Mongolia is still open to foreign investment despite a hastily enacted law that subjects foreign investments to government approval and recent calls by some nationalist politicians to renegotiate the terms of a mega copper mining deal with Rio Tinto, a senior government official said.
The country was still keen to co-operate with foreign investors, Nemekhbayar Enkhbayar, the head of economy, finance and investment of the Ministry of Mines, said on the sidelines of an investment seminar in Hong Kong yesterday.
"Our basic policy is to co-operate with the world. We have no intention or policy to restrict foreign investment," Enkhbayar said. "Our government just wants to know what kind of companies are coming to Mongolia."
He called a law enacted in May, which subjects deals above US$75 million and those where foreign firms buy more than 49 per cent of an asset to government approval, a kind of "registration" and vetting rather than a restriction.
The law was drafted following alarm over Aluminum Corp of China's announcement that it was bidding for a 60 per cent stake in Mongolian coal miner SouthGobi Resources.
After that announcement, Ulan Bator threatened to withdraw SouthGobi's operating licences. The government told SouthGobi its licences were in good standing only a few days after Chalco withdrew its bid in September, but the few months of uncertainty caused a loss in sales for SouthGobi.
Enkhbayar played down concerns that some politicians want to reopen an investment agreement with Rio Tinto, which has 66 per cent control over the Oyu Tolgoi copper and gold mining project, among the world's five largest.
"The government will not change or terminate the basic contract … but there are some issues that are unclear," he said.
He said that under the agreement, Ulan Bator had the right to discuss the terms with Rio if the investment amount was different from the original agreed amount, adding that so far US$5 billion had been sunk into the project instead of the US$4 billion agreed. "We want to know the reason behind the difference," he said.
Investment in minerals mining, mostly by foreign firms, grew to US$4.6 billion last year from US$750 million in 2009 and US$2.9 billion in 2010. Enkhbayar expects this year's growth to exceed 10 per cent.
Howard Lambert, the head of corporate and investment banking in Mongolia for Dutch financial conglomerate ING, said he believed the process for compliance of the foreign investment regulations would be explained by the new government, which was elected in June, and that should ease investor concerns.
"As far as our [advisory and lending] business is concerned, nothing has changed. We are still seeing people who are coming to Mongolia to do business for the first time," Lambert said.