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I now primarily submit work covering emerging markets in Asia, including Mongolia, to the Forbes website here.
- I would not like to show off but I have to share an experience about a MSE listed stock that is I think quite typical.
After investing on MSE listed stocks for already 9 months, last year I went for the first time to visit some companies. The list was a combination of my ideas, my broker's ideas as well as his colleagues and some random factors.
We went to visit a company where my broker has booked a low profile (I did not want to raise expectations nor waste time of a senior executive) meeting with somebody in middle management.
As we were waiting in a meeting room next to the CEO's office for 15mn, the CEO asked what we were doing here and invited us in his office. A member of the board (as well as the holding company) joined in as he was around.
I explained I have been buying his stock for 9 months without really knowing what I was buying, just on the basis on the sector, critical for the Mongolian supply chain.
He had a great laugh and the meeting turn very relax and friendly. He was wondering how I could have been so patient buying his stock while the free float is very very small, really!
The CEO explained their business and then offered us a tour of the facilities. Engineer by training (turned investment banker) I was able to appreciate the technical explanations. The facilities were impressive, the CEO was good, very good.
Reacting as an investment banker, I thought he would do so well in a road show promoting his company for a placement. Both slick and knowledgeable, welcoming and answering questions.
Realizing I was a retired investment banker, he was also curious about ideas, a bit outside the box, I was bouncing. He offered that for my next trip to UB he would introduce me to the owner of the group.
As the annual results were not yet public, I did not even bother asking about numbers.
Also very transparent, he told us that ALL their production was sold to the holding company, exclusive distributor.
At this point a normal investor would have just run away assuming that a good chunk of the margin would be captured by the private holding company, not the listed entity. As a perfectly paranoid control freak having done business in Indonesia that was crossing my mind.
I don't know if they did or did not do that before and I DON'T CARE.
What I understood is that with such an impressive executive in charge and such a facility, those guys were not kidding.
I imagined that if the owner had the choice between 90% (for instance) of the current firm or 60% of a firm 10 times bigger he would easily go for the second alternative, and to achieve that, the business organization would have to converge toward normal standards, the past, whatever it was, being only the past, sunk costs.
So I went back home and bought more shares with the view that 5-10 years from now this would be a superb company while 2011 financials were not exactly stellar, rather poor.
A year after,
the 2012 numbers ARE VERY GOOD with earnings growth being a large multiple of +100% and now its PER does not look unusual. So obviously all the profit margins from the listed company were not squeezed by the holding company!
Common sense turning into reality. My reading seemed correct.
Another good year like that leveraging the boom and I am pretty much sure it will pop up on most radar screens, may be the company could raise equity to grow and… increase its float.
My point is that there are MANY MSE listed companies like this one, below radar screen, where investors could question, rightly or wrongly, corporate governance practices, unsophistication…
But what does matter is the TREND, not the absolute level where they are! Are they going in the right direction offering those patient enough to dig for information, MSE website or on the ground visits, with a bit of common sense, imagine how they can benefit if the GDP is multiplied by 2,3,5…who knows… great opportunities to pick potential winners.
Of course the most difficult part is …accumulating shares on MSE…which requires serious patience as average ticket size is very low (to the best of my knowledge there is NO Mongolian fund investing ONLY on MSE listed stocks), but there is no free lunch in that world so at this point it's D.I.Y. with bold patience.
Investors have to view MSE listed stocks not as stocks expecting normal performance but like perpetual call options on the GDP of Mongolia for the next 5-10 years aiming for x10 or x20 the "premium" paid.
As of course Efficient Market Hypothesis does not apply for now, and picking THE winner is mission impossible, a good solution is to pile in as many options as possible so that the ones that pay x5, x10, x20, x100… will offset the ones going bankrupt.
By the way, for now those numbers are not coming from another planet.
The case study is Silikat (NYSEARCA:SIL). Imagine that in 2010 you bought ONE share at MNT 458 (average) and did not do anything else, being diluted by the equity raising (and split post reval), then one year after, in MNT you are up x90.
It's real. Check the MSE website.
There are gems there but they don't always look very shiny.
14 Mar, 01:01 AMReplyDelete CommentLike3
That is an interesting point of view, MSE. I'll keep that in mind when I study the possibilities.
Even the foreign companies during business in Mongolia have some good stories, too, so I can well imagine the native ones have plenty of good stories.
14 Mar, 03:30 AMReplyDelete CommentLike1
And I don't read nor speak Mongolian!
So I imagine that for somebody who does, it's even easier to find gems on the MSE.
The good news, for now, is that they are small, overlooked, well below the radar screens of fund managers and as we know, thanks to the new Escrow Account system, a lot of foreign investors are grounded so it is still possible for patient guys to accumulate those (better have long list and grab what's falling).
Also those are not START-UP with all kind of IF, BUT, MAY BE, SUBJECT TO...they are existing companies with staff that operate as usual and are nicely adapting to the new situation, starting by posting their 2012 financials on MSE website much faster than before.
14 Mar, 08:51 AMReplyDelete CommentLike1
MSE you have the experience and resources to go looking for gems, it is interesting how you seem to be looking for small existing companies not necessarily involved in mining.
Did you subscribe to the Chinggis bond, and are you buying MMC?
I don't understand the machinations of your world but it seems to me that MMC is listed offshore and seems to have the nod in swallowing ETT along with any bond funded infrastructure.
I was told recently by an extremely well connected person that the foreigners will soon be gone and it will be a small glitch in Mongolia's history.
The Od couple seem to be untouchable as Mongolia's richest they move effortlessly through the politics to get what they want. The glass monstrosity next to the old Cultural Palace is a great example. It was former park land and was refused building permission until MCS made Enkhbayar a silent partner. Now it houses their Chinese partners interests Robert Kuok.
14 Mar, 03:01 PMReplyDelete CommentLike1
Chinggis Bond: no I did not and will not buy any bond issued by Mongolia (or anybody else) that is denominated in US$, or in any currency somebody is printing at will. I avoid US$ as much as possible.
I bought MNT denominated Mongolian government bonds end of 2011, including some 5 years. (also bought Just Agro LLC "meat bonds"). Honestly if Mongolia was issuing 10-15 years bonds denominated in MNT I would buy some because I have no doubt in the long term for MNT, whatever hiccups at GOM level in the short term.
HOWEVER, those returns are much smaller than what I expect buying MSE listed stocks. Those bonds are in the "safe part" of the portfolio together with IDR and MYR time deposits.
Mines, listed overseas or on MSE:
When I started investing in Mongolia in 2011, I did not dare touching the mines for several reasons:
•Their profitability is linked to the price of commodities so I want to bet on the price of commodities, up or down, there are easier and simpler ways to do this like options and futures.
•I am not an expert in mining and don't know everything that is around the valuation of mines.
•However as those mines were easily accessible to foreigners (on the MSE they are the biggest market cap) it is a fair assumption that Mongolian related mines were not trading at a massive discount to their international peers, in short, not really a screaming bargain.
•Then there is a political factor/risk. With so much $ underground, you can just expect anything unexpected to happen. Investment logic meddles with local politics. That was a big sword hanging over all the mines so damaging the odds, so why would I bother going into such a poor bet. (I have +20 years of derivatives and risk management i.e. my job was to evaluate odds!). In 2011, the political mood was rather soft so from a political risk premium for me it was as good as it could ever get.
So I passed and did not touch the mines.
But I cannot resist to "falling knives". In oct-nov 2012 when I saw the prices of some of those, I could not resist and bought a bit of everything (because I don't know how to pick a/the winner, if any!), MSE listed and overseas listed, MMC included (which is listed in Hong Kong). However that is smaller than my non MSE listed investments. It is a "technical punt", i.e. once they recover nicely, I flip them out as I have no intention to hang on them for the long run as I am still no expert in mines valuations.
Profitable or not, mines will affect the rest of the economy, the local economy and my thinking is pretty much pro-Mongolian in that respect.
Step 1: Build-up. While foreign equipment and foreign experts are both needed at this point, a good part (and growing) of the $ needed are going into the local economy and Mongolians pockets.
Step 2: Production. Once mines are in production, between % of equity owned by GOM (or a Mongolian SWF), the taxes, the royalties, salaries (smaller % of foreign staff) it is more $ going into the local economy and Mongolians pockets.
Foreign mines that have invested a lot in those projects will not give up …but they can go slow, …or use tactics to respond to GOM. So the build-up will go on, may be slowly, very slowly.
If foreigners have a feeling that rules are pretty clear, contracts are enforceable, then much more capital will flow into Mongolia and Mongolians WILL HAVE THE CHOICE to pick their partners, to decide how much they want to share, which projects are the priorities,….and so on, flooded with money IT WILL BE THEIR CHOICES, not imposed by a dire situation.
If this SEED money to jump start the Mongolian growth engine is not coming with the same magnitude because of fears and perceptions foreigners have of Mongolia, then GOM and Mongolians will have limited choices, will probably have to do with those that are available, may be not the ones they wish, they may not be able to dictate their terms, nor launch all the projects they need at once…
….but I think in the end it will work, everything may be delayed by 2, 3, …years.
In short, in my opinion, Mongolia should prioritize foreigners bringing EQUITY for the next 2-3 years, THEN prioritize debts or loans for project finance, while sharing little equity retaining additional equity upside!
Trying to finance everything now with debt only is I think suicidal.
Many other countries, at a more advanced stages and facing less challenges, tried this before and suffered very badly.
So for me, with a 5-10 years timeframe, I am betting on the local companies, listed on MSE, that will benefit from the growth in the Mongolian GDP. Will it grow by x2, x3, x5, x10 …in 10-20 years? I don't know and I don't care!
Common sense tells me that many of those companies will change dimensions and become much bigger, creating a lot of growth, opportunities and $ for people working for them as well as their shareholders, big and small, mostly Mongolians (foreigners on MSE represent a very tiny % once you take Firebird out of the equation, mostly in SHG-BAN-BEU anyway)!!
The common sense exercise is simply to imagine with the Mongolian GDP growing massively over 10-20 years how everything will be changing in UB and around, what will be needed, what sectors of the economy will benefit?
No need to be an "expert" highly paid research analyst in an investment bank to do this. Anybody looking at how a city works can come to the same conclusions. Not rocket science.
For instance (in no special order): cement, concrete, limestone deposit, iron, oil, transportation, real estate, shopping mall, import-export / supply, construction and construction materials, water treatment, power, hotel, restaurant, jewelry/consumer goods/luxury items, telecom, brokerage, …and you have your shopping list!
Disclaimer: I have stocks in pretty much all those sectors (when I was able to find shares to buy)
15 Mar, 12:59 AMReplyDelete CommentLike3
Looks like meetings are set to resume next week and we get a few morsels of insight to chew on.
Anyone aware of what conference the GOM senior mining official is attending in singapore ?
The chess game continues.
14 Mar, 04:55 PMReplyDelete CommentLike3
The Singapore Government investment arms have a lot of big assets in Australia maybe they are looking around at Mongolia? Maybe Rio executives don't want to set foot in Mongolia after the SGS drama and are looking for neutral ground?
When former PM Batbold was in Australia he had secret meetings with Rio in Melbourne.
Elbegdorj went to Iran last year looking for interest in Mongolian Uranium, seems they are looking at other options.
14 Mar, 05:23 PMReplyDelete CommentLike3
To KingFox and Dulleyefarmer,
I see 2 good reasons for GOM officials to spend some time in Singapore (and Malaysia as well) and learn a bunch of things.
1) While Singapore does not exactly need to raise debt, MAS has however been able to develop a S$ local bond market which is handy to have a reference yield curve and local corporations to raise S$ debt.
Mongolia could learn quite a lot from a visit to MAS!!!!
(I am absolutely sure the people I met at MAS last june would be more than willing to help).
Mongolia NEEDS to setup a Sovereign Wealth Fund and the earlier the better. I have read article about Chile as an example. I have no problem with Chile but the last priority for Mongolia for the next 10 years is to buy USD, EUR, JPY denominated government debts!
In my opinion, much better models for Mongolia would be:
* Khazanah (Malaysia)
* Temasek ...AT ITS BEGINNING!!
If Mongolians want to stay in control of their resources and their wealth, they'd better give themselves an instrument to support their local champions (tiny for now) like Temasek and Khazanah did!
For now, MSE listed companies are tiny and they need additional equity to grow and capture business opportunities before foreigners setup shops!
So from a Mongolian angle, it sounds a much better idea for local MSE listed entities to open their capital to a Mongolian SWF than to foreign private equity firms.
If nationalism is important in Mongolia, that is a way to play it smart!
About Khazanah, Mongolia can learn something else.
In the south of Malaysia there is something that on the face of it may look like a "white elephant" but could turn into a magic success in 10-20 years: Iskandar!!!!
In short leveraging and cloning Singapore.
That is Khazanah lead.
From a Singapore angle, GIC is shy of publicity (saved when mandatory because of disclosure) but is well run and I am sure that both GIC and Temasek (that bought some TRQ) would love investing in Mongolia but HOW and with WHO (i.e. that can EXECUTE!)?
That's a kind of headache many big guys like that are struggling with about Mongolia.
GOM-RIO meetings in Singapore? fair point.
14 Mar, 10:44 PMReplyDelete CommentLike2
Angola has set up a Sovereign Wealth Fund very recently. Maybe Mongolia and Angola can compare notes about doing that?
15 Mar, 03:41 AMReplyDelete CommentLike2
For commodities rich countries, especially young ones, it's a MUST.
Even with $0 in its bank account but a government guarantee,
it could unlock fast track many of the headaches GOM is facing.
They can BY LAW make the SWF beneficiary of all the pre-emption rights related to strategic mines, having a right of first refusal on just anything of that kind and any stake to be given to the government free of charge.
It is much easier through a fund than through a minister like for instance Indonesia has been doing with the MSOE, Ministry of State Owned Enterprises.
As Mongolia is just at its beginning it's much easier to start like that now with a better structure.
Having the benefits of years doing business with groups in Jakarta, while those 2 countries are very different population and temperature wise, I notice they face/have faced similar challenges!
Mongolia is facing now very similar challenges that Indonesia faced 20-25 years ago.
Successful businessmen in Indonesia are those that did not wait for the government to decide and build the infrastructure for them.
They did it and when comparing Indonesia 1996 and 2013 vintages, the results are pretty clear.
15 Mar, 04:40 AMReplyDelete CommentLike2
I just hope GOM will pay attention to the fact that next week there is the Mines And Money 2013 conference in Hong Kong.
And as it is the week of the Hong Kong rugby 7s,
needless to say it's likely to be very well attended with serious money in town!
PR wise, it may be important for Mongolia not to make headlines for the wrong reasons and push investors looking in other directions :)
My 2 cents :)
15 Mar, 04:46 AMReplyDelete CommentLike2
l wonder if Toxic Bob will talk about what is really going on in Mongolia or will he just talk up his latest ventures?
15 Mar, 03:55 PMReplyDelete CommentLike1
TTL 2012 financials!
I think people from RIO attending the OT meeting may find them ..."interesting".
15 Mar, 06:37 AMReplyDelete CommentLike2
I heard the shareholders' meeting was last Friday and it probably was a big disappointment among those who went there when the dividend to be paid this year was announced.
Not "exactly" MNT 1368 per share like last year I assume :)
Mongolian owned and Mongolian managed.
30 Apr, 06:30 AMReplyDelete CommentLike2
Obviously, TTL being the biggest weight of the (un-capped) MSE Top 20, this may not be without consequences next week on this index.
15 Mar, 06:39 AMReplyDelete CommentLike2
The positive is that now, because of the drop in market cap and therefore in weight, it's less an issue for the index.
Today TTL was down 13.78% while the MSE TOP 20 Index was 1.06%.
30 Apr, 06:31 AMReplyDelete CommentLike1
Just reading on the next phase of financing of OT, do you guys not find it a little odd that there is not one US bank involved ? Maybe just showing my North American based bias.
Great comments on SWF. I would be personally shocked if they are not considering some type of financial vehicle, especially if this "reform" movement is for real and in the best interests of the people of Mongolia. I'm still skeptical because we're still talking about politicians , and I'm jaded. I believe it's an exception to find one that actually puts the interest of its constituents ahead of their own.
15 Mar, 10:01 AMReplyDelete CommentLike3
I can see what you mean, KingFox, that the North American banks haven't become involved with Mongolia much.
Maybe that is an issue for the Business Council and the Chamber of Commerce to tackle sometime.
15 Mar, 11:33 AMReplyDelete CommentLike1
First on the SWF, I honestly would be very kind (unusual for people that know me) and patient with Mongolian politicians.
During my first to trip UB in june 2011, at a conference diner I was sitting next to somebody from the SPC and as soon I saw his business card, I offered him my sincere condolences and deepest sympathy because he was setup to fail!
As he almost felt from his chair I explained that years before I had a diner with his twin, somebody very senior at the Ministry of State Owned Enterprises in Jakarta (in 2007) and I almost cried when he described his job going from trying to get a good price for selling some state owned assets, listing some of those, picking non-corrupted executives to run those companies, prepare Requests For Proposals for investment banks, decode their (creative) replies,…, and many other things you just don't want to hear about. While not knowing exactly how much he was paid, with such a crazy To-Do-List I thought his job was suicidal.
So in june 2011, my guess was that the SPC person had an even more challenging job. Realizing I was retired and had "some kind" of knowledge of finance, he asked me if he could ask me for help once in a while which I accepted (knowing this would be for free). However I never heard from him.
Several other persons in different organizations in UB took my offer and that has lead to some (low profile) results. But to be fair between officially hired and paid consultants from big organizations (with their own agenda) and a retired investment banker doing that for free to avoid boredom, on the face of it, the first ones look better. It's easier to support the decision to rely on somebody paid with big title, visible credentials (and his owned agenda and bias) therefore ticking the boxes, i.e. if it's a failure, it's an "honest mistake", the usual line of defence for the management of investment banks.
Also as nobody ever faced such challenges, there is no map, guidelines, references,…a lot of room for error.
HOWEVER that is no excuse for not trying and instead go into hiding diluting decisions among people who have even less clues. No need to have 20 people around a table to make a decision when only 4 have the critical mass of knowledge. Mongolian politicians have to accept that whatever they do, they will be criticized in the short term…for the medium/long term good of the country. So if they move fast, ++ will be visible earlier and they will be rewarded. But it's tough, very tough.
So for SWF, Mongolian politicians have to check and analyse BY THEMSELVES what has been done elsewhere and MAKE THE DECISIONS for the good of THEIR country and THEIR CITIZENS, not to please box-tickers with their own bias and agendas.
For me a simple list of SWFs (among those I know a bit and my opinion) to analyse is:
The best models (for the next 10-20 years):
•Temasek (Singapore) at its beginning,
Good models (i.e. probably not covering the local strategic angle but operating nicely on "need to know basis" which I think is CRITICAL!):
•ADIA (Abu Dhabi),
Not so good (wrong priorities in my opinion):
Don't know enough about the others.
(I don't hold a passport from any of those countries )
So if GOM is really serious about protecting national interests of Mongolia and Mongolians, a SWF is a must.
By the way, while Dr. Mahathir is often seen as a controversial (and very provocative) person, I honestly believed he did well for his country, even if that in 1998 complicated a bit my job.
Mongolia should have a look at not only Khazanah but also the local pension funds like EPF…!
15 Mar, 11:41 PMReplyDelete CommentLike3
North American banks:
Having worked for quite a number of investment banks, US or US type, and having still good connections, I think Mongolia is below their radar screen, plain and simple!
The $ wallet of onshore fees to be shared does not justify to have a team on the ground.
I don't know banks that have COUNTRY bankers to cover Mongolia. It's "covered" generally by either Resources and Energy bankers, i.e. Sector bankers flying out of Hong Kong or Australia.
In 2011, there was a bit of movement from some starting business plans for Mongolia, then what happened in 2012 all along was enough to cool them down. When international investment banks face seriously accountability and profitability questions, how can they go to their board and shareholders with a business plan to build presence in Mongolia, starting by fixed costs, trying to find qualified people…that may change shop few months after,….?
•Potential fee wallet / challenges and uncertainty?
Who is the senior MD that would put his job on the line now for this?
May be GOM missed something there. More predictable low hanging fruits elsewhere!
No point being a front runner in that exercise. I think they are just watching each other and then be ready to tag along if something really develops in a SUSTAINABLE manner.
Saved BD Sec, just look at foreign controlled brokers on MSE. Are they really expanding? I think it's more about cost cutting!
Even the front runners among private equity firms have second thoughts.
That being said, ML-BOA and JPM were in the Chinggis Bond sovereign issuance as well as ML-BOA for the TDB bond. But that was done flying sector and DCM bankers case by case.
It will be interesting to see who will dare COMMITTING for Chinggis Bond II.
So like it or not, Mongolian politicians are responsible for damaging a momentum that was just building up.
The US attitude at the World Bank is interesting.
In theory it's about environmental issues.
While no expert in geopolitics, but very cynical, I am not quite sure it is the best interests of USA if the Mongolian mines develop very fast.
When considering the relative strategic situations of China, Russia and USA, are the USA the most likely to benefit from a fast development of Mongolia? Even #2?
In term of supply of equipments or consumer goods, Japan, South Korea and European countries may appear more neutral and may have more to gain, so I am not sure the USA sees a lot of upside in a fast development of Mongolia. Then no point going the extra mile.
16 Mar, 12:47 AMReplyDelete CommentLike3
Mongolia is at a disadvantage for international trade starting with its landlocked position squeezed in between Siberia and China. The country has plenty of competitors elsewhere in landlocked Central Asia. All the more reason for them to build up a Sovereign Wealth Fund.
Meanwhile there are plenty of other resource rich nations situated on the coasts with adequate or excellent ports available for easy trading activities with American shipping: Canada, Australia, Indonesia, Myanmar, Tanzania, Mozambique, South Africa, Angola, Namibia, Colombia, Chile, Peru, Brazil, Venezuela and maybe a few others.
This is one of the reasons I follow the Mongolian story, wondering to myself how well they can thrive despite their landlocked position. Maybe one way is to develop a reputation for being a neutral diplomatic political broker like landlocked Switzerland.
16 Mar, 02:07 AMReplyDelete CommentLike2
Another idea is to complete the establishment of Mongolian dry ports at the seaports of Tianjin and Vladivostok and some other ports. That idea is modeled after what Namibia's Port of Walvis Bay is developing for various inland African countries under United Nations auspices.
These are a couple of pdf links with maps explaining how Mongolia's connections to the seaports are being arranged under United Nations auspices.
16 Mar, 04:13 PMReplyDelete CommentLike2
16 Mar, 04:23 PMReplyDelete CommentLike2
The first link has changed. Same story different site about Mongolia's flags of convenience and dodgy activities
21 Mar, 02:52 PMReplyDelete CommentLike2
Mongolian/US ship boarding agreement
21 Mar, 03:28 PMReplyDelete CommentLike3
" Econoff recently spoke with ERDENES' Executive Director D.
Zorigt, who said that the company is modeled after Singapore's
state-owned TEMASEK and will essentially be a wealth management
Relevant to our recent discussions about SWF.
22 Mar, 04:05 PMReplyDelete CommentLike2
Any thoughts on the Olympic Residence?
16 Mar, 05:38 AMReplyDelete CommentLike2
All parts of the park have already been sold off and it is likely only a matter of time until it is developed. It would take a public groundswell of support against development of this park to stop it."
"The children's park was created by Tsendenbal's wife Anastasia Filatova who also created the Russian modeled College of Music and Dance.He was killed by a Russian Doctor allegedly by injection.
It is the Americans who have been speculating on this park area. Lee Cashell in particular has been spruiking it .UB is developing into separate small towns eg. Japan Town and this area has been actively promoted as the American area.It seems to reach down to the Hilton building which came to a construction halt in 2008."
"the American property developer you mention has no land ownership in the Children's Park area; that's just factually incorrect from talking both to him and his competitors"
"as I understand it, the Children's Park is owned predominantly by two different Mongolian conglomerates that respectively have different members of Mongolia's 10 richest people among their CEOs/chairs"
Am I mistaken or does the video show the Childrens Park Ferris wheel right in front of the building? l love the close up shot of the steel rods to show that they are using them and not chicken wire.
16 Mar, 03:53 PMReplyDelete CommentLike3
My thoughts are that it's an incredibly bad time to be so highly leveraged for a huge project such as the Olympic Residence.
18 Mar, 12:53 AMReplyDelete CommentLike1
This promo claims that BHP is opening an office in Mongolia. They bailed out in 2009.
18 Mar, 03:22 PMReplyDelete CommentLike2
One of these apartments is being funded by Ausaid but as usual they are completely unaware and believe that they are implementing their zero tolerance policy towards fraud.
20 Mar, 06:14 PMReplyDelete CommentLike1
"TDB is the first ever Mongolian bank to issue bonds and the only Mongolian repeat bond issuer."
It seems that there is only one experience of repeat bond issuing in Mongolia. Will Chinggis Bond mach 2 be the next?
Why would organizations like Bloomberg TV and others form partnerships with TDB when its ownership is hidden by the States Secrets Act and they don't even know who their real partners are? of course the major owner is reputed to be Enkhbayar and his family. This cable also provides the US view of the Zorig murder and the subsequent fiasco.
17 Mar, 03:18 PMReplyDelete CommentLike1
Analysis of TDB .
21 Mar, 03:51 PMReplyDelete CommentLike3
Further to the secret ownership of TDB and its partners. I forgot to include Goldman Sachs who took a 4.8% stake in the Bank. GS has quite an association with Mongolia, including the signing of the MCC/MCA compact with Henry Paulson the former CEO of GS.
If the US embassy was so aware of what was happening at TT and the TDB why are they letting US firms like Peabody and GS fall into such seemingly risky ventures?
Dr. Ganbat explains.
"The primary advocate for Enkhbayar's tainted international businesses, John L. Thornton, is the main perpetrator of the campaign to politicize and hype Enkhbayar's case.
A professor at Tsinghua University in Beijing, he is also a member of the International Advisory Council of the Chinese sovereign wealth fund China Investment Corporation. When he was serving as the President and Co-CEO of Goldman Sachs, Thornton visited Mongolia numerous times, and became quick friends with Enkhbayar. In 2008, Thornton and then-President Enkhbayar signed a Memorandum of Understanding to provide about million portable computers for national program "One child-One computer." However, the number of computers sent to Mongolia never reached this number. Interestingly,Enkhbayar's son chose a veteran Sachs employee as his bride.
Officials of this bank, who never delivered their promised computers for Mongolia's children, but produced a bride for Enkhbayar's son, are not eligible to oppose Mongolia's fight against corruption. There is a growing suspicion that, in fact, it was Enkhbayar's daughter-in-law, not his daughter who produced and broadcasted materials, spoiling Mongolia's reputation internationally. It is probable that Thornton is using this girl, who resigned her position at Sachs pledging to work for her family business, as Enkhbayar's puppet. Thornton spread vicious rumors worldwide for his "good pal", and provided mostly bogus information to influential figures in London, Washington D.C, and some international organizations. His partner Minton's close ties with Enkhbayar date back to when he was serving as US Ambassador to Mongolia. Minton provided an incorrect forecast of the 2009 election results to his superiors, assuring that Enkhbayar would once again be elected President. After returning to the States, he established an NGO under the name The Korea Society. When Minton tried to include Mongolia in the activities of his organization, he faced strong opposition from a better established organization The Asia Society. When President Elbegdorj paid an official visit to the United States, The Asia Society honored him with an award, further fuelling Minton's discontent."
¶15. (SBU) As a success or as a lingering failure, the Compact will
be a major landmark in bilateral diplomatic relations. Exaggerating
a bit, one council member told us, "If the Compact does not come
through, America will be finished here." That is hyperbole, but the
stakes for the relationship are now very high. Both sides will have
to display a firm commitment, and provide the time and personnel for
the closest collaboration, to complete this joint endeavor on
'Paulson was portrayed by William Hurt in the 2011 HBO film Too Big to Fail and by James Cromwell in the 2009 BBC film The Last Days of Lehman Brothers.
In the documentary film Inside Job, Paulson is cited as one of the persons responsible for the Economic Meltdown of 2008 and named in Time Magazine as one of the "25 People to Blame for the Financial Crisis"."
'It has been pointed out that Paulson's plan could potentially have some conflicts of interest, since Paulson was a former CEO of Goldman Sachs, a firm that might benefit largely from the plan. Economic columnists called for more scrutiny of his actions. Questions remain about Paulson's interest, despite having no direct financial interest in Goldman, since he had sold his entire stake in the firm prior to becoming Treasury Secretary, pursuant to ethics law. The Goldman Sachs benefit from the AIG bailout was recently estimated as US$12.9 billion and GS was the largest recipient of the public funds from AIG. Creating the collateralized debt obligations (CDO's) forming the basis of the current crisis was an active part of Goldman Sach's business during Paulson's tenure as CEO.
25 Mar, 03:59 PMReplyDelete CommentLike2
Sounds like the Mongolian SWF already exists and has a name:
Erdenes MGL LLC!
with stakes in EMC, BAN, SHV injected inside.
And that sounds like a good idea to me.
(But no point limiting Erdenes MGL LLC to mining only!!!)
For instance, once MIAT has been recapitalized, what about injecting it into Erdenes MGL LLC as well?
(and at least, 51% of state owned banks too!)
Now as the ETT IPO is somewhere stuck in the twilight zone and Mongolian citizens were supposed (don't know exactly what is the status at this point) to be given shares in ETT with the right to get cash, at a SET PRICE (that was not smart)…and are waiting …, I remember there was something else ABOUT GETTING SOME (none tradable) PREFERRED SHARES IN ERDENES MGL LLC as well, then may be it's time to dust this a bit.
For instance, the state would own ordinary (voting) shares to manage those assets in the long run,
while Mongolian citizens would get different shares, preferred shares non-voting, paying a little dividend (NOT FIXED) that would represent a small % of the annual earnings (to avoid creating an unsustainable pattern).
As Mongolians have already something (ETT?) allocated to them in the MSCH&CD system, it's easy to ADD a "something else", not listed not transferrable, but that will be those preferred shares.
Then what about making, BY LAW now, Erdenes MGL LLC the recipient of rights of first refusal, pre-emption rights, free grant of shares under SEFIL, and other things of that kind?
17 Mar, 11:17 PMReplyDelete CommentLike2
We have heard these promises from Governments before. Mongolia was once one big SWF with all citizens owning shares in all of the State owned companies. E MGL is set up for the GOM to control it's "strategic" interests. During the 2008 "election" the people were promised shares in "Bayan Mongol" a new entity to be created.
MSE your concept is good but can GOM be trusted? MIAT is currently under investigation in a corruption scandal and the recapitalization is reportedly from Chinggis Bond 1.
The poorest and most disadvantaged people in Mongolia can't claim any of these shares or reduced sum buy outs because they don't have a Mongolia ID card it is meaningless to them and just more lies. ETT will soon disappear there is no chance of an IPO in it's current shape.
Can a SWF be a LLC?
18 Mar, 02:44 PMReplyDelete CommentLike2
on all those questions, there is one possible answer:
The past is not always a good indication of the future.
I don't know many, if any, countries that developed started great without corruption,.... I have been investing in a bunch of MSE listed companies that, for now, are perceived very poorly in term of "corporate governance" (to use nice words) because I think they will see there is more FOR THEM to gain in moving towards something more usual (and recently saw amazing results from one along that line).
So there are mistakes, big mistakes being made, always.
What I don't like about GOM now is:
* the problem of taking decisions,
* also this idea (may it is just my perception) that before politicians were all bad and corrupted, and now they are all good and honest (which may be costly in 2016).
It's like in some countries where some politicians (when not in the government) always criticize the government and then when they are in charge just DO EXACTLY LIKE THE OTHERS.
(check France: Sarkozy-Hollande for instance within 1 year of SAID-DONE).
For foreign investors that are NOT yet in Mongolia, all the negative we see out of UB are enough to tell them not too rush and bring their capital and expertise to Mongolia...and that Mongolians will pay a serious cost for it.
But if you are there already, among all the frustrations, it will be improving even if right now it spells pretty much like chaos (because the to-do-list is daunting and scary and nobody was prepared for this).
Btw, if this kind of entity is launched with all those stakes inside, then at some point, it will become more visible and de facto more difficult to do "weird stuff in the dark" especially if that SWF in the making is dealing with foreign banks in Mergers & Acquisitions, IPO....so that will upgrade the standards I think.
LLC or JSC: ? not really critical. Charter could be created as it suits the needs by the parliament with super majority.
18 Mar, 07:32 PMReplyDelete CommentLike2
also this idea (may it is just my perception) that before politicians were all bad and corrupted, and now they are all good and honest (which may be costly in 2016).
Here is one living former Prime Minister that Mongolians should listen too. There are 11 former leaders who faced mysterious deaths. Listen to this survivor. The video shows photos of Mongolian genocide during the Stalin era, the corruption of Chuluunbat the former head of the Mongol Bank appointed by Enkhbayar. He lives a simple life he never had any "companies". There were quite a few good politicians from the old era not like those now following the three Buddhist evils of violence,ignorance and greed.
19 Mar, 05:08 AMReplyDelete CommentLike1
If the SWF is an LLC, then it would no longer be a SWF. The SWF should be structured like the The Government of Singapore Investment Corporation. It should be run by real businessmen, not politicians.
19 Mar, 07:48 AMReplyDelete CommentLike2
Temasek is a Ltd, i.e. LLC and many others of the same kind.
"Real businessmen": not sure because there would be short term bias and it will be a holding company, a portfolio for the long term of the country. Neither pure politicians.
19 Mar, 10:08 AMReplyDelete CommentLike2
Not sure that Singapore is a good example for Mongolia. Although both are sham democracies . Singapore is smart and has no natural resources Mongolia is the opposite.
19 Mar, 03:13 PMReplyDelete CommentLike3
the point, like on many things, is not to find the BEST, but avoid the WORST,
and in my mind, those SWF that try to be transparent to the world are the worst to protect the national interest of a country and its citizens, and that's here that nationalism in Mongolia should move from words to tangible actions!!
19 Mar, 09:12 PMReplyDelete CommentLike3
That underlines the challenges Mongolia is facing and for which there are limited or no road maps.
17 Mar, 11:39 PMReplyDelete CommentLike2
Where has Jon been for the past month? Is everything okay?
18 Mar, 12:51 AMReplyDelete CommentLike1
Jon had some health issues crop up. Recovery has been slow and some possible secondary issues cropped up. I communicated with him a couple days ago and he sounds hopeful - had a couple days of feeling decent the last few weeks.
18 Mar, 06:31 AMReplyDelete CommentLike4
appreciate the update HTL
18 Mar, 02:46 PMReplyDelete CommentLike2
Thank you, HTL. I hope for the best for our good friend Jon.
19 Mar, 07:52 AMReplyDelete CommentLike1
Another ridiculous and unaffordable project for Mongolia. Why not concentrate on getting running water and sanitation to the Ger districts where most of UB's citizens live.
Love the photo of a Singapore Railway station. Imagine a subway in UB.
19 Mar, 02:59 PMReplyDelete CommentLike3
I respectfully disagree. A subway system is something that UB desperately needs. And people in the ger district should be encouraged to move to affordable low end apartments closer to the city. Developing infrastructure to bring water and sanitation to the ger district would be a nightmare.
The GOM just needs to make sure that the spending of the 1.5B USD for the subway is optimized, not for filling up the pockets of the political elites.
20 Mar, 03:12 AMReplyDelete CommentLike2
I agree on all this saved the "optimized".
While, of course the $ are not supposed to go in some pockets, the fact is that there are so many things that need to be done, all now, in that country it is beyond imagination.
Even the most honest politician in the world as well as the most knowledgeable one would never be able to spend wisely without criticism those US$1.5bn,
so I would forgive them for making mistakes as long as they ACT NOW.
What I do not forgive is the noise and chaos that deters foreign capital / FDI to flow in
so that instead of trying crazy arbitrages to spend wisely US$1.5bn
it would have US$10bn to spend
leaving more room to errors (impossible to avoid at this stage) and able to undertake more projects of all kind dealing with ST-MT-LT needs.
Honestly HOW LONG do DP MPs expect it will take for those projects to be implemented (under a severely constrained environment)
and Mongolian citizens to see with their own eyes the benefits?
In my opinion, if they don't act NOW,
they'd better already write off the 2016 parliamentary elections because Mongolian citizens would seen by then only the negative, not the benefits coming after completion.
20 Mar, 03:38 AMReplyDelete CommentLike2
Is putting everything on debt smart. The startup costs of OT are on debt to THR, the new Airport in Terelj is debt to Japan, not to mention the rapidly disappearing Chinggis bond .Jargalsaikhan already stated that Mongolia's debt is now twice what it was to Russia. There is nothing moving at ETT and OT has only done a few tests.
A subway could provide new shelter for UB's homeless in Winter. There have been lots of programs to fix infrastructure but what happens?
20 Mar, 03:09 PMReplyDelete CommentLike3
that's the problem GOM's recent actions, or inaction, will trigger: choices, difficult choices!!
That "ridiculous and unaffordable" project is I think a very good idea for the medium and long term of UB and Mongolia...
but the short term reaction of people is "what's up for me now?"
After 7 trips to UB, it's pretty clear for me that the way it is growing you cannot fix what has to be fixed there so easily.
You start digging for the pipes and then you have holes all over the place, traffic jam turns to standstill and game over...the consequences overweight the benefits.
So this kind of projects are, I think, the sustainable solutions to problems of water, electricity,...in gers districts.
Several months ago, I read about the idea of having several new areas developed around UB from scratch (and have businesses as well as housing for workers around).
I think it's a good idea.
It's much easier, faster and cheaper to dig holes, create road when there is NOTHING than having to deal with existent roads, buildings,...
Have a look at the "parking area" outside Department Store every 6 months for instance. It's going from bad to worst.
Then having some activities that do not have to be in the centre of UB moved outside will reduce traffic as well.
If that could be in place in 4-5 years then GOM and the city can on the other hand focus on other short term needs too knowing that few years from now there will be an end to the infrastructure nightmare.
This idea is no different from how many cities in France were built more than a century ago by and for big firms, like Michelin, Usinor,....
Big activity zones + housing for workers with all the facilities.
That therefore limits traffic jam and make life easier for everybody.
In Jakarta, they have the concept of Mega-Blocks where in one housing area / compound, you find almost everything people need so that people don't have to wonder around for shopping increasing the pressure on a traffic already a nightmare.
Basically try to have areas that are more or less self-sufficient to limit collateral damages.
That's the dilemma governments of very young country are facing dealing:
* short term people priorities,
* medium - long term infrastructure needs for the country
* infrastructure needs for projects that will generate $ cashflows, pay for the rest, support the economy,...
Once political stunts have deterred some foreign capital to come in, then you have less capital available, therefore you cannot go for all those projects "at the same time" and have to make difficult choices leaving anyway a lot of people unhappy.
That's why I think the middle and low class will a heavy price for happened over the last 6-9 months.
Furthermore, when you look at everything that has to be done in Mongolia it's like mutually exclusive projects, i.e. the "supply chain" cannot deliver all, i.e. not enough workers, power, concrete, cement, steel, windows, water, ...capital,.....to do it all at the same time ...
A real headache and no place to hide, decisions have to be made!
19 Mar, 09:08 PMReplyDelete CommentLike1
That is part A:
That is part B, the reply:
It's not so different from the short term requests vs. long term common good I pointed at above.
It reminds regular "discussions" I have with my 14 years old teenager son, always asking for more (thanks to peer pressure among others)...whatever it is,
and of course I am often perceived as the bad cop, the NO-man.
(no problem, I am used to it, bullet-proof. I will check the results in 10 years and now my 14 years old is not knowledgeable to make those decisions. He will have later...and may regret the kids years!)
"But be careful what you wish for'Cause you just might get it"
(PCD, When I grow up)
It's getting better by the day because now he is seeing the benefits for himself of all the NO, as well as the YES (always very consistent) he got some years ago.
He knows that when I say NO, while he would love hearing YES (and he is trying to negotiate anyway), I am right and that's comfort him because I am not blinking subject to winds, moods or ...political surveys.
Sure if years ago, I had to be "elected" as a dad, I would have been "fired" easily.
However I am pretty much sure that now I would win such "elections" easily. :)
Short term requests to please vs. long term common good with negative short term side effects....yes that's not easy!
That's the question of Moral Hazard by the book!
Probably not always well covered.
19 Mar, 10:17 PMReplyDelete CommentLike1
Very good start!
Just hope his colleagues at GOM can listen to him about how political volatility impact negatively FDI and how FDI is critical to Mongolia (at this point!!!).
19 Mar, 10:24 PMReplyDelete CommentLike2
The interviewer sounds more like a beggar
20 Mar, 03:00 AMReplyDelete CommentLike1
"The main Russian demand was for Mongolia's
substantial, high-quality metallurgical and thermal coal deposit in
the south Gobi site of Tavan Tolgoi. According to MoIT sources, the
Russians proposed to the GOM a deal for Tavan Tolgoi: Seize the
asset from its private holders; give it to a Russian-company chosen
by the Russian government; and Russia would build Mongolia another
north-south rail line or a power plant in return."
Interesting cable, the GOM did sieze TT from it's private holders in 2007 exactly as directed by the Russians.Whats next?
20 Mar, 10:33 PMReplyDelete CommentLike4
"a Canadian company, has the right to sell shares in Canada on the
Toronto Exchange or those privately held; CNNC has the right to buy
these shares from any exchange or venue where they are legally
tendered -- and in these circumstances Mongolian law and policy is
irrelevant. At this point, CNNC is well on its way to owning the
very uranium holdings that the Russians craved and that the
Mongolian government wanted to make the heart of their ambitious
Interesting background on the Khan Resources dispute and general Uranium policies
22 Mar, 04:54 PMReplyDelete CommentLike3
This trade fair, Future Mongolia, should encourage growth in the construction industry.
24 Mar, 01:37 AMReplyDelete CommentLike2
TRQ conference call tomorrow, 1:00 pm EST, should get lots of attention, specifically surrounding the recent talks with GOM. Indications might be cautiously optimistic, (full disclosure, I'm talking my book!!), with SQG announcing on Friday the resumption of operations at Ovoot Tolgoi.
A little surprised that there wasn't a bigger pop in HK for SouthGobi, baby steps, and at least headed in the right direction. Question is how long does Rio hold on to this position, and are there any buyers ? Other than China. Peabody ?
Little of no follow through for SGQ on TSX, somewhat disappointing.
25 Mar, 09:47 AMReplyDelete CommentLike2
OK so being shut down is a clear positive it gave them time to adapt to the new environment!
Still no mention of the elephant in the room Justin Kapla and the money laundering/ Monnis mess.
25 Mar, 03:31 PMReplyDelete CommentLike1
Archives 09: December 11, 2012 to March 13, 2013
I'm trying to get back to normal but don't feel it. I have a lot of catching up to do as I've been off my usual for about six weeks, I think.
Thanks for the well wishes and the informative & insightful posts.
25 Mar, 05:26 PMReplyDelete CommentLike5
Take good care of yourself, Jon; your health comes first.
25 Mar, 05:29 PMReplyDelete CommentLike2
Great to see you felt well enough to poke your head up though!
Just don't over-do it and cause a relapse.
Slow and easy does it my friend!
25 Mar, 05:46 PMReplyDelete CommentLike2
Welcome back Jon
25 Mar, 07:17 PMReplyDelete CommentLike2
Well said HTL take it easy Jon. Things are going to get interesting with the Presidential election coming up
26 Mar, 02:46 AMReplyDelete CommentLike2
Very glad to see a post from you, Jon. I hope you get back to normal soon.
26 Mar, 03:00 AMReplyDelete CommentLike1
Glad you're feeling better there Jon.
26 Mar, 03:24 PMReplyDelete CommentLike1
Great to see you back Jon.
27 Mar, 11:36 PMReplyDelete CommentLike2
Belated welcome back John.
28 Mar, 10:19 AMReplyDelete CommentLike1
26 Mar, 03:06 PMReplyDelete CommentLike1
You can tell more about a conference by where its held and who owns it rather than the agenda.
I note they don't include Prince Andrew on their VIP guest list. He used to stay there when he was paid by Rio to go to Mongolia under the guise of his self appointed UKTI role to influence Mongolian Politicians.
26 Mar, 03:13 PMReplyDelete CommentLike2
May be, like me, he prefers to stay at Blue Sky. :)
26 Mar, 07:56 PMReplyDelete CommentLike2
Oh dear instead of Enkhbayar being groomed as the "Tony Blair of the Steppes" now we have the real thing. I wonder what meddling he is up to? The British got rid of Prince Andrew after a series of embarrassments then tried Prince Michael and nowTony Blair
26 Mar, 03:28 PMReplyDelete CommentLike1
The trip might be a success if he is judged to be diplomatic. If not, so much for that.
26 Mar, 03:36 PMReplyDelete CommentLike2
That could be another reason for him to hang around :)
26 Mar, 07:58 PMReplyDelete CommentLike2
Exactly. That may be the WHY.
26 Mar, 07:59 PMReplyDelete CommentLike1
Your area of expertise MSE what are J P Morgan doing in Mongolia, or what are they planning to do and why would they need Tony Blair?
I prefer to stay at a backpackers you meet more interesting people other than "beeziness" men and hookers that hang around the posh hotels.
26 Mar, 11:06 PMReplyDelete CommentLike2
The bank seems to be taking an interest in Mongolia mostly indirectly through Hong Kong. Maybe they want more direct ties to Mongolia?
26 Mar, 11:55 PMReplyDelete CommentLike1
I was at that conference and to be fair the JPM person explain DRs was excellent, but DRs are a classic for JPM and that was her usual show. (each bank has it own edge).
As far as I know,
none of the JPM, GS, ML, MS, CS, UBS, CITI,DB
are building now any presence in UB.
(if they were trying I would likely hear of this,
I may be even asked to setup a shop for one of them)
While I am pretty sure they all say to GOM "they are very committed to Mongolia,..." it's only cheap talk but no $, saved few plane tickets, hotel nights....but no serious commitment of headcounts!!
Better opportunities elsewhere.
In 2011, several were seriously thinking about that and preparing some business plans,
but in 2012 once SEFIL and South Gobi-Chalco struck (+ the rest) they put all that on ice....and by the way who were promoting the Mongolian case did not get exactly rewarded!!
So whoever has again this great idea of talking to his boss about doing business in Mongolia better think twice.
I don't know even ONE head of investment banking in Asia-Pac for one of those big IBs that would dare now signing a business plan for Mongolia, committing to build presence on the ground, signing the checks and hiring.
Would their own lawyers be comfortable to go there ?
The volatile political environment as well as the anti-foreign sentiment has I think deterred them.
They wait in Hong Kong, which is the base camp for investment bankers, ECM, DCM, M&A,....
So until further notice, and TANGIBLE HARD EVIDENCE
(not nice words, but FACTS),
those banks will conduct their activities from Hong Kong
(or Australia for sector bankers)
and there is any opportunity arising in UB, they will fly bankers.
May be GOM believes foreigners come and go, and will come back quickly, the fact is that there are real scars (almost visible to GOM) and the Mongolian political stunts have stabbed in their back some of the pro-Mongolian bankers.
Read by yourself about the change of focus.
27 Mar, 12:17 AMReplyDelete CommentLike2
I follow what you are saying, MSE. I have to wonder what Mr. Blair can do about that, if anything.
I notice that only a couple of firms related to Mongolia exhibited at the metals show in Hong Kong. There were many more exhibitors related to Nevada, Canada and Africa. So maybe business interest in Mongolia is waning for now.
27 Mar, 12:45 AMReplyDelete CommentLike2
"So maybe business interest in Mongolia is waning for now"
That's Mines and Money Hong Kong.
These kind of conferences are generally quite popular because they are happening just at the time of the Hong Kong Rugby 7s so many investors come from around the world for the conferences on that week and...attending the Rugby 7s too (Fiji won again, with great class!).
I went there last year and there was quite a number of friends already investing in Mongolia or interested in that were attending too.
This year only one of those was there and I did not bother going.
Even one Mongolian friend from UB came just for the Rugby 7s, but did not bother going to the conference, just the time for breakfast and lunch to keep us updated on the latest from UB...and to be fair, the conversation moved very quickly to a more positive topic for the rest of the lunch: Rugby!
That's the sad reality.
T Blair: I think he has the knowledge and the credentials to DECODE and help GOM understand how foreign investors react, what GOM did wrong, what they can achieve and how.
If somebody like him cannot help them see the light,
then I am very pessimistic for the rest.
27 Mar, 01:26 AMReplyDelete CommentLike2
I view the government as walking a tightrope, if I understand them correctly. They have to satisfy and support the business leaders and the workers, the industrial projects and the environment, the cities and the rural folk, the two giant neighbors, the political parties, the foreign investors and the native businesses and so on in order to be effective. So if a roving ambassador like Mr. Blair can appreciate the government's position, I think he can help facilitate a common understanding about how everyone can pitch in with the Mongolian economy.
27 Mar, 01:44 AMReplyDelete CommentLike2
TB was an advisor to JPM.
For matters related to governments, banks and finance, this kind of persons could help governments to get a better understanding of what bankers (seen biased) may try to explain.
Now, for his with his own consultancy firm, he may be simply be trying to help GOM and RIO find some common ground and settle an agreement on OT, while what happened before may have created a situation of such distrust between both sides that it would be difficult to have a relevant and meaningful discussion.
Somebody somewhere independent could help bridge that gap.
He has experience and knowledge,
so I believe he can really help there!
I already heard his name long time ago as one of the person that could help settle this kind of matter,
so I think it is very good news he is on the ground now.
26 Mar, 11:54 PMReplyDelete CommentLike2
27 Mar, 01:19 AMReplyDelete CommentLike2
"I am ready to share..."...but are they ready to LISTEN and ACT accordingly, that is the question!
What he may be discussing with GOM about RIO and OT is unlikely to show up on his blog.
If positive, suddenly you would see something unlocking on OT and that would be it, "thanks to fruitful discussions between and OT...." not a word about TB.
27 Mar, 01:30 AMReplyDelete CommentLike1
Any specific information about business deals will not show up in his blog. But his lecture sounded like a generic topic so the transcripts might show up there. A reader will have to "read between the lines" if it happens to show up there in order to grasp what he was trying to say. I'll be watching for it.
27 Mar, 12:07 PMReplyDelete CommentLike2
He is a paid consultant these days. His unwillingness to say who he would be meeting and what they would be talking about is telling. Usually when Rio "paid all expenses " for Prince Andrew to lobby then President Enkhbayar and others in the GOM they didn't always announce it publicly.
This just looks like a paid Rio lobbyist visiting Mongolia. Maybe Mongolia is the only country left that Tony hasn't saved, according to his website he is everywhere.
27 Mar, 03:57 PMReplyDelete CommentLike2
Step 1: Law to be approved by the parliament.
Step 2: Foreigners will be waiting and watching with a lot of attention the FIRST CASE where this law is applied.
Needless to say, if GOM really means business,
it has to pick QUICKLY a very CLEAR and PUBLIC example to prove it does mean business and it is SUSTAINABLE!!
If at implementation of the first case, there was an hiccup,
then it would be even worst!!
So we just have to wait. :)
27 Mar, 08:04 AMReplyDelete CommentLike2
Here's a summary article that may not contain any new material for you Mongolia experts:
Jon, I'm glad to hear you are back in the saddle!
27 Mar, 10:21 AMReplyDelete CommentLike3
In theory good, because GOM should learn something out of that, with a lot of information coming to their door.
BUT they have to listen and decide BY THEMSELVES, not being influenced by one or the other.
For some of those SWFs,
attending this kind of events and being visible
is a way to be recognized and get an endorsement that their strategy is good
...and that their citizens should be delighted to have such a successful SWF,
i.e. international PR for domestic purposes.
The SWFs that could be the best models (whoever that may be) for Mongolia MAY NOT EVEN BE THERE.
So I seriously encourage GOM and Mongolians to THINK BY THEMSELVES and for THEMSELVES,
not fall into the usual copy-paste / box-ticking of so-called "best practices".
27 Mar, 08:17 PMReplyDelete CommentLike2
The government will probably check out the other examples of setting up a fund before deciding for themselves about what to do about it.
28 Mar, 01:34 AMReplyDelete CommentLike2
That's exactly what I had in mind, strategic funds to support local businesses like Malaysia and Singapore (Temasek at its beginning).
"However, the Chilean funds are not strategic funds, i.e., aimed at encouraging business development and diversification. Some emerging countries such as the Emirates, Singapore and Malaysia created strategic funds with the clear aim of contributing to business development and production diversification."
Then later, the strategy may change and shift towards a GIC type.
28 Mar, 08:34 AMReplyDelete CommentLike2
I read with amazement a keynote speech given by Ulaan on " Effective Sovereign Wealth Fund Management'. Of course his own personal wealth management has been well documented by " Dr. Ganbat", Ulaan as I stated before pocketed the $11 million USD given to GOM by George Bush during his 2005 visit.
"Left with nothing to lose, Ulaan, quite contrary to the meaning of his name in English "Red", was one of the first ones to go running to Enkhbayar unabashed. He embezzled a fortune from the state, and materials of his activities are kept with Enkhbayar. He bartered a copy of those documents to Baabar, who is now using them as a tool in his harassments and threats. Some of Ulaan's acts were solo, while some were the result of a team effort with Enkhbayar. One of them is the incident of USD3 million debt of Darkhan Metallurgical Plant. This plant was completed with Japanese assistance, and was taken over by Mongolians in 1989. However, a company, Monimpex, was contracted, and additional investments were made because the Mongolian side still could not operate the plant. Soon Monimpex declared bankruptcy, and the Japanese investment of 10 years -- USD3 million -- has disappeared along with the company. When the Japanese demanded back their investment, then-Minister of Finance Ulaan signed and sent an official letter stating that there were no legal foundations for Mongolian government to pay the sum. The Japanese then appealed to Darkhan city court and lost. The matter was finally settled when a contract was signed between the parties to repay the USD3 million with the products from the plant in the course of 25 years. The certificate of this unreliable debt was bought by Ulaan for USD 200 thousand. He, the Minister of Finance, then allocated the USD3 million debt to Japan in the annual State Budget of 2005, earning himself a USD 2.8 million bounty. No wonder only two options await him today; joining Enkhbayar or serving jail time."
To Valley Boy we have already discussed the fact that Mongolia already has a SWF Erdenes MGL and it is based on the Temasek model as previously posted.
