Extractive Industries (EI)
The expansion of IFI financing of extractive industries in Mongolia raises several major concerns for civil society groups, including environmental risks and governance issues. BIC has urged the IFIs to adopt the best international social and environmental standards for all mining projects that they finance in Mongolia.
EI Transparency Issues
One of BIC’s primary concerns is revenue and contract transparency. BIC and other civil society organizations have advocated that payments made by mining companies to the government be transparent and published. The Mongolian Government’s commitment to the Extractive Industries Transparency Initiative (EITI) in December 2005 is a step in the right direction, but the IFIs can do more to require that projects be transparent.
Mongolia is now an EITI candidate country, having completed its pre-validation process in 2007. The country’s first report, covering 2006, was published in January of 2008 and can be found on Mongolia’s EITI website. The report identified major inconsistencies in the types of data reported by companies and the government, as well as inaccurate information from the government’s side. However, Mongolia is one of only a few countries to publish data on a disaggregated – company by company – basis. A National Council and Multi-stakeholder Working Group, both established in 2006, monitor the EITI process, but civil society has complained of inadequate representation. The NGO Coalition for Transparency in the Extractive Industries was formed in 2006.
IFI involvement in revenue and contract transparency has come through support of EITI. In 2007, the World Bank awarded Mongolia a $304,394.00 grant for EITI assistance. In the same year, the European Bank for Reconstruction and Development (EBRD) disclosed a $45 million loan to Mongolyn Alt Corporation for expansion of its coal mining operations. This project marks the first requirement for a Mongolian mining company to comply with EITI. On June 26, the World Bank approved $9.3 million in aid to Mongolia for technical assistance in the mining sector. The project focuses on strengthening the government’s capacity to manage revenue, state equity, and the regulatory framework. Parallel funding is expected from the ADB ($1.5 million) and the EBRD ($2.3 million).
EITI Project (WB website)
MAK Mining Project (EBRD website)
Mongolia Mining Sector Technical Assistance Project, World Bank Report No. AB3749, May 2, 2008 (WB website, Acrobat pdf)
Mining Sector TA Project (WB website)
EI Project Developments
IFI investment in Mongolia’s extractive sector has focused on large companies and immediate export, rather than developing the country’s capacity to process and add value to its resources. Illegal exports to China and South Korea also remain problematic.
Recent exploration has made Mongolia’s mining sector even more important. The two largest sites, Oyu Tolgoi (copper and gold) and Tavan Tolgoi (coal), could bring in $5 billion in foreign investment, a figure double the country’s GDP. NGOs have raised concerns over the transparency and management of these deals.
EBRD Consult, September 25, 2007 (EBRD website)
Mongolia is also seeking to develop its uranium mining capabilities with Russian assistance, but it is unlikely the IFIs would become involved with uranium projects.
Projects Under Watch
The European Bank for Reconstruction and Development has disclosed a $50 million loan, pending approval, to Centerra Gold for its operations in Mongolia and the Kyrgyz Republic. The project was assigned a low C/1 environmental rating. In Mongolia, the loan will support exploration and mining activities, including new technology for gold extraction. EBRD is also providing $100,000 in technical assistance to the Mining and Petroleum Authority of Mongolia.
Centerra Gold already operates extensive mining activities in the Kyrgyz Republic, where problems have surfaced at the large Kumtor mine. As a result, BIC is monitoring the extension of IFI financing of Centerra to Mongolia.
Centerra Gold Financing (EBRD website)
Country Strategies
World Bank Group
Country Assistance Strategy, World Bank, April 5, 2004 (World Bank website, Acrobat pdf 6.23 MB)
European bank for reconstruction and development
Mongolia joined the EBRD as a country of operation on October 15, 2006. The first country strategy, approved at the end of 2006, names enterprise development, infrastructure, policy dialogue, and the financial and natural resource sectors as its priorities. The strategy explicitly mentions EITI as an area of focus.
Mongolia Country Strategy, EBRD, December 5, 2006 (EBRD website, Acrobat pdf 0.5 MB)
Asian Development Bank
The current country strategy highlights private sector development and governance. The first Country Partnership Strategy for Mongolia is expected in 2008.
Country Operations Business Plan 2008-2010, ADB, November 2007 (ADB website, Acrobat pdf 220 KB)
Country Strategy and Program Update, ADB, August 2006 (ADB website, Acrobat pdf 261 KB)