BCM Mongolia NewsWire Highlights
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Business:
Standing Committee forwards to Government proposals on draft OT agreement; MPs say OT advance payment is actually a “high-interest loan”; Tiny percentage of licenses actually used in mining; Mining Association wants bigger role for private sector; Mining firms should work for community development, says risk consultant; D.Enkhtur of Anod Bank on hunger strike in jail; Khan Bank introduces internet banking for cell phone users; Peabody completes acquisition of interest in joint venture with Polo in Mongolia; Rio Tinto head to gauge shareholders’ mood; Rio shares drop as talk of a rights issue grows; 21 currency exchange centers given new license.
Economy:
USA noncommittal about diverting MCC grant to new projects; Government wants better terms from Russian bank; Joint railway venture with Russia will need USD2 billion; Central Bank cuts interest rate to stimulate growth; Money supply marginally less than in March; SMEs to get low-interest loans; Consumer sentiment down, survey finds; Consumer prices rise 2.2 percent in a month, annual inflation rate drops to 12.5%; Government approves action program to balance budget; MPs mull banning mining near rivers to savewater sources; 26,000 companies come clean under tax amnesty law; Energy prices will increase step by step; Ministry wants to fix minimum wages; First phase of work on “Moscow” micro-district completed; Agricultural equipment from Russia arrives; Savings-and-credit workers receive training; MNCCI receives offer from Irkutsk; Crisis gives new lease of life to EBRD; Sheraton opens in June 2011; China outpaces USA in cleaner coal-fired plants.
Politics:
Friendly talks and signing of agreements mark Putin’s six-hour visit; Ministry wants fewer students at universities; Members of band return from Moscow with no swine flu; 121 children living in streets; More babies born, and more die, too; Mongolia ranks 29th in childcare among developing nations; 850th birthday of Chinggis Khaan next year; Mongolian diplomats in Europe meet; No cars on May 31; Newspaper sales fall 3 million copies in a year.
LEAD STORIES:
STANDING COMMITTEE FORWARDS TO GOVERNMENT PROPOSALS ON DRAFT OT AGREEMENT
The Standing Committee on the Economy last week discussed the 11 recommendations submitted by two working groups set up to review proposals and suggestions on the draft Oyu Tolgoi investment agreement. These were received from party groups in Parliament, individual MPs, the media, and NGOs as well as concerned citizens. The committee decided to forward these recommendations to the Government for consideration to be incorporated in the draft before it is submitted to Parliament for approval. They include the following. The draft includes references to some taxes that are new and also to some at variance with present tax regulations, but does not explain how these would be enforced. Both party groups in Parliament have proposed to cut the initial agreement period from 30 years to 15 years, but this can be done only after amending the current minerals law. Also, according to the draft the initial 30-year period could be extended for two 20-year periods, thus making it possible that the agreement will be valid for 70 years. This should be clarified. The draft is also not clear about just when Mongolia can demand raising its 34% stake to 50%. At one point it says this can be done after Mongolia has repaid the amount invested on its behalf, but elsewhere it says this can be done a year after extending the initial agreement. The arrangement of the quantum of money that is to be spent by the investors as Mongolia’s 34% share of ownership and that will be adjusted against future dividends was not of benefit for the country. It was also not clear how the figure of USD5 billion had been arrived at as the investment share equivalent to 34% ownership. The USD125 million advance payment to Mongolia carries too high an interest rate considering the amount is not very big. The area where the agreement will apply must clearly be limited to the Oyu Tolgoi copper and gold deposit as registered in State documents and should not extend to any other area of the investor’s exploration and extraction work, nor should the various tax waivers offered in the agreement be allowed to be claimed for any work anywhere outside the specific deposits covered by the agreement. The details of the work schedule on the proposed copper smelter to be set up, its capacity, and sources of its funding should be included in the agreement. Since the draft says that in case any conflict arises between the English and Mongolian versions of the agreement the former will prevail, utmost care should be taken to see that both versions are identical in language and content and both sides must consent to regard both versions as binding. The investor will provide regular and adequate information about the project’s negative impact on the environment to the local people. The environmental restoration program must be transparent. Members were critical of the poor quality of the feasibility study. The Minister of Natural Resources and Energy, Mr. D.Zorigt, said an updated and upgraded version of the study has now been submitted to Speaker D.Demberel. Oyu Tolgoi is currently operated by Ivanhoe Mines (TSX:IVN) and its strategic partner, Rio Tinto (NYSE:RTP). Source: Zuunii Medee, www.news.mn, business-Mongolia.com
USA NONCOMMITTAL ABOUT DIVERTING MCC GRANT TO NEW PROECTS
The US has given a noncommittal reply to a recent enquiry from Mongolia if the MCC grant refused by Ulaanbaatar Railway can be diverted to new development projects. Secretary of State Hillary Clinton’s acknowledgment of a letter from Foreign Affairs and Trade Minister S.Batbold does not say anything about the request. She merely says Mongolia remains among the countries chosen by the USA to receive assistance from the Millennium Challenge Account, and reiterates continued US support to the Mongolian people in strengthening democratic institutions and in aiming for prosperity. Meanwhile, the Government met last week for another discussion on identifying projects for which it hopes to get MCC funds. Five such projects are likely to be forwarded. The first is on traumatology and prevention and control of common non-infectious diseases like blood pressure, diabetes, throat, intestinal, breast and cervical cancer, and heart attacks and apoplexy; the second on short- and long-term vocational training, including establishing colleges based on US community college models; the third on developing an intensive farm program near urban centers; the fourth is on air pollution control and production of clean energy; and the last to widen a road between Ulaanbaatar and Darkhan in 2010-12. The Foreign Affairs and Trade Ministry has denied “rumors that Mongolians have refused US aid” and has asserted that three of the four MCC-funded projects are on track. These relate to property rights, vocational training and healthcare and education. The Minister has written to the MCC Board of Directors explaining the background to the case of the railway project and the Ministry says the US Government “fully understands the Mongolian side’s intention to look for alternatives”. The MCC Board will meet on June 17. Source: www.gogo.mn, en.News.mn, The Ministry of Foreign Affairs and Trade
CENTRAL BANK CUTS INTEREST RATE TO STIMULATE GROWTH
The Central Bank reduced on Tuesday its interest rate from 14 to 12.75 percent. Its President, Mr. L.Purevdorj, told journalists that with the rate of inflation coming down to 12.5 percent in April from 20.7 percent in January (year-over-year), and with exchange rates expected to stabilize, it is now time to stimulate economic activity and put more money in the market. He hoped commercial banks would begin lending at lower rates, but knew this would not happen immediately “as banks have to meet their own compulsions”. Mr.Purevdorj said there would be no change in the quantum of reserve funds commercial banks are required to have. “Our policy is to help commercial banks expand and reduce the number of small banks,” he said. Source: en.News.mn
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