28 Mar, 03:28 AMReplyDelete CommentLike2
I realized you posted that, dulleyefarmer. But it did not sound like a sovereign wealth fund to me at all. It sounded like a state sponsored enterprise or a state owned company according to the link to your comment.
Some developing countries have those kinds of enterprises as part of their efforts to give some emphasis to certain parts of their economies. Here are a list of examples from Sri Lanka.
28 Mar, 10:29 AMReplyDelete CommentLike1
This is getting confusing.It seems a SWF can be anything GOM wants it to be. GOM could never run anything as impressive as Temasek. Erdenes seems to be more of a collection agency that the State Property Committee was trying to water down.I certainly wouldn't trust GOM to run a chook raffle let alone a SWF.
Temasek has claimed that it is not strictly a sovereign wealth fund, in the sense that it "has to sell assets to raise cash for new investments and doesn't require the government to give approvals". This claim, made by a Temasek spokesman in 2008, was subsequently disputed by the Singapore Ministry of Finance's governance and investment director, who asserted that a broad definition of the term "sovereign wealth fund" could include "all state-owned investment vehicles, regardless of their funding". He noted, however, that the claim had been made in the context of a 2008 agreement between the United States Treasury, the Abu Dhabi Investment Authority, and GIC regarding the transparency and non-politicization of investments by sovereign wealth funds, and that Temasek already meets disclosure guidelines and provides more details than required by the agreement.
'In Jan 2008, The Economist reported that Morgan Stanley had estimated the fund's assets at US$159.2 billion'
'Temasek Holdings's total shareholder return is 17% compounded annually since inception in 1974.'
'It would be in everyone's interest if the company were
structured and behaved like 'a normal private company'"
'¶3. (SBU) Econoff recently spoke with ERDENES' Executive Director D.
Zorigt, who said that the company is modeled after Singapore's
state-owned TEMASEK and will essentially be a wealth management
company, overseeing the intake of mining profit dividends, advising
the GOM on the selling of equity shares, and funneling income from
sales into the state budget to be reapportioned by parliament, some
of it back to ERDENES. (Note: ERDENES' roles and functions have yet
to be determined. For example, at a recent meeting between Commoff
and one of Zorigt's new staffers, the staffer related that Zorigt's
initial plan was rejected by the State Property Committee (SPC).
The staffer did not explain the SPC's reasons; however, she noted
that they sent back suggestions, in which ERDENES would function
more like a consulting firm for the GOM rather than as a wealth
28 Mar, 03:45 PMReplyDelete CommentLike2
:) That is why I said Temasek ...at its beginning!
What it has been over the last 10 years is quite different from what it was earlier.
What Mongolia needs in term of SWF now is quite different of what it will need 20-30 years later too.
"GOM could never run anything as impressive as Temasek. Erdenes seems to be more of a collection agency that the State Property Committee was trying to water down.I certainly wouldn't trust GOM to run a chook raffle let alone a SWF"
I think all SWF started the same way as a collection of bits and pieces that took shape over years and Temasek was no different at inception.
This kind of things has to be run on a NEED TO KNOW BASIS and making it totally transparent to everybody is probably the worst thing a government can do!
GIC is quite efficient but transparency is not how you can qualify it.
GOM may not seem up and running for many things now, but they will learn, for this and the rest.
28 Mar, 04:00 PMReplyDelete CommentLike2
A sovereign wealth fund, at least in the traditional sense, is an accumulating pool of public funds separate from the public budget meant for investing in long- term projects or emergency funding to keep the government functioning. It's a stash of set- aside funds, so to speak, meant to be a funding mechanism for perpetuating a country's economy.
A state owned enterprise, or some derivative term like that, is a firm structured to be funded by the government to achieve specific public and private goals to improve a sector of a country's economy.
It is entirely possible for a country to set up a sovereign wealth fund for the express purpose of funding the country's portfolio of state owned enterprises. The enterprises, in turn, will be expected to keep the economy functioning during the rough times.
Both the sovereign wealth funds and the state owned enterprises are also set up in order to defend a country's economy from being dominated by foreign multinational corporations. There are numerous countries with economies smaller than the multinational corporations who take the view that they are operating at a disadvantage to foreign financial interests. Economic nationalism can get out of hand in those scenarios. Such funds and enterprises, if they are managed well, can enable a country to become a better trading partner partly because they encourage confidence in dealing with the global trade pressures.
28 Mar, 08:22 PMReplyDelete CommentLike3
"The Development Bank" would that be the Asia Development Bank or the TDB?
I thought the MCC/MCA-M was building the "road to China" or small parts thereof? Can't wait to read their final report after September and the following audit.
Looks like more debt to the overburdened Mongolian populace.
1 Apr, 04:29 PMReplyDelete CommentLike2
The article is referring to the Development Bank of Mongolia, state-owned and issuer of US$580 million in medium-term notes.
11 Apr, 03:12 AMReplyDelete CommentLike3
So this is yet another Bank established by the MPP. Where is this money coming from? The DP established the Turin Bank to handle Government business. It seems there are so many Banks now in Mongolia all set up to handle their own interests. I can't help but notice your connection to Goldman Sachs a recent partner of TDB.
11 Apr, 05:39 AMReplyDelete CommentLike2
I was a fresh-faced associate at GS -- long ago and far away!
18 Apr, 12:56 AMReplyDelete CommentLike2
Somebody has to do it :)
18 Apr, 04:24 AMReplyDelete CommentLike1
You still have a fresh face Pat but does GS?
The limits of the Fiscal Stability Law must be growing fast as Mongolia's debt is now reported to be twice the old Russian debt of over $11 billion. That is nearly 20 times what the Chinggis bond raised and TDB is the only organization in Mongolia that issued bonds more than once. My source for the MIAT rumor is very credible, why would they buy now instead of leasing as they did previously? Lets see what happens. Keep watching the bond money in the Mongol Bank because it might evaporate soon.
22 Apr, 03:34 PMReplyDelete CommentLike1
"MP S.Ganbaatar is to sue Rio Tinto in the International Criminal Court, the ICC in Hague, according to a press conference held today, Tuesday April 2nd."
2 Apr, 03:47 PMReplyDelete CommentLike2
ganbaatar can slow the country for ages.
can this happen. any recourse for RIO?
3 Apr, 02:31 PMReplyDelete CommentLike4
Everything falling into place for MMC?
"Mongolia will fund 30 percent of the power station through its $1.5 billion Chinggis Bond fund. The rest will come from private investors and loans. Mongolia will own at least 34 percent of the plant, according to a March 30 statement."
Another big bite into the Chinggis Bond Fund that will ultimately provide infrastructure for whoever takes over ETT and of course even more debt for the people of Mongolia.There isn't much of the $1.5 Billion USD left and the prospects of CB 2 aren't looking good.
3 Apr, 03:24 PMReplyDelete CommentLike2
Most of the proceeds from the Chinggis Bond are still in MongolBank and have not been spent.
11 Apr, 03:12 AMReplyDelete CommentLike3
As Mongolia's resident debt advisor for the US treasury you certainly have an interesting job. Do you have a comment on the previously posted rumor about MIAT planning to use the Chinggis bond money to buy two new Boeing planes?
Most of the proceeds might be sitting in the Mongol Bank which now has Enkhbayar's son as Deputy, but large chunks of it have already been promised and surely it will soon disappear?
Do you find it disturbing that GOM is accumulating so much debt, more than twice the old debt to Russia already and rapidly rising. So many projects are put on debt including the start up costs for OT which is debt to Turquoise Hill.
11 Apr, 05:28 AMReplyDelete CommentLike2
If Mongolia and Mongolians want to enjoy for the next decades and centuries a better quality of life and more comfort,
then exporting commodities (first raw, then as more added value products) is essential. That's where Mongolia can get serious $.
The short term / medium term challenge is the infrastructure.
Does Mongolia want, for exports or imports (of construction materials, gas,....) to be totally dependent on China and/or Russia?
For my first trip to UB in june 2011, I was always wondering if the "taxis" would run out of gas before reaching my destination because of the gas supply issue with Russia.
Once is ok, but not every time so some long term sustainable solutions have to be put in place while dealing with short term constraints.
About this infrastructure,
part of it will provide Mongolians with better quality of life,
part of it will provide with higher added value, a regular source of income so it has to be built now.
Mongolia needs capital (and expertise, because there are only 2.8 million people) so what does really matter is:
What should be this mix of capital?
* Is it Equity only
(in which case, Mongolia may be giving away too much upside)
* Is it Debt only
(in which case, Mongolia may be at the mercy of markets turbulences like in 2009 and face serious funding problems, having to ask IMF)
Probably neither one nor the other!
More likely issuing more equity now, to acquire financial strengths and then more debt later in order to retain more upside...
BUT the equity raising opportunities have been compromised:
* ETT IPO ?
* MIAT and MSE IPOs ???
* OT agreement still surrounded by question marks
* and "SEFIL" + the rest making very very difficult for foreign mines to raise equity overseas!!
For instance, as you pointed out the case of MMC,
do you think that at the current share price MMC could raise US$500million of equity that could be further leveraged by some debt in order to invest more into infrastructure, which will be useful for Mongolia at large?
I don't think it would be easy. So that's equity that is not going to Mongolia creating a capital deficit.
And by the way,
it is EXACTLY the same problem for small local companies that are listed on MSE (most are not mines!) that would love to raise some capital, placing shares on MSE, in order to develop their business ...before foreign firms move seriously.
I have seen many over the last year, but there is no way they can do anything now on MSE because of the liquidity, and again it boils down to problems, often simple technical issues, I flagged earlier.
So what do they do? they apply for banks' loans or go to DBM and wait.
And even on the debt side, it is more complex than it looks.
Even if Chinggis Bond I was a great, unexpected, success, borrowing only US$ is not safe.
Mongolia has to develop its own MNT government bond market and I am sure Pat O'Connell is trying to help on this.
Issuing MNT government bonds is a strategic need for Mongolia!!!
Anyway, my point is that debt per say is not a problem if used to create infrastructure or support investments that will bring positive returns to Mongolia, cash flows or alike.
If it is wasted in consumer items, then it create something unsustainable and dangerous.
What is important is for Mongolia to DIVESIFY its sources of capital, equity and debt, US$ and MNT, short term and long term, as well as diversifying the investors base too, country of origin and type in order to have a sustainable capital base and the bright future that is written on the wall.
Ok it's a new situation that people in Mongolia would have never expected 15-20 years ago,
but that's the reality and it's promising,
so GOM has to learn and adapt, thinking a bit outside the box.
That's why some of the political stunts over the last 12 months were not "great"
because they badly affected those sources of capital limiting flexibility and independence for Mongolia.
11 Apr, 06:45 AMReplyDelete CommentLike3
Another great analysis MSE. You are the perfect person to be an advisor to GOM. You have great experience , passion and care about what is happening that is evidenced by your many thoughtful and incisive posts. You understand the real inquisitive legal system of Mongolia which is not dissimilar to the French system.
I found it unusual for Pat to comment as Public Servants are usually gagged, I really hope that he can make a difference.
" If it is wasted in consumer items, then it create something unsustainable and dangerous." Unfortunately I have no confidence in GOM using this money fairly and wisely.
The ability to raise more money via bonds and IPO's seems to be in tatters. I really worry about applying the nomad mentality to developing and running a fair and successful modern society.The pattern of behavior is to form short term alliances and go on ransacking missions then divide up the spoils. There is a tomorrow and they have to plan for it.
12 Apr, 06:16 PMReplyDelete CommentLike2
My understanding is that MIAT will be financing most of the cost of the Boeing planes. I can't speak to Mongolia's old debt to the Soviets, but current government debt levels appear to be within the limitations of the Fiscal Stability Law. There are lots of publicly announced projects for the use of Chinggis bond proceeds, but it's important to watch where money is actually spent. The projects that actually get built will ultimately determine whether borrowing $1.5 billion in one shot was a good idea or not.
18 Apr, 12:55 AMReplyDelete CommentLike2
Interesting to see the British via the Guardian having a go at the DP. Hot on the heels of Tony Blairs visit. I love his excuses. A former Governor of the Asia Development Bank with his hands in the till?
4 Apr, 04:09 AMReplyDelete CommentLike4
Why would such a relatively small amount from such an obscure place like Mongolia be top of the list?
4 Apr, 03:11 PMReplyDelete CommentLike2
Bayartsogt was a big supporter of the creation of the IAAC as an American requirement for MCA-M/MCC funds to be available to Mongolia. This quote from the time seems to have come back to bite him.
Member of Parliament S.Bayartsogt (Democratic Party) said" The main reason to establish such an office was to monitor police, the intelligence service and prosecutor's offices because we do not trust them".
It seems that he can't be trusted now.
4 Apr, 03:36 PMReplyDelete CommentLike2
"The World Bank's International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) have been operating in Mongolia since 2006, and with Turquoise Hill since 2009. Both banks have approved huge loans to Oyu Tolgoi despite all the controversy over the mine's inadequate Environmental and Social Impact Assessment".
Bayartsogt was also the Governor of the EBRD European Bank of Research and Development that is approving huge loans for OT, maybe the Swiss bank account was helping this process move forward?
Looks like the people affected by OT are uniting and will have a representative speak in London.
5 Apr, 03:46 PMReplyDelete CommentLike2
It is easy to argue the OT IA when your company is getting juicy contracts and you have money tucked away in your Swiss bank account.
Raash Onolt Comments (2)
Public reaction according to comments about the debate in
is more than 90% for Mr Ganbaatar ,although he was ill prepared and did very poor job in debating with the person who signed the agreement.
Mr Bayartsogt was well prepared, knowledgable and aggressive in presenting himself with displaying all the numbers, financial schemes. But I bet that ordinary mongolians did not understood it fully after watching 1.30 hour TV talk,.Mr Bayartsogt's claimed OT IA is best deal for Mongolia,almost a miracle which is not really convincing for any Mongolian. Probably miracle for Bayartsogt and those people who gets always large contract from OT. Bayartsogts Nomads, Bold's Bodi Intl, Monnis, Petrovise, even the president connected little unknown company got contracts from OT.
We (my family's 5 adults) got feeling that Mr Bayartsogt is acting like representative of foreigners. He was attacking Mr Ganbaatar for being too ignorant on the OT IA, even called him naive for MP.
Anyway, thanks to Mr Ganbaatar, ordinary citizens got first knowledge about OT IA from lesson given by Mr Bayartsogt. need more details and procedures.
They (MPs of both side, anti/pro MPs) should debate more often on OT, even OT representatives should do more work on openness/ deliver more information for public.
At the end we still did not got answer for question "Is OT mining good for us, I mean for ordinary mongolians?
23 Nov, 09:54 PM Reply Delete Comment Like 3
Jon Springer Comments (3346)
Thank you Raash Onolt. Fantastic summary. Would welcome some more opinions, but very much appreciate yours.
5 Apr, 04:06 PMReplyDelete CommentLike1
Bayartsogt isn't the only Mongolian to have companies in the British Virgin Islands. Mogi has stated the positions of the MCS brothers, Bayartsogt is being targetted but as usual MCS doesn't get challenged even though OD is now Director of MMC.
6 Apr, 05:04 PMReplyDelete CommentLike2
Why is it a problem to have companies in the BVI?
I have several myself. It's much easier to manage portfolios.
Instead of family joined accounts or else it's practical and convenient.
The BVI of the MCS brothers are perfectly disclosed to the WORLD in the PUBLIC ONLINE disclosure filing of HKEx.
They don't hide anything. Any change in their positions is disclosed in full according to the rules set by SFC on april 1, 2003.
it's not because journalists are trying to SELL newspapers and make a buzz out of that story that just any BVI or Cayman Islands company they pull out of that list is related to a crime or even a tax fraud.
They are perfectly legitimate reasons to use those.
6 Apr, 06:50 PMReplyDelete CommentLike4
It remains to be seen the result of the release of so much information by ICIJ. It is obviously very popular using BVI and other places as a tax haven. I think the problem with Bayartsogt is that his purchase of a BVI company which he then used to open a secret Swiss Bank account is seen as not only dodgy but corrupt and hypocritical for a man in his position
"I shouldn't have opened that account. I should have included the company in my declarations," Bayartsogt Sangajav told the International Consortium of Investigative Journalists (ICIJ).
"A cache of 2.5 million secret offshore files obtained by ICIJ includes documentation that Bayartsogt acquired a British Virgins Islands company, Legend Plus Capital Limited, in May 2008. The company was then used to open a Swiss bank account in the name of the Legend Plus Capital Limited, with an official address in the BVI."
6 Apr, 08:59 PMReplyDelete CommentLike3
In my case, there was at least 3 excellent legitimate and legal reasons to use BVI companies and by the way, none are tax related, as taxation of those investments with or without a BVI for Hong Kong residents is the same: 0%!
So please do put all users of BVI (or other companies) in the same bag, even if that's what ICIJ journalists seem to imply.
Using a BVI company does not preclude to comply in full with applicable laws or rules (if you are an investment banker, that has to be disclosed in detail to the compliance officer and be as transparent as if it was directly held...and it was).
So the problem of Bayartsogt, for what I have read, is that he should have disclosed this to the government,
and here there is matter for an investigation.
There are many things in everyday life that are very useful and often necessary,
but sometimes could be used for harmful purposes, how ever they should not be banned.
In finance, BVI, Cayman Islands, Bermuda....companies are one of those tools!
For instance, in order to enable MORTGAGES to be widely distributed for longer duration, to make real estate more affordable to Mongolians, SECURITISATION will be needed.
And that implies the using Cayman Islands companies for instance to move those mortgages from initial lenders (local banks) to investors with larger pockets, otherwise the Mongolian mortgage market will be totally constrained by the tiny size of local banks.
Same things for CREDIT CARDS or CAR LOANS.
The basic element behind those that create flexibility in a banking system are those "special purpose vehicles".
Of course, like many other things in your everyday life they can be misused.
6 Apr, 10:49 PMReplyDelete CommentLike3
MSE I will never argue your knowledge of the Banking system! I think the major question is where did this money really come from? As an MP he is protected by the State Secrets Act and like all other MP's has little to worry about unless you are one of the .5% of cases that get investigated by the IAAC.The IAAC won't investigate him as it is DP controlled but some of the 3 other investigative units might.
Do you think that the mortgage trail is ending more in China these days and not the traditional lenders?
7 Apr, 04:01 PMReplyDelete CommentLike3
"where the money comes from":
agreed, that's where tax payers could raise questions.
Like in many other matters, things have to be CONSISTENT. Most of the time, there is no need for MORE laws, but STRICTLY and CONSISTENTLY enforced.
(something that many countries miss I think).
So State Secrets Act and anti-corruption laws or rules do have to be compatible and consistent.
But here we have to be RELATIVELY patient with a young country.
How were Western democracies 10-20-50 years ago?
Probably not better for sure.
And now ? hummmm
Often the ones lecturing Mongolia about corruption may not be so perfect, ...may be just more sophisticated.
Just read the news out of France about the former minister in charge of budget, Mr. J. Cahuzac. ...and wait for the results of the investigations.
Mongolian politicians may not feel so bad after all.
Mortgages / loans...
The question is very simple.
How much capital does Mongolia need in the next 5 years to address its short term, medium term, long term needs (for people, for infrastructure for people, for infrastructures that will support mining in order to get regular revenues) ?
I think I posted something on this earlier.
Probably US$30-50bn all-in.
Can this be sourced as debt or equity from Mongolia, banks or investors? NO WAY, by few miles.
So raising capital, debt and equity, from foreign sources is absolutely critical.
Once GOM figures that out, then it has to DIVERSIFY
1) between capital (giving some upside while stable) and debt (keeping full upside but at the mercy of roll-over)
2) between different types and origin of investors
in order to:
* protect its sovereignty so that not to have to beg to IMF or else for $
* negotiate better terms having many options on the table.
Then ACT accordingly.
And to ACT in financial markets, you need to UNDERSTAND HOW THEY WORK, not assume over confident, foreigners will just run to Mongolia whatever the terms when GOM goes to the ATM machine asking for $.
So GOM has to understand all this and ACT accordingly, and be careful about any political PR stunt (for domestic purposes) because they always pop up on the international scene and may have very adverse impact.
it is exactly the OPPOSITE that GOM has done over the last 9 months just discouraging in words and actions foreign investors that could help GOM leverage the 3rd neighbour game and get more capital at better terms to jump start its growth engine...and THEN COLLECT, enjoying the spoils!!!
8 Apr, 12:32 AMReplyDelete CommentLike3
Great post MSE, but can you blame the GOM for being overconfident and shortsighted when the USD 1.5B infrastructure bond was 10x oversubscribed?
8 Apr, 02:53 AMReplyDelete CommentLike2
For a normal person,
it's ok to be overconfident when you see this.
When you run a government with such a crazy to-do-list and that has raised expectations of its citizens,
you just CANNOT base your assumptions on a one-off event, and the best case scenario
especially when similar blunders were very costly in 2009.
Reading books or watching movies I did not have the feeling Chinggis Khan was like that.
I think he was pretty much detail oriented, while that does not preclude from taking risks, as long as the return on risk (whatever is at stake) is worth it.
Also I had discussions with some politicians that were very seriously down to earth ...but unfortunately they are not getting a lot of attention because they do not promise this and that to be popular.
There may be an embedded bias (which came from the "foreign investor invasion" in 2011):
"Whatever we do, those greedy people will still come in".
So anybody trying to factor in how the perception of foreigners could affect the ability of Mongolia to raise capital, and therefore trying to prevent excesses, could be deemed as WORKING FOR THE ENNEMY as a nationalist sentiment had been leveraged for and pre-june elections.
(remember the OT saga along that line)
And it's not only about GOM
but many other people or institutions in UB, local or foreigners!
Because I am retired, having no bias, in quite a number of situations I tried to help flagging issues (I.e. stripping problems down to pieces, + and -, proposing potential solutions as well as the logic so that people could judge and decide by THEMSELVES) that could impact Mongolia in short and medium term....
....and in most of the cases, because it was not good news, not simple stuff, that was overlooked...and now consequences may be quite damaging.
for instance, one of the (if not THE) main issue affecting liquidity on MSE is the fact that post "upgrade" foreign institutions face serious headaches to open Escrow Accounts at the Clearing Banks to trade on MSE:
Solution 1: Fly to UB to get all the required documents notarized (more or less free of charge)
Solution 2: Get all those documents notarized in your financial centre, like Hong Kong, ...which may cost you more than the trip to UB.
Result: quite a number of foreign investors are on stand-by, waiting for their next trip to UB (when? ....if news improve seriously and in a sustainable manner...so unlikely in the short term) to do this.
Many of those foreign investors WERE ALREADY INVESTING BEFORE JULY 2012 and have their stock portfolios at MSCH&CD are on stand by waiting, because of those Escrow Accounts headaches...especially as they have no incentive to buy....and guess what Mongolian retail investors are selling in an empty market ...and local brokers find it even more difficult to pay their staff and bills.
(that impacts also the ability of GOM to sell MNT long dated bonds to foreign investors too)
Is it new? NO.
It was already flagged in September 2012 and several times with serious noises in at least 2 Mongolian conferences in Hong Kong in oct-nov 2012.
Any progress? Not that I am aware of.
Is it complicated? No, it just requires for some people from Mongol Bank, FRC, MSE and Clearing Banks to sit together, analyse the problems, dust and upgrade their anti-money laundering rules to fix it. (there are several short term fixes)
It could probably be done in one week!
In short you cannot blame inexperience
but you can blame inexperienced people that are in charge when they are not listening, analysing and taking actions.
8 Apr, 05:25 AMReplyDelete CommentLike2
Great analysis as usual MSE. Mongolia does have good Notary services I remember being quoted $60 per page by the UK Embassy but local companies are very cheap and provide good service.
Further to the ICIJ British Virgin Islands story.... http://bit.ly/12AxyIP
'ICIJ's data analysis showed that the people setting up offshore entities lived most often in China, Hong Kong and Taiwan. Another important group of clients comes from Russia and former Soviet republics. This helps explain why the second-largest source of capital investment flowing into China is the tiny offshore tax haven of the British Virgin Islands. Similarly, a large source of investment flowing into Russia is from Cyprus, a country that also features heavily in the data - and whose financial stability was recently undermined by a crisis precipitated by Cypriot-based banks being bloated by Russian money.'
8 Apr, 04:30 PMReplyDelete CommentLike2
Notary services in Mongolia:
Yes, very efficient, friendly, available in many places.
The legal system in Mongolia is closer to Civil Law (French and alike) than Common Law (UK, US, HK...) which explains why the role of Notary Public is different in the 2 systems.
In Hong Kong, the BVI is the basic element of capitalism.
When I dealt with large groups and tycoons, our counterparty was always a BVI, guaranteed by the listed entity.
When you walk in the office of those groups, you would often see a wall full of names (hundreds!), the names of the BVI subsidiaries and affiliates...and there were not trying to hide them. They were also fully disclosed in the annual reports of the listed entities and would appear in the disclosure of ownership in the stock exchange filings.
8 Apr, 07:57 PMReplyDelete CommentLike3
sorry I did not finish on Notary Public.
Because the system in Hong Kong is Common Law, the Notary Public has a different function, while having the same name.
In substance, it's the Lawyer, or the Certified Public Accountant that certifies true copies in Hong Kong....for very cheap or even free of charge.
In short, this problem of Escrow Account could be solved within a week if Mongol Bank - FRC - MSE:
* analyse HOW financial intermediaries overseas operate in a similar situations
* analyse WHAT are the related anti-money laundering laws and HOW they are applied in finance in FATF countries (the ones impacting the Escrow Accounts are ineffective (missing one essential piece) while cumbersome (killing trees for nothing))
* evaluate how to comply with the substance under a Mongolian legal system while keeping the form to a minimum,
* then see the MSE turnover increase!
It probably even boils down to simple problems of translation between what is written in Mongolian in the law and its translation in English.
Whatever is the word in Mongolian law or AML rules, it has been translated as "Notarization"
while a decent translation, in substance, could well be too:
" Certified true copy" or even
"Legalization"....which the Mongolian consulate in Hong Kong could do for a very effective price....and the problem would be solved.
Somebody has just to take this issue SERIOUSLY and tackle it.
Waiting is not likely to bring any positive outcome, while local brokers may file for bankruptcy and sell themselves to foreigners for MNT1.
If that is what the nationalist sentiment is supposed to achieve, there is clearly something I don't understand.
8 Apr, 08:20 PMReplyDelete CommentLike2
and by the way, on their side, local companies listed on MSE are really taking this seriously because as of today
198 companies have posted their 2012 financials on the MSE website!!
For information, in October 2012, less than 100 had posted their 2011 financials.
Now I just hope that GOM, Parliament, MSE, FRC and Mongol Bank will do their part of the work so that those local companies can really raise equity and gain muscles to take advantage of opportunities NOW before big foreign firms move in.
11 Apr, 07:11 AMReplyDelete CommentLike3
Thanks dulleyfarmer for the nod.
11 Apr, 10:04 AMReplyDelete CommentLike2
The MCS brothers are putting even more of their MMC shares as collateral:http://on.fb.me/12LZREk
11 Apr, 10:07 AMReplyDelete CommentLike2
Interesting developments Mogi what do you think is going to happen?
Sensational post from Joseph Harned! If Rio does put TRQ up for sale that is a huge statement and will make the upcoming election more interesting. Maybe MCS knew this and are cashing up.
11 Apr, 04:19 PMReplyDelete CommentLike2
Here's news about a new exchange traded fund partly devoted to Mongolian investments.
4 Apr, 05:27 PMReplyDelete CommentLike1
What an honour being bundled in with Nigeria!
5 Apr, 03:12 AMReplyDelete CommentLike3
I would not scoff at Nigeria. It is the largest oil producer in Africa that sends half of its oil exports to the USA. Nigeria also has very high FX reserves for such a poor country (>50B USD). China needs Nigeria's oil a lot more than they need Mongolia's coal and copper.
5 Apr, 03:56 AMReplyDelete CommentLike2
Correct. l was thinking more about Nigeria's scams and online reputation. China has been doing a lot of the heavy lifting in Africa as opposed to the European's who sat around a table one day and divided it up amongst themselves then left it in ruins.
5 Apr, 04:56 AMReplyDelete CommentLike4
The author should not have combined the two countries into one article. The developing countries are separate in their own ways and they have their own stories to tell. Many of their points of view are really interesting. It gets more interesting when they trade amongst themselves in order to generate stronger economies.
5 Apr, 11:56 AMReplyDelete CommentLike2
Here's some recent news about Ulaanbataar's air pollution problem. It sounds like there has to be more than one remedy for it.
5 Apr, 12:10 AMReplyDelete CommentLike2
For those looking for ideas about what to buy on MSE, here is a good review:
Disclaimer 1: I own most of those stocks.
Disclaimer 2: I am not a client of BD Sec.
8 Apr, 10:21 PMReplyDelete CommentLike2
Securities - FRC To Support Foreign Institutional Investors
Yes sure. What about ACTIONS!
There are big visible items (like Securities Market Law) but there are always a lot of small details bugging everybody.
Just to pick another one (other than Escrow Accounts):
Capital gain tax for foreign investors trading on MSE!
* how to calculate?
* how to pay?
* is it practical and sustainable for Mongolia? (I don't think so. Just look at what other countries do in that respect, i.e. withholding taxes on dividends to provide a regular growing income stream to tax authorities)
Right now, quite a number of foreigners got this answer to the first 2 questions: ?????
Result: They (me too) buy (for those setup) but avoid selling and trading which de facto affects liquidity because of those unknown.
Once Mongolia launches an IPO on MSE only or MSE + overseas exchange, people will suddenly realize this problem is likely to undermine the IPO and rushed decisions will be taken, likely needing fixes later once side effects are becoming apparent.
What about fixing that PRO-ACTIVELY once in a while?
8 Apr, 10:30 PMReplyDelete CommentLike2
Legal - SEFIL To See Parliament Or To Be Replaced?
"The changes that we have previously announced will result in the law regulating only the activities of foreign State Owned Enterprises (SOEs) and will exclude private companies and investors. However, we have since heard that the legislation may be scrapped completely"
That I think is VERY BAD (and please keep in mind I am a foreign investor)!!
A better approach could be to amend SEFIL as such:
•Applicable to Foreign SOEs (and firm controlled at +1/3 by a foreign SOE) for any investment,
•Applicable to 4-5 strategic sectors well defined for investment in equity above US$1bn,
•Approval from GOM within 3 months.
Foreign investors DO NOT NEED DOORS WIDE OPENED and equal opportunities with Mongolian companies AT THIS POINT IN TIME.
They need a STABLE CONSISTENT PREDICTABLE environment in which to operate. Not more at this point.
It's not because somebody is coming with a big checkbook he should be authorized to do whatever he wants. Mongolia has a small population and a stretched supply chain. Some control is needed, for the sake of serious foreign investors themselves.
Among other side effects, dropping all the safeguards would be perfect to refuel some nationalist sentiment before the next elections and a remake of may 2012.
Worldwide, I don't know many countries that IN PRACTICE (not only in theory) are wide opened, especially countries rich in commodities.
8 Apr, 10:40 PMReplyDelete CommentLike2
At least THERE IS ONE at GOM that understands PERFECTLY WELL the situation!!!
Too bad he is MPRP, from what I understand, and therefore his voice, his TECHNICAL knowledge and his experience may not be fully valued within GOM.
But there is hope!
9 Apr, 05:12 AMReplyDelete CommentLike2
That may be interesting to watch!
9 Apr, 09:30 AMReplyDelete CommentLike2
"One item that drew our attention was the performance of the Human Development Fund's (HDF) February revenue where 21.3 Billion MNT (15.2 Million USD) was collected. This represents a shortfall of 45.5% over planned revenues. The Ministry of Finance has explained that thisshortage is connected to the 13.5 Billion MNT (9.6 Million USD) shortfall in minerals royalties as well as the 4.2 Billion MNT (3 Million USD) shortfall in progressive minerals royalty revenue."
The excuses are starting to flow for the underfunding of the Human Development Fund. The Chalco pre payment of $250 million USD for ETT coal was supposed to be funding the HDF and also an OT pre payment of the same amount. A stated before a lot of Mongolians will never get anything form the HDF/ election promises because they don't have a Mongolian Identity card.The real cost of the HDF will be far less han the $6 billion mentioned and no time frame is mentioned. There are others who are offering half price or less buyouts of shares for cash payments and others are accepting a drip feed of pension payments, rent assistance or tuition and health insurance.GOM took the pre payments but blame royalty revenue for the underfunding.
Bayartsogt's own private wealth distribution scheme has been well covered lately.
"Bayartsogt's Democratic Party and the opposition Mongolian People's Revolutionary Party pledged during May general elections to distribute as much as $6 billion, or up to 1.5 million tugriks ($1,060) for every citizen, from the country's mining wealth.
"To fulfill the election pledge, the government may use a $250 million pre-payment from Oyu Tolgoi to seed its distribution program,"
9 Apr, 04:24 PMReplyDelete CommentLike2
"Oyu Tolgoi, whose development costs and schedule have been the subject of debate in Mongolia, is the primary driver of the country's $10 billion economy"
I think debt and "aid" are the primary drivers of the Mongolian economy. OT may start producing something in the future but at the moment huge debt is being accumulated and advanced. There is nothing much being moved across the border with ETT and SGS grinding to a halt and ongoing uncertainty at OT.
Here is a very rare case of someone being charged for offering fraudulent scholarships.He must have upset someone higher up.
A much larger scam operates freely in Australia, it is run by a former GIA agent and his wife who had a senior Australian Public servant as her boyfriend. They have been offering visa's ,jobs ,scholarships and study in Australia for years and in spite of being given evidence the Australian authorities do nothing. They maintain that the $63 million spent on MASP and similar scholarships is transparent and not corrupted.
10 Apr, 04:11 PMReplyDelete CommentLike2
Btw, I am long TRQ as well as TRQ Call Options.
11 Apr, 07:32 AMReplyDelete CommentLike1
Ever since Mogi changed carriers, I don't get his newsletters, and I haven't been keeping up with y'all here, so you may well be aware of this already, but my contacts in Oz tell me RIO has definitively put TRQ up for sale, along with other assets it deems "marginal" or "troublesome". That does not sound like the "long distance runner with deep pockets" some of us had counted on!
11 Apr, 01:00 PMReplyDelete CommentLike3
Rio since the rearranging of the deck chairs had been taking the big stick to a few trouble spots with some posturing and threats that turned out to be nothing much .If TRQ is put up for sale this could be a real barbeque stopper as we say in Australia. They have made a real mess of their PR in Mongolia and putting B grade people there who didn't want to be there.
11 Apr, 04:31 PMReplyDelete CommentLike2
For what it's worth, my source seemed not at all surprised by the sale but instead surprised by the timing, saying "right decision, wrong market."
11 Apr, 04:46 PMReplyDelete CommentLike2
VALE buys RIO's 51% stake at a concessionary price, and with a clean slate and some confidence-building measures from GOM unilaterally declares it to be a 49% stake, thereby finessing the silliness issue and getting the whole project off the dime with new eyes, new ears, new cred, and clean profile. What say You?
11 Apr, 04:56 PMReplyDelete CommentLike2
If TRQ is REALLY for sale,
then why bother selling Ivanhoe Australia
or a gold mine in Kazakhstan (TRQ owned) in feb. 2013?
Sounds more like ring-fencing TRQ.
11 Apr, 06:17 PMReplyDelete CommentLike2
Joe, not getting them huh? I started using MailChimp and seems a lot of people stopped getting them. Do keep checking your spam folder, or give me a different email to check.
That is false. Rio is only putting non-OT TRQ holdings up for sale, like SouthGobi, Ivanhoe Australia. OT is NOT up for sale.
11 Apr, 06:50 PMReplyDelete CommentLike2
As the Americans say they might be "all hat and no cattle". SGS is a real mess they never dealt with the big problems such as the declared payments to Enkhbayar via Monnis and the Sarah Armstrong and Justin Kapla ongoing saga. The Rio strategy seems to be to gag the real stories "ring fence" and concentrate on OT and try not to make any more mistakes.
12 Apr, 07:48 PMReplyDelete CommentLike2
Maybe Rio knows it will be used negatively in the upcoming election and they want to clean up some of the mess before that time. l can't see how it will help Justin Kapla. Imagine if he was detained/ restricted in another country the US might have taken a very different path.
13 Apr, 04:16 PMReplyDelete CommentLike1
11 Apr, 06:13 PMReplyDelete CommentLike2
More very unreliable GOM statistics notoriously overstated.
12 Apr, 03:43 AMReplyDelete CommentLike2
Is RIO also involved there ?
11 Apr, 10:49 PMReplyDelete CommentLike1
Goldman Sachs conflict of interest?
13 Apr, 04:24 PMReplyDelete CommentLike2
On the topic of GS and conflict of interest,
Disclaimer: I never worked for GS, I am not pro-GS, and in fact probably just the opposite.
But I think it would be totally ridiculous for GOM to sue GS on that basis.
GOM would end up looking so bad, with people laughing all around.
I have been a member of those resources/conflicts-of... committees when a bank had to decide if:
•It can allocate resources to execute a potential mandate,
•There is any potential conflict of interest,
•There is any reputation issue,
•This potential mandate is worth it,
•Some ring fencing could be put in place between teams working on conflicted projects (it DOES happen and THERE ARE solutions!),
•And in short it is worth pitching for such the mandate.
US$250k for an advisory mandate from GS to GOM WAS POCKET MONEY, GS working AT LOSS.
GS likely pitched for this just because at that time (not last year for sure) being associated with the sovereign was something viewed positively that could trigger other businesses from other clients, in short getting sovereign league tables credit for PR.
That was more or less "charitable work" for GS and they probably deeply regret this costly waste of time.
Honestly, I don't think at this point in time any big investment bank would see GOM as a great potential $ fees opportunity generator and would therefore allocate a lot of time of very senior people!
$ opportunities are ON THE OTHER SIDE with RIO, Anglo American, BHP, …..
There are not for their businesses in Mongolia, but for their WORLDWIDE business, through full service banking, M&A, ECM, DCM, general corporate finance.
If GOM was suing GS, in Mongolia or elsewhere, for US$250k, it would simply isolate itself from those big banks that GOM does really need ANYWAY….while those banks don't need GOM.
If GOM was going after GS for US$250k, there is a simple very likely outcome:
GS could dump a US$250k check on the PM's desk with a very short unpleasant comment…
…and trust me ANY INVESTMENT BANK would hear of it!
Then this story would come back during ANY committee of those banks when considering pitching for an investment bank mandate for GOM and a likely conclusion could be: "Not worth the trouble for now".
GOM would be US$250k richer … but the cost of this would a very high multiple of it.
If GOM really believes GS was in the middle of a conflict of interests and did not take adequate solutions to avoid damages to any party, then GOM has much more effective private solutions to "settle" this.
Now on GOM' side, it raises several questions:
•It's not rocket science for anybody, especially institutions, dealing with investment banks to understand what I just underlined, so I expect that GOM did not take for face value all the advices from GS but thought about them, asked for explanations, justifications,…before following, if relevant, those advices. The advisor does not decide. The client does and therefore the client has to analyze the logic behind the advices and exercise personal judgment because in the end it suffers the consequences and enjoys the benefits.
•Is it a good return for the Mongolian population at large if GOM goes after GS for a US$250k fee because of an alleged conflict of interest? That would be a costly exercise, in time and money, and I thought GOM had much more important / relevant priorities for Mongolians, but I am not Mongolian so may be I miss something.
13 Apr, 10:18 PMReplyDelete CommentLike6
Another collateral damage of what has been happening, or not happening over the last years!
Mongolian banking sector is way too small to cope with a fraction of the needs triggered by the evolution of Mongolia now. The equity of the banks is tiny so over-reliance on domestic lending over-exposed their tiny capital base to shocks, like those GOM generated over the last 9 months.
Like it or not, Mongolia is totally DEPENDANT on DIVERSIFIED (types and origins) sources of foreign capital, equity and debt, to jump start its growth engine. See previous posts.
Denial is no solution.
Serious tangible actions are long overdue.
13 Apr, 11:47 PMReplyDelete CommentLike6
Further to the Rio PR disaster in Mongolia. It is very insulting for Mongolian people to see the cosy arrangement of Monnis Tower ie. OT and Rio offices, The use of Chuulunbaatar the head of Monnis as Enkhbayar/Friedland intermediary and recipient of over $30 million in "private placements" just from South Gobi some declared and others not. If they want to improve their PR a good first step would be to find a new office and disassociate themselves from certain people.
14 Apr, 03:58 PMReplyDelete CommentLike5
Forgot to mention Chuulunbaatar being appointed to the board of Prophecy coal. The days of the one stop corruption shop are over.
16 Apr, 07:07 AMReplyDelete CommentLike2
DP taking a few hits recently
D. Bathuyag former Chairman of the Mineral Resources Authority a key player in the South Gobi mess has had his jail sentence reduced by 2.6 years.
Are they serious? This is the guy who recently sold his seat to MAK for $500,000 so that the Boss could install his son into the Ikh Hural. He also cleaned out the Savings Bank of $1.4 million USD and blew it at a Seoul Casino.
17 Apr, 03:53 PMReplyDelete CommentLike2
Example of right and wrong.
Of course GOM has to keep an eye on OT LLC numbers.
DP lead GOM took over in august-sept and OT was item #1 in the list so de facto an in depth audit of OT was to be done at once in sept-oct!!!!
It's not because GOM had not to contribute in cash to OT that it was a free lunch and that there was no need to pay attention for the new comers.
GOM should know WEEKLY or MONTHLY what was happening at OT!!
If Mongolian board members did not inform GOM REAL TIME, may be it's something to settle between Mongolians to start with!
Joined and several responsibilities!!!
At this point in time,
this kind of comment is not exactly positive for the credibility of GOM.
Better silence until SUSTAINABLE ACTION AND AGREEMENT WITH RIO are in INKED and in PLACE to have crystal clear announcement...for the sake of all, Mongolia to start with.
(If Mongolia wants to have decent regular sustainable access to international, it'd better prove it understands how those work)
We already saw the effects of unintended consequences from speeches and comments from GOM over the last few months.
Everybody is not exactly ready for that exercise.
In my opinion, some are:
while keeping a careful attitude.
18 Apr, 05:18 AMReplyDelete CommentLike4
Ch . Ulaan is one of the dirtiest of the current crop of Mongolian politicians as previously posted. For him to be Minister of Finance is a disgrace to the Mongolian people.
18 Apr, 07:33 AMReplyDelete CommentLike3
That's not exactly a kind of threatening grab and run speech in my opinion!
Disclaimer: I am long TRQ shares and call options (very recent)!
18 Apr, 05:22 AMReplyDelete CommentLike1
Who cares what Cameron McRae says he completely ignored the SGS Sarah Armstrong/ Justin Kapla problems and only talks on message.
18 Apr, 07:38 AMReplyDelete CommentLike1
Likely good news.
my Mongolian is not good enough to translate but I am sure some can flag the key points :)
19 Apr, 05:04 AMReplyDelete CommentLike1
Its the first stage of Foreign Investment laws. They want to have GOM control of Foreign investments over $1 billion tg. amongst other things.They are also trying to get rid of the current PM .
20 Apr, 01:31 AMReplyDelete CommentLike2
obviously a bit more relaxed than this.
and this on top:
Overseas listed mines reacted positively.
20 Apr, 02:30 AMReplyDelete CommentLike2
I prefer the third link and the last talking about ETT re starting is interesting. No details about the deal? If it is under the same terms then it is costing the people of Mongolia to truck coal across the border to Chalco who then are on selling a large part of it to Japan and Korea.
20 Apr, 05:43 AMReplyDelete CommentLike2
"The Mining Minister stated that international investors agreed to stop spreading and feeding negative news and messages through its' associated PR companies and media channels".
Am I dreaming or what?
What about real, tangible, sustainable actions from GOM to start with?
21 Apr, 05:37 AMReplyDelete CommentLike5
Same government ? Really ?
21 Apr, 05:42 AMReplyDelete CommentLike2
This is why Jon's blog has a role to play in posting information and "germane" news as Jon calls it.It is ridiculous for the Mining Minister to speak on behalf of international investors. People like you MSE are sophisticated and very experienced and are stating facts as you see them.GOM is trying to control the media but in 2013 that is increasingly difficult. Mentioning getting oil from Korea in the same article as the TT re start is interesting perhaps this is a factor as some of the coal was being on sold to Korea?
As for Ch. Ulaan , I think the IAAC will deal with him soon but he is right that a lot of the bad decisions and deals were made by the previous cabinet.
I think a lot of international investors and their PR companies and consultants actually talked up Mongolia. A good example would be Peter Epstein and his role as a paid consultant for South Gobi. It is only recently that poor communication and decision making is taking its toll. Mongolia is no longer a closed and isolated place if they are trading on open markets they will experience the reactions from negative news. I note that GOM recently hired its own American PR company lets see what they can do.
21 Apr, 03:45 PMReplyDelete CommentLike2
Mr. Epstein reported recently that he is largely out of coal stocks at least for the time being.
Maybe the new developments in coal bed methane extraction will encourage a revival in the coal sector.
21 Apr, 08:07 PMReplyDelete CommentLike2
What a great job ,being paid to be wrong. Coal gas is having a large backlash in Australia and some disastrous documentaries in the US.
22 Apr, 03:14 PMReplyDelete CommentLike1
This link has been previously posted but relevant again.
" Please note that Peter Epstein is a paid consultant for SouthGobi.SouthGobi has chosen not to meet with me, both this past September 2011 and during my current 18 day trip here in February 2012."
21 Apr, 03:59 PMReplyDelete CommentLike2
that was out on Monday.
Then afterwards, TRQ activity on NYSE was:
-1.60% with a volume of 1,426,367, the lowest of the last 5 days!
The impact is Z.E.R.O.!
Obviously whatever positive declaration GOM makes, President included, has limited or zero impact for international investors.
They are probably simply waiting for REAL, TANGIBLE, SUSTAINABLE ACTIONS OVER TIME to see if all this is real or just political noise.
The last 9 months give them good reasons to have doubts, including some very recent comments like this one.
Ratings may be one thing and people in finance don't take that for face value,
but CREDIBILITY is much more important for a country like Mongolia is dire need for capital and it's not WORDS that can fix that in the short term.
22 Apr, 08:22 PMReplyDelete CommentLike5
I agree completely. I am currently in Singapore on ice breaker meetings to raise funds for a project in Mongolia and it is absolutely dismal here. Investors are heavily discounting the upside due to political risk and operational risk.
The mining projects must come first in Mongolia, because those are the only projects that investors are willing to take risk in as the rewards are potentially exponential. Mining is the backbone and cornerstone of Mongolia's growth story. Without real actions that the GOM is completely committed to OT and will not attempt another renegotiation, most investors will not commit to mining projects either.
There are plenty of mining, oil & gas projects in Indonesia and Africa. Investors do not need Mongolia. China does not need Mongolia either.
But hey, where there is chaos, there is opportunity. :)
22 Apr, 11:18 PMReplyDelete CommentLike6
Foreign investors can decode the OT / Chalco saga in a very simple way and ask themselves a very simple question:
If China and/or RIO and/or Russia cannot manage smoothly their project in Mongolia and are banging their head on the wall, what are the odds for me smaller guy to expect something fair?
Brutal but simple common sense.
22 Apr, 11:39 PMReplyDelete CommentLike4
to be comprehensive,
I have to indicate I am long TRQ and long Call Options on TRQ
(accumulated over the last month)
22 Apr, 11:50 PMReplyDelete CommentLike3
An article backs up your long position on TRQ, MSE.
I wonder if it is a bit too early to be optimistic at this stage.
26 Jun, 12:38 AMReplyDelete CommentLike1
"But hey, where there is chaos, there is opportunity. :) "
Agreed, that makes my day,
i.e. I can still find very attractive prices on some MSE listed stocks for now,
because I am already setup, patient with plenty of time and
there is limited competition as most foreign investors are deterred from coming in many many ways.
BUT THAT DOES NOT HELP MONGOLIA I the short term / medium term :)
I have a feeling that Mongolia and Mongolians needs more capital to flow in that whatever YOU and I can provide.
If GOM and Mongolia want to have good deals, CHOICES, CONTROL ITS FUTURE instead of having it imposed (2009?), they need to fix this ASAP ...especially as weather is getting better and foreigners may be thinking about coming for conferences.
If NOTHING VERY SERIOUS is done then those investors will look elsewhere.
By the way, a group of financial investors from Hong Kong was 9 months ago considering a trip to Mongolia in may-june to understand financial markets (as I did a bit of lobbying and offered to help with introductions here and there).
In January, after reading the flow of "news" and "stories" from UB they dropped Mongolia and went for the plan B:
For instance in Indonesia, where there are clearly a lot of resources !!!!
22 Apr, 11:35 PMReplyDelete CommentLike5
Mongolia has plenty of competition for selling its mining ores, that is for sure. Myanmar, for instance, is just really beginning to offer to world markets its supply of base metals and industrial minerals. And Myanmar isn't landlocked, either.
22 Apr, 11:51 PMReplyDelete CommentLike3
I was just at Jakarta over the weekend. Business is much easier there. The climate and the food are wonderful as well.
23 Apr, 03:46 AMReplyDelete CommentLike3
Jakarta's location is fortuitous, too. Just imagine being situated between the markets of China, India and Australia.
Mongolia needs to take more steps to attract foreign investors only for the sake of being located a bit out of the way of most of the Asian commercial traffic.
23 Apr, 12:24 PMReplyDelete CommentLike2
Some clearly over-played their hand :)
23 Apr, 01:00 AMReplyDelete CommentLike3
"You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
Know when to run
You never count your money
When you're sittin' at the table
There'll be time enough for countin'
When the dealin's done"
Apologies to Kenny Rodgers.
23 Apr, 04:22 AMReplyDelete CommentLike3
some decoding on SEFIL changes:
"The amendment passed on Friday will exempt privately-owned foreign companies from the approval of parliament,
but they will still need approval from both the minister of economic development and the department minister for the industry in which the company operates.
The approval process will be triggered by any transaction involving 33 percent or more of a strategic entity, according to the original law.
But the amendments also tightened the restrictions on foreign state-owned entities (SOEs), removing a 100-billion tugrik ($71 million) threshold triggering government intervention.
That means all foreign SOEs will need the approval of Mongolia's cabinet in order to buy into a Mongolian firm, regardless of the size of the stake.
For purchases of stakes of more than 49 percent, the approval of parliament will also be required."
Honestly I think it is GOOD and it is ENOUGH!!!
Absolutely no need to do more!!!
I (and I am not Mongolian) don't think FOREIGNERS SHOULD HAVE EQUAL OPPORTUNITIES in strategic sectors!
It's normal that GOM has to give a blessing above 33% on strategic stakes even for non SOEs.
Now the most important:
GOM has to support its words with actions and prove ASAP with some real examples / templates that this process is:
Then the perceptions of:
that prevail now among foreigners may decrease substantially.
So I suggest that MED looks at its pile of projects waiting for approval, picks the most relevant and implement this.
23 Apr, 06:22 AMReplyDelete CommentLike4
MPP is continuing to attack the PM.
"MPP claims that it needs to verify some data of dismissed state staff, whether the Central Bank bought gold with Chinggis bond assets and if the Prime Minister`s relative won a tender in Tavantolgoi unfairly in order to add more reasons behind their demand for the Prime Minister`s resignation."
They are trying to make him the scapegoat for the drop in Foreign investment. If they bought gold with some of the Chinggis bond money the timing couldn't have been worse with the recent plunge in the gold price.
"Most of the proceeds from the Chinggis Bond are still in MongolBank and have not been spent." I wonder hpw much was spent on gold? This quote from Pat O'Connell, Mongolia's resident debt advisor.
Mongolia's PM is a powerful position and when PM Enkhbayar made most of his money.MPP is trying to get rid of Altanhuyag. Nearly all Mongolia's politicians have "won tenders" with their thinly veiled companies eg. Nomads.Bodi and Monnis. It is an essential part of doing business in Mongolia.
23 Apr, 03:56 PMReplyDelete CommentLike2
"Chairman of the DP caucus was asked about the rejection on a suggestion made by the opposition MPP caucus to establish a working group due to a report that the Central Bank of Mongolia might be buying gold with the assets of the Chinggis bond.
D.Erdenebat explained the rejection by saying "The Central Bank is not subject to the Government according to law. It belongs to the structure of Parliament. Any hearings from Parliament are open. "
23 Apr, 04:04 PMReplyDelete CommentLike1
Why a brutal reversal on both ETT (delivering again coal to Chalco) and OT?
May be because of the Fiscal Stability Law!!!
If there is no export from ETT and OT, then the budget deficit may be impacted and the governor spells out that:
•The budget deficit is capped 2% of GDP,
•The borrowing limit is capped at 50% of the GDP.
So may be a limit of tolerance had been reached on the standstills at ETT and OT and de facto,
* Budget Deficit has to decreased
* GDP to grow!!!
May be in the future, GOM should think about encouraging other foreigners to develop businesses (income generators) in Mongolia to limit its dependence on those 2 !!
23 Apr, 10:50 PMReplyDelete CommentLike5
Raising a bond for infrastructure in JPY? What happened to the 1.5B infrastructure bond?
24 Apr, 07:25 AMReplyDelete CommentLike1
If they raise funds in JPY and CNY, then Japanese and Chinese commercial banks will be keen to lend to support Japanese and Chinese contractors, especially if the country risk is covered by the Japanese and Chinese government through the Exim-banks.
It's as simple as that, and also because if it was pulling too hard on the US$ string now...it may BREAK!
On top, as all those central banks are printing, it makes sense to diversify borrowing to benefit from general competitive devaluations between USD, JPY, CNY, EUR, GBP.
It may still be in the account at Mongol Bank for now but there is already a long list of commitments for this, and the needs in term of capital for Mongolia are a LARGE multiple of this, say X15 or X20 !
Now they'd better move fast to restore investors (of all kind) confidence to get their growth engine up and running.
Moreover for railways, you need loans a bit longer than 5 years because you don't really get your return on capital so fast.
In borrowing this way, GOM is seeking funds from DIFFERENT LENDERS which is ALWAYS a good idea.
You JUST DON'T WANT TO BE AT THE MERCY of one market and one type of investors, and whatever event (else) affecting that market.
So for me it's wise.
24 Apr, 08:22 AMReplyDelete CommentLike5
This is getting beyond a joke. Now after the MCA/MCC is about to wind up its compact with Mongolia.The failure of their center piece project the road from UB to Zamin Uud is now replaced by a new toll road to be finished in 2015.This has no chance of happening on time or on budget.
