"Within one month our revenues had jumped over 50%."

Doing Business in Mongolia

gobi desert- Mongolia

Mongolia is a landlocked country in East and Central Asia. It is bordered by Russia to the north and China to the south, east and west. Mongolia’s political system is a parliamentary republic. Mongolia is the most sparsely populated independent country in the world, with a population of around 2.75 million people.  The country contains very little arable land, as much of its area is covered by steppes. About 20% of the population live on less than US$1.25 per day, according to an Human Development Report by the UN. The GDP per capita of Mongolia was estimated at $3200 in 2009, while its GDP was estimated at $9.459 billion, by the IMF. Mongolia joined the World Trade Organization in 1997 and seeks to expand its participation in regional economic and trade regimes.

Economic activity in Mongolia has traditionally been based on herding and agriculture, although development of extensive mineral deposits of copper, coal, molybdenum, tin, tungsten, and gold have emerged as a driver of industrial production, as reported by the US Bureau of East Asian Affairs.  Besides mining (21.8% of GDP) and agriculture (16% of GDP), dominant industries in the composition of GDP are wholesale and retail trade and service, transportation and storage, and real estate activities. The grey economy is estimated to be at least one-third the size of the official economy. Mongolia is ranked as lower middle income economy by the World Bank. Because of a boom in the mining sector, Mongolia had high growth rates in 2007 and 2008 (9.9% and 8.9%, respectively). In 2009, sharp drops in commodity prices and the effects of the global financial crisis caused the local currency to drop 40% against the U.S. dollar.

Mongolia was never listed among the Emerging markets countries until February 2011 when Citigroup analysts determined Mongolia to be one of Global Growth Generators countries which being countries with the most promising growth prospects for 2010–2050. In 2010, the Mongolian Stock Exchange had 336 companies listed with a total market capitalization of US$1 billion after doubling from US$406 million in 2008. Minerals represent more than 80% of Mongolia’s exports, a proportion expected to eventually rise to 95%. About 3,000 mining licences have been issued, as reported by The Economist. Mining is continuing to rise as a major industry of Mongolia as evidenced by number of Chinese, Russian and Canadian firms opening and starting mining business in Mongolia, according to the World Factbook. Mongolia also has extensive mineral deposits: copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production.

Overall, Mongolia seems like a great place to invest in for the time being. Its economy is highly dependent on mineral production, so businesses in other areas will have a harder time making inroads into the Mongolian market. But it seems the government is trying hard to bring prosperity to all areas of the country, through the mining boom. Recently, Mongolia’s economy was called the Wolf economy. The term was notably coined by Renaissance Capital in their report – Mongolia’s “Blue Sky Opportunity. They state that Mongolia is set to become the new Asian Tiger, or “Mongolian Wolf” as they prefer, and are “unstoppable”. With the recent developments in the mining industry and foreign interest increasing at an astonishing rate, it is claimed their Wolf Economy looks ready to pounce. The aggressive title mirrors the country’s attitude in the capital market environment, and with newfound mineral prospects it has the chance to retain its title as the fastest growing market in the region.

 

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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One Response to “Doing Business in Mongolia”

  1. Timber
    March 5, 2012 at 5:52 pm #

    I have never been in Mongolia but I ve heard the term “Wolf Economy”. Good one.

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