Author: OBG Admin

Éric N’guessan-Managing Partner-EY Côte d’Ivoire

The prices of building inputs on the rise in Mongolia’s construction sector, driven by fast-growing demand for materials

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In 2014 Mongolia’s construction industry saw a major uptick in output. Driven in large part by the government’s ongoing residential housing development programmes, the sector grew by 16.3% over the course of the year, according to data from the National Statistical Office. One key challenge during this period of rapid expansion has been sourcing construction materials. Only a handful of domestic companies produce building supplies in Mongolia – primarily cement, concrete, bricks and a small number of iron products. The bulk – around 70% –

Pham Hong Hai-CEO-HSBC Vietnam

Efforts to support local entreprenurs in Mongolia’s IT sector facilitating domestic content production

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While the overall number of internet users in Mongolia grew eight-fold from 2009 to mid-2014 – from just over 100,000 to more than 1m, according to the Communications Regulatory Commission of Mongolia (CRC), the nation’s telecommunications regulatory organisation – most locals spend their time online at foreign websites. As of mid-2014 Mongolian internet content was rare. According to recent statistics from SimilarWeb, an Israel-based data analytics company, the top six websites in Mongolia (by total page loads) are foreign sites, including Facebook (the most popular

Éric N’guessan-Managing Partner-EY Côte d’Ivoire

Rural connectivity: Boosting telecoms usage outside the capital is a government priority

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Mongolia’s status as the single least populous country in the world – according to recent census data the nation has a population density of 1.76 people per sq km – has presented a wide variety of challenges for the development of telecommunications systems. The cost of extending a fixed-line network into the nation’s vast rural areas – many of which are covered in mountains or empty desert – is out of reach for all but the largest telecoms operators, and ensuring return on investment in these projects is highly unlikely. Despite these constraints, in recent years the government has announced that it is committed to

Éric N’guessan-Managing Partner-EY Côte d’Ivoire

Fortifying supply: Ensuring long-term food security is a national priority

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Over the past five years Mongolia’s food security situation has improved dramatically. Current estimates put the country’s overall food self-sufficiency – a measure of the extent to which the nation can meet domestic demand for food – at 50-60%, which is up considerably on previous years. The steadily improving food security situation since the mid-2000s, in particular, can be attributed in part to a series of programmes put in place by the government and various private entities, including both domestic firms and international organisations. Good Conditions Mongolia’s herders, farmers and other food producers and suppliers have benefitted from four successive years of favourable agricultural conditions.

Sheikh Ahmad Duaij Jaber Al Sabah-Chairman-Commercial Bank of Kuwait

Outdoor activities in Mongolia have the potential to serve as a cornerstone of its tourism industry

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In February 2014 Mongolia’s Ministry of Culture, Sports and Tourism – now the Ministry of Environment, Green Development and Tourism (MEGDT) – introduced a new tourism slogan: “Mongolia, Nomadic by Nature”. The tourism tagline was commissioned by the government and developed by CNN’s Tourism Advertising Solutions and Knowledge Group in preparation for Mongolia’s turn as the official partner country of the Internationale Tourismus-Börse (ITB) Berlin 2015, the world’s largest tourism and travel trade fair. Nomadic by Nature In addition to referencing Mongolia’s traditional nomadic culture and history, the slogan was designed in part to highlight the country’s numerous one-of-a-kind outdoor adventure tourism products. Indeed, Mongolia’s

Éric N’guessan-Managing Partner-EY Côte d’Ivoire

A substantial number of new hotels set to come on-line in Mongolia in the coming years

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Lodging options for incoming visitors to Mongolia have increased dramatically over the past decade. While current, comprehensive data on the number and type of hotels is haphazard at best, according to recent estimates, Mongolia was home to at least 20 four- and fivestar properties as of the end of 2013, in addition to an equal number of two- and three-star hotels, although the capital, Ulaanbaatar, could use more mid-range accommodation, said J. Soyolmaa, director of DMD Mongolie. “There is a lack of high-quality, affordable three-star hotel rooms in Ulaanbaatar. This is a real problem, as many European travellers coming to Mongolia expect accommodations in this

Nhon Luc Ly-CEO-AIA Myanmar; Son Nguyen-Country President-Chubb Life Insurance Myanmar; Daw Zarchi Tin-CEO

Mongolia’s new investment law a good start, but more reforms needed

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A new investment law passed in October 2013 sent a clear message about the government’s pro-business reform ambitions, placing foreign and local investors on equal footing. New “tax stabilisation certificates” now offer an alternative to the previous investment agreements by freezing the relevant taxes for a period of up to 22.5 years. While the state mechanisms for such benefits were set up quickly, the process for granting them has proven slower than expected – the handful of applications that were under review in the first half of 2014 are mainly from local investors. Boosting foreign direct investment (FDI) after a 52% slump in 2013 will

Éric N’guessan-Managing Partner-EY Côte d’Ivoire

Partnering for trade: Fresh agreements with key neighbours are set to boost trade

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Landlocked between two large markets, Mongolia has long used an activist trade policy to develop “third neighbours” and improve its terms of trade. The 1965 International Convention on Transit Trade of Landlocked States already grants it access to third markets, although quotas and transit tariffs are still subject to negotiations. Over the past decade, however, China has largely cornered the market for Mongolia’s mineral exports – despite pledges to allow up to 30% of exports to transit to third markets like Japan and South Korea – largely due to poor transport infrastructure and high transit tariffs. The Economic Partnership Agreement (EPA) signed with Japan in

Nhon Luc Ly-CEO-AIA Myanmar; Son Nguyen-Country President-Chubb Life Insurance Myanmar; Daw Zarchi Tin-CEO

Forward planning: Managing debt with a new law under discussion

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While public spending has been key to maintaining growth in 2012 and 2013, its funding has relied on a ramp-up in foreign-currency (FC) debt. Constrained by the Fiscal Stability Law (FSL), which caps public debt at 40% of GDP, the government subsequently channelled expansionary quasi-fiscal spending through the Development Bank of Mongolia (DBM). Rising Leverage The Ministry of Economic Development (MED) drove the government’s external borrowing from its establishment in August 2012 until it was merged into the Ministry of Finance in late 2014. The FSL’s limits of 2% of GDP on budget deficits and 40% of GDP on gross debt constrain fiscal spending. However,

Chaim Zach-Managing Director and CEO-Agric International Technology and Trade; Kabiru Rabiu-Group Executive Director-BUA Group; and Aliyu Abbati Abdulhameed-Managing Director

New economic incentives in Mongolia could ease constraints on growth and boost small businesses

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Accounting for 95% of all registered enterprises and around half of employment (910,000 workers), Mongolia’s 90,000 small and medium-sized enterprises (SMEs) are a crucial fabric linking large resource projects to the domestic economy. Indeed, the National Development and Innovation Committee estimates that every $1 invested in mining creates a $1.84 multiplier effect in other sectors like infrastructure, services and the impact of migration. However, SMEs account for just 25% of GDP, according to the International Finance Corporation, meaning that significant potential remains. Government Support The state has long sought to support SMEs. For example, the 2008 Comprehensive National Development Strategy aims to promote import-substituting SMEs