ERDENES TAVAN TOLGOI PLACED UNDER SPECIAL REGIME AS REVENUE FALL

By A. Khaliun

According to preliminary results for the first half of 2025, total revenue and aid in the General State Budget amounted to 14 trillion MNT a decrease of 914.4 billion MNT, or 6.1%, compared to the same period last year, the National Statistics Office reported.

Falling coal prices on the global market have created the risk of a 2.2 trillion MNT shortfall in state budget revenue. The Ministry of Finance has projected that unless prices recover significantly, the budget deficit could reach 3.2 trillion MNT by end year.

Since the beginning of 2025, coal prices have continued to decline. As of June, the average price per ton stood at $70 down $20-25 compared to the same period last year. This year's state budget projected coal exports to remain at last year's level of 83 million tons. However, during the first half of 2025, exports reached just 38 million tons 4 million tons less year-on-year.

With state revenues under pressure and the economy facing increased strain, a delegation led by Prime Minister G. Zandanshatar including the Minister of Road and Transport Development and other relevant officials visited the southern Gobi region on July 19.

Minister of Road and Transport Development B. Delgersaikhan stated, "The physical volume of coal hasn't dropped sharply. We aim to reach - and ideally surpass last year's coal export level by year-end. As part of efforts to boost exports, we resolved the transportation of 5 million tons of coal via Mongolian Railway JSC under the agreement signed with China Energy."

The delegation led by Prime Minister G. Zandanshatar conducted an on-site visit to a branch mine of Erdenes Tavan Tolgoi JSC during the peak of summer. They concluded that the decline in coal revenue was driven not only by falling global prices but also by a drop in export volumes.

For instance, Erdenes Tavan Tolgoi had planned to ship 10 million tons of coal in 2025 but, as of now, has delivered only 145,000 tons. Equipment failures at the Tavantolgoi Coal Loading Logistics Center which was commissioned in 2024 have made it impossible to load and transport coal as planned, negatively impacting exports. In response, relevant ministers were instructed to resolve the technical issues at both the logistics center and the coal enrichment plant.

In addition, the Prime Minister appointed three representatives from the Independent Authority Against Corruption (IAAC) to conduct a comprehensive review of all contracts signed with the contractor that commissioned the center, as well as any agreements involving the company. Their task is to assess the implementation, performance, and responsibilities of all parties involved. Should any violations or unlawful actions be identified, the findings must be referred to the appropriate law enforcement agencies.

Erdenes Tavan Tolgoi a company whose shares are owned by the citizens of Mongolia, and which distributes dividends to them must not become a breeding ground for corruption or manipulated procurement schemes. The site inspection revealed numerous problems, including inefficiency, a lack of accountability, and unethical practices. As a result, directives were issued to cut costs by 50% and to suspend any projects or programs that have not yet been implemented.

A lack of coordination between ministries and sectors has led to excessive and inefficient spending. One example is the decision to construct the coal enrichment plant 12 kilometers from the mine a move that has resulted in significant financial losses. In response, the government has given Erdenes Tavan Tolgoi JSC a three- month mandate to undergo governance and operational reforms aimed at improving efficiency.

To oversee this process, a Council of Authorized Representatives was established, composed of experts and officials from various sectors. According to a government resolution issued on July 7, a special regime was imposed on the company for three months. The council is chaired by U. Byambasuren, Deputy Head of the Cabinet Secretariat.

Council Chairman U. Byambasuren stated: "Coal prices have fallen on the global market, and the conditions for fulfilling contracts signed through the Mining Products Exchange at higher prices have become increasingly difficult. As a result, Erdenes Tavan Tolgoi JSC a key driver of Mongolia's export revenue is facing serious operational challenges. 

To resolve these issues promptly and improve cross-sector coordination, the government has placed the company under a special regime.

By implementing the necessary reforms, it is estimated that export revenues and sales could each grow by 23%, while total exports may increase by 13%."

Among the key directives issued by Prime Minister G. Zandanshatar to the Council of Authorized Representatives are:

Resolve the challenges hindering coal trading in the short term;

Develop and submit, within 14 days, well- researched proposals to accelerate the sale of mining products through the commodities exchange;

Establish direct delivery channels to end consumers, including constructing warehouses in China and improving transport and logistics specifically by enhancing the operations and management of the Gashuunsukhait Road company to meet standard road conditions;

Increase coal shipments by rail to lower transportation costs, and boost coal exports through the Khangi-Mandal border checkpoint;

Restructure and optimize Erdenes Tavan Tolgoi JSC, conduct job classification and workplace certification, prepare and present detailed proposals by August 10 to create more compact and more skilled workforce.

The Prime Minister emphasized that ordinary engineers and technical staff who work diligently and with integrity must not be negatively affected by the upcoming changes.

The previous administration's policy to add value through higher value-added production remains in effect. As part of this, the Council of Authorized Representatives has also been tasked with accelerating preparations to establish the "Coal-Chemical Complex" industrial technology park, one of the government's flagship mega projects.

In the first half of 2025, Mongolia's trade with China reached $8.2 billion, accounting for 67.3% of total foreign trade turnover. Mining products made up 94.7% of Mongolia's exports, with 91.7% of these mineral products supplied to China.

According to the National Statistics Office, exports declined by $1.3 billion, largely due to a $2.1 billion (43.9%) drop in coal exports and a $31.4 million (19%) decline in crude oil exports. On a more positive note, exports of copper ore and concentrate rose by $897.9 million, an increase of 61.7% compared to the same period last year.

Amid falling prices for key export commodities and declining production, the government has begun preparing the 2026 state budget, in accordance with the Budget Law.

Ministries submitted their draft budgets to the Ministry of Finance by July 25. These proposals will be consolidated and reviewed by the government by August 15, after which they will be made publicly available. The formal submission of the draft budget to Parliament is scheduled for September 1, with subsequent stages of the budget approval process to follow.

Minister of Finance B. Javkhlan stated, "Proposals from ministries and members of Parliament must align with the government's regional development program. The 2026 state budget will not exceed the base established in the 2025 revised budget - we will adhere to a policy of fiscal tightening."

The government will base next year's revenue projections and economic growth targets on current macroeconomic conditions, particularly the global price of coal, Mongolia's leading export commodity.