Full-page ad in Wall Street Journal urges Mongolia to stop “shaking down” private companies

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 must wipe out corruption and enshrine the right to private property or risk losing U.S. foreign aid.

The ad published in yesterday’s edition of the Wall Street Journal was timed to coincide with the third U.S.-Mongolia business forum taking place this week in Washington, D.C., where the U.S. Commerce Department is 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 said.

The Center for Individual Freedom, an Alexandria, Virginia-based free-market advocacy group, suggested that Mongolia did not deserve a recent U.S. taxpayer-funded grant of US$300 million from the Millennium Challenge Corporation because the Mongolian government did not uphold western values.

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

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

Mining executives at an industry conference last November in Ulan Batar spoke out strongly against controversial mining laws they claimed were choking 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, INV-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), Entre Gold (ETG-T, EGI-X), and Red Hill Energy (RH-V, RHFFF-O).