Economy
From The Report: Mongolia 2012
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Mongolia’s resource-based economy is forecast to be one of the fastest growing in the world over the next two decades. The two big stories of 2011 were Tavan Tolgoi, a coal mine now ramping up its production, and Oyu Tolgoi, a copper and gold mine that should begin operations in 2013. The IMF expects investment in these projects, and growth in spinoff industries, to drive GDP growth to 12% in 2012, and the government projects even higher growth, at 25%. However, economists are warning of “Dutch disease” whereby overreliance on resource exports crowds out manufacturing and boosts inflation. Investing in infrastructure and educating citizens to participate in a modern economy will be key to achieving diversified growth.
This chapter features interviews with Ch. Ganhuyag, Vice-Minister of Finance and Founder, Mongolia Economic Forum; B. Ganzorig, Chairman, Foreign Investment and Foreign Trade Agency; Jim Dwyer, Executive Director, Business Council of Mongolia (BCM); and J. Odjargal, Chairman, MCS Group. It also includes a viewpoint from B. Byambasaikhan, CEO, Newcom Group.

Articles from this Chapter

Overview

High flyer: Strong outlook on the back of sound policies and increasing openness
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Forecast to be one of the world’s fastest-growing marketplaces over the next two decades, Mongolia’s economy is developing rapidly. The country’s resource wealth and open, liberalised market are attracting increasing interest from international investors and putting it in the global spotlight. MAIN FOCUSES: The two big stories of 2011 are Oyu Tolgoi (OT) and Tavan Tolgoi (TT). The former is a copper and gold mine expected to commence extraction in 2013 and containing an estimated 37m…

Interview

OBG talks to Ch. Ganhuyag, Vice-Minister of Finance and Founder, Mongolia Economic Forum
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Interview:Ch. Ganhuyag How will policy makers ensure that the rapid growth in the sector will not lead to a bubble? GANHUYAG: The growth is not driven by an artificial rise in demand, but rather by physical foreign capital and investments. Whether the increase in demand will lead to a bubble is not entirely up to us, because the growth is driven by commodities exports. As long as China and the rest of the world keep buying coal, copper and other commodities, revenues and income will continue…

Analysis

Open field: Recent regulatory and economic reforms make the business environment more attractive
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From a closed Communist system two decades ago, Mongolia has become one of Asia’s most open economies. Hand-in-hand with the rise of democracy, economic reform has led to radical changes in the business climate. Growth is now led by the private sector and investors from around the world are welcomed. Mongolia’s economy is relatively open and pro-business, though improvements could still be made. Regulatory reform has not yet spread to all areas, and issues of infrastructure and occasional…

Interview

OBG talks to B. Ganzorig, Chairman, Foreign Investment and Foreign Trade Agency
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Interview:B. Ganzorig What government incentives are in place to encourage foreign investments into non-mining sectors? GANZORIG: It has already become obvious that investments in Mongolian mining sector are profitable. Now our objective is to bring foreign investment in non-mining sectors to help diversify the economy. The corporate tax rate in Mongolia is between 10% and 25%, depending on income earned, and the amount of value-added tax is 10%, the region’s lowest rate. In compliance…

Interview

OBG talks to Jim Dwyer, Executive Director, Business Council of Mongolia (BCM)
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Interview:Jim Dwyer How has Mongolia’s foreign investment environment improved over the last five years? JIM DWYER: The decision to eliminate the Windfall Tax in 2009 was a big turning point. After the legislation was put in place in 2006, foreign direct investment (FDI) in both copper and gold came to a halt. FDI coming from China and Western investors simply stopped. In September of 2009, the Oyu Tolgoi investment agreement was signed, opening the floodgates for the record levels of FDI…

Analysis

Trading places: External demand is driving a spike in trade
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Largely trade-oriented, the Mongolian economy is powered by growing mineral exports and oiled by imports of capital and consumer goods. Volumes have risen over the past two years as the mining sector has geared up, while external demand and prices both remain strong. MINERAL MIGHT: In 2010 Mongolia’s total foreign trade turnover surged by 51.8% to reach $6.11bn, with exports rising 54.3% to $2.9bn and imports 49.7% to $3.2bn, according to the National Statistical Office. Mineral products…

Interview

OBG talks to J. Odjargal, Chairman, MCS Group
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Interview:J. Odjargal What role does the private sector play in pushing for change in areas of policy reform? ODJARGAL: Mongolia is a young country and a new market economy. In order to facilitate rapid economic growth, all policy and regulatory reforms, particularly legal reforms, must be done swiftly. The private sector is playing an active role in assisting the government with these developments and policymakers have been listening closely to their input. This is important because it shows…

Viewpoint

B. Byambasaikhan, CEO, Newcom Group, on the role of innovation and clean technology in building national infrastructure
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The Mongolian economy is transforming and expanding at an unprecedented rate. We are experiencing growth in every sector of the economy, from air travel to construction, from restaurants to retail. This high rate should be maintained throughout the decade: a $6bn economy in 2010 is projected to double in size in 2012, and quadruple by 2016. “Beating the market” has become a common theme in the business strategies of Mongolian companies. To fuel growth, we need trained and skilled people…

Analysis

Price pressure: With expansion throughout the economy comes rising inflation
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While Mongolia’s double-digit GDP growth is helping transform the country and makes it an emerging market star, it also contributes to double-digit inflation. High inflation is probably the single-biggest macroeconomic concern for the country since the end of the global economic crisis. While this is a sign of the economy’s success, rising prices are a serious issue for ordinary Mongolians, investors and policymakers. PRICES ON THE RISE: The National Statistical Office estimates that the…

Analysis

Broader horizons: The state looks to diversification to further strengthen the economy
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Operators of the Oyu Tolgoi copper and gold mine forecast that its copper production alone could account for a third of Mongolia’s GDP by 2020. This highlights mining’s importance to the economy, as well as the need for greater diversification. The global economic crisis of 2008-09 amply demonstrated the imperative of spreading out, as Mongolia was hit hard by falling commodity prices. While a repeat of that situation seems unlikely, there is still a need to develop other sectors to broaden…