Tag Archives: Parliament

Mongolian Parliament Votes for Nationalization of Mining Company



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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.

Fresh Amendment to Mongolia Company Law Incoming



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A new draft law to amend to the company law was submitted to the Mongolia Parliament recently. The purpose of the proposed amendments is to improve the regulation of liability limited companies with majority state ownership. There have been problems which have occurred with corporate governance of such majority state owned companies, in areas such as shareholder and board meetings and selecting members of the Board and executive management.

The amendment aims to improve legislation concerning proposals to call regular and irregular meetings of shareholders of these companies and improve the effectiveness of the regular Board of Directors meeting so as to aid is role as decision maker and to ensure normal operations of these companies.

The draft amendment includes the regulations clarifying procedures for to the call of regular and irregular meetings of shareholders of and the effectiveness of Board of Directors meetings.

Once the draft law enacted, rights, obligations and liabilities associated with the liability limited companies dominated by state ownership shall be clear and no additional funding from state budget shall be required for enforcement of this law.  We see this as a positive step to encourage independent decision making among leadership of key state owned enterprises, which are the primary vehicles by which Mongolia facilities and draws profits from several of its major mining operations.

Mongolia Looks to Improve Agricultural Sector



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During Parliament’s recent session, issues confronting agriculture in Mongolia were discussed. Importantly, economic growth in the agricultural sector was 2.8% higher this year than in the January through October period of 2015. This is contrast to many export sectors which saw a decline.

The government of Mongolia is implementing policies to support production of agricultural products in Mongolia. In each of 2012, 2014, and 2015, Mongolia produced the highest recorded crops yields in 25 years.

The government is seeking ways to promote Mongolian livestock and agricultural products to increase competitiveness globally and to meet international standards

Policies implemented by the government include discussions with China to promote meat export to China, and the government is pursuing a policy to provide herders and farmers with soft loans.

With all this in mind, it’s looking like a very good time to make a new investment in Mongolia in the farming and animal products sectors.

New Budget means Mongolia is Open for Business



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A draft of the 2017 budget for Mongolia is approved including a budget framework and an overview of policy through 2019.  The budget projects a 9.1% deficit for 2017.

The budget expects economic growth of 3% in 2017. In the interests of maintaining a stable tax environment for companies, taxes are not expected to increase. The government aims to improve infrastructure in the mining sector, move forward in large mining projects and generate budget revenue by increasing construction and investment.

The government’s operating expenses are set to be cut by 1% over 2017.  At the same time, money has been set aside for loans and scholarships for top students, as well as funding for private and public colleges.

There are also steps included to minimize the deficit, for example, operating expenses for state organizations will be cut. Each organization will receive a cut of 10% to 100%, depending on the organizations function. Expenditures for a number of state funded programs and events will be reduced by 410 billion MNT.

Mongolian parliament has approved the reduction of the number of domestic bonds issued and will promote economic growth by taking steps to ensure proper spending of funds received from foreign loans.

These measures, to limit the deficit, to promote large mining and infrastructure projects, and investing in Mongolia’s schools and students, are all positive steps for the country at a time when the overall economy has slowed due to global economic forces. If the increase in mining and infrastructure projects proceeds as expected, Mongolia could return to double digit growth in the coming years.

Mongolian Parliament to Consider New Anti-Corruption Program



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As we posted previously, the Anti-Corruption law of Mongolia was enacted firstly in 1996 and it was renewed by the Parliament in 2006. Furthermore, Mongolia became a Party to the United Nations Convention Against Corruption (UNCAC) in 2006.

According to the legislation, the Independent Authority Against Corruption was established in 2007 in charged with functions to raise anti-corruption public awareness and education, and corruption prevention activities, and to carry out under-cover operations, inquiries and investigations in detecting corruption crimes, and to review and inspect the assets and income declarations.

The National Program on Combating Corruption was approved by the Parliament of Mongolia in 2002. This program was implemented between 2002-2010. In recent years, a new National Program for Combating Corruption and Strengthening Integrity was drafted and submitted to the previous parliament. Unfortunately, Parliament at the time rejected the new program without discussion.

The current Parliament recently created a taskforce to prepare a draft program for discussion in the Parliament. The taskforce is led by the Chair of the Legal Standing Committee Sh. Radnaased. During the Parliament Legal Standing Committee meeting, a draft resolution on the National Program on Combating Corruption and Strengthening Integrity will be discussed. We expect the program to be presented and discussed at the Parliament plenary session in the near future.

New Parliament Approves Government



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The election of Parliament was held on June 29, 2016, and 76 members of Parliament took the oath of office on July 05. One of the Parliament’s first acts was to approve the law on the Structure of the Government, which occurred July 21, and became effective immediately. The law does not present a drastic change in the structure of Government or the Ministries. The government now includes 13 ministries with 16 Ministers.

The List of Government ministries is as follows:

  1. Ministry of Environment and Tourism
  2. Ministry of Defense
  3. Ministry of Foreign Affairs
  4. Ministry of Finance
  5. Ministry of Justice and Domestic Affairs
  6. Ministry of Labor and Social Welfare
  7. Ministry of Construction and Urban Development
  8. Ministry of Education, Culture, Science and Sports
  9. Ministry of Road and Development of Transport
  10. Ministry of Mining and Heavy industries
  11. Ministry of Food, Agriculture and Light industry
  12. Ministry of Energy
  13. Ministry of Health

The basic continuity of the government is a positive sign. If there had been major changes, a period of uncertainty would have followed while the new ministries are established, and personnel are appointed, while other ministries may have been shut down entirely. The fact that this has not been the case contributes to a trend of stability which can only be beneficial for foreign investments in the country.

Parliament Looks to Offshore Accounts



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Certain members of Parliament are planning a proposal for a new Law on Offshore Accounts. This comes in the wake of disclosures in the Panama Papers of names and offshore account details of several Mongolian nationals, including high-level government officials.

Following those revelations, the Standing Committee of Parliament initiated a formal request to the IAAC (Independent Authority Against Corruption), a Mongolian agency tasked with identification and elimination of corruption. The Standing Committee assigned the agency to perform a thorough review to determine of the accuracy of the Panama Papers information, and to verify information reported within the income declarations of senior pubic officials which were revealed to maintain offshore bank accounts.

The next step will be a new Law on Offshore Accounts which as envisioned would demand politicians and government officials to accurately and self-report their foreign bank account and real estate holdings in addition to those belonging to family members. Officials would also be required to identify and explain the sources of their income.

As the law is targeting Mongolian governmental officials, impact on foreign companies and foreign citizens in Mongolia should be minimal. In any case, the additional transparency among government officials will be a welcome and important step toward reducing corruption.