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August 17, 2013

Mongolian Parliament Recalled as Falling Foreign Investment Threatens Economy

by Reuters

Mongolia's parliament announced on Friday it would hold an emergency session next month, as the country looks to ward off an economic crisis sparked by uncertainty over its biggest mining project and falling foreign investment.

A government official said Thursday the National Security Council, headed by the country's president, was debating recalling parliament, currently in summer recess.

According to its website, parliament will now meet for a week-long session from Sept. 2, and is set to discuss, among other things, legislation governing foreign investment. The extraordinary session also could accelerate the approval of financing for a $5 billion expansion to global miner Rio Tinto's giant Oyu Tolgoi gold and copper mine.

Rio earlier this week announced mass lay-offs at Oyu Tolgoi, where it has put an underground expansion on ice due to disputes with the government. The job cuts have been read by some in Mongolia as an attempt to pressure the government into easing its demands on the miner over project financing, and the extra session of parliament could spur progress.

Dale Choi, an analyst at Mongolian Metals & Mining Research, said in a note on Friday that the recall was a “long overdue significant message from Mongolian authorities that the country wants back investment, both foreign and domestic.”

Delays at the Oyu Tolgoi giant copper-gold mine, as well as uncertainty over rules for foreign investors, have led to a sharp drop in foreign direct investment in Mongolia. A drop in prices for coal, which feeds the state budget, also has hurt.

According to figures released this week by the Ministry of Economic Development, foreign direct investment fell 43 percent in the first six months of 2013, with geology, mining and petroleum down by a third.