Delay in Oyu Tolgoi copper production will have severe macroeconomic effect
The Report: Mongolia 2013 sheds light on Mongoia’s foreign investment laws that are causing current concerns. The Report also provides key information on the state of Mongolian infrastructure, capital and expertise to investors.
Regional Editor Paulius Kuncinas said that Mongoia’s exports of coal, copper and iron should rise on the back of a favorable global outlook for commodities.
“This should help stabilize government finances, whilst increasing foreign reserves and also play a part in improving fragile investment confidence. The most significant milestone in 2013 remains the launch of commercial production at Rio’s copper mine, set to become the second largest in the world.”
On the question on TavanTogloi and Chalco during the press conference, Peter Markey of Ernst & Young commented: “The heart of the TavanTolgoi and Chalco problem is that they don’t have the money at TavanTolgoi that Chalco had paid.”
He notes that although it may seem that this responsibility lies in Mongolia’s previous Government, he highlighted that:“From an outsider’s perspective, a Government is a Government and the Government of Mongolia must have some kind of continuity. TheProblem at TavanTolgoi was that the Government regarded it as an extension of its treasury department. When it has some cash, it [the Government] said ‘give it to us.’ What we need to see is proper structures in place.”
Paulius Kuncinas stated: “I don’t want to take sides in the renegotiation. It has happened in other countries. It is taking place in Indonesia it did take place in Papua New Guinea.”
He emphasizeson the risk that every plan or forecast assumes that the copper production will start –even the reason the USD 1.5 billion was such a big deal was that everybody assumes that copper production will not be suspended for any reason. If it does, it will have “severe macroeconomic effects on currency and capital flows”.
The Report: Mongolia 2013 is the second in-depth and informative analysis report published by the Oxford Business Group (OBG) on Mongolia. D. Achit-Erdene from Mongolian International Capital Corporation (MICC), Paulius Kuncinas of Oxford Business Group, Jim Dwyer of Business Council Mongolia, Peter Markey of Ernst & Young and B. Enkhbat of Khanlex Advocates were at the press conference to answer questions.
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