BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org

info@bcmongolia.org

Issue 141, October 22 2010

NEWS HIGHLIGHTS:

Business: Ivanhoe’s equity rights offer widens rift with Rio;

Rio may find it tough to block Ivanhoe share sale, analyst says;

Oyu Tolgoi is setting the standard, says Environment Minister:

Hunnu Coal to raise AUD40 million to fast-track two projects:

SouthGobi hikes H2 sales guidance;

Oyu Tolgoi spending to cross USD5 billion, Rio forecasts;

Ministries asked to begin work on establishing Erdenes Tavan Tolgoi;

Aspire Mining defines 330.7-million-ton JORC coking coal resource;

Prophecy Resource all set to receive mining license;

Peabody eyeing Mongolian coal field to apply successful model;

Winsway to buy 1.2 million tons of semi-soft coking coal from SouthGobi;

Manas Petroleum begins seismic program;

MMC, Winsway join MonBiz indices, boost benchmarks by USD5.6 billion in value;

Sales jump, but LVMH tempers optimism;

Social investment companies invest in Credit Mongol;

Mongolia’s El Dorado parts partners;

Rio reports record production;

BHP and Rio scrap USD116 billion iron ore joint venture.

Economy: Some bond sales met goals and some did not, says Finance Minister;

IMF, Mongolia happy at success of Stand-by Arrangement;

Mongolians exchange ideas with London;

Minister feels streamlining operations will ease pressure at border points;

Managing Council for Development Bank named:

National forum stresses need to generate jobs;

Private sector enterprises have 14,000 vacancies;

Mongolia to use Canadian lumber for 96 regional centers;

Ban on mining-related licenses ends on December 1;

S. Oyun welcomes imminent repeal of windfall profits tax;

Donor organizations told winter preparations are better this year;

Petroleum official reassures citizens of refinery by 2014;

55.5% of foreign trade is with China;

Mongolian credit unions to get help from Canadian professional;

Chile mining echoes on Mongolian steppes;

The new threat to the global economy;

QE2 poised to heighten Asian currency dilemma;

Developing countries cannot let their budgets get out of hand;

China's economy slows, quite as expected;

China raises interest rates, sparks wide sell-off;

China closes 1,355 small coal mines, but death rate does not fall;

Norway’s huge wealth fund hits new peak.

Politics: Mongolia to pay Russia USD3 million as final settlement of “great debt”;

Government apologizes to France, Belgium, Germany over Khurts;

Majority tells Sant Maral survey unemployment is the main problem;

Batbold says Mongolia is admired for its achievements;

Mongolia consolidates its young democracy;

Eco-warriors call attention to economic development dilemma;

Hi-tech nomads at home in a changing world;

Old and new MPs jointly celebrate 20 years of parliamentary government;

City offers two-room apartment for 0.07 hectare of land in ger districts;

Poll to choose best woman politician;

South Korea to start water aid project in Ulaanbaatar;

Prime Minister promises agency for children’s affairs;

Horsing around in Mongolia;

Zambia charges Chinese bosses with attempted murder of miners.

*Click on titles above to link to articles.

BUSINESS

IVANHOE‟S EQUITY RIGHTS OFFER WIDENS RIFT WITH RIO The rift between Ivanhoe Mines Ltd. and Rio Tinto Ltd. continues to widen as the two miners fight over how the massive Oyu Tolgoi project should be controlled, financed and developed. Vancouver-based Ivanhoe unveiled a plan on Monday, to raise USD800 million to USD1 billion in financing through an equity rights offering, along with a management shakeup that returns Mr. Robert Friedland to the chief executive job. In doing so, it revealed huge disagreements with Rio Tinto that go well beyond the arbitration that Rio is pursuing over Ivanhoe‘s shareholder rights plan. In its prospectus for the equity offering, Ivanhoe acknowledged that Rio is against the move, noting that Rio believes the offering violates its contractual rights and thinks there are ―superior financing alternatives available‖. The fact that Ivanhoe is going ahead with it anyway suggests that relations between the two companies are not about to get any warmer. If successful, the offering could allow Ivanhoe to raise money without increasing Rio‘s influence on the company. The one thing both parties can agree on is that money needs to be raised. Oyu Tolgoi has a capital cost requirement of more than USD4 billion, and while Ivanhoe expects to secure a major financing package in the first half of 2011, the equity offering would fill in the gap. Read more… Ivanhoe owns 66% of Oyu Tolgoi in a joint venture with the Mongolian government, and Rio Tinto owns about 35% of Ivanhoe, with a right to increase its stake to 46.6%. Rio is not happy with this scenario, and badly wants to turn its Ivanhoe shares into a direct stake in the project. A standstill agreement prevents Rio from buying a controlling stake without buying the whole company. Rio has talked about bringing in the Chinese company Chinalco as another source of financing. But Ivanhoe decided to go with a rights issue, a common practice in Europe but highly unusual in North America. It would force Rio to buy 35% of the stock being issued if it wants to maintain its stake. While the stock has not yet been priced, it will sell at a discount to Ivanhoe‘s current share price. Rio has a right of first offer on Ivanhoe share issues, but Ivanhoe contends it does not apply to this offering. Merrill Lynch analysts Jason Fairclough and Peter O‘Connor said that by offering the rights issue to all shareholders, Ivanhoe avoids Rio‘s pre-emptive rights and still gets the funds it needs. ―The irony is that if this tactic is successful, Rio‘s cash could end up giving more ‗leverage‘ to Ivanhoe,‖ they wrote in a note to clients. They said that Rio could choose not to participate in the offering, but Ivanhoe may proceed anyway and dilute Rio‘s stake. A source close to Rio suggested the offering could reflect an inability by Ivanhoe to find a third-party investor. The source also pointed out that Ivanhoe previously said its financing package would

be ready in the first quarter of 2011; now the company is saying first half of 2011. In addition to the fight over financing, Ivanhoe revealed in the prospectus that it continues to argue with Rio over how quickly the project should be developed and how much it will cost. Rio wants to take a more conservative course than Ivanhoe, and Ivanhoe warned that a failure to reach consensus ―could potentially affect the Oyu Tolgoi project‘s current development schedule‖. "The goal of the offering is to ensure that Ivanhoe Mines remains in a strong financial position to bring the Oyu Tolgoi copper-gold mining complex into operation ahead of schedule in 2012 and to reinforce the company's independence to pursue strategic alternatives to protect and enhance shareholder value," Mr. Friedland said in a statement. With many strategic alternatives to consider, it was not a shock to see Mr. Friedland return to the CEO role at Ivanhoe. He was CEO for 10 years until 2006 and made a fortune selling the undeveloped Voisey‘s Bay nickel-copper deposit in Quebec to Inco Ltd. in 1996 for USD4.3 billion. Mr. Friedland, the founder and largest individual shareholder of Ivanhoe, intends to participate in the proposed rights offering to the maximum permitted level to maintain his present 18.3% ownership stake. Mr. John Macken, who has been CEO of Ivanhoe since 2006, will remain president and continue to lead the ongoing construction of the Oyu Tolgoi project. The company said it is also establishing the office of the chairman as part of an ongoing commitment to maximize shareholder value. The office of the chairman will also include Mr. Peter Meredith, its deputy chairman for the past four years, and Mr. Sam Riggall, who is executive vice president of Ivanhoe Australia and will take on the added duties of executive vice president for business development and strategic planning.

Source: www.financialpost.com

RIO MAY FIND IT TOUGH TO BLOCK IVANHOE SHARE SALE, ANALYST SAYS Rio Tinto, building the USD4.6-billion Oyu Tolgoi mine with Ivanhoe Mines, may have difficulty in blocking Ivanhoe‘s planned USD1-billion share sale should it choose to do so, according to RBC Capital Markets Ltd. Ivanhoe this week said it planned a rights offer to help fund development of the Oyu Tolgoi mine in Mongolia. Rio, which owns 35 percent of Ivanhoe, has informed the company that it‘s ―reserving its rights to make an arbitration claim or seek injunctive relief to protect its interests,‖ Vancouver-based Ivanhoe said in an October 18 regulatory filing. ―Among Rio‘s remedies would be an injunction against the rights offer, though this might prove difficult,‖ a London-based analyst at RBC has written in a report. ―Ultimately, Rio wants more of Oyu Tolgoi and Ivanhoe is, we believe, a seller -- at a price.‖ A disagreement between the two companies could lead to delays in starting the mine, while the partners will seek to avoid this, RBC said. Ivanhoe is seeking to raise between USD800 million and USD1 billion from the rights offer and has yet to disclose the price at which shares will be sold. Rio sees superior financing options for Ivanhoe and the plan offends its right of first offer, said Ivanhoe, which told Rio the idea is ―wrong and without merit‖. It said, ―We have advised the representative, the Chief Executive Officer and board of directors of Rio Tinto that if the rights offering is delayed or impeded by Rio Tinto‘s conduct, we intend to hold Rio Tinto fully liable for any and all losses Ivanhoe may suffer as a result of Rio Tinto‘s actions.‖ A London-based spokesman for Rio Tinto said on Wednesday in an e-mailed statement, ―Our first priority is to the Oyu Tolgoi project and making sure that nothing stands in the way of its swift development.‖

Source: Bloomberg

OYU TOLGOI IS SETTING THE STANDARD, SAYS ENVIRONMENT MINISTER Environment Minister L.Gansukh has appealed to all companies in the mining sector to follow the standards set by Oyu Tolgoi LLC. The company has a 30-person department for environmental monitoring. It monitors the use of chemicals and its effect on the water, soil, and vegetation. In comparison, Erdenet Corporation has only 4-5 people for the job. Energy Resource also has an environment department. It has built a greenhouse and planted vegetation that suits the Gobi in its reclamation process. Erdenes MGL, which has just started earth moving, is taking environmental issues seriously from the very beginning. The first layer of soil with plants in it is kept carefully, so that they can be replanted somewhere else. The Ministry would like to enforce environment-protection measures right from the beginning of the mining expansion. All companies ―will be graded and those not making the mark will face action, maybe even suspension of work, while those doing well will be rewarded‖. He said very little money had been spent in the environment sector in the last 20 years. ―The economy always took precedence over the environment,‖ but things are changing.

Expressing concern at the environmental damage inflicted by trucks carrying coal, Mr. Gansukh said the volume of both production and export of coal ―have gone up exponentially and much too rapidly to give us a chance to prepare for them‖. Border ports like Gashunsukhait were built to handle seasonal trade and where once the coal export volume was 140,000 tons in a full year, it was more than 6 million tons in just the first 8 months of this year.

