ulian Dierkes, Special to the SunPublished: Friday, January 11, 2008
David Emerson is in Mongolia "to promote Canada's trade and investment interests."
His visit, the first of a senior minister in a decade, was welcomed by the Mongolian government by an announcement that negotiations over an investment agreement between Vancouver-based Ivanhoe Mines (with Anglo-Australian mining giant Rio Tinto) and the Mongolian government will be yanked from a parliamentary committee.
In addition to moving forward with a Foreign Investment Promotion and Protection Agreement as announced during the visit, Emerson should initiate Canadian support for policy-making that would establish a value-based foreign policy that relies on Canada's expertise. Such a foreign policy could have a tangible impact on economic development and democracy in Mongolia and other developing countries.
Emerson's visit to Ulan Bator can initiate the foreign policy of a "natural resource superpower" that engages resource-rich developing economies. Such engagement is not limited to development aid, but would create a role for the Canadian government to support careful policy-making in other resource-rich nations. Engagement would assist nations like Mongolia in creating a stable policy environment, instead of narrowly supporting Canadian mining interests in the short term. In such an environment, the highly competitive Canadian resource sector will undoubtedly benefit -- and, given its concentration in Vancouver, British Columbia will benefit.
Canadian mining investments in Mongolia are second only to China's, and surpassed $250 million in 2004.
What expertise might Canada offer to Mongolia? A long history of (sometimes tumultuous) mining regulation in Canada could be instructive to Mongolians in determining their fate. Since a recent reshuffling of the governing coalition, the Mongolian cabinet is favouring direct government equity stakes in mining projects. While this policy was initially decried by investors, it will be to their long-term advantage; what government that is also a part owner raises taxes on mining activities?
Yet, resource-based growth can hardly be relied on in the long term, particularly for a country with few viable alternatives. Would Emerson, an economics PhD, advise the Mongolian government to put all its investments in mining rather than diversifying sources of government revenue?
An expansion of the Mongolian Development Fund could take the Canada Pension Plan Investment Board as a governance model for a sovereign wealth fund that operates at arm's length.
Julian Dierkes is an assistant professor and coordinates the program on Inner Asia at the University of British Columbia's Institute of Asian Research.