Tag Archives: Development

Draft Law Seeks to Define Liabilities for Mongolian Government Officials

A new draft law has been submitted to the Mongolian parliament. Named the Law on Imposing Liability on Selected and Appointed High Ranking Government Officials, the proposed law seeks to define liability for certain high ranking government officials. The draft will first be reviewed and discussed by Parliament before a vote. We are very excited at the current draft and our Mongolian lawyers consider the proposed law, if adopted, to be hugely important to Mongolian public policy and society. The need for the law stems from a feeling among many in the Mongolian public that politicians in the country often to act “Above the Law.” The effects of this official lawlessness are seen and felt by the public through displays of misbehavior and misconduct. In the past, there has not been adequate legislation to clearly identify inappropriate actions by public officials, and impose liability. The new draft is an important attempt to remedy this through new legislation.

To give readers a better idea of the problems facing Mongolia and the provisions in the law which will address these issues, the following are several weak points, or grey areas which the draft law will address.

The disciplinary sanctions set forth in the current Law on Public Service address only the executive branch government hierarchy, while not mentioning Members of Parliament, or those officers directly appointed by and responsible to the Parliament (the Legislative Branch and auxiliaries). Legal grounds for imposing liability on politicians within (the Legislative Branch and auxiliaries) have been absent or unclear at best. However, even grounds for imposing liabilities to the politicians within the government hierarchy carries uncertainty.

While each of the Law on Public Service, the Law on Anti-Corruption, and the Law on Regulation of Public and Private Interests and Prevention of Conflict of Interest in Public Service outline legal grounds to impose liability on officials, these each function as separate stand alone laws without a unified or common approach.  For example, liability under the Law on Public Service only targets administrative, executive, and public service professionals, and specified public officials. Political officers are not included.

Because of these limitations there is no clear body of law to assist in establishing or imposing liability on high ranking “selected” and “appointed” (as opposed to Elected) government officials. Currently, wrongdoing by such officials may only be determined on a case by case basis through a decision of a court, which does not allow for regular and effective enforcement.

In practice there is no regulation providing for the recall of elected officials such as Members of Parliament. The President, the Parliament Speaker, and Members of Parliament may be dismissed or recalled, only where the Constitutional Court of Mongolian issues a ruling that that they have violated the Constitution of Mongolia and must be removed. This is exceptionally difficult as there is no clear standard for establishing such violations in the legal system.

Under current legislation, political liability and means to impose it has not been addressed. Such liability will increase overall levels of responsibility for public officials who may be forced to resign, face recall, or be restricted from nominations for future public office in the event clear guidelines of liability are established. By establishing real legal consequences, the draft law is expected to help promote a culture of greater responsibility for public officials, bringing greater prestige and international respect to Mongolia’s political institutions and public officers.

Political liability is intended to increase the level of responsibility for individual officers by setting clear provisions and requires for resignations, dismissals, recalls and restrictions on rights to be nominated as candidate for specific period for the elected and appointed high ranking officials. In this way the new draft law seeks to establish a culture of self-responsibility and accountability for politicians as an integral part of public service regulation in the well-developed democracy in other countries. To this end the draft law will help to established procedures and a foundation for imposing liability on politicians within (the Legislative Branch and auxiliaries).

By doing so it is hoped that government influence and interference in public society and operations of private companies will be greatly reduced or eliminated.  Come back for our next post which will have an overview of some important provisions in the new draft law.

Mongolian Government Introduces Positive Amendments to 2017 Budget

Mongolia Minister of Finance B. Choijilsuren presented to the Speaker of Parliament M. Enkhbold a set of planned amendments to the 2017 state budget. These amendments have been designed to better ensure the government’s ability to meet its obligations under the International Monetary Fund’s extended fund facility program from which the government will receive substantial loans.

The amendments are intended to stabilize the national budget and the fiscal outlook financial environment, by reductions in budget deficits, and imposing discipline.

