As Prepared for Delivery
AMBASSADOR GALT: Good morning, good afternoon, and good evening to those of you who are joining my first Direct Line presentation as United States Ambassador to Mongolia: Mongolia: A Fresh Look for U.S. Exporters, and I would add a fresh look for U.S. investors, too.
I am joined today by Mr. Adiya of AmCham Mongolia and key members of my Team, Economic Chief John McDaniel and Senior Commercial Specialist Michael Richmond.
This is the first in a series of Mongolia Direct Line Presentations in the coming months.
Today, I would like to set the stage for a discussion on focused programs in agriculture, renewable energy, education, and other sectors by giving a concise report on the state of play for U.S. exporters and investors in Mongolia, and then, following Mr. Adiya’s presentation, give the lion’s share of this session over to your questions.
Before I begin, I would like to point out that detailed information on much of what we’re going to talk about today can be found in our 2016 Mongolia Country Commercial Guide and 2016 InvestmentClimate Statement, both of which are available on our Embassy website.
These annual documents provide comprehensive guidance on how exporters and investors can conduct business in Mongolia and identify concerns that may exist.
So – to get started – I’d like to touch on the general fiscal and economic trends in Mongolia likely to affect U.S. business interests.
Next, I’ll discuss our sense of the Mongolian government’s plans to promote investment.
And finally, I’ll offer U.S. Embassy views on targets of opportunity for U.S. exporters and investors.
Over the past decade, Mongolia’s GDP rose from $3.4 billion in 2006 to $12 billion in 2015.
The factors responsible for this impressive record – tremendous mineral reserves and agricultural endowments, proximity to the vast Asian market, and an educated labor force – remain in place and bode well for the future.
However, since a peak in 2011, Mongolian economic indicators have weakened.
Two primary factors have accounted for this fall – the decline in global commodity prices and Mongolian government missteps.
Most recently, you may have seen articles discussing Mongolia’s current fiscal and economic difficulties.
The issues are serious, but if the government of Mongolia pursues sound policy responses, it will receive ample support from the international community, including the International Monetary Fund, to meet these challenges.
While international experts view the current economic situation as short-term and expect a strong recovery in the next two to three years, exporters will have to search diligently for appropriate opportunities.
The government has announced its intention to impose austerity measures that could lead to a reduction in demand for goods and services.
Projects that would have led to economic growth and demand for U.S. goods or services could be delayed or canceled.
I am confident, however, that there will be bright spots.
The massive copper and gold mine, Oyu Tolgoi, will bring in annually $1.3 billion in foreign direct investment needed to develop the mine’s underground resources.
Tavan Tolgoi, the site of a large coking coal deposit, is poised to bring in major investment and opportunities while producing significant revenue for Mongolia.
Over time these and other projects will provide the economic foundation for Mongolia to develop commercially other sectors, such as agriculture, renewable energy products and energy conservation materials, education and infrastructure.
Turning to the Mongolian government, the Mongolian People’s Party won a decisive mandate in this June’s parliamentary elections – 65 out of 76 seats – largely on a platform of embracing foreign investment and expertise and restoring fiscal stability to government finances.
The new government has acted quickly both to publicly define problems and to address them.
Government leaders have met with investors and vowed to correct missteps that contributed to Mongolia’s economic decline.
For example, the Ministry of Justice is examining all imposed exit bans, and the government has vowed to rescind those not upheld by international law.
In addition, the new government has stated that it will reform mining sector laws, and consult with foreign and domestic investors on creating a more predictable and transparent climate for investment and business.
Key reforms will likely take several years to implement, but so far the government has taken meaningful steps to prove its trade and commerce bona fides.
The new government has suspended and we hope will eliminate onerous requirements for importers, including a recently imposed Certificate of Origin requirement, and is looking into other regulatory reforms to streamline procedures.
And while it has yet to fully implement the U.S.-Mongolia Transparency Agreement, the new government has committed to doing so this fall. We will be closely tracking progress.
In our 2016 Investment Climate Statement, we identify eight initiatives that we think Mongolia should pursue, based on our own analysis and our discussions with U.S. businesses, to create a professional, investor-friendly government:
1) address corruption;
2) establish judicial independence;
3) champion the private sector;
4) improve taxation;
5) improve rule-making;
6) maintain a professional civil service;
7) modernize agriculture; and
8) improve Mongolia’s physical infrastructure.
The government has signaled that development of the agricultural sector is a high priority, but specific plans on how it intends to support agriculture have yet to be announced.
Even before the new government’s election victory, we identified agriculture as a prime target for U.S. exporters.
Department of Commerce Deputy Assistant Secretary Patrick Santillo led an exploratory trade delegation to Mongolia in June, bringing U.S. companies together with more than 60 Mongolian companies and investors.
We expect that U.S. exporters of agricultural technology and services will have strong opportunities in Mongolia in the coming years.
Based on Mongolia’s vast renewable energy potential, largely wind, solar and hydro power generation, we encourage U.S. exporters to examine this market as well.
Energy efficiency is another area in which U.S. exporters and investors could find success in Mongolia.
Recently passed regulations will require Mongolian entities to develop energy efficiency solutions in the coming years, further inspiring collaboration with U.S. firms.
Of course mining will remain vitally important to the Mongolian economy and to U.S. investors.
And while global commodity prices will likely continue to be volatile, Mongolia will demand more mining products and services in the future.
Construction, the third largest economic sector in Mongolia, is another opportunity for U.S. exporters.
Even with a large increase in housing units, more than half of Ulaanbaatar’s inhabitants live in non-permanent structures.
The opening of the new airport in Ulaanbaatar next year will also provide opportunities in logistics and supply chain development.
Beyond these sectors, information technology is a growing need that would benefit from U.S. know-how.
Finally, Mongolia must train its overwhelmingly young work force to become more adaptable and internationally competitive, which presents opportunities for those seeking to sell training into Mongolia or to attract Mongolian students to study in the U.S.
At this point, I would like to turn the floor over to Mr. Adiya from AmCham, who will discuss how the U.S.-oriented business community sees Mongolia’s prospects for U.S. exporters and investors.
I look forward to your questions. Thank you.
