Mongolia

Extractive Industry Project Developments

IFI investment in Mongolia’s extractive sector has focused on large companies and immediate export, rather than developing the country’s capacity to process and add value to its resources. Illegal exports to China and South Korea also remain problematic. Recent exploration has made Mongolia’s mining sector even more important. The two largest sites, Oyu Tolgoi (copper and gold) and Tavan Tolgoi (coal), could bring in $5 billion in foreign investment, or roughly half of the country’s GDP in 2012. NGOs have raised concerns over the transparency and management of these deals. Mongolia is also seeking to develop its uranium mining capabilities with Russian assistance, but it is unlikely the IFIs would become involved with uranium projects.

In February 2013, both the EBRD and the IFC approved $1 billion in loans ($400 million each from their own accounts) to support the $12 billion Oyu Tolgoi (OT) project in the South Gobi, which makes it the single largest investment either IFI has made to Mongolia. In 2011, the World Bank also approved a $25 million technical assistance project called the Mining Infrastructure Investment Support (MINIS) project. CSOs such as Rivers Without Boundaries are concerned about two of the subproject feasibility studies the Bank is financing. The two projects – the Shuren Hydropower Plant and the Orkhon-Gobi River diversion – are anticipated to negatively impact Lake Baikal in Russia, which is fed by the rivers the projects are located on, among other concerns.

The EBRD in particular has invested in a number of extractive industry projects besides Oyu Tolgoi, ranging in investments as little as $10 million in equity in Altan Gold to finance their exploratory operations to investing $245 million in loans and equity to the three companies who operate the Ukhaa Khudag coal mine (part of the Tavan Tolgoi complex) and $350 million to fund the development of the Tsagaan Suvarga copper mine by the Mongolyn Alt Corporation. Both Ukhaa Khudag and Tsagaan Suvarga are located in the Southern Gobi.

Extractive Industry Transparency Issues

In the past, BIC and other civil society organizations advocated for payments made by mining companies to the government be transparent and published. The Mongolian Government’s commitment to the Extractive Industries Transparency Initiative (EITI) in December 2005 was a step in the right direction, but the IFIs can do more to require that projects be transparent. A National Council and Multi-stakeholder Working Group, both established in 2006, monitor the EITI process, but civil society complained of inadequate representation. The NGO Coalition for Transparency in the Extractive Industries was formed in 2006. Mongolia has been EITI Compliant since October 2010. The country’s latest reports can be found on Mongolia’s EITI webpage.

The IFIs have shown their eagerness to support Mongolia’s EITI initiatives through a number of grants and technical assistance projects. The World Bank, for instance, has approved three grants totaling $830 thousand to facilitate and deepen the implementation of EITI in Mongolia both prior to and following compliance in 2010. Both the ADB and the World Bank have also approved projects intended to strengthen the government’s capacity to manage mining revenues, state equity, and the regulatory framework. This includes two development policy loans (DPLs) from the World Bank totaling $69.7 million and a technical assistance grant from the ADB totaling $150 thousand.

Civil Society Analysis

A Golden Opportunity? – Unpacking the Relationship between Mongolia and the World Bank, June 2012
Spirited Away: Mongolia’s Mining Boom and the People That Development Left Behind, January 2012

Official Documents

Memorandum of Understanding between Mongolia and the World Bank Group, EBRD, and ADB, 30 Apr 2007
A Review of Environmental and Social Impacts in the Mining Sector, World Bank, May 2006
Terms of Reference of the Mongolia EITI Council, National Council, 2006
Mongolia EITI Reconciliation Reports, Mongolia EITI Secretariat website

Useful Websites

Natural Resource Governance Institute (formerly RWI), Mongolia country page
EITI, Mongolia country page
World Bank, Mongolia country page
International Finance Corporation, Mongolia country page
Asian Development Bank, Mongolia country page
European Bank for Reconstruction and Development, Mongolia country page

For other regional contacts, please see BIC’s ECA Program page.