May 7 – One of the most important laws in Mongolia, a Strategic Foreign Investment Law (SFIL) has been approved by the Government. The amendment is effective from 19 April 2013.

Article 4.7 was amended and now stipulates that the Parliament will be an approval authority for transactions where non- Mongolian State- owned enterprises initiate acquisition of more than 49% of the issued shares of a Mongolian entity. The current amendment no longer includes deals initiated by private investors that since now do not require Parliamentary approval and 100 billion MNT (equivalent to approximately 70 million USD) threshold in its entity.

Deals initiated by private investors still require formal approval by the Cabinet or the Ministry of Economic Development, since the acquisitions are within the scope of the SFIL.

The Regulation to the SFIL has been approved on 2 March 2013 and made officially available for review by the business community in Mongolia on the same date as approved SFIL, 19 April 2013. Though the Law undergone a number of positive amendments since it was first introduced on 17 May 2012, some areas of concern still present in the Law and require further work and clarification. But the overall investment attitude in Mongolia has gradually started to recover hoping to get the legal environment settled providing the encouraging investment opportunities.

May 6 – Followed by the discussion in the Parliament, the decision has been made to increase the average salary rate from 140,400 MNT to 192,000 MNT (approximate equivalent to 130 USD). This increase marks 36.7 percent growth from the previous level.

The decision is still to be approved by the Prime Minister. The minimum monthly wage must be reviewed and increased every 2 years, in accordance with the Labor Law of Mongolia. Last time minimum monthly wage has been amended on 4 April 2011. This year’s review is already overdue, probably partially due to required approval of the actual increase rate. Different authorities in Mongolia were suggesting different amounts ranging from 154,440 MNT to 239,400 MNT. The compromise of 192,000 MNT has been reached at the end of discussion.

The Confederation of Mongolian Trade Unions was actively involved in this process aiming to increase the minimum monthly wage rate and subsidies for Mongolians.

May 5 – The Government of Mongolia has approved 8 percent interest rate for long- term housing loans. The duration of the loan can be up to 20 years for the purchase of both old and new houses and apartments with the total area not more than 80 square meters. The compulsory condition is the provision of deposit in the amount of 10 to 30 percent of the purchase amount.

The Minister of Economic Development and the Minister of Construction and Urban Development has received responsibility for implementing and monitoring the terms of the loans issued by the local commercial banks.

The new loan conditions are implemented to encourage and improve the housing situation in Mongolia and Ulaanbaatar in particular, where 40 percent of the population is still living in ger districts without connection to the central heating and water supply. The Government has also discussed other possible solutions for the housing issues in Ulaanbaatar, among which, the Rented Housing Program, providing 1,300 apartments to households which are not able to afford purchasing own apartment.

May. 2 – The Government of Mongolia is expecting the fuel prices in Mongolia to stabilize due to diversification in the quantity of fuel suppliers. The current situation in Mongolia is almost 100 percent fuel dependence from Rosneft, one of the key fuel producers in Russia. Such direct dependence causes unexpected fluctuations in fuel price due to company’s corporate and regional conditions. The Deputy Minister of Mongolia is discussing the amendment to the fuel purchase agreement allowing Mongolia to buy fuel from Rosneft based on international market prices.

To diversify and strengthen fuel suppliers’ options, Mongolian government has started negotiations with fuel suppliers from China, South Korea and Belarus. The fuel purchase agreements are expected to be signed between China Oil and Mongolian fuel importers, such as NIK, Shunkhlai and Magnai Trade in the nearest future. Negotiations also involve South Korean fuel suppliers, such as Hyundai and SK Energy.

The price of crude oil exported from Mongolia to China will directly influence the fuel purchase price by Mongolia. The main crude oil producer in Mongolia is Dachin-33 company, it is named after the oil deposit in operation. According to the Ministry of Mining, there is no any serious indication that the oil price may rise soon, allowing to import fuel from China at stable price in the short to medium term. Due to this, the retail price for fuel in Mongolia may even decrease from next month.

Apr. 25 – The main reason for amendment of the current Law on Small and Medium Enterprises is a lack of legal support for herders in Mongolia. The aim of the amended Law is to recognize the herders as small and medium enterprises allowing and supporting the animal husbandry business to become economically viable for herders. A draft of the new Law has recently been submitted to Z. Enkhbold, the Speaker of the Parliament.

The members of parliament who worked on the draft of the Law consider the herders’ economical situation to be weak in terms of legal policies and regulations supporting herders’ vital farming activities. The draft bill initiated by the group of lawmakers will be a huge help for herders to operate independently and be involved in domestic and foreign projects.

Apr. 20 – Total 2013 year budget for urban infrastructure development including electricity, heating, potable water supply and sewage is 240 billion MNT (equivalent to 171 million USD). The funds will be sourced from both the State and Ulaanbaatar city budgets. In the interview to journalists, Ts. Bayarsaikhan, Minister of Construction and Urban Development informed that 17 new apartment complexes will be built this year, and the next year budget is expected to be approximately the same budget number as this year. The first apartments complex is planned to be open soon this year. The Ministry is also planning to build housing projects aimed for certain categories of people, such as senior aged people or young families. The housing project for senior aged people will be located in the southern part of Ulaanbaatar, the area with cleaner air compared to other parts of city.

