The position is to grant the power to the Government to sign the investment agreement on Tavan Tolgoi and Oyu Tolgoi. MP Kh.Badamsuren, Head of the working group of drafting the amendment in the Mineral Law of Mongolia, has his view regarding the current development in mining legislation.
Q: Working group on drafting the amendment in the Mineral Law of Mongolia worked on it for quite long time. What is the result of your group’s work?
MP Kh.Badamsuren: According to the resolution of the Speaker of the State Great Khural, a working group was established and started its work. The working group is paying much attention on drafting the amendment. All in all, the working group presented its first draft to the party groups of the parliament. Basically, party groups principally supported it. But there were many comments during the discussion from MPs. Therefore, the working group will discuss these comments and insert them into the draft law. One thing need to emphasize here is MPs have visionary approach.
Q: Can you give us more details regarding the first draft?
MP Kh.Badamsuren: It has been two years since the realization of the strategically important deposits. Especially, Oyu Tolgoi and Tavan Tolgoi deposits are the main highlight of the topics between Mongolians. About four or five years ago, we had chance to start building construction on these projects. Therefore, we lost so many chances and opportunities. We should agree o it in the top and bottom level. We don’t have much time to lose again, especially in this situation of crisis. Once the situation is like this, we should start building agreement on the strategically important deposits based on what we have today.
Q: But, only agreement will not solve the issue?
MP Kh.Badamsuren: The agreement unlocks the opportunity to start upon. Everybody will agree that mining is the main sector in the Mongolian economy. We should stabilize the legal environment of this sector. It is no good to change the legislation constantly. On the other hand, when we talk about mining industry, we are always so blinded with only few projects so called “strategically important”. But there are over 1000 deposits in Mongolia. We can’t mess up our legislation for mining industry to regulate few “world class” deposits. We are talking about so much general things. Actually we should go into detailed issues. Time will not wait for us. Also public has long awaited expectation. Foreign and domestic investors are under the uncertain situation. Therefore, when we are drafting amendment, we are considering comments and ideas of civil movement representatives, economists and scholars. The previous parliament established a working group and made some steps forward, but it was way too influenced by the pre-election emotion. On the other hand, world mineral trend turned 180 degrees. Therefore, we don’t want to amend law for two or one year.
We are preparing the draft that is visionary, providing development and growth, based on the close consideration of the proposed ideas and comments. But when we are working on the amendment seriously, we should not omit the issues of Oyu Tolgoi and Tavan Tolgoi. Therefore, at the first round, the Government will receive the right and power to start negotiation on investment agreement of Oyu Tolgoi and Tavan Tolgoi. Their issues were rejected from the State Great Khural previously. Therefore, the parliamentary groups agreed upon granting the power of building agreement on Oyu Tolgoi and Tavan Tolgoi. It can bring draft law if necessary.
Q: I have a question from you as the Head of the working group. The political parties offered one million and one and half million MNT as the election promise. But they say that it can be provided only after realizing the strategically important deposits. Can it be real before the end of this parliament term?
MP Kh.Badamsuren: Once it was promised, it should be fulfilled. Therefore, in order to reach their promises, main parties established coalition government. 3.5 billion US$ is required to reach this promise. It is huge amount of money. The main source of this money is the income from the mining projects. But today, these projects have no income at the moment. I am quite frustrated about it. We should accelerate the procedure to realize these projects. To build factory takes at least three years. Therefore, it might be seen that there is no chance of giving this money, but we should think about it and to work on it to reach the promises. For example, we can build agreement with provision of pre-payment of tax, fee and payments from these projects. It also inserted in the Action Plan of the Government. 6 deposits of 15 strategically important deposits are under operation. Remaining 9 must be taken into the consideration according to their characteristics and category.
Q: The issue of funding the strategically important deposits is cloudy. Isn’t it?
MP Kh.Badamsuren: The State Great Khural shall provide legislation for this issue. As I said you earlier, there are 15 strategic deposits. 6 of them is under operation. The remaining 9 deposits must be taken into the consideration according to their category. For example, if the issue of Oyu Tolgoi is solved, then Tsagaan Suvarga can be solved. If it will be decided as the development of South Gobi region, then Tavan Tolgoi issue can be finalized. If Tavan Tolgoi is solved, then it can bring solution to Tumurtei iron ore deposit. Before, we had view of producing ore enrichment and export, but now we have view of solving the issue in systemic way to provide complex solution.
We have been talking about over 30 years to refine and produce final product from ore enrichment of Erdenet Mine. It is time now. But the situation is getting worse for solid mine and geological condition. 25 tons of copper is produced from 100 tons of ore and remaining 75 tons are just soil. Being as an expert in this issue, I think that we could have solved this issue in the last 4 years. Miners, experts and professional who are working at Erdenet, shall agree with me. Also, once some commodity price is falling, but we can start with coal projects.
Q: Some criticize that the ownership of 51%-49% is unacceptable for the foreign investors. They say that it must be decreased, what is your point of view?
MP Kh.Badamsuren: According to the effective law of Mongolia, if the exploration is made by the budget money or by the Government, state ownership can be increased up to 50%. But if the private investment made in exploration work, the state ownership can reach 34%. When the commodity price was high, we were so mean with this provision and lost so much time. If the state ownership is high, then Mongolia will bear that much responsibility and risk. Also it must provide investment from its side according to ratio of its ownership. Of course, Oyu Tolgoi and Tavan Tolgoi are huge projects so we have to listen to the other side. But the income must be over 50% in Mongolia. Moreover, I think it is better to consider not the Mongolian State ownership but the Mongolian side ownership. The law of 2006 has exact provision regarding it: … world class project issue must be solved according to the interest of the Mongolian State, people and national interest… But if we be stubborn enough, then we will lose our partners.
This issue is still in pending situation. The main thing is that we learned many lessons from the past if major political parties or individuals are reluctant with their participation just because of not inserting their comments or ideas.