The Recent Election in Mongolia and the Future of Northeast Asia www.nbr.org

Landlocked between two major powers and rich with natural resources, Mongolia has actively pursued a strategy to diversify its external partnerships with countries in Northeast and Southeast Asia. As part of this “third neighbor” policy, the Mongolian Armed Forces have undergone significant restructuring and modernization and are considered a respectable partner in regional peace operations. Meanwhile, Mongolia’s economy remains weak and dependent on nonrenewable natural resources.

Following the recent election on July 9, the future trajectory of Mongolia’s foreign policy and U.S.-Mongolia relations raises many questions for U.S. policymakers and analysts. Given the increasingly close Sino-Russian relationship, Mongolia may prove to be helpful in guarding and enhancing U.S. interests in Asia. NBR spoke with Alicia Campi (Johns Hopkins SAIS) to better understand the policy and security implications of the recent Mongolian presidential election and to discuss the best course of action for the United States.

What were the main issues at stake in the Mongolian presidential election on July 9?

The presidential election this year centered around two issues: who should be Mongolia’s main trading partners going forward, and what is the appropriate role for Mongolia on the world stage.

For 70 years until 1990, Mongolia was a Soviet satellite and did not have much contact with China. The country’s move away from a close relationship with Russia in the last 25 years toward today’s economic dependence on China has produced a great deal of societal tension. Mongolia has formulated an economic development strategy that focuses on the development of large mining deposits, but this plan has been undermined by instability in its own government and uncertainty regarding the mining laws and regulations for foreign investors. All of this was compounded by the recent decline in mineral prices, which caused a number of Western investors to drop out. As a result, most of the players left in the market are Chinese investors, who are sometimes financially backed by their government for other than economic reasons. Chinese investment has reached the point of a near total monopoly of Mongolia’s economy: in 2015, China accounted for 88% of Mongolian exports and was the top foreign investor.

Economic instability, the lack of effective regulations, and China’s increasing control and presence have caused the rise of a Mongolian nationalist movement and sometimes anti-Chinese sentiment. Mongolians have a choice—to stay with China as their main trading partner or find other available options if they are not willing to continue relying solely on China. Mongolia lacks transit infrastructure, and Russia, which is its other border neighbor, has the interest but not the money to invest in a northern Mongolian transit route, which could bring Mongolia other trade partners.

Another issue is whether Mongolia should continue to focus on globalized development or return to much more domestically centered development—which is a very comparable trend to those exhibited through the Brexit vote and the election of Donald Trump. The previous president, Tsakhia Elbegdorj, had a vision of Mongolia being active on the international stage. Hence, Mongolia became very active in the Community of Democracies and World Economic Forum in Davos, and the president had plans to make Mongolia a center for international organizations, such as the United Nations, to hold conferences in Ulaanbaatar. This externally oriented perspective resulted in some backlash against Elbegdorj, with critics arguing that he was more focused on international image than working together with the parliamentary government to solve Mongolia’s developmental and social problems.

Similar to Donald Trump, Khaltmaagiin Battulga campaigned on the promise of “Mongolia first,” which above all means equal partnerships and better trade deals with countries like China. What are the prospects for President Battulga to actualize his so-called Mongolia-first policy?

I believe very firmly that Mongolian politicians of all parties understand clearly that Mongolia is a landlocked country between two great powers, and that it has poor infrastructure. In the past few years under Elbegdorj, as Russia and China have grown closer to one another for energy and economic reasons, Mongolia decided that it did not want a “great game” being played around them in the region. President Elbegdorj devised a new economic corridor strategy called “trilateralism.” He insisted that Mongolia, at least publicly, be at the table negotiating with the two other presidents on an annual basis, usually on the sidelines of the Shanghai Cooperation Organisation, to devise concrete plans on how to better integrate transportation across the Northeast Asian region. From these consultations, there have been real infrastructure and transportation developments, as well as improvements in customs coordination, over the past three years.

