There is a buzz around town …. the excitement about the Oyu Tolgoi agreement is yet again front page news ….. signature is imminent we are told … decisions will be taken in the next few days….this time it will get done…
This is not the first time we have heard this and probably not the last.
The current spring session of parliament is closing soon; Naadam is in less than 2 weeks. The parliament still has to officially confirm the equity based deal, a democratic president is trying to influence an MPRP majority parliament into action, political parties have to voice objections, create endless committees and special review groups. And of course, the investors have to find an agreement that they can sign. I personally see no quick resolution to this dilema…
Why does the OT agreement need to be the template for all other Mongolian mining agreements? Why can each agreement not be considered for its own merits depending on the circumstances at the time of negotiations? Why does Mongolia need to make an agreement from scratch instead of basing it more on templates from other sucessful mining agreements such as the ones that can be found in Canada, Chili or Australia? How big of a role should the Government play in the private sector?
While Mongolia ponders those important questions, it is increasingly at the mercy of the goodwill of foreign nations for ever increasing grants and loans. Every week brings new multimillion dollar loans to Mongolia while it does not seem the country has a clear strategy on how it will pay those loans back. It is spending money today that it hopes it will make tomorrow, a flawed strategy which sadly puts Mongolia in a weak negotiating position. What has been the opportunity cost of the past 5 years of discussions on OT? Could the current crisis have been avoided by swifter actions?
Even if, by some miracle, the agreement was to be signed this summer, it will probably be too late for Ivanhoe and Rio Tinto to start real, large scale investments and construction at the OT site and building its infrastructure in UB before the onset of winter. The trickling down effect will take a little while yet… This means that they will have to wait until next spring to start the heavy investments, thus, the possibility looms for yet another winter of discontent.
Furthermore, I believe that the OT investment has been blown out of proportion, it is not a magical key that will suddenly resolve all of Mongolia’s financial and foreign investment problems, it is only a part of a complex solution. There is more to the recovery than OT, TT is also important but most important of all is what the Mongolian Government will do with the revenues generated by those agreements. It seems that good financial management is the true key of swift recovery.
There is constant discussion and clamouring from parliament stating that they want an agreement which brings in as much revenue to the Mongolian people as possible. Fair enough, but I never hear discussions or strategies being made as to how those revenues will be distributed to the people? The motherland gift is a perfect example of a populist promise made with no thought as to how it will be done, who will pay for it and how it will be fairly distributed. Will the people get a real voice in how the revenues are distributed, will its allocation be transparent or will a major part of revenues be wasted on corruption, inefficient spendings and useless populist projects? This is what I am most interested in, how will the money be allocated, spent and so forth.
I hope the agreement is signed soon, if only to improve the image of Mongolia as a serious country attractive to foreign investments, but sadly it seems that over the past few years, too much time has been spent by parliamentarians fighting for personal gains instead of fighting for the good of the people.
It is my strong believe that a democracy which allows its members of parliament to own, manage and have financial interests in the private sector is an intrinsically flawed system. Public servants should serve the public above and beyond their own financial and personal interests. Providing the temptation to serve their own needs is dangerous as it changes the perspectives of their functions and ultimate decisions.
As Oscar Wilde famously said: “I find that I can resist almost anything except temptation…”
