MONGOLIA’S CENTRALISED MINING DATA AND E-LIBRARY

Marketing And Trading: Possibilities Of Establishing A Mineral Commodity Exchange In Mongolia

Authors: Manlaibaatar Z. Oyunzul Ts. Khorol-Erdene B.

Source: Economic Research Institute

Language: English

Keywords:

Date: 2021-09-28

According to the previous “Marketing and Trading in the Mining Sector” study (ERI, 2018), one of the problems associated with the export of mineral commodities is the fact that there are neither commodity trading platforms nor any organized mineral commodity exchanges in Mongolia. Mineral commodity exchanges fulfill important marketing, financial and risk management duties. Trading commodities on the exchange have many advantages such as producers’ share of the end market price increases, transparency in sales contracts improves, state budget revenue increases etc., According to a study conducted by the Mongolian Exporters’ Association (2013), it is possible to establish a mineral commodity exchange in the country. However, for a mineral commodity exchange to be viable, Mongolia must heavily invest in warehouses, logistics centers and transportation infrastructure. Moreover, it should be considered that Mongolia’s current level of financial services development and its macroeconomic environment is lacking when compared to regional countries. In addition to ensuring the availability of factors such as trading programs, networks and the technical infrastructure needed to operate an exchange, numerous regulations, guidelines and legislations have to be either amended or ratified to oversee the operations of a mineral commodity exchange. However, Mongolia’s legal environment and government policy on the development of a mineral commodity exchange is unclear and unstable. A new exchange would require a qualified workforce in addition to well-informed buyers and suppliers. As these necessities all require ample investments, detailed feasibility studies, and the decision of whether this investment is financed by the government. Finally, it should be considered and compared with other viable options such as expanding the current operations of the previously established Mongolian (Agricultural) Commodity Exchange to include mineral commodity trading and making use of already established foreign mineral commodity exchanges.

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