Draft Resolution Vague
Friday, November 28, 2008
NEWS HIGHLIGHTS:
Business: Draft resolution vague and disappointing,
says Do.Ganbold; BHP Billiton calls off Rio Tinto takeover bid;
President discusses financial situation with Peter Morrow; Foreign companies
account for 67,000 work places; 50% workers laid off at Oyu Tolgoi;
Gold mining company completes technical reclamation;
Work starts on Altanbulag trade zone;
Construction companies yet to get bank loans;
Private carriers raise air fares; Agency against camps in Khuvsgul protected
area; Incomnet expands its Gilat SkyEdge network; Camel milk dairy coming
up.
Economy: Parliament guarantees all bank deposits,
raises gold tax threshold; Parties come closer on budget; Parliament
discusses money issues behind closed doors;
MPs hurry with budget reading to meet deadline;
Copper drops to near three-year low as global surplus
widens; Zinc price also going down; Joint MPs’ group sets copper price
higher to compute revenue; Social policy to shift direction from cash
to jobs; MPs
find merit in audit office proposals; 920-km
highway to be built.
Politics: Government likely to do
without vice ministers; Korea to take fewer workers; Ministers review Mongolia-Russia
joint ventures; Environment
Ministry wants NGOs’ cooperation; Surface water sources drying up
fast; Need for policy on the elderly;
Indonesia looks for closer ties; Anti-Corruption Agency staff visits
all aimag centers; US university holds Mongolia week.
An announcement
LAURENZ
MELCHERS TAKES OVER AS BCM CHAIRMAN IN JANUARY
The Business Council
of Mongolia will
begin the new year with a new Chairman, as Mr. Laurenz Melchers takes
over from Mr. Peter Morrow, BCM's founding Chairman, who vacates the
position he took up on a temporary basis when Mr. Alain Fontaine left
the position. Mr. Melchers has been on the BCM Board of Directors since
the middle of this year.
Asked about his
reaction, the Chairman-designate said, “The offer was completely unexpected
and I feel honored.” What new direction does he hope to give to BCM
work? Mr. Melchers said, “The BCM has a highly skilled and motivated
staff, executive board and directors who are already working hard for
it and achieving great results. It will be my goal to continue on this
successful path and to put in my thoughts and ideas where needed. The
Council’s interest is to see Mongolia become a flourishing economy
that will benefit all. If there are opportunities for BCM to be a catalyst
in this process, it will take these up and act upon them.”
Mr. Melchers is
a co-founder of Mongolian
Star Melchers Company
(MSM) and has lived in Mongolia with his family since 1997. MSM is a
trade and service company, involved in mining and construction equipment
supply, automotive retail and service, consumer goods distribution,
and health care and hospital supplies.
The MSM motto is Powerful Service.
BCM members will be looking forward to some aces from their new Chairman.
PARLIAMENT
GUARANTEES ALL BANK DEPOSITS, RAISES GOLD TAX THRESHOLD
Jittery over small
bank runs and falling commodity prices, Mongolia's Government is guaranteeing
all bank deposits, as the country tries to ward off the global financial
crisis. Parliament approved the law Tuesday to try to shore up confidence
in Mongolia's 16 commercial banks, which hold USD1.1 billion in deposits,
and to ensure banks keep lending to buoy the economy.
"The world
economic crisis is not affecting Mongolia directly. However, we are
feeling the shock," Prime Minister Bayar told reporters. He said
some Mongolians had started to withdraw their savings from banks out
of concern they might collapse and that in part prompted the Government
to act to issue its 100 percent guarantee for deposits.
Mining, especially
of copper, is the lifeblood of the Mongolian economy. High prices for
minerals boosted economic growth to better than 9 percent last year,
with most of the output sold to China. But copper prices have plunged
by half this year, as the world economy slows. The drop has crimped
government revenues, most of which come from taxes on copper. As a result,
the Government has been forced to reduce spending, laying off some civil
servants and telling others to cut back on phone calls and driving official
cars. Getting large-scale mining projects going will be the best medicine
to reinvigorate the economy, Bayar said. Until then, the Government
hopes that banks will continue to lend money, cushioning the economy.
