Tag Archives: Development

The Mongolian Government Going Online

Mongolia may have a reputation of a sparsely populated nomadic country, but the Mongolian government in increasingly adopting the technologies of the 21st century to reach and serve the people even in the furthest reaches of the steppe. Several major government agencies have implemented systems to provide services online with great success. Foreign investors are able to take advantage of these systems to make doing business in Mongolia more effective and efficient.

The tax authority is one example. In 2014 the tax authority implemented a new online tax filing and tax payment system. A digital signature issued by the tax office is required to access the online tax portal. An individual authorized by a company to sign financial statements and tax returns must apply for a digital signature in order to be able to access the online tax portal system. The online tax filing and tax payments have proven to be more cost and time saving. The social insurance office has taken inspiration from this system and is now also online.

Recently several government bodies, such as Ministry of Finance, Bank of Mongolia, General Tax Administration, National Transportation Department and others, have collaborated and launch a website www.smartcar.mn. Through this site vehicle owners, both individuals and organizations, can pay vehicle taxes, driver’s insurance payments, traffic tickets and receive other vehicle related services.

The General Authority for Intellectual Property and State Registration recently announced that they are in process of preparation and implementation of a “One citizen, one registration” project. According to officials, one of the main purposes of this project is to create a unified national registration database for ownership and property related information of natural personas and legal entities. This project aims to eliminate duplication and discrepancies in information over multiple platforms and create a unified national registration database. Such database is planned to accessible online both for internal access for government bodies as well as to general public with certain limitations. This project envisages the use of digital signatures by individuals to obtain online services from government bodies. Currently, digital signatures used only by legal entities for online tax filing and public tenders (bidding). While this project is in planning stages and has yet to be approved by the Government, we have high hopes for successful implementation. Officials claim that, if this project gets approved, this will decrease the amount of paperwork, will be cost and time saving both for general public and government bodies, government services will be easier, more accessible and closer to general public, and for foreign investors.

At such rate of increasing online government services, it looks like in coming years we should expect less bureaucracy and more accessibility from Mongolian government bodies, which should contribute to increasing economic activity in the developing nation.

Switzerland Aids Mongolian Small-Scale Artisanal Mining

The Sustainable Artisanal Mining (SAM) Project started in 2005 and built on Swiss Agency for Development and Cooperation’s (SDC) experience in Artisanal and small-scale mining (ASM) projects in Ecuador, Bolivia, and Peru. Since 2005, the SAM Project has been contributing to the organization and formalization of Mongolian ASM sector, advocating for environmentally sound mining practices and raising awareness amongst stakeholders on responsible ASM. The SAM Project has been implemented in four Phases, so far, with goals and aims to develop an economically sustainable, environmentally responsible and human rights-based ASM sector in Mongolia benefiting from and contributing to, global best practice regarding ASM. Phase 1 of the SAM Project aimed to develop ASM as a motor for sustainable rural development under an integrated sustainable resource management by the Government of Mongolia. Goal of Phase 2 was to support ASM to create favorable conditions and structures for the ASM sector so that its contributions to socio-economic development based on the careful use of natural resources in selected areas will increase. Phase 3 secured the recognition of ASM as a formal sub-sector contributing to Mongolia’s economic development. Phase 4 of the SAM Project seeks to transform Mongolia into an international knowledge hub for ASM best practice. In Phase 4 of the SAM Project, SDC initiated and funded the development of ASM Knowledge Hub, a web-based platform, opening ceremony for which was held on March 1, 2018. The ASM Knowledge Hub is a web-based interactive platform, which will provide active exchange and distribution of ASM information and connect ASM actors and knowledge contributors in Mongolia as well as with global ASM stakeholders. The platform features latest news and updates in ASM sector and provides information on upcoming events regarding the sector. Visit ASM Knowledge Hub at www.asmhub.mn for various articles, studies, researches and publications produced by ASM stakeholders.

Time Running Out for Mongolians to Claim Free Land Entitlement

According to Mongolian law, each Mongolian citizen is legally entitled to own a plot of land. Plot size allotted will be depending on the location, which a smaller plot available in Ulaanbaatar, and a larger plot (up to .05 hectares) available in more rural areas This ownership entitlement is a one-time opportunity granted by “The Law on Allocation of Land to Mongolian Citizens for Ownership”. But the opportunity is not forever and the period to apply for a free grant of land in accordance with the law expires on May 1st this year.

As the deadline is fast approaching, our Mongolian lawyers would like to offer some tips on the application process to Mongolian citizens who have not yet taken advantage of the land grant.

Firstly, citizens applying for the land grant must submit applications materials to the local governor or land development office. The Application requirements as set out by law require applicants to submit the following documentation and materials.

