The United States has released its’ official position to the public on the Oyu Tolgoi’s project finance participation by the World Bank. It requested to be abstained from voting to participate based on “environmental policy concerns and legislative mandates”. The official position came shortly after IFC’s board approved the participation in the project.
The U.S. is the biggest shareholder of the World Bank and its’ member the IFC (International Finance Corporation). In Mongolia, the World Bank helps and advises governmental agencies to strengthen governance and institutionalization. On the other hand, IFC is strictly for profit and a commercial entity that invests in projects that will develop the economy while reducing poverty. Both of the organizations have strict rules of procedure to achieve their goals.
Therefore, in the case of OT project, the World Bank cannot advise the government to support the project financing under the recommendation and influence of IFC and MIGA (Multilateral Investment Guarantee Agency), also a World Bank member.
ESIA (Environmental and Social Impact Assessment) is a document/study that must be based on ground scientific research. Throughout last year, OT LLC tried to involve the relevant ministries to hear their advices. Unfortunately, it has been a little success. Nevertheless, OT LLC only needed to write a report that it had included the recommendations from the relevant ministries to fulfill the EBRD and IFC’s ESIA standards.
ESIA was open for public discussion for 90 days last October. It is no surprise if you had not noticed or heard about the discussion, because OT LLC kept it to the minimum level advertising only on few local papers to formally fulfill the ESIA standards required by the lenders.
OT LLC spent over USD20 million dollars to prepare the document says the personnel who is familiar with the procedure. It hired international environmental consultancy agencies such as Citrus Partners along with few local companies to finalize the document before it failed to get the U.S. vote. It is a sign that both Mongolian and U.S. government will not accept studies with gaps to go on with the project. However, OT LLC does not need an approval from the government for the lender’s ESIA. Nevertheless, it needs the government’s support.
It is a matter of time until OT LLC and its’ consultancy companies to fill the gaps in the document, but who will take the responsibility on lavish ESIA spending?