PROFILE OF THE ICT SECTOR OF MONGOLIA -...

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September 2002

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CONTENTS. 1 INTRODUCTION AND REFERENCES. 4

2 MONGOLIAN ICT-MARKET. 5

2.1 CUSTOMER SEGMENTS. 7 2.1.1 PUBLIC. 7 2.1.2 RESIDENTIAL. 9 2.1.3 CORPORATE. 9 2.2 PRODUCT SEGMENTS. 10 2.2.1 SOFTWARE. 10 2.2.2 HARDWARE. 12 2.2.3 IT-SERVICES. 13 2.2.4 CONTENT. 14 2.2.5 MEDIA. 14 2.2.6 INTERNET AND DATA-COMMUNICATION. 15 2.2.7 VOICE. 18 2.2.8 MOBILE. 20 2.2.9 WHOLESALE TELECOMMUNICATION PRODUCTS. 21

3 MONGOLIAN ICT-INDUSTRY. 21

3.1 KEY MARKET PLAYERS. 21 3.1.1 COMPANY OVERVIEW MATRIX. 21 3.1.2 IT-PARK INITIATIVE. 23 3.1.3 SOFTWARE HOUSES. 23 3.1.4 SYSTEM INTEGRATORS. 24 3.1.5 MEDIA. 24 3.1.6 BROADCASTERS AND CABLE TV. 25 3.1.7 CONTENT PROVIDERS. 25 3.1.8 INTERNET AND WAN- PROVIDERS. 25 3.1.9 INTERNET CAFÉS AND IP-TELEPHONY. 26 3.1.10 CELLULAR AND WLL PROVIDERS. 27 3.1.11 TELECOM SERVICE PROVIDERS. 27 3.1.12 TELECOM CARRIERS. 28 3.2 NETWORKS AND TECHNOLOGY. 28 3.2.1 CELLULAR. 28 3.2.2 PSTN. 28 3.2.3 INTERNET AND DATA-COMMUNICATION PLATFORMS. 28 3.2.4 INFRASTRUCTURE AND TRANSMISSION. 29 3.2.5 BROADCASTING NETWORKS. 29 3.2.6 INTERCONNECTS AND TELEHOUSES. 30 3.3 BUSINESS OPPORTUNITIES. 30 3.4 FDI MODEL ALTERNATIVES. 30

4 PUBLIC ENVIRONMENT. 30

4.1 POLITICAL FOCUS AND STRATEGIES. 30 4.2 ICT AUTHORITIES. 32 4.3 ICT ASSOCIATIONS. 32 4.4 LEGAL REGIME. 32 4.4.1 TELECOM LEGISLATION AND REGULATIONS. 32 4.4.2 IT AND INTERNET LEGISLATION. 35 4.4.3 ECONOMIC CRIME ENFORCEMENT. 35 4.4.4 INTERNATIONAL TREATIES, DISPUTES AND ARBITRATION. 35 4.4.5 OTHER RELEVANT LAWS. 36 4.5 TAXATION SCHEMES. 36 4.6 CUSTOMS SYSTEM. 37 4.7 INVESTMENT PROMOTION INSTITUTIONS. 37 4.8 COMPANY LEGAL REQUIREMENTS. 38 4.8.1 OWNERSHIP FORMAT. 38 4.8.2 COMPANIES REGISTRY. 39 4.8.3 COMPANY OPERATIONAL REQUIREMENTS AND ACCOUNTABILITIES. 40

5 FINANCIAL ENVIRONMENT. 40

5.1 DONORS AND FUNDING SCHEMES. 40 5.2 MONETARY AND FINANCE SYSTEM. 41 5.3 STOCK EXCHANGE. 41 5.4 BANKS. 42

6 ICT-SPECIFIC BUSINESS ENVIRONMENT. 42

6.1 SYNERGY OPPORTUNITIES. 42 6.2 HUMAN RESOURCES. 43

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6.2.1 ICT-EDUCATION AND RESEARCH. 43 6.2.2 DOMESTIC ICT LABOUR MARKET. 44 6.2.3 EXPATRIATE COMMUNITIES. 44 6.2.4 LOCAL CONSULTING RESOURCES. 45 6.2.5 GENERAL LABOUR MARKET. 45 6.2.6 LABOUR LEGISLATION. 45 6.2.7 LABOUR UNIONS. 46 6.2.8 IMMIGRATION AND WORK PERMITS. 47 6.3 CRUCIAL SUPPORT BUSINESSES. 47 6.3.1 EQUIPMENT VENDORS. 47 6.3.2 MARKET ANALYSIS AND STATISTICS. 47 6.3.3 PARCEL DELIVERY EXPORT AND IMPORT. 47 6.3.4 LEGAL SERVICES. 47 6.3.5 ACCOUNTING AND AUDITING SERVICES. 48 6.4 CRUCIAL INFRASTRUCTURE. 48 6.4.1 OFFICE AND TECHNICAL BUILDINGS. 48 6.4.2 HOTELS. 48

7 BASIC BUSINESS ENVIRONMENT. 48

7.1 COUNTRY CHARACTERISTICS. 48 7.1.1 HISTORY. 48 7.1.2 GEOGRAPHY. 49 7.1.3 TOPOGRAPHY. 49 7.1.4 CLIMATE. 49 7.1.5 ENVIRONMENTAL. 50 7.2 PUBLIC SYSTEM. 50 7.2.1 POLITICAL SYSTEM AND CONSTITUTION. 50 7.2.2 LEGAL SYSTEM. 51 7.2.3 LEGISLATION. 51 7.2.4 HEALTHCARE. 52 7.3 POPULATION. 52 7.3.1 DEMOGRAPHY. 52 7.3.2 EDUCATION. 53 7.3.3 HEALTH. 53 7.3.4 CRIME. 53 7.3.5 ACCOMMODATION. 54 7.4 ECONOMY. 54 7.4.1 MACRO ECONOMY. 54 7.4.2 SOCIO ECONOMY. 55 7.4.3 COST LEVEL. 55 7.4.4 NATURAL RESOURCES. 55 7.4.5 BUSINESS STRUCTURE. 55 7.4.6 PUBLIC ECONOMY. 56 7.5 TRANSPORTATION. 56 7.5.1 RAILWAYS. 56 7.5.2 ROADS. 57 7.5.3 WATERWAYS. 57 7.5.4 PORTS AND HARBOURS. 57 7.5.5 AIRPORTS. 57

8 SWOT. 57

9 CONCEPTUAL REFERENCE MODEL. 59

10 ANNEXES. 60

1 LIST OF MONGOLIAN ICT COMPANIES. 2 LIST OF DOCUMENTS USED FOR THE PROFILE. 3 LIST OF OFFICIALS AND EXECUTIVES INTERVIEWED FOR THE PROFILE.

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1 INTRODUCTION AND REFERENCES. This document has been prepared in August 2002, on behalf of the International Finance Corporation - IFC, by the following consultancy team:

• John Kjellemo, Principal Consultant, Intech, Norway. • ENKHJARGAL Sukhbaatar, Senior Consultant, MIDAS, Mongolia. • SAYANAA Lkhagvasuren, Interpreter and Executive Assistant, Mongolia.

The document is intended to be a baseline document for investors doing business case development or business planning for the Mongolian ICT industry (Information and Communication Technology). Main sources of information and references utilised in this document:

• A total of 38 interviews of Mongolian ICT companies, organisations and public bodies conducted by the consultancy team in July-August 2002.

• [InfoCon]. Data retrieved from various reports from InfoCon Co, Ltd. This is a Mongolian ICT consulting company.

• [CRC]. Information given by The Communications Regulatory Commission -CRC. • [UNDP, 2002]. Data retrieved from a survey by the United Nations Development Programme -UNDP -

in 2002 amongst 60 SW companies. • [ITU-T]. Public statistics from the International Telecommunication Union. • [MIDAS]. Data retrieved from surveys by The Mongolian Information Development Association -

MIDAS. • [MFOS]. Data retrieved from Research on ICT Policy in Mongolia, 2001. Mongolian Foundation for

Open Society. • [National Statistical Office]. Public statistics of Mongolia.

References made in the document are also denoting the applicable year of the information. Monetary values are as the main rule given in USD applying the exchange rate of 1105 MNT/USD. For some aspects, the consultancy team faced a lack of available information and estimates and assumptions were made (unambiguously noted in the text). In other cases there were also significant discrepancies between findings. Therefore, in some cases, ambiguous information sets have been incorporated in the text and should thus be handled as indicative information.

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2 MONGOLIAN ICT-MARKET. The entire Mongolian ICT product portfolio comprises a variety of material products, immaterial rights and services both traded on a lease and an ownership basis and as wholesale and retail products. The domestic ICT customers range highly different groups all the way from telecom service providers leasing telecom infrastructure wholesale products to the communication needs of the nomadic Mongolian population. In addition to the domestic market, the international wholesale market for software development and international transit capacity is of importance and is addressed. The following table describes briefly the customer segmentation model utilised in this document. The table describes further segmentation of the customer groups due to various market behaviour parameters, and the basic market entities are identified for each customer group. Customer group Customer

entity Further

segmentation parameters Residential Individuals, households. Age-bands, income- bands,

employment type, social and geographic group.

Public Institution, individual employees Institution type (area of operation), income-bands, number of employees R

etai

l

Corporate Company, individual employees Business type (area of operation),, income-bands, number of employees

Dom

estic

Telecom operators/ media stations

Company Business type, income-bands, number of employees

SW houses Company SW product areas, development platform, income-bands, number of employees

Inte

rnat

.

Who

lesa

le

Telecom carriers Company Networks and geographical interest, income-bands, number of employees

The following matrix outlines a generic overview of the Mongolian ICT market. It matches the target customers for each product-group, and outlines the typical terms (sale or lease) the products are traded on:

CUSTOMER National market International market Residential Public Corporate Telecom operators/

media stations SW houses Telecom carriers

Software Software development

Specialised business applications. CAM, E-commerce, OSS etc. Usage rights or ownership.

Specialised public applications. Registries, maps, meteorological, aviation etc. Usage rights or ownership.

Subcontracting of source form code development. Ownership of source form code.

Software resale Standard applications. Usage rights.

Standard applications. Usage rights.

Standard applications. Usage rights.

Hardware Computer and peripheral resale

Consumer hardware. Ownership.



Network equipment

LAN/WAN equipment. Ownership.

LAN/WAN equipment. Ownership.

Telecom equipment. Ownership/lease.

IT services Outsourcing, support. Lease.

Outsourcing, support. Lease.

Content Subscription, payment services.

Subscription, payment services.

Media TV/ Radio Subscription, payment services.

Broadcast/ CATV Subscription, payment services.

Broadcast capacity. Lease.

Internet/ datacom

ISP services Access + services. Subscription/lease.

Access + services. Subscription/lease.

Access + services. Subscription/lease.

ASP Application hosting. Lease

Application hosting. Lease

Datacom WAN. Lease. WAN. Lease. Fixed Voice service.

Lease/subscription Voice service. Lease/subscription

Voice service. Lease/subscription

Mobile Voice service. Lease/subscription



PRO

DU

CT

Wholesale telecom

Capacity, housing interconnects, infrastructure. Ownership, lease.

International transit capacity.

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The following ICT product areas are not covered by this report:

• Mobile handset sales. • Fixed telephones sales. • Telecom equipment sales. • Minor end-user equipment sales like faxes etc. • Computer accessories and minor peripherals sales. • Advertisement market in conjunction with and bundled to ICT products like content and media.

2.1 Customer Segments.

2.1.1 Public. This customer segment comprises all public Mongolian bodies and their ICT-spendings. The public system comprises in general the following functions and services:

• Political system. • Main public services.

o Healthcare. o Education. o Social security and welfare. o Housing and community. o Public central heating system. o Police force and forensic institutions. o Judicial. o Recreation, culture, art and sports. o Military service and security. o Public postal system. o Public media. o Aviation authorities. o Taxation and public auditing. o Meteorological and environmental. o Civil work like sewerage, water supply etc, and community services. o Geographical services. o Public registries and statistics like real estate etc. o Fire enforcement. o Public railway transportation. o Public road systems. o Public support activities for industry and agriculture.

• Governmental owned enterprises, i.e. mines. • Governmental owned land and real estate. • Direct ICT-involvement like public telecommunication assets.

The public administrative system of Mongolia is organised as a 4 level hierarchy:

1. Central Government and Ministries. 2. 21 aimags (regional administrative units) and Ulaanbaatar city authorities. 3. 340 Soums. 4. 1658 Baghs.

Key facts public market segment: [National Statistical Office].

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Typical applications • Public databases to support statistics and registries. • Geographical Information Systems- GIS, and digitised maps. • Telemedicine. • E-learning. • Public media broadcasting. • Military and security applications. • Meteorological and environmental applications. • Public information. • WEB based interface to public services (like civil work applications etc.) • Public direct involvement in basic telecommunications. • In addition the public market is a consumer of general ICT services i.e. office support systems to support their internal operations. The market behaviour for this part is to great extent equivalent to the corporate market segment.

Market entities • Public administrations (with budget responsibility). • Public Institutions. • Publicly owned companies. • Employees.

Total market • Central Government and Ministries. • 21 aimags (regional administrative units) and Ulaanbaatar city authorities. • 340 Soums. • 1 658 Baghs. • Health care institutions, military units etc. etc. • 68 thousand employees (public administration)

Total buying power (annual budget)

565 mill USD (total public budget expenditures). 37 thousand USD total CAPEX

Buying power market entities (average monthly income)

Central budget (Central Government and Ministries): Local budget (aimags and Ulaanbaatar city authorities:

425 mill USD 140 mill USD

Current ICT spendings Less than 10 % including telecom infrastructure CAPEX. (Rough estimate).

Further segmentation Employees, Central government: Employees, regional administrations:

41 thousand 27 thousand

Remarks public customer segment:

• The budget structure is divided into a 2-tier system, with the central budget handled by the central Government, and the local budgets handled by the 21 aimags and the Ulaanbaatar city authorities respectively.

• There are currently no dedicated budget posts for ICT CAPEX or OPEX in the public budgets, but

spendings are an integral part of general lump sum posts. Telecom infrastructure investments are as an example part of the Postal Budget Flow Expenses. This is identified as a weakness because traceable and transparent metrics for spendings per sector are very important managerial parameters to help the implementation and measurement of political strategies and goals.

• The public budgets comprise OPEX for the internal ICT platform usage, CAPEX for general public ICT

applications (public databases registries, E-learning etc.) and investments in the state owned telecommunication infrastructure (held by Post and Telecom Authority -PTA and operated by Mongolian Telecom). To our findings a rough estimate shows the total ICT spendings are less than 10 % of the total budget. (CAPEX, OPEX and telecom investments).

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2.1.2 Residential. Key facts Mongolian residential market: [National Statistical Office, 2001].

Typical applications • Social voice and Internet based communication. • Entertainment. • Education. • Home office and telecommuting. • WEB search. • B2C E-commerce. • E - banking.

Market entities • Households • Individuals

Total market Individuals, total: Individuals over 14 years: Households:

2 442 1 643

560

thousand thousand thousand

Total buying power 67 mill USD (Total annual income population). Buying power market entities (average monthly income)

Per household: Per household urban areas: Per household urban areas: Public employees: Private employees: GDP/capita:

100 121 78

50 - 100 100 - 500

424

USD USD USD USD USD USD

Current ICT spendings Approximately 5 % of total spendings. Further segmentation Income band distribution:

Population 15-64 years: Population over 64 years: Further age distribution: Economic active population: Labour force: Urban population: Rural population: Nomadic population: Population, uneducated: Population, secondary school: Population, university degree:

NA 64 4

NA 873 1 115

57 43

30 (of rural) 11 50 8

% % thousand thousand % % % % % %

2.1.3 Corporate. Key facts Mongolian ICT corporate customer segment: [National Statistical Office, 2001, The Company Registration Office]. Typical applications • Computer Aided Manufacturing - CAM.

• Office Support Systems • Operational Support Systems. • Computer Aided Design -CAD. • E-Commerce. • E-banking. • Business communication; voice and electronic. • Intranet. • Marketing (web page etc.) • Etc.

Market entities Company Individual employees

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Total market Number of companies total: Number of public owned companies: Number of private companies, total: of which:

Private enterprises: Corporatives: Partnership companies: Shareholders companies: Limited Liability companies:

24 503 473

24 030

4 148 2 022 3 819 398

13 643

Total buying power Private sector GDP contribution: Gross output industrial sector: EBITDA aggregated: Earnings aggregated:

765 mill USD (73 %) 582 mill USD NA NA

Buying power market segments (GDP contribution business vertical, private sector).

Agriculture, forestry: Industry: Construction: Trade/services: Hotels/catering: Transport/communication: Financial services: Real estate/business services: Education: Health: Other services:

267 69 19

229 14 59 15

9 5 1 2

mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD mill USD

Current ICT spendings NA (Porbably less than 10 % in CAPEX and OPEX) Employment composition private sector (thousand employees, ROUGHLY ESTIMATED)

Agriculture, forestry: Industry: Construction: Trade/services: Hotels/catering: Transport/communication: Financial services: Real estate/business services: Education: Health: Other services: Total

394 52 18 80 15 17

3 6 6 2

14 608

Further segmentation Small and Medium Businesses-SMB: Large enterprises:

NA NA

2.2 Product Segments.

2.2.1 Software.

2.2.1.1 Software Development and Outsourcing. This product group comprises tailor-made development, adaptation or customisation of software applications and subcontracted source form code. A predominantly part of domestically developed software applications are web related, but applications has been developed also i.e. in banking, financial-accounting, insurance, customer care, logistics etc. The penetration of tailor-made SW applications in the public and corporate market segments, are in general low.

