S. Javkhlanbaatar, Foreign Investment Regulations and Registration Department Head, Ministry of Economic Development of Mongolia

1. FOREIGN DIRECT INVESTMENT
REGULATIONS IN MONGOLIA
Javkhlanbaatar Sereeter
Director, Foreign Investment Regulation and Registration Department
Ulaanbaatar, 2013-04-19
MINISTRY OF ECONOMIC DEVELOPMENT

2. Content
What Are the Main Regulations of FDI?
How Does FDI Perform?
How Does Mongolia Protect Foreign Investment?

3. Foreign Investment Legal Framework
International
Agreements
Bilateral Investment
Protection Agreements
National Laws on
Foreign Investment
1. Washington Convention on
Investment Dispute Settlement
2. Seoul Convention on Investment
Insurance
3. WTO Agreements (including TRIMs)
Most-Favoured Nation Treatment

4. Foreign Investment Legal Framework
International
Agreements
National Laws on
Foreign Investment
• Mongolia has a Bilateral Investment
Protection Agreement with 43
countries.
Bilateral Investment
Protection Agreements

5. Foreign Investment Legal Framework
National Laws on
Foreign Investment
International
Agreements
Bilateral Investment
Agreements • The Foreign Investment Law of
Mongolia (1993)
• The Law Regulating Foreign
Investment in Entities in the
Strategic Sectors (2012)

6. Foreign Investment Legal Framework
The Foreign Investment
Law of Mongolia
National Treatment
No-Expropriation
Free Repatriation

7. Foreign Investment Legal Framework
The Law Regulating Foreign Investment in
Entities in the Strategic Sectors (2012)
Certain Thresholds
Acquisitions &
Transactions
Approval from the Govt.
& Parliament
1. Mining
2. Banking & Financing
3. Media &
Telecommunications

8. DB 2013 Rank DB 2012 Rank Change in Ranks
Economy 76 88 12
Start up business 39 95 +56
Dealing with
construction permits
121 121 No change
Getting electricity 169 168 -1
Registering property 22 24 2
Getting credit 53 67 14
Protecting investors 25 29 4
Paying taxes 70 65 -5
Trading across
borders
175 174 -1
Enforcing contracts 29 29 No change
Resolving
insolvency
127 130 3
Doing Business Report 2013

9. Doing Business Report 2013

10. 2010 2011 2012
Total FDI inflow USD1,026bln USD4,9bln USD3,9bln*
Number of
countries
59 66 59*
Number of newly
established entities
769 933 774
Number of
dissolved or
deregistered as
foreign invested
companies
214 233 156
Foreign Direct Investment
(*) preliminary data

11. Foreign Direct Investment by Sectors
73.9%
16.3%
1.5%
0.9%
0.9%
Geological prospecting, oil exploration &
mining
Trade and catering services
Bank and financial services
Light industry
Engineering construction and production of
construction materials

13. FDI trends and impact
A mining-led FDI boom
Source: UNCTAD FDI/TNC Database and UNCTAD report of Investment Policy Review
2001: Oyu Tolgoi discovers
mineral deposit
2005: Oyu Tolgoi project
receives approval
2008: Oyu Tolgoi completion
of first construction phase
2010: Oyu Tolgoi construction
budget of $758 million
2011: Oyu Tolgoi progression
Total FDI Non-mining FDI
0
1000
2000
3000
4000
5000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$ million

14. FDI impacts
FDI
88%
gross fixed
capital
55% of
GDP
17 %
employment
180 000 jobs
50% of
Tax
revenue
UNCTAD report “Investment Policy Review” FDI data 2011

15. Key Obstacles

16. From the Action Plan of the Government:
 Lower interest rates to single digits;
 Improve infrastructure;
 Introduce single window policies in export;
 Reform housing finance system;
 Implement job creation programs;
 Implement reforms at border crossing point ;
Action Plan

17. Type of Bond First Ever Government Sovereign Debt Bond
Issued Period November 2012
Credit Rating of Mongolia BB- (S&P)/ B1 (Moody’s)/B+(Fitch)
Volume of Bond $1,5 billion out of $5 billion
Period 5 years for $500 mln, 10 years for $1 bln
Registered Stock Exchange Singapore Stock Exchange
Coupon Rate
4.125% for 5 year bond
5.125% for 10 year bond
Investment Purpose To finance important projects in infrastructure and manufacturing
17
Chingiss Bond

18. Projects financed
Projects Amount of Investment
Inter-aimag auto roads/1400 km/ MNT570 bln
Tavan tolgoi power station USD 50 mil
Engineering infrastructure in UB MNT415 bln
“Street Project” in UB USD 200 mln
New railway project USD 200 mln
Support to cashmere industry MNT 95 bln
Infrastructure development in Zamyn-Uud port MNT 33 bln
Support to the Mongolian Mortgage Corporation MNT 10 bln

19. Strategic objectives for FDI
A new role for FDI as catalyst for diversification based
on three pillars:
Geographical diversification – to promote regional
development and the crowding in of domestic
investors
Source country diversification – to reduce
dependency on a small number of FDI-supplying
nations
Sectoral diversification - to generate economic
growth outside of mining;
UNCTAD report “Investment Policy Review”

20. FDI Strategic agenda
 Restore legal certainty in the foreign investment
legislation
 Close regulatory and implementation gaps in the
investment climate
 Address key governance issues
 Use FDI to tackle the infrastructure challenge
 Acquire the skills needed for economic diversification
 Use FDI to develop tourism
 Use mining as a growth pole
 Promote SME development and entrepreneurship
 Adopt modern investment promotion techniques and
infrastructure
UNCTAD report “Investment Policy Review”

