“CHULUUT” FLUORSPAR PROCESSING PLANT PROJECT UPDATE
The Chuluut project’s main equipment are installed successfully. Flotation cell drainage wall concrete work started 40% completion. Floor concrete preparation is ongoing /filling with aggregate and compaction/ scheduled to start rebar and form work on 1st of June. Planning to install the roof sandwich panel starting from 2nd of June.
HAPPY CHILDREN’S DAY
All the kids, chin up, smile, and celebrate the day dedicated specially to you! June 1 is celebrated as Children’s Day in Mongolia. We prepared customized children’s books based on age and interest of our beloved kids. Reading for pleasure can benefit a child’s education, social and cognitive development, their wellbeing, and their mental health. The most precious thing in this world is a smile on the face of a child. Let us make this world a safe and enjoyable place for our kids. Happy children’s day!
EK STRENGTHENED MANPOWER WITH NEW EXPERT
Let us welcome Mr. Shagdarsuren Erdmaa /Shaggy/ to EK family. He is joining with us as of 29, May, today as Commercial Manager / Financial Analyst in the Operations department.
He will oversee commercial duties of Chuluut Project and simultaneously work as Financial Analyst for EK. Good luck Shaggy for the challenging and rewarding career journey with EK.
ECONOMY
CHINA’S COKING COAL IMPORTS INCREASE IN APRIL
China's coking coal imports rose in April from March as Mongolia reopened its border and Chinese buyers ramped up purchases of cargoes that were diverted from regions still under Covid-19 lockdowns.
China imported 6.21mn t of coking coal in April, up by 12pc from 5.52mn t in March, but down by 16pc from a year earlier, according to Chinese customs data.
January-April imports rose by 9pc to 26mn t, as a surge in seaborne material offset Mongolian supply.
Seaborne imports rose by 45pc to 5.4mn t in April on the year, taking their January-April total up by 70pc to 22.8mn t.
Mongolian coking coal imports increased to 775,241t in April from 49,580t in March, but fell by 79pc from 3.69mn t a year earlier. Mongolian imports restarted in late March but with fewer daily coal trucks allowed through border checkpoints.
Source: ArgusMedia.com
RETAIL FUEL PRICE DROPS AGAIN
Rosneft, major petroleum supplier to Mongolia, has been reducing its border prices for the past three months, reports Ts.Erdenebayar, Head of the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) yesterday, May 26.
In January, the border price of imported fuel was USD 630-646 per ton due to falling oil prices at the world market. In May, the price fell by USD 98-158 per ton compared to the previous month and he stressed that this situation has a positive effect on fuel prices in the domestic market.
In May, A-80 fuel price was lowered by MNT 50 per liter, and AI-92 fuel by MNT 80-100, AI-95 fuel by MNT 200 and diesel fuel by MNT 160 respectively, making the total decrease in the retail price of fuel since March 18 - MNT 380 for A-80, MNT 475 for Ai-92, MNT 440 for Ai-95 and MNT 590 for diesel fuel per liter.
Source: Montsame
MONGOLIA RANKED 93RD OUT OF 100 IN STARTUPS RANKING
According to the StartupBlink 2020 Global Rankings Report, Mongolia is ranked 93rd out of the top 100 and Ulaanbaatar entered for the first time this year at rank 690 out of 1,000 cities. A global startup ecosystem map and research centre StartupBlink released The StartupBlink 2020 Global Rankings Report.
There are 193 UN member states, and 4,416 cities in the world with a population of more than 150,000. The report ranks the startup ecosystem of 100 countries and 1000 cities with the help of an algorithm that processes the data and indicators based on the quality and quantity of startups and its sponsors and business environment.
The report states, “The tech talent in Mongolia and the development of high-quality startups have both seen a significant spike over the past year. Ulaanbaatar is set to be a stepping stone in Mongolia’s emerging IT sector, leading the economy in a new direction.
Source: News.mn, Montsame
GROUNDBREAKING CEREMONY HELD FOR NEW FACTORY BUILDING OF BIOCOMBINAT
Minister of Foreign Affairs D.Tsogtbaatar and Minister of Food, Agriculture and Light Industry Ch.Ulaan participated in the groundbreaking ceremony for the new factory building of Biocombinat in Songino yesterday, on May 21. The ceremony was attended online by István Joó, Deputy State Secretary for Export Development of the Ministry of Foreign Affairs and Trade of Hungary, from Budapest.
The sides expressed satisfaction with the 70th anniversary of the establishment of diplomatic relations between Mongolia and Hungary is coinciding with the implementation of the project which has been underway for more than a decade, and reaffirmed their commitment to further expand and strengthen trade and economic cooperation.
Minister of Foreign Affairs D.Tsogtbaatar emphasized that the successful implementation of the project opens a new page in the economic relations between the two countries and provides an opportunity to start negotiations on the implementation of the next major projects with the loan financing of the Hungarian Government.
