Mongolia's Government Woes May Help MiningMongolia's Government Woes may Help Mining
By: Dorothy Kosich
Posted: '13-JAN-06 05:00' GMT © Mineweb
RENO--(Mineweb.com) As Mongolia's 15-month old coalition government teeters on the brink of collapse, the result may ultimately provide a more stable political situation for foreign mining operators.
The UB Post of Mongolia reported Thursday that M. Enkhbold, the Chairman of the Mongolian People's Revolutionary Party, said that 10 ministers out of 17 cabinet members have agreed to resign. The cabinet officials who resigned include the Minister of Nature and the Environment and the Minister of Fuel and Energy.
In a news conference Thursday, Enkhbold said a slowdown of economic growth and increasing inflation caused the MPRP to leave the coalition government. The MPRP is expected to form a new government. A parliamentary vote on the formation of a new government was scheduled for Thursday. However, Prime Minister Tsakhiagiin Elbegdorj said the Democratic Party would not be a part of a new government. The MPRP demanded that the Prime Minister resign.
The two parties formed a coalition after national elections in 2004 in which neither party won a clear majority. The MPRP has 38 out of the 76 seats in Mongolia's Parliament, the Great Hural. However, 39 seats are required to take power. MPRP head Nambarum Enkhbayar is the President of Mongolia. However, under Mongolia's system of government, the President's role is ceremonial while the Prime Minister and Parliament hold the real power.
In 1990, Mongolia abandoned its one-party state in favor of democracy and privatization. But, the withdrawal of financial support from the former Soviet Union caused the nation's economy to collapse. An estimated one-third of Mongolia's population is believed to be living in poverty.
Prime Minister Elbegdorj, a Democrat, is now fighting for his political life. More than 1,000 protestors forced their way into the office building of the MPRP Thursday, according to the national news agency Montsame. The protestors demanded that the government of Elbegdorj stay in power.
Ironically, the resignation came during a government debate over changes to Mongolia's mineral law. The proposed changes will be submitted to lawmakers by April. Bloomberg reported that the government is considering limiting the amount of time that companies can keep their exploration rights. A parliamentary group promoting the amendments contends that the changes are needed to stop speculation on the value of exploration permits and to raise funds to fight poverty and help the environment.
R. Edward Flood, Deputy Chairman of Ivanhoe Mines, told Mineweb that he believes the "vote of no confidence" may lead to the formation of a more stable government which would be more beneficial for foreign miners. Flood explained that Mongolia's Constitution is configured to handle the current political situation.
Last month, the Mongolian Cabinet decided not to seek state participation in future mineral deposits that may be discovered by privately funded exploration and mining companies. In a recent press release, Ivanhoe Miners Chairman Robert Friedland said the Oyu Tolgoi copper-gold project in the South Gobi region and Ivanhoe's Mongolian exploration licenses would not be affected by the proposed changes to the nation's eight-year-old mineral law. Ivanhoe, BHP Billiton, CVRD, Centerra Gold, and others companies are exploring and/or mining in Mongolia.
If enacted into law by Parliament as recommended by the Cabinet, the amendments would introduce a public auction system to allocate future exploration and mining licenses for areas where state-funded geological investigation or reconnaissance works have been conducted, areas surrendered by license holders, areas where licenses have been revoked, and areas for new licensing. The proposed changes would also require additional performance criteria for environmental restoration work, according to a recent Ivanhoe release.
However, Elbegdorj told the media that "if the government resigns, potential business investors, international communities, who were looking at Mongolia with positive belief, would flee from Mongolia."