Last week, a proposal was made by the Minister of Mining D.Gankhuyag on amending the Minerals Law of Mongolia . If approved by the SGK, the amendment will resume the issuance of exploration licenses that has been prohibited by the law from 2010. Also, the “law with a long name” (Law on the Prohibition of Minerals Exploration in Water Basins and Forested Areas) enabled the government to cancel over 200 licenses. However, the Mining Minister advocated the new amendment that the areas would not be overlapped and those licenses would not be renewed. Instead, it will allow further exploration in many different areas in the country that will increase reserves and deposits that will lead to more economic benefit. The Minister believes that it will attract more investors and side businesses that follows mining industry will also boost the other sectors.
Actually, this rhetoric has been around for so many years that it stopped convincing the public nor the investors. Industry specialists know that volatility is a dagger with sharp edges on both sides. Moreover, the coal market that our latest boom has been enjoying is in the decline. Commodity prices have been falling due to global decrease in demand followed by the recession and nobody wants to expand their investment in these uncertain times. Obviously, it is an opportunity to prepare weaker law requirement for investors in an desperate attempt to attract them. However, the it will prove how unstable the country is in terms of legal environment.
The number of licenses from 2010 to 2014 have decreased from 4137 to 2868. From 2005-2010 the licenses covered 46% of the entire Mongolian territory. Now it is only 7.6%. It is a positive result in social and economic sense. Although the licensed territory has decreased, the remaining licenses drove the country to boost its GDP for the last few years. We are not going to mine half of our country out. It is absurd. Instead, we shall improve the management side of the revenues that is to be created in the future from mining activities.
When the momentum came to us, we failed to build our railways, build refining factories, implementing major projects such as power plants. A Minister that is resigning Kh.Battulga, that argued that building Chinese standard gauges would threaten the countries security has failed to build a single km railway in the north of the country. He had held up the project that has been proposed by Energy Resource Inc. to build the railway to Gashuun Sukhait-Gants Mod port with their own resources. Last month, Mongolian and Chinese companies signed deal with a Chinese company owning 49% of the railway. This is geopolitical and economic disaster and result of a misguided policy.
Opening up the licenses issuance would not boost the economy, it will worsen the social and moral achievement we had as a country. We need stable and sound policies. Not the policies that fluctuates along with commodity prices. SGK is yet to approve the amendment, however, in desperation of DP’s attempt to revive the economy, it might get approved. We will update our readers in due course.