The government of Mongolia has hired a top American lobby group to shop its new foreign investment law.
For the next year Washington-based Venn Strategies will be paid $45,000 per month — plus an additional $5,000 a month for travel and other expenses – to "educate key stakeholders regarding opportunities for trade and investment in/with Mongolia."
Changes to Mongolia's 2012 Strategic Entities Foreign Investment Law (SEFIL) came into force last week and is designed to turn around a slowdown in its economy which was the world's fastest growing at the start of the decade and a steep fall-off in foreign investment.
Foreign direct investment in the country dropped 49% to September 2013 compared to last year which already marked a 17% year-on-year decline, the value of the currency, the tugrik, is down more than 20% this year, inflation has returned to double digits and the Mongolian central bank's off-balance sheet spending is burning through foreign reserves as foreign debts balloon to 55% of GDP.
The path to prosperity for Mongolia, ranked 155th in the world according to GDP per capita, has always been a rocky one. The country has been bailed out by the IMF no fewer than five times and it suffers a domestic bank failure on average every 18 months.
While the new legislation's greater certainty surrounding mining taxes and royalties and the scrapping of the distinction between private foreign and domestic investors are being universally welcomed as a positive step, Mongolia has a long way to go to restore investor confidence.