HomeReportsBureau of Economic and Business Affairs2018 Investment Climate Statements...Mongolia

# 					2018 Investment Climate Statements: Mongolia			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Tremendous mineral reserves, agricultural endowments, and proximity to Asia’s vast markets make Mongolia an attractive destination for medium- to long-term foreign direct investment (FDI). Beyond mining, which attracts the majority of FDI, agriculture, livestock, and renewable energy sectors provide opportunities for economic diversification and markets for U.S. goods and services. 2017 spikes in coking coal prices spurred GDP growth from 1.2 percent in 2016 to 5.1 percent in 2017, and FDI inflows reached USD 792 million in 2017 from USD 218 million in 2016. However, volatile global commodities markets, fiscal limitations, limited infrastructure, policy missteps, and the Government of Mongolia’s (GOM) ambivalence to FDI, as exemplified by its relationship with Rio Tinto and the Oyu Tolgoi copper and gold mega-mine, warrants caution in the short term.

Against this backdrop, the government, which assumed power in late 2017, continues some encouraging steps initiated by its predecessors. First, it is implementing the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment (TA), which came into force in March 2017 (TA: https://ustr.gov/sites/default/files/US-Mongolia%20Transparency%20Agreement-English-Final-As%20Posted.pdf). Welcomed by U.S. and foreign investors alike, the TA requires clear processes for drafting and commenting on new legislation and regulations for laws involving trade and investment. However, implementing these commitments challenges the government, and the business community must advocate for transparency to ensure government compliance with its obligations.

Second, in 2017, the International Monetary Fund (IMF) helped Mongolia avoid default on its large public debt with a comprehensive USD 5.5 billion package bringing necessary discipline and budget reforms. The IMF agreement allowed the GOM to refinance sovereign bonds on the international market that came due in 2017 and 2018, a more attractive and politically palatable alternative to relying exclusively on Chinese financing. Although investors recognize IMF-led budget tightening limits GOM capital expenditure, they praise the GOM’s ongoing, but incomplete, reform of its fiscal and borrowing practices and banking sector. The IMF and the Mongolian government anticipate economic growth of at least five percent in 2018, with new capital projects creating higher levels of sustainable growth in 2019.

GOM’s commitment to bold, pragmatic steps may nurture a stable, predictable business environment. Key to this outcome, U.S. and foreign investors and some Mongolian government officials assert Mongolia must stem constant, non-transparent amending of legal and regulatory rules, which frustrates Mongolia’s ability to stabilize its business environment and risks losing the FDI Mongolia needs to grow. Finally, Mongolia must: (1) root out the pervasive corruption threatening the foundational institutions of democracy; (2) create in reality the judicial independence the constitution establishes in principle; (3) facilitate private sector small- and medium-sized enterprises as an engine of economic diversification; (4) establish transparent, inclusive, effective rule-making processes for drafting and implementing commercial legislation; (5) modernize such traditional sectors as agriculture and animal husbandry; and (6) improve physical infrastructure. Notably, Mongolia offers women and minorities opportunities for economic empowerment and allows equal access to investment developments and protections.

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Toward Foreign Direct Investment**

Over the last five years, Mongolia has suffered from a combination of volatility in the value of its key commodity exports of coal and copper and policy missteps. These missteps have threatened fiscal stability and led the GOM to seek financial support from an IMF-led group of organizations and bilateral donors to cover budget shortfalls and sovereign debts. Since 2017, this three-year program has required significant budget tightening, increased fiscal discipline, and financial sector reforms. Consequently, the GOM has limited capacity to financially support investment projects in important sectors, most notably, energy, mining, and agriculture; and must rely on FDI to support its broad economic and development agendas.

The GOM publicly endorses a policy of seeking FDI and has taken measures that demonstrate this commitment. Investors view government support for the Oyu Tolgoi copper and gold mega-mine project as a bellwether for Mongolia’s openness to FDI and as demonstrable proof of Mongolia’s willingness to honor agreements. Despite minority political voices occasionally calling for material changes on agreements with large foreign investors, the GOM continues to affirm and abide by the investment agreements that established Oyu Tolgoi. In addition, the GOM imposes few onerous requirements for imports and has drastically reduced the use of prosecutorial “exit bans” against foreign business executives (now exclusively the responsibility of the General Prosecutor’s Office). Finally, the government has begun to implement the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment (TA). This Agreement allows investors and exporters to review and comment on legislation and regulations affecting trade and commerce before they are approved. A copy of the TA is available here: https://ustr.gov/sites/default/files/US-Mongolia%20Transparency%20Agreement-English-Final-As%20Posted.pdf .

Investors, foreign and domestic, have expressed appreciation for these positive steps but question whether recent progress indicates broader, more permanent progress. They state Mongolia possesses internationally high-standard laws and regulations, but note constant amending of laws and regulations prevents development of a stable and consistent business environment conducive to investment. Investors perceive officials have too much discretion to not only interpret statutes and regulations but to impose rules outside the legal code. Volatile commodity prices also serves as a disincentive to invest in Mongolia’s mining and other sectors, including construction, real estate, and IT, depending on mining sector activity for profitability. Investors approve of GOM plans to diversify the economy from overreliance on the mining sector – with the agricultural and livestock sectors being the most important diversification targets – but are concerned about the government’s slow progress to craft and implement practical diversification strategies. Investors also point to stalled GOM negotiations over key infrastructure projects, lack of progress on construction of power plants and railroads, and the absence of an agreement with a consortium to exploit the Tavan Tolgoi mega-coking coal mine, as reasons for skepticism about Mongolia’s ability to provide a business-enabling environment.

Investors continue to criticize the 2016 closing of the Invest Mongolia Agency (IMA), which had promoted Mongolian investment opportunities abroad and assisted foreign investors with obtaining tax stabilization, corporate registrations, and investment dispute resolutions with the government. The IMA’s replacement, the National Development Agency (NDA: http://investmongolia.com/ ), is supposed to issue tax stabilization certificates but has not implemented a process for doing so. The NDA says it will restore the IMA but the government has yet to fund this new agency fully. In conjunction with the International Finance Corporation, and with the support of the U.S. Embassy in Ulaanbaatar and business associations, including AmCham, the GOM established the Investment Protection Council (IPC: http://ipc.gov.mn/?lang=en ) to assist investors in dispute with government agencies. While investors praise the IPC in concept, they recommend that the government provide the IPC with a formal regulatory and statutory basis for its actions and more resources to execute its mandate. In addition, the Prime Minister’s Office maintains an Investors Advisory Council, which occasionally includes representatives from the foreign investment community.

Broadly, investors perceive no systemic, institutional effort to impose laws and practices that discriminate against foreign investors in general or U.S. investors in particular – with two key exceptions. First, foreign investors object to the regulatory requirement that they invest a minimum of USD 100,000 to establish a venture when the Investment Law of Mongolia states that all investors in Mongolia, without reference to nationality, are subject to national treatment. In contrast, Mongolian investors are not subject to investment minimums. Second, foreign nationals and companies may not own real estate; only Mongolian adult citizens can own land. Additionally, while foreign investors may obtain use rights (excluding mining exploration and extraction licenses) for the underlying land, these rights last for five years with a one-time five year renewal. The government imposes no such restriction on its nationals.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Mongolia’s constitution and related statutes limit the right to own land to adult citizens of Mongolia. However, no formal law exists vesting Mongolia’s pastoral nomadic herders with exclusive rights of pasturage, control of water, or land rights. As such, rural municipalities unofficially recognize that traditional, customary access to these resources by pastoralists must be taken into account before, during, and after other non-resident users, particularly but not exclusively those in the mining sector, can exercise use and ownership rights. Both foreign and domestic investors have the same rights to establish, sell, transfer, or securitize structures, shares, use-rights, companies, and movable property, subject to relevant legislation and related regulation controlling such activities in all sectors. Mongolia generally imposes no statutory or regulatory limits on foreign ownership and control of investments. The only exception is that the Mining Law of Mongolia allows the GOM to acquire up to 50 percent of mineral deposits deemed of strategic value to the state by Parliament. Investors assert that regulatory discretion allows bureaucrats to exercise *de facto* control over use of legally granted rights, corporate governance decisions, and ownership stakes. Finally, Mongolia has no formal or informal investment screening mechanism.

**Other Investment Policy Reviews**

The GOM conducted an investment policy review through the United Nations Conference on Trade and Development (UNCTAD) in 2013 and a trade policy review with the World Trade Organization (WTO) in 2014. Although the Organization for Economic Cooperation and Development (OECD) has not conducted a comprehensive investment policy review of Mongolia, it has completed economic studies on specific aspects of investment and development in Mongolia.

For the UNCTAD Mongolia investment policy review:http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=758 .

For the WTO Mongolia investment policy review in the context of a Trade Policy Review:https://www.wto.org/english/tratop_e/tpr_e/tp397_e.htm .

For OECD Mongolia reports:http://www.oecd.org/countries/mongolia .

