MONGOLIA’S ECONOMY AND POLITICS
Please give us your assessment of Mongolia’s economy today and growth expectations for the next few years.
is one of the world’s fastest growing economies. Mongolia’s steady economic growth over the recent years is driven by an emerging mining industry. The growth reached 17.5 percent in 2011 and 12.3 percent last year.
The economic prospects for Mongolia are quite positive. According to the World Bank, the Asian Development Bank, the Mongolia’s economy is projected to grow at 13 percent in 2013. We expect double-digit growth over the coming years. The mining sector will remain the engine of the Mongolia’s economy. What are some Mongolia’s competitive advantages as an investment destination?
Mongolia is a very attractive country for investment. First, Mongolia is a democracy. Mongolia has achieved remarkable success over the past two decades in transforming itself from a socialist country with a planned economy into a vibrant multi-party democracy. We successfully have chaired Community of Democracies for the last two years, a global intergovernmental coalition of around 130 countries. In March of this year, we hosted Ministerial Conference of CD in Ulaanbaatar.
Second, Mongolia has a favorable legal environment for foreign investment. The legal environment for investment is very important. We have been making substantial progress in reforming legal and judicial system to serve people equally and justly. Mongolia is a relatively easy country for conducting business, with free currency exchange and a stable democratic government. Third, some people may argue that Mongolia has a small market of just 3 million population. My response to them is simple. We are located in the hub of 1.5 billion people. I mean our two neighbors, China and Russia. They are the largest emerging markets every investor wants to enter. In other words, we are not landlocked but we are a market linking country. Last but not least, Mongolia has rich untapped mineral resources such as gold, copper, coal, iron, zinc. How will the Mongolian authorities work to best utilize the revenue from major projects in the near future and to ensure sustainable long-term economic development?
Mongolia’s economy is heavily dependent on exports and foreign capital. Any significant decline in international prices for commodities including coal and copper, Mongolia’s main exports, poses risks to Mongolia’s export revenue. Mongolia’s mining boom also carries with it certain risks associated with mineral dependency, so-called Dutch Disease.
Therefore, the Parliament and the Government have undertaken a broad range of measures to avoid Dutch Disease and resource curses, and to ensure long-term economic development.
The Human Development Fund
has been established which enables Mongolian people receive a share from revenues gained from minerals. Mongolia stands to earn a lot in the coming years from mining and the Fund is meant to save the money, use it productively to build wealth for the future generation instead of just spending it on welfare programs.
The fund also meant to protect Mongolia from what is known as the Dutch disease, to describe an economic condition that, in its broadest sense, refers to negative consequences arising from large increases to a country's income. The Government share of profits from strategic mines will be put into this fund.
The Fiscal Stability Fund
has also been created. Any mineral revenue in excess of certain threshold should be placed in the Fund. These savings would be then used during downturn to finance the budget.
What kind of steps are the Mongolian authorities taking in order to address infrastructure bottlenecks?
Developing infrastructure is crucial to our economic growth. The Government aims to build road network connecting all the aimags to Ulaanbaatar and other major cities in Mongolia. The Government also aims to construct a railway network and new housing projects near mining towns. To fund these development projects, Mongolia has sold 1.5 billion USD in its first ever government bond offering last November. In recent years, the Government has increased capital spending for the development of infrastructure.
The Government is also seeking private sector investment through public partnerships. The Concessions Law adopted in 2012 sets the legal framework for the development of infrastructure projects in Mongolia. The Government has thus far identified 121 projects to be implemented with private sector participation both foreign and domestic companies.
We would like to see more foreign investment in infrastructure. Japan, one of our closest partner, is active in this area. Mitsubishi Corporation and Chiyoda Corporation have started constructing new international airport in Mongolia, which meets all international standards. In which sectors of Mongolia’s economy do you anticipate some of the best prospects for potential U.S. investment?
Mongolia needs to diversify
its economy. FDI has been one of the main sources of current economic growth. We consider attracting foreign investment to in line with our interests. We would like to see more foreign investment in industry, processing, infrastructure, agriculture and technology.
The diversification provides opportunity for investment. The agricultural sector
has immense potential for Mongolia. Our livestock herd accounts 47 mln. We could supply a percentage of our neighbor’s food needs with high-quality eco-products. We have high hopes for the cashmere sector, as Mongolia is the second-largest exporter of cashmere.
