Canadian Bilateral Aid for Mongolia?

The question of whether Canada should offer bilateral development aid or not has been looming large since Canada first posted a resident ambassador in Mongolia in 2008.

I firmly believe not only that bilateral aid can continue to make a constructive contribution to Mongolian development, but also that Canada should consider where it may have particular expertise and experience to offer when selecting areas that such bilateral aid might focus on.

An article in the Globe and Mail, “CIDA funds seen to be subsidizing mining firms” on January 29 examines the apparent policy of the Conservative government to focus development aid on activities related to mining and resource extraction. This policy is seen by some to be self-serving and, worse, corporate welfare in disguise. I might generally sympathize with such criticism, but would disagree with the argument and logic in the case of Mongolia.

Development aid is being re-examined from many angles. Ian Smillie, “a long-time foreign aid watcher and critic” recently made an argument quite similar to those referenced by the G&M in a post for the Canadian International Council, esp. in its reference to the mining industry. The G&M has been examining similar arguments in its New Humanitarians series.

A brief general argument for expertise-based development aid

Yet, I believe that there is a reasonable case to be made for development projects that are focused on resource extraction and funded with (my) taxpayer’s money, namely when this is an area where particular expertise exists.

A significant mining industry and significant public expertise on the regulation of resource extraction do not co-exist in Canada by any accident, but because the mining industry is long-established and plays an important role in provincial as well as federal politics.

NGOs, government offices, academics, as well as corporations have thus developed extensive expertise on mining in Canada, expertise that would be much less prominent in donor countries with a less prominent mining sector, say The Netherlands or Denmark.

While it should be clear for what purposes (not private/corporate gain) bilateral development aid might be deployed, I believe that such aid could be offered to Mongolia and have a positive impact.

Disclosure
If bilateral aid were to be extended to Mongolia, I would have a reasonable chance at participating in aid-projects in the future, as one of the few academics in Canada who specializes in contemporary Mongolia to some extent.
I do not knowingly own any mining stock.
I am not currently a member of any political party.

Beyond the general argument for an expertise/experience-based aid program, let’s turn to the argument on Mongolia specifically.

What “Canadian” projects could benefit from aid to Mongolia?

Canada is often mentioned as the second-largest foreign direct investor in Canada. Virtually all of this investment is private investment in mining ventures. The lion’s share of this investment is tied to Ivanhoe Mines share in the giant Oyu Tolgoi project. This project and Ivanhoe’s role in it has led to a perception among many Mongolian’s that foreign investment in mining is Canadian investment in mining.

However, Ivanhoe Mines appears to be on its way out of the Oyu Tolgoi project. Rio Tinto recently acquired a majority of Ivanhoe Mines shares and is clearly calling the shots on the Oyu Tolgoi project (see Mining Weekly for an update on this topic). While Rio Tinto is linked to Canada through its Alcan aluminum venture, it is an Anglo-Australian corporation.

Even in its heyday as an investor in Mongolia, it would be a stretch to call Ivanhoe Mines a Canadian company in any aspect other than its mailing address and the location for its corporate headquarters. Ivanhoe’s driving force, Robert Friedland, is a Canadian citizen, but does not appear to spend much time in Canada, nor does he play a big role in any meaningful Canadian community nationally or locally in BC/Vancouver. In fact, for a company of its size (largely linked to the Mongolian project) Ivanhoe has virtually no public or community profile in Vancouver and has not contributed to any Canadian-Mongolian activities, projects or efforts that I am aware of.

Despite perceptions and portrayals, I thus think it’s a stretch to consider Ivanhoe Mines to be a Canadian company in any qualitatively meaningful way.

Mind you, they sure could use some help with their public profile in Mongolia which is not good.

What about other Canadian mining activities in Mongolia?

Two Ivanhoe Mines satellites, South Gobi Resources and Entrée Gold have active exploration programs and, in the case of South Gobi, are producing coal. These companies are no more meaningfully Canadian than the Ivanhoe mothership.

Uranium exploration has ground to a standstill following the difficult case of Khan Resources and its turbulent relationship with Mongolian regulatory authorities.

Centerra Gold’s Mongolian Boroo Gold unit has finished production at its Boroo mine and is not yet producing at its Gatsuurt site.

Prophecy Coal runs an operating coal mine on the Russian-Mongolian border and is developing a further coal mine that would be coupled in a very interesting way with an on-site powerplant to feed electricity into the Mongolian grid.

Beyond that I am only aware of exploration projects by junior miners. [See my list of foreign mining projects in Mongolia.]

While Canada-based activities in Mongolia are thus quite significant in terms of their overall volume, the vast majority is tied to a single project that is not likely to be “Canadian” in the longterm (and never really was). If the Harper government had a plan to use aid to indirectly benefit Canadian mining companies, Mongolia would not be a very good place to carry this plan out as there are few companies that could benefit. I doubt that even the most crass of business-interest driven policy-makers would be eager to develop a policy that would primarily benefit Robert Friedland, perhaps one of Canada’s internationally least-popular offshore citizens.

The positive case for bilateral aid to Mongolia is thus in my mind based on a) expertise, and b) a need to counteract and balance some of the activities of a single actor, Ivanhoe Mines, which is perceived to represent Canada in Mongolia even though it is not meaningfully a Canadian company.

This entry was posted in Bilateral Aid, Canada, Development, Media and Press, Mining, Mining, Oyu Tolgoi and tagged . Bookmark the permalink.

3 Responses to Canadian Bilateral Aid for Mongolia?

  1. Marissa Smith says:

    What about Redpath, whose logo is half a red maple leaf, and other contractors?

    • You’re right, of course, Marissa, that the mining industry doesn’t only consist of mining companies themselves, but of a large field of supplies, contractors, etc. Here there actually may be much more significant Canadian involvement than in the actual ownership of mines, but these consultants, engineering firms, etc. are generally relatively invisible to consumers, aren’t they?

  2. Marissa Smith says:

    Yeah, and even after the Halliburton/Cheney scandal, right? I agree that such aid wouldn’t be some kind of direct transfer from the Canadian government into the pockets of the top execs of “Canadian” mining executives. In any case though, I think we can say that investments that the Canadian government makes into the mining sector are going to benefit Canadian companies, workers, and investors (including small-time stuff like individuals with retirement portfolios). Not that that’s a reason in itself to not have such bilateral aid of course.

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