**Business Facilitation**

In its 2013 Investment Policy Review of Mongolia, UNCTAD reported that to diversify and facilitate FDI beyond mining, Mongolia needed to comprehensively reform FDI policies to include clear “developmental objectives.” Legislation and regulation should be reformed so as to reflect an “open stance and practice” to FDI. The GOM’s limited institutional capacity requires enhancement to better implement and enforce effective, efficient regulations. As of 2018, Mongolia has yet to adopt these recommendations and has not applied UNCTAD’s ten investment facilitation guidelines to create a consistently transparent, predictable, efficient, and open regime to facilitate FDI. A copy of the UNCTAD report is available online: (http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=758 ).

However, consistent with the World Bank’s 2017 Doing Business Report, investors report that Mongolia’s business registration process is reasonably efficient and clear. All enterprises, foreign and domestic, must register with the General Authority for State Registration (GASR: http://burtgel.gov.mn/eng/index.php ). Registrants obtain form UB 03-II and other required documents from the website and can submit completed documents by email. GASR aims at a two-day turnaround for the review and approval process. However, investors report bureaucratic discretion can add weeks or even months to the process and argue more transparent adherence to the relevant laws and regulations would stabilize and streamline registration. Once approved by GASR, a company must register with the Mongolian General Taxation Authority (GTA: http://en.mta.mn/ ). Upon hiring its first employees, a company must register with the Social Insurance Agency (http://www.ndaatgal.mn/v1/ ). GASR reports that notarization is not required for its registration process.

Finally, while foreign investors routinely experience bureaucratic difficulties, they have never reported, nor has the U.S. Embassy in Ulaanbaatar ever observed, that business facilitation and registration agencies discriminate against women and minorities.

**Outward Investment**

Although the GOM neither promotes nor incentivizes outward investment, it does not restrict domestic investors from investing abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

The United States and Mongolia signed a Bilateral Investment Treaty (BIT) in 1994, with the agreement entering into force in 1997. The BIT states that the agreement will protect U.S. investors and assist Mongolia in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thus strengthening the development of the private sector. More information on the BIT is available from the U.S. Department of State’s website: https://www.state.gov/e/eb/ifd/bit/117402.htm.

In January 2017, the two countries certified completion of their respective applicable legal requirements and procedures for the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment (TA), which came into effect on March 20, 2017. The TA sets out clear processes for drafting and commenting on new legislation and regulations and requires strict transparency related to laws involving trade and investment. A copy of the TA is available here: https://ustr.gov/sites/default/files/US-Mongolia%20Transparency%20Agreement-English-Final-As%20Posted.pdf .

Mongolia and the United States have no bilateral tax or free-trade agreements.

Mongolia has an Economic Partnership Agreement (EPA) with Japan, which entered into effect in June 2016. For details on the EPA, please see the Japanese Ministry of Finance website (http://www.mofa.go.jp/policy/economy/fta/mongolia.html ). In 2016 Mongolia and Canada signed a Foreign Investment Promotion and Protection Agreement (FIPA) which entered into force in March 2017. For the FIPA text, please see the Canadian government website: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/mongolia-mongolie/fipa-apie/text-texte/canada_mongolia-mongolie.aspx?lang=eng&_ga=1.84652378.2117710027.1489461603 . In 2017 Mongolia and the Republic of Korea launched talks on a Free Trade Agreement.

Information regarding the various other investment agreements that Mongolia has signed is available from the UNCTAD website: http://investmentpolicyhub.unctad.org/IIA/CountryBits/139#iiaInnerMenu .

**Mongolia’s Taxation Regime**

In late 2017, the GOM embarked on a corporate tax reform program officially aimed at lowering rates while broadening the tax base for business activities in Mongolia. The new tax law will impose a corporate income tax of 10 percent on profits up to 6 billion tugriks (USD 2.5 million), up from the current 3 billion tugrik (USD 1.3 million) profit threshold; and apply a 25 percent profit tax on net earnings above 6 billion tugriks. Foreign and domestic investors have responded positively to this proposal, set to be introduced to parliament in spring 2018.

In addition, the GOM has passed and is proposing additional taxes on transactions related to the disposition of use rights and equities. In January 2018, the government imposed a 30 percent tax on the gross assessed value of any transfer of license for land use, including exploration and extraction licenses for mining. The largest beneficial owner of an enterprise is liable for the 30 percent tax on the use right, whenever a transfer of rights occurs, even if no sale of rights occurs. The Mongolian General Taxation Authority (GTA: http://en.mta.mn/ ) determines the value of the use rights using an internal, non-transparent system. In response to sustained criticism of this tax, the GOM has proposed lowering it to 10 percent of the assessed net value of the transfer rights.

The GOM has also proposed a 15 percent tax on the gross value of any sale of Mongolian equities by foreign investors based on the value the equities at the time they were first acquired, without reference to the actual value of the equities at time of sale. Share sales by Mongolian nationals would be taxed at lower rate on the net value of the transaction.

The GOM has argued it must impose these taxes to recover revenue lost to tax mitigation (as opposed to evasion) strategies used by investors, particularly foreign investors, and to discourage unhealthy speculation in its resource extraction sectors. Lacking the capacity to track revenues outside Mongolia, the government has decided to automatically tax the largest beneficial owner of the asset in Mongolia, no matter the nature of the transaction.

In January 2018, the GOM rescinded its planned introduction of a progressive personal income tax structure it had previously approved in 2017 as a precondition to entering into an IMF program. The GOM cited widespread public opposition and an improved fiscal budget situation for returning to its 10 percent flat personal tax rate.

While investors accept and recognize their obligation to pay taxes, they express deep concern about these current and proposed taxes. First, they believe the GOM has not given sufficient time for a transparent review of the impact of these taxes on affected parties. Second, they argue that these statutes give the GTA non-transparent authority to arbitrarily determine the value of a use right or an equity. Third, the imposition of excessive taxes on these transactions automatically raises the costs of investing in Mongolia, making it a less competitive destination for investment. Investors say that if they cannot make a reasonable profit in an arguably risky environment, they will invest elsewhere, denying Mongolia capital and technology it needs to develop economically and generate domestic employment. Finally, investors remain concerned about the GOM’s tax dispute mechanism. Large tax assessments, some in excess of USD 100 million, have been levied by the GOM against private companies, and disputes have remained un-adjudicated in the courts or the Tax Dispute Resolution Council for several years.

							3. Legal Regime					

**Transparency of the Regulatory System**

In September 2013, the United States and Mongolia signed the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment, or Transparency Agreement (TA). The agreement marked an important step in developing and broadening the economic relationship between the two countries. The TA makes it easier for U.S. and Mongolian firms to do business by guaranteeing transparency in the formation of trade-related laws and regulations, the conduct of fair administrative proceedings, and measures to address bribery and corruption. In addition, it provides for commercial laws and regulations to be published in English, improving transparency and making it easier for foreign investors to operate in the country. Parliament ratified the TA in December 2014, the United States and Mongolia certified that their respective applicable legal requirements and procedures were completed in January 2017, and the TA entered into force on March 20, 2017. Mongolia has five years to implement the TA fully. A copy of the TA is available here: https://ustr.gov/sites/default/files/US-Mongolia%20Transparency%20Agreement-English-Final-As%20Posted.pdf .

Entered into force on January 1, 2017, the Law on Legislation (LL) aligns Mongolia’s legislative processes with its TA obligations. The LL clarifies who has the right to draft legislation, the format of these bills, the respective roles of the GOM and parliament, and the procedures for obtaining and employing public comment on pending legislation. The LL states that law initiators – i.e., members of parliament, the president of Mongolia, or the cabinet of Mongolia – may introduce laws and amendments to existing statutes. To initiate legislation, the initiator must fulfill the following criteria: (1) provide a clear process for both developing, and justifying the need for, the draft legislation; (2) set out methodologies for estimating costs to the government related to the draft law’s implementation; (3) evaluate the impact of the legislation on the public once implemented; and (4) conduct public outreach before submitting legislation to the public. The LL requires that both the Head of the Cabinet Secretariat and the Head of the Parliament Secretariat certify that the law initiator has complied with these requirements before parliament officially accepts legislation for consideration.

To justify draft legislation and account for its costs and impacts, initiators must conduct studies that clearly demonstrate the need for and consequences of a new law. The initiator may reach out to government experts or contract with citizens and such legal entities as professional associations or civil society organizations for data-based information. Initiators must also submit draft legislation to the cabinet and affected ministries for comment and review as a precondition for receiving certification from the Head of the Cabinet Secretariat that the legislation complies with the LL.

The LL requires that law initiators obtain public comment by posting draft legislation and required reports evaluating costs and impacts on parliament’s official website at least thirty days prior to submitting it to parliament (http://forum.parliament.mn/projects?status=Submitted ). These posts must explicitly state the time period for public comment and review. In addition, initiators must solicit comments in writing, organize public meetings and discussions, seek comments through social media, and carry out public surveys. No more than thirty days after the public comment period ends, the initiator must prepare a matrix of all comments, including those used to revise the legislation as well as those not used. This matrix must be posted on parliament’s official web site. After passage of a new law, parliament is responsible for monitoring and evaluating both the implementation and impact of the legislation.

Both the TA and LL do not require the GOM to follow its transparency requirements for budget and related tax legislation. For example, in late 2017, parliament changed the process for issuing mining exploration licenses from an application process to a tender process, which could generate revenue for the budget. Because the GOM defined this change as a fiscal measure, it did not have to submit this legislation to LL requirements, nor did it have to submit for public review changes to the Minerals Law or the Land Use Law required by this budget act. Investors have expressed concern the GOM used this loophole in the LL and TA to pass legislation to escape its notice and comment obligations.

