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http://zgm.mn/post/214/

Court rules to imprison two former PMs for 30 days

Suspects' lawyers claim IAAC violated laws with the detention

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http://zgm.mn/post/214/



Chingeltei District Court ruled out to detain the former Prime Ministers Bayar Sanj and Saikhanbileg Chimed for 30 days for investigation yesterday. The trial was attended by their lawyers while former PMs were attending online from the 461st Detention Center. During the legal proceeding, former PM Bayar remarked, “Detaining for a month-long period is not interesting to me. Two Premiers being detained in connection to Oyu Tolgoi Investment Agreement will have impact on Mongolia’s global reputation, sending signs that Oyu Tolgoi Agreement was inefficient, and abolishing the reputation of the project will affect Mongolia’s economy.


Therefore, please see the issue from this perspective.” As their lawyers said, Bayar and Saikhanbileg were questioned simultaneously in adjacent rooms and were detained without a judge’s permission. The detention was ruled out in order to prevent possible tampering, removal or destruction of evidence. Danzannorov Lkhagvaa, lawyer of Saikhanbileg notified that a person can only be detained with a judge’s permission when the state special protection is still in effect. The lawyer also condemned that Independent Authority Against Corruption (IAAC) conducted the arrest by violating laws and chose the worst form of restraint. In addition, the IAAC and General Prosecutor’s Office of Mongolia detained former Minister of Finance Bayartsogt Sangajav, former Head of General Department of Taxation Ariunsan Baldanjav and CEO of Erdenes Mongol LLC Byambasaikhan Bayanjargal in relation to the Dubai Agreement earlier this month.



Enkhjargal.B Oyunbayar.N

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Government seeks dual-listing for Erdenes Tavan Tolgoi IPO

​Cabinet plans to offer 30 percent stake of Erdenes Tavan Tolgoi through a dual-listing​

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According to the Minister of Mining and Heavy Industry Sumiyabazar Dolgorsuren, the Cabinet issued a resolution on intensifying the development of Tavan Tolgoi residual deposits during its regular session yesterday. The resolution to improve economic circulation of the deposits were presented to the Parliament. The Cabinet presented the draft to the Mongolian People’s Party group in the Parliament and received its approval and was ratified by the National Security Council on June 14. If the Parliament approves the bill within two weeks, the preparatory works of Erdenes Tavan Tolgoi’s IPO, which is expected to offer 30 percent of its stakes, are in plan to be completed within 180 days. The working group, which is formed by over 40 staff of Ministry of Road and Transport Development, Ministry of Finance, Ministry of Energy, Ministry of Mining and Heavy Industry, Erdenes Mongol and Erdenes Tavan Tolgoi, is currently drafting documents on renewing the feasibility, integrated resource report, projects on water supply, electricity grid, auto road and railways of Tavan Tolgoi deposits. For instance, the resource estimation is expected to be increased by 7.4 billion tons with the JORC code. Authorities informed that the USD 5.7 billion appraisal of the deposit conducted in 2011 can be revised as a result. “Within the frames of intensifying Tavan Tolgoi residual deposits, the Cabinet is holding talks and exchanging views with international exchanges and investment banks; for example, the Hong Kong, Tokyo, New-York, London and Toronto exchanges have sent their respective offers. There are rumors that state-owned enterprises are inefficient. I think we are obliged to demonstrate the public that the Government can be a good manager. The President, Parliament Speaker and Prime Minister share the same view that the Tavan Tolgoi residual deposits have to be aggravated,” remarked Mr. Sumiyabazar Dolgorsuren. He added, “Since there is a risk that the stock price will plunge, we are being careful to launch the IPO at the domestic stock exchange. Thus, we view that it is rational to launch a dual-listed IPO.”

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EMC labour union opposes illegal appointment

Labour union demands wage raise over paying Standard Bank debt​​

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The Labour Union of the Erdenet Mining Corporation (EMC) held a press conference on the recent actions of some authorities, namely the directors responsible for the factor and social affairs, appointed by the board, which was also formed despite ban by court. According to the Head of Labour Union, for the last few months, the workers have been protesting the repayment of the loan issued by collateralizing the company’s stake, demanding the people responsible for collateralizing the EMC's stake to the Standard Bank of South Africa to pay the debt and increase the workers’ wage instead.