Source: Montsame
WORKING GROUP TO STUDY POSSIBILITIES ON CREATING MONGOLIA-EEC FREE TRADE AGREEMENT
The first consultative meeting on setting up a joint working group in charge of studying the possibilities to establish Free Trade Agreement between Mongolia and the Eurasian Economic Commission (EEC) took place virtually on May 22.
Representatives at the meeting were headed by G.Ulziisaikhan, Deputy Director of Foreign Trade and Economic Cooperation Department of the Ministry of Foreign Affairs and A.E.Kudasov, Director of Trade Policy Department of EEC. Official delegates from EEC member states – Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia also attended the meeting.
After exchanging mutual opinions on commitment and scope of research of the working group, the sides discussed about some organizational matters required for launching an official joint research. The sides also agreed to organize next meetings in an online format until the global pandemic subsides.
Source: Montsame
FOREIGN DIRECT INVESTMENT: INTERNATIONAL INVESTMENT LAW DEVELOPMENTS
The definition of the investment, but especially different aspects to define FDI, are fairly important to comprehend as well as the appropriate application of promotion incentives of State. Each State may have a project or sector specifics that necessitate different investment terms that will apply. FDI has a variety of meanings and definitions related to different purposes. It is fairly challenging to distinguish or extract legal terms out of various economic activities as the nature of investment includes but is not limited to trade, products, capital contribution, and foreign capital. Therefore, when dealing with a particular legal regime governing FDI, it is important to check how FDI is defined. (Advocates for International Development, 2012).
Generally defined by the textbook, foreign investment involves the transfer of tangible and intangible assets from one country to another for the purpose of their use in that country to generate wealth under the total or partial control of the owner of assets (Sornarajah, 2010).
Source: GoGo News
THE PROSPECT OF POWER OF SIBERIA 2
Late last year, 2 December 2019, China and Russia launched a gas pipeline that is more than 6,000 kilometers long, an outcome of their long-planned energy partnership. Dubbed the Power of Siberia, Russia is bringing its vast natural gas resources to energy-starved Peoples Republic of China, and in so doing signaling a strategic shift from the politically volatile west of the United States and Europe to the less sensitive People's Republic. Both Chinese President Xi Jinping and Russian President Vladimir Putin inaugurated the pipeline via a joint video conference in Sochi.
Now Gazprom has begun a feasibility study to construct a Power of Siberia 2 natural gas pipeline with an annual volume of up to 50 billion cubic meters that will be pumped over the mountains and rolling plateaus of Mongolia to China.
As its relationships with Europe and the United States grow more tenuous, Russia is looking to bring its vast natural gas resources to the east.
Source: Pipeline-Journal.net
BUSINESS
NEW TRANSFER PRICING RULES IN MONGOLIA
The tax reform effective from 1 January 2020 introduced new transfer pricing (“TP”) rules to align with the international requirements. The first reporting period is 2020 with a reporting deadline in February 2021. This tax alert summarises main highlights of these updates.
General TP principle introduced in the law
If conditions of the transactions between related parties (“controlled transactions”) are different from conditions of transactions between unrelated parties (“independent transactions”), and the tax base was reduced as a result, the tax base shall be increased by the differences of such reduced amount and relevant reassessed tax shall be levied.
TP legislation
• The General Taxation Law, dated 22 March 2019, provides general TP rules including the TP principles, requirements for TP reporting, use of TP methods and TP adjustments.
• The Corporate Income Tax Law, dated 22 March 2019, along with tax rules applied in related party transactions, provides the detailed guideline on a country-by-country reporting.
• …
Source: PwC Mongolia
BODI INSURANCE JSC LAUNCHES IPO
Primary market order opening and the opening bell ceremony for ‘Bodi Insurance’ JSC, a newly listed company on the Tier 1, was today, May 25 at the Mongolian Stock Exchange (MSE).
The company is offering its 60.0 percent or 35.2 million shares of the total issuing shares to the strategic investors at the fixed price MNT 113.0, and its 20 percent or 11.7 million shares to public by a method of book building at the price between MNT 113 and MNT 135 and aims to raise total of MNT 5.3-5.6 billion to be used for investment activities and technology advancement.
Since 2014, “Bodi Insurance” JSC has been cooperating with AXA Group headquartered in France, which leads in health insurance in the world, in areas of double insurance and health insurance. Moreover, the company has introduced insurtech technology in its operation and is leading with its online insurance service in the sector.
