Mongolia's Prime Minister Defends Mining Law Changes Amid Investor Concerns

Mongolia's Prime Minister, Oyun Erdene Luvsannamsrai, has robustly defended recent amendments to the country's mining laws, which aim to redistribute financial gains from the mining sector and combat corruption. The changes have sparked concerns among foreign investors regarding their potential impact on investments in Mongolia's critical mineral reserves.

A key component of the legislative overhaul is the establishment of a Sovereign Wealth Fund, designed to ensure a more equitable distribution of mining revenue among the Mongolian population. This fund is inspired by the Norwegian model and aims to align its structure and governance with Norway's by 2030. The fund's estimated value could reach $2.9 billion by that time, significantly contributing to Mongolia's long-term development plan.

Prime Minister Luvsannamsrai emphasized that the fund aims to tackle the concentration of wealth and reduce the influence of the 'hidden shadow economy.' He stated, 'The establishment of the Sovereign Wealth Fund demonstrates the government's commitment in action to tackling the power of oligarchs who have for too long taken money away from the Mongolian people through corruption and other illegal activities present in the mining sector.'

Why this matters: Mongolia's mining sector reforms have significant implications for the country's economic development and its ability to attract foreign investment. The success of these reforms could have a ripple effect on other countries seeking to balance economic growth with social welfare and transparency.

The amended Law on Minerals now limits ownership of a legal entity holding a special license for a strategic mineral deposit to a maximum of 34% share. However, exceptions are made for investment agreements, including the Oyu Tolgoi project. The exact amounts of state-held shares will be determined by the State Great Khural on a case-by-case basis.

Despite the concerns from foreign investors, the Mongolian government remains committed to maintaining a thriving minerals sector that delivers significant financial returns for investment partners. The Sovereign Wealth Fund aims to cultivate new opportunities for international partnerships on projects of mutual benefit.

Prime Minister Luvsannamsrai reiterated the government's dedication to transparency and governance within mining companies. 'The key rationale behind the Sovereign Wealth Fund is to achieve a balanced distribution of mining sector revenue by enhancing transparency and governance within mining companies and reducing the influence of the hidden shadow economy,' he explained.

The Independent Authority Against Corruption (IAAC) in Mongolia has reported significant progress in reducing corruption-related losses. Between 2022 and 2023, these losses plummeted by 83.1%, from 5 trillion Mongolian tugriks (MNT) to 0.845 trillion MNT. This progress is attributed to the prime minister's Year of Anti-Corruption initiative and is expected to be bolstered further by the establishment of the Sovereign Wealth Fund.

As Mongolia continues to tackle the complexities of managing its vast mineral resources, the government’s focus on transparency, equitable revenue distribution, and anti-corruption measures will be critical. The impact of these changes on foreign investment remains to be fully seen, but the government's commitment to reform is clear.

Key Takeaways

• Mongolia's mining law amendments aim to redistribute financial gains and combat corruption.
• A Sovereign Wealth Fund will be established to ensure equitable revenue distribution among the population.
• The fund's estimated value could reach $2.9 billion by 2030, contributing to Mongolia's development plan.
• The reforms limit ownership of strategic mineral deposits to 34% and aim to reduce corruption and oligarch influence.
• The government remains committed to transparency and governance in the mining sector, seeking to attract foreign investment.