Wednesday, October 21, 2009

LAMA OF THE GOBI new edtion now available!

At long last my book Lama of the Gobi has gone global! As some of you have seen the first version appeared in Mongolia a couple of years ago and was sold in UB bookshops.

The new edition is available in bookshops across Asia and online anywhere. It was published by Blacksmith Books in Hong Kong and comes in paper back. It has been expanded and revised so even if you read the first edition you’ll find nuggets of new information in this second edition. For now the best place to buy one is on the website. If you already read the first edition, you can now go to the amazon page and write a review!

More information is available is available on the Blacksmith website.

Sunday, October 18, 2009


South China Morning Post
OCTOBER 8, 2009

By Michael Kohn

On the gritty outskirts of Ulan Bator, where heavy trucks lumber along pot-holed roads and packs of mangy dogs patrol garbage-strewn alleys, a shiny new billboard is attracting curious onlookers.

The sign describes an ambitious plan to modernize the neighborhood, the 11th ward of Bayanhoshuu District, raising it from slum-like conditions to the first-world in a flash.

A “before” image on the sign shows the neighborhood’s current layout of uneven streets, dead-ends and labyrinth of alleyways. To the right, an “after” image promises a sort of American suburbia experience of neatly trimmed lawns, sidewalks and quaint bungalows in the shade of poplar trees.

“This is our dream,” says community organizer Lhamsuren Ragchabazar. “If we can redesign the neighborhood people will have more conveniences and a better standard of living.”

The plan may sound like fantasy for this poor country, but Ragchabazar was undeterred. A crafty land readjustment scheme, he explains, will fund the project.

Residents are being asked to give a portion of their property, fences will be moved closer together and the excess land will be sold to raise money for much-needed infrastructure like roads and plumbing.

“One needs to give up something in order to get something better in return,” says Hirano Ryuko, a project advisor for JICA, which is supporting the government initiative. “Properties will be smaller but will have more value if the neighborhood is in better shape.”

But only a handful of the families in the neighborhood have signed up for the plan.

“Land readjustment programs take 10 to 15 years,” says Tsedendash Tulga, the head of Ulan Bator’s Land Management and Planning Division. “It can take that long just to change the mind of the community.”

And so it goes for Ulan Bator’s amoeba-like outer districts, which have sprawled out of control over the past two decades. Migrants from rural Mongolia have flooded the capital in search of work; most of the new arrivals end up in peri-urban settlements like Bayanhoshuu.

They bring with them their gers, the round felt tents used by nomads. The widespread use of the ger gives the districts a sense of impermanence, as if the residents may just pack up and return to the steppes one day. The wood fences dividing the gers create a maze of walls reminiscent of frontier outposts of the American west.

The tents are not new to the city. Since its early days in the mid-1600s the residents had a habit of moving the town every few years, until it eventually came to rest at its current location in 1778. Traditionally the gers were set up like a protective ring around the main monastery, Gandantegchinlin. The city grew rapidly during 20th century when Soviet town planners arrived with blueprints for a modern urban core. But most of the ger districts remained, expanded into valleys.

Migrants continue to arrive and occupy any possible patch of earth, often in flood prone areas. Last July eight people in Ulan Bator died in floods when their gers, placed in steep sided gullies, were washed away.

The uncontrolled growth of the ger areas means that no space has been set aside for roads, let alone basic necessities such as underground sewerage systems.

In Bayanhoshuu, residents line up outside a pump house for water, which they cart it home in plastic barrels. Hot showers can be had at a local bathhouse, though it’s too small to accommodate the needs the 10,000 district residents.

“It’s a difficult life because we have to go a long way for water,” says Puruvdulam Tsetsegee, a retired state employee who lives in the neighborhood. “And showers are very expensive. We have a family of six and each shower costs Tg1800 ($1.25). On top of this we have buy food and other necessities so it really adds up.”

Problems are exacerbated in winter when temperatures plummet to minus 30 degrees Celsius. Residents keep warm by burning coal or wood in their pot-bellied stoves, although this of little use during midnight runs to the nearest outhouse.

In winter, the accumulated soot caused by tens of thousands of stoves creates an appalling black cloud that engulfs the entire city. This winter an estimated 700,000 tons of coal is needed to supply the city’s 160,000 ger district families.

The situation is not helped by Ulaanbaatar’s topography – it’s almost completely surrounded by low mountains that trap the poisonous air until a strong wind can blow it away.

The smog has had detrimental affects on the health of the population. The number respiratory diseases among children under five is three times greater in Ulaanbaatar compared to children living outside the city.

Planners say the long-term goal is to install central heating in the ger districts, thereby reducing their dependence on coal. But that could take decades.

