At the scheduled meeting held on March 24, 2021, the Monetary Policy Committee (MPC) of the Bank of Mongolia took into consideration the current state and outlook of the economy and financial markets, as well as the uncertainties and risks inherent in the domestic and external environments, and decided to:

Keep the policy rate unchanged at 6 percent;

Issue up to MNT 350.0 billion under the long-term repo financing in the second quarter of 2021. The financing has been expanded to involve businesses in processing, service sectors, and trade businesses with more than 200 employees.

Annual headline inflation stands at 2.6 percent nationwide and 2.0 percent in Ulaanbaatar city as of February 2021. The impact of the demand factor on inflation is seen to have a gradual increase in the coming quarters as the economic activity intensifies, while supply-side inflation is expected to increase further owing to the prices of fuels and refined coal. Inflation is projected to remain unchanged at the target level in the medium-term, but it may change due to the spread of coronavirus and vaccination activity.

If vaccination continues successfully, economic activity is expected to increase, with businesses returning to normalcy. In the first two months of 2021, the export grew by 73 percent. The processing sector showed an increase of 66 percent and 37 percent in January and February respectively. In addition, Moody's changed the outlook of Mongolia's issuer ratings to stable from negative in connection with increased official foreign currency reserves and reduced pressures of short-term external debt as well as expected recovery of the economy.

The step-by-step implementation of monetary and macroprudential policy measures and the adoption of new financing instruments by the central bank directed at mitigating the impact of the COVID-19 pandemic contribute to decelerating the pace of domestic economic downturns, facilitating recovery, and ensuring the stability of the banking sector.

If inflation exceeds the target level, the MPC will make policy adjustments.

Mongolia's third Trade Policy Review has provided us a good opportunity to examine its economic, trade, and investment developments since the previous Review, as well as to learn about the unique challenges caused by the COVID-19 pandemic that has impacted trade and the global economy. I would like to thank the Mongolian delegation, headed by H.E. Ms. Battsetseg Batmunkh, Minister for Foreign Affairs, for her remarks and participation from capital. My appreciation also goes to our discussant, H.E. Ambassador Dr. Rashidi Said of Malaysia for his thoughtful comments and remarks and of course to the 23 delegations that took the floor during these two days and those that participated through the advance question and answer process.

Members commended Mongolia on its overall open trade and investment regime, including its policy orientation toward more inclusive trade. Its economic performance over the review period had been impressive as there was generally continued economic growth until early 2020. The impact of COVID-19 has severely affected the Mongolian economy, albeit with Government intervention, mainly in the form of stimulus packages, it was hoped that the economy would recover quickly and accelerate. Despite these positive trends, Mongolia's economy remained heavily reliant on a few sectors and its trade was concentrated in terms of products and markets, thus Members felt that there was a strong need to diversify. This issue was recognized by the Government as one of its top national policy priorities, as addressed in Mongolia's Economic Recovery Program and the Mongolian Export Program, among others. Merchandise exports and imports reached a record high of USD 13.7 billion in 2019 and the trade balance remained positive for many years, but several Members noted that Mongolia had yet to reach its trade potential.

Mongolia was a key trade partner particularly to its regional neighbors and its move to deepen regional economic and trade integration was welcomed. It was noted that Mongolia had concluded its first FTA with Japan and had recently implemented the Asia-Pacific Trade Agreement (APTA). Furthermore, it was examining possibilities for future free trade agreements. Mongolia benefitted from a number of GSP programs from other Members that could help in diversifying its exports.

Many Members applauded Mongolia's contributions to the Multilateral Trading System including through its coordinating role of the Asian Group of Developing Countries and its contribution the group of Landlocked Developing Countries. Mongolia's ratification of the Trade Facilitation Agreement, its support of the Buenos Aires Declaration on Women's Economic Empowerment, and its participation in various Joint Statement Initiatives were viewed as particularly welcome developments during the period. Several Members inquired about the status of the initiative for joining the WTO's Agreement on Government Procurement and encouraged Mongolia to become a party to the Agreement in the near future. It was also suggested that Mongolia engage further in multilateral and plurilateral trade negotiations in order to reap greater benefits from the Multilateral Trading System.

Foreign investment had featured prominently in many interventions and in the advance written questions. Several Members noted they were a significant source of foreign direct investment in Mongolia and welcomed the initiatives of the One-Stop Service Center and the Investors Protection Council. Although investment policies and practices had generally promoted and protected foreign investors, some Members noted that there was still room for improvement. Frequent amendments of investment laws and regulations were seen as unpredictable and created an unstable environment. In the view of some Members, there was a need to enhance regulatory certainty, reduce investment risk, improve transparency and the business environment, and create a level playing field for foreign investors.

