SUMMARY

Discover Mongolia 2019: Minerals & Mining Business Summit was co-organized by the Ministry of Mining & Heavy Industry (“MMHI”), the Business Council of Mongolia (“BCM”), and the Mongolian National Mining Association (“MNMA”) and held over the 26^th September to 28^th September 2019. These are the key events and their focus:

1. September 26 (Morning) – Investor’s Tour

Sponsors of and speakers at Discover Mongolia, collaborative partners of the IAP, and select persons by the Chairman (in total 29 people) “toured” the city to have meetings with key figureheads from the MMHI, the Responsible Mining lobby group in the Parliament, and the Bank of Mongolia

• MMHI – E. Batbold (Director of Strategy and Policy Planning) & Mr. M. Dagva (Advisor to the Minister)
• Parliament – A. Undraa (MP and Chairwoman of the Responsible Mining lobby group)
• Bank of Mongolia – B. Bayardavaa. (Director General of Monetary Policy)

 2. September 26 (Afternoon) – IAP Meeting #2: Minister’s Workshop

• Invited IAP panelists and collaborative partners of the IAP attended a closed-door (Chatham House rules) workshop in the afternoon, 38 were in attendance.
  • The following presentations were made:
    • A shortened version of the “Case for Change” by the Chairman
    • “Overview of the International Exploration and Mining Sector” by Richard Schodde, MinEx Consulting Pty Ltd
    • Issues associated with the current legislations by D.Tsogbaatar former Minister of Mining
      • A supplementary presentation on “Necessary reforms to the regulatory system for natural resources in Mongolia”
    • Remarks on AMEP-2 by Australian Ambassador, Dave Vosen
  • Discussions with attendees followed the presentations addressing:
    • Oil & Gas sector
    • Geological prospectivity
    • Status of the exploration sector and licensing system
    • Status of the tax regime impacting the sector
    • Proposed constitutional amendments
    • Social licensing (both local and state level)
  • A survey was held with the questions based on slide 2 of the three-slide “snakes and ladders” deck on the resource investor’s thought model prior to making an investment in any jurisdiction.
    • Survey respondents across all organization groupings generally rated Mongolia’s competitiveness and attractiveness for resource sector investment to be poor

3. September 27 – 17^th Annual Discover Mongolia Forum (2019).

• It is estimated that 500 were in attendance
• Four panels were held with topics on:
  • Why invest in Mongolia’s resource sector?
  • Accessing growth with high-valuation upsides
  • Accessing growth with high-valuation upsides: Energy
  • Supporting Mongolia’s development

4. September 28 – Site visit to Oyu Tolgoi

Demonstrated the immense contributions that can be made by supporting tier-1 resource projects and that they are responsibly operated.

I. INVESTOR TOUR

The investors tour gave the opportunity to have a deeper insight into the latest policy developments and macroeconomic statistics for those that were identified in providing for or aiding in foreign investment to Mongolia’s resource sector.

A. MMHI – Mr. E. Batbold, Director of Strategy and Policy Planning & Mr. M. Dagva, Advisor to the Minister

Mr. Batbold presented the current issues facing the MMHI and his recommendations. These are: 

Mr. Batbold additionally discussed several ongoing projects in various stages: 

1. ETT IPO Project (will be used to fund water supply and infrastructure + railway to Sainshand)
2. Gold and copper smelter/refinery
3. Development of the Asgat Silver Deposit
4. Rare Earth Element geological service
5. EITI Changes
6. Oil refinery
7. OT Parliamentary Session

Mr. Dagva added on to the discussion with a focus on state owned enterprises, privatization, and politicization. He also touched upon increasing FDI and attracting investors – key problems that the IAP are also trying to address. Additionally, the MMHI are seeking the assistance of CODELCO to learn cases of good and bad governance, with the aim to prevent outcomes of the latter.

Mr. Dagva’s ending remarks were on ETT and three benefits that would be raised from its IPO: (1) raise money like OT/and provide tech services to Mongolia; (2) support infrastructure projects in Southern Gobi; (3) Other SOEs will following this good example.

B. Parliament – Dr. A. Undraa (MP)

Dr. A. Undraa discussed the current status of the constitutional amendment, the OT evaluation working group, public perception.

 C.Bank of Mongolia – Mr. B. Bayardavaa

Mr. Bayardavaa made a presentation titled “Mongolian Economy: Policy and Challenges”. He described the current macroeconomic status of Mongolia – crucial pieces of information on determining the probability of any project to generate a return. Currently, the economy is recovering from the crises that occurred in 2016-2017. There is a challenge in that this recovery must be maintained – medium term outcomes regarding debt are dependent on the profitability of Oyu Tolgoi and Tavan Tolgoi. 

2. 17^TH ANNUAL DISCOVER MONGOLIA FORUM (2019)

Discover Mongolia was held to re-establish Mongolia’s economic potential by increasing its competitiveness and attractiveness to the global investor, in line with the goals of the IAP. To achieve this objective, the forum this year held panel sessions that would directly address it.

Additionally, to further drive into audience members that Mongolia is still competitive and attractive, the chair of each panel curated questions that would drive discussions on those two topics. This is detailed below:

After the conference, a reception was held at New York and London Room, Shangri-La Hotel Ulaanbaatar. 

4. SITE VISIT TO OYU TOLGOI

Sponsors and speakers were invited to visit Oyu Tolgoi and their operations. The goal for the site visit is to address Work Group 1, “Facilitate greater support for large projects”. The site visit was held in both Mongolian and English. Prior to entering the site, participants had to attend a mandatory safety induction, demonstrating the fact that tier 1 operations had workplace safety as their number one priority. Afterwards, the following areas were visited (in chronological order):

• Museum: Participants learned the history of OT, current reserve estimations, and models of the ore body. This section of the tour was headed by the OT’s head geologist.
• Core warehouse: Up to 800m of historical drill core samples were shown.
• South Oyu open pit: Participants were ushered to a lookout point to have a bird’s eye view of the operations currently ongoing.
• Mazaalai mess hall: Lunch was served in this clean and modern facility.
• Hazard park: A state-of-the art facility showing various hazard scenarios and how they can be mitigated with following proper regulations and using the right PPE. At the tailend, demonstrations were held with audience participation.
• Chandmani facility: Participants were taken by Ward Anderson (Underground Surface Construction Manager) to the recently finished building housing the entrance/exit of the underground, and control room for Phase 2. As of the visit, it was undergoing a soft start, moving ~50 people from the old building to the new per week.
• Bagging facility: The site visit to the bagging facility once it resumed from its planned shutdown for maintenance.

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Table of Contents

• Opening remarks
  • Tatsuya Hamada, CEO of MobiCom and BCM Board Member
  • A.Undraa, MP, Chair of the Sustainable Development Goals Subcommittee
  • Jon Lyons, Vice President of Erdene Resource Development Corp. and BCM Board Member
• Digital Transformation in Mongolia
  • Digital Transformation in Government
  • New Era of AI
  • Digital Literacy in Mongolia
  • Panel Discussion
  • Future of the Internet
  • Customer Service
• Next Generation Cybersecurity
  • Game Changer for Technology
  • Evolved: How We Can Deal with Next Generation Attacks
  • FireEye: Overview
  • Security in the IoT Era: Device Visibility and Control
• Data Analytics and Cloud Computing
  • Go Digital: ICT Accelerating the Digital Economy
  • Driving the Enterprise Digital Transformation
  • Machine Data Insights into the AI World

OPENING REMARKS

On June 18, 2019, MobiCom and the Business Council of Mongolia (BCM) jointly organized the “Digital Enterprise 2019” conference at the Shangri-La Hotel. Mr. Tatsuya Hamada, Chairman and CEO of Mobicom and Member of the Board of Directors and Executive Committee of the BCM, delivered the opening speech of the conference. He is also the Chair of the BCM’s Growth and Innovation Working Group.

Remarks by Tatsuya Hamada
 

Mr. Hamada, with the sum of human knowledge in the palm of his hand

MobiCom’s entire business is placing heavy emphasis on digital transformation (DX), with entire units and many executives, including Mr. Hamada, involved.

Today, there is no government or enterprise that is not interested in digital transformation. In public service and business operations around the world, it is now the norm. DX, which could be said began with the computer, is no longer in the conceptual stage; today it is in the implementation stage. Given the pace of technological advancement, the pace of innovation and DX has grown exponentially. Acronyms such as AI, VR, IoT, and AR – artificial intelligence, virtual reality, internet of things, and augmented reality – are common parlance today.

3 important elements of DX:

1. Unification and improvement of customer experience.
2. Fundamental review and restructuring of existing business models.
3. Creation and establishment of new business

Society, the economy, and businesses are changing before our eyes. DX is not just a project; it is more like an entire cultural shift, a transition into a different paradigm. Today and more so in the future, it will become an essential driver of success. In the public sphere, e-government initiatives around the world have taken hold, including in Mongolia.

Remarks by A.Undraa, Member of Parliament

Ms. Undraa Agvaanluvsan is an MP who is the Chair of the Sustainable Development Goals Subcommittee.

One of the current major debates in politics right now is the process of constitutional amendments. In addition to improving enhancement of democracy, human rights, and justice, the constitutional amendments also address economic issues such as economic freedom, economic development, and the business environment. The digital sphere is a key part of that development, noted Ms. Undraa.

Mongolians are a uniquely adaptive people. Traditionally, this was a necessity due to the climate and nomadic culture. However, this also has enabled Mongolians to become quick learners, and a people who adapt rapidly, whether that be to a climate or to technological progress. For example, Facebook usage in Mongolia is the highest per-capita in Asia. Despite a population of around 3 million people, registered personal phone numbers exceed that number, meaning that on average one person carries at least one mobile number, and many people carry more than one. Society is connected through many networks and connections.

Corruption is a major problem in Mongolia. E-government initiatives will be a major aspect of combatting corruption, noted Ms. Undraa.

Introduction to the BCM by Jon Lyons, BCM Board Member and Vice President of Erdene Resource Development Corp.
 

Mr. Lyons explaining the great work we do at the BCM

Click here to view presentation

Mr. Lyons chose to deliver his presentation on behalf of the BCM in Mongolian, to the delight of Mongolian attendees. He briefly introduced the BCM and its vision and mission to attendees. As the Vice Chair of the BCM’s Growth and Innovation Working Group, he works closely with Mr. Hamada.

An important idea he mentioned was the idea of “increasing the size of the pie.” Everyone and every sector has its own specific interests; however, working together to create an improved business environment benefits all the players. 

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DIGITAL TRANSFORMATION IN MONGOLIA

The first session of the conference saw presenters speak on digital transformation in government, the new era of AI, and digital literacy in Mongolia.

Digital Transformation in government

Presentation not available to the public

Mr. B.Batjargal, Vice Director of the Mongolian National Data Center, gave a presentation of what kinds of activities have been happening when it comes to digital transformation in government.

The government is striving to improve public services for citizens and businesses. At the one-stop service center of UB, about half of services delivered concern capital city registration.

Another initiative that people may be familiar with is the ATM-like document procurement machines seen around major city hubs, such as the central post office. Here citizens can get birth certificates, various forms of ID, etc. without going to an office.

A comprehensive transition requires infrastructure first and foremost. Then you need the digital ecosystem. Third, there is the question of information security.
The National Data Center was established in 2009 by the government. In 2019, a Disaster Recovery Center subdivision was established.

Regarding the regulatory environment, three key policies are in place. 

Before the current base system, there was no unified standard for exchange of information, and government bodies would exchange information freely in whatever form or method they desired.

Regarding cybercrime, Mr. Batjargal stated that we are currently in the 5^th generation of cybercrime, the “mega” era. There have been several occasions where government organizations, the military, and even Khaan Quest proponents were hacked. Out of 183 million daily requests for information exchange, about 3 million are malicious.

New Era of AI

Presentation not available to the public

Gabit Bazar is the Founder and Chairman of Infinite Solutions LLC, an IT solution provider and investment venture with a focus in fintech, and enterprise software solutions. He has launched successful startups in Silicon Valley, Denver, and New York. He also co-founded Nest High School, a new school with a special curriculum in IT and tech.

Perhaps the breakthrough moment and the real beginning of AI was the IBM-created AI Deep Blue beating chess grandmaster Gary Kasparov in a game of chess.
“Deep learning” seeks to emulate the neural connections of a brain, in that it can process data and “learn” from that data, altering its own decision-making algorithms to be better or more accurate or more befitting of a situation in the future.

There are a couple limitations to AI: massive amounts of data, super computer power, top AI scientists, and singular defined domain.

In July 2016, the Google Home’s speech recognition error rate was 8.5% percent. In less than one year, in May 2017, this rate had fallen to 4.9%. Megvii Technology’s Face++ application used in China can recognize 3 million faces in one second. In 2012, self-driving cars made 1 error per second. In 2017, they had an average error rate of 1 error per year.

Some threats presented by AI include job replacements and the question of whether a fair, shared economy can be realized. AI will replace the majority of workers in entire industries. Mechanical, repetitive, and physical jobs are more at risk than creative professions.

Even jobs that require a human touch, such as teachers and doctors, will work in conjunction with AI. Research that takes months may be conducted nearly instantaneously.

What does Mongolia need to do? Update its educational system. Collaborate: don’t hog data. Learn from the best.

In the past, the goal of education was getting good grades, to get a good job, and start a family, etc. Today, we must emphasize skill sets over grades, spend quality time, and work with time.

It’s not about regurgitating texts and formulas, but solving complex issues that require interrelated skill sets and personal attributes: “learn how to learn.” It’s not about just having a good job, but working with passion. It’s not just about starting a family, but spending quality time with them.

