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ANALYSIS OF MONGOLIA'S MINERAL RESOURCES WITHIN THE CONTEXT OF GLOBALIZATION
Table of Contents
1.0 Introduction 2
2.0 Situational Analysis 2
2.1 Internal Strengths and Weaknesses 2
2.1.1 Internal Strengths 2
2.1.2 Internal Weaknesses 3
2.2 External Opportunities and Threats 4
2.2.1 External Opportunities 4
2.2.2 External Threats 4
3.0 Strategies 5
4.0 Action Play 5
5.0 Conclusion 6
6.0 References 6
1.0 Introduction
Mongolia, an ideal place for development of mineral industry, is enriched in various mineral resources. With the discoveries of the Oyu Tolgoi giant copper/gold deposit and the White Hill large size copper-zinc deposit occurring in southern Mongolia. The http://www.ukassignment.org/jndzydx/ mineral explorations have attracted the great attention from Mongolian domestic and international mining communities. This essay will firstly use the SWOT model to analyze the present mineral industry of Mongolia within the context of globalization. Following this, it will summarize the basic geological feature of mineral occurrences and the modified mining legislation to make a strategy for the mining resources in Mongolia. Finally, it will discuss the exploitation of important mineral deposit and the future of Mongolian mineral industry.
2.0 Situational Analysis
Mongolia has abundant mineral resources, but the backward economy restricts the mining development. In order to change this situation, it is important to use the SWOT model to analyze the present mineral industry of Mongolia within the context of globalization for a clearly understanding (Nye, 2009).
2.1 Internal Strengths and Weaknesses
2.1.1 Internal Strengths
Abundant Resources
Mongolia is enriched in mineral resources. It has been discovered almost 80 kinds of mineral resources so far, including copper, gold and so on. Mongolia is set for a rapid increase in production of gold, copper and coal leading to fast growth in the mining sector (James 2011). It is expected that mining sector output will grow to US$11.5bn by 2015, marking a fourfold increase from 2010 levels of US$2.6bn. Most of this rapid growth will occur in the second half of 2012 and 2013 as the Oyu Tolgoi copper/gold mine commences production.
Regulatory Environment
Mongolia has made significant progress over the last decade to improve its business environment since the promulgation of the Mining Law in 1997. Most importantly, the government recently rescinded the 68% windfall tax which had been a great impediment to foreign investment into the country. The repeal of the tax led to a wave of investment including the completion of the Oyu Tolgoi agreement, which will bring billions of dollars of investment into the country.
2.1.2 Internal Weaknesses
Inaccurate Technical Parameters
Most existing data are completed through the geological survey by former Soviet Union and Mongolia geologists in 1950s to 1960s, because of the low level of geological work, the technical parameters are inaccurate (Farrington, 2000). Most of the current mining in Mongolia is private. The information provided by the miners is often incomplete, sometimes mistaken.
Changeable Laws And Policies
In recent years, the Government of Mongolia has issued a series of new mining laws, making the mining investment environment unstable and increasing the risk of mining investment in Mongolia. What’s worse, parliament has sometimes failed to consult the wider investment and business community on new legislation, which has resulted in the initiation of laws that could deter future investment.
Less Financial Support
The banking sector remains weighed down by dire asset quality and a depleted capital base. Effective reform and further government support will be crucial in assuring that the sector is able to support the ongoing recovery.
Poor Transportation Infrastructure
Mongolia is a country without sea, while the domestic transport conditions are extremely poor, limiting the abundant mining resources in Mongolia to be exported to foreign markets (Gavin, 2008). If the company tries to build its own railway or road to transport the mining resources, it can’t afford them. In order to solve this problem, the Government of Mongolia should make more effort to update the transportation infrastructure.
2.2 External Opportunities and Threats
2.2.1 External Opportunities
High Price of Scarce Goods
In recent decades, the economic development in Northeast Asian region is rapid; its total energy demand has constantly increased. In order to develop the economy, it is necessary to rely on the mining resources. However, mining resources are natural resources, they can’t be recycled. The abundant mining resource in Mongolia helps to ease the problem. What’s more, the rise in global commodity prices has brought unprecedented opportunities to the Mongolian mineral exploration and development.
