Mongolia generally does not discriminate against foreign investors with two major exceptions. First, foreign investors must invest a minimum of $100,000 to establish a venture; in contrast, Mongolian investors face no investment minimums.  Second, only Mongolian adult citizens may own real estate.  Additionally, while foreign investors may obtain use rights for the underlying land, these rights last for five years with a one-time, five-year renewal.  The government imposes no such restriction on its nationals.  Mongolia offers the “One-Stop-Shop for Investors,” which provides investors with services related to visas, taxation, notarization, and business registration.  Mongolia’s recently created Ministry of Economy and Development has publicly stated that it will create a new foreign investment and foreign trade support entity to assume the duties of the One-Stop-Shop, which remains operational ( https://investmongolia.gov.mn/ ). Regardless of what shape the new agency takes, investors encourage the government to develop policies aimed at retaining existing foreign direct investment in country.

Except for real estate, foreign and domestic investors have the same rights to establish, sell, transfer, or securitize structures, shares, use rights, companies, and movable property.  Mongolia generally imposes no statutory or regulatory limits on foreign ownership and control of investments, except for foreign state-owned entities.  The Mining Law allows the government to acquire up to 50 percent of mineral deposits deemed of “strategic” value to the state by parliament.  Since 2019, Article 6.2 of Mongolia’s Constitution also requires the state to take a “majority” share of the “benefits” of strategic mining projects.  Investors are waiting for the government to clarify the meaning of “benefits” derived from mining activities, which according to government officials may mean profit and may also include such non-cash contributions as development programs, employment, or technology transfers.  Investors also observe that excessive regulatory discretion allows bureaucrats de facto control over the use of legally granted rights, corporate governance decisions, and ownership stakes, stating that in some cases regulators make up rules beyond their actual statutory remit.  Finally, Mongolia has no formal or informal investment-screening mechanism, although the National Security Council has barred investments from some foreign state-owned entities.

Mongolia underwent its regular World Trade Organization Trade Policy Review in 2021 (WTO | Mongolia ).

Mongolia’s business registration process is reasonably clear.  Foreign and domestic enterprises must register with the State Registration Office ( https://burtgel.gov.mn/ ).  Registrants can obtain required forms online and submit them by email.  The State Registration Office aims at a two-day turnaround for the review and approval process.  Investors report bureaucratic discretion often adds weeks or even months to the process and state more transparent adherence to the relevant laws and regulations would yield a consistent, streamlined process.  Once approved by the State Registration Office, a company must register with the General Tax Authority ( http://en.mta.mn/ ).  Upon hiring its first employees, a company must register with the Social Insurance Agency ( http://www.ndaatgal.mn/v1/ ).

The ease of opening a business does not apply to closing a business, however.  Foreign investors and legal contacts report the onerous bureaucratic and judicial process of disestablishment takes no less than 18-24 months.

While the Mongolian Government neither promotes nor incentivizes outward investment, it does not generally restrict domestic investors from investing abroad, although politically exposed persons and their families may undergo additional scrutiny or may even be barred from investment abroad.

The Law on Legislation sets out who may draft and submit legislation; the format of these bills; the respective roles of the Mongolian parliament, government, and president; and the procedures for obtaining and employing public comment on pending legislation.  The Law on Legislation states that law initiators – members of parliament, the president of Mongolia, or cabinet ministers – must fulfill these criteria:  (1) provide a clear process for developing and justifying the need for draft legislation; (2) set out methodologies for estimating costs to the government related to a bill’s implementation; (3) evaluate the impact of the legislation on the public; and (4) conduct public outreach before submitting bills to parliament.

Initiators must post draft legislation for public comment and publish reports evaluating costs and impacts on parliament’s official website ( Parliament of Mongolia/Projects ) at least 30 days prior to submitting bills to parliament.  Posts must explicitly state the time for public comment and review.  Initiators must solicit comments in writing, organize public meetings, seek comments through social media, and carry out public surveys.  No more than 30 days after the public comment period ends, initiators must prepare a matrix of all comments, including those used to revise the bill as well as those not used, which must be posted on parliament’s official web site.  After a law’s passage, parliament must monitor and evaluate its implementation and impacts.  Investors report that while legislators have not implemented all these requirements, most relevant legislation is posted on parliament’s website before passage.  Ministries and agencies have not fulfilled these statutory requirements, according to businesses.

