Development in business and management

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Executive summary

Mongolia is well known throughout the globe for the extraction of minerals the mining industry, thus becoming the fastest ever growing industry in the world, bringing lots of opportunities with it. The mining industry have led to great research opportunities which alongside have attracted a lot of foreign direct investment from countries like, Canada, china, Russia and some other countries. Mongolian economy is primarily based on agriculture and mining industry has enabled to develop cashmere exports, minerals and food products to other country.

The Ivanhoe Mines has been working on Oyu Tolgoi project and doing excellent job for Mongolian such as heating systems have been introduced to gers to prevent air pollution resulting in lot of opportunity to use comfortable and traditional gers for a long time. Jobs have been created for lots of people.

Industrialisation and urbanisation and improved transport have brought economic benefit and improvements to the residents. Although these processes have also led to the environmental degradation, climate changes, air and water pollution and natural resources and ecology which has been threatening the prospect of future generation. Labours are not properly trained, thus resulting in the damage of land and health problems according to situation happening in Mongolia.


Mongolia is a landlocked country located in the northeast Asia which is surrounded by Russia and China with total area of 1.59 million sq km with a population of 2.7 million. 0.76% of the land in Mongolia is arable, 99.24% is used for extraction of natural resources such as oil, coal, copper, molybdenum, tungsten, phosphates, tin, nickel, zinc, fluorspar, gold, silver and iron. The economic development of Mongolia has progressively grown over the years from the period of communism to socialism. This has enabled the industrialisation and growth of the economy with increased industrial output from the original economic base of animal husbandry and crop production. The development of the mining industry has led to improvements in the transportation and communications systems.

The World Bank's Mongolia Quarterly stated that the government decided to impose a tight fiscal policy to lower the inflation rate as well as the lowering the reserve from 5.5% to 5.0%. The GDP ratio is increased to $9.399 billion in 2008 which enables $3.541 per capita. According to CIA World Factbook, unemployment rate is 3.0% in December 2008.

Mongolia is experiencing a miracle in the mining industry bringing opportunities and also major effects and playing an important role in the Mongolian economics. Mining industry of Mongolia is producing 20% of the GDP, 64.0% of Gross industrial output, 68.5% of export and 47.7% of FDI alone with addition of the 20 percent of the state budget income. Mongolia is well known for mineral deposits; according to government analysis furthermore it has attracted many foreign investors during the last few years and 47.4% of them are from China, 12.2% is from Canada, Korea (7.3%), Japan (5.0%), USA (3.6%) and other foreign investors which is available in Mongolian mining industry association official website.

Major mineral deposits in Mongolia

The internal analysis of mining industry

The analysing method of internal environment is SWOT analysis to evaluate the organisation strength, weakness, threat and opportunities such as organisation culture, structure, management, experience, staff and so on.

  1. Strength of mining industry
  2. Mongolia is well known for its geology and its mining industry across the world. It has become one of the leading developments for years purely on the success of extracting of raw materials, profits resulting on exports and also playing important role for the economic development. Mining industry of Mongolia is producing significant and large amount of the state budget income which is from few major deposits in Mongolia which are attracting on not only in Mongolia but also in the world. The Mongolian mining industry outlook can be seen in the chart below.

  3. Weakness
  4. Extracting new kinds of minerals and processing final products to export is still in stagnant situation. The mines and deposits found with state budget exploration 20 years ago are still not in use in industrial processes even today. The cause of this lack of use is directly connected to infrastructure problems with electricity and road. Security of the mining industry is not in good which enables illegal ninja to extract the resources. Mongolian mining industry has less availability in labour and skill. Because few students entering the fields, lack of available funding for the students support and research, lack of interest on part of university administration.

