By Rory Briggs

Mongolian citizens have become the first victims of the proposed foreign investment law as investors begin to scale back their operations in the country. Foreign investors and resource companies are currently reviewing their budgets for Mongolia in response to an anti-business draft law that was proposed to Parliament in early May.
Although the initial draft has been diluted, the latest draft still seeks to impose weighty restrictions on foreign investors who have been critical to Mongolia’s growth. Investor confidence in the country’s current stability is diminishing as result.
The resources boom in the country and the previously business-friendly political environment had fuelled a flurry of foreign direct investment and a rise in GDP per capita of over 60% since 2009. But with companies now holding back on new investment, the impacts have been immediate with drill rigs idled and increasing local job losses.
Mongolia could see a significant departure from its current line of growth. A natural resources investment firm in Ulaanbaatar told The UB Post yesterday that in the face of new legislation they plan to scale back their operations by 75% as they follow other companies to more business friendly emerging markets.

By B.BYAMBADORJ

The following is an interview with Deputy Director at the Development Bank, L. Bolormaa.

-The Development Bank is now one year old. What has been the progress and productivity of the bank throughout this year?
-The Development Bank did a lot in the past year. We have released bonds to that represent Mongolia. In March 21, 2012, we released five-year term bonds worth USD 580 million at the interest rate of 5.75% in the Singapore Stock Exchange. They were successfully traded to American, Asian and European investors. The interest rate of 5.75% is very low. Previously, we had the chance to release the bonds in both 2010 and 2011. If it had happened in those years, Tavan Tolgoi would be in full economic circulation and the industrial development we are talking about today should have progressed a lot more. Nevertheless, we should appreciate what we have done; we have traded our bonds successfully. We have successfully widened our partnership with prominent financial organizations worldwide.
-Are the Development Bank’s operations independent from politics?
-From the beginning, the bank set its foundations so it could be allowed to work independently and separately. This was valued and appreciated by our investors.
I have two things to say on this. With elections coming up in a month, there are signs of politics being involved with the DB. There is no need to bring politics into DB no matter what. The DB is a financial organization that represents Mongolia to the world, and if politics gets involved this would negatively affect our operations. This should be taken into account and we should respect the rights and benefits of the whole nation.
Secondly, to maintain its stability, a bank should support and fund reliable and profitable Government and non-Government operations and projects. But right now, we have the downside of only accepting and funding Government projects. In the future, this may negatively affect the DB. We are currently discussing funding profitable non-Governmental, private projects that promises to yield profit.
For example, operations at MIAT and the Fifth Thermal Power Plant, although not in included in the Government resolution, are sure to contribute to economic growth. But our assistance to them is limited by the policies and jurisdiction set for our Bank. In the future, I think the Government should relieve these limitations for the sake of the stability of the DB.

By B.BYAMBADORJ

The year 2012 marks the 90th anniversary of Mongolia’s mining sector, and it was celebrated, as we have reported previously, with the Mining Mongolia 90th International Open conference, held on May 9th and 10th at the Central Palace of Culture of the Mongolian Trade Union. The Mineral Resources Authority and Ministry of Mineral Resources and Energy organized it.
The aim of the conference was to introduce and present current mining companies and organizations to the public, and support their cooperation with each other. The mining companies, in addition to Mongolian administrative bodies, will discuss the difficulties they face and talk about ways to overcome them. Another important objective of the open forum is to connect investors with mining projects while also assisting growing businesses with new investors. The latest mining technology, equipment and innovations will also be discussed between the representatives of the mining industry.
D. Zorigt, Minister of Mineral Resources and Energy, led the opening ceremony. His speech generally focused on the high impact of Mongolia’s mining sector within both society and the economy and its inevitable growth in the future.
Zorigt noted that the mining sector carried a significant weight of the Mongolian economy since its establishment with the Nalaikh coal mine in 1922.

By DALE CHOI

Frontier Securities attended “Hong Kong as an Attractive Capital Raising Destination” Forum on 26th April, 2012 organized by Centillion Group and FIFTA of Mongolia. As a service to Mongolian companies, Frontier Securities interviewed some of the notable presenters asking specific questions that hopefully will be of interest for the companies.
Following is the brief interview with Andrew Wong, Managing Director and Global Head of Investment Banking, BOC International.
-Why has there not been a major Mongolian IPO-s since MMC in 2010?
-I think one of the primary reasons was related to the fact that the commodity prices were in general negatively affected by the weak world market and many natural resources companies wanted to wait until valuation recovers. Because of that, I think a number of Mongolian companies which were considering a major international IPO have postponed their plans. Last year not many large- sized Mongolian companies have pushed forward with their IPO plans.
I also think that bonds are easier sell than equity at the moment.
-Why should Mongolian companies consider raising capital in Hong Kong through BOCI?
-I think our firm has many distinctive features and, because of those, I think Mongolian companies that are contemplating of raising capital in Hong Kong should consider us.
First of all, we specialise in the Hong Kong market. Hong Kong/China is our only market basically and in fact it is our home market. We were established in Hong Kong 33 years ago. Mongolia is very much related to China as China is Mongolia’s largest trading partner both in terms of exports and imports. HK is the offshore centre of finance for China. Mongolia, China, Hong Kong. There is natural and logical synergy here.