggle Ivanhoe faced over the Oyu Tolgoi property and Khan‘s current problems are any indication, foreign miners will no doubt be wary of investing in Mongolia in the future; especially with the high turnover rate for government officials in key positions and the nation‘s poor ranking (120th in 2009) on Transparency International‘s corruption perception index. The biggest influence on Mongolia‘s mining future and its associated political risks is its powerful and resource-hungry neighbors, China and Russia. It relies on both China and Russia for trade and economic support. China is the nation‘s biggest trade partner, purchasing over 70 percent of Mongolia‘s exports in 2009.

It should be clear to most that Khan Resources is caught in the middle of a cold war over Mongolia‘s resources. And at the center of this struggle is the Dornod uranium deposit, which reportedly holds reserves of about 22,000 tons with the potential for more. For the moment, Russia is pulling the strings on this marionette show. Khan‘s management has accused Russia of ―working behind the scenes to force it out of a deposit in the northeast‖. Read more… Russia provides Mongolia with economic and humanitarian support. But, of course, this neighborly kindness comes at a cost. Russia is certainly not bestowing such aid without expecting something in return. Rumors have been circulating that Russia and Mongolia plan to cut Khan out and develop the project themselves. Mr. Martin Quick, Khan‘s CEO, says once the company announced CNNC‘s bid, Mongolia‘s NEA began claiming the Canadian miner was in violation of the Nuclear Energy Law. ―The fact that we have found a Chinese partner has probably upset the Russians, and we think the Russians are putting a lot of political pressure on the Mongolians.‖ But, the joint venture is not merely speculation. Mongolian state-owned MonAtom (51 percent) and Russia‘s ARMZ, along with potential Japanese or Chinese partners, are forming a joint venture called Dornod Uranium. The group has already been granted a license on the property after Khan‘s was revoked, according to The Voice of Russia. There are also reports that the Mongolian government has told CNNC not to continue with its takeover of Khan. For now, the offer is still open and has been extended to May 25, so that CNNC can obtain approval from the Chinese government. While Mongolian‘s top officials may seek to align themselves with Russia, ―China is unlikely to step aside, and will also have much to say on where and how Mongolia builds its roads and railways,‖ insists an analyst. Source: uraniuminvestingnews.com

ROSATOM BOSS SAYS MONGOLIAN DECISION ON JOINT VENTURE SOON Mr. Sergei Kiriyenko, head of the Russian state-owned civilian nuclear power corporation, Rosatom, has hinted the Government of Mongolia could soon decide on establishing a joint venture with Russia to develop a Mongolian uranium deposit. In the Black Sea resort of Sochi for a meeting with Russian Prime Minister Vladimir Putin, Mr. Kiriyenko said on Tuesday the Secretary of the Mongolian National Security Council has confirmed to Rosatom that a final decision on placing the deposit in the joint venture would be made soon. He added that Russia had transferred all relevant documents on the joint venture to the Mongolian side and work on the deposit could begin quickly as the deposit was located just 300 km from Russia's Chita Region where there was a mining enterprise whose specialists and equipment could be used in developing the Mongolian deposit. Source: RIA Novosti

FOOD PRODUCERS’ TEAM VISITS MCS TIGER A team from the Mongolian Food Producers‘ Association led by its chief, MP D.Terbishdagva, recently saw the operations of MCS Tiger and was most impressed. The company began production three years ago and has introduced international food security standard ISO 22000-2005 and quality management standard ISO 9001-2008. Use of advanced technology in can packaging allows it to produce 25 million liters of beer per year. Apart from the internationally known Tiger beer, the company has introduced two national brands of beer, Sengur and Jalam Khar. MCS Tiger has also created 200 jobs.

Source: Udriin Sonin

CASH MINERALS ACQUIRES MONGOLIAN URANIUM PROPERTIES

Toronto-based junior explorer Cash Minerals Ltd. plans to acquire "very prospective uranium properties" in Mongolia in a CAD3 million-plus cash, stock and royalty deal. The company said it had an agreement to acquire 100 per cent of Eam Exploration LLC from East Asia Minerals Corp. The project portfolio includes seven properties, Ulaan Nuur, Ingenii, Enger Ar, Sevsul Bulag, Hutul, Unegt and Bukht Uul, totaling approximately 155,500 hectares. Terms of the deal include a CAD2-million cash payment and about CAD1 million in stock, as well as smelter royalty payments. East Asia would also have the right to nominate one person for election to the Cash Minerals board, while the Toronto miner would be granted the right to use East Asia's Mongolian infrastructure, including their office in Ulaanbaatar and technical and geological staff for one year, with the right to negotiate extensions.

"Acquisition of East Asia's Mongolian uranium assets represents a significant step towards rebuilding the company," Cash Minerals president and CEO Doug Currie has said.

Source: www.winnipegfreepress.com

GOVERNMENT WANTS CHINESE MINER’S LICENSE REVOKED

The Government has recommended the revocation of the license of Enjunmen, a Chinese company that mines fluorspar in Dornogobi province. Two weeks ago a Mongolian citizen was run over by a car at the mine site after scuffles between mine workers and artisanal miners who worked nearby. Mr. Ya.Sodbaatar, head of the State Inspection Agency (SIA), reported that Enjunmen had last year been found to have violated several rules and regulations. It was ordered to halt operations on July 1, 2009 but continued nevertheless. SIA found the company had not submitted a report of its operations in 2009, or its operation plan for 2010. It also used explosive materials without proper permit, and did not follow safety guidelines. No plan of environmental restoration was in place. The borders of the mining area were not demarcated, workers did not have any proper contract, and three of the five Chinese citizens at the mining site did not have proper work permits. Source: Ardiin Erkh

ENERGY RESOURCES OFFERING SCHOLARSHIP TO MUST STUDENTS The long-term agreement signed last year between Energy Resources Ltd. and the Mongolian University of Science and Technology will help further national development by providing qualified engineers and technicians to industries, especially domestic ones, a meeting at the company‘s Ukhaa Khudag mine was told on Sunday. The agreement covers 6 projects in conducting research and training, and creating employment. ―Energy Resources‖ scholarships will be awarded to 30 students every year. According to Mr. B. Damdinsuren, Rector of the university, this will on the one hand help meet the demand for qualified professionals as the industrial sector expands, and on the other offer incentives to students by opening up job prospects. This year the company received 225 applications for the scholarships. In addition to choosing 30 from among them, the company also selected 10 students to receive on the job training at the mine.

