UNCTAD-Mongolia

chapter 2
In this regard, the customs infrastructure still needs
important upgrading. Customs inspection equipment
and anti-smuggling detection facilities are inadequate
in most customs border posts and the only customs
laboratory is in the headquarters of the Mongolian
Customs General Administration (MCGA) in Ulaanbaatar,
to which samples of goods have to be transported for
examination. In this context, risk management and
post-clearance audits cannot be effectively or widely
introduced. Corruption levels are also reportedly very
high, all of which constitute bottlenecks to trade (ADB,
2011).
The Government Action Plan 2012-2016 puts
great emphasis on trade facilitation and customs
modernization, committing the authorities to border
port modernization and to the implementation of a
single window for exports. Upgrading the customs
infrastructure will also remove one of the roadblocks
on the way to regional customs operation, the benefits
of which, in terms of trade facilitation would be major.
In 2005, Mongolia and China commenced bilateral
consultations and preparatory work for the pilottesting
of joint customs control at selected crossing
points. They assessed that the difficulties in the way
of its implementation included: lack of experience
and of relevant laws and regulations; lack of financial
resources and underdevelopment of infrastructure at
the Mongolian side of the border (MCGA, 2009). In
2009, nonetheless, pilot joint customs control started
in Zamyn-Uud and Erenhot, significantly contributing to
reduction of clearance time.
D. Selected sector
policies
1. Mining
Upon its introduction in 1997, the Minerals Law of
Mongolia, which drew on western mining law models,
was widely regarded as the most foreign investor
friendly in Asia (Backer and McKenzie, 2010). At the
time, Mongolia’s vast underground resources were
largely unknown and attracting investment to the sector
was a primary concern. Since then, the mining regime
has undergone a number of changes, generally aimed at
increasing public gains from mining activity. However,
the mechanisms in place to provide adequate protection
of the environment and of the local communities are
inadequate and in 2010, a moratorium on new mining
licences was introduced by the President of Mongolia
in view of the adoption of a new minerals law. Several
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existing licences were also suspended, pending a review
on environmental grounds.
In Mongolia, the subsoil resources are property of the
State (section B.5) and the Ministry of Mining (MoM) is
charged with issuing exploration and extraction rights to
private investors through licences. The key features of
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the regime applicable to mineral licences in the Minerals
Law are described below.
Reconnaissance
No licence is required and any legal person can conduct
reconnaissance for minerals in areas already under
exploration or mining licence upon notification to the
State and local authorities and with the permission of
the landowners/possessors/users.
Exploration
Exploration rights are granted on a first come, first
served basis, except for the land explored with State
funds or if the prior holder has forfeited exploration
rights, in which case they are made available by tender.
Exploration licences, unlike extraction ones, are
subject to the approval of the Governor of the relevant
aimag. The size of an exploration area cannot exceed
400,000 hectares. The licences are valid for three years,
extendable twice, each time for a period of three years.
No surrender requirement applies and there are no limits
on the number of licences per business entity. Licence
holders are required to spend a minimum amount on
exploration activities after the first year, and licence fees
per hectare increase each year. These conditions proved
insufficient to avoid speculative licence acquisitions.
The fact that many exploration licence holders do not
invest in any active exploration is one of the reasons
behind the recent introduction of a moratorium on new
licences.
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The moratorium was still in place at the time of preparation of this
report.
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In 2012, with the adoption of the new Government structure, the
former Ministry of Mineral Resources and Energy (MMRE) was
unbundled into two ministries — the Ministry of Energy and the
Ministry of Mining.
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