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Doing Business in Mongolia: Potential Business Challenges, Part Two

Following up on Part 1 of some challenges to be prepared for when working or doing business in Mongolia, here is Part 2. This list really focuses on more practical things that many people who have worked in foreign countries may have already experienced, such as occasional electricity or internet outages or translation issues.

Electricity and Internet Outages

As I have already mentioned above, Mongolia, like many developing countries, has at times issues with electricity. This is due, in no small part, to the construction boom that has been going on for the past several years, but which came to an abrupt halt almost exactly a year ago. Mongolia is a very centralized country, with virtually everything coming through UB before being sent out into the aimags, and electricity is no exception. Of course is doesn’t help matters when all of the power plants are also located in the capital city.

Because of the huge surge in demand for electricity, mostly from new apartment and office buildings throughout the city, electricity outages are prone to happen. That said, more often than not they are caused by construction crews not really knowing what they are doing and cutting through the line. Power outages are occasional, but when they do happen they can last for a half a day or longer. My advice…have some good old fashion non-computer work on hand, or a laptop with a long battery.

Internet outages similarly occur.  Internet outages seem to occur more often but usually last for shorter periods, usually ranging from ten to 30 minutes. Internet service interruptions are sometimes caused by problems with lines from China or Russia but are usually a result of someone cutting through the line. If the intertubes are an absolute necessity for you Mongolia’s internet service providers are offering better and faster service every day and USB modems are available from several ISPs.

Don’t Forget the Translation

Needing documents translated can cause major delays to projects if proper time has not been given. A translator, at the most, can probably translate ten pages a day and this number could easily become lower if the translation is technical or an area where s/he does not have much expertise.

According to the Civil Code agreements, contracts and the like can be executed in any language the parties select, but if at any time there are going to be Mongolian governmental agencies involved, it will need to be translated regardless of what the Civil Code says. Mongolian government officials are going to want to see contracts, company resolutions, employment agreements or any other documents that may be necessary to form a company, apply for special licenses or apply for visas in Mongolia.

Translation is easily forgotten about when making arrangements for meetings or registration with the government, yet it remains one of the most important aspects of doing business in a foreign country. It is easy to forget that not everyone attending a meeting will speak English and quite often it dawns on the organizer at the last minute that documents and materials need to be translated. The best advice I can give is to plan ahead, be prepared and get everything translated in good time.

Mongolian Currency Law

The new Currency Law went into effect on August 9, 2009, and while I think many people are under the impression that Mongolia will give some leeway on its implementation, I highly suggest it be taken seriously from day one.

The Currency Law states that all advertisements, contracts, agreements, invoices, and settlement within the territory of Mongolia must be made in tugrug. This includes paying or receiving money for goods or services, employee salaries including expat workers, and contracts must all be in tugrug, if they are in Mongolia between domestic companies. Obviously the tugrug is not a freely convertible currency so transactions between Mongolian and overseas companies do not fall within the realm of the Currency Law.

The penalties for breaking this can be high indeed. For first-time offenders the income involved in the transaction can be confiscated. For second-time offenders the fine can be from ten to thirty times minimum wage (currently MNT108,000, or about US75) for individuals or fifty to one hundred times the minimum wage for companies. For those who violate the law more than twice any special licenses that the company may hold are subject to revocation. Is losing your minerals or construction license really worth paying in dollars or euros? I don’t think it really is.

Are We Boring You?

This is a problem that really is a worldwide issue, but at times Mongolians seem to take it to the extreme. Very rarely will a Mongolian receive a call on their mobile and not answer it, regardless of the importance of the meeting. Often they’ll get up and go stand in a corner or lean down under the conference table and whisper, but that hardly reduces the distraction of someone speaking while a meeting is taking place. Texting is very common as well, but I think texting, while distracting, is much less so than actually having another conversation during a meeting.

Incredibly enough I have also heard stories of Mongolians walking into a meeting, sitting down, open up a newspaper and begin reading. While taking an important call or answering an urgent text may necessary occasionally, reading the newspaper or any other unrelated document is shocking or distracting for many. I think most Mongolians do not notice because it is a somewhat common practice for Mongolians to be seen reading the throughout the day as well. If you can live with it then there is obviously nothing more to do but carry on with the meeting. If it gets to be too big of an issue politely ask the person to put away the paper so they s/he can fully participate in the meeting.

Workforce Challenges

The final challenge to foreign companies is to keep in mind the small pool of workers available from which to pull in Mongolia. The small overall population of Mongolia is only 2.7 million and coupled with an education system that is vastly different from what most of us are used to can make it difficult to find suitable workers. While Mongolia does have a high literacy rate, and is justifiably proud of that fact, that does not necessarily mean your company will have an easier time of finding an accountant with knowledge of international best practice or a qualified geologist. This, along with the fact that many of those who are part of the influx into Ulaanbaatar during the past years are herders or farmers with few marketable skills, can make it somewhat difficult to find the skills you need.

Of course one solution is to hire expat workers, but this can only fill so many positions as Mongolia operates a foreign worker quota system that varies depending on the sector. More and more Mongolians are going abroad to foreign universities to study. Luckily for Mongolia and Mongolian companies, they quite often return to Mongolia after finishing university or living overseas for several years. Most Mongolians I have met in other countries talk about how much they miss it and look forward to returning when they can. So instead of a brain drain of the most educated Mongolians the opposite happens, with many returning to increase the quality of the workforce.

Thus ends my two part blog on challenges foreigners may face working in Mongolia. Again, this is not to be negative or disparage Mongolia, its government or its people, it is simply meant as an honest look at what I have observed from the tiny microcosm in which I operate. Your experience can, and probably will, vary, but these issues are certainly worth bearing in mind as your company prepares to set up shop in Mongolia.

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