Credit, legal and operational risks have made it very difficult for Mongolian banks to access global capital markets. This second landmark transaction of Frontclear in Mongolia has made it possible for Development Bank of Mongolia LLC (DBM) to competitively access the swap market with foreign banks and hedge the proceeds of a Samurai bond issue into USD. Both cross currency swap transactions were documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customized the swap confirmation to overcome legal issues in the Mongolian market.

The transactions helped to further clarify certain legal issues related to close-out netting in Mongolia, which were mitigated by effective Frontclear deal arranging and structuring. The transaction documents introduced best practice operational and legal concepts, which were reviewed and discussed in a Frontclear organized Executives’ Roundtable in Ulaanbaatar in September 2018. Frontclear is already planning further technical assistance in Mongolia to address those legal issues as well as other roadblocks preventing Mongolian banks effecting accessing global funding and swap markets.

“We are proud to execute our second transaction in Mongolia and the key role we have played in originating the structure and bringing Societe Generale to work in money market transactions in the country. The transaction strengthens Mongolian banks’ ability to mitigate legal and operational risks and sets a benchmark for the development of Mongolia’s money market going forward,” according to Andrei Shinkevich, Senior VP at Frontclear.

“This is DBM’s first ever swap transaction with Societe Generale and we look forward to working with new partners to expand our treasury operation,” – Amgalan Battulga, Head of Treasury Management of Development Bank of Mongolia noted.

“Societe Generale is delighted to have concluded this transaction with Frontclear allowing Development Bank of Mongolia to hedge interest rate and currency risks related to its Samurai bond. It illustrates the strength of the collaboration between our two institutions, Societe Generale and Frontclear, which share the common objective to participate to the development of capital markets in emerging countries,” says Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale said.
source: Development Bank of Mongolia

The partnership’s aim is to utilize Terra’s blockchain technology and change how Mongolian citizens pay for goods and services, as well as to reform the largely cash-based infrastructure of Mongolia by enabling more transparent and convenient digital payments. Terra’s payment solution will first launch in Ulaanbaatar City’s Nalaikh District through a pilot program, with plans to expand citywide.

Mongolia’s fintech market is still in its early stages, but has recently experienced a series of successful IPOs from local startups that display the market’s rising potential.

The pilot program in Nalaikh City will launch with two main features:

peer-to-peer (P2P) payments to allow instant transfer among users of different banks, and
mobile payments to build the infrastructure for secure, contactless payments.

Facilitating P2P and recurring utility payments with Terra are important first steps towards building a blockchain-based financial infrastructure in Mongolia,” commented Daniel Shin, Co-founder of Terra. “From there, we will build out a wider range of financial services, reforming the remittance, loan, and overall banking industry. We are extremely honored to work closely with the Mongolian government and look forward to the launch of Terra in Ulaanbaatar.

We believe this pilot program with Terra will reform how the people of Nalaikh City make everyday payments. It will contribute to the development and enrichment of the nation’s digital payment infrastructure, while creating a new online platform to easily share information and offering great opportunities to connect with our citizens through advanced technology. We look forward to becoming the first customers of this blockchain payment system and setting into motion financial reform in the capital city,” said Radnaabazar Choijinsambuu, Governor, Nalaikh District of the Capital City.

The pilot program is set to launch within the next 6 months. A special task force made of key players from Terra, Nalaikh District, and XGround – a fintech company with a strong base in Mongolia – will oversee the initiative.

There has been rising anger over a long-running corruption case related to allegations that Enkhbold and other political figures had looked to raise 60 billion tugrik ($23 million) by selling off government positions. Enkhbold has denied the allegations.

The Mongolian opposition Democratic Party (DP) January 7 demanded to hold immediate general elections accusing MANAN of leading Mongolia to poverty.

A cross-party group of politicians who are boycotting the parliament’s plenary sessions has signed a letter demanding Enkhbold’s resignation. Enkhbold rejected to step down.

On December 27, 2018 nearly 25 thousand people took to streets in Ulaanbaatar to protest against "corrupt officials."

As of 10.30 a.m., today (10 January), the exchange rate stood MNT 2670- MNT 2675 at the ‘Naiman Sharga’ market.