Mongolia's positive developments in the area of trade facilitation were recognized as it had undertaken significant efforts to improve trade facilitation and modernize its customs procedures. This was particularly important given Mongolia's geographical location as a landlocked country and as an important transit corridor along the old Silk Road. The adoption of the National Trade Facilitation Roadmap, the establishment of the National Trade Facilitation Committee, the development of the single window application, and creation of electronic data exchange were all important steps taken to make improvements in this area. Nevertheless, some Members noted that they still faced difficulties with Mongolia's customs clearance and inspection procedures.

In their interventions, Members referred to remaining challenges in a number of areas. Mongolia's SPS regime was characterized as lacking alignment with international SPS standards and Mongolia was encouraged to make improvements in this area. Import quotas on certain agricultural products were seen as problematic on several fronts, including what some Members saw as possible inconsistency with WTO obligations. The regulatory framework and new laws proposed on alcoholic beverages were also of concern; and at least one Member referred to disruption to trade flows over mandatory enrichment standards for wheat flour.

The importance of strengthening good governance, improving transparency and the legal environment were also recurrent themes during our discussions. Transparency was identified by several Members as needing improvement on a number of fronts, including in the areas of government procurement, investment laws and regulations, regulatory and legislative processes, and permits and licensing processes for imported goods. Securing an independent judiciary and upholding the rule of law were identified as key elements in enhancing governance.

While Mongolia had made notifications in a number of areas during the review period, several were noted as lacking and Mongolia was encouraged to make further efforts to remedy the situation. Notifications on agriculture, customs valuation, quantitative restrictions, subsidies, and import licensing were consistently noted as being outstanding. Members highlighted that it was important for Mongolia to improve transparency in its trade policies and practices through notifications in the future.

These were the main areas of discussion at this Review that has allowed us to gain a better understanding of Mongolia's trade, investment, and related policies. Mongolia received over 300 advance written questions and it was commended for having replied to all of them prior to this meeting. In a month's time, Mongolia is expected to reply to any late submissions and follow-up questions at which time the third Trade Policy Review of Mongolia will successfully conclude.

A consortium led by Japanese engineering company JGC Holdings has been awarded the contract to build Mongolia's first utility-scale solar-plus-storage power plant by the country's energy ministry, pv magazine reported on March 22.

The 5 MW/3.6 MWh power plant will reportedly be built in partnership with Mongolian EPC contractor MCS International LLC and Japanese ceramics company and network attached storage (NAS) provider NGK Insulators Ltd, which will provide its large-scale sodium-sulfur-based battery systems for the project. “NGK's NAS batteries are capable of storing electricity even in extremely cold and extremely hot environments and were suitable for the weather conditions in Mongolia,” Yuki Ichihara, of JGC Holdings' Group Development Management Department, told the journal.

“NGK believes that the order for this project was won as a result of strong evaluations of NAS batteries’ ability to offer a large capacity and long discharge time, along with NGK’s extensive delivery and long-term operational track records,” the Japanese battery provider said in a separate statement.

The plant will be located in Uliastai, in Mongolia's Zavkhan Province, and will come online in the spring of 2022, the company said.

The project is being financed by the Asian Development Bank (ADB) and the Joint Crediting Mechanism (JCM), which was established by the Japanese Ministry of Environment at the ADB itself.

The tender for the project was launched by the Mongolian authorities in February. It is part of the Upscaling Renewable Energy Sector Project, which aims to deploy 40.5 MW of solar and wind capacity in the country’s western and Altai-Uliastai regions.

Mongolia’s installed PV capacity stood at just 89 MW at the end of 2019, according to statistics published by the International Renewable Energy Agency. In 2017, Mongolia had to import around 20% of its required electricity.

A group of Mongolians have launched the Mars V project. They are in their second year of implementing the project to build Comprehensive Training Academy for Survival and Adaptation and Space Exploration and Development Free Zone in the Mongolian Gobi.

It is estimated that the development would bring annual revenue of MNT 20 billion to the country. Mongolia has the coldest Gobi in the world where temperatures drop to -42C, which closely resembles Mars, as proved by international scientists. Conquering planet Mars has become a short-term goal for the humankind. Mars V project team aims to create an environment for training Mars visitors, which is crucial to fulfilling the collective dream of ruling the galaxy. This has great economic benefits. Over 200 young people are conducting the project study with 2,800 volunteers.

