Introducing the Mongolia Environmental Trust Fund
This article is reprinted from the Mongolian Conservation Newsletter, issue 2, August 1997. The entire issue is available by e-mail subscription from firstname.lastname@example.org and is posted by the editor, Rogier Gruys, to the Web at http://www.magicnet.mn/btz.
Introducing the Mongolia Environmental Trust Fund
The Ministry of Nature and the Environment (Government of Mongolia) and the United Nations Development Programme (UNDP) have developed a proposal to establish the Mongolia Environmental Trust Fund (METF). The overall objective of this fund is to provide long-term financial support for projects that further the aims of biodiversity conservation in Mongolia and the sustainable management of the land and its resources, ecosystems, and wildlife. The Fund will provide a highly important complement to foreign funded activities which have a limited time span, as well as government funding which is insufficient, and is at risk of being cut due to economic difficulties in Mongolia.
The Importance of Environmental Conservation in Mongolia
The health of Mongolia's natural ecosystems and populations of wild species is of both national and global importance. Mongolia's territory forms an important part of the global ecosystem in the ecological transition zone in Central Asia, where the great Siberian taiga, the Central Asian steppe, the high Altai mountains, and the Gobi desert converge. Many globally threatened or endangered species occur in Mongolia, including snow leopard, mountain Argali sheep, musk deer, Gobi bear, Bactrian camel, Asiatic wild ass, Przewalski's Horse, saiga antelope, Mongolian jerboa, and white-naped crane.
Environmental conservation also plays a critical role in Mongolia's economy, well-being, and traditions. For example, livestock grazing is crucial to the economy, comprising 70% of agricultural production and providing the basis for the textile industries. These activities depend directly on healthy grasslands and clean water. The environment is also the foundation of Mongolia's expanding tourist industry, attracting visitors from all over the world to experience Mongolia's unique landscapes.
The Government of Mongolia has demonstrated its understanding of the importance of environmental conservation, through joining the international conventions on biodiversity and desertification, and setting a long-term goal of expanding its system of protected areas to cover 30% of its territory. The government has also made considerable progress in developing environmental legislation, policies and action plans to combat desertification and the loss of biological diversity.
International recognition of the importance of Mongolia's ecosystems has been demonstrated by the designation of some of its territory as biosphere reserves, and by the number of foreign-funded environmental projects active in the country.
But Mongolia's ecosystems are essentially very fragile and vulnerable to many forms of economic exploitation. As Mongolia undergoes rapid economic and social transition, her ecosystems are facing increasing threats and challenges. There are already signs that pressures on the environment are not sustainable and that the limited renewable natural resources of soil, water, forest, grassland, fish and wildlife are being over-exploited. The number of dust storms and the frequency of flash floods is rising; the area of degraded and deforested land has increased, water tables have fallen in some areas; and populations of certain endangered species are declining.
Development of a Proposal for the METF
The need for an environmental fund to support key activities of the biodiversity conservation programme in Mongolia was identified in the Biodiversity Conservation Action Programme (BAP) developed by the UNDP Mongolia Biodiversity Programme (MBP) in 1996. In particular, an environmental fund was proposed by the MBP to support a biodiversity conservation training programme, species conservation projects and model protected area management.
The benefits of an environmental fund was also identified in the National Plan of Action to Combat Desertification (NPACD 1996). In particular it was proposed that a fund be established to finance small-scale, local level activities to mitigate desertification and drought.
In response to these needs, a proposal to establish the METF was developed by UNDP and the Government of Mongolia, with assistance in the early stages from WWF, to meet basic needs of the programmes which conserve biodiversity and combat desertification in Mongolia.
The Environment and Development Group (EDG) of Oxford, United Kingdom, began work in April 1997, assisting the Ministry for Nature and the Environment (MNE) with the legal and fund-raising aspects of setting up the Trust.
Structure of the METF
Environmental Funds provide an innovative means of supporting environmental conservation. They may take many different forms, but all share certain common features:
- They are a financial instrument to provide long-term, secure funding for environmental programmes.
- They are an institutional instrument for governments, NGOs, international donors and the private sector to work together cooperatively on a long-term basis.
- They are a grant-making instrument for funding small-scale, innovative projects, which national governments and international agencies may find it impractical or inefficient to fund.
- They are relatively non-bureaucratic and are an instrument for actively involving public participation in environmental activities.
- They are an appealing investment mechanism for donors.
- All environmental funds are subject to scrupulous accounting and auditing procedures, and their books and reports are open for inspection to government, donors, NGOs and individuals.
The METF will have two accounts: the capital of the METF will be invested in an off-shore account, managed by an asset manager of an experienced financial institution. The second account will be in Mongolia and used for disbursement.
The METF will be established as two parallel legal entities outside government: a non-profit foundation in the Netherlands, and a registered office, legally established as an NGO, in Mongolia.
The Fund will be governed by a nine-member Board of Directors, including representatives from government, Mongolian NGOs, the Mongolian academic sector and the international donor community. This Board will be supported by several committees:
- The Fund Administration Office in Mongolia (FAO), composed of an Executive Director and a small administrative staff, will be established by the Board to carry out the day-to-day management of the METF.
- The Scientific and Technical Advisory Committee (STAC) will advise the Board on the feasibility and environmental impact of projects proposed for funding and on ways to increase participation by local people in METF activities. This Board will also be responsible for setting. guidelines to evaluate these projects.
- The Financial Advisory Committee (FAC), composed of three individuals with expertise in financial investments, will act as a resource to advise the Board on all matters relating to finance, both in Mongolia and abroad. The FAC will also ensure that proper accounting procedures are established and adhered to.
Capitalization of the METF
Donations to the METF will be sought from a wide variety of potential sources. The fund-raising strategy adopted will focus initially on the international donor community, and later on other potential donors, including those in the private sector. Emphasis will be placed on developing national sources of income for the METF. In addition, the Fund will receive annual counterpart funding from the Government of Mongolia.
To donors, the METF will provide a method of contributing to conservation activities in Mongolia that offers the opportunity to enter into unparalleled partnerships with the government and NGO community, the coordination of activities with national strategies, and reduced transaction costs.
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