Cover Mongolia: [BREAKING: SEFIL to regulate only foreign SOEs, GoM proposes]

Tuesday, March 19, 2013

[BREAKING: SEFIL to regulate only foreign SOEs, GoM proposes]

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Blue Wolf Mongolia Countdown: 32 days till liquidation

Mogi: no official statement can be found on the internet though, so don’t go jumping with joy just yet

SFIL to Only Regulate State Owned Enterprises

March 18 (MIBG) “Bravo, Government of Mongolia” - one of the headlines in Ulaanbaatar’s daily newspapers this morning.

Over the weekend the Prime Minister of Mongolia, Mr. Altankhuyag, announced that the GOM has prepared an amendment to the Strategic Foreign Investment Law that regulates foreign investment into strategic sectors. According to the Prime Ministers announcement the proposed foreign investment restrictions will no longer affect private sector entities and will only regulate foreign state owned enterprises. As it was reported, foreign state owned enterprises will need to obtain parliamentary approval if it intends to acquire more than 49% of an entity that operates in Mongolia's strategically important sectors. The current law defines the strategically important sectors as: Mining, Finance, and Communications.

The Bank of Mongolia recently reported that YoY foreign direct investment has dropped 41%. This decline has been largely blamed on the introduction of the new law which was approved in May of 2012. The introduction was a knee-jerk reaction to the bid by state owned Aluminum Corporation of China Limited (Chalco) to acquire a controlling stake in SouthGobi Resources.

The pending changes will be welcomed news for investors and should reinvigorate foreign capital into the market. While the Draft Minerals Law is still an obvious concern we believe that this announcement should be seen as a strengthening commitment to foreign investors from the Government.

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Mogi Munkhdul Badral Bontoi

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