25 Apr, 03:36 PMReplyDelete CommentLike2
Funny, I would agree with an academic:
In short, his message is:
"get down to earth quickly, get ETT up and running (i.e. PRODUCING (even if it's below cost for now) asap and stop disturbing RIO on OT because you are in serious needs for the revenues it generates, directly and indirectly,
otherwise you will fail big time to meet the requirements of YOUR OWN Financial Stability Law".
In that respect, a member of GOM that jeopardizes OT's business and delays production
is de facto responsible for breaching that law.
Is my understanding correct ?
26 Apr, 06:20 AMReplyDelete CommentLike5
If OT does start producing anything then GOM will have to start repaying its 34% of the $6 billion USD start up costs which it has as debt to Turquoise Hill. What is the arrangement for paying back this debt and when will there be any tangible benefits to the Mongolian people? Any revenue generated will go to the already massive debt repayments.
The article is basically a summary of what we have been talking about recently but good to see an Australian comment.
27 Apr, 04:10 AMReplyDelete CommentLike4
Also on ETT, the decision to stop exporting coal to Chalco was also suicidal, especially when fighting with RIO on OT's budget therefore delaying production and $ inflow.
Then during all that time, other foreign private equity investors were just waiting, not sending $ to their Mongolian operations delaying production of just everything as well as taxes and royalties.
The general attitude was wait-and-see!
If things could not be normalized between RIO and GOM why would smaller guys expect to be able to conduct their business normally there.
27 Apr, 06:45 AMReplyDelete CommentLike5
It is also suicidal to move coal to Chalco for less than it costs to produce and transport. Enebish and others who were involved in this poor deal have ruined the chance for Mongolia to get off to a good start with ETT. Chalco knows it can bribe to get a good deal for them and as usual Mongolian officials sell out their own people for 20 pieces of silver.
"RIO and OT can borrow relatively cheaply and GOM will benefit from this!!"
EBRD and ADB. Recently resigned Bayartsogt was governor of both these banks that have approved massive loans already for OT. This seems to be suiting Rio but not the people of Mongolia as their start up costs remain as debt to Turquiose Hill who will no doubt charge them higher interest than the deal arranged by Bayartsogt?
27 Apr, 04:14 PMReplyDelete CommentLike3
No it's not to do that for few months or a year at that point in time as Mongolia needs the cash flows.
The benefits are much more than the negatives for Mongolia at large.
Anyway, you think what you want.
I am telling you as I see it without bias.
If Mongolians have problems with some of their politicians, they should not elect them but send them to court.
I heard so many time Mongolians were proud of their democratic system. Then put it at good use.
Actions related to business with foreigners impact the cash flows Mongolia at large and Mongolians badly need NOW.
27 Apr, 07:51 PMReplyDelete CommentLike4
Mogi has already mentioned this regarding the resumption of coal exports from ETT.
This seems to be 2X crazy first it is costing money for ETT to deliver then they are paying a higher interest rate than first agreed for the money already advanced. Not sustainable and falling into the hands of MMC.
"Mongolia's largest state-owned coal company, agreed to pay a higher interest rate on $186 million due to Aluminum Corp. of China Ltd. as part of an accord to resume coal deliveries."
Mogi also says Friedland's stake in Turquoise is now only around 8%
2 May, 04:03 PMReplyDelete CommentLike2
RIO is not there to make the live of GOM and Mongolians miserable. It has nothing to win there.
ONCE there is a clear agreement between GOM and RIO and Mongolian MPs stop fighting for something they don't even know, then the CREDIT of OT, TRQ and Mongolia improves big time! The political premium decreases.
RIO and OT can borrow relatively cheaply and GOM will benefit from this!!
OT gets funding for the second phase, in very good conditions because the POLITICAL RISK is perceived lower.
Once RIO has insurance GOM is not there to backstab them, then it can go FULL STEAM AHEAD produce as much and as fast as possible FOR THE SAKE OF ALL, to catch up with time wasted, but also to prove to Mongolia it is a reliable partner it can count on.
Even if cash flows from production are not coming TODAY to GOM, the fact problems are settled (TANGIBLE ACTIONS NEEDED) and everybody is acting in good faith, means Mongolia can easily get short term funding in good conditions to plug short term holes.
If GOM settles nicely with RIO with REAL AND TANGIBLE ACTIONS then Chinggis Bond II will be a walk in the park!
If GOM can settle peaceful with RIO on OT (tangible actions needed), it is a TEMPLATE for all other foreign investors and FDI will flow in even faster than in 2011.
If GOM keeps on the guerilla with RIO, even a US$1.5bn debt is UNSUSTAINABLE in this environment.
If GOM settles with RIO and really works SERIOUSLY as a team player, the current debt is something RIDICULOUSLY LOW compared to what Mongolia and Mongolian will be showered with!
Your country is VERY RICH and all MONGOLIANS can benefit very seriously from this (even if it's never fair an equal, it will be a lot) so fighting for a higher % of the $ pie while reducing the total $ amount was not smart at all.
That is why I was so upset about what happened over the last 12 months because what GOM and MPs were doing was not in the best interest of my friends, Mongolians in UB, while pretending to do so!!!
Even US$10bn debt over 15 years, or more, invested wisely in infrastructure should be NO PROBLEM to repay while enjoying a much higher quality of life. On top, foreigners will inject EQUITY taking a lot of the risks on their own making the debt burden for Mongolia even lower.
Remember, I am investing on MSE listed stocks, i.e. local companies (most are not mines!), since 2011, and keep on buying so if Mongolia had not this kind of potential, I would not bother wasting my time and money.
I am still wondering if those going after RIO on OT thought about this more than 5 mn. That was plain suicidal.
So don't worry about the debt.
Worry about your government having some common sense and getting down to earth.
27 Apr, 06:33 AMReplyDelete CommentLike4
Thank you for sharing your wise words, MSE Investor. Currently we are waiting for assurances that we can show to foreign investors that the GOM will not interfere with OT, non SOE foreign investments, and overall mining projects. Before then, foreign investors are heavily discounting the political risk and operational risks in Mongolia; most do not even care about Mongolia anymore. I'm afraid even after Mongolia is on the right path, it will take quite some time to rebuild the confidence of foreign investors.
28 Apr, 12:59 AMReplyDelete CommentLike2
Agreed. Confidence is something fragile!
It takes a while to build but it goes fast,
so at this point it will boil down to REALLY TANGIBLE ACTIONS...
...while 2 years ago Mongolia had a good "credit", had much more flexibility, not much to do and had just to enjoy FDI that was helping Mongolia to modernize and Mongolians to enjoy a better life.
May be Mongolians should go visit Qatar and check how all this happened over the last 30-40 years.
28 Apr, 04:24 AMReplyDelete CommentLike4
Or check out Abu Dhabi, perhaps.
28 Apr, 10:30 PMReplyDelete CommentLike1
Not expert in the matter, but I don't think Abu Dhabi was resource wise comparable in any way to either Qatar or Mongolia.
29 Apr, 05:44 AMReplyDelete CommentLike4
Or maybe a free trade zone with some banks located in it situated at the border away from the cities?
29 Apr, 11:42 AMReplyDelete CommentLike1
The good credit is evaporating fast. Not long ago UB was called Ulaanqatar and Minegolia, maybe it should be called Whinegolia and Ulaanbarter as they might be reduced to a barter system soon.
28 Apr, 03:44 PMReplyDelete CommentLike3
An ancient Buddhist City in Afghanistan about to be destroyed by a Chinese Copper Mining venture.
29 Apr, 05:36 AMReplyDelete CommentLike3
That is something new.
Mongolian owned, Mongolian managed.
Generally complaints of all kind are coming from another location...
29 Apr, 05:47 AMReplyDelete CommentLike4
Unions have had demonstrations in UB about the lack of jobs for Mongolians at OT as well. They have a stated aim of employing 90% Mongolians but the number now is nothing like that with over 7000 Chinese during the construction phase. OT's aim is very different to he reality. Another PR mess.
If they are sending coal to Chalco as a charity and below cost then they have to try and make savings.They don't want union troublemakers and they don't care about creating good jobs and conditions for Mongolian workers.
29 Apr, 03:35 PMReplyDelete CommentLike3
As long as GOM does not SERIOUSLY encourage with TANGIBLE ACTIONS foreign money to flow in asap, Mongolians, and not only Mongolian workers, will be very unhappy.
29 Apr, 07:55 PMReplyDelete CommentLike4
People eventually learn that they cannot have it both ways: Eat their cake and keep it too.
29 Apr, 11:31 PMReplyDelete CommentLike2
Same problems with my 14 years old now also seriously overconfident while he did not issue some Chinggis Bonds :) :) :)
Moral hazard is a very popular nowadays.
30 Apr, 01:08 AMReplyDelete CommentLike3
"Planned resumption of field activities and confirmation of licenses standing:
Despite recent speculation driven by an ongoing Mongolian court case, Kincora has had confirmation from the Mineral Resources Authority of Mongolia ("MRAM") that all its licenses remain in good order. A staged systematic exploration programme is planned with field season activities expected to recommence within the next month."
Elsewhere or even in Mongolia 2 years ago, that would have been enough.
Now, thanks to the doubt created, especially after this:
it may be a good idea to have CLEAR CONFIRMATION of this from MRAM or the PM himself !
GOM and related institutions have to understand that if they intend to raise capital, debt, equity ...or syndicated loans, from foreign investors, through local market or foreign markets, it'd better pay attention on how to handle PRICE SENSITIVE INFORMATION because that seriously impacts the COUNTRY RISK PREMIUM!!
29 Apr, 09:36 PMReplyDelete CommentLike4
30 Apr, 01:12 AMReplyDelete CommentLike3
These GOM based graphs/pie charts are always amusing. Personally l wouldn't trust anything that mentions Vancouver and Mongolia in the same paragraph.
30 Apr, 05:41 AMReplyDelete CommentLike2
Some news on OT
3 May, 05:46 AMReplyDelete CommentLike3
About time for another update on Jon.How is his recovery going?
5 May, 03:51 PMReplyDelete CommentLike1
"The offer fell apart after Japan and South Korea called the bidding process unfair and Mongolia's National Security Council, which reviews large foreign investment projects, rejected the plan."
The offer fell apart because corrupt officials such as Enebish signed off on a stupid deal with Chalco. This deal now has a higher interest payment on the money advanced from Chalco and it still cost the people of Mongolia more than they get paid for delivering coal to Chalco.
6 May, 04:57 AMReplyDelete CommentLike2
Nice connection to MCS and Robert Kerry. My understanding is this is a private rail line?
8 May, 04:04 PMReplyDelete CommentLike3
It sounds like a public- private partnership or state- sponsored enterprise or joint effort.
Maybe this project, the rail line being constructed between the coal mines and the Chinese border, will show what can be a workable arrangement between government and industry to help build the rest of the rail network in Mongolia.
9 May, 01:26 AMReplyDelete CommentLike2
It's about time. Hopefully soon they will install some automated coal loading machines that will load coal directly into the containers on rail. Manually loading coal onto trucks to be transported to China is the most difficult part of the coal logistics business.
9 May, 03:23 AMReplyDelete CommentLike2
It might be time to consider looking into the Mongolian oil sector if some meaningful progress is now being made there.
9 May, 03:00 AMReplyDelete CommentLike1
China sounds interested in the oil.
27 Jun, 11:59 PMReplyDelete CommentLike1
Japan was supposed to be getting ETT coal via Chalco as part of the $250 million advance to GOM.
Japan has tried for centuries to get a foothold in China and Mongolia, as Mongolia's most recent invader following their creation of Manchukuo and their archeological attempts to create a link between Mongolian people and Japanese I would be wary of their motives. They are trying to get Mongolia indebted to them for the supposed new Airport at Terelj and their "generous" low interest long term loan which will service the casino and link to Japan Town on the Zaisan side of the Tuul River.
11 May, 03:53 AMReplyDelete CommentLike2
Here are a couple of primary sources with links about Japanese economic and social efforts in Mongolia.
Since Japan is relatively poor in raw materials, they probably will be interested in remaining a good customer for Mongolian natural resources, woolen articles and some other items.
13 May, 04:47 PMReplyDelete CommentLike1
Don't kid yourself their motives run deeper than woolen jumpers.
14 May, 03:11 AMReplyDelete CommentLike1
That was against Stalin.
14 May, 04:59 AMReplyDelete CommentLike1
Please read more than the first paragraph. This incident involved several of my family members and close friends families we understand it quite well.
14 May, 06:51 AMReplyDelete CommentLike0
I understand your concern, dulleyefarmer, that the battle was mainly fought against Mongolia.
But I say "that was against Stalin" instead of "that was against Marshal Choibalsan" mostly because the Japanese were ultimately aiming to control the main railroad junction near Chita, which the Japanese had controlled for a short time when they interfered in the Russian Civil War just after World War One. By controlling that railroad junction they could prevent Stalin's troops from moving eastward along the Trans- Siberian Railway to Khabarovsk and Vladivostok and southeastward through Manchukuo to Port Arthur and the Korean Peninsula along the Chinese Eastern Railway. They were afraid that Stalin was making the Soviet Union strong enough by 1939 to overturn the results of the Russo- Japanese War of 1904-1905 which happened in their favor.
So I think the Japanese aggressors of 1939 were actually thinking of heading north into Siberia from the area of the Mongolian- Manchukuo border incidents and not further west into Mongolia.
At any rate, there should not be any worry about a recurrence of that situation in these times. The geopolitical situation of 2013 in Northeast Asia is way different than that of 1939.
14 May, 02:02 PMReplyDelete CommentLike1
I'm thinking along the lines that probably the more Japanese investments in Siberia take shape, the greater the likelihood that trade between Mongolia and Japan will increase by way of Siberia.
18 May, 04:46 PMReplyDelete CommentLike1
As predicted months ago the Presidential election should be an easy victory for Elbegdorj. Interesting choices by MPRP and MPP a woman and a popular wrestler as opposed to some very dirty potential candidates who have all but conceded this election to the DP.
13 May, 03:42 PMReplyDelete CommentLike2
A loan for OT with no details made public by a Government that is about to lose office in September. This also follows the US refusal to support it supposedly on environmental grounds.
14 May, 03:40 PMReplyDelete CommentLike2
Glad to see that the Asia Foundation is not heading/ organizing and speaking for the electoral observer team for the forthcoming presidential election. Lets hope Dame Audrey can do a better job than William Infante did in 2008 and that she has the resources to attend more than the <10%? of stations that were attended last time.
I hope that some of the observer team will be brave enough to mention what really happens. The 2008 election saw not just a blackout of the "press' except for MNB but the shutdown of the internet. Tanks were deployed and people shot dead in the streets. Who ordered the response?Hundreds of people many innocent and political rivals were imprisoned in Gandshudag.
It was never a good idea to have TAF, an organization founded by the CIA in 1951 as the committee for free Asia as electoral observers.There doesn't seem to be much political grooming going on yet? Will the observer team monitor the appalling standard of political advertising and monetary promises?
15 May, 04:03 PMReplyDelete CommentLike2
"EFIC's decision to lend money to Rio comes despite Australia's Productivity Commission urging the organisation to ''substantially reorientate'' its focus toward small exporters, rather than big companies that can easily source money elsewhere at low interest rates."
Why are Australian taxpayers paying for this? 34% of these set up loans are liabilities for the GOM and will have to be repayed at a higher interest rate as debt to Turquiose Hill. Australia has already wasted over $63 million dollars in Mongolia since 1995.
16 May, 04:50 AMReplyDelete CommentLike2
Regarding the attempt to sue Bayartsogt, this has no chance as stated before the IAAC is DP controlled. He has resigned his position and will get a slap on the wrist then return later.
"Eight NGOs delivered the request to the Anti-Corruption Authority today, May 7th." Which organizations delivered this request? Are they Mongolian as the article is written by a Mongolian?
These are all god points but l don't think he will be giving any answers.
Over 42,000 public officials are required to gve their income statements to the IAAC most of them are lies a.The most famous one was Enkhbayar who claimed that he only wned one apartment in Ub and a saddle given to hm by George Bush!
I love a good spy story unfortunately l think K.Sairaan is in deep trouble. It's very interesting to see his connection to the former PM Bayar. Another former advisor to Bayar and former Ambassador to Australia Jambaldorj has just been given a plum job as Mongolia's permanent representative at ASEAN. I wonder what we are to make of this. Will Bayar make his anticipated comeback at the next election cycle?
18 May, 05:36 PMReplyDelete CommentLike2
"According to the Presidential Election law no online or physical press should insult or release slanderous comments related to candidates during the period of the Presidential Election. "
This is missing the point of a media crackdown as some leaders are already protected under Mongolian law. The biggest problem is the standard of advertising by the political parties and the seemingly unregulated advertising lndustry.Enkhbayar had his TV9 and various newspapers along with key editorial placements.
19 May, 04:02 PMReplyDelete CommentLike2
Many thanks to Jon for putting together a list of conference topics. It helps me to think about Mongolia's prospects.
20 May, 12:47 PMReplyDelete CommentLike1
Here's a few more meetings.
22 May, 01:29 PMReplyDelete CommentLike1
The election circus is starting. Former PM Bayar who lives in Canada and former General Secretary of the MPP U. Khurelsukh who is now "studying" in Australia are coming back to Mongolia to help out Bat Erdene in the election campaign.
Khurelsukh as previously posted famously cleaned out the Mongolian savings Bank of $1.4 million USD and with 2 others blew it at a Seoul casino. He escaped conviction but a female Bank employee was sentenced to 6 years jail.Enkhbayar's wife flew to Korea to get the proof so that Enkhbayar could use it against him. After the MPP's poor performance in the last general election he resigned hen sold his seat to the Boss of MAK company Nyamtaisha who plans to install his son in the Ikh Hural. The seat was reportedly sold for $500,000 and Khurelsukh at the time said he needed to go to Korea to help his sick wife.
If he is studying on an Australian Government Scholarship or Leadership program then some serious questions need to be asked. These programs have recently provided a tax payer funded education for the General Secretary of the MPRP.There are many examples of the MASP corruption going back to 1995 and involving over $63 million. This follows the Australian Government recently approving a large loan for OT without detail and against advice.
20 May, 03:49 PMReplyDelete CommentLike2
lf Khurelsukh is "studying" in Australia as claimed and he is being funded by the Australian taxpayers then it would breach several eligibility criteria. He is a private citizen and no longer an MP or member of a key Ministry and he is also a former Army Officer. Like numerous MASP Scholarship holders they usually don't declare Military service.Is this the type of person that should be holding an Australian visa ?
21 May, 03:53 PMReplyDelete CommentLike1
21 May, 03:24 AMReplyDelete CommentLike1
More than 10 months after the MSE upgrade,
the turnover is so high (today US$14,410) that some Mongolian brokers have to find other centres of interests.
http://resource-cap.com Mongolia & Myanmar
http://bit.ly/10hLEsJ Japanese real estate.
21 May, 06:54 AMReplyDelete CommentLike4
Mongolians might be more willing to diversify their holdings and trading interests into other Asian countries as they become more wealthy over time. They could conceivably purchase more Burmese rice shipped over an expanded railway network in coming years, for instance.
21 May, 12:20 PMReplyDelete CommentLike1
Apparently the Chinggis Bond money isn't sitting in the Mongol Bank it has nearly all gone. Some of these projects are stretching the imagination.
21 May, 04:16 PMReplyDelete CommentLike2
The Prime Minister's statement appears to describe a lot of projects on which he hopes that Chinggis Bond proceeds will be spent, rather than projects on which proceeds have already been spent. Consequently, US$347 million "left" means unallocated to projects and not unspent. Money that has been allocated can take a long time to get spent -- and can be re-allocated in the interim.
22 May, 12:27 AMReplyDelete CommentLike3
By the way, funding wise,
is there any progress on the MNT government bonds front?
Or is MoF still exclusively relying on tiny (relative to the needs) local banks (with probably serious currency and duration mismatches) to jump start the MNT bond market and creating a MNT yield curve, basically putting all the eggs in one basket and dancing close around.
For the time being saved pennies for 12-28-52 weeks that is going nowhere.
That is bizarre at a time the massive JPY printing triggers spill-over everywhere but obviously not Mongolia MNT!!
When will Mongol Bank and FRC enable brokers to submit bids to MNT government bonds auctions on behalf of clients in order to diversify the sources of funding (thanks to foreigners' largest pockets) and increase the durations?
With only tiny local banks acting as principals, otherwise the outcome is doomed.
May be OTA could invite some US banks to show their expertise in that matter and act de facto as "Primary Dealers" as local banks seem totally unable to do this.
22 May, 02:09 AMReplyDelete CommentLike4
This one is hilarious.
I think there is a misunderstanding somewhere because the problem is not about "Sustainable finance in Mongolia" but making sure that the "Finances of Mongolia are sustainable" .
That's clearly a problem of priorities at GOM, getting things in the right order.
22 May, 02:14 AMReplyDelete CommentLike4
I'm inclined to agree that the banks are undercapitalized. But if they can help create a new industry turning some profits then that will tend to make the economic scenario there more sustainable over time. I'll be interested to see if this actually works.
22 May, 12:26 PMReplyDelete CommentLike1
"allocation" that's the KEY word.
I hope GOM can allocate its time and priorities wisely and quickly because otherwise, within few months, once everything is allocated while new projects pop up,
The Return Of Chinggis Bond may not may a walk in the park, more like a walk in the Gobi.
Priority wise, I mean OT, OT, OT, OT and OT!
Time for GOM to prove with TANGIBLE PUBLIC SUSTAINABLE ACTIONS, not cheap talks, IT UNDERSTANDS BUSINESS and can stand by an AGREEMENT SIGNED by the GOVERNMENT OF MONGOLIA,
because if THIS government does not respect THIS agreement, then foreigners may rightly wonder if the NEXT government will honour agreements signed by THIS GOVERNMENT.
A bit of long term thinking would not hurt before opening a Pandora Box.
22 May, 02:00 AMReplyDelete CommentLike4
Wow they managed to cram in every possible cliche' in 3 paragraphs. I feel sorry for the people who have to sit through such rubbish. Good to see Pat is guarding the Chinggis bond money.
22 May, 03:47 AMReplyDelete CommentLike1
It sounds like banker's lingo for wanting Mongolia to diversify its economy while improving its business practices as it develops. The bankers and the other investors can obtain more opportunities for profit in diversified economies while the host governments can obtain more lines of revenue when they diversify their economies.
This is a global effort in keeping with each nation's economic aspirations beyond which they are specifically famous for. For example, Ivory Coast wants to be known for more than its cocoa, Ghana wants to known for more than its gold, Thailand wants to be known for more than its rice, and so on.
Mongolia has greater aspirations beyond copper and coal. It will interesting to see how well those ambitions will match reality in the years to come.
22 May, 08:20 PMReplyDelete CommentLike2
Singapore wanted to be known for more than just a trading port. They succeeded by creating a very reliable long term working class and a low tax business environment with the highest transparency.
Like MSE Investor mentioned, long term thinking and planning are paramount to make Mongolia's dream into reality. Talk is not enough; Mongolia needs tangible, consistent, and sustainable actions. Developed countries around the world are cannibalizing themselves. This is the perfect opportunity for Mongolia to capitalize and emerge as an internationally recognized wealthy and great country.
22 May, 10:20 PMReplyDelete CommentLike4
Diversification is critical for Mongolia in term of … sources and types of financing ASAP.
Diversification in term of economy and business is completely a different story and not a short or even a medium term priority!
Mongolia has to acknowledge reality, it's very rich in (hard) commodities (copper, coal, gold, uranium, fluorspar, rare earth,…) , so it'd better leverage that nicely, smartly, quickly …in order to in the medium-long term to be less commodity dependent.
Believing that NOWADAYS cashmere exports can power Mongolian iPhones and hummers is I think a total illusion. Tourism alike!
Acceptance could be a good step forward starting by:
1)Looking at the supply chain management for commodities mining and make sure Mongolian companies are very active there.
2)While at the same check what are all the basic "building blocks" needed in the build-up of the infrastructure to limit dependence on foreigners. For instance for buildings you need: power supply, cement, sand, water, steel, copper, glass, workforce (and what they need), capital,…and many more, and guess what on ALL THOSE Mongolia is stretched. Those are the priorities! (using any natural / cheap sources of energy link wind, sun as well as systems leveraging the fact that temperature is constant 2-3 meters below surface whatever the temperature outside (I know, I use!) is good)
3)Then few years later, once those basic blocks of the economy are in place and it is STABLE, Mongolia may think about other segments to develop its economy but for now it has to accept its commodities situation.
I am too cynical to believe that countries investing in Mongolia outside mining and outside businesses positively correlated to mining (that by the way goes very far!!) have other objectives than creating some political goodwill to gain something else on the bigger pie.
So it's fair that GOM may try to promote another image
and foreign countries try to pretend they are interested in,
but for the time being they BOTH have one thing in mind. :)
22 May, 10:54 PMReplyDelete CommentLike4
About planning ahead, it is somewhere baffling.
For what I read, Mongolia has good chess players,
so how come that GOM and MPs have mishandled the situation so badly over the last 2 years, short sighted with such a short term behaviour?
What about having Mongolian chess players joining GOM ???
That would not hurt!!!
22 May, 10:57 PMReplyDelete CommentLike4
A conference on a "resource curse" scenario a couple of years ago might have influenced some government players in planning how to allocate funds to the economic sectors. The meeting might have also influenced the government to propose changes in the mining policies before they realized why those changes would be controversial.
It almost sounds like the rest of the economy outside of the mining sector needs to have its own sovereign wealth fund or separate government bond fund.
24 May, 01:21 AMReplyDelete CommentLike1
Ha ha, those were my exact thoughts. Kudos to the young Mongolian boy who won the world championships. If only the GOM had him on board.
25 May, 09:21 PMReplyDelete CommentLike3
Yes that would be great, but it's the same headache as hiring a risk manager!!
For GOM to hire good Mongolian chess players, it implies that politicians can already analyse their shortcomings ...therefore have good analytical skills ALREADY.
Same with firms and external risk managers:
Those in dire needs are generally overconfident and will never do until they hit the wall and it's too late.
Those that DO ASK for help of an external risk manager are probably careful enough already, risk management wise, to NOT need so much help.
It's circular :)
May be Mongolian voters should start voting for chess players instead of wrestlers :) :) :)
25 May, 11:56 PMReplyDelete CommentLike4
'In 2009, for example, Elbegdorj won with just over 51% of the votes against N Enkhbayar in an election where Enkhbayar clearly didn't have the full support of the then-MPRP."
Baabar predicted the result months prior to this election. The former First Secretary of ther Mongolian Embassy in Australia told me that this election was "a stroke of genius" whereby they didn't rig it as usual because the Nyamdorj and Khurelsukh factions wanted to get rid of Enkhbayar and they did.
I detect a strong groundswell of MPP and MPRP supporters who are seriously worried about the future of Mongolia and are going to vote for Elbegdorj.Udval is an Enkhbayar supporter and making up the numbers who is going to replace her that has any credibility?
Bat Erdene is seen as a good guy who is unscathed by the politics of Mongolia. Elbegdorj barring massive electoral corruption will win easily.
22 May, 04:28 AMReplyDelete CommentLike3
"If the current president, President Ts. Elbegdorj, is reelected the government will make policies in the mining sector for the first time. These policies will make amendments to the mineral law and the many other laws that are connected to it . This means that the legal environment of the sector will be renewed and the rules and regulations will be made clear."
The DP didn't sign the bad deals and didn't institutionalise corruption on the scale of the Enkhbayar/Friedland cosy arrangement using Monnis as their intermediary. They inherited these bad deals and now have a chance to cnange some of them.
"-The Mongolian People's Party gradually adjusted to being the opposition and now have enough reason to impeach the prime minister. "
Really.There has been a failed push recently to blame the PM for the drop in Foreign investment and to have him removed but it failed. Lets see the evidence to have him impeached.
The Sant Maral group has produced some reasonably accurate data in the past but has also done some very dodgy work in the past with the Asia Foundation producing their anti corruption surveys.
Interesting to see this attempt to portray the MPP as the Nationalist Party. They are the ones who made this current mess and weren't interested in Mongolia's national interest but only in lining their own pockets.
Another poor standard biased article.
22 May, 04:04 PMReplyDelete CommentLike2
Great news for the DP.Dagvadorj was once a great Enkhbayar supporter after he gave him the old Circus building opposite the State department Store. He rushed over to try and help Enkhbayar after he was arrested.Like I previously posted there is a strong groundswell of Mongolians who are going to support Elbegdorj. Battulga will make a good future PM or President. Dagvadorj is much more famous than Bat Erdene and a great addition to the DP.
23 May, 05:23 AMReplyDelete CommentLike2
Dagvadorj's company won the tender for the privatisation of the State Circus. I believe the winning tender was in excess of $500,000.
Terming this transaction a gift, resulting in supposed support for Enkhbayar and then translating to DP loyalty seems a bit of a stretch.
Having said that, you are right. It is a coup for the DP to recruit him. Particularly as his elder brother ( famous and successful Mongolian wrestler Sumiyabazar) just got elected to Parliament for the MPP! They are in business together so it appears as though they are covering bases.
Two years ago the MPP did much better with a campaign to recruit popular figures. Bold (now Rio) and singer Tuya amongst many more. And they already have Sumiyabazar and presidential candidate Baterdene. The benefits of such high profile members is not known, or at least cancel each other out.
24 May, 05:17 AMReplyDelete CommentLike1
it was widely believed in Mongolia that Enkhbayar "gave' him the Circus building. Both men were at the height of their power. l guess we will never know the truth of the transaction. He did race over to help Enkhbayar after he had been arrested this was well covered in the media.
People like him not only because he was the Sumo champion but he was seen to be honest and reached his goals the hard way.Mongolias first Sumo champ was allegedly sponsored by Sawada [Khan Bank}and got involved with some very dodgy Japanese possibly with tattoos who were into match fixing. They allegedly approached Dagvadorj to talk about re arranging some match results. The story goes that he gave them some free advice about sex and travel.The Japanese then didn't want him to break their record for the number of wins so then they started to discredit him by reporting incidents of his behaviour and the suspension for him playing in a Mongolian charity soccer match.These stories were picked up in particular by Mark Willacy from ABC Australia and not checked out accurately.
Dagvadorj retired not only as a great champion but with his integrity as well, something that other Mongolian wrestlers couldn't acheive.
There is a thriving market in Mongolia for match fixing at Naadam. If you make it to round 5 then you can get a title that will help your prestige and business. A lot of money has changed hands for wrestlers to lose the 4th round.
Enkhbayar used Chirac's love of Sumo to try and set up deals with Areva only to be rebuked by the Ikh Hural.
In Mongolia as you know if you show any signs of weakness you are finished, Enkhbayar is in this position now and many are deserting him and the MPP.
25 May, 04:59 PMReplyDelete CommentLike1
anything happening in Bodi Tower with Mr. Bold and Mr. Bayasgalan?
23 May, 07:56 AMReplyDelete CommentLike1
Bit out of touch with the Bodi group. Bold and Boldhuyag are brothers who own the group and Bayasgalan is the head of the Golomt Bank.After June 2 l may have some news.
24 May, 03:06 AMReplyDelete CommentLike1
Bold's lawyer published a major open letter to the Bank of Mongolia two days ago, slamming the current management, past practices and pointing out serious irregularities. He has also been on Twitter with similar stuff plus photos of his trashed offices. He calls for the bom to take action. Refer tohttp://www.news.mn (only in Mongolian)
Golomt Management published advertisments today disputing the accusations and saying all is well. Refer to http://bit.ly/123pHUE (Mongolian)
English translations available.
My money is on the Bold version being more believable. The situation appears to be coming to a head.
24 May, 05:20 AMReplyDelete CommentLike1
I read an English version of Bold's letter.
My money on him too.
It puts Mongol Bank in a difficult position.
It also underlines something else:
THE WEAKNESS OF THE BANKING SYSTEM IN MONGOLIA which is an impediment to the growth of Mongolia,
even when everything goes well.
Now with this kind of situations, it's scary, very scary.
How long the MoF does expect to have a decent MNT government bond market (size and tenors) to finance less visible projects as well as provide a reference yield curve for Mongolian corporations while relying on a handful of tiny local banks?
What about using brokers too as it was the case before July 2, 2012 ?
24 May, 10:04 AMReplyDelete CommentLike3
(fresh) World Bank paper for bedtime reading:
23 May, 08:12 AMReplyDelete CommentLike4
That would send anyone to sleep.
24 May, 03:52 AMReplyDelete CommentLike1
This latest graph from the Mongol Bank belies all the headlines about falling FDI:
Falls in January and February, but huge increase in March.
Possibly an anomoly due to OyuTolgoi?
24 May, 07:03 AMReplyDelete CommentLike2
"The Mongolian banking sector is already well developed, offering a full range of conventional banking services. The corporate banking sector has all the products that are needed for the extension of credit and financial intermediation."
l don't think MSE would agree with these comments from the former CEO of Golomt Bank John Finigan. A year is a long time in banking especially in Mongolia.
26 May, 02:07 AMReplyDelete CommentLike2
I also disagree with those comments from Finigan.
While some banks may be doing their best, their size is still a MAJOR impediment for the growth of Mongolia, its financing and the especially the financing of GOM.
The noises (any truth) out of Bodi / Golomt are pointing out further at those weaknesses.
Building on a sand and water only is not wise.
Luckily the Securities Markets Law has been voted
and that will enable foreign banks to move in by Jan 1, 2014 more decisively,
for instance as Clearing Banks for MSE trading to solve problems foreigners are facing when OPENING AND OPERAITNG their Escrow Account!!!
It's really a pity that those local banks did not take the MSE upgrade seriously and did not act as team players for the long term of MSE and Mongolia and establish a good track record with foreigners to retain a large chunk of this business in the future.
Those who had to deal with these headaches since july 2, 2012 may be waiting impatiently for foreign custodian banks to establish shops in UB and then move their Escrow Accounts.
the decision to team with one bank or another belongs to the broker,
but the reality will be very simple and brutal:
Either local brokers establish Escrow Accounts with foreign custodian banks to enable foreign investors to have their Escrow Accounts with professionals, headache free,
OR those foreign investors will execute with OTHER BROKERS (new comers may be, no sunk costs, no backlog) that WILL USE FOREIGN CUSTODIAN BANKS as CLEARING BANKS,
no IF, no BUT, no MAY BE....
My Way or the Highway, plain and simple!!!!
So now local brokers have to act quickly!!
The clock is ticking.
7 months to go!!!
26 May, 02:40 AMReplyDelete CommentLike3
Is there any news about Justin Kapla? The Rio Tinto media machine seems to have forgotten about him. Is he still prevented from leaving Mongolia?
How is the sale of South Gobi going there are no announcements on their website.? Rio has done such a disastrous PR job in Mongolia, blanketing serious issues and leaving them unresolved.
26 May, 04:19 PMReplyDelete CommentLike2
The MSE website has been upgraded!
Sections worth attention:
•Market / Securities Order: Whole market first bid-ask in one glance.
•Listing / Security Information / with listed of companies that have stopped trading, been delisted, state owned as well as tender offers.
•Listing / Listed Company: Dividend.
•Members / Members Information: Financial Statements of brokers.
26 May, 10:44 PMReplyDelete CommentLike4
That is really good news. I'm glad to see that.
27 May, 03:46 PMReplyDelete CommentLike1
The author here comes to the conclusion that Turquoise Hill's stock is fully valued given the present circumstances. He includes a high quality map with his article.
27 May, 03:51 PMReplyDelete CommentLike1
"A concentrator with a nameplate capacity of 100,000 tonnes per day of throughput has been constructed and is being commissioned. The first concentrate was produced in January of this year, and the concentrator has reached 70% of its design capacity."
Come on they have shipped nothing and this article is misleading.
28 May, 06:02 AMReplyDelete CommentLike1
I don't think it has reached its value yet.
28 May, 11:35 AMReplyDelete CommentLike1
This other article sounds closer to reality.
28 May, 12:14 PMReplyDelete CommentLike1
Tourists vs. foreign investors:
US$190 spending per tourist in a group. Good.
What about investment bankers, private equity, hedge fund managers and foreign investors of all kind?
I would probably multiply that amount easily by 2, 3 or more!!
And on top, those guys are coming to UB spending $ to INVEST more $ to fuel the Mongolian engine.
While on each of my trips (business and holidays) in 2011 and 2012, I always got a very warm welcome (wherever the place) what I have heard from friends in UB over the last 6 months was not so friendly...
may some people in Mongolia may want to think about it in respect of tourists or businessmen coming with $ for the country.
28 May, 09:30 AMReplyDelete CommentLike5
Another famous wrestler Sukhbat joins the DP.
The latest on the Golomt Bank drama. Apparently Bayasgalan gave $200 million to his friend Horolsuren a former MIAT executive and deeply involved in the MIAT corruption case. He apparently formed "Mongolian Airlines" which has bought the 2 new Boeing planes. Bayasgalan lied to the shareholders of the Golomt Bank which resulted in the current drama.What is the connection of Mongolian Airlines to MIAT?
29 May, 05:33 AMReplyDelete CommentLike1
is it related to this?
29 May, 05:47 AMReplyDelete CommentLike2
Yes it is him
'The information comes from the former vise director of MIAT, Ch.Khorolsuren, who worked in MIAT from 2005 to 2010. '
Seems like Khorolsuren dropped his associates into it but now is facing his own scandal.
'A source close to the matter says that one suspect, Ch.Khorolsuren, is highly connected to a Minister of the current Government. But the name of that Minister is being hidden. '
That Minister could possibly be the Foreign Minister Bold and part owner of Bodi Group.
'Ch.Khorolsuren, his brother Ch.Suuritogtokh and the director of an unnamed company'
Wonder what that company is?
This site details the recent delivery of a Boeing 767 to MIAT.
Khorolsuren was Director of Mongolian Airlines Group whose parent company os Bodi.
29 May, 03:49 PMReplyDelete CommentLike1
I agree with this post from Mendee.I have been posting for months that Elbegdorj will will easily.
Unfortunately I think Julian has been tainted by his previous involvements in Mongolian elections. He has been used as an academic to give credibility to some of the previous "results".
We are now witnessing a large shift from MPP and MPRP to the DP. Mongolians can now see more clearly the web of corruption perfected under the Enkhbayar regime. The DP is not perfect but they have done a lot of work replacing many corrupt Enkhbayar appointees.
Recent defections of Dagvadorj and Sukhbat only strengthen their popular appeal.
30 May, 04:11 PMReplyDelete CommentLike2
Some unhappy locals in Kyrgyzstan.
31 May, 04:39 PMReplyDelete CommentLike2
may be they are discovering there are limits to foreigners' generosity, that moral hazard is not great in the long run, get extra little short term things (or avoiding short term pain) can trigger very bad medium-long term consequences...(just ask Cyprus and MPs who rejected the first bailout plan, asking for better terms....They ended up much worst ! R.I.P.)
1 Jun, 02:37 AMReplyDelete CommentLike3
Kyrgyzstan apparently needs to develop a middle class.
7 Jun, 12:06 PMReplyDelete CommentLike1
"No such thing as a coincidence."
22 Jun, 05:43 PMReplyDelete CommentLike1
Something similar happened regarding Uzbekistan about 5-6 years ago. They voted to close the US base but apparently let them resume some kind of capacity no doubt after the appropriate wheels were greased. Their is an agenda for 4 Military bases in Mongolia and one has apparently been constructed.
23 Jun, 03:52 AMReplyDelete CommentLike1
Consolidated Balance Sheet of Banks as of April 30, 2013
Wondering what is this sudden brutal currency mismatch from march to april 2013 ????
1 Jun, 02:22 AMReplyDelete CommentLike4
Dumb question time. Where does the Chinggis Bond $1.5 Billion USD figure in this balance sheet?
Apparently there has been a bit of cold weather in UB this week. It was so cold that Khorolsuren was seen to have his hands in his own pockets!
1 Jun, 03:04 AMReplyDelete CommentLike2
Chinggis Bond funds should be in a GOM account at the Central Bank.
If GOM has decided to leave some with local banks, it appears in Deposits Foreign Currency (because it's US$).
May be GOM has decided that instead of keeping those US$ idle at Mongol Bank it could lend those to local banks ...that may need US$...instead of having the local banks going to Mongol Bank begging for US$ against MNT.
Anyway, that does not sound to me like a sign of strength, one way or another.
1 Jun, 11:44 PMReplyDelete CommentLike4
Given that Mongolia now has Foreign debt estimated at twice the $11 Billion once owed to Russia where does this debt figure in the consolidated balance sheet of banks? The Foreign debt figures seem very low and don't seem to include items like the OT start up costs that are debt to Turquoise Hill and $2 Billion USD and rising. This is GOM debt to a publicly listed company?
7 Jun, 04:15 AMReplyDelete CommentLike2
It's a bit early for back slapping and medals. The MCC/MCA has been a major failure in Mongolia even the American audit of their progress was damning.
If you call USD floating around in Mongolia somewhere and a string of unachieved projects a success then you are easily satisfied.
Their centre piece project ie. the Railway to which they had allocated $183 million failed to materialize and they hastily threw together plan B lots of vacuous stop gap projects.
To date the total allocated money hasn't been spent, most of their projects remain uncompleted or a poor standard and their management has been hopeless.
The creation of the IAAC has been a lasting legacy of the program. It was required to be set up to make Mongolia eligible for the funds. The DP have been able to use it very effectively possibly contrary to it's original objectives.
It's American money and they can do whatever they like with it.
1 Jun, 04:09 PMReplyDelete CommentLike2
I think they will have more success if they concentrate on just one or two initiatives which will tend to help grow the economy in a general way. Too much multitasking leads to a lack of focus. Perhaps they can just help build more roads and set up more trade shows and technical seminars, for instance.
1 Jun, 08:32 PMReplyDelete CommentLike2
Focus, focus, focus...agreed in theory it's the way forward, prioritize and focus BUT that assumes that somebody at GOM can:
Analyse the global situation, factor in constraints and then decide (and that means be able to resist to short term begging, bargaining,....) basically a very cold blooded super project manager impossible to corrupt.
Even in other countries, with more experienced staff around, it would be like Mission Impossible.
In Mongolia, forget it.
But if at least, all energies were focused on the same direction, that would save a LOT of troubles.
1 Jun, 11:50 PMReplyDelete CommentLike4
Further to the MIAT/Golomt Bank saga Khorolsuren was recently in Australia looking at property in Melbourne seems he is cashed up and maybe looking at an early retirement/exit strategy.
GOM shows it's priorities. When Mongolians were being registered for their theoretical ETT shares the former Ambassador Jambaldorj sent his son around Australia to electronically finger print every eligible Mongolian who wanted to claim. Now for the election you had to register with the Embassy before May31 and if you want to vote you have to drive to Canberra yourself and agree to be fingerprinted.
2 Jun, 04:15 PMReplyDelete CommentLike2
"In 2009, the Mongolian government transferred 50 percent of Ulaanbaatar Railway shares to the beneficial ownership of Russian Railways for a five-year term."
If this is true then next year the 5 year term is up.
4 Jun, 03:54 PMReplyDelete CommentLike1
From a Reuters article on May 28th
"Earlier this month (May) Rio Tinto's Chief Executive Sam Walsh said he expected approvals from the Mongolian government within two weeks to transport copper out of the Oyu Tolgoi mine and copper concentrate was being stockpiled at the mine awaiting the approvals."
Does anyone know if this approval has been granted by the GOM ? I'm assuming not as I have not seen anything, but am assuming that something should be hitting the wires very soon and that this would be an important step forward.
5 Jun, 10:44 AMReplyDelete CommentLike3
but my guess is some kind of standstill agreement between GOM and RIO.
GOM is trying to control noise ...that may have adverse impact on foreigners when Mongolia badly needs capital.
On the other hand, I am assuming that RIO, whatever it's getting, is not showing off with any sign of victory to avoid creating problems BEFORE the elections, that some would leverage for short term political stunts.
So not sure if both sides have agreed on anything,
but they may have at least agreed on at least one thing: SILENCE...
which honestly looking at the last 1.5 years is already a progress. :)
May be stock exchanges around the world will now have to factor in Mongolian political factors and elections timing
for the regulation of communication of listed companies with activities in Mongolia.
6 Jun, 01:39 AMReplyDelete CommentLike3
How is Jon doing ? Have not heard from him for a long time...
5 Jun, 02:43 PMReplyDelete CommentLike2
Last I communicated, a lot of things going on and up in the air. He's unsure of what path he'll take going forward. He siad he'll think about something I can pass on, but that was a couple weeks back. I'll ping him again.
5 Jun, 02:53 PMReplyDelete CommentLike3
Here is an unfortunate Mongolian exchange that had not benefitted from the help and support from the London Stock Exchange and is struggling with a pitiful daily turnover of MNT 260 billions…
…hold on, now I know where all the MSE brokers are busy making month ends now, taking advantage of the MSE year long winter !!
6 Jun, 04:27 AMReplyDelete CommentLike2
...oooops, may be that is the total turnover in 2-3 months...
...but ANYWAY still much more than MSE !!!
6 Jun, 04:34 AMReplyDelete CommentLike3
Interesting that the Criminal Police and State Investigation Department would investigate the former General Secretary of the MPRP . This shows a real turning point.
7 Jun, 04:49 AMReplyDelete CommentLike1
What a surprise.
7 Jun, 05:11 PMReplyDelete CommentLike2
'Ex-Im Bank's chairman and president Fred Hochberg said the investment would support 2,000 jobs in the US through the use of American-made products at the mine.'
America has changed it's position from refusing to invest in OT on "environmental" grounds to now providing 2000 jobs at home. Really?
King Fox March 15
"Just reading on the next phase of financing of OT, do you guys not find it a little odd that there is not one US bank involved ? Maybe just showing my North American based bias."
MSE Investor March 16
"The US attitude at the World Bank is interesting.
In theory it's about environmental issues.
While no expert in geopolitics, but very cynical, I am not quite sure it is the best interests of USA if the Mongolian mines develop very fast.
When considering the relative strategic situations of China, Russia and USA, are the USA the most likely to benefit from a fast development of Mongolia? Even #2?
In term of supply of equipments or consumer goods, Japan, South Korea and European countries may appear more neutral and may have more to gain, so I am not sure the USA sees a lot of upside in a fast development of Mongolia. Then no point going the extra mile."
8 Jun, 04:59 AMReplyDelete CommentLike2
It seems the property market is really struggling in Mongolia right now. There is always a lagging effect in real estate rent and sale prices due to denial in a bear market. I just renewed my city center apartment from $800 per month to $450 per month. My landlord tells me he has been constantly lowering rent prices. It seems that there aren't enough foreigners around anymore to pay the higher rents and buy up the mid-high end apartments. Grade A office space have been lowering their prices as well.
My perception from all of this is that Mongolia has certainly not bottomed out yet.
8 Jun, 05:06 AMReplyDelete CommentLike4
It was obvious from about 2007 that there was going to be a huge glut of badly built apartments and office space. Park land.,Children's playgrounds. School yards anything they could get their hands on was plastered in shonky constructions.
One political advisor to Terbishdagva has built over 500 apartments in Hanuul district. There are programs to get people into apartments and out of the Ger Districts but they don't seem to be achieving much.
Property is much cheaper in parts of the US. Rent has always been strange in UB you can get a great deal for a long term lease but short term is expensive, sounds like you have a great new deal.
8 Jun, 04:36 PMReplyDelete CommentLike2
Speaking of affordable apartments to get people out of the ger district, I have a few Mongolian friends who are involved in such projects, but I just don't see how it can be viable. Here are some problems that come to mind:
1. There are no tax incentives for such projects.
2. Government is managing the infrastructure such as sewage, water, and electricity to the land where the ger district is. That sounds like a disaster waiting to happen.
3. Government is capping the mortgage rates at 8% annually. That is really low for Mongolia. Who with a stable job or income would want an apartment in the ger district?
4. Would they be able to convince people to give up 600 sqm of their land just to acquire 100 sqm of a low end apartment?
Are such projects assisted or funded by the GOM? I just can't see these projects succeeding unless the GOM bleeds money, which then a good portion of it will go to corruption.
Yes, rent is absolutely strange in UB. I will soon be based in Shanghai and only visit UB one week per month. Rent is cheaper in the city center of Shanghai than it is in the city center of UB. As for sale price, Shanghai is astronomically higher.
9 Jun, 01:53 AMReplyDelete CommentLike3
I am not sure there is "one" UB real estate market. Flats for foreigners are more directly impacted by "foreigners friendly" ( :) ) attitude of GOM and MPs over the last 1.5 years. 2 Years ago there was probably more demand than supply....now it's probably the opposite.
As mentioned many times, HOW LONG will it take for GOM:
1) to acknowledge its TOTAL dependence on foreign capital and
2) to SURROUND WITHOUT CONDITIONS (*) , i.e. quick tangible sustainable actions on what is the most visible for foreigners and is THE CASE STUDY, OT ?
The segment of the real estate market not directly impacted by foreigners may be more resilient but WOULD BE impacted ANYWAY in the medium term if nothing is done.
(*) it's sad to use such words but obviously when considering what happened over the last year and half on many aspects, it's probably relevant.
9 Jun, 08:06 AMReplyDelete CommentLike4
Just a quick comment on the "8%" mortgages (which will really be at the higher end of the scale reported in the GoM press release--9%). They are a bad deal for someone. Either the commercial banks will be taking a hit on their net interest margin (and drag down their RoAA) or the GoM will have to charge a cost of fund below their repayment of the bond. Another clear case where a government promise does not jive with the reality of the numbers but the commercial banks will have to go along with the project in order to not lose market share even though it will reduce profitability (along with killing all existing mortgage loan products as people wait for the 9% mortgages to flow). In reality, something closer to 11% might be sustainable but these numbers are not.
9 Jun, 11:02 AMReplyDelete CommentLike2
Thoughts on Michael Pettis's prediction that hard commodity prices will collapse even further by 2015?
China is focused on moving up the value chain and shifting away from investment growth to domestic consumption. If Pettis's prediction becomes true, it will not bode well for Mongolia as its economy is currently completely based on hard commodity exports.
9 Jun, 11:34 AMReplyDelete CommentLike2
Not unexpected :)
"A Mongolian source said: "As I understand it, Rio Tinto hired Mr Blair to come in to give a lesson on 'respecting' contracts." "
Fair and square!
If you want to be taken seriously and be welcome at the business table, then behave.
9 Jun, 08:10 AMReplyDelete CommentLike4
'Yesterday, a Rio Tinto spokesman said Mr Blair had not been involved in any mediation or negotiations between the company and the Mongolian government.
Mr Blair's spokesman also denied any involvement. "We have not been involved in any dispute between Rio Tinto and the Government," he said in a statement.'
The Telegraph is spinning this story to give the impression that "The former prime minister has negotiated a contract to advise the Mongolian government"
GOM did not hire him to give him an exorbitant fee for his advice and "delivery unit concept' whatever that is.
As I said at the time Tony is a paid consultant and Rio used him like they did with Prince Andrew and his UKTI self appointed role.l'm sure the Mongolian people will love to hear their country described as a "backwater".
How can Rio expect to make any progress when they can't be honest. Another PR mess.
9 Jun, 04:45 PMReplyDelete CommentLike3
"The mine, discovered in 2001"
Another comment on this article. OT is a strategic mine that has been mined for centuries. In Ancient times there was smelting there that is partly why it has been designated strategic. BHP held the exploration license in the 1990's and then sold it to Friedland in 2001.
The exploitation license was given to Friedland by Enkhbayar for $50 million as part of the hurried Russian debt negotiations. Reportedly paid in Ivanhoe bonds the $50 million later disappeared allegedly into the pockets of the 31 MPRP MP's.
The Telegraph needs to get it's facts right.
9 Jun, 05:23 PMReplyDelete CommentLike2
Amateurish and insensitive journalism. They even wrote 3 paragraphs about the "Expats in Mongolia" Facebook group and its founder because someone who works for Tony Blair joined the group.
9 Jun, 11:02 PMReplyDelete CommentLike2
Sorry but I have to ...up to some extend...disagree.
I am not a friend of T Blair
but if somebody can help GOM and MPs
doing the maths 1 + 1 = 2
to understand the situation they have put Mongolia into
and what are the very serious CONSEQUENCES for the long term of Mongolia if it wants to be taken seriously by foreigners from western democracies (outside the dual dilemma between China and Russia...that would have no problem "enforcing" their contracts),
and even if this guy is a paid consultant by RIO or TRQ,
I think this guy will do a great favour to Mongolia and Mongolians.
I think there is so much mistrust between GOM and RIO that those two cannot talk directly! We saw the results and read the stories.
So somebody who has government experience (whatever the results) can help translate / decode.
Then in the end, it's up to GOM to decide!! THEIR CALL!!
Not Tony Blair, not RIO.
Up to GOM to ask the right questions, listen to the logic, analyse everything and DECIDE...then face the consequences of the decisions made.
Also in term of $, there is a credibility problem.
It's not because you may have A LOT of experience (say on financial markets and securities) and be kind enough to give FREE OF CHARGE your feedback on financial markets matters (explaining the +, the -) while leaving decisions to Mongolian decision makers that it leads to any result.
Paid consultants, with may be LESS experience and NOT explaining why this or that (i.e. not educating Mongolians to become self-dependent on this too!!) ,
MAY / WILL get MORE ATTENTION.
Trust me, I have seen that more than once in Mongolia over the last 2 years.
Then when the expected accident happens (not a IF just a WHEN) and they come back to you with a "why?"...you are left saying "I told you so" !!!
Most of the time, the damages are not lethal,
but from experience it translated in serious delays, therefore $ costs...and for a country that badly needs foreign capital to jump start its growth engine and road to prosperity for Mongolians,
that is too bad.
So if T Blair, or the pope, can help GOM understand in depth the situation and see the light, SO BE IT.
10 Jun, 12:15 AMReplyDelete CommentLike4
At least some are not afraid of making decisions and bold moves!
9 Jun, 10:37 PMReplyDelete CommentLike4
Previously clubs were supposed to close down at 12:00 AM, but that's actually exactly when most people start showing up and party until 3:00 AM and later anyway. A lot of corruption money went to the police to leave the clubs alone.
There is a law in Mongolia that we can't get breakfast before 8 AM in the summer and 9 AM in the winter? So if a restaurant serves me breakfast at 7:50 AM, will they get fined?
