By Business Council Mongolia
Mr. L.Zorig, Vice Chairman of the National Development and Reform Committee, feels that public-private partnership (PPP) will be very important in the plans being formulated for a comprehensive development of infrastructure in the mineral deposits locations in the southern parts of the country. The plan includes construction of energy facilities, roads, railways, water supply, property maintenance, urban planning and port development and is estimated to cost USD5 billion before mining in Oyu Tolgoi, Tavan Tolgoi, Tsagaan Suvarga and Nariin Suhait can properly begin.

The State will be responsible for energy supply, but is likely to need foreign investment to build high-capacity power stations in Tavan Tolgoi and Shivee Ovoo. Similarly the Government will construct all roads, but much of the rest of the work will need private investment. The railway to carry coal to China will be constructed with private money, and that from Tavan Tolgoi to Sainshand and Zuunbayan will call for cooperation between foreign and local investors, both Government and private. Parliament has set up a working group to help the Ministry of Legal Affairs and Justice prepare a draft law on PPP.

Areas Of PPP Must Be Expanded, Says Chamber Boss
Mr. S.Demberel, Chairman of the Mongolian National Chamber of Commerce and Industry, has stressed the need to expand areas of public-private partnership (PPP). Both the Constitution and the Minerals Law give the State the full ownership of all subsoil assets and this ownership is inviolate but this does not mean, he said, that the State has to do everything about them and get all the profits from them. “History has proved that a so-called state authoritarian regime is not efficient at all,” he said. The owner must transfer parts of its rights via exploration licenses, operation permits, development or investment permits, etc.

Ownership is pointless if it does not give the right to dispose of the asset in an efficient, profitable and responsible manner. PPP does not take away the State’s rights to ownership, but does mean that it cannot be the only side to profit from such ownership. PPP, he said, leads to a "win-win situation, where both the State and the private sector win”. In his view Mongolia does not need an elaborate law like South Korea to regulate PPP here. It will be enough if a legal basis is in place for "a case by case implementation”. The general law will govern individual agreements on projects. These would be legally binding and to facilitate their enforceability they can be modeled on existing international contracts. This can apply to both leasing, where operational rights are transferred for a given period, and to development, where investment is made without disturbing the ownership. The present laws on both are poorly worded in Mongolia, he said.

 

Western Prospector Group Ltd. has announced that 38,003,666 or approximately 69% of its issued and outstanding common shares were validly deposited to the offer of First Development Holdings Corporation for all outstanding common shares of the company and not withdrawn as at close of day on June 29. This result represents substantial support for the offer. First Development has taken up and accepted for payment all such shares tendered.

First Development has communicated to Western Prospector an intention to commence a second step transaction by way of statutory arrangement, amalgamation, merger, reorganization, consolidation, recapitalization or other transaction to acquire all remaining Western Prospector common shares.

First Development is an indirect wholly-owned subsidiary of CNNC International Limited, a public company listed on the Hong Kong Stock Exchange. CNNC Overseas Uranium Holding Ltd., a wholly owned unit of China National Nuclear Corporation (CNNC), holds approximately 70.25% of the issued share capital of CNNC Intl. CNNC is China's leading uranium development and nuclear fuel company.

Source: www.westernprospector.com

A NewsWire Highlight by Business Council of Mongolia:

There is widespread expectation that the impasse over the Oyu Tolgoi investment agreement will be resolved before Naadam. Minister of Minerals and Energy D.Zorigt told the MPRP group in Parliament on Monday that considerable progress has been made in finalizing the position of the Mongolian Government on the issue, on the basis of all the suggestions and recommendations from various quarters, including the Standing Committee on the Economy and the working group set up by Parliament. Informal discussions have continued to be held with the investors and the final Mongolian version, once approved by Parliament, is expected to be then negotiated with bright chances of an early settlement.

The final version of the Mongolian position, to be submitted to Parliament, calls for 34% Mongolian ownership, no tax waiver, and an advance payment of USD225 million with lower interest rates. The demand for a 55% share of the profits has not yet been decided. The Government wants Rio Tinto International Holding and Ivanhoe Mines Canada to be co-signatories along with Ivanhoe Mines Mongolia Inc. Two years will be given to the investors to raise funds and five years to complete all construction and start operating to full capacity.

Since Mongolia does not have the resources to provide all the electricity needed for the project, alternatives have been proposed. Mongolia will build the roads, but their maintenance will be the responsibility of the project. The water supply to the project will be extended to cover the needs of herders and the local population. An annual audit will be made and the report will be submitted to the state auditing authority. 

Oyu Tolgoi is currently operated by Ivanhoe Mines (TSX:IVN) and its strategic partner, Rio Tinto (NYSE:RTP).

There seems to be a lot of positive sentiments regarding an OT (Oyu Tolgoi) Investment Agreement. But should we really be that optimistic? Chris de Gruben , the Accidental Entrepeneur, puts our feet back on the ground.

by Chris de Gruben

The current session of parliament is closing soon, Naadam is in less than 2 weeks.The parliament still has to officially confirm the equity based deal, a democratic president is trying to influence an MPRP majority parliament into action, political parties have to voice objections, create endless committees and special review groups. And of course, the investors have to find an agreement that they can sign.

I see no quick resolution to this dilema.

