Economy
From The Report: Mongolia 2014
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Having an estimated $1.3trn in mineral deposits at current market prices, Mongolia holds great promise for investors. With GDP standing at just $10.3bn in 2012, a single large project has the potential to significantly boost foreign direct investment and growth. The core budget deficit declined from $319m in 2012 to $178m in 2013, equal to 1.7% of GDP; however, off-budget spending was rising. The government has announced plans to re-launch the privatisation process, with the aim of reducing the number of state-owned enterprises by one-third. Future economic growth will depend on the success of a range of measures aimed at improving economic conditions and sustainability.
This chapter contains interviews with P. Tsagaan, Chief of Staff, Office of the President; Ch. Ulaan, Minister of Finance; Jim Dwyer, Executive Director, Business Council of Mongolia; and B. Byambasaikhan; Managing Partner, NovaTerra LLC, and Chairman, Business Council of Mongolia.

Articles from this Chapter

Overview

Continued momentum: Despite turbulence, double-digit growth was maintained in 2013
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Following a mining-related boom in exports and foreign direct investment (FDI), from mid-2012 Mongolia’s rapid economic growth faced the challenges of trade deterioration and falling commodity prices and demand on the one hand, and global and regional uncertainty on the other. The Oyu Tolgoi (OT) gold and copper mine that had emerged as a beacon for investor appetite in the land-locked yet resource-rich country has become a bellwether for investor confidence. With an estimated $1.3trn in mineral…

Analysis

Foundations for development: The government has begun investing heavily in infrastructure
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Ranked 133rd of 148 in the World Economic Forum’s 2013 Global Competitiveness Index for overall infrastructure quality, Mongolia’s domestic and regional connectivity is hampered by poor-quality roads, inadequate power supply and the limited reach of its railways. From 2012 the government began investing heavily in infrastructure development, although most of this spending has been off-budget through the Development Bank of Mongolia (DBM). While DBM’s debt is accounted for in formal budgeting,…

Interview

Turning over a new leaf: OBG talks to P. Tsagaan, Chief of Staff, Office of the President
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Interview: Tsagaan Puntsag What short-term impact might the “From Big Government to Smart Government” initiative have? TSAGAAN PUNTSAG: For the last 20 years, Mongolia has conducted a dual political and economic transition, and we have achieved quite a lot. Yet, we have failed to reduce government inefficiency. Today, we have an electoral democracy, though with shortcomings. After much deliberation, we have concluded that Mongolia needs to reform its government to provide transparency, inclusiveness,…

Interview

OBG talks to Chultem Ulaan, Minister of Finance
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Interview: Chultem Ulaan What instruments are at your disposal to reverse the trend of depreciation in the turgik and ensure its stability in the long term? CHULTEM ULAAN: Providing stability for the national currency is one of our fundamental goals. Much of the government’s budgetary and economic activities are directed towards achieving this. The ministry of finance has conducted an in-depth analysis of the key causes of this continuous depreciation, and we are now working to level the balance…

Analysis

Lending a hand: The authorities have been implementing a pro-growth policy
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The Bank of Mongolia (BOM) pursued cautious and targeted monetary easing in 2013 in a bid to maintain macro stability, prevent credit crunch risk, and offset the impact of reduced exports and foreign direct investment. Amid benchmark interest rate cuts totalling 2.75 points in January (0.75), April (1) and June (1) to 10.5%, the BOM has used unconventional monetary policy instruments to pump MNT liquidity through the banking system toward key industries and the government bond market to stimulate…

Analysis

Raising the roof: Various measures could support the growth of SMEs
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New measures aimed at lowering the tax burden for small and medium-sized enterprises (SMEs) should incentivise private operators to expand, but businesses may still face challenges in obtaining the credit they need. In January 2014 the government announced it would submit a plan to parliament to amend regulations on the payment of value-added tax (VAT) by SMEs. Under the proposal, companies with revenues of less than $29,000 would be exempt from VAT. At present, the exemption ceiling is set at $5800,…

Interview

OBG talks to Jim Dwyer, Executive Director, Business Council of Mongolia
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Interview:Jim Dwyer How might the new investment law affect foreign direct investment (FDI) in 2014? Is the new law enough to bring back investors’ confidence? JIM DWYER: Foreign investment in Mongolia is key, as it should be a major part of the country’s development in coming years. The previous investment law dried up and stopped new foreign investments coming into the country. FDI levels, which had hit $5bn in 2011, dropped dramatically in 2012 and halved in 2013. The only investment…

Interview

OBG talks to Jim Dwyer, Executive Director, Business Council of Mongolia
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Interview:Jim Dwyer How might the new investment law affect foreign direct investment (FDI) in 2014? Is the new law enough to bring back investors’ confidence? JIM DWYER: Foreign investment in Mongolia is key, as it should be a major part of the country’s development in coming years. The previous investment law dried up and stopped new foreign investments coming into the country. FDI levels, which had hit $5bn in 2011, dropped dramatically in 2012 and halved in 2013. The only investment…

Viewpoint

Smart investments: B. Byambasaikhan, Managing Partner, NovaTerra, and Chairman, Business Council of Mongolia, on growth, standards and technology
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Viewpoint:Bayanjargal Byambasaikhan The economy has made great strides, having grown tenfold over the past decade. In 2013, Mongolians were able to find the answer to a key question: “Where will Mongolia be in 2020, 2030, 2040 and 2050?” For the first time, there is a consensus amongst businesses, media, central and local governments, politics and academia on Mongolia’s roadmap for economic competitiveness. Now, the goal is to reach a AAA credit rating by 2030 and $55,000 GDP per capita…

Analysis

Chinggis can: The country’s first sovereign bond was heavily oversubscribed
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The government in Mongolia has revealed plans to support domestic export manufacturers, with the aim of reducing a burgeoning import bill and boosting the country’s economic foundations. Prime Minister N. Altankhuyag said at a press conference in January 2014 that the government would allocate $216m from the $1.5bn raised by the sale of “Chinggis bonds” to provide loans to local businesses in the primary export industries of minerals and cashmere. Mongolia’s first sovereign bond, which was…