P.Ochirbat, the First President of Mongolia: Nothing Is Well-Made In the Draft Law On Mineral.

Apr 2 • Business, Economy, Government, Mining • 807 Views • No Comments on P.Ochirbat, the First President of Mongolia: Nothing Is Well-Made In the Draft Law On Mineral.

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ochirbat.jpgThe share of foreign investment in the strategic deposits will be no more than 49% in the provisions of the draft law on amending the Mineral Law of Mongolia. There are many debates and discussions around these 49 and 51 percent. What is your position towards them?

Everybody is talking nonsense. According to the Constitution of Mongolia, the natural resource is the property of the people of Mongolia and is under the protection of the State. The State has the right to own, acquire and exploit its resource. The State can transfer to the others only the right to exploit. It implements it through agreement with terms and payments. But the right to own the resource is 100% by the State. When the Constitution says so, what are the people talking about 49% and 51%? First of all, it should determine to own what exactly. It can be license ownership or certain portion of the investment or some appropriate portion of asset. Or it can be certain portion of the shares which were offered to the public in order to exploit the deposit. The term of owning is used only for these purposes.

So does the exploit mean?

The investment is required to exploit Oyu Tolgoi and Tavan Tolgoi deposits. If we had, Mongolia would invest 100% and own and exploit. The State has such a right. Unfortunately, we don’t have such fund and possibility, so the exploiting right has to transfer to the investors. Their ownership can be 100% and less. If foreign investment is 70%, 80% or 50 %, the Mongolian Government will invest the rest of the fund. It can provide its investment together with other legal bodies. This quota must not be set by the law. But the investor must sign the agreement to provide the all funds to exploit the resource and pay profit tax. If we calculate in such a way, the income from the deposit reaches 50% of the profit. To gain 50% of the total profit without bearing any risk of investment is the best option for the Mongolia. It is not that necessary for the Government to receive all the responsibility on its shoulder.

So this means that Government is wrong about acquiring the strategically important deposits?

It is nonsense when people invested and wanted to share its profit, we are stubborn to invest ourselves. Capacity of Mongolia is so poor. We shall spare that investment in mining into other sectors of economy. If we refuse from foreign investment, then we are falling into bankruptcy. Others are offering the investment in our mining sector, and then we should spare our investment to other sectors such as agriculture or accommodation. We have dozens of works and sectors that are demanding initial investment such as public transportation, energy, fresh water supply. Why we rejects those who offered investment and profit for us. If the Government has such fund then it must be spared to different sector.

The Government announced that Government will acquire Tavan Tolgoi. According to this policy, it reached an agreement with “Energy Resource” and sacked its ownership?

It is wrong when Government takes back the licenses that are prepared long ago for the exploitation and management. There are people justifying that Government is taking back its property because of their exploration cost was funded by the Government. But only 20% of the total field of Tavan Tolgoi was funded by the Government. If it recollects, then the Government entitled to take back its 20%. Actually, such act of Government sacking is very wrong. “Energy Resource” did not breach any law and regulation to lose its licenses. If Government wants to take back its license, then the Government shall pay compensation. Finally, this dispute and negotiation settled on the sharing of 96% to Government and 4% to Energy Resource. I will not comment on it. Principally, it hinders the policy to support private sector and suffocating it.

Mining sector is the key resource of the Mongolian economy in the coming 50 years. How we develop this key industry in a good way?

Mining sector provides 30% of GDP, over 70% of export of Mongolia and over 70% of industrial product. It means the Mongolian economy is based on the mining sector. It is the most risky system for the economy. The Mongolian economy cannot hold for long if the commodity price decrease drastically one day. Nothing will replace the mining sector. What if the natural resource is finished? Therefore, whole country’s economy cannot be based on one sector and other sectors must be developed immediately. Especially, we shall provide minimum 70% of the food supply domestically. It is the issue of security and health. We are saying no to the investors who wanted to invest in the mining sector even we failed to provide the investment in the agriculture sector.

What is your opinion regarding the draft law on amending the Mineral Law of Mongolia?

In one word, nothing is well-made in the draft law on Mineral. I read through the draft law. If that is true, such amendments cannot be made. It is not a law. It has many provisions that are breaching the Constitution of Mongolia. On the other hand, its provisions are contradictory to each other. Also, it is contradicting with the Complex Policy of the Development of Mongolia. There is no such a law on the earth. Generally, it is not well-done law.

We are talking about strategic deposit. It is wrong term from the economy point of view. There are strategic minerals. It can be developed into the strategic deposit based on this term. But the term of “strategic deposit” is determined much differently in 1994, 1997 and 2006 Mineral Laws and two different in the current draft law. What we shall follow from these five descriptions? It is legally prohibited to determine terms in many different ways. Our law makers are doing such unclear provisions in their law.

Even the term of “mineral” is determined in three different ways in the in the draft law. According to the previous law, the mineral licenses ownership was open to the citizens. Every Mongolian has the right to make own license, conduct exploration work and exploit the natural resource. The current drafts and previous laws changed it into legal body. Therefore, the Mongolian citizens cannot enjoy their right that was granted by the Constitution of Mongolia. In such manners, there nothing is well-done in the draft law. Such a law cannot be adopted.

The ad-hoc session of the Parliament that was announced to discuss this draft law was suspended even without discussing. Its reason looks like the break in the joint position on 51%, but it has different reasons?

According to the Law on order of Parliament, the issues for the Parliamentary session must be discussed through party council at the parliament by receiving comments of the Government after preliminary discussion by the standing committee. As for the suspension of the ad-hoc session, it was because of Parliament which breached its law. Suspension request by the Democratic Party is one thing. It cannot be justified discussing Government proposal instead of discussing the draft law.

Nobody knows whether the draft law was discussed through the standing committees. Why announcing the ad-hoc session, when nothing is ready yet? It is a part of election show. It is breaching the law with all its aspects. Parliament is breaching its law; the adopted laws are faulty and contradictory and the law making order and regulation is illegal itself. One thing is really interesting is that the issue of mineral law and mining has been postponed for three or four years and now everybody is rushing to adopt it.

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