Mongolian news website (www.news.mn) run by newspaper "Ardiin Erkh" interviewed Batbayar Nyamjav, Mongolian Democratic Party lawmaker on July 29, 2009. I have translated the parts related to Oyu Tolgoi investment agreement.
-Everybody is saying Ivanhoe Mines might leave Mongolia since the Great Khural delayed the Oyu Tolgoi investment agreement through certain condition! You was in the center of this action of the Khural?
- According to Mongolian Constitution, State Great Khural represents Mongolian state. Khural made a decision and gave the Government the right to execute the agreement.
- Draft Investment Agreements on Oyu Tolgoi were discussed by the Khural third time. Why this time, Khural pressed to apply the 68% Windfall Profits Tax in the Agreement? The investors feels hurt by this?
- Actually, the Oyu Tolgoi Investment Agreement issue was discussed by the Khural second time. Many people are saying that the issue of passing Oyu Tolgoi investment agreement has been continuing for six years. This is not true. This issue has been raised in Khural and the Government level for about two years. Current minerals law was passed in 2006. Previous minerals law did not have a provision on “investment agreement” , instead it had provision on “Stability Agreement”. Then, the agreement issue was regulated by the law on Foreign Investment. First draft investment law on Oyu Tolgoi was given to the Khural for discussion in 2007. During parliamentary discussion of the draft agreement, Government of Mongolia withdrew the draft. It was not sent back by the Khural. Prime Minister Bayar Sanjaa withdrew the draft agreement submitted by previous Prime Minister Enkhbold Mieygombo after he succeeded him. Next time, in March, 2009, the Government submitted another draft agreement and the Khural discussed it and passed this decision. Therefore, there is no question of delaying the the agreement.
-What if the Oyu Tolgoi agreement is not made because of the conditions put forward by the Khural?
- There is no such thing as agreement must precede before the Project implementation. There are many deposits in Mongolia being developed and used without agreements. If one want have agreement, one can go ahead for it. Also it is perfectly ok not to have an agreement.
- Windfall Profit tax law imposes 68% tax on copper concentrates. Was this draft Oyu Tolgoi agreement was about exporting enriched concentrates?
- This draft agreement is about ore enrichment operation. We passed the 68% Windfall Profits tax law with the intention of producing end products and goods in Mongolia and develop Mongolia and improve living standards of our people. The more Mongolia produces end products and goods here, the more profit we will enjoy. Now look at Mongolia! Before 1990s, we were raw materials supplier for then Soviet Union-Russia. Since 1990, we are supplying raw materials for China. A country which directly exports its raw materials without adding value to it, can never develop as most of profit to be made from raw materials shifts to other side. In another word, this tax was raised as economic leverage to lay industrial foundation in Mongolia. This is the only intention. Therefore, if you don’t want to pay the Windfall tax, then build copper smelter here. The concentrate is 75% earth and 25% copper. If build smelter here, it will produce 99% copper. This will benefit Mongolia.
- Then why Ivanhoe Mines is backing off from building smelter if they don’t’ wan to pay the tax?
- In the end, they just want to sell Mongolian resources to China! This is their main interest. It does not matter if one has Mongolian, Russian, Chinese, American or Japanese name; everybody would want to sell Mongolian commodities to China. China is the market. Chinese also interested to buy concentrates from Mongolia. We want to produce copper here as we want to have more profit from our resources and commodities. If we can produce copper here in Mongolia, we can export it to anywhere in the world, not only to China. We would have more opportunity. Intention is to reduce economic dependence from our two neighbors. If Mongolia have production of copper, car engine plant can be developed here. Also can produce computer parts and cables. These can be exported to US, Japan, Korea. However, concentrate can be exported only to China.
- The above issues are next issues. Now the question is what to do in order to develop the Oyu Tolgoi? What if Ivanhoe Mines backs out of the deal?
- Who said they are backing out?
- The columnist Baabar and many other people are saying and writing so. Oyu Tolgoi is handed out to China etc!
-Baabar is a columnist. On the other hand, he is a columnist paid by mining lobby. He is saying Ivanhoe is backing out of the deal. However, share price of Ivanhoe Mines on New York Exchange is gaining. On July 1, when Democratic Party’s parliamentary group decided to discuss the Oyu Tolgoi agreement, share price of Ivanhoe increased by 23%. Today, it is increased by 61%. Look at this chart. On July 30, the share was worth 5.60 US$ . Now as of July 27, it is 8.16 US$. The Khural passed the resolution on authorization of the Government on July 16. Then the price of the IVN share plunged to 7.72 US$. Now it is going up and reached 8.16 US$. If the Khural made a wrong decision then, how come the share price of the company is gaining and going up? Copper price on July 15th was 5200 US$ per ton. Now it is 5500 US$. We, Mongolians are a people born with “golden spoon”. It was not an accident that the Chinggis Khaan conquered the world and we inherited this vast territory with much resources. We are living poor because of our poor skills. Now you look and see if Rio Tinto will back out of the deal. One thing that sets straight various lies and rumors is price of shares.
