Mongolia – Same Same…But Different

It is said that there are many ways to skin a cat. Kuppy has provided us with his analysis of Mongolia here and here. Following on from this I asked an investment banker friend to provide us with his perspective on Mongolia. Sam is smart, well educated, and young. He could at this stage in his life choose to work in pretty much any country in the world. Read on to find out where he now lives and why.

Driving through the Gobi desert earlier this year, the stark landscape of southern Mongolia reminds me of outback Australia – dry, desolate and with a sprinkling of livestock dotting the horizon.  It takes a tough people to populate this environment and Mongolians have lived there for centuries, grinding out a living in unforgiving terrain just as the early settlers did in Australia.

Of course there are other similarities between Mongolia and Australia – both countries are huge, sparsely populated and blessed with mineral resources.  This similarity ended when we tried to leave Khanbogd, a soum (town centre) in South Gobi province, and found that we had to wait a couple of hours because the electricity to power the petrol pump would not be turned on until 2pm!

Despite sitting on undeveloped mineral resources valued at close to USD 1 trillion, it is obvious when you are on the ground in Mongolia that the country is sorely lacking in infrastructure and also the capital to remedy the situation.  The country (and the mining industry for that matter) needs roads, railway, power plants, processing plants and logistics centres to be built so that the mineral wealth can be extracted, processed and transported to market in a cost efficient manner.

When one takes a look at the banking sector and capital market in Mongolia, it is easy to comprehend the current situation.  The total assets in the Mongolian banking system amount to just under USD 5 billion at the end of 2010, with total loan outstanding at around USD 2.5 billion.  The market capitalization of the Mongolian Stock Exchange was approximately USD 1.1 billion in December 2010 and this was after growth of 121% from 2009!  Even comparing this to the market capitalization of the “Big Australian” alone, BHP (USD 220 billion), or even its smaller sibling, Rio Tinto (USD 143 billion), we are not even batting in the same league.

So obviously there is not a lot of capital in the form of domestic savings to be tapped for much needed infrastructure development.  This will serve to further slow down the development of the mining sector.  The Government estimates that nearly USD 20 billion of capital is required over the next 5 years, with priority areas in the mining sector (USD 10.2 billion) and infrastructure development (USD 7.7 billion).  It will be difficult to satisfy this capital need from domestic sources, as such foreign capital will need to be involved.

Perhaps recognizing this, the Government has made the regulatory environment welcoming to foreign investors.  Aside from certain strategic mining reserves, foreign investors can fully participate in the economy on par with locals.  Whilst the laws and regulations are not always clear-cut (even for Mongolians!), it is clear from meetings with government officials that they are practical minded and willing to work to reach a solution.  It’s a matter of knowing the right people to speak to.

As the dividends roll in from the mining boom, infrastructure will improve, the laws and regulations will evolve, the income level of the people will rise significantly, creating a consumer society with demands for restaurants, designer clothes, cars and electronic goods much like their peers anywhere.  Actually, Mongolia is projected to be one of the fastest growing economies in the world over the next 20 years.

For any intrepid investors willing to take a chance, this is almost getting in on the ground floor.  Of course everything is not rosy.  You only have to step out of the airport to realize this.  But it’s a decent country to live in – people are friendly and open-minded, public safety is not bad.

I moved fulltime to Ulaanbaatar in May of this year and now have a front row seat as I watch this country take off.  Mongolia reminds me of China in the 1990’s.  I was there but I did not stay because I wanted to experience that rite of passage that all Australians go through – working holiday in London and backpacking through Europe.  Who would have thought a second chance would come around?  Now I’m fully prepared to take advantage of this opportunity.


Chris again.

Sam is from Melbourne, Australia and has recently joined a local Mongolian bank heading up its investment banking division.  He now works with the Government and local entrepreneurs to raise capital overseas. If anyone wishes to get a hold of him feel free to drop us a note and we will furnish his details to you.

Fortune favours the bold – Latin proverb


This Post Has 8 Comments

  1. jack leibel


    Just wondering if Sam would have any thoughts regarding developing a banking relationship with a mongolian bank with a simple CD. I understnd that interest rates are quite favorable in Mongolia compared to the US.

    Thank you.

    J. Leibel

  2. Sam Lim

    Hi Jack,

    You can definitely get higher interest rates in Mongolia compared to the US (but also higher credit risk, of course). We have been working with local commercial banks to place foreign funds on deposits and, with larger amounts, the rates are negotiable.

    Deposits can be made in MNT or USD. Some of our clients like MNT, not just because of the higher interest rates on offer, but also because of the expectation that the local currency will appreciate in light of expected capital inflow.

    Get in touch if you want to talk details.

    Kibd regards

  3. Mark S.

    Hi Sam,

    I am a U.S. based investors and I am very interested in establishing a Mongolian banking relationship in order to benefit from the higher interest rates and provide capital to support local growth. I have taken some initial steps along these lines and would like to explore this with you. Please contact me at your earliest convenience if you are interested.

    Thank You.

    Mark S.

    P.S. How much is the exit tax? Is the local income tax on interest (to be withheld) 10%? Are there agreements in the works to eliminate double taxation between U.S. and Mongolia?

  4. David D

    Hi Sam,
    Like the others, I’m a private US investor who’d love to get in on the ground floor. I’m open to simply creating a bank account and participating in the higher rates, but to the extent that actual investment in local businesses is available and profitable, I’d be open to that as well. What options are out there for foreigners? Is it straightforward to simply open a brokerage account, or is there a better way to access the growth. I look forward to hearing from you.


  5. Bridget

    Hi Sam,

    Like you I am originally from Melbourne, Australia and am looking at ways to access the incredible opportunity presented by Mongolia! In your opinion, is direct investment via setting up a Mongolian brokerage account preferable to investing in a listed company with Mongolian exposure (such as Harris Kuppermann’s Mongolian Growth Fund)? Also, I and a colleague are planning a visit to the country in the next few months and wondered if you had any advice about where to stay/go (over a two-week visit) to get the maximum feel/experience of the country.
    Thanks for a great article and look forward to hearing your advice,

    Kind Regards,

  6. Sam Lim

    Hi Bridget,

    Good to hear from a fellow Melburnian. Where are you based now?

    To invest in Mongolia, you’ll need to be on the ground as information is not readily obtainable. Even with simple requests such as audited financial statements, an investor may have to actually go to the company and ask for a copy.

    If you are merely looking for exposure to listed equities, then you can simply set up a brokerage account. The capital market is not very developed in Mongolia and there is no market liquidity or depth, so you’ll have to be patient.

    There are more opportunities in unlisted equities (or debt). But you’ll have to be here to seek them out. The advantage with funds such as Harris’ is that he is actually based here and his team has capacity to search out the investment opportunities in-country.

    Feel free to look me up when you visit. We can chat more. It’s getting cold now, with winter setting in. For me, the best part of Mongolia is the country-side. The nature is pristine and untouched and the nomads warm and welcoming.

    Send me an email ( if you want to chat further.

    Kind regards

  7. Karen

    Hello Sam,
    I’m just starting to research investments in Mongolia. I’d like to get in on the ground floor, but frankly I’m not very knowledgeable in this area. Can a person open a safe account or CD’s relatively easy, and How?

    Thank you

    1. Mark Wallace


      In most instances you need to go to Mongolia to open a bank account. However, Golomt Bank will open a savings account for you remotely. You can get the information directly from their website (Google them). Sam’s NI Bank will also work remotely with you.

      You can also check out Resource Investment Capital’s MSE Liquidity fund, which is a hybrid cash and stock investment vehicle.


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