While General Administrative Law Article 6 aligns Mongolia’s regulatory drafting process with Transparency Agreement obligations, investors report the government is not generally enforcing it.  Under the Transparency Agreement, originators of regulations must seek public comment by posting draft regulations in a single journal of national circulation, designated as LegalInfo.mn ( HYPERLINK “https://www.legalinfo.mn/%22%20/t%20%22_blank” t “_blank” LegalInfo).  Drafters must record, report, and respond to significant public comments.  The Ministry of Justice and Home Affairs must certify each regulatory drafting process complies with the General Administrative Law before a regulation enters force.  After approval, the statutorily responsible government agency monitors implementation and impacts.

Businesses also note unpredictable, nontransparent regulatory burdens at the local—province and county—levels.  They note inconsistent application of regulations and statutes among central, provincial, and municipal jurisdictions and a lack of expertise among local inspectors.  Regional tax, health, and safety inspectors are cited as particularly problematic.  The Economic Policy and Competitiveness Research Center of Mongolia annually ranks local regulatory burdens: http://en.aimagindex.mn/competitiveness .

Mongolia’s so-called Glass Budget Law requires all levels of government to publicly post proposed and actual budget expenditures, and the law, according to businesses and transparency experts, has generally been followed.  However, parliament can waive these transparency requirements for emergencies and for budgetary bills and has on several occasions in 2020 and 2021 during the COVID-19 pandemic.

The government neither promotes nor requires companies’ environmental, social, and governance (ESG) disclosures to facilitate transparency and/or help investors and consumers distinguish between high- and low-quality investments.  The government does, however, limit the right to invest in such high-risk securities as digital tokens and cryptocurrencies to professional investors and other high net-worth individuals.

Mongolia, which has generally eschewed regional economic blocs, acceded to the Asia-Pacific Trade Agreement (APTA) in 2021.  Also, Mongolia often seeks to adapt European standards and norms in such areas as construction materials, food, and environmental regulations; looks to U.S. standards in the hydrocarbon sector; and adopts a combination of Australian and Canadian standards and norms in the mining sector.  Mongolia also tends to employ World Organization for Animal Health standards for its animal health regulations.  Mongolia, a member of the WTO, asserts it will notify the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations.

Investors state that judges frequently avoid controversial decisions in business disputes, preferring to delay judgment for as long as possible—sometimes years.  If a decision is made, businesses face similarly long delays enforcing court orders.  In some instances, cases have taken so long that by the time an enforcement is executed, the counterparty has liquidated assets and vanished.  Investors note similarly long delays with respect to inspection agencies, such as the Tax Dispute Settlement Resolution Council, as well as with other inspection agency panels, especially those related to mineral licenses and health matters.

In 2021, parliament revised the Law of the Judiciary to bring it into line with the amended constitution.  This law limits the powers of the government, parliament, and the president to influence the selection and removal of judges; and vests the Judicial Disciplinary Council with responsibility for disciplining jurists, except in matters involving criminal acts.  Investors have praised these reforms, saying are helping to restore judicial independence severely.

Under Mongolia’s hybrid civil law-common law system, trial judges may use prior rulings to adjudicate similar cases but have no obligation to follow legal precedent as such.  Mongolian laws, and even their implementing regulations, often lack the specificity needed for consistent judicial and prosecutorial interpretation and application.  All courts may rule on matters of fact as well as matters of law at any point in the judicial process.

Mongolia has specialized laws for contracts but no dedicated courts for commercial activities. Contractual disputes are usually adjudicated through the Civil Court division of the district court system.  Criminal Courts adjudicate crime cases brought by the General Prosecutors Office. Disputants may appeal to the City Court of Ulaanbaatar and ultimately to the Supreme Court of Mongolia.  Mongolia has several specialized administrative courts adjudicating cases brought by citizens, foreign residents, and businesses against official administrative acts.  Mongolia’s Constitutional Court, the Tsets, rules on constitutional issues.  The General Executive Agency for Court Decisions enforces judgments and orders.

Investors and legal sector experts say that the Administrative Court is procedurally competent, fair, and consistent but that the Civil Courts deliver highly inconsistent judgments.

The 2013 Investment Law sets the general statutory and regulatory frame for all investors in Mongolia.  Under the law, foreign investors may access the same investment opportunities as Mongolian citizens and receive the same protections as domestic investors.  Investment domicile, not investor nationality, determines if an investment is foreign or domestic.  The law provides for a more stable tax environment and offers tax and other incentives for investors; and authorizes a single point of registration, the State Registration Office ( www.burtgel.gov.mn ), for all investors.  The law offers qualifying companies transferable tax-stabilization certificates valid for up to 27 years. Affected taxes may include the corporate-income tax, excise taxes, customs duties, value-added tax, and royalties.

