BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org

info@bcmongolia.org

Issue 114, April 16, 2010

NEWS HIGHLIGHTS:

Business:

NEA official says Mongolia will develop uranium field with Russia;

Khan Resources prepares Mongolian court appeal after cancellation of licenses;

Khan fumes, notes inconsistencies in Mongolian action;

SouthGobi Energy hopes to post „robust‟ earnings next year;

Ivanhoe to announce independent OT development plan;

Hunnu Coal to buy 60% stake in Unst Khudag coal mine;

Leighton secures USD940 million contract boost;

Investment company sees potential in Mongolia;

Rio Tinto's Stern Hu decides not to appeal;

Shiseido gets Mongolian distributor for sale of products;

Rio Tinto case highlights risks in China;

Louis Vuitton posts strong revenue gain;

„Consumer Reports‟ knocks Lexus SUV.

Economy:

Mongolia‟s USD1 billion bond issue in Q4;

National debt equals state budget;

Social, economic indices for first quarter published;

Mongolia gets rail project on track;

Non-performing loans less than in February;

ADB sees Mongolia returning to growth this year;

World Bank sees economy rebounding, and a rise in inflation;

Mongolia now has 15 private banks;

Economists not at ease with decision to give MNT1.5 million to all;

Batbold sees Hong Kong as a natural choice for Mongolian firms to list;

Mining hordes invade the 'Kuwait of Central Asia';

Railway workers demand wage increase;

Italian trade team attends forum;

Mining companies and tax authorities trade charges;

World Bank brings in banking sector reform experts;

Customs delays being eased, says official;

Call to develop local engineering manufacturing;

Herders face loss of pastureland to phosphorus mining:

SMEs making traditional items want help to increase sales;

New geological projects listed;

China's economy soars, but risks trail rebound;

China‟s coking coal imports seen to rise 47% in 2010;

Hu balances tone on yuan;

March trade deficit strengthens China‟s case on yuan;

Toronto exchanges in drive to attract Chinese investors;

Asia warned of forex intervention risk;

Don‟t lose momentum, urges IMF chief;

GFMS sees 777,000 tons copper surplus in 2009.

Politics:

PM calls critics “irresponsible and unjust”;

Sack threat for Minister unless action is taken on copper smelter;

Batbold, Chinese leader meet at Boao Forum, reaffirm ties;

Speaker Demberel calls for action in key areas;

PM says railway policy will help get two routes to sea;

Russian side arrives to discuss the issue of debt;

MPs‟ group presents another draft Election Law;

Khongor residents complain of official cover-up of toxicity;

Human rights group fails to meet as MPs stay away;

Inspection agency recording degraded land;

Conservation program team visiting Mongolia later this month;

Russian medals for Mongolian war veterans;

Mongolia and Hong Kong to develop ties;

Science Council of Asia to meet in Mongolia next year;

MPs find tour of Australian mines instructive.

*Click on titles above to link to articles.

BUSINESS NEA OFFICIAL SAYS MONGOLIA WILL DEVELOP URANIUM FIELD WITH RUSSIA

Mongolia will develop its biggest untapped uranium field in a venture with Russia after revoking Khan Resources Inc.’s permit to exploit the Dornod resource. State-owned MonAtom will hold at least 51 percent in a venture with Russia’s government-run ARMZ Uranium Holding and possible partners from Japan or China. The uranium venture, called Dornod Uranium, will be registered in Mongolia ―in the very near future‖, Mr. T. Bayarbayasgalan, nuclear materials chief at Mongolia’s Nuclear Energy Agency, said in an e-mailed response to questions on April 9, confirming the cancellation of Khan’s license. Source: Bloomberg.com

KHAN RESOURCES PREPARES MONGOLIAN COURT APPEAL AFTER CANCELLATION OF LICENSES Khan Resources will launch an appeal in Mongolian courts within the next few days, hoping to overturn a decision by the country's Nuclear Energy Agency to invalidate mining and exploration licenses held by the company's subsidiaries. Khan shares dropped 36.5% on Tuesday, after the firm said it was notified that the licenses had been canceled, with effect from October 8. CEO Martin Quick said he is confident the decision will not stand. ―They will show that the NEA really doesn't have the legal wherewithal to take licenses away willy nilly,‖ he said. If necessary, Khan will pursue international arbitration to protect its rights. Mr. Quick said he believes the invalidation of the licenses is in response to Russian pressure on Mongolia to provide access to uranium deposits. Khan, which agreed in February to be acquired by China National Nuclear Corp, said it was informed that the invalidations related to ―non-compliance issues‖ raised last year, which the company maintains it has since dealt with. According to a statement on the NEA website, however, the agency cited a rule that companies with uranium assets must notify the government of plans to restructure or change control within a certain time. Khan's main asset is a 58% interest in Central Asian Uranium Company (CAUC), which holds the Dornod uranium project. The company also owns 100% of Khan Mongolia, which has an exploration property next to Dornod. The Dornod uranium deposit was initially discovered and developed by Russia, and began producing the nuclear fuel in 1988, but the mine stopped operations in 1995, after uranium demand fell off and funds for the operation dried up. Mr. Quick said the company is in constant contact with CNNC, and that the bid has not been affected by the notices of invalidation. Khan has spent about USD20 million on the project to date. Read more… Mr. Quick pointed to a uranium exploration and development joint venture deal signed last year, with much fanfare, between Mongolia and Russia. Although the agreement did not include much in the way of specifics, the initiative was tellingly labeled the 'Dornod' joint venture. ―There's a lot of

politics involved, and rather underhanded politics,‖ he said. ―I think the goal of Russia has always been, and certainly in the last year and a half or so, to go back into Mongolia and take back the Soviet-era uranium mines that were developed there. And hopefully get them for nothing by pressuring the Mongolians.‖ Last year, Russian State-owned miner Atomredmetzoloto, which owns 21% of CAUC, launched a hostile bid for Khan, which the Canadian junior rejected as opportunistic. ARMZ withdrew the offer in February, after Khan agreed to be acquired by CNNC, citing reports that the Dornod license could be revoked. Source: www.miningweekly.com

KHAN FUMES, NOTES INCONSISTENCIES IN MONGOLIAN ACTION

"We view the NEA decision to invalidate the Dornod licenses as without any legitimate or legal foundation and it may be politically motivated,‖ Khan Resources CEO Martin Quick has said. ―The NEA's intention appears to be to invalidate our licenses, as well as potentially those held by other foreign companies operating in the region, with a view to transferring all of the mineral rights and interests in the entire Dornod uranium region to a Dornod Uranium joint venture that is purportedly being established between the Russian and Mongolian Governments, with complete disregard to Khan's rights and interests." ―Despite the fact that the Nuclear Energy Law stipulates that exploration licenses must be re-issued within three months and mining licenses within six to 12 months, the license re-registrations of Khan are still pending,‖ the company said in a statement on Tuesday. ―Khan has made repeated requests for an official update as to the status of these applications and its licenses. However, until now, Khan has not yet received any official response from the NEA.‖ Now, in response to its queries, Khan has been informed that the licenses were in fact invalidated from October last year, because of its failure to address the violations identified by the April site visit. ―Khan continues to believe that it and its Mongolian subsidiaries have always operated and continue to operate in compliance with all applicable Mongolian laws, including the Nuclear Energy Law, and there is no legal basis for the NEA invalidation notices,‖ the company said. The notices are a violation of Khan's rights and interests under the laws of Mongolia, and are in breach of Mongolia's obligations under international law, the company said. ―Khan and its legal counsel intend to vigorously defend its rights and interests, and to pursue all available rights and remedies in the Canadian and Mongolian courts and, if necessary, in international arbitration.‖ Read more… The firm also pointed out that it has had meetings with government officials as recently as March 29, about alleged non-compliance on some issues related to the licenses, which would suggest that the licenses were still valid at the time. "It is entirely unclear and completely nonsensical as to why the State Specialized Inspection Agency would continue to inspect the Dornod licenses and engage in communications and discussions with Khan and its subsidiaries concerning the Dornod licenses with a view to coming to a formal decision at some point in the future, if in fact that licenses were invalidated in October 2009, as the NEA now alleges," Mr. Quick said. Source: www.miningweekly.com

