BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 193, November 11 2011

NEWS HIGHLIGHTS: Business

Petro Matad reevaluates oil expectations at Davsan Tolgoi;

TT and OT to have own power plants;

Khan Bank announces changes in management;

Standard & Poor's and Moody's rate Golomt Bank;

SouthGobi reports record earnings;

Erdenes TT adds IARUDI to its roster of advisors;

Erdene to raise capital for exploration;

Haranga takes a bigger piece of Selenge project;

Trafigura plans to wake a “sleeping giant”;

Parliament stalls Centerra's plans to ramp up production;

Origo and Trafigura partner for coal investment;

Housing Finance Corp. establishes rules for 100,000 Apartments program;

Forex losses cut Cameco’s profits;

Rio brushes off fears about China's decline.

Economics

M&A deals likely to prevail in mining sector, says expert panel;

Mongolia vulnerable to economic perils in west, says Central Bank;

Falling stock prices in Mongolia due to slower growth in China;

Ties to China shield Mongolia from economic turmoil;

Mongolia’s “Doing Business” ranking a little better in 2012;

Mine workers expected to receive series of salary increases;

Countryside banks refuse loans;

Rise in imports contributes to record deficit;

Government struggles to meet living standards with economic growth;

Mining sector sets trajectory towards new wealth;

Mongolia moves to innovate its production;

U.S. contemplates rare earth stockpile;

Hong Kong Exchange IPOs on the decline;

European banks collapse threatens to crush credit in Asia;

Silk road expands past the Pacific.

Politics

Higher interest rates not enough, says MPs;

DP takes campaign contributions on the web;

MPP convention set for late November;

DP supporters continue push for Batbold's resignation;

New bill to distribute 1,072 TT shares to citizens;

Business leader protests 20 percent stock distribution to citizens;

Doctors and teachers threaten to strike;

State Budget to contract in 2013;

Government to provide discounts for electricity to eligible families;

WikiLeaks releases media ties with politicians;

Dalai Lama visits UB;

Elbegdorj observes 90 years of relations with Russia;

MPRP accuse coalition of conspiracy;

Christianity drives a rift between young people and traditional society;

Families shrink as women rise in status;

Mongolian woman leads by example in South Korea.

*Click on titles above to link to articles

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BUSINESS PETRO MATAD REEVALUATES OIL EXPECTATIONS AT DAVSAN TOLGOI No oil has been recovered during tests at the Davsan Tolgoi 11 well (DT-11). Oil encountered during the drilling of DT-11, in addition to oil observed at DT-1, 2, 3, is now considered to be residual oil. Four wells drilled at a lower elevation to the crest of Davsan Tolgoi are still considered valid candidates for further testing and possible stimulation. The drilling program indicates a petroleum system on Block XX does exist, and exploration will continue.

“We are disappointed that the test results from DT-11 have revealed that the crest of Davsan Tolgoi anticline does not contain commercial oil,” said Doug McGay, Petrod Matad‟s chief executive officer. “However, it is important to note that the focus on the prospect on the crestal area is only one component of Davsan Tolgoi and there is still scope for the development of other parts of the prospect. In addition, there remains advanced exploration potential in the area around Davsan Tolgoi and the other basins in Block XX are developing into promising plays.” Wells where drilling reached lower depths exhibit differences from DT-1, 2, 3, and 11. The oil remains in place, presumably because the greater pressure at depths keeps the faults tightly sealed so that the reservoirs are not breached and flushed. Secondly, oils from the deeper wells are lighter. McGay said the company will assess other aspects of the company's exploration program for this year. The company believes the drilling program has proven a petroleum system on Block XX exists and will continue exploration. Exploration and drilling activities for DT-4, 5, 7, and 8 will go forward.

Source: Petro Matad Limited

TT AND OT TO HAVE THEIR OWN POWER PLANTS Both Oyu Tolgoi and Tavan Tolgoi will have separate power plants to address their energy needs. The government committed to resolving a variety of pressing issues regarding infrastructure to the development of the South Gobi region in a recent cabinet meeting. The government hopes to address issues regarding water, transportation, and energy supply in the Gobi. The government commissioned Erdenes Tavan Tolgoi to complete a feasibility study for a power plant for its mining operations this year. Meanwhile, Oyu Tolgoi is responsible for building a power plant to supply enough energy for production without impacting the project's budget cost and to consume coal produced by Tavan Tolgoi. To expand the region‟s water supply government also plans to explore for underground water sources near or at Tavan Tolgoi and Sainshand. For transportation, the government plans to construct a four-lane, 245 kilometer paved road from Tavan Tolgoi to Gashuun Sukhait, bordering China. It is also investigating the possibility for roads from the South Gobi to Khangai Mandal Soum and The Zamyn Uud border zone to China. Mongolian Mining Corporation (MMC) reported last month the completion of its commissioned paved road between its Ukhaa Khudag coking coal mine and the Gashuun Sukhait border zone to China. The two lane road is intended for heavy-loaded coal trucks. “Putting responsibility for developing the power plants in the hands of investors should ensure that the mines will have sufficient power when it is needed,” said Senior Infrastructure Specialist of World Bank Jim Reichert.

Source: Frontier Securities

KHAN BANK ANNOUNCES CHANGES IN MANAGEMENT Khan Bank announced this week that Simon Morris has decided to resign in order to join a larger Asian bank as Chief Executive Officer. Mr. Hideo Sawada, the Board Chairman, commented: “During his time as CEO, Simon has taken the Bank to a new level of performance, and he leaves the Bank in very good shape. We thank him for his endeavors.” “My time at Khan Bank has been rewarding and fulfilling,” said Simon Morris. “I would like to thank the Board, our customers, and staff for the support, trust, and confidence that they had in me whilst I was the CEO of this bank”. Khan Bank announced that Mr. Norihiko Kato is appointed as acting CEO. Mr. Kato is an experienced banker with over 25 years of experience in senior management positions in the Bank of Tokyo-Mitsubishi UFJ in the Middle East, Netherlands, the USA, and Japan. In 2009-2010, Mr. Kato led the Wholesale Banking team at Khan Bank and was successful in building up the skills and capacities of the team, leading the restructuring of problem loans, and introducing new services and products for corporate clients of the Bank. Mr. Kato commented: “I‟m very excited about this opportunity to work with the Bank‟s customers and staff again.” Khan Bank also announced that Mr. D. Molomjamts has been appointed as Independent Director of the Bank. The Board is honored that Mr. Molomjamts accepted the offer to join the Board. As a former Governor of Bank of Mongolia and Minister of Finance, his extensive experience will be invaluable to

the Bank. Source: Khan Bank

STANDARD & POOR'S AND MOODY'S RATE GOLOMT BANK Golomt Bank has become the first Mongolian bank to earn ratings from the world's two leading global credit rating agencies, Moody's and Standard & Poor's. Moody's awarded Golomt the highest rating in the Mongolian banking sector. Both credit raters declared Golomt Bank to be a stable banker. Golomt is the first institution to receive a rating from Standard and Poor's. Standard & Poor‟s cited Golomt's good position in card services, international trade, finance and services, proactive capital management, and more diversified business mix than its local peers as evidence for its rating. The firm also mentioned Mongolia‟s strong economic growth prospects as evident from it 16.7 percent growth in its gross domestic product (GDP) in the first three quarters of 2012, one of the highest in the world.

