Tag Archives: mongolia

EITI’s Governance Structure – Helpful or Harmful?

Christina Toepell, MAAPPS // May 2, 2015

The FIFA scandals of the past weeks have shown that certain governance structures are detrimental to organizational processes. Luckily, EITI is far away from these scenarios, but its international and national governance structure might also serve as a cause for some of its challenges. On the top governance level, EITI international is providing recommendations and implementation guidelines to the country offices. On the national level, a multi stakeholder group (MSG) consists of mining companies, government officials and civil society initiatives. It is supposed to gather in general assemblies to inform on the progress of the national EITI office, current measures taken by all participating groups and communicate new initiatives.

Setting up this particular governance structure for EITI was important to foster international acceptance of the standard and support its acceptance of all stakeholders. EITI international’s relative detachment of the national offices is relevant and needed to include local specificities while still enforcing fair and equal measures across all member countries. The governance structure of having a multi stakeholder group is important when trying to integrate an organized measurement of control into the EITI structure of the country. The MSG further allows all partners to be equally involved and guarantees a shared feeling of responsibility for the success of the project.

This governance structure, however, inevitably leads to a lack of ownership, which Bulgan also mentioned in her post on the relevance of EITI. The international EITI secretariat provides hard requirements but leaves full independence in implementation. In Mongolia, the EITI secretariat consists of three members. These agents are working on combining the requests and requirements of at least four parties: Mining companies, government officials, civil society groups and EITI international. Personal conversations have revealed that national coordinators often spend more time on harmonizing these different mindsets, opinions and incentives than working on true progress for EITI. If the MSG as a “principal” cannot agree on feeling shared responsibility and the EITI national office is a mere “agent”, where is the sense of ownership that brings EITI forward?

The differing incentives of individuals lead to internal governance deadlock. Our meeting with the MSG in Ulaanbaatar exposed diverted civil society ideas with representatives sometimes showing higher interests in opposing each other than interacting on a positive basis. Proposed progress of EITI in certain aspects might raise strong opposition, which then leads to a compromise consisting of no progress at all.

The question remains, what governance structure would be more ideal? Where is the Mongolian optimum in the trade-off between an inclusive EITI process and real progress for mining transparency? Should there be a stronger sense of ownership by the EITI office? A clearer mandate for the EITI national office with simultaneous implementation of an increased importance on the MSG control mechanism might be a first approach.

The Trip to Ulaanbaatar: An Unforgettable Journey

Justin Kwan, MAAPPS // May 13, 2015

After 19,308km of traveling from Canada to Mongolia, the Asia Pacific Policy Project team has finally returned back to the University of British Columbia. The journey to Ulaanbaatar has been an amazing experience, to say the very least. Nine days in Mongolia’s capital city has created a fresh viewpoint not only on the way I view policy making, but the real struggles that occur between different interest groups in the negotiation process.

The beginning of the trip started with the participation in the Freedom Online Coalition (FOC) Conference, with a keynote opening speech by Tsakhiagiin Elbegdorj, the President of Mongolia. While freedom online and the EITI subnational reporting project may appear to be completely unrelated, President Elbedgdorj acknowledged that beyond mining, he wanted his country to expand its investments and businesses into the IT and software industry. Perhaps a subtle, but clear sign that that Mongolia is looking to diversify its investments, and perhaps has too heavily relied on the extractive industry to support its economy.

A reoccurring theme throughout the trip however has been the frequent discussion of the mismatch between our “words and deeds.” A FOC panel discussing future internet trends noted the question of double speak and the distance between practice and implementation in policy making. After team discussions and reflections upon our trip, we agreed that the coined term could most appropriately be used in our meetings with government and civil society organizations.

Throughout the trip, three perspectives about the future of subnational reporting emerged from out meetings. On one hand, I can see great optimism about Mongolia’s future and EITI subnational reporting. In our meeting with Mongolia’s EITI secretariat office, it was indicated that already, 19 out of 21 Aimags are reporting at the subnational level through electronic online surveys. This is something that we were pleasantly surprised to learn about and that future training workshops will be providing this upcoming year to help facilitate the transition.

On the other hand however, there is another perspective from other civil society groups that the EITI project has failed to reach out and properly inform citizens about transparency in the mining sector. According to them, there is no desire to make this information accessible to ordinary citizens, and the project has wasted millions of dollars. With the fact that EITI Mongolia is still in the process of securing donor funds for the next year, it would appear that the initiative may be in limbo for the upcoming months.

A third and final perspective from EITI civil society stakeholders reveals the passion and desire to create a robust civil society that will protect the country’s interests. There is a legitimate desire amongst these groups to encourage the population to become more involved, and there is a legitimate sense of frustration and debate as to how these ideas can be fully implemented. While many ideas were exchanged, it was surprising to note that a rather important voice remained silent throughout these discussions, perhaps one of the most important voices for inciting real change in Mongolia.