SOUTHGOBI ENERGY HOPES TO POST „ROBUST‟ EARNINGS NEXT YEAR

SouthGobi Energy Resources Ltd., the Canada-listed mining company backed by China’s sovereign wealth fund, may post ―robust‖ earnings starting next year as production expands, CEO Alexander Molyneux has said. Earnings will be ―neutral‖ this year, he said, without elaborating. Performance still depends on the price of coking coal, used in steelmaking. SouthGobi, listed in Hong Kong since January, posted a bigger loss last year after the startup of its Ovoot Tolgoi mine in southern Mongolia increased costs. The company plans to produce about 14 million metric tons of unprocessed coal in Mongolia in 2013, compared with 1.3 million tons last year, Mr. Molyneux said. SouthGobi is making ―very strong‖ margins at its mines in Mongolia, Mr. Molyneux said. Since April 1, the company has been selling unprocessed coal at USD40 a metric ton while the cost of extraction is about USD20 a ton, he said. ―So you make USD20 a ton, and that’s pretty good money,‖ he said. ―Our exploration and corporate overhead costs will remain relatively flat as the earnings grow from the mining business.‖ Mongolia’s coal exports to China may climb to about 12 million tons this year from 8.5 million tons in 2009, according to Mr. Molyneux. Shipments may increase as much as 50 million tons in three to five years, he said. ―We want to have about 25 percent of that market by then.‖ The coal producer currently has USD840 million in cash to fund expansion plans and does not have

any financing needs for now. SouthGobi may spend USD590 million in the next three years to boost output. Source: Bloomberg.com

IVANHOE TO ANNOUNCE INDEPENDENT OT DEVELOPMENT PLAN

An independent development plan for the Oyu Tolgoi copper mine in Mongolia is slated to be announced after a shareholder meeting in May, Ivanhoe Mines Executive Chairman Robert Friedland has said. Ivanhoe is now looking at "a number of interesting alternatives to enhance our shareholder value," he told a conference. Ivanhoe has hired Citigroup Inc. and Hatch Corporate Finance, a London-based mining adviser, to explore financing options. The 50-year investment agreement gives Oyu Tolgoi project shareholders the right of first refusal to purchase any shares if Ivanhoe or the Mongolian Government wish to sell them, and gives Ivanhoe or the Government the same right should shareholders wish to sell, Mr. Friedland said. Ivanhoe has also announced a separate shareholders' rights plan that is intended to prevent any "creeping" or hostile takeover of Ivanhoe Mines Ltd., the parent of OT LLC, which also holds other projects and interests, including in Ivanhoe Australia and SouthGobi Energy Resources. Shareholders need to vote to approve this in May.

Source: Dow Jones Newswires

HUNNU COAL TO BUY 60% STAKE IN UNST KHUDAG COAL MINE

Australian coal developer Hunnu Coal will acquire a 60% interest in the Unst Khudag coal mine, which is expected to start production during the latter part of this year. The property consists of two exploration licenses and a mining license covering around 59,000 hectares, and is located about 200 km from an operational multi-party coal loading facility on a rail line. The project also has an approved mining plan and feasibility study for mining a proposed 98.7 million tons of coal, starting by the end of this year. Hunnu said in a statement on Monday that it was currently undertaking a detailed operational review of the Unst Khudag mine, with particular attention to qualifying the coal tonnage and coal quality, as well as reviewing existing coal test work and bulk sampling results. The company would also review the current mine plan and feasibility study, and would aim to establish offtake contracts. Hunnu noted that the acquisition of the Unst Khudag project would quickly move the company from an explorer to a near-term producer. Further, Hunnu was continuing to assess a number of additional acquisition opportunities to assist in this target. Hunnu holds a number of exploration tenements in Mongolia, as well as a number of rights. Source: www.miningweekly.com

LEIGHTON SECURES USD940 MILLION CONTRACT BOOST

A subsidiary of Leighton Holdings Ltd. has signed a USD940-million contract adjustment to increase production at a coal mine in southern Mongolia. Leighton Asia signed the contract adjustment, which will pave the way for increased production at the Ukhaa Khudag coal mine, according to a statement from the parent company. The mine produced 1.8 million tons of coal last year, after it commenced production in April. Leighton's contract will allow production from the mine to be ramped up to 10 million tons a year by June 2011. The mine is controlled by Energy Resources LLC and Leighton Asia was awarded the original mining contract in February last year. Leighton Asia managing director Hamish Tyrwhitt said the request to expand its capacity was the result of his company's success in developing a world class operation at the mine. "Our strong working relationship with Energy Resources and the local communities in the South Gobi region will ensure the continued success of this project," Mr. Tyrwhitt said in a statement.

Source: Ninemsn

INVESTMENT COMPANY SEES POTENTIAL IN MONGOLIA

On a recent trip to China S3 Investment Company Chairman and CEO Jim Bickel explored new opportunities for S3's wholly-owned Redwood Capital subsidiary in Mongolia, an exciting potential new market. Mongolia has recently gained attention as a new frontier for foreign private equity investment, particularly in the areas of natural resources and mining. "Redwood Capital's most recently announced client is based in Mongolia, and in addition to this recent signing, we believe that there may be additional opportunities for Redwood in Mongolia," said Mr. Bickel. "I was pleased to not only attend the Euromoney Mongolia-Asian Investment Forum event in Beijing, but also to

travel to Mongolia and see the country in person." Source: S3 Investment Company

RIO TINTO‟S STERN HU DECIDES NOT TO APPEAL

Rio Tinto's former China iron ore head Stern Hu has decided not to appeal his conviction for accepting bribes and stealing commercial secrets, his lawyer has said. Mr. Hu was sentenced last month by a court in Shanghai to serve 10 years in jail. Source: Reuters.com

SHISEIDO GETS MONGOLIAN DISTRIBUTOR FOR SALE OF PRODUCTS Shiseido will commence sales of cosmetic products in Ulaanbaatar from the end of May through the Bishrelt Trade Co. Mongolia will thus be the 74th country where the company’s products will be available through direct import. The Japanese cosmetics producing company feels the scale of the prestige cosmetics market is still not yet large in Mongolia, but has been showing rapid growth, nearly doubling in the six years since 2003. Settings for cosmetics sales counters such as upscale shopping centers have been developed along with the rising fashion awareness of women living in urban areas. Source: Shiseido S.A.

RIO TINTO CASE HIGHLIGHTS RISKS IN CHINA

From mysterious detentions to secret trials alleging cash piles stashed in Shanghai flats and corporate espionage aimed at subverting global iron ore talks, the tale of Stern Hu and three other former Rio Tinto employees sentenced to jail in China sounds almost too racy to be real. Almost, but not quite. Immediately after Mr. Hu and his Chinese former colleagues were sentenced to seven to 14 years, Rio acknowledged there was ―clear evidence‖ that they were guilty of bribery, though their convictions for commercial espionage are more debatable. In China, every prosecution is on some level political; but, had they been innocent, politics alone would not have been enough to convict them. This was not – or at least not only – a geopolitically convoluted plan by ―China Inc‖ to punish Rio Tinto plc. Nor is it simply a tale of greed with Chinese characteristics. It is a complex and murky tale – with lessons for every foreign company operating in the country. China’s rising demand for iron ore drove up prices, creating a lucrative differential between the cost of ore on the nascent spot market and the cost of fixed-price contract ore determined by global agreement between miners and steelmakers. The Rio Tinto four were found to possess commercially ―secret‖ documents related to the country’s steel industry, some of which detailed production cutbacks at Chinese steel mills during the global slump. Others, apparently, profiled various mills’ production capacity, iron ore requirements and negotiating positions. Elsewhere, such information could be easy to obtain while conducting market research. It might even be public. But in China the big steelmakers are state-owned and even basic data are technically secret. The central questions are how the salesmen obtained the information and whether it was used to influence last year’s iron ore negotiations. To date, Rio’s investigations have not found evidence of bribes paid to acquire documents. Rio also appears to have accepted information that steel mill representatives handed over voluntarily. But the mills said they handed it over grudgingly, feeling the company was in ―too dominant a position to resist‖ if the mills wanted Rio’s iron ore. Read more… To prove the men’s possession of the documents, Chinese authorities would need access to Rio’s computer servers. The only way in is through an electronic pass key that carries a scrambling digital password. It is possible that the men, once detained, were stripped of everything including these pass keys, allowing computer access. It may take longer than Mr. Hu’s 10 years in prison to find out whether the documents in question were actually sensitive. Business hopes that a reform to China’s state secrets law will come sooner than that. Meanwhile the question remains of how Rio did not spot corruption in one of its most profitable markets. Mr. Hu, Rio’s head iron ore salesman in China, did not have absolute power to allocate tons of iron ore to anyone he chose. Rio requires such transactions to be reviewed by two ―oversight teams‖, including one outside the country. The company, stunned by the detentions and frozen out of contact with its employees, spent months with lawyers and forensic accountants conducting an investigation of contracts, money flows, staff e-mails and its computer systems. But according to the company, it turned up no

