Altan San Securities - Mongolia Investment - Demberel: We cannot establish authoritarian regime in mining sector

Demberel: We cannot establish authoritarian regime in mining sector

The Mongolian Mining Journal interviewed recently Mr Demberel, the Head of the National Chamber of Commerce and Industry. The full version of the interview is as follows:
Q: The Oyu Tolgoi investment proposal has been sent back to the Government for re-consideration. A working group has been delegated to study a golden share option through which the Government will have right to ownership. The golden share option was previously offered from the National Chamber of Trade and Industry for the Oyu Tolgoi agreement proposal. What is the benefit of having golden shares?

A: Initially we proposed this golden share idea for the government policy document of the Minerals Industry Development Plan through the year 2015. When people take golden shares, this is purely a notion of interest and rights. In an emergency situation, when resolutions are made contrary to the right of ownership, the golden share entitles a veto. There are many possible investment options in regard to partnerships of the State and private entities. We can work from this aspect. According to the Constitution and the minerals law, the State is owner of subsoil assets. So the owner can transfer his rights via an exploration license, operation permit, development or investment permits, etc. The main thing is that Mongolia guaranteed its rights to dispose, rather than necessarily stressing 34% or 51%. That is why it is important that we implement the project for making an efficient law where the rights are stated for efficient disposal or transfer. As for the current situation, some bring strange ideas about getting a loan in addition to 34%. Our position is relative to issuing golden shares to sell on the Mongolian stock exchange. We are thinking of studying the option and then introduce our final position. We cannot have a so-called state authoritarian regime because history has proven that such a regime is not efficient at all. Thus, the main principle is РРР or forming a partnership of the State and private entities. The State, as an owner/controller makes a profit, but should not be a sole winner. We should practice the principles of "win- win" or, that is to say, all parties should win.
Q: Nearly five billion USD will be invested for the infrastructure of projects Cooperation of the State with the private sector is coming up to a new level.
A: The country is only beginning to provide a legal basis for PPP or Partnership of the State and private entities. Korean РРР law, for example, is a whole volume with many pages. Mongolia does not need such a thick book or a whole packet of the laws. It should be enough that the main principles are stated in the concept and that laws are made for approval as the Government policy document. A legal basis should be provided for "case by case" implementation. That is to say, a legal basis for enforcing PPP variations on certain projects. There is no need for a proliferation of laws and regulations. Sometimes, things are regulated by a contract or an agreement. It should be sufficient if concepts in principle and other principles should be stated in the general law. The rest can be regulated by an agreement or contract. In that case, making international sample contracts can be helpful. The samples should be explained clearly for which project and in which mining sector it is recommended. Mineral resources are huge in the country and this sect development right; whereas, leasing is for transmission of operational rights. "Development rights" means investment in the deposit area where the initial owner remains the same. Actually our laws on this regard are poorly written.

Source: Montsame

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