Source: Biznes.news.mn

AUSTRALIAN PM FIRM ON RESOURCES TAX, AS MINERS FUME

Mr. Kevin Rudd, Australia‘s prime minister, has told mining groups that he is firmly committed to a proposed 40 per cent tax on profits generated by resource companies in spite of growing industry resistance. Mr. Rudd said on Wednesday that he would not ―walk away‖ from the ―controversial‖ plan, despite meeting the previous evening for a dinner meeting with mining executives including Mr. Sam Walsh, chief executive of the iron ore division at Rio Tinto, and Mr. Ian Ashby, head of iron ore at rival BHP Billiton. ―They were very forthright in putting their views and their concerns about the super profits tax that we‘re proposing. I was equally forthright in explaining why we believe this is necessary,‖ Mr. Rudd told a radio program. Mr. Rudd‘s comments came as some of the industry‘s most influential figures met Mr. Tony Abbott, the opposition leader, in Canberra. ―We‘ve got a long job ahead of us,‖ said Mr. Marius Kloppers, BHP‘s chief executive. Mr. Abbott said he was ―deeply hostile‖ to the tax on what he called ―the most efficient and the most competitive‖ sector of the economy. ―The last thing I want to do is to see any damage done to what is in effect the goose that laid the golden egg for Australia,‖ the opposition leader said. Facing an election this year, Mr. Rudd‘s Labor party on Sunday announced the so-called resources super profits tax, which it said would overhaul the country‘s taxation system to address the challenges of an ageing population and rising healthcare costs. Australian mining companies say the levy would not only hurt earnings and dividends but also jeopardize the viability of already approved projects. Read more… Analysts estimate the tax would cut Rio‘s 2013 earnings by 21 per cent and reduce BHP‘s by 17 per cent. Fitch, the rating agency, said on Wednesday it did not see any impact of the plan on the miners‘ ratings. Fitch estimated that the combined additional annual tax burden for Rio and BHP could be upwards of AUD3 billion, a fraction of the companies‘ AUD125 billion of operating earnings before interest, taxes, depreciation, amortization and rent in the past three years.

The new tax on mining projects from July 2012 under a sweeping pre-election tax overhaul will also boost pension savings for workers. The government will also cut the company tax rate from 30 percent to 29 percent from mid 2013 and to 28 percent by mid 2014, and will refund state-based royalties currently imposed on mining projects. It is set to raise about USD11 billion in its first two years. "If implemented, these proposals seriously threaten Australia's competitiveness, jeopardize future investments and will adversely impact the future wealth and standard of living of all Australians," Mr. Kloppers said in a statement. Treasurer Wayne Swan said the government expected strong opposition to its plan, from both the resources industry and conservative opposition parties, and would now consult miners on details of the new tax. "We are under no illusions about how difficult it will be to win support for this package," he said, adding support would never be unanimous. Mr. Swan said the new tax would help all Australians share the benefits of a prolonged mining boom which helped Australia avoid recession during the global financial crisis. Mr. Swan denied the new mining tax would discourage investment, and said governments had only received about AUD9 billion extra from resource charges over the past 10 years, while resource profits were AUD80 billion higher. To further allay mining concerns, Swan said Australia would now also give mining companies a tax rebate to offset the cost of resource exploration from July 2011, in a move it said would benefit 4,300 companies. The government will also set up an infrastructure fund, with an initial payment of AUD700 million from 2012-13, to help pay for roads, ports, railways and utilities for resource industries. Source: Reuters, The Financial Times

RIO TINTO HALTS NEW PROJECTS IN AUSTRALIA

Rio Tinto has put new Australian iron ore projects on hold because of uncertainty about the impact of Australia's proposed tax changes. The company is concerned the new profits tax will halt investment and stop new mining projects, Mr. Sam Walsh, chief executive of iron ore, said on Wednesday in Perth. "In our own case, we've got our projects on hold while we try to understand the ramifications of a 40% increase in taxes," he said. There is a "lack of clarity as to the rules" for the proposed tax, he said. Rio Tinto has agreed to an iron ore production merger with BHP, which some analysts have speculated may need to be renegotiated to reflect the proposed tax changes. Source: The Wall Street Journal Asia

BRANDS FLOCK TO SHANGHAI EXPO

Mr. Kevin Wale, head of GM in China, calls the World Expo in Shanghai the ―Olympics of technology‖. He might as well call the USD55 billion event the Olympics of branding: a chance for foreign multinationals to peddle their products – from Coke that freezes instantly when opened to GM cars that park themselves – to 70-100 million, mostly Chinese, people who will attend the six-month show. In spite of complaints of a tougher environment in China from some foreign companies, scores of multinationals have invested heavily in the event. Ms. Brenda Foster, head of the American Chamber of Commerce in Shanghai, says the participation of U.S. companies – several have their own pavilions and corporate America contributed more than USD60 million to build the USA pavilion – ―is one of many indicators that U.S. companies are increasingly committed to the China market‖. That is one reason why, when U.S. legal restrictions prevented Washington from funding its pavilion from state coffers, Mrs. Hillary Clinton, Secretary of State, was able to pressure corporate America to pay for it. No one wanted America to be unrepresented at Expo – least of all companies that still, in spite of all the hardships, think China is one of the best places on earth to do business. Numerous chief executives of Fortune 100 companies are expected to visit Expo and some foreign companies say they may bring their global board meetings to Shanghai during the event with some meetings to be held at the site itself. Ms. Foster points out that investing in a chunk of Expo turf is a good way to ―advance your government relations strategy‖. Other foreign businessmen put it more bluntly: many multinationals felt they did not dare snub Shanghai and its Expo, the culmination of years of work and spending. Read more… The corporate investment appears to have paid off: many of the corporate pavilions stand out as some of the most lavish, the most technologically advanced and most interesting of the 200-odd

pavilions. Many of the national pavilions are lackluster and unimaginative by comparison. Expo has even inspired its own line of luxury goods: Chanel has launched an Expo handbag that looks like a Chinese food box and Prada has a tote with grass sprouting in front of the Oriental Pearl Tower, symbol of modern Shanghai (capitalizing on Expo‘s theme of better integrating urban life with the natural environment). But another business leader puts it more cynically: for foreign business, it is plain ―prudent‖ not to stay away.

Source: The Financial Times

ECONOMY IMF SAYS REVISED BUDGET INFRINGES TERMS OF AGREEMENT

IMF Country Representative P. Ramlogan told Parliament Speaker D.Demberel on Monday that reported provisions in the revised budget for 2010 violated Mongolia‘s agreement with the IMF, and that if these were not reviewed, the Fund ―would find it difficult‖ to continue with the agreement. That the budget deficit will become 6.4 percent of the GDP was not so important as the Fund had agreed to exclude the costs of bank restructuring from State budget expenses, and when that is done, the deficit remains under the stipulated 5 percent. However, the Finance Minister‘s move to include income from increased copper prices in the budget revenue violated Mongolia‘s promise to put all extra income into a special fund. Mr. Ramlogan suggested that the deficit be controlled by cutting down on unnecessary expenditure. He also urged progress in restructuring the banking sector, adopting the fiscal stability law and streamlining the welfare package. He offered to organize a workshop on inflation and monetary policy in cooperation with the Mongolian Parliament. The Speaker assured him that Parliament was well aware of the need to keep to the agreement with the IMF, but pleaded for ―understanding‖. The current economic and social situation in the country ―does not allow us a chance to put any extra budget income into a special fund,‖ he said, adding that political imperatives in a democracy at times make it impossible to ignore ―widespread popular pressure‖. He hoped the IMF would consider the special situation and appreciate why the terms of the revised budget cannot be kept. He assured Mr. Ramlogan that Parliament would review expense proposals stringently and requested him to recommend to the IMF Board that the Mongolia-IMF agreement be continued for another two years. Source: English.News.mn, Montsame

