Investment environment in Mongolia

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FOREIGN INVESTMENT SITUATION OF MONGOLIA

Today the external and internal favorable legal environment for foreign investment in Mongolia has been created.

A member of WTO since 1997, Mongolia acceded to the “Washington Convention on Investment Dispute Settlement of 1965” in 1996, joined the “Seoul Convention on Investment Insurance of 1985” in 1999 and a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group and investors will thus be eligible for risk insurance through MIGA.Mongolia respectively signed the “Agreement on Mutual Protection and Promotion of Investment” more than 40 countries, “Agreement on Avoidance of Double Taxation” signed with 34 countries.

By the Law on Foreign Investment /passed in 1990 and subsequently revised in 1993, 1998, 2002 and 29 May 2008/ the foreign investor may run any business in all areas of production and all services other than those prohibited by the laws of Mongolia; establish wholly foreign-owned business entities or joint business entities with Mongolian investors. The Constitution of Mongolia protects FDI and the Foreign Investment Law complemented by relevant legislation and regulations, as well as international treaties and agreements to which Mongolia is bound and thus it is prohibits nationalizing and illegally confiscating assets and capital of foreign investors. Foreign investors receive treatment equal to that enjoyed by domestic investors as regards rights to own, utilize and exploit assets and capital. Amendments of 2002 were are aimed to create more favorable legal environment for foreign investment, to improve the legal conditions for potential long-term investors and to bring Mongolian FDI legal environment close to the international. Amendments of 28 May, 2008 were legalized the requirements from the foreign investors to create the minimum of investment in 100 000 USD to attract the interests of its bigiest investors and attribute the quality of foreign investment.

Foreign investors are grantees the following rights:

  1. to own, utilize and dispose of investment assets and to repatriate capital invested in Mongolia;
  2. to manage and to participate in management of economic entities with foreign investment participation;
  3. to assign and transfer their rights and duties to other legal bodies;
  4. to transfer the following revenue, income and profits out of Mongolia

a) Dividends and income associated with shareholders' contributions;
b) Income associated with disposal of assets, bond sales and transfer of ownership rights and liquidation of assets.

  1. Foreign investors are permitted to lease land for up to 60 years and such a lease can be extended for another 40 years.
  2. Foreign investors have a right conclude a Stability Agreement with the Government of Mongolia
  3. Foreign investors have a right implement an investment project without registering a business entity in Mongolia

With the purpose to improve the competitive capacity of the country, to create new workplace, to decrease informal economy and to bring the legal environment close to the international standards, the Parliament of Mongolia amended set of laws on taxes in June 2006. According to those laws, the taxes of business entities has decreased by 5% each and became 10% and 25% that as we consider, is a big concession to investors.

On 5th of March 2008, the Government in its Resolution No.83 has re-approved a list of priority sectors. For instance, in manufacturing sector production of:

  • processed oil products or refinery of oil and coal
  • iron and steel production
  • processed products in coke furnace

The Mongolian Government is fully committed to create better investment and business climate and eliminate retraining problems as quickly as possible and thus, for instance, in 2001 in the new Special Licensing Law of the government of Mongolia has reduced the number of licenses and permissions that needed to be obtained for business activities from 600 to 82. FIFTA /Foreign Investment and Foreign Trade Agency/ makes foreign investors’ registration procedure prompter and quicker and all issues relevant to set up a foreign invested company will be decided in 3 working days.
Since July, 2005, Mongolia became eligible for exporting to the EU market without any duties or quata under the GSP Plus scheme. As a result, there is an opportunity to supply over 7200 product items to all the 27 EU member countries (for instance, copper and copper products, iron and iron products, zync, alluminuim, lead and lead products edible products of animal origin, meat, meat offal or blood products, prepared or preserved meat, textile, knitted or crocheted articles, wool, cashmere, woolen and cashmere products, wool, fine or coarse animal hair, horsehair, yarn just to name a few). In this relation, it is obvious that not only domestic enterprises but also foreign invested industries will benefit and it is with no doubt that their numbers will also grow.
One of the factors in increasing FDI in Mongolia, besides new investors, re-investment made by the excisting investors plays an important role proving that Mongolia has created favorable investment climate that has been noted by the international organizations.
A favorable condition for investment and business created by the Government of Mongolia was also noted by the international organizations, for instance, in the Report of UNICTAD, it highlights the continued growth of FDI in Mongolia whereby the country entered into the list of the leading countries by investment capacity index among 140 countries. In 2005, the two internationally-renowned agencies Moody’s and Fitch Rating has assigned long-term foreign currency and local currency rating of BB- to Mongolia.
Mongolia currently enjoying stable economic growth and moderate inflationaccording to a WTO Secretariat report on Mongolia Trade Policy Review made in March, 2005
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Also, in 2005, the Government of Mongolia has successfully completed the Trade policy review by the WTO. The World Bank with the cooperation of International Finance Cooperation has conducted “Doing business 2007” research on business legal framework of 175 countries and Mongolia is included in the leading 45 countries that have a favorable business environment.
The amount of foreign investment in Mongolia is increasing day-by-day as a result of favorable external and internal legal environment of foreign investment.
As a result of the Government effort to create more favorable climate for investment, the foreign investment amount is steadily increasing year by year and its socio-economic influence is becoming more tangible. As the end November, 2008, 9271 companies from 100 countries were registered with total investment of 2,980 billion USD.

Breif about investment from Austria

As of August 20 2008 since 1990 in total 11 companies form Austria have been registered in Mongolia with investment of 2,35 mln USD.
In terms of sectors 10 thousand USD of total investment has been made in mining and geological prospecting, 1,8 mln. USD in processing of animal originated raw materials, 150 thousand USD in light industry, 50 thousand USD in information technology and communication, 10 thousand USD in tourism sector and 330 thousand USD in trade and service sector.

It is possible in the future to cooperate between Mongolia and Austria in the field of renewable energy, tourism, processing of animal originated raw materials, light and food industry and agriculture.

For more detailed information8 related to Mongolian foreign investment you can visit to the website www.mfat.gov.mn of Mongolian Ministry of Foreign Affairs and Trade, http://www.investmongolia.com of Foreign Investment and Foreign Trade Agency and http://www.mongolchamber.mn/en/index.php of Mongolian National Chamber of Commerce and Industry.

Please visit also to the website http://www.legalinfo.mn/pages/1/page1.php?vmenuclick=1 of National Legal Unified System, if you would like to know Mongolian business related laws in English