Questionable Benefits from the Mining Sector
A lot of people have said that Mongolia is at a crossroad. The first road seems to lead toward wealth for Mongolian citizens, a democratic government, a powerful economy, good governance, and a protected wild environment. The other road points to poverty, intellectual enslavement, corrupt government, and devastated nature. The latter seems to be the road Mongolia is heading. However, it is Mongolia’s leaders rather than the road that matters most. Although Mongolia has a unified government, there are signs that its economy and market are splitting into two separate independent spheres. Those divisions range from the formal and informal, urban and rural, as well as the mining and non-mining sectors.
Although it seems that the economy is growing, in reality even the small and medium entrepreneurs’ registration cannot be performed. The government cannot measure or monitor what is their contribution to the economy or how much damage they are inflicting upon the environment.
Disparity between urban and rural society is growing. While the populations at frontier locations are growing scarcer, the living conditions in Ulaanbaatar are worsening due to overcrowding in the city. Although the government is supposedly conducting egalitarian policies, in reality it seems as though inequality is on the rise in educational and health services.
It is becoming apparent that our economy is being divided between the mining and non-mining sector. Mining companies are exporting the majority of their products while importing the majority of their equipment, material resources, as well as human resources. However, non-mining sectors (trade, services, agriculture, animal husbandry, and so on), which have the capacity to create large numbers of jobs, are conducting their operations under the tremendous pressures of rising inflation and fluctuating exchange rates. They are also faced with the difficulty of either raising salaries or risking the loss of capable personnel to the mining sector.
Wealthy mining companies larger than the government and able to outspend its budget are entering into politics as well. A country with an annual budget of USD 2 billion cannot compete with firms able to raise USD 25 billion on the foreign market.
In addition, there is a rising trend in the amount of foreign investments directed towards the establishment of medium-level companies that do not conform to the environmental and occupational safety standards on a regular basis. Meanwhile, national companies are starting to lose their status as medium-level companies. On the other hand, the mining sector, which employs a large concentration of Mongolians, is inhabited by “ninja” artisan miners.
All of this leads to a picture of three completely different worlds within the mining sector. There are powerful foreign investors, followed by medium-level investors, and finally small-scale mining entrepreneurs (the Mongolian “ninjas”).
During this year of globalization, Mongolian business entities and companies can grow and acquire the capacity to compete internationally. However, the reality is quite the opposite. Foreigners are forcefully entering and driving Mongolians into the second and third world. They can do this because they have the money, knowledge, and access.
It can plainly be seen that the world industry is starting to grow thirsty for raw materials. Certainly, the growth of the world population will create an increase in demand for coal and copper. Supply cannot surpass demand. By correctly assessing the external environment, it is possible for Mongolian miners today to grow into large investors rather than work as ninjas. In other words, if we can direct the wealth of mining from a totally different angle, then Mongolia can become one of the world’s largest players. Otherwise, if Mongolia focuses only on its internal structure, it could fall victims to the resource curse.
The most important thing is to determine what are the benefits of growth to the mining sector for ordinary citizens and society at large? Today we should not just sit still, waiting for benefits to come to us. Instead, we should establish the appropriate conditions.
The main tools to rid Mongolia of its mining dependency are diversification to the economy, good governance, and offering new opportunities for citizens to participate in governance. Establishing citizen halls at the provincial and local level and creating community-run associations are the healthiest, most appropriate, and most effective measures to monitor the mining sector and contribute towards the development of responsible mining. In addition, it is important to learn from the experiences of large foreign mining companies, and improve governance and management structures in order to open the door to the world market for other sectors as well.
Although it seems that the economy is growing, in reality even the small and medium entrepreneurs’ registration cannot be performed. The government cannot measure or monitor what is their contribution to the economy or how much damage they are inflicting upon the environment.
Disparity between urban and rural society is growing. While the populations at frontier locations are growing scarcer, the living conditions in Ulaanbaatar are worsening due to overcrowding in the city. Although the government is supposedly conducting egalitarian policies, in reality it seems as though inequality is on the rise in educational and health services.
