Эрдсийг эрдэнэст
Ирээдүйг өндөр хөгжилд
Mining The Resources
Minding the future

D. Erdenechimeg: Legal reform will be a part of long-term development plan reflecting complex social, economic and environmental issues

In connection with the amendment to the Minerals Law, E. Odjargal talks to D. Erdenechimeg, Manager of the Governance Program, Open Society Forum, and a member of a sub-working group for the draft law, on regulations such as enforcement of Article 6.2 of the Constitution, licensing and local relations. 


What is the status of the revision draft of the Minerals Law? 
Last January, the Ministry of Mining and Heavy Industry (MMHI) established a working group to develop a draft law on bringing minerals laws into conformity with the Constitution. Two sub-working groups were established: one to provide policy guidelines for the team developing the revision draft of the Minerals Law, and the other to carry out a package of studies under the Law on Legislation. 
It is understood that the sub-working groups are working without interruption online and in other ways even during the quarantine period. The sub- working groups have not yet presented their outcomes to the working group that is developing the revision draft. 
A package of studies is 1) to assess the enforcement and consequences of the laws currently effective and determine aspects of revision and possible version; and 2) assess consequences of developed draft law 3) estimate costs for its enforcement. Based on the results of the studies, aspects of the legal reform and its framework will be determined, and the work on draft development will be carried out. This legal reform is seen as significant and grounded in extensive discussions involving the public and relevant parties to create a social consensus. Therefore, there is hope that MMHI will soon make a public presentation on the concept and the revision of the draft of the law, along with reports on relevant studies and get feedback. 

What are the main concepts of this revision in your opinion? 
Of course, this time, the reform shall be directed towards creating the policy coordination environment for realization of the amendment made to the Constitution of Mongolia in 2019.  
Viewing the concept of the Constitution, the priority of the reform shall be directed towards implementing the principle of sustainable development through a long-term policy and plan that enables subsoil resources to create real growth and development.  But, in doing so, it should not only grow the economy and increase income, but also ensure social, economic, and environmental balance with benefits felt by all citizens. In other words, it should address the complex issues of the sector by covering all stages from discovering the resource to spending properly the gained income, domestically. In addition, it should be part of planning policies and programs of other sectors and social and environmental issues taken into longer term consideration.  Therefore, the reform should not be limited to just one sector or amendments to 1-2 laws. We need to consider it in a comprehensive way, in conformity with the principle of inter-sectoral coordination and sustainable development, and not in a narrow way as just a revision of the Minerals Law. 

In the framework of verifying citizens’ right to live in a healthy safe environment, it is expected to include significant changes on developing responsible mining, preventing disputes and misunderstandings caused in local communities, and building-up public monitoring and involvement. 
In general, the right to live in a healthy and safe environment and the right to information are the basic rights granted under Article 16 of the Constitution. But, why is this essentially connected specially to this sector and included in the Article 6.2? Perhaps, the reason is that there are many areas, rivers and streams eroded and degraded and human rights violations reported during the past period. Therefore, there are essential amendments to be made especially on environmental impact assessment, and implemented in practice with information and accountability to citizens.  


From your view as a specialist, how should the amendment made to the Constitution, and regulations stated in the Article 6.2 be reflected in the Minerals Law?  
Personally, I would like to see the concepts in the Constitution implemented in the following way. For example, we need to manage activities utilizing natural resources under a long-term comprehensive policy. Although the statement “Pillaring on the long-term policy” is not limited in time only and considers the interests of the next generation and connects to the statement “the right to live in a healthy and safe environment shall be secured,” it has direct connections with the principle of sustainable development.   
In order to implement comprehensively the concepts of the Constitution, the relevant articles should be considered in a comprehensive manner. Therefore, I would like to emphasize again that it is necessary to take care of environmental, social and economic returns and balance the risks involved.  

In order to secure the right to live in a healthy and safe environment, the priority is to ensure the right of citizens to know of the impact of certain activities and how to reduce them; This is through first knowing and then providing feedback. It is necessary to include regulations directed towards ensuring the right to appeal under the laws of the sector if the rights to know and participate and to live in a healthy and safe environment are violated for environmental reasons. This means conformity with other related basic laws.      One of the basic reasons behind environmental violations is poor quality environmental impact assessments that are carried out with no involvement of citizens in the local community.  Thus, there is a requirement to change this system as a whole, so as to make assessment reports publicly available, and ensuring detailed assessments before granting any licenses. 

