By Michael Kohn

SERGELEN, Mongolia (AFP) – After enduring a harsh winter last year that killed almost half of her 1,000 head of livestock, Baatariin Erdenechimeg moved halfway across Mongolia in search of a new start.

But this winter has been no better — her family has lost a third of its remaining animals and may lose more before the warmer weather returns.

“Our animals could not survive that kind of cold,” said Erdenechimeg, a 42-year-old mother of two.

“They collapsed in the snow and died overnight. Our remaining animals are just skin and bones.”

Erdenechimeg, one of hundreds of thousands of Mongolians who lead nomadic lives and depend entirely on livestock for a living, is grappling with the country’s second straight dzud — a severe winter after a dry summer.

The rare double-barreled weather phenomenon — one of the worst on record in Mongolia — often leads to food shortages for the livestock that generations in the landlocked, impoverished Asian nation have depended upon for survival.

More than 3.5 million animals — cows, sheep, goats, yaks, horses and camels — have died so far, with 60 percent of the country still buried under deep snow.

The frozen carcasses of these animals now lie scattered across the Mongolian steppes, their twisted bodies half buried in the snow drifts.

January was the worst, with the mercury frozen at -40 degrees Celsius (-40 Fahrenheit) for three straight weeks, Erdenechimeg said.

To keep their herd alive, she corralled the animals into tight pens while her husband Batdorj trudged into the darkness and blowing snow to look for strays.

Their eight horses quickly succumbed, along with scores of sheep and cashmere goats. The lambs only survived because Erdenechimeg kept dozens of them inside the family ger, the circular felt tent-home used by nomads.

More of her animals will die before winter is out because she simply has nothing to feed them. The lifeless and frozen ground will not see green shoots for another six weeks at the earliest.

“We?ve just had a string of bad luck. Last year we lost a lot of animals so we moved to new pastures. But the dzud has followed us,” she said.

The last major dzud to hit Mongolia occurred over three straight winters from 2000 to 2002, with about 2.5 million animals dying each year.

Tens of thousands of herders who lost everything moved to the capital Ulan Bator in search of work. Most of them were unsuccessful and unemployment in the country runs at more than 30 percent.

This year’s dzud has been even more deadly, and officials predict that some five million animals could die before summer.

Herders with 200 animals or less have been hardest hit. Inexperienced and ill-prepared for the harsh winter conditions, many have lost 50 to 60 percent of their livestock.

“The big herders have managed, but small-scale herders are not equipped to deal with a dzud as powerful as this one,” said Akbar Usmani, the country representative for the United Nations Development Programme (UNDP) in Mongolia.

“They need to be weaned away from herding into some other line of business.”

The UN estimates that 15 million dollars in emergency aid to herders is needed as they try to survive the winter and save their animals.

Two convoys carrying fodder for animals, plus blankets, clothing and flour have left Ulan Bator.

Emergency teams have also been dispatched to rural areas to help pregnant women reach hospitals. But in the west of the country, hundreds of households remain inaccessible due to the deep snows and blocked roads.

“Mongolia is about the size of Alaska with a population of 2.7 million. So reaching out to some of these herders is a challenge in any circumstances,” said Usmani.

The UN’s Food and Agriculture Organisation estimated last month that total economic losses stemming from the dzud had already exceeded 60 million dollars.

Nine human deaths have so far been reported — mainly herders who got lost in whiteouts while searching for wayward animals.

UN field workers report many cases of psychological trauma as herders try to cope with the loss of their livelihoods and the sight of dead animals piling up near their homes.

“When we came to their homes, they would just start crying. They were in shock at seeing their beloved animals freeze and starve to death,” said Ulaanbayariin Tungalag, a UN worker who visited hard-hit Dundgobi province.

When the snows begin to melt, the UNDP and the country’s National Emergency Management Agency (NEMA) will launch a 1.8-million-dollar carcass-clearing project aimed at preventing the onset of disease caused by decomposing animals.