WORLD BANK WARNS ABOUT RETURN TO BOOM-AND-BUST CYCLE

Noting how the positive trend of improvement in the fiscal deficit stalled in the first quarter of 2010, the World Bank has warned, in its latest monthly economic update, that Mongolia risks returning to the boom-and-bust cycle of the pre-crisis years if expenditures were to continue to rise in step with mining-related revenues. Fiscal consolidation is necessary, given the difficult financing conditions projected for the next few years, and especially because 2011 will be a difficult year for the budget as the Windfall Profits Tax will have been abolished. Mongolia‘s trade deficit has stabilized in recent months, and the exchange rate against the U.S. dollar has been stable, while foreign exchange reserves are close to record levels. The economic recovery and the prospects of strong growth in 2010 have contributed to recent consumer prices rises. In the banking sector, total lending growth remains muted as nominal lending and deposit rates remain high. On an aggregate level the commercial banks realized a profit of MNT 2.8 billion in March after reaching a loss of MNT 143.4 billion through 2009. The ratio of non-performing loans to total loans stabilized in March, but is still at 22 percent while principal in arrears is increasing. Source: The World Bank For the complete World Bank ―Mongolia Monthly Economic Update‖ March 2010, please visit BCM website – Resources, Mongolia Reports. REVISED BUDGET TO REFLECT COPPER PRICE RISE

Minister of Finance S.Bayartsogt has said revenues in the revised budget for 2010 are expected to be MNT 2.7 trillion, rising MNT364.2 billion over what was approved earlier. Expenses have also been raised by MNT465.9 billion to reach MNT 3.2 trillion. The resulting deficit will be MNT460.3 billion or 6.4 percent of GDP. The revised estimates are based on average copper price at USD7,500 per ton instead of the earlier USD5,800, raising income by MNT209.3 billion. Gold price average is now estimated at USD1,100 per ounce in place of USD900. The Minister said the deficit will not affect the agreement with the International Monetary Fund as

the IMF has agreed to keep the MNT150 billion given to the Zoos Bank and the State Bank out of budget expenses. Once this is done, the deficit will be under 5 percent of GDP. Income from the Oyu Tolgoi project will be MNT 50.3 billion more than originally estimated. With increased revenue, the Government has the leeway to spend more. Salaries and pensions, unchanged since 2008, will go up 30 percent from October 1. MNT 78.2 billion will be needed for this in the present year. MNT3.8 billion will be spent on the livestock program, MNT5 billion on implementing court orders, MNT3.1 billion in the health sector, and MNT1.4 billion to pay Child Money and other family allowances.

Source: www.News.mn

PARLIAMENT APPROVES PROPOSAL FOR COPPER SMELTER

Parliament last week approved, after just one reading, the proposal to build a copper smelting factory in cooperation with Erdenet Copper, with 77.4 percent of MPs supporting it. The Government will now study all aspects of the issue and present a detailed work plan to Parliament by October 1, and preparatory work must begin in the first half of 2011. Even while expressing their support for the smelter, many MPs expressed some reservations about the substantial investment, the proper location, and sales possibilities. The Head of the task force that had studied the issue, Mr. D.Damba-Ochir, said, ―We are not worried about sales as the market is there in China, Japan and South Korea.‖ However, the best location has to be decided after considering several issues and this will take time.

Source: Ardiin Erkh

MP SEES NO SMELTER SOON, CALLS DECISION “AN EXPRESSION OF INTENT” Mr. Kh.Narankhuu, an MPRP MP, has said the Parliament proposal to establish a copper smelter should be seen basically as an expression of intent, as the country is in no position to start work on one within the stipulated time. A smelter will need around USD300-400 million and the Government ―just does not have the money‖. The work can begin only when an investor is found. Going for a comprensively environment-friendly plant will be even more expensive. The exact location will also be contentious and will not be settled in a hurry. Again, a smelting factory will need almost as much energy as the Erdenet factory. A new power plant will take time to come up. More important, he said, some other sectors will be ―affected negatively if we start producing refined copper‖. Almost half of the freight revenue earned by the railway comes from transporting copper ore. Three-fourths of the ore is just dirt. When that is removed in processing, the railway will carry freight a quarter of the earlier weight. ―Until Oyu Tolgoi and Tavan Tolgoi come into full production and offer alternative freight, the national economy cannot afford the loss of the copper ore revenue for the railway,‖ he said.

Mr. Narankhuu, who was Director-General at Erdenet for seven years, said these were also the reasons why the factory administration never agreed to repeated Russian suggestions to build a smelter. Now Russia will not agree to invest in one, and Erdenet itself is too deep in debt to do so.

Source: Ardiin Erkh

GROUP WORKING TO REDUCE NUMBER OF BUSINESS LAWS AND REGULATIONS

The private sector, hamstrung by a plethora of laws and regulations, is looking forward to the successful completion of a program that it hopes will help reform the business environment in 2010. The program was begun last year and is being jointly devised and implemented by the Ministry of Justice and Internal Affairs, the Mongolian National Chamber of Commerce and Industry, and the German development organization, GTZ. The program aims to install a proper legal environment to forward economically sustainable development. Right now, a 21-member group is poring over 400 draft laws to bring the number down to just 81. Contradiction, inconsistency and duplication will be eliminated. A study found 2,175 of 4,316 extant rules and regulations are not properly registered with the relevant Ministries. It also found that only 1,211 laws and regulations are generally enforced. The final tally of 81 laws, unambiguously worded, will remove a major hurdle on the path of private business to develop without the State breathing down its neck at every small step. A major beneficiary of the exercise will be the Minerals Law.

Source: Udriin Sonin

MINING, GLOBAL WARMING BLAMED FOR LOSS OF 4,000 RIVERS, LAKES

A survey in 2009 by the Ministry of Nature, Environment and Tourism revealed that 3,732 water

courses and streams in the country, as well as 1,162 natural water reservoirs, had gone dry since 2007. Global warming and mining activities had led to the drying up, causing water deficiency and desertification. Mining companies, domestic and foreign, played a key role in this by digging near water sources and clearing forests and trees as they explored for gold and other underground minerals, leading to soil erosion and pollution. In another development, the number of fish in the Tuul River has been grossly depleted in the past three years, mainly because of lack of oxygen in the water. The State Inspection Authority has blamed discharge of chemical waste into the river by Chinese-invested factories for this. All these facts came up when Parliament discussed the National Water Program last week. The program calls for many measures to enforce proper and less wasteful use of water, including installation of water meters in homes. The Ministry has established the National Bureau of Water and will add 15,000 households to the 18,000 that already have such meters. Minister L.Gansukh said many of the threatened water sources are in remote areas, and Mongolia has neither the technology nor the human resources to undo the damage. Read more… MPs criticized the present practice of allowing animal skin and leather factories to operate under license from the Ministry for Food, Agriculture and Light Industry with no role for the Ministry for Environment in monitoring their activities. The factories themselves are under the authority of the Mayor‘s Office, with, again, no role for the concerned Ministry.

