Invest Asia Group in Mongolia
Last Update: 13th September 2020
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Parliament Building in Ulaanbaatar, Mongolia
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Mongolia is a large, landlocked country located between China and Russia in East Asia. Originally part of the Soviet Union during the 20th century, Mongolia regained independence following the anti-Communist revolutions of 1989 and has transitioned to a multi-party system, market economy ever since.
Originally, the Mongolian economy relied upon agriculture and livestock but with rich mineral deposits across the country, mining is the main industrial activity. Aside from minerals (including coal, copper, molybdenum, tin, tungsten, and gold), cashmere is also a notable export and Mongolia produces a substantial percentage of all world cashmere supplies.
Originally, the Mongolian economy relied upon agriculture and livestock but with rich mineral deposits across the country, mining is the main industrial activity. Aside from minerals (including coal, copper, molybdenum, tin, tungsten, and gold), cashmere is also a notable export and Mongolia produces a substantial percentage of all world cashmere supplies.
Mongolia: Overview
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Mongolia is the most sparsely populated country in the world with a population of only 3.3 million but with a land size over 4 times larger than Germany! Famous for its nomadic populace and spectacular scenery, this landlocked country is in a strategic position between the superpower countries of China and Russia.
Whilst Mongolia is renowned for Genghis Khan, deserts, mountains and Buddhist history, its rich natural resources have been at the forefront of developing the economy. Since joining the World Trade Organization in 1997, Mongolia has welcomed international investors across a diverse range of sectors. This has been reflected in its continual climbing of the rankings of 'ease of doing business' where it has continually improved annually. Despite challenges with its minimal arable land and lack of sea, various analysts are very bullish on the future of the economy of Mongolia with various opportunities for investors. |
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Mongolia Cities
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With approximately 40% of the population living in the capital city of Mongolia (Ulaanbaatar), this is by far the largest city in the country, however, we've listed the top five cities in Mongolia (by population) below.
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Mongolia Provinces
Mongolia has 21 different provinces throughout the country as well as the capital city of Ulaanbaatar. Aside from the provinces, there are also additional lower tiered administrative divisions including districts and sub-districts but for the purpose of this country overview, these details aren't necessary. Provinces of Mongolia are as follows:
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Mines in Mongolia
Mongolia's economy has largely relied on natural resource extraction with a number of mines currently operating throughout the country. Coal, copper and Gold are the major reserves currently extracted from Mongolia. This list isn't exhaustive but provides details of operating mines.
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Famous Iron Ore Mine(s) in Mongolia
Famous Coal Mines in Mongolia
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Famous Copper Mines in Mongolia
Famous Gold Mines in Mongolia
Famous Tungsten Mines in Mongolia
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Aside from the above famous mines, there are also a large number of other opportunities to extract a diverse range of minerals. Mongolia welcomes foreign investment into the mining industry with producers, developers and explorers operating at different levels within the country.
Business Operations in MongoliaOperating a business in Mongolia presents an array of opportunities as well as challenges. Aside from obvious business related risks, understanding and working within a foreign system presents numerous challenges to investors.
However, with a relevant strategy, professional advice and local team, these risks can be mitigated. Whilst details are quite complex, we’ve summarized accordingly so readers can gain an understanding of the different options and processes involved in operating a business in Mongolia. |
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Forming a Company in Mongolia
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Establishing a company in Mongolia is not an easy process and depending upon your specific business objectives, there are various different options when establishing a company within Mongolia.
Similar to other East Asian countries, Mongolia has adopted a variety of different structures for establishing companies. The following structures are the most commonly implemented for investors establishing a company within Mongolia:
Aside from the specific company structures, investors also should consider other factors before establishing in Mongolia including business sector factors, location and regional language skills. |
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Mongolia Company Formation Procedure
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The company formation procedure in Mongolia varies depending upon the company type and structure. For the purposes of this country overview article, we will outline the procedures involved in forming a Wholly Foreign-Owned Enterprise (WFOE) in Mongolia.
Aside from the above overview/general procedures to form a company, there are also specific additional steps required, depending upon the sector and industry. Mongolia, like most countries also prohibits investment across a number of sectors so investors should be aware of these restrictions in advance. Invest Asia Group strongly advises investors to engage either an experienced local consulting company or an international law firm to navigate these processes. |
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International Investors
Whilst there are certain restrictions, international investors/companies can operate businesses in Mongolia. Mining is a popular industry among international corporations. Moreover with continual, ongoing reforms, the number of restricted industries that foreign investors are able to operate in Mongolia is continually being reduced on an annual basis.
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Corporate Taxes
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There are a number of different corporate taxes within Mongolia as outlined below:
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Where to establish
Within Mongolia, the only place to establish a headquarters is in the capital city of the country - Ulaanbaatar. This is the only internationally recognized city with any size within the country. Obviously mining companies will have assets in various other areas but a corporate headquarters is essential within Ulaanbaatar.
Tax-Friendly Policies
Yes – a number of tax-friendly investment policies exist to encourage investment within specific sectors and industries. Further details can be provided, depending upon your specific inquiry.
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Financial Markets in Mongolia
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Mongolia's Financial Markets are relatively young, considering the political turmoil that has gripped the country throughout the 20th century. Originally, the Mongolian Stock Exchange was implemented to assist in privatizing state assets (1991) whilst the primary and secondary market commenced trading in August 1995. Currently, there is one stock exchange within Mongolia, called the Mongolia Stock Exchange (MSE). A brief overview of the Mongolia Stock Exchange is outlined below
Mongolia Stock Exchange (MSE)
The Mongolia Stock Exchange is Mongolia's only stock exchange and is one of the world's smallest stock exchanges by market capitalization. With a market cap of USD $945 million and limited products including equities, government bonds and corporate bonds as well as it being a frontier market, generally the appeal to international investors is minimal. The MSETOP Index (Mongolia Stock Exchange Index Top 20) is a popular index tracking the top 20 stocks within Mongolia. In addition, the MSE A and MSE B are two other commonly used indices.
