Transparency of Contracts of Public Resource Exploiting (MN0032)

Status quo or problem addressed by the commitment: Ensuring information transparency of documents regulating relations between government and stateowned enterprises using public resources is important to establish accountability measures. In addition to this ensuring transparency of the use of public resources such as land, water and mineral is a priority for Mongolia. Main Objective: Ensure transparency of the agreements to use public resources Brief Description of commitment (140 character limit): Identify what is considered as public resources in mineral, land, water and petroleum category in Mongolia with the engagement of the public and civil society organisations. Identify types of documents such as agreements on utilising deposits, investment and sustainability agreements, shareholding and product sharing agreements, other similar agreements, local cooperation agreements and agreements for land and water usage and develop an information database of these documents that is accessible to the public.

11. Transparency of contracts of public resource exploitation

Commitment Text:

Identify what is considered as public resources in the mineral, land, water and petroleum category in Mongolia with the engagement of the public and civil society organizations.

Identify types of documents such as agreements on utilizing deposits, investment and sustainability agreements, shareholding and product sharing agreements, local cooperation agreements and agreements for land and water usage and develop an information database of these documents that is accessible to the public.

Status quo or problem addressed:

It is important to establish accountability measures and information transparency of documents that regulate relations between government and state-owned enterprises who use public resources. In addition to this ensuring transparency of the use of public resources such as land, water and minerals are a priority for Mongolia.

Main Objective:

Ensure transparency in the agreements to use public resources.

Milestones:

11.1. Identify scope or relevance and relevant list of public resources

a. Minerals and Oil

b. Land and Water

11.2. Identify types of agreements and contracts to be covered

a. Use of deposit, investment, sustainability, shareholding, product allocation, and similar agreements.

b. Land and Water Usage Contract.

c. Local Cooperation Agreement and other similar agreements.

11.3. Develop contract database

11.4. Ensure access to contract database by the public

Responsible institution: Central Government Authority responsible for budget and financing issues

Supporting institutions: Central Government Authority responsible for Foreign Investment Mineral Resource Authority, Mongolian Petroleum Authority, Open Society Forum

Start date: 30 June 2016

End date: 30 June 2018

Context and Objectives

Mongolia’s economy is heavily dependent on the extraction of various natural resources found throughout its vast and sparsely populated territory.[Note101: Extractive industries accounted for 20 percent of Mongolia’s GDP, 18.6% of government revenue and 86.2% of total exports in 2016 according to the 2016 EITI report available here: http://www.eitimongolia.mn/sites/default/files/uploads/final-reports/Mongolia_EITI_Report_2016_English.pdf.] However, there has been a lack of transparency regarding contracts for natural resource exploitation, with civil society and the public unable to access and monitor contracts.[Note102: Natural Resource Governance Institute, 'Contract Transparency a Critical Component of Civil Society Oversight in Mongolia,' 19 November 2015, https://resourcegovernance.org/blog/contract-transparency-critical-component-civil-society-oversight-mongolia.] For example, although Article 36.1 of the 2014 Law on Petroleum stipulates that certain information on oil exploration and contracts should be shared to the public through mass media, this law is often not enforced.[Note103: Law of Mongolia on Petroleum (the new edition), available at: http://english.pam.gov.mn/content/-Law-of-Mongolia-On-Petroleum---the-new-edition--11370.shtml.] This commitment seeks to ensure greater transparency in public resource contracts by identifying the scope of public resources to be reported (within the categories of land, water, mineral, and petroleum), identifying the scope of contracts to be covered, and developing a contract database for public use. This commitment is a continuation of Commitment 3.3.1.5 from Mongolia’s previous action plan, which called for publishing all investment, stability, and production sharing agreements related to publicly-owned resources. Though not specifically mentioned in the commitment text, this commitment also attempts to address the 2016 General Administrative Law, which requires public consultations in the development stage of contracts on public interest affairs signed by government entities.[Note104: As clarified in IRM questionnaire completed by Enkhtsetseg Dagva, Program Manager, Open Society Forum, 23 April 2018.]

The publication of an accessible database on public resource contracts is relevant to the OGP value of access to information. Although not a specific milestone, the commitment mentions identifying what is considered a public resource through engaging civil society and the public, thus also making it relevant to the OGP value of civic participation. While the commitment lists categories of resources and types of contracts to be covered in the database, it does not provide detail on how the public will help develop the database or how the database will be promoted to the public. Additionally, it is unclear what is meant by the 'scope' of public resources to be included in the database. For example, this could mean the geographical scale of the extractives sites or the range of the public resources within the categories covered in the database.