Source: The Mongolian Mining Journal

HUNNU COAL TO RAISE AUD40 MILLION TO FAST-TRACK TWO PROJECTS Exploration company Hunnu Coal is looking to raise up to AUD40 million to accelerate its Mongolian coking and thermal coal projects, through placing 50 million shares, at an issue price of 80c a share, to institutional and sophisticated investors. The placement would be issued in two tranches, with the first 24 million shares planned on October 27. The issue of the second tranche would be conditional upon shareholder approval. Funds raised in the placement would also be used to calculate a Joint Ore Reserves Committee resource at both the Tsant Uul coking coal and the Unst Khudag thermal coal projects. Both these projects would also be fast-tracked for development. The company has set a timetable of developing three coal mines in Mongolia within the next four years.

Source: www.miningweekly.com

SOUTHGOBI HIKES H2 SALES GUIDANCE SouthGobi Resources, which is listed in Toronto and Hong Kong, now expects to sell about 1.5 million tons of coal in the second half of this year, after saying earlier it expected second half sales would be around the 875,000 tons sold in the first six months. The company had warned in August that some of its high-sulphur coal being mined was less attractive to buyers and might need to be stockpiled until the firm was able to process it or blending opportunities came up. Now it says it has successfully been processing the coal through basic screening, and has confirmed it can sell the processed material. "The company is now rapidly increasing its screening capacity and expects to have four screens operating by the end of October," SouthGobi said. As a result, and despite third-quarter sales of less than 200,000 tons, the company has raised its guidance significantly for the total second half of the year. "SouthGobi has set new records for its daily shipping rate in October and has already sold in excess of 400 000 tons for the month to date," the firm reported.

Source: www.miningweekly.com

OYU TOLGOI SPENDING TO CROSS USD5 BILLION, RIO FORECASTS Capital spending on the Oyu Tolgoi project is likely to be over USD5 billion, Mr. Peter Nicholls, General Manager Commercial of Rio Tinto‘s copper unit, said in a presentation at the Mongolia Investment Summit in Hong Kong last week. The project has a potential life of more than 50 years. First output is scheduled for 2013, Mr. Nicholls said, with full underground production expected in 2018.

Source: Bloomberg

MINISTRIES ASKED TO BEGIN WORK ON ESTABLISHING ERDENES TAVAN TOLGOI Wednesday‘s regular meeting of the Government took the formal final decision to establish Erdenes TavanTolgoi LLC and asked related ministries to take the necessary steps for this. The State Property Committee and Erdenes MGL have been asked to arrange for the initial capital for Erdenes Tavan Tolgoi. Briefing media after the meeting, the head of the Government Secretariat, Mr. Ch.Khurelbaatar, said ownership of the company will be divided into 15 billion shares and 10% of this will be equally distributed among all citizens. Another 10% will be sold at a pre-determined price to business entities, and 30% more will be traded at domestic and foreign stock exchanges. The recent successful IPO of the MMC at the Hong Kong Exchange indicates that Erdenes Tavan Tolgoi also would be attractive to domestic and foreign investors. The Government will secure the services of an investment bank and other professional experts to determine the price at which shares will be offered in a public sale, but these should not sell for less than the price paid for Energy Resources shares in Hong Kong. Mr. Khurelbaatar said the Tavan Tolgoi deposit has two main parts, one of which will be mined by a company selected as operator by Erdenes Tavan Tolgoi. The first stage of the selection is over and the choice is now limited to three companies, two Australian and one German, and will be announced in November.

Source: Ardiin Erkh

ASPIRE MINING DEFINES 330.7-MILLION-TON JORC COKING COAL RESOURCE Just eight months after acquiring the Ovoot Coking Coal and the Nuramt Coal projects in Mongolia, Aspire Mining has defined an initial maiden 330.7 million tons JORC coking coal resource at Ovoot. Over 80% of the resource is in the measured and indicated categories, and 75% of the coal resource is above 250 meters vertical depth, making large scale open pit mining a distinct possibility. The Ovoot project encompasses an area of approximately 509 sq. km, with only 10% of the project area drilled to date, allowing for a potentially significant increase in the JORC resource. Initial coal quality parameters indicate high quality coal, low in moisture. However, follow up tests will be undertaken to establish washing yield, product specifications and coking properties. Aspire will be looking to develop an infrastructure strategy for a rail connection from Ovoot.

Source: Aspire Mining

PROPHECY RESOURCE ALL SET TO RECEIVE MINING LICENSE Following an on-site inspection at the Ulaan Ovoo mine site of Prophecy Resource Corp., an official government commission appointed by the Mongolian Ministry of Mineral Resources and Energy has told the company that it will be granted the mining license soon and to prepare to begin production operations. The eight-member commission was satisfied with how the company had complied with all legal requirements so far. Prophecy now waits for the mining license, which will make it the second Canadian company after SouthGobi Resources to receive a permit to mine in Mongolia. Leighton and Prophecy have deployed over 50 staff at the Ulaan Ovoo mine, with a full line of mining equipment. Initial production will be at the rate of 120,000 tons a month. Over 2 million tons of waste has already been removed to expose the project's massive coal seam at surface. Prophecy hopes to become contract coal shipper to local power plants and beyond. As part of a trial run prior to the official commissioning of the mine, and at the Ministry's request, the company has already provided 10,000 tons of coal to power stations in Darkhan and Erdenet. Prophecy has 100% interest in the 208.8-million-ton Ulaan Ovoo project. The mining license will be a fully transferable one, valid for 30 year that can be extended by an additional 40 years.

Source: Prophecy Resource

PEABODY EYEING MONGOLIAN COAL FIELD TO APPLY SUCCESSFUL MODEL Peabody Energy is eyeing its newly acquired coal field in Mongolia near the northern Chinese border to apply the Powder River Basin model, regarded as the most prolific coal mining model in the industry to date. Some 14 active coal mines extract more than 400 million tons annually, and two railroads deliver that coal to some 37 states in the USA. Mr. Fred Palmer, senior vice president of government relations for Peabody, said the model for mining coal should be applied in nations around the world in order to lift growing populations out of poverty and to further advance economies of developed nations. For him, using more coal is a matter of human rights in that cheap coal offers a higher standard of living for all. Cheap coal power "allows people to live better and live longer," said Mr. Palmer. Mr. Palmer said if the richest nations in the world force developing countries to put the current CO2 emissions-heavy coal power plant model on the shelf, it would be inhumane to those populations desperate to lift themselves out of poverty. "I say it's energy apartheid to sit here in the U.S. and say the rest of the world cannot enjoy the same lifestyle," said Mr. Palmer.

Source: trib.com

WINSWAY TO BUY 1.2 MILLION TONS OF SEMI-SOFT COKING COAL FROM SOUTHGOBI Winsway Singapore, a directly wholly owned subsidiary of Winsway Coking Coal Holdings Limited, and SouthGobi Sands LLC have entered into two agreements which took effect from October 15. These will allow Winsway to buy an aggregate of up to 1.2 million tons of semi-soft coking coal from SouthGobi to be delivered within the last quarter of 2010, and then to deliver it to end users specified by SouthGobi. The two companies are also discussing long-term cooperation.

Source: SouthGobi Resources

MANAS PETROLEUM BEGINS SEISMIC PROGRAM Manas Petroleum Corporation has announced the start-up of seismic operations on Blocks XIII and XIV in Mongolia as planned for the year 2010, and is anticipated to be completed by November 2010. All operating licenses and permits have been received and the contractor's personnel and

equipment are on site. This program includes 300 km of 2D seismic survey which represents the required work program for the year 2011 in accordance with the terms of the Product Sharing Contract. Gobi Energy Partners LLC, a Mongolian subsidiary owned by Manas through its Swiss subsidiary DWM Petroleum AG, is the operator of the project. Gobi has an agreement for seismic services with the Chinese company DQE International Tamsag (Mongol) LLC, a subsidiary of CNPC Daqing Petroleum. The purpose of the vibro-seismic survey is to increase the chances of success of the exploratory wells intended to be drilled upon completion and interpretation of the new seismic data. The first well is anticipated to be drilled in 2011.

Source: Manas Petroleum

MMC, WINSWAY JOIN MonBiz INDICES, BOOST BENCHMARKS BY USD5.6 BILLION IN VALUE Mongolia Mining Corp. and Winsway Coking Coal Holdings have been added to both the MonBiz Mongolia Index and MonBiz Hong Kong Index after their IPOs in Hong Kong last week. The two companies add USD5.6 billion in market capitalization value to each index, an amount that is larger than Mongolia's 2009 GDP of USD4.2 billion. The MonBiz Mongolia Index now has 26 members with a total market capitalization of USD29.3 billion or near 700% of Mongolia's GDP. Meanwhile, the MonBiz Hong Kong Index reached 9 members and USD10.6 billion in market capitalization or twice the size of the country's GDP. With USD3.8 billion in market capitalization, MMC now ranks as the largest Mongolian-owned company and third largest Mongolia-focused internationally listed company after Ivanhoe Mines and Centerra Gold. Winsway is ranked 6th. As a result, the expanded MonBiz Mongolia Index now includes six companies with market capitalization exceeding USD1 billion, four of them listed in Hong Kong. Thanks to MMC and Winsway, the market capitalization of the MonBiz Hong Kong Index has more than doubled to USD10.6 billion and the HKEx's share in the Index's total market capitalization jumped to 36% from 23%.

Source: Eurasia Capital

SALES JUMP, BUT LVMH TEMPERS OPTIMISM French luxury-goods company LVMH (Louis Vuitton Moët Hennessy) reported a 24% jump in third-quarter sales, confirming a strong rebound for luxury products from champagne to high-end watches. Sales at the world's largest luxury company rose by more than 20% as all divisions posted double-digit growth. For the rest of the year, "we should be balancing optimism and caution," LVMH Finance Director Jean Jacques Guiony has said. He said the restocking by retailers that boosted LVMH's performance earlier this year had ended but the company was still performing well, which was cause for optimism. He warned, however, of less-favorable currency rates and tougher quarterly comparisons to come, particularly in the U.S. The fashion and leather-goods division—home to luggage maker Louis Vuitton, which was one of the industry's top performers throughout the financial crisis— continued its brisk pace of growth, up 26%. The company raised prices of its Louis Vuitton products by an average of 9% in Europe in recent weeks, the first time it has implemented price increases since the crisis. Sales of those products have exceeded LVMH expectations, and capacity constraints have prompted it to shorten hours of some stores in France. LVMH expressed interest in expanding in "the most promising markets." Luxury companies are scrambling to expand in Asia, especially China, as the country's growth gives rise to a new wave of consumers seeking high-end goods.