The UN is hoping to recruit some 20,000 herding families to the project. Each participating family will receive 60 dollars to bury their dead animals. The remaining 600,000 dollars will be used to buy shovels and other equipment.

For Erdenechimeg, the money can’t come soon enough.

“We need cash for basic staples like flour, rice and tea,” she says. “We have fewer animals to sell this summer so every little bit helps.”

ULAN BATOR — Inside a small office in Mongolia’s capital Ulan Bator, Banzaragchaa Altan-Od fields calls from ship captains and ports around the globe — an unusual job for someone in a landlocked nation.

The Mongolian Maritime Administration, based in a city located about 1,400 kilometres (850 miles) from the nearest ocean port, has registered more than 1,600 ships since it opened its doors in 2003.

For shipping companies, using the Mongolian flag of convenience is a good bargain, as registry fees are five to 10 percent lower than the going market rate, administration chief Altan-Od told AFP in an interview.

For the impoverished Asian country, the office is an unlikely moneymaker, raking about 350,000 dollars into state coffers a year.

“This is only the beginning of our business operations. We are going to expand our operations and focus on offering quality services,” said Altan-Od, who studied maritime law for two years in Sweden.

Shipping companies that fly Mongolia’s red, blue and yellow banner enjoy special tax breaks and reduced tariffs, the registry office says.

More than 300 ships from over 40 countries are currently on the books after others dropped off for various reasons, including failing to meet safety standards or being scrapped or sunk.

The operation is headquartered in Ulan Bator but registries are handled by the Singapore-based classification company Sovereign Ventures.

Altan-Od says his ultimate goal is to open a duty-free area in the eastern Chinese port of Tianjin — 800 kilometres from the Mongolian border.

“We are doing business with the Chinese to expand our maritime methods,” he said. “Hopefully this new port will be open by 2012.”

Such an arrangement would also allow resource-rich Mongolia to send its own exports — coal, copper and other minerals — to markets around the globe. The port would also allow Mongolia to import oil from overseas.

Mongolia?s biggest shipping client so far is Japan, with 54 ships registered. Other important clients include Singapore with 42 vessels, Indonesia with 24 and Cambodia with 23. The list includes 23 oil tankers.

The country’s unusual relationship with the distant sea is nothing new.

It once had a massive navy when Kublai Khan ruled the Mongolian empire more than 700 years ago, and Marco Polo sailed from China back to Europe on a ship with the Mongolian seal.

The imperial navy came to a quick end in 1281 when a typhoon wiped out almost the entire fleet of 4,000 ships as they attempted to invade Japan. About 100,000 Mongolian soldiers perished in the storm.

It has not been all smooth sailing for the ship registry either, with two ships lost last month. In both incidents, one off the coast of India and the other in the Malacca Straits, overloading was cited as the cause.

It also is battling an image problem, with rampant allegations that Mongolia-flagged ships were involved in trafficking illegal goods, and the seizure of a ship in Malaysia in 2007, but Altan-Od refutes the claims.

“There are a lot of stories in the news saying that Mongolia is involved in smuggling. But we are not involved in any illegal acts. All our agreements specifically state that we do not tolerate smuggling on our crafts,” he said.

The ship registry is responsible for ensuring the sea worthiness of vessels and is also supposed to enforce maritime treaties to ensure they are not polluting the oceans, smuggling goods or conducting any other illegal activities.

Altan-Od notes that his office earlier this year axed its one and only North Korean ship over political and commercial concerns.

“We had one ship from North Korea but we decided to drop it. We want to avoid any political confrontations,” he said.

The article appeared on the AFP News Wire on Oct 30, 2009

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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.

This article appeared in the South China Morning Post on October 8, 2009

By Michael Kohn

Sept 24, 2009

The global financial crisis hit hard in Mongolia, forcing everyone from goat herders to mineral prospectors to tighten their belts. But the crisis did at least accomplish something pleasantly unexpected: It forced lawmakers to abandon repressive taxation to attract investment.