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Average day price for Mongolian SW developers is 50 USD. For comparison the price is approx. 150 USD for Chinese developers. Approximately 60 private companies and a total of 600 developers are currently involved in tailor-made and customised SW application development in Mongolia. Of the 600 software developers approximately 40 % are employed by the public sector while 60 % are employed in the private companies. The primary target market segments are the domestic corporate and public segments. However several companies are also involved in International software development outsourcing (subcontracting market). The estimated annual turnover for this product segment is approx.: 3 million USD.

2.2.1.2 Consumer Software. A predominant part of "off the shelf" consumer software are bundled applications like Microsoft Office etc. A survey of 2001 [InfoCon. 2001] showed the following distribution of Software extensively used in organisations: (Percentage of organisations extensively using the application in question).

Application Percentage of companies with extensive use

MS Office. 95 % Internet Explorer. 87 % Netscape. 72 % Eudora. 32 % Outlook express. 69 % Pagemaker. 72 % Groupware. 10 %

Software piracy is considered to be a problem, but has high attention by the appropriate authorities.

2.2.1.3 Corporate Software Applications. The usage of standard and customised applications for corporate users, are in general limited. In most commercial branches the potential of increasing output, customer handling, logistics, product quality etc, is heavily under-exploited. Generic Commercial Services. This segment comprises generic applications for supporting most business operations like: Accounting, invoicing systems, sales support, logistic support, office-support (text editor, spreadsheet, project management etc.), CAD (Computer Aided Design), Management Support systems etc. Most applications currently utilised in companies are standard SW packages. Business Specific Applications. This segment comprises specialised software like CAM (Computer Aided Manufacturing), CRM (Customer Relations Management), OSS (Operational Support Systems) and other applications customised for the business operations in question. Specialised applications are relatively limited in use in the Mongolian market. E-Business Applications. Business to Customer (B2C) E-commerce applications are in use, but so far mainly on experimental basis and for a limited numbers of users. Main applications areas are electronic payment, web based credit card payments and transactions. Business to Business (B2B) E-commerce is very limited in use. Some freight forwarders are commencing to adopt some limited applications.

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2.2.1.4 Public Software Applications. The penetration of typical public software applications is still rather limited in Mongolia. In particular there is a lack of computer based public registries etc. There are some legacy applications like the meteorological systems and others. An updated application for the civil aviation has been established. In addition projects for Geographical Information Systems-GIS, environmental and disaster management primarily to support basic rural economic sectors, like livestock and agriculture, has earlier been pursued but not concluded. The following main ongoing projects are involved in the development of public applications: Mongolian Development Gateway (MDG) MDG is a publicly headed project to encourage a broader view, and the adoption of ICT as a major tool for the development of the Mongolian society and socio-economy. MDG will form an integral part of the worldwide Global Development Gateway initiative. Infodev and the World Bank are the prime supporters of the project. Several local capabilities are involved in the project team; the so called Mongolia Development Team, like InfoCon, MIDAS etc. This project is working closely with the Ministry of Infrastructure and the National ICT Committee -NICT. The mission is to utilize the latest ICT technology to implement a wide-scale E-development program to facilitate the penetration of modern governance, business, technology, management, methodology, international development and cooperation opportunities in all sectors of the country. The current focus areas are E-procurement and E-learning applications. International Development and Research Council of Canada For more details please turn to http://mongolia-gateway.mn/ Internet Based Distance Education Project This project is supported by the International Development and Research Council of Canada – IDRC. The primary goal of the project is to instigate the processes of research, development and experimentation with web-based instruction and pedagogical methods in Mongolia. Main project activities are:

• Help and promote the implementation of E-learning concepts as part of the educational authorities’ vision and strategy.

• Support the establishment of the E-learning technological platform. • Involving relevant institutions in the endeavours. • Evaluate the optimal basic technological platform. • Evaluate and conduct field trials for courseware supporting E-lectures in: English language, gender

education, Information Technology and grade 4 to 10 math classes. Currently the target pupil groups are: English students, gender education students, Information Technology students, grade five to ten pupils, pupils graduating for mathematical and English entrance exams, autodidacts studying the above mentioned fields and school drop-out children. The project also aims to increase the Mongolian language web content. For more info see: http://www.elearning.mn/

2.2.2 Hardware.

2.2.2.1 Computers and Peripherals. According to customs service approx.. 54 000 computers have been imported into Mongolia until the end of 2001. This official number will be utilised in this report. On the other hand National Statistic Office estimated a total of 80 000 computers by year 2000 [ITU-T] whereof 3 000 were in private use. The board estimated a total sales of 10 000 PCs in the year 2000. A survey conducted in 2001 among 101 public and private organisations [InfoCon] showed the following composition of computers in organisations due to computer-power:

Pentium 486 386 Other 53 % 25 % 13 % 7 %

http://mongolia-gateway.mn/

http://www.elearning.mn/

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The same survey showed that 24 % of the organisations claimed that all of their employees needed computers to properly fulfil their job tasks. The residual group claimed on the average between 50 -64 % of the work force needed computers. Retail hardware distributors are selling most international computer brands like Dell, HP-Compaq, Acer Packard and Bell. Well-known computer brands constitute approximately 30 % of the market. In addition there are domestically assembled computers. The computer market had an annual growth rate of approx.. 4 % in 2001. 90 % of the computers are Microsoft based while the rest are Solaris and Linux based. Key information of computers in secondary schools: [InfoCon and The Mongolian University of Science and Technology].

• There are currently 616 public and approx.. 64 private secondary schools, giving a total of approx.. 680 with altogether 506 000 pupils (2001).

• There are registered 1 387 computers in the public schools. (This number is probably higher due to donated computers and the reassembly of older defect computers). An estimate [InfoCon] indicated a total of 1 510 computers in 2001, whereof 740 computers in Ulaanbaatar schools and 770 in Rural schools). The number includes computers down to Intel 386 processor capacity.

• The penetration is 2,4 PCs per secondary school. • Only 174 secondary schools are considered to have sufficient computer equipment. • Annually central budget for IT equipment in secondary schools is approx.. 9 million USD.

The total number of PC's in high schools and universities are more than 3 000 where about 35% of PC's are installed at Science and Technology University. About 70% of total PC's at Science and Technology University has allocated for training and laboratory research activities. [InfoCon, 2001]. A survey [InfoCon, 2001] amongst 500 individuals and 150 organizations and corporates showed:

• Approximately 5 % of households have computers. • Approximately 90 % of organizations and corporates have computers available.

Penetration figures: (Flat estimates, not weighted):

Penetration Computers Total

population Households Economical

active pop Companies

(private and public owned)

54 000 2,2 % 9,6 % 6,2 % 2,2 PCs/ company In addition the total number of faxes is estimated to in excess of 10 500 [ITU-T, 2000].

2.2.2.2 Network Equipment. The available information is limited on number and penetration of LANs and router equipment in the corporate and public customer segments. 80 percent of state owned high schools and universities have implemented LANs.

2.2.3 IT-Services. Several companies are offering operational outsourcing and support for intranet networks and software. The available statistics for these services are highly limited.

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2.2.4 Content. Free WEB Content. MN is the Internet country domain for Mongolia. There are more than 800 hundred public domain web pages hosted under the MN domain in Mongolia both in Mongolian and English language of which 317 (2001) was directly under the top level domain: MN. 10-15 % of the web sites are frequently updated and dynamic. [MIDAS and Datacom]. Approximately 25 % of web hits originated from Mongolia are on Mongolian hosts. [InfoCon, 2001]. 23 % of the web sites are public and organisations, 14 % educational, 61 % corporate and 2 % private. MN web sites are mainly hosted on 35 web servers provided by Mongolian ISPs. 60 % of web servers are Windows 2 000 based, 22 % Linux and 10 % Solaris/Unix based. Commercial WEB and WAP Content. The number of payment service web pages is currently highly limited. The online newspaper: Mongolian NewTimes offers a payment based news service. See http://www.newtimes.mn/. Both cellular providers Skytel and Mobicom offer WAP services on their platforms; the Skytel WAP Service and Yo!WAP accordingly. A few companies are also starting to develop content. The ISPs are not directly involved in the efforts unless the cellular providers are hosting or collocating the content-providers servers or data. Most Mongolian WAP users are currently simply browsing WAP content. The Yo!WAP service supports: E-mail, daily news, TV programs browsing, bank account statements, railway and flight schedules, jokes, contests, horoscopes, messages to Voice-mail accounts, logos and pictures downloads, English-Mongolian dictionary and retrieval of information from Yahoo, Hotmail and other selected websites. 3G content. Skytel has tested 3G (Third Generation Mobile) services within Ulaanbaatar based on the CDMA platform (Carrier Division Multiple Access). Broadband services. Particular broadband oriented portals and services are currently not available in the Mongolian market.

2.2.5 Media. The following media services are currently available in the Mongolian market:

• Analogue TV, terrestrial based broadcasting. • Analogue TV, Coaxial cable distributed - CATV. • Analogue TV, MMDC (Multimedia Digital Communication). • Analogue TV, satellite based broadcasting. • Analogue radio, terrestrial based broadcasting.

The following media services are currently not available in the Mongolian market

• RDS -Radio Data System- support for FM-radio. • Digital Audio Broadcast - DAB. • Digital Video Terrestrial and Satellite Broadcast; DVB-T and DVB-S. • Interactive-digital TV. • Multimedia Home Platform - MHP

http://www.newtimes.mn/

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2.2.5.1 TV/Radio. TVs and radios have the following penetration in Mongolia: [National Statistical Office].

Number Penetration Total

population Households Economical

active pop Television sets 173 100 7 % 31% 20 % Radios (wired

outlets) 121 400 5 % 22 % 14 %

2.2.5.2 Broadcasters and CATV. Approx.. 50 000 households in Ulaanbaatar and other main cities are CATV subscribers. This gives a penetration of 8,9 % due to households.

2.2.6 Internet and Data-communication.

2.2.6.1 ISP Services. Key facts ISP products in the Mongolian market: [ISPs, 2002 and InfoCon, 2001]:

Products launched Products currently not available Product availability • Internet access. • Dial up clients: 56 Kbs PSTN access. • Fixed clients: ADSL, HDSL, WLAN access, radio modem and E1 leased line. • Mail. • Web browsing. • News. • Web-hosting. • Mail hosting (netcentric mail server). • Domain name handling and DNS. • VoN and VoIP (Voice on the Net, Voice over IP). • FoIP. (Fax over Ip). • "Narrowband"-Portals. • Internet café services. • Public Internet Centres.

• Broadband portals and services. • Internet access: Fixed clients: SHDSL, SDSL, leased line exceeding E1 capacity (copper or fibre based).

Customer base 12 500 fixed subscribers approximately 50 000 users. Market growth CAGR: Approx. 10 % annually. (Exponential growth experienced all the period

since 1996). [InfoCon, 2001]. Suppressed demand Waiting lists: None for dial up access. Market penetration subscriptions (Flat estimates, not weighted)

by corporates: Companies:

by population Total population: Urban population: Households: Economical active population:

51 % 0,4 % 4 % 9 % 6 %

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Market penetration users (Flat estimates, not weighted)


by population Total population: Urban population: Households:

Economical active population:

2,0 users per company 2 % 4 % 9 % 6 %

Customer segment distribution (users)

Public and Corporate: Residential: Users based in Ulaanbaatar:

60 % 40 % 95 %

Market situation Highly efficient market, fierce competition, demand suppressed by access prices versus buying power.

Competition High. Product substitutes Internet Cafés, Public Internet centres. (ISPs are anyway wholesalers). Geographical reach At least all aimag centres have Internet access points. Price level (MRC -monthly recurring charge)

Telephone access line: Local: Long distance:

Dial-up access subscription: Unlimited: 300 hrs premium: 50 hr standard:

Dial up prepaid: 50 hr: 25 hr: 5 hr: Leased line:

64 Kbs: 128 Kbs: ADSL (384/128 Kbs shared):

Web hosting: 10 MB: 30 MB: 100 MB: 300 MB

Domain name: Top level: Sublevel:

VoIP (International):

0,38 8,40-12,60 45-65 60-69 25 39-45 21-24 4,5 350-1100 550 -1750 350-750 0-300 5 - 6 8 10-15 49 110 3 28,3 - 48,8

USD/hr USD/hr USD MRC USD MRC USD MRC USD MRC USD MRC USD MRC USD MRC USD MRC USD MRC USD one off USD MRC USD MRC USD MRC USD MRC USD one off USD one off US Cent/Minute

Total turnover market segment

Estimated by order of magnitude to 2 mill. USD.

Key figures Internet market in comparison with international figures: [ITU-T, 2000].

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Mongolia Asia Africa Europe Americas Oceannia WORLD Host total 151 10'554'632 274'742 15'324'765 112'496'115 2'731'944 141'382'198 Hosst per 10 K inhabitant

0.59 29.29 3.44 191.46 1'335.40 885.26 232.70

k Total number of internet users

50.0 157'778.5 6'737.7 144'410.1 182'642.7 8'505.3 500'074.3

Users per 10 K inhabitants

156.31 437.49 84.73 1'804.60 2'169.39 2'771.58 823.24

Estimated PCs K 35 117'093 7'558 140'591 218'245 11'879 495'366 PCs per 100 inhabitants

1.37 3.31 1.06 17.94 26.61 39.91 8.42

A survey [InfoCon, 2001] amongst 101 companies and public organisations showed: 93 % had Internet connections and virtually all the rest had plans to connect in the near future. 97 % had their own E-mail address. 54 % had their own web page. 32 % claimed high cost constrained their Internet usage and 28 % insufficient computer equipment (due to cost). A very high portion of the ISP cost structure is due to Satellite based upstream peering capacity constituting approx.. 52 % of the total cost. The market is also constrained because the "critical mass" of users hasn't been reached. 30 % of the organisations limited their use due to limited Internet usage among customers, business and professional partners The usage pattern registered in the same survey is given beneath: [InfoCon, 2001].

Internet service Regular use Occasional use E-mail 86 12 Information search 48 23 Information database 34 21 Groupware 13 19 E-payment 1 4 Booking and registration 4 21 Subscriptions 1 12 Distance learning 6 10 E-trading 1 12

A survey among 500 Individuals [InfoCon, 2001] showed the following:

• Approx.. 11 % access Internet from home. • Approx.. 40 % access Internet from office or school during business hours. • Approx.. 33 % access Internet from Internet cafés or Internet Public service centres.

Key facts Internet access solutions:

• A predominant part of the access solutions are dial up and radio modem. • From a survey amongst 60 software development companies: 75% of SW companies had dial-up

connection and 13 % had high-speed always-on connection. [UNDP, 2002]. • From a survey amongst 101 public organizations and private companies: 58 % had dial up, 20 % leased

lines and 22 % other connections. [InfoCon, 2001]. • A survey of 50 Internet cafés showed: 74 % operates with dial up connections, 14 % with wireless

connections, 8 % with ADSL connection and 18 % with LAN or leased line connection. [InfoCon, 2001].

• Currently 15 universities and high schools are connected to Internet via high-speed wireless network and all universities and institutions have dial up access to the Internet through Erdemnet (academic IP network). [University of Science and Technology, 2002].

• The Ulaanbaatar Central Metropolitan Library has a fixed 64 Kbs clear channel Internet access, another 10 Libraries (2 in Ulaanbaatar and 8 in aimags) have dial-up Internet access. [InfoCon, 2001].

Key facts Internet cafés: [MFOS, 2002].

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• There are more than 100 Internet cafés and 9 Public Internet Centres. • Main services: Internet access, general computer usage, printing, scanning, games, copying, Internet

telephony (particularly international) and Internet Fax. • Customer segments distribution: Predominantly private. • Market status: High efficient market, fierce competition and commoditised market. Market is

sustainable and will probably grow in the lower income bands due to the socio-economic situation. • Competition: High. • Substitute products: ISP services. • Geographical reach: Most aimag centers and Ulaanbaatar city. • Price level: 45 to 90 US Cent/hour. • Total turnover market segment: NA.

2.2.6.2 ASP Services. Some System Integrators offers ASP services. The market should be growing due to lack of computer power and operational and maintenance skills for the majority of enterprises.

2.2.6.3 WAN-Intranet Services. WAN Services Available:

• IP-VPN provided by ISPs. (Virtual Private Network), • Leased lines. • Bundled firewall.

WAN Services currently not available:

• Narrowband TDM. • n*64 Kbs TDM. • Frame Relay. • ATM (Asynchronous Transfer Mode).

There are currently a very limited number of WAN customers in Mongolia. Our estimate is approximately 50 customers on IP-VPN solutions. Leased circuit revenues in 2000 (also comprising wholesale products) were 873 thousand USD. [ITU-T].

2.2.7 Voice. Key facts voice services: [InfoCon, 2001, ITU-T, 2001, telephone operators, 2002].

Products launched Products currently not available Product availability • Domestic Direct Dialling -DDD- fixed voice. (93 % on digital PCM 64 Kbs based platform, 7 % on analogue switching platform). • International Direct Dialling -IDD- fixed voice. (100 % on digital PCM 64 Kbs based platform). • Payphones. • n*64 Kbs voice access lines. • Some Intelligent Network Services • IN services. • Calling card services. • PABX sales and services.

• ISDN Basic Access. • Voice VPN (Virtual Private Network). • Call centre services. • IN services like tele-voting etc.

