BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 65, April 17, 2009

NEWS HIGHLIGHTS:

Business: Western receives notice suspending Gurvanbulag licenses; Boroo negotiations

continuing; Energy Resource given permission to begin mining at Ukhaa Khudag; Mongolia Energy claims “full government support”; Standing Committee keeps putting off debate on OT draft; DP group “cannot approve OT agreement the way it is now”; Khan Bank adjudged the best bank in Mongolia in 2008; Missing Anod Bank executive in detention in USA; Province Governor stops illegal coal sales by senior border officials; Arbitration court to hear Altan Dornod case on April 23; Russian company director to be probed for tax evasion; German firm to help build coking coal plant; Government to sell bonds to finance gold mining; Official denies Railway audit has been canceled, admits delay; Rhenium found in molybdenum deposit; Erdenes MGL to guarantee payments to investors and creditors; New Russia-Mongolia company to help build railway infrastructure; Denison to sell 20% stake, uranium to Korea Electric; Rio, seeking China deal, sells USD3.5 billion of bonds; Rio board defends Chinalco deal before unhappy shareholders; Conference discusses mining and infrastructure.

Economy: China to give USD1.5 billion low-interest loan, says Deputy PM Enkhbold; China asks its

firms to invest in countries like Mongolia; US investment firm enthusiastic about Mongolia; Q1 foreign trade deficit rises 52.1% in a year; China-Mongolia commission meets; Money supply up since February; Rush of citizens claiming social allowances; Standing Committee approves proposal to issue bonds; No fuel price increase if USD is below MNT1,570; Asset evaluation methods to be streamlined; Foreign labor to be allowed in oil exploration, and to build roads and railway.

Politics: Mongolia-China ties at their best ever, asserts Bayar; Putin arrives on May 13; Russian

President to attend victory anniversary celebrations; Mongolia expresses support for China on Taiwan, Tibet; President begins campaign for re-election; Tamper-proof ballot box seals come from USA; MPRP opens bank account to collect campaign donations; Olympic medalists credit Enkhbayar with their success; GPS apparatus gift to help fight desertification; Vice Consul explains different U.S. visas to students; Interactive talk on human rights; Park in Denver named after Ulaanbaatar.

BUSINESS WESTERN RECEIVES NOTICE SUSPENDING GURVANBULAG LICENSES

The Mineral Resources Authority of Mongolia (MRAM) has notified Western Prospector Group Ltd. that its exploration licenses 7685X and 4969X have been suspended for three months following irregularities discovered by inspectors from Mongolia's Atomic Energy Agency. The licenses thus suspended are the primary licenses for Western's Gurvanbulag deposit,

Western has not yet received the English translation of the inspectors’ report. Both licenses are liable to be revoked if Western is not able to satisfy the Agency that the alleged violations have been rectified.

Local media say the newly established Nuclear Energy Department decided on the inspection after learning that Western Prospector was negotiating with the Chinese Nuclear Energy Agency to sell 75% of its shares of uranium deposits for USD31 million. The inspection on April 8 and 9 found that the company had erred on several counts, including not submitting the required detailed environment reports on the Gurvanbulag uranium deposit.

Source: www.westernprospector.com, Undeshnii shuudan

BOROO NEGOTIATIONS CONTINUING

On March 27, 2009 Boroo Gold (BGC) management and the Trade Union agreed to accept the

recommendations of the arbitration panel and to return to negotiations, with the objective of revising the Collective Agreement to address issues of enhanced redundancy pay and a closure bonus. The possibility of a legal strike at this time was therefore averted.

The Trade Union submitted their demands on January 20, 2009. These demands were far in excess of anything required by the BGC Collective Agreement or by the Labor Code. When management didn't fully agree to the demands by February 3, 2009, the Trade Union suspended all negotiations and initiated the collective labor dispute process. The Trade Union therefore did not engage in any negotiations with management for almost 8 weeks. The Trade Union has not yet completed a financial analysis of their demands.

Negotiating teams from management and the Trade Union will be meeting with the union's financial advisor on April 17, 2009 to help bring the analysis to completion. Both management and the Trade Union want to reach a mutually acceptable settlement with respect to the demands as quickly as possible. A small group of union activists, who are impatient with the pace of negotiations, are staging a peaceful protest at Boroo headquarters in UB.

Management has emphasized to the Trade Union executive that the union's demands will not be agreed to as submitted. Any potential revisions to the Collective Agreement must be arrived at through the process of negotiation. Management also indicated that any potential revisions to the Collective Agreement will not make any distinction between union members and non-members.

Source: Boroo Press Release

ENERGY RESOURCE GIVEN PERMISSION TO BEGIN MINING AT UKHAA KHUDAG

A committee appointed by the Ministry of Minerals and Energy has given permission to Energy Resource LLC to start operations at the Ukhaa Khudag mines in Tsogttsetsii soum of Omnogobi province after an on-the-spot inspection of the site. The mine is part of the Tavan Tolgoi coal deposit.

Energy Resource has plans to build a coal processing plant, and also an airport near Tsogttsetsii soum. It has signed an agreement with German State owned Deutsche Bahn to build a railroad in the Gobi region.

Source: Zuunii shuudan

MONGOLIA ENERGY CLAIMS “FULL GOVERNMENT SUPPORT”

Mongolia Energy Corp., which is active in western Mongolia, has said it will not be affected by the Government's move to reform its minerals law and that it has full government support for its projects. "If we had been in South Gobi, we would be mixed up in all the politics regardless of what you're doing - it's guilt by association," Chief Executive Officer James Schaeffer has said.

