Mongolia, five years on
Mongolia is booming, something you notice in the plane from Moscow, which is filled with European businessmen and entrepreneurs, including from the Netherlands.
The timing of my visit is perfect, as it coincides with the five-year anniversary of the local ING office in Ulan Bator. In addition to a press conference and reception for clients and other guests, there are meetings scheduled with local and international companies. It’s a good opportunity to gauge the mood in the country after my last visit about 18 months ago.
A Dutch exporter of truck tires tells of an upcoming mining trade show later that week in Ulan Bator. With its huge reserves of coal, iron ore, gold, silver, copper and other precious metals, Mongolia is a particularly interesting market for suppliers to the mining industry. The investments in Oyu Tolgoi and Tavan Tolgoi are the flagship projects, accounting for 17% growth in 2012. But recent disputes about these projects have led to a sharp decline in growth figures. Where does Mongolia stand?
On 23 September, Jeroen Plag, head of International Corporate Clients ING, got his own blog on the website of “Het Financieele Dagblad”, the leading Dutch financial daily. On ingcb.com, we publish the English translations of these blogs, with kind permission of the FD. The focus of his blog is on Asia from an international business and market insights perspective, as a lot is happening in the region and Jeroen is offering it from first hand.
During our well-attended reception there is ample opportunity to hear what local and international companies think about how Mongolia is doing. Yes, there are still obstacles, and yes traffic is a thorn in the side. A couple of journalists are at least an hour late for the press conference due to traffic. But overall people are positive about Mongolia’s future prospects.
The government is working on implementing new investment rules that should enable money flows towards the country. In addition to mining, the government is aiming for several new sectors that offer many opportunities for Dutch businesses, such as sustainable energy, livestock and greenhouses. At end-September, a Dutch trade mission is coming over to explore several of these possibilities. Institutions such as FMO and Triodos have been investing in Mongolia for some time, making our country the third largest investor in the country after China (50%) and Canada in 2012. Mongolia has only 2.7 million inhabitants and is four-and-a-half times the size of Germany - plenty of space for Dutch cows that can deliver both meat and milk to Russia and China. With the harsh winters - in 2009 25% of livestock died due to the cold - it is key to invest in better stables and management.
In the field of renewable energy, there is also heavy investment. In a country with severe and constant winds, leading to a heavy delay on my trip back, and a great need for energy due to mining, there are plenty of investors willing to invest in wind farms. FMO has, together with an American party, invested in a farm that already supplies energy. Local parties have plans to build wind mills with a capacity of 1 gigawatt. Like the cows, electricity can also be exported to neighbouring countries.
Finally, Kentucky Fried Chicken opened its first drive-in restaurant this summer. I quickly went to see - without eating because I prefer local restaurants - but they have found themselves a challenge after a very successful opening just before the summer. In Mongolia people mainly drive imported cars from Japan and Korea. Japanese drive on the left, while Koreans drive on the right, with corresponding drivers’ seats. To which side should the checkout for the drive-thru be?
Tonight, I’m heading to Japan to talk to our contacts there. How would large Japanese companies look at the economic developments now that the Shinzo Abe government is finally trying to shake things up with his Abenomics?”
Initially published by Dutch daily 'Het Financieele Dagblad', re-published with permission by ING.