9 Jun, 11:06 PMReplyDelete CommentLike3
but "selling" alcohol is still prohibited from 12:00am to 03:00am so there is room for "opportunities" :)
Anyway, a good dusting of all those is still good news anyway.
9 Jun, 11:54 PMReplyDelete CommentLike3
l think the point with Rio is that it has made such a mess of their PR virtually at all levels that they think they can throw money at consultants to fix their mess. lf they hadn't alienated so many people and had been more honest and transparent they would have a much better working relationship in Mongolia. Personally I think Tony Blair has a credibility problem and no one in GOM is going to listen to him.
Regarding Nightclubs l agree with Haiguike it depends who you are and who you have to pay off.
I was once told that 3 million Mongolians drink 16 bottles of vodka per month! You can always get a drink virtually anywhere.
10 Jun, 03:00 AMReplyDelete CommentLike2
A CNBC piece with Peter Akerley of Erdene Gold on Mongolia. He hints at a delay in shipping OT copper. Given no official approvals from GOM for such shipments, confirming the obvious I guess.
With the Presidential elections a foregone conclusion are we just waiting for the inauguration. On June 27th does the switch just get flipped on ?
10 Jun, 10:51 AMReplyDelete CommentLike2
Interesting to see a Foreign Mining Executive say that Elbegdorj will provide a period of stability and a more investor friendly environment.He has gone from being branded a resource nationalist to being a stabilizing influence. The same problems remain how to get fuel and how to get huge amounts of resources out of the country on a dilapidated railway or expensive trucking. The OT first shipment in June has now become "later this summer".On June 24 the switch might be turned on or off.
Given that a large amount of phase two funding is coming from America and Australia will those Governments make provision for the GOM start up costs debt of 34% or will the debt be inflated and owed to Turquoise Hill like the deal in phase one?
What is going on with the Mongolian railways debacle?
There is so much money wasted on proposals, survey, designs and preliminary deals that they could have actually built something instead of talking about it.
This is what happens when you cross Jenko Battulga.I wonder where the Railroad Battulga wanted built "in a number of places" was?
Enkhsaikhan is seen as a relatively clean ex DP PM who was thrown out of his job by Elbegdorj who claimed that as Chairman of the DP he should be PM.He ultimately joined the MPRP in voting against Elbegdorj's Government
Appointed head of TT Power Plant Project.
A bit of background on the Russian position regarding Tavan Tolgoi and the Railroad.
How about this.
"Mongolian Mining Corp. (975), the nation's biggest coking-coal exporter, will receive 84.3 billion tugriks ($59 million) in compensation as part of a pact with the government to terminate a rail-concession agreement."
"In 2009, the Mongolian government transferred 50 percent of Ulaanbaatar Railway shares to the beneficial ownership of Russian Railways for a five-year term." What is the significance of this ? Was it to block the attempt by MCC to audit the railway?
"Mysterious death of Ulaanbaatar Railways CEO V.V.Magdei was very suspicious.
At the time there were reports in Mongolian press claiming that G.Batkhuu (owner of "APU", "Shunkhlai" etc) was responsible for his death.
I have no idea whether it's true or not, but it is common knowledge in Mongolia that he has extensive dealings with very questionable Russian businessmen"
Guest Investor comment.
"(iv) procurement and initial performance of financial management services
necessary to perform an assessment of UBTZ's books and records;"
"(ii) UBTZ shall commit to making progress towards bringing its financial
systems, books and records in line with IAS and to having its financial statements audited at
certain intervals as agreed by the Parties during the Compact Term by a qualified international
auditing firm in accordance with IAS; and
(iii) UBTZ shall commit to lease newly acquired rail equipment from LeaseCo,
to allow LeaseCo to lease such equipment to both UBTZ and other shippers at fair market rates,
and to allow such equipment to operate on UBTZ's tracks."
The MCC attempt to audit and control the Railway failed. The Russians refused the audit and other conditions of this thinly veiled attempt at control.
10 Jun, 03:37 PMReplyDelete CommentLike2
Honestly, the way this saga has been going on for years now,
I am wondering if any journalist from Reuters will be wasting time to go there...to learn it has been postponed.
The odds of a real shipment (not 1kg or a copper coin in a big truck!) of copper leaving OT on june 14, 2013 are quite low.
...and even if that was EVER happening,
one may wonder how long (April 1, 2014 ?) before that truck crosses the Chinese border as "some administrative papers may not be in order" or there could be a problem refilling the tank of the truck (ETT?) or unpaid taxes or a flat tire or a strike or local population demonstrating for environmental issues...basically the usual in Mongolia.
Sorry for this kind of caricature
but that's what GOM got us used to.
11 Jun, 02:57 AMReplyDelete CommentLike1
You forgot to mention that Mongolians think it is bad luck to travel on Tuesdays so tuesday is out.
11 Jun, 03:50 AMReplyDelete CommentLike2
oh thanks. I did not know this one.
Please tell me about all the Mongolian good luck / bad luck stories.
Sometimes this kind of things can explain weird (for others) situations.
If Hong Kong, if you want a cheap rent (and are a foreigner) then flat #4 on 4F or 44F is perfect for you because the pronunciation of 4 in Cantonese is more or less close to death.
So what about Mongolia ?
11 Jun, 04:02 AMReplyDelete CommentLike1
No clue if the source (unidentified) is reliable or from Wonderland!
Wishful thinking ???
11 Jun, 03:48 AMReplyDelete CommentLike2
This article is absolute rubbish.Blair came to Mongolia as a paid consultant to Rio Tinto. He was not hired by GOM and personally l don't care how much money he has made as claimed in the first line of this piece of rubbish. Another PR disaster for Rio who can't tell the truth.
I thought he was famous for the "weapons of mass destruction" invasion of Iraq.The Northern Irish problem was created by the British after their colonisation and annexation of Irish lands. this was yet another UN failure by drawing a line across a country in 1921 similar to other failures in Vietnam and Korea.
Mongolia has not signed up Blair as a Government advisor.
11 Jun, 04:44 AMReplyDelete CommentLike1
As frustrating as this has been, if trucks start rolling with concentrate even at 44 tonnes, that is a step forward and I would argue a significant one. A crack in the dam that hopefully will lead to a growing cash flow stream.
11 Jun, 08:51 AMReplyDelete CommentLike3
Agreed, even if this happens in a week or in a month, it's good, but organizing a show with journalists is the best way to bring bad luck and
...then again Mongolia will be associated with "unreliable".
In fact, just today, a friend running a PE / investment shop in Hong Kong heard about Mongolia and as he associated my name and Mongolia, he called me.
His impression/perception about Mongolia before I even say anything was FAIL!
...and to be fair, other than stating the facts, I had little to cheer him up...
and it will take more than few kg of copper in a big truck to prove that Mongolia and GOM DO mean business.
Now there so many disappointments with Mongolia, a little positive does not hurt, while keeping expectations very very low...and invest accordingly, i.e. not a primary investment place!
11 Jun, 09:28 AMReplyDelete CommentLike4
At 44 tonnes it might be cheaper for them to hire a shipping container.I wonder if the Executives who live out of Mongolia will be there, and what about Justin Kapla will he be there? Aim low and achieve your goals.
I expect that the 12 Journalsits that Rio sent to Australia will be there making nice stories. l hope it's better than the usual Bloomberg/Reuters standard of Mongolian story.
11 Jun, 03:40 PMReplyDelete CommentLike2
Reuters thought OT was producing Coal?
"Rio Tinto, operator of the mine, declined to comment on the event"
It's their big day and still they are making no comment. Who is running the PR?
11 Jun, 04:06 PMReplyDelete CommentLike2
"big day" ??? You must be joking.
As you know your country quite well, I assume you don't believe trucks loaded with real copper will leave OT on Friday, don't you?
No comment from RIO or TRQ, because they probably don't believe it will happen thanks to all kind of local backstabbing / disruptive admin paperwork actions or inactions.
The PM said early they have instructed all their administration to do their best to make it happen, but we all know how effective this government can be at "running this country" and on Friday we may even have hard evidence of this.
Just look at the Mongolia Investor Confidence Index (in short TRQ); it was down 4.39% yesterday on what people perceived as "good news".
GOM and MPs JUST DON'T GET IT, they still don't understand the extend of the problems they are in...and Mongolian middle and low classes will be paying DEARLY for their blunders.
11 Jun, 10:20 PMReplyDelete CommentLike4
MSE Investor, what makes you so passionate about and interested in investing in Mongolia? There are other emerging markets out there that may not be so investor friendly on paper, but much better than Mongolia in reality, such as: China, Indonesia, Thailand, and even Vietnam, etc...
11 Jun, 11:40 PMReplyDelete CommentLike2
Very good question:
My logic is rather simple.
What is underground is massive: US$500bn? US$1.5tn? I don't know and I don't care but in a country with less than 3 million people, the impact will be massive, never seen before.
When economist, NGOs,…or whoever talk about Dutch disease and say Mongolia should avoid this, I think they just don't get it.
20 years from now the term "Dutch disease" will be GONE from economists' books and replaced by "Mongolian disease" that would have been much more powerful.
No point staying in denial, just acknowledge, accept and adapt!!!
Price of commodities may go up or down, mines make money or no, who cares? Not me for sure! What does matter is that many have passed the point of no-return and will go on anyway, as long as marginal cost is below selling price.
Money going to mines is used to:
•Pay for foreign expertise
•Pay for foreign equipment
•And the rest spills-over in the local economy.
Once mines are in production, money goes to foreign shareholders and lenders and the rest goes to local suppliers, local staff and government entities ….and it spills all over the place.
And ANYTHING that is in the SUPPLY CHAIN or is POSITIVELY CORRELATED to the TURNOVER of mines is positively affected.
(so people will change job to be working in a sector that benefits from mining money, directly or not, to be paid more)
So even if Mongolia and Mongolians do not get 100% of the proceeds, what they get is massive for such a small country! Never seen before.
Then no wonder many, if not all, are becoming very greedy and would just do anything (I do mean that!) to get a piece of the action.
That should translate in the GDP of Mongolia to go up like crazy: x2, x3, x5, x10 in the next 10-20 years?
No clue, I don't care.
What I know is that it is likely to be massive, brutal.
So what could be the impact on the stocks listed on MSE
(forget the mines and APU already too big in its sector and so correlated to the turnover of mines)?
Within 5-10 years, many will see their share prices are likely to go up by x10 or x20 or may be more….while some will go bankrupt!!
So if you buy 40 of them, and out of that
a) 10 go under,
b) 10 go up by x20
and the rest goes up by only x10…
you may have not done so badly
That's what I am betting on, which is perfectly consistent with my finance experience in risk management, options, derivatives.
Buying MSE listed stocks, I am just buying perpetual lucky draw tickets, I am buying perpetual call options on the GDP of Mongolia!
Once the machine is on (Jan 1, 2014 or earlier) and hedge funds start piling into Mongolia
what you will see is something even more powerful than what happened on NASDAQ in 1998-2000 thanks to all the "trend following features" that are the (sick) basic of today's finance (mark-to-market, herding, margin financing, quintiling,…).
Furthermore, the free float on MSE is so tiny that while I am only a "retail investor" I can verify the impact of my trades monthly reading the free float report.
So it will be very entertaining when somebody goes in and tries to invest a tiny US$20million on MSE.
That will be so so "funny" with stocks limit up for WEEKS !!
The mess that has been going on for the last 1.5 years is somewhere annoying because once you have something in mind, you would like that to happen now rather than later
….but when thinking harder, all this is good news for ME.
For now thanks to the stupidities related to the Escrow Account system, very few foreigners are setup to operate on MSE and even less trade regularly,
but I do…with limited competition while on the selling I can see informed retail investors dumping shares they got from privatizations without any clues what are their fair values or potential,
so those 1.5 years of mess have been a real blessing for me to grab some real gems!!!
Waiting for the lucky draw now :)
However as I went to UB so many times, this mismanagement of the country makes me very sad because my Mongolian friends are (and will be) paying an UNECESSARY HEAVY COST for GOM's inability to understand the reality of the situation and take swift actions.
Brokers are suffering a lot (some are probably bankrupt) and they owe that to the mismanagement of the country over the last 1.5 years after the 2011 momentum was torpedoed.
Other emerging markets:
I manage my money, I am not a fund manager and have zero obligation to look here or there or follow the crowd.
I am also a bit of a contrarian.
But I got pretty good experience in some countries like Indonesia (from which Mongolia could learn A LOT!! So similar in many aspects).
Vietnam is promising in the long run, but the specificities of Mongolia I think offer a much higher return on risk, for whoever dares looking ….seriously.
The rest does not impress me much.
Also on the "friendly on the paper", I am a kind of contrarian.
Risk aware does not mean risk afraid!
Risk management is about analysing risks and then deciding to do it or not if the return on risk is worth it or not.
When you buy an AAA bond you get a very low return because it is perceived risk-free…and it cannot get better than that. But if there is a little 0.1% chance of trouble and you get hit, you face a full risk for a pitiful return.
If you go for a CCC bond in theory very risky, first you get paid a high return for what is perceived very risky….but if for some reasons, that risk does not materialized then you have made a killing!
Same with Mongolia. Because it is so small, very few know EXACTLY how it is and how it works, so following "attribution" concept, their analysis is biased to justify from the start the fact they don't want to check.
In 2011, Mongolia risks were OVERLOOKED, people willing to look at the glass half full. Now the opposite.
But about SEFIL I don't think any serious investor would be surprised that Mongolia would NOT have ANY safeguards against foreigners buying its resources.
Just ANY country in that situation would have done the same to control who is buying strategic stakes.
MPs were right in substance but WRONG for the form, destroying the momentum and shooting themselves in the feet. (If I was advising a Mongolian SWF, I am not sure most would find me so pro-foreigners )
Same with tax treaties enabling some to move profits out of Mongolia free of tax. That was Wonderland and totally unexpected and unsustainable. Those benefitting from that were certainly not expecting that to last very long for sure.
So the government and MPs were RIGHT in SUBSTANCE
but SO SO WRONG, SO BLIND, SO SHORT SIGHTED in form and I have not seen any sign proving they have changed.
Also, outside personal investment, my long experience in finance can be of help to some in UB, so it's also a hobby helping some and there. While there are many people in UB understanding the problems and what should be done, it is often difficult for their opinions to prevail (even with detailed technical analysis to support their ideas), especially as the others having no clue cannot de facto understand why what the others suggest is relevant.
On top the unexpected success of Chinggis Bond I triggered some seriously dangerous overconfidence.
Blessing in the short term, curse in the medium term.
In the long run, it will work….but in the short-medium term, that will be painful in Mongolia
…while on my side, sitting on my portfolio of perpetual lucky draw tickets, it does not change anything, just be able to grab more.
Ooops, better stop; it's already turning into a novel.
12 Jun, 02:32 AMReplyDelete CommentLike2
Haha, wonderful. Thank you for the long post. I actually read all of it. I agree with you on all points except on the part that Mongolia's GDP and the MSE will increase by over ten-fold in the future. I think we can definitely count on the GOM to screw it up. Long term, it will go up. Will it resemble anything close to what Singapore, Dubai, or Qatar has done? Not even close.
I believe it will take at least another generation or two to get things right. By then, China's demand for hard commodities will have plateaued or will be in decline. There are definitely some very good investments such as TRQ and other Mongolian companies on the ASX. I just do not trust the MSE; I believe it will remain a speculative vehicle plagued by front running, insider trading, and more.
Yes, the Chinggis bond was quite a surprise.
In my opinion, Mongolia does not look attractive when there is the Indonesia story. They have a population of 350 million, much more diligent workforce, good corruption rather than bad corruption, and much more abundant and diverse resources than Mongolia.
12 Jun, 04:59 AMReplyDelete CommentLike2
GOM screwing up: There is GOM and GOM and the presidential elections may surprise us. While there are not enough chess players in GOM, what's happening between DP, MPP and MPRP sounds pretty much a good game of chess where some politicians may just be the pawns of foreign countries while others are showing great, non-conventional, thinking skills. Love it.
The fact is that behind all the ups and downs, the screw up and the rest, PROGRESSES ARE REALLY BEING MADE! I have not read myself the final version of the Securities Markets Law but very good (local) friends of mine perfectly knowledgeable in the matter have checked for me points I flagged long time ago as "must absolutely be removed" …and those were gone. So it was frustrating and long, very long, but in the end this piece of legislation is likely GOOD for some years. Then they can fine tune.
Same with MSE plateform. There are still many things to fix, but to be fair A LOT has been done, again kicking and screaming, playing 5 sides pool table, but it has seriously been improved.
Listed companies: visited quite a number in 2012. Yes those guys are taking things seriously and honestly do not deserve such a poor government, but they adapt. Just look at the number of MSE listed entities that have posted their financials so early this year. Just amazing.
Financials numbers are very good…and likely STILL UNDERVALUED…because companies had NO INCENTIVE to show the full extent of their profits. Proof of that: just look at the number of companies that are either going private (not to share their profits with strangers) or consolidate their ownership in one hand before foreign invasion and share prices taking off. They are very profitable and will be even more, the only real challenge being for them to raise equity while minimizing the dilution for the owners (they just have to ask me for ideas ).
So MSE listed entities can really make a killing. But one should not be too naïve either, some assets may sometimes be inside the balance sheet of the listco, sometimes out…but I have seen much worst in Jakarta for sure! So Mongolians just need to learn from…Indonesia to be a bit more proficient on this.
Anyway the x10 / x 20 targets are perfectly real and I have already stocks in portfolio up x2 or x3…and supported by numbers. I just got lucky to visit those and understand their business, very simple.
TRQ may be a good investment but it's before everything an index of the Mongolian risk factor for months and years ahead! It's a minor part of my portfolio.
Indonesia will rely on its domestic market and own consumption. Mongolia will benefit from the export of its resources.
Corruption wise, Indonesia was not great in 1997-1998, kind of "get a license, convert it into $, run to Singapore and hide it in a private bank". Then in 2006 onwards, the money had been invested seriously onshore (through BVI companies) and Indonesian tycoons have done very well, seen their future in Indonesia.
Mongolia is probably 15-20 years behind in the cycle. Things will be improving but I don't think the DP lead so-called anti-corruption campaign prevailing is a smart move. It's a double edge sword that will cost dearly to DP members in 3-5 years. Raising that bar is not a free-lunch.
One element that supports an exponential growth on MSE is just the masses:
•Amount of money underground,
•Hot money around,
•Greed always a very reliable factor!
The maths are clear.
12 Jun, 06:33 AMReplyDelete CommentLike3
that being said, even if the MSE stocks (not all!) go up only X10 or X15, I will not cry and still drink (Mongolian) vodka...to support APU (not my favourite ...stock)
12 Jun, 06:35 AMReplyDelete CommentLike2
It might be worthwhile for the government to redirect the revenues paid by the miners and drillers into a national development bank or a national development trust fund instead of into the general fund where revenues are more difficult to track. That will tend to help grow the rest of the economy with improved infrastructure and get around the possibilities posed by a Dutch disease scenario. The funding for the banks or trusts should tend to be self- sustaining over time much like the various sovereign wealth funds in other countries are meant to be self- sufficient over time.
Here are a few examples.
12 Jun, 02:33 PMReplyDelete CommentLike1
Some Mongolians might be interested in this discussion about what seems to be practical.
12 Jun, 02:38 PMReplyDelete CommentLike1
They can have all the resources in the World but as long as the Mongolian government corruption goes unchecked, they keeps shooting Mongolia in the foot and keep acting like a semi banana republic it will not do them any good. Politicians get elected in Mongolia by offering payouts to a gullible public , and attacking foreign corporations. Once elected, they think they can do what they want with total disregard for signed contracts and law. Large companies like Rio Tinto are well versed at dealing with clowns like the GOM but smaller companies are just wasting their time in Mongolia as they will either get wrapped up in the corruption or/ and buried by it. You can look at the experiences of Khan resources, South Gobi coal and even the disaster that Tavan Tolgoi (huge rich coking coal deposit) has become if you want examples.
23 Jun, 08:57 AMReplyDelete CommentLike3
Absolutely huge trading volume on TRQ in Toronto today, the result of one block. 15,341,200 shares were crossed at $6.36 CAD by Morgan Stanley. Have not looked at all the stats for the day but looks like they were also on the bid throughout the day. CIBC also active.
12 Jun, 02:16 PMReplyDelete CommentLike1
TRQ shares will have a spike because OT has supposedly started producing something but will soon drop when they realize it is nothing much the the dispute hasn't been resolved.
MSE I enjoyed reading your long post. i remember you said you avoid Mining stocks and were long only in MMC. Most of your stocks are in small local companies. Miners come and go but the small companies will grow. You are interested in Mongolian good /bad luck stories. They also believe that digging the earth destroys the slumber of the earth and is bad luck.
Khorolsuren offers to pay back some of the money in the MIAT insurance scam. Small amounts compared to what Golomt Bank via Bayasgalan allegedly gave him.
12 Jun, 03:50 PMReplyDelete CommentLike2
Have been buying some mines, MSE or overseas listed, since Q4 2012, MMC included, and also some TRQ options, but that's opportunistic because they crashed so much and I have a feeling now they offer a good potential from a contrarian angle.
The bulk of my Mongolian exposure is MSE listed shares, non mines:
RMC, HRM, UID, ULN, BNG, MIE, MIB, ZOO, TAV, AOI,HBO, NKT,IBA, NEH,EER,SIL, BUK, BDS, ....and more than 100 like that!
12 Jun, 07:19 PMReplyDelete CommentLike2
Another great story that will contribute effectively to the reputation of Mongolia and GOM:
Tue Jun 11, 2013 2:15am EDT
* Mine start-up key to Mongolia, Rio Tinto growth
* Output could help fill Grasberg shortfall
(Reuters) - Global miner Rio Tinto plans to start exporting copper from the $6.2-billion Oyu Tolgoi mine in Mongolia on Friday, according to an invitation received by Reuters, marking the opening of a mine that will eventually make up one-third of the country's economy.
Journalists have been invited to attend a ceremony at the mine on June 14 to celebrate the first shipment.
However on Tuesday and Wednesday, TRQ did not jump following this great piece of "news" proving that now foreigners totally write off positive news out of Mongolia and GOM as totally unreliable!!
"Rio Tinto is delaying an event to mark first exports from the $6.2 billion Oyu Tolgoi mine in Mongolia, as it awaits final clearance from the government, sources familiar with the situation said on Thursday."
…. and in spite of the "make it happen" message from the PM in April.
Now was it necessary to pull this kind of stunt on that day?
Why did GOM let OT or else invite journalists? I assume Reuters called GOM and nobody denied.
A week earlier or later, a month earlier or later,…was NOT IMPORTANT however after the April 20, 2013 "message of confidence" and this failure, GOM RAISED EXPECTATIONS and ONCE AGAIN FAILED…as usual.
Do they really understand the cost in term of foreign investors' perceptions in raising expectations and not delivering?
In short, whatever GOM says, does anybody care? It cannot be trusted! Better wait for tangible sustainable actions over some time to see if this time it's for real.
That will certainly make things easier to raise financing for Mongolia!
13 Jun, 03:18 AMReplyDelete CommentLike2
LOVE THIS :)
13 Jun, 11:14 AMReplyDelete CommentLike1
Basically a re hash of the Telegraph story. We are supposed to be impressed by his wealth and contacts. The facts remain the same he is a paid Consultant sent to Mongolia by Rio. As previously posted he has a massive credibility problem and GOM won't take any notice of him. He sees himself as a World saviour but is really spruiking big business.If Tony has been advising them why is the OT launch day set for today such a PR mess?
13 Jun, 03:46 PMReplyDelete CommentLike2
" A street of Paris" in UB ???
I am dreaming !!
Does Mongolians want to also copy:
* striking for any reason
* 35 hours per week (then having to work more while pretending it is still in effect)
* retiring at 60 years old
or just the Vuitton bags
(btw, $ up front are needed for that so better settle with RIO at the earliest :) !!)
15 Jun, 03:03 AMReplyDelete CommentLike2
Seems that the FIRST OT shipment (and tax collections) are linked to settling the rest so may be RIO is leveraging a substantial need for cash from GOM's side to clarify other things too :)
Never a dull day!
15 Jun, 03:04 AMReplyDelete CommentLike2
Rio doesn't seem to understand the loss of face that allowing shipments whilst the dispute is unresolved will cause.It seems clear from this comment that GOM doesn't want sales income declared in an off shore tax haven.
"The most important request was that the sales income must be positioned in Mongolia."
There may be issues that the GOM start up debt which is held as inflated debt to Turquoise Hill might have to start being repaid after the shipments technically begin even if it is one 44 ton truck.
Regarding a Paris street in UB ... having just watched the DVD I think it would make an excellent location for a re make of Les Miserables.
I love the brief to the students, design a Paris street and while you are at it could you re design the Ger District. To easy.
15 Jun, 05:06 PMReplyDelete CommentLike2
RIO / GOM: yes sure, and I just would take for face value EVERYTHING that GOM says.
I think you may have to start to understand that whatever RIO says or does is not ALWAYS black and whatever GOM says or does is not always white, otherwise you may miss a good part of the story.
16 Jun, 04:58 AMReplyDelete CommentLike1
I am not that naive. You must admit that Rio's PR . negotiations and secret dealings has been a disaster in Mongolia? I have also been posting some of the problems within the DP eg. MIAT/Golomt. I don't think that everything they do is "white". It is a reasonable to ask that "sales income must be positioned in Mongolia". I am not talking about face value ie. believing everything someone says but the loss of face.
Rio has made no comment on Sarah Armstrong, Justin Kapla SGS, GOM negotiations and the start up debacle at OT did I miss anything? They are currently well behind in the game of chess.
16 Jun, 03:50 PMReplyDelete CommentLike2
"Rio's PR . negotiations and secret dealings has been a disaster in Mongolia?"
May be you are talking about what happened BEFORE RIO took over TRQ in 2012 ?
When dealing with a government that shows a volatile behaviour, keeping the world press updated real time does not help.
By the way, RIO and TRQ are listed so communication follows some rules (UPSI) that GOM should learn asap if it ever wants to list overseas some SOEs.
If you are RIO and there are people on the other side that are trying to best to settle the matters (not only make noise) you don't want to make their lives more complicated when they discuss with the rest of GOM and MPs, you have to trust them, give them the best possible support, leave that to them and hope for the best.
Sarah Armstrong...: again, like it or not, used to it or not, those were legal matters related to Mongolia and I don't think RIO making noise in the newspapers or challenging the Mongolian legal system publically would have help in anyway.
For sure, some would have reacted as saying that RIO is meddling into Mongolian affairs and behave as it had bought the country.
PR: Mongolia is a DEMOCRACY but people vote to elect MPs, not RIO. So for a firm like this, even if it is not simple, YOU HAVE to deal with the government elected by Mongolians, not try to influence their votes for president or MPs.
You have to be factual when stating your achievements for the business and show that you respect/care for the people around (when you are relatively so big) and RIO did quite a lot to raise awareness on this.
Now when there is such a big project around, you can be sure that politicians will try their best, or their... worst, to leverage this for their benefits,
i.e. it's called ATTRIBUTION (*) , their success or RIO's failures.
For a firm like RIO, it's a headache and you have to navigate through this being consistent (since 2012 when you took over) expecting Mongolian people to see and analyse short and long term. You cannot force people. It's a democracy.
Even you are treated unfairly is not a reason to open your mouth and react to anything popping up in the newspapers.
It does not help. You are there to run a project, in silence, and hope that your achievements will help people see the lights.
When you play chess, you keep your mouth shut, because whatever you say may give hints to the other player what you have in mind....and btw, between GOM and RIO it's not one lose / one win!!!
It is perfectly possible that both win or both lose....the later being the track now with GOM damaging the pie it wants a larger share of!
(and by the way, that's only OT related!! )
(*) you blame your broker for bad investments but congratulate yourself for picking the successful ones.
16 Jun, 09:38 PMReplyDelete CommentLike1
Rio has done numerous secret dealings with GOM let me give you one example. PM Batbold conducted secret meetings with RIO in Melbourne during his visit in 2011 which were not announced in his itinery.
This visit also featured a Mongolian masquerading as President of the Mongolia Association of Victoria and inviting 4 of his friends to the official luncheon with the Australian PM. One of these gate crashers was the General Secretary of MPRP.Embarrassingly for Australia they easily breached the PM's security and checking bonafides well that doesn't exist in DFAT.
I don't consider Rio to be only a company but it operates as a defacto British Empire. I am also including the SGS debacle with over $30 million in share placements and payments to he Enkhbayar/Friedland intermediary Monnis which Rio inherited and has left unexplained.i realise that any company isn't going to give real time commentary on all of it's actions but over time maybe some of them could be explained?
Sarah Armstrong was hung out to dry by Rio executives who gave her executive authority in Mongolia because they didn't want to go there. She signed the International Arbitration case against GOM and that is when her problems started.Justin Kapla is Justin who?
One point that l noticed you didn't want to comment on was the sudden involvement of US and Australian Banks in phase two OT funding?
A big company/defacto empire should have a much smarter PR team in Mongolia. The chess analogy came from you and Haguike who said Mongolians have good chess players like the young boy who won a title and maybe the GOM should enlist him. This is a game of chess weather we like it or not.
17 Jun, 04:05 AMReplyDelete CommentLike1
No clue. No opinion. They will just tag along at some point.
17 Jun, 07:44 AMReplyDelete CommentLike1
About real estate, just at the end of the interview (after he talks about Columbia).
ok, ok, we know the story "very small market"...
The usual chicken and egg case.
Did he ring Mr YAK with a big check to double the size of the YAK, or ring APIP probably also looking to increase its equity.
May be even MAD too.
Or he could otherwise accumulate HRM, TAH (both seeing new "Substantial shareholders") UID, ...or a bunch of small other companies with nice pieces of real estate in UB.
17 Jun, 07:49 AMReplyDelete CommentLike2
Another point that no one is commenting on is that the dispute with Rio and GOM is being spun as greedy Mongolia wanting a bigger slice of the pie but complaining about their share of start up costs. Actually the major point is that they want sales income to be positioned in Mongolia not Cayman or British Virgin Islands or any other tax haven which you described once as a vital part of capitalism. It is perfectly reasonable for GOM to want this money to stay in their country.
As far as US and Australian Banks "just tagging along" l think the Australian position as l posted on May 16 is very irregular. They aren't disclosing the amount or terms of the loan and going against the advice of the Australian Producivity Commission.
"EFIC's decision to lend money to Rio comes despite Australia's Productivity Commission urging the organisation to ''substantially reorientate'' its focus toward small exporters, rather than big companies that can easily source money elsewhere at low interest rates."
17 Jun, 03:45 PMReplyDelete CommentLike2
What was originally agreed upon for the sales income? Certainly an agreement of this magnitude must have covered where the sales income would be held in. If the original agreement stipulated that sales income would be held in an offshore entity, then how is it reasonable for GOM to make this request?
Why should Rio Tinto feel comfortable holding all of their assets in Mongolia after what has happened in the past year? What start-up costs for GOM? Do you mean the percentage of sales revenue, taxes, and royalties for GOM?
Resource nationalism has been infecting developing countries globally. Investors and shareholders are very reluctant to risk billions now (USD7B+ is a lot of money). It will be a very long time before another OT sized project is invested in Mongolia.
If you believe GOM is holding its own in the game of chess, I respectfully disagree. I agree that Rio Tinto indirectly financed a smear campaign against Mongolia, but what matters is what the international investment communities' perceptions are, and right now and for the near future, it is very negative.
18 Jun, 05:24 AMReplyDelete CommentLike2
Agreed. Those agreements would be very very comprehensive.
Using a BVI would be a classic for just any group to avoid un-necessary frictions for financing exercises (bonds, loans,....) WITH THE AGREEMENT OF THE LOCAL GOVERNMENT to avoid having to modify local laws and taxes rules while the local government would love to encourage overseas financing.
The taxes on sales would be covered ANYWAY in such agreement IN SPITE of using a BVI, or whatever.
For instance, if a company incorporated and listed in Hong Kong (where there are very few taxes!!) needs financing for overseas assets, IT WILL NEVER ISSUE THE BONDS DIRECTLY UNDER ITS NAME!
It will issue the bonds through a wholly owned BVI subsidiary created for that single purpose that is guaranteed by the mother listed company so that the proceeds can be allocated to the different worldwide entities, including the local ones, with minimum frictions and without having to explain to bondholders other things inside the company that make it difficult to understand while irrelevant.
And everything is FULLY DISCLOSED in the prospectus and in the annual report.
The day Mongolia wants to list ETT or others in overseas markets IT WILL HAVE TO USE THOSE TOOLS as well.
A bond issued THE sovereign is sovereign, no need to add bits and pieces, covenants,...
Anything else is pretty much issued from a SPV guaranteed by an operating or an listed company.
When local banks will try to raise financing using their portfolios of mortgages, car loans, credit cards receivables,....they will transfer all those assets to Cayman Islands or Bermuda special purpose vehicles in order to raise financing from those in international markets.
Trying to raise financing through a Mongolian LLC subsidiary would be simply impossible because Mongolian laws do not cover many of what is needed to fit this standard operating procedures (if not standard, investors will not bother adapting and would just pass!) and minimize documentation costs making it just impossible, so the Mongolian tax authorities would collect 0 tax on this because that transaction would not happen!
On the other hand, using an overseas SPV to achieve this would increase the velocity (badly needed! ask them) of the assets of the banks that therefore would become much MORE PROFITABLE and pay much more local taxes on their massively increasing earnings!!
If something was not covered in the agreement,
then the current government can blame the previous ones (and its advisors) and prove to its citizens the faults they committed.
RIO cannot be held responsible if those that signed the agreement with ...IVANHOE made mistakes...
or were too optimistic in respect of coal prices for instance for ETT!!
Foreigners are watching this because
what happens now will tell them
what could happen tomorrow with a new government trying to do some cherry picking on a new agreement if today's GOM was to make some mistakes.
Consistency is the problem now!
18 Jun, 08:39 AMReplyDelete CommentLike2
SPVs are absolutely necessary for income from overseas investments. Even the MCS brothers use BVI. Does Mongolia want to follow the examples of Bolivia, Ecuador, and Zimbabwe or the examples of UAE, Qatar, and Singapore?
Right now international investors heavily discount political and operational risks in Mongolia. The perception is that GOM cannot be trusted to honor agreements, Mongolian business people are shortsighted scam artists, and Mongolian employees by far the most difficult to manage. Whether this is partially true or not does not matter. What matters is the perception. Perception IS reality.
Mongolia officially became a middle income country since 2011, but at the current rate they are going, they will be stuck in the middle income trap. This is quite unfortunate because Mongolia's economy has more possibilities than Qatar, UAE, and Singapore combined.
18 Jun, 10:39 AMReplyDelete CommentLike2
I am only quoting what GOM has stated. My fellow bloggers understand the benefits of BVI and others companies for raising funds etc. but for the average Mongolian they will see it as money going off shore to be declared in a low tax environment.
Perhaps Rio's smear campaign has come home to roost and this could be counted as another of their many PR disasters in Mongolia.
Start up costs are the 34% of the $6 billion ? for phase one and phase 2 which is now backed by US and Australian Banks in some non transparent arrangements. This debt is held as debt to Turquoise Hill and will no doubt be inflated.
Whatever the original agreement was in the good old days of Enkhbayar/Friedland/Mo... will be changed that is why there is a dispute.
MSE Investor suggested that in the original deal for ETT they may have been optimistic about the coal price. The deal was apparently signed for $70 pt for 5 years but in reality that didn't happen as the price quickly dropped to $53. if it was supposedly fixed why was it subject to market fluctuation? This is another bad deal that Mongolians see and it is costing them money along with the OT deal.
It will be interesting to see what Sam Walsh can achieve at G8
18 Jun, 03:56 PMReplyDelete CommentLike2
When I said the previous government may have been optimistic about the coal price, it means that assuming coal price would continue to go up, THEY HAD NO PROBLEM SIGNING A FLOATING SELLING PRICE contract without bothering too much about the rest, for instance THE MARGIN above the index that may have been a decreasing one over time.
But as coal price went down, the index as well and the contracted selling price too.
Anyway as you pointed out, it is much easier to blame foreigners that trying to understand why and avoid more blunders down the road.
Have fun :)
19 Jun, 02:18 AMReplyDelete CommentLike2
Some reports at the time said it was fixed for 5 years at $70 per ton.Unless we can read the actual agreement we won't know. Obviously it wasn't.
19 Jun, 03:24 AMReplyDelete CommentLike2
CHALCO made an advance payment of 350 million USD to ETT on July 2011, to be paid back in coal. ETT has been unable to pay the costs of delivery, leaving about 180 million USD of the contract unfulfilled, which ETT is pocketing and has not paid CHALCO back.
Yes, obviously it was not fixed for 5 years at $70 per ton.
"This is another bad deal that Mongolians see and it is costing them money along with the OT deal."
--- If "bad deals" are signed, it is still best to honor them. It will cost Mongolia a lot more in the long run by not honoring agreements. China signed a "bad deal" by handing over Hong Kong for 99 years to England. They waited all the way until July 1997 before taking HK back.
19 Jun, 04:01 AMReplyDelete CommentLike3
Everybody makes mistakes, everybody faces unexpected challenges.
The smartest ones are able to leverage a blunder into something bright for the future and get seriously rewarded.
Trying to correct past mistakes / sunk costs to avoid the consequences is never, never a good return on time.
Without having seen that agreement, it's easy to guess the kind of stuff that were in because while my business was not related to commodities, but other derivatives, you always find the same bits and pieces.
Once the client (here ETT) has explained the constraints and objectives, structuring the trade is relatively simple.
If ETT wanted a straight forward sale over 5 years at a fixed spread over a floating index without pre-payment that would have been much more transparent and made life much easier for everybody, Chalco to start with!
But GOM wanted CASH UP FRONT... for Mongolians...so :)
Here is my guess what this may have been:
* The contract to sell coal was pretty much a floating price with a decreasing spread over a Chinese Index.
* Then ETT got the benefit of a pre-payment, borrowing the present value of the selling price (floating) but at a fixed interest rate so de facto the discount rate spread over US$ treasuries was not likely to be cheap for sure.
* The decreasing spread was a teaser for ETT to show a HIGHER selling price up front when the agreement was signed and help its IPO.
* The price may have been fixed for 1-2 years with a floating price afterwards.
Anyway, in 2009 Mongolians got WHAT THEY WANTED:
* cash upfront for ETT ...to disperse to Mongolian citizens
* higher initial spread (i.e. selling price) to help the IPO...torpedoed by local politics.
Chalco just priced accordingly "that stuff".
(because some of those elements required by Mongolians had to be hedged by Chalco with banks!)
That's just MY GUESS as I never seen THIS agreement.
If Mongolians THEN were not happy with it,
they should not have signed it.
If Mongolians NOW, including those who received the cash dispersed, are not happy with that contract,
they should discuss with those Mongolians in charge then and who signed it.
The problems behind ETT-Chalco and GOM-OT-TRQ agreements are of the same substance.
The cost to walk away from a contract is always very heavy, much higher than penalties paid or to be paid, especially for a young country that badly needs international markets to finance its growth.
Later Mongolia WILL dictate its terms, later, not now after this disgrace.
Experience will show to Mongolia what that cost is.
Threatening to tear apart a contract is not cheap either,
because the party threatening DOES NOT GET the (potential) benefit upfront of walking away...but suffers the cost anyway.
For more on playing with fire an financial markets,
please have a look at Argentina!
19 Jun, 05:08 AMReplyDelete CommentLike2
"But GOM wanted CASH UP FRONT... for Mongolians...so :)"
--- That is exactly how CHALCO does business. The mega state owned companies pay cash upfront in order to get the best prices and the best deals. GOM wanted to renegotiate the terms and conditions. CHALCO threatened to take this matter to international court, which Mongolia is very sensitive to, therefore ETT has no choice but to fulfill the remainder of the agreement. ETT is currently insolvent with hundreds of millions USD in debt.
GOM should have gotten the Mongolian chess champion boy to negotiate the agreement. I'm sure he would have done a better job.
19 Jun, 05:42 AMReplyDelete CommentLike1
honestly, I don't think Chalco had to insist loudly on that one :) :)
Every potential competitor would have easily guess that CASH UP FRONT was mandatory.
If I had to reply to a Mongolian RFP, that would have been a GIVEN.
Anyway the conclusion, as you rightly pointed it out, is:
Can they extract a lesson from that, move forward, and be much smarter, more knowledgeable when negotiating contracts in the future...and that implies not throwing away the contract, or threatening to do so, if they "lose".
In short "grow up",
which is exactly what I say regularly to my 14 years old teenager "moral hazard on legs" son!
19 Jun, 06:48 AMReplyDelete CommentLike1
I hope it works out for them. It will be interesting to watch to see if their debt reduction will happen as envisioned, in any case.
19 Jun, 01:29 PMReplyDelete CommentLike1
Yes they are sensitive to International Courts Khan Resources, SGS and possibly Chalco? Enebish had to retire for health reasons after this debacle he also claimed that Mongolians would get 20%of ETT instead of the original 10%.
I think that when they took this cash advance they effectively doomed ETT to a cheap sale.If every Mongolian got their ETT shares as promised that would be around $3.3 billion USD the Chalco advance supposedly for the Human Development Fund/ 2008 election promise is only 10% of the money required.As discussed before Mongolians are being cheated out of their shares by not having ID, accepting welfare and health Insurance drip payments and by direct low cash buyouts of shares.
ETT is already insolvent and it is falling in place according the the US embassy emails posted in Wikileaks. The Russians wanted GOM to seize it from the private Mongolian consortium who owned it and then give it to a company of their choosing later. They did seize it in 2007 and imprisoned the Mongolian CEO.
ETT will end up in private hands most likely MCS/MMC who recently got a bonus $59 million for terminating their 19 year private rail agreement. they are positioning themselves via their BVI company.
The Mongolian people have only received 10% of their promised money and i can't see that they will get any more. All companies in Mongolia were owned by the people at one stage ETT is being stripped and will end up in the hands of Oligarchs the same as every other company of importance in Mongolia did.GOM will probably offer it for sale and tell Mongolians what a good deal they got and give them a little more money on the drip feed.
There was a lot of bad reporting on the Chalco deal and outright lies l think MSE Investors scenario is on the money.
This is a hopeless deal and to start off ETT like this is a disaster, the so called Mining boom has straight away turned into a liability costing the people of Mongolia dearly and for what ...10% of what they were promised.
Imagine a Mongolian chess board/? Elizabeth 2 as Queen/Rio Elbegdorj as King, Sir Tony and Prince Andrew as Knights,Russia and China as Bishops, MCS and Monnis as Rooks and poor herders as the pawns.
19 Jun, 04:10 PMReplyDelete CommentLike1
Yes Hong Kong was a bad deal. The Qing Dynasty banished opium from their country as England was making a fortune by turning the country into opium addicts and slaves after the abo;ishion of African Slave trading. Fabricated incidents such as the Arrow War and Second Opium War make very interesting reading and they have one thing in common Englishmen acting outside their authority.
FDR the former American President inherited a lot of his money from Delano his maternal Grandfather who was a Chinese slave trader and opium dealer. FDR wasn't a bad deal but created the "New Deal' and also is responsible for creating the US intelligence network .
21 Jun, 05:38 PMReplyDelete CommentLike3
Maybe the beginning of a very long road to restoring some confidence in the country.....
Anyone who thinks this is not a bigger chess game of power and $$$ btwn countries is very naive imvho. It is no coincidence that Sam Walsh is in the UK at a pre G-8 summit meeting and touching on issues that related specifically to Mongolia.
I wonder if Peabody has any senior people there ?
The tension btwn Russia and US (West) over Syria may have impacts on other "business" in parts of the world like Mongolia.
18 Jun, 09:10 AMReplyDelete CommentLike2
Let me fix that broken link for you. Thanks for the article.
18 Jun, 10:05 AMReplyDelete CommentLike2
very long indeed.
I perfectly understand Altai trying to rebuild the momentum post Securities Markets Law vote
as well as Lee's comments trying to consolidate his group,
but that being said, I don't read anybody else (outside Mongolia) comments.
I have serious doubts about the air time big financial firms are ready to allocate or re-allocate for Mongolia ...while in fact they have been downgrading their expectations !
As I bumped today into a former colleague and we talked about their business plans for Mongolia, the word that came at once from her mouth was "headache" ...and she switched topic to something else.
So outside a small(er) group of people, I am not sure there are still many people paying attention to news out of Mongolia.
(just checking by the "Read Receipt" or "Deleted without being read" it's clear).
Agreed, when looking at what's happening in Syria, in Japan (printing), with NSA, in Detroit, depression here and recession there,...then it'd be better pretty big and positive news from Mongolia to get attention in financial markets.
And agreed again, all kind of countries (not only China, Russia, USA) are trying to move things their way in Mongolia, which makes the situation even more complicated and are delaying everything.
Just hope Mongolians will see through that and make wise decisions for themselves, not only for the short term.
18 Jun, 10:16 AMReplyDelete CommentLike3
"The re-loading costed us 2-3 USD per ton. Therefore we will save tens of millions dollars, and of course time and labour."
It was costing over $60 per ton to transport coal which was around $7 less than they were getting for it. How will $2-3 make this profitable?
"The agreement was made between Erdenes TT and Chalco receiving USD 350 million in 2011. The outstanding debt today is USD170 million. We must pay it out with our coal. According to our calculation it will require 4-5 months to finish off the debt."
I think he needs a new calculator.
"Current seasonal price is USD56 per ton. The price for the next season will be established on 1st of July. Generally, the coal market looks dim. The price is more likely to fall.'
20 Jun, 04:08 PMReplyDelete CommentLike2
Not another Railway deal! Another memorandum to go with all the others recently posted.
Can't help but laugh "M. Kirsan Ilyumzhinov, the President of FIDE (the World Chess Federation)" After our recent Chess analogies.
22 Jun, 04:20 PMReplyDelete CommentLike1
MMC Keeps getting bigger.
25 Jun, 03:34 PMReplyDelete CommentLike2
This story by Matt Chambers missing the point about the dispute.Once again we see a story where greedy Mongolia wants "a bigger slice of the pie" but the actual main sticking point is GOM wants sales income positioned in Mongolia not a tax haven.
Maybe Matt could write a story about Australian tax payers funding the secret deal with Rio for phase two OT?
The delays are not because of the Presidential election the dispute has been going on since DP gained power in the Ikh Hural. The shipments he is talking about at this stage are a few 44 ton trucks miniscule and unfeasible amounts.
25 Jun, 03:55 PMReplyDelete CommentLike2
The result is as predicted a clear win with happiness in the streets intead of tanks.Interesting to see Elbegdorj portayed as " the most friendly to foreign investors."The BBC is using all the Enkhbayar/Tony Blair of the steppes cliche's "fighting corruption", "encouraging Foreign Investment"He has gone from a resource nationalist to the foreigner friendly pin up boy?
Elbegdorj is described as a former Journalist he actually holds a Harvard Degree and he didn't lead the Democratic revolution in Mongolia.He was part of it along with the murdered Zorig and the current UB Mayor Bat Uul.
27 Jun, 06:28 AMReplyDelete CommentLike2
Well at least now we will be able to put the thesis that the TRQ shipments were being held back at the request of the GOM due to the impending election. If the delay was the result of something else, i.e. where the $$ are banked, we should find out relatively soon.... of course by that time the 2016 elections will be upon us .....
27 Jun, 11:12 AMReplyDelete CommentLike3
The next delay will be Naadam. GOM needs to do a better job in stating its reasons to the Foreign media and Foreign journalists need to be more balanced but their media organizations might not want to hear that.
The election cycle is one of the wonders of "democracy" short term aims and posturing designed only to get yourself re elected.The next cycle in Mongolia will be fascinating with the exit of Elbegdorj and maybe the return of Bayar? The DP has done a good job rooting out many of the Enkhbayar placements in key positions and so many of the MPP/MPRP MP's have so much dirt on them that it will be hard to run for high office.
A lot of Foreign mining companies have wasted a lot of money backing the wrong horse so now they will have to deal with the dangerous Resource Nationalist now supposedly Foreigner friendly Elbegdorj
27 Jun, 04:05 PMReplyDelete CommentLike2
Xac Bank is going for a new promotion style.
30 Jun, 04:40 AMReplyDelete CommentLike2
"There is no significant problem with the Oyu Tolgoi mineral export contract," Davaajav Gankhuyag said. "The first shipments will start on July 9."
This is suppose to be a quote from the minister's twitter account today, unfortunately I am not fluent in Mongolian and can not confirm his comments....
7 Jul, 06:40 PMReplyDelete CommentLike1
Glad to see a comment KF. Do you have a link for that? Tomorrow it will happen ?
l would call sales income being declared in Mongolia a "significant problem" but the Mining Minister doesn't.
8 Jul, 03:04 AMReplyDelete CommentLike1
I think it is pretty widely reported today. I picked it up first in a Montreal source and then checked the ministers tweets, where there were several, but all in Mongolian. I was unable to translate but he did appear to be busy yesterday.
Doesn't appear to have helped RIO today though. On the ASX, it was down 2%. TRQ is bid up in NA pre market, up ~$0.54 USD to $6.00 USD or almost 10% with just under 20K shares traded.
Still a little suspicious and odd though as nothing from RIO/TRQ that I can tell, and an arguably important government announcement being made by the minister on his twitter account ?!
This doesn't appear to be a good signal imo. I think it actually looks like they, GOM and RIO/TRQ are still not on the same page and are still posturing.
8 Jul, 08:49 AMReplyDelete CommentLike3
Seems the Enkhbayar corruption case may be hotting up again. Bilegt has been arrested on his return to UB.It smells like some kind of deal has been done?Enkhbayar's sister was wanted by Interpol but the MPRP junior Justice Minister wrote to them requesting to have her removed from their wanted list.
Guest Investor Comments (20)
Here is what the court sentence states exactly:
"N. Enkhbayar, with the Ulaanbaatar City Mayor and Director of the capital City Property Privatization Commission of that time, T. Bilegt and D. Chuluunbaatar , illegally purchased the Ulaanbaatar Times printing house under the name of Do. Chuluunbaatar and under the Media Holding company to be registered under his sister"s name N. Enkhtuya, and further registered it as a subsidiary to his own company, which the court deemed that it caused huge damages to the Capital City."
Guest Investor comment December 9 2012
'Note that the former mayor Bilegt was not sentenced, even though it was he who approved the privatisation. Bilegt is hiding somewhere in the United States where he went for health reasons and never returned.
The prosecution could not prove Enkhbayar's link to privatisation, so they found a roundabout way - they conjectured that since he later has acquired the company which gave financing to management team which won the privatisation tender, so he must have been an ultimate beneficiary and he must have organized this illegal conspiracy all along back in 2008!
But not a shred of hard proof was produced - not a single piece of written evidence with his signature at the time of privatisation, no witness testimony, no testimony of "co-conspirators", nothing."
'It turns out that in 2010, Mr. N.Enkhbayar, retired former president of Mongolia, has decided to go into private business and became CEO of a company called "Eskon".
"Eskon" in turn has acquired another company called "Media holding" owned before by N.Enkhtuya, his sister.
Two years earlier, in 2008, this "Media holding" company has given a loan (several hundred thousand dollars) to managers of "Ulaanbaatar Times" newspaper.
So essentially the case against Enkhbayar is that he became a CEO of a company which acquired another company which two years before gave a loan to managers of "Ulaanbaatar Times" which money they used to win the privatisation tender which might have been disadvantageous for the state (which btw they also failed to prove)."
8 Jul, 03:44 PMReplyDelete CommentLike2
Seems like they got that 44 ton truck fired up?
9 Jul, 04:12 AMReplyDelete CommentLike2
Probably the best coverage of todays events,
9 Jul, 10:03 AMReplyDelete CommentLike2
Interesting that it would be on twitter and not an official Government announcement .Still no detail on the main sticking points and a possible resolution? They are obviously keen to get something moving there resolved or unresolved. No speech from the Mongolian side only McRae? Was it Shakespeare who said "one swallow doth not a Summer make"?
9 Jul, 03:40 PMReplyDelete CommentLike1
Apologies to Aristotle
10 Jul, 03:29 AMReplyDelete CommentLike1
What the hell is going on .... trucks rolling and now this from the new prez ...... (from an AsiaOne article)
"ULAN BATOR - Mongolia's re-elected President Tsakhia Elbegdorj was sworn in Wednesday, promising rapid development amid a resources boom."....
" In his speech Elbegdorj promised years of rapid development to come, including cheap ecologically friendly power and a new railway."
'Roads would be built from each region to Ulan Bator, and the capital would have highways and a metro. "New towns will be built in Mongolia," he added.'
10 Jul, 07:57 AMReplyDelete CommentLike2
and this is, well ..... as close to a 180 as I can recall
and not being lost on the analysts
and more from the swearing in of the new/old president
"It is the time for Mongolia to consolidate our achievements and aspire to a faster and more intense development. We shall accomplish our goal to supply ourselves with environmentally friendly and affordable energy," he said.
"We shall support investments into education, health, local development, infrastructure, new technologies, and enterprises with clear and stable policies." The Mongolian leader also pledged to continue constructive cooperation with other countries and international organizations.
"We shall work to promote mutually beneficial and constructive decisions in bilateral relations with our neighbors in infrastructure, investment, trade, transit transport, and other pending issues."
10 Jul, 08:13 AMReplyDelete CommentLike2
16 Jul, 03:10 AMReplyDelete CommentLike2
Is this the new "Dutch Disease"?
"It created more jobs than any other company in Mongolia"
Yes jobs for the estimated 6000 Chinese construction workers and very few for Mongolians.
18 Jul, 03:18 AMReplyDelete CommentLike2
"In general, if there are more companies working in Mongolia through the Netherlands, there is the risk of losing tax revenue," she told Reuters in the sail-shaped Blue Sky Tower in the city"s financial district. "In terms of the amount of investment, it"s significant to our economy."
--- Then don't sign the treaty. Tax treaties build trade, relationships, and economic growth. Just ask Singapore and their endless list of tax treaties.
"Yes jobs for the estimated 6000 Chinese construction workers and very few for Mongolians."
--- Even the Chinese workers spend money in Mongolia and thus ultimately create jobs for Mongolians as well. Even if they don't, with increased business and tax revenues, Mongolia can be like Qatar and hand out generous benefits to its citizens for life.
