Edited by ITOFO.J

According to the recent developments of the world’s biggest coking coal reserve Tavan Tolgoi where the choice of a full state ownership and contract mining seems to have been opted for, it appears Mongolia’s Government has taken the decision to expend its role in the exploitation of its natural resources of coal, copper, gold and uranium.

Unfortunately, its prospects of rightly increasing its control of and profit from the exploitation of its natural resources may be compromised by this dire winter’s zud - the worst temperatures in 37 years - and the burden of a huge fiscal debt.

Because of the debt and the looming financial and humanitarian crisis as the numbers of livestock perishing and herders migrating to the city increase, the Government is going to need cash rapidly to avoid the deterioration of its current economic situation and of the living standards of the majority of its citizens.

The arrival of herders fleeing the countryside for the cities is going to exacerbate further the already complicated situation of the ger districts where unemployment thrives and developments of urban and social infrastructure are urgently needed.  

Some believe the cash can only come from opening up the country’s mining sector to foreign firms. Arshad Sayed, country manager with the World Bank, thinks “Mongolia should not be holding back” as long it is careful and stays away from “dodgy deals.” As such, in a cruel game of fate, this winter could play against the will of Mongolia’s Government to take advantage of its natural resources at the ‘expense’ of foreign mining companies.

These latter had been discouraged from investing in Mongolia since its Government began to insist on majority local ownership for big projects, and had slapped a windfall tax on mining profits which will not expire until next year.

So, while the country sits on what are estimated to be the world’s second largest reserves of copper and uranium, while vast quantities of resources remain unexplored, and while most of its small population of 2.7 million inhabitants is still living in poverty, Mongolia might have to benefit a little less from its rich soil.

In spite of the country’s growth, the proportion of the population below the poverty line estimated to be 35.6% in 1998 and 36.1% in 2002–2003, is still 32.2% in 2006.