Information Transparency of the Owners of the Entities with Rights to Use Mineral Resources (MN0033)

Status quo or problem addressed by the commitment: Transparency of the operations related to the use of natural resources is the fundamental principle of accountability. Today, this information is not entirely transparent, thus limiting the public's capacity and opportunity to monitor and make these operators accountable. Main Objective: Make information public about the owners of the entities who are exploiting natural resources. Brief Description of commitment (140 character limit): - Identify relevant natural resources o Minerals and oil o Land and Water - Establish mechanism to collect information about owners - Establish mechanism to check and confirm the information - Disseminate the information to the general public

12. Transparency of information on beneficial ownership in mining sector

Commitment Text:

- Identify relevant natural resources

o Minerals and oil

o Land and Water

- Establish mechanism to collect information about the owners.

- Establish mechanism to check and confirm the information

- Disseminate the information to the general public.

Status quo or problem addressed:

Transparency of the operations related to the use of natural resources is the fundamental principle of accountability. Today, this information is not entirely transparent, thus limiting the public's capacity and opportunity to monitor and make these operators accountable.

Main Objective:

Make information public about the owners of the entities who are exploiting natural resources.

Milestones:

12.1. Identify relevant natural resources

a. Minerals and oil

b. Land and Water

12.2. Develop mechanism to collect information about the owners

12.3. Establish mechanism to confirm the information in the database

12.4. Disseminate the information to the public

Responsible institutions: Central Government Authority responsible for Budget and Finance Central Government Authority responsible for Mining Related Issues

Supporting institutions: Central Government Authority Responsible for Justice Central Government Authority Responsible for Foreign Investment Petroleum Authority Mineral Authority, Open Society Forum, Extractive Industry Transparency Initiative, Borderless Steps NGO

Start date: 30 June 2016

End date: 30 June 2018

Context and Objectives

The Asia Foundation and the Sant Maral Foundation’s 2017 study on corruption perceptions in Mongolia found that the public viewed land utilization, state mining, and local procurement offices as the most corrupt sectors in Mongolia.[Note114: The Asia Foundation and Sant Maral Foundation, '2017 Survey on Perceptions and Knowledge of Corruption: Strengthening Democratic Participation and Transparency in the Public Sector in Mongolia Project,' https://asiafoundation.org/wp-content/uploads/2017/09/MG-SPEAK2017_ENG.pdf.] Despite concerns of potential corruption in the extractives sector,[Note115: United Nations Development Programme, Corruption risk assessment in Mining sector of Mongolia, 7 June 2016, available at: http://www.mn.undp.org/content/mongolia/en/home/library/democratic_governance/CorruptionRiskAssessmentinMiningSectorofMongolia.html.] Mongolia passed the Law on the Amendments to the Mineral Law in 2014, which lifted a 2010 moratorium on issuing new licenses.[Note116: For more information on the 2014 amendments to the 2006 Minerals Law, see: http://www.eisourcebook.org/cms/January%202016/Mongolia%20Mineral%20Law%20Amendments%202014.pdf.] Mineral license information is available online through the Mineral Resources and Petroleum Authority’s central directory. This commitment aims to improve transparency in the extractives sector by collecting information on beneficiaries of companies involved in this sector and disseminating it to the public. In doing so, this commitment builds off Commitment 3.3.1.4 from Mongolia’s previous action plan that established a central database for information on oil, mineral, and land tenure ownership licenses.

The dissemination of information on beneficial ownership of companies involved in the extractives sector to the public is relevant to the OGP value of access to information. While the commitment’s overall objective (to publish information on beneficial ownership) is clear, the milestones leave out some important details such as how the mechanism to confirm information on beneficiaries will be established and how the information will be disseminated to the public. Also, the definition of 'beneficial ownership,' which can have multiple interpretations, is unclear from the commitment text. Therefore, the specificity is marked as medium.

Although the publication of oil, mineral, and land tenure license ownership on a central database (Commitment 3.3.1.4) had a potentially transformative impact at the outset of the previous action plan, the IRM End of Term Report found that it only improved access to information marginally because of the limited disclosure of petroleum and land license ownership.[Note117: 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. 18.] In addition, civil society considered the published information to be unsatisfactory and requested that the government disclose the beneficial ownership information for companies that hold licenses. This commitment specifically addresses this recommendation and is particularly salient due to the concerns of corruption in the extractives sector. Therefore, the commitment could have a potentially transformative impact on access to beneficial ownership information for the Mongolian extractives sector.