Investors cite two primary national-treatment issues with respect to investment rules.  First, foreign nationals and companies may not own real estate; only Mongolian adult citizens may own real estate.  While foreign investors may obtain use rights for the underlying land, these rights expire after a set number of years with limited rights of renewal.  Government officials have said that in some cases municipal, provincial, and central government officials may waive land-use rights limits and recommend that investors contact the relevant agency or ministry for more information on how to apply for these waivers.  Foreign investors also object to the regulatory requirement that each foreign investor in any given venture must invest a minimum of $100,000.  Although the Investment Law has no such requirement, Mongolian regulators impose it on all foreign investors without requiring the same minimum from Mongolian investors.

The Ministry of Economy and Development manages the “One-Stop-Shop for Investors,” which provides investor services on visas, taxation, social insurance, notarization, and business registration ( https://investmongolia.gov.mn/ ).  The Ministry of Economy and Development has publicly stated that it will establish in 2022 a new foreign investment and foreign trade support entity to assume the duties of the One-Stop-Shop, although no date has been provided.

Mongolia’s Agency for Fair Competition and Consumer Protection reviews domestic transactions for competition-related concerns.  For a description of the Agency go to  AFCCP .  The Agency for Fair Competition and Consumer Protection launched no 2021 competition cases affecting U.S. FDI.  U.S. investors generally find the AFCCP applies its norms and procedures transparently, although they remain concerned the agency favors local economic interests over foreign interests.  AFCCP decisions may be appealed to the courts.

State entities at all levels may confiscate or modify land-use rights for purposes of economic development, national security, historical preservation, or environmental protection.  Mongolia’s constitution recognizes private real-property rights and derivative rights, and Mongolian law specifically bars the government from expropriating assets without payment of adequate, market-based compensation.  Investors express little disagreement with such takings in principle but state that a lack of clear lines of authority among the central, provincial, and municipal governments has led to loss of property and use rights in practice.  For example, the Minerals Law provides no clear division of local, regional, and national jurisdictions for issuances of land-use permits and special-use rights.  Faced with unclear lines of authority and frequent differences in practices and interpretation of rules and regulations by different levels of government, investors may find themselves unable to fully exercise legally conferred rights.

Some expropriation cases involve court expropriations after third-party criminal trials at which investors are compelled to appear as “civil defendants” – but are not allowed to fully participate in the proceedings.  In these cases, government officials are convicted of corruption, and the court then orders the civil defendant to surrender a license or property, or pay a tax penalty or fine, for having received an alleged favor from the criminal defendant with no judicial proceedings to determine if property or licenses were obtained illegally.

Businesses claim the tax dispute settlement processes has become a form of indirect expropriation.  2020 amendments to the Tax Law allow tax officials to require disputants to place the entire disputed tax assessment in escrow as a precondition for disputing the tax assessments, which encourages officials to issue punitive tax assessments that make using settlement processes prohibitively expensive and confiscatory.

Bankruptcy law treats bankruptcy as a civil matter requiring judicial adjudication.  Mongolia allows registration of mortgages and other debt instruments backed by real estate, structures, and other immovable collateral (mining and exploration licenses, intellectual property rights, and other use rights); and movable property (cars, equipment, livestock, receivables, and other items of value).  Although investors may securitize movable and immovable assets, local law firms hold that the bankruptcy process remains too vague, onerous, and time-consuming for practical use.  Reporting that foreclosure and bankruptcy proceedings usually require no less than 18 months, with 36 months not uncommon, legal advisors state that a lengthy appeals process, perceived corruption, and government interference may create years of delay.   Moreover, while in court, creditors face suspended interest payments and limited access to the asset.

The government generally offers the same tax preferences to foreign and domestic investors; and occasionally waives tariffs for imports of essential fuel and food products or for imports in such targeted sectors as agriculture or energy.  Exemptions may apply to Mongolia’s 5-percent import duty and 10-percent value-added tax (VAT).  The government may offer traditional and green energy sector investments such incentives as feed-in tariffs, discounts on electricity rates, or tax incentives.  The government may also extend tax credits on a case-by-case basis to investments in such sectors as minerals processing, agriculture, and infrastructure.   Under the Investment Law, foreign-invested companies, properly registered and paying taxes in Mongolia, qualify as domestic Mongolian entities for investment incentive packages that, among other benefits, offer tax stabilization for up to 27 years.  While in theory the government can issue guarantees or jointly finance foreign direct investment projects, it seldom does so in practice.