evidence of wrongdoing of any kind. The bribe-induced sales raised no red flags in its systems. They conformed to all criteria of Rio pricing policies. This implies that, at least in cases where bribe-giving companies won sales of Rio ore through spot-priced auctions, they were tipped off in advance to bid a certain amount higher. Rio’s investigation, crucially, did not extend to the men’s private dealings. The company is now comprehensively reviewing its systems. The men were accused of stealing internal memos outlining China’s negotiating plan. The court said China overpaid by more than Rmb1billion for iron ore last year because of the Rio men. The idea is that the company could afford to take a hard line in its negotiations only because it knew exactly its steelmaking counterparties’ position. Those close to Mr. Hu say he did not pay a bribe to obtain such information, and considered it part of his job to get market intelligence on Chinese steelmakers. The commercial secrets charges – heard in a court closed even to diplomats, in contravention of international treaties protecting Mr. Hu, an Australian – appear least persuasive. But they may explain the detentions. Beijing appeared to be caught off guard by the detentions, which were made by the Shanghai state security bureau. Central authorities almost certainly did not hatch a plan to strong-arm one of the West’s most famous companies. It is possible the arrests reflect the haphazardness of China’s state bureaucracy rather than a concerted display of state strength. But the bribery phase of the trial, at least, reflected well on the prosecution and did not impugn Chinese legal procedure, say those who read transcripts. While its men were detained without charge, Rio appears to have been as much in the dark as everyone else. The men’s lawyers did not talk to the company’s lawyers. Rio’s only contact was through Australian diplomats. The lack of basic information, amid an escalating international incident, was uniquely stomach-turning for a group whose fortunes are more than ever dependent on the Chinese economy. In 2009, 65 per cent of Rio’s net profits came from iron ore sales largely to China. Last year 24 per cent of all its output went to China. Once the men were convicted, Rio immediately sacked them, prompting accusations it had abandoned them to avoid Beijing’s censure. However, the miner has a rigid ethics policy that appears to have left it little choice. Some foreign business people in China have reacted, paradoxically, with relief to the verdicts. Iron ore, they say, is politically contentious in a way that few foreign businesses are. Some have resolved to eschew BlackBerrys and laptops, and move offshore whenever they have sensitive deals to do. Others were already doing so. Those whose business strays near Chinese strategic industries such as steel are worried that the trial fails to clarify the boundaries of commercial espionage. But it is clear that every foreign company is vulnerable to selective prosecution in the country: anti-corruption laws exist there, as they do all over the world. Beijing can and does enforce them. For industry insiders, the strongest impression from the affair was not necessarily the guilt or innocence of the men, but the sense that overly high emotions accompanied Chinese actions from the iron ore negotiations to the failure of the Chinalco deal to the arrests. Whether intended or not, the sequencing conveys vindictiveness, some say. Perhaps the most abiding lesson, observers say, is that China remains an immature market operator with a government inexperienced in wielding its increasingly formidable power. In the meantime, a certain amount of heavy-handedness is inevitable.

Source: The Financial Times

LOUIS VUITTON POSTS STRONG REVENUE GAIN

French luxury-goods giant LVMH Moet Hennessy Louis Vuitton Tuesday fueled hopes for a swift rebound in the luxury-goods sector after it posted an 11% surge in first-quarter revenue that beat expectations. The figure showed distributors began replenishing stocks of wine, watches and high-end jewelry, the weakest performers in recent quarters for the company and the industry. The fashion and leather-goods division, home to its key brand Louis Vuitton, posted sales that were up 8% from last year. Louis Vuitton has emerged as a top-performer in the industry during the economic downturn, and analysts said the first quarter showed the brand's continued strength on top of high growth last year. The watches and jewelry division bounced back with a 33% rise in sales. The company opened a store in Ulaanbaatar last year. Source: The Wall Street Journal Asia

„CONSUMER REPORTS‟ KNOCKS LEXUS SUV

The influential U.S. magazine Consumer Reports dealt Toyota Motor Corp. another blow Tuesday, issuing a rare "don't buy" recommendation for the 2010 Lexus GX 460 sport-utility vehicle out of concern it could roll over. The magazine already had suspended its recommendations for eight Toyota models recalled in January for sticky-accelerator concerns. In certain conditions, the gas pedal in those models is slow to return to idle. Four of the magazine's auto engineers found a safety risk in the Lexus SUV during their standard emergency-handling tests. The luxury SUV "slid out until the vehicle was almost sideways before the electronic stability control system was able to regain control," the magazine said. The stability-control system is designed to prevent vehicles from sliding out in a turn. In a real-world driving situation such as exiting a highway ramp, the condition could cause a serious rollover accident, Consumer Reports said. "Because the GX is a tall SUV with a high center of gravity, our concern for rollover safety is heightened," the magazine said. It added that it had not heard of any such incidents happening among consumers. The magazine said the "don't buy" designation is rare; the last time a vehicle's performance was considered not acceptable was with the 2001 Mitsubishi Montero Limited. The recommendation comes as Toyota tries to recover from a safety crisis that has hurt its reputation as a quality leader amid concerns that its Toyota and Lexus products are prone to sudden acceleration. Source: The Wall Street Journal Asia

ECONOMY MONGOLIA‟S USD1 BILLION BOND ISSUE IN Q4

Prime Minister S. Batbold told a forum organized by the Hong Kong Stock Exchange on Monday that Mongolia plans to raise up to USD1 billion through a sovereign bond offering in the fourth quarter, and is also moving ahead with plans to list publicly owned mining, energy and infrastructure assets. The Government hasn't determined which assets will be listed, a matter that requires parliamentary approval. Though Mongolian officials said a listing venue hasn't been decided, Mr. Batbold said that "Hong Kong is a natural choice for us in terms of funding and expertise." He said Hong Kong was the "best gateway" to Mongolia's largest trading partner, mainland China. Mr. Batbold has previously laid out a plan to list three companies holding state-owned assets: one for mining assets, another for energy and a third for infrastructure. On Monday, Mr. D. Zorigt, Mongolia's Minister for Mineral Resources and Energy, opened up the possibility for other mining listings as well, saying that the Government might also list individual state-owned mineral assets and mining projects. "We always thought it wasn't a good idea to have all our mining assets in one basket," Mr. Zorigt said. Mr. Batbold confirmed his government's intention to maintain control of the rights to the Tavan Tolgoi coking-coal mining project and to subcontract its development to outside companies. The decision effectively dashes any hope that foreign mining companies would be the main beneficiaries from extracting the deposit’s 6.5 billion metric tons of coking coal. The Prime Minister said the situation for Tavan Tolgoi was different from that for Oyu Tolgoi, since the Government itself owns the rights to Tavan Tolgoi.

Source: The Wall Street Journal Asia

NATIONAL DEBT EQUALS STATE BUDGET

Finance Minister S.Bayartsogt has said that the total foreign debt of Mongolia has reached MNT2.8 trillion, equal to the whole annual state budget. Of this 31.7 percent is in USD, 26.5 percent in Japanese yen, 28.1 percent in euro and 13.7 percent in other currencies. He was speaking at a joint meeting of the Standing Committees on the Economy, on Security and Foreign Policy, and on the Budget which discussed a loan offer from Monaco, and a draft cooperation agreement with the Asian Development Bank for additional financing on a project to develop regional roads. Both drafts were approved and would now go to Parliament, but several MPs expressed their unhappiness with aspects in both. Some felt that Monaco, with which diplomatic relations were established only two years ago, is offering assistance worth no more than MNT30 million only to help it join the European Union. The ADB loan carries a low interest but has preconditions which make it less acceptable than high interest loans. Mr. Bayartsogt stated that Mongolia will no longer take loans with such preconditions.

