The World Bank Report No: ISR16590 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: 7 Status: ARCHIVED Archive Date: 17-Nov-2014 (P108768) Country: Mongolia Approval FY: 2008 Product Line: IBRD/IDA Region: EAST ASIA AND PACIFIC Lending Instrument: Technical Assistance Loan Implementing Agency(ies): 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 05-May-2014 Effectiveness Date 04-May-2009 Revised Closing Date 31-Mar-2015 Actual Mid Term Review Date 01-Nov-2011 Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project’s objective is to establish key pieces of the policy, fiscal, legal, regulatory and institutional framework for the mining and extractive sector that meets the needs of the public sector, industry, and civil society. 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 Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Moderate Implementation Status Overview With a closing date of March 31, 2015, the project objectives are achievable and progress towards the PDO is rated as Moderately Satisfactory. It is expected that all activities will be delivered by the end of 2014, with funds fully disbursed by the closing date. Given the shortage of funds in MSISTAP which was due to a combination of earlier delays and an unfavorable exchange rate over recent years, the Project had to drop several activities planned for the final year. This includes support for preparation of some supporting regulations Page 1 of 9 The World Bank Report No: ISR16590 to the revised Mining Law, revisions to the Erdenes Mongol legal and regulatory framework, and development of model agreements for mining. Some of these activities will be completed under parallel projects, with the Bank administered Extractive Industries Technical Advisory Facility (EI-TAF) taking on development of recommendations for model mining and community agreements. Given the progress to-date, these changes in the project do not affect the overall PDO. Public Disclosure Copy Since its approval in 2008, MSISTAP has showed some very important results. It has not only set up a new computerized mining licensing system (which is a corner stone of mining sector administration) and improved quality and efficiency of taxation and auditing of mining companies, but it also strengthened capacity of the state-owned mining company (Erdenes Mongol), provided technical review of various commodities, including gold, coal and unconventional oil and gas, to inform the government's strategy in regards to their promotion and development, and undertook a consultative strategic environmental and social assessment of mining sector. The Government emphasizes the timely and effective delivery and the major impact the project has had on the mining sector, increasing the transparency and efficiency of the sector, and improvements to the legislative framework. The project notes steady progress over the past year (following the restructuring of January 2014), and the improved speed of project implementation. The 2013 MSISTAP M&E report has been prepared by the PIU (publicly available on the MSISTAP website). A final M&E report will be prepared next year to form part of the ICR, due by September 2015. Given the success of MSISTAP, and the transformational potential of the extractives sector for the development of Mongolia, the Bank Team held discussions with the Ministry of Economic Development and the Ministry of Finance to assess the need and demand for technical assistance and follow up support post March-2015. Further steps will be discussed at the project closing stage as part of sector dialog between the Bank and the Government of Mongolia. Locations Country First Administrative Division Location Planned Actual Mongolia Not Entered Ulaanbaatar Hot Mongolia Not Entered Tavan Tolgoy Mongolia Not Entered Tsogttsetsiy Sum 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 Stabiltiy Law adopted Criteria agreed and withdraw from newly established Sovereign in 2010 (went into force in Jan implemented in Budget Wealth Fund are made based on agreed 2013) regulates deposits into framework for 2012 Budget Macroeconomic criteria and withdrawals from the Public Disclosure Copy Fiscal Stabilization Fund and sets fiscal rules. Date 26-Jun-2009 15-Oct-2014 31-Dec-2013 Comments achieved with some delay; will require further work to refine the SWF (by the govt) Level of mining related transfers from national Text Value Not currently disclosed Integrated Budget Law of Dec Disclosed and discussed/ government to Aimag and Soum authorities is 2011 addresses financial monitored by citizen groups/ known and publicly disclosed. flows to and uses of funds at civil society sub-national level. Page 2 of 9 The World Bank Report No: ISR16590 Date 26-Jun-2009 15-Oct-2014 31-Dec-2013 Comments Sub-national transfer are being discussed to be Public Disclosure Copy incorporated into EITI process next year. Mining Tax Audits are completed and Text Value none currently 2 audits completed; Minimum of two audits assessments raised guidelines and manuals for completed auditors adopted in 2014 Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments Clear authority and responsibilities for Text Value Roles confused resulting in Functional management Institutional roles clarified in Government mining sector management gaps and conflicts review of MoM completed in line with clearly stated institutions, especially regarding environmental 2013 and recommendations regulations. and social aspects associated with mining on