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

  • Persistent uncertainties clouding Mongolia's political and business environment outlook suggest that downside risks remain to our real 2014 and 2015 GDP forecast of 9.8% and 8.0% respectively. Our core scenario remains for an agreement for the Oyu Tolgoi (OT) mine expansion to be reached by end-2014 although we note downside risks that further delays could mean that an agreement will only be reached after parliamentary elections in 2016. Indeed, rising domestic opposition from both within the ruling coalition and bureaucrats threatens to prevent the government from passing the legislative changes needed to restore investor confidence in the economy.

  • The Togrog remains under immense depreciatory pressures, with the latest dispute between Rio Tinto and the Mongolian government (over alleged tax evasion) further weakening the unit in addition to the 10% losses since...

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Mongolia Operational Risk Coverage (9)

Mongolia Operational Risk

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Mongolia's impressive growth rate, booming mining sector and reasonably well-educated labour force should mark it out as one of the most attractive investment destinations regionally. However, 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, we score Mongolia 49.8 out of 100 for its Operational Risk placing the country 16th out of 30 countries in Asia.

BMI considers the foremost advantage for businesses in Mongolia to be the country&#39...

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Mongolia Crime & Security

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BMI View: The main risks with regards to crime and security in Mongolia stem from a nationalist group that targets foreign business people over concerns that they will exploit Mongolia's natural resources. Besides this, the greatest risk to visitors comes from petty crime such as pick-pocketing and theft, as well as scams involving horse theft, border scams and harassment for money. Corruption is also perceived as being pervasive in Mongolia. More positively, Mongolia has no territorial disputes with its neighbours, and its security in the event of an external attack is guaranteed by Russia and China. Due to these considerations, Mongolia scores 61.0 out of 100 in the overall BMI Crime and Security Risk Index, placing it 12th out of 30 states in the Asia region.

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Mongolia Labour Market

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The key labour market risk facing investors in Mongolia is 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 11th out of 30 states, with a score of 55.2 out of 100.

Access to education in Mongolia has varied since the end of the early 1990s. Under Soviet rule...

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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 set for robust growth, as projects including the Oyu Tolgoi (OT) mine will significantly increase the country's mining output over the coming years.

Mining Sector Outlook: We believe Mongolia's mining sector will experience significant growth, as the development of the massive Oyu Tolgoi (OT) mine will drastically increase the country's gold and copper production over the coming years. The country's mining sector will outperform other areas of the economy, leading to an increasing concentration of labour and wealth in this industry. We believe the OT project is one of Mongolia's largest economic undertakings and will account for one-third of the economy once OT becomes fully operational in 2021.

Robust Growth To...

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Latest Mongolia Articles

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Latest Mongolia Blogs

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