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The monthly meeting on June 28, with Mr. Laurenz Melchers in the chair, was attended by 85 members. In the absence of Executive Director Jim Dwyer, Vice Director Ser-od Ichinkhorloo welcomed the five new members since the last meeting. They are: Independent LLC, importer and distributor in Mongolia of frozen New Zealand fish products; Mongolian Mortgage Corporation (MIK), working to promote and develop primary and secondary mortgage markets; Valiant Art, seeking to “bring new life to international art… with work from a little-known realm”; Firebird Mongolia Fund, a closed-end, limited-life fund dedicated to local Mongolian equity securities; and HoldTop Investment LLC, the first U.S. Silicon Valley-based venture capital firm to expand to Mongolia. Their induction takes the membership strength to 150.
The first of the evening’s three presentations was by Mr. Dennis Price, COO-Mongolia, Mongolia Energy Corporation, on his company’s Khushuut Coking Coal Project. Production will begin in August and will see a rapid rise before hitting a peak in 2013. The company has an agreement with Baosteel to supply coal to the Chinese company from 2010 to 2020. Trucks will take the coal to the Chinese border 340 km away, providing jobs to Mongolians. A power plant to be set up will supply electricity to areas outside the mine also.
Mr. Randolph Koppa, Chairman of Mongolian Mortgage Corporation (MIK) and President of Trade & Development Bank, talked on how MIK was and would be promoting affordable home ownership for Mongolians through capital market development. The Central Bank and nine commercial banks hold shares in MIK, which promotes and develops primary and secondary mortgage markets and positions itself as an intermediary between the two. Its success in raising medium- to long-term funds on domestic and foreign capital markets through a series of capital market tools to create and ensure a smooth functioning of a long-term financing system to promote affordable home ownership and urban development for Mongolia’s people will require right legislation, wise government policy, and free rivalry in the private sector. It has already given 16,807 loans worth altogether MNT233.7 billion.
Mr. Ch.Ganbat, Advisor to the Minister of Road, Transportation, Construction and Urban Development, gave a detailed presentation on the proposed industrial and investment cluster in Sainshand, and on how it is expected to promote sustainable economic growth in Mongolia. The country’s GDP is still “miniscule” in terms of the market value of its mineral resources, and the complex will be a key factor in “successfully developing our economic growth vision”, raising the GDP to USD41 billion in 11 years, he said. The Boston Consulting Group, a leading global management consulting firm, was retained for the work and, Mr. Ganbat said, it has not recommended setting up a copper smelter, which the Mongolian Parliament insists upon. The whole implementation will be in five phases, beginning with floating of tenders by August 20. The Prime Minister himself chairs the steering committee for this seminally significant concept of development through clusters and concentrated infrastructure.
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Altogether 65 members attended the monthly meeting on May 24 at the Khan Bank Theater on Seoul Street. The change of venue was found necessary because the space at the Open Society Forum had become too small for the strong attendance at recent meetings.
Mr. Laurenz Melchers was in the chair and made several announcements about upcoming events. A meeting with the Prime Minister was likely to be held in the near future. A big German delegation is coming, with its focus mainly on mining. Mr. Layton Croft, who has been associated with the BCM since the very beginning and is on its Board of Directors, will be leaving Mongolia soon. His absence will be deeply felt.
Executive Director Jim Dwyer revealed that membership now stood at 145. The most recent additions are Crown Worldwide, a Hong Kong-based relocation company; Sustainability East Asia, an environmental and occupational health safety consultancy; Knauf Gips Mongolia, which deals in construction and interior decoration material; Kito, a real estate developer; and Aspire Mining, an Australian-based miner acquiring a Mongolian coal deposit from Altai Gold.
The first of the evening’s three presentations was by Mr. D. Mandakh, Chairman, Authority for Fair Competition and Consumer Protection of Mongolia. His organization is responsible for implementation of the Competition Law and also of the Consumer Protection Law. Their goal is to maintain a sustainable economy and this they do through investigations and market studies. For example, he cited how 20 audit firms have been fined for keeping their rates too high for smaller firms to use their services for the mandatory annual income of accounts. However, the present provisions of the law permit a maximum of fine of MNT250,000 which, Mr. Mandakh felt, was “a silly amount”. Even then, the quantum of fines levied has jumped up from MNT1,840,500 in 2009 to MNT12,670,000 in the first four months of 2010.
Mongolia does not have a tradition of competition in its economy and this makes their job somewhat difficult, but they are closely collaborating with similar bodies in other countries to identify areas of expansion and improvement.