Mongolia Energy, which is set to begin its mining operations by the middle of this year, plans to produce 3 million tons of coal a year in 2009, raising it to 8 million per annum by 2012. Coking coal prices have fallen about 60 percent in the spot market from a peak of USD715 a ton last year, but Mr. Schaeffer said he believes prices for the key raw material used to make steel have stabilized.

Mr. Schaeffer said Mongolia Energy, which transformed itself from a technology company to a mining firm in 2007, is eyeing weaker rivals as possible takeover targets amid the global financial crisis, as “it's a perfect time to be out looking for projects”. He declined to give a profit forecast, but said the company will see an improvement in cash flows in 2010 from the production of coal.

Source: Reuters.com

STANDING COMMITTEE KEEPS PUTTING OFF DEBATE ON OT DRAFT The Standing Committee on Economic Policy decided on Wednesday, for the second time this week, to put off discussion of the Oyu Tolgoi investment draft. No reason was given why the committee was not sticking to the agenda.

Source: business-Mongolia.com

DP GROUP “CANNOT APPROVE OT AGREEMENT THE WAY IT IS NOW”

The Democratic Party group in Parliament “does not find it possible to approve the draft Oyu Tolgoi

investment agreement the way it is now”, its Head, Mr. Ch.Saikhanbileg, told media on Monday, adding that “the Government and the investors must provide more detailed information”.

The main objection of the group was that the technical and economic estimates were too imprecise. For example, it is not clear when the smelting plant will be built. “Even small businesses plan their investments steps in advance, but the draft leaves important things vague,” Mr. Saikhanbileg said. He felt members would find it easier to assess the merits of the draft when they debate it in Parliament only when all facts and figures were available to them.

Source: www.news.mn

KHAN BANK ADJUDGED THE BEST BANK IN MONGOLIA IN 2008

The Erdenet Mining Corporation has been named the top business entity in Mongolia in 2008 by the National Chamber of Commerce and Industry and the Government of Mongolia. MCS, Mobicom, Boroo Gold, NIC, Just Group, Magnai Trade, Nomin Holding, Bodi Group, and the Darkhan Metallurgical Plant come next in the list, putting two state owned and eight private companies among the top 10. This is the eighth year such a list has been prepared.

Khan Bank has been adjudged the best bank, followed by Golomt Bank, Trade and Development Bank, Mongolian Post Bank, and Zoos Bank. This is the 5th time the bank with the largest branch network has been so honored. The panelists took into account the bank’s strengths over its peers, namely, financial performance and range of products and services. In 2008, Khan Bank had 40% growth in total assets over the previous year and 36.8% growth in deposits. An estimated 80% of all Mongolian households bank with Khan Bank. It created over 500 jobs in 2008, giving it a 40% share of the entire workforce in the Mongolian banking sector.

The ranking of non-banking financial institutions is led by Credit Mongol, Transcapital, Mongonguur, and BID, in that order.

The assessment criteria include the amount of tax paid into the state budget, creation of new jobs, and social responsibility. This list of top performers is announced every year to acknowledge their contribution to the socio-economic development of the country, to enhance their business prestige, and to give them more exposure, inside the country and abroad.

Source: Montsame, www.khanbank.com, Undesnii shuudan

MISSING ANOD BANK EXECUTIVE IN DETENTION IN USA

Of the four top executives of Anod Bank, three are in Mongolian jails pending completion of further police investigation, but the whereabouts of the fourth has only now been revealed. Mr. Ulambayar, who headed the bank’s administrative department, left for the USA just two days before the scandal broke, ostensibly for medical treatment. However, Interpol had been alerted and he was arrested as he landed at San Francisco airport on December 10 last year. He has sought political asylum in the USA and remains in police detention until that plea is disposed of.

Source: Onoodor

PROVINCE GOVERNOR STOPS ILLEGAL COAL SALES BY SENIOR BORDER OFFICIALS

Governor J.Batsuuri of Sukhbaatar province has ended the practice initiated and condoned by previous administrations that gave senior officials at the General Authority for Border Inspection in the province RMB22 per ton of coal sold to China. So far the General Authority for Border Inspection enjoyed the rights to operate coal mines in restricted border areas. Since they did not have the necessary expertise, it is believed that the border authority officials allowed Chinese to work on the deposits and took a share of the earnings.

Source: Ardchilal

ARBITRATION COURT TO HEAR ALTAN DORNOD CASE ON APRIL 23

An arbitration court in Frankfurt will hear on April 23 the plea of the Russian invested Altan Dornod Mongol and Bostokneftgas companies claiming USD1 billion from the Mongolian Government for imposing the windfall tax on their profits, in breach of intergovernmental agreements. Last year, the companies mined about 2,500 tons of gold worth USD 65 million without paying any windfall

tax. They have not been able to pay salaries to their staff as all bank accounts have been frozen.

Source: Onoodor

RUSSIAN COMPANY DIRECTOR TO BE PROBED FOR TAX EVASION

Mr. B.A. Igoshin, executive director of the Russian invested Altan Dornod Mongol, is alleged to have not paid taxes amounting to more than MNT 50 billion. Criminal investigation into the case will start soon.

