🏔 EXPORT FINANCING | REVISED INVESTMENT BILL | GDP Q1

POWERED BY

Greetings! Whether it's morning, afternoon, or evening, we're thrilled to have you reading the 66th edition of our newsletter. Your decision to open this email indicates that you're enjoying our content, even if it's just a little bit.

Why not share the love and recommend Inside Mongolia to your friends? It's as easy as clicking the button below.

So far, 19 of our readers have already referred at least one person. Help us spread the word and grow our community! Thank you for your support. 😎

🤔 DID YOU KNOW?

 📜 MONGOLIA DRAFTS NEW INVESTMENT BILL TO ATTRACT FOREIGN CAPITAL

The Ministry of Economic Development is seeking public feedback on a revised Investment Bill to boost foreign direct investment (FDI) and diversify the economy.

• The country has struggled to attract FDI since the peak of its resources boom in 2012 when it received ₮5.5 trillion ($1.6 billion) in the third quarter. Ten years later, FDI had fallen by 60.2% in the same period, according to official data.

• Furthermore, more than three-quarters of FDI goes to the mining industry, leaving other sectors underdeveloped.

A capricious journey

Michael Klecheski, a former US ambassador to Mongolia, said the country needed “a more stable legal and regulatory environment” to lure investors. However, Mongolia has amended its original 1993 Foreign Investment Act 110 times and its revised 2013 Investment Act 40 times, creating uncertainty and confusion.

The new bill proposes several changes to address these issues, including:

• Allowing foreign-invested enterprises to own land for the duration of their tax stabilization agreement with the government.

• Reducing the withholding tax on repatriating profits from 20% to 10%.

• Raising the fee for registering a legal entity from $13 to $100 while lowering the fee for registering a foreign-invested enterprise from $213 to $100, making them the same.

• Scrapping the special residency permit for foreign investors and removing the requirement for companies with foreign founders or shareholders to have at least one-third of their shares owned by a Mongolian national.

Despite the promising start, the bill does not address the over-reliance on FDI in the mining sector or offer any guarantees against further legal changes. Some analysts have questioned whether it will be enough to improve Mongolia’s reputation among foreign investors.

📈 DATA STORY: GDP

Good news: Mongolia’s economy grew 7.6% in the first quarter due to the mining sector revival and China’s openness. In addition, the World Bank introduced its Economic Update on Mongolia. The World Bank now expects Mongolia’s economy to accelerate to 5.2% growth in 2023 from 4.7% in 2022 as mining and exports expand and the post-pandemic recovery in services continues.

🇲🇳 SURVEY: EXPORTERS NEED MORE SUPPORT TO THRIVE

Mongolia is a one-trick pony. Its export sector depends almost entirely on mining, which accounts for 93% of its foreign sales. Other industries struggle to compete in global markets, hampered by poor access to finance, skilled workers, and government services. A survey by the Mongolian National Chamber of Commerce and Industry (MNCCI) found that only 4.2% of all businesses in the country export their products, and most of them do so sporadically.

Survey results

The survey also showed that non-mining exporters are more innovative than both the mining industry and the average business, but this has not boosted their growth or competitiveness. They rely on their own funds for 90% of their operations, and more than 40% have outstanding loans. They also face a higher workforce shortage rate and more red tape than other firms.

• Mining exports have grown from 50% of the total in 2000 to 93% in 2022, while non-mining exports have shrunk.

• Only 5% of the exporters are in the mining industry, suggesting that a few large companies reap most of the benefits.

• About 56% of the exporters have revenues of less than ₮300 million ($106,000), while only 19% have more than ₮2.5 billion, indicating strong enthusiasm from small exporters.

Mongolia needs to diversify its export sector if it wants to reduce its vulnerability to commodity price swings and achieve a more balanced and sustainable development. This will require more investment and support for non-mining exporters and reforms to ease their access to finance, labor, and public services.

🏃 QUICK STORIES

📌 Khan Bank Has Completed Its IPO. Mongolia's largest lender by assets, Khan Bank, has raised ₮336 billion ($118 million) in a heavily oversubscribed initial public offering that boosted the value of the country's stock market to ₮8.5 trillion. The IPO, which attracted orders worth 183% of the shares on offer, was the biggest ever listing on the Mongolian Stock Exchange.

📌 Ulaanbaatar’s Mayor Announces Plans to Issue Bond of ₮187 Billion. Ulaanbaatar plans to tap the bond market to finance a project to ease traffic congestion in Mongolia's capital. The city government, which has no investment budget this year, aims to raise funds for the scheme that began in 2022. The bond issuance follows the passage of a law that grants Ulaanbaatar more autonomy over its finances and governance.

📌 J. Tana Joins the Board of Directors of Oyu Tolgoi. She brings a wealth of academic and professional experience in economics and natural resources. Ms Tana graduated from Harvard and Oxford and was a Global Shaper scholar of the World Economic Forum. She worked as a consultant for McKinsey & Company in Kazakhstan and Washington, D.C., advising mining companies on strategy and operations.

📌 Pope Francis Confirms Trip to Mongolia: Pope Francis announced that the first papal visit to Mongolia will take place in September. He will stop by the landlocked Asian country after a trip to Marseille, France. Catholicism has a tiny but growing presence in Mongolia, where a cardinal leads some 1,300 Faithfuls.

📌 Mongolia’s Money Supply Surges. The central bank says that M2, a broad measure of money in circulation, rose by 16.8% year on year to ₮30.9 trillion ($10.7 billion) in March. This was mainly driven by a sharp increase in demand deposits, which jumped by 83.8%, and a smaller rise in time deposits, which grew by 39.1%.

⭐ TOP NEWS

• China’s Reincarnation Monopoly Has a Mongolia Problem (Foreign Policy)

• Mongolia Commits to Start Automatic Exchange of Financial Account Information by 2026 (OECD)

• Team Splicing from Mongolia Wins the SCALA Hackathon for Asia and the Pacific (UNDP)

• How Mongolia’s Gobi Desert Became a Critical Environmental Battleground (Global Press Journal)

• United States Provides Additional Assistance in Response to Mongolia’s Dzud (U.S Embassy in Mongolia)

💭 WATCH & LEARN

Partnership Inquiries:
Place an ad

Editor: E. Zolbayar
Writer: A. Bilguun, A. Bayarmaa

Disclaimer: The information "Inside Mongolia" provides is for educational and informational purposes only. It is not intended to be and does not constitute financial advice, trading advice, or any other advice. The decision whether to take into account the information we provide is solely our readers' independent decision.