Foreign investors must stay in, after getting in

Layton Croft, Vice President External Affairs and Corporate Citizenship, SouthGobi Resources, was one of the speakers at the Mongolian Investment Summit in Hong Kong. He did not refer to economic figures, financial charts or official data in his presentation. Instead, he used his experience of living and working in Mongolia for 15 years to offer a unique personal perspective to foreign investors. MMJ is presenting some parts of his speech.

There is a lot to learn from Mongolian people – the way they look at the world, the way they think and behave, their fierce individualism and stubborn self-confidence, their industriousness and self-reliance, their willingness to try new things and take risks, and their openness and accessibility as people.

I am not an investment banker, nor an economist, nor an equities analyst – so I won’t speak about commodities forecasts, equities valuations, sovereign risk, or the Chinese demand outlook for Mongolian coal. But I will talk about the equally important “softer side” of foreign investment in Mongolia, which is something I have first-hand experience with.

I am a passionate student and advocate of Mongolia, and I am always proud, and humbled, when my Mongolian friends and colleagues tell me I am part-Mongolian. I have lived and worked in Mongolia for about 15 years in all – from living in Bayanhongor Aimag, to spending time working and traveling in all 21 aimags and a hundred soums across the country, and for many years with my family in Ulaanbaatar. I am also intimately familiar with the Gobi region, where so much of the mining action is these days.

My time and experiences in Mongolia have taught me a lot, given me special insights, and have fostered in me a deep love and passion for Mongolia, which I reckon is with me for life. My point with all of this is that, deep in my own heart, I really want Mongolia to win. And by “win” I mean a combination of a lot of things: reducing and eliminating poverty, expanding and spreading prosperity, ensuring human security, growing the economy, diversifying and protecting the economy, building human capital, preserving and promoting cultural identity and cultural heritage, protecting national security and sovereignty, and protecting and conserving natural resources such as water, air, and pastureland. Importantly, “winning” for Mongolia means doing all of the above by Mongolians, for Mongolians, and distinctly in a “Mongolian way.”

The Mongolia story isn’t just about getting rich or richer. It’s equally about the ability of a small country sandwiched between two giants to be the master of its own destiny, and to map out and achieve a bold vision for a better future for itself and all its citizens, and on its own terms. If, and when, that happens, everyone wins, including us foreign investors.

For us to be successful foreign investors in Mongolia, we need to live there, to learn Mongolian language, and Mongolian culture. We need to live and breathe alongside and among Mongolian people. We need to make Mongolians friends, take walks in their shoes, see through their eyes. We need to study and work constantly to understand the cultural, psychological and socio-political implications of Mongolia’s nomadic history and what it means, in both historical and contemporary terms, to be “nomadic.”

And importantly, to be successful foreign investors in Mongolia, we need to not only tolerate risk, but we need to tolerate amuity, and uncertainty, and unpredictability, and different logical frameworks for doing things. Put another way, just because things might not make sense to us does not mean they don’t make sense.

We need to respect Mongolian people and “the Mongolian way,” recognizing that by respect I mean through our behaviors and not just our words or intellectual acknowledgement.. And fundamentally, we need to do all of the above all the while keeping our core personal and corporate values, responsibilities, and integrity firmly intact, and unshakable.

Succeeding in a so-called “frontier market” like Mongolia also requires patience, and humility. As a rule of thumb, it’s usually better to listen first and then talk rather than to talk first and then listen. Although Mongolians value directness, being subtle and nuanced and diplomatic at the right times is often more effective than emphatic arm-waving or table-pounding.

Mongolia may have a 30% poverty rate, but it has a 100% pride rate. And Mongolian pride is admirable, and remarkable. There is a lot to learn from Mongolian people – the way they look at the world, the way they think and behave, their fierce individualism and stubborn self-confidence, their industriousness and self-reliance, their willingness to try new things and take risks, and their openness and accessibility as people.
As foreigners, our behavior and how we are perceived is critical. And because Mongolia is a small, intimate community, building and protecting your individual and corporate reputation is paramount. Looking for shortcuts down shadowy alleys is not advised. Transparency is advised.