The primary changes in the new budget include:

  1. Increasing taxes on alcoholic beverages and imposing tariffs on imported cigarettes;
  2. Increasing taxes on gasoline and diesel fuel;
  3. Increasing taxes on imported vehicles, in accordance with engine capacity;
  4. Dividing personal income taxes into three brackets and increasing personal income tax for people with higher incomes;
  5. Charging a ten percent tax on interest earned from savings accounts;
  6. Raising social insurance fees;

Of these, the biggest and the one that caught the attention of our China lawyers is the changes proposed for the personal income tax. The exact income levels which will be cut off points between the three tax tiers is not yet known, however it is likely that many expatriate employees in Mongolia may be affected by higher taxes on their income.

In addition to the above, the amended budget will impose several new measures intended to reduce the government’s overall operational sending levels and bring expenditures in line with government revenues.

  1. Increase the efficiency of tenders being carried out in the medical sector;
  2. Raise the retirement age every two years;
  3. Promote the Meat and Milk Campaign to develop Mongolian meat and dairy industry;
  4. Provide the state’s monthly welfare allowance of 20,000 MNT for children and other state assistance only to targeted groups;
  5. Repeal existing laws that put pressure on the state budget.

The government will aim to limit deficit spending to 10.6% of overall GDP, with revenue expected to be 23.1 percent of GDP, and overall spending to be 33.7% of GDP.

Of the above measures, LehmanLaw Mongolia is pleased to see efforts to promote the Mongolia meat and dairy industry included. Mongolia’s large expanse of green pasture land, clean water and fresh air should provide excellent opportunities for entrepreneurs and foreign investors seeking to establish meat and dairy production operations in the country. Exports of such products to China should find a willing market, as Chinese meat and dairy consumption is expected to continue rising trends.

The other good news is the general commitment to eliminate old laws that cause unnecessary financial strain on the government. This review process is necessary and is expected to help the government identify new areas where spending can be reduced by smart changes to the law. This is the kind of reform needed to stabilize the Mongolian economy and prepare for long term growth.

Human Rights Development in Mongolia

Mongolia Foreign Affairs Minister Ts.Munkh-Orgil recently spoke at the United Nations Human Rights Council where he presented the current human rights policies and measures undertaken by the Government of Mongolia.

Human rights are essential values enshrined in the Constitution of Mongolia, which was one of the original countries to implement the Millennium Development Goal Number 9 as a national plan to improve human rights and promote democratic government.

The Mongolian government’s 2016-2020 action plan places a great priority on continued legal reforms based on the preservation of human rights. Mongolia is working toward elimination of the death penalty, and amending the criminal law and other laws to protect the rights of children and the elderly, as well to protect against domestic violence; combat human trafficking; enhance the transparency, accountability, and independence of the judiciary; and fight corruption in the public sector.

Mongolia’s commitment to democracy and fairness is a major positive point for many foreign businesses and NGOs operating in Mongolia. As the first international law firm established in the country, LehmanLaw Mongolia is excited to see continued progress and development in this area among many others in Mongolian law and society.

United Nations Development Program in Mongolia

Assistant Secretary General of the United Nations and Director of the Regional Bureau for Asia and Pacific at the United Nations Development Programme (UNDP) Haoliang Xu, is meeting with Mongolian officials to review and discuss the United Nations Development Assistance Framework, a plan for the continued development of Mongolia in years 2017 through 2021.

Mongolia’s cooperation with the UN Agency is intended to assist in the development of new renewalble energy sources in Mongolia and improving Mongolia’s capacity to implement legal and regulatory reform in areas important to preventing and responding to environmental risks. Also priorities are general economic development, and implementation of international principles of rule of law.

The UN Agency is also expected to work with Mongolia in cultivating new ideas and programs for the reduction of air pollution in Ulaabaatar, which has become a problem in recent years, particularly winter. Initiatives to promote the private sector in Mongolia will also be discussed.

Continued cooperation between Mongolia and international organizations such as Mongolia are expected to bring long term benefits as Mongolia navigates trends of increasing urbanization and seeks modernization and development in both its economy and its legal system. Continued cooperation with UN agencies helps to promote stability and prosperity in the country.

