With a huge landmass of more than MONGOLIA. Diversifying at Full Speed. Invest with the partners of the people

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1 MONGOLIA Diversifying at Full Speed The democratic country of lucrative mineral resources and a forward-thinking, professional business community takes off. With a huge landmass of more than 1.5 million square kilometers that borders Russia and China, and a population of 3 million, Mongolia has been one of the most exciting emerging economies to watch and invest in in recent years. Growth reached 9.8% in 2013, and although recent economic wealth has been on the back of mining, rising demand for services to support this industry has led to a strong diversification in the marketplace. Agriculture, energy, infrastructure, construction, manufacturing, and tourism are just some of the areas that Mongolia is keen to develop over the coming years. We have to be very practical and collaborate with foreign nations that can help us catch up, says Tsakhiagiin Elbegdorj, Mongolia s president. We have talked a lot for 20 years and now the Tsakhiagiin Elbegdorj President Norovyn Altankhuyag Prime Minister Chimed Saikhanbileg Chief of the Cabinet Secretariat whole country and its decision-makers are being mobilized toward that goal. The pattern, action, decision, and implementation shall speed up the process and make it more efficient and transparent at the same time. As the investment and legal climate become more stable and attractive, Prime Minister Norovyn Altankhuyag foresees double-digit expansion making an appearance soon. The political and economic perspectives are good, he says. We have a young, strong, and educated workforce and are working hard to continue our common megaproject, capitalizing on a fresh generation to build more infrastructure, connect the countryside with the capital, and develop Mongolian brands. We want to see a favorable environment for all Mongolians, to upgrade their quality of life and standards and have them benefit from higher salaries. We need to prevent our precious young workforce from migrating abroad. A controversial investment law introduced in 2011 may have deterred FDI, but, in repealing it in early 2013, the government Invest with the partners of the people Erdenes MGL LLC Building 6, Jigjidjav Street Tel: Fax: S1

2 showed its determination to improve the situation. Every decision here goes through a consensus process and we have learned a lot from this, says Chief of the Cabinet Secretariat Chimed Saikhanbileg. It is important we understand that Mongolians and international investors are all in the same boat and moving toward the same goal. Mining Riches With proven reserves of coal, copper, fluorspar, gold, and petroleum in the ground, and with resource-hungry neighbor China right next door, Mongolia has an economy underpinned by mining. There are plenty of companies serving the industry, but the only one truly owned by the people of Mongolia is Erdenes Tavan Tolgoi. Founded in 2010, Erdenes TT is responsible for one of the world s largest untapped coking and thermal coal deposits, with its estimated resource size of 6.4 billion tons. Executive director Yaichil Batsuuri takes up the story. Every citizen of Mongolia has a right to own 1,072 shares of this company, he says. This is why we have to strengthen the company and make it more profitable. We are increasing our production every year; in 2012, we produced 2.5 million tons of coal to export to China. Last year we tripled that amount, and in 2015 we are aiming to make it 15 million tons. We have to improve our infrastructure. By 2016 we will be producing more than 20 million tons of coal per year. Transportation is quite expensive and getting the coal to the Chinese border is costintensive. We are now working on a railway project that will reach from our mine to China. Forty percent of our current costs are involved in transportation. Erdenes TT manages one of the biggest deposits in the world; by meeting the demand from China, we can all win and make a huge profit. I would therefore like to invite investors to come in and help us realize the strong potential of this project. Batsuuri believes Mongolia is now on the right track. We have learned from past mistakes and that is our advantage, he says. Erdenes TT is a subsidiary of Erdenes MGL, the state-owned en- MONROAD The Mongolian connection specialists With our state-of-the-art construction technology, highly skilled workforce and socially responsible practices, we have grown to become a pioneer in modern road building and a well respected contractor in the region. MONROAD LLC Bayangol district, 20th khoroo, Monroad LLC building Tel: Fax: info@monroad.mn S2

