Saturday, February 7, 2015

Mongolia Brief December 31, 2014

Ministries' Operational Strategies Adopted
By B. Amarsaikhan
Ulaanbaatar, December 31 (MONTSAME) The Cabinet at its meeting on December 30 adopted programs on function' strategies and structure changes of every of 14 Ministries.
This has been done due to recent changes in structures and compositions of Ministries. The programs determine their priorities, goals, operational strategies and main objectives, outline their departments' general responsibilities, directions, activities and operations, and highlight ways of coordinating ties between the Ministries and with localities' administrations.
The adoption of the documents provides the Ministries with a regularity in activities, adequate definition of responsibilities and accountability mechanism.

Website for Glass Account reporting to be launched
December 31 ( The "Glass Account" law on financial transparency within the government will take effect on January 1st, 2015, and Minister of Mongolia and Head of the Cabinet Secretariat S.Bayartsogt gave a briefing on what the law will entail.
A website is now ready to be launched for glass account law operations. The website,, will be hosted at the Mongolia National Data Center.
The website will provide links to access budget, investment, tender, stock, and spending information about 6,088 offices, including the Office of the President, the State Great Khural, the Cabinet, state agencies, local budget funded organizations, and state owned companies.
The website is designed to allow the public and civil servants to directly access state financial information with ease.
The site is seen as the first version of an online governance web portal, which will include a wide range of information about state agency activities. S.Bayartsogt commented that the website will be improved further.
The Finance Minister will run the website according to the Glass Account law.

Border Port Administrations Dismissed
By B. Amarsaikhan
Ulaanbaatar, December 31 (MONTSAME) The Cabinet decided on December 30 to dismiss all administrations of border ports and to assign their responsibilities to the related authorities of customs.
This has been done due to the duplications of general and subsidiary roles with other border control authorities, and in accordance with the parliamentary resolution No.70, which obligates the cabinet to present within the first quarter of 2015 the proposal on refining the structures and vacancies of the state bodies and on dismissing/integrating certain agencies, offices, units and state-run institutions along with the budget clarifications.  
A total of 128 posts, their payroll funds and operational costs of the dismissed administrations have been transferred to the subsidiary organizations of the General Authority of Customs.

Cabinet Meeting in Brief
By B. Khuder
Ulaanbaatar, December 31 (MONTSAME) At the cabinet meeting on Monday, the Ambassador Extraordinary and Plenipotentiary of Mongolia to Austria Mr G.Batjargal was authorized to sign an export credit contract for a project on improving firefighting techniques and facilities of the emergency services of Mongolia.
This project will be implemented in frames of a Mongolia-Austria intergovernmental agreement on the financial cooperation. With a soft-loan from the Austrian government, firefighting facilities will be given to Mongolia’s emergency services. At a national level, our emergency service has currently 198 firefighting vehicles, a half of them are made in 1967-1990 and their utilization time has expired.
- The cabinet discussed a matter on giving a right to adopt a draft new wording of the rule for selection of granting special licenses. Then it decided to authorize a state body in charge of geology and mining affairs to approve the rule in accordance with the law on minerals, after reflecting some proposals from Ministers.
- The cabinet approved a rule of administrating and utilizing the general data of families, which gives information on families livelihood nationwide. This data is used when the government implements various policies, porgrammes and activities to deliver social welfare and state allowances to people.
- From January 1 of 2015, the rule on giving one year non-refundable assistance to state servants will come into force. 
- The cabinet backed governmental principle and directions for establishing a trilateral agreement on labour and social agreement for 2015-2016.

