February 6, 2009NEWS HIGHLIGHTS:
Business:
Mongolia not to abandon 2007 stand, says Minister; Mongolia seeking loans linked to mining deals; D.L.Lobb to oversee Peabody’s Mongolian Operations; Rio to sell assets to Vale for USD1.6 billion; Rise in number of minerals licenses; UB Railway asks Minister for USD145 million loan; Milk company allowed to resume production; Mongolia’s first flour factory in 25 years; Mining business forum on February 10; 61,000 head of livestock die in 8 provinces; Eagle TV opens conference center.
Economy:
Mongolia looks far and wide for loan to plug budget deficit; Moody's readies to downgrade Mongolia's ratings; Zambia abolishes 25% windfall mining tax; Nuclear power plant likely by 2012; Labor union favors less pay for less work, but no job cuts; Anti-corruption boss says all are equal before the law; Central Bank asks for citizens’ help to end transactions made in USD; Shanghai holds clue to copper glut at LME; Plea to hike electricity, heating rates; Institute to train 7,000 construction workers this year; Refinery in country will make petroleum cheaper, says MP; First two assembled buses on way to Kazakhstan.
Politics:
Bayar has surgery in Seoul; President hosts conference on Mongolia in Davos; Mongolia fares poorly in open access to State budget; Russian President, Prime Minister to visit Mongolia; Smaller parties breathe fire on Oyu Tolgoi; NGO promises computer for waste paper; 30% of Ulaanbaatar households have Internet; Project to cover 220 child laborers.
BUSINESS
MONGOLIA NOT TO ABANDON 2007 STAND, SAYS MINISTER
The special Government meeting on Friday was told that work on the two Tolgoi draft agreements was still continuing. Minister for Minerals and Energy D.Zorigt said preliminary talks with the investors were still on, but he hoped the draft on Oyu Tolgoi would be ready before the proposed special session of Parliament this month. The draft on Tavan Tolgoi would have to wait for the Spring session.
The Minister refused to share information on the negotiations as they were at a delicate stage. He, however, hinted that the Mongolian side would not abandon its position indicated in 2007. This means that Mongolia will not agree to less than 34 percent ownership in Oyu Tolgoi. He would neither confirm nor deny that this meant “no definite changes have been proposed” in the Oyu Tolgoi draft. The global crisis has affected both the national economy and the investors, so the Mongolian side was not keen on revising its stated position in 2007. Mongolia wanted to pay its share of investment costs by adjusting them against advance payment of taxes, but there could be some changes on its stand on tax concessions.
About Tavan Tolgoi, he would only say that the Government has hired Deutsche Bank and JP Morgan to advise it in the talks. Representatives of both investment banks are in Ulaanbaatar and holding talks with the investors. The next level of negotiations will begin only after everybody’s views on the preliminaries are ascertained and filed.
Source: Undesnii shuudan
MONGOLIA LOOKS FAR AND WIDE FOR LOAN TO PLUG BUDGET DEFICIT
Finance Minister S.Bayartsogt has expressed the hope that the advantages intrinsic to its being a small economy would help Mongolia tide over the present economic crisis faster than others. The Mongolian economy is small, has seasonal fluctuations, and is almost entirely dependent on imports. All three add up to deepen the crisis. However, the positive aspect of a small economy is that economic activity is reasonably straightforward, with less uncertainty and unpredictability. Once the right policy is identified and implemented, recovery will be quick. “We have to be frugal and make utmost use of local resources and capacity,” he said.
The Government has cast its net wide to get money to plug the budget deficit. It has approached donor countries, international financial organizations such as the IMF, the World Bank, the ADB, and also individual countries such as China and Qatar. It is also exploring how much it will get as deposit money from investors in Oyu Tolgoi and Tavan Tolgoi. It also has plans to issue bonds worth USD1.2 billion in the international market. A last resort will be diverting the budgetary allocation earmarked for developing small and medium enterprises.
Several meetings have already been held with IMF representatives and the Minister was optimistic that a loan of USD120 million would be agreed upon. Like all IMF loans, this money will be released only as capital for programs. This means that the Mongolian Government and the IMF have to agree on the program(s) as also the governing policy. Organizations such as the World Bank and the ADB, and donor countries also, give loans to implement programs blessed by the IMF. It is therefore imperative to convince the IMF about the soundness of Mongolian economic policy. Agreeing with a questioner from the media that the IMF does not favor deficit budgets and/or “unproductive” social welfare payments, Mr.Bayartsogt said, “The IMF has suggested some measures, such as reducing investment and welfare payments, and will send teams working with us on a comprehensive program based on our own action plan.”
He revealed that the initial reaction of both China and Qatar to a request for USD3 billion loan has been encouraging but both countries have asked for more time to decide.
Source: en.news.mn
MOODY’S READIES TO DOWNGRADE MONGOLIA’S RATINGS
Moody's Investors Service is set to downgrade Mongolia's ratings and ceilings owing to concerns over the rapid deterioration in the country's external payments position and the inability of the government to put in place a policy framework which would ensure balance of payments stability and fiscal sustainability. The Moody's review affects Mongolia's B1 foreign-and local-currency ratings for government bonds, the Ba2 foreign-currency country ceiling for bonds, the B2 foreign-currency ceiling for bank deposits, as well as the Baa2 local-currency bank deposit ceiling. Moody's initially assigned Mongolia's B1 ratings in October 2005; they have been unchanged since that time and with a stable outlook until now.
Tom Byrne, a Moody's Senior Vice President, has said in a statement released in Singapore that “the pace of depletion in (Mongolia’s) official foreign exchange reserves has been rapid, owing to the fall in exports, meager long-term capital inflows, the intensified dollarization of the country's domestic deposit base, and past adherence to a fixed exchange rate policy." He adds, “The continued downturn in export performance and the further weakening in confidence in the togrog could overwhelm the efforts of the authorities to stem the hemorrhage."
Moody's rating review will focus on the ability of the Government to prevent further deterioration in the country's external payment position and to fashion a program that ensures long-term fiscal and economic stabilization. This would likely involve an assessment of the robustness of the policy framework and also of the extent to which possible enhanced external financial assistance could impart stability.
Source: Moody's Singapore Pte Ltd.
The complete text of the statement can be seen at BCM's website, Articles/Reports on Mongolia.
BAYAR HAS SURGERY IN SEOUL
Prime Minister S.Bayar underwent surgery in Seoul on Thursday after he had injured a rib when he fell from a horse on January 31. Initial medical opinion that six weeks’ bed rest will help the injury heal and that there was no need to send him abroad was revised, and he was taken to Seoul on Wednesday.
Visiting Olziit near Ulaanbaatar to see Honored Horseman Ganbaatar on Saturday, the Prime Minister decided on riding a horse and had the accident, according to his spokesman, S.Batbaatar. The horse shied at a snow-drift, and Mr. Bayar, wearing snow boots that did not fit the stirrup, could not keep to the saddle.
He is likely to spend 10 days in hospital.
Source: Ardiin Erkh, Montsame, en.news.mn
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