clarifications of roles and activities. authorities provided and accepted by MoM. SESA completed in 2014 and clarifies roles on env/social side. Mining Law revised in July 2014 Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments Regulations are to be prepared by government Nov/ Dec 2014 following revision of Mining Law mineral licensing procedures streamlined and Text Value 4-6 months Revised Mining Law adopted 2 months processing times reduced July 2014 and the ban on issuing new licenses which was in place since 2010 is being lifted. Time for processing will be verified before project closure based Public Disclosure Copy on actual records Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments Geological information is digitized and Text Value very limited, no digital Willl not be met 200,000 data points digitised published and readily available in user friendly geochemistry digital formats. Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments Activities under this component were cancelled due to other projects Page 3 of 9 The World Bank Report No: ISR16590 supporting it (EBRD). However, this is not being implemented either due to a national security council ruling Public Disclosure Copy limiting access to geodata. Ministry undertaking some limited digitazation on its own. Companies and civil society participate in Text Value No data availabe. Companies and Civil society Consultations taking place for consultation for pieces of legislation and participate in consultation, policy, each piece of regulation for mining sector through public fora including proven involvement legislation and regulation. arranged by the government. in consultation on the Mining Law revisions, new Transparancy Law and various regulations issues for environmental law in 2013. Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments No comprehensive surveying Target achieved has been undertaken. MSISTAP has funded consultation with key stakeholders over new legislation. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Sovereign Wealth Fund or alternative revenue Text Value Mongolian Development Fund Soverign Wealth Fund New Fund Operational stabilisation mechanism established in place but deficient without established in 2013 when the defined operating criteria Fiscal Stability Law went into force. Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments TA provided. SWF will require an update based on technical Public Disclosure Copy advice and the new SWF law is under discussion. Support establishment of mechanisms for Text Value No policy unit serving Prime Several reports produced by a Produce first report preparation and dissemination of independent Minister research institution and professional mining sector economic and published on economics and policyreports. mining policy; conferences organized to discuss reports. Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments target met in 2014 Page 4 of 9 The World Bank Report No: ISR16590 Modern Mining cadastre regulation adopted Text Value Regulations under preparation Mining law revised in July Mining Cadastre is in use and and promulgated 2014 which specify provisions has public access and for tendering and first come tendering first served approach on Public Disclosure Copy licensing; new regulations due before November 2014. Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments Regulations being updated following amendments to Mining Law - expected to be done on time Preparation of Draft Model Mineral Text Value First draft prepared Production Sharing Draft Model PSA and Mining Development Agreement Agreement drafted and under Agreements consistent with consultation. Model Mining International best practice Agreement and Model adopted and utilised Community Devt Agreement will be prepared in 2015. Provisions for the model agreements in place in the revised Mining Law 2014 and Petroleum Law Date 26-Jun-2009 15-Oct-2014 31-Dec-2013 Comments Drafting of MDA and CDA will start in early November 2014 and expected to complete in 2015 (funding bridged by EI- TAF grant provided by the Bank given insufficient funding inMSISTAP in final year) Income tax laws on mining amended and Text Value Income tax law for mining Achieved - Windfall profit tax Final modifications to tax laws supporting regulations drafted deficient law of 2006 revised in 2010; submitted to Parliament for Investment code revised in consideration. Public Disclosure Copy 2013 - changes in force from 2014. Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments TA on taxation matters delivered; support not limited to income tax law but also on royalty and stabilization of fiscal provisions Page 5 of 9 The World Bank Report No: ISR16590 Options study prepared on double taxation Text Value Treaties exist but Government Achieved Work completed on treaties dissatisfied with operations double taxation treaties – Government Public Disclosure Copy satisfied with current position on double taxation treaties. Date 26-Jun-2009 15-Oct-2014 31-Dec-2013 Comments Study delivered in 2013, some treaties revoked and amended accordingly in 2013 GDNT tax audit staff trained and competent to Text Value no staff trained to Achieved; tax audit 10 staff trained of which 2 are carry out mining company tax audits international standards department received multiple leading mining tax audits support and study tours (all relevant staff participated - exceeds target) Date 26-Jun-2009 15-Oct-2014 31-Mar-2015 Comments Handbooks prepared and