A Brief Note On Legal Risk And Regulation In Mongolia

Submitted By Slian
Words: 851
Pages: 4

Legal risk and Regulation


Mongolia has transformed itself a socialist country to a vibrant multiparty democracy and try to open its market in recent decades. Mongolian government established Law on Foreign investment in 1993 to promote foreign investment, protect right and assets of investors, and regulate relations pertaining to foreign investment. With its open-market economy, Mongolia has improved its economy rapidly, and then it became a member of World Trade Organization in 1997.
To build a better competitive legal environment, the Parliament of Mongolia amended set of laws on taxes in June 2006. These laws ensure that the taxes of business entities has decreased by 5% each and became 10% and 25% which is a big concession to investors in Mongolia.
Amendments as of 2008 were legalized the requirements from the foreign investors to create the minimum of investment in USD$100 000 to attract the interests of its biggest investors and attribute the quality of foreign investment. Foreign investors are grantees the following rights:
1. to own, utilize and dispose of investment assets and to repatriate capital invested in Mongolia;
2. to manage and to participate in management of economic entities with foreign investment participation;
3. to assign and transfer their rights and duties to other legal bodies;
4. to transfer the following revenue, income and profits out of Mongolia
a. Dividends and income associated with shareholders' contributions;
b. Income associated with disposal of assets, bond sales and transfer of ownership rights and liquidation of assets.
Not only that, the amendments state that foreign investors are permitted to lease land for up to 60 years and such a lease can be extended for another 40 years; furthermore, foreign investors also have a right conclude a Stability Agreement with the Government of Mongolia. They have a right implement an investment project without registering a business entity in Mongolia. In order to improve the business climate for foreign investors, Mongolian government legislated a new investment law in 2013, which enacted the private sector’s share in the economy had increased to 85%.
Although Mongolia tries to improve its investment laws to attract more foreign investors, corruption still is one of the most serious risks to impact foreign investors’ decisions. According to 2015 index of economic freedom, the score of property right in Mongolia was 30, which meant that property ownership was weakly protected by the government and the court system is highly inefficient. Not only that, this rate also point out that “corruption is extensive, and the judiciary is strongly influenced by other branches of government, large possibility of Expropriation.
All in all, Mongolian has its business potential to attract international investors, but it is more important for these investors to consider the risk level of their business is relatively medium-to-high due to the possibility of governmental uncertainties in Mongolia. All investor should check and understand all business regulations before investing in Mongolia.

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