The Impact of Mining Lifecycles in Mongolia and Kyrgyzstan

Political, Social, Environmental and Cultural Contexts

Troy Sternberg, Kemel Toktomushev, Byambabaatar Ichinkhorloo, Troy Sternberg, Kemel Toktomushev, Byambabaatar Ichinkhorloo

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000461091
• Edition: 1
• Topic: Business
• Subtopic: Industria energetica
• Index: Business

This volume investigates how mining affects societies and communities in Mongolia and Kyrgyzstan.

As ex-Soviet states, Mongolia and Kyrgyzstan share history, culture and transitions to democracy. Most importantly, both are mineral-rich countries on China's frontier and epi-centres of resource extraction. This volume examines challenges communities in these countries encounter on the long journey through resource exploration, extraction and mine closure. The book is organised into three related sectionsthat travel from mine licensing and instigation to early anticipation of benefit through the realisation of social and environmental impacts to finite issues such as jobs, monitoring, dispute resolution and reclamation. Most originally, each chapter will include a final section entitled "Notes from the field" that presents the voice of in-country researchers and stakeholders. These sections will provide local contextual knowledge on the chapter's theme by practitioners from Mongolia and Central Asia. The volume thereby offers a distinctively grounded perspective on the tensions and benefits of mining in this dynamic region. Using Mongolia and Kyrgyzstan as case studies, the volume reflects on the evolving challenges communities and societies encounter with resource extraction worldwide.

The book will be of great interest to students and scholars of mining and natural resource extraction, corporate social responsibility and sustainable development.

1Mining lifecycles in Mongolia and Kyrgyzstan

Troy Sternberg, Kemel Toktomushev and Byambabaatar Ichinkhorloo

DOI: 10.4324/9781003097341-1

Our book investigates on how mining affects societies and communities in Mongolia and Kyrgyzstan. These two ex-Soviet states share similar 20th-century history, traditional pastoralism and steppe culture and now democratic approaches to governance. Both mineral-rich countries on China’s frontier are epicentres of resource extraction and resultant processes that reconfigure politics and economics. They also share community opposition and suspicion of foreign companies, factors that place mining at the centre of the national debate. Active civil society, high social media use and changing policies stir attention and uncertainty. There is a cycle of mining – the repeated activities and challenges that countries and communities encounter on the long journey through resource exploration, extraction and mine closure. An investigation of mining starts with licensing, knowledge and instigation; travels from early evaluation and anticipation of benefit, goes through the realisation of social and environmental impact, then disrupted expectation and difficulty in achieving agency towards amelioration. With time comes the post-struggle phase, whether through achievement or resignation, where direct confrontation evolves to seek accommodation or tentative acceptance of conditions and proceeds to finite issues such as jobs, monitoring, dispute resolution and land reclamation. Each chapter identifies and engages with a phase of the mining lifescycle in contemporary Kyrgystan and Mongolia. The goal is to understand processes in two states at the epicentre of mining development today.

Resource extraction brings new challenges for citizens and governments and presents the enduring conundrum – how to direct mining development for a country’s positive benefit. Much research has focused on mineral resources in South America and Africa (Conde 2017; Larmer and Laterza 2017) whilst the lifecycle of a mine in Inner Asia digresses through Soviet legacies, nascent democracies and engaged publics (Sternberg 2020). Here the industry is framed by international investment, China’s Belt and Road Intitiative, weak governance and a perceived lack of citizen and community benefit. This has led to a range of outcomes from episodes of violence in Kyrgyzstan to a negotiated community development agreement in Mongolia (Lezak et al. 2019). Understanding the life of a mine investigates the three phases – exploration, extraction and rehabilitation/closure – that represent the extractive cycle. The book portrays the challenges that mining presents to communities and governments in developing countries.

The Kyrgyzstan–Mongolian perspective forms a basis to present South-to-South country processes, engagement and understanding. Whilst conflict dominates the discussion, evolving regional practice includes efforts at mediation and amelioration. Mining predates current nation states in the region; 21st-century transitions encourage applied knowledge of lifecycles that reflects contemporary realities. This era of “new silk roads,” international investment flows, inequality, social media fact and rumour, colour revolutions and political fatigue hosts transformative extractive dynamics. Our series of mining panoramas brings context and experience to the Inner Asian steppe region. Examination of contemporary society and new knowledge embeds the region in the global mining paradigm. This introduction outlines themes that frame the book’s chapters; an awareness of history, society and contemporary dynamics is key to understanding mining lifecycles in the region.

