Policy

Strategic deposits to be enthroned into the Constitution

Parliament Resolution no. 73 regarding public opinion poll and the approval of Constitutional amendment Bill was passed on September 11. In the Bill, clause 6.2 about natural resources has been significantly adjusted. Clause 6.2 of the current Constitution states “The land except that in citizen’s private ownership, as well as the subsoil with its mineral wealth, forests, water resources, and the game,  is the property of the State”. 

While the Bill signed and presented by 62 members of Parliament only added the sentence “the State shall uphold the principles of equality, justice, national economic security and sustainable development in using natural resources”, the President’s version changed “state property” into “public property” and added a lengthy sentence concerning natural resources. In the end, it was changed into the following form before opening the public polling.


Amend the following article and clause of the Constitution of Mongolia accordingly:

1/ Clause 2, Article 6:
“2.  The land, except that in private ownership of the citizens of Mongolia, as well as the land subsoil, forests, water resources, and fauna shall be State public property. The Government policy on the use of natural resources must be based on long-term development policy and must be aimed towards safeguarding the rights of present and future generations of citizens to live in a healthy and safe environment and concentrating revenues from natural resources into the Sovereign Wealth Fund and distributing them equally.
Under its right to live in a healthy and safe environment, the citizen of Mongolia shall have the right to access information on environmental impacts from the use of natural resources. The principle of equally distributing the profits from natural resources among each citizen must be upheld.
Operation of strategic mineral deposits shall be regulated by law in such a principle as to be owned by the people and the majority of the revenues therefrom to be allocated to the people.”


Not only the mining industry but economists are voicing their concerns over the array of potential ramifications should this clause is approved as it is. While the Government can own property, such encroachment on public property and putting itself on top of them as a “hat” could create new distortions, says economist S.Demberel.   

In addition, a new sentence never before addressed by industry specialists and lawyers has popped up at the second stage of Parliament discussion: “Operation of strategic mineral deposits shall be regulated by law in such a principle as to be owned by the people and majority of the revenues therefrom to be allocated to the people”. Completely absent from the previous discussion, this new addition is hereby revealed just before public polls. If this Constitutional amendment Bill gets public support from the October 30 and 31, 2019 polls, there’s a substantial risk of rocking not only the mining sector but the whole of the country’s economy. On the issue, economist Ch. Otgochuluu said “The term strategic deposit suddenly propped up while being non-existent previously. It is possible that the economists and mining sector could overlook this. There’s a risk of choking domestic and foreign investors. From a point of appeasing the public, however, this might work.”

None of the amendment bills had any research or study pointing to the justification and outcomes of amending the current clause 6.2.

Thus, the term “strategic deposit” first introduced in the Minerals Law in 2007 is making a debut in the Constitution. The minerals sector heavily criticizes this term, citing “strategic products” as a more optimal and preferred alternative. Indeed, industry specialists have warned about the possible implications of keeping the term “strategic deposit” if significant changes were to be made in the Minerals Law.   

Even further, the part “…shall be regulated by law in such a principle as … majority of the revenues therefrom to be allocated to the people” also has the potential to create uncertainties and shoo away investors. 

Without fully realizing the scope and consequences of the amended clause, it’s best not to touch it at all. On top of it, neither the Parliament nor the President had any research or study pointing to the justification and outcomes of amending the current clause 6.2. In the current climate of uncertainties in the foreign market and domestic political instabilities, a single clause in the Constitutional amendment could completely overturn the minerals and natural resources sector.

However, the President vetoed the Parliament Resolution no. 73 on conducting the public poll and approving the Constitutional amendment Bill on September 20, 2019. A lot depends on whether the Parliament accepts the veto or not. 



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