Mongolia seeks to limit restrictions on foreign investment

By bne IntelliNews March 20, 2013

bne -

The Mongolian government has drawn up an amendment to the country's controversial Strategic Foreign Investment Law that would relax restrictions on private investors.

The move is a reaction from the government to rising problems provoked by the recent resurgence in resource nationalism in both Mongolia and the wider Central Asian region. Protectionist forces pushed through the original legislation in 2012; it currently requires foreign companies secure permission from parliament before acquiring a stake greater than 49% in any company in a strategically important sector of the economy.

The proposed amendment would limit this restriction to foreign state-owned companies, thereby exempting private companies, Prime Minister Norov Altankhuyag announced, according to reports in the Mongolian press. The law applies to companies in the mining, finance and communications sector.

The largest casualty of the legislation thus far has been the planned acquisition of a controlling stake in SouthGobi Resources by China's state owned Aluminum Corporation of China Limited (Chalco). Chalco announced in September that it was abandoning the $938m deal as it did not expect to get regulatory approval.

"The pending changes will be welcome news for investors and should reinvigorate foreign capital into the market," writes the Mongolian Investment Banking Group. "While the Draft Minerals Law is still an obvious concern, we believe that this announcement should be seen as a strengthening commitment to foreign investors from the government."

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