Digital Literacy in Mongolia

Click here to view presentation

Ms. A.Byambajargal is the Founder of the Faro Foundation Mongolia, and is an advocate for public education on digital literacy in Mongolia.

Digital literacy means the ability of an individual to find, evaluate, and compose clear information through writing and other mediums on various digital platforms. This includes communicating, handling info and content, transacting, problem solving, and being safe and lawful online. Facebook is by far the most widely-used social media platform in Mongolia. Faro also works in partnership with Facebook to improve digital literacy.

It is safe to say people born after 2000 are digital natives. The older generations are the ones who have more problems concerning digital literacy, the “digital immigrants.”

Byambajargal initiated a Digital Literacy Library in Mongolia, which seeks to educate individuals on things such as privacy, security, critical thinking and evaluation, functional skills, and other aspects of good online practices. It also includes “profile exploration” of a person’s online presence, analyzing how aligned one’s online persona is in line with their real-life persona. The program includes curricula designed for teachers, students, and parents.

It’s going to take 10 years for digital literacy to be fully implemented in the education sector, so must start thinking about that long-term today.

Panel Discussion

The three presenters were then invited back on stage for a panel discussion, moderated by Mr. Munkhzorig, the Head of MobiCom’s IT Division.

Question for Batjargal: What role does the private sector play in digital development in relation to government?

There are many public-private partnership initiatives going on. The government is cooperating with business to create better platforms for their sectors. One such example is with the 4 major telecom operators. There are two good systems in place right now that we mentioned earlier. As for the future, who knows what might come.

Question for Gabit: You mentioned that big companies such as Google and IBM have sometimes stopped requiring college degrees. Your Nest High School will specialize in IT. Does that mean they will graduate high school and go right into work in IT?

Gabit: High school in Mongolia means 10^th, 11^th, and 12^th grade. What we’re going to do is introduce a fourth year of high school. That year is purposed for training. Our goal is not just to prepare them for a job, but to give them choices: the choices one needs to make to find oneself, to strive to do what they desire, to try work and see if they like it or not.
Don’t think of the school as purely an IT school. IT and AI will explode in the next decade, but that doesn’t mean everyone and everything will be working as IT engineers. We will still have doctors, lawyers, and teachers. However, those jobs will be different from today. That is what we aim to prepare students for.

Question for Byambajargal: Where does Mongolia rank in terms of digital literacy?

Byambajargal: Digital literacy itself is not something that has been around for very long. The program we teach is taught in only 58 countries. Some digital literacy leaders include Canada, Finland, and Australia. Our work with Facebook has also not been going on for very long. We are one of the newest enrollees; however, we are learning and progressing very rapidly compared to how new we are. Mongolia has not been ranked in terms of digital literacy, but we will be within 5 years. Our digital literacy program is recognized for best practice for Asia. It is very different teaching digital literacy to 40 year olds compared to teens and 20-something individuals.

Question for Batjargal: What is going to be the government’s role in updating the educational system to improve digital literacy?

Batjargal: This is a bit outside of my area of expertise, as it concerns something more related to national-level policy at the Ministry of Education I would assume. What I can say is that we learn fast. As far infrastructure development, we are a large territory, but I still think we can progress rapidly.

Question for Gabit: You have been working at Infinite Solutions for over a decade. What difference do you see today compared to a decade ago?

Gabit: Back then, something people really simply did not accept was the price of software. You see all the counterfeit Windows used in computers in Mongolia. That’s why we geared our business more for the US. I believe this has improved. The government’s “Khur” system is a brilliant creation that makes life easier for a lot of people. Back in the day, we used to have this mentality of “we’ll do it our own way.” Today, we are seeing that we can’t do everything that way, which is a good development.

Question from Mergen from the audience: How should we reach more people? We are quite behind in the IT world. How can we accelerate the process of educating youth?

Gabit: The reason why we established Nest High School is related to a point made earlier, that only 2.8% of high school graduates choose IT majors. Back in the day and still to this day, kids dream of graduating and entering top global companies. We want to train those future engineers, but not to prepare them to go abroad to work for Apple, Google, Baidu, Tencent, or whatever. Sure, we encourage them to go work with them for a few years. But what we really want is to bring them here. We want to partner with American and Chinese major companies, to bring their experiences and business here.

Byambajargal: Facebook is interested in Mongolia. They say they want to open an office here. However, one thing that is clearly lacking in Mongolia is English-language skills. Compared to China, Mongolia is ages behind. We have to prepare the coming generations in language and IT in order for them to achieve success in the global environment. Mongolians also lack teamwork skills. There is a cultural difference. The younger generations are getting better at this. I just want to reiterate that we must emphasize the education sector.

Future of the Internet

Click here to view all presentations (p. 34, English-Mongolian mix)

Mr. Ts.Idermunkh is the CEO of MobiNet, a subsidiary of MobiCom. He has 15 years of managerial experience in the telecom and service industry.

The total ISP contracted bandwidth is 68 Gbps. Of the 300,000 ISP users, 70% use speeds of 2-5 Mbps. Mongolian internet penetration was at 65% in 2018. Internet speeds are lower than the global average. Speeds to foreign connections are even slower, ranked 161^st in the world.

By 2022, 80% of all global traffic will be video, up from 70% in 2017. 60% of the world will be using internet, up from 45% in 2017, and the number of connected devices per person will rise to 3.6, up from 2.4 in 2017. High definition and ultra-high definition video usage is increasing, whereas as standard definition has remained steady for the past several years.

Furthermore, cloud services and storage is rapidly rising, behind only YouTube and Facebook.

The future of the internet will bring more internet cache systems (CDN), more cloud computing, more reliable and stable internet peering. Advancements in security should also arrive. Faster speeds is a given. The key is good support and service.

Customer Service
 

Click here to view all presentations (p. 48, English)

Ms. Bayarmaa is the MobiCom’s Chief Experience Officer.

MobiCom’s customer support center received 37,000 contacts daily. 98% of contacts are through the phone, but customer inquiries through social has been increasing lately, at 2% currently. The company was the first to establish a dedicated call center, and also serves as outsourcing to major domestic companies based on its model. In 2011, it began implementing 25 KPIs. It also introduced designated call distribution, relaying a customer’s call to a specific agent based on the needs of the customer and abilities of the operator.

On top of simply answering questions from customers, operators also listen to customers and relay messages to management.

Their customer care center features a smart greeting (based on time of day), smart routing (depending on postpaid, enterprise, prepaid, etc.), and a different IVR leading to a different customer care agent.

To handle the millions of calls it received annually, they calls must be forecasted, based on time, day, season, etc. It then organizes is work force based on that forecast to handle peak call hours. The most important thing is customer experience.

Furthermore, customer service is implementing “Customer Journey Analytics.” This looks at a customer’s call in historical context, taking into consideration what other inquiries the customer sought previously, what phones he used in the past, their data usage, past transactions, etc. It even takes into consideration things such as a customer who may have left a previous call or left a branch unsatisfied. The “contact center” is transforming into a “customer experience center” that is predictive and proactive. Instead of waiting for the customer to relay a problem, it will seek to proactively detect potential problems and proactively address that for the customer, or offer ways to improve satisfaction with available services. Essentially, it will be more personalized customer service based on analytics.

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NEXT GENERATION CYBERSECURITY

The second portion of the conference invited cybersecurity experts from abroad to introduce their companies and products, focusing on IT security in the era of digital transformation.

Game Changer for Technology

Click here to view all presentations (p. 64, English)

Norman Lam is Vice President and GM for Greater China operations for Juniper Networks.

Juniper was founded in 1996 and is headquartered in Sunnyvale, CA. In 2018, it had $4.6 billion in revenue with business in 43 countries employing 9,300 people. It is considered a leader in data centers, as rated by Gartner as well as Forrester Wave. Its JUNOS Contrail Automation system is rated higher than comparable software by Cisco and Dell. It is ranked #1 in product reliability, service & support, security, and technology innovation by SP Vendor Ranking. One of the biggest security R&D programs is at Juniper.

Mission: “Connect everything. Empower everyone.” Vision: “Engineering simplicity.”

50% of enterprise applications will be in the cloud by 2020. In 2022, about $8 trillion will be spent on fighting cybercrime globally.

Juniper helps companies build clouds, connect people to clouds, distribute clouds to enable 5G and IoT, and deliver the software-defined network. In the near future, we will all be using “complex clouds.”

9 out of 10 of the most capitalized companies are tech companies.

The top 2 priorities of digital transformation are security and automation. When talking about clouds, there are many types. From the many types, we have to talk about hybrid clouds when keeping the customer in mind. The key is how to connect everything in a secure way – different machines in different places. Juniper’s software is designed not only to build a platform, but to manage it and also expand it.

5 step migration to digital enterprise:

1. Device led
2. Architecture led
3. Operations led
4. Business led
5. Customer led

The final stage needs to be driven by the customer’s needs.

Evolved: How We Can Deal with Next-Generation Attacks

Click here to view all presentations (p. 80, English)

Stan Ho is the Sales Engineer Manager of China and Mongolia of Sophos Group.

Sophos is a UK company based in Oxford. It has 3,500 employees serving over 300,000 customers. Since its establishment in 1985, the company has acquired many companies in the IT and cybersecurity industry. The company uses AI to detect malware, being a leader in endpoint protection and unified threat management.

By the end of 2019, over 1 billion unique malware samples will exist. Modern antivirus programs are becoming increasingly useless. In 2018, over 16,000 software vulnerabilities were reported.

Sophos’ flagship product is the Intercept X, which uses deep learning, which has higher detection rates and gets better with more data compared to traditional machine learning. The Intercept X is a next-gen endpoint solution that has anti-exploit, anti-malware, anti-ransomware, root cause analysis, as well as machine learning.

Next-gen firewalls are becoming more popular among enterprise customers.  Sophos offers the XG Series in this regard, which has modular desktop options for LTE, DSL, and WiFi. This firewall also utilizes deep learning technology, and convicts 3,500 files weekly.  When an endpoint is compromised, the firewall will detect who is compromised, and provide automatic response within seconds.

Many of the company’s cyber security solutions can be controlled via Sophos Central, which can be used as a dashboard, by the admin, or as self-service.

All these can be combined into a Synchronized Security suite.

FireEye Overview
 

Click here to view all presentation (p. 110, English)

Lawrence Li is Channel Account Manager for FireEye Greater China.

FireEye is a global cybersecurity firm with 4 Operations Centers worldwide. It has tracked over 35 nation-state sponsored APTs (Advanced Persistent Threats). In 2018, the firm published 24,000 intelligence reports with the back of over 700 threat researchers, platform engineers, malware analysts, intelligence analysts, and investigators.

One key thing about FireEye is that it employs actionable intelligence. It has nation-grade capabilities, with adversarial intelligence and campaign intelligence. It can tell you where a threat is coming from, who is behind it, what they want, and how they operate.

Today, if you have bitcoin, you can just buy malware from the underground economy. Furthermore, normal software usually cannot detect zero-day exploits.

The FireEye ecosystem comprises three aspects: services, technology, and intelligence. For the service part, it protects cloud services and third party data and solutions. It offers expertise on demand. The front line is to prevent an attack, but in the case of being too late, it can also tell you how it happened and take steps to prevent this in the future.

 For the tech part, it features network security, email security, and endpoint security. It offers anti-phishing protection for emails. For endpoint, it doesn’t do antivirus at all, but does EDR – endpoint detection and response. Normally, hackers will drop a payload and raise its privileges to admin level, and try to affect multiple devices.

According to Forrester, FireEye is a leader in Cyber Incident Response Services as well as EDR, ahead of IBM, CrowdStrike, Kaspersky Labs, and Flashpoint. Regardless of whether it’s intelligence, or products, or EDR, they are all connected. APTs require lots of intelligence from an advanced vendor.

Security in the IoT era: Device Visibility and Control

Click here to view all presentations (p. 133, English)

Michael LaFuente is a Snioer Technical Consultant at ForeScout Technology. ForeScout has over 2,900 customers in 80 countries, with over 4.7 million devices in the device cloud.

IoT connected devices will grow from today onward. Thus, we must rethink IoT security concerns, by prioritizing understanding, increasing IoT security funding, and increasing resources (such as work force).

Due to a lack of understanding of IoT, most enterprises are willing to accept a high level of risk in IoT. There is disagreement on who should lead IoT security matters, between whether it should be IT-led or LoB-led (Line of Business).

In a study by Forrester, 70% of responders states they are confident in their IoT security, yet when ask how confident they are that they can identify 100% of IoT devices, only 18% state they could.

Why don’t they do anything about it? Budget constraints, believe traditional approach encompasses IoT, and senior leadership doesn’t see the need for it. To address this, we have to promote a security culture. Make people aware of the risks. We must improve visibility of devices, and we also need the necessary tools for control of those devices. Also, by segmenting properly, even if an attack occurs, we can slow the spread of an attack in the network.

ForeScout’s product vision is to become the de facto standard for device visibility across an extended enterprise. This spans across a campus, the IoT, data center, the cloud, and operations. The base for all this is device visibility. ForeScout can help you identify any device that touches the network. Upon identification, it can tell you whether that device is compliant. Next, it can provide network access control. After that is network segmentation, and finally, incident responsible.

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DATA ANALYTICS AND CLOUD COMPUTING

The final session of the day was on the topic of data analytics and cloud computing. 

Go Digital: ICT Accelerating the Digital Economy

Presentation not available to the public

Ling Wu is the Principal Strategy Marketing Expert at Huawei Technologies.

What is the digital economy? It is the intelligence revolution that is following the information revolution, which can be called the digital economy 1.0. Today’s intelligence revolution can be considered the digital economy 2.0. We are harnessing AI to process quantities of information that was not possible before.

