A Mongolian Capitalist – Part I

In the last post Chris talked about Mongolia. It’s truly a land of opportunity, and it’s experiencing a boom that will be one for the history books to be sure.

In the spirit of continuing our Frontier Capitalists theme, we wanted to introduce you to another good friend whose taken the proverbial “bull by the horns” and actually relocated to Mongolia! A bold move, but likely one that will make him an 8 or 9 figure fortune over the next decade.

Chris recently interviewed Harris Kupperman, a successful hedge fund manager and now the CEO of a Mongolia-based diversified investment company that is investing heavily into real estate and financial services (we’ll speak more about that in our next post). We also let our friend Carlos Andres throw a few questions out there, and between the two of them our readers should come away with a pretty clear picture of what’s happening on the ground in Mongolia.

So let’s get started!

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Chris: In our last post I gave a little overview of why Mark and I like Mongolia so that readers have a basic background to the story. Can you tell us why you like it so much (so much so in fact that you moved there!), and not just from the standpoint of a capitalist and investor, but also as a global citizen. What’s so great?

Harris: To start with, the weather… Just kidding. But where else do you have a 150 degree swing from summer to winter? Everything in Mongolia is so unique, it’s like no other place and that’s why I enjoy it so much. No other country has gone from half nomad to wealthiest per capita in a decade. I want to be here and see it happen. I enjoy the intellectual factors at play in building a business in a country like this. Every day is just fascinating. Besides, I really do enjoy living here. It is one of the most open and free countries in the world, the people are friendly and I’m having a great time.

Carlos: When did Mongolia first come to your attention and under what circumstances?  What were you up to at the time?

Harris: I’ve managed a hedge fund since 2003 and through that I have always been looking for interesting opportunities. I first learned the Mongolia story in 2005, but I was too busy with other things to really figure it out other than sending some Emails. I kept it on my radar though. A very good friend of mine in Hong Kong had been telling me for ages that we needed to go take a look and then finally in August of 2010, I arrived in Mongolia. Once you are here, you realize that the Western investment media has it all wrong, the growth is much stronger than what you hear about and it is the reason that I have pretty much dedicated my time to Mongolia ever since. There is no other story like it in the investment world.

Chris: I know we’ve discussed this before, but can you tell our readers how what’s taking place in Mongolia compares on a historical basis to previous booms… if at all?

Harris: There is no historical precedent. You are looking at an economy that might literally double each year for the next decade. I cannot think of anything like this in history. Basically, mineral exports are going to go from 2 billion in 2010 to some number around 20-80 billion by 2017 and continue growing from there. It’s just never happened before.

Carlos: What type of government do you have in Mongolia and what’s the basic structure?

Harris: Mongolia has a fully democratic government with regular elections that see the ruling party change. It is a very Western-style government that is very much free.

Carlos: What type of economic regime is in operation? Is it liberalized trade and free market, socialist, Chinese style communism or something else?  What is the economic and political leaning of government officials?  Is the idea of a free market present?

Harris: It is the best free market country that I know of. There’s a bit of bureaucracy left over from Soviet days, but the government understands growth and they want the country to be successful. Remember that the guys in politics tend to be the richest citizens and they want to make sure that they become wealthier. They are doing everything possible to promote growth. Taxes are minimal, regulation barely exists and bureaucracy is slowly being tamed. It’s paradise for investors.

Chris: What do you see as the biggest risk to investing in Mongolia? Is it the government, who might do something stupid along the way, or is there anything else?

Harris: Like most countries, as an investor, the government is usually the biggest risk. I think the current government is smarter than most. They know they need foreign investors in order to develop the mineral resources as Mongolia doesn’t have billions to spend on the necessary infrastructure. More importantly, they already stubbed their toe badly a few years back with an excess profits tax which has now been repealed. I do not think they will try something like this again. The other risk is a global slowdown as you have a country that is a major commodity exporter. I’m less worried about this risk however.

Carlos: How about the security and crime situation in the country in terms of both personal safety and business security?

Harris: There is essentially no crime. I feel perfectly safe walking by myself at 2 am. Business security is the same. I feel safer here than in Manhattan doing business, and we all know that Manhattan has been sterilized to the point that it’s like Disneyland.

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Mark again… We’ll continue our discussion with Harris on Monday next week, and let you know the name of the company he co-founded to invest in Mongolia.

To our readers from the U.S., have a safe and happy 4th of July weekend. I can just smell the hamburgers and corn grilling on the BBQ. I do miss this time of year in the States.

– Mark

“Freedom is nothing else but a chance to be better” – Albert Camus