The document outlines Mongolia's economic reform objectives as stated in the government's Action Plan for Reform. It lists the key objectives as lowering interest rates, controlling inflation, implementing tax and border crossing reforms, upgrading small and medium enterprises, and establishing special economic zones. It then discusses the establishment of the Ministry of Economic Development and initial reform steps taken, including issuing "Chinggis bonds" internationally, shifting to 4-year public investment planning, and plans to develop domestic manufacturing of construction materials. The document also addresses foreign investment policies, sectors receiving foreign investment, and policies for the coal sector.

1. ECONOMIC REFORM OBJECTIVES
VICE MINISTER FOR ECONOMIC DEVELOPMENT
H.E. Mr.O.CHULUUNBAT
Ulaanbaatar
2013-02-21
MINISTRY OF ECONOMIC DEVELOPMENT

2. INDEX
Investment in Coal sector
Foreign investment policy
Reform objectives of Macro economy
First steps for the Reforms

3. Economic development objectives stated in the Action Plan of the Reform
Government:
 Lower interest rates to single digits;
 Cease to be led by inflation and start controlling inflation;
 Introduce single window policies in export;
 Start manufacturing construction materials domestically;
 Reform housing finance system;
 Implement job creation programs;
 Implement 2nd phase of tax reforms for supporting businesses;
 Implement reforms at border crossing point ;
 Upgrade MSE;
 Start work on establishment of Special zone for banking and finance,
stock exchange, information technology, leisure and airway junction
The reform objectives of Macro economy

4. First steps for Reforms
1. New Government has established the Ministry of Economic
Development - responsible for integrated macroeconomic planning
1) regulation of implementation of comprehensive socio-economic
development policies; development planning; coordination of inter-
sector policy
2) determining the top priority and the sectors; stabilization of sector and
infrastructure development relationship
3) integrated investment policies
4) foreign investment policies, regulation and registration matters
5) integrated loan and aid policy
6) Integrated economic cooperation policies and regulation
7) trade policies and regulation
8) establishment and strengthening of high technology and innovation
promotion mechanisms
9) development of free trade zones
10) concessions and PPP policies

5. First steps for Reforms
2. Issued successfully ‘Chinggis bond’ in the international markets with
following significance:
 2 fold increase in foreign reserves that supports macroeconomic stability
Provides basis for stabilization of national currency, allowing inflation expectations to
stabilize for the first time in 5 years
This gives turn policy to the Bank of Mongolia to decrease policy rates and increase
money supply, which will support overall economy
Increased potential credit sources in the economy
Allows financing the Social Insurance Fund and effective implementation of notional
personal accounts system
Allows introduction of classical mortgage finance system

6. First steps for Reforms
3. Made decision is to shift to 4-year mid-term public investment planning
 Establish investment fund mechanism, e.g. Social Insurance Fund capable of
investing
 Started mid-term public investment planning initiative at 330 soums
“Soum” project in rural Mongolia and “Street” project in Ulaanbaatar have been
formulated

7. First steps for Reforms
4. Initial steps for manufacturing of construction materials and petroleum
products, which is the main cause for the foreign trade and domestic
economic volatilities.
 Decisions taken by the authorities to establish the Oil refinery at Darkhan.
Negotiations are in progress with Government of Japan.
 Intentions are set to supply the key construction materials for domestic demand
completely. Within the framework, planning to establish the cement, rebar plants and
metallurgy by region.

8. First steps for Reforms
5. Investments into infrastructure projects
 Аuto roads
 Rail roads
 Power stations
 Power networks

9. Foreign investment policies
•Foreign direct investments are one of the main pillars of the economic
development of Mongolia.
•In order to attract more foreign direct investment, the measures will be taken
for the improvement of business environment.
•“Regulations” will be made to ensure that investments are for the mutual
benefit of parties, in line with economic development policies, and are
beneficial for Mongolia and its people.
•Within the framework of such objectives, target sectors and activities for
foreign direct investment will be defined.
An example is the passing of the Law on Regulation of Foreign
Investment in Business Entities Operating in Sectors of Strategic
Importance

10. Foreign investment policies
For following reasons, the Ministry does not support assertions that investors are
departing due to the above mentioned law:
1. During “Chinggis bond” release received offers amounted to 15bln, or 10times
the amount sought.
2. “Doing Business” of World Bank and ОЕСD studies have shown that Mongolia
made progress as investment and business destination.

