In 2016, Mongolia and Canada signed the Canada-Mongolia Foreign Investment Promotion and Protection Agreement, which provides a more transparent and predictable regulatory environment for Canadian investors in Mongolia. The agreement’s strong protections help Canadian and Mongolian companies deepen commercial ties.
Investment-related laws and regulations of Mongolia render equal rights and opportunities to both foreign and domestic investors to run a business in Mongolia. There are no restrictions on trading foreign currencies and returning profits to their home country. The tax environment is internationally competitive and certain taxes can be stabilized through the issuance of a stabilization certificate as well as investment agreements.
Mongolia is a mineral-rich landlocked country encountering its biggest challenge of diversifying the economy with non-mining export products and accessing new market destinations. In 2020, Mongolia’s GDP amounted to $14.4 billion and growth averaged -5.3 per cent over the previous year, due to COVID-19. It is forecasted to recover in 2021, accelerate in 2022 as post-pandemic global recovery strengthens and reach 6 per cent by 2023.
Canada is the top-tier investor in the mining sector of Mongolia. One of the world’s largest copper-gold deposits was discovered by a junior Canadian exploration company in Mongolia and it is now being developed into a multi-billion-dollar world-class mine, known as Turquoise Hill (Oyu Tolgoi). During the underground mine construction for this project, bilateral trade between the countries reached $260 million, which was boosted by the import of machinery and equipment from Canada.
Several other TSX-listed Canadian companies are developing their projects in Mongolia. Mongolia-Canada ties in the mining sector are also bolstered by a cross-listing of TSX-listed companies’ shares on the Mongolian Stock Exchange.
However, the volume of bilateral trade in other goods and services is far behind the above-mentioned mining-
related co-operation. Canadian imports totalled $27.7 million in 2020, which is 50 per cent lower than the previous year. The total value of goods sent from Mongolia to Canada was $850,000. Mongolia exported cashmere products and prefabricated yurts and imported vehicle, machinery and their parts from Canada.
Mongolian yurts, the traditional dwellings of Central Asian nomads, are very popular in Canada. More than a tent, the yurt is the result of ancient know-how and has been developed over hundreds of years. Made to resist extreme climates, this circular domed abode is warm in the winter and cool in the summer.
Mongolian cashmere is known as one of the softest fibres in the world. Despite supplying 45 per cent of the unprocessed cashmere in the global market, only 10 per cent of final cashmere products with a “Made in Mongolia” label enter the global market. Recently, the Mongolian wool and cashmere association introduced a “Mongolian noble fibre” mark, which certifies that the product is made with 100-per-cent high quality wool and cashmere sustainably sourced from Mongolia. The cashmere sector employed 10,000 in 2020, of which 90 per cent were women. Indeed, 52 per cent of total registered entities are women-led enterprises. It reflects a policy in which the government pays particular attention to giving women more equitable access to business.
Due to similar weather conditions, Canadian and Mongolian entrepreneurs in the construction and agriculture sectors could learn from each other and work well together. Given the importance of bilateral trade involving Canadian wooden structure building materials and technology, we are working closely with the Standards Council of Canada and other standards-developing organizations to adopt more Canadian standards.
Mongolia’s farmers are interested in importing seeds of crop varieties, such as wheat, barley and buckwheat, that are suitable in Mongolian climate conditions. They also want to learn best practices for establishing feedlots, developing quality beef production, refining supply chains and exporting. Advanced agricultural technologies help Mongolia to diversify its exports.
In accordance with the recent amendments to banking laws, commercial banks in Mongolia will be publicly traded companies by 2023, with shares of each owner not exceeding 20 per cent. Canadian institutional investors are welcome to the banking sector of Mongolia. Transport, logistic services, aviation, online trading, information technologies, health, education, agriculture, forestry, wooden construction and tourism are also potential areas of prosperous business and sustainable investment.
In addition to the domestic laws and regulations, the friendly political and economic relations formed with our main market countries such as Russia, China, Japan and South Korea, as well as the agreements signed with these countries can be advantageous for investors operating in Mongolia. Mongolia, with its easy access to much of Asia, remains committed to welcoming Canadian investors.
Ariunbold Yadmaa is Mongolia’s ambassador to Canada. Reach him by phone at (613) 240-2749 or by email at mongolia@rogers.com.