Ulan Bator didn’t have a choice. The country’s wealth resides in its vast reserves of copper, gold, silver and high-quality coal, among other minerals. In 2006 the local legislature, the Great Hural, enacted a 68% windfall tax on copper exports priced at $2,600 per ton or above and gold exports at $500 per ounce or above. Lawmakers thought the levy would swell public coffers. It had the opposite effect. Mining companies put their operations on hold, gold was smuggled out of the country and foreign investors fled. Not only did tax revenue stop flowing but fewer companies were around to contribute, as the tax burden forced many into a state of semi-hibernation. Then the boom times ended and Mongolia found itself hit by the financial crisis, too.

So in a moment of clarity, the legislature scrapped the tax late last month. Money is now pouring into the country. Canada’s Ivanhoe Mines and Australia-based Rio Tinto are expected to ink soon a major deal to exploit the massive Oyu Tolgoi copper and gold mine. In the deal as currently structured, the government would receive a $250 million advance against any future royalties and taxes. The next project in the pipeline is Tavan Tolgoi, said to be the world’s largest undeveloped coal deposit, with 6.5 billion tons of coal. Several mining companies have submitted bids, including a consortium of Russian energy companies, Shenhua and Peabody Energy.

But Mongolia can’t rest on its laurels. There is much more the government can do to attract investment, starting with a badly needed upgrade to the country’s sagging, Soviet-era domestic infrastructure. To date most governments have preferred to spend money on populist handouts rather than on productivity-
enhancing public works.

Ulan Bator also needs to get tough on corruption and law enforcement. Transparency International ranks the country 99th out of 179 countries and officials are on the take at every level of society, particularly mid-level bureaucrats. Some improvements have been made, such as the creation of an anticorruption task force, but laws still need beefing up to put white-collar criminals behind bars. Finally, Mongolia needs to modernize its educational system to provide training in business, construction and mining engineering. Mongolians need their own operational and financial expertise to properly support the supply chain around mines.

Underlying all of this is the assumption that Mongolia will continue to be an open market and friendly to investors from anywhere in the world. Scrapping the windfall profits tax is a good start. Now the real effort begins to build the country, and build it responsibly.

Mr. Kohn is the author of “Dateline Mongolia: An American Journalist in Mongolia” (RDR Books, 2006).

Sept 14, 2009

ULAN BATOR (AFP) — More than two dozen horsemen raced across the finish line in Mongolia this month after a test of endurance that would have impressed even legendary conqueror Genghis Khan.

The international group of riders pounded 860 kilometres (530 miles) across the Asian country’s vast grasslands in the 10-day Mongol Derby, which organisers call the world’s longest horse race.

South African architect Charles van Wyk, 28, tied for first with local rider Shiravsambuu Galbadrakh, leading home a field from 10 countries including Argentina, Australia, Britain, New Zealand, Spain and the United States.

The Adventurists, a Britain-based organisation that dreamed up the derby, designed the race as a way to promote Mongolian tradition and culture — while raising money for charity.

Participants changed steeds every 40 kilometres or so at urtuus — horse relay stations patterned on those used during Genghis Khan’s time to deliver post across the Mongol Empire, from the Pacific Ocean to the edge of Europe.

“Modern life is changing the steppes but that does not mean they are all coming to the city,” Van Wyk told AFP.

“In fact the quality of life is quite good on the steppes and even the foreign riders longed to go back after we returned to the city.”

Nomads in traditional gers, or round felt tents, manned each station, providing riders with boiled mutton and fermented mare’s milk, a common drink in Mongolia. But on some nights, they slept in the open.

“There were days when I wondered why I had even started this race because I was so tired. But then I would get back into the rhythm of things and press on,” said Van Wyk.

A total of about 700 horses were used during the event.

“Having been in Mongolia for the past seven years we came to understand how important horses are to the local culture,” said The Adventurists’ director Tom Morgan.