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Other ways to get exposure to Mongolian Stocks
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Aside from the above ways to gain exposure to Mongolian companies (via the Mongolian Stock Exchange), investors also have options to invest in Frontier Market focused Index Funds and Mongolian stocks listing in international markets. From a commodities extraction perspective, a number of international, publicly traded companies across multiple exchanges own and operate mining ventures within Mongolia. There are also large Mongolian companies listed on the Hong Kong Stock Exchange as their preferred listing.
Despite an array of different challenges and a heavy reliance on the mining industry, Mongolia's future growth should continue to offer opportunities and a number of attractive investment options. |
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Foreign Exchange & Capital Controls
The Mongolian Currency is the Mongolian Tögrög (MNT) and is a free floating currency, with the Bank of Mongolia occasionally intervening in the currency market. There are no currency controls within Mongolia for foreign investments. The Mongolian Tögrög is a fully convertible currency and unlike some neighboring countries, there are no issues repatriating profits from Mongolia. Being a commodities export economy, the currency often tracks the commodity markets.
Commodities
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Mongolia is predominantly a raw material, export oriented economy with a plethora of minerals. Whilst Mongolia is a landlocked country, the rapid economic development of China and strategic location near Russia has spurred the local economy throughout the early 21st century with Mongolia also welcoming international investment.
Some of the top commodities Mongolia imports include:
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Mongolia imports the vast majority of its refined petroleum from Russia whilst its car imports are predominantly from Japan. Other delivery trucks and large construction vehicles originate from China.
In terms of exports, Mongolia exports a number of different commodities including:
As outlined above, Mongolia is predominantly a raw materials export economy with minimal manufacturing/industrial, especially considering it's a neighbor to China. |
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Within Mongolia, the Mongolian Commodity Exchange (MCE) also known as the Mongolian Agricultural Commodity Exchange offers a number of different products across different classes including:
For further specific details about Mongolia, the Financial Markets within Mongolia and how we can be of assistance, please contact our team to find out more. |
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Cryptocurrency in Mongolia
In terms of Cryptocurrency in Mongolia - it's best known as a location for mining cryptocurrency with low electricity costs and cold weather providing an ideal environment to mine.
There are restrictions on Initial Coin Offerings (ICOs) within Mongolia and for further details regarding the latest status of cryptocurrency in Mongolia (outside of mining), please contact our team. |
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Property in Mongolia
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During the early 21st century, Mongolia experienced a real estate boom combined with the strong economic growth experienced during this period. As at 2020, whilst the 'heat' has been taken out of the market, the overall economy and housing pricing largely follows the commodities cycle, of which Mongolia is heavily exposed to. For the purposes of this brief overview, Invest Asia Group only focuses on the property market within the capital city, Ulaanbaatar as opposed to any other Mongolian cities.
International Investors & the Mongolian Property Market
Property Laws in Mongolia are detailed and comprehensive with protection of title as well as ownership rights. These laws apply to both local citizens and foreign investors and there's no distinction between the two in terms of property rights. The right to property ownership is separate from the right to land ownership. However, there are some restrictions whereby foreigners can own houses and apartments but cannot own land on a freehold basis. There are specific Land Laws as outlined below:
Generally, foreigners investing into Mongolian property under land usage are expats living in Mongolia over 183 days per year. The process when purchasing property within Mongolia can be summarized as follows:
To find out more about investing into the Mongolian property market, please contact our team directly so we can be of assistance. |
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Property Taxes & Fees
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The property market in Mongolia is varied depending upon the location but foreign investors would only be interested in opportunities within Ulaanbaatar. There are a number of extra costs associated with purchasing property within Mongolia, although it offers more favorable taxes compared to some neighboring countries/jurisdictions.
When purchasing within Mongolia there are a number of fees associated in doing so, these fees are as follows:
In regards to the Notary Fees and Stamp Duty Fees - these are progressive rates, depending upon the overall value of the property. For further details regarding fees associated with acquiring property in Mongolia, please contact our team. |
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Best Locations to Purchase Property
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Being a very sparse and low population country, Mongolia only really has a couple of options for investors to purchase property. Most foreign investors would only consider investing in the capital city of Ulaanbaatar (which Invest Asia Group recommends too) for its yields and growth but there are some other cities too that are becoming (slightly) more popular/of interest too.
As detailed above, Invest Asia Group encourages investors looking at the property market within Mongolia to focus on Ulaanbaatar as opposed to other cities. For district as well as city specific information in relation to locations for property investing, please contact our team. |
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Venture Capital/Private Equity in Mongolia
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Mongolia's startup scene started to take off following the Global Financial Crisis in 2008 on-wards with a large focus of investment on the mining sector. Seed as well as early stage venture funds started to appear around 2010 and generally consisted of financial institutions as well as large companies. Angel investors are also within Mongolia, however, they can take between 30-60% equity in startups, which is not internationally competitive for startups.
However, in recent years with the significant dependence on mining resulting in an economic downturn, the economy has begun attempting to transition to an IT economy with a focus on artificial intelligence and robotics. Some technology startups from Mongolia include:
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Other Jurisdictions in East Asia
China
Taiwan
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Japan
Hong Kong
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South Korea
Macau
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