Source: News.mn

SOUTHGOBI REPORTS RECORD EARNINGS SouthGobi Resources has reported a net income of USD 55.9 million, rising 97 percent from 27.5 million 12 months ago with shares rising to USD 0.31 each. Income from mine operations for the quarter increased to a record of USD 20.6 million. The net income in the quarter was primarily due to the USD 62.1 million gain on the fair value change of the embedded derivatives in the China Investment Corporation convertible debenture bond. Income from mine operations for the quarter increased to a record of USD 20.6 million compared to a loss from mine operations of USD 6.7 million last year. Revenues for the quarter grew to USD 60.5 million from USD 6.6 million from 12 months ago. Revenue was negatively impacted by an increase in the average proportional royalty payable. The effective royalty for the quarter was 16 percent compared to 5 percent last year. The revenue for the quarter represented the highest quarterly revenue since the commencement of mining operations. Total raw coal production for the quarter more than doubled to 1.25 million tons from 0.57 million tons in the year-ago quarter. The company sold 1.37 million tons of coal at an average realized selling price of approximately USD 54 per ton. It views market conditions for the fourth quarter of 2012 as similar to those in the third quarter. However, the company said it is more difficult to forecast volumes for the period. SouthGobi owns three coal projects in Mongolia, including Ovoot Tolgoi Mine, a producing mine; and two development projects, the Soumber Deposit and the Ovoot Tolgoi Underground Deposit. During the quarter the company was awarded the tender to construct a paved highway from Ovoot Tolgoi to the Chinese border with consortium partner NTB.

Source: RTT News

ERDENES TT ADDS IARUDI TO ITS ROSTER OF ADVISORS IARUDI Consulting has begun work with Erdenes Tavan Tolgoi to assist with management reporting, technical accounting and IFRS compliant reporting. IARUDI joins Goldman Sachs, BNP Paribas, Deutsche Bank, Macquarie, Norton Rose, and PricewaterhouseCoopers in advisement to the firm. “We are thrilled to be working so closely with ETT here in Mongolia,” said Chris Hurde, chief executive officer. “ETT is set to have an enormous impact on the Mongolian economy and it is an excellent opportunity for us to play a part in its department.” IARUDI Consulting is a Mongolian consulting firm based in Central Tower, Ulaanbaatar. The firm provides professional accounting and compliance services to foreign clients looking to become established in the local marketplace and Mongolian companies looking to expand or list on international stock exchanges.

Source: IARUDI Consulting LLC

ERDENE TO RAISE CAPITAL FOR EXPLORATION Erdene Resources Development Corp. (ERDC) will issue additional shares on the Toronto Stock Exchange (TSX) to raise additional capital for exploration. ERDC will issue shares worth USD 2 million. The price of a new share will be discounted by 9.3 percent

from the average closing price from 1 November to 10. Erdene has operated in Mongolia since 1994. It has developed a copper and molybdenum deposit mine in the Zuunmod area. Source: News.mn

HARANGA TAKES A BIGGER PIECE OF SELENGE PROJECT Haranga Resources acquired a further 20 percent interest in the joint venture company that holds the five exploration licenses comprising the Selenge iron ore project, bringing its total interest to 80 percent. Significant widths of iron mineralization have been intersected at all three of the iron ore targets drilled at Selenge to date and drilling is ongoing with four diamond rigs currently in operation. Metallurgical test work has commenced on initial samples from Bayantsogt and the company is aiming to define an initial JORC Resource by early 2012. The company's Selenge iron ore project covers 600 square kilometers in the heart of Mongolia's premier iron ore development region, and has access to the main trans-Mongolian rail line and nearby rail spurs. Mineralization at Bayantsogt is similar to the nearby 300 million ton Eruu Gol deposit. Initial drilling at the larger Dund Bulag prospect has recently discovered significant widths of iron mineralization of a similar nature to that observed at Bayantsogt as well. Minerals discovered from initial drilling at Huiten Gol appear to be smaller in width but of a higher iron grade than at Bayantsogt. Results of the samples from Dund Bulag and Huiten Gol are pending. Haranga Resources is a mining and exploration firm focused on developing high quality iron ore projects in Mongolia.

Source: Proactive Investors

TRAFIGURA PLANS TO WAKE A “SLEEPING GIANT” The world's second largest independent trader of non-ferrous metals, Trafigura Beheer BV, plans to expand in Mongolia to deliver more iron ore, coal and copper to the China market. Trafigura secured its first iron ore and coal supply agreement in the country in the past few months. Trafigura's first Mongolian tin shipment is due this week. “In all commodity businesses I anticipate strong growth, and in the bulk commodities of coal and iron ore I am targeting a multiple of what we already have,” said Mikhail Zeldovich, head of Trafigura‟s Russia and Mongolia unit. “We very much see Mongolia as a sleeping giant of resources that's now beginning to awaken.” Mongolia in June surpassed Australia as the biggest seller of coking coal to China and total exports are due to rise 65 percent this year. Economic growth may surge to 23 percent in 2013, more than twice the forecast expansion in China, as mining projects begin production. Last year, Amsterdam-based Trafigura provided more than USD 40 million in financing to help start production at a lead and zinc mine in eastern Mongolia. The trader has also invested in a trucking company in Mongolia to transport coal from producers including Mongolyn Alt Group to China. It ranks among the top three sells of copper in Mongolia. The Trafigura team has grown to more than 80 local staff since began buying copper from local smelters in 1997, and more will be added. Trafigura is now considering investments in a “few” miners close to starting production, but Zeldovich didn't go into detail. Trafigura has also set up a joint venture with Origo Partners, a Beijing-based private equity firm with stakes in a number of exploration assets in Mongolia, including Gobi Coal and Energy. The venture will explore for iron ore and coal in north and northwest Mongolia.

Source: Business Week

PARLIAMENT STALLS CENTERRA'S PLANS TO RAMP UP PRODUCTION Centerra Gold plans to boost production by 50 percent by 2014 to just under one million ounces yearly, said Chief Executive Officer Steve Lang. At the company's Boroo gold project, it is producing between 50,000 and 200,000 ounces a year using stockpiled ore, but Centerra wants to increase the mill's output to between 150,000 ounces and 200,000 ounces a year with ore from the Gatsuurt deposit 35 kilometers away. Although the government has delayed permission, Lang remains confident Centerra will ultimately win approval. The problem began in 2009 when the government introduced a new law prohibiting mining development in forested areas or at headwaters, while providing compensation to companies whose license it

revoked. Gatsuurt was one of those projects. After Parliament learned it would need to spend USD 5 billion to compensate license holders, it decided it would enforce the law in stages. The first victims were about 500 mainly local alluvial miners. The companies decided to sue after it became apparent the state would struggle to pay the USD 500 million due to them. In response, Prime Minister S. Batbold suspended the law, and the miners dropped their case. A Parliamentary committee amended the legislation. Those amendments would supposedly allow operations at Gatsuurt. After Parliament returned from its summer recess this fall, 20 MPs demanded a renegotiation of the Oyu Tolgoi investment agreement to increase government's stake in the project to 50 percent ahead of schedule. The government dropped the issue after investors began to feel disillusioned with investment opportunities in Mongolia. The affair impacted Centerra, however, because the amendments fell from Parliament's priority list, said Lang. Read more… He said although the situation was frustrating, it is perhaps best not to push an issue he perceived to be “an internal Mongolian matter.” The upcoming 2012 election could further delay the approval of the Gatsuurt project. Other growth will come from Centerra's flagship Kumtor mine. The Kumtor and Gatsuurt project combined would lift Centerra's output by about 50 percent to just under one million ounces annually in about three years, said Lang.

