CDA Micaller: Good morning Chairman Potter, members of the American Chamber of Commerce in Mongolia, and guests. My team and I are continuing the tradition of the AmCham rollout of our Mongolia Investment Climate Statement inaugurated by Ambassador Galt in 2017.
I want to thank you and Amcham for hosting, and for the guests who are attending this important event.
I recently returned from the United States, so before I begin my remarks regarding the Investment Climate Statement, I wanted to take this opportunity brief AmCham members directly on the historic developments in the U.S.-Mongolia relationship over the past two weeks.
We recognized the importance of personal chemistry, symbolism, and visuals as we collaboratively pursued concrete, substantive progress in the relationship.
Prime Minister Khurelsukh had good, substantive meetings with our senior leaders, and made important personal connections with our leadership, from President Trump and Vice President Pence to Secretary Pompeo.
We are extremely grateful for Mongolia’s continued contributions to the Resolute Support Mission in Afghanistan. Resolute Support is based on our shared values and commitment to a safer, more secure world. I have had the great honor of personally thanking several rotations of soldiers from the Mongolian Armed Forces as they depart Ulaanbaatar Chinggis Khaan International Airport to serve alongside U.S. troops and our Coalition partners in Afghanistan and welcoming them back home upon the completion of their job well done.
As AmCham members well know, we have prioritized our economic engagement with Mongolia, particularly improving the business climate to bring about diversified, sustainable economic growth and create jobs and improve the quality of life for Americans and Mongolians through trade and investment. I have much great news to report.
First, the Acting CEO of the Millennium Challenge Corporation hosted the Prime Minister for the rollout of the second MCC compact. This $350 million grant assistance program will focus on bulk water supply here in UB, address a significant obstacle to economic growth, and improve the health and well-being of Ulaanbaatar’s 1.5 million residents. At the same time, this grant funding will bring greater transparency and quality to infrastructure improvements in this sector that could serve as a model for other sectors as well.
Second, we have institutionalized our shared commitment to an intensified and broadened economic partnership through the release of a joint Roadmap for Expanded Economic Partnership. The Roadmap is available on our embassy website in English and Mongolian.
At the same time that we have prioritized our economic engagement, we have pursued a deepening and broadening in our already strong relationship. Last week, we announced an Expanded Comprehensive Partnership that will take the relationship to the next level. It is a statement of the United States’ strong, long-term commitment to the bilateral relationship and a recognition of the leading role Mongolia can play in ensuring a rules-based order in the Indo-Pacific region and beyond based on our shared values of promoting peace, protecting human rights, and ensuring the political and economic sovereignty of all nations.
Indeed, we were all touched by the gracious donation of Mongolian camel hair blankets to the victims of Hurricane Florence that the Prime Minister announced to Vice President Pence. From our shared commitment to religious freedom, to our longstanding traditions of charity and volunteerism, this is but another great example of the many things that Mongolians and Americans have in common.
Finally, as many of you know, President Trump nominated Michael Klecheski to be the next U.S. Ambassador to Mongolia, pending Senate confirmation. Ambassador-designate Klecheski is one of our most seasoned, experienced, and talented diplomats. His nomination is a powerful sign of the high importance that the United States places on our relationship with Mongolia.
The Expanded Comprehensive Partnership and the Roadmap for Expanded Economic Partnership between the United States and Mongolia are important documents that underscore our commitment to improving our economic and commercial relationship with Mongolia. As is the Investment Climate Statement we are here today to discuss.
Like the American Days Expo, the Investment Climate Statement rollout is a precedent worth embracing and continuing.
- First, we’ll talk about AmCham and the broader business community’s role in producing the Investment Climate Statement.
- Then, we’ll discuss what the 2018 Investment Climate Statement reveals about Mongolia’s investment climate.
- I’ll conclude speaking about how we can work together to improve those parts of the investment climate holding back Mongolia’s short, mid, and long-term prospects.
Some background about the Investment Climate Statement: The State Department prepares 170 of these annual reports to help U.S. companies make informed business decisions about foreign markets.
The report surveys Openness to Foreign Investment, Legal Regimes and Transparency, Industrial Policies, Protection of Real and Intellectual Property Rights, State-Owned Enterprises, Responsible Business Conduct, Corruption, and Political and Security Environments.
We read a wide range of sources, review all sorts of media, and confidentially talk with analysts, civil society, government officials, and, most importantly, with you, the members of the foreign and domestic business community.
We talk about your perceptions of what’s happening and what’s likely to happen in the world of commerce, trade, and investment.
From this, we draw a picture of the Mongolian government’s approaches to investment in general and foreign direct investment in particular, which we distribute through every available network, including preparing a Mongolian-language version.
In other words, we base our report largely on what we hear from you in the business community, who are our eyes and ears when it comes to understanding the investment climate in Mongolia.
So where are we in 2018?
Broadly, you told us you perceived real improvement to the macro-economy, but are worried that a lack of transparency with respect to the government’s approach to the implementation of laws and regulations makes for an uncertain investment climate.
That being said, there are real bright spots.
- The government and parliament have largely honored their commitments to the IMF arrangement.