Source: The Wall Street Journal Asia

SOCIAL INVESTMENT COMPANIES INVEST IN CREDIT MONGOL Responsibility Social Investments AG, an investment manager founded in 2003 in Switzerland, has recently made five debt investments totaling USD5.5 million in microfinance institutions (MFIs) Prasac of Cambodia and Credit Mongol of Mongolia. In addition, Mikrofinanz-Fonds made a debt investment totaling USD 250,000 in Credit Mongol. Credit Mongol LLC is a non-banking microfinance institution (MFI) established as a limited liability company in 2000 in Mongolia as part of the European Union Tacis Program, which seeks to help partner states in Eastern Europe and Central Asia transition into market economies. Credit Mongol aims to provide microloans to small and medium-sized enterprises and currently serves six regions in Mongolia. As of December 2008, Credit Mongol had USD4.9 million in assets, 1,524 active borrowers, a gross loan portfolio of USD4.2 million, a return on assets of 9.35 percent and a return

on equity of 26 percent. Source: MicroCapital.org

MONGOLIA‟S EL DORADO PARTS PARTNERS In Mongolia‘s South Gobi desert lies Oyu Tolgoi, touted as having the world‘s largest untapped copper and gold deposits. Little wonder then that this El Dorado has become a boardroom battleground between the relatively unknown Ivanhoe Mines and its biggest shareholder, the giant Australian mining company, Rio Tinto. Our attempts to get near this mine or elicit any comment from Ivanhoe were about as fruitless as the Spanish conquistador‘s attempts to find the legendary El Dorado, or ―Lost City of Gold‖ in the 16th century. Twice Ivanhoe stopped our reporters from visiting the mine with delegations from the investment community, saying reporters were not allowed to mingle with bankers on visits to the mine. We don‘t know why that would be. We mingle with them pretty often in other contexts and usually find each other‘s company amusing and mutually informative. Perhaps that‘s the point of Ivanhoe‘s policy. The company and its executive chairman, Mr. Robert Friedland, do not seem to trust the media much. They maintain a robust website, http://www.ivanhoemines.com/s/The_Facts.asp., that pretty much takes issue with every story written about them. Mr. Friedman is legendary in the business for spinning a story and trying to control the narrative. He has lived a colorful and adventurous life. Perhaps he admired in his youth the swashbuckling medieval hero of Sir Walter Scott‘s novel, Ivanhoe, a noble in the disguise of the ―black knight‖ who fights alongside Robin Hood, and so named his company after him. Read more… Mr. Friedland has had a Midas touch when it comes to monetizing mining assets over the years in a business where exploration is fraught with risk. In that sense, he calls to mind the original El Dorado, or ―Golden One‖. This was the name given to the kings of the Muisica tribe in what is now Colombia, when they were undergoing an initiation rite for taking the throne: they covered themselves in gold dust before diving into Lake Guatavita. In time, the Muisica towns and their treasures fell to the conquistadors, who never did find the ―lost city‖. Mr. Friedman can only hope that his efforts to foil Rio Tinto‘s efforts to take over Ivanhoe on the cheap will fare better than the Muisica‘s attempts to fend off the Spanish. He may need a Robin Hood or a ―white knight‖, however, to come to his rescue.

Source: Reuter‘s blog

RIO REPORTS RECORD PRODUCTION Rio Tinto CEO Tom Albanese last week said in a production report that the group reported record production in iron ore, alumina and coking coal, driven by an insatiable appetite for commodities from Asian giants. Analysts said the report pointed to continuing growth. "This production report points the way for Rio to show a very strong rebound in both production and profits in 2010 and the same for BHP," said a Sydney-based analyst. "Albanese and Kloppers (BHP's chief executive) are rightfully putting the pedal to the metal on everything," he said. Source: Reuters

BHP AND RIO SCRAP USD116 BILLION IRON ORE JOINT VENTURE BHP Billiton and Rio Tinto ditched plans to form the world's biggest iron-ore joint venture, in a victory for steelmakers that could prompt both miners to step up competing expansions. The announcement marked the second failed attempt in three years by BHP chief executive Marius Kloppers to buy into Rio's superior iron ore assets, and strengthens the hand of steel mills which feared the pair would gain too much pricing control. Monday's long-expected news also left BHP focusing squarely on a USD39 billion hostile bid for fertilizer group Potash Corp, no longer distracted by the USD116 billion marriage of the two miners' mammoth Australian iron ore operations. "The failure of the joint venture will be slightly more positive for Rio than BHP, but it's important to remember it's actually a negative for both companies," said an analyst. A joint venture between Rio and BHP, the world's second and third largest iron ore miners, would have eclipsed Brazil's Vale, the world's largest supplier, and would have reaped more than USD10 billion in savings from combining rail and port operations. BHP and Rio Tinto had a fall-back option to share some iron ore infrastructure in the event the full joint venture failed, but this "Plan B" is also in doubt, given the opposition that has emerged among competition regulators to the venture. Analysts had estimated Plan B could yield at least half of the

savings envisaged in the joint venture plan. Now, BHP and Rio Tinto will have to review regulators' objections to their joint venture plan to gauge whether even a more modest collaboration would be allowed, a source close to the process said. The failure of the deal was widely expected after Rio Tinto and BHP were recently advised that their proposal would not be approved by competition watchdogs in the European Union, Australian, Japan, South Korea and Germany. Rio is in a much better position now to survive without the joint venture than when the deal was announced in 2009, when it was desperately slashing USD40 billion in debt.

Source: Reuters

ECONOMY SOME BOND SALES MET GOALS AND SOME DID NOT, SAYS FINANCE MINISTER Minister of Finance S. Bayartsogt told Parliament on Friday that the Government has sold bonds worth more than MNT1 trillion since 2002. Until 2006, the aim was to raise money, but after 2007 the imperative shifted to plugging the budget deficit. Bonds for MNT270 billion were offered in 2009. Bonds worth another MNT60 billion were sold to raise money to implement the 4000 Apartments program, to prop up both the construction and the banking sector. Earlier, a series of bonds worth MNT75 billion was sold to support gold mining companies, on the suggestion of the Central Bank which was worried about the fall in value of the MNT. Bonds were also sold to meet the terms of the Stand-by program with the International Monetary Fund. The Minister claimed the bond sale for apartments has served its purpose but this has not been so in some other instances. Bonds worth MNT170 billion were sold to pump money into Anod Bank. ―The Central Bank President had promised that sale of collaterals for unpaid loans will be used to repay the bond holders but it has not worked out that way, and the Government will now have to use tax payers‘ money to bear the costs of the bank going onto liquidation,‖ Mr. Bayartsogt told MPs.

Source: News.mn

IMF, MONGOLIA HAPPY AT SUCCESS OF STAND-BY ARRANGEMENT A joint statement by Minister of Finance S. Bayartsogt, Central Bank Governor L. Purevdorj, and the IMF Staff Mission chief for Mongolia Steven Barnett, issued on the occasion of the successful completion of Mongolia's Stand-by Arrangement (SBA) with the IMF, notes that the Government‘s ―determined policy implementation within the framework of the IMF-supported SBA has led to a remarkable economic turnaround with growth expected to exceed 7 percent this year‖, and to macroeconomic performance improving significantly. Since joining the IMF in 1991, Mongolia has had several IMF-supported programs to facilitate structural reforms that helped the transition to a market economy, to promote economic stability, and to reduce poverty. These included an SBA (1991-1992), Enhanced Structural Adjustment Facility I (ESAF) (1993-1996), ESAF II (1997-2001), and Poverty Reduction and Growth Facility (2001-2005). ―These programs, however, all eventually went off-track; the recently concluded SBA marks the first time that Mongolia has successfully completed an IMF-supported program,‖ the statement said. It concludes, "The Mongolian economy is poised to enter a period of rapid economic growth with the development of its vast mineral resources. Managing the pending boom, however, will require continued prudent economic management. This includes consolidating the recent gains in fiscal policy by strictly adhering to the Fiscal Stability Law recently adopted, continuing to gear monetary policy towards fighting inflation supported by the flexible exchange rate regime, pressing ahead with reforms to strengthen the banking system, and proceeding with social welfare reform. These policies will help ensure that Mongolia‘s mineral wealth leads to strong and sustainable growth that spreads prosperity to all of Mongolia‘s citizens." Source: IMF Press release

MONGOLIANS EXCHANGE IDEAS WITH LONDON Mongolia's Stock Exchange opens its doors for an hour a day to host the slow trickle of brokers making their way to work. The candy-pink paint job is a deceptively lively mask for the dearth of activity inside, where a huge hall echoes any time a trade is made. The bourse needs help. Out of 367 companies listed since the 1990s (as part of a voucher privatization program), over half have been suspended and of those left, less than 20 are liquid enough to be traded on a daily basis. With the vast majority of shares in the pockets of very few investors, manipulation and insider trading have become commonplace. Mongolia's stock market had the distinction of being the best performer in the world over the last decade, up 1,600%, and is on course to be the same again this