In the meantime, Mongolia is at the mercy of the goodwill of foreign nations for ever increasing grants and loans. Every week brings new multimillion dollar loans to Mongolia while it does not seem the country has a clear strategy on how it will pay it back. It is spending money today that it hopes it will make tomorrow, a flawed strategy which sadly puts Mongolia in a weak negotiating position.

Even if, by some miracle, the agreement was to be signed this summer, it will probably be too late for Ivanhoe and Rio Tinto to start real, large scale investments and construction at the OT site and building its infrastructure in UB before the onset of winter.

This means that they will have to wait until next spring to start the heavy investments, thus yet another winter of discontent.

Furthermore, I believe that the OT investment has been blown out of proportion, it is not a magical key that will suddenly resolve all of Mongolia's financial and foreign investment problems, it is only part of a complex solution.

There is more to the recovery than OT, TT is also important but most important of all is what the Mongolian Government will do with the money.

There is constant discussion and clamouring from parliament stating that they want an agreement which brings in as much revenue to the Mongolian people as possible.

Fair enough, but I never hear discussions or strategies being made as to how those revenues will be distributed to the people? The motherland gift is a perfect example of a populist promise made with no thought as to how it will be done, who will pay for it and how it will be fairly distributed.

Will be people get a voice in how the revenues are distributed, will its allocation be transparent or will a major part of revenues be wasted on corruption, useless populist projects, all with the aim of improving the condition of the few against the many? This is what I am interested in, how will the money be allocated, spent and so forth.

I hope the agreement is signed soon, if only to improve the image of Mongolia as a serious country worthy of investments, but sadly it seems that too much time is spent by parliamentarians fighting for personal gains instead of fighting for the good of the people.

It is my strong believe that a democracy which allows its members of parliament to own, manage and have financial interests in the private sector is a flawed system. Public servants should serve the public above and beyond their own financial and personal interests. Providing the temptation to serve their own needs is dangerous as it changes the perspectives of their functions. As Oscar Wilde said: I find that I can resist almost anything except temptation...

Mongolia announced on Wednesday that it will continue sending soldiers to participate as peacekeepers in Sierra Leone.

Mongolia began participating in this international deployment in January 2006.

This will be the eighth deployment of Mongolian soldiers to Sierra Leone.

While involved in the peacekeeping operation, Mongolian soldiers provide support in enforcing the ceasefire treaty and peace process, defending UN buildings and its employees, helping to ensure humanitarian and human rights operations, assisting in building national security and training army forces and policemen.

The Foreign Investment and Foreign Trade Agency of Mongolia, with assistance of the London School of Economics and Political Science, is conducting a survey of local embeddedness of foreign direct investment /FDI/ in Mongolia. If your company is foreign invested business entity that is actively carrying out business activities in Mongolia, we would like to invite you to take part in this survey.

This is an important survey that the agency will use in designing, implementing and improving the policies, in the future, related to foreign investment in Mongolia, and we need you to cooperate and complete the survey.

This survey offers you the following benefits:

1.      a direct opportunity to convey your proposals to the state jurisdictions and the President of Mongolia formally and informally, as it has been over three years since the president has initiated an annual informal meeting with foreign investors in order to understand their concerns and to take possible measures to address those issues;

2.      a perfect opportunity to get into FIFTA's updated list of contacts and be constantly informed of every domestic and international events that FIFTA hosts and receive foreign investors' newsletters that comprise the latest amendments to laws and regulations related to FDI and other important information about business opportunities in Mongolia, and utilize dozens of other opportunities that FIFTA provides,

A few important points that you should know:

1.      The survey should be filled out by someone who works in the senior management, i.e. directors or senior managers, at your company.

2.   Each response to the survey will be treated with high confidentiality and anonymity.


The survey questions should take no longer than 25 minutes. We highly value your efforts and opinions that will help us to study the local embeddedness of FDI in Mongolia and enhance its environment. Hence, please kindly respond to us if your company is foreign invested business entity that is actively carrying out business activities in Mongolia and we will send you the survey shortly.

For questions please contact:

If you have any questions, please feel free to contact :
Munkhchimeg Enkhee
Geography and Environment Department
London School of Economics and Political Science
+44-75-4785-0225, m.enkhee@lse.ac.uk.

News.mn reports: The head of the MPRP group in Parliament, D.Lundeejantsan, told media on Monday that chances of breaking the deadlock over the Oyutolgoi agreement were bright. Nothing is settled, but there has been positive progress, he asserted.

After several months of work there are two clear options now and the group will soon decide which one it favors. One option is for Mongolia to own 34% of the mines, while the other is to own no share but to earn revenue from taxes. Both have risks and ”we need to study them thoroughly”, he said. A choice is difficult as long-term issues of national security are involved.

Asked if the spring session of Parliament will be able to take a decision on payment of the Motherland Allowance or the Treasure Share, Lundeejantsan said the session had plans to discuss 55 issues, and only 10 of them have not yet been taken up, including the draft laws on these. A joint working group of the two parties was established to see if the two drafts could be combined and presented in the autumn session.

Red more: en.news.mn

This here is Ch. Munkh-Erdene, an accomplished board harp (or Yatga / Ятга) player, performing a piece by a renowned Mongolian composer B.Sharav.

Bloomberg interview with Elbegdorj on the Rio Tinto mining agreement

Further to my post in April about Tsahim Urtuu scholarships for Hazara Mongol students, 3 students have been selected for the 5-year scholarship from the Hazara community in Afghanistan to study in Mongolia. Further details are available on their website.