October 2011
Mongolians have savings worth MNT3.5 billion in the country‘s 14 commercial banks. If anything was to happen to them, the state is pledged to fully compensate each and every account holder, in compliance with a law Parliamentpassed in November, 2009.
Interestingly, it was the Government which had proposed the law. That was a time of confusion amidst the global economic crisis, and two years later, it is ready to be amended in the Fall session. When that is done, Mongol Bank is expected to put it into effect in the new year.
It will be renamed Saving Deposit Insurance Law and the state guarantee for personal deposit accounts is to be withdrawn, as is usual in market economies. A new state agency is proposed to be established and customers will have to pay premium as insurance of protection from risks to their accounts, just like for any other commodity. This will herald several other changes in the legal environment of the financial service sector.
The state organization is likely to become bigger, however, and not shrink, as many demand. For example, a new geology department is planned under the Ministry of Mineral Resources and Energy. Professionals in the department will be expected to offer evaluation and consultation expertise, as the demand for both is very high. The proposal is to be submitted to the Government in November.
Arguably, the most important item on the agenda of the Fall session is enlarging the scope of the present Minerals Law, giving it a new name, Resource Law or Mining Law. It could also be that the current law is retained but its application limited to matters related to licences. The new law will have more precise and unequivocal regulations, and its ambit will be clearly defined.
No draft proposals on reforming the minerals law is as yet ready, but sector professionals have been vocal on what these must be, and also on what must not be. One hopes the Ministry will consider all these suggestions. According to Vice Minister B.Ariunsan, amendments to the current law are certain and new state policy documents are also more than likely. They will form the basis of deployment of deposits of strategic importance. Given the rapid development of the minerals sector, there should be no delay in this.
Moves have been afoot to end gold exploration and extraction in river basin areas. Around 240 companies engaged in either under licence will be compensated. The law also enjoins compensation for miners whose operations in forest basins and river zones will have to cease. If the law is implemented fully, altogether 1,782 licences will be revoked and the estimated amount of compensation will be MNT 5.1 billion. It has been left unclear how and when this money will be paid, but the amount being so huge, the implementation of the law is likely to be done in stages.
The present prohibition of grant of any fresh exploration licence, under a law initiated by the President, expires at the end the year and the Fall session will decide on what happens next. The National Development and Innovation Committee (NDIC) has been studying the comparative merits of various locations for industrial parks. There have been proposals to establish industrial centres in Nalaikh and Baganuur, and an NDIC official has said, without giving details, that mining companies have proposed to establish something similar near Tavan Tolgoi.
The Parliament session will also discuss the budget for 2012, an election year. We are passing through a critical time when Mongol Bank has lost control over money flow from overseas, and the monetary policy will have to be reviewed. MPs are likely to spend long hours in discussing the preliminary Tavan Tolgoi bid selection and also the new election law.
Parliament no longer works in silence. Sparks will fly as the Democratic Party aims to strengthen itself before facing the electorate. Party Chairman and First Deputy Prime Minister N.Altankhuyag recently on one occasion collected a few people on Sukhbaatar Square to show the intra-party demand for drastic reforms. However, there were more flags than people in the gathering. The rich young leaders of the Mongolian People’s Party tour the countryside, offering goodies. In urban constituencies, a third force is trying to emerge. The ensuing Fall session promises to be a very busy one, not the least because MPs will launch their election campaign during it.