year, with the leading index rising over 100% in just two months this summer. But with an average daily turnover of just USD100,000 for the whole exchange, these gains could just as easily be one of the local oligarchs playing games. The bourse badly needs reform, as Mongolia is expecting a wave of cash to hit the economy in the coming years after Canada's Ivanhoe Mines brings the massive Oyu Tolgoi copper/gold mine on stream in 2013, which should increase the size of the economy by half on its own. The government is well aware of the problems and has finally turned its mind to fixing them. Earlier this year, it announced the exchange would be privatized and put the job out for tender. From an original 12 applications, four candidates were short listed and a proud Prime Minister S. Batbold recently said the London Stock Exchange (LSE) was the "front-runner". The LSE has no doubt helped its bid by hosting a conference in Ulaanbaatar at the end of September to discuss the future of the local bourse. With a reputation as strong as London's and expected growth as overwhelming as Mongolia's, it wasn't difficult to impress. Emerging markets represent 12% of the LSE, USD635 billion worth of stocks, and the exchange is keen to expand into the fast growing economies of the east. With the largest pool of liquidity in the world and over 200 years of expertise, the LSE has a lot to offer. "Mongolia has huge opportunities with regards to development of the natural resources, and that growth will support the economy," says Ms. Tracey Pierce, director of equity primary markets. "If they're to monetize those opportunities, they're going to need efficient capital markets, and London truly is the center for global finance for natural resources companies." Read more… However, the opportunities for both parties won't come without bumps in the road. In October, a representative of Mongolia's State Property Committee suddenly announced that the tender had been cancelled. With that decision almost instantly overturned, it would appear infighting has broken out over a strategic decision that will set the course for the development of the country's capital markets for decades to come. Fears of foreign ownership and flip-flopping on tenders have become something of a norm in Mongolia. Both the deals to develop Oyu Tolgoi mine and the giant Tavan Tolgoi coal deposit by foreign investors have followed a similar winding path – the Oyu Tolgoi deal took six years to sign and Tavan Tolgoi is back on the table after a first attempt to auction it was cancelled earlier this year, frustrating international investors. The executive director of the Mongolian Stock Exchange (MSE), Mr. R. Sodkhuu, had to fend off accusations that he was selling out in a recent interview with the local media. "Mongolians can do the work," he said. "We will not permanently hand over the MSE to any foreign bidder." As head of the Agricultural Association and four years as an MP before helping to draft the new securities law, Mr. Sodkhuu is a fiery public speaker and has inflamed the media with Mongol patriotism before. "If we took back our Oyu Tolgoi," he said in 2008, "we could have raised several billion dollars like Ivanhoe [Mines]." Amidst recent arguments over accusations of corruption, he is now fighting to restore his reputation with one hand while beckoning London with the other. Mongolia recognizes the real need for diversification and a developed domestic capital market to channel the wall of cash that Oyu Tolgoi will bring. Dwarfed by their two neighbors, Russia and China, however, they are being very cautious to balance foreign influence during this pivotal period. They would rather be in charge of their own development process themselves if they could manage it. The government's Financial Regulatory Committee (FRC) has drafted a new securities law, which is due to go to a vote in November. With over 100 new articles, the law aims to introduce international standards by drawing on the experience of other leading exchanges around the world. Strict investor and company rules as well as harsher penalties for crimes wield the stick, and new much-anticipated depositary receipt rules and fund structures offer the carrot. Despite this step forward, there were still complaints from the panel at the LSE's conference. "What's the point of over regulating a market that barely has a heartbeat?" asked Mr. Lee Cashell, founder of Asia Pacific Investment Partners. Finding "complete paralysis" from the FRC, he insists that more IPOs and tradable floats are required to drive this market forward. Happily, this is about to change. Tavan Tolgoi will be listed on the MSE and shares distributed to citizens, according to the government's latest announcements. In fact, all "strategically significant" companies must sell at least 10% to the public via the MSE, it says, despite the deep-seated problems with the exchange - though critics argue that demands for local listing can't be met until the MSE has had its makeover, and this could take years. The LSE is plugging London dual listings to Mongolian companies before relying on the MSE and offering up London's Alternative Investment Market (AIM) is no doubt where the interest in Mongolia

stems. "We're definitely here to win [the management tender]," says Ms. Pierce with confidence. "We are here for the long term and would like to use London's expertise to support the future development of the Mongolian capital markets."

Source: Business News Europe

MINISTER FEELS STREAMLINING OPERATIONS WILL EASE PRESSURE AT BORDER POINTS Mineral Resources and Energy Minister D.Zorigt recently visited the border checkpoint at Gashunsukhait where the volume of traffic often led to a 5-km-long line of vehicles. On his return he told media that coal export has been increasing lately, but there has been little expansion of facilities at the checkpoint. The most urgent task is to get a new border port complex under the Concession Law. Not just the work facilities, the living and working conditions of the staff have to be improved in tandem. As for now, a streamlining of operational practices is essential to ease the chaotic conditions. More than 300 vehicles pass the border every day and the number is increasing with material for Oyu Tolgoi coming in. Stuff worth USD500 million will come for Oyu Tolgoi before the end of 2010 and the Minister thought it would be helpful if there was a separate channel for them. ―Some such simple changes will have to do until a large-scale overhaul can start,‖ he said, adding, ―All the people there work very hard in trying conditions, but things can be improved if there is proper coordination between the responsibilities of various organizations.‖ Another border point, Zamin-Uud, has an urban status, has an Administrator and its expenses come from the province‘s budget, which makes planning easy. However, Gashunsukhait does not have the status and has no financial autonomy. Workers‘ families are expected to arrive shortly and many things should be made ready for them. The local administration has started working on the issue. A small township will be built within two years at a place 5 km from the border. Only the decision has been taken, and no work is yet done on planning and design. The Government has allowed the local administration to spend USD2 billion for improving work at the port in cooperation with the major companies operating in the Gobi. Told of the local perception that the Chinese are not interested in any improvement, the Minister said, ―I haven‘t noticed anything like this. It is always helpful to have similar infrastructure development on both sides of a border crossing. The Chinese side of the port is already better equipped and it is for us to match their facilities.‖ Giving his impression of the work of the three mines close to one another in Umnugobi province, Tavantolgoi, Energy Resource, and Erdenes MGL, Mr. Zorigt said, ―The differences. In Ukhaa Khudag, things are world class. Erdenes MGL will also work well and efficiently. On the other hand, we visited Tavantolgoi, a company owned by the local government and the Director could not even recall the names of the companies that worked there as operators and could give us no idea of operations in any of the four territories.‖

Source: The Mongolian Mining Journal

MANAGING COUNCIL FOR DEVELOPMENT BANK NAMED The State Property Committee (SPC) has constituted a 9-member Managing Council for the newly set up Development Bank, under Mr. Ch.Khashchuluun, head of the National Development and Innovation Committee. The other members are Mr. B.Darinchuluun, head of the Government Secretariat; Mr. J.Ganbat, a departmental head at the Ministry of Finance; Mr. Kh.Volodya, a departmental head at the SPC; Mr. B.Enebish, Executive Director of Erdenes MGL; Mr. D.Enkhjargal, the Central Bank Representative in London; Mr. Peter Morrow, former Executive Director of Khan Bank; Ms. L.Bolormaa, Executive Director of BFAS LLC; and Mr. Saha Meyanathan, a former Resident Representative of the World Bank in Mongolia.

Source: Undesnii Shuudan

NATIONAL FORUM STRESSES NEED TO GENERATE JOBS More than 400 delegates from all over the country, including MPs, senior Government officials, and representatives of civil society organizations at the first ever national forum on employment discussed several issues related to labor, a vital sector in development. The meeting was jointly sponsored by the Ministry of Social Welfare and Labor, the Employers‘ Federation, and the Mongolian Confederation of Labor Unions. Several sets of figures show that the International Labor Organization‘s finding that the rapid growth in the Mongolian economy between 2002 and 2008 did not generate enough jobs for the growing working age population still remains valid and a cause for worry. Working age people were 49.5% of the population in 2008, rising to 66.5% in 2009 and will be 61.5% between 2009 and 2025. Lack of employment in the countryside has led to migration to cities. While 42.8% of the population

lived in the countryside in 2000, the figure was 37.4% in 2009. The number of Mongolians working abroad has also increased. Ten years ago, there were 10,000 Mongolians working in South Korea but the number has since reached 40,000. The meeting called for both the Government‘s financial policy and the Central Bank‘s monetary policy make bank credit is easier to access if more businesses are to come up and provide jobs. The state sector employs 41% of the work force and the remaining 59% are in the private sector. The success of the Government‘s support of the small and middle enterprises is evident in the fact that 82% of business entities have between 1-9 workers, 8.2% have 10-16, 6.1% have 20-49 and only 3.2% have more than 50.

Source: Ardiin Erkh

PRIVATE SECTOR ENTERPRISES HAVE 14,000 VACANCIES The Mongolian Employers‘ Federation (MEF) organized a conference last week to mark the 20th anniversary of the revival of the private sector in Mongolia. It honored 20 pioneering enterprises and identified 50 new products to hit the market in recent years. Some 65,000 business enterprises are registered in the country, but the actively functioning among them would number around 35,000. An unofficial study has found that the private sector employs 86% of the total work force and produces 70% of the GDP. This, says Mr. Kh. Ganbaatar, Executive Director and Deputy President of the MEF, is abundant proof that the private sector is the main engine of economic growth in the country. The meeting expressed concern that this pivotal role of small and medium enterprises is overshadowed by the attention given to mining. ―Everybody talks about the 3,000 jobs Oyu Tolgoi would provide, as if there is no other avenue of employment. In fact, our members can immediately find work for 14,000 people, with just a little help from the authorities,‖ Mr. Ganbaatar said.

Source: Undesnii Shuudan

MONGOLIA TO USE CANADIAN LUMBER FOR 96 REGIONAL CENTERS Mongolia plans to build 96 regional government centers from British Columbia lumber and Canadian wood technology, the Forests and Range Minister of the province, Mr. Pat Bell has said. "The government of Mongolia has recognized that B.C. wood products and wood-frame construction are ideally suited to government and institutional buildings and for housing." Over the past few years B.C. has helped Mongolia adopt its building code for wood-frame construction, train officials and inspectors, and set up a Mongolian wood-frame construction sector. "Wood-frame construction is energy-efficient, climate-friendly, and well suited to our needs in Mongolia," Prime Minister S. Batbold said during his visit to Canada. "With the support of British Columbia, our government has adopted Canada's wood-frame building code and will be using Canadian wood technology and wood products from British Columbia in new public buildings around Mongolia." Mr. Bell‘s and Mr. Batbold‘s comments came after the signing of a memorandum of understanding between Mongolia and B.C., through which B.C. will provide technical expertise to assist in the design and supervision of the project. Under the MoU, Mongolia agrees to buy all structural lumber for the centers from B.C. suppliers.

Source: BCLocalNews.com

BAN ON MINING-RELATED LICENSES ENDS ON DECEMBER 1 Revising President Ts.Elbegdorj‘s decree imposing an indefinite ban on issue of all mining licenses, Parliament suspended all such activity until December 1. Officials of the Mineral Resources Authority have said they would have to resume issue of licenses after that date if Parliament does not extend the term of suspension.

Source: Udriin Sonin

S. OYUN WELCOMES IMMINENT REPEAL OF WINDFALL PROFITS TAX MP and former Foreign Minister S.Oyun has welcomed the repeal of the windfall profits tax from January 1, 2011, saying that Civil Will, the party she leads, has been against the tax from the very beginning, ―even though we were in a minority‖. She recalled how, ―when we said it was wrong, others called us unpatriotic‖. Admitting that the tax did earn revenue, she said the state budget cannot be made to depend on one tax. The tax delayed the Oyu Tolgoi agreement and if it were not canceled, other large mining projects would also not be taken up, leading to more unemployment and economic stagnation. Noting that Mongolia is among countries with the highest mining taxes, she said, ―It is unfortunate that we are not the best, but it would be terrible if we are the worst.‖

Source: Ardiin Erkh DONOR ORGANIZATIONS TOLD WINTER PREPARATIONS ARE BETTER THIS YEAR At a meeting last week, the Minister of Food, Agriculture and Light Industry told representatives of donor organizations and UN agencies that the Government was now better prepared to aid herders protect their animals during the cold months. Weather forecasts are that the coming winter will be even more severe than the last one, which devastated the herder economy. Fodder and hay have been prepared and stored locally, so that they can be reached without loss of time. Herders have also been told to make their own arrangements to deal with any emergency. Deputy Prime Minister N.Enkhbold, who also heads the National Emergency Commission, suggested the creation of a permanent fund to meet the needs of such sudden natural disaster.