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Customer base 132 000 (Mongolian Telecom). (Approx.. 60 % Ulaanbaatar). 12 000 (RailCom)

Volume (Mongolia Telecom figures)

Local: Long distance: International (outbound): International (inbound):

495,2 mill minutes 30,8 mill minutes 4,7 mill minutes 19,6 mill minutes

Market growth 5,4 % (CAGR in terms of subscriptions). Suppressed demand Waiting list

Waiting time Ulaanbaatar: 38 000 (2001) 1-1,5 years

Market share of total voice volume

39 % (VoIP not taken into account)

Market penetration subscriptions (Flat estimates, not weighted)


by population Total population: Households:


5,87 telephones per company. 5,9 % 25,7 % 16,5 %

Market penetration subscriptions (survey)

Ulaanbaatar offices: Ulaanbaatar households:

90 % 80 %

Customer segment distribution (user groups)

NA

Product substitutes Mobile voice. Internet voice (particularly international). Market situation Low efficient market, tariffed monopoly/duopoly DDD, demand suppressed by

waiting lists and buying force limitations. IDD competition. Competition DDD; Low. IDD; Medium. Geographical reach Ulaanbaatar, Darkhan, Erdenet, Zuunmod, Sukhbaatar, Sainshand, Choir, Bulgan,

Hetel, Baganuur, Bagahangai, Harhorin, Zamiin uud and Altanbulag. Price level (MRC -monthly recurring charge)

Traffic charge: Local: Less than 300 km Between 300 and 1 000 Km Long distance: International: (average)

Fixed charge monthly: Connection fee:

0,6 13,9 18,6 20,9 83,6 0,5 - 6 5 - 51

US Cent/minute US Cent/minute US Cent/minute US Cent/minute US Cent/minute USD MRC USD one off.

Total turnover market segment [ITU-T 2000]

Total revenue: Subscription and connection fee: DDD: IDD (net revenue):

20,1 3,1 6,1 10,9

Mill USD Mill USD Mill USD Mill USD

Key figures fixed voice market in comparison with international figures. [ITU-T. 2000]. Mongolia Asia Africa Europe Americas Oceania WORLD K Users -95 77.7 181'688.4 12'311.4 263'161.5 221'147.7 10'942.7 689'251.6 K Users -01 123.0 391'179.0 20'918.3 325'102.8 296'582.4 12'305.1 1'046'087.6 CAGR 95-01 7.9

13.6

9.2

3.6

5.0

2.0

7.2

Main lines per 100 inhabitants -95

3.50

5.46

1.77

33.27

28.70

38.81

12.29

Main lines per 100 inhabitants -01

4.81

10.85

2.62

40.62

35.21

40.02

17.21

CAGR % 5.4 12.1 6.8 3.4 3.5 0.5 5.8

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2.2.8 Mobile. Key facts mobile market: [Mobile companies, 2002].

Products launched Products currently not available Product availability • Cellular voice service digital and analogue. (The analogue service is currently being converted). • WLL voice services. • Short Message Service - SMS. • Voice mail. • WAP (2.5 G).

• Paging. • MMS - Multimedia Messaging Service. • 3 G/UMTS. • Position based services and mobile payment (M-Payment). • Pager network (closed down).

Customer base 216 000 cellular subscribers (post and prepaid). More than 10 000 WLL subscribers.

Volume NA. Market growth Substantial growth -01 to -02 Suppressed demand No waiting lists Market share of total voice volume

61 % (cellular and WLL).

Market penetration subscriptions (Flat estimates, not weighted)


by population Total population: Households:


8,8 telephones per company. 8,8 % 38,6 % 24,8 %

Customer segment distribution (users)

NA

Product substitutes Fixed voice and Internet telephony. Market situation Half efficient market, moving towards a commoditised market, can reach saturation

due to buying force limitations. Competition Two players both WLL and mobile. Coverage Cellular: Ulaanbaatar, Darkhan-Uul, Orkhon-Uul, Selenge, Zamiin-Uud,

Baganuur, Zuun Mod, Bulgan, Uvurkhangai, Zuunkharaa, Sainshand. WLL: Ulaanbaatar and 16 aimag centres (Mobicom). Cellular: 1,9 % geographic and 58 % population. [ITU-T, 2000].

Price level (MRC -monthly recurring charge)

Traffic charge (domestic): Fixed charge monthly: Connection fee: Deposit, domestic calls: Deposit, international calls: Prepaid cards:

12-13 20-22 100 100 300 4-32

US Cent/minute USD MRC USD one off. USD one off. USD one off. USD one off.

Total turnover market segment

Total turnover 1999: Rough estimate 2002:

9,1 >20

mill USD mill USD

Key figures for cellular services in comparison to international figures: [ITU-T, 2001]. Mongolia Asia Africa Europe Americas Oceania WORLDK Users -95 - 23'104.7 646.5 24'081.3 40'244.4 2'618.3 90'695.2 K Users -01 195.0 336'614.4 23'545.2 350'330.4 221'984.3 13'823.0 946'297.4 CAGR 95-01 82.1 56.2 32.9 32.0 47.8 Per 100 Inhabitants 7.62 56.3 2.95 43.77 26.35 44.95 15.57 Percentage of total telephone subscribers

61.3

46.3

53.0

51.9 42.8 52.9 47.5

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2.2.9 Wholesale Telecommunication Products. There is already a vivid and well-established market for wholesale telecommunication products in Mongolia with a broad range of products:

• Access and leased line capacity. • International satellite capacity. • Voice interconnects. [Mobile companies and Mongolian Telecom, 2001]. Between the two mobile

companies Skytel and Mobicom the interconnect volume was 10,9 million traffic minutes. The interconnect price to Mongolian Telecom equals, as the main rule, the retail price both for DDD and IDD. The interconnect charges from fixed to mobile ranges 1,6 to 3,2 US Cent/minute. Interconnect charges mobile to mobile equals in most cases the equivalent fixed telephony tariff.

• International voice connectivity through Mongolian international gateways. • International voice connectivity through international voice clearinghouses bundled with satellite

capacity. • Broadcasters and CATV companies are offering broadcast capacity to TV and radio stations on a

wholesale basis. • International satellite based peering is available. International backbone capacity bundled with upstream

Internet port is thus very expensive in Mongolia. This is due to lack of fibre based interconnects, hence satellite based peering is the alternative of choice. A typical price for a satellite E1 bundled with a US Internet port is 11 000 USD. (The carrier company RailCom however has a satellite based E1 peering arrangement with a Russian backbone provider under test). The International peering hence constitutes a major part of the ISPs cost structure; typically more than 50 %.

• Swapping based trade arrangements are currently not widespread. • There are telehouses established and co-location services offered.

3 MONGOLIAN ICT-INDUSTRY.

3.1 Key Market Players.

3.1.1 Company Overview Matrix. This is a general overview table of ICT market players in Mongolia, indicating their involvement in generic sectors of the ICT value chain:

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ITITITIT SYSTEM INTEGRATOR √√√√ √√√√ √√√√ √√√√ √√√√ √√√√

SOFTWARE HOUSE √√√√ √√√√ √√√√ √√√√ √√√√ √√√√ √√√√

MEDIAMEDIAMEDIAMEDIA TV √√√√

RADIO √√√√ BROADCASTER √√√√

CATV √√√√

CONTENTCONTENTCONTENTCONTENT COMM. BROADBAND CONTENT

COMMERCIAL CONTENT √√√√ √√√√

INTERNETINTERNETINTERNETINTERNET ISP Access (tier 2) √√√√ √√√√ √√√√ √√√√ √√√√ √√√√ √√√√

Backbone (tier 1) √√√√

ASP √√√√ √√√√

TELECOM TELECOM TELECOM TELECOM RESELLER

SERVICE Virtual

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Cellular √√√√ √√√√ √√√√ √√√√

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Long Distance √√√√ √√√√ √√√√ √√√√ √√√√ √√√√ √√√√ International √√√√ √√√√ √√√√

FACILITY Housing √√√√ √√√√

PROVIDER Ducts/ Ditches √√√√

Infrastructure √√√√

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3.1.2 IT-Park Initiative. The IT-Park project is funded by the government and international donors. It's main purpose is to support private IT- companies. Initially the plan and intention is to support 50 SW companies. The IT-Park will have the following main functions:

• Provide housing, computer and network facilities to private companies and individual programmers as part of an incubator programme.

• Provide and maintain IT statistics to the public. • Provide particular IT related information to the authorities and support decision-making and strategy

development. • Research efforts in the IT field with emphasis on economical effects and Human Resource in IT. • Provide training for private companies.

This body is established just recently, and is currently limited by housing, lack of adequate computers and network facilities.

3.1.3 Software Houses. There are currently approx.. 60 dedicated software development companies in Mongolia [UNDP, 2002]. Some of the key players:

• Grape City Mongolia. Joint venture with 50 % Mongolian and 50 % Japanese ownership. Have a total of 40 SW developers. Annual turnover is between 200 -300 000 USD.

• Engineersoft. Mongolian Private Partnership Company. 25 full time and 2-3 part time SW developers. Key areas: Web programming, Database programming, Network installation, Training. Has had several international projects and is subcontracting and cooperating with a German company.

• Interactive. Private Mongolian Partnership Company. 15 employees. Main products: Accountancy package, Supermarket automation package and support. Annual revenues approx.. 130 thousand USD.

Key facts for Mongolian SW companies: [UNDP, 2002].

• High fragmentation of the industry. • Approx.. 90% of the companies have less than 16 full-time employees. • 50 % of the companies are established in year 2000 or later. • Small sized companies and limited specialisation. • Large project in Mongolia are outsourced to Russian and Indian companies • 75 % of SW companies have only dial-up connections • 13 % have high-speed always-on connection • More than 80 % of SW companies have one PC per employee or more. • More than 90 % of SW companies offer either web-design services or develop web-based

applications. • Only 50 % have branded (domain based) e-mail addresses. • Limited international peering capacity constrains international SW-outsourcing and subcontracting. • No company has ISO or CMM certifications. • Very few (10%) have Oracle Partner Network. • 80 % of SW companies have no employee with individual SW certificates. • Only 10 % have no employee fluent in English. • 50 % of the firms have employees taking English classes. • 60 % of the firms have 5 employees or above fluent in Russian. • Approx.. 50 % have concluded at least one international project. • 30 % of the companies have strong relationships with international clients

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• Lack of focus and activities in marketing and international business network building. • Lack of managerial skills.

3.1.4 System Integrators. There are several System Integrator companies offering system integrator services and equipment:

• BSB Service Ltd. Established in 1991. Private company, 100 % Mongolian owned. 120 employees in total (comprises also consumer electronics etc.). Products: SW development, sales computers and peripherals, HW repair and 6 retail stores in electronics.

• Skytel Communication & Computers -Skytel C&C. Established in 2000. Is a joint venture between Korea and Mongolia with a 40 % to 60 % ownership split. This is a holding company involved in several aspects of the Mongolian ICT industry. It's main subsidiary is the cellular provider Skytel Co. Llc. (see chpt for Cellular Providers for details). Skytel C&C's main business is IDD now operating 2 international gateways with a 40 % market-share. It has 18 SW and HW engineers doing SW development and system integration for the corporate market.

• MCS Electronics Co., Ltd. Is a 100 % private owned Mongolian company and has 90 employees. The product spectre ranges: HW sales (approx.. 30 % market share), network and telecom equipment sales, cabling systems, ISP, ASP, consulting, support services and it has a limited software development activity. Approx.. 50 % of the sales are in the corporate market, and 50 % are to telecom companies.

3.1.5 Media. There are currently no pay TV or radio stations in Mongolia. There is one nationwide governmental owned TV station and one public radio station. Both are partly financed by commercial advertisements. There are several TV channels in Mongolia:

• Mongolian National TV (MN TV). Public owned partly financed by commercial advertisements. • UBS TV. Half Public. • Eagle TV. Commercial • Channel 25. Commercial • UBS RGB (only in Darkhan). • Regional TV stations in all aimags.

Radio stations:

• Mongolian National Radio (nationwide coverage). • 14 FM Radios in UB. • All aimag centres have at least one regional FM station.

The following 22 companies are currently radio broadcasting license holders: [CRC, 2002].

• Derven-Uul radio • Badruun Co.Ltd • AE and Jaag Co.Ltd • Noyon Co.Ltd (Bagakhangai) • Bilegsanaa Co.Ltd • Erdenet press and information

department • Non formal distant education

project (Orkhon, Darkhan) • Seruuleg newspaper • RTT centre • Standard M Co.Ltd • Chugu Co. Ltd

• Munkh-Orgil Idesh Linch Co.Ltd • Mongolia Telecom • Exodus International Co.Ltd • NC Association • Information Technology school

of the MUST • Ereen tsav Co.Ltd (Dornod) • Ombo (Arkhangai) • Lha Co.Ltd • Govi wave (Emne-Gobi) • Ergen Selenge (Selenge) • Buyannaliakh (Nalaikh)

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3.1.6 Broadcasters and Cable TV. There are numerous CATV providers offering cable TV product packages in Ulaanbaatar and the other 4 biggest cities: List of companies with CATV licenses: [CRC, 2002].

• Sansar CaTV Co.Ltd • Hiimori CaTV Co.Ltd • Gun nariin Co.Ltd (Hotol) • Nomin suvd (Baganuur) • Lha CaTV (Darkhan) • Mon-Electron Co.Ltd • Nisleg (Flight) trade Co.Ltd • Malchin (Herder) Co.Ltd (Omno-

Gobi) • Radio Network CaTV

• Botu Co.Ltd • Solar Energy (Dorno-gobi) • Communication Trade • Information CaTV • Buyan Nalaikh (Nalaikh) • Chandmani Altai Co.Ltd (Gobi-Altai) • Ereen Tsav (Dornod) • Haan Altai Co.Ltd (Hovd) • Uranbaigali trade (Zavkhan)

Mongolian Telecom is operating the main terrestrial based broadcaster network for TV and radio distribution. The platforms are still governmental assets. The following three companies are granted wireless TV distribution licenses [CRC, 2002]:

• Hiimori CaTV • Naran trade Co.Ltd • Sanburd (Hentii)

The following 10 companies have acquired terrestrial based broadcasting licenses: [CRC, 2002].

AE and JAAG Co.Ltd MBC Co.Ltd Ulaanbaatar TV RTT centre Media Holding Co.Ltd

Monplus Co.Ltd (Darkhan) RGB (Darkhan) Noyon Co.Ltd (Baganuur) Lha Co.Ltd Mongolia Telecom

3.1.7 Content Providers. There are a highly limited number of payment web sites on Mongolian hosts. One of them is the news service, NewTimes in Mongilian language on www.newtimes.mn. There are some web-advertisement services in conjunction with free web pages.

3.1.8 Internet and WAN- Providers. Altogether 11 companies are licensed for commercial Internet Access Provider -ISPs (tier 2) operations in Mongolia: [CRC, 2002].

Datacom Co.Ltd Erdemnet Co.Ltd Bodicomputer Co.Ltd Status Qvo Co.Ltd Micom Co.Ltd

Newcom Co.Ltd Mobicom Corporation Telcable Co.LTd Skytel Co.Ltd MCS electronics Globalnet

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• Magicnet. A private owned company with foreign owners. The first and biggest ISP. 42 employees. Provides various fixed and dial up Internet access solutions, and considers to establish WLAN access. Also provides VPN managed services, firewall and operational outsourcing of network and applications. Is pursuing significant yearly investment programs of 250 000 - 500 000 USD. Number of customers are approx.. 7 500 dial-up clients and 28 fixed clients with a market share of approx.. 60 % in both segments. Reports an ARPU of approx.. 165 USD for dial-up user annually.

• Micom Co. Ltd. Is the ISP subsidiary of Mongolia Telecom, hence a joint venture between the Government of Mongolia and Korean investors. There are currently 24 employees. Main product areas are: Internet access, VoIP, FoIP, international IP roaming (150 countries), web hosting, web design, VPN and LAN. In addition Micom provides IT consulting for corporate intranet solutions and IT based trading. Number of dial-up ISP subscribers is approx.. 2 000 (market share of 16 %). Main operations in Ulaanbaatar, but also several regional branches with services in rural areas. It is the second biggest ISP. Offers dial up, leased line and ADSL access. The company has several investment and product launch plans, but depends upon the mother company business plans and budgets. The company considers to invite donors for particular rural projects. Is planning to establish fixed access PoPs in all aimag centres. Annual revenue (2002) is approx. 620 000 USD with a net profit of approx. 62 000 USD.

• Bodicom. This is the ISP subsidiary of Bodicomputer LLC. Bodicomputer is owned by private Mongolian owners. Bodicom offers dial-up Internet access, ISP services, web design, web-hosting and FoIP.

• O’Net. Is a local ISP for the city of Erdenet. • MCS.COM Co. Ltd. In addition to System Integrator business MCS is also providing ISP services. • Mobicom Co. Ltd. In addition to its mobile operations, Mobicom is also offering ISP services. Current

subscribers are approx. 1 000. • Erdemnet, CSMS. This is primarily the IP-network for academic institutions however Erdemnet has

also commercial customers. It is connected to the public peering point, and has a dedicated international peering arrangement. 16 universities and 70 secondary schools in Ulaanbaatar have fixed connections while other secondary schools are connected by means of dial up access.

• InfoCon. This is primarily a consultancy company, but it also has the ownership and the operational responsibility of the public peering node; the Mongolian Interexchange Point -MIX.

RailCom is running an Internet access test project. The upstream peering is in Russia based on E1 fibre capacity.

3.1.9 Internet Cafés and IP-Telephony. There are currently more than 100 Internet cafés in Ulaanbaatar providing various services like:

• Internet access. • General computer usage. • Printing • Scanning • Games • Copying • Internet Telephony (particularly international).

Key facts for Internet Cafés: [MFOS, 2 000].

• 70 % operate with 3-10 computers, 16% with 11- 20 computers and 14 % with more than 20 computers. • Cost level ranges from 45 to 90 US Cent/hour. • 74 % operates with dial up connections, 14 % with wireless connections, 8 % with ADSL connections

and 18 % with LAN or leased line connections. Public Internet Centres are providing non-commercial Internet access and computer usage to private users. MFOS (Mongolian Foundation for Open Society) has funded 3 Public Internet Centres in aimags and 1 in Ulaanbaatar, and another 6 centres are funded by UNDP (United Nations Development Programme).