Starting from 2003, 29,000 citizens have taken long- term apartment loans for an accumulated amount of 603 million USD. The Ministry is pursuing the adoption of the legal policy that would allow to keep the term of loan at 20 years and the compulsory prepayment of 10-30 per cent of the apartment price.

As noted by Ts. Bayarsaikhan, the Ministry will also support the local construction materials market, helping domestic producers to provide cement and concrete produced in Mongolia.

Apr. 18 – Oil shale in Mongolia has been on the radar of technical experts and investors for a number of years already, but the actual potential of oil shale development in Mongolia has never been widely discussed. Preliminary “greenfield” estimates assume 800 billion tonnes of oil shale are available in Mongolia. The preliminary estimate was completed in 1990 based on exploration of about 19 per cent outlined oil shale area. Though the final amount of oil shale is not defined yet, it is clearly a promising opportunity for Mongolia to establish a fuel independence.

According to the local media, Petroleum Authority of Mongolia has received 3 proposals/ pre- feasibility studies from Mongolyn Alt Corporation (Mongolia), Genie Oil and Gas (USA) and Total (France) on development of oil shale in Mongolia. According to pre- feasibility studies, the cost of production of 1 liter of high quality diesel (Euro-4 Standard of European emission standard for light commercial vehicles) is about 350 MNT. Selling price per 1 liter of such diesel is set to maximum 1,000 MNT. The main requirements of potential producers are the business- friendly environment, compliance to health and safety regulations and acceptance of modern production technologies.

According to O. Erdenebulag, Deputy Minister of Mining, the Ministry is planning to establish a production contract terms to make it possible for Mongolia to use locally- produced fuel within next 2 years. The proposed area for pilot plant is most likely to be in Tuv or Dorngovi provinces. It is estimated that approximately 4 billion USD of investment required for mining development and processing plant construction. If successful, oil shale project will create 5,000 new jobs and bring 850 million USD in taxes to the State budget annually.

Apr. 15 – Ch. Saikhanbileg, Minister of the Cabinet of Mongolia met Francisco J. Sanchez, the Under Secretary for International Trade of the U.S. Department of Commerce to discuss economic and trade cooperation between 2 countries. During the meeting, the Minister noted that Mongolia is willing to widen the economic relationship between Mongolia and USA. One of the important steps taken by the Ministry recently is introduction of the amended Strategic Foreign Investment Law creating encouraging investment opportunities for private companies.

One of the proposals discussed during the meeting is the proposal to cooperate on development of Tavan Tolgoi coal mine made by privately owned US- based Peabody Energy Corporation. Peabody Energy is one of the major global coal mining companies having 28 coal projects in USA, Australia and Mongolia.

The Minister also focused on Mongolia’s initiative to collaborate with US companies in the field of development of shale oil in Mongolia.

Apr. 10 – Agricultural Stock Exchange has been officially launched in Mongolia on 5 April. At the beginning, the Stock Exchange will function in a testing mode trading cashmere in Sukhbaatar, Khentii and Dornod provinces of Mongolia. On an opening ceremony, O. Magnai, director of the Agency for Fair Competition and Consumer Rights of Mongolia noted, that the launch of Stock Exchange is a big step forward bringing the agricultural sector to a new level, a truly game changing point for the agricultural sector of Mongolia.

O. Magnai focused on the fact that the Stock Exchange will keep the purchase and sale prices on an official, open and public level which does not allow separate private individuals setting up different prices. Official pricing will prevent inflation of prices and artificial demand.

It is expected that by 2014 the Stock Exchange will be equipped with up to date software which is not currently in place due to testing mode of operation.

Apr. 10 – The new draft of the Securities Law has just been introduced for the discussion at the spring session of the Parliament which started on April 5. The suggested draft has been in the process of revision for more than 1 year and is expected to become a game- change regulation allowing dual listing.

According to Mr. Altai Khangai, the Chief Executive of the Mongolian Stock Exchange (MSE), the adoption of the revised law could potentially bring the MSE’s stock capitalization to almost 40 billion USD value compared to today’s 1.2 billion USD capitalization, as a result of much better liquidity. He emphasizes the importance of the actual legal regulation being in place, as more and more companies with Mongolian assets listed on international stock exchanges are looking for listing on MSE as well.

Based on the performance of stock exchanges operating in Asia, MSE has the worst performance rate, showing the benchmark MSE Top 20 index falling 11 percent this year. The new regulation is expected to help Mongolia to revitalize the foreign investment situation which currently demonstrates the 40% drop in the amount of foreign direct investments (equity) compared to the same period in the previous year. Such significant decline in the FDI level in Mongolia might be the consequence of fast introduction on the Strategic Foreign Investment Law in May 2012 which is currently in the process of improving amendments approval.

If implementation of the new Securities Law is successful in bringing the total capitalization of the MSE to 40 billion USD, as assumed by the Mr. Altai Khangai, MSE will be the 16th largest stock exchange in the Asia Pacific region following Vietnam.