11. Foreign investment policies
3. In regional terms, Mongolia is a relatively open country with liberalized
economy.
0 0,1 0,2 0,3 0,4 0,5
Sweden
USA
Norway
Mongolia
Austria
Ukraine
Australia
Kazakhstan
Korea
Russia
China
0.128
0.116
0.106
0.096
0.089
0.089
0.059
0.408
0.178
0.143
0.137
FDI Restriction Index, ОЕСD, 2012

12. Foreign investment policies
Countries compete in the following areas in relation to FDI:
 Таx regime
/Income tax-10%, CIT-10% and 25%, VAТ-10%/
 Таriff levels
/Import tax 5%, export tax 0%/
Free trade zones
/Leisure centers/
Government guarantees and assurances
/Concession and investment agreements/
 Land possession rights
/Dedicated laws/
 Profit transfer rights
/Legal protection/
 Property rights /Legal protection/
 Level of infrastructure development /attention is given to these issues and
important decisions are made/

13. AUTOROAD PROJECT

14. Tamsagbulag
Jargalant
Khandgait
DARKHAN
DALANZADGAD
Khanbogd
Tsogt Ovoo
Gashuun Suhait
DORNOGOVY
TUV
DUNDGOVY
MANDALGOVY
SUKHBAATAR
Matad
Bichigt
Havirga
DORNOD
Ereentsav
Yarantai
ULGII
Ulgii
Uench
UMNUGOVY
ZAVKHAN
GOVY-ALTAI
Burgastai
Naranbulag
CHOIR
MURUN
Khatgal
BAYANHONGOR
UVURHANGAI
BAYANHONGOR
Khankh
ERDENET
Tsahir
Battsengel
TSETSERLEG
ARVAIHEER
ARHANGAI
HUVSGUL
BAYAN-ULGII
ULAANGOM
ULIASTAI
KHOVD
UVS
BULGAN
SAINSHAND
CHOIBALSAN
BARUUN- URT
UNDURKHAAN
ZUUN MOD
KHENTII
SELENGE
BULGAN
Baga-Ilbenh
Oyutolgoi
Tavantolgoi
Tsagaan
suvarga
Shivee huren
Ulaanbaishint
Nariin suhait
ТT-Tsagaan Suvarge-
Sainshand route
ТT- Gashuun Sukhait
Nariin Sukhait-Shivee Kuren
Sainshand-Baruun Urt-
Khuut-Choibalsan route
Khuur-Numrug
route
Khuut-
Bichigt route
RAILWAY PROJECT – 1800km

15. POWER NETWORK

16. Foreign investment policies
 Near term objectives in line with Foreign Investment Policies:
 Organize national workshop on the draft report and recommendations pertaining to
current Foreign Investment Policies of Mongolia / in conjunction with UNCTAD in
March, 2013/
 Formulate a strategic document on attraction of foreign investments
 Increase the volume of economically viable, programmatic FDI /aligned with
economic development policies, creating jobs, transferring technology, etc./
 Enhance the relevant legal environment
 Increase share of public funding toward capacity improvements in auto road, rail
road, BCP and strengthening of financial sector

17. Amount of FDI
/2012 estimates/
2010 2011 2012
Total investments USD1,026bln USD4,9bln USD4,0bln*
Number of
countries
59 66 59*
Number of newly
established
entiities
769 933 774
Number of
dissolved or
deregistered as
foreign invested
companies
214 233 156
Foreign investment policies
(*) урьдчилсан дүн

18. №
Тоp investing countries
1990-2012.06.30
% Total /USD/
1 PRChina 31.71 3.65 bln
2 Netherlands 23.16 2.67 bln
3 Luxemburg 9.01 1,04 bln
4 BritishVirgin Islands 7.48 0.86 bln
5 Singapore 5.45 0.63 bln
6 Canada 4.23 0.49 bln
7 South Korea 2.93 0.34 bln
8 USA 2.54 0.29 bln
9 Hong Kong 1.80 0.21 bln
10 Japan 1.60 0.18 bln
Foreign investment policies

19. 73.9%
16.3%
1.5%
0.9%
0.9%
Геологи, уул уурхайн эрэл хайгуул,
олборлолт, газрын тосны салбар
Худалдаа, нийтийн хоол
Банк, санхүүгийн үйл ажиллагаа
Хөнгөн үйлдвэр
Инженерийн барилга байгууламж,
барилгын материалын үйлдвэрлэл
Foreign investment policies
Foreign investment by sectors /2012.06.30/
This picture needs to change—more
diversification is needed

20. Foreign invested companies operating in coal sector of Mongolia
№ Country
Number of
companies
1 PR China 18
2 Mongolia-PRChina JV 9
3 British Virgin Islands 8
4 Singapore 3
5 Аustralia 2
6 Canada 2
7 Luxemburg 2
8 Моngolia-Russia JV 2
9 Luxemburg- VI JV 1
10 Luxemburg-Seychelles JV 1
11 Mongolia-US JV 1
12 Mongolia-South Korea JV 1
13 Mongolia-Hong Kong JV 1
14 Mongolia-VI JV 1
15 Mongolia-Luxemburg JV 1
16 Netherlands 1
Total 54
Foreign investment in the coal sector

21.  Policy direction:
 Single window policies in exports
 Marketing products at international market prices
 Development of transport infrastructure
 Domestic power production
 Support eco friendly investments
 Improvement of operational efficiency of Erdenes TT
Foreign investment in the coal sector