22 Jul, 11:30 PMReplyDelete CommentLike1
"Turquoise Hill was created in 2009, five years after Mongolia and the Netherlands signed a tax treaty to avoid double taxation and boost investment in Mongolia. But in 2011, Mongolia decided to cancel the pact, arguing that it would cost the country income from one of the most lucrative gold and copper mines in the world."
"Until June 27, 2004, the predominant party in Mongolia was the ex-communist party Mongolian People's Revolutionary Party or MPRP. The main opposition party was the Democratic Party or DP, which controlled a governing coalition from 1996 to 2000.
From 2000 to 2004 MPRP was back in power, but results of the 2004 elections required the establishing of the first ever coalition government in Mongolia between the MPRP and MDC (Motherland Democratic Coalition).'
Once again we have the situation where the bad deals of the MPRP have been cancelled by the DP. 2003-4 was the height of the Russian debt repayment scandal, the dodgy deal for the exploitation license for OT and seemingly some nice cosy tax agreements with the Netherlands.
Singapore is the second smallest city state behind the Vatican with no natural resources their situation is quite different to Mongolia. GOM wants sales income to be posted in Mongolia and not the Netherlands and the DP has a mandate from the people to make these changes. Do we want to interfere with democracy?
23 Jul, 04:01 PMReplyDelete CommentLike1
A deal is a deal. 34% is a bad deal? There have been far worse deals. China (Qing Dynasty) leased HK to England for 100 years just to stop the Opium War. Since then, ROC and PRC, both governments that came to power from revolution of the people, honored that horrendous deal.
The fact that Singapore is the second smallest city with no natural resources and was once thought to be doomed after they were separated from Malaysia became a top wealth per capita and the top FX reserves per capita country should provide a great example of what Mongolia should do. Keep taxes low, maximize rule of law, abolish corruption, honor contracts, and build from there.
Parliamentary election is every 4 years in Mongolia. What's there to prevent the next government in power to renege "bad deals" made over these four years under DP's governance?
The people do not know any better. Political elites use soviet propaganda to brainwash their own people when these policy changes would only make things much worse for the Mongolian people. They are only looking to empower themselves, the elite 1%, and are salivating at the trillions of dollars of investment and tax revenues coming in.
Mongolia has convinced me that democracy cannot work in any frontier market. Mongolia will be stuck in the middle income gap. The 1% will be filthy rich while many will stay in poverty.
26 Jul, 01:19 AMReplyDelete CommentLike1
34% is the percentage that GOM can take of any company. Any western government can use their mandate to change bad deals and policies. In Australia we have the Mining Tax, Pacific Solution and Carbon Tax as recent examples. The problem with the so called democratic system is that the incoming Government can exercise it's mandate. In Mongolia's case l think the country is in for a DP era so Investors better get used to it.
Which markets does "democracy' work in? It is only a recent manifestation post 1850 in UK as the house of Lords used to fight the ever increasing power of the Lower House.
Tax is a problem in Mongolia as foreigners are slugged with a 40% tax while rich locals don't seem to know what the concept is.
Soviet style propaganda? I think the Rio shareholders such as the British Royal family would also be" salivating at the trillions of dollars of investment and tax revenues coming in"
26 Jul, 04:14 AMReplyDelete CommentLike1
"Australia we have the Mining Tax, Pacific Solution and Carbon Tax as recent examples."
--- Australia is not a good example. 1) They are already a developed country. 2) In the beginning of their development, they had very mining friendly policies. Nothing was mined privately until these policies were implemented. 3) Until Mongolia gets the $40,000+ GDP per capita range, it would be best not to do direct comparisons. 4) Canada and Indonesia are gladly taking Australia's market share and will very gladly take Mongolia's market share too.
" In Mongolia's case l think the country is in for a DP era so Investors better get used to it."
--- We are in the middle of a global hard commodities bear market, China slowdown, another pending global financial crisis, and shareholders are no longer interested in high risk investments such as OT in Mongolia. Mongolia better get used to it. The last four years were only due to a case of easy hot money coming into Mongolia.
"Tax is a problem in Mongolia as foreigners are slugged with a 40% tax while rich locals don't seem to know what the concept is."
--- Ditto about the tax issue. I have had my fair share of last second increased taxation and double taxation in Mongolia.
"I think the Rio shareholders such as the British Royal family would also be" salivating at the trillions of dollars of investment and tax revenues coming in"
--- Greed is fine as long as it is transparent and straight forward. I would need an entire page to list all the ways that OT benefits Mongolia and the Mongolian people overall. I cannot say the same for the political elites. More government welfare and appeasing irrational public sentiment to get votes are not good for Mongolia in the long term.
26 Jul, 08:13 PMReplyDelete CommentLike2
Erdenet was developed during the cold war and kept secret for a time. Enkhbayar embezzled a reported $10 million per annum from the mine during his time as Prime Minister.This is great news that Ganzorig has been arrested and hopefully the money stolen from the Mongolian people can be returned. Enkhbayar critically ill? come on don't make me laugh.He was in the State second hospital which is luxury for politicians then transferred to the luxury section of Gandshudag Prison.
18 Jul, 03:29 AMReplyDelete CommentLike2
Why the TRQ's perform poorly so far ? It was just 6-7% spike in the first shipment date of copper . This was a $20 stock not so long time ago. I thought the conflict with GOM should be eased now . What keep the share price depressed ?
18 Jul, 10:00 AMReplyDelete CommentLike2
No one believes that everything is sorted out there are still 22 sticking points. The Mongolian way is to make big decisions at Naadam and Tsaagan Sar time. l'm surprised that they got any spike surely investors are more sophisticated than that.Mccorj l love your comment. i don't think they are clueless they are skilled manipulators with access to a lot of information and power which they have used/abused for their own purposes. America needs to be a lot smarter and have better caliber people representing it in Mongolia
"The primary advocate for Enkhbayar's tainted international businesses, John L. Thornton, is the main perpetrator of the campaign to politicize and hype Enkhbayar's case. A professor at Tsinghua University in Beijing, he is also a member of the International Advisory Council of the Chinese sovereign wealth fund China Investment Corporation. When he was serving as the President and Co-CEO of Goldman Sachs, Thornton visited Mongolia numerous times, and became quick friends with Enkhbayar.""as Enkhbayar's puppet. Thornton spread vicious rumors worldwide for his "good pal", and provided mostly bogus information to influential figures in London, Washington D.C, and some international organizations. His partner Minton's close ties with Enkhbayar date back to when he was serving as US Ambassador to Mongolia. Minton provided an incorrect forecast of the 2009 election results to his superiors, assuring that Enkhbayar would once again be elected President. '"Another great advocate for Enkhbayar has emerged from all the way across the pond, in the distant United States of America. Senator Dianne Feinstein, an elderly lady of almost 80 years of age. With her money and power she ranks in the top four influencers of current USA policy, and is a close friend of Secretary Clinton. Senator Feinstein is also the wife of Richard Blum, one of the top billionaires in America, and is the richest woman working in the US Senate. Daughter to a Russian Jew who fled to America during the October Revolution, she detests communism, was born and raised in San-Francisco, and represents California in Congress. Enkhbayar first met Mr. Blum and Senator Feinstein in 2002 in the States. In order to utilize the status and reputation of this influential billionaire, Enkhbayar asked Mr. Blum to become an Honorary Consul of Mongolia. "
18 Jul, 05:12 PMReplyDelete CommentLike2
Minton, Feinstein, Thornton ----no one interested in the progress of Mongolia should pay any attention to what they say.
Clueless asses----get the news out. They should have no say or opinion of anything in Mongolia-- they talk as if they knew. What nerve. They do not represent Americans well. We are our own worst enemies when it comes to our reputation. We actually allow freedom of speech even if you haven't a clue as to what is actual fact.. excuse us. we know they're useless.
18 Jul, 10:02 AMReplyDelete CommentLike1
That first link didn't work.
18 Jul, 05:36 PMReplyDelete CommentLike2
How Enkhbayar influenced Minton, Thornton and Feinstein seems to be part of the existing corruption issue currently being addressed. Is it possible that other Mongolian citizens who fell under his web, knowingly or not, might be creating unsavory issues that are slowing the progress of their country by trying to isolate the country. It seems that the benefits of OYU TOLGOI can be so huge that the focus is diverted from the benefits to what is perceived as the greed of outside investors.
I can agree the the country has made progress with the Netherlands in highlighting an unfairness in the double tax issue, which hopes to be addressed, but to purposely delay OYU TOLGOI until every eventual goal is addressed is disingenuous. When Mongolia needed the existing agreements they signed them and received the funding under the agreed circumstances. Some of the issues currently requested would have squashed the original agreement.
They seem to be adding "bait and switch" trickery to fill in the gaps of the corruption steps they are fixing-----hence no gain. I'm beginning to believe that if you fix all 22 issues they say are pending--------another 22 will arise.
It is the impression generated by the government.
thx for your above reply.
19 Jul, 09:05 AMReplyDelete CommentLike2
Enkhbayars influence still directly affects these issues today his key placements in all areas of mongolian life are slowly being dealt with.Mongolians are angry that Enkhbayar alone gave Friedland the exploitation license for OT in late 2003 for $50 million. This was reportedly issued in Ivanhoe bonds then used as part of the Russian debt repayment. The money disappeared via a third European country and ended up in the pockets of the 31 corrupters of Mongolia the then MPRP.No wonder the populace is angry and doesn't like this deal.The potential for OT is huge but will the average Mongolian ever feel any benefit? This money will never be distributed fairly to its small population. The only "benefits' now are out of control inflation,environmental destruction, unaffordable housing and empty promises for ETT shares which will soon be worthless.
The signing of the OT deal was done under the previous Government and many others including the ETT /Chalco deal are a disgrace. Mongolia now has to pay to truck coal to Chalco and on top of that agree to pay higher interest on the $350 million advance or risk legal action.Minton it seems was easily influenced he should have been checking the pulse of the Mongolian people and not Miss Mongolia's pulse.
19 Jul, 05:44 PMReplyDelete CommentLike2
time to resurrect a response from MSE investor to Dulleye farmer. One of the best solutions to some of the issues in Mongolia was printed in this article on March 15 in Jon Springers Instablog covering Mongolia.
Rather than damning everybody in one blanket, why doesn't the hierarchy in Mongolia Lead their folks "prioritize their partners bringing EQUITY into their country. THEN prioritize debts or loans for project finance thereby sharing little equity, RETAINING additional equity upside".
Draw a line in the sand. Forget past glitches, punish the corrupters. All new funding should start with Mongolia aiming to fund and
develop their own SWF for their own growth starting with new investment laws now. Get started. Grandfather the ---pre new laws. Stop the energy your wasting on corrections. Get moving. You've developed a very poor business reputation . You could change that quickly and jump decades in the process.
Jon, you have some great contributors and great suggestions. one of the best blogs I've witnessed. thx
20 Jul, 01:45 PMReplyDelete CommentLike2
Yes I'm missing MSE. His passion and experience is very refreshing. Maybe he is still drowning his sorrows after Elbegdorj's clear win ? I feel pushed into a counter role at times as no one is highlighting the other side and most investors seem to consider the DP and Elbegdorj dangerous resource nationalists. As I stated before Australia had it's own version of this with the Whitlam Government who dared to "buy back the farm"Recently we saw PM Rudd dumped partially for daring to try and introduce a Mining tax.If you upset the big miners then they have the ability to deal with politicians.
MSE has great advice based on his experience and he is very generous with his time and opinions. GOM really needs a person like him as an advisor and not pretend ones like Tony l'm everywhere Blair paid lobbyist/pretend GOM advisor.
As far as SWF creation goes ETT is already insolvent thanks to the MPRP deal signed with Chalco and other costs. This was supposed to be the flagship SWF sharing 20% of its wealth with the Mongolian people. Now it is a disaster with the bottom feeders waiting to snap it up. Very similar to what happened to Erdenet and many other State/People owned companies.
I think Mongolia is running a kind of parallel universe courting Foreign Miners but keeping it's Russian trump card in the background. It's my feeling not my area of expertise.
The DP knows it has to punish corruption on all sides and it is starting to do that even some DP hierarchy have been sentenced.
I wish to highlight corruption and in particular the uninformed and often ridiculous initiatives by Foreign Governments in Mongolia.
Looks like a lot of the contributors are over Mongolia over one year we have seen the salesmen and apologists the insiders and Investors all pushing their cases. To me it's what isn't said that I find most interesting. Looks like it's just you and me mccorj?
20 Jul, 06:05 PMReplyDelete CommentLike1
It seems to me that the government is promoting Mongolia's situation as a trade corridor, as it primarily should be.
21 Jul, 02:02 AMReplyDelete CommentLike1
This is the opinion of a blogger not GOM policy
'The Manchu success was attributed to their ability to marry Mongol military technique with Chinese administrative government.'
The Qing Dynasty was an alliance between the Manchu and the bordering Mongolian banners that were invited to rule China after Beijing was over run with bandits following the collapse of the Ming Dynasty. They didn't just marry Mongolian military technique the nobility married Mongolians and vice versa. The Qing nearly always had a Mongolian as head of the Military.It wasnt until Empress Cixi and Prince Kung (both part Mongolian) allowed Chinese generals into the military that the trouble started for the Mongolians.
The Han had always been pushed into the Arts or administration and kept out of power.
The Qing were using private armies headed and equiped by Americans. They ended up owing Frederick Ward a lot of money so he was convieniently shot in the back during a battle.Ward had married a Chinese gangster's daughter and bought 2 American gunships that he used for his smuggling operations.
New Chinese Generals Zeng Guofan his beother Zeng Guoquan and student Li Hongchang didn't want the Mongolian military to get hold of the modern American weapon. they devised a plan whereby Senggerinchin the Qing Military leader and his Mongolian cavalry would be wiped out during a battle with the Nien in 1865.The Chinese generals supposed allies turned on them during the battle and wiped out the remnants of the Second Opium war Mongolian Cavalry.This was the turning point for he rise of power of the Han Chinese in China Li Hong Zhang went on to become the most powerful man in China and began modernising Chinese Industry and capability.
I wouldn't call Mongolia a transit corridor i would call it a transit obstacle with a delapidated railway and goat tracks for roads.But it has potential.
21 Jul, 05:47 PMReplyDelete CommentLike1
The government is working along the lines the blogger describes toward the end of his article. The government wants to diversify the economy away from the "Minegolia" concept by promoting trade and working on the infrastructure. They have indicated they don't want the economy to be dominated by foreign mining companies. How successful they will be about doing all this remains to be seen. Much depends on the outcome of their negotiations with the foreign mining companies, Russia and China.
22 Jul, 12:05 AMReplyDelete CommentLike2
22 Jul, 12:33 AMReplyDelete CommentLike1
Unfortunately the people of modern day Mongolia consider themselves ar mongol part of the 600,000 chosen ones to be part of the true Mongolia. They don't acknowledge or appreciate the many other Mongolian groups as being genuine. Mongolians in the so called buffer states are referred to as ovor Mongol and the detested Chinese are referred to as omkhee xujaa (smelly go back home).
22 Jul, 04:55 AMReplyDelete CommentLike2
That is unfortunate in the sense they could have built up stronger trading links and enhanced security with their immediate neighbors from an earlier time. But I can also see why the Khalkha Mongols adopted a defensive posture due to the pressure coming from Qing China.
I can see that the history of the region contributed to a sense of isolation which tended to hobble economic progress. But it looks like Mongolia has a good chance to retry for a national renewal.
22 Jul, 05:00 PMReplyDelete CommentLike0
I agree with Valleyboy on the point of Mongolias national renewal.
Saw a great article by an anonymous writer in the Monday July 22 issue of UBPost called "fair distribution of natural resources".
It seems to be exactly on target. Mongolia could be the transit point between Europe and Asia. This should be a major goal. Create this infrastructure as you grow.
While developing your democracy, stop looking backward all the time. You've identified corruption. Assign it as a function--it's one ball in the air. Keep an eye on it but move ahead with the next step in your hierarchy. You've identified the issue with the Netherlands double tax problem. Netherlands sees the issue and sees it may need fixing. Keep an eye on it.
Get your revenue targets focused and working for the whole population (properly and fairly distributed, SWF for the future) etc etc.
The UB Post article says it well.
As a democracy, others expect you to act democratically. Honor your agreements. If, as times change, they need to be adjusted, do so democratically with the agreement of the original parties. You can't expect anyone else to rely on you if you "bait and switch" or rethink a prior regimes decisions. Those decisions were made democratically and the world should expect you to adjust to changes democratically.
This could take you a long way in the direction of being a world transit point as the global power is switching from west to east.
Apologies for length of discourse.
24 Jul, 11:56 AMReplyDelete CommentLike3
Speaking of East- West Eurasian trade, Mongolia's main competition is the overland freight corridor going through the Dzungarian Gate between Kazakhstan and China. That route offers a direct link between the Chinese heartland and Europe, bypassing Mongolia from its west. That border crossing is a magnet for economic development.
Mongolia is working on a similar scenario with its border crossings with Russia and China. Mongolia therefore has the prospect of developing two new economic hubs.
24 Jul, 03:21 PMReplyDelete CommentLike0
Comments on Savings Bank collapse?
24 Jul, 03:26 PMReplyDelete CommentLike1
There are so many "Banks' in Mongolia now and each party seems to set up a new one to handle Government business like the recently formed Turin Bank.
There was the famous scandal involving the former General Secretary of the MPRP Khurelsukh who recently sold seat to MAK company.
The Savings Bank was cleaned out by them and the money blown at a Seoul Casino . We have covered this fact numerous times in the blog.It was sold to Sergei Badrav? from the Chinggis Khan Bank and large indiscrepencies were found in the accounts.
This is the same Savings Bank and a good summary of it's history.
The Zoos and Anod Banks being taken over by the Mongol Bank is interesting.One of these Banks failed because a certain high profile Mongolian Gold Miner refused to pay back a reported %70 million nd the other went down as a result of the new Narantuul Market development on the other side of the train line near the current market.
We need to lure MSE Investor out to make a comment on his area of expertise or Pat Mongolia's resident debt advisor.
24 Jul, 05:48 PMReplyDelete CommentLike1
Apologies to Sergei Badrav who is the producer of the historically inaccurate but photographically brilliant Mongol movie. The Savings Bank was owned by Sergei Grommov and as far as I know none of the people who lost their life savings when Khurelsukh and his 2 accomplices blew the money got their money back. As far as assets being transferred to the Mongol Bank lets see what really happens?
25 Jul, 12:51 AMReplyDelete CommentLike1
As stated before in this blog Khurelsukh has apparently been "studying " in Australia no doubt taking advantage of the Australian taxpayers and the Australian Goverments complete inability to screen and control its visa and scholarship programs.
27 Jul, 04:38 PMReplyDelete CommentLike0
A clearer view of the OT situation from the Mongolian side.
27 Jul, 04:52 PMReplyDelete CommentLike1
'State Bank was formed by the government in 2009 to hold Anod Bank and Zoos Bank and functions like a commercial lender. Mongol Bank is the nation's central bank."
The Bank was the last State owned Bank to be privatised and was sold to the Grommov consortium for $20 million USD in 2006. Interesting runners up the Anod-Monnis consortium.
Unless there is confusion with the Turin Bank
the story in the first link is incorrect.
The State Bank which collapsed is not this newly created State Bank.To save confusion we could call the former a laundromat as its primary function was money laundering and the latter ring fences other failed Banks.
27 Jul, 05:22 PMReplyDelete CommentLike1
Dulleye, you are a wealth of information and for many of us, the only source---so I for one would like to read you every day. is there any site we could look up for current daily news and information on all things mongolian, not just the Oyu tolgoi dispute. thx
28 Jul, 10:03 AMReplyDelete CommentLike0
Thanks for the appreciation. Unfortunately l have to work so sitting on my butt all day behind a computer isn't an option. l would consider a career change, any offers?
Getting info from Mongolia can be like pulling teeth l just try to join the dots and unlike a lot of Foreigners in Mongolia l try to keep an open mind instead of sticking to a fixed agenda.
It astounds me the stupidity of Foreign missions to Mongolia in particular Australia, the network of dirty Government departments and NGO's on both sides makes me sick.
Emails and international phone calls are monitored and as we experienced with the UB Post if a vibrant blog gets up and running they "change servers" delay and censor it or don't publish your comments at all.
28 Jul, 05:23 PMReplyDelete CommentLike0
Ever wondered what happened to B.Enebish the man supposedly responsible for the signing of the unbelievably bad Erdenes Tavan Tolgoi deal with Chalco and promised the Mongolian people 20% of ETT?
He resigned due to poor health but appears in fine health in Canberra as guest of Ambassador Ravdan Bold former US Ambassador and former head of the Mongolian G.I.A.
Accompanied by former Boroo Gold employee now "President" of the Mongolia Association of Victoria.
In recent years Australia has provided an education/haven for Enebish, Khorolsuren (Miat/ Golomt Bank Scandal) now in prison for 10 years, Shilegdamba now former General Secretary of MPRP and several other very dodgy people in positions of power in Mongolia. Australia is really becoming an embarrassment. I was once told that "the Australian Government is very stupid and easy to fool" seems they were right.
28 Jul, 06:46 PMReplyDelete CommentLike1
Tony is back spruiking Rio Tinto again.His "delivery unit concept" doesn't come cheaply.
The facts are that UK has an extremely low aid budget in Mongolia in 2006 it was around $140,000 pounds a pittance compared to what the US and Australia have squandered. The former Ambassador was married to a Rio executive and they would provide limited checks if required for the Australian government.They also hosted Prince Andrew several times to lobby the GOM until his fall from grace.
They were involved in the arrest of Bat Khurts
29 Jul, 05:51 PMReplyDelete CommentLike2
Two of my favourites in one article.Superb comments from Baabar. The day the MPRP introduced the Windfall Profits Tax a Rio employee in UB told me that Mongolia just missed the Mining boom. It produced an instant black market in gold and caused a damaging standoff that wasted valuable time.This tax is a bit like the Mining Super Profits tax in Australia it appeared to be tough but in reality produced nothing except scare mongering.
Love his reference to Dante's inferno , I used to call it Infante's inferno after the former head of the Asia Foundation in Mongolia and great political meddler Bill Infante. He maintains a role in Mongolia through Breakthrough PR run by his wife who is a member of Business Mongolia and this blog.
A former TAF head Layton Crofy left this "aid" organisation to be installed on the Ivanhoe board and is now an "at large Board member" of the American Center for Mongolian Studies.What a strange career path.
30 Jul, 05:05 PMReplyDelete CommentLike2
DEF, it's clear to me that you should be working in intelligence. :)
31 Jul, 12:13 AMReplyDelete CommentLike1
Australia isn't interested in intelligence it will show their zero tolerance policies to be laughable. They don't want to do things that are fair and honest/accountable they want to only support a small group of Mining companies to get what they want from Mongolia. The MASP scholarship programs are supposedly run by 2 Australians one is a wealthy wife of a Mongolian Mining executive how on earth can that be transparent?
There has been a series of very bad incidents regarding Mongolia/ Australia that have been ignored as they think they will be getting what they want. When then Foreign Minister Downer visited Mongolia in 2007, as a sideline he gave $10,000 to the Lotus Children's Orphange an incredible place run by Didi Kalika an ex pat Australia who has been in Mongolia over 20years and cares for over 160 children.Australia has squandered over $63 million mostly on ther bloated contracts and packages for the "Scholorship" programs. The $10,000 is a pathetic insult when you consider the caliber of people who have been given around $70,000pa to study in Australia.A large drilling company once claimed to have given Lotus orphanage $50,000 Didi told me they said it on their website but no money ever came their way.MCS also offered to "sponsor" Lotus and if they agreed to call it the MCS Lotus orphange they would give them 10 vacant acres for a new development on the NW side of UB. Didi has high standards and declined their offer.
Who is interested in the truth ? As Baabar pointed out In Dante's 'Divine Comedy' the sin worse than injury was remaining silent while next to the filthy and vile.
31 Jul, 05:04 AMReplyDelete CommentLike1
Cameron McRae is leaving Mongolia. He will join a list of executives who left Mongolia in the last year some very hurriedly as in South Gobi case and others in a more orderly fashion.Putting a Mongolian in charge won't change anything just ask the Mongolian former head of TT consortium who was imprisoned as the GOM siezed it back from it's Mongolian private owners in 2007.
Nothing much is being resolved l think Mc Rae has done a poor job.
31 Jul, 04:58 PMReplyDelete CommentLike2
It seems that President Elbegdorj has given former President Enkhbayar a Presidential pardon!
As l posted on June 8 Bilegt the key man in the matters that had Enkhbayar imprisoned returned to UB from the US and was promptly arrested. There has been a deal of some kind
1 Aug, 04:10 PMReplyDelete CommentLike1
"He has been cleaning the mess that has former Ivanhoe Mines (currently Turquoise Hill Resources) VPs, managers and the former CEO Keith Marshall left."
I think he made plenty of his own mess such as the South Gobi Sarah Armstrong .Justin Kapla ongoing dispute. His stonewalling and inability to explain and unwillingness to spend time in Mongolia created a poor impression.The huge private share placements to Monnis remain unexplained.
"It was also at Mr.McRae's tenure, the company's public relations VP has been replaced with Houston Spencer after he saw that OT LLC is not doing well on informing and promoting the public about the project."
That is understatement of the year.Their PR has always been appalling and transparent in its methods.
"Rio Tinto's style of prolonging and transparency lacking approach along with the government's inconsistency and instability has been a perfect cocktail of the current debacle."
2 Aug, 05:08 PMReplyDelete CommentLike1
2 Aug, 08:08 PMReplyDelete CommentLike0
"The total assets of State Bank, which was established after Zoos Bank was closed down, expanded five times overnight, whilst its own assets were increased by 100 billion MNT. This is money paid by our taxes."
I repeat my post from July 27. Jargalsaikhan is confusing the two "State Banks". Surprisingly innacurate article from Defacto usually I enjoy reading them.
'State Bank was formed by the government in 2009 to hold Anod Bank and Zoos Bank and functions like a commercial lender. Mongol Bank is the nation's central bank."
The Bank was the last State owned Bank to be privatised and was sold to the Grommov consortium for $20 million USD in 2006. Interesting runners up the Anod-Monnis consortium.
Unless there is confusion with the Turin Bank
the story in the first link is incorrect.
The State Bank which collapsed is not this newly created State Bank.To save confusion we could call the former a laundromat as its primary function was money laundering and the latter ring fences other failed Banks.
6 Aug, 05:00 PMReplyDelete CommentLike2
Was asked what I think about the following statements:
-rio is spreading bad rumors about mongolia with the international media to knock the price of trq down from 20 to 4 in 2 years.
-most of rio's problems in mongolia are self inflicted and minor issues generated to create news flow for overseas media consumption and trq price manipulation
- timing of camron mcrae, ceo of trq's resignation right during the death spiral is highly suspicious
- rio is rumored to be leaving copper on the mongolia side of the border so they can claim that the mongols wont let it leave
- they are making up nonsense on the issue of mongolia's parliament needing to approve the phase 2 budget as PM just said it was bogus.
-they are accelerating phase 2 so that they have a capital need when none should exist under the mine-plan.
7 Aug, 10:43 AMReplyDelete CommentLike2
My Quick thoughts (15 minutes worth)...
There's an old Mongolian (and Chinese) saying, "Sometimes you have to kill the monkey to scare the chickens." Since about February of this year, if you asked me what should be the headline for a story about the situation in Mongolia today, I'd say: "Mongolia Kills Too Many Monkeys."
Mongolia was warned repeatedly about their schoolboy tactics of always demanding more from Ivanhoe/Rio/Turquoise Hill. The schoolboys in government and major corporations - the rich families of Mongolia who will be on top whether the economy booms or collapses - were told repeatedly by the foreign corporate management of the country's greatest asset - and particularly often by Cameron McRae - that they were going too far and that there would be consequences to pay.
However, the whiny schoolboys persisted and engaged in shenanigans. For Mongolia's schoolboys to now accuse Rio of itself engaging in shenanigans now is laughable. It is the government line, and what the government allowed to leak into the international media for weeks and months at a time over the past few years that originally weakened Ivanhoe/Turquoise Hill's share strength. It was the government's desire to toy with this asset, and these corporations, that weakened the company, and its share price, sufficiently to ouster Robert Friedland and put Rio in full control.
And let us review who Robert Friedland was to Mongolia. He was the white guy that put Mongolia on the global investment map. He was the guy that promoted investing in the rocks beneath the frozen steppe. He was the one who dug deep enough to find Mongolia's riches where others had tried and failed. However, at the end of the day the childish school boys didn't like the stories on the street of what happened behind closed doors in hotels and offices, and decided they had some sort of ill-advised vendetta against Mongolia's greatest promoter in 500 years.
Rather than being strategic like Chinggis Khan would have been and realizing Friedland was their greatest international marketing asset, they more or less worked to throw him out of the country and celebrated Rio's takeover of the Turquoise Hill asset like hostages rescued from an armed bank robber.
And yes, the school boys did this all while the price of copper and gold went up, and the share price of Ivanhoe/Turquoise Hill should have been going up as well. They thought these prices would go up forever, and they had all the time in the world to claim their prize, develop their greatest asset, develop their economy. They dallied on every infrastructure development. They played games with smaller mining outfits. They changed rules after agreements to make life more difficult for foreign investors. They played the games of the nouveau riche against each other, focusing more on turf wars than the development of the nation. Well played it was not.
For now, the whiny well-off school boys, and the foolish citizenry who votes for them and chooses to defend one group in power over another (as if there's a difference) all reap what they have sowed. A major global corporation now owns your country's most important asset. They control its development. Moreover, they are limited in how many shares of the company they can accumulate each year by Canadian laws halfway around the world. The price of copper and gold is down. The stock would be down just for that. Rumors spread driving the price down further only to make the major corporation's slow accumulation of shares cheaper. You have played them and now you accuse them of playing you?
I don't know if that is true, but turnabout is fair play.
Thus, in a country that for 700 years has had their men wrestle topless because they are afraid of unknowingly being beaten by a woman, all I can say is: Ladies of Mongolia, remember your great queens and princess, and take control from these whiny boys. These school boys convinced you to give up your heritage and move to the city with the promise of a booming economy and then whined their way into destroying the economy before it ever started. Go beat them.
7 Aug, 10:44 AMReplyDelete CommentLike4
I'll try to clean out the old messages in the next few days folks... nice to see some are still here...
P.S. TRQ is good for the trade, but pointless to hold.
7 Aug, 10:45 AMReplyDelete CommentLike1
The queens did much to rise the spirit of the country through troubled times.
All the best to Mongolia!
7 Aug, 12:52 PMReplyDelete CommentLike1
Just a quick stunt
(SA deleted some of my comments without any decent reason so I was "on strike")
here before something longer afterwards.
About ladies of Mongolia I 100% agreed with Jon.
If ran by Mongolian ladies and chess players (or both) Mongolia would already compete with Qatar !
I read Mongol Queens and clearly there are still quite a number of that calibre in UB nowadays.
After Chinggis Bond I,
one may wonder what could be the name for #2 (if ever).
May I suggest:
"Sorkhokhatani Khatun Bonds" :)
For what I read, this one was not bad in the IQ / survival instincts league tables.
Also on the topic of the "bad" OT Agreement, may be the descendants of Chinggis Khan could remember the common sense and the survival (in a tribe / group sense) instinct of their hero.
I am no expert in Mongolian history so please correct me if wrong.
What about "Jochi" the first "son" of Temujin?
Wasn't he the result of his wife Borte being kidnapped and raped by Merkits?
Did Temujin kill him or kick him out when he got Borte back? No!
To secure the survival of the tribe and the leadership (in time where birth mortality was very high) he kept him as his son and later Jochi ruled the Russian part of the empire.
Risk management 101, Chinggis way!! Smart guy, very smart!
May be some Mongolians have the feeling that the OT Agreement was a kind of rape.
If so, then may be they should think about what their model would have done in a similar situation weighting the pro and con to secure the medium long term good of the country.
Just my few cents.
now somebody in UB may be laughing reading this post and an e-mail he got yesterday!! ok it's signed. :)
8 Aug, 03:15 AMReplyDelete CommentLike0
SA deleted some of your comments? Your comments should be mandatory reading for all investors in Mongolia and GOM officials.
Jochi reminds me a bit of the British Royal Family Henry the 4th ? was fathered by a French Archer when the King was away in the Holy Lands, the real King (Michael ) lives in Deniliquin Australia!
Welcome back from your strike SA should value your contributions.
8 Aug, 04:35 AMReplyDelete CommentLike0
Agreed 100%, Jon. Couldn't have worded it any better. Are you now recovered and back full time? By the way, I have just relocated out of Mongolia for much greater opportunities. I only spend 10% of my time in UB now.
8 Aug, 08:13 AMReplyDelete CommentLike1
Queen Elizabeth was the one who created the British Empire.
8 Aug, 08:14 AMReplyDelete CommentLike1
Hail King Michael. lt was Edward 4th who had some fresh genes.
Yes Elizabeth 1 certainly did develop the British Empire but it also expanded under the long reign of Victoria usually with two vital ingredients piracy and slave labor.
Elizabeth 2 now runs what l call the defacto British Empire using a lot of public money and Diplomatic missions to further their interests based on the work of Tiny Rowland.
8 Aug, 05:39 PMReplyDelete CommentLike1
First happy to see you back.
Second, I have to agree with ALL your comments.
Mongolian politicians overplayed their hand big time and cornerized themselves.
I think the worst part for them, in some ways, is that Mongolia is a democracy!
I started reading a book: "Does everyone want democracy, Insight from Mongolia" from Paula LW Sabloff.
One thing she pointed out was that Mongolians are very proud that Mongolia is a democracy, they want to be respected as such and they expect other democracies to help them.
This is a very interesting "constraint" for Mongolian politicians, especially when trying to "re-negotiate", "amend",...the OT Agreement.
They cannot go a frontal attack (not good for a democracy) so they go for all kind of guerrilla tactics...which blew out brilliantly sinking their credibility on their international scene.
Of course I am not naïve and with this huge amount of money underground and this small number of people above ground,
it's foolish to expect people in power to resist to corruption.
But they have to think a bit longer term to collect their ...honey pot because thanks to their stunts this honey pot is shrinking.
Corrupted or not, they are very seriously short sighted.
How long before they grow up?
If they want to be taken seriously by democracies around the world, there is a serious need for progress.
9 Aug, 12:16 AMReplyDelete CommentLike1
Good to see you back!! Hope you and yours are well.
15 Aug, 07:28 AMReplyDelete CommentLike1
Welcome back, Jon!
You have been missed.
7 Aug, 10:58 AMReplyDelete CommentLike4
Didn't like to pry into your situation Jon but great to hear from you.I hope the blog contributors will continue to participate as you have continued to provide a fair forum for a range of ideas. The climate has changed dramatically in Mongolia and we need to keep interested in what is happening there in spite of our constant disappointments. Even if our contributions are few and far between it is important to maintain it and keep a valuable archive.
As I mentioned before on the wrestling analogy a lot of money changes hands at the UB Naadam for Wrestlers to lose the 4th round. If you make it through you have a permanent title that helps your prestige and business. As for the loser he is young and strong and can come back next year in the meantime go and count your money.Call me old fashioned but l always prefer to wrestle topless. Wonderfully refreshing to hear your indignation again Jon. Welcome back.
7 Aug, 04:35 PMReplyDelete CommentLike2
IMF 911 soon ?
Not reading the news about Mongolia for a while is very good for health. You are more relaxed, even when you ride the "Dragon Khan" roller coaster (by the way for the new one in UB if schoolboys are short ideas, I suggest "TRQ") in Port Aventura (Spain).
That is now finished and yesterday I was invited to a Mongolian event where somebody from a Mongolian ministry was singing the infrastructure song…before coming back in some months I assume (trying) to raise capital.
Needless to say, a Chinggis Bond II or a Sorkhokhatani Khatun Bond may not be a walk in the park, not even as smooth as a ride in a 40 years old Russian van in the South Gobi.
The situation has gone from bad to worse and while the TRQ roller coaster may be a visible part of the iceberg, the MNT exchange rate is a scarier one.
2 years ago N. Zoljargal was smiling about his foreign reserves. Is he still smiling now?
ING just published a research report with a "we think the Tugrik depreciation trend is your friend" underlining the massive increase of "Claim on banks" in the balance sheet of Mongol Bank in Q1 2013.
The Housing Mortgage Program was great for Mongolians able to exchange their 18% 5 years mortgages for 8% 20 yeas ones.
It was even better for local Mongolian banks able to get …liquidity…because as far as I understand the risk taker is now MIK, i.e. GOM!!! So timely.
Savings Bank had to be bailed out recently.
So which foreign firms would like to keep money in Mongolian banks, USD or MNT?
Is everybody comfortable with the credit risk?
2 years ago, the Mongolian banking sector was not big, especially when thinking about the gigantesque capital needs of Mongolia. Now I think it's much worse as some hot money has walked through the door as MNT exchange rate demonstrates. May be hot money is not reliable but foreign reserves and FDI is still needed, and in the case of Mongolia badly needed.
While GOM members and MPs spend a lot of time on OT, it's perfectly baffling they overlook some low hanging sources of financing that are:
I am talking about MNT denominated government bonds auctions!
For now, the Ministry of Finance is still totally and absolutely dependent on the local banks which are tiny and weak …and I think supported by Mongol Bank.
In the long and medium term, foreign investors could see serious upside in MNT, but for now I doubt many are comfortable with the credit risk of local banks (while there would not be such a risk on the sovereign),
so why is the Ministry of Finance and Mongol Bank still putting all their eggs in the local banking basket?
GOM could jump start its local bond market leveraging foreigners.
There are 3 very simple steps to solve this:
•Authorize local brokers to act as agents for MNT Government bond auctions,
•Replace the Multiple-price auction system (perfect for price collusion therefore deterring foreigners) by a Single-price auction system which would benefit the government (thanks to foreigners pushing yield down because less yield sensitive),
•Revamp the local banks Escrow Account opening procedures that do not comply with FATF and are unnecessary cumbersome for foreigners.
(and btw, MSE has enabled the secondary trading function for MNT government bonds)
If those were fixed, within 6 to 12 months, Mongolia could raise probably close to US$1bn with long durations instead of relying on local banks that are facing a run from hot money.
So why is this not happening?
Why Ministry of Finance and Mongol Bank still want to rely solely on local banks for MNT government bonds auctions?
8 Aug, 03:52 AMReplyDelete CommentLike1
sorry that MSE gets edited. we don't have to agree with everything said, but when it's filtered you no longer know who said what. this is how Mongolia steps in it. they think their way is the right way.
incidentally------ best Opinion on Mongolia, read UBPost, July 29,2013 in their opinion section. "butter in the mouth".
glad everyone is back. I love the professionalism (except the edit) of the participants.
8 Aug, 08:56 AMReplyDelete CommentLike1
While the Mongolia politics spoil the picture, there are slow (*) but steady progress on the technical front.
For instance I think Mongolia Stock Exchange is the only stock exchange in the world to provide such a comprehensive information on dividends!!
The website has been seriously upgraded in May.
Check this page:
Among new foreign investors on MSE, who would be able to guess what is the "ex-date"? This simple page (still needs improvement like sorting by name or Symbol) can for sure save many disappointment from foreign investors jumping to buy a stock because they heard of a big dividend to discover that the ex-date is already passed!!!
That page is also a mine to find who is still in business, who is delisted,…
So for sure, there will always be people complaining about "corporate governance", "transparency",…like one investor labelling MSE a "mirage" in a conference last year, but the fact is that for whoever wants to find information there is, and there is more and more.
And if investors feel there is something wrong or that could be improved, they simply have to tell MSE, send an e-mail and explain.
Same applies with the regulator, FRC!
If they get constructive feedback they factor that in.
They listen. They welcome any help!
That was for the half empty glass part :)
(*) to be fair, there is a limited local pool of talent and the so-called "consultants" or "advisors" are not always acting in the best interests of Mongolia (to be defined ) but often pitching for their shop, so it takes time!
9 Aug, 12:32 AMReplyDelete CommentLike0
9 Aug, 11:13 AMReplyDelete CommentLike1
I don't think that is a bad idea.
Poland did some similar re- workings of its government owned companies when they went through some tough adjustments to get out from under communism. Citizens became shareholders and thereby learned to become capitalist while realizing that they had an actual stake in the well being of their economy. Poland is much wealthier than 25 years ago as a result.
9 Aug, 01:42 PMReplyDelete CommentLike0
There is a little problem:
The "OT LLC shares" have strings attached, the shareholders loan to GOM to buy them!!!
And because of the costs overrun (and interests), this loan has increased :)
So GOM has to first repay the shareholders loan (a construction like this may be: TRQ gave the money to OT LLC which gave it GOM to buy the OT LLC stake I assume) from the profits of OT LLC, THEN it can enjoy the dividends ...long time from now.
De facto, OT LLC cannot be changed into a JSC or a Ltd before that internal shareholders loan structure is repaid.
Can GOM repay that loan in full now ? :)
May be Chinggis Bond II?
In short not a walk in the park/Gobi, a very complex idea to implement especially when taking into account GOM's credibility with international investors.
It was probably simply a fishing expedition from an ECM originator from an investment bank.
Execution? Would love to see that!!
9 Aug, 09:41 PMReplyDelete CommentLike1
It seems SA has deleted one of my comments headed "are they serious" in response to this article and MSE Investors post on August 9th.
I was pointing out that this idea will pass on the huge inflated and spiralling debt of GOM to TRQ who are currently loaning GOM their 34% share of the start up costs.Using the example of Erdenes Tavan Tolgoi and Erdenet as examples of how this could be done successfully is unbelievable. ETT is an insolvent mess after being sold out by Enebish for fast money and Erdenet has already gone through this process once when all Mongolians owned shares then they were held in holding companies then disapeared. This is a good blog I don'the the point in removing fair comments and MSE Investor had the same problem recently. Do we have to copy everything? this is the deleted post.
Are they serious?
" The sales of both project stakes would echo a similar government plan for state-owned coal company Erdenes Tavan Tolgoi LLC, in which more than 1,000 shares will be issued free of charge to every Mongolian citizen.
"Something like that can also happen at Erdenet and Erdenes Oyu Tolgoi," Otgochuluu said"
ETT is an insolvent mess and they want to make an example of it?This is just applying more old thinking that wont fix anything.ETT has only produced around 10% of its supposed benefit to all Mongolians (with an lD card). This is the same old pattern in which all State owned companies were plundered in the 1990's. Shares were given out in a supposed fair process and held in holding companies then disappear. Erdenet has already gone through this process once.
Why is there such a hurry for phase 2 OT and why are American and Australian Banks suddenly interested and not disclosing the details of their deals? They can't run phase one properly let alone look at phase two.A few 44 tonne truck loads of concentrate over the border is nothing to get excited about.
Of course by giving Mongolians shares they are also giving them shares in the spiraling debt which is inflated and held by TRQ they forgot to mention that bit.ETT is a disastrous example.
Another wise old monkey saying Jon. The higher the great Ape climbed up the tree the more of his arse you could see."
15 Aug, 06:32 PMReplyDelete CommentLike0
SA began going through all posts with bots set to certain parameters that automatically delete "offensive" or personal attack types of comments. On other instas we noticed this sometime ago (4-6 weeks) and some of the members have complained and received responses from SA. A good friend and compadre was put in the penalty box (on probation with delayed posts up to a day later) for some minor off color words and suggestions about some company management or authors. Just to let you know that this is going on. It seems that SA doesn't want to have the same type of comments as are prevalent on Yadoodle or ZH.
15 Aug, 06:43 PMReplyDelete CommentLike1
perhaps the arse reference was deemed offensive and Jon's reference to killing the monkey wasn't I apologize profusely and substitute gluteus maximus immediately to replace the "offensive" word.
16 Aug, 03:34 AMReplyDelete CommentLike1
I wasn't complaining or chastising you, only explaining what we had found out about missing comments.
16 Aug, 02:57 PMReplyDelete CommentLike1
"For example, Mongolia is exporting copper, coal and gold etc. However, there is no income. Economic units are working and exporting, but cannot bring in a single dollar home. The reason being is that the money is already pre-spent."
"We will not spend the Chinggis Bond money on these kind of events. It will be spent on development and infrastructure. Those things that will make a dollar into two."
Comments/ admissions from PM Altanhuyag. Interesting use of the Human development fund as an excuse.
11 Aug, 06:01 AMReplyDelete CommentLike2
"We are affirming as a government that we will continue to support OT project."
--- He forgot to follow it up with "...as long as we political elites are able to make non-transparent deals that will allow us to cheat and steal the majority of the wealth."
At the current rate, Mongolia's elites have sold their country out. The 1% in Mongolia will own 99% of all the wealth, and there won't be that much of it as the elites will continue to make bad sweetheart deals in exchange for fast cash.
"We will not spend the Chinggis Bond money on these kind of events. It will be spent on development and infrastructure. Those things that will make a dollar into two."
--- He also forgot to mention that it was already spent lavishly on luxurious resorts by the top political families. What is there left of the bond money? Everyone knows that the money was used to pay for projects at inflated prices, which the top guy pockets half of the money and use the rest for the cheapest low quality materials. Meanwhile, the working class Mongolians and the poor continue to see their purchasing power and standard of living wiped out from the current and coming rampant inflation of the MNT.
11 Aug, 06:57 AMReplyDelete CommentLike1
Couldn't agree more. All done while cheating Mongolian citizens of their promises/entitlements.... now relaxing in Australia sold out his own people in the botched Chalco deal. He promised 20% of ETT to the people that is around $7 billion not $350 million of which only part was distributed to the HDF fund.The media reported lies that the deal was fixed for 5 years at $70 per tonne. He was played by Chalco who know the game of corruption and fast cash well.
"ENEBISH: Parliament recommended that up to 30% of the shares should be sold through an international and domestic initial public offering (NYSEARCA:IPO), while 20% will belong to Mongolians. The remaining 51% will stay under the state's control. The timeframe for the IPO is the first or second quarter of 2012."
The big miners are very willing to play the game and dish out big juicy contracts to MP's private companies.How is the bond money going? Would love to hear Pat's thoughts . Surely there is no chance of any type of bond/IPO issue in the current environment?
Not one comment on the release of Enkhbayar and the sudden and undisclosed involvement of Australian and US banks in OT phase 2
11 Aug, 05:21 PMReplyDelete CommentLike2
"The revenue generated by the Chinggis Bond, worth 1.5 billion USD, is kept abroad and using it as warranty"
"On top of that, the foreign exchange reserves use funding from the Chinggis Bond, which means that Mongol Bank does not have the right to use it all for sterilization (injection of foreign currency into the market and pull of domestic currency)."
Pat assured us that the bond money was sitting in an account at the Mongol Bank is it still there?
There is still confusion over the collapse of the Savings Bank with some reports claiming the assets were being transferred to the Mongol Bank. Other articles claim that assets are being transferred to the State Bank ie. Turin Namk which is the holding yard for failed Banks such as Zoos and Anod and now the privatised Savings Bank.
"After holding 47 auctions between the commercial banks and acquiring 855 million USD from the foreign exchange reserves, Mongol Bank injected the U.S. dollars into circulation and pulled Mongolian tugrug from the market. Nevertheless, this measure of theirs only slowed down the decline of the tugrug and was not effective enough to actually stop it."
Wonder how long they can keep this up?
12 Aug, 04:42 PMReplyDelete CommentLike1
What a mess. Sounds like he made a series of bad decisions and
is blaming everyone else. Imagine buying a gold mine from Momgol Gazar he must be crazy.
The answer is simple problems are never caused by Mongolians.
12 Aug, 05:13 PMReplyDelete CommentLike1
"The answer is simple problems are never caused by Mongolians. "
:) agreed, always very naughty foreigners....:)
However when you crunch the numbers from the Housing Mortgage Program exchanging 5 Years 18% loans for 20 Years 8% loans on US$265millions (last Mongol Bank numbers),
that leads to a total cash savings for borrowers of US$4.5million per month in aggregate...for the next 5 years !!
(may be interesting afterwards; the mines better be running full speed showering Mongolians with banknotes!)
Now what are Mongolians doing with this cash saved?
Bank accounts deposits? MSE listed stocks?
I have a feeling that a good % is used to buy things that are imported (in some ways) and further triggering USD outflows.
Even if people use this to buy a new flat instead of a Hummer,
which % of the total cost originates from Mongolia and what has to be imported (because the local construction supply chain cannot provide)?
It's called unintended consequences :)
Always a trade-off.
13 Aug, 01:41 AMReplyDelete CommentLike1
"If the government is giving up on fighting Rio Tinto and prolonging this exhausting saga, there is a solution.
The solution is simple, sell the 34% of the stake in exchange of triple royalty. From the current 5% to 15%. With this draconian royalty, the government will have no right to complain, and Rio Tinto will be the side that will demand accelerating whatever permissions and affirmations it needs from the government. The government will have no headache of dealing with the mine-building mess, and it is risk-free."
Interesting coincidence. May be testing public reaction ?
May be THE solution!!!!
13 Aug, 12:54 AMReplyDelete CommentLike1
"If the government is giving up on fighting Rio Tinto and prolonging this exhausting saga, there is a solution.
The solution is simple, sell the 34% of the stake in exchange of triple royalty. From the current 5% to 15%. With this draconian royalty, the government will have no right to complain, and Rio Tinto will be the side that will demand accelerating whatever permissions and affirmations it needs from the government. The government will have no headache of dealing with the mine-building mess, and it is risk-free."
There is a bit of structuring behind this but it should be workable.
* Royalties to GOM are paid by OT LLC
* GOM has 34% of OT LLC
* But the loan to GOM is from RIO.
However I don't know how the adjustment in costs (at OT LLC level) is passed to RIO …knowing there is TRQ in the middle and that is listed.
The bargaining will take place on the new royalties = 5% + x%. What is x% ?
Anyway, one solution (several possible) to unravel the montage could be:
•GOM gives the 34% in OT LLC to RIO
•RIO forgives the loan to GOM
•And in exchange OT LLC pays now 5% +x% royalties to GOM
•But RIO pays back the x% royalties to OT LLC (as OT LLC and TRQ minority shareholders should not be impacted).
Then we end up with:
•GOM getting 5% +x% royalties from OT LLC,
•OT LLC getting reimbursed the x% royalties from RIO
•RIO owns 34% of OT LLC while TRQ still owns 66%
Then RIO and OT LLC just have to exchange the extra x% payment from RIO to OT LLC against some shares of OT LLC held by RIO,
subject to TRQ approval third party in the deal.
The final picture should be:
•GOM getting 5% +x% royalties from OT LLC,
•RIO owning a bit less than 34% of OT LLC and TRQ owning the rest.
I assuming that in such a peace treaty between GOM and RIO, the SGQ case will be included to settle the tab with a "paix des braves".
TRQ could sell its SGQ stake to RIO (GOM should be ok with this) and receive in exchange some of the OT LLC shares from RIO.
Prices of coal mines or copper mines are both very depressed so that should not be too complicated ...while still miles away below Chalco's bid.
(Then later, RIO could take care of SGQ more quietly.)
In the end, RIO may offer the rest of its OT LLC shares to TRQ in exchange for new TRQ shares.
Then putting financing in place for phase II could become much easier for everybody, especially the creditors as TRQ would become a much cleaner company.
Anyway, that's just one possible way to unravel the montage, subject to the negotiation / bargaining on what is x%
Will see if it was a random idea or some public perception test.
That is much more realistic and doable than a listing of OT LLC...(which implies finding some investors...:) ).
On top, GOM needs cash NOW and this solution with an increases of the royalties does just this!!!
13 Aug, 01:31 AMReplyDelete CommentLike0
Jon, glad to see you're back again. Hope you and your family are well.
13 Aug, 05:05 AMReplyDelete CommentLike1
Extremely poor performance and nothing like the predictions of the paid consultants.Citing weak demand in China is only part of the story. Still no mention /acknowledgement of the damage done by the Sarah Armstrong/Justin Kapla saga and the huge private share placements to Monnis.Poor standard article blaming China and not their own management.
Rail maintainenece is being done by private operators?They say Tuesday is a bad day for travelling in Mongolia.
13 Aug, 04:42 PMReplyDelete CommentLike0
Another story that along with the announced layoffs by Rio, and recently announced foreign investment numbers are adding to the possibility of an "emergency" session of parliament during the summer hiatus, as reported by Reuters.
TD Securities also cuts TRQ to "Reduce" from "Hold"...... in broker speak, SELL.
16 Aug, 12:43 PMReplyDelete CommentLike2
Mongolia has not been able to ship raw unprocessed coal successfully. That should be a good enough indicator that Mongolia is not ready for drilling and exporting oil.
17 Aug, 08:55 AMReplyDelete CommentLike0
16 Aug, 02:15 PMReplyDelete CommentLike0
Some serious environmental concerns not to mention the costs involved.Wolf sounds like a typical company that will talk it up sell out and produce nothing except surveys and hype. Mongolia had a good oil field but they let it fall into Sinopecs hands
16 Aug, 05:01 PMReplyDelete CommentLike1
That got me wondering who has actual access to Mongolia's oil fields.
The government has recently opened up the oil shale regions for possible development.
The Inner Mongolian oil connection sounds like a worthwhile pursuit for the time being.
Fracking will probably be limited in dry regions because it takes a certain amount of water to frack. So I'll guess that the oil will be drilled by conventional means.
17 Aug, 02:34 PMReplyDelete CommentLike0
17 Aug, 12:01 AMReplyDelete CommentLike0
"The USD350 million was blown in the wind by the previous coalition government as a cash-handover to the general public. It meant a year and half of USD15 per month to 2.7 million people. The public was eagerly waiting for the Erdenes TT's IPO that would create value to the common shares that has been distributed to the public, also, for free. "
A quick calculation adds up to $729 million. This statement is completely misleading.Only part of the Chalco advance was supposedly distributed through the shares/human development fund. Blaming the promises made to the Mongolian people is unconscionable . The original promise was over $3.5 billion or if you believed Enebish $7 billion the Chalco advance is only a fraction of what was promised. l ask a lot of Mongolians the same question have you recieved your shares yet and the answer is always no.
17 Aug, 05:23 AMReplyDelete CommentLike1
Handing out shares or even cash to the general public is, imo, a poor way of distributing the countries wealth considering where the country stands with its standard of living. There has to be some honest, genuine mongolian administrators that can guide the country to a higher standard of living given the base they are working off of.