  5. Opportunities
  6. The number of extractive mining products has been increasing year by year and creating great opportunity to develop infrastructure complex in that major deposits area. There are great opportunity to research and study the establishment of chemical industries and establishing extractive industries directed to Asian developed countries. Along with the resources, Mongolia has an opportunity to have technique and technology, know-how, foreign direct investment, business knowledge and experience and management and ready to cooperate in this industry. The mining companies in Mongolia are not only concentrating on exploring and extracting the minerals but also they support and develop the better education training program and funded around 200 million MNT for the infrastructure through the Gobi desert such as they have sponsored new heating system, new kitchen machinery and new facilities like car for the official use, toilet, trash bin and backyard field for the school and kinder garden, they have provided elementary cashmere training for the Gobi 22 women and it has been effectively worth. The mining companies have funded 405 million MNT for the local hospital to improve their technology and machinery. The entrepreneurs and herders has taken benefit from the mining companies in order to development in mining industry has given job opportunities indirectly.

  7. Threats
  8. Technique and technology of mining industry are still limited in development thus there is danger to damaging land in the process of extraction of minerals. The mineral levels of gold and coal production are high causing environmental pollution. In addition the extracting processes of illegal ninja increases the risk of poor strategic extraction affecting the quality of minerals sold. Some of the newly established deposits are using non-standard toxic chemical causing damage to environment and people at the same time, thus the level of illnesses associated with pollution are increasing among the local inhabitants. According to World Bank survey, scenario analysis of air pollution in Mongolia between 2010 and 2020 designated unless the government need to make effort at certain level, air pollution and health problem will be significant issue. There is no single solution to reduce the emission.

The external environment of organisation

The external environment affects every work team in the industry and also affects the industry as a whole analysis is of the political, economical, social, technological, legal and ecological effects on the industry.

  1. Political factors in mining industry
  2. Political stability in the country has enabled the construction of infrastructure and development of supporting industries such as oil infrastructure, energy systems, water and road that are important for the supply of inputs and demand of the industry outputs. This stability has attracted a lot of foreign direct investment from Canada, China and Russia which has led to greater exploration of resources. However there is still a lot of political interference of the government in policy making and awarding of contracts to invest in the industry.

    Taxation policy: Mongolian government has drafted a legislative amendments to eliminate the windfall mining tax to bring nation's royalties of the tax system to include 5% royalty, 5% importing, 20% withholding tax and 68% excess profits tax.

  3. Economical
  4. Economy of Mongolia is strongly based on agriculture and mining industry which has enabled to develop cashmere exports, mineral and food products to the other country.

    Economic growth: The Mongolian economic growth has reached 9.9% in 2007 according to World Bank and is still expected to grow, raising the standards of living and generating wealth for Mongolians. The government has been focusing on policies to transfer from aid loan based economic mechanisms to foreign investment supported economic mechanisms.

    Inflation rate: The government has tried its best to have inflation rate as low as possible and has seen positive results with inflation reducing from 5.7% in April 2008 to 2.2% in April 2009

    The Mongolian government has preferred the 100% foreign investment than aid from other countries during the economy crisis which enable the Mongolia to benefit from it. Next 50 years the mining industry production will be grown at least by 5%.

  5. Social and cultural factor
  6. Currently in Ulaanbaatar smoke is pouring from the chimneys in Ger district and mining companies are introduced heating system in Gers to prevent the air pollution and to provide better living condition for the inhabitants.

    The herders who are near to the deposits have been supported to install new facilities by the mining companies such as moving to the better place with water system in waterhole, new house with heating system and even the good conditioned place for the livestock. And the mining companies have given lots of job opportunity for the nation which has reduced the unemployment rate according to index has been made by government

  7. Technological factor
  8. As far as technology has developed potentially, as well as the mining industry is very sophisticated industry with advanced technology including automation, satellite communications, smart sensors, and robotics. The computer and microprocessors are responsible for making efficient and reliable machinery for extraction, operation and processing to gain new competitive environments in safe and environmentally sound manner. For example, remote control of carrying equipment and the use of autonomous mobile transportation equipment is increasing worker safety as well as reducing industry costs.

  9. Legal factor
  10. The Environmental Protection Law 1995 of Mongolia is established and given responsibility to take action against its environmental effects to the mining industry.

    Changes in government policies can have negative effect on mining. For example The Mongolia has imposed new windfall tax on commodities, the exploration investment significantly felt after adopting this law in 2006.