Citizens need to submit their application to the relevant local Governor or land department to acquire land for ownership for the purpose of family needs.

  • notarized copies of birth certificates of family members who have not reached 16 years of age
  • letter of confirmation by a Governor of khoroo or bag on the status of the family and number of its members;
  • if land is possessed according to Law on Land, then copies of the land certificate to possess land or notarized copy of the land possession contract;
  • an outlining map showing location and size of the land requested (if the land is to be owned on a shared basis among a group then an outlining map of every parcel belonging to each owner showing its size, location and boundary).

The local governor will review the application documentation and resolve the application within a period of 3 months from receiving the application. Usually the land is granted unless there are irregularities in the documentation. The land grant issued by the governor will indicate the plot’s location, boundaries, purpose, full name of the new owner, the owner’s identification number and birth certificate number for those who have not yet reached 16 years of age.

Based on the decision of Governor, the local Immovable Property Registration Office will register the land ownership status and will issue a registration certificate for immovable property reflecting ownership.

Changes to Mongolian Central Bank Guarantee Independent Operation

Finishing our series (part one here, part two here) reporting on changes to the operations of the Mongolian Central Bank we present here the new provisions which will work to solidify and encode in the law the bank’s operations as an independent entity, not directly under the control of the executive branch of the government.

Independence of the Central bank from Government.

The amendments explicitly provide for the independence of the Central bank from the government. It is clear that the government should not provide any direction to the Central Bank regarding the agreements and transactions the bank enters into or in any other matter unless explicitly provided for in the law. The Central Bank of Mongolia should not directly or indirectly grant credit to the Government of Mongolia and may only purchase long and short-term securities of the Government from primary or secondary market except where explicitly provided for in the law.

Granting Credit to the Government

Under the new law, the Central bank of Mongolia may grant temporary credit or buy a short- term Government Bond in order to meet seasonal liquidity needs of the government, subject to repayment before the end of the financial year. If the Central Bank of Mongolia bought bond/securities issued by the Government, it will be added to the credit balance of the Government. In the frame of open market operation, the long -term securities of Government purchased by the Central Bank of Mongolia contingent upon repayment in short terms will not be included in the total amount of the balance of temporary credits.

Supervision of Bank Activities

The Central Bank of Mongolia will have authority to establish procedures, regulations and instructions, and make decisions, and carry out supervision and enforcement activities relating to the licensing to establish banks and operating activities of banks. This includes matters relating to the maintenance of adequate paid in capital and liquidity of bank assets, improving the security of the banking system, and regulation of banking activities for the purpose of protecting the interests of depositors and customers.

New amendment also updated the range of Central Bank’s activities.

In order to implement its objectives, the Central Bank of Mongolia will conduct the following activities:

  • issuing and regulating currencies into transaction;
  • formulation and implementation of monetary policy;
  • acting as the Government’s fiscal intermediary;
  • supervision of banking and entities specified in the law activities;
  • organizing, reconciling and supervising of local/national payments and settlements system;
  • holding and management of the State’s reserves of foreign currencies;
  • protecting right and interest of customer, depositor;
  • implement balanced/proper macro policy.

Changes to Mongolia Central Bank Managment

New Amendments to the Law of Mongolia on Central Bank

In our previous post, we introduced changes to the law on the governance of the Mongolia Central Bank. In this post, we will take a closer look at the most important changes.

Monetary Policy Committee

According to the new amendments to the Law of Mongolia on Central Bank, major changes are coming for the management committees’ roles. For instance, the Monetary Policy Committee will consist of 7 members including 4 adjunct members, and members will be appointed in terms of 6 years. Monetary Policy Committee will discuss and decide following matters: a) a draft of state monetary policy; b) determine interest of instrument of monetary policy; c) determine required reserves amount of bank, requirement of proper balance of percentage and amount. Form/ Formula of Monetary policy committee’s activity will be meeting.

The Monetary Policy Committee will decide matters via a majority vote of members participating in the meeting and the chairman will make a final decision in case of a tie. The meeting of the monetary policy committee will be held no less than 4 times a year. If President of Central bank of Mongolia or not less than 3 members of committee proposed to hold a meeting, special meeting will be conducted. Monetary policy committee’s decision will be issued by resolution type/form/format and certified by the signature of the chairman of meeting.

Monetary Policy Instrument

The Central Bank of Mongolia will use the following instruments to implement the state monetary policy.

1) Setting of the amount and proportion of compulsory reserves to be maintained by banks;

2) Grant a credit to the banks and use financial instruments;

3) pursuing a unified policy on interest rate;

4) conducting open market operations;

5) imposing a ceiling on credit outstanding to be granted by banks.

