Delay in Oyu Tolgoi copper production will have severe macroeconomic effect

At a press conference on Monday ‘The Report: Mongolia 2013’ was unveiled at the Kempinski Hotel Khan Palace.
The Report: Mongolia 2013 sheds light on Mongoia’s foreign investment laws that are causing current concerns. The Report also provides key information on the state of Mongolian infrastructure, capital and expertise to investors.
Regional Editor Paulius Kuncinas said that Mongoia’s exports of coal, copper and iron should rise on the back of a favorable global outlook for commodities.
“This should help stabilize government finances, whilst increasing foreign reserves and also play a part in improving fragile investment confidence. The most significant milestone in 2013 remains the launch of commercial production at Rio’s copper mine, set to become the second largest in the world.”
On the question on TavanTogloi and Chalco during the press conference, Peter Markey of Ernst & Young commented: “The heart of the TavanTolgoi and Chalco problem is that they don’t have the money at TavanTolgoi that Chalco had paid.”
He notes that although it may seem that this responsibility lies in Mongolia’s previous Government, he highlighted that:“From an outsider’s perspective, a Government is a Government and the Government of Mongolia must have some kind of continuity. 
TheProblem at TavanTolgoi was that the Government regarded it as an extension of its treasury department. When it has some cash, it [the Government] said ‘give it to us.’ What we need to see is proper structures in place.”
Paulius Kuncinas stated: “I don’t want to take sides in the renegotiation. It has happened in other countries. It is taking place in Indonesia it did take place in Papua New Guinea.”
He emphasizeson the risk that every plan or forecast assumes that the copper production will start –even the reason the USD 1.5 billion was such a big deal was that everybody assumes that copper production will not be suspended for any reason. If it does, it will have “severe macroeconomic effects on currency and capital flows”.
The Report: Mongolia 2013 is the second in-depth and informative analysis report published by the Oxford Business Group (OBG) on Mongolia. D. Achit-Erdene from Mongolian International Capital Corporation (MICC), Paulius Kuncinas of Oxford Business Group, Jim Dwyer of Business Council Mongolia, Peter Markey of Ernst & Young and B. Enkhbat of Khanlex Advocates were at the press conference to answer questions.


Mongolia to have an oil refinery in the next three years

Mongolia to have an oil refinery in the next three years
Each year, over a million tonnes of oil come to
Mongolia from refineries abroad
Annually, Mongolia imports approximately 1.1 million tonnes of oil products, of which 98.2 percent is from Russia, 1 percent from China and 0.6 percent from S. Korea, spending approximately USD1 billion. 60 percent of the imported oil products are sold wholesale and 40 percent is sold retail.
As of 2011, Mongolia’s consumption of oil products reached 1.050 million tonnes, of which 32 percent were petroleum, 2.27 percent—fuel for airplanes, 60 percent-diesel fuel, 1.7 percent- fuel oil, 3.8 percent –bitumen and 1.0 percent- liquefied gas. Growth of oil products consumption of any country directly connects with growth in GDP. According to a study of the recent decade, 1 percent growth of Mongolia’s GDP resulted in a 1.0-1.35 percent growth of fuel consumption. To estimate GDP to be an average of 14 percent in 2013-2016, annual fuel consumption is likely to reach 1.7-1.8 million tonnes.
For Mongolia, that depends almost entirely on one country for its fuel, it is necessary to establish an oil refinery in order to eliminate oil dependence and maintain economic security. Does Mongolia have sufficient oil extraction to justify establishment of an oil refinery? How much oil reserve products does Mongolia have?
Mongolia became an oil exporter, exporting 351,500 tonnes in 2011 and extracting 3.38 million barrels of oil by 2012. It is estimated that it has the potential to extract 1.5 million tonnes of oil by 2015. Income from oil to the State Budget are increasing year by year. In 2012, Tgs104 billion came to the State Budget from oil. It was planned to bring Tgs14 billion in 2013 and Tgs300 billion in 2016 from oil to the budget. Mongolia has been registered to have an identified exploitable reserve of 35-42 million tonnes of oil. Therefore, it is intended to establish a refinery with the capablity of processing no less than a million tonnes of oil per year.
It requires taking 3-4 years and USD680-750 million to establish an oil refinery which is capable of processing 2 million tonnes oil a year.
Mongolia has the potential to extract
1.5 million barrels of oil by 2015
“Mongolia’s oil extraction reaches production levels; therefore, we seek to establish an oil refinery which can provide 60-70 percent of the domestic oil supply within the next three years,” said G. Olziiburen, acting chief of the Oil Authority. The government set up a working group on establishing an oil refinery and reflected it in the 2013 State Budget as a relevant expense to work out a Feasibility Study for the refinery. A joint working group of the Ministry of Mining, Ministry of Foreign Relations and Ministry of Economic Development is working on this issue.
To build a refinery which is capable of processing   million tonnes of oil, it will require USD680-750 million. To build a refinery with 1.5 million tonnes capacity, the government needs to spend USD550-650 million.