Post-Soviet context

Though few publications link research in Mongolia and Kyrgyzstan, a productive comparison draws the countries together. Parallel histories and related development experiences highlight the similarities. Kyrgyzstan left the Soviet Union in 1991 and Mongolia abandoned socialism in 1990. Since independence, both nations have pursued versions of democracy and a market economy. Socialism, as practiced in these countries, has served as a foundation for transformation of property ownership, mining regimes and mineral resources management since the 1990s. Existing structures became a reference point for generations who grew up during the Soviet era and in the post-socialist period (Humphrey 2002). Concepts of wealth distribution, state ownership and intervention and resource management have persisted to some degree in both countries. Though there were policy changes in mining, state ownership of mineral resources (e.g. Mongolia’s 34% interest Oyu Tolgoi mine) has repeated in the post-socialist period. Moreover, the state continues equitable distribution of wealth in the form of cash transfers from mineral revenue.

Constitutions and land laws of both countries mirror the legislation of the Soviet Union. There were two property rights - one was “the state ownership of all land including soil, minerals, as well as forests” and the other was the “individual land use rights” recognised by the state (Osakwe 1985, pp.147–8). Post-socialist legal systems retained both rights which allowed people to use state ownership against private mining, hoping for a share of the wealth. It also legalised suppression of community opposition to state-owned mines. On one hand, this post-socialist system gave power to oligarchies to control mineral resources by manipulating people and communities against competitors. The case of Gurvantes in Mongolia shows how the local community and government target only one mine out of several in the same place. On the other hand, post-socialist generations are influenced by the nostalgic memory of elders about honest people and equitable living conditions under socialism. This has shaped new, positive legacies of socialism ignoring past hardships of central planning, political oppression and colonial history in search for a more equitable and just society. This is evident in Mongolia where the public-supported state ownership of the Erdenet copper mine though the government lost the case of nationalising the mine at all levels in court. This suggests that the shadow of socialism exists and passes from one generation to another through memory that shapes an improper the marriage of state and businesses.

Institutional development in mining regimes

As most states inherited mineral title from a crown, monarchy, aristocrat or landlord, it legitimatised the absolute rights of state ownership of land and subsoil over people in the constitution (Flomenhoft, 2018; Scott, 2008). After 1990 private property regimes in Mongolia introduced the concepts such as “mining claim” or “usufruct through discovery” and “labour theory of ownership” in extractive industries. It justifies the resource claim of an institution or local people who discovered or depended on the resources and mineral deposits. This conception helped people benefit directly from subsoil and surface rights while resisting royal or state prerogatives over minerals (Mcdowell, 2004; Scott, 2008). The socialist government of Mongolia conducted mineral surveys and feasibility studies of the mineral deposits through state funding; post-socialist governments passed this to the private sector. Artisanal miners demanded legitimacy to use and benefit from the mineral resources that they discovered or found in abandoned mining sites in competition with the state and private mining companies. This has raised questions about the state’s right to resources or to have shares in the mining projects and sets “free mining” against “resource nationalism.”

One method to reduce the impact and costs of mining are environmental and social impact assessments. These can reduce conflicts among mining stakeholders, local residents and investors and address resettlement, compensation, benefit sharing whilst securing mining operations. However, Mongolia and Kyrgyzstan did not conduct adequate environmental and social impact assessment during socialism. Until the early 2000s, they relied on state power to distribute benefit through planning mining towns. As the state lost its power to impose agendas over private properties and mine sites, environmental and social impact assessments became prerequisites to mitigate impacts and sustain local livelihoods, presenting challenges in both countries.

Mongolia preferred cash distributions during the mining boom in 2004–12, whilst cost management developed slowly during bust cycle in 1997–2004 and 2012–19 (Dagys et al. 2020; Isakova et al. 2012). Study suggests that each mining cycle has a definitive role in developing institutions and both countries have not experienced full mining cycles of exploration, extraction and mine site rehabilitation after closure in the post-socialist period. There are few closures of mines that started in socialist time to show development cost, benefits and rehabilitation. National governments and publics have the opportunity to discuss mining and commodity price cycles through the presence of civil society organisations and governance mechanisms. For example, Mongolia’s past political and economic dependence on the Soviet Union made it determined to have economic sovereignty. The government negotiated with mining stakeholders and revised legal frameworks thanks to democracy and pluralism. Some national or international corporate stakeholders opportunistically used the policy changes in property rights to grab state-funded mineral deposits during bust cycles in 1997–2004. When the resource boom cycle started in 2004 policy changed to create benefit and cost management institutions by distributing resource shares to people and encouraging civil society movements.