Publicly listed Mongolian companies adhere to International Financial Reporting Standards (IFRS). As with statutory requirements for transparent law making, regulations for accounting, legal, and regulatory procedures also require transparent processes for consistent implementation, and are sometimes (but not always) consistent with international norms and best practices. The business community and legal experts have criticized legal, regulatory, and accounting practices that are non-transparent, vague, or poorly worded in Mongolian and English translations, as well as inconsistently enforced. Domestic and foreign investors claim these domestic practices are largely aimed at extracting revenue for both the government and individuals, and occasionally to injure a company that may be competing against a state-owned or influential private entity. Consequently, some investors have concluded that the Mongolian government does not use transparent laws and regulations to create a level playing field for either foreign or domestic competitors. However, investors have expressed some hope that the TA and the recently passed transparency-based legislation will give them leverage in dealing with GOM regulators.

The General Administrative Law, Article 6, (GAL) brings Mongolia’s regulatory drafting process into line with its TA obligations. Parliament specifies in the text of each statute the specific ministry responsible for administering the law, which includes drafting regulations. The designated ministry creates a ministerial working group that may include representatives of other ministries affected by the statute. Regulatory drafts must be reviewed by the Ministry of Justice and Home Affairs to ensure consistency with other statutes and the constitution of Mongolia. The GAL requires regulations to use scientific or data-driven assessments to assess the costs and impact of proposed rules. The GAL also requires ministries, agencies, and provincial governments to seek public comment by posting draft regulations on their respective websites for at least thirty days and by holding public hearings, following the rules set out in the 2015 Public Hearing Law. The drafting entity must record, report, and respond to the public comment. The Ministry of Justice and Home Affairs must certify that each regulatory drafting process complies with the GAL before the regulations enter into force. After approval, the relevant government agency must monitor and evaluate the implementation and impact of the regulations.

Designated implementing agencies, such as the Mineral Resources and Petroleum Authority, the General Tax Authority, or the General Agency for Specialized Inspections, have statutory responsibility for enforcing regulations. These agencies use administrative remedies to enforce most regulations, including but not limited to seizing contraband, suspending or cancelling use rights and permits, or freezing financial assets. In addition to these administrative remedies, organizations responsible for criminal enforcement, such as the National Police, may enforce regulations using such criminal penalties as imprisonment if the regulatory infraction rises to the level of a crime. The public can contest administrative enforcement acts under the 2002 Law on Procedure for Administrative Cases (LPAC). The LPAC gives disputants the right to a hearing from the Administrative Court of Mongolia. However, the LPAC requires that parties first mediate the dispute with the relevant regulatory authority before seeking judicial remedy. Once the Administrative Court rules, either party can appeal the decision to the Supreme Court of Mongolia.

**International Regulatory Considerations**

Mongolia is not part of any regional economic block but often seeks to adapt and adopt European standards and norms in areas such as construction materials, food, and environmental regulations; looks to U.S. standards for activity in the petroleum sector; and adopts a combination of Australian and Canadian standards and norms in the mining sector. Mongolia also tends to employ World Organisation for Animal Health standards for its animal health regulations. Finally, Mongolia has a tendency to sync its veterinary, customs, and transport standards to China’s, its primary trade partner.

Mongolia, a member of the WTO, asserts that it will notify the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations; however, as demonstrated by the failure to notify TBT about changes in the process for using certificates of origin in 2016, Mongolia does not always comply with that commitment.

Mongolia is a signatory to the Trade Facilitation Agreement (TFA) and is working with both the European Union and the United States to comply with its TFA obligations. Lack of capacity has delayed implementation of TFA requisites.

**Legal System and Judicial Independence**

Mongolia has adopted a hybrid Civil Law-Common Law system of jurisprudence. Trial judges may use prior rulings to adjudicate similar cases but have no obligation to respect legal precedent as such. Mongolian laws, and even their implementing regulations, often lack the specificity needed for consistent interpretation and application. Experienced and dedicated judges do their best to rule in the spirit of the law in routine matters. However, statutory and regulatory vagueness invites corruption within the underfinanced and understaffed judiciary, especially in cases where large sums of money are at stake, or where large foreign corporations are in court against domestic government agencies or well-connected private Mongolian citizens.

Mongolia has a specialized law for contracts but no dedicated law for commercial activities. Contractual disputes are usually adjudicated in Mongolia’s district court system. Disputants may appeal cases to the City Court of Ulaanbaatar and ultimately to the Supreme Court of Mongolia. Mongolia has in place several specialized administrative courts authorized to adjudicate cases brought by citizens against official administrative acts. Disputants may appeal administrative court decisions to higher trial courts. Mongolia has a Constitutional Court, dedicated to ruling on constitutional issues. The General Executive Agency for Court Decisions (GEACD) enforces court decisions.

The Mongolian constitution specifies that non-judicial elements of the GOM “shall not interfere with the discharge of judicial duties” by the judicial branch. The Judicial General Council (JGC), composed of respected jurists, is charged with the constitutional duty of ensuring the impartiality of judges and independence of the judiciary. However, the council lacks official authority to investigate allegations of judicial misconduct or to impose disciplinary measures on judges or other judicial sector personnel. Mongolian law recently required judges to maintain membership in the Mongolian Bar Association (MBA), but some judges actively oppose that requirement with the result that the MBA is no better positioned than the JGC to police the judiciary.

The legislative branch has interfered directly with the judicial branch. In 2016 Mongolia’s Constitutional Court ruled that four provisions of a subsidized residential mortgage program were unconstitutional. Following the program’s suspension, then Parliament Speaker Z. Enkhbold issued a statement that “the parliament will annul the decision of the Constitutional Court and restore the original law with the same provisions as before.” Parliament thereupon voted in special session to dismiss the presiding justice of the court, paving the way for re-adoption of the original legislation and re-establishment of the mortgage subsidy program. Legal experts believe parliament has no authority under Mongolian law to dismiss the presiding justice. Even members of parliament who supported his ouster did so to keep the very popular mortgage program in place and readily admit that the speaker effectively engineered an assault on the court’s independence.

Legal experts believe Mongolia’s substantive law also invites judicial corruption through weak distinctions between the branches of the GOM, which allows unconstitutional overreach. The thinly staffed GEACD is charged with implementing the decisions and verdicts of Mongolia’s civil and criminal courts. GEACD is responsible for operating prisons, garnishing wages, impounding moveable property, and much more. But GEACD personnel do not report to the JGC or directly to the courts, but report to the Ministry of Justice and Home Affairs (an element of the executive branch). The GEACD works closely on a functional level with the Office of the Prosecutor General, an independent agency run by a presidential appointee. However, its funding is provided by parliament. The strong influence of Mongolian prosecutors on Mongolian courts is well documented. Mongolian courts, for example, rarely dismiss charges over the objection of the prosecution or otherwise enter defense verdicts even after trial. As a result of this convoluted chain-of-command, the GEACD can function as a conduit of potentially inappropriate communication from an interested corner of the GOM to the judiciary.

**Laws and Regulations on Foreign Direct Investment**

2017 saw no major changes in the 2013 Investment Law of Mongolia. The Investment Law frames the general statutory and regulatory environment for all investors in Mongolia. Under the law, foreign investors can access the same investment opportunities as Mongolian citizens and receive the same protections as domestic investors. Investor residence, not nationality, determines whether an investor is foreign or domestic. The law also provides for a more stable tax environment and provides tax and other incentives for investors. Accordingly, most investments by private foreign individuals or firms residing in Mongolia need only be registered with the General Authority State Registration (GASR: http://burtgel.gov.mn/eng/index.php ).

The Investment Law offers tax incentives in the form of transferrable tax stabilization certificates that give qualifying projects favorable tax treatment for up to 27 years. Affected taxes may include the corporate income tax, customs duties, value-added tax, and mineral resource royalties. The law had created a one-stop shop for investors, the Invest Mongolia Agency (IMA), but the government cancelled this program in 2016. The National Development Agency is now responsible for issuing tax stabilization certificates but has not implemented a process for doing so. The remaining IMA support functions are no longer available to foreign investors from the GOM. The NDA has stated it will create a successor agency to the IMA but the government has yet to fund this new agency.

While foreign investors say they appreciate the intent of the Investment Law, they note it does not always deliver the promised national treatment, specifically in two areas. First, foreign nationals and companies may not own real estate; only Mongolian adult citizens can own land. While foreign investors may obtain use rights for the underlying land, these rights expire after a set number of years, with a limited right of renewal. Second, foreign investors object to the regulatory requirement that they invest a minimum of USD 100,000 to establish a venture. Although the Investment Law has no such requirement, GOM regulators have unilaterally imposed it on all foreign investors. In contrast, Mongolian investors are not subject to investment minimums.

**Competition and Anti-Trust Laws**

Mongolia’s Agency for Fair Competition and Consumer Protection (AFCCP) reviews domestic transactions for competition-related concerns. For a description of the AFCCP and its legal and regulatory powers, see the UNCTAD website (http://unctad.org/en/PublicationsLibrary/ditcclp2012d2_Mongolia_en.pdf ) and the AFCCP website (http://www.afccp.gov.mn/ ).

