Advancing Extractive Industry Transparency (MN0057)

What problem does the commitment aim to address? Natural resource activities, public control over revenue management and governance through transparency, increase accountability, and reduce the risk of corruption and conflicts of interest.

What are the causes of the problem? Mineral resources sector, particularly operational activities of state-owned companies, face high risk of corruption and conflict of interests. Irresponsible mining operations, environmental and human rights violations are influencing in unsupportive attitude towards mining, and becoming the source of misunderstandings and conflicts among local community and society. The implementation of the Extractive Industry Transparency Initiative, which has been successfully implemented by Mongolia since 2006, has clearly weakened in recent years due to the fact that the duties and responsibilities of the public and private sectors related to ensuring transparency are not guaranteed by law. Translucency in transparency and governance is reducing competitiveness and showing negative impact to the investment.

What has been done so far to solve the problem? Concept paper of the Law on the Extractive Industries Transparency has been approved. The Ministry of Mining and Heavy Industry drafted the Law on the Extractive Industries Transparency in 2020, however the draft was not submitted to the parliament. This is the third draft. The Ministry of Justice and Home Affairs additionally included the issue of ensuring transparency of other natural resources, such as land, forests, water to the minerals issues and amended draft to the Law on the Extractive Industries Transparency and currently receiving public comments on the draft.

What solution are you proposing? 1.The government will be responsible to implement corresponding activities to ensure transparency; 2.Legislate the composition and operation of an integrated database for the extractive industry transparency and link it to the state open database; 3.Define the functions of government institutions related to the formation of the database; 4.Ensure the transparency of the beneficial ownership in the extractive industry; 5.Ensure transparency of the contract; 6.The transparency of the National Wealth Fund activities, income and expenses shall be legalized; 7.Ensure transparency for state-owned legal entities operating in the extractive industry; 8.Determining the alternation of mineral and oil licensing areas, granting special licenses, signing contracts related to the use of natural resources, approving exploration results reports, technical and economic evaluations, and granting land and water use licenses, all decision-making process will be legislated to ensure transparency; 9.Establish civic engagement mechanisms to ensure transparency, determine industry policy, and monitor the implementation of law. 10. Complete activities to ensure transparency and clarify the financial sources. In determining national and local budgets, policies and regulations for the extractive industry, conditions will be created to oversee industry information, calculations, and research. 11. Determine the responsibility for the violation of the duty to ensure transparency.

What results do we want to achieve by implementing this commitment? State, local, private and mixed companies operating in the extraction and natural resources related activities, their contracts with subcontractors and financial information of supply and purchase shall be kept open and subject to public scrutiny. This will increase the profitability and benefits of projects in the natural resources sector.

Milestones | Expected Outputs | Expected Completion Dates

1.1.Submit the Law on the Extractive Industries Transparency for Parliament discussion. | -The law will be approved. -Unified database for the extractive industry will be created and open data will be compiled. | 2025

1.2.Clarify the functions and responsibilities of relevant government, state, local, private, and mixed companies in the field of transparency, and accustom to upload information related to its activities to the database in the form of open data; The information made public through the report of Mongolia's EITI is reported directly by the government agencies through their websites. | Government, state, local, private, and mixed legal entities will disclose relevant information openly. | 2024-2025

1.3.Funding for transparency implementation activities should be included in the state budget | The state budget will be approved, which includes the financing of activities for the implementation of transparency. | 2025