Mongolia faced a lot of setbacks in the recent past due to
several wrong steps taken by the government in the mining sector. Mining sector
constitutes almost 20% of the GDP and hence the drop in revenue from the mining
sector affected the entire economy badly. The foreign direct investment in the
country has fallen by 47% and the currency faced a depreciation of 20%.
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| Mines of Mongolia |
However, the government could rise to the occasion and it
brought a new law aimed at promoting new investments in the mining sector. The
new law has been approved by the parliament and at the same time country’s
cabinet has approved several crucial changes in the 2012 Strategic Entities Foreign
Investment Law to make the things smoother. With this amendment the uncertainty
surrounding the taxes and royalty has been removed and the picture became
clearer now. Besides, the differentiation between the domestic and foreign investors
has been removed. According to the Mongolia Cabinet Secretary, this move will
be a turning point in the history of Mongolia. As the country has a great treasure
of different metals, minerals and coal, this new law will help the country to
attract good foreign direct investment and the same will certainly change the
fate of the nation.
Although the new law has been welcomed widely by the mining industry, still there are issues to be solved to take full benefits out of this
law. Second phase underground development of Oyu Tolgoi, the largest copper
mine has been stalled due to different reasons. Similarly the license of Vancouver based
explorer Entrée Gold has been cancelled during last February and the talks are
still going on that. There are several more instances like these which may pull
back foreign investors. However, government is keen to solve all those issues
as fast as possible.
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