Source: Ardiin Erkh, Xinhua

MINISTER WORRIES MORE SALARY MAY LEAD TO INFLATION

Minister of Finance S.Bayartsogt has said the Government is aware of the pressure the rise in public servants‘ salaries will put on the private sector. Many businesses will likely have to make a choice between conceding employees‘ demand for a higher salary and reducing manpower. ―We think it would be a good idea not to make such big and public announcements of any future salary increase,‖ he said, adding traders will be prompted to jack up prices of products and services and inflation might reach double digits by the end of the year. ―This would mean only a 4-5 percent real increase in salary, and this is why I warned the negotiators not to politicize economic issues,‖ he said. Denying that the Government is taking too long to proceed with the fiscal stability law or that there has been any pressure on this from the IMF, Mr. Bayartsogt hoped it will be passed in the Spring session. ―Once the law is in force, there will be no need for any more budget revisions. All extra income coming from increased commodity prices will be automatically transferred into a stability fund and there will be no demands to increase budget expenses,‖ he said. Source: Undesnii Shuudan

CHINA GIVES CNY40 MILLION AS GRANT

Chinese and Mongolian Ministers signed several agreements on bilateral cooperation in Shanghai last week as President Ts.Elbegdorj looked on. Foreign Minister G.Zandanshatar and China's Minister of Commerce Chen Deming inked an economic and technical cooperation agreement on a Chinese grant worth CNY40 million. This was followed by another on opening cultural centers in Beijing and Ulaanbaatar, signed by Minister of Education, Culture and Science Yo.Otgonbayar and Cai Wu, Minister of Culture of China. Earlier on the day, President Hu Jintao hosted an official welcome ceremony for the visiting Mongolian Head of State. In their talks, President Elbegdorj reiterated that continuing with and further strengthening good relations with China was a priority in Mongolia's foreign policy. President Hu Jintao underlined that cooperation with Mongolia was not only mutually beneficial, but was also useful for regional development. China was ready to help implement programs in Mongolia and to render financial and technical assistance for large projects. He urged Mongolia to make the most effective use of the assistance it received from China.

Source: Montsame MODEST GROWTH IN INTERNET AND E-COMMERCE USAGE

Some technology companies from countries like South Korea and China have started to open offices in Mongolia, focusing on software development rather than hardware production, and the telecommunication and Internet market represents a small but growing sector in the country. Government initiatives, like the e-Mongolia National Program proclaimed in the mid-1990s, are helping spread Internet awareness and usage throughout the country. There has been successful liberalization of all market segments, partial privatization of the fixed-line incumbent operator,

Mongolia Telecom, and establishment of an independent regulator. As a result, a number of telecommunications companies and Internet service providers have been appearing in the Internet and phone market, leading to increasing competition. MobiCom and MagicNet are the largest cell phone and ISP operator in Mongolia respectively. Intense competition is seen in both fixed and mobile telephony, including local, long-distance, and international, Internet, VoIP, and VSATs. Dial-up still remains the main way of Internet connection, although wireless and broadband internet, recently introduced, has been developing rapidly. The largest Internet Service Provider is MagicNet. The company was founded in 1992 as a State owned Mongolian Data Company (MDC) and privatized in 1994. MDC is to 90% owned by its employees and owns MagicNet as a subsidiary. The second largest ISP is represented by MobiNet, launched in 2001 by Mongolia‘s first mobile operator, the Mongolian-Japanese MobiCom Corporation. There are more than 10 other Internet services providers. Despite Internet usage growing 1,000% in the past decade, the volume of Internet subscribers in the country was a modest 10.9% by the end of 2009. That may be compared to 1.1% in 2000 and 10.3% in 2007. The E-commerce sector is developing, thanks to Government support and incentives. Source: E-commerce Journal

INDIA BANS COAL MINING IN DENSE FORESTS

Mining companies in India will be blocked from tapping up to a third of the country‘s biggest coal reserves after the Government declared them ―no-go‖ areas for mining because of their environmental sensitivity. Mr. Jairam Ramesh, the Environment Minister, said that the decision to ban coal mining in dense forest areas was part of an attempt to better regulate India‘s mining industry, which has operated with little regard for its environmental and social consequences. The move by the Ministry of the Environment and Forests applies to up to 35 per cent of the country‘s coal reserves. It has caused anger among Indian power project developers and mining companies. Mr. Ramesh admitted that some companies had received ―in principle‖ approval several years ago to mine in areas now declared off-limits. ―Companies are agitated,‖ said an executive at one infrastructure firm. ―Many have already ordered equipment and moved forward on this basis.‖ Mr. Ramesh acknowledged that his new zoning plan would mean Asia‘s third-largest economy would have to import more coal, but insisted that the move was crucial to save India‘s natural habitats. ―It‘s all very well to say environment and development have to go hand in hand, but what are the practical implications of that?‖ he said. ―The practical implications are that there will be instances were you say yes; there will be instances where you say ‗yes, but‘ and there will be instances where you say ‗no‘.‖ Mr. Ramesh said getting environmental clearance for mining projects was traditionally merely a ―formality‖ and companies ―found creative ways of getting around it‖. But he said India could no longer afford to approve every proposed mine. ―There are areas where mining has clearly exceeded the carrying capacity,‖ he said. Source: The Financial Times

CHINA IGNITES GLOBAL COAL MARKET

China's growing appetite for imported coal has lit a fire under coal prices and fueled deal making linked to the belief that the country, once a major exporter, will be a long-term buyer of foreign coal. China's coal-importing binge started last year when international prices were low as a result of the recession while Beijing's stimulus spending kept domestic prices relatively high. With coal the primary fuel for China's economic engine, the buying is continuing even as global prices rise. China's coal imports in March jumped 165% from March 2009. The country's growth amid the global economic rebound is already driving up a wide swath of commodities, including iron and oil. But so far—at least for coal—prices remain below the pre-recession highs of 2008. Still, in March, Goldman Sachs raised its estimates for global coal prices, with supplies of certain types of coal remaining tight through 2011 because there aren't a lot of new mines opening soon. In a quarterly report, the China Electricity Council, an industry trade group, recently warned that demand for thermal coal used in power plants would remain high for the rest of this year because of strong growth and supply constraints. More than 70% of China's electricity comes from coal-fired power plants, and the country's power-generating capacity is expected to expand 10% this year. The surge in Chinese demand is prompting acquisitions. Last year, Chinese miner Yanzhou Coal Mining Co. bought Australia's Felix Resources Ltd. for USD3.2 billion. St. Louis-based Peabody Energy

Corp., meanwhile, is trying to buy Australia's biggest coal exporter, Macarthur Coal Ltd, for USD4 billion. Read more… For decades, China was a net exporter of coal, selling some 83 million metric tons more than it bought internationally in 2003. By 2007, that had started to change, with China recording net imports in some months, a development that helped to send global coal prices to records. But last year trade swung dramatically, with China importing nearly 126 million metric tons and exporting just 22 million. China swallowed more than a fifth of the 600 million tons of total seaborne-coal trade last year, jolting the global coal business at a time when steel mills and power plants elsewhere were sidelined by recession. The trend has continued this year, with coal imports in the first three months of 2010 jumping 226% from a year earlier to 44.4 million tons. That is a fraction of China's consumption, which amounted to 1.4 billion tons of coal in 2008. Suppliers are scrambling to keep up. Peabody Energy estimates that Asia will add enough power plants in the next three years to burn the equivalent of a billion more tons of coal annually, with most of that demand from China. China has some of the world's biggest reserves of low-quality thermal coal, but such coal tends to have higher levels of pollutants like sulfur. The newer, cleaner power plants being built require better grades of coal. And many of those plants are on the coast, where it can be less expensive to buy seaborne coal than to bring it by rail from China's remote inland regions. China also has inadequate domestic supplies of higher-grade coking coal, which is a key ingredient for making the steel that feeds the country's booming construction industry. Coking coal and other types of coal used to make steel, known as metallurgical coal, accounted for 27% of China's coal imports in 2009, up from 16% in 2008. Source: The Wall Street Journal Asia