Completion

Implementation of this commitment is linked to Mongolia’s compliance with the Extractive Industries Transparency Initiative (EITI), a global standard to promote open and accountable management of natural resources. Requirement 2.5 of the EITI Standard 2016 requires all implementing countries to disclose beneficial ownership information for companies that have obtained rights to extract oil, gas, and minerals by 2020.[Note118: EITI International Secretariat, The EITI Standard 2016, 15 February 2016, http://www.eitimongolia.mn/sites/default/files/uploads/english_eiti_standard_0.pdf, pg. 21] In December 2016, Mongolia’s EITI multistakeholder group (MSG) approved a roadmap to disclose beneficial ownership of corporate entities that bid for, operate, or invest in the extractive sector.[Note119: See: Roadmap for beneficial owners disclosure within the EITI standard, available at: https://eiti.org/sites/default/files/documents/mongolia_eiti_road_map_on_bo_2016_12_20_in_english.pdf.] The roadmap has seven objectives with 32 planned activities to be carried out by 2020, including the incorporation of a database with beneficial ownership information in Mongolia’s 2018 EITI report, and to conduct awareness raising activities and disseminate this information to the public.

Mongolia’s 2016 EITI report found that out of 213 companies selected to complete the template for beneficial ownership in accordance with Requirement 2.5 of the EITI Standard, only 47 companies (22 percent) submitted their beneficial ownership information to the Mongolia EITI’s e-Reporting system.[Note120: Mongolia Extractive Industries Transparency Initiative, Mongolia Eleventh EITI Reconciliation Report 2016, November 2017, https://eiti.org/sites/default/files/documents/2016_m_eiti_report_final_english.pdf, pg. 127.] Objective 6 of the EITI roadmap is to conduct a pilot collection of beneficial ownership information and ensure data accuracy by incorporating government bodies and agencies’ data system, exchanging information and updating relevant forms. Objective 7 of the roadmap is to ensure beneficial ownership information is disclosed and publicly accessible through Mongolia’s 2018 EITI report. However, according to the roadmap, the collection of information for the database and its disclosure to the public are not scheduled to take place until 2019, after the action plan’s June 2018 end date.

There have been regular meetings and discussions among EITI stakeholders on beneficial ownership disclosure. In 2016–17, nine discussions and workshops took place among different government agencies, extractive companies, and CSOs. Civil society and media representatives have also formed an informal group to improve the legal environment for beneficial ownership disclosure. According to a civil society representative, the State Registration Agency is working to collect beneficial ownership information on all mining companies by June 2018.[Note121: IRM questionnaire completed by Enkhtsetseg Dagva, Program Manager, Open Society Forum, 23 April 2018.]

Given the limited number of companies that provided beneficial ownership information in the most recent EITI report, as well as the scheduled collection and incorporation of beneficial ownership information for 2019, the completion of this commitment is considered limited and behind schedule.

Early Results

Mongolia’s EITI website includes an interactive infographic with the results of a beneficial ownership questionnaire that the multistakeholder group prepared for Mongolia’s 2013 EITI report.[Note122: See: http://www.eitimongolia.mn/en/beneficial-owners.] The infographic includes the shareholder country, type, and name for the 215 companies that responded to the voluntary questionnaire (out of a total of 250). However, subsequent EITI reports have been less successful in providing beneficial ownership data. Thirty of 236 companies provided information in 2014, 51 of 202 companies responded in 2015 (of which 26 disclosed beneficial ownership), and 47 of 213 companies reported information in 2016.[Note123: See: https://eiti.org/mongolia#beneficial-ownership-disclosure.] For the most recent data, Appendix 25.a of Mongolia’s 2016 EITI report includes beneficial ownership information for the 47 companies that responded to the request for disclosure.[Note124: See the 2016 Mongolia Extractive Industries Transparency Initiative Report Appendices, https://eiti.org/sites/default/files/documents/2016_m_eiti_report_appendices_en_final.pdf, pgs. 121-123.]

Next Steps

According to a representative from the Open Society Forum, government organizations are still reluctant to publicly disclose their beneficial ownership information. There are also continued barriers in privacy-related laws that limit the amount of beneficial ownership disclosure. Moving forward, beyond implementing the steps outlined in Mongolia’s EITI roadmap, the government could ensure that privacy laws do not inhibit future beneficial ownership disclosure to the public.

