Invest in Mongolia

NOTE: This information was prepared from the link: FIFTA Mongolia Official Web

For more information, please refer to the link: http://www.investmongolia.com/fiftanew/?lang=Eng

Prepared by: Odbayar Badamgarav | Date: October 19, 2011

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Content

Starting a Business…………………………………………………………………….2

Reason for Investing………………………………………………………………....3

Friendly FDI Policy and Investment Protection……………………..…5

Mongolia: a secure and safe place for your investment…..……7

Educated and Multilingual Population………………………………...….8

Rich Natural Resources……………………………………………………….…..10

Strategic location………………………………………………………………..……14

World Brands in Mongolia………………………………………..…………….16

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Mongolia…endless opportunities…




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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Many economies have undertaken reforms to smooth the starting a business process in stages-

and often as part of a larger regulatory reform program. A number of studies have shown that

among the benefits of streamlining the process to start a business have been greater firm

satisfaction and savings and more registered businesses financial resources and job

opportunities. Economies with higher entry costs are associated with a larger informal sector

and a smaller number of legally registered firms.

Procedures to legally start and operate a company (number)

Preregistration (for example, name verification or reservation, notarization) Registration Post registration (for example, social security registration, company seal)

Time required to complete each procedure (calendar days)

Does not include time spent gathering information Each procedure starts on a separate day Procedure completed once final documents is received No prior contact with officials

Cost required to complete each procedure (% of income per capita)

Official costs only, no bribes No professional fees unless services required by law

Paid-in minimum capital (% of income per capita)

Deposited in a bank or with a notary prior to registration begins

Starting a Business




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Case Study Assumptions

Doing Business records all procedures that are officially required for an entrepreneur to start up and formally operate an industrial or commercial business.

Any required information is readily available and that all agencies involved in the start-up process function without corruption.

The business:

is a limited liability company, located in the largest business city

conducts general commercial activities

is 100% domestically owned

has a start-up capital of 10 times income per capita

has a turnover of at least 100 times income per capita

has at least 10 and up to 50 employees

does not qualify for investment incentives or any special benefits

leases the commercial plant and offices and is not proprietor of real estate




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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Mongolia offers the following competitive advantages to foreign investors:

Strategic location. Mongolia borders the resource-rich, vast Siberian region of Russia to the

north and rapidly emerging China to the south. Easy access to the large international markets of

these two neighbors and important global players: China, Russia, South Korea, Japan, Taiwan Perfectly Located

Close to Large Commodity Consumers China - Siberia - Korea – Japan Close to Northwest China Industrial Hub Freight Costs to Most North Asian Markets US$15-20/ Mt Lower than

Competitors

Reason for Investing




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Extensive natural resources. Mongolia's is blessed with rich mineral resources such as gold,

copper, uranium, coal, molybdenum and oil and great abundance of animal origin raw

materials, especially, world well-known cashmere, wool and leather.

World-Class Mineral Resources

Over 6000 Occurrences of 80+ Mineral

Copper - Coal - Iron - Zinc – Fluorspar

Some of the World's Largest Deposits

Potential to Become a Major Global Commodities Player




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Figure 1. World Copper Production assuming:

Source:

1) USGS Minerals Report: Copper, Sept 2009

2) Mongolia National Statistics Yearbook

3) Ivanhoe forecasts for Oyu Tolgoi

Figure 2. Global Coal Reserves (% of total)

Source: Renaissance Capital*Inferred reserves




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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Foreign Direct Investment (FDI) remains a priority for the Mongolian government.

As the end of 2009, since 1990, over 9940 foreign invested companies (including the oil sector)

have been registered from 100 countries with the total direct investment of 3.8 billion USD and

70% of the total investment volume has been made in 2005-2009. And only in 2009 the foreign

direct investment has reached 801 mln USD of 613 companies.

In terms of sectors, mining and geological prospecting took almost the half of the total

investment and counts 61.3%, trade and catering service - 19.7%, banking and finance - 3.1%,

light industry - 2.8%, construction and production of construction materials - 1.9%, processing

of animal originated materials - 1.4%.

Friendly FDI Policy and Investment Protection




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Figure 1. Foreign Direct Investment, by years

Source: FIFTA database

Figure 2. Foreign Direct Investment by Sectors /as the end of 2010/

Source: FIFTA database




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Foreign investors are guaranteed legal protection under Mongolia's laws and international treaties signed by Mongolia.

