A More Constructive Longterm Interaction Between Rio Tinto and Mongolia

By Julian Dierkes

In a previous post, I gave my sense of where the re-negotiations regarding the OT Agreement are heading and how I see this as a step in a repeating cycle. I have also pointed to a quest for (an imagined) perfection at being a factor that contributes to this cycle.

Below, my attempt to offer suggestions of how this cycle could be broken. A third post will look at factors that have led to this dynamic. For some notes on any conflict of interest I have with this topic, see the bottom of the previous post.

How to Address Longterm Conflict Dynamic

Can that repeating cycle of agreement – public doubts about agreement – new negotiations be avoided?

Certainly not within the short-term, i.e. in less than five years, I don’t think.

But I have long thought that the single most important initiative that could place the Oyu Tolgoi project on a more solid basis when it comes to social license to operate is public education about mining. Two slightly less daunting other initiatives could focus on a change in Rio Tinto thinking that approaches Mongolians more on their own terms, including their expectations and aspirations for the mine itself, and for the government to allow more of a role and more capacity-building in the media, academia, and think tanks, for Mongolians to embrace such more independent domestic sources of analysis, and for donors to support that development.

These would all be mutually-reinforcing directions, but success in any one of these three areas would likely enable elements of a more stable longterm relationship between the government and any mining investor, not just Rio Tinto and Turquoise Hill.

Public Mining Education

Since I started getting more involved in questions around mining governance in the late 2000s, Mongolian officials have made huge strides in understanding and responding to the significant challenges that resource-based development poses to policy-makers and regulators. Many different elements responding to those challenges have been introduced and revised over the past 15 years (EIAs, sovereign wealth funds, community benefits agreements, EITI, etc.) and there has been more and more Mongolian government agency in making informed decisions about making these decisions. In 2016 when we were undertaking a small project that focused on young professionals, it was clear that many of those professionals were well-acquainted with the range of possible policy and regulatory challenges and how to meet them. That is not to say that the leadership of the relevant ministries and agencies may have always been best-equipped for these challenges, nor that patronage appointments have not regularly interfered with policy-making, but, generally, policy-making capacity has been steadily growing.

However, from my perspective, education of the public about mining and the decisions it necessitates, has been lagging behind policy capacity.

What I mean here are basic topics such as the mine life cycle from exploration, feasibility, construction, operation all the way through rehabilitation, and the various technical, financial and regulatory aspects that are of variable importance during different stages. But also some of the basic geology and engineering to be able to comprehend the technological challenges related to a deposit like Oyu Tolgoi in particular. Environmental and social impacts are of great importance to understand more fully in that context as well. And some increased financial literacy might go a long way to deepen understanding of debt, but also of different revenue streams and why the public might prefer such revenues over specific contributions made by companies locally, which Mongolians very liberally subsume under “corporate social responsibility”.

A generally greater understanding of a mining project would allow many Mongolians to make more informed decisions, to be less susceptible to populist claims, but also to ask more informed and more pointed questions of their representatives and government to hold them accountable. Such greater understanding would also leverage the desired impact of transparency measures like the EITI which go largely unnoticed by most of the general public.

Avenues to Foster Public Understanding

This kind of public mining education is a task that both, the government as well as investors, can take on. Obviously, there would have to be some prior education about why a citizen should put much trust into educational materials that are provided or promoted by one actor or the other, but that prior discussion of the reliability and trustworthiness of education materials would have many positive spin-off effects itself. Many different arrangements could be imagined where investors and government contribute funding that enables training/education developed independently.

Training could be deployed in schools (this seems really important as a basis for vocational training in any case), but also through various media and potentially incorporating the e-government platforms under development by the current government. This has also been an area for curriculum development in higher education, though largely in the technical fields focused directly on mining, less so, I think, in ancillary fields like business, law, etc.

Note that the level of public education about mining may also seem low in mature mining jurisdictions like Canada. Even a well-educated person selected randomly on the streets of Vancouver (well, perhaps not downtown where a lot of mining finance is concentrated) might know little about the life cycle of a mine. But in Canada, the public generally relies on very well-developed capacity in the press, in academia and among civil society organizations to substitute for an individual in-depth understanding. Given the huge importance of Oyu Tolgoi and the mining sector to the future of Mongolia, public education might have to take precedence over the establishment of trustworthy institutions (though see below on capacity building).

Note that I am aware of several efforts at providing public education on mining, but that they seem to not have taken root.