Compared to the digital consumer, the digital industry is a much bigger piece of digital transformation. ICT is becoming a general purpose technology, just as the international combustion today is an everyday piece of technology. By 2025, Huawei sees $5 trillion of opportunities in ICT, and 5G is seen as a key technology driving the ICT industry to meet new historic opportunities as a foundation for intelligence. As 5G is rolled out, it forces synergy with other technologies, such as IoT, surveillance, new energy, control systems, manufacturing, etc.

Many nations are implementing national initiatives to support a digital economy. It is envisioned that productivity will increase of 25% by 2025 with ICT acceleration of the economy, and it is estimated that for every 16-20% growth in ICT, GDP will grow by 1%.

Shenzhen’s Safe City Project: Lowest criminal rate in history. Due to over 400,000 cameras installed with 100PB of data storage, homocides dropped from 270 in 2007 to 24 in 2017, most of them detected within 24 hours.

Long Gang District e-governance: 90% online delivery of services; 70% of data shared between agencies; internal process down by a third; and public satisfaction of over 95%. This is all on 1 network, 1 cloud, and 1 database.

Green Data Center for Dubai Int’l Airport: power consumption down 30%; Time for delivery down from 24 to 13 months.

Mobile payments in China has been growing at an ultra-rapid pace. In major cities, you have no virtual need for a paper currency or even a wallet, with all transactions done through your mobile phone, thanks to the LTE network.

Alibaba’s smart warehouse requires just a few members of staff to handle millions of kg of packages, due to robots and IoT.

Earlier in 2019, the first remote operation was conducted on a pig through the 5G eMBB network.

ICT Triggers Vertical Digitalization Integration. Given sufficient penetration of internet, cloud computing, big data, mobile payments, and bandwidth,
Broadband is the foundation on top of which a digital economy must be built.

As an ICT Industry benchmark, China’s only competitor today is the US, and the two are neck and neck.

In China, the government invested $720 billion in 4G, but companies received over $2 trillion in revenue from that investment.

One rising star in ICT infrastructure is Malaysia, which has rapidly developed in this regard in a very short amount of time. This is thanks to a high level of investment by the government in ICT.

The future is an intelligence society of all things connected: smart parking, connected city lighting, smart water, smart metering, connected elevators, internet of vehicles, smart homes, etc.

Driving the Enterprise Digital Transformation

Click here to view all presentations (p. 158, English)

Huaming Wu is a Senior Consultant for VMware.

VM has over a thousand VMware service professionals, serving over 5,000 customers including global top 500 enterprises, including in education, finance, government, technology, healthcare and pharma, and manufacturing. In 2018 alone, the company received multiple awards coveted by businesses and the IT industry.
VMware creates an experience that makes the cloud invisible and easy to control so that customers can focus on transforming their business. Brands will eventually refine and revitalize its purpose. RPA and AI will join forces to create digital workers for more than 40% of enterprises. 25% of leaders will use automation to address the talent scarcity squeeze. Finally, investors are looking at the top 4 industries: manufacturing, retail, financial services, and transportation. That is why transformation is necessary.

Application needs are driving IT strategies and directions. Thus, data center and cloud solutions must match the needs of each application. The challenge for IT is to increase IT agility while reducing complexity and risk. The more scalable it is, the more it can extend to any cloud, and the faster the time to market, the faster the IT agility.

China Mobile Communications Corporations is the largest telecom corporation by market capitalization, and also the largest mobile phone operator by number of subscribers, with over 902 million subscribers as of June 2018. 2^nd tier and 3^rd tier tech support teams are managers and experts of VMware.

Machine Data Insights into the AI World

Click here to view all presentations (p. 177, English)

Yantao Hu is a Senior Consultant for Splunk North Asia. Splunk’s mission is to make machine data accessible.  It is organizing the .conf19 on October 21-24 in Las Vegas.

Top predictions for 2019 by Splunk:

• AI and machine learning breaks out of the lab
• Security in the wake of heightened compliance regulations and evolving digital environments
• IT operations transform to focus on application mobility
• IoT claims its stake in the modern organization.

NASDAQ uses Splunk UBA for insight into internal threats and data science-driven approach. UBA is active directory intelligence – “the root of all evil.” It uses unsupervised ML analysis to do this.

Vodafone also implemented Splunk AI, to improve efficiency and speed of service restoration post planned and unplanned outages to ensure application uptime. It implemented decisions based on real time performance resulting in efficient queue throttling, and also applied machine learning to predict ticket priorities, categories, assignees and resolutions. This resulted in cost savings, reduced SME dependency, and improved customer experience.

Deutsche Bahn implemented Condition-Based Maintenance (CBM). It analyzed train door machine data using machine learning, because maintenance and repair costs exceeded estimated. It detected anomalies using DBSCAN (from the machine learning toolkit). This reduced service interruptions, brought even distribution of stress to mechanical components, and gave foresight into potential failures.

Blackstone uses Splunk’s anti-phishing software to detect malware in emails. This brought down the speed of the process from over half an hour to about 40 seconds.

Aspects of Industry 4.0, the age of the smart factory:

• Interoperability
• Information transparency
• Decentralized decisions
• Technical assistance systems

BMW began using the technical assistance system to rework its process. They collected data from tests such as crash tests, brake tests, and chassis tests, and used Splunk machine learning to provide an assistance system. This allowed qualified recommendations to be provided to workers.

 

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After the conference, a networking reception was held at Agartha restaurant on the 3rd floor of the Shangri-La.

- End -
 

MobiCom and the BCM would like to extend our appreciation to all the presenters, panelists, and attendees.

The Business Council of Mongolia’s (BCM) Monthly Meeting was held on 17 October 2019 at the Mongolian National Chamber of Commerce and Industry (MNCCI), with BCM Chairman B.Byambasaikhan hosting for an audience of around 120.

The guest of honor at this meeting was the Minister of Mining and Heavy Industry, D.Sumiyabazar. The BCM conducted this October meeting as a continuation of the recently organized 2019 Discover Mongolia Mining and Minerals Business Summit, and aimed to provide members with information on the sector’s challenges and required reforms, asking the question of if Mongolia’s most important sector is already in crisis.

New member introduced:

• ADT Law Firm Mongolia (website)

REMARKS BY CHAIRMAN BYAMBASAIKHAN AND BCM UPDATES
 

This is the first time we held a Monthly Meeting at the MNCCI, and the BCM has been collaborating with the MNCCI and will continue to foster the cooperation on important issues.

The BCM co-organized the 17th Discover Mongolia conference with the Ministry of Mining and Heavy Industry and Mongolian National Mining Association (MNMA). This year’s event achieved its core objectives of connecting mining and exploration companies with policy-makers and wider stakeholders in Mongolia as well as providing a first-hand experience for many international investors who visited Mongolia.

Through the dialogue that took place during the 17th annual Discover Mongolia, our members and participants were able to gain insightful knowledge on industry trends and outlook, voice their concerns to policy-makers, and recommend solutions during three days of intensive discussions and activities.

The BCM also was the main organizer from the Mongolian side for the Boao forum for Asia, which was well attended.

On the 23rd of October, the BCM is organizing a Business Tour of the Data and Call Center of Mobicom Corporation.

In November, under the scope of the Memorandum of Understanding (MoU) between the Business Council of Mongolia (BCM) and the China International Council for the Promotion of Multinational Corporations (CICPMC) signed on 20 August 2019, the two organizations agreed to strengthen cooperation and promotion of business opportunities between their respective members in Mongolia and China. Therefore, the BCM is hereby inviting members to attend “The 12th International Roundtable of Multinational Corporations Leaders” (IRMCL), which is being held from November 21st to 22nd, 2019 in Beijing, China.

This conference is an international, large-scale and high-level conference co-sponsored by the China International Council for the Promotion of Multinational Corporations (CICPMC), and several United Nations organizations, including the United Nations Development Programme (UNDP), and United Nations Conference on Trade and Development (UNCATD), among others.

SPEECH BY MINISTER OF MINING AND HEAVY INDUSTRY D.SUMIYABAZAR
 

(Note: The following is an unofficial BCM translation of the text of the minister's speech)

Dear guests and representatives,
Ladies and gentlemen, good afternoon to you all.

I am pleased to be here today at the BCM’s monthly meeting to share the policies of the resource sector as well as development trends and projections for the sector, connecting them to issues surrounding governance, competitiveness, and investment, and I am eager to discuss and exchange ideas on these topics with you.

Dear entrepreneurs,

The Government of Mongolia is working to create a system that is open to investors, with a transparent legal environment, one that fosters economic stability, and protects the interests of business people.

As for our ministry, we are implementing policies and conducting certain works to develop the legal environment for the sectors of geology, mining, crude oil, and heavy industry, as well as to develop responsible mining.

Mongolia received USD 23.9 billion in foreign direct investment between 1990-2018, USD 17.5 billion, or 73%, of which was made in the mining sector. This shows clearly the role this sector plays in the economy.

Despite that, due to instability in the commodities market, investment in the sector swung from 262% to -70% in four years, which was a bitter experience we must be sure to remember. Although this can be explained due to the cyclical nature of the sector on one hand, on the other hand we must also realize that our domestic situation had a direct impact.

I have established in partnership with the BCM the International Advisory Panel (IAP) comprising representatives of major companies engaged in exploration and extraction. The purpose of this is to work closely with strategic investors and address issues they face in a more organized and practical way.

In addition, companies joining the “Voluntary Responsible Mining Codex” – purposed for introducing standards in responsible mining and fostering the sustainable development of the sector – means that when companies conduct operations in the countryside, they receive not only the official permissions from government agencies, but also gain the invaluable social license from the local citizens.

The capital market is growing in Mongolia, and major projects have begun listing on the stock exchange. In 2018, an exploration company listed on the Toronto Stock Exchange dual-listed on the Mongolian Stock Exchange. This is going to intensify going forward, and companies have expressed their interest in newly dual-listing.

Although it seems that competition between state-owned and private companies is going to increase, the truth of the matter is that state-owned enterprises (SOEs) cannot keep up with the pace of business compared to private companies. Due to the fact that the issues faced by SOEs, such as infrastructure and lag in technology and methods, are costly and time-consuming to address, it is vital that we make these companies public shareholding companies and improve their governance and efficiency.

As you may know, the government and parliament have agreed to offer up to 30% of the company which owns the special permit for one the largest coking coal deposits, Tavan Tolgoi, on an international and the domestic stock exchanges. Currently the government is providing the official permissions necessary to make preparations to list the company. “Erdenes Tavan Tolgoi Mining” – the company to be listed – has been established and operations have commenced.

The capital raised through the IPO will be used to finance projects and programs on roads, railways, power, and a coal washing plant, amounting to USD 5.2 billion in costs. First, this will improve the quantity and quality of Mongolian coal exports. Second, we are aiming to supply coking coal to countries in Northeast Asia by improving regional transport and logistics integration with Russia and China.

In the mid and long-term future, a major part of our goals is to develop a coal-chemical plant, as well as get started on exploration and extraction of coal bed methane.

Since the commencement of the Oyu Tolgoi underground mine’s development as planned up to today, USD 9.1 billion has been spent in Mongolia, which has had the positive influence of accelerating economic growth and business activity. Following the OT project, there are benefits which cannot be quantified by money, such as world class mining management, new technology, and work force. When the next OT is implemented, this will enable us to approach the project with experience, with a work force, in a knowledgeable manner.

In order to develop the exploration sector, increase resource reserves, and reduce risks for investors engaged in mineral exploration, several works have been planned and are being implemented, including:

• We are formulating individual policies and strategies for gold, copper, rare-earth elements, raw materials for batteries, coal, and uranium. In the past we had a general policy for minerals as a whole, but now we are creating policies and strategies for each type of mineral.
   
• The “National geological database” program has been approved, and we are now working on creating a geology and exploration database in line with international standards.
   
• We have had great success in cooperation with the Australian government in detailed research studies on each of the staple minerals, making them open and accessible electronically.

As for the development of the processing industry, we are working on the construction of an oil refinery with a capacity of 1.5 million tons, and we are also in the process of selecting the investor for a copper smelting plant. In the future we will establish a complex for ferrous and non-ferrous metals and a gold smelter to process the raw materials.

Ladies and gentlemen,

Although we recognize the need to develop non-mining sectors and diversify the economy, seeing from market conditions and global development trends, the mining sector will continue to be a pillar sector and the main driver of development for the next 20-30 years.

Thus, I believe the prudent thing to do is to bolster our competitiveness, take full advantage of our geographical and other comparative advantages, and adhere to sector policies that will foster this.

Under this scope, we are aiming to diversify commodities and their types exported. The fact that mineral exports amount to USD 6 billion, with copper and coal accounting for 75% of that, shows that we are not taking complete advantage of the opportunities we have. Therefore, the MMHI is going to implement policies to develop other mineral sectors, namely gold, iron ore, spar, and uranium, into a billion-dollar sector.

We are engaged in talks with neighboring countries concerning transportation of mining products, construction of trade infrastructure, developing transit transportation, and creating competitive tariff conditions.

To expand rail and road networks, current projects under implementation include the Tavan Tolgoi-Gashuun Sukhait; Tavan Tolgoi-Zuunbayan; and Tavan Tolgoi-Oyu Tolgoi-Khangi rail and road projects. Furthermore, we have reached an understanding with Oyu Tolgoi on the issue of constructing the Tavan Tolgoi power plant. To resume construction of the 240-km Tavan Tolgoi-Gashuun Sukhait route, we have established the “Tavan Tolgoi Railway” company.

Alongside with Tavan Tolgoi infrastructure, the government has decided to construct the Nariin Sukhait-Shivee Khuren railway. By implementing these projects, the value of deposits and exports will rise significantly.