The Bank of Mongolia increased its foreign reserve to USD 3.4 billion and purchased 22 tonnes of gold in 2018. As a result of high commodity prices on international markets, Mongolia’s export revenue rose and the State Budget was positive for first time in last six years. However, Mongolia’s currency rate is continuing to fall against the US Dollar.

Mongolian students who study in universities and institutions receive a monthly allowance of MNT 70,000.

In the first 11 months of 2018, prices of meat escalated by 15.5- 31.6 percent depending on the type according to the National Statistics Office. The impact of meat price increase was visible in the inflation as the Bank of Mongolia (BoM) announced that inflation exceeded the 8 percent target level, reaching 9.3 percent in November. According to the BoM, meat prices accounted for 1.3 percentage point for inflation. Meat and meat products make up over 10 percent of the basket of consumer goods in Mongolia. Ministry of Food, Agriculture and Light Industry (MFALI) informed that MNT 4.6 billion will be allocated for scarcity of meat in Spring from the 2019 State Budget. Within this frame, the ministry expects to reserve 10,000 tons of meat beforehand. Due to the surge in meat exports, the ministry also plans to take policy measures on increasing domestic supply of meat Regarding the matter, Economist Khaschuluun Chuluundorj said, “Meat export growth will increase domestic meat prices. Because higher global meat price will eventually pull up domestic price of meat. We have to be ready for this.”

Around 12-15 million heads of livestock are used for domestic needs. According to the MFALI, Mongolia has enough reserves to fully supply domestic demands, provide 9 million heads of livestock to economic circulation and export over 180,000 tons of meat.

Ulz river flows through transboundary areas such as Norovlin soum of Khentii aimag, and Bayan-Uul, Bayandun, Dashbalbar and Chuluunkhoroot soums of Dornod aimag, taking its origin from Ikh and Baga Burd springs located in Norovlin soum of Khentii aimag. The length of Ulz river is 510 km, 90 percent of which belongs to Mongolian territory.

Although, numerous rivers including Duch, Turgen, Berkh, Khuurain valley, Ar bulag, Kharkhiraa, Ajnai used to flow in Ulz river, most of the rivers dried up in recent years, making Ulz River at risk of running dry too.

According to the numbers, about 15 thousand locals live near the basin of Ulz river. So, the locals expressing their concerns towards the issue, saying that measures need to be taken immediately,

Thus, MP N.Nomtoibayar initiated the project in order to increase the water flow of Ulz river. A feasibility study for the project will be formulated in the first phase.

The company distributed 1072 shares to the public at MNT 933 per share respectively and has been running on deficit since 2013. However, the company managed to settle most of its debt in 2017.

The amount of dividends will be set after an audit on its 2018 financial report. After that, the board will hold a meeting to submit its request for the distribution to the Cabinet for suggestions. Preliminary schedules of the final decision has been set in April. “This matter is different from the upcoming potential initial public offering (IPO). Dividends will be distributed regardless of the IPO process,” explained Mr. Gankhuyag.

IPO financing to be spent on improving profitability and infrastructure
According to officials, 1.3 million citizens who own ETT shares have not yet opened brokerage accounts. Since the establishment of ETT information center in May 2018, over 500,000 people have opened brokerage accounts. If the ETT board decides to distribute dividends to the public, people with the account will have instant access to the financing.

Mr. Gankhuyag also informed that the preparatory works of the IPO are mostly complete. The company is ready to present a bill to the Parliament if five investment banks and an audit firm are selected.

Initially, ETT will offer 30 percent of its stake at the Hong Kong Stock Exchange and could potentially seek dual-listing at the New York Stock Exchange later on. According to Mr. Gankhuyag, the company is requiring USD 1 billion to increase profitability, such as continuing the railroad construction and establishing coal preparation plant, while the necessary nationwide infrastructure is estimated to total USD 2 billion.

Last year, the company reportedly improved its governance, financial and human resource policies, as well as redetermining its reserves and completing the IPO preparation.

With the Australian Joint Ore Reserves Committee (JORC) Code, ETT’s coal reserve was confirmed to be 7.3 billion tons. Thus, international organizations view that the company is fully capable of raising the necessary financing, noted Mr. Gankhuyag.