BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmmongolia.org

Email: Jim@bcmmongolia.org Issue 25, May 23, 2008

NEWS HIGHLIGHTS:

Business: Western Prospector Advises Shareholders Not to Take Action; Israeli Company to Introduce New Irrigation System; Mining Company’s License Canceled Due to Illegal Activity; Mongolian, Japanese Stock Exchanges to Cooperate (Click here to go to Business)

Economy: Petroleum Products to be Exempt from Tax; Draft Resolution on Cashmere Submitted; Tax Rate on Gold to be Changed; Strategic Issues of South Gobi Infrastructure; MP Gankhuyag: It’s Impossible to Hold Inflation at 6%; UB Mayor Orders Ban on Plastic Bags (Click here to go to Economy)

Politics: 2008 Election Campaigning Begins; National New Party Sets Election Platform; Parties Establish New Coalition; Prime Minister Meets Chinese Ambassador (Click here to go to Politics)

NOTICE TO BCM MEMBERS AND INVITED FRIENDS:

The next BCM meeting for BCM Members, and friends with meeting invitations, will be Monday, May 26, at 5 PM at the Open Society Forum.

Featured will be an Election Panel comprised of:

S. Oyun, Chairperson, Civil Will Party

Y. Otgonbayar, Secretary General, Mongolian Peoples Revolutionary Party

Ts. Elbegdorj, Chairman, Democratic Party

In addition, updates will be presented by Y. Ichihashi, Ambassador of Japan to Mongolia, and by D. Ganbold, President, MNMA and E. Sodontogos, Advisor to President, MNMA. Also a special award to BCM’s 100th Member, a free round trip ticket on Eznis Airways to any destination in Mongolia, will be presented to Eagle Security.

BUSINESS

WESTERN PROSPECTOR ADVISES SHAREHOLDERS NOT TO TAKE ACTION

Western Prospector Group Ltd. (TSX VENTURE: WNP) has announced that it is reviewing

the unsolicited takeover offer by Khan Resources Inc. (TSX:KRI). The Company's Board of

Directors appointed a committee of advisers to assist the Board in fulfilling its fiduciary

duties. The Khan offer is open for acceptance until June 20, 2008. Western Prospector

will carefully review and consider the Khan bid with the assistance of its independent

advisers. By May 27, the Board will make a recommendation to shareholders regarding the

Khan bid. Western has urged its shareholders not to take any action in relation to the

Khan offer until they have received the Board’s recommendation.

Source: www.westernprospector.com

ISRAELI COMPANY TO INTRODUCE NEW IRRIGATION SYSTEM

Netafim, an Israeli-based agribusiness company and global leader in innovative agricultural

solutions, plans to introduce its drip irrigation system to Mongolia. The company with 40

years of experience is active in over 100 countries. It specializes in Crop Management

Technology and Biofuel Energy. While in Israel, President Enkhbayar and a Mongolian

delegation visited Netafim and were very impressed by the drip irrigation system. The

enterprise plans to introduce the system in Mongolia with the aim of producing more and

better crops, but with less water.

Sources: Jerusalem Post, www.jpost.com

www.netafim.com

MINING COMPANY’S LICENSE CANCELED DUE TO ILLEGAL ACTIVITY

The Minerals Resources and Petroleum Authority of Mongolia (MRPAM) canceled the gold

mining license of the ZUB Mining Company which was found to be extracting sand and

gravel from the Tuul River bank. “The illegal activity of the mining company was due to

poor cooperation of state organizations” said Bat-Orgil, Head of the Board of Geology at

MRPAM. He explained that MRPAM has a duty to register the mining company and the

Ministry of Nature and Environment and the State Professional Inspection Agency should

control the operations of the mining companies. There are only three state inspectors

responsible for overseeing the operations of all mining companies which makes it

impossible to keep up with the workload. He suggested that local governors should report

information about illegal activity to MRPAM.

Source: www.news.mn

MONGOLIAN, JAPANESE STOCK EXCHANGES TO COOPERATE

An agreement was signed between the Mongolian and Tokyo stock exchanges this week. The memorandum of understanding pledges to increase the cooperation between the stock exchanges. It is the first step towards allowing trading on both countries’ stock exchanges. “Both Exchanges wish to foster the development of channels of communication and a cooperative relationship between them for the purpose of supporting and advancing the development of the securities markets in both Japan and Mongolia,” read the statement.

