Written in Mongolia and read by professionals
in over 160 countries worldwide

Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates


Moody’s Downgrades Mongolia’s Government Bond Outlook to Negative and Affirms B1 Rating

By Elena Fehrbach

Moody’s Investors Service has changed the outlook on Mongolia’s government bond from stable to negative. At the same time, Moody’s affirmed government’s issuer and bond B1 ratings, unsecured MNT rating at (P)B1 and the issuer’s short-term Not Prime issuer rating.

As part of the rating action, Moody’s has changed the outlook on the government-owned bond raised by the Development Bank of Mongolia (DBM) from stable to negative and affirmed DBM’s senior unsecured B1 rating and its senior unsecured MNT (P)B1 rating. DBM’s debt obligations justify rating at the same level as the government of Mongolia as DBM’s payment obligations carry a credit guarantee of the government. Continue reading

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Golomt Bank Introduces the American Express Card in Mongolia

By Elena Fehrbach

Jan. 24 – Golomt Bank, one of the leading banks in Mongolia, is introducing the American Express credit cards in Mongolia. The Bank has signed the cooperation agreement with American Express Company, an international financial services corporation headquartered in New York on issue of American Express credit cards in Mongolia. Initially, the cooperation has started back in 2006 when the American Express has chosen Golomt as an official partner in Mongolia, but now the cooperation is officially sealed by the agreement.

The agreement with Golomt is the part of American Express’s global business development program on establishment of the beneficial business relationships with the international and local banks globally. The choice of Golomt Bank by American Express is based on an extensive research of the banking sector and believes that Golomt Bank is the best partner in Mongolia based on the selection criteria. Golomt Bank has a leading position in the market for the customer service, online banking services and a variety or credit card and dual debit card services for Mongolian citizens living in Mongolia and abroad, as well as expatriates working in Mongolia. Continue reading

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Moody’s Outlook on Mongolian Banks Has Been Revised to “Negative”

By Elena Fehrbach

Jan. 22 – Moody’s Investor Services (Moody’s) has issues a revised rating for three Mongolian ban, downgrading them from “Stable” to “Negative”. The Banks under study are: Khan Bank, Trade and Development Bank and Xac Bank. Other than that, Trade and Development Bank’s baseline credit assessment (BCA) was downgraded from B1 to B2. Moody’s opinion about TDB’s rating downgrade is that the loan portfolio of this bank is too much overweighed against risky sectors, such as construction and mining. Moody’s has also affirmed TDB’s B1 senior unsecured bond and local currency deposit ratings based on assessment of TDB’s systematic importance being the second largest lender in terms of loans in the Mongolian Banking System.

Rating Rationale

Moody’s has commented that the rationale behind the ratings downgrade is that the banks remain vulnerable to deterioration is assets quality and high amount of borrowers against highly intensive changing operating environment. The industrial peculiarity of Mongolia also plays its role. Resource-based industry constitutes the significant part of the economy and due to boom-bust cycles characteristic to such sectors, the operating environment is highly volatile. Continue reading

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Mongolian Stock Exchange- a new securities investment vehicle in Mongolia

By Elena Fehrbach

Jan. 20 – 2013 was a very busy year for the Mongolian Stock Exchange (MSE) and resulted in a legal and structural reform being introduced to the investment community on 1 January 2014. The new Securities Market Law came into force on that day, marking a beginning of the new securities investment era in Mongolia. The adoption of the new Securities Law came straight after adoption of the revised Investment Law on 1 November 2013 that has replaced the controversial Strategic Foreign Investment Law. New regulations are targeting the attraction of the foreign investment into Mongolia by providing internationally-accepted best practices and platforms for investments.

Securities Markets Law

As the newest regulation, Securities Markets Law (SML) immediately became the major point of discussion and attention since January 1 this year. It took about 5 months to draft the Law with all the relevant regulations. The final document is a sophisticated framework introducing financial instruments and concepts which have never been practiced in Mongolia before, such as custody, differentiation between nominee and beneficial ownership, options, futures, depository receipts and warrants. Twenty-two tailored regulations have been designed for each component of the Law, such as dual listing, clearing and other relevant components. Continue reading

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Oyu Tolgoi Budget and Issues Settlement Update

By Elena Fehrbach

Jan. 13 – According to the announcement by Mr. D. Ganbold, Director at Erdenes Oyu Tolgoi, a state-owned enterprise that holds state’s share in Oyu Tolgoi project, the financing of the second stage of Oyu Tolgoi development could be resolved by the end of January. The estimating financing of the second and the main stage is approximately 6.6 billion USD. The negotiations of the financing stopped in October 2013 when the Government of Mongolia and Rio Tinto entered into a dispute over a number of financial and operational issues. Continue reading

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Mongolia’s Policy on the Minerals Sector is Under Final Discussion

By Elena Fehrbach

Jan. 5 – The Policy on the Minerals Sector has been first introduced in July 2013 as a legal guideline on the main principles of operation in the minerals sector approved by the government. Since July, the Policy undergone a number of revisions and is now well-shaped for the final discussion by the Parliament. It should be noted, that the Policy is not an equivalent or substitute to the Minerals Law, but a leading document showing country’s direction in the minerals sector.

As for the Minerals Law, the new draft of the Law has been introduced to public approximately year ago and became a reason for a serious criticism on behalf of mining companies and potential investors. The first draft of the Law had a series of unfavorable ownership and operations conditions treated as “unacceptable” in some cases. The Government’s reaction on the criticism was a prompt promise of further work on amendments that would involve specialists from the industry involved in the minerals sector operations directly or indirectly, such as representatives of mining companies, law firms and financial institutions. Continue reading

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Progress on Oyu Tolgoi Negotiations with the Mongolian Government

By Elena Fehrbach

The dispute between Rio Tinto and the Government of Mongolia regarding the development of Oyu Tolgoi, the biggest copper mine in the world is still ongoing. As noted by the Head of Communication of Turquoise Hills, a Mongolian subsidiary of Rio Tinto, the dispute on the remaining issues of conflict can be resolved before the end of 2013. Out of 30 issues in the negotiations agenda, at least half have been already solved. The issues cover aspects related to the budget for the underground mine expansion, management and control structure, confirmation of the spending related to the 1st stage of the project and other issues. Continue reading

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Mongolia Signs MoU with Securities and Future Commission of Hong Kong

By Elena Fehrbach

Representatives of the Securities and Future Commission of Hong Kong (SFCHK) visited Mongolia and signed the Memorandum of Understanding (MoU) with the Financial Regulatory Commission of Mongolia on mutual cooperation and information exchange. Hong Kong delegation was headed by Mr. Carlson Tong, Chairman of the Securities and Futures Commission and Mr. Mark Stuart, Head of Enforcement of the Commission. Continue reading

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Dezan Shira & Associates provide a range of services for companies looking to undertake foreign direct investment into Asia, These include corporate establishment, accounting, tax, payroll, audit and due diligence. To learn more about the firm, please contact one of our specialists at mongolia@dezshira.com, download our corporate brochure or visit at us www.dezshira.com

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