Parliament adopts mineral resource policy

At its January 16 plenary meeting, Parliament adopted a parliamentary resolution ‘State Policy on Mineral Resources’. The document was adopted following frequent discussion by three parliaments. During the last discussion, voting was carried out for over 300 issues of principle. As a result, the resolution was approved with the support of 80 percent of MPs present at the plenary meeting. MPs and the sector’s Ministry appreciate that the document is very significant because it has determined a State unified policy on the minerals sector for the first time and reflected principles to reduce state participation in the sector, follow a stable legal environment, and make it transparent. “The State Policy includes key principles, such as to be open and transparent, make legal environment stable as much as possible and not to classify investors and not to differentiate them by types of properties. A policy will be adhered to develop the sector based on Public and Private Partnership,” said the Mining Minister D. Gankhuyag. “Based on a declaration in the Constitution of Mongolia saying “The land, its subsoil, forests, water, fauna and flora and other natural resources shall be subject to people’s power and state protection,” The State Policy on the minerals sector aims at ensuring sustainable economic growth and continually improving people’s living standards and quality by means of developing accountable, mutually beneficial, open and decent environment-economy-social balanced extractive and processing production with modern eco-friendly techniques, technology and management relied on its advantages of underground wealth within the global sustainable development ideology and tendency,” reads the document. “At the end of deliberating for the past six months, we adopted the policy document. The draft was very good work that was drawn up for a longer period based on the achievements of world countries. The issue of what time the policy document was been adopted is important. Today, foreign investment is stagnant in Mongolia. Caused by an instable legal environment, investors turned away. Moreover, companies operating in the mining sector started cutting staff. The policy document that was adopted at this time must give confidence to people, not have any ambiguous meaning and not be in conflict with other laws. Actually, it has to give hope that Mongolia is going to develop its mining sector, the private sector operating in the sector is going to be encouraged, and the government will support with all related aspects,” said S. Odontuya, MP and head of the working group for the policy document. Some clauses in the draft of the policy document were controversial, causing the MPP group and ‘Justice’ coalition group in parliament to take breaks respectively. For example, the ‘Justice’ coalition made a suggestion to leave a clause unchanged on developing state regulations in registration, permits and control levels and on bringing state participation to a decent level in the activity of minerals exploration and extraction, and to include a statement in the policy document reading “Some kinds of mineral resources and deposits can be kept in reserve with a purpose to conform to national security and natural and ecological balance. The State shall be responsible for relevant compensation matters if a deposit was explored with money of the private sector”. “I am against a policy which aims to restrict state participation as much as possible in the mining sector because there have not yet been national magnates in this sector. Therefore, restricting state participation at this time means foreigners will hold the policy. In the present situation, the sector is being protected with foreign investment; this clause about restricting state participation must not be there. The private sector and particular foreigners do not bear responsibility before Mongolians to exploit minerals efficiently and work for prosperity and goodness of children in the future. Mongolia’s State must be responsible for this issue throughout the generations of its existence. I hold the position of principle that eluding duty and restricting state participation in any issue is wrong. Moreover, mineral resources have to be exploited under a specific policy. Certain deposits and mineral resources have to be passed to our future generations,” explained MP S. Uyanga about the coalition’s proposal. However, MPs who do not agree with the coalition’s proposal were dominant. “Roughly 70 percent of Mongolia’s total territory is in reserve. It means that there has not been any exploration licenses issued in these areas. Therefore, putting the remaining 30 percent of area into reserve again is not right thing because 70 percent of the territory is in reserve. The mining sector needs to be developed and other sectors need to be boosted. Mongolia should be a country without dependence on the mining sector alone, but from other developed economic sectors,” said MP L.Enkh-Amgalan. MP S. Odontuya replied, “In Provision 13 of the law on Mineral Resources, there is a detailed clause on how to make a deposit in reserve. Adding to the clause on making a deposit reserve, the Coalition’s group considered that if the deposit is explored by private funding, the State will take the deposit and give compensation. This is a clause which may produce negative results. Therefore, we considered that the clause is unnecessary to be included in the policy. If clauses that have already been included in the present effective law are re-included in the policy document, it will make people hesitate. An issue regarding inheritance of land to future generation is a different matter. Soon, a Bill on Sovereign Wealth Fund will come to Parliament. According to international experience, the mining sector is well-developed and income from the sector is passed to future generations through the wealth fund. This experience will be implemented under the law on Sovereign Wealth Funds. Not exploiting natural resources at all to save for future generation is a one-legged view.” Furthermore, most MPs did not support another clause saying that if an environmental NGO sues a company which caused damage to nature, wins and recovers losses in litigation, the company is imposed a fine, and a certain amount of the fine shall be given as encouragement to the NGO. They claimed that the clause contradicts with many laws and it is likely to bring negative results, such as NGOs will pressure mining companies. “With a purpose to conduct sales of minerals products at external and internal markets openly, and in an optimal and highly efficient way that meets market principles, to set the price justly, develop domestic capital market and regulate exports with a unified policy, State Policy has stated to establish a stock exchange of Mongolian mineral resources and the stock exchange is to be established within this year”, said the Mining Minister. For a purpose to intensify the export of products in the minerals sector, the policy document includes the following clauses; to implement all possible ways of cooperation between Public and Private or/and in international arena and adhere to mining diplomacy and win-win principle; to bring radioactive materials, rare earth elements, subterranean water and some gold, coal, iron and copper deposits that are competitive in international and regional market and have huge reserves into the classification of deposits with strategic importance and to conduct exploration, mining and processing operations of these deposits with state participation; to show policy support to companies in the first turn, which exploit eco-friendly and harmless state-of-the-art techniques and technology, conduct open and accountable mining operations, and pay great amounts of tax to state and local budgets; to upgrade the procession of mineral resources and show policy support for processing industries of value-added cathode copper, metal makings, uranium yellowcake, purified gold, rare earth elements concentrate and fluorspar; to implement projects to concentrate coal, establish coking and chemical plants, erect power stations relied on energy coal deposits, produce smokeless fuel from brown coal and liquefied fuel from coal and oil shale as well as gasify coal to produce good quality gas; to encourage eco-friendly and harmless modern techniques, technology and innovations in processing plants, and the government will support processing plants with taxation, finance and other policies. Within natural protection and rehabilitation, some things have been banned; exploration and mining activities have been restricted in biologically weak regions and prohibited in natural protection zones, areas of historical memorial sites as well as in land with unique geological formation; new deposits of coal with sulfuric content higher than 1.5 percent has been restricted to open, new deposit of coal with sulfuric content higher than 3 percent has been banned to open; mining operations have been restricted in areas where geological disasters may occur as well as mining extraction and processing activities have been temporarily or completely banned in areas where disasters actually occurred. Moreover, a policy will be followed to use surface water much more in minerals extraction and processing activities, re-cycle waste water, and use grey water for mining activity in order not to use fresh subterranean water as much as possible. B.Ooluun