Mongolia aims to offer more than history in quest for funds

PUBLISHED : Monday, 02 September, 2002, 12:00am
UPDATED : Monday, 02 September, 2002, 12:00am

CHINA HAS BEEN practising these lines for years: We are open for business, our investment laws welcome foreign investors and we are living up to our World Trade Organisation commitments.

But business people here, while drawn to the world's largest country's potential market size, complain of having to settle with joint ventures or representative officers. They say laws are too strict, too vague or anti-foreigner.

Much of the Western world questioned China's WTO role for two years before the country was admitted last year.

Now the same sorts of promises are coming from a neighbouring country, Mongolia. And business people don't know what to think.

On Friday, for the first time in modern Mongolian history, the country's deputy industry and trade minister and two leaders from the government's Foreign Investment and Foreign Trade Agency travelled outside Mongolia to talk up their business climate. Working through a public relations company, they chose Beijing as the closest centre of foreign media and met with reporters all day.

'My main reason for being here is to announce the foreign investment policy of Mongolia and proclaim 2002 as the year of investment,' Deputy Industry and Trade Minister O. Edernee said.

He indicated that Mongolia, a five-year WTO member, allows foreign investors to open any kind of business of any scale without a local partner. The nation of 2.5 million people outlaws only businesses that operate casinos, sell pornography or make weapons. So someone from abroad can launch an Internet service provider, open a newspaper or build a yurt for US$2,000 and rent it out for profit.

Permits cost US$6 to US$12 each and can be arranged in one place within three weeks. People from some countries can get lifetime visas, up from the maximum one-year visa allowed to any foreigner working in China. People from 20 countries can enter Mongolia visa-free from 14 days to three months.

Mongolians are as educated as Chinese people - the prospect of educated workers often brings foreign business to China - and although the country lacks a seaport, its railroad system reaches into mining areas, Mr Edernee said. As well, the Internet and modern phone systems had penetrated into the country's provincial capitals, and he noted an abundance of cyber cafes.

Mongolia welcomed investors first because the government gave up its command economy and added democracy in 1990, Mr Edernee said.

The present government had also cleaned up corruption, bringing Mongolia to slightly above the international average cleanliness level.

Banks, meanwhile, are being reformed and privatised after losing public confidence in the early 1990s, according to government sources.

Of the 2,180 foreign firms now investing in Mongolia, 28 per cent mine, 17 per cent work in light industry and 8 per cent are in construction. Others sell soft drinks, offer mobile phone service, help provide Internet lines, rent property and organise travel. China is the leading source of investment, followed by Japan and South Korea. The number of investors has risen seven times since 1995. Names include Coca-Cola, Sumitomo and Samsung. Investment has totalled US$734 million and created 67,000 local jobs.

From September 17-19 Mongolia will host an investment forum to present joint-venture projects that range from slaughterhouses to a national park tourism information centre.

Hong Kong business people might think Mongolia was too far or question government policies, said Katherine Chan, corporate communications officer with the Hong Kong Trade Development Council.

Hong Kong businesses active in Mongolia were 'at least not common,' she said.

Officials from two multinational telecommunications companies began to talk about investments in Inner Mongolia before realising this region, south of Mongolia proper, is part of China.

A Hong Kong stock brokerage official said no one in the firm followed business in Mongolia. A Shanghai-based investment analyst agreed Mongolia was off the analyst radar, suggesting that blizzards, droughts and famines may cause fear among potential investors.

But Mr Erdenee said he thought the lack of investment arose from Mongolia's lack of self-promotion. 'All people read about are blizzards, droughts and dead animals. So they know nothing about the business climate,' he said.

Foreigners also know about travel to Mongolia's grasslands and deserts. That is how adventure traveller Lee Cashell found out in 1998. Since then, he has worked through his Hong Kong-based Asia Pacific Investment Partners to run a rental company called Mongolian Properties and a tourism company, Mongolian Resorts. Rentals can earn returns up to 20 per cent because it costs little to build, he said.