The newly elected president, Battulga, is a successful businessman who understands that in order to diversify trade partners to include Europe, India, or Japan, Mongolia needs to get more connected through infrastructure development with its two neighbors. For twenty years in the democratic era, Mongolians understood the necessity and the importance of infrastructure development but deliberately rejected it. Infrastructure development was seen as being oriented solely toward China, which would perpetuate China’s trade partner bias and monopoly of Mongolia’s economy. With the recent rapprochement between China and Russia, Russia has been able to persuade China to cooperate in areas of the Russian Far East to revise and modernize Russian transit and communication infrastructure toward the maritime Pacific. That plan carries the potential for Mongolian railways and highways to go not only south but also north, as long as the rapprochement exists between the two big powers. Instead of being locked out by its neighbors, Mongolia has developed a policy of engagement and has relied on Russia to represent its point of view with China. I predict that this trilateral strategy to develop Mongolia as a transit nation in Eurasia will continue.

Further, even if President Battulga wants to pursue a Mongolia-first policy, he will be hampered because he is not very popular within his own party, the Democratic Party (DP). He was at odds with the previous president, who was also from the DP and worked against Battulga during the pre-general election campaign. In addition, the rival Mongolian People’s Party (MPP) since 2016 has had full control over the parliament. The MPP is the ex-Communist party that traditionally is more pro-Russian, possibly less free-market, and less transparent. Its candidate became the favorite of certain elites in the recent election, including Western and Chinese investors. However, Mongolian politics is personality-driven, as opposed to being driven by political ideology. Personalities within the parties lead factions and attract the attention of the populace. As a former parliamentarian, President Battulga understands and will be able to work with some factions in the MPP-dominant party. He will have to court some parliamentarians and their constituents, who either didn’t vote in the recent election or were with the MPP but are younger and don’t like the way the nation’s policies have developed. If the economy is moving forward, members of the parliament and the public could be enticed to support his Mongolia-first policy.

What does President Battulga’s victory signal for Mongolia’s third-neighbor policy, as well as its foreign policy toward China and Russia for the next four years?

The Mongolian government’s national security concepts of 1994 and 2010 never officially used the term “third neighbor.” They list countries important for Mongolia in a prioritizing order, and most of those countries (e.g., Russia, China, the United States, Japan, the EU countries, South Korea, Turkey, and India) were the same in both documents. The term “third neighbor” has not gone out of fashion but is continually redefined or reprioritized over the years. A possible new third neighbor might be Iran, as a major client for Mongolian meat and minerals. In terms of possible reprioritizations, President Battulga is interested in India because he is a fervent Buddhist and a supporter of the Dalai Lama. Mongolia and the Dalai Lama have cultural and religious connections, and during the last 30 years the relationship between Mongolia and the Dalai Lama has been facilitated out of Delhi. This is a sore point with China.

The idea that President Battulga is a puppet of Vladimir Putin has come up in the foreign press, but that is not the case. He is a very savvy politician. He is pro-Russia but also knows it is not possible to exclude China from Mongolia’s economic development. The question is the degree to which China should be represented in Mongolia’s economy. Since there is not a united DP to support President Battulga’s nationalist initiative, it is unclear what his relationship with Japan, South Korea, and the EU countries would be. Alternatively, he may focus mainly on Mongolia internally and less on the outside world or Mongolia’s role on the global stage. It seems that until transit infrastructure is completed through the trilateralism policy, President Battulga’s strategy will be to slow everything down relating to China. China is hurt by his election, but there likely won’t be a major change of policy to reorient regulations and rules just to target China.

Can you elaborate on Mongolia’s interests in helping solve regional security issues, such as nuclear tensions on the Korean Peninsula, given its precedent of serving as a neutral territory for dialogue?

President Elbegdorj believed that Mongolia could break out of its isolationism and its lack of voice in the international community by serving as a bridge to solve regional problems in Northeast Asia. Northeast Asia is one of the only developed regions that does not have institutional structures and frameworks, and Mongolia is the only country in this region that does not have major problems with any of its neighbors. Becoming more active in regional security is a way to raise the profile of the country in order to break out of its landlocked isolation between China and Russia and eventually expand economically. The Ulaanbaatar Dialogue on Northeast Asian Security just finished a fourth round, and North Korea attended three of the four rounds. It is the only multilateral dialogue framework today that North Korea has been participating in, which is due to Mongolia’s long-standing relationship with North Korea. Mongolia was the second country after the Soviet Union to recognize the North Korean government, and it took a number of the politburo’s children and grandchildren in for protection to save them during the Korean War. In reality, Mongolia is the only country that North Korea, to some extent, trusts. If President Trump were to meet with Kim Jong-un, the one place such a dialogue could take place is in Ulaanbaatar.

