A

Жижиг

A

Дунд

A

Том
http://zgm.mn/post/1152/

President meets Putin and Xi: Gas pipeline cooperation affirmed

​Heads of State of Russia and China support establishment of gas pipe via Mongolia​

 0 сэтгэгдэл

A

Жижиг

A

Дунд

A

Том
http://zgm.mn/post/1152/


President of Mongolia Battulga Khaltmaa, yesterday, met with the President of the Russian Federation Vladimir Putin and President of the People’s Republic of China Xi Jinping on the sidelines of the Eastern Economic Forum, which will conclude today. One key topic at both meetings was the establishment of natural gas pipes, to which the two leaders agreed. During the meeting with his Russian counterpart, President Battulga mentioned his previous proposal on renewing the 1993 Agreement on Friendly Relations and Cooperation between Mongolia and Russia and establishing it without a defined term, and discussed the spendings of Russian RUB 100 billion soft loan on the reform of the Ulaanbaatar Railway Joint Venture and in energy sector and deepening the cooperation between the National Security Councils of the two countries, as well as adopting a revised cooperation plan. President Battulga also said that Mongolia was studying the possibility of accessing a port in the Far East, while making certain proposals, including establishing a joint working group to intensify the implementation of the Trilateral Economic Corridor program.

Furthermore, he made a proposal to cooperate on the establishment of the Northeast Asian super grid for energy and handed over an economic feasibility study related to the proposal and the projects to the Russian President. Russian President Vladimir Putin emphasized his satisfaction with the positive indicators in all areas of bilateral cooperation and economic growth in recent years and expressed interest to further intensify bilateral cooperation in agriculture, railway, and defense sectors. He then reiterated his support for the proposal of President Battulga on building the natural gas pipes between Russia and China via Mongolia. President Vladimir Putin said that the RUB 100 billion soft loan to Mongolia, which is currently under negotiations, can be used on the reform of the Ulaanbaatar Railway Joint Venture and a thermal power plant. The sides agreed to jointly celebrate the 80th anniversary of the Khalkha River Battle next year and organize a joint exhibition, produce a feature film and a documentary, and publish a book in the margins of the anniversary. Moreover, President Battulga invited President Vladimir Putin to pay a visit to Mongolia with the purpose of celebrating the anniversary together.

As for the bilateral meeting with his Chinese counterpart, President Battulga requested President Xi Jinping to support certain matters, including the establishment of the Northeast Asian Supergrid, construction of gas pipes cooperation on ranking the projects within the Mongolia-Russia-China Economic Corridor program, and value-added export of agricultural products. Also, President Battulga proposed to establish a joint working group to build a highway connecting Zamyn-Uud with Altanbulag. President Xi Jinping expressed his readiness to cooperate on complex reform of the comprehensive strategic partnership relations between the two countries, increasing bilateral trade turnover to USD 10 billion by 2020, railway construction, development of process manufacturing, and regional peace and security. President Xi Jinping supported the joint implementation of President Battulga’s proposals. Moreover, President Xi Jinping reaffirmed the invitation for President Battulga to make a state visit to China and attend the second Belt and Road Forum for International Cooperation in the first quarter of 2019. The Chinese side informed that it had accepted and will support a proposal on export of agricultural products from Mongolia to China, made by President Battulga during their last meeting in Qingdao.

A

Жижиг

A

Дунд

A

Том

Inflation rises above BoM target

 0 сэтгэгдэл


National Statistics Office (NSO) released the year-end preliminary results of social and economic situations of Mongolia yesterday. The year-end economic indicators were mostly positive as expected thanks to mining sector boom and the implementation of the International Monetary Fund program; however, inflation peaked above the Bank of Mongolia’s (BoM) target level for the second month in December 2018 following the rise in fuel prices and consumption.