Source: Mining Weekly

ORIGO AND TRAFIGURA PARTNER FOR COAL INVESTMENT Private equity investment company Origo Partners and commodity trader Trafigura Beheer BV have formed a joint venture company to invest in Mongolian coal and iron ore opportunities. The 50-50 joint venture will invest in already identified projects in the country. The two companies have also agreed to consider expanding the scope into other countries in the region, including Kazakhstan and Russia, and to possibly cover all commodities. Luke Leslie, Origo's head of Mongolia and mining investments, and Mikhail Zeldovich, Trafigura's head of Russia-CIS and Mongolia, will manage the joint venture together. Origo is a private equity investor and fund management company. The company has a wholly-owned subsidiary in Ulaanbaatar which invests in Mongolian assets and investments. Trafigura has been involved in Mongolia's natural resources sector since 1997 and has a representative office in the capital.

Source: Mining Journal

HOUSING FINANCE CORP. ESTABLISHES RULES FOR 100,000 APARTMENTS PROGRAM The Housing Finance Corporation finished drafting rules for the Government's 100,000 Apartments program. According to the draft of rules, eligible first-time home buyers can obtain 25-year loans at a 6 percent interest rate from commercial banks. Apartments purchased under the program must be smaller than 50-square meters. The loan program will be implemented after a list of eligible apartments is completed. The government still must decide on a separate program that would give free land to people on lower incomes.

Source: CPSI Newsletter

FOREX LOSSES CUT CAMECO‟S Q3 PROFITS Third-quarter profits at leading uranium producer Cameco fell 60 percent to USD 39 million as a result of losses on foreign exchange derivatives, reported the company this week. On an adjusted basis, earnings rose 30 percent to USD 104 million due to higher sales volume prices. The company, which made a hostile CAD 520 million bid for junior Hathor Exploration in September, said uncertainty in the uranium market would continue in the near to medium term, as the industry figured out the impact of the Japanese nuclear disaster. “The biggest drivers of uncertainty are concerns about excess German and Japanese uranium inventories and the extent to which deferrals and cancellations under sales contracts will introduce additional volumes into the market, said Cameco. In the long term, the firm said it saw robust growth potential for nuclear fuel demand, as countries such as Russia, India, and China continued to build new power plants. Cameco said it was “reviewing” Hathor‟s announcement last month that it had agreed to a friendly CAD

575-million bid from diversified miner Rio Tinto, which was 11 percent higher than the uranium producer‟s hostile overture. Source: Mining Weekly

RIO BRUSHES OFF FEARS ABOUT CHINA'S DECLINE Rio Tinto sought last week to brush off fears of a global economic slowdown and softening demand for industrial commodities in China, Rio's biggest market, where it said the economy should remain resilient. As a 49 percent stakeholder in Ivanhoe Mines, the 66 percent owner of the Oyu Tolgoi copper and gold project, and the head of operations for the project, China will continue to a key consumer of Rio goods as China is the number one consumer of fuel and minerals from Mongolia. “While the declining prospects in the west will undoubtedly contribute to the Chinese slowdown, domestic demand including domestic consumer remains strong,” Jan du Plessis, Rio Tinto chairperson. “That is why at Rio we continue to believe that China would be fairly resilient to even a quite sharp correction in the OECD economies.” China has been raising interest rates and banks' reserve requirement ratios to fight inflation and rein in borrowing, policies Premier Wen Jiabao has vowed will remain Beijing's top priority. A by-product of the strategy has been a slowing in new purchases of imports such as iron ore and copper, key revenue-getters for revenue. Rio is accelerating a plan to lift output by 50 percent to 333 million tons a year by 2015.

Source: Reuters

ECONOMY M&A DEALS LIKELY TO PREVAIL IN MINING SECTOR, SAYS EXPERT PANEL “It is very clear that mining is dominating the M&A (mergers and acquisitions) sector,” said Business Council of Mongolia (BCM) Executive Director Jim Dwyer at Mergermarket's “Mongolia: New Frontiers in M&A and Private Equity” forum this week. Since 2007, businesses have completed 80 M&A deals, of which USD 1.3 billion was spent on coal acquisitions. Possible future transactions include several companies with Mongolian assets in which large international entities own significant interests - Ivanhoe Mines, SouthGobi Resources, Aspire Mining, Sharyn Gol, Entrée Gold, and Xanadu Mines. This week a panel of seven experts spoke about M&A activities in Mongolia's mining sector. In addition to Dwyer as the event's moderator, panelists included Goldstream Managing Director and Mongolian Stock Exchange Chairman B. Baatar, Mongolia Opportunities Partners Managing Director Mandar Jayawant, Hunnu Coal Managing Director L. “George” Tumur, Citigroup‟s Head of Mergers & Acquisitions-Asia Douglas Farrell, and Davis Polk & Wardwell partners Mark Lehmkuhler and Bonnie Chan. Strategic investors have dominated the market because they prefer to control their own risks and have expertise in a sector as opposed to institutional investors, said Jayawant. “In Mongolia we are now seeing a generational transition where privatized companies that are now run by owners are seeing the younger generation‟s 'repats' who are ready to take over,” said Baatar. “This could result in a consolidation of sectors.” He added that state-run firms will not likely ever be sold out 100 percent, but are more likely candidates for pre-IPO placements and IPO‟s. Questions from the audience included a focus on safety to investors. Jayawant recommended that goals be clearly communicated so a minority investor will not be overshadowed by the majority holders. Farrell added that investors can use contingent “earn-out” payments that allow payment only if certain conditions are met as a method of bridging valuation differences between buyers and sellers. Farrell cited as an example Citigroup‟s client, Mongolian Mining Corporation, and its acquisition of QGX for $465 million in cash and notes plus an “earn-out”. Mergermarket, a unit of the Financial Times, co-hosted the event with the BCM and Davis Polk & Wardwell at the Kempinski Hotel attended by 150 business professionals in Mongolia.

Source: Business Council of Mongolia

MONGOLIA VULNERABLE TO ECONOMIC PERILS IN WEST, SAYS CENTRAL BANK Mongolia is not immune to the possibility of economic crisis, which has struck terror in the west, warned Governor of the Bank of Mongolia L. Purevdorj. Both the International Monetary Fund (IMF) and

World Bank have warned that the world economy is headed for another economic crisis. Stagnating growth in the western world threatens to pull down Mongolian exports, especially copper. It is possible that the 2008-2009 economic crisis could repeat itself, he said. To combat inflation, the Central Bank has tightened its monetary policy. It aims to achieve sustainable economic growth that will be stable over the long term. Sustainable economic growth includes inflation below 10 percent, limited yet stable economic growth, and confidence in the Mongolian tugrug. If inflation grows above 10 percent, it could create uncertainty towards consumption, investment, and savings and loans. Even at 10 percent, inflation could be a tremendous challenge to reducing poverty and maintaining the living standards in Mongolia. Purevdorj blamed the possibility of recession in Mongolia on a too-fast expanding budget, government intervention in the market and appreciation of the tugrug. To counter these issues, the governor prescribed a wider distribution of growth, increased productivity and jobs, and priority given to the development of the private sectors. State policy should also encourage growth in finance. If banks cannot increase their equity or improve management, they risk damaging the entire sector, he said. Read more… Mongolia's economy has grown to a record breaking 16.7 percent in the first three quarters in 2011. Currently, however, Mongolia is entirely dependent on the revenue from mineral exports, making it vulnerable to external changes. Salary raises to employees of the government and the mining sector have made it difficult for the private sector to compete to attract outstanding employees. Bank reserves have grown 26.7 percent to reach MNT 8.1 million, and credit has risen 48.2 percent to MNT 4.9 trillion in the first nine months of this year. Interest rates on loans have decreased 3.3 percent, while U.S. dollar loans have fallen 2 percent. Banks will have to grow bigger to effectively handle growing financial assets, said Purevdorj.

