Mongolia, a large, land-locked country with a small population, provides an important and increasingly rare example for Central Asia and beyond of how to manage a difficult economic transition within a democratic political framework.
The Government of Mongolia acknowledges that foreign direct investment is an essential component in the economic development, in particular for smaller transition economies like Mongolia. Therefore, the Government pays a significant attention to the foreign direct investment and creates more democratic external and internal legal environment.
All sectors of the Mongolian economy are open to foreign investors and foreign investment is protected from nationalization or expropriation. The Government of Mongolia considers food and agriculture, tourism, light and heavy industries, infrastructure: ICT, construction, energy sectors as the priority sectors for attracting foreign investment into the country.
Mongolia has significant mineral resources such as gold, copper, uranium, coal, molybdenum, phosphor, and oil. It has 1.3 million hectares of arable land, where pure natural products with high demand on the world market can be produced. Mongolia is the world’s second-largest producer of cashmere, with a world market share of 30%.
With its untamed nature and well preserved nomadic culture, Mongolia is an exotic tourism destination. The year 2006 has been announced as “800th anniversary of the Great Mongolian State” year and a number of activities are set to increase the foreign tourist arrivals in Mongolia.
The Government appreciates wide possibilities of the social and economic development created due to the achievements in the information and communication technology. Reforms in the education sector in line with the ICT development will build a potential for production of software competitive on the world market.
Mongolia has signed “Agreement on Avoidance of Double Taxation” with 33 countries and also has negotiated “Investment protection and Mutual protection Agreement” with 39 countries. Mongolia has joined the “1965 year’s Washington Convention on Settlement of Disputes” in 1996 and the “1985 year’s Seoul Convention on establishing of multilateral investment insurance agency” in 1999. In 1997 Mongolia became a member of the World Trade Organization.
Mongolia’s Competitive Advantage
Mongolia offers the following competitive advantages to foreign investors.
Access to 2 large markets. To its north, Mongolia borders with the resource-rich, vast Siberian region of Russia and, to its south, with the enormous market of China, the fastest growing economy in the world.
Stable political environment. The principles of respect of human rights, fundamental freedom and private ownership enshrined in the new Constitution. Legal guarantees that secure the foreign investors’ rights regarding invested assets and capital.
Strategic location. Mongolia’s border with the resource-rich Siberian region of Russia to the north and a rapidly emerging China to the south. Easy access to large international markets of these two traditional rivals and important global players.
Extensive natural resources. Mongolia’s rich mineral resources and great potential of animal origin raw materials. Wild nature and unspoiled land rich in tradition and culture.
Competitive business costs. Inexpensive raw materials and operating costs along with the key legislative acts. Per hour manufacturing costs significantly lower than that of the other nations. Economical rate for the rent of industrial premises and office space.
Young and well educated population. Mongolia’s young people under the 30 years of age, composing 70% of the population. High literacy rate exceeding 90%. Abundant, experienced and highly competitive workforce. Effective labor laws. No human rights concerns.
Conductive investment climate. FDI protected by the Constitution of Mongolia and the Foreign Investment Law along with the international treaties and agreements to which Mongolia is bound.
Risk free investment. Mongolia is full member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group, thus the investors are religible for risk insurance through MIGA
Stable economic growth. According to Mongolian Trade Policy Review in March, WTO Geneva, country’s early market-oriented reforms, including establishment of an open trade regime, significantly helped the transition of Mongolia from a centrally planned economy to a market-based economy, currently enjoying stable economic growth and moderate inflation. Mongolia’s recently obtained eligible status of EU GSP+ to export goods (around 7200 items with zero rate of customs duties to EU) supposed to attract more FDI to diversify Mongolia’s industrial structure into manufacturing and services, to ensure macroeconomic stability.
The well known international agencies, Moody’s and Fitch Ratings, has assigned a long-term foreign currency rating of ‘B+’ and a long-term local currency rating of ‘B+’ to Mongolia with a stable outlook. The agencies also assigned the country a short-term rating of ‘B+’ and a country ceiling rating of ‘B+’. It is also remarkable that UNCTAD in its Report highlighted the continued growth of FDI in Mongolia, whereby the country entered into the list of the leading countries by investment capacity index.
The Government of Mongolia believes that these opportunities can be best exploited through better management and strategic planning, superior exploitation of potential markets, and access to international financing, joint ventures and technical assistance. Mongolia’s government is ambitious and offers a matchless investment package for both local and foreign investors, making Mongolia an ideal choice for future investments.
Entry filed under: Introduction.