Mongolia

By Marius Toime of Berwin Leighton Paisner

Chimed Saikhanbileg, Mongolia’s incoming prime minister, must do more than simply continue the policies of his predecessor, ousted amid accusations of economic mismanagement and corruption.

His election by parliament last week, after Norov Altankhuyag was removed by a vote of no confidence, leaves big question marks over whether he can bring about real change. The opposition People’s Party boycotted his election, fearing that he will let the country drift without fresh leadership and put investment, jobs and income at risk. Read more

Mongolia is determined to reduce default risks on its international debt by resuming a long-stalled $4.2bn copper mine project by the end of this year, bringing government debt levels to within legal limits and cutting back on welfare payments, a senior government official said.

Risks associated with the north Asian country surged in July after Moody’s, the credit rating agency, downgraded its bonds by one rung to B2, a rating that signifies “high credit risk”. The reasons for the downgrade included plunging foreign exchange reserves, expansionary monetary and fiscal policies and an unpredictable environment for foreign direct investment (FDI). Read more

“When eating an elephant, take one bite at a time”, US Army officer and Vietnam veteran Creighton Abrams once said.

In his new book, The Rise of the New East, Ben Simpfendorfer does just that. His elephant is “The East”, the group of almost 50 emerging markets ranging from Turkey to China that is home to well over half of the world population.

Simpfendorfer gives his topic a thorough treatment. While his insights seem logical and intuitive, taken together they give an impressive oversight of into key trends shaping the region. beyondbrics noted five insights that particularly stood out. Read more

By Gavin Bowring, Asean Confidential

In November 2012, Mongolia issued US$1.5bn of five and 10-year sovereign debt – cutely called “Chinggis bonds” after the 13th century Mongol conqueror Genghis Khan. These were happily snapped up by yield-hungry investors as Mongolia continued to post one of the world’s fastest GDP growth rates. The government, in theory, should have used this money to invest in commercially viable infrastructure to provide power, transport and logistical infrastructure to support the country’s continued growth.

But with a substantial portion of this debt maturing within the next 3 years, concerns have been mounting about the government’s ability to repay. While some of the US$1.5bn bond was used to build useful social infrastructure within the capital, Ulaanbaatar – including new roads and schools – an equally significant portion was spent on pork-barrel and pump-priming programs. Moreover, the government has little to show in terms of commercially viable investments that generate returns. Read more

It was only an April Fool’s day joke – but when an Ulaanbaatar website suggested that Mongolia go on a Genghis Khan-style “investor roadshow” across several continents on horseback to win back international investors, it hinted at the size of the image deficit the north Asian nation faces.

In Mongolia, the 13th century great Khan is thought to have mythic powers “to make the difficult easy and the distant closer by”. So channelling his spirit to serve investor relations seems natural enough – especially when the task at hand is significant. Read more

A tussle between Mongolia’s authorities and some 60,000 “ninja miners” for control over the country’s gold industry captures in microcosm the broader battles that Ulaanbaatar is waging to shore up its slumping tugrik currency and central bank reserves.

The ninja miners – so named for the green bowls they carry on their backs that resemble the shells of cartoon characters from the 1990s “Teenage Mutant Ninja Turtles” movie – have been wreaking havoc with the nation’s gold production, thus reducing the amount of gold the central bank can buy to bolster its reserves. Read more

“Made in Mongolia” trolleybuses bump along Peace Avenue, Ulan Bator’s main east-west axis, alternating lousy braking with sudden acceleration. Most of their major components have been imported from abroad and the buses are only assembled locally. Still, they embody the ambition of local authorities to develop Mongolian industry.

“Before, we were thinking of importing everything. But things have been changing and today Mongolians can produce themselves, even buses,” said president Tsakhia Elbegdorj during the inauguration of a new bus assembly line in Ulan Bator few weeks ago. Read more

Resouce-rich Mongolia is going back to the international bond market in a push to offset a weakening economic cycle.

Government-backed Development Bank of Mongolia (DBM) has placed a ¥30bn ($290m), 10-year samurai bond to invest in much needed infrastructure projects. But the deal is stretching the country’s borrowing rules to the limit. Read more

Remember those Genghis bonds?

Back in November, eyebrows were raised in the emerging markets debt investment community when Mongolia – a country that has been rescued five times in the past 22 years by the International Monetary Fund – managed to raise $1.5bn at a price below Spain’s borrowing costs.