Commitment 3.3.1.5 from the previous action plan could have had a potentially transformative impact on public access to contracts for natural resources, but due to the limited number of contracts available at the end of the action plan cycle, the IRM End of Term Report found that it improved access to information only marginally.[Note105: Independent Report Mechanism, 'Mongolia: 2014-2016 End-of-Term Report,' https://www.opengovpartnership.org/wp-content/uploads/2001/01/Mongolia_EOTR_2014-2016.pdf, pg. 19.] Continuing to add contracts to the publicly available database is a laudable initiative toward greater transparency in the public resource sector, especially given the importance of these resources both to the country’s economy and to the lives of many rural Mongolians. However, the commitment does not call for any new methods of disseminating information on contracts to the public that might be more effective than a digital database, nor does it specify how civil society will influence the scope of resources and contracts to be made available. Therefore, the potential impact of this commitment is considered moderate.

Completion

As a result of a multistakeholder national discussion held in December 2014, representatives from government, civil society, and mining industries agreed to establish a publicly accessible online database for resource contracts.[Note106: See (in Mongolian): http://forum.mn/index.php?sel=project&menu_id=29&obj_id=5007.] In early 2017, the Open Society Forum, in cooperation with the Extractive Industries Transparency Initiative (EITI) Secretariat of Mongolia and the Ministry of Mining and Heavy Industry (MMHI), launched the Resource Contract Database (http://www.iltodgeree.mn). The database currently has 35 contracts, including one Production Sharing Agreement (DMW Petroleum AG), 22 cooperation agreements, and seven land and water usage agreements, among other agreements.[Note107: Available at: http://www.iltodgeree.mn/.] The contracts are available in text and PDF format and include annotations that explain relevant clauses and articles. Though still relatively low, the 35 contracts represent an increase from the seven that had been published on the database by the end of the first action plan period (June 2016).[Note108: Independent Report Mechanism, 'Mongolia: 2014-2016 End-of-Term Report,' https://www.opengovpartnership.org/wp-content/uploads/2001/01/Mongolia_EOTR_2014-2016.pdf, pg. 19.] According to a memorandum of understanding signed in June 2017 by the Ministry of Mining and Heavy Industry, the EITI Secretariat, and the Open Society Forum, the EITI Secretariat is responsible for maintaining and updating the database while the MMHI provides support for collecting the contracts from various government organizations.[Note109: IRM questionnaire completed by Enkhtsetseg Dagva, Program Manager, Open Society Forum, 23 April 2018.]

In addition to the mining contracts on the Resource Contract Database, there are 25 contracts between mining companies and local governments published on Mongolia’s EITI website.[Note110: Available at: http://www.eitimongolia.mn/en/node/4875.] However, this is the same number of contracts reported in the IRM End of Term Report for the previous action plan.[Note111: Independent Reporting Mechanism, 'Mongolia: 2014-2016 End-of-Term Report,' https://www.opengovpartnership.org/wp-content/uploads/2001/01/Mongolia_EOTR_2014-2016.pdf, pg. 17.] Mongolia also has seven contracts published on ResourseContracts.org, a global repository of extractive sector contracts.[Note112: See: http://www.resourcecontracts.org/search?q=mongolia.] Of the seven contracts, three are Production Sharing Agreements, while the others include a concession agreement, an amended and restated shareholders' agreement, an underground mine development and financing plan, and an asset sale and purchase agreement.

EITI currently rates Mongolia’s level of progress on contract disclosure as 'satisfactory' during the Second Validation (2018) against the EITI Standard.[Note113: See Mongolia’s progress by requirement for the second EITI validation (2018): https://eiti.org/mongolia#mongolias-progress-by-requirement.] Due to the ongoing nature of publishing mining contracts to the Resource Contract Database, the implementation of this commitment is assessed as substantial at the end of the first year of the action plan.

Next Steps

While the disclosure of resource exploitation contracts is an important goal, future commitments in this area could improve opportunities for the public to participate in the awarding of contracts, particularly at the local level. Also, the government could consider developing mechanisms for public accountability that cover issues such as the environment and public health. Furthermore, to achieve a higher potential impact, future commitments could more clearly specify the expected outcomes, as well as how they differ from existing government practices.