New Partnership to Improve Mongolian Construction Standards

The Mongolia Ministry of Construction and Urban Development (MCUD) signed a new MOU with the IFC for the joint development of new regulations and policies to promote environmentally friendly construction in Mongolia.

In one respect, Mongolia is one of the Most urbanized countries in Asia, with 72% of its population living in a city. However about 60% of city dwellers live in traditional tent-like gers. Many of these gers, as well as newer housing rely on stoves or coal burning to provide heating in the cold winter. This contributes to pollution and health problems.

Mandatory measures are expected to provide significant benefits in the reduction of pollution and improving public health. The partnership between MCUD and IFC is intended to promote stronger energy efficiency regulations and sustainable construction.

The Government of Mongolia aims to reduce heat losses from buildings by 20 percent by 2020 and 40 percent by 2030, compared to 2014 levels.

Mongolia Economy to Benefit from Key Stabilization Measure

The good news is that the Government of Mongolia has agreed with the International Monetary Fund on the terms of financing of USD 440,000. The total current external financing for Mongolia is USD 5.5 billion. Negotiations on the current financing agreement have been ongoing since August of last year.

The agreement is preliminary, and has to be approved by the IMF’s Executive Board; however, in most cases the Executive Board will not overturn a preliminary agreement. The agreement will also depend on the Government of Mongolia meeting a series of agreed actions, which include the ceasing of certain off the record activities of Mongol Bank, and performing a diagnostic on the Mongolia banking system.

According to experts at the IMF, Mongolia’s loose budgeting in past years is a major cause of the country’s current economic troubles and relatively high debt. As a result, the IMF is requiring the national budget to be tightened. The agreement allows for the continuance of certain social spending for low income populations.

The government will be required to implement several fiscal reform actions. A Council will be established to provide independent budget forecasts and review expenditures. The Ministry of Finance will have to approve the budgets for any proposals.

The agreement with the IMF if implemented is expected to strengthen Mongolia’s prospects for sustainable growth going forward. Finance Minister B. Choijilsuren compared the reform package to a medicine that is “Bitter,” but helps to “heal.” LehmanLaw Mongolia is excited to see the agreement as it demonstrates both the belief the IMF has in the Mongolian economy as well as the determination of the government of Mongolia to accept difficult reforms in favor of a more sustainable path toward economic growth. With this agreement reached, there has never been a better time to come to Mongolia and see what unique business opportunities may be had in this unique developing country.

Proposed New Mongolia Laws Promise Reform in 4 Key Areas

Parliament has just issued a list of draft laws to be considered during the fall session in 2017. This list includes drafts in relation to State Budget 2017 and number of completely new proposed laws. There are also several proposed amendments to existing laws that look to be very interesting going forward.

The following are the newly initiated draft laws:

  • Amendments to Constitutional law
  • Law on National System of Payment
  • Law on Development of the Ger District
  • Law on Investigating and Resolving Infringements
  • Casino law
  • Law on Mongolian Foreign Relations
  • Law on Safety of Information
  • Law on Encouraging Development of Youth
  • Law on Food Supplements for Infants and Toddlers
  • Law on Health of Livestock and Animals
  • Law on Resource of Livestock Genetics
  • Law on Enriched Food
  • Law on Responsibility of Elected or Appointed State High Officials
  • Law on Protecting Critic’s Rights

The Mongolian Lawyers at LehmanLaw Mongolia are particularly interested in the proposed Law on National System of Payment.  There is huge potential for reform and modernization in this area and we are excited and looking forward to significant changes under a new law.

We expect the proposed Law on Investigating and Resolving Infringements to be very interesting to foreign businesses seeking greater protection for Intellectual Property rights in Mongolia, including Copyright, Trademarks and Patents. We hope the new law will provide a clear system for enforcement of protected intellectual property rights in Mongolia.

Two proposed laws appear to target Mongolia’s growing agricultural sector.  Mongolia is ripe for increased foreign investment in the agricultural sector and an improved legal framework in this area will be sure to increase interest. We will monitor related developments

It also looks like there will be a proposed law regarding establishing norms of official behavior, which appears to be an effort to increase anti-corruption measures among government officials; a very positive development which we will explore more fully as details are available.