Source: www.mongolia-web.com

ECONOMY

PETROLEUM PRODUCTS TO BE EXEMPT FROM TAX

The Government is taking measures to stop consumer price increases and has decided to

exempt the Value Added Tax and the Excise Tax from petroleum products by gradually

reducing these two taxes for petroleum products to a zero rate. Parliament discussed

drafts to amend the Excise Tax Law and the Value Added Tax Law. Mongolia consumes 750

thousand tons of petroleum annually. The Parliament is planning to collect 182 billion tgs

from four types of Import Taxes - the Customs Duty, the Value Added Tax, the Excise Tax

and the Transportation Cost Tax. During the first 4 months of the year, 47 billion tgs were

collected.

Sources: Onoodor

Mineral News Daily, www.miningmongolia.mn

DRAFT RESOLUTION ON CASHMERE SUBMITTED

Recently, the price of cashmere has fallen from MNT 40 thousand per one kg, to MNT 25

thousand, which has had a great impact on herders’ incomes. A resolution was submitted

to Parliament by Z. Enkhbold, B. Batbayar, and A. Murat to adjust the situation. According

to the draft, the government would create reserves by purchasing cashmere from herders

for MNT 30 thousand per kg and sell it when the price rises. The reason cashmere prices

have fallen is due to the upcoming Beijing Olympic Games. It is expected that price will

rise after the Olympics. Purchasing will be made by the largest companies providing raw

materials. Mongolia outputs over 3000 tons of cashmere a year, 30 percent of the world

market.

Source: MONTSAME

TAX RATE ON GOLD TO BE CHANGED

The Government has drawn up amendments to the law on minerals which aim to alleviate

the tax burden on gold mining companies, increase the volume of gold sold to the

MongolBank, allocate revenue from taxes imposed on the gold sold, and annul the windfall

tax to bring royalties to international standards. In May 2006, the Parliament approved a

law on windfall tax on some products. Before this, the volume of gold sold to MongolBank

had increased annually. Since 2006, it has drastically decreased. Last year, 10.5 tons of

gold were sold to the MongolBank, and a total of MNT 72.1 billion windfall taxes were

imposed on extracted gold, but only MNT 34.2 billion was allocated in the state budget.

Source: MONTSAME

STRATEGIC ISSUES of SOUTH GOBI INFRASTRUCTURE

On May 15th, a meeting was organized by the Mongolian government in cooperation with the World Bank. The topic of discussion was “Strategic Issues of South Gobi Infrastructure”. Representatives from the Ministry of Industry and Trade, the Ministry of Fuel and Energy, the Ministry of Transportation and Tourism, the Ministry of Construction and Urban Development, the Ministry of Environment, the Mongolian National Mining Association (MNMA), and the World Bank attended and made speeches on South Gobi development.

Source: MNMA Weekly News, www.miningmongolia.mn

MP GANKHUYAG: IT’S IMPOSSIBLE TO HOLD INFLATION AT 6%

Minerals Daily News interviewed Parliament Member and Chairman of the Economic Standing Committee, M. Gankhuyag, on the State budget and economy.

“In the economy, the inflation rate depends on the Budget and Monetary policy. Price increase is a result of the price of petroleum which makes up 40% of inflation. The Government plans to promote flour, wheat, potato and vegetable industries. If the Government implements this plan it can hold inflation at one digit unless there are obstacles. This can be eased through tax regulations of petroleum and flour. If we want to help society, we need to regulate supply and demand fluctuations.”

“The Government must support industries that meet public needs, but we need new technologies. Business depends on technology, so support for this must also be budgeted. By overlapping supply and demand we can reach great achievements. I don’t believe that

inflation will be held at 6%, maybe under 10. The Government should take all possible measures.”