Source: Frontier Securities, Zuunii Medee

FALLING STOCK PRICES IN MONGOLIA DUE TO SLOWER GROWTH IN CHINA Although little has changed domestically, Mongolian mining stock prices have been falling during the last six months. The cool down is likely due to indications that China may be headed towards significant slowdown. The slowdown was engineered by the Chinese government, which has been tightening its monetary policy to fight inflation and to cool down its real estate sector. As a result, demand for construction related commodities such as steel, cement, and copper have experienced devaluations. Demand for raw materials from Mongolia could slow down at least in the next few months. Although Mongolian products have lower prices and consequently a cushion against this demand shock, investors' confidence in China's growth is faltering in response to this news. A slowdown in steel demand means that coking coal, a key ingredient for steel production, will fall too. However, since Mongolian commodities are cheaper than Australian and Indian products, the demand for the latter two will fall first. Investors' confidence in Mongolian mining stocks is directly related to the outlook on China's economy. Although the current slowdown is due to the government's efforts to cool the growth, there could be deeper problems in China's economy, reported the source.

Source: MICC

TIES TO CHINA SHIELD MONGOLIA FROM ECONOMIC TURMOIL Research by risk analysis firm Maplecroft this year reveals high levels of economic integration with BRIC nations (Brazil, Russia, India, and China) buffered regional partners and resource rich countries from global downturn. Synergies with both Russia and especially China provides Mongolia with added protection against economic decline. The 20 of the most integrated countries during the 2008-2009 economic crisis experienced average growth of 2.3, while the bottom 20 contracted by about 1 percent. New research into the BRIC nations has revealed that the countries with the highest economic integration with the emerging powers managed to sustain growth during the global downturn of 2008 and 2009, compared to a contraction seen in the countries with the least financial ties. “If this economic resilience is indeed a product of integration with the emerging powers, we can expect the most integrated countries to better withstand a similar downturn that of 2008 and 2009,” said Chris

Dixon, risk analyst at Maplecroft. However, should the current economic turbulence in Europe and the United States spread, investment risks in the economies may increase.” The emerging Power Integration Index Series released by Maplecroft assess the economic integration of 180 countries with each of the BRIC nations, as well as South Africa The economic strength of the emerging powers, especially China, proved critical in the wake of the 2008-2009 crisis. Read more… Maplecroft's analysis reveals a clear distinction in the economic performance following the onset of the crisis between the countries with close trading and investment links to BRIC nations and those without. The economic emergence of the BRIC nations has had a dramatic effect on global commerce patterns. The past two decades have seen the expansion of multinational operations and supply chains in the BRIC nations, as companies attempt to exploit new investment opportunities that align with long-term growth potential. The global shift became more apparent with the quick recovery of the BRIC nations compared to advanced economies which floundered following the 2008-2009 crisis.

Source: Maplecroft

MONGOLIA‟S “DOING BUSINESS” RANKING A LITTLE BETTER IN 2012 Mongolia moved up its rank three places in the World Bank „Doing Business 2012‟ report. This year Mongolia landed at 86 out of a total 183 countries on the report. The report notes significant improvements in the ability to obtain permits for construction as well as getting credit. The largest detractors were found in tax payments and ease to open a business. Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-sized business when complying with relevant regulations. It measures and tracks changes in regulations affecting 10 areas in the life cycle of a business. Source: World Bank

MINE WORKERS EXPECTED TO RECEIVE SERIES OF SALARY INCREASES Mine workers are due to receive a 19 percent salary increase by the end of this year. Although mine workers will receive the raises, it will only amount to a 5 percent real increase to their purchasing power. Inflation will account for 14 percent of salary increases offered by mining firms. The suggested salaries are actually higher than salaries offered in Europe, but are average in developing countries. The PwC Salary Survey Team has said that salaries n the mining sectors are expected to rise by another 12 to 13 percent next year. The mining sector currently has a shortage of skilled workers to fill positions such as mechanics, electricians, and welders.

Source: Unuudur

COUNTRYSIDE BANKS REFUSE LOANS In response to the Bank of Mongolia's 0.5 percent increase in its policy interest rates, some commercial banks have opted to discontinue their loan services at branches in the countryside. The central bank says it has raised interest rates to 12.25 percent to bring stability to the economy. It has no plans to reduce interest in the near future. While some banks have discontinued their loan services, others have raised their interest rates.

Source: Undesnii Shuudan

RISE IN IMPORTS CONTRIBUTES TO RECORD DEFICIT Imports are rising fast, reported the Central Bank of Mongolia last week, contributing to a record deficit of USD 1.4 billion. The external trade condition index, a comparison of 10 products that make up about 90 percent of exports and imports of now and 2000, is up for the first time in 12 months. In the third quarter, external trade in Mongolia increased 92.4 percent year-on-year to reach USD 8.2 billion. Exports are up by 66.7 percent at USD 3.3 billion, while imports are up 114.7 percent at USD 4.8 billion. Almost all of Mongolia's products in the external trade condition index are from the minerals sector. Coal makes up 41.8 percent of all exports, while copper is 22.3 percent, iron is 9 percent, and crude oil is 5.3 percent. The growth in exports resulted from an increased volume of exports and price growth in minerals. However, copper concentrate, non-monetized gold, molybdenum, and cashmere have all experienced a decline in volume traded. A combination of increased imports of heavy machinery and

mechanisms, equipment, and spare parts; petroleum; and vehicles have all contributed to a doubling of imports received in Mongolia. “A booming mining industry, especially the Oyu Tolgoi ramp up, spurred these imports, especially for transport equipment and machinery,” said Frontier Securities Chief Market Strategist Dale Choi. “Mongolians are also spending more on consumption as a result of higher incomes.” Choi said Mongolia benefited from nearly all of the price hikes in commodities, especially in coal. Coal will continue to lead Mongolia's exports until Oyu Tolgoi reaches operation. Imports have, however, increased Mongolia's deficit to a record USD 1.4 billion. How Mongolia fares in the future will depend mainly on demand from China. If commodity prices fall, exports and government revenue will take a dramatic hit.

Source: Frontier Securities

GOVERNMENT STRUGGLES TO MEET LIVING STANDARDS WITH ECONOMIC GROWTH Although Mongolia's growth parallels that of Qatar and Kazakhstan, it must face significant challenges to provide the basic needs to its citizens, said Chairman of the Mongolian Stock Exchange (MSE) B. Bold. Real gross domestic product (GDP) growth in the third quarter this year has reached 16.7 percent, reported the National Statistics Office. However, that wealth has not reached everyone. Of the total population living in Ulaanbaatar, 60 percent live in substandard housing that is heated by coal and wood stoves, one of the key contributors to severe pollution in the city during the winter time. Ulaanbaatar currently holds the title as the world's most polluted city in winter. Existing centralized heating for current modern housing is also adding to pollution levels. Authorities are determined to resolve the issue of air and water pollution and improve Ulaanbaatar's infrastructure. Trade and Development Bank estimates that USD 300 million of investment is needed for road repair in the capital. This all is to the benefit of investment opportunities in property and real estate, also supported by demand from the local population and an influx of expatriate personal entering the country.

