Tag Archives: Development

Mongolia Implements New Tender Process to Obtain Mining Licenses



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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



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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



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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.

Mongolia is in the Middle of a Constitutional Amendment Process



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Mongolian Constitution has been in force for the last 25 years, dating from its adoption in 1992. It has been amended once in 1999 and again in 2001. It is the fourth Constitution of Mongolia since the first was adopted in 1924. Subsequent constitutions were put into place in 1940 and in 1960.

Mongolians today pay close attention to issues connected with the recent constitutional reform. A series of public consultations for Constitutional reform have been held in the Ulaanbaatar and in local aimags.

Several recommendations have been put forward for public discussion:

  • maintaining the current balance of power between the legislature and the executive branches of government;
  • strengthening the unity of the country;
  • consolidating how local administration is structured;
  • developing a professional, independent civil service;
  • strengthening the judiciary to improve the legal structure; and
  • creating a bicameral legislature that would include the State Great Hural and the State Congress. (Mongolians Discuss Constitutional Reform, supra.)

Taking the outcome of the public consultations into consideration, a consolidated proposal will be finalized and submitted to the parliament during the upcoming autumn session this year. However, the Democratic Party disagreed with this procedure and issued a statement demanding to hold a public referendum to hear voices of the people rather than organizing public consultations taking place in limited scope.

According to the Constitution, Constitutional amendments may be initiated by the President, members of the Parliament and the Government, as well as being proposed by the Constitutional Court to the parliament. A national referendum on constitutional amendment may be held where it is supported by at least two-thirds of the legislature. An amendment to the Constitution will have the same force as the Constitution when adopted by not less than three fourths of votes of all members of the parliament.

 At the moment, the general public is encouraged to provide inputs to the proposed amendments. More information may be found at the following website:  http://forum.parliament.mn/projects/171.

Mongolia Continues Cooperation with China on Mutual Free Trade Zone



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Chinese news media is reporting that China and Mongolia are beginning a new process of conducting a feasibility study regarding development of a new Free Trade Zone (FTZ).

This comes in the contest of the second China-Mongolia Expo, held in Hohhot, the capital of China’s Inner Mongolia region. The conference will occur in late September, and will serve as a forum to discuss issues of mutual cooperation and development between China and Mongolia.

Mongolia’s trade with China in the first six months of 2017 has been USD $3.1 billion. This is a 44.2% increase year-on-year. China mainly exports gas, diesel, food, machinery and equipment to Mongolia, and imports natural resources, fur and raw materials.

Talk of the new FTZ comes after the China-Mongolia Cross-border Economic Cooperation Zone (CECZ) was announced in 2015. The CECZ is a 18 square kilometer  territory evenly divided along the China-Mongolia border. The CECZ is intended to facilitate import/export processing, logistics, warehousing, and e-commerce.

The increase in economic cooperation between China and Mongolia is a core part of the wider China-Mongolia-Russia economic corridor, which seeks to facilitate integration of Mongolia with the economies and infrastructure of China’s northern territories and Russia’s far east.

Mongolia Presidential Election Maintains Divide Between Presidency and Parliament



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The people of Mongolia have just completed the election of the President of Mongolia. Battulga Khaltmaa, of the Democratic Party, is the victor. Mr. Khaltmaa follows Ts. Elbegdorj, also of the Democratic Party in serving as President. This will continue the previous dynamic of a Democratic Party President serving concurrently with a parliament dominated by the Mongolian People’s Party (MPP).

Mr. Khaltmaa achieved his win with 50.6% of votes cast, with a voter turn-out estimated at 60%. The MPP candidate received 41.2% of the vote, while 8.2% of ballots were returned in protest with no selection, a practice expressly allowed by the Election Law of 2015.

The MPP continues to hold a supermajority in parliament. Therefore, they will retain the capability to override any potential veto by Mr. Khaltmaa of proposed legislation. Still, his presence at the top is expected to force some concessions on the part of the parliament. Mr. Khaltmaa will be primarily responsible for foreign policy, and negotiations of treaties with foreign governments.

During the campaign, Mr. Khaltmaa advocated for state involvement in the economy, and management of natural resources. He has framed his pending presidency as a necessary balance against the MPP dominated parliament. It is expected that a period of adjustment will follow the election in which the parliament and Mr. Khaltmaa learn to work together and set boundaries.

Mr. Khaltmaa is called a Nationalist by Bloomberg. His campaign has promised to increase public access to wealth from Mongolia’s large resource mining projects. He has also promised to reduce trade imbalances Mongolia has with Russia China, a task which may be easier said than done. Even so, the rhetoric has not been overly hostile to foreign investment and the election is not expected to derail Mongolia’s recent efforts to revitalize its mining boom, or efforts to diversify its economy in the agricultural sector.

Mongolia’s Economic Diversification



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Strategically located between Russia and China, Mongolia provides rare opportunities for savvy business leaders and investors to start new businesses and expand existing ones. In recent years, Mongolia has suffered economic hardship, as can be seen from the stark drop in GDP growth over the past few years.