21. Foreign Investment Legal Framework
• Mining
• Banking & Finance
• Telecommunications &
Media
Sectors with
conditions/Strategic
• Except Strategic Sectors
Sectors with no
conditions

22. SURVEY ON FOREIGN DIRECT INVESTMENT
RESTRICTIONS IN THE SELECTED COUNTRIES
Country Strategic
Sectors
Organizatio
n of
authorizatio
n
Transactions
needed approval
Thresholds
for Approval
Duration
for
Reviewing
Application
form for
approval
Mongolia 1. Minerals
Sector
2. Banking
and Financing
Sector
3. Media and
Telecommunic
ation Sector
Parliament
Or
Cabinet
Note:
Parliament
approves
acquisitions
over 49% by
only state
owned entities
upon the law
amendment
-49% or more of total
equity when the
amount of transaction
exceeds 100 bln MNT
-34% or more of the
total equity/shares of
national entities
-51% or more of
management
-Monopoly cases in
the relevant markets
49% &100bln
MNT for
Parliament
approval
34% or more for
Cabinet Approval
90 days
In a written form
Australia 1. Media
2.
Telecommunica
tion
3. Transport
4. Army
equipment&
Human
resource supply
5. Nuclear
energy&
uranium
6. Real estate
Treasurer
Foreign
Investment
ReviewBoard
-To acquire or sell of
shares and equities of
domestic entities
-To acquire real estates
-Obtaining majority of
Voting Management
-Owner’s change and
rearrangement of the
contract
-any investment by
foreign governments
and related entities
More than 5% of
shares in the media
sector
15% in other
sectors
244 miln. AusD as
2011
53 mln.
AusDdeveloped
commercial real
estate
5 mln. AusDreal
estate if heritage is
30 days
If necessary
extended until
90 days
Online

23. SURVEY ON FOREIGN DIRECT INVESTMENT
RESTRICTIONS IN THE SELECTED COUNTRIES
Country Strategic
Sectors
Organizati
on of
authorizati
on
Transactions
needed
approval
Thresholds
for Approval
Duration
for
Reviewing
Application
form for
approval
China 1. Mining
2. Banking
3.
Telecommunication
4. Light Industry
5. Electric power
6. Insurance
Office of
Commerce
and Industry
More than 15%
Russia 1. Defense
2. Energy
3. Air force
4. Cosmology
5. Mining
6. Radio
Communication
7. Television
8. Publishing
Industry
9.
Telecommunication
Government Acquisition of
shares more 50%
from stock
exchange or
investin 50% equity
of a strategic
company of Russia
If foreign investor
is aState owned
entity the threshold
is 25% each
If the sector is
Mining, the
threshold is 10%
-10%
-25%
-50%
1 month
If necessary
with extension
till3 months

24. SURVEY ON FOREIGN DIRECT INVESTMENT
RESTRICTIONS IN THE SELECTED COUNTRIES
Chile 1. Mining
2. Transport
3. Telecommunication
4. Agriculture
5. Construction
6. Forestry
7. Electricity
8. Processing Industry
Prohibited sectors:
-air transport
-press and media
-maritime industry
Central Bank of
Chile
registersinvestm
ents for 10.000-
7.5 million USD.
Foreign
Investment
Committee shall
approve shares,
technology,
assets of more
than 2.5 million
USD more than
5 million USD
investment.
-Acquisitions of
national assets
-Change in
shareholders
and in contracts
10.000 USD 120 days Online
The
Republic of
Korea
Prohibited Sectors:
1. Postal Services
2. Legal Services
3. Management of
Financial Market
4. Education
5. Political and Labor
organizations
6. Nuclear Energy
Restricted Sectors:
1. Wheat and crop
harvesting
2. Beef farming
Ministry
Invest Korea
Acquire shares
and stocks
Merging
Change in owners
and contracts
Above 10% of
stock
More than 100
million Won
Max share in
some sectors
are
25%, 30% or
50%.
7-90 days Online

25. Type of
legal
documents
Strategic
sectors
Permits from
Parliament
Permits from
Government
Transactions
without permits
For State
owned
company
Terms of
obtaining
permits
Laws 1. Mineral
2. Banking and
Finance
3. Information
and technology
49% and above 100
billion tugriks
For private
investors 34%-
49% and lower
than 100 billion
tugriks
1%-34% for
private investors
1%-100% all
must have
permits
For Parliament
level is
uncertain, for
government
level till 90
days.
Regulation Relies business
activities
According to the
related regulations, it
will be issued by
Government and
then will be
presented to the
Parliament
The MED will take
applications and
then proceed to
the Cabinet
Secretariat and
get the decision to
inform investors.
According to the
Foreign
investment law,
Ministry of
Economic
Development is
in charge of this.
1%-49% and
lower than 100
billion tugriks ,
approval will be
issued by the
Cabinet
meeting
If higher than
this, it will be
issued by the
Parliament.
The
Government will
issue approval
within 30 days
but it can
extend to 90
days by the
Law.
INVESTMENT REGULATIONS ON STRATEGIC SECTORS

26. Expectations from FDI
Job creation
Technology transfer
Value addition
Different Sectors
Environment Friendly

27. www.investmongolia.com
javkhlanbaatar@med.gov.mn