Mongolia offers a new frontier for investment

Home to the legendary conqueror Genghis Khan, the land-locked and remote Asian nation provides an interesting and attractive investment destination.

Mongolia has been making regular strides to foster a conducive environment for foreign investment and trade through policy reforms, legal certainty and sound governance. Cradled between, China and Russia Mongolia provides an extensive transport links to major regional markets.

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According to statistics released by the Mongolian government, the country’s economy grew by 5.1 percent in 2019 driven by increases in added value of the service sector and the agriculture sector in accordance with the National Statistics Office (NSO). According to figures published by the Mongol Bank GDP grew by 8.6 per cent in the first quarter, 6.8 per cent in the second quarter and 6.3 per cent in the third quarter of 2019, respectively (NSO) Mongolia’s exports hit over USD 7 billion in 2019. According to UNCTAD World Investment Report 2020, FDI flows to Mongolia amounted to USD 2,4 billion in 2019, up from USD 2,2 billion in 2018 (+12,4 per cent), mostly due to continued large mining projects, especially the Oyu Tolgoi copper-gold mine.

The Khushuut mine in Mongolia is one of the largest coal deposits in Asia of its kind.

According to the Economic Freedom Index Mongolia 2020 released by the Heritage Foundation, Mongolia’s economic freedom score is 55.9, making its economy the 127th freest in the 2020 Index. Its overall score has decreased by 0.5 point, with lower scores for judicial effectiveness and government integrity exceeding improvements in government spending and investment freedom.

The main sectors of investment are mining and energy.

Mining

Mongolia boasts of vast resources of copper, coal and other precious materials valued over $ 1.3 trillion. In fact, the Khushuut mine is one of the largest coal deposits in Asia of its kind.

According to UN Comtrade, Mongolia’s top exports were centered around two commodities: coal briquettes worth $2.8 billion and copper ore worth $2 billion in 2018.

Energy

To meet the increasing demand for electricity, reduce the country’s heavy reliance on coal, and improve energy security, Mongolia is committed to promoting renewable energy development. Nicknamed “The Land of Eternal Blue Sky,” Mongolia’s climate makes it a prime location for solar power generation, especially in the South Gobi region.

Currently, Mongolia has attracted around USD 14.3 billion of announced cross-border greenfield FDI projects between 2003 and 2017.

Infrastructure

Mongolia’s infrastructure, especially in terms of transport and water infrastructure, suffer from development. The government has undertaken several large-scale infrastructure development projects to improve infrastructure service delivery, however there is little to no private sector participation in infrastructure projects,

India and Mongolia

Caught between two of its immediate neighbours – Russia and China, India has often been seen as a counter weight, a declared third neighbour and a strategic partner. Mongolia has been traditionally supporting India in the United Nations and various other international forums. It has supported India for the non permanent seat of the UN Security Council (UNSC) for 2011-2012. The two countries also share defence cooperation, with The BSF (MHA) of India and the Mongolian General Authority for Border Protection (GABP) have been closely cooperating on border patrolling and related subjects for over eight years. In addition India has contributed regularly towards building centres of excellence and knowledge in Mongolia including the Rajiv Gandhi Polytechnic College for Production & Art (RGPCPA) and Atal Bihari Vajpayee Centre for Excellence in ICT. In addition, the two countries signed MoUs on space cooperation and disaster management in 2019.

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