Enkhbayar languishes in prison, says family

The recently arrested former president of Mongolia has suffered human rights abuses from investigators and prison authorities, and his health is ailing, said his family and legal council.

Former president Nambar Enkbayar has waited in a prison facility since April 13 while prosecutors investigate him on corruption charges.

Officials from Mongolia’s Independent Authority Against Corruption (IAAC) attempted to arrest the former president on orders from the Sukhbaatar District Court during late evening on April 12, but failed to take him into custody due to interference from his security. Enkhbayar holed up in his home in the capital while his supporters protested on the city streets. It was not until the next morning that police officials raided his home and took him into custody.

The local television network owned by Enkhbayar was ready to capture the event on camera when police came to arrest him. On the video captured by local news, the former president was seen leaving his home without wearing shoes and his coat over his head while police escorted him away.

Enkhbayar’s family said the case is politically motivated. His chief defense lawyer, Oktober Basandkhuu, said even the district judge who issued his client’s arrest was appointed by rivals in government who would go to any lengths to keep him from running in next June’s election.

“The whole purpose of his detention is not to corroborate the investigation,” said Basankhuu. “It’s clearly to imprison and isolate him.

“They decided the outcome long ago,” he said, speaking of Enkhbayar’s rivals in government.

Enkbayar’s lawyer said that a local association of independent human rights lawyers had already deemed the situation “political imprisonment”. He added that the local branch of Amnesty International had failed to send word to the main office in London.

On the morning of May 4, Enkhbayar announced he would refuse water. Leading up to the dry hunger strike, the 54-year-old former president refused to eat anything but a potato and bowl of rice each day since shortly after his arrest.

His physical condition has worsened since he announced his demonstration, said his lawyer. At the time he interviewed with Reuters, Basankhuu said his client’s heart rate had jumped to 130 beats per minute in addition to signs of fatigue. He also reportedly demonstrated symptoms of liver complications, including yellowing of the eyes and a dark-yellow skin complexion.

Enkhbayar’s family complained that they nor his legal defense had been notified of his decision to go on a dry hunger strike within the three hours mandated by law. They also said authorities denied his family face time to plead with Enkhbayar to give up his hunger strike.

These claims are in addition to the alleged loss of Enkhbayar’s confidential meetings with his lawyers.

“He essentially has no confidentiality. There are four cameras in the observation room and they’ve all been installed since his detention,” said Basankhuu.

When word got out that the former president’s health was deteriorating. Enkhbayar’s wife, Onon Tsolmon, said she rushed to see her husband at the prison facility in Mongolia’s Tuv province, about two hours from the capital, Ulan Bator. Arriving sometime around midnight, she said a crowd of about 10 doctors were present but ignored her inquiries regarding her husband’s health.

She said she later learned from an outside source that they had all signed confidentiality agreements that prohibited them from speaking with the president’s family, his legal defense, or the media.

Neither she nor her son has seen Enkhbayar since the day of his arrest.

The list allegations of abuse include deliberately conducting construction outside his cell throughout the night to prevent him from resting, coercing him to testify against himself, and threatening to hurt or kidnap his daughter. He was also allegedly refused the medical treatment needed before undergoing his dry hunger strike, which could have exacerbated his ailments.

“They’ve been breaking the law every step of the way,” said daughter-in-law Tumur Darima. “They’ve threatened they could do anything to break him down.”

All the while, elected officials and candidates are ramping up campaign activity for this year’s June parliamentary elections.

The government is under tremendous pressure to redistribute the wealth raked in by massive mining projects such as the huge Oyu Tolgoi copper and gold project and Tavan Tolgoi coal mine. For this aim government has allocated 20 percent of all shares of the state-owned mining firm operating at Tavan Tolgoi to Mongolian citizens.

Political analyst and head of the Sant Maral Foundation polling agency Luvsandendev Sumati said he felt Enkbayar was going to “extreme measures” to rally support from his followers. He said the president may have been disappointed in the lack of demonstrations held in his behalf following his arrest and the little attention in the media brought to his case.

Enkhbayar served as both prime minister and president with what remained of the country’s communist party after democracy was installed in 1991, now called the Mongolian People’s Party. After losing the presidency to Democratic Party candidate Tsakhia Elbegdorj in 2009, he set out to begin his own offshoot party under the remnant communist party’s original title, the Mongolian People’s Revolutionary Party.