Mr. Marat Utegenov, CEO, Mongolia Development Resources (MDR), which is all set to become the first MSE-listed investment holding company, listed their activities and said they hoped to begin secondary offers next year. Work will begin in real earnest as soon as the Financial Regulatory Commission grants them re-registration as Mongolia Development Resources under a new prospectus. Mr. Utgenov ended by asserting his company’s commitment to protecting shareholders’ rights and to corporate governance.
This last was the subject of the final presentation, by Mr. J. Unenbat, Executive Director, Corporate Governance Development Center. The Center became functional in June last year. Earlier efforts to instill some norms of governance, particularly in banking, had not come to much, but the Center has been making serious efforts to present the concept of corporate governance as more than a “fashion statement”. It now has 12 core module courses, including those for Secretaries and also Directors, and also offers customized training. It has started governance courses for MBA students, has conducted training for trainers, as also in-house training. USAID and IFC have been regular partners. Mr. Unenbat hoped the awareness will gradually grow, for only a reputation for proper corporate governance will attract and keep capital here.
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The monthly meeting on April 26, attended by 89 members, began with Chairman Laurenz Melchers mentioning several things that have happened since the last meeting such as the visit by former Ambassador Michael Ussery, who has extensive experience in higher education, exploring whether Mongolia is ready for an American University of Mongolia. Executive Director Jim Dwyer said membership now stood at 138, the most recent 5 of whom are Marubeni, Talk Talk English, Mitsubishi, Hunnu Coal, and State Bank of Mongolia. He also reported on the work of the seven working groups, one of which has been renamed the Education Group, involving over 90 volunteers.
The presentation by the visiting Business and Biodiversity Offsets Program (BBOP) team was in two parts. Ms. Kerry ten Kate said their work depends on collaboration between the public and private sectors. Even well-intentioned and extensive restoration after industrial activity, especially mining, leaves “a significant residual impact” on biodiversity. The BBOP believes adherence to a “mitigation hierarchy” can help turn this usually negative net impact into a positive one.
Mr. Ray Victurine said proper restoration, as practiced by Rio Tinto, among others, has shown that developing biodiversity offsets goes beyond legal imperatives. Adoption of best practice principles helps companies reduce operational and project development risks, at the same time forging good relationships with regulators and stakeholders, which can contribute to securing permits and broader social license to operate. The team hopes to persuade the Government of Mongolia to become a partner, and companies to set up pilot projects, as has been successfully done in several other countries.
Mr. D. Damba, President of the Mongolian National Mining Association (MNMA), then provided an update on the mining sector. MNMA is not against regulations and laws as such, but want these to be reasonable and prudent, shorn of negative impacts and helping in “profitable and efficient mining”. MNMA has taken up with the Prime Minister and other authorities various issues that it considers “impractical”, and has protested against Government action in certain cases, as in that of Khan Resources. The Prime Minister has accepted in principle the MNMA stand that the General Tax Authority should not be involved in either developing the methodology of calculating taxes or in the actual determination of tax liabilities. Instead, its role should be restricted to collecting taxes.
Mr. Ben Turnbull, CEO, State Bank of Mongolia, said this new bank, wholly owned by the Government, is ranked 6th in terms of size among the 15 commercial banks in the country. The EBRD and the World Bank have arranged to put in place an ex-pat management team. He made it clear that the new bank is “a bridge bank”, and will be under State ownership only temporarily before being privatized in around three years’ time. In that period it will provide safe and stable banking services to help tide over stressful times for the banking sector.
Mr. Martin Quick, CEO of beleaguered Khan Resources, made a statement when members in the audience were asked to briefly comment on their businesses. He referred to the “abrupt, unilateral, and highly illegal” invalidation of the company’s two licenses on the Dornod uranium fields, and said the company’s Board of Directors was determined to get justice for its shareholders, in Mongolian or international courts, against the expropriation. He sought the full support of the private sector, while acknowledging that companies have their own interests to pursue.
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Executive Director Jim Dwyer told the monthly meeting, held on March 22 with Mr. Laurenz Melchers in the chair, that BCM membership had reached an all-time high of 133, surpassing the 131 at the end of last year. Of them, 71 were present. The newest members are Transwest, a mining service providing company, Air Trans, a plane ticketing agency, and Khurai Co. a hard rock gold exploration entity.
There has been a significant growth in the number of people visiting the BCM Web page. They are spread over 60 countries. In recent weeks, the number of those accessing the English-language page has risen 45%, while that of those going for the Mongolian section has grown 62%, with the mining database a special attraction. The groups are also busy and the seventh one, on the Environment, has now been properly constituted, with Ms. Meloney Lindberg of The Asia Foundation at its head. With funding from GTZ, the Capital Markets Group is arranging for 12 Government officials to visit the Frankfurt Bourse. It has also requested the Prime Minister to have a meeting with the Hong Kong Stock Exchange chief when he comes to Ulaanbaatar shortly.