- Growth has surpassed expectations and government revenues are stronger than expected.
Accelerating inflation is something to watch, of course, but Mongolia’s economy is much stronger today than when I arrived two years ago.
Some countries have a hard time implementing their IMF “program,” but Mongolia’s doing a good job so far of not quitting course.
The IMF program, by making Oyu Tolgoi’s continued progress a macro-economic imperative, allows space for OT’s essential underground development to continue.
The government, parliament, and the public have accepted that Mongolia’s economic health, its very reputation as a place for sustainable, profitable investment, depends on OT reaching full production.
The investor community welcomes this respite from the seemingly endless turmoil swirling around OT, but also worries that market-disrupting turbulence could return at any moment, unless OT’s shareholders – the government and Rio Tinto – reach long term accommodation built on transparent management practices, government procedures, and public expectations of the project’s benefits and costs.
2018 saw some improvements in legislative and regulatory transparency, in large part thanks to the U.S.-Mongolia Transparency Agreement. However, Mongolia has a long way to go before transparency becomes the rule rather than the exception.
Mongolia needs to take its commitments under the U.S. Mongolia Transparency Agreement seriously. We in the U.S. government stand ready to help with appropriate technical assistance.
Last year, we also saw the inauguration of the Investor Protection Council, under the Prime Minister, to offer some relief to investors seeking to avoid issues with the government.
The Council remains very much a work-in-progress.
However, investors have told us they would like to use this venue to discuss and resolve problems affecting investments before they escalate to something more serious.
2017 saw the electronic movable property registration system come on line. Pledges of receivables, certain use rights, cars, and other objects of value can now be officially registered.
Coupled with the immovable property registration system, creditors and borrowers have a more secure basis to act on pledges of all types.
This innovation can lower the risks of borrowing and eventually lower interest rates based on those risks.
Challenges remain, though, and I hope Mongolia continues to make progress ironing out the technical issues related to this system.
Reform of Mongolia’s foreclosure procedures to allow for a more efficient and timely process for acting on pledges of movable and immovable property remains undone.
You continue to tell us that Mongolia must improve bankruptcy processes so that insolvent businesses can actually close.
The business community has also emphasized its concerns about rules related to the expropriation of property.
More positively, you’ve said that Mongolia has a functional regime to protect intellectual property rights – although improvements are necessary, particularly in the area of software and digital piracy.
Finally, we stand ready to assist Mongolia in implementing reforms to help root out corruption – a problem every country in the world faces in one form or another.
The Transparency Agreement is a strong step in that direction.
These are the highlights of the 2018 Statement, and had we the time, there’s a lot more we could unpack.
So I encourage you to take a closer look.
At this point, let’s consider what the ICS tells us about mobilizing our joint resources to improve the investment climate. Four areas I would like to emphasize this morning.
First, the IMF agreement has two more years to run, and we will continue to focus on implementation.
That means involving the business community in outreach activities encouraging the government and parliament to stay the course on reforms that bring stability and the hope of prosperity to Mongolia.
On paper, Mongolia’s legislative and regulatory instruments make it a global leader in transparency.
However, in order to ensure that laws, regulations, and administrative acts are transparently enacted and executed, the business community and the public need to put these instruments to work.
We have convened meetings led by experts to explain to AmCham, other business groups, and the government of Mongolia how to use existing laws and agreements to ensure transparency.
Some investors have told us we are too focused on a dry, uninteresting issue, but I ask you, would you really say no to a chance to properly and thoroughly comment upon draft tax legislation, or other proposed laws and regulations?
Third, intellectual property rights protection or IPR.
AmCham and the Embassy collaboratively protect and promote U.S. intellectual property rights, but the Investment Climate Statement points to areas where improvements must come, especially in the area of software and digital media piracy.
The U.S. Embassy has begun to engage Mongolia’s vibrant e-commerce sector.
U.S. entities such as Facebook and Amazon have proven valued partners for Mongolian companies, but these new digital worlds generate challenges for consumers, regulators, and intellectual property rights holders.
In the spirit of the Trump Administration’s Indo-Pacific Strategy for the Digital Economy, the Embassy has inaugurated a business-government dialogue to discuss the commercial and regulatory concerns arising out of ecommerce activities.
The first session occurred yesterday, September 27, convening 60 government and business representatives to discuss issues as varied as data privacy, IPR in the age of e-commerce, and international payments.
Fourth, property rights and financing.
AmCham and the Embassy must continue to build on the progress we have already made to address property rights challenges.
Now, none of these challenges we cite are new.
Our ICS archives, nearly two decades in the making, reveal an emerging market requiring clear-eyed, realistic business people to work through the short-term challenges.
Mongolia is not for the timid nor the inexperienced, but it needs to become more welcoming and more predictable to those risking capital, technologies, and human resources.
Creating the conditions to attract institutional investors to Mongolia is an essential next step for Mongolia’s economic development.
The business community’s role in this process is to continue to provide your candid perspectives, to use the tools laid out in our Investment Climate Statement – the statutes, regulations and best practices, and to encourage partners and decision makers to make the Mongolian climate as competitive and attractive as any in this region or the globe.
Now I would be pleased to answer your questions.