This information is derived from the State Department's Office of Investment Affairs' Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov

Policies Towards Foreign Direct Investment

Over the last four years, Mongolia has suffered from a combination of declines in the value of its key commodity exports of coal and copper and policy missteps. These missteps have led the Government of Mongolia (GOM) to seek financial support from an International Monetary Fund (IMF)-led group of organizations and bilateral donors to cover budget shortfalls and sovereign debts. Starting in 2017, this three-year program will require significant budget tightening and increased fiscal discipline. Consequently, the GOM is limited in its capacity to financially support investment projects in important sectors, most notably mining and agriculture; and relies on foreign direct investment (FDI) to support its broad economic and development agendas.

The GOM has publicly pledged to support FDI and taken significant measures that confirm this commitment. It has reaffirmed support for the investment agreements that established the Oyu Tolgoi copper/gold mega-mine project, repealed potentially onerous certificate of origin requirements for imports in response to U.S. Embassy, AmCham, and U.S. company complaints, reduced the use of prosecutorial “exit bans” against foreign business executives (although these continue to be a source of concern), and moved to bring into force and implement the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment. This Agreement allows investors and exporters to review and comment on legislation and regulations affecting trade and commerce before they are approved. A copy of the Transparency Agreement is available here.

Investors have expressed appreciation for these positive steps, but question whether this recent progress indicates broader and more permanent progress. In late 2016, the GOM closed the Invest Mongolia Agency (IMA), which had promoted Mongolian investment opportunities abroad and assisted foreign investors with obtaining tax stabilization, corporate registrations, and investment dispute resolutions with the government. The IMA replacement, the new National Development Agency, is supposed to issue tax stabilization certificates but has not implemented a process for doing so. The previous IMA support functions are no longer available to foreign investors from the GOM. In conjunction with the International Finance Corporation and the World Bank, the GOM has promised, but not yet established, an Investor Dispute Resolution Council. In addition, the Prime Minister’s Office maintains an Investors Advisory Council, which occasionally includes representatives from the foreign investment community.

Investors are also concerned that the GOM has not yet fulfilled public commitments to adequately reform or completely eliminate the practice of barring foreign and Mongolian nationals involved in a commercial dispute from leaving Mongolia, commonly referred to as an exit ban. Other concerns that investors point to include stalled GOM negotiations over key infrastructure projects, lack of progress on construction of power plants, and the absence of an agreement with a consortium to exploit the Tavan Tolgoi mega-coking coal mine, as reasons for skepticism about Mongolia's ability to provide a business-enabling environment. They also cite stagnant global commodity prices as a disincentive to invest in Mongolia's mining sector and other sectors, including construction, real estate, and IT, that depend on mining sector activity for profitability. Investors approve of GOM plans to diversify the economy from overreliance on the volatile mining sector – with the agricultural and livestock sectors being the most important diversification targets – but are concerned about the government’s slow progress to craft and implement practical diversification strategies.

Broadly, there is no systemic, institutional effort to impose laws and practices that discriminate against foreign investors in general or U.S. investors in particular – with two key exceptions. First, foreign investors object to the regulatory requirement that they invest a minimum of USD $100,000 to establish a venture when the Investment Law of Mongolia states that all investors in Mongolia, without reference to nationality, are subject to national treatment. In contrast, Mongolian investors are not subject to investment minimums. Second, foreign nationals and companies may not own real estate; only Mongolian adult citizens can own land. While foreign investors may obtain use rights for the underlying land, these rights expire after a set number of years, with no automatic right of renewal.

Various international financial institutions (IFI) active in Mongolia have helped the country improve its standing as a destination for FDI. The European Bank for Reconstruction and Development (EBRD) has invested nearly USD $2 billion in the country, mostly in projects designed to facilitate private sector growth in the mining, energy, financial, agri-business, and retail sectors. The Asian Development Bank's USD $700 million project portfolio largely complements EBRD efforts in its focus on the transportation, energy, urban utilities and services, education, and health sectors. The International Finance Corporation and the World Bank have committed several hundred million dollars to projects that support infrastructure development, employment generation, economic diversification as well as the institutional strengthening of the mining sector. Other UN agencies and NGOs also make significant contributions to making Mongolia more accommodating to FDI either as their primary missions or as secondary aspects of their programming.

In line with these IFI investment-support projects, the U.S. government, GOM, and international NGO Mercy Corps have launched a USD $10 million program to stimulate production and export opportunities in the domestic livestock economy. The project works with herders, meat processors, downstream customers, U.S. technology suppliers, government organizations, and veterinarians to produce high quality, organic Mongolian meat products meeting international export standards.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Constitution limits the right to privately own land to adult citizens of Mongolia. However, no formal law exists vesting Mongolia’s pastoral nomadic herders with exclusive rights of pasturage, control of water, or land rights. As such, rural municipalities unofficially recognize that traditional, customary access to these resources by pastoralists must be taken into account before, during, and after other non-resident users, particularly but not exclusively those in the mining sector, can exercise their use and ownership rights. Both foreign and domestic investors have the same rights to establish, sell, transfer, or securitize structures, shares, use-rights, companies, and movable property, subject to relevant legislation and related regulation controlling such activities. Mongolian law does allow creditors to recover debts by seizing and disposing of property offered as collateral.

Other Investment Policy Reviews

The GOM conducted an investment policy review through the United Nations Conference on Trade and Development (UNCTAD) in 2013 and a trade policy review with the World Trade Organization (WTO) in 2014. Although the Organization for Economic Cooperation and Development (OECD) has not conducted a comprehensive investment policy review of Mongolia in the past three years, it has completed economic studies on specific aspects of investment and development in Mongolia.

UNCTAD Mongolia investment policy review

WTO Mongolia investment policy review in the context of a Trade Policy Review

OECD Mongolia reports

Business Facilitation

In its 2013 Investment Policy Review of Mongolia, UNCTAD reported that to diversify and facilitate FDI beyond mining, Mongolia needed to comprehensively reform FDI policies to include clear “developmental objectives.” Legislation and regulation should be reformed so as to reflect an “open stance and practice” to FDI. The GOM’s limited institutional capacity requires enhancement to better implement and enforce effective, efficient regulations. As of 2017, Mongolia has yet to adopt these recommendations and has not applied UNCTAD’s ten investment facilitation guidelines to create a consistently transparent, predictable, efficient, and open regime to facilitate FDI. A copy of the UNCTAD report is available online.

However, consistent with the World Bank’s 2016 Doing Business Report, investors report that Mongolia’s business registration process is reasonable efficient and clear. All enterprises, foreign and domestic, must register with the General Authority for Intellectual Property and State Registration (GAIPSR). Registrants obtain form UB 03-II and other required documents from the website and can submit completed documents by email. GAIPSR aims at a two-day turnaround for the review and approval process, but investors report that complex cases can take anywhere from several weeks to three months. Once approved by GAIPSR, a company must register with the Mongolian General Authority Taxation (GTA). Upon hiring its first employees, a company must register with the Social Insurance Agency. GAIPSR reports that notarization is not required for its registration process.

Outward Investment

Although the GOM neither promotes nor incentivizes outward investment, it does not restrict domestic investors from investing abroad.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.