Mongolia joined the World Bank and Asian Development Bank in 1991, and became the European Bank for Reconstruction and Development’s newest country of operations in 2006. The international financial institutions (IFIs) have already committed 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.
China and Russia are major export and import partners, respectively, and economic activity is focused on the mining sector, which provides roughly 17% of Gross Domestic Product (GDP). There are more than 300 mining companies operating in Mongolia. Coal, gold, and copper account for a large percentage of mining activities in the country. In April 2007, Mongolia’s government signed a Memorandum of Understanding (MoU) with the World Bank, the European Bank of Reconstruction and Development (EBRD), and the Asian Development Bank (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, and BIC has urged that the MoU be made public.
The expansion of IFIs 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. 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 that contracts between the companies and the government be 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 that they finance be more transparent.