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http://zgm.mn/post/3304/

BoM: Mongolia will exit greylist in 2020

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http://zgm.mn/post/3304/
  • Inclusion in the FATF’s watch list will not affect foreign transactions 


    Mongolia will be removed from the Financial Action Task Force (FATF)’s grey list within 2020, said the Bank of Mongolia (BoM). Mongolia has been included on a list of countries monitored by an international agency that polices anti-money laundering activities and terrorism financing couple of weeks earlier.Erdembbileg Ochirkhuu, First Deputy Governor of BoM stated that Mongolia will not have serious problems such as delaying foreign settlements due to the watch list. He said, “We are working with a plan to get out of greylist in 2020. The four indicators of FATF’s recommendation that have been evaluated as unsatisfactory can be improved in the short-term. Also, payment and transaction fee has not increased since the inclusion in greylist. FATF’s International Co-operation Review Group (ICRG) has already completed Mongolia’s risk evaluation in 2017.”During the FATF Plenary and Working Group meetings took place in Paris, Mongolia pledged to implement its action plan, including improving sectoral money laundering and terrorist financing risk understanding by Designated Non-Financial Business or Profession (DNFBP) supervisors, applying a riskbased approach to supervision, demonstrating increased inves-tigations and prosecutions of different types of money laun-dering activity in line with identified risks and applying effective, proportionate and dissua sive sanctions.“The grey list is not a bank debt issue. The FATF evaluates the legal framework and system for detec ting money laundering and terrorism,” addressed Ayush Dunk huu, Director General of Bank of Mongolia’s Legal Department. According to the follow-up report to Mongolia’s assessment of anti-money laundering and counter-terrorist financing measures, the country has undertaken a number of secto ral assessments including for NBFIs since 2017 mutual eva luation report (MER). The risk assessments of real estate and terrorist financing (TF) are recognized as positive, though it is difficult to fully appreciate what an average or moderate rating for TF means in the context of Mongolia. The global body said Mongolia had taken steps to improve its cooperation in the fight against money laundering, but that it needs to do continue enhancing its legal framework through legis lative measures and guidance to be removed from the grey list.







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    ACM annuls former PM decree on Dubai agreement

    Oyu Tolgoi, a copper-gold mine in the South Gobi region of Mongolia, holds one of the largest undeveloped high-grade copper deposits in the world.

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    Administrative Court of Mongolia (ACM) annulled Former Prime Minister Saikhanbileg Chimed’s order No.27, 99 and 123 on the 2015 Dubai Agreement. The document covers the costly and several times delayed underground expansion of Oyu Tolgoi (OT). Darkhan Mongol Nogoon Negdel NGO had requested ACM to invalidate Saikhanbileg’s order, considering it violated the law. The court decision confirms that the deal was signed illegally and the Dubai agreement has become invalid. However, the Government of Mongolia has the right to appeal to the ACM decision. Erdenes Oyu Tolgoi LLC, the 34 percent shareholder of OT declined to give specific information on the matter. Amongst Mongolians, the Dubai deal refers to an agreement on the pathway forward for starting development of the underground mine, which was signed by representatives of the government of Mongolia, Rio Tinto and Turquoise Hill Resources at a meeting held in Dubai in May 2015. Oyu Tolgoi was launched in 2009 after an investment agreement granted Mongolia its share and the rest to Canada’s Ivanhoe Mines, now the Rio Tinto-controlled Turquoise Hill Resources. Oyu Tolgoi, a copper-gold mine in the South Gobi region of Mongolia, approximately 550 km south of the capital Ulaanbaatar, holds one of the largest undeveloped high-grade copper deposits in the world. Between 2010 and the third quarter of 2019, OT spent over USD three billion on national procurement, of which USD 523 million was spent on procurement from Umnugovi province. The company signed MNT 2.7 billion contract to purchase 5,000 locally made standard leather safety boots from Khos Az LLC for the next three years. Following the opening of the two new factories in Manlai soum, 64 new jobs were created.







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    Economy grows 6.3 percent as service sector increases

    Service sector accounted for 2.9 percentage points or 40 percent of the growth, while mining sector growth made about 1.5 percentage points or 24 percent of the GDP rise.

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    THE MINING SECTOR GROWTH MADE ABOUT 1.5 PERCENTAGE POINTS OR 24 PERCENT OF THE GDP RISE. SERVICE SECTOR INCLUDES TRADE, TRANSPORTATION, AND COMMUNICATION SECTORS, WHICH DEPEND ON THE MINING SECTOR, SHOWING THAT MONGOLIA’S ECONOMY IS STILL ENCOURAGED BY THE GROWTH IN MINING.

