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Foreign trade 

Since the start of the transition to a market economy, Mongolia has been carrying out a policy to promote foreign trade and foreign investment. With the support of donor countries and international organisations Mongolia strives to find its place in the international arena, renewing its economic system. Compared to other countries in transition, Mongolia achieved tangible results in trade liberalisation. Mongolia's accession to the World Trade Organization (WTO) in January 1997 highlights its relative success in pursuing economic reforms and developing a new trade regime in line with international trading principles. Accession has allowed Mongolia to become a part of the global trade regime, to access full information on WTO member countries and to benefit from human resource development in the trade field.

Foreign trade of Mongolia had been totally dependent on former socialist countries, especially from the Soviet Union, until the 90s. Today, Mongolia develops foreign trade with over 80 countries of the world and more than 80 percent of the trade turnover goes to Russia, China, the United States, Japan and South Korea. According to statistics, for the
first quarter of 2004, total external trade turnover equalled $316.3 mln, of which exports are $131.4 mln and imports are $184.9 mln. Total external trade balance turned a deficit of $53.5 mln. As compared with the same period of the previous year, total external trade turnover increased by 6.8 percent, of which exports increased by 1.7 percent and imports by 10.8 percent, respectively.

The main export goods are: minerals including copper, molybdenum and fluorspar concentrates, and raw materials and products of animal origin such as meat, cashmere, wool, animal casings, hides and skins, garments, carpets, blankets and others. The imports mainly consist of petroleum products, equipment and spare parts, vehicles, chemicals, foodstuff and consumer goods. Although the total trade turnover increases each year, foreign trade balance remains negative, mainly due to the world price decrease of its key export products such as copper, gold and cashmere. The appropriate legal environment has been created for the establishment of free trade and economic zones.

Foreign investment

Foreign investment is one of the major factors need to provide economic growth in Mongolia. Mongolia has the following competitive advantages and favourable environment for foreign investors:

Foreign investment within the territory of Mongolia enjoys the legal protection guaranteed by the Constitution of the country and by the international treaties to which Mongolia is a party. The Foreign Investment Law of Mongolia was adopted in 1991. Amendments to the law were made in 1993, 2001 and 2002.  The objectives  of these changes were to create a more favourable and competitive foreign investment environment. Currently Mongolia entered into agreements on avoidance of double taxation with 27 countries of Asia and Europe. It has concluded agreements on mutual protection and encouragement of investment with 34 countries of the world.

Mongolia joined the Washington Convention of 1965 on Settlement of International Investment Disputes in 1996 and the Seoul Convention of 1985 on investment insurance in 1999. Also, the country is a member of World Bank's Multilateral Investment Insurance Agency (MilA). Since 1990 foreign investment equalling about USS1 billion (including the oil exploration sector) were introduced into the Mongolian economy by approximately 3083 foreign-invested companies from 124 countries. Most foreign companies are Chinese, followed by those from other South East Asian countries and the Americas. For example, 37.9 % of those on the list are Chinese, 13.2% Canadian, 11.4% American, 8.1% South Korean, 6% Japanese and 3.3% are Russian. Of these 3083 foreign companies 60.4% are joint ventures and the remainder are 100% foreign-owned. In terms of geographic location, 95.6 % are based in Ulaanbaatar.  

Foreign-invested companies created about 67 thousand new jobs for the domestic work force. More than 2,500 foreign specialists working in Mongolia are also making an intellectual investment to our country by introducing new management methods. Many world-famous corporations, such as Caterpillar, Samsung, Sumitomo, Coca Cola, Itochu, Komatsu, Hyundai, Procter & Gamble, Ford, Mercedes-Benz and others are doing business in Mongolia. Mining, tourism, infrastructure and agricultural processing are now major areas of foreign investment. The year 2002 was announced by the Government as the "Year for Investment Promotion", the objective of which was to streamline investment to priority sectors such as mining, deep processing of agricultural products, tourism and information technology.

Within the framework of this Year, "Investor's Forum - 2002" was organised in Ulaanbaatar in September, involving about 600 participants from 44 countries and more than 400 national investors and business people. Foreign-invested entities enjoy the possible advantages in owning, and using their properties and disposing of their incomes. For example, a foreign investor can rent land for 60 years and extend it for another 40 years. In addition, a foreign investor establishes a Stability Agreement with the Government of Mongolia.

A foreign investor can also carry out a project instead of establishing a business entity. The foreign Investment and Foreign Trade Agency of Mongolia (FIFTA), is a government body responsible for the promotion and facilitation of foreign investment, registers activities of foreign-invested companies operating in the territory of Mongolia, expands external relations of the country and renders assistance and services to investors. At the end of 2003 direct foreign investment reached 164.9 billion tugrigs.