MONGOLIA is OPEN for BUSINESS Invest Mongolia Agency WHY INVEST IN - PowerPoint PPT Presentation

MONGOLIA is OPEN for BUSINESS Invest Mongolia Agency

WHY INVEST IN MONGOLIA 1. Large mineral resource base that can be leveraged for value added processing 2. Situated between two giant economies, China and Russia, Mongolia promises abundant opportunity for growth 3. Attractive FDI environment and trade through an open policy committed to reducing bureaucracy and corruption 4. Vibrant and flourishing democratic Government with stability since 1990 5. A large number of Industrial & Infrastructure mega projects open for investors to participate

Reason 1. LARGE MINERAL RESOURCE BASE Minerals – Main Composition of Total Exports Leading country in Mineral Resources (1H2013) Best Practice, Country Coal Mineral Capacity Index 16% Copper 27% MONGOLIA #1 7% Iron ores & Scrap 4% Crude oil 10% Chile #8 Zinc 20% 17% Gold Columbia #21 Other Vietnam #40 Mongolia ’ s World Class Mineral Reserves P.R China #45 Approved Main Mineral Resources Reserves(2013) All countries 96 Copper (million tons) 84.1 Source: Fraser Institute Report,2013 Coal (billion tons) 26.8 Gold (thousand tons) 2.4  Total coal exports are estimated to exceed 30 million tons at Zinc (thousand tons) 37 340.4 the end of 2015 once railway infrastructure is in place and is expected to further increase to 50 million tons by 2017 Iron ore (mln tons) 1 088.9  Operations at the Oyu Tolgoi deposit have commenced in Uranium (thousand tons) 47.9 2013 and exports of its products began in July of 2013. Rare Earth (thousand tons) 3,768 These exports are expected to play a crucial role in total Conventional crude oil (mln barrel) 2,438 exports of Mongolia. 3

Reason 1. LARGE MINERAL RESOURCE BASE Strategic Deposits including Oyu Tolgoi and Tavan Tolgoi , world’s largest untapped deposits Asgat Burenkhaan Erdenet Boroo Tumurtoi Gurvanbulag Mardai Silver Phosphorite Copper/molybdenum Gold Iron ore Uranium Uranium 6.4 mm tons 300 mm tons 1.2 bln tons 0.025 mm tons 229.3 mm tons 0.016 mm tons 0.001 mm tons Dornot Baganuur Ulaangom Coal Uranium 600.0 mm tons 0.029 mm tons Rashaan Choibalsan Tumurtein Ovoo Shivee Ovoo t Tamasagulag Zinc Coal Ondorhaan Gantsmod 7.7 mm tons 646.2 mm tons Ulaanbaatar Tsahiurt Hugshin gol jargalant Tsagaan Suvarga Tavan Tolgoi Hotgor Copper/ Coal Hushuut Molybdenum 7.4 bln tons 10.6 mm tons Olonubulag Nariin Sukhait Oyu Tolgoi Coal Copper 37mm tons 125.5 mm tons Gold 1,431 tons Mongolia’s world class mineral reserves Estimated reserves by 2012

Reason 2. STRATEGIC LOCATION Situated between two massive economies, China to the south and Russia to the north, Mongolia promises abundant opportunity for growth. GDP 2012 in USD billions Population 2012 in millions RUSSIA US$ 2,014 143 MONGOLIA US$ 10 3 Korea US$ 1,129 50 CHINA US$ 8,358 1351 JAPAN US$ 5,959 128 5

Reason 3. ATTRACTIVE FDI ENVIRONMENT PROTECTING INVESTORS STARTING A BUSINESS REGISTERING PROPERTY ENFORCING CONTRACTS GETTING CREDIT According to the 2014 Doing Business report by the WORLD BANK, MONGOLIA is ranked 76 th progressing by four places compared to the previous year.

Reason 3. ATTRACTIVE FDI ENVIRONMENT % US$ bln MONGOLIA CONTINUES TO GROW IN DOUBLE DIGITS 20 20 19.0 18.9 17.5 18 15.9 16 14.8 14.1 15 14 12.2 12.0 12.8 12 10.6 10 8.9 10 8.8 6.4 8 6.9 6 5.3 4 5 3.9 3.9 2 -1.3 0 0 -2 2008 2009 2010 2011 2012 2013 2014 2015 2016 GDP growth, yoy% GDP at current prices, US$ bln Ministry of Economic Development forecasts Mongolia to continue in double digit growth in the coming years.

