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.
