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Right now we are living interesting pre-election days in Mongolia. Due to pandemic-related restrictions, the election with the largest number of candidates in the history of parliamentary elections of Mongolia or 606 people, is to be carried out with all due precautions. In these eighth parliamentary elections we have thirteen parties, four coalitions uniting twelve more parties, in total 485 party nominees and 121 independent candidates. Also these elections mark the record high number of independent candidates. Among them we find ex-members of the leading two political parties and former leaders of the country. Plus this time we also have the highest number of young candidates running for elections who form majority among the candidates. For the first time in the history of elections three candidates who are not able to come to Mongolia due to pandemic quarantine are competing in these elections online from abroad. There is even one candidate who is participating in these elections from the prison. The elections look as exciting as any thriller.

We could count many more interesting facts and comparisons like the above, but let’s focus on what the political parties’ platforms say about their position on the mineral sector. These elections shall have enlarged districts and multiple mandates within the district where the competition would be predominantly between Mongolian People’s Party and Democratic Party who have ruled this country in turns for the last thirty years. We have selected Right Person Electorate Coalition as the strongest third opponent so far to compare its platform against the abovementioned two. “Right Person Electorate” Coalition consists of National Labor Party, Mongolian Social Democratic Party, and Ethical Party. The Coalitions rests basically on the image created by NLP (“HUN”) Party. The party’s candidates are people around thirty to forty years old who are specialists with clean name but with no prior experience or history in politics and not familiar to the public, which makes them stand out among the others. In 2020, fifty seven percent of total electorate are people under forty, the public atmosphere is charged with the desire for change. There are high expectations that maybe this coalition would deliver something that the two predominant parties failed to deliver so the coalition could have a chance.
The platforms of the selected three political powers paid due attention to mineral sector. Specifically they stated how they would manage the natural resources and revenues generated from them. Small political parties and coalitions consisting of such are vying for attention by unique propositions for mineral sector reform and some bordering with the grotesque in their policy proposals.
First of all, let’s mention the recession that the Mongolian economy has already suffered with a drop of over ten percent in GDP in the first quarter of the year during pandemic. After elections we are to face the big crisis which is somehow pushed aside from public attention during elections. As the imminent problems reside in the economy, we looked into the platforms to analyze how they define their policies to cope with the crisis to reverse the economic downturn and to overcome the challenge to repay the foreign debt. Only DP and MPP mentioned measures to deal with the challenges caused by the pandemic while other parties and political powers probably omitted such considerations because they do not hope to gain majority of seats in the parliament.
The MPP Platform has a general statement that the Party shall “devise and implement a special plan to remove the socio-economic difficulties caused by Covid-19 pandemic, and to restore industry and service sectors, and take measures to compensate the livelihood income of the economic entities, organizatons and people who suffered income loss.” Whereas the DP platform has the section on “Special Policy during Crisis”. All mentioned about keeping jobs and implementing special programs to support businesses, but the specific thing about this time is the promise to endorse a special program and package of laws on combating the pandemic during the first meeting of the parliament. The difference goes further in prioritization of the budget items of 2020 and specific planning on saving measures, loans to be provided to individuals and companies in order to overcome the crisis, support to be provided to the salary fund of the economic entities and organizations, tax cuts and etc. In order to raise funds for post-crisis restoration program, the Government promises to immediately grant necessary decisions, permits and concessions to the mining and processing industry projects, which basically mentioned the underground mining of Oyutolgoi and oil refinery. Furthermore, our attention was caught by the statement below:
-resolve once and for all issues faced in geological explorations and prospecting, and immediately launch geological explorations. Protect legitimate interests of investors, implement drastic reforms in complaint resolution and provide tax stability to the investment projects beneficial to the country.
During the past four years, the MPP led Government has changed the main concept whereby the mineral licenses were provided for the last twenty years. In 2017, the principle to provide licenses based on application was abandoned and is to be provided only based on selection, a turn that has limited the development in geological explorations and investment basically has come to naught. Subsequently the Government led by U.Khurelsukh made the decision to stop granting exploration licenses at all throughout 2020. An eyecatching content from DP platform is the statement to immediately amend the Law on Minerals which would resolve complaints and disputes caused by the cancelling of licenses and confiscating the deposits where the exploration was conducted by the public funds during 2019-2020 and give the opportunity to the projects on halt. This idea becomes even clearer when you read the policy to be pursued in the mineral sector, that is to increase the resources and to grant mineral exploration licenses according to the international standards. Anyway, this is a more farsighted step in the geological exploration sector.
On the other hand, the MPP platform has two provisions on geological explorations.
-Intensify geological exploration works conducted by government budget funds, increase the mineral resources, start economic utilization of deposits with estimated reserves and carry out fair distribution of wealth.
-Disclose mining licensing and cancel licenses granted in breach of the law.
Please pay attention to the fact that it mainly states the government budget. This shows that the principles of selection in licensing would continue. This means the government will be predominantly involved in exploring and finding the mineral prospects, bearing huge risks associated with it. Furthermore, as Mongolia lacks projects that would attract and intensify foreign investor’s interest besides exploration, this huge potential will be untapped.