“The Democratic Party has usually occupied the niche of serving as the protest vote, but now [Enkhbayar’s opposition coalition] is competing for this,” Sumati said. “Enkhbayar had until now usually belonged to the ruling party. This is a new role for him to play.”

According to local media, since his arrest four seat holders in Parliament have abandoned the Mongolian People’s Party to join up with Enkhbayar.

Images courtesy of Wikipedia Commons, News.mn

Find my report from Reuters here.


Mongolia Could Go It Alone at TT, says Erdenes-TT COO

Mongolia might choose to go it alone on the development of the western block of its giant Tavan Tolgoi coal mine after struggling for years to find the right investors, an executive with the state-owned firm in charge of the project said.

Speaking at a regular meeting of leaders from Mongolia’s private sector on Monday, Graeme Hancock, the chief operating officer of Erdenes-Tavan Tolgoi, suggested that the Mongolian government would not be able to appease the diverse foreign investors hoping to invest in the project.

“In my view, this is a very difficult group to put together into a consortium,” said Hancock. “We’ve got a pretty good chance it will never happen.”

If that were the case, Erdenes-TT was likely to reassume control of the property and lead the western block of the project itself, he said.

Last July, Mongolia announced that China’s Shenhua Group , U.S.-based Peabody and a mysterious Russian-Mongolian consortium headed by Russian Railways would be handed the rights to develop the project, but after Japanese and South Korean bidders complained the government said the decision was not yet final.

The Tavan Tolgoi coal deposit, in Mongolia’s south Gobi region, has estimated reserves of as much as 7.5 billion tonnes of coal, including the world’s largest untapped deposit of coking coal used to make steel.

A final decision on the structure of the consortium has been repeatedly delayed, and Hancock said the matter was now unlikely to be settled before a parliamentary election in June.

Shenhua and Peabody were not immediately available for comment when contacted by Reuters.

Analysts have accused Mongolia of putting politics ahead of business, saying its priority was to appease its two giant neighbours, Russia andChina, rather than get the best deal for Tavan Tolgoi.


Mongolia’s tiny economy is at the beginning of a mining boom and others warn the country might still need experienced overseas firms to help develop huge projects like Tavan Tolgoi.

“All options are open to the government,” said Dale Choi, chief investment strategist at Ulan Bator-based Frontier Securities. “I think it’s in Mongolia’s best interest to have a major coal company involved because Erdenes is a small young company.”

Mongolia’s plans to list Tavan Tolgoi’s eastern Tsankhi section, originally scheduled for the first half of 2012, have also been delayed, with parliament still deliberating over not just the investment agreement for the western block, but also a new securities law.

Analysts have said a domestic and overseas initial public offering for 29 percent of Erdenes-TT could raise around $3 billion. Hancock of Erdenes-Tavan Tolgoi said a decision to take control over the western block could potentially double the value of the company.

He added that the company would go ahead with the development of the western block in May or June, whether an investment agreement had been put in place or not.

Mongolia sits on vast quantities of mineral resources but it has struggled to find the investment required to build the infrastructure, processing facilities and transport network required to deliver its coal or copper to markets.

Tavan Tolgoi, around 300 km (190 miles) from the Chinese border, is already producing 2.5 million tonnes a year. It aims to raise total annual output to 6 million tonnes by 2013, eventually rising to 20 million tonnes.

Note: This story is a reprint of an article written by my from Reuters

Enkhbayar in Jail

Officials took Mongolia’s third president into custody last Friday, stirring up protest among his supporters and in Parliament. The former president’s arrest has drummed up anger among the populace just months away from this year’s June elections.

Videos of the arrest show former president Nambar Enkhbayar being escorted away without wearing shoes by out-of-uniform officials yesterday morning in Mongolia’s capital, Ulaanbaatar. A district court prompted the nation’s Anti Corruption Authority to go forward with the arrest for his repeated refusal to cooperate with a police investigation into himself for corruption.

