- Mongolia’s mining sector scores a “satisfactory” 64 of 100 points in global resource governance index
- Mongolia achieves a good score among Eurasian countries for governance of mining taxation and subnational revenue sharing
- Erdenes Mongol criticized for failing to disclose adequate financial information
- Governance of Fiscal Stability Fund ranks 18th among 33 sovereign wealth funds in study
ULAANBAATAR, 28 June 2017—A global index assessing countries’ governance of natural resources has given Mongolia’s mining sector a satisfactory score of 64 out of 100 points, placing it 15th among 89 country-specific sector assessments worldwide, and first among nine countries assessed in the Eurasia region.
But the Natural Resource Governance Institute (NRGI), publisher of the 2017 Resource Governance Index, also raises concerns over poor financial disclosure by Erdenes Mongol, the country’s largest state-owned enterprise, and lack of disclosures at Mongolia’s sovereign wealth fund.
Dependence on extractive revenues has exacerbated the impact of falling copper prices on Mongolian government revenues. Commenting on the index findings, Dorjdari Namkhaijantsan, Mongolia manager for NRGI, said: “Although the overall index score is satisfactory, Mongolia’s dependence on mining has meant that we are at the mercy of prices. This has brought the country to the brink of sovereign debt default in the low commodity price environment. No bailout from the International Monetary Fund will fix this; we must implement policies that account for market volatility. We need to ensure that fiscal rules and the fiscal stabilization fund, the tools that were devised by the government to counter the boom-bust cycles in mining, are actually implemented well and not changed or raided every time the government faces difficulties.”
The country’s current debt crisis is reflected by the index, which characterizes revenue management in Mongolia as “weak,” mainly because the government has not adhered to fiscal rules. This weakness stands in contrast with satisfactory scores in many, but not all, areas of Mongolia’s resource governance.
In the index, Mongolia ranks second-best for governance of subnational resource revenue sharing, behind Brazil, due to Mongolia’s transparent sharing rules, and comprehensive disclosures.
Mongolia’s score for indicators measuring laws and regulations is 20 points higher than its score for implementation and enforcement. This gap between law and practice is widest in sovereign wealth fund governance, and is also significant in governance of local social and environmental impacts.
Another area of concern is the management of state-owned enterprises (SOEs). Mongolia lags with a score of 40 of 100 points in SOE governance, ranking seventh among the eight Eurasian state-owned enterprises assessed in the index. Researchers found Erdenes Mongol, Mongolia’s largest state-owned enterprise, lacking in a number of key areas including transparency—the company does not publish its financial reports or disclose key production and sales information.
Mongolia’s sovereign wealth fund, the Fiscal Stability Fund, scores a poor score of 42 of 100 points, ranking 18th among 33 funds accessed as part of the project. This reflects shortcomings in a number of areas including transparency and parliamentary oversight.
Full results from the Resource Governance Index globally are available on at www.resourcegovernanceindex.org.
Note to editors:
The Resource Governance Index is the sum total of 89 sector-specific assessments in 81 countries (in eight countries NRGI assessed both oil and gas and mining sectors), formulated using a framework of 149 critical questions answered by 150 researchers, drawing upon almost 10,000 supporting documents.
For each assessment, NRGI has calculated the composite score using the scores of three index components. Two of the components comprise new research based on expert answers to the questionnaire, and directly measure governance of countries’ extractive resources.
The first component—value realization—covers the governance of allocating extraction rights, exploration, production, environmental protection, revenue collection and state-owned enterprises. The second—revenue management—covers national budgeting, subnational resource revenue sharing and sovereign wealth funds. The index’s third component assesses a country’s enabling environment. This component draws on pre-existing research to measure the broader governance context.
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