People appointed by the board allegedly broke into the union's office

However, the recently illegal board has started dismissing the people who issued the demand, informed the union. The board also forbid the heads of the labour union to enter the factory for about half month. Labour Union alerted that the people appointed by the board have attempted to steal the union’s stamp by breaking into their office. They have started a lawsuit against the board. Head of the union remarked that political pressure and high cost bids have been disclosed thanks to the Law on Glass Accounts, and the company’s net profit was increased as a result. However, the union criticized that the company became non-transparent and several political appointments took place since the nationalization of EMC. Earlier this year, Administrative Court revoked the Cabinet’s decision to nationalize EMC and suspended the board, which is fully formed by the Cabinet members. Nevertheless, the suspended board held meetings and decided to alter the structural organization of EMC, which is a clear violation of Mongolian law.

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Mongolia proposes to establish permanent organization for Northeast Asian mayors

​Northeast Asian Mayors' forum discuss opportunity to improve air quality in Ulaanbaatar​

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At the initiative of the Ulaanbaatar City Mayor Batbold Sundui, the third Northeast Asian Mayors’ forum is taking place under the theme Low Carbon City Development: Improving Air Quality and Reducing Greenhouse Gas Emissions between June 17 and 19. Northeast Asian cities play an important role in the world economy and are responsible for 30 percent of greenhouse gas emissions of the world. In accordance with the 2015 Paris Agreement on climate change, every countries are obliged to make effort in reducing greenhouse gas emissions. The Parliament of Mongolia approved the related documents in 2016, setting a goal to cut greenhouse gas by 14 percent by 2030. Opening the forum, the Mayor Batbold Sundui remarked, “One quarter of the world population live in the Northeast Asian region. Urban areas emit 60 percent of total greenhouse gas; thus, the best urban development policy is to adapt low-cost technologies that can reduce greenhouse gas in the short term.

Population shift from rural to urban areas is becoming the key cause for air pollution

Since Northeast Asia has been the center of technology and innovation, I have no doubts that the cutting edge technologies that minimizes natural resources consumption introduced here in Ulaanbaatar will be an ideal example for other cities. Due to the geographical location, vulnerable ecosystem and economic system that is highly dependent on weather, Ulaanbaatar is heavily affected by the climate change. As a result of desertification, drought and dzud, the population shift from rural to urban areas is becoming the key cause for unplanned expansion, environmental and air pollutions. Hence, I propose to make this forum a permanent organization and recommend to establish a Secretariat.

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Biography from garments to oil

History of the original concept of OT agreement

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The first western investor since 1928, when the foreign investors were chased out of Mongolia, was “Temuujin Mench” of Great Britain in 1992. This was a small and medium sized garment factory. Purpose of this investor was to use quota of garments given for Mongolia as an additional bonus for joining the World Trade Organization and to export Mongolian- made products to the USA. Just several months after commissioning the factory, an uprising started. They demanded an equal distribution of its revenue among all workers. As a result, the equipment were vandalized and thrown out of the window. Police did not lift a finger to intervene. In other words, Mongolian state did not protect the property of others. “Temuujin Mench” quickly withdrew from Mongolia. They set up a factory in Inner Mongolia and expanded further, opening many branches. Since then, several garment factories from China and South Korea came to Mongolia to use the Mongolian garment quota; however, none of them succeeded. The first Chinese restaurants opened in Mongolia were intimidated until they were closed down. The Editor-in-Chief of a tabloid newspaper that organized the intimidation and pressure of the “Temujin Mench” has acquired an accommodation and even built a house for himself. Two women who participated in the act also benefited a lot from this. They were glorified in the media and were awarded as “patriots”. At the peak of the transitional period, inflation increased to 300 percent and unemployment skyrocketed. Many women, who were employed by the factory that were earning hard currency, hit the streets. What was the lesson? Calling out and inviting foreign investment is a deception and the Constitution, which says the property of all forms will be protected by the state, is a lie. Come on in! and when you do, we will destroy you. Many people observed Mongolia as a dangerous place for investment and a fertile soil for acting ”patriot”, which can be very profitable.

