World Bank Approves Three Projects in Mongolia

The World Bank’s Board has just approved a grant totaling US$ 15.3 million awarded to three big projects in Mongolia.
US$ 1 million is granted for additional financing under the Rural Education and Development Project (READ), US$ 9.3 million for a Mining Sector Technical Assistance Project (MSTA), and US$ 5 million for the Enhanced Justice Sector Services Project (JSSP). Since December 2007, the Government of Mongolia has been working with the One Laptop per Child Foundation (OLPC) to introduce 20,000 XO laptop computers (computers specifically designed for primary school children) into the country’s schools to improve the quality of education.

In association with this ongoing initiative, the Mongolian government has requested additional financing under the World Bank’s Rural Education and Development Project (READ) to support its ongoing collaboration with OLPC, hoping to use READ to enhance the value of the XO laptop computers by integrating children’s digital libraries for students in rural schools.
The Enhanced Justice Sector Services Project will assist Mongolia implement its “Millennium Development Goals-Based National Development Strategy” (NDS) by strengthening government institutions and improving the legal environment in an effort to ensure transparency and the accessibility of public services.

In 2007, the Parliament of Mongolia completed preparation for a “Millennium Development Goals-Based National Development Strategy” in which the concepts of law, justice and human rights figure prominently. A working group, established by the Ministry of Justice and Home Affairs, also evaluated the impact of The World Bank’s Legal and Judicial Reform Project in December 2007, noting the importance of a comprehensive public and legal education and the need to continue the improvement of both the IT and physical infrastructures of the Supreme Court and the Court Enforcement Agency.
The proposed Mining Sector Technical Assistance project is seen as the first phase of a longer-term engagement to support the Government in developing this key sector in the economy.

Mongolia is experiencing a boom in its mining sector, which brings new opportunities as well as major challenges. Mongolia has a range of potential world-class mineral deposits, and has attracted considerable investment in exploration in recent years. In 2007, mining directly accounted for about 20 percent of the GDP, 56 percent of gross industrial output, 69 percent of exports, and 36 percent of government revenue.

Mongolia’s mining sector has the potential to contribute significantly to further economic growth. However, its successful development will, largely, depend on the government’s ability to establish and maintain a competitive and stable regulatory and fiscal framework, prudently and transparently manage its mineral wealth to the benefit of all its population, and ensure sound environmental and social governance.

“We are very pleased to be able to provide support to the Government of Mongolia and its people to enhance the positive outcomes from mining sector development which are crucial for Mongolia’s further economic development” said Arshad Sayed, Country Manager and Resident Representative of the World Bank in Mongolia.

The MSTA project is designed to help assist the government enhance the effectiveness in regulating and managing the mining sector, and to assist increase the sector’s contribution to the national budget. It will also help to manage the effective distribution of benefit streams, and a sustainable economic growth through commodity price cycles. On the more technical level, the project will work to develop further the regulatory framework for mining, improve the capacity of the government to effectively monitor the mining sector, as well as increase the availability of geological data and support programs to mitigate the health and safety risks for artisanal and small-scale miners.

“The much focused project development objective for this first phase is to assist the government develop further the legal and regulatory framework for the mining sector that meets the needs of government, industry, and civil society. This includes the operation of Erdenes MGL LLC according to international standards, standards we would expect from a stock exchange listed mining company,” noted Graeme Hancock, Senior Mining Specialist and TTL for the MSTA project and the World Bank.
World Bank will provide the project with US$ 9.3 million, of which US$ 4.2 million is a grant and US$ 5.1million is credit (interest free soft loan). In addition to the World Bank assistance, other external partners such as GTZ, ADB, EBRD and IFC have also committed technical assistance to the mining sector of Mongolia.

The Project consists of five main components.
1. Strengthening the capacity to manage mining sector revenues in the Ministry of Finance and the General Department of National Taxation.
2. Improving regulatory capacity to manage mining sector development in the Ministry of Industry and Trade and the Mineral Resources and Petroleum Authority of Mongolia (MRPAM).
3. Developing the capacity for management of state equity in Erdenes MGL Company.
4. Project management in the Ministry of Finance.
5. Infrastructure development strategy to support Sustainable Development of South-Eastern Mongolia with a multi-stakeholder group comprising both central government ministries and aimag governments.

In addition, there will be collaboration with the Ministry of Nature and Environment, particularly on capacity building for environmental monitoring and the development of a regulatory framework for mineral sector development.
Project assistance would address a range of issues across government agencies, including management of macroeconomic impacts of large mining sector developments, improving the minerals sector tax collection and audit capacity; clarification and improvements in the minerals sector benefit distribution; and capacity building for managing the environmental and social impacts of mining.

Another core focus of all Project activities will be the development of human resources capacity within government agencies.
A Project Implementation Unit will be established by the Ministry of Finance, Mongolia , which has prior experience in implementing World Bank projects and is presently responsible for implementing the Governance Assistance Project.