Эрдсийг эрдэнэст
Ирээдүйг өндөр хөгжилд
Mining The Resources
Minding the future



Ts. Elbegsaikhan

 Foreign direct investment in Mongolia peaked in 2011 but fallen precipitously since then. Since the approval of the revised Investment Law in 2013, foreign investment in Mongolia has virtually ceased, with the exception of Oyutolgoi. We cannot go forward without thinking about what to do next. It has been two years since the Mongolian Government established a working group in January 2021 to develop a revised draft of the Investment Law.

According to the conclusions of the working group initiated by the Prime Minister, a number of obstacles obstruct the implementation of investment legislation and development of an enabling legal environment. The working group selected and sorted by importance the obstacles to improving the legal framework.

For example, by the time the rulings, decisions, and other documents are approved in the foreign country, the 15 day period established by the Law on State Registration of Legal Entities gets expired. “The methodology for assessing special mining licenses and taxation of income from the transfer of special licenses” is unclear, complaints and disputes are resolved very slowly, and no clear answers are given.

In addition, cases of civil law disputes turning into criminal cases have increased, and investors’ rights are not guaranteed during investigations by the police and prosecutor’s office. The restoration of violated rights is not sufficiently guaranteed. Decisions made by the arbitration court take a long time to be executed.

Two of the above-mentioned problems can solved measures. through However, the procedural remaining problems should be solved by institutional methods. for example, by strengthening the capacity of the courts and the police, reducing bureaucracy, etc. This is why they want to reform the law.


The question arises, however, whether they have achieved anything other than a revision of the entire law. The sad truth is that the impact of all these amendments and changes in the law made in the past have not been evaluated today. Moreover, even the statistical data show there are no achievements.

It was explained that the reason for the lack of investment shortly after the current law was passed was due to the fall in commodity prices on the world market. However, despite the recovery of commodity prices, investments in Mongolia did not increase. A total of 40 amendments were made to 27 articles of the Investment Law. What if the problem is not related to the law or the market, but to the attitudes and behavior of Mongolians?

The U.S. Embassy in Mongolia published an article titled “Mongolia’s Investment Climate Statement”. This report describes the difficulties faced by foreign investors operating in Mongolia.

According to the investors mentioned in that report, “the application of the law is unclear. Law enforcement agencies understand and interpret the law as they want and are very bureaucratic.” On the other hand, court decisions are delayed for a long time, and enforcement also takes a long time.

Businesses point to significant and unpredictable regulatory pressures at all levels. Also, the report states that the process of resolving tax disputes is too slow, which “indirectly, creates a risk of confiscating the property.” This also largely coincides with the problems identified by the government working group.

From this point of view, it seems appropriate to amend the Civil Law rather than the Investment Law. Investors say that judges tend to avoid decisions related to business disputes. It is common for court proceedings to drag on for several years. In addition, if a decision is made but enforcement is too slow, it happens that the other party to the dispute sells its assets and disappears. According to the Ministry of Justice and Interior, it takes an average of 3.5 years to resolve civil cases, and there are cases that have not been resolved for 15 years.

The report notes similarly long delays and waits for decisions by the Tax Dispute Resolution Board and other inspection bodies, particularly the f indings of inspection bodies related to mineral licensing and health issues.

Political decisions, cases involving politicians or Mongolians are slower to be resolved. Most investors and legal experts recommend the use of legal, non judicial dispute resolution mechanisms in the case of disputes between state owned enterprises in Mongolia.

Tax disputes have not bypassed Oyu Tolgoi, and some of them are still not fully resolved. According to investors, the main problem is that the fines and penalties imposed by the tax authorities are unreasonable.

In addition, judges often make completely different decisions when considering similar cases. Investors are surprised by the fact that previous decisions and cases are not analyzed. So instead of trying to attract foreign investment, “we want to have a policy to keep existing foreign direct investment in the country,” investors say.

In other words, to become a country capable of attracting investment from abroad, we need not only to “wash our face,” but also to “wash our hands”. If we want to promote our positive image to the outside world, we need to focus on eliminating internal divisions and proper distribution of power.

However, if we want to attract foreign direct investment, there are also tasks that must be done first. first, we must conclude tax agreements with countries that plan to expand trade and economic relations. We can conclude agreements similar to the Economic Partnership Agreement signed with Japan.

After signing the Oyu Tolgoi agreement, Mongolia concluded a double taxation agreement with many countries, which meant that a large amount of money that should have stayed in Mongolia flowed abroad. But on the other hand, it cannot be denied that these agreements may have been a bridge for more foreign capital to f low into Mongolia. In fact, all foreign investments that came into Mongolia passed through this bridge.

The next issue is also internal: taking the pressure off businesses. The reality is that doing business in our country is now not easy. This is a problem not only for foreigners but also for domestic investors. There are many different bosses and inspectors who issue too many regulations, controls, and impose f ines. They act as if their job is not to support, help, and improve. But one big change in Mongolia this year was the introduction of an e-business online system, where business documents and some services were digitized.

With the exception of the war between Russia and Ukraine, China has ended its “Zero-Covid” policy, economic activity is returning to normal, and international trade and relations are developing. The impact of this recovery has begun to be felt in Mongolia, where GDP grew 7.9% in the first quarter as a result of export growth. Today, what can we do to attract global money flow to Mongolia? Only with the Investment Law? Let me remind you that there will be no improvement until the right decisions are made.