ABOUT MONGOLIA 

Mongolia has population of 2.8 million and is located in east central Asia. It covers 1.56 million square kilometers in area and shares a 4,677 km border with China to the south and a 3,485 km border with Russia to the north.

Mongolia is famous for its wild nature, nomadic culture, hospitable people and its rich history. With the fall of the Soviet Union, Mongolia began dramatic political reforms and transferred into a democratic free market economy in the 1990’s.

Mongolia is a resource rich country, not only for coal, but other minerals including copper, gold, iron ore, lead and molybdenum.

Mongolia is an economy that is positioned for significant growth in coming years.  In mid-2014 Mongolia signed a number of tripartite infrastructure agreements with Russia and China covering significant upgrades to rail infrastructure and border crossings.

These agreements were further enhanced in mid-2015 where the Governments of Russia, China and Mongolia signed a further Memorandum which compiled a guideline for building a trilateral Economic Corridor through Mongolia. In addition, framework agreements were also signed covering the facilitation of international trade along this Economic Corridor and on cooperation for ports of entry between the three nations.

The trilateral Economic Corridor is aimed at improving levels of trade not only between the three nations but increasing land based trade between Central Asia and Europe. The Economic Corridor integrates China’s New Silk Road with Russian rail planning and Mongolian Rail Policy.

The impact of this new rail infrastructure will be significant on the Mongolian economy through opening up the nation to access export markets and thereby unlocking its natural resources and facilitating the development of other industries including manufacturing, raw materials, agriculture, tourism, and more.

 

Economic Data for Mongolia released for the 2014 full year has shown:

GDP Growth in 2014:                                     7.8% (2013: 11.7%)

Average Inflation in 2014:                             12.8% (2013: 8.6%)

Main export market (% 2014):                      China 87.8%, (2013: 86.8%)

Government Budget:                                      In Deficit

Exports in 2014:                                              US$5.7 Bil (2013: US$4.2 Bil)

Total Foreign Investment 2014:                    US$382 M (2013: US$2.1 Bil)

(Source: Publicly available data, Bank of Mongolia, Wold Bank, China Daily.)

 

Mongolia as an Investment Destination

Investment Law

  • Effective November 2013, the Investment Law aims to provide equality between foreign and domestic investors and does not distinguish between domestic or foreign investors.
  • Incentivizes investment by allowing greater proportion of foreign employees, no restriction on asset movements in/out of country, provisions that protect against nationalisation of assets, and imposing high thresholds of approval for any future proposed changes.
  • Provides tax stabilisation certificates for Investors for a period of time (5-15 yrs) based on size of investment, and allows for the negotiation of an Investment Agreement for large investments (> US$300m) which stabilises the tax and operational environment.
  • No restrictions on investments, unless the investor is a foreign “SOE” for which 50% or more of its ownership is held by a foreign Government, in which investments >33% of the investment will require approval from Mongolian Investment regulatory, administrative body.

For a more detailed interpretation and how this impacts Aspire, please click here.

Foreign Exchange Rates

  • MNT has depreciated significantly against the US dollar over that last 18 months from 1,714.6 (Jan 2014) to 1,903.2 at (June 2015).
  • Anticipating that the longer term foreign exchange rate will improve with increased exports and improved trade and current account balance.

Minerals Law (2014)

  • Increased land available for exploration from 8% to 20%.
  • Exploration licence moratorium lifted.
  • Extended initial term of exploration licence from 9 to 12 years, with option to extend for a further 3 years.

Allows explorations licences to be transferred, with no restriction on juniors using licences as security for capital raisings.

Credit Rating

Rating

S&P
(April 2015)

Moody's
(July 2014)

Fitch
(Dec 2014)

Long term

B+

B2

B+

Short term

B

NP

B

Outlook

Negative

Negative

n/a