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03.09.2015 foreign direct investment trend and mongolia (1)
1. FOREIGN DIRECT INVESTMENT
TREND AND MONGOLIA
JAVKHLANBAATAR SEREETER
DIRECTOR GENERAL
INVEST MONGOLIA AGENCY
FOR “DISCOVER MONGOLIA 2015”
Ulaanbaatar
2015.09.03
2. Business Freedom in the Mining Industry
Global Outlook
Investment Legal environment
Mining and PPP projects
Content
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3. Business Freedom in the Mining Industry
GLOBAL INVESTMENT TREND
1. Global FDI inflows declined by 16% in 2014. The reason for decline:
1. Fragility of the global economy,
2. Policy uncertainty for investors and
3. Elevated geopolitical risks.
2. Inward FDI flows to developing economies reached their highest level with 2%
rise.
Among the top 10 FDI recipients, China became the world’s largest and 5 are developing
economies.
3. The low level of flows to developed countries persisted in 2014.
Despite the revival in cross border M&As overall FDI flows of developed countries
declined 28%. They were significantly affected by a single large-scale divestment from
the US.
4. Investments by developing-country multinational enterprises reached a record
level: developing Asia now invests more than any other region.
9 of the 20 largest investor countries were from developing or transition economies.
5. Announced Greenfield investment declined by 2%
Developing countries continued to attract 2/3 of announced Greenfield investments.
Source: UNCTAD Policy Review, April 2015
4. Business Freedom in the Mining Industry
Source: UNCTAD Global Investment Trends Monitor, April 2015
Developed Economies
Developing and transition economies
Top 20 investors in 2014
(billions of USD )
Landlocked Asian
Countries’ comparison in 2014
(millions of USD)
337
150
116
114
112
56
56
53
41
41
32
31
31
19
17
16
13
13
13
12
5. Business Freedom in the Mining Industry
REGIONAL INVESTMENT TREND
1. African FDI inflows remained flat
- The services share in Africa FDI is still lower than the global and developing country
average
2. Developing Asian FDI inflows grew by 9% to its historically high levels
- FDI inflows to East and South East Asia increased by 10%.
- MNEs have become a major force in enhancing regional connectivity in the sub region,
through cross border investment in infrastructure.
3. South American FDI inflows decreased after 4 years of consecutive increases.
- This is mainly due to a decline in cross-border M&As in Central America and Caribbean
and to lower commodity prices.
4. Developed countries’ FDI inflows fell by 28%.
- Burgeoning FDI income is providing a counterbalance to trade deficit, particularly in the
US and more recently in Japan.
Source: UNCTAD Policy Review, April 2015
6. Business Freedom in the Mining Industry
• Measures geared towards investment liberalization, promotion and facilitation.
• Countries and regions continue their search for reform of the international
investment agreements regime.
• Developed countries encourage their MNEs to invest in their home countries.
Global FDI recovery is in sight: FDI inflows are projected to grow by
• 11% to $1.4 trillion in 2015,
• $1.5 trillion in 2016
• $1.7 trillion in 2017.
Mongolia continuously gear up investment liberalization, promotion and
attraction by offering smooth business environment, and generous fiscal
and regulatory incentives while promoting to mega infrastructure and
industrial projects as well as diversified investment.
Source: UNCTAD Policy Review, April 2015
INVESTMENT POLICY TREND
7. Business Freedom in the Mining Industry
1. China overtook both the US and Japan more than a decade ago to become
Emerging Asia’s largest export destination.
- Asian exports to China contracted around 4.6% in the first quarter of 2015.
- Weaker China demand has translated into lower commodity prices which impact the
commodity exporters, including Mongolia.
1. China’s growth slowdown hits Asia via lower FDI.
- However, China’s structural slowdown is driving outbound investments into the rest of
Asia.
2. Trade links with China are highest for the Northeast Asian economies, especially
Mongolia.
- Trade links: Hong Kong 88% of GDP, Taiwan 15%, Korea 10% and Mongolia 90% of its
GDP. This means Mongolia would hurt a lot from dependency of its trade.
WHEN IT COMES TO COMMODITY,
CHINA MATTERS…
Source: Bank of America, June 9 th 2015
8. Business Freedom in the Mining Industry
Global Outlook
Investment Legal environment
Mining and PPP projects
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9. Business Freedom in the Mining Industry
Seoul convention
establishing the
Multilateral Investment
Guarantee Agency
Washington convention on
the Settlement of
Investment Disputes
Foreign Investment
Protection and Promotion
agreements with 43
countries
Tax treaties with 30
countries
Mongolia-Japan Economic
Partnership
Agreement/First FTA/
Process of accession to
APTA
INTERNATIONAL LEGAL FRAMEWORK
Discussing to enter bilateral and multilateral agreements and actively participates in the
process of regional integration.