GOLD PRICES HIT HIGHEST LEVELS IN 5 MONTHS Gold futures were at five-month highs Monday as continued concerns about Greece prompted a move into havens and participants increasingly set their sights on USD1,200 an ounce. Anticipation is building as the metal continues to climb back toward its all-time front-month high of USD1,226.40 set in December. Source: The Wall Street Journal Asia

CHINA SLOWDOWN FEARS AFFECT COMMODITY PRICES

The reception given to news that China‘s manufacturing activity was expanding at its slowest pace in six months sits in sharp contrast to reports from the U.S. on Monday, which showed better-than-forecast manufacturing and personal consumption. Shanghai stocks fell another 1.2 percent on Tuesday to a seven-month low. Investors in China, and elsewhere, fear that Beijing‘s attempts to cool rampant speculation and economic overheating – banks‘ reserve requirement ratios were again raised over the weekend – will cause a sharper slowdown than desired. There is also the worry that a slackening of demand in China may be an early signal that the ―inventory surge‖ enjoyed in most developed nations is starting to subside. If true, that would suggest the Chinese stock market's travails are not quixotic but a precursor to a poor summer for riskier assets. The slowdown in Chinese manufacturing growth delivered a blow to industrial commodities. Copper, the sector bellwether, dropped 2.2 percent to USD7,255 a ton. Gold was a bit softer – off 0.1 per cent to USD1,1,80 – but remained close to the five-month intraday high of USD1,187 hit on Monday as traders remained concerned about currency alternatives. Source: The Financial Times

CHINESE BUYERS MAY ENTER URANIUM TERM MARKET SOON

Chinese buyers will likely start entering into long-term supply contracts for uranium ―in the near term‖, a senior executive at Canadian producer Cameco has said. Long-term contracts usually call for deliveries to begin more than two years after the contract is finalized, and use a number of pricing formulas, including fixed prices adjusted by inflation indices, and market-linked prices. China has done some very limited purchasing in the long-term markets, but the focus has been on securing the nuclear fuel for the initial cores that are being built and started up in the country, said senior vice-president for marketing and business development George Assie. ―They just haven't been active in signing significant volumes of long-term contracts. But I would expect that that would change over here in the near term,‖ he said.

On the spot market, Cameco expects to see Chinese buyers purchase between five and six million tons of uranium this year. Source: www.miningweekly.com

ASEAN PLUS THREE GROUP UNVEILS FUND TO SPUR BOND ISSUANCE

Thirteen Asian nations have agreed to set up a USD700 million fund to encourage the issuance of local-currency-denominated bonds by giving guarantees. The finance ministers of the 10 members of the Association of Southeast Asian Nations and of Japan, China and South Korea, collectively known as Asean Plus Three, unveiled the plan after a meeting in Tashkent. The fund is aimed at increasing bond issuance by companies in the Asean-plus-three countries by raising the credit scores of companies that would otherwise have trouble floating bonds. It will also try to make small companies and infrastructure firms less vulnerable to credit crunches by reducing their reliance on banks for funds. To maintain economic growth in the Asean-plus-three area, "it's becoming increasingly important for the region's savings to be invested within the region," the finance ministers said in a statement. The USD700 million will be maintained as a trust fund at the Asian Development Bank called the Credit Guarantee and Investment Facility, and the goal will be to begin its operations by the end of the year. Japan and China each plan to contribute USD200 million to the fund, South Korea plans to pay USD100 million, while the Asean countries will together put up USD70 million and the ADB will contribute the rest. Source: The Wall Street Journal Asia

YUAN GAINS WORLD-WIDE CLOUT, RIVALS DOLLAR A new heavyweight is flexing its muscles in the USD3 trillion-a-day market for currency trading: China. It is an unusual sort of influence given that the Chinese currency, the yuan, doesn't readily trade in foreign-exchange markets and its value is fixed against the dollar. Yet China's economy, and speculation that the yuan's value vis-a-vis the dollar will soon be allowed to rise, is moving currencies around the world. This is especially true in Asia, where the U.S. dollar has long reigned as the most consequential currency. It's also making waves in countries that are major raw-materials suppliers to China such as Australia, Canada and Brazil. Speculators, for instance, bet that other Asian currencies, especially those that are more freely traded, will rise relative to the dollar when the yuan is also allowed to. Investors believe expectations of yuan appreciation give central banks in these countries the leeway to let currencies strengthen without fear of losing export competitiveness. To be sure, the U.S. dollar is still the undisputed top dog. It's the most heavily traded currency in the world and—as the recent financial crisis proved— still the denomination that investors flee to in tough times. Even so, China's growing currency clout is showing up indirectly. For instance, derivatives that investors use to bet on the yuan's direction have become popular. And these yuan bets are starting to move other currencies, too. Read more… The so-called dollar bloc—Australia, Canada and New Zealand, whose currencies have long been considered closely tied to the value of the U.S. dollar—are more sensitive to China these days as well. A large part of that is China's demand for commodities from those countries. Canada has seen its currency rise to parity with the dollar in recent months, thanks in part to China's demand for its raw materials, including oil and timber. In theory, the strength of currencies broadly reflects the relative growth rates of underlying economies. China's economic output will be more than USD5 trillion, or around 9% of the world's economy, according to the International Monetary Fund. The U.S. is a quarter of the world's economy. The euro zone is 20% and Japan is 9%. Source: The Wall Street Journal Asia

EBRD SET FOR TIMELY BOOST IN CAPITAL International efforts to support economic recovery in central and eastern Europe are set to get a big boost this month from a decision to raise by 50 per cent to USD40 billion the capital of the European Bank for Reconstruction and Development. The bank has about 60 shareholder governments, headed by European Union members, the US and Japan. They are expected to agree unanimously to provide the bank with extra resources for a region that has been slow to pull out of the global crisis. The EBRD is raising its economic growth forecasts for 2010 for central and eastern Europe (CEE), including Turkey, from 3.4 percent to 3.6-3.7 percent. Officials warn this conceals wide variations

between above-average performers, such as Russia and Poland, and states still struggling to escape the recession. CEE‘s dependence on incoming foreign investment, which was now weak, undeveloped local financial markets, and dependence on either commodities or a narrow range of manufactured exports made the recovery sluggish. Source: The Financial Times

