About: Economy, expats, Mongolia, Ulaanbaatar, workers
The expat invasion of Mongolia has started again with renewed vigor; every week brings plane loads of enthusiastic consultants, engineers and entrepreneurs, all eager to make their mark (and fortune) in this new land of opportunities. The bars and restaurants of Ulaanbaatar are quickly filling with the incessant chatter of a new Mongolian world order being created by vast amounts of foreign investments and the foreign experts that usually accompanies them.
It is certainly true that Mongolia is currently riding the wave of increased foreign investments.
Expats are still considered in many cases to be a necessity and are still a reality within most of Mongolia’s key industries. Is this to the detriment or to the benefit of Mongolia as a whole? How much longer will the “expat know-how” be essential to the development of the country? It is of course impossible to generalize the contribution of the expat community in Mongolia, it is certain that a number of key expats in the country have shaped the development of the country and its current direction. Peter Morrow has turned around Khan Bank to make it a pillar of the banking industry; Jim Dwyer has created the wildly successful and important Business Council of Mongolia, the USAID team has shaped many of Mongolia’s tax and business reforms but below this wave of very public expat executives, you can find another, growing wave of Mongolian leaders of industry who are achieving the next great things. Expat executives are no longer in the limelight, it is the new generation of Mongolians that have taken over the flag and are pushing the country forward. So, is it still the case that for a company or a venture to really succeed , it needs expat workers? Can they still be considered cost effective? To be able to answer this question with any credibility it is important to better define what is meant by the term “expats” in Mongolia.
First of all, there is the low cost expat labour. Essentially, the massive influx of Chinese construction workers and other cheap labour, this segment has grown considerably over the last few years with a rumoured 200,000 Chinese labourers currently in Mongolia. It is likely that as the property market and the economy develops further; this category of expat workers will keep growing at a fast pace. Chinese workers are simply cheaper, often better trained and willing to accept harsher working conditions than their Mongolian equivalent counterparts.
The same phenomenon was witnessed in Dubai over the past 15 years as its entire manufacturing; construction and low skill labour base was imported from India. Unless Mongolian workers start accept lower wages and continue to improve their skill base, China will remain an attractive recruitment base for Mongolian companies.
The new type of expat increasingly seen on the streets of Ulaanbaatar is the highly skilled western executive expats, often working for large mining companies or within the banking sector. They are the engineers, CFO’s, bankers slowly transferring their knowledge to Mongolia but they are still unlikely to be replaced for a few years yet as the skills they bring are so unique and complex to acquire that they will remain an essential element of the development of Mongolia over the coming decade. The largest seasonal wave of expats workers into Mongolia are the small entrepreneurs, NGO workers, and the assorted rabble of consultants. Apart from a few rare cases, many of those lost souls in search of a cause are gradually becoming a dying breed as Mongolia no longer requires their services.
The small scale business minded expats face fierce competition from the Mongolian “repats” who are quickly returning to Mongolia. It is no longer sufficient to have been educated abroad, speak a number of languages or have an international outlook in life to secure a financially lucrative position in a company or institution. The “repats” have not only acquired all of that but they also have the distinct advantage of already having a network in place as well as speaking the language. Mongolia has now entered the stage of its development where the trend is moving towards businesses becoming entirely legal and transparent, foreign businesses have lost their edge and must now compete amongst equals. This has to be regarded as a positive development, various businesses such as the Talk Talk school of English are leading their industry in improving the quality of their products, furthering their transparency and improving levels of services.
The best restaurants and bars in town are no longer foreign owned and managed but entirely Mongolian, the best shops are owned by Mongolian chains and the upcoming service providers are fully Mongolian owned and managed. The role of the skilled expatriate workers is changing gradually, the initial role was to bring the world to Mongolia but this is now reversed as the mission is to bring the world to Mongolia. Mongolian companies are increasingly keen to get exposure on the global markets, to actively seek foreign investment at the source; those are the markets where expat workers have to develop their skills in order to remain competitive.
Should a Mongolia based SME company be looking towards expats for its staff and growth? This is probably no longer a necessity as the expats are often not aware of the intricacies of the Mongolian market and rarely speak the language. By the same stretch, should expat companies based in Mongolia, still market themselves predominantly to other expats as is still often the case? Apart from some specific industries such as expat services, corporate relocation or Mongolian language classes, this is no longer the case, the lion’s share of the wealth and the economy is held in the hands of the Mongolian population, not the expat community.
Are expats still worth the extra costs they incur? Yes for the low cost imported labour, yes for some executive specialized positions, but generally speaking, the extra costs incurred in hiring expats are no longer justified for SME’s, NGO’s, consultancy projects and middle management positions. The domestic labour market has caught up to the task and is proving to be better suited and more cost effective.
About: Economy, expats, Mongolia, Ulaanbaatar, workers