Legal protection and rights guaranteed to foreign investors by local law include the following: non-discriminatory treatment, i.e., national treatment, with respect to the possession, use and disposal of property within the territory of Mongolia; transfer of profits and dividends; repatriation of proceeds from the sale of assets in the event of liquidating a business; and freely transferable compensation for any assets expropriated for a legitimate public purpose, without discrimination, following due process of law. In Mongolia it is prohibited to nationalize and illegally confiscate assets and capital of foreign investors.

Additionally, the Mongolian legal system provides appropriate guarantees concerning investment dispute settlement procedures and ensures free access for foreign or domestic investors to international commercial arbitration unless otherwise provided by the contracting parties. Mongolia has joined the Washington Convention on the Settlement of Investment disputes between the State and nationals of another State (1965, join 1996) and the "Seoul Convention on Investment Insurance"(1985, join 1999).

Mongolia became a member of the World Trade Organization in 1997. Mongolia is also a full member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group, since January 1999; thereby, making investors eligible for risk insurance through MIGA.

Mongolia has negotiated "Encouraging and Mutual Protection of Investment Agreement" with 39 countries; "Exemption on Double Taxation Agreements" have been negotiated with 34

Mongolia: a secure and safe place for investment




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countries. According to the World Bank survey "Doing Business 2011" Mongolia is among the leading countries by protecting investors' ranking.

Benchmarking Protecting Investors Regulations Mongolia is ranked 28 overall for Protecting Investors.

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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Relative to its small population, Mongolia possesses a good labor pool. In educational

indicators, Mongolia out-performs most other countries at a comparable stage of development.

Mongolia has a young, dynamic and well educated population with 70% the population younger

than 35 years old.

Many Mongolians speak and understand English. In addition to English, which is a compulsory

subject in schools, as well as widely used, some Mongolians also speak Russian, German,

Chinese, Japanese or Korean.

The literacy rate in Mongolia is among the highest in Asia. 98 percent of the population over 15

is able to read and write.

Figure 1. adult literacy rate (%)

Source: World bank

Education and Multilingual Population




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Education: Education remains a priority for the Mongolian government, as shown in its below

average education expenditure when compared to other Asian countries. Mongolia spends 4.2

percent of its GDP on education falling behind only to Malaysia and Thailand.

Figure 2. education expenditure (% GDP)

Source: World Bank

Educational System:

Mongolian educations system consists of basic education, undergraduate education, post

graduate education and vocational trainings. Basic education is 11 years, undergraduate

education is about 4-6 years and post graduate education and vocational trainings vary

depending on the subject.

Secondary school enrollment in Mongolia remains high at 76.1%; tertiary school enrollment in

Mongolia is among the highest in Asia.




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Figure 3. Tertiary school enrollment (%)

Source: World bank

Mongolia has a relatively good pool of graduates coming from the Mongolian universities. The

Mongolian University of Science and Technology covers all main technological areas. University

of Computer Science and Management offers software engineering, information systems, and

computer hardware engineering courses. The School of Telecommunication offers ICT programs

such as information technology, information networks and telematics.




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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Mongolia is a large, unspoiled country with extensive, mostly untapped natural resources, great

disposition of arable land and raw materials from animal origin. Its strategic location between

giant markets such as Russia and China creates big opportunities for the development of

Mongolia's rich natural resources.

Vast Mineral Resources

Mongolia's mineral riches and many intriguing opportunities in the mining sector have garnered

international attention. The mining industry's historic output has largely been copper gold and

fluorite, but Mongolia has other significant mineral resources such as uranium, coal, oil,

molybdenum, phosphor, zinc, etc.

Rich Natural Resources




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Figure 1. Coal Production

Source: World bank

Figure 2. Copper Production

Source: World bank




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In 2010, the total industrial output increased by 169.7 bln.tog or 10.0 percent to 1874.6 bln.tog

(at 2005 constant prices) compared to the previous year. The increase in the industrial output

was mainly due to 16.7-91.8 percent increase in main mining and quarrying products such as

crude oil, fluorspar concentrate and coal; 11.2-69.0 percent increase in manufacturing products

such as copper, lime, alcohol, metal steel, flour, solid concrete, cement, metal foundries, and

2.1-2.3 times increase in products such as steel casting, and iron ore.

