Actions will speak louder than words
Image by sphraner at Adobe Stock
Economic mismanagement is something that has persistently troubled Mongolia, and current authorities aim to avoid repeating past mistakes, promising to implement a series of programs and reforms that will help maintain macroeconomic stability, with fiscal consolidation critical to this.
One of the largest changes to the Mongolian legal landscape was the introduction of the sovereign wealth fund, more commonly referred to as the Chinggis Fund. The Fund is composed of three accounts: Future Heritage Fund, Development Fund, and Savings Fund, with revenue from several major mining corporations transferred to it. To date, the Future Heritage Fund has generated around 4 million MNT. The overall Fund’s revenues will come from many sources, including a 34% royalty on mineral resources. By 2030, it is predicted that the Fund could reach 18 trillion MNT (US$5 billion).
Despite the clear benefits to citizens, there is still concern that the Fund will be mismanaged by the government, the populous being wary of previous wrongdoings. “For a country like Mongolia, which is highly dependent on commodities like coal and copper, it is important to save and invest the profits wisely when the market is favorable, rather than spending them all immediately,” explained Capital Markets Mongolia’s CEO, Zolbayar Enkhbaatar.
As part of the government’s action plan running from 2024-2028 and Mongolia’s Vision 2050, most of the country’s FDI will be put towards 14 mega projects, aimed at boosting domestic industry.
Erdenes ITP is in charge of one mega project, building six Industrial Technology Parks (ITPs) to increase the amount of processed products Mongolia exports. Currently, 90% of Mongolia’s mining goods and commodities are exported raw. “Our main achievement has been completing master development plans for all six ITPs. These plans outline each park’s competitive advantages, resource potential, domestic and international supply chains, and the types of products that can be produced and exported,” highlighted Munkh-Ider N., CEO of Erdenes ITP.
Over the past several years, two Mongolian laws in particular have been in the spotlight when it comes to the mining industry. The Minerals Law and the Foreign Investment Law have needed reform for several years, however, parliament has never come to a conclusive agreement on how the updated laws should look.
“The government has been preparing and discussing the draft Minerals Law for years without final approval. The lack of a stable legal environment has created uncertainty, and while the government has made efforts to attract investment, the frequent changes make it difficult for foreign investors to plan long-term,” explained Nyamtseren Bataa, managing partner of Snow Hill Consultancy.
InvesCore Financial Group (ICFG) has been observing how the proposed changes will affect investor sentiment toward Mongolia. “One of the focuses of the proposed legislation currently under discussion is to make it easier for foreign state-owned companies to invest in Mongolia. This is a step in the right direction, but I believe the government should also explore broader opportunities for private sector companies,” outlined Bayasgalan Dalaijamts, CEO of ICFG.
Progress may have been slow, but companies are noticing that the proposed changes are encouraging investors. BlackRock Partners has been working with many different stakeholders in mining to support investment, promote innovative policy, and build trust with communities. Surakhbayar Galsan, CEO, stated: “The updates to the Minerals Law and Foreign Investment Law are a positive development. Although progress has been slow, the revisions send a good signal to international investors, indicating that Mongolia is taking steps to improve its regulatory framework.”
However, according to Galsan, words are not enough. He continued: “The real impact will depend on how effectively they are enforced on the ground. The amendments provide a foundation for future improvements, and I am optimistic that over the next few years, we will see tangible progress.”
For now, the updates to these laws remain on paper, and this is hurting the mining industry. “There have been some instances where projects and investments have been put on hold due to the uncertainty around these laws. Some large transactions have even been canceled as investors remain unsure about the regulatory environment,” declared Shaukat Tapia, country managing partner of PwC Azerbaijan and Mongolia.
Together, these reforms, initiatives, and investments set the stage for a more resilient, sustainable, and globally competitive mining sector in Mongolia.
Image by sphraner at Adobe Stock
Economic mismanagement is something that has persistently troubled Mongolia, and current authorities aim to avoid repeating past mistakes, promising to implement a series of programs and reforms that will help maintain macroeconomic stability, with fiscal consolidation critical to this.
One of the largest changes to the Mongolian legal landscape was the introduction of the sovereign wealth fund, more commonly referred to as the Chinggis Fund. The Fund is composed of three accounts: Future Heritage Fund, Development Fund, and Savings Fund, with revenue from several major mining corporations transferred to it. To date, the Future Heritage Fund has generated around 4 million MNT. The overall Fund’s revenues will come from many sources, including a 34% royalty on mineral resources. By 2030, it is predicted that the Fund could reach 18 trillion MNT (US$5 billion).
Despite the clear benefits to citizens, there is still concern that the Fund will be mismanaged by the government, the populous being wary of previous wrongdoings. “For a country like Mongolia, which is highly dependent on commodities like coal and copper, it is important to save and invest the profits wisely when the market is favorable, rather than spending them all immediately,” explained Capital Markets Mongolia’s CEO, Zolbayar Enkhbaatar.
As part of the government’s action plan running from 2024-2028 and Mongolia’s Vision 2050, most of the country’s FDI will be put towards 14 mega projects, aimed at boosting domestic industry.
Erdenes ITP is in charge of one mega project, building six Industrial Technology Parks (ITPs) to increase the amount of processed products Mongolia exports. Currently, 90% of Mongolia’s mining goods and commodities are exported raw. “Our main achievement has been completing master development plans for all six ITPs. These plans outline each park’s competitive advantages, resource potential, domestic and international supply chains, and the types of products that can be produced and exported,” highlighted Munkh-Ider N., CEO of Erdenes ITP.
Over the past several years, two Mongolian laws in particular have been in the spotlight when it comes to the mining industry. The Minerals Law and the Foreign Investment Law have needed reform for several years, however, parliament has never come to a conclusive agreement on how the updated laws should look.
“The government has been preparing and discussing the draft Minerals Law for years without final approval. The lack of a stable legal environment has created uncertainty, and while the government has made efforts to attract investment, the frequent changes make it difficult for foreign investors to plan long-term,” explained Nyamtseren Bataa, managing partner of Snow Hill Consultancy.
InvesCore Financial Group (ICFG) has been observing how the proposed changes will affect investor sentiment toward Mongolia. “One of the focuses of the proposed legislation currently under discussion is to make it easier for foreign state-owned companies to invest in Mongolia. This is a step in the right direction, but I believe the government should also explore broader opportunities for private sector companies,” outlined Bayasgalan Dalaijamts, CEO of ICFG.
Progress may have been slow, but companies are noticing that the proposed changes are encouraging investors. BlackRock Partners has been working with many different stakeholders in mining to support investment, promote innovative policy, and build trust with communities. Surakhbayar Galsan, CEO, stated: “The updates to the Minerals Law and Foreign Investment Law are a positive development. Although progress has been slow, the revisions send a good signal to international investors, indicating that Mongolia is taking steps to improve its regulatory framework.”
However, according to Galsan, words are not enough. He continued: “The real impact will depend on how effectively they are enforced on the ground. The amendments provide a foundation for future improvements, and I am optimistic that over the next few years, we will see tangible progress.”
For now, the updates to these laws remain on paper, and this is hurting the mining industry. “There have been some instances where projects and investments have been put on hold due to the uncertainty around these laws. Some large transactions have even been canceled as investors remain unsure about the regulatory environment,” declared Shaukat Tapia, country managing partner of PwC Azerbaijan and Mongolia.
Together, these reforms, initiatives, and investments set the stage for a more resilient, sustainable, and globally competitive mining sector in Mongolia.
