WSJ ad calls on U. S. to cut off aid to Mongolia

The Center for Individual Freedom has published a full-page ad in The Wall Street Journal demanding that U. S. President George Bush and Secretary of State Condoleeza Rice tell Mongolia that it has to wipe out corruption and enshrine the right to private property or risk losing U. S. foreign aid.

The ad published in the April 24 edition was calculated to coincide with the third U. S.-Mongolia business forum taking place in Washington,

D. C., where the U. S. Commerce Department was hosting a delegation of Mongolian officials.

“Mongolia has begun a full-scale assault on the rule of law, disregarding legal contracts, shaking down private companies through confiscatory taxes on mining interests, and intimidating Western businesses into relinquishing ownership to the State,” the ad claimed.

The Alexandria, Virginia-based CFIF is a free-market advocacy group suggested that Mongolia did not deserve grants paid for by U. S. taxpayers of about US$300 million from the Millennium Challenge Corporation because it did not uphold western values.

“Millennium Challenge grants are intended to encourage countries to eliminate corruption, uphold the rule of law and protect property rights — all Western ideals and interests. MCC grants should not be used to subsidize countries headed in the wrong direction.”

A number of foreign mining companies are attempting projects in the former communist country, which is still grappling with democracy and free-market concepts.

Mining executives at an industry conference last November in Ulaanbataar spoke out strongly against controversial mining laws they claimed were strangling mine development and urged the government to become more transparent and market-oriented in its policy making.

Their list of grievances ranged from Mongolia’s opaque investment climate, uncertainty over tenure, and laws that give the state the right to buy into deposits that were discovered with both public and private funds and deemed of “strategic importance.”

In May 2006, the regime introduced a 68% windfall profits tax on gold and copper. Under the law, miners must pay taxes of 68% on their shipments of gold and copper when the price of gold reaches US$500 per oz. and copper is over US$2,600 per tonne — thresholds significantly below current market prices.

Mongolia’s abundant natural resources have attracted a number of companies including: Ivanhoe Mines (IVN-T, IVN-N, IVN-Q), Rio Tinto (RTP-N, RIO-L, Erdene Resources (ERD-T), QGX (QGX-T, QGXLF-O), Western Prospector (KRI-T, KHRIF-O), SouthGobi Energy Resources (SGQ-V, SGQRF-O), Khan Resources (KRI-T, KHRIF-O), Centerra Gold(CG-T, CAGDF-O), Entree Gold (ETG-T, EGI-X), and Red Hill Energy (RH-V, RHFFF-O).