Mongolian Parliament Votes for Nationalization of Mining Company

In 2016, a private Mongolian company, Mongolian Copper Corporation (MCC), bought 49% of shares in Erdenet Mining Corporation (EMC). The shares were purchased from previous owners, the government of Russia, and Russian state-owned Rostec Corporation. Described by Rostec as, “valued at a market premium,” The purchase initially attracted public criticism as to how it was conducted.

A task force, lead by Sh. Radnaased Head of the Mongolian Parliament’s Standing Committee on Law (SCL) investigated the transaction and found that MCC had paid over USD 400 million for the stake utilizing a pattern of illegal corporate structure ss and illegal financing arrangements. The transaction violated several provisions of the Mongolian Constitution and statutory laws. The SCL made a proposal this year to transfer the 49% stake in EMC to the Mongolian Government. The Mongolian Parliament has passed a resolution endorsing this course of action.

The sale to MCC was approved by the former government, the day before new parliamentary elections were held. Some now say the allegations of illegal conduct are political fabrications designed to make nationalization of the shares easier by discrediting the original sale.

Though in this case the nationalized shares are currently owned by a private Mongolian company, foreign investors will no doubt take note. Though the current government has allowed foreign mining company Rio Tinto to continue with the Oyu Tolgoi mining expansion, and claims that Mongolia is open to foreign investment, it is clear that among parliament at least, there are substantial sentiments regarding government ownership of mining projects.

Will Mongolia Continue Economic Growth?

Mongolia may be poised for a new phase of economic growth according to Nikkei Asian Review. After an initial mining boom in 2011 and 2012, with growth reaching up to 17% of GDP in 2011, The Mongolian economy slowed. Low commodities prices led to reduced economic growth.

That may be set to change. According to the article, commodities prices increased toward the end of 2016, setting Mongolia up for a new phase of growth; if the right policies can be found to cultivate growing industries.

In addition to the Mining industry, the article gives examples of two Mongolian entrepreneurs who are producing and marketing new diabetes testing devices. The article also points to initiatives to increase renewable energy production capacity in Mongolia.

In the past, Mongolia’s windfall from mining resulted in poor planning and waste. Recent reforms by the new government have encouraged the International Monetary Fund to step in with new funding to ease Mongolia’s foreign debt burden.

If the trend of smart government continues, and at LehmanLaw Mongolia we think it will, the country is well placed for continued future growth. The key will be to diversify the economy away from reliance on the mining sector and to promote entrepreneurship and small business. The recent tax break on small business is a step in the right direction.

Prime Minister Discusses Future of Mongolian Cooperation With Eurasian Economic Commission

On February 2-3, Mongolian Prime Minister J. Erdenebat met with a representative of the Eurasian Economic Commission (EEC) for talks promoting economic cooperation between the EEC and Mongolia.

In the meeting, Mongolia indicated that it hoped to establish a Free Trade Agreement with the EEC. The EEC representative supported the PM’s proposal, suggesting a formal decision would be seen from the EEC relatively soon. As trade between Mongolia and the EEC has been stable but stagnant for several years, the EEC hopes to organize a business forum for entrepreneurs from EEC member states, and Mongolian organizations.

The Prime Minister was quick to agree and assured EEC companies there are great business opportunities in Mongolia, and made clear that the Mongolian Government is currently making efforts to improve its agricultural sector, including exports to EEC states.

The sides agreed to work to strengthen collaboration in establishing regulations and raising standards in veterinary, sanitation, and quarantine regulations and practices. There was also mutual agreement to promote joint training, and business seminars in Mongolia.

The meeting ended with an agreement on protocol for a second meeting to be held this year In November, and developing an action plan for joint working groups, which will include provisions to facilitate cooperation in transportation and infrastructure.

LehmanLaw Mongolia is pleased to learn of the government’s continued focus on developing the Mongolian economy through increasing trade and promoting the agricultural sector, as well as development of Mongolian infrastructure.