Source: Zuunii Medee

PETROLEUM OFFICIAL REASSURES CITIZENS OF REFINERY BY 2014 Petroleum Authority Chairman D.Amarsaikhan recently told citizens of Zuunbayan in Dornogobi that exploration for petroleum in the area was very important for the country. The people had wanted to know how a Chinese company, Dongsheng, keeps exporting 40-60 trainloads of petroleum every week to China. Mr. Amarsaikhan said the company discovered petroleum in Zuunbayan in 1994 and now works under a product sharing agreement with the Government. It has produced 1,790 million barrels of oil until August, 2010, and exported 1,700 million barrels of it. It has so far recovered USD14 million or 8% of its outlay, and paid MNT33 billion to the Government. Under the terms of the product sharing agreement, the companies are responsible for 100% of the expenses and bear all risks. In case oil is found, they pay a flat rate as production royalty. A company is allowed to recover its costs, and shares profits with the Government. Usually the Government gets 40% in the first stage and its share increases with increase in daily output, and finally becomes 60%. Seven petroleum companies are now working on exploration and production in six territories in Dornogobi. More drilling by Dongsheng is revealing more occurrences. Altan Tengis, another Chinese company, has discovered a fresh deposit. A processing unit with a minimum capacity of 1 million tons is going to come up, to meet Mongolia‘s demands fully. Asked why the producing companies should agree to offer the oil for local processing, instead of exporting it as now, Mr. Amarsaikhan explained that the product sharing agreement says that in the event of a processing plant coming up in Mongolia, the companies would pay the country its share, not in cash but in an equivalent quantity of crude. Mongolia‘s share of the crude produced will be enough to meet the demands of the processing plant. It will require a minimum of 3-4 years to build and the cost would be around USD400 million.

Source: The Mongolian Mining Journal

55.5% OF FOREIGN TRADE IS WITH CHINA Figures for the first nine months of this year show that 55.5% of Mongolia‘s total foreign trade was with China and 19.3% with Russia. Trade with China increased by 9% year-on-year. Russia was the source of 34.3% of total imports while 30% of them came from People‘s Republic of China.

Source: Undesnii Shuudan

MONGOLIAN CREDIT UNIONS TO GET HELP FROM CANADIAN PROFESSIONAL Mr. Ken Doleman is hoping to initiate about 50 years worth of time travel in Mongolia. The CEO of the Swan Valley Credit Union is heading up a team of credit union employees from across Canada to provide consulting and mentoring services to the fledgling financial co-operative sector in Mongolia, where he estimates the banking system is more than a half-century behind the North American model. Mr. Doleman will spend two weeks working with the management and boards of individual credit unions, with the goal of helping alleviate poverty through the gathering of savings and micro-lending. The more money deposited in savings accounts, the more that can be lent to budding entrepreneurs looking to start cellphone businesses, small restaurants, grocery stores and taxi cab companies. "(Credit unions) there are small. They'd have four or five employees, little use, if any, of technology, very basic ways of operating and very limited services and products. (Canadians) would see it as a small micro-finance kind of outlet, (a place) without any sophistication at all," he said. "If they're 50 years behind us, they can leapfrog over many of the barriers we had along our co-operative journey in Canada. They've leapt over land lines and bypassed that infrastructure completely and gone to cellphone service." Because the credit union system is in its relative infancy in Mongolia, Mr. Doleman said, the upside is almost unlimited. There are fewer than 200 savings and

credit co-operatives in the country of 2.7 million people, with about 25,000 members. Swan Valley Credit Union serves a region of about 12,000 people. It has $200 million in assets and 9,300 members.

Source: Winnipeg Free Press

CHILE MINING ECHOES ON MONGOLIAN STEPPES As the last of 33 trapped miners were pulled to the surface in Chile, a group of bankers, government officials and mining company executives were gathered in Hong Kong to talk about the coming minerals explosion in Mongolia. "We are following the economic model of Chile," said Mr. D. Zorigt, Mongolia's minister of mineral resources and energy. "There are a lot of lessons we can learn from the mine accident." The celebrations on the Atacama Desert in Chile, the toxic sludge coursing through the streets of Devecser, Hungary, and the economic hopes of the people on the steppes of Mongolia share a common link -- the world's growing hunger for dwindling resources plumbed from the ground. "Safety has always been an issue ... it almost goes without saying," said Mr. Chris Hinde, editorial director for Aspermont UK, publisher of Mining Journal and other mining industry publications. "How to mine without polluting, ruining lifestyles, fitting in with the existing community are the real challenges." As mining commodities enjoy boom times, pressure is growing to build the world's supply of coal, bauxite and rare earth metals in increasingly difficult locales. As safety and environmental risks rise, so does the allure for developing economies like Mongolia to harness the world's growing minerals appetite. "We expect to be one of the top-performing economies in the next few years, and this is mainly due to mining," Mr. Zorigt said. Mongolia's economic output is projected to nearly quadruple to USD23 billion by 2013, and Mr. Zorigt projects the nation's per capita income -- which now stands about USD3,200 a year -- will grow to USD5,000 by 2015 and USD12,000 by 2021. Read more… But a commodities boom in developing nations is often beset by the "Dutch disease" -- a lopsided influx of capital that causes currency and prices in the country to inflate without trickling through to the rest of the economy. ―The socio-economic challenges when mining transforms an economy are enormous and there's a tremendous amount of risk associated with that," said Mr. Nigel Finch, senior lecturer at the University of Sydney's school of business and economics. "But when they plow that back into their own nation to do the right sort of things that one would imagine -- building roads, hospitals and all the rest of it -- they bring home so much cash in one go it has this enormous splash effect on the economy," he said. Often it's not the obvious socio-economic impacts that are hardest for mining companies, said Mr. Hinde. "For example, if you build a mine in some parts of Africa, you obviously want to employ local people. The problem is that in the structure of a lot of African tribes seniority comes with age," he said. "Mining at a stroke destroys centuries of culture, because the young men are the men who have salaries and making good money -- how on earth do you stop that, because they're the ones driving the trucks and equipment? But then they effectively almost take control of the tribe, because they've got the money." The Chilean economy was built on copper mining, but avoided becoming a victim of Dutch disease. "Copper transformed the Chilean economy and Chile has had enormous social benefit from mining ... there's enormous wealth that's being created there and that's fed back into the economy," Mr. Finch said. The rescue in Chile illustrates the safety issues in mining and the market pressures driving operators to get minerals out of the ground while prices are high. The small-time operation at the heart of the Chile accident was mining copper and gold, both of which have hit record prices in recent weeks. "All mining is dangerous: It's enormous equipment, it's explosives and it's unskilled or semi-skilled labor," Mr. Finch said. "There's obviously going to be some occupational safety hazards. Where you've got a workforce that's desperate to make a dollar, the enforcement is going to be more lax. China is an example of that."

Source: CNN.com

THE NEW THREAT TO THE GLOBAL ECONOMY Concerns about currency tensions are intensifying as the U.S. trade deficit rockets and the Federal Reserve mulls another round of quantitative easing (QE). But it is not the U.S. and other developed countries that should be worried. The main source of contention is currencies, in particular the value of China‘s renminbi. Holding

down the value of currencies against market pressures – as practised by Beijing on a huge scale – -creates distortions and should be stopped. But this would treat the symptom rather than the cause. Global imbalances are largely the result of poorly coordinated macroeconomic policies. The U.S. runs large trade deficits with European countries whose currency floats. Letting the renminbi appreciate will make little difference if countries cannot learn to cooperate better on other economic policies. With the U.S. unable to rely on foreign demand and Federal Reserve chairman Ben Bernanke publicly flirting with an explicit inflation target, further monetary easing seems likely. The prospect has sent the dollar plummeting against most major currencies. There could be yet further falls if QE is stepped up, accelerating the flight from the dollar. How effective more QE would be is questionable: long-term interest rates in the U.S. are already extremely low. With U.S. assets offering low returns and the financial system in weak health, much of the new money will find its way to high-yielding emerging markets. There will be little additional benefit to the U.S. economy. The good news for countries such as the U.S. and Britain is that a monetary tsunami makes the prospect of a global double-dip recession more remote. The bad news for emerging markets is that the next major threat to the global economy could originate in their own back yards. Read more... Emerging markets are not enthusiastic about further QE. They fear that the resulting increase in capital inflows will push up their currencies, undermining the competitiveness of exporters. From Brazil to Malaysia, currencies have shot up against the dollar this year. Continued appreciation could encourage further currency interventions. A flood of liquidity could also create huge asset bubbles in emerging markets. Some are taking precautionary measures. Capital controls may help to temper inflows, but they are easily circumvented and could be overwhelmed by large inflows.

Source: The Financial Times

QE2 POISED TO HEIGHTEN ASIAN CURRENCY DILEMMA Growing expectations that a fresh round of quantitative easing looms in the U.S. and Singapore‘s decision to tighten monetary policy sent the dollar to multiyear lows against several Asia-Pacific currencies. This adds to the dilemma facing the region‘s fast-growing economies, which face pressure to allow their currencies to appreciate and fear that surging inflows could destabilize their economies. The dilemma stems from an intensifying dispute between the U.S. and China, with the former calling for faster renminbi appreciation, and the latter blaming U.S. monetary policy for potentially destabilizing flows into emerging markets. The situation is set to be further complicated should the U.S. move forward, as expected, with what has been dubbed QE2, which would release even more liquidity, much of which could end up in Asian emerging markets. ―It‘s basically the dollar getting destroyed,‖ said a strategist at Société Générale. The Reserve Bank of India has intervened in the foreign exchange market at least three times during the past fortnight to prevent the rupee appreciating against the dollar, and to step capital flows likely to disrupt the economy. Most Asian central banks have been buying dollars to slow the rise of their currencies. Intervention has added more than USD250 billion to Asian foreign exchange reserves during the past quarter, with about USD120 billion of that in September alone, according to BNP Paribas analysts.

Source: The Financial Times

DEVELOPING COUNTRIES CANNOT LET THEIR BUDGETS GET OUT OF HAND It seems premature to start worrying about the next financial crisis. Yet amid the current gloom, Wall Street is snapping up assets of the ―emerging economies‖ that are growing faster and offer higher, more consistent returns. Financial regulators and policy makers in these countries need to pay close attention. The Institute of International Finance, which lobbies for big banks, estimates that ISD825 billion will flow into developing countries this year, 42 percent more than in 2009. Investments in debt of emerging economies alone is expected to triple, to USD272 billion. While developing countries often benefit from foreign investments, huge inflows of capital complicate their macroeconomic management. They push up the value of their currency, boosting imports and slowing exports, and they promote fast credit expansion — which can cause inflation, inflate asset bubbles and usually leave a pile of bad loans. This money turns tail at the first sign of trouble, tipping countries into crisis.

