Friday, July 18, 2014

Mongolia Brief July 17, 2014 Part III



A.Bilguun: Instead of getting a loan, a state-owned company should be privatized and apply for an IPO in international markets
July 18 (UB Post) Executive Director of Mongolian Investment Banking Group A.Bilguun talks about the current economic situation. He is an experienced specialist who graduated in finance from Saint Mary’s University, Canada, and worked at the Toronto Stock Exchange.

When economic policies are intensified in September, how do you envision changes in the current economic crisis?
We need to review our economic structure. Mongolia exports natural minerals to build up the majority of the state budget. Direct foreign investments are the biggest doors for bringing in funds to Mongolia. It’s beneficial for us to have foreign companies invest in major domestic projects, meaning that they’ll be responsible for financial risks. In the current economic situation, it’s impossible for Mongolia to monitor and regulate prices in international markets. Therefore, we must attract foreign investors, find funding for our own businesses, and export risks. In order to increase investments, at least the issues related to the 106 mining licenses, the Law on Minerals, and Oyu Tolgoi’s (OT) investment should be resolved. Although the Mineral Law was approved, its regulations haven’t been established. As for OT, financial issues regarding the underground mines are still unclear and creating more and more problems with each passing day. This also means that investments in Mongolia are moving further away.
The main reason for stocks dropping is the announcement by the General Department of Taxation stating that OT has tax debts on the project. The feasibility study and financial issues of the underground mines, which are to be defined in September, may be delayed. This situation weakens international investors’ trust and confidence in Mongolia. The two sides, investors and the Mongolian government, keep on bringing up twenty-something questions, and instead of resolving them, they accuse one another and add more issues. This not only makes investors who wanted to invest in OT lose interest, but also degrades Mongolia’s reputation in international markets. This problem must be resolved urgently and put to one side.
You mentioned that the feasibility study and financial issues of OT, the only hope for getting USD into the economy, may be decided in September. However, the investors’ side and the Mongolian government aren’t able to resolve the issue and are instead increasing the number of issues. Can you elaborate on this?
The Mongolian government and investor, Turquoise Hill Resources, should define the issue specifically and openly announce them to the public, as well as investors. If not, the two sides will have tons of issues in front of them and continue the dispute into next year. Investors and banking and finance companies in other countries are assuming that all of this is the Mongolian government’s fault.
In order to fix and correct the economic crisis, the government is taking measures such as giving concessional loans and tax exemptions in specific sectors. In reality, the experts are saying that it’s worsening. As a representative of the private sector, in order to calm the economic crisis, what countermeasures should the government take within a short period of time?
The attempts of the government to overcome the economic crisis are failing and making the situation even worse. They issued a huge amount of loans and cash to the construction sector, which increased deficit loan amounts in the banking sector, increased financial risks, and raised apartment prices. Furthermore, under the program to stabilize prices, a large sum of cash was supplied to the economy and became the main aspect of rising inflation. Now, the government should stop this work to supply cash, privatize large, corrupted state-owned companies which are working inefficiently through the domestic stock exchange, and then, prepare them for IPOs in international markets.
The World Bank highlighted in their economic outlook that the high index of balance of payment deficit indicates future major economic difficulty. How can the balance of payment deficit be reduced?
The Central Bank needs to implement a hard money policy. In simple terms, the balance of payment deficit is the money which comes in and goes out of Mongolia. People who come to live and work in Mongolia from overseas carry a considerable amount of risk in coming to Mongolia, and so they get higher salaries.  The same applies to investors. Investors have interests in making a lot of profit in exchange for taking up a significant amount of risk when providing funds. During this period of slow economic growth in Mongolia, opportunities to make a profit are decreasing. Businesses and investors are taking this into account and taking actions accordingly. People considering starting a business in the country will only think of saving and protecting their own money in this high risk environment. A certain amount of money has left Mongolia in this manner. It’s required for the Central Bank to increase policy development.
Since the Mongolian economy has degraded so much, it’s impossible to hold soft policies. Only when the economy has fallen to a certain degree, can it be stabilized with soft policies. However, the current situation is really at a level where soft policies will not work.
The currency savings deposit takes up a considerable percentage of the Mongolian savings deposit. Experts say that there are many people who aren’t putting their money in circulation due to fear. In order to get them to put it into circulation, what must be done?
Money will be put into circulation only if the MNT is strengthened. Since 2012, everything was done forcefully. There haven’t been any results. Instead of doing things forcefully, we should resolve the problem through negotiation. The Central Bank should think of implementing policies to strengthen the MNT.
Mongolia used to use direct foreign investments to close off the balance of payment deficit. Now that investments have decreased, we’re starting to approach foreign exchange (FX) reserves. Through this, FX reserves were reduced by some 50 percent and the USD exchange rate became just over 1,800 MNT. What kind of real risks will this pose to the Mongolian economy?
According to a June 16 report by Morgan Stanley, a multinational financial services corporation, “Mongolia’s FX reserves reached 1.7 billion USD by the end of April. However, Mongolia’s FX reserves were at nearly 2.2 billion USD at the end of February, according to Mongol Bank. If the FX reserves stay in decline for a few more months, Mongolia will come closer to the two-month import cover, the same point where Mongolia received International Monetary Fund assistance in 2009.”
This report was made after comparing FX reserves with GDP. The USD exchange rate may get intense again, since during the summer exploration work and the amount of exportation products increases and brings in the most USD into Mongolia. However, the USD exchange rate isn’t dropping from 1,800 MNT. It’s certain that the exchange rate will become even tighter in September and October, when students go back to school.
Mongolia announced it will increase its GDP by 70, later by 90 percent. Also, it will build up funds from international markets and then get loans. Objectively, is this possible? Is there any other way Mongolia can accumulate funds?
There are other ways. Getting a loan isn’t a difficult decision. There are many gateways. For instance, decrease inefficient spending and the huge structure of state-owned organizations, where 50 percent of total resources produced in Mongolia are spent. If the structure becomes compact, a lot of money can be saved. Before anything, we must cut down on spending. We could also put up stocks of state-owned companies in the domestic stock exchange. There may be foreign companies willing to carry these risks and invest. It’s crucial to find and utilize these opportunities. For Mongolia, where revenue is inconsistent and dependent on the price of minerals, getting loans and debts isn’t a wise choice. There are countries like Japan and the USA which have more debt than its GDP. These countries are able to produce and manufacture final products within the country and export them. Their future profit is definite so their credit rating is high. For Mongolia, with the current economy, getting a loan is the worst possible option; a dead-end option.
Mongolia wants to put up its companies on domestic and foreign stock markets. Do the Mongolian Stock Exchange and companies have the capacity for it?
Actually, Mongolian stock market structure isn’t that bad, but since there aren’t any investors in the stock exchange, products are spoiling. Now we should select two to three state-owned companies announce them internationally and apply for an IPO. It’s a much wiser step than getting a loan. When companies get an IPO, they’ll get funds and supervision as well as transparency in governance, which will reduce deficits and assist them in working efficiently.
Source: Undesnii Shuudan

