The World Bank Report No: ISR8334 Implementation Status & Results Mongolia Mongolia Mining Sector Technical Assistance Project (P108768) Public Disclosure Copy Operation Name: Mongolia Mining Sector Technical Assistance Project Project Stage: Implementation Seq.No: 4 Status: ARCHIVED Archive Date: 03-Apr-2013 (P108768) Country: Mongolia Approval FY: 2008 Product Line: IBRD/IDA Region: EAST ASIA AND PACIFIC Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Ministry of Finance Key Dates Board Approval Date 26-Jun-2008 Original Closing Date 31-Dec-2012 Planned Mid Term Review Date 15-Jul-2010 Last Archived ISR Date 21-Apr-2012 Effectiveness Date 04-May-2009 Revised Closing Date 31-Dec-2013 Actual Mid Term Review Date 01-Nov-2011 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objective (PDO) for this first phase of support is to assist the Government to develop further the policy, fiscal, legal, regulatory and institutional framework for the mining and extractive sector that meets the needs of government, industry, and civil society. This includes the operation of Erdenes MGL LLC according to good international practice associated with a commercial entity. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Strengthening capacity to manage mining revenues 4.10 Improving regulatory capacity to manage mining sector development 3.00 Development of capacity to manage State Equity 1.40 Project Management 0.80 Public Disclosure Copy Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Unsatisfactory Overall Risk Rating Implementation Status Overview Progress towards achieving the MSISTAP’s PDO will depend on conclusion of an ongoing review of the minerals legislation, clarification of regulatory roles of several agencies, decisions on whether or not to sustain the moratorium on mineral licensing and ban on making geodata more accessible, and the path taken by the state mineral enterprise to Page 1 of 6 The World Bank Report No: ISR8334 commercialize its operations and adopt best corporate governance practices. The 2013 work plan includes such crucial activities as a Strategic Environmental and Social Assessment of the mining sector, a functional review of regulatory institutions, launch of the web-based mining cadastre, support with development of model investment agreements and completion of a program of support to the General Tax Department on mining taxation. All of these activities are in advanced procurement stages but completing them before the end of the calendar year 2013 will be a big challenge. Public Disclosure Copy Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Annual Budget decisions to replenish or Text Value None Fiscal Stability Law of 2010 Criteria agreed and withdraw from newly established Sovereign regulates deposits into and implemented in Budget Wealth Fund are made based on agreed withdrawals from the Fiscal framework for 2012 Budget Macroeconomic criteria Stabilization Fund and sets fiscal rules Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Spending levels for basic services to Aimags Text Value Not currently disclosed Integrated Budget Law of Disclosed and discussed/ disclosed publicly December 2011 addresses monitored by citizen groups/ financial flows to and uses of civil society funds at sub-national level Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Mining Tax Audits are completed and Text Value none currently Mining tax audit unit in place Minimum of two audits assessments raised and receiving training completed Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Clear lines of responsibility for Mining sector Text Value Roles confused resulting in Functional review of Institutional roles clarified in Public Disclosure Copy management, especially for social and gaps and conflicts institutional roles and line with clearly stated environmental management responsibilities part of 2013 regulations. program. Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments SESA workshop held to define TOR for SESA in Oct 2012. Procurement is underway. Page 2 of 6 The World Bank Report No: ISR8334 mineral licensing procedures streamlined and Text Value 4-6 months On-line access to mining 2 months processing times reduced cadastre being installed. Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Public Disclosure Copy Comments Until moratorium is lifted it will not be possible to evaluate typical processing time Increased availability of digital geological Text Value very limited, no digital National security ruling 200,000 data points digitised information geochemistry limiting open access to geodata still in place. Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Establishment of good practice management Text Value no formal procedures adopted Erdenes MGL and its Procedures manual adopted systems consistent with OECD principles of subsidiaries have been and implemented consistent corporate governance established with full corporate with OECD principles legal standing. Erdenes MGL has not yet taken all the measures needed to meet the OECD Principles of Corporate Governance Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments The board changed following June 2012 elections. Corporate governance review to start soon. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Sovereign Wealth Fund or alternative revenue Text Value Mongolian Development Fund Review of existing funds New Fund Operational stabilisation mechanism established in place but deficient without completed defined operating criteria Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Public Disclosure Copy Comments A SWF international conference will take place in March 2013 to discuss global experiences. Preparation of Draft Model Mineral Text Value First draft prepared Request from MoF to prepare Draft Model Agreement Development Agreement model agreements consistent with International best practice adopted and utilised Page 3 of 6 The World Bank Report No: ISR8334 Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments procurement underway Preparation and adoption of a policy statement Text Value No policy statement exists Unclear Policy paper prepared, Public Disclosure Copy on State Equity participation in the mining adopted and promulgated sector Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments May become a part of the mineral policy Establishment of a policy unit/think tank which Text Value No policy unit serving Prime No progress to date Policy unit established and produces good quality economic and mining Minister produced 6 policy or position policy statements. papers Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Discussion underway to establish systematic access to international expertise Modern Mining cadastre regulation adopted Text Value Regulations under preparation Regulations issued in April Companies confirm improved and promulgated 2010 cadastre operations and reduced processing times Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Due to ongoing moratorium on licensing it is not possible to evaluate performance of the cadastre Income Tax law and supporting regulations Text Value Income tax law for mining Local consultant lawyers hired New Mining Tax Policy drafted, enacted and implementation deficient to support tax reforms statement prepared, commenced legislation prepared and adopted and implementation commenced Date 26-Jun-2009 31-Jan-2013 31-Dec-2013 Comments Preparation of income tax legislation in progress with Public Disclosure Copy IMF and US Treasury support Options study prepared on double taxation Text Value Treaties exist but Government Local consultant lawyers hired Options for review of Tax treaties dissatisfied with operations to support tax treaty reforms treaties prepared and decisions taken in next steps to resolve any issues Date 26-Jun-2009 31-Dec-2012 31-Dec-2013 Comments Also being supported by IMF and US Treasury teams. Page 4 of 6 The World Bank Report No: ISR8334 GDNT tax audit staff trained and competent to Text Value no staff trained to Tax audit training, study tour 10 staff trained of which 2 are carry out mining company tax audits international standards and pilot audit completed leading mining tax audits Date 26-Jun-2009 31-Dec-2012 31-Dec-2013 Public Disclosure Copy Comments Also being supported by IMF and US Treasury teams Data on Financial Performance (as of 25-Feb-2013) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P108768 IDA-44890 Effective 26-Jun-2008 07-Oct-2008 04-May-2009 31-Dec-2012 31-Dec-2013 P108768 IDA-H4110 Effective 26-Jun-2008 07-Oct-2008 04-May-2009 31-Dec-2012 31-Dec-2013 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P108768 IDA-44890 Effective XDR 3.15 3.15 0.00 1.75 1.40 56.00 P108768 IDA-H4110 Effective XDR 2.57 2.57 0.00 1.88 0.69 73.00 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation Page 5 of 6 The World Bank Report No: ISR8334 The Project Steering Committee to agree on the framework for the final phase of the project (potentially, a final extension of the closing date, but the feasibility of this would need to be reviewed by Bank management). Public Disclosure Copy Restructuring History Level two Approved on 05-Jul-2012 Related Projects There are no related projects. Public Disclosure Copy Page 6 of 6