OBG talks to D. Zorigt, Minister of Mineral Resources and Energy

Interview: D. Zorigt

How sustainable is the current rapid rate of growth we are seeing in the mining industry?

ZORIGT: The mining sector’s status as an engine of healthy growth for Mongolia depends on legal, political and social stability. In terms of the legal environment, we are currently looking at amendments to the Minerals Law, seeking to improve the overall framework of regulation. We want to ensure environmental issues are addressed more stringently and that international standards for finance, social regulations and accountability practices are being met.

With regard to the political environment, a democratic Mongolia is a rare exception in this part of the world, and has been for the last 20 years. The mining boom in Mongolia only came after significant consolidation of democratic changes in our country. Going forward we are combining these elements of our open and democratic society with our mining potential. We must make sure the political environment remains stable because government revenues will soon increase very sharply, which will give the government the capacity to start investment programmes and other activities. More importantly, however, this should not lead to any significant political changes in our democratic environment. All public decisions on investments and the distribution of the economic benefits from the mining sector must continue to be done transparently.

Social justice remains an issue of great importance. Looking at examples from other countries, resource-driven growth often leads to a concentration of wealth. Mining is generally a global business with global profits, while Mongolia is a small country with a modest population and a relatively equalitarian society. We want to very strongly support the development of a middle-class society in terms of distribution of taxes in education, social housing and health care, so our economic benefits reach every corner. Mongolia is geographically large and has a range of living conditions. We must admit we are still a relatively poor country, so economic benefits must reach our people.

What are some major differences we can expect in the new Minerals Law? What are some of the key factors shaping the legislation?

ZORIGT: It is too early to speak about specific details in the amendments to the minerals law, but it is important that these discussions are being done openly in the parliament. Most of the changes are focused on meeting environmental standards and increasing local participation. We want local communities to benefit from these projects. We are also taking steps aimed at allowing indigenous Mongolian businesses to grow and become globally competitive.

For instance, Erdenes MGL is the licence holder for one for the largest coking coal reserves in this part of the world. We already have plans for a 50% privatisation and we expect Erdenes MGL to be listed on an international and reputable exchange in 2012. Erdenes MGL should grow not only domestically but also internationally, so diversification abroad is something we should not rule out. We plan to position Erdenes MGL in the top five global companies with coking coal assets.

How can Mongolia use its mining wealth to promote growth, while ensuring development remains both diversified and sustainable ?

ZORIGT: As soon as 2012 or 2013, we will see infrastructural development become the second engine of growth in our economy. We have already announced large bids for new power plants with investments reaching $1.4bn. In addition, we have new projects in railway construction and social housing.

We also see big potential in downstream industries for minerals processing in coal and metallurgical industries and refineries. The government is actively pursuing and investing in feasibility studies to determine the viability and practicality of developing industrial parks, such as Sainshand Industrial Park.

The main factor here is that the country’s indigenous companies have the capacity to go beyond mining. This is what we are trying to target in our efforts.