Interview: L. Boldkhuyag
To what extent should foreign investors regard Mongolia as an attractive economic destination within the medium to long term?
L. BOLDKHUYAG: Despite some economic difficulties in recent years, Mongolia is a significant prospect for both domestic and foreign investors. There is huge potential in its mineral resources if they can be extracted in an effective and equitable manner. In fact, more than 85% of the elements on the Mendeleev Table can be found in Mongolia. Opportunities are not limited to mining: there are a number of other areas, such as financial services and energy infrastructure, that can bring considerable benefit to the economy. This is an ideal time to invest in the country given that most assets are currently undervalued due to the aforementioned factors, as well as owing to the recent devaluation of the tugrik against the dollar.
Mongolia also benefits from its strategic location. The visits in 2014 of Chinese President Xi Jinping and Russian President Vladimir Putin saw important agreements, such as one with the Chinese that will open their ports to Mongolian goods. Mongolia should seize the opportunities that proximity to two of the world’s largest economies can bring to their development, not forgetting other allies such as Japan, South Korea and the US, whose continued investment is also essential to developing our economy further. These relationships remain a key pillar of President Elbegdorj’s foreign policy.
Other than mining, what sectors pose the greatest potential for future development?
BOLDKHUYAG: There are a number of opportunities. The effective development of the country’s mineral resources requires introducing financial products and services that meet international standards. Establishing investment banks and funds that are transparent and well-capitalised would benefit the economy greatly. Moreover, recent changes to the securities market law – such as the new legal framework for custodian banking – have made the process of setting up such institutions much easier and more feasible. By welcoming these institutions, more investors, both foreign and domestic, can be brought into the economy and help fund much-needed development in areas like building infrastructure and new mining projects. There has already been significant interest from North American, European and Asian investors to get involved in such developments. To take advantage of these opportunities, Mongolia needs to make sure that its retail banks are transparent and well-run. Also, the issues delaying Oyu Tolgoi and the awarding of new mining licences must be resolved before investors will regain their enthusiasm for investing in Mongolia.
Further, the country needs a considerable amount of investment in utilities infrastructure. Ulaanbaatar has grown rapidly over the past decade, and many of its residents still lack access to water, heating and electricity. There is plenty of potential for companies interested in building these capacities. People need to be able to live comfortable lives: if such basic human needs are not met, the attainment of higher levels of economic growth will be impossible. Large-scale power generation projects will be required so that the country can lessen its dependence on expensive electricity imports from China and Russia. Renewable sources of energy such as solar and wind are other areas that would benefit from an increase in foreign investment and expertise. Nor should Mongolia’s potential as an energy corridor between its two neighbours be overlooked.
Production should also be encouraged, at least in order to meet domestic demand. For instance, while Mongolia will likely never be a large exporter of its agricultural products, it could definitely invest in expanding its capacity in the area in order to meet local needs, given its relatively small population. For all of these sectors that I have mentioned, the involvement of foreign investors will be crucial, both in order to provide financing as well as to share knowledge. Mongolia will not be able to attain its full economic and social potential unless it is prepared to work alongside others.
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