How Rio Tinto Approaches Mongolia

From the outside, the overwhelming sense of RT’s engagement has been that they wish they could just treat the country as a spreadsheet. There have been few attempts of engaging Mongolians on their own terms to my knowledge. Sure, RT surely has had conversations, perhaps even more social interaction, with members of the government, but even that has seemed more like a necessary burden than an opportunity to shape their strategy in developing Oyu Tolgoi. That attitude is also reflected in the frequent turnover of RT-sent OT CEOs.

Clearly, RT was hampered by the legacy of the problematic interaction between Robert Friedland/Ivanhoe and the Mongolian public, but efforts to overcome those difficulties have also been limited.

The attempt to ignore Mongolian expectations and aspirations and to represent a view that managing this kind of project would be the same where ever in the world you might find yourself, has led to some notable sources of tension or at least disappointment. The most glaring in this regard seems to be that many Mongolians did and perhaps still do expect Oyu Tolgoi to develop like Erdenet has, ie as an integrated Kombinat that houses, feeds, and employs workers and their families on the basis of a vertically and horizontally integrated enterprise. The fact that the construction of a city in the Gobi would make no sense (the lack of water is only the most obvious of many challenges), has not diminished the expectations that many Mongolians had of the project.

At least the local RT and OT management seems to have embraced a need to communicate more actively with the Mongolian public, but it is still unclear to me whether that message has landed with central RT management. This remains a big obstacle to a more stable long-term relationship, I believe.

Capacity Building

The final piece that would promote a more productive relationship in my mind would be more robust capacities outside of the government and companies. As I mentioned above, many Canadians rely entirely on the media, civil society and academia to monitor, analyze and explain the development of industries. And that is on top of the political opposition in legislatures that may have populist tendencies on occasion but will also be held accountable by the public if their analyses are not focused on specifics of a project.

This would be no different in Norway, Australia and many other countries and it is not at all limited to the resource sector. These institutions have failed to develop fully over the past 15 years in Mongolia and they have no where near the standing and resources required to act as a trusted monitor on government and corporate decisions.

Providing the independent analysis that would hold other actors to account has become increasingly more difficult (rather than easier) when the political culture has veered to suspecting any political action to be motivated by potential personal gain, not a desire at providing analyses to motivate political action for generalized benefit.

The media had its finest moment during the SME Fund scandal, I would argue, but investigative capacity has been much reduced. There are specific outlets that have a credible specialization on resources matters like the Mongolian Mining Journal, but they have failed to escape their niche, in large part, I suspect, because more general media have not embraced their brand of independent analysis.

No credible think tanks have emerged and only some academics are present with detailed analyses in policy debates. There are some commentators like Jargal de Facto, but he remains a fairly lonely voice in some part because many other commentators prefer to speculate about his motivations rather than questioning/extending/reinforcing aspects of his analysis. There are also smaller media outlets, perhaps some podcasts, for example, that may be more credible to some readers/listeners,

There have been numerous attempts to build more independent bodies for policy analysis, or to train and support journalists in their efforts at greater independence. It would be harsh to say that all of these have failed, but they certainly have not thrived. Perhaps trust in independence does not come easily and we have to accept that this may develop over time in Mongolia, but it is clear that if there were more, and more independent eyes on the OT Agreement, for example, this would force the government and perhaps political parties into clarifying any criticisms of the agreement that they might have.

Impact

Of course, the repeated cycles of negotiation and the lack of broad support for the OT project have many different aspects that lead to this dynamic. It is highlight unlikely that one suggestion or even three suggestions would “fix” this dynamic. I thus hesitate to claim that the adoption of any or all of the three suggestions would necessarily lead to a longer-term agreement. But in the absence of many other proposals on how a longer-term relationship might be forged between investors and the government to the benefit of Mongolians, I do believe that these would be three topics that should be considered by investors, the government and donor organizations, but also by Mongolian civil society.

Update

Some further discussion on Reddit:

About Julian Dierkes

Julian Dierkes is a sociologist by training (PhD Princeton Univ) and a Mongolist by choice and passion since around 2005. He teaches in the Master of Public Policy and Global Affairs at the University of British Columbia in Vancouver, Canada. He tweets @jdierkes
This entry was posted in Education, EITI, International Agreements, Mining, Mining Governance, Oyu Tolgoi, Oyu Tolgoi, Politics, Public Policy and tagged . Bookmark the permalink.

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