MNT 1 billion to be invested in Zamyn-Uud free zone www.montsame.mn

Ulaanbaatar /MONTSAME/ At the plenary meeting of the Parliamentary Session on October 4, the parliamentarians continued the first discussion of the draft bills on the 2019 State Budget, Social Insurance Fund budget for 2019 and Health Insurance Fund budget for 2019.

Russia to construct 6 nuclear power plant units in India www.rt.com

Moscow and New Delhi have agreed to extend their peaceful nuclear energy business. Russia’s Rosatom will build new sites in India, according to an agreement signed during Russian President Vladimir Putin’s visit to India.
“The parties plan, in particular, to develop the project on construction of six Russia-designed nuclear power plant units in India at the new site, to expand cooperation in third countries and cooperation in new promising areas in the nuclear power industry,” the press release from Rosatom said.

Mongolia’s growth prospects remain robust www.montsame.mn

Ulaanbaatar/MONTSAME/ ‘Navigating Uncertainty’, the October 2018 edition of the World Bank East Asia and Pacific Economic Update was presented today in Ulaanbaatar, Mongolia. The economic update underscores, however that in recent months a combination of trade tensions, higher US interest rates, a stronger US dollar, and financial market volatility in many emerging economies has increased the uncertainty around the region’s growth outlook. Despite a less favorable external environment, the growth outlook for developing East Asia and Pacific (EAP) remains positive. Growth in developing EAP is expected to be 6.3 percent in 2018, lower than in 2017 due to the continued moderation in China’s growth as its economy continues to rebalance. In EAP’s smaller economies, growth prospects remain robust, averaging over 6 percent annually in Cambodia, Lao PDR, Mongolia, and Myanmar between 2018 and 2020.

“Robust growth has been and will continue to be the key to reducing poverty and vulnerability in the region,” said Victoria Kwakwa, World Bank Vice President for East Asia and the Pacific. “Protectionism and turbulence in financial markets can hurt the prospects for medium-term growth, with the most adverse consequences for the poorest and most vulnerable. This is a time for policy makers across the region to remain vigilant and proactively enhance their countries’ preparedness and resilience.”

On Mongolia’s recent developments, the Navigating Uncertainty states that the growth momentum has continued in 2018 H1 as real GDP expanded by 6.3 percent from 5.2 percent in 2017 and 1.4 percent in 2016. Despite cross-border bottlenecks with China and weather-related shocks (including heavy flooding during the summer), growth exceeded expectations in 2018 H1, largely supported by a revived coal sector, and strong private investment mainly in mineral and trade sectors. Improved market sentiments following successful implementation of government’s economic recovery plan also contributed to this positive performance. Positive developments in the labor market resulted in a strong recovery of private consumption in 2018 H1, which grew by 5.7 percent (y/y) from 0.5 percent in 2017. Although inflation remained below the central bank rate of 8 percent, it accelerated to 7.7 percent in July 2018 with rising prices of meat, vegetables (both affected by a harsh winter and heavy flooding during summer), fuel, and the effects of excise tax levied on vehicles. Real average household income, which contracted in 2016, increased by 6 percent in 2018 H1. As a result, the poverty rate is expected to fall in 2018. The fiscal stance has continued to improve significantly, with a surplus of 2.8 percent of GDP in 2018 H1 from a deficit 0.8 percent of GDP in 2017 H1. This is explained by a better than expected revenue performance from coal and copper exports, and a commitment to spending control (e.g., reduction in interest payments, streamlining wage bill through hiring freeze, and rationalization of underperforming capital spending). Substantial improvement in fiscal balance ultimately led to a reduction in government debt in 2018 H1. In addition, government successfully repaid the first payment of USD500 million for the USD1.5 billion Chinggis Bond in January and USD160 million Dim Sum Bond in June. Despite positive terms of trade, current account balance slightly deteriorated in 2018 H1 following a surge in the service account deficit. This was mainly explained by the rise in transportation activities following a robust trade performance. Total imports increased by 40 percent in July 2018, with a surge in capital goods imports. The slight deterioration in the current account was compensated by a rise in official sector support and strong FDI inflows. With the bond repayments, gross international reserves slightly fell to USD2.9 billion in June 2018 (4.9 months of imports) from USD3.2 billion reached in May, its highest level since May 2013. Bank of Mongolia (BoM) has emphasized reserves accumulation rather than nominal exchange rate appreciation. However, due to rising inflation, the real effective exchange rate appreciated modestly by about 3 percent (y/y) in June 2018.

