VZCZCXRO1208
RR RUEHLMC
DE RUEHUM #0783/01 2900840
ZNR UUUUU ZZH
R 170840Z OCT 06
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 0467
INFO RUEHBJ/AMEMBASSY BEIJING 5274
RUEHML/AMEMBASSY MANILA 1246
RUEHUL/AMEMBASSY SEOUL 2500
RUEHKO/AMEMBASSY TOKYO 2269
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC 0374
RUCNDT/USMISSION USUN NEW YORK 0450
RUEKJCS/SECDEF WASHDC
RHEHNSC/NSC WASHDC
RUCPODC/USDOC WASHDC 1111
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000783 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM AND EB/IFD 
TREASURY FOR T.T.YANG; PASS USEDS TO WORLD BANK AND IMF 
MCC FOR MONGOLIA COUNTRY DIRECTOR J. HALLMARK 
MANILA FOR USED TO ADB 
 
E.O. 12958: N/A 
TAGS: EFIN PREL EAID KCOR KMCA MG
SUBJECT: AMBASSADOR'S INTRODUCTORY CALL ON FINANCE MINISTER 
BAYARTSAIKHAN 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION. 
 
1.(SBU)  SUMMARY:  During his October 16 courtesy call, the 
Ambassador complimented Mongolia's recent economic and 
financial legislation covering tax reforms, 
anti-money-laundering, and anti-corruption.  Both he and 
Minister Bayatersaikhan were hopeful that Mongolia's 
Millennium Challenge compact could be concluded in spring 
2007, and both saw the compact as a vehicle for significantly 
expanding U.S.-Mongolia cooperation and interaction. They 
exchanged views on corruption and civil service reform. END 
SUMMARY. 
 
¶2. (U) The Ambassador, accompanied by DCM (notetaker) and 
interpreter, called October 16 on Minister of Finance 
Nadmidiin Bayartsaikhan.  Finance Ministry State Secretary 
Khurlbaatar, Advisor to the Minister Hongkor, and his 
interpreter also attended the cordial half hour meeting. 
 
¶3. (SBU)  The Ambassador expressed appreciation for the 
Minister's reaffirmation, at the October 9-10 donor technical 
meeting (septel), of Mongolia's commitment to market 
economics and reform.  He also expressed appreciation for 
passage by the State Great Hural (parliament) of 
anti-money-laundering (AML), anti-corruption, and tax reform 
legislation.  The Ambassador also noted the importance of 
State Secretary Khurlbaatar's leadership of Mongolia's 
Millennium Challenge Account (MCA) National Council.  And he 
recalled that the Treasury Department was considering 
providing technical assistance through a resident advisor in 
the Ministry's Budget Office. 
 
¶4. (SBU)  Minister Bayartsaikhan welcomed the Ambassador and 
noted his Ministry's close cooperation with USAID and the 
USAID-funded Economic Policy Reform and Competitiveness 
project, which provided useful policy analysis, particularly 
regarding tax reform.  The Ministry would also be active 
fleshing out AML regulations and implementing them.  He also 
expressed thanks for the U.S. Embassy's participation in the 
recent donor technical meeting and support for Mongolia's 
policies.  He said Mongolians eagerly await a Millennium 
Challenge compact and he personally sees the compact as a 
vehicle to expand Mongolia-U.S. economic and commercial 
interactions.  He also hoped U.S. investors, along with 
Japanese, Korean, and EU investors, would help balance out 
investment interest from Russia and China.  The Ambassador 
responded that the U.S. was also interested in the successful 
conclusion of the MCA compact and he promised the Embassy's 
support in helping nudge the process along.  The Ambassador 
also noted that the Finance Ministry was responsible for 
leading the mining stabilization and investment agreement 
process, a step critical to Mongolia's development of its 
mineral resources and it economic future.  U.S. technical 
assistance to the Ministry could improve cooperation and 
coordination on a wide range of issues, including such as 
AML, counter-terrorism finance, and counterfeiting.  The 
Minister welcomed the prospect of increased cooperation 
presented by a Treasury technical advisor. 
 
¶5. (SBU)  The Minister noted the DCM (then Charge') had 
expressed concern at the donor technical meeting about the 
uneven, untransparent implementation of tax and customs 
regulations, coupled with bribery and corruption concerns. 
(NOTE:  During a particularly positive portrayal of 
Mongolia's business climate, DCM had noted that U.S., 
international, and Mongolian businesses had observed a 
serious up-tick in unwarranted, non-transparent tax audits 
coupled with offers to "solve their tax problems" with a 
bribe of 10% of the total tax bill.)  The Minister said that, 
as both Customs and the Tax Authority fall under the 
Ministry's purview, he took such charges seriously.  Civil 
service salaries needed to be increased, as the average 
salary was barely US$100 per month and hardly sufficient to 
live on.  The Ministry was also working with the Asian 
Development Bank and World Bank on improving operations and 
governance with project of US$5 and US$4 million, 
 
ULAANBAATA 00000783  002 OF 002 
 
 
respectively.  After reviewing the U.S.' own experiences 
regarding corruption and civil service reform, the Ambassador 
replied that improving systems -- practical arrangements -- 
along with strong and vocal leadership would be needed to 
fight corruption. 
MINTON