Mongolia Country Update #2

4 June 2008

Recent developments, decisions, and civil society activities related to activities of the International Financial Institutions (IFIs) in Mongolia.

The Mongolia Country Updates provide information about recent developments, decisions, and civil society activities related to International Financial Institution (IFI) involvement in Mongolia including that of the World Bank (WB), International Finance Corporation (IFC), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB). If you would like to be included in or removed from the distribution list, please e-mail the moderator, George Holliday, at gholliday@bicusa.org. Correspondence with BIC may be conducted in Russian.

The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF. For more information about BIC, see www.bicusa.org.

Sections:

I. IFI Project Activities
II. Extractive Industry Transparency Issues
III. Civil Society Activities
IV. IFI Consultations and Policy Updates
V.  Other Notable Developments

I. IFI Project Activities

IFC Activities

May 1, 2008: The International Finance Corporation approved an A Loan of up to $15 million and a C Loan of up to $10 million for MCS Group, one of the largest private enterprises in Mongolia.

MCS Group (IFC website)

World Bank Activities

April 21, 2008: The World Bank approved a $4 million grant to help combat Avian and Human Influenza. 

AHI (WB website)

EBRD Activities

May 28, 2008: The European Bank for Reconstruction and Development approved a syndicated loan to MCS Beverages for the construction of a new plant. 

MCS Beverages (EBRD website)

November 20, 2007: EBRD made its first loan to the corporate sector in Mongolia with a 1.5 million euro credit to Nomun Inter Trade, the leading non-alcoholic beverage company in Mongolia.

First Corporate Loan (EBRD website)

November 15, 2007: EBRD disclosed its proposed investment of $9 million for up to a 30% share in DIF – Minii Delgur, a supermarket company seeking to expand in the capital. 

DIF - Minii Delgur (EBRD website)

ADB Activities

February 27, 2008: The Asian Development Bank will provide a $37.5 million grant to help finance the $200 million Western Regional Road Corridor Project, linking China and Mongolia by roadway. 

Western Regional Road Corridor (ADB website)

December 19, 2007: The Asian Development Bank awarded a $3 million grant to boost trade within the Central Asia Regional Economic Cooperation (CAREC), of which Kazakhstan, Azerbaijan, China, Kyrgyz Republic, Mongolia, Tajikistan, Uzbekistan, and Afghanistan are members.

Trade in Central Asia (ADB website)

December 13, 2007: ADB and Mongolia entered into an agreement for a $14 million grant toward the Third Health Sector Development Project. The grant agreement can be found at the link below:

Grant Agreement (ADB website)

II. Extractive Industry Transparency Issues

Overview

The Extractive Industries Transparency Initiative (EITI) was begun in 2002 by UK Prime Minister Tony Blair.  It aims to improve openness and transparency in company payments and in government revenues from extractive industries. An independent auditor reconciles payments from companies with revenues received by the government. 

EITI Progress

Mining forms a large part of Mongolia’s export economy.  The growth of the extractive sector, including gold, copper, and coal, led the Mongolian government to adopt EITI in December of 2005. Efforts slowed, however, with subsequent political instability. The country’s first report, covering 2006, was published in January of 2008 and can be found on Mongolia’s EITI website. A National Council and Multi-stakeholder Working Group, both established in 2006, monitor the EITI process. The working group is led by the senior advisor to the Prime Minister. Its members include representatives from government, companies, and civil society. The EITI Mongolia website provides further details on the stakeholder group and many other aspects of EITI implementation. Mongolia is now a candidate country, having completed its pre-validation process in 2007. 

The NGO Coalition for Transparency in the Extractive Industries was formed in 2006. Civil society has been active, and the government has made at least outward attempts to involve such organizations.    

For more information, see the links below:

Revenue Watch Institute website

EITI website 

IFI Involvement

• World Bank support of EITI includes administration of the EITI Multi-Donor Trust Fund and assistance to civil society groups and the EITI Secretariat. 
• In 2007, the World Bank committed $304,394.00 to EITI in Mongolia. The Multi-Donor Trust Fund provides funding for the EITI Secretariat under the Ministry of Finance, a branch that opened on September 10, 2007. EITI Project (WB website)
• On April 12, 2008, the World Bank announced an Extractive Industries Transparency Initiative Plus Plus (EITI++) project, which offers governments additional options and technical aid for improving revenue management. Civil society groups, such as Publish What You Pay, have endorsed the project. EITI Plus Plus (WB website)
• As of January 2007, all investors supported by the International Finance Corporation must publish their payments to the government.  The IFC will evaluate investor compliance in the first half of 2008.  Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
• The European Bank for Reconstruction and Development (EBRD) has pledged support for EITI through active involvement in EITI consultation, promotion of transparency in revenue reporting and within the financial sector, and capacity-building aid for countries implementing EITI principles. EBRD EITI Policy (EBRD website)
• In February of 2008, the Asian Development Bank officially endorsed EITI. ADB Endorses EITI (ADB website)

