Mines in Mongolia
Countries: Canada, China, Mongolia, Russia
Mongolia could soon be home to the largest copper mine in the world.
After years of negotiations, Western mining companies Rio Tinto and Ivanhoe are close to reaching an agreement with the Mongolian parliament to develop significantly the Oyu Tolgoi mine. Mineweb reports that the untapped deposit contains 78 billion pounds of copper and 45 million ounces of gold. If all goes to plan, the massive investment would double the size of Mongolia's economy and create thousands of jobs, according to NPR.
The economic crisis has hit Mongolia harder than most countries in East Asia. One in four people are out of work, NPR reports. The country’s nomadic herders – 40 percent of the population – are struggling after the price of cashmere dramatically declined earlier this year (see Manasi Sharma’s Downturn in the Gobi). Now, some are hailing Oyu Tolgoi as an immediate economic fix.
But there are several obvious challenges. First, Mongolia is highly corrupt. It is ranked 102 out of 180 countries in the latest Transparency International index, an annual rating of perceived levels of corruption (defined as the abuse of public office for private gain). Additionally, the editorial in Mineweb suggests that Russia and China may have inordinate influence over Mongolia’s mining industry. Given these two factors, how much will the average Mongolian gain?
Lastly, there are the social implications of this investment to consider. For many nomadic herders, shifting to industrial mining jobs is far from ideal, but there isn’t much else to turn to. People are desperate now that raw cashmere and other materials do not provide a reliable way to feed and clothe families. "They are losing their land, their animals, and even their culture," reported NPR’s Louisa Lim, "for a few specks of gold."
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It seems like the development
It seems like the development of this valuable resource could have many positive effects on the Mongolian economy, but I guess the question is, would the positive outweigh the negative?
Besides the challenges listed in the article, there is also the issue of the environmental impact. Though the environmental impact may be seen as negligible in the short-run if it leads to growth, the long-term effects of development of the mine should be considered and could make the growth unsustainable, leaving Mongolia like Indonesia after it started running out of the trees that had given the economy its quick growth.
Added to the environmental issue is the empirical evidence that countries that follow a path of liberalization experience a decline in economic growth (a trend we discussed extensively in my economic development class). As privatization is part of the liberalization process, it should be questioned whether privatizing the copper mines will lead to growth and actually benefit Mongolians, considering too the corruption that the article mentions.
Before turning to the mines as a saving grace for the economy, the issue of the depreciation in the value of cashmere should be further investigated. If it is as vital a resource as it seems, given that 40 percent of the population depends on it for a livelihood, more should be done to find out why it has declined in value so drastically, and what can be done to improve it. Turning to industries that already exist, like the cashmere industry, and trying to improve them or build on the might be a better option. If there is a way to develop the copper mines without environmental degradation or the local people losing out, then great. But this should be considered carefully by the Mongolian government before it enters into a deal with Rio Tinto and Ivanhoe.
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