    As of first nine months of 2019, Mongolia’s GDP at 2010 constant price increased 6.5 percent, to MNT 13.7 trillion, according to the National Statistical Office (NSO). This was mainly due to increases in the service sector which accounted for 2.9 percentage points or 40 percent of the growth.

    The mining sector growth made about 1.5 percentage points or 24 percent of the GDP rise. Service sector includes trade, transportation, and communication sectors, which depend on the mining sector, showing that Mongolia’s economy is still encouraged by the growth in mining. In terms of the largest mining companies’ performance, Erdenes Tavan Tolgoi JSC exported 12.6 million tons of coal in the first 10 months and Energy Resource LLC 4.2 million tons of coal. Coal exports have reached 32.3 million tons, a 5 percent increase from the same period of last year.Thus, 524 national companies have supplied their products and services to Oyu Tolgoi (OT) LLC during the reporting period. OT spent USD 329 million on national procurement and the construction of Shaft 2 at the Oyu Tolgoi mine has been declared complete.The World Bank highlighted in its report in October, “In Mongolia, growth momentum has continued in the first half of 2019, as GDP rose to 7.3 percent from 6.8 percent in 2018. This robust performance has largely been supported by a strong coal sector and increased private investment. However, the report cautions of the risks including political uncertainty, commodity price shocks, cross border bottlenecks, implementation delay mega projects and slower implementation of banking sector reforms.”In addition to the main economic indicators, inflation has also declined. Consumer price index (CPI) at the national level, which increased 9 percent in September, rose 7.6 percent in October. In October 2019, a 5.1 percent increase in CPI from the end of the previous year was mainly due to increases in prices for meat and meat products by 27.4 percent and clothing, cloth and footwear for each group by 5.4 percent and alcoholic beverages, tobacco group by 2.7 percent, respectively.Meat prices have risen by 30 percent year on year, but have dropped by about 4 percent in October, compared to the previous month. However, the inflation rate in Ulaanbaatar is 8.5 percent, which exceeds the Bank of Mongolia (BoM)’s target.

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    Coal export reaches 76 percent of target

    Mongolia exported a total of 32.3 million tons of coal earning USD 2.75 billion in the first ten months of 2019

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    Mongolia exported a total of 32.3 million tons of coal earning USD 2.75 billion in the first ten months of 2019, which is only equal to 76 percent of the 2019 export target of 42 million tons, according to the General Customs Administration of Mongolia. The coal export in the third quarter rose 1.4 tons or USD 309.2 million compared to the same period of the previous year. Mongolia exported 98.2 percent of the total coal to its southern neighbor. The country’s coal export remained less than 80 percent behind plan. In other words, Mongolia needs to export 9.7 tons of coal to meet the target plan. According to the Bloomberg report, China’s coal import is expected to stand between 200-300 million tons, posing risk to the coal export of its neighbor.In the same period of 2018, the average border price of coal stood at USD 78.8 per ton and increased to USD 85.0 this year.

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    Job availability expectationdecreases among consumers

    Consumers’ expectation of Mongolia’s economic situation in the next six months has deteriorated

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    Current Situation Index (CSI) was the main driver of this growth. In particular, the CSI has increased by 7.3 percentage points to 60.7. However, the Expectation Index has decreased slightly by 1.8 percentage points and reached 98.7.

    Consumers’ expectation of Mon­golia’s economic situation in the next six months has deteriorated, even though the current situation index has improved significantly. Consumers are less optimistic about job availability and income from a year earlier, decreasing the expectation index. In the third quarter of 2019, the Consumer Confidence Index (CCI) in Mongolia is 83.5 at a similar level compared to the same period in the previous year. It has increased only by 1.8 percentage points. A significant increase in the Current Situation Index (CSI) was the main driver of this growth. In particular, the CSI has increased by 7.3 percentage points to 60.7. However, the Expectation Index has decreased slightly by 1.8 per­centage points and reached 98.7.CCI in Ulaanbaatar was 94.1 in the reporting period while CSI reached 68.1, and Expectation In­dex stood at 111.5. Consumers in rural areas are less optimistic than in Ulaanbaatar with average CCI of 77.1. CCI survey collects data on con­sumers’ expectation price levels. In the third quarter of 2019, 61 per­cent of individuals have the ex­pectation of an “increase in price level” in the next six months and this response is lower by 11 per­cent compared to 2018. A quarter of consumers expects “no change in price level” in half a year. In the next year, consumers are expecting the annual inflation rate to be around 6 percent and the exchange rate of USD to be around MNT 2,706.