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U.S. group urges cutting off aid to Mongolia citing ‘anti-western’ business practices

Monday, 28 April 2008

Newspaper advertising published in the United States last week calls on the U.S. government to cut off aid to Mongolia unless the Mongolian government acts to “eliminate corruption and protect private property.”

The Center for Individual Freedom (CFIF) published a full page ad in the Wall Street Journal calling on President George W. Bush and Secretary of State Condoleezza Rice to, according to the ad, "Send a Clear Message to Mongolia: Eliminate Corruption and Protect Private Property -- Or Risk Losing U.S. Foreign Aid."

The ad was published as the U.S. Commerce Department hosted a delegation of Mongolian officials at the third U.S.-Mongolia Business Forum in Washington D.C.

In the ad, CFIF highlighted trends they call “disturbing” which they claim have arisen since Mongolia received a nearly $300 million grant from the U.S. taxpayer-funded Millennium Challenge Corporation (MCC).

In part, the ad read, "Mongolia has begun a full-scale assault on the rule of law, disregarding legal contracts, shaking down private companies through confiscatory taxes on mining interests, and intimidating Western businesses into relinquishing ownership to the State."

CFIF also emphasized that MCC grants must be used for countries that demonstrate a commitment to upholding western values, "Millennium Challenge grants are intended to encourage countries to eliminate corruption, uphold the rule of law, and protect property rights -- all Western ideals and interests. MCC grants should not be used to subsidize countries headed in the wrong direction."

Founded in 1998, the Center for Individual Freedom is a Constitutional and free-market advocacy organization with more than 250,000 supporters and activist in the United States.

Comments (2)

1 Anti-Mongolia Campaign
Written by Mendbayar Nyambuu, on 2008-04-28 22:15:26, IP: 202.131.245.25

I don't know if this woman who wrote the article called "US lobby group irked by Mongolia nationalization" on Forbes.com has executed a special order or just expressed her anti-Mongol feeling, using her position. Either way, she did it poorly. Poorly because what she said was not true and full of false, misleading accusations. Yeah, on the other hand she has maybe reached her goal to paint Mongolia black and confuse some readers. The article is given by a separate post under title "Kwok's article".
She said, some American taxpayers are upset to see foreign (shouldn't be here put "US" instead of "foreign"?) aid flowing to Mongolia where the government "nationalized" a major coal mine which used to be a "property" of a private company.
Here starts the trouble. She didn't do any studying regarding this issue (or didn't want to) and it is sad that Forbes.com is represented by such a poor performer.

First of all, the subject who "owned" Tavan Tolgoi (TT) deposit is not a company; it's a consortium composed of separate companies. Each of these companies held a license for TT deposit to develop it, but did very little or nothing since 1999 when they got the licenses. This consortium, called Energy Resource, held 6 licenses and they did almost nothing but to put some fences around and keep the licenses "safe" for almost 10 years. That's not the way how to use licenses! The government has noticed it and decided to take the initiative and do something. It has negotiated with the consortium and received most licenses back, equal to 96 % of ownership, and left 4% to the consortium considering the little investment they had made.

Now the government awaits the amended Mineral law to be passed by the Parliament and ready to start to share the 96% with foreign investors in a joint partnership. The government will announce an international tender and whoever wins, receives the 49% of government's share.
One could argue about these percentages and discuss if it's appropriate for the government to hold 51% or not etc., but the important thing is that Mongolia wants to work together with foreign ,especially western, investors and will not "force the foreign miners to bid according to a completely different set of rules" as this woman stated in her article. I don't know what set of rules would have satisfied her. We are not talking about a small deposit. This is gonna be a huge mine, covering 70000 hectares land with almost 4 billion metric tons of thermal and coking coal in reserve. Currently, large companies from India, USA and Russia have shown their interests to invest in developing of TT deposit.