3 accomplished, these will provide a huge impact for development, giving Mongolians lots of advantages and empowering people in all areas of the country. Odon Sainbuyan Executive Director, Erdenes MGL Tengis Garamgaibaatar CEO, Monroad David Holliday CEO, MobiCom tity that acts as a bridge between Mongolia s mining sector, foreign companies, and the Mongolian government. It is actively seeking collaborations with foreign investors to help it overcome technological and infrastructure challenges at the Tavan Tolgoi mine. Mongolia s mining sector is in the first stages of development, so we just don t have the infrastructure we need, says Odon Sainbuyan, Erdenes MGL s executive director. We need advanced technology and the most up-to-date help so we can progress further. Signum Industrial Corp., in the meantime, sees the importance of attracting foreign investment by example, setting trends that other investors can follow. At the present time, investors are fully observing the negotiation between Rio Tinto, managers of the Oyu Tolgoi mine, and the government of Mongolia in order to assess their further investments in the country, but if Mongolia had four or five similar projects to OT, investors would be doing a cross-analysis, says Signum s chairman, Chinbat Narmandakh. Our objective is therefore to have more projects that will create a more balanced outlook. That way, investors could have a better understanding of the real situation. Signum is taking part in the development of the most important industrial park that will be built in Mongolia in the years to come, the aim of which is to build a row of economic activities under one roof that will trigger diversification and a much-needed scaling up of the Mongolian economy. As mentioned, Mongolia s infrastructural needs are considerable. The vast, scarcely populated and subarctic country has poor transport connectivity and high unit costs of service delivery, but the good news is that there are lots of megadevelopment projects in the pipeline. First, the national railway is being expanded through the construction of approximately 5,684 kilometers of new track while an international airport will increase the range of international airborne connections within the country and the region as a whole. By 2016 there are expected to be around 1,600 kilometers of road being built in the country connecting six provinces. Once Building a Country One enterprise actively helping the mining industry and the modernization of Mongolia at the same time is civil engineering company Monroad. With vast experience and a strong adherence to international standards, the company is a go-to for foreign investors. We do things in the proper way compared to other companies that follow local standards, says Tengis Garamgaibaatar, CEO of Monroad. We have accomplished several projects, from airports to city roads, and have worked in all fields. The company is endeavoring to capitalize on the increase of exporting coal, copper, and other minerals to foreign markets. Coking coal, which is abundant in Mongolia, is a key resource for the production of different industrial components, Garamgaibaatar says. Having access to this and being able to transport it more cost-efficiently is something companies from more developed nations are able to do. We are particularly interested in joint ventures. We have a few projects in the pipeline for 2014; we are building a 100-kilometer road and new railway project, for example, and are planning on bidding for new roads and the new airport. Since government funding started going through the development bank, everything has run more smoothly. We want to move into contracts in cities. There is talk of building a metro system for Ulaanbaatar, which would be very interesting for us, but we would need foreign expertise to bring it to fruition. Freight forwarder Mongolian Express Co. Ltd. (Monex) is also working to build a well-connected country so that the fruits of industry can be easily dispatched to the marketplace. Mongolia cannot export its mining products efficiently, says Monex CEO Enkhbat Dorjsuren. In addition to that, the products become more expensive due to the higher transportation costs. Monex has a very important terminal in Ulaanbaatar. We are planning to upgrade our current facilities and also expand to other areas such as Shivee-Ovoo. Freight forwarding will continue to be an important line of business, but we are looking into developing a logistics service since it is virtually non-existent here. Making Connections It is not just physical connectivity that is being improved across the country. As the least-densely-populated country in the world, with a significant portion of the population living a nomadic lifestyle, it has been difficult for companies to make headway into Mongolian soci- S3

