Foreign direct investment (FDI) has been the engine of Mongolia's economic growth and is highly dependent on commodity prices. According to UNCTAD's World Investment Report 2023, FDI flows to Mongolia amounted to USD 2.5 billion in 2022, up by 15.2% compared to the USD 2.5 billion recorded one year earlier and above the pre-pandemic level. At the end of the same period, the total FDI stock stood at USD 28.5 billion, around 169.4% of the country’s GDP. Mongolia's main investment partners are China, Canada, Russia, Great Britain, and the United States. The sectors attracting the most foreign investment are mining, oil, and construction. Tremendous mineral reserves, agricultural endowments, and proximity to Asia’s vast markets make Mongolia an attractive destination for medium to long-term foreign direct investment. According to the World Bank, in the first nine months of 2023, FDI inflows declined by 9% year-on-year and reached 8.4% of GDP, compared to 9.6% in 2022. The decrease in FDI in the mining sector can be primarily attributed to reduced financing needs at the Oyu Tolgoi underground mine project. However, FDI in the non-mining sectors remains subdued at only 2% of GDP, reflecting the limited investor interest amid tighter global financial market conditions.
Mongolia imposes minimal market-access barriers, with investors encountering few investment restrictions and enjoying mostly unrestricted market access. With the exception of real estate, both foreign and domestic investors in Mongolia possess the same rights to establish, sell, transfer, or securitize structures, shares, use rights, companies, and movable property. Mongolia generally imposes no statutory or regulatory limits on foreign ownership and control of investments, except for foreign state-owned entities. According to the Mining Law, the government reserves the right to acquire up to 50% of mineral deposits deemed of "strategic" value to the state by parliament. Additionally, since 2019, Article 6.2 of Mongolia's Constitution mandates that the state take a "majority" share of the "benefits" from strategic mining projects. However, only Mongolian adult citizens are permitted to own real estate in the form of land. While foreign investors can obtain use rights for the underlying land, these rights are valid for five years with a one-time, five-year renewal, a restriction not imposed on Mongolian nationals by the government. The government typically extends the same tax preferences to both foreign and domestic investors. Conversely, vulnerability to external economic and financial shocks, ineffective dispute resolution mechanisms, and a lack of input from stakeholders during rulemaking all serve as impediments to FDI. To date, Mongolia has established Foreign Investment Protection and Promotion Agreements with 43 countries and Double Taxation treaties with 26. Moreover, it is a member of the Seoul Convention establishing the Multilateral Investment Guarantee Agency, and the Washington Convention on the Settlement of Investment Disputes. Mongolia ranks 121st among the 180 economies on the 2023 Corruption Perception Index and 76th out of 184 countries on the latest Index of Economic Freedom.
Mongolia | East Asia & Pacific | Estados Unidos | Alemanha | |
---|---|---|---|---|
Index of Transaction Transparency* | 6.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 8.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
Foreign Direct Investment | 2020 | 2021 | 2022 |
---|---|---|---|
FDI Inward Flow (million USD) | 1,719 | 2,173 | 2,504 |
FDI Stock (million USD) | 24,206.7 | 26,281.8 | 28,521.5 |
Number of Greenfield Investments* | 1.0 | 0.0 | 1.0 |
Value of Greenfield Investments (million USD) | 12 | 0 | 7 |
Source: UNCTAD - Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Income tax | 10% |
Non-residents | 20% |
Mongolia | East Asia & Pacific | Estados Unidos | Alemanha | |
---|---|---|---|---|
Number of Payments of Taxes per Year | 19.0 | 23.4 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 134.0 | 195.1 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 25.7 | 33.8 | 36.6 | 48.8 |
Source: Doing Business - Latest available data.
Setting Up a Company | Mongolia | East Asia & Pacific |
---|---|---|
Procedures (number) | 8.00 | 7.25 |
Time (days) | 12.00 | 29.73 |
Source: Doing Business.
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Latest Update: May 2024