New Investment Law in Mongolia

The Mongolian government is in the process of reviewing a number of key laws with a view to bringing equality to domestic and foreign investors, in order to create stability in both investment and taxation. The primary aim is to restore international confidence and to turn around the significant drop in foreign direct investment (FDI) that was seen in 2012 (20%) and H1 2013 (43%).

The reduced levels of FDI in the market have had a significant impact in the Mongolian job market, leading to lower job creation and even redundancies (refer to the major layoffs made by Oyu Tolgoi in light of the suspension of Phase 2 activity). If you are a talented job seeker in Mongolia the number of options likely to be open to you now are lower than they were in 2011 when jobs were rapidly coming onto the market and it was really a job seekers market.
The impact has also been felt at the executive search level with companies being increasingly slow to hire at the senior level and processes therefore being quite lengthy and decisions sometimes put on hold.

FDI can bring significant benefits to host countries for a host of reasons: corporate tax revenues, new jobs in Mongolia, introduction of new technology to the market, increased access to foreign markets, employee training and human capital development etc. With the decrease in FDI we've seen a decrease in all of these benefits.

Within the laws that has had this impact is one called the Strategic Entities Foreign Investment Law, or SEFIL, which was passed in May 2012 and in which an investor acquiring 33% or above of a firm requires government approval of the transaction, and an acquisition of 49% or more requires parliamentary approval.

As of today, the new Investment Law, is currently at the final stage of parliamentary approval. The vote will most likely take place in December of this year. Once the new Investment Law takes effect it will replace the current Foreign Investment Law (1993) and the Law to Regulate Foreign Investment in Sectors of Strategic Importance (SEFIL) of 2012

This would undeniably go some way towards restoring foreign investment but experts believe that this law alone will not be enough to bring the foreign investment back to levels similar to year 2011, where Mongolia achieved an economic growth of 17.3%.

The proposed law has 6 major changes to foreign investments in Mongolia.

No discrimination between foreign and domestic investors. Which would equally support both domestic and foreign invested entities while still protecting against state owned enterprises.Provide economic and legal stability. It will allow foreign investors to be exempt from any change in law occurring after the agreement.No more "Sectors of Strategic Importance". There will be no separation between sectors, previously, Minerals, Banking, Finance, Communication were listed as Strategic Importance.Foreign investors will be defined as private and state owned. If foreign investors' state ownership portion exceeds 1/4th the law would require approval from relevant ministry.Taxation stability for investments. Investments over 15 billion MNT will be supported by a tax stability program, the duration between 5-10 depending on the commitment size.Invest Mongolia. Introduction of a new agency under title of "Invest Mongolia" with a one purpose only: attracting foreign direct investment into Mongolia. With a dedicated agency the Government will better engage in discussions of FDI.

If the new proposal passes, Mongolia will take a big step forward in terms of encouraging renewed levels of foreign investment.

It is our hope that this step, alongside others, will restore FDI inflows into Mongolia, leading to creation of more jobs and brighter careers in Mongolia. It will also open doors for Mongolians overseas (repats) to come back and work in better circumstances in their home country.

Mongolia Talent Network is the leading Mongolian recruitment / headhunting agency in Ulaanbaatar. We have a large team of headhunters permanently based in Mongolia working to get you great job options in Mongolia. In addition to our direct clients, we also have over 100 companies using our website to advertise their job positions on our free job board. Rate this Article

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Rav Howards has published 3 articles. Article submitted on September 28, 2013. Word count: 615

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