The real upside to Mongolia investments is going to come not necessarily to foreign investors who get in, but more likely to those with the ability to stay in. And to that end, patience is not only a virtue but an essential business tool. I have found that “actively waiting,” as opposed to, say, “passively waiting,” is the best way to deal with what can seem like inaction, backsliding or an opaque outlook when it comes to moving your business forward.

 It is important not to think linearly and two-dimensionally. It is important to think laterally, and multi-dimensionally. Zero sum thinking is not advised. That is because so much of what is happening in Mongolia today – economically, politically, socially – is not only new for us as foreigners, but much of it is also new for Mongolians too.

We need to understand, and learn how to do things, “the Mongolian way.” Never forget the significance of the fact that it was Mongolian people – and not just their great leader acting alone – who established the largest land empire in human history. It was an extraordinary achievement, and it was done in a Mongolian way.

Investing our money is the easy part. As or more important is investing our time, and that means building meaningful, and trust-based relationships, professional and personal relationships, with Mongolians. Ever since I first started getting to know Mongolian people, in the summer of 1994, I was struck by how “democratic” the Mongolian character is – and by “democratic” I mean “little D” democratic, or not in a partisan or political sense. Mongolians, to generalize, possess innate curiosity, openness, individualism, confidence, and an interest in learning new things and applying that new knowledge in practical ways.

Mongolia’s democracy is strong and getting stronger, and everyone has a voice and many people like to speak up. It’s important as foreign investors to listen, and study, what people are saying, how they are saying it, to whom, and to what end. We should be neutral but networked, and knowledgeable. .

Foreign investors are sometimes implicated in the debates around poverty in Mongolia, and not always in a favourable light. As foreign-invested minerals and mining companies, we are always going to be under particular scrutiny when it comes to the perceived imperative for us to create new Mongolian jobs, improve livelihoods, and help reduce poverty.
More than ever before, foreign-invested companies operating in Mongolia’s minerals and mining sector have to be competitive not just with other foreign companies, but with Mongolian companies as well. We have to not only differentiate ourselves, but we have to prove to Mongolians – public officials and private citizens alike – how we can and do add value and why we are valuable for Mongolia. If we want to succeed, we have to deliver value not only to our shareholders, but equally so to our Mongolian stakeholders. This is a new paradigm.

I offer two general suggestions for foreign companies to consider in terms of us adding value to Mongolian stakeholders in addition to our own shareholders.  The first is for us to never forget the importance of quality, and to pay attention to details. There is so much talk today of how Mongolia’s resources are and how much money is to be made in Mongolia. But unless and until foreign investors focus as much on qualitative, non-commercial aspects of their investments – in terms of how they will benefit Mongolian people and protect Mongolia’s natural environment – they will risk losing competitive advantage.

A so-called “social license to operate” is no longer good enough. Now, to compete and succeed in Mongolia, the local communities where we operate and our other Mongolian stakeholders must have the “social desire for us to be operating there.” Foreign invested mining companies need Mongolians to want us, and to need us, and for that to happen, we must demonstrate why and how we add extra value and leave behind tangible, lasting benefits for Mongolians.

It’s not just about social investments, charity and PR. It’s about being conscientious and pro-active – as a mining company – in terms of understanding, protecting and supporting Mongolian interests: Mongolian culture, Mongolian human development, and Mongolian environmental conservation. The best capacity building is a function of real partnership, and real participation, where everyone has skin in the game. This is not always instinctive for foreign mining companies, but it is a powerful way to build competitive advantage.

I spoke earlier about how my passion for Mongolia and Mongolian people comes from me genuinely wanting Mongolia to “win.” The good news for foreign investors is that “win-wins” are possible, and encouraged, and that there are still opportunities for foreign companies to help Mongolia keep winning.