final study tour to tax audit departments in Australia is scheduled for December 2014. Ministry of Mining policies reviewed and Text Value Some work has been New Mineral Policy formally Government adopts revised undertaken to review the adopted/ passed by Cabinet recommendations in the form Ministry’s strategic in January 2014 of policy statements. communications plan. MSISTAP has also funded advice on how to bestdevelop the mining industry, including opportunities for downstream processing in Mongolia. Public Disclosure Copy Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments During 2009-2014 TA also provided on coal policy, gold strategy and strategy for unconventional oil and gas. The target is achievedbeyond plans. Page 6 of 9 The World Bank Report No: ISR16590 Modern company reporting requirements Text Value Reporting exists in regulations Almost achieved -Mining law regulations issues and passed regulations are prepared, promulgated, but needs modifications and updated in July 2014 and implemented, and monitored follow up includes reporting requirements Public Disclosure Copy Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments Law adopted and regulations due by November 2014. Modern occupation, health and safety Text Value Regulations exist but require Mining law adopted, Legislation passed, regulations are prepared, promulgated, update and modernization regulations to be updated authorities actively monitoring implemented and monitored. according to the new law health and safety practices based on new regulations. Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments Due to be completed in November 2014. Given insufficient funding in MSISTAP these regulations are to be funded by parallel donor funding. Strategic environmental & social assessment Text Value Limited SESA completed in Fall 2014, Results presented, undertaken, areas for improvement in social Almost achieved -- SESA Government responding to (including gender) & environmental regulation submitted for ministerial key findings identified, recommendations made for updating approval by MoM and laws MoEGD. Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments No systematic review of Good progress on env/social legislation governing management included environmental/ social impacts passage of new SEA undertaken. regulation, consultation regulation and cumulative impact assessment regulations in 2013. Consultation with a range of stakeholders Text Value Limited Achieved SESA Consultation process Public Disclosure Copy including civil society, community members completed. Working local and the private sector undertaken as part of engagement tools (models) asocial and environmental strategic evolved assessment process. Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments A range of stakeholders Regulations on consultation dissatisfied with engagement are in place since 2013 and in mechanism, government use. approaches to consultation. Page 7 of 9 The World Bank Report No: ISR16590 Modern mine closure and post closure Text Value law and regulations require Partially achieved -- TA Modern mine closure and regulations are prepared and promulgated closure planning but no provided (jointly with BGR) post closure regulations are specific regulation prepared and promulgated Public Disclosure Copy Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments MSISTAP will track this indicator further even though it is outside of its direct support. Erdenes MGL financial reports are provided Text Value not systemic reporting Achieved Financial reports are provided quarterly to the Board of Directors. quarterly to the Board of Directors. Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments Erdenes Mongol operates largely within international norms of reporting Establishment of appropriate legal structure Text Value EMGL was established in Achieved in 2010 Appropriate legal structure and preparation and adoption of suitable 2007 and preparation and adoption corporate charter and reporting arrangements of suitable corporate charter for Erdenes MGL and reporting arrangements in place. Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Comments Update is required based on changing mandate of EMGL and will have to complete separate from MSISTAP as funds have all been committed Provision of management-related and Text Value no systemic capacity building Achieved Management-related and governance related training events to build governance related training capabilities needed within Erdenes MGL. event provided Date 28-Mar-2014 15-Oct-2014 31-Mar-2015 Public Disclosure Copy Comments EMGL received extensive training and TA Data on Financial Performance (as of 28-Oct-2014) 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-Mar-2015 P108768 IDA-H4110 Effective 26-Jun-2008 07-Oct-2008 04-May-2009 31-Dec-2012 31-Mar-2015 Page 8 of 9 The World Bank Report No: ISR16590 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 2.58 0.57 82.00 P108768 IDA-H4110 Effective XDR 2.57 2.57 0.00 2.57 0.00 100.00 Public Disclosure Copy Disbursement Graph Key Decisions Regarding Implementation MSISTAP will close at the end of March, 2015, with a projected 100% disbursement rate. A project closing workshop will be planned for the 1st quarter 2015 to assess lessons learnt and to evaluate project impacts. Restructuring History Public Disclosure Copy Level two Approved on 05-Jul-2012, Level 1 Board/AOB Decision on 10-Jan-2014 Related Projects There are no related projects. Page 9 of 9