In 2012, when the package of environmental laws was amended, it included the requirement that environmental strategic assessments should be carried out for large-scale projects and programs. Also, that the assessment of impacts should be accumulated for areas where mining activities have been carried out for many years, or many projects are being implemented in one place. For example, in the areas such as the Zaamar soum of Tuv aimag, Eruu soum of Selenge aimag and Dalanjargalan soum of Dornogovi aimag, it is impossible to assess the environmental impacts just for one project. The accompanying impacts of other projects are also necessary to be assessed. However, this regulation has not been implemented until today. In 2017, when even the government approved the Gold-2 and then the Heavy Industry programs, it did not carry out strategic assessments. Only now, the Ministry of Environment and Tourism is going to carry out the assessment of impacts to be accumulated for the tailing’s management of Erdenet Mining Corporation for the first time, after being summoned to court. So, rather than to just make changes in the law, it is important to implement current regulations more effectively, does it not ? 

It seems that, of course, under the statement “Benefits shall be distributed equal and honestly”, the issues on creating savings, increasing the savings and increasing salary and income through the budget revenue  will be discussed.  The most important thing is that the government involvement is high and if it remains the same, benefits will be brought by ensuring governance and transparency. In fact, in order to eliminate the condition that only a few people receive benefits, the suppliers and the final owners of the companies should be transparent. This is also related to tax revenue increase. Originally, transparency was discussed first in the extractive industry, now in all industries, and there is a requirement for all legal entities to have registered their final owners. However, it is unfortunate that less than 40 percent of license holding companies registered their final owners, when implementation was assessed 1.5 years after  instituting this regulation. Therefore, if the information of this register is not disseminated to the public, it is of little importance.   

Article 6.2 of the Constitution considers “state public property.” How can it be reflected clearly in the Minerals Law and directed accordingly? 
In general, the issue of subsoil resources being “a state public property” is not new – it  is included in the Constitution.  Before the amendment made in 2019,  subsoil resources in  areas other than those owned by citizens, were,in general , state property. More clearly, under the Law on State and Local Property, state property and natural resources are classified as for public use.     Therefore, such amendment made to the Constitution clarified the “public” property to be under the control of the people. Why was it required to be clarified? The attribution “public” was included for the purpose of creating a condition in which natural resources should be spent properly for the interest of all  people, its benefits distributed equally and honestly to citizens. All these activities should be carried out under the control of the owner of the resources or all citizens according to the draft of the amendment to the Constitution and the protocols of the Standing Committee meeting and the parliament session where it was discussed. 

Lessons were taken from mistakes, inefficient expenditure, irresponsibility, corruption, environmental degradation and human rights violations that occurred in connection with minerals mining until today. Therefore, if it is going to utilize  natural resources, “a state public property,” for the sake of the public interest should be under public control as a priority with the  requirement to ensure information transparency at high level. For this purpose, it is necessary to make clear the rights and obligations of the government and its agencies in keeping information transparency by passing the Law on Minerals Sector Transparency which has been expected since 2014 and realize the public control. The state policy formulating activity should also be carried out based on comprehensive discussion and  involvement of the public and all stakeholders such as investors, companies, local communities, professional associations and NGOs. Specially, in making major decisions on an agreement, a license, environmental and social impact assessment, it is required to ensure involvement of parties whose interests are affected. Initially  the basic principle of the right to know which was included specifically related to this sector in the Constitution, is in the mechanisms of citizens’ participation which was included in the General Administrative Law early in 2016. In general, it is proper that the Minerals Law, Subsoil Law and Law on Environmental Assessment should be brought into conformity with the General Law on Administration. In this way, the conditions for utilizing properly “a state public property” under public control for the sake of the public interest will be created. 

By the way, I would  say that you all should read a series of studies conducted by the Open Society Forum for the purpose of clarifying the concept of the Article 6.2 of the Constitution. 

I believe that under the reform, the clauses stating that “a deposit of strategic importance” and “if reserves are determined as a result of exploration carried out with private investment, the state shall own up to 34 percent” in the Minerals Law should be changed. 
The statement “A deposit of strategic importance” cannot be changed in the near future. The reason is that it is stated in the Constitution. But it needs to set detailed criteria for considering what is “strategic” and review the list. It is set with criteria “to the extent of having impact on the national security, the country’s economy and the social development” which are difficult to be measured. It has been  unclear how they are used for determining currently existing deposits as strategic. 