Outlook

Supported by strong domestic demand, FDI and relatively robust commodity exports, economic growth is projected to further improve to 5.9 percent in 2018 from 5.4 percent in 2017, and to accelerate to around 6.6 percent in 2019. Private investment supported by FDI and private sector credit will remain a key driver for growth in the medium term, especially in mining, manufacturing, and transport services. Despite reduced depreciation pressure on exchange rate, inflation will likely rise although modestly putting at risk the BOM medium term target of 8 percent amid strong domestic demand and rising food and petrol prices. Private consumption is also projected to further improve over the medium term following improvement in labor market despite efforts by the central bank to cool off strong credit growth. Accordingly, BOM is likely to gradually tighten monetary policy to contain inflation and continue to build up reserves amid fast growing imports and bank credit. Agriculture is projected to grow by nearly 4 percent over the medium term, but below its 2014–16 performance, due to the adverse effects of a harsh winter and flooding of last summer. Industry is projected to grow by about 8 percent in 2018–20, as substantial developments are expected in mining. Services sector growth would continue to be supported by strong linkages between mining and transport. The unexpected revenue overperformance of 2017 supported by mineral receipts will continue in 2018, resulting in a decline in the fiscal deficit to 1.4 percent of GDP from 1.9 percent in 2017. However, although the deficit for 2019–20 will be lower than planned in the original government fiscal adjustment program, it is projected to average 4 percent in 2019–20 as the revenue performance will be slightly offset by a moderate increase in expenditures (wage increase for civil servants and a rise in donor financed investment). Declining path of deficit will likely result in continued reduction on debt over the medium term. Accordingly, the country’s declining debt will gradually help addressing underlying vulnerabilities of the balance of payments. However, despite robust export growth, investment related imports in 2019–20 would rise and put additional pressure on the current account balance. Relatively stabilized exchange rate will continue as the disbursement of donors’ support and further FDI inflows materialize. Gross international reserves are expected to continue to improve. Given the positive economic outlook, poverty rates are expected to decline starting from 2018.

Risks and Challenges

There are substantial domestic and external exogenous risks to the outlook. These risks include political uncertainty exacerbated by the 2020 election which could trigger a delay in the implementation of mega projects in the mining sector; commodity market volatility and weakening global demand; climate shocks; revived bottlenecks at the China border; and effects of poor handling of the deficiencies of the anti-money laundering regime. Growing political uncertainty could induce a sudden relaxation of the government’s commitment to structural reforms. Mongolia’s growth prospects could be adversely affected by the consequences of an escalating trade war and a potential reduction in global demand—mainly from China—for coal, copper and other commodities and the resultant decline in global commodity prices. Weather related shocks, resumption of non-trade barriers at the border with China, could also significantly affect Mongolia’s coal exports. Limited progress on addressing anti-money laundering deficiencies could potentially affect FDI inflows and the financial sector.
source: World Bank Group

Hong Kong and New York stock exchanges to be observed for Tavan Tolgoi stock trading www.montsame.mn

Ulaanbaatar /MONTSAME/ During the Cabinet's regular meeting on October 3, selection of the stock exchange on which the Tavan Tolgoi shares to be traded was discussed. Minister of Mining and Heavy Industry D.Sumiyabazar gave briefing on that matter.

Mongolia's economy to grow 5.9 pct in 2018: WB www.xinhuanet.com

ULAN BATOR, Oct. 4 (Xinhua) -- Mongolia's economy will grow 5.9 percent in 2018, supported by a revived coal sector and strong private investment mainly in the mineral and trade sectors, the World Bank (WB) said Thursday in its latest report.

Mortgage budget may be cut to half in 2019 www.zgm.mn

According to the Bank of Mongolia (BoM), MNT 16 billion worth eight percent mortgage loans were granted to 239 people in September. Since the beginning of this year, a total of 2,724 people received mortgage loans, totalling MNT 203.3 billion, of which the bank sourced MNT 143.7 billion and the remaining were financed by the Government. The amount of mortgage loan issued in the reporting month decreased by around 30 percent from the previous month and by 32.2 percent from the same period of last year. The Government and the BoM, through previously issued mortgage loan repayments, are financing MNT 300 billion to the mortgage program this year. As for next year, the Government may allocate MNT 115 billion to the program according to the 2019 State Budget draft. That is less than half the allocation for this year when affordable housing program is seen as the most effective solution to air pollution. The draft of 2019 State Budget doubled the tax deduction to first-time accommodation buyers within the frames of air pollution reduction and housing policies.

