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http://zgm.mn/post/1300/

BoM may restrict FX withdrawal if Parliament passes bill on currency

​Law on Currency Regulation will allow BoM to control FX flow​

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http://zgm.mn/post/1300/


The Bank of Mongolia (BoM) included an article that can allow the bank to temporarily restrict withdrawal and transfer of foreign exchange on the draft Law on Currency Regulation, which was passed by the Parliamentary Standing Committee on Economy. BoM explains the article is aimed at maintaining financial stability and reduce dollarization as trade deficit pressures the currency rate. Furthermore, it will allow the bank to control currency rate during sharp volatility. In the first eight months of 2018, the balance of payment totalled USD 361 million in deficit. Within the frames of the International Monetary Fund’s Extended Fund Facility arrangement, Mongolia agreed to have a foreign exchange (FX) reserves of 1-year of average import purchase.

Foreign exchange control will reduce investment, warn economists

Officials highlighted that Mongolia’s current FX reserves can cover six months of import purchase. The BoM set a goal to continue the reform in banking and financial sectors on the 2019 Monetary Policy Guidelines. Thus, several bills will be prepared within the frame. For instance, the bills on Financial Consumer Protection, Development of Secondary Market for Asset Management and Improvement of Legal Regulation of Treasury. The economist club of Bloomberg TV Mongolia highlighted that the Government’s control on fx in and outflow has a negative effect of reducing investment. On the contrary, the BoM views the draft Law on Currency Regulation will reduce FX risks. “The flexibility of currency rate will help protect the economy from foreign shock and boost export competitiveness,” highlighted the Governor of BoM Bayartsaikhan Nadmid. Furthermore, the bill on Financial Consumer Protection will be a strong impetus in reducing interest rate. The bank explained that the lack of identification of financial consumer brought them into an uncertain situation, ultimately harming their rights. The Parliament is expected to discuss the bill soon.

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Trade Unions request PM to focus on interest rate cut

PM Khurelsukh receives Confederation of Mongolian Trade Unions representatives

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Prime Minister Khurelsukh Ukhnaa and the Minister of Labor and Social Protection Chinzorig Sodnom received the representatives of the Confederation of Mongolian Trade Unions (CMTU) yesterday. The CMTU officials requested the PM to focus on lowering the interest rate.

After highlighting the fact that the economy grew by 6.4 percent and the improving budget balance under the Extended Fund Facility program of the International Monetary Fund, the PM noted to focus on distributing the benefits of the economic growth to the public by increasing wage and pension. He addressed, “The average salary of the public sector reached MNT 916,000, a 27.5 percent growth since 2016. Under the trilateral agreement, the minimum wage has been set at MNT 320,000. This raised the salaries of about 100,000 workers by 33.3 percent. Furthermore, the Cabinet has acknowledged the CMTU suggestion on setting minimum pension age in line with the life expectancy and lowered it to 60 for men and 55 for women, from the initial plan of 65 for men and 60 for women. The Government is prioritizing to strengthen social justice, improve accountability and discipline of the public sector, and economic growth.”

In turn, the President of the CMTU Amgalanbaatar Khayankhyarvaa requested the PM to further raise wage and implement social partnership in provinces and rural areas as agreement on the 2019-2020 Labor and Social Consensus. He then asked the PM to promote employment and cut the interest rate.

Later on, a spokesperson of the trade union of Uvs province suggested the PM to conduct a study on  a 5-10 year intensified development and highlighted the importance of non-collateral discounted loans for small and medium-sized enterprises (SMEs).
Trade Union of EMC suggests employee stock option

A spokesperson of the trade union of the Erdenet Mining Corporation (EMC) suggested granting the 10 percent of the company’s stake as stock options to employees in order to boost productivity and set an example for both stateowned enterprises and private entities.

• CMTU President requests the PM to further raise salaries. 

• Trade union of Uvs province suggested the PM to conduct a study on a 5-10 year intensified development and highlighted the importance of non-collateral discounted loans for SMEs. 

• PM expresses to further study the suggestions and make effort in implementing them.

PM Khurelsukh responded, “Unless we move away from the heavy dependence on the mining sector, Mongolia could face another economic crisis. Therefore, the Cabinet is prioritizing the development of SMEs, animal husbandry, and farming. The biggest challenge is unemployment. The State will support business entities. It is important that we govern our natural resources. Thus, we will nationalize the illegally privatized assets. Establishment of the oil refinery will help reduce the foreign exchange outflow and cut domestic oil prices. As for all your suggestions, we will further study these matters and make effort in implementing them.”

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Demand for office areas overtops supply

Real estate agents expect steady growth in office demand

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Whilst the housing market is the center of attention in the real estate, offices are showing promising forecast as the demand is exceeding supply according to Master Properties LLC.

Last year, a total of 215 projects with an available office space of 985,000 square meters was commissioned. About half of these are located in the downtown area in Sukhbaatar district. 72.9 percent of offices in this district are luxury-class; however, about 80 percent of private entities operating in the capital are the small and medium-sized enterprises with up to 20 workers. According to a survey, these entities prefer comfortable, low-cost offices that are not too far from downtown. In other words, there is a gap between the purchasing ability of customers and construction supply.

