CNSV >> Mongolia Investment Banking Group//Comments on the Impact to Foreign Investment

Most readers will already be aware that the incumbent in yesterday¹s

Presidential election, Mr. Elbegdorj of the Democratic Party, has won by a

small margin at 50.23%. MIBG would like to take this opportunity to

highlight the importance of Elbegdorj¹s re-election and to point out the

fundamental shift that we believe it signifies for Mongolia¹s investment

climate.

1.    Elbegdorj¹s agenda for re-election stated that Mongolia will not

discriminate against investors. While this was a far reaching statement

lacking some clarity we believe that it presents an open and strong

foundation for foreign investment into Mongolia. We fully expect him to play

a significant role in the development of the New Investment Law that we have

reviewed for our readers previously as well as the New Minerals Law which is

expected to be softened now that the election has passed.

2.    This will be Elbegdorj¹s last term in office, which means that his

economic policy is less likely to carry the populist sentiment that is

required to win office in Mongolia. That said, we are cognizant that the

Democratic Party will be looking to create a favorable position for the next

Parliamentary elections. However, we feel that the signs of economic

weakness that have already become evident will force Elbegdorj¹s hand to

support foreign investment into the country.

3.    With Elbegdorj¹s win confirmed, the three heads of state (President,

Prime minister and Speaker) for the next three years are all members of the

Democratic Party. This provides Mongolia with a solid foundation for the

next three years in terms of the introduction and implementation of

Government policy and legislation. This will support progress across the

country and should streamline Government activities as there will be little

concern for Presidential and Parliamentary disputes which could result in

either side using their veto power to override the other.

4.    In the next few months we expect that the New Minerals Law will move

to the forefront of investors¹ attention. Introduced to strong opposition in

December of last year, Elbegdorj withdrew his draft and ordered a new

working group to develop the country¹s mining policy to which the proposed

law was to be re-modeled. We strongly believe that this decision by

Elbegdorj was aimed at protecting all stakeholders, domestic and foreign,

whereas previous laws that affected Mongolia¹s investment climate were

proposed and passed by Parliament without input from such external

stakeholders as the mining community.

5.    The fight against corruption has been one of the cornerstone

activities of the Democratic Party, we expect that this is likely to

continue for the remainder of Elbegdorj¹s term. As this is his last term in

office we believe that he is likely take a much stronger stance than he has

in the past and will attempt to eradicate the corruption that has plagued

both the private and public sectors since the early 2000¹s.

We strongly believe that Elbegdorj¹s re-election is a major step forward for

Mongolia. It is a strong signal to the foreign investment community, for

private sector growth, and for the overall economy of the country. If you

have any questions about this or any other research produced by MIBG please

contact the MIBG Research Team at research@mibg.mn.