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Mineral licence problem raised at Mongolia investors' forum

Text of report in English by Ch. Sumiyabazar carried by Mongolian newspaper The UB Post website on 20 September

Thursday, 20 September: The second Mongolia Investment Forum 2007 was held in Ulaanbaatar on 18 September. Over 200 delegates from around 20 countries attended the event, which had The UB Post as its sole Mongolian media partner. The first forum was held in New York in last March.

The forum was co-organized by Foreign Investment and Foreign Trade Agency of Mongolia (FIFTA) and Euromoney Conferences. The forum in four different panel sessions focused on economic outlook, financial sector, infrastructure, and mining.

"The GDP growth of the country has reached 8.4 per cent last year. And foreign trade volume has overrun 3bn US dollars," said Prime Minister M.Enhbold in his opening address at the conference.

"The government of Mongolia has been following a policy of paying more attention to develop the minerals sector, the country's key economic driving force, and to give a special push to the processing industry," he said.

Over the past few years, Mongolia has opened up to foreign investments. Every year more companies, funds and individuals invest in what is becoming one of Asia's fastest growing and emerging economies. All sectors have seen major changes in the last years, especially in the
infrastructure, minerals, property and financial sectors.

The hottest panel session of the forum was, of course, on the mining sector from which around 70 per cent of the country's export earning comes. At the session, Lu. Bold, chair of the Minerals Resources and Petroleum Authority, whose annulment of mineral licences has caused panic among some foreign investors, and John Brock, president and CEO of Western Prospector Group, who claimed his company's share prices had fallen following the annulment, found themselves face to face.

"Investors do not like any uncertainty," said Brock, who sharply criticized the government of Mongolia, its political system and legal codes. He said western investors have lost billions of dollars in international market capitalization because of the Mongolian government's stance on its minerals wealth. "State ownership is poorly defined, which is not a global common practice," Brock asserted.

Last year, following an amendment to the minerals law, the government gave itself the qualified right to acquire an interest of up to 34 per cent in strategically significant deposits discovered with private funds, and up to 50 per cent in deposits that had been discovered through the use of state funding in the past.

"The challenge lies in formulating a development policy to exploit resources and in proper management of revenue. The government of Mongolia signed extractive industries transparency initiative, which we applauded. It was a very important step," said Michael Ipson, country manager of the International Finance Corporation.

"We believe the future will find Mongolia as a leading country in the world in terms of attracting foreign investment in the exploration industry," said Peter Akerley, president and CEO of Erdene Gold.

Over 6,000 mineral licences are currently effective in Mongolia, where around 40 per cent of the territory is licensed. The biggest project is Oyu Tolgoi, a large scale copper and gold deposit in Omnogobi Province, whose investment agreement is still awaiting approval by parliament after
over five years of negotiation.

The agreement seems also vital at the forum for the real estate marketers.
If the investment agreement is signed, the pace of expat relocation, construction and the growth in the real estate market of not only Ulaanbaatar but also outside the city will be more pronounced than ever.

Darhan, the second largest city of Mongolia, is also an attractive place for real estate builders where steel, cement and metallurgical factories are located, according to Lee Cashell, CEO of Mongolian Properties. "Production of steel and cement needs to be increased. One of the issues to be tackled is transportation of construction materials by railway. Also more and better need to be done in city planning," said Cashell.

"The Mongol Bank (central bank) has advised commercial banks to decrease their interest rates on loan products. Lately, interest rates have come down especially in mortgage rates, and mortgage length is increasing. But the current rate is still not sufficiently low," said D. Bayarsaihan, chair of the Financial Regulatory Authority.

Source: The UB Post website, Ulaanbaatar, in English 20 Sep 07

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