S.Sodkhuu, the director of MSE: If we took back our Oyu Tolgoi … we could have raised several billion US$ like Ivanhoe…

Oct 21 • Companies, Economy, Finance, Government, Interview, Mining • 3416 Views • 4 Comments on S.Sodkhuu, the director of MSE: If we took back our Oyu Tolgoi … we could have raised several billion US$ like Ivanhoe…

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Photo courtesy of www.gogo.mn

Mr. S.Sodkhuu, Director of the Mongolian Stock Exchange, has discussed with a journalist from Udriin Sonin.

Q: What is the situation now in Mongolia for stock exchange, the “engine” of the market economy?

S.Sodkhuu: … Capital market has 600 years of history, but we don’t need to wait for another 600 years to develop. We have position to avoid negative experiences and take good examples from it. At the moment 12 shareholding companies were established in classic way and operating in the market. Just few days ago, “Monfresh”, one of the largest food company, went into public. I can raise several billion US$ when we establish small office on our mining projects and announce to the world. If we do so, world capital market will be interested in us. In order to reach the world level, we need world class share-holding company…

Q: Some economists say that if everyone opens automatically account at the broker dealer companies according to their state registration #, there will be revolution in economy. De Sato said that unregistered capital of poor people is much bigger than we help them. Does MSE has capacity to realize this huge capital?

S.Sodkhuu: I proposed it three years ago. We waste so much money to register people of Mongolia. If we offer them account to open, then it will be much easier. “Grant of Motherland-Nation” is the basement of capital market. Over 600 thousand people from Mongolia and foreign countries registered to open account. Actually, everyone could have account when the Investment Voucher distributed. But due to the black market and closed way of transaction, only 1.2 million people opened their account. All these were revealed during the inspection that was held in last two years. Mongolians started to understand importance of shares. 75% of US citizens have account at NYSE. But we are 2.6 million only. We all can have account.

Q: Can children money be distributed through stock exchange. Some people are still hesitating about its fair distribution.

S.Sodkhuu: …Excellent idea. I proposed it also when children money was distributed. Not only children money, but if all social welfare funds collected at the Stock Exchange, then there will be big fund. Capital can be invested in strategic projects. There are many people understands capital market and actively dealing with its trade. On the other hand foreigners are afraid of Mongolians to learn in capital market. They are afraid of losing their profit to Mongolians.  People who has some money enters into Mongolia and demonstrate that they are for Mongolians and for the well being of Mongolia and tries to sign stability and investment agreement. I don’t believe in foreigners to develop Mongolia. Mongolians will develop Mongolia…
…In developed countries GDP is about 50,000 US$, but we shall set forth such target. We have lots of chance to attract capital from the world capital market. We have deposits, land and meat…
We shall improve living standard based on it. We can manage price only by increasing our GDP and create reserve. Otherwise, we cannot do anything to tackle price when it is high in the world market…
Q: During the recession in 1920s, an American economist said that single dollar that was not distributed through stock market is the enemy of the state. How much of GDP went through stock exchange?

S.Sodkhuu: When I say about it, it is uncomfortable for me, because it is like boasting myself. Three years ago the market capitalization of the stock exchange was 50 billion MNT. It is over 700 billion MNT now. It is about 20% of GDP. I think that it will reach 50% soon.

Q: If it reaches 50% of GDP, then there will be real increase of industry?

S.Sodkhuu: Value of MSE is the evaluation of the Mongolian market. This 700 billion MNT says that how Mongolians are eager for the market economy and it is good example that Mongolia is changing. I think that it will reach over 2 trillion MNT soon.
9 million US$ is small money

Q: What is the latest development of your project with South Korean Stock Exchange?

S.Sodkhuu: I signed cooperation agreement with 5 tigers of Asia. We are getting closer to Japanese, South Korean, Hong Kong, Taiwanese, Singaporean and Shanghai stock exchanges. Stock exchange is the arena of the world trade. But MSE must not be weak to host this trade. We are implementing joint project with South Korean side. We will bring stock exchange into the world class level and have national human resource in stock exchange.