Those are the dynamics behind Mexico‘s 1994 ―tequila crisis,‖ the 1997 Asian crisis, the 1998 Russian catastrophe, the 1999 Brazilian debacle and the 2002 Argentine collapse. The housing bubble that burst in the USA in 2008 was painfully similar, with irrational investments and then a sudden flight. A collapse in emerging market bonds would further damage the weak balance sheets of American banks. Still, it is not time to panic. Developing countries are in relatively good economic shape, while interest rates in the wealthy countries are likely to stay low for years. Yet the financial system remains fragile. And a shock — say a default in Ireland or Greece — could prompt a fast U-turn away from emerging markets. There is little policy makers in the rich world can do to stop these flows. Governments in the developing world must prepare now for when the money masters change their minds. That means they cannot let their budgets get out of hand. And they have to keep a very close eye on their own banks. This might also be a good time to consider capital controls to slow inflows. Chile managed them successfully in the 1990s. Even the International Monetary Fund — long a foe of anything that got in the way of money — acknowledged this year that controls should be part of the toolkit.

Source: The New York Times

CHINA‟S ECONOMY SLOWS, QUITE AS EXPECTED China's gross domestic product rose 9.6% from a year earlier in the third quarter, slowing from 10.3% growth in the second quarter, official data issued Thursday show, as the government withdrew stimulus and took measures to cool sectors such as the property market. The moderation in economic growth was in line with economists' expectations. Given the central bank's surprise decision to raise benchmark interest rates earlier this week, the data likely indicate the authorities are comfortable with the current slowdown and are more concerned about rising inflation and property prices. "The economic recovery trend was further consolidated, and is developing in the direction [targeted by] macroeconomic controls," the National Bureau of Statistics said in a statement announcing the latest figures. China‘s consumer price index rose 3.6% in September, the bureau's data showed, up from August's 3.5% and matching economists' expectations. Analysts still expect consumer inflation to moderate in coming months as the impact of poor summer weather on food prices fades, but elevated food prices have already lasted longer than many analysts expected. Recent economic data have also suggested that China's economic momentum, after slowing for several months, bottomed out around July and has begun to stabilize or even pick up since then.

Source: The Wall Street Journal Asia

CHINA RAISES INTEREST RATES, SPARKS WIDE SELL-OFF China surprised investors by raising interest rates Tuesday, sparking a world-wide sell-off in stocks, commodities and emerging-markets currencies as investors lowered their expectations for Chinese growth, which has been seen as a key driver of the global economy. China's central bank announced it would raise key rates by a quarter percentage point, the first move since it cut rates in December 2008. While many investors had been expecting China to raise interest rates in coming months, the timing of the move was unexpected. It is viewed as the first in a series of interest rate increases. Currency markets, where exchange rates reflect bets by investors scouring the globe for the highest returns, reacted swiftly. On the assumption that China's rate boost will damp its economy, investors removed some bets on the currencies of other surging markets, and money flowed back to the U.S. dollar. Australia, seen as closely linked to Chinese growth, saw its currency fall 2.6% against the dollar. The U.S. dollar rose 1.8% against the Canadian dollar and 0.6% against the Brazilian real. Investors were split on the impact China's move will have on currency diplomacy. Tensions have been building as a result of the money flooding into emerging markets, driving up the currencies of countries such as Brazil and South Korea against the dollar. Because China effectively pegs the yuan to the dollar, exporters in those countries have been losing competitiveness against China, their chief rival in the global markets. In response, many governments have been pushing back against the tide of money boosting their currencies. China's interest-rate move marks a shift in strategy by authorities. Until now, they had been relying on administrative controls such as limits on bank lending and changes in required mortgage down-payments to modulate growth. "Today's decision to hike rates suggests that Beijing feels these earlier, more targeted measures are no longer enough to keep the economy on an even keel," said a bank economist. Read more… The impact of China's rate rise was also felt in the commodity markets, where Chinese demand

plays a significant role in setting prices. Oil prices suffered their biggest decline in eight months, losing more than 4% to USD79.49. Gold, which set a record high last week, fell USD36.10 per troy ounce, or 2.63% to USD1335.10. Traders say the market swings were likely magnified by the fact that China's move caught many investors off guard. The People's Bank of China said Tuesday that it increased the benchmark one-year interest rates on loans and deposits by a quarter of a percentage point each. The last time it raised interest rates was in 2007. China's central bank, as usual, didn't elaborate on the reasons for its interest-rate move, which came two days before key economic data for September and the third quarter are due. "They are starting to see signs that growth is picking up … and now is the time to begin cautious tightening," said an analyst. Some investors interpreted China's rate move as a sign the country might rein in a steady but gradual appreciation of its currency against the dollar seen recently. That's in part because a rising currency, like higher interest rates, serves as a brake on inflation—thus a rate increase means it wouldn't need to allow the currency to rise as quickly. Source: The Wall Street Journal Asia

CHINA CLOSES 1,355 SMALL COAL MINES, BUT DEATH RATE DOES NOT FALL The Chinese government closed down 1,355 small coal mines in the first nine months of the year, already surpassing its target for the year. This bid to improve safety and reduce pollution in the industry means 125.2 million tons less of local coal production. China's coal production still climbed 17% in the first nine months to 2.4 billion tons, as new production was added to replace outdated mines. However, despite small and unsafe mines being closed, fatalities in the industry so far this year have remained flat compared with the same period in 2009. Accidents killed 2,631 Chinese coal miners in 2009, a considerable drop from the 6,995 deaths reported in 2002. By comparison, the United States had 34 mining deaths in 2009, a record low for the country.

Source: www.miningweekly.com, CNN.com

NORWAY‟S HUGE WEALTH FUND HITS NEW PEAK Norway‘s sovereign wealth fund has topped USD518 billion. The country has been building the fund for 14 years in an attempt to preserve its oil wealth for future generations. Today it owns about 1 per cent of all global stocks and counts as the world‘s second biggest sovereign wealth fund after Abu Dhabi‘s. The new peak comes after a volatile period for the so-called ―oil fund‖, which declined 23 per cent during the global financial crisis in 2008 before recovering most of the losses last year. The fund has become one of Norway‘s biggest sources of global influence, with the government using it to press foreign companies on issues such as corporate governance, labor rights and the environment. Wal-Mart, the US retailer, and Rio Tinto, the Anglo-Australian mining group, are among dozens of companies excluded from the fund for alleged ethical violations. In another sign of muscle-flexing, Norway‘s central bank, which manages the fund, last month sued Citigroup for losses resulting from alleged misstatements during the financial crisis. The fund is intended to ensure that Norway continues to benefit from its oil windfall long after North Sea reserves run dry and to limit inflationary pressures by restricting the amount of oil revenues available for government spending. In ―normal‖ years the government may spend 4 per cent of the fund‘s value – although this rule has been flouted over the past two years as Oslo sought to cushion the impact of the global downturn.

Source: The Financial Times

POLITICS MONGOLIA TO PAY RUSSIA USD3 MILLION AS FINAL SETTLEMENT OF “GREAT DEBT” Three rounds of talks between the two finance ministries agreed some time ago that Mongolia will pay Russia USD3 million in full settlement of all its monetary debts incurred between 1949 and 1991. Both Governments now have to approve of this decision and Minister of Finance S.Bayartsogt said on Friday that the Mongolian Government has recently done so. Tracing the course of the resolution of the ―great debt‖ issue, Mr. Bayartsogt said that the amount Mongolia owed to the Soviet Union and its successor state, Russia, was computed in 2003. Based on exchange parity between the MNT and the rouble, the principal was fixed at MNT9.6 billion and the interest on it was MNT2.2 billion. The total to be repaid thus stood at MNT11.8 billion.

The then Prime Ministers of the two countries, Mr. N.Enkhbayar and Mr. S.Kasiyanov, negotiated the issue and it was decided to deduct from the total the MNT260.3 million Russia had given to the Erdenet factory and the interest on this. The total amount to be repaid was then agreed to be MNT11.4 billion. Russia agreed to write off 97.8% of this and Mongolia was left with 2.2% to pay, but it was understood that the amount would be adjusted against the accounts of the two countries‘ joint venture Mongolrostsvetmet. However, just before the visit of President Medvedev to Mongolia in September, 2009, Moscow announced that Mongolia was still to pay back the 2.2%. It was decided during the visit that the debt issue would be resolved within two months. Russia repeated its claim at a meeting of the World Bank in Istanbul in October, 2009. The talks at the Finance Ministry level were held after this and after further adjustments, Mongolia now has to repay USD3 million.

Source: Ardiin Erkh

GOVERNMENT APOLOGIZES TO FRANCE, BELGIUM, GERMANY OVER KHURTS The Ministry of Foreign Affairs has sent an official note of apology to the Governments of France, Belgium and Germany, asking them not to press for the transfer of Mr. B.Khurts, Chief of Administration at the National Security Council, from Britain, where he is now under detention. These three countries want to interrogate him in a case of violation of human rights in their territory when Mr. Khurts and some other Mongolians abducted a Mongolian national in France in 2003 and brought him home through Belgium and Germany. Mr. Khurts was arrested in Britain on September 17 and is being tried there, but the charge against him does not actually involve Britain. The British Government has not replied to demands from the Mongolian Deputy Prime Minister and the Minister of Justice to release Mr. Khurts who had been travelling on a diplomatic passport. The next hearing of his case is fixed for November 15 when the court may decide to hand him over to the countries which want him. The Government has hired a defense lawyer for him and is hoping the three European countries will drop their demand to try Mr. Khurts.

