BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmmongolia.org

Email: Jim@bcmmongolia.org Issue 22, May 2, 2008

NEWS HIGHLIGHTS:

Business: Panasonic Showroom Opens; Bloomberg to Broadcast Mongolian Stock News; MIAT Flights to Nagoya and Osaka; Commercial Center in Darkhan

Economy: Mongolia’s Socio-Economic Situation; Togrog’s Exchange Rate Not Expected to Fall; New Sports Complex; New Ambassador to EU; Delegation Discusses Energy and Security at UN Forum

Politics: Mongolia’s Mining Debate; Group Urges Cutting Off Aid to Mongolia; Civil Will Party Maintains Name Following National Unity Party Merger; Anti-Corruption Agency Surveys Corruption Level

NOTICE TO BCM MEMBERS

BCM NewsWire welcomes relevant business news stories and organization announcements that would be of potential interest to our members and readers. Please contact Tuguldur at BCM at tugi@bcmmongolia.org or Julie Pitzen, NewsWire editor at juliepitzen@yahoo.com with your suggestions.

Readers may notice the addition of banner ad Company logos after the Articles section of the NewsWire. These are paid sponsorships. Any member who is interested in sponsorship should contact the BCM office.

APRIL BUSINESS MEETING RECAP

It was nice seeing 65 members at our BCM monthly meeting this past Monday. The next monthly meeting will be held Monday, May 26.

Pete Morrow opened the meeting and introduced the Council’s new Vice Director, Ser-Od Ichinkhorloo and new BCM NewsWire editor, Julie Pitzen. He announced an interest in forming a working group for the privatization of the stock exchange and asked member to forward their thoughts on this to Jim. He also brought up the recent spate of negative articles about Mongolia including the full page ad in the Wall Street Journal and mentioned that BCM and top officials are unable to determine who is behind them.

Executive Director, Jim Dwyer announced that BCM membership has reached 95 members, an increase of six members from the last meeting. There will be a free round trip awarded on Eznis Airways for the 100

th BCM member. He also mentioned the success of the International Tax

Workshop co-sponsored with PricewaterhouseCoopers on April 15th. Jim asked members to please

complete the survey that was sent out concerning the Legislative Standing Committee.

Brian Goldbeck, Charge d’Affaires, US embassy, gave a briefing and introduced Robert Reid, Country Director for the MCC. Michael Richmond, Senior Commercial Specialist at the US Embassy, spoke about grants for trade consulting services from US sources available for Mongolian projects.

Our first speaker was Dr. Julian Dierkes, Assistant Professor and Coordinator for the Program on Inner Asia at the University of British Columbia. Dr. Dierkes spoke on his interests and many projects here in Mongolia particularly in the areas of development and mining. He also spoke of UBC’s interest in creating a Chair in Mongolian Research and the need to create an endowment for this appointment and associated research projects. Dr. Dierkes is in the process of organizing an international conference, “Contemporary Mongolia – Transitions, Development and Social Transformations”, to be held in Vancouver, Canada, November 14-17, 2008. Interested participants and supporters may contact him at: j.dierkes@ubc.ca.

Our second speaker, Bettina Moriera Infante, Director, Breakthrough PR, spoke on how PR drives business results. She described PR as key in creating a proactive corporate image and how it plays a vital role in corporate strategy. She also spoke about branding and brand advocacy and how these are new concepts in Mongolia. Bettina’s presentation has been e-mailed to BCM members. She can be contacted at: Bettina@breakthroughpr.mn, or www.breakthroughpr.mn.

BUSINESS

PANASONIC SHOWROOM OPENS

The Global Electronics Company has opened a Panasonic showroom. The opening ceremony was attended by the Global Electronics Director-General, I. Boldbaatar, Japan's Ambassador to Mongolia, Y. Ishihashi, Manager of the Tatsushital Electric Industrial Company, Mr. Wadamori and other officials. The showroom offers a wide choice of Panasonic products ranging from plasma TVs and domestic appliances, to security cameras.

Source: MONTSAME

BLOOMBERG TO BROADCAST MONGOLIAN STOCK NEWS

Bloomberg will soon begin broadcasting stock information from the Mongolian Stock Exchange which currently trades stocks from over 300 companies. In March 2007, the two organizations made an agreement and Bloomberg delegates visited Mongolia to become acquainted with the activities of the Mongolian Stock Exchange. Financial organizations of foreign countries are interested in the economic state and stock information of Mongolia. Delegates noted that it was essential to make the agreement and begin broadcasting trading information.