17 Aug, 12:20 PMReplyDelete CommentLike0
Agreed but in the run up to the 2008 election both major parties engaged in a share bidding war trying to outdo each other with share offers.A genuine properly run SWF would be the answer as we have discussed previously. ETT shares,( those with ID cards that actually got any) will soon be worthless and the idea to "create value to the common shares" is a cruel joke.PM Altanhuyag should know better than to make such statements. MSE investors opinion piece in Business Mongolia is a good summary and offers solutions as well.
Who will trust GOM if it repeals the 2 investment laws ? The same thing happened with the introduction of he 64% sudden wealth tax. It produced instant animosity and a long standoff. When it was abolished it was soon replaced with the current laws
17 Aug, 03:33 PMReplyDelete CommentLike1
"Who will trust GOM if it repeals the 2 investment laws ?"
I would certainly not say I am an expert in Mongolia
but much with more than 10 years in Asia, from my first day in Mongolia 2 years ago I was baffled by several things, quite different from the rest of Asia.
One of them I have seen in many situations:
"Face issue" does not exist in Mongolia!
...and sometimes it goes quite far
(from weird to unbelievable including hilarious)
and you just fall from you chair, but that is Mongolia!
With such a difficult environment and short life expectancy, "face issue" would be totally counter-productive.
Survival of the family, the group, the tribe, the country ...were more important than saving face.
Check Chinggis life :)
That is one of the great + I saw in Mongolia from the beginning.
While it is a very young country with limited in-house expertise, no face issue is a time saver.
From many other people or country, I would never tolerate a 180 degrees change of direction i.e. "You decided to waste my time on useless bargaining while knowing where it would end from day one, so you have zero, you are not serious for business".
Not in Mongolia. I would easily forgive that.
There is a bit / a lot of trial an errors and you have to repeat many times the same things.
May be GOM and PMs now understand that in asking for a change in the OT Agreement (as well as other things they did) did open a very nasty Pandora Box that would first impact them!!
Now may be they are seeing by themselves consequences they have been warned about for more than a year.
I assume that they have seen how the may 2012 SEFIL vote was perceived by foreign investors and therefore how it affected Mongolia.
Being a democracy means dealing with a group of other democracies that have rules, practices, habits,...and new comers cannot ignore that and try to change everything...even if for a while (Chinggis bond I) they have the feeling they can get it their way!
They misread big time signals from international markets that they are totally dependant on, like it or now,...for now (10 years from now, it will be very different, but for now Mongolia has to cope with this)
Now the set of laws, rules,...has to converge towards a more consistent framework.
The Sept 2-6 week is a very important week for Mongolia because of the conferences and numbers of foreigners in UB.
So what is said and done in the Parliament will be known by foreigners!
If this goes on well, foreigners may leave UB with a very positive impression and Mongolia may get a second opportunity to rebuild a good image in financial markets.
From the beginning, sharing wealth was a headache never seen.
Some has to be given up from to people as cash,
Some has to be invested into infrastructure that will help people,
Some has to be invested into infrastructure that will support mining and other industries that will generate income for Mongolia, directly and indirectly.
There is no perfect mix. Votes will expect more upfront and on aspects that will directly improve their lives....but they need to be sensitive that the third leg is critical to secure their future, because spending cash handout into consumer goods ignoring the rest is worst (ask East Germans how they felt 10 years after they were offered Ostmark-Deutschmark parity (upfront advantage)? )
Giving shares to people could be done slowly!
Many companies were privatized through vouchers in 90s and shares are still widely spread (easy to see on daily trading) but Mongolians are selling, not buying stocks, so I would be caution about expectations from giving shares to Mongolians.
I think they have to understand some basics first.
Also giving shares to be listed with a cash price guarantee is a risky game, suicidal in the case of Mongolia.
Like it or not, it's a DERIVATIVE and so there are many other things GOM should learn before ever wondering on this land, especially for an IPO.
18 Aug, 02:19 AMReplyDelete CommentLike2
You are a very trusting man.I note you tend to avoid Mining stocks and collect the small Mongolian non Mining companies.
Face does exist in Mongolia but in a different form to China. The Chinese will often have a person within a company who handles Guangxi the art of relationships.
The old Banner system has been replaced by false Khans of business whose only power is there money.A lot of the problems in Asia traditionally stemed from the lack of a clear leader. They didn't always use the primagenito idea and power could be passed on to anyone as long as they were the right generation. For example the UK will have a clear line of succession apart from the Edward 4th mishap but Asia/Mongolia wont so they spend most of their time fighting and plotting to get power.This is the mindset where thieves are confused with royalty.Enkhbayar presiding at Naadam was wearing traditional Royal dress and hat.
An Englishman based in Beijing had to go to UB regularly to run his business of railing mineral samples for analysis.He hated going to UB and large amounts of these samples were regularly stolen from the shipments.Then President Enkhbayar told him he had to lease a large office space from his silent partners MCS and employ Enkhbayar's son to sit in this huge office doing nothing.Enkhbayar's explanation was "in Mongolia you need to have a big face"
My idea of a SWF is something that grows and benefits all Mongolians cash handouts were never part of a SWF they were purely election pork barreling and incredibly short sighted apart from not even eventuating for a lot of Mongolians.ETT is supposed to be a type of SWF and it is a disaster.
18 Aug, 05:12 PMReplyDelete CommentLike2
I wonder how long it will be until GOM floats a great new idea of selling ETT or giving it to a Russian company as exposed in wikileaks? This seems to be the latest approach of bundling up the debt problems and trying to sell them.
The MCC/ MCA final report must be coming out soon?
19 Aug, 05:05 PMReplyDelete CommentLike0
Awareness raised?? Better late than never!
On Oct 30-31, 2012 in Hong Kong I was attending the Mongolia Investment Summit…
…and it appeared more like a Mongolian …bashing.
See Mongolian tango…among several others! http://bit.ly/12kWCSr
However, instead of trying to understand and decode what some foreigners, speakers and non-speakers, were saying (among others, I heard the word "Mirage" about MSE) and factor that in, some people (including some prominent Mongolian figures, non-speaker) were clearly upset about this negative PR questioning openly "biased comments" repeating how attractive Mongolia was.
Then no wonder, less than a month after (Nov. 26, 2012 half day), there was an Economic Dialogue: Invest Mongolia!!
This sounded to me like a desperate tentative to restore a positive spin…
Now President has met with former NSC members, parliament is supposed to come back in session early… and we can read this kind of comment.
Better late than never.
I have no problem with a government changing direction by 180 degrees to correct previous errors, as long as that is for good…and not to see another U-turn with a year or …three.
But it's better to read the message from day one instead of wasting costly time and inflict unnecessary pain to the Mongolian population. Those who take the risk to bring this message may often have no real $ incentive but just do it trying to help before something very bad does happen.
In short, shooting the messenger (foreign messengers included) never changes the substance of the message.
I just hope the awareness is really rising across UB and that tangible and sustainable actions are implemented.
20 Aug, 03:13 AMReplyDelete CommentLike1
Good to see Defacto back on track good article.
20 Aug, 05:02 PMReplyDelete CommentLike0
If the Mongolian Parliament is going to have a special sitting to repeal some investment laws l would also suggest to them that they immediately get rid of the State Secrets Law.
This cowardly piece of Stalinism is probably the single biggest block to Mongolias development.If they are serious about transparency and corruption it has to go immediately.
20 Aug, 06:09 PMReplyDelete CommentLike1
This is an example of why Mongolia should welcome foreigners and FDI asap!
If FDI to ....mines...slows down, then there will be less $ for government to renovate and upgrade housing ...and non-mines foreign firms will not come to Mongolia with new techniques and new ideas.
That is called transfer of technology!! Mongolians may be smart but there is no point re-inventing the wheel on your own.
Better ...sincerely (no more tricks)...welcome foreigners to help Mongolians have a better life over years (ok it always too slow but it's improving and it took more time for any other country to get up the curve anyway!)
If GOM makes more mistakes and FDI slows down big time, now that Mongolians are getting some taste of what they could get, I think they may not be so kind in the next elections with politicians that prevented this to go on.
21 Aug, 11:31 PMReplyDelete CommentLike1
Example of something easy to get warmer in Mongolian winter, more or less free of charge.
And that is from personal experience because I implemented this myself (to get cooler in summer without air con).
The basic principle is very simple:
Even in Mongolia, if you dig a hole at a certain depth, the temperature is constant during the whole year, whatever the temperature outside.
So imagine a place (south of Europe) where temperatures vary between -5C in winter and +40C in summer. However at 2 meters below surface, the temperature is pretty much constant ~13C during the whole year.
Quiz: how to cool down in summer …without AC?
You just need a bit of space and a fan!
Just dig a hole in your garden (90m long) at 2m depth and bury a cylinder pipe of 0.25m diameter. The entrance starts with a vent collecting fresh air at +40C. On the other end, there is a fan extracting the air pumping it into your house.
After travelling during 90m in an environment that is around 13C temperature, the air that went in at +40C goes out at ~ +23C into your house, plain and simple.
So once you have installed this brutally simple system, you just have to pay to power the fan (may be solar powered) and that's it!
No AC, 23C instead of 40C. Numbers are real! My summer house in south Europe!
Mongolia has a lot of space so even with temperatures varying between -50C and +40C, that could be implemented, especially for winter.
I am pretty much sure that at 2/3 meters below surface, the temperature is stable during the whole year. May be +10/+13C. So the same system could be implemented with large pipes (material should favor thermal exchange. Mine was plastic) buried at 3 meters below surface for 200m long (the longer the better). Then the air sucked in at -50C may go out at ~ +5C…which is much easier and cheaper to heat than -50C air.
Mongolia has space, a lot of space, so burying pipes for that purpose should not be a big issue.
21 Aug, 11:53 PMReplyDelete CommentLike1
Something else outside-the-box
22 Aug, 12:10 AMReplyDelete CommentLike0
Cease fire on SGQ too ???
22 Aug, 08:13 AMReplyDelete CommentLike0
They have a long way to go to get an exploitation license, GOM must be trying to give the impression that it is Foreign Investment friendly again. Did they issue a RHA return home agreement for Justin Kapla?
There has been no public news on his situation since February he is either still in Mongolia unable to leave or been sent home quietly?
22 Aug, 04:13 PMReplyDelete CommentLike0
They will need some friendly foreign investment in order to build up their industrial sector, too; especially for starting the Sainshand industrial site with its associated infrastructure such as water pipelines.
23 Aug, 09:04 PMReplyDelete CommentLike0
GOM was calling for interest in the Zamin Uud area in 2006 for someone to build and operate a Casino, the catch was they had to build extensive infrastructure. No mention of a Casino in Sainshand?
23 Aug, 11:23 PMReplyDelete CommentLike0
Who in the world would go to a casino in Zamin Uud when they can go to Macau or Singapore?
24 Aug, 01:46 AMReplyDelete CommentLike1
...or South Korea :)
24 Aug, 04:44 AMReplyDelete CommentLike1
Foreign companies have approached GOM to build a casino multiple times before and they are probably still going for it; however, there seems to be no progress at all.
I always said that Mongolia can be a financial center for Northern China, Korea, Japan, and Russia. Nope. GOM doesn't seem to be interested in that either. Even Singapore open itself up to casinos, and as MSE pointed out, South Korea as well. Mongolian women have more statuesque, taller model-like figures and the weather and environment in Mongolia are absolutely gorgeous from June to September. These factors would definitely sway many to the Mongolian casinos over the ones in South Korea.
They could easily create a nice resort and open itself up to membership only gaming. The rich Mongolians gamble their money away in Macau and Singapore anyway. Might as well keep it in the country and make the GOM some tax revenue. As for the Zamin Uud project, GOM probably asked the foreign investors to create all the extensive infrastructure and still give up 51% ownership.
It would have made total sense for Mongolia to allow MCS and the Chinese to build multiple railroads to streamline its exports to its ONLY buyer on the entire planet. Sigh, the list goes on.
But on the economic forum, the leaders of Mongolia talk about branding Mongolia as the organic food producer of Asia? Seriously? With its current infrastructure? Even with state of the art infrastructure, how can they compete with Inner Mongolia? Japan may be a customer, but why would they do that when there's Australia that can ship entire cows by sea?
Either way, Mongolia is going to continue to grow with many ups and downs, although 99% of the wealth will be owned by the 1%. This may sound bad to my Mongolian friends, but the only reason Mongolia will continue to grow is because they will be riding on the coattails of China's growth engine as China eventually overtakes the U.S. as the #1 economy in the world and the CNY becomes the "petro yuan" and the world's reserve currency.
24 Aug, 11:41 AMReplyDelete CommentLike1
l refer to my post 10th June regarding the railway situation. What you say makes perfect sense. The stuborness to insist on Russian guage railway shows that there is a long term plan .MCS/MMA always seems to be untouchable. The Od brothers both have personal wealth similar to the claimed Central Bank reserves made by the head of the DP group in Parliament D. Erdenebat.Jenko Battulga claimed recently hat they get all the good contracts and no one can touch them. Together with their Chinese partner Robert Kwok/ Kerry Group they seemed destined to be one of the few beneficiaries of Mongolias mineral wealth.
As far as Casinos go there is going to be one at Terelj along with this soft loan airport from Japan to compliment their presence in "Japan Town" Zaisan.
Why they would allow such a thing in a beautiful National park is unbelievable. There is plenty of room out to he west past the current Airport.
Seoul casinos would welcome Mongolians especially after the former General secretary of the MPP Khurelsukh blew $1.4 million USD stolen from the recently collapsed Savings Bank in one.
26 Aug, 07:03 PMReplyDelete CommentLike1
A lot of wise comments
23 Aug, 02:24 AMReplyDelete CommentLike0
Quick glance at those:
•Poverty headcount: while Mongolians may not be satisfied, there are clear progresses,
•Strong demand growth vs. CPI: Mongolians have adopted capitalism and consumer habits (and not only local products, so GOM better make sure exports are strong),
•Chinggis Bond proceeds: The impact on the reserves in nov. 2012 is clear as well as where they stand now, in short-a one off effect,
•And to finish with, the share prices of MMC-TRQ-SGQ to enlight GOM on how some foreigners may feel about Mongolia.
23 Aug, 03:06 AMReplyDelete CommentLike1
"Sources: Mongolian authorities; and IMF staff estimates. "
GOM figures are always amusing but when combined with IMF estimates it becomes ridiculous.
23 Aug, 05:34 AMReplyDelete CommentLike0
"However,l personally don't feel Mongolia is facing economic crisis."
Unbelievable comments from the head of DP group in Parliament D. Erdenebat.
23 Aug, 04:53 PMReplyDelete CommentLike0
"Currently, the Central Bank has 2.7 billion USD reserves and a reserve equal to 800 million CNY, plus 1.2 billion USD that remains from the Chinggis Bonds."
--- LOL what an outright bold-faced lie.
"We can survive without Oyu Tolgoi for some period. We have survived this long with our livestock."
--- Yeah, I'm sure everyone is dying to go back into that lifestyle. That must be why they are buying up all the range rovers and modern style apartments.
"I don't think Rio Tinto would just abandon their 7.5 billion USD in Mongolian soil."
--- He's definitely right about that, but the shareholders are not going to allow the GOM to obnoxiously cheat and steal either.
Well, that's really all we need to see. If this guy is the head of DP in parliament, that means Mongolia is going to be in a deep world of hurt. If he thinks Mongolia isn't facing a crisis now, then let's see what happens by the end of this year and into next year. A global recession is coming. I think I will write a piece on how Mongolia and other Asian emerging economies aside from China is about to get hit by a tidal wave due to the U.S. federal reserve cutting off QE and China and Japan not buying U.S. treasury bonds for the past 6 months.
24 Aug, 12:03 PMReplyDelete CommentLike3
Simply unbelievable for those who know the real story.
23 Aug, 05:09 PMReplyDelete CommentLike1
It's Malaysia where it is ultra corrupt and Mongolia has zero weight in international politics. Had Altantuya been a U.S. citizen, someone would have been hanged and apologies would have been made.
24 Aug, 12:13 PMReplyDelete CommentLike0
Sounds like a bit of overtime for M16. l'm sure Rio will be really impressed by their delegation
infomongolia seems to be churning out some really low grade propaganda lately.
Love your post Haguike.Crisis what crisis GOM wants to blame falling prices and rising USD they never admit to any mistakes/corruption and mismanagement on their part
Regarding Altantuya. Malaysia sent this guy to UB to "report" on the story shortly after she was blown up.
l listened to him for 2 days and was not impressed but his cameraman was more sensible
She was married to Madai one half of Hip Hop group Black Rose.She was a well known party girl and got a job as Bagindas "assistant".lt was rumoured in UB that he was into drugs and arms trading . She got caught up in a dangerous world of French submarine contracts and promises. Edie Chua seemed more interested in finding her son who was reportedly fathered by Baginda.He met her parents but no one would let him near the boy.
She went to Malaysia reportedly to confront him about her son and promised money. Her arrival records from immigration were pulled and the rest is history.
24 Aug, 05:12 PMReplyDelete CommentLike0
"Until the project financing is resolved I think it is proper to continue the underground mine with revenues from concentrate," Gankhuyag said in a letter to Rio Tinto that he showed reporters on Aug. 9.'
"Mongolia wants the planned $5.1 billion expansion at Rio Tinto Group's Oyu Tolgoi mine to be financed from cash flow until a dispute over the cost of the biggest foreign investment in the nation is resolved."
There is no cash flow as recently admitted by PM Altanhuyag any dollars coming in have already been spent.
"The company plans to export 300,000 tons of concentrate this year with revenue of $1 billion, Gankhuyag said'
Imposible under the current restrictions and truck loads limits of 44 tons. Most of the financing seems to be already in place for phase 2 from American and Australian Banks. In Australias case they aren't disclosing the details and are acting against advice.The trouble is the inflated debt at 7-8% passed on to GOM by Rio/TRQ.
1700 jobs lost? Maybe for Chinese as there was over 6000 of them at OT there wouldn't be that many Mongolians there.
25 Aug, 04:59 PMReplyDelete CommentLike1
Koreans are helping Mongolia rehabilitate its mining fields.
Mining reclamation seems to be its own standalone industry by now with its own economics.
26 Aug, 09:30 PMReplyDelete CommentLike0
Cannot wait (like many foreign investors attending the conferences) to be in UB next week to see if all the nice words from the president and the PM do translate into ...ANY action or were just ...cheap talk.
At MNT 1598 per USD,
there are obviously very few USD coming in
the USD going out (buying consumer items like smartphone, luxury items, ....)...university fees...as somebody flagged before :)
The good news is that some traditional Mongolia products (cashmere, leather) are more competitive,
so that should be a great week for cashmere shopping in my favourite shop in ...Central Tower (baffling but that's where I found last year great quality products at very attractive prices).
Need a leather jacket too :)
27 Aug, 06:36 AMReplyDelete CommentLike0
Are you serious? I never go into those stores because I just assume the prices will be outrageous. I better check it out when I stop by UB over the next 5 days. Anything other than cashmere though? I spend 80% of my time in Southern Asia these days.
27 Aug, 11:20 AMReplyDelete CommentLike0
I wait with anticipation for your report on the conference. l don't know how you manage to keep awake at such events. They have run out of hype and really need some smart action. Maybe GOM could recruit you as its advisor and delete any reference to Rio's latest lobbyist Tony Blair.
I can't imagine the south of France or Hong Kong as being cold enough for cashmere. perhaps your underground cooling system is working too well!
Mongolian cashmere is an excellent product but needs to modernize some of its designs.
27 Aug, 03:46 PMReplyDelete CommentLike0
went to one shop (owned by the wife of ...SG) last year in Central Tower at the same time of the year just as they were on massive sale, getting rid of inventory, securing cash before winter.
Excellent quality products and much cheaper than the showrooms of the big names. Of course, the prices may not be like that during the whole year. :)
Southern Asia: Did you go to Jakarta Plaza Senayan? Still a lot of local shoppers in luxury shops?
27 Aug, 07:15 PMReplyDelete CommentLike0
Yes, I went to Plaza Senayan. Central Park is far more impressive though. A lot of local shoppers EVERYWHERE. I was completely amazed how big of a consumer market there is in Jakarta. Indonesia is not given the credit it deserves. India is getting all the attention and more than half of the people in the world project India to surpass China, which is lunacy.
The haagen daaz store was large and ridiculously expensive, yet the entire place was filled with locals.
I actually spend most of my time in Shanghai. I plan to visit Myanmar sometime over the next 6 months. I hear there are great business opportunities there. It's very corrupt; perhaps even more than Mongolia, but things get done and protection is taken very seriously. That's the clear difference.
27 Aug, 10:45 PMReplyDelete CommentLike1
"Cause I may be bad, but I'm perfectly good at it"
28 Aug, 01:37 AMReplyDelete CommentLike0
l get tired of these less than 1000 word formulaic half truth grabs from Reuters and Bloomberg.
"SEFIL was introduced just before parliamentary elections in May 2012, as lawmakers sought to block a bid by the Aluminium Corporation of China Ltd (Chalco) to buy a majority stake in a Mongolian coal deposit"
Love the way they avoid using the "South Gobi" words. This debacle started when South Gobi tried to sell to Chalco.There is still no explanation of what happened to Justin Kapla and Sarah Armstrong in the fall out from this.
"Mongolia hopes to establish an approval board to review proposed acquisitions by state-owned firms, he said, along similar lines as one that already exists in Australia"
The Australian system is working really well? That is why so much of our prime producing land and assets are being snapped up by Chinese and Singaporeans. the latest huge example would be Cubby Station
They harvested a massive crop of cotton last year reportedly over $200 million that goes straight to China.
The SEFIL was only one of 22 sticking points in the dispute with Rio.
27 Aug, 04:52 PMReplyDelete CommentLike0
I love this!
"Q: There are people say that how will the economy get better when a person who always opposed the OT agreement becomes the Mining Minister. "
"A: There maybe many people who interested in making me look like a person who is allergic to foreign investors.
However, I am not that kind of person.
The talks on additional financing and cost overruns of the initial investment has been going on for a quite long time.
As both member of parliament and cabinet member I have different roles.
A MP has a duty to draft and initiate laws, and monitor and control it.
In the other hand, cabinet member has a duty to implement parliament decisions. I hold the principal of abiding law."
28 Aug, 01:40 AMReplyDelete CommentLike0
by the way, saw "Cirque du soleil" in HK last week end.
There was an impressive Mongolian contortionist!
28 Aug, 01:42 AMReplyDelete CommentLike1
Are you sure the contortionist you saw wasn't Mining Minister Ganhuyag? The article is full of classic quotes from him.
'Tavan Tolgoi is still operational. It even increased the export target from 2.5 million tons last year to 7.5 tons."
It might have increased its target but nothing is happening and every truck load of coal is still costing the Mongolian people money and not making any money.
"We heard that there are talks on forming a company with OT LLC's 34% and Erdenet JVC's 51% called "Mongol Copper". Can you please elaborate on this? You have also mentioned that the company will be able to raise capital from international equity markets?'
Here is a new one to be avoided.
28 Aug, 04:41 PMReplyDelete CommentLike0
Cirque du Soleil: now that you say this, I am wondering :) :)
29 Aug, 08:37 PMReplyDelete CommentLike0
Check out my comment on this recent SA article. I believe the MNT will depreciate past USD/MNT 2,000.
28 Aug, 05:45 AMReplyDelete CommentLike0
The situation of Indonesia now has nothing to do with 1997.
In the 2008, the major problems came from excessive REPO financing (unsustainable and unstable) and impacting mostly some... big groups ...mostly commodities related.
Now they are ...marginal to that picture...and I think the central bank has been piling up reserves (to avoid 1997) refusing to let IDR to appreciate before.
And the rush towards gold has been destroying the foreign reserves.
So what (rush to gold) is a blessing for China is a curse for India.
Mongolia: the situation is the most volatile in both directions I think.
If nothing serious is done within a month or two, then 2000 (or worst) should be reached by year end and GOM will be good to dial IMF 911!!
If very serious actions are taken, then it may go back to 1300...because in fact, Mongolia does not need a lot to stay afloat and that is a rounding error of the funds willing to go in.
So next week we may know if Mongolia does mean business ...and that will tell us what happens to MNT during the winter months !!!
Now it is time for GOM members and MPs to cry and face responsibility for having wasted a superb window of opportunity during which they could have raised tens of US$ billions in sticky capital and jump start their growth engine in order to get cash lows from mines...
....but they preferred
1) distributed cash raised to Mongolians (that spent it in non-income generating items)
2) challenge foreigners and disrupt the momentum trying to get a higher % share of a pie they were damaging!
They overplayed their hands big time.
It is very unfortunate that the Mongolian Tango warning in October 2012 at the HK conference was not taken seriously but resulted in a ostrich like behaviour!!
28 Aug, 09:49 AMReplyDelete CommentLike0
Good call on the Indian currency.
What will happen to the tugrug ? Do you think this will push inflation higher? It is already extremely high.
29 Aug, 04:28 AMReplyDelete CommentLike1
Sincerely, in case of a further depreciation of the tugrik, the inflation would probably be a ... marginal...by-product!
Remember what was being said not so long ago:
* foreigners are investing (therefore bringing USD to convert into MNT) in real estate and driving the prices up in UB (inflation?) and ...Mongolians have problems finding affordable flats. That's bad!
* now if foreigners are on strike and therefore don't bring USD to UB...then whatever is needed and has to be imported (and paid in USD) is becoming more expensive (inflation) ...for instance iToys, luxury bags, luxury cars, ...university fees,...as well as basic food supply not available in Mongolia
inflation or inflation?
So what is good for Mongolians?
Foreigners bringing massive amounts of USD (and the collateral damages that come with them) or
foreigners not bringing any USD to Mongolia?
Time to think about it and chose.
Mongolians cannot have their cake and eat them!
Time to think about it and ...not only Mongolian politicians, just every Mongolian!!
In fact, for what I have seen all over UB, Mongolians have already chosen:
They have happily adopted capitalism (thanks to cash hand outs) ...and have already deeply committed themselves to this way of life,
so it's time to stop with denial and go for it seriously because half way would bring the - without the + !!
While I would not agree with what Mongol Bank is doing (or not doing) on MNT government bonds auctions,
I would however agree with what governor Zoljargal said once in a conference a while ago.
No point looking at inflation in absolute number.
Most of it is imported from...China, so better look at inflation differential with China.
Mongolia is not an island; it's dependent on China (for now and for a while), like it or not!
If Mongolia does not want to be too China dependent,
then it'd better show some love to other foreigners, seriously and quickly!
29 Aug, 07:25 AMReplyDelete CommentLike1
rather binary outcome by year end I think:
* Either above MNT 2000 per USD
* Or below MNT1300
depending on how they act.
Weird but ...
It's Mongolia so we'd better get used to this.
One year ago exactly who would have predicted US$15bn demand on 5 & 10 years sovereign bonds within 2 months?
Not many for sure ...but it happened!
However those kind of events do not mean sustainability for sure!!
Anything for now GOM needs to act decisively.
Fingers crossed and watching the show!
28 Aug, 12:23 PMReplyDelete CommentLike1
That is a very extreme binary option, but quite accurate.
I will take the former of above 2,000 per USD just by looking at the track record of the new GOM in the past 15 months.
All you have to do is read the quote from the leader of DP in Parliament, which was something along the lines of, "We can survive without Oyu Tolgoi for some period. We have survived this long with our livestock."
I am also taking into account that there is going to be a run to perceived safe haven currencies in the JPY, CNY and USD, and probably the EUR too. All other currencies are going to be tested. During this storm, very few are going to run to the MNT. Even Mongolians will be running away from the MNT similar to what happened in 2008/2009.
Horrible time to be in the importing retail business in Mongolia, but it sure will be a great time to pick up assets for cheap when there is blood in the streets. I hope our friend Harris Kupperman will be able to do well in raising capital. Now is the perfect time for him to load up to deploy.
I still think Mongolia will be a highly leveraged and rewarding play to China's growth engine once the dust settles in the storm. Stay away from private deals completely unless you're the one running it on the ground. Most foreigners and locals running private companies cannot be trusted or relied on at all. I still don't trust the MSE. Only worthwhile plays will be the Mongolian stocks listed in AUS or CAN. Just be prepared to sell them during the good times.
29 Aug, 01:18 PMReplyDelete CommentLike0
"Even Mongolians will be running away from the MNT similar to what happened in 2008/2009."
...and then the MNT appreciated nicely afterwards...so the conclusion is that they were not a good indicator...or may be they were a contrarian indicator :)
Mongolian retail investors are the ones selling MSE listed shares (with my shopping activity for 2 years now I have good statistics on that!), no doubt about it and it is confirm big time by monthly free float reports across the board.
So as long as I am buying what uninformed retail investors are selling, I am pretty relax.
Buying what insiders are selling or new shares companies are issuing would be a different game...but that's not what is happening by far.
29 Aug, 08:34 PMReplyDelete CommentLike0
Sure, I never said to not jump back into Mongolia after the storm. However, you still may be waiting for a long time and even if they appreciate, you better be prepared to sell during the good times (e.g. TRQ 2010/2011). In order for the MNT and MSE listed stocks to go up, Mongolia must have a story to sell. With what has happened in the past 17 months, it may take several years for Mongolia to repair its image.
Having stayed in Mongolia for 16 months, I have come to the conclusion that I simply do not trust Mongolian leadership and the present generation of "have nots" in the current democratic system.
2 Sep, 11:46 AMReplyDelete CommentLike0
'To bolster Mongolia's competitiveness and help lighten Mongolia Mining's debt load, the Mongolian government has offered to buy the company's paved road, which Gotov said could bring in about US$100 million. He hopes to conclude talks on the road's sale by the end of this year.'
Following the deal to buy back their railway agreement they seem to be doing very nicely from GOM.
"Mongolian Mining was the only miner in the nation to have increased its exports in the first half, by 32 per cent, Gotov said.'
" "With the expected completion of a railway by the end of 2015, Mongolia will make a comeback."
I wonder which railway proposal that is there have been so many. I refer to my post on June 10th.
29 Aug, 04:46 PMReplyDelete CommentLike1
I see where Tsagaan has announced his resignation from the Board of Oyu Tolgoi LLC, and given Rio a huge serve, laced with threats on the way out.
Was the writing on the wall for him to be replaced and he has fallen on his sword, using the occasion to convey his personal feelings?
Or is he upping the ante on behalf of the President/Government and are we about to witness heightened tensions?
If the latter, how much further can the tide go out?
The proposed new SEFIL legislation may be seen as a cure-all and all that is necessary to lure back investment. If the minerals law reflects the draft minerals policy, and if the proposed changes to the tax law are as negative for investment as rumoured the proposed SEFIL law will resemble a candle in the wind.
Particularly if the GOM vs Rio conflict continues to fester or erupt.
30 Aug, 10:59 AMReplyDelete CommentLike1
resignation of puntsag tsagaan---according to business-mongolia article jan 19 (I think) 2013-----looks like he was responsible for helping draft the current status foo the investment agreements which increased the restrictions on foreign investment. his resignation could be a huge plus toward resurrecting foreign investment in mongolia (as MSE investor says might come with the concomitant negative issues which would also have to be resolved) but you have to expect some negatives with (what some believe to be overpowering positives for all Mongolians and investors) the positives. It would be great to see progress but we now see how hard that is when your country has such a horrid background of suppression and mis-trust.
good luck, we're rooting for you. next week could be the new cornerstone-----let's hope.
30 Aug, 01:12 PMReplyDelete CommentLike0
Fascinating development. Tsaagan is seen as one of the "good" guys of Mongolian politics for him to resign and say what he did is very significant. He was Professor Chimid's assistant when they drafted/cut and pasted Mongolia's new constitution in 1993 and was sent by the Asia Foundation/CIA to study Constitutional law in the US. The hints and suggestions in his comments are very enlightening. I hope he will write a memoir of his experience.
If Rio is trying to obliterate TRQ share price they have certainly done that and are they trying to make GOM give up it's 34% share?
More references to Rio's relentless negative PR. Last year Mozambique this year Mongolia?
"In the period of the first phase, I am also glad that we have amended the Shareholders Agreement decreasing the shareholder loan rate by 5%. The debt pressure for the country has been decreased by USD1.5 billion, think about it, it is as same as what we have raised by Chinggis Bond. It means we have saved a cost in the future. "
GOM put their share of start up costs as debt to TRQ rumoured to be paid back at 7-8%
"By the way, all the minutes of the board meetings are recorded in audio and written formats. Therefore, later on, when the minutes will be open as the project's history, people may understand a lot interesting things."
I'm sure they will never see the light of day.
"There are conditions in the Rio Tinto's loan term-sheet that our side cannot accept in any circumstances, and also contradicts with the Investment Agreement."
Turning the screws.
"We can conclude that Rio Tinto is playing a double game by making Mongolia look as a no-go for investors through their meaningless negative PRs. Alright, I do not want to get any more further on this subject.'
"You have to ask themselves. Perhaps, they won't give you an answer. It's obvious that Rio Tinto is playing a chess on two sides in order to increase their profit from the underground mine"
There is that chess analogy again.
"Things might swing back. God's boomerang laws. I think Australians are well aware how boomerangs work.
30 Aug, 05:05 PMReplyDelete CommentLike0
I'm not certain how much of a "good guy" Tsagaan is these days. No doubt a distinguished career and indications are that he has always been a liberal, free market thinker. He lost a lot of credibility with his support and promotion of the President's draft minerals law earlier this year. These days he seems to be practicing "Realpolitik" - politics based primarily on power and on practical and material factors and considerations, rather than ideological notions.
I fail to see any examples of "black PR" by Rio. While international reportage has been woefully incomplete and lightweight, what has been reported has mostly been based on Mongolian actions and their own complaints, reported in local media. For example Minister Gunkhuyag's radical beliefs and intemperate statements from the moment he was appointed and are still ongoing. ("Fund the second stage from cashflow"). Secondly Rio have reporting standards dictated by their public listing status. Those standards include the stern requirement to promptly report events that may be market sensitive. They were required by law to fully report the complications arising with the second stage financing progress that had been formally notified to them by their partner (the government).
Rio have done a remarkable and restrained job, considering they have a partner that is playing politics for their constituency and perhaps for other reasons. To blame them for Black PR and wealth destruction is a major leap in imagination.
Having said that, no doubt they have sophisticated PR machinery. The Government could also instill discipline into their ranks plus employ professional international PR advice. The former is probably impossible, what with the characters involved. The latter could be easily done. But whether they accept that advice would be a further difficulty.
Mongolia wanted to be a part owner of Oyu Tolgoi and moved heaven and earth to do so. Now the Government is starting to recognize that perhaps that was not a good idea. They appear to be losing the boardroom arm wrestles, and are realising the national implications of large funding packages. The ultimate step will be to privatize their share. That dance has already started with the floating of the idea in a low level fashion.
Whilst potentially serious, Mr Tsagaan's complaints and threats are probably the same as the face-saving process that Minister Gankhuyag is currently working his way through (in my opinion).
31 Aug, 01:17 AMReplyDelete CommentLike1
Agreed, agreed, agreed.
Outsmarted but trying to distance the president (he is his chief of staff) from the rest of the story may be ...while pointing a ..."moral" finger at RIO ...as usual for domestic politics.
"We are a democracy so we have to live with this signed agreement...but the other guy is not playing the game in good faith."
Now if the OT agreement was one-sided leaving "so little" to Mongolia...
...then they'd better think twice before removing SEFIL altogether and replacing that with a new Investment Law within weeks...
...as it could be seen by Mongolians as too much foreign investor friendly.
31 Aug, 04:15 AMReplyDelete CommentLike0
Contortionist worthy of the Cirque du Soleil.
He sees a train wreck coming and is getting out. it reminds me a bit of the resignation of PM Bayar before the signing of vital agreements.Out smarted in the game of chess?
31 Aug, 05:07 AMReplyDelete CommentLike0
He is perceived by Mongolians as relatively good but he is getting on now and retirement beckons. Quite a few Older generation DP people are interested in Ludwig Von Mises.
GOM has employed an American PR firm and reportedly paid them $350,000.They have obviously done a disastrous job out of not much to work with.
Jon raised the point about what is the hurry in getting phase 2 going so quickly is it to put on impossible debt load onto GOM and make them let go of their 34% stake .MSE Investor proposed they give it up for higher royalties. They seem to be bundling up debt and trying to make a silk purse from a sows ear.
PM Altanhuyag and Mining Minister Ganhuyag have been making ridiculous statements lately and both of them are clearly not up to the task.
As far as Rio black PR goes Rio has successfully shut down numerous stories from Mongolia and has control of numerous "journalists " in Mongolia and abroad. lf the shareholders don't know they're not going to ask.For example there is nothing posted anywhere in the world about the fate of Justin Kapla since February this year.Rio is continuing to make a staement by maintaining its office in the Monnis tower with OT they continue to show the Mongolian people which camp they are in and who they are aligned with.
The big money is in the 80% of resources underground at OT. These resources were unknown during the original surveys around the time of BHP's ownership of the exploration license in the 1990's. lt was much later that the area was re surveyed ( a lot of work done by Australians) and the huge much deeper deposits were found by improved technology.
31 Aug, 04:23 AMReplyDelete CommentLike1
Speaking of Black PR. It seems OT has bought the silence of one of the best commentators on Mongolia Brian White.The Black PR is more a case of control and silence, what a shame to see Brian go to the dark side and join the worldwide throng of servile "journalists".
31 Aug, 04:24 PMReplyDelete CommentLike0
I agree with your comments about Mr White's qualities as a commentator, Farmer.
But perhaps OT wanted to recruit his talent, knowledge and empathy, not to shut him down? His Mongolian language skills, love of Mongolia, forensic methods and ability to relate to Mongolians would be of immense value to any organization that wishes to enhance it's relationship and understanding of Mongolia as well as effectively communicate to the country.
I have never perceived material or philosophies that Rio/OT would prefer not published.
He commented extensively on the IA in March: http://bit.ly/13OwyAo . The comments section is also illuminating reading.
Any reasonable reader would perceive his information and views well thought through, principled and even-handed, even if some may not agree with them. Even crediting Rio with the darkest of motives, I fail to see anything he has written as justifying a shutdown.
Having said all of that, there an aspect of your observation that is very pertinent. With his blog now self-censoring on the matter of OT we now have one less independent and thoughtful commentator on that subject. That is a loss.
1 Sep, 02:11 AMReplyDelete CommentLike1
Perhaps its along the lines of Layton Croft who went from the head of the Asia Foundation in Mongolia a supposed aid organisation established by the CIA in 1951 to the board of Ivanhoe. Perhaps he had similar talent knowledge and empathy?
l am referring to Brian's future work his previous work is known and respected and can't be shutdown as it is out for all to see.The self censoring of OT comes at a very delicate time as the situation comes to a head and his appointment is a cunning move.lt's a shame they didn't employ people with these talents at the start instead of the usual types.
1 Sep, 04:22 AMReplyDelete CommentLike0
I have always enjoyed your well informed input Farmer, and respect your opinions. However, your comments about Mr Croft should not be allowed to stand without correction. He was never on the board of Ivanhoe, any listed company or even the board of local companies such as Ivanhoe Mongolia LLC or OT LLC. His language skills, management ability and empathy with Mongolia were put to good use by Ivanhoe as Executive Vice President (Corporate Affairs and Social Responsibility), where he performed those tasks with distinction (in my and others opinion).
He was in Mongolia for almost a decade doing community work before spending a brief time with the Asia Foundation from where he was headhunted by Ivanhoe in about 2005.
Given his skillset, probably for the same reasons that I have hypothesized OT has employed Mr White. That is, the right men for legitimate business, liaison and community relationship tasks.
As a knowledgeable Mongolian hand, you would have noticed the irony that I entered this thread talking about Mr Tsagaan and ending up discussing Mr White !!
1 Sep, 09:59 AMReplyDelete CommentLike0
Yes very ironic tsaagan meaning white in Mongolian.
I stand corrected Layton was head hunted by Ivanhoe and given an Executive position.Can't help but notice the similarities both Peace Corps volunteers both snapped up by Mining companies. Brian was webmaster for the American centre for Monbgolian Studies.
which has Layton Croft as one of its Board Members.
He didn't just spend a "brief time with the Asia Foundation" he was the TAF country representative so well versed in the intelligence world.I still find it disturbing that someone can go from a CIA off shoot to a large Mining company obviously bringing lots of sensitive information with them.
"the right men for legitimate business, liaison and community relationship tasks.'If so then Croft has done a very poor job as Ivanhoe hit rock bottom as far as its community relationships go.
1 Sep, 04:04 PMReplyDelete CommentLike1
Looks like Khan resources doesn't want to take on Russia but the case against GOM is still on track for November.
1 Sep, 04:18 PMReplyDelete CommentLike0
On the ground in UB and it's quite interesting already.
First, for what I am being told (did not bother attending this one this year ) the attendance at a conference is not even half of last year…and even speakers were hard to find.
Second: 2 sides of the same coin. On the way from airport to hotel on Sunday, I was impressed by the major work to fix/rebuild the road. Yesterday a friend (living in UB for years) as we were passing by Seoul street where there were major road work too, told me to look in one of those holes to see how this was build (pretty deep with good layers of concrete). His comments: "Russian made!! Clearly not the standard used for the road to the airport!! Within 3-4 years, they will have to fix that road to airport again." Agreed while big heavy trucks on Seoul street are unlikely, I wonder how long it would take for similar heavy trucks to blow out the road to the airport.
Third: Got the same comment from 2 sources. Imagine you are a Mongolian working in a mine going to a bank asking for a mortgage to buy a flat. The answer you are likely to hear is" just forget it"!! Jobs in mines may not be seen as very reliable sources of income for local banks. Wondering why . Does GOM understand the pain it is inflicting, indirectly, to the Mongolian middle and low class? They fully adopted capitalism way of life and they start getting some sense of how dependent they are…and need this economy to be sent in the right direction, which implies getting capital in asap and that implies seriously welcoming foreigners.
By the way as we were leaving the restaurant in Seoul Street around 8.30pm he told me to walk back to my hotel through Peace Avenue and not Seoul street (shorter) because it was safer. "there are people badly in needs for money and I don't want problems happening to you. Peace avenue has more lights, much safer".
Four: in the morning waiting in my broker's office, I was having a look at some local newspapers and saw a great ad dated 30/08/2013…in English:
Oyu Tolgoi LLC: Superintendent, Media liaison (1) - Media and communications department…
Deadline 6th of September, 2013
So obviously OT is trying something there
May be GOM could recycle the template and hire too in that position.
Fifth: discussed with several persons, locals, on the ground and unless they are in finance, they don't understand what's up on OT, RIO, TTT…but what they understand is that many companies, small business, shops ….have upgraded their premises to adapt….but now don't see their expectations being met. People are clearly much more sensitive to money than in previous years…while they have not yet felt the pain of the FX impacting the cost of all consumers goods they are buying and that mostly imported. May not be fun at all in the coming weeks if nothing very serious is done and MNT keeps diving.
To be continued.
2 Sep, 08:17 PMReplyDelete CommentLike1
How much is that job paying? Is it USD or the diving Tg?
Good observations look forward to the next installment.
3 Sep, 04:48 AMReplyDelete CommentLike0
Also more important, especially for those who like technical analysis and old saying: there are big signs of capitulations among MSE brokers!!!
Those that were not cost sensitive and went aggressively for the new age consistent with the high expectations raised by the LSE-MSE agreement are deeply regretting that. By year end there could be even less brokers active on MSE.
I heard of 2 names of big names that are considering either merger or outright closing of their shop!
Some that already downsized seriously (moving to cheaper office, cutting headcount) are left in a situation (anybody to answer the phone?) where it scares local clients …moving their business to other brokers, more cost aware and consistent…but even those are adding side activities to secure additional cashflow stream and secure survival ….until the race starts.
As usual where there are risks, there are opportunities
2 Sep, 08:30 PMReplyDelete CommentLike0
l'm flattered to be translated into Chinese but when l log in to SA it shows l have zero following?
'Since commencing its operations in Mongolia in 2006, the EBRD has invested almost US$ 1 billion in about 60 projects in various sectors of the Mongolian economy'
EBRD has been arranging large loans for OT along with ADB and American and Australian Banks and are now trying to look small business friendly.
'Borrowers will be micro, small and medium-sized enterprises (MSMEs) that sell their goods and services in local currency, and are therefore most vulnerable when borrowing in foreign currencies.'
'The Governor of the Bank of Mongolia, Mr N. Zoljargal, said: "Greater use of tugrug, stronger local money and capital markets mean a more robust and stable economy.'
Greater use of the tugrug is right because you will need a lot more of them to buy anything.
Wonder how the trial of Bayartsogt is going? it doesn't look good when your former Finance Minister and Board of Governors Bank member gets caught with his hands in the till.
3 Sep, 03:33 PMReplyDelete CommentLike1
Interesting! What is csqf?
Speaking of greater use of the tugrug, the taxi drivers have adjusted very quickly. I can no longer get to state department store from the airport for only 20,000 MNT.
4 Sep, 03:12 AMReplyDelete CommentLike0
There was talk of Taxis going up to 1000tg. per klm but there was a public outcry and the chance for a few politicians to jump in and look good.. Around 2006 it was 250-300. Look forward to your opinions this week.
4 Sep, 04:31 AMReplyDelete CommentLike1
I really enjoy Ghengis 2001, MSE Investor, Haiguike, and dulleyefarmer.
When I log on in east coast USA I look at my e-mail and hope to find an alert mail informing me that there are comments in my Seeking Alpha file.
You folks are some of the only info we get with knowledgeable input on the Mongolian scene on a consistent basis.
Please know that there are folks looking forward to reading any comments you care to present. Not to say there are'nt other interesting contributors but this core is counted on to be present as often as possible. Please keep it up . I'm glad Jon started this. Would like to hear more from him.
thank you all.
4 Sep, 01:55 PMReplyDelete CommentLike2
anyone hear from still dazed, valley boy, or king fox lately?
Seems like some positive efforts to further development in Mongolia have occurred since the election. hope it all continues.
It seems as if progress is desired but experience is needed badly in order to prevent the unintended consequences every time someone thinks they should offer their opinion as if they were the plenipotentiary of Mongolia. Freedom of speech is wonderful as long as one doesn't poison the water in the well by overlooking the unintended consequences. Add to your professional help as much as you can, whether it's Tony Blair or others of experience in international diplomacy. Why make their mistakes all over again.
Seems like what we read of the Continental Congress and how they progressed in the US.
Best of luck.
4 Sep, 02:16 PMReplyDelete CommentLike0
I've been in stealth mode and lurking lately as I don't have anything to add (been busy working a new job with variable hours and days also).
4 Sep, 02:27 PMReplyDelete CommentLike0
I'm just pre- occupied with a real estate soap opera which rents a space in my mind, shall we say, mccorj, but I will check in on Seeking Alpha now and then.
I agree this blog needs some more commentators who care about Mongolia if they can be found. Mongolia is in an interesting situation with its various pressures and potentials. I hope it all works out for them.
4 Sep, 02:38 PMReplyDelete CommentLike0
VB l agree we need more commentators who care and aren't pushing an agenda.This blog has always been good in that it gave some a chance to leave their own work /websites for a while and comment in a neutral environment. There are plenty of Mongolians who care but are careful with what they say.
l would like to hear from Pat O Connell and what is going on as Mongolia's Resident Debt Advisor.The trouble with Government employees they are usually gagged and blogs are often used as an intelligence gathering device which puts some off. The good old days with Guest Investor and Jon?
4 Sep, 04:25 PMReplyDelete CommentLike1
It's not about being "gagged" it's simply about the basic fact because of Pat's position he has UPSI ("Unpublished Price Sensitive Information") and in any market in the world, mistakes or leaks of some kind may lead to jail time!
In my previous as an investment banker (even in a bizarre box) I was a Permanent Insider and basic mistakes could be very costly up to jail time.
So Pat is not at liberty to talk about anything anywhere.
However I would strongly suggest he does some in-house training at GOM on what is UPSI so that ministers understand that TRQ is a listed company and whatever they say or do may have substantial impact, which is why it is generally recommend that such information are published outside market hours to enable information to be passed fairly across the board before markets open. :)
6 Sep, 03:13 AMReplyDelete CommentLike1
Simple basic pro-active common sense thinking.
If now GOM members do not pay attention to the fact that, not only TRQ, that many Mongolian related companies are listed in Toronto, Sydney, Hong Kong, London and comments or announcements leading to high material impacts made during market hours may make the regulators of those stock exchanges may a bit uneasy, then later when GOM is launching an IPO in one of those markets it may find those regulators less…flexible. A bit of attention now could make the IPO of ETT, MIAT, MSE,….later much easier!
6 Sep, 03:29 AMReplyDelete CommentLike0
l wasn't suggesting Pat was gagged l made a general comment about Government employees which included my own experience.l was surprised that he jumped into the Chinggis Bond discussion and glad he did. As l said before he has a very difficult job that he is doing in a professional manner lets hope some of his integrity and work practices rub off on the locals.
6 Sep, 06:14 AMReplyDelete CommentLike1
I am still a regular reader, but have to be cautious about what I say. I'll try to inject information that I think is helpful, but leave the opinions to the more experienced participants!
4 Sep, 11:12 PMReplyDelete CommentLike1
Great line Pat. Wouldn't it be wonderful if opinions were categorized as experience-ergo-qualified (assumes objectivity), or opinion based on very limited knowledge (unaware of other consequences--or, if implemented could cause unintended consequences). I notice how the Prime Minister seems very objective and won't answer when probed in an area not within his purview.
Another reason why this is a great (even erudite) blog.
5 Sep, 09:36 AMReplyDelete CommentLike0
l fully understand Pat's position he is there to do a job in a professional manner and l'm sure it's difficult. Being objective is ideal if we can get all the facts but that doesn't happen often in Mongolia therefore opinion often has to do. l imagine them trying to isolate you and no doubt with a carefully placed local assistant reporting your every move?
ln golfing terms l definitely "putt from the rough" and find nothing wrong with trusting my feelings and gut instinct.
5 Sep, 04:20 PMReplyDelete CommentLike0
MSEI commented: "many Mongolian related companies are listed in Toronto, Sydney, Hong Kong, London and comments or announcements leading to high material impacts".
That is a very good point and a real issue, which I made in a lesser way above about Rio's duties to report market sensitive information about second stage funding.
Mongolia is part of the world stage now and utterences and decisions government make have impacts; they need to and are reported around the world at cyber-speed.
A case in point is the current move to cancel 100+ mineral licenses as part of the MRAM court case.
If any of those belong to listed companies, and I believe there are some, then that type of action will need to be formally reported as a material event.
Another dent looming for investor confidence and international perception.
6 Sep, 04:52 AMReplyDelete CommentLike1
The MRAM court case is a real issue where Mongolia became a victim of its "operating procedure" and it will take time …and anyway, whatever could be the practical solution, even a great one will be irrelevant about confidence and perception.
"Another dent looming for investor confidence and international perception."
At this point, can it be worst?
However I really believe we could be close to a turning point where the situation requires drastic actions…otherwise Santa Claus in Mongolia may be the IMF 991 hotline!
It does not take a lot (just willingness) to spin the story positively:
A peace treaty (not a cease fire!) with RIO with an OT law in parliament (to avoid any further discussion from any political party as the 2009 agreement signed by the then government was obviously not enough)!!!
Then it could be a clear signal that Mongolia and GOM mean business and they can be serious in business partners with RIO. That would be THE positive signal for other foreign investors and MNT to move the other way.
The rest is only words, i.e. nothing.
Recently, about the current situation, some politicians were saying that Mongolians would adapt easily and go back to their traditional lives. :) :) :)
Yes, sure. I am still in UB and I would recommend to them to go to the Children's Palace for the Discover Mongolia conference (finished) or walk on Peace Avenue and watch!!
It seems pretty clear to me that the (elegant) Mongolian ladies have already voted, adopting capitalism and shopping beyond doubt, many wearing luxury …imported (US$ flying out) ….items from head to toes.
Comparing this conference to 2012 and 2011 was pretty clear on this…while the attendance on the investors' side was limited (and the "gala dinner" chopped).
So it may be time for some to stop denial, move to acceptance, adapt and rebuild FDI inflow …before winter.
6 Sep, 09:57 AMReplyDelete CommentLike1
Tugrug 1660 and rising?
7 Sep, 04:21 AMReplyDelete CommentLike0
USD/MNT at Golomt is 1670 buy and 1723 sell. That is absolutely bonkers. It was only less than 2 months ago when it was holding steady at 1400.
7 Sep, 11:57 AMReplyDelete CommentLike1
I got quoted 1770 (sell) on Saturday afternoon.
But about the FX levels, I am not sure the trading is that huge at this kind of levels.
it could easily be at 2000 or worst by the end of the week, but that is beyond the point.
What is important is:
Are most (some do understand but have limited capabilities) GOM ministers able to understand the seriousness of the situation...and therefore act accordingly?
If so, the worst it drops, the higher the awareness, the more drastic the actions, then the better for Mongolia in MT and LT.
I have not read the news so I don't where they stand on Tony Blair, but the fact IS that he (with team) was running inside the lobby of Blue Sky Hotel on Saturday around 13:15 (then left back before 16:00 and came back later.
First hand information from a friend who was in the lobby waiting for his guest for a lunch and then was in the coffee shop for a meeting.
I read a comment later Saturday from a Mongolian friend who seemed shocked that "The Mongolian advisor" was staying at Blue Sky (not cheap but excellent).
My reply was "so be it".
The bill may more likely be paid by RIO or an investment bank, but even if it's GOM, so be it if it can get things done.
Trying to save pennies while losing dollars does not make any sense to me.
Now I think GOM members and RIO have problems talking face-to-face, so if a "Monsieur bons offices" helps bridge this communication gap, I have no doubt GOM would save or make a very high multiple of Tony Blair potential hotel bill...but I have little doubts somebody else would pick up the tab....because for now, everybody lose at that game and this has to change and so whoever is the one helping and picking the tab, he is the smart one.
8 Sep, 03:13 AMReplyDelete CommentLike1
if I have to guess, that's where the bill may be going!!
Then if things get really fixed, watch the pipeline of Mongolian deals for JP Morgan in the coming years....and GOM and Mongolians will enjoy the return...because this week, while shopping was going full speed, some were getting pretty nervous on MNT prices!
That been said, MNT is also following the trend like other emerging market currencies!!!
Compare INR and MNT for instance and you will see it's not that bad.
Look at IDR,..
