Mongolia to Ease Investment Limit Amid Rio Tinto Dispute

Mongolia will ease limits on foreign investment that requires parliamentary approval even as it restricts overseas ownership in industries such as mining amid a dispute with Rio Tinto Group.

The threshold will be raised to 1 trillion tugrik ($715 million) from 100 billion tugrik, Foreign Minister Luvsanvandan Bold said today in an interview.

“Today at the cabinet meeting this issue will be addressed and there will be changes in the law in the near future so that the international community and investors will be happy,” he said.

Mongolia, in the midst of a dispute with Rio over control of the $6.6 billion Oyu Tolgoi copper and gold project, passed a law last May restricting foreign companies from buying control of assets in industries including mining, telecommunications, media and financial services. The law blocked Aluminum Corp. of China Ltd.’s plan to buy coal miner SouthGobi Resources Ltd.

The change “will start the deal flow from investors, which has been stopped since last May,” said Jim Dwyer, executive director of the Business Council of Mongolia, which represents more than 200 organizations and companies working in the nation. “Its good for the country to have foreign investment start up again after some nine months.”

The Strategic Entities Foreign Investment Law required any deal worth more than 100 billion tugrik and involving the transfer of more than 49 percent of a Mongolian company to a foreign group to be referred to parliament for approval.

SouthGobi later came under Rio Tinto’s control after the London-based company took a majority stake in the coal miner’s parent company.

Jay Liotta, a partner at Ulan Bator-based Mahoney Liotta LLC, said the law still lacks clarity.

“The draft regulations and threshold increase do very little to address the substantive issues” in the Strategic Entities Foreign Investment Law, he said. “I remain cautiously optimistic.”

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