Mongolia is developing its business laws and systems to transition to a market economy. Entering the Mongolian market presents challenges in assessing risks for businesses. Mongolia has abundant natural resources like minerals and agriculture that could make its population wealthy, but attracting and protecting investors is critical to realizing this potential. The Mongolian economy is expected to grow 12.5% in 2013 due to mining projects like the Tavan Tolgoi coking coal mine, but is vulnerable to downsides from China's economy. The Mongolian government agreed to a three-way split of the Tsankhi block of the Tavan Tolgoi mine between a Chinese company, Russian company, and U.S. company to satisfy

1. Enkhjin Amarbuyan
Handong2 FK13-5
Summary of research
Mongolia is continuing to develop its systems of business law, taxation, banking, and
external links to the international business community and, most importantly, a market
economy. Entering Mongolia presents, however, a unique challenge to business people when
attempting to assess real business risks and to make reality-based decisions rather than relying
on perceptions. Abundant natural resource wealth and agricultural production make Mongolia's
population one of the potentially richest countries per capita in the region. However, converting
this potential into reality requires many critical factors to function in concert. Attracting and
protecting investors is among the most critical of these factors.Economic activity in Mongolia
has traditionally been based on agriculture and livestock. The Mongolian economy will likely
show another double digit growth in 2013 but is exposed to downside risks. The World Bank is
revising its baseline growth forecast for 2013 to 12.5 percent from its previous forecast of the
April Economic Update, reflecting the softer growth in China than we had previously projected
in April and lower-than-expected pace of recovery in mining. A coalition led by China’s largest
coal company Shenhua Group was granted a leading 40 percent share of a massive Mongolian
mining project in July, leaving a Russian-Mongolian concern with 36 percent and U.S.-based
Peabody Energy with 24 percent.
Why did the Mongolian government agree to a three-way, international division of
spoils for the western Tsankhi block of the Tavan Tolgoi coking coal project?
Industry sources familiar with investing in Mongolia said the government, as expected,
opted in part to satisfy China’s huge appetite for energy resources. The open pit Tavan Tolgoi,
one of the world’s largest untapped mines, has proven reserves of 6.4 billion tons, including 1.2
billion tons in the Tsankhi block alone.
But the government in Ulan Bator also wants to use the mine project to strengthen its
longtime political and cultural links with Russia, according to the sources. Moreover, including
Peabody was seen as a nod to America’s role as a geopolitical balancer in Asia, especially for
Mongolia’s relations with China and Russia.
Shenhua has long shown its interest in Mongolian coal investment. In 2009, the company
started building an Inner Mongolia railroad line from the coal-belt city Baotou to Ganqimaodu
at the Mongolian border – just 180 kilometers from Tavan Tolgoi.
Shenhua’s current annual production capacity is about 400 million tons of coal. The company
currently has about 70 billion yuan in cash available for acquisitions, said Huang Qing, Shenhua
board secretary.