Esteemed guests,

The mid-term outlook for the Mongolian economy is positive. The mining commodities market is relatively stable. Relations and cooperation with neighboring countries has reached new levels. At this time, as parliament and the government make decisions to intensify implementation of major projects, we are creating favorable conditions and opportunities to invest in Mongolia.

To increase mineral exploration and extraction; to raise the level of processing and enriching; to introduce high-efficiency technology; to comprehensively implement infrastructure projects, your involvement as entrepreneurs is important.

There are 13 major projects of tremendous significance to development in the mining and heavy industry sector approved by the government, and they need MNT 22.4 trillion, or USD 8.4 billion, in financing. On top of that, if you consider other sub-projects and programs to follow these major projects, you have the full opportunity to work with us on a long-term, mutually beneficial basis.

Mongolia’s mining sector has the full potential to compete globally. I believe that on top of geological reserves and high prospectivity, a favorable legal and regulatory environment has been created. As of 2018, Mongolia has agreements with 43 countries on mutual protection and support for investment and double-taxation treaties with 26 countries.

In conclusion, I call on you, entrepreneurs, investors, and wealth creators, to take full advantage of Mongolia’s resource reserves and opportunities, so that we may develop together. 

VIDEO OF POST-DISCOVER MONGOLIA INTERVIEW WITH RICHARD SCHODDE, MINEX CONSULTING; A. BILGUUN, CHAIRMAN OF THE MNMA; AND SAM SPRING, BCM RESOURCE & ENVIRONMENT WORKING GROUP NON-BOARD VICE CHAIR AND CEO AND PRESIDENT OF KINCORA COPPER LTD.

The audience was shown a video of an interview conducted by Mr. Bilguun with Richard Schodde and Sam Spring after the Discover Mongolia forum.

Click here to watch the video.

Click here to view the presentation.

PANEL DISCUSSION: DEVELOPMENT SOLUTIONS FOR THE RESOURCE SECTOR
 

Board Director Mr. Tumentsogt, CEO of Erdenes Oyu Tolgoi, moderated a panel discussion, with some esteemed panelists:

• Mr. Ankhbayar, Director of the Heavy Industry and Oil Policy Implementation Regulation Department of the Ministry of Mining and Heavy Industry
• Mr. Bilguun, Chairman of the Mongolian National Mining Association
• Mr. Jean Pascal Nganou, World Bank Senior Economist
• Mrs. Kirsten Livermore, Team Leader of the Australia-Mongolia Extractives Program-2
• Mr. Achit-Erdene, CEO of the MICC
• Mr. Manduul, Executive Vice President of ETT Mining LLC
• Mr. Otgonchuluu, Economist

Question for Ankhbayar: This year has seen many important agreements signed with other countries. We have signed strategic partnership agreements with Russia, China, and the United States. During the recent visit by the Mongolian president to India, he signed a loan agreement for the additional funding of 236 million USD necessary for the oil refinery project. Would you please give some information on the development and implementation of this project?

Ankhbayar: I glad to be here today to provide some information on the oil refinery. The refinery is a major project reflected in the government’s 2016-2020 action plan. It is being financed through a 1 billion USD credit line from the government of India, and was signed during Modi’s visit to Mongolia. During President Battulga’s recent visit to India, another agreement for additional funding was signed. We tried five or six times to get started on an oil refinery in the past, but for various reasons they fell through. The refinery will give Mongolia two or three key benefits. First, Mongolia is currently almost entirely dependent on Russia for petroleum. It will reduce that dependency. Second, a comparable project in the oil sector has not been implemented in the oil sector for 30 years. Thus, it will bring in modern know-how and our engineers and experts will benefit. We have already sent a cohort of students to India to study in this regard. Third, it will advance the Ministry’s objective of producing more value-added products.

What is the supporting infrastructure going to be like for the refinery, such as transport, supply of crude oil, and other such things?

Ankhbayar: The oil refinery itself is located about 600 km away from the source crude oil. Of the crude oil areas in Mongolia, we supply 1 million tons of raw crude oil to China. Whether that will be transported to the refinery by rail or road is still being discussed. Speaking of infrastructure in general, the Zuunbayan railroad is going to be the first horizontal (latitudinal) railroad in Mongolia. There is also the possibility to export to Russia. We have established a working group. I think we are leaning more towards the railroad solution.

Question for Bilguun: The BCM and MNMA recently successfully co-organized the Discover Mongolia forum. As a co-organizer, how do you see the outcomes of the forum? You are one of the people who pay great attention to improving the reputation of the sector. What are some of the outcomes of the forum? How was investors’ sentiment?

Bilguun: Let me be frank, it was not great. We have to realize that in Mongolia, as a jurisdiction, we are competing with other countries. On top of competing with other mining jurisdictions, we are competing with other sectors. There are new economic sectors in North America and South America, such as the tech sector and marijuana sector. The pipeline of projects is really non-existent in Mongolia. There is not land to explore. Why is that? First issue is environmental, and the second is economic. In my opinion, the environmental issue is not related to mining. We believe it’s actually more to do with overgrazing by animals. The other issue we can address is the way mining revenue is divided. According to the mining law, 30% of royalties from mining are supposed to go to the aimags and soums where the mining is happening. Those revenues aren’t flowing back to the communities anymore. We have to restore that, so that people can actually benefit. We believe that is the most practical route.

Question for Nganou: The World Bank recently released its East Asia and Pacific Economic Update, “Weathering Growing Risks.” Can you comment on how the Mongolian economy is doing? How is the trade war affecting us? What is the outlook for this year and the coming years?

Nganou: Today, October 17^th, marks the International End of Poverty day. We all know that around 800,000 people in Mongolia live below the poverty line. About 30% of the people in rural areas live in poverty, and about 17% in urban areas. Also, about 50% of people live just above the poverty level. So they are very vulnerable to shocks. There must be multi-part effort by the government to address this. We have seen how in recent history China has lifted many out of poverty. It is no coincidence that this year’s Nobel Prize in economics was awarded to three economists for their work on poverty studies. It is important to foster the linkages related to the mining sector to alleviate poverty, to ensure inclusive, sustainable growth in Mongolia. To answer your question, our region is facing an increasing uncertainty, fostered by a slowdown and a possible global recession, exacerbated by the trade war. We believe that for Mongolia, the momentum over the past 3 years, growth has averaged above 6%. It has been supported by mineral exports, private investment, and FDI. FDI is indeed critical. Private consumption and meat exports have also played an important role. We believe growth will remain positive, although it will be more challenging. We think growth in 2020-2022 will average above 5%. There is uncertainty, however, and investors do not like uncertainty. Weakening in global demand will see a decline in commodity prices, which will affect Mongolia. The government must commit to fiscal responsibility and competitiveness. Mongolia must resolve insolvency, and trade issues at the border. The rights of minority of investors must be protected. We must encourage investment in innovation so that productivity grows.

What is your comment or suggestion regarding sectors other than mining which can create employment, where the government can provide incentives?

Nganou: As a World Bank expert, I am not in support of picking the winners. My broad answer is to enable the environment, in terms of human capital, infrastructure, and institutions. That is critical for any sector to emerge. We don’t believe picking this or that sector is the way to go. You must diversify assets. Human capital is key for any sector to grow.

Question for Livermore: What is the AMEP and what are the future plans for Mongolia’s extractives?
 

Livermore: The Minister gave a good description in his speech, highlighting the need for an open and transparent environment. He supports and collaborative approach and giving a positive message about mining to the public. He also talked about the positive gains of international standards. That is what we do at AMEP, which is a partnership between the Mognolian and Australian governments, two countries where mining is very important. AMEP is a four-year program. The program for this year was made in a consultative manner. We talked to businesses, ministries, and civil societies, to get a sense of common priorities. One project we are working on is to create a Mongolian valuation code for mineral resources in line with international standards, like ones used in Australia and South Africa. It will be important for companies to be able to list on the stock exchange and other business transaction, by having an independent and robust valuation. We are also working with the Ministry of Finance on remeditation on closures.
There is also MonGeoCat, the Mongolian Geological Catalog, which provides an online catalog of metadata of each piece of geological information that the Mongolian government has. Users can go online anywhere in the world, and search using the map or documents to see what Mongolia has in terms of geoscience and data. It is proving to be extremely successful.
We also participate with the Ministry on the review of feasibility studies, bringing in international standards to make the process more efficient.
We are also working on Coal Bed Methane in Mongolia, and we believe there is potential for development in Mongolia. I have seen with my own eyes how CBM can go from nothing to a major industry in Australia.
The point of AMEP is to be more than the sum of our parts. These projects should individually and collectively improve the investment environment of Mongolia. Each will serve as an opportunity or leverage for greater contributions.

Working in evaluation or listing on stock exchanges, or feasibility studies, what will be your focus among these projects?

Livermore: I suppose each one will have a different set up partners. As an example, for the project on feasibility studies, the ministry is anticipating a review of that regulation. We're still working on the scope of the activities in the industry, but we are already talking to some companies, such as Aspire Mining. We are looking for opportunities to involve the private sector and other stakeholders.
As a first step on work on feasibility studies, we are working to do a roundtable, to understand what the problems are before we start giving technical advice.

Questions for Achit-Erdene: Congratulations on being appointed CEO of Aspire Mining. What is the company working on regarding future development? How do you see the equities market? What are your business objectives for your company?

Achit-Erdene: Aspire Mining is an ASX-listed company with a market cap of around 100 million AUD. It has Mongolian and Australian shareholders, so it is a true partnership between the two. We have a great project in northern Mongolia, featuring about 200 million tons of coking coal. We will invest about 400 million USD over the next two years, mostly in roads. We will build a 560km road, as well as a rail terminal in Erdenet. There will also be a coal washing plant and small power plant to support activities. We plan to do this with Mongolian and international investors. Aspire is seeking to going into production and are trying to obtain permits. The new minerals law says we need to get community approval, which is a good thing. Bilguun mentioned how taxes aren’t going back to the communities. Although the minerals sector has grown tremendously, the poverty level has not fallen as much. So the mineral wealth is not being shared. Politicians have taken this very simple image of trucking coal and minerals abroad, so they just say, look at how all the wealth is being shipped to other countries. Mongolia has potential to develop agriculture and livestock. For the Mongolian economy to be sustainable, we have to diversify the economy. We must invest wisely in reduction of poverty and infrastructure. Mining sector alone cannot resolve poverty. Tax revenues have grown as well, yet poverty is still at around 30%. I think we have one of the most inefficient allocation of tax money.

Question for Manduul: What are the challenges you are facing concerning the IPO of ETT? Every Mongolian citizen owns 1,072 shares. When will they realize its value?

Manduul: In June of 2018, parliament passed a resolution ordering ETT to conduct an IPO. Of course there were many questions, such as the Law on Tenders. There are some things that are vague, especially to foreigners. At the political level, we waited on political consensus on some things, such as what should be the structure of ETT. Should we conduct an IPO for ETT as a whole or on a deposit, or a subsidiary? This past summer it was decided that a subsidiary based on the East Tsankhi mine, and that is to be the focus of the IPO. I see three major risks. First, the global macro situation. There is the increased uncertainty in the region, the trade war, and commodity prices. These are things out of our control, so we have to be wise with our timing. The second issue is investors’ perceptions. This is a national issue. You heard yesterday that Mongolia has been greylisted by the FATF. This will cause increases in transactional costs and borrowing costs, which could affect our IPO. Third, here in Mongolia, at the stakeholder level, there is a wide gap in knowledge, information, and understanding. There is a need to explain and help people understand in order to form a consensus. I believe this will require the most time. The IPO brings benefits other than just financial ones. For example, it will foster governance of international standards at our SOE. This will increase pressures on other SOEs to improve their governance and bring it up to international standards. This in turn will benefit the economy as a whole. Furthermore, this IPO may be for ETT and East Tsankhi, but it will have reverberations into the future. It will open the door for others. Surely there will be other deals in the future. Regarding the 1,072 shares, the IPO is for a subsidiary. However, it will make the shares more valuable and bring us closer to realizing that value.

Question for Otgonchuluu: You are one of the top experts in the issue of competitiveness. Where is the Mongolian mining sector heading? What are the prospects? What should we do more?

Otgonchuluu: If you compare today’s situation to 30 or 40 years ago, we are doing much better. Almost everyone was poor by today’s standards. There was no private property. The most important contribution has come from mining. I have compared the statistics of the effect of mining on GDP, and it’s really a great achievement, in terms of increase in exports and GDP. But people still do not realize this, so we have to work on public education and awareness.
I happy about the policy the Minister is pursuing. The national geological database announced yesterday will also be a very good thing. Lots of things are still in progress. According to the SDGs, the per capita GDP must be around 17,500 USD. Right now it is at around 4,500 USD. How can we triple this number in under 10 years? The only way is mining. The government must be braver, more anti-populist, and must start issuing exploration licenses. Up to 40% of the territory can be explored, whereas now it’s only about 5%. The government must be more brave. Perhaps through a first come first serve basis, as the current tendering process is very complicated. Speaking to people, the majority people are not anti-mining. So the government must be braver.
One more thing, I saw the balance of payment figures. We are currently running an export surplus, which is good, but we have a deficit in services exports, meaning we import more services than export. So I think there is room for development of consulting, especially in mining. If we can develop more auxiliary businesses surrounding mining, there is high potential there. It would also be good for the exchange rate.

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After the meeting, a networking reception was held in the Ballroom of the MNCCI.

