Mongolia and                         MINING                       The policy evolution: what is next?                     ...
Guess a country        •       Total GDP 0.9 billion dollars, GDP growth rate 5.5%        •       Annual GDP per capita 38...
Guess again a country               • GDP 10 billion dollars, expected 2013                       growth rate 18%         ...
Guess again another                      country                •      Population 3 million                •      GDP 37 b...
Did you recognize those countries?              •        Its just one - Mongolia              •        First slide 2003   ...
Astonishing transformation                       From agricultural economyMonday, March 18, 13
..To a booming commodity economy           and its just a beginning..Monday, March 18, 13
•  Economic growth 17.3% in 2011, one of highest in world•  First quarter of 2012: 12.3%, one of highest in world again•  ...
•      Managing the transformation:          •      Benefit the population, reduce                 poverty          • Use t...
Governance        •      Anti-cyclical budget policy: budget increase limit is implemented        •      National audit ch...
Impact of mining on                   Mongolian economy           •       Exports boost           •       Investment desti...
Thats’ Mongolia’s strategy    •      1990s first attempt to bring in foreign investment after           Soviet aid dried up...
Strategy cont’d      •      2011 Starting search for contractor             for Tavantolgoi deposit,                  Thir...
Strategy forecasted    • National Development strategy:            after 2015 more to attention to            value added ...
What about mining?   •       More local coordination for mining - Obtain local residents‟ opinion in the           process...
Mining strategy cont’d      •      Create a legal environment to enable the national economic entities to have            ...
Mining policy cont’d         •      Renew the economic statistical data of natural resources,                and a system ...
•      The Tavantolgoi coal deposit shall remain under the state               ownership. In order to exploit the deposit,...
Anticipating the changes        •      More local control        •      More overview of environmental aspects        •   ...
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Khashchuluun eng

