Weekend Economists Writing Like the Dickens, February 8-10, 2013

[xchrom]

37. Rocky road ahead for Mongolia

http://www.atimes.com/atimes/China/OB09Ad01.html

In Mongolia today, hunger for coal, copper, gold and uranium wealth is at odds with democracy as the demands of international resource giants collide with a stubborn political culture of resource nationalism.

In time for the June 2012 parliamentary elections, Mongolia's grand khural (parliament) passed a law subjecting the purchase by "state-owned entities" of controlling interest in strategic Mongolian mining enterprises to government approval (as well as a host of other key industries).

The immediate provocation for the legislation was the sale by a Canadian company, Ivanhoe Resources, of its controlling interest in SouthGobi, an operator of coal mines in Mongolia, to a Chinese


resource giant, the Aluminum Company of China, known as Chalco.

The legislation overtly targeted China. Vice Finance Minister Ganhuyag Chuluun Hutagt told Bloomberg that the country needed new investment laws to diversity its exports to countries other than China, which consumes a lion's share of Mongolia's coal and copper:
We don't want to be faced with one sovereign ... Our struggle to gain political freedom was a long one and we cherish that. We will not let foreign government-owned entities control strategic assets in Mongolia.
This is not an unambiguous win for non-Chinese international resource companies.