Mongolia to ease foreign investment law

Cabinet Minister Ch.Saikhanbileg last week submitted a revised draft of the “Law on Regulation of the Foreign Investments in the Strategically Significant Industries” to parliament.

The law in question currently requires foreign investors to obtain parliamentary approval when contributing more than a 49 percent stake or investing more than 100 billion MNT (70 million USD) in “strategic sectors,” which include the mineral resources, banking, finance, media, and telecommunications industries.

Aiming to ease conditions that may currently be discouraging investors, the amended law would increase the foreign investment threshold to 1 trillion MNT (719.7 million USD). The government clarified that the main target of the law is foreign state-owned investors, not private companies.

“If the new bill is passed in the upcoming parliament spring session, the procedure to obtain permissions on foreign direct investment in strategic sectors will be easier and more promptly resolved,” said Minister Ch.Saikhanbileg.

The existing investment law, passed last May, is believed to have effectively blocked Chinese state-owned steel giant CHALCO from investing in SouthGobi Resources, as parliament denied approval for this investment.

According to the Bank of Mongolia’s figures, foreign direct investment dropped 17 percent in 2012. This coincided with moves by the government that are believed by critics to have deterred investments in copper and coal.

This month the government decided to postpone the debate on the draft revision of the Mineral Resources Law until after presidential elections, which are scheduled for June, allowing more time for talks with industry leaders, and reducing the risk of the issue becoming embroiled in nationalist sentiment in the lead up to the election.

The draft Mineral Resources Law was released late last year but was not received favorably by mining companies, as it was viewed as giving the State the right to shares in strategic minerals deposits and the authority to change tax rates on mine leases, and would make it easier for the State to take back mining leases.

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