The Mongolian government has had a free-trade zone program since 2004.  Two free-trade zones are along the Trans-Mongolian Highway and Railroad: (1) the northern Mongolia-Russia border town of Altanbulag; and (2) the southern Mongolia-China border town of Zamiin-Uud.  Both free-trade zones are relatively inactive, requiring development.  A third free-trade zone is located at the port-of-entry of Tsagaannuur in the far western province of Bayan-Olgii bordering Russia. Mongolian officials also suggest the new Ulaanbaatar International Airport may host a Special Economic Zone that may have some of the characteristics of existing free-trade zones but may also offer a broader range of yet-to-be-determined incentives.

Mongolia does not generally require foreign investors to use local goods, services, or equity; or to engage in import substitution.  Neither foreign nor domestic businesses need to export a certain percentage of output or use foreign exchange to cover exports.  The government applies the same geographical restrictions to foreign and domestic investors, involving border security, environmental concerns, and local-use rights.  The government does not impose onerous or discriminatory visa, residence, or work permit requirements on U.S. investors—although foreign and domestic firms must meet certain industry-specific, local-hire requirements.

The Mongolian government strongly encourages but does not legally compel domestic sourcing of inputs, especially for firms engaged in natural-resource extraction.  The Minerals Law states that holders of exploration and mining licenses should preferentially supply extracted minerals at market prices to Mongolian processing facilities and should procure goods and services and hire subcontractors from business entities registered in Mongolia.  Although facing no legal requirement to source locally, investors occasionally report that central, provincial, or municipal governments will delay permitting and licensing until domestic and foreign enterprises make some effort to source locally.  Hiring Mongolians is often a de facto necessity because the government sometimes issues work visas for foreign employees only if employers have attempted to hire domestically.  These requirements do not apply to members of boards of directors.

Despite pressure to source locally, foreign investors generally set their own export and production targets without concern for government-imposed quotas or requirements.  Mongolia does not require (but often encourages) technology transfers.  The government generally imposes no offset requirements for major procurements.  Investors, not the government, generally decide on technology, intellectual property, and finance as they see fit.  Except for an unenforced provision of the Minerals Law requiring mining companies to list 10 percent of the shares of the Mongolian-registered mining company on the Mongolian Stock Exchange, foreign-invested businesses are not required to sell shares into the Mongolian market.  Equity stakes are generally at the discretion of investors, Mongolian or foreign.  In cases where investments may have national economic, political, security, or social impacts, the government has, without a clear statutory basis, restricted the type of financing foreign investors may use, their choice of partners, or to whom they sell shares or equity stakes.

The government generally requires neither data localization nor compels IT providers to turn over source code or provide surveillance access, except for criminal investigations.  Businesses may freely transmit customer or other business-related data abroad, except for financial data, which is subject to data localization requirements.

The Mongolian Constitution provides that “the State shall recognize any forms of public and private properties.”  Statute limits real-estate ownership to adult citizens of Mongolia. Civil law allows private Mongolian citizens or government agencies to assume property ownership or use rights if the current owner or holder of use rights does not use that property or those rights.  In the case of use rights, revocation and assumption is almost always written into the formal agreements covering the rights.  Squatters may, under certain circumstances, claim effective property ownership of unused structures.

Foreign investors may own permanent physical structures and obtain use rights to land and resources, but only Mongolian citizens may own real estate, and only in municipalities.  Land ownership does not convey ownership of, or necessarily access to, surface or subsurface resource rights, which remain with the state.  Outside municipalities, the state owns the land and resources in perpetuity and may lease those resources to public and private entities.

Ownership of a structure may vest the owner with control over the use rights of the land upon which the structure sits.  Use rights are granted for terms ranging from 3 to 60 years, depending on the particular use right.  However, foreign nationals and foreign companies can lease land-use rights for no more than 10 years:  a five-year term and a single five-year renewal.

Although Mongolia has a well-established register for immovable property – structures and real estate – it lacks a central register for use rights; consequently, investors, particularly those investing in rural Mongolia, have no easy way to learn who might have conflicting rights. Complicating matters, Mongolia’s civil-law system is still developing a formal process for apportioning multiple use rights on adjacent lands or adjudicating disputes arising from conflicting use rights.  As of 2022, the Mongolian government has no accurate figure for land with clear titles.

