The incumbent prime minister of Mongolia, Oyun-Erdene Luvsannamsrai took office in 2021. While the new administration was under immediate pressure to strategize a post-COVID economic recovery plan, both internal and external challenges continue to soar.
The prime minister answered questions from The Diplomat’s Bolor Lkhaajav on his administration’s policies and solutions for fighting corruption, maintaining a strong foreign policy, and streamlining foreign direct investment (FDI). The interview below has been lightly edited for clarity.
Considering Mongolia’s mining-dependent economy, diversification is necessary. What are some of the diversification plans and investment opportunities Mongolia is currently initiating with third neighbors?
We have a number of diversification plans in place to boost investment opportunities in Mongolia stemming from our landmark “New Recovery Policy,” which will create an investment-friendly climate. Our overarching message to foreign investors is clear: Mongolia is open for business.
Due to our policies, we have ensured that GDP grew by 4.8 percent in 2022, an uptick of 2.2 percentage points over predicted growth, and we expect to achieve an increase to 5.4 percent growth in 2023. Mongolia is well on track to becoming the fifth-fastest growing economy in Asia. Greater economic growth lifts people out of economic hardship, raises living standards, and ensures a growing middle class – one of the key elements of the New Recovery Policy.
There are so many opportunities to invest in Mongolia. In 2022, we launched “Mindgolia,” an innovative platform showcasing our thriving tech sector and shifting digital transformation.
Additionally, we are consistently benchmarking our successes in attracting and hosting FDI, such as the Oyu-Tolgoi project, one of the largest copper mining projects in the world. We are clear in our view that FDI is one of the key pillars to grow our economy and will contribute to our future sustainability, building a better future for generations to come.
Tourism is also critical to diversifying the economy and is responsible for the same amount of revenue as the total income of Mongolia’s non-mining sector. Tourism, mining, and agriculture represent the three key pillars of a future Mongolian economy. In November last year, the government unveiled a major package of new measures to showcase Mongolia as a growing tourist destination. As such, we are proud to have recently launched our “Welcome to Mongolia” campaign, as well as designating 2023-2025 as the years to visit Mongolia. Our campaign will encourage overseas travelers to visit Mongolia for both business and tourism.
Our landmark Tourism Bill also contains further proposals to open more travel routes, modernize Mongolia’s visa system, and reduce the cost of flights to and from the country. Measures in the Tourism Bill include introducing a VAT refund for tourists upon departure from Mongolia on purchases during their stay, including hotel and accommodation costs.
Additionally, this bill aims to increase the number of countries in which an “e-visa” will be issued online within 48 hours of application. The bill will allow for a significant increase in the number of flights to and from Mongolia, as well as establish a Tourism Development Fund to support sector financing while also designating parts of Mongolia as strategic regions for tourism development.
What are some of the legal issues your administration is solving or addressing in order to increase the confidence of investors?
We have settled our tax arbitration issue with Rio Tinto and, as investors will have seen, resolved many outstanding issues related to Oyu Tolgoi, thereby allowing the commencement of underground production. The agreed funding plan ensures value for the government of Mongolia and the Mongolian people. The continued successful cooperation between Oyu Tolgoi and Rio will continue to inspire confidence in foreign investors.
We are also making great strides to boost investor confidence by tackling corruption through a range of measures as identified in the recently announced anticorruption strategy and our five-point plan to root out corruption in the country and business operating environment.
Our efforts to tackle corruption through our Whistleblower Law have shown that the government’s priorities are the people’s priorities. This is why we have announced 2023 as the year of anti-corruption.
During the recent protests, it was the Mongolian government that uncovered and shone a light on historical corruption leading us to introduce the Commodity Exchange Law for the transparent public trading of mining products. It is vital that we continue to fight and root out corruption wherever it exists.
Transparency builds better societies, and we are boosting transparency through our E-Business platform while working to create a unified electronic registration database for the intellectual property sector as part of the digitization of services provided by the government to citizens. We have passed a law on regulating money lending systems to improve the legal protections afforded to consumers, as well as a law on permitting, which will reduce the number of special licenses and permits from more than 1,600 to 360.
