Mongolia to scrap foreign ownership law

Mongolia is really worried about falling foreign investment in the country.

So much so that is is considering recalling its parliament, currently enjoying summer recess, for an emergency session to counter an impending crisis brought about by sliding coal prices and uncertainty over its massive Tavan Tolgoi met coal mine and the Oyu Tolgoi copper-gold project.

Mongolia is also considering changes to its 2012 Strategic Entities Foreign Investment Law (SEFIL), which observers believe is at least partly to blame for the more than 40% slump in foreign direct investment in the Asian nation during the first half of the year.

Under SEFIL state-owned companies need state approval for a stake of any size in in a company deemed to belong to a "strategic" sector such as mining and if these firms want approval for a majority stake parliament has to give the go-ahead.

All foreign firms wanting to buy 33% or more must secure government approval, but IVC Postreports according to Mongolia's Director of Foreign Investment Sereeter Javkhlanbaatar, this provision could be scrapped.

Javkhlanbaatar said the new policy would assuage investor fears on ownership limits adding: "We won't separate the market between strategic and non-strategic."

Foreign state-owned firms – which mostly means Chinese companies – would still need official approval however.

Last year China's state-owned Aluminum Corp's bid for coal producer SouthGobi Resources (TSX:SGQ)(HKSE:1878) was blocked by Mongolian authorities sending shares of the Turquoise Hill-owned company (TSE:TRQ) into a tailspin it has not yet recovered from.

Stamp circa 1979 shows the Soviet Rapidity experimental train from the series “Locomotives.” Image by AlexanderZam / Shutterstock.com