This is the same herd that flattered foreign colonists and slandered each other, while the colonists plundered, insulted and robbed the country for almost 400 years. By 1996, hard currency reserve of the State was around USD 6 million (which is now USD 2 billion) and consolidated budget of the State was USD 250 million (now - USD 7 billion) and GDP per capita was USD 350 (now - 3779) and Mongolia was considered one of the poorest nations in the world. Erdenet copper mine, which was the only source of cash flow (a.k.a cash cow) for the country, was operating at loss because of the plunge in copper price. Main advantage was cashmere; however, cashmere production was less than three thousand tons, which is not sufficient. International aids and donations, financing of international banks and financial institutions were a key source for livelihood of the nation. Take the case of Japan for example. Between 1990-2000, Japan granted USD 1 billion soft loan for Mongolia. It was clear to everybody that this country was not able to get out of its sinking hole without foreign investments. Foreign investment is a domestically unable assets brought from abroad and used for profit generation; and thus, it is mutually beneficial for both parties. Countries compete with each other over potential investments. Today, the country that attracted the most foreign investment is the US. The People’s Republic of China made an effort for over 35 years and is now ranked 2nd. Different states of the US competes with each other over investment too. Main trick to attract foreign investment is to provide favorable conditions for the investors, as well as to guarantee stable legal environment.

It is impractical to build a refinery for the sake of a “spittle” of an oil

The Parliament passed several laws specifically for this. One of them was a law to establish a stability agreement with anybody that invests more than USD 20 million. Experts complimented the 1993 Law on Production Sharing Agreement and 1997 Minerals Law as one of the top ten regulations in the world. However, investors were still ignoring Mongolia. Mongolian wealth was not explored and studied. Exploration of the wealth requires considerable investment. It is said that the geological industry first spends huge fundings for exploration and “takes a rest” to raise fund for mining operations. During this period, no financing were able to be found for exploration. In 1997, only USD 100 million was spent for geological exploration in the whole world. Commodity price plunges when the production activates. In 1998, an ounce of gold was USD 240 (it is now over USD 1300 as of last week), copper was USD 1350 dollars (It surpassed USD 8 thousand couple of years ago, reaching almost USD 10 thousand). Nobody wanted to spend money in a place nobody explored during this time. After begging for a long time, a small company called NESCOR came to Mongolia to explore gold in Zuunbayan of Eastern Gobi region. In 1988, a famous American geologist William C.

