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http://zgm.mn/post/3100/

Enkhbold: Revoking numerous licenses may scare off investors

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http://zgm.mn/post/3100/


There has been a lot of changes in the mining sector, which accounts for nearly 90 percent of the exports, 75 percent of the Foreign Direct Investments, and 24 percent of the GDP. Mineral Resources and Petroleum Authority of Mongolia (MRPAM) has revoked 50 licenses since 2019. The Executive Director of the Mongolian National Mining Association, Mr. Enkhbold talked about the concerns and further challenges of the mining sector.

-The Government has withdrawn several mining licenses in the last month. How does it affect the mining sector of Mongolia?

-Even though the Government of Mongolia is prioritizing the environmental issues over mineral operations, it might be unfair for some entities in the sector. Mongolian National Mining Association aims to decrease irresponsible mining activities and it will not support the companies which offer indecent mining projects in Mongolia. However, the Government’s decision to revoke numerous licenses simultaneously is inappropriate. It will affect negatively to the external environment and investors. The government should reconsider the decision since it’s posing risk for the mining sector development.

-What are the best options in this case?

-The relevant authorities should make their conclusions and assessments on time so that it will not be necessary to stop the operation of many companies at the same time.

-Mongolia’s coal exports increased compared to the previous year. However, it might be reduced due to the decreasing coal imports of China. What is your view on this situation?

-It is too early to predict the results in advance. Mongolia nearly reached 60 percent of its target to export 42 million tons of coal to China. And the Chinese government has imposed quotas on its imports, but it can be increased or decreased depending on the economic and political situation in the global market. Currently, the main triggering factor of Mongolia’s coal exports is the trade dispute between the U.S and China. The two countries may settle their trade conflict this month.

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BoM: Rise in exchange rate will be tempered

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MNT/USD rate hiked to USD 2,679

Following Mongolia’s inclusion on Financial Action Task Force FATF)’s grey list, the foreign exchange rate appeared to rise in the domestic market. In the last week, Mongolian tugrik (MNT)’s exchange rate against the US dollar (USd) weakened by USd 20, reaching USD 2,679. Accordingly, the Bank of Mongolia (BoM) organized an auction and supplied more than uSd 70 million to the market to reduce the exchange rate movements. Chairman of the Financial Regulatory Commission (FRC), Davaaasuren Sodnomdarjaa said, “Over 50 NBFIs are operating at Naiman Sharga exchange. The exchange rate fluctuated last weekend, and we are investigating the causes. However, the exchange rate is likely to be stabilized. We will work to warn those people who attempted to make a profit taking advantage of the greylisting.” After the pending assessment program of IMF completes, Mongolia will accept investment worth at least USD 700 million. Under such circumstances, the USD exchange rate is expected to lower, according to economists. The foreign currency flow may depend on whether the Oyu Tolgoi (OT) project’s second phase of construction will continue in the coming year. Last year, the project accounted for more than 70 percent of foreign direct investment in Mongolia.In other words, the majority of economists believe that Mongolia may not lack foreign currency as long as the OT project progresses. As of August, BoM’s foreign exchange reserves amounted to USD 3.6 billion, which is the highest level since 2016. BoM also explained the MNT depreciation is temporary and will be tempered.





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FATF urges Mongolia to combat offshore

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  • Greylist puts uncertainty on Mongolia’s economy
  • Mongolia worked to address weak-nesses with the FATF’s standards since 2017