Source: Frontier Securities

MINING SECTOR SETS TRAJECTORY TOWARDS NEW WEALTH A nation of just over three million, where herding and agriculture is still a major aspect of people's lives, Mongolia is on the cusp of prosperity. Experts estimate the country possesses up to USD 1 trillion worth of untapped resources. That would result in over USD 333,333 per every man, woman and child in the country. Having entered 2011 with 6.7 percent economic growth during economic turmoil in the rest of the world, growth this year could hit 14 percent. Other estimates predict it could grow as high as 20 percent, or if the informal economy is taken into account could even approach 40 percent. The Oyu Tolgoi copper and gold project will soon be a major source of income in 2013 when operations begin. Oyu Tolgoi should earn USD 5 billion per year for half a century, said James Passin, manager and co-founder of Firebird Management. Mongolia is also the site of major gold, uranium, and coking coal deposits. It hopes to exploit its coking coal for new coal-to-liquid fuel technologies. Added revenue in the hands of government has added pressure on officials to develop policies for long-term stable growth. Government also hopes to avoid “Dutch disease,” a resource curse that has plagued other resource-based economies. Additionally, rapid economic development has placed its toll on water supplies and forests, causing the government to improve enforcement of existing laws and establish national parks to make them off-limits to development. “Even though we have this important and promising income [from the mining sector], ... we need to deal with growth carefully in order to avoid [overheating] the economy,” said Prime Minister S. Batbold during a forum held in New York. “This is a topic we need to focus on.” He said Mongolia was at a “critical stage of its development,” acknowledging that inflation and a surge in disposable income are already creating problems. Dependence on oil and petrol imports is another vulnerability that can cause volatility in consumer costs.

Source: Eurasianet

MONGOLIA MOVES TOWARD INNOVATIVE PRODUCTION As a result of the Innovate Project instituted in 2009, 37 projects with nearly MNT 3 billion worth of funding have been introduced, said Prime Minister S. Batbold.

Last week Batbold gave a report entitled “The Process and Results of Innovation Activity.” The prime minister said 83.2 percent of Mongolian exports are unprocessed raw materials, 15.1 percent is semi processed, and 0.02 percent are high-tech products. Parliament has not yet debated the bill for the Law on Innovation. The passage of this law would mean an important step to the creation of a National Innovation System, said Batbold. As a result of the 2009 project, 40 technology and over 20 model factories and workshops will be introduced. The firm Monhimo is currently producing the sterilization products Sanitol and Tamedin and plans to produce nano calcium from horse bones for export to South Korea.

Source: Unuudur

U.S. CONTEMPLATES RARE EARTH STOCKPILE The creation of a U.S. rare earth strategic reserve is more likely to get the go-ahead after China's largest exporter halted production. Since China's decision to limit the production and export of rare earths, nations and companies dependent on the materials used for high-tech hardware have searched for new sources of production. Mongolia is one destination firms have looked to for a news source if demand continues. The decision by Inner Mongolia's Baotou Steel Rare-Earth to stop production for a month was described as a “wake up call” in the United States. The U.S Department of Defense is dependent on the rare earth elements for used in a variety of applications, including global positioning, and guidance and controls systems. The Baotou closure is the latest rare-earth related jolt from China. Last year, the country reduced its export quota by more than 37 percent. Afterwards, speculators helped create a “bubble effect” in the rare earth market, but prices have been on the decline since summer. The amount of sway China has over rare earth supplies has led to government concern and a scurry to develop production sources outside of the Asian nation. With prices having been kept lower for years by a glut of Chinese production, there had been little incentive for development of deposits outside of China. A U.S. stockpile, however, could exacerbate the shortage of rare earths outside of China. One expert advised that the United States would be wise to delay its implementation until three of four years after the ramp up of production from the main-non-Chinese rare earths miners, U.S. Molycorp and Australian Lynas. Although it would add a level of stability to rare earth supplies, a stockpile would add to demand for them. A second industry analyst said the creation of a strategic reserve would probably give a boost to rare earth prices in the short term. Even without a strategic reserve, Molycorp would be able to meet U.S. demand, he added.

Source: Financial Times

HONG KONG EXCHANGE IPOS ON THE DECLINE The Hong Kong market for initial public offerings (IPOs) is drying up as market volatility scares off companies and the approach of holidays, when IPOs typically stop. A number of Mongolian firms, such as Mongolian Mining Corporation trade on the Hong Kong Stock Exchange (HKEx). State-owned Erdenes Tavan Tolgoi will also likely list on the HKEx in addition to markets in London and Ulaanbaatar, but difficulties in hammering out an agreement and upcoming elections have delayed the deal. The fourth quarter is typically the biggest for IPOs in Hong Kong, accounting for 51 percent of annual IPO revenue, Hong Kong has been the top IPO destination in the world for the past two years and is second to New York this year. However, since market volatility grew over the summer, the IPO machine has stalled. A month into the fourth quarter, markets remain frozen. Only the USD1.7 billion Citic Securities IPO has completed. The window for IPOs typically shuts in mid-December, and an early showing for Chinese New Year on 23 January means offerings will not resume until February at the earliest. Read more… “For the investment banks' bankers, fees are not going to be at the level that many had hoped for and that obviously will have knock-on consequences to bonus pools,” said Keith Pogson, financial-services managing partner for Ernst & Young. If investors grow bullish again, a wave of IPOs could hit the market quickly. More than USD 20 billion worth of listings are awaiting release. However, the past few months have been littered with failed IPOs. Pushing against a rebound in the IPO market are the weak performance of earlier deals and

investor concerns about the market. Another hope for bankers is the window stays open until late December. That has happened before, but typically when the markets are strong and IPOs are flooding out.

Source: Wall Street Journal

EUROPEAN BANKS COLLAPSE THREATENS TO CRUSH CREDIT IN ASIA Stuart Gulliver, chief executive of HSBC, warned on Tuesday that Asia is facing the threat of a potential slowdown in the flow of credit to the region, especially from beleaguered European banks. A slowdown in China, a huge consumer of Mongolian exports, could have significant ramifications to Mongolia. Many Asian nations depend of foreign banks for a large chunk of their funding, raising the prospect of a credit crunch as cash-starved foreign banks either retrench or raise the price of their loans. Continental European banks were responsible for 21 percent of the USD 2,520 billion of international bank loans outstanding in Asia, excluding Japan as the second quarter of 2011. “The strong increases in credit availability in Asia that has supported demand growth cannot continue indefinitely,” said Gulliver. “Any reduction in credit availability is likely to be gradual—but it remains a risk policymakers will need to manage. And we need to be careful to monitor the risk of a sharp withdrawal of credit by European banks as a result of events at home. JPMorgan expects emerging market growth to slow to well below its current trend as a result of tighter financial market conditions as well as weaker capital inflows and sluggish external demand. Local banks are also seeing their cost of funds rise amid concerns about their asset quality, it said.