The task of sorting out this mess has been left to Tulga, who occupies a small office in Ulan Bator’s gleaming new City Hall. He said almost three quarters of city residents live in ger districts and the challenge of moving them to apartments is hampered by the increasing numbers of new migrants.

“It is difficult to control migration. The people have a constitutional right to live where ever they want so we can’t stop them from moving to the capital,” Tulga explains.

A lack of zoning laws means that newly arrived to pitch their tents where ever they please. The city is dealing with that problem by dividing the ger districts into three categories.

Zone One, closest to the urban core, will be transformed into mixed-use housing with apartments and commercial areas. Zone Two, slightly farther out, will remain ger districts, only better organized and connected to the urban infrastructure. Zone Three, mainly the new developments on the outskirts, will be torn down and returned to its natural state.

People currently living in Zone Three will be moved to other parts of the city, increasing the density of the capital but reducing the sprawl that has wrought environmental problems like pollution and land degradation.

The urban crush has had a ripple effect on Ulan Bator’s city center, where once empty boulevards now teem with Korean taxis, Humvees and Landcruisers. During the mid-day rush hour it can take 30 minutes to drive three kilometers across the city center.

“We cannot blame one person, like the mayor the prime minister. Every city worker is jointly responsible for these issues. We all have to come together to solve these problems,” said Tulga.

The city has recently given him a boost by installing streets lights around back alleys of
Bayanhoshuu. Some of the lights are solar-powered, part of a government effort to use environmentally friendly technology.

But despite the token gestures by City Hall, Tulga admits the onus is on the public to reform their own neighborhoods.

“The main purpose of the pilot project is to show the community that it can work with the city to make necessary changes for a better life,” he said.

Saturday, October 10, 2009

Website Revamp

I have revamped my website and it should be easier for you to search for my stories in Mongolia and beyond. just go to my website and click on the articles link.

Friday, September 18, 2009

My Interview with D. Zorigt, Minister of Mineral Resources in Mongolia

The raw text of my interview with Minister Zorigt (Ministry of Minerals and Energy)

How much could this OT produce in monetary terms?

ZORIGT: We are talking about quite signifcant numbers. We have done our numbers for the next half century. If the price range is around $4000 per ton we are talking about a total number that includes tax revenues, fees etc. A ballpark figure is 28 billion dollars. This is a significant number. That is in real terms, not NPV terms.

On an annual basis we are talking about 58 million tons of ore produced. Per annum this means around 800 million dollars at peak performance, if we look at the dividends as well as taxes.

Why did the government back off its attempt to acquire 51% of Ivanhoe shares?

ZORIGT: The government has all sorts of negotiations. In these negotiations we have heard various ideas from both sides. I don’t want to go into the details of it because we are in the final stages of the agreement. The only thing I can say is the outcome is fair and mutually beneficial to both sides.

What does Mongolia plan to do with the $250 million in advance taxes?

ZORIGT: This money will be used to fulfill the promises of the two parties made during the last election. These two parties are now part of a coalition government. It will be done through enacting various social welfare laws or it will be done through a sovereign welfare fund, which is called the Mongolian development fund. There were many promises made during the campaign, which need to be met.

Can Mongolia continue to give these cash payments? Would it not be better to invest in infrastructure?

ZORIGT: Of course there are longer term interests for Mongolia. But first, let me ask you a question, where are you from Michael?

The US.

ZORIGT: Do you know of any schemes where the government pays the tax payer? Provides the tax payer with financial assistance during a time of economic crisis in the US?

Absolutely, I was paid $600 last year. But generally the government does not give out money to each and every citizen.

ZORIGT: Certainly, and there are longer term interests. We are talking now about big plans for the infrastructure development. We need to build a railway down south in the Gobi for the mines to be developed. We need to have a road there, we need to have a power plant there. Mongolia is one of the largest countries in the world so we need infrastructure to connect these places But lets remember one thing. This is a democratic country and the core value of the democratic society is the trust between the citizens and the government. The whole notion of the democratic government is that government is elected by the people. And the election promises that were made cannot be easily thrown out. It should not easily be thrown out. Parties should work to earn the trust of the people. This is the backbone of a democratic society. I can give you hundreds of examples of elections in western countries where promises were made to the people. This reflects the real situation in every country. What I am trying to say is that there are real infrastructure needs and certainly there will a government to meet those infrastructure needs. But there are also social requirements and promises that have been made. And we consider ourselves a successful democratic country. For the past twenty years we have been holding free and fair elections, multi-party elections. And we certainly need to uphold these values. The trust that has been put into the parties and into the electoral system is very important.