Amendments to State Budget of 2015 to Be Presented
By B. Amarsaikhan
Ulaanbaatar, December 31 (MONTSAME) The Cabinet at its meeting on December 30 settled to present draft amendments to the State Budget and related to it laws.
This has been necessitated by a decline in prices of our main export products, caused by the changes in the world market, and in Oyu tolgoi production. These amendments will change the assumptions, reflected in the budget framework presented, to ease a possible in 2015 shortfall of estimated GDP. The documents to be presented include drafts of amendments to the State Budget framework for 2015, the Budget Assumptions for 2016-2017 and Law on Sustainability of the Budget, to the Law on Ulaanbaatar Taxation, to the General Law on Taxation, and draft annihilation of the Law on Arms’ Taxation, of the Law on Taxation of Transport and Vehicles and of the Law on Taxation of Immovable Properties, and draft amendments to the Income Tax Law and a draft on Taxation of Properties.
The cabinet considers these changes will help mobilize appropriate estimations of macroeconomic indicators and of mining sector income to be collected for the State Budget and adequate planning and distribution of the State Budget.

Draft Amendments to 2015 Budget Laws Submitted
By B. Khuder
Ulaanbaatar, December 31 (MONTSAME) Drafts amendments to the laws on 2015 budget were submitted Tuesday to the Speaker Z.Enkhbold.
The current economic difficulties cause a performance of general budget revenue to decline by some MNT 1 trillion by a pending performance of 2014, and even the national economic situation does not seem to rise in 2015 against 2014. The amendments have been drawn up with necessities to scrutinize the budget revenue of 2015 and to reduce the size approved.
In accordance with the law on governmental structure, the Minister of Finance J.Erdenebat MP submitted to the Speaker draft amendments to the laws on 2015 budget, on budget for social insurance fund, and on budget for the Human Development Fund for 2015. 

President issues decree to create National Council
December 31 ( Mongolia has won the bid to host the 11th Asia-Europe Meeting (ASEM) Summit in 2016. President Ts.Elbegdorj issued a decree to create a National Council in charge of organizing and providing guidance for the event.
President Ts.Elbegdorj appointed PM Ch.Saikhanbileg as chair, Foreign Affairs Minister L.Purevsuren and Chief of Staff of the Office of the President of Mongolia P.Tsagaan as vice chairs, and Finance Minister, Road and Transport Minister, Minister of Mongolia and head of Cabinet Secretariat, the Mayor of Ulaanbaatar, National Security and Foreign Policy Advisor to the President of Mongolia, Advisor to the President of Mongolia for International Public Affairs, Senior Advisor to Speaker, Senior Advisor to the PM, and head of the working group of the National Security Council of Mongolia as members of the National Council.
State Secretary of the Foreign Affairs Ministry of Mongolia was made Secretary of the National Council with an appendix to the decree.

