The Mongolian Railway Dilemma (Update 2): The Government will develop special policy on railway

Feb 1 • Companies, Energy, Laws, Mining • 917 Views • 1 Comment on The Mongolian Railway Dilemma (Update 2): The Government will develop special policy on railway

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Last Friday, the General Session of the State Great Khural was held and MPs P.Altangerel, S.Byambatsogt, D.Gankhuyag, G.Zandashatar set questions on Tavan Tolgoi from the Prime Minister. Tavan Tolgoi was explored by the budget and its reserve was registered to the Mineral Wealth Council. MPs wanted to receive more detailed information on this issue. But MPs were frustrated with absence of Prime Minister and Minister for Mineral Resources and Energy.

On behalf of the Prime Minister, Mr. Ch.Khurelbaatar, Minister for Cabinet Secretariat, answered to the questions.

Brief background:

Tavan Tolgoi deposit ahs reserve of 6.42 billion tons of coal, 1.8 billion of cocking coal. The deposit was in mining operation in 1967 and mined 9.8 million tons only. Energy Resource and Tavan Tolgoi Companies are mining coal, two companies of Tavan Tolgoi area license holding companies, excluding Erdenes MGL and Daitsukui LLC. The export price is set in accordance with the average price of coal at Shaanxi Province of People’s Republic of China.

Its price average in 2008 was $153.1 per ton for cocking coal and $63.2 for brown coal. There is a calculation that budget investment into Tavan Tolgoi was 37.1 billion MNT. Erdenes MGL, a state owned company, hired “Norvest” LLC, a Canadian company, as a consultant. According to the consultancy report, two more mines can be in operation at Tavan Tolgoi and Tsanhiin field is the most valuable part of the deposit. It also named China, South Korea and Japan as the primary markets for Tavan Tolgoi products. After the brief update on information of Tavan Tolgoi, several MPs set some questions and are as follows:

MP N.Ganbyamba: Because of poor development of legal environment regulating state ownership and use, others are managing our property. License holder owns wealth under the surface. Without our consent, rightful owners, our wealth is registered and realized in the foreign capital market to raise fund?

Ch.Khurelbaatar: The Government will propose special policy on Tavan Tolgoi and present to the State Great Khural. Your comment is stated in the policy.

MP P.Altangerel: Difficult situation is approaching if we lose time in determining state policy on strategically important deposits. Exactly same situation is formed around Tavan Tolgoi issue. We are lacking policy when we are in a hurry to start operation. How much of Tavan Tolgoi is owned by public, private and state?

MP Ch.Khurelbaatar: The Government didn’t include coal issue in the main principles of privatization until 2012, because it will develop special policy on it. It requires many aspects such as world standard and geopolitics. It was owned by the private sector before the new Mineral Law of Mongolia. After the new law, its ownership is returned to the state and Energy Resource owns 4% of the deposit. It will be unfair if the Government revive talks of increasing its stake.

B.Ariunsan, Deputy Minister for Mineral Resources and Energy: Tavan Tolgoi area has 71 thousand hectare. 68 thousand hectares are owned by Erdenes MGL and remaining 3000 hectare is owned by Energy Resource and other companies.

MP D.Gannkhuyag: The state budget investment of exploring and developing Tavan Tolgoi deposit was 37 billion MNT, but foreign investors of Oyu Tolgoi claim that they spent over 400 billion MNT. Why the Mongolian exploration and development cost was so low and foreigners high? Actually, mining license shall be issued after the signing of investment agreement. But how can you explain that MRA issues before that?

Deputy Minister B.Ariunsan: Licenses are issued according to the effective laws of Mongolia. We will work on license issuance in the future.

MP N.Batbayar: Tavan Tolgoi consists of many fields. State participation must be in existence in the strategically important deposits. The deposit was explored and developed by the state budget. Therefore, state involvement must be in Energy Resources LLC, an owner of Ukhaa Khudag field. Why the law provisions are breached. Does the Government know about it, or it just ignores it?

Deputy Minister B.Ariunsan: The Government signed an agreement with Energy Resource LLC on Ukhaa Khudag area of Tavan Tolgoi deposit. As for the strategic deposits, the state involvement must be. The Government hired a consultancy company for Tavan Tolgoi. If we solve the infrastructure issues, the construction and development of Tavan Tolgoi will intensify.

MP Z.Enkhbold: It is a complex issue to develop Tavan Tolgoi deposit. It is not the issue of today to dig it and hire a Chinese driver to deliver it. Holding mining license is not a name of doing whatever owner wants to do. Even the Government can instruct these companies what type of truck of vehicle to use to deliver coal to the border. If we keep railway under the management of the state we can make up to $200 million. Former Prime Minister S.Bayar granted such profitable railway to the private sector.

Minister Ch.Khurelbaatar: The Government will develop policy on railway and present it to the State Great Khural. But it can’t manage it before the end of fall session of SGK.

MP Z.Enkhbold: Party group has position of discussing railway issue before the end of the session.

Minister Ch.Khurelbaatar: We had no policy on railway. At this time we will solve the whole issue. The main railway can be owned by the state and the transporting company can be privte. The Government will bring concrete proposal on it.

MP L.Gundalai: Why some part of Tavan Tolgoi goes to private sector? Can Government take it back to itself? Why don’t you solve the issues and mess around mineral licenses? Or you’d better divide all licenses to the people of Mongolia. Otherwise, few people are getting richer using public property. I made proposal to dismiss Minister B.Jargalsaikhan for issuing license to “Daitsuki”. But, where is the justice to grant the license when dismissing responsible Minister.

D.Batkhuyag, Head of MRA: The main reason of delay is that the issue of “Daitsuki” went to the court. The final decision hasn’t been made. Other companies received the license according to the related laws.

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One Response to The Mongolian Railway Dilemma (Update 2): The Government will develop special policy on railway

  1. Barry says:

    Strange mix of communism and capitalism.
    Can Mongolia have it both ways?

    when it comes to ralroads, why consider narrow gauge?
    Would it be compatible with other countries rail systems?
    Japan and Germany are the most advanced technology wise in the railroad industry, in the world.
    Just curious.


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