Problem Areas

1. Mongolia’s Reconciliation Report identified major inconsistencies in the types of data reported by companies and the government. 
2. The Reconciliation Report also noted “incomplete and inaccurate” information from the government’s side. In Order No. 16, the Prime Minister called for greater cooperation from local and state governments to reconcile government receipts. However, public access to budgetary information is limited.     
3. According to the Revenue Watch Institute, civil society members have complained that the make-up of the National Council was not truly representative of civil society.  
4. Illegal exports to China and South Korea distort the actual situation within the extractive sector. 

Resources

EITI Report on the First Mongolian Reconciliation, prepared for EITI Mongolia by Crane White & Associates, February 2008 (EITI Mongolia website, Acrobat pdf)

Order No. 16 of the Prime Minister of Mongolia, Mongolian Government, February 1, 2008 (EITI Mongolia website, Acrobat pdf)

Terms of Reference of the Mongolia EITI Council, National Council, 2006 (WB website, Acrobat pdf)

Drilling Down: The Civil Society Guide to Extractive Industry Revenues and the EITI, Revenue Watch Institute, May 2008 (RWI website)

Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)

Eye on EITI: Civil Society Perspectives and Recommendations on the Extractive Industries Transparency Initiative, Publish What You Pay and Revenue Watch Institute, 2006 (EITI website, Acrobat pdf)

III. Civil Society Activities

Community Engagement Seminar

On May 27-29, 2008, the Asia Foundation in Mongolia held a Community Engagement Seminar to raise awareness and train a wide range of public stakeholders on community engagement. The objectives of the seminar included training the pubic on land and resource use policy oversight and promoting citizens’ participation in mining licensing procedures and community-based natural resource management.

Community Engagement Seminar (Mongolian River Resources website)

Mining Licensing and Community Partnership Guides for Mongolia

In February 2008, the Asia Foundation in Mongolia published two guides, Mine Licensing: a Mongolian Citizens Guide, which explores how licenses are awarded and how civil society can engage in exploration and mine licensing, and Community Partnership: a Mongolian Citizen Guide, which discusses how to form community partnerships to conserve local lands and ensure responsible natural resource use under Mongolian environmental protection law.

Mine Licensing: A Mongolian Citizens Guide (Mongolian Rivers Resources website, Acrobat pdf)

Community Partnership: A Mongolian Citizen Guide (Mongolian Rivers Resources website, Acrobat pdf)

First Environmental Scorecards Produced

In 2008. the Mongolian Nature Protection Coalition produced the Mongolian Nature and Environment Assessment report, which rates Mongolia’s elected officials based on their environmental friendliness. The guide is the first environmental score card to look at officials' votes as well as the best and worst events related to environmental protection and natural resource use.

Mongolian Nature and Environment Assessment (Mongolian Rivers Resources website, Acrobat pdf)

BIC Letter to EBRD

In 2007, the Bank Information Center followed up on the Annual Meetings with the EBRD by sending a letter with its recommendations for best practices in Mongolia’s mining sector. 

Letter to EBRD Regarding Mongolia's Mining Practices  (BIC website)

EIB Civil Society Workshop

On June 30, 2008, the European Investment Bank will hold a workshop for civil society organizations in Brussels, Belgium. The workshop will be in English and French and include observers from other international finance organizations. For more information and to request an invitation, visit the link below:

EIB Civil Society Workshop (EIB website)

IV. IFI Consultations and Policy Updates

Extended Consultation on EIB’s Environmental and Social Statement

The European Investment Bank has extended the public consultation period for its Environmental and Social Statement until June 20, 2008. A consultation meeting will be held in Warsaw on June 12. With sufficient stakeholder interest, the Bank intends to hold the second round of consultation between September 1 and 28 to seek input on the second draft revised Statement on Environmental and Social Principles and Standards. Submission details and the statement draft can be found at the links below.

Comment Submission Details (EIB website)

EIB Environmental and Social Statement (EIB website, Acrobat pdf)

Public Consultation on EIB's Environmental and Social Statement (EIB website)

EBRD Environmental and Social Policy

On May 12, 2008, the Board of Directors of the European Bank for Reconstruction and Development (EBRD) approved the Bank's new Environmental and Social Policy as well as a new Public Information Policy, one week before the EBRD's Annual Meetings in Kiev, Ukraine.

