Mongolia's Economic Challenge
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Mongolia's Economic Challenge

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Mongolia has repeatedly insisted that it wants to open its doors for business to all countries with a genuine interest in participating in the country’s sustainable growth. How much of this policy is lip service though and how fair is the bidding process for prospective foreign investors? Mongolia’s long awaited initial public offering (IPO) for its lucrative coal mine in Tavan Tolgoi will have to wait at least until 2013 according to recent remarks by government officials. The repeated delay of one of Mongolia’s signature markets is sending mixed signals to foreign investors and has the potential to erode investor confidence in the resource-rich Central Asian country.

Tavan Tolgoi represents one of Mongolia’s most important chips to foreign investors as the company controls an area that is believed to contain the world’s largest undeveloped coking-coal deposit. The mine is situated in Mongolia’s southern Gobi desert which has made it an appealing location for Chinese investors. In July 2011, China’s Shenhua Group was awarded a 40% stake in the mine. The remaining investment contracts were awarded to a Russian-Mongolian consortium (36%) and American mining company Peabody (24%). It was believed that this trilateral group would jointly develop the mine, but government officials in Ulan Bator demurred on their decision after Japanese and South Korean companies began protesting that the bidding process had been unfair.

The uncertainty has created a five-chair shuffle in which East Asia’s largest power brokers are competing to have a lasting economic footprint in Mongolia. Mongolian President Tsakhia Elbegdorj has cautioned that the contract for developing the mine is not a done deal after rejecting a previous decision to hand the majority of the mining rights to the Chinese-backed consortium. Elbegdorj insisted that it is “essential that it (developing the mine) is in line with policies and in line with our national security. We have two big neighbors and we need investment. I think the door is still open in the negotiations with big national investors.”

The underperforming price of coal in the financial markets is pushing the IPO deeper into 2013 as investors wait for an opportune time to establish a market presence. The Tavan Tolgoi IPO, which is expected to be offered at U.S. $3 billion, has also been pushed back due to legal constraints involved in listing Tavan in three international markets – London, Hong Kong and Ulan Bator. Reports of the delayed IPO come amid frustrations with Hong Kong’s increasingly complicated legal frameworks and restrictions. Mongolian officials are working to amend their legal securities framework to allow the IPO to list on all three markets.

Comments
48
Hulan
February 8, 2013 at 02:20

Yes, I really enjoyed people taking Mongolia into a global context and actively discussing it. There are some very powerful points in the debate, but I honestly doubt that what John Chan thinks is the majority opinion in the country. After all, the policies put forward by the government can not reflect everyone's opinion. In terms of Mongolia, Their policy is to keep a balance and diversity in the countries investing in it. It does not have a bias to China or the West. To the Mongolian eyes, they will always be countries pursuing their own national interests. Only Mongolia truly cares about their land and safety and we know that. That is why these investment procedures should be dealt with the utmost care. I personally think Elbegdorj's pursuit to diversify the economy in terms of both sector and region is the wise and only effective choice for the future of Mongolian economy.  And mining is damaging the land, but it is the milestone for Mongolia until we are able to process them in a market level standard for export. I truly have much hope for the potential development of Mongolia and taking into account the existing International law and china's recognition of Mongolia as a sovereign state, China can not swallow Mongolia, but they can damage them through their economic advantages. 

[...] J. Berkshire. “Mongolia’s Economic Challenge”. The Diplomat, December 8, [...]

amar
January 6, 2013 at 03:02

John Chan with his high education and brainwashed mouth is definitely a member of CCP. Cant be much lower. Wow, i had a real pleasure reading these debates. I regret i couldnt join earlier and co-debate to put Chan on his place. Now i have much better understanding of what our Southern neighbors think of us…

amar
January 6, 2013 at 02:24

Damn… Mr. Chan you remind me of that Communist guy who is blaming and giving communist lectures to Pui emperor on Last Emperor movie. I feel sorry for people like you.

Erdene
January 6, 2013 at 01:59

Chinese invasion or digestion of Mongolia is highly unlikely and will be so until unimaginable events occur in international politics or nature of the world. Some people, as their opinion suggest me that they from China, commenting to follow their misunderstanding of real history of the countries would tarnish its Chinese government of building good image in abroad. It seems to possibly image that if there are majority of the Chinese people holding this mispreposition, there will be great danger to world peace.I hope people who had forgotten their ancestors’ grief and sorrow from the worst war in their history will not be allowed to participate in any decision making in China. For peace

vic doesnt know
January 5, 2013 at 19:50

damn fools. commenting on the status of mongolia. mongolia was never part of chinese fools. china was part of mongolian empire nad together we were the part of manchu empire remember these were never main land chinamen in power over mongolia. next step we survived because we were smarter tyan those who wanted to occupy us. that hasnt happened yet. and we will so our best not to let things go the beijing way.

East is not all YELLOW
January 5, 2013 at 15:31

East is Yellow my ***. (My apologies to the moderator). China has never ruled Mongolia, only Manchuria did, which is a totally different tribe, but now Chinified. We ruled China for over 200 over years. You have no rights to call my government "Rebel". Manchurians were a nomadic tribe and a very strong one, they ruled CHina same as they ruled Mongolia.

Amarsanaa
January 5, 2013 at 15:16

Thank you Sneider for your most mature approach in these interesting debates. At the end of 50-ies 100% of Mongolians voted for Mongolian independence, not even 99,9%, but all 100… Mongolia's eternal fate is to be independent. That's why throughout the history, no matter how our neighbors' were playing game, at the end we are independent and thanks to the smart national security policies we are still protected, unless Chinese make a military intervention, which wouldn't happen in the modern world… (Not unless WW3 starts, or we get kicked from UN. Or US and Chine become best friends which again never happens.) We, Mongolians have nothing personal against Chinese, but Chinese must behave what they say. Things never remain in one condition. History is like a pulse rate. Mongolia might determine the world's policy in 70-100 years. Big ambitions? Oh yes, everything starts with big ambitions, that's why powerful nations prosper and fall-apart, while back then-small nations rise and become powerful again… We will always keep our independence, politically and inside our hearts, which is most important.

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