 

Under the theme of “Concerted action for common development in the new era”, Boao Forum for Asia (BFA) Ulaanbaatar Conference 2019 was held during 19^th to 21^st of August, 2019 organized by BFA and the Ministry of Foreign Affairs. The BCM co-organized the forum. With over 260 member companies and solid partnership with the diplomatic community in Mongolia, the BCM is privileged to take the role of co-organizer of the forum to promote the business community and investment climate of Mongolia to its Asian neighbors. As BCM strives to provide an advantageous business platform, member companies of the BCM were invited exclusively for the forum and participated in large numbers.

Over 300 distinguished local and international guests and delegates were in attendance, namely H.E. BAN Ki-moon, BFA Chairman of the Board, the 8th Secretary-General of the United Nations; U. Khurelsukh, Prime Minister of Mongolia; D. Tsogtbaatar, Minister of Foreign Affairs of Mongolia; H.E. LI Baodong, BFA Secretary General, Former Vice Minister of Foreign Affairs of China; H.E. XING Haiming, Chinese Ambassador to Mongolia; A. Alisjahbana, Executive Secretary of UNESCAP.

1. Khurelsukh, Prime Minister of Mongolia commenced the forum with opening remarks and emphasized the importance of the forum for the economic integration of Asia.

H.E. BAN Ki-moon gave an insightful speech with great significance on the pressing issues of the new era. He touched on global warming, air pollution and urged the countries to cooperate on the common solution such as usage of clean energy. Multilateralism and free trade were also mentioned, “Mongolia is a developing country with great potential. Not only strengthening the relations with the two neighbors, but also Mongolia must enhance its policy towards multilateralism by expanding ties with other countries around the world” he said.

The Chairman of the BCM, B.Byambasaikhan delivered one of the opening remarks, cited the potential of Mongolia’s role in the interconnecting the countries of the region and said “The fact that Mongolia hosts this year’s forum manifests the growing recognition of Mongolia’s impact for the regional integrity and prosperity”. He emphasized connectivity is vital for bringing the countries in the region together and Mongolia’s vast resources in renewable energy with estimated 1.2 TW of solar and 200 GW of wind capacity will play a key role in this perspective.

The forum continued with Plenary Session under the topic of “Business Opportunities: Investment climate in Mongolia”. D. Sumiyabazar, Minister of Mining and Heavy Industry of Mongolia, delivered the first presentation on the prospect and challenges of resources sector of Mongolia which accounts for the majority of export and revenue of the nation. He stressed on the following issues:

• Attracting investors and partnering with other countries on the exploration work
• To finance and develop processing and refining industry which is crucial for the sector and export
• Prospect of Tavan Tolgoi mine and its impact

CEO of “Erdenes Mongol” LLC P. Gankhuu stressed the SOE now reached at a value of USD 5.7 billion with ownership of significant shares of the nation’s strategic mineral assets. “We are aiming to creating added value of the operation of our mineral assets their and associated infrastructure development” he said. He highlights the following projects which are being implemented or planned by “Erdenes Mongol” LLC and encouraged the business delegates of the forum to form a partnership on the projects, citing “Erdenes Mongol” LLC will welcome the interested parties for cooperation:

• “Shivee Energy” project aims to transforming coal into energy export to China as well as Northeast Asia
• “Erdenes Steel” a subsidiary company that will produce 300 thousand tons of steel and 500 thousand tons of coke
• Gold processing plant
• Methane exploration with Australian investors

1. Bayarsaikhan, Chairman of the National Development Agency of Mongolia focused on the investment environment and the current works to improve competitiveness and investment framework. He highlighted the following topics:

• 3 Pillars Development Policy which is aligned with sustainable development – 2030 of the UN
• Investment Protection Council and Public – Private Consultative Committee
• Investment Reform Map and its implementation process
• One stop service center to ease the registration and visa process for investors
• FDI increased by 30% with over 500 registration of new companies

The forum continued with keynote sessions, first session on New Direction: Aligning “Belt and Road” with “Development Road” and Randolph Koppa, Vice Chairman of the BCM attended the session as one of the speakers. He spoke about the rich possibilities of Mongolia to be a part of BRI with aligned interests and its positive impacts to the economy of Mongolia.

Keynote session two focused on Connectivity: Expanding Horizons into Regional Cooperation and chaired by Ts. Tumentsogt, Member of the Member of the Board and Vice Chair of Energy, Infrastructure and Connectivity Working Group of the BCM. The session discussed the prospect of interconnecting Northeast Asia’s power grid with Mongolia being major exporter of solar and wind energy. Ayumi Konishi, Special Senior Advisor to the President of the ADB delivered key note speech saying “ADB has been supporting Mongolia’s initiative to interconnect the region in terms of energy and infrastructure. As “Development Road” and “NAPSI” projects move forward, it will significantly enhance Mongolia’s potential to become a bridge between Europe and Asia as well as interconnected Northeast Asia”.

Keynote session three was about Common Goal: Green Development, chaired by E. Orchlon, Member of the Board and Vice Chair of Economic Freedom and Competitiveness Working Group of the BCM. M. Bold from XACBank gave keynote speech on air pollution as a global issue and urgency of green development. Other speakers expressed their support on Mongolia’s initiatives in an effort to develop clean energy sector and discussed the frameworks for mutual cooperation.

Business Leaders Face to Face Dialogue session held between business representatives of over 20 local and international companies, co-chaired by Ts. Tumentsogt, Member of the Member of the Board and Vice Chair of Energy, Infrastructure and Connectivity Working Group of the BCM. They exchanged views on establishing partnerships and discussed exploring business opportunities. Numbers of BCM representatives namely B. Solongoo, Member of the Board and Chair of Tax, Legal and Ethics Working Group; Ch. Batnasan, Vice Chair of Energy, Infrastructure and Connectivity Working Group; U. Unenburen, Vice Chair of Growth and Innovation Working Group and G. Enkhtaivan CEO of Mongolian Re were in attendance.

About Boao Forum of Asia

Since its inception in 2001, Boao Forum has evolved into a frontier stage of discussion for common development and economic prosperity of Asia. The founding purpose of BFA was to promote economic integration in Asia. Its mission now is to pool positive energy for the development of Asia and the world. With a status of one of the founding members of the forum, Mongolia has maintained its active participation and the fact that Ulaanbaatar was named to host this year’s forum recognizes the increasing role of Mongolia as a facilitator of the connectivity in the region and Asia.

BCM UPDATES

The Business Council of Mongolia’s (BCM) May Monthly Meeting was held on May 16 at the Shangri-La Hotel, with Chairman B.Byambasaikhan hosting for an audience of around 150 members and invited guests. Mr. E.Orchlon, CEO of Clean Energy Asia LLC, BCM Board Director, and Vice Chair of the BCM’s Economic Freedom and Competitiveness Working Group, opened up this meeting on the “Competitive Edge of Mongolia.”

In June, the BCM is taking a delegation to Singapore to meet with Asian business associations, such as the Singapore Business Federation and Singapore Manufacturing Federation. In addition, there will be a Singapore-Mongolia business dialogue with our BCM members. 

If you have not already signed up for this trip, we highly encourage you to do so, as it will be a great opportunity to expand your business horizons.

A Knowledge Sharing Session was held on Friday with John Bell, CEO of Khan Bank.

The Tumen Shuvuut Factory tour taking place May 24 tour has been fully booked. The BCM will continue to organize more business tours for our members in the future.

New and renewing members also received their Certificate of Membership after the presentations and panel:

1. BRB – website
   
2. Continental Air – website
    
3. ZAMine Services – website
   
4. Mongolian Re – website
   
   

PRESENTATION BY B.LAKSHMI: “COMPETITIVENESS OF MONGOLIA – GLOBAL RANKING”

Click here for presentation (English)

Mrs. B.Lakshmi is the Director of the Economic Policy and Competitiveness Research Center (EPCRC), a national think-tank established in 2010 that aims to conduct surveys and help build a competitive Mongolia using globally accepted research methodologies.

"Competitiveness of Nations is a field of economic theory, which analyses the facts and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people.“ - Stephane Garelli, Professor at IMD, Director of the World Competitiveness Center.

Why are Rankings Important?

• Benchmark globally
• Highlight competitive strengths & target weaknesses
• Set goals and targets
• Promote the country / Attract investments
• Determine outward investment strategy
• Promote international standing
• Learn from others

The EPCRC is affiliated with the IMD World Competitiveness Center, working to help collect data for its annual World Competitiveness Yearbook. In 2018, the 30th edition of the survey was published, ranking 63 countries based on 340 criteria. Mongolia ranked 62nd out of 63 countries overall.

Countries are given a score from 0 to 100 on these four factors. Mongolia's scores are as follows:

The EPCRC also publishes a domestic provincial competitiveness report annually, which seeks to evaluate the relative competitiveness of the 21 provinces. In its 2018, Orkhon Province ranked 1st, and Arkhangai Province came last. For UB, the EPCRC publishes a District Competitiveness report as well. Details on these rankings can be found in the presentation linked above.

10 Golden Rules of Competitiveness:

1. Stable and predictable legislative environment
2. Ease of doing business
3. Investing in infrastructure
4. Strengthening the middle class
5. Develop privately-owned medium-sized enterprises
6. Maintain a relationship between wage levels, productivity and taxation
7. Promote private savings and domestic investment
8. Balance aggressiveness on international markets with attractiveness
9. Counterweight the advantages of globalization
10. Always return the tangible signs of successful competitiveness to the people

PRESENTATION BY A.BILGUUN: “COMPETITIVE EDGE OF THE RESOURCE SECTOR OF MONGOLIA”

Click here for presentation (Mongolian)

A.Bilguun is the CEO of the Mongolian Investment Banking Group (MIBG) and Chairman of the Mongolian National Mining Association.

In general, nations themselves don’t really compete directly with one another; it’s their companies that are competing with one another. The US-China trade dispute is a matter of the respective governments arguing in the interests of companies that operate in their territories.

Mongolia’s GDP per capita growth has been exceptionally slow since 1990 compared to neighboring countries. Only Kyrgyzstan has been slower. The average income per capita is USD 387 per month (about MNT 1 million). During the mining boom, income per capita jumped from USD 253 per month in 2010 to USD 410 per month in 2012. Mongolia’s GDP is about the same as Netflix’s revenue.

Moreover, about 1.69 million citizens receive some kind of government welfare, such as child benefits, pension, disability benefits, etc. 

The reason for such dismal figures, in Bilguun’s opinion, is the well-intentioned but poorly executed policy of the government to force economic diversification. Although not a bad thing, what has happened is the government has forcefully brought down mining’s share of GDP. 

In 2018, the market capitalization of Mongolian companies on international stock exchanges fell by 40%, while the global mining sector fell by 23%.

“Since 2009, Mongolia has not provided a big, major reason to invest in the country, though there may be lots of small reasons,” Bilguun said. 

As for mining, it’s not the level of taxation that is impeding investment and growth, it’s the instability of the legal and regulatory environment that is the key issue.

There were two statistical correlations Bilguun showed which were most telling. The first was the negative relationship between FDI and monthly disbursements of unemployment benefits - meaning when one rises, the other falls, and vice versa.

The second was the relationship between state budget balance (as a percentage of GDP) and the value of the tugrik against the US dollar. In 2016, the budget deficit as a percentage of GDP was at a peak high of 15.3%, that same year, the MNT depreciated from 1,970 MNT to 1 USD to 2,470 MNT.

PRESENTATION BY CH.ANAR: “BECOMING INTERNATIONALLY COMPETITIVE IN THE FINTECH SECTOR”

Click here for presentation (English)

Ch.Anar is the Founder and CEO of AND Global.

Mongolians are quickly building a Fintech sector with international scalability. AND Global is the parent company of LendMN. There is also LendPinoy (Philippines).

“We have been able to cultivate teams that are agile and innovative by combining sector specialists and technology experts.” The company boasts over 200 Mongolian talents and 6 nationalities. 

Young people are ambitious and have massive potential. To build a truly disruptive Fintech sector that is internationally competitive, we must begin to train professionals and executives on par with international standards. “Mongolia is not quite ready to compete internationally,” Anar said.

Though there many talented Mongolian working at international companies, there are few at the senior management level. Anar’s conclusion is that we must address the low level of development of things like capacity to conclude major agreements, lead multinational companies, and other some bigger than big issues.

PRESENTATION BY D.GANKHUYAG: "COMPETITIVE EDGE OF THE RENEWABLE ENERGY SECTOR"

Click here for presentation (Mongolian)

D.Gankhuyag is the CEO of Gobi Green Energy.

The energy sector is a strategically vital sector for any nation. Mongolia’s total installed energy capacity was 1,240 MW in 2017, with about 11.8% coming from renewables.

Mongolia has a major ambition of becoming a renewable energy exporter, and reaching export levels comparable to coal and copper, which currently comprise the majority of exports. Renewables will be a key driver of economic diversification.

There is also the North-East Asia Regional Power Interconnection initiative, which Mongolia is aiming to play a key role in. Mongolia has a comparative economic advantage, given its vast solar resources and lower costs. This presents great opportunities to attract foreign investment. By 2036, the aim is to have an installed capacity of 100 GW. This regional initiative is also considered in China’s Belt and Road initiative.

According to estimates, Mongolia has 1,100,000 MW of wind potential, and 5,000 TW of solar potential. Around 2,500-3,000 hours of sunlight hours per year can be captured.

In order for these ambitions to be realized, many issues must be tackled: power lines and other infrastructure, storage, tariffs, and legal and regulatory matters.

PRESENTATION BY B.ARIUNAA: “COMPETITIVE EDGE OF MONGOLIAN CASHMERE”

Presentation not available to the public

B.Ariunaa is the Deputy Director of Sales at Gobi Corporation.

