Ambassador Galt’s Remarks at the AmCham Reception

Good evening.

Chairman Magnai and members of AmCham, thank you for hosting this excellent reception for me.

Thank you, Steve, for the kind introduction, and for sponsoring tonight’s event.

AmCham and I go back a long way.

I’ve worked with your sister AmChams throughout my career.

I had a good meeting with the U.S. Chamber before coming to UB.

They were full of praise for the outstanding job you all have done to stand up an organization dedicated to promoting U.S. commercial interests and values in Mongolia.

I had the pleasure of discussing these interests and values with Chairman Jackson Cox on his last day in Mongolia.

I learned a lot from our conversation and tried desperately to absorb some of Jackson’s enviable energy before he left us for the warmer climes of Bangkok.

I found myself agreeing with many of Jackson’s observations, among them that Mongolia and AmCham are in transition.

Mongolia is still coming to terms with the implications of a free market economy, and AmCham is moving from being a new organization to a mature one.

And AmCham Mongolia is also growing and changing.

The AmCham Mongolia of 2015 has the responsibility, consistent with its growing capacities, to support its members’ shared interests in more sophisticated ways.

My team and I stand ready to work with AmCham as it embraces its evolving role as Mongolia’s leading advocate for free enterprise.

It’s truly a privilege for me to be in Mongolia as United States Ambassador.

This is where I wanted to serve.

Mongolia has tremendous strategic value to the United States and our relationship is consequential to our overall rebalance to the Asia Pacific – which by the way is vividly demonstrated by President Obama’s current travel in the region, first to Philippines to attend the APEC Summit and now in Malaysia.

In the short two months I’ve been in UB, I’ve found that reality has exceeded my expectations.

There is an optimism and an energy about Mongolia – and in this room tonight – that is inspiring.

I have a long list of goals my Embassy team and I are working to accomplish.

Tonight I’d like to focus on what we’re doing to advance our trade and economic agenda and specifically what we’re doing to support U.S. commercial interests in Mongolia.

My team and I will focus on the following priorities going forward:

  • First and foremost, bringing our Transparency Agreement into force, which we believe will contribute toward improving the business and investment climate;
  • Supporting OT’s momentum to restart Phase 2; and
  • Diversifying the Mongolian economy by increasing U.S.-Mongolian business partnerships.

I very much hope to do all of this in concert with AmCham and other organizations dedicated to supporting U.S. commercial interests in Mongolia.

AmCham is our indispensable partner in enhancing the U.S.-Mongolia commercial relationship.

In that spirit, I have a couple of specific things that I’ll ask you tonight to work on with us.

So first, our bilateral Transparency Agreement or TA sets out the measures that the U.S. and Mongolia will take to ensure transparent drafting and implementation of policies, legislation, and regulations affecting trade and commercial activities.

This initiative came from you, the business community – you told us that lack of transparent laws and regulations made investing in Mongolia too risky.

A formal process for public comment and review of legislation will go a long way to ensuring that rules and laws reflect stakeholder interests and to making that playing field flat as Steve mentioned.

Ratified in 2014, the TA will not come into force until Mongolia brings its laws into compliance.  We are nearly there, but we have been nearly there for a quite a while now.  We never seem to get all the way there.

The process is ongoing, and I would ask AmCham members to speak to your contacts in the Mongolian government and beyond about the importance and urgency of bringing the TA into force.

Second, as you all know, FDI in Mongolia has fallen by 85 percent from 2011 through the first quarter of 2015; and, in fact, may have turned negative in the most recent quarter.

American investors are not the only ones leery of committing to Mongolia.

In December 2014, Prime Minister Saikhanbileg vowed that his government would focus almost exclusively on healing Mongolia’s battered economy by restoring investor faith in Mongolia.

The Prime Minister made re-launching of the two FDI-fueled mining mega-projects – OyuTolgoi and TavanTolgoi – the centerpiece of his plan.

As of today, OT is moving forward.

Last May, the Mongolian government and Rio Tinto signed an agreement that allows the re-start of the Phase 2 underground project.

Although major capital flows from mining may not come for several years, OT Phase 2 will bring much-needed investment and development to Mongolia.

I had the pleasure of visiting OT earlier this week with Tricia and several other colleagues here in the room.

We went down into the underground, and saw firsthand what Mongolia and Rio Tinto have accomplished together.