The Central bank will develop/draft the procedure for the determination, assessment, supervision of the required compulsory reserves of banks.

Supervision Committee of Bank:

Supervision Committee of Bank will discuss and issue recommendations on the following matters regarding to implement power of Central Bank to supervise on the banks.

  • To implement to supervise banks, regulate bank’s activity pursuant to the law, a draft of resolution, methodology, procedure, guidance, rule in connection with enforcement measure to the bank;
  • Report on the supervision of the banks;
  • Proposal to grant credit to the bank, Corporation of Savings Insurance in order to stabilize banking and financial system under the law.

The composition and rule of Supervision committee of Bank will be approved by the President of Central Bank of Mongolia.

Parliament Confirms Changes for Central Bank of Mongolia

The Parliament of Mongolia has approved amendments to the law governing the Central bank of Mongolia. The changes will effect the legal status of the bank and its independence. The Bank’s decision making process has been adjusted based on the standards, practices and principles implemented by central banks in other countries so the operations of the Central bank of Mongolia will comport with the international standard. The amendments will enter into force from the April 1, 2018.

One big change coming is that the bank’s involvement and influence with matters such as the state budget will be circumscribed, making the bank more independent from the Government. At the same time, there will be a mechanism in place to ensure clear lines of communication between the government and the bank.

This amendment will contribute to the increase of independence of the Central Bank, proper development of monetary policy, improvement of implementation of legal circumstance, promotion of further price stability at the macroeconomic level and will help to provide greater financial stability, and to maintain and promote long term economic stability for the slowly growing Mongolian economy

Most of world’s Central banks are responsible for balancing inflation and price level, and such responsibilities are clearly provided for in relevant laws. However, the Mongolian Central bank’s mission had been to balance and stabilizing the National currency. The new amendments help to more clearly define the Central Bank’s goal. The amendment defines the Central bank’s objective as the “Price Stability”, this objective and goals is meeting and complying with international level and standard.

This is undoubtedly a positive development for the Mongolian economy. We will keep you updated and will have a more detailed discussion regarding the exact nature of the new amendments in an upcoming blog.

Mongolia Minerals Exploration License: Review and Revocation

In our previous post, we introduced Mongolia’s new tender process for obtaining a license for minerals exploration activities. Here, we will briefly discuss the procedures and requirements on review of an application for the exploration license. 

Application Review

After receiving applications for a license to explore for minerals in a particular plot, the State Administrative Agency of Mongolia will evaluate each technical proposal and fee proposal submitted by the interested parties on a scale, and will notify the candidate who obtained the highest scoring evaluation that it is eligible to receive the exploration license. If two or more applicants obtained equal or similar evaluation scores, the applicant which first submitted the application is first eligible to be issued the exploration license. If an applicant submitted incomplete documents or a review of the technical aspects of the documentation reveals that the application does not meet the requirements to be eligible for the exploration license, the State Administrative Agency will notify the applicants in writing regarding their exclusion from the remainder of the tender process, and will provide and explanation along with returning the application documentation to the applicant.

The selected candidates are required to pay an initial annual exploration license fee within 10 days after receiving notice of eligibility. If the candidate fails to pay this fee, it will be deemed to be a ground to revoke the license. After payment of the initial fee, the State Administrative Agency will issue an Exploration License valid for a three (3) year period. When the Exploration License is issued, the Ministry of Environment, the local province, district, city’s governor, and local Inspection Agency with jurisdiction over the target plot will each be notified directly, and the aware of the exploration license will be published in public media.

Revocation of a License

There are several potential issues which may result in revocation of an issued minerals exploration license. Breach of rules and standard procedures for exploration will result in revocation, and the holder will be required to transfer the license back to the State Administrative Agency. Failure to pay required corporate income taxes, to duly report to the tax office and to report relevant information to the tax office will also result in revocation of the license. The Exploration License will be revoked in the event that the license holder does not report such status to the Mongolia Legal Entity Registration Office (LERO), along with relevant details about its corporate structure and holdings, or where changes to the license holders corporate governance and information is not reported within 10 days to the Tax Office.

Mongolia Implements New Tender Process to Obtain Mining Licenses

Companies in or considering getting into the Mongolian mining industry need to be aware of new changes in procedures for obtaining a license for minerals exploration. The new changes are geared toward making it easier to apply for and register a minerals exploration license, which will hopefully facilitate interest in continued minerals exploration in the Mongolian steppe.

The amendment of the Law on Minerals regulating the issuing of new mining licenses, was adopted by the Mongolian Parliament on 10 November 2017. Under the law, new mining and exploration licenses will be granted through a new tender process starting this year. Prior to the amendment, mining licenses were obtained through applications and tender bids.