4 ety, but MobiCom has thrown down the gauntlet to the competition. The leading provider of telecommunications in Mongolia, however, has been rapidly expanding its service to engage remote communities and provide better connections to current users. We are the largest network in the country and serve almost all the population, says CEO David Holliday. We spent around $50 billion in 2013 and have been able to get 70 base stations deployed over 60 days. This will give us greater coverage, not only geographically, but for more intense demand. We are attracting new users but are also seeing the demand for data grow exponentially. We are trying out 4G, as this will not only improve people s access to data space but also use the existing spectrum to deliver it more efficiently. Our infrastructure and fiber-optic network are unrivaled. We also have the resources and a high-caliber staff. I have been particularly impressed by this since being here; it has been a pleasure to see the enthusiasm of the staff. For Gobi Corp., technology and connectivity have not hindered what is an extremely impressive global operation. A skilled manufacturer of high-quality cashmere products, Gobi distributes 80% of its products to retailers of department stores and boutiques around the world. Gobi prides itself on excellent service and response times, competitive pricing, and strong market awareness. It also has It has been a pleasure to see the enthusiasm and highcaliber of the staff. a fresh, cutting-edge design team. There has been a dramatic increase in the number of tourists in Mongolia in recent years and the sector is regarded as an intrinsic part of the government s diversification plan. Established in 1997, the Genco Tour Bureau is one of the leading tour operators in the country. Specializing in outbound and inbound tours, the pioneering company also built the emblematic Genghis Khan statue outside Ulaanbaatar. Our main goal is to make Mongolia one of the world s top travel destinations, says energetic CEO Namuun Battulga. We provide a wide range of tours, including family-friendly, adventure, sports, culture, and healing, and we custom-make tours as well. A rising standard of living is also having an impact on the domestic front. Mongolia became a middle-income country in 2011, and as a middle class rapidly emerges, so too does the need for better-quality consumer goods and products. For Jargalsaikhan B., president and CEO of BSB Service, one of the country s most important electronics appliance suppliers, customer service is the key to a successful business. Our salespeople understand that our job is to help people, not to make the highest instant sale, he says. We used to buy lots of Asian electronics but people are veering away from them and David Holliday, CEO, MobiCom Building Value S ignum Ventures Corp. was established with the purpose of developing, promoting and implementing large-scale industrial and infrastructure projects in Mongolia, furthering the scope of benefit derived from the enormous potential of the country s mining sector. It is estimated that only 25% of Mongolian territory has been explored, which signals the extent of mineral wealth still left to be uncovered. Signum, which develops industrial coking-coal plants, cement plants, and railway projects, believes that it is the responsibility of Mongolian companies to establish a long-term vision for using these resources effectively and to identify opportunities to increase the value of these minerals and improve the sustainability of the overall industry. Through years of expertise and an astute understanding of the local economy, Signum has also emerged as a key player in one of the most promising projects in Mongolia, the Sainshand Industrial Complex. Once completed, this park will be instrumental in the development of the country by processing local raw materials into refined copper, coking coal, and steel, thus creating value-added products and introducing advanced technology and modern infrastructure for the country. Signum s vision is to drastically boost and diversify the Mongolian economy by capitalizing on the full spectrum of wealth inherent in these local natural resources to create new jobs, increase the value of Mongolian exports, and reduce its dependency on imports. By acting as both a practical and intellectual liaison between local and international professionals, Signum has the unique ability to provide a continuously wider range of opportunities for the Mongolian market. Signum Ventures Corporation Tel: info@signumventures.com Make a deposit in a worthwhile investment With shares in two of the most promising mines in Mongolia, we invite investment to allow us to fulfil the potential we have and continue our mission to provide the infrastructure needed to keep the mines productive, such as water, electricity, railways and paved roads. ERDENES TAVAN TOLGOI JSC Tel: Fax: S4

5 Expanding Opportunities in Mongolia and Beyond Mongolia is at a pivotal point in its history, with a growing market economy and swathes of untapped precious resources. Global Business spoke to Dugar Jargalsaikhan, CEO and chairman of Mongolian Investment Holdings Group about the country s vast possibilities. Global Business: What variables have been key to Mongolia s development? Dugar Jargalsaikhan: Measured against the former USSR republics that began to transform toward a market economy in the early 1990s, Mongolia has been able to develop a well-functioning democracy. Landlocked between Russia and China, and as proud heirs of a deep-rooted nomadic tradition, Mongolians have been able to effectively cope with astonishing vicissitudes across history to become an important player within Northeast Asia today. Mongolians enjoy their freedom and even during the Soviet-dominated period freedom was a very important value. Nowadays, a well-educated youth embodies this spirit while possessing unique