N.Tugstsogt seizes bronze medal at Kazakhstan President’s Cup International Boxing Tournament
July 18 (UB Post) Mongolian State Honored Athlete and Olympic silver medalist in boxing N.Tugstsogt captured a bronze medal at the fourth Kazakhstan President’s Cup International Boxing Tournament, which took place in Almaty, Kazakhstan, from July 8 to 13.
After defeating opponents in the first two rounds, N.Tugstsogt competed against Zhanbolat Tilegenuly, a boxer from Kazakhstan, and lost 1:2 in the silver medal fight.
Nine boxers from Mongolia fought in the tournament and only N.Tugstsogt seized a medal.
The tournament brought together the best boxers in the world, Olympic champions and winners of the Asian Games and European and Asian championships. This year, 104 boxers from 12 countries, namely Azerbaijan, Iraq, Cuba, Kyrgyzstan, Mongolia, Russia, Tajikistan, Thailand, Uzbekistan, Ukraine, the Philippines and Kazakhstan, participated in the tournament.

22 friends of the T.bataar dinosaur to arrive in Mongolia
July 18 (UB Post) The Lenin Museum, once property of the Mongolian People’s Party (MPP), will soon be converted into the Central Museum of Dinosaurs. Construction of the museum is underway. A corridor to the exhibition hall has been covered with white felt printed with the footprints of dinosaurs, and a sculpture of the head of T.bataar, a dinosaur that lived in Asia 70 million years ago, was built on the museum’s door.
The building was set to open on June 1, but has not yet fulfilled that promise. However, an exhibition was held at the museum on June 8, titled “T.bataar and Best Collections.”
The exhibit featured the skeleton of the T.bataar dinosaur in the center of the hall, who spent the winter in Darkhan-Uul Province. A life-size foam sculpture of the Saikhaniya dinosaur, posed next to him, was also included in the exhibit, along with the skeletons of a small Tseratops that lived 70 million years ago in Gurvantes soum of Umnugobi Province, and 15 baby Prototseratops found in Tugrug Shiree of Bulgan soum.
Painter D.Batjargal and five other painters and sculptors created the Saikhaniya dinosaur.
Minister of Ministry of Culture, Sport and Tourism (MCST) Ts.Oyungerel was interviewed by Dulguun of Gogo.mn on July 10, where she revealed that the skeletons of 22 dinosaurs found in the same location as the T.bataar have been legally repossessed by Mongolia.
When will the Central Museum of Dinosaurs officially open?
The building was in bad condition. It will take a lot of time to repair it. But next week the exhibition “Past and Present of the Lenin Museum” will be opened.
What is the cost of the museum renovation?
We expected that the repairs would cost between 200 and 300 million MNT, but we want to build a world standard museum, which means we will need 5 billion MNT.
How many paleontological finds have occurred in Mongolia?
There have been 186 Mongolian finds which are now being returned from Europe. More than 20 of them are as big as the T.bataar. We sent two big collections to the Japanese exhibition “Dinosaurs of the Mongolian Gobi”, and six dinosaurs are stored at the Paleontological Centre. If our museum has a big enough space, we will include ten dinosaur skeletons.
Additionally, 22 dinosaur fossils found in the same location as the T.baatar have been legally repossessed by Mongolia from the United States as of July 10.
Has the illegal dinosaur trading network been shut down?
Law enforcement officials in the United States and our experts have stricken down the illegal dinosaur trading network.

Naadam: A history of pride
July 18 (UB Post) By Mathilde Michaud
Before you arrive in Mongolia for the first time, you picture it as Western history books have described it: Chinggis Khan’s empire abundant with men on horses, living in gers and ready for conquest. But the real Ulaanbaatar will leave you surprised. The city has a completely different feel from popular imaginings. Soviet architecture lines the streets and Wi-Fi is available in nearly every square and public space. You then understand what 2014 Mongolia is: a land with a culture rich in history far from being forgotten, present in everyday life, and where pride in the past reinforces today’s nationalism.