Mongolia has the ability and track record of helping the North Koreans. It has moved some money back and forth from other countries to North Korea, been the site for Japanese negotiations with North Korea on the return of Japanese abductees, hosted nonofficial discussions between the United States and the DPRK [Democratic People’s Republic of Korea], and given North Korean ships Mongolian flags for cover so that they could enter international ports. President Battulga may not pursue Korean Peninsula security efforts at the same level of interest as his predecessor did, but in reality the only solution to Mongolia’s landlocked status is to find ports for Mongolian products other than Tianjin or Vladivostok, both of which are at overcapacity. The best viable option for Mongolia to decrease its isolation is the North Korean port at Rajin-Sonbong. As long as we can have some peace and some confidence building on the peninsula, that port is Mongolia’s answer to its isolation. Mongolia has been willing to play a neutral role as a bridge to North Korea, but the window on this possibility may be closing, as tensions on the Korean Peninsula mount and military options rise in consideration. Nonetheless, it remains the best location for negotiations, and the nations participating in the six-party talks should more effectively include Mongolia in regional peacemaking efforts.

In what direction do you foresee U.S.-Mongolia relations going over the next four years? What realistically can be done to strengthen the bilateral relationship in a way that enhances U.S. interests in the region?

We must be realistic about the limited potential of bilateral economic ties, which unfortunately are not very strong in terms of direct trade, particularly in raw minerals. However, the United States and Mongolia can develop cooperation in agricultural products, small and medium enterprises, education, media, and legal services. After all, Mongolia is a flourishing democracy located between the Chinese and Russian markets. But it is not economically viable nor particularly helpful to Mongolia or U.S.-Eurasian interests for giant U.S. companies just to act as intermediaries to the Chinese market. The U.S. government should be strengthening Mongolian economic independence rather than promoting Mongolian economic dependence on the two border neighbors.

Since 2003, the United States and Mongolia have conducted joint military training exercises under the name Khaan Quest, which has grown to include 51 countries. China began as an observer and now is a full participant. In 2005, Donald Rumsfeld went to Mongolia to announce the establishment of an international peacekeeping training center, and President George W. Bush made a very successful state visit, which included a speech to the Mongolian parliament and nation. The United States initially gave $17 million to set up the Five Hills training center. Mongolia also has separate annual exercises with Russia, which has its own training facility close to the peacekeeping training base. Additionally, the U.S. military has a strong relationship to Mongolia through the Alaska State National Guard. Mongolia also has been active in supporting U.S. allied military efforts in Afghanistan and Iraq and has built a reputation in the Pentagon and the U.S. Congress as a reliable military partner. The military ties have been the best part of the U.S.-Mongolia relationship for the past fifteen years and likely will continue because they have grown within a multilateral framework. Our military relationship is a strong one, and both sides have been careful to develop it in a meaningful way, yet in such a manner as to not threaten Mongolia’s two giant neighbors.

One should note that Mongolia’s peacekeeping and democracy training activities are appealing particularly for Central Asian countries and states like Myanmar that either have been ignored or have existing problems with neighbors and don’t want to rely on larger countries like India to be trained. Mongolia has been very successful in developing this role into a business. Former president Elbegdorj created an international development fund to share his nation’s experiences and lessons with Myanmar, Kyrgyzstan, and Afghanistan, among other countries, in building an effective parliamentary democracy, legal reform, and training for diplomats and public servants, journalists, and other civil society members. He also promoted Mongolia as a Silk Road tourism center. It will be interesting to watch President Battulga’s efforts in these areas.

“Fruits” national program approved www.montsame.mn

Ulaanbaatar /MONTSAME/ The cabinet meeting held Wednesday adopted a national program “Fruits”, and obliged P.Sergelen, the Minister of Food, Agriculture and Light Industry, to provide the program with professional and methodological management and to control the implementation.

Toyota says to delay start of Mexico plant to early 2020 www.reuters.com

TOKYO (Reuters) - Toyota Motor Corp will push back the start of operations at its scheduled new plant in Mexico, to the first half of 2020 from the initial plan of 2019, the company said on Thursday.

Facebook is officially launching its big attack on TV www.businessinsider.com

Facebook's push into becoming a destination for original TV shows begins on Thursday with the launch of its redesigned video tab, Business Insider has learned.