adaptable skills for survival. It has not been any particular political party or leader that has brought the country forward, but rather a combination of great individual and collective efforts. GB: Which are the most promising sectors in this diversifying economy? DJ: Until recently everybody was looking at mining. Mining will remain a big driver of the economy for the next few decades, but putting too much emphasis on mining is a biased approach. Mongolia is immersed in a process of notable economic diversification and is capitalizing on the positive spillover effect this natural abundance of vast mineral wealth has triggered. The next boom will be in energy, agriculture, logistics, and financial services. Its population might be small, but Mongolia is part of a very significant region sharing a common border of more than 4,000 kilometers with China and more than 3,000 kilometers with Russia. Mongolia is well positioned to capitalize on every sector. The country is engaged in top-notch technology, in such interesting fields as water, soil, and including dust control, or the halting of desertification all of which can bring significant benefits to both Mongolia and the region. GB: Is there room for renewable energies? DJ: Studies done by important academic entities suggest that Mongolia has the highest potential for renewable energies on the continent. Despite some technical difficulties, the country and the companies involved are facing, they are very keen to continue on this green path to offer greater cost efficiency, greater hygiene, and, for example, help in the reduction of pollution in Ulaanbaatar. GB: How business-friendly is the investment environment in Mongolia? DJ: The global economic slowdown in the past few years and the failure to manage the growth generated by the mining boom hit the country hard. Despite the difficulties however, it has been a good learning process, and as a result, Mongolia has created an adequate environment for doing business based on the lessons learned. The government still needs to ensure that its role is consistent with the constitution and that it addresses issues related to broader social development without competing with the private sector for business, however. Since Mongolia opened up, the country has enjoyed very strong support from the broader global community, including international financial institutions and donor countries. This has been critical in forming investment-related policies. According to a Mongolian saying It is better to see once than to hear a hundred times. Anyone wishing to establish business or relations with Mongolia should therefore travel to Mongolia to truly understand the country first. It is very different from any other country in Asia. demanding European appliances. These have more features and offer a better user experience. Our strategy is to stay close to the customer, so we are planning to set up a store in every district of the city. Competitive companies that distribute consumer products are becoming increasingly important for Mongolian society as a whole. The Naran Group is one such company. From a business model that started by importing simple manufactured goods, food, and commodities, the company has successfully expanded into other business lines: opening malls, bringing international television channels, and importing first-class quality garments. As visionary entrepreneur Sereeter Boldkhet explains: One branch of our company brought HBO, Cinemax, and other fantastic channels here, which has brought the world to Mongolians. A lot of people thank us because their children are now speaking English. We are looking to become self-sufficient in basic products and reducing our dependence on imported goods. A fledgling Mongolian insurance industry is expected to experience rapid growth over the coming decade if it is to match the quickly changing requirements of the country s economy. As resource-extraction projects become operational, a huge opportunity exists for firms capable of dealing with the increased demand. In 2013 the country was host to 16 insurance companies, but in recent years the market has grown by around 20% per annum. This is slated to increase in the future as mining sector requirements feed into the financial services industry. We are looking to become self-sufficient in basic products and reducing our dependency on imports. Sereeter Boldkhet, Naran Group ARD Insurance, as one of the top three insurance companies is the country, is ready to continue growing in the upcoming years, broaden its services, further enhance its quality, and also consider international expansion in the future. Having celebrated 20 years in business in 2013, ARD has gained the respect of Mongolians and foreign investors alike. CEO Ms. Chuluuntsetseg was educated abroad and has brought significant know-how back to become a key developer of the local market. I will continue to lead this company toward a brighter and stronger future, along with the country as a whole, she says. Ard Insurance LLC Central Tower 505, 411 Chinggis Khaan Square 2, Sukhbaatar District 8 Khoroo Ulaanbaatar 14200, Mongolia Tel: / 89 Fax: S5