**Expropriation and Compensation**

Although Mongolia generally respects property rights, the Mongolian government and parliament may exercise eminent domain in the national interest. Mongolian state entities at all levels are authorized to confiscate or modify land use rights for purposes of economic development, national security, historical preservation, or environmental protection. However, Mongolia’s constitution recognizes private real property rights and derivative rights, and Mongolian law specifically bars the GOM from expropriating such assets without payment of adequate, market-based compensation. Investors express little disagreement with such takings in principle but worry that a lack of clear lines of authority among the central, provincial, and municipal levels of government creates occasions for loss of property rights. For example, the 2006 Minerals Law (amended in 2014) provides no clear division of local, regional, and national jurisdictions for issuances of land use permits and special use rights. Faced with unclear lines of authority and frequent differences in practices and interpretation of rules and regulations by different levels of government, investors can find themselves unable to fully exercise duly conferred property rights. The GOM has acknowledged this but has yet to remedy it.

Many of the cases alleging expropriation involve court expropriations after criminal trials in which the investors were compelled to appear as “civil defendants” but were not allowed to fully participate in the court proceedings. In these cases a GOM official is usually convicted of corruption and sentenced to prison, and the trial court judge then orders the foreign civil defendant to surrender a license or pay a tax penalty or fine for having received an alleged favor from the criminal defendant. In ongoing disputes involving several foreign investors, among them U.S. companies, the courts have taken property or revoked use licenses despite an absence of evidence the property or licenses were derived from corruption.

Investors and the legal community have expressed concerns about an act of parliament they perceive as expropriation. In June 2016, the Mongolian Copper Company, a privately-held entity, bought 49 percent of Mongolian state-owned Erdenet Mining Corporation from the Russian state-owned company Rostec. The non-transparent sale of this mining asset generated public controversy. Parliament subsequently nullified the transaction in February 2017, and ordered seizure of the Mongolian company’s shares. In March 2018, Mongolia’s Constitutional Court upheld this taking but ordered the government to compensate the private company. While investors and legal experts do not dispute parliament’s powers under the constitution and statute to nationalize property, they state that parliament has no authority to undo a business transaction between two non-government or foreign parties. They assert that the court, bending to improper pressure from parliament, delivered a decision inconsistent with Mongolia’s constitution. Consequently, they argue that this taking undermines the sanctity of contracts and may well discourage investment into other projects.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Mongolia has ratified the Washington Convention and has joined the International Centre for Settlement of Investment Disputes (ICSID) in 1991. It also signed and ratified the New York Convention in 1994. The government of Mongolia has accepted international arbitration in several disputes.

*Investor-State Dispute Settlement*

The U.S.-Mongolia Bilateral Investment Treaty (BIT) entered into force in 1997 (http://www.state.gov/e/eb/ifd/bit/117402.htm). Under the BIT, the two countries have agreed to respect international legal standards for state-facilitated property expropriation and compensation matters involving nationals of either country. The BIT effectively provides an extra measure of protection against financial loss for U.S. nationals doing business in Mongolia. In at least one expropriation case, however, the GOM restored a mining license it had unilaterally modified years previously, but declined to compensate for undisputed financial loss as required by the BIT and independently required by the domestic law specifically cited in rendering the modification. Under the BIT, such uncompensated expropriation is appealable through arbitration proceedings. However, the cost of arbitration can make it impractical for aggrieved parties.

The number of investment disputes involving foreigners in Mongolia is unknown. Fearing to jeopardize future opportunities in Mongolia, some U.S. and foreign investors quietly pursue or even abandon potentially sensitive projects, especially those involving a GOM interest. Some investors report that GOM entities have solicited bribes in order to preempt or resolve particular investment disputes with foreign interests.

In disputes involving the GOM, investors report government interference in the dispute resolution process, both administrative and judicial. Foreign investors describe three general categories of disputes that invite such interference. The first comprises disputes between private parties before a GOM administrative tribunal. In these cases, a Mongolian private party may exploit contacts in government, the judiciary, law enforcement, or the prosecutor’s office to coerce a foreign private party to accede to demands. The second category involves disputes between investors and the GOM directly. In these cases, the GOM may claim a sovereign right to intervene in the business venture, often because the GOM itself is operating a competing state-owned enterprise (SOE) or because officials have undisclosed business interests. The third category involves Mongolian tax officials or prosecutors levying highly inflated tax assessments against a foreign entity and demanding immediate payment, sometimes in concert with imposition of exit bans on company executives or even the filing of criminal charges.

Investors have reported local courts recognize and enforce arbitral decisions, but that problems exist with enforcement. The thinly staffed GEACD is charged with implementing the decisions and verdicts of Mongolia’s civil and criminal courts. GEACD employees often live in the jurisdictions in which they work, and are subject to pressure from friends and professional acquaintances. A complicated chain-of-command and opportunities for conflicts of interest can weaken GEACD’s resolve to execute court judgments on behalf of foreign and domestic interests.

*International Commercial Arbitration and Foreign Courts*

Although investors voice concern that the GOM may choose to ignore international arbitration decisions, the GOM has consistently declared it will honor arbitral awards. In 2016 the GOM and Canadian uranium mining company Khan Resources settled a high-profile expropriation dispute after a Paris arbitration panel awarded USD 104 million to the Canadian company. The parties settled for USD 70 million, which the GOM paid in May 2016.

To improve Mongolia-based international arbitration, parliament passed a new Arbitration Law in January 2017. Based on the United Nations Commission on International Trade Law (UNCITRAL), the Arbitration Law provides a clearer set of rules and protections for Mongolia-based arbitration. The law does not, however, designate any particular organization for use by all disputants, and remains unused by a foreign entity, to our knowledge. Any organization that satisfies specific requirements set out in the law can provide arbitral services. This change breaks the monopoly on domestic arbitration held by the Mongolian National Chamber of Commerce and Industry (MNCCI), which many investors criticized as politicized, unfamiliar with commercial practices, and too self-interested to render fair decisions. Foreign investors say they prefer international arbitration but might consider domestic arbitration if the newly established domestic arbitration tribunals are seen to be fair and effective.

The new law also limits the role of Mongolia’s courts in the arbitration process. Previously, disputants could appeal to Mongolia’s civil courts if the results of “binding arbitration” were not to their liking. The new arbitration law limits parties to a single appeal only to Mongolia’s Court of Civil Appeals (CCA). The CCA can only reject an arbitration judgment for “serious” procedural failings or discrepancies with official public policy initiatives.

As reported in the section on Investor-State Dispute Settlement, local courts will recognize both foreign and domestic arbitral awards and order the General Executive Agency for Court Decisions to enforce them, although collection may be slowed or even sabotaged for the reasons described above.

Foreign investors perceive a bias against them if they pursue legal action against a Mongolian SOE. To our knowledge, no foreign plaintiff has prevailed against an SOE in Mongolia’s courts. Mongolia-based legal experts say foreign investors and exporters are likely to experience preemptory, non-transparent court processes up to outright discrimination by judges. Most investors and legal experts advise using other dispute resolution mechanisms when confronting Mongolian SOEs.

**Bankruptcy Regulations**

Mongolia’s Bankruptcy Law defines bankruptcy as a civil matter. Mongolian law mandates the registration of mortgages and other debt instruments backed by real estate, structures, immovable collateral (mining and exploration licenses and other use rights); and, after March 2017, movable property (cars, equipment, livestock, receivables, and other items of value). However, even though the law allows for securitizing movable and immovable assets, local law firms hold that the bankruptcy process remains too vague, onerous, and time consuming to make it practical. Mongolia’s constitution and statutes allow contested foreclosure and bankruptcy only through judicial (rather than administrative) proceedings. Local business and legal advisors report that proceedings usually require no less than 18 months, with 36 months not uncommon. Investors and legal advisors state that a lengthy appeals process, perceived corruption, and government interference can create years of delay. Moreover, while in court, creditors face suspended interest payments and limited access to the asset.

							4. Industrial Policies					

**Investment Incentives**

The GOM generally offers the same tax preferences to both foreign and domestic investors. The GOM occasionally grants tax exemptions for imports of essential fuel and food products or for imports in certain targeted sectors, such as agriculture or energy. Such exemptions can apply to Mongolia’s five percent import duty and 10 percent value-added tax (VAT). In addition, the GOM occasionally extends a 10 percent tax credit on a case-by-case basis to investments in key sectors such as mining, agriculture, and infrastructure. Under the Investment Law, foreign-invested companies properly registered and paying taxes in Mongolia are considered domestic Mongolian entities, thus qualifying for investment incentive packages that, among other benefits, include tax stabilization for a period of years. In 2014 parliament authorized the central bank, the Bank of Mongolia (BOM), to waive 7.5 percent of the 10 percent royalty on gold miners pay when selling gold to the BOM and Mongolian commercial banks through 2017. The GOM has extended this program and continues to underwrite low-interest loans from commercial banks for small- to medium-sized gold mines selling gold to the BOM.