Source: Undesnii Shuudan

SOCIAL, ECONOMIC INDICES FOR FIRST QUARTER PUBLISHED

The National Statistical Office has published figures relating to various sectors. Unless otherwise mentioned, all data are for the first three months of 2010 and the comparison is with figures for the corresponding period last year. Consumer price index The national consumer price index in March 2010 rose 2.0 percent over February, 7.4 percent over the end of 2009 and by 8.5 percent over March 2009. Industrial output Total industrial output reached MNT 394.2 billion, increasing 13.4 per cent at 2005 constant prices. Stock trading

Altogether 11.7 million shares valued at MNT3.6 billion were traded at the Stock Exchange in March. In terms of the number of shares traded this was a threefold increase over February and 16.4 times more than in March last year. Unemployment

The number of registered unemployed people stood at 37,100, an increase of 6.8 percent. Freight, passengers

All types of transport taken together carried 5.0 million tons of freight and 61.0 million passengers. The volume of freight rose by 16.1 percent, and that of passengers by 26.2 percent. Budget, taxes

The General Government budget showed a deficit of MNT109.2 billion. The current account had a surplus of MNT27.1 billion. Tax revenue increased 73.3 percent. Receipts from the windfall profits tax rose 13.5 times more, from VAT 68.6 percent, and from corporate income tax 97.9 percent. Non-tax revenue increased by 5.6 percent. External trade Mongolia’s trade with 103 countries reached a total turnover of USD1076.2 million, of which exports accounted for USD499.0 million and imports for USD577.2 million, resulting in a deficit of USD78.2 million, a 9.3 per cent rise. The total turnover increased 50.3 per cent, exports rising 54.8 per cent, and imports 46.6 per cent. Construction and installation

Construction and installation work worth MNT 8.4 billion was carried out, 47.7 per cent of which was executed by domestic entities. Pensions and social allowances

The total number of insured persons was 397,500, of whom 59.1 percent worked in private establishments and 40.9 percent for the Government. MNT83.4 billion was paid in pensions from the Social Insurance fund. Some 73 percent of this went to the elderly, 12.8 percent to the disabled, 7.5 percent to families that lost their breadwinner, and 6.8 percent to veterans. Altogether 173,000 people received pensions, benefits and assistance totaling MNT11.2 billion. The number has gone down by 86.1 percent, and the amount of money disbursed was 67.0 percent less. Births, deaths

There were 6.1 births and 1.6 deaths per 1,000 population. The number of live births was 16,875, rising 3.3 percent over the same period of the previous year. Infant mortality rose 14.3 percent, but the number of maternal deaths dropped by four to stand at eight. Source: The National Statistics Office

MONGOLIA GETS RAIL PROJECT ON TRACK

Mongolia has taken its first step in building the infrastructure required to be a leading commodities exporter, after it approved construction of more than 5,000 km of railways. Provisional plans for an "east-west" rail network have been passed unanimously by Parliament. Prime Minister S. Batbold confirmed to investors at a conference in Hong Kong that the railway project was moving ahead.

One purpose is to connect the necklace of resource deposits that extend along Mongolia's southern perimeter in the south Gobi desert. Many of the deposits - including Rio Tinto and Ivanhoe Mines' world-class copper project at Oyu Tolgoi - are less than 200km from the Chinese border. Mongolia’s proximity to China is a huge advantage along with the sheer volume of metals beneath its grasslands. But the country's lack of basic infrastructure has undermined its prospects. The Soviet-built Trans-Mongolian Railway is the only large rail artery in the semi-nomadic country of fewer than 3 million people. However, Mongolian leaders have released no estimates of project costs. One prominent investor in Mongolia said the railway would require "a serious bond". In translated documents seen by the Financial Times, the Government has committed itself to finance and build the railways itself. But it also aired the possibility of public-private partnerships that could be lucrative for international infrastructure contractors. The plans feature six rail lines totaling 1,800 km starting construction this year. That should be followed in 2011 by an additional project totaling 1,400 km of track. After 2015 an additional 2,000 km of rails are due to start construction. Read more… Mongolia's vast infrastructure-building needs also extend to electrification and road-building. The costs stand to strain an economy of relatively minuscule output that is fragile after the global financial crisis. The crisis burst bubbles in the banking, real estate, and construction industries after the collapse of global commodities prices undermined speculators' expectations. Last year the International Monetary Fund extended a USD230m loan to the country that is still being disbursed. But in the past six months Mongolian leaders have been touring financial centers such as London, attempting to assure investors that a new, technocratic, and multi-party leadership has a blueprint for developing the country. Plans include partial privatization and flotation of many State-owned resource assets. The rails will be Russian gauge. Executives in the Mongolian mining industry said in January an "east-west" railway was controversial and making headlines in part because of a debate over gauge and its political implications. The country's foreign policy balances the interests of powerful neighbors Russia and China. China uses a different gauge, meaning Mongolian trains carrying commodities exports will need to pause at the border and change their chassis. Source: The Financial Times

NON-PERFORMING LOANS LESS THAN IN FEBRUARY

The Central Bank reports that money supply (broad money or M2) at the end of March expanded to MNT2,974.5 billion, 0.2 percent less than in February but 26.4 percent more than in March last year. Currency issued in circulation reached MNT384.5 billion, 9.1 percent more than in February, and 13.7 percent more than in March 2009. Loans outstanding at the end of March were 0.2 percent more than in February and 1.9 percent more than in March 2009. Principals in arrears increased 1.4 percent over February and 13.0 percent over March last year. Non-performing were 6.3 percent less than in February and 1.6 times more than in March last year. Source: The Mongol Bank ADB SEES MONGOLIA RETURNING TO GROWTH THIS YEAR

The Asian Development Bank (ADB) has raised its regional growth forecast this year to 7.5 percent from 6.6 percent, but warns that governments need to adjust policies to avoid shocks that could hamper the recovery. Mongolia is among the countries identified in the report as returning to growth. China is forecast to grow by 9.6 percent, after last year's 8.7 percent expansion almost single-handedly lifted the region's overall growth to 5.9 per cent, offsetting weakness elsewhere, the ADB said in its economic outlook released earlier this week. Five Southeast Asian economies that contracted last year - Malaysia, Singapore, Thailand, Cambodia and Brunei - also are set to return to growth, together with Hong Kong, Mongolia and Taiwan, the bank said. Next year, GDP growth across the region is seen easing back to 7.3 percent. But the fragile recovery could be derailed by a premature withdrawal of stimulus, a sharp rise in commodity prices, persistent global financial imbalances and deteriorating debt positions in some countries, warned ADB president Haruhiko Kuroda. Source: The Asian Development Bank

WORLD BANK SEES ECONOMY REBOUNDING, AND A RISE IN INFLATION

In its monthly economic update for February, released earlier this week, the World Bank Mongolia has noted that both exports and imports have started rebounding, reflecting the improvement in the domestic economy. Foreign exchange reserves are close to record levels, while high real interest rates and expectations of currency appreciation have caused a large increase in MNT deposits. The fiscal deficit also continues to improve. However, all this has been accompanied by a sharp upturn in inflation which rose to 8.7 percent year-on-year (y-o-y), roughly double the level in January and up from just 1.2 percent in December 2009. This increase has been mainly driven by a rise in food (mainly meat) prices following the large livestock losses during the recent dzud and a distribution of MNT70,000 to citizens. Overall through, the economy is continuing to show signs of recovery, supported by a favorable external environment, on the back of strong policy actions over the past year.

Source: The World Bank For complete World Bank February Economic Update, please refer to BCM website – Resources, Mongolia Reports. MONGOLIA NOW HAS 15 PRIVATE BANKS

Central Bank President L.Purevdorj has said there are now 15 privately owned banks operating in Mongolia in place of the 16 some months ago. The 15 do not include Zoos Bank which has become State Bank and is fully owned by the Government. Anod Bank is still limping along, not yet declared bankrupt and so is counted among the 15. Savings Bank and Mongol Post Bank have merged to form Savings Bank. No account holder has lost any money because of the changes, Mr. Purevdorj said. Source: Ardin Erkh

ECONOMISTS NOT AT EASE WITH DECISION TO GIVE MNT1.5 MILLION TO ALL

Several economists have expressed their reservation about the Government’s announcement that every Mongolian citizen will receive MNT1.5 million by 2012. Mr. Ts. Demberel appreciated that both parties were in a bind, having made this the basis of their election campaign. However, it still will be unwise to distribute so much cash. ―Most of this will end up in the hands of Chinese manufacturers, and a much better decision would have been to spend it on infrastructure that benefits all,‖ he said. Mr. Ch. Khashchuluun, Chairman of the National Development and Innovation Committee, said it is not yet clear how the money will be actually distributed. ―It is important to guard against inflation as that would nullify any benefit to people,‖ he said. Mr. D. Batjargal, Director of the University of Finance and Economy, wondered where the money will come from and hoped the Government would not have to take foreign loans to fulfill its pledge. Mr. D. Jargalsaikhan said the total amount needed would be MNT6.25 trillion, ―far more than the country’s present annual GDP‖ and was certain the country ―does not have the economic capacity to implement the Government’s decision‖. Honored Economist N. Dashzeveg refused to comment without knowing where the Government hoped or planned to get the money from.

Source: Zuunii Medee

BATBOLD SEES HONG KONG AS A NATURAL CHOICE FOR MONGOLIAN FIRMS TO LIST Hong Kong is a natural choice for Mongolian enterprises to go public as the resources-rich country develops its vast untapped mineral wealth, Prime Minister S.Batbold has said. "Mongolia is at a very exciting stage of development. We need expertise from investors abroad," he said at an event in Hong Kong on Monday. "We have this momentum and we need to keep up this momentum."

