Questionable Benefits from the Mining Sector

A lot of people have said that Mongolia
is at a crossroad. The first road seems to lead toward wealth for
Mongolian citizens, a democratic government, a powerful economy, good
governance, and a protected wild environment. The other road points to
poverty, intellectual enslavement, corrupt government, and devastated
nature. The latter seems to be the road Mongolia is heading. However, it
is Mongolia’s leaders rather than the road that matters most. Although
Mongolia has a unified government, there are signs that its economy and
market are splitting into two separate independent spheres. Those
divisions range from the formal and informal, urban and rural, as well
as the mining and non-mining sectors. Although it seems that the economy
is growing, in reality even the small and medium entrepreneurs’
registration cannot be performed. The government cannot measure or
monitor what is their contribution to the economy or how much damage
they are inflicting upon the environment.

Disparity between urban and rural
society is growing. While the populations at frontier locations are
growing scarcer, the living conditions in Ulaanbaatar are worsening due
to overcrowding in the city. Although the government is supposedly
conducting egalitarian policies, in reality it seems as though
inequality is on the rise in educational and health services. It is
becoming apparent that our economy is being divided between the mining
and non-mining sector. Mining companies are exporting the majority of
their products while importing the majority of their equipment, material
resources, as well as human resources. However, non-mining sectors
(trade, services, agriculture, animal husbandry, and so on), which have
the capacity to create large numbers of jobs, are conducting their
operations under the tremendous pressures of rising inflation and
fluctuating exchange rates. They are also faced with the difficulty of
either raising salaries or risking the loss of capable personnel to the
mining sector. These sectors can barely subsist under the shadow of the
mining sector.

Pro-mining publicity is on the rise,
arguing that the mining sector will alleviate all obstacles related to
poverty and job creation. It also promises to elevate the standards of
living for Mongolians to a level comparable to that of citizens of
countries in the Mid-East, where citizens can live well without doing
much work. Mongolia’s political leaders succumbing to election fever are
utilizing their experience in politics to promote such a misconception
as well. However, what is the true situation? Irresponsibility and
disorder are taking hold of the mining sector. The incompetence of
government can be seen simply from how it has handled the issuance of
licensing. The government has issued many thousands of licenses for
exploration and excavation throughout country, but the government has
concentrated complete authority under itself. It has become unable to
monitor operations at all sites with mining activities, but continues to
expand its authority over all parts of the country because it does not
trust its citizens and the local provincial governments. Due to the
government’s inability to manage the huge inflow of money from the
mining sector, people are being put under greater pressures from
inflation. The foreign trade deficit has reached USD 1 billion.
Mongolians are buying more and more from abroad. Because the Southern
and Gobi provinces trade only with foreign countries, Mongolia will very
soon lose control of this region.

Wealthy mining companies larger than the
government and able to outspend its budget are entering into politics
as well. A country with an annual budget of USD 2 billion cannot compete
with firms able to raise USD 25 billion on the foreign market. In
addition, there is a rising trend in the amount of foreign investments
directed towards the establishment of medium-level companies that do not
conform to the environmental and occupational safety standards on a
regular basis. Meanwhile, national companies are starting to lose their
status as medium-level companies. On the other hand, the mining sector,
which employs a large concentration of Mongolians, is inhabited by
“ninja” artisan miners. All of this leads to a picture of three
completely different worlds within the mining sector. There are powerful
foreign investors, followed by medium-level investors, and finally
small-scale mining entrepreneurs (the Mongolian “ninjas”).

During this year of globalization,
Mongolian business entities and companies can grow and acquire the
capacity to compete internationally. However, the reality is quite the
opposite. Foreigners are forcefully entering and driving Mongolians into
the second and third world. They can do this because they have the
money, knowledge, and access. It can plainly be seen that the world
industry is starting to grow thirsty for raw materials. Certainly, the
growth of the world population will create an increase in demand for
coal and copper. Supply cannot surpass demand. By correctly assessing
the external environment, it is possible for Mongolian miners today to
grow into large investors rather than work as ninjas. In other words, if
we can direct the wealth of mining from a totally different angle, then
Mongolia can become one of the world’s largest players. Otherwise, if
Mongolia focuses only on its internal structure, it could fall victims
to the resource curse. The most important thing is to determine what are
the benefits of growth to the mining sector for ordinary citizens and
society at large? Today we should not just sit still, waiting for
benefits to come to us. Instead, we should establish the appropriate
conditions.