10. Business Freedom in the Mining Industry
INVESTMENT LEGAL ENVIRONMENT
Investment Law highlights:
No approval to enter into market and buy a local company
No discrimination between Foreign and Local company
Fast incorporation process
Stability guarantees
More liberalized and generous incentives
Investor friendly
Special designated agency for investors
11. Business Freedom in the Mining Industry
On April 29th 2014 “Mongolian Foreign
investment Policy Review” report drafted
jointly by Government of Mongolia and
UN conference on Trade and
Development /UNCTAD/ was presented
at the UNCTAD member countries
intergovernmental meeting.
Investment policy review Trade policy review
The second review of the trade
policies and practices of Mongolia
took place on 24 and 26th of
September 2014. The basis for the
review was a report by the WTO
Secretariat and a report by the
Government of Mongolia.
12. Business Freedom in the Mining Industry12
INVESTMENT INCENTIVES
• If more than 500
billion MNT (US$
~300mln)
Investment
Agreement
• First 5 years tax
free
Economic Free
Zones
• Customs
Duty, VAT
free
SMEs
•VAT
•Corporate
Income Tax
Stabilization Certificate
FISCAL AND REGULATORY INCENTIVES
No import duty for machines and equipment of
manufacturing, processing and industrial facilities
Incentives for training
Multiple and permanent visas for investors – No Visa
regime with over 40 countries
Land lease for development projects
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13. Business Freedom in the Mining Industry
EVALUATION OF INT’L ORGANIZATIONS ON
MONGOLIA’S PERFORMANCE
China Kazak
hstan
Russia Mongolia
Business Freedom 52.1 73.7 70.0 68.2
Trade Freedom 71.8 79.0 75.0 74.8
Investment Freedom 25.0 40.0 25.0 50.0
Global Competitiveness- Ranked at 98th
World Bank- Doing Business Report
Attracting Foreign Investment- Mongolia is
ranked overall at 78th out of 135 nations
Source: Global Opportunity Index 2015, WEF, 2014-2015,
Heritage Foundation and The Wall Street Journal
Note: 100 score represents the freest
Economic Freedom Index-Mongolia is the 96th
freest country out of 186
15. Business Freedom in the Mining Industry
• Sector diversification
• Geographical diversification
• Source country diversification
Managing
stakeholders
interests
More favorable
condition
• Synergy between government institutions
• Capacity building program
• Social program to promote a positive impact of FDI
Diversification
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Protection
• One stop online services
• Aftercare services
• Grievance management mechanism
• Reduce procedural barriers
• Incentives
Financial Incentives
Fiscal Incentives
Regulatory Incentives
MONGOLIA’S EFFORT TO ATTRACT FDI
16. Business Freedom in the Mining Industry
Global Outlook
Investment Legal Environment
Mining and PPP projects
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17. Business Freedom in the Mining Industry
GAIN/LOSS INDEX OF IPO COMPANIES
/2010-2014/
Total 37 companies with IPO on markets, those registered in Mongolia as a foreign
investor. During 2010-2014, 11 companies gained profit, 22 of them showed loss.
5
32
0 10 20 30 40
Gain
Loss
Income
growth
< 0.0%, 20
Income
growth
> 0.0%,
17
15 16 17 18 19 20 21
Stock indices of selected companies
/2010-2015/
Source: Invest Mongolia Agency, 2015
18. Business Freedom in the Mining Industry
AVERAGE EARNING/LOSS PER SHARE
OF TOTAL COMPANIES /2010-2014/
0
10
20
30
Earning per
share
Loss per share
7
30
Earning per
share
>1.00$
48.2%
Earning per
share 0.00$ :
1.00$
42.8%
Loss per
share
< -1.00$
17%
Loss per
share -0.00$
to -1.00$
83%
Companies with Earning per share /EPS/
- Centerra Gold
- Rio Tinto
- BANPU /Hunnu Coal
- Peabody Energy Corp
- Carajas Copper Company/Voyager
Resources
- Central Asia Metals
- Manas Petroleum
Source: Invest Mongolia Agency, 2015
19. Business Freedom in the Mining Industry
Investment Agreement
• Oyu Tolgoi
• Tavan tolgoi- ongoing
• 1 more proposal on a copper
deposit
Stabilization Certificate
• Awarded to
• 1 coal mine company
• 1 Iron mine company
MINING PROJECTS SEEKING LEGAL SUPPORT
20. Business Freedom in the Mining Industry
CONCESSION PROJECTS SIGNED
Industrial and Infrastructure projects
1. Mining and Metallurgy Complex Construction Project, Contract: $725 million
2. Oil Refinery Plant Construction in the East Region
3. State Reserve Storage Project in Rashaant Contracts : $55 million
4. Nariinsukhait-Shiveekhuren Road project, Contract: MNT 109 billion
5. Railway from Erdenet city to Ovoot Mining, Contract: $1.3 billion
Energy projects
1. Baganuur Power Plant Contract: $900 million
2. Chandgana Power Plant and Baganuur to
Undurkhaan Electric Transmission Line Construction Project
3. Tevshiin Gobi Power Plant Project in Saintsagaan soum in Dundgobi
21. Thank you for your
attention
Web: www.investmongolia.com
Phone: +976-11-320706, 310599
Email: info@investmongolia.com
@investmongolia