Mongolia – Time to Jump Back In?

Ganzorig Ulziibayar is the President of Mandal Insurance and Chairman at Mandal Asset Management, an investment management company in Mongolia.

He has been involved in the Mongolian capital markets for a decade and it shows when you speak with him. Street savvy with an in-depth understanding of how Mongolia works. I figured it a no-brainer to speak with him about the recent political developments in the country.

The following is part of our discussion:


Scott: Mongolia’s Securities and Investment Laws are supposed to have already been passed/revised. With the current situation in government, which Chris described in his last post, Congolia, what is the probability these get passed in the next month or two?

Ganzorig: It seems to me that the State now gives full attention to the development of sound capital markets. Without a Securities law amended it’s a distant possibility that the vision will be realized.

So, I would say it will be a matter of few months to have our current Securities law amended. I have heard that the government is pushing for this, and it is already being discussed in government sessions. Now we will wait for it to go to a Parliamentary session.

Scott: I think it’s safe to say that the MPRP decided to call for resignations of it’s MP’s only after the issuance of the $1.5 billion in sovereign debt. What impact will this have on future debt raisings? The government does need to raise additional capital for planned infrastructure projects. Will this “spook” the market?

Ganzorig: I do not see much risk associated with further issuances. Global investors are eventually forced to follow the fundamentals and those fundamentals are for a more robust Asia for decades to come. Mongolia is providing the resources needed for Asian economic growth.

Mongolia does not need trillions of dollars; only a small fraction of global assets under management should come to Mongolia.

I see significant demand for Mongolia, and as you guys often point out, the “early birds” will make the most money.

Scott: Of the foreign investors I have spoken with, most are not too terribly pessimistic on Mongolia, even with the rhetoric coming out of the government regarding OT. However, there are still plenty of investors who are skeptical. How does the government go about salvaging its reputation with foreign investors?

Ganzorig: Basically, I do think there has been much scattered talk, but never a strong official position with regards to the OT agreement. From my perspective, most of these talks stemmed from not being fully aware of the specific terms in the agreement. So my conclusion is there has not been enough education and public awareness on the subject.

Scott: There are two ways for Mongolia to turn: It can continue to court foreign investment and remain a free-market, encouraging development of infrastructure, social services and mining; Or, Mongolia can deter foreign investment and return to the dark ages. Having lived through the transition in 1990, seeing Mongolia gain independence from the FSU, which path is more likely?

Ganzorig: This is an absolute no brainer. Mongolia is a solid, democratic government, with a free market and a growing number of private enterprises. Foreign investments are like water, soil and air for democracies, absolutely crucial.

I was here when this country was socialist. You are right that I have seen the difficult days of transition from a socialist to market economy, not to mention the voucher system. Having gone through these things, this country cannot turn away from a free market path.

Scott: Would a DP majority quell fears both domestically as well as internationally about investment?

Ganzorig: A recent move from the President, the Parliament and government suggests that they admit there having been some negative news spreading about the government’s intentions with regard to foreign investment. You have to understand that Mongolia is not a fragile democracy. When it comes to foreign investment it is already in the deep interests of the citizens themselves. Citizens fully understand that investments create growth, jobs and enable the transfer of knowledge.

Scott: Where do you think we go from here? What is the next step?

Ganzorig: The government needs to settle down and focus on the country’s development instead of politics. Actually this has become a major problem for many democratic countries, even the U.S.

We are at a crucial stage to re-focus on the long term development strategy, which will benefit the populous. And of course that must be based on a free market economy, supported by technology, innovation and education.

Scott: Ganzorig, thank you for your thoughts. I look forward to speaking again soon.

Ganzorig: Thank you Scott


It’s always instructive to get the story directly from the guys on the ground, especially when they are locals.

You and I can visit these places, even set up shop and live for years within the community, however we will never have the perspective of someone who was born there.

Mongolia is looking more and more attractive (again), especially for speculators like us who like to get in as early as we can. When you get a hiccup that you can capitalize on, like the government tensions, you need to jump…assuming your macro thesis for the place hasn’t changed.

We think the time to jump back into Mongolia (or add to existing positions) may be now, and so do some of our friends, like Ganzorig.

For example, APU, the country’s largest beverage company is trading within 100 tugriks (less than US $0.10) of a new 19-month low. This is a solid company, and as a public play on the MSE it’s not difficult to pick up shares. I just may do so shortly.

We recommend contacting our friend Eric Zurrin at Resource Investment Capital if you want to learn more about the Mongolian equity market. Eric’s a trusted friend and one of the sharpest guys we know.

– Scott

“We have to find the right balance between democracy and capitalism. Capitalism means private entrepreneurs trying to get as much profit as possible. But democracy sometimes causes problems to them because people want changes. Let’s try to find this right balance.” – Former Mongolian President Enkhbayar Nambar (currently incarcerated)


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