As for “Right Person Electorate” Coalition, despite the omission of the words geological explorations they promised to ensure stability for investment in mining sector. Their platform mostly emphasizes the private sector role, responsibility and attracting foreign investment, which only stand out in contrast to the MPP approach of greater government role.
Another principal issue in political platforms is the sovereign funds. As the Constitutional Amendments which came into force on 25 May legalized the principle “to consolidate benefits of the mineral resources in the national sovereign fund and to ensure fair distribution”, the parties ought to announce their policies on wealth distribution.
The MPP devised a policy to pass a law on sovereign funds, increase revenues from the mining sector, create savings of at least one trillion MNT per annum, invest the funds in financial instruments, increase the funds and make investments in the large national projects to diversify the economy. Subsequently they are to establish a National Housing Corporation, and together with the General Fund of Savings and National Sovereign Fund to help hundred fifty thousand households to obtain apartments. Also, they stated that When operating the mineral deposits in line with the principle, that the natural resources belong to the people, legal regulations will be made to ensure that their benefits are distributed to the majority of people. At this state it is impossible to identify whether they mean the law on sovereign funds that they plan to pass or a different new law. In fact, the MPP announced in its platform that they will make amednments to forty laws in relation to full implementation of the Constitutional Amendments and establish several new ministries.
Also it has defined that the proceeds from the natural resources would be distributed to the people in the following way:
-Increase opportunites for national SMEs to work as suppliers to such large companies as Oyutolgoi and Erdenet.
-Increase the benefits for Mongolia from Oyutolgoi and other mining projects, establish Social Responsibilty Fund to support individuals with low and middle income.
Please make notice of the promise to establish Social Responsibility Fund. Mongolia has abundant number of funds. We do not lack in the number of Government’s special funds, which commonly have bad record. The government funds that go through the special funds are usually managed by political decisions, without monitoring and spent on purposes other than their designation, boosting corruption and inefficiencies in recent years. Although the intentions sound great nobody wants another version of SME support fund scandal. For your information, the MPP platform talks about establishing numerous new funds. Besides three abovementioned funds they shall establish many more with poetic names such as Youth Development Support Fund, Export Guarantee Fund, Risk Fund and Herders’ Shared Fund where they want to pour public money.
As for the DP they also promised to pool the benefits from natural resources into the National Sovereign Fund and just like the MPP they developed the same concept to provide the citizens with apartments by establishing a sub-fund besides the National Sovereign Fund. They have the idea to transfer the privileged bonds of the Government and Mongol Bank to the sub-fund so that they are actively circulated in the secondary markets. There is a small additional detail - in so doing the fund savings shall be used to expand the availability of credits to support housing and household business and finances.
However, a drastic difference is that they directly stated the source of revenues to be pooled into the Sovereign Fund, which is the royalties. They said the royalties shall be separated from the state budget revenues and only five percent will remain in the budget whereas the rest will be pooled into the Sovereign Fund and a specialized organization shall manage the fund. Royalties are taxes with special significance. They constitute one third of total revenues gained from mining and almost fifty percent of the revenues that go to the state budget. If you take away royalties you would create a big vacuum in the budget that entails the question how to fill it in the state budget, Future Heritage Fund which is a sovereign fund consisting of mining revenues saved for the future generations and General Local Development Fund that is distributed to twenty one aimags and the capital city. Or should we just deem them as unnecessary? The answer to this question cannot be found from the platform.
Besides this the DP platform has another provision on revenue distribution.
-set up a system of direct distribution to local areas of up to thirty percent of revenues from natural resources collected at the state budget.
Distribution of larger mining revenues to the local areas, where the mining takes place, is something desired not only by the local areas but the mining companies themselves. One of the reasons why the local communities do not like the mining sector is because they do not benefit from it. The DP calls this arrangement which would serve as the main mechanism to obtain social license from the local communities and its goal to save royalties at the Sovereign Fund as budget revenue and expenditure reform. Of course, it is important and necessary step to make budget reforms in order to reduce dependency on the mining sector and diversify the economy,but the real prospects for its realization look dim. Anyway, both DP and MPP formula call for distributing the mining revenues not to the four, but five different sections.
“Right Person Electorate” Coalition declared, “Only the right economic policy shall ensure that the natural resources benefit everyone”…“stability and savings fund shall be expanded”, “fair distribution of wealth with equal opportunities and conditions for each individual shall be ensured”. In general, the coalition platform has the characteristic of concepts stating general principles and approaches. This is a big and innovative difference from the long list of promises made by DP and MPP covering all social interactions.
An important section, that allows to probe the party platforms on the sound policy to support mining sector, is the part on their approaches to large mining deposits. “Right Person Electorate” specified about developing national corporations which would compete regionally, so does MPP who prioritized similar large projects. The section named “Mega Projects to Lead to Development” has listed comprehensive utilization of Tavantolgoi deposit: Oyutolgoi underground mining, launch operations of Tsagaansuvarga, Kharmagtai, Asgat and Salkhit silver deposits. It is strange that Gatsuurt deposit which was registered as a strategic deposit and always included in the Government Action Plans since 2008 is not mentioned at all. This project ripe for operations was left out of attention for the first time. In regard to Erdenet Factory where the Government seized 100% ownership, out of which 49% are disputed with the private sector, it said only that a locally owned Cathode Copper Plant shall be constructed.