Sources: Bloomberg

Minerals News Daily www.miningmongolia.mn

MIAT FLIGHTS TO NAGOYA AND OSAKA

MIAT has posted its summer schedule and will make 1-3 flights to Beijing and Seoul each day during July and August of this year. This is due to the leasing of a Boeing-737 from Ireland. Also there will be four flights a week to Europe. During the peak of the summer tourist season, MIAT also plans to make four flights to Tokyo and two flights to Osaka and Nagoya each week.

Sources: MONTSAME

Odriin Sonin

COMMERCIAL CENTER IN DARKHAN

The construction of a new international commercial center is due to begin in Darkhan city by order of the Monkh Khaldun Group. It will have over 1,000 commercial halls available for leasing and 400 square meters of exhibition space. The project is expected to create 1,200 jobs. The center’s administration has begun making leasing contracts with various commercial and service networks.

Source: MONTSAME

ECONOMY

MONGOLIA’S SOCIO-ECONOMIC SITUATION

Parliament presented a review of Mongolia’s socio-economic situation and the financial state of the Government. In 2007, the labor-age population was 1642.2 thousand, the economically- active population stood at 1054 thousand, the number of employed was 1024.1 thousand, the number of unemployed was 29.9 thousand, and the unemployment rate was 2.8 percent, a decrease of 0.8 point compared to 2004.

In 2008, the average salary of a state employee was MNT 300 thousand, an increase of 3.5 times. In 2007, the average household income increased by 24.3 percent over 2004, meaning salaries rose by 44 percent and pensions by 95.9 percent.

Economic growth reached 9.9 percent in 2007. The average growth of the industrial sector was 9.3 percent between 2004 and 2007 that of the agricultural sector stood at 12.4 percent, an average growth of the construction area accounted for 8.5 percent, and that of the transportation and communications sectors stood at 15.2 percent. Between 2000 and 2003, an average share of GDP per capita was MNT 885.7 thousand, whereas between 2004 and 2007, this amount reached MNT

1140.1 thousand, an increase of 1.3 times.

The consumer price index increased to 15.1 percent year over year in December 2007. The consumer price index averaged 5.6 percent between 2000 and 2003. Between 2004 and 2007, this figure increased up 10.4 percent.

The MNT exchange rate against the U.S. dollar was relatively stable. In 2004-2007 it equaled 1184.8 togrogs. During this period, the togrog weakened against the USD dollar by 6.8 percent. The total amount of credit granted by commercial banks reached MNT 2056 billion at the end of 2007 an increase of 3.4 times compared to 2004.

The volume of investments made from the state budget between 2004 and 2007 reached MNT 617 billion, an increase of 4.2 times. The volume of direct foreign investments during the period of 2004-2007, reached USD 1 380.4 million.

In 2007, foreign currency reserves of Mongolia reached USD 975.3 million. General budget indices have shown a progress. Between 2004 and 2007 the state budget showed a surplus of 1.8 percent. Foreign trade turnover increased 29.6 percent in 2004-2007. Mongolia's payment balance shows a surplus of USD 240.7 million as of 2007. In 2008 the budget revenue and aid revenue are at MNT 2423.2 billion and budget expenditure and credits are at MNT 2560.1 billion. The current budget balance shows a surplus of MNT 653.8 billion.

Source: MONTSAME

TOGROG'S EXCHANGE RATE NOT EXPECTED TO FALL

In connection with a rumor that has been spreading about the expected decrease in the exchange-value of togrogs and commercial banks halting the granting of loans, Finance Minister Ch. Ulaan and president of the Central Bank, A. Batsukh gave a briefing last Friday. The Mongol bank pursues a policy to maintain the inflation rate at a low level. There is no ground for the drastic decrease in the exchange-value of the national currency, they claim. Despite the togrog's exchange rate trend of weakening against the U.S. dollar, the Mongol bank takes measures to maintain stability. The decline in granting loans is explained by the fact that the commercial banks were offering large credits in the first three months of 2008. This has led to an increase in money supplies and trends that influence the inflation rate. In view of this, commercial banks have been granting fewer loans in accordance with a warning by the Mongol Bank. Compared with figures from the previous year, the size of loans granted by the commercial banks this year increased by 60 percent.

Source: MONTSAME

NEW SPORTS COMPLEX

Ulaanbaatar’s mayor, T. Bilegt, met with Li Hiun Je, Director of South Korea’s Photo Bank. They discussed the Sports Complex center project and Li Hiun Je mentioned that they could begin financing the modern standard construction project as soon as land permission was officially resolved. The expected location will be in the north part of the city, Aidsiin Davaa, close to Chinggis Khaan airport. The project amounts to 5 billion tugrugs and the Korean side will cover 100 percent.

