The amendment to the Constitution of Mongolia, approved by Parliament on November 14, 2019, enshrines several key principles for responsible resource management. First, it mandates a long-term development policy for utilizing natural resources. Second, it guarantees the right to a healthy and safe environment for all present and future generations. Third, it emphasizes that the benefits of subsoil resources should be concentrated in the Sovereign Wealth Fund and distributed equitably and fairly. Finally, it establishes the principle of public ownership over strategic mineral deposits, with a legal framework ensuring majority benefits flow to the people. This commitment to responsible resource use is further solidified by the newly approved Sovereign Wealth Fund Law in April 2024, alongside amendments to existing legislations.
I. The Law on Sovereign Wealth Fund
On January 9, 2020, following the amendments to Mongolia's Constitution, the Great Khural adopted Resolution No. 02 on "Alignment of Legislation with the Amendments to the Constitution of Mongolia, and Measures to Be Taken Related to It" and approved the draft law on the Sovereign Wealth Fund, guided by the following basic principles:
- Consolidate revenues from subsoil resources in the Sovereign Wealth Fund. Increase the fund through financially efficient projects, programs, and issuing securities.
- Promote inclusive economic growth and ensure fair distribution of benefits.
- Ensure harmony between the Sovereign Wealth Fund Law and the Law on Special Government Funds.
The "Preliminary Research Report on the Needs and Requirements of the Draft Law on the Sovereign Wealth Fund" proposed a three-tiered structure for Mongolia's Sovereign Wealth Fund. The first tier, the Future Heritage Fund, would be dedicated to generating savings from natural resources for future generations. The Savings Fund would focus on distributing resources to benefit citizens. Finally, the Development Fund would channel funds towards financing major development projects. The report further recommended studying best practices from wealth funds in Norway, Kazakhstan, Kuwait, Saudi Arabia, New Mexico, and Alaska. These insights would inform the development of a robust regulatory framework for the Sovereign Wealth Fund. This framework, in turn, would enable the implementation of parallel development policies for both current and future generations through these sub-funds.
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