Source: The Mongolian Mining Journal                 Date: 21 July, 2010

Mr. N.Enkhbayar, Economic Advisor to the Prime Minister, has cautioned that optimal utilization of the Tavan Tolgoi resources would need much more than the present practice of just transporting and unloading across the border in small volumes. “We shall now need more complex negotiations and shrewd analysts who know how the commodity market works,” he has said. Now that the Government policy on the railway has been approved by Parliament, work can start on determining how the railway will be constructed, by whom and what the terms of the agreement would be. “All this takes time and we should not expect trains to start running soon,” he has said.

Mr. Enkhbayar feels Mongolia has to outgrow the mindset that is a legacy of the old regime. An inability to identify, evaluate and grab chances provided in a free market, “to grasp the modalities of the market system as it works in most of the rest of the world, especially in the wealthy West” has led to international organizations sometimes criticizing Mongolia for producing “wish lists”, for preparing “dream projects” that do not come true. “Another problem with us is that we lack a proper understanding of the way things need to be done,” he has said, citing as example how all the talk about setting up metallurgical and processing industries sidesteps any concrete reference to how this can be done. “No one publicly admits that a copper smelter is technologically complicated, requires large investment, and skills. We do not have any of these at the moment so a smelter is indeed wishful thinking. Where will the electricity and other basic requirements come from?” he asks.

Mr. Enkhbayar recognizes that if foreign companies thought it would be commercially viable, they would not only have built a processing plant in Mongolia, but would also have started manufacturing cars here. They were deterred by the market size for the product and by the lack of skilled labor. These are preliminary considerations before building any large industry, whoever wants to build it.

Mr. Enkhbayar has reiterated that the position of the Prime Minister is that the choice of the extracting contractor at Tavan Tolgoi will depend on the merit of the total package offered to Mongolia, not just on who will do the work at the least cost. “Ultimately the project will be profitable depending on the quality of the coal and timely delivery. It is a fiercely competitive world and customers are not interested in whether the coal comes from a Mongolian state-owned company or an Australian private company. Origin has become secondary in a globalised world. The determining factor is commercial competence and it is up to Mongolia to make the most of its resources and opportunities,” he had said.