The
building where Mongolia’s youthful and engaging Minister for Mining and Energy,
D. Zorigt, sits is being ripped apart inside and put back together. An apt metaphor
for the country, writes The Australian, in the midst of a remarkable economic
overhaul due to the emerging exploitation of its vast mineral wealth, and the
work it will take to lift its whole population into a better life. The former
senior public servant, with his responsibility for driving the industry that
will soon make up 95 per cent of the country”s exports, is one of the handful
of key decision makers that could help the foundation of prosperity for
generations. With proper industrialization the Mongolian government has
estimated its GDP could grow elevenfold to USD41 billion by 2020.

But
the model to attract the world”s largest miners, who will have the capital
resources to invest in the 15 deposits designated as nationally significant, is
still being developed and tested by the government. Zorigt says deposits whose
exploration was done by the government will remain 50 per cent in government
hands, with a 34 per cent stake in the others. It was Zorigt who set up the
government”s holding company Erdenes MGL (it means treasure in Mongolian),
which will hold the government stakes in its major mining deposits. He was then
tapped for a cabinet position (Mongolia allows a mixture of politicians and
external experts in its executive) and last year entered parliament in a
by-election.

The
looming test will be the Tavan Tolgoi deposit, which holds 6 billion tons of
coal. It has been split on to five different concessions, or blocks, and the
government is working on plan for the first two. “The first one will be 50
per cent-owned by the government, 10 per cent floated on the local market for
retail investors, 10 per cent available for domestic companies and 30 per cent
floated on international markets,” Zorigt says.

He
now says he does not expect one large miner to snap up the 30 per cent, as was
originally mooted.

The
second block with be 100 per cent-owned by the government, but be licensed to a
single mining group that will then pay a fee to the government for mining
rights. But details for this remain sketchy and, if past form is any guide,
could well be changed before being finalized.

“We
have plenty of interest and we are talking to lots of people,” he says.
But Zorigt says he is keen to finish the process on the first block first.
Contract tenders are due in the first week of October with Leighton a possible
bidder.

On
the ground, there are fundamental infrastructure problems with water, power and
transport. “It”s a growth problem,” Zorigt says. “In 2000, our
GDP per capita was maybe USD400-USD500. Now it is over USD2000.”If you
look at the government budget, I remember when it used to be a bit over USD200
million. Now are talking well over USD2 billion.”

Zorigt
says the government has ambitious plans to solve the infrastructure problems.
In February, Mongolia”s parliament adopted a landmark Concession Law that will
allow private companies to investment in infrastructure by way of public
private partnerships. “This is going to be an extremely important
law,” Zorigt says. “Before this we didn”t have that legal
framework.”

And
in recent weeks the government has just approved a list of more that 100
projects so private investors can pour money into railways, roads, power and
housing projects. “Private companies can come in and operate them and get
their money back. This law and this list are probably going to be the solution
to our problem; so far we have struggled to make the public investment in
infrastructure,” Zorigt says. “This is very serious bet on the
future.”