Industrial output (at 2005 constant prices), in 2010, showed increase in mining of;

Coal and lignite extraction of peat (91.8%)

Extraction of crude petroleum and natural gas (16.7%)

Other mining and quarrying (19.5%)

For the mining and quarrying sector;

Manufacturing of basic metals (29.6%)

Manufacturing of coke, refined petroleum products and nuclear fuel (-3.5%)

Manufacturing of chemicals and chemical products (18.2%) for the manufacturing sector compared to the previous year.




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Figure 3. Production of major commodities

Source: Bulletin of Statistics, December 2010

Vast arable land and livestock

The vast amount of land suitable for agriculture and the size and variety of the Mongolian herd

provide investment opportunities in crop agriculture, wool (cashmere) and leather processing,

as well as meat processing and dairy food industry.

In 2010, 355.1 thous.tons of cereals, 168.0 thous.tons of potatoes, 82.3 thous.tons of

vegetables were harvested and 1132.3 thous.tons of gross hay harvest, 31.3 thous.tons of

handmade fodder were produced. Cereals harvest decreased by 36.6 thous.tons or 9.3 percent,

while potatoes increased by 16.7 thous.tons or 11.1 percent, vegetables by 4.3 thous.tons or

5.5 percent, gross hay harvest by 220.0 thous.tons or 24.1 percent, handmade fodder by 5.5

thous.tons or 21.1 percent compared to previous year.




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Figure 4. Cereals, potatoes and Vegetables were harvest

Source: /Monthly bulletin of statistics, December 2010/

Figure 5. Cereals, potatoes and Vegetables were harvest

Source: /Monthly bulletin of statistics, December 2010/

Livestock sector

Mongolia is extremely well suited for extensive livestock production. Nomadic herding of

livestock is one of the mainstays of the Mongolian economy, and forms the basis of its cultural

identity. At national level as of the of 2010, 32.7 mln.livestock were counted, of which 1920.3

thous.horse, 2176.0 thous.cattle, 269.6 thous.camel, 14480.4 thous.sheeps and 13883.2

thous.goat.




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Figure 6. Livestock

Source: /monthly bulletin of statistics December 2010/

Figure 7. Total livestock (%)- 2010

Source: /monthly bulletin of statistics December 2010/

The total number of livestock decreased by 11.3 mln.heads or 25.7 percent compared to the

previous year, of which horse by 301.0 percent or 13.5 thous, cattle by 423.3 thous or 16.3

percent, camel by 7.5 thous or 2.7 percent, sheep by 4.8 mln or 24.9 percent, goat by 5.8 mln or

29.4 percent.




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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Mongolia's central location provides its foreign investors with strategic access to the largest and

fastest growing markets in the world.

Mongolia's richness in natural resources and China's insatiable demand for resources make

them natural trading partners, especially given their close geographical proximity. Its historical

links to the Russian Federation and Eastern Europe and its cultural affinity to Japan and Korea

provide needed balance.

Strategic Location




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Over 2.7 billion people reside within 5 hours flying time of Mongolia.

4 countries comprising 60% of the world's GDP and 7 of the world's fastest growing economies

are within 7 days by rail or sea freight.

As a part of the Millennium Project, the Government of Mongolia has planned the construction

of a giant highway network connecting Russia and China across Mongolia horizontally and

vertically.

The main ports to enter Mongolia are:

Chinggis Khaan International Airport, Ulaanbaatar

Suhhbaatar Railway Station -Mongolian-Russian border

Zamyn Uud Railway Station -Mongolian-Chinese border

The railway system serves the transit route for cargo moving between the People's Republic of

China and the Russian Federation via Mongolia. Both Mongolian and Russian gauge are broad

and allows the cargo to go straight from Mongolia into the Russian Federation and Europe.

Chinese rail lines use the standard gauge of 1,435 mm and cargo must be changed at the

border. Sea access:

Tianjin [China]: 1,344 km; Nakhodka [Russia]: 4,037 k




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Fashion:

Louis Vuitton, Burberry, Ermenegildo Zegna, Emporio Armani, Calvin Klein, Hugo Boss, Adidas

Automobiles:

Mercedes-Benz, BMW, Land Rover, Volkswagen, Subaru, Nissan, Toyota, Hyundai, Kia, Skoda, Chevrolet, Ford, Daimler Chrysler

Mining Industry:

Ivanhoe Mines, Rio Tinto

Mining Equipments:

Liebherr, Trek, Caterpillar

World Brands in Mongolia

Invest in Mongolia

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