  11. Ecological factor
  12. Mongolia has lots of natural, social, and cultural resources, but has a large and landlocked territory, with a high and growing urbanization and concentration rate, and faces harsh weather conditions.

    Mining industry is never been favourable to the environment, causing damage to the land, desertification, air and water pollution, or lake and stream pollution, lack of skill in chemical compound causes damage to the environment as well as for the residents, and support the climate change in order to extract the minerals. So the mining industry has large public and community issue.

Porter's diamond analysis of competitive environment

  1. Factor conditions
  2. Mining industry of Mongolia is one of the leading developments of Mongolian economy with capacity to provide huge amount of raw materials and to develop the heavy industry which means the capital is in good condition. However due to poorly trained labors with no qualification skills, techniques and technology used in the industry is very poor which causes the damage of land as well as the poisoning the environment at the same time people.

  3. Demand conditions
  4. Coal and copper demand was always high, so Mongolia could be the significant copper suppliers in the world. The value of metal and mineral exports accounted 75.7% of the country's total exports which contributes 1.53 billion MNT to the country in 2006.

    The Mongolian mining industry is not only attracted by domestic investors but also the foreign major investors such as Canadian Ivanhoe mines and Rio Tinto of United Kingdom.

    Demand of minerals and mineral product is rising in the worldwide, resulting in its price increase

  5. Related and Supporting Industry
  6. The most supportive countries of Mongolian mining industry are China and Russia that they import the special machinery and technology which support Mongolian mining industry to develop.

    The infrastructure of road, water and energy system is poor that requires high investment in Mongolian mining industry.

    The major related industries are government who impose rules and regulation, so the mining industry need to improve relation with government and community, financial institutions who are implementing procedures, endorsing policy to ensure that the companies they finance are working to reduce and manage environment and social impact of their operations on the communities in which they operate. These issues have seen to delay development and add to the costs of a mine.

  7. Industry structure, strategy and Rivalry
  8. In 2005, mining industry was accounted 61% by foreign investors, the leading investors is china followed by Canada, Japan, Republic of Korea and United States, this amount was estimated to increase in next few years.

    Privatisation creates great competition among the companies and able them to gain competitive advantage. The industry strategy benefit to the nations in order to establish intensive mining industry, increase the income to the country's GDP, increase importing, new technique and technology, increase the job opportunities through to nations, support professional human resource in mining field, develop energy industry, develop infrastructure in towns, increase in production and services in the domestic market and better living condition for the nation.

    The Mongolian mining industry aims to meet the international standard to fulfil demand for domestic and global market with its products.

Ecological factor

  1. Ecological influence to the Mongolian mining industry
  2. Industrialization, urbanization and improved transport have brought economic benefit and improvements to the human wellbeing across the globe, however these processes have also led to the environmental degradation, climate change, air and water pollution and natural resources and ecology which has is threatening the prospects of future generation.

    Industrial development and the huge increase in human population have added a new ingredient to the mix of influences on global climate. In recent years media have contained many stories about extreme weather conditions often citing such events as evidence of anthropogenic disruption to the climate system. The many harmful effects are localized, leading to deteriorating living conditions and natural environment of communities, air and water pollution causing illness.

    The eco-environmental issues which the planet has been faced with has led to loss of species, global climate change, ozone depletion, acid rain, river and air pollution and dangerous substance from production processes.

    According to Juniper (2007) the mining operation also contributes to the ecological factors that have led to the deterioration of the planet and have impacted on tree cover, in many cases, water quality, serious pollution, desertification, land damage, toxic substances and acid mine drainage have been linked to many mines. Last few years, ecosystem in Mongolia has changed significantly and caused climate change by human activity influence. According to news on 23rd of September 2009, desertification and natural disaster has increased, variety of water and biology resources has been disappeared which affect social and economy development in Mongolia, negatively to the people's lives and increased the poverty.

    Mongolia has become one of the 110 countries where the desertification has affected badly.

    The 40% of the entire land and 145 villages has been deserted last few years in Mongolia, thus resulting in loss of 1.6 hectare million of trees, 100 type of vegetation and animals, 28 stream and lake has been polluted during the extraction process of minerals.