AMERICANS AGAIN SPENDING MORE THAN THEY EARN

The revival of the U.S. consumer in recent months has been cheered by economists as a sign that the recovery is on a more solid footing. But there may be a dark side to this resurgence: on Main Street and in shopping malls across the country, Americans are once again spending more than they are earning. Data released this week by the Commerce Department showed that the U.S. personal savings rate dropped from 3 percent to 2.7 percent in March, its lowest level in 18 months. The downward move came as personal spending increased by 0.6 percent, boosted by strong car purchases, while personal income grew only half as fast, by 0.3 percent, over the same period. A similar pattern was observed in February. If the trend continues, it would defy the view of many economists and policymakers who believe that American households, burnt by high unemployment and depressed house prices, will be much more careful with their money and more reluctant to take on debt in the coming years. ―Speculation that consumers are reforming, repenting and rebalancing now looks either premature or overstated,‖ says an economist at JPMorgan. Read more… The U.S. savings rate has been on a downward path for several decades. It stood at 9 percent in March 1980, 6.5 percent in March 1990, and 2.7 percent in March 2000, before moving as low as 0.8 percent in the middle of the last decade, as Americans became increasingly willing to take on debt through the aggressive use of all sorts of loans from credit cards to mortgages and home equity loans. This behavior is widely judged to have exacerbated the recession that began in December 2007, as overstretched household budgets could not absorb the impact of job losses and falling house prices. By May last year, the savings rate had spiked up again to a peak of 6.4 percent, leading to widespread expectations that a fundamental shift towards higher savings would start to take hold. In a speech in San Francisco last month, Mr. Don Kohn, outgoing vice-chairman of the Federal Reserve, remained adamant that higher savings was one of the structural changes produced by the recession that would ultimately benefit the US economy. ―The U.S. economy should emerge from this episode stronger, more resilient, and on a more sustainable growth path than before the recession,‖ Mr. Kohn said. ―Consumers probably will save more than in the past, reflecting the likelihood that household net worth will be lower relative to income than it was over the past decade or so and that credit, appropriately, will be somewhat less available than during the boom.‖ Source: The Financial Times

ASIAN STOCKS FALL, RAISING DOUBTS ON RECOVERY PACE

Jitters over Europe's growing debt problems are adding to Asia's stock-market malaise, as investors wonder whether the region's surprisingly strong recovery has already peaked. Asia's stocks were mostly lower Wednesday on the back of a selloff in U.S. and European stocks Tuesday, adding to losses so far this year in markets in and around China. Hong Kong's Hang Seng Index fell 2.1% to 20327.54 and is now down 7.1% since the start of the year. Taiwan's main index fell nearly 3% and is now off 6% for the year. Mainland China's benchmark Shanghai Composite, which rose 0.8%, is off 13% in 2010. India's Sensitive Index, or Sensex, was down 0.3% Wednesday and has lost 2.2% for the year. Japan and South Korea, closed for holidays Wednesday, are among the few exceptions this year, up 4.9% and 2.1% respectively. Asia's slack stock performance this year contrasts with its world-beating economic growth. China's economy expanded 11.9% in the first quarter and its massive bank lending in 2009 drove the region's recovery. Measures of manufacturing and industrial production are near highs. For now, a bigger concern is that Asia's future growth will slow as policy makers tighten the monetary screws. At the same time, some early signs are showing that the recovery in Asia is beginning to pull back from the roaring post-crisis bounce over the past two quarters. Read more… It is less likely that Europe's problems will spread directly to Asia's financial systems. Most of Asia

has diligently accumulated foreign-exchange reserves since the Asian financial crisis in 1997-1998 and private-sector debt remains relatively low. Optimists say Asia's stock slowdown this year is typical at the stage in an economic recovery where governments concerned about inflation begin to rein in easy-money policies. Investors get nervous that policy makers could go too far and snuff out growth. Source: The Wall Street Journal Asia IMF BOOSTS ASIA GROWTH FORECAST

The International Monetary Fund expects Asia's economic growth this year and next to be slightly higher than its recent estimates because of upward revisions to Singapore's forecasts, but has cautioned Asian policy makers to guard against potential bubbles in local asset markets. The Fund‘s latest ‗Regional Economic Outlook for Asia and the Pacific‘ notes that surging capital inflows to Asia amid the region's recovery mark a break from previous rebounds, when such inflows were slower to return. On this occasion, "real money investors" account for the bulk of new funds, rather than leveraged investors, it said. But the IMF indicated the risks that come with such inflows mean Asian policy makers need to consider letting their exchange rates strengthen. Letting exchange rates appreciate can forestall short-term inflows, because resistance to appreciation pressures can fuel expectations of future currency rises, it said. The IMF also said that without more currency appreciation, the pressure to sterilize the impact of inflows on money supply will lead central banks to revert to "cheap" tools, such as reserve requirement rules on banks, to mop up liquidity. Such moves risk distorting the domestic banking system. The IMF reiterated China's yuan remains undervalued. Read more… "Brighter economic growth prospects and widening interest rate differentials with advanced economies are likely to attract more capital to the region," it said. "This could lead to overheating in some economies and increase their vulnerability to credit and asset price booms with the risk of subsequent abrupt reversals." "Over the medium term, currencies in the region are expected to strengthen further," the IMF said. "Further appreciation of regional currencies would be consistent with the need to safeguard Asian economies against the threat to price and financial stability from the rapid return to potential output levels and the persistence of large capital inflows." It now projects growth for all of Asia in 2010 and 2011 to reach 7.1% in both years. In its World Economic Outlook issued April 21, the IMF had forecast Asian growth rates of 6.9% this year and 7% next year. The IMF left its forecast for economic growth in China, which underpins regional growth, unchanged at 10% this year. China's GDP expanded 8.7% last year. Source: The Wall Street Journal Asia For the complete IMF ―Regional Economic Outlook - Asia and the Pacific‖ released in April, 2010, please see BCM website – Resources, Mongolia Reports.

POLITICS ORDER AMENDED TO ALLOW TRANSFER OF MINING LICENSES

The National Security Council (NSC) last week partly amended President Ts.Elbegdorj‘s order on April 20 that had temporarily suspended all transactions relating to mining licenses. New licenses cannot be issued even now, but the NSC order allows transfer of licenses from one owner to another. The Executive Director of the Mongolian National Mining Association, Mr. N.Algaa, has criticized the Presidential ordinance for harming the legitimate business interests of many companies. He has welcomed the new move as ―a partial rectification of a wrong‖. Source: Zuunii Medee MPs NOT TO GET MNT1 BILLION TO SPEND IN CONSTITUENCY

Minister of Finance S.Bayartsogt has said the proposal to allocate MNT 1 billion to every Member of Parliament to spend on their constituency has been scrapped. Instead of spending the money through individual MPs, the entire amount of MNT 76 billion will be part of the Ministries‘ budgets and will be allocated to the relevant state budget disbursement authorities. The changed procedure was adopted after a letter from the Constitutional Court had defined the legal position. Source: Ardiin Erkh

PROSECUTOR GENERAL RESIGNS

State Prosecutor General M.Altankhuyag has submitted his letter of resignation on health reasons, with one year left of his six-year term. The reputation of Mongolian law enforcing organizations took a beating in the aftermath of the July 1 incidents and ever since he assumed office, President Elbegdorj has been nudging Mr. Altankhuyag to go. He made the suggestion in his speech at the opening of the Spring session of Parliament also. Now that he has submitted his resignation, interest shifts to the choice of a successor. Had this been a year ago, the obvious front runners would have been Mr. D.Dorligjav, now Head of the President‘s Office, and Mrs. B.Delgermaa. Both are lawyers. Mrs. Delgermaa is known for her commitment to judicial reform and protection of human rights. They are still contenders, but now face challenge from Mr. A.Gansukh, Deputy Minister of Transport. He, too, was trained in law and defended the late Ts.Sukhbaatar when he was charged with taking bribe from people selected to go to South Korea for work. Mr. Gansukh is also married to the sister of the wife of Prime Minister S.Batbold. Some politicians are behind him, but it is difficult to say if their support stems from their appreciation of his legal acumen or from his family links to the Prime Minister. Not that there is any guarantee, in present-day Mongolia, that someone apart from these three will not be the final choice, from some other family network or because of what is known as connections. Source: English.News.mn

