🇨🇦🇲🇳 Canada and Mongolia | Inside the 2024 budget | Minimum wage surge

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Mongolian delegates including the Governor of the Bank of Mongolia, the Chairman of the Financial Regulatory Commission, the CEO of the Mongolian Stock Exchange, and representatives of listed banks as well as securities firms are visiting HK on November 27-29. Please reply to this email if you are interested in participating in related investment events.

In today’s newsletter:

• 50th anniversary of Canada and Mongolia diplomatic relations,

• Inside the 2024 budget,

• A hike in Mongolia's minimum wage.

Enjoy your reading. 😉

🍁 5 Decades of Diplomatic Relations 

As we approach the end of November, Canada and Mongolia prepare to commemorate the half-century anniversary of their diplomatic relations. Over the past 5 decades, the 2 countries' relationship has evolved into a comprehensive partnership, spanning diverse fields from economic cooperation to educational exchanges.

• By the way: The Minister of Foreign Affairs of Mongolia’s visit to Canada commences today in commemoration of the diplomatic anniversary.

A Flourishing Economic Partnership

Canada and Mongolia established diplomatic ties on November 30, 1973, laying the foundation for a thriving economic partnership. Today, Canada stands as Mongolia's largest investor of Mongolia. Specifically, Canada's investment in Mongolia has reached $15.8 billion over the past 12 years, with Rio Tinto’s (RIO) $15 billion investment in the Oyu Tolgoi project playing a significant role in this growth.

• Digging deep: Comparing Canada's investment to the other countries, it is 3 times bigger than China's and 9.8 times bigger than America's. Basically, in the last 12 years, Canada accounts for more than half of FDI in Mongolia. 

• Do you know? Mongolia’s exports to Canada exceeded far more than its imports from 2005 to 2010. However, starting from 2013, the amount of exports decreased sharply, and imports began to increase. As a result, last year Mongolia’s exports to Canada reached $1 million and imports reached $21.8 million.

• Mongolian companies in the TSX: FYI, several mining companies are listed on the Toronto Stock Exchange, including Erdene Resource Development Corp (ERD.TO) and Xanadu Mines (XAM.TO).

Education: A Bridge to the Future

Also, 2 countries’ diplomatic relations in the education sector are expanding. Currently, over 350 Mongolian students are pursuing higher education in Canada, enriching their knowledge and skills in diverse fields such as finance, economic development, mining, civil aviation, engineering, and agriculture.

A Model of Regional Cooperation

As Canada and Mongolia celebrate 50 years of diplomatic relations, they look forward to continuing their journey of collaboration and mutual growth. Also, Canada is a great example of Mongolia receiving the most investments from its third neighbor rather than its two neighbors.

DATA STORY: 🔜 The Monthly Minimum Wage Set to Increase 20%, Reaching ₮660,000

Effective next year, Mongolia's minimum wage is set to rise by a substantial 20%, reaching a new level of ₮660,000 per month.

The minimum wage has been steadily increasing since 2007.

• The upcoming rise in the minimum wage is expected to increase to ₮110,000 from the current level, marking a remarkable 2.1-fold increase since the last adjustment 5 years ago. 

🤔 Budget Surge in Election Years

Come election year, Mongolia’s budget spending takes a rollercoaster ride, soaring high with excitement! 🎢 

It's like a budget bonanza during the election spectacle. A big budget has been given the green light because of the upcoming elections next year.

Election Year Budget Trends

Every 4 years during Mongolia’s parliamentary elections, the budget sees a significant boost. For instance, in 2008, it shot up by 47.1%. This trend continued in 2012 as well as subsequent election years.

Budget Reduction After Elections

However, right after the election excitement, budget spending usually takes a hit. In 2009, it dropped by 8%, and in 2017, by 5.1%. This suggests that election events impact budget decisions more than market or economic conditions.

• Next Year's Budget Outlook: Following the rules, the budget spending for the next year is set to be 22.3% higher than 2023, reaching ₮27.4 trillion. This marks a 3 fold increase in budget expenses during the 8 years of the MPP government.

• Consequences of Increased Spending: Unfortunately, the downside is a soaring deficit during election years. In 2020, the deficit hit a record of ₮4.4 trillion, and in 2016, ₮3.7 trillion. Only in 2010 and 2018 did we manage to avoid deficits.

• But hey, the budget drama doesn't end there! Increasing spending and deficits become mischievous troublemakers, causing inflation and playing tricks on the currency's purchasing power. In the future, the potential exists for credit rating agencies such as Moody's to issue a downgrade for our credit, resulting in increased costs for the government when seeking to borrow funds.

Final Thought

The budget deficit for the next year is expected to reach ₮2.1 billion. When will this cycle of soaring spending during election years come to an end?

🏃 QUICK STORIES

🔵Housing prices in UB city increased by 10.9% YoY as of Q3 2023. The average price of a new apartment per square meter was ₮3.95 million while the highest price was ₮4.26 million in the Khan-Uul district. On the other hand, the average price of an old apartment per square meter was ₮3.47 million.

🔵Erdenes Tavantolgoi JSC’s commodity trading amount exceeded $1 billion. The company has traded 8 million tonnes of coal valued at $1 billion in 59 trades, since last February of 2023. This amount accounted for 72% of the total 11.1 million tonnes of coal on the commodity exchange market.

🔵Mongolian Mining Corporation (0975.HK) redeemed all of its notes at the redemption price of 102.3% of the principal amount. The full remaining outstanding 9.25% guaranteed senior notes were due 2024. As a consequence, the stock price has increased by 18.1% and reached HK$4.1.

🔵LendMN (LEND) to issue ₮5 billion bond to fund its operations. The 18-month bond will carry a coupon rate of 18% and a face value of ₮100,000. The bond will be issued on the OTC market, and Tenger Capital LLC will be the underwriter of the bond.

🔵Steppe Gold (STGO.TO)’s revenue reached $39.6 million as of Q3 2023. During the first 9 months of 2023, the company sold 19,809 gold ounces, and 53,694 silver ounces from 481.6 thousand tonnes of ore. As a consequence, the net debt of the company reached $13.1 million.

⭐ TOP NEWS

• Report: Jade Gas Holdings Limited’s Quarterly Activities Report. (JadeGas)

• Culture: Mongolia Launches a Shakespeare-esque Play in London. (TheDiplomat)

• Climate: Dust, Hail and Bank Loans: The Mongolian Herders Facing Life Without Grass. (TheGuardian)

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Editor: E.Zolbayar
Writer: M.Khulan & Skh.Angirmaa & G.Aminaa

Disclaimer: The information Inside Mongolia provides is for educational and informational purposes only. It is not intended to be or constitute financial advice, trading advice, or any other advice. The decision whether to consider the information we provide is solely our readers' independent decision.