Sukhgerel Dugersuren, Executive Director of Mongolian organization Oyu Tolgoi Watch, questions the wisdom of multilateral funding of a deeply controversial project.
Dr Kim, where is Mongolia’s economic diversification?
In late February the World Bank’s private sector arm, the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) decided to spearhead a $4 billion dollar syndicated loan to a copper, gold and silver mine located in the Gobi Desert in Mongolia, which is also backed by a $1 billion political risks guarantee provided by the World Bank’s Multilateral Investment Guarantee Agency (MIGA).
Yet the details of this 10-year-old project are constantly changing, meaning that the Mongolian people do not know what or whom to believe. An increasing number believe that it is going to lead Mongolia to dependence on one product and one corporation, driving the country into deep insecurity.
Oyu Tolgoi LLC – 34 per cent owned by the government of Mongolia and 66 per cent by Rio Tinto through its 51 per cent stake in Ivanhoe Mines, now known as Turquoise Hill Resources – applied for the loan to complete its investment in the Oyu Tolgoi mine (see Update 84, 83, 82).
In order to bring the mine to full operation it requires a $13.2 billion investment – triple the estimate given when it first negotiated a $4-5 billion investment with the Mongolian government.
The government of Mongolia is understandably worried about the cost overrun and increasing investment required to bring the mine to operation, potentially reducing the benefits to the government and people. Since the investment requirement changed so drastically the government wants to re-negotiate the deal but the company refuses, accusing the government of ‘resource nationalism’.