Getting back to OT, when do you expect exploitation of the mine to begin?
ZORIGT: We certainly have a timetable in the agreement that within two years all the finances must be completely secured. Then the construction period should be achieved in five years. So it will be a maximum of seven years. But certainly the plan as it is written in the feasibility study, which we are discussing right now is to go ahead much quicker. So we are expecting that sometime by 2012 or 2013 production will begin.

How much will it cost to build the mine?
ZORIGT: Well, so far there has been a significant amount of money invested. If we discount that number, then we are left with a figure of four billion dollars needs to be invested over the next five years after the signing of the agreement.

When do you expect money to start rolling in?
ZORIGT: Money will start flowing to the government from day one. Because of all sorts of import taxes and VAT taxes that we have in place. For the first year we will see at least $100 million dollars just from these taxes. So the money will be flowing to the government quite soon. The taxes will be on the import of the equipment and other taxes.

And money will flow from the supply chain?
ZORIGT: Sure. This is a four billion dollar investment project. As you can imagine Mongolia will benefit from this flow significantly. In the agreement we have certain clauses with regard to energy. After four years the project will take all its energy needs from Mongolia. So it’s an important clause. Water is imporatant, certainly that will come from Mongolia. Roads are important. Value added production will be taking place in this country. We certainly are looking right now and planning for the construction of a copper smelter. It will be built based on this Oyu Tolgoi project. We certainly think that downstream and upstream production will have great benefits for the country.

Do think that Mongolia can be energy independent?
ZORIGT: We currently produce most of our energy in Mongolia. If you are asking whether the increased needs and requirements for energy will be met, yes I think so. Mongolia has significant coal reserves. We are planning at this point to build a new power station in the capital city. And we will have power exporting capacity in the Gobi. We are also talking about building a new power station down south in the vicinity of the OT project. So I think we have considerable energy projects coming up.

Can talk about the prospects of atomic energy in Mongolia?
ZORIGT: The law on nuclear energy has been adopted and the agency has been set up, which is in charge of this matter. Its an independent agency so I think the policy and frame work needs to be discussed.

Will Mongolia build a nuclear power plant?
ZORIGT: As it is written in the policy document this is possible, but in the distant future.

What is happening with the uranium deposit Dornod aimag?
ZORIGT: The question needs to be directed to the nuclear energy agency. They are responsible for the matter.

During Medvedyev’s visit there was talk of building a gas pipeline. Any forward movement?
ZORIGT: The issue has put this forward. Russia has abundant natural gas resources and we certainly hope that we can expand dialogue on this issue.

Windfall profits tax -- why was it scrapped?
ZORIGT: We have been looking into the longer term future of the country. We are looking at the overall health of the mining sector. We have one large copper producer at this point (Erdenet), and that copper producer has been affected by that tax significantly. At the end of the day the calculations show that even if you are not for this windfall profits tax the majority of the revenue would have gone to the government anyway, under the existing tax system, because remember the government is a significant shareholder in that project as well. So what we thought when we were proposing that amendment is certainly the issue of Erdenet, and certainly the long term future of the mining industry. Because it affects not only Erdenet but it also affects the gold miners. That was the main reason why we dealt with this issue.

Did Mongolia earn significant tax revenues while the tax was in place?
ZORIGT: The Mongolian government made about 900 billion tugrik (approx: $750 million dollars). That money has been spent on rural infrastructure development. We have spent it on social welfare programs. About one third of it was saved and we are using it at the time of the financial crisis. So I should certainly say that the positive effects of this tax can be felt through out the country. But at the time of the crisis, at the time when we need to encourage private investment we felt it was important to have greater flexibility in terms of the tax regime.

Did the tax cause gold smuggling?
ZORIGT: Yes, our Central Bank and Customs Office reports that this was the case. It was quite obvious that such activities was taking place.

... This is why from the point of view of the government, we felt it was very important to support the private sector to invest more. Lets remember that Erdenet is a state company and in accordance with this we dealt with the windfall tax. It was for the sake of the private gold miners that we dealt with this windfall tax. So every country has its own choices to make, so at this point of history we have made this decision.

Whatever policies we have had is the result of a democratic process. Those decisions sometimes affect the health of the business sector. A this point we feel its important to support the private investment into the mining sector.

If you compare numbers now to ten years ago. Last year we have had 170 billion tugrik into exploration. Ten years ago it was under 10 million dollars. The doors have never been closed. If you look at the tax environment in Mongolia it is a very competitive environment. We have 25% corporate income tax, at its highest. 10% personal income tax. Competitive rate for VAT and royalties of 5%. There are restrictions on bringing foreign labor, but certainly the government policy is to encourage the construction of big mining projects. So it is a very competitive policy at this point. Certainly I can feel that the investment community is aware of these changes.