The new tab will be called "Watch" and showcase a slew of shows from the likes of BuzzFeed, Tastemade, ATTN, and Condé Nast, people familiar with the matter said.

Facebook officially confirmed the impending launch of Watch on Wednesday afternoon following the publication of this report. The company didn't specify a date for the launch but said that it would happen "soon."

Facebook sees high-quality, scripted video as an important feature to retain users, particularly a younger demographic that is increasingly flocking to rival Snapchat, as well as a means to rake in brand advertising dollars traditionally reserved for traditional TV. 

"We hope Watch will be home to a wide range of shows -- from reality to comedy to live sports," CEO Mark Zuckerberg wrote in a Facebook post. "Some will be made by professional creators, and others from regular people in our community."

The new Watch tab will showcase episodic videos that follow a theme or story arc, Facebook said on Wednesday. Users will be able to create a watch list to keep up with new episodes their favorite shows, which will also be available to watch on Facebook's TV app.

Among the different sections in the tab will be ones for the "most talked about" videos and ones that "friends are watching." Viewers will also be able to see comments from others while watching a show.

Facebook intends to feature a wide gambit of shows through Watch, including live shows that feature hosts responding in real-time to users' questions and live events like Major League Baseball games. The company is also hoping to attract more premium, traditional shows, like those you might see on cable or broadcast TV.

Facebook initially hoped to debut its redesigned video tab and show effort earlier this year, but the date has been moved back several times as more show partners have been brought on board.

In typical Facebook fashion, only a small percentage of users will see the new Watch tab in the Facebook app immediately after it launches on Thursday. But Facebook plans to slowly make it available to everyone in the coming weeks.

While some shows will be available right away to the small percentage of users with initial access to the Watch tab, roughly 40 shows will be included in the first full slate of programming scheduled to debut for everyone on August 28, people familiar with the matter said.

Facebook has been willing to pay millions of dollars for exclusive rights to more premium, longer shows, while less expensive and shorter shows reportedly cost between $5,000 and $20,000. The cheaper shows are permitted to be shown outside of Facebook after they exclusively debut in the Watch tab.

While a Facebook representative declined to comment on advertising and other financial agreements for Watch, TechCrunch reported that content partners will be able to keep 55% of revenue from mid-roll video ads.

North Korea breathes new life into gold price, mining stocks www.mining.com

On Wednesday, the return of the safe haven buyer and a weaker US dollar combined to lift the gold price to its highest level in eight weeks.

Gold futures in New York for delivery in December, the most active contract, touched a high of $1,284.70, up 1.8% from Tuesday's settlement price in heavy volume of just under 28m ounces traded, before pairing some gains in afternoon trade. Gold is up 11.5% so far in 2017.

Gold's rally came after US President Trump said in response to intelligence reports that North Korea has developed miniaturized warheads, that further threats from the country would be met with “fire and fury like the world has never seen.” The totalitarian state then released a statement saying it's examining an operational plan to fire ballistic missiles toward a US military base on the island of Guam west of the Philippines.

Ross Norman, CEO of London-based bullion trader Sharps Pixley told MarketWatch gold is "behaving in its traditional manner as a safe-haven asset" but only a rally above $1,295 would convince him the metal has entered a significant bullish phase:

“I’m always suspicious of moves like this because the issues that cause them are rarely sustained,” he said, referring to the political tensions between North Korea and the U.S.
Gold's leg up on Wednesday saw major gold mining stocks enjoying one of the best trading days in weeks with gains across the board.

Top producer Barrick Gold added 1.4% affording the Toronto-based company a $19.4 billion market valuation in New York. Gains for world number two producer Newmont with output of 5m ounces expected this year, lifted the Denver-based company's year to date performance to 5.8%. Vancouver-based Goldcorp added 1.2% for a market cap of $12.7 billion, but the stock is still down 6.7% so far in 2017.

ADRs of the third largest gold miner in terms of output, AngloGold Ashanti trading in New York showed only modest gains. The Johannesburg-based company is facing protests in South Africa as it plans to lay off 8,500 workers at its lossmaking operations in the country. Anglogold's has lost nearly 30% of its value over the past six months.

Fellow South Africa-based producer Sibanye Gold jumped 2.5% on the day, but is down more than 20% in value this year despite the stronger gold price. Like AngloGold, Sibanye is downsizing operations in South Africa amid rising costs and unprofitability. Central and West Africa focused Randgold Resources jumped 2.3% and the company is now worth 25% more than at the end of 2016.

