Spotlight on Mongolia

Spotlight on Mongolia

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Imagination's blog for industry insight, innovation, inspiration and general life contemplation.
IMAGINATION Global
  • Patrick Reid
  • MD Investor Communications
0

Spotlight on Mongolia

Blue skies for investors in the land of the great blue sky

1990 was a turning point for Mongolia. The 1.5 million square km country in Central Asia abandoned its 70-year-old Soviet-style one-party state and embraced political and economic reforms. Since then democracy has brought with it a freedom to look further afield for opportunity and embrace commerce. The struggles of the country’s economy left many of its citizens in poverty but times are changing and the vast quantities of untapped mineral wealth and new thinking of its young business leaders are helping place Mongolia on the map as an emerging market with opportunities for foreign investors. By 2012 Mongolia was one of the world's fastest growing economies, driven by foreign direct investment. It reported a 17% growth rate in 2011, and 16.7% in the first quarter of 2012.
 
Imagination, has been working with the Mongolian Stock Exchange and the Mongolian British Chamber of Commerce to help generate incoming investment and promote business opportunities in Mongolia. With partners that include PwC, ING and Rio Tinto, the Mongolian British Chamber of Commerce has highly influential support in its aim to promote investment, joint ventures, training, research and development opportunities between the two countries.
 
Whilst opportunities exist for businesses in the financial services, food and technology sectors, Mongolia is best known for mining opportunities. Chinese demand for minerals fuelled a mining boom, and although Mongolia still only places 72 in the list of jurisdictions for mining exploration and development, according to a leading Canadian think tank, it still rates above better known emerging economies such as the DRC, Zimbabwe, the Philippines, Ecuador and Venezuela.
 
The future opportunities in mining and associated industries are what are capturing investors’ attention. Only 25% of the country has been geologically surveyed and already 6,000 world class deposits have been identified, covering 69 elements of the total 111 elements of the periodic table according to the Mongolian Foreign Investment and Foreign Trade Agency (FIFTA).
 
Mining makes up 22.5 % of GDP and the IMF now estimates total GDP to accelerate 20 fold by 2019. Currently, Mongolia contains the 15th strategically most important deposits in the world including the Oyu Tolgoi copper, gold and silver mine, ranked as the world’s largest undeveloped copper deposit and managed by Ivanhoe, Rio Tinto and the Mongolian government. Market forecasters rank Mongolia’s mining industry potential to be on a par with or greater than Australia’s mining sector today.
 
The equivalent of billions of GBP has been committed by the Mongolian government and international mining investors for infrastructure and mine development.
 
Known as the “land of the great blue sky”, the weather conditions in Mongolia are fierce, ranging from -40c in winter to +40c in summer. It is not a place for the faint-hearted. Transport and infrastructure are among the challenges for business. The landlocked country is dominated by sparsely populated steppe and semi-desert, without the roads in place to ease export.
 
The investors looking for a genuine investment opportunity are not put off by the hurdles. Mongolia has strong ties with Russia and China and is cultivating relations with the US and Japan, as well as the UK.
 
The country benefits from the repatriation of many of its young people who have been educated in the US and UK and are now back establishing and running key businesses. To work there is to work amongst some of the world’s elite young business professionals and although there are ‘frontier market’ issues that have to be faced the prospects and enthusiasm are encouraging. Mongolia is a thriving and open economy with opportunities as vast as its landscape. Its free market policies – including free trade and capital movement, a liberal financial system and no internet censorship make it a favourable business destination. Blue skies indeed for the land of the great blue sky.
 

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