Source: Financial Times

SILK ROAD EXPANDS PAST THE PACIFIC While the European Union struggles to resolve its foreign debt crisis and the United States worries over its soaring fiscal deficit, the most important long-term economic changes may be emerging in South-East Asia and South America. It seems the silk road that Mongolia helped develop in the 1300s is reemerging in a new form that spans oceans. A network of new “south-south” trading routes connecting Asia, Latin America and other emerging regions is being called the Southern Silk Road. One example of this change is the Vale Brazil, the first of a new breed of Chinamax-class bulk carriers with the capacity to carry almost twice as much Brazilian iron ore to China as most previous ships. “Emerging markets will rise in significance as both exporters and importers,” said Willem Buiter, chief economist at Citigroup. “Intra-emerging market trade, which rose only 6 percent of world trade in 2000 to 15 percent in 2010, is set to account for 27 percent in 2030 and 38 percent in 2050.” The driver of all this is the rapid growth in emerging Asia since the 1997-1998 Asian financial crisis, when a series of structural reforms in the region re-energized the export-led development model with low interest rates in western markets and inflation fears receded. Trade barriers remain “thick,” however, which is a potential obstacle because much of the growth of emerging markets depends of their ability to trade. Read more… Trade barriers will dominate the annual summit in Honolulu of the 21 economy Asia Pacific Economic Cooperation group (APEC). APEC has helped smooth cross-border business activity by spreading regulatory best practice. At their last summit in Yokohama, Japan, APEC leaders committed themselves to a Free Trade Area of the Asia Pacific (FTAAP), which would somehow coordinate the confusing web of overlapping deals already made. However, due to the complexity of negotiations between so many economies, a deal to establish an FTAAP is highly unlikely. The best hope is for an expansion of the TPSEP, which groups Singapore, Chile, New Zealand, and Brunei.

Source: Financial Times

POLITICS NEW STATE MONETARY POLICY APPROVED BY PARLIAMENT Parliament approved a new state monetary policy last week and forwarded it to the Standing Committee on Economics. Some MPs, however, were critical of the policy. They said it shouldn't be approved until the 2012 state

budget is finalized, and state spending is still too high. Some businesses are unable to get loans because the Central Bank is raising its policy rate as well. The government still plans to give each citizen a monthly allowance of MNT 21,000 until the middle of next year, pointed out critics further. This would fulfill a campaign pledge made in 2008. However, critics said the budgets should not be politicized in this way. Some MPs suggested reducing expenditures in the 2012 budget, and monitoring business loans more closely. They also said the Central Bank should research ways to curb inflation other than raising rates.

Source: News.mn

DP TAKES CAMPAIGN CONTRIBUTIONS ON THE WEB The Democratic Party (DP) is soliciting donations on the Internet in preparation for the 2012 elections. The party expects to spend MNT 50 million for campaign expenses leading up to the election. The party's expected expenses have come under criticism because it plans to raise its funds through public donations from individuals and organizations. Supporters of the DP can donate to their campaign on the website handiv.mn. The party claims the website provides full transparency, allowing visitors on the web to see where contributions have come from. The party has limited contributions to MNT 2 million from individuals and MNT 20 million from organizations per year.

Source: Zuunii Medee

MPP CONVENTION SET FOR LATE NOVEMBER A meeting for the Mongolian People's Party Board Council this week resulted in the decision to hold the party's convention on 28 November. Parliamentary elections will be held in June 2012. The Mongolian People's party will create a working group to help prepare for the upcoming election. MPP leader and Prime Minister S. Batbold will lead the group alongside Secretary General U. Khurelsukh as deputy.

Source: Undesnii Shuudan

DP SUPPORTERS CONTINUE PUSH FOR BATBOLD'S RESIGNATION Members of the Democratic Party (DP) and its supporters appealed to the Constitutional Court for the resignation of Prime Minister S. Batbold last week. The group supports the 9 MPs who initially motioned for the prime minister's dismissal and an increase in the 34 percent interest in the Oyu Tolgoi copper and gold project to the government. The 9 MPs failed to collect the 20 signatures needed to bring the motion to Parliament. Those in support of Batbold's resignation argument he has breached Article 1.2 and 41.1 of the constitutions. The articles in question state, “The main principle of a government activity is to follow democracy, justice, freedom, equality, national peace, and respect to the law,” and “The government should lead and shall be responsible to follow the law.”

Source: Udriin Sonin

NEW BILL TO DISTRIBUTE 1,072 TT SHARES TO CITIZENS Parliament is debating a bill that would increase the number of Tavan Tolgoi shares distributed to citizens from 10 percent to 20 percent. The 39th Resolution of Parliament currently mandates that every Mongolian born before 1 March 2011 shall receive 536 free shares of the Tavan Tolgoi coal project. Another 10 percent would be sold to Mongolian firms. After receiving their shares, citizens are free to use their shares as they like. If the new bill is passed, however, citizens will receive 1,072 shares, leaving none to be sold to companies. If companies would like to buy shares, they will have to purchase them from citizens. The bill has already received support from the Democratic Party (DP) and Mongolian People's Party (MPP).

Source: Undesnii Shuudan

BUSINESS LEADER PROTESTS 20 PERCENT STOCK DISTRIBUTION TO CITIZENS The suggestion that the 10 percent of Tavan Tolgoi stock originally intended to businesses and organizations instead be distributed to citizens came under fire during the Mongolian People's Party caucus at Parliament. MPs discussed the 39th protocol of Parliament, mandating the distribution of 10 percent of Tavan Tolgoi stocks to citizens. However, this would take away from sorely needed capital

to develop the project, said a critic. Member of the Mongol 999 Union and Urbanek Director B. Lkhagvajav spoke out against the change. He said the 39th protocol was a decision of Parliament and no political party has the right to change it. Although the MPP and the Democratic Party have decided to distribute 20 percent of share to citizens, it should only be Parliament that can decide upon the issue. Giving away the shares for free will devalue them, he said.

Source: News.mn

DOCTORS AND TEACHERS THREATEN TO STRIKE Trade unions representing doctors and teachers have demanded a salary increases by 1 January 2012 in a press conference and have threatened to strike if their demands are not met. The government had previously promised to double the salaries of these workers before next year's first quarter has ended, but later decided it would only increase salaries by MNT 80,000 on 1 March 2012, followed by another 23 percent raise on 1 May. The trade unions now demand the MNT 80,000 increase on 1 January and the following 23 percent raise before the Tsagaan Sar holiday in February. The Unions have sent official letters to the government with their requests. If a reply was not received by 9 November, the unions said they would begin countrywide demonstrations on 10 November.

Source: Udriin Sonin

STATE BUDGET TO CONTRACT IN 2013 Minister of Finance S. Bayartsogt said Parliament will reduce the state budget by MNT 1.5 trillion in 2013, in accordance with the Law on Budget Stability. Critics have said the 2012 budget is too large and will create more problems for Mongolia. A rise in the salaries of civil workers also contributed to the expansion of the 2012 budget. MP O. Chuluunbat criticized the rising number of state employees. He said government has employed 50,000 government workers in recent years. MPs agreed that the salaries of state workers shall not rise in 2013 as government has already decided they will for 2012. This decision would also end the “allowances” paid to citizens, for which MPs have sworn not to promise during the upcoming 2012 elections.