We would like to see more processing facilities for different materials since Mongolia has enormous potential to become a major center in the region. If we process our minerals and commodities internally we can count on the world’s largest market, China, just across the border. Thanks to our geographical location, we can easily export products to China, Russia and East Asia.
We need investment in developing our infrastructure. Expanding our transport capacities and building new rail networks is crucial to our growth. We have the resources to produce energy for domestic consumption as Mongolia is rich in coal reserves. We have a shortage of energy because of poor infrastructure. MONGOLIA-UNITED STATES RELATIONS
Please comment on the evolution of Mongolia-United States relations in recent years.
It is a great pleasure to note that our relations and cooperation have seen a remarkable expansion over last two decades since the establishment of diplomatic relations between the two countries in 1987.
Mongolia has been aspiring to develop good-neighbourly relations with partners so-called ‘third neighbours’ besides its two neighbours. Those are countries that have supported Mongolia’s democratic transformation. We consider the United States as the most important ‘third neighbor’. Mongolia highly values its third neighbor relations with the US and its support for the further expansion of our bilateral relations and cooperation in accordance with the principles of Comprehensive Partnership.
Mongolian people are grateful for the United States and greatly appreciate its generous assistance to Mongolia from the very beginning of the transition towards democracy and market economy.
Mongolia is beneficiary of the Millennium Challenge Compact, which plays important role in sustaining economic growth and alleviating poverty in the country. Government of Mongolia has been consistently working to achieve tangible outcomes from its first Millennium Challenge Compact which has been implementing in last four years and is due to complete in September of this year.
Today multiparty elections, political pluralism and market economy are the reality of Mongolia. Democracy and human rights are shared values for Mongolia and the United States. Both our countries work together to promote democracy at the international area through our activities within the United Nations Democracy Fund and the Community of Democracies as well.
We build up a deep mutual understanding and a productive interactive dialogue at all levels. Two countries enjoy excellent bilateral cooperation in the defense field. Particularly we work shoulder to shoulder in international peacekeeping operations around the globe.
Looking back to these two decades of collaboration I can say that the Mongolian Government and all Mongolians are satisfied with the results. And I am fully confident that the coming years will be even more prosperous for the friendship and cooperation of our two nations. In what areas would you like to see the Government of Mongolia and the United States working more closely together?
I would like to see more investment from the U.S. in Mongolia and more goods made in Mongolia at the U.S. market. As ambassador, my highest priority is to enhance and strengthen trade and economic ties with the U.S.
Although trade and investment flows between Mongolia and USA have witnessed a strong growth in recent years, business and investment cooperation between our two countries is lacking far behind our excellent political cooperation at the regional and global level.
As of 2012, a total trade turnover between Mongolia and the USA amounted 539 mln, whereas Mongolian exports made up USD 3.5 mln, and import from the USA USD 535 mln. respectively. Motor vehicles, machinery and equipments are the main import items from the USA. Total investment since 1990 amounts USD 292 mln. The USA ranked at 8th.
There are immense opportunities for U.S investors and business people in Mongolia, particularly in the areas such as infrastructure, energy and fuel, which we meet our entire demand by importing from Russia. Please give your final message about Mongolia and its vast potential for the influential readers of U.S.A Today.
Mongolia has a great long-lasting history. This year we are celebrating the 2222nd Anniversary of the Mongolian Statehood. During its long history, Mongol nation has substantially contributed to the civilization and achievements of mankind.
As a result of the democratic revolution in 1990, and tremendous efforts of Mongolian people, Mongolia has become a vibrant and stable democracy with market-based economy. This is an irreversible move because democracy is aspiration of Mongolian people who enjoy freedom and self-determination.
Pursuing open, peaceful and multi-polar foreign policy, Mongolia plays a more important role at the global and regional arena and gains a good reputation.
The success of Mongolia is not only the achievement of Mongolians, but also it is the fruit of collective efforts and hard work of partner countries, organizations and people with whom the Mongolians cooperate.
Mongolia is at the brink of intensive development. We need to do plenty of work ahead to achieve our ambitious development goals and build state-of-art infrastructure, processing industry together with strong competitive services sector.
Our successes that we have achieved up to now over past decades would not have been possible without assistance provided by our foreign partners including United States. Today, we realize more than ever that our development goals, planned mega projects in mining, infrastructure and industrial projects could not succeed without foreign investment and cooperation. As Ambassador to the United States, I would like to welcome U.S investors and business people to Mongolia and to call upon them to realize “Mongolian dream” as people from all around the world realize the American dream in the U.S.