"Prompted by the Center for Individual Freedom (CFIF), a free markets advocacy group based in Alexandria, Virginia, nearly 35,000 supporters sent letters to the Bush administration asking officials to reconsider foreign aid to Mongolia in response to government-sanctioned expropriation of Western interests there, the Center said Thursday. The supporters expressed concern over the infringement of American property rights and increased corruption in Mongolia.", she wrote.
35000 Americans? I don't believe it. Has the Bush administration informed back to this so called "Center for Individual Freedom" (a funny name for a free markets advocacy group) how many letters it received? Well, that's a good administration, if it did so.
Or the CFIF is just playing with numbers. Or they might have passed out some 35000 cards to people, asking them to put a stamp on it and drop it in the mailbox. Some might have sent this "letter" thank the excellent CFIF-job, describing Mongolia as a monster. I think that only the Bush administration can provide us with the information how many "letters" it actually received.
Or the CFIF might have sent those "letters" on behalf of 35000 "Americans" who are so worried about the infringement of American property rights in Mongolia.
So there are many methods to "represent" Americans.

Now, I want you pay an attention to the words she used above to scare Americans.
"...government- sanctioned expropriation of Western interests there,.." and "...infringement of American property rights..." . Let's discuss them one by one.

What Western interests has the Mongolian government approved or encouraged to expropriate, if I may ask? If she means Ivanhoe Mines, then it looks like she is a fan of Mr. Friedland, a Chicago native, also a Canadian citizen, who owns the company and well-known as "Toxic Bob".
"Friedland's Summitville mine spilled cyanide and copper into the Alamosa River in southern Colorado in 1990. The runoff killed fish and contaminated water and was regarded as one of the worst environmental disasters in Colorado. He avoided legal responsibility by making a timely resignation. He then tried to sue the US Environmental Protection Agency and Justice Department for ‘conspiracy, abuse of process, libel, breach of disclosure duties, loss of business opportunities and damage to reputation’. He subsequently moved his assets out of the country, reaching a settlement in 2000 for $27 million – a fraction of the $150 million needed to clean up the mess." (see NI at http://www.newint.org/columns/worldbeaters/2006/08/01/)

"In 1995 the Omai gold mine holding pond collapsed, spewing 3.2 billion litres of cyanide-laced tailings into two rivers in Guyana – reputedly the largest cyanide spill in history. No reparations at all have been paid here. Though an independent report on the disaster denied any damage, there were news photographs and eyewitness accounts of dead fish, pigs and crocodiles. The mine was a joint venture between the World Bank, the Guyana Government and Friedland’s South American Goldfields. Once again, a timely resignation saved him from legal responsibility."
(see NI)

Around the world, Friedland has left a trail of environmental wreckage behind him and now "Toxic Bob" is touting copper and gold deposits discovered in Mongolia.
"The threat of such incidents was one of the reasons why people took to the streets to protest against Ivanhoe Mines in Mongolia in April 2006, burning an effigy of Friedland and camping out in the capital, Ulaanbaatar, for three weeks." (see NI)

"In 2005 Friedland told an investor conference about his Mongolian venture: ‘So we’re coming in from outer space and landing at Oyu Tolgoi… And the nice thing about this: there’s no people around; the land is flat, there’s no tropical jungle; there’s no NGOs. We’re only 70 kilometres from the Chinese border. It does not snow here. You’ve got lots of room for waste dumps.’"
(see NI). I think he means what he says.

I don't know if we should let him make "Oyu Tolgoi" a second "Summitville". To me he looks like somebody who cares only for the benefit he can get, and not the one who also cares about other things, including the environment. He is also very skilled avoiding the responsibility which proves again that he might be not worthy to trust and/or to work together. According to some news, recently he is getting more "green", but still, it sounds like the wolf has become a "vegetarian". So I personally am not sure if he does a good job unless we can legally hold him responsible so that he cannot "run away" if something goes wrong.

The legal changes will be the principle for the agreements on both Oyu Tolgoi and TT deposits.
Mr. Friedland was clever to offer the Mongolian government to pay its debt of $50 Mill. to Russia and in return to acquire the right to develop the TT deposit , tax free for the first 3 years.
The dumb government officials fell into the "trap" set by Mr. Friedland, but fortunately people got aware of this unfair deal and stopped it. We don't want that he does what he wants and how, meaning that the tragedy in Summitville , Guyana and other places must not repeat in Mongolia. He has already invested millions of dollars and made an agreement with Rio Tinto, another large mining company, to jointly develop its project. But if he does not respect Mongolia's interest and cannot assure to protect from an environmental disaster in that region, then he won't be able to make a long term deal with Mongolian government.
It was not the Mongolian government; it was him who scared everybody with his "adventurous" past and quite not a good reputation which caused this delay.

