The document summarizes the FDI environment in Mongolia. It notes that FDI into Mongolia has been sharply decreasing since 2011 due to declines in commodity prices, the completion of major investment projects, and policy uncertainty. It identifies actions needed to improve the investment climate such as diversifying the economy, streamlining regulations, establishing an independent investment promotion agency, and pursuing new infrastructure projects. The document aims to provide an overview of Mongolia's FDI trends and policy priorities to attract more foreign investment.

1. FDI ENVIRONMENT IN
MONGOLIA
Jim Dwyer
Executive Director
Business Council of Mongolia
CAMCA Regional Forum
Ulaanbaatar, Mongolia
20 June, 2015
INVEST in
MONGOLIA

2. Content
INVESTMENT PERFORMANCE
REASONS FOR DOWNTURN
POLICY ACTIONS

3. FDI into of Mongolia has been decreasing sharply
0.32 0.37 0.50
0.71 0.80
1.03
4.99
4.40
2.29
0.57
15.85%
36.23% 41.80%
13.01%
28.06%
386.36%
-11.82%
-47.95% -75.20%
(2.00)
(1.00)
-
1.00
2.00
3.00
4.00
5.00
6.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014.11.31
billionUSD
FDI Percentage
/in billion USD/

4. Registered foreign invested companies /by number of companies/

5. Export of coal (million USD)
Export price of coal
Reason 1:
• Main export commodity
price dropped
2011.01 2015.02
Coal 141.94$ 65.76$
Metals 245.48$ 137.27$
Copper 9533.2$ 5729$
Iron Ore 179.63$ 62.69$

6. Reason 2:
• Phase 1 of OT Project has completed
Investment Amount:
7.1 billion USD
OT investment has been the
main reason for the rapid
growth of FDI in 2011-2012
• 40 companies listed in International stock exchanges

7. Reason 3:
Strategic Entities Foreign
Investment Law /2012/
Long Name Law /2009/
Presidential moratorium
on new exploration
licenses /2010/
Government Changes
Corruption Issues /in
2013 106 exploration
licenses held by foreign
and local investors were
revoked as a result of a
court case/
Arbitration cases
Court cases / Imprison
cases
Tax disputes
Unexpected Changes
of Regulations
Negative messages Unfavorable attitudes
• Uncertainty

8. EASE OF DOING BUSINESS IN MONGOLIA
According to the 2015 Doing Business report by the World Bank, Mongolia is ranked 72nd place out of 189 Economies
DB 2015 Rank
8
173
142
90
84
74
61
42
30
24
17
Trading Across Borders
Getting Electricity
Resonlving Insolvency
Paying Taxes
Dealing with Construction Permits
Getting Credit
Starting a Business
Registreing Property
Enforcing Contracts
Protecting Minority Investors

9. Source: MIGA-EIU Political Risk Survey 2013
7
13
24
31
33
43
45
58
War
Terrorism
Expropriation
NHFO
Civil disturbance
T&C restrictions
Breach of contract
Adverse regulatory changes
Types of political risk of most concern
to investors in developing economies in
next 3 years /percent/
INTERNATIONAL SURVEYS
Key Findings of the WB and IFC
survey in Mongolia /provisional
report/
 The main investor concerns are
caused by the certain government
organizations:
– Lack of Transparency and Arbitrary
Government Action
– Expropriation
– Discrimination
– Breach of Contract
 Even the investment is adequately
protected in legal documents,
investors do not feel the reliable
protection.
 High degree of dissatisfaction to
resolve investors grievances.

10. Scenarios to 2021
INVESTMENT POLICY REVIEW
/April 2014, UNCTAD/
Recommendations
2
1
• Resource curse and macroeconomic instability
• Mining development hampered by national and international political
and economic difficulties
• Investment in infrastructure constrained
• Mining revenues are put to productive use
• Macroeconomic stability attained
• Economy diversifies, infrastructure improves
• Sustainable and inclusive development
1
• New objectives and
tools of a
comprehensive FDI
strategy
2
• Regulatory and
institutional reforms
for foreign and local
private sector
development
3
• Programmes for
achieving
diversification through
FDI and other
activities of foreign
companies

11. Foreign
Investment Law
(FIL)
Remove the pre-establishment screening of FDI
Abolish the need for investment certificates
Replace the minimum deposit requirement
Improve the methodology for the collection of FDI
Regulation of Foreign
Investment in entities
operating in strategic
sectors (SEFIL)
Replace the comprehensive pre-establishment
screening with a proper national security test
Mongolia’s
Investment
Promotion Agency
(IPA)
Establish an independent, public sector-funded and
private sector-oriented agency
Remove all regulatory functions, including screening
and registration and assign proper investment
promotion and facilitation functions
Staff the agency with professional and experienced
personnel
Provide the IPA with secure and adequate financial
resources
1. New objectives and tools of a comprehensive FDI strategy

12. POLICY ACTIONS
• Sector diversification
• Geographical diversification
• Source country diversification
Managing
stakeholders
interests
More favorable
condition
• Synergy between government institutions
• Capacity building programme
• Social program to promote a positive impact of FDI
Diversification
12
Protection
• One stop online services
• Aftercare services
• Grievance management mechanism
• Facilitate procedural barriers
• Incentives
Financial Incentives
Fiscal Incentives
Regulatory Incentives

13. Expected investment from mega projects and PPP
projects exceeds 18bln USD
OT II Phase
Investment: 5bln
USD
Investment Agreement
TT
Investment: 4bln
USD
Investment Agreement is
under negotiation
TTPP
Investment: 1bln
USD
Investment Agreement
Public-Private Partnership Projects
Total Investment amount : ~7bln USD
The Government has signed 17 PPP agreements
• “Telmen power plant” project
• “Altanbulag-Ulaanbaatar-Zamyn-Uud highway”
project
• “Nariinsukhait – Shiveehuren” road project
• “Establishment of the mining and metal
processing complex” project
• “Tuul-Songino power plant” project
•“Tavantolgoi-Khanbogd-Hangi” road project
• 9 road projects with total length of 1167.6 km
• Projects for construction of 72 kindergarden and
school complexes
CHP5
Investment: 1.2
bln USD
Concession Agreement

14. Thank you for your attention
INVEST in
MONGOLIA
Invest Mongolia Agency
Web: www.investmongolia.com
Phone: +976-11-320706, 310599
Email: info@investmongolia.com
The Business Council of Mongolia
Web: www.bcmongolia.org
Phone: +976-11-317027; 70114442
Email: info@bcmongolia.org