The UB Post, Mongolia’s independent English weekly newspaper is participating at the Mongolia-Asia Investment Forum 2009 as media partner. Following is from Euromoney Conferences:
Mongolia-Asia Investment Forum 2009
31 March 2009
The Conrad Hotel, Hong Kong
Mongolia is a country which has come a long way turning around its economy in a short space of time, generating an average of 6-8 per cent growth of GDP over the past five years. Recent World Bank reports have announced Mongolia as one of the fastest growing and most stable economies in current turbulent times.
The Euromoney Mongolia-Asia Investment Forum will bring together top level government officials, world class economists, some of the biggest investors investing in Mongolia and multilateral companies as speakers to help you identify where the best investment opportunities are in Mongolia and how best to access these opportunities.
Some of the topics the conference will discuss include:
• Mongolia’s economic outlook in the face of a global economic turmoil
• Work in progress: political, economical and legal reforms: what changes need to be made?
• Financing Mongolia’s infrastructure needs
• Developments and reforms in the mining sector
Attendance is by invitation only. If you would like to be considered for a free place please e-mail email@example.com.
IF Parliament approves a recently submitted proposal, Mongolia will soon double its excise tax on imported used cars.
In an effort to take some of the burden off Ulaanbaatar’s congested roads, the government plans to reduce auto imports. This year Ulaanbaatar had about 150,000 registered motor vehicles.
The growing need of vehicles in Mongolia will likely increase as the nation’s young population reaches driving age. According to US International Census data, there are 300,000 Mongolian boys and girls aged 15-19, making it the nations largest 5-year span demographic. Soon, these teenagers and young adults will be looking for affordable cars. For them, it is primarily a choice between used Chinese, Korean, or Japanese cars. Currently, Japanese cars dominate the market.
Current excise tax law imposes a fee ranging from US$500 to US$4,000 per vehicle depending on the automobile’s engine capacity and year of production, as well as its additional value-added tax, and import duty. Importing a 1997 Nissan Sunny with a 1,500 cc engine, for example, currently requires US$1,000 in taxes. Passing the new tax law would increase that fee to US$2,000 next month.
Small hatchback-type cars, which have become widely popular on Ulaanbaatar’s roads because of their small engine, require a smaller fee. According to Kh.Baatar, a used Japanese-car dealer, those increased taxes will go straight to consumers. “By mid-October, used car prices would increase by US$2,000 in average,” he said. “The price of Japanese used passenger car, which is now US$5,500, may become US$7,500 next month.”
According to Japan’s Customs Statistics Office, Mongolia has imported 14,322 used passenger cars from Japan in the first half of 2008, making the country one of the top five used car importers in the world after Russia, Chile, the United Arabian Emirates, and New Zealand.
Recently gathered statistics, which do not include data on trucks or commercial vehicles, indicate the total market value of used cars in Mongolia is approximately JPY4.3 trillion, JPY303,000 per unit in average. In 2004, Mongolia imported 6,000 used cars from Japan only. Just last year, when Mongolia placed 11th out of all country’s importing used Japanese passenger vehicles, that number increased to 17,000 units. This year some predict that figure will reach 30,000 units.
“Mongolia sounds like a very interesting place. We are very interested in developing our sales there. I hear that bigger cars will become more expensive. Smaller capacity cars may not be so affected,” said Simon Doherty, a sales and marketing manager of Japan Partner Company.
“Mongolia is a growing market. Japanese cars are a good value because they have a very strict inspection system here and the cars are in good condition. The roads here are very good so the cars are in good condition and because the roads are busy, the cars have low mileage,” Doherty said.
Delegates from the Japan Used Motor Vehicle Exporters Association (JUMVEA) attended a business forum held on September 22 in Ulaanbaatar to talk about Mongolia’s growing market for used cars. “The used car sales market of Mongolia has attracted member companies to do business with both Mongolian traders and individual buyers,” said Hiroshi Sato, Chairman of JUMVEA.
On September 12, the nation’s two major political parties, Mongolian People’s Revolutionary Party and Democratic Party, signed an agreement to form the coalition government until 2012. According to the agreement, the Government will support the importation of hybrid and low-emission engine vehicles in an effort to reduce Ulaanbaatar’s air pollution.
