Misunderstood Mongolia

Mar 30 • Government, Laws, Mining, News, Opinion, Politics • 2492 Views • 11 Comments on Misunderstood Mongolia

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As being one of the few sources to provide Mongolian business related news to international audiences in English we strive to be independent and unbiased.

We understand that news can affect analyses of analysts around the world, public opinions, thus, result a correlated effect on the capital markets. However, at Business-Mongolia.com, our integrity and our duties to our readers come first. Therefore, we will keep publishing our unbiased and independent news from the closest sources of an event or a case.

Despite our effort, some international news agencies are giving wrong signals about the country’s mining and investment sector. We regret that some of the companies in the country also pouring oil on the fire.

There was never an official statement or government stance to nationalize or expropriate the foreign or domestic owned mines and properties. Mongolia is an example democracy, and a developing nation with a free market. It needs all the help it could get to become a well governed and prosperous state being sandwiched between two giant powers.

It is embedded in the Constitution of Mongolia that all the reserve and resources /underground wealth/ belong to the people of the country. License is merely a tool or a permission to develop and extract these if the government believes it is economically profitable to the country. Economic profitability is the base of all the investment and commercial transactions. International investors and know it, we understand it.

The Strategic Investment Law is under review after receiving enormous amount of scrutiny and criticism from both international and local investors and business people. The message from the government is clear – we want to support SMEs, and limit foreign state-owned enterprises to dominate Mongolian market. It is an strategic decision, and it should not be underestimated or misunderstood.

The BBC, as one of the most global news agencies in the world reports on many issues and events of the country. The last news titled “Dividing up Mongolia’s mining riches from Oyu Tolgoi” mentioned the comment regarding resource nationalism by Cameron Mcrae, CEO of Oyu Tolgoi LLC. Then it asks the opinion of Gee, a Mongolian rapper. Gee, probably one of the most patriotic rappers in the country had an easy answer “We will not gain” – referring to the ordinary citizens of the country.

The international media ignores the fact that 34% of Oyu Tolgoi which belongs to the Mongolian shareholder – Erdenes Oyu Tolgoi LLC, a state-owned company does not come as a free-carry. Yet accepted that, the cost overruns, lack of proper explanation, and 4 time-champion Feasibility study that has been delayed for another year is what puts pressure on the Mongolian government from the people. It seems like a debt-trap, after it involves international financial and development institutions and commercial banks to get 4 billion USD to spread the risk on phase-II development

Oyu Tolgoi LLC that sometimes referred as a copper unit of Rio Tinto PLC by international media has been consequently failing to win the hearts of the general public. Then, it blames it on the government for spreading wrong message about the company and demands for an apology letter on the Oyu Tolgoi LLC shareholders meeting last month from the government ministers.

The 2013 Technical Report released this week was a proof that there had been hidden costs after it stated a 5.1 billion for second phase of the mine’s development excluding the power plant and concentrate expansion. Some analysts from international companies had released similar opinions.

Mongolia needs foreign investment to prosper in partnership. Also, it needs international agencies and institutions such as World Bank to strengthen their knowledge on governing and managing its’ forthcoming wealth. Both of the parties have to work hard to resolve the outstanding issues and get on with the business.

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11 Responses to Misunderstood Mongolia

  1. Ron Biller says:

    To The Editor:

    Since 2001,I have had a large investment in Ivanhoe Mines/Turquoise Hill Resources. I am not sure you are aware, that currently, in addition to Rio Tinto, there are over 174 International Banks and Financial Institutions from all over the World, representing millions of investors, invested in Turquoise Hill Resources. These are generally the largest institutions from every major country. I assume that most of these investors are like myself, in that we have been paying attention to all of the comments and actions by your news media, but more importantly by your governmental representatives. You may not have intended to be very accusatory and inflammatory, but that is the way I have viewed most of what I read from Mongolia. Your commentary has suggested, lying, cheating, stealing and bribery. You have frozen bank assets, you have negated licenses and prevented key employees from leaving your country. All the while billions of dollars are being invested and many of your people have become and will become wealthy. Since 2001, my investment has deteriorated significantly due to the continuous negative Mongolian rhetoric. Most of what emanates from Mongolia seems to be very negative, maybe this a cultural thing, maybe you are, in general, paranoid about doing business with the rest of the world. International business must recognize the value and importance of contracts, all contracts. Mongolia, must recognize how governmental officials suggesting contracts can be changed after years of negotiating, scares not only Rio Tinto, but every other major Company that has or had an interest in investing in Mongolia. My observation, is that English is difficult to communicate from a Mongolian perspective, much of what I read, is hard to understand and translate. I realize how impossible it would be for me to communicate in Mongolian. My suggestion is for your country and government to turn the corner and have a more accepting attitude, become totally positive. Start trying to make things work for business instead of looking for ways to sabotage. Your country has much to be thankful for and the possibility for a bright successful future. However, you have been going in the wrong direction. I would like to be optimistic, but am losing enthusiasm. Lastly, China is your neighbor, a neighbor that will buy most of what you produce. Deciding to build your railroad to Russian specifications seems insane to me, when your shipping mostly to the Chinese. Transportation cost represent a large percentage of the cost of goods, dumping everything at the Chinese border and having to re-load because your not wanting to compete with China rail system seems irrational. Hopefully, we will all begin to hear some very positive commentary coming from Mongolia and her people.
    Thank You,
    Ron Biller

  2. S Boyd says:

    Well said Mr. Biller

  3. TulgaOd says:

    Ron,

    You should blame the people who made false promises to you and lying, cheating and stealing from both sides.