Shares in Toronto's Kinross Gold added 1.4% in New York. The Canadian miner with four mines in the US, a couple in Russia and operations in Brazil and West Africa is now up more than 34% in 2017 affording it a market cap of $5.2 billion.

Other Canadian gold companies also performed well with Agnico Eagle building on 6.5% gains year to date, Yamana Gold adding 3.2% and Eldorado Gold gaining just over 1%. Eldorado stock is down nearly 20% over two weeks as the company struggles to advance its projects in Greece.

World number six producer behind Kinross, Australia's Newcrest Mining, added nearly 4% bringing the US$16.5 billion company's year to date performance to +15% .

Russian imports from countries outside CIS up 27% this year www.rt.com

Russia has drastically increased imports from non-CIS (Commonwealth of Independent States) countries through July this year, according to the data from Russia’s Federal Customs Service.

Mongolia End-of-Term Report 2014-2016 www.opengovpartnership.org

In 2017, the Independent Reporting Mechanism (IRM) published the end-of-term report for Mongolia’s first action plan. The report covers the full action plan implementation period of 2014 through 2016.

How a group of Mongolian herders took on a mining giant — and won www.devex.com

WASHINGTON — Tending camels in the Gobi desert — moving them to fresh grazing pastures in the spring and summer, and to shelter in the winter — has been a way of life for families in Mongolia for thousands of years. But cycles of freezing winters and dry summers — a natural phenomenon which the herders call the “dzud” — are ravaging the already inhospitable terrain with increasing frequency as a result of climate change, leaving millions of livestock dead from cold or starvation.

As life for the camel herders becomes more challenging, they face a further threat in the form of Mongolia’s booming mining industry, which the families argue is putting their livelihoods, health and culture at risk.

But the herders are fighting to defend their way of life. In May, they won a landmark agreement with the operators of one of the world’s largest copper mines — the World Bank-backed Oyu Tolgoi — dedicated to improving the lives of their families, their animals and their environment. Constituting more than 50 separate commitments on the part of Oyu Tolgoi LLC and the Mongolian government, a co-owner of the mine, activists have described the victory as “rare” and “historic” — the culmination of four years of negotiations mediated by the World Bank’s Compliance Advisor Ombudsman in one of the few successful cases of its kind.

“Agreements like these … are rare in our field. The size and scope of the agreements is testament to the hard work that all parties have put into the dispute resolution process,” said Caitlin Daniel, an attorney with the NGO Accountability Counsel, which supported the herders through the complaint process with legal advice and negotiation training.

The case serves as a model for how marginalized communities can hold companies and their institutional investors to account, and for how corporations can settle conflicts and ensure they are operating in a socially and environmentally conscious way, Daniel said.

Inside the campaign to support communities harmed by development

When safeguards fail, development finance can sometimes cause harm to the same communities it aims to help. A growing number of civil society organizations are leading the campaign for redress.

The agreement still needs to be implemented. Battsengel Lkhamdoorov, who was elected by his fellow herders to represent them during the negotiations, believes that their complaints are “starting to be addressed in a serious way,” but said that “we will continue to be vigilant and make sure what has been agreed to is actually accomplished.” Nonetheless, the agreement itself remains a landmark achievement.

How was it reached — and what does it mean for other communities affected by these issues?

Mongolia’s hidden treasure

The Oyu Tolgoi mining site, which means “turquoise hill,” is widely thought to be one of the largest undeveloped copper deposits in the world. Located in a remote area of the south Gobi desert, much hope is pinned on it. Once complete, it is expected to boost Mongolia’s gross domestic product by up to 30 percent.

Mongolia has made huge strides in its social and economic development over the past 25 years — tripling its GDP, decreasing maternal and child mortality levels and improving school enrolments. But the economy has taken a downturn in recent years, in part due to falling commodity prices. The country was forced to ask the International Monetary Fund for a $5.5 billion rescue package earlier this year.

As a result, the success of the Oyu Tolgoi project is a priority for the government. Predicting an economic rebound for Mongolia in 2019, the World Bank points to it as a key factor in the country’s hoped-for recovery.