Go to Auto Trading Business Blog of Mongolia at http://autotrading.bblog.mn (in Mongolian)
Following is from Euromoney Conferences:
The Mongolia Investment Forum 2008
10-11 September 2008
State Palace, Ulaanbaatar
Following on from the huge success of the previous two years, Euromoney is proud to host the 3rd Annual Mongolia Investment Forum, which will take place on 10-11 September 2008 in Ulaanbaatar.
With a growth rate of 8.7% GDP in 2007, Mongolia has witnessed a remarkably strong growth rate against a backdrop of a gloomy slowing global economy. The Forum will bring together over 500 participants including decision makers, international investors, corporate financiers and key market players to help identify where the best investment opportunities are in Mongolia
Supported by the Mongolian government, Euromoney’s Mongolia Forum is regarded as the most prestigious forum in the country.
Some of the topics to be discussed at this year’s conference include:
– What reforms need to be implemented by the Mongolian government to ensure sustainable levels of economic growth?
– To what extent do the bond markets provide an efficient means for building a healthy financial system?
– What further banking reforms are required to increase financing opportunities?
– What are the key projects in the infrastructure sector to look out for in the year ahead?
– How will legislation, tariff reforms and restructuring of the energy sector improve energy distribution?
– How are mining companies responding to China’s increasing demand for minerals?
– To what extent will environmental concerns impact the development of the industry?
For more information, please contact Alexander Pang on tel: +852 2842 6991 or fax: +852 2842 7067 or email: firstname.lastname@example.org.
Supporting Government Organisation
HOW MUCH IT WILL COST
TARIFF SCHEDULE FOR IMPORTED GOODS
All merchandise imported is subject to a value-added tax (VAT) of 13%, and a 5% import duty. Import duty does not apply to equipment and tools imported to Mongolia for hospitals.
Vehicles are subject to an additional excise tax (in addition to import duty and VAT):
|Excise Tax Schedule For Automobiles|
|Tax on cars used
from 0 to 2 years
|Tax on cars used
from 2 to 4 years
|Tax on cars used
over +4 years
|Up to 2000||$500.00||$1000.00||$2000.00|
Customs Declaration Fees:
- US$5 for basic declaration;
- US$8 for basic intensive and simplified customs declaration;
- US$5 for every additional declaration.
- Payment for the charged services are to be made in MNT at the US Dollar rate of the day.
- Annual Vehicle Tax
- 2,000MNT to 100,000MNT depending on engine size and capacity.
- Annually, must be returned by Feb 15th of next year.
DOCUMENTS REQUIRED BY MONGOLIAN CUSTOMS TO IMPORT GOODS
The following documents are required by Mongolian Customs:
- Contract for import
- License for import
- Cargo Manifest
- Bill of Lading
- Transportation Invoice (railway bill, road shipment bill, airfreight bill, and/or combined transportation bill)
- Merchandise Customs Declaration
- Declaration of Merchandise Value
- Proof of Insurance
- Commercial Invoice
- Payment Receipt
- Status on quality control of goods
- Packing List
- Certificate of Origin
- License from responsible agency
- Receipts of payment for related duties and taxes
WHAT MUST BE DONE
CUSTOMS CLEARING PROCEDURES TO IMPORT GOODS VIA RAILROAD
Goods are cleared based on a Customs Merchandise Declaration, which is filled out by the importer/exporter in Mongolian. The importer/exporter can use the service of broker companies such as MONGOLTRANS, TUUSHIN and IFFC, to prepare the Merchandise Customs Declaration.
The general steps to clear imported goods are shown below and should be followed in sequence:
- 1. Importer/ Exporter (I/E) obtains shipment documents from the Transport Dispatcher at the point of arrival of goods (UB Train Station, Toolkit Station or “Gurvaljin” container yard, etc.).
- An inspector at the Ulaanbaatar Railroad Customs makes sure that the packet of papers is complete and reviews shipment documents.
- I/E goes to one of the broker companies (MONGOLTRANS, TUUSHIN and IFFC) to prepare a Merchandise Customs Declaration.
- Payment of taxes and fees to the bank (located in the same building as the Ulaanbaatar Railroad Customs).