Tell me about Tavan Tolgoi.
ZORIGT: It will be a thorough negotiating process, I can’t say what party has an advantage. All the parties that have expressed interest have a fair chance to negotiate with the Mongolian government.

What sectors will be development with mining profits?
ZORIGT: We have large mining operations, and these require power, rail connections, road connections. We are talking about building a railway in the Gobi, as well as a significant power station. We are talking about roads. It’s going to require big financing sources.

What measures are being taken to ensure that Mongolia’s environment won’t be damaged?
ZORIGT: We attach great value to this issue. We are nomadic people and our lifestyle is indelibly linked with nature. This is why we believe that having a mining industry that is friendly to the environment is an important issue. We have a professional inspection agency which is inspecting all kinds of agencies involved with the mines.

Can you speak about the ninja miners and if anything is being done to regulate their activities.
ZORIGT: I should say first that these 100,000 people are employed in this business. These families are working their way out of poverty. These 100,000 people are not depending on the government for an income or social welfare. They are not waiting for the government to dole them out. We think the goverment should offer a proper legal framework for them to work without damaging the environment, within the proper legal framework, in terms of labor practices, for example not allowing child labor. We are working on the draft legislation on this matter and we have set up a group that involves various stakeholders, including civil society groups. Under the government regulation what you can do is work under the gold fields set up for gold mining. You just can’t do it anywhere. Local governments should provide this land, but still there are thousands working outside these regulations. Their life is not easy. Probably for many of them it would not be their first choice, if they had a choice, but we have to appreciate the fact that these people are working hard. A proper legal frame work needs to be set to protect their health, to protect the environment and make sure that there are proper legal practices.

How will Mongolia develop its resources over the next 5-10 years?
ZORIGT: Mining is the backbone of the Mongolian economy, it accounts for close to 30% of its GDP and 70% of its exports. Mining industry is important but we have to diversify so there will be different mines in different locations so they can affect regional development and give an impetus to infrastructure development. Private investment has to be encouraged, both foreign and domestic, which is why we have a competitive regime. We have other projects in the pipeline, such as the iron project near Darkhan, and the Shivee Ovoo coal project in Dornogobi. Mongolia makes around 30 million a year in oil, but this is just the exploration stage.

...I believe this is a very exciting time for Mongolia. Over the past two decades we have talked a lot about how to develop this country, how to make sure we have a free and prosperous society. I think now we have a real chance to make it a prosperous society. We think that Mongolia can be a mid-developed country. GDP was around $1800 in the year 2008. Our goal is to have GDP at $15,000 by the year 2015. We have to work very hard to reach that goal. If you ask me for a vision of Mongolia’s future there are many countries around the world which have developed based on their natural resources. I myself spent almost two years in Australia. So like to believe that Mongolia has great many similarities to this country, or Canada for instance, or Norway, which uses its natural resources to speed up its development. I think that we have a great chance, given our political system, our natural resource endowments to become a country that has an economy that is market based and a social welfare system that takes care of its own people when its needed.

Democracy is the cornerstone of all that we can achieve, a free and open society is one that does not come easy. But we have been able to achieve that. Through this open and transparent process we will be able to develop policies that are attractive to all groups. Two years ago we established an agency dedicated to fighting corruption. I am optimistic. For Mongolia the antidote to corruption is its open society, democracy, transparanency and participation of all the stakeholders in the decision making process. We are aware of that.

I studied in Russia in the late 80s, early 90s. I was there when the Berlin Wall fell. It was an exciting period for all of us. I studied at the Moscow Institute of International relations. I also studied in Australia at the Australian National University, Asia Pacific research school. I got a Masters Degree in International Relations. I have a legal background. I am 38. I believe that my generation, people in their late 30s, is tasked with creating a modern, civilized and prosperous country. It is an important task. I believe that there are many young people around the country, if you look at the business community in the country, most of them are headed by people in their late 30s, early 40s. This is a time when we have to give our best effort.

I have two daughters. My daughter will study in Beijing.

Frankly speaking there is not a lot of spare time for me to do activities outside work. When I have free time I spend it with the kids. I grew up in Ulaanbaatar. I am city boy. My grandfather is a nomad, my uncle is a nomad. My father comes from Tov Aimag, near the Gobi. He grew up there. Then he went to work for the governement. He trained as an electrical engineer. He worked in the power stations.

I like soccer a lot, but I don’t play so well anymore! I still like to watch the sport.