Source: Onoodor

GERMAN FIRM TO HELP BUILD COKING COAL PLANT

Industrial Corporation Mongolia LLC has signed an agreement with Uhde LLC, a subsidiary of ThyssenKrupp of Germany, to build a coking coal plant near Choir city of southern Mongolia. The plant will use the "heat recovery" technology which Uhde has perfected. This safe and environment-friendly technology will generate electricity as it produces coke from coal. Since the area chosen for the plant is short of water, Uhde will use a technology that will depend more on cool air than on water. When fully operational, the plant will produce up to 2 million tons of coke per year and will supply some of it to German steel producers.

Source: Montsame

GOVERNMENT TO SELL BONDS TO FINANCE GOLD MINING

A special meeting of the Government on Monday approved several measures to support the gold sector in order to ensure economic growth and increase the foreign exchange reserves. Government bonds worth USD200 million will be sold during the next 12-18 months. The sale proceeds will be loaned to cash-starved gold mining companies through commercial banks. Four banks - Trade and Development Bank, Golomt Bank, Zoos Bank and Capitron Bank - have said they have pending credit applications for MNT170 billion from some 50 gold mining companies. An increase in gold production is expected to raise forex reserves by USD 600 million.

Source: Ardiin Erkh

OFFICIAL DENIES RAILWAY AUDIT HAS BEEN CANCELED, ADMITS DELAY

The director of the railway project of the Mongolian Millennium Challenge Fund, Mr. P.Batsaikhan, has denied that work on the project has come to a standstill as there was no audit of Ulaanbaatar Railway accounts last year, or that the audit inspection has been canceled. The Millennium Challenge Corporation has been clear that money will be released only after the audit is done.

Mr. Batsaikhan said most of the work is going on according to plan but “some things were being delayed because of a temporary halt in the audit inspection work. For example, a tender for the first five of 30 locomotives should have been announced but it has been postponed because of the audit delay. ”

The Railway will get USD188 million from the total Millennium Challenge Fund grant of USD285 million.

Source: en.News.mn

RHENIUM FOUND IN MOLYBDENUM DEPOSIT

The Mineral Council has announced that a molybdenum deposit discovered at Khandgait in Selenge district of Bulgan province has been found to contain a secondary mineral, rhenium, mostly used in the electronic industry. There are 22 grams of rhenium per ton of molybdenum concentrate in the deposit. A similar situation prevails in the Erdenet deposit, but the rhenium there was never registered as a secondary mineral.

Global demand for rhenium has been increasing, and the Council wants a clearer idea of how much of it is there before the molybdenum mining begins. The exploration license for the Khandgait deposit is held by Monresources LLC, a 100% domestically owned company. With around 20,000 tons of molybdenum, the deposit is smaller than Erdenet, but Mongolia can still earn USD29 million in royalties and USD340 million in other taxes from it. Geological exploration has been completed only

at the central part of the deposit and a detailed feasibility study is yet to be made.

Source: Udriin sonin

ERDENES MGL TO GUARANTEE PAYMENTS TO INVESTORS AND CREDITORS

A special Government meeting on April 13 empowered Erdenes MGL, a state-owned company, to guarantee payments to investors and creditors in infrastructure projects. The decision became necessary as the Government had several times failed to get investors interested in the projects as they were uncertain about being paid. Mongolian law permits a 100-percent state-owned company to guarantee such payments and Erdenes MGL is likely to convince investors of its ability and solvency because of its access to mining revenues.

There are seven of these projects that will together cost USD6 billion. Among them is the 990-km Altanbulag-Ulaanbaatar-Zamyn-Uud international highway. Another is a 920-km road from Tavan Tolgoi to Choibalsan via Zuunbayan. Some 350 km of roads in Ulaanbaatar need extensive repairs and 212 km of new roads will be built in the capital city region. There will also be 1,284 km of raised roads as part of the Millennium road program. The other three projects are building 100,000 apartments, building a cement factory with a capacity of 1 million tons per year, and building a metallurgical factory to produce 500,000 tons of iron and steel per year.

Source: Ardiin Erkh

NEW RUSSIA-MONGOLIA COMPANY TO HELP BUILD RAILWAY INFRASTRUCTURE

The Government has decided to set up a new company, mainly to build and repair railway infrastructure, and to prepare technical and financial feasibility studies prior to seeking investment in railway infrastructure. It will be a joint venture between Russian Railways, a Russian company in the state sector, the Mongolian state-owned company Erdenes MGL, and the recently formed Mongolian Railway Company.

The joint company could go into mining also through subsidiary companies. For now, Russian Railways will invest USD1.8 million in the new venture, and the two Mongolian companies together will give the same amount.

Source: www.news.mn

DENISON TO SELL 20% STAKE, URANIUM TO KOREA ELECTRIC

Denison Mines Corp., a Canadian uranium producer which has high potential exploration and development properties in Mongolia, has agreed to sell a 19.9 percent stake in the company to Korea Electric Power Corp. for USD62.1 million and supply the utility with uranium until 2015. The agreement requires the Toronto-based mining company to sell as much as 690,000 pounds of enriched uranium a year to the state-controlled utility starting in 2010.

Seoul-based Korea Electric and other power companies in Asia are stepping up efforts to lock in supplies of uranium, the raw material in nuclear reactor fuel, amid concern about future shortages. China is urging its companies to acquire foreign supplies of uranium reserves as the country expands its nuclear-generating capacity, an official of China’s National Energy Administration said last month. South Korean officials have expressed interest in Mongolian uranium in recent years, and this move now gives a Korean company access.