Source: Reuters.com

MINING HORDES INVADE THE „KUWAIT OF CENTRAL ASIA‟

If there was a competition to find the ugliest city on Earth, Ulaanbaatar would be the leading contender for the title. The combination of grim, Soviet-style concrete high-rises, rambling slum-shanties and towering coal-fired power plants belching out smoke over the city reeks of the depression and decay that was a legacy of decades of communist rule. But look more closely and it is clear that change is afoot in this mineral-rich former Soviet acolyte which is on the cusp of a mining boom that has led investors to describe Mongolia as the "Kuwait of Central Asia". The augurs of new wealth are already visible on Ulaanbaatar’s dowdy streets – luxury brands such as Louis Vuitton and Armani have opened branches in the past year, catering to customers in Range Rovers and Porsche Cayennes. And in the city's Grand Khaan Irish Pub the

vanguard of the coming investment boom can be found quaffing pints and discussing deals – suited diplomats and investment bankers rubbing shoulders with rough-necked mining engineers and their suspiciously pretty local "girlfriends". For decades the global resources industry has had its eye on Mongolia's huge mineral deposits – it has world-class reserves of gold, copper, coal, fluorspar, silver, uranium and tungsten – but has been deterred by a combination of corruption and political instability. That all changed last year, however, with the formation of a pro-business government that is now, albeit cautiously, welcoming foreign investors to partake in a boom that it hopes will triple the nation's GDP in the next decade. Headline-grabbing, public investments are only the tip of the iceberg, according to Mr. Matthew Totty, managing director of Redwood Capital, which specializes in bringing Chinese firms to the international markets. Mr. Totty is among those who see Mongolia as the next big opportunity or, as he puts it, "the last major untapped frontier" for mineral exploration, with the lure of a resource-hungry China on its doorstep. Read more… Mr. Totty said investing attitudes towards Mongolia had been transformed over the last year. "Since they sorted out the windfall tax and settled with Ivanhoe, the floodgates have opened. I've seen a 180-degree turnaround in Hong Kong; private equity firms that wouldn't touch Mongolia a year ago are now actively focusing on the country." Such confidence in the "new" Mongolia is not universally shared, however, particularly after the Government announced this year that it was canceling its auction for a 49 percent stake in the world's largest undeveloped coal field, the USD2-billion Tavan Tolgoi (TT) deposit. Having invited bids from heavyweights including BHP Billiton, Vale SA, and U.S. miner Peabody, Prime Minister S.Batbold announced last month the Government had decided it preferred complete state control, adding that other projects would be decided "on a case-by-case basis". Such uncertainty was seen by some as a disturbing throwback to the last decade, as was the passage of a 2009 Nuclear Energy Law which appropriated 51 percent of all state-discovered uranium deposits to the Government for no fee, effectively halting all uranium projects in Mongolia. Worries also persist over the impact of strategic squabbles between Russia, which still exerts political influence over Mongolia, and China, the natural customer for its mineral resources. Tensions between the two are being blamed for the failure to agree a deal to build a planned railway linking the Oyu Tolgoi and Tavan Tolgoi mines to China, a move described as a "no-brainer" commercially, but unacceptable politically to Russia and sections of the Mongolian public who fear China's growing influence. And yet, notwithstanding these political risks, the potential rewards continue to lure investors like Mr. Totty. "This is the last virgin frontier for minerals exploitation, but you have to accept that there are strategic aspects the government will seek to control. Much of the elite is savvy, Ivy League-educated and understands international business culture. In the end, Mongolia desperately needs the foreign investment and the know-how. If they screw over a big public company they're done for, and they know it."

Source: The Telegraph, UK

RAILWAY WORKERS DEMAND WAGE INCREASE Railway workers are demanding a 15 percent wage raise by May 1. Union representatives told a press conference that more than half of the 16,000 workers in the sector have debts in banks. Their average monthly salary is MNT 300,000, while the 30 or so Russian experts are paid MNT 7-8 million a month. The workers also charged UB Railway with falsely stating in its latest financial report that the company paid MNT1,710 for one liter of diesel when the actual cost was much lower. The railway uses 70,000 tons of diesel in a year. Source: Onoodor

ITALIAN TRADE TEAM ATTENDS FORUM

Mr. Adolfo Urso, Deputy Minister for International Trade, led his country’s delegation to Monday’s Mongolian-Italian economic forum at the Mongolian National Chamber of Commerce and Industry. The forum was attended by over 100 delegates from both sides, including MNCCI Chairman S.Demberel, the Italian Ambassador in China, Mr.Ricardo Sessa, and officials from the Chamber of Commerce in Milan, the Italy-Mongolia Business Council, the Mongolian Foreign Ministry and the Foreign Investment and Foreign Trade Department. The Italian delegates expressed interest in investing in and cooperating with Mongolian banking,

insurance, cashmere, jewelry, energy, and meat sectors. From now on an Italian Day will be organized in Mongolia and a Mongolian Day in Italy each year. Source: English.News.mn

MINING COMPANIES AND TAX AUTHORITIES TRADE CHARGES

A conference last week on issues relating to export of mining products heard mining companies and tax authorities trade charges. Mining companies complained that the tax office often calculated their dues arbitrarily, not taking into account several costs exempted in international practice. They also criticized the present practice that authorizes only the Central Customs Laboratory to analyze ore before export, saying that this could be done at less cost to the miners in the special laboratories in the Erdenet JV and the Russian-owned Tsairtmeneral in Sukhbaatar. The tax authorities defended themselves strongly, saying mining companies operate only for profit and try to pay as little tax as possible. Some observers at the conference agreed with this and said the mine usage fees should not be seen as a tax.

Source: English.News.mn

WORLD BANK BRINGS IN BANKING SECTOR REFORM EXPERTS

Following a request from the Central Bank, the World Bank Mongolia last week arranged for three internationally reputable banking and financial sector restructuring experts to visit Mongolia to suggest ways of surmounting the difficulties in the country’s financial and banking sectors. Their program here had to be readjusted as they reached later than scheduled, because of a flight cancellation, but they met with MPs, senior Government officials, commercial bank executives, economists and external partners. An open public and media session on ―Global experience on banking restructuring‖ took place on April 9. The three who came are Mr. Mats Josefsson, Mr. Carl Lindgren, and Mr. Engine Akcakoca. Mr. Josefsson said at the media session that banks in almost every country have faced problems in the past two years, but this was not uncommon. A study done by the International Monetary Fund (IMF) some years ago had found that roughly two-thirds of its 190 member countries had experienced banking problems during the past 15-20 years. Whatever the reason for their poor performance, once banks fail to support the corporate sector with loans and working capital, the country’s economic growth will be impaired. That is why Governments around the world have been propping up their banking system and why institutions like the World Bank and the IMF are so much concerned about banking issues. He agreed that banks have to be supported but under very strict conditions and in most cases, it is only the state that has the resources and capacity to restore confidence through clear and transparent rules and by providing equity if current owners lack the resources to do it. However, it must be clearly understood that the support is for the services offered by banks and not for bank managers, boards or owners. The Government of Mongolia and the Bank of Mongolia are in the process of finalizing Mongolia’s banking restructuring strategy which will be submitted to Parliament. This strategy outlines a framework of banking restructuring resolution techniques. Read more… The need for bank restructuring, whether in an acute crisis or in a chronic condition, should not be a political matter. Efforts to restore public confidence in a bank can be counterproductive if they are seen to be acts of political convenience. ―Banks are not helped when politicians debate who to blame and which political party caused the problems,‖ Mr. Josefsson said. He recommended quick handling of any early sign of banking problems as ―these have a habit of not going away and of only getting worse‖. Unfortunately, most countries have failed to do this, adding to the cost of reconstruction.