At around 9 p.m. last Thursday night protesters took to Sukhbaatar Square, the capital’s most common gathering place for protests, and the same place where unrest broke out on July 1, 2008 after anger over supposed election fraud. Angry citizens took to the streets after current President Tsakhia Elbegdorj told local press that the he felt the election had been fixed to allow the country’s Mongolian People’s Revolutionary Party (currently under the name the Mongolian People’s Party) to remain in power.

That protest turned violent and demonstrators began marching the streets. Three high-ranking police officers are now facing charges for the murder of four individuals for their alleged distribution of live ammunition, according to a report by the Chinese news agency Xinhua.

Officials announced the reasons for Enkhbayar’s arrest to the press following the public outcry. The lead investigator to the case for the Anti Corruption Authority, E. Amarbat, said the former president has been investigated since February 2010 for his private use of public funds.

“We attempted to hand [Enkhbayar] a summons for his questioning 10 times, and each time he refused”, said Amarbat. The official added that his agency tried to reach him at his home and office to no avail.

Enkhbayar has publicly vowed to refuse all questionings by investigators on the matter.

The three main charges are the illegal privatization of local newspaper Ulaanbaatar Times, the illegal privatization of the Urgoo Hotel in his sister Enkhtuya’s name, and the use of donated equipment from Japan to open his own television studio and the station TV-9.

Amarbat said that equipment for Japan was to be given to the government to produce religious-based programming. TV-9 is the same station whose journalists were facing pressures from police officials to reveal their sources to a story on the Ulaanbaatar Times. Privatization of the local newspaper began when Enkhbayar was president, but the government turned against after he lost the 2009 election to current President Elbegdorj.

The international press organization Reporters Without Border reported that the newspaper’s former editor in Chief, Dulguur Chuluunbaatar, was arrested in March last year and was held for two months.

Officials said Enkhbayar will remain in prison for 12 days while interrogators question him on the charges.

Once again there was protest at Sukhbaatar square by former President Enkhbayar’s supporters on the day of his arrest. At the rally demonstrators gathered waving the flags of Enkhbayar’s political party, chanting, “Free him”!

Many offices located near Sukhbaatar, including Central Tower and the the Blue Sky Building, asked their workers to leave early on Friday.

One person in attendance, Ulzii Bud, was one of the original supporters of Mongolia’s 1991 protests, where citizens demanded a democratic government.

This year Mongolians will vote in parliamentary elections. Many voters have been swept up by populist sentiments, opposing foreign ownership of Mongolia’s land for mining.

“I’ll vote for whoever works to represent our rights and is honest—someone like Enkhbayar”, said Bud.

Nationalist undertones were also present, as much of Mongolia’s population fears foreign influences, especially from China. A recent proposal by Chinese aluminium producer Chalco to purchase up to a 60 percent interest in SouthGobi Resources, a coal miner with a project in Mongolia’s southern Gobi region, has many citizens upset.

“I’m here protesting for the independence of my country”, said Shinee Enkhtaiwan , a herder from Mongolia’s rural regions. “People are using my country and we’re running out of land because of the Chinese who come and take it away”.

“We’re running out of places to herd our animals to the miners”.

Political instability has many foreign investors wary about directing their money into Mongolian enterprises. Mongolian policy makers have been known to speak out and act against the interest of foreign companies to stir up populist support.

Promises Best Left Broken


Government has committed itself to fairly distributing the wealth from Mongolia’s booming mineral sector to the people, but its plans so far have not come together as it would have liked. Now government is left with the task of finding some way to continue its monthly allowance payments during this recently commenced spring session of Parliamen, while many argue that its attempts thus far have been shallow short-term resolutions rather than long-term resolves to poverty and poor standards of living.

Parliament members were falling over themselves in 2008 trying to top their competitors’ promises for election into office. While state Parliament positions are by appointment proportionate to the number of votes a party received, local elections have citizens directly elect their public officials. Meanwhile sitting members in state Parliament interested in extending their time in office must make sure they still have a seat left for them after the elections.

The 2008 elections had party members promising increasingly more money in the form of cash handouts to citizens until the Mongolian People’s Party topped off at MNT 1 million a head. Government was slow to make those payments as it had not actually developed a plan to finance that sum for the 2.8 million citizens living in Mongolia. Eventually the delay led to protests following the 2009-2010 so-called zud, an extremely harsh winter with excessive snowfall that usually results in large-scale animal deaths.