Part of the Oyu Tolgoi mining site. Photo by: Brücke-Osteuropa
It is thought that the mine was first discovered by the Russians in the 1950s, and has changed hands many times since then. It is now jointly owned by the Mongolian government, which has a 34 percent share, and Canadian mining company Turquoise Hill Resources, which is predominantly owned by British-Australian mining giant Rio Tinto. It is operated by Oyu Tolgoi LLC.

Fearing it would be difficult to attract foreign investment into the formerly Communist country, in 2010 Oyu Tolgoi’s owners approached the International Finance Corporation — the private sector arm of the World Bank — and the European Bank for Reconstruction and Development to request financing to develop the site, which includes an underground mine as well as an open pit operation.

A financing package was eventually agreed, with the development finance institutions putting up $4.4 billion between them. That included $400 million in direct financing from the IFC, as well as syndicated loans with 15 other commercial lenders worth $820 million, and guarantees from the World Bank’s Multilateral Investment Guarantee Agency.

The mine is currently partially operational, with the final work set to be completed by 2025.

‘A forced change of lifestyle’

More than a third of Mongolians are herders of some kind, making a living by moving their animals to different pastures depending on the season. With this way of life increasingly under threat, mining activities can also pose a problem because of conflicts over land rights and the impact on the environment.

The Oyu Tolgoi site, which spans 250 square kilometers of desert, was no exception.

By 2012, the situation had deteriorated far enough that, with the aid of two Mongolian NGOs — Gobi Soil and Oyu Tolgoi Watch — a group of herders filed a complaint with the CAO, the body tasked with resolving disputes with local communities affected by IFC investments, claiming that the development of the mine was threatening their livelihoods, health and culture.

Before the IFC had even approved financing for the mine, the herders claimed that 11 herding households were unfairly pressured into relocating their winter camps and signing unfair compensation packages. As a result, many had lost animals during the harsh winter because they were forced onto inferior plots of land.

The herders also claimed that compensation packages offered to 89 other households whose pastures and water wells were impacted by the development of the mine failed to meet their needs. They asked for revised compensation and a comprehensive training program to help the herders develop new skills to “address the pressures of a forced change of lifestyle.”

Five months later, in February 2013, the herders filed a second complaint — this time, about the diversion of sections of two rivers running through the area to make way for the construction of roads and other infrastructure linked to the mine. According to the herders, these diversions caused wells and springs to dry up, leading to a scarcity of drinking water and the deterioration of pasture land.

Water has long been the biggest cause of tension between mining companies and local communities. Between 2010 and 2017, nearly 60 percent of all mining complaints lodged with the IFC centered around it. The south Gobi desert may be rich in minerals but it is poor in water — already the driest part of Mongolia, mining activities there mean that resources are being stretched further.

Despite the complaints being lodged with the CAO, IFC financing for the mine went ahead.

The mediator

The CAO was set up in 1999 to review complaints from communities who claim to have been negatively impacted by companies funded directly or indirectly by the World Bank’s private sector financiers — the IFC and MIGA. It came as part of the World Bank’s drive to become more socially and environmentally conscious, after a number of highly controversial infrastructure projects — such as the Polonoroeste project, designed to build a highway into the Amazon — sparked international outcry.

In a majority of cases handled by the CAO, no agreement was reached, nor was a compliance investigation undertaken. Within cases of dispute resolution, only around a third resulted in an agreement.
—
The CAO has two modes of working — mediating and negotiating between companies and communities to resolve disputes; or it can launch a compliance investigation to determine whether a company has adhered to the bank’s environmental and social safety policies.

The success of the CAO is disputed. As of 2016, the ombudsman had handled 160 cases in 49 countries — but accusations of social and environmental harm caused by IFC and MIGA-backed projects have continued. A recent study by the University of California, Berkeley, looking at 71 CAO cases found that in a majority of them no agreement was reached, nor was a compliance investigation undertaken. Within cases of dispute resolution, only around a third resulted in an agreement.

The camel herders were among the lucky ones.

The negotiations

After receiving the first complaint, a team from the CAO flew to Mongolia to meet with the herders and the mine’s operator. Both groups chose to pursue a dispute resolution through the CAO — a voluntary process which either party can withdraw from at any point. Other options open to the herders would have been litigation, direct negotiation without a mediator, and media campaigns and protests.

The Accountability Counsel’s Daniel said the herders initially struggled to overcome the “significant power imbalance at play.”

