Prosecutor requests stripping Mongolian MPs of immunity www.news.mn

The State General Prosecutor’s Office of Mongolia has submitted a request for stripping four parliament members of immunity. According to one source, MP’s B.Undarmaa, G.Soltan, D.Damba-Ochir and L.Enkhbold are facing prosecuted over the ongoing scandal of the Small and Medium Enterprises Fund. However, the parliamentary standing committee on immunity has been delayed twice due lack of attendance.

China gets go-ahead for 6GW onshore wind farm in Inner Mongolia www.asian-power.com

It could be the world’s largest onshore wind project.

"Doing business with Mongolia”, “UK Investors show” business program March 27-April 02 London UK www.mongolianbusinessdatabase.com

Mongolian Business Database with the support of the British Embassy in UB and Mongolian-British Chamber of Commerce is starting to register the participant for “MBCCI’s Doing Business with Mongolia” seminar and “UK Investors show” in London UK between March 27-April 02. 2019.
The delegates will visit the House of Commons by the special invitation of Mr.John Grogan, MP of UK and the Chairman of Mongolian-British Chamber of Commerce etc.

A Debilitating Corruption Scandal Threatens More Damage to Mongolia’s Economy www.worldpoliticsreview.com

Mongolia has been rocked in recent months by a series of corruption scandals that have prompted large-scale demonstrations in the capital, Ulaanbaatar. The government of Prime Minister Ukhnaagiin Khurelsukh has been paralyzed by revelations that senior government officials, including members of his Cabinet, misused funds that were intended to assist small and medium-sized enterprises. In an interview with WPR, Morris Rossabi, a professor of East Asian history at Columbia University, explains why corruption is so widespread in Mongolia and why the current wave of scandals comes at a particularly bad time for its economy.

World Politics Review: Why is corruption such a pervasive issue in Mongolia, and how did it motivate so many people to take to the streets last month?

Rossabi: Corruption has accelerated dramatically in Mongolia’s “wild ride to capitalism” since 1990. The country was plagued by minor levels of bribery and graft from its empire stage in the 13th and 14th centuries to its communist period from 1921 to 1990, but corruption was not a pervasive part of Mongolian political culture. The post-communist era, however, has witnessed an increase in corruption in politics, business and the educational and medical systems.

To be sure, corruption existed in the communist period, but there were checks on such illegal activities. In an ostensibly egalitarian state with a population as small as Mongolia’s, displays of ill-gotten wealth—in the forms of big houses, fancy clothing and elaborate parties—were both readily noticeable and perilous. The authorities were capricious but had the power to inflict severe punishments for malfeasance. Fear of such reprisals would frequently prevent overt, large-scale corruption.

That changed in the post-communist era, as officials emerged relatively unscathed from accusations and even convictions of accepting bribes or kickbacks. Nambaryn Enkhbayar, a prominent politician who served as both prime minister and president of Mongolia during the 2000s, was found guilty of corruption in 2012 but was pardoned after serving one year in prison. He is now active in politics again, as leader of the small Mongolian People’s Revolutionary Party.

In another well-known case, former Prime Minister Sanjaagiin Bayar was repeatedly accused of accepting bribes in exchange for his signature on a 2009 agreement with a foreign company to extract gold and copper from Mongolia’s largest mine. He and several other officials were finally arrested in 2018, but further legal action has yet to be taken.

The recent street demonstrations, in protest of a Cabinet minister and other senior officials illegally obtaining low-interest loans from a fund allocated for small and medium-sized enterprises, follow in a long line of such efforts. Mongolians took to the streets in 2005 to protest the leasing of land with valuable mineral deposits to Robert Friedland, an American-Canadian financier whose record on environmental protection is so abhorrent that he earned the nickname “Toxic Bob.” In 2008, demonstrations over alleged improprieties in that year’s legislative elections resulted in a number of deaths and in damage to buildings in the center of Ulaanbaatar. These efforts, however, did not lead to significant reforms, and it remains to be seen whether the current protests will be more effective.

WPR: What actions have been taken by the government so far in response to the current loan scandal, and what further measures could officials take to restore public confidence?

Rossabi: The government has been compelled to act in light of the seriousness of the accusations. Twenty-one members of parliament and several Cabinet ministers are confirmed to have profited from low-interest loans designed to assist small and medium-sized enterprises. The Economist Intelligence Unit, citing local press reports, notes that 124 out of 134 firms that received loans from the fund in 2016 were connected to government officials or their families. For example, the roads and transport minister requested and received a loan of $371,000 for his wife’s high-end postoperative medical center. Meanwhile, small business owners with no political connections frequently reported that they had received no responses or were denied loans.