Gobi was established in 1981, and is the world’s number one cashmere coat producer. The company had 2,113 employees in 2018, and a domestic market share of 71% and export market share of 63%. Globally, Gobi is in 13 countries and 40 cities.

Mongolia and China (mainly Inner Mongolia) account for 93% of the global raw cashmere market, producing 18,500 tons of raw cashmere in FY 2018. Global cashmere output has been stable over the last 3 years. Mongolia produced 9,500 tons of raw cashmere in 2018 (48% of global supply).

Mongolian companies Gobi and Goyo have 2.5% of the global market share. China’s Erdos has 27%.

Mongolian cashmere is recognized internationally for its superior quality, and Mongolia provides the widest color range. However, only 15% of Mongolian raw cashmere is processed until end product domestically. The remaining 85% is exported to China, Italy, the UK, and other countries.

In 2017-2018, the price of raw cashmere rose 25% year-over-year. Over the next five years, the industry is forecasted to grow 3.86% annually.

The major issue faced by domestic manufacturers is the fact that the cashmere sourcing season occurs once a year in spring, and is a cash-heavy process. Mongolian manufacturers must compete with international bidders that have large cash reserves. 
 

PANEL DISCUSSION

After the presentations, a panel discussion was held, moderated by E.Orchlon, CEO of Clean Energy Asia. On the panel were: 

• Ch.Anar, CEO of AND Global
• B.Ariunaa, Deputy Director of Sales at Gobi Corporation
• A.Bilguun, CEO of MIBG and Chairman of the Mongolian National Mining Association
• D.Gankhuyag, CEO of Gobi Green Energy
• B.Lakshmi, Director General of the Economic Policy and Competitiveness Research Center

Open question to the panel: You have studied the competitiveness of Mongolia and its various sectors. In your respective sectors, do you see a specific Mongolian competitiveness edge?

Ariunaa: Made in Mongolia is a major advantage, especially when compared to sentiments around Made in China. Since China makes a great deal of clothes sold all over the world, people like to see something different.

To Anar: Is there a “Mongolian fintech” brand?

Anar: Competition in fintech is fierce. Fintech of course is the coupling of finance with IT and technology. When it comes to Mongolians, I think there are many who are creative and come up with new and good ideas. Mongolians are also generally good at math. There are many talented Mongolians working in Silicon Valley for major firms. As for weaknesses, I would say Mongolians lack a certain determination or tenacity - that drive to go through with something until the end. When it comes to thorough execution of a plan or perfecting an idea or product, I have observed that the Japanese and people who studied in Japan show excellence in this regard.

Bilguun: Mining is a sector in which many things have been tried and has garnered experience somewhat. We have companies listed on foreign stock exchanges. Mongolian mining’s advantage is that it can offer higher returns on investment that many other sectors cannot offer. For example, around the time of the Lehmann Brothers’ collapse in 2008-09, Turquoise Hill’s share price was around $2.30, and after the investment in OT, it jumped to $12. Mongolian mining companies can offer 20-30% returns on investment, or even 40-50% if it’s a really good year. Secondly, there is the potential of attracting more investment and delivering value upon the discovery of new deposits.

Gankhuyag: Energy is unique in that it is a commodity that is not transported by vehicles. To transport energy you must build power lines and other infrastructure. Mongolia’s key advantages are our geographic location and renewable energy resources such as wind and solar. Furthermore, many nations around the world have set goals and made pledges to reduce fossil fuel consumption, including neighbors such as Japan and Korea, who plan to transition to 100% renewables in the future. We have massive potential to export renewable energy. One downside is that Mongolia is not considered a significant factor in these regional discussions, so we can’t really set the agenda.

Lakshmi: The government has good intentions in saying that they want to support manufacturing and economic diversification; however, the infrastructure necessary, both hard and soft, to properly support these things is not there. Say you want to establish a factory. You have to buy the land, lay down infrastructure, and say you do all the physically necessary things. Then there’s the inefficient, bureaucratic process of applying for so many different special permits, and then you go seek a loan, and so on. Confronted with this, many choose to simply import a product and sell it, which is much is easier and perhaps more profitable. This does not bode well for any wish to bolster domestic manufacturing.

Secondly, there are some cultural downfalls in Mongolia, certain things that cannot be quantified easily. We can speak highly of individual talents, skills, and knowledge, but we are not as good when it comes to teamwork, and being supportive of one another. This is observed in export sectors where there are a few major players in the market. There is no unified marketing strategy within a sector that promotes Mongolia as a whole.

Question for Anar: Regarding special permits, your companies operate in multiple countries. Compared to Mongolia, how is the licensing process in other countries?

Anar: Of course there are differences. In Mongolia, we have about 10 permits to operate. One good thing is the Bank of Mongolia and Financial Regulatory Commission have become more open to new things. Compared to how it was a while ago, much has improved. In Singapore, there are few regulations regarding fintech. However, if you are operating in accordance with current laws, they are generally accepting of things and will not hinder you much. That’s why many fintech companies are being established in Singapore. Compared to the Philippines, Mongolia seems less bureaucratic to me. However, compared to Singapore or Switzerland, there is much that can be improved in Mongolia too.
 

QUESTION AND ANSWER

After the panel discussion, a brief audience Q&A was held.
 

Question from audience member Bilguunnaran:  If you had to pick one or two things that you think Mongolia should really focus on to promote the country internationally and boost competitiveness, what would they be?

Bilguun: If you want people to invest in you, you have to offer higher returns. This is something we can do, and it’s really not that difficult a thing to do. We have to realize what economic returns we can offer, and play to our strengths and comparative advantages.

Lakshmi: I think our biggest downfall is we are not supportive enough of one another and must become better at working as a team. This goes for the individual level, departmental level, and even at the organizational level. Companies should work better with another. Take the constant controversy surrounding OT. It’s only a few loud voices that are stirring controversy. Yet, who among us are unifying our voices in support of OT? It isn’t there. Sure, in terms of individual talent and skill, there are many things we as Mongolians can be proud of, but when it comes to teamwork and cooperation, we have to do more and do better. This is the most important thing I believe.

Question from journalist Enkhtsetseg for Ariunaa: Given that Tavan Bogd is a major stakeholder in both Gobi as well as Goyo (two biggest cashmere companies), how does that work when it comes to the operations of the two companies? Are you going to be cooperative or competitive?

Enkhtsetseg, journalist at Mongolian Economy magazine, asks a question.

Ariunaa: In general, we will compete in some areas and cooperate in other areas. When it comes to the international market, we will cooperate. For example, if we get a mass order from abroad that cannot be fulfilled in time by our manufacturing capacity, we can cooperate there for the benefit of Mongolian cashmere as a whole. We are going to compete when it comes to target markets, however. Gobi is going to target the more classic style, while Goyo will go more for newer styles.
 

PRESENTATION BY B.TSEND-AYUSH, DIRECTOR OF THE INVESTMENT PROMOTION DIVISION OF THE NATIONAL DEVELOPMENT AGENCY

Click here for presentation

The NDA established an MoU with the BCM. Tsend-Ayush provided an introduction to the kinds of works the NDA has been doing recently, such as at the One-Stop Service Center for investors. The BCM and NDA also cooperated in creating a booklet for investors filled with key information on doing business and investing in Mongolia, which was given out to members during the meeting. The booklet contains information on investing, procedures, taxation, and more in English.

In the future, other important informational material will be produced, such as investing abroad from Mongolia or investing in Mongolia from abroad.
 

After the meeting was adjourned, members were treated to a networking reception at the IKiGAi Japanese restaurant.

Full house at IKiGAi

The Business Council of Mongolia’s (BCM) April Monthly Meeting was held on April 17 at the Shangri-La Hotel, with Chairman B.Byambasaikhan hosting for an audience of around 110 members and invited guests. Chairman and CEO of MobiCom Corporation and Chair of the BCM’s Growth and Innovation Working Group Tatsuya Hamada led this meeting on the topic of“Digital Transformation – Experience and Outlook.”

The meeting was opened with the signing ceremony of a Memorandum of Understanding between the BCM and the National Development Association (NDA). This cooperative endeavor between the BCM and NDA is an effort to enhance protection of the legal interests of investors, improve the investment climate, exchange information between the organizations, introduce international experience, as well as create a handbook for investors.

In addition, the BCM has taken on the role of Coordinator for the Public-Private Dialogue Council established under the Investment Protection Council, and will facilitate discussion of pending proposals by government and parliament. The BCM will actively represent the interests of the private sector and raise issues faced by investors to government organizations. Thus, Chairman Byambasaikhan urges members of the BCM to reach out and relay their messages and concerns concerning business and investment in Mongolia.

BCM Chairman B.Byambasaikhan (left) and Director-General of the National Development Agency B.Bayarsaikhan (right) upon signing the MoU. (Photo by GoGo News)

New and renewing members also received their Certificate of Membership after the presentations and panel:

1. Erel Group - (website)
2. Espresso Italiano - (Facebook)
3. DBM Asset Management - (website)
4. Sant School - (Facebook)
5. Sfeco Consulting - (website)
6. Specialized Career Consulting - (website)

SPEECH BY TATSUYA HAMADA: “SETTING THE SCENE – LESSONS FROM MONGOLIA”

Photo by GoGo News
 

Mr. Tatsuya Hamada is the Chairman and CEO of MobiCom Corporation, and also serves as the Chair of the BCM’s Growth and Innovation Working Group.

Nowadays, there is no business management and no business executive who is not interested in digital technology and digital transformation.  “Digital transformation” is often shortened as “DX.”

Even in Mongolia, digital transformation is not something we anticipate for the future – it is something that is in progress right now. Historically, DX was greatly accelerated in 2008, spurred by the Lehman shock. Many start-up companies sprung up, such as in IT and fintech, especially on the West Coast of the US. This occurred not only in finance, but a variety of areas. DX is the transformation of traditional business by harnessing IT to achieve lower costs and higher performance, efficiency, and productivity. It does not simply mean “a transition from analogue to digital.”

One reason why corporate executives are paying increasingly greater attention to DX is to boost competitiveness. For example, Company A operates at a large scale, with many employees and lots of paperwork, which is expensive. Company B, although smaller, utilizes automation, smart technology, and digital transformation and augmentation. Company B is the company of the future.

Digital disruptors such as Uber and Amazon started business with limited resources. However, these players today are dominant, and changing the market. Power balance and positioning in the market are shifting drastically. 

In China, every day fewer and fewer people use physical cash. Even debit and credit cards are becoming less common. Everyone simply uses their smartphone for payments and transactions. 

However, the speed of technological development is too fast for regulators to keep up with. Therefore, these and such other topics will be discussed in Mr. Hamada’s Growth and Innovation Working Group's meetings to come.
 

PRESENTATION BY B.TSEESUREN: “DATA DRIVEN ORGANIZATION”

Click here for full presentation (English-Mongolian mix)

Photo by GoGo News

B.Tseesuren, PDEng, is the Senior Vice President of IT Zone, which joined the BCM as member this earlier this year.

The most important aspect of DX is data. Data is the foundation of all DX, and there is no DX without data. Today, data and DX is something the business sphere must delve into comprehensively. It is no longer a concern of only IT engineers and computer scientists, but every company and manager.

Mr. Tseesuren gave the example of DBS Bank, which was named the world’s “Best Digital Bank” by Euromoney in 2016 and 2018, beating giants such as Citi, BBVA, and ING. The goal of a business should not be to become a large company just for the sake of being big, but to operate like a start-up, despite employing 22,000 people. A “22,000-employee start-up” must be customer-obsessed, data-driven, take risks and experiment, be agile, and be an adaptive and learning organization.

DBS engaged in innovation programs such as idea vaults and hackathons, enabling easy access to data for experimentation and testing of new ideas

“Can your people conduct such experiments? Does your business have easy access to data?” he asked.

The speaker continued on to elaborate on the Gartner Maturity Model for Data and Analytics. What level is your business?

Source: Gartner.com

The majority of Mongolian companies have yet to reach Level 3 of the model. Companies must invest in D&A systems and instill the culture in their workplaces as soon as possible, he said.

In traditional business, sifting through data was a question of weeks or longer, such as when producing a report. Modern organizations must transition to a unified data and IT infrastructure, such that vital information can be produced within minutes, even seconds, or in real-time.

Note: IT Zone has expressed willingness to cooperate with BCM members who are interested. In addition, the company is organizing Data Forum 2019 on May 15, 2019. More information will be published soon.
 

PRESENTATION BY B.MUNKHZORIG: “DIGITAL TRANSFORMATION: A NOVEL USE OF DIGITAL TECHNOLOGY TO SOLVE TRADITIONAL PROBLEMS”

Click here for full presentation (English)

Photo by GoGo News

B.Munkhzorig is the Director of MobiCom’s IT Division.

Using the first real image of a black hole published last week, Mr. Munkhzorig explained just at what level of digital technology the world has reached. Something which has only been in the minds of physicists and drawn from imagination for a hundred years has been captured in real life by an array of telescopes comprising a global network of radio telescopes.

Before delving into the topic of DX and the Fourth Industrial Revolution, Munkhzorig explained what is not DX:

• is NOT analytics. DX is using quality data to question your assumptions and challenging the status-quo.
• is NOT about data capture and storage. DX is about data consumption to improve decision making, compliance, and operations. 
• is NOT an IT initiative. DX is focusing on the business goals and outcomes and not the technology.
• is NOT an outsourcing initiative. DX is having a simple, scalable, and flexible digital infrastructure to serve the business effectively.

According to Forbes, 84% of DX initiatives in business enterprises fail.

One misunderstanding many people have is that technological advancement itself puts companies or industries out of business, but that is not the case. It is more because of the inflexibility of businesses – a lagging behind the times, or perhaps even a refusal to adapt to new realities – that entire industries begin losing out.