Source: News.mn

GOVERNMENT TO PROVIDE DISCOUNTS FOR ELECTRICITY TO ELIGIBLE FAMILIES The government will open a program to provide discounts for electricity to families who live in the zone for improved air quality in Ulaanbaatar. The cabinet approved the discount at a regular meeting held last week. This program will supposedly reduce electricity costs by 50 percent at night to families who meet specific criteria in contributing to the reduction of air pollution. The period will last from 6 p.m. to 9 a.m. Families interested in the discount may apply to related organizations. To be eligible, the families must have electric meters and high quality appliances. Government commissioned Minister of Finance S. Bayartsogt to deal with the money-related issues and investigate possibilities for compensation to energy producers. Government also tasked some ministers and mayor of Ulaanbaatar to report to the cabinet every June about plans for the reduction of air pollution. An estimated MNT 2.5 billion will be necessary for this year's discount to 90,700 families, and MNT 5.9 billion for next year.

Source: CPSI Newsletter

WIKILEAKS RELEASES MEDIA TIES WITH POLITICIANS The WikiLeaks website has released information regarding the media's ties with key political organizations and figures. The information released is based on a 2009 study written by a source named “Minton” that is believed to be former U.S. Ambassador to Mongolia Mark Minton. Although the study is two years old, the general content of the report is still accurate today. The report says Udriin Sonin has connections with the Democratic Party (DP), while Unuudur is tied to the Mongolian People's Party (MPP).

Zuuni Medee was originally a government information newspaper. A disagreement between the general editor, former President N. Enkhbayar, and former Minister of Foreign Affairs S. Batbold led to a split that resulted in the creation of Undesnii Shuudan. Undesnii now reportedly has ties to the DP. Unen reportedly has connections to the MPP. Ardchilal and Mongoliin Medee are owned by Kh. Battulga, the Minister of Road, Transport, Construction, and Urban Development. The television broadcast station MNB is a state-owned channel, watched mostly by people in the countryside. TV-9 is owned by former President N. Enkhbayar of the Mongolian People's Revolutionary Party (MPRP). The stations TV-25, Duugar Suvag and Bolovsrol Suvag are privately owned. Eagle TV is an American owned station promoting Christianity. Since this report, Mongolian has seen the introduction of the newspaper Udriin Shuudan, Uls Turrin Toim, and Undesnii Medee, and the television channels SBN, NTV, and TB-88. WikiLeaks is a controversial organization providing an anonymous way for sources to leak information to journalists. It often publishes original source material alongside its own news stories.

Source: Zuunii Medee

DALAI LAMA VISITS UB The Dalai Lama made a surprise visit to Ulaanbaatar this week. His last visit to Mongolia was in 2006. The Buddhist leader arrived directly from Japan and clearly had been issued a visa, though it was not announced beforehand. The decision by the Mongolian government to issue a visa could be a cause for some friction between Mongolia and its neighbor to the south. The Dalai Lama held public teachings this week, one of which took place in the Sports Palace constructed with Chinese funding. He also met with Mongolian government officials at a reception. The visit comes after the recent enthronement of Bogd Javzandamba Hutag in Ulaanbaatar as the head of Gandantegchenlin monastery—the center of Mongolian Buddhists and the largest monastery in Mongolia. The ninth Bogd was born in Tibet in 1932 and was later identified as the incarnation of the eighth when he was four years old. He fled Tibet to India in 1961 and received Mongolian citizenship in 2010. His enthronement prompted wide public attention in Mongolia.

Source: Mongolia Today

ELBEGDORJ OBSERVES 90 YEARS OF RELATIONS WITH RUSSIA President Ts. Elbegdorj sent a letter to the Russian president in commemoration of the 90th anniversary since the establishment of diplomatic relations between Mongolia and Russia. Elbegdorj expressed his gratitude to Russian President Dmitry Medvedev for nearly a century's worth of relations and joy that Russia and Mongolia are approaching the level of a strategic partnership. “You have made a great contribution for our cooperation,” said Elbegdorj. “I am sure that our two country's friendship and cooperation will expand, and would meet the requirements of this historic period.”

Source: Udriin Sonin

MPRP ACCUSE COALITION OF CONSPIRACY Officials of the Mongolian People's Revolutionary Party (MPRP) have requested the resignation of Ts. Nyamdorj, the minister of Legal and Domestic Affairs in a letter. Secretary General N. Udval and Secretary L. Tsog informed the press of their request this week. MPRP officials have accused the coalition government of conspiring against them because of past accusations of illegal activity. “We received information about a plan to accuse N. Enkhbayar of murder,” said Udval. The MPRP also warned that if the President fails to reply quickly enough, the party will take new measures.

Source: Udriin Sonin

CHRISTIANITY DRIVES A RIFT BETWEEN YOUNG PEOPLE AND TRADITIONAL SOCIETY The approximately 1,000 young Mongolians the Mormon Church has sent to other countries demonstrates how successful it has been at converting young Mongolians since the early 1990s, when the fall of communism brought religious freedom to the traditionally Buddhist nation. A 2010 government census found 3.4 percent of Mongolians now claim to be Christian—a small but growing proportion of the population. Mongolia's peaceful shift to democracy has led to huge social

change as the country has opened up its vast mineral reserves to investors, bringing rapid economic growth that has created a growing divide between rich and poor. Society suddenly opened up and people are empty, said Baabar, a key figure in the democratic revolution of the 1990s and a well-known social commentator. “They will believe in anything.” Buddhism, Mongolia's official religion with about 90% of believers, is also enjoying a revival after more than 70 years of socialism, during which thousands of monasteries were destroyed and monks killed during communist purges. However Buddhism is seen more as a way of life than religion, allowing it to struggle with the aggressive promotion of Christianity, said Luvsandendev Sumati, Director of Mongolian research organization Sant Maral Foundation. Mongolia's political leaders overtly support Buddhism and D. Natsagdorj, a senior Buddhist monk in the Mongolian capital Ulaanbaatar, said they were monitoring the activities of foreign religious groups. “These foreign religious people are brainwashing Mongolians,” said Natsagdorj. “If they come to Mongolia, they must respect Mongolian culture. If not, they will be told to leave.” Read more… More than 10,000 Mongolians have joined the faith in the past two decades, said William Clark, an American missionary. In a reversal of traditional roles, the Mormon Church now recruits missionaries in developing countries such as Mongolia to spread the word in the west. Many are given scholarships to study abroad for two years while they carry out their work. However, the success of foreign faiths—and the methods used to achieve it—are proving controversial in Mongolia. Reverend P. Jamsran, one of the country's first Christian converts, said the growing influence of his faith had worried Buddhist leaders in Mongolia and led to the harassment of staff at the theological college he runs. He said 2010 had been the most difficult year yet for Christians in Mongolia.

Source: AFP

FAMILIES SHRINK AS WOMEN RISE IN STATUS Mongolia, one of the world's largest and most sparsely populated countries on the planet, continues to encourage large families. Insufficient fertility rates have prompted government to offer incentives for having children. However, as women become more empowered, educated, and financially independent, cash handouts are not enough to get in the way of a woman's career. Women who have six or more children receive MNT 200,000 and a medal, while those with four are given MNT 100,000 and a lesser medal. In some cases the payment is annual, but is given quarterly as well. More than 129,000 Mongolian mothers have won such awards since the 1950s when these programs where introduced. “After 70 years of socialist development, Mongolians found their life-world turned upside down in 1991,” said Thomas Spoorenberg, a demographer with the United Nations who specializes in Mongolia. “When such large-scale changes take place and life is uncertain, people are wary of having many children. Mongolia followed that pattern.” In modern Mongolia women are encouraged to complete degrees and pursue careers while men still herd in the countryside. In 2005, for every 100 men, 162 women pursued higher studies. The rise in female education has caused Mongolian women to choose to have fewer children, and delay marriage and having children to develop their careers. Read more… However, some traditional ideas do not die. Four years ago during the year of the golden pig, an auspicious time to have children, statistics show families changed their childbearing practices during that time. Between 1970 and 1975, the average Mongolian childbearing rate was estimated to be 7.22 per woman, but fell to 4.6 in 1989 when the Berlin Wall fell. The fertility rate fell hard again in 1991 after the Soviet Union's collapse cut off the source of nearly a third of Mongolia's gross domestic product (GDP). The fertility rate crashed to a record low of 1.95 in 2005 while the world averaged about 2.3. After the government began upping its incentives in 2006, the rate has started to rise. The fertility rate reached 2.69 in 2009, when the world averaged 2.5.