Investors should note the ongoing International Monetary Fund Program has required the GOM to cancel, modify, or suspend some lending schemes and tax incentives.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

The Mongolian government launched a free trade zone (FTZ) program in 2004. Two FTZ areas are located along the Mongolia spur of the trans-Siberian highway: the northern Russia-Mongolia border town of Altanbulag and the southern Chinese-Mongolia border town of Zamiin-Uud. Both FTZs are relatively inactive, still pending development. A third FTZ is located at the port of entry of Tsagaannuur in the far western province of Bayan-Olgii bordering Russia. Mongolian officials also suggest that the New Ulaanbaatar International Airport (NUBIA), expected to commence operations in 2019, may host an FTZ. Observers have noted that Mongolia’s FTZ program has failed to prosper due to lack of implementing regulations based on international best practices and insufficient resources to develop human capacity and appropriate on-site infrastructure.

**Performance and Data Localization Requirements**

Mongolia does not legally require foreign investors to use local goods, services, or equity, or to engage in substitution of imports. The government applies the same geographical restrictions to both foreign and domestic investors. Existing restrictions involve border security, environmental concerns, and local use rights. The government does not impose onerous or discriminatory visa, residence, or work permit requirements on U.S. investors – although foreign and domestic firms must meet certain industry-specific local hire requirements. Neither foreign nor domestic businesses need to purchase from local sources, export a certain percentage of output, or use foreign exchange to cover exports.

The GOM strongly encourages but does not legally compel domestic sourcing of material inputs, especially for firms engaged in natural resource extraction. The 2014 amendments to the 2006 Minerals Law of Mongolia state that holders of exploration and mining licenses should preferentially supply extracted minerals at market prices to Mongolian processing facilities and should procure goods and services and hire subcontractors from business entities registered in Mongolia. Although there are no formal enforcement procedures to ensure local sourcing, investors occasionally report that central, provincial, or municipal governments slow down permitting and licensing until domestic and foreign enterprises make some effort to source locally. Hiring Mongolians essentially becomes a legal necessity considering the GOM requirement that employers seeking work visas for foreign employees demonstrate that their workforces comprise the same percentage of domestic hires suggested in Mongolia’s procurement law. A long-pending draft labor law, if adopted in 2018, would clarify the extent to which these target percentages are mandatory.

Despite pressure to source locally, foreign investors generally set their own export and production targets without concern for government-imposed targets or requirements. Mongolia does not require technology transfers. The government generally imposes no offset requirements for major procurements. Investors, not the Mongolian government, make arrangements regarding technology, intellectual property, and similar resources, and generally may finance as they see fit. Except for a currently unenforced provision of the amended Minerals Law of Mongolia requiring mining companies to list 10 percent of the shares of the Mongolian mining company on the Mongolian Stock Exchange, foreign-invested businesses are not required to sell shares to Mongolian nationals. Equity stakes are generally at the discretion of investors, Mongolian or foreign.

In cases where investments are determined to have national impact or raise national security concerns, the GOM may restrict the type of financing that foreign investors may use, their choice of partners, or to whom they sell shares or equity stakes. Investors and local legal experts note that the system by which the GOM regulates these transactions lacks a clear statutory basis and transparent, predictable regulatory procedures.

Investors can locate and hire workers without using hiring agencies as long as hiring practices follow Mongolia’s Law on Labor. Mongolian law requires companies to employ Mongolian workers in certain labor categories where it has been determined that a Mongolian can perform the task as well as a foreigner. This law generally applies to unskilled labor categories and not fields in which a high degree of technical expertise not existing in Mongolia is required.

The GOM has no forced localization policy for data storage; no legal requirements for IT providers to turn over source code or to provide access for surveillance; and no rules or mechanisms for maintaining a certain amount of data storage at facilities within the territory of Mongolia.

							5. Protection of Property Rights					

**Real Property**

The Mongolian constitution provides that “the State shall recognize any forms of public and private properties.” The constitution limits real estate ownership to adult citizens of Mongolia, though that limitation does not apply to “subsoil,” a term not expressly defined in the constitution. Mongolian civil law allows private Mongolian citizens or government agencies to assume property ownership or use rights if the current owner or holder of use rights does not use the property or the rights. In the case of use rights, revocation and assumption is almost always written into the formal agreements covering the rights. Squatters may also under certain circumstances claim effective property ownership of unused structures.

Although foreigners and non-resident investors may own structures and obtain use rights to land, only Mongolian citizens may own real estate. Ownership of a structure vests the owner with control over the use rights of the land upon which the structure sits. Use rights are granted from periods of three to sixty years depending on the particular use right. However, foreign nationals or foreign companies can obtain a land use right for no more than 10 years: a five year lease term with a single five year renewal. Although Mongolia has a well-established register for immovable property – structures and real estate – it lacks a central register for use rights; consequently, investors, particularly those seeking to invest in rural Mongolia, have no easy way to learn who might have conflicting rights. Complicating matters, Mongolia’s civil law system has yet to develop a formal process for apportioning multiple use rights on adjacent lands or adjudicating disputes arising from conflicting use rights.

Mongolian law allows creditors to recover debts by seizing and disposing of property offered as collateral. Mongolian law mandates that mortgages and other debt instruments backed by real estate, fixed structures, and other immovable collateral be registered with the Immovable Property Office of the General Authority for State Registration (GASR: http://burtgel.gov.mn/eng/index.php ). Mongolian law began allowing movable property (cars, equipment, livestock, receivables, and other items of value) in March 2017 to be registered with GASR as collateral. Investors report that the immovable property registration system is generally reliable, but the movable property system continues to experience capacity issues and suffers from non-transparent, arbitrary regulations that limit access. At this point, the GOM has no accurate figure for land with clear titles.

**Intellectual Property Rights**

Mongolia supports intellectual property rights (IPR) in general, and as member of the World Intellectual Property Organization (WIPO) has signed and ratified most relevant treaties and conventions, including the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights (WTO TRIPS). Mongolia’s parliament has yet to ratify the WIPO internet treaties. Nevertheless, the Mongolian government and its IPR enforcer, the Intellectual Property Office of Mongolia (IPOM), make a good faith effort to comply with these agreements. For additional information on IPR protection, see http://www.ipom.mn/ .

Under TRIPS and Mongolian law, the Mongolian Customs Authority (MCA) and the National Police Economic Crimes Unit (ECU) have an obligation to protect IPR. MCA can seize shipments at the border, while the ECU has the exclusive power to conduct criminal investigations and bring criminal charges against IPR violators. The IPOM has the administrative authority to investigate and, with the official concurrence of the General Prosecutors Office, the power to seize pirated goods. Of these agencies, the IPOM makes the most consistent efforts to fulfill Mongolia’s IPR treaty commitments. It generally has an excellent record of protecting U.S. trademarks and copyrights; however, tight resources limit the IPOM’s ability to act. In most cases, when a rights holder files a complaint, the IPOM investigates. If it determines that an abuse has occurred, it has in every case so far seized the pirated products under its administrative powers granted by Mongolian law. Mongolia does not publicize figures of seizures of IPR violating contraband.

The U.S. Embassy is aware of two particular areas where enforcement lags. First, legitimate software products remain rare in Mongolia, with IPOM estimating in early 2018 that at least 85 percent of the domestic market uses pirated software. The IPOM enforces the law where it can, but the scale of the problem dwarfs its capacity to deal with it. Second, pirated optical media are also readily available and subject to spotty anti-piracy enforcement. The growth of online downloads of pirated digital media by individuals, local Mongolian TV stations using pirated videos, radio broadcasters playing pirated music, and cellular service providers offering pirated ringtones has eclipsed local production and imports of fake CDs, videos, and DVDs. The IPOM acknowledges that most local public and privately held TV stations, over 180 at latest count, regularly broadcast pirated materials; however, the IPOM hesitates to move on these broadcasters, most of which are connected to major government or political figures. The IPOM rarely initiates action on its own without prompting from rights holders.

The IPOM has told rights holders it intends to amend Mongolia’s copyright and patent laws in 2018 and that it will seek comment and review from affected parties. However, it has not yet provided details of its planned legal changes.

Although the IPOM acknowledges Mongolia’s IPR challenges, the GOM has demonstrated sufficient progress and political will to avoid Mongolia being considered either a notorious market for pirated goods or as a U.S. Trade Representative Special 301 country.

For more on IPR issues, contact the U.S. Embassy in Ulaanbaatar Economic and Commercial Section; +976-7007-6001 or Ulaanbaatar-Econ-Comm@state.gov. For additional resources on protecting IPR in Mongolia, please see the American Chamber of Commerce in Mongolia website: http://amcham.mn/ . The U.S. Embassy also provides a list of attorneys available here: https://mn.usembassy.gov/u-s-citizen-services/arrest-of-a-u-s-citizen/.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles: http://www.wipo.int/directory/en/ .

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Mongolia is developing the experience and expertise needed to sustain portfolio investments and active capital markets. The GOM has reported that it wants to establish vibrant capital markets, and seeks to use the state-owned Mongolian Stock Exchange (MSE: http://mse.mn/en ) as the primary venue for generating capital and portfolio investments. To achieve this goal, parliament passed the Revised Securities Market Law, which most investors believe creates a sufficient regulatory apparatus for these activities.