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3.1.10 Cellular and WLL Providers. There are granted two licenses for cellular operations in Mongolia [CRC, 2002]:

• Mobicom Corporation. • Skytel Co.Ltd.

In addition there are granted two licenses for WLL based telephony operations (Wireless Local Loop):

• Mobicom Corporation. • Mongolia Telecom. (Has just recently commenced to establish the network).

Mobicom Co. Ltd. Established in 1996. This is a joint venture company between one Mongolian and two Japanese companies. Appr 150 employees. Key product areas: Cellular including WAP (GSM 900/1800 and CDMA), WLL telephony, data-communication services, satellite services and access ISP. Market share is 70-80 % of active cellular users with 168 000 post and prepaid customers. In addition Mobicom has 10 000 WLL voice customers. Skytel Co. Ltd. Established in 1999 as a Korean-Mongolian joint venture. Key product areas: Cellular including WAP (CDMA based and analogue AMPS based). The analogue platform is being phased out. (AMPS-Advanced Mobile Phone Service).

3.1.11 Telecom Service Providers. The following four companies/institutions are licensed for basic telecom services in Mongolia: [CRC, 2002].

• Mongolia Telecom • Mongolian Railway Authorities • Mongolian Civil Aviation Authorities • Incomnet

Mongolia Telecom. Is the former state owned monopoly provider of telecom services in Mongolia. Telecom operations started with the establishment of a telegraph link back in 1898. The company has now undergone profound changes and is currently 49 % privatised. It is still the monopoly licence holder of the remaining monopoly and partly deregulated service areas in the country. The main foreign investor is Korean Telecom. It is currently a pure operating company, and has a lease arrangement for it's network and housing facilities that remains to be governmental assets (Post and Telephone Authority -PTA, is the legal owner). The ownership of these assets are now subject to revision, and a probable change will be to privatise service networks (like PSTN) and housing, while transmission probably will remain governmental owned. The company offers services both in the retail and wholesale market ranging PSTN, IDD, leased lines (both retail and wholesale), ADSL access and also co-location products to other companies (the public peering node is i.e. located in Mongolian Telecom co-location premises). Mongolia Telecom are currently considering two major projects:

• Gigabit Ethernet backbone network, initially in Ulaanbaatar. • Rebuild and the upgrade Governmental Intranet infrastructure.

In addition the following companies are licensed for IN based Inquiry services:

• MBC international Co.Ltd • Mongol News Co.Ltd • Tugsucharhui Co., Ltd.

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3.1.12 Telecom Carriers. RailCom is mainly a telecom carrier company offering transport services in the telecom wholesale market. It also offers limited fixed voice services. The company is a joint venture between The Government and a Russian federation. It has currently a fibre based network of 1 405 Km, and is in the process of negotiating fibre interconnect both with the Russian Trans Telecom company and the Chinese Railway company. They are leasing transmission capacity from Mongolian Telecom facilitating connectivity to Eastern aimags. The product range is so far E1 and sub-E1 oriented. International transit capacity products will be launched when interconnect arrangements are in place. Skytel and Mongolia Telecom are also acting in the carrier market segment.

3.2 Networks and Technology.

3.2.1 Cellular. • The digital mobile networks are based on CDMA (Carrier Division Multiple Access) and GSM- 900

and 1 800 platforms (Global System Mobile). • There is also an analogue AMPS based network. However this platform is about to be converted to

CDMA technology. • WLL based telephony is available. • Mobicom cellular network: Total capacity: 100 000 channels. Number of exchanges: 2 (GSM). 1

(WLL). Number of basestations: approx. 70. • Skytel network: Number of exchanges: 2. Number of base-stations: 37.

3.2.2 PSTN. • The Mongolia Telecom total capacity is 143 857 lines of which 132 200 are in use. • In addition RailCom has a total of 12 000 lines. This PBX network consists of approx. 18 exchanges

from Siemens. • There are totally 342 branch exchanges of which 272 are analogue low-capacity exchanges in rural

locations. • 210 branch exchanges are connected by means of radio links. • There are two domestic transit exchanges. • There are in total 4 international GW exchanges. Mongolia Telecom has a total international capacity of

180 channels. • There are direct link interconnects with approx. 150 countries through satellite networks. • 93 % percent of the PSTN platform is digitised. • 100 percent of the international telephone lines are digitised.

3.2.3 Internet and Data-communication Platforms. • There are no dedicated public WAN networks available like n*64 Kbs TDM, ATM, Frame Relay or

others. Dedicated WAN services are produced as leased line networks. • ISPs produce VPN (Virtual private Network) solutions on their TCP/IP platforms. Mainly network

based IPSec tunnelling. • There are some internal dedicated datacom networks like the satellite based X.25 network for the civil

aviation authorities, the X.25 network for the meteorological authorities, and a LAN based Governmental Intranet infrastructure. There is also a dedicated data-communication platform for International Airline Telecommunications Society - SITA providing airline ticketing and ordering services to travel agencies.

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• Upstream international Internet peering: Currently all international peering is based on Satellite capacity bundled with remote Internet ports. The total international peering capacity is 10.5 Mbps downstream and 5 Mbps upstream. The highest individual capacity is the Micom 3 Mbs link. All international peering is private. RailCom has currently a 2 Mbs (E1) fibre based peering arrangement with Russia under test. [MIDAS, 2002].

• Public peering: 6 ISPs are connected to the Mongolian Internet Exchange Point -MIX. The MIX exchanges approx. 4,5 terrabyte per day. [Infocon, 2002].

• ISP Network platforms: Frame Relay and leased line backbone is currently utilised as transport level for the IP networks. Typical NNI capacity is E1 (Network Node Interface). ATM backbone or back to back arrangements are not utilised. Few or none of the backbone routers are running MPLS (Multi Protocol Label Switching).

• There are 151 registered Internet hosts. [ITU-T, 2001].

3.2.4 Infrastructure and Transmission. Key facts for Infrastructure and Transmission networks in Mongolia: [Telecom Carriers, 2002].

• 2 100 km of analogue radiolink and FDM coaxial systems (Frequency Domain Multiplexing), which is connecting Ulaanbaatar and aimag centres.

• There are more than 900 km of digital radio-relay links. • 40 percent of the radio-relay lines are currently digital. • 30 000 km of air-line, twisted pair cables, connecting aimag centres and soum centres. • RailCom has a 12 pair fibre-optical culvert embedded cable of 1405 Km, spanning the country from the

northern border with Russia to the southern border with China. Main branches of this fibre-cable are: The Salkhit - Erdenet route (169 km) and Bagakhangai -Baganuur route (98 km). RailCom is in the process of negotiation to establish interconnects with Chinese and Russian carriers. (This will eventually be the shortest fibre route between East-Asia and Europe.). The fibre is currently heavily under-utilised and solely equipped with 155 Mbs STM-1 Terminal Multiplexor systems. The cable is currently interconnected to Russia on the E1 level.

• Mongolian Telecom has a limited range of fibre cables within Ulaanbaatar city (Mongolian Telecom asset and not Governmental asset).

• Mobicom has established a 155 Mbs STM-1 within Ulaanbaatar city. • Mobicom is establishing a 34 Mbs (E3) PDH radiolink to the western Aimags. • There are satellite earth stations connecting to the Intelsat and Intersputnik satellites. • VSAT technology has been installed in Zavkhan, Khubsugul, Arkhangai and Uvs aimags. • The Government is establishing a new 1 700 Km long fibre-optical cable to eastern aimags. The project

is estimated with a cost of 14 million USD. This fibre will be operated by Mongolian Telecom. • Skytel has 120 Km of fibre cable rings within Ulaanbaatar city equipped with PDH and SDH

termination equipment. • There are several digitised access network solutions established like ADSL, HDSL, WLL and WLAN.

3.2.5 Broadcasting Networks. • The national radio and TV are distributed on the Intelsat and Intersputnik satellites. • There is a terrestrial based broadcasting network consisting of 376 frequency transformer stations. • Television main broadcast stations: 4 (plus 18 provincial repeaters and many low powered repeaters)

(1999) • The goal is to have 75 % radio broadcasting geographical reach. • CATV networks are based on coaxial cables, fibre optics and wireless MMDC (Multimedia Digital

Communication). UTP are in some cases utilised for distribution cabling (Unshielded Twisted Pair). • Analogue TV format: PAL-non interlaced (Phase Alternation Line).

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3.2.6 Interconnects and Telehouses. • There is currently no dedicated telehouse facilities established; however, Mongolian telecom offers co-

location space. • Interconnects are established in a meshed network topology with direct links between the partners. • All fixed and mobile voice providers are interconnected for voice traffic. • ISPs are interconnected through the public peering point: MIX.

3.3 Business Opportunities. For concrete ICT-investment prospect proposals see http://www.investmongolia.com/technology.htm. In addition the following identified business ideas should be of interest:

• Third mobile license is about to be announced. (Bid based). • SW outsourcing. Partnership with local SW companies. Several capable and highly competitive SW

development companies have an unexploited potential of subcontracting on international SW development projects. Several companies are passively looking for international projects but are lacking efforts, marketing skills and travelling budgets to establish appropriate international business connections. Such concepts will not be capital intensive, and should be of great interest to international SW houses currently intensely looking for cost cuts.

• Exploit the fact that Mongolia has much brain-force at low cost! • RailCom fibre spanning the country with huge potentials of international IRU-based transit capacity

sales and also international capacity for domestic market. (Indefeasible Right of Use). • Establish telecom access infrastructure on CATV coaxial cables. • Electronically typing of hardcopy books and documents. • Telehouses. • WEB and WAP services.

3.4 FDI Model Alternatives. The following ownership model options exist for foreign investors:

• A wholly owned business entity. • A local branch or subsidiary of the foreign enterprise licensed as a Mongolian business entity. • A joint venture established by foreign and Mongolian investments. • The acquisition of a stake in a Mongolian company or an investment in other securities.

4 PUBLIC ENVIRONMENT.

4.1 Political Focus and Strategies. The Government of Mongolia has expressed a major commitment in the ICT industry, and pointed the industry out as one of the main political focus areas. The following major initiatives have been taken:

• Tax waiver schemes for foreign investors. • Establishment of the National ICT Committee headed by the Prime Minister. • Measures to promote privatisation of public telecom assets in line with the Law of Privatisation.

The main political ambitions and strategies are depicted in the strategy document: ICT Vision-2010. This document was officially endorsed by the Parliament in 2000.

http://www.investmongolia.com/technology.htm

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ICT Vision-2010. The main strategies stated in the document are:

• Provide state support to create communication and information infrastructure based on national satellites.

• Provide support to implement all kinds of ICT services. • Provide state support and implement basic and applied research in the area of ICT. • Provide support and implement domestic production of ICT products. • Support localization of ICT companies and technical facilities. • Ensure public usage of software supporting Mongolian language • Develop and adopt information systems for the public administration. • Support and facilitate the expansion of the ICT business in order to make it a highly efficient

economic sector. • Finalize necessary measures to make proper domain names available to all registered companies

within Ulaanbaatar by the year 2002 and for companies in the aimags by the year 2010. • Establish ICT based business information centres in central locations of rural areas. • Implement E-commerce and introduce electronic payment tools such as smart card and electronic

payment for public services. • Implement ICT tools in the social service sector. • Promote and ensure equal availability of ICT applications to citizens regardless of religions,

political opinions, race, age and gender. • Provide opportunities for telecommuting.

In addition there are several other strategy documents for the ICT sector: Government Action Plan. The Action Plan consists of a total of 1 079 activities in several fields of society. The goal is to finalise all actions by the year 2004. Certain activities cover ICT:

• Ulaanbaatar and aimag centre schools shall be connected to Internet. • Research institutes shall be connected to the Erdemnet academic network. • ICT - information systems shall be implemented for the customs service and the railroad system. • Improve information availability to rural areas and establish a geographic information database. • Creation of information networks for the transportation sector. • Improve air navigation and airport networks. • Convert all telecommunications lines to digital platform. • Increase fixed telephone penetration by 5% annually. • VSAT systems shall be installed in the following aimags: Bayankhongor, Gobi-Altai, Khovd, Bayan-

Ulgii, Gobi-sumber, Dornogobi, Dundgobi and Umnugobi. • The Khentii, Sukhbaatar and Dornod aimags shall be connected by fibre optical cable.

General plan to develop the telecommunications sector of Mongolia by the year 2010. This plan consists of 4 main chapters:

• Strengthening the structure of the communications sector. • Creation of an improved legal environment for the telecommunications sector. • Step-by-step conversion to digital technology for existing networks. • Introduce and implement new services such as Internet, mobile telephone and others.

Mid-term strategy to develop telecommunications in Mongolia The main goals stated in this document are:

• To support the general development of the country through technical and technological renovation of the basic telecommunications network.

• Establish integrated digital network. • Encourage local and international investments. • Introduce competition. • Pursue and conduct the privatisation process.

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• Improve outcome of the telecom sector. • Expand access, application and coverage of the telecommunications services.

4.2 ICT Authorities. The following authorities have responsibilities within the ICT sector of Mongolia.

• National ICT Commission -NICT. The NICT committee has representatives from the government, the public-sector, Non Governmental Organisations (NGOs) and the education sector. The committee is headed by the Prime Minister and is an advisory body to the Government.

• Ministry of Infrastructure. The current government has assigned most ICT related issues to the Ministry of Infrastructure as the main governmental authority.

• ICT Officer at the Ministry of Infrastructure. The Ministry of Infrastructure has currently one full-time officer responsible for ICT policy issues. The officer is also responsible for coordinating donor's initiatives in the ICT field.

• The Communications Regulatory Commission -CRC. This is the regulatory body for telecommunication issues in Mongolia. (See chapter "Telecom Legislations and Regulations" for details).

• Post and Telecommunication Authority -PTA. Is currently the legal stakeholder of the governmental owned telecommunication infrastructure, operated by Mongolia Telecom. PTA also has minor operational responsibilities like network planning and network procurement and deployment.

• Regulatory council on implementation of the ICT in education sector. The regulatory council is responsible for the implementation of ICT in the educational sector. It has 7 members.

All ICT related activities are planned to be reorganised and gathered into one dedicated unit; the new ICT Department.

4.3 ICT Associations. The following main associations are involved in ICT related issues in Mongolia:

• Mongolian Information Development Association -MIDAS. Is a Non Governmental Organisation, (NGO) funded by various sponsors, membership fees and other sources of income. It is heavily involved in all aspects of Mongolian ICT activities. This organisation has substituted the former National ICT Council and has members from ICT authorities, education, private companies and donor organisations. It is the main association for coordination between various players in the Mongolian ICT sector.

• MONITA. Is an association with 25 IT company members. It's main objective is to strengthen the relationship between Mongolian and foreign IT companies.

• Mongolian Association of Information and Communication Technology -MAICT. Members: Voluntary individuals, organizations and companies. Main emphasis is to contribute with the development of ICT to improve all aspects of the Mongolian society. The association is involved in measures to increase PC usage and availability, improve communication and networking facilities, increase software usage, focus on data-base usage and processing. Is further involved in data/information collection, processing, storing and dissemination of data. MAICT is also preparing training packages.

4.4 Legal Regime.

4.4.1 Telecom Legislation and Regulations.

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4.4.1.1 Laws. The following laws are directly applicable to telecom operations:

• Telecommunication Law. • Law on Radio Frequency. • Communications Regulatory Body's Charter.

English versions can be retrieved from: http://www.ict.mn/midas. These three laws are updated and in force. Telecommunication Law. The Telecommunications Law was endorsed by the parliament in 2000 amending and revising the previous law of 1995. The purpose of the Telecommunications Law is to conduct the relationships between the government, service providers, private and corporate customers and other organizations. Main articles of the law covers:

• Terminology. • The establishment, the utilization and the protection of telecommunications networks. • Service provision. • Organization of the telecommunication business and ICT authorities. • License obligations for service providers. • Monitoring of the telecommunication business activities. • Rights and responsibilities of service providers and users.

Radio Frequency Law. The Law on Radio Frequency was approved in 1999. The purpose of the law is to regulate the distribution, utilization, protection, proprietorship and ownership of radio frequencies. Main articles cover:

• Terminology. • Governmental rights. • Frequency licensing. • Authorization and monitoring of radio frequency related issues. • Governmental rights concerning Mongolian satellite connections.

4.4.1.2 Regulatory Regime and Bodies. The regulating body for telecommunication activities is: The Communications Regulatory Committee -CRC. CRC shall by intention have an independent position versus the policy-making bodies. The policy making body is: Strategic Planning & Integrated Policy Dept, Ministry of Infrastructure. The main regulatory duties and responsibilities are given beneath: [ITU-T and CRC].

Numbering Plans

Tariff proposal Tariff approval Technical standards

Inter-connection charges

Regulator Operator Regulator Regulator Ministry. (Proposal: Operator)

Frequency allocation

Type approval Monitor service quality

Establishment of License Fees

Arbitration of disputes

Regulator Regulator (Under revision)

Regulator Ministry Regulator (For limited issues).

The current regulatory situation for individual product groups is given beneath: [ITU-T and CRC].

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Local services

Domestic long dist.

Internat. long dist.

xDSL Wireless local loop

Mobile analogue

Mobile digital

Partial competition

Monopoly Full competition

Full competition

Full competition

Monopoly Duopoly

Leased lines

Data Paging Mobile satellite

Fixed satellite

Cable TV ISP

Duopoly Full competition

Full competition

Full competition

Full competition

Full competition

Full competition

4.4.1.3 Licenses. Telecom operations in Mongolia as the main rule, requires granted licence(s). Licensing is in accordance with The Business Licensing Law. There are separate licences for each service area like:

• PSTN. • Transmission. • WLL. • Mobile. • Internet -ISP. • VoIP. • Datacom (WAN). • International gateway. • CATV and terrestrial broadcast. • National radio and television. • Local radio and TV: (Frequency and service licence required).

