BCM Mongolia Newswire Highlights: Investors, the Economy and State Participation in Mining

Business:	“We have to know investors’ minds,” says Bayar; State participation “a crazy idea”; Centerra meets ministers on Gatsuurt project; Rio reviews development plans as China slows down fast; Record coking coal export; Mining companies forced to trim capital budgets; Copper prices rise in New York; Japanese firm wants to mine uranium; Anod Bank hires senior Korean banker; Chez Bernard Café for sale.
Economy:	Bankers assess economy, see hope; Stock prices fall in Mongolia; “Wealth share is a promise to be kept”, but maybe not in cash: Bayar; Audit office suggests radical cost control measures; IMF team holds talks with leaders; Oil import deal signed with Kazakhstan; Russia lowers both petrol prices and export tax; MNT2.4 billion to be saved after axing 300 jobs; Foreign trade to rise by 37.5 percent; Flour prices fall; Train fares go up by 50 percent.
Politics:	Putin to attend Erdenet anniversary; Government hopes to raise growth rate, lower poverty; Joint military exercises with Russia soon; Industrialization on the agenda; 8,000 to be chosen for work in Korea; Anti-Corruption Agency sends suggestions to Government; Vietnamese urged to invest in Mongolia; Conference on Mongolia in Vancouver.

 

“WE HAVE TO KNOW INVESTORS’ MINDS,” SAYS BAYAR

Prime Minister S.Bayar has said that the inevitable and irreversible fall in State revenue following the drop in copper prices would certainly have a direct impact on Government policy in general, and on social welfare subsidies in particular. Several other proposals will also have to be reviewed as the situation develops. He said, “We also have to know for certain whether investors retain their interest in developing the Oyu Tolgoi deposit and just how much they will or can invest. In September, some of these companies told me that their costs were rising with the passage of time. If work on Oyu Tolgoi had begun last year, they would have needed around USD2.3 billion, but their estimates in September 2008 had raised this to USD4.2 billion.”
About the Tavan Tolgoi coal deposits, the Prime Minister said several countries and many private companies were interested in investing there. But first, a firm and secure legal framework must be put in place. “Foreign investors wish to be assured of a transparent and stable environment, and for this we have to make sure that the new minerals law we adopt is unambiguous, and serves both short and long-term national interests. A political consensus on this is important but cannot be achieved in haste,” he said.

 

BANKERS ASSESS ECONOMY, SEE HOPE

Four of the country’s senior bankers were asked for their opinion on how the global financial crisis would affect Mongolia. Here is what they said:

Governor of MongolBank, A.Batsukh: It will not directly affect our economy. But foreign investment will certainly decrease and prices will go up. Mongolia must increase the liquidity and manage the economy better so that existing assets do not lose their value. This way, we will have less risk.
Director of Golomt Bank, D.Bayasgalan: Mongolia will not be affected directly because no Mongolian financial organization has anything to do with foreign bond and loan markets. But we have also to cope with the fall in copper price, the Chinese economic slowdown, and the fall in value of some currencies. Mongolian commercial banks will most likely have to do without foreign funding. The sharp fall in oil prices will have direct positive effects. 
CEO of Khan Bank, Peter Morrow: The main forces behind the global financial crisis have little to do with Mongolia. Also, we have few relationships with foreign markets and international stock exchanges. However, it will now be more difficult for us to approach foreign markets and some of the planned projects are likely to be postponed because of lack of funds. We hope the situation will improve soon. Prices of commonly used items are falling and inflation, too, is being controlled. 
President of Trade and Development Bank, Randolph S.Koppa: I am confident of Mongolia weathering the crisis, but government policy on the economy has to be clear and investment terms on exploration of principal mineral deposits have to be resolved soon. The banking system here is not dependent on world financial markets, and the turmoil there should leave us unaffected. Economic slowdown has, however, already started. Fall in prices of and demand for commodities and raw materials is affecting exports. The Chinese market, however, is likely to maintain its demand for mining products from here. Mongolia needs to make necessary amendments to the mining law. Once mining resumes in earnest, the economy will look up. Commercial banks have lent MNT230 billion in the last three years to prospective buyers of houses and apartments. The Mongol Bank, the Mongolian Bankers’ Association, and the Mongolian Housing Corporation (MIK) are working in tandem to keep on financing the housing market. MIK is expected to borrow from commercial banks, to improve their liquidity.

 

STATE PARTICIPATION “A CRAZY IDEA”

Addressing a press conference jointly organized by the World Bank and the Asia Foundation, the President of the Mongolian National Mining Association, Mr. Do.Ganbold, described State participation in the mining sector as a “crazy idea” and also said the windfall profits tax “must be” withdrawn. Referring to the upcoming Discover Mongolia as “the most important and realistic forum for Mongolia’s mining sector”, he said it would give intending and present investors a chance to exchange ideas.
Mr. Graeme Hancock, Senior Mining Specialist of the World Bank, said the bureaucracy in state services often impeded Mongolia’s investment climate

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