Mongolia plans emergency parliament session on investment law

By bne IntelliNews August 19, 2013

Clare Nuttall in Astana -

Mongolia is to recall parliament for an emergency session on September 2-6 to pass new legislation on foreign investment, in an attempt to reassure international investors after foreign direct investment (FDI) fell dramatically in the first half of 2013.

The parliament is considering new legislation to replace the existing Strategic Entities Foreign Investment Law (SEFIL), a controversial piece of legislation adopted in May 2012.

According to a statement on the Mongolian government website, the new law will not discriminate between "large or small, foreign or domestic companies", Bloomberg reports.

The law was rushed through, mainly in response to growing foreign - in particular Chinese - control over Mongolian assets, especially in the mineral resources sector. It was amended in April this year, with the parliament backing plans to lift a MBT100bn ($71m) threshold for government approval of international investments.

Ulaanbaatar was already planning to review SEFIL following the re-election of President Tsakhia Elbegdorj in June. However, a slump in foreign investment this year, together with the escalation of an ongoing dispute between the government and Rio Tinto, one of the country's largest investors, are believed to have been the trigger for speeding up the process.

Mongolia saw FDI drop by 43% in the first half of 2013, according to the central bank. The fall is attributed to uncertainty in advance of the June elections and growing concerns over resource nationalism, as well as the stalling of the Oyu Tolgoi project.

On August 15, Rio Tinto announced it was laying off up to 1,700 workers at the Oyu Tolgoi copper-gold deposit - one of Mongolia's largest investment projects. The layoffs were announced after delays in the start of the second phase development of the mine due to an ongoing dispute between the Mongolian government and Rio Tinto.

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