In addition there are licences for frequency utilisation. Internet cafés do not require a license. Licence fees are in some cases due to individual considerations. Normally the fee must be fixed by a competent authority and be transparent and available on demand. The Business Licensing Law prohibits any additional fees or charges exceeding the fixed license fee except stamp duties. Frequency utilisation licenses are calculated due to the following parameters: Bandwidth and emitted power. License fee for international gateway operations are 50 000 USD. International VoIP operations are subject to a minor license fee, while fixed line IDD is subject to a substantial fee. This is found to be biasing the competition in favour of VoIP. Other licenses i.e. GSM might be subject to bids. Currently an Invitation to Tenderor for the third GSM license is being prepared. License applications shall be in accordance with the following procedure: The application shall be filed and submitted to the Communication Regulatory Commission -CRC. It shall contain a description of accounting, finance and economical figures for the applicant and his technical and professional capabilities. In addition existing business activities shall be described. The applicant is entitled to have a preliminary response within 7 calendar days, and a formal approval or denial within one calendar month after submittal. The applicant must be a registered company of Mongolia. Currently the following number of licenses has been granted:

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Basic telecom services Wireless phone service Wireless Cable TV 4 2 3

Mobile services Telecom equipment production and services

Cable TV

2 15 19 Radio TV broadcasting Assembling com-

munications cable lines 22 10 31

ISPs Inmarsat service Pre-paid phone service 11 1 2

Inquiry service by special dial number

3

4.4.2 IT and Internet Legislation. There is a major lack of legislatory framework for IT and Internet operations concerning all areas like:

• E-commerce. • Intellectual Property Rights (IPRs). • IT-Licensing. • IT piracy. • Internet policing.

There are a limited number of clauses in the Copyright Law and Patent Law related to SW IPRs, however these are generally considered to be too vague and the wording should be more specific.

4.4.3 Economic Crime Enforcement. Economic crime is governed by the following two laws:

• Anti Corruption Law. • Unfair Competition Law.

Our qualitative findings and feedback is that economic crime is under control, and is not considered to be any significant obstacle to the ICT industry or investments.

4.4.4 International Treaties, Disputes and Arbitration. Mongolia has signed the following main treaties and agreements governing: International trade, disputes and arbitration settlements.

• Mongolia is a member of the World Trade Organisation WTO. • Mongolia is a signatory of the Washington Convention on the Settlement of Investment Disputes

between States and Nationals of the other States. • Mongolia is a signatory of the Seoul Convention establishing the MIGA. • Mongolia is a signatory of the New York Convention of 1958 on Recognition and Enforcement of

Foreign Arbitral Awards. • Mongolia is a signatory of Paris Convention on the Protection of Industrial Property. • In addition Mongolia has entered bilateral agreements on investment encouragement and protection

with 30 countries.

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4.4.5 Other Relevant Laws. There are more than 100 laws applicable to business operations in Mongolia. The most important ones are:

1. Accounting Law 2. Auditing Law 3. Bankruptcy Law 4. Business Licensing Law 5. Company Law of Mongolia 6. Customs Tariff Law of Mongolia 7. Economic Entity and Organization’s Income Tax Law 8. General Taxation Law 9. Insurance Law 10. Labour Law 11. Law against Unfair Competition 12. Law on Economic Zones 13. Law on Immovable Property Registration 14. Law on Securities

English versions of the major ones can be retrieved from: http://www.investnet.mn/32laws.htm

4.5 Taxation Schemes. Tax on Corporate Earnings. According to the Foreign Investment Law the Company income tax for foreign-invested companies with foreign investors is exempted from income tax in a period for 5 years. A company with at least 25% foreign stake is classified as foreign-invested. The following 5 years the income tax is 50 percent of the normal rates. (In some areas of investment, particularly supporting rural area and healthcare, the tax waiver scheme is more beneficial). According to a Supreme Court rule this is also subject to Mobile Services operation. However it should be noted that this incentive schemes are subject to revision and phasing out due to requirements from the World Trade Organisation - WTO and The International Monetary Fund -IMF. Companies invested into backbone telecom network are exempted from income tax in a period for 10 years and the following 5 years is 50% of the normal rates. In case of investment into electronic industry tax exemption is 100% in a period of 10 years and 50% off for the following 5 years. The Government has approved to enter a Tax Incentives and Stability Agreement with foreign investors investing at least 2 million USD. The duration of the Agreement may be up to 10 years. If the investment exceeds 10 million USD, the duration of the agreement may be up to 15 years. The ordinary tax level on corporate earnings is 40 % for the portion of earning performance exceeding approx. 90 000 USD (MNT 100 mill), and 15 % on the earning portion beneath that point. The following (main) expenses are tax deductible: Salaries, material expenses, depreciation, semi-processed products, steam, water, energy, fuel, petroleum, spare parts, social and health insurance premiums, external work and services provided by external entities as part of the production process, rental payments and interest of loans. Tax depreciation period for computers is 5 years. Buildings and constructions are 40 years. Other assets, equipment and machinery are 10 years. Value-Added Tax - VAT.

http://www.investnet.mn/32laws.htm

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All trade in Mongolia is subject to VAT (Value Added Tax). The VAT is administrated by the Customs Administration. Companies with gross taxable income of less than approx. 9 000 USD (MNT 10 million) are exempted from VAT. Companies with annual taxable sales exceeding approx. 9 000 USD (MNT10 million) are liable for registration as a value-added taxpayer. The VAT rates applicable for the ICT sector are as follows:

• 15 percent for most goods and services sold domestically. • Export of goods to be consumed outside Mongolia is exempted. • Financial and insurance services, leases and rent of accommodation are not subject to VAT. • Technological equipment and machinery imported as part of the registered capital of legal persons

operating under the Foreign Investment Law are not subject to VAT. The following documents are of interest and can be retrieved from the authorities (English versions available):

• Value-added Tax Regulations. • Guide for VAT Payer Registration. • A Guide for VAT Registered Businesses: Keeping Records and Accounts by Registered VAT Payer.

4.6 Customs System. The import tax is in general 5 % (ad valorem rate). Mongolia is not yet a signatory of international customs instruments such as the Brussels Definition of Value, GATT Valuation Code etc. The valuation process is reported to suffer from lack of uniformity. Technological equipment and machinery imported as part of the registered capital of legal persons operating under the Foreign Investment Law is not subject to import tax. Import tax is, like the VAT, refundable when part of a company value add process. Zero rate customs tariff (products exempted from customs tax) are applicable to several ICT products like:

• Automatic data processing machines and units thereof, magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.

• Parts and accessories of the machines of heading. • Diodes, transistors and similar semi-conductor devices, photosensitive semi-conductor devices,

including photovoltaic cells, whether or not assembled in modules or made up into panels, light emitting diodes, mounted piezo-electric crystals.

• Electronic integrated circuits and micro assemblies. Several of the ICT companies operating in Mongolia reported fast and reliable customs clearance processes when conducted by professional freight forwarders solely with 3 to 5 days international delivery. Several of the companies reported a too rigorous and bureaucratic process while conducting the import process themselves. Customs Law, Customs Tariff Law, Rules on Customs Valuation have been developed in accordance with the rules and principles of the WTO multilateral trade agreements, including Customs Valuation Agreement. Mongolia has committed itself to fully implement WTO Customs Valuation Agreement.

4.7 Investment Promotion Institutions. Several bodies has been established to support foreign investments in Mongolia: Foreign Investment and Foreign Trade Agency - FIFTA.

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FIFTA is the main governmental authority for promoting and facilitating foreign investment. FIFTA is a member of WAITA (World Association of Investment Promotion Agencies). FIFTA is intended to be a one stop shopping facility for supporting foreign investors and entrepreneurs by rendering the following services:

• Geographical and business-wise desks with tailor-made competence, to support business opportunities and business cases for particular business areas.

• Supporting the registration process for the establishment of companies. • Direct liaisons with local offices of tax, labour, social security, work permits, visas, customs, and all

other legal formalities. Web site: www.mol.mn The Mongolian Chamber of Commerce and Industry - MCCI. This is a private organization currently with more than 400 corporate members. MCCI's prime responsibility is to pursue international trade relations. The Chamber offers several services for its member companies like:

• Providing information on Mongolian trade and economic conditions and opportunities. • Organizing trade exhibitions in Mongolia. • Organizing the promotion of Mongolian products in international exhibitions. • Trademarks and patents registration. • Watching for violations of intellectual property rights. • Arbitration of business disputes.

The MCCI is a member of the International Chamber of Commerce and Industry, and of the Asian Trade Promotion Organizations Forum. It has also connections with several foreign Chamber of Commerce organisations. Mongolian Business Development Agency -MBDA. MBDA is an independent, non-profit, non-governmental organization with the main objective of promoting private enterprise development in Mongolia. The MBDA serves as an intermediary body between private sector and the authorities. The MBDA is funded and supported by private agencies and has been participating in the projects in cooperation with the Government of Mongolia. MBDA generates and promotes projects, provides information and advisory services, and offers business, technical, and managerial support. It assists in preparing training packages in support of business development activities. In addition there are several other bodies providing support to foreign investors like: The World Bank, IFC, UNDP, The U.S. Embassy, Mongolian Honorary Consuls in the USA, The U.S.-Mongolia Business Council, The Asian Development Bank (ADB) and others.

4.8 Company Legal Requirements. The Company Law and The Licensing Law is the main legislation conducting all operations and activities of Mongolian business entities.

4.8.1 Ownership Format. There are four main legal ownership formats for companies in Mongolia:

1. Private Company. The company is owned and operated by the owner that is completely liable for external debts.

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2. Private Partnership Company. A partnership company is a separate legal person. One principal shareholder has unlimited liability of external debt. One or more other owner can have a certain liability for external debt constrained to a certain amount.

3. Limited Liability Company - XXK. A limited company is a separate legal person. The company is owned by it's members (the shareholders), and run by the director. Shares are not offered to the public. Shareholders are solely liable for the share value and NOT for external debt.

4. Public Limited Company -XK. Also denoted a joint (or open) stock company. Same as Limited Liability company however shares are offered to the public through The Mongolian Stock Exchange or traded at international stock exchanges.

Any company may establish one or more branches or representative offices by issuing authorization to an executive of such office. Capital contributions for company shares may be made in cash, contributing assets or intellectual property. Owners’ equity in Public Limited Companies shall be at least 9 000 USD (MNT 10 million); and in case of “XXK” (limited-liability company) it shall be at least 900 USD (MNT 1 million).

4.8.2 Companies Registry. Company registration and legalisation, are governed by The Company Law. FIFTA provides complete assistance for the entire duration of the registration process. For further details please turn to FIFTA. Law on Licensing lists types of licenses, permits to be obtained for certain businesses before registration and incorporation. For foreign-invested companies FIFTA issues additional certificate of approval for establishing such companies, which serves as the main document for customs clearance of duty free imports. All Mongolian juridical entity companies are registered in the following registry: Registration Office of the General Department of the State Taxation registry. The registration process for business in Mongolia is considered both transparent and uncomplicated. The registration process is in three main steps.

1. Name registration: Obtaining a Company name certification issued by the State Registration Agency of Mongolia.

2. Obtaining a; Certificate of Approval from Foreign Investment and Foreign Trade Agency (FIFTA). 3. Obtaining a final approval from the General Department of State Taxation.

All company registration applications both for foreign investors and joint ventures investors shall initially be filed to the: Foreign Investment and Foreign Trade Agency (FIFTA). The FIFTA- application shall be constituted by the following:

• Application letter. • Description of company activities for 100 % foreign owned applicants.

After being granted the Certificate of Approval from FIFTA, an application must be filed to the General Department of State Taxation. This application shall be constituted by the following:

• The Certificate of Approval from FIFTA • The company charter (shareholders agreement and statute) signed by all owners and notarised by

Notarius Publicus. • A notarised schedule, legalised by Notarius Publicus, showing the equity share held by each partner.

(Solely applicable to joint venture companies.) • Local bank account numbers both for MNT and foreign currency accounts to be utilised by the

investors. • Company foreign representative's passport copies. • A certificate showing the amount of capital held by the foreign company in its home country. • Local administration approval documents by local administration where the company will be based.

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• Additional documents may be required in certain cases. Failure to register a business entity can result in a substantial fine and confiscation of profits from the business enterprise.

4.8.3 Company Operational Requirements and Accountabilities. Operational requirements and accountabilities for legal companies in Mongolia, are mainly governed by the Company Law. The following main areas are covered:

• Basic organisational requirements. • Authority, duties and formalities of the Shareholders Meeting. • Authority and duties of the Board of Directors. • Authority and duties for the Chairman of the Board of Directors. • Authority and duties of The Executive Body. • Authority and duties of the Executive director. • Personal liabilities of the Members of a company's Board of Directors and collegial executive body, the

executive director, the chief financial officer, the general accountant and other senior executive officers. • Audits of a Company’s Financial and Economic Activities • Duties of the Supervisory Board of a Company. • The Accounting Books and Reports • The Financial Statements and Annual Reports

The accounts of all Mongolian companies shall conform to International Accounting Standards (IAS). The governing board of each limited liability company (public or private) is required to retain an independent auditor or an auditing board with supervisory responsibility for the financial affairs of the company. The annual financial report shall be in accordance with a prescribed form and filed yearly to the Securities Commission, the company registrar, financial authorities and taxation authorities. Audits are to be conducted in accordance with International Standards on Auditing (ISA) Corporate taxpayers pay income taxes monthly in advance in accordance with the payment schedule and submit quarterly returns to the tax authority. Companies with annual taxable sales exceeding 9 000 USD (MNT 10 million) shall be registered as a value-added taxpayer.

5 FINANCIAL ENVIRONMENT.

5.1 Donors and Funding Schemes. The following main donors are and have been involved in ICT programmes and initiatives in Mongolia:

• United Nations Development Programme -UNDP. Is the main non-commercial contributor to ICT development.

• Mongolian Foundation for Open Society -MFOS (Soros foundation). Is a Non Governmental Organisation, funded by the private donor: George Soros. The main initiatives are in Internet projects, support in policy making and ICT introduction in public bodies.

• Asian Development Bank (ADB). The main initiative is focused on the educational sector development, and ICT equipment has been given to this sector. By end 1999, ADB had approved 21 loans, amounting to 428 mill USD.

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• German Technical Assistance (GTZ). One of the ICT projects implemented in the Ministry of Justice and Jurisprudence was the development of the database of laws and regulations.

• International Development Research Center of Canada (IDRC). Has been involved in Internet activities i.e. the Distant Education and ICT Policy Research Project.

• Indian Government. Main involvement in the support of ICT in the education sector. • Government of Korea. Involved in the IT park and telecommunication projects. • World Bank. Is one of the main donors and is involved in several ICT projects such as Mongolian

Development Gateway. • United Nations Economic and Social Commision for Asian Pacific. • Japan International Cooperation Agency - JICA. Telecommunication projects and Sakura project

for the rural school computerization. • The Government of Japan. Involved in telecommunication projects • International Telecommunication Union ITU. • USAID. Involved in the Open Government web site.

The donor's contributions to Mongolia have reached a total of approximately 370 mill USD annually the last two years. There are no available statistics on the percentage of total contributions being spent in ICT, however a rough estimate indicates a percentage less than 10 %.

5.2 Monetary and Finance System. The central bank: The Bank of Mongolia has a high degree of integrity and independence versus the government. The Bank of Mongolia has the main responsibility of implementing the state monetary policy. The parliament has a supervisory role for the monetary policy. Key facts monetary system:

Currency tugruk Currency code MNT Central bank duties • Management of monetary policy.

• Interest rates. • Exchange rates. • Government borrowing. • Bank notes. • Minting. • State foreign currency reserves. • Licensing of commercial banks.

Exchange rates USD 1=MNT 1105 as of May 2002 Fiscal year Calendar year. Broad money (M2) 300 mill USD Loans, volume 104 mill USD Percentage non-performing loans

8,1%

5.3 Stock Exchange. The Mongolian Stock Exchange (MSE) was established in 1991, and was initially a central instrument in the privatisation process. The MSE activities are governed by the Law on Securities. Mongolian company securities cannot be traded on international stock exchanges without also being traded on MSE. The MSE main duties:

• Being a market place for securities. • Registration of companies' shares.

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• Deposits. • Settlements. • Public stock and rate information. • Intermediation in shareholding companies to distribute dividends. • Assistance to stock companies in organizing it's meetings etc.

Key facts MSE: [National Statistics Office, 2001].

Trade turnover 30 mill USD Turnover increase from previous year

240 %

Traded securities Shares: Government bonds: Company bonds:

15,9 million 343,1 thousand 120,4 thousand

Trade volume composition

Shares: Government bonds: Company bonds:

29 mill USD 456 mill USD 1,1 mill USD

MSE Top 75 index 814,02 points MSE Top 75 Index increase

122,27 points (form previous year).

Trading days 255 days

5.4 Banks. All banking operations are subject to the Banking Law intending a fully commercially based banking system. The bank system is a two-tier system with the national bank; the Bank of Mongolia (or Mongol Bank) with the tier-one function, and currently 16 banks providing commercial services. 13 banks are completely commercial while 3 are public and semi-public. The following banking services are available:

• Corporate folio and long-term accounts. • Private accounts also for foreign citizens. • International transfers. • Currency exchange. • Loans. • ATM (Automatic Transfer Machine). • Credit card cash advance. • Traveller's cheques.

A company with foreign investments may open an account due to the following:

• Registration by the Foreign Investment and Foreign Trade Agency (FIFTA). • Authorization from the Ministry of Finance. • A letter requesting the account.