Shake Ups in Construction
By S. Batzaya
December 31 (Mongolian Economy) For many, the development of a country can at some level be determined by the appearance of its streets and buildings as well as the life-style of the people and the living standards of its citizens. If true, how does Mongolia measure?
The construction work underway throughout Ulaanbaatar is readily apparent, but this extensive urbanisation does not retain much space for playgrounds or quiet, secluded spots for the elderly to sit and relax. And the growing number of new buildings does little to reduce the number of ger district residents. In fact, the number of ger district residents is on the rise. Currently, 189,000 households reside in ger districts.
Between 2010 and 2012, around 30,000 new apartments were commissioned each year. Professional organisations in construction said this was not enough, however.
The crux is a lack of foreign investment for construction – but it is not for a lack of trying. For example, the sector comprises 10 percent of total foreign direct investment in Mongolia last year. Yet, only a mere USD 150 million of investment out of a potential USD 700 million made it to companies.
These figures are low for an emerging market such as Mongolia. Foreign investors interested in Mongolia see the economic growth, opportunities for investment, and the development of financial structure, but, despite the need for foreign investment, Mongolia’s mistreatment of foreign investors has chased them away.
Mongolian-made materials
Meanwhile housing construction is on the rise. A research team established by a partnership between the Ministry of Construction and Urban Development and the Construction Development Center found that 20,000 apartments received registration certificates last year compared with 35,000 to 36,000 this year.
Construction output increased 70 percent last year from the commissioning of 20,000 apartments in Ulaanbaatar and 7,000 outside the city. Some 17,105 citizens have transitioned to a new mortgage programme thanks to the 8 percent a year loan interest program backed by the central bank. That program opened the door to home ownership to 14,685 new citizens, lending MNT 430 billion to 97 construction companies to help finance the completion of unfinished   construction projects.
One of six mechanisms brought out by the Price Stabilization Programme is still running today. This year the Ministry of Construction and Urban Development is more focused on contributing to the production of building materials rather than whether or not their prices remain consistent. Mongolia is set to rid itself of its dependence on imported building materials, including cement and steel reinforcement.
The government recently announced that it would provide funding of MNT 1 billion to projects that would help domestic production replace imported goods. The government has so far approved 50 out of 1,151 projects submitted.
“A Khutul cement and chalk factory, for example, has been established in Khutul. Darkhan and Nalaikh factories and are to produce 700,000 tonnes of cement a year,” said Construction and Urban Development minister Tsevelmaagiin Bayarsaikhan. “There will be some stone crushing plants with the capacity of crushing more than 300,000 tonnes of stone a year.
“In this case, land and infrastructure issues to install these plants need to be tackled by the government so that the price of apartments could be decreased,” he said.
Two amendments for the current mortgage programme have been written. They would, for example, create the opportunity for mortgages to apartments of more than 80 square metres. There is also a resolution for the state to lead the way for the construction of up to 200 houses. Infrastructure will be built for new apartment blocks at what are currently ger districts. MNT 5 million to MNT 7 billion is expected to be spent from the proceeds of the Chinggis bond for the engineering of a pipeline network to connect with 1,000 new apartments.
Infrastructure issues are also being tackled in the provinces of Dornogobi, Umnugobi, Uvurkhangai, Khentii, Selenge, Tuv, Bayankhongor, Orkhon, Darkhan-Uul, Bulgan and Arkhangai.
Additionally, production for building and insulation materials is being developed. Last year more than 150 new factories and plants opened, according to the Mongolian Association of Building Material Producers. Some 260 types of equipment were exempt from customs tax totalling MNT 2.9 billion and value-added tax worth MNT 6.2 billion.  
Investment vs. Management
Construction and real estate are seen by many investors and analysts as far less risky than mining. Still, legal uncertainties triggered a mass exodus of foreign investors, which was detrimental to the economy as a whole rather than any one sector.
When investors employ their due diligence to measure market potential in Mongolia they often find that yields fall short of inflation and decide to save their money instead. A common mistake made by Mongolian companies is they completely forego the need to develop a strategy for management.
“Mongolian companies do nothing with management after they’ve attained foreign investment,” said B. Naranjargal, chief executive at UMC Alpha.
“Typically, if a company can satisfy its investors with initial project goals, the next investors become more willing to invest in those companies. But this does not happen in Mongolia, mainly due to the lack of management among these companies,” she said.
For government, special attention will be needed in the tax environment to protect investors’ interests. The role of companies will be to ensure that projects start without too many problems. And although guarantees can ease some investor anxieties for project financing, Mongolian firms are rarely able to provide it.
Freeing up the market and providing additional players in finance – such as a sovereign funds, pension funds, and insurance agencies – would provide more routes to lead investment towards real estate. If the government could get the ball rolling inside the country, perhaps the foreign investors would take notice.

Mongolia to Practice German Agricultural Technologies
By B. Amarsaikhan
Ulaanbaatar, December 31 (MONTSAME) The Minister of Food and Agriculture R.Burmaa received on December 30 the Ambassador of Germany to Mongolia Mr Gerhard Thiedemann, to discuss the "Mongolia-Germany Sustainable Agricultural Development" project being implemented here by the Federal Ministry of Food and Agriculture of Germany.
In frames of the project, leading technologies are being introduced to Mongolia in colza and potato plantings. An agreement on Cooperation between the Ministries, signed in 2011, is being realized successfully in plantings of colza and potato on fields of "Agrocomplex" LLC in Tov aimag and of "Elite Seed" LLC in Selenge aimag.
The Minister requested Mr Thiedemann’s support for the second phase of the implementation of the above project and of the further projects to be realized in establishing a model dairy farm and in developing cooperatives of herders.
The Ambassador agreed to show support and to appoint for her meetings with the Federal Minister of Food and Agriculture of Germany and with other related officials during the "Green Week" international expo expected in Berlin next month and the Summit of Ministries of Food and Agriculture.

