Mongolia’s success and challenges against COVID-19 www.eastasiaforum.org

The COVID-19 pandemic will go down in history because of the extraordinary impact it has had on health, the economy and people’s lives across the world. Mongolia is no exception and sound government policy is essential to steer it through the next phase of the crisis.

Despite its proximity to China and close ties with South Korea, Mongolia responded quickly and with great success against COVID-19. By mid-February, the government declared a state of alert and implemented a broad array of strict measures. Its borders were sealed to everyone (even Mongolian citizens), large public events such as the traditional new year were cancelled, and people were ordered to stay at home.

All levels of schooling were moved online and non-essential businesses were either closed or shifted to work-from-home arrangements. The government has worked closely with the World Health Organization and delivered a succinct message about social distancing, wearing face masks in public, and the need for frequent handwashing. These swift actions successfully barred the spread of the virus and as of early August there is no community transmission and no record of any COVID-19-related deaths.

Yet the lockdown has undoubtedly stalled the economy. The economy shrank by 10.7 per cent in the first quarter and total exports fell by 28 per cent. The transportation sector experienced a 29.4 per cent drop. The mining sector has been hit hard as a full border closure with China has caused mining exports to cease completely. Although mining activity resumed in mid-March, with coal production almost returning to pre-pandemic levels in June, semi-annual production is under half of that in 2019.

Mongolia is no exception to the swathe of countries bolstering their economies with fiscal stimulus measures. The parliament approved a plan to mitigate the socio-economic impact of the pandemic on 9 April and the government’s stimulus package will be in effect between 1 April and 1 October. Measures include personal income tax and social insurance contribution exemptions for both employees and employers, a corporate income tax waiver and a five-fold increase in the Child Money transfer — a welfare program for families with children who live below the poverty line. The initial estimate of the package is MNT5.1 billion (US$1.8 million) and is subject to further changes.

The Bank of Mongolia and the Financial Regulatory Commission have also implemented a slew of temporary financial leniency measures to prevent a financial crisis. They include a 2 per cent drop in interest rates, the relaxation of reserve requirements for commercial banks, a six month deferral of interest and principal repayments, and loan reclassification and restructuring.

Although the stimulus package has brought some relief to businesses and households, delayed government action has been criticised by academics, businesses and the public. In a survey conducted by the Trade and Industry Chamber of Mongolia, 65 per cent of businesses reported a significant fall in revenue due to the lockdown. Within two months, over 52,000 applications (out of 72,209 borrowers) requested to defer mortgage repayments. More than 37,000 loans have been reclassified in accordance with new loan standards.

But the pause in economic activity has already impacted the government’s budget. Mining revenue makes up about 20 per cent of budget revenue, so the fall in mining exports weighs heavily. Tax revenue fell by around 20 per cent and social security contributions were down by 40 per cent in the first half of the year.

Not surprisingly, the biggest increase in expenditure occurred in subsidies and transfers — now 2.5 times that of 2019. While countries tend to avoid unnecessary spending, Mongolia has more than doubled its expenditure on domestic investment. This is despite the fact the government is heavily indebted, with public debt around 65 per cent of GDP — of which 85 per cent is foreign debt and in need of servicing. This hinders the government’s ability to cushion against present and future economic shocks.

Undoubtedly, the poor are being hit the hardest. Mongolia has a relatively high poverty rate of 28.4 per cent as of 2018. This will certainly get worse without government support. Currently, the expanded (albeit temporary) safety net provides some relief for the most economically vulnerable, although a large section of the population will face an elevated risk of falling into poverty when the stimulus package ends in December.

It is almost certain that the COVID-19 recession will deepen further. The government needs to evaluate its impact on the economy and people’s livelihoods in order to enact fiscal stimulus that is both cost-effective and sizeable. The 2020 budget review should be submitted urgently by the new government formed after June parliamentary elections.

The government faces the extraordinary challenge of boosting the economy while preventing a second wave from hitting Mongolian society. More resources need to be allocated to those who are likely to be worst affected. The bottom line is to continue to stop community transmission of the virus while preventing as many people as possible from falling into poverty and supporting the reintegration of workers back into the economy.