2018 was rather generous for Mongolia considering the fact that the economy grew by 6.3 percent in the first half. At the time, the Asian Development Bank highlighted that this was “driven by the expansion of investments in the mining sector and an increase in household consumption on the back of improved household loan grants.” As mentioned, consumer loan played its role in the economy. However, growing inflation is drawback for increased consumption. Consumer loan pushes households to pay three-quarters of their income to loans, creating a situation where the consumer could face bigger risk from the loan repayment.
According to the report, the inflation measured by the national consumer price index increased by 8.1 percent from the previous year. NSO explained that the growth was mainly contributed by increases in prices of food and non-alcoholic beverages by 9.1 percent and alcoholic beverages and tobacco by 8 percent, transport by 9.7 percent, housing, water, electricity, and fuels by 16.3 percent, and health by 11.4 percent.

The Monetary Policy Committee reached a decision to limit household debt-to-income ratio at 70 percent and set the maturity of non-mortgage commercials to not exceed 30 months, which took effect on January 1, 2019. Plus, petroleum price was lowered by MNT 100 this week; thus, economists expect the inflation to stabilize in the upcoming months.

Additionally, the total trade turnover reached USD 12.9 billion as of December 2018, of which exports totaled USD 7 billion and imports - USD 5.9 billion. Compared to the same period of the previous year, export increased by 13.1 percent and import by 35.5 percent. Money supply reached MNT 19.5 trillion in November, displaying MNT 3.6 trillion growth (4.4 percent) year over year. The currency issued in circulation totaled MNT 968.6 billion, an 8.2 percent increase. Additionally, the nominal average exchange rate of the MNT against the USD announced by the Bank of Mongolia depreciated by 8.4 percent from the previous year and fell 3.8 percent against CNY.

A

Жижиг

A

Дунд

A

Том

Dissolution of consortium suspends Fifth Thermal Power Plant construction

2019 dubbed Smart Energy System year

 0 сэтгэгдэл


Minister of Energy Davaasuren Tserenpil announced 2019 as the year for smart energy and disclosed the current situation of certain energy projects, including the constructions of the fifth thermal power plant and hydropower plants during a press conference yesterday.

Mr. Davaasuren addressed, “I, hereby, announce this year as the year for Smart Energy System. The entire world is adapting to the usage of a smart system. We have to follow this practice. This will allow us to settle various issues. In doing so, we will involve top-notch programmers, technicians, and engineers, as well as all the government bodies in the energy sector.”

Within the frame, electricity and heat measurement instruments will be installed in power plants, which will drastically reduce the risks of accidents and delays. For instance, the ministry is planning to cooperate with the Russian Federation to install a smart system in turbine generators. The cost is currently unidentified and will be set soon as the ministry assigned tasks to the boards of implementing companies.

According to the ministry, the construction of the Fifth Thermal Power Plant has been suspended due to the dissolution of the consortium. Therefore, the ministry plans to increase the capacities of currently existing power plants. For example, the feasibility study of expanding the capacity of the Second Thermal Powerplant to 300MW has been completed. Additionally, Mr. Davaasuren noted that the night-time electricity discount will further continue in 2019- 2020.

As for the Erdeneburen Hydropower Plant, the ministry has reportedly settled the project financing and is planning to commence the construction this year. However, the Egiin Gol Hydroelectricity project is on a hold-up due to environmental issues. The minister highlighted that the completion of these two hydropower plants will create a fully independent electrical system.

On the air pollution reduction actions, the ministry announced to install a 4 kWh heating equipment in 42,000 households in Ulaanbaatar city.

ENERGY SECTOR FACES MNT 20 BILLION LOSS ANNUALLY

According to the Director General of the Energy Regulatory Commission Tleikhan Almalik, the base electric charge did not change since 2015. Currently, Mongolia is purchasing electricity at MNT 32,000 per kWh and is selling them to private entities at MNT 9,000 per kWh. The annual loss of the energy sector is currently over MNT 20 billion. With the exception of coal, all the materials and equipment are imported, and due to the increase in foreign exchange rates, the deficit has further piled up. Therefore, the commission is planning to revise the base charge this year.