The 2013 Amended Securities Market Law of Mongolia provides a legal framework for dual listing of securities on both the Mongolian Stock Exchange (MSE) and approved international exchanges. The Financial Regulatory Commission (FRC) issued a temporary list of approved foreign stock exchanges in 2017 and list of approved jurisdictions in which underlying securities of depository receipts are registered. According to the FRC, companies registering on any of these 26 exchanges will face a simple and straightforward procedure to dual list on the MSE. While investors have expressed support for dual listing, they note the MSE has yet to bring its practices in line with international best practices used by other exchanges, such as clearing and disclosure procedures, making which makes MSE listings risky. As a result, no company has yet to execute a dual-listing on the MSE. Overall, most foreign investors shy away from investing in the MSE because it lacks the regulatory capacity, accountability, transparency, and liquidity to effect proper capital formation and portfolio investments.

The GOM imposes few restrictions on the flow of capital into and out of any of its markets and, despite previous, unsuccessful attempts to require businesses to channel all transactions through Mongolian commercial banks, has respected IMF Article VIII by imposing no restrictions on payments and transfers for international transactions.

The Mongolian financial system allocates credit on market terms and such credit is available to foreign investors through a variety of debt instruments.

**Money and Banking System**

Of the 14 commercial banks currently operating in Mongolia, four large banks are majority owned by both Mongolian and foreign investors. These banks – Golomt, Khan, Khas, and Trade and Development Bank – collectively hold approximately 80 percent of all banking assets or about USD 10.5 billion as of January 2018. The banks operate branches throughout the country and are regularly audited by one of the big four international accounting firms. Mongolian commercial banks had rates of non-performing loans averaging 8.7 percent in March 2018, a slight increase from March 2017’s 8.2 percent. The four major commercial banks generally follow international standards for prudent capital reserve requirements, have conservative lending policies, up-to-date banking technology, seem generally well-managed, and are open to foreigners opening bank accounts under the same terms as Mongolian nationals. In addition, foreign investors, including the International Finance Corporation and Goldman Sachs, have equity stakes in several of these four banks. While there are no legal prohibitions, the GOM generally discourages majority foreign control of any local commercial bank or foreign establishment of local branch operations. Mongolia’s commercial banks also face the challenge of maintaining correspondent relations with U.S.-based banks. Local bankers report that correspondent banks are terminating their Mongolian relationships because of the perceived weak financial regulatory oversight in Mongolia and the corresponding high costs of compliance for the limited revenue generated from the small number of Mongolian transactions.

To consolidate weaker, less capitalized banks into larger, better funded institutions, the BOM in 2015 ordered all commercial banks to increase their minimum paid-in-capital from the current minimum of USD 8 million to USD 25 million by December 2018. While the BOM and Mongolia’s financial system have endured insolvencies over time, each failed bank had shown clear signs of distress before the BOM moved to safeguard depositors and the banking system. As with many issues in Mongolia, the problem is not lack of laws or procedures for dealing with troubled banks, but rather some lack of capacity and an apparent reluctance on the part of BOM banking overseers to enforce regulations related to capital reserve requirements, bank management and corporate governance, and non-performing loans.

Pursuant to the IMF-led program, international auditors conducted an in-depth asset quality review of Mongolia’s commercial banking in 2017. The audits, a condition for Mongolia’s receiving support under an IMF extended fund facility, reviewed the asset quality of all of Mongolia’s 14 commercial banks. Banking executives and the IMF reported that the results were better than expected, revealing a relatively small systemic mismatch of asset valuation to the total loan portfolio. The commercial banks now have until the end of 2018 to raise capital to cover the approximate asset shortfall of USD 200 million for the sector’s total loan portfolio of USD 13 billion. Publicly, the BOM and the IMF have stated that the banking assessments are unlikely to measurably affect the commercial banking sector but may result in some consolidation among smaller, undercapitalized banks.

Parliament amended the Banking Law of Mongolia (BL) in January 2018, and the amendments went into force on April 1, 2018. However, commercial banks have until January 1, 2019, to comply with the amended BL. The BL provides for the following: (1) requires banks to disclose actual beneficial owners; (2) prohibits banks from establishing subsidiaries or affiliates and engaging in related party transactions; (3) clarifies rules of corporate governance; (4) introduces comprehensive measures for rescuing troubled banks and resolving bank failures; and (5) provides the BOM with broader regulatory powers over banks, especially in area of dealing with troubled banks.

Blockchain technologies, such as Bitcoin and related cryptocurrencies, began generating significant investments in Mongolia (nearly USD 150 million in late 2017). According to the BOM and commercial banks, blockchain currencies are not properly registered for tax purposes and operate outside of the supervision of the BOM, which is responsible for regulating currencies in Mongolia.

In addition to traditional commercial banks, the BOM also authorizes the delivery of financial services through non-bank-financial-institutions, credit co-ops, and pawn shops. Although these entities can extend credit for collateral, they cannot take deposits. These entities avail themselves of the same settlement mechanisms available to individual and bank creditors.

**Foreign Exchange and Remittances**

The Mongolian government employs a liberal regime for controlling foreign exchange. Foreign and domestic businesses report no problems converting or transferring investment funds, profits and revenues, loan repayments, or lease payments into whatever currency they wish aside from occasional, market-driven shortages of foreign reserves. Mongolia’s national currency, the tugrik (denoted as MNT), is fully convertible into a wide array of international currencies with its relative value fluctuating freely (after falling in recent years, it strengthened 2.5 percent against the USD in 2017) in response to economic trends. The Bank of Mongolia regularly intervenes in currency markets to limit MNT volatility.

The 2009 Currency Law of Mongolia requires all domestic transactions be conducted in MNT unless expressly exempted by the BOM. Regulation prohibits the listing in Mongolia of wholesale or retail prices in any fashion (including as an internal accounting practice) that effectively denominates or otherwise indexes those prices to currencies other than the MNT. Given the 50 percent devaluation of the MNT during Mongolia’s most recent fiscal crisis, this requirement has adversely impacted businesses that pay for imported goods in U.S. dollars or other foreign currency and sell them in MNT. Businesses caught adjusting MNT prices in exact or nearly exact proportion to currency fluctuations can face stiff penalties up to the full market value of the involved goods.

BOM regulation compels lenders to issue written warnings to borrowers seeking dollar-denominated loans that the steady depreciation of the MNT in recent years has translated to very significant increases in the real costs of servicing dollar loans. Hedging forward mechanisms available elsewhere to mitigate exchange risk for many national currencies are generally unavailable in Mongolia given the small size of the market. Letters of credit in a variety of currencies are available for trade facilitation. The GOM sometimes resorts to paying for goods and services with promissory notes that cannot be directly exchanged for other currencies.

*Remittance Policies*

Businesses report no delays in remitting investment returns or receiving in-bound funds. Most transfers are completed within a few days to a week. However, in response to occasional currency shortages, most often of U.S. dollars, commercial banks can temporally limit the amounts they exchange daily, transmit abroad, or allow to be withdrawn. Remittances sent abroad are subject to a ten percent withholding tax to cover any potential profit, income, or value-added tax liabilities.

**Sovereign Wealth Funds**

Mongolia’s Ministry of Finance currently manages two sovereign wealth funds (SWF): the Fiscal Stabilization Fund and the Future Heritage Fund. Both are to be funded through the diversion of mining sector revenues. The Fiscal Stabilization Fund is intended to divert revenues that might promote boom and bust cycles of spending; however, Mongolia’s recent fiscal crisis all but depleted this fund. The Future Heritage Fund, a SWF similar to the Norwegian SWF (Pension Fund Global), is designed to accumulate mining revenues for the future and invest the proceeds exclusively outside Mongolia. The Ministry of Finance and the IMF project the Future Heritage Fund will start accumulating USD 104-125 million annually in 2022, coinciding with increased revenues from the Oyu Tolgoi copper and gold mega mine.

Previous iterations of sovereign wealth funds have been spent locally on social programs and domestic projects, none of which has negatively impacted U.S. investment in Mongolia.

Although the IMF is aware of Mongolia’s sovereign fund efforts, Mongolia does not participate in the IMF SWF working group or ascribe to the code of good SWF practices known as the Santiago Principles, though the government says it has integrated many of these principles in its laws and intends to join the IMF working group in 2020.

							7. State-Owned Enterprises					

The Mongolian government maintains various state owned enterprises (SOEs) in the banking and finance, energy production, mining, and transport sectors. The Government Agency for Policy Coordination on State Property (PCSP: http://www.pcsp.gov.mn/en ) manages the non-mining and non-financial assets. The Ministry of Finance manages the State Bank of Mongolia and the Mongolian Stock Exchange, and SOE Erdenes Mongol holds most of the government’s mining assets. The PCSP does not provide a complete list of its SOEs. Investors can compete with SOEs, although in some cases an opaque regulatory framework limits both competition and investor penetration. Indeed, both foreign and domestic private investors believe the current GOM approach to regulating SOEs favors Mongolian SOEs over private enterprises and foreign SOEs. Although many private companies have been created or registered in Mongolia in recent years, including foreign private companies, the GOM has also created several dozen SOEs over the same period.

In 2010 Mongolia passed and implemented the Law of Mongolia on Competition applying to private enterprises and SOEs alike. Prior to passage, competition between state-owned and private businesses had been declining for the simple reason that many SOEs had been privatized. Currently, firms from Mongolia, China, Japan, Europe, Canada, and the United States have sought opportunities for renewable and traditional power generation, a sector still dominated by state-owned coal-fired power plants and a state-owned transmission grid. However, few want to invest in the power generation field until the regulatory and statutory framework for private power generation firms up and tariffs reflect commercial best practices and true cost recovery.