“There is nowhere else in the world with so many horses and so much space, so it seemed like the perfect place to do it.”

The Adventurists also organise the annual Mongol rally, a race from London to Ulan Bator in dangerously small vehicles, but Morgan said he experienced a nervous moment when the horse riders set off.

“There was a lot of apprehension because we had never done anything like this before. But in the end it was a great success, thanks largely to the great network of nomads in Mongolia — and some really good horses,” he said.

The riders emerged relatively unscathed from the marathon ride, with only a few scrapes and bruises, and one minor concussion.

That result surprised horse trainer Yundenbat Unenburen, who helped set up the urtuus for the Derby.

“I didn?t think they would even get halfway. But when they all crossed the finish line I had to admit I was wrong. They proved that they are the bravest, hardest and toughest people,” Unenburen said.

Every competitor was handed a special tablet modelled after those used by ancient urtuu riders, which allowed them free access across the empire.

But modern forms of communication were never far out of reach of the riders, with herders using mobile phones and with satellite dishes affixed to some of their gers.

Most of the money raised went to Mercy Corps, which supports poverty alleviation programmes in Mongolia, one of the most impoverished countries in Asia.

Morgan says plans have been laid for a similar event next year. Riders must fill out an online application (www.mongolderby.theadventurists.com) and have proven skills in both horse riding and wilderness survival.

Investors from across Asia gathered in Ulan Bator on Tuesday for a one-day conference to discuss key opportunities in the landlocked state — and the words on everyone’s lips were Oyu Tolgoi.

Mining giants Rio Tinto and Ivanhoe are on the verge of signing a major deal with the Mongolian government to pave the way for the much-delayed exploitation of the massive copper and gold deposits buried deep in the Gobi desert.

The Oyu Tolgoi project, which is expected to employ 5,000 people at the mine and thousands more in the supply chain around it, was made possible when lawmakers recently scrapped a controversial windfall profits tax.

“The mood at the conference was very upbeat,” said Peter Morrow, chairman of Khan Bank, the biggest in the country.

“The deal with Oyu Tolgoi brings a whole different tone to the discussion. We can now talk more tangibly about a supply chain, infrastructure needs and things that are going to happen in the next several years of development of this mine.”

Lawmaker Sanjaasurengiin Oyun told AFP on the sidelines of the conference that scrapping the windfall profits tax would open doors for Ulan Bator.

“The windfall profits tax was very unfortunate because it suddenly made Mongolia one of the toughest tax regimes for mining,” Oyun said.

“We went from being one of the most liberal tax countries to one of the most conservative and it turned off investment.”

The GDP per capita of Mongolia — one of the poorest countries in Asia — is 164th in the world, just ahead of the Gaza Strip, and is likely to get a significant boost if the Oyu Tolgoi project moves forward.

Oyu Tolgoi has the biggest minerals deposit in the country, with the potential to produce more than 440,000 tonnes of copper and 330,000 ounces of gold a year on average for at least 35 years.

But it is just one of several untapped fields in the vast country, which also has uranium deposits, silver and even oil.

Late last month, Russia and Mongolia agreed to form a joint venture to exploit the Dornod uranium deposit during a visit by Russian President Dmitry Medvedev. And China is planting oil rigs in the east of the country.

“The critical thing is how these resources are managed. If they are managed well then I see no reason that Mongolia’s mining sector cannot succeed,” said Parmeshwar Ramlogan, the International Monetary Fund representative here.

“I see no reason that investors should not be coming to Mongolia. The country has a lot of potential and there is much to be gained from investing here.”

Representatives from the equipment, construction, banking, telecommunications and transport sectors said the next step is to develop the infrastructure to support the booming mining sector.

“On a scale of zero to one hundred, Mongolia is at around five on its road to supply chain development,” said panelist Laurenz Melchers, an importer of Mercedes-Benz vehicles and Bosch tools.