Creditors may seize and dispose of property offered as collateral, although this process is often subject to lengthy legal delays.  Debt instruments backed by real estate, fixed structures, and other immovable collateral may be registered with the Immovable Property Office of the State Registration Office ( www.burtgel.gov.mn ).  Movable property (cars, equipment, livestock, receivables, and other items of value) may also be registered with the State Registration Office as collateral.  Investors report that the movable-property registration system, while generally reliable, experiences occasional technical capacity issues.

Film, television, and digital content from the United States enjoy strong copyright protection in Mongolia.  Mongolia’s Internet Service Providers (ISPs) will quickly block access to internet addresses of offending sites once listed by the Intellectual Property Office of Mongolia.  However, use of pirated software by Mongolian government ministries, home-use consumers, and businesses is rampant.  Patent protection for pharmaceutical and medical device importers is virtually non-existent, with trademark law generally the only recourse for rightsholders.  While enforcement agencies will seize trademark-infringing drugs, simply removing the infringing trademark still allows the importer to bring in the patent-infringing drug. Medical devices encounter similar problems.  Trademark infringement also includes stores distributing counterfeit apparel and fake spare parts for heavy equipment. However, the Intellectual Property Office of Mongolia has not focused on these areas because rightsholders have not filed complaints.

IPR violations below MNT 50 million ($17,000) are subject to administrative enforcement; those above MNT 50 million are subject to criminal enforcement.  Enforcement agencies do pursue criminal and civil intellectual property (IP) cases, suggesting a willingness by Mongolian courts, prosecutors, administrative investigators, and police to attack the problem.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles: http://www.wipo.int/directory/en/. 

Mongolia has few restrictions on capital flows and has respected IMF Article VIII by not restricting international payments and transfers.  However, capital markets are underdeveloped, with little ability to trade futures or derivatives on traditional markets. The state-owned Mongolian Stock Exchange ( http://www.mse.mn/en/aboutus_en ) is the primary venue for domestic capital and portfolio investments, although fintech companies have begun promoting investments using digital tokens and other virtual assets.  Credit is available on local market terms to foreign investors in a variety of forms.

Mongolia’s four largest commercial banks – Khan, Trade and Development Bank (TDB), Xac, and Golomt – are majority owned by combinations of Mongolian and foreign investors and collectively hold 84.3 percent of all banking assets, or about $12.1 billion (as of December 2021).  Mongolian commercial banks had rates of non-performing loans (NPLs) averaging 10 percent in December 2021, a decrease from December 2020’s 11.8 percent, although these classifications do not conform with international standards given COVID-19 forbearance measures.  Ongoing COVID-19 rules enabling postponement of consumer loan and mortgage payments create additional forbearance risk in the banking sector.  The Bank of Mongolia, Mongolia’s central bank, regulates banking operations. Foreigners may establish domestic accounts so long as they can prove lawful residence in Mongolia.

Parliament amended Mongolia’s Law on Banking in 2021.  The amended law states that ownership by a shareholder and their related parties collectively and as certified by the Bank of Mongolia shall not exceed 20 percent.  Banks have until December 31, 2023, to comply with this divestment requirement.  In addition, Mongolia’s four systemically important commercial banks – Khan, TDB, Xac, and Golomt – and the state-owned State Bank must list themselves on the Mongolian Stock Exchange by June 30, 2022.  The new rules may improve bank governance by creating accountability to a broader group of shareholders, although there are concerns that the stipulated timeline may not be conducive to sector stability.

The IMF has reported unaddressed macroprudential concerns regarding the relatively large banking system, resulting in the Extended Fund Facility’s unsuccessful completion in 2020. The banking system is broadly undercapitalized, while commercial banking practices and regulatory supervision are inadequate for ensuring macroeconomic stability. Mongolia also has a significant number of illiquid banks.  Potential investors in Mongolia’s banking sector should conduct careful due diligence as sector participants and regulators have expressed concerns that the balance sheets of certain systemically important banks may have been inflated or misreported to create the perception of higher capital-adequacy ratios than is accurate.

International and domestic sector participants observe that the Bank of Mongolia does not exercise adequate macroprudential oversight over banks, enabling these banks to misreport their assets.  It has also allowed insolvent smaller banks to continue operating despite not having enough assets to cover liabilities.  Investors contemplating IPO participation should carefully factor in the additional systemic risk associated with these regulatory concerns.