The 2006 Minerals Law of Mongolia (amended in 2014) and the 2009 Nuclear Energy Law grant the GOM the right to acquire equity stakes ranging from 34 percent up to 100 percent of certain uranium and rare earth deposits deemed strategic for the nation. Once acquired, these assets are vested with Erdenes Mongol, the state-owned entity for mining assets. Mongolia requires Erdenes Mongol to use its profits to “benefit the Mongolian people.”

The role of the state as an equity owner in management of revenues and operation of mines remains unclear. Investors question the GOM’s capacity to deal with conflicts of interest arising from its position as both regulator and owner-operator. Specifically, they worry that the GOM’s desire to maximize local procurement, employment, and revenues may compromise the long-term commercial viability of mining projects. Investors also question the GOM’s capacity to execute its fiduciary responsibilities as both owner and operator of mines. Observers are concerned that the GOM waives legal and regulatory requirements for state-owned mining companies that it imposes on all others. Generally, approval for relevant environmental and operating permits for private coal mines in Mongolia takes at least two years. However, there are indications that the GOM has exempted Erdenes Tavan Tolgoi (ETT) mining operations from regulatory requirements imposed on other operations. Preferential treatment for SOEs creates the appearance that the GOM has one standard for its SOEs and another for foreign-invested and private domestic invested companies; and also provides SOEs with substantial cost advantages via a more lenient interpretation or outright waiver of legal requirements.

Mongolian SOEs will source from foreign firms only when inputs are not available locally or cannot be produced competitively in Mongolia. SOEs and private enterprises are under political pressure to source locally as much as possible and often resort to creating local Mongolian shell companies to act as domestic storefronts for foreign-sourced goods. This unofficial requirement adds inefficiency and cost to serving the Mongolian market. Finally, Mongolia is not yet a party to the World Trade Organization Procurement Agreement, although it has expressed a desire to join.

**Mongolian Compliance with OECD Guidelines on Corporate Governance of SOEs**

Mongolian SOEs do not adhere to the OECD Corporate Governance Guidelines for SOEs; however, they are technically required to follow to the same international best practices on disclosure, accounting, and reporting as imposed on private companies. When SOEs seek international investment and financing, they tend to follow these rules. Many international best practices are not institutionalized in Mongolian law, and SOEs tend to follow existing Mongolian rules. At the same time, foreign-invested firms follow the international rules, causing inconsistencies in corporate governance, management, disclosure, and accounting.

The SOE corporate governance structure is clear on paper; an independent management answers to an independent board of directors, which reports to the Government Agency for Policy Coordination on State Property (PCSP: http://www.pcsp.gov.mn/en ). In reality, government officials note that management and board of director operations and appointments are subject to political interference to an almost crippling extent. In support of developing a professional management, the Asian Development Bank is funding a USD 35 million corporate governance strengthening project for Erdenes Mongol, an SOE holding key copper and coal mining assets.

**Privatization Program**

Parliament’s 2016 National Action Plan references privatizing some state-held assets, but the government has yet to identify the specific assets to privatize or the process to implement privatization. The GOM routinely floats the possibility of privatizing through sales of shares or equity in the Mongolian Stock Exchange (MSE), the national air carrier MIAT, the Mongol Post Office, and other properties but so far has sold only 30 percent of the Mongol Post Office to private buyers through an initial public offering on the MSE. While stating it welcomes foreign participation in privatization efforts, the GOM has not clarified a tendering process for the privatization of state assets not to be sold via the MSE. Mongolia has no plans to privatize its power or rail systems. The latter is jointly held with the government of Russia, but the law does allow private firms to build, operate, and transfer new railroads to the state.

							8. Responsible Business Conduct					

The concept and practice of responsible business conduct (RBC) in Mongolia is still in its infancy. Most international companies make good faith efforts to work with local communities. The larger firms tend to follow accepted international RBC practices and underwrite a range of RBC activities across Mongolia; however, smaller companies, lacking sufficient resources, often limit RBC actions to the locales in which they work. Generally, firms adopting RBC are perceived favorably, at least within the communities in which they operate. Nationally, responses range from praise from politicians to cynical condemnation by certain civil society groups that allege RBC is no more than an attempt to buy public approval. Public awareness of RBC remains limited, with only a few NGOs involved in RBC promotion or monitoring, and those concentrated on such large projects as the Oyu Tolgoi mega-mine project owned by international mining giant Rio Tinto.

Given the lack of high profile, controversial instances of private sector impact on human rights, the GOM, given its limited capacities, generally takes a light but good faith touch on enforcing legislation on human rights, labor rights, consumer protection, environmental protection, and other laws protecting individuals from adverse business impacts. While the Company Law of Mongolia articulates rules of corporate governance, accounting requirements, and shareholder rights, it legislates no rules for executive compensation. Finally, Mongolia, a supplier of mining outputs rather than processor, has no official position on OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and no domestic legislation regarding due diligence for companies that source minerals that may originate from conflict-affected areas.

Although the government is aware of Organisation for Economic Co-operation and Development (OECD: http://www.oecd.org/about/ ) and UN principles on RBC, it has not prioritized adopting an over-arching statutory requirement for RBC covering all companies. However, the 2013 amended Minerals Law of Mongolia requires minerals exploration and mining companies to develop local development plans with the soum (county) in which they operate. Ministry of Mining and Heavy Industry (MMHI) officials explain that the GOM will eventually codify and standardize how companies should work with soums on local development issues. The MMHI has a model agreement laying out specific, mandatory obligations that companies and municipalities would assume toward one another and the specific projects companies would be able to undertake in the municipalities. After five years, investors report the model agreement remains a work in progress.

Mongolia is a member in good standing of the Extractive Industries Transparency Initiative (EITI: http://eitimongolia.mn/en ).

							9. Corruption					

Corruption remains widespread in Mongolia. Although the law provides criminal penalties for corruption by officials, the government does not always implement the law effectively and corruption continues at all levels. Private enterprises commonly report instances in which government employees pressure them to pay bribes to transfer use rights, settle disputes, clear customs, ease tax obligations, act on applications, obtain permits, and complete registrations. Although the constitution and law provide for an independent judiciary, NGOs and private businesses report that judicial corruption and third-party influence continue. Factors contributing to corruption include: conflicts of interest, lack of transparency, limited access to information, an inadequate civil service system, and weak government control of key institutions.

Mongolia’s new criminal code, effective July 1, 2017, introduced stricter liability for corruption and corruption-related offenses for public servants and government officials. These laws extend to the immediate families of government officials. The laws also require government officials to disclose their assets to the Independent Authority Against Corruption (IAAC: http://www.iaac.mn/home?lang=en ). In addition, the government in March 2017 developed a three-year action plan to implement the National Program Combatting Corruption adopted in November 2016. The Anti-Corruption Law has been bolstered by several amendments since its 2006 passage; however, the government has passed no legislation dedicated to protecting NGOs and others investigating and reporting government corruption. Although Mongolia has a relatively free press that allows NGOs and reporters to publicize findings, recourse to criminal libel and defamation laws may permit officials accused of corruption to use the threat of criminal prosecution to silence critics. Finally, Mongolia imposes no statutory requirement on companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. U.S. and other foreign businesses have reported that they accept the need for and have adopted internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

The IAAC is the principal agency responsible for investigating corruption, assisted at times by the National Police Agency’s Organized Crime Division. Although some investors question the IAAC’s political impartiality, the public generally views the agency as effective. The IAAC follows a standard operating procedure for ensuring that investigations of corruption allegations are handled correctly. The IAAC has publically reported on its recent successes, including its reformation of the government tender process to permit only electronic tender submissions and the blacklisting of companies violating rules of government procurement. It airs a weekly awareness program on Mongolian National TV to inform the public of its anti-corruption activities.

The GOM since July 2017 has also put forth measures to reduce the use of offshore bank accounts by government officials to combat corruption. In conjunction, the IAAC announced in early 2018 that several current and former public officials associated with offshore bank accounts were subject to active investigations.

In addition, Mongolia has signed and ratified the UN Anticorruption Convention (UNAC: https://www.unodc.org/unodc/en/corruption/ratification-status.html ) but not the OECD Anti-Bribery Convention.

The U.S. Embassy in Ulaanbaatar would not recommend any particular industry group or non-profit for vetting of potential local investment partners. Normally, local legal firms provide such services. A partial list of local legal firms is here: https://mn.usembassy.gov/u-s-citizen-services/arrest-of-a-u-s-citizen/.

For more information on corruption in Mongolia, see The Asia Foundation’s surveys on corruption in Mongolia (http://asiafoundation.org/2016/11/30/asia-foundation-releases-study-private-perceptions-corruption-stopp-mongolia/ ) and the State Department’s 2016 Mongolian Human Rights Report (https://www.state.gov/j/drl/rls/hrrpt/).

