One of the headline issues giving rise to concerns among investors in Mongolia right now is the effect of a new Currency Law being approved by Parliament, and its implications both for existing and potential FDI.
As we head into the first week of September, conference season is upon us, with a number of investor-related events taking place in the space of just 5 days, including traditional annual events such as Coal Mongolia, Discover Mongolia and the IWFCI Global Women’s Trade Summit.
Mongolia has a rich tradition of nomadic pastoralism, constituting a key element of the nation’s culture and traditions. With the onset of significant urbanization, and just under half of the country’s population now residing in or around Ulaanbaatar, these traditions are slowly changing, exacerbated by the infamous Mongolian dzud which reduces the livestock population and damages the livelihood of nomadic herders.
Recent announcements and developments regarding construction of a gas pipeline between Russia and China, transiting Mongolia, have been gathering steam and if the project moves forward would be a major boon for the Mongolian economy with a number of potential side benefits. These developments have built on the concept of an “economic corridor” between China and Russia routing through Mongolia.
Effective from 1 January 2018, Mongolia introduced changes to its Minerals Law, Land Law, Law on Registration of Legal Entities and various tax specific laws, with the aim of increasing tax revenues by way of a 30% tax on the direct or indirect transfer of rights in land and minerals licences.
Several immigration issues have been prevalent over the course of 2018 as a result of various factors which are impacting both on foreign invested major projects, including Oyu Tolgoi, and now trickling down to impact on smaller businesses.
It is difficult to imagine the sheer scale of the Chinese government’s “One Belt, One Road” policy, and it is equally difficult to imagine the huge problems and ‘black economy’ surrounding the reported 100 km tailback of minerals through the border points with China. One presents a carrot and the other a stick. How can these issues be navigated by the Mongolian authorities?
It’s always an exciting moment for lawyers when the Parliamentary agenda for the next session is published and there are some interesting legislative developments penciled in for discussion during the fall session of Parliament. While this time is typically dominated by debates around the state budget, a number of other interesting points are worth highlighting.
Developing the vast Erdenes Tavan Tolgoi coal deposit has been one of the biggest strategic challenges that Mongolia has faced over the past ten years, with various different unsuccessful attempts having been made. These range from the failed auction of 2010, the abortive international IPO in 2012-13, the blocked deal with Shenhua in 2015, and on the operational side, a difficult contract with Chalco that has kept the business locked down to onerous long-term obligations, and the shift of operations from Macmahon to the mysterious TTJVCo. Meanwhile, the 1072 citizens shares issue remains unresolved and confusing.
A number of important pieces of legislation are slated in the books for the upcoming spring session of Parliament, including extensive amendments to tax legislation, a new law on Mining, the revised Labour Law and various amendments to laws in the banking sector aimed at implementation of the ongoing IMF program.
Mongolia is currently gripped by offshore fever, with new developments coming on a regular basis, most recently a Cabinet decision to increase the scope of jurisdiction that are covered by offshore accounts legislation. This reflects a much wider international concern around the use of offshore accounts, which this article will touch upon, and which has certainly fueled domestic concern.