Mongolia economy

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. Continue reading »

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. Continue reading »

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. Continue reading »

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. Continue reading »

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. Continue reading »

The vast deposits of copper, coal, gold and silver under Mongolian soil could soon be governed by a radically different regulatory framework — if a new draft of the country’s Minerals Law is passed in its current form. Continue reading »

After a few nervous months, Mongolia has secured a power supply agreement with China for the huge Oyu Tolgoi copper and gold mine. Rio Tinto, the Australian miner developing the $6bn project, confirmed on Monday that it had a binding electricity supply deal.

With that in place, the mine is all set to start commissioning in the next few weeks and begin commercial production next summer. Continue reading »

What do you do if you’re a small country, rich in minerals that went from boom to bust when the bottom fell out of the commodities market? Copy Chile, is the answer.

Chile’s experience as a small, copper-dependent economy that prudently stashed cash during the boom years, allowing it to ride out the 2008-09 world economic crash and uncork anti-cyclical spending, was the perfect case study for Mongolia. Continue reading »