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FACTBOX-Key political risks to watch in Mongolia
Landlocked Mongolia sits on vast quantities of untapped mineral wealth and analysts say it could be one of the fastest growing economies of the next decade, as well as a key investment target for global mining giants.
BEIJING, Sept 4 (Reuters) - Landlocked Mongolia sits on vast quantities of untapped mineral wealth and analysts say it could be one of the fastest growing economies of the next decade, as well as a key investment target for global mining giants.
The $5 billion Oyu Tolgoi project, jointly owned by Ivanhoe Mines (IVN.TO: Quote) and the Mongolian government, will be the world"s biggest copper mine outside Chile once full operation starts in 2013. Plans are also under way to develop the Tavan Tolgoi coking coal mine, the world"s biggest untapped deposit of its kind.
But foreign companies and investors are watching to see whether the country"s fledgling democratic government can build the infrastructure required, maintain stability, improve the rule of law and -- most crucially -- negotiate its way through the geopolitical pressures exerted by its two large neighbours, Russia in the north and China in the south.
Following is a summary of key Mongolia risks to watch:
POLITICAL INSTABILITY
The capricious nature of Mongolia"s democratic government can complicate foreign investment projects. The 5-year negotiations on the Oyu Tolgoi property were conducted against a backdrop of damaging political and legal uncertainties, including local ownership requirements and a windfall tax on mining profits that was only rescinded last year.
The frequent replacement of key personnel at the top levels of Mongolia"s government has also caused concern, with the changes often accompanied by nationalist rhetoric and populist promises to secure more control over the country"s assets.
Analysts also complain about the weakness of Mongolia"s political parties and its poor regulatory capacity
The $5 billion Oyu Tolgoi project, jointly owned by Ivanhoe Mines (IVN.TO: Quote) and the Mongolian government, will be the world"s biggest copper mine outside Chile once full operation starts in 2013. Plans are also under way to develop the Tavan Tolgoi coking coal mine, the world"s biggest untapped deposit of its kind.
But foreign companies and investors are watching to see whether the country"s fledgling democratic government can build the infrastructure required, maintain stability, improve the rule of law and -- most crucially -- negotiate its way through the geopolitical pressures exerted by its two large neighbours, Russia in the north and China in the south.
Following is a summary of key Mongolia risks to watch:
POLITICAL INSTABILITY
The capricious nature of Mongolia"s democratic government can complicate foreign investment projects. The 5-year negotiations on the Oyu Tolgoi property were conducted against a backdrop of damaging political and legal uncertainties, including local ownership requirements and a windfall tax on mining profits that was only rescinded last year.
The frequent replacement of key personnel at the top levels of Mongolia"s government has also caused concern, with the changes often accompanied by nationalist rhetoric and populist promises to secure more control over the country"s assets.
Analysts also complain about the weakness of Mongolia"s political parties and its poor regulatory capacity