It is feasible to develop tourism as part of the Mars V project as the Gobi environment could give the feeling as if one was on Mars. With this, frying into space and visiting a different planet will no longer be a rare opportunity presented only to astronauts. The project team emphasized that the unique scenery can be found only in the Mongolian Gobi.

“Humans are planning to send a manned mission to Mars. The Mars visitors have to be trained in the place most similar to Mars. That place is the Mongolian Gobi. We are the ‘closest’ to Mars. We are offering something we have to the world and will build a training base for the Mars visitors and another base for adaptation. Our country has limited capacity to do what other countries do for global competition, but it would be beneficial to the country’s economy and scientific development if we play to our strengths," Mars-V Project Executive Director G.Amgalanbayar said.

The project team is currently conducting a regional study across six aimags.

Rio Tinto (ASX, LON, NYSE: RIO) continues to make public its efforts to repair its damaged relations with Australian traditional landowners after the destruction a 46,000-year-old sacred site last year, by outlining detailed plans to improve its cultural heritage management.

The mining giant said on Tuesday it will hold virtual seminars to demonstrate the steps it had taken to make amends after the Juukan Gorge incident, which sparked international outrage and cost several top executives their jobs.

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Rio also said it had kicked off a review on best practices for cultural heritage management in the mining industry, which will be done in consultation with a newly formed Indigenous advisory group and other independent parties.

The goal, the world’s second-largest miner said, is to identify gaps in current protocols and provide a clear pathway to re-establish trust over time and regain Rio Tinto’s previous standing in this area.

“We must focus on real engagement with our communities, understanding their felt experience and never forgetting that, ultimately, we are guests on their land,” chief executive Jakob Stausholm says.

Tony Bevan, a director at Wintawari Guruma Aboriginal Corporation (WGAC), one of nine Aboriginal Corporations that have agreements with Rio, told Reuters that the mining company had not provided them any details on the plans.

“WGAC [has] yet to see any evidence of a strengthened and improved approach to cultural heritage management. We have no visibility on the significantly strengthened internal practices, policies and governance that [are] referred to,” Bevan said, adding the announcement “came across as another big company marketing document.”

Looming legislation change

Rio Tinto’s demolition of the Juukan sacred caves, which had permit approval, not only caused a global outcry, it also triggered a government inquiry that recommended legal and sectorial reforms, including the halt all of Rio’s activities in Western Australia’s Pilbara region.

The parliamentary commission also asked the miner to undertake land rehabilitation and review all of its agreements with traditional owners.

The inquiry has not detailed what, if any, financial compensation Rio Tinto should pay to the traditional owners as part of a negotiated restitution package. It only said the agreement should include keeping intact places where artifacts and other materials could be stored and displayed.

The Western Australia government is currently reviewing these laws, which were written decades before Native Title was introduced.

The daily COVID-19 press briefing by the Ministry of Health for March 24 reported that in the past 24 hours 12,605 people were tested at the laboratories nationwide and 218 new coronavirus cases were confirmed.

In specific, 176 cases were detected in Ulaanbaatar, 27 cases in Uvurkhangai aimag, 10 in Darkhan-Uul and five in Tuv aimag.

The total number of confirmed coronavirus cases in Mongolia now has reached 5610, with 3,947 recoveries.

Today, 1367 patients are receiving treatment at the National Center for Communicable Diseases, Central Military Hospital, Second Clinic for Maternal and Child Health, and hospitals in Tuv, Uvs, Khuvsgul and Darkhan-Uul aimags.

A 4.7 earthquake hit Central Mongolia last night, 23 March 2021, at 10:46 pm local time. The quake occurred at a shallow depth of 10 km, and about 160 km south of Ulaanbaatar, city capital of Mongolia.

Our monitoring service received multiple user reports describing light to moderate shaking. Most of these were reported from the capital city. Based on all available data, the quake was felt at up to a radius of 350 km from the epicenter.

Many people also reported that they felt their bed or couch shaking. Hanging appliances were also rattling during the quake. However, there were no immediate reports of significant damage.

This quake was unusual as it did not occur on any known faults or volcanoes in the country. The epicenter plotted approximately 400 to 500 km north of the Main Mongolian Lineament. Most of the tectonic activities in the country are usually focused on the northern and western regions. The most recent strong quake that hit the country occurred early this year. It struck with a magnitude of 6.8 right under Lake Khuvsgul in Northern Mongolia, near the Russian-Mongolian border.

