Mongolia curbs investments by foreign state-owned companies to control assets, secure economic future
SHANGHAI — Mongolia, China’s largest supplier of coking coal, passed a law restricting foreign state-owned companies from controlling key assets, threatening planned investment by groups such as Aluminum Corp. of China Ltd.
Legislation giving the state powers to veto acquisitions of assets by foreign companies in the resources, finance, media and communications industries was passed late last week, according to a statement on Mongolia’s parliamentary website. Foreign companies seeking more than 49 per cent of strategic assets will need approval from parliament, it said.
The restriction means Mongolia joins Indonesia and Argentina in seeking to control ownership of resource assets to secure their economic future. The passage of the law was accelerated after a public outcry following moves last month by Aluminum Corp., known as Chalco, to buy SouthGobi Resources Ltd.
“We’ve expressed our concern about the law,” Howard Lambert, the Mongolia country head for ING Groep NV, said by phone from Ulan Bator.
“If it’s implemented well, policed and the process is clear for the foreigners, then I can’t see it as detrimental. But if it’s pulled out of the draw as a weapon on a sporadic basis, then it could cause problems.”
Shen Hui, a spokeswoman for Beijing-based Chalco, declined to comment on the new law. Chalco said on April 25 that it won’t proceed with its offer to buy 60 per cent of SouthGobi for as much as $925 million unless it gets approval from Mongolia.
The law isn’t likely to apply to deals concluded before it was passed and is aimed at ensuring no one country or product dominates the economy, Vice Finance Minister Ganhuyag Chuluun Hutagt said in an interview.
Mongolia is squeezed between China and Russia, two of the world’s 10 largest economies and the No. 1 and No. 3 countries by land mass. China accounts for over 80 per cent of its neighbour’s import and export trade, according to the World Bank.
Exports to China rose to 92 per cent of the total in the first quarter, Mongolia’s statistics office said last week.
Chinese companies, many of which are state-run, will need to adapt their strategy without necessarily being shut out of the Mongolian market, ING’s Howard said.
“This may be just a question of ownership and control,” Howard said. “There’ll still be financing from Chinese companies that want to develop their presence in Mongolia. So they’ll then have to use a loans approach as opposed to an equity approach.”
Bloomberg
© Copyright (c) The Vancouver Sun
Legislation giving the state powers to veto acquisitions of assets by foreign companies in the resources, finance, media and communications industries was passed late last week, according to a statement on Mongolia’s parliamentary website. Foreign companies seeking more than 49 per cent of strategic assets will need approval from parliament, it said.
The restriction means Mongolia joins Indonesia and Argentina in seeking to control ownership of resource assets to secure their economic future. The passage of the law was accelerated after a public outcry following moves last month by Aluminum Corp., known as Chalco, to buy SouthGobi Resources Ltd.
“We’ve expressed our concern about the law,” Howard Lambert, the Mongolia country head for ING Groep NV, said by phone from Ulan Bator.
“If it’s implemented well, policed and the process is clear for the foreigners, then I can’t see it as detrimental. But if it’s pulled out of the draw as a weapon on a sporadic basis, then it could cause problems.”
Shen Hui, a spokeswoman for Beijing-based Chalco, declined to comment on the new law. Chalco said on April 25 that it won’t proceed with its offer to buy 60 per cent of SouthGobi for as much as $925 million unless it gets approval from Mongolia.
The law isn’t likely to apply to deals concluded before it was passed and is aimed at ensuring no one country or product dominates the economy, Vice Finance Minister Ganhuyag Chuluun Hutagt said in an interview.
Mongolia is squeezed between China and Russia, two of the world’s 10 largest economies and the No. 1 and No. 3 countries by land mass. China accounts for over 80 per cent of its neighbour’s import and export trade, according to the World Bank.
Exports to China rose to 92 per cent of the total in the first quarter, Mongolia’s statistics office said last week.
Chinese companies, many of which are state-run, will need to adapt their strategy without necessarily being shut out of the Mongolian market, ING’s Howard said.
“This may be just a question of ownership and control,” Howard said. “There’ll still be financing from Chinese companies that want to develop their presence in Mongolia. So they’ll then have to use a loans approach as opposed to an equity approach.”
Bloomberg
© Copyright (c) The Vancouver Sun
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