6 ICT-SPECIFIC BUSINESS ENVIRONMENT.

6.1 Synergy Opportunities. Several components, particularly of the telecom industry, but also of the IT industry, are highly capital intensive. A substantial amount of investments for particularly terrestrial telecom infrastructure (CATV, fibre, and copper)

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are related to civil work. Housing is also an important factor both concerning roll out times of networks and cost. The international telecom society has therefore long time ago discovered the opportunities to share infrastructure and civil work costs with other adequate businesses by a horizontal business focus and horizontal integration. The industry worldwide has experienced several successful cooperation projects between telecom carriers and other adequate businesses typically utility providers, railroad companies etc. The following typical synergy effects can be exploited:

• Fibre spinning on high voltage ground wires. Rollout times and cost is reduced to approximately one-third compared to traditional ploughing. A lot of new power-line projects are also offered with pre-fibred ground lines.

• Fibre can also be spun on electrified railroad power lines. • Railroads are usually built with culverts for signalling systems etc. These are highly applicable for

fibre cables. • Terrestrial power line ditches should be equipped with telecom cable ducts. • Water and oil pipeline systems are usually applicable for telecom cables. • Public civil work like water and sewer ditches should be equipped with cable ducts. • Power distribution companies usually have transformer stations that correspond to network node needs

in access networks. The following table outlines general indicators for possible synergies. [power companies, Railway company etc.]

High voltage power lines 220 V line: 1 128 km 110 V line: 1 992 km

Railroad tracks with culverts 1 815 Km Electrified railroads 0 Km Power distribution companies. 14 transformer stations in

Ulaanbaatar and Nalaikh district Oil pipelines: 0 Km Pipelines systems: Clean water pipelines: 325 km

Sewerage pipelines: 110 km (solely Ulaanbaatar)

6.2 Human Resources.

6.2.1 ICT-Education and Research. The main Technological educational institution in Mongolia is The Mongolian University of Science and Technology. This is a public poly-technical institution covering all main technological areas. It is the biggest Mongolian university and has currently approx. 17 000 students out of a total of approx. 90 000 university students (enrolled and graduates). 17 individual universities belong to this organisation. The University of Computer Science and Management and School of Telecommunication are offering dedicated ICT programmes. The university has a strong relationship to and several joint projects with the private sector. The University of Computer Science and Management is offering the following main ICT programmes: SW- engineering, Information systems, Computer hardware engineering and Computer aided manufacturing. This university has it's main campus in Ulaanbaatar and 3 regional branches. The School of Telecommunication is offering the following main ICT programmes: Information technology, Information Networks, Radio Communication, Television Technology, Communication Industry and Telematics. They both support the following educational degrees:

• Bachelor programme: 4 years. • Master programme: additional 1.5 years. • Doctor programme: additional minimum 2 years.

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In addition The Pedagogical University have programmes for ICT teachers. There are also some ICT related courses at The University of Mongolia. Eight private colleges are offering ICT programmes on the college level. The biggest ones are The Altai College and the Tsakhim College with approx. 300 ICT students each. Number of students under ICT education:

• Approximately 1 100 students are studying IT topics at university level. • Approximately 1 000 students are studying telecom topics at university level. • Approximately 900 students are studying ICT topics at college level.

The ICT programmes are regarded as very popular for secondary level graduates attracting highly skilled students. A Cisco Local Academy is established giving courses in TCP/IP networking technology. The lectures are E-learning based. There are currently 60 students attending courses at this institution. Joint Lab is an IT research centre based on the cooperation between a Japanese software house and The Mongolian University of Science and Technology.

6.2.2 Domestic ICT Labour Market. ICT labour market key facts: [InfoCon, The Mongolian University of Science and Technology, mainly 2001].

• The total ICT labour market consists of in excess of 11.500 employees. o 85 % employed by the government. o 15 % employed by the private sector.

• In excess of 600 SW programmers. (2001). o 40 % employed by the government. o 60 % employed by the private sector. o Currently a lack of software programmers. o A substantial amount of SW developers does not hold international certifications.

• Close to 5 000 employees in telecom companies. o 150 -200 employed in cellular operations.

• There are 1 600 telecommunication graduates from local institutions. • There are 1 500 SW graduates from local institutions. • In addition there are many Mongolian ICT graduates from former Soviet Union and Eastern European

institutions. • Local professionals are increasingly being recognised by foreign companies. • Average salary level for software programmers in the private sector are:

o Approx. 250 USD/month + benefits for programmers with 1-2 years experience. o 300 - 400 USD/month + benefits for programmers with more than 2 years experience. o Approximately 500 USD/month + benefits for managers in IT companies. o Benefits are usually: Company flats (approx. 30-40 USD/month), free training and bonus

schemes.

6.2.3 Expatriate Communities. There are in general few expatriates employed in the Mongolian ICT industry, even for international joint venture companies. As a member of the WTO Mongolia has undertaken several commitments particularly in telecommunication, affecting the entry and temporary stay of natural persons with managerial and technical skills which are in short supply in Mongolia. These are professionals within the following categories: Business visitors, intra-corporate transferees and professionals under a service contract.

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6.2.4 Local Consulting Resources. There are several Mongolian consultants companies primarily in the IT and Internet sectors. Two central companies are:

• InfoCon. • JEMR consulting.

6.2.5 General Labour Market. Mongolian labour market key figures: [National Statistics Office, 2001].

Number of people of working age

1 403 thousand

Economically active population

873 thousand

Employment Total: Ulaanbaatar: Male: Female:

832 thousand 221 thousand 424 thousand 408 thousand

Unemployment 40 thousand Unemployment rate 4,6 % Average monthly salaries

50-100 USD per month for public employees and 100 - 500 USD per month for private employees.

Key facts Mongolian labour market:

• There is a shortage of some skilled workers particularly multilingual with English skills. • Mongolian employees are usually considered to be highly motivated, and with a high general capability

level. • Terms and conditions of employment are generally negotiated directly with the local employee. In some

industries terms are negotiated with the adequate labour union. • Several governmental guidelines exist for contracts of employment. • The standard workweek is 40 hours, although longer or shorter hours can be negotiated between the

parties. Typical business hours are 0900-1800 with 1 hours lunch break. • There are no requirements on providing housing for employees, but the practice is encouraged. • Available job positions can be announced in local newspapers (Mongolian and English language.)

6.2.6 Labour Legislation. All employment in Mongolia shall adhere to the Labour Law accompanied by several additional regulations. The Labour Law governs labour relations of state entities and foreign enterprises with Mongolian nationals, as well as purely Mongolian employment contracts. The following main rules apply particularly for Non-Mongolian Employees:

• Foreign investment companies shall primarily employ Mongolian citizens. • Special or high qualifications positions can be held by foreign citizens. • Work permits applications shall be issued to the Agency for Labour Coordination under the Ministry of

Health and Social Welfare one month prior to the commencement of the employment. • Mongolian Employees employed by foreign investment companies: This shall be strictly in accordance

with the regulations. Local employees should primarily be hired through a local Labour Exchange. However, in most cases, local employees are hired by the Mongolian partner directly.

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Main rules for employment:

• All employment shall be conducted by a written and duly signed employment contract stating at least the terms and the scope of the employment.

• The standard working day is set to 8 hours (subject to modification by mutual agreement), and the maximum standard working week is 40 hours.

• Overtime is reimbursed with at least 1.5 times the standard rate of pay. • There is a minimum wage paragraph. Minimum wage is currently set at MNT 30,000 a month (approx.

30 USD). • Employer's deduction from workers pay, other than for income tax and child support, is limited to 20%

of gross monthly wages. • Companies pay 19 or 20 percent of payroll costs to the government for pensions, health coverage, and

other public allowances. • Employees are entitled to eight bank holidays leave annually. • Vacation requirements: Once a year. Basic duration of annual leave is 21 working days. Depending on

the number of years worked and the working condition, additional days are added. Children under the age of 16 may have 30 working days of annual vacation leave.

• Pregnant women may take 45 days of leave before the due date and 56 days after giving birth. She has further the right, but not the obligation to non-paid leave of absence until the child is 2 years old. (If twins, then until they are 3 years old). She is entitled to return to the same position after her maternity leave.

• Employment discrimination on the grounds of social or property status, race, colour, nationality, sex, religion or political views is prohibited.

• Night work and dangerous jobs are particularly addressed. • The employment of women and teenagers are particularly addressed. • Collective employment agreements are particularly addressed. • When a company lays off a worker, the company is required to pay compensation equivalent to the

average wage for a period not less than one month to the worker. • The retirement age for men is 60 and 45-55 for women depending on years of service and number of

children. • The Labours Law governs the resolution of labour disputes.

6.2.7 Labour Unions. Mongolian Labour Union activities are governed by the Trade Union Rights Law. The law states the following main rights and obligations for the unions:

• Negotiate with management and employers, concluding collective or other agreements and provide

control over its implementation. • Represent member's interests in labour dispute settlements. • Negotiate with the government and employers' organisations on issues like: Revision of minimum

wages, measures to reduce unemployment, increase of wages and the revision of pensions and allowances.

• Monitor the adherence to and request the management to comply with applicable labour legislation. • Eventually appeal to court on behalf of members or staff whose major rights have been violated. • Demand to suspend, revise or cease employer's decisions violating labour legislation. • Monitor health, environmental and security issues for employees. • Pursue and facilitate a discussion process amongst members to improve the labour legislatory

framework. • Request the management to provide information necessary to conduct union activities. • Eventually organize demonstrations, meetings and strikes according to the provisions of Mongolian

legislation The Confederation of Mongolian Trade Unions (CMTU) is the national umbrella organisation for several sectoral unions. Altogether the central union represents more than 450 000 employees in its membership unions and affiliates.

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CMTU has a Solidarity Fund from where it renders financial assistance to members i.e. in case of strikes.

CMTU is an affiliate of the International Confederation of Free Trade Unions, and its Asia-Pacific Regional Organization.

6.2.8 Immigration and Work Permits. A valid passport and entry/exit visas are required for foreign citizens visiting less than 30 days. Foreign citizens staying more than 30 days need a valid passport and a residence permit. Foreign citizens being employed needs in addition a work permit.

• Tourist visas. Both entry and exit visas required accordingly. There are several types: Single-Entry visa, multiple entry visa, combined entry and exit visas and a 7 days extension visa. Visas can be issued on arrival point or at several countries of origin.

• Residency Permits. Stays in Mongolia exceeding 30 (+7) days requires a Residence Permit. Such permit can solely be obtained with a letter of invitation from a state administrative organization, political party, public organization, economic entity, Mongolian citizen, or foreign citizen who has resided in Mongolia more than three months. There are two categories of residence permits:

o Temporary Residency Permit. These permits are generally issued within a couple of days and are valid for three months to one year. A temporary residency permit can be renewed an unlimited number of times.

o Short Term Residency Permit. This is non-renewable and valid for a maximum of 90 days.

6.3 Crucial Support Businesses.

6.3.1 Equipment Vendors. Most brands of telecom, TCP/IP and IT equipment manufacturers are represented in Mongolia.

6.3.2 Market Analysis and Statistics. There are private companies present supporting statistical data, performing Gallup polls, and market research. This is in addition to publicly available statistical information from the National Statistics Office. One organisation is i.e.: Market Research Institute - MRI. The Market Research Institute is a private organization. The MRI's primary objective is to provide the Government of Mongolia with market research data. Its office is divided into three different departments: Economic Research, Market Research, and Trade and Business Promotion.

6.3.3 Parcel Delivery Export and Import. Professional and reliable parcel delivery and goods forwarding services are supported in Mongolia. There are several major companies represented like i.e.: DHL Worldwide Express, Mongolia Central Post Office Express Mail Service, Federal Express and United States parcel Service (UPS).

6.3.4 Legal Services. There are both local law firms and branches of international law firms rendering legal assistance to business clients in Mongolia.

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6.3.5 Accounting and Auditing Services. There are several local and international business accounting and auditing companies present in Mongolia.

6.4 Crucial Infrastructure.

6.4.1 Office and Technical Buildings. Appropriate buildings for offices and technical purposes are generally highly available and reasonably priced. Virtually all buildings in Mongolia were constructed based on Soviet models and methods. Existing office and factory space hence usually does not directly meet adequate standards. Power, hot water and telephone outages might occur but services are continuously being improved and are expected to meet appropriate standards soon. Office space rents are about 10-30 USD per square meter per month. Construction sector is not operating at full capacity. Hence construction services are available for refurbishment, adaptation and new construction at reasonable prices. Technical facilities supporting data-floors or ducting, EMC (Electro Magnetic Compatibility) and EMP (Electro Magnetic Pulse) protection are scarcely available and existing premises must usually be upgraded. Housing are usually available on rental or leasing arrangement. The constitution prohibits general foreign ownership of land. However the Foreign Investment Law provides for long-term lease for foreigners. The Land Tenure Law provides tenure rights for up to 60 years, with the possibility of another 40 years prolongation.

6.4.2 Hotels. Ulaanbaatar and several other main cities provide high standard hotels.

7 BASIC BUSINESS ENVIRONMENT.

7.1 Country Characteristics.

7.1.1 History. The unified Mongolian state was formed in 1203 AD, by nomadic tribal groups headed by the famous Genghis Khan. He and the succeeding reigns conquered nearly all of Asia and European Russia. Their armies went as far as Central Europe and Southeast Asia. Genghis Khan's grandson; Kublai Khan, conquered China and established the Yuan dynasty (1279-1368 AD). The Mongolian influence in China and other occupied territories diminished sharply in the period following the Yan era (overthrown in 1368 AD). During the Quin dynasty of China Mongolia was brought under Chinese control, and incorporated as the Chinese province Outer Mongolia (1691-1911). However Outer Mongolia was granted some extent of autonomy. In 1912 Mongolia became an autonomous state under Russian protection (1912-19).

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Mongolia won its independence in 1921 with Soviet backing. A communist regime was installed in 1924 led by the Mongolian Peoples Revolutionary Party (MPRP). During the early 1990s, the ex-communist Mongolian People's Revolutionary Party (MPRP) gradually yielded its monopoly on power. In 1996, the Democratic Union Coalition (DUC) defeated the MPRP in the first democratic national election.

7.1.2 Geography. Main geographical facts:

Location Northern Asia, between China and Russia Geographic coordinates Latitude:

Latitude Between 42 and 52 degrees North. Between 85 and 120 degrees East.

Area Total: Water:

1 565 million sq Km. 0 sq Km.

Area - comparative Slightly smaller than Alaska, three times the size of France. Land boundaries Total:

Border countries: 8 162 Km. China: 4 677 Km. Russia: 3 485 Km.

Coastline 0 Km (landlocked) Maritime claims None (landlocked) Land use (2000.) Arable land:

Permanent crops: Permanent pastures: Forests and woodland: Other:

6 % 0 % 81 % 11 % 2 %

Irrigated land 800 sq Km (1993). Population density 1,56 persons per sq Km Population distribution Urban:

Rural: Ulaanbaatar: Darkhan: Erdenet:

1 397 thousand 1 045 thousand 813 thousand 86 thousand 77 thousand

Geography - note Landlocked, strategic location between China and Russia.

7.1.3 Topography. Key topographical facts: [National Statistics Office].

Terrain Vast semi-desert and desert plains, grassy steppe, mountains in west and southwest, Gobi Desert in south-central.

Average altitude 1 580 m above sea level. Ulaanbaatar 1 351 m above sea level. Elevation extremes Lowest point:

Highest point: Hoh Nuur 518 m Nayramadlin Orgil 4 374 m

7.1.4 Climate. Key climatical facts: [National Statistics Office].

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General

Short and humid summers. Dry and some times extremely cold winters, limited snow. Temperatures sometimes falling to -40 C.

Climate type Desert and continental (large daily and seasonal temperature ranges)

Average temperature July

Northern part: Gobi desert: Ulaanbaatar:

100 C 250 C Temperatures reaching 300 C

Average temperature January

Ulaanbaatar: Gobi desert:

- 21,80 C. - 14,90 C

7.1.5 Environmental. Mongolia is one of the few remaining nations hosting huge areas of untouched nature. As a result of rapid urbanization and industrial growth, Mongolia's environmental situation has deteriorated in several areas. Soft coal burning related to Ulaanbaatar industry has resulted in severely polluted air. Deforestation, overgrazed pastures, and efforts to increase grain and hay production by ploughing up more virgin land have increased soil erosion from wind and rain. Most recently, with the rapid growth of newly privatised herds, overgrazing in selected areas is also a concern. Mongolia is a signatory to the following international environmental treaties: Biodiversity, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea and Ozone Layer Protection.

7.2 Public System.

7.2.1 Political System and Constitution. Political and constitutional system key facts: Country name None conventional short form:

Local short form: Former name:

Mongolia. Mongol Uls. Outer Mongolia.

Government type Constitution: Elections: Election term: Parliament structure: President: Prime Minister: Cabinet:

Democratic republic, parliamentary system. Majority vote. Direct presidential elections. 4 years. Uni-cameral. Relatively limited powers. Formal duties. Nominated by and serves on behalf of the majority political party. Appointed by the parliament in consultation with the president.

Independence 11 July 1921 (from China) National holiday Independence Day/Revolution Day, 11 July (1921) Constitution 12 February 1992 Legislative branch Parliament:

Members of parliament: Last election: Election results (parties):

State Great Hural. 76 seats. 2 July 2000. Mongolian People's Revolutionary Party -MPRP: 72 delegates. Others: 4 delegates.

Executive branch President: Natsagiyn BAGABANDI (since 20 June 1997).

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Prime Minister: Nambaryn ENKHBAYAR (since 26 July 2000) Capital city Ulaanbaatar Administrative divisions

Level 1: Level 2: Level 3: Level 4:

Central government. 21 Aimags and Ulaanbaatar city. 340 Soums. 1658 Baghs.

aimags Arhangay, Bayanhongor, Bayan-Olgiy, Bulgan, Darkhan-Uul, Dornod, Dornogovi, Dundgovi, Dzavhan,, Govi-Altay, Govi-Sumber, Hentiy, Hovd, Hovsgol, Omnogovi, Orkhon, Ovorhangay, Selenge, Suhbaatar, Tov, Uvs.