Source: Bloomberg.com

RIO, SEEKING CHINA DEAL, SELLS USD3.5 BILLION OF BONDS

Rio Tinto Group, the world’s third-largest mining company, sold on Tuesday USD3.5 billion of bonds, its first debt issue in almost a year. The debt-laden company sold USD2 billion of five-year notes and USD1.5 billion of 10-year notes for capital management and refinancing. They were priced at as much as three percentage points higher than its last bond offering.

Rio is seeking approval for a USD19.5 billion bailout from Aluminum Corp. of China to reduce debt that grew 19-fold after its 2007 acquisition of Alcan Inc. Rio has a “Plan B” should the deal fail, which may include selling shares, bonds or more assets.

Rio joins bigger rivals BHP Billiton Ltd. and Anglo American Plc in selling bonds amid an easing of

the freeze in credit markets. The last time Rio sold bonds was in June 2008 when it raised USD5 billion from three sales. It has USD10 billion of borrowings due within a year and USD29.7 billion of “medium and long-term” borrowings. “With the bond markets open for business it makes sense for us to be taking advantage of the opportunity,” Rio’s Chief Financial Officer Guy Elliott said, adding there had been a “high level” of interest in the sale.

The notes sold on Tuesday are rated Baa1 by Moody’s Investors Service, the third-lowest level of investment quality, and one step lower at BBB by Standard & Poor’s. Proceeds will be used to repay bank debt. The company hired Deutsche Bank AG, JPMorgan Chase & Co. and Morgan Stanley to sell the bonds.

Source: Bloomberg.com

RIO BOARD DEFENDS CHINALCO DEAL BEFORE UNHAPPY SHAREHOLDERS

Rio Tinto posted weaker first-quarter aluminum and iron ore output on Wednesday and defended its USD19.5 billion asset and stake sale deal with China's Chinalco in front of unhappy shareholders. Aluminum production fell a steeper-than-expected 6 percent, iron ore production was down 15 percent, while refined copper rose 33 percent as the firm struggled to balance supply with global demand.

Rio released its production figures on the same day as its annual general meeting, which gave shareholders a chance to let off steam over a plan to sell state-owned Chinalco stakes in prized assets and allow it to double its holding in Rio to 18 percent. "You seem intent on mortgaging parts of Rio Tinto ... Please do not get us into this deep mire," one shareholder said. The deal has sparked opposition from some shareholders who want to participate in Rio's fundraising and from Australian politicians worried about Chinese influence in a key sector.

Outgoing Rio Chairman Paul Skinner said the Rio board was keenly listening to shareholders about Chinalco, which still needs approval from Australian regulators before it goes to a shareholder vote due in June. The board, however, remained fully behind the deal, which provided flexibility amid uncertainty about when the global economy and metals prices might recover, he added.

"Given weakness in the more developed economies, it is unlikely that we will see a synchronized global recovery for the next 12 to 18 months," Mr. Skinner told the meeting. He shrugged off some analysts' views that Rio's successful USD3.5 billion bond issue on Tuesday meant the Chinalco deal was no longer as necessary to slash Rio's USD39 billion in debt. "It's something of course which gives us a few more financial degrees of freedom, but it shouldn't be seen anything more than that," he told reporters following the meeting.

Source: Reuters.com

CONFERENCE DISCUSSES MINING AND INFRASTRUCTURE

The two-day conference on mining and infrastructure in Mongolia, organized jointly by the Government and the World Bank, began on Monday. The Bank’s Resident Representative and Country Manager here, Dr. Arshad Sayed, wondered if geography is destiny for a country and, if it was, how Mongolia would be best served in getting the most and best from its physical, social, and human capital and how its infrastructure could be most appropriately developed to get dividends from investing that capital. Over two full days, a keynote address and nine panel discussions gave those who attended a rare opportunity to listen to a spectrum of views on issues that defy easy solution.

The main speaker was Dr. Eduardo Aninat, who has held a variety of positions to make him uniquely qualified to discuss the most effective ways of managing the macroeconomic impacts of a commodity-driven and export-based economy. He was Finance Minister of Chile, the world’s biggest exporter of copper, and Deputy Managing Director of the IMF after an earlier stint as Chairman of the Board of Governors of the IMF and the World Bank. He was also President of the Social Equity Forum, sponsored by the Inter-American Development Bank to place social equity concerns at the top of macroeconomic and sectoral policy agendas. After analyzing the “habitual problems” of developing countries, commodity supply/demand conditions, variability in commodity producing countries, economies of scale, the case for stabilization and then sovereign funds, and fiscal budget components, Mr. Aninat concluded by affirming that the real and only goal of growth was citizens’

stable and sustainable welfare. For this it was essential to distribute income equitably and this can be done only by proper use of time, space and the instruments of strategy.

Later, at a panel discussion where Mongolian politicians and economic bureaucrats made generous use of statistics to project the future, Mr. Aninat, saying that his long experience of wearing both hats has made him “humble and skeptical”, urged them to be wary of getting carried away, to give adequate importance to imponderables, and to plan realistically on the basis of achievable inputs.

The World Bank estimates that in less than ten years, the mines in southern Mongolia could be generating annual revenues of more than USD5 billion, while employing about 8,000 people. This calls for a huge construction and expansion of infrastructure in the region and the rest of the conference was given over to discussing various aspects of a comprehensive draft on the issue prepared by the World Bank. They included township development, transport (mainly railways vs. roads), electricity, water resources, and environmental and social issues. Once the needs are prioritized and agreed upon would come the question of financing, and then identifying and putting in place the institutional options to deliver the needs of this infrastructure. None of this is going to be easy, but good governance has never been expected to be easy.

