Is Mongolia the next Eldorado?
For the past 4 years I have worked and lived in Mongolia, I have invested all my time and financial resources into building a property portfolio and other small investments such as Sub’baatar Sandwiches.
As the financial crisis here seems to only get worse, as the politicians are too busy to bicker amongst each other and as little visible progress is made in the signing of the OT agreement, I can’t help but wonder if it was all a terrible mistake. Would I have done better to put my money into a safe fund in Europe, do micro financing for Somalian pirates or even lend it to a Macau casino?
For the past week, I have analyzed and looked at ways of diversifying my Mongolian portfolio of investments. Where is the best place to invest, what makes the most sense. Every time I look around I keep coming back to Mongolia. On paper at least, it seems to have everything going for it.
It has a stable democracy, a solid rule of law, good tax rates, open foreign investments laws, an envious geopolitical situation between two enormous markets, a small population and enormous amounts of untapped resources. It has enormous potential, on that everyone agrees, but currently lacks one important factor: the ability to realize that potential.
For the past 4 years, the Mongolian government has been consistently second guessing itself about the direction it ought to take in regards to mining and foreign investments, it has stalled for time, constantly moving two small steps forward and one big step backwards.
It seems that now, Mongolia is at the make or break time, will the OT agreement be signed? Will foreign investors be lured once more into the promised land of attractive rates of return? Or will foreign investor’s patience run out? Will they seek new markets?
It is my opinion that Mongolia can move towards a number of different scenarios;
The Dubai scenario involves using the revenues from the limited available mining resources to invest and diversify into other sectors of the economy such as tourism and real estate. Import skilled foreign labour and become an important regional hub. Provide excellent social services to your domestic population and create alternate sources of wealth and revenues.
The Nigeria scenario, involves high levels of Government corruption, a small very wealthy elite that controls 85% of the country’s wealth and a majority of the population living in abject poverty.
And what is the most likely scenario; a mix of both. While corruption is likely to get worst if large sums of money are involved, there is no doubt that a very wealthy Mongolian elite will be created but Mongolia is lucky enough to have a growing democracy, an environment which encourage entrepreneurship and a very vocal and strong middle class that wants the country to move forward.
Despite various recent displays of hesitation within the Mongolian Government, I think I will be patient and keep my investments where they are.
