One. Introduction  


On 22 April, 2015 Oyu Tolgoi LLC, Umnugobi Aimag, Khanbogd Soum and other Partner Communities of Umnugobi Aimag entered into a Cooperation Agreement. On 28 September, Gobi Oyu Development support fund (the Gobi Oyu DSF), was established as an independent legal entity and registered in Umnugobi Aimag pursuant to the Cooperation Agreement to be governed by the Charter of the Gobi Oyu DSF.    


The Gobi Oyu DSF aims to improve the wellbeing and capacity of Umnugobi Aimag and Partner Communities by supporting Projects and Programs that target social infrastructure and the expansion of broad-based economic participation in the Umnugobi Aimag and Partner Communities.


Two. Definitions


Except as set out below, words and expressions in this Guideline have the same meaning as defined in the Cooperation Agreement.


DSF means Gobi Oyu Development support fund, an entity established in accordance with clause 8 of the Cooperation Agreement.

DSF Board means the board of members constituted in accordance with paragraph 2 of Schedule 3, Cooperation Agreement.

DSF Proposal means a proposal for a Program or a Project submitted to the DSF.

Contribution has the meaning given in clause 8.3 of the Cooperation Agreement.

Custodial Trustee means a person appointed under paragraph 3.4 of Schedule 3 of the Cooperation Agreement.

Executive Director means a person appointed from time to time as the executive director of the Gobi Oyu DSF.

Relationship Committee means the committee established under clause 4 of the Cooperation Agreement and which will be governed by Oyu Tolgoi LLC Representatives and Umnugobi Aimag and Khanbogd Soum Representatives (Community Representatives) and operate in accordance with the principles set out in Schedule 2 of the Cooperation Agreement and any further policies and guidelines adopted by the Representatives from time to time.

Relationship Committee Secretary means the person appointed under paragraph 6 of Schedule 2 of the Cooperation Agreement.

Partner Communities mean Khanbogd Soum, Manlai Soum, Bayan-Ovoo Soum and Dalanzadgad Soum of Umnugobi Aimag.

Project means any tangible building or facility constructed to promote the sustainable socio-economic development or otherwise for the benefit of Umnugobi Aimag and Partner Communities which is approved for funding support from the DSF by the DSF Board in accordance with the policies and procedures adopted by it from time to time.

Program means any activity undertaken to promote the sustainable socio-economic development or otherwise for the benefit of Umnugobi Aimag and Partner Communities which is approved for funding support from the DSF by the DSF Board in accordance with the policies and procedures adopted by it from time to time.

Thematic Schedules means Schedule 4 to Schedule 10 of the Cooperation Agreement.

Three. Purpose of the Funding Guideline   

This Funding Guideline (the Guideline) sets out the principles applicable to funding criteria including funding principles, priority areas, allocation target, and eligibility of applicants.


The DSF Board may update these principles from time to time as it considers necessary or appropriate. From time to time, the DSF Board may develop more detailed descriptions of the principles in these Guidelines and the types and characteristics of projects that are likely to satisfy these principles and qualify for funding support. These more detailed descriptions may be set out in appendices and schedules to these Guidelines.


Details of disbursements, and the progress made on any Project and Program assisted by disbursements may be made publicly available in a form agreed by the Board taking into account the confidentiality, commercial sensitivity, and contributions received from Oyu Tolgoi LLC pursuant to the Cooperation Agreement.  

Operating costs of the Gobi Oyu DSF are for its own account and must be met from the contributions received from Oyu Tolgoi LLC pursuant to the Cooperation Agreement (the Contribution) or from other revenue generated by the Gobi Oyu DSF.

Four.  Priority Projects and Programs and Funds allocation  

4.1 Priority Projects and Programs and Funds allocation target

Projects and Programs which are aligned with the Thematic Schedules of the Cooperation Agreement will be assisted by disbursements from the Contribution (DSF Funds) in accordance with this Guideline. The focus areas for Projects and Programs are set out below. The DSF Board and the Relationship Committee will be guided by the following current allocation targets in reviewing and making decisions on DSF Proposals:

    1. Social infrastructure projects and programs – up to 48%
    2. Sustainable development projects and programs – up to 40%
    3. "Next generation fund” - 6%
      •  Micro loan program
      • Student scholarship/sponsorship
    4. Southgobi donation and sponsorship – 1%

e. Annual operational costs of the “Gobi Oyu” DSF - an annual budget to be determined based on the operation plan and scope of work and managed by the DSF Board (not to exceed 5% of the annual Contribution).     