Source: Montsame
COVID-19 AND CASHMERE: RETHINKING ONE OF MONGOLIA’S LARGEST INDUSTRIES
From an early decision to close its schools and borders in late January 2020, to its close monitoring and containment of citizens returning from abroad, Mongolia’s response to the COVID-19 outbreak has been markedly successful, with zero fatalities reported thus far. The Mongolian government’s close coordination with multilateral organizations such as the World Bank and UNICEF bolstered these efforts by securing funding for essential medical supplies and public health campaigns. Despite these victories at home, however, Mongolia has still felt the pains caused by the paralysis of global markets; in the first quarter, its GDP has shrunk by 6.1 percent.
Lockdown measures would have a negative impact on any economy under most circumstances. But in the wake of the COVID-19 pandemic, one of Mongolia’s largest industries has been hit especially hard – cashmere. Mongolia produces around 40 percent of the world’s supply of cashmere, its top non-mineral export, with more than a third of the population involved in its production.
Source: The Diplomat
WHAT IS A DOMINANT POSITION IN MONGOLIA COMPETITION LAW
We have already posted a brief introduction about the Competition Law of Mongolia earlier. This time, we would like to address this blog on issues related to the legal regulation of business entities in dominant position.
The legal regulation of the business entities in dominant position is currently governed by the Competition Law, the Procedure for Determining Legal Monopolies and Dominant Entrepreneurs, and the Procedure for Reorganizing a Dominant Legal Entity by Acquiring and Merging with Other Legal Entities and Concluding the Purchase of a Competitor’s Shares.
A business entity in dominant position is an entrepreneur who solo or in association with other persons in a particular product market accounts for one-third or more of the production, sales, or purchases of the product in that market. In addition, [if] the business entity accounts for less than one-third of the production, sales or purchases of the product in the market…
Source: LehmanLaw Mongolia
WHAT IS A NATURAL MONOPOLY IN MONGOLIAN COMPETITION LAW?
In our previous post, we looked at the legal regulation of business entity in “Dominant Position” from a competition law perspective. In today’s post we will review background and legal regulation of business entity in a “Natural Monopoly.”
The legal entity in natural monopoly defined as legitimate monopoly entrepreneurs exists when a single entity alone accounts for the total supply of particular goods to the market at the lowest minimum social cost.
A business entity in natural monopoly shall be determined in accordance with the methodology set forth in the Procedures for Identifying Business Entity in Natural Monopoly and Dominant position. If an entrepreneur is identified as natural monopoly, the Authority of Fair Competition and Consumer Protection issues a decision confirming that the business entity is a legitimate monopoly.
The Authority for Fair Competition and Consumer Protection shall regulate the activities of of naturally monopolistic business entities as follows:
Source: LehmanLaw Mongolia
ELIXIR CAPITAL RAISING RECEIVES OUTSTANDING SUPPORT
Elixir Energy Limited has received strong support for its Share Purchase Plan (SPP) with applications totalling over $2.9 million.
Given the successful first stage of the company’s exploration campaign earlier this year and the successful containment of COVID-19 in Mongolia, the company recently decided to raise funds of around $2 million in order to expedite its delineation and exploration efforts.
The aim was to raise around 65% of the funds from a placement (with director participation) and the balance from a SPP.
In placing the shares, the company sought $1.25 million as a minimum, but the placement was oversubscribed with bids received in excess of $2 million, more than the combined total target.
Importantly, this represented a compelling show of confidence in the company’s Nomgon IX coal bed methane (CBM) production sharing contract (PSC) in the South of Mongolia, proximal to the Chinese border.
Source: FinFeed.com, TheMarketHerald.com.au
FINTECH COMPANIES GRANTED PAYMENT SERVICE LICENSE
Fintech companies that qualified requirements stated in the Law on National Payment System have been granted the license of payment service today.
In particular, a payment card processor license was issued to KKTT LLC and an e-money license was given to Super Up LLC and Ard Credit NBFI.
At the ceremony, Vice Governor of the Bank of Mongolia G.Enkhtaivan expressed confidence that the licensed Fintech Companies would introduce payment services that meet the interest of consumers, ensuring confidentiality and security and working reliably.
Source: Montsame
100 TONS OF FINE CASHMERE TO BE EXPORTED TO ITALY
Mongolia’s finest cashmere that meets the Mongolian Noble Fibre standard has already been recognized by world brands. The Ministry of Food, Agriculture and Light Industry reports that preparations have been made to export 100 tons of such cashmere to Italy.
Sukhbaatar aimag’s cashmere (15.8-16.1 microns) meets the Noble Fibre standard for Mongolia’s finest cashmere. Mongolia accounts for around 40 percent of the global cashmere production. About 20-30 percent of the cashmere produced in the country meets the Mongolian Noble Fibre standard.
Mongolian Noble Fibre trademark represents high-quality products that meet world standards and were produced environmentally friendly and indicates the origin and quality of the product. Khanbogd Cashmere LLC, the company that will export the 100 tons of cashmere, was awarded the trademark last year.
Source: Montsame