Source: Undesnii Shuudan

CUSTOMS DELAYS BEING EASED, SAYS OFFICIAL The Head of Ulaanbaatar Customs Office, Dr. S. Tsetsgee, has stressed the importance of economic security in ensuring overall national security and hoped times would soon improve from last year which showed no economic growth, with GDP actually falling 1.6% from 2005. Foreign trade will play an important part in the recovery and for this Customs’ services must be efficient. He was aware that both individuals and traders, big and small, were often impatient with loss of time and money because of the way goods move across Customs posts at borders, but wanted them to understand that work load has increased enormously and the delay is often not because of Customs procedures only. There are many other authorities who work at borders. Some of their

responsibilities are being transferred to the Customs to avoid duplication of work. Source: Udriin Sonin

CALL TO DEVELOP LOCAL ENGINEERING MANUFACTURING

The National Statistical Office has reported that Mongolia spent USD 3 billion on importing machines, equipment, electronic goods, and means of motorized transportation in the last three years. Many of these were simple devices requiring no great designing or engineering skill. The Mongolian National Association of Metallurgic and Machinery Production has now written to the President, the Prime Minister, the Speaker, and individual MPs to draw their attention to the need for developing the engineering manufacturing sector in the country. Mr. D. Jargalsaikhan, Head of Electric Transportation Company, emphasizes that there is adequate expertise locally and all that was needed were capital and entrepreneurship. If the Government provides or arranges for these, the industrial and technological sectors were sure to thrive, generating employment and providing an incentive to many Mongolians working overseas to return home. The expected expansion of mining activity will also offer a ready local market.

Source: Onoodor

HERDERS FACE LOSS OF PASTURELAND TO PHOSPHORUS MINING

With 47 mineral exploration and mining licenses issued in Burentogtokh soum of Khuvsgul province, traditional pastureland around the Burenkhaan phosphorus deposit is now fully controlled by mineral companies, both domestic and foreign. About 10 herders, with thousands of animals, who have held legal pastureland licenses for 50 years or more, are in a fix. According to the Minerals Law, mineral licenses can be issued only after the local government approves of them. The herders are not aware if this has been done, but they say there has been no official intimation to them about any change in the status of the licenses they hold. Article 6 of Constitution puts all natural resources under the people’s ownership and assures them government protection. The herders, seeing their constitutional right threatened, have sought the help of the Coalition of Civil Movements for Environmental Protection and human rights organizations.

Source: Onoodor

SMEs MAKING TRADITIONAL ITEMS WANT HELP TO INCREASE SALES

Several small and medium enterprises, producing cashmere garments, felt footwear, hats, traditional costumes and souvenirs feel that an average tourist spends around USD10 on buying such things while in Mongolia. The Government sometimes places an order for some item of traditional clothing, to be used by national leaders on ceremonial occasions or as state gifts to foreign dignitaries. This is not enough for them to be economically viable. Ordinary Mongolians largely buy their traditional deels and shoes that are made in China. These enterprises feel they can produce and sell more if the Government made it mandatory for people dealing with tourist arrivals, at airports, hotels and tourist camps, to wear national dress and ensure that these are made in Mongolia.

Source: Onoodor

NEW GEOLOGICAL PROJECTS LISTED According to the Ministry of Minerals and Energy, areas totaling 25,412.7 square km will be covered by geological survey and study this year. Ten new projects will be surveyed in the 1:50,000 scale, and preliminary geophysical study will be made along the border areas. Three-dimensional geological structure and metallogenic study under the North-Central-East Asia project is also expected to begin. Source: Minerals News

CHINA‟S ECONOMY SOARS, BUT RISKS TRAIL REBOUND China's economy expanded 11.9% from a year earlier in the first quarter of 2010, the Government said Thursday, a strong result that highlighted both the strength of the recovery in the world's third-largest economy and the increasing risks of overheating. In a statement issued before the data was published, China's State Council said the nation's economic recovery has been further consolidated, but there are still prominent problems and risks to deal with. The growth in the first quarter's GDP accelerated from the 10.7% gain reported in the fourth quarter of 2009, and was faster than the 11.5% median forecast of economists. But the State Council cautioned against excessive optimism, noting that the fast rate of growth in the first

quarter is largely due to the low base of comparison a year earlier, when the impact of the global financial crisis led to China's slowest quarterly expansion in nearly two decades. "A number of factors driving up prices are appearing, strengthening expectations of inflation. The problem of excessive increases in housing prices in some cities is particularly acute," the State Council said in its statement issued after a quarterly meeting on the economy, headed by Premier Wen Jiabao. Banks started to shrink their new lending significantly in February and March of this year, after the Government set a smaller target for new loans this year. Fixed-asset investment in urban areas, an important measure of capital spending, has also been slowing from over 30% growth last year. Source: The Wall Street Journal Asia

CHINA‟S COKING COAL IMPORTS SEEN TO RISE 47% IN 2010

China's imports of steelmaking material coking coal is expected to jump about 47% from a year earlier to 50 million tons in 2010, a senior executive of the country's top coking coal producer said on Tuesday. China's massive steel sector grew increasingly hungry for imported coking coal, but the country lacks sufficient supplies of quality coking coal. In 2009, coking coal imports jumped four-fold from a year earlier to more than 34 million tons. The country's coking coal production, meanwhile, is likely to grow 9% this year from last year's 500 million tons, compared with a modest 5% gain in 2009. Source: www.miningweekly.com

HU BALANCES TONE ON YUAN

Chinese President Hu Jintao indicated to U.S. President Barack Obama in a meeting Monday that Beijing remains committed to gradually changing its currency policy and helping to increase imports from the U.S. It wasn't the first time that China made such comments, and Mr. Hu also signaled Beijing's displeasure at demands from Washington and elsewhere that China let its currency's value rise—telling Mr. Obama that any changes to China's exchange-rate policies would be based on the country's own economic needs. But Mr. Hu's reassurance, at a face-to-face meeting with the U.S. president, indicated an effort at conciliation and cooperation on an issue that has been a source of tension between the two nations. In recent weeks, the Obama administration has been trying to give China time to move on its own on the currency, engaging in behind-the-scenes negotiations with Chinese leaders but refraining from tough talk. Warming relations and a surprise visit by U.S. Treasury Secretary Timothy Geithner to Beijing last week had set off a wave of speculation that China could be preparing to change its currency policy sooner rather than later. Mr. Hu, China's president and the top official of its ruling Communist Party, told Mr. Obama that while China is looking to revamp the way it sets the value of the yuan, it "won't push forward the reform under external pressure‖. Read more… Mr. Hu's signal of determination that China wouldn't bow to pressure and the comments in Beijing on Tuesday will likely reinforce the general belief among analysts that while a sudden, large jump in the value of the yuan against the U.S. dollar is unlikely, China is probably willing to allow its currency to gradually climb upwards in the coming months. Mr. Hu also said he hopes the U.S. can increase its exports to China, especially by easing curbs on China's imports of U.S.-made high-technology products, as soon as possible. However, China also announced Tuesday that it had imposed duties on imports from the U.S. and Russia of a type of steel used in the power sector, showing that it will continue to defend its interests on trade matters. Source: The Wall Street Journal Asia

MARCH TRADE DEFICIT STRENGTHENS CHINA‟S CASE ON YUAN China ran its first monthly trade deficit in six years in March, a development that, while likely temporary, was quickly seized on by the nation's Commerce Ministry to argue against the need to revalue China's currency. With imports of commodities surging last month, China swung to a trade deficit of USD7.24 billion in March from a surplus of USD7.61 billion in February. Overall imports were up 66% from a year earlier in March, with purchases of crude oil and copper at near-record levels in volume terms. The import bill was further boosted by rising commodity prices. China's trade surpluses have in fact been shrinking as the Government's stimulus plan boosted purchases from abroad. The cumulative

trade surplus for the first quarter of 2010 was down 77% from a year earlier to USD14.49 billion. China's Ministry of Commerce, which has been a vocal defender of exporters and opponent of any change in the currency regime, argued the latest data show no move is needed. It said the fact that China ran a deficit in March, without any move in its currency, shows that "the deciding factor for the balance of trade is not the exchange rate, but market supply and demand and other factors". Source: The Wall Street Journal Asia

TORONTO EXCHANGES IN DRIVE TO ATTRACT CHINESE INVESTORS

The Toronto Stock Exchange is stepping up its drive to attract Chinese investors and listings to Canada as a springboard for them to participate more broadly in North American capital markets. Mr. Tom Kloet, chief executive of TMX Group, which includes the Toronto Exchange and the small-cap TSX Venture Exchange, said the two markets were ―mechanisms (for the Chinese) to get to North American investors as a whole‖. TMX hosted a seminar for Chinese investors in Shanghai last week, following presentations in Beijing, Xi’an and Suzhou last autumn. ―One of the things that came out of the discussion,‖ Mr. Kloet said, ―is that the two-tier structure of starting with the venture exchange and graduating up to the senior market is really beneficial for us. We provide them with a very valuable entry point into the capital markets with our junior stock market.‖ China makes up the second largest source, after the U.S., of non-Canadian listings in Toronto. A total of 53 Chinese companies currently trade on the two Toronto exchanges, with a market value of about CAD8.6bn, up from CAD3.6bn at the end of 2008. Source: The Financial Times

