Interview: B. Chuluunbatar
Which ongoing specific legislative reforms will help improve the investment climate in Mongolia for both the domestic and foreign private sectors?
B. CHULUUNBATAR: Because of increasing foreign investment, there has been a growing demand for an updated legal framework that better reflects the current economic situation. For example, the corporate tax law, which was drafted five to six years ago, is not very relevant since everything – starting with the size of the businesses – has changed so drastically in the last couple of years. Our government should focus on these legislative reforms because we need to maintain our competitiveness in relation to comparable Asian countries, like the Philippines and Myanmar, which are currently attracting foreign investment. We also need to improve our public services to decrease bureaucracy. Transparency and the adoption of new information technologies are crucial here. Regarding the former, it is surprising how fast social and economic change has taken place in Mongolia and how quickly we have seen improvements in terms of transparency.
To what extent have the lack of infrastructure and qualified human capital made it more difficult to do business in Mongolia?
CHULUUNBATAR: The infrastructure deficit has seriously affected small-scale and medium-scale mining projects, while the bigger projects are developing infrastructure by themselves. However, in all types of operations, the lack of labour and infrastructure is increasing the overall costs of the projects by 10-20%. As a vast but sparsely populated country with little prior experience in the field of mining, human resource capacity is a big concern for us. What Mongolia should do is to partner up with other developed countries to bring in more skilled workers and catch up with infrastructure development. We certainly need to invest in the training of our own population, but at the same time we have to keep wheels turning. The fact that 10% of the working population – numbering 120,000 – live abroad is also a relevant point. They are our most highly educated and skilled citizens. The “brain drain” that began during the revolution of the 1990s has also contributed to the human capital problem. However, many Mongolians have been moving back as a result of recent economic growth. This is a good sign, and the government should support this phenomenon of highly skilled expatriates moving back home.
The lack of qualified human capital is affecting all sectors in the country. At the moment, the main strategy of response is to bring in skilled workers from countries like China and Korea, and to encourage our own population to obtain qualifications. Foreign investors, particularly in the field of mining, are currently establishing technical and vocational schools with this objective in mind. We hope that with these joint efforts we will be able to solve the human resource problem within the next five to 10 years.
What needs to be done to prepare Mongolian companies to face competition as part of the international market in the upcoming years?
CHULUUNBATAR: I believe there should be a policy and legal framework to protect national companies from international competition. We still need to provide a suitable environment for potential investors. Foreign investment should be beneficial for both sides. A way to do this would be to partner incoming foreign investors with a local company. The local company can offer support and shorten the learning curve. Mongolian companies would have the chance to learn from the foreign companies in terms of knowledge and technology transfer. Being able to implement international standards in quality management systems and corporate governance is crucial for Mongolian companies. We have seen fruitful outcomes from this partnership strategy in countries like China and Russia, and this represents a vital step in promoting the long-term success of foreign companies here as well as a viable way for local companies to enter the international market.
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