- I/E brings all collected documents to a goods clearance officer at the UB Railroad Customs and obtains a number for the Merchandise Customs Declaration.
- Importer/Exporter and Customs Inspector go to the container yard to inspect the goods.
- Goods are inspected and released.
Source: http://japan-used-car-exporting.info All tax informations here should be checked for any updates.
- Prospects for 2005-2006: Surging to 10% in 2004, growth was led by higher commodity prices for gold, copper, etc. spurred by demand from Mongolia’s chief trading partner, China. Government estimates predict 8% growth in 2005. However, 8% may be too optimistic as the impact of the end of the Multi-Fiber Agreement on Mongolia’s 2nd biggest export earner—apparel—will lower overall growth. Economic tightening coupled with a high rate of public indebtedness promise to make 2005 and 2006 leaner years for Mongolia.
- Political Situation: Mongolia has held eight presidential and parliamentary elections in the past 12 years, during which power changed political hands peacefully. In 2004, the Democratic opposition won 34 seats, leaving the former communists (MPRP) with 36, with 3 seats going to independents and two still in dispute (seven months after the election). There was some initial worry that the even split between rivals would render Mongolia ungovernable; however both parties formed a Grand Coalition government that has held together and governed so far. Changes have yet to disrupt the local business environment or the administrative apparatus.
- Mongolian-U.S. Relations: Good Mongolian-US relations have developed rapidly over the last 15 years to include humanitarian and technical assistance, military to military relations, business development, and a host of smaller programs. Mongolia calls the US its “third neighbor” to balance relations with China and Russia. Mongolia has contributed peacekeeping forces to both Iraq and Afghanistan. Over the past decade, we record no incidents of anti-American sentiment or politically motivated damage to American projects or installations.
- Russo-Sino-Mongolian Relations: Relations with Russia and China are critical because Mongolia depends on both for power, petroleum and transportation. Sour relations among these neighbors invariably affects Mongolia’s business environment. When the Dalai Lama visited in spring 2003, the Chinese temporarily halted all commercial rail shipments for “technical reasons.”
- Weak rule of law
- Corruption in the bureaucracy
- Ignorance of best commercial practices in the government and private sectors
- Lack of transparency in regulatory and legislative processes
- Some abuse of phyto-sanitary and licensing regimes in both the pharmaceutical and food production industries to protect existing state and private interests
- Mining: Over 6000 deposits of approximately 80 minerals exist in Mongolia, among them coal, copper, uranium, iron ore, oil, tungsten, molybdenum and phosphate. Of particular note are Mongolia’s excellent metallurgic coal deposits. Currently, 160 are being exploited. Mongolia’s location next to resource needy Chinese provides a ready market for Mongolia’s mineral wealth. As with all industrial sectors in Mongolia, the developing infrastructure is a concern.
- Construction: The population of the Mongolian capital Ulaanbaatar has more than doubled in 7 years from 450,000 to over a million. Quality commercial and residential stock is in short supply and demand shows no signs of slacking. By 2010, Ulaanbaatar’s population is expected to grow by over 60%, bringing a demand of 700,000 additional family units as well increased need for expanding municipal facilities.
- Tourism: Mongolia is an attractive venue for adventure and cultural tourism. In 2004, the government estimates that over 200,000 visitors saw famed fossil discoveries, a legendary history, religious sites, and a vibrant, living nomad culture. However, long, cold winters limit the length of the tourist season. Inadequate tourism infrastructure requires upgrading.
- Meat Processing: Mongolia has vast herds of sheep and cattle, and hungry neighbors. Satisfying demand in Russia, China, Korea, and Japan offers an opportunity to American ranchers and meat processing and marketing technologies. However quotas and restrictive health regulations inhibit the meat trade among Mongolian and her neighbors. Existing Mongolian processing facilities require upgrading to increase production capacity, quality, and sanitation. For this and for other opportunities to export American agricultural products and technologies into Mongolia, contact the USDA supported Mongolia-based AGPROMO at email@example.com.
Market Entry Strategies:
- Personal Relations are key: Mongolians like to deal with old friends. Investors must establish and maintain close relationships with their Mongolian counterparts and relevant government agencies. Family and school ties are still very strong in Mongolia. Learn who is related to whom when establishing business connections.