MPs URGE PRIME MINISTER TO CURB CORRUPTION

In an open letter to Prime Minister S.Batbold, two Democratic Party MPs, Hero of Mongolia E.Bat-Uul and Mr. Ya.Batsuuri, have lamented the unchecked growth of corruption, bribery, and bureaucracy in government organizations, greatly hindering economic progress and the development of a democratic ethos. If no corrective action is taken, the trend will eventually disgrace the nation on the international stage, they feel. Political parties and leaders talk a lot about action against corruption during elections, but allow it to thrive when they are in a position to take remedial action. Hidden business deals involving high officials, their fingers in the pie in any major budgetary investments, and misuse and abuse of the funds of state owned businesses have got out of control and reached proportions that endanger national security. Citizens wait in vain for signs of official action, but there is no change in the authorities‘ apathy. Reminding Mr. Batbold that in a democracy people‘s feelings cannot continue to be ignored, the two MPs have urged the Government to come out with a comprehensive statement on its stand on the matter. As a first step, they have said, companies and organizations like Erdenet Copper, Ulaanbaatar Railway, MIAT, and the Civil Aviation Authority of Mongolia should immediately have their accounts audited by firms with international exposure. Source: Udriin Sonin

THREE MPs JOIN INTERNATIONAL ANTI-CORRUPTION ORGANIZATION OF LAWMAKERS Three MPs -- Mr. J.Sukhbaatar (MPRP), Mr. Kh.Temuujin (DP), and Mr. J.Enkhbayar (MPRP) – informed the Standing Committee on Justice last week that they have formed a Mongolian chapter of the Global Organization of Parliamentarians Against Corruption (GOPAC). GOPAC began in 2002 in Canada with support from the Canadian Parliament, the World Bank, and CIDA, the Canadian international development agency. Over the years it has grown into an international network of parliamentarians dedicated to good governance and combating corruption throughout the world. Over 900 members of Parliament in around 90 countries are now active in it.

Source: Udriin Sonin

MINISTER ACCUSES ANTI-CORRUPTION MP OF OVERSTEPPING LIMITS

The Standing Committee on Justice is likely to hold an open hearing on May 12, if three MPs have their way. Mr. B.Bat-Erdene (MPRP), Mr. Kh.Temuujin (DP), and Mr. J.Sukhbaatar (MPRP) told media that a working group under Mr. Sukhbaatar has been established to review financial reports, and to fix responsibility for breaches of law, especially on matters relating to possible corruption. The open hearing will concentrate on three subjects: preparation of financial reports; enumerating possible violations; and recommending action against suggested offenders. The three would like to make the open hearing an annual event. Mr. Sukhbaatar, who had told the press conference, ―We are living in a society of corruption,‖ was immediately afterward invited to his room by the Minister for Internal Affairs. There Mr. Ts.Nyamdorj accused the MP of ―acting as a bodyguard‖ of Mr.Temuujin, and warned him that he

had gone beyond his limits in talking about human rights and ministerial conduct. He is also believed to have pulled the MP by his tie. When Mr. Sukhbaatar left the room, there were red marks on his neck and his shirt and jacket were in disarray.

Source: Ardin Erkh

ELBEGDORJ’S CHINA VISIT “DEFINES A NEW ERA” President Ts. Elbegdorj returned home on Tuesday morning after a six-day official visit to China at the invitation of Chairman Hu Jintao. Foreign Minister G. Zandanshatar told reporters the visit ―defined a new era in bilateral relationship‖, giving a significant impetus to forge deeper mutual understanding and stronger partnership between the two neighboring countries. This was the refrain at all the meetings the Mongolian side held with the Chinese leadership. Apart from meeting Chinese leaders, Mr. Elbegdorj visited the Mongolian pavilion at the Shanghai Expo the day after its formal inauguration. Women in deel, singing a long song, welcomed him and gave him milk in a silver bowl, as national tradition called for. The main items on display at the Mongolian pavilion are cashmere and felt products, Mongolian vodka, and seabuckthorn juice. There is a ger constructed without using a single nail. A replica of a small dinosaur is also there. The Chinese Government gave USD900,000 to Mongolia to construct its pavilion on a 330-sq-meter area. Source: English.News.mn BETTER TO BE A WOMAN THAN A CHILD IN MONGOLIA

Women in Mongolia fare better as women than they do as mothers, while children are worse off than both, according to the 11th annual Save The Children index, which ranks the best and worst places to be a mother, looks at the well-being of women and children in 160 countries which includes access to education, economic opportunities, and health care. The countries are divided into three tiers. The first included 43 ―more developed‖ nations, the second, which includes Mongolia, 77 ―less developed‖, and the last 40 ―least developed‖ countries. Women in Mongolia are ranked 4th in their group, while mothers are at the 10th place and children come 53rd. This is ahead of China and way above India. Mothers in Norway and Australia are in the best nations in the world to bring up their children while mothers in Afghanistan and many African nations fare worst. The United States came 28th in the list, down from 27 last year, largely as its rate for maternal mortality -- 1 in 4,800 -- is one of the highest in the developed world. The United States also offers less maternity leave than other wealthy nations. The 2010 list of 43 developed nations and 117 in the developing world highlighted the fact that nearly 350,000 women die during pregnancy or childbirth every year and nearly 9 million children die before their fifth birthday. In Afghanistan, Jordan, Lebanon, Libyan Arab Jamahiriya, Morocco, Oman, Pakistan, Syria and Yemen, women earn 25 cents or less for every dollar men earn. In Mongolia, women earn 87 cents for every dollar men earn and in Mozambique they earn 90 cents. Source: Save the Children, Reuters.com

CENTRAL BANK DENIES POLITICAL ROLE IN APPOINTMENTS

The Central Bank has attributed the rise in Mongolian foreign currency reserve to USD1.3 billion to foreign loans and aid, to an increase in its own holding of gold and silver, and in the amount in foreign currency accounts in commercial banks, and to the profit it made in foreign currency trade. The increased reserve will sustain macro-economic stability and guarantee the stability of the MNT. The bank traces the recently reported price rise of 8.7% to increased meat prices and to the rates for electricity, heating, water, and landline phone calls being raised by between 10 and 37.5%. It says the distribution of money to citizens and raising public servants‘ wages ―may also stir up inflation‖. Denying allegations that its two new Vice Presidents were political appointees, the Public Relations Department of the Bank has said it does not work to serve parties‘ interests and both men ―were chosen in regard to their professional and educational experience, and ethics‖. In any case, the Bank can ―better pursue its main task of implementing monetary policy if it had the support of parties in Parliament‖. Referring to the issue of MNT180 million that has disappeared from the Central Bank‘s branch in Khuvsgul province, the Bank has said, ―Risk is a normal part of work in the financial sector, whether in commercial banks or in the Central Bank‖. Source: Zuunii Medee

NO NEW PETROL/DISEL STATIONS IN ULAANBAATAR

The Mayor of Ulaanbaatar has ordered a complete ban on allocating land for petrol/diesel stations and car repair centers. Existing stations have been given until September 1 to remove all open fuel containers and arrange for underground storage. These and several other measures have been adopted after a national commission recommended a series of security measures. Source: Undesnii Shuudan

