NRGI displays assessment result on Erdenes Mongol www.zgm.mn
Natural Resource Governance Institute (NRGI) has conducted an external assessment on the structure, operations and financial information of Erdenes Mongol (EM) SOE over the last two years and presented its results. Erdenes Mongol has 21 subsidiaries and the NRGI assessed the financial information of five companies, namely Baganuur JSC, Shivee Ovoo JSC, Erdenes Mongol LLC, Erdenes Oyu Tolgoi LLC, and Erdenes Tavan Tolgoi JSC.
Since its establishment in 2006, Erdenes Mongol did not report any profit until 2015. However, the company’s net profit amounted to MNT 41 billion in 2016-2018. Such profitability was the result of increased coal prices and coal transportation from Tavantolgoi to China.
Despite the increase in total profitability, EM and its subsidiaries do not pay dividends regularly to the Mongolian State Fund. However, some state-owned mining companies such as China Shenhua Energy, India’s Coal India, and Indonesia’s Antam pay 30-100 percent of their profits regularly to the state fund.
According to a study, EM has received external loans and assistance due to the deficit in financial reports, but the government and authorities’ monitoring on the matter is inadequate. By the end of 2017, the debt totaled MNT 877 billion. This is becoming a high risk for taxpayers.
The Government of Mongolia is the 100 percent owner of Erdenes Mongol LLC. The Government can improve the living standards of its people by implementing the activities in four areas, including functionality, management, and human resource, transparency, and control in order to make Erdenes Mongol profitable until 2035.
The average tenure of executive director of Erdenes Mongol's subsidiaries is 1.7 years. When the executives are replaced, over 80 percent of management teams are replaced as well. It is one of the main factors that Erdenes Mongol is not being profitable.
Published Date:2019-06-19