Foreign investors and businessmen are largely interested in Mongolia’s mining sector and this was the main subject at the 4th annual ‘Euromoney Mongolia Investment Forum’ sponsored by Euromoney and the Foreign Investment and Foreign Trade Agency (FIFTA) at the State Palace in Ulaanbaatar on September 8, 2009, with particular focus on the effect of the Oyu Tolgoi Project on Mongolia’s economy and investments. Speakers at the Forum declared that the Oyu Tolgoi Project would be a pilot and model project for the next large mining projects and would provide considerable progress in Mongolia’s economy and social life.

“The Mongolian investment environment is good. So far, large investors have not been interested in Mongolia as there were no big projects. However, tactical investors are now becoming interested in Mongolia and it is therefore expected that ‘tactical investors’ will become ‘strategic investors’,” said Mandar Jayawant, the managing partner at Frontier Investment and Development Partners.

Mr. Jayawant recommended that, if Mongolia wants to develop its mining industry, more emphasis also needs to be placed on developing its stock market as this would attract much more strategic and financial investment. Mr. Jayawant was previously the Asian Development Bank’s Deputy Country Director for Mongolia and has worked in China,
Uzbekistan, the Philippines and Indonesia.

Deputy Prime Minister, M.Enkhbold noted in his opening address by saying that Mongolia sees the mining industry as its major sector to attract foreign investment and that State policy is directed to supporting this.

He said, “Thanks to firm support by Mongolia’s foreign investment policy, the amount of foreign investment into the country is increasing year by year, contributing considerably to its economy. It gives me pleasure to note that foreign direct investment (FDI) and total investment per year are exceeding official development assistance and we believe that transnational companies will be interested to invest in Mongolia in the near future. A key factor for this is the fact that Mongolia has rich mineral resources, such as, gold, copper, zinc, silver and uranium.”

The Deputy Prime Minister confirmed that, basides mining production, the Mongolian Government is also making efforts
to attract foreign investments for the agricultural, food and energy production, infrastructural, construction, IT, tourism, and both heavy and light industries. Mr.Enkhbold requested investors to consider opportunities to invest
in these sectors and to develop fruitful cooperation with Mongolia’s economic entities.

Mongolia’s total foreign investment includes 54 percent in the mining sector alone and is showing a steady growth trend. From 1990 to 2008, Mongolia had attracted USD 3,1 billion in foreign investments by 9,750 foreign investor companies. FDI is increasing every year, with a notable increase of 41.8 percent in 2008 compared to the previous year.

Recommendations by foreign investors are that it is essential to prepare skilled manpower, analyze ways to absorb huge foreign investments and promote fruitful cooperation with domestic entities in order to develop the country’s mining industry and put it to good economic use.

Khan Bank, one of the Forum’s main sponsors, confirmed the Bank’s plans to activate banking services for mining projects, starting especially with the Oyu Tolgoi Project. “The Bank has already opened a branch located near the OT Deposit and is planning to open another near the Tavan Tolgoi Deposit,” said Khan Bank CEO Peter Morrow.

Noting that the demand to attract capital from foreign sources is a high priority in Mongolia’s banking sector, Mr. Morrow added that the banks’ increasing competition in the mining sector is likely to continue.

In parallel with large mining projects, new settlement areas will emerge, raising demands for food and goods’ supplies, and other services. Forum participants therefore focused special attention on profit opportunities
in the mining sector supply chain. The Mongolian Business Council has collected information and created a database on 11,000 suppliers.

The Forum was attended by more than 300 delegates from over 20 countries, such as, the USA, Japan, France, Germany, and Singapore.

Participants further recommended that Mongolia should organize an investors’ summit also saying that it
is time for other countries to become involved. In criticism they said that at present loans to cover requirements for expertise are not granted in Mongolia and that it is now necessary to change this law to allow such loans.

MP S. Oyun said that fair and balanced investment conditions for Mongolia and investors has now been established and Mongolia’s development should rely more on human development instead of on only mineral resources.

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