8 Sep, 03:21 AMReplyDelete CommentLike1
l think you are right about where the bill is going. Prince Andrew used to stay at the Khan Palace. History might read that Mongolia was just another bond scandal?
"In 2012, JPMorgan Chase & Co was charged for misrepresenting and failing to disclose that the CIO had engaged in extremely risky and speculative trades that exposed JPMorgan to significant losses."
Enron and Worldcom are massive scandals What is their interest in Mongolia? lt seems they are using Tony Blair to try and patch up Investor confidence then set up a new bond scandal in Mongolia? Their record of underwriting bonds and business practises make disturbing reading. l think they will need more than Tony's "delivery unit concept" to make this one work.
"Enron used a variety of deceptive, bewildering, and fraudulent accounting practices and tactics to cover their fraud in reporting Enron's financial information"
"Enron's shareholders lost $74 billion in the four years before the company's bankruptcy ($40 to $45 billion was attributed to fraud)"
The history of the Tavan Tolgoi should not be forgotten.
"Some suggest that Morgan Stanley may have an edge because the son of Sukhbaatar Batbold, Mongolia's prime minister, works for the company (as an analyst in Chicago)."
" JPMorgan and Citigroup can also tout the fact that they arranged the Hong Kong IPO of Mongolia Mining Corp in October'
8 Sep, 04:13 PMReplyDelete CommentLike1
I have no doubt about the fraud substance of Enron and WorldCom stories
but JPM in 2012 has absolutely nothing to do with that
and it would totally shocking to compare them or put them on the same line. Please don't.
The "significant" word is pretty much insignificant at JPM's scale, especially when compared to similar regular prop trading profits in the early 90s.
Storm in a teacup, just badly managed communication wise.
I am wondering why some are getting excited about this; it is simply not worth it.
(however when a bank becomes too visible, then it attracts attention and some try to leverage it to make headlines. Nothing unusual there)
The only that should have an eye on those losses is JPM's regulator, OCC.
But since 2008 some have been trying to make headlines.
Anyway, there should be nothing wrong if the bill was going this way, just a more likely positive outcome thanks to new parties to help bridge differences and get both sides to come to the same table to talk.
While many international banks have reduced their expectations (and therefore commitment in staff and budget) for Mongolia,
it would be good to see one investing and committing, expecting to build some credentials as "we know the market, we have helped here and there" to gain investment banking market share in IPO, bonds, M&A in the coming years, from the public and the private side.
That's how big investment banks work! Try to build credentials doing transactions (IPO, sovereign bonds,..) with government entities in order gain business from the private sector over time.
IPOs of government entities while being bigger in $ are often the smallest net revenues earners because the nominal fees are smaller (often post RFP) and the cost associated with managing those complicated/risky IPOs are higher.
That would be no surprises that an IB would go into a government IPO for very tiny or zero net revenue (was in one of those committees deciding to pursue deals or not) just to build credentials and gain other profitable business over time.
Standard operating procedure.
If my guess was true,
that would be very good news for Mongolia
that at least one bank, especially of that kind, does care and help.
8 Sep, 06:47 PMReplyDelete CommentLike2
"that would be very good news for Mongolia
that at least one bank, especially of that kind, does care and help."
They are such great guys who just want to help out Mongolia?
They were involved with Worldcom.
"JPMorgan Chase, which helped underwrite $15.4 billion of WorldCom's bonds"
8 Sep, 07:36 PMReplyDelete CommentLike0
IBs are not great guys, just do their business, may try to see the story with a more positive attitude and move forward.
You can find horror stories everywhere, on anybody, all the times,
and on a relative note (with 25 years in 5 different IBs of that kind) JPM has done better than most!
They did not need to be bailed out, directly or indirectly, by the US government to start with!
If JPM, MS, ML, GS don't pay attention to Mongolia...then Mongolia can say or do whatever it wants, its access to financial markets will be seriously limited, the economic growth and prosperity of Mongolia will take much more time.
You don't have to like or trust JPM; just watch how those big IBs can be game changers.
For now, many foreigners that moved in big time in 2011...are folding and in UB you can see that.
8 Sep, 09:18 PMReplyDelete CommentLike2
Shocked that the adviser is staying at Blue Sky? Where was he supposed to stay at? Bayangol? Mongolia does not even have a legitimate 5-star hotel.
Anyone noticed that Xi Jinping is visiting all the countries in Central Asia to establish good bilateral relationships, but not Mongolia? If I were the GOM, I would be quite worried. Xi even visited Tanzania and the Republic of Congo, but not Mongolia.
8 Sep, 09:31 PMReplyDelete CommentLike2
Regarding UPSI leaking from the Mongol Bank.l refer to my post Dec. 7 2012 regarding former President Emkhbayar's son.
' Can someone please explain to me again how his son E. Batsugar was ineligible to run for parliament but was made number two man at the Mongol Bank?"
Enkhbayar can surely contact his son anytime he wants UPSI?
A deal was done to instal him at Mongo; Bank and the former head of the Bank O. Chuluunbat was appointed by Enkhbayar for a 5 year term. He was with Enkhbayar at the time of his arrest and was his puppet. He was also implicated in Mongolian media as having paid a large bribe to have his son released from a 10 year drug sentence. Anytime he wanted UPSI he could get it.
A quote from one of my favourite articles that l frequently refer back to .Keith Harmon Snow has provided a rich source of material from a former insider.His account of the Khan bank is interesting.
"Mongolia's Khan Bank was privatized (2000-2004) under the direction of Development Alternatives Inc. (DAI), a Washington DC intelligence and defense outfit, packed with CIA types, that directly links USAID with the Pentagon (amongst other things, DAI conducts special operations trainings for the Pentagon's Special Operations Command Europe). Khan Bank is now 52% owned by Sawada Holdings of Japan, with DAI, the International Finance Corporation (World Bank), and Khan Bank CEO Simon Morris (NASDAQ:UK) and former CEO and present adviser Peter Morrow (NYSE:USA). The Khan Bank shareholder Tavan Bogd Group is their Mongolian front company partner. DAI provided the two senior managers of the bank: J. Peter Morrow and Ben Turnbull, Deputy CEO. Establishing a clear link between global capital and military force, DAI's Vice-President for Global Security is Colonel (Ret.) Barry Shapiro, who spent most of his career conducting U.S. Army Special Forces special operations missions throughout Southeast and Central Asia. DAI director Ann Hudock is a former Country Representative for The Asia Foundation. TAF is teamed with Khan bank for their 'Books for Asia' program in Mongolia, and Khan Bank is funding all kinds of public relations initiatives -- green-washing campaigns meant to sanitize their corporate image and blind the public about their true impact on the people and land.'
7 Sep, 04:51 PMReplyDelete CommentLike0
Not expert in Mongolian politics, if I have to compare what has been done or being done by past or current governors of Mongol Bank, I have to seriously disagree.
Reading news and watching actions, if all the ministers of GOM were like Chuluunbat O., Mongolia would certainly not be facing the current problems it is facing now, plain and simple.
Very likely doing much better beyond doubts.
Without him, I doubt Chinggis Bond I would have been flying so easily and that's the opinion from somebody with +25 years of investment banking.
For GOM, I think it would have been much better if he was the Minister of Finance or Minister of Economic Dev.
...and the level of attention he was getting from journalists at the Discover Mongolia in UB on Thursday was not unmatched.
While on the other side, there are very important things the current governor of Mongol Bank could do now, or have done before, that could help Mongolia!
Flagged in some of my previous posts.
So for the sake of Mongolia, I would prefer to clone past governor than current one. sorry!
Being a political appointee is not a sin!
In another Mongolian organization, I know somebody that while he was a political appointee (family connections) he did an excellent job!
Mongolia has a small number of people (because a small population) with relevant expertise for required sectors, so you have to deal with who has expertise and is around, politically or family connected or now.
If people get business done and help move forward so be it.
Mongolia cannot afford to be picky about such potential or alleged suspicions.
So it's better not to jump to conclusions.
8 Sep, 02:56 AMReplyDelete CommentLike3
The Chinese are ready to rail coal from the border to Baotou.
The story ironically written by a Mongolian.
9 Sep, 05:03 AMReplyDelete CommentLike1
Farmer - you reference to Snow's 2010/11 caused me to re-read it. It was a scandalous left-wing green rant then and it remains so.
It is not even a cogent piece of writing. It contains leaps of logic, biased "reporting" techniques, un-attributed quotes, wild conspiracy theories and the unwarranted trashing of good people's work and reputation.
After it was first published it drew widespread condemnation and refutation and then sane people just left it alone to sink into the pit of mud that all such conspiracy theories eventually reside.
Anyone who lived in Mongolia through that time and has even a passing knowledge of the events and people described knows what a lot of hogwash that story was.
As you correctly said, hard information and truths are hard to come by, and you admit to "putting from the rough" to draw conclusions. I also understand their sometimes is a grassy knoll.
May I respectfully suggest that in this case, and that of the Black PR by Rio plus the latest suggestions about JPMorgan you may be swinging that putter a little wildly? And that the ball may inadvertently hit and hurt innocent bystanders?
Occam's Razor: "Simpler explanations are, other things being equal, generally better than more complex ones"
Having said all of that your insider knowledge, excellent research and succinct opinions and views normally add great value to our discussions.
9 Sep, 11:54 AMReplyDelete CommentLike2
Parliament's website reports:-
Parliament Speaker Z.Enkhbold interviewed the Financial Regulatory Committee Chairman on Saturday:
ZE: Foreign exchange dealers are influencing exchange. Which dealer sold USD at 1780? Where are the transaction documents? 1780 is a speculative rate. You should know.
FRC: Dealers just advertised that they will sell at 1780. No sales have been done. The exchange rate changed 10 times today.
ZE: We don't need this unregulated black market . Rumors of Tugrik depreciation are absolutely wrong. You should warn people that doing things like this is wrong. You should find persons who the 1780 rate and confiscate their licenses.
9 Sep, 12:20 PMReplyDelete CommentLike2
That's not unusual.
In 1998 around Asia there were comments of the same substance.
A newspaper in Hong Kong published a picture of the door of our office (a big IB) stating that's it was where a well known figure running a big hedge fund was hiding. :) :)
What can you say?
Stay put and do your business low profile.
As we were libelled "bad guys" for no reasons,
we avoided anything that could be seen as provocation.
Few weeks later, a government entity was expecting (without explicit invitation) IBs to come to pitch for an important piece of business
(and by the way, we had a good outside the box solution).
Labelled bad guys, we did not go to avoid creating controversy and embarrassment.
It was a week later that through some back channel communications (the friend of friend) that this entity had to tell it wanted us to come which we did.
So we prepared a presentation and came.
They loved our outside the box solution but because of the way we had been brushed with by newspaper and public,
they had to acknowledge that the risk was too at that time.
Anyway, we did our job, tried to help them and simply went back to office to go on with our usual work because out of control PR perception.
That's life. No big deal.
When it's not this, it's something else.
Many years ago, being a derivative person implied the risk to be torched alive :)
9 Sep, 09:14 PMReplyDelete CommentLike1
I think if MPs have the good of the Mongolian economy at heart, there are many things they could do to help FRC.
On different topics, Securities Markets Law included,
FRC has done a great job and it would need more help and support to improve Mongolian financial markets.
One very simple example:
MSE has advertised it has tested its MNT government bond secondary trading platform.
However MNT government bonds auctions participation is for now limited to local banks (severely constrained by small equity).
What about having local brokers involved as agents to increase the potential list of targeted clients?
What about MPs talking to FRC on that topic, ask for its technical opinion and then change the current system accordingly?
With more diversified sources of capital (and long dated MNT government bonds sold to foreigners, that would be sticky capital)
then there would be no need to talk FX for that reason.
Mongol Bank safe would be loaded with foreign reserves and MNT to appreciate.
Whatever it is, the message may be unpleasant, but it is still worth reading because in some instances there may be easy fixes!
The "shoot the messenger" in financial markets has never lead to any results (if message was not read and dealt with the substance), just triggering some adaptation that may be even more problematic.
9 Sep, 09:30 PMReplyDelete CommentLike1
A lot of the facts remain the same regarding Keith's article. l notice it is one of the few English articles that Mongolians bothered to comment on. His conclusions could be argued but l find his research and interviews meticulous and thorough. l would like to see Keith write more on Mongolia now that Brian White has been filtered Most of his focus these days has been Africa.
Love your reference to the grassy knoll, of course it wasn't a grassy knoll but a storm water pit in the gutter which led to a large pipe getaway. The grassy knoll has become a symbol of conspiracy theories. lt used to be a tactic of one of our former contributors to label comments that he didn't like conspiracy theories.l was living in Mongolia at that time and interviewed several of the people mentioned in that article.
Perhaps l am playing like my countryman Greg Norman taking a 6 shot advantage into the last day only to choke and be beaten by Faldo? Yes if l am taking a swing it is wise to stand back as far as ex pats in Mongolia being innocent bystanders that is amusing.
l guess l have become bored with the wall of silence on recent events.
Love the comment from Enkhbold.
" Rumors of Tugrik depreciation are absolutely wrong"
The man is delusional.
One good quote deserves another.
"O body swayed to music, O brightening glance,
How can we know the dancer from the dance?" W.B.Yeats
9 Sep, 04:21 PMReplyDelete CommentLike0
A gold mine of information for Mongolia!
Table 5: Ranking of institutions vs. Macro factors
Table 6: Financial markets developments
Then the pages on Mongolia 260-261:
See 8th pillar!
While laws and regulations may be fixed, I think Mongolians and their government may be very frustrated in the medium term because they are unlikely to see the benefits they expect …as long as the Mongolian banking sector is still so tiny! That has to change!
A country with such bright economic prospects cannot grow over relying on a tiny banking sector!
9 Sep, 11:56 PMReplyDelete CommentLike3
What was your impression of the recent Discover Mongolia Conference? l see the Chairman is calling for comments and feedback. Do you think it addressed any of the fundamental problems?
You suggested a big reduction in participants and range of speakers this year.
10 Sep, 04:16 PMReplyDelete CommentLike0
MSE Investor. thx for the heads-up on the Global Competitive Report. Love this kind of info. Wouldn't it be wonderful to have all nations require that their political infrastructures be staffed with personnel with this type global knowledge as a requirement. This satisfies my frustration as to leaders eliminating their propensity for 'unintended consequences'.
Dulleye, could you give a link to what you find as a result of the Discover Mongolia Conference. thx
10 Sep, 05:23 PMReplyDelete CommentLike2
There were 2 conferences that week in UB; I attended Discover Mongolia on Thursday-Friday but not the first one (perfect waste of time last year).
Please keep in mind that I am cynical and a bit outside the box so what would seem weird for some would be normal for me.
The comments from friends attending the first conference were not good. Lack of speakers (often sponsors), last minute change of important speakers…
I went to Discover Mongolia in 2011 and to be fair while the Children's Palace was not full, this year it was not that empty. However the "Gala dinner" was cut so for those who paid for the Green badge (with dinners) instead of the White badge (without dinner), they were left short change networking wise.
They tried to organize it as panel discussions with people from government, NGO civil society, private sector,…often 10 persons per panel with everybody having a little time (3mn) for an opening statement and then several questions bounced by the moderator. They were on the clock and it was quite timely. To be fair it worked quite well when considering the risks. I remember at the other conference last year, one speaker was reading her 3 pages of notes (she had obviously not been explained how it works) while the moderator and the organizer were jumping up and down around her to know how long it would take, instead of just saying "stop". That was very bad. At Discover Mongolia people had been clearly briefed about that and each panel member has obviously prepared. Very few were off. That was professional.
The panels gave some ideas how diverse were the views from different sides but it also showed how it is complicated to make decisions there! This is a feeling I had for a while about Mongolia: difficulty to make decision while having big forums with just everybody adding input! It is not because all the stakeholders have given their input and some have worked very hard to include them that everybody will be happy. It's not. That was one finding that Rebecca Darling (IFC) flagged with an example from Ontario. I just hope all the Mongolians paid attention to any single word she said. When going for an extensive survey, expectations are raised beyond limits and self amplifying feedback loop during the survey raise frustrations after. I think Mongolians have to learn how to make decisions in a smaller committee with people attending on a need-to-know-basis. It's a small population with therefore very few people with expertise. Let those in charge and with expertise do. Don't clog the system. As Rebecca Darling said in substance: Not one (commodity rich) country got it right; don't feel bad; there is no template; learn and adapt.
The speech (his last!) of the day was for Cameron Mc Rae without doubt. People can say whatever they want about RIO, that was very professional, factual, detail oriented. As I was listening to this, I could not prevent myself from wondering what a Mongolian controlled and managed firm would have done here. May be RIO are the bad guys, but they are perfectly good at it. So Mongolians "be careful what you wish for 'Cause you just might get it" (PCD).
Decisions, announcements,…Nothing held my breath. With a bit of experience and especially what happened over the last 1.5 year, my expectations on the changes of those laws next week are very low. If Mongolians have the feeling they give up something valuable to restore confidence and FDI, I think it's wrong. They will be disappointed and frustrated. That is too little too late, while 9 months ago it would have done the job. Why did they ignore the message behind the Mongolia Tango in Oct 2012? It was then easier to fix. Anyway, I would love to be wrong there. The coming weeks will if there is a little bit of substance behind those words. By the way in the Investment Law, there are scary Pandora Box words like "culture, and traditional customs". While in substance those seem fair, after some comments from NGOs, I really wonder how this would turn out.
There were less people attending, but it was mainly tourists missing in action, i.e. new comers to town, PE investors, fund managers,…attracted by the boom. So less hot money in town while the usual long term players were there. Quality vs quantity? That should not be bad but Mongolia has to treat fairly those that have been and will be long term partners, because the hot money ones will add serious risks.
What was the most striking for me was the disconnection between what a MP said not long ago (no problem with mining cycles, we can go back to our usual way of life) and what I saw. I think Mongolians were survivors but they softened recently. What I saw during the coffee breaks was an amazing fashion show! Between (female) journalists, hostesses for sponsors and Mongolian ladies attending the conference, it was impressive relative to previous years. First by the quantity. Then by the dress code, from head to toe, including iToys and cameras. The luxury shops in UB should have a good a time. The always elegant Mongolian ladies have voted and MPs'd better remember this. There is no way back! And all those items are bought with US$, so GOM'd better make sure to restore the flow of US$ to UB asap. Later in the week, there was a Nomin event on Beattles Street and the substance was the same. Around UB, same trend, no question. Expectations from the population are high.
Also I was able to see again that Mongolians don't have serious face issues. Talking here and there, I was asked for my opinion and then advices from all kind of people and organizations and my follow-up list is just crazy. There are quite a lot of people that do want to fix things, ask for ideas and advices on how they should act accordingly within their environment (GOM related included). There were baffling situations where some important people with tight schedules were making themselves available for …a lunch! If you complain about Mongolia and GOM but you offer constructive comments, they are well received by most, especially in a private discussion…and there is follow up, may be slowly, but there are actions.
Anyway, I was delighted to fly back to UB for that amazing enlightening week.
10 Sep, 09:40 PMReplyDelete CommentLike3
Great summary. Sounds like "culture ' and "traditional customs" will be the new weasel words like strategic and non strategic were before?. Sounds a bit like a large company bonding workshop ie. divide into groups let everyone have a say then workshop ideas then ignore them. Did they have the falling backwards game and let your colleagues catch you?
I hope they took notes on your ideas and will implement some of them.
Mongolian women have already voted and are not as servile as their southern neighbors. Was it Ronald Reagan who once said if it wasn't for women us men would have been perfectly happy living in our caves ( or with our livestock).
No big announcements to coincide with the conference and Rio continuing to be good at being bad?
11 Sep, 04:28 PMReplyDelete CommentLike1
"Mongolian women have already voted and are not as servile as their southern neighbors."
--- If you're referring to Vietnam, Indonesia and some of the other SE Asian countries, I would agree with you. But if you referring to China, it is quite the complete opposite. 6 to 5 male/female selection ratio, Shanghainese (superficial, money loving, women control all the money) culture spreading like wildfire across the country, and a sense of entitlement to the extreme. More and more men in China are doing all the laundry, cooking, and dishes these days while making the money and handing it over to their women to go shopping. Less and less women are getting married because they see it as a limitation for them to prey on multiple men or find that one ultimate rich and cultured one that their families will accept. I do not like living in China or maybe I have not become accustomed to the lifestyle yet, but I sure love the opportunities here.
I have met a few Mongolian women who live in China and they say that Chinese women are much smarter by looking to get everything they can from a man and his family before the man can get what he wants. If you want to see superficial materialism to the extreme, check out the tier 1 cities in China.
11 Sep, 09:58 PMReplyDelete CommentLike2
Better be good at being bad than...be bad at being good and have voters short changed!
11 Sep, 07:07 PMReplyDelete CommentLike2
May be somebody can translate the substance of this but:
* that does not like new money raised more but more like a credit line, may be extended,
* and there are strings attached, i.e. buy equipment from Japan, not for just any purpose that Mongolia sees fit.
MNT exchange rate will tell us how it is perceived.
12 Sep, 05:54 AMReplyDelete CommentLike1
This is not a translation, but information on the same subject: Loans secured by a government guarantees may be possible, as Mongolia's credit rating may not allow the Japanese to issue bonds in the normal sense.
Which probably ties in with your impressions above, MSEI.
12 Sep, 11:34 AMReplyDelete CommentLike1
The Japanese will be loving the opportunities as GOM becomes more desperate. I refer to some of my previous posts for some reason Mongolians tolerate their most recent invaders whilst focusing too much on the Chinese. The Japanese have been trying to get a foothold onto the Chinese /Mongolian area and at last it might be happening.
l like Haguike's observations on bunking arrangements in China. Around 5-6 years ago there was a 27% jump in divorce rates in China as women voted with their feet. This lead to bizarre advertising campaigns targeting women having relationships with foreigners. I'm glad you made the distinction between tier one cities because in the far flung areas where l have been the situation is much different. l was working for a guy from Hailar whose aunty was sold in a card game to a goat herder. Many rural parts of China have changed little in 1000 years.
Every family wants there only child to be a boy and if he isn't well to do he can go to Vietnam or Mongolia to look for a bride.
The old British stronghold area on Shamian Island Guangzhou is full of American couples adopting unwanted Chinese girl babies and streets full of related businesses have developed as a result.
Mongolians don't have these restrictions and it is a blessing and good luck to have children of any gender.
Mongolian women have had a very strong role in society and l hope more of them can make it into Mongolian politics.
12 Sep, 03:40 PMReplyDelete CommentLike2
Perhaps the Japanese will store their spent nuclear fuel underground rather than shipping it to Mongolia if they can find a spot in Japan that is not prone to earthquakes.
12 Sep, 08:23 PMReplyDelete CommentLike0
"According to Reuters May 8, a Trade Ministry official said Japan, U.S. and Mongolia officials discussed possible construction of a nuclear waste storage facility for countries with nuclear power plants but no spent fuel storage capability of their own. That mandate could also include the domestic spent fuel inventories of Japan and the U.S."
"In its statement to the press May 10 the Mongolian embassy said, "As the Nuclear Energy Agency of Mongolia has pointed out in April, there have not been any talks with foreign organizations or individuals on the issue of accepting nuclear waste of other countries since there are no legal grounds for such talks."
One of them has to be wrong?
"Mongolia plans to have its first nuclear power plant by 2020. It also has plans to build nuclear fuel production plants (enrichment) to tap its rich uranium resources. The country has no public consultation process which means any decisions made by the government will direct the resources of state-own nuclear facilities."
Following last years visit by President Elbegdorj to Iran looking for uranium markets this is disturbing.The decisions in the hands of GOM without public consultation is a disaster waiting to happen.Lets hope the usual greed doesn't blind them.
Following our recent discussion on JP Morgan l remember being half asleep in high school listening to lectures on how they lent money to both sides during WW2. l love the term "Banksters". It highlights that such companies would do anything for money.
"According to Sutton's research, Morgan banking executives in funneled illegal Bolshevik gold into the U.S., intervened to free Leon Trotsky (who advocated "total revolution"), and transported Lenin across Europe in a "sealed" train (with $5 to $6 million in gold to facilitate the revolution). German bankster Max Warburg was instrumental in financing Lenin and the Russian Revolution."
Without the Russian revolution there would have been no Chairman Mao as detailed in the 2005 biography by Jon Halliday and his wife Jung Chang
A great source of material on Russia is John Helmer
The author of this article lived in Mongolia for a while.
14 Sep, 03:35 PMReplyDelete CommentLike1
There doesn't seem to be much information forthcoming since that time in 2011 to follow up on the idea of sending Japanese spent nuclear fuel to Mongolia. It appears that Japan is making a great effort to deal with it within their own jurisdiction.
Mongolia is studying their situation to determine if nuclear energy will be practical for them in coming years.
14 Sep, 05:36 PMReplyDelete CommentLike1
"Mongolia plans to have its first nuclear power plant by 2020. It also has plans to build nuclear fuel production plants (enrichment) to tap its rich uranium resources. The country has no public consultation process which means any decisions made by the government will direct the resources of state-own nuclear facilities."
LOL it takes 7 to 12 years to build a nuclear power plant and they are going to do this without public consultation? Either Reuters is full of it or GOM is delusional.
One nuclear power plant would be more than enough to support UB's entire energy needs. GOM should focus on building a more efficient coal power plant first. Chinggis Khaan and Kublai Khaan must be rolling in their graves.
15 Sep, 10:54 AMReplyDelete CommentLike2
yes, thinking about everything else and the challenges faced by Mongolia and GOM on just any topic, that one is just so scary, trying to run for the Olympics before walking!!
15 Sep, 09:42 PMReplyDelete CommentLike2
There are three radiation detection stations built by the US in Mongolia at Zamin Uud, Ulaan Uud and Chinggis Khan Airport l wonder what they have picked up?
There have been numerous proposals for waste disposal in Mongolia
l thought Japan just spread their waste over their countryside the country seems fairly plastered with it. l could go for a cheap skiing holiday but l don't want to come back with two heads.
12 Sep, 10:57 PMReplyDelete CommentLike0
"l don't want to come back with two heads. " :)
Could be a solution for some facing serious brain teasers.
Better two brains than one. :) :) :)
13 Sep, 12:52 AMReplyDelete CommentLike1
lt amazed me that Mongolia remained relatively pristine during the Russian occupation there are rumours of nuclear waste dumping in Murmansk .My grandfather spent 7 years in Japan at ground zero re building as part of the British occupation Army it killed him and he died in his 50's. This is a serious problem that GOM should never be allowed to be involved with. Just imagine the cream taken off the top and a storage bunker built to Mongolian standards.
13 Sep, 04:36 AMReplyDelete CommentLike0
MSE.Investor must be a clairvoyant. You no sooner advised us of the World Economic Council (your blog of 9/11/2013) and Mongolia is hosting a council meeting in UB starting today.
The sections you cited should be required reading for all management and political figures since Mongolia has such few people for such a massive democracy. The more educated and involved, the better.
As to Haiguike on the 9/8/13 noted the Xi Jinping non-visit to Mongolia, I see he greeted the president , albeit belatedly. You folks have a finger on the pulse or the country is reading Jon's blog and are into SA.
I'm seeing a positive mind set lately.
13 Sep, 08:11 AMReplyDelete CommentLike1
Not clairvoyant :)
I think it's more or less an annual event in UB at that time of the year, so I assume they have this after this kind of report has been published
and with the special session of the parliament next week, it's critical time for GOM to act.
Also, I would love to be wrong (because I am long that country and my friends in UB don't need unnecessary suffering)
but I would not see:
* the Japanese credit line
* the modified laws
as game changers.
They may smooth the difficulties but are unlikely to reverse the trend and get massive FDI inflow.
For perceptions to change now, a very sizeable and visible "anchor" deal is needed.
That could be:
* a peace treaty with RIO (with an OT law), or
* a massive deal with an international mine (and with Graeme Hancock in, Anglo-American would be a great name), or
* a massive (US$1bn) investment ticket from one of the Middle East SWF: QIA, ADIA, KIA.
So I hope that Tony Blair will be good at selling the Mongolian story :) :) :)
Some GOM members are reading those blogs on top of getting direct feedback through several channels.
"Mongolia has such few people"
That is really the problem, lack of capital and expertise.
Capital will come in anyway, but getting expertise is more challenging with only 2.9 million people.
Luckily they are not exactly shy when asking for help,
but their to-do-list is way beyond crazy. :)
13 Sep, 09:13 AMReplyDelete CommentLike1
"In the afternoon, Prime Minister N.Altankhuyag and accompanying officials also met Japanese private sector representatives about their support of new bond issues'
Good luck with that one.
MSE Investor would you also include the Russians in an "anchor"deal?
13 Sep, 03:54 PMReplyDelete CommentLike0
It has to be a template for other investors proving that Mongolia means business. So in a Russian deal people assume that I assume there is a bit of "you give me this, I give you that" not exactly an example about what other investors would achieve and then would trigger a rush.
13 Sep, 07:21 PMReplyDelete CommentLike1
They could consider this German licensed technology refined at Tsinghua University.
Can you imagine a Mongolian company getting a contract for total/partial construction. Half would go into the bosses pocket and the result would be the dodgiest building with every corner cut.
The Khan resources court case had implications that GOM was seizing back uranium licenses and giving them to people of their choosing such as Rosatom.
15 Sep, 03:33 PMReplyDelete CommentLike1
Ok, that's where Mongolians (and foreigners) have to give a chance to their businessmen and politicians.
First I don't think any country in the world moved up from undeveloped to developed status within a certain dose of mismanagement, corruption and other collateral damages and with such a cookie jar buried underground, the temptation is big.
Second the past may be a poor representation of the future.
I have invested in quite a number of MSE listed companies with questionable reputation and for which "corporate governance" would not be great (and it's a big understatement), I even met quite a number of them.
Buying a stock where the controlling shareholders may move some assets out of the listed entity into their own pockets is a risk.
But the fact is that I have seen quite a number of companies that understood very well (not because they said so) that growing the company to a very large size was a much more promising way to make money for the controlling shareholders than milking minority shareholders for pennies!!
They got the maths correct and while many still suffer from a bad reputation, their actions on little things prove they aim for the big game and prepare accordingly.
As I never tried to lecture them on corporate governance and good behaviour, but was just trying to understand well their business (to guess what would be their next move on the chessboard) so more than once the "We have no time. 15 mn meeting only" turned up to be a 1h or more.
On the other hand, I have seen one pushing forward "its best practices, foreign management, large foreign shareholder base" as an endorsement of quality to be a less than stellar performer...
While not being totally naïve, you have to give people a chance and put things in perspective.
15 Sep, 10:00 PMReplyDelete CommentLike2
I see where Snow's much-admired "activist" Munkhbayar has reverted to type and fired shots near parliament today.
16 Sep, 02:03 AMReplyDelete CommentLike0
Munkhbayar was much admired and recommended for the Goldman prize by the Asia Foundation and in particular Bill Infante/ Breakthrough PR and was their activist Keith merely reported on the leveraging done by TAF which backfired in a very embarrassing manner.Do you have more info on the circumstances of the latest incident? l don't think he is a very good shot as no one was killed last time. This American set play has been a real joke.
19 Sep, 05:49 AMReplyDelete CommentLike0
And this too:
I don't know many, if any, stock exchanges in the world that provide this level of information on dividend.
Sure it's much easier to ignore this and complain.
Now that means that people at MSE and FRC (as well as brokers) have worked very hard for this, so I hope that politicians will get serious very quickly so that all those efforts were not a total waste of time and money and then everybody in Mongolia can enjoy the fruits.
16 Sep, 10:29 PMReplyDelete CommentLike2
Jim Walker on Mongolia!
" Bouncing from one bad solution to the next less bad solution to the next is not a legislative process, it is just a mess."
17 Sep, 02:02 AMReplyDelete CommentLike1
About Sumo Bonds:
Anyway, we should not hold our breath for this and the potential impact upon issuance, if ever, may be limited.
What would be more interesting would be the impact of a shower of either petro-dollars or LNG-dollars on Mongolia.
That certainly would be a much stronger anchor and may ignite something...
Just hope the guest of Blue Sky hotel on sept 7-8 will do a good job...for the sake of all.
17 Sep, 02:21 AMReplyDelete CommentLike1
17 Sep, 09:39 PMReplyDelete CommentLike1
There's a higher chance of Santa Claus being real than Mongolia having even a measly USD3B in FX reserves.
17 Sep, 11:13 PMReplyDelete CommentLike3
While uranium may not exactly be the template for other mines,
that is a good start.
Just hope they don't oversell this story too quickly but focus on negotiation, execution and then announcement once everything has been inked and signed.
17 Sep, 11:35 PMReplyDelete CommentLike2
That's MNT 449.1 bn (~US$274 million) refinanced from 18% 5 years to 8% 20 years, therefore a saving of 1.70% per month of the loan amount.
In aggregate (in UB mostly) that's a cash savings of US$4.7million per month...(for the first 5 years).
No wonder shopping was going full speed when I was in UB 2 weeks ago!
One little problem:
Out of the US$4.7million, how much is going straight into shopping?
Then out of the shopping amount, how much is to buy items ....imported thanks to US$ flying out of Mongol Bank?
Unintended consequences may be??
Just hope that the guys inside the parliament understand this, otherwise this winter will be very cold.
18 Sep, 08:33 AMReplyDelete CommentLike2
I have heard that a number of the new 8% 20-year mortgage loans are being made to wealthy Mongolians who pledge existing apartments for the down payment and "purchase" new apartments from relatives who simply transfer title. They then invest the 8% money at a spread.
20 Sep, 12:50 AMReplyDelete CommentLike4
:) :) :)
Good, best practices from the west!
I know that one. It's called equitization. Use assets that can generally be used as collateral to raise cash …for other purposes.
There is little technical risk (obviously overlooked for now) that eliminates the "arbitrage".
"They then invest the 8% money at a spread."
But it's a 20 years loan at 8% and I have not heard of long dated MNT investments.
New government bonds have a maximum tenor of 12 months while old ones (5 years tenor then) are now ~3 years (thank you to Mongol Bank for preventing improvements).
So there are serious reinvestments risks…if things turn nicely, US$ flow in, and MNT rates collapse.
Anyway, thanks to this it will support SMEs!!!!
Mongolian entrepreneurs can leverage any mortgage free flat as follows:
•Sell the flat to a family member which borrows at 8% for 20 years and sign a 20 years lease (with a back end "over-the-counter" deal),
•Use the cash to invest in a business where getting a long term bank loan may be quite challenging or plain impossible!
•It works even better if both family members are associates in the business, then it's easier to mutualize exposure to business and real estate.
So thanks to the Housing Mortgage Program, SMEs may get access to cheap money (better than buying shoes, bags, itoys,…, and other-dollars-flying-t... !!!
Soon UB may run out of collateral (i.e. flat to be mortgaged) ...and the business risks that local banks did not want to take...they will get them anyway, ....5 sides Mongolian pool table. :)
20 Sep, 01:45 AMReplyDelete CommentLike1
...by the way, I heard exactly one example like this 2 weeks ago from somebody (clearly not wealthy) who pledged an apartment to buy another one ...to be built by 2015... :(
Anyway if some wealthy Mongolians are increasing their leverage on real estate,
while the Mongolian ladies go shopping for imported luxury items, that is more or less cutting any flexibility GOM may have left!!
With more exposure to real estate (on margin) then any slow down will become even more painful and unpleasant...cornerizing further GOM!
Those going for extra real estate exposure on margin may have more influence on their MPs than the middle and low class
so there is hope things get fixed faster...for the wrong reasons.
May be GOM members and MPs should understand it is quite difficult to play liar poker when all the cards are face up on the table while others players keep them close to their chest.
Foreigners have a pretty good understanding of the dynamics of international finance as well as how many bullets GOM is left with.
20 Sep, 02:02 AMReplyDelete CommentLike1
Along the line of "just hope the guys inside the parliament understand this, otherwise this winter will be very cold",
here are some news from the MSE brokers,
2013 H1 financials:
For those not exactly fluent Mongolian, to decode the titles, here are the 2012 numbers (not 2011 I think)
Anyway, last column(#11) is Net Income
and column #9 is Net Revenue.
No need to explain in length.
I think you see the ...little...problem.
What about cutting trading hours at MSE from 3 hours to 3 mn
to save energy as winter is approaching?
When the LSE-MSE agreement was announced early 2011 with all the celebrations and drum beating, expectations were raised high, very high...as high as the Bly Sky Tower where some moved their office...
...and now 2.5 years later, with the help of a couple of shots in the back,
it's not so great and we hear signs of C.A.P.I.T.U.L.A.T.I.O.N. in several places.
"When the going gets though, the tough get going" Billy Ocean.
18 Sep, 09:02 AMReplyDelete CommentLike2
What about "no comment until decisions made and tangible sustainable visible actions taken"?
18 Sep, 09:05 AMReplyDelete CommentLike2
Peace treaty between GOM and RIO and OT law thanks!
18 Sep, 09:06 AMReplyDelete CommentLike1
September 18, 2013 6:57 pm
Debt restructurings need a better way forward than this.
A good example of what happens to those overconfident misreading foreign investors and a bit stubborn.
18 Sep, 10:39 PMReplyDelete CommentLike1
Former President Enkhbayar has his son E.Batsugar as 2IC at the Mongol Bank. An English informant and a Mongolian website has been peddling a story that E. Batsugar is nor Enkhbayar's son and that his father is B.Bilegt who was studying in Russia with Enkhbayar's wife Tsolmon.
Tsolmon has has been recently romantically linked to Purevbat an artist/Monk
The other Bilegt who was involved in the Enkhbayar corruption case and fled to the US obviously with help was arrested on his return to UB. I posted at the time that a deal had been done to release Enkhbayar. Apparently Bilegt didn't like prison and began singing like a a bird giving authorities more than enough to permanently silence Enkhbayar.
19 Sep, 06:27 AMReplyDelete CommentLike0
about Mongol Bank and Enkhbayar,
I am very sorry but if Enkhbayar has ANY influence at Mongol Bank, there are many things that would be much better than they are now.
He has not!!!
So whoever may be affiliated or related to Enkhbayar at Mongol Bank, he has ZERO, nicht, neant, que dalle, nada, zilch, influence.
As you brought the name of Chuluunbat O. earlier,
if HE was in charge of Mongol Bank, for what I read and what I know, many things would be much better now and Mongolia would have predictable, decent, regular and sustainable access to international financial markets....instead of .... :)
When you know a bit of finance, while not being a finance geek, and you read news out of Mongolia, you have no doubt about that.
I am just wondering why this guy is not Minister of Finance, plain and simple or at least MED minister, full title!
Of course he is not DP but he is MPRP and in the government coalition, so if GOM try to fix things ...with very whoever has expertise, knowledge and experience, that would be a good start, when there is a reshuffle of the government.
19 Sep, 07:13 AMReplyDelete CommentLike1
Are you suggesting that as the largest private owner of the Trade and Development Bank and having his "son" as 2 IC at Mongol Bank carries no influence?
If his ownership wasn't hidden by the State Secrets Act we could all see the real extent of his influence.
If Chuluunbat was so smart he should have aligned himself differently. l guess not many people predicted the Khurelsukh and Nyamdorj factions ousting Enkhbayar by simply not rigging the 2009 election as usual.Once Enkhbayar was finished this obviously reduced the options of many of his devotees.
Chuluunbat is supposedly doing very nicely with his Chinese partners destroying parts of his hometown Selenge Aimag and sending timber to China.
Chinggis Khan used to promote men on ability not rank but GOM doesn't.
19 Sep, 04:25 PMReplyDelete CommentLike0
If you are suggesting that l am a "finance geek" then l am proud to accept. l am not a Bankster and l have always admitted my lack of knowledge in this area and have respected your experience and passion.
l see there has been more press regarding JP Morgan Mongolia's great new friend.
19 Sep, 06:31 PMReplyDelete CommentLike1
btw, for what I understand about the beneficial owners behind TDB, they are not MPRP, just the opposite!
So Enkhbayar's influence there is zero, plain and simple!
25 Sep, 08:09 AMReplyDelete CommentLike1
30 Sep, 01:27 AMReplyDelete CommentLike0
That does not prove any MPRP, MPP or...DP affiliation behind!
Until 2011, DP and MPP (incl. MPRP) were in a coalition, so there were no bias from this.
30 Sep, 06:35 AMReplyDelete CommentLike1
Of course it doesn't prove anything thanks to hiding behind the State Secrets Act. Everyone in Mongolia knows Enkhbayars role in TDB. Prior to his ousting factions within his own party used some of their staff to find his assets, one of them was a former MASP scholarship holder in Australia.
30 Sep, 03:51 PMReplyDelete CommentLike0
what I hear from the ground consistently is neither of those parties, but the third one.
30 Sep, 07:23 PMReplyDelete CommentLike1
It was expected by the end of May (2013).
Luckily it was a team of 20:
"The auditing team consisting of 20 people from the government was appointed to investigate the costs incurred during phase one of development of the project last spring as one appointed by Oyu Tolgoi LLC."
"However the first phase of development for Oyu Tolgoi overran the originally planned costs in the feasibility study. Oyu Tolgoi LLC admitted that the investment for the first phase of development for Oyu Tolgoi project jumped to 6.5 billion US dollars, 800 million US dollar higher than planned in the feasibility study. But the government of Mongolia estimated that it increased by 2 billion US dollars."
So what were the findings? US$800million or US$2bn extra costs?
What did the "auditing team" found? If it is exactly …what the government estimated, then one may wonder why 20 people worked so hard for at least 5 months.
I am wondering how many projects of that kind end up costly meeting the original planned costs, especially in situations like this
What about the Suez canal, Panama canal, Eurotunnel,….
The good news for those from Ivanhoe that were there at the beginning is that:
whatever what is said or written now, Mongolians will be thanking those guys for tens of years …because without OT and Ivanhoe, Mongolia would have not taken off the ground so early.
Time and history will settle the matter.
So all this now is just NOISE, noise that however impacts the Mongolian middle and low class!!! Just hope MPs listen to what Mongolians are telling them.
19 Sep, 07:01 AMReplyDelete CommentLike1
To GOM: Be Bold!!!
I think GOM has missed a huge window of opportunity early 2013, but it may have a second chance now.
When there is a new CEO in Western listed company (RIO included) it means he has a window of SIX MONTHS during which he can more or less do whatever he wants …and blame the guy who was previously in charge.
Nothing new there, every international investor knows that. Cut losses, write off sunk costs.
If there is something wrong, the new CEO has to cut the losses, decide of the new direction. The write off belongs to his predecessor, the future is his. Business as usual.
So what was GOM doing early 2013? Obviously not this. :) :) :)
Because if you want the new guy to take serious decisions and commit his future, you have to prove you mean business and there are no more guerilla tactics afterwards, because that would be his problems and his nightmares.
What about now?
The good news is that, if GOM can prove it means business and want to deal, there is some flexibility…and probably more than they expect (arguing about an overrun cost of US$2bn or US$800million…which will look ridiculous few years from now!)
RIO can run OT.
GOM wants the cash flows.
And South Gobi is in the Twilight Zone, contaminated, suspicious.
What about another Bold move?
GOM offers to RIO the package:
=> 34% of OT LLC - loan from RIO + an OT law
And gets in return:
=> higher royalties (to be determined) from OT + TRQ's stake in South Gobi with flexibility to (run it and) merge it in a Mongolian coal company with ETT and TTL?
(that's what a Mongolian website suggested some weeks ago plus the South Gobi twist)
If GOM can prove to RIO it is serious (that is the big if),
then it probably get more than it was expected.
Anyway, bottom line is action either ways, no more cheap talks.
19 Sep, 07:36 AMReplyDelete CommentLike1
Sounds like a gold... mine ...of information for GOM.
19 Sep, 08:13 AMReplyDelete CommentLike1
"It reminded me of an old Mongolian proverb that I made up: Even a three legged wolf still has fangs."
Even a three legged wolf with no fangs can still give you a nasty suck.
This must be the incident ghengis2001 was refering to involving the Asia Foundation's pin up boy Munkbayar.
22 Sep, 04:19 PMReplyDelete CommentLike0
latest data from IMF
23 Sep, 01:10 AMReplyDelete CommentLike2
23 Sep, 03:58 AMReplyDelete CommentLike2
For what I have heard about this, MPs do not mean business and do not seem to understand how serious the situation is.
Still talks, cheap talks ...but no action.
Business as usual in UB.
23 Sep, 08:18 AMReplyDelete CommentLike1
23 Sep, 12:22 PMReplyDelete CommentLike1
Speaking of economic development projects the much troubled MCC compact with Mongolia has concluded. Perhaps it's most significant achievement was the creation of the IAAC which has been used so effectively by the Democrat Party. The MCC had damning reports during the running of the compact l wonder how the final assessment will turn out? Their centerpiece project the $183 million USD "improvement/control" of the railway failed to materialize along with many other failures.
GOM is good at gouging money for feasibility studies and surveys but very little seems to actually get done.
24 Sep, 04:09 PMReplyDelete CommentLike0
Great, so what about A.C.T.I.O.N.S. ...now?
There are real external factors (price of commodities, macro-economics) but there are also Mongolian-linked external factors (FDI flowing in) and Mongolian MPs and GOM better understand asap that, like it or not, they are perfectly FDI dependent!!
Most of the problems are Mongolian self inflicted damages!
The good news is that it does not take a lot to reverse the trend and spin the story positively.
Just willingness to act!
A peace treaty with RIO with an OT law and the case is settled!
GOM just have to do the maths about what it may lose and win there.
The direct and indirect impact of OT for now in the Mongolian economy is huge, critical, so better deal with it now...if Mongolia wants ever to take off and ...then...gain independence !!
Because once FDI flows in to UB, then Mongolia will have more choices in term of partners, opportunities, ...becoming less OT dependent over time.
That is not rocket science, it's not even chess; it's plain common sense to figure that one out.
24 Sep, 11:15 PMReplyDelete CommentLike1
Was there mandatory attendance for all MPs to sit and listen?
25 Sep, 12:40 AMReplyDelete CommentLike1
"Where is love?"
That's what the Black Eyes Peas were singing ...
...and it seems Mongolian MPs and GOM members have problems understanding why foreigners don't feel loved when thinking about investing in UB.
Dear MPs and GOM members,
no need to brainstorm very hard to find evidence of the pain inflicted to foreign investors!!
While trading on MSE for 2.5 years now and having a certain dose of patience
(which is heavily implied in the first part of this sentence),
I am always amazed by the level of stupidity (sorry there is no other word) one may find dealing with paperwork, for instance when operating an Escrow Account at one of the Clearing Banks.
In short, to transfer funds between several Escrow Accounts of yours at the same Clearing Bank, you have to be in UB... or pay a little fortune at a notary public for a notarized copy.
Originals, even directly sent by DHL, have no value in that world!
The other solution is that if you are lucky enough to meet one officer of that bank where you live, armed with your transfer instructions and your passport, you ambush the guy and hand over to him the document while showing your passport.
Therefore one officer of the bank can testify you have hand delivered in person the transfer instructions.
Of course the challenge is to track the where about officers of Mongolian banks.
...but luckily there is a Mongolian conference in Hong Kong mid-November and some of those officers are speakers at that conference, so you just have to wait in the lobby of the hotel until you find one ...to execute your transfer instructions.
If you miss that window, then too bad, the next one I heard of is in London.
For those adventurous enough thinking about investing in Mongolia and on MSE, the key words are:
* thinking outside the box
Welcome to Mongolia
Good luck if you expect foreign investors to rush in your market!!
25 Sep, 03:58 AMReplyDelete CommentLike2
The task force includes Nyamdorj one of the key people responsible for ousting former President Enkhbayar.
Challenging times for Pat.
25 Sep, 05:25 AMReplyDelete CommentLike0
Honestly, if I was invited, I would not mind helping this task force, especially on the dusting side :)
25 Sep, 06:56 AMReplyDelete CommentLike1
Challenging times for Pat ??
No. I don't see why it would be.
Pat is O.T.A. so guessing from Hong Kong,
his mission is pretty "simple" and straight to me.
It is to assist the MoF on a technical basis based on what GOM decides, not more not less!
OTA is Office of Treasury Assistance
The mission of Pat is not to impose anything to MoF nor to Mongol Bank!
Mongolia is a sovereign country and Pat's job is to assist MoF based on Parliament and GOM's decisions.
However for what I have seen about Escrow Accounts opening and operating procedures at Clearing Banks (to trade on MSE)
while there is a lot of paperwork involved,
the facts are:
* some of those papers (never asked elsewhere) are absolutely and perfectly irrelevant
* some critical elements (in other countries and in substance) are not even required
to the point that if local Clearing Banks were facing a FATF in depth investigation (with me to help),
I have little doubt the result would be a FAIL.
Furthermore, while Mongol Bank governor announced in oct 2012 at the Mongolia Summit in HK that a system of Primary Dealers would soon be in place for MNT government bonds,
one year after, I have not seen anything remotely close to this.
MOF is only able to issue up to 52 weeks because the Mongol Bank lead auctions are limited to the (tiny) local banks
and the multiple price auction system which is a deterrent for "outsiders" as academics flagged.
So I believe there is a very substantial cost of opportunity for MOF and Mongolia in term of MNT long dated financing
(before 2012, MOF issued up to 5 years...which local banks may not be keen at while foreigners may be!!)
and MPs may want to hold Mongol Bank accountable.
25 Sep, 06:52 AMReplyDelete CommentLike1
Why don't one of you constant participants start a new blog? Doesn't it seem unwieldy to you to have to go through 630+ comments just to get to the bottom to read a new comment? It's time to turn the page, in my opinion.
25 Sep, 01:42 PMReplyDelete CommentLike1
but while it is taking more and more of my time, in many different situations, Mongolia is still a hobby.
Friends (foreigners in UB or abroad) of mine for who Mongolia is a full time job are more less turning suicidal when piling up headaches.
It's only a hobby for me, for now.
(however when I see what I have been doing over 2.5 years, I am pretty much at some point Mongolia will become a business for me in 1-2 years, but don't know yet how as there are many possibilities)
My input is mostly finance related so once things have improved (technical + turnover ...) on MSE, then I will have nothing to add and will shut up.
So if I believe something may have been overlooked or I would see things with a different angle, then I will write a few lines. (always too long anyway). That's it.
If I was to start a blog, then it would become a job and I would be under the obligation to write something daily even when I don't feel so.
Also, many of my posts are related to articles coming from other websites to which I may add a comment. Nothing ground breaking.
If there was another blog, I would be happy to comment the same way, but not lead for sure.
25 Sep, 07:12 PMReplyDelete CommentLike3
By challenging time for Pat l mean that he has already stated that he has to be careful in what he says. There is obviously a lot of things going on behind the scenes. As Mongolia's resident Debt Advisor he can advise but will they listen?
This blog has been fine . Jon seems to have abandoned it as most of the things he was spruiking didn't happen and many are sick and tired of GOM and its antics.
The early days of this blog featured a wider range of contributors often pushing an agenda.(example Peter Epstein as paid consultant for South Gobi). My observation is that a lot of the contributors were simply wrong and now have nothing much to say. MSE Investor has been a breath of fresh air with his always positive advice.
We tried blogging on Mongolian sites but when ever the blog became interesting the server was "upgraded" comments disappeared and a new censored system installed ( please see comments regarding UB Post).
SA in spite of its critics has provided a fair forum that is archived.My criticism would be not allowing me to see who is following my comments and the ability of certain contributors to easily establish your identity.Also my comments (number) only show the recent blog and not the archived comments.
Jon just needs to archive the comments now and again. The blog seems to have readers but at this time comments are low.
25 Sep, 04:02 PMReplyDelete CommentLike0
You guys are not my only source of information about what is going on in Mongolia, but I read this blog every day and learn new things consistently. I suspect there are a lot more readers than there are commenters.
25 Sep, 10:07 PMReplyDelete CommentLike3
I can only speak for myself, but I still come here to catch up whenever there are new comments. Until there is some very positive news about how the GOM views foreign investors, I will continue to lurk.
26 Sep, 01:20 AMReplyDelete CommentLike3
"What he did in the past was for Mongolia`s good future".
" With the full backing of the Soviets, Tsedenbal successfully purged his political opponents. It is said that during his time as head of the state, Tsedenbal submitted requests for the incorporation of Mongolia into the USSR on five to eight occasions, but these proposals were invariably rejected by the Soviet leaders."
Interesting to see the MPP honoring the former Soviet puppet leader Tsedenbal.Purging his political opponents usually meant being hacked to death with an axe in the case of Damaryn Tomor-Ochir. He didn't want Mongolia to be a sovereign nation but part of Russia.
His Russian wife was responsible for many good things in UB such as the Childrens Park now transforming into the US part of UB, the Music and Dance College and the Children's Library.
He was blamed for many things after "democracy" reached Mongolia and GOM refused to let him back into the country. He was allegedly killed by injection by a Russian Doctor a common Russian method.
26 Sep, 12:38 AMReplyDelete CommentLike1
One for MSEI to do his tea-leaf reading upon:
The GOM have offered 2.5% royalty on gold produced from OT and sold to the BOM. Versus the normal 5%. At the moment, OT gold is going over the border in the conc and not coming back.
Weird - - - - how do they expect OT to sell them the gold, given it is not refined out of the concentrate until it gets to the Chinese smelters? Some sort of exchange/swap deal?
More weird, why do this? Is it part of a set of gives and takes about to be announced?
Another "give" seems to be that the original budget that supposed the normal sliding-scale royalties be applied to OT has been amended and replaced with the ia-agreed tax/royalties. In other words the Gov has given up pursuing OT for the increased royalties.
While the meetings in London are in the early days, things seem to be moving, and perhaps positively.
26 Sep, 03:31 AMReplyDelete CommentLike2
While I am more a coffee addict, I will try to do my best with the tea-leaf
First there is this comment:
For what I have been told, some MPs have said that the lowering of the royalties on gold from 10% to 2.5% was just like giving away $5.7bn but my Mongolian is not good enough to decode this.
Then there are ninjas. If mining gold cannot a normal business, then those that would do it professionally would give up but the ninjas have no reason to stop.
If mining gold is encouraged and supported, then mines will keep an eye on their properties and those mining illegally may put their skills at a better use in a safer environment.
So general comment, if people with track record playing long term are not welcome and respected, then those taking their places may not be so good.
Life difficult for legitimate gold mines => ninjas take advantage of it
Difficult for long term investors => hot money shows up, then pulls back and …it hurts.
Same problem. Mongolia will get the investors and the miners it deserves.
