Source: Reuters                        Date: 23 September, 2010

Prime Minister S. Batbold told reporters on the sidelines of the United Nations General Assembly meeting on Monday that the London Stock Exchange (LSE) is the front-runner in a bid to manage the country’s stock exchange, expected to be up and running by year-end. "London is the front-runner" to run this exchange, building it up from scratch," he said.

The government's international tender offer for a management contract for a new stock exchange drew 12 bidders, with the field now narrowed to four. Mr. Batbold said the four are the London Stock Exchange, NASDAQ OMX, Deutsche Bourse, and the Korean Stock Exchange.

The idea is to have established companies with listings elsewhere add a dual listing on the Mongolian exchange. "First, what we would ask from them is to have a dual listing on the Mongolian Stock Exchange (MSE) from those already listed companies," he said.

"Secondly, there will be (large) state-owned enterprises through the privatization program. So we will have a quite serious change in our privatization concept so that state-owned enterprises, especially the large ones, will go through IPO on the MSE and possibly in combination with international stock exchanges," Mr. Batbold said.

Even as the global financial crisis has wrought havoc on developed economies and put a crimp in generally robust emerging markets, economic growth will remain strong, Mr. Batbold said, albeit down from the almost 10 percent per year average growth of the last decade. "Despite the financial crisis and difficulties we face in different industries, especially the livestock and others because of the harsh winters, still we have 7-8 percent growth of GDP this year. That is quite promising, I think, for Mongolia," he said.

Mr. Batbold said the massive Tavan Tolgoi coal mine, a deposit of approximately 7.5 billion tons, is a "unique deposit".  A tender for an operating license will be granted in one month, but Mr. Batbold gave no indication of front-runners.  In addition, he said the government plans to list up to 50 percent of the mine through an initial public offering process, but with the government maintaining ownership of the assets.

With the increase in investment and revenues thrown off from the mining sector, Mongolia's currency has strengthened against the U.S. dollar since the acute impact of the global financial crisis softened. In order to limit the impact of money flowing in and to start saving for future needs, the government has submitted a budget stabilization fund law in Parliament.

Mongolia is trying to navigate its way in developing its economy while shedding its historical vulnerability to its two neighbors, Russia and China. Mr. Batbold made a point of "encouraging other friends" to invest in Mongolia to provide more balanced economic development and greater sophistication in its industry.

There is concern over China's growing influence in the economy, as it bought 70 percent of Mongolia's exports last year. While Beijing relinquished its claim to Mongolia in 1950, there remains a deep concern that Chinese workers will lead to increasing immigration into Mongolia for work, especially if Chinese firms grab a large swath of the mining sector.

Mr. Batbold said the current work force at Oyu Tolgoi is 60 percent Mongolian and 40 percent international, mostly Chinese, because higher-skilled workers from outside Mongolia are needed to complete construction of the mine. "We have a certain plan to prepare Mongolian workers through vocational training.  Gradually this ratio of 60/40 will be increased up to 90 (percent) and above, within two to three years," Mr. Batbold said.