Source: Engish.News.mn

MAJORITY TELLS SANT MARAL SURVEY UNEMPLOYMENT IS THE MAIN PROBLEM For 35.7 percent of the respondents to the Sant Maral Foundation October 2010 survey, unemployment is the major problem in Mongolia today, while 18.3 percent give that place to standard of living/poverty/income, 9.5 percent to price increases, and 4.2 percent to corruption. At the same time, 61.2 percent felt government policies always fail to solve the most important problem they mentioned. Even then, 71.3 percent said they would participate if elections were held tomorrow. And if they are indeed called upon do so, 20.8 percent nationwide would vote for the MPRP and 21.0 percent for the DP. Asked how the money from the mining sector should be used, 38.3 percent said the state should spend it on economic development, while 31.3 percent wanted long-term programs in education, health, etc. should be taken up, and 16.5 percent thought there should be increased social programs to give immediate relief to the poor. A majority (42.9 percent) felt the economic situation is stagnating, while 36.1 percent saw it as improving, and 12.2 percent as being in decline. More than half (55.4 percent) thought five years from now, the economic situation will be ―slightly better‖, while 11.2 percent felt it will be ―much better‖, and 16.7 said they did not expect any change. Nationwide, 24.0 percent felt political parties represent public opinion, and 67.7 percent felt they do not. About society in general, 69.9 percent felt there is more injustice, and 3.8 percent said there is more justice. Even then, 87.4 percent said they were ―very proud‖ to be Mongolian, and 88.2 percent were optimistic about their future. The representative sample of 1,000 respondents from Ulaanbaatar and Dornod, Umnugovi, Uvs, Khuvsgul provinces was collected from October 1 to October 9.

Source: Sant Maral Foundation For the complete Sant Maral "Polit Barometer October 2010" survey, visit BCM website – Resources, Mongolia Reports. BATBOLD SAYS MONGOLIA IS ADMIRED FOR ITS ACHIEVEMENTS Prime Minister S. Batbold has told a meeting of the MPRP, of which he is chairman, that Mongolia has made great progress on its path to democracy and the market economy in the last 20 years, but there was still a long way before it could sit back and reflect on the gains of the transition. ―As the dominant political force in the country, the MPRP bears the major responsibility for both

achievements and shortcomings‖ and the party has set up 33 working groups to analyze and assess progress in diverse areas in society, economy, and politics. Referring to his recent visit to the UN and interaction with international leaders, Mr. Batbold said there was widespread admiration for what Mongolia has come to stand for. Recognition was coming in several ways, he said, making a special mention of a statement by President Roza Otunbayeva of Kyrgyzstan in which she said that her country was ―adopting Mongolia as a model for the democratic parliamentary structure Kyrgyzstan was hoping to erect‖.

Source: Zuunii Medee

MONGOLIA CONSOLIDATES ITS YOUNG DEMOCRACY In an exclusive interview with Inside Asia recently, President Ts. Elbegdorj was clear that Mongolia's democracy is not only irreversible but it is consolidating despite all the ups and downs. Most importantly, his country is moving forward to integrate with the world community of democracies. The Community of Democracies, an international conference to promote democracy worldwide, will be held in Ulaanbaatar in 2013. Mr. Elbegdorj knows very well all the democratic challenges his country has to face in dismantling old system and mindsets. Lack of transparency, corruption, respect of human rights and injustice are some of the top challenges that impede functional democracy. Still, Mr. Elbegdorj reiterated that Mongolia's young democracy respects liberty, freedom and promotes human rights. New York-based Freedom House this year rated the country as free. Indeed, it is a major achievement that Mongolian democracy has survived in the past 20 years. When talking to NGOs, one got a pretty grim view of the country's democratic future. They said democracy is on the decline in the past five years because of corrupt politicians and cronyism without much public engagement. But the president said that his government is inviting views and welcoming participation from the estimated 7,000 NGOs. Under his government, representatives from government and civil society organizations hold talks every first Tuesday of each month. Read more... Last December, Mr. Elbegdorj established the Citizens' Hall to encourage civil participation in planning and decision-making process. This is part of the government's plan to decentralize the central authorities to the rest of country. Such gatherings help the government and the public to reconcile their differences over issues related to natural resources extraction. Former foreign minister S. Oyun, now a prominent opposition figure, was equally succinct in saying that Mongolia needs to integrate with broader Asia, including ASEAN, to promote economic and social development. "That is the future of Mongolia," she said. Mr. Elbegdorj, too, wishes one day Mongolia can become a dialogue partner of ASEAN. Two remarkable developments that come with the democratization process have been the revival of long suppressed Buddhism and traditional medicine in Mongolia.

Source: The China Post

OLD AND NEW MPs JOINTLY CELEBRATE 20 YEARS OF PARLIAMENTRAY GOVERNMENT It was a happy reunion day on Wednesday when more than 30 members of the previous five Parliaments mingled with those of the present one at Government Hall, to mark the 20th anniversary of parliamentary government in Mongolia. In these years, about 200 individuals have been elected to Parliament and all of them were awarded a commemorative medal. The first Parliament (1990-1992) was called The State Conference (SC) and 30 of its 56 members attended yesterday‘s special meeting. Former Prime Minister S.Bayar was the head of a Standing Committee then and greeted his colleagues from 18 years ago. President Ts.Elbegdorj presented certificates to them. In his speech, Parliament Speaker D.Demberel recalled the days of the SC and how it worked to revive a sense of national pride and justice that had been corroded by corruption, financial wrongdoing, and abuse of power. President Elbegdorj‘s 30-minute speech was a strong indictment of the prevalent political culture that threatens to alienate the Government and Parliament members from people. It would be a mistake, he said, to think that people clamored only for monetary promises to be fulfilled, when their larger demand was for social justice and employment with dignity.

Source: English.news.mn

CITY OFFERS TWO-ROOM APARTMENT FOR 0.07 HECTARE OF LAND IN GER DISTRICTS Mayor G. Munkhbayar has instructed city officials to speed up work on the program to relocate inhabitants of ger districts. They would be offered apartments, of different sizes according to their

choice, in lieu of the land where they live now. Until these apartment blocks come up on these lands in about five years, they will be provided with temporary apartments. All this entails a lot of legal work, changing land ownership rights and occupation agreements. Mr. J. Aldarjavkhlan, Executive Director of Residential Apartment Financing Corporation, says making this temporary relocation compulsory is a better option than paying cash compensation for the land any household gives up to make way for apartment blocks to be sold later. If people get money, they will just move elsewhere and so ger districts will keep coming up in new areas. Work on these temporary apartments has begun in several parts of the city and will proceed in phases. Persuading ger district households has not been, and will not be, easy, especially as many want more money for their land. At present, it has been decided that 0.07 hectares of land is to be exchanged for a two-room flat.

Source: Onoodor

ECO-WARRIORS CALL ATTENTION TO ECONOMIC DEVELOPMENT DILEMMA In early September at a small outpost 110 km north of Ulaanbaatar, four environmental activists armed with hunting rifles opened fire on gold mining equipment owned by two foreign companies. The incident has come to symbolize the challenges faced by the Mongolian government as it strives to balance environmental protection and economic growth in the development of the country‘s immense mineral wealth. To a certain extent, the shooting incident is a reflection of the wrenching economic changes already under way. The shooters, members of the United Movement of Mongolian Rivers and Lakes, caused only minimal property damage, just a few dents in a bulldozer tread and a busted radiator. But they sent a powerful message: Puraam, a Chinese firm, and Centerra Gold, a Canadian-operated company, aren‘t welcome in the area, one of Mongolia‘s few forested regions. The activists were also protesting the government‘s failure to properly implement environmental regulations, including a one-year-old law prohibiting exploration or mining at the headwaters of rivers. Mining experts and activists agree the government is at fault for enacting laws it has neither the ability, nor perhaps the will, to enforce. Centerra Gold and Puraam are operating on 168 hectares of land in the headwaters of the Selenge, Mongolia‘s largest river, which feeds Lake Baikal, the world‘s largest freshwater lake. In the rush to develop the site, the local environment has suffered, activists contend. ―We targeted these companies because they are mining illegally in a historically important place and right next to the headwaters of two crucial rivers in a healthy forest region in defiance of existing laws. They need to be shut down,‖ alleged Mr. Ts. Munkhbayar, a former herder turned conservationist and recipient of a 2007 Goldman Environmental Prize. A 1991 discovery led to the present day gold rush in the area around the former logging hamlet of Tunkhel. The Gatsuurt deposit, currently managed by Centerra, contains an estimated 1.3 million ounces of gold, according to the company‘s website. Read more… Activists became alarmed after traces of arsenic were found at the site. ―When you‘re talking about risks like arsenic, responsible and transparent mining does not work,‖ said Mr. D. Dashdorj, a retired Tunkhel resident who is now campaigning for the closure of the Gatsuurt mines. Outside the fenced-off mining sites, a herder says he can no longer access a well now within company‘s work zone and must instead rely on the polluted rivers for drinking water. Back in the capital, facing criminal prosecution, the environmentalists justified their radical actions, asserting they had no other choice in order to accomplish their aim of calling attention to government negligence. Some officials hint that the reason for government inaction could be that environmental protection legislation is too expensive to implement. ―The principle of the law is right. The government adopted the law with a view to protect the environment, but the implementation side has many issues,‖ admits Mr. T. Tegshsaikhan, an official at the Mineral Resources Authority of Mongolia, the state‘s implementation agency for the law. Licenses of mining companies operating less than 200 meters from a water source may be revoked or modified, provided the government compensates license holders for exploration expenses already incurred, or lost revenue from mining operations already initiated. Technically, mining companies can continue operating until they‘ve been compensated, Mr. Tegshsaikhan said. Currently, the total compensation that would have to be paid out in order for the law to be fully implemented stands at a staggering USD4 billion. ―When you make a law, you have to put a lot of thought into it, and in this case, it looks like the homework was not done very well,‖ said Ms. Rena Guenduez, senior mining advisor at the USAID-sponsored Economic Policy Reform and Competitiveness Project.

The shooting incident is part of a trend. Mining conflicts and confrontations have increased dramatically in Mongolia in the last two years, she said. This year alone there have been six reported mining related confrontations and one death. ―This will increase and escalate, if there is no mechanism for participation and no mechanism to resolve conflict,‖ Ms. Guenduez said, adding that frequently changing laws, ―myths about mining,‖ and lack of informed decision making in Mongolia leave both mining companies and the public frustrated. Foreign company representatives also express frustration about the legislative framework. Centerra Gold‘s vice president for Mongolia, Mr. Doug Krahn, said that his firm had done nothing illegal and fully supported environmental protection provisions. But he added there was not enough consultation done with the industry to create a law that could be effectively implemented. He also blamed pollution at the Gatsuurt site on previous operations there, undertaken prior to the start of Centerra‘s activity. ―That entire valley is covered in tailings from work that previous companies have done before us,‖ he said. He stressed that all water currently discharged from area mines is treated to meet required groundwater standards. Although many Mongolians are dazzled by economic growth projections, some, like Mr. Munkhbayar of the United Movement of Mongolian Rivers and Lakes, are already convinced that the social and environmental costs are too high. While he had neither heard of the term ―eco-terrorism‖, nor thinks it applies to him, Mr. Munkhbayar readily acknowledged to EurasiaNet.org that he broke the law and he could end up with a five-year prison term. It is a sentence, he said, that he is more than willing to endure, if it will help preserve Mongolia‘s environment. ―Exploiting everything is not development,‖ Mr. Munkhbayar said.