Source: www.news.mn

NEW AMBASSADOR TO EU

President N. Enkhbayar gave a letter of credentials to A. Battur, newly appointed Extraordinary and Plenipotentiary Ambassador to the EU from Mongolia. The Head of the Mongolian State congratulated him on his appointment as ambassador. In turn, the Ambassador noted the EU is Mongolia’s third big neighbor. He will be working for the development relations and cooperation between the international organization in the EU and Mongolia. He also expressed his confidence that if ambassadors and diplomats work actively, they are able to do many things for their homeland. Informed by the Press and Information Department of the President.

Source: www.olloo.mn

DELEGATION DISCUSSES ENERGY AND SECURITY AT UN COMMISSION FORUM

A delegation led by Ch.Khurelbaatar, Minister of Fuel and Energy, attended the 64th forum of the

United Nations Economic and Social Commission for the Asia-Pacific held April 24-30 in Bangkok. The session theme was “Energy security and sustainable development in the Asia-Pacific”. At the meeting, the delegation shared their views on difficulties in the Asia-Pacific to supply energy, security, and the need for intensification in the cooperation of the matter. Ch.Khurelbaatar, who attending the session, introduced Mongolia’s policy on the energy sector and its implementation. While attending

the session, he met with Mrs. Noeleen Heyzer, the UN Under-Secretary-General and Executive Secretary of the UNESCAP. They exchanged issues on the cooperation between Mongolia and UNESCAP.

Source: www.olloo.mn

POLITICS

MONGOLIA’S MINING DEBATE

In a recent article posted in the Bangkok Post, Lu. Bold, chairman of Mongolia’s Mineral Resources and Petroleum Authority, was interviewed about the current mining debate.

"There have been some proposals from parliamentarians for changing the laws with the government holding a majority in strategic mines," he said. Under the new law, the government could hold a 51% stake in "strategic" mines as opposed to the current 34% maximum. Mr. Bold said "strategic mines" meant very large operations that legislators believe should be owned by the government.

World Growth recently called on Mongolia to implement a mining policy establishing clear ownership rights and a transparent legal and regulatory framework. It said this would encourage investment in mining, promoting greater economic growth and development in Mongolia.

Mr. Bold says he agrees, which is why the government will not try to take back concessions already granted to various companies. Instead, he says, it would want to co-invest in those mines. "According to the constitution the expropriation of any mines or assets is prohibited and therefore in the case of mines too, we do not expropriate anything," he said.

Mongolia is not only looking at the contentious issue of ownership. Other considerations include a windfall tax on key minerals, though consideration is unlikely until after the elections. Mongolia has in place a 68% windfall tax on copper concentrate, on the portion of the price that is above $2,800 a ton, while there is a similar tax on gold when the price exceeds $500 an ounce. On gold, for example, the country is planning to raise the base price to $800 an ounce, but these proposals will take time.

Mr. Bold's assessment comes at a time when resource-rich countries around the world are seeking greater control over their vast stores of crude oil and other minerals.

Sources: Bangkok Post www.bangkokpost.com

Minerals News Daily www.miningmongolia.mn

GROUP URGES CUTTING OFF AID TO MONGOLIA

A full page ad published in the Wall Street Journal last week, called on the U.S. government to cut off aid to Mongolia unless the Mongolian government acts to “eliminate corruption and protect private property.” The Center for Individual Freedom (CFIF) published the ad, calling on President George W. Bush and Secretary of State Condoleezza Rice to, according to the ad, "Send a Clear Message to Mongolia: Eliminate Corruption and Protect Private Property - Or Risk Losing U.S. Foreign Aid."

The ad was published as the U.S. Commerce Department hosted a delegation of Mongolian officials at the third U.S. - Mongolia Business Forum in Washington D.C. In the ad, CFIF highlighted trends they call “disturbing” which they claim have arisen since Mongolia received a nearly $300 million grant from the U.S. taxpayer-funded Millennium Challenge Corporation (MCC). In part, the ad read, "Mongolia has begun a full-scale assault on the rule of law, disregarding legal contracts, shaking down private companies through confiscatory taxes on mining interests, and intimidating Western businesses into relinquishing ownership to the State."

CFIF also emphasized that MCC grants must be used for countries that demonstrate a commitment to upholding western values, "Millennium Challenge grants are intended to encourage countries to eliminate corruption, uphold the rule of law, and protect property rights -- all Western ideals and interests. MCC grants should not be used to subsidize countries headed in the wrong direction."

