Mongolia sits atop so much mineral wealth - an estimated US$1.3 trillion in gold, copper, coal and iron ore - that it is sometimes called "Minegolia". It is among the world's fastest-growing economies. Even so, some of its bigger foreign investors want out.
The recent turmoil at Golomt Bank, one of Mongolia's biggest lenders, illuminates some of the reasons.
Credit Suisse and Abu Dhabi's sovereign wealth fund invested in Golomt in the past few years, seeking a share of the country's promised bounty. Those hopes have soured amid allegations that one of Golomt's owners arranged loans he did not report, hid defaults for years and, as the bank's board called for probes, oversaw the destruction of financial records.
Both investors, claiming breach of contract, started arbitration efforts in recent months for repayment of loans, just as Mongolia's leaders flew into Hong Kong and New York to drum up new investment.
Credit Suisse and Abu Dhabi extended a combined US$35 million in convertible loans to Golomt starting in 2007. The agreements required the bank to provide prompt audited financial statements. Within five years of each deal, each investor was to gain Golomt shares as part of an initial public offering.
Come 2012, no share offer had occurred. Instead, that year the foreign investors, some members of the bank's board and its chief executive learned the bank had missed payments on off-the-books debts to a Japanese trading company as far back as 2008, two sources said.
Golomt also failed to produce a 2012 audit in the first three months of last year as required in the loan deals.
Starting in late 2012, three companies examined the bank's books, their communications to Golomt's board showed, with one declining to sign off on the audit and the other two alleging that some of the bank's managers had deleted financial records.
In one investigation commissioned by Golomt's board, PricewaterhouseCoopers wrote that managers inside the bank deleted more than 6,800 files and records from the Swift interbank cash transfer system from August 2007 to May 2008.
Golomt vice-president Bolormaa Luvsandorj said the bank stood by an audit of its 2012 results done late last year, which said it had resolved the Japanese company's complaints.
"These are past issues," Bolormaa said last month, adding that the bank reported strong liquidity last year and "an extremely prudent loan-asset ratio of 57.1 per cent".
Mongol Bank, the country's central bank and financial regulator, investigated Golomt several times, said its chief, Zoljargal Naidansuren. "The bank is safe and sound," he said last month.
The events at Golomt illustrate the growing wariness of some foreign investors despite Mongolia's economic promise. The country ranked among the world's three fastest-growing economies in 2011 and 2012, with gross domestic product expanding as much as 17.5 per cent.
Yet foreign direct investment, after cresting in 2011 and 2012, fell by almost half last year. In the past five years, four of Mongolia's top 10 banks have folded or merged to avoid bankruptcy.
The latest was Savings Bank, which defaulted on about US$100 million of loans in July and sparked a London court case by South Africa's Standard Bank, alleging fraud. Mongolian officials barred one of Standard Bank's consultants from leaving the country for a month late last year.
"I've been coming here for nine years. I've been a real cheerleader for Mongolia," the banker, Chris Bradley, said in December before returning to Australia. "Now I feel embarrassed."
This article appeared in the South China Morning Post print edition as Mongolian mining dream turns sour