Speculation Surrounding Erdenet Sale

By Julian Dierkes

A Massive Privatization Coup Right Before an Election?

It seemed odd that there was an announcement just before the June 29 election that the 49% portion of the longtime engine of Mongolian development, Erdenet mine, that was owned by Russian Monrostsvetment  was sold to the Trade and Development Bank of Mongolia. The timing suggested that this was a political scheme related to the election. This was reinforced by the general perception that TDBM was associated with the DP.

Given that the DP was likely to lose big, the suspicion at the time was that the DP was trying to sway the election by showing itself to be a guarantor of Mongolian interests.

Obviously, voters were not swayed. To the contrary, a common interpretation at the time was that the MPP did not react to the announcement beyond an initial press conference  in part because it would showcase DP “muddling” in the economy and DP corruption. Voters would be able to judge for themselves, and it appears that they did.

But is that what was behind the relative quiet in reaction to the Erdenet announcement from the MPP?

Asking Questions About the Sale of Erdenet

Lkhagva E of Mongol TV has taken a leading role in investigating the sale as he reported previously on this blog. He has stayed with this story.

Initially, there was an announcement by Prime Minister J Erdenebat that a cabinet committee would investigate the sale. Lots of questions have been raised about who authorized the sale, who spoke for the Government of Mongolia in passing on a first-right-of-refusal opportunity to purchase the Russian stake, how is the governance of Erdenet Mine now organized (particularly given the re-shuffle of the management of Erdenes Mongol, the state holding company), etc. Erdenet is designated a strategic asset so that governance questions are especially pertinent. The committee was due to report August 5, then again August 25, but no report has appeared.

Asking Even More Questions About Erdenet

It now appears that Ts Nyamdorj, a leading politician in the governing Mongolian People’s Party, has taken on this issue and is pushing hard to follow up on some of the confusing leads.

Nyamdorj himself was forced to resign as chairman of the Ikh Khural in 2007 after it was asserted that he had changed laws that parliament had voted on. He continues to be a force in the MPP, however. While he is not a member of party leader M Enkhbold’s faction, he does not seem to be particularly antagonistic towards Enkhbold.

Speculation about Context for Erdenet Sale

In his pursuit of answers on the Erdenet sale, however, Nyamdorj appears to be pushing hard against party colleagues as well as the DP. Some of his remarks imply that there may have been collusion about the sale between the DP and the MPP. Many Mongolians are interpreting this to mean that some kind of agreement between Enkhbold and Pres. Elbegdorj must have existed at the time. That is also seen as speculation, but a reasonably explanation of why the MPP’s reaction to the announcement of the sale was so muted.

In response to some of the revelations by Nyamdorj, the government has begun releasing some documents and also made cabinet minutes of a meeting on June 13 public.

While I would emphasize that I am reporting on speculation here (some of which founded on documents released, but some of it on interpretation), this speculation is significant in shining a light on the activities of the president and the chairman of parliament with great implications for Mongolia’s further development. For development to be socially and economically sustainable, assets like Erdenet have to be protected with particular vigilance on behalf of Mongolians. The current understanding of how Erdenet was “privatized” suggests very little care, and hints at personal rather than national advantage.

It is also important to recognize that if some of this speculation about the sale of Erdenet is born out by further documents and revelations, this will severely undermine the MPP government’s efforts to portray itself as having turned a corner in how investors (foreign and domestic) are treated and how reliably the government as an investment partner is.

This entry was posted in Corruption, Erdenet, Ikh Khural 2016, Mining, Mining Governance, Policy and tagged . Bookmark the permalink.

7 Responses to Speculation Surrounding Erdenet Sale

  1. If transaction of Erdenet was ‘non-compliant’ , can it be unraveled? Is the prior cadre of PMs, who did not protect peoples interest, as people are actual owners, guilty of abuse of power and thereby breaking law and punishable by same?

    • Very interesting question. I would imagine (but don’t know exactly) that there is some possibility to reverse this kind of sale. The important part in my mind would be a very strong message to people involved in this (and future) transaction that they will be less likely to cut secret deals (if that is indeed what happened).

    • Iveelt says:

      At least two tiers of legal proceedings: The prior PM’s approval to alter the board structure in relation to the sale of the 49% shares, and, separately, a violation of law on the first-right-of-refusal process on the sale. No viable professional legal interpretation has been published on intricate inter-relation of the relevant statutes of the Constitution vs. the Administrative Law on this case. Along with the absence of such, the current cabinet moved the case over to the anti-corruption agency, which is notoriously rumored to be under the influence of the President’s office. This action possibly adds to the complication of the case legally, IMO.

  2. But the degree of less likely is equal to the penalty for the infraction. No penalty— no ‘less likely’.

    thx for keeping the subject in public focus—- this also helps the ‘less likely’

    Can we get more access to LkhagvaE. Seems to take quite a bit of courage to expose the government for being inappropriate (a lady journalist seems to have been permanently quieted in the not too distant past).
    He may help spark more credibility for Mongolias journalism.

    Thank you

    • I’m delighted that Lkhagva has been following this story so carefully. As you probably know, he’s also very active in training and professional development activities for journalists. He and others like him have an important role to play in Mongolia’s development.

  3. Iveelt says:

    There is also an interesting fact about Erdenet that perhaps may have some relevance. Back some years ago when consolidating the state owned strategic assets under Erdenes Mongol, the government and the parliament have left Erdenet out on its own. Perhaps to avoid complications with consent from the Russian state shareholder entity. If the shares have been transferred successfully, would it not make sense now to consolidate the holdings of the state owned shares under Erdenes Mongol? As intended, such consolidation attempts better transparency in reporting and management, aiming at strategic economic impact.

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