Reason 3. FDI continues to grow despite coal price Foreign Direct Investment into Mongolia USD mm 5000 2010: Oyu Tolgoi 2011: Oyu construction budget of Tolgoi 4500 $758 million Progression 4000 2008: Oyu Tolgoi 3500 completion of first construction phase 3000 2500 2005: Oyu Tolgoi project receives approval 2000 2012: Unfavorable coal market 1500 2001: Oyu Tolgoi 1000 discovers mineral deposit 500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total FDI Non-Mining FDI Source: Invest Mongolia Agency, 2012 8

Reason 3. THE REVISED INVESTMENT LAW Effective Nov 1, 2013 Key features  Eliminates approval system to foreign investors and replaces it with registration procedure.  Promises the same guarantees and protections to both Domestic and Foreign Investors.  Creates an independent agency to serve investors in many ways  Reveals possible tax and non-tax state supports and incentives to investors  Increases efficiency of investment facilitating a mechanism to follow up real projects in the economy  First Legal Act including regional and sectors classification in order to diversify the economy as a whole. 9

Reason 3. THE REVISED INVESTMENT LAW The new investment law is aimed at reviving foreign investment by easing restrictions on investors in key sectors such as mining and by providing greater certainty on the taxes. Tax Incentives Provided by the new Investment Law Tax rate VAT VAT 10% 10% Corporate income Corporate income 10% Tax-free economic Customs duty 5% zones 5% Royalty 5% 5 22 years years Source: Government of Mongolia, 2013 10

Reason 3. INVEST MONGOLIA AGENCY New Services to Investors 1. Provide 1. Investment integrated 1. Legal Consultancy Research information 2. Project 2. Investment & 2. Guide Investors Management Investors Database to business and Consultancy 3. Targeted public procedures 3. Aftercare Promotion & AD 3. Organize Field assistance Campaign Tours

Reason 3. ATTRACTIVE FDI ENVIRONMENT • WTO member since 1997 • Member of Multilateral Investment Guarantee Agency (MIGA) • Avoidance of Double Taxation Agreement signed with 26 countries • Mutual Protection and Promotion of Investment Agreement signed with 44 countries • Bilateral Transparency Agreement signed with United Stated • Joined to Asia-Pacific Trade Agreement (APTA) • Negotiation for the Japan-Mongolia Economic Partnership Agreement (EPA) is at the last stage

Reason 3. ATTRACTIVE FDI ENVIRONMENT The drop in FDI in 2013 is largely attributable to the completion of Phase 1 of the OT project as well as some changes to the strategic investment law of 2012 and other temporary factors. FDI Regulatory Restrictiveness Index (Closed = 0.450 1, Open = 0) 0.400 0.350 0.300 After adoption of the Strategic Entities Foreign Investment Law, 2012 0.250 Potential after the new Investment Law 0.200 Non-OECD 0.150 Average 0.100 OECD Average 0.050 0.000 Kyrgyz Republic Slovak Republic United Kingdom Czech Republic United States Saudi Arabia New Zealand South Africa Luxembourg Kazakhstan Switzerland Netherlands Costa Rica Mongolia Indonesia Mongolia Argentina Colombia Germany Malaysia Australia Denmark Lithuania Romania Morocco Hungary Slovenia Portugal Canada Ukraine Norway Sweden Belgium Mexico Tunisia Iceland Austria Greece Estonia Finland Jordan Russia Turkey Poland France Ireland Japan Korea Latvia China Israel Brazil Egypt Spain India Chile Peru Italy 13

Reason 4. DEMOCRATIC GOVERNMENT  Tested with 7 consecutive successful democratic elections  Free and Fair election system  Less Domestic protests and Civil movement  Stability-next elections are in 2016 and 2017  Member of 69 international institutions and entered 250 international agreements and pacts  Peaceful and ultimately successful translation since 1990 to become a mature democracy over the last 20 years 14

Reason 5. MEGA PROJECTS The Development Bank of Mongolia provides loans to finance large scale development projects and programs 1 of Mongolia approved by the Parliament and the list of projects and programs to be financed shall be approved by spring session of the Parliament.  New Development Medium Term Target Program  Railroad Transportation  Sainshand Industrial Complex  Auto Roads and Energy Facilities Railways Iron Ore Cluster Coal to Gas $16.0 bln $1.0 bln $10.0 bln Coal to Liquids Highways Copper Smelter $2.5 bln $0.46 bln $2.0 bln Subways Coal Washing Oil Production $1.50 bln $0.8 bln $0.8 bln 15

Reason 5. MEGA PROJECTS Industrial mega projects to utilize abundant coal resources in order to create value add and domestic sources of strategic products. 1 Coal Washing and Handling 2 3 Coal – to – Gas Plant Coal – to – Liquid Plant Plant • To increase energy efficiency and cut • The Project aims to create domestic • CHPP complex to be constructed as 2 reliance on oil and gas imports source of petroleum products thus x 10Mtpa modules, and • To provide cleaner fuel sources vital enhancing energy independence and commencement of construction in for solving pollution in urban centers. security of supplies through the 2014. • First module in June 2015, and introduction of commercially proven, cutting edge technology in second 5 mtpa in November 2014. • CHPP ramping up to processing 20Mt Mongolia. of ROM by 2017. 16