In a brief talk, Mr. D.Damba, the new President of the Mongolian National Mining Association, said MNMA plans to institute some structural changes and also involve other sectors in its activity. It would also like to have wider and stronger cooperation with organizations like Responsible Mining and The Asia Foundation. Its agenda for 2010 includes “aggressive lobbying” for a lowering of the tax threshold, improving the legal improvement, and making legislation enforceable. A priority area will be to seek changes in three laws adopted last year that are negatively impacting the mining industry.
Mr. Damba said few MPs were knowledgeable about the complexities of the industry and MNMA would seek to redress “this serious problem” by persuading them to receive and weigh advice from professional bodies before taking decisions.
Mr. Damba and Mr. Melchers then signed, amidst applause, a memorandum of agreement on BCM and MNMA extending their collaboration in the coming days.
Mr. George Tumur, Managing Director of Perth-based Hunnu Coal, gave a presentation detailing their “aggressive exploration plans” in several areas of Mongolia before reaching a target of extracting 500 million tons of coal annually.
Another presentation was by Mr. G. Temuulen, Deputy Director of Erdenes MGL, standing in for the company’s General Director , Mr. B.Enebish. He spoke of the State-owned company’s goal of “maximizing the benefits of the mining boom” for Mongolia.
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With membership now standing at 126 entities, some 35% more than the number last year, it was no surprise that attendance at the monthly meeting on February 22 was an almost record 90. After BCM Chairman Laurenz Melchers had welcomed them, Executive Director Jim Dwyer introduced the two newest members – B Television, and Master Properties. He also gave a brief report on the work of BCM’s 6 Working Groups which include approximately 70 individual volunteers. An Environmental Working Group has been formed comprising mining company environmental experts and environmental NGOs. Another on Entrepreneurship was being put in place.
An update on the work of BCM’s Legislative Working Group was provided by its Chairman, Mr. Bayar Budragchaa. The WG’s efforts led by B. Enkhbat of Eznis Airways presented recommendations for the Concession Law to the Parliamentary Working Group headed by Mr Ts. Munkh-Orgil. The Law was recently adopted by Parliament to take effect on March 1 and does reflect BCM’s comments and is mostly if not 100% reflective of best international practice.
The evening featured two presentations. In the first, Mr. Ya. Sodbaatar, Director of the State Specialized Inspection Agency (SSIA), detailed the reforms introduced and planned in the agency. The goal is to make its work business-friendly and not obstructive. Parliament will soon consider amendments to the law and regulations that govern the way the agency and its staff work. Reaching the targeted international standards will require “a total u-turn in the mindset of many who are stuck in the 1930s”, he said, adding that this is not going to be easy for the 3,000 workers at the agency, 1,700 of them employed as inspectors. However, he was confident that “positive and tangible results” will be achieved by the steps being taken. He called for cooperation from BCM members and urged them for suggestions based on their international expertise and Mongolian experience.
The proposed overhaul, with assistance from the UN and the World Bank, will streamline and expedite procedures. Revealing that the present system in Mongolia calls for inspections at more levels than in most other countries in Central Asia, Mr. Sodbaatar said, “Inspection without results is ridiculous.” Inspectors with the agency are often seen as flexing their muscles and throwing their weight around, “and they do at times abuse their rights and privileges, but they also have to follow a system which has 327 norms”. There will now be transparency, better accessibility, more decentralization, drastic cuts in the number of stages, rationalization and simplification of procedures, and, most important, there will be “human reform”.
The agency does not see its work as insisting on finding fault, and will focus on helping the business environment. “Clear boundaries will be established”, more and more work will be done online, one-stop windows will minimize delays, and there will be fast-track resolution of disputes. “These are coming late, but they are finally coming,” he said, and assured the audience that mistrust will be replaced by collaboration. The civil society will be given a role, and inspectors’ performance will be monitored and evaluated. From next year, the agency will pay for all samples collected for testing.
South Gobi sands Executive Director David Bartel gave an overview of the company, mining coal at Ovoot Tolgoi and other deposits. Asserting that they are a “good corporate citizen”, Mr. Bartel talked about the jobs the company has created and about the expected multiplier effects of its expansion plans. Expressing his appreciation of and admiration for the Mongolian work force, Mr. Bartel said their thirst for learning seems insatiable.
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Monthly Meeting Recap