SHANGHAI EXPO IMAGINES FUTURE, REDREAMS PAST

From the public toilet to the odorless loo: 159 years of World Expo history culminated on May 1 when the first visitor officially relieved themselves in that most enduring of Expo inventions, the public convenience – liberated of pong specially for the largest Expo yet, in Shanghai. From the Crystal Palace in London, built for the 1851 Great Exhibition of the Works of Industry of All Nations, to the Eiffel Tower, the Ferris Wheel, caramel corn and Juicy Fruit chewing gum, World Expos are always full of the newest things. Some Expos have a profound effect on the societies that host them: at the 1939 New York World‘s Fair, General Motors proposed the US interstate highway system which transformed America when it was built a couple of decades later. Others have added to the way we speak: according to Wikipedia, the expression ―to spend a penny‖ – which in Britain means a visit to the toilet – originated at the 1851 Expo, where a penny bought a clean toilet seat, a towel, a comb and a shoe shine. But the Expo that has opened to the public in Shanghai will offer more than a vision of a purgative utopia with its smell-free ―ecological toilets‖ – themselves a marvel in a country with some of the world‘s stinkiest loos – but a futuristic model of a society where people live happily in the ―Better City, Better life‖ of the Expo‘s motto. There are pavilions with walls of wickerwork or bamboo – both from Spain; houses that keep cool or warm year-round without conventional heating or cooling – from Hanover; cars that park themselves – from G; and several pavilions that move or change shape depending on the whims of those inside. There are even giant funnels that capture rainwater to flush the loos, and Cokes that freeze upon opening – the perfect drink for pounding the vast treeless pavements between national pavilions. Read more… No one can predict how many of these inventions will be extant 159 years hence. Many of the grand visions of Expos past have proved less than enduring. GM‘s ―Futurama II‖ exhibit at the New York World‘s Fair of 1964 – one of the last globally famous such fairs – imagined a ―Tomorrow-land‖ filled with futuristic vehicles whizzing around on impossibly clean multilevel roads. This year‘s joint pavilion built by GM and SAIC, its Chinese joint venture partner, is eerily similar in some ways: like the 1964 show, it imagines a Jetsons style world, reminiscent of the 1960s space age cartoon, of effortless mobility. But effortless mobility on the roads is not much closer to realization today than it was in 1964: so is the Expo about imagining the future, or just redreaming the past? Ms. Karin Zhang, GM‘s Expo spokeswoman, points out that GM just comes up with the vision: it cannot execute it alone. The interstate superhighway system was GM‘s idea; but the US and state governments had to build it. And other GM inventions premiered at Expo have caught on: like the airbag and the child car seat, both legacies of the otherwise unremembered 1974 Spokane Expo. This year‘s Expo boasts other inventions, too, that are futuristic in a retro sort of way: robots shaped like Haibao, the Shanghai Expo‘s pudgy blue mascot, will talk to visitors and take their pictures. But although robots have been around at Expos for decades, they are not widely sold to do things like hoovering and other menial chores, as the Jetsons promised they would nearly 50 years ago. And in the Cisco pavilion, an automated household appliance offers an after-school drink to a child just back from his studies: another peculiar Jetsons moment, for anyone old enough to remember when that dream was still undreamt. Most Expos leave no mark on world history, others lurk in the memory of those who visit them for decades. Shanghai wants to be one of the most memorable ones and if the 1851 Expo is anything to judge by, it was smart to start with loos. Source: The Financial Times

JAPANESE WOMAN PLANTS 100 CHERRY TREES IN ANNUAL RITUAL

Some 200 years after Kayuchi introduced the cherry tree to Mongolia, planting many of them at the Khamriin monastery in Dornogobi province, another Japanese national, Kayuchi Namae, has planted 100 of them in Sainshand in the same province. She wants to do this every year.

Source: English.News.mn

INDONESIA TEACHES CHINESE AT SCHOOLS TO ATTRACT TRADE FAVORS

When the Regent of a coastal rice-growing region on the island of Java, first toured China as part of an official delegation, his eyes went wide. Here was the future, he thought: skyscrapers and humming factories and grand highways. Now Mr. Masfuk has begun trying to move his Indonesian region toward that future: he has mandated that all the schools in Lamongan, population 1.5 million, teach Mandarin Chinese to prepare the youth for doing business with China. The policy goes against decades of anti-Chinese hostility in Indonesia. Things are changing, and the Chinese government is now sending hundreds of teachers to Indonesia. As China‘s economic power grows, the study of Mandarin is surging around the world. Its rise in Indonesia may be one of the most telling examples of how China‘s influence is overflowing even the steepest of barriers. Many Indonesian students of Mandarin are ethnic Chinese eager to reconnect with their culture. But there are also students of other ethnicities, like those in Lamongan, who want to capitalize on growing economic ties between Indonesia and China. The two countries did USD28.4 billion of trade in 2009, and a free trade zone that took effect this year between China and Southeast Asian countries has already led to a huge trade surge, according to the Chinese Ministry of Commerce. That attitude is exactly what China has been seeking to cultivate by aggressively supporting the expansion of Mandarin programs here and in many other countries. President Hu Jintao has publicly called for China to exercise greater global influence through the spread of culture and diplomacy, or ―soft power‖. The Ministry of Education is one instrument in that campaign — last year, it sent 4,800 teachers to about 110 countries. Read more… Among Indonesian officials, attitudes toward China‘s growth are complicated. Indonesia has had a trade deficit with China in recent years, and some officials fear China‘s colossal economic might. Then there are optimists like Mr. Masfuk. ―I‘m looking at trade and investment between Lamongan and China, which has fantastic prospects for the future,‖ he said, grinning broadly in his office. ―We hope 5 to 10 years from now, there will be working-age students who will be able to speak Chinese,‖ he added. ―If Chinese businesspeople or investors come to Lamongan, we hope our students will be able to explain Lamongan to them.‖ Lamongan is one of the top sources of rice, fish, corn, tobacco and soybeans in East Java. Some of those products could be exported to China, officials here say, and Lamongan could build factories for Chinese companies. Source: The New York Times

ANNOUNCEMENTS

BLUE OCEAN COUNTRY: MONGOLIA - MAY 12, 2010

The Jeff Group from South Korea and the Growing Nations Group in Mongolia are jointly organizing a business workshop and forum on May 12 at Ulaanbaatar Hotel. The event has been named Blue Ocean Country: Mongolia 2010, as the proceedings are meant to offer participants a chance to learn the concept of Blue Ocean, a new paradigm to create something from nothing by taking a calculated risk. BCM is the official supporting organization. Intending participants may please contact B. Sainbayar at 88092028 or 21243191, or at mongolia2028@gmail.com. See www.gngmongolia.com.

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“BSPOT" on B-TV

BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.

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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 TOP 20 INDEX

FOREIGN-LISTED COMPANIES WITH MONGOLIAN ASSETS

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]

March 31, 2010 *8.5% [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 – May 6, 2010

Currency name Currency Rate

US dollars USD 1,394.06

Euro EUR 1,805.10

Japanese yen JPY 14.73

British pound GBP 2,109.91

Hong Kong dollar HKD 179.52

Chinese yuan CNY 204.21

Russian ruble RUB 46.84

South Korean won KRW 1.25

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.