**Resources to Report Corruption**

Government agencies responsible for combating corruption:

Independent Agency Against Corruption (IAAC)District 5, Seoul Street 41Ulaanbaatar, Mongolia 14250Telephone: +976-70110251; 976-11-311919Email: contact@iaac.mnWeb: http://www.iaac.mn/home?lang=en 

Local “watchdog” organization:

Transparency International MongoliaTur-Od Lkhagvajav, Chairman of the Mongolian National ChapterZorig Foundation, 2nd floorPeace Avenue 17, Sukhbaataar DistrictUlaanbaatar, MongoliaTelephone: +976 9919 1007; +976 9511 4777; +976 95599714Email: lturod@gmail.comWeb: https://www.transparency.org/country/MNG 

							10. Political and Security Environment					

The Mongolian political and security environment is characterized largely by peace and stability, with rare instances of political violence. Mongolia has held 13 successful presidential and parliamentary elections over the past 20 years, though a brief outbreak of civil unrest (including violence) followed disputed parliamentary elections in July 2008. During that unrest, five people were killed and a political party’s headquarters was burned. The violence was quickly contained and order restored, and no repeat of a similar level of civil unrest has occurred since. Mongolia held peaceful presidential elections less than a year later in May 2009, in which the incumbent president was defeated and conceded the next day with power smoothly transitioning to the winner. Mongolia’s successful parliamentary elections in June 2016 also led to a peaceful transition of political power. The 2017 presidential race required a runoff election for the first time, with no reports of significant irregularities.

A more resource-nationalist tone in politics has become evident in recent years. Media and observer reports suggest rising anti-foreigner sentiment among some elements of the public, mostly based on the desire to have Mongolian resources developed in an environmentally sound, culturally sensitive way by Mongolians for the benefit of Mongolians. However, this nationalist sentiment has led to no known incidents of anti-Americanism or politically motivated damage to American projects or installations since the United States and Mongolia established diplomatic relations in 1987. Over the last three years, some commentators have described a rising level of hostility towards Chinese, Vietnamese, and South and North Korean nationals in Mongolia. This hostility has led to instances of improper seizure of Chinese and Korean property, and in some cases acts of physical violence against Chinese nationals and Chinese-owned property, and to a lesser extent, against Korean and Vietnamese nationals residing in Mongolia.

							11. Labor Policies and Practices					

The National Statistics Office of Mongolia (NSO) reports that as of January 2018, 7.8 percent, or 109,000, out of the 1.4 million people defined by the NSO as economically active were unemployed. Youth unemployment (15-34 year olds) hovers around 57 percent of total unemployed. Approximately 6,000 foreign workers are officially registered with the Ministry of Labor (MOL), of whom two-thirds work in construction, mining, and manufacturing. More than one-third of the foreign workers come from China.

The Mongolian labor pool of nearly 1.4 million workers, of whom 802,000 live in urban areas and 566,000 in rural areas, is generally educated, young, and skilled. Unskilled labor is abundant but shortages exist in most professional categories requiring advanced degrees or vocational training, including all types of engineers and professional tradespeople in the construction, mining, and services sectors. Foreign-invested companies address these shortages by providing in-country training to their staff, increasing salaries and benefits to retain employees, or hiring expatriate workers with specific skills and expertise unavailable in Mongolia.

Mongolian labor laws are not particularly restrictive. Investors can locate and hire workers without using hiring agencies, as long as hiring practices follow the 1999 Law on Labor of Mongolia (LOL). The LOL requires companies to employ Mongolian workers in all labor categories wherever the Ministry of Labor and Social Protection (MLSP) determines a Mongolian can perform the task as well as a foreigner. This LOL provision generally applies to unskilled labor categories. If an employer seeks to hire a non-Mongolian laborer and cannot obtain a waiver from MLSP for that employee, the employer can pay a monthly waiver fee. Depending on a project’s importance, MLSP can exempt employers from 50 percent of the waiver fees per worker. However, employers report difficulty in obtaining waivers, due in part to public perceptions that foreign and domestic companies refuse to hire Mongolians in the numbers that they should.

Because Mongolia’s long, cold winters limit outdoor operations in the infrastructure development, commercial and residential construction, and mining exploration sectors, employers tend to use a higher degree of temporary contract labor than companies that can operate year-round. The law allows employers and employees to use these short-term contracts.

Employers have expressed concern over the package of proposed amendments to the LOL before parliament. If passed in 2018, these amendments would mandate that employers, the GOM, and the Confederation of Mongolian Trade Unions (CMTU) form a committee to set actual work hours and conditions, rather than allowing employers and employees to contract directly based on actual labor needs. Both foreign and local employers have advocated against this change and other proposed amendments to LOL, noting that such changes restrict their ability to respond to fluctuating market conditions.

The LOL allows workers to form or join independent unions and professional organizations of their choosing and protects rights to strike and collective bargaining. However, some provisions restrict these rights for foreign workers, certain public servants, and workers without formal employment contracts, though all groups have the right to organize. The law protects the right of workers to participate in trade union activities without discrimination, and the government has protected this right in practice. The law provides for reinstatement of workers fired for union activity, but the CMTU reports that this provision is not always enforced. According to the CMTU, some employees occasionally face obstacles to forming or joining unions, and some employers have taken steps to weaken existing unions. For example, some companies use the portion of employees’ salaries deducted for union dues for other purposes rather than forwarding the monies to the unions. Some employers have prohibited workers from participating in union activities during working hours, contravening the law. There also have been some violations of collective bargaining rights, as some employers refuse to conclude collective bargaining agreements in contracts.

The Law on Collective Bargaining regulates relations among employers, employees, trade unions, and the government. Wages and other conditions of employment are set between employers (whether public or private) and employees, with trade union input in some cases. Laws protecting the rights to collective bargaining and freedom of association are generally enforced. The Tripartite Labor Dispute Settlement Committees (TC) resolves the majority of disputes between workers and management and consists of representatives from Mongolia’s CMTU, employers, and the government. However, management and legal contacts state that TCs are not compliant either with the existing labor law or Mongolia’s 2013 Law on Mediation. Cases that cannot be resolved by TCs are referred to the courts. For how Mongolian labor laws relate to union activity, see the 2017 Mongolia Country Report on Human Rights Practices (https://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper).

The LOL allows employers to fire or lay off workers for cause; however, depending on the circumstances, severance may be required and workers may seek judicial review of their dismissal. Investors and legal experts report that Mongolia’s courts usually support employee claims, especially when the plaintiff or defendant is a foreign business. The statutory severance package requires employers to pay laid off workers one month of the contracted salary; fired workers receive no severance. Laid off or fired workers are entitled to three months of unemployment insurance from the Social Insurance Agency.

The International Labor Organization (ILO) has expressed concern about child labor practices and variations between Mongolian law and international labor standards. Authorities report that employers often do not follow the law, requiring minors to work in excess of the permitted hours per week and paying them less than the minimum wage. The General Agency for Specialized Inspections (GASI: http://www.inspection.gov.mn/ ) enforces all labor regulations; however the agency is understaffed. GASI inspectors are authorized to compel compliance with labor statutes, but its limited capacity, combined with the growing number of privately owned enterprises (over 150,000), limits enforcement. Additional information on the ILO conventions ratified by Mongolia is available on the ILO website: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:103142 .

Mongolia and the United States do not have a signed trade agreement that covers their respective labor practices.

							12. OPIC and Other Investment Insurance Programs					

The United States Overseas Private Investment Corporation (OPIC) offers loans and political risk insurance to U.S. investors active in most sectors of the Mongolian economy, ranging from education to logistic services to finance. In addition, OPIC and Mongolia have signed an Investment Incentive Agreement that requires the GOM to extend national treatment to OPIC-financed projects in Mongolia. The agreement is available online: http://photos.state.gov/libraries/mongolia/5/business/1990_OPIC-Investment-Incentive-Agreement-with-Mongolia.pdf . For example, under this agreement mining licenses of firms receiving an OPIC loan may be pledged as collateral to OPIC, a right not normally bestowed on foreign financial entities. The U.S. Export-Import Bank (EXIM: www.exim.gov ) offers programs in Mongolia for short-, medium-, and long-term transactions in the public sector and for short- and medium-term transactions in the private sector. Mongolia is also a member of the Multilateral Investment Guarantee Agency (MIGA: https://www.miga.org/ ).

South Korea, Canada, the Russian Federation, Japan, China, Poland, Hungary, and Austria have provided investment and trade financing for their firms in Mongolia. In addition, the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) have supplied significant financial support for Mongolian investments.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

*Table 3: Sources and Destination of FDI*

Note: The Government of Mongolia has never tracked where the beneficial ownership of a given investment actually terminates. The government only records where the company claims its domicile. The U.S. Embassy is aware of numerous cases where foreign entities active in Mongolia do not incorporate in their countries of origin but rather do so in third countries, largely for tax mitigation purposes. Consequently, although Mongolia’s data and the IMF’s, respectively, suggest that much of Mongolia’s investment originates from such places as the Netherlands or Singapore, much of the investment comes from other jurisdictions, including but not limited to the United States, Australia, Canada, Russia, and China.

*Table 4: Sources of Portfolio Investment*

Note: From IMF’s Coordinated Portfolio Investment Survey (CPIS) site: http://data.imf.org/?sk=B981B4E3-4E58-467E-9B90-9DE0C3367363 .

							14. Contact for More Information					

The Economic and Commercial SectionU.S. EmbassyP.O. Box 341Ulaanbaatar 14192, MongoliaTelephone: +976-7007-6001Email: Ulaanbaatar-Econ-Comm@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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