Source: Minerals Daily News, www.miningmongolia.mn

UB MAYOR ORDERS BAN ON PLASTIC BAGS

On May 19, Ulaanbaatar Mayor, T. Bilegt, announced that all types of plastic bags will be

prohibited from use in all shops and trade centers beginning June 1. This campaign was

initiated by G. Monkhbayar, Director of the Citizens Representative Khural of the

Metropolitan Governor’s Office, as a means of addressing the litter issue in UB. The

Mayor’s order says that trade and service centers should promote the use of paper and

cloth bags.

Source: www.news.mn

POLITICS

2008 ELECTION CAMPAIGNING BEGINS

The General Election Committee (GEC) held a press conference to announce the official

start of campaigning for the Parliamentary election to be held on June 29, 2008.

According to election laws, the start of election campaigning must be announced 45 days

before voting day, and political parties and candidates must submit their intent to

participate within 5 days after the announcement.

Source: MONTSAME

NATIONAL NEW PARTY SETS ELECTION PLATFORM

The National New Party (NNP) held its Plenary meeting on May 15, and approved its

election platform. Party Chairman, Ts. Tsolmon briefed the press on his party’s platform

which includes such actions as: stockpiling a State reserve of food items; increasing child

financial support to Tgs20,000 per child; declaring Buddhism as the State religion;

establishing strict State control over alcohol and vodka production; establishing a

hothouse to cultivate plants; and providing free tertiary education.

Source: MONTSAME

PARTIES ESTABLISH NEW COALITION

The Mongolian Green Party (MGP), Civil Movement Party (CMP) and Mongolian Social

Democrat Party (MSDP) have a established a coalition and will participate in the upcoming

election. The coalition is campaigning under the slogan of “Let’s clean the motherland”.

B. Enkhbat, MGP leader said “A new political power is a start to the beginning of change.

We need a fair and transparent State. Our platform is not a collection of promises but this

would be an objective of the civil coalition. We are participating in politics not for money

and high ranking positions, but only to clear our country of all negative factors.”

Source: MONTSAME

PRIME MINISTER MEETS CHINESE AMBASSADOR

On May 16, Prime Minister Bayar met with Mr. Yu Hongyao, Chinese Ambassador to

Mongolia. The Prime Minister expressed his condolences to the victims of the earthquake

in Sichuan Province. He informed the Ambassador that the Mongolian Government had

donated US $50,000 to the Chinese Embassy as aid to the victims. During the meeting, the

Prime Minister and Ambassador also discussed their countries’ cooperation, the 2008

Olympics, and summit meetings.

Source: MONTSAME

SPONSORS

ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the week ending May 22, 2008 trading activity on the Mongolian Stock Exchange (MSE)

totaled 815,600 shares with 40 companies traded. Total market value of transactions was

MNT 497.5 million.

The Top-20 Index decreased by 388.98 points or 3.3 % compared to the previous week

closing at 11,323.53 points. The MSE Composite Index decreased by 158.54 points or 3.1%

from the prior week closing at 4,965.01 points.

Most active stocks traded were: Auto Impex (386,000 shares); Jenco Tour Bureau (222,100 shares), Olloo (65,700 shares), UID (State Department Store) (64,800 shares), and Tuul Songino Usnii Noots (30,300 shares).

Major share price percentage gainers were: Ulaanbaatar (7.4%), Auto Impex (6.1%), NIC

(1.9%), Altai (0.4%), and Guril tejeel Bulgan (0.1%). Major share price percentage losers

were: Talkh Chicker (15.7%), Olloo (13.4%), Dornod (11.9%), UB Hotel (10.8%), and Makh

Impex (10.0%).

Total market capitalization of the 358 stock companies listed on the MSE was MNT 793.8

billion, a decrease of MNT 27.7 billion or 3.1% from the previous week.

INFLATION

Year 2006 6.0% [source: IMF] Year 2007 Avg. 9.0% [source: ADB] Year 2007 *15.1% [source: World Bank] March 31, 2008 *20.6% [source: MongolBank] * year over year (yoy)

CURRENCY RATES - May 22, 2008

Currency name Currency Rate

US dollars US 1162

Euro EUR 1823

Japanese yen JPY 11.2

British pound GBP 2262.3

Chinese yuan CNY 167

Russian ruble RUB 47.7