Founded in 1998, the Center for Individual Freedom is a Constitutional and free-market advocacy organization with more than 250,000 supporters and activists in the United States.

Sources: MONTSAME

Wall Street Journal

Mongolia-web.com

CIVIL WILL PARTY RETAINS NAME FOLLOWING NATIONAL UNITY PARTY MERGER

The National Unity party, founded in 1994, held a press conference on April 24th, announcing its

decision to merge with the Civil Will Party. The two political parties’ principles and activities have much in common, declared the leader of the National Unity Party, L. Sukhbaatar, explaining the decision of the parties to merge. S. Oyun would be the party’s Chairperson. She said that, despite some changes to be made in party documents, the party name would not be changed, continuing to be called the “Civil Will Party” (CWP). Membership of the new party has increased to 63,000, including 18,000 from the National Unity Party and 45,000 from the CWP. The CWP party intends to nominate 50 candidates for the upcoming election at a National Committee meeting in mid-May. “Since the two parties have merged, the unified principle of nominating candidates will be adhered to,” she added.

Source: Mongol Messenger

ANTI-CORRUPTION AGENCY SURVEYS CORRUPTION LEVEL

The Anti-Corruption Agency is working on a mission to monitor the implementation of the government’s anti-corruption related law and regulation. As of April 24, 2008, more than 400 officials from the Ministries of Food and Agriculture, Trade and Industry, Fuel and Energy, Education, Culture and Science, Road, Transportation and Tourism and related agencies submitted their income reports. More than 40 applications which were not submitted are under investigation.

Meanwhile, The Asia Foundation in Mongolia called a press conference Tuesday in the Government House to summarize its survey on scope, case and affect of corruption. The survey was conducted for the fifth time involving 600 households from Ulaanbaatar city and Ovorkhangai, Khovd, Dornod and Tov aimags. The first survey was carried out in March 2006.

The Survey revealed that the Anti-Corruption Agency has been effectively fighting against corruption and its rating is constantly increasing, B. Davaasuren, Program Manager of the Asia Foundation said. One of the biggest changes is that there has been a decrease in the number of respondents who said "I would offer a bribe if I had money". 61 percent said they would not accept a bribe. The number of participants who had offered a bribe has reduced to 19 percent. The majority of respondents still consider the most corrupt and bureaucratic organizations are in land, mining and customs sectors as well as license and permission granting authorities.

Sources: www.news.mn

MONTSAME

_____________________________________________________________________________

Sponsors:

_____________________________________________________________________________

ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the week ending April 25, 2008, trading activity on the Mongolian Stock Exchange (MSE) totaled

730,900 shares with 56 companies traded. Total market value of transactions was MNT 607.5 million.

In addition, 50.2 thousands in bonds of reconstruction were sold for MNT 502.0 million.

Out of 56 stock companies’ shares traded that week, the price of 16 increased, 24 decreased and 16

remained unchanged.

The Top-20 Index decreased by 510.75 points or 4.1 % compared to the previous week closing at

11873.67 points. The MSE Composite Index increased to 5,363.25, an increase of 0.1% from the

previous week.

Most active stocks traded were: Moninjbar stock company (292.100 shares), Jenco Tour Bureau

(243,600 shares), Darkhan nekhii (66,700 shares), Mogoin Gol (41,500 shares), and HB Oil (26,700

shares).

Major share price percentage gainers were: Monnoos (15%), Autozam Arkhangai (15%), Savshim

(13.1%), Mongoliin gegee (11.7%) and Darkhan nekhii (6.1%).

Major share price percentage losers were: Almaas (15%), Spirt Bal Buram (13.8%), Buyalag nalarkh

(13.0%), NIC (12.2%), and APU (7%).

Total market capitalization of the 358 stock companies listed on the MSE was MNT 837.1 billion and

decreased by MNT 23.8 billion (2.8%) from the previous week.

INFLATION

Year 2006 6.0% [source: IMF]

Year 2007 Avg.9.0% [source: ADB]

Dec 2007 *15.1% [source: World Bank]

Jan 2008 *17.5% [source: IMF]

* Year over year (YOY)

CURRENCY RATES - May 1, 2008

Currency name Currency Rate

US dollars US 1164.99

Euro EUR 1814.06

Japanese yen JPY 11.19

British pound GBP 2291.71

Hong Kong dollar HKD 149.47

Chinese yuan CNY 166.59

Russian ruble RUB 49.22

South Korean won KRW 1.16