Canada is not inviting the US or China to WTO reform meeting www.bbc.com

Canada has not invited the US or China to a high-level meeting on reforming the World Trade Organisation (WTO).

MP Ya.Sodbaatar appointed as Minister of Road and Transportation Development www.montsame.mn

Ulaanbaatar /MONTSAME/ MP Ya.Sodbaatar has been appointed as Minister of Road and Transportation Development. Today's plenary meeting of the parliamentary session discussed the appointment as the Government submitted its proposal. After the appointment he received the stamp of the Minister.

Lee Myung-bak, S Korea ex-president, jailed for 15 years www.bbc.com

Former South Korean president Lee Myung-bak has been jailed for 15 years for corruption.

Modi and Putin to ink $5bn missile deal despite US threat www.asia.nikkei.com

NEW DELHI -- Indian Prime Minister Narendra Modi and Russian President Vladmir Putin are expected to sign a deal in New Delhi this week for Moscow to supply S-400 air defense missile systems at a cost of over $5 billion, despite the threat of U.S. sanctions.

The two countries have been negotiating the deal since 2015. The purchase of five S-400 Triumf missile systems and associated equipment is expected to boost India's defense capability along its borders with nuclear-armed Pakistan and China. The S-400 is Russia's most-advanced long-range surface-to-air missile system and is planned for induction in the Indian Air Force by 2022.

"The theme of military-technical cooperation will be on the agenda," said Russian spokesperson for the president Dmitry Peskov on Monday, according to Russian news agency TASS. "A package of agreements is to be signed."

A day after Peskov's remark, Putin's top foreign policy aide Yuri Ushakov was quoted by media as saying in Moscow that the Russian president will oversee the signing of the S-400 deal during his visit.

The S-400 Triumf, which NATO calls SA-21 Growler, is a mobile multichannel air defense missile system. It entered service of the Russian army in 2007 and is capable of engaging all types of aerial targets including aircraft, unmanned aerial vehicles, and ballistic and cruise missiles within a range of 400 km, at an altitude of up to 30 km.

China also bought this advanced missile system from Russia this year following a purchase of Su-35 combat aircraft in late 2017. Those purchases prompted the U.S. to impose sanctions on Beijing last month for violating the so-called "Countering America's Adversaries Through Sanctions Act" which decrees economic bans on those importing Russian military hardware.

S-400 missile air defense systems are seen during the parade at Red Square in Moscow on May 9. © Reuters
The administration of U.S. President Donald Trump has warned countries planning to buy S-400 and other Russian defense equipment of similar action.

"We hope that at least this step [sanctions on China] will send a signal of our seriousness and perhaps encourage others to think twice about their own engagement with the Russian defense and intelligence sectors," the U.S. State Department said on Sept. 20.

New Delhi -- which has a 70-year history of procuring military hardware from Russia from where it gets 60% of its defense equipment -- is hoping to get a waiver from the U.S. for the S-400 deal. After Russia, the U.S. is India's largest arms supplier.

In early September, U.S. and Indian defense and foreign ministers met in New Delhi for their "2+2" talks. U.S. Secretary of State Mike Pompeo said then: "We do understand the history, right, of India's relationship with Russia and legacy systems."

"Our effort here, too, is not to penalize great strategic partners like India, a major defense partner. The sanctions aren't intended to adversely impact countries like India. They are intended to ... have an impact on the sanctioned country, which is Russia," he said.

The Indian Air Force sees the S-400 Triumf as "an absolute necessity and part of its offensive-defense strategy of maintaining a credible deterrence along two fronts with China and Pakistan," according to a report in India Today.

Its Tombstone radar can sense up to 300 targets nearly 600 km away which means that the system "can peer deep inside Pakistani territory and pick up aircraft as soon as they are airborne," the report said. "Deployed along the eastern border with China, the missile system can easily monitor fighter jets taking off from airfields along the Tibetan plateau."

In the summer of 2017, India and China faced a 73-day military standoff on the Doklam plateau bordering Bhutan -- the longest such confrontation between the two countries in decades. The two sides agreed to improve communication earlier this year, but tensions have not dissipated.

As for Pakistan, relations have frayed in the last two years as direct talks stalled and the military exchanged fire in the disputed region of Kashmir.