From this trip, we have realized that although our desires to encourage EITI policy recommendations have somewhat fallen on deaf ears, there is still hope. Indeed, there is a complete disconnect between policy theory and policy implementation, and the actors who can make the most difference prefer to keep the status quo. However, trips like this showed us some of the most real-time up-to-date information about subnational reporting that no literature was able to provide. The Ministry of Mining of Mongolia also revealed that the extractive industries transparency legislation has been drafted and is seeking approval from parliament. Although frequent election cycles have created a lack of continuity in policy making in Mongolia and perhaps a somewhat unstable political environment, I still look at this situation with a great sense of optimism because the hopes and aspirations of the people in Mongolia are strong. While I myself may be aspirational in my outlook, I look at the desire for change as one of the greatest motivators for continuing to strive for success.

Reading about Mongolia is one experience, living it and experiencing it first hand is completely different – something I truly believe everyone should try at least once in their lifetime.

On Our Way to Ulan Bator!

Justin Kwan, MAAPPS // May 3, 2015

Although the semester has just finished, a group of 6 students from the Asia Pacific Policy Class will have the opportunity to travel to Ulan Bator, the capital city of Mongolia to present the findings from two different projects we have been working on. The first team has been formulating policy solutions to help bring further awareness to subnational reporting and attempt to further enhance the usefulness of the data to the general public through various public institutions such as libraries, soum level government and banks. Meanwhile, the second team has formulated a paper, which analyzes the success of subnational reporting on different dimensions, which include democratic governance, rule of law, civil society participation and perception of corruption. Both teams are most definitely excited to share their findings in Mongolia and hope that our research on subnational reporting can not only inform EITI better of the unique experiences countries have faced in their attempts to implement local level reporting but how this information can be used to better civil societies around the world.

Before flying off this past week, some further research for the trip to Mongolia has taught me a few interesting facts. Most fascinatingly, I discovered that after Russian, German is one of the most widely spoken foreign languages in Mongolia, due to the country’s special historical relationship with East Germany. Although, though this trend is slowly giving way to English, the Korean language is also gaining momentum due to the large population of Mongolians working in South Korea. From this, we can see Mongolia as the intersections of various histories; from the historical legacies of socialism to the ways even the Korean Wave has also made an impact on Mongolian society and youth culture. While in Ulan Bator, I am curious to know what influences have impacted the city the most, visually through its architecture but also through the collective public memory in various institutions such as museums, statues and other public places.

In reflection upon the course this year, I realized that a concept like subnational reporting, although now a common word in our team’s vocabulary is still a relatively new concept to most of our EITI candidate and compliant countries. In a country like Canada, interprovincial government transfers and the coordination amongst our federal and provincial governments represent a complicated but relatively effective process that regulates provincial level coordination with our own federal government. In my case study country of Indonesia, the Presidential Regulation RI No.26 2010 which although regulates and legally enforces subnational reporting, the enforcement of such policies have not been as easy. Indonesia is still trying to test out how it is best equipped to deal with the task of subnational reporting implementation, although its initial plans of decentralization and the issuing of local mining permits has somewhat slowed down the process due to the lack of local of coordination amongst local governments to issues licenses. Rather than looking at this as a failure, I see this as one of the many projects that are part of the testing period that will eventually help subnational reporting projects to be successful. It will be interesting to see how our meetings in Mongolia will represent the ways in which the people view and regard subnational reporting within their own country and abroad.

For now however, the land of blue skies awaits the team in Mongolia!

EITI Report: Chinese companies reporting in Mongolia and other EITI Implementing Countries

Justin Kwan, MAAPPS // April 13, 2015

While researching about sub-national reporting the other day, a re-tweet from EITI’s official Twitter account caught my eye. The retweet came from Lizzie Parsons Senior Advisor in China for Global Witness, an organization which attempts to “break links between natural resources, conflict and corruption.” Her tweet linked to a recent March 2015 EITI report which discusses the transparency of Chinese organizations in the extractive industry. In one sense, China’s growing economic presence around the world warrants a rightful investigation into its business practices, since corruption as a whole appears to be a large problem in the country. One does not have to look too far to see that Xi Jinping recently launched one of the nation’s largest Chinese anti-corruption campaigns. However, there is a lack of context as to why EITI launched such a report, its origins, and why other countries have not received similar audits. These questions remained unanswered.

The findings of the report are especially interesting since it states not only that “there does not appear to be any cases in which a company based in China has refused to collaborate with a host country implementing the EITI” but rather there is an “increasing number of Chinese companies are disclosing information in EITI countries where they are required to report.” In fact, the companies that were based in Western countries were seen as equally contributing to delays compared to Chinese companies. Furthermore, Chinese companies were reported to have been involved in the extractives industries of at least 23 of the 38 EITI implementing countries which published reports. Here, I would like to highlight the results of two Asia Pacific countries.