“At the beginning it was a hard process — there was a lot of tension and emotional outbursts,” she said. “But the herders became more empowered over time to represent themselves at the table.”

Everyone Devex spoke to agreed that the formation of a Tripartite Council, known as the TPC, in 2015, to act as an independent, freestanding forum through which to resolve the complaints and deal with any future issues, was key to the success of the negotiations. It is expected that the TPC — which includes representatives from the herders, Oyu Tolgoi, and the government — will continue to meet regularly during the life of the project.

Battsengel Lkhamdoorov, a member of the Elected Herder Team that negotiated with Oyu Tolgoi and the local government. Photo by: Accountability Counsel
Daniel described the TPC as a “very significant achievement” for the herders, while Neil Pereira, principal investment officer at IFC for the Oyu Tolgoi project, said he had sat in meetings and seen first hand the council’s effectiveness.

A spokesperson for Oyu Tolgoi said the TPC created a “level playing field where stakeholders participate equitably in a process of consensual negotiation; building capacity to engage constructively and move forward.”

The mining company also praised the CAO for the training, facilitation and conflict resolution services it provided to TPC members throughout the process.

A number of smaller agreements were reached early on. For example, Oyu Tolgoi agreed to let herders graze their animals on the project site and visit the mine. But reaching agreement on the bigger social and environmental impacts of the mine proved more difficult.

As a result, two independent experts were appointed jointly by the herders and Oyu Tolgoi to investigate. The final reports were submitted at the beginning of 2017: The experts broadly supported the herders’ claims and criticized the company’s compensation processes and environmental assessment and monitoring practices. They also found that the mine had created conflict among the herders themselves, as they competed for land and water.

Based on this, two key agreements were reached through the TPC, and signed in May 2017.

The agreements included dozens of commitments made by the mining company and also the government, including constructing new wells and maintaining existing ones; developing a pasture management plan; and better monitoring the environmental impacts of the mine’s operations.

Oyu Tolgoi also agreed to review its compensation packages and expand the eligibility criteria to include more herders. It pledged a number of initiatives to boost the economic sustainability of the herders’ traditional livelihoods, including developing a local market and supply chain for animal products, building a slaughterhouse, and introducing a fodder planting program.

They will also work to improve health services for herders and set up a scholarship program to help children explore alternative livelihoods.

Significantly, a participatory monitoring program will be designed in consultation with the herders that will include training and employment for many of them.

While the final agreement represents a “historic” victory for the herders, their supporters stressed that ongoing support will be needed to ensure it is properly implemented.

“It is critical [the herders] still have this Tripartite Council and that the CAO is engaged,” Daniel said.

Critics of the CAO say it lacks teeth to enforce the agreements it helps to mediate, which are voluntary. But it will at least monitor the implementation of the agreement for 12 months, and close the case if progress is satisfactory.

Oyu Tolgoi told Devex in an email that it is “fully committed to implement agreed actions under the agreements.”

‘Healthy respect’ for the CAO process

The ombudsman has often struggled to hold the IFC itself to account. The World Bank’s private sector arm dismissed the CAO’s most recent audit report, which criticized it for inadequate monitoring of investments in financial intermediaries, with officers describing the report as “misleading and inaccurate.”

“A project of this size will always have issues … it’s the nature of the business. We don’t want anyone to be adversely affected but we would be naive to think you can build a project of this scale and not have issues.”
— Neil Pereira, principal investment officer at IFC for the Oyu Tolgoi project
But IFC’s Pereira said he has a “healthy respect” for the CAO process, and that the outcome of the herders’ case demonstrates it is fulfilling its function as a “check and balance” on the IFC and MIGA. He added that the IFC had been “fully involved and supportive” of the process.

“A lot of good has come out of this process, we’ve been able to interact with people and understand their specific issues and I think for the most part their issues have been addressed … That’s what [the] IFC wants,” he said.

Pereira also explained that while the IFC’s board knew about the pending CAO case when it voted to approve financing for the mine in 2013, the clear potential upsides and the Mongolian government’s strong support for the project meant it went ahead.

IFC estimates that more than 18,000 jobs either have been or will be created by the mine, with about 90 percent going to local staff. In addition, the project contributed more than $1 billion in taxes and other payments to the government between 2010 and 2015, and local spending associated with the mine was about $4 billion at the end of 2015, according to IFC data.

