Mongolia seeking prosperity with boost of copper exports
BEIJING — Mongolia plans to channel revenue from rising copper exports into an economic development fund as part of changes to reap more benefit from its mineral riches and root out corruption, the North Asian nation’s prime minister said this week after the opening of a major expansion of its biggest mine.
Luvsannamsrain OyunErdene attended a ceremony 4,300 feet below ground to mark the start of underground production Monday at the Oyu Tolgoi mine in the Gobi Desert in southern Mongolia. He was joined by executives of Rio Tinto, the Australian mining giant that owns a 66% stake in the mine. The government owns the rest.
The multibillion-dollar expansion of Oyu Tolgoi is the latest effort to generate prosperity from Mongolia’s copper, coal, gold and other minerals following three decades of complaints about economic malaise and corruption.
Oyun-Erdene, who took office in 2021, represents a younger generation following leaders who grew up under the Soviet-allied former communist government. At 42, the politician with the burly build of an American college football player has a master’s degree in public policy from the Harvard Kennedy School and experience working abroad.
“We are working hard to eliminate the old culture and introduce a new mindset,” the prime minister said by video link from Ulan Bator, the Mongolian capital.
Mongolia gets more than 90% of its export revenue from minerals and is benefiting from the surge in global sales of electric cars that use more than a mile of copper wire in their motors.
Oyun-Erdene said his government plans to invest copper revenue in public health, education and developing technology, tourism and other new industries, as well create a sovereign wealth fund.
“We do believe this will be a historic moment for the livelihoods and standard of living of the people of Mongolia,” OyunErdene said. He said his government wants to make “the wealth and natural resources of Mongolia beneficial and equally distributed to all the people of Mongolia.”
Mongolia’s economic growth is forecast by the International Monetary Fund to accelerate this year to 5% from last year’s 2.5%. But households have struggled with inflation that spiked to 14% last year. Economic output per person is about $4,500, barely one-third of neighboring China’s level.
Government plans call for more than doubling average economic output for Mongolia’s 3.2 million people to $10,000 by 2030.
The planned fund includes a pool of money for housing, education and health, a separate fund for development projects and a “stabilization fund” to cushion against changes in commodity prices, according to Oyun. That is similar to sovereign wealth funds operated by Chile, another big copper exporter, and oil producers to invest natural resource revenues.
Other planned investments to “enhance our economic independence” include two hydroelectric power plants to reduce Mongolia’s need for electricity from its giant neighbors, China and Russia, according to Oyun-Erdene.
To extract more value from its copper, Mongolia announced an agreement this week with Rio Tinto to look at building a smelter.
Oyu Tolgoi, about 350 miles south of Ulan Bator, started digging copper from an open pit in 2012 before developing the underground mine that its operators say is more valuable. The mine, with a workforce of 20,000, says it has paid $4 billion in taxes and other fees to the government.
Production is forecast to rise to 500,000 tons per year, or enough to equip 6 million electric vehicles. Its operators say that would make Oyu Tolgoi the world’s fourth-largest copper mine.