FOREIGN INVESTMENT LAW BECOMES AN INCREASING THREAT FOLLOWING JOB LOSSES
May 16 (UB Post) Mongolian citizens have become the first victims of the proposed foreign investment law as investors begin to scale back their operations in the country. Foreign investors and resource companies are currently reviewing their budgets for Mongolia in response to an anti-business draft law that was proposed to Parliament in early May.
Although the initial draft has been diluted, the latest draft still seeks to impose weighty restrictions on foreign investors who have been critical to Mongolia's growth. Investor confidence in the country's current stability is diminishing as result.
The resources boom in the country and the previously business-friendly political environment had fuelled a flurry of foreign direct investment and a rise in GDP per capita of over 60% since 2009. But with companies now holding back on new investment, the impacts have been immediate with drill rigs idled and increasing local job losses.
Mongolia could see a significant departure from its current line of growth. A natural resources investment firm in Ulaanbaatar told The UB Post yesterday that in the face of new legislation they plan to scale back their operations by 75% as they follow other companies to more business friendly emerging markets.
Approval of the current draft law will be felt throughout the country as decreasing investment drives down disposable income and job security.
One analyst suggested that Mongolia "could miss the opportunity to sell its commodities as global commodity investors are already pricing in the end of the super cycle. Parliament does not have long to get things right in today's environment of attractive commodity prices".
An industry mining executive told us that "amid a global slowdown in commodity prices, this law will mean that many Mongolian projects may never be financed"It is seemingly a distinct possibility that Mongolia will be ignored by the foreign investment community. Politicians behind this law will be to blame for a large missed opportunity for further growth and wealth to all Mongolians.
Although the initial draft has been diluted, the latest draft still seeks to impose weighty restrictions on foreign investors who have been critical to Mongolia's growth. Investor confidence in the country's current stability is diminishing as result.
The resources boom in the country and the previously business-friendly political environment had fuelled a flurry of foreign direct investment and a rise in GDP per capita of over 60% since 2009. But with companies now holding back on new investment, the impacts have been immediate with drill rigs idled and increasing local job losses.
Mongolia could see a significant departure from its current line of growth. A natural resources investment firm in Ulaanbaatar told The UB Post yesterday that in the face of new legislation they plan to scale back their operations by 75% as they follow other companies to more business friendly emerging markets.
Approval of the current draft law will be felt throughout the country as decreasing investment drives down disposable income and job security.
One analyst suggested that Mongolia "could miss the opportunity to sell its commodities as global commodity investors are already pricing in the end of the super cycle. Parliament does not have long to get things right in today's environment of attractive commodity prices".
An industry mining executive told us that "amid a global slowdown in commodity prices, this law will mean that many Mongolian projects may never be financed"It is seemingly a distinct possibility that Mongolia will be ignored by the foreign investment community. Politicians behind this law will be to blame for a large missed opportunity for further growth and wealth to all Mongolians.
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