11. Transparency of contracts of public resource exploitation

Commitment Text:

Identify what is considered as public resources in the mineral, land, water and petroleum category in Mongolia with the engagement of the public and civil society organizations.

Identify types of documents such as agreements on utilizing deposits, investment and sustainability agreements, shareholding and product sharing agreements, local cooperation agreements and agreements for land and water usage and develop an information database of these documents that is accessible to the public.

Status quo or problem addressed:

It is important to establish accountability measures and information transparency of documents that regulate relations between government and state-owned enterprises who use public resources. In addition to this ensuring transparency of the use of public resources such as land, water and minerals are a priority for Mongolia.

Milestones:

11.1. Identify scope or relevance and relevant list of public resources

1. Minerals and Oil
2. Land and Water

11.2. Identify types of agreements and contracts to be covered

1. Use of deposit, investment, sustainability, shareholding, product allocation, and similar agreements.
2. Land and Water Usage Contract.
3. Local Cooperation Agreement and other similar agreements.

11.3. Develop contract database

11.4. Ensure access to contract database by the public

Responsible institution: Central Government Authority responsible for budget and financing issues

Supporting institutions: Central Government Authority responsible for Foreign Investment Mineral Resource Authority, Mongolian Petroleum Authority, Open Society Forum

Start date: 30 June 2016

End date: 30 June 2018

Editorial Note: This is an abridged version of the commitment text. For the full commitment text from the Mongolian National Action Plan, see: https://www.opengovpartnership.org/wp-content/uploads/2017/05/Mongolia-NAP2-Final-Eng_0.pdf

Commitment Aim

This commitment aimed to ensure greater transparency in public resource contracts by identifying the scope of public resources to be reported, and contracts to be covered, and developing a publicly accessible database of contracts.

The extraction of natural resources accounted for 23.4 percent of GDP and 79.6 percent of total exports in 2017. [65]

Status

Midterm: Substantial

In early 2017, the Open Society Forum (OSF), in cooperation with the Extractive Industries Transparency Initiative (EITI) Secretariat of Mongolia and the Ministry of Mining and Heavy Industry (MMHI), launched the Resource Contract Database (http://www.iltodgeree.mn) (Milestones 11.1 - 11.3). The database had 35 contracts, including one Production Sharing Agreement (DMW Petroleum AG), 22 cooperation agreements, and seven land and water usage agreements. According to a memorandum of understanding signed in June 2017 by the MMHI, the EITI Secretariat, and the OSF, the EITI Secretariat was responsible for maintaining and updating the database while the MMHI would provide support to collect the contracts from various government organizations. [66]

EITI rated Mongolia’s level of progress on contract disclosure as “satisfactory” during the Second Validation (2018) against the EITI Standard (Milestone 11.4). [67]

For more information, please see the IRM 2016-2017 Progress Report. [68]

End of term: Complete

As of September 2018, the Resource Contract Database (http://www.iltodgeree.mn) had published 274 contracts – an almost 8-fold increase from numbers reported in the IRM progress report (Milestones 11.1-11.4). There were also 140 annotations. [69] While this was sufficient to meet the objectives of the commitment, the database still did not contain major investment and product sharing agreements.

Did It Open Government?

Access to Information: Major

Civic Participation: Marginal

The disclosure of 274 public resource contracts on the Resource Contract Database represents a major improvement in access to information in Mongolia. This is particularly pertinent given the large share of the natural resources sector in the economy. While the scope of coverage continues to increase, the inclusion of all investment and product sharing agreements stands to further enhance the impact of this commitment.

In addition, the collaboration between government and civil society—i.e. the MMHI, the EITI Secretariat and the OSF—to collect the public resource contracts, and maintain and update the database, represents a marginal improvement in civic participation as well. The scope of impact on civic participation may be enhanced by facilitating the inclusion of a wider group of civil society in these decision-making processes.

Carried Forward?

This commitment is included in Mongolia’s third action plan as Commitment 11: Transparency of licensing, operational and financial information of state-owned companies. The milestones under this commitment include renewing the conceptual framework for the Extractives Sector Transparency Law; creating a legal environment to mandate the administration and regular updating of the Resource Contract Database; raising awareness of contract parties under Natural Resources Use Agreements; and carrying out midterm and final evaluations on the enforcement of laws and the implementation of the action plan.