It is an amazing project – the industrial processes and the underground development – but to my mind, the real wealth coming out of the ground at OT are the hundreds of skilled Mongolian workers at the site.

They show what partnership accomplishes and should be a model for other investments in Mongolia.

Even while OT progresses, however, investors hesitate to invest because they believe that Mongolia’s investment environment lacks consistency and clarity.

In addition to the lack of transparency, investors experience inconsistently applied regulations.

Add to this the willingness of Mongolian officials to impose “exit bans” on foreign business executives whose companies become involved in business-related disputes with the government or with Mongolian citizens.

The 2015 conviction and imprisonment of three mining executives (one of them a U.S. citizen) continues to haunt investors.

They fear that Mongolia’s courts and prosecutors will not fully observe principles of due process, and that foreign investors will be coerced into settling legal disputes on disadvantageous terms.

Senior Government of Mongolia officials committed last year to respond to these investor concerns, and I would ask AmCham to join with my Embassy to push the government of Mongolia to resolve the travel ban issue once and for all.

My third priority – diversification.

There is no question that Mongolia needs to diversify its economy, and we welcome efforts by all comers to achieve this goal.

But diversification without focus is every bit as dangerous to the economy as focusing exclusively on mining.

The challenge for Mongolia is to embrace mining at the same time it seeks to diversify its economy.

Mining is foundational activity that can and will produce revenues, skilled workers, and technological know-how that can be used for other investments and development.

While mining is coming into its own, Mongolia ought to be thinking about the sorts of commercial activity in which it can competitively engage, about new export markets, and about new import avenues.

But with limited resources, even if mining pays fabulous dividends, it will be impossible to engage productively in every investment.

To my mind, letting private companies and investors identify and make competitive investments while the government concentrates on creating a stable, predictable environment open to all would be a recipe for success for Mongolia.

AmCham has a vital part to play in this process.

Mongolia’s citizens remain ambivalent about the implications of the free market and the role of the government in catalyzing and sustaining a market economy.

A productive role for AmCham would be to lead a frank and open public dialogue on the role of private enterprise in Mongolia that will both complete and smooth Mongolia’s transition to a free market economy.

As for what sectors look good for private investment, to my mind, Mongolia has native advantages in agriculture and animal husbandry.

Of course, these sectors currently lack both the physical infrastructure and the statutory framework needed for sustainable investments.

Only the government can underwrite the necessary infrastructure and create a new legal framework.

But this is another opportunity for AmCham Mongolia to engage the government in a dialogue on the respective roles of the public and private sectors in creating a robust and sustainable agricultural sector.

Promoting Mongolia’s agricultural sector to U.S. exporters and investors is another area where my team and I would like to partner with AmCham.

I am planning a multi-year effort for U.S. trade delegations to Mongolia and the promotion of U.S. trade shows to Mongolian investors in order to encourage U.S. expertise, exporters, and U.S. FDI into this potentially competitive sector.

As my words make clear, my team and I support Mongolia, but not naively.

We know the challenges and we see opportunities for those with their eyes open.

Just last week, a Mongolian company, Brother Merchants, joined a U.S. maker of security clothing and accessories, 5.11 Tactical, to open a retail outlet here in UB.

The venture will also pursue contracts with corporate and public entities and may well produce some products in Mongolia.

The partners did their homework.

They recognized Mongolia’s short-term ills, and crafted a long-term plan to overcome them in order to both add to their bottom line and contribute to Mongolia’s economic vitality.

Whether we’re talking about fast food, or a company that sells U.S. energy conservation equipment, U.S. and Mongolian businesses are partnering for the long haul.

AmCham Mongolia and the U.S. Embassy can play a vital role in supporting these partnerships – by informing potential business partners about the lay of the land from our different perspectives; offering promotional opportunities, such as the annual American Days Expo; standing by them with broad-based advocacy when laws and regulations affect their operations; and most importantly, reassuring them that they have someone in their corner as they invest in Mongolia.

My commercial team; most of them are here tonight, John McDaniel, Michael Richmond, Altan, Daria, and Jargal, and I stand ready to work with AmCham to support current and future business partnerships.

Tonight, I’ve outlined my priorities in terms of enhancing the U.S.-Mongolian commercial relationship and laid out a few areas where I hope we can work collaboratively with the AmCham to achieve common goals.

Thank you again for hosting me this evening and for the very warm welcome to Mongolia.

I look forward to working with you all. Thank you very much.