EBRD 2008 Environmental and Social Policy, May 12, 2008 (EBRD website, Acrobat pdf)

BIC comments on the draft EBRD Environmental and Social Policy, April 8, 2008 (BIC website)

EBRD Public Information Policy

The new Public Information Policy was approved on May 12, 2008, bringing some positive improvements to the previous policy. Civil Society comments on the initial discussion paper called for more transparent and amenable public consultation and disclosure provisions, an independent appeal system, and more timely and automatic disclosure of project impact information. Concerns were also expressed at the disclosure exceptions.

EBRD 2008 Public Information Policy, May 12, 2009 (EBRD website, Acrobat pdf)

Global Transparency Initiative and CEE Bankwatch Network comments on EBRD PIP, December 26, 2007 (GTI website, Acrobat pdf)

Independent Recourse Mechanism Review

EBRD is currently reviewing its complaint review system, the Independent Recourse Mechanism (IRM). It is also expected that a revised version of the IRM policy will be made public late 2008 for an additional round of public comment period that will last through January 2009.

EB Independent Recourse Mechanism (EBRD website, Acrobat pdf)

Study: Weak EBRD complaints mechanism (CEE Bankwatch study)

World Bank Consultations

The World Bank Group is seeking comments on its strategic priorities for civil society engagement. The process will take place from March until July of 2008. Additionally, the bank is drafting an issues paper on Climate Change, which is currently available for comment and will be discussed at the 2008 Annual Meetings. Details can be found here:   

Strategic Priorities Framework for Bank – Civil Society Relations (WB website)

Climate Change Global Consultation page (WB website)

V. Other Notable Developments

World Bank and IMF Spring 2008 Meetings Summary

The World Bank and IMF Spring Meetings addressed climate change, rising food and commodity prices, and the global credit crisis. Civil society meetings examined revenue transparency in extractive industries, anti-corruption measures, IMF conditionalities, and a variety of other issues. For summaries of official WB/IMF meetings as well as civil society strategy meetings, see the links below:

Bretton Woods Project (BWP website)

IMF and World Bank - Spring Meetings 2008 (IMF website)

WB and IMF: Revenue and Contract Transparency Assessment

Global Witness and Bank Information Center are conducting an assessment of revenue and contract/licensing transparency implementation in extractive industry operations by the World Bank, IFC and IMF. Preliminary findings of the assessment across 15 resource rich countries revealed that revenue transparency is inconsistent across countries and programs of these institutions. Both civil society involvement and contract transparency were rarely mentioned in institutions’ project/country documents and were only once used as progress indicator upon which further funding was tied. GW and BIC plan to release the final assessment during summer 2008.

New World Bank Website Publishes Company Payments

The World Bank launched a webpage, where IFC clients publish their payment to their host governments starting with operations in 2007. The webpage provides figures for companies that already disclosed payment figures and those planning to do so during June 2008, as well as projects that do not involve payments to the government.

IFC Extractive Industry Clients Government Payment Disclosure (WB website)

Independent Evaluation Office (IEO) Report

The International Monetary Fund leadership has commented on the IEO report of 2008. The report examines IMF governance structures, accountability, and stakeholder involvement. The comments and report can be found at the link below:

IEO Report and the IMF (IMF website)

EBRD 2008 Annual Meetings and Business Forum

Over 2,000 government, civil society, and business actors met in Kiev, Ukraine on May 18-19, 2008, for the EBRD’s Annual Meeting. Civil society groups were critical of the bank’s support of problem projects and of new policies drafted without adequate commentary from civil society. These policies, energy efficiency, and banking systems formed some of the topics of discussion. More information on the meetings and civil society responses can be found at the following links:

2008 Annual Meetings (EBRD website)

Blogs and 2008 Annual Meetings News (IFIwatchnet website)

Comments on New EBRD Policies (BIC website)

EBRD's Annual Meeting (BIC website)

Asian Development Bank 2008 Annual Meetings

At the 2008 Annual Meeting in Madrid, Spain, on May 6-7, 2008, rising food costs were a major area of concern. The ADB committed $500 million to address the problem immediately and $2 billion for agricultural support in the coming year. The ADB also launched its Strategy 2020, which will help shape ADB activity in the future. Some civil society actors have objected to the strategy. Further news articles, summaries, and useful documents can be found at these sites:

Annual Meeting News and 2008 News (ADB website)

2008 ADB Annual Meeting and Civil Society Criticisms (BIC website)

NGOs Boycott ADB Consultations, ADB Agrees to Second Draft

Several members of the NGO Forum Network did not attend the Asian Development Bank’s April roundtable consultations, citing the draft Safeguard Policy Statement’s failure to comply with basic objectives. After U.S. and NGO pressure, the ADB agreed in May to release another draft and consultation.   

ADB Consultations Boycotted (BIC website)

ADB Agrees to Second Draft (BIC website)