Presentation Summary: Environmental Regulation

Mongolia Lecture Series
Institute of Asian Research, UBC

A Panel Presentation

FAQ Mongolia: Some Answers to the Most Frequently Asked Questions on (Mining) Policy

Supported by

Presentation Summary

How Have Recent Policy Shifts in Mongolia Shaped Environmental Management in the Mining Sector?

 Kirsten Dales

Uniquely situated between the Siberian Taiga, Central Asian Steppe and Gobi dessert, Mongolia’s iconic landscapes support incredible biodiversity and a distinctive culture strongly tied to the land. Traditionally, as a pastoral centric nomadic herding society dependent upon fragile grasslands, Mongolian herders migrated their herds to allow for revegetation of recently grazed areas to maintain ecosystem function and sustain future generations. These age-old practices serve as simple but effective approaches to environmental conservation, which, is deeply embedded, in Mongolian national identity. Contemporary environmental management however faces new and complex challenges with the rapid expansion of the mining sector and adapting to the adverse effects of climate change.

Resource rich developing nations such as Mongolia face a number of difficult issues to overcome the ‘natural resource paradox’ and to identify environmental priorities in the wake of rapid economic development. Global commodity markets can swing creating uncertainty in revenue streams and unstable, corrupt or limited capacity of government institutions can fail to implement effective environmental management strategies leading to land degradation, water pollution and scarcity, biodiversity loss, increased vulnerability of rural populations, conflict, and particularly in the context of Mongolia, the loss of cultural heritage which is inextricably linked with ecosystem health.

Policy in Mongolia has faced a number of challenges since emerging from behind the iron curtain, adjusting to a market economy and adopting democracy as a parliamentary republic in 1990. Environmental management is not as the name would suggest, managing the environment but taking action to manage the adverse impacts on human societies on natural systems and this constitutes a difficult task even for stable democracies of developed nations. Environmental policy and management approaches in Mongolia have been shaped by policy shifts and proximate geopolitical influences of Russia and China, as well as resource demands of the global market place. Although at times viewed as politically unstable, in the context of environmental policy Mongolia has seen a devolution of environmental responsibility from central powers to local aimag (province) and soum (village) administrations, indicating a trend towards more decentralized approaches, supporting environmental mainstreaming.

Surveying the political landscape in the context of mining, the Mongolian government focused to a large degree on encouraging foreign investments and enabling trade, particularly in the 1990s. The National Environmental Action Plan of 1995 implemented 14 Environmental laws significant in the communicating the message of environmental values but, alas, were weakly enforced and lagged behind the rapidly expanding mining sector leading to widespread environmental degradation from the formal and informal mining sectors. In following years, a number of additional laws were passed aimed at more strict enforcement, increased administrative and civic liability, and development of a more conducive legal, economic and institutional environment for the sustainable use of natural resources.

The Mongolian Minerals Law of 1997 drew on western mining models and was regarded at the time as the most foreign investor friendly mining policy in Asia. By investors it was considered to be progressive, internally consistent and effective but there were weaknesses in relation to environmental responsibilities. This greatly improved the legal climate for direct foreign investment by clearly defining legal regulations and simplifying the mining licensing process while reducing royalty and exploration fees.

In 1998 the enactment of the Environmental Impact Assessment law reflected international policy norms of EIAs in the mine licensing process and at the same time the Ministry of Nature and Environment instigated a stronger push towards decentralized control to the aimag, soum and bagh level. This can be viewed as an important step in the right direction and emphasizes the intent on adopting international best practices however some feel this law lagged the rapid development which had already taken place in the extractive mineral sector.

Controversial legislative changes arrived in 2006 with amendments to the Minerals Law. The 2006 Law reserved some of the substance of 1997 version, but contained new provisions reflecting a shift towards resource nationalism providing for State entitlements and increasing potential for political interference. The legislative reform weakened rights and security of mineral titleholders in Mongolia and was criticized by investors for lack of detail and clarity in a number of articles. Uncertainty still exists as to how a number of important provisions will be interpreted and applied in particular around provisions surrounding concept of ‘Deposits of Strategic Importance’. This provision allows the government to designate certain deposits as strategic and demand a particular share with limited recourse for the mining industry and was not well received by investors. Further, the imposition of a 68% Wind Fall Profit Tax destabilized direct investment sending a strong message that times were indeed changing in Mongolia’s ‘wild west’ gold rush era paralleled to that of the 1800’s in North America.