Additionally, we have passed a law on Public-Private Partnerships as part of a series of reforms to support economic growth in line with international standards. We know that investors require a robust legal framework to facilitate foreign direct investment in a functioning democracy that is stable. We are guaranteeing that framework and business environment.
The prolonged Russia-Ukraine war has placed Mongolia in a challenging position, considering Ulaanbaatar’s bilateral relations with both Moscow and Kyiv. From Mongolia’s foreign policy standpoint, how will your administration manage its short- and medium-term effects if the security environment were to escalate?
We regret that the situation has deteriorated to the extent that it has and hope for a swift end to the conflict.
We continue to maintain good relations with all our neighbors as well as actively promote our third neighbor policy, through which Mongolia seeks to develop enhanced economic and bilateral ties with all countries.
As a democratic, peaceful nation, our foreign policy will reflect our values, and will do everything that we can to make sure that the world returns to stability.
Given Mongolia’s friendly relations with all nations around the world, our policy is clear.
The regional geopolitical environment certainly has changed in the last five years. Defense expenditures are increasing in almost all East Asian countries. Mongolia, too, increased its defense budget, although Mongolia’s foreign policy supports peaceful resolutions and diplomatic dialogue via many channels. What are some of the innovative ways or new mechanisms that Ulaanbaatar is looking into to balance these destabilizing factors and maintain strong relations with third neighbors?
The New Recovery Policy is the ultimate endorsement of Mongolia’s Third Neighbor Policy, as we promote inward investment such as that seen by Rio Tinto at the Oyu Tolgoi mine. Trade and investment are key to enhancing our energy security, building further cultural exchanges, and boosting our economy and growth prospects.
The regional and global geopolitical situation is one we are always mindful of. We will not exacerbate or take steps that will heighten tensions or destabilize both our country and key relationships. However, in line with the government’s New Recovery Policy, we continue to seek to explore new markets and create enhanced bilateral relationships with key allies globally. Whilst our existing relationships will remain, ultimately, this will focus more and more further afield through key multilateral organizations and partnerships.
What actions has your government taken since the December 2022 protests to try to address the demands made? Do you foresee further protests or unrest in 2023?
Mongolia is proudly democratic, and freedom of speech is vital to Mongolian society. The government uncovered and brought to the fore the historical issue of corruption as witnessed through the coal theft case, which we continue to pursue in earnest, including justice for guilty parties. Both protesters and the government were and are completely aligned in our joint wish to fight corruption and right a historical wrong. It is for this reason that I went out to speak directly speak to the demonstrators.
The government will continue to ensure that corruption is rooted out and that we will never see these issues again regarding corruption.
As for protests, Mongolia, as a free country, we vociferously defend the rights of citizens to protest and exercise their rights to free speech.
The Ministry of Justice recently submitted Mongolia’s Anti-Corruption Strategy. What are some of the improvements in comparison to the 2016 version? At what level these anti-corruption measures can show its effects?
The previous “National Anti-Corruption Strategy” ended with 75 percent of all recommendations implemented. The latest strategy is highly ambitious in its recommendations, with 10 goals, 45 objectives, and, 224 anti-corruption activities outlined in the strategy.
The government has welcomed the latest strategy, and while it still needs to make its way through the parliamentary process, we have committed to working with the anticorruption state agency (IAAC) on its implementation through 2030.
The key difference with this strategy is that it doesn’t stand alone. We have already committed to a number of actions that align with the recommendations of the strategy in this, the “Year of Fighting Corruption.”
These include strengthening a corruption-free public service, effective participation of citizens, the involvement of civil society and media in this work, the independence of state institutions, reducing the risk of corruption in the budgeting and procurement process, and tackling theft, embezzlement, and waste.
We are making significant progress in our anti-corruption efforts, but there is more to do. This strategy gives us a clear pathway to continue and enhance our anti-corruption measures and confirms we are on the right track to building a society of trust and confidence in government and our country.