Well-Performed Mongolian Political System
Mongolia’s relatively well-functioning system of parliamentary democracy should leave it well equipped to manage the rapid social and economic transitions that it will face as the mining sector is developed. While social protest is more likely than in an authoritarian state, we believe that the Mongolian system will be more durable over the longer run.
Rapidly Rising Revenues
Mongolia Bureau of Statistics shows that in January 2011, Mongolia exports $209 million, imports $348 million. From the export structure, mineral export revenues accounted for 91% of total export earnings. Rapidly rising revenues on the back of the mining boom will provide the government with ample funds to engage in much-needed improvements to the country’s infrastructure. This in turn should further boost Mongolia’s attractiveness to foreign investors.
2.2.2 External Threats
The Loss of Wealth
Mongolian mining plays a very important role in the economy. In recent years, because of the substantial increase in international commodity prices, mining has brought great revenues, however, a large number of revenues are gone with the foreign investors, the government and society in Mongolia are not happy with it, complaining about the existing mining policy and regulations are too favorable to foreign investors.
Fluctuations In Export Prices
From the export structure, mineral export revenues accounted for 91% of total export earnings in Mongolia. Mongolia remains at risk of over-reliance on commodities, which leave it exposed to fluctuations in the price of its key exports.
3.0 Strategies
By the end of 2008, the Government of Mongolia had passed a 2008-2012 development plan, which is aimed at accelerating the development of its strategic minerals to keep Mongolia's economy continue to grow steadily and benefits every citizen. Mongolia currently has 15 strategic minerals; each mineral will have a great impact on the Mongolian economy. As the overall economy of Mongolia is not large, every development of a strategic mineral will play an important role in Mongolia's economic development.
Although there are complains about the investors, it is still necessary for Mongolia to open the door to welcome the foreign investors to develop economy.
4.0 Action Play
It is one of the important principles to attract foreign investment into Mongolia. Since the end of last century, the Mongolian Government have promulgated new mines Law and developed a series of preferential policies to improve the mining investment environment (Andrew, 2006). Many International mining companies come one after another, now it has become one of the world's hot mining investment regions.
Currently, the Government of Mongolia focuses on the development of two strategic minerals, Tavan Tolgoi coal mineral, Oyu Tolgoi copper/gold mineral.
Tavan Tolgoi coal mineral, located in southern Mongolia, is one of the world's largest undeveloped coals mineral. The government and company should finalize their decision on exactly which companies will be taking Tavan Tolgoi forward over the coming years. With this in mind, parliament is expected to give final approval to the Tavan Tolgoi deal when it resumes sitting for its autumn session. In April 2011, the Mongolian government decided 50% of the Tavan Tolgoi coal mineral company’s shares are held by the government, 30% sold to foreign investors through overseas exchanges, 10% of the shares will be distributed free to local residents.
5.0 Conclusion
To sum up, through the SWOT model, there are both opportunities and concerns associated with the mineral resources within the context of globalization. Because of Mongolia's abundant mineral resources and preferential policies, it has become a global competition for resources among countries. The investors from United States, Russia, Canada, Australia and other countries have had a firm foothold in Mongolia. However, there are still so many actions for Mongolia to improve its investment environment, foreign investors should be careful.
6.0 References
Andrew Stubblefield & Suede Chandra, 2006. Impacts of gold mining and land use alterations on the water quality of central Mongolian rivers New Zealand: Pearson Education
Gavin M. Mud & Mark Smith, 2008. Sustainability of uranium mining and milling: toward quantifying resources and eco-efficiency. Environ. Sci. Technol., 42(7), pp. 2624–2630.
James P. Dorian, 2011. USSR-Mongolia: A minerals association about to end. New York: Appleton.#p#分页标题#e#
John D. Farrington, 2000. The Impact of mining activities on Mongolia’s protected areas: A status report with policy recommendations. Business Monitor International, August, pp.13-15.
Nye J. & Ryun F., 2009. Discovery of the Whit e Hill copper zinc deposit occurring http://www.ukassignment.org/jndzydx/ in the southern Mongolia and its geological significance. Journal of Economy, Vol.2, pp.35-38.
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