It has been almost ten years now since the Mongolian economic growth was completely linked to the mining industry. Not only the economy, but the political situation is also depending on this sector. In political science, the term “Banana Republic” describes a country with an economy and politics both dependent upon a single industry. In the Mongolian case, this term can be rephrased as “Coal Republic”.
Mongolia is rich in coal resources. The Tavan Tolgoi, with a total estimated resource of 7.5 billion tonnes, is the largest coal site in Mongolia. Unfortunately, it is apparently destined to become the center of domestic economic and political conflicts, weapon of populist promises, and a major funding source for the political parties.
Fate Number One.
The Tavan Tolgoi deposit, which was first discovered in 1930s, has gradually been brought to operation since 1967 . Bringing Tavan Tolgoi mine into production was not an option, due to the political and economic situation in the period of socialism, however, after Mongolia’s democratic transition in 1990, the exploration began again. Total resources were estimated at 6.4 billion tonnes right away. The British BHP company gained the exploratory license in 1998, however, they relinguished the license deeming it as unprofitable, and returned it to the Mongolian government. The exploration license was then obtained by Mine Info LLC, which soon transferred it to Energy Resources LLC in 2005. After a year, the exploration licenses of Energy Resources LLC were converted into operation licenses. However, the Government of Mongolia decided to review the ownership of mines that have a massive reserves, but are owned by only one company, and in 2008 Tavan Tolgoi was brought back under the government’s control.
Fate Number Two.
Tavan Tolgoi was converted into the state-owned Erdenes-Tavantolgoi Company by the 39th decree of the State Great Khural in 2010, and decided to give 10% of its shares to citizens (536 shares per citizen), 10% to domestic companies and sell 30% in the stock exchange. The underlying rationale of this decision were the election campaign promises of the two dominant political parties’ on handing out cash under the policy names “Treasure Stock” and “Generosity of the Motherland” for every citizen during the election 2008. The two political parties later formed a coalition government and passed the 57th decree of the State Great Khural in 2011 to give 20% of the shares of Erdenes Tavantolgoi, and additional 536 shares to all citizens.
In the same year, the Government of Mongolia divided the Tavan Tolgoi mine into two parts, gave East Tsankhi block’s mining license to Chalco with the base price of a ton of coal to be set at USD 70, and took an advance payment of 350 million USD. In order to live up to their previous election promises before the next parliamentary election in 2012, the government distributed 21,000 MNT to people for free through “Human Developmend Fund”.
Fate Number Three.
The Government of Mongolia announced an open tender to attract domestic and foreign investors, since Tavan Tolgoi is huge coal deposit, which requires massive infrastructure for transport, mining, and production. In 2014, the government awarded the tender to a consortium involving Mongolia’s Energy Resources LLC, China’s Shenhua Energy and Japan’s Sumitomo, but this decision was revised after the confrontation of the former Parliament Speaker Z. Enkhbold. Unfortunately, Z. Enkhbold is indeed proud of his decision, attending the parliamentary election of 2020 with the slogan “Tavan Tolgoi was retained for you”. Furthermore, M. Enkhsaikhan, who was responsible for organizing the tender, resides in prison.
Fate Number Four.
The railway issue is another apple of discord of Tavan Tolgoi. Energy Resources LLC announced plans to launch the construction of the railway from Ukhaa Khudag to Gashuun Sukhait before the 2012 parliamentary election, which was rejected and eventually transferred to the government. This task was then given to the Mongolian Railway company in 2013, funded by Chinggis bond with a total amount of 280 million USD, but did not proceed after a mere earthwork. Arguments revolved around railway gauges (whether it should be broad or narrow), instead of asking by whom, or how it should be constructed. Although in 2014, the Mongolian government decided to build a narrow-gauge rail track, somehow the construction of broad-gauge railway is now in the process implemented by Bodi International, the company which won the “secret” tender. The current President of Mongolia, who was back then in charge of the uncompleted railway ‘earthwork’, issued a suspicious National Security paper that led to constructing the railroad of the Tavan Tolgoi-Zuun Bayan direction (total 414 km), instead of the Tavan Tolgoi-Gashuun Sukhait.
Fate Number Five.
By the 73rd decree of the Parliament in 2018, 30% of the total shares of Tavan Tolgoi were to be traded in international stock exchanges. Accordingly, the Government decree No. 296 regulated the implementation. The Minister of Mining D. Sumiyabazar held meetings with investors from the major cities of the world during which presentations were given . However, the current Prime Minister U. Khurelsukh, has contrariwise, disapproved the selling of Tavan Tolgoi stock shares this March. The Mongolian government revised the decision yet again.
In the Present
In 2019, Erdenes Tavantolgoi operation made profit for the first time since its establishment and decided to begin distribution of dividents to its 2.5 million shareholders. Although the Minister of Mining and Heavy Industry announced that the 100 thousand MNT will be distributed to each of the shareholders on May 1, one month after the promised date, still no divident was paid. Erdenes Tavantolgoi company has already transferred 60 billion MNT to Mongolian Central Securities Depository but it is obvious that the government is holding it up due to the parliamentary election. Most likely, the distribution of dividents will begin two days before the election date. Mongolian people are well aware of that politicians and their electoral campaigns are financed by the state-owned (yet de facto party-owned) companies.
Basically, Tavan Tolgoi’s “fates” have become that of the entire Mongolian society. Erdenes Tavantolgoi is so used to being played around with during every election cycle. Therefore, unless we turn Erdenes Tavantolgoi into a public company and ensure the independency of its board from the government, we will experience many more “fates” that are just waiting for us around the corner.
2020.06.03
Trans. by Riya.T and Sungerel.U