Dr. Graeme Hancock, senior mining specialist for the World Bank’s Oil, Gas and Mining Policy Division: Mongolian banks are potential
Dr. Graeme Hancock, senior mining specialist for the World Bank’s Oil, Gas and Mining Policy Division has his opinion towards the Mongolian economy and mining.
Q: Can you share the goal of Discover Mongolia Forum and its result?
Dr. Graeme Hancock: Forum set forth many targets. The main issue was the investors to summon in Mongolia and exchange their experiences and comment on the expecting mineral law of Mongolia. As the result, they get to know about drafting the mineral law progress and found out that the investment agreement achievements.
Q: How would you evaluate the Mongolian mining sector?
Dr. Graeme Hancock: We see copper price fall recently. There are several unclear things in the Mongolian mining sector. But they will be much clear with the expecting Mineral Law of Mongolia. As for today, it is important to reach common understanding on cooperation with the Government of Mongolia. I think it is closer now. It is hard to evaluate right at the moment.
Q: Do windfall tax and 51% ownership anywhere else in the world?
Dr. Graeme Hancock: Generally, if observe the other countries of the world, there are some occasions Government owns up to 30%. But Mongolia talks about 50% ownership, and it is very rare in the world. It is almost impossible in the market economy. It will also bring crisis and risk. Because, windfall tax of 68% will decrease the gold and copper production. It also pushes foreign investment and calls risks itself. Windfall tax could bring sudden increase of budget income, but it was short term income. If we look beyond, no investment made in gold and copper production since the tax levied.
Q: Does the Mongolian Government listen to your voice?
Dr. Graeme Hancock: We advise for Mongolia based on the real situation, according to the other countries model. We work closely with the Government. But it doesn’t mean that the Government shall follow our words or direction. Decision making is its own right.
Q: Does the Government accept your advice?
Dr. Graeme Hancock: It is hard to say eys. Sometimes it follows our advise and sometimes it acts in opposite way.
Q: Cooperation between World Bank and Government of Mongolia is not transparent. Some economists say that the Government of Mongolia follows World Bank advice and make mistake.
Dr. Graeme Hancock: I don’t agree with tehm. Because World Bank has huge experience in many countries of the world. We hire experienced professionals with high profile. Perhaps, it has long visionary policy; therefore it might look not effective for today. That was the crisis about, I guess.
Q: How would you evaluate the Mongolian economy?
Dr. Graeme Hancock: It is not that bad as for today. Because world crisis is strong, but it has less influence in Mongolia. According to our point of view, the Mongolian economy, especially its banking sector is strong. Of course the copper price fall is affecting the economy, but not that seriously. But there is a risk. If the Government is reluctant in encouraging investment, it will face risk. Because if the investment withdraws, the economy condition will deteriorate further.
Q: Negative hearsay about our banks?
Dr. Graeme Hancock: As I said you before, the Mongolian banks are strong and healthy. Because, loan of these banks is pure savings of their customers. It means Mongolia is independent from external factors and foreign monetary policy. But it is not my question to answer. World Bank works closely with other banks of the world. It is the conclusion of our experts working in those banks. Construction works are being stopped. It is important to calculate what if they can’t complete their construction and payback the loan. Basically, it has to be bit more cautious.
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