ASIA WARNED OF FOREX INTERVENTION RISK

Asia’s developing countries are risking a renewed economic crisis by intervening extensively in foreign exchange markets, the Asian Development Bank (ADB) warned in its annual regional review on Tuesday. The ADB, which gives financial and technical assistance to more than 40 developing countries, forecast economic growth of 7.5 per cent this year, moderating slightly to 7.3 per cent in 2011 as the impact of extraordinary monetary and fiscal policies dissipates. However, the bank said the region’s robust recovery from the global financial crisis could be put at risk by widespread intervention in the currency markets by countries seeking to maintain or improve export competitiveness. The review, overseen by ADB chief economist Jong-Wha Lee, said the speed and strength of the recovery in developing Asia, together with low interest rates in most developed countries, was prompting ―huge‖ short-term capital inflows. ―Given extensive intervention combined with excessive liquidity, real exchange rate appreciation and economic overheating could follow. In particular, the sudden reversal of short-term capital flows [as a result of intervention] could endanger financial and economic stability and bring about a currency and financial crisis,‖ the report said. Read more… Noting that estimates vary, the bank quoted evidence suggesting that the currencies of China, Hong Kong, Malaysia, Taiwan and Singapore were more than 20 per cent undervalued against the dollar, while the currencies of the Philippines and Thailand were about 10 per cent undervalued. It said that only Indonesia, South Korea and India had currencies that appeared to be slightly over-valued against the dollar. The ADB said that to reduce the risks of a sudden reversal of capital flows caused by intervention central banks should allow exchange rates to adjust to the so-called equilibrium level, at which the economy operates at full employment with low inflation and a sustainable external balance of payments position. The ADB called for a range of other reforms, including closer coordination of monetary policy and financial regulation to prevent asset price bubbles, and widespread action to remove structural impediments to increases in domestic economic demand. Source: The Financial Times

For complete ADB Annual Regional Review, please refer to BCM website – Resources, Mongolia Reports. DON‟T LOSE MOMENTUM, URGES IMF CHIEF

International Monetary Fund Managing Director Dominique Strauss-Kahn has stressed the need to maintain momentum in financial overhaul, warning of the risks posed as countries' approaches diverge. He said in a speech over the weekend that as the world economy becomes more

interconnected, international policy coordination will be important to secure "stable, strong and balanced" economic growth. He also cautioned that global economic imbalances are likely to widen again unless policies that encourage new sources of growth to emerge are implemented. "Many countries are approaching … big-picture reforms from different directions and at different speeds," Mr. Strauss-Kahn said at the inaugural conference of the George Soros-sponsored Institute for New Economic Thinking. "This presents a great risk of uncoordinated policies, distorted capital flows and regulatory arbitrage," he said. On a related point, Mr. Strauss-Kahn acknowledged the importance of plans to handle large and complex financial—so-called too-big-to-fail—institutions, but noted that proposed mechanisms may be limited by national borders. Source: The Wall Street Journal Asia

GFMS SEES 777,000 TONS COPPER SURPLUS IN 2009

The global copper market showed a supply surplus of 777,000 tons in 2009 due to weak demand from economies outside of China, independent metals analysts GFMS has said. This is more than double the 365,000-ton surplus estimated last month by the International Copper Study Group (ICSG), which is the main provider of regular data on global copper supply and demand. The report by GFMS, which has been the benchmark provider of fundamental precious metals data for decades, is the latest effort to bring more transparency to the copper market, an opaque sector made more difficult by uncertainty over stockpiles in China, the world's biggest consumer. Although GFMS did not make concrete predictions for 2010 and beyond, it did say that the price outlook for copper remained bullish in the long-term -- despite last year's surplus -- due to limited supplies, strong demand from China and India and recovering demand from developed countries. It attributed the current disconnect between rising prices and slack demand for copper to speculative investments in futures contracts for the metal by funds on the medium-term expectation that supply would remain limited and demand would return more robustly to create a deficit in late 2010. GFMS added that the price of copper would likely be volatile in the near term until global demand outside of China recovered sufficiently to reflect the current price levels which were ahead of market fundamentals. Source: www.miningweekly.com

POLITICS PM CALLS CRITICS “IRRESPONSIBLE AND UNJUST” Prime Minister S.Batbold, the new MPRP chairman whom outgoing party head S.Bayar had proposed as his successor as something ―what the society wants", is set to consolidate his power both in the party and in the coalition government where the MPRP is the majority force. In his first speech as party chief, Mr. Batbold said it is ―is irresponsible and unjust to blame the government for the effects of a global crisis or of a natural disaster‖, as some people are doing. During the course of presenting a report on the current economic, social and political situation at the party conference of the MPRP he regretted that when the majority is longing for peace and stability so that the Mongolian economy can take a big jump to development and reconstruction, ―there are some who are calling for a revolution‖. Acknowledging that the MPRP and the DP are ―fierce competitors during elections and will always fight each other for political power‖, he said at the moment, the two are partners in the national interest and are solving problems together. ―For the sake of the people and the country, we must continue with this,‖ he said. Questions and criticism are part of the democratic process, but they must be in ―an atmosphere of political and public stability‖, he said, adding that certain groups want to encourage instability by saying they do not trust the government in anything. Every issue has to be traced to the roots and then assessed. ―This is wrong,‖ he said. Source: Ardin Erkh

SACK THREAT FOR MINISTER UNLESS ACTION IS TAKEN ON COPPER SMELTER

During discussions on Wednesday, some members of the Standing Committee on the Economy threatened the Minister for Minerals and Energy with dismissal if no concrete action is taken by June 1 to set up a copper smelter. ―There has been so much talk; now we need to see something happening on the ground,‖ they said as the Committee voted with an overwhelming majority for a proposal seeking a Parliament resolution favoring a smelter to be established. USD500 million is needed to build a smelter with a 130,000-ton capacity. A smaller one can also be

considered, the MPs said. Two sites were favored, one at the Erdenet complex, and the other in Sainshand. In the case of the latter, the copper ore will have to be transported from Erdenet, adding to costs. Since Erdenet is a joint venture with Russia, ownership of the smelter has to be sorted out if it is built there. Source: English.News.mn

BATBOLD, CHINESE LEADER MEET AT BOAO FORUM, REAFFIRM TIES

Chinese Vice President Xi Jinping and Mongolian Prime Minister S. Batbold underscored their commitment to seeking stronger cooperation when they met on Saturday on the sidelines of the annual session of the Boao Forum for Asia (BFA), a pan-Asian platform for dialogue on key issues affecting Asia and the world. Reviewing bilateral ties, Mr. Xi said China and Mongolia enjoyed a good-neighbor relationship. The two countries celebrated 60 years of diplomatic ties last year. China has been Mongolia's biggest trade partner for 11 consecutive years and almost 1 million people traveled between the two countries last year, Xi said. He appreciated Mongolia's understanding and support for China on issues concerning China's core interests. With a 4,710-km border, China and Mongolia enjoyed a unique advantage in working together, Mr. Xi said, adding China would like to work with Mongolia to expand bilateral cooperation. Mr. Batbold proposed the two countries work more closely in economy, trade, finance, minerals, energy, infrastructure and people-to-people exchanges. He reaffirmed Mongolia would adhere to the one-China policy. Mr. Batbold, one of 2,000 political and business figures and experts from Asia and around the world who gathered at the island resort in south China's Hainan Province for the BFA annual session, said Mongolia paid much attention to the BFA as the forum played an important role in boosting regional cooperation. Source: Xinhua

SPEAKER DEMBEREL CALLS FOR ACTION IN KEY AREAS Speaker D. Demberel has expressed the hope that the present session of Parliament will take appropriate decisions on some key issues on a priority basis. The Government has been asked to prepare a report on increasing citizens’ income and submit it to Parliament. Government officials’ wages also need to be increased. Herders, who make substantial contribution to the economy, are now facing severe challenges and many of them are in no position to repay their bank loans. Some solution has to be found to this after talking to the lending banks. In 2009, 7.1 million tons of coal and 1.6 million tons of iron ore were exported whereas the corresponding figures for the first two months of this year are 1.1 million tons and 300,000 tons respectively. Their prices have also gone up, so it must be ensured that appropriate trade agreements are made and also that the anticipated increase in tax revenue does indeed materialize. Some financial power and authority must be passed on to local governments. He also wants firm action to stress and strengthen Mongolia’s commitment to democracy and the market economy. Source: Udriin Sonin

