Nietzsche’s aphorism of “What doesn’t kill you makes you stronger” is my optimistic view about Mongolian business environment,
including foreign investments, although several factors are nearly undermining foreign direct investment and general business environment. You may have encountered or heard about challenges such as corruption, crony capitalism, a weak legal framework, inconsistent law enforcement, and unstable policies and regulations. There are also economic and commercial
drawbacks, including a small market, high risk of currency depreciation, and costly logistics. Larger investors might worry about Mongolia’s geography—sandwiched between Russia and China—and the associated geopolitical risks. Meanwhile, existing investors often face daily hurdles like government bureaucracy, rising nationalism, and erratic application of laws. This list isn’t
exhaustive; it omits “surprises,” originally tied to major events like elections but now occurring more frequently. I’ll discuss a recent surprise later, but first, let’s focus on the key obstacle.
The above-mentioned issues are undeniable and have persisted since the 1990s. But which is the most detrimental? Opinions differ widely, though I’m not here to rank them. Instead, I ask: do these challenges share a common root or cause? I argue that “internal politics” is the primary cause. By this, I mean politically motivated actions, conflicts, inactions, and PR efforts within Mongolia. You might wonder why I focus on internal politics when Mongolia is a proud democracy—the only one
in Central Asia. Indeed, we cherish our democratic status, but as a young democracy, we’ve faced significant political turbulence.
1. THE RECENT SURPRISE: STRATEGIC DEPOSITS
What is the recent surprise? This relates to the interpretation and application of the concept of “Strategic Deposit”. This concept is not a new, but the Minerals Law was amended on 19 April 2024 to revise certain provisions related to Strategic Deposits, aligning them with the amendments to the Constitution. Pursuant to this new amendments under the Minerals Law, the state shall hold up to 34% or 50% of the entity holding the license, free of charge, and potentially without making any investment. Obviously, this creates various uncertainties and suprises, specially with respect to the companies which have been operating and mining. Some could argue this is potentially “expropriation” and others could argue that the state has this power under the Constitution. The both sides have their strong arguments as the relevant implementation, interpretation and process is vague and
subjective to the Parliamentary discretion.
The Objective of these amendments to the Constitution and Minerals Law were ultimately designed to maximize the benefits from natural resources for the benefits of its citizens. See the full article on the link https://www.melvilledalai.com/.../the-mongolian-business... 
BY Erdenedalai Odkhuu, Partner

Published Date:2025-04-28