When Asia's qualification campaign for 2022 FIFA World Cup Qatar™ began in June 2019, Mongolia had the honour of hosting the very first qualifying game globally. The Blue Wolves duly registered the first qualifying victory by winning 2-0 against Brunei Darussalam, before a 2-1 away defeat allowed them to progress 3-2 on aggregate.

Now 21 months on, the East Asians are again the first to act as the continent's qualifying resumes this week. The team, under new boss Rastislav Bozik, take on hosts Tajikistan on Thursday before facing Group F leaders Japan five days later. Having seen the qualifying fixtures postponed for a year due to Covid-19, the team are hungry to embrace the return to action according to Bozik.

"It was really a hard period for the whole world," the 43-year-old Slovak manager told FIFA.com. "A short league format, a long winter and all sorts of hardships caused [by the pandemic] made our preparation very difficult. But we have dealt with it and put the worst behind us. Now our squad is full of energy and we will work hard and have our players in their normal shape."

Bozik has spent much of his 18-year coaching career in Asia at clubs like Son Dong Tam Long An and Al Wahda, as well as working as an assistant coach with Malaysia. He was appointed head coach of Mongolia last September with the job being his first senior national team role.

"It is an honour to coach a national team, especially for me with Mongolia," he added. "My last job was the head of Youth and Coach Education by MFF (Mongolian Football Federation). Now my tasks are to make selection decisions and prepare suitable strategy for the senior national team. I am thankful for the faith shown in me."

Winning hearts and minds

Having never progressed beyond the first round in Asia's World Cup qualifying before, Mongolia made history on the road to Qatar 2022 with the victory over Brunei Darussalam sending them through to the second round for the first time.

"The milestone victory sent a strong signal which the country needed. The team won the hearts of the people and conversely the fans' support motivated the players," Bozik added reflecting on their first-round campaign.

In the process, 32-year-old captain Tsedenbal Norjmoo struck twice, while 29-year-old forward Nyam-Osor Naranbold was also on target as they edged Brunei Darussalam. They history-making campaign continued in their maiden second-round match with a 1-0 home win over Myanmar, and this time it was 20-year-old Dolgoon Amaraa who netted the winner.

"These three players will continue to play key roles in this squad," added the coach. "Actually they represent three generations of the team. So we have the veteran players who help with their experiences while the youngsters can provide fresh impetus."

Languishing at the bottom of their group with just a lone win from their five outings, Mongolia are desperate to conjure another victory. They lost to third-placed Tajikistan 1-0 in September 2019, before conceding six unanswered goals to runaway leaders Japan a month later.

"Needless to say, the matches are big challenges for us. We play away against strong rivals. We will focus on our performances rather than results. And good results will come as long as we work well in details like individual play, formation and teamwork. This is our philosophy."

"Mongolian players are quick in learning if they get motivated. They are a disciplined team and they play with a high spirit. In short, they can defy odds and achieve positive transition."

The Asian Development Bank (ADB) has approved a $73 million loan to improve social welfare support for the poor and vulnerable, especially women and children, to mitigate the socioeconomic impacts of the coronavirus disease (COVID-19) pandemic in Mongolia.

The project will specifically expand the child money program, which provides universal cash grants to all children aged 0–17. ADB will finance a share of the extended shock-responsive increase in the monthly child grant benefits through June 2021. This follows on from the earlier top-ups supported under an emergency assistance loan from April to September 2020.

“Mongolia took early and decisive action to prevent the outbreak of COVID-19 in 2020,” said ADB Principal Social Sector Specialist Karin Schelzig. “However, while the direct health impact was initially limited, economic data and several rapid assessments confirm that the socioeconomic consequences of the virus containment efforts were substantial, and things took a turn for the worse with the first community transmission recorded in November 2020, requiring renewed lockdowns.”

As early as May 2020, nearly three-quarters of all Mongolian households and 85% of poor households reported experiencing some sort of economic shock. Nearly two-thirds (64%) of all households reported an increase in food prices, while nearly three-quarters (73%) of self-employed workers experienced income loss. About 70% of farmers and herder households reported a decline in income compared with the previous year.

The project will also help strengthen social welfare programs and systems in Mongolia to be better able to respond to future shocks and crises. ADB will finance activities to update the poverty targeting system and the Integrated Household Database with more accurate data to be better able to reach people in need.