12. Transparency of information on beneficial ownership in mining sector

Commitment Text:

- Identify relevant natural resources

• Minerals and oil
• Land and Water

- Establish mechanism to collect information about the owners.

- Establish mechanism to check and confirm the information

- Disseminate the information to the general public.

Status quo or problem addressed:

Transparency of the operations related to the use of natural resources is the fundamental principle of accountability. Today, this information is not entirely transparent, thus limiting the public's capacity and opportunity to monitor and make these operators accountable.

Milestones:

12.1. Identify relevant natural resources

1. Minerals and oil
2. Land and Water

12.2. Develop mechanism to collect information about the owners

12.3. Establish mechanism to confirm the information in the database

12.4. Disseminate the information to the public

Responsible institutions: Central Government Authority responsible for Budget and Finance Central Government Authority responsible for Mining Related Issues

Supporting institutions: Central Government Authority Responsible for Justice Central Government Authority Responsible for Foreign Investment Petroleum Authority Mineral Authority, Open Society Forum, Extractive Industry Transparency Initiative, Borderless Steps NGO

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 improve transparency in the extractives sector by collecting and publishing information on beneficial ownership.

The call for disclosure of beneficial ownership information concerning companies with licences to extract natural resources came from civil society. The public identified land use, mining, and local-government procurement as the most corrupt sectors in Mongolia. [70] The extraction of natural resources accounted for 23.4 percent of the country’s GDP.

Status

Midterm: Limited

Mongolia’s 2016 EITI report found that out of 213 companies selected to complete the template for beneficial ownership in accordance with Requirement 2.5 of the EITI Standard, only 47 companies (22 percent) submitted their beneficial ownership information to Mongolia EITI’s e-Reporting system. [71] However, according to the EITI roadmap, the collection of information for the database and its disclosure to the public were not scheduled to take place until 2019 (Milestones 12.1-12.4).

In 2016–17, different government agencies, extractive companies, and CSOs participated in nine discussions and workshops on beneficial ownership disclosure (Milestones 12.1 and 12.2). Civil society and media representatives also formed an informal group to improve the legal environment for beneficial ownership disclosure. According to a civil society representative, the State Registration Agency is working to collect beneficial ownership information on all mining companies by June 2018. [72]

End of term: Limited

The government did not take any further action to advance this commitment in the remaining period of this report (Milestones 12.1-12.4).

However, independent of government, civil society took several steps to push the commitment forward. In early 2018, the Natural Resource Governance Institute (NRGI) and Transparency Fund NGO launched the following website on beneficial owners https://iltodezed.wordpress.com/ (Il tod ezed means transparent owners). At the end of term, the website published information pertaining to 50 mining companies, including its licenses and activities, management, board of directors, and beneficial owners. This activity is relevant to Milestone 12.4.

EITI and OSF led the organization of a series of seminars, workshops, and awareness-raising activities on beneficial ownership for different stakeholders such as company representatives, members of parliament, and other decision-makers and civil society during the reporting period. Stakeholders are also engaged in ongoing discussions on laws that can be amended to simplify disclosure of beneficial owners.

Did It Open Government?

Access to Information: Did Not Change

While the government participated in workshops, discussions, and consultations on beneficial ownership disclosure in the extractives sector, this did not translate into the government establishing a database to disclose and disseminate such information as envisioned under this commitment. As a result, this commitment did not contribute to an improvement in access to information.

Despite the lack of progress under this commitment, stakeholders recognize that the disclosure of beneficial ownership in the extractive sector can help to address anonymity, build trust with the public, and prevent tax evasion and corruption in Mongolia. Most importantly, this reform would lead to a more level playing field for investors and ensure the benefits from the sector trickle down to all Mongolians. [73]

Carried Forward?

This commitment is included in Mongolia’s third action plan as Commitment 10: Transparency of beneficial owners. The commitment aims to organize a joint meeting of different stakeholders to discuss creating a legal environment for disclosure of beneficial ownership; re-visiting the Extractive Sector Transparency Bill and other related legislation towards facilitating their adoption; collecting and publicly disclosing data on beneficial owners; raising awareness on the requirement for disclosure of beneficial owners; and carrying out midterm and final evaluation on enforcement of laws and implementation of the action plan.