There is a difficulty of government decisions being frozen at the local authority level. In other words, the local authority hinders many issues, including implementation of the Minerals Law and moreover, issuance of exploration licenses. What position do you have on this issue? How are local rights and obligations are reflected in the legal reform? 
There are several reasons why the local community does not support mining. For example, from the view of previous lessons learned, for the environment, there was much irresponsibility. The issue of overgrazing causes difficulties to herders. Although mining activities have been carried out without interruptions for many years, there have been no significant development and progress, and no sustainable work places have been created in local communities. On the social media, there have been shown photos of ger districts with captions stating that Ulaanbaatar remains as it was 100 years ago. Like this, there are many aimags and soums that say that there is no development and progress, although dozens of mines have been operated for 30 years. Moreover, as there is no transparency and control, local authorities set improper requirements, requests for money and corruption issues are raised, as noted by managers of companies.  However, such issues raised between the local communities and the companies remain are not beneficial to the parties, to the country, company and the local community, at the end. Coordination is one of the basic functions of the government. Therefore, I think, local involvement at the proper level has to take place in the reform of the Minerals Laws and it should be coordinated by the government. Regarding the proper level, if there are phases for the mining activities, in the priority, the government itself should improve its relationship with the local community even in the first phase. 

When determining the areas where there is to be exploration licensing, local community should be involved in this phase. However, it seems to me that it is necessary that a decision should be issued by considering the development plan of the aimag and the soum based on how the government estimates all potential risks in advance by conducting environmental and social impact assessments, rather than by exaggerating state property and national interests, and monitoring and reducing them, as well as consultation on the requirements for implementing any project.   

One reason that the local community gives refusal of an exploration license is that the company carrying out exploration obtains the mining license with dominant right, and there is no local environment in it. This is an  irresponsible mining operation. Therefore, there is little opportunity for enjoying the support of local citizens without resolving  who should be issued with the mining license and how the mining will be made more responsible. A look at the budget revenue analysis, is essential in determining a state policy. Although at present, there are over 1700 mining licenses effective, only over 10 companies have accounted for the 80-90 percent of the tax revenues of the extractive industry over the recent ten years. That is revenue mostly from copper, coal, oil and a little from gold. What is the real return of these many small projects? There will be a question that should we utilize all what we have found, this should be in accordance with a time table and in sequence. There will be people who say this should not be limited to the budget revenue only, but also consider many things such as jobs, new technology, accompanying businesses, infrastructure development etc.  Therefore, it is necessary to analyze other returns such as revenues gained and jobs created by small businesses other than the leading companies in comparison with   their environmental and social impacts and expenditure, and record data on this aspect starting from now. At least, it is proper that the policy should be improving the criteria set for issuing a license and granting a license to a responsible company with sound technology by considering the ratio of its expenditure and effectiveness.  

What is your opinion on the position of some aimags where large-scale mining projects have been implemented that it holds “with-no-mining” policy? 
Well, international experts recommend to determine the areas valuable ecologically, culturally and historically and the with-no-mining zones in the priority rather than to note that it holds no-mining policy. The Ministry of Nature and Tourism carried out a study of this type. I hope that if it is able to implement all of these in a complex, protect the local community from risks and distribute their returns optimistically, the number of aimags and soums holding “with-no-mining” policy will be reduced. 


Under the legal reform, is there a requirement for the royalty and other local allocations to be changed? 
First, it needs to review whether they were able to be allocated in accordance with laws before making changes. This allocation is received through the integrated Local Community Development Fund. It needs to make clear what the allocation is spent for and how the citizens’ involvement was ensured. Possibly, doing this, an opportunity for the citizens to know and recognize the mining contribution to local community development will be created. This is also important for establishing social consensus. 
Another way of delivering directly the mining return to the local community is by a Cooperation Agreement. Under this agreement, the parties agree on the investment and contributions to be made. But transparency is important in order to increase the effectiveness of the agreement and make it understandable to citizens. If not just only the agreement, but also the process of signing the agreement is transparent, it will prevent corruption and it is helpful for the agreement to be a quality one. Also information on implementation should not be missed. As of today, in fact, local citizens don’t know what was agreed with whom,  and what was received and given. 

The investments planned under the Cooperation Agreement are made mostly through the Local Communities Development Funds,   or Local NGOs. It is not the Local Development Fund allocated from the budget. It is a fund which has NGO status, and is a company with its own Board of Directors and members from the local community and, in some cases, with citizens’ representatives.  Currently, there is the time to speak on the procedures of such funds. This is  public property, built with no difference on public wealth. 

What proposals are promoted by civil societies in revision of the draft? 
The main thing is that we express our positions that first, it needs to determine policy directions limiting not to amendments to 1-2 laws, if it strives for making significant reform in order to realize completely the concepts of the Constitution. Currently, there is the phase of establishing the frame of the reform. As there is no draft law and/or a document have been prepared, we have proposals of principle character, including the above mentioned issues. Furthermore, we will submit detailed proposals and actively involve, when the Concept and the Draft Law become ready for the public. The most important issue  is on whether the reforms will be right and then whether there is capacity for implementation. Therefore, there is expectation that the process of developing the draft law will be transparent and many discussions will be organized among stakeholders. Civil society will have strong position on this and will require transparency and participation.