Download - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011
MONGOLIAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Political Outlook
The outlook for the domestic political scene is
stable, and the president, Elbegdorj Tsakhia
and, prime minister, Batbold Sukhbaatar will
maintain the Mongolia’s relatively liberal social
and economic policies, as well as its multilateral
foreign policy stance. Mongolia’s
foreign policy will continue to be based on its
close relationship with its two neighbors,
Russia and China, as well and developing
close relationship with its “Third Neighboors”,
the US, Japan and Western Countries.
These ties have been strengthened by a series
of bilateral visits with the Russia, China and
Japan and other countries. Mongolia has also
signed agreement on setting up state owned
JV of Mongolia and Russia, Dornod Uran” to
extract and mine uranium resources. Mongolia
also has significant presence of Western
capital in the form of investment by Ivanhoe
Mines and Rio Tinto in its masive Oyu Tolgoi
copper and gold project in South Gobi region.
There are no immediate threats in North East
Asian region, which Mongolia is located,
except an issue of North Korea.
Mongolian peacekeepers also participate
actively in international peacekeeping efforts in
such countries as Chad and Sudan, as well as
participating in military operations of US-led
coalition in Iraq and Afghanistan.
As well as seeking close relationship with its
two neighbors, Russia and China, Mongolia
will seek to have balance by developing close
strategic relationships with US, Japan and EU.
Taking notice of its overreliance from China on
exports of commodities, Mongolian
Government will seek to build a new railroad
route to reach markets of Japan and South
Korea via Russa.
Economic performance
Mongolian economy expected to have grown
at a rate of 8% in 2010 and as of September
2010 Industrial production grew at annual rate
of 15%. According to Bank of Mongolia,
Mongolian Official Foreign Currency Reserve
hit $2 billion USD at the end of 2010.
In 2010 Mongolia made a foreign trade with
132 countries of the world and total foreign
trade turnover reached 6177.1 million USD,
from which export stood at 2899.2 million USD
and imports at 3277.9 million USD. The total
foreign trade turnover increased by 53.5% and
exports increased by 53.8% and imports
increased by 53.3% respectively.
Total number of unemployed people who
registered with relevant authorities as of end of
December 2010 stood at 38.3 thousand
people.
Consumer price index has increased by 13.0%
compared to the same period last year in
December 2010. The average yearly inflation
rate was at 10.1%.
In 2010 Government of Mongolian began to
hand out 10,000 tugriks to each citizen every
month and beginning from January 1, 2011 it
will hand out 21,000 tugriks to each citizen,
which will boost domestic consumption.
Mongolian National Tugrik (MNT) was the best
performing currency of the world in 2010 and it
appreciated by 16% and stood at 1,257.18
against a USD. The authorities also agreed to
allow greater exchange rate flexibility, to
strengthen the fragile banking system, and to
improve the targeting of social spending.
Investment in mining has increased a lot.
The outlook of economy in 2011 looks very
bright and Mongolian economy is expected to
grow by 12% in 2011 according to a forecast
by Economic Intelligence Unit. Cash handouts
to citizens will increase domestic
consumption, but will also push inflation
higher.
As for copper, the price is projected to remain
at high levels (more than 9,000 USD per ton)
during the forecast period, which will stimulate
production. İn 2010 coal became the largest
export commodity in terms of value and it is
expected to remain same in 2011.
Prospects for development of new mines
brightened considerably in October 2009,
when the government signed an agreement
with an international mining company to exploit
the Oyu Tolgoi copper and gold deposit.
Investment in this project is expected to total
$6 billion production is projected to start in
2013. The long-awaited Oyu Tolgoi agreement
and subsequent construction will raise investor
confidence and have knock-on effects on
other parts of the economy.
Moreover, the government is considering
proposals to mine the large Tavan Tolgoi coal
deposit with international partners and
distribute share vouchers after organizing it as
Joint Stock Company. The valuation of Tavan
Tolgoi deposit by international experts range
from 30-40 billion USD and it has 6.5 billion
tonnes of coal reserve. FDI inflows into mining
are expected to rise significantly over the
forecast period.
Investment is expected to increase further,
driven by Oyu Tolgoi. Also, Mongolian
Government is planning to build a railroad
from Tavan tolgoi deposit to Russia via Gobi
Desert and Eastern Mongolia with a plan to
transport it to Russian Pacific ocean ports to
Japan and South Korea.
Moreover, after abolishment of 68% Windfall
Profits Tax on gold and copper takes its effect
beginning from January 1, 2011, the gold sold
to Central Bank and related tax revenue is
likely to increase, because gold industry will
come out of shadow.
Also, uranium mining and extraction is likely
start in 2011.
Information obtained from the Exchange.
Key Information Contacts
National Statistics Office www.nso.mn
Bank of Mongolia www.mongolbank.mn
National Development and Innovation Committee www.ndic.gov.mn
PAGE 95