IN order to encourage foreign investors to again consider Mongolia the government needs to finalize a number of significant projects, according to Business Council of Mongolia executive director Jim Dwyer. He says investors need to see stage two of Oyu Tolgoi proceed, the huge Tavan Tolgoi coal deposit move forward, a new power plant upgrade take place and a coal-to-liquid plant make headway.

Speaking to Oxford Business Group before the Mongolia 2014 Investment Summit in London, Jim Dwyer said foreign investment in Mongolia is key as it should be a major component of the country’s economic development in coming years. “The previous investment law dried up and stopped new foreign investments coming into the country. FDI levels had hit US$5 billion in 2011, dropped dramatically in 2012 and halved in 2013.

“The only investment for Mongolia now is Rio Tinto’s Oyu Tolgoi mine. There are no further significant or important transactions to speak of and the big question at this point is, when will FDI become robust again? It would be hard to say we will see a significant improvement in 2014.

“The new investment law was enacted on November 1, 2013, and will make it easy and quick to register and do small transactions but it will not bring back the large international investors who have been disappointed in the last year – at least not immediately. This will remain the case until they see demonstrative evidence that things have changed.”

Jim Dwyer said, “The first thing for the Mongolian government to do, therefore, is to finalize significant projects. Investors need to see phase two of Oyu Tolgoi moving forward; they need to see Tavan Tolgoi, a huge untapped coal deposit, moving forward; they must see CHP5, a needed power plant upgrade, make progress; and they need to see the coal-to-liquid plant from MCS, Mongolia’s biggest conglomerate, and POSCO, a South Korean steel and power giant, make headway. These are all important projects and are by no means confined to just the mining sector.

“Should these projects move meaningfully in the right direction, Mongolia will start gradually building momentum again as investors regain confidence in its markets. Mongolia can once more become a top investment destination from 2015 onwards. We are now at the beginning of the next wave of new investments coming into Mongolia.”

He also said that there should be a clear separation between government and the private sector, which isn’t the case now in Mongolia. “The government’s focus should be on regulations and policies, and on collecting taxes and royalties. This would greatly increase government revenues, and would attract more foreign investment from companies that could partner with local businesses.

“One help in this regard was the president’s announcement in late 2013 that he aims to privatize one-third of the country’s state-owned enterprises. Though it will surely take time, it is a positive step. More than half of SOEs are losing money as many do not have management skills. Many of these companies are run by politicians with conflicts of interests, when they should in fact be run by skilled managers who have plenty of knowledge and experience in the private sector. How the president’s initiative will evolve remains to be seen, but it is undeniable that this measure will be very beneficial towards the development of Mongolia’s economy.”

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