Source: BCM Newswire

ECONOMY CHINA TO GIVE USD1.5 BILLION LOW-INTEREST LOAN, SAYS DEPUTY PM ENKHBOLD

Deputy Prime Minister M.Enkhbold, who recently led his country’s delegation to a meeting of the Mongolia –China intergovernmental commission in Beijing, told newsmen on returning home that China has agreed to give Mongolia a large loan. However, instead of the USD3 billion that Mongolia asked for to tide over the financial crisis, China has offered USD1.5 billion to commercial banks as a long-term and low-interest loan, with the Mongolian Government guaranteeing repayment. This loan will be used in the banking, mining and construction sectors, said Mr. Enkhbold who had been entrusted by the Government to pursue the loan request with Chinese leaders. China is also believed to have asked for some favors in the mining sector as a quid pro quo, but the Mongolian Government has said that all parties interested in Tavan Tolgoi will have to bid for the tender first.

Mongolia sent a request for a large loan to India, Russia, Japan, China, Qatar, and South Korea but only Russia and China have agreed to give low-interest, long-term soft loans. The loan agreement is likely to be signed during Prime Minister Bayar’s present visit to China.

Source: Onoodor, business-Mongolia.com

CHINA ASKS ITS FIRMS TO INVEST IN COUNTRIES LIKE MONGOLIA Mr. Li Ruogu, president of the Export-Import Bank of China, has said Chinese firms should increase their investment in developing countries such as Mongolia and those in Africa, Southeast Asia and Latin America. "Now is a good time for Chinese firms to invest overseas, as banks have been instructed to support overseas mergers and acquisitions." Mr. Li said such investment could be mutually beneficial for China and investment-receiving countries which could expect a boost to the economy with the combination of China's capital and local resources. To help domestic firms make foreign investments China last week unveiled an investment guide book, the first in a proposed series. The books will include investment laws and regulations of the countries and statistics about individual countries along with other useful information such as advice on problems that firms may encounter. The ministry said it would cover as many as 160 countries and regions by the end of June, and would constantly update the guideline.

Source: www.xinhua.net

US INVESTMENT FIRM ENTHUSIASTIC ABOUT MONGOLIA

Templeton Asset Management Ltd., which oversees about USD20 billion of emerging-market assets, is studying the possibility of investing in Mongolia-listed stocks. The company has bought shares of companies with interests in Mongolia, such as Chinese gold and coal miners, declining to be more specific. The California-based company is not set up in Mongolia and needs custodians in the country to hold its securities.

“We continue to see countries such as China form alliances to secure the long-term provisions of commodities,” a company spokesman has said. “While in the short-term, the country will be impacted by the recent correction in commodity prices, a long-term uptrend in commodity prices will benefit Mongolia.” The country is luring investors who are betting that China’s hunger for resources will help the nation sustain growth amid a global financial turmoil. It attracted about USD1 billion of private equity in the past 24 months, according to Mr. Robert Lepsoe, an honorary consul of Mongolia.

Mr. Marc Faber, publisher of the Gloom, Boom & Doom report, has described Mongolia as a country with huge potential and “torn between two lovers -- China and Russia”. He has also termed Mongolia as “another Saudi Arabia, incredibly resource rich, next to the largest population in the world”.

Source: Bloomberg.com

Q1 FOREIGN TRADE DEFICIT RISES 52.1% IN A YEAR

Mongolia carried out foreign trade with 86 countries in the first quarter of 2009, the total turnover reaching USD716.2 million, of which exports accounted for USD322.3 million and imports for USD393.9 million. The total was USD462.9 million or 39.3 percent less than in the same period last year. Exports were less by USD257.5 million or 44.4 percent, and imports by USD205.4 million or 34.3 percent. The foreign trade balance showed a deficit of USD71.6 million, a rise of 52.1 percent against the same period in 2008.

Export earning fell because of a decrease in the price of cooper concentrate by 58.4 percent, in that of zinc concentrate by 83.5 percent and in that of gold by 40.8 percent. The export volume of these minerals also went down.

Source: Montsame

CHINA-MONGOLIA COMMISSION MEETS Among the issues discussed at the 11th meeting of the Mongolia-China Intergovernmental Commission on trade, economy, science and technology last week in Beijing were prompt use of the USD300 million soft loan granted by China, expediting negotiations on constructing the Shivee Ovoo energy complex, reducing non-tariff barriers for livestock products and raw materials, and an agreement on foodstuff safety. The meeting agreed to change the present practice that allows Chinese truck drivers to drive 300 km into Mongolian territory to carry coal, but stops Mongolian truck drivers from entering China. Now both sides will have equal rights to transport coal. The Mongolian delegation, headed by Deputy Premier M.Enkhbold, acknowledged that support from China has contributed significantly to Mongolia's socio-economic development, and hoped this would continue. Vice-Minister of Commerce Chen Jian led the Chinese side at the meeting.

Source: en.News.mn, Onoodor

MONEY SUPPLY UP SINCE FEBRUARY

The Central Bank reports that money supply (broad money or M2) at the end of March reached MNT2,415.3 billion, an increase of MNT38.2 billion or 1.6 percent over that in February, but MNT39.8 billion or 1.6 percent less than in March 2008.