  4. Terrence Edwards says:

    I don’t understand the editorial comments coming from this website as of late. I especially don’t understand the call for balanced coverage followed by a diatribe on the evil of foreign investors–again without any proof or data to support the claims made. The investors that have stood by Mongolia have lost just as much as Mongolia has.

    You seem very poorly informed on the Oyu Tolgoi matter or are just intent propagating false information.

    “The international media ignores the fact that 34% of Oyu Tolgoi which belongs to the Mongolian shareholder – Erdenes Oyu Tolgoi LLC, a state-owned company does not come as a free-carry.”

    Mongolia has not paid anything for the OT project, yet. If the project is unsuccessful the terms of it IA agreement exempt it from ever paying for its stake.

    “Oyu Tolgoi LLC that sometimes referred as a copper unit of Rio Tinto PLC by international media has been consequently failing to win the hearts of the general public. Then, it blames it on the government for spreading wrong message about the company and demands for an apology letter on the Oyu Tolgoi LLC shareholders meeting last month from the government ministers.”

    The government repeatedly sends mixed messages on investment. Officials will talk about needs for cooperation and consensus at conferences in English and then vilify foreign investors when speaking to the newspaper most closely aligned with their party. If the Mongolian government is so concerned about its image it needs to find a new communications strategy. Investors are not stupid. Just because you comment in Mongolian language does not mean English-speaking investors will never hear of it.

    I am a foreign journalist reporting from UB, so I am speaking from first-hand experience.

    Rio Tinto, Oyu Tolgoi, LLC, and Turquoise Hills have responded to these accusation repeatedly. The entire discussion has been he-said-she-said nonsense. This kind of poor editorial hack-job is not help either.

  5. Name (required) says:

    Happy fools day!

  6. Amarsanaa says:

    Terrence, please find the numbers and facts as information, then blame writer.

  7. Howard says:

    Terrence,

    I think the OT related commentaries coming from this website allow us to see the news from a different perspective.

    The forward looking assumption should not be based on as if there is a chance that the project will be unsuccessful. Is that the only advantage? We are all aware of the fact that both Rio and Mongolia wants to implement the project successfully. I cannot think of anyone who wants to see the project failing.

    The cost of having a stake in the project comes with 6.5+LIBOR and previously 9.9+USCI for Mongolians. I don’t understand why the logic of increased cost of building the mine will result delayed dividends is not clear to you. I mean, that is the main concern that has been on the major local news portals.

    It seems it came as a surprise when the Mongolians found out the project company has been advancing with the project without an approved feasibility study on it’s change on mine design. In your opinion, has this had to be hidden from the public? I don’t see how the editor criticized foreign investors for their investment in Mongolia. I think he is accusing the people on the ground who ignores and discredits the rule of law of the country. So, who thinks the investors are stupid?

  8. Mongol friend says:

    Mongol rappers should stop spreading propaganda to influence Mongol youth. What Mongol youth desperately needs to understand is that Mongolian future is in their own hands. Instead of doing nothing but hanging around and listening to silly rapper statements, they need to become part of the growing process and the industrialisation. It is themselves that need to provide the prosperity to their own country for their children and grand children. So Mongolian youngsters, choose an education that can attribute to that. Also the many Mongolians studying abroad, after having finished their studies, they should come back to their country, in order to also become part of that same growing process, if they want their country to become a prosperous one. Mongolia no longer needs that outdated rapper generation. CONTRIBUTION should become the new key word for a new rapper generation. That way even a rapper can contribute to the growth as well !!

  9. Ron Biller says:

    To TulgaOd

    Tulga, I can blame no one for my investment.
    No one from Ivanhoe Mines or Turquoise Hill Resources or even Rio Tinto lied to me. They
    have provided sufficient information over the last 12 years for me to evaluate the possibilities for Oyu Tolgoi. None of the information that I have read was a lie. Everything they have communicated has turned out about like they had planned. This what is confusing for me, Mongolia’s governmental officials have had access to everything I have read, as it is all public information. The expected cost of building the mine has increased a little, however during this time the cost of Oil has gone from $20 a barrel to $100, consequently every paper clip, gallon of paint, Crane, bulldozer, that has been moved to the Gobi desert from around the world, has cost a hell of a lot more. Where in the hell, have you been. Mongolia should hire Mongolians who are totally fluent in English to translate all this information properly. My only mistake was believing Mongolia would be a good place to invest.
    Thanks for letting me comment.
    Ron B

  10. Gthang says:

    They haven’t provided enough information to Mongolia. That is why they are under scrutiny. I feel sorry that you feel that there aren’t any Mongolians who are not fluent in English.

    If you hire someone who is totally westernized to your standards, surely he/she won’t be able to communicate with the locals fully.

    If you compare what has been provided to the Mongolian shareholders and what was actual, you will understand.

    I regret that these companies portraying us as savages and Mongolia as a socialist wrecks.

    Time will show.

  11. Marp says:

    This article proves that this publication is very biased as all it does is makes excuses for Mongolia’s behavior while ignoring all the facts. Ron Biller spells it out quite well. The foreign investors are nor stupid and if Mongolia wants success and foreign investment, Mongolia will have to change its ways. Stability and the honoring of contracts are critical for foreign investors and without these foreign investors find other countries to invest their money in..

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