PM SAYS RAILWAY POLICY WILL HELP GET TWO ROUTES TO SEA

Placing before Parliament the Government policy on railway transportation, Prime Minister S. Batbold said the policy has to be seen as an extension of Mongolia’s foreign relations and in terms of long-term trade needs. The proposed railway will afford the country two routes to the sea, one through each neighbor. It will also help in putting Mongolia on the Asia-Europe link program.‖ Source: Undesnii Shuudan

RUSSIAN SIDE ARRIVES TO DISCUSS THE ISSUE OF DEBT

A joint Russia-Mongolia working group, set up two months ago, has just begun work on reviewing all issues relating to the outstanding debt to Russia. A Russian team led by a Deputy Director in the Foreign and National Debt Department in the Ministry of Finance arrived in Mongolia last week. The Mongolian side is led by the Head of the Debt Management Department in the Ministry of Finance. The two teams have been studying and discussing documents, but there is no word as yet that any agreement is near. Source: Undesnii Shuudan

MPs‟ GROUP PRESENTS ANOTHER DRAFT ELECTION LAW

A working group consisting of heavyweight MPs like Mr. D.Lundeejantsan, Mr. Ch.Saikhanbileg, Mr. Z.Enkhbold, Mr. E.Bat-Uul, Mr. S.Lambaa, Mrs. S.Oyun and several others has submitted a draft law

on elections to Parliament. It retains the general structure of the existing law, but the proposed amendments cover some 65 percent of the contents. Voting will be on any Wednesday in the second half of June, as people have been found to stay home over the weekend. The number of voters in any polling center will be 2,000 in districts, 3,000 in provincial centers and 4,000 in Ulaanbaatar. The election committees at each center will no longer include representatives of parties, unions and individual candidates. Instead, they will have only government staff. The draft also proposes to make the local State Registration Service responsible for preparing and updating the voter list at each constituency, taking the task away from the General Election Committee. The draft wants the proportional representation system to be adopted and lists procedures to be followed when nominating candidates, from parties and unions as well as non-party individuals, the qualifications for candidates, grounds for rejection of nominations, etc. Every candidate must have their campaign expenses estimated by some external organization and none can receive more than MNT1 million from an individual and MNT3 million from an organization. A party will have to poll at least 7 percent of total valid votes to get representation in Parliament. The total percentage received by a party will be divided proportionally among its candidates. Every party list has to include the name of at least two Kazakhs and 15 women. Read more… One of the developers of the draft, Mr. E.Bat-Uul, said that the present law has been universally criticized. An election must be as fair as possible. Only then will all results be accepted in good grace. ―Our draft is certainly not flawless, but we have tried to make the fewest mistakes and to make it widely acceptable,‖ he said. Another member of the group, Mrs. Oyun, admitted the 7% minimum limit is too high but most in the group felt this would reduce the role of money power. No calculation however has been made on how many candidates can win with 7% or more of votes. Even with at least 15% of the candidates being women, she felt most of the ultimate winners will be men. Source: English.News.mn, Udriin Sonin

KHONGOR RESIDENTS COMPLAIN OF OFFICIAL COVER-UP OF TOXICITY

A team representing the citizens of Khongor district in Darkhan-Uul province has accused the Government of concealing the fact that toxic chemicals such as cyanide were found in the soil of Khongor, and of covering up the World Health Organization (WHO) report on the extent of toxicity in the district. Still births among both humans and animals are even now taking place and skin diseases and other strange complaints are also common, but no reason for this has been formally given so far, they alleged and blamed ―a certain official‖ for masterminding the cover-up. They also identified several others as having connived in this. They said WHO analysts had told civil representatives at the district last week that Khongor was not as much poisoned with mercury as two other districts but there was certainly toxicity there, with chemicals such as arsenic, cadmium and mercury present at considerably higher levels than permissible. The team told media that while officials protect their jobs by hiding facts, 60 people have died, many women have had miscarriages, and maybe all 2,300 residents, from babies to old people, have cancer. Source: Ardin Erkh

HUMAN RIGHTS GROUP FAILS TO MEET AS MPs STAY AWAY

The meeting of the Sub-Committee on Human Rights could not be held on Wednesday because there was no quorum, leading to speculation that MPs are not very willing to talk about the July 1 incidents. The head of the sub-committee, MP Kh.Temuujin, said it was unfortunate that MPs stayed away even after the meeting had been postponed three times. Source: Zuunii Medee

INSPECTION AGENCY RECORDING DEGRADED LAND The State Specialized Inspection Agency is preparing a list of areas left unrehabilitated after extraction and other mining activities in Khentii, Bayankhongor, Arkhangai, Uvurkhangai, Umnugovi, and Dornogovi provinces. A preliminary check has found that altogether 858.1 hectares of land has been degraded. Source: Minerals News

CONSERVATION PROGRAM TEAM VISITING MONGOLIA LATER THIS MONTH

A Business and Biodiversity Offsets Program (BBOP) delegation is to visit Mongolia from April 26

through May 3 at the invitation of the Ministry of Nature, Environment and Tourism. The Wildlife Conservation Society (WCS) is organizing the visit which will include meetings with a broad group of stakeholders, and engaging with the business community. In addition to a short presentation at the BCM’s monthly meeting on April 26, the BBOP delegation will also be providing two workshops: An Introduction to Biodiversity Offsets on the afternoon of April 28, and the more in-depth session A Technical Training on Biodiversity Offsets on the morning of April 29. Those interested should contact the following by April 21 for an invitation: Email: afine@wcs.org; Tel: +976 11 323 719. BBOP is a partnership between companies, governments and conservation experts to explore biodiversity offsets, a name given to conservation actions intended to compensate for the residual, unavoidable harm to biodiversity caused by development projects, so as to ensure no net loss of biodiversity. Source: The Wildlife Conservation Society Mongolia

RUSSIAN MEDALS FOR MONGOLIAN WAR VETERANS Russian President D.Medvedev has awarded commemorative medals to several Mongolians who served with the Soviet army in World War II, known here as the Great Patriotic War, that ended 65 years ago. Ambassador V.V.Samoilenko held a ceremony at the Russian Embassy last week to award the medals to the Mongolian veterans thus honored. Source: Montsame

MONGOLIA AND HONG KONG TO DEVELOP TIES

Prime Minister S. Batbold told senior officials of the Hong Kong Special Administrative Region (SAR) of China that Mongolia is interested in utilizing Hong Kong's experience in banking and security markets. The SAR Governor, Mr. Donald Tsang, replied that they were ―ready to help Mongolian companies and firms to increase their investments‖ and invited businessmen to come to Hong Kong to study experiences. He also offered to help Mongolia in scientific research and education. Both sides agreed that a direct Ulaanbaatar-Hong Kong flight would help further bilateral ties, boosting tourism and financial cooperation. A Mongolian Consulate in Hong Kong is likely to be opened soon.

Source: Montsame

SCIENCE COUNCIL OF ASIA TO MEET IN MONGOLIA NEXT YEAR

The 11th annual conference of the Science Council of Asia (SCA) will be held in Ulaanbaatar in 2011, to focus on ecological issues, particularly the reduction of desertification and sand movements, it was revealed after Deputy Prime Minister M. Enkhbold held talks with visiting SCA general secretary Masatoshi Tsunaki last week. The Mongolian Government and the Academy of Sciences will offer full support to make the conference a success. The SCA was founded in 2000, with its secretariat in Japan. It has members from 19 organizations in 11 countries. Mongolia became the 11th member country in 2004. The SCA focuses on sustainable development toward a prosperous, harmonious and greener Asia. Its first conference was held in Thailand in May 2001 and the 10th conference will be held in the Philippines later this year.

Source: Xinhua

MPs FIND TOUR OF AUSTRALIAN MINES INSTRUCTIVE Mr. A. Tleikhan has said he and the other MPs who recently visited Australia to study the mining scene therefore feel that the Australian model can be successfully replicated in Mongolia. Ownership of the property ―does not matter so much if the extraction operations are given to the right company on the basis of open and competitive bidding‖, he said. Since it has been decided not to dilute Government ownership of Tavan Tolgoi, Mongolia has only to choose the best possible company which will operate there. The work may be divided among 10 companies but the MP felt, from his Australian experience, that best results would be obtained if Mongolian companies were also involved as partners. The Australian emphasis on environmental rehabilitation and safety had also impressed the MPs. Source: Undesnii Shuudan

ANNOUNCEMENTS

“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.

____________________________________

“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

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 – April 15, 2010

Currency name Currency Rate

US dollars USD 1,392.05

Euro EUR 1,896.88

Japanese yen JPY 14.90

British pound GBP 2,144.31

Hong Kong dollar HKD 179.38

Chinese yuan CNY 203.94

Russian ruble RUB 47.94

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.