Currency in circulation at the end of March reached MNT338.3 billion, a drop of MNT59.0 billion or 14.9 percent against February, and of MNT 9.8 billion or 3.0 percent from March, 2008. Total loans amounted to MNT2,671.7 billion, decreasing MNT13.6 billion or 0.5 percent from February, but MNT335.8 billion or 14.4 percent more than in March, 2008.

Source: Montsame

RUSH OF CITIZENS CLAIMING SOCIAL ALLOWANCES

Most of the 69,000 complaints and applications received by the Ulaanbaatar Mayor’s Office in the first three months of 2009 were from citizens who wanted to receive some social welfare allowance. Many also demanded gers or apartments.

Source: Ardiin Erkh

STANDING COMMITTEE APPROVES PROPOSAL TO ISSUE BONDS The Standing Committee on Economic Policy has approved the Government request to be allowed to issue bonds worth MNT220 billion to make up the budget deficit. The IMF program to support the stability of the Mongolian economy calls for USD76.3 million, equivalent in value to 51.1 million SDRs, to be deposited at a special account of the Ministry of Finance and an equal sum is to be placed in the IMF account at the Central Bank. The bonds are to be issued to raise this money.

Source: business-mongolia.com

NO FUEL PRICE INCREASE IF USD IS BELOW MNT 1,570

According to a Government decision, exchange rates can henceforth be given as a reason to increase fuel prices only if the value of USD exceeds MNT1,570. The Government has also decided to change the tax rates that were imposed in August, 2008. Imports through Altanbulag will be taxed lower than those through other ports.

Source: Ardiin Erkh

ASSET EVALUATION METHODS TO BE STREAMLINED

With numerous complaints reaching it about the apparently erratic and arbitrary ways in which the 26 companies and 86 individuals authorized to assess the value of assets operate, the Government has decided to present a draft law to Parliament to establish clearer guidelines and procedures for the work.

Source: www.news.mn

FOREIGN LABOR TO BE ALLOWED IN OIL EXPLORATION, AND TO BUILD ROADS AND RAILWAY

The Government will allow companies engaged in oil exploration and highway and railroad construction to bring in foreign experts and skilled labor for their work. This applies to work on the Taishir and Durgun water plants, on the road connecting Sainshand, Choir and Zamiin-Uud, and also on road construction in Erdenet, Bulgan and Unit. Companies estimate they will require 3,900 workers for oil exploration, 350 more for work in Zuunbayan oil reserve, and 200 for constructing the railroad connecting Eruu port to Bayangol iron mines.

Minister of Social Welfare and Labor T. Gandi was asked to work with the Ministry of Road, Transport, Construction and Urban Planning on identifying companies that need to import manpower. Their projects will be included in the 100,000 Apartments program.

Source: en.News.mn, Montsame

POLITICS

MONGOLIA-CHINA TIES AT THEIR BEST EVER, ASSERTS BAYAR Mongolia-China relations are at their peak, marked by complete mutual trust, Prime Minister Sanjaa Bayar said in an interview with a Chinese news agency on the eve of his five-day China visit that began on Tuesday. This is Mr. Bayar’s first official visit to China after he took office as Prime Minister, and it also coincides with the 60th anniversary of the establishment of diplomatic relations between the two countries. Apart from holding talks with Chinese leaders, Mr. Bayar will attend the annual Bo'ao Forum for Asia meeting, scheduled for April 17-19. He said maintaining friendly relations with China is one of the top priorities of Mongolia's foreign policy. Bilateral relations have witnessed smooth development in all fields, and there have been regular top-level exchanges and dialogues. The Prime Minister said he and Chinese leaders will exchange views on a wide range of issues including economic, political and cultural cooperation. China's investment projects in Mongolia will also be discussed. China has been Mongolia's largest investor and trade partner for years. Mr. Bayar expressed his belief that economic and trade cooperation between China and Mongolia is right now at its best ever, and will continue to progress in the future. He identified infrastructure

construction, mineral resources exploitation, oil exploration and trade in oil products as the most promising elements in economic cooperation between the two countries. The two sides could also cooperate in producing liquefied fuels from oil derivatives and coal. Mr. Bayar hoped big Chinese firms would participate in such cooperation projects, as also in the electricity and railway sectors. Mongolia was also interested in utilizing the opportunities offered by the free trade port in the Binhai new area of north China's Tianjin city.

Source: www.chinaview.cn

PUTIN ARRIVES ON MAY 13

Russian Prime Minister Vladimir Putin will come to Mongolia on May 13. No details of his program here has been made public, nor is it known who will be coming with him, so that an idea can be made of the possible thrust of his talks with Mongolia’s leaders. Mr. Putin came to Mongolia in 2002 when he was President.

The present visit will be at a time when the Presidential election campaign in Mongolia will be in its last and, perhaps, decisive phase. During his visit to Russia last month Prime Minister S.Bayar, in his capacity as MPRP chairman, stressed the need to have closer ties with the United Russia Party, headed by Mt. Putin. Observers wonder what effect the high-profile visitor may have on the outcome of Mongolia’s election.

Source: www.news.mn

RUSSIAN PRESIDENT TO ATTEND VICTORY ANNIVERSARY CELEBRATIONS

Russian President D. Medvedev has written to President N. Enkhbayar confirming his participation in the 70th anniversary celebrations of the Russian-Mongolian victory over Japanese forces in the Khalkh river war. He has also invited the Mongolian President to attend the next meeting of the Shanghai Cooperation Organization on June 15-16.