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Khashchuluun eng

  1. 1. Mongolia and MINING The policy evolution: what is next? Ch. Khashchuluun UBRM ConsultingMonday, March 18, 13
  2. 2. Guess a country • Total GDP 0.9 billion dollars, GDP growth rate 5.5% • Annual GDP per capita 385 US dollars • Largest sectors of economy • Trade 28.8% of GDP • Agriculture 20% of GDP • Hotels and restaurants 15.1% of GDP • Total export 615 million dollars • Total import 800 million dollars • Total investment: 244 million dollars, total public investment 30 million dollarsMonday, March 18, 13
  3. 3. Guess again a country • GDP 10 billion dollars, expected 2013 growth rate 18% • GDP per capita 4000 US dollars • Investment/GDP ratio 60.6% one of top 5 in the world • 2013 public investment expected to reach 4 billion dollars • Export 4.3 billion dollarsMonday, March 18, 13
  4. 4. Guess again another country • Population 3 million • GDP 37 billion US dollars • GDP per capita 12,600 US dollars • Exports 15 billion dollars • Large services sector: transport, banking, hotels, retail • Good infrastructureMonday, March 18, 13
  5. 5. Did you recognize those countries? • Its just one - Mongolia • First slide 2003 • Second slide 2013 • Third is a forecast for 2018Monday, March 18, 13
  6. 6. Astonishing transformation From agricultural economyMonday, March 18, 13
  7. 7. ..To a booming commodity economy and its just a beginning..Monday, March 18, 13
  8. 8. •  Economic growth 17.3% in 2011, one of highest in world•  First quarter of 2012: 12.3%, one of highest in world again•  Forecast for 2013: 18%•  Forecast: average growth rate of 14% for next decade•  GDP per capita reached 3000 USD from up from 1700 in less than 3 years•  Poverty rate is down from 39% to 29% in 2 years•  Unemployment is down to 8% from 11% in 2 years•  Doubling of exports in 2 yearsMonday, March 18, 13
  9. 9. • Managing the transformation: • Benefit the population, reduce poverty • Use the commodity boom to develop and diversify the economy, create more jobs • Accumulate mining revenue for future generations • Prepare for cyclical boom and bust crises • Invest in human development as much as humanly possibleMonday, March 18, 13
  10. 10. Governance • Anti-cyclical budget policy: budget increase limit is implemented • National audit checks elections platforms of parties for financial feasibility • New budget law to strengthen development planning system and its financing • Public investment legislation is approved, all large public projects require pre-FS and FS • Creation of SWF • Ceasing cash transfers from July 2012, moving to target groups • Anti-corruption law and efforts. Law on conflict of interests is enacted. • Strong emphasis on environmental protectionMonday, March 18, 13
  11. 11. Impact of mining on Mongolian economy • Exports boost • Investment destination • Engine of growth • Employment boost • Poverty alleviation • Technology transfer, vocational education development • Financial resources • Access to world financial and commodity markets • Boost for local and international infrastructureMonday, March 18, 13
  12. 12. Thats’ Mongolia’s strategy • 1990s first attempt to bring in foreign investment after Soviet aid dried up • 1997 new Mining Law First stage • 2005 a top Exploration investment destination of bringing in • 2006 Catching commodities price rise windfall: creating FDI Strategic deposits and government share ownership system • 2007 National Development strategy: use large strategic deposits as a leverage for economic growth (before 2015) • 2009: First Strategic deposit is contracted to Rio Tinto Second stage and TH • Stronger push for environmental protection: River basin of mining as law, freezing of new licenses growth engineMonday, March 18, 13
  13. 13. Strategy cont’d • 2011 Starting search for contractor for Tavantolgoi deposit, Third stage • 2012 Fine tuning the investment of mining as process growth engine • 2013 Starting negotiations for rest - of strategic deposits (coal, addressing phosphor, iron ore, gold, etc) for FS issues of and environmental impact environmental assessment degradation • Consolidate government mining and high holdings in various mines concentration (Baganuur, Erdenet, Sharin Gol, etc) of growth •Monday, March 18, 13
  14. 14. Strategy forecasted • National Development strategy: after 2015 more to attention to value added industries • Iron ore smelting - Darkhan Fourth stage of mining as a • Copper ore smelting Dornogobi value creator • Oil processing - Darkhan • Coal processing - Dornogobi • 2013 improvement of Strategic investment lawMonday, March 18, 13
  15. 15. What about mining? • More local coordination for mining - Obtain local residents‟ opinion in the processes of issuance of mineral licenses; • Stricter control - Introduce a practice of issuing exploitation licenses on the basis of the Government‟s resolutions; • - Put certain limitation on the number of mineral licenses to be issued to economic and legal entities; • - Mining exploration license shall be issued only for those areas which are authorized by the state / Green zones • - Pursue the principle not issue permits to mines which are identified economically non-viable by feasibility studies, and entail greater environmental damages; • - Grant the right to exploit a deposit to economic entities that have provided a financial guarantee certifying the concerned entity is able to do the restoration works in line with the applicable standards. • - To further elaborate the definition of “strategically important deposits” stipulated in the Minerals Law on the basis of a survey, and implement a special policy in regard to energy and coking coal, copper, iron ore and rare earth elementsMonday, March 18, 13
  16. 16. Mining strategy cont’d • Create a legal environment to enable the national economic entities to have preferential supplier or sub-contractor right in the projects implemented in the mining sector; • ! Renew the list of strategically important deposits and intensify the processes to put the large deposits into economic circulation. Consolidate the state ownership of strategically important deposits in line with a corporate structure, and in accordance with provisions of the Law on Human Development Fund, provide citizens with preferred shares; • ! Ensure that the extraction, storage and trading of gold is transparent; • ! Further elaborate the regulations to extract minerals through micro mining processes and improve the control on enforcements ; • ! Facilitate application of principles and standards of “The Extractive Industries Transparency Initiative” and “The Responsible Mining Initiative”. • ! Ensure compliance with the Law to Prohibit Mineral Exploration and Mining Operations at River Headwaters, Protected Zones of Water Reservoirs and Forested Areas, and develop environmentally friendly mining; •Monday, March 18, 13
  17. 17. Mining policy cont’d • Renew the economic statistical data of natural resources, and a system for assessment methodology to assess the impacts of the minerals industry on the country‟s economic and financial sectors; • ! Reduce export of minerals as raw materials in order to ensure the economic growth stability, gradually upgrade the processing level of export products in line with international standards, and increase the export volume of value added mining products; • ! Establish a complex metallurgical plant with modern techniques and technology relied on iron ore deposits located in the Darkhan and Selenge region; •Monday, March 18, 13
  18. 18. • The Tavantolgoi coal deposit shall remain under the state ownership. In order to exploit the deposit, attract domestic and foreign investment to economic entities and companies to carry out extractive operations. • Subsequently, take measures to sell the Tavantolgoi shares at the domestic and foreign stock exchanges • ! Ensure transparency of license trading; • ! Provide support to efforts to introduce environment friendly, and leading techniques and technology in mining operations, count the number of degraded areas due to mining, involve the responsible subjects in rehabilitation processes, and allot the rehabilitation expenses in the state budget account;Monday, March 18, 13
  19. 19. Anticipating the changes • More local control • More overview of environmental aspects • Less new licenses to be issued • The new Mining Law - thats what it says • The key is stay business friendly and foreign investment friendly while implementing those changesMonday, March 18, 13

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