In Mongolia, our main case study, it was interesting to see that there are at least ten Chinese companies active in Mongolia as well as two joint venture projects.  On the whole, the information that Chinese companies disclosed went “beyond financial disclosure” although ironically, the largest Chinese Company, PetroChina Dachin Tamsag, and the Chinese-Mongolian joint venture Chinhua MAK Nariin Sukhait both did not disclosure their financial information. While Chinese companies continued to grow within the Mongolian market, the 2012 Strategic Entities Foreign Investment Law passed in Mongolia prevented foreign companies from obtaining more than 49% of shares of a company until it was reversed in 2013 when overseas investment dropped by 43%. While Mongolia may not necessarily want Chinese investments entering into the company, the opposite has happened. But when given the choice between protecting national interests or increasing economic prosperity, a difficult choice must be made. This is extremely problematic for Mongolia given the fact that the country is heavily reliant on Chinese transit routes for exporting its extractive resources.

Mongolia however is not the only country to have raised concerns about Chinese investments. Myanmar, another EITI candidate country has also express public concern with Chinese operations in the Shwe Myanmar-China gas pipeline project which is operated by Chinese company CNPC. The focus however in Myanmar has centred upon environmental degradation and land use by Chinese companies, despite the fact that “Chinese companies [are trying] to gain a more positive image by investing in environment and corporate CSR projects.” Quite interestingly, with the opening up of the country, Myanmar’s civil society has continued to protest the pipeline project as well as the Letpadaung copper mine (which has Chinese company Wanbao as one of the two sponsors in the joint-venture). This suggests not only the potential for civil society to also become involved in the process of subnational reporting when more formal initiatives become active in the country, but also that Myanmar’s civil society continues to grow and is becoming a strong and active voice in discussions. While Myanmar may not be as developed as Indonesia or the Philippines in its timeline for subnational reporting implementation, these points do however suggest great hope for increasing transparency in Myanmar’s extractive resource sector.

Sub-national reporting in Mongolia: a Necessity or a Myth?

Lotus Ruan, MAAPPS // Feb 26, 2015

In our last discussion, we debated over why subnational reporting matters to Mongolia. In other words, what might be some of the incentives for local governments, extracting companies, and social organizations to take one step further in introducing this new measure to Mongolia?

To answer this question, it would be useful to look at why countries are willing to participate in EITI practice at the national reporting level at the first place. There is no doubt that the EITI practice has been successful since it was launched in 2002. We witnessed substantive growth in the number of its member countries and of reporting companies in each country. While EITI’s principle and purpose is to increase the “public understanding of government revenues and expenditure over time” which could help inform the public choice of “appropriate and realistic options for sustainable development,” it somehow becomes a benchmark for investors when they are making decisions whether to invest in certain country or not. Perhaps this is also one of the reasons why even fragile states with corrupt governments such as Yemen would strike to keep their EITI membership and fight for a higher status.

As far as I’m concerned, the motivations for Mongolia and other countries to proceed with sub-national reporting can be explained in a similar vein, that is, sub-national reporting can assist the country in curtailing corruption at both national and subnational levels and thus win her a better international reputation and in attracting companies to invest in certain regions. In this blog entry, I’ll mainly focus on the first motivation.

While Mongolia has made a successful ad peaceful democratic transition from a communist one party regime based on the Soviet model two decades ago, it still has a long way to go in terms of fighting against corruption and increasing accountability in its newly established democracy system. In such as less develop system, the discovery of natural resources and wealth more often than not brings both economic opportunities and governance challenges.

Whereas Mongolia’s recent discovery of copper, gold, coal, and uranium deposits is bound to attract foreign investment, past experience has showed that natural resource wealth in the context of poverty and weak institutions can lead to corruption, conflict and insecurity. In the case of Mongolia, we already see that a mining development is generating concerns about its potential damage to the country’s environment and its traditntal agricultural setting, a lack of infrastructure and water resources, a rise of corruption, and an increasing economic inequality.

The EITI practice at a national level has undoubtedly helped Mongolia with its transparency level in extractive industries. Meanwhile, the country has implemented other measures to fight against corruption as well. The establishment of an Independent Authority Against Corruption in 2007, the Mongolia National Audit Office, and the like all contribute to maintain the country’s revenue transparency and expenditure transparency.

Institutionally speaking, the Mineral Resources and Petroleum Authority of Mongolia is responsible for implementing the mineral law, issuing mining licences, archiving geological data and conducting surveys and research. However, given the high risks involved in mining activities, companies are still tempted to pay bribes and politicians are often bending the rules and regulations applying to the sector in certain companies’ favour because of their corrupt networks. For Mongolia, this creates a rising concern for international organizations and local communities as well as a sense of insecurity among investors. According to World Bank, Mongolia’s regulatory framework is somewhat weak in the areas of public participation, sanctions, informal mining.

For Mongolia’s policy-makers, implementing sub-national EITI reporting can better hold local officials and companies accountable. By focusing on the sub-national level, EITI can actually deliver reports and discourse disagreed payments and intergovernmental transfers to citizens and concerned groups and thus have a stronger impact on its oil/gas and/or mining-producing regions where there is usually a lack of trust among local community, civil society, and potential investors. 

I’ll elaborate more on the second motivation in my next blog post.