At the time, many took the sale – equal to nearly one-fifth of the size of Mongolia’s economy and akin to the US borrowing $2.5tn in one go – as yet another sign that investors, flushed with cash and desperate for yields, were jumping into markets that they don’t fully understand.

Fast forward eight months and the skeptics appeared to have been proved right. Read more

By Marius Toime of Berwin Leighton Paisner

After months of anticipation, Rio Tinto was given the green light last week to begin exporting its first copper shipments from the giant Oyu Tolgoi mine. This colossal project is predicted to boost Mongolia’s GDP by a third in the coming years, giving it one of the highest per capita GDPs in the world.

Mongolia’s mining sector presents a tantalising set of opportunities, yet one that leaves a complex web of issues in its wake. Read more

The incumbent vs the wrestling champion vs the first female candidate: Mongolia’s presidential election is being fought against a backdrop of rapid economic expansion. But there is rising voter discontent with the lack of benefit from the country’s mineral resources and from corruption. The FT’s Leslie Hook reports.

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By Julian Dierkes of the University of British Columbia

As Mongolia gears up for its presidential election on June 26, wrestlers have increasingly become part of the political landscape. Both main parties in Mongolia now count sporting heroes among their prominent members. The Mongolian People’s Party has even nominated a former wrestling champion, B Bat-Erdene as its candidate in the election.

Has Mongolian politics become a grappling sport? Read more

With so much uncertainty permeating the financial markets, not least emerging markets, it’s heartening to see a big, solid multinational making a big, solid €10bn bet on EM growth.

On Tuesday, German chemicals group BASF announced plans to double annual sales in the Asia-Pacific region to €25bn by 2020, including €2bn to come from new businesses and acquisitions.In a decisive shift away from Germany-centred thinking, it will raise local content from around 60 per cent now to 75 per cent, and base 25 per cent of research and development in the region. Read more

By Julian Dierkes of the University of British Colombia

With three candidates declared for Mongolia’s presidential election a month from now, one of the issues that will be watched most closely from abroad is the candidates’ positions on large-scale mining projects. Much (foreign) ink will be spilled describing all three candidates as “resource nationalists” of various stripes. Read more

By Julian Dierkes of the University of British Colombia

Over the weekend Mongolia will host the seventh ministerial conference of the Community of Democracies, a global caucus of democratic nations formed with the intention of fostering democracy around the world. For Mongolia, holding the chairmanship and hosting the ministerial conference are confirmation of its achievements in democratic development. Read more

Sometimes an abundance of riches can be a headache.

That has been the problem facing Mongolia as it sorts out what to do with a huge coal deposit in the middle of the Gobi Desert. Read more

By Terrence Edwards of bne in Ulan Bator

Mongolia’s parliament passed an amendment on Friday to its controversial foreign investment law of last year, which should allow over 100 pending investment deals in the country to now progress.

The Strategic Entities Foreign Investment Law (SEFIL) was rushed through parliament in May 2012 as protests grew about the increasing foreign (ie Chinese) control over the country’s vast mineral wealth. But the wide-ranging nature of the law caused foreign investment to fall through the floor. Read more

Mongolia is one of the brightest hopes among the world’s frontier markets: a fast-growing economy with a vibrant democracy and a young population. So it’s salutary to be reminded that not all is necessarily well.

On Thursday, Moody’s Investors Service published its first report on the country’s banking sector, giving it a negative outlook. The reason, writes Hyun Hee Park, Moody’s analyst in Hong Kong, is “rapid loan growth in an economy that is increasingly exposed to commodity-driven boom-bust cycles,” exacerbated by “high loan concentrations, weak risk-monitoring systems, and the developing nature of the regulatory framework.” Ouch. Read more

By Julian Dierkes of the University of British Colombia

Rio Tinto and the government of Mongolia are committed to ramping up production at the Oyu Tolgoi gold and copper mine, one of the world’s largest. The recent turmoil between the two partners should push them to clarify their roles and help create more solid support for the project from the Mongolian public. Read more

By Terrence Edwards of bne

Mongolia is following the footsteps of its largest trading partner, China, whose first western food chain in 1987 was Yum! Brands’ KFC. Now Mongolia’s Tavan Bogd Group has attained franchise rights to the restaurant chain, though the success of fast food in this fast-developing frontier market has so far been mixed. Read more