Suffrage 18 years of age; universal Political parties Citizens' Will Party - CWP

Democratic Party - DP Mongolian People's Revolutionary Party - MPRP Mongolian Democratic New Socialist Party - MDNSP Mongolian Republican Party - MRP

Political pressure groups

None

International organizations

ARF (dialogue partner), AsDB, ASEAN (observer), CCC, EBRD, ESCAP, FAO, G-77, IAEA, IBRD, ICAO, ICFTU, ICRM, IDA, IFAD, IFC, IFRCS, ILO, IMF, IMO, Intelsat, Interpol, IOC, ISO, ITU, NAM, OPCW, UN, UNCTAD, UNESCO, UNIDO, UPU, WHO, WIPO, WMO, WToO, WTrO

Diplomatic connections

Diplomatic relationship with 141 countries.

7.2.2 Legal System. The General Council of Courts is the administrative body handling the judicial branch of the authorities. The council is also implementing the integrity and independence from the Legislative and Executive branch of the authority structure. The legal hierarchy is a four-tier system:

COURT DUTIES AND AUTHORITY Constitutional Court • Official interpretation of the Constitution.

• Handling disputes governed by the Constitution. Supreme Court • Handle legal disputes except from Constitutional issues.

• Handle certain severe criminal cases. • Handle cases of human rights transferred from the

Constitutional Court or the Prosecutor General. • Examine the decisions of lower courts through the appeals

process. Appellate courts • Examine the decisions of District Courts. District courts • Handles all basic criminal or civil right cases and legal

disputes. Is the ordinary entry point in the judicial system. The Constitution also provides for the establishment of specialized courts such as criminal, civil and administrative courts that are not under the supervision of the Supreme Court.

7.2.3 Legislation. The legislation is subject to a rather profound and ongoing transition in this young democracy. The system is a blend of Russian, Chinese, Turkish, and Western systems of law that combines aspects of a parliamentary system with some aspects of a presidential system; constitution is somewhat ambiguous on judicial review of legislative acts and has not accepted compulsory ICJ jurisdiction.

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7.2.4 Healthcare. There are altogether local hospital, dental treatment, pharmacy, laboratory, emergency, eye-care services rendered in Mongolia. However the healthcares are in general not considered to satisfy international standards. In 1994 the State Great Hural adopted the Social Insurance Law. This law form the legislative base of the social insurance system. The social insurance fund is formed on the basis of premiums paid by citizens, employers and organizations. The fund gives pensions and allowances to retired employees, disabled citizens, citizens with reduced labour capacity, citizens suffering from illness and unemployed. Further the fund grants an allowance, pension and payment to family members whose breadwinners died. Employees, who are working subject to a labour contract with entities, organizations, government officers and herders, are automatically covered by insurance. The rest of the citizens are covered by the insurance on a voluntary basis.

7.3 Population.

7.3.1 Demography. Key demographical facts: [National Statistical Office, 2001]. Population: 2 442 thousand. Age structure: 0-14 years:

15-64 years: 65 years and over:

32,7 % 63,7 % 3,6 %

Social groups Rural: Urban: Nomadic:

43 % 57 % 30 % (portion of rural)

Net growth rate: 1,47 % Exile population Approximately 3,4 million in China, mainly in the Inner Mongolia autonomous

region. Approximately 0,5 million in Russia, primarily in Buryatia and Kalmykia.

Birth rate: 20,5 births /1,000 population. Total fertility rate: 2,2 children born/woman. Death rate: 6,6 deaths/1,000 population. Net migration rate 0 migrant(s)/1,000 population. Sex ratio: (male/female)

At birth: Under 15 years: 15-64 years: 65 years and over: Total population:

1,05 male(s)/female 1,03 male(s)/female 1 male(s)/female 0,76 male(s)/female 1 male(s)/female

Infant mortality rate:

29.5 deaths/1,000 live births.

Life expectancy at birth:

Male: Female:

65 years 69 years

Religions: (1998) Tibetan Buddhist. Muslim, Shamanism and Christian.

96 % 4 %

Average persons per household

4.4

Ethnic groups: Mongolian: Kazak: Russian: Chinese: Other:

86 %, 6 % 2 % 2 % 4 %

Languages: Official language: Khalkha Mongol - more than 90 %, minor languages include Kazakh, Chinese and Russian.

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7.3.2 Education. Education key facts: [National Statistical Office, 2001].

Literacy rate: 82,9% Foreign languages: Russian is still the most widely spoken foreign

language but English, German and French, as well as Chinese, Korean and Japanese are becoming more common. Foreign language instruction has increased dramatically and more teachers are being trained to teach foreign languages in school.

Mandatory education: 8-year education Annual number of graduates mandatory education

38,2 thousand students

Annual number of graduates secondary school.

24,1 thousand students

Annual number of graduates University:

14 868 students

Mandatory education: 8-year education Percentage of uneducated people 11,7% of male

11,5% of female Percentage completed primary school.

23,8% of male 23,1% of female

Percentage completed secondary school.


Percentage of incomplete higher education


Percentage completed University: 7,6% of male 7,7% of female

7.3.3 Health. Health situation, key facts: [National Statistical Office, 2001, Private Association for drug control].

Patients hospitalised 498 thousand Registered patients with infectious diseases

52 thousand

Infant mortality rate 3 % HIV/AIDS: Less than 100 (1999). HIV/AIDS - deaths: 1 registered death. Drug abuse 5,3 % Alcohol abuse NA

Drug abuse due to a survey amongst 3 000 people in the age 13 to 27 in Urban areas.

7.3.4 Crime. Crime, key facts: [National Statistical Office, 2001].

Registered number of crimes in 2001 23 670 Percentage of crimes committed by drunkards

22,9 %

Percentage of unemployed criminals 65,2 % Number of criminals sentenced 13 581 Crime rate in 2000 compared to 2001 90,1 %

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7.3.5 Accommodation. Most inhabitants live in flats built during the Soviet influenced period hence in accordance with Soviet building style and standards. Most flats are rented from the state. State rented flats are very modestly priced typically 30 USD/mnth. The nomadic groups live in "ger" settlements that are traditional style tents. There is in general a lack of accommodation due to limited buying power.

7.4 Economy. Agriculture and livestock is traditionally the main components of the economy. There are extensive mineral deposits. During the Soviet influenced period Soviet economic assistance peaked to one-third of GDP. This ceased almost immediately in 1990/91 driving Mongolia into a severe recession. The governments following the initial democratic election in 1996, have been pursuing economic growth and a free-market economic regime. Several measures are taken like: Issuing privatisation programmes, facilitating foreign investment, easing and removing price controls, liberalizing trade and support the restructuring of the banking system and the energy sector. Economic growth picked up in 1997-99 after stalling in 1996 due to natural disasters and decreased revenues from copper and cashmere exports. In August and September 1999, the economy suffered from a temporary Russian ban on exports of fuel and other petroleum products. In June 1999 the international donor community pledged over 300 million USD per year. The current MPRP government, elected in July 2000 must deal with budget deficits and a substantial foreign debt.

7.4.1 Macro Economy. Macro-economy, key indicators. [National Statistical Office, 2001, MIDAS and FIFTA]. GDP: 1 051 mill USD GNI 1 055 mill USD GDP - real growth rate 1,1% GDP - per capita 424,6 USD GDP - composition by sector

Agriculture: Industry: Transportation and communication Construction: Trade: Services:

27,8 % 24,9 % 10,4 % 1,4 % 23,7 % 11,8 %

GDP- contribution ICT sector.

Approx. 6 %

Inflation rate (consumer prices).

4,2 % |May, 2002]

Economic aid - recipient 300 mill USD/ annually Exports. 385 mill USD/ annually Exports - commodities. Copper, livestock, animal products, cashmere, wool, hides, fluorspar, other

nonferrous metals. Exports - partners. China:

USA: Russia: Japan:

60 % 20 % 9 % 2 %

Imports. 555 mill USD Imports - commodities. Machinery and equipment, fuels, food products, industrial consumer goods,

chemicals, building materials, sugar, tea and alcoholic drinks.

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Imports - partners. Russia: China: Japan: South Korea: USA:

33 % 21 % 12 % 10 % 4 %

Fuel Import. Russia: 100 % Foreign Direct Investment -FDI.

Total accumulated: Number of companies with FDI: Investing countries:

481 mill USD. More than 2 000 Approx. 70

FDI composition by country.

China: South Korea: Japan: USA: Russia: Bulgaria:

30 % 12 % 10 % 7 % 6 % 6 %

FDI percentage ICT sector.

6 % (estimated).

7.4.2 Socio Economy. Statistics on socio economic indicators are generally highly limited. A few socio economic facts: [National Statistics Office].

• Population below poverty line: 40 % (2000). • Household expenditure distribution: (1995)

o Lowest 10 % expenditure band: 2,9 % of households. o Highest 10 % expenditure band: 24,5 %

7.4.3 Cost Level. General living expenditures in Mongolia are considerably lower than Europe and the US.

7.4.4 Natural Resources. Main natural resources: Oil, coal, copper, molybdenum, tungsten, phosphates, tin, nickel, zinc, wolfram, fluorspar, gold, silver, iron and phosphate. Mongolia has a substantial production and proven reserve of coal, and has the potential to begin significant petroleum exports in the future.

7.4.5 Business Structure.

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Business structure key facts: [National Statistical Office, 2001 and 2000] Contribution

GDP, sector vertical

Percentage Contribution GDP, sector

vertical

Private share (2000)

Employees

[Thous USD] [%] [%] [Thous] Agriculture, forestry: 272 26 98 402 Industry, total: 56

Mining 123 12 20 Manufacturing 76 7 56 Energy, water 25 2 18

Construction: 21 2 89 20 Trade/services: 257 25 89 90 Hotels/catering: 15 1 92 17 Transport/communication: 123 12 48 35 Financial services: 37 3 42 7 Real estate/business services: 11 1 83 7 Public administration and services: 46 4 0 68 Education: 49 5 11 55 Health: 18 2 6 33 Other services: 4 0 46 4 Other facts:

• Private sector total share of GDP: 73 %. (2000). • Main industries: Construction materials, mining (particularly coal and copper); food and beverages and

processing of animal products.

7.4.6 Public Economy. Public economy key indicators: (Source: National Statistical Office, statistics of 2001). Income sources Taxes, Social security contributions, capital revenue, public business operations Revenues State budget:

Local budget: Total:

384 mill USD 76 mill USD 461 mill USD

Expenditures State budget: Local budget: Total:

425 mill USD 140 mill USD 566 mill USD

Total budget deficit 105 mill USD External debt 760 mill USD (2000)

7.5 Transportation.

7.5.1 Railways. Mongolian railway infrastructure comprises a total of 1 815 Km tracks. The main line is linking Ulaanbaatar with the Russian and Chinese border and connects with Russia's Trans-Siberian trunk line at Ulan Ude. There are several tributary lines from the main line connecting important mining, industrial and military centres. There are international train connections providing both passenger and freight services to both Russia and China. The railway system connects to the Russian Pacific port of Vostochny/Nakhodka and the Chinese port of Tianjin. The Mongolian railroad system struggles with a lot of problems with delay and capacity due to several factors:

• Tracks based on Soviet gauge of 1 520 mm incompatible with Chinese narrow gauge of 1 435 mm.

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• Lack of containers and cranes. • Lack of spare parts due to obsolete equipment. • Vulnerable track topology due to one main line.

There are several ongoing measures to improve railroad conditions in Mongolia. There are over 20 railroad based freight forwarders handling domestic and international freight. There is also the International Freight Forwarding Centre particularly emphasizing international rail-freight services.

7.5.2 Roads. The Mongolian road system comprises a total of 3 387 Km roads whereof 1 563 Km is paved and 1 824 km is unpaved. There are also 45 862 km of rural roads that consist of rough, unimproved, cross-country tracks [2000]. The Mongolian road system is severely underdeveloped and struggling to handle the increasing burden of vehicles for goods and people. Still poor roads are the only means of ground transportation connecting 16 out of Mongolia's 21 aimags. These poor roads can temporarily be impassable due to severe weather conditions. There are sufficient truck, car rental, petroleum and vehicle-maintenance services present. Major measures are taken to improve the road infrastructure however Mongolia is still facing a lot of challenges in this area.

7.5.3 Waterways. Domestic commercial waterways are totally 400 km [1999].

7.5.4 Ports and Harbours. None, but railroad access to Russian and Chinese ports.

7.5.5 Airports. There are totally 34 Airports in Mongolia with the following characteristics [2000]:

• Paved runways exceeding 2 438 m: 7 • Paved runways beneath 914 m: 1 • Airports - with unpaved runways: total: 26.

Mongolian Civil Air Transport - MIAT, the state owned national airline, has a monopoly on domestic scheduled flights in Mongolia. Private charter service is available including a Bell Jet Ranger helicopter. Domestic air service sometimes suffers from lack of regularity. This is anyway the preferred means of transportation to several regional centres. Ulaanbaatar's Buyant Ukha airport is the main international airport. MIAT, Air China, Korean Airlines, and Aeroflot provide international flights from Ulaanbaatar. These carriers provide regularly services to Beijing and Hohot in China, Seoul in Korea, Osaka in Japan, Irkutsk and Moscow in Russia, Almaty in Kazakhstan, and Berlin and Frankfurt in Germany. All airlines flying into Ulaanbaatar maintain limited international airfreight services on their regular passenger flights.

8 SWOT. The following table gives the SWOT-analysis for the Mongolian ICT Sector based on the quantitative and qualitative findings of the consultancy team.

SWOT STRENGTHS WEAKNESSES

• Beneficial taxation incentives on corporate earnings, VAT and Import tax incentives for foreign investors. • Low-cost labor market and beneficial general cost level. • Young population. • High education level general and in ICT professions. • Adequate telecom infrastructure in Ulaanbaatar and other main cities. • Political attitude and commitment in ICT. Adequate telecom sector legal framework. • Adequate legal framework for FDI. • Considered politically and socially stable. • Donors commitment in ICT development. • Commitment to privatization. • Regional economic recovery from Asian crisis. • Proper economic crime enforcement and legal framework. • Crime rate and health conditions under control.

• General limited buying force in most customer segments and low GDP/capita. • High platform cost level in rural areas due to low population density and nomadic lifestyle. • Subsidizing of basic services in rural areas increases price level in urban areas, and constrains growth in areas with economic growth potential. • Nomadic lifestyle precludes the feasibility of fixed ICT infrastructure in rural areas. • Limited implementation of legal framework, well defined sanctions and handling of disputes. • Lack of managerial and sales/marketing skills in local labor market. • Lack of SW developers with international certification. • Lack of legal framework for IT and Internet. • Generally lack of efficient handling of disputes due to

OPPORTUNITIES telecom regulations. • Low penetration ratios in most product segments. • Several identified potential drivers in the economy like oil, tourism and mining. Any increase in buying power will excite increased ICT spendings in the domestic market. • Suppressed market due to waiting lists for basic services. • National venture market not exploited due to constraints and problems with the local Mongolian Stock Exchange. • Consolidation phase in US and European economies might shift investment streams to low cost and non-saturated markets. • Consolidation phase in western economies decreases price level and increases availability of equipment and Human Resources from those territories. • Short economic life times of hardware and equipment in first world economies, implicates very high cost/benefit ratios for 2-3 years old second hand equipment. • Hugh unexploited potentials of ICT usage in most business areas. ICT spendings can potentially be a major driver for GDP growth. • Major development in radio and satellite based technologies might offer new efficient solutions to rural areas. • Proximity to the world's fastest growing economy (China). • Good knowledge of Russian business culture and language. • Unused potential in Human Resource exchange with other countries. • Unused synergy potential for utilizing power lines and coordinating civil work for telecom infrastructure deployments. • Unexploited potential of increasing the awareness of Mongolian capabilities abroad. • Fiber infrastructure heavily under-exploited. Marginal investment will give substantial capacity growth. • Inefficient physical transportation and very low population density in rural areas, should implicate higher focus and spendings on electronic communication. • Technical "Greenfield" situation gives the opportunity to establish a modern platform without a "technical heritage burden". • International partnership for Mongolian SW developing companies can give substantial value add to market access

• High transportation costs due to distance and underdeveloped infrastructure. • Highly underdeveloped and under-equipped ICT facilities particularly in rural areas. • Telecom equipment prices increased by climatic conditions. • Ordinary taxation level on corporate earnings limits reinvestment and profitability. • Two level taxation on earnings boosts company fragmentation. • Lack of implementation of VAT deductions on incoming goods and services. I• Interconnect charges (voice) equal to retail price. • Language and font standards. • Unclear taxation exempt situation for ICT areas others than basic telecom services. • Few expatriates employed in Mongolian ICT companies even for companies with foreign partners. • Limited exchange of Mongolian professionals with international companies. • No dedicated public budget posts on public ICT spendings. • Weak implementation of copyright legislation to protect SW IPRs. • High interest rates on domestic loans. • Inefficient and unclear customs clearance procedures for non professionals (however professional freight forwarders handles export and import well). • Lack of implementation and enforcement of Law Against Unfair Competition. No particular body is granted the responsibility. • Few formal backup and resilience agreements for ISP connectivity and international peering. • High and even increasing tariffs on Internet access particularly fixed access constrains SW development industry. • Highly insufficient satellite based international peering capacity. • Substantial difference between ICT usage and availability between rural and urban population. • Limited market research material. • Limited public statistics on basic market data.

and skills with limited financial requirements. THREATS • Seems to be an unexploited opportunity to provide telecom access services on CATV infrastructure. • ICT represents an opportunity to offer services in rural areas despite distance and lack of physical infrastructure thus limiting the gap between rural and urban population. • ICT represents more cost efficient solutions for public services in particularly rural areas i.e. distance learning and telemedicine applications • Underlying turnover and revenues increases both in IT and telecom both in Europe and US. The western world ICT crisis is financial due to overinvestment, licensing etc, overoptimistic 3 G scenarios etc. The ICT business itself is sound and the markets are increasing and forecasted to increase!