The presentation features many concepts described through easy-to-understand illustrations, such as the agile scrum, design sprint, digital capability vs. leadership capability, and more.
 

PRESENTATION BY U.KHOSJARGAL: “BUSINESS PROCESS RE-ENGINGEERING”

Presentation not available to the public

Photo by GoGo News

U.Khosjargal is a Project Director at Golomt Bank.

The first question you should ask yourself is “why do we do business?” And the type of digital transformation you implement will depend on the answer. Some would say for profits, to create a new products, to feed our family, etc.

After you answer the question of why, ask yourself how? The path is different for each company, and the answer to how is your company strategy to realize its vision and mission. 

“If you can’t measure it, you cannot improve it,” he said. You can have great goals, such as cornering this percentage of the market, or this amount of profit, and other objectives; however, without harmonization of your business process and improvements based on KPIs, this is not possible. 

"Reengineering is the innovation based fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service, and speed," according to Michael Hammer.

Regardless of the role of the actor, the other actors in a relationship must consider the interests of the others. The company may think of its profits, productivity, and being the best. The employee is concerned more about salary and benefits, personal fulfillment, or their reputation. Speed, prices, and quality are the most important things to a customer. Business partners care most about reliability, adhering to standards, and satisfaction with a partnership. As with many in things, the key is balance. 

In addition, business process re-engineering is not a linear process, but a circular, continual process. After a business initiates a change and implements a redesign, there must be monitoring and improvements, which in due time should result in the envisioning of a new process.

Source: Consultus.hr

PANEL DISCUSSION: “OPPORTUNITIES TO TRANSFORM YOUR BUSINESS”

After the presentations, a panel discussion was held, moderated by U.Unenburen, Chairman of Bitmonex, a cryptocurrency exchange. On the panel were: 

• U.Khosjargal, Project Director at Golomt Bank
• B.Munkhzorig, Director of the IT Division at MobiCom
• B.Solongoo, Co-Founder and Partner at Avinex Partners LLP
• B. Tseesuren, PDEng, Senior Vice President at IT Zone

Question for Munkhzorig: Are there ways to accelerate your pace of digital transformation? I went to a Starbucks in South Korea and they told me, “Sorry, we don’t accept cash.” Is this possible in Mongolia?
Regarding MobiCom’s “Candy” program, what were its goals, and what were some challenges?

Munkhzorig: It may be difficult right at this moment, but I don't see why this can't happen here in Mongolia. All the soums in the aimags are connected to the internet. There's really nothing hindering a transition into digital payments.

Regarding the MobiCom’s Candy program, MobiCom first introduced a digital payment scheme in 2010, called MobiExpress. Back then, people really were not ready for such a thing. Perhaps they did not trust it; perhaps they didn’t understand why they should make transactions through their phones. That was nine years ago.

Today things are much different. People see how the world is changing. Banks have introduced mobile payments, and for people it makes sense that a bank would introduce such applications. 

As for our Candy scheme, it began as a loyalty program in 2014, and in 2017, it became a digital currency. Last year, we received licensing from the Bank of Mongolia for it to become a formal digital currency.

But to answer your question, it has not reached the levels that we had hoped for when we first initiated it. There are various reasons, which are working on. In any case, I certainly believe the time has come for Mongolia to transition to digital payments and gradually do away with physical cash.

Question for Solongoo: I want to ask you about the legal environment related to digital transformation. Also, last year the EU introduced the General Data Protection Regulation (GDPR). Where is Mongolia in comparison?

Solongoo: The core foundation of digital transformation is definitely data. In Mongolia’s case, we give away our data to companies. However, our privacy laws are quite outdated. The 1995 Law on Personal Secrecy is the main law governing data provision and usage. Understandably, today this law is inadequate when it comes to the various issues related to personal privacy and data. Questions such as what data can be used, how it is to be stored, what data can be transferred, to whom, by whom, and other such legal questions are rather vague. The recent law that entered force in the EU, perhaps you received many emails around December regarding changes to various companies’ privacy policies, is in my opinion the most comprehensive modern regulation that seeks to protect the interests of individuals.

There is the need for improved regulatory schemes for data privacy in Mongolia. For example, everyone uses the personal Registration Number for everything, and we provide this unique identifier to anyone and everyone without thinking twice. We must be able to register individuals at the state and government level and prevent fraud, while at the same time protecting their private, personal details.

Question for Tseesuren: Today we talk about this data, that data, big data, and all types of data. We talk about AI. Is there AI in Mongolia? What advice would you give to effectively harness data and make prudent decisions?

Tseesuren: AI is still not common, not just in Mongolia, but in the world in general. 

People say “we don’t have data” or that they have too little data. Yet, they conduct numerous transactions. At the very least, you need to have data to submit necessary financial and tax reports. What they lack is not data, but experience. Any business or operation has data to be observed. The culture of data capture and observation has not been instilled in the business culture.

Question for Khosjargal: We frequently see organizations and departments run in an unprofessional manner. We see mistakes that were easily preventable, or taking too long on something needlessly. Is business process re-engineering something that is only for large companies? Can BPR be implemented in SMEs?

Khosjargal: Size does not matter when it comes to process re-engineering. Something that has become more common internationally is the joint venture structure, especially among SMEs. They form a shared space among one another.

Let me use a small dental clinic as an example. The operator is a capable dentist, has good customers, and runs a stable business. Yet, the dentist spends 30% of his or her time actually performing dentistry, and the other 70% on other things. The dentist is not a lawyer, not an accountant, or a specialized inspector, so he or she spends much more time on those issues, which detracts from the core business. However, there are technological, cloud-based solutions to such problems. You can utilize external legal counsel, or have external accountants draw up your finances. This is something we are looking into for Mongolia. Many of the 50,000 legal entities operating in Mongolia stand to benefit.

BPR is not necessarily something that a large company implements by spending lots of money. Whatever business you operate, you have customers or clients. In order to improve your operations, any company in any industry can implement the principles. So something SMEs who are members of the BCM can do is create a shared space to resolve issues such as the one mentioned in my example.

QUESTION AND ANSWER

After the panel discussion, a brief audience Q&A was held.
 

Question from Khosjargal (audience member with the same as the panelist): A visa for South Korea is taking up to 70 days to be processed on occasion. They explain that many applicants submit falsified documents. Is this a satisfactory explanation? What are your thoughts?

Khosjargal: As a banker, people often ask me in dismay why the exchange rate is depreciating. Basically, it is a reflection of how the world values us. Part of the answer is related to this, when it comes to visa issuance wait periods for South Korea. Perhaps there could be procedural or bureaucratic aspects related to the internal operations of their Embassy; however, South Korea is a very developed country, and data usage and analysis is highly developed there. I don't think the problem is so much related to processing or data analysis at the Embassy of South Korea. Contrarily, it is more related to Mongolia's international standing. Of course, there may be some operational areas that could be improved.

Munkhzorig: Even in this situation concerning falsified documents, there are potential tech solutions. In future, blockchain technology will make it so it is virtually impossible to submit falsified documents. The technology is there. However, this is easier said than done. The regulatory framework is not there yet. 

On an unrelated note, the moderator asked a few moments ago about AI. It is not something brand new in our time. It goes all the way back to the 1950s. Perhaps you know about an IBM computer beating chess master Gary Kasparov. AI just means an analysis of a situation based on an algorithm written by humans and acting accordingly. It seems like every company is talking about pursuing AI in these past 2 or 3 years. The reason why is because of big data. There is simply a lot more data for even simple algorithms to process. Even in our network operations, we employ what could be called AI. It analyzes signals and makes adjustments accordingly based on the situational reading. It's not some incomprehensible, overly technical thing.

Question from Wayne Thompson: Do you think the general public of Mongolia will perceive DX as a threat to labor, and general worker roles, careers, and so forth? How should we avoid that with the language and rhetoric we use as tech leaders?

Tseesuren: Whenever a new change is coming, people get worried. The main leadership should be the private sector. When people get better service and more options from the private sector, that would help. However, the government should also play a role, such as with e-government initiatives. That would help the public to understand the benefits.

A lot of people have they fear that they will be replaced by robots or by software. How do we avoid that, and keep the message clear that this is service improvement?

For example, a hundred years ago, people were worried about mass production - that mass we would be cast out on the street. I think it is a similar situation here. The whole of society has been improved. Digital Transformation and the Fourth Industrial Revolution will significantly improve our lives. In 50 years, we will live in a completely different society. There may be some misperceptions along the way, but we can just go, and I think we will see the positives.

- End -
 

Digital Immigrants vs. Digital Natives

The BCM would like to extend our appreciation to all the presenters, panelists, and attendees of the Monthly Meeting.

The Business Council of Mongolia’s (BCM) March Monthly Meeting was held on March 28 at the Shangri-La Hotel, with Chairman B.Byambasaikhan hosting for an audience of around 100 members and invited guests. The topic of the meeting was the “Study on the role of government based on the principles of the Mongolian Constitution for sustainable social development.”

BCM Board Member and CEO of Clean Energy Asia Mr. Orchlon opened up the third meeting of the year. Orchlon was also recently named as one of Forbes' Asia 30 Under 30.

In 2018, BCM held comprehensive board elections to elect the 15 members of the Board of Directors. “BCM is the most well-placed platform to be able to unite and align the public sector with the private sector with the policymakers,” he stated.

As part of BCM’s mission to build this alignment at the Board level, six Working Groups, all headed by Board Members, are being driven vigorously and energetically. An update on the activities of these Working Groups will be emailed to members next week.

The BCM currently has 256 members, with a current renewal rate of 78% thus far for 2019.

New members also received their Certificate of Membership after the presentation and panel:

1. Bank of China - (website)
2. Mobicom Corporation - (website)
3. Global Outsourcing LLC - (website)
4. Media Group LLC - (info)
5. ItZone LLC - (website)
6. Nomin & Advocates LLP - (website)
7. CoverHill LLC - (LinkedIn)

The key objective of this meeting was to present the results of an eight-month study by TUS Solution LLC and hold a discussion on the results.

PRESENTATION ON “ANALYSIS AND OUTLINING OF THE CONSTITUTION OF MONGOLIA BASED ON SYSTEM MODELING”

Click here for full presentation (Mongolian only)

Background on systems analysis

Mr. D.Jargalsaikhan presented the results of the study named above. Jargalsaikhan is on the BCM’s Board of Directors and chairs the Economic Freedom and Competitiveness Working Group. He is also the Chairman of TUS Solution LLC as well as Founder and Chairman of the Young Researcher Support Foundation.

In 2017, a smaller-scale study on the same topic produced interesting results, which prompted the Director of TUS Solution to broaden the study to see if the results held. The team working on this more recent studied comprised an eclectic group of professionals from various fields: philosophy, sociology, psychology, public health, theoretical mathematics, political science, business, and law.

Most studies on the Constitution of Mongolia are conducted by lawyers and other legal experts. Studying the Constitution from a systems analysis viewpoint is something novel which has rarely been considered. To use the metaphor of a house, when something malfunctions in the house, we form or already have a mental image of what or where the problem lies, and perhaps how to solve the malfunction. Like a house, the Constitution is an abstraction of interrelated ideas that is unique from and greater than the sum of its parts.

The study was an attempt to form a sort of “mental image” of society and the constitution, perhaps something Plato might call the “ideal state” of the “form” of the Constitution of Mongolia – something which can never be reached but something which we must continually strive for.

As a humble disclaimer, Mr. Jargalsaikhan noted that this study was the first of its kind and that there can be areas of improvement on future investigations. 

Certainly a complex and intricate topic to grasp, and at times reading off like aWittgensteinian treatise, but highly useful nonetheless.


Source: informationisbeautiful.net

The 5 axioms of a living system:

1. Having a unified purpose
2. The purpose has to be realized through actions and/or duties to undertake
3. The results and performance of the activities undertaken to realize the purpose must produce information or data for the concerned parties
4. Information and data on results and performance must be measurable
5. The system’s realization of its purpose is continually improved through corrections on impediments and malfunctions

The study had two key objectives:

1. To identify the base reasons for societal distortions we see in Mongolia today
2. To create a visual model of how society is to operate according to theConstitution of Mongolia (in presentation linked above)

There is the key phrase and "mission" in the preamble of the Constitution, "aspiring toward the supreme objective of building a humane, civil and democratic society in the country." So how well is that aspiration being realized  today?

Results of the study

The study produced 11 conclusions:

1. The phrase in the constitution "aspiring toward the supreme objective of building a humane, civil and democratic society in the country" satisfied the criterion of a unified purpose of the citizenry.
2. The concepts in the Constitution contain the logical foundations to constitute a social system capable of fulfilling its purpose
3. The various representatives of the state – president, parliament, government, judges, prosecutors, and regional administrations – are not being properly governed in accordance with Article 19.1 of the Constitution.
4. Of all the organizations tasked with representing the state in order to implement the goals of the Constitution, only the Constitution Court is being governed in accordance with Article 19.1.
5. The duties of political parties and their activities in order to realize the goals of the Constitution before the people are not defined by the Constitution nor other laws.
6. Because there are no laws defining the measurement and evaluation of participants that are to fulfill the "mission," there is no agreed-upon method of measuring the performance or implementation of the "mission."
7. Because there are no laws tasking an organization or entity with the monitoring of participants that are to fulfill the "mission," no such monitoring has been conducted on the performance and results of the "mission."
8. Because the efficiency to be achieved by the various organizations and officials representing the state in order to fulfill the "mission" of the Constitution is not defined through performance and results pertaining to the objectives, there is no incentive for these participant units to strive towards the "mission."
9. Because the criteria for evaluating the "mission" stated in the Constitution is not defined, it presents the opportunity for organizations and officials whose duty it is to represent the state to operate outside of the directive laid out in Article 19.1.
10. Because the criteria, information, and duties necessary to the entities representing the state to find the reasons for hindrances they face and are bound to face and fulfill the “mission” are not defined in the law, it is not possible to find and point out the base reasons for such hindrances of the past and potential hindrances in the future.
11. Because it is not defined in the law how the participant units that are to fulfill the “mission” are to enable the citizenry to discuss the planning and reporting of the provision of citizens’ rights stated in Article 16 and duties of the state laid out in Article 19, the opportunity for citizens to participate in the planning and oversight of the fulfillment of the “mission” is restricted.