Mongolia’s 2020 removal from the Financial Action Task Force (FATF) “grey list” jurisdictions under enhanced monitoring may give confidence to investors that the country takes seriously anti-money laundering and countering the financing of terrorism concerns.  However, sector participants note ongoing challenges in developing new correspondent relations with banks in foreign jurisdictions, with some counterparty banks citing high compliance costs.

Mongolia’s Ministry of Finance manages two sovereign wealth funds (SWF) funded through diversion of mining sector revenues: the Fiscal Stabilization Fund and the Future Heritage Fund.  The Fiscal Stabilization Fund diverts revenues that might promote boom and bust cycles of spending; however, Mongolia’s recent fiscal crises have depleted this fund.  The Future Heritage Fund, resembling Norway’s Global Pension Fund, accumulates mining revenues for the future and invests the proceeds exclusively outside Mongolia.  Mongolia’s Future Heritage Fund follows the Santiago Principles, and Mongolia is an associate member of the International Forum of Sovereign Wealth Funds.  The Ministry of Finance and the IMF project the Future Heritage Fund should start accumulating $104-125 million annually in 2023, coinciding with increased revenues from the Oyu Tolgoi copper and gold mine.  These SWFs are not meaningfully funded as of 2022, however.

Mongolia has state-owned enterprises (SOEs) in the banking and finance, energy production, mining, and transport sectors.  The Ministry of Finance manages the State Bank of Mongolia and the Mongolian Stock Exchange, and the SOE Erdenes Mongol holds most of the government’s mining assets.  The Ministry of Roads and Transport Development manages the Mongolian Railway Authority.  The Government Agency for Policy Coordination on State Property ( http://www.pcsp.gov.mn/en ) publicly stated that it administers 106 non-mining and non-financial assets but does not provide a complete, official list of its SOEs.  State Property Agency representatives have publicly said their SOE count does not include aimag (provincial) and soum (county) level locally-owned enterprises (LOEs), which number in the hundreds.

Investors are concerned SOEs crowd out more efficient private-sector investment.  Investors can compete with SOEs, but an opaque regulatory framework limits competition.  Businesses have observed that government regulators favor SOEs, such as streamlining processes for environmental permits or ignoring health and safety issues at SOEs.

Mongolian SOEs do not adhere to the OECD Corporate Governance Guidelines for SOEs.  Although legally required to follow the same international best practices on disclosure, accounting, and reporting used by private companies, SOEs tend to follow these rules only when seeking international investment and financing.  Many international best practices are not institutionalized in Mongolian law, and SOEs tend to follow existing Mongolian rules.  At the same time, foreign-invested firms follow the international rules, causing inconsistencies in corporate governance, management, disclosure, minority-shareholder rights, and finance.

The government perennially floats privatization for such state-held assets as the Mongolian Stock Exchange, the national air carrier MIAT, the Mongol Post Office, and mining assets, through sales of shares or equity but has not identified how or when it would do so.

The practice of responsible business conduct (RBC) in Mongolia has improved.  Most international companies make good-faith efforts to work with local communities.  Larger domestic firms tend to follow accepted international responsible business conduct practices and underwrite a range of related activities, while smaller companies, lacking resources, often limit responsible business conduct actions to the locales in which they work.  Locally, firms adopting responsible business conduct are perceived favorably by the communities in which they operate.  Nationally, responses range from praise from politicians to condemnation by certain civil-society groups alleging responsible business conduct nothing more than a cynical attempt to buy public approval.  Public awareness of responsible business conduct is limited, with only a few NGOs involved in responsible business conduct promotion or monitoring, and those concentrated on such large private-sector projects as the Oyu Tolgoi mega-mine, while shying away from state-owned entities.

Given Mongolia’s high social media penetration, businesses should be aware that discussions regarding their activities could be ongoing on international and domestic social media sites; and should monitor social media discussions to ensure their activities are portrayed accurately.

The government attempts to enforce legislation on human rights, labor rights, consumer protection, environmental protection, and other laws protecting individuals from adverse business impacts.  While the Company Law articulates rules of corporate governance, accounting requirements, and shareholder rights, it has no rules for executive compensation.

Mongolia has no official position on OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and no domestic legislation on due diligence for companies sourcing minerals originating from conflict-affected areas.  The government has not adopted the Organization for Economic Co-operation and Development (OECD) and UN principles on responsible business conduct:   http://www.oecd.org/about/ ).  Mongolia is a member in good standing of the Extractive Industries Transparency Initiative ( EITI ).

There have been no alleged/reported human or labor rights concerns relating to RBC of which foreign businesses should be aware.  However, businesses should be aware that a disorganized system for granting and enforcing use rights for land, timber, water, and mining assets has given rise to the perception among local communities that central, provincial, and municipal governments are improperly granting rights in contravention to local customs and statutes.

