Mongolia’s Parliament Approves Changes to Foreign Investment Law

Mongolia’s parliament approved an amendment to its foreign investment law, easing some restrictions on overseas private companies while maintaining controls on state-owned groups, after a slump in investments.

The changes remove the need for parliament to review investments by non-state owned companies, said Sereeter Javkhlanbaatar, director of foreign investment at the Ministry of Economic Development, by phone from Ulaanbaatar. Deals involving state-owned companies or companies with government equity will still need to be reviewed if the investment is more than 49 percent.

The amendments may help to boost investor confidence following protracted disputes with key Mongolian investors, including Rio Tinto Group. Foreign direct investment in Mongolia declined 17 percent last year and is down 58 percent in the first two months of this year.

“The amendments are welcome but the damage has been done, and many investors’ appetites have moved on to more stable jurisdictions,” James Liotta a partner at Mahoney Liotta LLC in Ulaanbaatar, said by e-mail. “Those who are locked in are likely to take a much more conservative approach toward investing in Mongolia.”

The law applies to companies in the strategic sectors of mining, banking and media, Chimed Saikhanbileg, the government’s cabinet secretary, said by phone from Ulaanbaatar. Today’s changes only apply to parliamentary reviews for non-state owned foreign companies and don’t remove the need for both state and private companies in those sectors to get approval from the government, the prime minister and his cabinet, for investments, he said.