"The Mongolian
banking system is sound and stable. It is not on the edge of collapse
or anything like that," Finance Minister Bayartsogt told Parliament
when urging legislators to approve the 100 percent guarantee on bank
deposits. "This law is designed to safeguard collapse of the banking
system." To further bolster the banks, the Government has asked
Parliament to approve a law to inject USD250 million in state treasury
funds into the commercial banks to encourage lending.
In an effort to
curb widespread tax evasion and replenish revenues, Parliament also
raised the threshold price for the windfall profit tax on gold. The
68 percent tax on profits will be now imposed when gold prices climb
above USD850 an ounce, rather than the USD500 mark set two years ago.
The USD2,600 a ton threshold for copper remains unchanged.
Source:
Associated Press, International Herald Tribune
50% WORKERS
LAID OFF AT OYU TOLGOI
Ivanhoe Mines has laid
off 50% of its workers at Oyu
Tolgoi and 10% of
the staff in its Ulaanbaatar office. The company has also cut its 2009
budget by 70%.
Source: Onoodor
DRAFT RESOLUTION
VAGUE AND DISAPPOINTING, SAYS Do. GANBOLD
Do.Ganbold, President
of the Mongolian National Mining Association, says that while
the basic outlines of the draft resolution prepared by the MPs’ working
group on mining were better than the suggestions during discussions
in Parliament, many of the details in it were impracticable. There were
also contradictions. For example, on Tavan Tolgoi the proposal to work
within the framework of the 2006 law is soon followed by another to
study the possibility of setting up a company where the Mongolian side
will own not less than 51 percent. This is against the 2006 law which
put the state’s ownership share in projects where the prospecting
work had been done at State expense at 50 percent, and not more.
Investors were
generally disappointed, he said. It was clear that the draft “was
prepared by people who don’t understand mining at all”. Also, much
in it had been left vague and will merely make for uncertainty as time
goes on, something they were most keen to avoid. He could not be sure
whether these inconsistencies were innocent lapses or deliberate equivocation.
In any case, investors right now are uncertain if the Government will
go for investment agreements first or changes in the law before that.
Anyway, with Parliament busy with the budget until December 1, Do.Ganbold
saw little chance of any further progress on the mining issue before
the new year.
The deteriorating
financial situation was making negotiation prospects worse. Earlier,
investors might have said, “OK, let us accept the Mongolian terms,”
but now any such accommodation will be difficult, with product prices
on a downslide, and financial credit hard to come by. Do.Ganbold
thought their present constraints could even lead investors to ultimately
reject the conditions that the Mongolian side might insist upon. In
business, what was acceptable in the past may not be so any longer and
“if the Mongolian side does not understand this, they must not talk
about market economy”.
Calling the ideas
about asking investors to pay taxes and fees in advance “an absolutely
impossible demand”, Do.Ganbold said, “We don’t need to produce
tons of paper before beginning talks. Investors are ready for them.
It is not a matter of who won and who lost. We need to cooperate at
a time of global crisis.”
During the Euromoney
Forum some investors openly said, “We are glad that MPRP won the election
as it opens up possibilities of cooperation.” Asked if investors took
sides in the country’s political contest, Do.Ganbold said neither
foreign nor local investors could have any overt preference for any
party label, but both wanted to deal with people who were “more organized,
more responsible, and more flexible”.
Referring to MPs
frantically working on budget cuts following declining mining revenue,
Do.Ganbold said the situation would not improve even if new investment
agreements were signed soon. New projects will start yielding revenue
after three years at the earliest. The budget revenue has fallen because
income from Erdenet has fallen. If work on Oyu Tolgoi had started
two years ago the situation today would be different, as income from
there would have been 3.5 times more than that from Erdenet.
Do.Ganbold rated
as bleak Mongolia’s chances to find money for its share of expenses
in Oyu Tolgoi and Tavan Tolgoi unless it went for big loans. Asked about
product sharing, he said, loud and clear, “That is impossible.”
Source:
Ardiin Erkh
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