American Embassy “Investment Climate Report”

The American Embassy in Ulan Bator helpfully has compiled a report on the sorry state of the climate for foreign investment in Mongolia.

From page 29:

Investors inform us of numerous and consistent accounts where rulings apparently ignore contract terms. Further, the judges adjudicating such cases have told investors or to third party intermediaries that such decisions are justified based on the foreign identity of the plaintiff or defendant. Examples of arguments include: the foreign investor can afford the loss; the foreigner must be stealing from
Mongolia in some way and so deserves to lose; or that Mongolian judges must support Mongolians or risk being accused of being unpatriotic. While the validity and accuracy of these claims is difficult to assess, the number and consistency of the complaints suggest that that Mongolia’s judiciary is not treating foreign investors equitably.

I find it difficult to tolerate this kind of discrimination. Mongolia has many other problems making investing there a very risky idea right now, most of them discussed in this report. But this particular problem is not only harming the investment climate; it is incompatible with basic values of fairness.

Page 39 has this to say about investment in the energy sector:

Currently, firms from Mongolia, China, Japan, Europe, Canada, and the U.S. are actively seeking opportunities for renewable and traditional power generation in Mongolia. However, few want to invest in the power generation field until the regulatory and statutory framework for private power generation firms up and tariffs are set at commercial rates.

It will be interesting to see how Softbank deals with these problems in their bid to invest over $600 million in some early wind projects.

 

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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