In response to the scandal, the head of the fund in question has been arrested and a Cabinet vice minister, as well as at least two other officials, have been detained. The minister for food, agriculture and light industry, Batjargal Batzorig, resigned over the revelation that members of his family had received a loan for a transport company they owned. Khurelsukh appears to not have been involved, but many lawmakers thought he should accept some of the blame. Nonetheless, he survived a vote of no confidence in November. Mongolian media outlets speculated about the deals he made with other members of parliament to retain his post, but no evidence of such backroom dealing has emerged.

The government will require significant reforms to restore public confidence. First, it is notable that this widespread corruption scandal was revealed by local investigative journalists and not by the government’s own anti-corruption agency. This is a sign that the agency needs more personnel, resources and authority. Second, the accused government officials must be prosecuted and, if found guilty, must serve significant prison sentences. Finally, in the future, international aid funds should be overseen by a special agency, shielded from interference by senior politicians. Without these measures, corruption in government will persist.

WPR: How is the ongoing furor over corruption and the related political dysfunction likely to affect Khurelsukh’s policy agenda?

Rossabi: Khurelsukh was elected in 2017 after his predecessor was caught on tape requesting payment for an appointment to a position in government. It is a sad irony that someone who took office partially as a response to corruption now finds himself mired in a corruption scandal.

The current president, Khaltmaa Battulga, is a political rival of Kurelsukh’s and has called for his resignation, but Battulga’s criticisms were seen as lacking credibility due to his own history of profiting from the poorly administered sale of state assets during the 1990s. Still, the scandal-ridden Cabinet and the power struggle with Battulga has crippled Khurelsukh’s ability to govern effectively.

This plague of scandal and dysfunction comes at a particularly bad time for Mongolia’s economy. In 2017, the International Monetary Fund provided a $5.5 billion guarantee for unpaid Mongolian loans, rescuing the country from a sovereign debt default. But the current scandal has no doubt undermined confidence in the Mongolian government on the part of the IMF and other international financial institutions, potentially affecting their future approach toward Ulaanbaatar.

More broadly, the government needs new economic policies to diversify away from mining. Mongolia’s reliance on the extraction of metals and minerals to power its economic growth subjects it to the vagaries of world commodity prices. A drop in these prices over the past four years has dealt a devastating economic blow. Reformers in government, as well as international financial institutions and development banks, had plans to promote other sectors, such as manufacturing and eco-tourism. But corruption scandals have diverted attention from these efforts. As if that wasn’t bad enough, the National Chamber of Commerce and Industry, fed up with pervasive graft, has urged its members not to pay taxes until corruption is rooted out and the government has stabilized.

Clearly, a full recovery from these scandals will require considerable time and persistent effort. It may even require drastic reforms to Mongolia’s political and economic systems.

Religious organisations in Mongolia under inspection www.news.mn

Mongolia’s National Emergency Management Agency has been holding an inspection of all monasteries, churches and religious organisations which are currently active in Ulaanbaatar. The inspection is aimed at preventing fire and identifying any other possible health risks in places where many people gather.

Former Justice Minister arrested on corruption charges www.news.mn

Earlier today, Mongolia’s anti-corruption agency arrested former Justice Minister D.Dorligjav and his younger brother D.Baatar. Law enforcement officers also searched the former minister’s home yesterday (7 January).

Two Mongolians arrested for smuggling dinosaur fossil www.news.mn

Mongolian Police have arrested two people over the illegal possession of a rare dinosaur fossil. The pair, a man from Ulaanbaatar and another from South Gobi (Umnugobi) province, were arrested after the police found information on the internet announcing the sale of the fossil.

Prosecutor reveals officials involved in SME Fund scandal www.zgm.mn

Prosecutor’s Office recently disclosed the names of suspects in an official letter addressed to the Constitutional Court.

Children overcrowd hospitals due to swine flu outbreak www.zgm.mn

Regardless of immediate measure to increase capacity by adding additional beds, hospitals overcrowded with children suffering from influenza and common cold. In the first week of this year, a total of 4,136 instances out of 57,508 ambulatory care were diagnosed with influenza or similar illness in the capital city alone.

A cold blast from China chills industrial metals markets: Andy Home www.mining.com

Base metals started the new year where they left off the old one, by falling again.

The London Metal Exchange index (LMEX) slumped to a one-and-a-half year low of 2730.1 on Jan. 3.

The trigger was Apple Inc's revenue warning, not the type of news event that normally roils prices of old-economy metals such as copper, lead and zinc.

But the reaction was highly instructive of what to expect in the months ahead. It signals that base metals continue to be beholden to the bigger financial narrative, locked into a risk-on, risk-off dance with global markets, particularly the U.S. stock market.

First and foremost, it signals that base metals continue to be beholden to the bigger financial narrative, locked into a risk-on, risk-off dance with global markets, particularly the U.S. stock market.

