Friday, February 25, 2011

“Ulaan Qatar”

UB Post
February 25, 2011

This week Mongolia is about to make a historical decision. It will announce contract miner for Tavan Tolgoi, the world’s largest unexploited coking coal deposit with estimated reserve of 6.5 tons and banks to manage an IPO worth up to US$5 billion for the deposit.

For the first time, our government is about to implement this ambitious project to make a historical change in the country’s economy by hiring international capital market players and attracting billions of investment, without the participation of a foreign country.

More than 150 representatives from over twenty biggest world banks including “Morgan Stanley”, “Goldman Sachs”, “Macquarie Group”, “Citigroup”, “JP Morgan Chase & Co”, “Deutsche Bank”, “Credit Suisse Group and UBS” and many others gathered here in Ulaanbaatar to present their proposals battling for a piece of the country’s upcoming coal IPO.

These banks see the deposit not only as an opportunity to make astronomical profit but also as a matter of reputation and prestige as Mongolia is the first developing country in the world to raise such a big capital from mining industry.

Beside the deposit, three or banks to be shortlisted will also get a piece of financing of enormous infrastructure projects related to the deposit’s development. For this reason, The Wall Street Journal reported that giant banks fight each other in Ulaanbaatar to do extraction in Mongolia.

Western press say that it is estimated to raise up to US$5-billion by selling a 30% stake in Erdenes Tavantolgoi Co., the state-owned coal company.

You have to wonder whether, with Mongolia’s citizens entitled to share of any state-owned assets listed on the exchange, the country’s 2.8 million people may one day enjoy GDP per capita akin to Abu Dhabi or Qatar.

According to “Financial Times”, if 2010 was the year when equities on the exchange in Ulaanbaatar, the capital, skyrocketed, then 2011 looks like the year they went into orbit. They also wrote that the country’s 2.8 million people may one day enjoy GDP per capita akin to Qatar and that its capital may become not Ulaanbaatar but Ulaan Qatar.

Qatar with population of only 1.5 million, is the world No.1 gas exporter and its GDP per capita recently reached up to US$100,000 leaving behind Switzerland and the United States of America, becoming one of the richest state in the world.

Though we can be Qatar in terms of mineral resource, we are much better developed in terms of government and social structures, human rights and freedom. This country with absolute monarchy system may see political crisis like it is happening in neighboring Bahrain.

Mongolians had completed the democratic revolution which has just started in Arabian countries, some twenty years ago. The independent democratic country is supposed to use own mineral resources more efficiently than the dependent countries with monarch system.

Unfortunately, it is still likely that in Mongolia, only those in power and their accomplices become richer and richer like in Qatar, while the majority of population stays poor like in northern Yemen.

The Government of Mongolia decided to sell 10% of Erdenes TT to domestic professional investors and give 10% free to its people, 30% to international investors and own remained 50%.

Each of Mongolian citizens started to register to get 550 shares and the State Property Committee head announced that the shares’ distribution is expected to complete before Naadam Holiday in July.

There are two methods only to make a profit in shares. The one is dividend and the other is capital appreciation. In a country like Mongolia where the half of its population lives only for daily foods to eat, the people will hurry to sell their free shares at first chance to do so.

Today I see the picture of next ten years as follows. Deceitful and shrewd ones would buy and collect all shares in legal and fraudulent ways and after a decade the most of population would remain poor like today and become the slave of few people who managed to centralize all resources in their hands.

In democratic but poor Philippine, 19 families only own all resources and capitals of this country.

Mongolians have not forgotten how some twenty years ago the authorities “distributed” the asset that the Mongolian people created for sixty years, exactly in the same way today.

It is time to search for the ways to use our God-given resources in a way beneficial to each single citizen from generation to generation, in order to become “Ulaan Qatar” not in statistics but in reality. This is a new intellectual challenge that Mongolians face. The bell of history is ringing only about this.

Translated by Shinebayar

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