Investment Agreement term would become 15 years only


Recently SGK discussed a draft law on decreasing investment agreement length from 30 years to 15 years. This draft law was presented on July 2009. There were some Q&A session on the draft before MPs approved to discuss the law at the general session of SGK.

MP P.Altangerel: The length of IA is decreased down to 15 years, shall it take effect on Oyu Tolgoi Investment Agreement?

MP N.Batbayar: This law shall not take effect, but if MPs make decision to take effect, it can.

MP E.Bat-Uul: IA length shall not be decreased. Investors pour in when the economy is favourable and leave during downturn. Korean economy failure was resulted from mass attraction of short term investment. 15 years for mining business is too short. It shall be longer to give them gain profit.

MP N.Batbayar: Mineral Law of Mongolia stated the length of agreement shall be 30 years. But it converted into 70 years for Oyu Tolgoi. Therefore, I have opinion to decrease the number of 30 to 15. It can’t be that for 70 years there will not be any changes in taxation. We eliminated 68% windfall tax. But Australia, a leading mining country in the world, is about to impose 40% tax on mining. Mongolia has much more position than Australia. Also, geographically, we are neighbouring with our buyers. It will be advantage for investors.

MP E.Bat-Uul: Tax stability was a part of Oyu Tolgoi negotiation. For example, if we make deal on potato, we don’t know it’s price would become up to ₮1000 or ₮200, therefore, we make agreement on price at ₮600. If it reaches ₮1000, we will lose and if it will be ₮200, we win. The agreement is made like this way. It is the key principle of attracting longer term of investment, isn’t it?

MP N.Batbayar: Investment Agreement has only in under developed countries. But it is never be longer than 15 years, but, as for Mongolia, we don’t even need to make Investment Agreement. Such, agreements are made in countries where tax environment is not stable. But in Mongolia, its tax system has been stable for last 20 years. In other words, tax has been decreased all the time. Only one try was windfall tax. But it was imposed on only for the copper concentrate, but as for gold, we made mistake.

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