Mongolia from a “Mongolian” Perspective

Chris and I make no bones about Mongolia being our favourite frontier market, and likely the richest place per capita in the world in 10 years. We’re continuously amazed at the people we meet that are involved in the country’s financial markets.

The expats who have gone and made Mongolia their home; guys like Harris Kupperman from Mongolia Growth Group, Lee Cashell, Eric Zurrin, Chris DeGruben… These guys are self-made, pioneer types who I’d go into battle with anytime!

But we’ve also met a lot of Mongolian nationals who really, really impress us. Mongolian Mogul Jamul Jadamba and BDSec founder Dayanbilguun Danzan to name a couple.

Today I’m talking to ‘Mogi’ Munkhdul Badral, he’s the Senior Client Manager / Executive Director of CPS International LLC.

I wanted to talk to him candidly about his country, and get the perspective of another national, someone who understands Mongolia both then, and now. I think you’ll be as impressed with ‘Mogi’ as I was when you’re finished reading!
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Mark: Mogi, we’ve spoken to quite a few guys on the ground in Mongolia. It’s always nice to get the perspective of a Mongolian national. You’re involved directly in the brokerage business, in Mongolia, CPS International, a Mongolian marketing arm of CPS Securities, a Perth, Australia-based stockbroking and corporate advisory firm. We’ll get into that later, but first tell me a bit about your background and personal story.

Mogi: I was raised in a diplomat’s family, with my father serving, and still is, Mongolia’s Ministry of Foreign Affairs all his career. So I was quite privileged to have travelled and experienced a world besides my own from a young age.

I first learned to write in Russian, hit puberty in English, adolesced in Mongolian and became an adult in Japanese. This will give you an idea of how I spent my life from childhood through college. After spending more than half of my life overseas, until just recently, having lived in countries like the US, Switzerland, and Japan, I’m bit ashamed to say that back then I never planned to go back, not just yet at least.

After college in Japan, by circumstances I had to come back. It was a little scary back then, with absolutely no Mongolian work experience, not sure what career I wanted, and whether Mongolia is the place I can achieve my goals. That was back in early 2009.

Although it wasn’t my decision, I can now most definitely say that coming back home was the best thing that happened to me. I came back at a time when the Global Financial Crisis had just hit the world, Mongolia had just started to feel the effects of it, needing the IMF and major countries to extend us a parachute, and of course before the OT Investment Agreement was signed, signaling the beginning of the mining boom we’re seeing now.

So I would say I came at exactly the right time, if not perhaps just a little late, a time when the world, even Mongolia, only had half an eye on my country.

Mark: Our recent interview with a Mongolian mogul, Jamul Jadamba proved extremely popular. I want to understand the boom in Mongolia, from the perspective of a Mongolian. I’ve heard some incredible stories about Mongolian nationals literally rising up from rags to incredible riches in a few short years. The opportunity is just staggering. How do you view this opportunity potentially transforming Mongolia?

Mogi: The current perceived richest Mongolians now mostly all came from a background of trading goods between countries. Well, trading goods is just a nice way of saying buying and selling from your suitcase.

As overseas students in the 80s, early 90s taking goods from China and Mongolia during their college vacations and selling it triple, quadruple their prices, filling the hole created by lack of proper trade relationships between Asia and Eastern Europe, thus tasting the benefits of capitalism before the country had not even seen what capitalism is.

Those newly turned capitalists thus exploited the first privatization experiment of the 90s, buying up state-owned assets for far less than the value of even the real estate it was occupying. I guess exploiting is not the “politically correct” term, but what else would you expect from a smart businessman, you see an opportunity and you take it.

Now we’re seeing a second wave of rags to riches stories that will challenge the old guard to be innovative and set an example to the 3rd generation.

If Chinggis Khaan transformed our nation, this new found mineral wealth will do the same for Mongolia. We may be seeing the beginning of a nation turning into a world sovereign wealth power, per capita of course, with Mongolia being just a nation of 2.8 million (latest official statistics).

On the other hand, it could also turn Mongolia into a place where money just seems to go and disappear. But I actually have every confidence we’re heading in somewhat the right direction and in the end be able to concentrate all the wealth on a national scale and use it to properly incubate each and every Mongolian, because we will need every smart, skilled, healthy Mongolian we can get.