As a consequence, the country has embraced economic evolution. Political and business leaders have been forced to seek ways to fuel the economy, not only from mining which was the backbone of Mongolia’s economy for many years, but also from other sectors such as agriculture, renewable energy and tourism. At the same time, a global wave of technology and entrepreneurship have impacted the way Mongolians think and do business, spurring bold initiatives and a reaching out to the international community.

According to the World Bank, while livestock provides subsistence, income, and wealth for nearly half of Mongolia’s population, only 7 % of exports consist of raw livestock materials and primary processed products. This is in stark contrast with statistics for the mining sector, which only employs 5% of the workforce but has produced nearly 90% of Mongolia’s exports since 2000. This imbalance has spurred the Mongolian government to initiate policies and programs that support export-oriented enterprises outside the mining sector.

However, small and medium sized enterprises, which make up more than 80 percent of registered businesses in Mongolia, lack the knowledge, skills, capital and networks to effectively develop and distribute products that can compete in international markets. Therefore, foreign talent, expertise, capital and connections and investment, are well sought after in the country.

In order to decrease the economic vulnerability and meet the needs of the majority of Mongolian society who are dependent on non-mining, agrarian sectors, Mongolian government has been obliged to diversify Mongolia’s economy. In doing so, in addition to export-oriented support policies and programs, Mongolian government has introduced various programs and policies supporting import substitution.

In addition to macro-economic motivations, a strong societal need for food security has led to the opening of a large variety of food factories. Many of them have been formed in partnership with foreign companies and experts who have the sophisticated technical skills to complement their Mongolian partners’ local knowledge.

In this country of vast territory, patriotic people and thirst for advanced technologies and international connections, savvy investors and business people will discover many opportunities.

Bank of Korea Assisting with Modernization of Mongolia’s Foreign Exchange Policy



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The Bank of Mongolia, signed a cooperation agreement on June 21, 2017 with the Bank of Korea. The agreement solidifies plans by both organizations to cooperation regarding development of a comprehensive strategy for development of the foreign exchange market in Mongolia.

The Bank of Korea has been conducting a study on Mongolia’s foreign exchange market. The results of the study are expected to have an important impact on development of foreign exchange regulations and growth of the foreign exchange market in Mongolia.

Major complaints about the current state of the foreign exchange market in Mongolia include the lack of transparency in the process and inefficient operations. The study will draw on the Bank of Korea’s past experience in managing foreign exchange issues in Korea to set out a road map for Mongolia.

The plan is expected to help stabilize the exchange rate of the Mongolian Tugrug, which will facilitate a better environment for foreign investment and domestic economic growth.

Renewable Energy Program Means New Opportunity for Mongolian Economy



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According to The World Bank, a new renewable energy project is to be launched in Mongolia, utilizing over $50 million in loans and grants from international organizations. The project is a part of the World Bank’s efforts to assist Mongolia’s long term path of sustainable development.

Playing off the government of Mongolia’s plans to produce 30% of the country’s energy via renewable sources by the year 2030, the new project will focus on providing financing for renewable energy investments in Mongolia.

Mongolia is a vast, open country with abundant solar energy and wind energy potential, waiting to be taken advantage of. One key aspect of the program is the construction of the first large scale solar power plant in Mongolia, designed to supply electricity throughout Mongolia’s western regions.

Another important aspect of the program will be the revamping and renewal of Mongolia’s electricity distribution grid, which currently operates inefficiently resulting gin losses of up to 25% of energy transferred on the network.

Sustainable development and efficient electricity distribution are key to promoting long term economic growth in Mongolia. The new funding will go toward providing new opportunities for businesses and families in Ulaanbaatar, as well as throughout the rural areas of Mongolia. The project will also provide funded needed to attract foreign companies with renewable energy technologies to Mongolia.

Mongolia’s Role in the New Silk Road



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When China held its Belt and Road Forum for International Cooperation in Beijing May 14 to 15th, China’s President Xi Jinping welcomed Mongolia’s efforts to help link the European and Asian economies.

China welcomes cooperation with Mongolia in areas of trade and investment, agriculture, industrial growth, and energy development. President Xi suggested that China Belt and Road Initiative complements Mongolia’s own Prairie Road development initiative. Cooperation is also important to promote a China, Mongolia, Russia economic corridor.

President Xi advocated for a study of establishing a Free Trade Zone on the Border wth Mongolia, and increasing economic cooperation between the countries, including cooperation on major mineral industry programs and infrastructure.

Prime Minister Erdenebat of Mongolia indicated cooperation with China is a Priority for Mongolia, and said China’s Belt and Road initiative is important for promoting development in Mongolia. According to Erdenebat, Mongolia may play an important role as a link between Europe and East Asia.

Mongolia is well placed between major powers Russia and China to serve as a conduit for economic and cultural exchange. Mongolia suffers from a lack of population compared to its large southern neighbor, however, Mongolia’s rich mineral resources mean Mongolia will be able to generate foreign interest and income for years to come. With budgetary reform in Mongolia well underway, further integration with China and Russia is one more positive development for the future of the Mongolian economy.