Q: How much money is required for the reform?

S.Sodkhuu: 9 million US$. The State Great Khural and Government of Mongolia is paying much attention on it. The new Government replied to bring the proposal again.

Q: It is small money, it is even three times smaller than goat money.

S.Sodkhuu: Yes, it is small money actually. But it might sounds big for some people. But it is small than what we will achieve. We will arrange trade of world class corporations. We need to move towards world standard. We always seek money from budget or grant aid. We have many ways, some part of MSE can go into public to the world.
… If we took back our Oyu Tolgoi after its exploration and establish our own company to go into the world market, we could have raised several billion US$ like Ivanhoe…
Q: Can MSE support itself?

S.Sodkhuu: It is no longer dependant on budget. It can support itself now. Even it paid over 50 million MNT as tax.

Q: When IPO is offered, foreigners buy it. We cannot limit their right. What is the method to allow Mongolians to buy share?

S.Sodkhuu: A provision of selling 10% of the strategic deposits share at the MSE. If mining projects are into exploitation, MSE will organize special trade for Mongolians.

Q: There are not few people makes profit on buying share of Ivanhoe Mines. How to attract all citizens into the capital market?

S.Sodkhuu: People need to learn in it. But Mongolians are opening many accounts. It is pity to play on the profit of Ivanhoe Mines share difference. Ivanhoe Mines is registered in Canada. This company is raising money on our Oyu Tolgoi and suing this money to invest in Mongolia. They are raising money on our property and investing us and make profit. If we took back our Oyu Tolgoi after its exploration and establish our own company to go into the world market, we could have raised several billion US$ like Ivanhoe did.

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4 Responses to S.Sodkhuu, the director of MSE: If we took back our Oyu Tolgoi … we could have raised several billion US$ like Ivanhoe…

  1. copper says:

    I don’t think Mongolia wants to follow Venezuela’s path. No rational investor is willing to invest in Venzuela these days. They backed away when oil prices were still high. Now that oil prices have tanked, they are doomed!

  2. Ivan Investor says:

    Mr. Sodkhuu’s suggestion that Mongolia would not honor the property rights of Ivanhoe Mines investors could be very dangerous. If Mongolia demonstrated no respect for property rights, would the world be willing to come to their rescue if China were to “take back” Oyu Tolgoi from Mongolia? Disrespect for the rule of law by a country that is so powerless without the support of law-abiding people around the world is incredibly naive. The irony is that this guy is the director of their stock exchange. Good luck attracting capital under his policies!

  3. Arthur Krauser says:

    I’m not an expert on Mongolian business but the head of the MSE ought to realize that Ivanhoe and Rio Tinto are willing to give the GOM 55% of the revenues of OT for doing absolutely nothing but granting a contract for the mine to be opened.

    What a deal.

    Some Mongolians appear to be a century behind the “tigers” of the Asian economies.

    These people appear to feel victimized by the mining companies when their refusal to agree on mining contracts has kept their country poor.

    They just do not know the reality of a growth oriented economy for they have never expwereinced one.

    They are poor and don’t appreciate what mining revenues could really do for the nation even with Western companies doing the mining.

    In a real sense their economic perspectives are primitive.

    If only they could trust Ivanhoe and Rio Tinto to deliver huge revenues to their homeland.

    But they afe too inexperienced to trust and definitely not expereinced enough to run these large mining projects.

    It is an amazing phenomenon full of fanciful hopes and almost delusional negativity towards the mining companies.

    Fortunately PM Bayar and the President of Mongolia do appear to appreciate the rewards of an OT cotract with Ivanhoe and Rio Tinto.

    Have to see what develops.

  4. Narangerel says:

    There are many bad examples of Ivanhoe and Rio Tinto on environmental issues. Mongolia has precaution about North-South dilemma. So far North was only exploiting the natural resources of the South(developing countries). USA has very little environmental concern on protection of the environment, because it was utilitarian point of view of natural resources use (example USA Forest service). I think, we right on not in rush with mining, there is no good examples exist, ever even in developed countries, including USA.

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