Country context

Having sketched out the parallel political and institutional contexts of mining in Mongolia and Kyrgyzstan, we now take the cases in turn to provide more detailed background for the chapters that follow. Mining contributes significantly to national gross domestic product (GDP), 28% in Mongolia and comprises ~87% of exports (MSIS 2021). In Kyrgyzstan extraction is ~10% of GDP, whilst remittances at 28% is the largest sector (WDI/World Bank 2020). Here, the former’s coal, copper, gold and iron goes primarily to China (>80%) whilst the latter’s gold and precious metals are recorded as exports to Switzerland, Uzbekistan and Russia. Much is promised when licenses are granted, yet extractive employment is limited and often low-skilled. This creates tension in both countries that have high poverty rates (28% in Mongolia, 22% in Kyrgyzstan). Balancing tax revenue, community and national benefit and pursuit of Sustainable Development Goals present ongoing issues.

In Kyrgyzstan and Mongolia, extractives industries dominate political and economic discourses. In both countries (a) mining has been identified as a strategic priority for development and as an indivisible element of domestic politics and (b) mining emerged as an issue of a much broader magnitude. It has already become evident that extraction is no longer solely about economic growth, but rather about social inclusion. Creation of favourable conditions for both mining companies to generate profit and for local communities to improve their quality of life should be viewed as the ultimate aim of mining development in the region. This is one of the reasons why the efforts of incumbent governments to develop the sector are consistently mired by growing communal anxieties. Unless the provision of welfare benefits from mining is extended to all stakeholders, mining will negatively impact political stability on both local and national levels.

As steppe cultures evolved from a common nomadic background, pastoralists in Mongolian rangelands and mountain pasture in Kyrgyzstan have resisted the negative changes encountered with mining. Social disharmony, land and water degradation, lack of jobs and mistrust between citizens, companies and the state have led to conflicts. The process has divided rural and urban residents over perceptions of mining benefit to families, communities the country. Local resistance to mining and demonstrations were attempts to reverse unfavourable changes. Changing subsistence patterns, behaviour, attitudes and increased living costs are well documented in the following chapters. Influences modify institutions and organisations, including in social movements, governance, communities and civil society. Local or regional values and beliefs are likely to transition in the near future in ways that may affect culture.

Kyrgyzstan’s visible Soviet heritage, Asian hospitality and natural beauty draws expatriates and tourists. Yet this image does not reveal the country’s real struggle. Kyrgyzstan is the only country in the region that survived two inter-ethnic conflicts, witnessed two popular revolutions, ousted two corrupt presidents, and yet remains in a transition quagmire (Toktomushev, 2017). After gaining independence by default in 1991, Kyrgyzstan embarked on a journey away from its Soviet past towards market economy and a more democratic future. Despite being one of the smallest and poorest countries in the post-Soviet region, Kyrgyzstan used to exhibit its free spirit, democratic changes and market reforms. Whilst Kyrgyzstan was considered an island of democracy, the mining industry came to represent the challenges the country faces.

These visions were soon crushed by consistent economic failures and subsequent democratisation reversals. The dissolution of the Soviet Union exposed the stark dependency of Kyrgyzstan on Soviet central authority. The rapid breakdown of logistics chains and a lack of support from Moscow accelerated Kyrgyzstan’s economic decay. A majority of population found themselves struggling over physical survival with chronic poverty reaching unseen levels. Spikes of western involvement only precipitated a unique environment in which authoritarian governance flourished (Owen et al., 2018). As a result, the upheavals of political, economic and social nature became the new normal for post-Soviet Kyrgyzstan. The more the people yearned for changes, the more the country became mired in economic problems, corruption, criminality and clan-based politics. Two popular uprisings in 2005 and 2010 did not live up to expectations and Kyrgyzstan remained a weak state vulnerable to internal and external insecurities.

Kyrgyzstan’s rich mineral resources did not pull the country out of poverty. During Soviet times, small mining towns spread across the country with their own hospitals, schools and infrastructure. After the dissolution of the USSR these towns quickly fell into decay. The demise of the socialist economy exposed how unsustainable Soviet mining projects were in Kyrgyzstan. As a result, neit...