Eventually the Human Development Fund was set up with the intention of directing the wealth from the country’s mineral economy to diversifying the economy and improving the lives of people. So far, however, the fund has chiefly been a reserve for the MNT 21,000 monthly allowances set up to make good on those election promises until meeting the MNT 1 million mark.

Half way into each month long lines form in front of commercial banks so people can collect their MNT 21,000 allowance, but last month people were turned away. Bank officials said they had not yet received the payments from the government, spreading distress to the populace. 

“It is true that this month’s allowance is postponed,” O. Khuyagtsogt, budget officer at the Finance of Ministry, told local newspaper Undesnii Shuudan. “The reason is related to an inability to gather the funds in time.” He added that this month’s payments would be made in the middle of the month, just as they had before.

Most analysis shows that the cash handouts have been largely detrimental to the economy by exacerbating inflation pressures already present in Mongolia due to too-fast growth and volatility to the tugrug. In February inflation was up 12.5 percent compared to a year before, according to the National Statistical Office (NSO). And meat prices are reaching record highs, with mutton costing MNT 8,500 a kilogram after never before surpassing MNT 5,000 per kilogram, reported local financial magazine Mongolian Economy.

Since the implementation of the allowance system, politicians have continually criticized the practice of cash handouts. Rather than point to rising inflationary trends, however, they would rather talk about how handouts make people lazy, as if any one person could actually live on MNT 21,000 over the course of a month. Indeed, however, employment statistics have shown a drop since their installation with a 51.6 percent increase in the number of registered unemployed in February compared to the year before, according to the NSO.

Some reports have spread news that the HDF’s fund are running short, leaving the finance ministry scrambling to find the money. The finance minister, D. Khayankhyarvaa, had previously announced that funding was adequate to run until July, but the delay last month had some wondering if that was true. The 2012 budget allotted MNT 800 billion to the fund, of which MNT 700 billion was directed towards the MNT 21,000 allowances. Up until now, government had used funds from a pre-payment from the investors of the Oyu Tolgoi copper and gold project. Parliament had expected at least half of the residual MNT 800 billion to come from an advance payment from investors of the Tavan Tolgoi’s western tsankhi project as well, but delays in their selection has made it impossible.

The turn of events make further payments down the road, such as the MNT 1 million to elderly and disabled people, looking unlikely as well. The government has since decided to distribute an additional MNT 1 million worth of stock in Erdenes-Tavan Tolgoi as an option in place of cash handouts as well.

Although it is encouraging to see the government going to such pains to fairly distribute this wealth among the populace, the rash, half-thought-out methods they have used so far are troubling. Hopefully they can learn from their mistakes and instead use collected taxes from mining companies for infrastructure projects and propping up industries that would create new jobs, as the International Monetary Fund has recommended. On the other hand, it would be quite distressing if the government suddenly lost interest in the matter all together after elections this June.

A Forum for ’em All

While at other forums the mining industry seems to consume every conversation and topic, this year at the Mongolia Economic Forum guests and presenters seemed to want to talk about anything other than the booming mineral sector. While the mining sector fueled last year’s 17.3 percent nominal gross domestic product  growth, as reported by the World Bank, diversification will help the nation avert sour side effects such as “Dutch disease” and the “resource curse.”

At the discussion for “Economic Development: Inclusive Growth,” participants discussed how Mongolia must go beyond the Human Development Fund and establish a sovereign wealth fund that can direct money generated from the mining industry to investments to develop other industries in Mongolia. Chile was used as an example of a country that has benefited tremendously from its mineral industry, but has managed to build up industries such as wine production, agriculture, and fisheries. For Mongolia, eco-tourism, sea buckthorn, organic meats, and cashmere are all viable opportunities discussed that could be used for diversification of the economy. During the conversation C. Demberel, director of the Mongolian National Chamber of Commerce and Industry (MNCCI), called on representatives from industries unrelated to mining to speak loud and demand support from government.

“Equal opportunity, especially for young people, is needed by government,” said Demberel. “Only when the proper environment is created can we see the benefit. Will it be only the mining sector, while other sectors die?”