Mongolia has a private security industry, and many public and private entities avail themselves of private security services.  However, Mongolia has neither signed the Montreux Document on Private Military and Security Companies nor supports the International Code of Conduct or Private Security Service Providers (ICoCA).

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

While Mongolia has included climate change as a factor in policy formulation across agencies and ministries, the government has no specific green investment plan but very general environmental policies.  The Government of Mongolia’s 2020-2024 action plan includes issues related to climate change and references establishment of a green financing system.  Regarding policy efforts to achieve net-zero carbon emissions by 2050, the government has offered neither policy recommendations nor specific regulatory or legal measures for carbon reduction. Consequently, the government has no expectations that the private sector will undertake measures to achieve net-zero emissions.  More broadly, the government continues to examine ways to incentivize preserving biodiversity, particularly through eco-labelling and tax credits.  Finally, procurement policies have yet to be greened.  While the Law of Procurement includes a policy related to green procurement, implementation has lagged, business and environmental communities have reported.

Investors have acknowledged that corruption is widespread in Mongolia, leading some to curtail additional investments or to exit Mongolia entirely.  Given the level of corruption, U.S. businesses are advised to be especially diligent in complying with the U.S. Foreign Corrupt Practices Act.  Although Mongolian law penalizes corrupt officials, the government does not always implement the law effectively or evenhandedly.  Private enterprises report instances where officials and political operatives demand bribes to transfer-use rights, settle disputes, clear customs, ease tax obligations, act on applications, obtain permits, and complete registrations.  NGOs and private businesses report judicial corruption is also present.  Factors contributing to corruption include conflicts of interest, lack of transparency, limited access to information, an underfunded civil-service system, low salaries, and limited government control of key institutions.

Mongolia does not require companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.  U.S. and other foreign businesses have reported that they accept the need for and have adopted internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.  (For Mongolia anti-corruption efforts:   https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/mongolia/.

The Independent Agency Against Corruption (IAAC) has primary responsibility for investigating corruption, assisted at times by the National Police Agency’s Organized Crime Division.

Mongolia has signed and ratified the UN Anticorruption Convention ( UNAC ) but not the OECD Anti-Bribery Convention.

Independent Agency Against Corruption (IAAC)
District 5, Seoul Street 41
Ulaanbaatar, Mongolia 14250
Telephone:  +976-70110251; 976-11-311919
Email:   contact@iaac.mn 
Web:     http://www.iaac.mn/home?lang=en 

Transparency International Mongolia
O. Batbayar, Executive Director, Mongolia Chapter
Office 803, 8th floor, Dalai Tower, Unesco Street,
Sukhbaatar District – Khoroo 1, Ulaanbaatar 14230
Web:   https://www.transparency.org/country/MNG

Mongolia’s political and security environment is peaceful and stable.  Crime is low in the capital Ulaanbaatar but fluctuates seasonally.  Street-level petty theft and assault occur with some regularity, while more complex financial and fraud-based crimes are rising.  U.S. investors are generally welcomed by the Mongolian people; however, in small numbers and in specific areas, anti-foreign sentiment fueled by fringe nationalist groups occurs.  These sentiments do not focus on U.S. investors exclusively and are subject to current events.  Resource sector investors have reported that disputes between those with legal rights to utilize local resources and residents can lead to protests, disorder, and, in rare cases, violence.

The National Statistics Office of Mongolia reports official unemployment was 8.1 percent (99,400 people) of Mongolia’s 1.23-million-person labor force (December 2021).  Youth unemployment hovers around 18 percent of total unemployed.  42 percent (519,420) of the labor force lives in Ulaanbaatar and 58 percent (707,084) in rural areas.  Women accounted for 47.6 percent (583,621) of total labor, with women’s unemployment at 7.4 percent; women compose 43.6 percent (43,333) of total unemployed.  The latest statistics on labor-age disabled workers from 2019 put the total pool of workers at 98,166, of whom 9,179 were employed.  5,617 foreign workers from 77 countries are officially registered with the Ministry of Labor and Social Welfare, of whom two-thirds work in construction and mining.  63 percent of registered foreign workers are from China, despite COVID-19-related travel restrictions.

Unskilled labor is abundant, but chronic shortages persist in most professional categories requiring advanced degrees or vocational training, including all types of engineers and professional tradespeople in the construction, mining, and services sectors.  Foreign-invested companies address shortages by providing in-country training, increasing salaries and benefits to retain employees, or hiring expatriate workers with expertise unavailable in Mongolia.