Source: Zuunii shuudan

MONGOLIA EXPRESSES SUPPORT FOR CHINA ON TAIWAN, TIBET

Chinese Vice Premier Wang Qishan and his Mongolian counterpart Miegombyn Enkhbold last week pledged to deepen bilateral cooperation on energy and infrastructure. "China-Mongolia relations have developed smoothly since the two countries forged diplomatic ties 60 years ago, featuring increasing political mutual trust and frequent high-level visits,” they said at the 11th meeting of the Sino-Mongolian Joint Commission of Trade and Economy.

Mr. Wang described the Chinese and Mongolian economies as complementary and marked by close cooperation in such sectors as trade, investment and finance. The two countries should make joint efforts to overcome the impacts of the global financial crisis, he said, while stressing the need for them to create an environment for investment and trade between Chinese and Mongolian enterprises.

Mr. Enkhbold said Mongolia firmly adhered to the one-China policy and supported China's stand on issues relating to Taiwan and Tibet. He also called for enhanced cooperation in economy and trade.

Source: www.xinhuanet.com

PRESIDENT BEGINS CAMPAIGN FOR RE-ELECTION

President N.Enkhbayar, the Mongolian People's Revolutionary Party (MPRP) candidate in the presidential election next month, formally began his campaign last week. He said the four years of his first term seem to have passed quickly, but “actually, Mongolia has become completely different” in this time. It now has a long-term National Development Strategy and the state spends MNT100-125 million a day on the school lunch program that covers 250,000 pupils. School children work with laptops. He offered several other examples to show how in the past four years Mongolia has become “a prosperous society and a welfare state”.

However, he asked people to remember that the recent successes are the fruits of measures taken decades ago. “The reforms began not in 2005 but in 1921” when the MPRP prepared “a new socio-political-economic structure to develop the country after liberating it from alien dictators and establishing definite borders”. The goal was to “enhance the prestige and self-respect of the

Mongolian people, and to win recognition of the whole world”. The job of “creating a new Mongolia” must not stop ever.

He singled out Mongolia’s Olympic successes last year and the US grant of USD285 million in the Millennium Challenge Account as examples of how the world has recognized Mongolia’s achievements and potential. The events of July 1 last year were “a setback and must never be allowed to recur”. More has to be done for women, and economic gains should be more equitably distributed and as “the people's President”, he would strive to create “a harmonious, law-abiding, peaceful and just” society. “The god Ochirvaani, worshiped by our ancestors, smiles on us but also tells us to be morally excellent, and full of goodwill towards one another,” he told a cheering crowd.

Source: Montsame

TAMPER-PROOF BALLOT BOX SEALS COME FROM USA

Ten thousand tamper-proof seals to close ballot boxes in the presidential election have arrived from the USA. They cost around MNT10 million and the arrangement was made with the help of the Asia Foundation and the Embassy of Great Britain.

The only way to open the box after the seal is put will be to cut the seal. The number on a ballot box must agree with the number on the seal to preempt any misuse.

Source: en.News.mn

MPRP OPENS BANK ACCOUNT TO COLLECT CAMPAIGN DONATIONS

The Administrative Committee of MPRP has opened a bank account where donations for President Enkhbayar’s re-election campaign can be credited. Individuals can donate up to MNT 5 million and for companies the upper limit is MNT10 million. Cash is accepted but state owned enterprises, state budgeted organization, and foreign organizations are not allowed to contribute to political campaigns.

Source: Zuunii medee

OLYMPIC MEDALISTS CREDIT ENKHBAYAR WITH THEIR SUCCESS

A festive mood marked the inauguration last week at the Central Culture Palace of the re-election campaign of Mr. N.Enkhbayar, the Mongolian People's Revolutionary Party (MPRP) presidential candidate. State Honored Sportsman and Olympic gold medal winner N.Tuvshinbayar said the Mongolian successes in Beijing were made possible by the sports policy followed by Mr. Enkhbayar when he was Prime Minister, and it was in the fitness of things that Mongolia’s first Olympic gold medals should have come when he was President. Another State Honored Sportsman and Beijing Olympic champion, Labor Hero E.Badar-Uugan, recalled that before the Olympics last year, the President had climbed one of the highest peaks of the country and got “a national flag blessed by God”. This he then gave to the Olympic contingent. People's Writer T.Galsan said he saw President Enkhbayar as a "most suitable name card of Mongolia to the world”.

Addressing the gathering, Prime Minister S.Bayar said the MPRP had chosen its candidate unanimously “on the basis of feedbacks from the grassroots which clearly indicated the people’s faith in the incumbent head of state”. Mr. Bayar reviewed the very successful public career of Mr. Enkhbayar, who had been elected Member of Parliament four times, had been MPRP Secretary-General and then Chairman, been Prime Minister and Parliament Speaker, and finally President. “Four years ago, I was his campaign manager, and today, he as President and I as Prime Minister, we work together for the prosperity of Mongolia,” he said.

Source: Montsame

GPS APPARATUS GIFT TO HELP FIGHT DESERTIFICATION

UNDP has donated GPS apparatus worth USD14,000 to the Geology and Geography Faculty of the National University of Mongolia as part of the Sustainable Land Management for Combating Desertification project. According to national project coordinator N.Batjargal, the acquisition will meet the need to update facilities for training national personnel in land management. UNDP is also committed to supporting such training and research work.