The conversation took a similar tone at the “Inclusive Growth: Risk Management” discussion. However, instead of sovereign wealth fund, a fund for fiscal stability that would counteract volatility to commodity prices was the mechanism most discussed.

“A currency turnover of three times means a shock to the economy that would hit Mongolia three times harder,” said N. Zoljargal, deputy governor of the Bank of Mongolia. He added that government interference exacerbates risks and urged that monetary policy be free from politics. “We’re not gods or fortunetellers. Better to be conservative and underestimate than to be overly ambitious.”

Risk management is a relatively new concept to Mongolia that it is only beginning to introduce to the economy. Now would be an apt time as well, with rising credit and greater dependence on commodity prices. 2011 saw the highest number of mortgages ever recorded in Mongolia, said Randolph Koppa, president of the Trade and Development Bank. Unfortunately, credit is also growing tight, which is why Trade and Development Bank was so enthused by the 4.8 percent stake purchase by Goldman Sachs. The suggestion for a protective fund to keep in times of volatile prices for commodities such as copper and coal was supported by all participants. However, diversifying the economy through investment is the most proactive step to take, participants agreed.

Randolph Koppa, president of the Trade and Development Bank echoed suggestions to hedge external risks, noting that 45 percent of all costs from the mining industry last year went to diesel fuel. Insecure sources of gas and diesel fuels has continually been a problem leading to escalating prices, which came to a head at the top of the new year when gas prices spiced up to MNT 250. The government is currently planning for a coal-to-liquid fuel plant at the planned Sainshand industrial complex near Choir Soum.

There were also echoes of recommendations made by the World Bank and International Monetary Fund for a flexible exchange rate rather than wasting resources on a targeted value, potentially exposing the economy to weakness. But perhaps special guest speaker Jonathan Greenberg, a professor at Stanford University, summed up these sentiments of cooperatives efforts and the need to go beyond mineral production best when he quoted the proverb “100 friends are more precious than 100 pieces of gold.” He lauded the passage of laws for prudent fiscal action, such as the Integrated Budget Law.

“Overcoming the resource curse is not about luck,” said Greenberg. He added that being prepared means listening to the opinions of experts from various sectors, and employing “diversification, reinvestment, and stable employment.”

Despite all this talk of good will, it will be left to Parliament to decide what happens next. Policy makers have vowed to consider the suggestions made and implement them into upcoming laws to go before Parliament. Much of the discussions were framed around ideals rather than any detailed policy suggestions as well.

The real shame, however, was the government’s failure to utilize the event as an opportunity to make some important announcements. Bloomberg news has made six reports since the conference, regarding the Erdenes-Tavan Tolgoi public offering and marketing of the USD 600 million Euronote bonds, yet none of these were mentioned by officials at the event. With a large gathering of guests from Mongolia’s private sector and abroad, one could imagine this to be a perfect opportunity to get people excited. Mongolian business owners have never been known to use these events as a microphone to advocate for some outcome or stir up a buzz, as Oyu Tolgoi Chief Executive Cameron McRae did at last year’s Discover Mongolia forum when he warned Parliament not to tamper with the 2009 agreement (which they eventually would do about a month later).

A Pressing Issue

Mongolia placed 100 out of 179 countries on the Press Freedom Index 2011-2012 by Reporters Without Borders. While the ranking follows a spat of activity that has had reporters and authorities contending with one another, attacks against the press is only part of the story.

“Where there is protest, often times abuses towards the media are not far behind; and this year there was plenty. Reports Without Borders writes, “Crackdown was the word of the year in 2011. Never has freedom of information been so closely associated with democracy. Never have journalists, through their reporting, vexed the enemies of freedom so much. Never have acts of censorship and physical attacks on journalists seemed so numerous.”

Although this diatribe on dictators and suppressions of liberties means little for Mongolia, protests ignited was at the root of the acts described, and populist protests are not unheard of here. And while ranking a little past halfway is far from encouraging, the media and Mongolia can hardly be characterized as entirely innocent. In Mongolia many journalists see their position as a stepping stone to a political career, while others receive large payments from elected officials during election season for favorable coverage. Sources in government have also complained of midnight phone calls threatening to print a false article unless they pay a hefty bribe.

