Table Of Content«
Investment
Guide
for Mongolia
FINANCE AND INVESTMENT
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Investment Guide
for Mongolia
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and
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FOREWORD
Foreign direct investment (FDI) is an essential engine of economic
development. In addition to providing important capital inflows, it brings new
technologies and skills and provides access to markets and production and
distribution networks. It also generates employment and, through increased
exports, has a positive effect on the balance of payments. Improving the
conditions for sustainable FDI is therefore an important component in the
programme of work for the OECD’s Centre for Co-operation with Non-
Members, and inits work with Mongolia. Since the early1990s, Mongolia has
not only actively participated in investment promotion activities at the OECD
Centre for Private Sector Development in Istanbul, but also in such OECD
activities as training of tax officials, the Anti-Corruption Network, and the
AdvisoryGrouponPrivatisation.
ThisInvestmentGuideforMongoliaidentifiesareasof opportunityforpotential
foreign investors, provides information on the historical, political, economic,
financial and legal framework and serves as a source of reference for investors
as well as government officials, to make a balanced assessment of the
investment climate. The Guide builds on economic analysis and examines the
institutional and policy framework for FDI. It also includes a survey of
investors to identify areas where action can be taken by the government to
improvetheclimateforFDI.
With rich natural resources and competitive operating costs, Mongolia is in a
good position to increase its share of available world-wide FDI, not only in the
key sectors of mining and agriculture, but also in the developing sectors of
services, transport and communications. To exploit its potential further, action
will be necessary to address weaknesses in the legislative and regulatory
frameworkandtoimprovetheoperatingenvironmentforbusiness.
This Investment Guide for Mongolia describes the general characteristics of the
country and the regional context. It looks at the evolution of the Mongolian
economy since the early1990s, including the trends in foreign investment. It
also analyses the policy framework for investment, and focuses on the business
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environment. The results of a survey of foreign investors in Mongolia are
discussed, drawing conclusions and making recommendations to improve the
climateforFDIinthecountry.
I hope that this volume will serve as a useful tool for those who would like to
enhance the environment for foreign direct investment in Mongolia, by
providing a reference source on these topics for policy-makers and experts in
boththepublicandprivatesectors.
SeiichiKondo
DeputySecretary-General
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ACKNOWLEDGEMENTS
The informationandmaterial containedhereistheresultofresearchcarriedout
in1999 and early2000 by the Centre for Co-operation with Non-Members in
co-operation with FIFTA (the Foreign Investment and Foreign Trade Agency)
of Mongolia. The Investment Guide was prepared by staff members of the
OECD’s Enterprise Development Unit and its Centre for Co-operation with
Non-Members, MsElizabethCunningham and MrMakotoAsano, with
secretarial support from MsEkaterinaTravkina, working jointly with local
counterparts in Mongolia, Mr Baljinnyam Sodnompil (Premier International,
Inc.), andMr Voroshilov Enkhbold(formerly FIFTA, nowMinistry of Industry
and Commerce). The work of the International Monetary Fund, the World
Bank and the US Embassy in Ulaanbaatar has proved invaluable in preparing
this publication. The Investment Guide for Mongolia has also been made
possiblebyavoluntarycontributionfromtheGovernmentofJapan.
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TABLEOFCONTENTS
PREFACE...........................................................................................................9
SUMMARY,CONCLUSIONSANDRECOMMENDATIONS..................11
Summary........................................................................................................11
Conclusions....................................................................................................15
Recommendations..........................................................................................15
I--GENERALCHARACTERISTICS..........................................................19
GeographyandClimate..................................................................................19
PeopleandLanguage......................................................................................20
PoliticalHistory..............................................................................................20
ThePoliticalSystem.......................................................................................21
TheRegionalandInternationalContext.........................................................23
II--THEECONOMY.....................................................................................25
TheHistoricalContext...................................................................................25
RecentEconomicTrends................................................................................26
SpecialFeaturesoftheMongolianEconomy.................................................31
StructureoftheMongolianEconomy............................................................33
Maineconomicsectors...................................................................................35
TheEnvironment............................................................................................41
InvestmentTrends..........................................................................................43
FeedbackfromInvestors................................................................................45
III--THEINVESTMENTPOLICYFRAMEWORK.................................49
Introduction....................................................................................................49
TheLegalFrameworkforInvestment............................................................49
InvestmentIncentives.....................................................................................53
AmendmentstotheLawonForeignInvestment............................................55
TheInstitutionalFramework..........................................................................56
TradeandInvestmentAgreements.................................................................59
ThePrivatisationProgramme.........................................................................60
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IV--THELEGALENVIRONMENT...........................................................71
Introduction....................................................................................................71
CompanyLaw................................................................................................71
FormsofBusinessOrganisationandBusinessRegistration..........................72
Taxation..........................................................................................................75
AccountingandAuditing...............................................................................90
TheBankingSystem......................................................................................91
Bankruptcy.....................................................................................................92
TheLabourMarket.........................................................................................93
Insurance........................................................................................................94
IntellectualPropertyRights............................................................................96
Customs..........................................................................................................96
LandReform...................................................................................................97
CONTACTSINMONGOLIA......................................................................101
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