    The 78% of the river and lake in Mongolia are located near to mineral deposits in Mongolia; it pollutes water following with the extracting process of gold and copper with dangerous substances. The release of these substances into the water bodies has caused health problems and serious illness through the Mongolian mining districts. One of terrible example is that during gold extraction in Khongor village, illegal ninjas have polluted the river which is the only river flowing through Khongor village, by being accidently dispersed mercury used by illegal, the entire residents has been poisoned.

    Furthermore after the incident, there are 52 people died, 60 miscarriages and 8 abnormal birth defect and residents have had unknown rush on their body. This has become an emergency call for the government to make proper environmental law.

    As if the depredations of mining were not serious enough in causing the degradation, fragmentation and progressive clearance of this incredible planetary asset, it now seems that there is a far larger threat to the Earth's largest rainforest: lack of rain.

    Holden (2008) stated that the spread of desert like conditions and land degradation in arid and semi arid environments is as a result of mainly human influence or climate change. In Mongolia, the most mined areas are not returned to pre-mined form which is causing catastrophic environmental changes in form of desertification, lack of rain and hurricane.

    The deposit Zaamar and Ultii have faced precarious situation not rehabilitating the mined area where the most illegal ninjas extract minerals.

    In October 2006, world mining leader Rio Tinto approved to form a strategic partnership by investing in Ivanhoe and, through an Ivanhoe-Rio Tinto Technical Committee, will jointly engineer, construct and operate Ivanhoe's Oyu Tolgoi copper-gold mining complex in Mongolia's South Gobi region Umnugobi that the project will bring significant development to the Mongolia for a decades, but according to the Mongolian journalist and native citizen, Umnugovi of Mongolia has had serious climate change and natural disaster every day such as golden hurricane and lack of rain. If the Ivanhoe mines operate until 2012, the native citizens need to move and leave their states forever.

    According to Brown (2006) the Mongolian villagers migrate across their vast country in search of ever decreasing grassland regions to feed their stock and escape from the ever spreading deserts. Especially between 1999 and 2002, Mongolia has hit by three zud (extremely heavy and snowy winter), lost 11 million livestock.

  3. Effectiveness of the industry response
  4. According to Evans (1997), the growth without damage is 'sustainable development' a marriage of economy and ecology, as the only practical solution. So In 1989 James Stevenson of Rio Tinto Corporation (the world's largest mining company) admitted that sustainable growth is awkward concept for the extractive industry- 'How does mining fit in? How can you regard a copper mine as a sustainable development?' -remembering that all mines have finite life, some of twenty years or even less.

    As Munro, a leading environmentalist, has written the best miners can do is to show environmental responsibility and return the mined area as nearly as possible to its pre-mining form or provide some other use for the desolation that might have resulted from his work, such as turning an opencast pit into sailing lake and waste heaps into material for the construction industry.

    Causing environmental impact, the mining industry would proactively support the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, in spite of legitimacy. Basically, corporate social responsibility is important aspect in mining sector to show public that they honor people, planet, and profit.

    Mongolian mining industry stated that the industry policy is to achieve the high standard of environmental care to contribute to the society's material needs. The mining companies are not only to follow the legislative requirements but also to apply proven and efficiently feasible measures to protect the environment throughout exploration, mining, processing and recovery activities.

    The policy is to meet the terms with all applicable laws, regulations and standards; maintain the spirit of the law; and where laws do not effectively protect the environment, apply standards that minimize any adverse environmental impacts resulting from the operations, secondly to communicate openly with government and community on environmental issues, and contribute to the development of policies, legislation and regulations that may affect mining companies and to ensure that all employees and suppliers of goods and services are aware of their environmental responsibilities in relation to Mongolian mining companies activities.

    In addition to ensure that the mining companies in Mongolia have management systems to identify, control and monitor environmental risks arising from the operations; to do research and set up programs to protect resources, reduce wastes, improve processes and protect the environment.

    According to Health, Safety and Environment report of the Mongolian mining industry, the industry has been developed the environment management program to control the environmental issues, the program is being actively monitored for potential environmental impacts.