We’re seeing something of it in the Development Bank of Mongolia, concentrating international investments in one vehicle and investing in the right sectors. We’ll see more of this on the national scale such as the Fiscal Stability Fund, and Human Development Fund. Although HDF now just looks like a “Welfare for All Fund”, but in the future, it should become the primary investor in our people’s education and health.

Mark: I’m in the middle of reading a fabulous book that was recommended by a friend of mine, it’s called, Genghis Khan and the Making of the Modern World. Like most people I was ignorant of just how much of our “modern world” was shaped and created by him, it’s really incredible!

Mogi: I have to admit I haven’t read Mr. Weathorford’s book yet, hoping someone might give it to me as a present (wink), but what the book writes about is what we were all taught in high school, or for my previous generations, reconfirmed. It’s good to have someone finally tell a story from all perspectives, not just from the old scripts of the Middle East, Europe or China, and show the world the Mongols that we believe we were back then.

Mark: Well, maybe someone reading this will buy you a copy ;-)

The Mongols had a very influential hand in almost everything… from warfare to class systems and technology. I think anyone who wants to understand Mongolia needs to read and re-read this book.

My question to you is, what do you think the majority of people wanting to do business in Mongolia, or invest into Mongolia need to understand about the culture and the people?

Mogi: Now, don’t get me wrong, Mongolia as a nation and people understand that we need foreign expertise and investment at the moment and in the foreseeable future. But what our history and culture will tell you is that to be a Mongol meant fear, meant strength, meant power, and most importantly meant independence.

With our true independence in 1990, we have reconfirmed it, if not yet politically and economically, then mentally. If before a Mongolian business needed a foreign partner to succeed into the international arena, then now an international business can’t succeed without a local partner in Mongolia. What I’m trying to say is that, the best and only way to succeed in doing business in Mongolia is to instill a sense of ownership, a sense of stakeholdership for Mongolians in “foreign” invested businesses.

One example I can give from my personal experience is Hunnu Coal. Matthew Wood came to Mongolia and partnered with Lkhagvadorj Tumur or George as he is called, and of course with CPS where besides managing the IPO, CPS brought in Mongolian investors to take part in the pre-IPO, IPO, post-IPO process. Hunnu also had a good Employee Stock Ownership Plan (ESOP) where with the Banpu takeover, I’ve seen dozens of their employees being finally able to buy their first apartments. This is FANTASTIC for Mongolia and we aim to continue, via CPS, in being part of this process.

Mark: Something that a lot of investors gloss over is inflation, it’s pretty high in Mongolia. The rapid influx of foreign capital into the country is a double-edged sword. This is going to really test the Mongolian Central Bankers, and politicians. Inflation is not popular, and the majority of Mongolian’s are still quite poor.

The rapid growth is, as it always does, leaving quite a few people behind. What’s your take on this and the potential solutions for dealing with it?

Mogi: I fully agree inflation is a big problem in relieving poverty, no one likes it – the people don’t because their salaries don’t increase in line with inflation, investors don’t like it because their costs aren’t what they used to be. And I don’t like it because my cup of coffee at my favorite coffee corner increases prices twice every year. But I think our politicians learned a lot from this election cycle on what causes inflation and what part they play in increasing it as well.

So I’m hoping from the next election cycle, our politicians will cease giving out cash handouts to everyone regardless of wealth and need, and invest that money in things that will actually help relieve poverty, like the health and education of people.

People always say that it should be invested in infrastructure, so I’m deliberately saying health and education, because infrastructure has enough attention on it. That’s I think what our politicians should be doing, besides the usual stuff IMF says, reduce the rise in government expenditure and all.

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We’ll pick it up again tomorrow with Mogi. Meanwhile, if you didn’t see our post yesterday where we talked about our upcoming meet up in Ulaanbaatar, Mongolia at the end of July, drop us a note.

Chris and I have setup what we think will be one of the most rewarding and beneficial investor gatherings you’ve ever been to. We’re meeting with influential Mongolian business leaders, politicians and expat movers and shakers – the guys getting things done in Mongolia.

There are a limited number of spots, and after yesterday’s response it looks like we’ll be sold out quickly. So, if you want to join us, contact us sooner than later.

– Mark

“I couldn’t wait for success, so I went ahead without it.” – Jonathan Winters

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