The trend in the office market is dependent on economic growth. Experts highlight that almost half of the demand for class-A offices are both, directly and indirectly, connected to the mining sector. Thus, the office market began to restore on the back of the upsurge of the mining sector since 2017.

The number of office seeking entities annually grow by 1,100 on average, which equals to 50,000- 60,000 in square meters. Plus, nearly 40 percent of entities renting office spaces are unsatisfied with the office environment. Considering these indicators, real estate agents forecast the demand for office to grow steadily in the upcoming years, suggesting an annual growth of over 8 percent.

As for ideal offices, a survey shows that private entities prioritize location the most, preferably near downtown. The priority list is followed up by price, class, and availability of parking areas. The preference drops significantly for office buildings that perform poorly on these areas, noted Tenkhleg  Zuuch LLC.





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Scholars suggest coalbed methane for power source

Erdenes Tavan Tolgoi holds discussion on additional power source

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Erdenes Tavan Tolgoi JSC (ETT), in cooperation with the Mongolian National Council of Scholars (MNCS), held a discussion under the theme “Erdenes Tavan Tolgoi-Innovation, Production” yesterday, addressing the necessity to resolve additional electricity required for installing new technology.

Tavan Tolgoi residual deposits have a total methane reserve of up to 10 billion cubic meters. “One cubic meter of methane gas equals one-liter diesel fuel in terms of energy. In other words, the deposits have 10 billion liters of diesel fuel reserves. The annual average domestic demand is a bit over one million tons. Since the energy source is gas, it is environmentally friendly and can be used directly on-site,” according to the spokesperson of the Ministry of Energy.

According to scholars, extracting methane gas is highly efficient for the economy as the demand is currently high in China’s market. By extracting methane gas, Mongolia can annually export about 800 MW electricity. Plus, the gas can be liquified for domestic use and transported to the People’s Republic of China via both auto road, and gas pipes.

If supplied to the domestic market, the methane can cut the current cost per kWh of electricity by half. Specifically, the zero-loss price of methane gas is MNT 44-63 and the cost of equal energy production currently stands to about MNT 100.

Mongolia has an installed electricity capacity of 1.1 Gw. The national electricity grid, which consists of five systems, is in urgent need to increase the capacity of the Southern energy system. The undersupply is filled in by import from China at present. Although the upcoming Tavan Tolgoi Thermal Power Plant will solve the problem, the construction will take about 3-5 years. Thus, scholars are suggesting the use of coalbed methane gas to directly supply this gap.

ETT has announced 2019 "the year of development". With an aim to improve the efficiency of Tavan Tolgoi mine, the company signed a Memorandum of Understanding with MNCS on adopting cutting-edge technology, refined coal, natural gas, ensuring the workers’ health, and developing ecologically friendly production.

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MSE warns to delist firms that fail to deliver reports

LendMN NBFI plans to introduce international transaction service

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In order to improve the transparency in the financial market, Altai Khangai, CEO of the MSE, warns to delist publicly traded firms in case of failure to deliver financial and operational reports.

On the list of firms with good governance, the recent IPOs are at the forefront; for example, LendMN JSC was the first company to turn in their 2018 financial and operational reports. The company earned a net profit of MNT 2.5 billion last year, making it possible for the company to distribute dividends this year. Additionally, the company recently announced to introduce an international transaction service by cooperating with “Transfer To” inc. According to Marketinfo, the board of LendMN has approved the CEO to sign MNT 1.4 billion worth deal with Transfer To.

Also, the MSE Tier-II listed company Mongol Savkhi JSC’s sales revenue totaled MNT 270 million in 2018, which is about 9.4 percent lower than the previous year. The stock price of the company, which  manufactures leather and felt products, stood at MNT 480 per share as of February 2, which is a 50 percent fall year over year.

The net loss of the state-owned Darkhan Thermal Power Plant JSC reduced to MNT 1.8 billion last year. This is about 25 percent lower than in 2017. The 2018 financial report of the company shows that the cut in losses was mostly driven by the reduced foreign exchange losses.

Last year, a total of 130 MSE-listed firms have disclosed their financial and operational reports. The remaining 80 companies did not share their financial information to shareholders. Thus, in order to protect the investors’ rights, the MSE has warned to delist publicly traded companies that failed to disclose their reports or organize shareholders’ meetings.

In January, the market capitalization of the MSE diminished by 2.53 percent (MNT 63.5 billion), to MNT 2.4 trillion with the Top 20 Index growing 0.43 percent. Specifically, stock trades accounted for 97 percent of total trades and securities - 3 percent. Compared to January 2018, stock trades jumped by 5 times and securities trade was cut by 45 times. While the new IPOs had the biggest impact on stock trades, the suspension of Government securities trades at the primary market resulted in inactivity in the overall securities market.