The Government of Mongolia sees its minerals sector as critical to national plans for sustainable development, according to a new IGF Mining Policy Framework (MPF) Assessment.
“Mongolia is in the midst of a fiscal crisis and seeks to expand responsible development of its minerals sector in order to generate much-needed revenues,” said Kristi Disney Bruckner, a member of IGF’s assessment team for Mongolia.
“We were encouraged to see that, despite this crisis, leaders of Mongolia’s Ministry of Mining and Heavy Industry remain committed to developing and implementing a legal framework for the minerals sector that will promote long-term sustainable development.”
The ministry is currently revising key areas of its legal framework for the mining industry, including the new Law on Mining. The Government of Mongolia invited the IGF to perform an MPF Assessment in order to help identify gaps and ensure that the law reflects international best practices, with a focus on achieving sustainable development objectives. More information—including the draft Law on Mining—is available on the ministry’s website.
Over the past quarter century, Mongolia has experienced increased foreign direct investment in extractive industries. But economic growth has slowed significantly in recent years. The government is working to stimulate economic growth while ensuring that it meets its commitments to national and international sustainability goals, including the United Nations Sustainable Development Goals and Mongolia’s Nationally Determined Contributions under the Paris Agreement. While the country takes a multi-sectorial approach for economic growth, including through its vast agricultural and service sectors, the minerals sector remains a key focus of the government’s growth strategy and is a major contributor to Mongolia’s GDP.
The MPF Assessment reviewed the mining laws and policies of Mongolia and the country’s capacity to implement the IGF’s flagship MPF. It involved extensive desk-based research and a 12-day field visit to Mongolia in which the assessment team visited large- and small-scale mine sites and met with numerous stakeholders from government, civil society, international organizations and the private sector. It was conducted by Sustainable Development Strategies Group and the Ulaanbaatar-based Sustainable Development Research Centre between August 2016 and February 2017.
During the assessment, the Government of Mongolia invited the IGF to facilitate a series of capacity-building workshops focused on issues related to transfer pricing and beneficial ownership, socioeconomic benefit optimization and mine closure. The workshops, attended by over 80 Mongolian participants from national and subnational government, industry and civil society sectors, were held in March 2017 and featured leading international and Mongolian experts and institutions.
“We are grateful to the IGF for this assessment and the excellent capacity building workshops, which have helped us develop practical ways to address the gaps in our framework,” Minister of Mining Ts. Dashdorj said.
“We look forward to continuing our engagement in the IGF and to participating in the Annual General Meeting this October. Our partnership with the IGF helps us ensure that we are governing our minerals sector in a responsible and innovative manner that meets the needs of both current and future generations.”
The assessment team identified several major strengths of Mongolia’s mining sector in its report. The sector is led by many well-trained and highly competent professionals, in both private and public entities. The recently approved Model Agreement on Issues of Environmental Protection, Mine Exploitation, and Infrastructure Development in Relation to Mine Site Development and Jobs Creation serves as a model for agreements between mining companies and local administrative bodies to promote integration of benefits of mining into aimag (province) and soum (district) levels.
The increasingly frequent use of multistakeholder councils at the aimag and soum levels are viewed favourably by stakeholders as mechanisms to discuss and manage concerns related to the minerals sector. The level of open and transparent data on tax and royalty flows, largely a result of Mongolia’s decade of experience implementing the Extractive Industries Transparency Initiative, was also cited as a major strength in Mongolia. Furthermore, the report commends the efforts of the Government of Mongolia to include a legal framework for artisanal and small-scale mining in its mining law, with implementation support from the Swiss Sustainable Artisanal Mining Project and others.
IGF’s assessment team also identified a number of gaps in Mongolia’s mining law and policy framework.
“The government is well aware of many challenges it faces, and seems committed to taking action to fill the gaps in its existing laws and regulations,” said Luke Danielson, co-author of the IGF’s Mongolia Assessment Report. “It is already working to draft a new Law on Mining, which regulates mine closure and other important aspects of the mining industry. Government officials are actively engaging in capacity building with a number of governmental and non-governmental organizations.”
One of the gaps the team identified in its report was a lack of management of large-volume and high-risk mine wastes, including, but not limited to, their impact on water resources. The report also identifies a lack of government capacity to audit complex tax returns and to deal with transfer pricing, beneficial ownership and related issues. Mongolia also lacks clear criteria regarding which deposits should be classified as “mineral deposits of strategic importance.” The team also identified a lack of clarity and transparency regarding how revenue is distributed to and utilized at the aimag and soum levels.
Mongolia’s participation in the IGF contributes to the implementation of the country’s comprehensive and ambitious State Minerals Policy 2014–2025. The State Minerals Policy lays out a vision for responsible mining, with the goal of providing sufficient social and economic benefits from mining, while also achieving Mongolia’s national plans to implement the Sustainable Development Goals.
“We see great promise in Mongolia,” Bruckner said. “The Ministry of Mining and Heavy Industry’s commitment to sustainable development of the minerals sector sets a great example throughout Asia, while also attracting responsible investors who share this vision. The ministry’s work to develop a comprehensive system for planning and regulating mine closure and rehabilitation shows concrete and practical progress towards addressing the gaps identified in the IGF Assessment. The IGF is extremely pleased by the fruitful partnership it has developed with the Government of Mongolia and looks forward to ongoing collaboration.”
The IGF supports nearly 60 nations committed to leveraging mining for sustainable development to ensure that negative impacts are limited and financial benefits are shared. It is devoted to optimizing the benefits of mining to achieve poverty reduction, inclusive growth, social development and environmental stewardship.
Secretariat duties are performed by the International Institute for Sustainable Development. Secretariat funding is provided by the Government of Canada.