Having failed to adequately comply with the recommendations of the Financial Action Task Force (FATF), concerning anti-money laundering and counter-terrorism financing measures, Mongolia has been added to the FATF’s grey list along with Iceland and Zimbabwe, according to a FATF statement released on Friday in Paris. It is risking all foreign transactions and investments to halt, leaving Mongolia’s economy in uncertainty say some analysts as reaction to the decision.The country succeeded in getting out of the grey list in 2014 after taking actions to combat terror funding and money laundering. Mongolia has worked to address weaknesses in its technical compliance with the FATF’s standards since 2017. Meanwhile, its economy is in recovery following a bailout from the International Monetary Fund in 2017. Fund disbursement from the IMF program has been delayed since the end of last year as the central bank reviews a process of re-capitalizing domestic commercial banks. Since the completion of its mutual evaluation report (MER) in 2017, Mongolia has made progress on a number of its MER recommended actions to improve technical compliance and effectiveness, including by enhancing its money laundering (ML) and terrorist financing (TF) risk understanding, and introducing a comprehensive institutional framework to give effect to proliferation financing (PF) targeted financial sanctions (TFS) obligations, and enhancing its TF TFS legal framework through legislative measures and guidance, said FATF public statement.When government officials were discussing Mongolia’s potential inclusion in greylisting, Parliament Speaker Zandanshatar Gombojav said, “An international conference with the Asia/Pacific Group (APG) on Money Laundering and Financial Action Task on Money Laundering took place on September 12 to 13 in Bangkok, Thailand. Mongolia represented its report on work against financing terrorism and money laundering. Unfortunately, four indicators have been evaluated as unsatisfactory, and they have officially alerted us to resubmit the report.”










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Government bond trades at securities market slump

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- The Ministry of Finance plans to sell government bonds at the MSE based on blockchain technology. 

Mongolian government bonds worth MNT 8 billion were sold at the secondary market in the first 10 months of this year. This is only a quarter of the previous year’s trade volume.This is the third consecutive decline of Government bond trade on the domestic market following the Ministry of Finance (MoF)’s decision to halt primary market trade of the product in October 2017. However, the Ministry of Finance plans to sell government bonds at the MSE based blockchain technology. The preparation work had started in 2018. In other words, government bonds will be more accessible to citizens and investors by combining traditional and advanced methods in the coming year. Mongolia’s domestic enterprise ICT Group LLC created the blockchain platform to trade bonds. “Citizens were used to go to the banks only to buy government bonds. But they will be able to trade online by mobile phones,” says the executive director of the company. The government bonds are not simply a source of budget revenue. It is a tool to regulate fiscal policy and stabilize the national currency. Therefore, completely halting the government bond had significant negative consequences. The Ministry of Finance has explained that the 2017 decision to stop trade of the bonds was to avoid increasing government cuts in the domestic market and to prevent the government from capturing the assets of the banks.



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Toxic air pollutants rise amid lack of snow

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  • Concentration of major air pollutants rise despite anti pollution measures
  • Mongolia started to calculate its air quality index based on the human health impact

As of October, air pollutants, namely sulfur dioxide (SO2), nitrogen dioxide (NO2), carbon monoxide (CO), and PM10 have increased significantly compared to the previous year, according to Agaar.mn. Officials believe that toxic pollutants in the air rose mainly due to the dryness, wind speed, and lack of snowfall in Ulaanbaatar. “Sulfur dioxide is present in motor vehicle emissions, as the result of fuel combustion. In the past, motor vehicle exhaust was important, but not the main source of accumulation sulfur dioxide in the air. The reason why its concentrations in the air became relatively higher may be weather conditions. For example, Ulaanbaatar was snowy a year ago, unlike today’s dry weather. It might be the key factor for air quality to reduce,” said a specialist at the National Agency for Meteorology and Environment Monitoring (NAMEM). Sulfur dioxide affects human health when inhaled. Those most at risk of developing problems if they are exposed to sulfur dioxide are people with asthma or similar conditions. In May 2019, burning raw coal in Ulaanbaatar was forbidden. Accordingly, the government coordinated the manufacture and supply of enhanced coal briquettes, which is assumed to reduce air pollution in Ulaanbaatar by 40­50 percent. The fuel replacement was followed by the Ministry of Environment and Tourism’s decision in October 2018 to change how the air quality index (AQI) is calculated. Instead of the previously used one hour average of air pollution being reported, a three­hour moving average is used to calculate AQI. A spokesperson told, “The air quality index aims to provide people with air quality news as fast as possible. Most countries’ air quality index measures include the US Environmental Protection Agency (EPA) and WHO's air pollution indicators. In 2018, Mongolia started to calculate its air quality index considering the impact on human health”.
However, some analysts are against this change. Robert Ritz, Data Scientist and Director of LETU Mongolia, criticized the rule change saying that it smoothes out peaks and troughs, and can easily make it appear that air pollution is reducing. According to a recent report released by the United Nations Development Program (UNDP), Mongolia’s economic costs associated with air pollution were estimated at USD 645 million or MNT 1.6 trillion annually.