The Naadam Festival is a unique demonstration of this mixing of eras in Mongolian culture. Entering Central Stadium, Mongolian flags flap in the wind and traditional clothing is seen alongside t-shirts and trousers, but this variety gathered in the tiers could not compare to what followed, as the opening ceremony elaborated upon this beauty. The most interesting part of the ceremony was not how beautiful the costumes were, or how impressive the whole parade was on the surface – even though both were noteworthy, it was the rich history that made it all possible. To better understand it, a review of the meaning of Naadam is necessary.
From survival to national holiday
Naadam, short for Eriin Gurvan Naadam, stands for the Three Games of Men: wrestling, archery and horse riding. All three of these games can be traced back in Mongolian history to long before the appearance of the first official Naadam festival. Indeed, they have their roots in the military traditions of the Mongols, whose leaders would choose their warriors based on how well they performed during public competitions preceding major hunts or battles. Furthermore, practicing these three sports was a matter of survival. Denis Sinor, former professor of Central Asian Studies at the University of Indiana, conveyed it in simple words in his essay The Inner Asian Warrior:“fighting was a precondition for survival.” No distinction was made between soldiers and herdsmen; the Mongol language did not even have a word for “soldier”, or a distinction between “war” and “peace”. Equipment and space for the enactment of the three games could be found within the nomadic lifestyle itself, as every family possessed horses, bows and arrows and every child learned to wrestle from his earliest years.
What had been a matter of personal survival soon became one of national survival. In the 15th century, as Buddhism was introduced to Mongolia, these martial and hunting rituals – Naadam – became part of the religious ceremonies organized to pay tribute to the new Living Buddha. For the first time, the Three Games of Men were given political meaning. They were to publically display the location of power within society, to reaffirm the role of religion as partner to the state in the ruling of the Mongols. The two-century rule of the Qing Dynasty – from the late 17th century to the early 20th century – changed this balance of power as participation in Naadam was forbidden to monks. What had always been a crucial part of Mongolian culture and their way to form united action for independence was partly obstructed, putting a spoke in the wheels of Mongolia’s unity. This interdiction led the people to organize mini-Naadam events among themselves in order to preserve their culture, making it a central part of their fight for independence.
Multiple commemorations
It comes as no surprise then when Naadam became one of the central commemorations of the 1921 revolution that freed Mongolia from the rule of the Manchus. As Mongolia achieved independence, it also regained the freedom for all to participate in the Three Manly Games. Naadam became a ceremony of state, demonstrating its new political status and how communist ideals won back Mongolia’s unity. Seventy years later, a new revolution, a democratic one, once again changed Mongolia’s course. Sandwiched between China and Russia, two giants who had been battling for influence over the steppes, Mongolia had its first democratically elected government in 1990. Emblematic of Mongolia’s independence and national identity, Naadam took a new turn, as it became the country’s national day, a commemoration of the two revolutions that brought the country to its newly redefined national identity. Naadam has also more recently been a celebration of the foundation of the Mongolian Empire by Chinggis Khan 808 years ago.
In the light of all this history, we can now understand why the 1920s waltz, military marches and traditional singing and dancing are intertwined in the festival’s opening ceremony. Mongolia’s culture is one that carries its history, making past pride shine only to make its present brighter.

