Mongolia joined the World Bank and Asian Development Bank (ADB) in 1991 and the European Bank for Reconstruction and Development (EBRD) as a country of operation in 2006. The international financial institutions (IFIs) have already disbursed more than $1.2 billion combined to projects in Mongolia. As IFI interest in Mongolia’s mining sector grows, so do concerns about resulting negative social and environmental impacts.
There are more than 300 mining companies operating in Mongolia. Coal, gold, and copper account for a large per centage of their mining activities. In April 2007, Mongolia’s government signed a Memorandum of Understanding (MOU) with the World Bank, EBRD, and ADB on the development of the country’s mining sector. The MOU signals growing interest on the part of the IFIs in expanding activities in this sector. As a result, the extractive sector is a key issue to monitor.
Mining for gold, copper and coal is a rapidly growing sector in Mongolia
One specific extractives project, the Oyu Tolgoi mine, is becoming controversial in the region and internationally. When operational (projected 2013), it will become Mongolia's largest copper and gold mine. It will be financed by the Mongolian government and two mining companies, Rio Tinto and the Canadian Ivanhoe Mines. Ivanhoe Mines Ltd. is able to finance this project with substantial loans from th e European Bank for Reconstruction and Development (EBRD) and the World Bank Group's International Finance Corporation (IFC); specifically, $300 million from each of these lenders and mobilization of an additional $1.2 billion from private lenders. The involvement of international development banks in this project has attracted attention, especially considering the numerous civil society complaints beginning to surface about the potential social and environmental impacts of the mine, as well as the manner in which it is being developed.
An independent CSO, OT Watch, has been formed in Mongolia specifically to observe and lobby around these issues. OT Watch and other Mongolian and international CSOs have raised concerns about effects on water use and availability, crowding out of existing economic sectors, relocation and use of indigenous land, lack of economic infrastructure to support mining activity, and insufficient advocacy for indigenous rights. OT Watch, BIC, and other CSOs have suggested several strategies to address
some of these concerns, including appointment of staff specifically to work with civil society, access to project timelines and other information that will allow for meaningful civil society participation, and provision of information on environmental and social standards and policies. The future of the IFC's involvement in the project is as of yet unclear, but for the moment, it conti
Mining project sponsors propose to compensate for the loss of nomadic herders' way of life by beginning desert gardening programs
nues to work with Ivanhoe Mines as it conducts due diligence assessments on the project. Overall, as IFIs become more involved in Mongolia, they have an increasing responsibility to consider political, social, and environmental consequences of lending and technical assistance related to extractive industries.