PANEL DISCUSSION

After the presentation, a panel discussion was held to discuss the study. Moderating the panel was B.Bolor-Erdene, Founder and Editor-in-Chief of trends.mn, and the panelists were:

• B.Enkhbayar, Former Deputy Minister of Justice and Internal Affairs
• D.Jargalsaikhan, BCM Board of Member and Director of TUS Solution
• S.Erdenebold, President of the Democratic Youth Union
• O.Mashbat, Political Researcher

With the political backdrop of the controversial legal amendment recently initiated by President Battulga and swiftly ratified by parliament, many panelists alluded both directly and indirectly to the turn of events in the political scene, generally in dismay.

One of several things that the panelists agreed on was the need for legal reform, whether that be in the form of constitutional amendments or making sure subordinate laws align with the constitution. "There are labor unions in Mongolia whose 'constitution' is older than our national Constitution," said one panelist. 

Given the variety of backgrounds among the panelists, people saw the issue from different angles. Whereas a businessman or economist anticipates risks or hindrances, the lawyer generally looks in hindsight, saying "here is where we went wrong." However, lawyers do not possess a monopoly on discussion of the Constitution, stated Enkhbayar.

The first organization to implement systems engineering comprehensively was the US Department of Defense, and the second was NASA. However, systems modeling can be harnessed to improve the effectiveness of any organization big or small, or in the case of the study, society as a whole.

One tangential topic raised by Erdenebold was the surge of online fake news, trolls, and other such thing which have an effect on society, and the capacity to influence elections. We must be very aware of this and the challenge this presents for democracies, he stated.

As mentioned by Erdenebold, in the end, the checks and balance and separation of powers must be ensured by the constitution, and that if this is lost, generations may suffer as a result.

The BCM would like to extend our appreciation to all the presenters, panelists, and attendees of the Monthly Meeting.

BCM AND AMCHAM INTRODUCTIONS

From left to right: BCM Chairman Byambasaikhan Bayanjargal; Speaker of Parliament Zandanshatar Gombojav; Chairman of AmCham Oybek Khalilov

A joint Monthly Meeting was organized by the Business Council of Mongolia (BCM) and the American Chamber of Commerce in Mongolia (AmCham) on Monday, 4 March 2019 at the Shangri-La Hotel, with the newly-appointed Chairman of the State Great Khural (Speaker of Parliament) Mr. Zandanshatar Gombojav as the guest of honor.

The BCM’s purpose is to serve its members to ensure economic freedoms and property rights as enshrined in the Constitution of Mongolia are protected, by engaging with the public, its members, and the government.

AmCham and the BCM have worked closely in the past year, especially regarding corporate income tax and other tax reform issues.

Chairman of AmCham Mr. Oybek Khalilov congratulated Speaker Zandanshatar on his election to the highest office in the legislative body. 

AmCham strongly advocates for private sector-led growth. Mongolia’s economy today is highly dependent on exports; however, with its geographical location, natural resources, and well-educated young population, the country has huge potential to advance other sectors of the economy, noted Mr. Khalilov. Sectors with high potential include agriculture, tourism, finance, cashmere, renewable energy and ICT. AmCham Mongolia fully supports Mongolia’s initiative on the Mongolia Third Neighbor Trade Act to be discussed by the US Congress, which will advance bilateral commercial relations by boosting jobs, increasing duty-free exports of Mongolian cashmere products, and empowering women in Mongolia. Mongolia produces a third of the world’s raw cashmere. AmCham also advocates full implementation of the US-Mongolia transparency agreement.

SPEECH BY CHAIRMAN OF THE STATE GREAT KHURAL MR. ZANDANSHATAR

To start off, the Chairman of the State Great Khural (Speaker of Parliament) gave an update on the current economic climate. The government and parliament are making efforts to make the business and investment environment more stable and protect the interests of investors, he said. 

A brief update on the current economic situation:

• GDP growth 6.9% in 2018
• The Bank of Mongolia purchased 22 tons of gold
• The government recorded a budget surplus of MNT 11 billion after 11 years of deficit

According to IMF’s Extended Fund Facility review, Mongolia’s economy is recovering, but we are aware of risks associated with commodity prices

The government has begun large-scale projects such as the oil refinery and the wastewater treatment plant.

This spring the Tavan Tolgoi railroads and other road projects will also commence.

The government has adopted the Three-Pillar Development Policy, which shall be the cornerstones of development:

1. Governance reform through better accountability and effectiveness in the rule of law. Lawmakers are currently striving to strengthen the democracy through constitutional amendments. 
   “In other words, we are trying to build a great wall of democracy” in this region. Governance reform will be evaluated based on the World Bank’s Worldwide Governance Indicators.
2. Economic reform through economic diversification
3. Social reform – from welfare state to a productive society

“Listening to investors’ needs is an important part of our economic agenda to create a more predictable and stable investment and trade environment,” said the Speaker

The government has established the Investment Protection Council (IPC), which features a regular consultation mechanism and addresses grievances of investors. This is in part due to the transparency agreement with the US. This mechanism prevents the adoption of laws pertaining to business and investment without prior consultation with the private sector.

With assistance from the World Bank, the government is implementing Public-Private Dialogue (PPD).

Another project in the works is the “Digital Parliament Project,” which comprises three components:

1. e-information – comprehensive information on current affairs and law-making process in parliament
2. e-participation – an online forum facilitating two-way discussion on draft laws
3. e-voting - introducing a mobile app with all Mongolian laws and government publications, and will soon publish an English version of the website and forum

The Speaker requests cooperation of the BCM and AmCham in assisting to build the capacity of parliament to translate draft laws and other government documents.

In line with investment policies, the National Development Agency and World Bank Group are working on investment reform mapping: comprehensive analysis and assessment of current investment and legal environment of Mongolia.

A One-Stop Service Center for investors was recently established, providing foreign investors with legal and market information and assisting with registration of legal entities and residence permits. In the future, the center will also provide info regarding customs and taxes. 

The Speaker wrapped up by saying “To conclude, let me express my concern about the rule of law. I believe that laws on investment are much dependent on trust. The only guarantee of gaining confidence is to ensure that the laws and rules are clear and enforced. Each case must be handled according to the law without any interference. In brief, it is a matter of the strong rule of law. Therefore, it is essential that officials at all levels of office, all levels of public service strictly follow ethical standards and norms, be committed and accountable, and adhere to the principles of fairness and justice. That is why Parliament announced this year as the Year of Citizen-Centered Public Service. Taking this opportunity, I would like to assure that both parliament and government continue to pay special attention to continuous improvement of the legal and regulatory environment for investors.”

QUESTION AND ANSWER
 

Question from BCM Chairman Byambasaikhan: There has not been much news about the IPC recently. I understand there has been structural changes. Since you were the Chair of the IPC in the past, would you brief us on recent IPC activities and future plans?

Speaker Zandanshatar: IPC operations are continually improving, but we are planning to submit a new law on investment. An extraordinary session of parliament is planned for mid-March, during which legislators will debate the Law on Investment and General Law on Taxation. In the future, we plan to start an independent body for foreign investment protection. Before 2012, we used to have the Foreign Investment Agency, responsible for protecting FDI in Mongolia. The IPC’s activities have not slowed down and are improving.

Question by Jay Liotta from MahoneyLiotta: Mongolia made the choice in the 1990s to have an independent, private sector-driven economy. We have seen great strides in development since then, but in the last 10-12 years, we have seen an erosion of that with legislation making it difficult for private sector growth. Most recently, we have seen the growth of state-owned enterprises and a big drive for the state to create jobs. Has Mongolia given up on an independent, private-sector driven economy?

Speaker: Since the 1990s, Mongolia has been striving to establish democratic institutions in the public sector and a market-oriented economy. In recent years, Erdenes Tavan Tolgoi has been a big player in the economy as a state-owned enterprise, due to the commodity prices. In such a small economy, the contribution of major SOEs may look significant. Erdenet and ETT are paying almost 30% of the total tax income of Mongolia. That is why the role of SOEs is increasing. However, compared to China and other economies, the government and parliament are still eager to promote our private sector. Parliament is planning and extraordinary session in March, where we plan to discuss the Law on Concessions, Corporate Income Tax Law, and Personal Income Tax Law. These laws are aimed at supporting and promoting the private sector. Most importantly, we will create a 1% tax environment for small and medium-sized enterprises.
The government is set on issuing an IPO for Erdenes Tavan Tolgoi. There are also discussions regarding a potential IPO for Erdenet Copper.
The top priority at this moment is to ensure economic recovery and overcome the financial difficulties (debt burdens). That is why the role of government is increasing.
 

Question from Randolph Koppa of TDB: We see some pending legislation that causes some worry. With the 22 tons of gold purchased by the central bank, with the trade surplus, and increase in foreign investment, why would there be a consideration in the currency laws to control through the central bank the inflows of foreign exchange from exports, which would effectively dismantle the two-tier banking system?

Speaker: The central bank is implementing banking sector reform in cooperation with the IMF, and the government is also paying greater attention to money laundering to address suspicious cash flows. Recently we acknowledged that we don’t have sufficient information about export payments from overseas. On the other hand, we want to introduce have a liberal economy, but also want to control money laundering, so the question is how to strike a balance in these two things.

Question from Byambasaikhan: Parliament is currently is currently in the process of discussing amendments to the Law on Renewable Energy. This sector has been able to attract over half a billion dollars of real investment, and I understand that the current drafts in discussion will significantly change the system that allowed this private investment money to come in without any government guarantees purely on the back of strong power purchase agreements. Many companies are concerned that the change in rules will affect the flow of investment into the renewable energy sector. When is the Law on Renewable Energy going to be discussed or passed?

Speaker: It is a difficult question because I don’t know when the government will submit these bills on renewable energy. I do know that we are not capable of paying subsidies to renewable energy companies in these times of national difficulties. The government is debating this issue. On the one hand, we have to stick to our policy to support renewable energy; on the other hand, we have to calculate the financial burdens on the state budget.

Question from Chairman of AmCham Khalilov: In 2013 the US-Mongolia Transparency Agreement was first introduced, and was then ratified in 2017. What were the latest steps in terms of the implementation of the Agreement?

Speaker: I mentioned in my speech about the Transparency Agreement and digital forum. We are trying to form our legislative process during the extraordinary session in March. I would to cooperate with BCM and AmCham to translate bills and laws in accordance with the transparency agreement. Currently we do not have sufficient capacity in parliament to do this. Most importantly, we will introduce the e-parliament project, where will have e-information, e-participation and e-voting applications. In this regard, the business community, BCM, AmCham, etc. can participate in the debate concerning draft laws. Draft laws which get adopted will be available immediately in digital form; however, translations will take some time.

Comment and question from Chairman Byambasaikhan: Your proposal to work together with BCM is welcome, and we can establish a task force comprised of our members to work on this. You mentioned about constitutional amendments in the works. Lots of businesses are anxiously waiting for time frames, as we don’t want to have false expectations.

Speaker: Political parties and scholars reached the conclusion that constitutional amendments are necessary to strengthen our democracy. At this moment, most political parties, scholars, and civil society organizations are involved in this process. We also conducted deliberative polling, receiving 5.6 million opinions from 350,000 thousand citizens. For two years we did a lot of listening. We are now preparing a declaration for constitutional amendments, calling on all stakeholders to give us their comments and thoughts. After 2-3 years of hard work, we have almost finished drafting the constitutional amendments. These will provide better checks and balances of constitutional powers. I hope we will start discussions on constitutional amendments by May, and that is why we are calling an extraordinary session of parliament in March. In the end, parliament and the people of Mongolia will decide on these constitutional amendments.
 

Question from EBRD Country Director Irina Kravchenko: It sounds encouraging for international and private investors, and we would like to see results through these reforms announced. We understand the difficulties the economy has faced and are glad to see it recovering. Honoring agreements made in whatever sector is crucial for investment stability. There is some worry about changes to regulations regarding renewable energy, not only regarding new investments, but also old ones?
Also, how is the progress regarding the development of public-private partnerships? International debt is still high despite reductions. Are there any considerations in the government to push forward these structures? You have huge investment needs which cannot all be resolved through sovereign lending or soft loans and concessional loans.

Speaker: I would like to thank you Irina and the EBRD for the continued support for Mongolia through soft loans for the private sector. This spring, we start major railroad and road projects, so this year will be a very constructive year for Mongolia. Regarding public-private partnerships, we are now working with the National Development Association, which will submit to us a package of laws to support our business community. It will be the first law covering PPPs. There will be a bill on social responsibility, and we have already received a bill on professional associations. In order to have a united voice of business communities, we need to strengthen our chambers of commerce and professional associations.
The government and parliament are listening to the business community, but the business community need to unite their voices and consolidate opinions, sometimes advocating for contradictory things. The question of PPPs will be debated in parliament in the autumn session.
 

The BCM and AmCham would like to extend our appreciation to Speaker Zandanshatar, and to all the attendees of this joint special Monthly Meeting.