FEAS Yearbook FEAS Yearbook 2003 | Page 73

MONGOLIAN STOCK EXCHANGE Dulamsuren Dorligsuren Chairman and CEO Revisions to the Securities and Exchange Law brought a number of changes in the status of the market participants. Revisions to the Securities and Exchange Law, adopted by the Parliament in December 2002, brought a number of changes in the status of the market participants, a minimum in the amount of equity, and the responsibilities of the Exchange. For example, these revisions stated that the Mongolian Stock Exchange (MSE) would become a profit-making entity, the minimum amount of equity to be not less than 1 billion tugrugs (US$ 0.9 million). Brokers and dealers are to set an equity amount of more than 50 million tugrugs (US$ 0.04 million). This resulted in a decrease in the number of securities companies in compliance with the new regulations from 34 to 26 or a 30% decrease from the previous year. The government of Mongolia has been working to implement its goals to support foreign investments, especially in the areas of infrastructure, construction and mining. During 2003 there were no significant changes in the MSE listing criteria and securities trading. Improvements to the system are currently being made. In October 2003 the MSE was divided into two independent organizations: one in charge of securities trading, and the other in charge of securities clearing, settlement and depository. Proper ties via new programming between the two organizations are planned. HISTORY AND DEVELOPMENT FUTURE OUTLOOK During the transitional period from a central planned economy to a market economy in Mongolia, many social and economic changes were made, such as the establishment of new relations, new entities, new productions and services. Two of those changes were the founding of the MSE on 18 January 1991 by government resolution and the initiation of the privatization process. With the start of secondary market activity, shares of more than tugrugs 38 billion (US$ 32.53 million) were traded during 1996-2003. Since the inception of government bond trading in 2000, and corporate bond trading in 2001, to date government bonds valued at tugrugs 105.4 billion (US$ 90.2 million), and corporate bonds valued at tugrugs 6.9 billion (US$ 6.0 million) have been traded. According to the privatization policy adopted by the government in 1992-1995, 96.1 million shares valued at tugrugs 8.2 billion (US$ 7.0 million) of 475 state-owned entities were traded by the MSE. The new Securities and Exchange Law, adopted by Parliament in December 2002, declared the MSE to be a business entity, allowing it to carry out legal business services. The Securities and Exchange Law was passed in 1994 and the Corporate Law in 1995 resulting in the establishment of the secondary market. Twenty-nine broker firms, operated and financed by the MSE, were privatized. New statutes of the MSE were adopted by the government resolution of 1995. The Foreign Investment Law has been amended three times since its initial adoption in 1993. The law was adopted to attract foreign investors by exempting them from taxes in the first 3-10 years and by giving a 50% discount in taxes in the following 3-5 years depending on their activities and exports. This has resulted in an increase in the number of foreign investments each year. According to the government resolution, the MSE was reorganized as a profit-making, state- owned shareholding company. Plans are to: • develop a government and corporate bond market; • establish a mortgage-backed securities market in Mongolia (a related law has just been adopted); • develop an information disclosure system to: • disseminate information through mass media such as TV, radio and newspapers in a fair and transparent way; • redesign the market website to make it more usable; • improve public confidence and continue training programs for market participants and others; • introduce the importance of the stock market; and • develop corporate governance principles. FEDERATION OF EURO-ASIAN STOCK EXCHANGES YEARBOOK 2003/2004 PAGE 71