The above figures are only targets and, based on the principles of the Cooperation Agreement and the Thematic Schedules (as they may be amended from time to time) and the aims of the DSF, the DSF Board may amend its views on priority Projects and Programs, and make changes to the above funds allocation targets from time to time.    

4.2 Description of Priority Projects and Programs  

  1. Social infrastructure projects

These are projects that are more likely to be of a tangible nature that result in infrastructure, buildings and facilities for public utilities or equipment that contribute to improved living standard and wellbeing of residents and members of Umnugobi Aimag and Partner Communities, for example in relation to health or education. Project submissions from organizations, business entities or government agencies with a consistent track record of good governance, established record of executing social infrastructure projects of various scales and cost-efficient management will be prioritized. Set out in Appendix 3 to these Guidelines are descriptions and examples of preferred types of social infrastructure Projects and Programs (together with other preferred types of Projects and Programs grouped according to the thematic areas set out in the schedules to the Cooperation Agreement).

  1. Sustainable development projects/programs

Sustainable Development Programs are programs of a more intangible nature initiated, developed and managed by the civil society or community groups and/or government agencies. Funding support for sustainable development programs/projects may be provided on a one-time basis, or several times on a continuing basis. 

Quota will be imposed and certain proportion of an annual funding will be allocated for Sustainable Development Projects to be managed by participation of soum governor’s office and communities of Partner Communities and non-mining soums (collectively referred to as “Target Soums”) and such allocated funding will be desirable to be expended on projects or programs targeted to vulnerable groups or members in Umnugobi Aimag such as disabled persons, elderly, people with special needs  to support or harness their livelihood, physical and economic wellbeing. 

The allocation of financial contribution for Sustainable Development Projects in Target Soums is set out below:

  • Allocate Khanbogd soum funding in Mongolian tugrugs equal to 70,000 United States dollars
  • Allocate Manlai, Bayan-Ovoo and Dalanzadgad soums funding in Mongolian tugrugs equal to 50,000 United States dollars
  • Allocate each non mining soums of Umnugobi aimag funding in Mongolian tugrugs equal to 30,000 United States dollars.


  1. “Next Generation Fund”

The Gobi Oyu DSF will allocate, each year, 6% of the annual Contribution for the next generation (the Next generation fund). These funds will be in the form of a ‘revolving fund’ that is available for SMEs to borrow from and invest in business start-ups or business growth and for provision of scholarship for students from Umnugobi aimag.

The Next Generation Fund will be administered by a financial institution, such as a bank, to support a micro-finance program for residents of Umnugobi Aimag. The banking institution in which the Next Generation Fund is placed, and administered from, must be an appropriately licensed body in Mongolia which meets all criteria set by the Gobi Oyu DSF and the Mongol Bank. The Gobi Oyu DSF will provide guidance and procedures (which may be amended or updated from time to time) to the banking or financial institution in relation to eligible applicants, monetary amounts to provide, and other conditions relating to designation, use, or operation of the Next Generation Fund.

In addition, the banking institution must be able to offer additional and competitive products or services to strengthen the social and economic impact, sustainability, and cost efficiency of the Next Generation Fund, produce an enforceable and irrevocable guarantee, and/or risk fund (or like arrangement) to ensure adequate assurance to manage and mitigate any risk associated with the Next Generation Fund, including its administration, lending and borrowing by and from the Next generation fund for a period of at least 10 years ahead. The Gobi Oyu DSF will make necessary agreements or arrangement with the banking or financial institution with respect to details of the Next Generation Fund. 


4. Southgobi Donation and Sponsorship

Donation and Sponsorship may be provided to targeted beneficiaries and they may include funding support for sporting and cultural events, conferences and competitions.

5. Annual Operational Costs

Annual operational costs will cover costs and expenses related to operations of the Gobi Oyu DSF including its management, administration, and personnel to ensure that the principles of the Cooperation Agreement are properly and transparently implemented.

6. Other sources of financing

Financial contribution or matching-fund and/or in-kind contributions from other donors or investors may be used in addition to the Contribution approved by the Board to implement the Projects or Programs. The DSF Board will support and prefer Projects and Programs where another party, including local government, is willing to provide funds (matching or significant contributions) for a Project or Program that enables the funding parties to share the funding burden and allow Gobi Oyu DSF to maximize the positive impact of its funding for the benefit of the community. The decision to participate in co-funding arrangements will, in addition to other factors referred to in these Guidelines, depends upon the DSF Board being satisfied about the ability and demonstrated willingness of the co-funding party to provide funds for the Project or Program in question.