Some 30 students will be able to use the apparatus during field work, giving them an opportunity to carry out joint projects with foreign organizations for combating desertification and other research.

Source: Montsame

VICE CONSUL EXPLAINS DIFFERENT U.S. VISAS TO STUDENTS

Talking at the American Cultural and Information Center last week U.S. Embassy Vice Consul Chris Anderson explained to the audience, mainly students, the differences between student, exchange, and work visas. Student visas are strictly for academic studies – too many people use student visas to work illegally in the U.S – while exchange visas are a good way for people to experience life in the U.S. He also mentioned that it is difficult to obtain a visa for studying English in the U.S., due to widespread abuse of student visas for English language study. He listed the general requirements to support a student visa application, which include evidence that the applicant has a serious interest in studying, has a good knowledge of English and will be able to pay for the education in the U.S. Mr. Anderson also recommended some good exchange programs, such as the Summer Work and Travel Program, Au Pair programs and Rotary Club exchanges, if people wish to work, experience life in the U.S. and make some money. He also suggested some ways in which students could pay for their studies in the U.S. For example, they can go to the U.S. during the summer on the Summer Work and Travel Program, save money and improve their English. Then later, once back in Mongolia they could apply to a college in the U.S. to finish their studies. Another possibility of saving money would be to study two years at a community college in the U.S., and then transfer to a regular, full college to finish the Bachelor’s degree. The audience was interested in the different scholarship programs the Embassy announces and asked for more information about the exchange programs he had recommended.

Source: mongolia.usembassy.gov

INTERACTIVE TALK ON HUMAN RIGHTS

A recent lecture by U.S. Embassy Public Affairs Officer Marissa Maurer at the American Cultural and Information Center to mark 60 years of the Universal Declaration of Human Rights turned out to be very interactive. The audience was particularly interested in the current status of human rights in the U.S., particularly in labor and women’s rights. When asked their opinions about human rights challenges in Mongolia, they highlighted concerns about trafficking, labor conditions for Mongolians working in foreign countries, and the rights of children living in abusive families.

Source: mongolia.usembassy.gov

PARK IN DENVER NAMED AFTER ULAANBAATAR

US Ambassador Mark C. Minton told Mayor of Ulaanbaatar G.Monkhbayar last week that a park in Denver, Colorado, has been named after the Mongolian capital, and that Mongolians in the USA plan to hold a gathering in October in Denver. Mr. Minton passed on a message from the Denver Mayor to Mr. Monkhbayar calling for wider ties between the two sister cities.

Mr. Monkhbayar invited the Mayor of Denver to Ulaanbaatar to attend the city’s 370th anniversary celebrations in October 2009 and said he would see if a suitable street in Ulaanbaatar can be named after Denver.

Source: Montsame

NEW MONGOLIAN LAWS

The following amendments to current Mongolian laws were published in the latest weekly Government Bulletin. Unless decided otherwise by Parliament, the laws take effect ten (10) days after publication. Bulletin Date Law

26.03.2009 Amendments to "Law on Guarantee on savings in banks" Amendments to "Law on Civil Service"

Amendments to "Law on administrative and territorial units and their administrations"

Please visit BCM website, Legislative Committee, for a summary of new Mongolian laws.

BCM members who wish complete versions of the laws in Mongolian language are welcome to call or email the BCM office (11-332-345; info@bcmmongolia.org) to arrange for a convenient pickup.

ANNOUNCEMENT

MINETECH-2009 The Mongolian National Mining Association invites you to be a part of MINETECH-2009, a mining machinery and equipment show on April 17 and 18 at Misheel Expo Center, Ulaanbaatar. The Expo is designed to help miners and explorers make educated decisions before a major buy. Attendance is FREE.

Source: www.miningmongolia.mn/minetech _____________________________________________________________________________________

SPONSORS

ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the week ended April 10, 2009, trading activity on the Mongolian Stock Exchange (MSE) totaled

850,900 shares with 32 companies traded. Total market value of transactions was MNT 193.6

million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 459.3

billion, and increased by MNT 6.9 billion, or 1.5 % from the previous week.

The Top-20 Index increased by 75.92 points or 1.5% compared to the previous week, closing at

5,056.20 points. The MSE Composite Index increased by 16.33 points or 0.7% compared to the

previous week, closing at 2,524.77 points.

Most active stocks traded were: Remicon (722,700 shares), Khuh Gan (45,300 shares), Zoos Bank

(38,100 shares), APU (9,200 shares), and Genco Tur Buro (8,900 shares).

Major share price percentage gainers were: Shivee Ovoo (15.0%), Gazar Suljmel (15.0%), Auto

Teever Tav (14.8%), Baganuur (9.5%), and NIC (8.3%). Major share price percentage losers were:

Bulgan Undarga (12.5%), Buunii Khudaldaa (8.2%), Makhimpex (7.8%), Talkh Chicker (5.9%), and

Genco Tur Buro (5.6%).

INFLATION

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

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

March 31, 2009 *16.3% [source: NSOM] * year over year (yoy)

CURRENCY RATES – April 16, 2009

Currency name Currency Rate

US dollars USD 1421.79

Euro EUR 1880.60

Japanese yen JPY 14.40

British pound GBP 2114.63

Hong Kong dollar HKD 183.45

Chinese yuan CNY 208.06

Russian ruble RUB 42.51

South Korean won KRW 1.06

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.