Enough about this "toxic" man. Let's go further. I am not sure what she meant by "infringement of American property rights". American property rights are violated in Mongolia? What the heck...? OK. That's a bullshit.

She wrote, "For instance, Mongolia has received nearly $300 million in grants from the Millennium Challenge Corporation, a U.S. government corporation that aims at reducing global poverty through the promotion of sustainable economic growth, to improve the country's railway infrastructure, in which Russian investors have an ownership stake."
Then she quotes what the CFIF director Mr. Lee, apparently a strong anti-Mongol guy, said,
"While the Mongolian government is attacking the values that Americans hold dear, including those demanded by the MCC, it is simultaneously accepting American taxpayer largesse. This is simply unacceptable".

My God. I wonder what values demanded (?) by MCC (Millennium Challenge Corporation) and hold dear by Americans, are attacked (?) by Mongolian government.
I can't comment on this one since it makes no sense. I'd rather inform the reader about MCC and its cooperation with Mongolia. (But I believe he is upset because of the "nationalization" of TT deposit and the approval of new windfall taxes on gold and copper exports by Mongolian Parliament, and he uses such a nonsense just to blame Mongolia)

"The Millennium Challenge Corporation (MCC) is a United States Government corporation designed to work with some of the poorest countries in the world. Established in January 2004, MCC is based on the principle that aid is most effective when it reinforces good governance, economic freedom and investments in people. MCC’s mission is to reduce global poverty through the promotion of sustainable economic growth." (see www.mcc.gov)
Its key principles are:
1. Reducing poverty thru economic growth
The MCC focuses specifically on promoting sustainable economic growth to reduce poverty through investments in areas such as transportation, water and industrial infrastructure, agriculture, education, private sector development, and capacity building.
2. Supporting good policy
Support in governing justly, investing in their citizens, and encouraging economic freedom. Because corruption undermines every aspect of sustainable development, MCC has made fighting it one of its highest priorities.

Mongolia and MCC signed a 5 year Compact in October 2007. The goal is to reduce poverty by improving the railroad, the principal economic lifeline in Mongolia, and by targeting assistance for vocational education, health improvement, and property registration.

There is a guy named Mr. Pham, a director of the Nelson Institute for International and Public Affairs at James Madison University in Harrisonburg, VA, USA, who also opposes any aid to Mongolia because it was "mean" to western investors and acting like its neighbors.
If he meant by "taking cues" from the neighbors the "nationalization" of TT deposit, I have said already enough. Whether it is better for the government to keep 51 percent or not, is a different question. But it is not like as Mr. Pham's trying to scare Americans, 100 percent government ownership.

He lied about Mongolia's declination in virtually all indicators of the scorecard . In fact, according to Mr. Christensen, there are marginal declines in some areas, but almost in every area Mongolia is still well ahead of other developing countries. (see both Mr. Pham's and Mr. Christensen's articles- "Mongolia's challenge" and "A commitment to Mongolia"respectively, in separate post)
He blames Mongolia blindly of "flouting" the MCC's aims and accuses it of treating foreign companies "unfairly". At least that was his goal to give readers such impression.

The 68 percent of windfall tax is much discussed issue in Mongolia but I think this is irrelevant to MCC's goal. Regarding the Boroo Gold company, there was a very unfair deal made in the first place and later they agreed on some amendments. Any deal must be fair to both sides and, lack of experience and knowledge back then led to an agreement which was very favorable for the Canadian side and that mistake was corrected. That's all.

He wrote, " It (meaning the Mongolian government) pressured the Toront-based Centerra's Boroo Gold to renegotiate certain terms in the longstanding stability agreement it first negotiated in 2002 and has demanded 100 percent of a large coal mining project."
In this sentence he intentionally has "clued together" two different things. But for an ordinary reader it looks like that the government forced Boroo Gold to change some terms AND give up the total ownership of some kind of coal mine. But the last part about the coal mining project has nothing to do with Boroo Gold company. He was "referring" to Tavan Tolgoi deposit which we have discussed earlier. But like I said he "constructed" the sentence so, to confuse readers.