- Use of Agents: Find a Mongolian advisor to guide through the ins and outs of local customs and business practices.
- Structure of ownership: The Foreign Investment Law of Mongolia does not require foreign investors to have a Mongolian partner. All investment may be 100% foreign-owned and operated (with the exception of land ownership).
- Product Pricing: Sensitive to price, Mongolian consumers will choose the less expensive product–unless they can be swayed by after-sales service or clear product superiority. They perceive American- branded goods as superior to all others, and will more often than not pay a premium to avoid purchasing lower cost, lower quality items
Before the 1990s, made-in-Russia vehicles filled the streets of Ulaanbaatar. Today, one can see hardly any Russian cars among Ulaanbaatar’s 70,000 vehicles, except off-road vehicles like UAZ jeeps, still favored by many off road drivers. Ulaanbaatar’s motor vehicles range from cheap, small sedans to big off-road jeeps, many of which were imported from South Korea and Japan. No traffic laws exist to limit today’s mixed traffic of both left and right-hand driven cars. According to foreign trade statistical figures from the first ten months of last year by the General Customs Office, Mongolia imported 99 motor vehicles from the U.S., 102 from Germany, 379 from Russia, 73 from UK, 18 from China, 3 from Sweden, 2,660 from South Korea, and 7,628 motor vehicles were imported from Japan.
Imported cars are subject to customs tax and excise tax. The government imposes excise tax on imported cars depending on their cylinder capacity and year of production.
|Capacity of cyllinder of engine /cc/||Excise tax (in USD)|
|Year of production /by year/|
|0-3 years||4-9 years||More than 10 years|
|Less than 1,500||500||1000||2000|
|More than 2,500||2000||2500||4000|
Source: Excise Tax Law
Although the world’s big companies, Toyota, Hyundai, Nissan, Suzuki, Ford, Mercedes Benz, and BMW, have authorized sales agents in Mongolia, people still prefer driving cheaper and used cars.
“Many Japanese used car exporter companies expressed their interests in cooperating on sales in the Mongolian market, which is rapidly growing,” said a businessman of an auto trading company.
“But our government lacks attention and checks on the imported cars whether they are stolen cars. The government only cares about collecting taxes. We [importers] don’t declare the price of vehicles truly because the customs tax is high.”
Japan exports used vehicles to over 180 countries; the largest markets are Russia and New Zealand, according to Japan Used Motor Vehicle Exporters Association. “In the future, further increases of Japanese used export are expected, especially to developing countries,” noted Hiroshi Sata, chairman of the association.
“We sell used Toyota Mark II for US$5,000, Land Cruiser US$25,000, Mitsubishi Pajero for US$9,000, and Toyota Raum for US$4,500. Buyers like Japanese ones because of safety, but the spare parts are more expensive than Korean ones,” said a retailer of Dako Auto, one of the largest auto vehicle importing companies in Mongolia.
In an effort to promote automobile manufacturing in the country, the government committed to not charge any excise tax on exporting cars, which were manufactured in Mongolia, by the Excise Tax Law of Mongolia.
Up till today, this sector is still vacant, awaiting potential investors.
“We have no record of this type of proposal submission. If someone foreign investor proposes, we will support it,” said an officer of the Mongolian Chamber of Commerce and Industry.
Source: www.newswire.mn. All tax information and prices here should be checked for any updates.
Information on exporting and importing Japanese used vehicles into Mongolia is very hard to come by, especially in English. This is difficult for importers and exporters alike as the try to find ways to bring trade to this rising star. Just last year in 2007, Mongolia was place as the 11th top importing country of Japanese used passenger vehicles.
The ever need of vehicles growing in Mongolia will be dramatically rising as the baby boom generation are starting become adults. In fact, according to US International Census data, the largest 5-year span group in Mongolia is 15-19 at about 300 thousands boys and girls.
Soon, these teenagers and young adults will be looking for affordable cars. For them, it is a choice between used Chinese, Korean, or Japanese cars. Currently, the market is very open and growing rapidly and is good time for Japanese used vehicle exporters to enter the market.