Mongolia's new law expected to attract Chinese billions

New investment legislation is expected to result in mainland firms pouring billions of dollars into key railway and highway projects

PUBLISHED : Wednesday, 20 November, 2013, 2:55am
UPDATED : Wednesday, 20 November, 2013, 4:35pm

Mongolia's new law is expected to encourage billions of dollars of Chinese investments, said speakers at the Mongolia 2013 Investment Summit in Hong Kong yesterday.

Chinese companies were interested in investing in railway and highway projects in Mongolia, said Javkhlanbaatar Sereeter, acting director general of the Invest Mongolia Agency of Mongolia's Ministry of Economic Development. "Chinese companies are very competitive in terms of price. I expect Chinese investment volume will increase in the next two years."

Chinese companies were negotiating to invest in a US$2 billion highway connecting Russia, Mongolia and China, Sereeter said.

Mongolia had planned US$50 billion of mega projects in the next 10 years, said road and transport minister Amarjargal Gansukh. "We are looking for investors in mining, energy and transport infrastructure."

Construction had begun on 1,800 kilometres of railway costing US$5.2 billion, which was one-third of the planned national rail network, Gansukh said.

China was the biggest foreign investor in Mongolia, accounting for 30 per cent of Mongolia's foreign direct investment, said Sereeter.

China accounts for the largest number of foreign-controlled companies in Mongolia, with about 5,000, he said, adding that the country was also the biggest trading partner and export market for Mongolia, whose exports are mostly commodities such as coal.

"I'm sure the new investment law will encourage more Chinese investment in Mongolia, including Chinese state-owned enterprises," said Sereeter.

In October, Mongolia's parliament approved an investment law that ended different rules for domestic and foreign private investors, and lessened government approval requirements.

The law will take effect on January 1.

"The new law will spur more Chinese investment in Mongolia," said Alisher Ali, managing partner of Silk Road Management, an investment firm focusing on frontier markets.

The previous investment law, enacted last year, had a negative impact on Mongolian companies, including those listed in Hong Kong, as it led to uncertainty over foreign ownership of Mongolian assets, Ali said.

The 2012 law was in large part responsible for the failure by Aluminum Corp of China, a Chinese state-owned aluminium producer, to acquire 60 per cent of SouthGobi Resources last year, Ali said. SouthGobi is a Hong Kong-listed firm with coal mines in Mongolia.

The new investment law repealed large chunks of the one in 2012, Ali said.

Meanwhile, Erdenes Tavan Tolgoi, Mongolia's biggest state-owned coal producer, planned to list in Hong Kong, London and Mongolia in 2015, raising up to US$1 billion, said chief executive Batsuuri Yaichil.

In 2012, the company cancelled plans to raise US$3 billion by listing in Hong Kong, London and Mongolia.