Economic Dependence of Mongolia on Minerals: Consequences and Policies

Description

This book is a compass for resource rich-developing countries, taking Mongolia as a case study. Policy aspects of the development of the mining sector in developing countries such as Mongolia and its impact on the economy and society are reviewed. The book deals with specific industry policies and challenges identified by policy makers, its characteristics and policy recommendations moving forward with an emphasis on the importance of evidence-based policy making (EBPM). It begins with the country’s development strategy and the role of the mining industry, highlighting the fact that major strategic and policy documents still suffer from ambiguity and clear guidance as well as gaps in policy directions. The book also highlights the need for policy makers to improve transparency initiatives. Authors emphasize transparency or lack thereof in mining contracts, taxation, trading, and marketing and provide specific policy recommendations and alternative policy actions. The macroeconomic and social impact of the mining sector and the role of foreign direct investment is also discussed. Particularly, utilizing in-house economic analytical tools, the role and impact of resource revenue management policy in Mongolia is evaluated. Further, the impact of mining projects on the livelihood of local households as well as the importance of obtaining a social license to operate is discussed. This monograph is recommended for readers who want an in-depth comprehensive understanding of the mining sector, EBPM, and key lessons learned in managing natural resources in Mongolia. Acknowledgments Contents Editors and Contributors Introduction 1 General Background 2 Mining Sector Contracting in Mongolia 3 Foreign Direct Investment in Mongolia: Impact and Determinants 4 Mining Development Strategy in Mongolia 5 Budget Revenue Management 6 Social License to Operate Mining Sector Contracting in Mongolia 1 Introduction 2 Mongolia’s Mining Contracts: Specific Features 2.1 Mongolia’s Contracts with Foreign Enterprises for Investment: Before the Transition to a Market Economy and Early Transition Years 1990–2000 2.2 Modification of the 1993 Law on FDI and Its Implications for Contracts in Mining 2.3 Contract Spillovers from Mining to Finance 3 Ensuring a Positive Outcome on the Host Country: Crucial Issues, International Practices, and the Oyu Tolgoi Agreement Example 3.1 Fiscal Regime: Tax Stabilization 3.2 Equity and Financing Arrangements 3.3 Local Purchases of Goods and Services 3.4 Infrastructure Development 3.5 Maximization of Employment Opportunities 3.6 Community Engagement 3.7 Social and Environmental Issues 4 Recommendations for a Sample Mining Developing Contract for Mongolia 4.1 General Issues 4.2 Mongolia’s Case References Foreign Direct Investment in Mongolia: Impact and Determinants 1 Introduction 2 Dynamics of FDI in Mongolia 3 Economic Impact of FDI in the Mining Sector 4 The Determinants of FDI 4.1 Global Commodity Prices and FDI in the Mining Sector 4.2 Investment Climate in the Mining Sector 4.3 Other Institutional Dimensions 5 FDI and Economic Diversification 6 Conclusion References Mining Development Strategy 1 Introduction 2 Overview of Strategic Documents in the Minerals Sector 3 Assessments of Strategy Documents in Accordance with NRGI Benchmarking 3.1 Cognizant of the Reality 3.2 Considering the Long-Term Approach 3.3 Comprehensiveness and Inclusiveness—Consideration of the Full Range of Issues in the Management of Resource Wealth and Development, Implementation and Oversight Processes Must be Inclusive 4 Conclusion References Budget Revenue Management 1 Introduction 2 Literature Review 3 Fiscal Rules and Sovereign Wealth Funds 3.1 Fiscal Rules 3.2 International Sovereign Wealth Funds 3.3 Mongolia’s Sovereign Wealth Funds 4 Dynamics of the Mongolian Economy 5 Current State of Budget Revenue Management in Mongolia 6 Imposition of the FSL 6.1 Scenarios and Simulations 6.2 Simulation Results 7 Sensitivity of Economic Indicators to the Changes in the FSL 7.1 Scenarios and Simulations 7.2 Simulation Results 8 An Assessment of the Potential Impact of SWFs on the Mongolian Economy 8.1 Scenarios and Simulations 8.2 Simulation Results 9 Conclusions References Impact of Mining on Local Livelihood and Social Licensing in Mongolia 1 Introduction 2 Mining Impact in Mongolia and Cases of SLO 3 Understanding the SLO and Its Evaluation 3.1 What is the SLO, and What Studies Recommend for the Mining Sector? 3.2 Evaluation of SLO and Application of Methodologies 4 Social Acceptance Survey: A Case of Erdenes Silver Resource 4.1 Salkhit Project Overview 4.2 Conducting Social Acceptance Survey 4.3 Survey Result 5 Conclusions and Recommendations References Appendix Other Survey Statistics