About Ivanhoe has been written also enough. But there is his next trick to confuse readers that Rio Tinto (as if it operates by itself) is also waiting for its agreement to be ratified. The mentioning of this name has only one purpose: to show the readers that how "many companies from different countries" were treated "badly" by the government.
In fact, Rio Tinto "showed up" later, after it bought certain shares from Ivanhoe Mines and agreed to develop jointly the TT project. So we are talking about here about one subject, a joint venture. So Rio Tinto joined Ivanhoe Mines recently, while Ivanhoe was "stuck" with the project, waiting for a longtime agreement with the government. I believe that Ivanhoe's situation with the government will be cleared as soon as the parliament passes the amendments to the Mineral Law.

I think generally the government will work together with the one who offers the most profitable and acceptable deal. I believe also they would prefer western investors and Mr. Pham's suspicion about handing over things to Moscow after chasing out westerners is just absurd.
And calling the Shanghai Cooperation Organization as "anti-American" is just again Mr. Pham's tactic to portray Mongolia as a two-faced , not a trustworthy partner who makes friends with America's "enemies". He is not a dumb guy, no, not at all, and he can cause "troubles" giving people wrong impression and understanding.

Mr. Pham wrote, "And if America is destined to lose Mongolia as a partner,we certainly shouldn't shovel hundreds of millions of taxpayers' dollars there as the Mongolian government thumbs its nose at the very principles underlying the Millennium Challenge Account."
(Thank God it didn't show a fist with a raised middle finger!)

The Deputy assistant secretary for East Asian and Pacific Affairs in Department of State, Mr. Christensen has responded to Mr. Pham's article and asks, "Should we abandon Mongolia and its reform efforts now when process is being made? Or should we continue to work with the Mongolians to help them complete their democratic transition?"
Mr. Pham's answer on this one is clear. He wants to "save" some money and become a "hero".

Lastly, let me copy some quotes from MCC site, page Mongolia, including the amounts for each project.
"The Millennium Challenge Corporation’s Board of Directors has approved a nearly $285 million Compact proposal with the Government of Mongolia to reduce poverty and increase economic growth. The Compact is designed to increase economic activity, including exports, through a substantial improvement in the efficiency and capacity of the rail network, the economic backbone of the country. In addition, it is intended to increase opportunities of ordinary Mongolians by enabling them to capitalize on their land assets more effectively as a platform for family income improvement, helping them to qualify for the more demanding and financially rewarding market-oriented jobs required in a developing economy, and ensuring that they become healthier and more productive as they enter the marketplace. Finally, the Compact is structured to enhance the sustainability of the proposed projects by promoting both long-term changes in the legal and regulatory environment, and building capacity to ensure that the Mongolians are able to carry forward the Program’s intended transformational impact."

1. Rail project - $ 188.38 million
2. Property rights project - $ 23.06 million
3. Vocational education project - $ 25.51 million
4. Health project - $ 17.03 million
5. Administration - $ 26.03 million
The cost of monitoring and evaluation of the Compact is $ 4.7 million

Well, Mr. Lee, Mr. Pham and Ms. Kwok -the author of the article "US Lobby group irked by Mongolia nationalization", thinks that MCC and USAID are just wasting money because Mongolia does not deserve it. Why would they want that?
Ironically, when I read their names it looks like that they are all of Asian origins. Let me guess:
Lee is a Chinese name, Pham is a Vietnamese name and Kwok might be a Korean name. Yet those "Asians" are united to "abandon" Mongolia. The reason? Very simple. They don't like Mongolia and they don't want Mongolia to be a democratic, developed and powerful country. They are anti-Mongol worms. Moreover, they are anti-American too, even though they are very good at pretending to be "true Americans" who worries about America and its money. Why? Because they don't want America being a friend of Mongolia and they oppose America's influence in this region. They want America stay away from Asia and has less friend and partner. That's why they have organized this propaganda with the goal to turn the American people against Mongolia.
But that's not gonna happen.

== Above are user comments received from Mendbayar Nyambuu by email. ==

2 Written by Peter, on 2008-04-28 22:33:35, IP: 203.194.117.254
Looks like things are heating up on this site. Will Ivanhoe Mines post? I want to hear your side.

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