Mongolia

In-depth country-focused analysis on Mongolia's economic, political and operational risk environment, complemented by detailed sector insight

Mongolia

Our comprehensive assessment of Mongolia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Mongolia, as well as the latest industry developments that could impact Mongolia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Mongolia before your competitors.

Country Risk

Mongolia Country Risk

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Core Views

  • The Mongolian government will continue to keep on good terms with its neighbours. Mongolia remains at risk of becoming dependent on China, and therefore it will continue to pursue investment ties with other countries in the US, India, as well as states in the North Asian region such as Japan in its so called 'third neighbour' foreign policy.

  • Weak mining-related investment, subdued export demand due to a cooling Chinese economy, and a slowdown in the construction and real estate sectors will act as headwinds to the Mongolian economy in 2015. Beyond 2015, we expect real GDP growth to pick up over the coming years, averaging 8.1% over the next decade, as the second phase expansion of the Oyu Tolgoi (OT) copper and gold mine looks set to being in late 2015.

  • We are bearish on the Mongolian togrog against the US dollar...

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Mongolia Operational Risk Coverage (9)

Mongolia Operational Risk

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Mongolia offers an attractive environment for investors, with an impressive growth rate, booming mining sector and reasonably well-educated labour force. Nonetheless, a number of key risks limit the market's overall appeal, not least the country's inadequate logistics infrastructure, which drives up the cost of doing business in Mongolia; the high cost of carrying out operational procedures, such as opening and closing a business; and the country's diverse legal risks, particularly with regards to ICT. Mongolia's status as a landlocked country acts as a huge barrier to trade, leaving the country heavily reliant on its neighbours Russia and China. Overall, Mongolia obtains a score of 48.9 out of 100 for its Operational Risk, placing the country 18th out of 38 countries in Asia and 100th out of 201 countries globally.

The biggest risk to investors in Mongolia stems from the country's wholly inadequate...

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Mongolia Crime & Security

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Mongolia offers a reasonably secure operating environment, particularly for Western-owned businesses, but suffers from high levels of petty crime and poor protections against sophisticated crimes. This means that, while the country experiences no real threat of violence, there are endemic issues with low-level theft and burglary, and the country's banking and internet infrastructures are vulnerable to exploitation. Significant risks also arise from Mongolia's corrupt and xenophobic police force, and from its xenophobic, nationalist gangs. Despite this, the costs to businesses arising from Mongolia's crime and security environment are few, with limited impact of organised crime and minimal cause for inflating incentives to attract overseas labour. As a result, Mongolia ranks in 17th position out of 38 states in the Asia region for its overall Crime and Security Risks, with a score of 53.0 out of 100.

Mongolia's...

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Mongolia Labour Market

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Mongolia's labour market risks are driven by the small size of the working age population, which restricts the range of recruitment options available. This issue is exacerbated by low employment rates and the prevalence of agricultural workers, which limit the variety of vocational skills. However, improving enrolment rates in all tiers of education, particularly at the tertiary level, will boost the quality of the labour market, and investors will be able to take advantage of favourable demographics over the medium term. In addition, both obvious and hidden labour costs are low, which significantly reduces the financial burden of employing a large workforce. Mongolia is ranked relatively highly in the Asia region in the BMI Labour Market Risk Index, placed 12th out of 38 states, with a score of 56.3 out of 100.

Investors in Mongolia benefit from a relatively well-educated talent pool, with a comparatively...

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Mongolia Logistics

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As the 19 th largest in the world, Mongolia is one of the largest landlocked countries in the world. This poses severe constraints to the country's supply chains, which struggle to connect the vastly populated country. An inadequate road, rail and port service means that transporting goods both within and beyond the country's border is a costly venture, while poor water availability, low internet penetration and rising electricity costs pose risk to businesses operating in the country. The country does, however, have an impressive growth rate with the IMF forecasting that Mongolia's economy will be the fastest-growing economy in the world over the next decade. Investors must therefore balance the strong potential of this country with its heavy risks. BMI scores Mongolia 28.5 out of 100 for its logistical risk. This ranks the country last out of 30 countries in Emerging Europe, 2.6 points behind Kyrgyzstan and 33.3 points behind...

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Mongolia Trade & Investment

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In the past decade, Mongolia has transformed itself from a country under Soviet rule to one of the most rapidly expanding economies in the world. The country was one of the top performing economies in 2013, with growth of 11.7%, and is forecast to be amongst the top-performing countries in 2014. According the World Bank, Mongolia now classifies as a mid-low income country on account of the rapid amount of foreign direct investment is has received, and is expected to enter mid-high income in the near future. The main driver of Mongolia's rapid economic expansion has been the mining industry's development. Mongolia is richly endowed with natural resources, with commodities such as copper, gold and coal making up the majority of the country's exports. Despite the influx of investment, Mongolia's business environment still poses risk to investors. An inadequate legal framework, high levels of red tape and high levels of trade protection increase operational risk in the...

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Mongolia Industry Coverage (1)

Mining

Mongolia Mining

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BMI View: Mongolia's mining sector is well placed for continued expansion over the next few years as foreign investors continue to leverage the country's significant mineral reserves, robust infrastructure framework and proximity to major export markets such as China. Projects such as the Oyu Tolgoi mine will significantly increase the country's mining output over the coming years. The breakup of the super coalition puts future deals critical to mine production at risk.

Mining Sector Outlook: The recent agreement between the Mongolian government and Rio Tinto with regard to the Oyu Tolgoi mining project is a positive development for the Mongolian mining sector on a number of levels. In May 2015, the newly formed Mongolian super coalition agreed to proceed with the nearly USD5bn...

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Latest Mongolia Articles

  • China's stock market collapse and currency devaluation have revealed the un...

  • China's equity crash is far from over, and is likely to expose the weak und...

  • Three major global events have occurred more or less simultaneously in July...

Latest Mongolia Blogs

  • Business Monitor International (BMI) has just published two articles on the...

  • A renewed slowdown in Chinese economic growth in the second half of 2013 wi...