Classified cable message 08ULAANBAATAR9191from the U.S. Embassy to Mongolia which appeared on the wikileaks website last August, paints a dim picture (yet not entirely bleak) of the state of news reporting in the country. The report characterized the Mongolian press as “’partly free”, but feeling intimidated.” Globe International, an international organization that advocates for media and human rights, reported 37 cases where officials violated the rights of reports in 2007, including three physical attacks, 20 searches, two criminal charges after printing information, two imprisonments, and 10 cases of court proceedings.

“Journalists say they are intimidated through civil and criminal defamation suits as well as pressure to reveal sources,” said the wire. “They report sometimes being questioned by police or intelligent officers, and a lack of police interest in investigating when they are physically attacked or harassed,”

Last month the International Federation of Journalists (IFJ) condemned an assault on the Khongor Television news crew on 2 January, where guards reportedly assaulted journalist T. Danaasuren and camera operator J. Tuvshintulga during an incident between independent artisan miners and guards from the Special Mines company in Bayankhongor Aimag. The television crew was reportedly approached by the company’s guards while entering Special Mines’ premises to investigate the dispute. The guards reportedly threatened to kill the news crew, and struck Danaasuren in the face. The guards seized the crew’s camera and detained them in an unheated ger for two hours. The camera was destroyed during the scuffle between the camera operator and the guards.

Meanwhile, the Mongolian Journalists Union and TV9 have reported increasing pressure from police officials to disclose their unnamed sources. Local newspaper Zuuni Medeee reported that police officials have gone as far as to threaten reporters with charging crimes against them if they do not give up their right to keep their unnamed sources confidential. Police have focused their attentions on one program by TV9 in particular. The police have reportedly interrogated journalist N. Binderya, general producer D. Turmunk, and other staff about the program. The police have demanded that journalists name their sources and the content of the program, while TV9 has since decided to suspend the releases of that program.

Like most private business, generally the owners of news outlets are kept secret. The lack of transparency has been a barrier that foreign politicians such as Vice President Joseph Biden during his summer visit and financial parties interested in the development of the Mongolian Stock Exchange have strong pushed for. Only former president N. Enkhbayar, who is currently being investigated for corruption, has publicly disclosed that he owns the television network TV9, and the leaked wire says it is rumored that his wife owns Zunii Medee, a leading local newspaper.

One event involving the incarceration of the owner of a large newspaper after attempting to privatize it has demonstrated how important government officials believe it is to keep the release of information under tight control. D. Chuluunbaatar, the former editor-in-chief of the daily newspaper Ulaanbaatar Times was arrested last March, charged with illegally privatizing the newspaper and causing serious damage to public property. In 2008 Chuluunbaatar led the management team to privatize the newspaper with assistance from Capital City Privatization Commission, reported UB Post, a local English language newspaper.

When Chuluunbaatar first took his position with the newspaper, the office was partly demolished and facing millions of tugrugs in debt. To many, his ability to privatize the newspaper and extend its life would look to be a success, however the change in regime for the government in 2009 may have resulted in the loss of some powerful allies, and his incarceration may be because he was simply no longer benefiting anyone. The editor was finally freed from prison last July after remaining in custody for two months, reported Reporters with Borders, due to ailing health problems.

Current legislation does little to protect the rights of journalists or inspire much confidence in free speech and transparency. The State Secrets Law stretches so far and is so all encompassing that it keeps a tight lid on data as seemingly trivial as the depths of rivers and the name of scholarship recipients. However, the wire bluntly states that secrecy over scholarships makes it doubtful that they are awarded fairly and impartially. Libel lawsuits can be particularly troublesome, and fear from them causes many reporters to self censor their work.The leaked cable wire also provides a generally negative assessment of those working in the news industry, describing news workers as “inexperienced young kids.” Most of the news reporting on television focuses is rather shallow and banal. The line between reporting and advertising blurs as roving reporters offer endless reviews of shops, products, and services throughout the city. Fluff talk shows features that feature officials and foreign visitors as guests with light conversation and softball questions are also numerous.
Interviews in print news reports are often incomplete and fail to address many lingering questions that the reporter either failed to consider or is afraid to address. Personal experience shows that most reporters and journalists are poorly trained and are never taught principles of objective and ethical reporting. The most savvy and prolific journalists most often have attended events abroad through foreign press exchange programs or have direct contact with foreign journalists in Mongolia. Otherwise, the same kind of shallow reporting and overly-flattering interviews with government officials and people in business (who may or may not advertise with the news outlet) is passed onto the next generation. Journalists are often low paid and overworked, sometimes having to write as many as five to 10 stories a day. Journalists have spoken frankly about using a single press release to write multiple articles in a day. Promotion is elusive to many, and usually is more dependent on a journalist’s affiliation to a particular government official than any merited achievements.

