Integrated Mineral Resources Initiative

Programme description

Title: Integrated Mineral Resources Initiative
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Mongolia
Lead executing agency: Ministry of Industry
Overall term: 2014 to 2017

Context
Mongolia is one of the world’s richest countries in terms of mineral resources, with significant deposits of coal, copper, gold, fluorspar, and tungsten. Developing the mineral resource sector can lead to substantial growth and widespread prosperity for the population as a whole. Nevertheless, the mineral reserves are a key cause of structural inequalities in the country. In order to develop the mineral resource sector and at the same time diversify the economy, the country needs foreign direct investment and technical expertise.

Many resource-rich countries are faced with what is termed a ‘resource curse’. In Mongolia, too, during times of high raw materials prices, there is a risk that this natural wealth will either not be used or will be misappropriated.

Mongolia’s gross domestic product growth has ranged between minus 1.3 per cent (2009) to plus 17.5 per cent (2012) and nominal growth of 6 per cent for 2014. These wide fluctuations reflect significantly reduced demand for mineral resources from China, Mongolia’s most important market, and increased international competition from other commodity-producing countries.

Translating mineral wealth into strong, sustainable, and inclusive economic growth requires structured macroeconomic measures and a coherent political framework to support foreign direct investment. The country lacks dialogue platforms to facilitate constructive communication between the local population, local government and businesses. In addition, Mongolia lacks the resources and skills needed to translate resource wealth into inclusive growth based on a long-term development strategy. As a long-standing partner, Germany supports Mongolia in implementing its development strategy.

Objective
The ability of national and local partner institutions to promote inclusive and sustainable growth based on mineral resource wealth is improved.

Approach
The Integrated Mineral Resources Initiative (IMRI) brings together three German federal ministries in a partnership – the Federal Ministry for Economic Development and Cooperation, the Federal Ministry of Economics and Technology and the Federal Foreign Office. Alongside GIZ, the Physikalisch-Technische Bundesanstalt (PTB) and the private sector are also involved.

The initiative comprises three fields of activity:

  1. Sustainable location development in mining regions
  2. Macroeconomic management of a resource-based market economy
  3. Supporting the agreement between Germany and Mongolia on cooperation in the field of mineral resources

The project pursues a multi-stakeholder and multi-level approach. It strengthens the partner ministries’ capacity for macroeconomic management of a resource-based economy. Assistance is provided to media representatives, universities, and the private sector to enable them to promote the economic discourse. The project adopts an integrated approach to location development in the region: dialogue platforms and capacity development measures are implemented and the stakeholders are enabled to improve their participation in economic, social, and political discourse and development.

German and international consulting companies are involved in disseminating up-to-date knowledge and coaching the staff of Mongolian partner institutions.

In cooperation with the Swiss Agency for Development and Cooperation (SDC), steps are being taken to set up a local value chain for gold, especially gold jewellery, and create local employment and earning opportunities.

Good economic governance is a key concern of IMRI. Capacity development of employees from selected ministries and specialist agencies or authorities will help to achieve this, as will broaden knowledge on how to assess resource deposits and on how to draft and monitor conditions, laws, and agreements in the raw materials sector.

Results
Between 2011 and 2014, the first IMRI programme provided substantial assistance and targeted advisory services to a number of partner organizations. The project is closely linked to government activities aimed at improving the institutional and economic policy environment, especially in the mining sector. In addition, the project contributes to increasing value creation in Mongolia and to creating jobs throughout the mining sector. In-depth advice has been provided to around 70 small and medium-sized enterprises, enhancing their ability to serve as qualified regional suppliers to mining companies.

In the German and Mongolian private sector, intensive cooperation with the German-Mongolian Business Association (DMUV) has improved the human resources of the Association and its performance profile. The number of members has increased as a result.

International and large Mongolian companies have been made aware of the importance of topics such as corporate social responsibility, safety at work, and gender and human rights. These issues are now mainstreamed in Mongolian businesses.

By involving German companies in development measures, the project helps to implement the agreement on cooperation in the field of mineral resources between Germany and Mongolia. German business representatives act as speakers at dialogue events and training courses; at the same time, the market access of German companies is also promoted.

Cooperation schemes and transferring product and management knowledge are specifically promoted. This enables local businesses to offer sophisticated, customer-oriented solutions based on German technology on their markets.

Mongolia. Mongolian and German partners sign a memorandum of understanding. © GIZ

Contact

Stefan Hanselmann
stefan.hanselmann@giz.de