International comparison of the investment climate of Mongolia and other frontier markets

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1 International comparison of the investment climate of Mongolia and other frontier markets Jigjidmaa Dugeree Senior Private Sector Specialist, World Bank Group Hong Kong 20 th April 2018

2 Mongolia ranks better for overall ease of doing business than many developing Asian countries

3 A competitive ease of doing business rank Mongolia s overall EODB rank may come as a surprise to some The country is currently ranked 62 nd globally that s ahead of high-profile emerging Asian hotspots such as: o Vietnam (68) o Indonesia (72) o Philippines (113) And other smaller emerging markets like: o Cambodia (131) o Laos (141) Mongolia also ranks higher than many Central Asian countries, including: o Uzbekistan (74) o Kyrgyzstan (77) o Tajikistan (123). Source: World Bank Group Doing Business (2018)

4 Compared with other global peers, Mongolia also ranks quite favorably Mongolia also ranks quite favourably compared with other comparator markets (emerging economies where natural resources play an important role): Mongolia Chile Malaysia Oman Kyrgyz South Africa Doing Business Rankings, 2017 & Source: World Bank Group Doing Business (2018)

5 Some long-term improvements In addition to ranking favourably compared to many developing Asian economies, Mongolia has shown some encouraging improvements in its own performance over the past decade In 2010, the country s Distance to Frontier score (which helps assess the absolute level of regulatory performance over time) was 59% today, it has grown to 69% There have also been improvements in getting credit: Mongolia currently ranks 20 th globally (up from 59 th place in 2016) DISTANCE TO FRONTIER SCORE: % %

6 Governance indicators Mongolia has also made improvements on most Governance indicators. It ranks high in political stability but lower on other indicators EAP EAP Mongolia Mongolia Accountability Political Stability Government Effectiveness Regulatory Quality Rule of Law Control of Corruption Source: World Bank Group Worldwide Governance Indicators (2016)

7 Investment climate issues: Despite a number of favourable rankings, our findings and indeed those of other international institutions point to comparative weaknesses in areas such as: o Trading across borders o Getting electricity o Enforcing contracts o Resolving insolvency o Access to land o Frequently changing regulations o Control of corruption

8 Sector and source market dependency Mongolia remains highly dependent on the minerals sector for its FDI Since 2003, analysis shows that more than 80% of Mongolia s FDI has come from mining and other extractive industries. Mongolia is also highly dependent on just a few source countries for its FDI: 70% of its FDI comes from just two countries (China and Netherlands). This level of source market concentration and dependency is higher than other countries in the region, such as Kyrgyzstan. High dependencies such as these mean that Mongolia is vulnerable to fluctuations and potential downturns in these industries and economies. Mongolia s FDI projects since % 14% Metals Coal, Oil & Natural Gas Other 63% Source: fdi Markets (Financial Times Ltd.)

9 Investment Reform as a Government Priority is therefore a welcome development

10 Sustaining public-private dialogue In December 2017, a Public-Private Consultative Council (PPCC) was established, with the support of the World Bank Group This has been an important step in ensuring investors build and strengthen sustainable dialogue with the Government on key issues that matter to them Source: Government of Mongolia

11 Developing an Investment Reform Map Encouraged by developments like the PPC, the World Bank Group is now continuing to work with the Government on an Investment Reform Map which will make recommendations on climate improvements in numerous areas, including: o Expanding regional trade and investment agreements with neighbouring countries o Reviewing existing foreign participation restrictions o Reviewing inconsistencies and discrepancies among legal instruments and guaranteeing investor protection stipulated in domestic and international law o Reviewing existing policies relating to local content requirements, visas and other areas o Other improvements in the ease of doing business and good regulatory governance

12 Mongolia has much more to offer than mining

13 Beyond mining While mining often dominates the headlines when it comes to business news about Mongolia, the country is undertaking significant steps to diversify its economy and offer attractive business propositions and project opportunities to potential investors in other sectors Agribusiness and tourism are just two examples of other sectors that offer investment opportunities

14 Untapped agribusiness potential An overreliance on one sector (or sector grouping) for FDI is never a healthy strategy. To support the country s FDI diversification, the World Bank Group recently developed a detailed analysis of agribusiness subsectors that offer strong investment potential for Mongolia So in the very near future, you are likely to hear more about investment opportunities in areas like: o Red meat processing o Dairy products o Cattle breeding o Cashmere final products

15 THANK YOU VERY MUCH! 14