- If so, why Ivanhoe Mines is refusing to pay this tax set by law. Or maybe our government is working for them? The minerals law says Mongolia’s share is to be 34%!
- It is either way. Multinational companies basically plunder small and underdeveloped countries. They demand for certain conditions for operations and use various tricks to secure these conditions. They push for laws that will benefit them and then disappears. Mongolia is not an African or South East Asian country. We have 800 years of statehood. When Mongolian empire existed, there were no America, Australia and Rio Tinto. But Europe was there. Here, I got a little emotional (smiling). If one wants to work in Mongolia, it has be according to Mongolian laws.
On the other hand, they call themselves investors. Someone without money can not be described as investor. Right! Will you rent your place to someone without money? Proposal of Ivanhoe Mines is like “you rent me your place free and then I will rent it to someone else and you will get a cut. “ They admitted that they don’t have funding and it will take two years to raise funds and capital. Whose land and resources they are using to raise fund and capital? Investment agreement is a guarantee of a government. They are going to rais fund and capital using our resources and guarantee of our government! Then how come they will skim cream and we leave with leftovers. If Government can make guarantee, any of our Mongolian company can raise funds and capital. Then, we should develop the deposit by ourselves. Oyu Tolgoi is not first copper production of Mongolia. We have “Erdenet” plant which has 30 year history and knows how to deal in international market. However, we can not chase them away from deposit discovered by them.,. At the same time, they can not act like they are masters of the deposit. Our Mongolian companies area getting funds by saying “ we have mineral resources and you provide necessary capital “ to foreigners and evaluates 1 ton of gold as 1 million dollars. Why can’t state can not do same? There are 1000 tons of gold in Oyu Tolgoi deposit worth about one billion dollars. Why some of our people are fighting to execute an agreement that will greatly benefit other side? It shows that there are certain interest is mixed here. Therefore, it is a relative issue that anybody can twist and explain according to their interest. Investment agreement means keeping current tax environment stable. But the investors went beyond that and demanding tax exemptions.
- Will our condition remain same if Chinese company comes instead of Rio Tinto?
- Rio Tinto is a company and Mongolia is an independent country. Independent country have own territory and land and laws. Independent country have a right to choose its fate and nobody has a right to interfere in it. This means we have a right to do what we want and if somebody pushes something we don’t want, it means interference in affairs of independent country. Therefore, we should decide whom we should let in. Another company can come in. Main thing is it must be beneficial for Mongolia.
-There is an overwhelming fear in Mongolia that if Rio Tinto backs out of the deal, Chinese will come?
- It is like scaring a child with talk of monster. China is the biggest advantage of Mongolia. One should use its weakness as advantage and utilize this advantage. Rio Tinto wants to invest in Mongolia. It is not because Rio Tinto loves Mongolia. It is after Mongolia’s resources. Greed is a force that drives up society. To that extent, nobody will refuse from Mongolia’s natural wealth. This is natural. Second, our geographic location puts Mongolia in a very profitable position. World’s largest markets are China, India and Russia in terms of population. These large population centers would need buildings, food, clothes etc. It is our advantage to be between two of the world’s largest market. If we assume that China is the largest world market, Mongolia is the country that have longest land border with China (4700 km long). Also Mongolia is a democratic country with market economy and does not plunder private property.
- What if Government of Mongolia can not execute an agreement? Dismiss the government?
- The Khural gave a task to Government. Let’s wait and see. If government can execute this task, it can work further. If not, it is natural to hold accountability and responsibility. Oyu Tolgoi is guarantee of Mongolia for 100 years. We can not make a mistake here. This is not an issue where we fight each other because of political affiliation and orientation. To that extent, MPRP and Mongolian Democratic Party had no fundamental disagreements over this agreement.
- However, the lawmakers are not united 100% amongst themselves. Also, there is talk that you are blackmailing Ivanhoe Mines to get a cut.
- Well, failed wrestler have many reasons. What is truth? Only time will tell it.
- How is Government of Mongolia’s capacity for this deal?
- Based on this draft agreement, there is no way but to give the government inadequate score. Government is killing our own economy. Construction sector is the leading sector of economy. We have asked the government to support this sector. Now construction season is more than halfway. However, all construction projects have been stalled. Therefore, now it is no use to talk about Government dismissal. This issue will be decided by living standards of people.
Interviewed by B.Semuun
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