A brief introduction to draft Law of Mongolia on Transparency in the Minerals Resources Sector (Mar 2015)  

Draft law on Transparency in the Mineral Resources Sector was presented to the Parliament of Mongolia on October 13, 2014. According to the official introduction of the draft law, prepared by the Government, there have been several reasons to draft this law: (1) Mongolia needs legislation to implement Extractive Industries Transparency Initiative (EITI), (2) Although it is mentioned in the Government official documents, such as State Policy on Minerals, State Policy on Petroleum till 2017, the Mongolian Government’s Action Plan for 2012-2016, that the Government shall ensure  transparency in the mineral sector, however, scope of application of the Minerals Law is limited to certain areas. Therefore, a separate law to regulate transparency in the mineral resources sector needs to be passed.

The draft law consists of 4 chapters and 17 articles. Purpose of the law, as stipulated in the draft, is to regulate relations arising from implementation of transparency in the mineral resources sector. This includes relations regarding submission of a transparency report by a license holder, preparation of an integrated report of mineral sector transparency based on reports submitted by license holders and informing the public about the integrated report.

In accordance with the draft, the National Council of Transparency in Mineral Resource Sector shall be the organization responsible for implementation of transparency in the mineral sector of Mongolia. Pursuant to the draft law, a license holder has the following liabilities with regard to the transparency in the mineral sector: to submit its report on time and manner as stated in the law; to make clarification when necessary; to supplement relevant documents and to respond accurately to inquiry from the National Council, or its Office, or a report integrator. A license holder has rights: to request a training, or professional help from the National Council, or its Office with regard to preparation of a report, to receive clarification and information related to its report, to take a copy of an integrated report and to use it for its activity.

According to the draft law, there will be three types of transparency report: a license holder’s transparency report, a government organization’s first stage transparency report and the government integrated report. A license holder shall submit its report of the previous year within May 15 of the following year. If this provision is violated, the license holder shall be imposed a fine equal to 15 amounts of the minimum salary.

With the formation of favorable legal environment on the transparency of mineral resources sector the following long-term socio-economic advantages are projected:

1. The basis for cooperative administration, cooperative control administration and organizational structures will be enabled by bringing the transparency in the mineral resources industry to advanced international standards;
2. Establishment of information database for the mineral resources industry.
3. The establishment of legal basis to avoid and prevent unreasonable expenses, illegal payment transactions performed by industry enterprises;
4. Build the correct partnership between the state, private sector and the civil society in the mineral resources industry;
5. Public scrutiny, transparency on operational fundamentals and communication between producing companies, state and public organizations will be enabled;
6. The expense reduction of producing companies will enhance profit consequently increasing the tax, revenue and payments to the local government and the country budget;
7. Transparency on industry taxes, payments, revenue spending and allocation will enable the implementation of correct management of mineral resources.

The draft law has successfully passed by the Government and the Parliament’s Economic standing committee discussions, and is now ready for Parliament discussions.

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