For Pereira, the IFC’s involvement presented an opportunity to set a good standard for mining projects in Mongolia, which only relatively recently entered the market economy system, and help ensure that future activities were carried out in an “appropriate manner.”

“A project of this size will always have issues … it’s the nature of the business,” he said. “We don’t want anyone to be adversely affected but we would be naive to think you can build a project of this scale and not have issues.”

“While we do our best to mitigate this, when problems do come up we try and address them, and the CAO can help us [do this],” he added.

Pereira described Rio Tinto as a “very good partner and we’ve been very happy with their involvement.” He is confident that the company is “committed to doing the right thing” by the herders. Devex contacted Rio Tinto for comment but had not received a response at the time of publication.

Transparent communication and the value of involving communities throughout the design, implementation, monitoring and maintenance phases of a mining project emerged as recurring themes throughout the dispute resolution process, according to Daniel. In fact, the case might never been brought forward if communication between the company and the herders had been better from the start, she said.

“Often, issues are so frightening for herders because they are still not really seeing the type of regular updates, or information disclosure you would want to see … They [Oyu Tolgoi] could have done that to begin with — so there is still [a] lot that could be done on the front end to avoid the need for these [formal complaints] in the first place,” she said.

IFC appears to have taken this lesson on board, as well as the need to pay special attention to water use by mining companies. Motivated by the Mongolia case, it brokered a voluntary code of practice on water management with eight mining companies in 2016, which calls for signatories to be more transparent, to develop participatory monitoring programs for communities living close to mining sites and to measure and monitor water resources.

The parties “have come a long way in building trust with each other” since the first complaint was lodged in 2012, Daniel said. Now, Oyu Tolgoi will “need to maintain that trust and implement the agreements well to truly resolve the dispute.”

Kincora closes $4.52m in new equity raise for Tier 1 copper porphyry targets www.kincoracopper.com

Vancouver, BC— August 8th, 2017
Kincora Copper Ltd. (the “Company”, “Kincora”) (TSXV:KCC) is pleased to announce that it has closed the previously announced non-brokered private placement for gross proceeds of $4,524,687 through the issuance of 13,711,174 Units at a price of C$0.33 per Unit. Each Unit is comprised of one common share (the “Shares”) and one-half of a share purchase warrant with each whole warrant (the “Warrants”) entitling the holder to acquire a further Share at C$0.445 for a period of two years. The private placement is subject to final TSX-V approval.
Proceeds from the offering will accelerate Kincora’s exploration and expansion strategy. In 2016, Kincora surpassed Rio Tinto, and related entities, to become the dominant landholder along the Devonian copper-gold belt (100% ownership of 1437 km2). Kincora will shortly initiate an extensive two-phase drill program at the East Tsagaan Suvarga and Bayan Tal targets for up to
16,000 metres (up to 8,000 metres at both targets), while advancing its district scale multitarget, multi-stage pipeline up the value curve.
All Units issued are subject to a four-month hold period expiring four months and one day from the date of issuance.
Sam Spring, President & CEO, commented: “We are encouraged by the support received from new and existing investors despite a challenging market for junior explorers, with many new groups having undertaken detailed due diligence providing validation of our exciting dual exploration and expansion strategy.
This is testament to the quality of Kincora’s targets and the strategic value of our dominant position in this highly mineralized but vastly underexplored Devonian belt, which we are shortly looking to drill test for the first time by any explorer since 2012. This new equity will significantly strengthen Kincora's ability to test a number of Tier 1 copper porphyry targets while enabling the Company to further enhance its holdings on the belt.
The copper price remains favourable, with prices increasing 50% since we secured the IBEX transaction, and with multiple value add work streams now funded we plan to shortly
increase awareness for what is effectively a new copper junior to the wider public markets.”
800–1199 West Hastings Street, Vancouver, BC V6E 3T5 Phone +1 604 283 1722 Fax +1 888 241 5996

MCAA first deputy-director meets DPRK delegation www.montsame.mn

Ulaanbaatar /MONTSAME/ B.Altantsom, First Deputy-Director of the Mongolian Civil Aviation Authority (MCAA), received Wednesday a delegation headed by Mr Ri Yong Son, Vice Head of the Civil Aviation Authority of North Korea, who is participating in the 54th DGCA Conference in Ulaanbaatar.