7. Special support for Khanbogd Soum

Khanbogd Soum is the closest community to the Oyu Tolgoi Project and its impacts (real or potential) and therefore in addition to the other criteria set out in this Guideline it is a priority that the Projects and Programs contributing to social infrastructure, livelihood support and wellbeing of Khanbogd Soum and its population will be given particular priority in selecting, recommending and deciding on DSF Proposals. Hence, each calendar year the Gobi Oyu DSF will aim to finance at least one infrastructure Project which has a direct benefit to, and to be implemented in, Khanbogd Soum.  

Five. Targeted groups and beneficiaries  

Any individual registered and residing in the Umnugobi Aimag and Partner Communities are targeted beneficiaries of the Projects and Programs to be supported by the Gobi Oyu DSF and in particular the following are preferred beneficiaries:

  • Children and youth
  • Herders
  • Vulnerable persons
  • Disabled people
  • Women.

Six. Funding criteria 

Projects and Programs to be supported by the funding of the Gobi Oyu DSF must have a strong potential to promote the Gobi Oyu DSF’s mission and strategies to build sustainable capacity in Umnugobi Aimag and Partner Communities through Projects and Programs that benefit social wellbeing and broad-based social and economic participation of Umnugobi aimag and Partner Communities. Accordingly, the following criteria will be considered in selecting Projects and Programs:

  • Be implemented in Umnugobi aimag and/or Partner Communities
  • Aligned with priority Projects and Programs  
  • Direct positive impacts and sustainable benefits on community livelihood
  • Clearly defined outcomes and results that are measurable and auditable KPIs
  • Clear implementation schedule (with performance milestones and execution timeframes identified) for proposed projects 
  • Involve target groups or community members and be based on their needs
  • Robust and transparent procurement policies and processes
  • Health, safety, environment and community risk assessments must be conducted and risk controls must be identified, particularly for community infrastructure development projects. The controls should ensure that the project is compliant with relevant Mongolian HSE legal requirements and should be aligned (where relevant) with OT LLC’s HSEC requirements. The DSF will seek to provide non-exhaustive risk identification and assessment information to assist applicants to carry out appropriate risk assessments for Projects and Programs. Applicants will remain responsible for identifying, assessing and managing HSEC and other risks for their Projects and Programs.
  • Eligible applicant and/or Project/Program contractor must demonstrate a reputation for fair business dealing, operating or functioning free from any type of corrupt practice or bribery (actual or alleged) and without promoting or furthering the interests or agenda of any political groups or organizations, and must have robust and transparent procurement policies and processes in implementing proposed projects/programs
  • Eligible applicant must demonstrate sustainability and viability of the Project and Program (budget, costs, availability of costumers, and personnel, and other resources required to sustain, operate, and successfully benefit from the project/program and ongoing monitoring to meet statutory requirements, in particular those relating to infrastructure projects)
  • No existence of any debt, financial default, claims or loss (actual or potential) which may impair timely and quality execution and delivery of Project/Program. The Gobi Oyu DSF shall be entitled to request financial statements of the Eligible applicant or the Project/Program contractor which have been audited by a credible audit institution and structure any funding in a way that ring-fences any DSF funds to ensure that they support the approved Project/Program and no other purposes

In order to assess whether any of the above or other criteria are met or otherwise assess the suitability of the DSF Proposal, the Gobi Oyu DSF (ED or DSF Board) may decide to procure engineering, financial, legal or other types of review before the DSF Proposal is considered for approval.

Seven. Suspension and termination of DSF Funds

Gobi Oyu DSF will have the right to suspend or terminate the provision of DSF Funds in the event of the following: project or Program makes no progress, substantially deviate from the implementation schedule, or otherwise defaults in the execution or performance of plans or their activities result in unsafe, incomplete or substandard outcomes, and d/Eligible applicant or Project/Program Contractor is involved, in any way, in corrupt activity, conduct or action.

Eight. Applications not to be considered by the Gobi Oyu DSF

The Gobi Oyu DSF will not receive and consider the following applications which:

  • Are intended to support religious advocacy and/or political activities
  • Projects/programs outside of South Gobi
  • General organizational administrative support
  • Cover travel expense, medication expense or expenses necessary for participation in a competition
  • Any pre-commenced project
  • Projects seeking deficit or emergency funding
  • Project/programs initiated by organizations operating for profit.


CLICK HERE FOR FULL VERSION of Funding Guideline of Gobi oyu development support fund

CLICK HERE  for Gobi oyu development support fund Protocol for revied, assessment and decision on DSF proposals.