Area Selection

The minerals exploration process will start with a determination by the State Administrative Agency as to the target plot of land to be explored. After identifying a candidate area for exploration, the State Administrative Agency will notify the provincial governor and local municipality, and provide a detailed outline and map of the proposed exploration.

The governor and local municipality will have 45 days to provide a response to the State Administrative Agency giving local opinion as to the planned exploration in the target area. A meeting of citizen representatives should be held to determine local attitudes. If there is no official reply within the 45-day period the proposed exploration is considered accepted by the locality.

After a target area has been approved for minerals exploration, the State Administrative Agency will announce a selection process inviting potential exploration companies to submit application documents to be considered to management the exploration. The invitation period will last 30 days and include publication through public media and newspapers. In the event that an area targeted for exploration receives no applicants to conduct the exploration, the State Administrative Agency will leave the area open and conduct further announcements going forward.   

Selection Process

With the new Changes, licenses for minerals exploration will be issued through a special selection and bidding process. Interested companies are required to submit a request to be considered to participate in the selection process to the State Administrative Agency. The application must include documentation regarding the applicant’s technical proposal or project outline documentation. The required documentation will include information regarding personnel requirements, techniques and technology, and the nature of the planned exploration work.  The State Administrative Agency will register the request and give a receipt to the applicant while the request is considered.

Our next post will look at procedures for review of submitted applications and revocation of issued licenses.

Major New Mongolia Wind Energy Project Secures Funding

An international conglomerate has now closed a deal on financing to construct and manage a new 55 MW wind energy facility in Mongolia.

Located in Dornogobi province, the project will be Mongolia’s third and eventually its largest ever wind energy park. Turbines to power the park of 25 V110-2.0 MW turbines in 2.2 MW power-optimized mode, will be supplied by Danish company Vestas. European Investment Bank and the European Bank for Reconstruction and Development provide financing.

Traditionally Mongolia’s energy industry has been dominated by coal. Now, Mongolia’s wide open spaces and abundant wind allow for greater reliance on wind energy.

The new wind energy project will help Mongolia meet its energy needs resulting from higher demand, increased industrialization and urbanization trends.

Political Unrest in Mongolia Threatens IMF Review of Funding

The Executive Board of the International Monetary Fund (IMF) on May 24, 2017 approved a three-year extended arrangement under Extended Fund Facility (EFF) for Mongolia to support the country’s economic reform program. Other financing partners, including the Asian Development Bank, the World Bank, Japan, and Korea, have also committed to provide budgetary and project support, and the People’s Bank of China has agreed to extend its swap line with the Bank of Mongolia. In sum, the total financing package amounts to about $5.5 billion. The Board’s approval of the arrangement enabled the immediate disbursement of about $38.6 million. Addition of these funds to reserve currency of Bank of Mongolia had positive impact on the country’s economy and improves outlook for foreign investment.

Prior to each quarterly disbursement, IMF staff monitors and reviews if the country’s progress in meeting the conditions under the program justifies the continuation of disbursement. By this standard IMF staff team visited Ulaanbaatar from July 19 to August 2, 2017 to conduct discussions on the first review of the EFF arrangement. At the end of the visit the IMF staff team concluded that performance under the program has been good, with all quantitative targets on track. According to Bank of Mongolia’s report, the IMF staff’s positive conclusion enabled subsequent funding from above mentioned financing partners within the EFF arrangement. The IMF staff conclusion is subject to review by the management and Executive Board of the IMF. The Board is expected to consider the first review in late September, and this could lead to a disbursement of about $37.82 million.

In the midst of this positive news, Mongolian politics remains unwieldy. On August 23, 2017 thirty members of Mongolian People’s Party (MPP) group in the parliament signed and submitted a petition to dismiss the Prime Minister J.Erdenebat, and consequently, the Government. This is likely to cause some level of political destabilization. History of some countries (e.g. Argentina, Greece) shows that political destabilization may cause IMF to suspend or even cancel its financial aid altogether. Though we have high hopes that these political issues will not escalate to that point in Mongolia.

It is critical that this happens not long after the stir occurred during the Presidential election, in connection with payout of children’s money by the Government. The IMF staff team disapproved such action by the Government. Therefore the Government committed itself to target the Children’s Money Program to less affluent families, which partially led to overall positive preliminary findings of the IMF staff team. Thus any kind of political destabilization may not only affect the further implementation of EFF arrangement, as well as country’s further economic well-being.

According to the Constitution of Mongolia, the petition to dismiss Prime Minister should be discussed and resolved by the parliament within 15 days. We will keep you informed here of the outcome, and potential consequences.