Mongolia’s 2021 Revised Labor Law (RLL) came into force January 2022.  However, the Ministry of Labor and Social Protection, responsible for enforcing this statute, has not adopted all necessary regulations to support enforcement.  The RLL formalizes most practices described below, which had heretofore been customary between employer and employee or achieved through regulatory fiat.  It also creates a new system for employers using long shifts for their crews, mostly in the resource extraction sectors.  The RLL stipulates that work and resting shifts must be equal—for example, 14 days on must be balanced by 14 days off—and that overtime must be limited.  Employers report these new rules effectively require them to hire more employees to achieve the same staffing levels under old rules and with more administrative burdens.  As Mongolia faces chronic shortages of skilled employees, employers are concerned the RLL will lead to rising costs as headcounts might have to increase while productivity per worker decreases, threatening the commercial viability of those businesses with limited capacity to absorb or pass on these additional costs.

The RLL retains the requirement that companies employ Mongolian workers in all labor categories where the Ministry of Labor and Social Protection determines a Mongolian can perform the task as well as a foreigner.  This provision primarily applies to unskilled labor categories.  Investors can locate and hire workers without hiring agencies, if hiring practices follow the RLL.  If employers want to hire expatriate laborers and cannot obtain a waiver from the Ministry of Labor and Social Protection for that employee, the employer can pay a monthly waiver fee.  Depending on a project’s importance, the Ministry of Labor and Social Protection can exempt employers from 50 percent of the waiver fees per worker.  However, employers report difficulty in obtaining waivers.  (For details on Mongolian labor law: https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/mongolia/).

Because Mongolia’s winters limit operations in infrastructure development, construction, and mining, employers tend to use a higher degree of temporary contract labor than companies operating year-round.  The RLL allows employers and employees to use short-term contracts; however, such contracts are limited to work lasting less six months comprising less than 30 percent of an entity’s labor force.

The RLL allows most workers to form or join independent unions and professional organizations and protects rights to strike; but denies these rights to foreign workers, certain public servants, and workers without formal employment contracts.  However, all groups have the right to organize.  The law protects the right to participate in trade union activities without retaliation, and the government has protected this right in practice.  The law provides for reinstatement of workers fired for union activity, but this provision is not always enforced.  Some employees occasionally face obstacles to forming or joining unions, and some employers have taken steps to weaken existing unions.  For example, some employers prohibit participation in union activities during working hours or refuse to conclude collective bargaining agreements in contracts.

The RLL allows employers to fire or lay off workers for cause.  Depending on the circumstances, however, severance may be required, and workers may seek judicial review of their dismissal.  Under the RLL, retirement is no longer a legal justification for firing an employee, and mass redundancy layoffs require 90-days’ notice.  Employers and legal experts report that Mongolia’s courts usually support employee claims, especially if the plaintiff or defendant is a foreign business.  The severance laws require employers to pay laid off workers one month of the contracted salary, but fired workers receive no severance.  Laid off or fired workers are entitled to three months of unemployment insurance from the Social Insurance Agency.

The Law on Collective Bargaining regulates relations among employers, employees, trade unions, and the government.  Wages and other conditions of employment are set between employers (whether public or private) and employees, with trade union input in some cases. Laws protecting the rights to collective bargaining and freedom of association are generally enforced.  The Mongolian Confederation of Trade Unions represents most workers in the resource extraction and construction-related sectors in collective bargaining activities but not government and agricultural sector employees.  The Confederation of Trade Unions also mediates specific grievances through government-sanctioned Tripartite Labor Dispute Settlement Committees.  Tripartite Labor Dispute Settlement Committees resolve most disputes between workers and management and consist of representatives Confederation of Trade Unions, employers, and the government.  Cases not resolved by these Committees may go to court.

The International Labor Organization (ILO) is concerned about child-labor practices and variations between Mongolian law and international labor standards.  Authorities report employers often require minors to work more than weekly permitted hours, paying them less than the minimum wage.  The General Agency for Specialized Inspections ( GASI ) enforces all labor regulations but is understaffed.  ILO conventions ratified by Mongolia:   Mongolia (ilo.org) 

The Economic and Commercial Section
U.S. Embassy
P.O. Box 341
Ulaanbaatar 14192, Mongolia
Telephone:  +976-7007-6001
Email:  Ulaanbaatar-Commercial