So, while Mongolia is still far from the worst example of journalism (after all it is only 60 places behind the United States), it still clearly has a long way to go. It’s certainly not the worse in Central Asia either. Azerbaijan at 162nd takes that prize. Some 70 years as a Soviet satellite, where the media and the government were one in the same, is bound to leave a scar. Until the public starts expecting more from its media things are unlikely to change. To do that, however, people would need a frame of reference for quality.

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What’s in a Credit Score?

Standard & Poor’s Rating Services’ recently upgraded outlook is a sign of positive development to the Mongolian economy and has already resulted in a similar upgrade for Golomt Bank. However, a financial crisis, the kind the International Monetary Fund has warned about, could send that rating back down; while the passage of the securities law, as former Mongolian Stock Exchange President Bill Gorman suggested, and better banking regulation could eventually pull Mongolia out of the junk bond category.

S&P revised Mongolia’s outlook to “positive” from “stable” and affirmed its nation’s sovereign ratings, citing its growth prospects as more mines begin operations. The rating has a crucial influence on the ratings of banking agencies, which accounts for a similar boost to Golomt Bank’s rating. Mongolia’s long-term sovereign rating remains “BB-” and its short-term rating “B”, S&P said. The nation’s Mongolian Stock Exchange (MSE) TOP 20 stock index gained 2.8 percent following the report, the biggest one-day increase in months. The biggest threats to Mongolia’s rating are instability within the economy and excessive government spending.

Both the World Bank and IMF have warned that government allowances, raises to government salaries, and other misappropriations of government funds will only incite inflation. However, political season is in full swing in Mongolia, and parliament members are having a tough time saying no. Just recently, kindergarten and primary teachers went on strike because of a salary dispute after the government opted to delay salary increases it promised in 2011 to further back this year. International organizations have advised for wise investments in infrastructure as a better use of its money.

Government spending jumped 50 percent in real terms to 6.3 trillion tugrug ($4.6 billion) this year, pushing inflation in the $8.4-billion-economy to 14 percent, Steven Bennett, IMF’s head of Mongolia coverage, said in an interview in Tokyo. Excessive borrowing could also put that rating in jeopardy. The passage of the Fiscal Stability Law would limit the size of the deficit, but it won’t take effect until 2013. The World Bank reported that the trade deficit neared record levels at USD 1.4 billion in September, mostly due to the import of mining-related equipment. Credit is a relatively new concept to Mongolia. While credit cards have still not entered the market place, debit cards are commonplace. Bank-issued loans are the only kind of credit available, and banks require proof of a year’s worth of employment for even the smallest of loans. Repayment statistics aren’t available, but anecdotal evidence from personal experience in the countryside does not inspire confidence. What does, however, is XacBank’s introduction of the Kiva program, which allows donors to finance business startups in Mongolia.

The credit rating will certainly have an effect on the sale of the Mongolian sovereign euro-denominated bonds worth USD 600 billion to be sold through the Singapore Stock Exchange (SGX). With a rating of “BB-“, Mongolia is still considered a junk bond, which would ultimately drive up interest rates. The government has said they have acquired a fair interest rate for themselves in statements. With production already begun at the eastern block of Tavan Tolgoi, and Oyu Tolgoi slotted to begin production in 2013—two projects that are expected to drive up the economy—Mongolia looks like a safe bet. However, experts have wondered what a hard landing in China, Mongolia’s prime customer for base metals and energy products, would mean for Mongolia. Of course the fact that the former head of the Development Bank of Mongolia, Ch. Khashchuluunl, lost his job because he said the bond release could not be done is unsettling as well.

Photo courtesy of Flikr.com/Doug88888

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