The linkage comes in the form of U.S. President Donald Trump and the tariffs tension with China.

What really spooked global markets in Apple's rare warning was the company's comments about disappointing sales in China, an ominous sign that a slowdown in the world's second largest economy risks ricocheting on the world's largest.

Such fears were only exacerbated by sliding manufacturing purchasing managers' indices in both countries.

Signs of actual contraction in China bode particularly ill for metals, given the country remains the engine of growth in global usage.

Metals bulls are banking on Beijing doing what it always does when the going gets tough, opening the taps and stimulating investment down the usual infrastructure and construction channels.

We've been here before in 2009 and 2015 and both times the trick worked. This time, however, could be different.

Made in China
Both China's official manufacturing PMI and the Caixin PMI, which captures the mood among the country's smaller companies, fell below the 50 level in December, signalling slowdown has become outright contraction.

The last time this happened was in 2015, a year of misery for the LME metals complex, which only bottomed out in January 2016.

There was no trade war back then but the core driver is the same. Both slowdowns were made in China by the Chinese government.

Beijing's target last year was the same as in 2015, namely to soak up excess liquidity caused by the previous stimulus and its most obvious manifestation in disorderly property markets.

Metals analysts have been fretting about the impact of China's credit tightening for many months, particularly since it has hit hardest the relatively dynamic private sector.

This time around, they have more to worry about.

Overlaying the credit chill effect on manufacturing activity has been Beijing's new "war on smog" policy.

Analysts tend to focus on the winter heating season restrictions but the environmental crackdown has been running continuously for over a year and has encompassed every part of China's metals economy.

Many smaller companies, both producers and users, have been closed while even official-sector supply chains have been upended by rounds of inspections and restrictions.

It's impossible to quantify the cumulative hit in terms of headline growth but there is no doubt that the clean air campaign has been a significant drag and one that isn't going to go away any time soon.

The two government policies have combined to hit China's manufacturing sector even before the tariffs effect comes fully into play.

Stimulus and the law of diminishing returns
The Chinese authorities have reacted with an increased sense of urgency to the deteriorating economic picture.

More infrastructure spending has been promised with the focus on urban subway systems, high-speed railways and power grid spending.

This week has brought a bigger stimulus jab in the form of a cut in banks' reserve ratios, in effect freeing up $116 billion in new lending.

However, Beijing's stimulus cycle is subject to the law of diminishing returns. The scale of stimulus in 2015-2016 was much smaller than that of 2009 and the third is likely to be smaller still.

Not only is it physically impossible to replicate the amount of infrastructure built over the last 10 years – there are, after all, only so many airports and high-speed railway lines that even China needs.

But Beijing is now wary, third time around, of the excess that inevitably follows a government-made boom.

Look, for example, at the residential property sector, where policymakers are still warning of speculative excess and trying to wean regional governments off their financial addiction to land sales.

Stimulus the third time around will be no shock-and-awe package but, rather, an attempt to smooth out select areas of weakness in the Chinese economy.

It will also take time to flow through to tangible metals demand.

Beware dead cats
A broad analyst consensus is that the impact of the current round of Chinese stimulus will start to lift metals prices some time in the second quarter.

Before then, to quote Goldman Sachs, "industrial metals are likely to face material headwinds and remain volatile in (the first quarter)." That Jan. 4 prognosis accompanied a downgrade of the bank's near-term price forecasts.

Goldman, however, like many commentators is still constructive on the medium-term outlook, maintaining 12-month targets of $7,000 per tonne for copper and $2,000 for aluminium, compared with current prices of $5,930 and $1,860 respectively.

The next few months, everyone seems to agree, are going to be difficult ones for bulls.

There is plenty of potential for sharp corrective rallies. Speculators are short metals across the LME board, according to broker Marex Spectron.

In cases such as aluminium and nickel the positioning is extreme, which is why both are eating into production cost curves.

A corrective bounce is only a presidential tweet away as the markets try and read the smoke signals from the ongoing trade talks between the United States and China.

But any rally may be of the dead cat variety.

Hopes for a trade war peace, or at least a truce, may dominate short-term sentiment but tariffs on China will only accelerate or brake a process that is already underway.

China engineered its current slowdown and now it must engineer growth.

Beijing's biggest problem is how to do this without repeating the mistakes of the past and simply generating a new round of the stimulus-boom-bust cycle that played out after 2009 and 2015.

Complicating this balancing act is the "blue skies" promise made by President Xi Jinping to the Chinese people. The clean air campaign can be dialled down but it cannot be reversed.

And lastly, but not least, Beijing must try and reinvigorate its economy just as manufacturing growth everywhere else is starting to slow.

It's a tall order.

China's third stimulus in a decade may not prove to be three times lucky for industrial metals.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Andy Home, editing by Susan Fenton)