It is becoming apparent that our economy is being divided between the mining and non-mining sector. Mining companies are exporting the majority of their products while importing the majority of their equipment, material resources, as well as human resources. However, non-mining sectors (trade, services, agriculture, animal husbandry, and so on), which have the capacity to create large numbers of jobs, are conducting their operations under the tremendous pressures of rising inflation and fluctuating exchange rates. They are also faced with the difficulty of either raising salaries or risking the loss of capable personnel to the mining sector.
These sectors can barely subsist under the shadow of the mining sector.
Pro-mining publicity is on the rise, arguing that the mining sector will alleviate all obstacles related to poverty and job creation. It also promises to elevate the standards of living for Mongolians to a level comparable to that of citizens of countries in the Mid-East, where citizens can live well without doing much work.
Pro-mining publicity is on the rise, arguing that the mining sector will alleviate all obstacles related to poverty and job creation. It also promises to elevate the standards of living for Mongolians to a level comparable to that of citizens of countries in the Mid-East, where citizens can live well without doing much work.
Mongolia’s political leaders succumbing to election fever are utilizing their experience in politics to promote such a misconception as well.
However, what is the true situation? Irresponsibility and disorder are taking hold of the mining sector. The incompetence of government can be seen simply from how it has handled the issuance of licensing. The government has issued many thousands of licenses for exploration and excavation throughout country, but the government has concentrated complete authority under itself. It has become unable to monitor operations at all sites with mining activities, but continues to expand its authority over all parts of the country because it does not trust its citizens and the local provincial governments.
Due to the government’s inability to manage the huge inflow of money from the mining sector, people are being put under greater pressures from inflation. The foreign trade deficit has reached USD 1 billion.
However, what is the true situation? Irresponsibility and disorder are taking hold of the mining sector. The incompetence of government can be seen simply from how it has handled the issuance of licensing. The government has issued many thousands of licenses for exploration and excavation throughout country, but the government has concentrated complete authority under itself. It has become unable to monitor operations at all sites with mining activities, but continues to expand its authority over all parts of the country because it does not trust its citizens and the local provincial governments.
Due to the government’s inability to manage the huge inflow of money from the mining sector, people are being put under greater pressures from inflation. The foreign trade deficit has reached USD 1 billion.
Mongolians are buying more and more from abroad. Because the Southern and Gobi provinces trade only with foreign countries, Mongolia will very soon lose control of this region.
Wealthy mining companies larger than the government and able to outspend its budget are entering into politics as well. A country with an annual budget of USD 2 billion cannot compete with firms able to raise USD 25 billion on the foreign market.
In addition, there is a rising trend in the amount of foreign investments directed towards the establishment of medium-level companies that do not conform to the environmental and occupational safety standards on a regular basis. Meanwhile, national companies are starting to lose their status as medium-level companies. On the other hand, the mining sector, which employs a large concentration of Mongolians, is inhabited by “ninja” artisan miners.
All of this leads to a picture of three completely different worlds within the mining sector. There are powerful foreign investors, followed by medium-level investors, and finally small-scale mining entrepreneurs (the Mongolian “ninjas”).
During this year of globalization, Mongolian business entities and companies can grow and acquire the capacity to compete internationally. However, the reality is quite the opposite. Foreigners are forcefully entering and driving Mongolians into the second and third world. They can do this because they have the money, knowledge, and access.
It can plainly be seen that the world industry is starting to grow thirsty for raw materials. Certainly, the growth of the world population will create an increase in demand for coal and copper. Supply cannot surpass demand. By correctly assessing the external environment, it is possible for Mongolian miners today to grow into large investors rather than work as ninjas. In other words, if we can direct the wealth of mining from a totally different angle, then Mongolia can become one of the world’s largest players. Otherwise, if Mongolia focuses only on its internal structure, it could fall victims to the resource curse.
The most important thing is to determine what are the benefits of growth to the mining sector for ordinary citizens and society at large? Today we should not just sit still, waiting for benefits to come to us. Instead, we should establish the appropriate conditions.
The main tools to rid Mongolia of its mining dependency are diversification to the economy, good governance, and offering new opportunities for citizens to participate in governance. Establishing citizen halls at the provincial and local level and creating community-run associations are the healthiest, most appropriate, and most effective measures to monitor the mining sector and contribute towards the development of responsible mining. In addition, it is important to learn from the experiences of large foreign mining companies, and improve governance and management structures in order to open the door to the world market for other sectors as well.
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