Luxury Louis Vuitton + Humble Goat Herder =Growing Mongolia

From October 12 to October 14, the ballroom of Conrad Hotel in Hong Kong was given over to women and men in business attire, talking money and mining. They were there as delegates to the Mining Investment Insight conference, where the Mongolian Mining Journal was the media partner. After two days of general discussion on the risks and rewards of mining, the focus on the last day shifted to investment possibilities in Mongolia. Mineral Resources and Energy Minister D.Zorigt  gave the opening speech and from then on it was all about opportunities in a land of endless promise. Investors were invited  and inspired from the stage.

Besides the Minister three MPs had come from Mongolia to the conference. They participated in panel discussions. Mr O.Chuluunbat, MP and former Governor of the Bank of Mongolia, said Mongolia’s exports this year were double last year’s, and then made liberal use of facts and figures to convince delegates that the Mongolian economy is performing “extremely well” and urged investors not to miss a golden opportunity. This one word, opportunity, became synonymous with Mongolia as speaker after speaker talked about what was on offer.

After Mr Masa Igata, CEO of Frontier Securities had said “there are plenty of opportunities in Mongolia”, his colleague, Mr Oscar Mendoza, emphasised that Government policy would be the most important thing to watch. However, there was so much  possibility for doing business in Mongolia that the future could not be but bright.

Mr Randolph Koppa, President of the Trade and Development Bank, said Mongolia would double its GDP within five years as mining projects take off in the country. This will be followed by another doubling by 2020.

Mr Alisha Ali Djumanov, Chairman of Mongolia Development Resources and Eurasia Capital, also referred to Mongolia’s “rapid growth” and said that “the investment environment there, seen against that in other countries in Asia, specially in Central Asia and in the former Soviet Union countries was very promising”. Certain issues have to be “resolved, but generally speaking, Mongolia is an investment-friendly country”, he added.  Mr Djumanov traced the present strong interest in Mongolia among foreign investors to the signing of the Oyu Tolgoi agreement in October, 2009.

The poor state of infrastructure in the vast country with a small population was a predominant concern of delegates who had many questions on how the Government planned to redress the need. Minister Zorigt said they expected the task to be taken over by private companies and, as an example of how this could be done, he mentioned that Mongolian Mining Corporation had  built a 270-km road in the Gobi region in only six months this year. “We trust the private sector to rise to the challenge,” he affirmed.

Mr Simon Morris, CEO of Khan Bank, the gest bank of Mongolia, began his presentation with a picture of the Louis Vuitton store in Ulaanbaatar. The brief but telling caption simply said, “Everyone knows only economically developed countries have LV stores.” According to Mr Morris, the fact that Mongolia had this and other luxury goods stores “tells you more about the country’s prospects than its GDP and such financial statistics”. The next picture he showed gave a  panoramic view of the countryside -- the green steppe, white gers and a blue sky. “If you go outside UB, you quickly get into the traditional nomadic life” was its caption. Mr Morris has been in Mongolia for just about six months and is still struck by the peaceful contradictions between urban and country life here.

Taking up from his statement that “Mongolia is still a very nomadic country”, Mr Layton Croft , Vice President of SouthGobi Resources, said the nomadic culture was evident in the capital city, too, where the traffic culture was an extension of nomadic horse riding. With 15 years in Mongolia behind him, Mr Croft asked foreign investors to respect the Mongolian people in a Mongolian way. “To be a successful investor, we need to have a clearer understanding of the psychological and sociopolitical impact of Mongolian nomadic history on the present,” he said, adding, “Mongolia has a 30% poverty rate and a100% pride rate. This pride in themselves gives a special dimension to Mongolians.” Mr Croft’s presentation was very practical and foreign investors would do well to remember this in Mongolia.

Going back to Mr Morris, he surprised delegates by asking them, “How many cashmere sweaters will China need next year?” Nobody could say for sure but 50 million was the figure settled for. In Italy, 10 million cashmere sweaters are sold annually, Mr Morris added, and then explained that his reference to wool was simply to show that there are many other possibilities for investment in Mongolia besides the mining sector. The country with 2.7 million people has 43.3 million head of livestock. Almost 20 million of these were goats. At 2.2 million, the number of horses was much lower, but the horse symbolizes the country’s nomadic culture.

Mr D.Bailiikhuu, a senior official at the State Property Committee, said that the Government was preparing plans to privatize MIAT, the state airline, and the stock exchange and its policy was to attract and encourage foreign investment.

The impression that delegates took back from the meeting was that today’s Mongolia is a land of opportunity and possibilities for investors. It is on the cusp of a boom, an unprecedented expansion. The LV store is simply a sign of this positive development. Big mining projects will lead the country’s march to progress, but there are plenty of other investment possibilities, one of them being cashmere. The future of Mongolia is as much in the hands of the goat herder as it is in those of miners. More such LV stores can be built with the work of humble goat herders. This is Mongolia, a country which straddles two different worlds, one urban and the other nomadic.
 

  by B.Tsatsral