“But this is just the beginning of a massive project. This is the right time to be here.”
Lee Cashell, a 41-year-old American, launched a real estate business here seven years ago by renting out three Soviet-era flats. Today, he owns several luxury apartment blocks and a cement factory.

“I am extremely optimistic about this country. Times have been tough over the past year but there are times to be cautious and other times to plant the flag — now is that time,” he told the conference.

OYU TOLGOI, Mongolia, Sept 3, 2008 (AFP) – At a remote outpost in the Gobi Desert, hundreds of kilometres from any paved road, Keith Marshall is poring over satellite images, geological surveys and sheets of statistics, literally mapping out Mongolia’s economic future.

Working out of a wind-lashed military-style tent dubbed the “Weather Haven”, the British engineer is laying the groundwork for what he says will be one of the biggest copper mines in the world.

Oyu Tolgoi, or Turquoise Hill, will have the capacity to churn out a million tonnes of copper each year, as well as gold, a potentially big boost to this impoverished country’s economy, which still relies heavily on Soviet-era infrastructure and donor aid money.

Sandwiched between Russia and China, Mongolia has a population of just 2.7 million people spread over an area more than double the size of France. The average salary is just 200 dollars a month.

“Oyu Tolgoi is going to bring dividends to the Mongolian people for four or five generations to come,” said Marshall, managing director of Ivanhoe Mines Mongolia, the Canadian company that owns the exploration license for the site.

Shafts will be sunk to 1,300 metres (4,200 feet) and a two-kilometre (1.2-mile) wide pit will be excavated.

The copper concentrate will be shipped to neighbouring China and eventually find its way into cell phones, laptop computers and cars around the world.

But Oyu Tolgoi has been the subject of much controversy and has yet to win final government approval, with the issue stirring vigorous debate from nomad camps in the Gobi to the streets of Ulan Bator and the halls of parliament.

A final contract between the government and Ivanhoe has been held up several times by angry street protests, as citizens have demanded a greater percentage of the profits.

Members of parliament have revisited the issue dozens of times but have yet to find a balance with Ivanhoe, although the protests have subsided.

In a compromise, Ivanhoe agreed to give the government a 34 percent stake in the project, which Marshall estimates will require between six and 10 billion dollars of investment to make fully operational.

The government has since indicated it wants a 51 percent share, while critics also point to other problems.

“No one in Mongolia has the experience to handle such a huge mine, not the people nor the government,” said Sainkhuugiin Ganbaatar, president of the Mongolian Trade Union and onetime leader of the street protests.

“So we must not rush into a deal with a foreign mining company until we fully understand what is at stake.”

Ganbaatar, regarded as a non-partisan voice in Mongolia’s often intense brand of democracy, is demanding a full appraisal of the mine from an independent body that has no affiliation with Mongolia or its government.

As time passes, however, the mining company has grown increasingly restless.

“The project has reached a stage of development where we can’t do much more work without an agreement. We have had to scale down operations, which means laying off workers and letting projects sit idle,” said Marshall.

But investor confidence remains strong. Rio Tinto recently bought a 9.9 percent stake in Ivanhoe Mines Ltd. and has an option to go up to 46 percent within five years after an investment agreement is signed with the Mongolian government.

Recent elections that gave the ruling Mongolia People’s Revolutionary Party a clear majority in parliament following four years of an uneasy coalition have given Ivanhoe further hope that a deal can be done by the end of the year.

If work starts soon, Marshall expects to see profits start pouring in by 2013. In the meantime, the 500 workers at Oyu Tolgoi keep the project going.

An exploratory shaft has been sunk to almost 1,400 metres and a mixed team of expatriate and Mongolian miners are now drifting laterally towards the main body of ore, nicknamed Hugo Dummett.

Hugo will keep the miners busy for 30 years or so, after which they can tap the nearby Heruga deposit, big enough to give the project another 20 years of life.

The mine is expected to employ 5,000 people, with thousands more coming to fill out of the supply chain expected to grow around the mine.

This article appeared on the AFP news wire Sept 3, 2009