Ulaanbaatar /MONTSAME/ International Finance Corporation (IFC), a member of the World Bank Group, has recently released a report to help Mongolia formulate a new investment policy and strategy to better leverage existing foreign direct investment (FDI), attract new forms of FDI, and diversify its economy. This week, IFC and the National Development Agency (NDA) are holding another round of consultation that focuses on private sector stakeholders.

The report, ‘Investment Reform Map for Mongolia’, reveals that FDI is a critical source of capital to support Mongolia’s economic and development agendas. Yet, FDI inflows have been volatile over the last decade and not focused on achieving economic diversification and upgrading. Natural resource-seeking FDI represents 81 percent of total FDI project value since 2012.

“FDI can help Mongolia obtain the capital and know-how it needs for development while saving scarce public resources,” said Jigjidmaa Dugeree, Senior Private Sector Specialist, IFC. “Our findings also show that the country will benefit from more consistent and clear investment policies. The report offers a practical approach to help Mongolia maximize the benefits of FDI and achieve economic diversification.”

The report recommends a two-pillar approach. The first entails maximizing FDI in natural resources by continuing to attract FDI in mining. At the same time, implementing a strategy to increase domestic value addition and linkages between foreign and domestic investors is imperative. The second entails focusing on economic diversification through FDI in other sectors. Further, the FDI policy should focus on sectors and markets where the country can be competitive. Initial findings indicate that some sectors and sub-sectors including tourism and hospitality, e-commerce, and agribusiness have potential to attract FDI.

“IRM report was instrumental in pushing certain reforms including transfer of working secretariat of IPC to NDA, and developing an idea on necessity to have one stop service which will be materialized by the beginning of the next year. We are also starting to work on Investment Policy statement with the help from IFC and would like to see private sector as the active participator in the drafting process,” said B. Bayarsaikhan, Director General of NDA. 

The report further highlights that the investment climate and good governance in Mongolia can be improved. To achieve this, the focus should be on effective implementation of current laws (including the Investment Law) and regulations, and on strengthening the existing investor grievance mechanism (Investment Protection Council, Public Private Consultative Committee, NDA). Moreover, Mongolia needs to rebuild a credible investment promotion capacity.