Ariun-Erdene Bayarjargal is an Associate Lecturer in Economics at the Australian National University.

First ever railway bridge connecting Russia & China to open in 2022 www.rt.com

The long-awaited cross-border railway bridge linking Russia and China across the Amur river is scheduled to be commissioned in the first quarter of 2022, authorities in Russia’s Jewish Autonomous Region announced on Wednesday.
The 2,209-meter-long (1.4 mile) structure will link Russia’s Far East with China’s northernmost Heilongjiang province. The Nizhneleninskoye (Jewish Autonomous Region) to Tongjiang (Heilongjiang province) bridge will be the first railway bridge between the two countries. It is expected to bring bilateral trade to new highs.

Cabinet meeting: Small, Medium-sized Enterprise Directorate established www.montsame.mn

-The Cabinet decided to submit amendment bills to the 2020 State Budget and 2020 budgets for Health Insurance and Health Insurance to the Parliament.

Man dies of bubonic plague in Mongolia www.channelnewsasia.com

Ulaanbaatar, MONGOLIA: Bubonic plague has killed a man in western Mongolia, the country's health ministry said on Wednesday (Aug 12), the latest in a handful of cases to emerge there and in neighbouring China this year.

Mongolia’s Sumo Champions www.thediplomat.com

Registered unemployed decreased by 0.9 percent from June www.montsame.mn

Ulaanbaatar /MONTSAME/. In July 2020, Labour agencies in aimags and the Capital city registered 5.2 thousand new unemployed, 1.3 thousand persons from the unemployment register hired on a new job, and 5.4 thousand persons removed from the unemployment register due to inactive job seeking. In Ulaanbaatar, 1.6 thousand persons newly registered in Labour agencies of municipal and the district offices, and 433 persons from the unemployment register were hired in July 2020.

Government debt rose by 1.7 times between 2015-2019 www.montsame.mn

Ulaanbaatar /MONTSAME/. In 2015, total government debt was MNT 14.4 trillion and it increased by 54.5 percent in 2016 to MNT 22.3 trillion, reaching MNT 23.9 trillion in 2019. It means the total government debt increased by 1.7 times between 2015-2019.

Russia has $1.5bn plan to dent China’s rare earth dominance www.mining.com

Russia plans investment of $1.5 billion in rare earth minerals, critical to the defence, telecommunications and renewable energy sectors, as it strives to become the biggest producer after China by 2030, a top government official told Reuters.

China’s booming copper imports an echo of the last crisis www.mining.com

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

China’s imports of industrial metals are booming.

Refined copper imports hit an all-time high of 494,000 tonnes in June and accelerated again in July with the preliminary trade figures implying another record high of 530,000 tonnes.

Imports of unwrought aluminum, a mixture of primary metal and alloy, surged to 254,000 tonnes in June.

China’s trade in primary aluminum is normally minimal with imports and exports largely cancelling each other out, while the country has historically been a net exporter of alloy.

The only precedent for such a dramatic shift to net aluminum importer is back in 2009, when China came to the rescue of metal markets devastated by the impact of the global financial crisis.

The comparisons between the current covid-19 crisis and the credit meltdown a decade ago are accumulating.

But this may be a case of history rhyming with itself rather than repeating itself.

While many of the drivers behind China’s import surge are similar to those at work back in 2009, there is one important difference, namely the supply disruption that has followed the spread of the fatal coronavirus around the globe.

Supply disruption
There was no comparable wave of supply hits in the global financial crisis but rather a drip-drip of price-related closures.

Market forces have taken a toll on higher-cost miners this time around as prices plunged in the first quarter of the year.

But the bigger impact has come from national lockdowns and quarantine measures in countries supplying China with raw materials.

China’s imports of copper and aluminum scrap have collapsed by 50% and 54% respectively so far this year.

Scrap collection networks around the world have seized up and the resulting loss of supply has been compounded by China’s own flip-flopping on its scrap import purity rules.

The country is the world’s largest processor of old scrap into new copper and a major user of new scrap at the product manufacturing stage of the supply chain.

