With foreign direct investment flowing largely to its mining sector, Mongolia responds favorably to UNCTAD’s Investment Policy Review recommending it to stimulate sustainable growth by diversifying FDI inflows.
Mr. Ochirbat Chuluunbat, Vice Minister of Economic Development of Mongolia, said he expected UNCTAD’s Investment Policy Review (IPR) of Mongolia to help catalyze growth and have considerable impact on sustainable development in his country.
The IPR recommendations are timely, Mr. Chuluunbat said. Mongolia is taking steps to capitalize on development opportunities presented by foreign investment in mining and setting up a strategy to diversify foreign direct investment (FDI) inflows into the country.
“Since 1991, when we moved towards a market economy, we have been implementing reforms to increase living standards in Mongolia. A quite significant contribution was made by FDI. Our evolution was not always smooth, but together with UNCTAD and consultations with private sector we have managed to move forward with reforms to improve the legal environment,” Mr. Chuluunbat added.
Following the IPR presentation, international investors were able to exchange views on the investment potential of Mongolia with the Government delegation. Country representatives and private sector experts and entrepreneurs commended the Government for enacting a new law on investments in 2013.
Dr. Mukhisa Kituyi, the Secretary-General of UNCTAD, praised the Mongolian authorities for such recent steps undertaken to restore investor confidence, which show that the IPR recommendations had already been put to good use. The Secretary-General further explained that managing such rapid economic growth as that expected in Mongolia so that it is inclusive is a key challenge for the country.
“The IPR aims to assist the Government of Mongolia to promote diversification of FDI inflows. The report shows that there are many opportunities to diversify inflows beyond mining, into sectors such as tourism, financial and business services, manufacturing niche products, livestock and infrastructure” Dr. Kituyi said.
The report recommends that Mongolia adopt a three-pronged diversification strategy aimed at attracting investment to new sectors, to new regions within the country, and from non-traditional investors.
Essential to the proposed strategy are improvements in transparency, accountability, business procedures and anti-corruption laws. In addition, the IPR counsels Mongolia to employ mining revenues, as well as FDI, to address major infrastructure and skills impediments. The mining sector itself could become a “growth pole” supporting economic diversification, with the adoption of an enhanced regulatory framework.
In addition, the IPR suggests that considerable potential exists in sectors associated with the country's traditional economic and social model, such as in eco-tourism, livestock and cashmere production. Growing FDI in these segments will require a carefully designed plan, strong institutional setting and professional investor-targeting based on a country brand.
Representatives of the international community participating in the discussion of the IPR were optimistic about Mongolia's potential to attract investment, but stressed the need to improve investment regulations, national infrastructure and diversification efforts.
A final draft of the IPR was earlier presented to Mr. Norovyn Altankhuyag, Prime Minister of Mongolia, and discussed at a workshop held in Ulaanbaatar, attended by public officials and private-sector representatives, in March 2013.
UNCTAD produces IPRs at the request of developing countries and nearly 40 such reviews have so far been carried out.