Umnugobi shows the way in local involvement

5th of 9, 2017

Mongolia’s largest aimag, Umnugobi, has acquired the status of a “strategic aimag”, with its three strategically important deposits contributing significantly to the country’s economy. It is also one of the few aimags that do not accept any subsidy from the state budget. A recent development in Umnugobi is that its people are increasingly getting involved in finding ways to realize more benefits from the mining sector. This trend is spreading to other aimags with mining, which is no surprise, given the rising global awareness that local involvement is key to the successful progress of any mining project.

Presenting a development plan for the aimag at a CIRDI workshop on the State`s Role in Resource Governance, on June 19-23, held in cooperation with NRGI and attended by state owned companies, young professionals and NGOs from Mongolia, Kyrgyzstan, and Afghanistan, J. Sukh-Erdene, Head of the Investment and Development Policy Planning Department of the aimag government, revealed that the responsibility for development will be decentralized, with Umnugobi being divided into three geographical regions – west, centre and east – for the purpose.

Interestingly, the Central region 
of Umnugobi, the aimag with 61,500 people living in 15 soums spread over 165 thousand  sq km, is to focus on two non-mining sectors, tourism and agriculture. Incidentally, at present the entire aimag has 23 tourist camps, which can host altogether 15,000 visitors at one time. Development of the two other regions would be dependent mostly on mining, but tourism and agriculture would also receive importance. The general idea is to gradually diversify the aimag’s economy and reduce its dependence on mining. 

Right now, exploration licences cover 11.3 percent of the aimag’s 1.86 million hectares, while extraction licences have been allocated over 522,900 hectares. 

There are three strategically important deposits -- Tavan Tolgoi, Oyu Tolgoi, and Narynsukhait --  and several other major mines in the aimag and 14 companies are in a position to carry on extraction -- Oyu Tolgoi LLC, Tavantolgoi, Erdenes Tavan Tolgoi, Energy Resources, Munkhnoyonsuvarga, Dunyuan, Olon Ovoot Gold, Zuv Zug, Mongolyn Alt, Chinhua–MAK-Narynsukhait, SouthGobi Sands, Usukh Zoos, Terra Energy, and Javkhlant Ord. However, right now, only nine of them are in active operation.

Now, how exactly is this local involvement going to work? Under agreements to be signed with the aimag authorities, miners will have to locally procure at least 50 percent of their needs, and at least half the number of workers will have to be local. Such a cooperation agreement was signed on June 22 with Energy Resources, which is one of the best examples of responsible mining in the country. This agreement is further proof of the company’s commitment to be socially responsible by strengthening local involvement, according to Sukh-Erdene. At present, the company’s local procurement level is 23 percent and it will raise this to the level mentioned in the agreement. As more such agreements are signed with other mining entities, it is expected that 5,000 new workplaces will be offered to locals by 2020.

The aimag government’s action plan for 2016-2020 is called “We together” and was approved late last year. Besides increasing local procurement and job creation for locals, it aims at reducing dust pollution from mining, and strengthening measures to protect citizens’ rights.

Preparatory work on these cooperation agreements began late last year. A meeting between aimag authorities and mining company executives was held on 19 December in Ulaanbaatar, while the two soums of Gurvantes and Tsogttsetsii, major mining centres, saw meetings between aimag and soum officials, citizens and company representatives in February and March respectively.

The implementation of every cooperation agreement will be overseen by a 9-member committee, with three delegates each from the aimag, the soum and the company.

Infrastructure is priority

Umnugobi is now focused on building infrastructure. The Tsetsii 50-MW wind park in Tsogttsetsii soum, being built by Clean Energy Asia LLC, is expected to be commissioned this year. Mongolyn Alt is finalizing its plans to build a 56-MW power plant in Gurvantes soum. As of now, Gurvantes, Sevrei, and Noyon soums are not connected to the central power line and import energy from China. This should change soon.

Paved roads are coming up fast. An 81-km paved road connecting Dalanzadgad and Bayandalai is expected to be opened very soon and this will be extended to Gurvantes and Shiveekhuren ports. A 59.6-km paved road connecting Tsogttsetsii and Dalanzadgad is expected to be built under government concession. When this happens, the long-awaited UB-Tsogttsetsii-Gashuunsukhait vertical axis auto road will be reality.

Work has begun on the 34.5-km paved road connecting Khanbogd and the OT mine. Oyu Tolgoi is paying for the road.
The motto for the environmental protection programme of the Umnugobi government is “One ton of resources and one tree”. Under this, if a company exports one million tons of resources, it would have to plant one million trees. If this really happens, Umnugobi would very soon become the leading green aimag in the country. Currently 60,000 trees are planted in the aimag per year, which is a relatively good number, but if the companies really adopt and implement the new goal, as Sukh-Erdene hopes they will, it would be a major stride towards meeting the needs of proper reclamation.

The aimag also wants to protect water resources and reduce dust. Water is scarce and so very precious in the gobi region. Currently all mines use underground water resources, which may take 5000-10,000 years to be re-filled. Therefore, the aimag is urging miners to keep their water usage at the minimum level, and/or to use state-of-the-art technology which should also be eco-friendly.

Sukh-Erdene says Umnugobi is convinced of the merits of the Orkhon gobi water pipeline project and will continue to support it in all possible ways. With help from the national government in improving water infrastructure, road building, and modernizing and expanding the border ports of Gashuunsukhait and Shiveekhuren, both located in the aimag, Umnugobi will take a big leap to being Mongolia’s mining showpiece, and a major provider of revenue.

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