Thursday, July 23, 2009

Mongolian Military to Send Troops to Afghanistan

Mongolia has proven eager to flex its muscles on the international stage. The army recently announced that it would deploy about 150 soldiers to Afghanistan. About 120 of these will help guard a military base and then around 25 will be training the Afghan army in weapons use and maintenance. Apparently Mongolia is good at this sort of work because they were trained to use Soviet weapons back in the day and the Afghans still use Soviet hardware left over from their war with the USSR. You can read all about it here. I wrote this piece for the AFP. I had real trouble getting this piece out because on the day I was writing it the Defense Minister from South Korea was in town and it was near impossible to pin anyone down for an interview. The story eventually saw the light of day. One interesting footnote to this story is historical relationship between Mongolia and Afghanistan. Of course, the Mongols were one of many invading armies to occupy that country. The Hazaras are actually said to be decedents of Ghengis Khan’s warriors. Apparently, the Mongolian soldiers that have gone to Afghanistan have been a huge source of fascination for the Hazaras as they try to better understand their past. Interesting that Mongolia is able to reconnect with this ancient history some 800 years after the fact.

Tuesday, June 23, 2009

Danzan Ravjaa's Treasure to be Revealed

Anyone want to see buried treasure dug up from the Gobi? I thought so. As many of you are aware the personal belongings of Danzan Ravjaa were buried in the Gobi Desert in the 1930s. Much of it has been brought out of the ground and can be viewed at the Danzan Ravjaa Museum in Sainshand. Some of it still lies in the Gobi. But on Aug 1 a few of the crates containing Danzan Ravjaa’s belongings will be dug up. The event will be broadcast over the internet. Check the website for me details.

Monday, June 8, 2009

New Travel Route Open Between Mongolia and China

According to "China Hospitality News" website, a new travel route has opened up between Mongolia and China. The border crossing near Bulgan soum, Khovd Aimag is now open to tourists with a valid Chinese visa. Having crossed the border you'll be in northern Xinjiang province.

This is a great new way to get between China and Mongolia. You can cross the country to the western aimag and slip into China without having to trek all the way back to UB. I visited this part of Khovd aimag about 10 years ago. It's remote and beautiful with lots of opportunities for camping. From Bulgan its possible to travel up the Bulgan river to Bayan Olgii aimag. More details here.

If anyone does this route this summer, drop me a line and let me know how it goes!

Monday, May 25, 2009

A New Prez

Mongolia is full of surprises and this election is no different. Elbegdorj assumed the “change” mantle and managed to convince enough voters that he could deliver. I’ll need to eat my words after predicting earlier that Enkhbayar would win!

Its truly fascinating that Elbegdorj, so scorned after last summers’ riots could come roaring back to win this election. Though as I suspect this was as much a vote against Enkhbayar as it was a vote for Elbegdorj. Now Elbegdorj, who has been a prominent politician since the mid-1990s and twice prime minister, must somehow re-invent himself in order to “be the change” that he campaigned on. His major campaign promise has been to end corruption. The first 100 days will be a test to see whether or not he acts on this promise. Let’s see how it goes.

Friday, May 1, 2009

Elbegdorj Hangs Tough in Mongolia Presidential Polls

For those of you following the Presidential elections in Mongolia, there is a bit of a surprise from the latest Sant Maral poll. Here is an excerpt from the report:

"A nationwide survey of voting intentions gives the DP candidate, Mr. Ts. Elbegdorj, a slight edge over his MPRP rival, incumbent President Mr. N. Enkhbayar. Asked which candidate they would vote for as President, 37% of the respondents across the nation suppported Mr. Elbegdorj, while 36.2% were for Mr. Enkhbayar. The lead for the DP challenger was larger in Ulaanbaatar, where he had 36.7% support against Mr. Enkhbayar’s 32.3%. In the countryside, however, 38.3% favored the President, with 37.2% saying they preferred Mr. Elbegdorj. In Ulaanbaatar, the percentage of the respondents who said they would not vote was 8.8%, who refused to reveal their preference 8.1%, and those who had not made up their mind 14.2%."

So it looks like it is going to a be a tight race after all. Why is the race so tight? Blame it on factional divide within the MPRP. The MPRP has historically been very tight and not affected by the factionalism that has ripped apart the Democrats over the years. But now factions are growing in the MPRP ranks and some of them are lining up against the president. The poll reflects this divide.

Monday, April 27, 2009

Nuclear Power for Mongolia? You betcha.

So the IAEA has come and gone. Here is the follow up article. You'll find the crucial information in the last paragraph, where it says:
Mongolia plans to establish its nuclear power plant in 2021.