Youth: Today’s Best Investment
July 18 (UB Post) By Naomi Kitahara
UNFPA representative
As Mongolia celebrated Naadam on July 11th, the global community celebrated World Population Day, this year dedicated to the theme of “Investing in Youth.” Over 25 percent of the world’s population is between the ages of 15 and 25: the largest youth population in history. For Mongolia, nearly 50 percent of the population is under the age of 25.
Adolescents and youth are central to Mongolia’s development agenda, representing a vast population cohort and a demographic dividend capable of driving Mongolia’s development for years to come, but with a major caveat – investment. Investing in youth builds a society where everybody can claim their rights and maximize their opportunities to contribute to Mongolia’s development. Investing in youth is not an option, but it is a necessity. Youth is a period of transition, where choices and opportunities determine their future, dramatically impacting families, communities, society and the development of Mongolia.
Key fact #1: worldwide, more than 15 million girls aged 15 to 19 give birth every year. In Mongolia, the adolescent birth rate is rising, recording in 2013 the highest level in the past 15 years, 33 births per 1,000 adolescents. Early pregnancy threatens the health of mothers and their children – the risk of maternal death is up to 50 percent greater for adolescent mothers than for older women. It is the leading cause of death among adolescent girls. For those who survive, early pregnancy disrupts girls’ education, impairing their life chances, professional development, and economic opportunities.
Key fact #2: globally, young people are almost three times more likely than adults to be unemployed. In Mongolia, the unemployment rate, as of 2010, for adolescents was approximately 31 percent. This can and must change – in Mongolia, 80 percent of undergraduates study a major in business administration, economics and law, yet labor demand is highest in mining-related industries such as engineering and construction. Education must equip youth with appropriate skills to gain employment.
Key fact #3: this generation of young people is the most inter-connected in history. Despite rural-urban, economic and other disparities, an impressive 72.9 percent of Mongolian youth access the internet. This is a golden opportunity for education, economic and social development, an opportunity that must be maximized.
The main question is how can we improve the situation for youth in Mongolia? First and foremost, policy-making must be supportive, prioritizing and meeting the needs of adolescents and youth. Ongoing Government efforts to revise the population policy and develop a youth policy and adolescent health policy are a good start. Policy is one thing, but implementation is critical for genuinely improving the lives of youth. Youth-supportive policy in other sectors and ministries is also vital. Effective policy demands young people’s participation: contributing to policy development and decision-making in a meaningful, influential way. Beyond policy, young people’s formal and informal education must go beyond technical skills, providing life skills, such as understanding health and gender issues, communicating effectively and making sound decisions. This is what youth need not just for employability, but to make critical choices in daily life. Finally, investing in youth requires targeted, accessible social services, particularly youth-friendly health services, giving them the opportunity to determine their own life paths.
Mongolian youth have expectations – higher than the generations before them – for a fulfilling life, freedom, and opportunities. They want their human rights upheld, and they want to be influencing decisions that affect their lives – “nothing about us without us.” Investing in youth supports young people to be productive and dynamic, enhancing their lives and the lives of those around them – parents, siblings, children and all of society. This is what will drive Mongolia’s development for years to come.
We all must be united in placing young people at the heart of Mongolian and global development efforts.
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