Penttila determined that a cavity land area with a capacity of six billion barrels exists in Mongolia after analysing satellite images. This cavity may contain water, oil or natural gas. There was also a chance that it could be just empty. When he came to Mongolia and informed about the potential oil deposit in Mongolia, our authorities laughed at him and said “Russians already proved that there are none”. In 1991, Penttila brought two junior companies named “ Nescor” and “Soco”. Junior means small company that takes risks to explore minerals, undertaking all geological processes to sell the findings to a larger company who can mine and use the minerals. From these juniors, “Soco” decided to try its luck in Eastern steppe. It was a risky step since each drilling costs about USD 1 million. By 2000, they have spent around USD 150 million. They discovered first oil findings in 1998. President of Mongolia Ochirbat Punsalmaa sprinkled his deel (traditional Mongolian clothes) with oil in excitement. The owner of “Soco” Edward T. Story was happy. He was working enthusiastically to find large reserves and transfer the deposits to global giants. He established a Mongolia-North American business group and lead it himself, and was almost “in love” with Mongolia. However, when the company found a small amount of oil, Mongolians suddenly changed their behaviour. Exploration lease was increased by 20 times after 2000. They suspected about his shipment of crude oil, which was merely around 50 thousand tons, to China for refinery. On the other hand, it is impractical to build a refinery for the sake of a “spittle” of an oil. Mongolians began pressuring him when he could not find American giants interested in a deposit that does not have any proven reserves. It is said that Ed Story was crying when he told about his misery to the Mongolian Ambassador. USD 150 million is a huge debt for a junior company. The debt equalled Mongolia’s state budget at the time. He was courting with a Chinese state-owned enterprise (SOE) Daqing and sold the deposit for half of its price and ran away. Since Daqing is an SOE, it can ignore losses. Socialist economy? After over a decade of drilling, they determined that the oil of Tamsag basin is 3 thousand meters underneath the earth. In another words, it is very costly to produce oil. Currently, they produce 400 thousand tons of oil and if refined, half the production will be end products. However, Mongolian oil demand is over a million tons. They are operating at loss; however, the activities to push them out has already began. The fate of “Nescor”, which came to work in Zuunbayan oil field ended in an even worse tragedy. Production sharing agreement means investors will be responsible for all expenditures and, if they find minerals, it will be shared, according to its principle. Mongolians did not want to conclude such “exploitative” agreement with Nescor. Surely enough, there are much more oil reserves underneath the crusts within Mongolia!
Mongolian side borrowed half the investment required for the exploration from Nescor and pledged to payback from future production. This was the original concept of the Oyu Tolgoi agreement concluded later. They ignored the fact that they have to share the risk if no oil is found. By 1996, Mongolia ended up with USD 8 million of debt in this way.
• It was clear that Mongolia was not able to get out of its sinking hole without foreign investments.
• Experts complimented the 1993 Law on Production Sharing Agreement and 1997 Minerals Law as one of the top ten regulations in the world.
• Mongolia ended up with USD 8 million debt due to Zuunbayan oil field agreement with Nescor, which is the predecessor of the concept of OT deal.
At that time, the total hard currency reserve of the state was just over USD 6 million. Former PM Enkhsaikhan Mendsaikhan pressured to change this agreement into production sharing agreement as a way to avoid ending up with debt. According to the Production Sharing Agreement, investors take full responsibility. After revising the agreement, the owner of the “Nescor” company died in an accident. The heirs did not want to deal with Mongolia again. There are thousands of miseries and problems in Mongolia covered under “no idea” and “cannot” phrases, emotions and patriotic disguises. A system where no one is held accountable for their actions has been established and is a chronic disease in Mongolia. There is a country called Central African Republic. This country, a former colony of France, has a population of 4 million, and has a territory as large as Ukraine. It also has huge reserves of diamond, oil, bauxite, uranium and is one of the poorest countries in the world. Mining was never developed there and only a single diamond mine, which was used by the French, became a battleground for rulers of various generations to fight with each other. A man who staged a coup declared the country as the Central African Empire and proclaimed himself as the emperor. Western investors were afraid of investing in this country with unstable politics. If they invest in this country, the locals would fight amongst each other, plundering the investment and overthrowing the government, creating chaos and mayhem. Therefore, nobody dares to take their natural resources. Recently, naive Korea and China invested in its natural resources, which became the reason to the overthrow the next government. The new leader announced that all agreements concluded with foreign investors will be reviewed in order to set justice. No matter how thorough they reviewed the agreements, probably nobody will ever go there now. There is an internationalist song which goes something like “regardless of skin color, we all bleed the same”. Kyrgyzstan is the “most democratic” country among the Central Asian republics of the former Soviet Union. It is also the poorest. The GDP per capita is less than USD 1 thousand. Kumtor, the highest elevated gold mine in the world, is the only source of revenue for this country. Canadian “Centerra Gold” invested in the development of this deposit, which has 350 tons of gold reserves (compared to this, Boroo Gold mine has 40 tons of gold and Oyu Tolgoi deposit has 1000 tons of gold reserves) since 1994, and the mine was commissioned in 1997. Since the mine is in harsh mountainous terrain, the investment was costly.

Kyrgyz people concluded an agreement to own 66 percent stake and to payback from future profits. At that time, when the price of gold was low, this became a heavy burden. Therefore, they revised the agreement so they could own only 16 percent and increased the tax. However, gold price began to pick up. This resulted in a coup took place, establishing “justice”. The Kyrgyz ownership was increased to 34 percent. Colorful revolution! The new president began to take advantage of Kumtor gold mine along with his relatives and brothers. Another rebellion and another coup d’etat. And this time, a colorless revolution. Kyrgyzstan earned about USD 2 billion from Kumtor mine, shared and benefitted. The authorities had the bigger pie, stealing the profit. If it was not for the mine, this country would have starved during the transitional period. With the surge in gold price, the dispute got worse. An emergency commission to review the Kumtor was set up. Patriotic members of this commission comprised of the parliament members demanded full nationalization and confiscation of the mine. Since the Kyrgyz government realized that they cannot operate this mine, which required advanced technology, they said “no” and were nicknamed as an Uzbek hybrids that sold their motherland. As result of these, the company’s stock value in the international market plunged to USD 500 million from USD 1.3 billion, almost to one third of its value, and the country was ready for the next revolution. It is bad for Kyrgyz people. The Kumtor mine was in ping pong and affected the country’s development; however, none of those revolutionaries and patriots were held accountable. They call this democracy. Our people call graves “Khirgisuur”. There is a lake called Khyrgas. They say Kyrgyz and Mongolia are brothers with common origins.