Wu Bangguo Arrives in Ulan Bator for Official Goodwill Visit to Mongolia

Wu Bangguo Arrives in Ulan Bator for Official Goodwill Visit to Mongolia

At the invitation of Zandaakhuu Enkhbold, chairman of the Mongolian State Great Hural, Wu Bangguo, chairman of the Standing Committee of the National People's Congress of China, arrived in Ulan Bator on the morning of January 30, 2013 for his official goodwill visit to Mongolia, his second to the country in 16 years. Before the visit, Wu attended the 21st annual meeting of the Asia-Pacific Parliamentary Forum in Vladivostok, Russia.
In the afternoon after his arrival, Wu held a meeting with Enkhbold in the Government Palace of Mongolia. Wu said that since China and Mongolia established diplomatic relations over 60 years ago, the bilateral relationship has always featured friendship and cooperation. In particular, recent years has seen frequent exchange of visits between high-ranking officials of the two countries, yielding tangible results in all fields of exchange and cooperation. Since China and Mongolia forged a strategic partnership in 2011, bilateral relations have entered a new stage of development. China appreciates Mongolia's long-term support on issues of Taiwan, Xinjiang Uyghur Autonomous Region, and Tibet. China respects Mongolia's sovereignty, independence and territorial integrity, as well as the path of development the Mongolian people have chosen for themselves. Wu stressed that China will always view and develop relations with Mongolia from a strategic perspective, and is willing to work with Mongolia to enrich the connotation of their bilateral ties. He put forward a four-point proposal to further ties. Firstly, China and Mongolia should consolidate the political foundation of their relations through strengthening their strategic mutual trust, continuing to support each other on issues concerning their core interests, strengthening communication and coordination on major issues, and carrying out close cooperation in law enforcement and non-traditional security areas. Secondly, the two countries should deepen mutually beneficial cooperation in the three important areas of mining, infrastructure construction and finance, and push for new achievements in economic and trade cooperation, so that the economic foundation of their relations can be strengthened. Thirdly, the two countries should consolidate the social and cultural aspects of their relations by intensifying people-to-people exchanges between their youths, media and local governments in a bid to strengthen mutual understanding and consolidate their traditional friendship. Fourthly, China and Mongolia should also beef up their cooperation on multilateral issues and continue to support each other in global and regional issues to safeguard their common interests. China supports Mongolia's bid to be an Asia-Pacific Economic Cooperation member and is willing to help Mongolia become better involved in regional cooperation in Northeast Asia and have stronger collaboration with Shanghai Cooperation Organization members.
When it comes to relations between parliaments, Wu stressed that inter-parliamentary exchanges are an important part of state-to-state relations. In recent years, China's National People's Congress and the State Great Hural of Mongolia, the two countries' parliaments, have carried out close and friendly exchanges, adding new contents and injecting new forces into the bilateral relations. In addition, Wu expressed his hopes that the two legislative bodies should further strengthen communication at all levels, share experiences in governance and democratic and legal practices, and create a legal environment conducive to pragmatic cooperation.
For his part, Enkhbold extended his warm welcome to Wu, stating that Wu's visit will have an important and far-reaching impact on the relations between the two parliaments as well as the two countries. He said that the Mongolian people and the Chinese people enjoy profound traditional friendship. Developing friendly and good neighborly relations with China has been the common stance and strategic choice of the Mongolian government and Parliament. The State Great Hural of Mongolia is ready to strengthen friendly relations with the National People's Congress of China, push forward cooperation with China in the fields of politics, trade and economy, and humanity, as well as on global and regional issues, and contribute to the comprehensive development of China-Mongolia relations.
After the end of their meeting, Wu and Enkhbold signed the Memorandum of Cooperation between the National People's Congress of the People's Republic of China and the State Great Hural of Mongolia. They also attended the signing ceremony of agreements in economic and technology cooperation between the two governments.

Source:Ministry of Foreign Affairs of People's Republic China.

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