Source: eurasianet.org

HI-TECH NOMADS AT HOME IN A CHANGING WORLD Ts. Tumurbaatar, 35 and considered a well-to-do Mongol nomad, is the proud owner of more than 1,000 sheep, horses and goats, many of which he inherited from his father. After finishing high school, he has spent his life looking after this precious livestock. Each year, their milk, meat, skin and wool earn him sufficient income to feed his family of a wife and three children. Six years ago, he received a plate from a township council, praising him as a successful nomad with more than 1,000 animals to his name. "I am happy to be here following in the footsteps of my father," he said. "I know the area very well, so we know when to move in and set up camp," he explained. His family will move again, to prepare for the harsh winter that they know is approaching. "It is not easy to live in winter, but my family will survive," he emphasised. Inside his large ger, I spotted a Korean-made 20-inch flat-screen TV plus radio along with several huge wooden frames with photographs of the family and friends. Placed nearby are photos of Buddhist monks including a smiling Dalai Lama. "I respect him," explained my host. Being a Buddhist, Tumurbaatar has deeply ingrained beliefs and customs to avoid upsetting the natural balance and environment when he and his family move around. Political and economic transformation since 1990 has slowly helped to dismantle stoic Soviet governance and usher in a new era of rapid change for Mongolians, both city dwellers and those living on the plains. It is a common sight now to see cars parked alongside gers. On the outskirts of Tumurbaatar's camp, it's easy to spot a locally made satellite dish, a car, two Chinese-made motorcycles and a solar panel. The 24 x 35-inch solar panel is enough to power a single light bulb and the TV for two or three hours a day. Read more... "We have 18 channels to watch news and music plus the [English] Premier League," he said with a huge smile. Inside the cosy yurt, the iron stove in the middle of the room, which is used to heat milk, also keeps visitors warm. He said he wanted to see his children get a good education and then work in the city. Of course, not every nomadic family shares this vision. B. Batmunkh, 52, another herdsman, living in a nearby village, said he has a clear plan for his children. He is one of the growing number of nomads who has chosen to live two lives, first in the city and then in the ger. He and his wife explained that they want their children, all girls, to get a good education, then they can choose whatever lifestyle they want. Batmunkh worked as an official in the IT sector for more than two decades. Five years ago, he decided to quit and return to a traditional nomadic life, leaving the stress of city behind. These days he enjoys the same trouble-free routine every day: Wake up early, milk the livestock at regular intervals six or seven times through the day, then rest or take care of the sheep and goats. The two families are also part of a local network known as Vansemberuu, which promotes primary

healthcare in Mongolia by providing a "family pharmacy kit" that contains traditional (herbal) medicine instead of expensive Western medicine. Funded by the Nippon Foundation since 2006, the program has proved a success, with more than 46,000 families throughout Mongolia carrying the kit of 12 kinds of pill for everyday use. A family with children suffering from a cold or fever can use the pills in the kit and pay later - just like with a hotel's mini bar. Since a box of pills costs less than USD1, the bill puts minimal pressure on the family's finances and the payback rate is almost 100 per cent.

Source: The Nation, Bangkok

POLL TO CHOOSE BEST WOMAN POLITICIAN The Public Relations and Survey Research Center offered 50 names for an opinion poll and has now made a shortlist of 12 among from whom a follow-up poll will be asked to choose the best woman politician in post-1990 Mongolia. Among the top contenders are Mrs. S. Oyun, a 4-term MP and Head of Civil Will, Ms. D. Oyunkhorol, Ms. D. Oyungerel, a former Advisor to the Prime Minister, Ms. D. Munkhuu, Head of the Gal Golomt Center and a former MP.

Source: Zuunii Medee

SOUTH KOREA TO START WATER AID PROJECT IN ULAANBAATAR Korea‘s largest water development aid projects yet will kick off in three Asian countries with the aim to better the lives of millions of people, the Korea International Cooperation Agency has said. The agency, as part of the East Asia Climate Partnership, will start projects in Mongolia, Azerbaijan and the Philippines with an estimated budget of 78 billion USD69 million, hoping to directly affect 639,000 lives and indirectly affect countless more. In Ulaanbaatar, the KOICA plans to stabilize the water supply by building wells and insulating water reservoirs among other things. When the project finishes in 2014, it is expected to serve over 330,000 people.

Source: www.koreaherald.com

PRIME MINISTER PROMISES AGENCY FOR CHILDREN‟S AFFAIRS Schoolchildren from the 6 districts of Ulaanbaatar, who have distinguished themselves in scholastic, creative or athletic aptitudes, gathered in the Ikh Tenger complex last weekend to discussed questions like ―What do children need?‖, ―What can they do for society?‖, and ―What are the most urgent problems to be solved?‖ A summary of the discussions will be presented at both the 26th MPRP congress and to Parliament Speaker D.Demberel. Prime Minister S.Batbold took an active part in the discussions and promised the participants that the Governmental would try to see that an agency was set up exclusively for children‘s affairs.

Source: Udriin Sonin

HORSING AROUND IN MONGOLIA As recessions go, Karakorum can claim an unrivaled slide. In the mid-13th century, it was the capital of the Mongol Empire — the largest the world has ever seen. Genghis Khan's horsemen ranged from the Korean peninsula to the Caspian Sea and his descendants built a stunning Silk Road city in the Orkhon Valley, where Genghis Khan had arisen from common stock. For a few decades wine flowed from gilded fountains in Karakorum's palace. In 1260, however, Kubilai Khan, Genghis Khan's grandson, decided to move the capital elsewhere, and the city slowly became a backwater. Chinese raids left it in ruins by the end of the 1300s. The location was able to regain some importance in the late 16th century, when the Tibetan Buddhist monastery Erdene Zuu — an enormous walled complex of ancient temples — was built upon the site of Karakorum using palace rubble. But while it flourished for 350 years, it too was destroyed — or, rather, most of it was — during a 1939 purge orchestrated by the Mongolian People's Revolutionary Party. Thousands of monks were killed. A few structures at Erdene Zuu, including three temples, somehow survived, and after the end of communist rule in Mongolia in 1990 they were once again used for worship. "This isn't what it once was," concedes Bassa, the monastery's head monk. "But it is alive, and growing." Monks have been slowly returning, joined these days by a regular flow of tourists. Read more… The Orkhon Valley itself is more than enough reason to make the bumpy 380-km drive from the capital Ulan Bator. The area is the cradle of Mongol society and a UNESCO World Heritage site. Visitors can see Mongolians living off the land in the timeless nomadic style, and it's a popular area for horse trekking.

Also putting the area back on the map is the Genghis Khan Polo & Riding Club, genghiskhanpolo.com, which operates a string of luxury gers (Mongolian circular felt huts). This summer it was the venue for the Shanghai Tang Polo Cup, with players traveling from all parts of the globe to compete. "The polo was great," enthused Nicholas Wills, a stockbroker from London. "But the real attraction is Mongolia. Where else can you ride for hours and hours and never see a fence?" After a centuries-long hiatus, it's gratifying to know that Karakorum once again rings to the chanting of monks, the sounds of contest and the thunder of hooves.

Source: www.time.com

ZAMBIA CHARGES CHINESE BOSSES WITH ATTEMPTED MURDER OF MINERS Police in Zambia have charged two Chinese mine managers with attempted murder in connection with the shooting last week of 11 miners protesting about poor pay and conditions. The pair worked at a mine 325 km south of the capital, Lusaka. Nine of the men who were shot are out of danger, but two were transferred to a hospital in Lusaka for surgery. China is one of the biggest investors in the southern African nation's mining industry, but its companies have not enjoyed an easy ride with staff, unions or the political opposition, which routinely accuses them of abuses. In 2005, five Zambians were shot and wounded by managers during pay riots at a Chinese-owned mine.

Source: www.miningweekly.com

ANNOUNCEMENTS

MONGOLIA INVESTMENT SUMMIT, NOVEMBER 23-25, LONDON The Mongolia Investment Summit on 23-25 November in London will be bringing together companies operating in Mongolia with the Mongolian government to discuss the opportunities and challenges surrounding investing in this frontier economy. Those registering before 5 November will save up to £135.

Delegates will:

• Learn the best entry strategies into Mongolia • Access partnership and investment opportunities • Gain first hand insights into regulations and policies affecting foreign investment • Understand how frontier market investment can work for you • Get a clear picture of how the government is working to improve Mongolia's business environment. Among the speakers will be: • Andrew Harding, Chief Executive, Copper, Rio Tinto on the importance of emerging markets in meeting global commodity demands. • Robert Friedland, Executive Chairman, Ivanhoe Mines on how they worked with the Mongolian government to come to an agreement on the Oyu Tolgoi mine, and how the mine will be developed. • Kevin Bortz, Director, Natural Resources, EBRD about Mongolia's economic outlook and what remaining reforms need to be made. • G. Tsogtsaikhan, Director, MonAtom LLC about where the opportunities for Mongolia's uranium mining are found. • T. Amarzul, Executive Director, Petro Matad LLC on the development of Mongolia's petroleum resources, and why they chose to list with LSE AIM. • Daniel Broby, Chief Investment Officer, Silk Invest about their appetite for Mongolian investment, what type of projects they are seeking and what restrictions and risk perceptions they have. More information can be had at www.terrapinn.com/mongolia. _____________________________________________________________

“HOW THEY SEE US” ON BTV ON OCTOBER 23 Saturday, October 23 is the next date for ―How they see us‖, BTV‘s fortnightly program in Mongolian started in cooperation with BCM. Tomorrow‘s 15-minute program will be from 21:15, and will cover reports on Mongolia in international media, featured in the BCM NewsWire, including Prime Minister S.Batbold‘s conversation with Charlie Rose of Bloomberg.

_________________________________________________

“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.

____________________________________________________________________________________

NEW POSTINGS ON BCM WEBSITE‟S „MONGOLIAN BUSINESS NEWS‟

The draft Tavan Tolgoi Investment Agreement which was submitted by the Government to Parliament is posted in both languages to BCM‘s websites, (www.bcmongolia.org) and (www.bcm.mn), ‗Mongolian Business News‘ for your review.

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.

SPONSORS

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] September 30, 2010 *10.6% [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]

May 12, 2010 11.00% [source: IMF]

CURRENCY RATES – October 21, 2010

Currency name Currency Rate

US dollars USD 1,296.98

Euro EUR 1,791.39

Japanese yen JPY 15.97

British pound GBP 2,041.71

Hong Kong dollar HKD 167.10

Chinese yuan CNY 195.03

Russian ruble RUB 42.16

South Korean won KRW 1.15

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.