• Debt crisis in European and US companies constrains industrial investments from those capital markets. • Overinvestment, 3 G licenses, monkey business to boost venture markets, overoptimistic 3G and infrastructure scenarios. • International investment climate in ICT sector. • Migration and emigration of highly qualified ICT professionals due to income gap. • If no proper measures taken, ICT might increase the social gap between the rural and urban population.

9 CONCEPTUAL REFERENCE MODEL.

ExistinCompan

Other newcommers

MARKET

NewCo

MONGOLIAN ICT INDUSTRY

ICT-SPECIFIC BUSIN

BASIC BUSINESS ENVIRONMENT

PUBLIC

RESIDENTIAL PUBLIC CORPO

Political strategies. Authorities and assoc. Legal model Taxation Customs Company legal req. Support bodies

SW develop. System integr.

Media Content

Internet/Datacom Voice

MW

Country characteristics Population

Human resources Transportation Public system

Business Economy

ICT Human resourCrucial support bu

g ies

INVESTORS

ESS ENVIRONMENT

FINANCE

RATE

Financial IndustrialLocal Finance

Monetary Funding Stock exchange

obile holesale

Structure

ces sinesses

Crucial infrastructure Synergy opportunities

10 ANNEXES.

ANNEX 1. List of Mongolian ICT Companies. Company name: Agt-Uul service Director’s name: B.Jamsran Phone: 976-99180253 Company name: Beam Service Director’s name: Bat-Erdene Phone: 976-11-683410 E-mail: [email protected] Address: Songino Hairkhan district, 13-r horoo Company name: BiSoft Co.,Ltd Director’s name: Phone: 976-11- 452154 E-mail: [email protected] Address: National Association of Agricultural cooperative building , 214 Company name: Bit Co.,Ltd Director’s name: Phone: 976-11- 324369, 976-99114160 E-mail: Address: Baga toiruu 5, left side of the UB hotel Company name: BizMongolia Director’s name: Sunjidmaa Phone: 976- 99177912 E-mail: [email protected] Address: Company name: BLG – SOFTWARE Director’s name: Phone: 976-11-325309 E-mail: [email protected] Address: Baga toiruu 18-37 Company name: Bodi Computer Director’s name: S.Natsagdorj Phone: 976-11-311971 E-mail: Address: Sukhbaatar square, 3-4 floor Cultural plaza Company name: BSB Service Co.,Ltd Director’s name: A.Sukhdorj Phone: 976-11- 326418 E-mail: [email protected] Address: Teeverchdiin gudamj-5, UB-28

Company name: CIT Director’s name: Erdenechimeg Phone: 976-11-321941 E-mail: Address: Mongolian Youth Association building Company name: Comsoft Co.,Ltd Director’s name: Phone: 976-11-325744, 976- 99196402 E-mail: [email protected] Address: Chingeltei district, baga toiruu 13-34 (in front UB bank) Company name: Cyber market Director’s name: Phone: 976-99185338 E-mail: [email protected] Address: Cyber market in front of the NUM. Company name: Datacom Director’s name: D.Enkhbat Phone: 976-11-315544 E-mail: Address: 4th floor, MONTEL building Company name: Deico Co.,Ltd Director’s name: Phone: 976-11-311781 E-mail: [email protected] Address: Company name: Dotmaker Director’s name: Amarlkhagva Phone: 325986, 99195901 E-mail: Address: IT park building, 1st floor Company name: ECS Director’s name: Munkhbaatar Phone: 976-352214, 976-99192916 E-mail: [email protected] Address: NIC company building

mailto:[email protected]

Company name: ECM Director’s name: G.Zorig Phone: E-mail: Address: Hudaldaanii gudamj-9, 2-3f(urt tsagaan) Company name: EMongol Co.,Ltd Director’s name: Munkhbat Phone: 976- 99264331 E-mail: [email protected] Address: IT park building, Ulaanbaatar Company name: Engiinersoft Director’s name: J.Batbold Phone: 976-11-310232 E-mail: Address: "Tahi-Co” building, #207 Company name: GENEX Co.,Ltd Director’s name: Phone: 976-11-329290 E-mail: Address: Seoul Street Company name: GrapeCity Director’s name: A. Sukhdorj Phone: 976-11-328720 E-mail: [email protected] Address: UB-28 Teeverchdiin gudamj 5, BSB Service Company name: I service Director’s name: L.Baatarkhuu Phone: 976-11-310735 E-mail: Address: IT park building, 1st floor Company name: Ikh buren Director’s name: Phone: 976-11-328173 E-mail: [email protected] Address: Mongolian Trade Union building, 2nd floor, #221 Company name: Incomnet Co.,Ltd Director’s name: Ganbaatar Phone: 976-11-810108 E-mail: [email protected], [email protected] Address: Bayanzurkh district, 5-r khoroo, Peace ave., 51st post office Company name: Info Systems Co.,Ltd Director’s name: Zagdragchaa Phone: 976-11-326399, 976-99196549 E-mail: [email protected] Address: Tahi Co.

Company name: Infocon Director’s name: B.Narantsetseg Phone: 976-11-328469 E-mail: [email protected] Address: International Trade Center ("MonroImpex"), #504 Company name: Intermedee Director’s name: Altantuya Phone: 976-11-321371 E-mail: Address: IT park building, 1st floor, #106 Company name: Interactive Director’s name: R.Ganbold Phone: 976-11-350445 E-mail: [email protected] Address: Ih toiruu-29/39, UB-46, POB-440 Company name: Internet@Copy Center Director’s name: Phone: 976-11-323236 E-mail: Address: In front of the NUM, "Canyon” center Company name: IT PARK Director’s name: Batjargal Phone: 976-99110699 E-mail: [email protected] Address: IT park building Company name: ISC Director’s name: Uyanga Phone: 976-11-318431, 976-99112129 E-mail: [email protected] Address: Civil defense office building Company name: JEMR Director’s name: R.Oyun Phone: 976-11-323230 E-mail: [email protected] Address: Institute of Meteorology Company name: Msoft Director’s name: Bas-Bish Phone: 976-99190644 E-mail: Address: Company name: Macrosoft Co.,Ltd Director’s name: Phone: 976-99111279 E-mail: [email protected] Address: Central aimag Company name: Magicnet Director’s name: Jonh Savageau Phone: 976-11-315544 E-mail: [email protected] Address: IT park building, 1st floor


Company name: MCS Electronics Co.,Ltd Director’s name: Bayar Phone: E-mail: [email protected] Address: Natsagdorj Street, MCS Plaza 3-rd floor Company name: MCS International Co.,Ltd Director’s name: J.Odjargal Phone: 976-11-323705, 976-99113263 E-mail: [email protected] Address: Natsagdorj Street, MCS Plaza2-nd floor Company name: Micom Director’s name: Narantungalag Phone: 976-11-318360 E-mail: Address: Central post building Company name: MNSoft group Director’s name: Bat-Ulzii Phone: 976-99179184 E-mail: Address: MUIS-iin 3-r bair Company name: Mobicom corporation Director’s name: Batmend Phone: 976-11-318118, 976-99111999 E-mail: [email protected] Address: Peace ave. 3/1. P.O.B 20A UB 210620 Mobicom building Company name: Mongolia Telecom Director’s name: Shaaluu Phone: 976-11-320597, 326699 E-mail: [email protected] Address: Sukhbaatar squire1, UB 210611 POB 1166 Mongolia Company name: Morinii shandas Director’s name: Zoriglon Phone: 976-11-323934 E-mail: [email protected] Address: IT park building, 2nd floor, #203 Company name: MSS group Director’s name: Soronzonbold Phone: 99170005 E-mail: [email protected] Address: Computer Sceince and Management School Company name: National ICT Committee Director’s name: Gerelt-Od Phone: 976-11-323403 E-mail: Address: Teriin Ordon

Company name: National Statistical Office, Data processing Department Director’s name: Oyunbayar Phone: 976-11-329940 E-mail: [email protected] Address: Company name: NetCard Director’s name: R.Oyungerel Phone: 976-11-315544 E-mail: Address: IT park building, 1st floor Company name: NIC Director’s name: Phone: 976-11-327001 E-mail: [email protected] Address: str. Prime Minister Amar-8 Company name: Nomin Holding Director’s name: Phone: 976-11-313232 E-mail: [email protected], [email protected] Address: Peace ave. State Supermarket 7th floor Company name: Ordinat Director’s name: Phone: 99112171, 318472 E-mail: [email protected] Address: Left side of “Gerel” center, building 54, room #23 Company name: Orgiltech Director’s name: G.Tsogtoo Phone: 976-11-322837, 976-11-323748 E-mail: Address: Public property building No 5 room 211 Company name: PowerSoft Co.,Ltd Director’s name: Temuuder Phone: 976-99196468 E-mail: [email protected] Address: NUM 1st campus Company name: Rado Director’s name: Ganchimeg Phone: 976-11-344724, 976-99115593 E-mail: [email protected] Address: Khan-Uul district, Chingis ave. Nehmeliin-4 Company name: CISCO academy Director’s name: Nanjidjamts Phone: 976-99170067 E-mail: [email protected] Address: Computer Science and Management School

Company name: Sain Computer Co.,Ltd Director’s name: Phone: 976-99191490, 976-11-320513 E-mail: [email protected] Address: Sukhbaatar squire 4, Sanktpeterburg center33-34 Company name: Sigma Director’s name: Ya. Batdelger Phone: 976-11-353554, 976-96153426 E-mail: Address: Sigma shop, Bagatoiruu, next to the Oron zai bar Company name: Siticom Director’s name: Tsolmon Phone: 976-11-325597, 976-11-325560 E-mail: [email protected] Address: Chingeltei duureg, 6-r khoroo, 5-r bair Company name: Skytel Director’s name: Erdenebat Phone: 976-11-318488, fax 976-11-318487 E-mail: [email protected] Address: Chinggis's avenue-13. P.O.B 811. Ulaanbaatar Mongolia Company name: Sky C&C Co.,Ltd Director’s name: Buyanjargal Phone: 976-11-315670, 976-11-320061, 976-91101065 E-mail: Address: 2nd floor of the Skytel plaza Company name: Softnet Director’s name: Erdenejargal Phone: 976-11-328325 E-mail: [email protected] Address: 1st 40000, 60th house, Sukhbaatar district Company name: SoftTech Director’s name: Tuul Phone: 976-99172599 E-mail: Address: Chingeltei district, 6th horoo, 5th building Company name: Sorgog Director’s name: Phone: 976-95151095, 976-99112821, 976-11-316353 E-mail: Address: 50 myangatiin, 30-r bair Company name: Speaker Group Director’s name: Jargal Phone: 976-11-326547, 976-99121796 E-mail: [email protected] Address: 1st floor of the NIC building

Company name: Tsahim systems Director’s name: Phone: 976-99278498, 976-99172197, 976-99196142 E-mail: [email protected] Address: Peace ave. 24, 50 myangat (11-r surguuliin zuun tald) Company name: TTK Director’s name: Phone: 976-11-323125 E-mail: [email protected] Address: Public property building# 5, 2nd floor, # 243 Company name: TTT Director’s name: Phone: 976-11-326331, 976-99112878 E-mail: [email protected] Address: National center for Children, 4th floor, # 405 Company name: Railcom Director’s name: Zorigtbaatar Phone: 976-942600, 976-99117206 E-mail: zorigt.mrc.mtz.mn Address: Zamchin street-1. Bayangol district


ANNEX 2. List of Documents Used for the Profile.

1. EngineerSoft Co., Ltd. 2. Bodicomputer LLC. 3. JEMR Consulting Co., Ltd. 4. Infocon Co., Ltd. 5. Survey Report on “Cross Border E-Services” project of UNDP 6. Investment Guide for Mongolia 7. Medium-Term Growth Policies for Poverty Reduction – Infrastructure sector Development 8. Research on ICT policy in Mongolia, Mongolian Foundation for Open Society 9. ICT infrastructure situation in Mongolia (Mongolian Foundation for Open Society) 10. Monthly bulletin of Statistics, June, 2002, National Statistical Office of Mongolia 11. 2001 Mongolian Statistical Yearbook 12. Project and Technical Assistance Proposals 2002-2004, Government of Mongolia 13. Interactive Co., Ltd. 14. Final report of the 12th consultative meeting and seminar/workshop on information and communications

technology and knowledge management, September 19th-23rd, 2000, Mongolia 15. www.mongolia-gateway.mn 16. MIDAS (Mongolian Information Development Association) 17. Year book of Statistics, Telecommunication Services 1991-2000, ITU 18. 2001 Statistics on Ifrastructure, Ministry of Infrastructure 19. 2002 World Telecommunication Development Report, ITU 20. Infrastructure Objectives comprised in the Government Action Plan 2000-2004, Minstry of Infrastructure 21. 2001 Annual Report, Mongolian Foundation for Open Society 22. 2001 Annual Report of Mongolia Telecom 23. MCS Holding, Co., Ltd. 24. The Public Investment Program and Development Project Proposals 2002-2005, Medium-Term Growth

Policies for Poverty Reduction, Government of Mongolia, Mongolia Consultative Group Meeting, 8th-10th July, 2002, Mongolia

25. Report on E-readiness assessment of Mongolia, Infocon Co., Ltd. 26. Mongolia Investors’ Conference on Oil/Gas and Mining, Ulaanbaatar, Mongolia, June 4th-5th, 1997, co-

sponsored by the World Bank and the Government of Mongolia 27. Investment Project brief profile “Mongolia:Investors’ Forum – 2002” 28. Ministry of Industry and Trade (brochure) 29. ICT Sector Development strategy, Mongolia Consultative Group Meeting, 8th-10th, 2002, Ulaanbaatar,

Mongolia 30. ICT Policy of Mongolia 31. Bulletin of the Mongolian University of Science and Technology 32. 2000 Main Statistical Survey of Mongolia, The National Statistical Department of Mongolia 33. “2001 Employment of the Population”, The National Statistical Department, Ulaanbaatar, 2002 34. 2001 Foreign Trade Statistics, Mongolian Customs General Administration, Ulaanbaatar, Mongolia 35. Economic Development Report for 2001, Ministry of Finance and Economy of Mongolia, Ulaanbaatar,

Mongolia

http://www.mongolia-gateway.mn/

ANNEX 2. List of Officials and Executives Interviewed for the Profile.

1. Ariunaa L., Information Program Director, Mongolian Foundation for Open Society (SOROS Foundation) 2. Batbold, General Director, EngineerSoft Co., Ltd. 3. Bat-Erdene J., ITA Senior Officer, Ministry of Infrastructure 4. Batjargal A., Director. IT Park 5. Batkhishig L., Senior Expert of technical development office, TELECOMONGOLIA 6. Batmend R., General Director, Mobicom Corporation 7. Battogtokh, Officer, FIFTA 8. Bayar V., General Director, MCS Electronics Co., Ltd. 9. Bayarmaa B., Director, International Project Management Department, MCS Holding Co., Ltd. 10. Bilgee N., Expert, Post and Telecommunications Authority 11. Boldbaatar L., Director, Eden Tours Co., Ltd. 12. Bolormaa, Head of the Technical Development Office, Mongolia Telecom 13. Buyanjargal Y., President, Sky C&C 14. Davaatseren B., Deputy Director General, Post and Telecommunication Authority of Mongolia 15. Dorjnamjim L., Country Officer, International Finance Corporation 16. Enkhbaatar, Information and Monitoring Department, Ministry of Industry and Trade 17. Enkhmend, Chairman, Communication Regulatory Committee 18. Erdenebaatar A., Director, Computer Science and Management School, Mongolian University of Science and

Technology 19. Erdenebat D., President, Skytel 20. Ganbaatar S., CEO, INCOMNET LLC. 21. Ganbold R., General Director, Interactive Co., Ltd. 22. John R. Savageau, CEO, Magicnet Co., Ltd. 23. Khudulmur S., Director, The Information and Computer Center, The National Agency for Meteorology,

Hydrology and Environment Monitoring 24. Margreet van Doodewaard, ICT for Development Advisor, UNDP 25. Michael D. Richmond, Commercial Assistant, Embassy of the United States of America to Mongolia 26. Narantsetseg B., General Director, InfoCon Co., Ltd. 27. Narantungalag Ch., Executive Director, MiCom 28. Narmandakh T., Officer, Ministry of Infrastructure 29. Natsagdorj S., Director, Bodicomputer Co., Ltd. 30. Odgerel U., Director, Information and Monitoring Department, Ministry of Infrastructure 31. Otgonbat S., Vice Chairman, Foreign Investment and Foreign Trade Agency, Government of Mongolia 32. Oyun, Director, JEMR Co., Ltd. 33. Robert F. Young, President, Asia Pacific, Lockheed Martin Global, Inc. 34. Sereeter J., Director General, Policy and Coordination Department of Roads, Transport, Information,

Communications and Tourism, Ministry of Infrastructure 35. Sukhdorj A., General Director, BSB Service Ltd. 36. Thomas J. Dwyer, Vice President, Business Development, China and Mongolia Region, Lockhead Martin

Global, Inc. 37. Tselmeg A., Director for Technology, MCS Electronics Co., Ltd. 38. Tserenjav L., Trade policy and economic cooperation department, Ministry of Industry and Trade 39. Tsogtsanaa J., Acting Director, Information Technology Division, The Bank of Mongolia 40. Tsolmon B., Director, SITICOM Co., Ltd. 41. Tsuyishi Fukao, Project Coordinator, UNDP 42. Yondon Ts., State Secretary, Ministry of Industry and Trade 43. Zorig G., Director, ECM Software Development, Internet Technology company 44. Zorigtbaatar B., Director, Commercial Center, Railcom

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