Source: Global Post

MONGOLIAN WOMAN LEADS BY EXAMPLE IN SOUTH KOREA Jeon Su-rim, an exception housewife, mother, and public servant who still finds time to pursue further

education, is also a Mongolian born star in South Korea demonstrating the competency and exceptional abilities of Mongolian women. J. Lkhagvasuren, who took the Korean name Jeon Su-rim, moved to South Korea more than 11 years ago from Mongolia and is the first migrant wife to be hired by any central government branch there. Hired by the Ministry of Gender Equality and Family last April, Lkhagvasuren liaises between multicultural families and the 200 offices throughout the nation. “Two to three times a week, I go to different centers and meet migrant wives, collect their opinions and listen to things that the ministry or central might need to develop,” she said. The 36-year-old mother cares for her two sons while working a nine-to-six job at the ministry. At night Jeong also attends graduate school courses at Seoul Women's University to get her master's in social welfare.

Source: Korean Herald

NEW MONGOLIAN LAWS AND REGULATIONS The following law and annulment were published in the latest weekly Government bulletin. Unless otherwise decided by Parliament, it will take effect ten (10) days after publication. Date Law and Annulment 03.11.2011 Law on City, village water supply, sanitation strap usage Annulment of Law on City, village water supply, sanitation strap usage Please visit BCM's website, Legislative Working Group, for a summary of new Mongolian laws. BCM members who wish to access complete versions of the laws and regulations in Mongolian language are welcome to email the BCM office: info@bcmongolia.org.

ANNOUNCEMENTS GLOBAL ENTREPRENEURSHIP WEEK 14-20 NOVEMBER Global Entrepreneurship Week (GEW) will be held 14 to 20 November and will be Mongolia's first participation in the event. GEW Mongolia 2011 will include competitions, special lectures, and network gatherings among other events. GEW is the world's largest celebration of entrepreneurship, and promotes it through a network of individuals and organizations that aim to inspire, connect, and equip entrepreneurs with the tools to bring to life and drive economic growth. GEW Mongolia 2011 is to be hosted by SWMONGOLIA, a Mongolian NGO also responsible for holding the successful Startup Weekends in Mongolia. SWMONGOLIA is a local non-profit that strives to inspire and support entrepreneurs. Its mission is to educate and inspire entrepreneurs, and give them the motivation and networking they need to take the next step in creating a successful startup company. For more information visit gewmongolia.com or visit the Facebook page at facebook.com/gewmongolia. ___________________________________________ RUNGE'S TRAINING COURSE,”MINING FOR NON-MINERS,” 5-6 DECEMBER 2011 Runge, a world class mining consulting, software, and training company, is offering its third “Mining for Non-Miners” course to be held 5-6 December in Ulaanbaatar. The aim of the course is to provide those from a non-mining background with a comprehensive introductory understanding of the mining industry. The course duration is two days, with the first day focused on coal mining, and the second day on metal mining. The two day course will cost USD 700 per student and will be delivered in Mongolian. For more information, email saruul@bcmongolia or call 317027. ___________________________________________ MONGOLIA INVESTMENT SUMMIT 2011, LONDON, DECEMBER 8-9 Are you looking for the next frontier market to generate stable returns? Do you find it difficult to access investment opportunities and forge partnerships in Mongolia? Do you need to be educated about

Mongolia‟s capital markets and the effects of the stock exchange‟s modernisation? Then you should attend the second annual Mongolia Investment Summit 2011, where government officials, mining companies, Mongolian businesses and European investors are coming together to discuss the opportunities and risks surrounding investing in Mongolia. What to expect Over 100 investors, government officials and companies operating in Mongolia will come together to discuss the opportunities that Mongolia holds for foreign investment. With unique networking opportunities the Mongolia investment Summit is the meeting place for this market. Mongolia Investment Summit is taking place in a month‟s time from 8-9 December at the Hilton Tower Bridge Hotel in London, to find out more please contact Stacey Kelly at stacey.kelly@terrapinn.com. BCM is a Supporting Organization of the event and BCM members can receive a 15% discount off the conference ticket price. Please use the following link: https://secure.terrapinn.com/V5/rCalc.aspx?E=4306&C=1448VCRS. ___________________________________________ MM TODAY” ON MNB-TV, FRIDAYS AT 21:15 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. ___________________________________________ “BSPOT” ON B-TV, MONDAY TO FRIDAY AT 21:30 B-TV (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. ___________________________________________ POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' AND BCM‟S MONGOLIAN WEBSITE „NEWS‟ SECTIONS As a key component of BCM‟s Mongolian website, „News‟ section, articles from the Government‟s “Open-Government.mn” site will be regularly posted. Also several draft laws, still to be discussed in Parliament, are posted on BCM‟s English website in the Legislative Working Group section. On BCM‟s English website - „Resource, Presentations‟ section for your review are several speeches at Discover Mongolia 2011, speeches from BCM‟s 9 monthly meetings in 2011, and the address by Peter Nicholls, OT‟s VP-Operations, at Global MInES in Sydney on July 4. Also on BCM‟s English website, „Resource, Mongolia Reports‟ section please note "Blitz and Lead" by Sant Maral Foundation, August 2011, Z. Batbayar, Deputy Director of the Water Authority, at BCM‟s Environmental Working Group‟s recent meeting, the Polit Barometer-May 2011 from Sant Maral Foundation and the U.S. Embassy Mongolia‟s Commercial Section‟s “2011 Mongolia Investment Climate Statement” - www.bcmongolia.org. We are now posting some news stories and analyses relevant to Mongolia on the BCM website's „Mongolian Business News‟ as they come, instead of waiting until Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‟s events. ___________________________________________ NETWORK WITH BCM The Business Council of Mongolia (BCM) is expanding its reach to your favorite social networks. Keep up to date on the latest business deals in Mongolia and how the climate for investment is improving each day with BCM. Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-MONGOLIA/129826330435540 to read the latest announcements and comment on events with the community. Hear breaking news and announcements as they happen when you follow BCM on Twitter at http://twitter.com/#!/bcmongolia. Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better business environment in Mongolia today. Of course for news information, interviews, and announcements regarding our organization, visit the

official BCM website at bcmongolia.org and bcm.mn.

ECONOMIC INDICATORS

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]

Year 2010 *13.0% [source: NSOM]

October 31, 2011 *10.9% [source: NSOM]

*Year-over-year (y-o-y)

CENTRAL BANK POLICY 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]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

CURRENCY RATES – November 10, 2011 Currency Name Currency Rate U.S. dollar USD 1,333.74

Euro EUR 1,803.08

Japanese yen JPY 17.11

British pound GBP 2,122.05

Hong Kong dollar HKD 170.09

Chinese yuan CNY 210.04

Russian ruble RUB 43.29

South Korean won KRW 1.19

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.