    The mining industry has been evaluated effectively in a way the detailed environmental control procedures have been developed and implemented and also an Environmental emergency response plan has been established and practiced, all the training has been given to the employees, in order to contribute for the new project, mining companies have done the preliminary environmental impact assessment, the technology transfer program has been developed and the environmental awareness training has been processed within the industry, all employees has been trained to response quickly and effectively to the environmental impacts and rapid action to all environmental incidents will continue throughout the life of the operation.

    To aim these objectives, the companies have monitored the usefulness of environmental management system by having the performances audited regularly.

  5. Areas for improvement in mining industry
  6. Environmental Protection Law of Mongolia 1995 stated that in order to guarantee the human right to live in healthy and safe environment, the state citizens and business entities must make sure to protect the environment for the present and future generation, the ecologically balanced social and economic development, the proper use of natural resources and restoration of available resource. Even though, the Mongolian mining industry has been trying to achieve the status, there are still areas left to improve in order to protect the environmental issue.

    In 1991 alone the German open pit mining and quarrying industry has to invest more than $100 million in environmental protection-two thirds for clean air and the rest in equal parts for noise reduction, waste disposal and water protection.

    The problem in Mongolian mining sector seemed the little percentage of the mined land rehabilitated, unsafe working conditions and lack of skills in chemical compound. The highly recommended situation is that Mongolian government should strengthen rules and regulation through rehabilitation to the mining companies.

    As David Munro mentioned above that the best miners could do is to return the mined areas as nearly as possible to its pre-mined form or provide some other use for the desolation.

    Turning an opencast pit into sailing lake and waste heaps into materials for the construction industry will be the successful environmental effect to the all nations.

    In addition, the unsafe working condition and lack of skills in hazardous chemical condition cause impacts in number of villages throughout Mongolia and have damaged the environment. To avoid that situation, the mining companies are supposed to support the employees into professional training programs and plus provide them special courses about hazardous chemical compound to protect the environment as well as the employees' health.

    The health and safety trainings should be provided within the organization regularly to achieve incident free operations.

    The dust control is important in any mine where silica dust may be generated to prevent miners contracting pneumoconiosis and related lung ailments. Dust must also be keep a minimum in all mines and quarries to protect local inhabitants.

    Lastly the mining companies can help to treat the water pollution. There are number of thing can be done in order to alleviate the problems of acid deposition. For example liming is done to normalize the pH of lakes that have been acidized. The best way to slow or stop acid deposition is to limit the chemical emissions at their source, limit the amount of sulfur and nitrogen oxide emission. Another approach to limit the pollution by switching to fuels that have no or low sulfur content, by using smokestack to reduce the amount of sulfur dioxide being released and by requiring the use of specially designed catalytic converters on vehicles.


The Mongolian mineral is well known throughout the globe for the extraction of minerals. The Mongolian mining industry has playing important role in order to develop the social and economy development. The technology and infrastructure has been major issue to the mining industry but there are opportunities they can get it from foreign direct investment.

Even there is a crisis in economy, the mining industry has high demand and has potential development in next few years.

The mining industry has a major impact on environment such as damaging land, desertification, lack of rain and ruining the ecosystem in result of serious health problem throughout the nation and the natural resources.

In order to protect the environment, the industry has tried to achieve high standard of environmental care, safety training have provided to the employees.

The mining industry could do rehabilitate the mined areas in to the pre-mined areas as nearly as possible, provide necessary training to the employees regularly, control dust in minimum level possible and cultivate the liming, switching fuels to low sulphur content against the environmental impact.


As we all know Mongolia is the country where extraction of minerals are being well known carried out as well as international investment have been attracted to it. The only drawback is that labour is so cheap and with no proper skills resulting in land damaged and weather changes. There is no modern equipment of extract the minerals, so it is obvious that the government should intervene to look after the welfare of the inhabitants first. They should provide proper training, new machinery and also look into the extraction of copper with dangerous substances which cause serious health problems. The government should impose laws concerning the exploitation of some extraction and processing the final product to exports which is still in stagnant situation.


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