P.Tsagaan: We don’t talk about politics at the Board of Directors meeting – we talk about Mongolia.
The following interview is with P.Tsagaan, one of the three current Mongolian members of the Board of Directors at Oyu Tolgoi LLC.
-A discussion concerning the Board of Directors of Oyu Tolgoi during a Parliament meeting sparked the issue of accountability and replacement of its Mongolian members. It has been widely circulated and has become a hot topic for the public and media. You are one of the Board members at Oyu Tolgoi. Your answers in Parliament meetings were very short, and you are generally quiet. What are the reasons for this?
-It would be a very long story if I decide to talk about this. There is no law that dictates a member of a Board of Directors of any company to report their business to the State. When required, we may decide to release information through our investors.
We have been talking about things like these before; this is nothing new – only this time, they were spoken publicly.
-But since then, some people have been and still are actively supporting that the three Mongolian members at the Board of Directors be relieved of their positions. How are you taking this?
-It is possible to let the Board members go. But we can’t just let them go when we want them to – it has its own rules and regulations on appointment and removal. Nevertheless, we have worked for the benefit of Mongolia and successfully completed the first phase of the project. No one has to thank us – but they could at least stop accusing us of doing nothing.
The three members have been appointed by the government. I can proudly say that we all have worked hard for the interest of our country. Representing Mongolia, we discussed and debated with one of the largest and most experienced companies; we even quarreled with them on more than one occasion. We don’t talk about politics or unions at the Board of Directors meeting – we talk about Mongolia. The investors think we are Mongolian nationalists with strong views. I think they would be surprised to know that we are looked down upon by our fellow countrymen.
I was appointed to this position while I was serving as the President’s assistant. N.Bagabandi was a two-term Mongolian president, and was also the Speaker of the Parliament. There was nothing wrong with choosing him for his ability and experience to be a member of the Board of Directors at Oyu Tolgoi. We all know that his words carry more weight than any other random nationalist out there.
People say Ch.Ganbold is simply a singer. I do not think it is his fault that he has a natural ability to sing. He is a very educated man who also serves as chairman of a large commercial bank.
-Can you name a few operations or decisions that are direct results of your involvement at the Board?
-We were appointed and attended our first Board meeting in June 2010. We have always protected the interests of Mongolia in every issue brought up at the Board. The first goal of the Board was to put the copper mine into operation. This was completed half a year ahead of its schedule. There were numerous difficulties during this time, but thanks to the enormous support and assistance from the Mongolian government, the State Property Committee, Erdenes-Oyu Tolgoi, Umnugobi Province, and the administration of Khanbogd Soum, in addition to the excellent financing and management provided by our investors, we have successfully overcome all of them and completed the first phase of the project. This is only the beginning of the construction project.
Past events and Board meeting logs will serve as proof when it comes to the question of our loyalty to Mongolia. If the Mongolian Board members failed to serve as a bridge between Oyu Tolgoi investors and the Government of Mongolia, the first phase could not have been in operation this soon.
For the past two and a half years, there were difficulties concerning Mongolian bureaucracy, beadledom and delays, as well as the foreign investors’ temperament. One simple example is that the discussion on whether to temporarily import energy from China has continued for 22 months.
Only a year after joining the Board, we were able to reduce the investment interest by five percent on an already signed contract. It may be easy to say, but it was not an easy task. This five percent means one billion USD is now removed from our annual interest fee. There has never been such a high cut on our expenditure before. The work on changing preferred stocks to common stocks was not easy, too.
All we have left to do is to talk to our investors about expanding production and increasing efficiency, as well as discussing and resolving obvious mistakes made on our contract.
-What is the most important discussion during that Parliament meeting?
-The unprofessional move by Goldman Sachs. Unless they come and apologize by their own initiative, our country will have to issue a complaint.
-Did the Mongolian government know everything about what’s happening right now?
-Of course they knew – the heart of the government’s strategy lies in knowing who is meeting who and where, and what is taking place. This project is the largest one undertaken by our government. It has many sides and many colors. Not only is it a business, but Oyu Tolgoi is also an important geopolitical project that promises Mongolia fast growth and its economic independence. This is the reason why we must treat this project with different views and with a long-term vision.
Despite having a vast territory and rich mineral resources, Mongolian people were always short on general everyday products for many years. I believe that the first step in overcoming this problem is to correctly cooperate with foreign investors.
Investors are not gods – they are cunning people who are interested in making money. By precisely utilizing their interest to profit from a business with Mongolia’s interest to grow its economy, Mongolia can become a great country once again. But to do so, we need smart and fair people who are totally dedicated to improving and flourishing Mongolia.
-The President of Mongolia spoke strongly on Oyu Tolgoi’s operations. Why didn’t he speak of this before?
-As the President of Mongolia, Ts.Elbegdorj knows everything about Mongolia inside out, including the strategically important Oyu Tolgoi project. It is always the center of his attention – as the Head of State, he said what had to be said during the Parliament meeting. It is his choice when and how to say his views.
-When will we be rid of occasional disputes between the investors and Mongolians?
-It depends on the two sides. The faster the heads of Rio Tinto get rid of its old and routine views and actually level with Mongolia, the faster our problems will disappear. Mongolians should also be rid of their “complaining old woman” behavior. We should resolve our issues and move on without embarrassing Mongolia in front of the world. I think our investors would agree.
But I think the two parties will find a way to get along because their objectives and interests are the same.
-The investment of Oyu Tolgoi has been constantly on the rise. What is the reason for this?
-We will soon know. There are implications that we are at fault for the huge expenditure. Both sides should look at the problem realistically. If we hadn’t confirmed and approved the 2012 budget, we wouldn’t have had our mine in operation by now – and its eventual outcome would have been very hard to imagine. For starters, we would have returned the 10,000 onsite workers back to where they came from and over 1,000 Mongolian companies’ contracts and agreements at Oyu Tolgoi would have halted. Thousands of people would have been out of job and ended up with no income.
On the other hand, the concrete molding of certain structures has to be done persistently. The quality of the structure will be put at risk if it is stopped for any reason, and the whole operation will have to be restarted. But what about restarting the work of a 1,300 meter deep tunnel? Do we let it collapse and dig again? Of course, we can do all that – we can destroy it and rebuild it anytime we want but we have to remember that 34 percent of all costs come down on Mongolia.
In short, we were in a stalemate with only one choice available. We discussed the matter with our investors and decided that we would definitely confirm the budget and put the mine in operation before its due time, and we would separately address the issue of cost later. I believe this was the right decision.
Once we had done it, we officially put it on paper that our budget has exceeded by one billion USD.
-What do you think is the reason why the discussion of Oyu Tolgoi has become more popular among Parliament members?
-There must be many reasons. They have a lot of things to discuss. Oyu Tolgoi and Tavan Tolgoi began at about the same time. But Oyu Tolgoi is now powered up and has begun production, whereas Tavan Tolgoi is essentially in a bankrupt state; and where is that famous Thermal Power Plant No. 5?
It is correct to criticize something on its usefulness, but it has to be realistic and backed by evidence. When the world looks at us, it does not matter which party is in control of the government. It is just Mongolia and the Government of Mongolia. So the government should not wrong the previous political party, they should instead have the ability see the government’s past, present, and future as one.
Additionally, foreigners should not take advantage of Mongolia’s interest to have access to a third neighbor, its low population, inexperience in loaning, or insufficient international financial knowledge.
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