In contrast, the DP set out a very important detail that it intends to sell the shares of Erdenet on stock market so that individuals and legal entities could own them. Not only “Erdenet” but also “Erdenes Tavantolgoi” and other state owned enterprises would be privatized through stock market to make them publicly traded companies. This is a provision most fitting provision to the DP agenda in the platform that is - to priorize private property and competitive markets while limiting government involvement.
“Right Person Electorate” Coalition had expressed a position similar to the DP by “removing political and party influence on large state owned mining companies and changing them into publicly traded companies to ensure public monitoring and to establish a balanced relationship between the citizens, government, and other shareholders of Mongolia”. Turning the state owned companies into publicly monitored companies will not only benefit the people through dividends, but serve as an important step forward for the future and economy of the country. It will also resolve all the problems related to unfair game, corruption and “illegal benefits” surrounding the state owned companies. The public is looking forward to such developments. So this is a position that reflects the realities.
The three political players compared here have promised to develop heavy industries in the coming four years, which would be something unseen for the last thirty years. The most avant-garde promises in the platforms would probably stay in the paper.
Let’s start from more humble ones. “Right Person Electorate” Coalition shall prioritize copper refinery and metallurgical industry and promise exemption from VAT and official enterprise income tax for the first five years in case of establishment of coking coal plant, steel plant, or coal processing chemical plant.
The DP promised a phase by phase evolution to restore metallurgical industry, to develop from oil extractors to fuel producers, to make processing industry the economic pillar, to establish steel, cast iron, copper, coal-chemical plants and oil refinery as well as a plant to process rare earth elements. In particular, they specified that they shall establish copper ore refinery based on Oyutolgoi deposit, coking coal-chemical plant based on Tavantolgoi deposit, metallurgical complex based on iron deposits in Darkhan-Selenge region, deep processing plant of tungsten, coal chemical plant in Choir, coking coal plant in Gobisumber with annual sixteen million ton production, subsequently the country is to have a metallurgical complex of cast iron and steel processing with capacity of fifteen million ton.
Here we would like to point out a strange phrase in the DP platform which says Mongolian gold will stay in Mongolia. The first reaction is to recall what the current President stated in 2018, who said “Enforce the state authority in the gold sector and put a strict requirement for gold miners to sell all their gold only to Mongol Bank. I shall submit such a change in the law to the Parliament”. Did the President’s statement of two years ago find its way into the platform or did they state their goal to establish gold processing plant with twenty thousand tons capacity in this way? It’s difficult to know exactly. If they are talking about establishing a gold refinery, they could have articulated it in a different way.
The MPP promised the largest number of heavy industries involved in the mining sector deep processing. According to the platform, our country is to receive one heavy industry plant every quarter, and end up with a dozen complexes that come into operation during the next four years. Let’s see some examples to this situation: Oil refinery, Tavantolgoi coal-chemical, coking coal-chemical and methane plant, coal preparation plants shall be built to wash thirty million tons of coal, refinery for precious metals and gold, copper and other metals; Baganuur district will have a plant to produce synthetic gas from coal, Nalaikh district shall have the second “Tavantolgoi improvised fuel plant”, Dornogobi aimag – iron and iron cast steel smelter, coking coal plant.
In addition, they are to build numerous railways and pave even more roads along with power and electricity stations. Again the MPP has the longest list of promises. The list includes all projects that have been already discussed, planned and rejected for years. The DP’s list is comparable to it. “Right Person Electorate” Coalition’s list is the shortest but also the most realistic which made it easier to digest and accept. They explained their policy to build railroad to transport exported coal, increase the share of renewable energy and supply Oyutolgoi power from domestic sources, all these points sound closer to home. The coalition platform contains the most unique concept which is to open the legal environment to allow foreign banks operate in Mongolia and thereby reduce the monthly business loan interest rate by one percent. They made a very brave step to address a topic that political powers shun the most.
In general, when you analyze the content of the platforms you would see that the Right Person Electorate Coalition’s tactics are to inidicate the flaws and distortions within democracy and the system that have built up for the past years and their intent to correct them. The MPP relies on achievements of its previous Government promising to save the falling economy. As for DP they are focusing mostly on the mistakes and works carried out by the MPP for the last four years. The general content of the platforms on mineral sector all support responsible mining and the MPP said they would continue their policy they have pursued for the past four years: they shall keep high government involvement. The DP will focus on changing the main policies pursued by the MPP in 2016-2020. “Right Person Electorate” Coalition is to ensure stability for foreign and domestic investment and work to attract more investment.
Mongolians have been suffering from the pitfalls of the previous election platforms that promised money and share from the national wealth but, in fact, made us all fall into debt by the machinations taken to deliver such promises. As for this year’s elections, although we do not see promises and welfare benefits expressed in monetary terms, still the policy competition focuses not on realistic planning but yet again false ambitions and abstract promises.