The facts are that:
•There is a lot of gold in OT,
•The price of gold fluctuates quite a lot,
•Keeping foreign reserves as old may not be totally insignificant at a time printing presses are running full speed,
•And over time, the headache for Mongolia will shift from raising capital but to invest its cash flows.
So early 2013 I sent to somebody (not far from GOM) in UB this e-mail:
"… as there are gold mines in Mongolia, it may be wise for GOM to pre-empt any sale of gold outside Mongolia, i.e. gold out of Mongolian mines should be offered FIRST to MongolBank so that it could be bought by either MongolBank or SWF.
As this would be a relatively small part of the Mongolian exports (coal and copper), Mongolia would not be adding substantially to correlation risks while protecting itself against potential run on USD, EUR, JPY,…
And of course, this gold should be held PHYSICALLY in Mongolia in a new specially built safekeeping facility at MongolBank.
If there is a nationalist sentiment developing in Mongolia, hording and keeping gold at home sounds pretty much a must do in that respect."
That is pretty much what China is doing! I don't think a lot of gold mined in China is exported
Keeping in mind my derivatives background, I also suggested it could also be possible for OT to sell forward (or much better enter into a collar where GOM would get the call and Mongol Bank sell the put) gold to Mongol Bank (which may hedge back with international banks or with GOM) so that at least a good portion of the revenues of OT is secured.
With a good chunk of its revenue stream (from gold) being hedged, therefore OT would become a less risky company and enjoy a lower funding cost.
Hedging the copper revenues would not be so easy.
Then back to GOM-OT-TRQ-RIO, finding a decent solution to please all parties is not such a big deal.
It's just a matter of willingness from GOM to go to the discussion table with mind and eyes opened. It's problem solving 101. Not rocket science.
What does GOM?
Where can GOM add value?
What does TRQ and RIO?
Where can TRQ and RIO add value?
Then if they bother putting on the table all the objectives and constraints and try seriously to look at solutions that address as much as possible that could be settled in a day.
It just requires one thing: GOM representatives to come to DEAL and Mongolia to stick to the agreement for tens of years.
Then there may be several solutions.
One could be GOM trading the OT stake - loan against an increase of royalties
Another one could be GOM cutting the royalties on gold and RIO to forgive the loan to GOM, in which case the 34% OT stake can be monetized, listed and/or giving to Mongolians…
If they want, it's simple. But do they want and can they do what is needed?
26 Sep, 06:29 AMReplyDelete CommentLike2
Just to let you know guys that I am a constant reader from Mongolia and finds the discussion(or comments) here food for thought.
26 Sep, 08:26 AMReplyDelete CommentLike3
Great solutions but any giving up of the 34% of OT will be seen as a loss of face. The black market is booming and took off the day GOM introduced the 64% sudden wealth tax.
As l mentioned before one Russian took 4 tons out of Mongolia and reportedly made over $70 million. He approached an expat pilot as he wanted to buy his own plane and fly out more gold.
Mongolians have a bad history of cleaning out banks ( MPP General Secretary Khurelsukh gambling $1.4 million stolen from the Savings Bank.)
l don't think they have the mindset or track record to handle this.
26 Sep, 04:17 PMReplyDelete CommentLike1
"Great solutions but any giving up of the 34% of OT will be seen as a loss of face."
Loss of face ? where?
if instead of getting a lot $$$ (dividends from OT once loan is paid) in 10-20-30.... years subject to all kind of factors in between, you get regularly each year $$$ (increased royalties), I don't see the problem.
Mongolians and GOM have clearly demonstrated on numerous occasions their priority is .....short term!
It's not new, it's historical, imposed by the situation.
Before june 2013, any 20 or 25 mortgages?
Any 20 years amortization of tangible assets?
Looked at what happened to ETT! Once cash went in from Chalco, GOM gave it away to Mongolians...who happily spent it asap! That does not sound long term to me.
Looked at TTL, Mongolian controlled and Mongolian operated.
its dividends payments until 2012 were massive...and what about now ? Has this mine being managed with a medium / long term plan, or just change anything into cash asap to distribute it as dividends?
Why would they try to play long term on this?
It's not natural.
Why would GOM try to be involved in the management for the long term of such a mine while they are not good at that (check ETT and TTL in case of doubt) and they are not used to this kind of time frame.
There is no face issue here.
The general attitude of Mongolians and GOM totally supports an exchange for increased royalties.
Doing hat you are not good at for what you don't like is just plain stupid, on top of inefficient.
26 Sep, 07:22 PMReplyDelete CommentLike2
What you say makes perfect sense but the voting public won't see it like that. Only part of the Chalco money was given away and only to those lucky enough to have an electronic ID card. I have yet to meet anyone who actually got some.
On another subject that sickens me to the core.....
The calibre of some of our Aussie "Diplomats" is a national disgrace. Here is the latest from a shameful list.
Brown was a former Asian Ausaid employee and used to host his friend Robert Dunn at taxpayers expense
27 Sep, 12:17 AMReplyDelete CommentLike0
The links for Brown didn't work. This sounds more like the Catholic Church rather than DFAT the standard in Asia is appalling.
"A departmental whistleblower claimed the Brown case is typical of the Government's hush-up approach to paedophilia allegations in diplomatic circles."
"Brown was one of 10 staff from the Department of Foreign Affairs and Trade investigated in 1996 for alleged child-sex offences, although no proceedings were brought against him."
27 Sep, 04:01 PMReplyDelete CommentLike0
"Likewise, if we manage to obtain investment from China to build the Tavan Tolgoi power plant, roads and railway with the condition of paying them back with our products, there will be less risk and our government will not have to suffer from increased debt pressure."
This is exactly what happened with Tavan Tolgoi the Chalco deal negotiated by Enebish, it backfired and produced disastrous on going debt pressure.
What is the point of not allowing media coverage of the World Economic Forum?
28 Sep, 04:01 PMReplyDelete CommentLike0
The linked article mentions the possibility of developing a new air cargo transport hub serving international markets. It sounds like that idea will be put into place at the new airport complex.
29 Sep, 02:35 AMReplyDelete CommentLike1
Sure great contribution. Made my day.
The substance behind is that local Mongolian banks (forget Savings Bank) are so tiny, too tiny to be of any relevance to provide the needed capital to Mongolia.
With only 2.9 million Mongolians, what can of savings can you rely on??
There is only one question:
How long will MoF be blind enough to rely solely on local tiny banks for MNT government bonds and the rest.
I understand and support that local groups should be protected BUT here MoF (and of course Mongol Bank) are seriously responsible for delaying progress in Mongolia.
29 Sep, 04:38 AMReplyDelete CommentLike1
" Anointed the "Best Managed Bank in Mongolia" by The Asian Banker magazine in April this year, the collapse of Savings Bank, the country's fifth-largest lender, only three months later,"
You really have to wonder about some of the "intelligence" some Banksters are putting out.How could you come to that conclusion after serious irregularities were found by the new owners Grimmov and $1.4 million USD was ransacked from it by the former General Secretary of the MPP. The Savings Bank l was told once in UB serves primarily to launder money.
29 Sep, 03:49 PMReplyDelete CommentLike0
"Regulators hope that foreign investment will help shake up the local securities firms. There are about 70 registered securities trading firms in Ulan Bator, but many do little trading. "One person with an excel spread sheet sitting in a car. He can be a broker," said Economides"
Just inappropriate and shocking.
Obviously a total lack of (recent) historical perspective.
While expectations were raised high in 2011 thanks to the LSE-MSE cooperation announcement,
the current turnover is even worst than it was before, while brokers have faced extra costs of all kind...and are just trying to survive until GOM, MSE and LSE deliver.
Aren't Mongolian brokers reacting to this??
29 Sep, 04:45 AMReplyDelete CommentLike2
Congratulations for job ...not done.
29 Sep, 04:48 AMReplyDelete CommentLike1
Hot air out of London!!!
"Mongolian Government and Rio Tinto form united stance over Oyu Tolgoi project"
"The negotiation between Mongolian officials and Rio Tinto representatives took place in the headquarter of Rio Tinto in London last Sunday according to local reports. Official sources say the negotiation was held with a positive atmosphere and the parties united their stance over the start of the underground portion of the mine. "
United stance" ??? I have problem figuring that may be be.
May be GOM members and RIO executive were dancing Mongolian Tango (M.A.D. oct 2012) . Who knows?
No report of fist fight,
nobody held up,
nobody screaming out of the room,
so one has to assume it is positive, as positive as it gets.
May be both sides could ask Obama and Rohani to be the middle men as they don not seem shy.
May be GOM members will go back next month to London to discuss further, may be every month ...
30 Sep, 12:13 AMReplyDelete CommentLike2
This makes 9 US Honorary Consuls to Mongolia.
"The Pintas & Mullins Law Firm has successfully recovered millions of dollars for over 10,000 clients from across the country."
Could be a push on to recover money and follow a few dodgy deals?
Am l too cynical on Sep 26 they sign some more US development deals bringing to over $290 million spent by USAID in Mongolia then the next day Elbegdorj makes a statement on Nuclear Disarmament.
A new anti corruption website sponsored by USAID and the Asia Foundation arguably the greatest manipulators of aid in Mongolia.
The Parliament should stay sitting until it resolves something.
30 Sep, 04:11 PMReplyDelete CommentLike0
For MSE, my hope, my wish, my prayer:
Can a foreign bank please setup shop asap in Mongolia as Clearing Bank for Escrow Accounts to trade on MSE?
Please, please, pIease, I beg you.
BONY, State Street, HSBC, DB, SC, Citi….whoever, I am not shy! Just any!!
Dealing with local banks is UBU-esque, stress testing like never seen.
Whoever setup shop there is sure to gain 30-40% market share to start with, and then help unlock normal foreign fund managers (DVP standards) that will never wonder in such a chaos until they find an institution that is not dysfunctional!
30 Sep, 10:10 PMReplyDelete CommentLike2
Bank of China is in UB, but I don't think they are engaging in any business except trade finance in the near future.
30 Sep, 11:19 PMReplyDelete CommentLike1
Tell them to speed up!
Will tell my broker to open Escrow Accounts with them on jan. 1, 2014!!!
30 Sep, 11:46 PMReplyDelete CommentLike2
When you think about market shares among Mongolian brokers,
you can infer market shares among Clearing Banks,
so if Bank Of China was to start as Clearing Bank on Jan. 1, 2014
you could predict a massive exodus...and I have no doubt it would start with 30 to 50% market share from the start :)
1 Oct, 12:08 AMReplyDelete CommentLike2
Don't you think the GOM would do something about that? If they went nuts over Chalco and SouthGobi, I can't imagine them not doing anything about BoC taking 50% of the MSE market share.
Anyway, it's really peanuts to BOC and the Big Four banks in China (ICBC, CCB, BOC, ABC) are very risk adverse. There is zero chance of this happening.
From what I have gathered from the Chinese businessmen in Mongolia and China, the political elites find it quite amusing that the GOM has played their cards so poorly or arrogantly. China is going around the world to build relationships with resource rich countries like South Africa, Kazakhstan, Russia, and many many many more. The sentiment is that if Mongolia wants to play the game this way, then China will just ignore the GOM and even let Mongolia starve itself as it has become addicted to easy debt and fast money.
1 Oct, 01:00 AMReplyDelete CommentLike4
That's probably how PRC sees Mongolia….the problem is that "won't keep…Mongolia…warm" in the middle of winter….and this winter (at MSE) will be cold enough.
You think you're special.
It's not rocket science to understand the situation.
Just wonder if Shania Twain ever visited Mongolia.
Agreed, agreed, agreed,…liar poker, game theory, chess, Mongolians MPs and GOM members overplayed their hands big time.
They still understand 0 to international financial markets, and they silence those who do.
Too bad, coal goes to or through China. Copper from OT goes to China.
Imports come from China …and when they come from Russia (diesel) that is not so smooth either.
Third neighbour country? Great, but what a bit of respect for basic concepts among democracies, like contract, if Mongolia wants to avoid being totally at the mercy of China and/or Russia ?
Time to grow up GOM….which is by the way what I tell my teenager son who believes he knows everything but luckily he has a 911-dad to fix his screw-up. Pretty familiar.
Now if Mongolia and MSE have a problem with Chinese banks becoming Clearing Banks, so be it.
But what about making the others really welcome instead of protecting the tiny local banks against all odds....until the consequences are lethal.
1 Oct, 02:27 AMReplyDelete CommentLike3
Having lived in Mongolia for almost 1.5 years, I am very certain that even if a Chinese bank were to come and be a clearing bank, as soon as it is successful, GOM and the elites would see it as a piece of the pie that belongs to them and that the Chinese are stealing from them. This magnitude of this mentality is multiplied when it is a Chinese company over a Japanese or Korean company, especially if it is state owned.
I think the Japanese are already making moves on the financial side, aren't they?
1 Oct, 03:32 AMReplyDelete CommentLike3
Japanese: I tried and ran away!
in 2011 I opened my first account with Frontier Securities.
When I went to UB for the first time and saw how it was run (they had just moved into the 7F of Blue Sky Tower :) ),
my analysis was "within a year all the key staff are gone".
So I opened linked accounts elsewhere to avoid being grounded.
One year and a month later, my forecasts were met and pretty much all were gone.
I am wondering who is left working in Frontier's office, how many sqm they use (may be working from a car with an excel spreadsheet see below) at Blue Sky Tower?
Are they even able to execute on the MSE floor?
Regulators hope that foreign investment will help shake up the local securities firms.
There are about 70 registered securities trading firms in Ulan Bator, but many do little trading.
"One person with an excel spread sheet sitting in a car. He can be a broker," said Economides
1 Oct, 04:11 AMReplyDelete CommentLike1
Yes, almost all of the Frontier guys left. I believe they are in the business of selling investment research reports, expos, and renting out apartments?
Don't underestimate the power of people who work hard from their cars or their homes. Problem is, I think most Mongolians love the image and comfort of their offices too much. They may start off working hard, but they look to bring in people under them to do all of their work as soon as possible.
I started off way too lenient in Mongolia. I paid the price and learned a lot from it.
1 Oct, 04:32 AMReplyDelete CommentLike2
those who left are not doing badly :)
I am in touch with most of them.
* "selling investment research reports" ? Who would pay for ...that?
* conferences: looks bad when the keynote speaker writes you off...while has time for another conference and was quite available for interviews or private meetings?
* renting out apartments? may be in Japan or Shenzhen, but clearly not in UB. :)
Anyway, Darwin is settling that matter.
Working from homes or cars:
Agreed, that is why I believe this comment that was posted in the SCMP was inappropriate, plain and simple.
1 Oct, 04:48 AMReplyDelete CommentLike3
"Anyway, Darwin is settling that matter."
I really regret paying $5,000 for the expo last year.
1 Oct, 06:11 AMReplyDelete CommentLike3
'This magnitude of this mentality is multiplied when it is a Chinese company over a Japanese or Korean company, especially if it is state owned."
A large part of Mongolias xenophobia towards China stems from the death of Stalin in 1953 and the subsequent Russia-China split and Mongolia's willingness to accept Russian propaganda.Mongolians educated in Russia usually returned with a Russian brain.
"From what I have gathered from the Chinese businessmen in Mongolia and China, the political elites find it quite amusing that the GOM has played their cards so poorly or arrogantly"
l have to agree with your comment. Chalco must be laughing at the deal done by Enebish for Tavan Tolgoi.Just bribe a few key people and you can get what you want natural selection in action?
1 Oct, 04:10 PMReplyDelete CommentLike1
What is impressive is that if you want to trade on MSE (now, thanks to the LSE's help and upgrade), you need to have an Escrow Account at one of the LOCAL Clearing Banks.
Before opening an account (securities and cash) at the clearing house (MSCH&CD) was quite straightforward and convenient.
Even from overseas that was headache free for such a young market.
Then post upgrade, before opening an Escrow Account as a foreigner you'd better take some sleeping pills to retain some form of control (trust me!!), or just reserve your room in a nuthouse…just in case.
You were asked for all kind of irrelevant and expensive documents….then no wonder, some foreigners who were trading before and still have their accounts at MSCH&CD with shares are still on stand-by as they see no upside opening an Escrow Account.
And some are wondering why there is no activity and some brokers have downgraded their offices to…mobile ones :)
Aren't they blind?
However local banks are quick at stating their "highest standards" (let me laugh) saying those rules came from Mongol Bank.
If you go to UB (cost you plane and hotel) then there is a still a lot of useless paperwork but it's more or less free.
Now having been licensed for many years in financial markets, as well as "Responsible Officer" I respect licensing but I am totally allergic to useless documents and that's what those Escrow Account requirements are about, i.e. they would fail any FATF in depth investigation!!
I guess even a baby money launderer could open an account at those banks.
If I was sent on a stealth mission by FATF to test the Mongolian banking system, the question is not if I would find a breach ...but just how many...and I am not a regulator!!!
Better, I even got evidence of a Clearing Banks were offering more attractive terms (to open Escrow Accounts) to investors coming through their affiliate brokers than through other brokers they had signed agreements with.
Level playing field? Probably no translation in Mongolian.
For now two days, while I am having online access to my Escrow Account my cash balance shows ZERO (it should not!) and it is impossible to get the history to track my settlement.
Even my date of birth now is incorrect.
The company name is wrong.
But there the "highest standards" of that bank are not exactly the same when it's about addressing clients urgent needs.
Totally in the dark. Cannot trade. Don't even know if my money is still there.
Are they still in business? No clue.
Of course, they don't send monthly statement, online or paper.
I really beg BONY, State Street, HSBC, DB, SC, Citi, BOCI…Just ANY foreign bank
to start a custodian bank activity there as of jan. 1, 2014
and become Clearing Banks to offer an alternative to this circus. Please, please!
30 Sep, 11:44 PMReplyDelete CommentLike3
Last time I heard there were 22 points!
So 15 points forward, 8 backwards.
Two steps forward, one step backward. That reminds me something.
There are obviously some progresses compared to this:
Progress at Oyu Tolgoi has stalled on disagreements that include the financing of the mine's underground expansion, which is expected to cost about $5.1 billion.
I think there is only one issue, a simple one:
GOM to demonstrate credibility and willingness to trade to RIO.
There is another issue:
The next Parliament elections are scheduled for 2016 so if Phase II was to start now,
would the current DP government able to show some visible achievement$$$$$ from this before the elections
so that the Mongolian "enlightened" voters can vote for DP again?
What about pretending "trying" while enjoying the status quo from royalties from Phase I instead?
Bluntly put: Does a DP lead GOM really want to settle the matter with RIO and move asap on phase II?
1 Oct, 02:44 AMReplyDelete CommentLike2
Normally, I don't comment on individual MSE listed stock, but this one is an example where feelings can make the difference vs. against box-ticking.
I have been accumulated BUK shares since may 2011.
Why? Simply because it is in the construction sector.
Financials, earnings, no clue!
Top down approach. Stock price not really unusual, so I just bought whatever was available.
Why asking for financial numbers I may not trust.
It would have been a bad return on time, on top of bugging the company.
Then in march 2012 I visited the company with my broker.
We were supposed to meet some middle manager but as we were waiting next to the CEO's office, he invited us in. Then took us for a tour of the facility. And for somebody like me, engineer (in fact before going into finance, I was about to join a firm in special alloys) but turning banker, that was quite impressive. The CEO was very good, investment banking slick, ready for an IPO/add-on road show.
However he mentioned something that would have got most investors run away. The unique distributor of the company's products was the holding company. A perfect corporate governance red flag.
But for me it was an opportunity.
If ever (no clue) the transfer prices between the listed company and the holding company was not fair, would the owner of the holding company become really rich? No.
May be a better deal was to grow that company, make sure all the profits were booked within the listed company, grab new contracts, get the CEO on the road to raise additional equity (the float is very tiny) and then with a slightly smaller stake in a much larger company, the owner would make much more.
That was my reading then after this impressive visit, so I went on buying as usual by bits and pieces P.A.T.I.E.N.T.L.Y.
Then on march 3, 2013 it announces a dividend.
Few weeks later the earnings were nicely up
Now this contract.
I don't know what is ahead but it does not look too bad at first sight.
And that's not the only of that kind on MSE.
Welcome to Mongolia
Disclaimer: Needless to say I hold quite a number of shares…and the free float is very tiny!
1 Oct, 08:21 AMReplyDelete CommentLike3
"Having the early mover advantage when entering frontier markets can make a difference"
Venkatesh Somanathan, director of regional trade finance product management at Deutsche Bank, discusses overcoming hurdles faced in frontier markets such as Mongolia and Myanmar.
Sure!! Cannot wait for DB to setup a shop in UB!
* What about becoming a Clearing Bank on jan. 1, 2014 as the Securities Investments Law will enable and custodian activities are a good business at DB.
* What about loading MNT government bonds and through reverse inquiries ask for 5-7 years MNT bonds? I am sure MoF would like it...and other follow. So what is the DB DCM team doing ? (probably have friends there; are they sleeping?)
* What about connecting the DB DMA machines to a local broker to be ready once the race starts (by the way, there is some serious shopping going on and I don't know how long the free float will last) ?
"To effectively penetrate into these frontier markets, banks will need close collaboration between domestic state authorities and regulators."
MSE and FRC people are very available and always helpful.
Not sure it's the same at Mongol Bank.
"To succeed in frontier markets, banks need a different mind-set from that of entering another market such as Indonesia."
I know. Where I worked before, DB was our custodian in JKT and that was handy, so what about moving to UB now?
anyway great article, great words,
what about some actions now
or is DB just waiting for government IPO mandate (and the curse that goes with it) ?
2 Oct, 11:41 PMReplyDelete CommentLike2
And even more US$ flying through the windows!!
but obviously some don't get the message :)
2 Oct, 11:46 PMReplyDelete CommentLike2
l previously posted how Khurelsukh the former General Secretary of the MPP and infamous Seoul casino gambler with the Savings bank's money sold his seat in Parliament to the head of the MAK group Nyamtaisha for a reported $500,000. He installed his son Nomtoibayar into the seat.A prime example of Mongolian democracy in action.There are rumours that he stabbed someone, no further details at the moment.
4 Oct, 03:38 AMReplyDelete CommentLike1
I have to agree with Dale Choi on this.
OT (peace treaty with RIO + OT law) and the 106 mining licences!
The rest is noise.
In my opinion, 9 months ago, it would have done the job,
but taking into account the damages done in 2013 (useless or negative comments, raising expectations) that's too little too late.
International financial markets are not holding their breath for Mongolia.
Just in case they missed the point, something is happening in the US Congress that gaining some interests.
If GOM wants to make headlines with a positive bang and get serious attention and momentum,
then I has to do much better than that.
The USDMNT exchange rate may give some ideas of the traction Mongolia is getting after this,
especially when USD is showing signs of weakness.
4 Oct, 07:12 AMReplyDelete CommentLike2
Haven't things changed since this puff piece by Damon Kitney on a journalistic freebie in 2010. lt makes you wonder what is going on behind the scenes in Mongolia given Leightons style of doing business.
Yet another of the myriad rail D&C projects.
5 Oct, 04:03 PMReplyDelete CommentLike0
A recent article from Brian White.
"If it sometimes feels like the government is negotiating against itself when it comes to policy positions on highly controversial issues such as Oyu Tolgoi or Tavan Tolgoi, that feeling is not unfounded."
l thought Brian wasn't allowed to mention Oyu Tolgoi in his new role as paid advisor to OT?
l think Jenko Battulga is most likely to be the next PM. He has made no secret of his ambition. He has made statements saying Mongolia needs a strong leader and he is the only person that dares question the might of MCS and their Chinese partner.His martial arts champion background will be very appealing to Mongolians.
"The MPP succumbed to factional infighting during the last parliament, and the disputes were so severe that one faction even broke off and formed the new MPRP, which is a member of the current government."
The disputes were so severe that the Khurelsukh and Nyamdaorj factions within his own party ousted Enkhbayar from office leaving him powerless. His only option was o take the vacant MPRP name after a short legal battle.
6 Oct, 03:11 PMReplyDelete CommentLike3
If Jenko Battulga becomes PM, Mongolia will be going backwards for at least 10 more years. For goodness sake, he's called Jenko because he is obsessed with the Godfather series and runs the country like it's his own Italian neighborhood. Of course he wants to challenge the MCS brothers because he wants to be more powerful than them.
8 Oct, 04:52 AMReplyDelete CommentLike3
l notice he got the spelling of Genko wrong? These guys think that the Sopranos is a documentary. We could see a big spike in the sale of hair gel in UB could be a good opportunity.
17 Oct, 03:54 PMReplyDelete CommentLike0
Don't forget the Vitalis.
18 Oct, 02:15 AMReplyDelete CommentLike0
Would love this.
It would save me the cost of the Mongolian visa...if I ever need to go back to UB...which is far from being obvious...:) ...when we see the seriousness of GOM tackling real issues.
Again, Mongolia would like to show off being member of another club but one may wonder how committed it really is !
Being a member of APEC, like being a democracy, triggers some obligations that Mongolia may have overlooked.
Rights and obligations are going together.
No cherry picking, especially for a new kid on the block.
7 Oct, 01:43 AMReplyDelete CommentLike1
While I will not waste a dime to attend the Mongolia Investment Summit in Hong Kong on Nov. 19-20, 2013,
I would like to remind however GOM of that important deadline!
Last year, many attending Mongolians were screaming, De Facto outraged, about the poor picture the Mongolian Tango presentation was giving of Mongolia:
But almost one year after, did Mongolian GOM members and MPs finally get the message the MAD team was trying to communicate (while unlikely to benefit, business wise, from this courageous presentation)?
Did they learn the lessons?
Did they acknowledge the problems?
Did they fix the issues?
Did they even try to fix the issues?
Did they change form and substance?
One may have doubts!
If the investors that will dare paying for this conference leave on Nov. 20 evening without a very positive impression and willing to commit serious money in Mongolia asap, then:
•MNT exchange rate may reflect this,
•Sponsors may think twice before footing another bill of that kind,
•And generally speaking it will become even more difficult for Mongolia to 1) get air time in international financial markets, 2) spin a positive momentum for whatever capital raising may be on the map.
In short, Mongolian politicians, at large, better not miss that one.
However, with noises of changes in the government around that sounds more like another horror movie in the making, but this time they cannot blame MAD.
7 Oct, 02:01 AMReplyDelete CommentLike1
MAD was simply reporting what the international media have already been reporting about Mongolia. What confuses me is why they were so negative when they were looking for investment for their 50M IPO.
8 Oct, 05:04 AMReplyDelete CommentLike3
•"Mongolia aims to show its relationship with foreign investors has reached a "turning point" by progressing on development of two of the country's largest mines, Cabinet Secretary Saikhanbileg Chimed said."
I certainly cannot disagree with this objective. Are all MPs onboard?
•"Saikhanbileg, who by the age of 29 was already Mongolia's Science and Education Minister, said resolving the Oyu Tolgoi financing package is his government's "number one priority," adding that he's hopeful a solution will be made by the company's directors, rather than politicians. "
•"Oyu Tolgoi needs to be resolved purely on business decisions, not political ones,"
Business vs. politics: That is less obvious. OT is strategic by nature and some political aspects cannot be ignored. One of the key benefits for Mongolia is the impact of OT on the Mongolian supply chain and how it can stimulate activity for the whole country. Even if the OT's shareholders were not making a dime, the benefits for the Mongolian economy from phase II would be substantial. So OT cannot be viewed in isolation as a stand-alone economic entity but within the context of Mongolia at large. It's Project Management 101; OT Phase II is on the critical path of many other projects in Mongolia.
"We have a missing link in expressing the government position to the rest of the world," said Saikhanbileg, adding that the government plans a promotional team that can travel outside the country to explain its actions.
"We are going to set up this kind of channel, so everyone can get info about Mongolia," he said. "The new agency called Invest Mongolia will do this."
In theory, the idea to copy "Invest Hong Kong" is nice but the problem does not lie here! Mongolia and GOM has very good PR, very knowledgeable experienced people that can make the difference, the problem is with the rest, people making comments out of tune undermining the momentum built while they should let the professionals talk. In 2011, the momentum for Mongolia was very good but who derailed it and how?
There should only one message from the government, the same song for everybody. Any minister that disagrees with the official line should be dismissed at once so that the PM can govern the country as he got mandated by the elected Parliament.
Less travel, less talk, more actions! Before going promoting something, it may be wise to decide exactly what to promote. Once serious decisions (OT + licenses) have been taken, then the PR will become very easy and $ flow in much faster than many expect.
7 Oct, 06:38 AMReplyDelete CommentLike2
APEC's biggest achievement is getting leaders to dress up in stupid shirts. l hope Mongolia can improve their look with a del inspired shirt with perhaps a little less colour.
The standard of Bloomberg articles continues to fall. Regarding the Mongolian Tango l was once told dancing is the vertical expression of a horizontal desire?
Seems to me one of the now 15 instead of 22 sticking points is still the new Dutch Disease ie. declaring profits in the Netherlands and not Mongolia.
Hong Kong Investment Summit ,book early to ensure disapointment.
7 Oct, 03:37 PMReplyDelete CommentLike0
s.ganbatar, seems to go to any extreme to be as negative as he can. are his positions a popular sentiment? he seems to be trying to poke his finger in any hole trying to find a following for his minor league attempts to play in the majors but will keep going until he gets some traction somewhere. give him something to do so Mongolia can get on with its life.
8 Oct, 09:35 PMReplyDelete CommentLike2
Attention Deficit Disorder, just trying to settle family scores.
Great, so the more he does like this, the more he discredits himself.
What is more annoying is more senior people in the government trying to do good speaking for this and for that...without tangible actions to support the speech.
Peter and the wolf.
Raising expectations too early is a very dangerous game that backfires.
Long time ago, when I was broker, I talked to clients about a potential takeover and suggest clients buy calls. They did...and nothing happened.
Several months later, the stock was getting hot. Same comments, same results.
Then 6 months later when I called clients about the potential take over of xxx, their message was plain and simple:
"if you ever talk to us about a take-over on that stock, we close the account and never trade with you". :(
...and the takeover did happen 2 weeks after! :)
I think GOM and Mongolia have exhausted international investors patience raising unrealistic expectations too early!
It does not matter if international investors miss opportunities ...because may be this time it is for good, but it's bad because ruined its credibility credit over the last year.
Also while in UB, one of my broker's staff reminded me something I said almost 2 years ago:
"a) You may have a simple life and limited improvements every year, but you would be happy.
b) If you had a simple life and then for a while you get a great life, enjoy things you just ignored, then if you go back to where you were, you are very miserable!!
Something has been taken from you!!
You were right. That's how we feel here now."
So going from A to B what does matter is how;
It's path dependant.
It's a classic of framing and manipulation.
That's how addictions are created.
Now Mongolians are addicted to capitalism and GOM'd better understand it's too late to ...change (was about to use another word :)) and tackle the problem with serious actions because it is a serious problem and if DP does not want to give away the 2016 elections without a fight, it'd better move FAST.
8 Oct, 11:51 PMReplyDelete CommentLike3
"Mongolia Provides Tax Certainty For Foreign Investors"
Anybody believes that, form and substance?
Some big guys who got government signatures on a piece of paper may not be so sure.
That needs a strong endorsement from a big foreign name, i.e. somebody that has more power and more leverage than the usual international investor.
9 Oct, 06:18 AMReplyDelete CommentLike2
GOM seems like a growing family with a few undisciplined children (MPs). Everyone would be happy to see the parents perform their function and take control of the best interests of the group.
9 Oct, 07:40 AMReplyDelete CommentLike2
Have a 14.5 boy and 11 daughter !
Overconfidence and moral hazard across the board :) :)
9 Oct, 08:59 AMReplyDelete CommentLike2
Saikhanbilek seems so much more positive than Ganbaatar. I dont see many strong stands by their leaders. Leadership needs to be shown and demonstrated else it grows into a dysfunctional unit and loses respect in eyes of others.
9 Oct, 07:54 AMReplyDelete CommentLike3
After the june 2012 elections, I was baffled to see DP going alone.
For me a "negotiated" coalition between DP and MPP (like before) seemed a no-brainer game theory solution
especially when you list people with government experience (not enough) in such a small population.
I was obviously wrong and I think DP overplayed its hand big time, may be preparing a great win for MPP in 2016, if they don't change course asap.
9 Oct, 09:03 AMReplyDelete CommentLike3
MSE, what if DP plays the blame the foreigners card and go to the extreme? Do you think it would work? Anyway, everyone is already talking about the next election in 2016 already. We just had one last year.
9 Oct, 09:09 AMReplyDelete CommentLike3
"DP plays the blame the foreigners card " ???
no compromise what so ever on OT and blame the foreigners if money does not come in?
That would be very silly after what has been already voted by the parliament, just doing it half way. Mongolians would be very frustrated.
Money (there is a lot of stupid money around) will still come in, small, much smaller, hot money, but enough to keep Mongolia afloat, with boom and bust, enough to create expectations
but pulling back quickly once in a while, more and more shocks, but not enough money to launch all the projects Mongolia needs and Mongolians need and expect now they got a taste of capitalism .
Wealthy Mongolians and politicians would do well,
but middle and low classes will feel the pain big time and most of those will see (they see already) where the problem is coming from...and 2016 will be settled beforehand.
9 Oct, 10:20 AMReplyDelete CommentLike3
Prescient call, Haiguike. The blame game is never too far away, but things are subtly changing.
From Saikhanbileg's interview of Oct 3 (in Bloomberg Oct 7):
"Another goal of his cabinet is to improve the clarity of
the government's message, Saikhanbileg said, indicating an
awareness of the bad press Mongolia has been subjected to over
the past year and a half.
"We have a missing link in expressing the government
position to the rest of the world," said Saikhanbileg"
This blaming of the international press has been a muted theme for quite a while. And there is a tiny bit of justification to that. In the main the coverage has been accurate, but not complete and thorough. Another problem has been the relaying of news in the Mongolian media that was meant for local consumption. No excuses, but at times the Mongolian politician playing for his local constituency says things differently. Plus, as Brian White has pointed out there have been a few mistranslation issues.
You could also read Saikhanbileg's view as the Government realizing they need to get their message across better. The problem is that their message to date would do nothing to alleviate concerns. Just the opposite. It is the situation and the message that have been the problem, not the delivery.
Of course you are probably referring to greater blame issues than just reporting. And there has been plenty of that in the past. You do not have to look too far to see the master at work - Russia blames everything from terrorist attacks to late trains on the US.
Extending Mccorj's analogy, the "it wasn't me" or "it was not my fault" or "it was him" cries used to be heard a lot in the Mongolian schoolyard. It does seem that a willingness to own an issue and to recant is gradually taking hold in Mongolia. Witness the latest statements from many different quarters (even including the Minister for Mines).
Having said all that I live for the day when I hear Batbayar admit he was wrong with his windfall profits tax. The devil will order air conditioners before that happens.
9 Oct, 12:08 PMReplyDelete CommentLike4
I'm convinced there are PMs and others who are so intent on finding fault with minor issues that they miss the main agenda.
Yet they get air time. Can they not know that they are destructive. It seems like a small cadre is trying to ruin it for the majority but no one in power stands up. Why don't the majority speak up? What happened to those folks who had once conquered so much?
9 Oct, 06:31 PMReplyDelete CommentLike3
"Why don't the majority speak up? What happened to those folks who had once conquered so much?"
--- The majority do not know any better. That is why I raised the question of a "blame it on the foreigners" election campaign. The educated middle class suffers, but they are a minority. The political elites gains more power with this move and the wealthy elites can always buy their way in. The poor will be appeased with more handouts and Soviet style propaganda.
"What happened to those folks who had once conquered so much?"
--- That was over 700 years ago. Chinggis Khaan and Kublai encouraged innovation and welcomed foreign technology. Few Mongolians acknowledge that Kublai made the capital of the Yuan dynasty in Beijing (Khanbaliq or Dadu) when Mongolians were at their apex in history. The current Mongolia has been too influenced by the former Soviet Union. Even the modern Mongolian language is in cyrillic. Dare I say the Mongolians in Inner Mongolia are more Mongolian than the ones in the country of Mongolia? Yet you will hear a lot of Mongolians say the Mongolians in Inner Mongolia are not true Mongolians.
"Having said all that I live for the day when I hear Batbayar admit he was wrong with his windfall profits tax. The devil will order air conditioners before that happens."
--- Face is more important than economic development in Mongolia. The GOM cannot give up its demands on the OT agreement, because that will be direct admission of defeat or wrongdoing. I believe DP will win 2016 again. They will have too much power and they can print all the money for their election campaign.
If Chavez, Mugabe and Zuma can be beloved in their respective democratic countries? Why can't DP do the same in Mongolia?
9 Oct, 10:08 PMReplyDelete CommentLike3
10 Oct, 02:18 AMReplyDelete CommentLike4
Some posts from January regarding Saikhanbileg. His role is media censorship and return fire. Surely he is Professor Chimid's son? The famous cut and paster of Mongolia's English language Constitution. l note he is a former student of George Washington University where the Asia Foundation sent P. Tsaagan Chimid's assistant and recently resigned Presidential Chief of Staff.
"Further to this censorship. Last friday/saturday? Caak's news service was shut down it is unclear if it is going through the same "improvements" as the UB Post did. Jon both of us posted comments on the new UB Post server and what happened? My comments were not in any way rude and I'm sure yours weren't either so why weren't they posted?
Apparently Saikhanbileg a DP supporter says there is too much bad language etc. on Mongolian blogs. I wonder if he has ever been on You Tube?
More info on Saikhanbileg, a former DP MP now has a GOM job to deal with Mongolian media. He is the focus of the Mongolian News Websites Association displeasure."
11 Oct, 04:02 PMReplyDelete CommentLike0
I see Ganbaatar on another press conference. I believe in freedom of the press but not abuse of the press. I also believe in "transparency" but not abuse of transparency. Representatives at a negotiation are usually chosen for their knowledge and focus on the issues being negotiated. When negotiations are completed, the findings are then made public. Otherwise why have elected officials.
Mongolia has so few folks schooled in international correspondence that total transparency can slow the entire governmental process. (aha---raison d'etre).
10 Oct, 10:29 AMReplyDelete CommentLike2
Transparency or grandstanding?
10 Oct, 12:21 PMReplyDelete CommentLike2
"We are going to set up this kind of channel, so everyone can get info about Mongolia," he said. "The new agency called Invest Mongolia will do this."
Wondering what Invest Mongolia will do about that (half page in SCMP today!)?
May be provide bodyguards to foreign investors?
Private security contractors moving in?
10 Oct, 10:35 PMReplyDelete CommentLike2
11 Oct, 05:19 AMReplyDelete CommentLike1
An excellent newsletter giving a great tour of the MSE website.
I am wondering how many stock exchanges in the world provide so much details, especially when comparing to that small one!
The work done by MSE put even more responsibilities on Mongolian politicians to deliver on their side!
11 Oct, 06:05 AMReplyDelete CommentLike0
For whoever trades on MSE, or thinks of trading on MSE,
this is mandatory reading!
Whatever the politics, that shows the sustainable technical progresses achieved by MSE to prepare and provide information to investors.
11 Oct, 07:54 AMReplyDelete CommentLike2
Discussions and thinking about GOM are always turning circular in some ways, but it always boils down to something that is baffling about Mongolia and OT.
For months, years, MPs and GOM members are in substance complaining about the OT Agreement. Everything goes, saved one thing: GOM does not tear it apart, because democracies don't do that!
To start with, wasn't this agreement signed by a coalition government, MPP + DP, which implies a majority of MPs supporting it and also under a DP president? Did I miss something there? We don't talk about one guy signing this overnight behind closed doors at night.
Then saved, "we need more", I have never read anything of substance about what had to be modified in this agreement. I read complains but never read one single specific counter-proposal from GOM and MPs how this OT Agreement should be modified. If we imagine one minute there are people at RIO willing to change a bit this agreement, they should be puzzled.
Then I am wondering why there is not one big foreign investment bank helping GOM in this exercise. Why?
Whatever the time taken by lawyers to draft those agreements, like this, lock-up, pre-emption rights, … or whatever, there are always some loopholes that could be leveraged so that while respecting the form of the contract, it's possible to twist the substance and gain something more.
It's not if, just how and who to get to achieve this.
How much is at stake for GOM and Mongolia? Based on the noise, the expectations could be higher, very high, in US$ billions for sure. So why can't GOM afford to hire an advisor, motivated with a nice % success fee?
Such a success fee could be in tens / hundreds of US$ millions if somebody can help GOM twist the OT Agreement to "get more" economic substance, while strictly respecting the form (i.e. with a Clean Legal Opinion!). That could be fat enough to find creative people ready to work hard for GOM to achieve that purpose.
Isn't there simply a problem of credibility plain and simple on GOM's side? If somebody was able to solve the OT brain teaser in favour of GOM, would he trust GOM to be paid? Credibility that is may be where the problem starts. Just my few cents.
11 Oct, 08:41 AMReplyDelete CommentLike1
perfect. GOM credibility-----what's that?
11 Oct, 10:14 AMReplyDelete CommentLike1
When 60 out of 76 MPs don't attend a meeting in parliament, it shows the system is useless. Fire them. They are hurting their country. however important they think they are, they're useless.
Mongolia will go nowhere with them.
Let the cabinet run the system. It has to be better then watching some one or party control the system into a slow demise.
Leadership should control or leave.
11 Oct, 09:10 PMReplyDelete CommentLike1
mccorj did you see the you tube video of the parliament voting? lt is a classic if an MP is absent others will lean over and press his button when voting is required.
There is more to come from this incident involving the Asia Foundation's pin up boy Ts. Munkhbayar.
The Police are investigating and trying to establish links to organisations that allegedly paid him money to carry out this stunt.They are also investigating alleged blackmail of mining companies.
The usual mindset is to find an external influence that is responsible and perpetuate the blame game.
Ch.Saikhanbileg isn't related to Professor Chimid.
13 Oct, 03:40 PMReplyDelete CommentLike0
the parliament is a disgrace to the country----and these are the chosen representatives???
All credibility is being lost and shown to the world. There is no strength or unity in any direction.
They should be concerned how quickly they can return to their pre-democratic existence. There are more than 300 Chinese to each Mongolian and on their border. Russia could bargain with China and have Mongolia for lunch----and who would say no?
They need some "tough love"--quickly.
Stop the violin. Your city is burning.
13 Oct, 05:19 PMReplyDelete CommentLike0
Something else, a bit less visible than copper, coal, gold and uranium!
14 Oct, 12:12 AMReplyDelete CommentLike1
14 Oct, 02:43 AMReplyDelete CommentLike1
Produced 420,000 tonnes in 2012! Come on ,that sounds like OT figures where they pile it up and can't move it. The same old infrastructure problems remain.
14 Oct, 03:44 PMReplyDelete CommentLike1
That is the same problem all over Mongolia
and the longer it takes for GOM to acknowledge that, at the beginning (not long in fact), it has to share equity to jump start the engine and build infrastructure,
the more and the longer Mongolians will be frustrated about this and that, always be complaining.
There is no half-way there.
Being a commodity rich country is great but if:
•You have NO infrastructure, roads, railways, ports, power stations, manpower,…and
•On top of that, you have ZERO bargaining power because you are landlocked country and the only serious buyer around is China,
Then you should not expect to maximize your prices and returns
especially when you "talk" about "third neighbor country" but do not practice
(how many non Chinese mines second hand buyers are impacted by the 106 licenses case and likely to stay put for a while?).
Now if Mongolians do not want to share any equity with foreigners that is fine but they should not expect the benefits that come with it.
However, they'd better put armed guards on the very long south border because ninjas are likely to be very active,
while if legitimate businesses were really supported that would limit this.
14 Oct, 11:01 PMReplyDelete CommentLike2
14 Oct, 11:28 AMReplyDelete CommentLike0
15 Oct, 02:35 AMReplyDelete CommentLike0
Just wondering why it takes so much time for the "buyers negotiate with Chinese customs officials over import approvals"
That is not exactly fresh story.
no approval = no "sale" = no royalty
May be China is trying to say something to Mongolia?
15 Oct, 05:41 AMReplyDelete CommentLike0
So great opportunity for the Mongolian PM to come back from China with a nice present:
An approval from the Chinese customs so that the clients of OT can import all the copper in stand-by! Can he get that done?
What about a US$1bn Panda Bond too?
15 Oct, 06:18 AMReplyDelete CommentLike0
Some memorable quotes from such a small article. He is certainly on message regarding the most obvious problems.
"He also noted that Mongolia has amended its investment law, making its legal environment stable and clearly understandable for investors.'
"Those who would like to invest in Mongolia from now on shall not feel fear of any sudden change in the investment law or regulations of the country".
Except if you are a Chinese company or a Foreign company trying to sell to a Chinese company.
l note that the head of Montsame was a recipient of an Australian tax payer funded "education" recently.
16 Oct, 03:56 PMReplyDelete CommentLike0
Among those little things that make your life and trading easier, have a look at the top right side of the Trading Report page of the MSE website:
Now there is the index level and variation, today's fresh!
Furthermore, if you check the charts of stocks
the historical data goes back to October 2008,
which was not the case several months ago.
So steadily MSE is upgrading its website as well as its trading platform.
I just hope the politicians will deliver their end of the deal,
for the sake of Mongolia at large!
16 Oct, 06:09 AMReplyDelete CommentLike2
are there any requirements of performance for MPs. do their constituents know they don't attend meetings. Looks like a 'no show' job with good pay and benefits. They will only focus on reelection and status quo. It'll be impossible for them to progress and yet they the hub of Europe and Asia and could be the center of commerce as well as communications for a significant part of the world. What happened to their vision?
16 Oct, 11:15 AMReplyDelete CommentLike0
A good summary.
May be more bad news to blow out.
Only one simple question:
When will GOM proves it means business?
If they want to inflict more pain to Mongolian middle and low classes, they just have to go on at snail speed....and winter will be tough, very tough!!
17 Oct, 07:23 AMReplyDelete CommentLike1
we do a dis-service by commenting.
GOM and all in power think they are are performing admirably. They now have 700 years experience at falling from top to bottom in world power and opinion.
Since the great Kahns, they are now at their nadir and seem very happy being there and have succeeded in appointing a cadre of MPs that will keep them there (small improvement can be made by keeping the other 16 MP away so they can achieve 100% 'no show').
I'm beginning to think my interest in their improvement is nothing but 'schadenfreude'.
17 Oct, 10:29 AMReplyDelete CommentLike0
lt's very frustrating to see the supposed application of "democracy" to basically a feudal clan structure based on the need to raid and loot. You can conquer on horseback but you have to get off to rule and Mongols were never good at that part. Applying the old mindset by simply replacing the Royal families with Oligarchs just isn't working. Being a humble farmer l hadn't heard of schadenfreude l think you care too much to be guilty of it.
l see the Mongols are taking over Australia.
17 Oct, 03:49 PMReplyDelete CommentLike0
How well are Mongolian banks doing?
Just have a look by yourself.
NPLs are up.
Foreign currency deposits are not exactly on the rise.
17 Oct, 10:45 PMReplyDelete CommentLike2
The DPRK angle!
Disclaimer: I have quite a lot of HBO so I am totally biased.
18 Oct, 08:37 AMReplyDelete CommentLike0
Perhaps Mongolia can show the DPRK that there are economic advantages as well as challenges to being a neutral country.
18 Oct, 02:03 PMReplyDelete CommentLike1
The view from the top about the DPRK angle:
It will be an interesting scenario if Mongolia can import Korean workers to develop its needed infrastructure.
1 Nov, 01:28 AMReplyDelete CommentLike1
Dulleye, love the Mongols connection. The difference is only the facade. The Mongols have no pretense of class, but motivations are similar-----'take what we can , by force or intimidation---the hell with the people----we'll even fight the authorities'. Seems to be the biker herd mentality. The GOM just wear suits.
18 Oct, 10:45 AMReplyDelete CommentLike1
Yes similar concept. This is also about race as the Mongols founded due to the Hells Angels not accepting Hispanics. Both groups founded by War veterans unable to adapt to society.
Regarding your post VB Jargalsaikhan wrote a very accurate predication of the recent Presidential election which countered his teacher Julian Dierkes view.
"Russia has been the only source of political, economic, and military support in the face of an assertive China.'
l can't agree with this comment the US has made significant steps in Military training of Mongolian troops through Khan Quest and Marine combat training programs.The US reportedly has an Air Base in Mongolia one of four announced in 2005 as part of Bush's Third neighbour announcement at the time.Mongolia had troops in Iraq and the tactic seemed to be to make Mongolia part of NATO.
Russia has tanks ready to roll in it's Embassy compound in Seoul Avenue and remains the elephant in the room . As posted previously after the Russian inspired seizure of Tavan Tolgoi in 2007 and the refusal to budge on the Rail gauge debacle it shows there is a long term plan for Russia to be key player in Mongolia's future.We don't pay enough attention to Russian influence in Mongolia.
18 Oct, 03:18 PMReplyDelete CommentLike1
There is definitely a military contribution from various countries besides Russia, as you point out, dulleyefarmer.
It must be in the plans somewhere to improve the highway connecting Nalaikh, where the armed forces are active, and Zuunmod, near the site of the new UB International Airport. Doing that will enable the commercial advantage of tying the airport with the mainline Trans- Mongolian Railway and the eastern half of the country.
18 Oct, 10:55 PMReplyDelete CommentLike0
Well it appears my great nation will be sending along some of its own elected officials, among others, for a visit to Mongolia. As has become obvious to just about anyone with capital at risk, not even the great capitalist USA is without a great deal of political risk these days.
18 Oct, 05:03 PMReplyDelete CommentLike0
there are enough companies listed in Canada and enough Canadian mines in Mongolia to deserve a little bit of support from Canada!
Better late than never!!
18 Oct, 06:17 PMReplyDelete CommentLike0
The mission has concluded l wonder how it went? They must be worried if they are going in October usually such visits seem to coincide with Naadam and the Mongolian Summer.
19 Oct, 02:28 PMReplyDelete CommentLike0
While I have not been trading on MSE for ever,
I think we may have seen the biggest historical transaction crossed today (Oct 21, 2013) on MSE:
14,710,009 APU shares crossed at MNT 3230
which is more or less US$ 28 millions!!!
It's exactly 15% discount to Friday MNT 3800 close.
This is roughly 19.80% (*) of the capital of APU, not exactly a small trade.
Because it is above the Influential Shareholder 5% threshold,
we could expect some disclosure, somewhere, some day.
What is interesting too is that it has been crossed as a "block"
not in the normal market while the 15% discount would have been ok (within the +/-15% circuit breaker limits)
as I imagine this kind of block is not the result of a last minute negotiation, more the results of some week end discussions, having in mind the Friday 3800 close.
May be the buyer did not want to take the risk to loose too many shares crossing in the open market.
Will see what announcement we get out of this.
(*) for western firms, below 20% does not qualify for equity accounting...but it is probably just a coincidence.
21 Oct, 05:06 AMReplyDelete CommentLike0
During his time as Agriculture Minister Terbishdagva had a plan to reduce around 200 vodka producers down to 5-6 key players. For a country that drinks 16 million bottles of vodka per month this should be a river of gold.
MCS had Xara vodka and Coke and Tiger beer.
Tried some APU Soyombo vodka recently it was very nice.
21 Oct, 04:04 PMReplyDelete CommentLike1
Soyombo is excellent!
Get regular supply of Mongolian vodka when friends from UB stop by in Hong Kong, or when I go there. :)
21 Oct, 10:03 PMReplyDelete CommentLike0
Now that concentrate is released from bondage, and revenue flows to OYU TOLGOI , is it an incorrect assumption to think that the MPs and GOM would benefit more, politically, from trying to help OYU TOLGOI and RIO TINTO end their conflict, restart phase 2, drive the positive pr, which will return the positive foreign investment and benefit all concerned to a great degree.
If then the benefits are'nt meted out to folks properly, then take that up as an issue rather than stop the source.
One would think that positive efforts would drive more votes than the opposite----but I'm no politician nor am I Mongolian.
21 Oct, 11:00 AMReplyDelete CommentLike0
Mccorj - Unfortunately it is not as simple as that. In simplistic summary, the terms of the IA mean that profits from OT do not flow as dividends to the Government until their financing/loans are repaid. Mind you, royalties and various direct and indirect taxes do get paid in the meantime, but it not the major pay-off of their 34% share of profits.
As the Mongolians see it, further financing for Stage 2 delays the start of their dividends. Their conundrum is that the money shot in terms of the high-yield long term portions of the deposit need that Stage 2 financing. But they seem to be coming to grips with it and possibly even wringing a few minor concessions.
Plus there are the other 13?? gripes still to work through as well. Some not financing-related.
But it seems to be getting there. Remember the demands to be a part of the sale contracts and to see them? And the requirement to deposit all sales proceeds in Mongolian banks? Plus the stated need to have 50% earlier? And any other number of disputes (including greater executive participation etc). All seem to have been resolved and mainly in the favor of commercial common sense and sanctity of contracts.
Minister Gankhuyag has publicly recanted his opposition. It seems all that are left is the remnant opposition led by Ganbaatar, who is being increasingly recognized for the fringe element he is. Every country has a few of them and they will always make more noise than effect.
In broad terms you are right, in my opinion. As the project beds down, they resolve the remaining issues (even if through attrition), jobs become more steady, taxes flow and benefits trickle down through the economy the parliamentarians will be more loath to upset the apple cart and even start positively assisting the project. It will still take some more time. How much time? All good judges I speak to are reluctant to pin that tail. Between six months and three years?
22 Oct, 07:31 AMReplyDelete CommentLike1
great answer Ghengis.
There has been preliminary chatter of a rights offering. Is that something that would help solve the impasse to the outstanding issues, and if so how? Otherwise what would be the purpose?
22 Oct, 11:28 AMReplyDelete CommentLike0
Fitch on the Banks
Morgan Stanley on the sovereign
In short, no way to see any improvement as long as it's just a handful of banks, at the mercy of the next domino to fall.
Get foreign banks in (subsidiaries, not rep office) in order to diversify risks asap!
22 Oct, 08:39 AMReplyDelete CommentLike1
I'm happy to hear Ganbaatar is only a fringe since his focus is on what seems to be minutia compared to Mongolias ability to become an international corridor for Euro-Asian commerce as an international benefit to world economy. He should read MSE investors entry for the banking synopsis by Fitch and others analysis of Mongolias current position in banking and tell me how that fringe even exists.
Fringe and myopia are the same in this case and should be off the table but they do have the right of free speech
22 Oct, 12:03 PMReplyDelete CommentLike0
It's my view that he is a fringe eleme