A

Жижиг

A

Дунд

A

Том

Parliament forms quorum after two months

MP Ulaan Chultem appointed as the Minister of Food, Agriculture and Light Industry

 0 сэтгэгдэл


After prolonging the lawmaking process for about two months, the Parliament finally formed a quorum last week. With multiple urgent items of high importance on the order list, the Parliament appointed Ulaan Chultem as the Minister of Food, Agriculture and Light Industry.

Next on the order list was the suspension of some Parliament members’ special rights who have involved in Small and Medium-sized Enterprise Development Fund embezzlement allegations. The Prosecutor General of Mongolia Enkh-Amgalan Magvannorov submitted a bill on suspending the rights of four Parliament members. Although a number of public servants related to the case were detained, the Parliament viewed that the loans of four MPs, namely Soltan Gombojai, Damba-Ochir Dorjdamba, Undarmaa Batbayar and Enkhbold Luvsan, drawn from the SMEDF are in line with the law of Mongolia.

At the plenary session, Mr. Enkh-Amgalan addressed, “We are investigating everyone related to funds. This is a very large-scale investigation. It is taking time because of the lack of staff. Only 25 people are working on each loans granted from the SMDF and the  Independent Authority Against Corruption is investigating the fund. There are many others, including Animal Husbandry Fund and Agriculture Support Fund.”

Additionally, the end to public demonstration on ousting the Speaker was followed with the meeting of Standing Committee on State Structure last friday. The committee held discussion on President-initiated bill on Parliament Session Procedures, which allows the Parliament to oust the Speaker with the majority votes from Parliament members. Accordingly, the bill will be discussed by the Parliament this week. The ratification of the bill lead to potential dissolution of the Parliament as Democratic Party caucus began collecting signatures for a petition to oust the Speaker.

A

Жижиг

A

Дунд

A

Том

Higher gold royalty poses threat to FX reserves

 0 сэтгэгдэл


Due to consecutive failure to form the quorum, the Parliament has delayed its plenary sessions for two months. One of the key items on the order list was a bill on extending 2.5 percent gold royalty for another three years, which was supposed to be ratified before the turn of the year. Thus, gold tax will now be set at pre-revision level at 5-10 percent, depending on the global price of gold.

According to a study conducted by the Bank of Mongolia (BoM), higher royalties lead to  lower gold purchase, which ultimately affects foreign exchange (FX) reserves. For instance, gold tax was at an unbearably high level of 68 percent with the sudden income tax in 2006-2013. As a result, gold purchase fell from 15.5 tons to 2.1 tons by 2010. In other words, the BoM’s treasury fund was almost drained empty.

Officials explain that the sudden income tax, which raised gold tax from 5 percent to 68 percent, was due to boom in copper price; however, the decision had more adverse effects than its benefits as the number of artisanal miners drastically increased as a result.

The 2.5 percent gold royalty was approved in 2014. The result was almost immediate as gold purchase consistently increased in an annual amount, reaching a record high of 22 tons last year, which is 10 percent higher than the previous record in 2017, expanding FX reserves by USD 800 million to a 15-year record.

Therefore, the increased gold royalty is raising concern over a potential tax avoidance of gold producers, reduced gold purchase and increased illegal transportation of gold. A spokesperson of the BoM previously stated, “This law was ratified to boost the economy that was collapsing in 2014. The 9 percent royalties will increase budget revenue by only MNT 50 billion. BoM views the 2.5 percent royalties should be extended by at least 3 years.” BoM estimates to increase foreign exchange (FX) reserves by USD 750 million this year. The 2019 Monetary Policy Guidelines ratified by the Parliament stated to increase FX reserves to USD 6.5 billion in the middle-term.

As for other countries, gold royalty stands at 3 percent in the U.S, 5 percent in Brazil, 4 percent in Indonesia and 2.5 percent in India. This shows that the current 5-10 percent tax is higher than average. 

Miners and investors seek favorable tax environment. China, for instance, deduct only CNY1.2-7 per ton of gold depending on the capacity of the mine, technical conditions and locations, as well as 2 percent royalty on import golds.