MONGOLIA’S MULTI-BILLION LEGISLATIVE DEBATE
The really big questions that affect everyone looking at Mongolian mining are: What shape will promised government legislation regulating the sector take? And when will it actually come into force?
The legislation will set the national mining policy of Mongolia. It will lay out the broad objectives and principles for further regulation including responsibilities, environmental protection and what form government participation in the industry might take.
“It will lay the foundation for the entire mining industry going forward. It will be looking at the next 15-20 years of history,” says Batsukh Enkhbat, managing partner of Khan Lex Advocates.
There have been several draft proposals of the law, which has been often-promised and long awaited. Unfortunately these proposals are all authored by significantly different people – NGOs, international developers, the mining ministry and the president’s office amongst others, Enkhbat adds. It makes it difficult to determine what the final proposal will be.
Even the draft from the presidential office is dubious, says Peter Morrow, chairman of the American University of Mongolia. “It was published in political season so I doubt it will happen as written. It’s unlikely to resemble the final.”
Although current drafts are not 100% reliable indictors, policy observers have a general idea of what the legislation might include from talks on the ground and a general overview of public sentiment in the democratic country.
Protecting the environment and safeguarding natural resources for future generations are high priorities, says Enkhbat. There is also high sentiment around increasing Mongolian participation in the mining boom.
This is taking the form of insisting on minimum Mongolian participation in some joint ventures as well as requirements for buying local content, he says.
“GDP and the economy have skyrocketed over the past several years. But Mongolians are quite disappointed with the performance of foreign mines in the country,” he adds. “All these riches have been shipped out without providing benefits to the country such as higher overall living standards. There is a justified perception of corruption in relation to mining operations”
But the government wants to ensure that it does not repeat the mistakes of the past and come down with too heavy a legislative hand.
The last year or two has been tough on foreign direct investment, the supply chain and mining, says Morrow. “There’s been lots of pain and suffering in corporate environment.”
For example, the Mongolian government passed a regulation requiring foreign investors seeking a controlling stake in three strategic sectors – mining, telecomms/media and banking/finance – to register and seek government approval through either the cabinet or parliament, depending on the size of the operation.
“The regulation itself is okay. It is similar to other countries in the world,” says Enkhbat. “But the reason that many were upset is that it’s been left deliberately vague and so it’s wide open to interpretation.”
The government has promised to amend this but statements on how are quite general still, he adds.
As to when either of these major changes are to take place – the government is currently off for its summer holiday. It briefly reviewed mining legislation before closing and is likely to start debating it again in October, says Enkhbat. Registration laws for investing in the strategic sector are on a greyer timescale, he adds.
Both of these are meant to be the first in a line of changes to improve Mongolia’s business situation.
The recent cycle of political elections has given the government a legislative agenda and a clear space of time to work with, says Enke Enkhjargal, chief resident representative for the Bank of Mongolia’s London office. The re-election of the Mongolian president, Tsakhiagiin Elbegdorj earlier this summer was based on improving legal infrastructure, improving transparency and reducing corruption, she adds.
There will be a look at other corporate laws such as the tax scheme and bureaucratic processes, says Bayanjargal Byambasaikhan, chairman of the Business Council of Mongolia and a partner at NovaTerra, an investment advisory in Ulaanbaatar.
This will hopefully improve an opportunity that is already quite golden. “Setting up a new business in Mongolia is probably one of the easier places in the world,” he says. “There is some bureaucracy, but over the last 12 months they’ve been working hard to eliminate red tape.”
PathfinderBuzz has also examined how infrastructure will play a critical role in the growth of mining and the Mongolian economy.
The legislation will set the national mining policy of Mongolia. It will lay out the broad objectives and principles for further regulation including responsibilities, environmental protection and what form government participation in the industry might take.
“It will lay the foundation for the entire mining industry going forward. It will be looking at the next 15-20 years of history,” says Batsukh Enkhbat, managing partner of Khan Lex Advocates.
There have been several draft proposals of the law, which has been often-promised and long awaited. Unfortunately these proposals are all authored by significantly different people – NGOs, international developers, the mining ministry and the president’s office amongst others, Enkhbat adds. It makes it difficult to determine what the final proposal will be.
Even the draft from the presidential office is dubious, says Peter Morrow, chairman of the American University of Mongolia. “It was published in political season so I doubt it will happen as written. It’s unlikely to resemble the final.”
Although current drafts are not 100% reliable indictors, policy observers have a general idea of what the legislation might include from talks on the ground and a general overview of public sentiment in the democratic country.
Protecting the environment and safeguarding natural resources for future generations are high priorities, says Enkhbat. There is also high sentiment around increasing Mongolian participation in the mining boom.
This is taking the form of insisting on minimum Mongolian participation in some joint ventures as well as requirements for buying local content, he says.
“GDP and the economy have skyrocketed over the past several years. But Mongolians are quite disappointed with the performance of foreign mines in the country,” he adds. “All these riches have been shipped out without providing benefits to the country such as higher overall living standards. There is a justified perception of corruption in relation to mining operations”
But the government wants to ensure that it does not repeat the mistakes of the past and come down with too heavy a legislative hand.
The last year or two has been tough on foreign direct investment, the supply chain and mining, says Morrow. “There’s been lots of pain and suffering in corporate environment.”
For example, the Mongolian government passed a regulation requiring foreign investors seeking a controlling stake in three strategic sectors – mining, telecomms/media and banking/finance – to register and seek government approval through either the cabinet or parliament, depending on the size of the operation.
“The regulation itself is okay. It is similar to other countries in the world,” says Enkhbat. “But the reason that many were upset is that it’s been left deliberately vague and so it’s wide open to interpretation.”
The government has promised to amend this but statements on how are quite general still, he adds.
As to when either of these major changes are to take place – the government is currently off for its summer holiday. It briefly reviewed mining legislation before closing and is likely to start debating it again in October, says Enkhbat. Registration laws for investing in the strategic sector are on a greyer timescale, he adds.
Both of these are meant to be the first in a line of changes to improve Mongolia’s business situation.
The recent cycle of political elections has given the government a legislative agenda and a clear space of time to work with, says Enke Enkhjargal, chief resident representative for the Bank of Mongolia’s London office. The re-election of the Mongolian president, Tsakhiagiin Elbegdorj earlier this summer was based on improving legal infrastructure, improving transparency and reducing corruption, she adds.
There will be a look at other corporate laws such as the tax scheme and bureaucratic processes, says Bayanjargal Byambasaikhan, chairman of the Business Council of Mongolia and a partner at NovaTerra, an investment advisory in Ulaanbaatar.
This will hopefully improve an opportunity that is already quite golden. “Setting up a new business in Mongolia is probably one of the easier places in the world,” he says. “There is some bureaucracy, but over the last 12 months they’ve been working hard to eliminate red tape.”
PathfinderBuzz has also examined how infrastructure will play a critical role in the growth of mining and the Mongolian economy.
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