Minister D.Oyunkhorol Meets Ambassador of Germany
By B. Khuder
Ulaanbaatar, December 31 (MONTSAME) The Minister of Environment, Green Development and Tourism D.Oyunkhorol MP Monday received Mr Gerhard Thiedemann, the Ambassador Extraordinary and Plenipotentiary of the Federal Republic of Germany to Mongolia. The latter congratulated Ms Oyunkhorol on being appointed the Minister.
Then the sides exchanged views on several issues such as upcoming participation of Mongolia in the ITB Berlin 2015 international exhibition.The ITB Berlin, considered the largest international exhibition of tourism, will definitely give to Mongolia a big opportunity to gain big experiences, Mr Thiedemann emphasized. He expressed a satisfaction with Mongolia's attaching a great importance to the exhibition, and with a plan on having Mongolian President to deliver a speech at the exhibition.
Mongolia is ensuring a preparation for the ITB Berlin exhibition, Ms Oyunkhorol said and added that all related issues will be tackled at the governmental level.
Mongolia and Germany have the experience in implementing specific projects and programmes on environmental matter. The government of Mongolia is maintaining a policy on continue these projects and abolishing some difficulties and obstacles, the Minister said.
The Ambassador said that outcomes of some of these projects were good, but partly, for example, the programme "Adaptation of forest rivers and eco-systems to the changes of biological diversities and climate" is being implemented successfully with a support from Germany, but a EUR 11.5 million worth project on reserving biological diversities and their adaptation to the climate change has faced problems.
Mr Thiedemann also underlined that Mongolia should reserve its protected natural areas in order to develop the tourism sector, adding that these programmes will help Mongolia fulfill these goals. He said he intends to collaborate with the Minister in developing the responsible mining and in introducing good technologies for environmental rehabilitation.
Ms Oyunkhorol supported the Ambassador’s initiatives. 

Preliminary Balance of Payments for First 11 Months of 2014
By B. Amarsaikhan
Ulaanbaatar, December 31 (MONTSAME) The Bank of Mongolia (BoM) reports on December 31 that the current account deficit stands at USD 1,001.0 million which shows decrease of 66 percent from the previous year. This is due to USD 2,062.5 million or 161 percent decrease in deficit of trade in goods, thus showed surplus of USD 779.0 million.
Capital and financial accounts showed surplus of USD 525.4 million which is decrease of 59 percent or USD 769.6 million from 2013. The main trigger to this reduction is 71 percent decline of foreign direct investment to Mongolia which equals to USD 1,382.7 million.

Stock Exchange News for December 31
By B. Khuder
Ulaanbaatar, December 31 (MONTSAME) At the Stock Exchange trades on Wednesday, a total of 530 thousand and 794 units of 18 JSCs were traded costing MNT one billion 128 million 588 thousand and 676.
"E-trans logistics” /4,550 units/, “Khokh gan” /3,486 units/, “State Department Store” /673 units/, “Sharyn gol” /457 units/ and "Shivee ovoo” /218 units/ were the most actively traded in terms of trading volume, in terms of trading value were "Sharyn gol” (MNT two million 758 thousand and 400), "Material impex” (MNT two million and 555 thousand), “Talkh chikher” (MNT two million 257 thousand and 900), “Shivee ovoo” (MNT one million and 090 thousand) and "Darkhan nekhii” (MNT 455 thousand and 300).
The total market capitalization was set at MNT one trillion 442 billion 655 million 414 thousand and 438. The Index of Top-20 JSCs was 14,854.24, increasing 30.73 units or 0.21% against the previous day.

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