ADB will also support the digitization of social welfare programs into the "e-welfare" system to streamline benefit and service delivery, and will implement and evaluate a pilot test of the graduation approach to introduce an innovative type of social protection program that builds on cash transfers with a holistic set of livelihood, financial inclusion, and coaching interventions.

The project forms part of ADB's holistic and comprehensive package of support to mitigate the impact of COVID-19 in Mongolia. The total project cost is $259.64 million, which includes government financing of $186.64. It is expected to be completed in 2023.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

Source: Asian Development Bank Mongolia Resident Mission

Global demand for liquefied natural gas will grow to 700 million tons annually by 2040 from 360 million tons last year, Shell said in its LNG Outlook 2021. As much as 75% of this demand growth will come from Asia.

Asian economies have been a key market for liquefied natural gas for years now. The fuel has been gaining growing prominence as a cleaner and cost-effective alternative to coal. This prominence will only continue growing with net-zero commitments, Shell said. And this growth could turn Asia into an LNG buyers’ cartel.

Bloomberg’s Anna Shiryaevskaya wrote in a recent article on LNG that Asian demand for LNG was upending traditional pricing models for the commodity. In the latest proof that fundamentals always beat everything else, Asia dictated LNG prices this winter, sending them sky-high during the coldest of the season and then pushing them back down to more normal levels once the weather started warming—all this despite the traditional price-setting model that is Europe-centric and that basically consists in tying LNG prices to the benchmark price of crude oil.

Europe is still a big consumer of liquefied natural gas, and it will continue to be a big consumer in the observable future. But in light of Shell’s forecast about 75% of future LNG demand coming from Asia, Europe starts to look like a minor buyer on what is certainly a booming market.

“Over the next couple of years European gas prices will become less and less Europe-centric, and more and more globally influenced,” an analyst with Swiss trading firm Axpo Solutions told Bloomberg’s Shiryaevskaya.

Most of this influence will come from Asia, as evidenced recently during the winter price spike. And it may well come with long-term supply contracts, which will have their own—longer—influence over LNG prices. The spot market was the go-to place to buy LNG in Asia until prices soared by more than 1,000 percent earlier this year. Now, long-term supply contracts look more reasonable to buyers.

Iran to join LNG race in Asia with huge North Pars development

Sellers share the sentiment. Last month, the energy minister of Qatar, the world’s top LNG producer and exporter, advised big sellers to secure long-term contracts to avoid a repeat of the January price spike, which, he said, would be inevitable if the spot market continued to dominate the LNG trade space, not least because supply was about to tighten once again.

So, on the one hand, demand is growing, and most of this growth is coming from one single region, dominated by three big consumers: China, India, and South Korea. The first two are particularly important: last year, China and India together accounted for the bulk of global growth in LNG imports, according to Shell, while the other two big LNG importers in Asia—Japan and South Korea—saw declines.

On the other hand, long-term supply contracts are starting to look more attractive than the volatile spot market once again, so big buyers could lock low prices while they last. This means that the spot market could become even more volatile if Qatar’s top energy man, Saad al-Kaabi is right and supply is indeed set to tighten. These trends are painting a picture of what could be called an emerging buyers’ cartel.

It is an involuntary cartel, for sure, at least for the time being. In LNG, Asian states are looking out for themselves, not for their neighbor, not least because of neighborly tensions such as the ones between China and India. But even an involuntary cartel could—and would—affect global LNG flows and prices, reducing supply to other LNG markets and pushing prices higher.

If big energy traders in China secure most of the LNG the country needs from Qatar, Australia, or the United States under long-term contracts, this will leave less LNG to go around outside China. This usually means higher prices, both on the spot market and the long-term supply contract market for latecomers. This is how Asia, although politically divided, could dictate global LNG prices in the coming decades.

“The susceptibility of UK and European gas markets to global LNG prices may be set to increase,” Cornwall Insight, an energy consultancy, told Bloomberg’s Shiryaevskaya. “With no concrete plans for new long-term storage facilities in the UK and declining UK Continental Shelf, it could point to a greater LNG dependency in the coming years.”

Indeed, Europe is set to become more dependent on LNG imports and more vulnerable to price movements on this market as it stops being the price-setter. It would be interesting to speculate whether the Asian powerhouses would be able to wield their dominance on the LNG market as a weapon. They are certainly in a position to influence global LNG flows, affecting supply, if not global demand, and, as a consequence, prices. And from what we recently saw in India, which started reducing its purchases of Middle Eastern oil because of price concerns, the world’s biggest buyers of LNG could certainly help or hinder supply growth in one or another part of the world, just like OPEC does with oil.