Scrap tightness is one important driver of China’s increased appetite for copper in refined metal form. The loss of aluminium scrap, meanwhile, is manifest in the dramatic turnaround in alloy trade flows.

Flows of metal concentrates from producer nations such a Peru have also been disrupted by lockdown.

Copper concentrate imports were flat year-on-year in the first seven months of 2020, a constrained outcome given China’s continuing build-out of smelter capacity and the consequent need for higher raw materials imports.

Lead concentrate imports fell by 25% in the first half of this year, compounding the scrap impact on a market that is heavily dependent on recyclable material.

Refined lead imports were subdued in the first part of 2020 but jumped to almost 10,000 tonnes in July, the highest monthly total since March 2019.

Zinc concentrate imports remained strong over most of the first half, up 42% on last year in bulk tonnage terms, but June’s imports slumped to a one-year low in June as shipments from locked-down Peru all but evaporated.

Refined metal imports were also running at a subdued level until June, when inflow jumped to a 10-month high of 65,000 tonnes.

Tin provides the clearest example of raw materials constraints feeding into the refined metal market.

Flows of tin concentrate, largely from mines in Myanmar, fell another 8% in January-June, extending a long-running downtrend. The combination with closures of some of China’s own mines has seen the country lift imports of refined tin to 9,400 tonnes from just 1,000 tonnes in the first half of 2019.

Indeed, China has flipped back from net exporter in 2018 and 2019 to net importer of the soldering metal.

Exuberance
Broken or damaged supply chains are the main differentiator, and an unambiguously bullish one, between this and the last crisis.

However, other drivers behind China’s import surge look remarkably similar.

Now, as then, China’s giant manufacturing sector has led the global recovery thanks to Beijing’s infrastructure-heavy stimulus.

That in turn has fed bullish exuberance on Chinese metal markets even while the rest of the world has gone into covid-19 meltdown. The resulting outperformance of Shanghai contracts such as aluminium has forced open an arbitrage window, through which increasing tonnages are now heading to China.

HOW LONG THESE SUPERCHARGED CHINESE IMPORTS CAN CONTINUE REMAINS TO BE SEEN

Now, as then, local Chinese prices have been artificially lifted by state purchases of unsold metal and stockpiling by regional governments lending a helping balance-sheet hand to local producers.

Now, as then, there is a strong sense of a speculative stock surge overlaying the industrial restocking exercise currently underway.

And just to heighten the sense of collective deja-vu, there is much speculation that the Chinese state is itself stockpiling copper.

The State Reserves Bureau is a secretive organisation so the speculation remains just that but every copper trader knows that the Bureau’s strategic purchases were a big part of the copper price rally from the 2009 lows below $3,000 per tonne to the all-time high of $10,190 in the second quarter of 2011.

There’s certainly no denying that the scale of China’s copper imports so far this year exceeds any analysts’ estimate of a “normal” industrial restocking cycle.

Soaking up surplus
The real impact of China’s renewed hunger for refined metal, however, is playing out in the international market.

LME copper stocks are currently low at 114,575 tonnes with more than half of that earmarked for physical load-out.

Such depleted inventory seems anomalous given the massive hit to demand that has occurred this year until you consider that China imported 440,000 tonnes more copper on a net basis in the first half of this year than last year.

That’s 440,000 tonnes that in all likelihood won’t be coming back again and July’s record tally will have lifted that figure significantly higher.

Similarly with aluminum. State research house Antaike is expecting primary imports of 400,000 tonnes this year, not enough to wipe out the expected surplus outside of China, but certainly sufficient to dent it.

How long these supercharged Chinese imports can continue remains to be seen.

But for now, it looks like China is coming to the rescue of industrial metal markets.

Again.

(Editing by Jane Merriman)

IOM Facilitates Return of 185 Mongolians Stranded in Czechia www.reliefweb.int

Ulaanbaatar, Mongolia – The International Organization for Migration (IOM), in coordination with the Governments of Mongolia and Czechia, has assisted 185 Mongolians to return home this week (11-08). The group were part of 250 Mongolians stranded in Czechia and some eastern European countries after borders were closed due to the COVID-19 pandemic.