The Mongolian Nature Protection Civil Movements Coalition (MNPCMC) and the Mongolian Environmental Civil Council (MECC) were formed in 2008 with the goal of advancing cooperation across environmental NGOs and to engage with the government. The vocal and instrumental River Movement groups focused on the serious issued of water pollution and over use associated with mining and a number of other NGOs continued to promote environmental advocacy and demand increased accountability. These organizations were seen as instrumental in the creation of the 2009 Law on the Prohibition of Minerals Exploration in Water Basins and Forested Areas, also known as the law with the long name.

This law is particularly of consequence as it suspended mining near headwaters of rivers, in sensitive riparian habitats and in protected forest areas. Cancelled licenses were not however released from their duty to rehabilitate the environment and must be completed within 2 years under the monitoring of Local governors and citizens emphasizing decentralized environmental co-management and public inclusion.

This law is not without its problems however, as the Government is required to pay compensations to the mineral license holders whose licenses were cancelled, but a mechanism to enable this has yet to be developed or implemented. Further, this law is seen as inconsistent by a number of actors as although some licenses were revoked, a number that breached the conditions outlined in the law were allowed to continue operations. Further, this law does not apply to ‘Deposits of Strategic Importance’, for which, the criteria and decision making process remain vague and may hypothetically create a loophole for specific mining areas.

Although the ‘Law with the long name’ was seen as a breakthrough for the environmental movement, mixed signals were sent as the highly publicized Oyu Tolgi mega mine project, thought to be the largest copper-gold mine in the world, was finally signed. In addition, an announcement was made that the Wind Fall Profit Tax was to be reversed in 2011 seen as a move to again promote foreign investment but left some wondering what the future would hold for the Mongolian sector.

As a consequence of the rapidly shifting legislative frameworks and number of unknowns, mining companies are obliged to cope with an unstable investment climate, inadequate infrastructure and limited financial and human resources of local administrations in charge of environmental management, thus the adoption of the principals of responsible mining practices may not constitute as a priority nor does the implementation of environmental rehabilitation efforts or civic engagement. While a limited number of mining companies have taken the lead in developing best practices in land reclamation, environmental rehabilitation and integrating community engagement into the process, supported by the ‘Law with the long name’, most companies have yet to make concerted efforts in these areas.

As of 2011 approximately 6,300 exploration and mining licenses have been issued in Mongolia covering approx 32% of the country. Historically due to its vast size and with the lowest population density in the world, Mongolia has always faced difficulties with enforcing regulations on the mining industry largely attributed to a lack of resources and overlapping areas of institutional responsibility. Although arguably in place, Mongolian environmental policy has been viewed as reactionary and inconsistent however, it must not be forgotten that progress is being made albeit not fast enough for some … and perhaps to fast for others.

The increasingly prevalent role of CSOs and Environmental NGOs in environmental advocacy and management approaches at the local level are linked to policy reform and reflected in recent legislative revisions indicating a positive trend towards strengthening the capacity of natural resource and environmental management. However with that said, the process is an imperfect one and a number of issues with institutional capacity, legislative enforcement and accountability remain. Looking ahead, the nexus of tripartite engagement between Government, Industry and civil society that will be required to support sustainability in the mining sector, if that can in fact come to fruition depends not only on social responsibility but a continued commitment to environmental sustainability that hopefully will become more then just a normative concept in this unique and vast Asian nation.

Video Recording of the Presentation

6’28” – 20’45”

About Kirsten Dales

Kirsten Dales is a Masters of Science Candidate studying Environmental Management and at Royal Roads University in Victoria BC. She has worked as a researcher for Duke University, Dartmouth College and the University of California Irvine in environmental science. Ms. Dales has been involved in environmental conservation projects in Nepal and most recently as an Independent researcher with the Engaging Stakeholder for Environmental Conservation (ESEC) project with The Asia Foundation in Ulaanbaatar, Mongolia.

This entry was posted in Environment, Environment, FAQ Mongolia Dec 16 2011, Mining, Policy, Regulation. Bookmark the permalink.

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